55 The doctrine of apparent authority may be stated thus:
"Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority." : Bowstead & Reynolds on Agency (18th Ed) para 8-013.
56 Under the doctrine of apparent authority, a person may become bound by the acts of another as apparent agent, even where he has forbidden the acts of the apparent agent or where the activity of the apparent agent is unlawful: ibid par 8-014.
57 The difficulty in this case is not the identification of the relevant legal principle but rather the application of the principle to particular facts. Minds often differ as to whether particular facts are sufficient to fasten liability on an innocent person who neither knew nor approved of the wrongful act of another who purported to act in his or her name.
58 I have found a case decided by the English Court of Appeal of particular assistance. The facts have close analogies in many respects to those of the present case. In Gurtner v Beaton [1993] 2 Lloyd's Rep 369, the plaintiffs were passengers in a light aircraft which crashed, injuring them seriously. They sued Cleanacres Ltd which, they claimed, had entered into a contract of carriage with them for the journey. They claimed that the contract of carriage had been entered into on behalf of Cleanacres Ltd by its agent, Mr Beaton. Mr Beaton was not, in fact, authorised by Cleanacres Ltd to enter into any contract of carriage. Cleanacres Ltd did not own or have any interest in the light aircraft involved in the crash. The contract of carriage was unlawful, as the aircraft was not licensed for such a journey. Cleanacres Ltd knew nothing about the plaintiffs, or the contract, or what Mr Beaton had arranged with the plaintiffs. If Cleanacres Ltd had known about the arrangement, it would not have allowed it to proceed.
59 Nevertheless, Cleanacres Ltd was held to be bound by the contract of carriage because Mr Beaton had their apparent authority to enter into it.
60 The facts upon which the decision rests - which have parallels in the present case - were as follows.
61 Mr Beaton was a pilot and flying instructor. He was employed on a casual basis by Cleanacres Ltd, which then owned two or three aircraft which were used in its agricultural business for the transport of its agronomists. Mr Beaton's duties were to teach some of the company's employees to fly and to supervise the maintenance of the aircraft.
62 Mr Beaton wished to conduct his own flying club, part time. Cleanacres Ltd was willing to permit him to "enjoy the prestige of the name 'Cleanacres'" for his flying club. Cleanacres Ltd provided a portable office for Mr Beaton's flying club at a local airport. Above the entrance to the office appeared the words "Cleanacres Aviation". Mr Beaton, in his role as aircraft maintenance supervisor employed by Cleanacres Ltd, used letterhead on which was printed "Cleanacres Aviation"; he submitted invoices in the name of Cleanacres Ltd. There was no written statement by Cleanacres Ltd of the limits of Mr Beaton's authority.
63 It was not possible for Mr Beaton, or Cleanacres Ltd, lawfully to carry passengers by air for reward as neither had the appropriate licence. To have done so would have been a criminal offence.
64 However, Mr Beaton illegally used the aircraft under his control for air taxi services for reward on a number of occasions. In doing so, he used the name "Cleanacres Ltd".
65 In 1983 Mr Beaton agreed to carry passengers for reward to Scotland in a light aircraft. He confirmed the agreement in writing on paper headed "Cleanacres Aviation". Mr Beaton arranged to use two light aircraft which did not belong to Cleanacres Ltd. Cleanacres Ltd knew nothing about this agreement.
66 The Court of Appeal identified the essential question as: "whether, by the act of putting Mr Beaton into the position of aviation manager of Cleanacres Aviation, it was represented by Cleanacres Ltd that he had the authority to use an aircraft under his control for air taxi work", although Cleanacres Ltd did not itself perform air taxi work as part of its business and did not authorise Cleanacres Aviation to perform air taxi work as part of the business of Cleanacres Aviation: at 380.
67 The Court of Appeal unanimously held that Cleanacres Ltd had held out Mr Beaton as having authority to enter into a contract for air taxi work on its behalf. The Court relied on the following facts and circumstances, which find parallels in the present case.
68 At 379, the Court said:
"The representation by Cleanacres Ltd that Mr Beaton had authority to enter into a contract for air taxi work was made by causing or permitting Mr Beaton to act as aviation manager of Cleanacres Aviation at Staverton Airport where he had suitable aircraft under his control and by permitting him so to act without any express limitation on his apparent authority. The placing of the name Cleanacres Aviation over the door of the office was plainly done within actual implied authority as was the use and control of the aircraft for all lawful purposes. Within the conduct of the business of Cleanacres Aviation the making of a contract was clearly within the apparent authority of Mr Beaton as aviation manager."
69 In the present case, Morgan Brooks caused or permitted Mr Cincotta to act as manager, and to represent himself as manager, of a business which Morgan Brooks authorised to trade using prominently the name "Morgan Brooks Group" and the logos and livery of the "Morgan Brooks Group". On its web site, which Dr Landa saw before making his investments, Morgan Brooks showed the address of Mr Cincotta's offices as its offices, showed Mr Cincotta as "Manager", and gave the e-mail contact address for Mr Cincotta's offices as its own e-mail address. The website contained no statement to the effect that the "offices" were, in fact, independently owned business entities and thus the "managers" were not managers of Morgan Brooks' own business.
70 Morgan Brooks permitted - indeed it required - Mr Cincotta to use letterhead and business cards showing Morgan Brooks Group prominently, without containing any express limitation on Mr Cincotta's authority, such as could easily have been done by including a statement to the effect: "This is an independently-owned business conducted under franchise" and showing clearly the identity of Mr Cincotta or ACN 067 as the owner of the business.
71 The placing of the signage and livery of "Morgan Brooks Group" on Mr Cincotta's offices at Coffs Harbour and Double Bay was done with the express authority of Morgan Brooks.
72 The letterhead which Morgan Brooks required Mr Cincotta to use showed the Coffs Harbour and Double Bay offices as amongst a list of "licensed offices". There was no explanation of what "licensed" meant. It did not necessarily imply that the "offices" were not branch offices of Morgan Brooks but were, in fact, independent businesses which were licensed to use the Morgan Brooks' name livery, within certain limitations. "Office" does not normally mean "independent business".
73 Morgan Brooks required that the stationery of a licensee show the ACN or ABN of the licensee's own business. However, the letterhead which Mr Cincotta was required to use did not identify to the ordinary reader that the ACN or ABN quoted was not that of "the Morgan Brooks Group" (or the entity which owned that name), but was that of a separate business entity. There was no way that the uninformed reader of the letterhead would know whose ACN or ABN was quoted, if not Morgan Brooks'.
74 Within the context of Mr Cincotta's business the making of a contract was clearly within his apparent authority. The Morgan Brooks' web site showed Mr Cincotta as the manager of the Coffs Harbour and Double Bay offices. The letter confirming the Contract sent by Mr Cincotta to Dr Landa on 17 October 2001 was signed by Mr Cincotta as "Manager, Morgan Brooks Group".
75 The Court of Appeal in Gurtner v Beaton (supra) said at 379:
"… there was no evidence from any witness to the effect that a reasonable person would regard the doing of air taxi work as within the usual authority of the aviation manager of an enterprise called Cleanacres Aviation who had an office at Staverton Airport and aircraft under his control. There is, however, no rule of law that such evidence is necessary for a case based on apparent authority of this nature. … the correct approach is to consider the whole of the conduct of Cleanacres Ltd in the light of all the circumstances in order to determine whether that conduct amounted to a holding out by them of Mr Beaton as having the necessary authority. … It is not right to concentrate on the use of the word 'usually' … and to treat it as decisive … on the ground that an aviation manager cannot be regarded as 'usually' having authority to make a contract for air taxi work when the aviation business of which he is manager does not include such work."
76 In the present case, the description which Morgan Brooks itself gave of the business which it conducted under the name "Morgan Brooks Group" was not clearly limited to the provision of mortgages and nothing else. Its web site also referred to it as "an established Fund Manager within the Banking and Finance industry" and as "a full member of … Australian Securitisation Forum and Commerce, Queensland". That was a very broad and indefinite description and could include a variety of activities within the financial services industry.
77 There was no evidence from any expert witness called by Dr Landa that a reasonable person would regard arranging a mortgage or advising on the investment of the proceeds of a mortgage as within the actual authority of the manager of a business describing itself in the terms in which Morgan Brooks described its business on its website. However, as held in Gurtner (supra), such evidence is not necessary as a matter of law. I must have regard to the conduct of Morgan Brooks in the light of all of the circumstances.
78 In Gurtner (supra) the Court said, at 380:
"To any person, without inside knowledge, who might deal with Mr Beaton as aviation manager of Cleanacres Aviation the fact that Mr Beaton could not lawfully engage in air taxi work would be unknown."
79 In the present case, an outsider such as Dr Landa would not know that Mr Cincotta, as "Manager, Morgan Brooks Group Coffs Harbour" or "Manager, Morgan Brooks Group Double Bay" had no authority under the relevant licence agreements with Morgan Brooks to engage in the provision of investment advice.
80 In Gurtner (supra) the Court said, at 380:
"It may, therefore, be inferred that there was nothing in the circumstances of Mr Beaton as manager at Staverton Airport which rendered the doing by him of air taxi work inappropriate by reference to his other aviation activities."
81 In the present case, there was nothing in the circumstances of Mr Cincotta as manager of a business engaged in providing what may be generically described as financial services and calling itself amongst other things "an established Fund Manager" which rendered the arrangement of a mortgage and the investment of the proceeds, or arranging the investment of funds not being the proceeds of a mortgage, as inappropriate by reference to his other activities of simply finding mortgages for borrowers.
82 I appreciate that it is easy to dismiss the decision in Gurtner as irrelevant because it is founded on different facts. No two cases present identical facts; the reasoning of the law proceeds upon similarities in factual situations. In my opinion, the facts of Gurtner and the decision in that case are persuasive in the present case.
83 I accept that Dr Landa decided to place his investments through Mr Cincotta because he trusted Mr Cincotta and because other members of his family had recommended Mr Cincotta. However, I accept also that Dr Landa was not without any interest in the substance and commercial reputation of the entity he might be dealing with in making his investments. I accept that he had regard to the business cards given to him by Mr Cincotta and Mr Wright and that he searched the web site of Morgan Brooks to find out more about the company which Mr Cincotta said he was representing. I accept that what Dr Landa saw on the Morgan Brooks' web site persuaded him that he would be dealing with a substantial commercial enterprise with offices all over Australia. I accept that Dr Landa was reassured further when he saw that Mr Cincotta was working from an office which bore the name and livery of Morgan Brooks. I am satisfied that these perceptions played a material part in Dr Landa's decision to proceed with Mr Cincotta's investment proposal.
84 I conclude that Morgan Brooks held out Mr Cincotta as having apparent authority on its behalf to enter into a contract for the investment of funds, whether or not those funds were derived from the proceeds of a mortgage which Mr Cincotta had also arranged. I find that Dr Landa relied upon that holding out in determining to enter into a contract with an entity which he believed to be Morgan Brooks, not Mr Cincotta or ACN 067.
85 It follows that Morgan Brooks was bound by the Contract.
Damages