Permanent Custodians Ltd v Geagea (No 4)

[2016] NSWSC 934

Supreme Court

New South Wales

Medium Neutral Citation:

Permanent Custodians Limited v Geagea (No 4) [2016] NSWSC 934

Hearing dates:

16 July 2015

Date of orders:

07 July 2016

Decision date:

07 July 2016

Jurisdiction:

Common Law

Before:

Rothman J

Decision:

(1)   Leave is granted to the fourth to sixth defendants to re-open to argue apportionment;

 

(2)   The damages assessed on the basis of a breach of warranty of authority were not, in the circumstances of this claim, apportionable;

 (3)   The plaintiff will bring in short minutes of an order reflecting the judgments of the Court in this matter within 7 days of the delivery of this judgment.

Catchwords:

PRACTICE AND PROCEDURE – application to re-open proceedings after reasons for judgment had issued but before entry of judgment – whether economic loss for breach of warranty of authority is apportionable claim under Civil Liability Act – application to re-open granted – economic loss not able to be apportioned.

Legislation Cited:

Civil Liability Act 2002
Civil Procedure Act 2005
Fair Trading Act 1987

Cases Cited:

Adams (Deputy Federal Commissioner of Taxation (Victoria)) v Chas. S. Watson Pty Ltd [1938] HCA 37; (1938) 60 CLR 545
Alramadan v Director of Public Prosecutions (NSW) (No 2) [2008] NSWCCA 69
Autodesk Inc v Dyason (No 2) [1993] HCA 6; (1993) 176 CLR 300
Brown v Brown [1993] 31 NSWLR 582
Collen v Wright (1857) 8 E. & B. 647; (1857) 27 L. J. (Q.B.) 215
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1
Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450; (2007) 244 ALR 552
Elliott v the Queen; Blessington v the Queen [2007] HCA 51; (2007) 234 CLR 38
Gosling v Gaskell [1897] AC 575
Khan v Hadid (No 3) [2008] NSWSC 819
Lee v Irons [1958] VR 436
Leggo v Brown & Dureau Ltd [1923] HCA 19; (1923) 32 CLR 95
Permanent Custodians Limited v Geagea [2014] NSW SC 562
Permanent Custodians Limited v Geagea (No 3) [2014] NSW SC 1489
Pittalis and Another v Grant and Another [1989] 2 All ER 622
Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492
Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) NSWLR 762
Teoh v Minister for Immigration, Local Government & Ethnic Affairs (1994) 49 FCR 409; (1994) 121 ALR 436
Collen v Wright (1857) 8 E. & B. 647; (1857) 27 L. J. (Q.B.) 215

Category:

Consequential orders (other than Costs)

Parties:

Permanent Custodians Limited (Plaintiff/Respondent)
Tony Geagea (First Defendant)
Charbel Geagea (Second Defendant)
David Geagea (Third Defendant)
Phillip Howard Symonds (Fourth Defendant/First Applicant)
Christopher James Swanson (Fifth Defendant/Second Applicant)
Terence Edmund Ledlin (Sixth Defendant/Third Applicant)

Representation:

Counsel:
M Ashhurst SC/S Docker (Plaintiff/Respondent)
No Appearance (First, Second and Third Defendants)
G Watson SC/J Downing (Fourth, Fifth and Sixth Defendants/First, Second and Third Applicants)

    Solicitors:
Kemp Strang (Plaintiff/Respondent)
No Appearance (First, Second and Third Defendants)
HWL Ebsworth Lawyers (Fourth, Fifth and Sixth Defendants/First, Second and Third Applicants)

File Number(s):

2005/269110

Judgment

1. HIS HONOUR: By motion on notice filed 12 December 2014, the fourth to sixth defendants sought orders that the proceedings be re-opened, that they be granted leave to make further submissions on the issue of whether the breach of warranty of authority is an apportionable claim pursuant to Part 4 of the Civil Liability Act 2002 and in relation to costs. If leave to re-open were granted and the Court was satisfied that the breach of warranty of authority is an apportionable claim, the fourth to sixth defendants seek an order that they pay 1.7% of the plaintiff’s costs on a party/party basis.

2. It is necessary to set out some history of these proceedings and in the process understand the current status of them. The liability proceedings were determined by judgment on 13 May 2014, [1] in which the Court issued judgment for the plaintiff against the fourth, fifth and sixth defendants; ordered that the fourth, fifth and sixth defendants pay the plaintiff’s costs of and incidental to these proceedings; and granted leave to the parties (particularly the fourth, fifth and sixth defendants) to address any question of costs and the effect of proportionate liability on the amount of the damages to be awarded.

   1. Permanent Custodians Limited v Geagea [2014] NSW SC 562.

3. In the proceedings on liability the plaintiff sued the first to third defendants for default under a mortgage and the fourth, fifth and sixth defendants (solicitors) in negligence, breach of warranty of authority and misleading or deceptive conduct.

4. By the time the liability proceedings were concluded, the plaintiff had resolved its claim against the first, second and third defendants by those defendants paying $300,000 to the plaintiff plus $130,000 for costs. As a consequence of the leave granted in the liability judgment, the Court received submissions on proportionate liability and on costs. In short, the liability judgment found for the fourth to sixth defendants on the claim in negligence but found for the plaintiff arising from a breach of warranty of authority and for misleading or deceptive conduct.

5. In short, the fourth to sixth defendants accepted that the breach of warranty of authority was not an apportionable claim for the purposes of Part 4 of the Civil Liability Act, but argued that the misleading or deceptive conduct, being a contravention of s 42 of the Fair Trading Act 1987 (as then enforced) was an apportionable claim and, as a consequence of that latter proposition, the whole of the damages was apportionable pursuant to the terms of s 34(1A) of the Civil Liability Act.

6. The judgment on proportionate liability and costs, [2] recited and or summarised the provisions of s 34 and s 35 of the Civil Liability Act and concluded that a proportionate and non-proportionate claim did not allow for apportionment for the non-apportionable claim. Since the plaintiff had elected for the breach of warranty of authority claim, and that was the only claim on which damages would be assessed, no apportionment applied to the damages for the successful claim for breach of warranty of authority.

   2. Permanent Custodians Limited v Geagea (No 3) [2014] NSW SC 1489 (hereinafter “the third judgment”).

Brief Facts

7. It is necessary to summarise in very short form the circumstances that gave rise to the proceedings. Permanent Custodians Limited were a mortgagee of residential property occupied by Mr and Mrs Geagea, the parents. The first defendant, Tony Geagea, one of three sons, retained the fourth to sixth defendants and, on the findings of the Court, more probably than not brought with him either the third defendant or a person who looked similar to his brother, the third defendant, and purported to mortgage property for which the mortgagors were each of the three brothers, each defendants, and the second of whom quite separately was purported to have signed documents giving rise to the mortgage.

8. The Court found that the first defendant had defrauded the plaintiff and deceived the fourth to sixth defendants as to his authority to act on behalf of the second defendant and possibly the third, although the latter was unnecessary to decide.

9. The Court determined that the fourth to sixth defendants were not negligent but that certain correspondence innocently represented that the solicitors acted for the third defendant in circumstances where, as a matter of fact, they may not have been. Further, one item of the correspondence misrepresented that they were acting for the second defendant. Nevertheless, at least in relation to the representation that the fourth to sixth defendants acted on behalf of the third defendant, there was a breach of warranty of authority, albeit innocent.

10. The third judgment determined [3] that the first defendant’s liability would be at 65%, a mortgage broker, Yes Home Loans at 33.1/3% of the remaining liability and, as a consequence, the liability of the fourth to sixth defendants would be at 231/3% of the total liability.

    3. Ibid at [21].

11. As a consequence, the difference between an order, that the fourth to sixth defendants pay the entire liability (less the amount received in the settlement) as against a proportionate liability is over 75% of damages.

12. The only order or direction issued by the Court as a result of the reasons for judgment in the third judgment was an order that the plaintiff provide short minutes of order to reflect the judgment. No substantive order has issued and no order has been entered.

13. The motion, with which the Court must now deal, seeks to re-open the proceedings in order to submit that the claim for damages arising from a breach of warranty of authority is an apportionable claim. Such a submission is contrary to the express or implied submissions on behalf of the fourth to sixth defendants made in the proceedings leading to the third judgment, in that the fourth to sixth defendants submitted that the Court was required to apportion liability in relation to misleading or deceptive conduct and in relation to the negligence claim, but made no such submission in relation to the plaintiff’s breach of warranty of authority claim.

14. From the foregoing, it is clear that in terms of culpability and relative responsibility for the loss suffered by the plaintiff, the fourth to sixth defendants are not responsible for as much as one quarter of damage to the plaintiff, [4] but have been rendered liable for all or almost all of the damage. Further, it is clear that the Court has made no substantive order, other than a general order, being judgment for the plaintiff against the fourth to sixth defendants, and an order for costs in respect of which leave was reserved to reargue.

    4. Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492.

Principles of re-opening of proceedings

15. Where, as here, the Court has not issued final judgment and judgment has not been entered, but the Court has issued reasons for judgment, the Court must determine, as a matter of discretion, whether to allow a party to re-open the proceedings and make further submissions. The discretion must be exercised judicially and such a discretion is governed, amongst other matters, by the provisions of s 56 of the Civil Procedure Act2005 enjoining the Court, the parties and legal practitioners to “facilitate the just, quick, and cheap resolution of the real issues between the parties”.

16. As the High Court has stated [5] :

[31]    It is well settled that a superior court of record such as the Supreme Court has a power to ‘reopen’ a proceeding until judgment in the case in question has been drawn up, passed and entered. But by what criteria is that authority to be exercised?

[32]    It is here that guidance is provided by remarks of Mason CJ in Autodesk Inc v Dyason (No 2). His Honour gave examples from jurisdictions in this country (including the New South Wales Court of Appeal) and the United Kingdom where the power to reopen had been exercised on grounds not limited to denial of a fair hearing, but went on:

‘What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to reargue their cases.’

The circumstance in Autodesk that Mason CJ dissented as to the outcome of the reopening application which was before this Court does not detract from his remarks.” [Footnotes omitted.]

5. Elliott v the Queen; Blessington v the Queen [2007] HCA 51; (2007) 234 CLR 38 at 48.

17. The judgment in Elliott & Blessington above, relates to a criminal prosecution, but the High Court in the passage above cites its judgment in Autodesk Inc v Dyason (No 2) [6] in which the High Court said:

    6. [1993] HCA 6; (1993) 176 CLR 300.

“[2]    … The exercise of the jurisdiction to reopen a judgment and to grant a rehearing is not confined to circumstances in which the applicant can show that, by accident and without fault on the applicant’s part, he or she has not been heard. It is true that the jurisdiction is to be exercised with great caution (Wentworth v. Woollahra Municipal Council [1982] HCA 41; (1982) 149 CLR 672, at p 684; State Rail Authority of N.S.W. v. Codelfa Construction Pty. Ltd. (1982) 150 CLR 29, at p 38.), having regard to the importance of the public interest in the finality of litigation. It is equally true, as this Court said in Wentworth v. Woollahra Municipal Council ((1982) 149 CLR, at p 684), that:

‘(g)enerally speaking, it will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard.’

[3]    But these statements do not exclude the exercise of jurisdiction to reopen a judgment which has apparently miscarried for other reasons, at least when the orders pronounced have not been perfected by the taking out of formal orders. So much was acknowledged by Brennan, Dawson, Toohey and Gaudron JJ. in Smith v. N.S.W. Bar Association (No.2) when their Honours said ([1992] HCA 36; (1992) 66 ALJR 605, at p 608; [1992] HCA 36; 108 ALR 55, at p 60.):

‘if reasons for judgment have been given, the power is only exercised if there is some matter calling for review’.

It is sufficient to give three examples. In In re Harrison’s Share under a Settlement ((1955) Ch 260), orders were set aside following a decision of the House of Lords which overruled authorities on the basis of which the orders had been made. In New South Wales Bar Association v. Smith (Unreported, 4 July 1991.), the New South Wales Court of Appeal reconsidered orders previously made in view of an argument that the Court had mistakenly assumed that particular evidence had not been given at earlier hearings (The Court of Appeal refused to set aside its orders but an appeal to this Court was successful). And, in Pittalis v. Sherefettin ((1986) QB 868), a judge recalled orders the day after they were made upon determining that he had ‘erred in a material matter in his approach to the case’ (ibid., at p 880. The Court of Appeal upheld the decision to review the matter, though disagreeing with the judge’s ultimate conclusion.).

[4]    These examples indicate that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or rehearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law. As this Court is a final court of appeal, there is no reason for it to confine the exercise of its jurisdiction in a way that would inhibit its capacity to rectify what it perceives to be an apparent error arising from some miscarriage in its judgment. However, it must be emphasized that the jurisdiction is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to re-argue their cases.” [7]

7. Ibid, per Mason CJ at 302 et seq.

18. These principles were discussed by the Court of Criminal Appeal in relation to an appeal to that Court and, after considering both Elliott & Blessington and Autodesk, the Court of Criminal Appeal [8] said:

“[12]    Accepting that it was necessary to reopen the appeal to call further evidence, the applicant assayed that task, but without providing any explanation as to why such further, and arguably more persuasive, material had not been presented on the appeal. Senior counsel for the applicant properly accepted that his application must be confined to material relevant to the existing grounds of appeal. In substance, the applicant has sought to reopen the appeal so as to remedy a deficiency in the material presented at the hearing. That approach would appear to fall squarely within the impermissible purpose of seeking ‘by a backdoor method’ to reargue an unsuccessful appeal. It cannot be justified on the criteria explained by Mason CJ in Autodesk (No. 2).”

8. Alramadan v Director of Public Prosecutions (NSW) (No 2) [2008] NSWCCA 69 (per Basten JA, Latham and Rothman JJ).

19. The principles that have been recited above have been expressed in the context of appeals. The overriding purpose prescribed by s 56 of the Civil Procedure Act and the notion of the finality of judgments may require a slightly more flexible approach when dealing with a matter at first instance. The principle, however, is the same.

20. In dealing with the facilitation of a speedy resolution of the issues between the parties, it may be appropriate to discuss the attitude that an appeal court may adopt, if any final orders were the subject of an appeal. If, for example, on appeal, the fourth to sixth defendants would be permitted to press an appeal on the ground that breach of a warranty of authority was, as a matter of fact and law, an apportionable claim, then no purpose (in terms of expedition) is served by refusing the fourth to sixth defendants the ability to re-open and address the issues at first instance.

21. There can be no doubt that facilitating a just outcome would require that the Court deal with the matter on the basis of the law as it is, rather than any error based upon the failure to put submissions, or even concede, a particular aspect that was ultimately held to be wrong.

22. As to “cheap” (in relation to these circumstances, this has no different meaning from “inexpensive”) the costs of the parties have already been expended in addressing the argument and no additional cost is occasioned by allowing the re-opening and deciding the matter on the basis of the law, as I hold it to be. If, as a consequence of the re-opening, error of law is identifiable or manifest, then that is a matter for any such appeal court.

23. This is not a case in which the parties have acted to their detriment on a basis of a position adopted by another party. Nor is it a case in which evidence has been adduced in circumstances where the party adducing the evidence could rely upon a position that is now sought to be withdrawn or substantially varied. There are and have been other proceedings in which, for example, parties seek to re-open after reasons for judgment but before entry of judgment in order to re-plead a defence in circumstances where the existence of that defence would or may have significantly affected the decision of an opposing party to adduce the evidence upon which that altered defence depends. [9]

    9. See Khan v Hadid (No 3) [2008] NSWSC 819.

24. In these proceedings, and on the application for re-opening, all of the evidence was adduced in circumstances where liability was in issue, relative liability was in issue and the parties adduced all of the evidence upon which they could possibly have relied were this matter to have been argued in submissions at the conclusion of the trial or otherwise. Further, the pleadings in the proceedings do not permit the Court to draw an inference that any party could possibly have been misled in a way which would have prejudiced their, or its, position on this matter.

25. Nevertheless, it is essential that the Court not allow parties to have an ability to reargue those matters upon which they were unsuccessful because some further argument has occurred to them, or they consider the Court has fallen into error. That, in any general sense, would not facilitate the just, quick and cheap resolution of issues between the parties, but rather prolong proceedings and undo the finality of proceedings at first instance.

19. Ultimately, the determination of whether to allow these issues to be re-agitated is an exercise of the discretion of the Court. While the Court at first instance is not in the same position as an appellate court, some guidance may be taken, in the exercise of that discretion, from the attitude on appeal of intermediate courts of appeal. In Teoh v Minister for Immigration, Local Government & Ethnic Affairs, [10] a full court of the Federal Court (Black CJ, Lee and Carr JJ) allowed an amendment to the original proceedings to allow the point of law to be taken on appeal in circumstances where the point had not been argued before the first instance judge, because it was within the scope of the issues raised by the case as presented.

    10. (1994) 49 FCR 409; (1994) 121 ALR 436.

20. In this court, the Court of Appeal had an undoubted discretion, in the interests of justice, to permit a point to be taken on appeal that was not taken at the trial. Generally, that is done in exceptional cases only and will not occur where evidence could have been adduced which would be, or could be, an answer to the point taken: see Coulton v Holcombe. [11] There are many cases dealing with what may be exceptions.

    11. [1986] HCA 33; (1986) 162 CLR 1.

21. Nevertheless, it has been decided that a pure question of law, raised for the first time on appeal, in circumstances where no further evidence could have been called at the trial or where the pleadings disclose that the point may have been a live issue upon which evidence should have been called, can be raised. [12] In Brown v Brown, Gleeson CJ dealt with the points sought to be raised on appeal for the first time, namely whether the presumption of advancement was available to rebut a presumption of a resulting trust, without discussing, in his reasons for judgment, whether the point should have or could have been raised. The other member of the Court, Cripps JA, agreed with Gleeson CJ. Only Kirby P discussed in any detail any issue associated with a difficulty in raising the legal argument before the Court on appeal for the first time and that was in the passage to which reference has been made. Otherwise, Kirby P was in dissent as to the orders that ought to be made. [13]

    12. Brown v Brown [1993] 31 NSWLR 582 at 602-604 (per Kirby P).

    13. See also Adams (Deputy Federal Commissioner of Taxation (Victoria)) v Chas. S. Watson Pty Ltd [1938] HCA 37; (1938) 60 CLR 545.

22. In Pittalis and Another v Grant and Another,[14] Nourse LJ said:

“The stance which an appellate court should take towards a point not raised at the trial is in general well settled …. It is perhaps best stated in Ex p Firth, re Cowburn (1882) 19 Ch D 419 at 429, [1881–5] All ER Rep 987 at 991 per Jessel MR:

‘… the rule is that, if a point was not taken before the tribunal which hears the evidence, and evidence could have been adduced which by any possibility would prevent the point from succeeding, it cannot be taken afterwards. You are bound to take the point in the first instance, so as to enable the other party to give evidence.’

Even if the point is a pure point of law, the appellate court retains a discretion to exclude it. But where we can be confident, first, that the other party has had opportunity enough to meet it, second, that he has not acted to his detriment on the faith of the earlier omission to raise it and, third, that he can be adequately protected in costs, our usual practice is to allow a pure point of law not raised below to be taken in this court.”

14. [1989] 2 All ER 622 at 626-627.

30. It is not for the Court as presently constituted to determine whether the Court of Appeal would or would not grant leave to raise the point on appeal. It is however, relevant that a court of appeal could allow the point to be raised and, given that the issue was a live one at the time that evidence was adduced and the parties argued apportionment generally, not being aware as to which course of action would succeed, it cannot be suggested that the plaintiff could have called evidence, otherwise available, that would answer the point that is now sought to be raised.

31. Fundamentally, the issue concerns the balance between justice and expedition. Further, were I to refuse leave to re-open and the issues sought to be raised showed an error in the application of principle to the damages issue (even if on the basis of an implied concession in submissions at trial), the Court of Appeal, if there were an appeal, would be faced with an exercise of discretion as to the re-opening and the difficulties associated with an appeal on that basis.

Apportionment

32. In dealing with the question of apportionment, one must first deal with the basis upon which liability has been determined.

33. The fourth to sixth defendants rely upon the evidence of the fourth defendant that he did not intend to represent the second defendant or that the second defendant was a client of his firm. The Court did not determine that the fourth defendant represented he was acting for the second defendant. It did determine that he represented or warranted that he had authority to act on behalf of the third defendant.

34. Further, the Court held that the scenario that was more probable than not is that the first defendant, Tony Geagea, attended on the premises of the fourth to sixth defendants in the company of a person who looked like and represented he was the third defendant. As a consequence, the fourth defendant, on behalf of the fourth to sixth defendants, represented or warranted that he had authority to act on behalf of the second defendant, in circumstances where, on the evidence before the Court, he did not.

35. The submissions on behalf of the fourth to sixth defendants assume that a claim for a breach of warranty of authority is a breach of a collateral contract and is a claim “in contract”. The precise classification of a claim for a breach of warranty of authority is not quite as clear as is submitted.

36. On one view, the basis for liability for breach of warranty of authority is that there is a collateral contract or that the agent (the person who warrants that authority exists) is bound by the contract otherwise executed. However, even where the warranty is given in such terms that the agent is not and cannot be a contracting party with the person to whom the warranty is given, the agent is liable, to the same extent, as the principal (if the principal were to exist) would have been. As Lord Herschell made clear:

“Where an agent purports to contract for another in such terms as not to make himself a contracting party, and he has no authority from that other to bind him as principal, neither the agent nor anyone else can be sued on the contract, though the agent may be subject to the same liability as if he had been a party to the contract in respect of his breach of an implied warranty that he possessed the authority which he represented himself to have.” [15]

15. Gosling v Gaskell [1897] AC 575 at 592.

37. In Collen v Wright, [16] Willes J said:

“[A] person who induces others to contract with him as the agent of a third party by an unqualified assertion of his being authorised to act as such agent, is answerable to the person who so contracts for any damages he sustains by means of the assertion of the authority being untrue… If one of two in such cases is to suffer it ought not to be the person who has been guilty of no error, but he who has by an untrue assertion, believed and acted upon as he intended it should be, and touching a subject within his peculiar knowledge, and as to which he gave the other party no opportunity of judging for himself has brought about the damage. The obligation arising in such a case is well-expressed by saying that the person professing to contract as agent for another impliedly undertakes with the person who enters into such a contract upon the faith of this being duly authorised, that the authority he professes to have does in point of fact exist. The fact of entering into the transaction with the professed agent as such is good consideration for the promise.”

16. (1857) 8 E. & B. 647; (1857) 27 L. J. (Q.B.) 215 at 217-218.

38. On one view of the comment of the majority in Collen v Wright, speaking, as it does, of promise and consideration, it may well be a contract. But the true basis of it has been the subject of much debate and academic writing.

39. An equally valid basis, given that it applies even in circumstances where there is an express prohibition on any contract with the agent or person warranting and given that it can apply to an agent in circumstances where the principal does not exist, is that it is a remedy based upon unconscionable conduct and akin to an estoppel. In other words, the person who warrants that authority exists is then liable for the conduct of the party to whom the warranty is expressed for damages that arise from that other party’s reliance upon the warranty or undertaking. [17] In Leggo, Isaacs J, described the elements of the action in the following manner:

“The essentials are (1) assertion of authority; (2) inducement by asserting; (3) transaction which but for that assertion the other party would not have entered into. Where they coexist there is a warranty. There is no suggestion that there must be ‘belief’ in the truth of the assertion; there must, of course, be reliance on the assertion, for that is connoted by the ‘inducement’. The other party might well say to the professing agent: ‘I have no belief about it; as to the instructions you have I am ignorant and agnostic, but I am content to rest upon and trust to your assurance and to base my dealing upon that.’ That is the only operative effect of the word ‘warranty.’” [18]

17. See Leggo v Brown & Dureau Ltd [1923] HCA 19; (1923) 32 CLR 95 at 99 per Knox CJ; Lee v Irons [1958] VR 436 at 445-446 per Pape J.

18. Leggo v Brown & Dureau Ltd, supra, at 106.

40. Notwithstanding the uncertainty referred to above, the provisions of the Civil Liability Act applies to all claims for economic loss arising from a failure to take reasonable care. In the view I take, it matters not whether breach of warranty of authority is a cause of action in contract. It does matter whether it causes economic loss (which has been found) and whether it arises from a failure to take reasonable care.

41. Damages for breach of warranty of authority do not depend upon negligence or a failure to take reasonable care. It is a strict liability, in the sense that it requires no actual intention, no fraud, no negligence, or any fault on the part of the agent. It requires only that a warranty of authority was given upon which the recipient of that warranty relied and the conduct in reliance on the authority caused damage.

42. Further, there is no finding by the Court in any of the judgments on liability, that the fourth defendant, himself or on behalf of the fourth to sixth defendants, failed to take reasonable care.

43. Thus, even if, in a cause of action that depends on strict liability, a factual finding of a failure to take reasonable care would be sufficient to invoke the provisions of s 34 of the Civil Liability Act, [19] no such finding has been made and the economic loss does not depend upon such failure having arisen.

    19. See Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187; (2008) NSWLR 762 (per Barrett J) and Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450; (2007) 244 ALR 552 (per Middleton J).

44. The determination of liability does not depend upon any failure to take reasonable care, either as an element of the claim or as a matter of fact in determining this particular liability.

Conclusion

45. As a consequence of the foregoing, the Court makes the following further orders or declarations:

1. Leave is granted to the fourth to sixth defendants to re-open to argue apportionment;

2. The damages assessed on the basis of a breach of warranty of authority were not, in the circumstances of this claim, apportionable;

3. The plaintiff will bring in short minutes of an order reflecting the judgments of the Court in this matter within 7 days of the delivery of this judgment.

**********

Endnotes

Decision last updated: 07 July 2016