Doiho Pty Ltd v Bridge Real Estate Pty Ltd

[2005] NSWCA 332

CITATION:	Doiho Pty Ltd v Bridge Real Estate Pty Ltd & Anor [2005] NSWCA 332
HEARING DATE(S):	21 September 2005
JUDGMENT DATE:	27 September 2005
JUDGMENT OF:	Handley JA at 1; Bryson JA at 20; Young CJ in Eq at 21
DECISION:	Appeal dismissed with costs

CATCHWORDS:	AGENCY - contractual - no common law duty of care to prevent economic loss to principal - NEGLIGENCE - contractual agent owed no duty of care to prevent third party making dishonest use of document - D
LEGISLATION CITED:	Property, Stock and Business Agents Act 1941
CASES CITED:	Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80
PARTIES:	Doiho Pty Ltd (Appellant) Bridge Real Estate Pty Ltd (First Respondent) Michael Ward (Second Respondent)
FILE NUMBER(S):	CA 40675 of 2004
COUNSEL:	N Obrart (Appellant) G J Parker (Respondents)
SOLICITORS:	Joe Ryan (Appellant) Ebsworth & Ebsworth (Respondents)

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 7791 of 2002
LOWER COURT JUDICIAL OFFICER:	Sidis DCJ

CA 40675 of 2004

HANDLEY JA
BRYSON JA
YOUNG CJ in Eq

27 SEPTEMBER 2005

DOIHO PTY LTD v BRIDGE REAL ESTATE PTY LTD & ANOR

CATCHWORDS

AGENCY – contractual – no common law duty of care to prevent economic loss to principal

NEGLIGENCE – contractual agent owed no duty of care to prevent third party making dishonest use of document

FACTS

The appellant sued the first respondent, its real estate agent, in the District Court alleging that on 25 June 1996 they had breached its duty by purporting to enter into a lease on the appellant’s behalf. The trial Judge dismissed the case on several grounds but found that the first respondent owed the appellant a common law duty to take reasonable care to avoid causing it economic loss. On appeal the appellant argued that the first respondent breached its duty of care to the appellant by putting in the hands of the tenant documents that he ultimately misused in proceedings in the Fair Trading Tribunal. HELD: (1) The agent had contractual duties to its principal but did not owe a common law duty of care to avoid causing its principal economic loss: Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80; (2) The agent did not owe a duty of care to prevent a third party making dishonest use of its letters: Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254; (3) The principal had full knowledge of the facts by 22 July 1997 and after 19 March 1998 it acted independently on its own advice in obtaining possession from the tenant, and defending the proceedings brought by the former tenant in the Tribunal. The deliberate acts of the landlord and the former tenant after March 1998 severed any possible causal link with any breaches of duty by the agent in June 1996.

ORDERS

Appeal dismissed with costs.

CA 40675 of 2004

HANDLEY JA
BRYSON JA
YOUNG CJ in Eq

27 SEPTEMBER 2005

DOIHO PTY LTD v BRIDGE REAL ESTATE PTY LTD & ANOR

Judgment

1 HANDLEY JA: The appellant owned a commercial property in the Newport Shopping Centre which it had leased for a term of three years expiring on 15 September 1996 with options of renewal. The lease had been assigned to Waycity Pty Ltd, whose principal was a Mr Singh, and it conducted Rohans Indian Restaurant on the premises. The appellant’s relationship with this tenant was a difficult one and on 29 September 1995 it appointed the first respondent (the agent) its managing agent for the property under what appears to be a standard form of agency agreement.

2 On 6 June 1996 Mr Ward, who was handling the appellant’s business on behalf of the agent, wrote to Mr Singh, confirming the landlord’s agreement to a new three year lease to commence on 15 September 1996. The landlord’s agreement was expressed to be “subject to” the following:

“(1) Payment of rental at the rate of $4,421.53 pcm to the expiry of the existing lease on the first of each month as contracted.

(2) Payment of all outstanding charges up to the expiry of your current lease …

(3) Payment of the outstanding month’s rental from March 1995 totalling $4,019.57.”

3 The appellant submitted that this letter had been sent without its authority and in breach of the agent’s obligations under their agreement. The letter made provision for its signature by Mr Singh, but this did not then occur. On 25 June, at a meeting between Mr Ward and Mr Singh, this letter, with handwritten amendments, was signed by both. The most significant amendment included an obligation on the part of the landlord to pay outgoings, replacing the obligation on the tenant under the expiring lease. The three conditions in the original letter were not changed.

4 The letter as signed was, on its face, a memorandum of agreement for lease, and if the agent had authority to sign it on behalf of the appellant the agreement would have been capable of specific performance by either party.

5 During a telephone conversation with Mr Ward on 7 August, initiated by Mr Singh, he told Mr Ward that he had changed his mind and no longer wished to proceed on the basis of that letter (black 171). Instead he proposed a new lease on different terms. Mr Ward wrote to Mr Singh the following day confirming that he no longer wished to pursue a new lease on the terms previously agreed. The letter stated that the appellant was not interested in Mr Singh’s counter proposal and he had been instructed to “formally retract all previous offers to lease the property”. The letter stated that after 15 September the tenant would hold over under a monthly tenancy.

6 The statement of Mr Singh on 7 August was a clear repudiation of any agreement to lease entered into on 25 June. Equally clearly the appellant accepted this repudiation when Mr Ward sent the letter of 8 August to Mr Singh. The tenant did not fulfil the conditions in the letter of 6 June on or before 15 September and made no attempt to enforce the agreement for lease of 25 June until after it vacated the property on 5 May 1998. There is no doubt that after the lease expired on 15 September the tenant was holding over as a monthly tenant.

7 The appellant terminated the agency relationship on 19 March 1998. It served a notice to quit on the tenant on 30 March and took possession on 5 May. It was then sued by the former tenant in the Fair Trading Tribunal for breach of the agreement for lease of 25 June 1996 and on 12 September 2000 the tenant was awarded $169,381.52 in damages. The landlord did not join the agent as a cross-defendant in the Tribunal and it did not call Mr Ward as a witness. The Tribunal accepted Mr Singh’s evidence that he did not repudiate the agreement on 7 August despite the terms of the agent’s letter the following day and non-performance of the three conditions specified in the letter of 6 June 1996. If, as the trial Judge held, the tenant held over after 15 September 1996 under the expired lease the Tribunal had no jurisdiction.

8 The appellant seeks to recover the damages from the agent as damages for its alleged breaches of the agency contract and in tort for alleged breaches of its duty of care. Its principal Ms Lakshmanan denied any advance knowledge of the letter of 6 June to the tenant or of the agreement of 25 June and claimed that the agent had no authority to commit the landlord to any binding agreement for lease. However she received a copy of the letter of 8 August soon afterwards. This referred to “a new lease on the terms set out in our letter of 6 June”, but she did not then ask for a copy. This is hardly surprising as Mr Ward had written to the tenant saying the deal was off and there was no protest from the tenant.

9 On 22 July 1997 the agent wrote a letter to Ms Lakshmanan which stated:

“During May and July of 1996 discussions took place between the tenant and Mike Ward at this office in respect of a new lease. On 6 June 1996 agreement was reached on the terms … and we attach a copy of the agreement for your records”.

10 By then at the latest the appellant was in possession of all relevant correspondence.

11 Sidis DCJ found, for three reasons, that no binding agreement for lease came into existence in June 1996. Two of those reasons are unarguably correct namely non-performance of the conditions in the letter of 6 June and the agent’s lack of authority to sign “leases” on behalf of the landlord recorded in cl 7 of the agency agreement. The Judge also found that on 7 August Mr Singh repudiated the agreement of 25 June and, by implication, this had been accepted by the letter of 8 August. She also found that the tenant held over under the expired lease after 15 September and that the agent’s advice to this effect was correct.

12 The Judge found that the agent committed a breach of contract and breach of duty by sending the letter of 6 June and purporting to sign the agreement of 25 June on behalf of the landlord. Clause 7 of the agency agreement excluded any actual authority in the agent to do these things, but it may have had ostensible authority although this was not suggested by counsel for the appellant.

13 Since 1980 it has been necessary for agreements of this type between real estate agents and their clients to be in writing: Property, Stock and Business Agents Act 1941 s 42AA. In these circumstances an agent of this type may have no ostensible authority in excess of his actual authority under the signed agreement. The point was not discussed in argument and need not be further considered.

14 The Judge found that the agent owed the appellant a common law duty to take reasonable care to avoid causing it economic loss. With respect I very much doubt whether such a duty existed in this case. The relationship between the parties was created and defined by their written agreement and there is no need for the law to create equivalent duties enforceable in tort where these have not been recognised in the past: Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80, 107-8. A gratuitous agent does owe tortious duties of care but there is no contract in such a case.

15 The breach of duty, as formulated by Ms Obrart, was putting the letters of 6 and 25 June 1996 into the hands of the tenant, without authority, when it was reasonably foreseeable that they could be misused, as they were, to create or support an unmeritorious case in the Tribunal.

16 On the evidence before Sidis DCJ the tenant’s evidence in the Tribunal was false, and knowingly so. Mr Singh was not called in the District Court proceedings and this appeal must be determined on the basis of the evidence given at this trial. The duty of care relied on was to prevent economic loss to the client, and was said to have been broken by giving the tenant letters which could be used to create or support a false case. However as Gleeson CJ said in Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254, 265 “… the general rule [is] that there is no duty to prevent a third party from harming another”. The principle applies with special force where that harm was deliberately inflicted. I very much doubt whether sending the letter of 6 June, and signing the agreement of 25 June, were breaches of a common law duty of care owed by the agent to its client.

17 Assuming there were such breaches, the findings in this case establish that the documents did not create an enforceable agreement for lease for reasons unconnected with the agent’s lack of authority, and any such agreement had been terminated for anticipatory breach. It is also clear that the appellant acted after 22 July 1997 with full knowledge of the facts, particularly so after 19 March 1998 when Ms Lakshmanan collected the appellant’s file from the agents.

18 Thereafter the appellant acted independently on the advice of others or self advised and any breaches of duty by the agent in 1996 did not cause or contribute to the losses it suffered under the orders of the Tribunal. The deliberate acts of the landlord and the tenant in and after 1998 severed any possible causal link with any possible breaches of duty in 1996.

19 For these reasons the Court, having heard counsel for the appellant, did not call on counsel for the respondent and dismissed the appeal with costs. That order is confirmed.

20 BRYSON JA: I agree with Handley JA.

21 YOUNG CJ in Eq: I agree with Handley JA.

22 I feel some sympathy with Ms Lakshmanan who has suffered a judgment against her company for $169,000 from a tribunal which would appear to have had no jurisdiction to make the order, and if it did have jurisdiction, reached the wrong result.

23 However that wrong result on the facts and law now revealed, may have been within the Tribunal's mandate to reach on the evidence and submissions before it.

24 Our role is to determine whether there is any appealable error in Judge Sidis' decision.

25 Despite Ms Obrart urging upon us everything that could be said to support the appellant's case, for the reasons given by Handley JA, the appeal must be dismissed with costs.

**********