Whywait Pty Ltd v Davison

[1996] QCA 178

IN THE COURT OF APPEAL	[1996] QCA 178
SUPREME COURT OF QUEENSLAND

Appeal. No. 184 of 1995

Brisbane

Before Macrossan C.J.
Pincus J.A.
McPherson J.A.

[Whywait Pty. Ltd. & Mays v. Davison]

BETWEEN

WHYWAIT PTY. LTD.

(Third Respondent) First Appellant

AND

GARY WILLIAM MAYS and MICHELLE ANNETTE MAYS

(Fourth Respondents) Second Appellant

AND

JOHN ARTHUR OXLEY DAVISON and
MAUREEN VALMAI DAVISON

(Appellants) Respondents

REASONS FOR JUDGMENT - THE COURT

Judgment delivered the 4th day of June 1996

By written contract, headed "Partnership Agreement" and dated 4 March 1992, the

respondents before this Court, who are Mr J.A.O. Davison and Mrs M.V. Davison, agreed

with Mr L.J. Cheers that they would combine to construct and sell four townhouses on land

at Mudgeeraba, of which the Davisons were to become registered proprietors. On 20

March 1992 a written building contract was entered into between the Davisons as "the

Proprietor", and Flamekey Pty. Ltd. and Geoffrey Martin as "the Builder", to construct the

townhouses. Later, on 20 June 1992, a second such building contract was entered into between Flamekey Pty. Ltd. and the Davisons to build a house at 101 Prospector Road,

Golden Grove Estate.

In the course of carrying out the building work, the appellant Whywait Pty. Ltd. was

engaged to do plumbing and drainage and other work at those sites. The managing

director or principal of Whywait Pty. Ltd. is a plumber whose name is Gary Mays, and the

company itself carries on the plumbing business under the name Gary Mays Plumbing

Service.

In an action commenced by plaint 652/1992 issued out of the District Court at

Southport, Whywait claimed $45,078.56 and interest as money owing by the Davisons for

work done and material supplied at the two building sites. Under s.97(1) of the

Queensland Building Services Authority Act 1991, an action arising from a domestic

building dispute must, on the application of a party, be removed to the Queensland Building

Tribunal, where the proceedings may be heard by the Tribunal established under that Act.

In this instance the proceedings came before Mr M. Burnett, barrister, who is a member

of and constituted the Tribunal for the purpose of those proceedings. After receiving oral

and written evidence and submissions, Mr Burnett gave his decision in writing on 10 March

1995. By the time the matter was heard by the Tribunal, other parties had become involved

in the proceedings. For the present, it is enough to say that the orders of the Tribunal were

that the Davisons pay Whywait the sum of $45,078.56 together with interest of $13,523.57

and that their cross-claims against Whywait and Mays be dismissed. There was a further

order that the builder Martin and Leslie Cheers pay $37,743.13 with interest to the

Davisons, as well as orders as to costs of the parties; but none of these orders need

concern us.

The Davisons were dissatisfied with the determination of the Tribunal, and under

s.94(1) of the Act they obtained leave of the District Court to appeal against it. The only

parties to that appeal were the Davisons and Whywait. After a hearing in the District Court,

the learned judge at Southport delivered judgment on 4 August 1995, by which he allowed

the appeal and "annulled" the order made by the Tribunal against the Davisons. Under

s.92(1) of the District Courts Act 1967, this appeal by Whywait has now been brought from

the decision of the District Court in its appellate jurisdiction. Before us, the notice of

appeal was amended to extend to the order for costs, which was made by his Honour in

the District Court some time after he had given his decision on the appeal in that court.

Something will be said in due course about the character of an appeal like this and

the status on the appeal of findings of fact made by the Tribunal. So far as relevant now,

the principal question before the Tribunal was whether the Davisons were liable for

plumbing and other work done on the two sites by Whywait on the instructions of Cheers.

According to the evidence of Mays it was in early March 1992 that Cheers telephoned him

about doing the work. He was then introduced to the Davisons, and met Cheers at the

Mudgeeraba site, where he was shown the partnership agreement. On behalf of Whywait,

he agreed to do the work, which commenced soon afterwards.

Cheers told Mays that he was authorised by the Davisons to represent them in the

project. In April, Mays, who had had some previous experience of Cheers, produced a

document A.W.103 dated 3 April 1992. It described the plumbing and drainage work to

be done, and referred to other matters, such as payments, materials, and workmanship.

It was headed "Authority to carry out work", and was addressed to the Davisons "for

attention Les Cheers". He asked Cheers to have it signed. When Mays next saw it, or a

photocopy of it, it bore what appeared to be the signature of one of the Davisons. In fact, the signature, like that on a subsequent document, had been forged by Cheers. The

Davisons were not aware of these documents at all, and Mays did not know the signatures

were forgeries. Cheers has since disappeared and cannot be found.

Before Mr Burnett, two questions, both affecting liability, were raised by the

Davisons in answer to Whywait's claim. One was whether Cheers had the actual authority

of the Davisons to contract for the work including some extras to be done; the other was

whether, if there was no actual authority from the Davisons, Cheers had nevertheless been

held out by them as having their authority, and so had ostensible authority to act and

contract on their behalf.

Logically the question of liability depended first on whether there was a partnership

between Cheers and the Davisons. If there was, then s.8 of the Partnership Act 1891

invested Cheers with actual authority to act on behalf of the firm. Section 8 provides:

"8. Power of partner to bind the firm. Every partner is an agent of the

firm and his or her other partners for the purpose of the business of the

partnership, and the acts of every partner who does any act for carrying on

in the usual way of business of the kind carried on by the firm of which the

partner is a member bind the firm and his or her partners, unless the partner

so acting has in fact no authority to act for the firm in the particular matter,

and the person with whom the partner is dealing either knows that the partner

has no authority, or does not know or believe the partner to be a partner."

On the other hand, if there was no partnership or "firm", but only a "joint venture", then (or

so it was contended by the Davisons) there could be no liability on their part for

transactions entered into by Cheers unless it was shown that they had held him out as

being their partner or agent. For that, it was necessary for Whywait to bring its case against the Davisons within the ambit of general principles imposing liability for the acts

of a person held out as agent, or within the terms of s.17(1) of the Partnership Act. The

provisions of that sub-section are as follows:

"17(1). Persons liable by 'holding out'. Everyone who by words spoken or written or by conduct represents himself or herself, or who knowingly suffers himself or herself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made."

In the reasons for his decision, Mr Burnett as the Tribunal found that there was a

partnership between the Davisons and Cheers. For that purpose, he relied on the terms

of the partnership agreement dated 4 March 1992. However, before reaching that

conclusion he first decided that Cheers had been held out by the Davisons to Mays and

Whywait as having authority to act on their behalf. In doing so, he specifically rejected the

Davisons' contention that there was anything "extraordinary" concerning the manner in

which the transaction had been carried out.

When the matter came on appeal to the District Court, the two questions of actual

authority (partnership or no partnership) and ostensible authority (no partnership, but a

holding out) seem to have become merged. The learned judge referred to the partnership

agreement of 4 March 1992, setting out its terms in full in his reasons, and adding that

counsel for the Davisons had submitted that it gave rise not to a true partnership but only

to a joint venture. His Honour then went on to refer to a letter dated 30 April 1992 to

Cheers from Whywait in which Mays required the Davisons to sign an attached form of

guarantee to the effect that payments would be made as all accounts fell due. The letter

of guarantee was later provided, but it was another forgery by Cheers, of which neither Mays nor the Davisons were aware. His Honour held that, being a forgery, the guarantee

was of no effect; but he also decided that, whatever the proper construction of the

"partnership agreement" of 4 March 1992, the evidence clearly established that Mays (and

through him Whywait) relied for payment on the purported guarantee from the Davisons

rather than any ostensible authority on the part of Cheers to arrange for work to be

performed. He added that it would be "quite unconscionable to hold the appellants

[Davisons] responsible for the conduct of Cheers in these circumstances". The appeal was

accordingly allowed.

His Honour's reasoning is open to criticism at various points. In the first place, it is

not clear what he meant in saying it was "unconscionable" to hold the Davisons liable. It

is true that s.48 of the Partnership Act preserves the rules of equity and of common law

applicable to partnership; but it does so subject to a proviso in s.48 that they shall "continue

in force except so far as they are inconsistent with the express provisions of this Act". The

common law had no rule of unconscionability, and, while equity does, it would in this context

plainly be inconsistent with the express provisions of s.8 and s.17(1) of the Act to apply it.

Any liability of the Davisons here falls to be determined not as between themselves and

Cheers as members of a partnership, but as between the partners and Whywait, which as

an "outsider" is as much an innocent victim of the fraudulent conduct of Cheers as are the

Davisons.

It seems more likely, however, that in saying what he did about "unconscionability",

his Honour was simply expressing his personal sympathy for the Davisons rather than

applying any supposed rule of equity in deciding the appeal. In any event, the conclusion

that in contracting to do the work Mays relied on the forged "guarantee" of payment rather

than authority possessed by Cheers is contrary to evidence before the Tribunal. The letter attaching the form of guarantee, to which Cheers forged the signature of the Davisons, is

dated 30 April 1992. Mays in his evidence said he had "certainly" commenced work on

the job "before he got anything back in writing" and that he had done it "on Cheers's say

so". If as he claimed he had started work in March, it was well before the guarantee form

accompanying the letter dated 30 April was returned to him. As Mr Burnett said in his

reasons, the dispute was one where issues of credit "had not played a significant role".

Where differences had arisen, he said he preferred the evidence of Mrs Davison to that

of May; but on the issue now being considered, May's evidence was not contradicted by

anything said by Mrs Davison. In fact, throughout his evidence May said he had acted on

the partnership agreement which had been shown to him, or on instructions given by

Cheers about the work, or, on some later occasions, on instructions given by Mrs Davison

when she came to the site.

His Honour's finding on this aspect of the case therefore cannot stand. Quite apart

from it, his reasons on the appeal still left unresolved the question before him whether or

not there was a partnership between the Davisons and Cheers. In her evidence to the

Tribunal Mrs Davison had said the relation between them was simply that of joint venturers.

In some of the oral evidence, as well as in the written partnership agreement itself, there

are references to "joint venture". Clause 5 of the written agreement refers to the Davisons

receiving interest at 20% on moneys advanced to the "joint venture"; cl. 6(b) refers to

Cheers engaging a builder to construct the four townhouses for a fee approved by the "joint

venture parties"; and cl. 6(c) requires him to obtain quotations to present to the joint venture

parties for acceptance".

The references to "joint venture" in the agreement itself, and in oral evidence or correspondence, are essentially neutral. Every partnership involves a joint venture, so that to speak of a partnership in such terms does not resolve the problem. In s.5(1) of the Act

"partnership" is defined as "the relation which subsists between persons carrying on a

business with a view of profit". Despite the marginal heading to the section, s.5(1) savours

of a description rather than a definition. What is to be gathered from that provision is that

a partnership is a "relation". It is the nature of the relation that is critical. In Birtchnell v.

Equity Trustees Executors & Agency Co. (1929) 42 C.L.R. 348, 407- 408, Dixon J.

stressed the element of "mutual confidence that the partners will engage in some particular

kind of activity or transaction for the joint advantage only". His Honour's statement to that

effect corresponds to remarks by James L.J. in Re Agriculturist Cattle Insurance Co.,

Baird's Case (1870) L.R. 5 Ch.App. 725, 732-733. A joint venture does not ordinarily

exhibit that element of mutual confidence whether to the same extent or at all.

It can scarcely be doubted that in this case a relation of mutual confidence existed

between Cheers and the Davisons, even if, for the latter, it was a confidence that, as events

turned out, was thoroughly abused by Cheers. Here the issue is not their relations with

each other, but between themselves and Whywait. In that regard, the requirements of the

statutory definition are satisfied. According to 5(1) of the Act, there must be a carrying on

in common of a business with a view of profit. Certainly a business was being carried on

in common. The building work was carried out under an agreement providing that the

Davisons should buy and pay for designated land on which the townhouses were to be built

(cl. 1). Cheers was to be responsible for managing the site and for the construction work,

including the provision of working drawings and engaging a builder, with whom he was to

jointly supervise construction (cl. 6). The parties were to share in the net profit from the sale of each unit equally "once final costs and outlays have been accounted for", and after the

Davisons had received interest at 20% on funds invested by them (cl. 3).

From this it is apparent that the parties agreed to conduct a business of building the

townhouses for profit, and to do so in common. It was not argued that a single venture

enterprise was incapable of constituting a "business", and in fact the parties carried the

enterprise beyond the original venture by building the house at Prospector Road, Golden

Grove Estate. They were not, within the meaning of s.6(b) of the Act, simply sharing "gross

returns", but agreed to share net profits in accordance with s.6(c). Whether after the

depredations of Cheers, any such profit was ever realised by the Davisons does not

appear; but it is enough that they had such profits in view.

There is therefore no reason to suppose that, in holding that a partnership existed

between the parties, the Tribunal was mistaken. The result is that under s.8 of the Act each

partner became the agent of the firm consisting of Davison, Davison and Cheers for acts

done for the purpose of the partnership business. The work which Whywait contracted to

do was, as Mr Burnett also found, within the ambit of plumbing work; or, in the case of the

other work it did (which seems to have included using a bobcat which was on site to form

a driveway) not so far removed from plumbing and drainage work as to be beyond that

ambit. It was, as Mr Burnett found, and the judge confirmed on appeal, work that was

shown to have been necessary and which was charged for at rates that were reasonable.

The contracts made with Whywait were entered into for the purpose of the

partnership business of building and selling houses, and were acts done for the purpose

of carrying on "in the usual way" a business of that kind. It was argued that that element

was absent from the present case because of an arrangement entered into between the

Mays and Cheers with respect to Flamekey Pty. Ltd. Flamekey was incorporated as a "shelf"company. It was acquired by Mr and Mrs Mays in connection with a family trust which

they had it in mind to establish. In the end, they abandoned that intention; but Cheers knew

of the existence of the company and spoke to the Mays about acquiring it from them.

Before that was done, the partnership venture with the Davisons came up, and Cheers

obtained May's permission, in return for paying a fee, to use the company to perform

administrative services associated with the construction work on the town houses. Those

services included the use of clerical, secretarial and banking facilities in relation to

checking orders, invoices, payments, and the like. Cheers told the Davisons that Flamekey

was his "nominated company" in terms of recital 3 of the partnership agreement, which

recorded that Cheers "and/or his nominated company" was to manage the building site

and the construction on the site.

It may be that his real object was to make use of Flamekey's builder's registration

number. On the first building contract dated 20 March 1992, Flamekey was named jointly

with Martin as "the Builder"; on the second, dated 20 June 1992, only Flamekey's name

appeared as the builder. For two partners (the Davisons) to contract with a corporation

which was being used in this fashion by their co-partner may not be an everyday event; but

at the time when Whywait carried out the work, Mays had not seen the building contracts,

which he saw for the first time only after the proceedings commenced. He dealt only with

Cheers and the Davisons, to whom he sent the invoices for the work done by Whywait. Mr

Burnett accepted May's explanation of the way in which the arrangement over Flamekey

came about, and specifically acquitted him of any "collusion" with Cheers. The contracts

under which Whywait worked were not made with Flamekey but with Cheers as a member

of the partnership with the Davisons. He was plumbing contractor to the partnership.

Section 8 thus operated to make the Davisons liable to Whywait unless the proviso

contained in the last part of the section was shown to be applicable. The operation of the

section is displaced if "the partner so acting" (in this case Cheers) "has in fact no authority

to act for the firm, and the person with whom he is dealing" (in this case Mays on behalf of

Whywait) "either knows that the partner has no authority, or does not know or believe the

partner to be a partner". It is clear that the Davisons could not bring themselves within the

scope of the proviso. As project manager Cheers had authority to contract for plumbing,

drainage and other work to be done, and in addition, Mays believed him to be a partner of

the Davisons. The issue is comprehended by Mr Burnett's findings that there was "nothing

in the facts of the case which would suggest that the Mays should have been put on

enquiry", and "there was nothing extraordinary in the manner of carrying out the

transaction". The findings to that effect were made in the context of considering Cheers's

ostensible authority, but they are more than adequate for the purpose of defeating any

reliance that might be placed on the proviso to s.8. That being so, the question of

ostensible authority and the applicability (if any) of s.17(1) need not be further considered.

On behalf of Whywait, Mr Curran of counsel submitted that, in any event, it was not

open to the judge on appeal to review the findings of the Tribunal in the manner or to the

extent that he did. Under s.94(1) of the Queensland Building Services Authority Act 1991

an appeal is not stated to be an appeal de novo, in which the appellate court is completely

free to draw inferences differing from those arrived at below, or to make findings

inconsistent with those reached by the Tribunal. On the contrary, the court's appellate

function is limited in the manner explained in decisions such as Clark v. Trevelyan [1963]

Q.W.N. 11; Callinan v. Boyne Smelters [1984] 2 Qd.R. 501; Aitken Transport Pty. Ltd. v. Voysey [1990] 1 Qd.R. 510, and other authorities in that tradition. Such an approach has

been adopted in decisions of District Courts when determining appeals from the Tribunal

under s.94, notably by Kimmins D.C.J. in Ashmore Constructions Pty. Ltd. v. Queensland

Building Services Authority (Feb. 1993: Dist.Ct.App. no. 11/1995). With respect, his

Honour's judgment to that effect appears correct. It also has the merit of restricting the

scope of appeals on matters of fact which may be brought from a tribunal which, having

regard to the provisions of the Act of 1991, was evidently designed to provide a more

informal and less expensive procedure and forum for determining domestic building

disputes than are generally believed to be available in ordinary litigation.

A general survey of the evidence before the Tribunal has been undertaken on this

occasion only because of the complaint of the Davisons before us that, on the appeal

before the District Court, his Honour did not resolve a number of issues that were raised

by them. In that respect, it should not be regarded as a precedent for the way in which such

appeals will be heard in the future, either in a District Court on appeal from the Tribunal, or

on appeal from that court to this.

On the evidence before it, the decision of the Tribunal in favour of Whywait was

correct. The appeal to this Court must be allowed with costs, and the order below

"annulling" the Tribunal's order against the Davisons must be set aside. The Davisons are

ordered to pay the costs of and incidental to the appeal below. They should, however, have

an indemnity certificate under the Appeal Costs Fund Act 1973 with respect to the costs

of the appeal in this Court.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal. No. 184 of 1995

Brisbane

[Whywait Pty. Ltd. & Mays v. Davison]

BETWEEN

WHYWAIT PTY. LTD.

(Third Respondent) First Appellant

AND

GARY WILLIAM MAYS and MICHELLE ANNETTE MAYS

(Fourth Respondents) Second Appellant

AND

JOHN ARTHUR OXLEY DAVISON and
MAUREEN VALMAI DAVISON

(Appellants) Respondents

Macrossan C.J.
Pincus J.A.

McPherson J.A.

Judgment delivered 04/06/96

Reasons for judgment by the Court

APPEAL ALLOWED WITH COSTS; ORDER OF THE DISTRICT COURT "ANNULLING" THE ORDER OF THE TRIBUNAL SET ASIDE. RESPONDENTS DAVISON AND DAVISON TO PAY THE COSTS OF AND INCIDENTAL TO THE APPEAL TO THE DISTRICT COURT. RESPONDENTS GRANTED AN INDEMNITY CERTIFICATE UNDER THE APPEAL COSTS FUND ACT 1973.

CATCHWORDS	PARTNERSHIP - Obligation of partners inter se, and between partners and third parties - Whether a joint venture or a partnership - Whether actual authority or ostensible authority. Partnership Act 1891 ss.5(1), 6(b) & (c), 8, and 17(1).
APPEALS - Appeal from Queensland Building Tribunal to District Court, and from District Court to Court of Appeal - Not a hearing de novo. Queensland Building Services Authority Act 1991 ss.94(1) and 97(1).
Counsel:	J.F. Curran for the first and second appellants
D. Lewis for the respondent
Solicitors:	Greenhow & Associates for the first and second appellants
Murphy Podmore & Associates for the respondent
Hearing Date:	16 February 1996