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WITHOUT PREJUDICE
Mr Tony Abbott PM

Cc:

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Bill Shorten Bill.Shorten.MP@aph.gov.au

Daniel Andrews Premier Victoria daniel.andrews@parliament.vic.gov.au
Senator George Brandis senator.brandis@aph.gov.au
George Williams george.williams@unsw.edu.au
Mr Clive Palmer Admin@PalmerUnited.com
Jacqui Lambie senator.ketter@aph.gov.au
Financial System Inquiry fsi@fsi.gov.au
Ref; 20150605-G. H. Schorel-Hlavka O.W.B. to Mr Tony Abbott PMRe BAIL IN violation of Commonwealth payment of pensions-etc

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C/o josh.frydenberg.mp@aph.gov.au

Tony,
As a CONSTITUTIONALIST I am concerned as to any purported BAIL IN and how
the Commonwealth of Australia deals with its liability of payments of pensions and other welfare
payments as well as monies owning in debts, etc.
.

It is the Commonwealth of Australia that insisted that those who were entitled to receiving
monies from the Commonwealth of Australia had to obtain a bank account for which the relevant
bank could not apply any charges in regard of monies so deposited by the Commonwealth of
Australia for the person(s) for whom the monies had been deposited in the account.
What one has to consider is the judgment in The South Australian Insurance Company Limited
v William Beavis Randell and Samuel Randell (South Australia) [1869] UKPC 71 (14
December 1869) -(1869_71) which makes it very clear that all and any monies that are deposited
with a bank becomes the property of the bank. It is not until a person who deposited the monies
or had someone else depositing the monies in his/her/their account the account holder(s) demand
payment in any form being equal or less then the value of monies on account entitlement that any
liability exist for the bank to make such a payment.
As such, where there is a BAIL IN then the bank cannot claim monies from account holders as
the account holders have no monies in the bank but mere entitlements to a certain value of
monies. An account holder may not seek to draw monies but may desire to transfer value of
monies from say a saving account to a Mastercard account within the same bank. If this were to
be so, then the account holder merely re-assigns the value of monies owed and value of monies
entitled upon to withdraw without altering the banks status in that regard, other than to reduce the
debt owning to the bank and reducing the credit in a savings account.
For example a account holder may have $500.00 in a savings account with the same bank to
which he uses a Mastercard account an d incur a debt of say $480.00. The Bank therefore has a
debt owning to it of $480.00 as well as has the $500.00 but against this a liability to pay out the
$500.00.00 leaving a net value in the bank of $20.00. If therefore the account holder transfer
$480.00 to pay out the $480.00 in debt then effectively the bank will have a $20.00 value and a
liability of paying out $20.00.
As such after this example we see that whichever way the bank net value is and remains to be
$20.00.
p1
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Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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If there was a so called BAIL IN it couldnt advance the bank one iota if the monies deposited
were those say of the Commonwealth of Australia, as the Commonwealth of Australia having
obligated the account holder to have an account cannot then be held liable for recklessness of any
say pension entitlements that the bank may have squandered. The Commonwealth of Australia
liability remains that it must make the payments and where it dictates a certain format of
payments to be followed then it must ensure those payments so made are safe and secure of any
irresponsible gambling by a bank.
Hansard 21-1-1898 Constitution Convention Debates
QUOTE Mr. HOWE:
They show that the thrift practised by the people of Australia is unparalleled in the history of the world. But
there is another side to this question, and a very gloomy and sorrowful side indeed. There are records of
bankruptcy, of reckless, and in some instances corrupt, management, when the hard earnings of the
people and the savings of a lifetime have been swept away-have melted away like snow before the
noonday sun. Through this reckless and corrupt management men who thought they had provided for
their old and declining age found themselves stranded on the cheerless shores of charity, and many of
them have had to accept even amongst ourselves the pauper's lot. The pauper's lot in Australia or in
any other country is to the deserving poor one of the saddest and darkest blots on our civilization.
END QUOTE
.

It would be absurd to accept that after more than 115 years after this statement made which was
specifically to pursue invalid and old age pension the Commonwealth of Australia then could
recklessly make payments of pensions into a bank that it failed to ensure was appropriately
governed and would be solvent in conduct.
The South Australian Insurance Company -v- William Beavis Randell And Samuel Randell
[1869] EngR 60- (1869) 6 Moo PC NS 341- (1869) 16 ER 755-60

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QUOTE
Moreover, it appears to their Lordships, that there is no sound distinction, in
principle, between this alvd the case of money deposited with a Banker on a deposit
receipt. It may have been deposited in negotiable paper, in Bank-notes, or in
Sovereigns, but it is paid in upon the known course and conditions of the Bankers
dealings. A man is supposed [353] to intend the natural consequence of his acts.
He knows the course of dealing ; he hands in the money ; he gets a deposit receipt ;
he knows that the money is taken by the Banker to be dealt with as part of his
current capital, to be used as his own for his own purposes. By the deposit, it is
placed in the disposing power of the Banker ; and surely he who has acquired the
disposing power over property for his own benefit, without the control of another,
has the beneficial ownership.
In the Bankers case in the House of Lords, the case of Foley v. Hill (2 H.L.C.
28), the question was fully discussed, whether a Banker, under such circumstances,
could be considered and dealt with as a Trustee ; Lord Cottenham says, at page 36 :
Money, when paid into a Bank, ceases altogether to be the money of the,Principal
(see Parker v. Marchant, 2 Phillips, 360) ; it is then the money of the Banker, who
is bound to return an equivalent by paying a similar sum to that deposited with
him, when he is asked for it. The money paid into the Bankers is money known
by the Principal to be placed there for the purpose of being under the control of
the Banker ; it is then the Bankers money ; he is known to deal with it as his own ;
he makes what profit of it he can, which profit he retains to himself, paying back
only the principal, according to the custom of Bankers in some places, or the principal
and a small rate of interest, according to the custom of Bankers in other
places. The money placed in the custody of a Banker is, to all intents and purposes,
the money of the Banker, to do with it as he pleases ; he is guilty of no breach
of trust in [%4] employing it; he is not answerable to the Principal if he puts it
into jeopardy, if he engages in a hazardous speculation; he is not bound to keep
it, or deal with it, as the property of his Principal, but he is, of course, answerable
for the amount, because he has contracted, having received that money, to repay to
the Principal, when demanded, a sum equivalent to that paid into his hands.
END QUOTE

p2
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Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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The judgement makes clear that (The South Australian Insurance Company Limited v William
Beavis Randell and Samuel Randell (South Australia) [1869] UKPC 71 (14 December 1869))
that the monies are not due and owning until a demand is made for payment to the bank, and in
the meantime the bank can do with the monies whatever it desires. As was with the wheat, the
miller could sell or the wheat in his possession but the moment a farmer demands payment for
the wheat he is obligated to make such a payment up to the value of the wheat so provided to the
miller. From this it must be clear that it is irrelevant if a bank (banker) has or has not depleted
any monies held by it because not until the account holder demands certain payments to be made
within his/her entitlement can any liability arise for the bank (banker) to do so.
As such I view on that issue any so called BAIL IN WOULD SERVE NO PURPOSE IN
THAT THE ACCOUNTHOLDERS NOT DEMANDING PAYMENTS HAVE NO
INFLUENCE TO THE FINANCIAL POSITION OF THE BANK UNTIL THE
ACCOUNT HOLDER DEMANDS PAYMENT. IT MAY VERY WELL BE THAT A
BANK MAY HAVE DEPLETED ALL RESERVES AND THE ACCOUNT HOLDER
DECIDE THAT IT IS BETTER TO WAIT BEFORE MAKING ANY DEMAND FOR
PAYMENT UNTIL THE BANK HAS AGAIN SUFFICIENT FUNDS TO DO SO.
The Commonwealth of Australia in my view couldnt make any obligations to any account
holder to having to carry some loss incurred by the bank in its reckless dealings with monies,
where the recipients of the same pensions but having an account with other banks not in dire
strait do not have the same obligations. The Commonwealth of Australia chose to sell the
commonwealth bank of Australia and so enhanced the risk of people such as pensioners to be
vulnerable to irresponsible conduct by this bank. The Commonwealth of Australia by depositing
monies in any account to the benefit of any person therefore must accept liability that it ensures
such bank, society or whatever is financial sound at the time of making such a deposit.
As the court clearly held that monies deposited into the bank are the property of the bank then the
Commonwealth of Australia by depositing monies into an account is not actually making a
payment to the person entitled to the payment but take the risk that the monies designated to be
payable to the recipient entitled to it may never make it that far.
If for example a person owes monies payable to the Commonwealth of Australia but the bank
fails to make that payment, despite that the account holder instructed the bank to make such a
payment then the Commonwealth of Australia will not pursue the bank but the account holder
who failed to make the payment.
As such if the Commonwealth of Australia pays into an account (dictated by the Commonwealth
of Australia to provide for any payments) but the bank fails to provide those value of monies or
any part thereof to the account holder when payment is demanded then I view effectively the
Commonwealth of Australia made no payment at all to the account holder. It could seek a refund
from the relevant bank but couldnt demand monies from the account holder that were never
provided to the account holder.
.

The Commonweal.th of Australia is liable to say pay all pensions the same amount of monies
where they so to say are entitled to the same amount of monies in a particular class. If then the
Commonwealth of Australia were to affect the monies to which pensioners were entitled upon
(by BAIL IN) but not so to other pensioner who are with a different bank then the
Commonwealth of Australia would fail in its obligations to provide in that regard UNIFORM
payments.
As the Commonwealth of Australia was constitutionally provided legislative powers as to
banking, other than state banks, then the onus is upon the Commonwealth of Australia to ensure
to regulate banking in an appropriate manner or have its own bank that deals with
Commonwealth of Australia payments to those entitled upon. Hence, as long as the
Commonwealth of Australia fails to ensure that banks are sol vent and cannot be engaging in
p3
5-6-2015
Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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risky money speculation or other conduct that may jeopardize its financial position then I view
the Commonwealth of Australia cannot avoid liability, neither can it deprive those entitled to
payments from the Commonwealth of Australia of the legal entitlements of payments by the
Commonwealth of Australia.
This obviously then presents another issue and that is that if one or more banks are so to say
going to the wall can the Commonwealth of Australia then legislate that all account holders of
whatever bank are to lose a certain value of their entitlement as to provide funds for the banks
that were mismanaged, etc. Obviously, while such con duct were to make it more equal fort those
pensioners who are holding a bank account, it wouldnt make it equal for those pensioners which
are not account holders with any bank but rather with a building society or whatever other
financial institution. Neither would this affect any payments made to any pensioner into a debt
account as then the monies paid are immediately paid to the bank to reduce its debt. Pensioners
who have a running debt account may desire to have a deposit made as such (for example in a
mortgage account) so that the monies are immediately reducing the mortgaged, albeit the account
holder can draw against it to increase the debt again.
For this any so called BAIL IN couldnt affect the very pension ordinary entitled to the same
amount of monies because of the various systems of banking in existence.
The referenced to pensioners must not be deemed to be limited to pensioners as the same applies
to anyone else entitled to certain payments by the Commonwealth of Australia.
Because the court ruled that monies one deposited into a bank is the property of the bank and the
account holder merely has a right to withdraw monies when demanded, then clearly any so called
BAIL IN has no purpose if account holders are not claiming any payments at that time.
In my view one cannot deny the right to make a demand of payment at a time long after the bank
may have perhaps been restructured and financial stable. Yet, the so called BAIL IN would not
make the bank financial stable but merely so to say rob account holders of their future
entitlement of payment upon demand regardless if the bank by then is financial sound. Also, it
would in effect in one way reduce the accountholders entitlement while not the banks entitlement
upon the same, such as the above example of the $20.00 net. As such the Commonwealth of
Australia would in effect with any BAIL IN endorse recklessness by banks how to manage
their financial situation without any real consequences to it.
An appropriate solution would in my view would be that the Commonwealth create say a
Peoples bank that is and remains constitutionally owned by the People (as such an amendment
of the constitution would be required) to avoid ever again the Commonwealth of Australia to
willy nilly sell of a bank as such, and then use this bank for all financial transactions that the
Commonwealth of Australia may desire to make to whomever.
In my view there is nothing to bar any State to again set up a State Bank, as while the State of
Victoria sold its State Bank to the Commonwealth of Australia it couldnt put condition on the
State to never again recreate a State Bank, this is because the provisions and application
constitution cannot be undermined by any deals between the Commonwealth of Australia and
any or all States.
Hansard 1-3-1898 Constitution Convention Debates (Official Record of the Debates of the National
Australasian Convention)
QUOTE
Mr. WISE.-If the Federal Parliament chose to legislate upon, say, the education question-and the
Constitution gives it no power to legislate in regard to that question-the Ministers for the time being in each
state might say-"We are favorable to this law, because we shall get 100,000 a year, or so much a year, from
the Federal Government as a subsidy for our schools," and thus they might wink at a violation of the
Constitution, while no one could complain. If this is to be allowed, why should we have these elaborate
provisions for the amendment of the Constitution? Why should we not say that the Constitution may
be amended in any way that the Ministries of the several colonies may unanimously agree? Why have
this provision for a referendum? Why consult the people at all? Why not leave this matter to the
Ministers of the day? But the proposal has a more serious aspect, and for that reason only I will ask
permission to occupy a few minutes in discussing it.
p4
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Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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END QUOTE

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While it may be argued that by transferring the rights of account holders/shareholders/etc by a

certain value to the bank it then has a cash injection to spend itself out of any financial
difficulties, but then again, the Commonwealth of Australia would by this burden certain
pensioners beyond their fault and not doing the same against others and as such the above set out
still applies.
peace, order, and good government
HANSARD 22-9-1897 Constitution Convention Debates (Official Record of the Debates of the National
Australasian Convention)
QUOTE The Hon. E. BARTON (New South Wales)[10.32]:

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I have read these reasons through very carefully, and I have been unable to discover that any of the
evils which my hon. and learned friend, Mr. Clark, fears may be expected from leaving these words as
they are. The powers are powers of legislation for the peace, order, and good government of the
commonwealth in respect of the matters specified. No construction in the world could confer any
powers beyond the ambit of those specified.
The Hon. N.E. LEWIS (Tasmania)[10.35]: I should like to submit for the consideration of the leader of the
Convention the question whether the words which the legislature of Tasmania have proposed to omit might
not raise the question whether legislation of the federal parliament was in every instance for the peace,
order, and good government of the commonwealth. Take, for instance, navigation laws. Might it not be
contended that certain navigation laws were not for the peace, order, and good government of the
commonwealth, and might there not be litigation upon the point? We are giving very full powers to the
parliament of the commonwealth, and might we not very well leave it to them to decide whether their
legislation was for the peace, order, and good government of the commonwealth? Surely that is
sufficient, without our saying definitely that their legislation should be for the peace, order, and good
government of the commonwealth. I hope the leader of the Convention will give the matter full
consideration with a view to seeing whether these words are not surplusage, and whether, therefore, they had
better not be left out of the bill altogether.
The Hon. E. BARTON: The suggestion of the hon. member will be considered by the Drafting
Committee.

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Amendment negatived.
END QUOTE

The issue is that the bank is gambling and/or mismanage its own monies and should have no
rights to then acquire the assets off shareholders/account holders to make payments of its own
inflicted recklessness and perhaps start all over again the same.
Indeed, the Commonwealth of Australia is limited to legislating for the peace, order and good
government of the Commonwealth of Australia and the banks are private organizations to
which I view the Commonwealth of Australia possesses no legislative power to provide for any
so called BAIL IN and/or BAIL OUT.
WHILE THE LEGISLATIVE POWERS FOR BANKING IS TO REGULATE THE
BANKS THEMSELVES, IT CANNOT INCLUDE TO SO TO SAY ROB ACCOUNT
HOLDERS OF THEIR ENTITLEMENTS.
IT WOULD IN MY VIEW BE ACQUSITION FOR PRIVATE PURPOSES WHICH
WOULD BE UNCONSTITUTIONAL.
Commonwealth of Australia Constitution Act 1900 (UK)

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QUOTE

(xxxi) the acquisition of property on just terms from any State or person for any purpose in respect
of which the Parliament has power to make laws;
END QUOTE

p5
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Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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We should hold bank managers/directors more accountable to seek to avoid their reckless
investments!
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The document can be downloaded from:

http://www.scribd.com/doc/235078173/20140725-G-H-Schorel-Hlavka-O-W-B-to-Submissionsto-the-Financial-System-Inquiry
Below I have converted to the best of my ability as my computer allows for the conversion of the
Pdf file to word, using copy and paste.
The South Australian Insurance Company -v- William Beavis Randell And Samuel Randell
[1869] EngR 60- (1869) 6 Moo PC NS 341- (1869) 16 ER 755-60
QUOTE

ON APPEAL FROM TEE S ~ P ~ CEOV~RTE O F THE P R ~ ~ I N COEF SOUTH

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AUSTRALIA.
TEE SOUTEI AUSTRALIAN I ~ ~ ~ R A~ N ~C ~W P A ~ W, I L-L I~A~ ~ ~ BEAVIS RANDELL and ~ A M
R~ AEN~~ E L L , - ~ e*~ [D~eco. ~14~, 1~86~91~. ~
A bailment on trust implies that there is reserved to the Bailor the right to
claim a re-delivery of the property deposited in baiIment [6 Moo. P.C. (N.S.)
Wherever 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 [6 Woo. P.C. (N.S.)

351, 3521.
Where, therefore, corn was deposited by Farmers with a Miller, to be stored
and used as part of the current consumable stock or capital of the Millers
trade, and was by him mixed with other corn deposited for the like purpose,
subject to the right of the Farmers to claim at any time, an equaI quantity
of corn of the like quality, without reference to any specific bulk from which
it was to be taken, or in lieu thereof the market price of any equal quantity,
on the day on which he made his demand, with a small charge for general
purposes :Held, that such a transaction amounted to a sale by the Farmer to the Miller,
and was not a bailment of the corn, and entitled the Miller to claim in respect
thereof upon a Policy of Insurance against fire as for his own property, notwithstand~
ng that such corn was not specifical~y insured, or described, as
required by the condit~ons of the Policy, as goods held in trust and on
commission, upon which condition the otaim was resisted by the Insurers.
This was an action on a Fire Policy of Insurance, in which the Respondents were
P~aint~ffasn, d the AppelIants were Defendants.
The Appellants were an Insurance Company, carrying on bminess in the
Province of South Australia, aiid having their principal place of business at E3421
Adelaide, in that Province. The Respondents were Millers, carrying on business
at Bluniberg, in the same Province.
The facts were these:On the 4th of July, 1866, application was made to the Appellants by the Respondents,
to insure the current stock in their Mill, namely, wheat, flour, sacks,
etc., to the amount of d21250, against loss or damage by fire, and on the same day an
Insurance was effected in the terms of such application, and subject to the conditions
endorsed on the Policy; one of which was that Goods held in trust or on comt~ission
must be insured as such, otherwise the Policy will not extend to cover them.
On the 17th of February, 1867, a fire occurred, whereby the Respondents Mill,
with the stock therein, was destroyed. A claim was made by the ~espox~denftosr
the loss, but the amount being disputed by the Appel~ants, an action was brought
by them to recover the value of the stock.
The Plaintiffs declared upon the Policy, and the Defendants pleaded, that the
P~aintiffs were not interested in the stock, and also that in their proposals f34.33
for the insurance they represented that the stock was to be insured for themselves,
whereas it was held by the Plaintiffs in trust for other persons. Issue was joined
on the pleas, and the action was tried before the Chief Justice and a jury.
Upon the trial it was admitted by the Plaintiffs, that the stock which had been
destroyed by the fire had been paid for by the Defendants, except such portion SS
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Mr G. H. Schorel-Hlavka O.W.B.
INSPECTOR-RIKATI about the BLACK HOLE in the CONSTITUTION-DVD
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the Defendants alleged was held by the Plaintiffs in trust for others; and the
question was, whether such portion, consisting of wheat, was held by the Plaintiffs
in trust, within the meaning of the above conditiox~, and was, therefore, not
covered by the Policy.
* Present : Lord Chelmsford, Sir James William Colvile, Sir Robert Pllillimore,
sir Josepfi Napier, Bart., and the Lord Justice Giffard.

3511.

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765
VI MOORE N.s., 344 SOUTH AUSTRALIAN INSURANCE eo. o. RANDELL [I8691
TIE evidence, so far as it was material to this question, showed that according
to the Plaint~ffs custom and course of business wheat was received by them from
Farmers to whom such course of business and dealing was known, and on receipt,
shot out of Rags in the presence of the Farmers who brought it into. large hutches,
here it became mixed with other wheat which had been received in a sirnilar manner,
and on part of which advances had been made to the Farmers by the Plaintiffs. The
wheat thus mixed lost its identity and became the current stock of the Plaintiffs,
which, according to their course of dealing, known to tha Farmers, was either sold
as wheat by the Plaintiffs or ground in their Mill. The Plaintiffs could do what
they liked with it. If ground, the flour produced from srxch stock was sold and otherwise
dealt with by the PIaintiffs as they t ~ i o u f~it, ~an~dt a s their own property. It
never was intended by the parties that the identical wheat delivered by the Farmers
should be returned to them. On delivery of the wheat to the Plaintiffs they gave
to the Farmer a receipt in E3443 these terms :- Received, etc., to store, and it, was
shot to be stored or taken on storage. The Farmer could at any time demand an
equal quantity of wheat of like quality with that delivered by him to the Plaintiffs,
or the market price of an equal quantity, fixing the price as of the day on which he
made his demand. The Plaintiffs had the option of delivering wheat of like
quality or paying such market price Advances were frequently made to the
Farmers by the Plaintiffs in respect of the wheat so delivered to them. No charge
was made by the Plaintiffs in respect of the wheat until after the lapse of a certain
time, when the charge was one farthing per bushel per month. The wheat in question
had been brought by Farmers to the Plaintiffs in manner aforesaid, and in the
course of business, and had been mixed with other wheat, and treated in the manner
aforesaid, and a portion of it had been paid for by the Plaintiffs. No evidence was
adduced on the part of the Defendants, but their Counsel applied for a nonsuit on
the ground that the wheat was held in trust, and was not the property of the
Plaintiffs.
The Chief Justice declined to nonsuit the Plaintiffs, and by consent the verdict
was entered for them for 2698, including interest, with leave to the Defendants to
move to enter a verdict for- them if the Court should be of opinion, that the wheat
so taken on storage was held in trust within the terms of the conditions in the
Policy.
A rule nisi was granted calling on the Pla~ntiffst o show cause why the verdict
for the Plaintiffs should not be set aside and a verdict entered for the Defendants,
pursuant to leave reserved, upon the following grounds :--First, that the goods
stored had not been [345] assured by the Plaintiffs; and secondly, that the wheat
taken on storage was held upon trust within the terms of the conditions of the
Policy.
This rule came on to be argued before the Chief Justice and Mr. Justice Gwynne,
when, the Court was divided in opinion, Mr. Justice Gwynne being of opinion, that
the property in the wheat when delirered was vested in the Plaintiffs beneficially,
as their own property, and was not property held in trust ; the Chief Justice being
of the contrary opinion, and Mr. Justice Wearing being precluded from taking part
in the judgment, the rule was discharged.
From this judgment the present appeal was brought.
Mr. C. E. Pollock, Q.C., and the Hon. A. Thesiger, for the Appellants.-The amount
of property covered by the Insurance depends on the terms of the Policy, and the
evidence. The receipts given to the Farmers were to store,)1 and though the Respondents,
as Millers, were permitted to grind and convert the corn deposited with
them into flour, get until they did so they mere merely Bailees of such corn, and held
the same in trust, within the exception contained in the conditions of the Policy.
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Goods held in trust must be 90 described to be included in a Policy: F&ers v.

illona~ehF &e a& LGfe ne^ C o ~ (5~ El. aand~ Bl. , 70); The L0do.n and
~ T ~ t h -Ra~ilweay sCr~vm~pwg~ v , GIys (1 E. and E., 652). The right of the
Respondents to grind or sell wheat taken from the bulk was an incident of the
storage; and they admitted, in their correspondence and claim, that the Insurance
was not made for their own p r o ~ ~ 6 ] - ~ e c t i obunt, for that of the Farmers, for whom
they, in fact and in law, held the wheat in trust. Bailment, according to Blackstone,
2 Corn. p. 451, is a delivery of goods in trust, upon a contract, expressed or implied,
7 56
SOUTH AUSTRALIAN INSURANCE CO. U. KANDELL [ 18691 VI MOORE N.S., 347
that the trust shall be faithfully executed on the part of the Bailee: 2 Steph. Coin.
p. 78 [4th Ed.] ; Sir William Jones on Bailment, p. 64 ; Story on Bailment, , 283 ;
Les T e r n s de la Ley, tit. As to borrowing a thing perishable,
as corn, .wine, or money, or the like, a man must, from the nature of the thing, have
an absolute property in them, otherwise it could not supply the uses for which it was
lent ; and, therefore, he is obliged to return something of the same sort, the same in
quantity and quality with what is borrowed. That is the law as laid down in the
Doctor and Student, Dial, 11. ch. xxxviii. ; by Muchall [Ed. 18151, In such a
case, however, if what is borrowed is lost, although it be not by any negligence of
the Borrower, as if he be robbed of it, he must make the loss good : Coggs v. Bernmd
(Ld. Raym., 915). Then is the mixture of the corn such a confusion of goods as
could vest the property of the whole in the Respondents. They were mere Storers,
and the mixture being by consent of the several Owners, they would have an interest
in common in proportion to their respective shares; 2 B1. Com. p. 405. The
Conzmixtio, Confusio, and Specificatio of the Civil Law differ materially from our
Law. Commixtio is the mixing together of things not liquid, and has no effect upon
the rights of the respective Owners if separation is practicable, but if not, as in this
case, creates a joint ownership : Irtst. Lib. 11. tit. I. [a471 pl. 28 ; Mackeldey, Systema
Juris Romani hodie usitate, $8 251, 252 ; Mackeldeys Mod. Civil Law, B. I. 270,
p. 285 [Ed. 18451; 2 Eents Comm. 5 589 [llth Ed.]; Jon,es v. ilfoore (4 Y. and C.,
351-356); Young v. Matthews (Law Rep. 2 C.P., 127); BuckTey v. Gross (3 B. and S.,
566, 574). Confusw likewise producks a connected whole, which, however, is
fluid : Ib. note * ; while Specificafio, which has no bearing in this case, is the
acquisition or the ownership of a new species: Mackeldey, Syst. JUC. Rorn. 3 246.
Pothier includes both Csmmixtw and Confusio under one head, Tom. IX. p.
166 ; Story on Bailments, 8 283, citing SeymouC v. Brown (19 dohnsons (Amr.) Rep.,
44); Peaxrce v. Schmch (3 Hills New York (Amr.) Rep., 28); Wccdszuor-thi v. Allcott
(2 Sdden (kmr.) Rep., 64). Then the mixing must be either a sale or a mutuum.
for if neither, it can only be a bailment, and the corn so in storage would be held in
trust, and within the exception in the Policy. To constitute a sale there must be
an intention to pass property : Yourcg v. Matthews (Law Rep. 2 C.P., 127). Pothier,
in his Trait6 du Contra# de prdt de Consomptzon, Tom. IV. tit. 11. [Ed. 18271,
discusses all the kinds of such contract, and defines and describes them as a mutuum.
Mr. Mellish, Q.C., and Mr. Way (of the Australian Bar), for the Respondents.-The wheat was not held in trust within the meaning of the conditions of the Policy.
The language used in the Policy was not according to the meaning of the parties
contracting. The contract was not one simply of deposit, but the wheat became
vested in the [448] Respondents on the delivery to them by the Farmers, and was,
in fact, sold to the Respondents, the price being to be paid in kind or in money.
If in money, at the market value of wheat equal in quality, at the time of demand
by the Farmers. There was n3 contract of bailment; the wheat deposited never
could be restored, and was never intended to be. Other wheat was to be substituted,
or else a money payment. Nor is there anything of a fiduciary character in the
deposit of the wheat by the Farmers. It is precisely similar to the deposit of money
with a Banker, the same money is never agreed or intended to be returned ; in such
a case there is no analogy to the relation between Principal and Factor, or Agent,
who is a quasi Trustee for his Principal in respect of the particular matter for
which he i s appointed Factor or Agent: Foley v. Hill (2 H.L.C., 28). It is not a
mutuum where the identical thing lent is not to be returned, but another thing of
the same kind, quality, nature, or value, as money, wine, or other things capable
of being valued by number, weight, or measure: Storys Law of Bailment, 5 47;
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but it is that species of bailment described by Sir William Jones, in his Law of
Bailment, p. 64, as a loan for use as distinguished from a mutuum, which,
a8 the specific things are not to be returned, the absolute property of them is
transferred to the borrower, who must bear the loss of them if they be destroyed by
wreck, pillage, fire, or other inevitable misfortune; and in a note by the Editor,
the very article in question, namely, corn, is referred to as an example of the peculiar
law: Ib. p. 65; Pothier, Trait6 du Contrat de DCpGt, Tom. IV. [349] tit. 111. ch. I.
Art. 11 ; Trat. du Droit de Domaine de PropriCtC, Tom. VIII. p. 2, ch. 11. S. 3, Art. 4.
In &pence V. The Union Marine Insurance Company (Law Rep. 3 P.C., 427), the doc))

757
Bailememt, p. 73.
trine of nlzd C u / ? ? ~ ~) its~ fuolly considered. There is not~iingi n the
word storage being used, to alter the legal result of the transaction, as shopin
by the evidence. But the dealing between the parties did not amount even to a
~ ~ z acc~ord~ing ~to thue C?ivil~ Law~: I nst. Lib. 111, tit. XIY. The corn CLelivered
was, while in bulk, not held in trust.
Their l~rds l i~pjsu d g ~ e n tw as pronounced by
Sir Joseph Napier.-The question in this case is, whether the wheat that was
taken in storage by the Respondents, under the circumstances stated in the Chief;
Justices notes of the evidence at the trial before him, is to be considered as property
heId by the Respondents in trust? or whether it is correctly described in the proposal
and in the Policy of Insurance as property in which the ~espondentsw ere
interested for themselvcs~ According to the ease that was cited by Mr, Thesiger
in his very able argument, the words of the Policy as to property held in trust
ought not to receive a technical Chancery construction (if I may so call it): but
the substant~al question is, whether the Respondents were the bene~cial Owners of
the wheat insured, or had merely the po~session as Bailees, whilst the property remained
in the Farmers who delivered the wheat, so long at least as it was not
actually a p p r o~r~a t ebdy use or pa~mento n the part of the ~ e s ~ o n d e n t s ?
Look~ngt o the evidence, in order to ascertain the conditions upon which this
wheat was del~vered and taken in storage, we find in the evidence of Randell (one
of the Plaintiffs) the following passage :- At the time of the fire the whole of the
wheat, excepting a few bags-not more than twenty-was in bulk. It had been
shot out of bags into large hutches. The wheat
was ours to do what we thought proper. We might grind or sell; and when any
one came who had brought us wheat, we had to pay market price of equal quality.
Again, the Foreman of the Plaintiffs, in his evidence, says :---. Farmer brings the
wheat, and he can sell it when he pleases to the Miller. ~ i l ~ ceanr do what he
likes with it, grind it or sell it. BII wheat when brought was emptied at once into
a storjng- lace in prese~ceo f Farmer who brought it.
The evidence of the only Farmer who was examined does not throw any light
upon the ~ u e s t ~ obnu,t rather obscuxes it. The substance and effect of all the evidence
that bears on this part of the case is this. When wheat W ~ bBro ught by the
Farmer to the Miller, he delivered it to the Miller to be stored with his current
stock that was used for the known purpo~eso f his trade. It was, with the consent
of the Farmer, put into storage with this consumable stock of the Miller; the
Farmer got a storage receipt for it, and might afterwards come, at any time he
thought fit, to claim the price of the same quantity of wheat of equal quality,
according to the market price of the day OR which he claimed ~ a ~ ~ e n t .
The evidence is somewhat con~useda nd i n c o n s~s -~~l ] - toenn th e surface in one
or two places, but it su~cient lya ppears that the Farmer had the right to select hi6
time for dcmand~ngp ~ymentf or the wheat, which, with his consent, was stored a t
the time of delivery, as part of the current consumable stock, which the Miller might
grind or sell or use a t his will and p~easure,f or his own profit.
There i s no direct evidence that the Farmer had the option of claiming an
equal quantity of wheat of the like quality) instead of the value in money; and
from the very nature of the dealing he could no% get baGk the identica1 wheat delivered,
as it was mixed in the common stack with his consent,
A b a i l ~ ~ e noft trust implies, that there is reserved to the Bailor the right to
claim a re-delivery of the property deposited in bailment. No doubt the case8 that
are referred to are generally eases of a bailment without a question of mixture.
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Hr. Thesiger, in his argument, put it as ift here was some d i ~ i n ~ t i oinn t he case,
in favour of the Appellants) on account of the ~ ~ ~j buuk thr e feacts , 8s they appear

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on the evidence, exclude the app~~c abi~oift ys uch a ~~s t inc t i#nT, akinx the view
of it most favourab~eto his argument, that the F a rwr could claim, as of right, an
equal quantity of the Iike quality, this must be withodt reference to any specific
bulk from which it should be taken, for the stock with which he consented to allow
his wheat to be mixed might a ave been uaed for the benefit of the ~ ~ I lbeefro re
the claim of the Farmer would
The law seems to be c o n c ~ s ~an~dy accur~telys tated by Sir ~ ~ i l i 8$mone s, in
Wave been a MiIler twelve years.

758
SOUTH AUSTRALIAN INSURANCE CO. v. RANDELL [1869] VI MOORE N.s., w2

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the passages cited by Mr. Mellish, from his Treatise on Bailments, pp. 64 and 102
[3rd Ed.]. Wherever there is a delivery of pro-[352]-perty on a contract for an
equivalent in money or some other valuable commodity, and not for the return of
his 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.
Chancellor Rent, in his Commentaries, Vol. ii. 5 589, p. 781 [llth Ed.], where
he refers to the case of Seyrnour v. Brown, of which he disapproves in common with
Mr. Justice Story, adopts the test, whether the identical subject-matter was to be
restored, either as it stood, or in an altered form; or whether a different thing
was to be given for it as an equivalent; for in the latter case it was a sale, and not
a bailment. Now,
the Farmers do not appear on the evidence to have contracted for more than to
be paid for an equal quantity of the like quality of wheat, delivered at the market
price of the day on which a settlement should be demanded. Supposing that there
was an implied option to claim an equal quantity of the like quality at any time
after delivery, there could be no right of claiming an aliquot part of the identical
bulk with which his wheat was mixed up at the time of delivery, for this was consumable
at the will and pleasure of the Miller, as part of the current stock, liable
to fluctuation, from time to time, both in quantity and quality.
Moreover, it appears to their Lordships, that there is no sound distinction, in
principle, between this alvd the case of money deposited with a Banker on a deposit
receipt. It may have been deposited in negotiable paper, in Bank-notes, or in
Sovereigns, but it is paid in upon the known course and conditions of the Bankers
dealings. A man is supposed [353] to intend the natural consequence of his acts.
He knows the course of dealing ; he hands in the money ; he gets a deposit receipt ;
he knows that the money is taken by the Banker to be dealt with as part of his
current capital, to be used as his own for his own purposes. By the deposit, it is
placed in the disposing power of the Banker ; and surely he who has acquired the
disposing power over property for his own benefit, without the control of another,
has the beneficial ownership.
In the Bankers case in the House of Lords, the case of Foley v. Hill (2 H.L.C.
28), the question was fully discussed, whether a Banker, under such circumstances,
could be considered and dealt with as a Trustee ; Lord Cottenham says, at page 36 :
Money, when paid into a Bank, ceases altogether to be the money of the,Principal
(see Parker v. Marchant, 2 Phillips, 360) ; it is then the money of the Banker, who
is bound to return an equivalent by paying a similar sum to that deposited with
him, when he is asked for it. The money paid into the Bankers is money known
by the Principal to be placed there for the purpose of being under the control of
the Banker ; it is then the Bankers money ; he is known to deal with it as his own ;
he makes what profit of it he can, which profit he retains to himself, paying back
only the principal, according to the custom of Bankers in some places, or the principal
and a small rate of interest, according to the custom of Bankers in other
places. The money placed in the custody of a Banker is, to all intents and purposes,
the money of the Banker, to do with it as he pleases ; he is guilty of no breach
of trust in [%4] employing it; he is not answerable to the Principal if he puts it
into jeopardy, if he engages in a hazardous speculation; he is not bound to keep
it, or deal with it, as the property of his Principal, but he is, of course, answerable
for the amount, because he has contracted, having received that money, to repay to
the Principal, when demanded, a sum equivalent to that paid into his hands.
An indelible incident, of trust property is, that a Trustee can never make use
of it for his own benefit. An incident of property, that is in bailment, is, that the

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Bailor may require its rewtoration. This right of recalling the deposit is relied on
by Lord Cottenham (p. 39), as a test to try the principal on which the fiduciary
relation was sought to be maintained. But in this case, no right seems to exist
on the part of the Depositor to get back either his identical wheat, or a share of
the specific bulk in which his wheat was mixed with his consent; there is no such
right on the one side, while, on the other, there is the power in the Miller of doing
what he liked with the wheat after it became part of his current stock. This is
an inverted order of right that is wholly inconsistent with the relation of Trustee
and cestui qqii trust that is contended for in this case.
7!i9

This is the true and settled doctrine, according to his opinion.

VI ~ 0 N.S.,0 566 ~SOUT H AUST~ALIAN~ N S U R (A20.~ U~. R~AN DELL El8691
Lord B r o u ~ ~ ~ina t~hei ~ca,s e already cited, says (p. 43) : Now, as to the Banker :
is his position with respect to his Customers that of a Trustee with respect to his
cestui p e tm at.2 Is it that of a Fr i n c i~awl ith respect to an Agent, or that of a
Principal with respect to a Factor? I see no ground for contend~ng that there is
any identity in those two points. I am now speaking of the common position of
a Banker, which consists of the common case of receiving money from his Customer
on condition of paying it back when asked for, or whan drawn upon; or of receiving
money from other parties, to the credit of the Oustomer, upon like conditions
to be drawn out by the Customer, or, in C O ~ ~ ~pa~rlOanRce , the money being
repaid when asked for, because the party who receives the money has the use of it
as his own, and in the using of which his trade consists, and but for vhich no Banker
could exist, especialIy a Banker who pays interest. But even a Banker who does
not pay interest could not possibly carry on his trade if he were to hold the money
and to pay it back, as a mere d e p o s ~ t aof~ t he principal. But he receives it, to
the knowledge of his Customer, for the express purpose of using it as his own,
which, if he were a Trustee, he could not do without a breach of trust.
As to the charge for storage, it is to be observed, that it is not the storage of the
wheat that was actually delivered, or of an equal quantity of the specific stock with
which it was mixed up at the time of delivery, but storage for an equal quantity
which is assumed to have been kept in the current stock of the Mill. It seems to be
an equ~tab~teer m of the final settlement, in which the Farmer has the benefit of
selecting the time that is most advantageous for himself to claim payment at the
market price of the day for the same quantity of like quality of wheat that he
delivered.
The charge or deduction for storage of so much in quantity as was d~ivered
may be set off against the Farmers privifege of selecting his own time for payment
at the market rate of the day. This is the more reasonable if there was an option
on the part of [366] the Miller to give a Farmer a like quantity of a like quality,
because he might then be supposed to have kept a quantity in storage for the purpose
of having it in his power to exercise this option j or, if the Farmer had a correspondin~
o ption of claiming an equal quantity of like quality, instead of the money
value. But, however this may be, it does not vary the general nature of the case
any more than where depos~ts are made with a Banker for a given time, and he
allows a small rate of interest on the money.
P ~ ~ t tht e~ jnnsu~ra nce out of view, let us see on whom would the loss fall of the
stored wheat destroyed by this fire. Would it be any answer for the Miller to say
to the Farmer, when he came to claim the price of the wheat, according to contract:
A11 this wheat has been destroyed by a fire? The Framer might well reply : It
was deKivered to you, and at once put into your current s$ock, to be used as -you
t*hought fit for your own use and benefit. You acquired complete dominion over
it, and you must, therefore, bear the loss. It i s not upon the exercise of a domin~on
not subject to control, but upon having such dominion, that beneficial ownership
depends. The party who has acquired such dominion over property is not bound to
exercise it8 in any particular way or at any particular time, but the having the
power to use property as his own for his own purposea, is wholly irreconc~lab~e
with the notion of his being a Trustee of t5e property, holding it for the benefit of
his ceetzci que trust.
There i s a passage in Doctor and student^ Dial. by ~ u r c h a [~Ela + I816],

to which reference may here be made. It i s in the second dia~ogue,[

$?ch. I

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xxrviii. : A man may have of another, by way of loan or borrowing money, corn,
wine, and such other things, where the same thing cannot be delivered if it be
occupied, but another thing of like nature and like value must be delivered for it ;
and such things he that they be lent to, may, by force of the loan, use as his own ;
and, therefore, if they perish, it is at his jeopardy. Here, by force of the contract,
the Miller might use as his own the whole of the wheat that was delivered to him by
the Farmers. Accordingly, the Miller would be respons~ble to the Farmers, notwithstanding
the loss of the wheat by the fire, gees suo pe&t d u ~ ~ ~ ~ .
If, then, the property was so vested in the ~ s ~ o n d e ntthsa t they must bear
the loss by the fire, if not i ~ d e ~ n i ~bye din surance, is ndt this the very case in
which, on e ~ e ~ tani iin~su~ran ce, a man ouqht to describe the property substantjally

760

SOUTH AUSTRALIAN INSURANCE CO. v. RANDELL [I8691 VI MOORE NS.,

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ws

and honestly as being insured for himself, and not held in trust for the benefit of
another? Although afterwards there may have been some inexactness and inconsistency
in the language of Mr. Randell, when trying to get a settlement, and
meeting objections that were raised by the Appellants (and we all know that such is
not unusual in disputed cases), this cannot alter the legal result of the whole
transaction. It depends up?n ascertained facts, and we are bound here to read the
report of the evidence, as reasonable men, with the eyes of common sense, and to
make every just inference which the statement of the evidence fairly warrants.
Their Lordships do not find anything in the Judges notes that is not reconcilable
with the Plaintiffs statement of the result of the dealings. [%I33 The wheat was
ours to do what we thought proper. We might grind or sell; and when any one
came who brought us wheat, we had to pay market price of equal quality. The
result is, in the opinion of their Lordships, that the Farmers who delivered their
wheat to the Responden~su pon the terms disclosed in the evidence, should not be
considered afterwards to be the beneficial owners and the Respondents bailees in
trust for the Farmers.
It appears to their Lordships, that this is not the case of a possession given
subject to a trust, but that it is the case of a property transferred for value, at the
time of delivery, upon special terms of settlement.
What Chancellor Kent, 8 589, p. 781 [1lth Ed.], describes as the true and
settled doctrine, which had been disturbed by the case of Seymour v. Broum (19
Johns. (Am..) Rep., 44)) but has been re-settled by subsequent decisions, is the
doctrine which is laid down with his known precision by Sir William Jones. It
comes to this, that where goods are delivered upon a contract for a valuable consideration,
whether in money or moneys worth, then the property passes. It is a
sale, and not a bailment. In the case of mixture by consent, the identity of the
specific property of each who consents is no longer ascertainable, and the mixed
property belongs to all in common. It may perhaps be regarded, under special
~ircumstances, as the case of persons having a common property, and if they all concur
in a bailment of this property, all may require a redelivery of what they have
so put in bailment. It may be that in such a case each might [359] claim separately
to have an aliquot part of the whole restored to him; but here the current stock
was, from its very nature, liable to be changed from day to day, both in quantity
and quality. The delivery was not for the peculiar or primary purpose of storage
simplicater, as in the case of a bailment of property to be returned to one Bailor,
or of any part to one or more of several joint Bailors; but the wheat was delivered
by each Farmer independently, to be stored and used as part of the current stock
or capital of the Millers trade. There seems to be no ground upon which zi Banker
is held not to be a Trustee, or a Bankers current capital not to he trust property,
that is not applicable in principle to the case of the Miller and his current stock of
wheat, which i s his trading capital.
Therefore, it appears to their Lordships, that the description in the proposal
and in the Policy is a correct and honest description of the subject of the insurance.
As the question reserved at the trial was, whether the wheat taken in storage should
be considered as trust property, within the terms of the conditions ctf the Policy,
and as their Lordships think that it should not be so considered, they will humbly
advise Her Majesty that the Order of the Court below, discharging the rule misi
to set aside the verdict, oughd to be affirmed, and the appeal dismissed with costs.
[Mews Dig. tit. BAILMENT, 1. GENBRALP RINCIPL;I Wtit . INSURANCE, c. FIRE,

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111. Zmterest. S.C. LR. 3 P.C. 101; 22 L.T. 843. Distinguished, Zsaac v.
Andmwc, 1877, 28 U.C. C.P. 40; Clurke v. MCFeEan, 1892, 23 O.R. 465.
Follow&, Benedlct v. Kew, 1878, 29 U.C. C.P. 410; J,mdor v. Nicol. 1886, 12
Man. Rep. 224.1
761
END QUOTE

I trust that this to some extent limited set out nevertheless will ensure that you and others will
give sufficient consideration to the matters set out in this correspondence.
I look forwards to your reply addressing the issues I raised.
This document is not intended and neither must be perceived to refer to all details/issues.

15

MAY JUSTICE ALWAYS PREVAIL

Our name is our motto!)

(
Awaiting your response,

G. H. Schorel-Hlavka O. W. B. (Friends call me Gerrit)

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