The implied agency claim
155 In addition to the evidence already canvassed in the discussion of the ostensible agency claim, Lennmar relies upon the statement in cross-examination of Mr Harrison, where he agreed with a proposition that someone at Bower Finance or Freshtel knew sufficient of TLL's profit margins to be able to determine the amount that TLL would charge the customer for the equipment rental. Lennmar submits that such knowledge indicated the closeness of the relationship between Freshtel and TLL. Lennmar submitted that in essence the relationship between Freshtel and TLL was that of a joint venture.
156 In answer to Lennmar's submissions as to the creation of agency between Freshtel and TLL by implied agreement, TLL denied that it had given Freshtel the authority to negotiate contracts on its behalf. TLL submits that customers were merely invited to make applications to TLL on the application forms provided to them. TLL referred to cl 3.6 of the Vendor Referrer Agreement, which prohibited Freshtel from making any statements regarding the contract with TLL without the authorisation of TLL, as establishing that Freshtel did not have its consent to represent TLL in its dealings with the customers.
157 The Court considers that for Freshtel to be TLL's agent on the basis of an implied agreement, it must be shown that Freshtel consented to be TLL's agent and TLL consented for Freshtel to be its agent.
158 Assent on the part of the principal can be established if the principal's words and conduct that, within the knowledge of the agent, are such as to lead to the reasonable inference that he is authorising the agent to act for the principal: Field v Shoalhaven Transport Pty Ltd [1970] 3 NSWR 96 at 103; Pole v Leask (1863) 8 LT 645, 648. It does not matter that the parties have not formally described their relationship as an agency. As Pearson LJ stated in Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137:
The relationship between principal and agent can only be established by the consent of the principal and agent. They will be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it themselves and even if they have professed to disclaim it.
159 Importantly, an agency can still be inferred by a court even if a contract between the parties stipulates that the relationship between them is not one of agency. This is relevant to the provisions of the Vendor Referrer Agreement which purport to disdain a relationship of agency between TLL and Freshtel. In South Sydney DRLFC v News Ltd (2000) 177 ALR 611 at 645-646, Finn J stated:
The parties cannot by the mere device of labelling, no matter how genuinely intentioned, either confer a particular legal character on a relationship that it does not possess or deny it a character that it does posse Ex parte Delhasse, above, at 532; see 2A Corpus Juris Secundum, "Agency", s7; see also the observations of Lord Denning in Massey v Crown Life Insurance Co quoted in the Australian Mutual Provident Society case, above, at 389
Save where an express labelling provision is shown to be a sham, the provision itself (as a manifestation of the parties' intent) must be given its proper weight in relation to the rest of their agreement and such other relevant circumstances as evidence the true character of their relationship. This may lead to its being disregarded entirely: Ex parte Delhasse, above; Board of Trade v Hammond Elevator Co, above; or to its being given full force and effect: Australian Mutual Provident Society v Chaplin, above. And such will depend upon whether, given the actual incidents and content of the relationship (that is, "the factual relation") to which the parties have consented, they have consented "to a state of fact upon which the law imposes the consequences which result from agency": Branwhite's case, above, at 587; Restatement, Second, Agency, s1 comment b.
160 Counsel for both parties referred the Court to several cases relevant to the question of implied agreement. It is useful to summarise them briefly.
161 In Branwhite v Worcester Works Finance Ltd [1969] AC 552, a customer traded in a car at a car dealership. The customer and the manager of the dealership agreed on a price for the new car the customer wished to purchase. The customer signed a hire-purchase agreement with the respondent finance company. The customer did not read the form, but signed it without the price stated. The manager said he would fill it in afterwards. The customer paid a deposit (the value of the car traded in). When the manager filled in and submitted the form to the finance company, he substituted a much higher price for the new car than that which was agreed with the customer. The customer refused to make any payments and sought to recover the deposit from the dealer. One of the questions was whether the dealer was acting as agent for the finance company in holding the deposit. The majority in the House of Lords (Morris of Borth-Y-Gest, Guest and Upjohn LLJ) decided that the dealer was not an agent for the finance company. Lord Upjohn stated at 577-578:
It is argued that in having possession of the finance company's forms and the ability to settle and fill in all these essential figures he showed that he was acting in the transaction generally as the agent of the finance company. But I do not myself think that this is a realistic approach. A motor dealer must have, if he is to be successful, one or more finance companies willing to enter into the ordinary bona fide hire-purchase agreements with purchasers, many of whom cannot pay the cash price. They must, therefore, supply him with forms and tell him as a matter of common sense the terms upon which they are prepared to do business… But I cannot see that this makes [the dealer] an agent of the finance company… He is a principal acting on his own behalf…
162 Branwhite was subsequently considered by Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270 ('NMFM'). In NMFM, a negative gearing financial strategy was offered to individual investors whereby investors would mortgage their homes to Citibank and then use the loan received to invest in a property trust. K was a financial adviser who received commissions from Citibank and NMFM from referring customers to their products. K made misrepresentations to customers in relation to NMFM's package. K also failed to warn investors of the dangers involved in such a product. K and the other advisors had Citibank mortgage application forms, which they or their customers filled out and which the customers signed. Citibank knew that the advisers had these forms and that they were recommending their product as part of the negative gearing package, but Citibank did not know all of the details of the package. The question for the Court was whether the advisers were the agents of Citibank.
163 Lindgren J followed Branwhite and decided at [562] that the supply of Citibank forms and the advisers' roles in relation to the completion, signing and forwarding to Citibank of them did not, per se, characterise the advisers as agents of Citibank. By merely providing the forms, Citibank did not put the advisers in a position to make the misrepresentations: see NMFM at [567]. Furthermore, although K had an agency agreement with Citibank, the scope of statements that K was authorised by Citibank to make was very small: see NMFM at [760]. The statements made by K were outside those that Citibank authorised him to make.
164 Lindgren J also considered whether there was any actual authority outside of the agency agreement that might encompass the making of the misrepresentations: His Honour stated at [1023] that:
No doubt, a mere introducer of business to Citibank could become an agent of Citibank without, or prior to, the formality of a written agency agreement. But since actual authority depends on consensus, due respect must be accorded to Citibank's intention that there be a distinction between mere introducers and its appointed agents, a distinction that I infer was known to the other Advisers because of the practice according to which their clients' applications could be and were forwarded by them to Kelly for submission to Citibank.
165 His Honour also relevantly stated at [1025]:
What is to be looked for in this chapter [on actual authority outside of the agency agreement] is not simply evidence that Citibank knew that an Adviser was following a systematic course of introducing his or her clients for the purpose of their obtaining Mortgage Power accommodation, or that Citibank knew that an Adviser was recommending that Mortgage Power was suitable to enable acquisition of a NM investment product, or that Citibank profited from the Adviser's introductions, or that the Adviser was familiar with Citibank's requirements and policies. What is to be looked for is evidence that Citibank actually authorised the Adviser to act as Citibank's representative or for Citibank or on behalf of Citibank in selling Mortgage Power. [Emphasis in original]
166 Lindgren J considered both whether Citibank knew what representations the advisers were making and whether the advisers were authorised to make those misrepresentations. His Honour defined 'authorisation' at [1032]:
In my view, the notion of "authorisation" relates to a point of time prior to the making of the statement in question and requires at least that the Adviser was not entitled to make the statement if Citibank objected, that is, that Citibank was entitled to prevent the Adviser from saying what he or she was about to say…
167 His Honour concluded at paragraphs [1188]-[1196] that the advisers were not 'the voice of' Citibank and that there were no sources of actual authority outside of the agency agreement.
168 Reference was also made to Tonto Homeloans Australia Pty Ltd v Tavares [2011] NSWCA 389. Such case involved a mortgage provider, ANZ, who employed a mortgage originator, Tonto HL, to find new clients. Tonto HL in turn employed a number of sub-introducers to find customers for it, including S-Loans. In the course of obtaining new customers for Tonto HL, S-Loans made a number of misrepresentations. The relevant question was whether S-Loans was the agent of Tonto HL. The 'Introduction Deed' signed by S-Loans and Tonto HL stipulated that S-Loans did not have the power to bind Tonto HL or ANZ to any loans and that the deed did not create a relationship of agency between the parties. Allsop P noted at [182]-[183] that the existence of such terms was not determinative of the question of agency.
169 Furthermore, his Honour noted that the Introduction Deed stated that S-Loans would use its 'best endeavours' to introduce customers to Tonto HL. However, his Honour stated at [187]:
The obligation of "endeavour", thus understood, may lead to elements of assessment and choice as to whether S Loans should, conformably with its obligations to its customers, to Tonto HL and taking into account its own interests, refer any particular loan application to Tonto HL. These are not obligations to act in the interests of Tonto HL, and not ones of a fiduciary character.
170 Allsop P concluded that the trial judge erred in finding that S-Loans was the agent of Tonto HL. His Honour said at [191]-[194]:
Taken as a whole, the Introduction Deed and the other agreed arrangements did not provide for an arrangement under which S Loans would act on behalf, and in the interests, of Tonto HL in the respects found by the primary judge. The reasoning of the primary judge commenced with the recognition that Tonto HL did not undertake interviews with the prospective borrowers and played no part in collecting and submitting relevant information. All those tasks, in respect of these borrowers, and any others introduced to Tonto HL by S Loans were done by S Loans. Thus, there was an entrusting of the organisational or enterprise tasks in that respect to S Loans. In these circumstances, and given the obligations of the deed, the primary judge saw no room for S Loans to act for its own customers.
That approach has two principal flaws. First, it elevates the organisational or enterprise structure of the relevant business and activity as a key factor in determining agency. Tonto HL, as the instigator of the business structure, is seen to have placed Streetwise in the position of collecting all relevant information for the conduct of the lending enterprise. Therefore the tasks that are part of the operation of the organisation or enterprise are to be viewed as entrusted with S Loans as agent: see generally Seavey op cit at 883-885; the discussion in F M B Reynolds, W Bowstead and M Graziadei Bowstead and Reynolds on Agency (17 th Ed, Sweet & Maxwell, 2001) at 21-22, and Lord Wilberforce in dissent in Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 585-586. This approach deflects attention from the correct task - ascertainment of the legal content of the consensual agreement between the parties.
Secondly, the approach fails to place the Introduction Deed in its commercial context. It was an agreement between two entities each of which had its own business. One was to endeavour to introduce business from its own customer base for the mutual commercial advantage of both.
Agency is to be determined by an analysis of the consensual legal relations between the parties, it is not merely a conclusion drawn from the performance by A of a function important, even necessary, to the operation or functioning of the business enterprise of P in question.
171 The Court respectfully adopts the approach of Allsop P. The considerations referred to by his Honour apply, by analogy, to the present circumstances.