Pico Holdings Inc v Wave Vistas Pty Ltd
[2003] QCA 204
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- Unreported Judgment
- Appeal Determined (QCA) - Appeal Determined (HCA)
- Pico Holdings Inc v Wave Vistas Pty Ltd[2003] QCA 204
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Pico Holdings Inc v Wave Vistas Pty Ltd[2003] QCA 204
Pico Holdings Inc v Wave Vistas Pty Ltd[2003] QCA 204
SUPREME COURT OF QUEENSLAND
CITATION: | Pico Holdings Inc v Wave Vistas P/L & Anor [2003] QCA 204 |
PARTIES: | PICO HOLDINGS INC (applicant/appellant) v WAVE VISTAS PTY LTD ACN 088 729 819 (formerly TURF CLUB AUSTRALIA PTY LTD) (first respondent/first respondent) NATIONAL AUSTRALIA BANK LTD ACN 004 044 937 (second respondent/second respondent) |
FILE NO/S: | Appeal No 3589 of 2002
SC No 8996 of 2001 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 23 May 2003 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 11 February 2003 |
JUDGES: | McMurdo P, Jerrard JA and Mullins J Separate reasons for judgment of each member of the Court, each concurring as to the orders made |
ORDERS: |
|
CATCHWORDS: | CONTRACTS – PARTIES – GENERAL PRINCIPLES – where sole director of first respondent company was also director of another company – where director entered into agreement with the appellant regarding land owned by the first respondent – where director did not communicate to the appellant that the first respondent was the owner of the land– where it was open on the evidence before the trial judge to find that a reasonable person in the position of the appellant would not have construed the offer made by the director as being made on behalf of the first respondent – first respondent not a party to agreement APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – POINTS AND OBJECTIONS NOT TAKEN BELOW – WHEN NOT ALLOWED TO BE RAISED ON APPEAL – QUESTIONS NOT RAISED ON PLEADINGS OR IN ARGUMENT – PARTICULAR CASES – QUESTION OF LAW – where appellant attempted to rely on the doctrine of undisclosed principal when not raised in the pleadings or at trial – where the subjective intention of the agent was not an issue at the trial - appellant not able to pursue on the appeal a claim based on the doctrine of undisclosed principal Property Law Act 1974 (Qld) s 11, s 59 Aitkin Transport Pty Ltd v Voysey [1990] 1 Qd R 510, cited GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, cited Keighley, Maxsted & Co v Durant [1901] AC 240, cited Maukad Holdings Pty Ltd v Kirk (unreported, Sup Ct (Tas), Wright J, 1 July 1998), distinguished NM Superannuation Pty Ltd v Baker (unreported, Sup Ct (NSW), Cohen J, 4 March 1992), distinguished Paal Nilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 AC 854, cited Siu v Eastern Insurance Co Ltd [1994] 2 AC 199,cited Taylor v Johnson (1983) 151 CLR 422, cited Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448, distinguished |
COUNSEL: | M R Pearce for the appellant G D Sheahan for the first respondent H Fraser QC, with B Porter, for the second respondent |
SOLICITORS: | McCullough Robertson (Brisbane) acting as Town Agents for Gilbert & Tobin (Sydney) for the appellant Mallesons Stephen Jaques for the first respondent Thynne & Macartney for the second respondent |
- McMURDO P: The facts and issues are set out in the reasons for judgment of Mullins J dismissing this appeal. I will only repeat those facts necessary to explain my reasons for reaching the same result.
- The learned primary judge found that Mr Hart, on behalf of the appellant ("Pico"), and Mr Voss, on behalf of Dominion Capital Pty Ltd ("Dominion"), reached an oral agreement in late April 2001 in terms recorded in the faxed letter of 4 May 2001[1] and the second addendum to the promissory note[2] but that the first respondent ("Turf Club") was not a party to the agreement.
- The threshold question for determination in this appeal is whether the learned primary judge erred in holding that Turf Club was not a party to that agreement.
- The answer to that question involves the application of well-established legal principles to the relevant facts. In Taylor v Johnson[3] Mason ACJ (as he then was), Murphy and Deane JJ affirmed that the objective theory of contract[4] remains apposite to Australian contract law:
"… while the sounds of conflict have not been completely stilled the clear trend in decided cases and academic writing has been to leave the objective theory in command of the field."[5]
- This means that in determining the existence of a contract, words should be interpreted in the light of surrounding circumstances and according to the view of a reasonable person in the position of the person to whom they are addressed. The interpretation of a contract can, however, never be entirely objective as the essence of a contract is an agreement between the parties. As Lord Diplock explained in Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal:[6]
"… what is necessary is that the intention of each [party] as it has been communicated and [reasonably] understood by the other (even though that which has been communicated does not represent the actual state of mind of the communicator) should coincide."[7]
- Extrinsic evidence is admissible and relevant to determine the identity of the parties to the contract: G R Securities v Baulkham Hills Private Hospital.[8]
- The relevant evidence here included:
- Mr Voss was a director of both Dominion and Turf Club. He had authority as director to act on behalf of Turf Club and to offer as security to Pico the undeveloped property owned by Turf Club, which bordered the Gold Coast Turf Club, known as Bundall Race Course.
- Mr Voss referred to the land accepted by Pico as security in return for its extension of Dominion's loan as "the Turf Club property" and "my Turf Club property".
- The faxed letter of 4 May 2001 from Mr Voss to Pico was on Dominion letterhead, written in the first person and signed by Mr Voss as "CHAIRMAN & MANAGING DIRECTOR". Attached to the letter was a faxed copy of the certificate of title of the land offered as security, showing Turf Club as the registered owner.
- Mr Hart was unsure whether he knew at the time of the agreement that Turf Club, not Dominion, was the registered proprietor of the land accepted as security but Mr Voss, with whom he had previously had commercial dealings over Pico's loan to Dominion, "was in the habit of referring to the number of entities he was involved with as his companies".
- Mr Pearce, on behalf of Pico, contends that two propositions of contract law should be applied to this case. The first is that if A and B have dealings and each conveys to the other the objective intention of making a contract and A has undoubted authority to make the contract on behalf of C and for the contract to be effective, C must be a party to it, then the intention will be imputed to A (and presumably B and C)[9] of making the contract on behalf of C. Mr Pearce's second proposition is that if A and B have dealings and each conveys to the other the objective intention of making a contract and A has undoubted authority to make the contract on behalf of C and D, and for the contract to be effective both C and D must be a party to it, then the intention will be imputed to A (and presumably B, C and D)[10] of making the contract on behalf of both C and D in the absence of evidence of objective intention on the part of A not to make the contract on behalf of either C or D.
- In support of those propositions, Mr Pearce has referred us to a number of cases[11] but none establishes either proposition; each of those cases, like this one, merely involved the application of established legal principle to its own facts.
- A further difficulty for Pico in demonstrating that either of these propositions is part of the law of contract is that the contract between Pico and Dominion was capable of efficacy between those two parties, regardless of whether Turf Club was also a party; the failure of Dominion to supply the security would enable Pico to refuse to extend the period of the loan and to sue Dominion for the debt.
- Pico also contends that the facts here, combined with the public policy principle that courts should strive to uphold commercial bargains, required the learned primary judge to conclude that the objective intention of the parties was an agreement between Pico, Turf Club and Dominion whereby Pico extended the period of its loan to Dominion in return for Turf Club providing as collateral the property deed. Pico asks this Court to overturn his Honour's finding that Turf Club was not a party to the agreement.
- His Honour's finding was not based on considerations of credit[12] but turns rather on the drawing of inferences from established facts;[13] nevertheless the appellant must establish some good reason for overturning the primary finding. The application of the law to the facts here may have allowed a different conclusion,[14] but that alone does not justify interference on appeal. The learned primary judge correctly identified the relevant legal principles[15] and has not misdirected himself in any way. There is no evidence that Mr Hart, on behalf of Pico, was aware at the time of the agreement that the property offered as security was owned by Turf Club. Although there is no direct evidence, he probably assumed it was owned either by Dominion, Mr Voss or a company controlled by Mr Voss, but this did not compel a finding that it was the objective intention of Dominion, Pico and the owner of the land that the owner of the land be a party to the agreement; the facts were at least equally consistent with Dominion simply agreeing to physically provide Pico with the certificate of title to the valuable land as collateral in consideration for Pico extending the period of the loan. The learned primary judge understandably placed considerable weight on the terms of the faxed letter of 4 May 2001 which was on Dominion letterhead and signed by Mr Voss as "CHAIRMAN & MANAGING DIRECTOR". I am not persuaded that his Honour erred in so doing and in concluding that Turf Club was not a party to the agreement; this conclusion was open and reasonable on the evidence and Pico has not demonstrated any reason for interfering with it on appeal.[16] It follows that this threshold ground of appeal must fail.
- I agree with Mullins J that, for the reasons she has given, Pico cannot for the first time on this appeal pursue a claim against Turf Club under the doctrine of undisclosed principal, which was neither pleaded nor tested at trial.
- As Turf Club was not a party to the agreement or the fax of 4 May 2001, ss 11 and 59 Property Law Act 1974 (Qld) need not be considered further and nor does the issue of priorities arise. The appeal should be dismissed with costs to be assessed.
- JERRARD JA: I have read and respectfully agree with the reasons for judgment of Mullins J in the principal judgment herein, and the supplementary reasons of the President, save that I respectfully disagree that the evidence led before the learned trial judge establishes that the authority possessed by Mr Voss, as its sole director, to act on behalf of Turf Club had the necessary consequence that he had authority to offer its real property to the appellant as security for the repayment of money it had earlier lent to Dominion Capital Pty Ltd. That apart, this is an appeal against findings of fact, and the reasons of judgment of the President and Mullins J amply demonstrate that those findings were open to the learned trial judge to make.
- The following comment on the appellant’s argument requires brief mention of some further facts. These include that the mortgage held by the second respondent bank over Turf Club’s property at Lot 2 on RP 817782 had been executed by Mr Voss on 21 May 2001. In discussions held on 29 and 30 March 2001, Mr Voss had offered that property to an officer of the respondent’s bank, who had agreed with the proposal, as security for loans Mr Voss then sought for re-financing the following companies within his group, namely Pastoral Care Heights Pty Ltd, Dominion Capital Pty Ltd, A1 Financial Planners Pty Ltd, Intavest Pty Ltd, Dominion Estates Pty Ltd, and Bio Engineering Pty Ltd. Loans were advanced before the bank got the agreed security. In those negotiations Mr Voss had clearly revealed to the second respondent both the separate existence of Turf Club, and that it was Turf Club’s property which was offered as security for those loans. Identification of Turf Club’s existence and ownership of that property was significantly absent in the dealings Mr Voss had with the appellant.
- It is instructive to consider the propositions of law on which the appellant relied to succeed, reproduced in full in the reasons for judgment of Mullins J, to the facts of this matter including those further facts. The “undoubted authority” ascribed to A in 1.(ii) and 2.(ii) of those propositions is really only the ostensible and actual authority a sole or managing director has to contract with others on behalf of a proprietary limited company. On facts such as these, that is not necessarily authority to make “the” contract whereby that company’s real property is treated as the beneficial property of the director, or available to that director for purposes not associated with that proprietary limited company. One can test this by considering what the position would have been if Mr Voss had revealed the following facts to Mr Hart on 25 April 2001:
- that the Turf Club property was owned by a company Turf Club Pty Ltd;
- of which Mr Voss was the sole director and controlling share holder;
- that property was unencumbered; but
- had been promised (not in writing) by Mr Voss on that Company’s behalf to the second respondent as security for group restructuring loans then being advanced by the bank to Dominion Capital and other companies; although
- no mortgage had been executed and the Certificate of Title had not been given to the bank.
- In those circumstances it is simply inconceivable that the appellant could regard Mr Voss, contracting either on his own behalf or for Dominion Capital, as having undoubted authority on behalf of Turf Club as well to offer its same property as an unencumbered security. There is the problem that Turf Club itself lacked undoubted authority to promise by contract the same land on 25 April 2001 as security to different lenders, since correspondence dated 19 April 2001 between Mr Voss and the second respondent, (and referring in its heading to “Dominion Capital and Voss Enterprises Restructure”) arguably provided a memorandum or note of Turf Club’s agreement to mortgage the property to the second respondent. There is then the very real problem of the lack of any obvious consideration for Turf Club’s asserted contractual promise to the appellant. Had the appellant been prepared to proceed on those further facts Mr Voss could have disclosed, it would undoubtedly have required that Turf Club entered into a Deed with it; to obviate the lack of consideration, to ensure Turf Club was a party, and to have Turf Club declare its property was unencumbered.
- The appellant contended that consideration was provided by its forbearance to sue Dominion Capital for the money lent, and that a request for that forbearance by Turf Club, to be implied from the circumstances, was sufficient to bind Turf Club[17]. As the first respondent submits, the problem with that argument is that there was no “forbearance” promised or granted in the unusual circumstances of this case. Instead, the appellant had “threatened” to write off the debt, not to enforce it; and it was Mr Voss who responded on Dominion’s behalf to that “threat” with a request for an extension. No one bargained to obtain forbearance.
- The appellant’s propositions require the court to impute an intent to Mr Voss irrespective of the fact that the imputed intent (to bind Turf Club Pty Ltd) was never stated by him to the appellant, and of the fact that Mr Voss had acted inconsistently with that imputed intent by earlier promising the property elsewhere as security. They require the court to impute bona fides to Mr Voss in his dealings with the appellant where bona fides did not obviously exist, and to the potential detriment of the bank. The conduct by Mr Voss making that imputation an unreasonable one would be part of the background factual material against which courts assess the objective intent of the parties.
- MULLINS J: Pico Holdings Inc (“the appellant”) applied to a judge of the Trial Division for a declaration that it had an equitable charge dated 4 May 2001 over property situated at Racecourse Drive, Bundall more particularly described as Lot 2 on RP 817782 in the County of Ward, Parish of Nerang being all the land contained in Title Reference 18660224 (“the land”) and a declaration that the equitable charge dated 4 May 2001 had priority over any charge, mortgage or interest over the land in favour of National Australia Bank Ltd (“the second respondent”). That application was dismissed and the caveat lodged by the appellant over the land was ordered to be removed. The appellant now appeals against those orders. At the time the charge was alleged to have been created, the registered owner of the land was Turf Club Australia Pty Ltd (now known as Wave Vistas Pty Ltd) (“the first respondent”).
Grounds of appeal
- The grounds of appeal set out in the notice of appeal are:
“1.The learned judge erred in holding that the first respondent was not a party to the agreement made in late April 2001 and recorded in the facsimile of 4 May 2001 and the second addendum to the promissory note (the “Agreement”).
2.The learned judge should have held that Peter David Voss was authorised by the first respondent to enter into the Agreement on its behalf and did so by:
(a)promising orally on or about 25 April 2001 in a conversation with John Russell Hart that the first respondent would grant in favour of the appellant a mortgage of the property described as lot 2 on registered plan 817782 in the County of Ward, Parish of Nerang, being all of the land contained in title reference 18660224 (the “Property”); and
(b)writing the letter dated 4 May 2001 to the appellant on behalf of the first respondent.
3.The learned judge should have held further as follows:
(a)that the Agreement created on equitable mortgage or charge over the Property in favour of the appellant, alternatively was an agreement by the first respondent enforceable by the appellant to grant such a mortgage or charge;
(b)that the appellant’s interest in the Property created by the Agreement took priority over any mortgage, charge or other interest in the Property held by the second respondent.”
Facts
- Apart from the issues raised by grounds 1 and 2 in the notice of appeal, there is no challenge to the findings made by the learned trial judge in relation to the dealings between the appellant and the first respondent. The following summary is taken from the reasons for judgment of the learned trial judge.
- At the time of the dealings between the parties Mr John Hart was a director of the appellant and Mr Peter Voss was a director of the first respondent and of Dominion Capital Pty Ltd (“Dominion”). In late December 2002 the appellant lent Dominion the sum of US$1.2m. A non-negotiable secured promissory note dated 22 December was executed by Dominion and issued to the appellant showing that the principal of US$1.2m was to be repaid no later than 5 January 2001 with interest at the rate of 12% pa. The security referred to in the note consisted of share certificates in a company called Dominion Wineries Limited. The common seal of Dominion appeared on the note as did the signature of Mr Voss as “Chairman & CEO”.
- On 4 January 2001 the appellant, without requiring anything further from Dominion agreed to extend the date for repayment from 5 January 2001 to 30 April 2001. An addendum dated 4 January 2001 signed by Mr James Mosier as general counsel and secretary of the appellant was issued recording the extension.
- On 25 April 2001 in a telephone conversation Mr Voss asked Mr Hart that the appellant further extend the loan. Mr Hart told Mr Voss the appellant would require further security, if the loan were to be extended. Mr Hart told Mr Voss that the appellant had “a continuing problem with its auditors concerning the loan of $1.2m and “the collateral” and the appellant would be obliged to write off the loan unless the adequacy of the collateral could be demonstrated to the appellant’s auditors. Mr Voss then offered to provide the land as security, referring to it as either “the Turf Club property” or “my Turf Club property” and saying it was unencumbered. He said he would give a recent valuation report and that the land was worth at least double the value of the loan. Mr Hart asked for “additional compensation” for extending the due date of the loan in the form of marketing rights in North America and Mexico to certain waste-water treatment technology. Mr Voss agreed to that. Mr Hart also asked for the title deeds to the land and a recent valuer’s report on it. Mr Voss agreed. Mr Hart on behalf of the appellant, agreed to accept the land as further security for the repayment of the loan and, accordingly, agreed to extend the repayment date from 30 April 2001 to 31 May 2001.
- On 4 May 2001 Mr Voss sent a facsimile transmission dated that day to Mr Hart at the appellant’s office in California. It was on a sheet with letterhead “Dominion Capital Pty Ltd” and was signed by Mr Voss as “Chairman and Managing Director”. The letter said, omitting the formal parts:
“This letter is to confirm that as consideration for PICO Holdings Inc agreeing to extend the maturity date for the US$1.2 Million loan to May 31st, 2001, I will provide additional substitute collateral. The collateral is the deed for property described as Lot 2, Registered Plan 817782, County of Ward – Parish of Nerang, Local Government – Gold Coast – (as described in Certificate of Title attached) with a valuation of $3.8 to $4.1 Million. This collateral is in substitute of previous collateral provided which will increase your security to effectively provide you with a loan value ratio of approximately 50%.
My solicitors will immediately provide a letter confirming that the deed is held in trust for the benefit of PICO Holdings Inc as collateral. In addition, a copy of the most recent valuation report will be forwarded.
Furthermore, the draft Agreement granting Vidler Water Company the exclusive marketing rights to the BioModule Waste Water Treatment Technology for the US and Mexico is complete and will be sent shortly for your review.”
A copy of the certificate of title of the land was attached to the letter which showed that the first respondent was the registered owner of the land.
- In early May 2001, after receipt of the facsimile from Mr Voss dated 4 May 2001, a second addendum to the promissory note, backdated to 25 April 2001, was made extending the date for repayment to 31 May 2001 and deleting the original provision concerning security (clause 4) and inserting the following:
“The obligations under this Note shall be secured by a deed for real property, which will constitute at all times a loan to value ratio of 50 per cent. The real property is described in the attached Certificate of Title. Payee shall have a first lien on the real property pledged as collateral for the Note, and no encumbrance or interest senior to Payee’s interest in the collateral shall be given or created by Maker.”
- On 10 July 2001 the appellant lodged a caveat forbidding the registration of any instrument affecting the land until the withdrawal of the caveat and claiming “AN ESTATE OR INTEREST IN FEE SIMPLE AND IN EQUITY” pursuant to “an equitable mortgage arising from the terms of a Non-negotiable Secured Promissory Note dated 22 December 2000 and a letter dated 4 May 2001”.
- Dominion failed to repay the loan and on 30 August 2001 the appellant obtained judgment against Dominion in the Supreme Court of Victoria for US$1.2m and interest from 22 December 2000 to the date of payment.
- The caveat lodged on 10 July 2001 lapsed. On 21 November 2001 the appellant obtained leave to lodge another caveat over the land on substantially the same grounds of the caveat lodged on 10 July 2001. That further caveat was lodged by the appellant on 22 November 2001.
Pleadings
- The appellant pleaded in para 4A of the amended statement of claim that on or about 25 April 2001 the first respondent granted an equitable mortgage or charge over the land to secure the loan to Dominion of US$1.2m. It was particularised that the equitable mortgage or charge was partly oral and partly in writing. To the extent that it was alleged to have been oral, the appellant claimed it was constituted by the telephone conversation on or about 25 April 2001 between Mr Hart on behalf of the appellant and Mr Voss on behalf of the first respondent. As an alternative plea, the appellant alleged in para 5 of the amended statement of claim that the appellant, the first respondent and Dominion agreed to the extension of the date for repayment of the loan from 30 April to 31 May 2001, the land would be provided as additional security for the loan and the first respondent would cause the title deeds to the land to be delivered to the appellant. Again, the particulars of the agreement that was alleged, to the extent that it was alleged to have been partly oral, were of the telephone conversation on 25 April 2001 between Mr Hart on behalf of the appellant and Mr Voss on behalf of the first respondent.
- The first respondent’s response to para 4A of the amended statement of claim was set out in para 4A of the amended defence. The first respondent alleged that there was no execution of any document or anything in writing by the first respondent constituting a charge or mortgage as required by s 127 of the Corporations Law; there was no holding out of Mr Voss as officer or agent of the first respondent, there was no promise by the first respondent to the appellant nor consent of the first respondent to the granting of an equitable charge or mortgage over the land, and there was no agreement as alleged for want of consideration, as at the time of the conversation and writings, the appellant had neither entitlement nor intention to sue Dominion or the first respondent. The first respondent also relied on these matters in respect of the alternative plea of the appellant and also raised that the first respondent was not a party to any agreement between the appellant and Dominion or that there was no concluded agreement in relation to the land between the appellant, Dominion and the first respondent. The first respondent also raised defences based on ss 11 and 56 of the Property Law Act 1974 (“PLA”).
- In its amended reply to the defence of the first respondent that was filed on 21 February 2002, the appellant responded to para 4A of the amended defence by alleging that:
“a)as at 4 May 2001 Mr Voss was the sole director of the respondent and thereby duly authorised to act on its behalf;
- the letter of 4 May 2001 was executed in accordance with
section 127(1)(c) of the Corporations Law;
c)section 127(4) of the Corporations Law provides that section 124 does not limit the ways in which a company may execute a document;
d)by virtue of section 129(5) of the Corporations Law the applicant was entitled to assume that the letter of 4 May 2001 was executed with the authority of the respondent;
e)there was a holding out of Voss as officer and agent of the respondent by virtue of his position as sole director;
f)the letter of 4 May 2001 constituted confirmation in writing that an equitable mortgage over the property had been granted;
g)the respondent consented to the granting of such equitable mortgage by its sole director executing the letter of 4 May 2001;
h)the consideration passing from the applicant for the purposes of the agreement was its promise to and extension of the term of the loan.”
- The evidence in chief for the application was on affidavit. Each of Mr Hart and Mr Voss were cross examined on 15 February 2002. As a result of Mr Voss disclosing in cross examination that the certificate of title for the land was held by the second respondent, the proceeding was adjourned. The appellant then filed an application against the second respondent seeking removal of the caveat dated 31 January 2002 lodged by the second respondent over the land. On 21 February 2002 the learned trial judge ordered that the second respondent be joined to the proceeding.
- A further hearing of the proceeding took place on 7 March 2002 at which the second respondent was represented by counsel and filed two affidavits of Mr Kenneth John Collins sworn respectively on 4 and 5 March 2002 and an affidavit of Ms Toni Laurene Couper sworn on 5 March 2002. Although the second respondent was joined to the proceeding, there were no pleadings involving the second respondent. The issue raised on the second respondent’s material was, if the appellant established its equitable charge or mortgage in respect of the land against the first respondent, whether the interest claimed by the second respondent as mortgagee was a prior interest. There was no cross examination of the second respondent’s deponents and submissions were made by counsel for each of the parties on 7 March 2002. The second respondent’s submissions raised the issue of whether failure to comply with s 59 of the PLA precluded any agreement between the appellant and the first respondent being enforceable.
Findings of trial judge
- The key findings made by the learned trial judge were expressed as follows:
“There was, I find, an agreement reached in late April 2001 between Mr Hart acting on behalf of the applicant and Mr Voss acting on behalf of Dominion Capital as recorded in the facsimile transmission of 4 May 2001 and the second addendum to the promissory note. The first respondent was, however, not a party to the agreement. The facsimile transmission from Mr Voss explicitly in his capacity as chairman and managing director of Dominion Capital bears out that conclusion. It is possible that Mr Voss had some inwardly held notion that he, as director of the first respondent, was making it a party to an agreement with the applicant, but, in my assessment, nothing said or written supports that analysis of what happened. The test of a person’s intention ‘is not a subjective but an objective one; that is to say, the intention which the law will attribute to a person is always that which that person’s conduct bears when reasonably construed by a person in the position of the offeree and not necessarily that which was present in the offeror’s own mind’: Anson’s Law of Contract, 27th ed. 1998, p. 31.
Not only was the first respondent not a party to the agreement, it did not create an equitable charge over the land. It was only Dominion Capital that held itself out as doing that. The facsimile transmission bears out that conclusion.”
- The material before the learned trial judge showed that Mr Voss was the sole director of the first respondent and that the two issued shares in the first respondent were held equally between Trans Atlantic Pty Ltd and Intavest Pty Ltd, each of which did not beneficially own the share. The material showed that of the 100 issued shares of Intavest Pty Ltd, Mr Voss owned 99 beneficially and Mr Anthony Daniel Voss owned 1 share beneficially.
- No party to the appeal sought to challenge the finding of the learned trial judge that the agreement was made on 25 April 2001 and that the letter dated 4 May 2001 sent by facsimile was merely in confirmation of an agreement that had already been made.
- Had the learned trial judge found that there was an oral agreement to which the first respondent was a party or there was an attempt by the first respondent orally to create or dispose of an interest in land, the learned trial judge indicated that he would have found that the requirements of ss 59 and 11 of the PLA would not have been met. The learned trial judge found that there was no written contract or any memorandum or note of a contract to which the first respondent was a party signed by it by some person lawfully authorised. This was on the basis that the learned trial judge found that the facsimile of 4 May 2001 showed that Mr Voss did not write it on behalf of the first respondent, but on behalf of Dominion. The learned trial judge also found that there was no writing creating an interest in the land executed by the first respondent or by an agent of the first respondent authorised in writing, as required by s 11(1)(a) of the PLA.
- It was therefore unnecessary for the learned trial judge to consider the issue of priorities between the appellant and the second respondent.
Submissions of the appellant on parties to the agreement
- On the basis of the facts found by the learned trial judge, Mr Pearce of counsel on behalf of the appellant submitted that the conclusion should have followed that the first respondent was a party to the agreement made on 25 April 2001. The appellant relied on the authority which Mr Voss had as its sole director to bind the first respondent and that as only the first respondent could make the agreement to mortgage the land, Mr Voss must have been taken to have agreed to the mortgage on behalf of that company which could do so. It was submitted that it was the type of case where Mr Voss was acting on behalf of both Dominion and the first respondent simultaneously.
- On the hearing of the appeal it was argued on behalf of the appellant that the first respondent was identified in the conversation which took place between Mr Hart and Mr Voss on 25 April 2001, when Mr Voss referred to the land as either “the Turf Club property” or “my Turf Club property”. There was no finding made by the learned trial judge that at the date of making the agreement on 25 April 2001 that Mr Hart knew that the first respondent owned the land. It would not be consistent with the findings that were made by the learned trial judge for this appeal to proceed on the basis that the first respondent was identified as the owner of the land by Mr Voss in his telephone conversation with Mr Hart on 25 April 2001.
- Mr Pearce relied on a number of authorities as supporting a proposition that where a person makes a contract and is authorised to do so on behalf of two or more companies and there is uncertainty about which company is the contracting party, the court may have regard to all the surrounding circumstances to determine the question: Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448, 13,453-13,454 (“Twynam”); NM Superannuation Pty Ltd v Baker (unreported, Sup Ct (NSW), Cohen J, 4 March 1992) (“NM Superannuation”); Maukad Holdings Pty Ltd v Kirk (unreported, Sup Ct (Tas), Wright J, 1 July 1998) (“Maukad”); and the statement in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 636:
“However, evidence of mutually known facts is always admissible to identify a descriptive term in a document … In accordance with this general rule, parol evidence is admissible to show that whatever name was used in the contract the person sued or suing is the person who made the contract: Trueman v Loder (1840) 11 Ad & El 589 at 594; 113 ER 539 at 541. Moreover, even if parol evidence is only admissible to clarify meaning when a term in a document is ambiguous, that rule has no application when the issue is whether the person sued or suing is a party to the contract.”
- It was also submitted on behalf of the appellant that as the letter dated 4 May 2001 was written in the first person throughout it indicated that Mr Voss did not purport to speak solely for Dominion and must be taken to have spoken for both companies on whose behalf he was contracting.
- The appellant argued that if the agreement reached on 25 April 2001 was not taken to have been made by Mr Voss on behalf of the first respondent in addition to Dominion, the parties’ conduct made no commercial sense. It was argued that it would be “absurd and irrational” to impute to Mr Voss an intention to bind only Dominion which could not give the mortgage. The appellant also argued that the courts should seek to uphold bargains made between business people and not defeat them on some narrow or pedantic ground, relying on Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, 437.
- Mr Pearce summarised the propositions of contract law on which the appellant relied as follows:
“1.If A and B have dealings, and
(i)each conveys to the other the objective intention of making a contract, and
(ii)A has undoubted authority to make the contract on behalf of C, and
(iii)for the contract to be effective, C must be a party to it
then, the intention will be imputed to A of making the contract on behalf of C.
- If A and B have dealings, and
- each conveys to the other the objective intention of making a contract, and
- A has undoubted authority to make the contract on behalf of C and D, and
- for the contract to be effective both C and D must be a parties to it
then, the intention will be imputed to A of making the contract on behalf of both C and D, in the absence of evidence of objective intention on the part of A not to make the contract on behalf of either C or D.”
- In the appellant’s submissions in reply, the appellant raised for the first time an argument that Mr Voss made the agreement on 25 April 2001 with the appellant as agent for the first respondent which was the undisclosed principal. On this basis the appellant submitted that it could enforce the agreement against the first respondent as the principal. Mr Pearce conceded that the appellant had not argued the case before the learned trial judge on the basis that the first respondent was the undisclosed principal, but submitted that it could be dealt with on the appeal, as no further facts were needed to deal with the argument.
Submissions of the respondents on parties to the agreement
- Each of the respondents sought to uphold the finding of the learned trial judge, that the first respondent was not a party to the agreement made on 25 April 2001.
- It was submitted by Mr Sheahan of counsel on behalf of the first respondent that there was no evidential or legal basis to support the assertion made by the appellant that Mr Voss was “clearly” acting on behalf of both companies simultaneously when speaking to Mr Hart on 25 April 2001.
- The first respondent relied on the approach taken by the Full Court in Aitkin Transport Pty Ltd v Voysey [1990] 1 Qd R 510 in determining the identity of parties to a contract by looking at the objective intention of both parties in the light of all the evidence and the surrounding circumstances, as well as the actual knowledge of the party seeking to enforce the promise against the other.
- The first respondent opposed the appellant’s attempt to rely on the doctrine of undisclosed principal on the basis that it was raised for the first time in the appellant’s submissions in reply for the purpose of the appeal.
- Mr H B Fraser of Queen’s Counsel who appeared with Mr Porter of counsel for the second respondent submitted that the appellant’s submissions in respect of why the conclusion should be drawn that Mr Voss was acting on behalf of the first respondent when speaking with Mr Hart in the telephone conversation of 25 April 2001 overlooked that the proper inquiry was to consider what a reasonable person in the position of the appellant would have construed the offer by Mr Voss to have been and also overlooked the facts that were before the learned trial judge.
- The second respondent relied on the fact that at no stage in the conversation of 25 April 2001 did Mr Voss state that the first respondent was the owner of the land or referred to the existence of the first respondent. According to the second respondent, it must follow that a reasonable person in the position of the appellant could not attribute an intention by Mr Voss to make an offer on behalf of the first respondent as at 25 April 2001.
- The second respondent also opposed the appellant being able to raise for the first time on the hearing of the appeal the argument that Mr Voss was acting as the undisclosed principal for the first respondent when contracting with the appellant on 25 April 2001. It was submitted that the case was run before the learned trial judge on the basis that it was the first respondent that had made the agreement by its director Mr Voss with the appellant on 25 April 2001 and that, if it had been suggested at the trial that Mr Voss was acting as the undisclosed principal of the first respondent, the course of the evidence may have been different.
- It was submitted on behalf of the second respondent that the propositions of law in the terms summarised by Mr Pearce were wrong, not supported by authority and inconsistent with the objective theory of contract.
Relevance of letter of 4 May 2001 to determining the parties to the agreement
- In view of the finding of the learned trial judge that the agreement was made on 25 April 2001 (which is not sought to be challenged), the facsimile of 4 May 2001 is extrinsic evidence on the issue of the identity of the parties to the agreement made on 25 April 2001.
- If there were an evidentiary basis for resort to this facsimile of 4 May 2001 to resolve any ambiguity about the identity of the parties and the agreement of 25 April 2001, the facsimile of 4 May 2001 is not itself a communication which, on its terms, can be attributed to the first respondent. The letter is on Dominion letterhead and written by Mr Voss as “Chairman & Managing Director” which could be a reference only to that capacity held in respect of the company from whom the letter purports to be a communication. It does not follow from the use of the first person by Mr Voss in the letter that Mr Voss was not purporting to speak solely for Dominion. Even though the copy of the certificate of title attached to the facsimile showed that the first respondent was the registered owner of the land, there is nothing else in the letter to suggest that the promise to provide that land as substitute collateral was being given on behalf of the first respondent whether alone or jointly with Dominion.
The law
- In Australia, the trend in decided cases and academic writings has been to favour the objective theory of contract which is concerned with the outward manifestations of the intentions of the parties: Taylor v Johnson (1983) 151 CLR 422, 428-429; 6 Halsbury’s Laws of Australia at para [110-30]. A classic formulation which illustrates the operation of the objective theory of contract is that of Blackburn J in Smith v Hughes (1871) LR 6 QB 597, 607:
“If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.”
- The appellant sought to rely on the following statement by Young J (as he then was) in Twynam at 13,453-13,454:
“The plaintiff says that because its representative had attended an aborted auction for Milton Downs held last November and had there seen the form of contract showing that the defendant was the vendor and because it knew that the chief executive officer of the vendor and other companies that popularly were tagged ‘Manildra’ was Mr Honan it must be taken to have known that when Mr Honan on the Manildra Group letterhead said that he would sell the property, that he was acting for the company which actually owned the property, which both parties knew was the defendant. Accordingly, it is said that the fact that the name Anburn was not actually mentioned in any of the documents is immaterial in working out whether the parties had reached the stage of making a contract. I think there is a lot for force in this argument.”
That statement reflects the facts in Twynam and cannot be elevated to any statement of principle. In any case, the facts in Twynam are not analogous to the facts pertaining at the time the agreement was made on 25 April 2001, as there was no finding that Mr Hart knew at the date of making the agreement that the first respondent owned the land.
- The aspect of the decision in NM Superannuation on which the appellant relied depends on the facts of that particular case. The issue was whether the review date for a superannuation fund had been altered from 1 April each year to 1 July. It was necessary for the court to be satisfied that there was an agreement between the fund manager and the trustee. At the relevant time one Mr Smith was secretary of each of the trustee and the employer company and letters from the trustee were written on the letterhead of the employer company when communicating with the fund manager. It was concluded that any discussions which took place between representatives of the fund manager and Mr Smith were with him in his capacity as both an officer of the company and also the trustee. The fact in NM Superannuation which distinguishes it from the facts of the present case was that, at the time of making the agreement about altering the review date, the fund manager knew that Mr Smith represented both the company and the trustee.
- Maukad is another decision which turns on its own facts. Maukad Holdings Pty Ltd had lent the sum of $26,000 and sought to recover it from Mr and Mrs Kirk. Mr and Mrs Kirk claimed the loan had been made to Kirk Tractors (SA) Pty Ltd. The loan sum had been advanced by a cheque made payable to Kirk Tractors (SA) Pty Ltd. The accountant for Maukad Holdings Pty Ltd who had prepared the letter of offer of loan had addressed it to “Mr B Kirk, Kirk Tractors Pty Ltd”. On the basis that the terms of the contract were inconclusive as to the identity of the parties, extrinsic evidence was admitted that resolved the ambiguity and showed that the loan was from Maukad Holdings Pty Ltd to Kirk Tractors (SA) Pty Ltd. It was a matter of applying the orthodox approach of objectively determining the identity of the parties to the contract in the light of the relevant evidence.
- What is immediately apparent from the propositions of law put forward by Mr Pearce are that they are concerned only with the intentions of one party or one set of parties to the contract and not the other. By way of example, in respect of the first proposition, the issue of whether C is a party to the contract must be considered from the viewpoint of B, in addition to the viewpoint of A. Clause (i) of each of the propositions also appears to be deficient in that when A and B have dealings with a view to making a contract, the objective intention of making the contract which is conveyed by one to the other is usually that each conveys to the other the objective intention of making the contract with the other. The identification of the parties to the contract by the parties is critical to the formation of the contract. A contract does not have an existence independent of the parties who have made the contract.
- These propositions put forward by Mr Pearce on behalf of the appellant are an attempt to elevate the facts on which the appellant sought to rely into a principle of law which is not supported by any of the authorities on which the appellant relied.
- The appellant relied heavily on the “undoubted authority” of Mr Voss to make the agreement that was made on 25 April 2001 on behalf of the first respondent. It follows from Mr Voss being the sole director of the first respondent that it was likely that he had authority to act on behalf of the first respondent. The cross examination of Mr Voss at the hearing of the proceeding was directed at his authority to act on behalf of the first respondent at the time the letter of 4 May 2001 was despatched:
“I’ll put it this way: at the time you wrote that letter you were the sole director of Turf Club Australia Pty Ltd, weren’t you?-- Correct, sir.
And you had authority as sole director to act on behalf of Turf Club Australia Pty Ltd?-- Correct sir, yes.
So there is no doubt at the time you wrote that letter that you had authority to offer the Turf Club property as security?-- Yes.”
The fact that Mr Voss may have had the authority to act on the first respondent at the time of making the agreement with the appellant on 25 April 2001 is not determinative of whether the first respondent was, in fact, a party to that agreement.
- On the basis of the findings made by the learned trial judge and, in particular that nothing that was said by Mr Voss in the conversation on 25 April 2001 conveyed to Mr Hart that Mr Voss was making an agreement with the appellant on behalf of the first respondent, a reasonable person in the position of the appellant would not have construed the offer by Mr Voss as being made on behalf of the first respondent. The learned trial judge correctly rejected the pleaded bases on which the appellant sought a finding that the first respondent was a party to the agreement made on 25 April 2001.
- The policy reasons relied on by the appellant to submit that the finding of the learned trial judge should be reversed are not particularly relevant in the circumstances in which the agreement of 25 April 2001 was made. There was an existing loan from the appellant to Dominion. The agreement arose as a result of a request made by Mr Voss on behalf of Dominion to extend the date of repayment of the loan to which Mr Hart of the appellant responded that the appellant would require further security to extend the loan. The finding that the first respondent was not a party to that agreement is a reflection of the evidence that was adduced. It is not a matter of “imputing” an intention to Mr Voss to bind only Dominion. It is a case of applying settled principles of law to facts that have been determined, in order to determine the identity of the parties to the contract.
Whether appellant can pursue claim based on doctrine of undisclosed principal
- On the hearing of the appeal, Mr Pearce sought to argue the application of the doctrine of undisclosed principal to the facts as found by the learned trial judge. This approach carries with it the implication that the argument was open on the pleadings, as they stood before the learned trial judge.
- The law relating to an undisclosed principal was summarised in Siu v Eastern Insurance Co Ltd [1994] 2 AC 199, 207:
“…(1) An undisclosed principal may sue and be sued on a contract made by an agent on his behalf, acting within the scope of his actual authority. (2) In entering into the contract, the agent must intend to act on the principal’s behalf. (3) The agent of an undisclosed principal may also sue and be sued on the contract. (4) Any defence which the third party may have against the agent is available against his principal. (5) The terms of the contract may, expressly or by implication, exclude the principal’s right to sue, and his liability to be sued. The contract itself, or the circumstances surrounding the contract, may show that the agent is the true and only principal.”
- The law which permits an undisclosed principal to sue and be sued on a contract to which the undisclosed principal is not a party has been described as an anomaly: Keighley, Maxsted & Co v Durant [1901] AC 240, 256. That is because it is an exception to the principle of privity of contract and, also, because what it makes relevant at the time the agent enters the contract is the agent’s subjective intention to act on the principal’s behalf. In the lastmentioned case, Lord Lindley stated at 261:
“The explanation of the doctrine that an undisclosed principal can sue and be sued on a contract made in the name of another person with his authority is, that the contract is in truth, although not in form, that of the undisclosed principal himself. Both the principal and the authority exist when the contract is made; and the person who makes it for him is only the instrument by which the principal acts. In allowing him to sue and be sued upon it, effect is given, so far as he is concerned, to what is true in fact, although that truth may not have been known to the other contracting party.”
- A fact that would have needed to be pleaded by the appellant against the first respondent in order to pursue the claim based on the doctrine of undisclosed principal was that, when making the agreement made on 25 April 2001 with the appellant, the agent (whether it was Mr Voss or Dominion) was intending to act on behalf of the first respondent.
- The appellant did not seek leave on the hearing of the appeal to amend the statement of claim to raise a claim based on the doctrine of undisclosed principal. If such an application had been made, the problem which faced the appellant was that more than such amendment would be required to enable a claim based on the doctrine of undisclosed principal to be determined at this stage. As it was not an issue at the trial on the pleadings, there was no evidence expressly directed at the subjective intention of Mr Voss at the time of the critical conversation with Mr Hart. The statement of the learned trial judge in the reasons for judgment that:
“It is possible that Mr Voss had some inwardly held notion that he, as director of the first respondent, was making it a party to an agreement with the applicant …”
could not and did not amount to a finding in respect of the fact required to be pleaded in order to establish that Mr Voss intended to act as the undisclosed principal of the first respondent, as that issue was not raised before the learned trial judge. As was urged at the hearing of this appeal on behalf of the respondents, the course of the evidence may well have differed, had the issue of undisclosed principal been agitated as an issue at the trial.
- At this stage of the proceeding in the light of the pleadings and the basis on which the trial was conducted before the learned trial judge, the appellant cannot pursue a claim against the first respondent based on the doctrine of undisclosed principal.
Writing requirements
- It was common ground on the hearing of the appeal that the appellant was relying on the facsimile of 4 May 2001 as confirmatory of the agreement made on 25 April 2001 and therefore it was not necessary for that facsimile to satisfy the requirements of s 11(1)(a) of the PLA. The issue that was argued on the appeal was whether the facsimile of 4 May 2001 complied with s 59 of the PLA. It is not necessary to deal with that issue in view of the conclusion that there was no error in the learned trial judge’s finding that the first respondent was not a party to the agreement made on 25 April 2001.
Priorities
- Just as the learned trial judge found it unnecessary to make findings on the issue of priorities between the appellant and the second respondent, it is also unnecessary to determine the priorities question on this appeal.
Orders
- It follows that the orders which should be made are:
- The appeal be dismissed.
- The appellant pay the costs of the first respondent and the second respondent of the appeal to be assessed.
Footnotes
[1] See Mullins J's reasons at [27].
[2] Ibid, [28]
[3] (1983) 151 CLR 422.
[4] As stated by Blackburn J in Smith v Hughes (1871) LR 6 QB 597, 607.
[5] Taylor v Johnson, 429; there is seldom any distinction between the practical effect of the objective and subjective theories, but the difference may be reflected in legal technique, for example, the consequences of a contract impeached on the ground of unilateral mistake: at 428-429.
[6] [1983] 1 AC 854. McHugh JA (as he then was) in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, 336; G R Securities v Baulkham Hills Private Hospital (1986) 40 NSWLR 631.
[7] Ibid, 915. See also Contract Law in Australia, 3rd ed, J W Carter and D J Harland, Butterworths, 1999, paras 110-112.
[8] Ibid, 634.
[9] The words in parentheses are my addition.
[10] Ibid.
[11] Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) 6 BPR 13,448, dicta of Young J (as he then was) at 13,453-13,454; N M Superannuation Pty Ltd v Baker (unreported, NSW Supreme Court, 4 March 1992) BC 9202029, where, at 32-35, the use of one company's letterhead in correspondence did not preclude another company from becoming a contractual party, and Maukad Holdings Pty Ltd v Kirk (unreported, Tas Supreme Court, 1 July 1998).
[12] cf SRA New South Wales v Earthline Constructions (1999) 75 ALJR 306, 307; Devries v ANR Commission (1993) 177 CLR 472, 479.
[13] cf Zuvela v Cosmarnan Concrete Pty Ltd (1996) 71 ALJR 29, 31.
[14] cf N M Superannuation Pty Ltd v Baker (supra).
[15] Reasons for Judgment, p 8.
[16] cf Aitken Transport Pty Ltd v Voysey [1990] 1 QdR 510,516.
[17] See Murphy v Timms [1987] 2 Qd R 550