Solicitors:
Oliveri Lawyers (Plaintiff)
Madison Marcus Law Firm (Defendant)
File Number(s): 2021/134642
[2]
JUDGMENT
At the commencement of the hearing Mr Wilson SC for the plaintiff, told me that one of the issues in the matter was whether or not a conversation that occurred on 28 January 2016 could amount to ratification of the Guarantee and Indemnity Agreement which is central to the dispute between the parties.
The agreement had been signed on 19 December 2008 by the plaintiff and by Mr Claude Cassegrain, on his own behalf and purportedly on behalf of the defendant. The defendant denies that Mr Cassegrain had authority to bind the company.
The plaintiff asserts that Mr Cassegrain was able to bind the company to the agreement but, in addition, wishes to raise as an alternative that there was ratification on behalf of the company in the conversation that occurred on 28 January 2016.
When Mr Wilson SC raised the matter, he properly told me that ratification was not included in the pleadings, in particular in the Reply, and that reliance upon ratification would be opposed by the defendant. This stance was confirmed by Mr Sirtes SC, for the defendant.
Mr Wilson SC then said that he proposed to make an application to allow him to pursue the issue. I adjourned for a few hours to enable him to prepare the application and to give the defendant time to consider it, especially as it might entail the calling of evidence that had not otherwise been planned.
Mr Wilson SC did prepare an application which I gave him leave to file; an affidavit was also filed on behalf of the defendant.
There are three versions of the conversation that occurred on 28 January 2016. There were three participants; Mr Oliveri, Mr Thomas Cassegrain and Mr Graham Lockett. Mr Thomas Cassegrain and Mr Lockett were then directors of the defendant and capable of acting on behalf of the defendant.
Mr Oliveri's recollection of the conversation begins with Mr Thomas Cassegrain saying:
"CATTO acknowledges Oliveri Legal's debt through the Guarantee and Indemnity and the Retainer Agreement. However, CATTO's request is that Oliveri Legal not proceed against CATTO at this stage to recover the debt. CATTO will pay the debt to Oliveri Legal if Oliveri Legal is prepared to wait until after the Trustee determines how much is recovered from Claude's shares in Expressway Spares and the shares of CATTO."
Mr Thomas Cassegrain's version of the conversation contains no acknowledgement but rather has Mr Lockett stating:
"CaTTO requests that Oliveri not pursue CaTTO for any alleged debt until after the trustee has dealt with Claude's bankruptcy and you have received Dividends from his estate. Claude has a significant shareholding in Expressway Spares and your debt may yet be fully satisfied by the trustee."
Mr Lockett has yet another version. His recollection includes him saying:
"The signature of Claude Cassegrain on the draft guarantee on behalf of CaTTO does not constitute a guarantee from CaTTO. CaTTO's constitution requires the signature of two directors not one, and our policy also requires an associated resolution of the board of directors of CaTTO to provide such a guarantee."
If Mr Oliveri's version was ultimately accepted, it might be put forward in favour of the finding of ratification. If Mr Thomas Cassegrain's version was favoured then an argument in favour of ratification could perhaps be advanced, but at this stage, I think that argument would be weak.
Mr Lockett's version, if accepted, obviously would not permit a conclusion of ratification.
In his opening remarks Mr Wilson SC carefully explained to me how the plaintiff asserted the defendant became bound by the agreement when it was made. The ratification argument is strictly an alternative. It is to be remembered that ratification does not rely upon the events that occurred when the agreement was made but rather on the adoption of the agreement at a later stage. This was clearly stated by Barrett AJA in Bennett v Strauss (2016) 341 ALR 141; [2016] NSWCA 324 when setting out the conditions for ratification:
"47. In the first place, ratification causes a relationship of principal and agent to come into existence retrospectively. Thus, where a person (A) has acted without the authority of another person (P) in making a contract on their behalf with a counterparty (C), that other person (P) may, by subsequent conduct, cause the first person (A) to be regarded as having been his or her agent when the contract was made, even though a relationship of principal and agent did not exist at that past time.
48. Where such a counterparty (C) seeks to enforce such a contract against the supposed principal (P), it is essential that the acts of the actor (A) in truth amounted to the immediate making of a contract. Only if the counterparty (C) establishes that the acts of the actor (A) were of that quality is there any question of the supposed principal (P) being fixed with contractual liability through ratification.
49. The counterparty (C) must next establish that the person who acted (A) did not "assume" or "profess" or "purport" to act in his or her own right and for his or her own benefit, but rather "assumed" or "professed" or "purported" to act for the supposed principal (P). That supposed principal will usually be an ascertained person but it may not be necessary for the person's precise identity to be known at the time of the contract.
50. There can be no ratification by an undisclosed principal, that is, where the actor (A) appears to be contracting for themself and the counterparty (C) has no notice that the actor is acting in a representative capacity. This was authoritatively established in Keighley Maxsted & Co v Durant.
51. Only if all these conditions are satisfied in relation to the course of conduct between the actor (A) and the counterparty (C) does any question arise as to whether subsequent conduct of the supposed principal (P) amounted to ratification causing, first, the actor (A) to be seen retrospectively as the agent of the supposed principal (P) (who, in turn, comes to be seen retrospectively as the principal for whom the actor acted) and, secondly, the rights and liabilities under the contract made between the actor (A) and the counterparty (C) to be seen retrospectively as rights and liabilities as between the counterparty (C) and the now recognised principal (P)."
In Shao v Crown Global Capital Pty Limited [2023] NSWSC 820, at [72], Ball J referred to this definition of ratification:
"The general principle relating to ratification is set out in these terms in Peter G Watts and FMB Reynolds, Bowstead & Reynolds on Agency (22nd ed, 2020, Sweet & Maxwell) at 2-047:
'Where an act is done purportedly in the name or on behalf of another by a person who has no actual authority to do that act, the person in whose name or on whose behalf the act is done may, if the third party had believed the act to be authorised, by ratifying the act, make it as valid and effectual … as if it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all."
This "general principle" expressed in this way illustrates the complete reversal of the plaintiff's case if reliance is placed upon ratification.
On 4 August 2023 the matter came before Henry J when the plaintiff sought, by notice of motion, leave to rely upon an Amended Reply. Ratification formed no part of the application. Clearly that motion would have been the proper time to ventilate ratification, rather than on the first day of the hearing.
The defendant, through its solicitor's affidavit, has said the case would have been prepared in a different way. I am not in a position to doubt that assertion.
There is another reason that I think the application should be refused. It is not unusual for cases to be put in the alternative, however the alternative (ratification) in this matter involves an acceptance of a fact that it is entirely contrary to the plaintiff's case, namely that the agreement with the defendant did not come into place on 19 December 2008, but rather occurred retrospectively on 28 January 2016.
I raised in argument a distinction between ratification and an admission made by Mr Thomas Cassegrain if Mr Oliveri's version of the conversation was accepted. In other words, it might be open to me to form a conclusion that Mr Thomas Cassegrain was admitting that his father, Mr Claude Cassegrain, had bound the defendant to the agreement in December 2008 as opposed to any ratification occurring in January 2016.
In summary, I think the plaintiff's application to argue that a ratification had occurred should be refused because it is simply too late and too diametrically opposed to the plaintiff's primary case. However, if the plaintiff chooses to do so, I do not think I should prevent the plaintiff from arguing that the above quoted words spoken by Mr Thomas Cassegrain amounted to an admission as I have described in the previous paragraph. I cannot see any prejudice flowing to the defendant in taking this approach.
Accordingly, I make the following orders:
1. The plaintiff is not permitted to advance a case that ratification of the Guarantee and Indemnity Agreement occurred on 28 January 2016.
2. The previous order does not prevent the plaintiff relying on the conversation on 28 January 2016 as amounting to an admission that the defendant had been validly made a party to the Guarantee and Indemnity Agreement on 19 December 2008.
[3]
Amendments
15 November 2023 - Jurisdiction amended to Equity
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Decision last updated: 15 November 2023