Davies v Apted

Case [2013] SASCFC 92

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

DAVIES v APTED

[2013] SASCFC 92

Judgment of The Full Court

(The Honourable Chief Justice Kourakis, The Honourable Justice Vanstone and The Honourable Justice Peek)

17 September 2013

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - CONTRACT IMPLIED FROM CONDUCT OF PARTIES

CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - CREATION OF RELATIONSHIP OF AGENCY

Plaintiff took action to recover monies advanced in accordance with an oral agreement - defendant denied liability on the basis that in negotiating the loan he had acted in his capacity as controlling director of a company - trial judge found that the borrower was the defendant acting in his own right - on appeal it was argued that the judge erred in law in denying himself resort to the surrounding circumstances and purpose of the transaction, and that the judge overlooked or wrongly disregarded relevant items of evidence.

Held:  appeal dismissed - no error of law or approach made out.

Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193; Graziano v Graziano [2010] SASCFC 76; (2010) 273 LSJS 553; Western Export Services Inc & Others v Jireh International Pty Ltd [2011] HCA 45; VTB Capital Plc v Nutritek International Corporation & Others [2012] 2 Lloyd's Rep 313; Prest v Petrodel Resources Ltd & Others [2013] 3 WLR 1, considered.

DAVIES v APTED
[2013] SASCFC 92

Full Court:  Kourakis CJ, Vanstone and Peek JJ

  1. KOURAKIS CJ:                I would join in the orders proposed by Vanstone J for the reasons given by her Honour.

  2. I would make a brief additional observation.  It is not uncommon for the identity of a contracting party to be complicated by the circumstance that a natural person has structured his financial and commercial affairs around one or more corporate alter-egos.  Legislative reform which has allowed for privately formed trading “corporations sole” and the commercial and taxation advantages afforded to corporations has contributed to this phenomenon.  The ease with which corporate structures can be rearranged, assets moved and liabilities incurred makes contracting with a corporate alter-ego a fraught undertaking.

  3. In a number of recent English authorities a concept referred to as “piercing” or “lifting” the corporate veil has been discussed.[1]  The principle, as best it can be identified, addresses the dishonest use of corporate vehicles to evade legal liability by fixing others with the liability evaded.[2]  The principle does not extend to holding the natural person who is the principal of a company liable for the contractual obligations of the company under a contract expressly entered into with the company alone.[3]  However, in my view, it is consistent with the objective theory of contract to have regard to the hesitation that a party would…

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AGLC
Davies v Apted [2013] SASCFC 92
Case
[2013] SASCFC 92
Decision Date

CaseChat Overview and Summary

The plaintiff, Mr Davies, appealed a decision of the trial judge who found in favour of the defendant, Mr Apted. Mr Davies sought to recover monies advanced under an oral agreement, but Mr Apted denied liability, asserting he had acted in his capacity as controlling director of a company, SABC, when negotiating the loan. The trial judge had found that Mr Apted was liable in his personal capacity. The appeal argued that the trial judge erred in law by failing to consider the surrounding circumstances and purpose of the transaction, and that relevant evidence had been overlooked or wrongly disregarded.

The appellate court was required to determine whether the trial judge had correctly construed the terms of the oral contract by considering all relevant evidence and surrounding circumstances. Specifically, the court had to assess if the judge had erred in law by limiting his consideration of the evidence or by misinterpreting its significance in concluding that Mr Apted was personally liable for the loan.

The court dismissed the appeal, finding the trial judge's reasons to be comprehensive, concise, and compelling. The appellate judges agreed with the trial judge's findings and ultimate decision. They noted that the identity of the borrower was a question of fact, and that there was a clear basis for the judge's findings, irrespective of the plaintiff's own understanding of the legal situation. The court also made orders regarding the admission of an affidavit and the payment of costs.

Orders

Orders of the court

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Background

Background to the litigation

The judge found for Mr Apted. Upon appeal it is argued that the judge wrongly denied himself resort to the surrounding facts and circumstances in construing the terms of the oral contract and it is further argued that he misused items of evidence in arriving at his conclusion.Background Mr Apted and Mr Davies were known to each other over many years through business, although they did not have any business interests in common. Either on 30 June 2004, or a day or so prior to that, the two men met at Mr Davies’ office. According to Mr Apted, Mr Davies told him that he had a strong interest in “taking a controlling position in a business known as ‘The Bar on Gouger’” and that, while he already had about 40 per cent of it, he wished to take a complete interest. Mr Apted said that Mr Davies asked whether Mr Apted knew where a “quick $100,000” could be found. He told Mr Apted that there would be something in it for him. He described the business as having a good cash flow. Mr Apted said that he would see about it. He spoke to two old friends, P and G, who were the trustees of the superannuation fund, SPC. They decided to have SPC borrow $100,000 from its banker, ANZ, and a cheque was drawn on 30 June 2004. The payee of the cheque was left blank, according to Mr Apted, on the instruction of Mr Davies. Mr Apted said he was told by Mr Davies that this would enable him to deposit the cheque into the account of whichever company he determined upon, he not operating a personal bank account. Mr Apted said that later that day he was at the business premises of P and G when a representative of the ANZ Bank telephoned P and G advising that a special answer had been sought in relation to the cheque and querying whether the cheque should be paid into the account of SABC, who was (by now) nominated as payee. The call was passed to Mr Apted. Mr Apted knew that SABC was a company associated with Mr Davies and so told the bank that the cheque should be met. The term of the loan was to be one year and the interest rate just over 9 per cent. When Mr Apted failed to repay the money to SPC he was sued and a default judgment entered against him. That led to him repaying the full amount, plus interest and costs. It was put to Mr Apted in cross-examination that at the time of the initial conversation he was told by Mr Davies that it was SABC which wished to acquire the balance of the shares in the Bar on Gouger. He denied that. He said that at all times he was dealing with Mr Davies as an individual. He said “I wasn’t dealing [with] tricky companies on the side or how he was going to do it. I was just dealing with Mr Davies”. He said he was unaware of the vehicle (if any) which Mr Davies would use to acquire the outstanding shares. It was put to Mr Apted that during the initial conversation with Mr Davies, Mr Davies had raised the question of an “outstanding debt” owed to SABC by Plastic Recyclers, a company associated with Mr Apted. In answer to that line of questioning Mr Apted asserted that there was no debt and the two issues were not connected. He explained that SABC had lost its investment in Plastic Recyclers and that there was no outstanding indebtedness. He said he had “no knowledge of those two issues being discussed on that day”, but said that later Mr Davies would often use the Plastic Recyclers matter as an excuse not to repay the $100,000 debt. He said the Plastic Recyclers issue was “never discussed specifically at that point”.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

PEEK J
In relation to the so-called “concession” made by Mr Apted in his closing address relating to why he sued Mr Davies as opposed to SABC, several observations could be made. First, this was the statement of an unrepresented man made in the course of submissions, rather than in evidence. It may well reflect a lay person’s views about the responsibilities of company directors. Second, on agency principles and depending on the facts found, both SABC and Mr Apted may well have been liable. In the end, the identity of the borrower is a question of fact and irrespective of the plaintiff’s own understanding of the legal situation, there was a clear basis for the findings made by the judge.Conclusion In my opinion the reasons of the trial judge are comprehensive, concise and compelling. I have no misgivings in relation to the findings made or the ultimate decision. I would make the following orders:1.the affidavit of Benjamin Robert Williams sworn 5 August 2013 tendered by the respondent is not admitted;2.the appeal is dismissed;3.the appellant is to pay the costs of the respondent of and incidental to the appeal. I agree with the orders proposed by Vanstone J and with her Honour’s reasons. I also agree with the additional reasons of the Chief Justice.

Ratio Decidendi

Legal Principle Established

Established by: PEEK J

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