Dick Smith Electronics Pty Ltd v 4G Networks Pty Ltd

[2009] VCC 186

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE

CIVIL DIVISION

Case No. CI-08-03379

DICK SMITH ELECTRONICS PTY LTD	Plaintiff
v.
4G NETWORKS PTY LTD & ORS	Defendants

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JUDGE:	HIS HONOUR JUDGE ANDERSON
WHERE HELD:	Melbourne
DATE OF HEARING:	16 & 17 March 2009
DATE OF JUDGMENT:	17 March 2009
CASE MAY BE CITED AS:	Dick Smith Electronics Pty Ltd v 4G Networks Pty Ltd
MEDIUM NEUTRAL CITATION:	[2009] VCC 0186

REASONS FOR JUDGMENT

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Catchwords:  Contract – Authority of agent to enter contract – No breach of warranty
of authority or actionable representations or conduct.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D McWilliams	City Pacific Law Firm Pty Ltd
For the First Defendant	No appearance
For the Second Defendant	No appearance
For the Third Defendant	Ms C Boyle	Rigby Cooke
HIS HONOUR:

1          Dick Smith Electronics Pty Ltd is a retailer of electronic goods and accessories. Between April 2005 and September 2007 it sold mobile telephone recharge vouchers to a total value of almost $3.5 million at the request of Mr Lauchlin Mulholland, the third defendant.

2          From April 2005 to the end of June 2007 the goods were invoiced to the second defendant, Oceanic Ventures Pty Ltd. This was a New Zealand company of which Mr Mulholland was a director. Primarily these were cash

sales although towards the end of the period the company was allowed a few
days to pay invoices.

3          During this period orders were placed by email or telephone by Mr Mulholland with the plaintiff’s credit department in Sydney. The credit department authorised the plaintiff’s store in Elizabeth Street, Melbourne to prepare the vouchers and to release the goods upon the credit department notifying the store that payment had been received. The vouchers were then collected from the store.

4          At the end of June 2007 there were probably no monies owing to the plaintiff. On 25 June 2007 Mr Mulholland telephoned the plaintiff’s credit manager, Ms Trish Paul. He told her that the name of the customer was to be changed “to 4G Networks for GST reasons”. Ms Paul changed the name on the plaintiff’s computer system on 5 July 2007 after Mr Mulholland notified her by email that

the new billing company was to be “4G Networks Pty Ltd, Suite 6, Level 2,
166 Wellington Street, Collingwood, Vic, 3066”.

5          Between 26 July and 10 September 2007, 11 further invoices were issued totalling $156,177 for vouchers supplied from the plaintiff’s Elizabeth Street store. It is likely that the goods continued to be ordered by Mr Mulholland and were collected later from the store when the vouchers had been prepared.

6          Some payments were made to the plaintiff between July and September 2007 which reduced the amount owing to $142,127.06. This amount remained unpaid and both the first and second defendants told the plaintiff that the responsibility for the account rested with the other defendant.

7          The plaintiff sued the two companies and Mr Mulholland. The first defendant, 4G Networks Pty Ltd, was sued pursuant to a “purchase contract” for the goods set out in the 11 invoices. The claim was made alternatively against the second defendant, Oceanic Ventures Pty Ltd, on two bases:

a.	firstly, pursuant to the purchase contracts; and
b.	secondly, on the basis of representations by Mulholland on behalf of the second defendant that it had authority on behalf of the first defendant to enter the contracts and, if it had no such authority to bind the first defendant, the plaintiff had suffered loss and damage.

8          This latter claim was pleaded as a claim for breach of warranty of authority or alternatively in breach of obligations under the Trade Practices Act or the Fair Trading Act not to engage in misleading or deceptive conduct. A similar claim was made against the third defendant, Mr Mulholland.

9          The central issue in the proceeding was whether Mr Mulholland had authority to bind the first defendant. The evidence disclosed that there was a business arrangement (or partnership) between the second defendant and the first

defendant and/or with an associated company, Telecom International Group Ltd. The second defendant financed certain parts of the business operations of the first defendant and Telecom International Group involved with the

provision of VOIP Technology by which overseas telephone calls were
provided to users at very inexpensive rates.

10        In April 2005 Mr Mulholland set up the account with the plaintiff on behalf of the second defendant. The vouchers were provided for use by the first defendant and Telecom International Group in its business. The second defendant was to share 40 per cent of the profits of the business, and the first defendant (or some other associated entity) to the extent of 60 per cent.

11        In June 2007 the first defendant, through its director, Mr Bryan Rowe, and its general manager, Mr Don Williams, determined that it would be more profitable for the business if it contracted directly with the plaintiff. It would then be entitled to claim GST input credits which would return it approximately 10 per cent of the price of the goods. These credits were not available to the second defendant because it was a New Zealand company. This was the basis for the explanation given to Ms Paul, the plaintiff’s credit manager, that the change of name of the account was “for GST reasons”. Ms Paul said in evidence she understood that the name change was so that a claim could be made for GST input credits.

12        There is, in my view, no doubt that the change of name, so that the first defendant became the contracting party, was authorised by the first defendant. There is an exchange of emails in evidence as follows:

(i) 26 June 2007 – 1.54pm (New Zealand time) – Don Williams of the first defendant to the third defendant, “Subject: GST”

“Locky, GST – are we done and dusted there with DSE [Dick Smith
Electronics]? Please update. Don Williams.”

(ii)        26 June 2007 – 1.35pm (AEST) – third defendant to Don Williams, “Subject: GST”

time, by the first defendant’s technical manager, Mr Jon Moss. What was unusual was that the plaintiff allowed the amount owing to blow out without requiring payment at the time of the orders or shortly afterwards, as had previously been the case. The plaintiff neglected its internal procedures which required credit accounts over $25,000 to be supported by directors’ guarantees and credit checks before approval.

15

Friendly reminders defendant, on 10 and 21 September 2007 but Mr Mulholland was not apparently spoken to about the state of the account until 4 October 2007. He promised to “fix everything” with Mr Rowe, the director of the first defendant.

“The request has gone in. Awaiting the reply. I asked it to be done
yesterday. Kind regards, Locky”

(iii)       29 June 2007 – 12.03pm – Don Williams to third defendant, “subject re: GST”

“Hi, did we get a firm reply on this? I want to have 4G on the invoices
from Monday. Thx.”

13        Mr Williams gave evidence that he requested Mr Mulholland to arrange the change of name on the plaintiff’s invoices. He said the first defendant had looking at ways of increasing profits and the first defendant had intended to

pay the accounts so that it could claim the GST tax input. Mr Williams said
that Mr Mulholland was authorised to place orders for vouchers with the
plaintiff on behalf of the first defendant.

14        The plaintiff continued to supply goods between July and September 2007. The invoices were all addressed to the first defendant and the goods were collected from its Elizabeth Street store, as they had previously been for some

“” about the accounts were sent, presumably to the first “take whatever steps you feel are appropriate” with the first defendant.

16        In the circumstances, I consider that the only appropriate conclusion on the evidence is that the dealings between July and September 2007 were between the plaintiff and the first defendant. The purchase contracts were entered into on behalf of the first defendant by the third defendant who was clearly authorised by the first defendant to do so. In as far as he warranted that he had the authority of the first defendant, he did have that authority, and accordingly there was no breach of warranty or actionable representations or conduct.

17        The plaintiff is entitled to judgement against the first defendant for $142,127.06, together with interest and costs. The claims against the second and third defendants will be dismissed. I will hear further argument in relation to the appropriate costs orders.

Certificate

I certify that these 5 pages are a true copy of the reasons for decision of His Honour

Judge Anderson delivered on 17 March 2009.

Dated: 17 March 2009.

Julien Lowy

Associate to His Honour Judge Anderson