The Revenue Gallery Pty Ltd v R & S Commercial Fitouts Pty Ltd - [2019] SADC 73

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
THE REVENUE GALLERY PTY LTD v R & S COMMERCIAL FITOUTS PTY LTD
[2019] SADC 73
Judgment of His Honour Judge Chivell
13 June 2019
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RELATIONS BETWEEN AGENT AND THIRD PERSONS - LIABILITIES OF AGENT - IN RESPECT OF CONTRACTS - AGENT CONTRACTING ON BEHALF OF UNDISCLOSED PRINCIPAL
ESTOPPEL - ESTOPPEL BY JUDGMENT - ISSUE ESTOPPEL - GENERAL PRINCIPLES
The respondent company had carried out work for which it had successfully sued Flehan Group Pty Ltd for payment. In a subsequent action The Revenue Gallery Pty Ltd, the applicant in this review, sued the respondent for alleged defective and incomplete work. The respondent defended the claim on the basis that its contract was with Flehan Group Pty Ltd. The applicant then unsuccessfully applied, inter alia, for leave to join Flehan Group Pty Ltd as a plaintiff, and the respondent’s application for summary judgment was granted.
Issues: whether the applicant was an undisclosed principal of Flehan Group Pty Ltd; whether the decision of the magistrate in the first action gave rise to an issue estoppel on the question of agency; whether in any event the applicant and Flehan Group Pty Ltd could not be co-plaintiffs because the assertion of the applicant of its own right as principal would destroy any claim by Flehan Group Pty Ltd as agent.
Held: Orders made by Magistrate Gumpl on 29 June 2018 affirmed. Application for review dismissed.
Magistrates Court Act 1991 (SA) s 3(2), s 38; Magistrates Court (Civil) Rules 2013 (SA) r 3, r 8, r 80, r 86, referred to.
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; Channel Seven Adelaide Pty Ltd v Manock [2010] SASCFC 59; Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141; Atkinson v Cotesworth (1825) 3 B & C 647, 107 ER 873; Vandervell Trustees Ltd v White [1971] AC 912; Blair v Curran (1939) 62 CLR 464; Montagu v Forwood [1893] 2 QB 350; Sedco Forex International Inc v Nexus Energy WA Proprietary Limited [2012] FCA 351; Davis v Capel [1959] NZLR 825; Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541; White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125; Dominus Pty Ltd v Daydream Island Resort Investments Pty Ltd & Ors [2003] QSC 44; Ceneavenue Pty Ltd v Martin [2008] SASC 158, (2008) 106 SASR 1; Egan v The Commonwealth Minister for Transport (1976) 14 SASR 445; Drummond-Jackson v British Medical Association [1970] 1 WLR 688, considered.

THE REVENUE GALLERY PTY LTD v R & S COMMERCIAL FITOUTS PTY LTD
[2019] SADC 73

This is an application for review of a decision in a minor civil action. The litigation arises out of work done by R & S Commercial Fitouts Pty Ltd at premises in Hindley Street, Adelaide. The premises are widely known as ‘the Crazy Horse Revue’.
In previous litigation,[1] R & S sued Flehan Group Pty Ltd for $35,769.80, being the first progress payment for work done. Flehan argued that R & S should have sued Revenue Gallery Pty Ltd instead. This argument was rejected. On 6 February 2017, Magistrate Fahey gave judgment in favour of R & S. Flehan paid the money owing ‘under protest’.
[1] R&S Commercial Fitouts Pty Ltd v Flehan Group Pty Ltd – File No. AMCCI-16-4130.
In this action, Revenue Gallery sued R & S for $11,640 for alleged defective and incomplete work. It is therefore a minor civil action as defined in s 3(2) of the Magistrates Court Act 1991 (SA). R & S defended the claim on the basis that its contract was with Flehan.
This is an application for a review of decisions made by Magistrate Gumpl on 29 June 2018. On that day:
·Revenue Gallery’s applications[2] for leave to join Flehan as a plaintiff, an extension of time within which to amend its claim, and leave to transfer the action to the general civil list, were refused;
·R & S’s application[3] for summary judgment in the action was granted.
[2] Filed on 5 March 2018.
[3] Filed on 8 December 2017.
In order to understand the context in which these applications were made, it is necessary to set out some of the history:
·Magistrate Fahey gave judgment for R & S against Flehan on 6 February 2017;
·the claim by Revenue Gallery against R & S was filed on 4 April 2017;
·the defence of R & S was filed on 24 April 2017;
·the action was listed for trial on 16 November 2017. An attempt to mediate the dispute was unsuccessful. On that day, Revenue Gallery was given leave to amend its claim within 21 days ‘in order to deal with the apparent anomaly that (Revenue Gallery), rather than (Flehan) was prosecuting the claim’.[4] No amendment was made;
·on 8 December 2017, R & S applied to have Revenue Gallery’s action struck out pursuant to r 8 of the Magistrates Court (Civil) Rules 2013. This rule gives the court power to enter summary judgment or immediate relief where there is ‘no reasonable basis for the action or defence’. Alternatively, R & S sought an order striking out the action as an abuse of process pursuant to MCCR 86;
·on 15 January 2018, Revenue Gallery was again given leave to amend its claim and failed to act;
·on 5 March 2018, Revenue Gallery sought an order joining Flehan as a second plaintiff, an extension of time to file and serve an amended claim, and an order transferring the proceedings to the general civil list on the basis that it proposed to increase its claim from $11,640 to $31,211.
[4] Reasons for Ruling of Magistrate Gumpl, 29 June 2018 at [6].
These applications were both heard by Magistrate Gumpl on 15 June 2018.
The position taken by R & S was that:
·the issue of who were the parties to the contract was decided by Magistrate Fahey on 6 February 2017. His Honour decided that the parties were R & S and Flehan. There has been no appeal (application to review) that decision;
·R & S was never given notice that it was contracting with Revenue Gallery. It had ‘never heard of The Revenue Gallery’[5];
·the directors of Flehan and Revenue Gallery are the same two men;
·there is no reasonable prospect that Revenue Gallery would be held to have been a contracting party;
·there was therefore no reasonable basis for Revenue Gallery’s claim;
·Revenue Gallery’s claim was ‘frivolous and vexatious or otherwise an abuse of process of the Court’.[6]
[5] Defendant’s Written Submissions in Action AMCCI-17-1170, [17].
[6] Ibid at [26].
As to Revenue Gallery’s application, R & S submitted:
·Revenue Gallery had been on notice since 24 April 2017 that R & S disputed that it had a contract with R & S. The issue was raised again in a conciliation conference before Magistrate Gumpl on 3 August 2017. The trial on 16 November 2017 was adjourned on the basis that the issue would be addressed. The application by R & S on 8 December was made on the basis that Revenue Gallery was the wrong party. It was discussed at the first hearing on 19 December 2017. This was adjourned and again Revenue Gallery was given leave to amend;
·the fact that Revenue Gallery did not seek to amend until 5 March 2018 amounted to undue delay;
·there had been no explanation for the delay;
·to allow Revenue Gallery’s application would contravene the principles set out in Aon Risk Services Australia Ltd v Australian National University;[7]
·the application was tactical and was not made in good faith;
·to allow the application would allow Revenue Gallery to commence afresh. This would cause irremediable prejudice to R & S;
·to allow the application would render the proceedings uneconomic.
[7] (2009) 239 CLR 175.
Revenue Gallery’s position was as follows:
·R & S’s position ignored the principles of agency – Flehan was acting as the agent for Revenue Gallery, which was an undisclosed principal;
·Magistrate Fahey’s decision in the earlier action had no bearing on the issue;
·Revenue Gallery’s application to add Flehan as a second plaintiff was ‘to avoid any further complaints or arguments from the defendant (R & S) about which entity is the proper plaintiff’;[8]
·MCCR 80 allowed the court to permit an amendment to pleadings ‘at any time before final judgment’;
·MCCR 3 imposed a duty on the court to promote ‘the expeditious, economical and just conduct and resolution of an action’, and the court must attempt to resolve multiple actions involving a party and determine all matters in dispute in an action so as to avoid a multiplicity of actions;
·Revenue Gallery’s application would result in the determination of all matters in dispute, including a live dispute concerning the identity of a contracting party;
·the issues raised by both applications gave rise to issues about agency, authority and R & S’s knowledge which required findings of fact from a full hearing on oral evidence;
·R & S had not demonstrated prejudice;
·Revenue Gallery had a reasonable basis for its claim;
·Revenue Gallery’s claim was not frivolous, vexatious or otherwise an abuse of the court’s process;
·as to the application to amend the amount claimed, Revenue Gallery’s original claim for $11,640 was expressed as relating to ‘some of the remedial works’ because the full cost was not known when the proceedings were issued. It would appear that even the sum of $31,211 was not a final figure, as Revenue Gallery indicated that it proposed to engage an ‘expert to provide an opinion on the quantum and cause of the loss and damage suffered’.[9]
[8] Plaintiff’s Submissions in Action AMCCI-17-1170 at [15].
[9] Ibid at [17].
The Magistrate’s Decision
In many ways, the respective applications by R & S and by Revenue Gallery are different sides of the same coin. Revenue Gallery’s application to join Flehan as a plaintiff is based upon its assertion that Flehan was its agent. R & S’s application for summary judgment is based on the assertion that Revenue Gallery cannot succeed and that Flehan was the contracting party.
Magistrate Gumpl dealt with Revenue Gallery’s application first. In his reasons,[10] his Honour referred to the judgment of the High Court in Aon v ANU,[11] as interpreted by the Full Court in Channel Seven Adelaide Pty Ltd v Manock.[12] His Honour said:[13]
[10] Reasons at [10]-[12].
[11] Supra.
[12] [2010] SASCFC 59 at [46].
[13] Reasons at [10].
The plaintiff’s request to file an amended claim at this stage of the proceedings enlivens both the power of the Court, pursuant to its own rules (MCR 80) and the principles set out in Aon Risk Services Australia Ltd v ANC (Aon).
In examining the approaches since Aon, the Full Court in Channel Seven Adelaide Pty Ltd v Manock noted:
There are a number of relevant matters that will need to be taken in to account in determining whether a late application for permission to amend should be granted. Those matters include:
(1)Whether there has been undue delay in making the application;
(2)The extent to which there will be wasted public resources in granting the amendment;
(3)Whether there will be inefficiency occasioned by the need to revisit interlocutory processes;
(4)Whether a trial date would need to be vacated or a trial adjourned;
(5)Whether there is any satisfactory reason for the delay in applying;
(6)Whether the point to be raised by the amendment would be raised in any event at the trial;
(7)The likelihood of strain and uncertainty being imposed on the litigants;
(8)Whether any further delay would undermine confidence in the administration of civil justice;
(9)Any other prejudice likely to be suffered by the other party;
(10)The additional costs likely to be incurred.
(footnotes and citations omitted)
In the application of those principles to the facts of the case, the Magistrate made the following points:
·it is ‘axiomatic’ that the application of MCCR 80 should be governed by the principles expressed in Aon and Manock.[14] I agree with this statement. It is consistent with MCCR 3(1)(a) and (b), which state:
[14] Ibid at [12].
(a)In interpreting, applying and enforcing observance of these Rules, the Court and Registrar must in all things promote the expeditious, economical and just conduct and resolution of an action or proceeding by negotiated agreement or judicial determination.
(b)These Rules are not intended to defeat the proper action brought in good faith of any party and are to be interpreted accordingly.
The inclusion in MCCR 3(1)(a) of the words ‘expeditious’ and ‘economical’ indicates that the principles outlined in Aon apply with particular force to civil actions in the Magistrates Court. Indeed, the emphasis on informality and expedition in the hearing of minor civil claims in s 38 of the Magistrates Court Act 1991 suggests that this applies with even greater force to minor civil actions;
·there had been undue delay in making the application.[15] Revenue Gallery had failed to plead any agency relationship with Flehan in these proceedings before 5 March 2018 despite being aware of the outcome of the previous proceedings and being given two opportunities to do so before filing this application;[16]
·public resources would be wasted, in particular, further interlocutory and pre-trial processes would be necessary;[17]
·granting Revenue Gallery’s orders would place further strain and uncertainty on R & S;[18]
·costs would escalate;[19]
·the undue delay in raising the agency issue suggests that this is a recent artifice on the part of Revenue Gallery to include Flehan as a party;[20]
·there is no utility in the application if the rights of the agent to sue are destroyed by the intervention of the principal.[21] This was obviously a reference to a passage from G E Dal Pont, Law of Agency,[22] which reads:
Although either principal or agent can sue or be sued, ‘the right of the principal prevails over that of his agent’, and the agent’s right ‘to enforce the contract is destroyed by the ‘intervention of the principal in the exercise of his own right’.[23] So if the principal sues the third party the agent cannot then sue the third party with respect to the same claim.[24]
This authority was cited by R & S’s counsel in written submissions to the Magistrate;
·it is ‘highly likely’ that the determination by Magistrate Fahey in the earlier action created an issue estoppel as to who the parties to the contract were;[25]
·there is ‘no jurisdiction to add as a party to an existing action a person by and against whom no relief … can be claimed’.[26]
[15] Ibid at [13].
[16] Ibid at [19].
[17] Ibid at [14]-[16].
[18] Ibid at [17].
[19] Ibid at [17].
[20] Ibid at [20].
[21] Ibid at [20].
[22] (Butterworths, 2001) at [19.29].
[23] Citing Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 150 per Hope JA.
[24] Citing Atkinson v Cotesworth (1825) 3 B & C 647; 107 ER 873.
[25] Reasons at [21].
[26] Citing Vandervell Trustees Ltd v White [1971] AC 912 at 944 per Lord Diplock.
For the above reasons, the Magistrate refused all three of the applications by Revenue Gallery.[27]
The Application for Review
[27] Reasons at [24].
The nature of the review
Both counsel accept that this is a review pursuant to s 38(6) of the Magistrates Court Act 1991 (SA). There is power in s 38(7)(d)(i) and (ii) to affirm or rescind the Magistrate’s decision. There is also an obligation in s 38(7)(e) to act ‘according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms’. I agree with the submission of Ms Wells, counsel for R & S, that the combined effect of these subsections is that I should not depart from the Magistrate’s decision unless there is a reasonable basis to do so, and to do so is in accordance with equity, good conscience and the substantial merits of the case.
The arguments put by the parties to the review were substantially the same as those put to Magistrate Gumpl. Counsel for Revenue Gallery, Mr Quinn, submitted:
·the Magistrate’s decision is plainly wrong;
·it was reasonably arguable that Revenue Gallery was an undisclosed principal and Flehan was acting as its agent when it contracted with R & S;
·the decision of Magistrate Fahey on 6 February 2017 did not alter the situation;
·the Magistrate found that Flehan was contracting with R & S as agent for Revenue Gallery at [21] of his reasons. They read:
Further, it is highly likely that the determination by Magistrate Fahey acted as an issue-estoppel, since the finding that Flehan Group Pty Ltd was legitimately responsible for the debt is a state of fact, the existence of which is a matter necessary for the outcomes of that case. This was a fundamental issue to the prior decision and, as such, would prevent the plaintiff from asserting that Flehan Group Pty Ltd was not a party to the action but merely an agent. Given the history of this matter and the result of the previous case, I would have expected the plaintiff to withdraw its original claim (and, through the same director(s)), sue in the name of Flehan Group Pty Ltd as the contracting party as a matter of common sense.
That was not the Magistrate’s finding. His Honour was merely expressing an expectation as to what Revenue Gallery might have done accepting that Magistrate Fahey’s decision gave rise to an issue estoppel. It was not a finding on the evidence;
·on R & S’s case, Revenue Gallery was an undisclosed principal.
This is also incorrect. R & S’s case was that Flehan was the principal with whom it contracted and Revenue Gallery was not involved in any capacity;
·Magistrate Fahey’s decision could not give rise to an issue estoppel on the question of agency.
For reasons which I will develop later, I agree with this submission;
·the facts that the agency issue was not raised before Magistrate Fahey, and he made no findings on that issue, were acknowledged;
·had Revenue Gallery’s application to join Flehan as a plaintiff been granted, R & S’s arguments about which entity is the proper plaintiff would have been avoided.
Ms Wells submitted:
·the first time Revenue Gallery asserted that it was Flehan’s undisclosed principal was in Mr Starke’s affidavit sworn on 5 March 2018. The issue was not raised in the earlier proceedings, or at any of the interlocutory stages of this action prior to 5 March 2018. In fact, the suggestion that Flehan and Revenue Gallery were agent and principal contradicts the assertion before Magistrate Fahey that Flehan was not a ‘trading entity’. These considerations justify Magistrate Gumpl’s conclusion that the assertion of an agency relationship is a ‘recent artifice’;[28]
·there is no pleading of a factual basis for a principal/agent relationship. In the proposed pleading, there is merely an assertion of the existence of such a relationship in the affidavit of Revenue Gallery’s solicitor. This is a conclusion of law and not a statement of fact;
·the application to join Flehan as a plaintiff is futile – it is inconsistent with Revenue Gallery’s pleading that it is entitled to the relief sought. There cannot be a pleading on Revenue Gallery’s case that Flehan has suffered a loss.
[28] Reasons of Magistrate Gumpl at [20].
Issue Estoppel

In her submissions, Ms Wells did not specifically submit that an issue estoppel arose. She submitted:
·Magistrate Fahey determined that Flehan was ‘responsible’ for the debt – his Honour appears to have accepted the submission of R & S that ‘the plaintiff would not have known which entity to invoice unless it had been so directed by the defendant’;[29]
·Flehan paid R & S in full the amount claimed following the judgment;
·there was no submission or pleading in the previous action in which it was suggested that Flehan was an agent for an undisclosed principal (in fact, Magistrate Fahey recorded that it was Revenue Gallery’s submission to him that the contract was with Revenue Gallery and not with Flehan, it was also submitted that Flehan was ‘not a trading entity’);[30]
·Magistrate Fahey made no finding about whether Revenue Gallery was an undisclosed principal.
[29] Reasons for Decision of Magistrate J Fahey, 6.2.17, at [11].
[30] Reasons of Magistrate Fahey, [9].
Ms Wells submitted that on this evidence, ‘there is no basis to assert that (Flehan) was not the principal and exclusive party to the contract with the Defendant but merely an agent’.[31] She submitted that the identity of the principal contracting party ‘was a particular issue forming a necessary ingredient in the breach of contract action finally determined between the same parties involving a different cause of action … which the applicant seeks to re-open’. Reference was made to Blair v Curran.[32]
[31] Respondent’s Outline of Argument, [30].
[32] (1939) 62 CLR 464.
In that case, Dixon J (as he then was) said:[33]
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.
His Honour added:[34]
The difficulty in the actual application of these conceptions is to distinguish the matters fundamental or cardinal to the prior decision or judgment, decree or order or necessarily involved in it as its legal justification or foundation from matters which even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment, decree or order.
(my emphasis)
[33] Ibid at 531-2.
[34] Ibid at 533.
In the earlier case, Magistrate Fahey referred to the issue of whether the correct party had been sued. He then said:[35]
In my view there is little in this argument. The directors of the Flehan Group Pty Ltd and the directors of the Revenue Gallery Pty Ltd are the same people and the defendant’s lawyer has advised both entities are solvent. If the plaintiff has invoiced the incorrect entity it has done so on advice from the defendant and the defendant must bear the consequences of that.[36]
[35] Reasons of Magistrate Fahey, [11].
[36] This proposition also seems to have been taken from a passage quoted in Dal Pont. At [19.30], the author quotes from the judgment in Montagu v Forwood [1893] 2 QB 350 at 355-6 per Bowen LJ: If A employs B as his agent to make any contract for him, or to receive money for him, and B makes a contract with C, … if B is a person who would be reasonably supposed to be acting as a principal, and is not known or suspected by C to be acting as an agent for any one, A cannot make a demand against C without the latter being entitled to stand in the same position as if B had in fact been a principal. If A has allowed his agent B to appear in the character of a principal he must take the consequences.
This conclusion is not sufficiently clear to give rise to issue estoppel. It does not appear to me that the issue of which party should have been sued was ‘fundamental or cardinal’ to Magistrate Fahey’s decision as to the outcome of that action, particularly as it was not an action in contract but was a claim pursuant to the Building and Construction Industry Security of Payment Act 2009. That Act prevented the argument about who was the contracting party being made because Flehan did not respond to the claim by R & S within the time period specified in the Act. By its failure to respond within time, the Act entitled R & S to apply for summary judgment.
I conclude that Revenue Gallery is not estopped by the judgment of Magistrate Fahey from asserting that Flehan was its undisclosed agent when dealing with R & S.
The Facts Pleaded
A more substantial difficulty facing the plaintiff is that the proposed pleading by Flehan as the second plaintiff, as set out in Exhibit DAS-1 to the affidavit of Mr Starke, solicitor for Revenue Gallery, sworn on 5 March 2018, does not plead any facts upon which a conclusion of agency could be based. Rather, it makes the following bald assertion of a legal conclusion rather than any fact which might lead to such a conclusion:
6. The Second Plaintiff, Flehan Group Pty Ltd, is and was at all material times acting as agent for the First Plaintiff and authorised to create legal relationships including the contract between the First Plaintiff and the Defendant.
Ms Wells submitted[37] that the plaintiff was required to plead facts which prove that:
·the agent had actual authority to bind and entitle the principal;
·the agent intended to enter the contract as the agent, even if that is not disclosed;[38]
·the terms of the contract may expressly or impliedly exclude the principal’s right to sue and his liability to be sued.[39]
[37] Citing Sedco Forex International Inc v Nexus Energy WA Proprietary Limited [2012] FCA 351 at [25]-[28] per Barker J.
[38] Sedco at [30].
[39] Citing Davis v Capel [1959] NZLR 825; Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 at 546-7; White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 at [83].
In Sedco, at [29], Barker J said:
In Dominus,[40] the Court, at [59], concluded that a bare allegation of the fact of agency pleaded a legal conclusion and it does not plead the facts upon which a conclusion might properly or arguably be reached. The Court confirmed its view that the material fact of agency properly particularised must specify every material act or omission of the principal with respect to its time, place and persons involved and in respect of which the applicant would seek to lead evidence upon trial and indeed in respect of which all parties must disclose documents to support or refute the inference that one party acted as agent for the other.
[40] Dominus Pty Ltd v Daydream Island Resort Investments Pty Ltd & Ors [2003] QSC 44.
I agree that the plaintiff’s proposed pleading does not satisfy this requirement and is liable to be struck out.
Joining Flehan as Plaintiff is Futile
As I have already mentioned, Revenue Gallery, in its own written submissions to the Magistrate, made a reference to the passage from Dal Pont[41] that the right of the agent to enforce the contract is ‘destroyed’ by the intervention of the principal in the exercise of his own right.
[41] Supra, at p 6.
The assertion by Revenue Gallery of its own right would destroy any claim by Flehan on Revenue Gallery’s own case. For that reason alone, they cannot stand together as co-plaintiffs.
Mr Quinn argued that Revenue Gallery’s proposed claim that it was an undisclosed principal was in the alternative to its principal contention that it contracted directly with R & S. His submission was:[42]
Well, alternative in this sense … The Revenue Gallery is the contracting party, that's one finding that is open. It's still open on the facts pleaded in this case that The Revenue Gallery is the contracting party and that's to be explored on evidence. If that's correct, then The Revenue Gallery proceeds on its claim and has to determine the substance of the defects and the breach of the contract, that's (a). The alternative (b) is that the Flehan Group is the contracting party and it contracted on behalf of the Revenue Gallery, that's (b).
[42] At T 17-18.
Further, Mr Quinn submitted[43] that ‘(the plaintiff’s) primary case is that the contract was with (Revenue Gallery) and it has pleaded that case. It hasn’t resiled from that …’
[43] At T 25.
A reading of the proposed amendments to Revenue Gallery’s claim[44] shows, however, that Revenue Gallery has ‘resiled’ from its earlier position. The proposed claim was to be amended by:
·deleting the former paragraph 5, which read:
The Plaintiff and the Defendant had at all material times an ongoing working business relationship.
·adding paragraph 6:
The Second Plaintiff, Flehan Group Pty Ltd, is and was at all material times acting as agent for the First Plaintiff and authorised to create legal relationships including the contract between the First Plaintiff and the Defendant.
(my emphasis)
[44] In Exhibit DAS-1 to Mr Starke’s affidavit of 5 March 2018.
Nowhere in the proposed pleading was it stated that Flehan’s status as Revenue Gallery’s agent was an alternative contention to Revenue Gallery’s principal contention that it contracted direct with R & S. It is true that the succeeding paragraphs made various references to things done by the ‘First Plaintiff’,[45] but there is no reference to the capacity in which Revenue Gallery allegedly acted. The claim concludes:
[45] For example, in paragraphs 7, 18 and 19.
Amount claimed:
The First and Second Plaintiff [sic] claims [sic] from the Defendant:
1.     the sum of $31,211.00;
2.     Interest …
3.     Costs.
This indicates a joint claim, not a claim by Revenue Gallery alone as principal, or in the alternative Revenue Gallery as undisclosed principal through the agency of Flehan.
I reject Mr Quinn’s submission that the agency claim was made in the alternative, and that Revenue Gallery’s claim to have contracted directly with R & S remained on foot if the claim was amended in accordance with the proposal in Mr Starke’s affidavit.
A further matter is that the proposed pleading does not establish that Flehan has suffered any loss. It asserts that ‘The First and Second Plaintiff claims from the Defendant … the sum of $31,211.00 … Interest … and Costs’. It is not pleaded how Flehan is entitled to claim.
Mr Quinn submitted that because Revenue Gallery and Flehan are related entities with the same directors, there could be evidence at trial that a director might draw an amount of money from one company and transfer it to the other in order to pay R & S’s claim, pursuant to some unidentified ‘existing relationship’[46] If there was any such relationship, it would not be that of principal and agent. The facts of any such relationship would need to be pleaded and they have not been. I reject this submission.
[46] T 51.
Further, as Magistrate Gumpl noted, once the agency is no longer undisclosed, the claim rests with the principal – the agent has sustained no loss and is entitled to no relief. His Honour quoted the observation of Lord Diplock in Vandervell Trustees Ltd v White:[47]
A party to an action must be a person who claims in that action some relief against another party to the action or against whom some relief is claimed by another party to the action. There is, in my view, no jurisdiction to add as a party to an existing action a person by and against whom no relief which the court has jurisdiction to grant can be claimed.
[47] Supra.
In summary:
·the Magistrate’s decisions to refuse Revenue Gallery’s applications to add Flehan as a plaintiff and amend the pleadings were justified because to do so would have breached the principles outlined by the High Court in Aon. In particular, the unexplained delay, the vexations caused by Revenue Gallery’s unmeritorious application to join Flehan, and the fact that the litigation would basically start again if the applications were allowed, all provided ample justification for his Honour’s decision;
·the applications were futile – Revenue Gallery’s assertion that it was the principal destroyed any claim to relief by Flehan. Flehan suffered no loss.
For those reasons, Magistrates Gumpl’s orders on Revenue Gallery’s application dated 5 March 2018 were correct, and should be affirmed.
Summary Judgment
As to the application by R & S for summary judgment, Magistrate Gumpl relied firstly on issue estoppel. For the reasons I have given, I consider that no issue estoppel arose.
His Honour made two further findings:
·the very reason Revenue Gallery wishes to join Flehan to the litigation is that the director(s) ‘must know that, as things currently stand, the plaintiff is in jeopardy of failure’;[48]
·it is ‘obvious’ that Revenue Gallery cannot succeed against R & S. His Honour referred to the observations of Debelle J in Ceneavenue Pty Ltd v Martin.[49]
[48] Ibid at [29].
[49] [2008] SASC 158; (2008) 106 SASR 1.
Having been prevented from joining Flehan as a plaintiff, the question for determination was whether Revenue Gallery was left with a reasonable basis for its claim.
I reject Mr Quinn’s submission that Revenue Gallery is entitled to a trial on a factual dispute as to whether Revenue Gallery is Flehan’s undisclosed principal. Revenue Gallery has been refused permission to plead that. Having been refused permission to amend, Revenue Gallery’s case in that regard was no longer ‘reasonably arguable’ and did not require ‘factual determination’.[50]
[50] Applicant’s written ‘Oral Skeleton’ at [8], [9].
Revenue Gallery has resiled from its claim that it contracted directly with R & S. The proposed amendments in the exhibit to Mr Starke’s affidavit make that clear. If Revenue Gallery cannot pursue a claim as undisclosed principal, it does not have a reasonable cause of action. In Egan v The Commonwealth Minister for Transport, Bray CJ said:[51]
A reasonable cause of action means one with some chance of success, however small, when only the allegations in the pleadings are considered … If it has none, and if there is no chance that it can be endowed with one by amendment, then it can be struck out.
[51] (1976) 14 SASR 445 at 448 citing Drummond-Jackson v British Medical Association [1970] 1 WLR 688. See also Ceneavenue Pty Ltd v Martin (supra) at [90] and [94].
The Magistrate was therefore correct in granting the application by R & S for summary judgment pursuant to MCCR 8.[52] Having abandoned its claim as a direct contracting party, and being prevented from pursuing a claim as undisclosed principal, Revenue Gallery’s claim had no prospect of success.
[52] Reasons of Magistrate Gumpl at [32].
I affirm the orders made by Magistrate Gumpl on 29 June 2018. The application for review is dismissed.