Career Academy Australia Pty Ltd v Do More Pty Ltd
[2018] VSC 790
•14 December 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2018 02022
| CAREER ACADEMY AUSTRALIA PTY LTD (ACN 612 664 561) | Plaintiff |
| v | |
| DO MORE PTY LTD (ACN 126 755 280) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 July 2018 |
DATE OF JUDGMENT: | 14 December 2018 |
CASE MAY BE CITED AS: | Career Academy Australia Pty Ltd v Do More Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 790 |
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CORPORATIONS – Application to set aside statutory demand pursuant to s 459G of the Corporations Act 2001 (Cth) on the basis there were genuine disputes – Whether manager of plaintiff had apparent authority to contract with defendant – Whether contract subsequently ratified by the plaintiff – Finding that plaintiff has genuine disputes – Statutory demand set aside.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Greenberger | LegalVision ILP Pty Ltd |
| For the Defendant | Mr A M Christophersen | Gadens Lawyers |
HIS HONOUR:
The plaintiff, Career Academy Australia Pty Ltd (‘Career Academy’), applies under s 459G of the Corporations Act 2001 (Cth) (‘the Act’) to set aside a statutory demand dated 7 May 2018 (‘the demand’) served on it by the defendant, Do More Pty Ltd (‘Do More’). The demand was accompanied by an affidavit of the Chief Executive Officer of Do More, Adam Cunningham (‘Mr Cunningham’), affirmed 7 May 2018.
The schedule to the demand claims that Career Academy is indebted to Do More for a total of $120,456.16. The debt is described in the schedule to the demand as the sum of amounts owing under a written agreement entitled “Statement of Work” and entered into between the parties on 2 March 2018 (‘Statement of Work’), pursuant to invoices rendered by Do More as follows:
(a) Invoice no. INV-1998 dated 5 March 2018 in the amount of $23,100.00 of which $15,400 remains unpaid (‘INV-1998’);
(b) Invoice no. 2032 dated 16 April 2018 in the amount of $57,910.16 (‘INV- 2032’); and
(c) Invoice no. 2040 dated 19 April 2018 in the amount of $47,146.00 (‘INV-2040’).
Career Academy relies on two affidavits of its director Daniel Hunt (Mr Hunt), affirmed 30 May 2018 and 20 June 2018 and an affidavit of its other director, Daniel Darren Parasol (Mr Parasol), filed 21 June 2018. Do More relies on an affidavit of Mr Cunningham filed 12 June 2018 in opposition to the application. Both parties also filed and served written submissions and, subsequent to the hearing of this matter, supplementary submissions. The application has been made within the time prescribed by s 459G(2)of the Act.
Career Academy contends that the demand should be set aside pursuant to s 459G of the Act, on the basis that there is a genuine dispute between the Career Academy and Do More about the existence of the debt claimed in the demand. In particular, Career Academy submits that the dispute concerns whether Career Academy is bound by the Statement of Work either from the date of its execution by its former employee, Ms Rowena Beach (‘Ms Beach’),[1] or by subsequent ratification by Career Academy.
[1]In the exhibits, Ms Beach was sometimes referred to as ‘Rowe’ in communications between the parties.
To that end Career Academy contends that the court should be satisfied that the disputes in respect of Ms Beach’s ostensible authority and whether it subsequently ratified the Statement of Work give rise to serious questions to be tried and plausible contentions requiring investigation[2] and should therefore be considered to be the subject of genuine disputes within the meaning of s 459H(1)(a) of the Act. It also contended that Do More’s claim involves the enaction of a penalty which is not recoverable.
[2]See Britten-Norman Pty Ltd v Analysis & Technology Australia Pty Ltd (2013) 85 NSWLR 601, 615.
For the reasons which follow, I consider that Career Academy has discharged the onus which it bears of establishing that there are genuine disputes in respect of the debts claimed in the demand. In my view, the legal questions and the factual scenario raise and involved real and plausible controversies concerning whether (i) Ms Beach had the apparent authority to contract on behalf of Career Academy with Do More and (ii) Career Academy subsequently ratified the Statement of Work. I consider that these matters are not apt for resolution in an application of this type. In the circumstances, I do not consider it necessary to consider whether the claims by Do More involves the enforcement of a penalty.
Legal Principles
It is important to be mindful of the standard which an applicant is required to achieve in applications of this type in order to establish the existence of a genuine dispute.
In the decision of the Court of Appeal in this State of Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq),[3] the principles were succinctly summarised as follows (citations omitted):
The terms of s 459H of the Corporations Act and the authorities make clear that, on an application to set aside a statutory demand, the applicant is required only to establish a genuine dispute or offsetting claim. The applicant is required to evidence the assertions relevant to the alleged dispute or offsetting claim only to the extent necessary for that primary task. It is not necessary for the applicant to advance a fully evidenced claim. Therefore, the task faced by an applicant is by no means at all a difficult or demanding one.
In determining such an application, it is not necessary or appropriate for a court to engage in an in-depth examination or determination of the merits of the alleged dispute. This is because an application alleging a genuine dispute or offsetting claim is akin to one for an interlocutory injunction and requires the applicant to establish that there is a ‘plausible contention requiring investigation’ of the existence of either a dispute as to the debt or an offsetting claim. It is therefore not helpful to perceive that one party is more likely than the other to succeed or that the eventual state of the account between the parties is more likely to be one result than another. Further, the determination of the ‘ultimate question’ of the existence of the debt at a substantive hearing should not be compromised.
The court is required to determine whether the dispute or offsetting claim is ‘genuine’. It has been said that the criterion of a ‘genuine’ dispute requires that the dispute be bona fide and truly exist in fact and that the grounds for alleging the existence of a dispute be real and not spurious, hypothetical, illusory or misconceived. It has also been observed that the dispute or offsetting claim should have a sufficient objective existence and prima facie plausibility to distinguish it from a merely spurious claim, bluster or assertion. It must also have sufficient factual particularity to exclude the merely fanciful or futile. A rigorous curial approach is essential to the effective operation of the statutory scheme.
The court is not required to accept uncritically every statement in an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be, as it may not have sufficient prima facie plausibility to merit further investigation as to its truth. The court is also not required to accept uncritically a patently feeble legal argument or an assertion of facts unsupported by evidence, although this should not be read as suggesting that the applicant must formally or comprehensively evidence the basis of its dispute or off-setting claim. Except in such extreme cases, the court should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on by the applicant to set aside a statutory demand.
[3][2015] VSCA 330, [47] – [50].
In Citation Resources Ltd v IBT Holdings Pty Ltd,[4] McKerracher J summarised the principles involved in considering whether there was a genuine dispute as follows:
[4][2016] FCA 1265, [17].
In short then:
(a)For there to be a genuine dispute, there must be a ‘plausible contention requiring investigation’. It raises the same sort of considerations as the ‘serious question to be tried’ criterion applicable to interlocutory injunctions.
(b)The company will fail in that task only if it is found upon the hearing of its s 459G application that the contentions upon which it seeks to rely in mounting its challenge are so devoid of substance that no further investigation is warranted. Once the company shows that even one issue has a sufficient degree of cogency to be arguable, a finding of genuine dispute must follow.
(c)The Court is not called on to determine the merits of, or to resolve, the dispute.
(d)The threshold is not high or demanding; however the claim must have some merit and be genuine. That requirement has been described variously as the claim must be ‘real and not spurious’, the claim must have ‘a real chance of success’, there must be ‘a serious question to be tried’.
(e)The Court does not engage in any form of balancing exercise between the strengths of competing contentions.
(f) The essential task is relatively simple — to identify the genuine level of a claim (not the likely result of it).
(g) A mere assertion of an oral agreement will not necessarily suffice.
In Spacorp Australia Pty Ltd v Myer Stores Ltd[5] Brooking and Charles JJA cautioned:
The only question for us is whether the judge erred in determining that there was no genuine dispute. One can of course differ from the judge without deciding that the debt did not exist. A great range of states of mind on what we might call the ultimate question - the existence of the debt - may accompany the view that there is a genuine dispute, ranging from a clear conviction that the debt does not exist to the opinion that the genuine dispute hurdle has only just been cleared.
We think, if we may say so, that, except in a case in which it is as plain as a pikestaff that there is no debt (where bluntness may be in the interests of both sides), judges should, in general at all events, in dealing, whether at first instance or on appeal, with the question of genuine dispute, be at pains to perform the admittedly delicate task of disposing of that question without expressing a view on what we have called the ultimate question. For otherwise, on an application which resembles if it is not in law an interlocutory one, things may be said which embarrass the judge before whom the ultimate question comes.
[5][2001] VSCA 89, [3] – [4].
Similarly in Roadships Logistics Ltd v Tree[6] Barrett J stated:
The defendant says that the event was of that quality and that I should so find. That is not the correct approach. The cases make it very plain that anything beyond fairly cursory factual investigation of the underlying merits is foreign to applications of this kind. The only question before me is whether there exists a genuine dispute as to the existence of the debt referred to in the statutory demand. To the extent that answer to the question of the existence of the debt goes to factual matters of any complexity, an application of this kind is not the occasion for those depths to be plumbed.
[6][2007] NSWSC 1084, [11].
Career Academy’s affidavit evidence in support of the application
In his affidavit filed 30 May 2018 (Mr Hunt’s affidavit), Mr Hunt summarises the factual basis for Career Academy’s alleged genuine disputes as follows:
(a) Career Academy never entered into any agreement with Do More;
(b) Career Academy did not obtain benefit from services provided by Do More to the value of the monies paid to Do More; and
(c) the monies claimed by Do More in invoice nos. 2032 & 2040 are not for services provided and may constitute the enforcement of a penalty.
Mr Hunt states that on 5 December 2017, Career Academy and Ms Beach signed a written agreement entitled “Contractor’s Agreement” by which Career Academy engaged Ms Beach to fulfil the role described as ‘AU Country Manager’ on a fixed-term basis for 6 months (‘the Contractor’s Agreement’). Clause 24.1 of the Contractor’s Agreement states as follows:
24.1Relationship: The Contractor may describe themselves as a contractor to the Principal, but must not describe itself in any way as an employee or agent of the Principal. The Contractor has no authority to bind, and must not bind, the Principal in any manner, without the prior written agreement of the Principal. This Agreement is not intended to create a relationship between the Parties of partnership joint venture, agency or employer-employee. Neither Party has authority to create assume or otherwise enter into any agreement that imposes rights or obligations on the part of the other Party [emphasis added].
I observe at this point that it was not suggested in the evidence relied upon by Career Academy that Do More was aware of the terms of the Contractor’s Agreement.
Mr Hunt deposes that at no time prior to 2 March 2018 did Career Academy agree (whether orally or in writing) to give Ms Beach authority to enter into an agreement with Do More and that at no time did Career Academy represent to Do More that Ms Beach had the authority to enter into an agreement with Do More, to bind Career Academy, or that Ms Beach was a director of Career Academy.
Mr Hunt states that on or about 21 March 2018 he was made aware by Ms Beach that she had arranged with Do More (trading under the name ‘Alkhemy’) for a trial of its services to Career Academy. Ms Beach paid for the provision of those services by Do More from her own monies and Career Academy agreed to reimburse her for those expenses in the sum of approximately $53,000. Mr Hunt states that his understanding was that that figure represented the entire cost of the trial of Do More’s services.
Mr Hunt states that on or about 16 April 2018 he became aware that INV-2032 had been sent to Career Academy by Do More.
Mr Hunt deposes that, shortly after reviewing INV-2032, he telephoned Ms Beach to enquire as to the basis upon which the invoice had been sent to Career Academy. During that telephone call, Ms Beach told him that she had ‘signed a contract in the name of the company without [Mr Hunt’s] knowledge’ and that she ‘takes full responsibility for doing this.’ Mr Hunt states that he told Ms Beach to ‘get out of the contract immediately’ and requested that she provide a ‘a copy of the contract signed without [his] consent.’
Mr Hunt states that he first sighted the Statement of Work on 20 April 2018, which he describes as ‘purportedly entered into between the plaintiff and defendant’.
Mr Hunt states that after receiving a copy of the Statement of Work, he telephoned Mr Cunningham on or about 20 April 2018 from London and asked him to suspend all services being provided by Do More while he investigated the matter. Mr Hunt states that Mr Cunningham said that Do More could not suspend the services being provided to Career Academy and that if Mr Hunt sought to terminate the agreement with Do More, he would send an invoice for the total amount payable under the agreement.
Mr Hunt states that he and Mr Cunningham had a further telephone conversation on or about 22 April 2018 in which Mr Cunningham suggested that Career Academy agree to the provision of ‘other services’ by Do More to the value of the monies payable to Do More under the Statement of Work. Mr Hunt states that he was unclear on what 'other services’ were to be provided and said that he could not agree to that proposal at that time.
Mr Hunt states that during the period 20-22 April 2018, he and Mr Cunningham continued their discussion in regards to the services provided (and to be provided) by Do More to Career Academy by way of exchange of emails. He states that he was in London at this time and exhibits a chain of emails between himself and Mr Cunningham to his affidavit. The more significant of those emails are as follows.
On 22 April 2018, Mr Hunt sent an email to Mr Cunningham which stated:
Hi Adam
Further to our telephone conversation, can you please send me:
1. All the emails you referred to of you declining the contract and Rowe pushing it and offering to pay more money
2. A copy of all invoices to date, paid or otherwise
3. Evidence of what business you have been able to generate in the past seven weeks
Mr Cunningham responded to that email in an email which states:
Hi Daniel
My declining of work was in a meeting with Rowe and my GM. I didn’t refer to any emails. There were no specific dollars talked about at that stage. More that we would no longer deliver that service as it wasn’t core to our direction. It was after that meeting that my GM and Rowe discussed it in more detail. I believe the model was Rowes concept as was the dollar point.
We did the sums and said we could take it on if there were minimums in place. That was it.
I’ll forward the email that has the statements for you shortly.
Re business generation, while we’ve exceed the original target of 10% lead to sale and then a revised target I think of 15% early on, it wasn’t a kpi of the purpose of the agreement. We were there to be quality control and an engine room for the sales team.
Prior to TCA changing the names of courses, removing courses and moving away from payment plans, we were hitting about 16% lead to sale. As at 7th of April it was around 15%.
We’ve served up about 190 enrolments to date. I believe that it is evident in your crm under Alkhemy.
Again with regard to your reporting and insights capability we’re familiar with your crm and systems … your team confirmed that Alkhemy would be leaps ahead of where you are.
On 22 April 2018, Mr Hunt sent a further email in response to Mr Cunningham’s email outlined above, stating:
Hi Adam,
It would be good to talk with your GM at some point.
Anyway, you mentioned in our call that $15k was overdue now (I assumed this is the value of your services up to and including 20th April). However, the remaining $105k will need further discussion as I still don’t genuinely believe the contract is valid. Rowe had no authority to sign that contract and I wasn’t made aware of it until Friday 20th April, hence my immediate call to you. I have sent this to our solicitors for confirmation and will respond when they do but it will likely be Tuesday your time. In the meantime and until this is resolved, please immediately suspend the services. There is no lead flow in any case.
Here are the three options as I see it:
1. On good faith, TCA[7] agrees to pay the $15k plus an agreed termination fee of say $35K now (ie. total $50k as full and final settlement). You will not need to provide any more services so will have no further costs here.
2.You defer the service to Q3 (ie. we recommence everything from 1st July 2018) and work together over the long term.
3.We utilise your other services as you proposed and work together over the long term – in terms of your proposal to utilise your other services to the value of $105k, I am happy to consider this but need a better/clearer understanding of what you can provide now and over the long term. I suggest a meeting in person to discuss this further. I am in London at the moment and have commitments this week and next week so the earliest I could get to you in AU is the week commencing Monday 7th May if you wanted to pursue this option.
[7]‘The Career Academy’.
On 22 April 2018, Mr Cunningham responded to Mr Hunt’s above email and stated as follows:
Thanks Daniel
Just confirming, were not able to stop services even if you stop lead flow as the agreement doesn’t allow for it. Not being difficult, we’re obliged by the agreement.
Thanks for the offers below.
We’ll be speaking with our firm in the morning at which time we’ll be clear about our next steps and will be able to provide feedback.
What would you like to know / confirm from our GM?
On 26 April 2018, Mr Hunt sent a letter to Do More to the attention of Mr Cunningham stating:
Re: Alkhemy contract not valid or legally binding
1. The Career Academy rejects your proposal to settle this dispute by paying $80,000 or enter into another contract.
2. Based on the legal advice received, we confirm that the contract is not legally binding and is of no effect. We accordingly repudiate the assertion that there is any formal contractual arrangement between you and the Career Academy.
We refer you to the Corporations Law – sections 127 and 129 – in support of our position that the “signing” of the document by Rowe does not bind The Career Academy.
3.Given our legal advice, for the avoidance of doubt, all offers made to you previously are deemed withdrawn.
4.It is common practice when signing a contract of this nature and magnitude, to do an ASIC search to confirm that the business is registered (ie. a legitimate and not fraudulent company) and that the person signing the contract is actually a registered director. Had you done this, you would clearly have seen that Rowe is not a director.
5. You, as CEO and director, have signed the contract on behalf of your business – not your general manager, and you would therefore expect the same from the other party.
6. Rowe has not even signed the contract, she has only appeared to initial it, and we note that she has not initialled each page either.
7.Rowe’s contractor’s agreement (she is not an employee) expressly precludes her from binding the Career Academy or its directors without the written agreement of the Principal (ie. me).
8.The Career Academy has not, according to any information received by me, appeared to have received any benefit from your services.
9.In terms of your request for The Career Academy to pay you $15,000, we request that you provide evidence of the work completed during the period from 2 March to 20 April 2018.
On 30 April 2018, Mr Hunt received a letter from Do More’s solicitors, stating, inter alia:
Your letter expressly rejects the existence of any formal contractual arrangement between Career Academy and Do More (contrary to the actual state of affairs). Career Academy has therefore indicated it is unwilling to be bound by, or to perform its obligations under, the Statement of Work. This amounts to a clear repudiation of the Statement of Work. Notwithstanding that Do More has at all times been ready, willing and able to perform all obligations under the Statement of Work, Do More hereby accepts your repudiation.
The Statement of Work is therefore immediately terminated and, pursuant to clause 3 thereof, Do More requires Career Academy to immediately pay all moneys unpaid under Statement Work, being:
·$15,400 for fees overdue for payment by Career Academy; and
·$105,056.16 for the minimum monthly payments for the remainder of the term.
…
We note that the Master Services Agreement under which the Statement of Work was made, and an earlier Statement of Work (dated 26 February 2018) under that Master Services Agreement, remain in effect.
Mr Hunt states that in the course of investigating whether Career Academy in fact obtained any benefit from the services provided by Do More, he located email correspondence in which Ms Beach informed Do More that it's services were not proving to be beneficial to Career Academy. The first is an email sent on 29 March 2018 from a Daniel Martin, whose email signatures state that he is the Director of Operations & Performance and includes the address ‘ that provides the results of an interim report comparing leads created in less than seven days and which states, inter alia, that the ‘[c]urrent conversion rate from lead to enrolment [was] 9.66% (when removing junk leads)’. The second of the emails was sent from Ms Beach to Daniel Martin and Martin Davie, on 28 May 2018 and stated:
[t]hanks Daniel. For the model to be sustainable we need 15%. The conversion is far too low and concerning. What strategies to you have to increase this?
Mr Hunt states that, by way of comparison, Career Academy’s internal sales team has been able to convert at least 15-20% of leads into actual course enrolments. He states that the percentage of converted leads from the work undertaken by Do More as referred to in the email from Daniel Martin referred to above appears to have been below 10%. Mr Hunt deposes that it therefore appears to him that the ‘warm leads’ alleged to have been transferred to Career Academy by Do More pursuant to the Statement of Work cannot have been properly qualified by Do More. He states that, as such, he does not believe that the services provided by Do More were of the value claimed by in INV-1998, and that even if there had been an agreement between Career Academy and Do More as contained in the Statement of Work it would have been open to Career Academy[8] to terminate it on the basis of underperformance (i.e. provision of poor quality services) by Do More and to seek a refund of at least some of the monies paid to Do More.
[8]Note that the affidavit states ‘defendant’ here, which is apparently a typographical error.
Do More’s affidavit material in opposition to the application
In his affidavit filed 12 June 2018, Mr Cunningham states that on 26 February 2018, Do More entered into an agreement with Career Academy (‘the Master Services Agreement’), which governed the provision of services by Do More to Career Academy. The signing page of the Master Services Agreement, which is dated 26 February 2018, was executed by Mr Cunningham on behalf of Do More and electronically initialled by Ms Beach on behalf of Career Academy as follows:
Mr Cunningham states that on or about 3 March 2018, the parties entered into the Statement of Work for the provision of services by Do More. The Statement of Work governed the provision of 'Enquiry Concierge (lead qualification)’ services by Do More to Career Academy. Mr Cunningham executed the Statement of Work on behalf of Do More and Ms Beach electronically initialled the written agreement on behalf of Career Academy. The execution clause was in the same format as that in the Master Services agreement.
Mr Cunningham states that Ms Beach represented herself to him as Career Academy’s ‘AU Country Manager.’ He deposes that he believed Ms Beach had authority to enter into both the Master Services Agreement and Statement of Work on behalf of Career Academy in the capacity of ‘AU Country Manager’ for the following reasons, among others:
(a) Mr Cunningham exhibits an email from Ms Beach to a representative of Do More on 21 February 2018 that shows Ms Beach’s email signature as being ‘Country Manager – Australia’.
(b) Ms Beach introduced Mr Cunningham and other members of Do More's staff to other senior management staff engaged by Career Academy. In this regard, Mr Cunningham exhibits an email from Ms Beach to Martin Davie and Tremayne Murphy of Do More sent on 21 February 2018 in which Ms Beach states ‘I wish to introduce you to Tony our Country Manager for NZ, Mark NZ Sales Manager and Sean our IT Manager’. On 28 February 2018, Ms Beach sent an email to Martin Davie and Tremayne Murphy of Do More in which Ms Beach states ‘[h]i Martin, can you please liaise with Pita.’ Pita Moimoi acted as the Australian Sales Manager for Career Academy at that time.
Mr Cunningham exhibits a screenshot of Ms Beach's LinkedIn profile taken on 21 April 2018 which confirms that Ms Beach advertised that she was engaged as Country Manager – Australia at Career Academy.
(c) In mid-February 2018 Mr Cunningham and Do More’s General Manager Martin Davie met with Ms Beach at Career Academy’s offices in Melbourne. The offices ‘were well presented and professional looking’. Mr Cunningham states that Ms Beach asked on this occasion if Do More would consider delivering lead management services to Career Academy so that their sales team could spend more time speaking with prospective students. Further, Mr Cunningham states that Ms Beach said that Career Academy wanted a way to test and measure the quality of their various lead sources such as ‘Get Course’ and ‘SeekLearning’.
(d) Ms Beach executed the Master Services Agreement and the Statement of Work on Career Academy’s behalf.
Mr Cunningham states that it has been brought to his attention that the signature page in the Statement of Work where Ms Beach signed is marked ‘Director’.
He believes that this was an oversight as a result of using a standard form signature page and that he believed at the time of signing, for the reasons described above, that Ms Beach acted for Career Academy in the capacity of ‘AU Country Manager.’ Mr Cunningham does not suggest that either Ms Beach or Career Academy represented to Do More that she was a director of Career Academy.
Mr Cunningham states that key terms of the Statement of Work are as follows:
(a) The initial term of the Statement of Work would commence on first provision of the services (around 7 March 2018) and continue until expiry of 3 months from 1 April 2018 (Clause 2);
(b) The fees payable by Do More for provision of the services were $20.00 per lead, totalling no less than:
(i) for the period from commencement until 31 March 2018, $7,000; and
(ii) thereafter, $10,000 per week (Clause 3).
(c) On termination of the Statement of Work all moneys unpaid by Career Academy, including all minimum monthly payments for the remainder of the term, will immediately become due and payable (Clause 3).
Mr Cunningham deposes that during the course of providing the services under the Statement of Work to Career Academy, Do More issued the following invoices to Career Academy:
(a) Invoice INV-1998 in the amount of $23,100, of which $7,700 was paid on 22 March 2018 and $15,400 remains outstanding; and
(b) Invoice INV-2010 in the amount of $45,571.46, which was paid in full on 22 March 2018.
Mr Cunningham exhibits copies of invoices INV-1998 and INV-2010 to his affidavit.
Mr Cunningham notes that in his affidavit, Mr Hunt indicates that Career Academy reimbursed Ms Beach about $53,000 in relation to the above invoices (see paragraph 16 above). In this regard, Mr Cunningham states that to his knowledge, after having made enquiries within Do More, Career Academy did not at that time assert to Do More that the Master Services Agreement or the Statement of Work were not valid or ongoing.
Mr Cunningham deposes that it was not until late April 2018 that he became aware that Mr Hunt asserted that Ms Beach did not have authority to enter the Master Services Agreement or the Statement of Work.
Mr Cunningham states that, on 16 April 2018, Do More issued Invoice INV-2032 in an amount of $57,910.16, consisting of the following amounts:
(a) $8,360.00 in respect of unbilled services provided in March 2018; and
(b) $49,550.16 representing the minimum fees due for the month of May.
Mr Cunningham exhibits to his affidavit a copy of invoice INV-2032.
Mr Cunningham notes that on 26 April 2018, Career Academy expressly repudiated the Statement of Work and that on 30 April 2018 Do More accepted the repudiation. In this regard, Mr Cunningham refers to the letter sent by his solicitors which is referred to above at paragraph 28.
Mr Cunningham states that, following termination of the Statement of Work, Do More issued Invoice 2040 in an amount of $47,146.00, representing the balance of the minimum fees payable under the Statement of Work, which were the fees that would have been payable for the month of June.
Mr Cunningham states that at the time that he affirmed his affidavit, Career Academy had failed to pay the total amount owing and due and payable of $120,456.16, consisting of:
(a) $23,760.00 for services rendered (under invoices INV- 1998 and INV-2032);
(b) $49,550.16 due and owing as of 20 April 2018 under the Statement of Work in respect of services to be provided for the month of May (under invoice INV 2032); and
(c) $47,146.00 representing the balance of the minimum fees payable under the Statement of Work following termination (under invoice INV -2040).
Minimum contract amounts not a penalty
Mr Cunningham asserts that the minimum agreed quantum of work specified in the agreement was an essential term of the Statement of Work. He states that Do More had stopped offering lead management services as part of its business in early 2017. Mr Cunningham deposes that during Do More’s initial meeting with Ms Beach at Career Academy’s offices in February 2018, Ms Beach asked if Do More would provide lead management services under the banner ‘Student Concierge’ (and that another phrase used was ‘Enquiry Concierge’). He deposes that he and Martin Davie explained to Ms Beach that Do More was not particularly interested in that business model, because Do More did not currently have suitable facilities or staff and would need to re-staff and resource the service from scratch.
Mr Cunningham states that after further negotiation, it was decided that Do More would be able to provide the service subject to a minimum commitment that would give cash flow certainty to the project and offset the start‑up costs and ongoing costs of providing the service. Mr Cunningham states that those costs included costs such as engaging staff, renting additional office space for a fixed term (a minimum three months, which he states was still ongoing as at the date of his affidavit), and implementing a suitable telephone system and CRM database system. He states that Ms Beach had proposed a possible throughput target of approximately 1000 leads per week and that the parties eventually agreed on a minimum weekly throughput of half that amount, 500 leads per week. Mr Cunningham states that this equated to a $10,000 per week minimum throughput for an abbreviated contract term (less than four months), with averages of $20.00 per lead on top of the first 500.
Mr Cunningham deposes that the payment out of the contracted minimum fees that became due on termination was a genuine attempt by Do More to predict the loss Do More would suffer if the Statement of Work was terminated early. He states that this was due to the fact that the contract term was shorter than four months and it would be difficult or impossible for Do More to mitigate its losses during that time frame if the contract was terminated.
Mr Cunningham states that, on the basis of these terms, Do More proceeded to put resources into delivering the project in preference to other opportunities.
Performance of the services
Mr Cunningham says that he believes that Do More has performed all services under the Statement of Work in accordance with the terms of the agreement. He states that the agreement did not include key performance indicators or other targets in terms of conversion rates or total enrolments based on leads but was based on performance of deliverables, that is, qualification of leads. He states that part of the reason for that was that because Do More was receiving all its leads via Career Academy, and Career Academy’s sales staff were performing the final conversion, Do More would not agree to be held to conversion rates that are dependent on the client’s performance. He deposes that, around the time that the Statement of Work was entered into, Ms Beach mentioned that Career Academy was looking for a conversion rate of 8 per cent or better.
On 20 March 2018, Ms Beach emailed Jacob McDonagh, copying in Martin Davie, Pita Moimoi and Daniel Martin of Do More saying, among other things, that Career Academy ‘want[s] 10% with transfers and 90% converting.’ Mr Cunningham states that this results in a total conversion rate of 9%.
Mr Cunningham refers to Ms Beach’s email sent to Do More on 30 March 2018, in which Ms Beach stated that ‘[f]or the model to be sustainable we need 15,’ ‘[t]he conversion is far too low and concerning,’ and ‘[w]hat strategies do you have to increase this?’ Do More’s general manager, Martin Davie, emailed Ms Beach on 30 March 2018 stating, among other things, that ‘[o]verall performance to date is sitting at 14.6% conversion rate ... [i]n addition, 80 of those 922 leads were missing data / incorrect … [t]hat takes our effective conversion rate to 16%.’
On 9 April 2018, Ms Beach emailed Martin Davie, copying in Mr Cunningham. In that email, Ms Beach states:
Hi Martin, I have 169 enrolments to date and 10 officially closed off as lost.
Happy to chat via phone at the agreed time of 1pm tomorrow. At this stage nothing to change due to budget restrictions and direction from the board - AU needing to be cash flow positive ASAP. We just need to continue focus on conversions of GetCourse leads.
Mr Cunningham states that, on 16 April 2018, Do More sent to Career Academy a weekly report showing, naming other things, total enrolments being 187 and a conversion rate at that date of 13.2 per cent. In support of his statement, Mr Cunningham exhibits printed slides from what is apparently a PowerPoint presentation. The fourth slide in the presentation summaries a number of ‘key stats’ as follows:
·Lifetime
o1412 Total completed leads
o187 Total enrolments
o461 Total transfers
o32.6% (31.9%) Lead to transfer
o40.6% (46.7%) Transfer to enrolment
o13.2% (14.9%) Lead to enrolments
·Current week
o195 Total completed leads
o18 Total enrolments
o62 Total transfers
o31.8% (34.8%) Lead to transfer
o29.0% (11.5%) Transfer to enrolment
o9.6% (4.2%) Lead to enrolment
Mr Cunningham states further that he understands from checking Do More's records that, at the time of termination, at least 205 enrolments had been achieved from leads qualified by Do More.
He says he recalls that during their first telephone call in April 2018, Mr Hunt said to him words to the effect, ‘we've been really pleased with the services to date… [c]ould we move the commitment to Q3 of 2018 as we have cash flow issues.’
On 21 April 2018, Mr Cunningham in an email to Mr Hunt, (which Mr Cunningham states followed on from the telephone call referred to above), Mr Cunningham states, among other things:
I also note that yesterday you called at 10.27 am and informed me that you were very happy with the work we'd delivered to date, that your [sic] keen to work with us for the long term and that you just wanted to request the postponement of payment to the third quarter as your hurdle was one of cashflow due to the nature of your business's payment plans product and not at all to do with the delivery of our service or satisfaction thereof.
On 22 April 2018, Mr Hunt sent Mr Cunningham an email apparently in reply, copying in the Accounting Manager at Career Academy, Brandon Canasa, stating:
Irrespective of what the contract states, Rowena has no legal authority to sign as a Director on behalf of the company. She is not a director so the contract is therefore invalid. I also understand Rowena paid your initial invoice from her own personal bank account. The Career Academy has not paid for this service.
I am the director with sole signing authority. The first time I was made aware of this contract was Friday, some seven weeks after she signed it, hence my immediate call to you. Our Global Accounting Manager and I would never have agreed to the terms in this contract had we seen it. To this end, we request that the services be suspended immediately. The current contract is not legally binding.
As discussed, I will be open to potentially renegotiating the contract for Australia and other countries that we operate in from Q3 onwards when we have adequate cashflow available. Please note that any new contract will need to be negotiated and signed by me (and only me).
Mr Cunningham refers to Mr Hunt’s statements regarding the adequacy of Career Academy’s cashflow and states that, accordingly, he does not believe that Career Academy makes any genuine criticism of Do More's service delivery under the agreement.
Mr Cunningham states that, for the reasons set out in his affidavit, he believes that there is no genuine dispute about the existence of the debts claimed by Do More.
Evidence in reply
In his affidavit filed 20 June 2018 (‘Mr Hunt’s second affidavit’), Mr Hunt refers to the Master Services Agreement and notes that, on the execution page of that agreement, Mr Cunningham has signed as a director of Do More and is the only signatory on behalf of Do More. He states further that, on that page, Ms Beach has purportedly signed by way of initials as a director of Career Academy.
Mr Hunt deposes that he first became aware of the Master Services Agreement on 20 April 2018, at the same time that he was first made aware of the Statement of Work. He states that at no time did he ever hold out or represent to Mr Cunningham or anyone that Ms Beach was authorised by Career Academy to sign the Master Services Agreement of the Statement of Work, and that nor, as he is informed by Mr Parasol and believes, did Mr Parasol.
On 7 May 2018, Ms Beach sent an email to Mr Hunt giving notice of her intention to terminate her services under the Contractor’s Agreement. Mr Hunt exhibits this email to his second affidavit, and it reads:
Please accept this email as my one (1) months [sic] notice of contract termination.
My last day will be Friday 02nd June.
Mr Hunt deposes that Ms Beach did not return to work for Career Academy after 7 May 2018.
Mr Hunt states that he inspected the email account Ms Beach used while contracted to Career Academy. He states that in the course of that inspection, he found the following information relating to Ms Beach’s dealings with Do More:
(a) That the Master Services Agreement and Statement of Work appear to have been prepared by Do More or their solicitors and emailed to Ms Beach in Microsoft Word format for the insertion of the electronic signatures and typed names of the directors of Career Academy, via a web application called RightSignature;
(b) That it appears that, after Ms Beach inserted her electronic signature and typed her name into the Master Services Agreement and Statement of Work, an email was automatically sent via the RightSignature web application to her and Mr Cunningham alerting them both that the Master Services Agreement and Statement of Work had been signed and of the identities of the signatories;
(c) That on 21 March 2018, emails were sent between Ms Beach., Martin Davie, and Mr Cunningham and that, in that correspondence, Mr Davie sent Ms Beach a screenshot of a series of text messages exchanged between Ms Beach and himself in which Ms Beach writes, among other things, ‘if I pay each month upfront and for leads it’s win!’;
(d) That, by email sent to Mr Davie and Mr Cunningham at 3.13pm on 21 March 2018, Ms Beach refers to an earlier discussion with Mr Davie and Mr Cunningham in which she told them that she would be signing the contract with Career Academy ‘to avoid back and forth and that she would ‘try to advance [payments] but couldn't guarantee’ that payments would be made as required ‘due to pay runs on the 20th of each month.’
Mr Hunt states that, regarding (d) above, he believes Ms Beach is referring to the Master Services Agreement and Statement of Work that she had signed. He asserts on this basis that she made Do More aware at the time of entering into those contracts that she might not be able to keep to their terms.
In relation to the matters raised by Mr Hunt and outlined in paragraph 60 above, Mr Hunt deposes that:
(a) Career Academy would never have entered into an agreement with Do More that required payment of between $28,000 - $40,000 per month payable in advance for 3 months and within 4 days of the issue of an invoice for payment (as per clause 3 of the Statement of Work), as Career Academy did not have the necessary cash flow to do so;
(b) he and Ms Beach regularly discussed Career Academy’s monthly budgets, and on this basis, he states that he believes Ms Beach would have been aware that Career Academy would never have entered into an agreement in the terms stated above in subparagraph (a);
(c) Ms Beach informed Do More that Career Academy would be unable to make the payments referred to in paragraph (a) and that he presumes Ms Beach so informed Do More of this around the time of entering into the Statement of Work;
(d) Ms Beach offered to make the payments due under the Statement of Work herself, following which Do More sent the Statement of Work to her for signing; and
(e) Do More was aware at all relevant times that it was Ms Beach alone who signed the Master Services Agreement and Statement of Work, and that she was not a director of Career Academy.
On 21 March 2018, Mr Hunt states that he received an email from Ms Beach informing him of arrangements she had made with Do More but not disclosing that she had signed the Master Services Agreement and Statement of Work. He exhibits to his second affidavit an email from Ms Beach to himself sent on 21 March 2018 which stated:
Team in negotiation with Alkhemy (call centre) I have agreed to payment in advance for a min number of leads being worked by them and warm transferred each month for a 3-month trial. Min 10% conversion. The contract is tight with warm transfers and we said we would pay in the month on the 20th of each month.
Firstly, the process is working more than successfully and we are 100% confident of delivery. (40 enrolments to date!) They have invested exclusively allocating staff to use and in all fairness need to be remunerated to counteract this. Can we please finalise the March payment (7k outstanding) and pay 50% of the April invoice so total of circa 30k.
With the remainder to be paid 20th April along with 50% of May on 20th April etc. This has been budgeted for – but I accept responsibility for not making it clearer and putting all in a tight cash flow position – both TCA[9] and Alkhemy.
Once the trial ends I would envision this to be a long term solution so we will negotiate payments once we get cash flow under control. This is too much of a lucrative and successful model to muck around with. If we can’t – I can advance pay personally.
[9]‘The Career Academy’.
Mr Hunt deposes that upon receipt of this email, he immediately phoned Brandon Canasa (‘Mr Canasa’), Accounting Manager at Career Academy, and asked Mr Canasa to join Ms Beach into that phone call, after which the three parties held a conference call. Mr Hunt deposes that, during this phone call, Ms Beach explained that she had agreed with Do More for them to provide services in relation to qualifying leads for a three month trial period, and that she needed to pay them $53,000 that day. Mr Hunt states that he disputed with Ms Beach the wisdom of engaging Do More for those services, and reminded her that Career Academy was not in a cash flow position to pay $53,000 in advance for a three-month trial. He states that Ms Beach apologised, and proposed that she would pay the $53,000, and that Career Academy reimburse her depending on cash flow. Mr Hunt deposes that he ‘went along’ with Ms Beach’s proposal to reimburse her.
In regards to the email referred to in paragraph 63 above and the conversation referred to above in paragraph 64 above, Mr Hunt asserts that he was misled by the email to believe that Do More had agreed to a minimum conversion rate into student enrolments of 10% of leads it transferred to Career Academy. He asserts that this would mean that any monies paid to Do More would be justified due to the revenue from the enrolments and that this would also be a convenient way to track the value of utilising Do More’s services. Mr Hunt asserts further that he was misled by Ms Beach stating (or implying) in the conversation that the contract price with Alkhemy was $53,000.
Mr Hunt states that had he known or been informed that either of the alleged representations made by Ms Beach referred to in paragraph 64 above were false or inaccurate, he would not have subsequently informed Ms Beach that Career Academy would reimburse her for monies paid or to be paid under the arrangement with Do More, because it would have been an uncommercial arrangement and/or financially unsustainable for Career Academy. Mr Hunt states that had he been informed at the relevant time that Ms Beach had purported to sign an agreement as a director of Career Academy, he would have asked her to provide him with a copy of any such agreement.
Mr Hunt says that no payments have ever been made by Career Academy to Do More, and that Career Academy agreed to reimburse Ms Beach for monies paid or to be paid to Do More as he believed that although she had acted outside of her authority, she had done so in good faith and in the interests of Career Academy having regard to its financial circumstances.
In response to Mr Cunningham’s statements referred to above in paragraph 33, and apparently in response to Mr Cunningham’s specific statement that Do More’s initial meeting with Ms Beach was at Career Academy’s offices in February 2018, Mr Cunningham deposes that the first email Ms Beach appears to have sent to Do More was on 20 February 2018. He exhibits to his affidavit an email sent by Ms Beach at that time stating:
Tremayne please e-meet Pita! Pita is our Sales Manager currently recruiting for several gun sales team members.
Our base salary is 60k plus super plus comms. Comms can average $2250 per week on top of salary if advisors hit their targets – which are achievable. Plus fun weekly comps like win a $2000 holiday voucher etc.
I shall leave you both to liaise.
Mr Hunt observes that, in the above email, Ms Beach introduces Mr Murphy, Head of Customer Experience at Do More, to Mr Moimoi, a Sales Manager with Career Academy.
Mr Hunt states that he believes that Ms Beach already knew Mr Murphy as they were (and to the best of Mr Hunt’s knowledge, are at the time he affirmed his second affidavit) in a romantic relationship. He deposes that Ms Beach did not at any time disclose to him that she was in a relationship with Mr Murphy, and he asserts that she therefore had at least a potential conflict of interest in dealing with Do More. He states further that he was not aware that Mr Murphy and Ms Beach were in a relationship at the relevant time and that, had Ms Beach disclosed that to him at the relevant time, he would have scrutinised Ms Beach’s dealings with Do More much more closely.
Mr Hunt asserts that Ms Beach appears to have kept Mr Murphy informed of dealings between the Do More and the Career Academy by email, even though he does not appear to Mr Hunt to have been involved in the provision of services by Do More.
Mr Hunt states that he is concerned that Ms Beach retained the services of Do More purportedly on behalf of Career Academy in circumstances where, as stated by Mr Cunningham in his affidavit, Do More ‘did not have suitable facilities or staff and would need to re-staff and resource the service from scratch’ (see paragraph 43 above) in order to benefit Mr Murphy in some way.
He states that he believes that Do More would have been aware that Ms Beach and Mr Murphy are in a romantic relationship as both Ms Beach and Mr Murphy have publicised it on Facebook.
To support his statements regarding Ms Beach and Mr Murphy being in a relationship, Mr Hunt exhibits two Facebook posts. The first is a Facebook post by the user ‘Tremayne Murphy,’ containing a photo of a man and a woman and stating that the user ‘Tremayne Murphy’ is ‘with Rowena Beach’. The second is a post by which the user ‘Rowena Beach’ updates her profile picture. The picture contains a photo of what appears to be the same man and woman. In the comments section the user ‘Rowena Beach’ has responded to a comment stating ‘#hotirishguy.’
In response to Mr Cunningham’s statement in his affidavit that Mr Hunt said that ‘[w]e've been really pleased with the services to date,’ (referred to in paragraph 53 above), Mr Hunt says that he did not say ‘we’ve been really pleased’ but said ‘Rowe has been really pleased ..‘ and that he could not comment at that time as to whether any services provided by Do More to the Career Academy were beneficial to Career Academy as he did not have sufficient knowledge of the matter at that stage.
In his affidavit filed 21 June 2018, Mr Parasol refers to the affidavits of Mr Hunt and confirms that wherever Mr Hunt’s affidavits refer to any conduct or knowledge of the Career Academy or himself, or any information provided to him by Mr Hunt, that Mr Hunt's affidavits are true and correct.
Has Career Academy established that it has genuine disputes?
The first issue which arises for consideration is whether Career Academy, which bears the onus, has established that it has a genuine dispute in relation to whether it is contractually bound to Do More by reason of Ms Beach having the apparent authority to enter into the subject agreements.
It is appropriate to survey the principles in regard to apparent (or ostensible) authority. Bowstead & Reynolds on Agency describes the principle as follows:
Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone's dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority.[10]
[10]F.M.B Reynolds, Bowstead & Reynolds (London Sweet & Maxwell, 16th ed, 1996) 8-013.
The doctrine was described by Diplock LJ in Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd:[11]
An “apparent” or “ostensible” authority … , is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted on by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed on him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.
[11][1964] 2 Q.B 480, 502.
The essence of apparent authority is an appearance emanating from the principal. Therefore, the representation must be made by the principal or by another agent authorised to act for the principal. It is usually said a representation by the agent themself that they have authority cannot create apparent authority, unless the principal can be regarded as having in some way instigated or permitted it, or put the agent in a position where he appears to be authorised to make it.
All “ostensible” authority involves a representation by the principal as to the extent of the agents authority. No representation by the agent as to the extent of his authority can amount to a “holding out” by the principal.[12]
[12]Ibid, [8–022] and the cases there cited.
In Dal Pont’s Law of Agency, the author illustrated the principle as follows:
So it is said that a principal (A) who “holds out” B to be authorised to contract on the principal’s behalf cannot deny the claim of C, who contracts with B in reliance on that holding out, on the ground that the contract is outside the terms of any actual authority conferred by A on B. The onus of establishing the estoppel, and thus the ostensible authority, is on C, who must show that the circumstances justify the inference that he or she had acted upon the “holding out”. Importantly, therefore, there is no need for C to establish any existing agency relationship between A and B, although such a relationship will commonly be the case because it is easier to conclude that C has reasonably relied on A’s representation if C knows or believes that B is an agent for A.[13]
[13]G E Dal Pont, Law of Agency, (LexisNexis Butterworths Australia, 3rd ed, 2014) 460.
Professor Dal Pont observes:[14]
“Ostensible” authority is said to involve a representation by the principal as to the extent of the (apparent) agent’s authority. It is rare indeed that the representation is effected by a principal directly communicating to the other party, for this would be evidence not of ostensible authority but of actual authority. So a representation by conduct of the principal commonly forms the foundation for ostensible authority. It may be implied, for instance, from a course of dealing, from the principal equipping an agent with a particular title, status and facilities, or the principal arming the agent with a document for signature.
[14]Ibid, [20.17]
The High Court in Pacific Carriers Ltd V BNP Paribas,[15] elaborated on the nature of representations in this context. At paragraph 36 and 38, the Court stated:
In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd, and in Northside Developments Pty Ltd v Registrar-General, this Court followed and applied Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd as to the general principles concerning the apparent or ostensible authority of an officer of a company dealing with a third party. Where an officer is held out by a company as having authority, and the third party relies on that apparent authority, and there is nothing in the company’s constitution to the contrary, the company is bound by its representation of authority. “The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract.” It is not enough that the representation should come from the officer alone. Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company’s conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company’s constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal’s conduct as a whole.
…
A kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with a certain title, status and facilities. In Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd, for example, the Court spoke of the representation that might flow from supplying a particular person with “a blank order form, thus arming him with a document which, when he signed it, would bear the hallmark of authenticity”. The reference to corporate administrative procedures under which an officer is armed with a document to which he or she can, by signature, impart an appearance of authenticity is a reminder of the wider principle of estoppel which may be relevant to a question of ostensible authority. The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation.
[15](2004) 218 CLR 451.
Professor Dal Pont describes the representation principle in the context of giving an agent a particular title or position. At paragraph 20.19, he states:
The representation by the principal may consist solely in investing the agent with a particular office. For example, in British Bank of the Middle East v Sun Life Assurance of Canada (UK) Ltd the only holding out by the defendant to the third party was to invest its employee with the title “branch manager”, which enabled that person to describe himself in correspondence relied upon by the third party. In such a case the only representation on which the third party can reasonably rely is one that the person in question has the powers normally or usually enjoyed by a branch manager. The court must then evaluate evidence as to the usual authority, in the particular trade or business, vested in persons with that title or job description. Austin J engaged in this evaluation in NCR Australia Pty Ltd v Credit Connection Pty Ltd (in liq), where the usual authority of a national credit manager was in issue. His Honour made the following remarks in this context:
The expression ‘national credit manager’ (in such a context as the present) signifies, in my opinion, that the holder of the office has authority to manage the company’s accounts receivable function and to that extent, the credit extended to the company’s debtors, and to pursue recovery from debtors who exceed available credit terms. There is implied authority, accordingly, to make demands for payment and probably also to enter into arrangements on the company's behalf for deferral of payment or payment by instalments, and also to instruct a mercantile agent to pursue recovery of a particular accounts under pre-existing arrangements between the company and that agent. The holding of the office, taken in isolation, does not imply any authority to commit the company to the institution of legal proceedings without reference to internal authority procedures, nor any authority to bind the company to a formal written agreement or deed with a supplier of services such as a debt collection agency.
Where the holding out is alleged to consist of a course of conduct wider than merely describing the agent as holding a particular office, even though the authority normally found in the hold of that office is material, it must be viewed as part and parcel of the whole course of the principal’s conduct in order to determine whether the totality of the principal’s actions constitute a holding out of the agent as possessing the necessary authority. The issue is, in any case, one directly relevant to whether there has been reasonable reliance by the third party on the principal’s alleged representation, and so is discussed in that context particularly by reference to cases involving facilities granted to the agent.[16]
[16]Dal Pont, above n 13.
Mr Christophersen of counsel who appeared on behalf of Do More contended that the circumstances were such that the so-called ‘indoor management rule’ (whereby any person dealing with a corporation is entitled to assume that the individual apparently acting for the corporation has authority to act for the corporation unless the person has some reason to know that the individual is acting outside authority), applied here. He referred to s 128 and 129 of the Act, which together provide that a person is entitled to assume that anyone held out by the company in office or an agent of the company has authority to exercise powers customarily exercised by that kind of officer or agent.
Section 129(3) of the Act provides:
A person may assume that anyone who is held out by the company to be an officer or agent of the company:
(a) has been duly appointed; and
(b)Has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.
In this context, he referred to the features of the evidence in regard to Career Academy’s conduct which is said to have cloaked Ms Beach with apparent authority:
(i) She was described as the ‘Country Manager Australia’ in her Career Academy email footer and her LinkedIn page.
(ii) Ms Beach introduced Do More staff to other senior Career Academy staff including Mr Pita Moimoi, Career Academy’s ‘AUS Sales Manager’, who deferred to Ms Beach in her role.
It is also said that Mr Moimoi as Sales Manager was aware of the agreement before it was signed and was involved in the ongoing provision of services under the agreement insofar as he:
(a) attended a product demonstration given by Do More on 21 February 2018;
(b) was in telephone and email contact with Martin Davie, manager of Do More regarding planning for sales team quality assurance on 1 March 2018; and
(c) received email updates on the services that Do More was providing.
(d) Mr Hunt’s email footer noted that Career Academy held itself out as an international organisation operating in ‘Ireland, New Zealand, the United Kingdom, Australia and Singapore.’.
Mr Christophersen contended that it is beyond dispute that a national manager of an international organisation would customarily have authority to enter into an agreement for the provision of sales and marketing services to that organisation, particularly in circumstances where the sales manager has been personally involved in the pre-contractual negotiations and the subsequent delivery of services. As such, he contended Do More is entitled under ss 128 and 129(3) of the Act to assume that the person held out by Career Academy as its national manager had authority to enter into an agreement for the provision of marketing and sale services.
The question for consideration in this application is whether on an application of the authorities referred to in paragraphs 8–11 above, the alleged dispute in respect of Ms Beach’s apparent authority is genuine, bona fide, and warrants further investigation and is not spurious, illusory or misconceived. I have come to the conclusion that the alleged dispute is genuine and that the issue is only capable of resolution after detailed consideration at an inter partes trial with cross‑examination of the relevant witnesses.
No doubt the matters to which Mr Christophersen refers relating to Ms Beach’s position at the company, the premises that she operated from, the apparent position which she appeared to hold in the hierarchy of Career Academy, together with the title with which she was cloaked are all factors which a court considering this issue at a conventional trial would regard as relevant for consideration in Do More’s favour, but I do not consider that it would be safe to determine in an application of this type, which thereby gives rise to a presumption of insolvency, that the arguments put up by Career Academy are not genuine or arguable.
This is not the clear cut factual situation the subject of consideration by the Court of Appeal in New South Wales in Osborn v Boral Resources (NSW) Pty Ltd[17] which was referred to me by Mr Christophersen. The appeal in that case followed a conventional trial in the District Court in which there was cross examination. The evidence was, with respect, quite overwhelmingly in favour of the plaintiff creditor and pointed, inter alia, to a clear holding out by the defendant of the authority of its general manager to enter into the subject transactions.[18]
[17][2012] NSWCA 155
[18]Ibid, see especially [10] – [11].
Tested this way, if this matter was the subject of a summary judgment application, it would in my view give rise to a triable issue.[19] In my view, it is more appropriate for a court hearing this matter in a conventional trial setting to consider the evidence of the alleged holding out by Career Academy of Ms Beach and determine whether Do More was entitled, upon on an application of the principle of apparent authority and ss 127 and 128 of the Act, to assume that she had the power to enter into the subject contracts.
[19]See Rohalo Pharmaceutical Pty Ltd v RP Scherer SpA & Pharmagel SpA (1994) 15 ACSR 347 at 353 - 354 per Lindgren J.
As Professor Dal Pont observes, the whole course of the principal’s conduct must be weighed in order to determine whether the totality of the principal’s actions constitute a holding out of the agent as possessing the necessary authority to enter into the contract with Do More.
I now turn to consider whether Career Academy has established a genuine dispute in respect to whether it has ratified the contract with Do More.
The concept of ratification was described by Herring CJ in Jones v Peters:[20]
The relation of principal and agent can of course be constituted retrospectively by ratification, with the act as being done by one person not assuming to act on his own behalf but for another though without his precedent or authority and that other subsequently ratifies what has been done on his behalf but without his authority.[21]
[20][1948] VLR 331.
[21]Ibid, 335.
In Firth v Staines,[22] Wright J listed three prerequisites for a valid ratification:
[22][1897] 2 QB 70 at 75.
(iii) ‘the agent whose act is sought to be ratified must have purported to act for the principal’;
(iv) ‘at the time the act was done the agent must have had a competent principal’;
(v) ‘at the time of the ratification the principal must be legally capable doing the act himself’.[23]
[23]See generally Dal Pont, above n 13, [5.7].
Further to these three elements, in order for there to be a valid ratification, there must be knowledge by the principal of the facts and circumstances relating to the agent’s unauthorised act and the ratification being effected within a reasonable time.
Before a principal can properly be said to have ratified or adopted the act of a purported agent, it must be shown that the principal had, at the time of the ratification, full knowledge of all the material facts and circumstances pertaining to the agent’s unauthorised act. The principal must have been presented with all proper materials upon which to make an informed decision whether or not to ratify. Lack of knowledge may arise from the agent’s concealment or misrepresentation, whether or not designed, or from the principal’s mere inadvertence.[24] The person seeking to enforce the agent’s act against the principal bears the onus of establishing full knowledge in the principal.[25]
[24]Ibid, 5.19.
[25]Ibid, 5.21.
Do More submits that there is no evidence that Career Academy took any objection to the validity of the agreements between the parties on the basis of authority or otherwise from the time that it was allegedly brought to Mr Hunt’s attention on 21 March until Do More’s repudiation on 26 April 2018. In this regard, Do More asserts there is an inconsistency between the evidence given by Career Academy as Mr Hunt states in his second affidavit that he was first made aware of the statement of work on 20 April 2018, whereas in the same affidavit he states that Ms Beach, via an email of 21 March 2018 (which is extracted above in paragraph 63) informed him of the arrangement she had made with Career Academy.
I pause at this point to observe that Ms Beach’s email to Mr Hunt speaks of ‘negotiations’ with Alkhemy in respect of a ‘three month trial’. Ms Beach culminates in the final paragraph of ‘once the trial ends I would envisage this to be a long term solution so we will negotiate payments once we get cash flow under control’.
In my view, for the purpose of this proceeding, this email is not such as to fully inform Mr Hunt that Ms Beach has entered into contractual arrangements on behalf of Career Academy. Rather, it speaks in terms of ‘negotiation’ and a ‘trial’.
Do More also asserts that there is a further inconsistency in Mr Hunt’s second affidavit where he states that Ms Beach did not disclose that she had signed the contracts. Career Academy asserts that this is inconsistent with Ms Beach’s email to Mr Hunt which states, ‘The contract is tight with warm transfers and we said we would pay in a month on the 20th of each month’. Further, in his second affidavit, Mr Hunt also states that he was misled by Ms Beach stating or implying that the contract price with Alkhemy (Career Academy) was $53,000. Do More submits that Mr Hunt was therefore aware that a contract existed between Do More and Career Academy and that payments were due under it on a monthly basis.
Do More asserts that even if Mr Hunt means to say that he did not take time to peruse the written agreement on 20 April 2018, Career Academy staff, including Mr Moimoi and Mr Hunt himself, were aware of the existence of an agreement, services being provided by Do More to Career Academy, the existence of payment terms and of moneys being paid under an agreement as set out in Ms Beach’s email to Mr Hunt on 21 March 2018. Further, attention was drawn to the evidence of Mr Hunt in both his first and second affidavit that he authorised the payment of amounts to Ms Beach in respect of sums due to Do More under the agreement. In his first affidavit, Mr Hunt states at paragraph 9 that Ms Beach paid for the provision of services by Do More and that Career Academy agreed to reimburse her for those expenses. In his second affidavit, Mr Hunt states that Ms Beach proposed that she would pay the $53,000 and that Career Academy would reimburse her, depending on cash flow.
Reference is also made to the affidavit of Mr Cunningham, who stated that to his knowledge, after having made enquiries of Do More, Career Academy did not at any time assert to Do More that the Master Services Agreement or the Statement of Work were invalid. Mr Cunningham stated that it was not until late April became aware that Mr Hunt had asserted that Ms Beach did not have authority to enter into the Master Services Agreement or the Statement of Work. Mr Cunningham states that from 21 March 2018 to the time of repudiation, Do More continued to provide services under the agreements as set out in Mr Cunningham’s affidavit and Career Academy continued to seek services pursuant to the agreement.
As such, Do More submits that Career Academy was aware of the agreement from at least 21 March 2018 and ratified it by making payment through Ms Beach and continuing to obtain the benefit of the agreement, and sought further performance under the agreement until the time of repudiation.
Again, in my view, Career Academy has established to the requisite standard that it has a genuine dispute in respect of whether it ratified the agreements with Do More. While Do More would appear to have cogent arguments in support of its position in this regard, the factual scenario and the application of the relevant legal principles lead me to the conclusion that there are arguable and plausible legal and factual contentions on the ratification issue. Certainly there is no contemporaneous documentary evidence available which to my mind renders Career Academy’s position spurious, unsustainable or not arguable. I do not consider that the controversy as to the state of affairs in respect of the contractual position between the parties in March and April 2018 is able to be resolved in this application on a proper application of the principles enunciated in the authorities to which I have referred.
In the circumstances, the statutory demand dated 7 May 2018 and served on Career Academy by Do More Pty Ltd is set aside.
If the parties wish to make any submissions as to costs, they should do so by 4.00pm on Monday, 17 December 2018. Otherwise, I will also order that Do More pay Career Academy’s costs of the proceeding, including any reserved costs.
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