Integrated Asset Management Pty Ltd v Trans Communications Pty Ltd

[2015] NSWSC 984

Supreme Court

New South Wales

Medium Neutral Citation:	Integrated Asset Management Pty Ltd v Trans Communications Pty Ltd [2015] NSWSC 984
Hearing dates:	27 March 2015
Date of orders:	23 July 2015
Decision date:	23 July 2015
Jurisdiction:	Common Law
Before:	Schmidt J
Decision:	The appeal must be allowed and her Honour’s judgment and orders set aside. The usual order as to costs is that they follow the event. The orders sought in the notice of appeal depart from that order. The parties are directed to confer as to costs and to file proposed short minutes of order. I will hear them on the question of costs, if there remains any disagreement.
Catchwords:	APPEAL – appeal against Local Court decision – contracts and agency – rental of telecommunications equipment – recovery of money owed under agreement – doctrine of undisclosed principal – appeal allowed – judgment and orders set aside
Legislation Cited:	Civil Procedure Act 2005 (NSW) Local Courts Act 2007 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 Bank of Western Australia v Salmon [No 1] [2009] NSWSC 224 Berzins v QBE Insurance (Australia) Ltd [2014] NSWCA 196 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 Davison v Vickery’s Motors Ltd (in liq) [1925] HCA 47; (1925) 37 CLR 1 Drabsch v Switzerland General Insurance Co Ltd (Supreme Court (NSW), Santow J, 16 October 1996, unrep) Hannover Life Re of Australasia Ltd v Dargan [2012] NSWCA 185 Humble v Hunter (1848) 12 QB 310 Keighley, Maxsted & Co v Durant [1902] AC 240 Multicar Engineering Pty Ltd v Federal Airports Corp (1997) 47 NSWLR 631 Newey v Westpac Banking Corporation [2014] NSWCA 319 NRMA Insurance Ltd v B & B Shipping and Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273 Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Limited (in liq) [2013] FCAFC 5; (2013) 209 FCR 368 Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699 Waller and Son Ltd v Thomas [1921] 1 KB 541 Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441; (2006) 200 FLR 125
Texts Cited:	G E Dal Pont, Law of Agency, (2nd ed 2008, LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Integrated Asset Management Pty Ltd ACN 087 604 948 (Plaintiff) Trans Communication Pty Ltd ACN 099 104 462 (First Defendant) John Peter Van Rooyen (Second Defendant)
Representation:	Counsel: Mr P Aquilina (Plaintiff) Mr S Fisher (Defendant) Solicitors: SR Law (Plaintiff) No solicitor, direct brief (First and Second Defendant)
File Number(s):	2014/164557
Publication restriction:	None
Decision under appeal	Court or tribunal: Local Court Jurisdiction: Common Law Date of Decision: May 2014 Before: Wynhausen LCM File Number(s): 2012/286088

Judgment

1. In May 2014, Wynhausen LCM dismissed a claim brought by the appellant, Integrated Asset Management Pty Limited, a finance company, against Trans Communications Pty Limited and one of its directors, Mr John Peter Van Rooyen, for recovery of what it claimed was owed under an agreement for the rental of certain telecommunication equipment which Trans Communications had entered with its agent, Technology Fund Management and which Mr Van Rooyen had guaranteed. Trans Communications had made payments under the agreement for some 36 months until it came to an end in 2012, but it never returned the rental equipment. The claim depended on the doctrine of undisclosed principal. Integrated Asset Management Pty Limited appeals the decision on certain questions of law.

2. Trans Communications had defended the claim on the basis that Integrated Asset Management was not a party to the rental agreement which it had made with Technology Fund Management. Further, that it had purchased the rental equipment by exercise of an option it had been granted under a collateral agreement it had made with Technology Fund Management’s agent, Mr Stephen Scales, by payment of $1, paid some months after the rental agreement had come to an end.

3. Her Honour found, however, that Integrated Asset Management had been the undisclosed principal of Technology Fund Management; that Mr Scales had been Integrated Asset Management’s sub-agent or sub-broker; that Trans Communications had entered an agreement with Mr Scales to purchase the rental equipment for the sum of $1; that this agreement had been obtained by Mr Scales’ misrepresentation; and that the effect of his misrepresentation was that the rental agreement was vitiated.

4. Trans Communications and Mr Van Rooyen sought to support the decision by a notice of contention, where they contended that Technology Fund Management had never made the rental agreement on which Integrated Asset Management’s case rested and, in the alternative, that Technology Fund Management was not authorised under the agency agreement to enter the rental agreement.

5. They also contended that Integrated Asset Management was not the proper plaintiff, which was Technology Fund Management; that the cases advanced at trial went beyond the pleadings and, for various identified reasons, justified a finding that Trans Communications’ 16 June 2009 offer to Technology Fund Management had not been accepted, so that no binding contract had come into existence and further, that no contract had been formed between either Integrated Asset Management or Technology Fund Management and Trans Communications; that the rental agreement did not bind Trans Communications; that the principal and agency agreement did not cover the rental agreement; that, if valid, the rental agreement was cancelled by valid notice and so Trans Communications had no obligation to make the payments claimed; that the doctrine of undisclosed principal did not apply to the rental agreement; that Technology Fund Management had not intended to enter the agreement as an agent; that Integrated Asset Management could not sue on the rental agreement because Technology Fund Management was there identified to be the owner of the equipment; and that the interests of justice exception to the doctrine of undisclosed principal applied. Other contentions were advanced in relation to the guarantee, to which it is not necessary to refer.

Issues

6. At the hearing, the parties identified what remained in issue on appeal to be:

“1.   Wheather [sic] Mr Scales was an agent of Integrated Asset Management.

2.   If Stephen Scales is an agent of Integrated Asset Management, did it ratify his actions when it accepted payment of the rental instalment payments made by Trans Communications

3.   Wheather [sic] Technology Fund Management entered into the Rental Agreement and Guarantee with Trans Communications and Mr Van Rooyen

4.   Wheather [sic] the doctrine of undisclosed Principal applies

If there was a collateral agreement as represented by Mr Scales, is it invalid by reason that it was inconsistent with the principal agreement, namely the Rental Agreement?

If Mr Scales was an agent of Integrated Asset Management did he act outside the scope of any such agency?”

7. Issue 3 was raised by the notice of contention. Whether Trans Communications and Mr Van Rooyen were entitled to advance that contention and other submissions they sought to advance as to the existence of the rental agreement, was in issue on appeal.

8. The appeal is brought under s 39 of the Local Courts Act 2007 (NSW), which gives a right of appeal to the Local Court on questions of law. At the hearing, the parties’ common position was that they did not seek to challenge any of Wynhausen’ LCM’s factual findings; that they did not seek to challenge mixed questions of fact and law, which requires leave; and that each of the issues they had identified turned on questions of law.

9. That agreement rested in part on Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 where it was observed at 355 that the questions of whether there is any evidence of a particular fact and whether a particular inference can be drawn from facts found or agreed, are questions of law.

The proceedings in the Local Court

10. In the Local Court, the case was opened for Integrated Asset Management on the basis that it was the undisclosed principal of Technology Fund Management. Technology Fund Management had asked Mr Scales, an independent broker who traded as Pro 9M, to go to Trans Communications’ office to witness the execution of the rental agreement by Trans Communications, which had been sent to it. Trans Communications’ claim that Mr Scales had entered an oral agreement with Mr Van Rooyen, varying the terms of the rental agreement, was denied.

11. The case opened for Trans Communications and Mr Van Rooyen was that the doctrine of undisclosed principal did not apply to the rental agreement. Trans Communications had received an offer from Technology Fund Management to enter into a rental agreement, which it had accepted, by Mr Van Rooyen signing the agreement for it and himself as guarantor. Mr Van Rooyen and Mr Scales had then also agreed that at the end of the 36 week term of the agreement, Trans Communications had an option to purchase the equipment for $1. That option was later exercised and so there was no cause of action maintainable against them.

12. Integrated Asset Management called evidence from its general manager collections, Mr Jason McMillan; Mr Malcolm Colless, a director of Technology Fund Management; and Mr Scales. Mr Van Rooyen also gave evidence. Numerous documents were tendered, including, over objection, the agency agreement between Integrated Asset Management and Technology Fund Management.

13. There were credit issues arising from the evidence of Mr Scales and Mr Van Rooyen, which her Honour resolved in favour of Mr Van Rooyen. Mr Scales denied making the collateral agreement. Mr Van Rooyen claimed that it was evidenced by a copy of the first page of the rental agreement, on which he had made a handwritten notation. There were two versions of that document in evidence and a number of versions of the rental agreement.

14. During the hearing, there was a degree of difficulty occasioned by the evidence about the structure of the group of companies of which Integrated Asset Management was a member and why different companies in the group had dealt with various matters referred to in the evidence. These were not matters pursued on appeal.

15. Mr McMillan gave evidence as to the relevant business practices, which involved Integrated Asset Management receiving a rental proposal from its agent, Technology Fund Management, for equipment finance for an applicant such as Trans Communications, itself an equipment supplier, or from a broker on behalf of an applicant. Such proposals were usually in the form of a rental agreement signed by the applicant, supported with information about the applicant. The application was subjected to a credit assessment and, if approved, the rental agreement was countersigned, and the equipment obtained from a supplier, who Integrated Asset Management paid. Technology Fund Management might pay a brokerage fee, if a broker like Mr Scales was involved. An account was created for the customer who received the rental equipment, in this case Trans Communications, which operated for the term of the contract. Rental instalment payments were credited to that account and, at the end of the term, the equipment was returned.

16. In this case the rental agreement signed by Mr Van Rooyen on 16 June 2009, was witnessed by Mr Scales and later executed by Mr Marc Vujnovich, then Integrated Asset Management’s acceptance officer. Rental instalment payments were made to the end of the term of the agreement in June 2012. The last payment made by Trans Communications for $1, was not received until October 2012, after the term of the agreement had ended in June.

17. Mr Macmillan was cross-examined as to Technology Fund Management’s business practices, with which he was not familiar, as well as those of Integrated Asset Management and its related company, ALLF Pty Ltd, which received rental payments for Integrated Asset Management. He explained that Integrated Asset Management received original rental agreements signed by applicants, which were delivered to it in person, or through mail, or by fax or email. In this case it was Mr Vujnovich who had signed the agreement. It was Integrated Asset Management which owned the equipment rented to Trans Communications under the rental agreement.

18. Mr Macmillan agreed in cross-examination that the $1 payment made by Trans Communications had been accompanied by a letter of 26 September, after rental payments had been pursued by letter of 20 August 2012. He said that he had mistakenly sent that letter on the letterhead of Alleasing Pty Ltd, rather than Integrated Asset Management. Trans Communications’ September letter to Technology Fund Management provided:

“Further to the agreement entered into between Technology Fund Management Pty Ltd and Trans Communications Pty Ltd on the 25th of June 2009, we attach* hereto our cheque in the amount of $1.00 being the final payment agreed upon, upon signature of the agreement referred to.” (ex 4)

19. What was not there disclosed was that Mr Van Rooyen was referring to the collateral agreement he later claimed he had negotiated with Mr Scales on the same day that he had executed the rental agreement on which Trans Communications relied in these proceedings. That agreement did not accompany this letter. Mr McMillan was not cross-examined about the collateral agreement, only the $1 payment.

20. Mr Colless, a director of Technology Fund Management, gave evidence that it was in the business of finance broking, acting as agent for various companies, including Integrated Asset Management, with whom it had a written agency agreement. In some cases it contracted other brokers as independent contractors, to act as its sub-brokers. He described the general procedure by which it entered rental agreements for Integrated Asset Management under its standard form rental agreement, trading under the name TrueRent.

21. Mr Colless explained that the standard form rental agreement was used as a leasing proposal, which together with information recorded on a “Client Information Page’, was provided to Integrated Asset Management. If the leasing proposal was approved, it informed the customer of the approval, provided the customer with the rental agreement to sign and then sent the executed agreement to Integrated Asset Management, for signature.

22. Technology Fund Management then received a tax invoice from the equipment supplier, which Integrated Asset Management paid. Technology Fund Management issued a tax invoice for its brokerage fee, which Integrated Asset Management also paid. If a sub-broker had been contracted to broker the transaction, Technology Fund Management paid the tax invoice issued to it by the sub-broker. The rental instalments then paid by the customer, here Trans Communications, belonged to Integrated Asset Management.

23. Mr Colless explained that in this case the finance application came to Technology Fund Management from Mr Scales, who knew the client. He later witnessed the execution of the agreement and sent the original to Technology Fund Management by mail. It was then sent on to Integrated Asset Management. That document was annexed to his statement. An electronic and paper copy was kept and the document scanned and emailed to Integrated Asset Management.

24. Mr Colless explained in cross-examination that Technology Fund Management had entered a number of other transactions with Trans Communications. This agreement had been witnessed by Mr Scales, who he explained was a sub-broker who solicits finance proposals and submits them to Technology Fund Management. He had rendered an invoice as the introducer of the finance which Trans Communications sought and had been paid a brokerage fee for brokering that deal. Technology Fund Management received and paid the tax invoice received from Pro 9M, of which Mr Scales was the principal.

25. In December 2011, Trans Communications wrote to Mr Colless, giving notice of cancellation of the rental agreement at the end of June 2012 and advising:

“We confirm that it is our intention to keep and own the equipment at the end of the period.

Please therefore confirm that you have received our notice and that all payments will seize [sic] from July 2012 onwards.” (ex 7 annex F)

26. Mr Colless explained that when he received this letter, he sent it to Integrated Asset Management. Ms Marie Darge, an employee of Alleasing, Integrated Asset Management by then having been taken into “the Alleasing fold”, who was responsible for end of term collections, to deal with.

27. An email exchange followed, which began with Ms Darge’s advice that at the end of the term the equipment had to be returned, or paid for in accordance with a spreadsheet provided. Mr Van Rooyen advised that they wished to “opt for the $1.00 purchase option at the end of the lease as per the agreement and not the return option”. He was asked what purchase option he was referring to and asked to provide supporting documentation. It was not provided, although Mr Van Rooyen said that it was written on the contract with Mr Scales present and suggested that he be asked to confirm it. The copy of the agreement executed by Integrated Asset Management had no such notation and Mr Van Rooyen was asked to confirm his intention to return or purchase the rental equipment.

28. Mr Scales’ evidence was that he was a self-employed finance broker. He had been dealing with Mr Van Rooyen and Trans Communications since 2003 in that capacity. He did not tell Mr Van Rooyen that he was working on behalf of TrueRent and did not negotiate the rental agreement with Mr Van Rooyen or his company. He had been told by Mr Colless that the finance application received from Trans Communications had been approved and was asked to collect the original signed agreement and post it to Technology Fund Management. He witnessed Mr Van Rooyen’s signature and used his fax machine to send the document to Technology Fund Management, confirmed by phone that it had been received and correctly executed. He then mailed the original, executed agreement by express post. He denied having agreed to a $1 option to buy the rental equipment, or having seen Mr Van Rooyen write anything about that agreement on the signed agreement.

29. In cross-examination, Mr Scales said the agreement which Mr Van Rooyen had executed had been emailed to him by Technology Fund Management, that Mr Van Rooyen had printed it and he had signed it, in his presence. Mr Scales denied witnessing two versions of that document. It was put to him that this was a lie. His evidence was that the handwriting and signatures on the second version of the agreement, which Mr Van Rooyen claimed recorded the $1 option agreement, were different and that his handwriting did not appear there. He later agreed that Mr Van Rooyen had made a photocopy of the executed agreement while he was with him.

30. Mr Scales agreed that he had been paid a brokerage fee of 5% by Technology Fund Management as introducer of the finance, not merely for witnessing a signature. He explained that in his work over the years he had built a relationship with Mr Van Rooyen. He denied that he was representing Technology Fund Management and said that he had represented himself, as a finance broker, agreeing that for this transaction, he was the introducer of the finance.

31. Mr Scales was also cross-examined about his response to enquiries from Mr Colless about the $1 option agreement.

26. In his affidavit Mr Van Rooyen said that his signature on the rental agreement had been witnessed by Mr Scales, who he knew to be a finance broker and that it was later executed for TrueRent by Mr Vujnovich, who he did not know. He said that when he executed the agreement, he had also negotiated with Mr Scales, on behalf of TrueRent, an option for Trans Communications to buy the equipment after expiry of the Rental Agreement for $1. He deposed to a conversation in which Mr Scales said “Alright”. You don’t need to worry about it even if it isn’t in the contract because that is what we do”. He documented the agreement on a separate copy of the first page of the rental agreement and would not have entered the rental agreement, without that option.

27. Mr Van Rooyen said that the agreement was scheduled to expire on 17 June 2012 and that he gave notice of cancellation by his 6 December 2011 letter, which he sent to Mr Colless. On 12 December, Ms Darge accepted the notice of cancellation, but informed him by email that his options were to return or purchase the equipment. On 13 December, he wrote to her, wishing to exercise the $1 option and on 14 December, she asked for documentation of the purchase option. He replied explaining that he had written down the option and copied Mr Scales into his email. He received no reply from Mr Scales, but on 19 December, Ms Darge said she would look at the agreement in the archives. In August 2012, he received a letter of demand. It was not until 26 September that he sent a letter with a cheque for $1, representing the exercise of the option. It said:

“Further to the agreement entered into between Technology Fund Management Pty Ltd and Trans Communications Pty Ltd on the 25th of June 2009, we attach* hereto our cheque in the amount of $1.00 being the final payment agreed upon, upon signature of the agreement referred to.”

34. The cheque was later cashed.

35. Mr Van Rooyen could not remember whether the document he had signed had been emailed to him by TrueRent or brought to him by Mr Scales. He agreed in cross-examination, however, that when he executed the rental agreement, he was hoping to rent the equipment and knew that it had to be executed by the authorised officer and the document completed.

36. Mr Van Rooyen did not produce a copy of the collateral agreement which he had kept, until after the proceedings were commenced. There were two versions of that document. Their authenticity was put in issue. On the first, a handwritten note appeared which the transcript records at p 60-61 on 27 March 2014. It said “One dollar on final payment. Will receive letter on month 36”. Mr Van Rooyen’s evidence was that the handwriting was his and that he had written those words in Mr Scales’ presence on 16 June, when he had executed the rental agreement.

37. This document had the date 25 June as the date of installation of the equipment. That entry did not appear on the document signed by Mr Vujnovich, kept in Integrated Management’s records, which was annexed to Mr Macmillan’s statement, where the date of commencement which had been entered was 17 June. In his cross-examination, Mr Van Rooyen explained that it was his wife who had entered the date 25 June on the document which recorded the collateral agreement, after speaking to someone at Technology Fund Management. He accepted that it was an error, but denied that his evidence in relation to the collateral agreement was a fabrication. Originally he said that those words were written on a photocopy he had taken of the first page of the agreement. Later he said that two copies of the agreement had been executed, then he said both had occurred.

38. The second version of the document evidencing the collateral agreement had no date entered as the date of installation of the equipment. Mr Van Rooyen was cross-examined about this document and its authenticity, but denied that his evidence that an agreement for a $1 option to buy the equipment at the end of the rental agreement has been made, was false.

39. The written agreement was for an initial term of 36 months. Clause 8 of the agreement provided that it would be automatically renewed, unless notice of termination was given at least 180 days prior to the expiry of the agreement, in which event the rental equipment had to be returned on termination of the agreement. There was no issue that Trans Communications gave that notice.

40. It continued making the monthly rental payments until June 2012, but it did not return the equipment at the end of the term. Integrated Asset Management later sought payment totalling $23,479.60 for monthly instalments for July and August 2012, under clause 8 of the agreement. The proceedings were commenced in June 2014.

41. In closing Trans Communications and Mr Van Rooyen addressed their written submissions, arguing that Integrated Asset Management was not the proper plaintiff, that was Technology Fund Management, a stranger to the litigation. They then claimed that the rental agreement which Trans Communications and Mr Van Rooyen had signed and Mr Scales had witnessed, constituted an offer which only Technology Fund Management could accept. While Mr Scales had faxed the agreement which Mr Van Rooyen had signed to Technology Fund Management, there was no evidence that this offer had been accepted. Its acceptance had never been communicated to them. In the result, no contract between Integrated Asset Management and Trans Communications had come into existence and the doctrine of undisclosed principal which was submitted to be as stated in Siu YinKwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 207, had no application.

42. It was also argued that the evidence did not establish that, by entering the agreement, Technology Fund Management intended to act on behalf of Integrated Asset Management. Accordingly, the doctrine of undisclosed principal did not apply. Further, even if a valid agreement had come into existence, it had been cancelled by the notice given by Trans Communications in December 2011.

43. Trans Communications and Mr Van Rooyen then sought to argue that the doctrine did not apply, because the purported agent, Technology Fund Management, had never entered into any contract with them.

44. Integrated Asset Management objected to this line of argument being advanced, because acceptance was not an issue which Trans Communications and Mr Van Rooyen had pleaded in their amended defence. The objection was answered on the basis that it was Integrated Asset Management who had not pleaded how the contract had come into existence, a matter which it was argued it had been obliged to plead in its statement of claim. Her Honour indicated that she would consider the pleadings and would determine that issue later (see T28/03/14 at 51).

45. It was also submitted for Trans Communications and Mr Van Rooyen that Mr Vojnovich, the employee of Integrated Asset Management who had executed the rental agreement, could never accept the offer which they had made to Technology Fund Management.

46. Integrated Asset Management’s objection to this line of argument was then further pursued. It submitted that evidence had not been called about these matters, because the existence of the rental agreement had not been put in issue by the defence. Directions were then given as to the filing of further written submissions as to these and other matters, then addressed.

47. Trans Communications and Mr Van Rooyen claimed that Mr Scales was Technology Funds Management’s agent. They submitted for Trans Communications and Mr Van Rooyen that under clause 17.6 of the agency agreement between Integrated Asset Management and Technology Fund Management, Technology Fund Management was not entitled to delegate or assign its rights to Mr Scales, without Integrated Asset Management’s prior written approval. There had been no such delegation and accordingly, the rental agreement was negotiated outside that authority and could not bind Integrated Asset Management.

48. Trans Communications and Mr Van Rooyen also submitted that Mr Scales had done all of the intermediary work between Trans Communications and Technology Fund Management, whom he had invoiced for his financial brokering fee; that he had frequently dealt with Mr Van Rooyen in a business context; and that it was he who had written an acceptance date on the rental agreement, which Mr Vujnovich had signed the following day.

49. The findings of fact sought by Trans Communications and Mr Van Rooyen were:

“A.   That the defendants made an offer to enter into the TFM Rental Agreement on 16 June 2009 (Substituted Exhibit JVR 1 to the Statement of John Peter Van Rooyen).

B.   That Mr Stephen Scales witnessed the signatures of Mr Van Rooyen to the 16 June 2009 offer to TFM on the TFM Rental Agreement document on 16 June 2009.

C.   That the 16 June 2009 offer was made to TFM (supported by the evidence of Stephen Scales and Malcolm Colless, as well as the personal defendant).

D.   That the 16 June 2009 offer did not contain terms concerning rental dates.

E.   That TFM did not disclose it was acting on behalf of the Plaintiff in dealing with the Defendants.

F.   That a stranger to the 16 June 2009 offer purportedly accepted the offer.

G.   Marc Vujnovich was an employee of the Plaintiff.

H.    That there was no evidence Marc Vujnovich was an authorised officer of TFM.

I.    That there is no evidence of acceptance of the offer of 16 June 2009 made to TFM.

J.    That there is no evidence of communication of acceptance by the plaintiff to the Defendants.

K.    That TFM never entered into a contract with the Defendants on the basis of the TFM Rental Agreement.

L.    That Stephen Scales was a finance broker engaged by TFM.

M.    That if the TFM Rental Agreement is a contract, TFM is not an agent who entered into it.

N.    That no contract was formed between the defendants and the plaintiff or TFM.

0.    That there is no consideration for the guarantee in that there is a total failure of consideration.”

50. In written submissions, Integrated Asset Management persisted with its case that Trans Communications and Mr Van Rooyen were not entitled to depart from their pleaded case as to the existence of the rental agreement. It is not necessary to further outline the submissions advanced.

The decision

51. Her Honour began by noting the case advanced by Integrated Asset Management, that it was the undisclosed principal of Technology Fund Management who, through its agent Technology Fund Management, had entered a written rental agreement with Trans Communications and Mr Van Rooyen. She noted various terms of the agreement as to the ownership of the equipment, the 36 month term of the agreement and the rental payments provided for. She also noted that Mr Scales was unknown to Integrated Asset Management, had not been appointed its agent and was not authorised to negotiate on its behalf. She also outlined the evidence as to how Technology Fund Management brokered such rental agreements for Integrated Asset Management under their principal and agency agreement.

52. Her Honour then noted the claim on which the defence rested, that Mr Scales had negotiated a collateral option agreement with Trans Communications, which permitted it to purchase the equipment for $1, which had been exercised and permitted it to retain the equipment at the end of the rental agreement. She noted the defence to have been:

“(1)   IAM Pty Ltd is not the proper plaintiff. The correct plaintiff TFM is a stranger to the proceedings and as such only TFM has the power to accept the offer, which was never done by TFM at any time;

(2)   The offer made by the defendants in terms of what they see as the TFM rental agreement was not accepted in the terms corresponding to the offer;

(3)   There was no acceptance of the terms of the offer communicated to the defendants;

(4)   There was collateral contract collateral the rental agreement by way of this dollar options agreement that I have already referred to. That was in writing on the same date, 16 June 2009;

(5)   The defendants in accordance with the terms of the rental agreement, this is again cl 8, served notice of cancellation of the agreement in compliance with cl 8;

(6)   That the doctrine of undisclosed principal does not apply for a number of different reasons, which I will look at more closely, and in any event, should also be excluded in an interest of justice exception in this particular case to that doctrine.”

53. Her Honour also noted the submission advanced by Trans Communications and Mr Van Rooyen that Integrated Asset Management’s failure to plead the principal and agency agreement, with the result that it was not binding as between Integrated Asset Management and Trans Communications and that the failure to particularise the terms of the agreement in the amended statement of claim, should result in Integrated Asset Management not being permitted to rely on the agreement.

54. Her Honour noted that Trans Communications and Mr Van Rooyen relied on Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, (where it was observed at [14] that in deciding whether or not a point was raised at trial no narrow or technical view should be taken; that ordinarily the pleadings will be of assistance, their function being to define the issues so that each party knows the case which he or she is to meet, but particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings).

55. After referring to Rule 14.4 of the Uniform Civil Procedure Rules 2005 (NSW) (which permits a reply to a defence to be filed by a plaintiff in Local Court proceedings only by leave of the Court), her Honour turned to Davison v Vickery’s Motors Ltd (in liq) [1925] HCA 47; (1925) 37 CLR 1 at 7, where Isaacs J observed:

“"The Court is bound to give judgment according to law," said Jessel M.R. in Chilton v. Corporation of London. Neither pleadings nor admissions can alter the law. Lord Loreburn L.C., in Gramophone Co. v. Magazine Holder Co., said: "A Court of justice can never be bound to accept as true any fact, merely because it is admitted between the parties."”. [Footnotes omitted]

56. Her Honour thus identified the issues that she would address at p 4 to be:

“Among the issues then that I will raise, and not necessarily in this order, the Court will address was there an agreement with respect to whether there was any acceptance of offer, if there was, was there an agreement between the plaintiffs and defendants, does the doctrine of undisclosed principal apply if it does is there any interest of justice exception, was there a collateral contract. If the Court finds that there was a collateral contract what then is the consequence for the plaintiff’s case.”

57. Her Honour then turned to the law on undisclosed principal, referring to Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545 and G E Dal Pont, Law of Agency, (2nd ed 2008, LexisNexis Butterworths) at 5 and various decisions there referred to. Her Honour then turned to the law in relation to collateral contracts. She then said looking at “whether there was a binding agreement and whether or not the acceptance was communicating [sic] to the defendants” (at 6), it was crucial that there were a number of different versions of the rental agreements relied on.

58. After outlining the evidence as to how and when various documents were executed and by whom, her Honour explained the conclusions she had reached at 9-11. In order to understand the errors into which her Honour fell, it is necessary to set out those reasons:

“The rental agreement the subject of these proceedings is not - and there is no issue - the first and only finance application brokered with Mr Van Ruen [sic] at Trans Com and Mr Scales. Indeed, looking at the trail of emails which constitute annexure JVR 4 to Mr Van Ruen's [sic] statement - and I also refer to p 96 and 97 of the 30 August transcript - but it is clear to see that looking at the emails with Marie Darge for All Leasing that there is some confusion on Ms Darge's part as to which specific contract with Trans Com, Mr Van Ruen [sic] is referring to when he gives notice of his intent to exercise the option and give notice of cancellation of the rental agreement.

I also note, and this is also part of that trail of emails, that the notice was given on 6 December 2011. There is a copy of the letter that is JVR 3, and JVR 4 the response from Marie Darge at All Leasing that after that Mr Van Ruen [sic] says that, "Having received that email I dealt directly with her by email, though he says at para 35 of his statement, "I had never heard of All Leasing before Ms Dirge's email."

In the case of Branwhite v Worcester Works Finance Ltd [1969] AC 552, Lord Upjohn says at p 577 that:

"When a broker completes the lender's forms or arranges the signing of documents that in itself is not conclusive agency. That in itself is not in itself is not conclusive of agency to the lender", he says, "I cannot see that this makes him an agent of the finance company. In any event, all he is doing is to fill in a document which he submits on behalf of the would be hirer which contains a proposal for hire purchase finance."

The subject matter of that authority he was referring to the motor dealership industry as far as I could see when he made those remarks. Mr Scales says, according to his evidence both oral and written, that he had a similar role in as far as his involvement in the rental agreement but the evidence would seem to indicate otherwise.

In the text Boylestad & Reynolds on agency, and I refer to the 19th ed, at article 1, it says:

"Agency is defined as a fiduciary relationship existing between two persons, one of whom expressly or impliedly manifests assent that the other should act on his behalf so as to effect his relations with third parties and the other of whom similarly manifests assent so to act or so act pursuant to the manifestation."

On the evidence it is clear that there was what could be called a fiduciary relationship between Mr Van Ruen [sic] and Mr Scales, what could be perhaps in colloquial terms described as a business relationship. This had developed over some six years. I did not find Mr Scales to be a witness of credit. The Court found his evidence to be evasive and inconsistent regarding what happened on 16 June 2009. Despite his denials regarding not having witnessed two separate documents, I am satisfied on the evidence that there were two separate documents witnessed by Scales and signed on that day. Also that Mr Scales did make a representation to Mr Van Ruen [sic] with respect to a $1 option to purchase the equipment. This is notwithstanding that he attempted to minimise his role in the transaction. The documentary evidence, however, does not support Mr Scales.

Further, I am satisfied that the plaintiff IAM had assented to the delegation by TFM to the appointment of Mr Scales as subagent. The evidence does not support the contention that Mr Scales had the actual authority to make the representation which the Court finds that he in fact did make to Mr Van Ruen [sic]. As I have already noted in Keighley Maxted v Durant p 11, Lord Linley refers to the principle of gratification [sic] by which an approval of what has been done is sometimes treated as equivalent to a previous authority to do it and I note that.

Looking then at Mr Van Ruen's [sic] version of events and his evidence, I find that to be more probable than that of Mr Scales. I find Mr Van Ruen [sic] to be a credible witness, both in the way in which he gave his evidence and as demonstrated by his actions on 6 December 2011 when pursuant to cl 8 of the rental agreement he gave notice that he intended to terminate the agreement so as to avoid its automatic renewal. I note also that the rental payments were made for the 36 months, and further that on 8 October 2010, this can be found at JVR6, there is a bank statement where the $1 was debited from Mr Van Ruen's [sic] cheque account and would appear to have been accepted.

I find Mr Van Ruen's [sic] evidence to be generally consistent with the documentary evidence, for example, the first payment was debited on 25 June 2009, which is consistent with exhibit 11.

It is the plaintiff's evidence that Mr Scales' role in the transaction, as I have already noted, was limited only to witnessing the rental agreement and returning it to TFM. By accepting payment of the rent al instalments, the Court finds that the plaintiff assented to the employment of Scales as the agent or the subagent or sub broker. It seems in this particular case that both those terms can be used interchangeably. The issue as the Court sees it is the conduct of Scales as found by the Court and the consequence that flow from In Boylestad v Reynolds -1 have already referred to that, article 76 at 8-073, the text says:

"The undisclosed principal doctrine requires that the principal authorised the agent to bring him into contractual privity with the third party even though the third party is unaware of this", it goes on to say, "A contract which is obtained by misrepresentation is on general grounds avoidable if the misrepresentation is material to the represented and this is known to the agent or principal or both."

At para 104 in White & Anor v Bay Corp Advantage Information Services Ltd & Co [2006] NSWSC 441 104 Campbell J examines what is meant by false statement:

"Not every false statement is misleading and deceptive", he goes on, "This depends on the context in which it is made and the purpose for which the statement in question is made to the personal class of persons to which it is made."

Applying this to all the evidence before the Court and considering the circumstances in which this agreement was made on 16 June 2009 the Court is satisfied that Mr Scales made that representation for the $1 option for the purpose of it would appear on the evidence securing the deal with Mr Van Ruen [sic] on behalf of Trans Com and in all the circumstances on the evidence before the Court while I am satisfied that the doctrine of undisclosed principal does apply IAM is the proper plaintiff.

I also find that the onus has been discharged and there was that delegation by TFM the agent for IAM to Mr Scales as subagent or sub broker. I am also satisfied that the $1 option agreement was lateral to the rental agreement and was made on the same date, 16 June 2009, between TFM by the subagent Mr Scales for the defendant 2 being Trans Com and Mr Van Ruen [sic]. I am satisfied that the rental agreement was obtained by the misrepresentation made by Scales the effect of which is to vitiate the rental agreement thus disentitling the plaintiff from relying on the renewal cl 8.

AS A CONSEQUENCE OF THIS I AM SATISFIED THAT THE DEFENDANTS ARE NOT LIABLE FOR THE AMOUNT PLEADED BY THE PLAINTIFF AS THE AGREEMENT WAS NOT AUTOMATICALLY RENEWED, NOR THAT THE EQUIPMENT SHOULD BE RETURNED. I HAVE ALREADY NOTED AS PER THE PAYMENT SCHEDULE ALL RENTAL PAYMENTS FOR THE 36 MONTHS WERE MADE.

Having reached this determination on the evidence it is not necessary for the Court to consider whether there was an in the interest of justice exception for the doctrine of undisclosed principal and the plaintiff's further amended statement of claim is dismissed.”

59. As the parties submitted, her Honour’s decision is difficult to understand. She did not find Mr Scales to be a witness of credit and preferred Mr Van Rooyen's evidence over his. She found that Integrated Asset Management had assented by Technology Fund Management’s appointment of Mr Scales as sub-agent, but that he did not have actual authority to make the representation which he had made to Mr Van Rooyen.

60. Her Honour took the view that it was by accepting payment of the rental instalments, that Integrated Asset Management, had assented to the employment of Mr Scales as sub-agent; that he had made the representation for the $1 option, for the purpose of it securing the deal with Mr Van Rooyen; that the doctrine of undisclosed principal applied; and that Integrated Asset Management was the proper plaintiff.

61. What her Honour meant, however, by the findings on the one hand, that Technology Fund Management had delegated to Mr Scales as sub-agent, but on the other, that the option agreement which was collateral to the rental agreement had been made between Technology Fund Management by Mr Scales for Trans Communications and Mr Van Rooyen, is not clear. That is the more so, given the finding that Mr Scales had a fiduciary relationship with Mr Van Rooyen.

Issue 1   Was Mr Scales an agent of Integrated Asset Management?

Issue 2   If Mr Scales was Integrated Asset Management’s agent, did it ratify his actions when it accepted payment of the rental instalment payments made to Trans Communications?

Issue 6    If Mr Scales was Integrated Asset Management’s agent, did he act outside the scope of the agency?

62. It is convenient to deal together with these issues, depending as they each do on the question of whether Mr Scales was Integrated Asset Management’s agent.

63. The case advanced on appeal for Integrated Asset Management was submitted by Trans Communications and Mr Van Rooyen to be completely answered by their contention that there was no binding rental agreement ever entered and if there was, that the doctrine of the undisclosed principal could not apply in the circumstances. For reasons which I will come to below, neither of these contentions may be accepted.

64. On appeal, it was common ground, however, that the parties had not argued in the Local Court that Mr Scales was Integrated Asset Management’s agent.

65. What Integrated Asset Management had claimed was that it was the undisclosed principal of Technology Fund Management, the company identified in the written rental agreement which Mr Van Rooyen had executed for Trans Communications, to be the owner of the rental equipment.

66. In their defence, Trans Communications and Mr Van Rooyen did not admit that Technology Funds Management was Integrated Asset Management’s agent. They claimed that it was Technology Fund Management with whom they had contracted and that Trans Communications had also entered the collateral option agreement with Technology Fund Management’s agent, Mr Scales.

67. But none of the parties claimed that Mr Scales was Integrated Asset Management’s agent.

68. As Trans Communications and Mr Van Rooyen submitted on appeal, the evidence was that Mr Scales was an independent finance broker who had had past dealings with Mr Van Rooyen; he had also brokered this financial deal; afterwards he had invoiced Technology Fund Management for his introduction of Trans Communications in respect of this transaction; and Technology Funds Management had paid him a brokerage fee for that introduction. They also argued that whether or not Integrated Asset Management had later ratified Mr Scales’ actions with respect to the collateral option agreement, “is beside the point” (mfi 4 at [26]).

69. In the Local Court, Trans Communications and Mr Van Rooyen denied that Integrated Asset Management was Technology Fund Management’s undisclosed principal. Their case, as they finally sought to advance it, was that the rental agreement with Technology Fund Management had not come into existence at all; that Mr Scales was a finance broker who had not only invoiced Technology Fund Management for the deal he had brokered as its agent, but had made the collateral agreement on its behalf.

70. Given the case which Trans Communications and Mr Van Rooyen advanced at trial, the onus fell on them to prove that Mr Scales was Technology Fund Management’s agent and that he had acted within the scope of his authority, when he made the claimed collateral agreement on which their defence rested (see Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Limited (in liq) [2013] FCAFC 5; (2013) 209 FCR 368 at [67]). That required them to establish, as her Honour observed, either that Technology Fund Management had by prior express or implied agreement appointed Mr Scales as its agent, or that it had subsequently ratified the acts he did on its behalf.

71. Her Honour concluded, however, that Mr Scales was Integrated Asset Management’s sub-agent. That would ordinarily require, as her Honour observed, the person alleging that delegation to prove that the principal, Integrated Asset Management, had assented to Technology Fund Management employing Mr Scales as its sub-agent, or if the circumstances made such an appointment appropriate, the principal knowing of it, not objecting.

72. Such a case was not, however, advanced by either party. There was thus an obvious procedural unfairness in disposing of the matter on a basis not argued by either party, without giving them an opportunity to be heard.

73. The reasons which her Honour gave reveal that while her Honour concluded, correctly, as I will explain, that Integrated Asset Management was Technology Fund Management’s undisclosed principal, she erred in concluding that Mr Scales was Integrated Asset Management’s sub-agent.

74. As discussed in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699 at [177], agency is ordinarily a consensual relationship, generally bearing a fiduciary character, in which, by its terms, the agent acts on behalf of and in the interest of the principal. There was no evidence of any such consensual relationship between Mr Scales and Integrated Asset Management. Further, the evidence as to the dealings between Mr Scales and Technology Fund Management, on her Honour’s findings, did not support the conclusion that there was any such relationship between them, or that it had subsequently become aware of and ratified his actions in relation to the collateral agreement.

75. Had the parties been given the opportunity to be heard on the question of whether Mr Scales was Integrated Asset Management’s sub-agent, a matter which they had not addressed and which had not been put to any of the witnesses, her Honour would have been reminded of the provisions of the agency agreement between Technology Fund Management and Integrated Asset Management. Trans Communications and Mr Van Rooyen relied on the terms of the agency agreement to submit that Technology Fund Management was not entitled to delegate or assign its rights to Mr Scales under the agency agreement, without Integrated Asset Management’s prior written approval. There was no evidence of such approval having been sought or given.

76. As Trans Communications and Mr Van Rooyen submitted on appeal, the evidence was that Mr Scales had brokered the finance deal they had pursued with Technology Fund Management. As her Honour observed, finance brokers such as Mr Scales are usually the agent of the borrower (see Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 234). Contrary facts can establish that they are the agent of the lender, but, as her Honour also observed, even payment of a broker’s commission or fee by the lender, in this case Technology Fund Management as Integrated Asset Management’s agent, will not necessarily, of itself, justify such an inference.

77. Her Honour expressly found that Mr Scales had had an ongoing relationship with Mr Van Rooyen for some 6 years, which was fiduciary in nature. Contrary to her Honour’s conclusion, that also told against the possibility that Mr Scales was Integrated Asset Management’s sub-agent.

78. Her Honour did not refer to the relevant provisions of the agreement between Integrated Asset Management and Technology Fund Management, which included clause 8, which limited Technology Fund Management’s authority, without prior written consent, to purport to bind Integrated Asset Management, and clause 17.6, which prevented it from assigning or delegating its rights, without such prior written consent being given. There was no such written consent sought or given.

79. Further, ordinarily an agent such as Technology Fund Management cannot create a relationship of principal and agent between a third person such as Mr Scales and its principal, in this case Integrated Asset Management, by delegation of a delegated power, without authority or assent. Here there was evidence of neither.

80. There was no evidence of Technology Fund Management seeking or obtaining consent, either to the appointment of Mr Scales as a sub-agent, or to binding Integrated Asset Management to the collateral agreement, of which neither company was aware, at the time the agreement was made, or even when Mr Van Rooyen gave notice of the termination of the rental agreement. There was no suggestion that Mr Scales’ appointment was known to Integrated Asset Management, let alone that it intended for Mr Scales to act on its behalf, or knowing of his appointment by Technology Fund Management, that it had no objection to it. Nor was there any evidence or submission by any party that Technology Fund Management had intended to appoint Mr Scales as Integrated Asset Management’s sub-agent, in breach of the agency agreement, let alone that Mr Scales, had received or accepted such an appointment. There was no evidence that he knew of Integrated Asset Management’s involvement in the rental agreement.

81. As observed in Quikfund at [67], an onus lies on the party alleging agency to prove not only its existence and terms, but also that in dealing with that party, the agent acted within his or her actual or ostensible authority. On the evidence there was no authority given to Technology Funds Management to appoint Mr Scales as sub-agent, which explains her Honour’s finding that Mr Scales did not have Integrated Asset Management’s actual authority. Nor was there any evidence that Mr Scales had ostensible authority to enter the collateral agreement, which she concluded came into existence as the result of the representation Mr Scales made to Mr Van Rooyen.

82. Her Honour concluded, however, that Integrated Asset Management’s assent was evidenced by it accepting payment of the instalments under the rental contract. The evidence was, however, that Integrated Asset Management was not then aware of Mr Scales’ involvement in the transaction, or that he had been appointed its sub-agent, or that he had made the representation which brought the collateral contract into existence. All that the rental agreement revealed was that he had witnessed Mr Van Rooyen’s signature.

83. Nor was there evidence that Integrated Asset Management or Technology Funds Management had represented to Trans Communications and Mr Van Rooyen that Mr Scales had authority to negotiate the collateral agreement. To the contrary, he was not known to Integrated Asset Management and his fiduciary relationship was found to be with Mr Van Rooyen.

84. For his part, Mr Van Rooyen had not heard of Integrated Asset Management before the proceedings were commenced. Even when he purported to exercise the option over 2 years later, by the notice he gave to Technology Funds Management in December 2011, he did not produce the document which her Honour found evidenced the collateral agreement which he had negotiated with Mr Scales. That document was not produced until after the proceedings were commenced, when it was annexed to Mr Van Rooyen’s affidavit.

85. There was no evidence that Integrated Asset Management ever ratified either Mr Scales’ appointment as its sub-agent, or the collateral agreement. Accepting payments under the rental agreement was incapable of ratifying either, given that the rental agreement did not evidence or disclose Mr Scales’ appointment as its sub-agent, or the existence of the collateral agreement. It was aware of neither. When the collateral agreement was raised by Mr Van Rooyen, it was denied by Mr Scales and by Integrated Asset Management. Even then, Mr Van Rooyen did not produce the document which her Honour found evidenced the agreement.

86. Her Honour found that there was confusion as to which specific rental contract with Trans Communication Mr Van Rooyen was referring, when he gave notice of his intention in December 2011 to terminate the contract in June 2012 and to exercise the option. Even the payment which he made in respect of the option, was not tendered until September 2012, after the rental agreement came to an end.

87. In the result, it must be accepted that her Honour erred in law, in concluding that Mr Scales was Integrated Asset Management’s sub-agent, resting as that conclusion did on its assent to his appointment. That conclusion had no foundation either in the cases which the parties had advanced, the evidence, or the applicable law. It also follows that the collateral agreement which her Honour found that Mr Scales entered, which was inconsistent with the terms of the agency agreement, did not bind Integrated Asset Management.

Issue 3   whether Technology Fund Management entered into the rental agreement – can this be raised on appeal?

88. It was Integrated Asset Management’s case that various of the arguments which Trans Communications and Mr Van Rooyen wished to advance by their notice of contention, were not available to them, because they had made relevant admissions in their amended defence as to factual matters from which they could not depart, particularly not having raised what was sought to be contended in cross-examination of the witnesses who could have given evidence about those matters at the trial.

89. Rule 50.11 of the Uniform Civil Procedure Rules permits a defendant to contend that the decision of the court below should be affirmed on grounds other than those relied on by the court below, by filing a notice of contention. As discussed by Barrett JA in Hannover Life Re of Australasia Ltd v Dargan [2012] NSWCA 185 at [23] – [23], ordinarily appellants cannot raise matters on appeal not agitated below, but by notice of contention respondents can seek to uphold the decision on “any good legal ground appearing upon the evidence, although he did not present it in the Court below” (quoting from Jordan CJ in NRMA Insurance Ltd v B & B Shipping and Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273 at 282). Considerations of fairness applying in a particular case may, however, deny a respondent such a right (see Lush J in Waller and Son Ltd v Thomas [1921] 1 KB 541 at 548).

90. As discussed in Berzins v QBE Insurance (Australia) Ltd [2014] NSWCA 196 at [57] justice does not require that a respondent be permitted to run new arguments on appeal which the appellant might have answered at trial by calling evidence (see Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7 - 8; Multicar Engineering Pty Ltd v Federal Airports Corp (1997) 47 NSWLR 631 at 645; Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at [51].

91. Further, it must be recalled in this case, as the parties accepted, in an appeal such as this from the Local Court under s 39 of the Local Court Act, findings of fact cannot be attacked.

92. Under s 56 of the Civil Procedure Act 2005 (NSW), parties have a duty to assist the Court to facilitate the just, quick and cheap resolution of the real issues lying between them in the proceedings. That obligation has effect at every stage of the proceedings, including at the outset, in the parties’ pleadings.

93. Rule 14.14 of the Uniform Civil Procedure Rules requires a defence to plead any matter which, if not pleaded specifically, would take the opposite party by surprise. Rule 14.26 provides that an allegation of fact is taken to be admitted, unless traversed in the opposite parties’ pleadings. Rule 14.27 deals with joining of issues, which does not arise here.

94. On appeal, it was submitted that the pleadings on both sides had been “exceedingly spartan”; that evidence was only filed afterwards; and that it was the plaintiff’s case which provided the fulcrum for the submission that the parties’ cases on both sides had gone well beyond the pleadings.

95. It is certainly true that the proceedings in the Local Court were long and difficult. That was not only the result of the nature of what was in issue, but the way in which the case was conducted. That there were a number of versions of the rental agreement annexed to various affidavits and otherwise tendered, was a reflection of the way in which the agreement was executed by the parties, at different times and places. A great deal of time was, it seems, unnecessarily spent on this, but that did not reveal that the case which Integrated Asset Management advanced, had departed from the case it had pleaded.

88. By its further amended statement of claim filed in August 2013, Integrated Asset Management claimed that Technology Fund Management was its agent and that it was its undisclosed principal, with the result that it was a party to the 16 June 2009 rental agreement which Mr Van Rooyen had guaranteed; under which payments had been made to June 2012, after which it had failed to make payments.

89. Trans Communications and Mr Van Rooyen had filed an amended defence in February 2013. In this defence it was not admitted that Integrated Asset Management was Technology Fund Management’s undisclosed principal and that Technology Fund Management was Integrated Asset Management’s agent was denied, for reasons there given.

90. It was not, however, denied that the rental agreement had come into existence between Trans Communications and Technology Fund Management. To the contrary, it was expressly pleaded that:

“(a)   The Rental Agreement was with Technology Fund Management Pty Ltd as the “Owner” of the equipment rented; and

(b)   Pursuant to the Rental Agreement, Technology Fund Management Pty Ltd represented itself as the “Owner” of the equipment rented; and

(c)   As the “Owner” of the equipment rented, Technology Fund Management Pty Ltd contracted with the defendants personally and not as agent for any undisclosed principal including the Plaintiff; and

(d)   On 20 August 2012 by letter from a corporation styled “Alleasing Pty Ltd” to the First Defendant, Alleasing Pty Ltd alleged that it was the owner of the equipment the subject of the Rental Agreement and that Technology Fund Management Pty had entered into the Rental Agreement on behalf of Alleasing Pty Ltd.”

99. It was further pleaded that Trans Communications had no obligation to pay Integrated Asset Management any money under the rental agreement having made monthly rental payments to Technology Fund Management under that agreement; having entered into a collateral agreement with Technology Fund Management, recorded in a copy of the agreement which Trans Communications had retained; and having served a notice of cancellation of the rental agreement on Technology Fund Management in accordance with clause 8 of that agreement. Trans Communications and Mr Van Rooyen also pleaded the existence of the collateral agreement for the purchase of the rental equipment for $1.

100. By these pleadings Trans Communications and Mr Van Rooyen not only admitted the existence of the rental agreement on which Integrated Asset Management advanced its case, but claimed that they had negotiated a collateral agreement and had abided by their terms. Had the existence of the rental agreement not been so admitted, it is difficult to see what the $1 option agreement could have been collateral to.

101. Evidence in this case was given by affidavit. Even at the hearing Mr Van Rooyen gave evidence consistent with the defence.

102. This was inconsistent with the submissions advanced on appeal, that even when the case was first opened on 29 August 2013 for Trans Communications and Mr Van Rooyen, it was intended to depart from the pleaded defence. A fair reading of the opening submissions, considered with the way in which the case was conducted before the final submissions advanced in March 2014, does not permit that submission to be accepted.

103. It follows that Trans Communications and Mr Van Rooyen were not entitled to withdraw their pleaded admissions, without leave being sought and granted in accordance with Rule 12.6 of the Uniform Civil Procedure Rules, which provides:

12.6   Withdrawal of matter in defence or subsequent pleading

(1)   A party raising any matter in a defence or subsequent pleading may withdraw the matter at any time.

(2)   Despite subrule (1), a party may not withdraw any admission, or any other matter that operates for the benefit of another party, except with the consent of the other party or by leave of the court.

(3)   A withdrawal under this rule is to be made by filing a notice of withdrawal stating the extent of the withdrawal.

(4)   If the withdrawal is by consent, the notice under subrule (3) must be accompanied by a notice from each party whose consent is required by subrule (2) to the effect that the party consents to the admission or other matter being withdrawn in accordance with the notice of withdrawal.

104. Such leave was not sought nor granted by Trans Communications and Mr Van Rooyen, either at trial or on appeal. On appeal, they argued that the evidence which Integrated Asset Management had led from Mr McMillan and Mr Colless was “discordant” and posed the rhetorical question, why it had been led, if the existence of the rental agreement was not in issue.

105. These submissions may also not be accepted. The amended defence reveals the admissions which were made. Consistently with those admissions, Mr Van Rooyen’s evidence was that Trans Communications had acted in accordance with the provisions of the rental agreement it had entered and had later sought to exercise the option granted under the collateral option agreement. What was raised by the defence in relation to the rental agreement was not its existence, but whether Integrated Asset Management was a party to it.

106. The agreement between Technology Fund Management and Integrated Asset Management expressly provided for Technology Fund Management to execute documents on behalf of Integrated Asset Management as attorney. Uncontested evidence was given as to how such agreements were executed in practice. That did not involve Mr Scales, whose practical involvement in the execution was to witness Mr Van Rooyen’s signature on the agreement at Trans Communications office and to provide it to Technology Fund Management for its consideration. There was no issue at trial that Mr Scales had witnessed Mr Van Rooyen’s signature on the rental agreement on which Integrated Asset Management advanced its case.

107. The evidence called from Mr McMillan and Mr Colless was directed to establish the case advanced by Integrated Asset Management, that it was Technology Fund Management’s undisclosed principal under the rental agreement. That such an agreement had been entered was not challenged in their cross-examination. They both said that the agreement had been physically executed by Mr Vujnovich, in accordance with the normal practice Mr McMillan and Mr Colless had described.

108. It is apparent from the course which the hearing took, that the challenge to the existence of the agreement followed from the evidence that it was Mr Vujnovich who had executed the agreement. It was only in submissions that the question of whether any agreement had come into existence as a result, was belatedly raised, over objection.

109. The argument as to the rental agreement sought to be advanced on appeal by Trans Communications and Mr Van Rooyen turned on the question of whether Mr Vujnovich, was an authorised officer. That term is not defined in the agency agreement. Evidence was led at the hearing that the agreement had been executed under procedures which Technology Fund Management and Integrated Asset Management had put in place, which included the power of attorney which Technology Fund Management had granted Integrated Asset Management under the agency agreement.

110. Neither Mr Colless nor Mr McMillan gave evidence about whether Mr Vujnovich was an authorised officer under the agency agreement, or his capacity otherwise, to sign the rental agreement. Nor was the matter raised in cross-examination with either Mr Colless or Mr McMillan, consistent with the existence of the agreement not being in issue.

111. While the rental agreement required that it be executed either by Technology Fund Management, or an authorised officer, by the agency agreement Technology Fund Management gave Integrated Asset Management its power of attorney. Nothing in the rental agreement precludes execution under such a power of attorney.

112. In any event, clause 1.2 of the rental agreement provided that Trans Communications was bound by the agreement once it was signed by the owner, even if it was not advised that this had occurred. As was Mr Van Rooyen’s evidence, once the executed agreement was provided to Technology Fund Management by Mr Scales, he hoped that it would be accepted. While he did not receive a copy of the executed agreement, that acceptance was, in fact, conveyed by the rental equipment Trans Communications was later provided, with the result the payments Trans Communications were then made, in accordance with the terms of the agreement, until the steps it took to bring the agreement to an end by the notice given in accordance with its terms, took effect.

113. Without seeking or obtaining leave to withdraw its pleaded admissions as to the existence of the agreement on which Integrated Asset Management’s case depended, its existence could thus not be challenged, as Trans Communications and Mr Van Rooyen sought to do, by submitting only in the final submissions which they advanced at the hearing below, that the agreement had not been properly executed when signed by Mr Vujnovich, at which point objection was taken. Even then the necessary leave was not sought. Her Honour said she would consider those objections. Her Honour’s decision reveals that she concluded that the rental agreement had come into existence, as had been admitted in the amended defence, even though reasons for that conclusion were not given.

114. Had leave to withdraw the pleaded admissions been sought, either at trial or on appeal, it would have had to have been refused. The applicable authorities were discussed by Kirby J in Bank of Western Australia v Salmon [No 1] [2009] NSWSC 224 at [40] - [46]. At [42] his Honour referred to Santow J’s decision in Drabsch v Switzerland General Insurance Co Ltd (Supreme Court (NSW), Santow J, 16 October 1996, unrep) where his Honour said at 7-8:

“1.    Where a party under no apparent disability makes a clear and distinct admission which is accepted by its opponent and acted upon, for reasons of policy and the due conduct of the business of the court, an application to withdraw the admission, especially at appeal, should not be freely granted; Coopers Brewery Ltd v Panfida Foods Ltd (1992) 26 NSWLR 738 per Rogers CJ Comm D, followed in IOL Petroleum Ltd v O'Neill per Young J (Young J, 17 November 1995, unreported) and Apex Pallett Hire Pty Ltd v Brambles Holdings Ltd (full Supreme Court of Victoria, 8 April 1988, unreported), and in that respect not following H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694 at 703.

2.    The question is one for the reviewing judge to consider in the context of each particular appeal, with the general guideline being that the person seeking on a review to withdraw a concession made should provide some good reason why the judge should disturb what was previously common ground or conceded; IOL Petroleum Ltd v O'Neill (supra), in the context of withdrawing a concession made before the Registrar.

3.    Where a court is satisfied that admissions have been made after consideration and advice such as from the parties' expert and after a full opportunity to consider its case and whether the admissions should be made, admissions so made with deliberateness and formality would ordinarily not be permitted to be withdrawn; Coopers Brewery Ltd v Panfida Foods Ltd (supra) at 745 and 748. Thus a court will not lend its approval to the withdrawal of admissions where, by analogy with the making of amendments, this is actuated by purely tactical reasons; compare Devae Prufcoat Pty Ltd v Altex Industrial Paints Ltd (Cole J, 15 March 1989, unreported).

4.    It will usually be appropriate to grant leave to withdraw an admission where it is shown that the admission is contrary to the actual facts. Leave may also be appropriate where circumstances show that the admission was made inadvertently or without due consideration of material matters. Irrespective of whether the admission has or has not been formally made, leave may be refused if the other party has changed its position in reliance upon the admission; H Clark (Doncaster) Ltd v Wilkinson (supra), in that respect not doubted.

5.    Following Cohen v McWilliam & Anor (1995) 38 NSWLR 476, a court is not obliged to give decisive weight to court efficiency, such that a party who wishes to defend its claim is entitled to a hearing on the merits, with cost orders being available as a means of compensating the other party for any costs thereby unnecessarily incurred or not fairly visited on the other party.”

115. Here, there was no good reason why what was common ground even when the evidence was given, should later be disturbed. Given the issues joined on the pleadings, the basis on which the proceedings were run in the Local Court at least until final submissions and the limited rights of appeal to this Court, no basis upon which the admissions made in the pleadings could be withdrawn, is apparent.

116. In those circumstances, the admissions made in the amended defence may not be departed from on appeal, by the matters raised in the notice of contention, as to the existence and terms of the rental agreement, without leave being sought and granted, as was Integrated Asset Management’s case.

117. Even on appeal, when objection was taken to the arguments advanced in the notice of contention, no leave to withdraw the admissions made in the amended defence was sought. Had it been, the leave would have had to be refused, consistently with the requirements of s 56 of the Civil Procedure Act2005 (NSW) and the requirements of s 58, which requires regard to be paid to what the dictates of justice requires in the circumstances.

118. As discussed in Whisprun Pty Ltd v Dixon at [51]:

“…It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action. Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs.” [footnotes omitted]

119. In the result, the admissions made in relation to the existence of the rental agreement cannot be withdrawn. On those admissions, her Honour properly had to consider whether Integrated Asset Management was Technology Fund Management’s undisclosed principal in the rental agreement it entered with Trans Communication and Mr Van Rooyen. The existence of that agreement cannot be challenged on this appeal.

Did the doctrine of undisclosed principal apply?

120. This was, the parties identified, their main battleground on this appeal.

121. Even so, on appeal, Trans Communications and Mr Van Rooyen argued, at one point, that the agency agreement between Integrated Asset Management and Technology Fund Management was irrelevant and ought not to have been received in evidence. Given what was in issue at the trial, namely, whether Integrated Asset Management was Technology Fund Management’s undisclosed agent, this agreement, which was not only a business record, but relevant to the assessment of the probability of the existence of facts in issue in the proceedings, was admissible under ss 55 and 69 of the Evidence Act.

122. There was no real issue between the parties as to the law. In the Local Court Trans Communications and Mr Van Rooyen had submitted that the doctrine as to an undisclosed principal was as stated in Siu YinKwan v Eastern Insurance Co Ltd at 207:

“(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal's behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal's right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”

123. Her Honour concluded that Integrated Asset Management was Technology Fund Management’s undisclosed principal, for reasons, which it must be accepted, are difficult to discern.

124. It may be inferred that her Honour was satisfied, on the evidence led of Mr Colless and Mr McMillan, that: (1) the rental agreement which Technology Fund Management and Trans Communications entered, was within the scope of Technology Fund Management’s actual authority under its agency agreement with Integrated Asset Management; (2) that in entering that agreement, Technology Fund Management intended to act on Integrated Asset Management's behalf; (3) that accordingly, Integrated Asset Management was entitled to sue Trans Communications on the rental agreement; (4) that the defences which Trans Communications sought to advance against Technology Fund Management, were defences which it was entitled to advance against Integrated Asset Management; and (5) that the rental agreement did not exclude Integrated Asset Management’s right to sue under the agreement and that the evidence did not establish that Technology Fund Management was the true and only principal.

125. On appeal Trans Communications and Mr Van Rooyen urged the conclusion that properly construed, the rental agreement did exclude Integrated Asset Management's right to sue under the agreement.

126. Other arguments advanced rested on provisions of the agency agreement, which authorised Technology Fund Management to enter certain leasing agreements, defined in clause 1.1. Trans Communications and Mr Van Rooyen argued that this only authorised Technology Fund Management to enter rental agreements there referred to “on behalf of the principal” in an approved form. The evidence established that it had not entered the rental agreement at all and that what had been entered, had not been approved.

127. The various other contentions pressed for Trans Communications and Mr Van Rooyen as to the existence of the agreement, which rested on other provisions of the agreements depended not only on the proper construction of the rental and agency agreements, but also on the evidence as to how the two companies managed the finance business they conducted as principal and agent.

128. These arguments cannot succeed, on the unchallenged evidence as to how these agreements were made under the arrangements put in place between Technology Fund Management and Integrated Asset Management and by the admissions I have already dealt with.

129. As I have explained, it is simply too late to raise these contentions now, given the admissions made in the amended defence and the failure to raise these issues at a time when evidence could have been led to meet them.

130. The case which Trans Communications and Mr Van Rooyen finally pressed was that the description of Technology Fund Management as the owner of the rental equipment “the highest form of property one can have”, was sufficient to exclude the application of the doctrine of undisclosed principal and that, in any event, the requirements of justice exemption to the principal applied (see Keighley, Maxsted & Co v Durant [1902] AC 240). This case must fail.

131. Clause 1 of the rental agreement provided that “the equipment is, and will remain, the sole property of the owner”.

132. In White v Baycorp Advantage Business Information Services Ltd [2006] NSWSC 441; (2006) 200 FLR 125 Campbell J, as his Honour then was, considered the doctrine of undisclosed principal, discussed in Humble v Hunter (1848) 12 QB 310, on which Trans Communications relied, observing at [80]:

“The principle which it exemplifies is, in my respectful view, accurately stated by Jordan CJ in Perpetual Trustee Co (Ltd) v Bligh (1940) 41 SR (NSW) 33 at 40:

“… if the written terms are such as to hold out the actual parties as the real and only principals, evidence is not admissible to show that there are other persons who are also liable as principals: Humble v Hunter (12 QB 310); Formby Bros v Formby (102 LT 116); Fred Drughorn Ltd v Rederiaktiebolaget Transatlantic [1919] AC 203.”

.

133. Campbell J observed that determining whether it is inconsistent with the terms of a particular contract, for one of the parties entering it to do so as agent for an undisclosed principal requires the contract as a whole to be considered. That accords with the modern approach to construction of contracts, discussed for example in Newey v Westpac Banking Corporation [2014] NSWCA 319 at [88] - [91].

134. In White the effect of the terms of the contract was “the equipment was and would remain the sole property of Konica Australia Pty Ltd, its successors and assigns, and any person entitled to the benefit of the Agreement.” Thus, his Honour concluded, the contract left open the possibility that Konica entered the agreement as agent for an undisclosed principal. At [84] his Honour said:

“I say nothing about what the situation would be if the agreement contained a term that the very entity which was a contracting party was the owner of the goods to which it related. In Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 150-151 Hope JA was of the view that an attornment was an act in the law to which the doctrine of undisclosed principal could apply, notwithstanding the problems of legal theory which would arise through there thereby being two concurrent and alternative rights to possession arising out of the one transaction. Hutley JA, at 155, reached the same conclusion. The reversal of that case in the Privy Council on other grounds (Maynegrain Pty Ltd v Compafina Bank (1984) 1 NSWLR 258) means that the decision of Hope and Hutley JJ is not an authority which binds me. However, I will not decide whether I agree with the views their Honours expressed when the question does not arise directly for consideration.”

135. This was relied on by Trans Communications and Mr Van Rooyen to support their case, the rental agreement expressly providing that Technology Funds Management was the owner of the equipment.

136. These submissions may not be accepted. In White his Honour concluded at [86] that the contract there in question did not fall into that class of agreements which, either from their inherent nature, or from the surrounding circumstances, are ones which can be availed of only by the people named as parties to them. He gave as an example a contract to paint a portrait, which could not be entered into by an artist as agent for an undisclosed principal. This is clearly not such a case.

137. In White there was evidence from one contracting party that he regarded it as important that he was dealing with the other contracting party, rather than with a finance company, because he did not like dealing with finance companies. While his Honour accepted that he held those views, he considered that they could not preclude Konica from entering the contract as agent for an undisclosed principal. Nor, he concluded, was there anything in the finance agreement which would objectively be regarded as the type of provision which it was likely would have been agreed to, only because it was the contracting party, rather than someone else.

138. This was a similar type of contract. Clause 12 of the rental agreement expressly provided that “The owner may assign, encumber, or otherwise deal with its rights in any way”. That provision cannot be overlooked in construing this contract. In my view, contrary to the case advanced by Trans Communications and Mr Van Rooyen, that provision puts this rental agreement, properly construed, into the same category as that considered by Campbell J in White. That is, one where the doctrine of undisclosed principal is not excluded by implication, given that Technology Funds Management was identified to be the owner of the rental equipment.

139. Further, there was not even evidence in this case, that Mr Van Rooyen would have had any objection to dealing with Integrated Asset Management, had its role been revealed. The existence of the interests of justice exception to the principal was in issue between the parties. Even accepting that it exists, there is nothing in the evidence I have outlined which is capable of providing a finding for the conclusion that the interests of justice requires the exclusion of the operation of the principal in this case.

140. In the result, it must be concluded that her Honour was correct in finding that Integrated Asset Management was Technology Fund Management’s undisclosed principal.

Orders

141. For the reasons given, I am satisfied that the appeal must be allowed and her Honour’s judgment and orders set aside. The usual order as to costs is that they follow the event. The orders sought in the notice of appeal depart from that order.

142. The parties are directed to confer as to costs and to file proposed short minutes of order. I will hear them on the question of costs, if there remains any disagreement.

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Decision last updated: 23 July 2015