Goomboorian Transport Pty Ltd & Ors v Hanson & Anor [2019] HCATrans 192 (13 September 2019)

Last Updated: 18 September 2019

[2019] HCATrans 192

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B22 of 2019

B e t w e e n -

GOOMBOORIAN TRANSPORT PTY LTD

First Applicant

J & M LOGHANDLING PTY LTD

Second Applicant

BELLING INVESTMENTS PTY LTD

Third Applicant

GOOMBOORIAN LOGGING PTY LTD

Fourth Applicant

LITTLE YABBA DROUGHTMASTER STUD PTY LTD

Fifth Applicant

EMMERDALE FARMING PTY LTD

Sixth Applicant

JILRAY PTY LTD

Seventh Applicant

J & M FARMING PTY LTD

Eighth Applicant

J & M FARMING PTY LTD AND LITTLE YABBA DROUGHTMASTER STUD PTY LTD

Ninth Applicant

JOHN GERHARD BELLING

Tenth Applicant

MARLENE ANNE BELLING

Eleventh Applicant

and

DOROTHY MAUREEN HANSON

First Respondent

NORMAN RICHARD HANSON

Second Respondent

Application for special leave to appeal

BELL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 SEPTEMBER 2019, AT 12.23 PM

Copyright in the High Court of Australia
MR A.L. TOKLEY, SC: May it please the Court, I appear with MS C.C. HEYWORTH‑SMITH, QC for the applicants. (instructed by Griffith Hack Lawyers)

MR G.J. HANDRAN: May it please the Court, I appear with my learned friend, MR D.K. FULLER, for the respondents. (instructed by Baldwins Lawyers)

BELL J: Yes, Mr Tokley.

MR TOKLEY: Your Honours, at the heart of the resolution of the case at bar lies the question what is or are the relevant principles concerning the law of tracing and what are sometimes called mixed substitutions. More particularly, the case at bar raises the issue of the normative content of the legal principle or principles upon which a court should act in determining tracing in circumstances where a person stole a substantial amount of money from her employer, but only used a small part of that money to purchase some monthly premiums of a life insurance policy and in circumstances where the proceeds of that policy found their way into the hands of volunteers, that is, persons who were non‑contributories, being the deceased parents.

Your Honours will know that Justice Gotterson who wrote the leading judgment in the court below relied very heavily upon the reasons of Lord Millett in Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102. That reliance can be seen from his Honour Justice Gotterson’s judgment at application book beginning at page 99 from paragraphs [48] to [54] onwards.

Your Honours, the correctness of some aspects of the approach of Lord Millett – and your Honours will remember that it was Lord Millett who wrote the leading judgment in Foskett v McKeown – has been questioned by some of the leading writers in the field of restitution law, including a Justice of this Court, his Honour Justice Edelman, and also a Professor Andrew Burrows from the University of Oxford.

Your Honours, in my respectful submission, the point of public importance raised by this case is one worthy of consideration by this Court. It is a suitable vehicle ‑ ‑ ‑

KEANE J: Before you get to that point, though, do you not need to read the insurance policy?

MR TOKLEY: Your Honour, that is part of it but the insurance policy is simply the conduit by which one traces the moneys that were stolen through to an amount ‑ ‑ ‑

KEANE J: But it is the source of the right.

MR TOKLEY: I am not sure, with respect, if that is correct, your Honour, unless one adopts a purely and simple proprietary analysis which is the approach that Lord Millett took and which is the approach that his Honour Justice Edelman.....has criticised. The analysis based on substitution of assets and the analysis based on searching the value is actually fundamentally flawed and the case presents an opportunity for this Court to consider a different form of analysis rather than the one that Lord Millett posited and the one that was used and adopted by the court below.

If tracing is the means by which one follows, for example, what has happened to money from A to B to C to D without any overlay of a proprietary rights analysis, then there is another way in which this matter could have been approached by the courts below and which is consistent with principles concerned with wrongdoing and with tracing, which Justice Edelman has identified in his article. Could I please provide to your Honours a small supplementary book of documents which contains Justice Edelman’s article?

BELL J: Yes.

MR TOKLEY: It also contains a chapter from a book edited by his Honour Justice Edelman, a chapter by Professor Burrows – and if I may, it will not take very long to bring your Honours’ attention to the critical features as to why I say this is both a question of public importance but also why this case is a suitable one for reconsideration of the questions that his Honour Justice Edelman has identified.

If your Honours could please go to page 39 of that supplementary book. Your Honours will see in the last paragraph on that page, about halfway through that paragraph, the sentence beginning “But the judiciary”:

But the judiciary has never enunciated the assumptions, or normative premises, upon which the law of tracing has been built.

BELL J: I am sorry, did you say this is on page 39?

MR TOKLEY: Page 39 of the supplementary book.

BELL J: Yes.

MR TOKLEY: Yes.

BELL J: In the first paragraph?

MR TOKLEY: In the paragraph beginning “In Tony’s memoirs”.

BELL J: I see, I am sorry. Yes, I see.

MR TOKLEY:

But the judiciary has never enunciated the assumptions, or normative premises, upon which the law of tracing has been built.

BELL J: What is the normative premise for which you contend, Mr Tokley?

MR TOKLEY: The normative premise for which we contend, your Honour, is this, that the use of the stolen moneys to pay some premiums meant that the deceased fulfilled her contractual obligations which ensured that cover continued or, in the language of the policy, was retained for the benefit of the insured and because a wrongdoer ought not to be allowed to argue that her money was used for the purposes of defeating our claim, it would be inappropriate for the parents, being mere volunteers, to receive the proceeds of the policy.

BELL J: So any consideration about whether the policy was correctly construed by the Court of Appeal below is rather beside the point on this broader normative argument?

MR TOKLEY: Correct, your Honour, yes. It is.

BELL J: It is an entirely new argument, is it?

MR TOKLEY: It is a variation on the argument in this sense.

KEANE J: Where do we see this argument being addressed by the Court of Appeal, in any of its variations?

MR TOKLEY: Your Honours, the Court of Appeal did not accept the argument that I have just addressed to you.

KEANE J: Did they address it at all?

MR TOKLEY: They do not address it, your Honour, but ‑ ‑ ‑

KEANE J: Because it was not presented to them.

MR TOKLEY: It was not presented in that way but it was presented – sorry, what I have done, your Honours, I have spelt out the underlying reason that underlies Justice Bond’s judgment. I can demonstrate that, your Honours, if your Honours could provide me with one second. If your Honours go to the application book and to page 26 of the application book and to paragraph [85] your Honours will see that – this is the paragraph beginning “To put it another way”. Do your Honours have that?

BELL J: Yes.

MR TOKLEY:

To put it another way, the right to any benefits which might flow from the insurance cover for September 2014 – which, to my mind, was the chose in action concerned – was an asset the retention of which was attributable to the fact that Ms Hanson stole money from the third and sixth plaintiffs and used it to pay the premium which ensured its retention.

What I have sought to do is to express more fully the principle that underlies that point. It was that conclusion by his Honour that was disagreed with by the Court of Appeal.

BELL J: Was that a reference to the final premium? What is his Honour referring to when his Honour says “and used it to pay the premium which ensured its retention”?

MR TOKLEY: Using the definite article, I would think it is the final premium that has been paid.

BELL J: Yes, and that was an issue of controversy both before the primary judge and in the Court of Appeal as to the significance, having regard to the nature of the policy of the circumstance that the last premium had been paid utilising the stolen funds.

MR TOKLEY: Yes, your Honour. Correct, your Honour, yes. But that if I may put it this way is simply the fortuitous circumstance through which one follows the conduit of tracing. Part of the problem and one reason why we seek this Court’s review of the matter is that to see the analysis of tracing through the prism of Foskett v McKeown only allows the Court to see it in one particular way.

If one puts to one side Foskett v McKeown and the idea that proceeds of the policy are the product of one or more of the premiums but sees that on the one hand $2.5 million has been stolen and, on the other hand, there are proceeds of $1.5 million available to be obtained, one has to – one goes through, in terms of the tracing exercise, the policy. But whether you fix upon the nature of the right as a chose in action and the right, for example, to have the proceeds or whether you describe it as an asset and one of the differences between Justice Bond and the Court of Appeal was their reference to this notion of an asset.

Justice Bond considered, as he says in that sentence in paragraph [85], that the chose in action, the asset which was retained, was attributable to the fact that she used stolen money to pay the last premium which ensured, in terms of her contractual obligations, the retention of that asset. Where the Court of Appeal approaches it is through the prism of ‑ ‑ ‑

BELL J: But is not his Honour – I am sorry, but in paragraph [85] is not his Honour dealing with the argument that, having regard to the nature of this policy, in his Honour’s analysis, the final payment was significant and his Honour points out that the point might have been more obvious if payment had been made in response to a notice from the insurer threatening cancellation.

MR TOKLEY: Correct, your Honour, yes, but it does not devalue our point that the use of the stolen money ensured the fulfilment – and that is why the normative principles which I describe ensured the fulfilment of the person – of their contractual obligations which in turn ensured that there would be a payment out of the proceeds at the end of the day.

BELL J: But that is inconsistent, is it not, if one goes, for example, just to the relatively brief reasons of Justice McMurdo where he points out, at application book 104, paragraph [71], that:

The policy continued to exist before the premium was paid two days later. Had it not been paid, still the policy would have continued until the insurer had elected to cancel the policy ‑ ‑ ‑

MR TOKLEY: Your Honour, that relies on what you might call a counterfactual argument which is what if it had not been paid what would be the outcome? What we say is that the positive aspect of it is that it was paid using our money. It did ensure the fulfilment of her obligations as spelt out at the policy of insurance. It does not undermine our point to say that counterfactually it might have continued in a particular way. Part of the problem, your Honour, is this. All of us look through the prism of Foskett v McKeown and, in particular, a decision of only one, albeit eminent, Law Lord, Lord Millett – but the article that I have provided to your Honour ‑ ‑ ‑

BELL J: Yes, I am sorry.

MR TOKLEY: ‑ ‑ ‑ indicates that there are, in fact, other ways to look at it. If your Honours would please go to page 46 of that supplementary book of documents, and your Honours will see the first full paragraph, beginning, “As for the tracing value through substitutions” – does your Honour have that?

BELL J: Yes.

MR TOKLEY: Your Honour will see, opposite about line 23:

In Foskett v McKeown, Lord Millett adopted the analysis of Professor Lionel Smith that the law of tracing identifies the passage of value from one asset into its substitute: ‘what is traced is not the physical asset itself but the value inherent in it’.

Then, Justice Edelman says, at the start of the next paragraph:

However, there are difficulties with this analysis as a sufficient basis upon which a tracing claim can succeed. First, in none of these cases was causation between the relevant links argued as an issue in any detail. Secondly, and fundamentally, the notion of a ‘transfer of value’ by a substitution is flawed.

As his Honour goes on to point out later in that paragraph, there is no substitution of one right for another. So when one is looking at the process and the reasoning of the Court of Appeal they have adopted the approach of Lord Millett. We say his Honour would say that that is a fundamentally flawed way to approach the analysis of these sorts of matters. That is why we say this is not a rare opportunity to look at a very important question of public importance, which is the tracing rules and the normative content of the principles that underlie them but what I have endeavoured to do is to identify that normative principle and how it would operate in this situation.

BELL J: But there is no hint of this in the court below.

KEANE J: For example, this article that you have given us ‑ ‑ ‑

MR TOKLEY: Yes, your Honour.

KEANE J: ‑ ‑ ‑ is not referred to in the Court of Appeal.

MR TOKLEY: No, your Honour, no, it is not, your Honour, no. Your Honours, there are a couple of ways in which your Honours can approach the matter, of course. One is that the decision lies – standing as it does – accepting the analysis of what we say is a fundamentally flawed approach to the law of tracing or your Honours can grant special leave in the matter for the Full Court of the High Court to consider it.

KEANE J: Is there not another problem, though, in that even taking the view that is now being urged upon us, which is not an argument that was even hinted at before the Court of Appeal, but even on that view if one takes the tracing approach, it is not the all or nothing result that your clients contended for in this case which is to say that they get everything because it was the last payment that clinched the deal, as it were. On the tracing approach your clients would only be entitled to a proportionate amount of the proceeds reflected in the proportion that the one payment bore to the other 95 payments.

MR TOKLEY: Your Honour, if one takes the approach of Foskett v McKeown that is certainly the way to analyse it. But, I have two points about that. The first is that even in Foskett v McKeown, Lord Millett and the other Law Lords say that you look at the contributions made to the premiums by the parties. One of the errors made by Justice Gotterson is that there was no contribution by the parents. They are mere volunteers.

So the question then is, even accepting what his Honour Justice Keane has just put to me, if there are 91/95ths of premiums paid for by the deceased it does not go back into the hands of the parents who are non‑contributories on the Foskett v McKeown approach. It must go back into the estate, against which we have a judgment.

KEANE J: And confounding the terms of the policy under which they are beneficiaries.

MR TOKLEY: But, your Honour, that does not and cannot determine our rights to the moneys depending upon what the normative principle is and that is why it is such an important point in this case. One of the points I was going to make about the article I was taking your Honours to, if your Honours would continue to bear with me, is that his Honour Justice Edelman in his article – and I accept that it was not brought to the court’s attention which was unfortunate given that it existed at the time – but if your Honours would please go to page 50, and your Honours will see the paragraph beginning:

As a matter of principle, rather than convenience, perhaps the best solution should be whether the first transaction between the plaintiff and defendant was a cause . . . If so, then the plaintiff should be entitled to claim a share of the benefit received by the defendant from the second transaction, in proportion with the contributions of the other causes. As with the lowest intermediate balance rule, this will require an assessment of the intention of the defendant in entering the second transaction. However, this is not the state of the law.

He then goes on to address Foskett v McKeown. His Honour, then, in the next paragraph says:

There is a further exception to a pure causal rule. Where the defendant is a wrongdoer the courts will not permit the wrongdoer to rely on causal arguments for the wrongdoer’s own benefit to defeat a claim for tracing.

That is the effect of what is being done here where it is said that the wrongdoer used her own money to pay the other 91/95ths of the policy. It is the wrongdoer using causal arguments to defeat our claim for tracing to the full amount of the proceeds. That is another way to look at it.

The example that his Honour addresses in that situation of where a trustee misappropriated £3,000 – had £4,000 of his own money – the only asset remaining was £2,137 and the trustee was not permitted to argue that the shares were purchased with his own funds. What the respondents seek to do here is to argue that the 91/95ths were purchased using her funds in circumstances where the amount of money she stole was 10 times her income and the payment of the premiums commenced after she started stealing from her employer. So, your Honours, at the end of the day if we make ‑ ‑ ‑

KEANE J: The arguments that arise in relation to that were not explored at all, either at trial or on appeal. To suggest that somehow or other the court could proceed on the basis that she paid the premiums because she had stolen them is just – we could not possibly entertain that, Mr Tokley.

MR TOKLEY: Your Honour, the finding of fact is there for your Honour to entertain that argument because his Honour makes a finding – there are two answers, your Honour. The first is that there are findings of fact which his Honour makes which would allow the Court to entertain that argument.

BELL J: Where are those findings?

MR TOKLEY: If your Honour goes to page 13 of the application book and your Honour will see in paragraph [22], the second sentence:

In the period from 2005 to 2014, Ms Hanson lost $805,444.63, gambling on poker machines. She could not have funded the extent of such losses from her lawful earnings.

That is one aspect. Implicit in that is that she used stolen moneys to fund her gambling instead of using her own moneys. In one sense it is a false issue because she stole so much money that the fortuitous choice of whether she used her money for this purpose or that purpose does not really assist on
the principle that I have just enunciated. The other is at pages 27, 28 and I will have to take your Honours through this very quickly. I see my time is up.

Your Honours, in paragraphs [92], [93] and [94] his Honour Justice Bond addresses the amount of stolen moneys and in each – in paragraphs [92](c), [93](c) and [94](c) and in each case the stolen moneys exceed the amount of wages from which the proceeds of the policy were paid. So there is a basis upon which we can argue that although it is said that she used her own money, in fact that was the fortuitous result of her spending the two and a half million dollars that she spent on other purposes.

It would enable fraudsters to circumvent both the rules of tracing and a just outcome if they can quarantine legitimate funds in one bank account and only use stolen moneys for a particular purpose. That is also an important point that, with respect, we consider should be, or can be addressed by this Court.

KEANE J: It was never addressed by the other side. They have never had the opportunity to address that case.

MR TOKLEY: I understand your Honour’s point, but in my submission, this does present the opportunity to look at those points.

BELL J: In circumstances in which the matter was conducted on an entirely different basis below it is very difficult to see how it does present that opportunity.

MR TOKLEY: Your Honour, as I started to mention, what I have tried to do is try and identify the normative principle that underlay the approach and the result of Justice Bond’s decision, so that is what I have been at pains to try and explain and to demonstrate why it is that one of the Justices of this Court has criticised the approach of Lord Millett. If one looks through the eyes of Lord Millett, one gets the result that happened in this case. If one looks at it in a different way – it is only this Court that can really say that the approach by the House or Lords is wrong. An intermediate court is not going to be in that position, absent this Court addressing the matter. May it please the Court, I see my time is up.

BELL J: We do not need to hear from you, thank you, Mr Handran.

In our view this application is not a suitable vehicle in which to consider the large normative question that senior counsel identifies. Special leave is refused with costs.

AT 12.48 PM THE MATTER WAS CONCLUDED