Slattery v R [1905] HCA 66; (1905) 2 CLR 546 (28 June 1905)

HIGH COURT OF AUSTRALIA

H C of A

On appeal from the Supreme Court of New South Wales.

28 June 1905

Griffith C.J., Barton and O'Connor JJ.

Want K.C., and Lamb, (with them Kelynack), for the appellant.

Sly K.C. and Hamilton, for the respondent.

Want K.C., in reply,

The judgment of the Court was delivered by:?Griffith C.J.

Griffith C.J.

Barton and O'Connor JJ.

[His Honor having shortly referred to the facts as already set out, continued:]

The question is not whether the appellant was guilty of fraudulent misappropriation, but whether he was properly convicted of larceny. That is a dry technical question, and in order to answer it we must deal with the Statutes as we find them.

It is clear that at common law the prisoner could not have been charged with larceny. Larceny under the English law was subject to many peculiar rules. It was necessary first of all that the charge should have reference to some specific thing. It must also be alleged and proved that the thing said to have been stolen, whether it was a sum of money, coin, or something representing money, or anything else, was the property of the person prosecuting. It was necessary also to prove what was called a taking and carrying away, and the taking must be from the prosecutor or from someone whose possession was the possession of the prosecutor. Any defect in this proof was fatal to the charge. One result of these rules was that a person entrusted with property to hold for another, who converted that property to his own use, could not be charged with larceny, because he did not wrongfully take it away, having had it lawfully in his possession. It was held by the Star Chamber in the 15th century that if a bailee broke bulk, as it was said, and took away part of the goods fraudulently, he might be convicted, because by doing so he took that part of the goods out of the possession of the owner, and so had been guilty of a felonious taking and carrying away. Up to 1857 the law remained that, as a general rule, a bailee of goods could not be convicted of larceny of the thing bailed. Shortly before that, in New South Wales, a law dealing with what was called larceny by carriers had been passed. But in England the general rule was, as stated by Sir James Stephen in his General View of the Criminal Law of England, pp. 51, 52, 53, that fraudulent misappropriation of property was not a criminal offence if the possession of it was originally honestly obtained. That is still the law in England and New South Wales, except so far as it has been altered by Statute. The exceptions made in England, which were made here at a later period, were as follows: First, servants embezzling their masters' money were excepted in 1799 from the protection of this rule; secondly, in 1812, bankers, partners, merchants, attorneys and other agents misappropriating money entrusted to them were excepted; thirdly, in 1827, factors and others fraudulently pledging goods; and in 1857, trustees under express trusts fraudulently disposing of trust funds; and in the same year bailees fraudulently misappropriating goods bailed to them were made liable for larceny.

Now, the Statute of 1857 (20 & 21 Vict. c. 54), which was referred to by Owen J. in his judgment, was entitled "An Act for the punishment of frauds committed by trustees, bankers, and other persons entrusted with property."

The fourth section provided that any person who, being a bailee of property, should fraudulently take or convert the same to his own use or the use of any person other than the owner thereof, although he should not break bulk or otherwise determine the bailment, should be guilty of larceny. The same Act contained provisions relating to trustees, bankers and other fiduciary agents. The term "property" in that Act did not include money or valuable securities. The Act 22 Vict. No. 9, which was passed in New South Wales about the same time, contained practically the same provisions. Then in one of the Criminal Law Consolidation Acts in England, 24 & 25 Vict. c. 96, called the Larceny Act, that section was re-enacted in these words: "Whosoever being a bailee of any chattels money or valuable security, shall fraudulently take or convert the same to his own use, or the use of any person other than the owner thereof, although he shall not break bulk or otherwise determine the bailment, shall be guilty of larceny, and may be convicted upon an indictment for larceny." That is the history of the legislation in England. Under those Statutes, applying the old law as far as it had not been altered, it was necessary to prove that the property fraudulently converted was the property of the bailor. That was an essential condition. If that proof was wanting there could be no conviction. It was held in R. v. Hassall[1] that there could not be a conviction of a man who had misappropriated part of the funds entrusted to him. Although he had received them for a specific purpose, he could not be convicted of larceny as a bailee of any specific sum of the money received, because he was not a bailee of that specific sum. It becomes necessary, therefore, in order to construe the section now before us, to consider what a bailee is.

A definition was read during the argument from Pollock and Wright on Possession in the Common Law, which we are prepared to accept as a correct definition. It occurs at page 163, and is as follows: "Upon the whole, it is conceived that in general any person is to be considered as a bailee who otherwise than as a servant either receives possession of a thing from another or consents to receive or hold possession of a thing for another upon an undertaking with the other person either to keep and return or deliver to him the specific thing or to (convey and) apply the specific thing according to the directions antecedent or future of the other person."

Mr. Hamilton in his very able argument admitted that bailment implies three things: first the delivery of some specific article by one person to another; second, that the thing delivered should remain the general property of the bailor; and third, that it, or some specific thing into which it is converted under the terms of the bailment, is to be returned to the bailor or delivered to some person for him. That is substantially correct. There are then three elements?a specific thing is delivered, the thing delivered remains the property of the bailor, or at least does not become the property of the bailee, and the thing itself or something for which it has been exchanged under the contract of bailment is to be restored or delivered. If the thing is applied under the instructions given by the bailor, as for instance, if an animal is entrusted to another to be sold and the proceeds applied in a particular way, the question whether the proceeds are or are not at common law the subject of a bailment, is a question of evidence, as appears from the case of R. v. De Banks[2] . The evidence might show that under the terms of the contract, the thing into which the original article was to be converted was to become the property of the bailor or the contrary. If the contract showed that the specific thing was to become the property of the bailor then there was a bailment of that thing, otherwise not. That being the common law, the decision in the last case cited to us, R. v. Holloway (Governor), Ex parte George[3] , was to the same effect. There securities had been delivered by the bailor to another for the purpose of raising a loan upon them. The question was whether, under the terms of the original delivery, the specific money which the bailee was to receive by way of loan, was to remain the property of the bailor or become the property of the bailee. That was under the common law. It was conceded here that under the common law this prosecution could not be maintained for the deficiency resulting from two or three years' transactions by the prisoner as agent for Mrs. Scanlon, because in such a case there was not at common law a bailment. It was not consistent with the terms of his employment as agent, as stated in her evidence, that he was to treat all the sovereigns, cheques, and bank notes which he received as her specific property. If, for instance, this property had been picked out of his pocket while he was carrying it about, the thief could not have been charged with stealing Mrs. Scanlon's money. It is clear from her instructions and the course of dealing between the parties that the property was to be dealt with as a mixed fund, out of which he was to make payments on her behalf, and account to her for the balance. At common law that was not a bailment, because the money was received under such circumstances that the specific money received was not to be handed over to her.

But it is said that the case is different under the Statute law of New South Wales. The amendment of the law relied upon was first introduced in New South Wales in the Criminal Law Amendment Act of 1883. Sec. 71 of that Act provides that "Whosoever being a bailee of any property fraudulently takes or converts the same or any part thereof?or any property into or for which it has been converted or exchanged?to his own use or the use of any person other than the owner thereof?although he shall not break bulk or otherwise determine the bailment?shall be guilty of larceny and may be convicted thereof upon an indictment for larceny." Now, stopping there, a change was introduced into the law by the use of the words "or any property into or for which it has been converted or exchanged." That is to say that, if a bailee, according to the definition I have read, having received property, whether it was to be returned in specie or to be disposed of under the instructions of the bailor, converted it into something else, and then fraudulently converted that substituted property to his own use, or the use of any other person than the owner, he should be guilty of larceny. That clearly made this change in the law, that, whether the conversion of the article bailed was authorized by the bailor or not, the bailee was equally guilty of larceny if he made away with the substituted property. But these words, as to which the difficulty arises, were added to the section: "And the accused shall be taken to be a bailee within this section although he may not have contracted to restore or deliver the specific property received by him or may only have contracted to restore or deliver the property specifically." What we have to do is to construe these words. It is said that they have entirely altered the law of bailment so far as regards larceny. The first observation that suggests itself is that there is nothing to show an intention to alter the law of bailment in general. The legislature merely provides that certain cases shall fall within the section which would not otherwise have done so. They altered the law in some respects. But in what? It must be borne in mind that from 1857, when the first English Statute was passed, and thenceforward, the books had spoken of a new offence, that of larceny as a bailee. In truth it was only a particular form of larceny, but that was the term commonly used. The old rule was that a bailee could not be guilty of larceny. This Statute said that he might be, and so altered the law. We must consider the legislature to have had that in their mind. And in construing these words we should, if possible, give them some sensible meaning as altering the law, and not as being futile. The first point arises on the words: "The accused shall be taken to be a bailee within this section." Of what is he to be taken to be a bailee? It must be of something. You cannot have a bailee in the abstract, any more than you can have, for instance, a husband in the abstract. There must be some property of which he is a bailee. It must mean therefore one of two things, either a bailee of the specific property received by him from the bailor, or of the property which was substituted for it. Let us see which of these constructions will give a sensible meaning to the words. Take the first. There the provision is that the accused shall be taken to be a bailee of the property received by him, although he may not have contracted to restore or deliver it, or may only have contracted to restore or deliver it. But both these conditions may be absolutely irrelevant to the question whether he was a bailee or not. A man is not necessarily any the less a bailee because he has not contracted to restore or deliver the specific property received by him. If the terms of the bailment were that he should sell the articles he is no less a bailee, and if he contracted to give it back to the bailor, and converted it, he would be none the less a bailee. So that on that construction the legislature have declared that he is a bailee notwithstanding the existence of circumstances which have nothing whatever to do with the case. On that construction therefore the words have no sensible meaning. Such a construction should not be resorted to unless we can find no other one which will give a sensible meaning to the words. Let us turn now to the second possible construction; the accused shall be taken to be a bailee of the substituted property within the meaning of this section, (and bear in mind that the legislature had in its mind that they were dealing with bailees of goods, and larceny by such persons of those goods), although he may not have contracted to restore or deliver the specific property, that is, the original property, received by him.

Now that would make a material change in the law, because under the common law, if the bailee had not contracted to restore or deliver the specific thing received by him, it might be that he would not be a bailee of the goods substituted for them, for the reasons already pointed out. The property in those goods could not then have been laid in the bailor, and under these circumstances the words in the first part of the section would be inapplicable, because the offence is converting property "to the use of any person other than the owner thereof;" and, as there would in that case be no bailment of the particular goods in question, and consequently no bailee, the person who converted them would be the only owner known to the law. If the bailment was on the terms that he was to give the property back to the bailor, and he did not do so, but wrongfully converted it to or exchanged it for something else, he might not at common law be a bailee of the property put in its place. Hence arose a difficulty in laying the property in the thing substituted. That difficulty is removed by the second construction of the words of the section, and a full meaning is thereby given to them. In that sense it relates only to the ownership of the substituted article, and in that respect alters the third condition or element referred to by Mr. Lamb and Mr. Hamilton, that the thing, or some specific thing into which the thing bailed has been converted or exchanged under the terms of the bailment, is to be returned to or applied under the directions of the bailor. It becomes no longer material to consider whether the thing into or for which the original article was converted or exchanged was so converted or exchanged under the terms of the contract or not. But in all other respects the Statute leaves the law unaltered. An essential condition in all cases is that the thing first delivered remained the general property of the bailor. So that really the section has no application to such a case as the present.

The question still remains to be considered, whether, where the property is received under the circumstances disclosed in this case, it remains the property of the bailor or becomes the property of the agent. I will deal with that presently.

Reliance was placed by the respondent upon several cases decided by the Supreme Court of New South Wales, some before the Crimes Act 1900, under sec. 125 of which this charge is laid, which takes the place of sec. 71 of the Act 46 Vict. No. 17. The first was R. v. Brodie[4] , and the second R. v. Amora[5] . The conclusions arrived at by the learned Judges in those cases are entirely consistent with all that I have stated. They treated the terms of this part of the section as relating to the substituted property only. They pointed out that under the old law the property in the substituted article would not be in the bailor, and that the effect of this section was that the substituted thing became the property of the bailor, and that therefore the bailee could be guilty of larceny of that thing. A careful consideration of the judgments shows that that was the reason of the decisions. And, if I may say so, I think that they were right. The foundation of both decisions was that there was an original bailment. Whether there was an original bailment in those cases may be open to question, but we are not now called upon to inquire into or criticise the reasons for which in those cases the Court thought that there had been a bailment in the first instance. But, if they were right in thinking so, then the consequence that the prisoners were properly convicted necessarily followed upon their construction of these words of the section. As regards that question each case must stand upon its own merits.

Now, can it be said in this case that there was an original bailment? Mr. Want referred us to a case in which it was held that you cannot bring an action for trover for money, because there is in the case of money no obligation to restore or deliver the specific coins. There must be a bailment of some specific money, cheques, or sovereigns in a bag, or indeed out of a bag. But under ordinary circumstances when money is given by one person to another with instructions to deal with it in a specific way, that is not a case of bailment, but of debt. That distinction was clearly pointed out by the Privy Council in the case of South Australian Insurance Co. v. Randell[6] . "A bailment on trust implies that there is reserved to the bailor the right to claim a re-delivery of the property deposited in bailment," but, "whenever there is a delivery of property on a contract for an equivalent in money, or some other valuable commodity, and not for the return of the identical subject-matter in its original or an altered form, this is a transfer of property for value?it is a sale and not a bailment." So, if there is a receipt of money under a contract, not to hand over the money received, but to account for it by paying a balance that may remain after carrying out the instructions of the principal with regard to the money, that creates a debt and not a bailment. That principle appears to be perfectly clear. It follows that in this case the relationship between Mrs. Scanlon and the prisoner was that of principal and agent, or creditor and debtor, not bailor and bailee. That is at common law. The Statute does not, in our opinion, affect the case in any way. The case of R. v. Pritchard[7] , decided in 1901, was also founded upon the assumption made by the Court that there was an original bailment. It is not necessary for us to say whether we think that there was such a bailment or not. The learned Judges who decided it thought that there was, and that the case was covered by the case of R. v. Amora[8] . It was, if there was an original bailment, but in the absence of a bailment the whole foundation of the structure is gone.

In the present case the learned Judges thought that the rule laid down in the earlier cases to which I have referred, applied. We cannot see that it has any application, because the question here is whether there was an original bailment or not. If there was not, the whole basis is gone.

There is another consideration with respect to the construction of sec. 125, which would be very weighty, if the reasons already given, viz., that the construction which we adopt is the only one which gives an intelligible meaning to the words, or makes any sensible alteration in the law, were not conclusive. Bearing in mind that at common law a person fraudulently appropriating money entrusted to him was not guilty of a criminal offence, and that he is only guilty of an offence when his acts are made punishable by some Statute, we start with the proposition that fraudulent appropriation of property is not an offence. We find that in this Statute the legislature has adopted from the Criminal Law Amendment Act, which had itself adopted them from the English Act of 1861, the Larceny Act, which re-enacted the Act of 1857, a series of careful provisions dealing with fraudulent appropriation of moneys by persons holding fiduciary positions. These provisions begin at sec. 165, which deals with the case of an agent misappropriating money, who is made liable only when there are instructions in writing. Sec. 166 deals with the case of an agent entrusted with any chattel or valuable security for safe custody, who misappropriates it in any manner. Sec. 168 deals with the case of an agent entrusted with property for safe custody who fraudulently sells or in any other way misappropriates it. Sec. 169 makes it an offence for a person entrusted with a power of attorney for sale or transfer of property, to fraudulently sell or misappropriate the same. Sec. 170 deals with the case of an agent fraudulently pledging or obtaining advances on property entrusted to him. Sec. 172 deals with trustees of property fraudulently misappropriating it to their own use, and sec. 173 with directors who fraudulently apply to their own use the property of the company. Sec. 177 contains a safeguard as to all these sections, that no person shall be convicted of any offence under the last preceding twelve sections in respect of any act or omission by him, if before being charged with the offence, he first disclosed the act or omission on oath, under compulsory process or compulsory examination in bankruptcy. So that, when a prosecution is instituted under any of these sections, it is a complete defence to show that the accused had disclosed the fact on oath. Whether that section would apply in this case is immaterial.

We find then that the legislature carefully considered the whole question of fraudulent misappropriation by agents and trustees, and made specific provision with regard to it in different cases. If sec. 125 is construed so as to make every agent who misappropriates money guilty of larceny, all these elaborate provisions would have been futile. According then to the ordinary rule, that if possible a Statute is to be construed so as to give the same effect to all its provisions, sec. 125 should be construed as relating to a different subject-matter.

Nobody can have any sympathy with fraudulent misappropriation. The law in New South Wales may be defective in this respect. It may be that the law in other places is more advanced, and that there are lacunæ or gaps in the law of New South Wales. But if there are, it is for the legislature, not for the Courts, to fill them up. The contention of the Crown amounts to this, that any fiduciary agent who misappropriates trust funds is liable to be charged with larceny as a bailee. There is no such law in the Statute book as we interpret it.

For these reasons, while not in any way differing from the construction placed upon this Statute by the Supreme Court in R. v. Amora[9] , and R. v. Pritchard[10] , as we understand those cases, we think that the case does not fall within the principle of those decisions, nor within sec. 125, and that the conviction must be quashed.

Appeal allowed. Order of Supreme Court affirming conviction discharged. Conviction quashed.

Solicitors for the appellant, Westgarth, Nathan & Co.

Solicitor for the respondent, The Crown Solicitor of New South Wales.

1. 8 Cox Cr. Ca., 491; 30 L.J. M.C., 175.

2. 13 Q.B.D., 29.

3. 66 L.J.Q.B., 830.

4. 15 N.S.W. L.R., 436.

5. 18 N.S.W. L.R., 114.

6. L.R. 3 P.C., 101, at p. 108.

7. (1901) 1 S.R. (N.S.W.), 364.

8. 18 N.S.W. L.R., 114.

9. 18 N.S.W. L.R., 114.

10. (1901) 1 S.R. (N.S.W.), 364.