Pachos v Davison

LEGISLATION CITED : Uniform Civil Procedure Rules 2005

CASES CITED : Pacific Carriers Limited v BNP Paribas [2004] HCA 35; 133 CLR 72 Smith v Hubbard Pty Limited [2006] NSWCA 109

John Pachos (Plaintiff) PARTIES : Charles Davison (First Defendant) Candice Weeden (Second Defendant)

COUNSEL : J Keys (Plaintiff) AS Monzo (1st Defendant)

SOLICITORS : Plaintiff in person Houston Dearn O'Connor (First Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HER HONOUR: This is appeal from the decision of a Local Court Magistrate at Burwood delivered on 6 May 2008. His Honour dismissed the plaintiff's claim against the first defendant and ordered the plaintiff to pay the first defendant's costs including costs on an indemnity basis from 17 December 2007. 2 The background of the matter is as follows. On 11 June 2007, the plaintiff, who is the owner of a business called High Tech Motor Sport, was approached by the second defendant, Candice Weeden, who identified herself as the first defendant's, "Motor Sport Media Manager" and said she was authorised to negotiate on the first defendant's behalf. She proceeded to negotiate with the plaintiff for one of his V8 utes to be leased out for the first defendant to drive at a forthcoming round of races at Hidden Valley, Darwin on 24 June 2007. 3 The plaintiff told the second defendant that the cost would be $15,000 plus GST, making a total of $16,500. She accepted these terms. The plaintiff asked for the first defendant's height and weight so that he could adjust the driving seat and for his licence details. These were, in due course, provided by the second defendant. 4 I should say by way of aside that the second defendant obtained the details of the first defendant's height and weight from the internet. She obtained the details from the defendant himself as a necessary precondition for his driving in the race. 5 The plaintiff accordingly arranged for one of his racing utes to be sent to Darwin before the event on 24 June. He himself also travelled to Darwin on 20 June. The plaintiff met the first defendant in Darwin on Friday 22 June. They had not previously had any direct contact with each other. The first defendant then proceeded to drive the plaintiff's vehicle at practice trials on 22 and 23 June and during the races on 24 June. During the practice on 22 June, some damage was occasioned to the vehicle which the plaintiff said cost $2,000, leading to his ultimately claiming an amount of $18,500 from the first defendant. 6 As to the payment for the lease of the vehicle, at some time during the day of 22 June, a cheque drawn by Candice Weeden was paid into the plaintiff's bank account for the agreed amount of the lease, namely, $16,500. However, the following Tuesday, the plaintiff was told by his bank that the cheque had been dishonoured. His attempts to obtain a replacement cheque were fruitless. Accordingly, he contacted the first defendant seeking payment and in due course commenced the Local Court proceedings against both defendants. 7 Later again, it must have become apparent that nothing could be achieved by pursuing the proceedings against the second defendant, so the plaintiff's case was directed at obtaining damages from the first defendant. 8 Both parties gave evidence in the Local Court proceedings and the first defendant also called evidence in support of his case. 9 The first defendant, who is a young man in his twenties, comes from a racing car family. His first contact with the second defendant was in April 2007 through Myspace where she entered him as a friend. She represented herself as being Manager of Public Relations at Holden, and held herself out to have degrees and qualifications relevant to the racing industry world. 10 A correspondence developed between the two of them. They first met in person in May 2007. On this occasion, the second defendant paid for their meals and made offers to the first defendant, including an offer to provide him with a Holden company car, with a fuel card, and to arrange for him to drive in the Australian V8 Ute Championships, these being the championships with which we are concerned in these proceedings. 11 When asked by the first defendant why the second defendant was assisting him in these ways, she said: "I want to help young upcoming drivers to achieve their goals because the motorsport industry is so cut-throat and expensive." 12 The first defendant accepted this explanation. He also accepted that the second defendant was, as she professed, employed by Holden. They next met during the June Queen's Birthday weekend 2007 at a racing event at Eastern Creek. This must be the same event at which the plaintiff also met the second defendant. The first defendant said that the second defendant was not wearing her Holden uniform on this occasion, as she had done previously, but she was acting like a "PR girl". She also invited him to the media centre at the races to which she clearly had access. It was during the course of this weekend that she said to the first defendant: "It has been confirmed by John Pachos that you will drive with the team at the next round which is to be held in Darwin, June 22nd to June 24th." 13 The first defendant said that at that time he had no interest in competing in these championships as his budget was committed to another event. He said to the second defendant: "I will do it if the drive is paid for in its entirety by you but only under those circumstances." 14 She accepted this condition, and it was arranged for the two of them to fly to Darwin. They were originally to fly together on the evening of 21 June but at the airport, it transpired that the flights had not been paid for and the first defendant had to pay for his own flight. The second defendant said that she would reimburse him on their return. She flew separately to Darwin the following day. 15 On the following Tuesday, after the event was over, they both flew back to Sydney. 16 On 4 July, the first defendant received a phone call from an employee in the Fraud Division of the Suncorp Bank in Queensland expressing serious concerns about the second defendant. This was the first notification the first defendant had that she was not what she held herself out to be. Ultimately, it transpired that the second defendant had none of the qualifications or credentials which she professed. As I understand it, she has been charged with fraud as a result of these events. 17 The plaintiff's case against the first defendant was based on contract. For reasons which I shall return to, it was dependent upon the plaintiff establishing an agency relationship between the first and second defendants. 18 It was not suggested that there was any actual agency between the two defendants in that the first defendant had in fact authorised the second defendant to act on his behalf in her dealings with the plaintiff. Rather, the case was based on an apparent or ostensible authority. In this regard, the Magistrate made the following findings: "The position is simply that there is nothing about Mr Davison's conduct which did any more even just negligently which went to hold out Ms Weeden as binding him in the contract with Mr Pachos.

There was … the plaintiff to suggest that Ms Weeden was inefficient and a bit unreliable and he was on notice of that but that is not the same thing. The general principle is … that there needs to be something that allows one to infer whether, upon the circumstances as a whole, the history of dealing or trade usage that there was a holding out and there wasn't. If there had been, then we might have had to, like Santow J in Smith , we might have got to a question whether Mr Pachos could be said to have been on constructive notice. I do not need to get to that because I do not believe there was any holding out, that there was any ostensible agency."

19 It is from this finding that the plaintiff has appealed under part 50 of the Uniform Civil Procedure Rules 2005. 20 It was conceded that the first defendant said nothing directly to the plaintiff to suggest that the second defendant was authorised to act on his behalf. Both parties relied in different ways on the judgment of Justice Santow in Smith v Hubbard Pty Limited [2006] NSWCA 109, where his Honour said: "This is an unfortunate dispute arising out of cross-claims between two parties each of whom was innocent of the fraud which led to the loss. Nonetheless the law recognises degrees of culpability or responsibility for that loss as between two innocent parties and decides where that loss must fall. Party A may, unwittingly but imprudently, arm a go-between with the means to perpetrate a fraud. It will frequently, as here, be a matter of dispute whether the go-between was A's agent and, if so, the scope of his actual or apparent authority. Party B may be deceived, yet should have had his suspicions aroused in the circumstances so putting him on constructive notice of a lack of authority. That epitomises the competing contentions in this appeal." 21 It is submitted by Ms Keys, on behalf of the plaintiff, that within these terms, the first defendant "unwittingly but imprudently" armed the second defendant with the means to perpetrate a fraud upon the plaintiff. 22 The plaintiff also referred to the High Court judgment in Pacific Carriers Limited v BNP Paribas [2004] HCA 35, where the High Court said, inter alia: "A kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with a certain title, status and facilities. In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd [1975] HCA 49; 133 CLR 72, for example, the Court spoke of the representation that might flow from supplying a particular person with "a blank order form, thus arming him with a document which, when he signed it, would bear the hallmark of authenticity". The reference to corporate administrative procedures under which an officer is armed with a document to which he or she can, by signature, impart an appearance of authenticity is a reminder of the wider principle of estoppel which may be relevant to a question of ostensible authority. The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation.

The reference to corporate administrative procedures under which an officer is armed with a document to which he or she can, by signature, impart an appearance of authenticity is a reminder of the wider principle of estoppel which may be relevant to a question of ostensible authority (and it refers to another authority). The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation." 23 The plaintiff in this case relies upon the fact that, in most situations, the driver of a vehicle in a racing event such as this, is responsible for paying the fee to the owner. This is not disputed. 24 Ms Keys, for the plaintiff, goes on to submit that the first defendant had a positive obligation to inform the plaintiff that he was not responsible for these fees, particularly as the second defendant had made promises to him, the first defendant, which she had failed to keep. This, Ms Keys submitted, should have alerted the first defendant to the possibility that the second defendant was not all she claimed to be. 25 I accept, on the evidence given before the Magistrate, that the first defendant genuinely believed that the second defendant was altruistically acting as his benefactor. There were one or two strange aspects of her behaviour, but I do not consider that these were sufficient to put him on notice as a reasonable person that she might not be what she held herself out to be. All the authorities on ostensible agency require that there must be some conduct, be it deliberate or negligent, by the ostensible principal on the basis of which the other party is led to infer that the agent is in fact authorised to act on his or her behalf. In other words, there must be some "arming" of the agent with the means to hold himself or herself out as in fact being authorised by the principal. 26 I asked Ms Keys what the first defendant's behaviour was in this regard. At first she said that it consisted of allowing the second defendant to enter into the arrangement with the plaintiff for the lease of the vehicle. But the evidence shows that this arrangement had already been made when the second defendant first approached the first defendant about the matter. Then it was submitted that the behaviour consisted of the first defendant permitting the second defendant to continue with the negotiations. Subsequently, it consisted in his going to Darwin and driving the plaintiff's car, and at the same time failing to tell the plaintiff that he was not responsible for paying for it. 27 It must be remembered that, at the time that the first defendant actually drove in the racing event on 24 June, the plaintiff was under the belief that he had already received payment for the lease of the vehicle. The cheque had been deposited into his account. It was only later he learnt that it had been dishonoured. At that stage there appeared to be no cause for concern about payment for the lease of the vehicle. 28 It is clear in retrospect that both the plaintiff and the first defendant were victims of the second defendant's misrepresentations. Certainly, the plaintiff's loss was significantly greater than that of the first defendant. But I can find nothing in the evidence which placed the first defendant on notice that the second defendant was not what she appeared to be and which might therefore have created some obligation upon him to alert the plaintiff that he was not accepting responsibility for the payment of the use of the car. 29 In other words, on my finding, there was no actual holding out by the first defendant that the second defendant was acting on his behalf, nor was there any negligence on his part. This was precisely the finding made by the Magistrate. 30 Ms Keys also claims that the first defendant is bound to pay damages in any event because the plaintiff provided a service, namely the use of his vehicle. The first defendant took advantage of that service thereby creating an obligation to pay for it. That would certainly be the case in the normal course of events, but here, for reasons already given, there was no contractual relationship between the plaintiff and the first defendant. An obligation to pay for goods or services presupposes the existence of a contractual relationship, express or implied, between the parties. Here, the relevant contract was between the plaintiff and the second defendant. Certainly, the first defendant received benefits under that contract, but he would never have proceeded to receive those benefits had he realised that he might be held responsible for paying for them. 31 Accordingly, I propose to dismiss the appeal.

Orders (i) appeal dismissed (ii) by consent, I order the plaintiff to pay the defendant's costs assessed and agreed at $11,000 inclusive of GST and to be paid within 28 days of today. **********

17/04/2009 - Typographical error in short case title - Paragraph(s) title

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