Plaintiff v Defendant

Supreme Court of Victoria|2013-05-14|Before: HARGRAVE J

Neely v Southern Cross Feeds Pty Ltd [2013] VSC 152 (Lansdowne AsJ)

AGENCY - Contract for sale of goods - Whether contract between supplier and natural person (A) or a company controlled by A - A contracted on behalf of a company but did not initially disclose the correct name of that company - Later supply of ABN for correct company - Parties always contemplated that goods would be supplied to A's company - Held: contract between supplier and A's company - A not personally liable - ; , 241-2.

1 The plaintiff, Southern Cross Feeds Pty Ltd, is a supplier of animal feeds. In about 2001, Southern Cross commenced supplying horse chaff at the request of the second defendant, Robert Neely, for the purpose of manufacturing a feed product for horses called 'Weight Lifter'. After many years of deliveries and payment by a company or companies associated with Mr Neely, a debt of about $47,000 remained unpaid. Southern Cross sued a company controlled by Mr Neely, Turquoisecroft Nominees Pty Ltd for the debt, in the belief that Turquoisecroft was liable. It obtained default judgment in the Magistrates' Court against Turquoisecroft, but the judgment was unsatisfied.

2 In a second proceeding in the Magistrates' Court, Southern Cross then sued another company associated with Mr Neely, Equine Nutrition Australia Pty Ltd, for the debt; and sued Mr Neely for damages of $4,000 for the costs it allegedly wasted in suing Turquoisecroft. The claim against Equine Nutrition was abandoned at trial of the second proceeding. At a late stage of the trial, Southern Cross was given leave to amend its claim against Mr Neely to include a claim that Mr Neely was personally liable for the debt. A Magistrate decided that Mr Neely was personally liable and gave judgment against him for the full amount of the debt.

3 Mr Neely appealed against the judgment to this Court, under s 109 of the Magistrates' Court Act 1989. That section gives a party to a civil proceeding in the Magistrates' Court a right of appeal to the Supreme Court, limited to an appeal from a final order on a question of law.

4 Pursuant to r 58.10(8) of the Supreme Court (General Civil Procedure) Rules 2005, Southern Cross applied to dismiss the appeal on the grounds that the notice of appeal did not sufficiently identify a question of law and because the appeal did not raise an arguable case. The application for dismissal was heard to an Associate Justice on 20 August 2012. After more than seven months, the Associate Justice dismissed the appeal on the basis that it did not raise a question of law or an arguable case on appeal.[1] A delay of that length in determining a summary dismissal application of that kind is clearly unacceptable. In effect, the Associate Justice heard and determined the appeal. That was not her function, which was only to determine whether the appeal raised an arguable question of law. In my opinion, summary dismissal applications such as that entertained by the Associate Justice are reserved for clear cases. Such applications should not lead to the virtual hearing of the appeal and lengthy reserved judgments, especially after a considerable delay, as happened here.

5 Mr Neely then appealed to a judge in the Practice Court. Given that the hearing before the Associate Justice was held in August 2012, and her judgment was delivered on 8 April 2013, a question arises as to whether the appeal is governed by r 77.06(7) as it stood before amendment from 1 January 2013. From that time, appeals from Associates Justices ceased to be by way of re-hearing de novo and were replaced by appeals in the strict sense, requiring error to be demonstrated. It is unnecessary to determine this issue, as I am satisfied that the error has been shown in the Associate Justice's decision and that she ought to have dismissed the application for summary dismissal of the appeal.

6 At the outset of the hearing in the Practice Court, I directed pursuant to s 47 of the Civil Procedure Act 2010 (Vic) that, if I was satisfied there was error by the Associate Justice, I would proceed instanter to hear and determine the appeal. I did this to further the overarching purpose contained in the Civil Procedure Act, especially having regard to the need to avoid further unnecessary costs being incurred by the parties in the proceeding and to ensure, so far as possible, that the costs were proportionate to the amount in dispute. Further, in hearing the appeal from the Associate Justice, it would be necessary to canvass all of the grounds of appeal. The parties embraced the Court's direction in this regard as appropriate in the circumstances of the case.

7 The Associate Justice was wrong to dismiss the appeal as either failing to sufficiently identify a question of law or as raising an unarguable case. In my opinion, the appeal should be allowed. My reasons follow.

8 The Magistrate did not make detailed factual findings. On appeal, however, it was accepted that the following facts were established before the Magistrate. In the following narrative, the findings of fact made by the Magistrate, to the extent they are recorded in or are necessarily implied from his reasons, have been accepted.

9 From at least 1 July 2000, before any relevant dealings took place between the parties, Mr Neely controlled a company called Turquoisecroft Nominees Pty Ltd as trustee for his family trust. Its ABN number was 46 680 842 670 from that time.

10 In about 2001 or 2002,[2] Mr Neely telephoned Brett Caddy, a director of Southern Cross, to talk about the supply of chaff. The two men then met at Mr Neely's farm in Lilydale called 'Shiralee Park'. Mr Caddy gave the following evidence in chief about what was said at the meeting:

COUNSEL: Right. And, what was discussed at that meeting?

MR CADDY: About supply of chaff to his company.

COUNSEL: So, what did he ask you to do?

MR CADDY: Give him a price to supply chaff to his company.

COUNSEL: Did he tell you what the company is called?

MR CADDY: Weight Lifter.

COUNSEL: Did he tell you where the company was?

MR CADDY: At the time, he had set up on his farm.

COUNSEL: And, did you discuss price?

MR CADDY: Yes.

COUNSEL: Did you agree to supply the chaff?

MR CADDY: Yes.

COUNSEL: And was the chaff supplied?

MR CADDY: Yes.

11 In cross-examination, Mr Caddy repeated evidence to this effect, agreeing with the cross-examiner's understanding of his evidence: to the effect that Mr Neely told him that 'his company wanted to buy goods from your company'. Later in his cross-examination, Mr Caddy agreed with the proposition that:

at the time you had your discussions with Mr Neely, leaving aside the name of the company or the name of the entity with whom you are going to be dealing, there was no doubt in your mind, was there, that Mr Neely was going to be dealing [through][3] a company of some sort?

12 At the time of this discussion, there was no company called, or including the words 'Weight Lifter' in existence. 'Weight Lifter' was the horse feed product sold by Mr Neely or a company associated with him. Some years later, in 2006, Mr Neely incorporated a company called Weight Lifter Horse Feed Pty Ltd ACN 121 246 982. The existence of this company was not disclosed to Southern Cross, nor was its ABN ever provided.

13 In the early stages of the trading relationship, chaff delivered at Mr Neely's request was paid for by cheques from either Shiralee Park Pastoral Company Pty Ltd or Turquoisecroft Nominees. Later, payments were made by direct deposit into Southern Cross's bank account. The evidence did not disclose who made those payments.

14 All of the invoices sent by Southern Cross in respect of chaff ordered by Mr Neely were addressed to 'Weight Lifter' at a post office box. The post office box number had presumably been given to Mr Caddy by Mr Neely.

15 After the trading relationship had been going for some time, Mr Neely supplied the ABN for Turquoisecroft to Mr Caddy. Mr Caddy could only recall that the ABN was supplied 'later', after the initial discussions with Mr Neely quoted above. This was the only ABN ever given by Mr Neely to Southern Cross. From this time, all invoices from Southern Cross included the Turquoisecroft ABN.

16 In his evidence, Mr Neely described the circumstances in which he provided Turquoisecroft's ABN to Southern Cross. He said that, about two years after the commencement of the trading relationship, he met with Mr Caddy and another director of Southern Cross, Gary Worrall. At that time, supplies of chaff were increasing and Mr Caddy and Mr Worrall asked 'who are we dealing with' and, according to Mr Neely, he replied that Southern Cross was dealing with Turquoisecroft. It was at this time that the ABN was supplied.

17 The Magistrate made no finding as to this aspect of Mr Neely's evidence. He found only that: 'no mention of Turquoisecroft took place when the parties formed their relationship' (a reference to the initial discussions between Mr Caddy and Mr Neely); that the ABN was supplied after the initial negotiations ('at a later stage'); and that the later provision of the ABN was therefore not relevant to 'the personalities of the contracting parties'.

18 The Magistrate gave brief oral reasons for decision, immediately upon the conclusion of oral argument. As noted, he did not make detailed factual findings, including as to potentially significant matters. However, on appeal, the parties accepted that the above facts were established or found.

19 The Magistrate reasoned that the governing authority was the decision of Justice Marks, as a member of the Appeal Division of this Court, in Marsh & McLennan v Stanyers Transport Pty Ltd.[4] In that case, Marks J summarised the principles concerning liability of an agent where there is non-disclosure of the name of the principal, as follows:

It is convenient first to discuss the circumstances in which an agent may himself or itself be liable where his or its principal is not disclosed.

There is some confusion in this area of the law. It arises from the failure to bear in mind the clear distinction between the non-disclosure of the name of a principal and non-disclosure of the fact that there is one, that is, non-disclosure of the fact of agency.

The distinction is discussed by Professor Reynolds, Reader in Law, University of Oxford, in "Practical Problems of the Undisclosed Principal Doctrine" (1983) Current Legal Problems. The mere fact that an agent does not identify the principal for whom he acts does not make the agent personally liable, unless on the proper interpretation of the contract he has contracted as a party to the contract, not as agent. In other words, an agent is not personally liable, even when acting for an undisclosed principal, unless on the proper interpretation of the contract he is a party to it as though he were principal. The question is one of interpretation of the contract: Scott v Geoghegan and Sons Pty Ltd (1969) 43 ALJR 243, per Taylor J, at 245.

The law was conveniently summarised by Professor Reynolds, at 120:

... the situation may be analysed as one where the principal is not undisclosed but rather unnamed or unidentified, ie his existence and connection with the transaction must be deemed to have been in some measure contemplated from the outset by the third party, though his name was not known. For such a situation recent case-law indicates that the prima facie rule is that the contract is between the third party and the principal. (N. and J. Vlassopulos Ltd v Ney Shipping Ltd (The Santa Carina) [1977] 1 Lloyd's Rep. 478.) The agent may sometimes additionally be liable, and even entitled: but his is not the primary liability, and such a result would seem to require some special feature, such as the use of a written contract upon the wording of which the agent appears to undertake liability, (e.g. Tudor Marine Ltd v Tradax Export SA (The Virgo) [1976] 2 Lloyd's Rep. 135) or the proof of a trade custom that the agent undertakes additional liability, (e.g. Fleet v Murton (1871) LR 7 QB 126) or other indications displacing the normal rule, (e.g. Franklyn v Lamond (1847) 4 CB 637 (auctioneer)).

This last set of rules relating to the unnamed principal, it should be noted, is considerably different from those governing the true undisclosed principal situation; and this makes it important to know whether on any set of facts the principal, if there is one, should be treated as truly undisclosed or merely as unnamed, though many old authorities do not make the distinction, (e.g. Scrutton, Charterparties (1st ed. 1886), Art. 14 (referring to a signature 'as agents for merchants' as an example of an undisclosed principal case.)).[5]

20 The Magistrate fixed upon the second emphasised words in the above quote, in particular the words: 'if there is one'. He reasoned that this was a case where the facts did not disclose any agency; it was not a case of a disclosed agency with an unnamed principal. He reasoned as follows:

there is no principal in this case. ...

... given that there is no principal known as Weight Lifter, then, by definition, [Mr Neely] can't be acting as an agent in any sense of the word. And that's why the words 'if there is one' were used advisedly. You have to get to the point where there is actually an unnamed principal as opposed to, I suppose, effectively the non-disclosure of an agency. There's a difference, however, between the non-disclosure of an agency and the non-existence of an agency. I think that's the salient point. It's not capable of being principal agency situation without the existence of a principal. The principal can't be Weight Lifter, neither can it be Turquoisecroft because there are no indicia of its existence in the initial negotiations. Principally the naming of it, but it also includes the provision of an ABN number after the event.[6]

21 Adopting a beneficial approach, the Magistrate probably intended, by the emphasised portion of his final sentence, to say that Turquoisecroft could not have been the principal because it was not named in the initial discussions between Mr Caddy and Mr Neely, and because Turquoisecroft's ABN was not provided until after the event.

22 The notice of appeal frames the question of the law in the following terms:

Whether the Court having found, as a fact, that [Southern Cross] knew that it was contracting with a company associated with [Mr Neely], erred in law in finding [Mr Neely] personally liable on the contract, on the basis that [Southern Cross] did not know the name of [Mr Neely's] company?

23 The Associate Justice held that this formulation 'does not identify a question of law arising from the application of the law of agency on which the appeal may be brought', because it involves an 'incorrect characterisation of the Magistrate's findings of fact.'[7] She supported this conclusion on the following basis:

The Magistrate did not find that there was no agency because the then plaintiff Southern Cross Feeds did not know the name of the principal for whom the then second defendant Mr Neely acted. He found that there was no agency because there was in fact no such principal, the principal having been identified by Mr Neely as Weight Lifter.[8]

24 That conclusion by the Associate Justice was wrong. The Magistrate's decision was obviously based on the fact that Mr Neely did not, in the initial discussion with Mr Caddy, name Turquoisecroft as the company who would be purchasing chaff from Southern Cross. Interpreting the Magistrate's reasons as best one can, he would have found that Turquoisecroft was the contracting party if its name had been mentioned in the initial discussions. In my view, the question of law as formulated is sufficient to raise the question of law advanced by Mr Neely on appeal. It would be pure semantics to decide otherwise.

25 Further, for the reasons appearing below, the appeal is not merely arguable but should succeed. The Associate Justice was wrong to conclude otherwise.

26 In my opinion, the Magistrate did not correctly apply Marsh & McLennan to the facts. Because Turquoisecroft was not named as Mr Neely's company in the initial discussions, and he wrongly referred to his company as 'Weight Lifter', the Magistrate reasoned that the contract was concluded between Southern Cross and Mr Neely 'from Weight Lifter'. As there was no company called 'Weight Lifter', the Magistrate concluded that there was no agency and Mr Neely was therefore personally liable. That conclusion ignores two critical matters. First, the clear evidence that Mr Caddy and Mr Neely contemplated from the outset that a company associated with Mr Neely would be the customer, and that Mr Neely was not undertaking personal liability for the chaff sold and delivered by Southern Cross. Second, the significance of the later provision by Mr Neely of Turquoisecroft's ABN to Southern Cross, and the fact that the ABN appeared on every invoice thereafter - including on every unpaid invoice forming part of the claim.

27 More completely, the Magistrate's reasoning takes no account of the following relevant facts:

(1) Mr Caddy's clear evidence that Mr Neely disclosed that he was acting for a company, and proposed to order chaff for supply to that company. Mr Caddy therefore knew from the outset that chaff ordered by Mr Neely was to be supplied to and paid for by Mr Neely's company.

(2) There is no evidence that Mr Caddy enquired as to the worth of the company to be supplied by Southern Cross, or as to the company's ability to pay for the chaff.

(3) Southern Cross did not ask Mr Neely to guarantee the debts of his company, so as to assume personal liability for any unpaid trading debt.

(4) Apart from addressing its invoices to 'Weight Lifter', Southern Cross did not concern itself with the precise name of the company with whom it was dealing, until there was default in payment. Its invoices did not refer to Weight Lifter 'Pty Ltd'.

(5) Before payments for chaff commenced being made by direct debit into Southern Cross's bank account, Mr Caddy said that cheques for payment initially came from Shiralee Park Pastoral Company and then from Turquoisecroft. There is no evidence that anyone from Southern Cross was concerned at that time as to the identity of the company paying for the chaff, notwithstanding that neither company had a name including 'Weight Lifter'.

(6) Later, Southern Cross requested the ABN of the company it was dealing with, accepted the ABN given by Mr Neely, and then included that ABN on all further invoices. From that time at least, Southern Cross must have intended to deal with the company or entity trading under that ABN (Turquoisecroft).

(7) It was only when Southern Cross decided to sue for the trading debt that, for the first time, it made enquiries as to the precise identity of the company it was dealing with. At that time, a search of the ABN provided by Mr Neely, and appearing on all of the unpaid invoices, disclosed that it was Turqouisecroft's ABN.

(8) Believing Turquoisecroft was the company it had been dealing with, Southern Cross sued Turquoisecroft to judgment in the Magistrates' Court. No claim was then made that Mr Neely was personally liable. That conduct provides objective evidence of Southern Cross's state of mind at all relevant times until that time - that it had contracted with a company controlled by Mr Neely. Further, after the ABN was provided, both Southern Cross and Mr Neely obviously intended that Turquoisecroft was its customer and was liable to pay for the chaff.

(9) It was only when Turquoisecroft did not pay the judgment debt that Southern Cross even considered suing Mr Neely personally, and then only for misrepresentation causing it to incur allegedly 'wasted' legal costs of $4,000 in suing Turquoisecroft. That claim was misconceived and was abandoned at trial.

(10) In an endeavour to recover its debt, Southern Cross commenced the second proceeding in the Magistrates' Court. It sued Equine Nutrition Australia Pty Ltd, another company associated with Mr Neely, as the debtor - on the basis that it had been the contracting party from the outset of the trading relationship. Equine Nutrition was not incorporated until many years after the commencement of the trading relationship, was not referred to on any of the invoices, and there was no evidence of it having ordered any chaff from Southern Cross. The claim against it was abandoned at trial. The fact that the claim was made, however, bolsters the conclusion that Southern Cross always intended to supply chaff to, and believed it had contracted with, a company controlled by Mr Neely; and not Mr Neely personally.

(11) It was only during the trial that a personal claim was first made that Mr Neely was personally responsible for the trading debt. The application to amend was made very late in the trial, after Southern Cross had closed its case, after Mr Neely had given evidence in chief, and well into the course of Mr Neely's cross-examination. It appears that the amendment resulted from comments made by the Magistrate as to the need to amend if a personal claim was to be made against Mr Neely for the debt. By the amendment, Southern Cross claimed that Mr Neely was personally liable because he named 'Weight Lifter' as his company in the initial negotiations, because there was no such company and that, therefore, Mr Neely was Southern Cross's customer.[9]

28 Taking the evidence as a whole, it is clear that Mr Neely disclosed that he was acting as agent for a company when ordering the chaff from Southern Cross. On the proper interpretation of the contract between the parties, the parties intended that Mr Neely was not contracting as a party in his own right, but only as agent for a company. Southern Cross's conduct throughout shows that it intended and at all relevant times believed it was contracting with a company controlled by Mr Neely. The evidence demonstrates that Turquoisecroft was the company utilised by Mr Neely for the purposes of the trading relationship with Southern Cross. Turquoisecroft was in existence at the time the trading relationship was formed and throughout the course of that relationship; and it was Turquoisecroft's ABN which was provided by Mr Neely to Southern Cross on request. When there was default in payment, Southern Cross, correctly, sued Turquoisecroft.

29 The fact that the company was incorrectly named in the initial discussion between Mr Neely and Mr Caddy is not decisive. No case was made that Southern Cross relied upon Mr Neely's mistaken reference to 'Weight Lifter' in the initial discussions, for example, on the basis that there was then a company bearing that name which Southern Cross believed was financially sound and able to pay for chaff delivered. In the particular circumstances of this case, the erroneous naming of a non-existent company as the principal should be treated as equivalent to the true principal (Turquoisecroft) being unnamed. If that be wrong, the identity of the principal was adequately disclosed when Turquoisecroft's ABN was provided after the commencement of the trading relationship; and Southern Cross thereafter accepted it as the principal with which it was dealing.

30 Counsel for Southern Cross contended that this was a case where Mr Neely contracted for a non-existent principal, and that Mr Neely is therefore presumed to be personally liable. He relied upon a number of cases to support this submission.[10] I do not accept that submission. Those cases stated that each case must depend on its own facts, as 'the fundamental question in every case must be what the parties intended or must be fairly understood to have intended'.[11] For the reasons given, the facts in this case are against any conclusion that there was no principal when the trading relationship commenced, and show that the parties intended that Mr Neely would not be personally liable.

31 The Magistrate ought to have found that Southern Cross agreed to supply a company controlled by Mr Neely and nominated by him. There is nothing in the course of the trading relationship, either at its inception or at any later time, to support an agreement or intention that Mr Neely would be personally liable for the chaff delivered. All of the evidence is to the contrary.

32 The appeal against the Associate Justice's dismissal of the appeal pursuant to r 58.10(8) must be allowed, and the appeal from the Magistrate's decision must also be allowed.

33 I will hear the parties as to the form of orders and as to costs.

[1] Neely v Southern Cross Feeds Pty Ltd [2013] VSC 152.

[2] The evidence on this issue was not clear, the Magistrate made no finding of fact and, for the reasons appearing below, it does not matter when.

[3] The transcript records 'with', but the cross-examiner obviously intended to say 'through' and Mr Caddy likely so understood him. If not, Mr Caddy's other evidence was in any event to that effect.

[5] Ibid 241-2 (emphasis added). See also Carminco Gold & Resources Ltd v Findlay & Co Stockbrokers (Underwriter) Pty Ltd [2007] FCAFC 194, [1]; Georges v Seaborn International (Trustee) [2012] FCA 75, [267].

[9] On appeal, Mr Neely challenges the Magistrate's decision to allow the amendment at such a late stage. There is considerable merit in that argument, but it is unnecessary to decide the issue, because the amended case ought to have been dismissed by the Magistrate.

[10] Kelner v Baxter (1866) LR 2 CP 174; Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304, 313-5, 318, 323-4; Vickery v Woods [1952] HCA 7; (1953) 85 CLR 336, 347-8; Black v Smallwood [1966] HCA 2; (1966) 117 CLR 52, 55-6, 62-3; Public Trustee v Taylor [1978] VicRp 31; [1978] VR 289, 292-3.

[11] Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304, 323.

Court (General Civil Procedure) Rules 2005

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