Local Court New South Wales Medium Neutral Citation: Integrated Asset Management Pty Ltd v Tekapo Pty Ltd [2013] NSWLC 28 Hearing dates: 19/08/2013 Decision date: 26 September 2013 Jurisdiction: Civil Before: Assessor Olischlager Decision: Verdict for the defendant Catchwords: CONTRACTS - rental agreement - agency - undisclosed principal - collateral agreement Cases Cited: Formby Brothers v Formby (1910) 102 LT 116 Fred Drughorn Ltd v Rederiakt Transatlantic [1919] AC 203 Hoyt's Pty Ltd v Spencer [1919] HCA 64; 27 CLR 133 Humble v Hunter (1848) 12 QB 310, [1843-60] All ER Rep 468 Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89; 89 CLR 507 Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 Talbot Underwriting Ltd v Nausch, Murray & Hogan Inc [2006] EWCA Civ 889 Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd [1968] 2 QB 545 White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 Texts Cited: Dal Pont, Law of Agency (2008), 2nd ed, Lexis Nexis Category: Principal judgment Parties: Integrated Asset Management Pty Ltd (plaintiff) Tekapo Pty Ltd (defendant) Representation: Mr Aquilina (for the plaintiff) Mr Challen (for the defendant) File Number(s): 2012/331803 Publication restriction: Nil Judgment 1The plaintiff, Integrated Asset Management Pty Ltd, seeks to recover money due under a rental agreement against the defendant, Tekapo Pty Ltd. Integrated Asset Management asserts that it is the undisclosed principal for Toshiba (Australia) Pty Ltd. Toshiba entered into an agreement with Tekapo on 22 March 2006 to rent a Toshiba photocopier for a term of 60 months commencing 8 March 2006. The rental term was to be automatically renewed for further periods of 90 days until such time as the agreement was terminated. The rental payment per month was $248.60. 2Integrated Asset Management has commenced these proceedings seeking to recover the sum of $3,729 for unpaid rental payments due for the months of February 2011 to May 2012. 3Tekapo disputes liability on two grounds; firstly that Integrated Asset Management Pty Ltd has no standing to sue on the contract as an undisclosed principal and secondly, the rental agreement ended after 60 months when ownership in the rental equipment transferred to Tekapo. 4For the reasons that follow the Court is satisfied that the claim by Integrated Asset Management fails. Undisclosed Principal 5The terms of the agreement do not identify Integrated Asset Management as a party to the rental agreement. Officers of Tekapo were wholly unaware of the existence of Integrated Asset Management prior to entering into the rental agreement. The doctrine of undisclosed principal is something of an exception to the privity of contract rule. Counsel for the plaintiff refers to the text Law of Agency (2008), 2nd ed, where G E Dal Pont describes the doctrine of undisclosed principal as follows: The doctrine of undisclosed principal dictates that a person can sue and be sued upon a contract even though the other contracting party does not know that the person which whom he or she is contracting was acting as an agent, except where the terms are inconsistent with the known person being an agent or otherwise expressly or impliedly confine the right to sue or be sued to the named parties. 6Counsel for the plaintiff submits that the rental agreement is one that is capable of being entered into by an agent on behalf of an undisclosed principal. Clause 12 of the terms of the rental agreement evidences that Toshiba was entitled to deal with its interest in the contract. Clause 12 provides: Assignment The renter must not assign, encumber or otherwise deal with the equipment or its rights under this agreement. The owner may assign, encumber or otherwise deal with its rights in any way. 7Mr Challen provided evidence and submissions as a director on behalf of Tekapo. Mr Challen asserts that the terms of the agreement are inconsistent with Toshiba entering into the agreement as agent for an undisclosed principal. In particular, Mr Challen relies on provisions of the agreement that refer to Toshiba being the "owner" of the rented photocopier as being incompatible with it acting as an agent for another entity who is the true "owner". By way of example, Clause 1 of the terms and conditions of the agreement provides: Ownership of the Equipment 1.1 The equipment is, and will remain, the sole property of the owner. The renter's only right to the equipment is the right to use it on the terms of this agreement. 1.2 This agreement does not bind the owner until the owner signs it, even if the renter has pre-paid any money or obtained delivery of the equipment. 8Furthermore, Mr Challen asserts that even if the agreement is capable of being entered into on behalf of an undisclosed principal the plaintiff has failed to provide evidence to establish the existence of agency in this instance. Analysis 9The doctrine of the law relating to an undisclosed principal was summarised by Lord Lloyd of Berwick in Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 2 AC 199 at 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. 10The dispute in the present case requires consideration of the fifth point of the doctrine, that is, whether the terms of the agreement exclude the construction that Toshiba signed as agent for an undisclosed principal. 11The description of Toshiba as the "owner" of the equipment is a factor that has been held as excluding the right of an undisclosed principal. In Humble v Hunter (1848) 12 QB 310, [1843-60] All ER Rep 468 it was held that the use of the term "owner" in relation to a shipping contract excluded evidence of the existence of an undisclosed principal. Lord Denman CJ stating that the doctrine of undisclosed principal "cannot be applied where the agent contracts as principal, and he has done so here by describing himself as "owner" of the ship". A similar approach was taken in Formby Brothers v Formby (1910) 102 LT 116 where an agent contracting in his own name as "proprietor" was held to have contracted as principal. 12The authorities, however, are not consistent on whether the use of such terms expressly excludes agency. In Fred Drughorn Ltd v Rederiakt Transatlantic [1919] AC 203 it was held that a person who had signed as a charterer did not exclude the person signing as agent for an undisclosed principal. 13In White v Baycorp Advantage Business Information Services Ltd (2006) 200 FLR 125 Campbell J considered these earlier decisions and concluded at [83]: The contract as a whole needs to be construed to decide whether it is inconsistent with its terms for one of the parties entering it to do so as agent for an undisclosed principal. That question is not determined by the fact that the agreement contains a term that someone is the "owner" of the goods to which it relates. It depends on who that "someone" is. 14It is clear that certain contracts will, by their personal nature, exclude the possibility that it is capable of being entered into by an agent on behalf of an undisclosed principal. A contract for painting a portrait is an example commonly referred to in authorities. In a commercial context, however, often there is little importance placed on the identity of the contracting party. In Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd [1968] 2 QB 545 Diplock LJ stated: Where an agent has such authority and enters into a contract with another party intending to do so on behalf of his principal, it matters not whether he discloses to the other party the identity of his principal, or even that he is contracting on behalf of a principal at all, if the other party is willing or leads the agent to believe that he is willing to treat as a party to the contract anyone on whose behalf the agent may have authorised to contract. In the case of an ordinary commercial contract such willingness of the other party may be assumed by the agent unless either the other party manifests his unwillingness or there are other circumstances which should lead the agent to realise that the other party was not so willing. 15In Talbot Underwriting Ltd v Nausch, Murray & Hogan Inc [2006] EWCA Civ 889 Moore-Brick LJ dealing with an undisclosed principle in a contract for insurance stated: The mere identification, whether by name or description, of certain persons as assureds cannot be sufficient of itself to demonstrate an unwillingness on the part of the insurer to contract with any other person.... Each case must therefore be decided by reference to the terms of the contract under consideration and the circumstances in which it came to be made, though no doubt due regard should be had to the warning of Lord Lloyd in Siu Yin Kwan v Eastern Insurance Co Ltd that if the courts are too ready to construe written contracts as contradicting the right of an undisclosed principal to intervene it would go far to destroy the beneficial assumption in commercial cases to which Diplock LJ referred in Teheran-Europe Co Ltd v ST Belton (Tractors) Ltd. 16Despite the reference within the contract to Toshiba being the "owner" of the equipment the Court is satisfied that this was not incompatible with Toshiba entering into the contract as an agent for Integrated Asset Management as the undisclosed principal. This was a commercial contract where there was no importance attached to the identity of the contracting parties. The capacity for Toshiba to assign its rights under the contract without the consent of Tekapo demonstrates that there was no special relationship or personality in Tekapo contracting with Toshiba. Clause 12 of the contract allowed the "owner" to "assign, encumber or otherwise deal with its rights in any way". This was clause is wide enough to include the potential for Toshiba to enter into the agreement as agent rather than as principal. 17The second element that the plaintiff needs to establish is the question as to whether Toshiba did, in fact, enter the agreement with the intention of being the agent of Integrated Asset Management. 18The plaintiff relies on the principal and agency agreement between Integrated Asset Management Pty Ltd and Toshiba as evidence of actual authority. There are a number of relevant provisions of this agreement including the following: Definitions In this document: "Leasing Agreement" means: (a) A rental agreement... in a form approved by the Principal from time to time. "Leasing Proposal" means a proposal, in a form approved by the Principal from time to time, in relation to a Leasing Agreement. 2.1 Appointment and performance (a) With effect on and from the date of this document the Principal appoints the Agent as its agent on the terms of this document, and the Agent accepts that appointment. (b) Except as this document expressly provides, the Agent has no authority to act for the Principal or to assume any obligation or liability on its behalf. (c) This agreement is subject to the letter of intent dated 19.05.00 between the parties. 3.1 Right of first refusal (a) The Agent will submit to the Principal proposals that it receives from persons who wish to lease, rent or hire equipment, in the form of a Leasing Proposal in accordance with clause 3.2 before it submits that proposal to any other financier as permitted in paragraph (b). (b) Only after the Principal has rejected a Leasing Proposal requesting the Principal to purchase Equipment and to approve the execution by the Agent of a Leasing Agreement in relation to it. A Leasing Proposal must contain full particulars of the proposed leasing arrangement. 3.5 Principal's discretion to approve (a) The Principal may in its absolute discretion approve or reject a Leasing Proposal, even if the Agent has provided all documents and information required under clause 3.4. The Principal must notify the Agent of its decision in writing, and the Agent may not purport to rely upon any notification or purported notification from the Principal that is not in writing. 4.1 If the Principal approves a Leasing Proposal then the Principal authorises the Agent to sign as agent for the Principal the relevant Leasing Agreement and any Security specified in the Leasing Proposal. 4.2 Obligation of Agent If the Principal approves a Leasing Proposal then the Agent must deliver to the Principal: (a) An invoice for the Equipment for an amount and in terms acceptable to the Principal (b) The Leasing Agreement and any Security specified in the Leasing Proposal, each in an Approved Form and duly signed by all parties... 4.3 Purchase of Equipment If the Principal is satisfied...then the Principal authorises the Agent to acquire the relevant Equipment on behalf of the Principal on terms approved by the Principal and the Principal must pay the agreed purchase price to the Agent. 4.4 Delivery of the Equipment (a) The Equipment is taken to be delivered to the Principal when the Principal pays the purchase price in accordance with clause 4.3. 5.4 Undisclosed agency (a) If the Principal approves a Leasing Proposal on the basis that the agency of the Agent in relation to that transaction is to be undisclosed, then the Principal must not, except as provided under paragraph (b), disclose to any person that the Agent is acting as Agent of the Principal. 11.1 Duration The agency agreement established by this document continues until terminated in accordance with clause 11.2 or clause 11.3. 11.2 Termination by either party (a) Either party may terminate the agency agreement established by this document by giving to the other 30 days written notice. 11.3 Termination following default (a) The Principal may be written notice to the Agent terminate the agency agreement established by this document at any time after an Event of Default occurs." 19Mr McMillan, the General Manager of Collections for the plaintiff, has attached a copy of the statement of Tekapo's rental statement of account from the Integrated Asset Management's computer system. Also attached is a copy of an invoice issued by Toshiba dated 23 February 2006 for an amount of $11,460.90 and a computer generated ledger from Integrated Asset Management purporting to settle the account. 20The defendant has submitted that the plaintiff's evidence fails to establish actual agency. The defendant points out the following flaws in the evidence of the plaintiff: 21Firstly, the principal and agency agreement entered into between Integrated Asset Management and Toshiba is dated 2000. There is no direct evidence to the effect that the agreement remained in force as at 22 March 2006. 22Secondly, the principal and agency agreement is subject to a letter of intent dated 19.5.00 between the parties. That letter of intent has not been tendered into evidence. 23Thirdly, the plaintiff has not provided a copy of the "leasing proposal" that was required to be submitted by Toshiba requesting Integrated Asset Management to purchase equipment and to approve the execution by the Agent of a Leasing Agreement as required by Paragraph 3.2. 24Fourthly, the plaintiff has not provided a copy of the written approval of the leasing proposal as required by paragraph 3.5 of the agency agreement. 25Fifthly, the copy of the invoice for the equipment is not directed to Integrated Asset Management. 26Sixthly, there is no direct evidence as to when Integrated Asset Management made payment for the equipment to Toshiba. 27The Court agrees that the plaintiff has failed to provide sufficient evidence to establish actual authority. The most critical failure in terms of the evidence of the plaintiff is the failure to provide evidence of a "leasing proposal" as being submitted for approval by Toshiba and approved in writing by Integrated Asset Management. 28In White v Baycorp Advantage Business Information Services Ltd Campbell J was dealing a rental agreement with very similar arrangement whereby a financier was the undisclosed principal for Konica. In that case Campbell J at [88] was satisfied of the existence of agency by reason of the existence of the agency agreement and evidence that Konica had made application to the undisclosed principal for approval to enter the agreement before it was entered. 29The principal and agency agreement required a leasing proposal to be submitted by Toshiba and approved in writing by Integrated Asset Management in order for actual authority to exist. There has been no explanation for the failure on the part of the plaintiff to produce these documents. No other witness evidence is provided on behalf of the plaintiff as to the existence of actual authority. 30The plaintiff has failed to establish that Toshiba had actual authority to enter the agreement on its behalf. 31There is a further impediment to the plaintiff's claim that it was the undisclosed principal of the rental agreement. The second point identified by Lord Lloyd of Berwick in Sui Yin Kwan v Eastern Insurance Co requires evidence that the agent, in entering into the contract, intended to act on the principal's behalf. 32There is no evidence from any officer of Toshiba to the effect that it entered the contract with the intention of acting on behalf of Integrated Asset Management. The evidence contained in email communications supports a different view. 33An email from Brett Fitzgerald of Toshiba dated 1 April 2010 to an officer of the defendant states; "Unfortunately, I have still not had a response from Alleasing (finance company) regarding the collection of your older machine". 34An email dated 10 February from a person by the name of Wahyu Rachman quotes the reference number of the rental agreement. The email address contains the identifying corporation Alleasing.com.au. 35An email dated 8 February 2012 to an officer of the defendant is signed off by Lucille Coombes a Collections Officer, Alleasing Pty Ltd. That email quotes the reference number of the rental agreement the subject of these proceedings and refers to rental arrears. 36Any intention on the part of Toshiba, as far as it can be inferred from the evidence, is that it intended to act as the agent for Alleasing. 37The plaintiff has submitted that Alleasing is a related entity. Notwithstanding this, it is clearly a separate corporate entity. The emails are inconsistent with the proposition that Toshiba intended to enter into the contract as agent for Integrated Asset Management. Transfer of Ownership at end of Initial Rental Period 38While the Court's finding that the plaintiff has failed to establish that it was the undisclosed principal on the rental agreement effectively resolves the dispute in favour of the defendant, for the sake of completeness, the Court will address the second ground of defence. 39The defendant submits that the rental agreement came to an end at the expiration of the initial 60 months at which time ownership in the equipment transferred to Tekapo. 40Mr Challen provides evidence that Tekapo had entered into an earlier agreement with Toshiba for the supply of a photocopier. On 30 March 2004 Tekapo had entered into a rental agreement with Toshiba for the supply of a photocopier on almost identical terms including a 60 month initial term which was capable of being renewed for additional terms. On 29 March 2004 Mr Fitzgerald sent an email to an officer of the defendant stating "Toshiba agree to transfer Full Ownership to HCB at the completion of Contract at No Charge". 41Mr Challen states that in or about February 2006 he had a meeting with Mr Fitzgerald regarding the supply of an additional photocopier to the defendant. Mr Challen states that Mr Fitzgerald advised that the same transfer of title at no cost arrangement would apply in respect of the proposed rental agreement on the basis of 60 monthly payments being entered into by Tekapo. Mr Challen states that in reliance of this representation the defendant entered into the rental agreement that is the subject of this dispute. 42Counsel for Integrated Asset Management disputes that such a representation was made. Counsel refers to the inconsistency in the evidence of the defendant. In an email dated 7 July 2011 from Mr Challen to an officer of Alleasing Mr Challen states: In or about late January 2011 I had a telephone conversation with a representative of Toshiba and its Brisbane office wherein we discussed the fact that the agreement was ending in February 2011. I advised that Tekapo would purchase the equipment for one dollar as I assumed it was an agreement for the purchase of the equipment. I was not advised at that time that it was a rental agreement nor was I advised that pursuant to clause 8 there was a need to provide 90 days notice in writing to Toshiba to end the agreement. 43The contention that title in the equipment would pass on payment of one dollar is inconsistent with Mr Challen's more recent statement that title would automatically transfer without any payment at the expiration of the initial period. 44Mr Challen acknowledges the inconsistency, however, he explains that five years had elapsed between the representation and his communications in 2011. That at the time he did not give detailed consideration of the matter as he was running a law firm and did not attach great significance to the communication. He states that it was only in light of litigation that he gave the matter further consideration and recalled in greater detail the conversation with Mr Fitzgerald. 45The Court accepts Mr Challen's evidence and his explanation for the discrepancy in his evidence. The Court accepts that it is likely that Tekapo would seek similar terms to those applying to the earlier rental agreement. The defendant dealt with Mr Fitzgerald in relation to the earlier rental agreement as well as this second agreement. There is no reason to suspect that Mr Fitzgerald would not make a similar representation. Integrated Asset Management has failed to obtain any statement from Mr Fitzgerald to challenge Mr Challen's version of events notwithstanding that it had the opportunity to provide evidence in reply. 46Finally, it is necessary to consider whether it was open for the defendant to rely upon the representation as a collateral agreement. Counsel for Integrated Asset Management submits that the collateral agreement cannot be relied upon as it is inconsistent with the terms of the written agreement. The relevant principle is stated in Hoyt's Pty Ltd v Spencer [1919] HCA 64; 27 CLR 133 at 147 and restated by Dixon CJ, Fullagar and Taylor JJ in Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89; 89 CLR 507 at 517 in the following terms: A collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement. Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it established that the writing was intended to contain only part of a fuller agreement it may be otherwise. That, however, is not the present case. But it may be established that an entirely separate agreement was made by the parties. One of them may give a collateral promise in consideration of the other entering into the principal agreement. But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides the consideration. If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support the promise. 47The plaintiff submits that the alleged collateral agreement is inconsistent with provisions contained in Clause 16 of the principal agreement that provide that the terms of the agreement may only be varied in writing and that the written agreement constitutes the entire agreement between the parties. 48The Court does not agree that the collateral agreement is inconsistent with the principal agreement. Clause 12 of the terms and conditions of the rental agreement provides; "The owner may assign, encumber or otherwise deal with its rights in any way". That right would extend to entering into an agreement to sell the equipment. 49Accordingly, the Court is satisfied that the rental agreement expired at the end of the 60 month initial period. 50The Court will enter a verdict in favour of the defendant. The Court reserves the question of costs. Assessor S Olischlager Small Claims Division Downing Centre Local Court 26 September 2013 ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 May 2014