Judgment
1HIS HONOUR: Quikfund appeals to this Court pursuant to the Local Court Act 2007 from the decision of his Honour Magistrate Townsden in the Local Court on 20 December 2012 on the following grounds:
His Honour erred in law in finding that Ms Seifor and/or Link Solutions Pty Ltd had ostensible authority for and were agent or agents of Quikfund.
His Honour erred in law in finding that s 52 of the Trade Practices Act 1974 and s 12DA(1) of the Australian Securities and Investments Commission Act 2001 could be pleaded in Chatswood Appliance's defence absent a claim for relief.
His Honour erred in law in finding that the rental agreement was not a financial service.
His Honour erred in law in making orders pursuant to sections 87(2)(a), 87(2)(ba) and 87(2)(d) of the Trade Practices Act.
2Quikfund originally commenced proceedings in the Court below by statement of claim filed on 23 November 2011. Quikfund provided finance for the supply by Link Solutions of telephone equipment to Chatswood Appliance. Quikfund sued for $16,830, being the amount alleged to be owing under a rental agreement made between it and Chatswood Appliance. Ian Johnson was the director of Chatswood Appliance who negotiated and signed the agreement on its behalf and who also guaranteed that company's obligations under it. Chatswood Appliance was required by the terms of the rental agreement to pay monthly instalments of rent in the sum of $561. Chatswood Appliance paid instalments at that rate for some time but ultimately ceased to do so during the unexpired term of the agreement. Quikfund terminated the agreement when Chatswood Appliance defaulted and sued for the balance of monies owing.
3The learned Magistrate dismissed Quikfund's claim. His Honour in fact made the following orders:
Pursuant to s 87(2)(a) the Chatswood Appliance Spare Parts Agreement is void ab initio.
Pursuant to s 87(2)(ba) the provisions of the Chatswood Appliance Spare Parts Agreement [are] unenforceable.
Pursuant to s 87(2)(d) Quikfund is to pay Chatswood Appliance $16,800 being the amount it paid under the Chatswood Appliance Spare Parts Agreement.
The obligations of Ian Johnson under the guarantee clauses [are] also unenforceable.
Quikfund to pay Chatswood Appliance's costs.
4The defence upon which Chatswood Appliance relied at the trial alleged a series of misrepresentations said to have been made when the agreement for the supply of the rented equipment was negotiated. Mr Johnson did not deal directly with Quikfund at that time but with Ms Marjan Seifor, who appears uncontroversially to have been employed by Link Solutions as a sales representative. Mr Johnson contended that Ms Seifor misrepresented certain aspects of the agreement that was then being negotiated and that in reliance upon them he committed Chatswood Appliance to the agreement with Quikfund and became personally liable as the guarantor of its obligations. Chatswood Appliance and Mr Johnson were not legally represented at any time until the hearing before his Honour and would appear to have prepared the defence unaided. Link Solutions was never joined as a party to the proceedings in any capacity by anyone.
5The central issue in the proceedings therefore became whether or not Ms Seifor was the agent of Quikfund and whether or not the representations allegedly made by her, and said to have induced Chatswood Appliance and Mr Johnson to make the agreement, were made on Quikfund's behalf. His Honour concluded that Ms Seifor was Quikfund's agent with ostensible authority to make representations for which it was responsible. The first ground of appeal challenges that finding upon the basis that it amounts to an error of law.
6Mr Johnson gave evidence before his Honour. His affidavit recited that he responded to an advertisement in the Yellow Pages in September 2008 that said "Don't pay full price for your telephone system or your calls." He said that a few days later he contacted Link Solutions and they organised for a sales representative to come out to see him. On 19 September 2008 Mr Johnson met with Ms Seifor from Link Solutions at his office premises at Roseville.
7At that meeting Ms Seifor said to Mr Johnson, "We can supply this phone system. By taking over your phone lines from Telstra, including mobiles, the cost of the phone calls will offset the cost of the equipment." She also added, "As a bonus deal included in the phone service, you will receive free equipment."
8Shortly thereafter Ms Seifor asked Mr Johnson how much he spent each month for his phone services. Mr Johnson showed her some phone bills. Ms Seifor calculated Mr Johnson's monthly phone charges to be about $550 including line rental. Ms Seifor then said, "We are able to offer you telephone services at a lower fee than your previous provider. We can give you three new mobiles with $200 cap, plus the phone calls, plus a new phone system through Clear Telecoms for the same price. What you spend on the phone calls will cover the cost of the equipment."
9Mr Johnson asked, "So all we have to pay is the $550 per month?" She replied, "Yes." Ms Seifor then produced a document and began filling it out. Mr Johnson looked at the front page of the document and saw that it contained a paragraph numbered "(c)" that said "The Customer paying Link Solutions $1.10 (including GST)." Mr Johnson then said, "So if we pay $1.00 at the end of the agreement, then we own the equipment?" Ms Seifor responded, "Yes." Mr Johnson then signed the first page of the document. That document has a heading at the top of the first page that says "Link Solutions". It also has a sentence in bold type in a box below that heading that reads "Letter of Understanding in relation to Customer Option to Purchase Plasma Equipment from LINK SOLUTIONS."
10Ms Seifor then turned the page of that document and pointed to page two where it read, "Total Monthly Plan Fee", underneath which was a box containing the number "550". Ms Seifor then said, "That is what you will be paying per month for the phone calls and line rental, which will be credited towards the phone system and equipment, in fact I will make it a bit cheaper for you." She then crossed out the "550" and inserted "510". Mr Johnson then signed the document and initialled it where indicated.
11Mr Johnson also signed a document that in due course became the agreement upon which Quikfund sues. It is headed with the words "Quikfund" and "TAX INVOICE AND RENTAL SCHEDULE". A schedule on the second page refers to the rental term as "60 months" and the monthly rental as "$510", in place of "$550" which is crossed out. Corresponding alterations are made to the applicable GST sums on these amounts. The document goes on to provide an authority for the direct debit of monthly rental instalments of $561 from an account nominated by Mr Johnson. There is no dispute that monthly deductions of that amount commenced and continued to be made in favour of Quikfund thereafter. Mr Johnson's signature as the guarantor also appears on this document.
12The "Quikfund Rental Agreement - Rental Terms" followed. Two of them should be noted:
"2. AGREEMENT
2.1 You may offer to rent goods from us by completing, signing and giving us a Rental Schedule. You may only withdraw or vary this offer with our consent. We may accept the offer made by You in a Rental Schedule by signing the Rental Schedule or by paying the supplier for the Goods to acquire them for the purposes of the Rental Agreement, whichever occurs first. These are the only ways in which we may accept Your offer.
9. OUR OWNERSHIP AND RIGHTS
9.1 The Goods are our property. You are a bailee of the Goods only and have no right to purchase or acquire any interest in them, except with our written consent."
13Quikfund submitted in the Court below that in order to show ostensible agency there must have been a representation made by it to Chatswood Appliance that Ms Seifor had the relevant authority to act on its behalf. Quikfund emphasised that there was no evidence that it was aware of the meeting held at the Chatswood Appliance's premises when the documents were signed and no evidence to suggest that Quikfund had any knowledge of what was said. There was no evidence that Quikfund was ever contacted during the meeting. Quikfund further emphasised that Ms Seifor only signed the document as a witness and did not accept the offer that it contained.
14Chatswood Appliance submitted to his Honour that Ms Seifor was acting both as a representative of Link Solutions as well as an agent of Quikfund. It was contended that she, through her various representations, arranged the contract between Quikfund and Chatswood Appliance. Ms Seifor did not give evidence before his Honour. It was submitted to his Honour that an inference arose that the same person amended the sums in both the Link Solutions and Quikfund documents. (Quikfund acknowledged before me that such an inference was clearly available). It was also implicit in these submissions that any representations made by Ms Seifor that induced Chatswood Appliance to enter into the agreement with Quikfund was available to it in defence of Quikfund's claims.
15Chatswood Appliance argued before his Honour that by entering into negotiations as to price, which led to the amendment to the sums referred to above, Quikfund indicated that Ms Seifor had authority to negotiate on its behalf. To that extent it was contended that it could not be said that Ms Seifor simply had possession of a blank copy of a rental agreement or merely explained its contents.
16His Honour was referred to Essington Investments Pty Ltd v Regency Property Pty Ltd [2004] NSWCA 375 in which Hodgson JA said this at [44] - [45]:
"[44] It is to be noted that the representation of authority must either be made, or at least be permitted to be made, by the principal. In the present case, all the relevant representations were made by the agent, so that the real question is whether they were themselves authorised by the principal and so made by the principal, or were relevantly 'permitted' to be made by the principal. Bowstead & Reynolds do not enter into a discussion of what can amount to permitting a representation to be made. However, Bowstead & Reynolds do note a representation may be made by permitting an agent to act in some way in the conduct of the principal's business with other persons, and also by entrusting the agent with the indicia of ownership of property: see para.8-017. The present case was not one in which the agent was entrusted with the indicia of ownership of property, but rather where the agent was entrusted with a signed contractual document; but there is arguably an analogy between these two situations.
[45] In my opinion, one circumstance in which it may be said that representations are permitted to be made is where a principal knows that an agent engaged on the principal's behalf is making representations as to the agent's authority, is able to prevent such representations being made or countermand them, but does not do so. There is arguably, in these circumstances, something like a representation by silence: the circumstances call for some action by the principal to ensure that persons are not misled by the agent, and the principal does not take that action." [Emphasis added]
17His Honour dealt with the issue as follows:
"Where, as in this case the evidence establishes that Ms Seifor directly negotiated the amount to be paid by the defendant by way of monthly instalment and where the agreed amount was then forwarded to the plaintiff who without query and within weeks commenced debiting that amount from the defendant bank account it is difficult not to accept the proposition that there existed ostensible authority."
18His Honour did not, for obvious reasons, have the benefit of the recent decision of the Full Court of the Federal Court in Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (In Liq) [2013] FCAFC 5. The relevant issue in that case was whether or not a Mr Croom, who made various representations to Prosperity, acted as the agent of Quikfund in circumstances where Quikfund should be held liable for the losses suffered by Prosperity as a result of acting in reliance upon those statements. It was common ground that Mr Croom was employed by a third party and was not employed by Quikfund, nor was he ever an officer of that company, at any time. In that case Prosperity relied upon the proposition that Quikfund should be held liable for certain misleading statements made by Mr Croom because Quikfund had appointed him as their agent to procure persons to seek finance from them and that the statements that Mr Croom made were within the general class or scope of statements that they thereby authorised him to make.
19After reviewing in some detail the authorities touching the question, the Court said this at [79] - [81]:
"[79] It is clear from the above brief conspectus of some of the relevant authorities that assertions made by the alleged agent that he or she is acting for the alleged principal can never by themselves prove the existence of the alleged agency. More is required. There must be some conduct on the part of the alleged principal from which the relationship of agency can be inferred and which breathes life into the assertions of the alleged agent.
[80] In the present case, at [31] of his Reasons, the learned primary judge found that Mr Croom signed each of the documents which he signed on 25 October 2007 as a representative of QCC, AER or, as the case may be, Axis. With great respect to his Honour, that finding was erroneous. Mr Croom did not sign any of those documents as a representative of AER. Indeed, there is no evidence that Mr Croom ever signed any document on behalf of either Quikfund or AER. Furthermore, most of his signatures on the various documents which he did sign were as a witness to the signature of Mr King. Mr Croom did, of course, sign various versions of the Letter of Understanding on behalf of QCC. He also described QCC/Technix as the 'Sales Agent' of Axis in the Axis Unlimited Plan document dated 11 October 2007 and signed several documents in October 2007 and in March 2008 on behalf of Axis which recorded the arrangements between Axis and Worldnet and Axis and Prosperity. But his actions in signing these latter documents are not probative of any agency between QCC and him, on the one hand, and Quikfund and AER, on the other hand.
[81] Three of the four AER equipment leases were signed on behalf of AER by a person whose identity was not revealed in the evidence. It is clear that the signature on each of those documents is not that of Mr Croom. The signatory is described as an 'authorised officer' of AER. The evidence also showed that the same position obtained in respect of the Quikfund equipment lease. The signature of the Quikfund representative on the Quikfund equipment lease is the same signature as appears on the relevant AER equipment leases."
20The Court stated its conclusions on this issue at [89] as follows:
"[89] For all of the above reasons, the primary judge erred when he found that, in his dealings with Prosperity, Mr Croom had acted as the agent of Quikfund and AER. His Honour's finding of agency was the foundation for his Honour's ultimate conclusion to the effect that Quikfund and AER must be held liable for the misrepresentations made by Mr Croom to Prosperity. That conclusion was also erroneous."
21It does not seem to me that the facts in that case are relevantly distinguishable from the present. Ms Seifor did not sign any documents in any capacity other than as a witness. She did not ever sign any documents as a representative of Quikfund. The evidence is also silent upon the precise relationship between Ms Seifor and Quikfund. Certainly Ms Seifor would appear never to have been employed by Quikfund and there was nothing to suggest that she had ever been authorised by it to do anything on its behalf. As far as the evidence goes, Link Solutions and hence Ms Seifor were in possession of blank rental agreements apparently provided by Quikfund to facilitate the possible provision of finance to Link Solutions' customers upon receipt of a completed application. There is no material that supported the proposition that Ms Seifor was authorised to make the representations complained of by Mr Johnson. There is no material that suggests that Ms Seifor was making, or had made, representations of which Quikfund was aware, and which it took no action to correct. The very form of the Quikfund rental agreement was that of an offer directed to Quikfund that it could choose either to accept or to reject. It also expressly contained provisions about ownership of the rented equipment that contradicted the alleged representations.
22I do not consider the fact that Ms Seifor directly negotiated the monthly rental instalment for inclusion in the Quikfund documents speaks in favour of her being armed with ostensible authority to make representations that bound Quikfund. In a commercially realistic sense, that fact says no more than that Ms Seifor knew and understood, or at least anticipated, that Quikfund would or might be prepared to provide finance for the proposed transaction with Link Solutions at the monthly instalment rate that she wrote into the offer. That was precisely what happened in fact. In the same way that Mr Croom was characterised by the Full Court in Quikfund v Prosperity, all that Ms Seifor did was complete the relevant forms, procure the hirer's signature upon them, and submit them to Quikfund for consideration. She neither required nor acquired the authority of Quikfund, ostensible or otherwise, for that purpose.
23Nor is this a case in which it can be said that Quikfund knew of or acquiesced in Ms Seifor's professing to act on its behalf so as to have become bound by her actions: see Clayton Robard Management Ltd v Siu (1988) 6 ACLC 57 at 60 (per Kirby P). The single plank in Chatswood Appliance's argument was that Quikfund had somehow invested Ms Seifor with the appearance of authority to act on its behalf and that Quikfund could not deny knowledge of the fact that third parties, such as Chatswood Appliance, might be induced to deal with it upon that basis. However, with the limited and largely insignificant fact that Quikfund began debiting Chatswood Appliance's nominated account with monthly deductions, his Honour did not determine the issue by reference to the knowledge or conduct of Quikfund at all so much as by reference to the conduct of Ms Seifor in allegedly "negotiating" on Quikfund's behalf. In this way his Honour effectively begged the question of what it was that Quikfund did or failed to do that led him to conclude that Ms Seifor's representations were its representations.
24The balance of the grounds of appeal are directed to the way in which his Honour dealt with the fact that Chatswood Appliance and Mr Johnson did not cross-claim or otherwise seek relief against Quikfund, either for the setting aside of the transaction or for the refund of money paid under it, and yet that is what his Honour ultimately ordered. In doing so his Honour took account of the terms of the defence that referred to certain sections of the Trade Practices Act. Argument in this Court therefore centred upon the effect of decisions such as Australian Mutual provident Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326, Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 and H P Mercantile Pty Ltd v Dierickx [2012] NSWSC 1005. There was as well argument upon what was in the particular facts of this case the connected issue of whether or not the Quikfund rental agreement was or was not a financial service. I was referred in this respect to the decision of the Full Court in Quikfund v Propensity at [125] - [128].
25Having regard to the view I have formed concerning his Honour's analysis and conclusions on the ostensible authority point, it is unnecessary to consider these further grounds of appeal. Each turns upon the consequence for Chatswood Appliance and Mr Johnson of his Honour's conclusions that were favourable to them on that issue. They necessarily fall away if the consequences or effect of Ms Seifor's alleged representations cannot be visited upon Quikfund. The possible availability of relief from the consequences of the representations against others is not a matter that calls for comment here.
26Finally, Chatswood Appliance contended that Quikfund required leave to appeal to this Court upon the basis that the issue of agency or authority involved at least a question of mixed fact and law.
27Sections 38 to 41 of the Local Court Act are in these relevant terms:
"38 Judgments and orders final
Subject to this Division, all judgments and orders of the Court exercising jurisdiction under this Part are final and conclusive.
39 Appeals as of right
(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.
(2)...
40 Appeals requiring leave
(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.
(2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court:
...
(c) an order as to costs.
41 Determination of appeals
(1) The Supreme Court may determine an appeal made under section 39 (1) or 40:
(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 Local Court for determination in accordance with the Supreme Court's directions, or
(d) by dismissing the appeal.
(2) ..."
28The facts that give rise to his Honour's finding are not in contest before me. Even if they were challenged in some way, there is no right of appeal on a question of fact alone. This Court has no authority to engage in a fact finding process on the merits of the case, even if the appeal involves a mixed question of fact and law: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2009) 74 NSWLR 481 at [38] - [70] and [144] - [150]; Nichols v Lee [2008] NSWSC 1243 at [61]; Ken Wolf Real Estate Pty Ltd v O'Halloran [2012] NSWSC 993 at [50] - [53].
29 His Honour's conclusion upon the question of Ms Seifor's ostensible authority is challenged as an error of law. Chatswood Appliance and Mr Johnson argued that the question of Ms Seifor's ostensible authority was at least a question of mixed fact and law and that leave to appeal was necessary. As leave had not been sought they asked that the appeal be dismissed.
30Although the issue is not without some doubt it is also unnecessary to determine it now. Counsel for Chatswood Appliance and Mr Johnson effectively acknowledged that leave should be granted if I were otherwise of the view that an error had been identified and that leave were required.
31I consider that his Honour erred in finding that Ms Seifor and/or Link Solutions had ostensible authority to act for Quikfund. I did not understand Chatswood Appliance or Mr Johnson to contest the fact that Quikfund was otherwise entitled to a verdict in its favour for the amount for which it sued in the Court below. Upon that assumption or understanding it would be open to me to make orders for the payment of that money to Quikfund. However, in my opinion it is preferable in the circumstances of this case, particularly in view of all of the other orders made in the Court below, to dispose of this appeal by remitting the matter to the Local Court for determination.
32I consider that the following orders should be made:
Set aside the judgment and orders of his Honour Townsden LCM made on 20 December 2012.
Remit the matter to the Local Court for determination according to law.
33Costs would ordinarily follow the event. However, at the request of the parties I will make no order upon the question of costs until I have heard further from them following consideration of these reasons.
[2]
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Decision last updated: 29 May 2013