McDonald v Ellem Warren Pty Ltd - [2023] QSC 255

SUPREME COURT OF QUEENSLAND

CITATION:

McDonald v Ellem Warren Pty Ltd [2023] QSC 255

PARTIES:

KAYE LEANNE McDONALD

(plaintiff)

v
ELLEM WARREN PTY LTD
ACN 160 660 891

(defendant)

FILE NO:

BS No 1406 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

14 November 2023

DELIVERED AT:

Brisbane

HEARING DATE:

25 October 2023

JUDGE:

Davis J

ORDERS:

1.   As to the application filed by the defendant:

(a) the application for summary judgment is dismissed;

(b) paragraphs 42.2 and 46 of the amended statement of claim are struck out.

2.   The application filed by the plaintiff is adjourned to a date to be fixed.

3.    The questions of costs and directions are reserved for further argument on a date to be fixed.

4.    The matter will be mentioned at 9.15 am on 21 November 2023.

CATCHWORDS:

CONTRACTS – PARTICULAR PARTIES – PRINCIPAL AND AGENT – AUTHORITY OF AGENTS – CONSTRUCTION AND EXTENT OF AUTHORITY – where trustees in bankruptcy sued the plaintiff – where third parties were funding the trustees in bankruptcy – where the defendant was the solicitor for the plaintiff – where the defendant and solicitors for the third parties purported to make an agreement – whether the agreement settled rights beyond those litigated – where the plaintiff alleged that the defendant had no express authority to enter into the agreement – where the plaintiff alleged that the defendant had ostensible authority to bind her – where she sued the defendant for loss occasioned by the agreement – whether the defendant had ostensible authority to bind her

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where trustees in bankruptcy sued the plaintiff – where third parties were funding the trustees in bankruptcy – where the defendant was the solicitor for the plaintiff – where the defendant and solicitors for the third parties purported to make an agreement – where the agreement settled rights beyond those litigated – where the plaintiff alleged that the defendant had no express authority to enter into the agreement – where the plaintiff alleged that the defendant had ostensible authority to bind her – where the plaintiff sued the defendant for loss occasioned to her by the agreement – where the defendant alleged that the plaintiff’s pleading did not establish ostensible authority – whether the pleading should be struck out

Bankruptcy Act 1966 (Cth), s 120, s 121
Uniform Civil Procedure Rules 1999, r 149, r 171, r 293

GE Dal Pont, Law of Agency, 3rd Edition, LexisNexis Butterworths, 2014

Across Australia Finance v Bassenger [2008] NSWSC 799, cited
Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd [2011] QCA 252, followed
Cassar v New South Wales Crime Commission (2014) 87 NSWLR 683; [2014] NSWCA 356, cited
Central Newbury Car Auctions Ltd v Unity Finance Limited [1957] 1 QB 371, followed
CIC Insurance Ltd v…

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: [2023] QSC 255
Decision Date: 14 November 2023

CaseChat Overview and Summary

In the case of McDonald v Ellem Warren Pty Ltd, the plaintiff, Kaye Leanne McDonald, sought to hold the defendant, Ellem Warren Pty Ltd (EW), liable for losses she suffered as a result of an agreement reached between EW's representative and the solicitors of third parties who were funding trustees in bankruptcy. Mrs McDonald alleged that the agreement settled rights beyond those that were being litigated and that EW had no express authority to enter into the agreement, but did have ostensible authority. EW applied for summary judgment and to strike out certain paragraphs of the plaintiff's statement of claim, while the plaintiff sought to strike out parts of the defence. The court was required to determine whether the defendant had the ostensible authority to bind the plaintiff to the agreement in question.

The court found that the plea of ostensible authority was flawed. Paragraph 42.2 of the statement of claim was deemed irrelevant, while paragraph 46 was otherwise deficient. The court held that an agent may bind a principal if the agent has actual or ostensible authority to enter into the transaction. Ostensible authority arises when the principal's actions represent to third parties that the agent has the authority to engage in the particular transaction on behalf of the principal. The court found that the plea in this case failed because it would be unfair or unjust to allow the defendant to depart from the state of affairs which the plaintiff had taken to be correct. As a result, the offending paragraphs of the statement of claim were struck out.

The defendant's application for summary judgment was dismissed, while the plaintiff's application to strike out parts of the defence was adjourned. The questions of costs and directions were reserved for further argument. The matter was to be mentioned at 9.15 am on 21 November 2023. The court's orders were that the application for summary judgment was dismissed, and paragraphs 42.2 and 46 of the amended statement of claim were struck out. The plaintiff's application to strike out parts of the defence was adjourned, and the questions of costs and directions were reserved for further argument.

Orders

Orders of the court

1. As to the application filed by the defendant:

(a) the application for summary judgment is dismissed;

(b) paragraphs 42.2 and 46 of the amended statement of claim are struck out.

2. The application filed by the plaintiff is adjourned to a date to be fixed.

3. The questions of costs and directions are reserved for further argument on a date to be fixed.

4. The matter will be mentioned at 9.15 am on 21 November 2023.

Background

Background to the litigation

The defendant, Ellem Warren Pty Ltd (EW), applied for summary judgment on the claim against it[1] and, in the alternative, to strike out various paragraphs of the statement of claim.[2] The plaintiff, Kaye Leanne McDonald, applied to strike out particular paragraphs of the defence filed by EW.[3][1]Uniform Civil Procedure Rules 1999, r 293.[2]Uniform Civil Procedure Rules 1999, r 171; the current pleading is the amended statement of claim filed 14 October 2022.[3]Uniform Civil Procedure Rules 1999, r 171; the current pleading is the further amended defence filed 28 February 2023.Background EW is an incorporated legal practice. Tristan Appleby was, at relevant times, a law clerk employed by EW. MCG Group Pty Ltd (MCG) is a company controlled by William McDonald. Mrs McDonald’s husband, Paul McDonald, was a defendant along with a company, Ftrus Pty Ltd (Ftrus), in proceedings brought by MCG in the Federal Court of Australia. Those proceedings (QUD107) were commenced on 23 March 2015 and sought relief under the Australian Consumer Law. Before the proceedings were commenced, Mr and Mrs McDonald were involved in real estate transactions concerning properties at Noosaville, namely 22 The Anchorage and 24 The Anchorage. Mr and Mrs McDonald acquired 22 The Anchorage on 20 March 2008. They held that property as tenants in common as to 1/100th share by Mr McDonald and 99/100th shares to Mrs McDonald. Mr and Mrs McDonald acquired 24 The Anchorage on 12 August 2008. That was initially held by them as joint tenants. In May 2014, Mr McDonald severed the joint tenancy and transferred all his interest (except for a 1/100 share) in 24 The Anchorage to Mrs McDonald. There are three companies bearing the name “Fortrus”; Fortrus Australia Pty Ltd (Fortrus Australia), Fortrus Resources Pty Ltd (Fortrus Resources) and Fortrus Holdings Pty Ltd (Fortrus Holdings).[4] At relevant times, Mr McDonald was the only shareholder of Fortrus Holdings.[4]There are actually more Fortus companies but not relevant to the present dispute. On 30 June 2014:1.Fortrus Australia loaned $16,831,000.77 to Mr and Mrs McDonald;2.Mr and Mrs McDonald mortgaged both 22 and 24 The Anchorage to Fortrus Australia to secure the sum advanced. Fortrus Holdings owned all issued shares in Fortrus Australia. Mr McDonald transferred his shares in Fortrus Holdings to Mrs McDonald on 30 June 2015 in consideration of a payment of $100. The effect of all these transactions was that Mrs McDonald became the registered proprietor of 99/100th shares in the fee simple in both 22 The Anchorage and 24 The Anchorage subject to a mortgage to an entity she effectively controlled. Proceedings QUD107 were tried in the Federal Court of Australia and judgment was given against Mr McDonald and Ftrus for damages on 10 June 2016. The amount of damages initially awarded was varied on 17 June 2016 and interest was also awarded. On 5 April 2017, Ftrus and Mr McDonald were ordered to pay MCG’s costs. Ftrus was wound up by order placing it in liquidation on 2 September 2016. Mr McDonald was declared bankrupt on 18 August 2016.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

It follows that those paragraphs of the amended statement of claim which concern the allegation of ostensible authority should be struck out.Conclusions and orders As earlier observed, EW abandoned the application for summary judgment and it should be dismissed. It was also common ground that Mrs McDonald’s application to strike out parts of the further amended defence should be adjourned. For the reasons given, I will strike out the offending paragraphs of the amended statement of claim. That leaves questions about costs and directions for repleading, etc. The parties should be given an opportunity to consider their respective positions on these matters and I will set a date for the matter to be mentioned before me. The orders are:1.As to the application filed by the defendant:(a)the application for summary judgment is dismissed;(b)paragraphs 42.2 and 46 of the amended statement of claim are struck out.2.The application filed by the plaintiff is adjourned to a date to be fixed.3.The questions of costs and directions are reserved for further argument on a date to be fixed.4.The matter will be mentioned at 9.15 am on 21 November 2023.

Ratio Decidendi

Legal Principle Established

EW have identified the particular paragraphs of the amended statement of claim which should be struck out as 42.2, 46, 48, 52.2, 55, 57 and 58.Consideration of the application to strike out offending paragraphs of the amended statement of claim As explained below, the plea of ostensible authority fails. The plea in paragraph 42.2 is (for reasons which follow) irrelevant and the plea in paragraph 46 is otherwise bad. Paragraphs 48, 52.2, 55, 57 and 58 all, one way or another, plead the consequences of the settlement agreement. As it is common ground that the settlement agreement is binding upon Mrs McDonald, these paragraphs should not be struck out. An agent may bind the principal where the agent has the actual or ostensible authority of the principal to enter into the transaction in question. An agent’s actual authority includes such authority as can be implied from the express grant of authority.[16] As explained by Dal Pont,[17] authority may be implied as being necessarily incidental to an express grant, or might be implied as the “usual authority” which such an agent would have, or might be implied by the usages and customs of the market in which the agent is to operate.[16]Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132-133 following Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502.[17]GE Dal Pont, Law of Agency, 3rd Edition, LexisNexis Butterworths, 2014 at 8.2. Ostensible authority arises from the actions of the principal so as to represent to third parties that the agent has the authority to enter into the particular transaction on behalf of the principal.[18] The rationale of ostensible authority as a vehicle by which a principal may become bound to a transaction in the absence of actual authorisation, was described by Denning LJ in Central Newbury Car Auctions Ltd v Unity Finance Limited[19] as follows:“[Y]ou start with an innocent person who has been led to believe in a state of affairs which he takes to be correct (in this case the purchaser has been led to believe that the rogue was the owner of the car) and has acted upon it. Then you ask yourself how has this innocent person been led into this belief. If it has been brought about by the conduct of another (in this case by the conduct of the original owner), who, though not solely responsible, nevertheless has contributed so large a part to it that it would be unfair or unjust to allow him to depart from it, then he is not allowed to go back on it so as to prejudice the innocent person who has acted on it ... [T]he basis of estoppel is that it would be unfair or unjust to allow a party to depart from a particular state of affairs which another has taken to be correct.”[20] (emphasis added)[18]Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72, Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 and Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [36] following Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503.[19][1957] 1 QB 371.[20]At 379-80.

CITATION:	McDonald v Ellem Warren Pty Ltd [2023] QSC 255
PARTIES:	KAYE LEANNE McDONALD (plaintiff) v ELLEM WARREN PTY LTD ACN 160 660 891 (defendant)
FILE NO:	BS No 1406 of 2021
DIVISION:	Trial Division
PROCEEDING:	Application
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	14 November 2023
DELIVERED AT:	Brisbane
HEARING DATE:	25 October 2023
JUDGE:	Davis J
ORDERS:	1. As to the application filed by the defendant: (a) the application for summary judgment is dismissed; (b) paragraphs 42.2 and 46 of the amended statement of claim are struck out. 2. The application filed by the plaintiff is adjourned to a date to be fixed. 3. The questions of costs and directions are reserved for further argument on a date to be fixed. 4. The matter will be mentioned at 9.15 am on 21 November 2023.
CATCHWORDS:	CONTRACTS – PARTICULAR PARTIES – PRINCIPAL AND AGENT – AUTHORITY OF AGENTS – CONSTRUCTION AND EXTENT OF AUTHORITY – where trustees in bankruptcy sued the plaintiff – where third parties were funding the trustees in bankruptcy – where the defendant was the solicitor for the plaintiff – where the defendant and solicitors for the third parties purported to make an agreement – whether the agreement settled rights beyond those litigated – where the plaintiff alleged that the defendant had no express authority to enter into the agreement – where the plaintiff alleged that the defendant had ostensible authority to bind her – where she sued the defendant for loss occasioned by the agreement – whether the defendant had ostensible authority to bind her PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where trustees in bankruptcy sued the plaintiff – where third parties were funding the trustees in bankruptcy – where the defendant was the solicitor for the plaintiff – where the defendant and solicitors for the third parties purported to make an agreement – where the agreement settled rights beyond those litigated – where the plaintiff alleged that the defendant had no express authority to enter into the agreement – where the plaintiff alleged that the defendant had ostensible authority to bind her – where the plaintiff sued the defendant for loss occasioned to her by the agreement – where the defendant alleged that the plaintiff’s pleading did not establish ostensible authority – whether the pleading should be struck out Bankruptcy Act 1966 (Cth), s 120, s 121 Uniform Civil Procedure Rules 1999, r 149, r 171, r 293 GE Dal Pont, Law of Agency, 3rd Edition, LexisNexis Butterworths, 2014 Across Australia Finance v Bassenger [2008] NSWSC 799, cited Barr Rock Pty Ltd v Blast Ice Creams Pty Ltd [2011] QCA 252, followed Cassar v New South Wales Crime Commission (2014) 87 NSWLR 683; [2014] NSWCA 356, cited Central Newbury Car Auctions Ltd v Unity Finance Limited [1957] 1 QB 371, followed CIC Insurance Ltd v…