AIF Pty Ltd v Berry Hardware Store & Anor

LEGISLATION CITED : Local Courts Act 1982 - ss 73, 75 Suitor's Fund Act

Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 CASES CITED : Devries v Australian National Railways Commission (1993) 177 CLR 472 Freeman & Lockyer v Buckhurst Park Properties (Magnal) Ltd [1964] 2 QB 480 R L & D Investments Pty Ltd v Bisby (2002) 37 MVT 479 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1990) 160 ALR 588 Swain v Waverley Municipal Council [2005] HCA 4

Australian Integrated Finance Pty Ltd (Plaintiff) Berry Hardware Store Pty Ltd PARTIES : (First Defendant)

Warren John Baines (Second Defendant)

Mr P McDowell (Plaintiff) COUNSEL : Mr K Morrissey (Defendants)

Forbes Dowling (Plaintiff) SOLICITORS : Lindsay Brien (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

AUSTRALIAN INTEGRATED FINANCE PTY LTD v BERRY HARDWARE STORE PTY LTD & ANOR

JUDGMENT (Appeal Decision of Local Court Magistrate - lease of ATM - agency ostensible authority)

1 HER HONOUR: By amended summons filed 21 February 2006 the plaintiff seeks firstly, an extension of time for leave to appeal and to appeal; secondly, leave to appeal from the decision of his Honour Magistrate D Dick dated 27 October 2005 ("the judgment") in the Local Court at Nowra; thirdly, an order varying the judgment by entering a verdict for the plaintiff together with an order that the defendant pay the plaintiff's costs as agreed or assessed; fourthly, in the alternative to 3, an order setting aside the judgment and remitting the matter to the Local Court for determination in accordance with the following directions: (a) that Mr Symons was, at all material times, neither an employee nor agent of the plaintiff, and (b) that the agreement between the parties was not mutually terminated; together with the remittance of the matter back to the Local Court for determination in accordance with those directions.

2 The plaintiff is Australian Integrated Finance Pty Ltd. The first defendant is Berry Hardware Store Pty Ltd. The second defendant is Warren John Baines. The plaintiff relied on the affidavit of David Joshua Edgeworth Simons sworn 6 February 2006. For convenience in this judgment I shall refer to the parties as plaintiff and defendant. The original summons was filed on 28 November 2005, which is a few days out of time. The judgment had been forwarded to the wrong address. In these circumstances, an extension of time to file the appeal is granted.

3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby (2002) 37 MVR 479; [2002] NSWSC 1082. It cannot be said that the judicial officer acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472, per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588.

4 In Swain v Waverley Municipal Council [2005] HCA 4, the Chief Justice at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

5 Section 75 of the Act provides that the Court may determine an appeal by either (a) by varying the terms of the judgment or order or (b) setting the judgment or order aside or (c) by setting the judgment or order aside and remitting the matter for determination in accordance with the Court's directions or (d) by dismissing the appeal. Background

6 In the Local Court the plaintiff pleaded that the first defendant owes moneys pursuant to a lease agreement in the sum of $26,708.66. The second defendant guaranteed the performance by the first defendant of its obligations under the lease agreement. This is not disputed. The amended defence pleaded that the first defendant returned the leased property to the plaintiff or its agent and plaintiff's agent refunded to the first defendant the initial payments made by the first defendant and the plaintiff's agent had represented to the defendant that the plaintiff had been paid in full and the defendants have no reasons to dispute the representations (AD [2]-[3]). The defence further pleaded misleading and deceptive conduct and unconscionable conduct (AD [4]-[5]). The Magistrate entered judgment in favour of the defendants.

7 The plaintiff appeals from the whole of the decision of the Magistrate. The main issue on appeal is whether the Magistrate erred when he held there was an agent acting on behalf of the plaintiff. The plaintiff submitted that the evidence did not establish that Mr Baines nor Mr Symons had either actual or ostensible authority to act as the plaintiff's agent.

8 In September 2002, Mr Baines (the proprietor of Shoalhaven Heads hardware shop) was approached by Phil Symons in relation to the installation of an automatic teller machine in the premises. As there were no other ATMs in the shopping complex at Shoalhaven Head he decided it would be a commercially sound idea to install one in his shop. Mr Symons explained to Mr Baines that he "represented three companies from the one group" the automatic teller machine supplier, EMS which subsequently became National ATM Services, a finance company that Mr Baines later found out to be Australian Integrated Finance Pty Limited who was to pay for the machine and ATM ADS, an advertiser who was to pay to him advertising space on the machine equal to the amount of the rental. It was represented to him that the advertising fee for the advertisements on the machine would pay the rental such that the machine would cost him nothing and in fact he would be paid a small transaction fee.

9 Mr Baines dealt mainly with two individuals, Mr Symons and Mr Peter Brear. It was the plaintiff's case that it did not employ Mr Symons or Mr Brear.

10 In relation to agency, the Magistrate stated at [29] - [32]: "The question of agency relies, in short, upon the intention of the parties so far as it may be gleaned from the circumstances. If no clear intention is evident, then the question is determined by construction dependent upon the form and terms of the written contract and upon surrounding circumstances. In this instant the rental schedule and tax invoice is clearly attested by Mr Symons. The name of the plaintiff has been disclosed. It is apparent that the documents prepared by Mr Symons were in truth, though not in strict form, intended to be used by agents of the plaintiff. Prior to Mr Symons approaching the defendants, the defendants had no knowledge of the plaintiff's business. It was Mr Symons who submitted the completed forms to the plaintiff for favourable consideration. Someone later accepted the proposal on behalf of the plaintiff. In this instance the plaintiff permitted Mr Symons to be seen as representing the plaintiff and being seen as having authority to act on the plaintiff's behalf. The plaintiff allowed Mr Symons access to its proposal form. While there is no written evidence of agency the facts show by implication the existence of the same. Mr Rudd gave evidence that there was a broker. The only person that could have been is Mr Symons. While the plaintiff may have considered it had done everything it was expected to do the representations by Mr Symons that It won't be a problem getting it installed and cashed up, in time for the Christmas rush are worthy of acceptance as genuine representations. Each party to a contract enters into the bargain in the expectation of receiving from the other the performance that the other has promised. It follows that the failure of one party substantially to carry out its obligations frees the other of the necessity to carry on with its own obligations. The court finds it was reasonable for the defendants to rely on the representations in the factual circumstances of this case."

11 The plaintiff referred to Freeman & Lockyer v Buckhurst Park Properties (Magnal) Ltd [1964] 2 QB 480 at 503, 505-506 where Diplock LJ stated: An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract. … "If the foregoing analysis of the relevant law is correct, it can be summarised by stating four conditions which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so. It must be shown: (1) that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor; (2) that such representation was made by a person or persons who had "actual" authority to manage the business of the company either generally or in respect of those matters to which the contract relates; (3) that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and (4) that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent."

12 There was no evidence given to establish that Mr Symons or Mr Brear had been given actual authority by the plaintiff. Nor was there any evidence that the principal (ie the plaintiff) made a representation to Mr Baines that the agent, be it Mr Symons or Mr Brear had authority to make those representations. Because the contract between the plaintiff and defendant entitled "Rental Schedule & Tax Invoice" (Bundle p 48) was signed by Mr Baines and by an authorised officer of the plaintiff, the agency issue does not come into play, nor is the finding that Mr Symons was the broker have any significance.

14 The next issue that arises is whether the contract was validly termination. Termination

15 Mr Baines stated in his statement dated 8 July 2005, at [9], that: "On or about 14 February 2003 I had a telephone conversation with a Mr Ian Russell of the plaintiff. In that discussion I outlined to him the history given above and that at the end of the conversation he said to me words to the effect, "Well if that's the case that you didn't get the machine up and running and you are returning it don't worry you won't have to make any payments. Can you just send me a detailed letter setting everything out and you won't have to worry anymore". On 14 February 2003 I sent a detailed letter to Mr Russell."

16 Mr Baines was not cross examined on this issue. He was a witness of credit. Mr Russell is an authorised officer of the plaintiff.

17 As a result of Mr Baines's telephone call to Mr Russell he (Mr Baines) forwarded a letter (dated 14/02/2003) to the plaintiff which outlined the history. At the time of writing that letter the ATM had not been collected from the hardware store. On 17 February 2003, the ATM machine was collected. It is not clear if the ATM machine has since been returned to the plaintiff. There is a tax invoice statement from National ATM Services North Sydney stating that it had received a Nano Cash ATM.

"The evidence shows that a person other than the Plaintiff refunded all monies paid by the defendants. The plaintiff submits that it nevertheless retains those monies in the form of a credit given to the first defendant. It is open to the Court to find that an agent of the plaintiff agreed to refund the payments and that it was not intended that the refund should be regarded as a credit. A mutual termination focuses upon whether the parties have assented to the agreement being abandoned. In this case the court is satisfied that the Plaintiff's agent and the defendants each regarded the contract as terminated. The Plaintiff's agent by its conduct and the defendants by their conduct have each led the other to assume that their obligations were at an end. Termination by agreement is to be distinguished from other methods of termination. Although it involves the bringing to an end of the outstanding obligations of the original contract, the means whereby termination is effected are largely different. A contract terminated by agreement produces the result that neither party has lost the benefit of its original bargain because of the other's substantial breach, and there can consequently be no claim for loss.

The court is not concerned with the subjective intention of each party, but with the way in which the conduct, or inaction, of each might reasonably be understood by the other. It is the task of the court to consider all of the circumstances to see whether an agreement to terminate can be inferred when viewed objectively. To that end the law is clear that in each case it is the conduct of the parties that must be considered. It is the courts view that informally, but effectively, the parties have so acted. All the evidence points to a mutual termination."

19 The plaintiff submitted that "termination" was not properly pleaded in the amended defence. It is my view that paragraphs 2 and 3 of the amended summons are sufficient to plead termination. Neither party was caught by surprise at trial. However, the Magistrate's decision in relation to termination is based upon the activities of the plaintiff's agent. As there was no evidence that the plaintiff authorised National ATM Services to act on its behalf it cannot be said to be the plaintiff's agent. That being so, the appeal is upheld. The decision of his Honour Magistrate D Dick dated 27 October 2005 is set aside. The matter is remitted to the Local Court for determination according to law.

20 Costs are discretionary. Costs usually follow the event. The defendants are to pay the plaintiff's costs as agreed or assessed. The defendants are to have a certificate under the Suitor's Fund Act, if applicable. The court orders: (1) An extension of time to file the appeal is granted.

(2) The appeal is upheld. (3) The decision of his Honour Magistrate D Dick dated 27 October 2005 is set aside. (4) The matter is remitted to the Local Court to be determined according to law. (5) The defendants are to pay the plaintiff's costs as agreed or assessed. The defendants are to have a certificate under the Suitor's Fund Act , if applicable. **********

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