Local Court New South Wales Medium Neutral Citation: ACN 142 134 076 Pty Ltd v Dimension Data Australis Pty Ltd & Maya [2013] NSWLC 30 Hearing dates: 23/05/2013, 16/09/2013 Decision date: 05 November 2013 Jurisdiction: Civil Before: Magistrate Bradd Decision: Verdict for the first and second defendants Catchwords: CONTRACTS - agency - whether the second defendant had ostensible authority - meaning of the term 'account manager'- whether the second defendant breached a warranty of authority - whether the plaintiff relied on the representation of the second defendant Legislation Cited: Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 Cases Cited: Australian Blue Metal Limited v Hughes & Ors (1961) 79 WN (NSW) 498 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Penn v Bristol & West Building Society & Ors [1997] 1 WLR 1356 Yonge v Toynbee [1910] 1 KB 215 Texts Cited: Bowstead W and Reynolds F.M.B., "Bowstead & Reynolds on Agency", 16th ed. (1996), Sweet & Maxwell Category: Principal judgment Parties: ACN 142 134 076 Pty Limited (formerly Virtual Learning Technologies Pty Ltd) (plaintiff) Dimension Data Australis Pty Ltd (first defendant) Terry Maya (second defendant) Representation: P Macarounas for the plaintiff D Pritchard SC for the defendants J Castrission for the plaintiff A Connolly for the defendants File Number(s): 2012/221724 Judgment The Claim 1ACN 142 134 076 Pty Limited (formerly known as Virtual Learning Technologies Pty Limited) (Virtual) claims that Dimension Data Australis Pty Ltd (Dimension Data) agreed to pay it 25% of the fee it invoiced to Robust Resources Limited (Robust) for work done. 2It pleads that the agreement was in writing signed by the account manager of Dimension Data, Terry Maya, and communicated to Virtual by email, who was held out by Dimension Data as the person responsible for negotiating the contract by which Virtual might award the contract to install information systems for Robust. 3It pleads that Mr Maya had actual or ostensible authority to execute the contract on behalf of Dimension Data. 4The amount claimed is 25% of $284,370.79 plus GST being $71,092.70 plus GST of $7,109.27. Agreed Facts 5Virtual was acting on behalf of Robust as a project manager. Virtual was referred to Dimension Data by Cisco Systems Australia Pty Limited (Cisco). Wayne Lewis represented Virtual and Terry Maya represented Dimension. Mr Maya sent a quotation for the work to be done at Robust to Mr Lewis. Mr Maya sought the advice of Mr Mitty, Chief Legal Officer of Dimension Data. Mr Lewis 6Mr Lewis says that Robust asked him to help organise video conferencing, and other electronic and computer requirements for their office. Mr Lewis informed Robust that he would arrange for his fee to be paid by the contractor. Mr Lewis approached Cisco for the equipment. Cisco referred him to Dimension Data for installation. He received a call from Mr Maya. Mr Lewis told Mr Maya that Virtual would be charging a fee from Dimension Data of 25% of the final invoice. Mr Maya asked him to send him a proposed agreement. Later, Mr Maya asked him to send him the proposed agreement concerning payment to Virtual. A few days later he received an email from Mr Maya, which includes the words "This quote has your 25% margin built in to overall pricing". Sometime later, Mr Maya confirmed in email correspondence that the fee agreement included the fee to Virtual of 25%. After the work was completed, Mr Lewis sent his final invoice to Mr Maya. The next day, Mr Maya gave him a signed authorised for payment copy of the invoice. Dimension Data has not paid the invoice. The proposed agreement 7The proposed agreement sent by Mr Lewis is in the form of a letter to be signed by Dimension Data confirming that Virtual will be paid 25% of the total amount invoiced to Robust. Mr Mitty sent an email to Mr Maya saying; "we will not send such a letter..." Mr Maya signed a letter in the terms proposed by Mr Lewis using the stationery of Dimension Data, and using the signature block of "Account Manager". Issue 8The primary issue is whether Mr Maya acted as the agent of Dimension Data, and if so whether he acted within the scope of his actual or ostensible authority. Actual Authority 9The employment agreement between Dimension Data and Mr Maya states: Employees will not have authority to, and shall not bind Dimension Data to any agreement or otherwise hold themselves out as being authorised to deal as an agent of Dimension Data except as authorised by Dimension Data or as implied by law. 10The signatories policy of Dimension Data states that an account manager means a person who administers a customer relationship. An authorised officer means a person appointed or authorised by the company to act on behalf of the company. An authorised officer can sign a customer contract. An account manager is not listed as an authorised officer. 11Mr Mitty, who is an authorised officer, told Mr Maya that Dimension Data would not sign the letter. 12I find that Mr Maya did not have actual authority to sign the letter. Ostensible Authority 13The plaintiff states that Mr Maya had the title of "accounts manager", with the usual authority that it brings. Further, Mr Maya was allowed to conduct himself with third parties and represent to them the views and positions of Dimension Data, without Dimension Data taking proper safeguards to prevent misrepresentation. No steps were taken by persons in authority to communicate Dimension Data's refusal to enter into the agreement with Virtual. The plaintiff relies upon the judgment of the High Court in Pacific Carriers Ltd v BNP Paribas1 where it states: Where an officer is held out by a company as having authority, and the third party relies on that apparent authority, and there is nothing in the company's constitution to the contrary, the company is bound by its representation of authority. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole. 14Did Dimension Data hold out Mr Maya as having authority to sign the relevant letter? What is the authority that an accounts manager would ordinarily be expected to have? What was the principal's conduct as a whole? Dimension Data did not expressly hold out Mr Maya as having authority to sign the letter. The authority that an accounts manager would ordinarily be expected to have is to manage an existing account by managing a customer relationship. The title "account manager" does not represent a holding out by Dimension Data that Mr Maya as an account manager had the authority to execute agreements on behalf of Dimension Data. It means he had the authority to communicate the position of Dimension Data to a customer. When Mr Lewis presented the proposed letter of agreement to Mr Maya, he was told that it would have to be cleared by the legal department. The communication to Mr Lewis informed Virtual that Mr Maya did not have authority without approval to sign the letter. Dimension Data made appropriate safeguards in the contract of employment with Mr Maya, by informing him that he was not allowed to sign certain documents, which would include the letter of agreement. The fact of allowing Mr Maya access to Dimension Data stationery and the means to draft correspondence does not amount to a failure of Dimension Data to implement appropriate safeguards; Dimension Data clearly informed Mr Maya about the type of documents he could not sign. 15The facts Pacific Carriers Ltd v BNP Paribas2 are different from the facts in question. In the former: (1)Ms Dhiri was the Manager of the Documentary Credit Department. (2)She had authority to sign documents in one capacity but not another and the documents made no express reference to the capacity in which they were signed. (3)Ms Dhiri was put in a position, which equipped her to deal with letters of indemnity. (4)Issuing a letter, which bound the bank, was a transaction forming part of the ordinary course of business of a bank. On the other hand: (5)Mr Maya was an account manager. He was employed to manage accounts, by dealing with customers. He was not given a title that would inform a reasonable person that he had authority to sign documents binding Dimension Data. (6)Mr Maya had no authority to sign documents binding Dimension Data; he only had authority to sign administrative communications. (7)Mr Maya was not put in a position, which equipped him to issue a letter binding Dimension Data. His role was to communicate only. 16The advertisements of positions of account manager contained in the affidavit of Mr Castrission do not say that an account manager has the capacity to bind the company. The advertisements stress knowledge of the business, problem solving abilities, and communication. Being a "deal maker" means negotiating deals, which are then presented to decision makers within the company. The term "key account manager" likewise is defined as a communication role, not a decision-making role. Corporations Act Part 2B.2 17The plaintiff states that ss 128 and 129 of the Corporations Act 2001 (Cth) (the Act) reflect the common law. The defendant states that the plaintiff has not pleaded the aforementioned Act, and there is a lack of procedural fairness. Uniform Civil Procedure Rules r 14.14(1) provides that: In a statement of claim, the plaintiff must plead specifically any matter that, if not pleaded specifically, may take the defendant by surprise. 18Part 2B.2 of the Act reflects the "indoor management rule". In Northside Developments Pty Ltd v Registrar-General3, the question of whether the indoor management rule was a "special rule relating to companies rather than an instance of the general law of agency" was discussed in the judgment of Mason CJ, which at 159 referring to Freeman and Lockyer4 states that: The rule of law in Turquands Case[5] in its application to the acts of a company undertaken through its agents is an exemplification of the law of principal and agent and that ambit of the operation of the rule is to be ascertained by reference to the actual or ostensible authority of the agent who purports to act on behalf of the company. 19Since the indoor management rule in its application to the acts of a company undertaken through its agent forms part of the law of agency, I find it is a matter that arises out of the evidence, and is not a matter that should have taken the defendant by surprise. It is therefore a matter that can be raised by the plaintiff. 20In so far as it is relevant, Part 2B.2 entitles a person to make certain assumptions in relation to dealings with a company. A person may assume that anyone who is held out by the company to be an officer or agent of the company has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of agent or officer of a similar company. The term "officer" is defined in s 9 of the Act, and does not include an "account manager". The term "agent" is not defined in the Act. Dimension Data held out Mr Maya to be an account manager. I find that Mr Maya was an agent of Dimension Data. 21The key question is what authority does an "account manager" of a similar company have? The question has been answered in paragraph 16 above. An account manager has power to manage an account by communicating with a customer and to the decision-makers within the company. 22The document signed by Mr Maya, was not signed in accordance with subsection 127(1) of the Act. 23I find that Virtual was not entitled to assume that Mr Maya had authority to exercise the power to bind Dimension Data by signing a letter using the letterhead of Dimension Data. 24I am not satisfied on the balance of probabilities that Mr Maya had ostensible authority. Ratification 25The plaintiff pleads that Dimension Data has ratified the actions of Mr Maya. The evidence of Mr Maya is that he built a 22-23% margin into the cost of the job to Robust, for the purposes of paying Mr Lewis 25% of the amount invoiced to Robust. By retaining the benefit Dimension Data may not deny the authority of Mr Maya to enter into the agreement with Virtual. 26I have been referred to Australian Blue Metal Limited v Hughes & Ors:6 The principle of ratification, as I see it, is that a purported principal cannot both approbate and reprobate the actions of his purported agent. Therefore, if the principal accepts the benefit which flows from the allegedly unauthorised act of the agent and knows that the benefit so flows he must, except in very special circumstances, be taken to have ratifies the agent's act. 27Mr Maya was authorised to negotiate a price for the contract between Dimension Data and Robust. The unauthorised act of Mr Maya was to promise that Dimension Data would pay Virtual a certain sum. What benefit flowed to Dimension Data from the unauthorised act? The answer is that Dimension Data obtained no benefit. Virtual provided no consideration to Dimension Data for the amount Mr Maya agreed Dimension Data would pay Virtual. 28I find that Dimension Data has not ratified the unauthorised act of Mr Maya. The Second Defendant 29Mr Maya is the second defendant. He has not filed a defence. He has given evidence that he signed the letter without authority. The plaintiff says that it relied on the letter of agreement signed by Mr Maya. Although not specifically pleaded, it appears that the plaintiff is relying on the principle of "breach of warranty of authority". 30Mr Lewis spoke to Cisco Systems about installation, and was told that Cisco Systems only supplied equipment, and they would refer an installer. Mr Maya contacted Mr Lewis and they negotiated a contract between Robust and Dimension Data. 31The principle of breach of warranty of authority is a principle of contract. When Mr Maya represented to Mr Lewis that the legal department had cleared the letter, and he signed it, he made a representation to Mr Lewis that he was authorised to sign it. The representation had contractual force. Virtual may bring a claim against Mr Maya for any damages suffered, which is the agreed fee payable to Virtual. 7 32In by article 107 of Bowstead & Reynolds on Agency it states: Where a person, by word or conduct, represents that he has authority to act on behalf of another, and a third part is induced by such representation to act in a manner in which he would not have acted if that representation had not been made, the first-mentioned person is deemed to warrant that the representation is true, and is liable for any loss caused to such third party by breach of that implied warranty. 8 And at page 596 of Bowstead & Reynolds it states: The rule to be deduced is, that where a person by asserting that he has authority of the principle induces another to enter into any transaction which he would not have entered into but for that assertion, and that assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook it to be true, and he is liable personally for the damage that has occurred. 9 33Did Mr Lewis provide consideration by acting in reliance on that promise? In other words did Mr Lewis rely on the promise contained in the letter of agreement to arrange a contract between Robust and Dimension Data? 34The affidavit sworn by Mr Wayne Lewis does not state that he relied on the letter of agreement. Mr Gary Lewis, the director of Robust asked the plaintiff to organise a Cisco system in the boardroom of Robust. Mr Wayne Lewis contacted Cisco, who told him that they did not install the systems. A person from Cisco told him that "someone from Dimension Data will contact you shortly and you may deal with them direct." Shortly thereafter, Mr Maya contacted him. Mr Lewis told him Virtual would be charging Dimension Data 25% of the amount of the invoice for work done. Mr Maya said "send me through your proposed agreement, and I will get our legal department to check it out. If it's OK, it will be authorised". They met. Mr Lewis told Mr Maya he only wanted to deal with one company. At the meeting he decided that Dimension Data should be appointed as the principal contractor, and asked Mr Maya to prepare a quotation. 35The salient points of the evidence are that: (1)Cisco arranged for Dimension Data to install the Cisco equipment. (2)Mr Maya contacted Mr Lewis. (3)Mr Lewis wanted to deal with only one company. (4)Mr Lewis decided to appoint Dimension Data as the principal contractor at a time when Mr Maya had only said he would "get our legal department to check it out". (5)Mr Lewis asked Mr Maya to prepare final quotes. (6)The meeting between Mr Lewis and Mr Maya took place on about 31 May. The deadline for installation was 14 July. 36Mr Lewis has said in evidence that he had quotes from three companies, all of whom had agreed to his demand, and he would not have arranged the contract with Dimension Data unless it agreed to his demand. 37I reject the oral evidence of Mr Lewis, as a recent invention, prompted by cross-examination. It is not mentioned by Mr Lewis in his affidavit and is at odds with the evidence contained in the affidavit. Cisco nominated Dimension Data, and Mr Lewis decided to appoint Dimension Data before he received the letter, and when the demand was a matter to be checked by the legal department. 38I find that Virtual was not induced by the representation to arrange a contract between Robust and Dimension Data. Orders 39The verdict of the court is for the first defendant and the second defendant. 40The plaintiff is to pay the costs of the first and second defendant. A party may apply for a costs hearing within 14 days of the date of judgment. Magistrate G Bradd Downing Centre Local Court 5 November 2013 Footnotes 1 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 466 [36] 2 Ibid 3 Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 154-160 4 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 5 Turquands Case (1856) 6 El & Bl 327; 119 ER 886 6 Australian Blue Metal Limited v Hughes & Ors (1961) 79 WN (NSW) 498 at 515 7 Yonge v Toynbee [1910] 1 KB 215 8 Penn v Bristol & West Building Society & Ors [1997] 1 WLR 1356 9 Ibid ********** 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: 18 June 2014