Equator Communications Pty Ltd v Midas Management Pty Ltd and Mead

[2007] NSWLC 19

Local Court of New South Wales

CITATION:	Equator Communications Pty Ltd v Midas Management Pty Ltd & Mead [2007] NSWLC 19
JURISDICTION:	Civil
PARTIES:	Equator Communications Pty Ltd Midas Management Pty Ltd Anthony Mead
FILE NUMBER:	12162/05
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	02/05/2007
MAGISTRATE:	Magistrate H Dillon
CATCHWORDS:	Contracts - Agency - Whether second defendant an agent for first defendant - Whether contract between plaintiff with first defendant or second defendant.Practice - Whether plaintiff estopped from maintaining action against first defendant because default judgment entered against second defendant - Whether default judgment should be set aside because entered irregularly or in bad faith
LEGISLATION CITED:	Fair Trading Act 1987 s.42. Trade Practices Act 1974 s.52. Uniform Civil Procedure Rules 2005 Rule 36.15(1)
CASES CITED:	Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 115 ALR 377. Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993. McMillan v McMillan (1891) 17 VLR 33. Marginson v Ian Potter & Co (1976) 136 CLR 161. Petersen v Moloney (1950-51) 84 CLR 91. Pickering v Busk (1812) 15 East 38. Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165.
REPRESENTATION:	Mr A.D. Crossland instructed by Robinson Legal Ms R.N. Winfield instructed by Morris Corkhill (for 1st Defendant) Ms M.S. Morris Corkhill instructed by Morris Corkhill (for 2nd Defendant)
ORDERS:	Verdict for the plaintiff against the first defendant and judgment accordingly in the sum of $35,507.01 plus interest to be calculated from 14 June 2005. Default judgment for the plaintiff against the second defendant set aside. Costs reserved.

JUDGMENT

1. When Mr Anthony Mead, the second defendant, was young he was taken by his mother to see the arrival of Santa Claus at the Grace Brothers store in Broadway. Later he visited New York City and saw the Macy’s Christmas Parade. These memories stayed with him into his late middle age and gave him the big idea which led to this case. He wanted to organise a Christmas Parade in Sydney.

2. In 2004, he set out to realise his dream. To do so, however, it was necessary to raise capital. The Sydney Christmas Parade Trust was set up in Noosa, Queensland, for this purpose and to organise the event. Midas Management Pty Ltd was installed as the trustee. Mr Wayne Farr, Mr Mead’s friend and adviser of 35 years, is the sole director of Midas.

3. To raise the capital it was necessary for the Sydney Christmas Parade Trust to market the project to potential sponsors and joint venturers. This in turn required brochures and marketing materials that could be used to create the enthusiasm and financial support needed to make the project a success.

4. Equator Communications Pty Ltd, the plaintiff, is the advertising agency that produced the brochures. It has never been paid for its work. It claims that it had an agreement with Midas that the trust would pay its fees for producing the brochures and materials inserted within them. Its claim against Midas is to a sum of $35,507.01.

5. Midas denies that it formed a contract with Equator. It asserts that Equator’s contract was with Mr Mead personally. It denies that Mr Mead was its agent. Mr Mead was therefore joined as the second defendant in this action and did not file a defence. A default judgment has been entered against him with damages to be assessed. He also asserts that he had a personal contract with Equator but claims that it was for a sum of $20,000 only.

6. The hearing, somewhat unusually, therefore consisted of the trial of the action between the first defendant and the plaintiff and, simultaneously, applying the same evidence, a contest concerning the assessment of damages in respect of the plaintiff’s action against Mr Mead.

The issues

7. In relation to the action against Midas, the issues in the case are relatively simple. First, did Equator have a contract with Midas? This entails consideration of whether Mr Mead had actual or ostensible authority to act as the Sydney Christmas Parade Trust’s agent.

8. Second, if the contract was with Midas, what were the terms of the agreement ultimately concluded? In particular, was the sum agreed by the parties $20,000 as claimed by Mr Mead or the greater sum claimed by Equator?

9. The plaintiff’s case is brought, firstly, in contract but, alternatively, it alleges that Midas, through its agent Mr Mead, engaged in misleading and deceptive conduct constituting a breach of s.52 of the Trade Practices Act 1974 (Cth). Both causes of action depend on the plaintiff proving that Mr Mead was acting as Midas’s agent at the relevant times.

10. The action against Mr Mead is brought pursuant to s.42 of the Fair Trading Act 1987. Section 42 is the NSW equivalent of s.52 of the Trade Practices Act. In essence, this claim asserts that Mr Mead made false or misleading representations to Equator that he was authorised to bind Midas when in fact he was not and that, as a result, Equator performed various works for Midas and suffered loss by virtue of its refusal to pay for those services. The claim against Mr Mead was pleaded in this fashion because both defendants asserted that Mr Mead was not Midas’s agent in his dealings with the plaintiff.

11. This action is, in effect, brought in the alternative by the plaintiff: if it fails against the first defendant it must succeed against Mr Mead. Concerning this matter, two issues arise. First, what is the quantum of damages?

12. As neither party had dealt with it in their oral submissions at the conclusion of the evidence, I raised the second issue,which concerns the possible inconsistency of judgments, during the course of closing addresses and invited the parties to make written submissions. Without expressing a concluded view on the pre-condition, I asked the parties what would be the appropriate orders concerning the default judgment entered against Mr Mead if I took the view, after a consideration of all the evidence, that he was not telling the truth in asserting that he had entered an agreement personally with Equator and had in fact made the contract as Midas’s agent.

Did Equator have a contract with Midas?

13. This is the key question in this case. The answer to it turns on the question whether Mr Mead was acting as the trust’s agent when he formed the agreement with Equator. The plaintiff asserts that Mr Mead had either actual or ostensible authority from Midas to act as its agent in relation to Equator and, having made the assertion, bears the onus of proving it on the balance of probabilities.

14. A corporation, such as Midas, necessarily acts through human agents. Midas could, self-evidently, have conducted its affairs through Mr Wayne Farr, its sole director. Whether Mr Mead was able to bind Midas to an agreement with Equator depends on whether he was given actual authority by Mr Farr to act on behalf of Midas’s behalf in forming that contract or whether by its conduct (which may be inferred from circumstantial evidence) it represented Mr Mead to be, or held him out as, its agent. A principal is estopped from denying an agent’s ostensible authority if it has apparently authorised the purported agent to act for it.

15. In Pickering v Busk (1812) 15 East 38 (at 43); 104 ER 758 (at 760) Lord Ellenborough observed:

Strangers can only look to the acts of the parties, and to the external indicia of property, and not to the private communications which may pass between a principal and his broker: and if a person authorise another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority… If the principal send his commodity to a place, where it is the ordinary business of the person to whom it is confided to sell, it must be intended that the commodity be sent thither for the purpose of sale.

16. Lord Diplock stated the essence of the doctrine of ostensible or apparent authority in Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 (at 503):

An ‘apparent’ or ‘ostensible’ authority … is a legal relationship between the principal and the contractor created by a representation, made by a principal to a contractor, intended be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the ‘apparent’ authority, so as to render the principal liable to perform any obligations imposed on him by such a contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted on by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.

17. I have considered and taken into account all the evidence given in the proceedings but, in the interests of economy, will refer only to the salient features of it.

18. Messrs Mead and Farr both gave evidence that Mr Farr had advised Mr Mead concerning the establishment of the Sydney Christmas Parade Trust. According to Mr Farr, his recommendation was that a trading trust be set up with Mr Mead as beneficiary. The trust deed which was executed on 29 July 2004, however, nominated Mr Farr, his de facto wife Ms Jennifer Emerson and a Mr Bill Mead (plus spouses, children, parents and siblings of the named beneficiaries and various other entities) as the income beneficiaries of the trust.

19. It is common ground that on about 31 March 2005 Mr Mead first made contact with Equator, leaving a message which was received by Mr David Stobart, a director of Equator, asking him to call about a “business opportunity”.

20. According to Mr Farr, on 1 April 2005, he had a conversation with Mr Mead in which Mr Mead told him that he wanted to appoint an advertising agency and in which Mr Mead requested that he, Mr Farr, send a letters by email to three advertising agencies including Equator. Mr Mead’s evidence accords with Mr Farr’s on this point.

21. The letter was received by Equator on that day by email. It was headed “Sydney Christmas Parade” and had a logo of a Christmas bauble on which the Sydney Opera House appeared. Below the header appeared a postal address (a post office box number) in Gladesville, NSW, together with telephone and fax numbers and Mr Mead’s email address. Immediately below those identifying details appeared the name “Sydney Christmas Parade Trust” with an Australian Business Number. The trustee was then identified as Midas Management Pty Ltd and a post office box number in Noosa was provided but no telephone number, fax number or email address appeared on the letter.

22. The letter stated:

Dear Sir,

Steve Allen of Essence Media suggested we contact you to obtain a quote for [press, radio and television advertising and] sales brochures (required now).

Enclosed is a copy of our draft Brochure, “Sydney Joins the World”, Press Release and Story Board.

City of Sydney Council has provided approval for the conduct of the Parade, which will be a major event based on the very successful Macy’s Christmas Parade in New York.

The advertising campaign would commence (say) October 2005, targeting greater Sydney, Central Coast, Wollongong, Newcastle and Canberra.

Please let us know if your agency can help us establish this event as a Sydney icon.

I can also be contacted on [a telephone number] or email [Mr Mead’s address].

23. Although the letter was unsigned, having been emailed, Mr Mead was nominated as the writer of the letter.

24. Mr Boyd Anderson, another director of Equator, and Mr Stobart gave evidence that on 7 April 2005 they had met Mr Mead at their office. They both stated that at that meeting Mr Mead told them that Mr Mead and his “partner” Mr Wayne Farr were organising the parade, that he had various people involved in the planning and that he needed Equator to handle the advertising and also that he needed a sales brochure produced “as soon as possible” to enable the parade’s sales staff to obtain sponsors. Both Messrs Anderson and Stobart expressed interest in doing the work. Mr Anderson gave evidence that he had told Mr Mead at that meeting that they would need “a formal letter of appointment”.

25. Evidence was given by Equator’s witnesses that, following the initial meeting, a number of further meetings of parties involved in the planning and organisation of the parade were convened. Messrs Anderson and Stobart stated that on 11 April they met Mr Mead and Mr Craig Gibbs to discuss sales packages. On 18 April, a large meeting attended by 15 people was held to discuss the parade. Mr Mead was nominated in the minutes as the representative of the Sydney Christmas Parade Trust. Minutes of another meeting held on 9 May also listed Mr Mead as representative of the trust.

26. Messrs Anderson and Stobart gave evidence that after the meeting of 18 April 2005 they had pressed Mr Mead for a letter of appointment authorising the agency to do the work on the sales brochure. According to Mr Anderson, Mr Mead’s reply had been, “I will get Wayne to send a letter of appointment to you.” No letter was produced by Mr Farr or Mr Mead.

27. On 26 April 2005, Messrs Stobart and Anderson had another meeting with Mr Mead concerning the sales brochure. Mr Anderson, somewhat frustrated by the trust’s failure to provide a letter of appointment had Equator had been requesting, had drafted a letter addressed to Equator from the trust for Mr Mead’s signature and took it to the meeting where it was presented to him.

28. In Mr Anderson’s statement, tendered in evidence, he said that he had told Mr Mead about the estimates Equator had obtained for the sales brochures but that before Equator could commit itself to spending money it required the letter of appointment. He said that he had told Mr Mead he could have Mr Farr examine it if he wished but that Mr Mead had replied in words to the effect of “I have to get the job moving or we will lose opportunities for getting sponsors. I can’t wait for Wayne. I will sign it now.”

29. He also gave evidence that in the course of the discussion that day Mr Mead had told him and Mr Stobart about his business background and had said at one point, “I never make any business decisions without [Mr Farr’s] approval.” Mr Anderson said that Mr Mead had also said that he had “never cheated anyone for payment and I do not intend to start doing that now.”

30. The letters of 1 April and 26 April 2005 and an email from Mr Anderson to Mr Mead were the three most important documents tendered in evidence. The letter of 26 April was headed “Sydney Christmas Parade Trust” (with its address being Mr Mead’s Gladesville post office box number) and reads as follows:

This letter confirms the appointment of Equator Communications Pty Ltd as Advertising Agency for the Sydney Christmas Parade 2005.

The Sydney Christmas Parade Trust agrees to pay all invoices for approved work within 30 days.

31. It was signed by Mr Mead on a date that is difficult to determine with precision. In their witness statements Messrs Anderson and Stobart said that Mr Mead signed the document when it was given to him on 26 April. That, however, appears to be incorrect. On 28 April, Mr Anderson emailed Mr Mead and, among other things, requested that he return “a signed copy of the appointment letter we gave to you on Tuesday.” (The email also discussed the terms of the agreement and I will come them in another section of this judgment below.) Mr Mead, in his witness statement, declared that he had signed the document on 29 April. (In his oral evidence, however, he asserted that he had been mistaken about the date and said that it had been signed on 9 June 2005.) On 2 May 2005, Mr Anderson wrote an email to Mr Mead complaining that Equator had not yet entered a written agreement with the trust and urged Mr Mead to give the matter his urgent attention.

32. Mr Farr stated that on 11 April he had been told by Mr Mead that Equator had agreed to provide services to him personally rather than wait for the trustee to raise funds. He said that at about that time he had had a further conversation with Mr Mead in which Mr Mead had said that he was going enter a private agreement with Equator which had quoted him a sum of $20,000. His evidence on this point was also supported in very similar terms by his de facto wife Ms Jennifer Emerson.

33. He also stated that he had been sent the 28 April email by Mr Mead and that on 29 April he had spoken to Mr Mead about it and been told by him that he, Mr Mead, had not yet entered a private agreement with Equator. Mr Farr said that in October 2005 he had been given a copy of the letter of appointment apparently signed by Mr Mead on 29 April. A copy of that letter was annexed to Mr Farr’s witness statement. It is not clear from the document how Mr Farr concluded that it had been signed on 29 April 2005. Nothing in his oral evidence clarified this either. The inference to be drawn is that this was something told to him by Mr Mead.

34. Mr Mead claimed in his witness statement that he had signed the letter of appointment “hurriedly” and “did not pay sufficient attention to the wording included by [Equator]”. In his oral evidence, however, he said that he had been mistaken and had thought that he had signed the document about 29 April because he had adverted to what Mr Farr had said about the letter. In fact, he said, he had signed the letter on 9 June 2005 (which the day on which he had had a lunch meeting with Equator which is further discussed below when I consider the terms of the contract.)

35. This evidence was very unsatisfactory and Mr Mead was cross-examined to some effect about it. His principal assertion was that he had signed the letter in a hurry without properly digesting its contents, yet that claim cannot stand with his assertion that he signed the document more than a month after he had be given it, nor with the indisputable facts that it consists in two very simple and short paragraphs easily comprehended by any English-speaking business person and Equator’s urgent demands for a letter of appointment before they would commit their own funds and resources to the project. Moreover, it is contradicted by Mr Farr. I do not accept Mr Mead’s claim that he did not understand the letter of appointment nor his assertion that he signed the document on 9 June 2005.

36. Both Messrs Farr and Mead stated in their evidence that, before any approaches were made by Mr Mead or the trust to any service providers regarding the parade project, Mr Farr had warned Mr Mead that he, Mr Farr, was the only person authorised to enter any contracts on behalf of the trust.

37. Mr Mead’s evidence was that Mr Farr had told him that the structure of the trust meant that only Mr Farr had authority to act on behalf of the trustee. He stated that he had accepted this and told all suppliers that they should submit all quotations to Midas for approval.

38. Mr Farr stated that he had warned Mr Mead he was the only person authorised under the trust to enter into financial or other contracts. In cross-examination, Mr Farr conceded, however, that the trust deed did not state this at all.

39. Copies of a couple of contracts entered by the trust with entities other than Equator were tendered by the defendants to show that the usual procedure adopted by the trust was for tenderers to deal with Mr Farr. This evidence was adduced to corroborate the defendants’ assertions that Mr Mead had no authority to enter contracts with suppliers of services and to corroborate his assertions that he had directed suppliers to Mr Farr.

40. On 1 July 2005, an agreement appears to have been reached by the trust with Beyond the Square Communication Pty Ltd. An unsigned copy of the written agreement was tendered. Among its terms was the following:

Item 9 – SCPT Representative . Anthony Mead, Executive Producer of the Sydney Christmas Parade shall be SCPT contact and he will liaise with Wayne Farr to reduce time and expenditure which may otherwise be incurred by Beyond the Square. However, Beyond the Square may contact Wayne Farr if it requires, given that Wayne Farr is required to execute any contractual arrangements between the parties. ” See Exhibit 15.

41. Another contract was formed by Australian Drive Force Management Pty Ltd (known as SMRI) with the trust. The agreement was signed by Mr Farr for the trust on 5 April 2005. See Exhibit 10. It is of interest, however, that the written agreement, which was drafted by SMRI, identifies the client as Sydney Christmas Parade Trust and the principals of that body as Mr Farr, which it called “Director of the corporate trustee [Midas]” and Mr Mead, whom it called “Executive Producer Manager of the Sydney Christmas Parade Trust. The position held by Mr Mead in relation to the trust was not in any way amended or corrected by Mr Farr when he signed the agreement for the trust. Nor did Mr Farr insert a term, similar to that found in the contract with Beyond the Square, to the effect that only he could execute further agreements with SMRI.

42. Another agreement was formed on 12 April 2005 between the trust and Kay Investment Corporation Pty Ltd (known as Event Alliance International). This was a consultancy agreement and was signed by Mr Farr for the trust on that day. Among other things, it was a term of the agreement that “the consultant shall report to Anthony Mead, Executive Producer Manager of the Sydney Christmas Parade Trust or nominated persons.” See Exhibit 11. Once again, there was nothing in this contract similar to the provision in the Beyond the Square agreement directing Event Alliance to Mr Farr in respect of further agreements.

Conclusions on agency and formation of the contract

43. Midas submitts that the plaintiff has not proved that Mr Mead acted as its agent in forming a contract with Equator. It is correct in stating that neither Mr Anderson or Mr Stobart ever met Mr Farr or made contact with him to establish the scope of his authority to act as its agent. Midas argues that, in fact, Equator ignored it and dealt solely with Mr Mead. That is also correct, but in each case Equator contends that this was because it was dealing with Mr Mead as the trust’s agent and had no need to go to anyone else.

44. Midas also argues from the fact that Equator drafted the letter of authority for Mr Mead to sign that it was on notice that the trust, which had its own letterhead, was not prepared to enter the agreement Equator was pressing upon Mr Mead. It submits that, despite the apparent lack of enthusiasm on the trust’s part for an agreement with Equator, evidenced by Mr Mead’s failure to produce a letter of authority from the trust, Equator wanted so badly to be involved in the project it pressed ahead with the work they had proposed to Mr Mead in the hope, ultimately, of reaping a commercial reward.

45. Equator refutes that argument by pointing to the facts that it sought and obtained a letter of authority from the person it says it believed was the trust’s agent. It had not been prepared to do any work without such a letter.

46. Midas also argues that Equator cannot rely on a document of its own making to bind a third party. It submits that Equator had no authority to create a letterhead entitled “Sydney Christmas Parade Trust”, that it created the letter without reference to the trustee and goes so far as to contend that “the creation of that letter is probably a fraud on the Trust as the consent of the trustee was not obtained by the plaintiff before its creation.”

47. Equator’s response is simple: it did not seek to bind a third party through a document of its own creation. It was seeking to bind the trust which it believed was the party seeking to engage the agency. Whether the trust was a third party or was one of the contracting parties is the issue at hand.

48. Equator does not contend that it was authorised to create a letterhead for Sydney Christmas Parade Trust. That is not to the point. The issue is whether the trust, through Mr Mead, adopted the letter of 26 April created by Equator.

49. Midas complains in its submissions that the issue of agency was not raised by the plaintiff in its pleadings. Two things should be said about that. First, there is no rule of pleading that requires a party specifically to plead agency. Second, an issue of agency is implicitly raised whenever one party alleges certain conduct done or omitted by a corporate entity because a corporation can only act through its human agents. The first defendant well understood that the plaintiff was alleging that Mr Mead was its agent. Particulars of relevant contractual conversations between Mr Mead and Equator were set out in the statement of claim against the first defendant. This complaint has no substance.

50. While on the subject of proper pleading, I digress to note that it is an important rule of pleading that allegations of fraud be pleaded specifically. Rule 14.4(2) & (3). Fraud was not pleaded by the first or second defendants in their defences nor was leave sought to do so. An allegation of fraud is, obviously, very serious and the burden lies on the party alleging it to make good its claim. In my view, it is wrong for such an allegation to be made without real justification for it.

51. Here there was none. Not even Mr Mead contends that he was deceived in any way by the letter. While Equator was well aware of the trust, on its own account (given in the evidence of Messrs Anderson and Stobart) it believed that Mr Mead was the authorised agent of the trust. I deal with the question of the letter of 26 April more fully below but it suffices for current purposes to make the following observations: that there was no deceptive conduct on the part of Equator; that the letter was taken away by Mr Mead who had an ample opportunity, had he availed himself of it, to show it to Mr Farr before signing it; that Mr Mead signed it; that there was no falsity contained in the terms of the letter; that no signatures were forged and that the letter was not amended at a later date to falsify its contents.

52. Midas further contends that the contra proferentum rule ought be applied in respect of the letter against the plaintiff because of its inherent ambiguities. That argument can also be disposed of immediately.

53. The rule applies only where a provision of a contract is ambiguous and requires that any ambiguity be read against the party which drafted the contract. Although the first defendant asserts the existence of ambiguity in it arising from its creation and ownership, there is, in my view, nothing confusing or obscure at all in the provisions of the letter of 26 April 2005. The terms of the document are clear and speak for themselves. The rule applies to the terms of a contract, not to the question of how it came into being. In any event, if it were relevant, which I doubt, there is, in fact, no ambiguity as to how the document came into existence. Therefore the rule has no application.

54. Midas argues that the evidence of Messrs Anderson and Stobart ought be given little weight because, it is alleged, they deliberately sought to conceal evidence and because of demonstrated unreliability in their accounts. Equator makes the converse submission. The determination of issues of credibility depends not only on an examination of the witnesses’ evidence in a vacuum but on a comparison being made between the evidence of Messrs Anderson and Stobart and that given by Messrs Mead and Farr. I will come to that in due course.

55. Mr Mead submits that his evidence ought be accepted and that the court should not be satisfied on the balance of probabilities that the plaintiff has proven he was an agent of the trust but rather should find that he entered an agreement for certain works to be done by Equator for a sum of $20,000. He submits that the circumstances of the creation of the letter of authority were such that the court should not find that it bound the trust. Mr Mead also joined the criticisms made of the plaintiff’s evidence by counsel for Midas.

56. Some of the evidence presented by both parties does not stand up to close scrutiny. After a passage of time, human memory tends to fade and sometimes events are honestly but mistakenly reconstructed by witnesses. Hence the importance of contemporaneous records created by persons when memories are fresh and when there are no ulterior motives for altering the historical narrative of events.

57. Messrs Anderson and Stobart certainly made some mistakes in their evidence. For example, they were mistaken in their evidence that Mr Mead had signed the letter of authority on 26 April. They were criticised for this and other lapses. They were also criticised by the defendants for having allegedly concealed important documentary evidence. A suggestion was made or implied that Messrs Anderson and Stobart had conspired to distort the evidence, to paint the defendants unfairly in an unfavourable light by hiding this evidence. That criticism would have been a powerful but for the fact at least some of the supposedly “concealed” evidence, such as the email of 28 April 2005, was in the hands of the first defendant and was in fact supportive of the plaintiff’s case.

58. Therefore, I did not form the impression that they had deliberately concealed important evidence for forensic advantage or that they had fabricated evidence. On the contrary, they appeared to me to be honest and doing their best to tell the truth as they recollected it. I deal with that issue more fully below. Nevertheless, notwithstanding some gaps in the business records, their accounts of what happened are far more fully supported by contemporaneous documentation than the evidence of Messrs Mead and Farr. For that reason, among others to which I will come, I formed the overall impression that their evidence was the more reliable.

59. For the following reasons I have concluded that Equator’s contract was with Midas:

60. First, the letter of 1 April 2005 was sent, by his own admission, by Mr Farr. His name appears nowhere in the letter. Nor did he provide in it any contact details for himself or Midas other than a Queensland post office box number. The letter was sent on what was ostensibly the letterhead of the trust. While the letter was clearly an invitation to treat, a fair reading of it held Mr Mead out as the agent of the trust for the purposes of negotiation of any agreements that may flow from the invitation. Nowhere does the letter suggest that Mr Mead’s authority was limited in any way or that any person wishing to enter an agreement with the trust must get in touch with Mr Farr.

61. Second, Mr Farr is a person of extensive business and financial experience. His advice has been sought and relied upon by Mr Mead for many years. It is, therefore, in my opinion, inconceivable that, when he sent the letter of 1 April 2005, Mr Farr had any intention but to hold out Mr Mead to the world as the agent of the trust for the purpose of negotiating a contract with an advertising agency. Had it been his intention as director of the trustee company to limit the scope of Mr Mead’s authority it would have been the simplest of measures to advert to this in that letter. He did not.

62. Third, there is no rational way of reading the letter of 1 April 2005 other than as suggesting that Mr Mead had the authority of the trust to enter contractual relations on its behalf: the only contact person nominated was Mr Mead and the only fast way of dealing with the trust was to get in touch with Mr Mead by email, fax or telephone. In stating that the sales brochure was “required now” the letter implied that there was a degree of urgency in the trust’s approach, through Mr Mead, in coming to an agreement. Moreover, the letter asks the recipient to “let us know if your agency can help us…” The letter directs the recipient’s attention to Mr Mead, not away from him, and the use of the pronoun “us” implies that Mr Mead had the authority of the trust to speak for it and to negotiate for it.

63. Fourth, apart from the tendering of the three written contracts, the defendants called no evidence from other witnesses to prove that Mr Mead had advised all suppliers to approach Mr Farr with their quotations. Perhaps that occurred in some instances, but it is revealing that the two contracts signed by Mr Farr for the trust in April hold Mr Mead out as the “executive producer manager” (which implies he had executive authority to act for the trust) and it is only in the July contract that any reference to Mr Farr having sole authority to make contracts emerges. That, of course, was at about the time Mr Mead was seeking to hold Equator at bay while he sought funding from Myer and other sources.

64. Mr Mead put Equator and, no doubt, other suppliers on notice that Mr Farr was his adviser or partner. Equator understood that Mr Mead would on occasion need to consult Mr Farr. That, however, is a long way short of being put on notice that he had no authority to bind the trust. I find it difficult to accept that in April 2005 such a limitation had been placed on Mr Mead’s authority or, if it had, that this had been communicated to all suppliers including Equator. Mr Mead claimed that all suppliers, including Equator, were told that only Mr Farr could enter agreements on behalf of the trust. There was no need for him to tell Equator this, however, if he was entering a personal agreement with Equator. This appears to be an internal contradiction in his account. Moreover, if he had a personal agreement with Equator it is odd indeed that the agency addressed its invoices to the trust not to him.

65. Midas makes the argument that trustees cannot delegate the exercise of their powers, authorities and discretions to a third party (see McMillan v McMillan (1891) 17 VLR 33). It then argues that this principle supports Mr Farr’s claims that he was the only person with authority to enter agreements on behalf of the trust.

66. That argument is flawed in three respects: First, trustees may appoint agents to carry out the decisions of the trustees. Indeed, a trust company could not perform any of its functions as a trustee except through its agents. Second, Mr Farr was himself an agent of the trustee company. He was not the trustee but a person who implemented the trustee’s decisions. True it is that he was the controller of the trustee company but that did not transform him into the trustee. Third, the trust needed agents to implement its decisions in Sydney. This could best be done through Mr Mead, who was on the spot, rather than through Mr Farr, who was in Queensland. If something urgent needed doing in Sydney, it made sense for the trust to have a local agent. He was not making decisions of the trust, he was implementing its decision to engage an advertising agency. The letter of 1 April demonstrates this point. That is a fifth reason for finding that the contract was made between Equator and Midas.

67. Sixth, during the long course of email correspondence that followed the production of the brochures and in which Mr Anderson pursued Mr Mead for payment between May and July 2005, not once did Mr Mead deny the trust’s liability or remind Equator that the contract had been made with him rather than with the trust (see below for more detailed discussion).

68. Seventh, Mr Farr gave evidence that Mr Mead told him that he, Mr Mead, had made a personal arrangement with Equator. That evidence was supported by the evidence of Ms Emerson. On Mr Mead’s evidence, Equator could have been in no doubt that they were contracting with him personally. But if that were the case, why did Equator draw up a letter of authority addressed to itself from the Sydney Christmas Parade Trust for Mr Mead’s signature? If it had a contract with Mr Mead, why did it address its five invoices dated 31 May 2005 to the trust and not him? Neither of these things makes sense unless Equator was of the view that its agreement was with the trust. Messrs Anderson and Stobart could only have come to that view because the trust held Mr Mead out as its agent or because Mr Mead held himself out to be its agent. Either way, Equator was never put on notice that Mr Mead was forming a contract with it on a personal basis.

69. Mr Mead was not an impressive witness but it seems unlikely that he felt any need to lie to his own financial adviser about the contract. He had no reason to do so. I therefore cannot accept that Mr Mead told Mr Farr that he had a personal contract with Equator. Mr Farr is, consequently, not a witness in whom I can place confidence concerning Mr Mead’s authority as an agent or lack of it. (Nor is Ms Emerson whose evidence is of questionable reliability on the further grounds that she lacks independence both because she is Mr Farr’s partner and because she stands to gain if the trust is relieved of liability.) If in about July 2005 Mr Farr considered that he ought to remove Mr Mead’s authority to act as agent, that had not occurred in April.

70. As Lord Ellenborough said in 1812, “strangers can only look to the acts of the parties” and, looking to these acts of the trustee and Mr Mead, the only reasonable conclusion a stranger (in this case Equator) could have drawn was that Mr Mead had actual authority to negotiate a deal for the provision of advertising services. Absent some express statement of lack of authority from either Mr Mead or the trustee, Equator was entitled to rely upon that apparent authority. Once the trustee had held Mr Mead out as its agent for the purposes of entering a contract with the advertising agency, it was immaterial whether Mr Mead in fact had actual authority from the trustee or not.

71. I do not accept Mr Mead’s evidence that he did not read the letter of authority. But even if true it, of course, provides the trust with no defence. In Toll (FGCT) Pty Limited v Alphapharm Pty Limited(2004) 219 CLR 165 the High Court applied the principle that a document containing contractual terms is signed, then, in the absence of fraud or misrepresentation, a party signing a commercial contract is bound by it and it is wholly immaterial whether the party (or its agent) has read the document or not when signing the document. Upon Mr Mead signing the letter of appointment, the trust, having held Mr Mead out to be its agent, was bound by the terms of that contract. It is no defence for Mr Mead to claim that he did not read it properly. No fraud or misrepresentation on the part of Equator was pleaded and those issues cannot be relied upon and are not relied upon by the defendants.

72. While, having made those findings, it is unnecessary to decide whether, at the time he signed the letter of authority Mr Mead had actual authority to bind the trust it is, in my view, more likely than not that he had. There is significant evidence to suggest that, while Mr Mead had put Equator on notice that he had a partner or adviser in Queensland, he had the actual authority in his own right to enter the agreement. That is implicit in the terms of the letter of 1 April 2005, it is implicit in the fashion that he conducted business with Equator, it is implicit in the fact that he signed the letter of appointment, it is implicit in the fact that Equator had no contact whatsoever with Mr Farr during the period they performed work for the trust and it is implicit in the fact that during June and July, when Equator and Mr Mead were negotiating a time for the payment of the invoices, he did not refer them to Mr Farr. It is also implicit in the very title Mr Mead bore on contractual documents signed by Mr Farr: “Executive Producer Manager of the Sydney Christmas Parade Trust”. It is utterly implausible that Mr Mead did not read the letter of authority and implausible that he would have signed it without authority.

73. Ultimately, however, it does not matter whether Mr Mead had been delegated the authority to make contracts on behalf of the trust because he had the trust’s ostensible authority.

74. Considering the urgency of getting the sales brochures done and the demands made by Equator upon Mr Mead for a letter of appointment before it would undertake the work, it seems more likely than not that the formal letter of appointment was signed around 2 May rather than in June as Mr Mead asserted in his oral evidence.

The terms of the contract

74. The contract formed by Equator and Midas was partly oral and partly written. The letter of 1 April set out the nature of the work for which the Sydney Christmas Parade Trust wanted Equator to quote, namely, press and advertising layout and copy, radio advertising copy, television commercials and sales brochures.

75. According to Mr Anderson, on 11 April 2005, he and Mr Stobart met Mr Mead and Mr Gibbs (of the sales management firm SMRI) at SMRI’s offices at Caringbah. Mr Anderson said that, at this meeting, Mr Mead had told them that they needed the sales brochures to be produced quickly. Mr Anderson said that he had told Messrs Mead and Gibbs that Equator would work on the sales brochures and asked for the details to be provided.

76. On 26 April 2005, as we have seen, Messrs Anderson and Stobart presented Mr Mead with the letter of authority drafted by Equator for his signature.

77. On 28 April 2005, Mr Anderson emailed Mr Mead about the brochures and their agreement. The relevant parts were as follows:

Attached are JPEG [digital image] files of the various pages of the sales folder, as discussed at the meeting. Just to confirm what we are now doing:

You have approved a budget of $20,000 to ---

a) Render the Santa logo illustration

b) Render the master parade illustration

c) Print 500 of the sales folders

We have now come to terms with 2 artists (one to do the logo and the other the master illustration) who will work within our budget and time restrictions. They are now proceeding with the work.

The deadline we are working to for finished folder is May 16.

To confirm other points discussed on Tuesday:

Our fees for this job will reflect the fact that we will be appointed to produce all your upcoming advertising, thus amortising our fees for strategy, design and writing.

As suggested on Tuesday, we anticipate the logo illustration will be used on every piece of printed material you produced from business cards and letterheads to leaflets and ads. We also expect to adapt the master illustration for use in much of the printed material to be produced for consumer promotion.

Our work on the A4 insert sheets is not included in the above, but we do not anticipate these will cost a great deal. However, we cannot proceed with them until we receive all relevant information, especially the requirements of Craig [Gibbs] and the rest of his sales team. I stress the importance of getting this information together as soon as possible.

Lastly, we would appreciate receiving a signed copy of the appointment letter we gave to you on Tuesday.

78. A copy of this email came into evidence as annexure to Mr Farr’s witness statement.

79. In his evidence, Mr Mead stated that he had made an agreement with Equator in which he emphasised that he had received a quotation for the brochure of $20,000 and that he had agreed to that sum only.

80. There is no dispute that the work was done and that the “sales kits”, the brochures and their A4 inserts, were accepted by Mr Mead in late May 2005.

81. On 31 May 2005, Equator produced its five invoices for the work. The first was in the sum of $2420, being for the production of the logo rendered by Rick Reynolds Design. The second was for the master illustration produced by Keith Scanlon Artworks. Equator charged $6655 for that work. The third invoice, in the sum of $9211.73, was for the Sydney Christmas Parade Sales Folder, artwork and printing folding having been produced by Alias Creative Works. The fourth was in the sum of $6495.28, being for the six inserts produced also by Alias. The final invoice was for fees in respect of 65 hours work performed by Equator itself in relation to design, writing, preparation and production supervision. Equator charged $10,725 for that work. Each of the invoices was addressed to the Sydney Christmas Parade Trust and was expressed to be payable within 14 days.

82. On or about 9 June 2005, Messrs Anderson and Stobart met Mr Mead for lunch at the Radisson Hotel in Sydney. Mr Anderson stated in his evidence that he had given the invoices to Mr Mead at that lunch meeting and had been told by Mr Mead that the invoices would be paid. He said that at the meeting Mr Mead had proposed that Equator become a joint venturer in the project, bearing its own costs for a share of the profits. Mr Anderson said that the proposal had been rejected without “a solid written agreement”.

83. On 15 June 2005, Equator wrote to Mr Mead. The letter was addressed to “Anthony Mead, Sydney Christmas Parade Trust” at Mr Mead’s home address in Roslyn Gardens. According to the letter, the five invoices were attached with a request that they be paid before any further arrangements were entered between Equator and the Sydney Christmas Parade. The letter went on to request that, as Equator had its own suppliers to pay, it be paid by 30 June 2005.

84. The letter then went on to discuss the joint venture proposal, raising questions for Mr Mead to answer and outlining Equator’s position. It stated that Equator could not make an offer to the Sydney Christmas Parade Trust until it was given the information it required. At no point in that letter did it agree to forgo the fees it had already claimed and invoiced, and, in discussing the possibility of some sort of future partnership with the trust, it made clear that its position was that, “regardless of the dividend arrangement, all supplier costs to Equator for preparation of Sydney Christmas Parade material are payable by the Trust (or Midas Management, whichever applies) on presentation of our invoice.” It also made clear that, in the event it did take up a partnership, Equator would not accept liability for any losses that may be incurred by the parade.

85. On 27 June 2005, Mr Anderson emailed Mr Mead about a number of matters and asked “could you please confirm that payment of our invoices will be forthcoming on 30 June (this Thursday) as promised.”

86. Mr Mead responded on 28 June thanking Mr Anderson for the reminder but neither confirming nor denying that payment would be forthcoming by 30 June.

87. On 4 July, Mr Anderson sent a further reminder email to Mr Mead concerning the invoices. This was addressed also to Mr Farr at Midas. Although a copy of Mr Mead’s (or Mr Farr’s) reply was not tendered in evidence, it appears that Mr Mead responded quickly this email. This can be inferred from the fact that on 5 July Mr Anderson emailed Mr Mead saying, among other things, “we are less encouraged to hear that payment of our invoices will now not happen until the 15th. We have paid our suppliers for these jobs, which means we are now financing the Parade, contrary to all our discussions and our understanding of the arrangement.” He also emphasised that on 9 June Mr Mead had agreed to pay the invoices by 30 June as demonstration of his bona fides. Mr Mead responded somewhat evasively by claiming to have been in meetings and promised to call Mr Anderson.

88. On 8 July, Messrs Anderson and Mead spoke by telephone. Following that call, Mr Anderson emailed Mr Mead purporting to confirm that Mr Mead had agreed to pay the invoices by early the following week and other concerns. Mr Mead replied: “Boyd, that is not what I said this AM. I am working towards to meet your commitment.” It is a little difficult to understand this response but it seems to deny any firm agreement to pay the invoices by the time asserted by Mr Anderson, but is not a denial of the obligation to pay them.

89. On 14 July, Mr Mead emailed Mr Boyd to give him an update on negotiations taking place with Myers and Disney. Mr Anderson responded tersely:

Thanks for the update. However, our primary concern at this stage, as we have said on a number of occasions now, is that you honour your undertakings to us. As today is the 14th and your most recent undertaking was to pay our invoices before the 15th, I take the opportunity to provide you with our bank details for the electronic transfer of $35,507.01 (as per our invoices, including GST).

90. On 20 July, Mr Mead again emailed Mr Anderson, stating, among other things, “I am still working on keeping the Parade together. I don’t have a time when funds will be available. As working on the past they were due on the 30th June 05. As we all know that did not happen. I will keep you advised.”

91. Mr Anderson responded to this missive with a demand for a guarantee of payment and a firm date on which the invoices would be paid. He set a deadline for a satisfactory response and threatened legal action if it was not produced.

92. Apart from the question of agency and the identification of the contracting parties, the second main issue concerns the sum of money agreed by the parties.

93. The defendants both argue that the only amount agreed by the parties was a sum of $20,000. This comes from the evidence of Mr Mead but also, it is asserted, from the email of 28 April 2005 sent by Mr Boyd to Mr Mead in which Mr Boyd acknowledged that Mr Mead had approved the expenditure of $20,000 in respect of certain work to be done by Equator and its sub-contractors.

94. It is instructive that it was the first defendant, through Mr Farr, who produced the best evidence of the terms of the contract in documentary form. As I have stated above, counsel for the first defendant was critical of the plaintiff for failing to produce all the relevant email transcripts. The inference she invited me to draw was that the plaintiff had been seeking to mislead the court by failing to adduce all the relevant material, including the email of 28 April 2005.

95. Contrary to that submission, however, a plain reading of this particular email is supportive of the plaintiff’s position, not Mr Mead’s or Midas’s, because it established that the agreement was for Midas to pay $20,000 in respective of specified work but that the inserts and anything else not particularised as falling within the budget of $20,000 would be an additional cost.

96. It is a statement of the obvious that not all contracts are for sums certain. Lawyers are familiar with this concept: few costs agreements specify a fixed amount. Rather, an estimate is given and an hourly or daily rate is specified to the client. The contract in this case was for an unstipulated amount over $20,000. The contract no doubt contained an implied term that the costs for the approved work be reasonable but there was no sum certain fixed by either Equator or Mr Mead and agreed upon by both parties.

97. It is possible that Mr Mead honestly but mistakenly reconstructed his evidence in claiming that “his” contract with Equator was for only $20,000, but he is contradicted, and his account disproved, by the very email he sent on to Mr Farr on 29 April 2005. It is reasonable to suppose that he read it before he sent it. He is unlikely to have sent it unless he had done so and understood its contents. His credibility as a witness was diminished very considerably by this inconsistency in his evidence.

98. Furthermore, on or about 9 June, but certainly no later than about 15 June 2005, Mr Mead was served with the five invoices upon which the plaintiff now relies. Then followed a lengthy and, on Equator’s side, increasingly terse and exasperated email correspondence with Mr Mead concerning payment of the invoices and, on Mr Mead’s part, an increasingly evasive series of responses, designed, so it appears, to put Equator off until he could obtain funding from Myer or some other major sponsor.

99. At no stage during that correspondence did Mr Mead assert that the contract was for only $20,000, deny the claim for $35,000, argue that Equator was seeking to overcharge the trust or claim that the work had not been performed by Equator and its suppliers. In his every response to Mr Anderson’s requests and demands for payment, Mr Mead implied acceptance of the fact that the trust owed Equator the sum claimed. He did not dispute the claim by even one cent all that time. He simply sought to evade making the payment.

100. Moreover, he had taken delivery of the sales brochures with their inserts. None was ever returned to Equator and no complaints were raised concerning the quality of the production.

101. Finally, the email of 28 April 2005 from Mr Anderson, the terms of which were never disputed by Mr Mead or Mr Farr until much later, shows that Mr Mead approved the work proposed by Equator in that email. By its letter of authority, presented to Mr Mead and signed some time in late April or early May by Mr Mead, and remitted to Equator probably in early May, agreed to pay all invoices for approved work within 30 days. Mr Mead, whether he knew the exact amount that would ultimately fall to be paid, had, on behalf of the trust, approved the work for which Equator now claims $35,507.01.

Conclusions on breach of contract

102. The work claimed for now by the plaintiff was set out in the email of 28 April and its invoices of 31 May 2005. The work had been approved by Mr Mead as the Sydney Christmas Parade Trust’s agent and was performed by Equator according to its side of the bargain. Mr Mead accepted delivery of the brochures after they had been produced in late May. The invoices were presented. No payment has yet been made either by the trustee company or Mr Mead.

103. The trustee company has sought to disclaim liability for Equator’s fees and Mr Mead to claim it. In my view, for the reasons I have set out above, the disclaimer of the first defendant, Midas, and the “confession” of Mr Mead are both false and ought be rejected. A verdict should therefore be entered against Midas.

The problem of inconsistent judgments
104. That conclusion leads to the problem I alluded to above at [12]. I sought submissions from the parties on this point but unfortunately received no useful assistance as to the appropriate order I should make.

105. The plaintiff contended that as it had pleaded a case of false or misleading representations on the part of Mr Mead, I should enter a verdict against him for the sum claimed.

106. The two defendants merely reiterated their previous submissions and did not address the particular problem I had raised except to argue, without reference to authority, that the judgment entered against Mr Mead acts as an estoppel, preventing the plaintiff maintaining its action against the first defendant.

107. The appropriate time for the defendants’ argument, it seems to me, was at the commencement of the trial. It was made after the conclusion of all the evidence and only when I raised the question. It was, in fairness however, made before I had made any findings.

108. Although the parties did not provide much assistance in dealing with the issue, and, in particular, did not refer to me to authority, there is some support to be found for the first defendant.

109. In relation to an agent acting for an undisclosed principal, the learned author of Bowstead on Agency (15th ed) tells us that the plaintiff is put to an election. He puts the rule this way:

Where an agent contracts for an undisclosed principal, the third party can, on discovery of the facts, sue either agent or principal. It is, however, well established that if the third party obtains judgment against the agent, he can no longer sue the principal, even though he obtained judgment in ignorance of the fact that the agent had been acting for another, and so of his full rights, and even though the judgment is unsatisfied. FMB Reynolds ibid. p.346. See also Priestly v Fernie (1863) 3 H & C 977; Kendall v Hamilton (1879) 4 App. Cas. 504 at 514-515.

110. The learned author of Fridman’s Law of Agency (5th ed) states, however, that the election must be unequivocal GHL Fridman Fridman’s Law of Agency 5th ed, Butterworths, London 1983 p.211.:

However, it is essential that both the principal and agent should be personally liable on the contract, that the third party has full actual knowledge of the true facts, that the third party should act within a reasonable time, before the state of accounts between principal and agent is altered and that the third party elects unequivocally, showing that he intends to relieve the agent of liability. This last is a question of fact which involves all the relevant circumstances.

111. In my view a question arises whether the plaintiff in this case has made an unequivocal election. It sued two parties in the alternative, a typical situation where the true principal to a contract is not transparent. One interpretation of Mr Mead’s failure to file a defence to the claim against him is that the defendants have sought to take tactical advantage of their obfuscations and denials of Mr Mead’s agency by offering Mr Mead as a sacrificial lamb to protect the assets of the trust from which he hopes to benefit.

112. In Petersen v Moloney (1950-51) 84 CLR 91 (at 103) , the High Court said:

The other matter which has required some consideration is this. The case is clearly one of alternative liability. Either Moloney or Pulbrook might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: see Morel Bros. & Co. Ltd. v. Earl of Westmoreland (1903) 1 KB 64; (1904) AC 11.

113. Two points should be made here. First, no question of an estoppel was raised by the first defendant until the problem of inconsistent judgments was raised.

114. Second, in Petersen the High Court made the point that:

[I]n the case of principal and agent, the election to sue one or the other is not concluded until after final judgment has been obtained against the one or the other, but, after obtaining this final judgment against the one, so long as it remains of record, no action is maintainable against the other, lest such second action bring about… inconvenient results . (1950-51) 84 CLR 91at 103-104.

115. Had Mr Mead filed a defence, and the actions against him and Midas been heard together, judgment would have been entered for him against the plaintiff and for the plaintiff against the first defendant. Until I raised the question during final addresses, neither Mr Mead nor Midas took objection to the matter proceeding to judgment, one way or the other, in relation to Midas.

116. In Marginson v Ian Potter & Co (1976) 136 CLR 161 (at 169), Gibbs CJ and Mason J said:

But once a third party has sued the agent to judgment he cannot thereafter, without setting aside that judgment , sue the undisclosed principal even if the existence of the principal was now known to the third party at the time when the judgment was obtained. This proposition rests not on the doctrine of election which depends in general upon knowledge of relevant facts but on another principle, namely that when judgment is obtained on a cause of action the cause of action merges in the judgment. Thus the liability of an undisclosed principal merges in a judgment obtained against the agent by the third party. (Emphasis added.)

117. There was no hearing on the merits and no evidence was considered by the court before the default judgment was entered. The plaintiff was virtually obliged by the first defendant’s own denials of liability to bring the alternative action against Mr Mead. The first defendant now seeks to take advantage of this by sheltering behind the default judgment notwithstanding that a hearing on the merits has now taken place and the facts alleged in the claim against Mr Mead have been disproved.

118. Generally, where there has been no hearing on the merits a res judicata estoppel will not arise. It has been held that a default judgment may give rise to a res judicata estoppel but that a default judgment “must always be scrutinised with extreme particularity for the purpose of ascertaining the bare essence of what they must necessarily have decided and… they can estop only for what ‘must necesessarily and with complete precision’ have been determined”: Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1010-12. (See also Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 115 ALR 377.)

119. What precisely has been determined, if anything, by the entry of the default judgment ? When it filed its statement of claim against the defendants the plaintiff was saying, in effect, our contract was with Midas but, if we are incorrect in our assertion, then it must have been with Mr Mead because he misled us by representing himself to be Midas’s agent. It was only because of Midas’s denial that Mr Mead was its agent that the plaintiff joined Mr Mead at all. Thus it is difficult to see that the default judgment can be said to have determined any factual issue.

120. The plaintiff’s submissions are incorrect: it cannot have a judgment against both parties when they are sued in the alternative. In any event, its case against Mr Mead is pleaded in terms of his lacking authority to bind Midas but representing that he had that authority. If he was Midas’s agent, as I have found, how could he have been making a misleading representation if he was making that very representation? Mr Mead can only be held liable in damages if he is found to have made a false or misleading representation upon which Equator relied to its detriment. He was not misleading Equator when he held himself out to be Midas’s agent.

121. If a default judgment has been entered irregularly, illegally or “against good faith” Rule 36.15(1)., the court has power pursuant to the Rules to set aside the judgment. Where there is no application from either party to do so it would, in my view, ordinarily be highly inappropriate to set aside a judgment of the court’s own motion. Nevertheless, the court has not only a right but an obligation to protect the integrity of its own process. Here it would be a travesty of justice if, at the end of a hard fought trial in which the merits of the case have been subjected to intense scrutiny and the facts distilled, and where no objection was taken to this course by either defendant, the plaintiff were now estopped from proceeding to obtain a judgment against Midas. Indeed, it would have been open for the plaintiff to have argued that the defendants should now be estopped by their own conduct from raising their estoppel argument.

122. In any event, the judgment against Mr Mead has been procured irregularly in the sense that, by his act of omission, he seeks, in bad faith, to take advantage of the ordinary process of the court for the benefit of the trust and ought be set aside accordingly. As neither party has made an application to do so, I propose to make the order of my own motion. As Mr Mead has not filed a defence, I do not think that the verdict that would otherwise be his can be entered.

123. In any event, even if the judgment were to stand, it would be open to the plaintiff to apply to have it set aside. Were it to stand, my assessment of damages is that the plaintiff has suffered no loss as a result of the cause of action it pleaded against Mr Mead: its loss was entirely due to the refusal by Midas to honour the contract negotiated by its agent, Mr Mead. Against Mr Mead, therefore, I would assess Equator’s damages as nil.

Verdict and judgment

124. In relation to the proceedings brought against Midas, there will be a verdict for the plaintiff against the first defendant in the sum of $35,507.01 plus interest to be calculated from 14 June 2005.

125. In relation to the plaintiff’s action against Mr Mead, the default judgment is set aside.

126. I reserve the question of costs.

Hugh Dillon

Magistrate