Parties
24 The first question which arises for consideration is whether Catts was a party to the agreement. He could only have been a party if Player and Spedding had authority to act on his behalf. His Honour found that when Player and Spedding went to see Isenberg on 1 July "they were speaking on behalf of the three of them", that is, themselves and Catts. It appears that this finding was based on his Honour's finding that, on 29 June 1998, "Catts … agreed to go into partnership with them". If this is correct, then Player's and Spedding's 'authority' to act on behalf of Catts was, presumably, their authority as partners.
25 This raises a number of immediate problems. In the first place, before Player and Spedding could act on behalf of the partnership, there had to be a partnership amongst Player, Spedding and Catts in existence prior to the meeting with Isenberg on 1 July 1998. The formal partnership did not commence until 1 September 1998. In my opinion, there was no evidence and no finding by his Honour that there was any other partnership in existence at the relevant time. The closest his Honour came to any finding as to the partnership other than that to which I have already referred, was his finding that "there was an agreement by the three of them to enter into partnership" (emphasis added). That is quite different to a finding that there was a partnership in existence.
26 Secondly, if, contrary to the view I have expressed, there was a partnership in existence at that point, and that was the basis of Player and Spedding's authority, any agreement reached would have been with the partnership. As such, Player, Spedding and Catts would have been jointly liable for the debt: see s 9 of the Partnership Act 1892 (NSW). The manner in which the individual partners bore that debt inter se would depend on the terms of their partnership agreement. The agreement alleged and accepted by his Honour to have been entered into is an agreement only as to the several liabilities of Player, Spedding and Catts. No joint liability was contemplated by the terms of the agreement accepted by his Honour. Nor is any joint liability reflected in the orders made.
27 The appellants also submitted that even if there was a partnership, the agreement did not fall within the business of the kind carried on by the partnership so that Player and Spedding were not agents for Catts in the transaction: see s 5 of the Partnership Act. The appellants submitted that the purchase of equipment for a new business could not fall within s 5. Whether or not that would be so in a particular case is a question of fact and was not determined by the trial judge. For myself, I consider that such a purchase could fall within s 5. However, the authority of a partner to bind the partnership under s 5 only commences when the partnership business commences: Lindley & Banks on Partnership (1995) 17th Ed at pp 385-388. Here, the new legal partnership did not commence until 1 September. Accordingly, some other partnership entered into by Player, Spedding and Catts would need to have been proved for the respondents to obtain the benefit of s 5. No such partnership was proved. However, even if it is assumed for present purposes that there was some such partnership and Player and Spedding were acting as agents within the meaning of s 5, Isenberg and Nans still face the difficulty to which I have referred in the preceding paragraphs and which I consider to be insuperable, namely, that given the terms of the agreement alleged, it was not an agreement with the partnership, but an agreement in which each of Player, Spedding and Catts were to have independent and several liabilities.
28 Was there any other basis upon which his Honour could have held that Player and Spedding were speaking on behalf of the three of them?
29 Leaving aside the principles of partnership law, an agent has authority to bind the principal if the agent has actual or ostensible authority to do so. There was of course no written agency agreement in existence. Accordingly, the only evidence upon which a finding of express actual authority could have been based was evidence from Catts himself. Catts' evidence was that he had pushed for Player and Spedding to see Isenberg and end the partnership, but that he did not believe they were going to negotiate with Isenberg as to the purchase of the equipment or the lease of the premises. Spedding gave evidence to the same effect, saying that the sole purpose of the meeting was to confirm they were ending the partnership. Player's evidence, although more extensive, does not detract from either of these versions. He said "we needed to know what [Isenberg's] intentions were so we would formulate a path to follow". Whilst his Honour made an adverse credibility finding in relation to Catts, he only did so to the extent that Catts' version of conversations differed from Isenberg's version. Isenberg did not, and on the facts could not, give evidence on this issue. Accordingly, there was no evidence upon which his Honour could have found that Player and Spedding were exercising express actual authority on behalf of Catts.
30 Did Player and Spedding have implied actual authority? Authority may be implied from the nature of the business which the agent is employed to transact. Again, no argument was advanced that this was the authority exercised on this occasion. The closest that any such argument came was that Spedding, Player and Catts had entered into partnership and that Spedding and Player were acting in accordance with their authority as partners. I have already dealt with that contention.
31 That leaves apparent or ostensible authority. Apparent authority derives from the conduct of the principal. Fridman, Law of Agency 7th Ed at 124 states: "to prove apparent authority, it is necessary to show that the principal's conduct was such as to mislead the third party and to induce him to rely upon the existence of the agency to his detriment". In my opinion, there was no such authority here. Catts, who would be the principal if such agency existed, did not deal with Isenberg or Nans at all in respect of the 1 July meeting. His only connection with the meeting at which the agreement was said to have come into existence was that he had reached an "in principle" agreement to go into partnership with Player and Spedding and that he had pressed his proposed partners to formally advise Isenberg that they intended to terminate the ISP Law Partnership and that Isenberg would not be invited to join the new partnership. There was no evidence Catts had authorised Player and Spedding to agree to anything in relation to equipment or premises. His conduct, therefore, could not have misled Isenberg in any way. Further, a statement by Player and Spedding that they were going into partnership with Catts was not conduct by Catts and could not be relied upon to prove that they were agents for Catts.
32 Accordingly, there was no basis upon which his Honour could have found Catts was a party to any agreement. That being so, the claim of the respondents that a contract was entered into with the three appellants fails at its inception.