Winstonu Pty Ltd v Pitson

REASONS FOR JUDGMENT GYLES J: 2 I have had the advantage of reading the judgment of Stone J in draft and agree with the substance of her Honour's judgment. As this involves this Court differing from concurrent findings in the courts below, I shall deal with some aspects myself. 3 The judgment of the learned Magistrate in the ACT Magistrate's Court does not discuss the possibility that Perryman Building Pty Ltd ("Perryman") was acting as agent for the respondent ("Mr Pitson") and the other members of the syndicate which was developing the property in question ("the Principals") in relation to the purchase of goods from Winstonu Pty Limited trading as Harvey Norman Electronics ("Winstonu"). It was accepted by counsel for Mr Pitson, before the ACT Supreme Court and here, that that issue was raised before the Magistrate and was open for consideration as part of Winstonu's case. The documents which were tendered, and the tenor of the cross examination of Mr Pitson, make the context of this concession clear enough, and provided sufficient evidence for the resolution of the issue. The failure to deal with the issue was plainly an error by the Magistrate. 4 Because of the amount involved, there was an appeal as of right to the Supreme Court from the decision in the Magistrate's Court. The relevant sections of the Magistrate's Court (Civil Jurisdiction) Act 1982 (ACT) include the following: "Evidence on appeal 391. In an appeal, the Supreme Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence. Effect of appeal on execution of judgment 393(1)On an appeal, the Supreme Court may - (a) affirm, reverse or vary the judgment or order appealed from; (b) give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order; (c) set aside the judgment or order appealed from, in whole or in part, and remit the proceedings to the Magistrates Court for further hearing and determination, subject to such directions as the Supreme Court thinks fit; or (d) award execution from the Supreme Court or remit the proceedings to the Magistrates Court for the execution of the judgment or order of the Supreme Court. (2) A judgment or order of the Supreme Court made in proceedings remitted under paragraph (1)(d) shall have effect as if it were a judgment or order of the Magistrates Court and may be enforced by the Magistrates Court accordingly." The appeal is thus a full appeal on fact and law, but not a de novo rehearing. 5 The grounds of appeal to the Supreme Court were as follows: i) "The Magistrate's Court erred in finding that the relationship between the respondent and the project manager (Perryman Pty Limited) was governed by an oral agreement, and not the written agreement signed by both parties and dated 22 June 1994. ii) The Magistrate's Court erred in not finding that at all material times Perryman Pty Limited acted as the respondent's agent in relation to the transactions with the appellant the subject of the litigation. iii) The Magistrate's Court erred in not finding that each transaction the subject of the litigation was between the respondent as principal and the appellant. iv) The Magistrate's Court erred in not finding that the respondent was liable to the appellant for the transactions the subject of the litigation." 6 It was common ground before the Supreme Court that if it was found that the Magistrate had not adequately addressed the issue of agency then that issue was to be resolved by the Supreme Court rather than by remitting the matter to the Magistrate's Court for further hearing. Neither side sought to lead further evidence pursuant to s 391. The Supreme Court proceeded to consider the appeal having regard to the Magistrate's reasons and the evidence before the Magistrate. That involved the Supreme Court considering factual issues for the first time. The problems occasioned by that course (in varying contexts) are discussed in cases such as Voulis v Kozary (1975) 180 CLR 177, McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284, Uranerz (Australia) Pty Ltd v Hale (1980) 30 ALR 193 and Superintendent of Licences v Ainsworth Nominees Pty Ltd (1987) 9 NSWLR 691. It was inherent in the course taken that, whilst the Supreme Court was invited to make de novo findings of fact, it could not differ from those findings of the Magistrate which depended upon the advantage which she had in seeing the witnesses. On the issue of agency, this meant that the manner in which the evidence of Mr Pitson was dealt with was crucial. 7 I agree with Stone J that the Project Management Agreement ("the Agreement") between Perryman and the Principals is consistent only with the appellant being, as it says, a project manager (or agent), rather than a principal, or, as it might alternatively be described, a builder. This conclusion follows from many aspects of the Agreement apart from cl 13 referred to in the judgment below. I mention recital B, the definition of "contract" in cl 1, and cll 6, 8, 20, 22 and 23. This seems to have been accepted in the Supreme Court, where it was held that the Magistrate had found that the Agreement had been varied by departing from any relationship of agency in relation to obtaining goods and services, this finding being based upon the evidence of Mr Pitson. The Supreme Court would have made the same finding based upon the same evidence. 8 I agree with Stone J that the evidence of Mr Pitson concerning his opinion as to the nature of the relationship was not a proper basis for such a finding. However, insofar as his evidence related to actual conduct, acceptance of that evidence by the Magistrate must, in turn, be accepted. It is thus necessary to examine that evidence with some care. The effect of his evidence on this point was that cl 13, and perhaps cl 15(b) and cl 18, of the Agreement were not complied with by Perryman, but that, instead, it was said on behalf of Perryman that all the Principals need be concerned about was the final result with the capped price (a reference to cl 33 of the Agreement). 9 In my opinion, this evidence falls well short of permitting a finding that the Agreement was varied by altering the role of Perryman from project manager/agent to builder/principal. Acquiescence by the Principals in a failure by the project manager to comply with some procedural requirements of the Agreement probably does not even establish variation of contract as to those requirements, but certainly does not establish variation of the fundamental nature of the contract. It is also to be noted that the undisputed evidence was that cl 20 of the Agreement, dealing with the vital topic of payment by the Principals' bank on behalf of the Principals of liabilities incurred for the project, was complied with at all times. 10 The correspondence which was exchanged between the Principals and Perryman in July 1995 when the Agreement was terminated and the evidence of Mr Pitson about his side of it (copies of which are missing) make it clear that each party was asserting that it was prepared to carry out the Agreement according to its terms, although there was disagreement between them as to an aspect of the matter not now relevant. This conduct is not consistent with any variation or abandonment of contract. 11 In my opinion, it follows that as the Agreement did continue to bind according to its terms, goods ordered for the project by Perryman were ordered by it as project manager and agent for the Principals. It does not matter whether the agency was disclosed to the supplier or not. 12 I should mention some miscellaneous matters: 1. Faintly put contentions by Mr Pitson in evidence that the pre-contract correspondence continued to bind notwithstanding the Agreement, and that they were inconsistent with the Agreement as to agency, are without substance. 2. No issue is raised as to election. 3. No issue is raised as to lack of parties. 4. I agree with Stone J that, in the events which happened, cl 33 did not have any relevant operation. The limit had not been reached either at the time of ordering or the time of delivery of the goods. 13 The appeal must succeed. This brings me to the orders to be made. Winstonu has submitted that this Court is in as good a position as was the Supreme Court to consider the issues of fact and law which arise, and opposes the remission of the matter. It is put that, apart from the calculation of interest, there is no issue as to which further findings or calculations are necessary. Counsel for the respondent did not take a categoric position on that. I cannot see any relevant difference between the ability of the Supreme Court and this Court to resolve the issues. Each appeal is a full appeal on fact and law, and neither is a hearing de novo. There is no point in returning the substance of the matter to the Supreme Court. It is not normally appropriate for the Supreme Court on appeal to hear fresh oral evidence, and to do so would be contrary to the express basis upon which the matter was heard in that Court. For obvious reasons of cost, the parties do not wish that the matter be remitted to the Magistrate, and, as I have said, it would be contrary to the prior agreement of the parties. As will be apparent, I have had no problem in deciding the matter on the material before us, which is the material which was before the Supreme Court. The parties did lead evidence relating to the issue before the Magistrate, and the matter can be resolved without differing from any finding of primary fact by the Magistrate properly based upon oral evidence. The only evidence which is not reproduced before us is of no relevance to the issues in the appeal as presented. 14 I would therefore allow the appeal, set aside the orders of the Supreme Court and order that in lieu thereof the appeal to the Supreme Court be allowed, the order of the Magistrate be set aside and that in lieu thereof it be ordered that the appellant have judgment for the amount of $37,082.50 claimed and interest to be calculated; and unless, within twenty one days, the parties file a minute of agreed order as to the amount of interest payable, order that this part of the matter be remitted to the Supreme Court for determination. I would order that the respondent pay the appellant's costs of the appeal to the Supreme Court and of the appeal to this Court. I would not make any order as to the costs before the Magistrate. The primary case, which occupied most of the hearing, failed. I would hear any application by the respondent for a certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) if sought within fourteen days by arrangement with the ACT Registry of the Court. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY A 71 OF 2000

ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: WINSTONU PTY LTD (ACN 003 401 367) TRADING AS HARVEY NORMAN ELECTRICS

REASONS FOR JUDGMENT STONE J: 15 This is an appeal from the judgment of Crispin J in the Supreme Court of the Australian Capital Territory dismissing an appeal from the decision of Magistrate Campbell in the Magistrates Court of the Australian Capital Territory. 16 In 1995 the appellant, Winstonu Pty Ltd ("Winstonu"), supplied certain electrical goods to the respondent for installation in home units known as "Westridge Terrace" being developed by the respondent and his joint venturers. On 31 August 1995 the respondent, Mr Pitson ("Pitson") made a payment of $30,000 towards the price of the goods. Despite making the payment, Pitson contended that he was not the person liable for the cost of the goods and that he made the payment only to facilitate the completion of the development. The balance of the price has not been paid.

procedural background 17 Before the magistrate, Winstonu made its claim against the respondent as purchaser under the contract. Winstonu maintained this claim before Crispin J, but added, as an alternative ground for relief, that the contract had been made between itself and Playoust Building Pty Limited who had been acting as agent for the respondent. Playoust Building Pty Limited later changed its name to Perryman Building Pty Limited and will be referred to as "Perryman" in these reasons. Perryman went into in liquidation and Winstonu has been unable to recover the amount owing in the liquidation. On appeal to this Court, the appellant relied solely on the argument that it is entitled to recover the amount outstanding under the contract from Pitson on the ground that, at the time of entry into the contract, Pitson was the undisclosed principal of Perryman. 18 At the trial before Magistrate Campbell the issues before this Court were not argued. It appears that, because there was no process of discovery and because the pleadings were not fully particularised, the appellant, at the time it commenced proceedings in the Magistrates' Court, was not aware of any agency arrangement between Pitson and Perryman. As a result, these issues were not properly put to the witnesses and were not fully discussed in the magistrate's judgment. It was not until the hearing before this Court that the question of an undisclosed principal was squarely addressed. These difficulties were moreover compounded by the fact that the Mr Perryman was unable to give evidence because of an illness that was variously described by witnesses and counsel as Alzheimer's disease or Parkinson's disease.

Project management agreement between pitson and perryman 19 The appellant submitted that, for the purposes of the contract with Winstonu, Perryman was acting as agent for the respondent, Pitson and his joint venturers as undisclosed principal. The alleged agency was said to arise from a written agreement between Pitson and his joint venturers (the "Principal") and Perryman (the "Project Manager") dated 22 June 1994 and headed "Project Management Agreement". Perryman had sent a draft of this agreement to Pitson under cover of a letter dated 17 June 1994. A letter dated 20 June 1994 from Pitson to Perryman refers to the draft agreement and to the letter of 17 June. It states: "I am pleased to confirm my oral advice to you that your proposal is accepted and that we wish to proceed to contract. We are examining the agreement … which you attached to your letter and expect to be in a position to give you our views on it within the next few days." 20 As noted above, the signed agreement is dated 22 June 1994. 21 The appellant relied on this agreement. It is therefore useful to set out some of the more pertinent clauses of the agreement. Clause 6 The Principal acknowledges that, subject to clause 7, the Project Manager shall not be liable for (a) any costs of the project other than those referred to in clause 22; (b) the design of the works; or (c) the construction of the works.

Clause 7 The Project Manager warrants that he will carry out all project management services pursuant to this agreement with due care and skill.

Clause 8 (a) The Principal hereby appoints the Project Manager the agent of the Principal for the purpose of providing the project management services referred to in parts C, D and E of this agreement. (b) Without limiting the generality of paragraph (a) the Principal hereby appoints the Project Manager his agent for the following purposes: (i) to permit any persons to enter the site; (ii) to refuse any persons the right to enter and to exclude any persons from the site; and (iii) to remove any unauthorised person from the site. (c) The Project Manager shall enter into consultancy agreements, agreements with Professional Service Providers and contracts as the disclosed agent for the Principal.

Clause 15(f) [in Part D] The Project Manager shall:

(f) arrange for the provision of the necessary plant, materials and labour to complete those parts of the works which have not been undertaken by Contractors, subject to the written approval of the Principal;….

Clause 20 [Manual amendments in the original contract are shown in bold] (a) The Project Manager shall submit to the Principal at the frequency specified in Schedule 9, (or if nothing is specified then once a month), on the date stated in Schedule 9, a statement of costs of the project during that period showing separately: (i) the sums payable to Contractors, Consultants and Professional Service Providers and the time for payment of each claim; (ii) an itemised list of other costs of the project and time for payment of each claim; (iii) costs of the project incurred by the Project Manager pursuant to clause (15)(f); and (iv) the fees due to the Project Manager. The Project Manager is to provide a performance undertaking equal to 5% of the contract price in the form of a bank guarantee. (b) After the Project Manager has submitted the statement of costs, the Principal shall: (i) endorse the request for payments to authorise the Bank to made (sic) a drawdown to the Project Manager who will be responsible for making make payments direct to Contractors, Consultants, Professional Service Providers and creditors for claims referred to in paragraphs (a)(i) and (ii); and (ii) within the time stated in Schedule 10, (or if nothing is stated, then 10 days) pay the Project Manager the costs and fees referred to in paragraphs (a)(iii) and (iv).

Clause 22 The Project Manager is liable for the following costs: (a) The remuneration of his employees at his principal or any branch office (not being a site office) except as is provided in Schedule 14. (b) Overhead expenses not attributable to the project. (c) The cost of making good defective work carried out pursuant to clause (15)(f) by the Project Manager. (d) The items referred to in Schedule 11.

Special Condition 33 The construction is to be completed, including carpets and landscaping, within 32 weeks of signing this contract and for a guaranteed not to exceed construction cost of $1,850,000. (One million, eight hundred and fifty thousand dollars)

If the final construction cost is less than $1,850,000 the difference between the final cost and the guaranteed not to exceed construction cost is to be shared equally between the Principal and the Project Manager. 22 As the above extracts indicate, the Project Management Agreement provided that Perryman was to act as Pitson's agent in relation to the purchase of certain goods. It provided that Perryman would make payments direct to various goods and service providers and that Pitson would authorise its bank to provide funds to Perryman as required. In his evidence, Pitson agreed that throughout the course of the project, goods were paid for in accordance with that procedure.

reasoning of magistrate campbell and crispin j 23 As noted in [3] and [4] above, the decision of Magistrate Campbell concerned the question, no longer relevant, whether the contract to supply goods was between Winstonu and Perryman or between Winstonu and Pitson. However, Magistrate Campbell did comment on the relationship between Perryman and Pitson, as follows: "The relationship between Mr Pitson and Perryman is not clear. While they entered into an agreement in 1994, Mr Pitson's evidence was that that agreement was honoured more in the breach. Mr Grigg's evidence on this point did not advance the issue much further. The agreement with Perryman seems to establish that it was to act as Mr Pitson's, and his other joint venturers', agent in certain circumstances. Mr Pitson's approval was needed for the obtaining of tenders and Mr Pitson and his colleagues would expect each month a statement prior to their approving the drawing down of money from their funding facility. The agreement basically was for Perryman to manage the project for a fee. As between the parties to this action, the only possible relevance of the project management agreement is to the issue of whether I am able to accept Mr Pitson's evidence as to his understanding of his relationship with Perryman. For if it was clearly Mr Pitson's understanding that at all times Perryman was acting as his agent then this belief would not be consistent with his evidence that he was simply helping out and attending to some of the finer detail in the early negotiations of the contract with the plaintiff. However, if I am satisfied that the letter of the contract was not followed and that Mr Pitson was unsure or confused as to his relationship with Perryman, then it is open to me to accept his evidence that at all times he believed the company was entering into contracts relating to the project company as principal." 24 With respect, it is difficult to see how Pitson's 'belief' that Perryman was not acting as his agent is relevant if there is, as a matter of law, a contractual agency between them. Mr Pitson is not an expert witness in relation to questions of law and evidence of his 'belief' in relation to the legal relationship between himself and Pitson is irrelevant and inadmissible. If, on a correct interpretation of the Project Management Agreement, Pitson has appointed Perryman as his agent for the purposes of purchasing goods in relation to the Westridge Terrace development, the fact that Pitson misunderstood the consequences of the agreement is irrelevant. Similarly, unless the agreement was varied (as to which see [17] below), it is not relevant that the Project Management Agreement may not have run in accordance with its terms; Sportsvision Australia v Tallglen Pty Ltd (1998) 44 NSWLR 103 (cf Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290). 25 In the Supreme Court, Crispin J expressly concluded that Perryman was not acting as Pitson's agent in relation to the purchase from Winstonu. His Honour referred to cl 13(b) of the agreement, headed "TENDERS", which reads: The Project Manager shall have the right to enter into any contracts without the prior approval of the Principal where the value of that contract is less than or equal to the amount as set out in Schedule 6 or, if nothing is stated, $5,000.00.

26 I agree with the submission of Mr Erskine, counsel for the appellant, that cl 13(b) of the Project Management Agreement is not relevant to the purchase of goods from Winstonu, as that clause relates only to contracts entered into subsequent to a tendering process. 27 Crispin J referred to cl 33 of the Project Management Agreement as an alternative basis for concluding that Perryman was not acting as Pitman's agent in relation to the contract with Winstonu. That clause, which is set out above, states that the contract was for "a guaranteed not to exceed construction cost of $1,850,000". Relying on Mr Pitson's evidence to the effect that the parties treated the Project Management Agreement as a fixed price contract for $1,850,000, Crispin J concluded that, "when the total cost began to approach the figure of $1.85 million mentioned in cl 33 the parties accepted that Perryman would assume the sole responsibility for engaging contractors and purchasing supplies without referral to the joint venturers or even consultation with them" 28 In my view, cl 33, on its face, does not have so wide an effect. Clause 33 contains a guarantee, given by Perryman, that the total cost of the project will not exceed $1.85 million. If when the goods were ordered from Winstonu, the cost exceeded that amount (and there is no evidence to suggest that this was the case), Pitson could have taken action on the guarantee and thereby sought to recover the additional sum. However, there is nothing in cl 33 to suggest that the agency would be terminated at such time. In any event, the learned magistrate found that at the time that Perryman agreed to purchase goods from Winstonu, being November/December 1994, the total cost of the project was "nowhere near the limit of the fixed price contract". Similarly it would not be relevant if, by the time some of the goods were delivered, in May/June of 1995, the total cost of the project was approaching the limit. Certainly there is nothing in the agreement to suggest that the agency would be terminated once the total costs approached$1.85 million. There was some suggestion that the written contract had been varied to achieve this outcome but there was no evidence to substantiate this claim.

consideration 29 As mentioned in par [3] above, the appellant's claim against Pitson is that Pitson was the undisclosed principal of Perryman on whose behalf Perryman entered into the contract with Winstonu. As a general rule, an undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of the agent's actual authority; Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847 at 864 per Lord Parmoor, Fred Drughorn Ltd v Rederiaktiebolaget Trans-Atlantic [1919] AC 203 at 206, Mooney v Williams (1905) 3 CLR 1 at 8, Danziger v Thompson [1944] KB 654. For the purposes of the above rule, parol evidence is admissible to prove the existence of the agency. Despite much academic criticism of this principle, it has been confirmed by numerous English and Australian authorities, including Siu v Eastern Insurance Co Ltd [1994] 2 AC 199 at 208-209, Carberry v Gardiner (1936) 36 SR (NSW) 559 at 574, Perpetual Trustee Co v Bligh (1940) 41 SR (NSW) 33 at 40 and Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 149-150 per Hope JA (Privy Council decision at [1984] 1 NSWLR 258). 30 There are two exceptions to this rule. First, where the express or implied terms of a contract provide that the actual parties are the real and only principals, evidence tending to prove that another person is also liable as principal is not admissible; Humble v Hunter (1848) 12 QB 310, Formby Brothers v Formby (1910) 102 LT Rep 116. This exception has been doubted (see, for example, Epps v Rothnie [1945] KB 562 at 565 per Scott LJ) but has been upheld in more recent cases, including Re Quatrovision P/L & Coys Act [1982] 1 NSWLR 95 at 105, Carberry v Gardiner (supra) at 574 and Perpetual Trustee Co v Bligh (supra) at 40. The circumstances in which such a term will be implied include those where the agent has been referred to as the "owner" or "proprietor" of certain property; Humble v Hunter (supra), Formby Bros v Formby (supra). Secondly, the contract must not be of such a kind that the personality of the contracting parties is material; see, for example, Carberry v Gardiner (supra) at 574-575.

conclusion 31 There is a written agreement between Pitson and Perryman appointing the latter as agent for the purpose of providing the services described under the Project Management Agreement. In my opinion this agreement provides sufficient authority for Perryman, as agent for Pitson, to contract with Winstonu for the supply of the relevant goods. As principal Pitson is liable for the price of those goods unless: (a) if Pitson's status as principal was not disclosed in the contract for the supply of the goods, one of the exceptions to the undisclosed principal rule discussed in [14] was established; (b) the Project Management Agreement had been varied by the parties before Perryman entered into the contract for the supply of the goods; or (c) the Project Management Agreement was not the complete repository of the parties' agreement 32 There is not sufficient evidence to support any of these grounds. Unfortunately, as mentioned in par [4] above, Mr Perryman was unable to give evidence because of illness. Nevertheless, some insight into his understanding of his relationship with Mr Pitson can be gleaned from his letter to Mr Pitson dated 10 July 1995, in which he states "You are aware under the contract that Perryman Building is merely your agent for the purposes of this development". Although there was some suggestion in Mr Pitson's evidence that the contract had been varied, it is clear that the magistrate did not attach much weight to this evidence and was not convinced that Pitson was an entirely reliable witness: "it seems most likely that all of the witnesses have over time rationalised their recollections and are now firmly of the view that their evidence reflects what actually happened, whereas the reality may be, at least in part, quite different…It is likely that [Mr Pitson's] view of himself as an injured party too may have coloured his recollection of conversations and circumstances.

33 In my opinion the evidence does not support any of the exceptions set out in [15] and accordingly the appeal must be allowed. I agree with the orders proposed by Gyles J. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone

Associate: Dated: 30 May 2001 Counsel for the Appellant: Mr C Erskine

Solicitor for the Appellant: Sutherland & Tiirikainen Solicitors

Solicitor for the Respondent: Chamberlains Law Firm