Hardinge & 1 Ors v Schidor & 1 Ors

Court of Appeal (NSW)|2002-03-04|Before: Mason P, Powell JA, Santow JA, David Hunt J, Per Powell JA

INTRODUCTION 39 This is an appeal from a decision of Goldring DCJ in the District Court. It arises from proceedings brought by the Appellants as Plaintiffs against the Respondents as Defendants in District Court proceedings No. 4512 of 2000 ("the Proceedings"). Those proceedings were brought as a claim for damages for breach of contract. This was by reason of an alleged failure of the Defendants to comply with their obligations to meet charges under a written agreement ("the Agreement") for hire of a bus to the Defendants for use in a commercial advertising "shoot" (Statement of Claim, Red Book, p2A to 4H). There is also a claim for failure to reinstate the bus to its former condition. 40 Pursuant to an amended Notice of Motion dated 22 February 2001 (Red Book, p7C to 7J) the Defendants/Respondents successfully applied to have the Proceedings "struck out" as against the First Defendant, an individual Mr Gert Schidor. The effect of this, if undisturbed is to leave the proceedings solely against the Second Defendant/Second Respondent, Gert Schidor Design Pty Limited, of which Mr Gert Schidor is an authorised officer; see affidavit of Mr Schidor (Black Book, p7, para 1). 41 The Appellants' Statement of Claim as Plaintiffs in the District Court was brought by Mr Biron Hardinge (also known as Bill Hardinge) as First Plaintiff and by what can be taken from the Agreement (Combined Book, 20C) to be his company Radio Masts (Aust) Pty Limited as Second Plaintiff. 42 Clauses 3 to 11 of the Statement of Claim state the basis of the claim with its Particulars. Clause 3 is in the following terms: "3. By written agreement ("the Agreement") dated 10 November 1999 the First Plaintiff, or alternatively the Second Plaintiff, agreed to hire the bus to the Defendants and the Defendants agreed to pay the First (or alternatively the Second) Plaintiff the agreed rent charges in relation to the hire of the bus and other monies." 43 I observe that the Statement of Claim contains no equivalent to clause 3 in relation to the Defendants whereby it is stated that the First (or alternatively the Second) Defendant is liable. Rather these claims are brought against both Defendants, on the basis that the hiring is to both of them and that each of the Defendants agreed to its terms and failed in the respects identified to comply with them. The Statement of Claim thus proceeds on the basis that the two Defendants are jointly and severally liable (see clause 12 of the Agreement (Black Book, p22). But nowhere in the pleading is there an express statement in those terms. 44 The Amended Notice of Grounds of Defence denies that the First Defendant was a party to the agreement (Red Book, p6, para 8). It is further stated in that Defence that "the First Defendant did not enter into an agreement with either Plaintiff on 10 November 1999 or on any other date", but that "the Second Defendant entered into an agreement with the First or Second Plaintiff as alleged on 10 November 1999"; see paras 11 i and ii (Red Book, p6). So, as at the close of the pleadings, the Defendants'/Respondents' position was that Gert Schidor Design Pty Limited entered into the agreement but not Gert Schidor the individual. The Plaintiffs/Appellants on the other hand, contend in the alternative that either the First or the Second Plaintiff entered into the agreement but proceed against both Defendants. 45 The Amended Notice of Motion to which reference has earlier been made does not invoke or identify any particular rules of the District Court relied upon, but simply seeks, baldly, an order that "the proceedings against the First Defendant be struck out". 46 When the matter came before Goldring DCJ on 23 February 2001, His Honour describes Mr Schidor as applying under two rules of the District Court (Red Book, p8-9). First, there is Pt 7 r 9 "joinder of parties in proceedings" which finds its statutory basis specifically in s161(2)(i) of the District Court Act 1973 (NSW). It provides as follows: "9. Where a party -

(a) has been improperly or unnecessarily joined; or (b) has ceased to be a proper or necessary party, the court, on application by any party or of its own motion, may, on terms, order that he cease to be a party and make orders for the further conduct of the action." 47 The other provision to which Goldring DCJ refers and which finds its statutory basis specifically in s161(2)(l) of the District Court Act 1973 (NSW) is Pt 9 r17, relevantly is in the following terms: "17(1) Where a pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleadings; (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings; or (c) is otherwise an abuse of the process of the court, the court may at any stage of the proceedings, on terms, order that the whole or any part of the pleading be struck out." 48 It should be noted that under Pt 9 r 17(2) "the court may receive evidence on the hearing of an application for an order under subrule (1)". There is no equivalent express provision in Pt 7 r9. However Pt 9 r17(1) appears to be the Rule which more closely accommodates what should strictly have been an application for the First Defendant to cease to be a party, and framed as such. 49 The Respondent in its Amended Notice of Contention (see below) adds (in para 5) that "The decision of Goldring DCJ was sustainable on the basis that the appellant's claim against the respondent ought to have been dismissed pursuant to Pt 11A r3 of the District Court Rules". That Rule permits evidence in support by affidavit. It is in the following terms: DIVISION 2 - Summary stay or dismissal Frivolity, etc [910/2] 3 . (1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - (a) no reasonable cause of action is disclosed; (b) the proceedings are frivolous or vexatious; or (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings. [SCR Pt 13 r5(1).] (2) Evidence in support of an application for an order under subrule (1) shall be by affidavit unless the Court otherwise orders, and the provisions of Pt 16 apply to any such application." 50 It is convenient that I turn at this point to the Grounds of Appeal for which leave to appeal was granted on 7 August 2001. The Grounds are as follows: " GROUNDS 1. The learned judge erred in holding that the agreement pleaded in the proceedings was incapable of being construed so as to bind the First Respondent. 2. the learned judge erred in striking out the proceedings as against the First Respondent. 3. Further, or in the alternative, the learned judge erred in striking out the proceedings as against the First Respondent without giving the appellants the opportunity to replead. 4. The learned judge erred in admitting into evidence any of the affidavit, and annexures thereto, of the First Respondence [sic] sworn 19 December 2000, save for:

(a) paragraphs (b) the final sentence of paragraph 9; and (c) annexure "E" of and to the said affidavit.

The learned judge misapprehended the meaning and effect of Part 7 Rule 9 of the District Court Rules 1973 and erred in applying the said rule in the case before him. 6. In the alternative to paragraph 5, if the said Part 7 Rule 9 was applicable to the instant case, the learned judge acted beyond jurisdiction in striking out the proceedings pursuant to the said rule. 7. Such further or other grounds as the Court considers appropriate." 51 I should also quote the Respondents' Amended Notice of Contention which, by way of amendment, includes the earlier quoted para 5. "The respondents contend that the decision of Judge Goldring in the court below should be affirmed on the following additional grounds:- 1. The correct form of Order that should have been made by Judge Goldring pursuant to Part 7 rule 9 of the District Court Rules, based on the same evidence, was "that the first defendant cease to be a party to the proceedings"; or alternatively, "that the defendant's name be struck out as being improperly joined." 2. What the judge in the court below had to decide pursuant to Part 7 rule 9, and possibly also pursuant to Part 9 rule 17, was not limited, as the judge said, to "a matter of construction of the contract".

If there was ambiguity present in the language or terms of the written contract relevant to the issue of who were the contracting parties, then the judge could have, and should have had regard to any extrinsic evidence which would assist him in resolving any such ambiguity, and consequently resolving the issue of whether the first defendant had been improperly joined.

The extrinsic evidence relevant to the issues of who were the contracting parties was admitted as part of the evidence contained in the affidavit of Mr G Schidor sworn on 19 December 2000. 4. It is contended that if the decision of Judge Goldring in the court below is not found to be sustainable solely as a matter of construction of the written contract, because of ambiguity or otherwise, then the annexures to the affidavit of Mr G Schidor sworn on 19 December 2000 make it clear beyond doubt that the first defendant was not a party to the contract with either or both of the plaintiffs. 5. The decision of Goldring DCJ was sustainable on the basis that the appellant's claim against the respondent ought to have been dismissed pursuant to Part 11A Rule 3 of the District Court Rules." 52 I should refer at this point to the affidavit and annexures thereto of the First Respondent Mr Schidor as "the extrinsic evidence". Essentially that admitted material seeks to provide extrinsic evidence as to the circumstances in which the contract was entered into. The Appellants' contention is that apart from formal parts, all that should have been admitted was the actual agreement. 53 I should note at this point that the appeal has proceeded on the basis that firstly, were the orders to have been made in proper form by Goldring DCJ assuming there were otherwise the basis for making them, the form of those orders should have been "that the First Defendant cease to be a party" to the relevant proceedings (in terms of Pt 7 r9) rather than "that the Proceedings as against the First Defendant be struck out … " (Red Book, 13Q, Judgment of Goldring DCJ). However, while correct, that may be treated as a matter of form rather than substance. I should add that, were it the case that this appeal failed so that only the Second Defendant (the company Gert Schidor Design) was liable under the Agreement (as Goldring DCJ concluded), mere striking out under Pt 9 r17 of that part of the pleading as purports to render the First Defendant also liable, without such re-pleading as were necessary to substitute solely the Second Defendant for "the Defendants" in the various clauses of the pleading, would meet this difficulty. The part severed would not leave a pleading which accurately articulated a claim solely against the corporate Second Defendant. However, it would clearly have been open to Goldring DCJ to order the minimum re-pleading necessary to remedy this, under Pt 7 r9 "for the further conduct of the action", or by way of "terms" under Pt 7 r9 or Pt 9 r17, requiring that re-pleading. 54 It must also follow that if the Appellant were to succeed in its appeal, but on the basis that only Mr Schidor should be a defendant rather than both Mr Schidor and his company Gert Schidor Design Pty Limited, then the Appellant would need to re-plead by suing only the First Defendant, Gert Schidor. The Appellant puts its case in the alternative. It is that either Gert Schidor alone is liable under the relevant agreement, or both Gert Schidor and his company. But on either basis, the Appellant contends Gert Schidor should not have been removed as a party. The Respondents contend that only the Second Defendant should have been joined as a party as it alone was the party to the agreement with the relevant Plaintiff. 55 The Respondents' case is that even without admission of the extrinsic evidence, the Agreement itself, plainly and unambiguously, is with Gert Schidor Design Pty Limited alone which was executed by its agent. There is no agreement also or instead with Gert Schidor himself. The extrinsic evidence admitted was the affidavit of Mr Schidor dated 19 December 2000. It annexes correspondence with the Plaintiffs all on Gert Schidor Design Pty Ltd letterhead, invoices addressed only to that Company and cheques in payment only from that Company. That extrinsic evidence is said to reinforce that conclusion; though not needed to do so. The Appellants contend that the extrinsic evidence should have been excluded. On the Respondents' case that would make no difference to the result reached by the trial judge. The trial judge makes no reference to the extrinsic evidence in his judgment.

RESOLUTION OF THE APPEAL 56 The starting point is the proper construction of the rental Agreement. The Agreement appears to be a standard form emanating from the Respondent/Owner commenced (somewhat informally) by a letter with the particular terms of hiring to the Appellant. The letter itself is addressed "ATTENTION: Mr Gert Schidor Gert Schidor Design Pty Limited ANC 003 082 217 686 New South Head Road Rose Bay NSW 2029"

followed by phone, mobile number and fax number. 57 The letter itself is addressed "Dear Gert". It is on the first page and contains the financial and other specific terms of the agreement which follows. Then there are three further pages constituting the rest of the agreement. These are essentially a pro forma, adapted minimally by inserting the description of the bus, and concluding with provision for execution. At the top of each page starting with the letter, on the top lefthand side appears the name "Bill Hardinge" whilst on the top righthand side appears the name "Radio Masts (Aust) Pty Ltd" with its ACN number and address. Thereafter those two names appear on the top of each of the remaining pages in the same place. Mr Schidor's affidavit states that while the first cheque under that Agreement was in favour of "Bill Hardinge" "[L]ater cheques were issued, at the direction of Mr Hardinge to Radio Masts Australia Pty Limited" (Black Book, p10, para 9). But even without that extrinsic evidence, there could be no doubt Mr Hardinge was closely associated with Radio Masts (Aust) Pty Limited. This is clear from the cl 1(b) of the Agreement itself. It defines "the owner" as meaning "Bill Hardinge of Radio Masts (Aust) Pty Limited". His execution at the end is in similar terms. 58 The Agreement, described as a "rental agreement", on page 2 contains the definition in clause 1(c) of "the renter". It states that "the renter includes any person who signs this Agreement and any person whose agent signs this Agreement" [emphasis added]. The Agreement then contains a number of provisions which ex facie are applicable to natural persons; see cl 3(f) for example forbidding the renter from driving the vehicle under the influence of alcohol. However, I agree with the Appellants' contention that these provisions can nonetheless properly be understood in the context of a standardised agreement with a company, which of necessity can only act through its employees and agents. Thus the obligation in clause 3(f) not to drive the vehicle under the influence of alcohol, etc. is to be understood as capable of applying either to a natural person or to a company. If the latter, it constitutes an obligation imposed on the company not to permit its employees or agents so to drive the vehicle. Similarly for other such provisions. 59 The execution pages reproduced below are important. They cover both "renter" and "owner" and contain the respective names of the two principals, Gert Schidor and B W Hardinge. These are followed in each case by the word "of" and then below that the name of the respective company with its ACN number and its address. Significantly, the mode of execution and the description of the executing parties both correspond in an identical fashion. Each individual (Mr Schidor and Mr Hardinge) have actually signed where "[signature]" appears below. Thus I quote: "'renter' Date 10/11/99 Signed [signature] Of: Gert Schidor Design Pty. Ltd. ACN 003 082 217 686 New South Head Road ROSE BAY NSW 2029 'owner' Date 10/11/99 Signed [signature] B. W. HARDINGE Of: Radio Masts (Aust) Pty. Ltd. ACN 006 113 926 48 Cairncroft Ave LAUNCHING PLACE 3139 " 60 The Appellants rely on that identity of execution along with the definition of "the owner" in clause 1(b). The latter definition is in these terms: "'the owner' means Bill Hardinge of Radio Masts (Aust) Pty Ltd". That is precisely how Mr Hardinge then describes himself when he signs. It is impossible therefore to avoid the conclusion that the Agreement renders Mr Hardinge liable personally by that definition, reinforced by the mode of his execution. Accepting that be so, there are parallel provisions for Mr Schidor. To these the Appellants seek to attribute parallel legal consequence, in rendering Mr Schidor personally liable if not also his company. Thus Mr Schidor: (a) executes identically to Mr Hardinge; and (b) is described at the point of execution in a precisely corresponding fashion to Mr Hardinge, as being "of" his company.

Mr Schidor is literally, in terms of the first part of the definition of "the renter", "any person who signs this Agreement" and thus liable if that literal construction were correct. The trial judge rejected that literal interpretation as having no reasonable prospect of success. But he did not consider whether personal liability could be founded otherwise than on such a literal interpretation. That alternative basis emphasises the parallel modes of execution of "owner" and "renter" in a context where Mr Hardinge is clearly personally liable, as confirmed by the definition of "owner". This suggests that in the execution language, "of" may bespeak not agency but a mere description of each individual (Mr Hardinge and Mr Schidor) by reference to his respective company. The Appellants task is only to demonstrate that, as on a summary application to strike out, such construction is not "bound to fail". 61 The construction adopted by the trial judge, that "of" here denotes agency, so as to bind only the company as "renter", is at odds with the following: (a) the parallel language of execution for Mr Hardinge, as "owner", who is personally liable; (b) if on this hypothesis, "of" did bespeak agency when used in relation to Mr Schidor, that does not reconcile with "of" having a different meaning in relation to Mr Hardinge who clearly does not sign as agent; (c) the lack of any language, beyond the ambiguous word "of", to bespeak agency; (d) the inclusive definition of "the renter" (contrasting with the exclusive definition of "the owner" by reference to "means"), strongly suggests a definition intended to embrace as liable under it, the individual who actually signs; but (e) it would be drawing a long bow to treat that definition as also capturing the company as well, when there is no suggestion Mr Schidor (who signs only once) is to be taken to sign in a dual capacity, first so as to bind himself as principal, and then to bind the company, being on that hypothesis an agent in the latter case but a principal in the former. 62 The ambiguous word "of" in the execution when read with the relevant definitions and in the context of the parallel description when executing, is difficult to justify as a loose shorthand for more conventional words denoting agency. Thus if in the case of Gert Schidor and Gert Schidor Design Pty Limited only the latter company were to be bound, one would expect language of greater precision to denote Mr Schidor signing solely as agent for the company; language such as, at least, "on behalf of" or more precisely "as agent for". I consider that to be a tenable construction, not capable of being dismissed as bound to fail; that is to say, that the word "of" is here used descriptively simply to identify each individual as "associated with" the relevant company. Such a construction would preclude any notion of agency. 63 The Agreement, which emanates from "the owner", would indeed be asymmetric and loaded against the owner, if it had on the one hand "the owner" bound personally as a natural person, yet had "the renter", bound only corporately. That is an unexpected result. 64 Concededly, the definitions differ of "the owner", as compared to "the renter", found in paras (b) and (c) of clause 1. Only "the renter" is an inclusive definition, contemplating the possibility of more than one person being liable as "the renter". The Appellants contend (in the alternative to their contention that Mr Schidor is liable personally, though only Mr Schidor) that this inclusive language is consistent with Mr Schidor's execution being intended to render liable both Mr Schidor and his company Gert Schidor Design Pty Limited; that is, as separately parties comprised in the expression "the renter". This is so, according to the Appellants, even though Mr Schidor signs only once. They contend, in light of the mode of execution and the definition of "the renter", that when Mr Schidor so signs, he is to be taken to intend to be both personally and corporately liable, though he signs only once. 65 Such an interpretation would however give two different meanings to the expression "any person" when used twice in clause 1(c). "Any person" would mean in its first mention Mr Schidor in his own right, and in the second mention his company Gert Schidor Design Pty Limited. This would be on the absurd basis that Mr Schidor intends his signature, signed but once, to connote both his intent to be liable personally and his intent to render the company liable, being taken by the one signature to sign now as its agent. I consider the latter interpretation, when all the circumstances are taken into account, so strained as likewise to be "bound to fail". That reflects the test applicable where the court is dealing with the abuse of its process and as is reflected in Pt 9 r17 in relation to pleadings which have a tendency to cause "prejudice, embarrassment or delay."; see Peter Kent Developments Pty Limited v ANZ Bank (SCNSW David Hunt J, 6 May 1980, unreported) at p11. Likewise if one were to apply by analogy the test applicable to a strikeout application, I consider such an argument "absolutely hopeless": Dey v Victorian Railway Commissioners (1948) 78 CLR 62 at 90. In those circumstances, one would not need even to look to the extrinsic evidence, if the argument were simply bound to fail, based on the unambiguous terms of the Agreement. To the extent one were entitled to look at the extrinsic evidence, it does not support such an interpretation either. 66 But so to reject the Appellants' argument that both Gert Schidor and his company are to be taken to be parties to the Agreement, jointly and severally liable as such, still leaves the Appellants' alternative contention. It is that the individual Mr Gert Schidor alone is a party to the Agreement as "the renter" and alone is liable as such. That is consistent with his signing but once, with the word "of" merely descriptive of his being associated with his following named company. There is, it is true, some indication contrary to that contention though not to my mind sufficient to render this interpretation bound to fail. Thus one might not ordinarily expect to see the ACN number added for each company if the intent were not to render the companies themselves liable, as distinct from the natural person first named described by reference to that company. However, for the reasons earlier advanced, I do not consider that that consideration weighs sufficiently heavily in the balance as to lead to the rejection of the Appellants' alternative argument that Mr Gert Schidor is alone liable. Ultimately, it is the language of the Agreement which is determinative. 67 When one turns to the reasoning of the trial judge, Goldring DCJ, he does not deal with the interpretive argument to which I have earlier made reference. 68 Goldring DCJ, however (Red Book, p10), rejects as "a totally untenable proposition" "the contention for the Plaintiffs … that this provision [clause 1(c)] is intended to, and did in fact, make Mr Schidor a party to the contract." He continues that "the whole of the document refers to the company as a party and the definition of "renter" to which I have referred … seems to me to refer to the legal person who is a party to the contract, not to any natural person whose physical signature appears to be attached." He refers to the "well-known commercial proposition that a corporation can only act through an agent". He concludes that "where, as in this case, a company is named as the party to the contract it seems to me that the company, that legal person, is the party to the contract and no other". 69 Taking the test to be simply whether the contrary argument is bound to fail and looking so far only at the Agreement itself, what is said by Goldring DCJ does not demonstrate that the Appellants' argument is "totally untenable". For, with respect, it is to beg the question to conclude that here Gert Schidor Pty Limited was "a company … named as the party to the contract" or to assert "that the whole of the document refers to the company as a party" (Red Book, 10). If the company by apt language were indeed rendered a party to the contract, I agree clause 1(c) would not render the mere execution by Gert Schidor sufficient to render him also personally liable. But the language of the Agreement does not, with respect compel the result which the trial judge finds, namely that it is Gert Schidor Design Pty Limited which is the party the Agreement seeks to bind, as distinct from Gert Schidor the individual. 70 Thus far I have considered only the terms of the contract without need for reference to the extrinsic evidence. It may be conceded that the Agreement itself has sufficient contrary indications, incorporating its opening letter, as to be ambiguous. That is, ambiguous in terms of whether the reference to Gert Schidor was, or was not, such as to render Gert Schidor personally liable. That allows in the extrinsic evidence to resolve that ambiguity, by identifying the parties' objective intention. This conclusion is contrary to the conclusion of the trial judge that there were not such ambiguity about the terms of the contract as would allow reference to extrinsic material. He thus sought in that respect to distinguish the decision of Brandon J in The Swan [1968] 1 Lloyds Reports 5 in particular the passages at pp12 to 13. With respect, I consider there was ambiguity and that it should be resolved by leaving Mr Gert Schidor liable as an individual, but not his company. I quote the relevant pages from Brandon J: "Where a contract is wholly in writing the intention depends on the true construction having regard to the nature of the contract and the surrounding circumstances of the document or documents in which the contract is contained. ….. Prima facie a party is personally liable on a contract if he puts his unqualified signature to it. In order therefore to exonerate the agent from liability the contract must show when construed as a whole that he contracted as agent only and did not undertake any personal liability. It is not sufficient that he should have described himself in the contract as an agent. …. Where it is stated in the contract that a person makes it "as agent for" or "on account of" or "on behalf of" or simply "for" a principal where words of that kind are added after such signature he is not personally liable." 71 The fourth appeal ground relied upon by the Appellant is that the relevant affidavit of Mr Gert Schidor, apart from the formal parts and the Agreement should not have been admitted into evidence. Clearly however the trial judge from the terms of his judgment did not consider he needed to rely on the extrinsic evidence. According to the view I have formed, he was entitled to admit the further evidence as he did. Moreover, he should have taken that evidence into account to determine whether the construction contended for by the Appellant was bound to fail. 72 That extrinsic evidence is in the form of an affidavit by Gert Schidor dated 19 December 2000. From it and its annexures it is clear, as I have said, that the invoices annexed were rendered to Gert Schidor Design Pty Ltd rather than Gert Schidor personally and the cheques paid in pursuance of the Agreement, though signed by Gert Schidor were clearly enough cheques drawn by Gert Schidor Design Pty Limited. Though an initial cheque was paid in favour of Bill Hardinge, all subsequent cheques were issued at the direction of Mr Hardinge to his company Radio Masts (Aust) Pty Limited (para 9 of the affidavit). Finally, Mr Schidor states, in conclusionary fashion and without further elaboration, that, "at all times the discussions between myself and Mr Hardinge were conducted by me as the authorised representative of Gert Schidor Design Pty Limited" and "I have not entered into any agreement with either the First or the Second Plaintiff as an individual". In those circumstances the Respondents contend that the extrinsic evidence is so overwhelming that, had the trial judge taken it into account as was open to him, he would have reached the same conclusion as he did without recourse to it, such that any argument to the contrary to the application for removal of Mr Gert Schidor as a party would be bound to fail. 73 For the reasons earlier stated, I do not so conclude. I would add that it is not uncommon for individuals to mix their business affairs with their personal affairs, paying for convenience out of a corporate cheque account. While it is true that the invoices were rendered to the company Gert Schidor Design Pty Limited that does not preclude further evidence at trial establishing that this too was a matter of convenience, though concededly that is a more powerful consideration against the Appellants. The other consideration which bears upon this is that Mr Hardinge first directed that he be paid personally and then later directed that the cheque go to his company. That would be a mode of dealing which indicated that commercial convenience lay behind the payment arrangements, but which does not unambiguously dispel the construction for which the Appellants contend of the Agreement itself. 74 It remains for me to deal with the Appellants' contention that there is no basis under the relevant District Court Rules for the admission of this extrinsic evidence. I would accept rather the Respondents' contention that such evidence is properly admissible, whether or not the Rules expressly permit such evidence, as does Pt 9 r17 in r17(2) and Pt 11A r3. Given the substance of the application was removal of a party as defendant in proceedings brought upon a contract, the question is simply whether the Agreement admits of sufficient ambiguity as to permit the introduction of that extrinsic evidence. It clearly does. This is insofar as it bears upon whether the then applicant (the First Respondent Gert Schidor) was indeed a party to the Agreement, thereby capable of being rendered liable as such.

OVERALL CONCLUSION 75 The Appellants should succeed upon their appeal on the basis that the trial judge should not have granted the original application by Mr Gert Schidor, the First Respondent to these proceedings, to be removed as a party. However, the Appellants fail on their alternative submission that both Mr Schidor and his company Gert Schidor Design Pty Limited, remain liable under the Agreement. Only Mr Schidor remains so liable. The trial judge did not err in admitting into evidence the affidavit of Mr Gert Schidor dated 19 December 2000 and its annexures in resolving any ambiguity in the Agreement for the purpose of determining the application before him. The trial judge had power by reference to Pt7 r9, supplemented as necessary by Pt 9 r17 and Pt 11A r3, to make orders striking out the proceedings against the First Respondent but should not have done so in the circumstances; rather he should have struck out the proceedings against the Second Respondent. The Appellants may need to replead in consequence. As to the above cost order, I have given consideration to whether costs in the court below and this Court should have instead become costs in the cause. However, the Appellants have substantially succeeded in these proceedings. In all the circumstances I would not wish to depart from the ordinary rule that costs should follow the event, given that the original application must be set aside.

ORDERS 76 The consequence of that conclusion is that I would make orders as follows:

(a) the orders of Goldring DCJ made on 23 February 2001 in District Court proceedings, matter number 4512 of 2000: (i) striking out the proceedings against the First Respondent; and (ii) ordering that the Appellants pay the First Respondent's costs; be set aside.

(b) the proceedings against the Second Respondent in the District Court proceedings be struck out; and

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Hardinge & 1 Ors v Schidor & 1 Ors [2002] NSWCA 277 FILE NUMBER(S) : CA 40167/01 HEARING DATE(S) : 4 March 2002 JUDGMENT DATE : 22 August 2002

COUNSEL : M W Young (Appellants) M R Aldridge, SC/C Whitelaw (Respondents) SOLICITORS : Tsolakis Solicitors (Appellants) Dominic David Stamfords (Respondents) CATCHWORDS : PRACTICE AND PROCEDURE - District Court Rules - application for removal of a defendant from District Court proceedings as not a party to agreement that is the basis of the dispute - CONTRACT - construction and interpretation of contract - principal and agent - CONTRACT - construction and interpretation - ambiguity - admission of extrinsic evidence - parole evidence rule - CORPORATIONS - contracts - agency - joint and several liability District Court Act 1973 (NSW) is Pt 9 r17; s161(2)(i) LEGISLATION CITED : District Court Rules Pt 7 r9; Pt 11A r3 Supreme Court Rules Pt 8 r9 Brimson v Rocla Concrete Pipes Pty. Limited [1982] 2 NSWLR 937 Carberry v Gardiner (1936) 36 SR 559 Danziger v Thompson [1944] 1 KB 654 Re Dayrell; Hastie v. Dayrell [1904] 2 Ch 496 Dey v Victorian Railway Commissioners (1948) 78 CLR 62 Fred. Drughorn, Limited v Rederiaktiebolaget Transatlantic [1919] AC 203 CASES CITED: MYT Engineering Pty. Limited v Mulcon Pty. Ltd. [1999] HCA 24; 195 CLR 636; 75 ALJR 823; 162 ALR 441 Perpetual Trustee Co (Ltd) v Bligh (1940) 41 SR 33 Peter Kent Developments Pty Limited v ANZ Bank (SCNSW David Hunt J, 6 May 1980, unreported) Re Redfern: Redfern v. Bryning (1877) LR 6 Ch D 133 Richardson v Landecker (1950) 50 SR 250 The Swan [1968] 1 Lloyds Reports 5 Uniting Church in Australia Property Trust (NSW) v. Monsen [1978] 1 NSWLR 574 Winstonu Pty. Ltd. v. Pitson [2001] FCA 541 DECISION : 1. Appeal dismissed with costs; 2. That Gert Schidor cease to be a party to District Court proceedings 4512 of 2000; thus varying the orders of Goldring DCJ made 23 February 2001.

In the light of the form of orders proposed by Santow JA in his Judgment, it should be noted, first, that no order that Design cease to be a party to the proceedings in the District Court was sought; and, second, that, on the hearing of the appeal (T.2-3, T.5-6), counsel for the Appellants did not abandon the claim that Design was a party to the Agreement. 27 In an Amended Notice of Contention filed on behalf the Respondents contended that the decision of Goldring DCJ should be affirmed on the following additional grounds: "1. The correct form of Order that should have been made by Judge Goldring pursuant to Part 7 rule 9 of the District Court Rules, based on the same evidence, was 'that the first defendant cease to be a party to the proceedings'; or alternatively, 'that the defendant's name be struck out as being improperly joined'. 2. What the judge in the court below had to decide pursuant to Part 7 rule 9, and possibly also pursuant to Part 9 rule 17, was not limited, as the judge said, to 'a matter of construction of the contract.' If there was ambiguity present in the language or terms of the written contract relevant to the issue of who were the contracting parties, then the judge could have, and should have had regard to my (sic) extrinsic evidence which would assist him in resolving any such ambiguity, and consequently resolving the issue of whether the first defendant had been improperly joined. 3. The extrinsic evidence relevant to the issue of who were the contracting parties was admitted as part of the evidence contained in the affidavit of Mr. G. Schidor sworn on 19 December 2000. 4. It is contended that if the decision of Judge Goldring in the court below is not found to be sustainable solely as a matter of construction of the written contract, because of ambiguity or otherwise, then the annexures to the affidavit of Mr. G. Schidor sworn on 19 December 2000 make it clear beyond doubt that the first defendant was not a party to the contract with either or both of the plaintiffs. 5. The decision of Goldring DCJ was sustainable on the basis that the appellant's claim against the respondent ought to have been dismissed pursuant to Part 11A rule 3 of the District Court Rules. 28 When the appeal was called on for hearing, Mr. M. W. Young appeared for the Appellants while Mr. M.R. Aldridge SC appeared for the Respondents. 29 So far as I have been able to ascertain, there is no appellate authority as to the principles to be applied by the Court on an application made pursuant to the provisions of DCR Pt 7 r 9 or of SCR Pt 8 r 9 which is in like terms. Indeed, the only authority which I have been able to ascertain which bears on the question is the decision of Rath J in Uniting Church in Australia Property Trust (NSW) v. Monsen [1978] 1 NSWLR 574, in the course of which Judgment his Honour said supra at 585-586: "It is appropriate here to comment upon the principles that should guide the court on this motion. ……… The rules also empower the Court to order that a party cease to be a party, where he has been improperly joined: Pt 8 r 9. The cases cited relate to summary dismissal or stay in relation to an alleged cause of action, but they provide guidance in the circumstances of this case. It may well be that, in the usual case, the propriety of joinder of parties may be appropriately determined as an independent issue, and should be so determined on an application made for that purpose. The reason is that, if the issues of fact and law are clearly defined, the proper parties to the resolution of those issues may be apparent. But where, as I think is the case here, the question of parties is, in some respects at least, related to substantive issues of law, in themselves arguable, then the proceedings should not be dismissed or stayed on the ground of misjoinder or nonjoinder of parties, unless the defect as to the parties is plainly demonstrable. The demonstration may be plain, even though detailed factual and legal analysis is required. In the present case, the statutory and factual histories are complex. The complexity arises from the nature of the subject matter, the interstate co-operation, particularly on a legislative level, and the change in the plan of union, evidenced by the 1972 amendments to the 1971 Act. But, upon analysis, this complexity is capable of resolution; and if it appeared that the resolution of the complexity was itself manifestly correct, and that plainly parties had been wrongly joined, or that some person should plainly have been joined, then it would be proper to dismiss or stay the proceedings. As will appear, I do not consider this to be such a case, though I do think that the complexity of the legislation is in some respects more apparent than real." 30 As the passages from his Judgment which I have set out (para. 19 (supra)) indicate, this, although somewhat differently expressed, was essentially the approach which Goldring DCJ adopted when dealing with the application. 31 Although accepting that an element of construction of the agreement was involved, I do not agree that the construction of the agreement was the essential question to be determined by Goldring DCJ on the hearing of the application. However, before turning to deal with that question, it is useful to record that, in November 1999, the Corporations Law provided (inter alia): "182(1) So far as concerns the formalities of making, varying or discharging a contract, a person acting under the express or implied authority of a company may make, vary or discharge a contract in the name of, or on behalf of, the company in the same manner as if the contract were made, varied or discharged by a natural person. (2) The making, variation or discharging of a contract in accordance with sub-section (1) is effectual in law and binds the company and other parties to the contract. ……… (7) A document or proceeding requiring authentification by a company maybe authenticated by the signature of an officer of the company and need not authenticated under the common seal of the company." 32 It is also convenient to note the following passages in the Judgment of Gleeson CJ, Gaudron, Gummow and Hayne JJ in MYT Engineering Pty. Limited v. Mulcon Pty. Ltd. [1999] HCA 24 [21-22]; 195 CLR 636 at 647,648; 75 ALJR 823, 828-829; 162 ALR 441,448-449: "21. In Black v. Smallwood ((1966) 117 CLR 52 at 61-62) Windeyer J said: 'There is a difference between a man's own acts and acts done for him by another man. The difficulty of the distinction in the case of a corporation is that a corporation must manifest its acts and intentions by the actions and declarations of human beings: and ambiguities and limitations of language make it difficult sometimes to express the distinction between acts done by a person as executant of the will of a corporation and acts done by a person as agent for a corporation, his principal. That the word 'agent' is in each case apt to describe the actor helps to disguise their different legal characters. I appreciate the force of what Walsh J said in the Supreme Court concerning the narrow differences in language upon which the decision in Newborne v. Sensolid (Great Britain) Ltd. ([1954] 1 QB 45) turned. But the distinction that differences in language reflect, sometimes not very clearly, is the distinction between the act of a man himself and acts done by another on his behalf. If in the case of a company the distinction is difficult to preserve, and may seem unreal, or merely verbal not conceptual, that is because the legal personality and capacity of the corporation are artificially created by law.' The references in s.182(1) to a person making 'a contract in the name of, or on behalf of, the company' must be read in this light. So too, the reference in s.444B(3) to execution ' by or on behalf of the company' and in s.444B(2) to the company 'execut(ing) the instrument' must be approached having regard to the fact that 'a corporation must manifest its acts and intentions by the actions and declarations of human beings'. 22. Companies statutes in Australia have long provided for companies to make contracts in writing without the company affixing its seal to the writing. Until the introduction of the Companies Codes in 1982 those provisions spoke of a contract being made 'on behalf of the company' by any person under its authority, express or implied. But the reference in such provisions to a contract being made 'on behalf of' the company should not be permitted to obscure the fact that the person who signed the contract did so as 'executant of the will' of the company. Thus, although distinction is to be drawn between 'a case where the execution of a document is effected by the subscription of the company's name followed by the signature of a director or directors as such and the case where the document is executed by an agent on behalf of the company' in each case the contract is the company's contract. As early in the development of company law as 1856 Pollock CB said, in Aggs v. Nicholson ((1856) 1 H & N 165 at 170; 156 ER 1161 at 1163) of the execution of a promissory note by a company: 'Considering the note independently of the statute referred to, looking only to the meaning of the words used, we think they purport to bind the company, and not the parties signing. Nobody doubts that that was the real intention, and why the law should regard popular language otherwise than popularly it is difficult to see, in this case at least. 'We, two of the directors of the Ark Society on behalf of the society, promise to pay' sealed with the seal of the society. Had the words been ' We, the Society promise ;' signed, 'PN-HW, for the society' or on ' behalf of the society ' it would have been clear. But we know well that the usage has been to say: 'I promise for AB' instead of saying, 'I, AB promise; signed for AB, CD,' and the words 'on behalf of' clearly originate in 7 & 8 Vict c 110' (emphasis added). ………"

(See also Perpetual Trustee Co (Ltd) v. Bligh (1940) 41 SR 33, 39-40 per Jordan CJ , Danziger v. Thompson [1944] 1 KB 654 ; Winstonu Pty. Ltd. v. Pitson [2001] FCA 541 [29] - [30] .) 35 In the present case, so it seems to me, not only are the terms of the agreement not such as to indicate that Mr. Schidor alone was the hirer, but the evidence as to Mr. Schidor's conversations with Mr. Hardinge in September and October, the cheque which was forwarded to Mr. Hardinge in October, the form of the agreement itself, the cheques which were paid pursuant to the agreement and the several invoices forwarded to Design in December 1999 all indicate that it was Design rather than Mr. Schidor which was the hirer of the bus. 36 Save only that, in my opinion, there should be substituted for the order that, as against Mr. Schidor, the proceedings in the District Court should be struck out, an order that Mr. Schidor cease to be a party to those proceedings, the appeal should be dismissed with costs. 37 I add that, even if I had been of a contrary view, I would not have been able to join with Santow JA in the orders which he has proposed as an order to the effect of the second of the orders proposed by his Honour had not been sought by either the Plaintiffs or the Defendants in the District Court nor been sought by the Appellants on the hearing of the appeal. That being so, it seems to me, that if I had been of a view contrary to that which I have indicated the only appropriate orders to be made were those sought by the Appellants in their Notice of Appeal. 38 SANTOW JA:

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