Midas Management v Equator Communications

Midas Management v Equator Communications - [2008] NSWSC 255 - NSWSC 2007 case summary — Zoe

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JUDGMENT (Appeal Local Court Magistrate - agency - Christmas parade) 1 HER HONOUR: By amended summons filed 17 August 2007 the plaintiff seeks orders firstly, that the appeal be allowed; secondly, that the judgment and orders of his Honour Magistrate Dillon made on 5 February 2007 be set aside; thirdly, that there be judgment for the plaintiff in the Local Court proceedings 12162 of 2005; and finally, that the costs order made on 20 June 2007 be set aside. 2 The plaintiff is Midas Management Pty Ltd (Midas) who was the first defendant in the Local Court. Equator Communications Pty Limited (Equator) is the first defendant and was the plaintiff in the Local Court. The second defendant is Anthony Mead (Mr Mead) who was also the second defendant in the Local Court. He appeared at the hearing of this appeal and was not legally represented and wishes to make submissions concerning costs. For convenience, I shall refer to the parties by name in this judgment. 3 Midas Management relied on two affidavits of Jacqueline Ann Griffin both sworn 14 September 2007. 4 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby (2002) 37 MVR 479; [2002] NSWSC 1082. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 5 In Swain v Waverley Municipal Council (2005) 220 CLR 517, the Chief Justice at 519 reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 6 Section 75 of the Local Courts Act provides that the Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 7 Midas raised 21 grounds of appeal which are convoluted. Doing the best I can, the grounds of appeal raise the following:

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(c) that raises matters of fact not arising out of the preceding pleading. (3) Matters which must be pleaded pursuant to subrule (2) include (but are not limited to) fraud, performance, release, statute of limitation, extinction of right or title, voluntary assumption of risk, causation of accident by unknown and undiscoverable mechanical defect and facts showing illegality." 26 In relation to this issue, in his judgment the Magistrate at [49] stated: "Midas complains in its submissions that the issue of agency was not raised by the plaintiff' in its pleadings. Two things should be said about that. First there is no rule of pleading that requires a party specifically to plead agency. Second, an issue of agency is implicitly raised whenever one party alleges certain conduct done or omitted by a corporate entity because a corporation can only act through its human agents. The first defendant understood that the plaintiff was alleging that Mr Mead was its agent. Particulars of relevant contractual conversations between Mr Mead and Equator were set out in the statement of claim against the first defendant. This complaint has no substance." 27 It is my view that Midas was well aware of the allegation of agency as, in its defence, it pleaded that Mr Mead did not have the requisite authority to enter into a contract on behalf of the trustee. 28 Even if it was not clear to Midas from the pleadings and prior to the commencement of the trial, the fact that agency was relied upon by Equator at the commencement of the trial in its opening would have put Midas on notice. Counsel for Equator stated: "The outstanding issue then, if this all together forms a contract, is the question of agency and indeed we submit that this probably the only real question before the Court. That is whether Mr Mead had authority to do what he purported to do, that is to bind the Trust and thereby the trustee to a contract with Equator." (27/07/06. T9. 12-17) 29 Counsel for Equator then indicated that they relied on five types of authority to make out their claim and that any one of them alone would be sufficient to make out their claim. Counsel for Equator continued: "So those are the five basis, we rely on all of them and we say that the evidence plainly supports each of them. We say we get across the line on at least one of them and we say, indeed, all of them." (27/07/06. T10. 2-5) 30 The trial proceeded for a further 2 days until it was adjourned part heard on 28 July 2006. The trial did recommended some 4½ months later, on 11 December 2006 when a final witness gave evidence and counsel for each party gave their closing addresses. Even if it was possible to say that Midas was initially taken by surprise, the opening of trial would of given them an indication of what submissions Equator was making in regard to Mr Mead's authority and the 4½ month adjournment would of given them ample opportunity to prepare a response. 31 The pleading in the defence and the opening submissions would have put Midas on notice beyond doubt that agency was central to Equator's case. This ground of appeal fails.

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33 Delegatus non potest delegare is an old common law rule which prohibited trustees from delegating their duties or powers to a third party. The extent to which this continues to reflect Australian law is open to debate. The learned authors of Jacobs' Law of Trusts in Australia have expressed the view that in the light of the amendments made to previous law by statute, it is arguable whether delegation by trustees should not be treated as a power which they possess rather than an exception to the duty not to delegate: (7th ed, LexisNexis Butterworths, Sydney, 2006) at [1723] and [1731]. 34 Turning to the trust deed, schedule 3 of the Sydney Christmas Parade Trust Deed (Ex B) outlines the powers and duties of Midas as trustee of the Trust. Clause 25 of Sch 3 provides that Midas may: "25. Employ agents in the execution of the trusts and powers herein contained and instead of acting personally from time to time to employ and pay out of the Trust Fund such managers, agents, advisers, solicitors, accountants or other persons or transact any business or to do any act required to be done in connection with the administration of the trusts hereof declared including the receipt and payment of money." 35 This clause essentially replicates s 53 of the Trustee Act 1923 and empowers the Trust to employ agents. 36 Midas submitted that even if such a power did exist it could only be exercised in writing. Midas submitted that since there is no evidence indicating that Midas passed a resolution appointing Mr Mead as an agent or ratifying the contract he entered into with Equator, that Midas is not bound to accept the contract. To support this submission Midas points to cl 50 of the deed which reads as follows: "50. The trustee may in writing delegate the exercise of all or any of the powers or discretions hereby conferred on the Trustee and execute powers of attorney or other instruments necessary to effectuate such purpose." 37 Clause 50 states that a trustee may choose to exercise its powers in writing it does not (as is contended by Midas) say that it must exercise its powers in writing. 38 The Magistrate at paras [65]-[66] of his Honour's judgment stated:

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"It is important to bear in mind that the doctrine of holding out is a form of estoppel. As such, the starting point is that the principal must be shown to have made a representation, which the third party could and did reasonably rely on, that the agent had the necessary authority. The relevant enquiry, therefore, in all cases is whether the acts of the principal constitute a representation that the agent had a particular authority and were reasonably so understood by the third party. This requires the Court to consider the principal's conduct as a whole . In many cases, the holding out or representation by the company consists solely of the fact that the company has invested the agent with a particular office, e.g., 'managing director' or 'secretary'. For example, in a case such as British Bank of the Middle East v. Sun Life Assurance of Canada (U.K.) Ltd., [1983] 2 Lloyd's Rep. 9, the only holding out by the defendants to the third party was to invest someone with the title 'Branch Manager', which enabled him so to describe himself in correspondence relied upon by the third party: in such a case, the only representation which the third party can reasonably rely upon is the representation that that person has the powers normally or usually enjoyed by a branch manager. Therefore, in such a case, the only relevant enquiry is as to the powers normally enjoyed by branch managers in general. But where, as in the present case, the holding out is alleged to consist of a course of conduct wider than merely describing the agent as holding a particular office, although the authority normally found in the holder of such an office is very material, it must be looked at as part and parcel of the whole course of the principal's conduct in order to decide whether the totality of the principal's actions constitute a holding out of the agent as possessing the necessary authority." 47 The Magistrate examined the factual matrix and the acts of the principal and the action of Mr Mead. Mr Farr admitted in his evidence that he had seen and acquiesced to Mr Mead sending the 1 April 2005 letter to Equator. That letter was prepared on official Sydney Parade Trust letterhead and although it nominated Midas as trustee, all of the contact details where Mr Mead's. The purpose of the letter was to introduce Equator to the parade concept and to provide a stimulus for further discussions concerning the event. In my view, it was open for the Magistrate to decide that the letter of 1 April 2005 was sufficient to demonstrate that Midas had held Mr Mead out as an agent of the Trust. 48 The Magistrate decided that by including Mr Mead's name without disclosing any warning that he did not have the authority to bind the Trust or that all final decisions would have to be approved by Mr Farr, Mr Farr gave the impression that Mr Mead had more authority than he actually did. According to the Magistrate, by conducting himself in this way Mr Farr enabled Mr Mead to hold himself out as an agent of the Trust. It is immaterial that Mr Farr may have told Mr Mead privately that Mr Mead was not authorised to bind the trust, and this was mutually recognised by Mr Mead, what matters is the perception that the letter created in Equator's mind: see Overbrooke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511 at 516 per Brightman J. 49 Midas responded by asserting that even if this letter did amount to a representation all it did was hold Mr Mead out as an agent authorised to negotiate on the Trust's behalf and to assist in the organisation of the parade, but not to contract on its behalf. This is said to arise from the fact that the 1 April 2005 letter is no more than an "invitation to treat". 50 This is not to the point. As mentioned above, in terms of agency law what is formative is the perception created in third parties by the holding out. The Magistrate made a finding that Mr Farr in holding Mr Mead out as the person to contact for all queries to do with the parade may of not in itself conferred actual authority on Mr Mead to bind the Trust, however it certainly gave the perception to outside third parties that he was authorised and in a position to act on behalf of the Trust. The authority was unqualified and enabled Mr Mead to claim with credibility he otherwise would not have had that he was authorised to bind the Trust. In such a situation it would be unfair to allow a principal to escape liability. As was explained by Browne-Wilkinson LJ in Egyptian International at 43: "It is obviously correct that an agent who has no actual or apparent authority either (a) to enter into a transaction or (b) to make representations as to the transaction cannot hold himself out as having authority to enter into the transaction so as to effect the principal's position. But, suppose a company confers actual or apparent authority on X to make representations and X erroneously represents to a third party that Y has authority to enter into a transaction; why should not such a representation be relied upon as part of the holding out of Y by the company? By parity of reasoning, if a company confers actual or apparent authority on A to make representations on the company's behalf but no actual authority on A to enter into the specific transaction, why should a representation made by A as to his authority not be capable of being relied on as one of the acts of holding out? There is substantial authority that it can be: see British Thomson-Houston Co. Ltd. v. Federated European Bank Ltd., [1932] 2 K.B. 176, especially at p. 182 (where the only holding out was an erroneous representation by the agent that he was managing director); and the Freeman & Lockyer case per Lord Justice Pearson at p. 499; Hely-Hutchinson v. Brayhead Ltd., [1968] 1 Q.B. 549 per Lord Denning, M.R. at p. 593A-D." 51 There is an authority which supported Midas' submission. In Russo-Chinese Bank v Li Yau Sam [1910] AC 174 at 184 Lord Atkinson said: "in order that the principle of "holding out" should in any given case of agency apply, the act done by the agent, and relied upon to bind the principal, must be an act of that particular class of acts which the agent is held out as having a general authority on behalf of his principal to do; and, of course, the party prejudiced must have believed in the existence of that general authority and been thereby misled. In other words, if the agent be held out as having only a limited authority to do on behalf of his principal acts of a particular class, then the principal is not bound by an act done outside that authority, even though it be an act of that particular class, because, the authority being thus represented to be limited, the party prejudiced has notice, and should ascertain whether or not the act is authorized." 52 To assist Midas it would need to be established that they told Equator that Mr Mead's authority was limited. On the Magistrate's findings there is no evidence that this disclosure occurred. Hence no assistance can be drawn by Midas from the judgment of Lord Atkinson.

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Notice 53 From the paragraphs of the Magistrate's decision extracted earlier in the judgment the Magistrate accepted that Equator was told by Mr Mead that he had a business partner in Mr Farr who on occasion he would consult before acting. Nonetheless, the Magistrate concluded that although this may have placed Equator on notice that such a partner or consultant existed, it falls short of being put on notice that Mr Mead had no authority to bind the trust. 54 Midas submitted that the Magistrate made an error of law in setting the threshold for notice so high. It submitted that in the circumstances of this case the information disclosed by Mr Mead as to the existence of Mr Farr should have put Equator on notice that Mr Mead did not have the authority to bind the Trust. In particular, Midas pointed to the following circumstances which they submitted in combination with the above mentioned disclosure would have given a reasonable person suspicion that Mr Mead was not the agent he was purporting to be. Firstly, it is noted that after the letter of 1 April 2005 Mr Mead was never able to produce any correspondence on official trust letterhead, a letterhead they knew was used for official correspondence. Secondly, that the only letter of appointment Equator were eventually able to obtain was on an authority prepared by themselves, which even then was only secured after applying considerable pressure on Mr Mead. Midas submitted that to obviate all of these suspicious circumstances Equator should have contacted Midas and made inquiries about Mr Mead's authority. Midas claims that if Equator had contacted Midas they would have discovered that Mr Mead was not acting with authority and they must therefore bare the consequences of their own carelessness. 55 It is trite law that no act done by an agent in excess of his or her authority is binding on a principal with respect to persons having notice that in doing the act the agent is exceeding their authority: Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 421 at 431 per Griffith CJ; Russo-Chinese Bank v Li Yau Sam [1910] AC 174 at 184 per Lord Atkinson. The rationale being that if a third party has knowledge, it cannot be said that they relied on a principal's representation or "holding out" in contracting with the agent: Armagas Ltd v Mundogas SA [1986] 1 AC 717 at 777 per Lord Keith of Kinkel. 56 Even though this principle may seem straight forward, in practice it can be difficult to determine what level of notice will suffice. The following commentary in Bowstead & Reynolds on Agency (18th ed, Sweet & Maxwell, London, 2006) at p 362 is helpful: "Situations of express notice cause no difficulty. The problem is to know what constitutes notice, and when there is a duty to inquire. It is often said that neither constructive nor presumed notice apply in commercial transactions. This certainly excludes the full doctrine of constructive notice of equitable interests in land, whereby a person may be deemed to have notice of property interests which would have come to his knowledge if such inquires and inspections had been made as ought reasonably to be made. But there can be no doubt that in many situations where it is relevant to know whether one person has knowledge of the facts, including those raising the doctrine of apparent authority, the court may infer from the circumstances that the person concerned must have known the facts in question or at least must have been suspicious to the extent that further inquires would have been appropriate in the context." This commentary was referred to with approval by a Full Bench of the Federal Court in Combulk Pty Ltd v TNT Management Pty Ltd (1993) 113 ALR 214 at 222. 57 A similar point was made by Mummery J in Alliance & Leicester Building Society v Edgestop Ltd (1993) 1 WLR 1462 at 1480 where his Honour said: "It appears that there may be cases in which a third party cannot hold the principal liable on the grounds of ostensible authority if he, the third party, did not rely on the representation by the principal or if he knew or must be taken to have known of the agent's lack of authority or if he neglected to take the opportunity of ascertaining the agent's authority or if he was put on inquiry by the facts of the transactions." 58 This statement seems to have been taken from Lloyds Bank v The Chartered Bank of India, Australia and China [1929] 1 KB 40 where Scrutton LJ at 56 spoke of an "irregularity" in a transaction that puts a contracting party on notice. 59 Examples of cases in the past that have given rise to such irregularities are situations where a third party is aware that an agent is under a conflict of duty and self interest (Lysaght Bros, Combulk Pty Ltd v TNT), is acting in a way beyond the authority usually delegated to an agent in their position (Overbrooke Estates v Glemcombe Properties Ltd [1974] 1 WLR 1335) or when an agent is acting in a way that deviates from an established custom that is usually applied in such circumstances (see Rasnoimport v Guthrie & Co Ltd [1966] 1 Lloyd's Rep 1). In other cases a contracting party has been held to have constructive notice that an agent did not have the requisite authority when that party has failed to take ordinary business precautions which if utilized would have discovered the truth. For example when they have failed to properly read the document that established the authority (see Jacob v Morris [1902] 1 Ch 816). 60 From paragraphs [24] - [29] the Magistrate outlined what exchanges occurred between Equator and Mr Mead between Equator receiving the 1 April 2005 correspondence and the letter of appointment executed by Mr Mead on 29 April 2005: 24. Mr Boyd Anderson, another director of Equator, and Mr Stobart gave evidence that on 7 April 2005 they had met Mr Mead at their office. They both stated that at that meeting Mr Mead told them that Mr Mead and his "partner" Mr Wayne Farr were organising the parade, that he had various people involved in the planning and that he needed Equator to handle the advertising and also that he needed a sales brochure produced "as soon as possible" to enable the parade's sales staff to obtain sponsors. Both Messrs Anderson and Stobart expressed interest in doing the work. Mr Anderson gave evidence that he had told Mr Mead at that meeting that they would need "a formal letter of appointment".

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The setting aside of the default judgment against Mr Mead 65 At the conclusion of the hearing, the Magistrate drew counsel's attention to the problem of inconsistent judgments that would occur if Mr Mead was held to be an agent of the trust. The inconsistency arose from the fact that Equator in its pleadings had claimed damages against Mr Mead in his personal capacity for breaching s 42 of the Fair Trading Act 1987 (NSW) as an alternative to its contract claim against Midas. The basis of the s 42 claim against Mr Mead was that if he was not an agent of the Trust then he had engaged in misleading and deceptive conduct in holding himself out as being an agent of the Trust. On these pleadings both claims cannot succeed. It is either one claim or the other. 66 No defence was filed for Mr Mead. Equator sought default judgment. On 1 February 2006, the court entered default judgment against Mr Mead with damages to be assessed. 67 On 25 July 2006, Mr Mead filed a notice of motion seeking to set aside the default judgment entered against him. On 31 August 2006 this notice of motion was heard by a Registrar in the Local Court. Equator opposed Mr Mead's motion. The notice of motion was dismissed and the default judgment remained on foot. 68 When the Magistrate sought submissions from the parties on the issue of inconsistent judgments, neither party addressed that issue. Midas submitted that the entry of default judgment against Mr Mead acts as an estoppel, preventing Equator from maintaining its action against Midas. Equator submitted that it could have judgment against both Midas and Mr Mead. No authority was cited by either party in support of their submissions. 69 The Magistrate, in his written reasons, drew an analogy from the situation in which a third party sues an agent and then an undisclosed principal for breach of contract and that third party is forced to make an election. His Honour referred to Marginson v Ian Potter & Co (1976) 136 CLR 161 where Gibbs CJ and Mason J at 169 said: "…But once a third party has sued the agent to judgment he cannot thereafter, without setting aside that judgment, sue the undisclosed principal even if the existence of the principal was not known to the third party at the time when the judgment was obtained. This proposition rests not on the doctrine of election which depends in general upon knowledge of relevant facts but on another principle, namely that when judgment is obtained on a cause of action the cause of action merges in the judgment. Thus the liability of an undisclosed principal merges in a judgment obtained against the agent by the third party …" 70 The Magistrate considered that Marginson stood for the proposition that two inconsistent judgments cannot coexist and the Court may set aside the earlier judgment. 71 On this topic, the Magistrate at [118] stated: "118. Generally, where there has been no hearing on the merits a res judicata estoppel will not arise. It has been held that a default judgment may give rise to a res judicata estoppel but that a default judgment "must always be scrutinised with extreme particularity for the purpose of ascertaining the bare essence of what they must necessarily have decided and... they can estop only for what 'must necessarily and with complete precision' have been determined": Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1010-12. (See also Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 115 ALR 377.)

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The plaintiff's submissions are incorrect: it cannot have a judgment against both parties when they are sued in the alternative. In any event, its case against Mr Mead is pleaded in terms of his lacking authority to bind Midas but representing that he had that authority. If he was Midas's agent, as I have found, how could he have been making a misleading representation if he was making that very representation? Mr Mead can only be held liable in damages if he is found to have made a false or misleading representation upon which Equator relied to its detriment. He was not misleading Equator when he held himself out to be Midas's agent." 72 From paragraphs [121] - [123] the Magistrate outlined why he considered that the Court on its own motion had the power to set aside the default judgment. Although he noted that "ordinarily it would be highly inappropriate to set aside a judgment on the Court's own motion", "here it would be a travesty of justice if, at the end of a hard fought trial in which the merits of the case have been subjected to intense scrutiny and the facts distilled, the plaintiff were now estopped from proceeding to obtain judgment against Midas". 73 Part 36.16 (2)(a) of the Uniform Civil Procedure Rules 2005 provides "The court may set aside or vary a judgment or order that it has been entered if: it is a default judgment." In my view the Magistrate had the power to set aside the default judgment on the Court's own motion. His Honour considered that the default judgment had been procured irregularly, in that the defendants in bad faith were seeking to hide behind it in order to protect the assets of the Trust. 74 The Magistrate referred to cases involving agents and undisclosed principals. In these cases there is one cause of action (for example a breach of contract) being pleaded against two independent parties - the agent and the undisclosed principal. While the parties are independent, agents are held to have entered such transactions both for themselves and on behalf of their principal and can thus sue and be sued on the contract: Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207. When a contracting party sues under that contract and succeeds in obtaining judgment against either an agent or an undisclosed principal, or vice versa, they cannot then turn around and sue the other party because to do so would be to give them two judgments for the one wrong: Henry J B Kendall v Hamilton (1879) 4 AC 504 at 515 per Lord Cairns. In taking one of the parties through to judgment, a plaintiff's claim against the agent and the undisclosed principal merges, and it is as if the claim against the party that has not been sued never existed in the first place. 75 The Magistrate identified that this was not the situation before the Court. The issue that presented itself was one of alternative liability on different causes of action. The problem that arose was not that the cause of action against Midas had merged into the judgment against Mr Mead - as the cause of action against Midas was for breach of contract whereas the cause of action against Mr Mead was for misleading and deceptive conduct but rather that the success of either action depended upon the finding of agency. If Mr Mead were the agent of Midas his claim for false and misleading conduct would fail. Alternatively, if Mr Mead was not the agent of Midas, the claim for misleading and deceptive conduct would fail. I agree with the Magistrate that Equator could not maintain two actions where success in one would be inconsistent with success in the other. 76 The Magistrate considered Petersen v Moloney (1951) 84 CLR 91, which held that a party cannot maintain two actions where success in one would be inconsistent with success in the other. In that situation the plaintiff has to make an election as to which judgment is to be maintained. In Petersen v Moloney, Mr Petersen had engaged Pullbrook, an estate agent to help sell his property. Moloney contacted Pullbrook after seeing the property advertised and over the proceeding days entered into a contract with Petersen to purchase the property. In believing that Pullbrook was authorised to receive money on behalf of Petersen, Moloney paid the purchase price to Pullbrook. Pullbrook misused the money and when none was received Petersen sued Moloney for failing to pay the purchase price. 77 At trial, Petersen pleaded two alternative causes of action. Firstly, it was claimed that since Pullbrook did not have the authority to receive the purchase price on behalf of Petersen, any money paid to him did not count. It was submitted that if Moloney wanted to recover its money it needed to pursue Pullbrook, but this in no way affected their rights to the purchase price. In the alternative, in case the first submission failed, Petersen also added Pullbrook as a defendant claiming that if he was an agent he had misused his authority and must therefore account. There were two alternative claims the success or failure of each depending upon the findings of agency. 78 The trial judge made two findings. They were firstly, that Pullbrook was Petersen's agent; and secondly, that Pullbrook was liable to account. For Petersen this judgment was a disaster. Pullbrook was a bankrupt and incapable of repaying the debt. As a result Petersen appealed. Peterson sought to have the judgment against Pullbrook set aside and the question of agency reconsidered. Moloney opposed the appeal on the basis that Peterson had an opportunity to drop the case against Pullbrook but chose not to do so. It was submitted that once Petersen had obtained judgment against Pullbrook that judgment was final and they were estopped from denying the agency. The High Court disagreed stating at 102-104: "The case is clearly one of alternative liability. Either Moloney or Pulbrook might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: see Morel Bros & Co Ltd v Earl of Westmoreland [13]. In the present case the plaintiff (as she was clearly entitled to do) proceeded against both of the persons possibly liable, claiming alternatively as against each. After Walker J had pronounced his decision she entered judgment against Pulbrook. Did this amount to a final election to treat Pulbrook as liable to the exclusion of Moloney? Apart from appeal, clearly it would amount to such an election. But the judgment was subject to appeal, and we do not think that the plaintiff can, by suing in the alternative and having judgment against one defendant, be precluded from maintaining on appeal that the judgment against that defendant should be discharged and that judgment should go against the other defendant. This is what the plaintiff seeks on this appeal, for her notice of appeal asks that the whole of the judgment of Walker J should be set aside and that in lieu thereof the judgment should be against Moloney. She has never asked, or put herself in a position where she must be treated as asking, for a judgment against both defendants. Herein the case differs from Morel Bros & Co Ltd v Earl of Westmoreland [14] and from Moore v Flanagan [15]. In each of those cases the plaintiff had obtained judgment against one of two defendants, of whom one but not both might have been liable, and then, without setting aside or seeking to set aside that judgment, had sought judgment against the other. This offended against the rule stated by Atkin LJ (as he then was) in Moore v Flanagan [16] at 928 that "a plaintiff cannot sue an agent to judgment and then sue the principal". The plaintiff in this case is not offending against that rule. It is to be noted that, although the rule is often stated in terms which would seem to make it depend on election, Vaughan Williams J (as he then was) in Hammond v. Schofield [17], at 457 said:- "The basis of this defence is not the election or unconscious election, if there can be such a thing, of the plaintiff, but the right of the co-contractor when sued in a second action on the same contract to insist, though not a party to the first action, on the rule that there shall not be more than one judgment on one entire contract". This passage is quoted by Scrutton LJ in Moore v Flanagan [18], at 925. Moore v Flanagan [19] was not, and this case is not, a case of "co-contractors", but the same rule is applicable, and it must rest on the same basis. There must not be more than one judgment where there is only one antecedent obligation. What Vaughan Williams J said in Hammond v. Schofield [20] seems to be in accord with what Lord Cairns said in Kendall v. Hamilton [21], at 514, 515. In Buckingham v Trotter [22] Darley CJ, speaking for the Full Court, said:- "The principle to be deduced from the authorities is that, in the case of principal and agent, the election to sue one or the other is not concluded until after final judgment has been obtained against the one or the other, but, after obtaining this final judgment against the one, so long as it remains of record, no action is maintainable against the other, lest such second action bring about the inconvenient results alluded to by Lord Cairns in Kendall v Hamilton" [23] 514, 515. Here the plaintiff asks that judgment against the one shall no longer remain of record but that judgment against the other shall be substituted for it. There is no rule which prevents her from doing this." [citations omitted] 79 As in Peterson, either Midas or Mead would be liable but both could not be. Equator submitted to the Magistrate that it could have judgment against both Mr Mead and Midas. This proposition is wrong. In the Local Court Equator did not made an election nor has it asked that the judgment against Mr Mead no longer remain on record and the judgment against Midas be substituted for it. Both judgments cannot be maintained because they are inconsistent. 80 It is my view that it is not open for the Magistrate to make the election only Equator could do that. Hence, it is my view that the Magistrate was not entitled to set aside the judgment against Mr Mead. However, neither party has turned its mind to address the principle in Peterson v Maloney. In the circumstances of this case, it is my view that the parties should be given an opportunity to do because otherwise the result may be unjust in the light of the Magistrate's findings in relation to the conduct of Midas and Mr Mead. 81 The decision of the Magistrate dated 5 February 2007 is set aside. The costs order made on 30 June 2007 is set aside for reasons given later in this judgment. 82 It is my view that the Magistrate erred in his reasons for setting aside the default judgment. The parties have not specifically had the opportunity to address the principle set out in Peterson v Maloney and what flows from that decision. This matter is remitted to the Magistrate to be dealt with according to law.

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