JUDGMENT OF: POWELL JA, BEAZLEY JA, STEIN JA

Contract - oral agreement, whether services within scope of agreement. Ostensible authority of manager

Representatives of the appellant airline and the respondent advertising agency reached an oral agreement in Bangkok for the delivery of and payment for advertising services. The respondent's agent in Australia performed advertising services for the appellant and sued for payment. The trial judge gave a verdict for the respondent for its fees plus interest.

The appellant argued that the advertising services rendered in Australia by the respondent's agent were not within the scope of the contract and that its Australian manager did not have authority to authorise the services performed under the contract.

The appellant's Australian manager had ostensible authority and the services performed were within the scope of the contract. The trial judge's findings of fact based on his preference for the credibility of the respondent's evidence over the appellant's should not be disturbed.

The respondent is entitled to interest on the verdict because the appellant has had the use of the money.

GARUDA INDONESIA AIRWAYS v BACKER SPIELVOGEL BATES LIMITED

STEIN JA: This is an appeal from a judgment of Patten DCJ allowing recovery for work done by the respondent advertising agency for work performed by its agent for the appellant pursuant to an oral agreement. His Honour awarded the respondent the sum of $98,647.24, plus interest of $121, 943.28.

The respondent is a member of a group of companies which carry on business as an advertising agency in Australia and Asia, while the appellant is an Indonesian company, registered as a foreign company in NSW.

The amount of the claim (apart from interest) is not disputed, and involves fees for advertising services undertaken by the respondent's agent in Australia for the appellant.

In its Amended Statement of Liquidated Claim, the respondent pleaded that the agreement between the parties contained implied terms that the plaintiff `would produce and arrange for the publication of advertising material in accordance with the instructions, directions and approvals of the Defendant's officers' and that `the defendant would pay to the plaintiff in accordance with the plaintiff's usual terms of trading its reasonable fees for services rendered.'(AB10)

(a) the defendant's officer Mr Barry Mayo gave directions and instructions to the

plaintiff's wholly owned subsidiary and agent Jamieson House Pty Limited ...

(b) the plaintiff by its agent Jamieson House designed a press and magazine

(c) the defendant by Mr Barry Mayo approved the campaign;

(d) the plaintiff by its agent Jamieson House produced creative and media work for

the purposes of the campaign and submitted such work to the defendant for

(e) the defendant approved the work;... [emphasis added] (AB 10)

His Honour found that the agreement consisted of an understanding formed at a meeting in a Bangkok restaurant in August 1986, between Messrs Ryan and McLay (on behalf of the respondent) and Mr Soeparno (on behalf of Garuda) as well as the appellant's subsequent conduct acquiescing in the activities undertaken by the respondent consistent with such an agreement having been reached.

Patten DCJ found that on the balance of probabilities he was entitled to infer that a contract was formed between the parties as pleaded in the Statement of Claim. That is, that the respondent would act as Garuda's advertising agent in Australia and elsewhere.

I am of the opinion that, on the probabilities, it is appropriate to draw such an

inference. In my view , the evidence of Mr McLeay (sic) as to his conversations with

Mr Soeparno, coupled with the evidence of other acts subsequently performed by Mr

McLeay, the evidence that the Defendant became listed as a client of the Plaintiff and

the involvement of Mr Mayo in the approval of a publication schedule and of creative

material, leads irresistibly to a conclusion, at least on the balance of probabilities, that

a contract was entered into between the Plaintiff and Defendant as pleaded in the

In its amended notice of appeal the appellant claims that:

3. His Honour erred in that he found there was a contract between the plaintiff and the

defendant when there was no sufficient evidence of such a contract and its terms.

It became apparent in oral argument before us that Mr Wardell, counsel for the appellant, accepted that there was a contractual arrangement between the parties. That is, there was no dispute that a contractual arrangement had been reached in the Bangkok meeting. What is disputed is whether the work, which was performed in Australia by the respondent's agent, was within the scope of the contract.

Following the Bangkok meeting, Mr Warry, on behalf of the respondent, made contact with Garuda's Australian Commercial Manager, Mr Mayo. Mr Warry was an employee of George Patterson Pty Limited in Sydney, which was treated as part of the respondent.

His Honour summarised the events which followed, and his narration mirrored the evidence of Mr Warry. His Honour found that Mr Warry was:

... a more impressive witness, who seemed to have a clear recollection of the

substance of the discussions. ... In any event, to the extent of any material conflict, I

prefer the evidence of Mr Warry [to that of Mr Mayo] (AB 264)

A number of meetings were held in Sydney between representatives of Garuda and the respondent. These took place at the appellant's Sydney premises. At the time of the first meeting in August 1986, Mr Mayo had apparently not received confirmation of his advertising budget. At the second meeting, on 9 October 1986, Mr Mayo indicated that he had been given a budget, of an amount in the vicinity of $200,000 to $250,000. He outlined Garuda's advertising needs.

Following that meeting Mr Warry prepared an advertising campaign proposal. The proposal was outlined to Mr Mayo and a number of other representatives of Garuda at a third meeting on 15 October 1986. A woman, representing the appellant, made suggestions for amendments to the proposal. A further proposal incorporating amendments was presented by Mr Warry and two other representatives of the respondent, to Mr Mayo and two women on behalf of the appellant, on 22 October 1986. Mr Warry's evidence, which was accepted by his Honour, was that at this meeting Mr Mayo approved the revised creative work and authorised it to go into production. Mr Warry asserts that after every meeting he forwarded to each participant a `Call Record', documenting what had occurred at the meeting. Although there was no direct evidence of the `Call Record' for this meeting, Mr Warry gave evidence, which his Honour accepted, that this was his invariable practice. Mr Mayo could not recall having received it.

Following the several meetings referred to above the respondent took a number of steps, which were not challenged at the time by the appellant, and which his Honour found were consistent with an agreement. They were:

* the listing of the appellant as a client of the respondent

The appellant's written submissions argue that there is no basis to infer an implied term into the contract formed between the appellant and respondent that Mr Mayo had authority to give directions and approvals in relation to advertising. The basis of this argument is one of onus of proof. The appellant contends that the respondent has not adduced sufficient evidence as to the terms of the oral contract to make a finding that the work, the subject of the claim, was within the contract or that Mr Mayo was given authority to approve expenditure.

On the appeal, the basis of the argument has changed somewhat. The appellant admits that a contract was formed (notwithstanding ground 3 of its Notice of Appeal). The respondent relies on ostensible authority, which was not expressed in the Statement of Claim, to attribute the acts of Mr Mayo to the appellant. In fact, the pleadings do not disclose any mechanism by which the respondent attributed the acts of Mr Mayo to the appellant. Nonetheless, that is the basis upon which the oral argument proceeded.

The respondent asserts, and the appellant denies, that Mr Mayo had authority and authorised the undertaking of the creative work on which the claim is based. The respondent bases its contention on arguments that Mr Mayo, as Garuda's Australian Commercial Manager, had ostensible if not actual authority to approve the expenditure and what took place at the meetings, particularly the meeting of 22 October 1986.

Ostensible authority is generally proven through evidence that the person has been clothed with the appearance of authority. Counsel for the appellant, Mr Wardell, accepted that it would be sufficient for the respondent to succeed for it to prove that Mr Mayo acted as if he had the appellant's authority to commission the advertising, and that the respondent had acted upon that impression. [T5 (47)].

His Honour did not make an express finding as to whether Mr Mayo had actual or ostensible authority. In his address at the end of the trial, Mr Wardell asserted that there was no evidence of Mr Mayo's authority (AB 89 S-X, AB 90 W). His Honour evidently directed his mind to the issue of ostensible authority because he said to Mr Wardell, `Mr Mayo obviously had ostensible authority to enter into an agreement in relation to advertising', to which Mr Wardell responded `Yes, I wouldn't dispute that as a general statement, but again to use Mr Mayo's words this was to the knowledge of everybody a one off situation'. (AB 94 D)

In his submission, Mr Wardell attempted to distance Messrs Mayo and Warry from Garuda and the respondent company respectively on the grounds that Mr Warry, as an agent of the respondent, was `not privy to the contract as reached in South East Asia' [T5 (50)]. Accordingly, he asserts that the respondent, who bears the onus of proof, has not adduced evidence to prove that the oral contract permitted the agents of the appellant and the respondent to contract. He argued that there would be no room for the principles of ostensible authority if the contract did not entitle Mr Warry to contract on behalf of the respondent. His Honour accepted the evidence of Mr McLay, who was present at the meeting, that work performed in Australia would be undertaken by the respondent's agent, as the respondent had no creative staff of its own in Australia (AB 261N-P). Accordingly, the agreement anticipated the use of agents by the respondent.

Mr Wardell has suggested an alternative explanation, that the parties were at cross-purposes, Mr Warry thinking he was obtaining approval from Mr Mayo for an advertising campaign and Mr Mayo thinking that he was providing input into a decision to advertise that had been taken elsewhere. I would reject this scenario. His Honour's preference for the evidence of Mr Warry over Mr Mayo, Mr Mayo's senior position with the appellant and his advertising budget, together with his failure to dispel the impression that he acted with Garuda's authority when made aware of the respondent's action, all lead to a contrary conclusion.

The appellant attempted to marshal support for its alternative proposition from the fact that there was no evidence of the accounts for the advertising having been sent to Mr Mayo in Sydney. It appears that the respondent sent its accounts to another company in the group of companies of which it was a member in Asia. However, in my opinion, this procedure does not undermine the respondent's contention that it was led to believe that Mr Mayo commissioned the advertising. Rather, it indicates the protocol of the group of companies of which the respondent is a part, and is not inconsistent with Mr Mayo having authority to approve the advertising within Australia because the appellant is a company which is registered as a foreign company in NSW.

If the fact that Mr Mayo did not directly receive an account for the advertising which he is said to have authorised, confirmed any impression that he may have had that he was merely providing input into an advertising campaign orchestrated in Asia, that is not to the point.

The appellant cannot be said to have been ignorant of the work that was done by the respondent in Australia. In this circumstance, it stood by and did not protest or otherwise take steps to inform the respondent that Mr Mayo was not authorised to approve advertising services. His Honour accepted that invoices recording advertising which the respondent caused to be published on behalf of the appellant in accordance with the schedule of advertising outlined to the appellant, would have been sent to the appellant (AB 263U-V), so that the appellant would have had knowledge that the advertising was taking place.

Accordingly, while his Honour did not make an express finding of ostensible authority, it must be implicit in his judgment that he so found, the plaintiff having pleaded that `the defendant approved the work' and the issue of Mr Mayo's authority having been raised and argued by the parties. His Honour clearly preferred the evidence of Mr Warry to that of Mr Mayo, saying:

Moreover, as it seems to me, Mr Warry's evidence derives support from what was

actually done without any complaint from the Defendant, namely the preparation and

publication of creative material according to an approved schedule. (AB 264)

In my opinion, his Honour would have been entitled to conclude that Mr Mayo had ostensible authority, particularly in light of his position as Commercial Manager for Australia and New Zealand, and his advertising budget. His Honour had the benefit of hearing the witnesses and forming a view as to their credibility and impression. The trial judge is uniquely placed and I am in no position to find that he erred.

I am also of the view that his Honour did not fail to have regard to the onus of proof. Although he made no express finding with regard to ostensible authority, it is clear from the quotation above that Mr Warry's evidence was that he, as agent for the respondent, understood Mr Mayo to be acting with the knowledge and imprimatur of Garuda and neither the appellant nor Mr Mayo resisted this impression. I am satisfied that the trial judge was justified in finding for the respondent and that the work performed for the appellant was within the terms of the contract.

Leaving to one side the case in contract, I note that it would have been open to the respondent to sue on a common-money count for a quantum meruit.

The second issue in the appeal concerns the award of interest by the trial judge. The appellant contends that the trial judge ought not to have awarded interest to the respondent because of its delay in bringing the proceedings. However, it is rare that interest will be refused and delay in commencing proceedings will not generally be such a case, (Bennett v Jones [1977] 2 NSWLR 355, Falkner v Bourke (1990) 19 NSWLR 574). A fortiori where the proceedings concern a claim in contract where the moneys were due to the claimant, and the defendant has had the use and benefit of that money.