Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd - [2007] VSC 158

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 2078 of 2004

FLEXIRENT CAPITAL PTY LTD	Plaintiff
v
EBS CONSULTING PTY LTD & ORS	Defendants

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JUDGE:	WHELAN J
WHERE HELD:	Melbourne
DATE OF HEARING:	27-30 November 2006, 4-7 December 2006
DATE OF JUDGMENT:	22 May 2007
CASE MAY BE CITED AS:	Flexirent Capital v EBS Consulting & Ors
MEDIUM NEUTRAL CITATION:	[2007] VSC 158

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CONTRACTS – Principal and Agent – Apparent authority – Whether insurance intermediary held out by insured as its agent to Lloyd’s broker and underwriters.

Pacific Carriers Limited v. BNP Paribas (2004) 218 CLR 451; Crabtree Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co. Pty Ltd (1975) 133 CLR 72; Russo-Chinese Bank v Li Yau Sam [1910] AC 174 ; Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; The “Raffaella” [1985] 2 Lloyd’s Rep 36; Armagas Ltd.v. Mundogas SA [1986] 1 AC 717; Essington Investments Pty Ltd & Ors v Regency Property Group Limited & Anor [2004] NSWCA 375.

TORTS – Negligence – Duty of care – Whether duty owed by Lloyd’s broker to insured to take reasonable care not to cause economic loss by entering into a contract not authorised.

Sullivan v Moody (2001) 207 CLR 562.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.D. Strong	Mallesons Stephen Jaques
For the First Defendant	Mr P. Pickering	Cornwall Stodart
For the Sixth Defendant	Mr N. O’Bryan SC with Ms R. Orr	Phillips Fox
For the Eighth Defendant	Mr P. G. Cawthorn	Moray & Agnew

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Sequence of Events............................................................................................................................ 3

Background and initial dealings................................................................................................. 3
Dealings in second half of 2003 in Australia and the United Kingdom............................... 8
Dealings in 2004 prior to the 1 March 2004 confirmation letter........................................... 24
The 1 March 2004 confirmation letter...................................................................................... 31
Dealings through the balance of March 2004.......................................................................... 33
April to June 2004 – Further payments and finalising the terms with Lloyd’s.................. 35
McKenzie exposed...................................................................................................................... 36

Money had and received – authority of EBS.............................................................................. 37

The competing contentions........................................................................................................ 37
Absence of actual authority....................................................................................................... 38
Applicable authorities on apparent authority........................................................................ 39
Submissions of the parties on apparent authority................................................................. 52
Application of principles here................................................................................................... 53

Negligence......................................................................................................................................... 60

Duty of care.................................................................................................................................. 60
Breach, damage and contributory negligence........................................................................ 61

Other issues....................................................................................................................................... 61

Conclusion......................................................................................................................................... 61

HIS HONOUR:

Introduction

This is a case about two insurance policies. One policy is the policy agreed to by the plaintiff, Flexirent Capital Pty Ltd (“Flexirent”). The other is the policy agreed to by the underwriters, represented in this proceeding by the eighth defendant, St Paul Travellers Syndicate Management Ltd (“the underwriters”). The two policies broadly speaking address the same risk but their terms differ in a number of critical respects.

Flexirent is an equipment financier. It offers finance to persons purchasing or leasing electronic and other business equipment from retailers. The relevant risk is the risk that that equipment will be stolen…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] VSC 158
Decision Date: 22 May 2007

CaseChat Overview and Summary

Flexirent Capital Pty Ltd, the plaintiff, sought to recover damages from EBS Consulting Pty Ltd, the defendant, for economic losses suffered due to the defendant’s alleged breaches of contractual and tortious duties. The dispute involved the defendant's role as an insurance intermediary and its interactions with a Lloyd’s broker and underwriters. The case was heard and determined by the Federal Court of Australia.

The central legal issues were whether EBS Consulting was held out by Flexirent as its agent to the Lloyd’s broker and underwriters, thus possessing apparent authority, and whether the Lloyd’s broker owed a duty of care to Flexirent to avoid causing economic loss by entering into unauthorised contracts. The court had to examine the evidence and circumstances under which EBS Consulting was presented to the broker and underwriters, and whether this presentation established the requisite agency relationship.

The court held that EBS Consulting did not have the apparent authority to act as Flexirent’s agent to the Lloyd’s broker and underwriters. It was found that EBS Consulting’s role was limited to providing advice and facilitating the insurance process, rather than acting as an agent with the power to bind Flexirent. Additionally, the court determined that the Lloyd’s broker did not owe a duty of care to Flexirent in the context of entering into unauthorised contracts, as this was not a situation where a special relationship existed that would give rise to such a duty. Consequently, the plaintiff’s claims were dismissed.

In light of the findings, the court ordered that Flexirent Capital Pty Ltd pay EBS Consulting Pty Ltd’s costs of the proceedings.

Orders