Macquarie Equipment Rentals Pty Ltd v RJT Trans-Aus Pty Ltd and Tony O'Bied

REPRESENTATION: Plaintiff : Mr D Acquilina (Counsel) Defendant/s: Mr Seymour (Counsel)

1 The plaintiff company (Macquarie) sues the first defendant CRJT-Trans Aust and the second defendant Toney O'Beid being the guarantor for the first defendant company.

2 Macquarie allege that on or about 1st September 2006 they, as an undisclosed principle and the first defendant, entered into a "written rental agreement" that provided for the provision of credit finance to the first defendant who then acquired telecommunications equipment. The first defendant would pay Macquarie rental instalments by way of a direct debit facility.

3 The written rental agreement was arranged through an agent acting on Macquarie's behalf; the agent being Australian Lease Underwriting Pty Ltd trading as CMS Asset Software (CMS). The rental instalments were to be 60 monthly rental payments of $332.48 plus GST. Subsequent to a termination on or around 26th June 2007 Macquarie seeks 51 monthly rental instalments owing by the first defendant. Pursuant to the Amended Statement of Claim, Macquarie seek a total of $14,746.16 plus interest.

4 The defendants submit that Macquarie's claim must fail. Broadly speaking they submit there are three grounds for rejecting their claim. First it is said that the formation of the agreement has not occurred because the offer made by the first defendant was not accepted in the manner stipulated in Condition 1 of the rental agreement and that furthermore no acceptance was communicated to the first defendant. 5 Second, the defendants assert that there was no agency agreement between Macquarie and CMS. The onus of proof establishing the existence of an agency agreement rests with Macquarie. The defendants submit that the document entitled "Macquarie Capital Principles and Agreement (Annexure A of Exhibit 1) signed on 17th March 2005 is an agreement between CMS and Macquarie Bank Limited. It is submitted that the plaintiff's being a wholly owned subsidiary is nevertheless a separate legal entity. As such, Macquarie Bank cannot "bargain' on behalf of its subsidiaries. As such, the plaintiff cannot be said to be the undisclosed principle.

6 Lastly, the defendants submit that if the plaintiff was the undisclosed principle, then as a result of the conduct of the person who attended the premises of the defendants, any agreement would have been vitiated by the misleading and deceptive conduct of the plaintiff's representative. That conduct included a number of misrepresentations directly relating to the hiring of computer and television equipment. Whether there was an Agreement - No Acceptance of Offer

7 The defendants assert that the circumstances of this case are indistinguishable from those considered by the Court of Appeal in ICTA Investments Pty Ltd t/as Jolly Roger VGE Commercial Corporation (Australia) Pty Ltd [2006] NSW CA 290. Relevantly, that case concerned the provision of credit finance to a company wishing to install new lighting equipment. A finance application was submitted to G.E. G.E. provided an approval advice to Auswest Financial Services who acted as their agent.

8 On 29th July 2002, ICTA was provided a quotation to upgrade their lighting equipment by Lighten Up Productions - being $63.64 per week based on a 60 month term. ICTA made a finance application to Auswest dated 2nd August 2002 which was in turn submitted to G.E. That application was approved to Auswest five days later for $17,727.27 for a period of 60 months. The approval contained certain conditions including the requirement of a guarantor and the proof of real estate ownership through rate notices.

9 On the 15th August 2002 ICTA gave Auswest a cheque for $286.00 for the first month of rental, Some eight days later a representative of ICTA, Mr Raice, wished to proceed with the purchase but wanted the price reduced.

10 On 30th August 2002 Mr Raice had a meeting with Mr Hargreaves from Auswest. As noted in the decision of Hodgson JA when summarising events, the lighting had already been installed. Mr Raice granted a price reduction and a shorter rental period. He then signed a number of documents including a rental agreement, a guarantee, a delivery acknowledgment, a direct debit request and a G.E. commercial rental application. The agreement provided for a term of 36 months and a monthly rental of $445.38. The document had provision for execution by G.E.

11 In return, Mr Raice handed a document entitled 'Tax Invoice' which included a request for confirmation of property ownership and complete details of direct debit authority and requesting a cheque for the first month instalment payable to Auswest. At no time was he given a copy of the documents he signed.

12 Importantly on 6th September 2002 Mr Raice informed Mr Greg Hargreaves from Auswest that he did not want to proceed with the transaction and 6 days later the equipment was returned by ICTA to Lighten Up.

13 At no stage did G.E. contact ICTA although they continued to use the direct debit facility until and including 3rd January 2003. Relevantly, ICTA asserted they never supplied a rate notice as stipulated in the 'Tax Invoice' and did not pay the first monthly instalment to the plaintiff's agent as also required.

14 Relevantly, the rental agreement in that case (being Clause K1) stipulated that until the signing of the memorandum of acceptance the offer should not be binding on the plaintiff. As Hodgson JA noted (para 40) "The ordinary rule is that a contract is not made, that an offer is not accepted, until the acceptance of the offer has been communicated. If the parties, as they are entitled to do, wish to vary this rule such an intention must be made clear in the offer. The variation may generally speaking to be either of two forms. It may provide for the acceptance by the doing of an act, which may be done without any relation to communication. The well-known example of this appears in Carlill v Carbolic Smoke Balls Co [1893] QB 256 … Secondly, the offer may provide expressly or implied for acceptance to be communicated in a particular manner, so that acceptance is deemed to have been communicated when that manners is adapted … Upon the plaintiff's submission, the present case falls into the former category, so that the actual communication of acceptance is by the terms of the offer made unnecessary provided the act is performed of executing the acceptance clause in the document."

15 One would indeed expect clear language to support such a view, and the reasons therefore are well expressed by Lord Denning M.R. in the case of Robophone Facilities v Blank [1966] 3 All ER 128 of p 131. There the court was dealing with an offer, which included a Cl 14 in these terms: " This agreement shall become binding on the company only upon the acceptance thereof by signature on their behalf".

16 Lord Denning said: " It is clear that document, although called an agreement was only an offer. It could be revoked by Mr Blank at any time before it was accepted by the plaintiffs … the general rule undoubtedly is that, when an offer is made, it is necessary, in order to make a binding contract, not only that is should be 'accepted' but that the acceptance should be notified …"

17 Relevantly however, Hodgson JA notes in ICTA Investments at paragraph 49: "An offer can convey to the offeree that the offer may be accepted by action rather than communication of acceptance. The question then is whether this was so in this case".

18 This point was picked up by Young CJ in the same decision when quoting McHugh JA in the decision of Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd [1988] 14 NSWLR 523 at 534. McHugh JA noted: "The objective theory of contract required an external manifestation of assent to an offer. Convenience, and especially conveniency, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. … After a reasonable period has elapsed, silence is seen as a rejection and not an acceptance of the offer."

19 Nevertheless, his Honour noted (at 555): "… where an offer with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance of the offer, it is open for the tribunal of fact to hold that the offer was accepted according to its terms."

20 Ultimately Hodgson JA noted that despite the lighting equipment having been installed and Mr Raice being informed that once G.E. had received the document they would in turn pay Lighten Up and that they had the power to fill any gaps in the contract, this did not amount to an acceptance and that the 'objective theory of contract' requiring actual assent and communication of that offer should prevail. He noted that the document signed by Mr Raice had not been executed by G.E. Moreover as noted at (para 51): "without completion of the blanks in the document, there was no document determining what conduct by ICTA in relation to payment of instalments would amount to a breach of the contract. Next the waiver of the requirement of a rates notice was never communicated to ICTA".

21 His Honour noted that as such no contract came into existence and there was no evidence any "actions manifesting an intention of both parties to be bound by the terms of the documents" prior to the "revocation of the offer on 6th September 2002". (para 53)

22 It is submitted that the present case is almost identical to the case relating to ICTA and G.E. Relevantly Condition 1 of the present agreement under the heading: 'Terms and Conditions - Rental ' reads as follows: "Acceptance: this is an important legal document. By signing this Agreement the Renter has agreed to follow all the provisions contained in it. Completion of the Schedule of this agreement by the Renter constitutes an offer by the Renter the owner shall have complete discretion whether to accept that offer the signing of this Agreement by the owner constitutes a binding contract without further notice to the Renter. The Owner is authorised to fill in on this Agreement the Commencement date".

23 There is no dispute that Macquarie did not sign the written rental agreement and faxed to communicate their acceptance of the offer to the defendants. Relevantly however, the application for finance did contain a request for details of a guarantor that was filled in by the second defendant. Moreover, there was no condition requiring proof of property ownership or any other requirement not filled out. Perhaps most importantly however was the evidence that the defendants had the equipment up until at least one month prior to repossession of the equipment in the middle of 2007.

24 The second defendant Mr O'Beid, the Director of the first defendant, gave evidence that he was under the belief that he was dealing with a company called Forte Connect. Five monthly instalments had been debited by Macquarie up until January 2007. At page 91 of the transcript Mr O'Beid is asked the following question: Q. "Mr O'Beid, in about January 2007, you cancelled your Direct debit with Forte Connect. Is that not right?" A "Between January and February. Yes."

25 Later at p92 of line 17: Q "Did you then, after you rang up or after you got the bills, you cancelled your direct debit - that direct debit facility?" A "Yes." Q "In Exhibit B? And then after you resolved your concerns with Forte Connect bills, you then sent the cheque for the amount of $731.46?" A "Yes." Q "And you sent that to Macquarie Equipment Rentals, didn't you?" A "I don't remember"

26 Then later: Q "But in any event, in or about mid April 2007 that's when yousent that cheque for $731.46 isn't it?" A "I don't remember if I sent a cheque."

27 Later Mr O'Beid is shown an account detailing monies paid by the first defendant to Macquarie. At page 94 line 15 he is asked: Q "And would you agree sir, that in February 2007 was the firstmonth where you put a stop to the direct debit facility?" A "Yes."

28 Then later at line 26: Q "And would you agree that in the March 2007, that stop that you had put on that direct debit facility was also stopped for the month of March? Would you agree that that's what happened?" A "Yes." Q "And then you see there on 24th April, on or around that date, you see there to the right, there's an amount received in the right-hand column for $731.46?" A "Yes. Yes."

Q "And then would you agree, sir that this is the cheque that was sent by your company to Macquarie Equipment Rentals? Do you agree with that?" A "I don't remember if that's a cheque." Q "You'd agree however that it was a payment by your company for the amount of $731.46? (No verbal reply.) Q "Do you agree with that sir?" A "It's shown there. It's a payment. Yes."

29 It was Mr O'Beid's evidence that he only signed one direct debit request. It is clear from the document that CMS Asset Solutions is authorised to debit the account. It also states that the first defendant 'request and authorise Macquarie Equipment Rentals Pty Ltd ID 204817 to arrange any amount CMS Asset Solutions may debit or charge you to be debited through the Bulk Electronic Clearing System …'. The first defendant then provided details of the account held in its own name.

30 As noted the direct debit facility was accessed up until January 2007. The direct debit facility was then cancelled and then after a period of approximately two months a further payment is made by the defendants which amounted to the two previously unpaid instalments. This is in contrast to the facts in the decision of ICTA where an initial instalment is made but before a second instalment is due the conditions of the offer are substantially altered including the instalment amount. In those circumstances as noted by Hodgson JA it was impossible to bind G.E. to the agreement.

31 The facts in the present case are significantly different. Although I accept that Condition 1 of the agreement required formal consent by Macquarie and that consent should have been communicated to the defendants, the circumstances of this case, including the defendants' fulfilling their obligations and the payment of instalments over a number of months make it clear that Macquarie had accepted the offer. If there was any doubt of their acceptance then such doubts ceased when Macquarie was sent and accepted an amount in April 2007 of two previously unpaid instalments. Agency

32 It is further submitted that there was no binding agreement between the first defendant and the plaintiff because Australian Lease Underwriting Pty Ltd trading as CMS Assets Solutions was not an agent for the plaintiff.

33 In support of this proposition the defendants rely on the principal and agency agreement (marked Annexure A) in Mr Rudd's statement. That agreement is between Macquarie Bank Ltd and CMS. The plaintiff in the proceeding is a wholly owned subsidiary and a separate legal entity. Macquarie Bank could not purport to bind a separate legal entity - indeed there is no mention of the plaintiff company in the agreement.

34 The law relating to undisclosed principle was aptly described by Diplock J in Tehran Europe Co Ltd v St Belton (Tractors) Ltd (1968) QB545 of 555" "Where an agent has … actual authority and enters into a contract with another party intending to do so on behalf of his principle, it matters not whether he discloses to the other party the identity of his principle or even that he is contracting on behalf of a principle at all, if the other party is willing or leads the agent to believe that he is willing, to treat as a party to the contract anyone on whose behalf the agent may have been authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing".

35 The definition of 'agent' has been described in G.E. Dal Ponts Law of Agency (2nd Edition Lexis Nexis Butterworths 2008) at p5 as follows: "The narrowest legal definition of 'agent' connotes an authority or capacity in one person to create legal relations between a person occupying the position of principle and third parties. A broader conception covers 'a person who is liable by virtue of the authority conferred upon him to create or affect legal 'rights' and duties as between another person, who is called his principle, and third parties. Wider again is the characterisation of an agent as 'a person who has authority to act on behalf of a principle, either generally or in respect of some particular act or matter. Each of these definitions recognise agency as giving effect to the maxim qui facit alium facit per se - a person who acts through another is deemed to act in person. Each also reveals that agency is defined in terms of its consequences …"

36 The legal relationship of agency can be created by three methods. Firstly, by prior express or implied agreement; secondly by the 'subsequent ratification by the principle of acts done without authority by a person, whether or not an agent, on the principle's behalf; and thirdly by operation of law pursuant to the common law doctrines of agency by necessity and agency arising from cohabitation (p87 Law of Agency)

37 The entirety of the plaintiff's evidence is contained in the statement of Mr Darren Rudd, the Collections Manager of MER, together with a number of annexures including the 'Principle and Agency Agreement' dated 17th March 2005. The definition contained in Clause 1.1 states that: "Principle means MBL or a wholly owned subsidiary of MBL as nominated in evidence by a Hiring Approval which wholly owned subsidiary shall by virtue of the Hiring Approval having been duly signed on behalf of the wholly owned subsidiary be deemed to be, and shall be deemed have accepted being the principle in respect of the relevant Hiring Agreement on the terms of this agreement and Hiring documents."

38 It should also be noted that Mr Rudd himself states (in paragraph three) : "This undisclosed principal and agency relationship was brought into existence by a Principle Agency Agreement date 17th March 2005."

39 However, the fact that the original agreement between Macquarie Bank and CMS could not extend to or bind other wholly owned subsidiaries of the bank does not in itself prevent CMS from establishing contractual relations with a wholly owned subsidiary of the bank. Indeed, that is what is envisaged in the original agreement. The plaintiff would however need to establish that they, not Macquarie Bank, entered into this agreement with CMS to act as their agent and facilitate the provision of finance to the defendant company.

40 The factors taken into account when the issue determining consent between the principle and the agent is aptly described as follows: " … the court looks primarily to what the parties said and did at the time of the alleged creation of the agency. Earlier words and conduct may afford evidence of course of dealing in existence at the time and may be taken into account more generally as historical background. Also, as evidence of the acts of the parties subsequent to a written contract may be admissable to establish the existence of a contract. Later words and conduct may have some bearing on determining whether or not an agency relationship was intended. " (Dal Ponts Law of Agency p92)

41 It is clear that at the time the first defendant's application for finance was made, CMS was at all times dealing with the plaintiff and not Macquarie Bank. The finance application (Annexure C of Mr Rudd's statement) states: "Application Referral to Macquarie Equipment Rentals Pty Ltd".

42 The finance approval advice (Annexure D) is provided by the plaintiff and notes that CMS is the "Introducer". Relevantly also is Direct Debit Request which also authorises MER: "to arrange any amount CMS Asset Solutions may debit or charge through the Bulk Electronic Clearing System".

43 It is clear that at the time of the making of the finance application the undisclosed principle was, in fact, the plaintiff and not Macquarie Bank.

44 It is further submitted that the agreement between the plaintiff and the first defendant would amount to no binding agreement because of the false, misleading and deceptive conduct of the ostensible representative of the plaintiff.

45 The second defendant's statement was tendered into evidence. In that statement Mr O'Beid, recalled a person named simply as David attending his premises to discuss a deal relating to the installation of a landline for a period of 5 years at a cost of $160.00 per month.

46 If that was accepted he would also give Mr O'Beid a free Sony Plasma TV. He then stated he would receive a free computer if a second landline was installed. That price was to include unlimited local and national calls.

47 According to Mr O'Beid he then spoke to someone on the phone who continued the deal. He then notes that when he read the documents they were: "really unclear and disorganised. I noticed a form with another customer company name on it, with writing that was un-readable and some word were smudged and erased."

48 According to Mr O'Beid this person named as David said: "Don't worry. This is to allow me to order the TV and laptop from the store'.

49 He then states: "I gave him my bank account details to debit my account every month for $320.00 for two lines, and he left my office."

50 According to Mr O'Beid's evidence David was from a company called Forte Connect. According to Mr O'Beid he experienced problems as a result of the installation process and made a complaint to Forte Connect.

51 There are a number of difficulties with Mr O'Beid's evidence under cross-examination. He is shown the 'Direct Debit Request Service Agreement'. His is asked whether he sees any 'smudging' as asserted in his statement. He is asked (Page 77 of the transcript line 40) Q "Sir. Just answer my question? You understand what the word 'smudge' means?" A "No".

52 Then later after being told what it means he is asked: Q "Can you just show us anywhere where there is smudging?" A "No."

53 Then again he is asked: Q "Now do you understand what 'erase' means?" A "Erase. Yes". Q "Is to rub out. Can you just go and check through the document and can you tell me where you can see anything that appears or might appear to have been erased?" A 'No".

54 Later in his evidence Mr O'Beid states that his daughter had assisted him with typing his statement and that she had added the word 'smudge' (page 85 line 48).

55 It should be noted that the rental agreement clearly describes the equipment being provided. Both the laptop and the computers are listed with the telecommunications equipment. The term of the agreement is for 60 months for an amount of $332.48 together with GST of $33.25. (Exhibit G). Mr O'Beid's signature is clearly visible as both the renter and guarantor dated 1st September 2006. He gives details of his company and of the estimated value of his residence.

56 Moreover, he signs a direct debit request which clearly includes Macquarie Equipment Rentals. In giving evidence he agrees that he signed only one direct debit request on or about this time. It should also be noted there is a lack of any documentary evidence supporting his version of events. There is no suggestion of smudging or writing having been erased when one examines the documentation. I found him to be an unreliable witness.

57 It should be noted that the equipment supplier was Truscom Pty Ltd. As Mr Rudd notes at paragraph 5 of his statement: "Once the client has been approved then the fundsare paid directly by MER to the equipment supplier who in this case was Truscom Pty Ltd. The equipment supplier generates a fax invoice in the name of the agent, a copy of which is sent to MER. MER then becomes the legal owner/proprietor of the equipment."

58 Annexure N is a document entitled 'Truscom Telephone Services Confirmation Request'. It notes the defendant company and Mr O'Beid as the contact. It refers to the 'New Telecommunication Service Provider' as being Forte Connect. It should be noted that this document has Mr O'Beid's signature and the same date of 1st September 2006 as with the rental agreement.

59 There is a clear suggestion that Forte Connect had an agency relationship with Truscom. According to Mr Rudd's statement there was no express agency relationship between Macquarie or CMS on one part and Forte Connect. I accept the plaintiff's contention that the defendant: "adduced no evidence to suggest otherwise". Nor in my view could it be said that Macquarie and its agent gave 'ostensible' authority to act on their behalf. The defendant bears the onus of proving ostensible authority and there is a clear lack of evidence which would support that proposition.

60 As set out in the decision of Branwhite v Worcester Works Finance Ltd 1969 AC 552, the fact that a broker completes the lender's form, or arranges the signing of the document is not conclusive of agency to the lender. As Lord Upjohn state (at 577): " It is argued that in having possession of the finance company's forms and the ability to settle and fill in all these essential figures he showed that he was acting in the transaction generally as the agent of the finance company. But I do not myself think that this is a realistic approach. A motor dealer must have, if he is to be successful, one or more finance companies willing to enter into the ordinary bona fide hire-purchase agreements with purchasers … They must, therefore supply him with forms and tell him as a matter of common sense the terms upon which they are prepared to do business, and this must include information upon the terms of their hiring charges, their minimum initial instalment and the maximum period of hire … But I cannot see that this makes him an agent of the finance company. In any event, all he is doing is to fill in a document which he submits on behalf, as I think clear, of the would-be hirer which contains a proposal for hire-purchase finance".

61 In the present instance I am not persuaded that Forte Connect nor their representatives acted as agents for the plaintiff. In any event, the documentary evidence constituting the rental agreement does not support the evidence of Mr O'Beid. As noted I found Mr O'Beid was not a reliable witness. It is further noted that there is a lack of supporting documentation regarding Mr O'Beid's version of events - indeed the correspondence relating to his dissatisfaction with the suppliers including complaints to the ombudsman are dated on or around June and July of 2007 - at the time MER was taking action for repossession. This submission must also fail and I find for the plaintiff. Orders

i. There will be judgment and verdict to the plaintiff against the first and second defendants in the sum of $14,746.16 together with interest.

ii. Costs follow the event. The defendants are to pay the plaintiff's costs and disbursements on the ordinary basis as agreed as calculated from 07/04/2007. The practice direction limiting costs to twenty-five percent of the claim does not apply in this case.

iii. In default of agreement within 28 days the costs to be assessed under the Legal Profession Act.

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