Chep Australia Ltd v Russo (No 2)
[2023] FedCFamC2G 978
•2 November 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
CHEP Australia Ltd v Russo (No 2) [2023] FedCFamC2G 978
File number: MLG 425 of 2021 Judgment of: JUDGE CHAMPION Date of judgment: 2 November 2023 Catchwords: BANKRUPTCY– Creditor’s petition – Where the Court exercised its discretion to go behind the judgment because there was substantial reason to question whether the debt is owing in circumstances in which there was a genuine dispute about whether a third party had apparent authority as to actions which gave rise to the debt – Agency – Whether third-party had apparent authority arising out of a course of dealing such that the debtor owed the debt the subject of the creditor’s petition – Debtor as principal revoked authority of third party – No apparent authority for third party’s actions which gave rise to the debt – No debt of statutory minimum owing – Creditor’s petition dismissed – Sequestration order set aside Legislation: Bankruptcy Act 1966 (Cth) ss. 40, 43, 44, 52
Corporations Act 2001 (Cth) s. 129
Federal Circuit and Family Court of Australia Act 2021 (Cth) s. 256
Bankruptcy Regulations 2021 (Cth) reg. 10A
Cases cited: Ali v Retail Decisions Pty Ltd [2012] FCA 1130
CHEP Australia Ltd v Russo [2021] FedCFamC2G 27
Cristovao v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41
Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78, 81; [2008] FCA 353
Equiticorp Finance Ltd (in liq.) v Bank of New Zealand (1993) 32 NSWLR 50
In re Fraser ex parte Central Bank of London [1892] 2 QB 633, 636
Jones v Dunkel (1959) 101 CLR 298
Joosse v Deputy Commissioner of Taxation (2004) 137 FCR 576; 57 ATR 92; FCFCA 245
NIML Ltd v Man Financial Australia Ltd (2006) 15 VR 156; [2006] VSCA 12 [40]
Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28
Re Kitay, Frigger (No. 2) [2018] FCA 1032
Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 & Anor. (2021) 286 FCR 494; [2021] FCAFC 143
Russo v CHEP Australia Ltd [2022] FCA 949
Stratton v Bowles (No. 2) [2015] FCA 43
Wolff v Donovan (1991) 29 FCR 480
Wren v Mahoney (1972) 126 CLR 212
Division: Division 2 General Federal Law Number of paragraphs: 117 Date of last submissions: 28 August 2023 Date of hearing: 28 August 2023 Place: Melbourne Counsel for the Applicant: Ms Carruthers Solicitor for the Applicant: Law Squared Counsel for the Respondent: Mr Golledge SC Respondent: In person ORDERS
MLG 425 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHEP AUSTRALIA LTD
Applicant
AND: DOMENICO RUSSO
Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
2 NOVEMBER 2023
THE COURT ORDERS THAT:
1.The creditor’s petition is dismissed.
2.The sequestration order made on 6 May 2021 is set aside.
3.On or before 4:00 pm on 9 November 2023 the Trustee file and serve submissions (not exceeding 5 pages) and any affidavit on which she seeks to rely as to consequential issues.
4.On or before 4:00 pm on 16 November 2023 the Applicant and Respondent file and serve submissions (not exceeding 5 pages) and any affidavit on which they seek to rely as to consequential issues.
5.There be liberty to apply.
AND THE COURT NOTES THAT:
A.In the absence of any application by a party for an oral hearing, consequential issues will be determined on the papers.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CHAMPION:
INTRODUCTION
By a Creditor’s Petition dated 11 March 2021, the Applicant, CHEP Australia Ltd, seeks a sequestration order under s. 43 of the Bankruptcy Act 1966 (Cth) against the estate of Mr Domenic Russo.
SUMMARY
CHEP is a large business which hires pallets. Mr Russo was the director of a company Baby Blue Pty Ltd (now in liquidation) (Company) which was a fruit and vegetable broker (mainly blueberries and cucumbers) and hired pallets for its business. The Company hired pallets from Lindsay Transport which as explained below I have found to be CHEP’s agent in Coffs Harbour. Mr Russo guaranteed his Company’s obligations to CHEP as to pallet hire. There is a dispute about pallets hired in the period December 2019 – February 2020 and the retention of those pallets. The disputed issue concerns the actions of a third-party, Mr Aaron Singh, who hired the pallets. CHEP submitted that Mr Russo granted Mr Singh actual authority or represented Mr Singh had apparent authority to hire the pallets for the Company and therefore Mr Russo is liable as to the debt arising from the hire of the pallets. On the other hand, Mr Russo submitted that Mr Singh did not have actual or apparent authority to hire the pallets and, as a result, Mr Russo is not liable for the costs of their hire.
On 14 May 2020 CHEP obtained a default judgment in the NSW Local Court against Mr Russo as to the pallet hire for $29,537.25 (Judgment) (CB18).
Because there is a substantial reason to question whether the debt that underlies the creditor’s petition is in fact owing, the Court has exercised its discretion to go behind the Judgment debt. As a second step, the Court has found that because Mr Russo revoked Mr Singh’s authority on 29 November 2019 and Mr Russo did not otherwise represent that Mr Singh had apparent authority to hire the pallets Mr Russo is not liable for charges for the pallets hired after 29 November 2019. As a result, CHEP has not proved Mr Russo’s indebtedness to it as to a debt of the statutory minimum. I will dismiss the creditor’s petition, as a consequential order set aside the sequestration order and hear further from the parties as to other consequential issues. I have set out my reasons below.
PROCEDURAL HISTORY
On 6 May 2021 a Registrar of this Court made a sequestration order. On 7 September 2021 a Judge of this Court dismissed Mr Russo’s review application as to the Registrar’s decision: CHEP Australia Ltd v Russo [2021] FedCFamC2G 27 (Primary Decision). On 17 August 2022 the Federal Court upheld Mr Russo’s appeal against the Primary Decision in Russo v CHEP Australia Ltd [2022] FCA 949 (McElwaine J) (FCA Decision) and remitted the rehearing of the review application to this Court.
A de novo review
I am therefore conducting a de novo review of the creditor’s petition before the Registrar. The Court’s power on review is to make any order or orders it thinks fit in relation to the matter: Federal Circuit and Family Court of Australia Act 2021 (Cth), s. 256.
My task is to consider afresh the creditor’s petition of CHEP and whether it has proved each of the matters in s. 52(1)(a)-(c) of the Act.
A preliminary issue: competency of the review application
CHEP submitted that “it was not clear” (AS, 15) that Mr Russo had complied with r. 7.05 of the Bankruptcy Rules 2021 (Cth) (Bankruptcy Rules) and its requirements that Mr Russo serve the review application on the Trustee and on each person known to Mr Russo to be a creditor. To the extent (if any) there was not strict compliance with r. 7.05, in the interests of justice I dispensed with the requirement for compliance or full compliance with the rules: Bankruptcy Rules, r. 1.04(2); Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r. 1.07. There was no relevant prejudice by permitting Mr Russo to proceed with his review application.
MATERIAL RELIED ON
There was no contest that CHEP had proved the formal matters under s. 52(1)(a) and (b) of the Act. As to those formal matters, CHEP read and relied on:
(a)an affidavit of Ms Jacqueline Wilcock, solicitor, made on 12 March 2021 verifying paragraph 4 of the creditor’s petition: (CB31-42);
(b)an affidavit of Ms Rosetta Delguidice, law clerk, made on 26 April 2021 (proving service of an order made at the first return of the creditor’s petition);
(c)an affidavit of debt of Mr Rahmani made on 25 August 2023: (CB555); and
(d)an affidavit of final search of Ms Jacqueline Wilcock made on 25 August 2023: (CB557- 559).
As to the contested matters under s. 52(1)(c) of the Act, CHEP read the following affidavits:
(a)an affidavit of Mr Enayat Rahmani, CHEP’s Senior Debt Recovery Specialist, made on 8 August 2023: (CB425-525); and
(b)an affidavit of Ms Chantelle Dixon, CHEP’s National Security Manager, made on 8 August 2023: (CB526-554).
Mr Russo read two affidavits:
(a)his first affidavit (with annexures) made on 10 June 2023. As this was Mr Russo’s primary affidavit, references in these reasons are to it: (CB92-419); and
(b)his second affidavit (with annexures) made on 17 June 2023: (CB420–424).
I ruled certain parts of different paragraphs of the affidavits inadmissible in the course of the trial.
In addition, I admitted into evidence a single annexure page (page 123) of an annexure to an earlier affidavit of Mr Russo made on 7 June 2021 which detailed his admission into Westmead Hospital on 3 May 2021 in connection with a neurological illness (T90-92). The earlier affidavit itself is not in evidence. The relevance of the hospital admission was to explain Mr Russo’s absence from the hearing when the creditor’s petition was first before the Judicial Registrar in May 2021. I have not drawn any inferences as to whether the debt is truly owing from the fact that Mr Russo did not appear before Judicial Registrar Ryan on 6 May 2021. I also have not drawn any inferences from the fact that Mr Russo did not challenge the default judgment in the NSW Local Court. A court exercising a bankruptcy jurisdiction is not concerned to protect the finality in the administration of justice as between parties to litigation but to protect the interests of third parties who are not participants in the litigation which led to the judgment in question: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; [2017] HCA 28, [67].
Further, by the parties’ agreement (T61:L13-26), the documents set out at (CB596–663) were admitted into evidence except for the documents at (CB637-645).
Mr Rahmani and Mr Russo were cross-examined. Ms Dixon was not cross-examined.
FACTS
Mr Russo and his Company, Baby Blue Pty Ltd (now in liquidation)
In August 2018, Mr Russo incorporated the Company, Baby Blue Group Pty Ltd. Mr Russo was its sole director and shareholder: Mr Russo, [8]: CB92. The Company was wound up on 24 March 2021 and is in liquidation.
In early 2019, Mr Russo arranged for the Company to rent a warehouse in the Coffs Harbour district (Coffs Harbour Warehouse) from where it operated its business: Mr Russo, [9]; (CB92).
The Company operated as a fruit and vegetable broker, mainly in blueberries and cucumbers: Mr Russo [9], CB92. The Company’s business involved the purchase of fresh produce from growers, its packaging and its delivery to various markets: Mr Russo, [9]: (CB92-93). The Company’s business need for pallets for the transport of fresh produce needs no further explanation.
CHEP’s Business
CHEP has a large business hiring pallets. At any given time, it has a pool of approximately 300,000,000 pallets in circulation: Mr Rahmani, [3] (CB424).
Mr Rahmani described the “myCHEP” platform. The “myCHEP” platform is an electronic record system which tracks the movement of CHEP pallets. Mr Rahmani deposed at [5]-[12] (CB425):
5.[…] All receipts, transfers and returns of pallets are recorded in the myCHEP platform, tracking how many pallets any CHEP customer has at any given time.
6. Any time there is activity (an order placed, or a transfer received or sent) through the myCHEP platform or by email, an automatic notification is sent to the customers nominated email account.
7.Customers have two (2) ways to order pallets, once their application has been accepted and any required deposit has been paid:
a.the customer can log into their myCHEP account, and place orders; or
b. transfers can be made between trading partners, with the transfers to be logged on the MyCHEP portal as valid notification to CHEP.
8. When an order is placed, CHEP subsequently updates the customer’s myCHEP account to ensure that there is an up-to-date history of pallets received and sent.
9. Customers of CHEP can order pallets to be delivered to them, can deliver pallets back to a CHEP service centre, and can send and receive CHEP pallets from other customers. Any of these transfers are recorded on the customer’s myCHEP platform.
10. Once a customer has placed an order, they may either attend a CHEP service centre and collect the pallets themselves, or they can organise for them to be delivered through their preferred transport provider.
11.If a customer is transferring pallets to another customer (eg: if one company is delivering 4 pallets of goods to a trading partner) the transferor will log the delivery of 4 pallets to the recipient on their myCHEP platform. Once the transferor logs the delivery, the transferred pallets will appear on the recipient’s myCHEP account, as well as on their invoice rendered by CHEP.
12. Customers have 60 days to reject or challenge the transfer (for example, if they dispute the number of pallets, the date of the transfer, or similar). In the event that no rejection of the pallets occurs on the recipient’s MyCHEP account, or no notice is provided to CHEP in writing within those 60 days, CHEP takes the transfer as being approved by the recipient.
[Emphasis added]
As to the disputed pallets, notwithstanding Mr Rahmani’s evidence at [6] of his affidavit above that an automatic notification would be sent to the customer, Mr Russo denied that he received automated notifications of activity on the Company’s account in December 2019 – February 2020: Mr Russo, [28] (CB98). It is also possible that the passage of time would make the retrieval of any such automatic emails difficult. Nonetheless, in circumstances in which none of the alleged notifications were in evidence, I accept Mr Russo’s evidence that he did not receive those automated notifications (T66:L20-27).
Mr Russo’s credit application with CHEP
In May 2019, Mr Russo applied to open a trading account for the Company with CHEP: Mr Russo, [13], (CB93). Mr Russo sent to CHEP an account application form: Mr Russo, Annexure A, pp. 23-28 (CB113-118). Mr Russo was asked to identify those persons the Company nominated to deal with CHEP in relation to the operation of the account and named only himself. Mr Russo identified that the Company had 3 employees (who were not named): Mr Russo, Annexure A p. 24 (CB114). He only identified himself by way by way of “contact details” (Mr Russo, affidavit, p. 24, (CB114). Mr Russo said he had an “anticipated monthly usage” of 60 pallets: Mr Russo, Annexure A, p. 25 (CB115).
I gratefully adopt McElwaine J’s description at [9]–[10] of the FCA Decision of the credit application as accurate. There was no relevant evidence before me which would affect the accuracy of His Honour’s description:
The credit application describes the nature of the business of the company as “Grower, Packaging, Packhouse and Merchant” (sic) and the date of commencement of the business is 19 October 2018. It states that the business has three employees, its postal address is denoted as a post office box in Sydney and its business address is recorded as 4/16 Hawke Drive Woolgoolga, NSW which is situated at Coffs Harbour (the Coffs Harbour premises). Under the heading “contact details” Mr Russo is nominated as the managing director or owner, his mobile telephone number is stated and the email address of “[email protected]” is recorded. Details are then recorded for each of the entries “Supply Chain”, “Sales”, “Accounts Payable” and “Invoice Receivables”. In each case, Mr Russo is nominated as the contact person with the email address “[email protected]”.
A little further down on the credit application, Mr Russo is stated as the applicant in his capacity as “owner/director”. Next follows the heading “Estimated Monthly Requirements” for which the box “Pallets” is nominated and the figure 60 is recorded adjacent to the words “Anticipated monthly usage (number of units of equipment)”. On the third page there appear various warranties whereby “the applicant”, inter alia, “warrants that the person signing this Application on behalf of the Applicant has authority to sign on behalf of and to bind the Applicant”. Finally, and immediately above the signature clause, appears the following statement in bold capitalised type: “all transactions will be subject to the CHEP terms of hire and/or terms of sale attached (which contain releases, indemnities and guarantees in favour of CHEP) which the applicant has read and agrees with”. There were no such terms and conditions attached to the credit application that was signed by Mr Russo and submitted to CHEP.
Guarantee
There is no dispute that Mr Russo guaranteed his Company’s obligations to CHEP under the credit application. No submissions were put on behalf of Mr Russo that his personal obligations under the guarantee were relevantly more limited than the Company’s obligations under the credit application. From the way the case was argued, it follows that if the Company was indebted to CHEP for the disputed pallets, so too was Mr Russo.
CHEP’s standard terms and conditions were in evidence before me (CB439-444). Clause 15 of the terms provided that:
15. Service Centres
The Hirer must only collect or Return an item of Equipment from or to a Service Centre that is authorised by CHEP to issue and accept that type of Equipment and only during the operating hours of that Service Centre. A list of authorised Service Centres and their operating hours will published from time to time on the CHEP Customer Portal.
Lindsay Transport operated CHEP’s authorised service centre in Boambee. Other than to note that the standard terms and conditions envisaged that pallets could be collected and returned at an authorised service centre, CHEP’s standard terms and conditions were not otherwise of assistance in the resolution of this dispute.
In mid-October 2019, after some delay, CHEP approved the Company’s credit application. The Company paid a security deposit of $2,190 (equal to the approximate value of 60 pallets) and the account was opened: Mr Russo, affidavit, [19] (CB95); Mr Rahmani, [18], (CB426).
A specific account number was allocated to the Company: Mr Rahmani, [18], (CB426). Mr Russo’s evidence was that was that the account number was public knowledge. The account number appeared on all the delivery dockets (or issue dockets) as the “ship to” address: (CB445–460; T65:L35). Access to the account was password protected. Mr Russo denied that he shared the security password with any other person: Mr Russo, [18]-[19] (CB95). I accept Mr Russo’s evidence that the account number was public knowledge and that he did not share the security password with any other person.
Mr Aaron Singh and his commercial relationship with the Company
A third-party, Mr Aaron Singh, was the person who actually placed the orders for pallets which have become the subject of the disputed debt between Mr Russo and CHEP.
Mr Singh was a blueberry grower in the Coffs Harbour district. Mr Russo knew Mr Singh as a salesperson in the fruit and vegetable markets: Mr Russo, [21] (CB95). Because Mr Russo was Sydney based, Mr Russo arranged for Mr Singh to assist the Company by attending at the Coffs Harbour warehouse from time to time to receive or despatch fresh produce. There was no evidence that Mr Singh was an employee or officer of the Company. I accept Mr Russo’s submission that there was no evidence that Mr Singh was given, or used, any designated title such as “manager” or “supervisor” to describe his role for the Company or that he was appointed to, or held any such role, with the Company. Mr Russo’s evidence of the commercial arrangements between Mr Singh and the Company was that: “I [Mr Russo] would pay him [Mr Singh] a small premium over the going consignment price return rates as compensation for his time and effort” (emphasis added): Mr Russo, [21] (CB95).
Mr Russo granted Mr Singh actual authority to deal with third parties, including Lindsay Transport, at least to the following extent. Mr Russo created and allowed Mr Singh to use a specific Baby Blue Group email address: [email protected] for his dealings on behalf of the Company: Mr Russo, [21] (CB95). Mr Russo’s evidence was that he had access to that Company email allocated to Mr Singh and monitored it daily: Mr Russo, [22], (CB95-96). Mr Singh had Mr Russo’s actual authority to procure freight services from Lindsay Transport using his baby blue email address. In evidence there were a series of emails as to Mr Singh procuring freight services from Lindsay Transport from 30 September 2019 (CB162) before the CHEP account was opened in mid-October 2019. Mr Russo’s evidence was that he actually authorised Mr Singh to hire 60 CHEP pallets from Lindsay Transport in November 2019.
Lindsay Transport as CHEP’s agent
Lindsay Transport was a Coffs Harbour transport company or group of companies: Mr Russo, [22]: (CB95).
There is no evidence that Mr Singh ever communicated directly with CHEP (as contrasted with Lindsay Transport) from his Baby Blue Group email address or his Gmail address. Neither the Company nor Mr Singh directly placed orders with CHEP. Mr Singh placed all orders for CHEP pallets with Lindsay Transport.
It was a point of contention between the parties as to whether it was accurate to describe Lindsay Transport as CHEP’s agent for the purposes of pallet hire. Mr Russo said plainly CHEP used Lindsay Transport as its agent in the Coffs Harbour district: Mr Russo, [23]; (CB96).
Mr Rahmani put it as follows (CB427, [24]):
From my review of CHEP’s books and records, I understand that the Company never placed an order with CHEP directly. Rather, all orders were placed through a transport company called Lindsay Transport, who subsequently would collect and deliver the requested equipment to the Company. In circumstances where the equipment was collected from a CHEP Service Centre, CHEP retains a copy of the issue dockets.
Mr Rahmani also deposed (CB429, [36]):
I am aware from my time working at the applicant that Lindsay Transport Australia provided services to the applicant, including receipt of orders and delivery of pallets in response to those orders
Mr Rahmani annexed to his affidavit a series of retained “issue documents” or delivery documents: (CB445-460). Each issue document set out that CHEP had a service centre as follows:
“Service Centre AUS2”
CHEP AUSTRALIA BOAMBEE
LINDSAY TRANSPORT”
Each “issue document” provided for shipping of the pallets to the Company at its Coffs Harbour warehouse. These issue documents were dated between 6 January 2020 (CB446) and 12 February 2020 (CB460). It is apparent on the face of the issue documents (CB445-460) that Lindsay Transport delivered CHEP pallets to the Company’s Coffs Harbour premises in the January 2020–February 2020 period. The issue documents set out the Company’s account number. The pallet delivery was recorded on the docket to be a delivery for the Company. The issue documents recorded the quantity of pallets delivered. It is apparent that on delivery Mr Singh signed for the delivery of pallets and his signature appears on the issue documents.
Notwithstanding Mr Russo’s description of Lindsay Transport as CHEP’s agent, it is a legal question as to whether the correct characterisation of the facts was that Lindsay Transport was an agent of CHEP as its principal as to the hire of the disputed pallets. I have set out below my reasons for finding that Lindsay Transport was CHEP’s agent.
The order and delivery of pallets in November 2019 and Mr Singh’s authority
As already noted, in November 2019 Mr Russo gave Mr Singh actual authority to place orders for at least 60 CHEP pallets. He said that he asked him to do so from the Baby Blue email address. Mr Russo’s evidence was as follows (Mr Russo, [24]; CB96):
On 8 November 2019, the first order on the company’s CHEP account was placed by Aaron Singh with Lindsay Transport and that was for the delivery of 61 pallets. I asked Aaron to place that order and he did so using the baby blue group email account which I had created for him.
By an email 5 dated November 2019 Mr Singh placed the first order with Lindsay Transport for the delivery of 60 pallets – on the face of the email for the Company – not from the Baby Blue email account but via his Gmail account: (CB461). Mr Singh wrote as to the pallet order, “book under” the Company’s account number. The email is as follows:
From: [email protected] <[email protected]>
Sent: Tuesday, 5 November 2019 2:03 PM
To: Coffs Freight <[email protected]>
Subject: Chep Pallets
Hi
Could you please send out 60 pallets
Book under this account
4000393317
Baby blue group
Aaron
Mr Russo denied that he had ever given actual authority to Mr Singh to order pallets from that personal Gmail address. I accept his evidence. Mr Russo’s evidence was (Mr Russo, [29]; CB98):
I do not and have never had access to that email address and I did not know Aaron Singh was placing orders for pallets or anything else by that email address and pretending to do so on behalf of Baby Blue Group and no transfer confirmation was sent to me by CHEP.
It was not easy to trace the evidence as to what happened as to that first order.
Mr Russo’s evidence was that the first order he had asked and authorised Mr Singh to place with CHEP was for 61 pallets. It was not clear as to whether Mr Singh purported to comply with Mr Russo’s request by the order he placed from his Gmail address on 5 November 2019.
Mr Russo’s evidence was that “I asked Aaron [Singh] to place that order and he did so using the baby blue group email account which I had created for him.” As set out above, in his affidavit, Mr Russo identified making the request of Mr Singh on 8 November 2019: Mr Russo, [24]; (CB96). In his oral evidence, he said he in fact authorised the order on 11 November 2019 (not 8 November 2019): (T63:L29). There was no evidence of an email ordering pallets on either date emanating from Mr Singh’s Company email address.
There were several email exchanges between Mr Singh and Lindsay Transport personnel as to CHEP pallets in November 2019 in which Mr Singh used his baby blue email address. There were emails exchanged between Mr Singh (from his Baby Blue Email address) and Ms McNamara at Lindsay Transport on 12 November 2019 in which Mr Singh followed up Lindsay Transport about the “CHEP pallets” and Ms McNamara responded “Pallets are planned to come to you today. I am sending you 60, to balance out our current IOU balance.” (CB177–178). In Mr Russo’s oral evidence, he also referred to an email from Ms Jennifer Atkins at Lindsay Transport to Mr Singh at his baby blue email address dated 22 November 2019 (CB139-140) (Mr Russo, Annexure F) which appeared to record a movement of 61 pallets from Baby Blue back to Lindsay Transport on 8 November 2021.
In his affidavit, Mr Russo did not deny the Company received the 60 pallets he had authorised Mr Russo to order sometime in November 2019. In cross examination, Mr Russo admitted that he had consented for Mr Singh to order pallets in November 2019 (T65:L6) and that he paid for those pallets (T65:L16-17). I accept Mr Russo’s evidence that he had no knowledge that Mr Singh ordered the 60 pallets from his personal Gmail address on 5 November 2019. I find that in fact Mr Singh ordered 60 pallets he was actually authorised to order but did so in an unauthorised way namely by sending an email from his Gmail address. It is submitted on behalf of CHEP that by paying for the pallets ordered from the Gmail address Mr Russo endorsed the order and thereby represented to CHEP that Mr Russo had the authority to order pallets in that way. CHEP’s submission was put more broadly that Mr Russo endorsed Mr Singh’s course of dealing with Lindsay Transport and, on that basis, Mr Russo represented to CHEP that Mr Singh had authority to order the pallets for and on behalf of the Company. As a result, so CHEP submitted, Mr Russo is liable as to the pallets ordered by Mr Singh pursuant to the doctrine of apparent authority. I will return to this issue below.
The transaction ledger
In evidence, there were two versions of CHEP’s transaction ledger (which I understood to be synonymous with the MyCHEP Platform) as to various pallet movements involving the Company. Mr Rahmani’s affidavit annexed one version of the transaction ledger (CB462-463); another was at CB662-663. There may be minor differences between the two versions of the transaction ledger. I have not relied on any difference between the two versions of the transaction ledger as to any issue I have had to decide. The transaction ledger (CB462) referred to a movement of 60 pallets on 5 November 2019 (row 1), 1 pallet on 8 November 2019 (row 2) and then “-61” on 13 November 2019 (row 3). Mr Rahmani said that the “-61” was what he called a “transfer off” – a reference to the pallets having moved on from the Company to another customer or perhaps returned to Lindsay Transport (a “transfer off” being premised on the pallets having been delivered to the Company in the first place): (Mr Rahmani , XX’N, T45). Although there was some dispute as to whether the Company ever received the pallets, I find on me the balance of probabilities the Company did receive the 60 pallets on about 12 November 2019,
The transaction ledger records approximately 20 further transactions involving the Company during November 2019, mainly by way of the “transfer off” of small numbers of pallets. There is, however, a further order for 30 pallets on or about 21 November 2018.There was no evidence as to who placed this order or how. I have referred to Ms McNamara’s (Lindsay Transport) email to Mr Singh at the Baby Blue Group on 12 November 2019 that she was sending 60 pallets “to balance out our current IOU balance”: (CB177). Ms McNamara wrote to Mr Singh at the baby blue group on 18 November 2019 that she had not received any CHEP transfers yet (CB180). I infer that she meant that she had not received the “transferred off” 61 pallets. I have also referred to the correspondence between Lindsay Transport and “[email protected]” dated 22 November 2019 which appeared to record a movement of 61 pallets back to Lindsay Transport on 8 November 2019 (CB139-140). On 26 November 2019 Ms McNamara sent an email to “aaron@babyblue group.com” in which she wrote: “I need you to send through your CHEP transfer dockets daily. They will be rejected if not able to be reconciled.” Ex R1. There was no other documentary evidence as to whether pallet orders in November 2019 were placed by Mr Singh from his Gmail account or from his baby blue group email or by way of direct entry to the MyCHEP platform.
Whilst there were ongoing communications between Ms McNamara (Lindsay Transport) and Mr Singh (at the Baby Blue email address) in November 2019 as to CHEP pallet issues, in November 2019, the only evidence as to the order of pallets by email was the email order Mr Singh placed from his Gmail account and identified should be charged to the Company’s account on 5 November 2019 for 60 pallets (CB461).
There were significant pallet orders after November 2019 from December 2019–February 2020 recorded on the transaction ledger (to which I have referred below).
CHEP invoices and statements of account
In evidence there were several CHEP invoices the earliest being dated 9 November 2019 and the latest 7 December 2019. Also in evidence were CHEP’s statements of account dated 2 December 2019, 16 December 2019, 15 January 2020, 3 February 2020 and 17 February 2020.
The CHEP invoice dated 9 November 2019 refers to a closing balance of 61 pallets (that is, 61 pallets in the possession of the Company for which CHEP invoiced the Company for $98.36): CB629. I find these pallets were only in fact delivered on or about 12 November 2021 in accordance with Ms McNamara’s email. A CHEP invoice dated 16 November 2019 (CB623-628) refers to the “transfer off” of 61 pallets on 8 November 2019.
A subsequent invoice dated 7 December 2019 (CB656) contains a notation for a “reversal to transfer off”.A “reversal to a transfer off” is effectively a notation that the Company in fact retained the pallets previously ‘transferred off”. That is, contrary to the invoice dated 16 November 2019 the true position was that the Company had not returned the 61 pallets. As a result, CHEP reinstated the charge for the Company for the ongoing hire and retention of the 61 pallets.
CHEP’s statement of account dated 2 December 2019 (CB646) recorded that $98.36 remained an amount outstanding as to item described numerically as “3813511862”.
CHEP’s statement of account dated 16 December 2019 (CB 647) recorded that $98.36 remained outstanding as to the transaction on 9 November 2019. The next statement of account – a month later on 15 January 2020 (CB 648) – has no corresponding record.
Further, on 6 December 2019 the Company generated a “recipient created tax invoice” (CB464) which recorded that it had paid the $98.36 as to item “3813511862”. Based on CHEP’s statement of account dated 15 January 2020 where the $98.36 charge had been removed and the company’s own recipient generated tax invoice, I find that the Company paid for those 61 pallets which were ordered from Mr Singh’s Gmail account on 5 November 2019 and which I have found were delivered on or about 12 November 2019.
29 November 2019 - An email from Mr Russo to Lindsay Transport that dealings should only be with him
On 29 November 2019 Mr Russo sent an email to Ms Vanlook, Ms McNamara and Mr Della at Lindsay Transport. The email copied in Ms Queenie Suitauloa (whether she was connected with Lindsay Transport is unknown). Mr Russo wrote as follows (CB315):
Unauthorised use
To whom it may concern,
Please note, that all future correspondence including invoicing, payments, billing and Baby Blue Group warehousing that includes, wording or has a mentioning of Baby Blue Group is only between Lindsay Transport and Myself (Domenico Russo). Should any other companies or entities contact you that are not connected too or operating out of Baby Blue Group’s Warehouse, please contact me as soon as possible as this may be unauthorised actions/activities not approved by myself for this account.
[Emphasis added]
Although the parties were in dispute as to the interpretation of this email, in my view, it served as notification to Lindsay Transport that any authority Mr Singh had previously possessed to order pallets for the Company was revoked. By his email, Mr Russo had notified Lindsay Transport that dealings with the Company were only to be between Lindsay Transport and Mr Russo. It is true that the email does not name Mr Singh. On my reading of it, it does not create an exception as to Mr Singh as a person with whom Lindsay Transport was authorised to deal, notwithstanding the express limitation that all dealings were only to be between Lindsay Transport and Mr Russo. After this email, in my view, it could not be said that it was reasonable for Lindsay Transport to believe that Mr Singh continued to act with authority to order pallets on behalf of the Company.
Orders of pallets after 29 November 2019
After 29 November 2019, the transaction ledger records further transactions between approximately 4 December 2019 and 16 December 2019 where the evidence was silent as to how the orders were made.
From 13 December 2019 through until 11 February 2020 Mr Singh ordered approximately 570 pallets. These pallet orders are (in broad terms) the disputed orders. It can be immediately noted that the quantity of pallets Mr Singh ordered vastly exceeded the Company’s anticipated usage of 60 pallets monthly set out in the credit application. Mr Singh made email orders on 13 December 2019, 16 December 2019, 29 December 2019, 2 January 2020, 4 January 2020, 8 January 2020, 15 January 2020, 17 January 2020, 19 January 2020, 22 January 2020, 24 January 2020, 29 January 2020, 30 January 2020, 3 February 2020, 4 February 2020, 6 February 2020 and 11 February 2020) (CB596-610). Mr Singh placed all orders from his personal Gmail address. Mr Russo was not copied into those emails. Mr Singh requested that all the pallets ordered be charged to the Company’s account and identified the Company’s account number. I have noted that in the absence of the automatic notification emails being produced in evidence before the Court that I have accepted Mr Russo’s evidence that he was not notified of these transactions. I accept Mr Russo’s evidence that he did not know about these transactions. The “issue documents” recorded that the pallets Mr Singh ordered were delivered to the Coffs Harbour premises of the Company on issue documents which referred to the Company’s account number and Mr. Singh signed for the pallets on their delivery.
CHEP issued a statement of account on 16 December 2019 (CB647) when these orders were not in substance apparent. On 15 January 2020 CHEP issued its next statement of account apparently sent by post to the Company’s PO Box when the amount outstanding was only $1341.57 (CB648). The extent of Mr Singh’s orders was only starting to appear in CHEP’s statements of account dated 3 February 2020 (CB649) and 17 February 2020 (CB650). I note that by 17 February 2020 (CB650) the total amount alleged to be outstanding from the Company (guaranteed by Mr Russo) to CHEP was $4,042.20.
As explained below, in circumstances in which Mr Russo had sent an email to Lindsay Transport on 29 November 2019 that all dealings between Lindsay Transport and the Company were only to be between Lindsay Transport and him, I find that these transactions were outside the scope of Mr Singh’s apparent authority. I also note that the order of 570 pallets in this period after 13 December 2019 and their subsequent non-return approximates the 586 pallets CHEP particularised as giving rise to $21,389 of the Judgment Debt CHEP entered in the NSW District Court on 23 June 2020: (CB472; CB479). It also appears that by June 2020 it was the Company’s alleged non-return of the disputed pallets for an extended period that had caused the size of the alleged debt significantly to escalate. An exact reconciliation of pallet numbers (570 pallets or 586 pallets) is not possible on the evidence or necessary.
Other events and the closing of the Company’s account
On 25 January 2020 Mr Russo’s evidence was that he vacated the Coffs Harbour leased premises and returned the keys to the real estate agent: Mr Russo, [34] (CB100).
On 10 February 2020, CHEP suspended the Company’s account with CHEP due to non-payment (CB389).
On 10 February 2020 the Company emailed CHEP and wrote “can you close my account completely and use the bond as payment” (CB392): see also, Mr Rahmani, Affidavit, [29]–[31] (CB428).
On 14 February 2020 Mr Russo emailed CHEP that his position was that after 9 January 2020 the Company’s account “has been used illegally and no authorisation by myself when I have stopped all trading from Coffs Harbour” (CB394).
Mr Rahmani’s evidence was that Mr Russo had not at any time before 14 February 2020 informed CHEP that there was any change in the Company’s status or location or that the authority of any employee or person working for the company had any limitation on their ability to make orders, sign for pallets or the like: Mr Rahmani, [32]; (CB428). Mr Rahmani did not refer to the email dated 29 November 2019.
Court proceedings
On 23 June 2020 CHEP obtained the default Judgment against Mr Russo and the Company for $29,537.25 inclusive of costs.
On 8 July 2020 a bankruptcy notice was issued (CB15-18). The bankruptcy notice annexed a sealed copy of the Judgment.
On 12 March 2021, CHEP filed a creditor’s petition in this Court and applied for a sequestration order against the estate of Mr Russo noting that the act of bankruptcy was Mr Russo’s failure to comply with the requirements of the bankruptcy notice.
On 24 March 2021, by Court order, the Company was wound up in liquidation.
CONSIDERATION
Section 43(1)(a) of the Act provides that “subject to this Act” where a debtor has committed an act of bankruptcy the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor. Section 43(1)(b) was satisfied in the current case. The relevant act of bankruptcy was the debtor’s non-compliance with the bankruptcy notice under s. 40(1)(g) of the Act.
Before making a sequestration order, I must be satisfied as to each of the matters in s. 52(1)(a) –(c). CHEP has proved the formal matters in s. 52(1)(a) and (b). The question in this case is whether CHEP has discharged its onus under s. 52(1)(c) to prove the debt on which it relies is owing. The burden of proof is on CHEP as the petitioner: Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78, 81; [2008] FCA 353, [14] (Gilmour J). A petitioning creditor has a “prima facie right” to a sequestration order once proof of each of the matters required by s. 52(1) has been satisfied: Stratton v Bowles (No. 2) [2015] FCA 43, [27] (Beach J).
Legal principles: a discretion to “go behind” the judgment
Whether a debt is in truth and reality owing is a question which arises under s. 52(1)(c) of the Act: Ali v Retail Decisions Pty Ltd [2012] FCA 1130 at [17]–[20] (Bromberg J). Although a judgment is usually taken to be determinative evidence of the existence of a debt, a judgment is not conclusive upon the hearing of a creditor’s petition and the Court has a discretion to “go behind” a judgment debt to determine whether in fact there is a debt owing: Ramsay, [39], [40] [47]; FCA Decision, [30]. Mr Russo carries the initial or tactical onus: Ali, [20] (Bromberg J); FCA Decision, [43]. The court exercising bankruptcy jurisdiction does not “set aside” the judgment of the other court but “goes round the judgment and inquires into the subject matter” (see: In re Fraser ex parte Central Bank of London [1892] 2 QB 633, 636 approved in Wren v Mahoney (1972) 126 CLR 212, 222, Barwick CJ).
A two-step process
It is a two-step process. As explained in Cristovao v Tan & Tan Lawyers Pty Ltd [2018] FCAFC 41 at [34] (Bromberg, Mortimer and Lee JJ):
When considering to go behind the prima facie evidence of the debt constituted by the judgment, a two-stage process inquiry arises: first, as to whether there is sufficient reason to question the existence of a real debt behind the judgment; and secondly, if there is, determining that issue (although these two steps may be determined together: [citations omitted]
The first step: whether there is a proper basis for the Court to exercise its discretion to go behind the judgment
In Ramsay, Edelman J expressed the relevant inquiry (or test) as to when the Court should exercise its discretion to go behind the judgment debt in two ways. First, by reference to whether there are “substantial reasons […] for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner”. Or, secondly, as expressed in earlier (older) cases, if there is “a prima facie case impeaching the judgment”: Ramsay, [110] (Edelman J); cited in the FCA Decision, [41]. In Joosse v Deputy Commissioner of Taxation (2004) 137 FCR 576; 57 ATR 92; FCFCA 245 at [6] the Court framed the relevant question as whether there was “substantial reason for doubting whether there is […] a debt”. Colvin J in Re Kitay, Frigger (No. 2) [2018] FCA 1032 at [20] framed the relevant inquiry as to whether there was “merit in the attack” on the judgment.
Because on a default judgment there has been no trial on the merits of the case, (as occurred with the Judgment in this case) “the court in bankruptcy will more readily look behind” it: Wolff v Donovan (1991) 29 FCR 480 at 486 (Lee and Hill JJ); approved in the FCA Decision, [43].
The first step: the discretion is engaged
There is a proper basis for the Court to exercise its discretion to go behind the judgment debt because there is a substantial reason for questioning whether there is a debt: Ramsay, Joosse (above). There is a substantial question as to the scope of Mr Singh’s actual and/or apparent authority to order pallets and a substantial question as to the factual and legal significance of the email communication dated 29 November 2019 (CB315) in circumstances in which the disputed pallets (or nearly all of them) which were the subject of the judgment debt were ordered after that date by Mr Singh without Mr Russo’s knowledge.
The second step: re-trying the case
Having decided to “go behind the judgment” the creditor has the burden of proving, independently of the Judgment, for the purposes of s. 52(1)(c) that there truly is a debt owing to it by the debtor: Ali, [25] (Bromberg J). In deciding that question, as Colvin J put it in Re Kitay at [19], “there is no alternative but to retry the whole case”.
In this matter, retrying the whole case requires a consideration of relevant principles as to the law of agency and whether Mr Singh had actual authority to order the disputed pallets. Or, alternatively, and this is the issue which truly arises in this case, whether Mr Russo (as to this point there is no difference in position between Mr Russo and the Company) represented to CHEP that Mr Singh had apparent authority to order the disputed pallets and, as a result, Mr Russo is estopped from resiling from any representation that he made to CHEP that Mr Singh had authority to order the pallets.
Legal principles: actual and apparent authority
Actual authority
Actual authority arises in circumstances in which a principal grants, and an agent accepts, authority for an agent to perform specific tasks on a principal’s behalf: Equiticorp Finance Ltd (in liq.) v Bank of New Zealand (1993) 32 NSWLR 50, 132 (Clarke and Cripps JJA).
Apparent or ostensible authority
The essence of the doctrine of apparent (or ostensible) authority is estoppel. Professor Dal Pont in Law of Agency (4th ed.) (Dal Pont) explains the doctrine at [20.7] as follows:
So that it is said that a principal (A) who “holds out” B to be authorised to contract on A’s behalf cannot deny the claim of C, who contracts with B in reliance on that holding out, on the ground that the contract lies outside any actual authority conferred by A on B. The onus of establishing the estoppel, and thus ostensible authority, is on C, who must show that the circumstances justify the inference that C had acted upon the “holding out”.
Further, I adopt the statement of principle drawn from the FCA Judgment at [56] as follows:
It is the scope of the apparent authority, examined through the lens of the representation and conduct of the principal, which is determinative of the estoppel which binds a principal to honour unauthorised acts of the agent: Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503, Diplock LJ.
Apparent authority may be “implied from a course of dealing” or “from the principal equipping an agent with a particular title, status and facilities”. The identification of the principal’s relevant “representation is pivotal to the elements of reliance and detriment”: Dal Pont, [20.17]. The focus of an apparent authority inquiry is the authority of the agent “apparent” to the other contracting party and the circumstances that may make it “appear” to that other party that the agent is properly authorised: Dal Pont, [20.23]. The failure to clarify to a third-party the boundaries of an agent’s authority may be an omission that serves to bolster the force of the original representation: Dal Pont, [20.25]. It is the principal who is estopped from denying apparent authority and it is the principal’s representation or holding out, not any representation or holding out by the agent that gives rise to such authority: Dal Pont, [20.32]. That is, an agent cannot self-authorise. Also, the onus of establishing the estoppel rests on the representee, that is, the third party who relies on the representation: Dal Pont, [20.7].
Revocation of ostensible authority
As to revoking apparent authority Dal Pont at [20.36] expressed the opinion:
Ostensible authority continues until the representation or “holding out” can no longer be said to be operative; that is, “when it is no longer reasonable for the third-party with whom the agent deals to believe that the agent continues to act with actual authority.
The application of the relevant legal principles as to actual and apparent authority to this case
Actual authority
The credit application designated Mr Russo as the Company’s contact person. It did not expressly authorise Mr Singh to act for the Company. The credit application did not go so far as to exclude another person (relevantly, Mr Singh) having authority to contract for and on behalf the Company. As McElwaine J put it in the FCA Decision “the terms document is not as clear as that”: FCA Decision, [47]. There was, however, no holding out of Mr Singh as having authority to hire pallets by reference to the content of the credit application.
CHEP’s standard terms and conditions did not affect the matter one way or the other.
In November 2019, Mr Russo (as principal) granted and Mr Singh (accepted) actual authority to order 60 or 61 pallets from CHEP. Mr Russo’s evidence was that he asked Mr Singh to place the order: Mr Russo, [24]; CB96. In my view, it does not matter whether that occurred on either 8 November 2019 (as he deposed in his affidavit: Mr Russo, [24], CB96) or on 11 November 2019 as he said in his oral evidence (T63:L29).
Apparent authority and the revocation of authority by the email dated 29 November 2019
Professor Dal Pont refers to equipping a person with apparent authority by reason of their position: see Dal Pont, [20.17]. Mr Russo never held out Mr Singh as having an apparent authority by reason of any position he held such as manager or purchasing officer of the Company.
Apparent authority may also arise by way of a “course of dealing”: Dal Pont, [20.17]. Professor Dal Pont continues at [20.18] “the principal’s “holding out” as to an agent’s authority can emanate from a course of dealing that is sufficiently frequent and understood.”
From 30 September 2019 up until 29 November 2019 Mr Russo had held out Mr Singh to Lindsay Transport personnel as having authority to deal with them for and on behalf of the Company to procure freight services. Mr Russo had granted him a baby blue email address for that purpose. In my view, Mr Singh also had apparent authority up until 29 November 2019 to deal with from Lindsay Transport as to pallets. There were various emails from Mr Singh’s Baby Blue email account about pallets.
On 29 November 2019 Mr Russo sent his email to Lindsay Transport (CB315) the first sentence of which read:
Please note, that all future correspondence including invoicing, payments, billing and Baby Blue Group warehousing that includes, wording or has a mentioning of Baby Blue Group is only between Lindsay Transport and Myself (Domenico Russo) […]
[Emphasis added]
The email revoked Mr Singh’s apparent authority. With reference to Professor Dal Pont’s opinion (set out at [20.36] of the Law of Agency and which I have extracted above) from 29 November 2019 the “holding out” or representation could no longer be said to be operative.
Mr Singh’s pallet orders from 13 December 2019 until 11 February 2020 were unauthorised.
It was no longer reasonable for Lindsay Transport after 29 November 2019 as the third-party with which Mr Singh previously had dealings to believe that Mr Singh (the agent) continued to act with authority. I have accepted Mr Russo’s evidence that Mr Singh did not have Mr Russo’s actual authority. Mr Singh no longer had apparent authority as to those unauthorised orders because Mr Russo had expressly notified Lindsay Transport in writing that all dealings on behalf of the Company were only to be with him. It was not open to Lindsay Transport to continue to rely on a pallet order on 5 November 2019 which had emanated from Mr Singh’s Gmail address as the source (together with other dealings) of the apparent authority by way of a course of dealing because the 29 November 2019 email revoked the authority of persons other than Mr Russo to deal with Lindsay Transport for the company from any email address. Mr Singh’s 5 November 2019 email and previous course of dealing was overtaken by events: namely, Mr Russo’s subsequent 29 November 2019 email. In my view, it was not necessary for the email to refer specifically to Mr Singh.
Mr Singh’s orders from his Gmail address
There was some debate between the parties as to how the Court should regard the fact that Mr Singh’s pallet orders in the period December 2019 – February 2020 (CB596-610) all emanated from Mr Singh’s Gmail address, a private email address rather than a Company email address. CHEP’s written submissions (at [70]-[71]) were that:
The suggestion that a person could be authorised to place orders on the company account, to be delivered to the Company’s premises, but only from a particular email address… is inherently flawed. No authority in support of this artificial distinction has been cited.
Mr Singh as a person, not an email address is clothed in the Company’s authority.
The appropriate focus is on the principal’s representation. What was Mr Russo’s representation as to Mr Singh’s authority?
Mr Singh made a number of representations as to his own authority: emails from his Gmail address which set out the Company account number and that he was ordering for the Company and receiving and signing for deliveries at the Company’s Coffs Harbour warehouse. Mr Singh as the agent could not self-authorise. I find that Mr Russo did not know of these emails, issue dockets or deliveries. I have accepted his evidence that he did not receive the automatic notifications. A time lag between the orders and CHEP’s statements of account did not sufficiently put him on notice of the unauthorised orders.
I have found that by his 29 November 2019 email Mr Russo revoked any apparent authority with which he had previously clothed Mr Singh.
As CHEP disputed the interpretation of the 29 November 2019 email which I have found it bears, my view is that even if Mr Russo had not sent the email dated 29 November 2019, in circumstances in which apparent authority is grounded in estoppel and preventing a principal from resiling from a representation he has made and on which a third party has relied, I find that there was not a course of dealing whereby Mr Russo had clothed Mr Singh with authority to order such a substantial number of pallets from his personal Gmail address. There was a solitary email from that Gmail address before 29 November 2019. I understood CHEP to submit that Mr Russo had endorsed Mr Singh’s authority to place pallet orders from his Gmail address by the payment for that order. There had been various other dealings between Lindsay Transport personnel and Mr Singh at his baby blue email address. Any course of dealing was “not sufficiently frequent or understood” (see Dal Pont, [20.18] above) to support a finding that Mr Russo had by a course of dealing held out Mr Singh as having authority to order substantial pallets from his Gmail address so that he is bound for Mr Singh’s unauthorised acts. It is a matter of fact and degree and I am not persuaded that the Company’s payment for those 60 pallets on a single occasion (even taken together with other communications from a company email address) meant that there was a sufficiently frequent or understood course of dealing whereby Mr Russo represented that Mr Singh had authority to order substantial pallets from a personal account and Lindsay Transport could rely upon a course of dealing as a representation of Mr Russo that Mr Singh had authority to place the Gmail orders. CHEP has not discharged its onus as the representee. Besides the alleged representation by way of a course of dealing, there was no apparent authority based on any position that Mr Singh held with the Company.
From 29 November 2019 Mr Singh did not have apparent authority. It was not open to Mr Singh to self-authorise and bind the Company by unilaterally sending emails from his Gmail address and signing for the delivery of the pallets he ordered when they arrived at the Coffs Harbour warehouse. The fact that the pallets were delivered to the Company’s Coffs Harbour premises referring to the Company’s account number where Mr Singh signed for them, was not a representation of Mr Russo. Further, I accept Mr Russo’s evidence that the account number which appeared on the “issue documents” was public knowledge (see also, T65:L25) and therefore he made no representation by reason of the fact that the company account number appeared on the issue documents. I accept Mr Russo’s evidence that he had no knowledge of the orders or the deliveries. Further, I cannot accept Mr Rahmani’s evidence that an automated notification would have notified Mr Russo as to each of these transactions on the MyCHEP Platform in circumstances in which none of these alleged automated emails were in evidence. I accept Mr Russo’s denial that he never received any such automated notifications.
My conclusion is that Mr Singh did not have the actual authority of the Company (or Mr Russo) to place the various orders he placed in December 2019 – February 2020 period from his Gmail account. Further, CHEP has not proved that notwithstanding the orders were unauthorised he had apparent authority.
Lindsay Transport as CHEP’s agent and the attribution of the knowledge of Lindsay Transport to CHEP
It is convenient now to return to the issue of whether Lindsay Transport was CHEP’s agent. CHEP submitted that Lindsay Transport was not its agent (T98:L27). There was no evidence that Mr Russo’s 29 November 2019 email was on-sent to CHEP. All Mr Singh’s disputed orders in December 2019 – February 2020 were emailed to Lindsay Transport. Mr Singh only dealt with Lindsay Transport. CHEP authorised Lindsay Transport to hire and deliver its hire pallets. CHEP’s claimed debt was premised on the work Lindsay Transport performed. Lindsay Transport had the authority to receive and implement orders for CHEP pallets. The issue dockets gave the Lindsay Transport address as the address for CHEP Australia Boambee as its service centre.
Mr Rahmani’s evidence at [36] (CB429) was that:
I am aware from my time working at the Applicant that Lindsay Transport Australia provided services to the Applicant including receipt of orders and delivery of pallets in response to those orders.
Further, I note that as to all Mr Singh’s Gmails after 29 November 2019 it is Lindsay Transport, not CHEP, which acts on them. Any reliance on any representation of Mr Russo, was reliance of Lindsay Transport (not CHEP). It was Lindsay Transport, not CHEP, that performed the contract that gave rise to the alleged debt by delivering the pallets.
By reference to the statement of principle drawn from Equiticorp above, CHEP as principal granted authority to its agent Lindsay Transport to perform specific tasks on the principal’s behalf as to the acceptance of orders for pallets and their delivery in the Coffs Harbour area and Lindsay Transport accepted that authority. As a matter of legal categorisation, I find that Lindsay Transport was CHEP’s agent.
The significance of this finding is that “the law presumes that knowledge of (or notice to) an agent is imputed (often said to be “attributed”) to the principal”: Dal Pont, [22.49]. “Notice to the agent is effective as notice to the principal whether or not the agent actually communicates the notice to the principal”: NIML Ltd v Man Financial Australia Ltd (2006) 15 VR 156; [2006] VSCA 12 [40] (Nettle JA).
Once Mr Russo notified Lindsay Transport by his email dated 29 November 2019 that all dealings were to be only with him any apparent authority of Mr Singh to hire pallets for and on behalf of the Company was revoked and once notice was provided to Lindsay Transport because Lindsay Transport was CHEP’s agent the knowledge of Lindsay Transport was attributed to CHEP, whether or not Lindsay Transport actually communicated the notice to CHEP. After 29 November 2019, it was not open to CHEP to say that it did not know that Mr Russo had revoked Mr Singh’s authority because its knowledge was taken to be the same as the knowledge of its agent, Lindsay Transport.
Mr Singh was not called as a witness
CHEP’s written submissions at [54] referred to the “unexplained absence” of Mr Singh as permitting me to draw an inference that his evidence would not have assisted Mr Russo: see Jones v Dunkel (1959) 101 CLR 298, 320. In circumstances in which Mr Russo’s position was in effect that Mr Singh had engaged in serious unauthorised behaviour, I did not regard Mr Singh as a witness in Mr Russo’s camp. I do not draw any inference from the fact that he was not called as a witness.
The Corporations Act
Section 129(3) of the Corporations Act 2001 (Cth) is as follows:
Officer or agent
(3)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.
This is not a case in which Mr Russo held Mr Singh out to be a purchasing officer or held out that Mr Singh held any position in the Company. It is therefore not possible to say that CHEP was entitled to “assume” that Mr Singh had authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company. Any apparent authority Mr Singh possessed arose only from a course of dealing. If, as I have found, Mr Russo’s holding out was limited, the statutory assumption does not assist: see analysis of McElwaine J in the FCA Decision, [67]. The provisions of the Corporations Act are not of further assistance in this case.
The statutory minimum debt as to a creditor’s petition
A creditor may only present a creditor’s petition for a debt that is for the statutory minimum or more: s. 44(1)(a). The prescribed statutory minimum is $10,000: Bankruptcy Regulations 2021 (Cth), reg. 10A. I have found that there is no debt owing as to pallets hired and retained after 29 November 2019 because Mr Singh was acting in an unauthorised way beyond the scope of his apparent authority. There may (or may not) be a small residual debt as to transactions which pre-date 29 November 2019. Even if that is the case, CHEP has not proved that Mr Russo owed a debt of the statutory minimum as to any debt incurred before 29 November 2019. By reference to the 7 December 2019 invoice, the total outstanding was only $356.19 (CB656). The Company’s security deposit of $2,190 (CB635) was applied in part payment of CHEP’s alleged debt (T54:L19). In the District Court CHEP gave particulars of how it calculated its debt (Statement of Claim, District Court, [12]: CB472). In excess of $20,000 of the debt related to the 570 pallets (or more) hired after 29 November 2019. Once the 570 pallets (or more) hired, and apparently never returned, after 29 November 2019 are excluded from calculations, although it is possible Mr Russo is liable for a small residual debt, any debt is less than the statutory minimum under s. 44(1).
CONCLUSION
I will make an order dismissing the creditor’s petition. I will make an order setting aside the sequestration order as an appropriate consequential order: Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 & Anor. (2021) 286 FCR 494; [2021] FCAFC 143, [3] (Allsop CJ); (Markovic and Derrington JJ agreeing).
By an email to this Court dated 17 August 2023 shortly before the hearing the Trustee notified the Court that: “in the event that the respondent’s application is successful, the trustee seeks to be heard on the question of her remuneration and legal costs.” Given that Mr Russo (the Respondent) has been successful, the Trustee ought to have that opportunity.
The Court will hear the parties as to consequential issues including as to the remuneration of the Trustee, costs and expenses reasonably incurred in the administration and costs of the application. There may be other consequential issues. The Court notes the comprehensive consideration of consequential orders in Robson, particularly in the comprehensive reasons of Colvin J: see, [254]–[258].
I will make procedural orders that the parties file and serve written submissions and any affidavit as to consequential issues. It appeared to me that it may be of assistance to CHEP and Mr Russo if the Trustee filed her submissions and any affidavit before the parties respond. I have made orders accordingly. The parties may approach chambers if they agree that another process is more efficient. I propose that consequential issues will be determined on the papers but if any party seeks a hearing as to consequential issues the Court will list the matter for a further oral hearing.
I certify that the preceding one hundred and seventeen (117) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 2 November 2023
18
4