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High Court of Australia Transcripts |
Last Updated: 3 June 2005
IN THE HIGH COURT OF AUSTRALIA
Office of the
Registry
Sydney No S448 of 2004
B e t w e e n -
ESSINGTON INVESTMENTS PTY LIMITED
First Applicant
ESSINGTON GROUP NORTH SYDNEY PTY LIMITED
Second Applicant
ESSINGTON ASIA PACIFIC PTY LIMITED
Third Applicant
and
REGENCY PROPERTY GROUP
First Respondent
RICHARD JAMES DRUMMOND
Second Respondent
Application for special leave to appeal
GLEESON CJ
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON FRIDAY, 27 MAY 2005, AT 12.03 PM
Copyright in the High Court of Australia
__________________
MR A.J.L. BANNON, SC: If it please the
Court, I appear in that matter with my learned friend, MR J.
STOLJAR, for the applicant. (instructed by McMahons National
Lawyers)
GLEESON CJ: Mr Bannon, there is a certificate from the Deputy Registrar saying that she has been informed by the solicitor for the second respondent that the second respondent does not wish to be heard on this application, and the first respondent does not want to put oral submissions.
MR BANNON: That is so.
GLEESON CJ: Yes, Mr Bannon.
MR BANNON: To the extent that bespeaks pessimism we rely on it; to the extent it bespeaks extreme optimism we say it is irrelevant. The issue in the case derives out of a narrow set of undisputed facts. The question is whether a person who receives a document, which on its face is an agreement which requires signature and exchange by two parties from the counterparty, signs the document in such a way to indicate on the face of the document that the person intends to be bound, delivers the document to a person whom he knows is dealing with that counterparty and expressly authorises the person to inform the counterparty that the document is executed and in the possession of that person, is bound in circumstances where that intermediary releases the document in such a way as found and not contested by the trial judge to represent to the counterparty that the authority of the signing party was without question.
In our submission, the case is sufficiently clear that it has resulted in a substantial injustice. The only real qualification that Justice Hodgson imposed which prevented our success was a qualification related to the fact that we received a facsimile copy. The judgment in BNP Paribas was handed down after argument in Essington in this case. Reference was made to it by the judges, but there was an argument heard on the decision. But in Paribas itself, in paragraph [34], a matter was relied upon in that case. The officer from the bank suggested that he did not think that a third party would be relying on the document and the signature of the bank on that document because he felt it was simply a copy. The court in passing noted that that was not a basis on which one would distinguish the ordinary principle.
The court also noted in that case, by reference to
Crabtree-Vickers, the circumstance – this is paragraph [38] of
BNP – that there may be cases where a person will be equipped by a
party by supplying that person with a document, and the expression
used is
“arming” an officer with a document, by which that person can
“impart the appearance of authenticity”.
It is referred to
as:
a reminder of the wider principle of estoppel which may be relevant to a question of ostensible authority.
In the present case the signing party, Mr Johns, did not by way of example write on the document something which would ensure that it could not be received and regarded and treated as something which has been signed without qualification. He took no step which protected the position. He appreciated the substantial risk he was creating.
His evidence, which is referred to in the application book at page 17, in which he says at the top of the page, “I will sign it on one condition” –this is the conversation he has with Mr Drummond, the intermediary – and he makes it clear that it cannot be released, “It must remain in your briefcase.” That was a recognition by him of the risk he was taking by signing the document in the unqualified way in which he did and providing it to that intermediary in that circumstance. Ultimately, what he was relying upon was the honesty of the intermediary which failed him. It was in full recognition that my client would be entitled to rely on the apparent authenticity of the document.
Ultimately, the reasoning of
his Honour Justice Hodgson, which is at odds of the reasoning of Justice
McColl, which we respectfully
suggest sets out the appropriate application of
principle, involves his Honour critically at 94 of the application book,
paragraph
53, coming to this conclusion:
the risk that an original will be misused so as to mislead third parties is a substantial risk, and is a risk which in many cases would be an unreasonable risk that could give rise to a finding that this misuse amounted to a representation permitted by the signer of the document. However, the risk that a copy would be misused –
does not equate to such risk. The difficulty with that - - -
CALLINAN J: Mr Bannon, sorry to interrupt you, but what do you say about paragraph 127 on page 47 in the reasons of the trial judge? I know that Justice Hodgson does not seem to have relied upon that.
MR BANNON: No.
CALLINAN J: It seems to me to be essential to the trial judge’s decision. It is very fact specific and the facts were open, and they would, I think, defeat your case.
MR BANNON: There is no doubt that his understanding was as set out in 127, but his Honour also found that that understanding was affected by the delivery of the document in the unqualified way. The real question - - -
CALLINAN J: Where do I find that finding?
MR BANNON: It is at - - -
CALLINAN J: He does say in that paragraph your case on ostensible authority cannot succeed.
MR BANNON: Yes.
CALLINAN J: I would have thought that is fairly conclusive against you.
MR BANNON: But the only reason it does – there is a finding, I will see if we can locate it, that his state of mind, reasonably concluded on the basis of receipt of the document, was that it was being provided to him by way of exchange and that he believed - - -
CALLINAN J: There would have to be a change in Mr Edwards’ understanding.
MR BANNON: Yes.
CALLINAN J: And does the trial judge make a finding that there was a change?
MR BANNON: He does.
CALLINAN J: Where do I find that then?
MR BANNON: I am just trying to locate it. Yes, at the top of 50, I think.
CALLINAN J: Thank you.
MR BANNON: It is paragraph 137, top of page 50:
There is no doubt that the plaintiffs thought that they were accepting an offer . . . and that their subjective intention was to conclude a contract by signing the document and returning it, by facsimile transmission, to Mr Drummond.
The point of
difference - - -
CALLINAN J: What about the introductory words to paragraph 137?
MR BANNON: Yes.
Had I concluded Mr Drummond had ostensible authority to initiate . . . by sending the amended . . . it would follow almost inevitably that, in so acting, he was either making on behalf of Regency, or causing Regency to make, an offer.
In other words, the point was – there was no question that his Honour found that Mr Edwards believed that on receipt of the document it was being transmitted with authority, and that his change of understanding had been brought about, but where we failed was the trial judge said that that change of understanding was brought about by an act of the agent and not by an act - - -
CALLINAN J: No holding out of any kind.
MR BANNON: That is right. That is where we say that fails
to take into account all of the circumstances of the case, but in particular the
arming of the intermediary with the signed document, which on its face indicated
an intention to enter into legal relations. The
only further overt act which
was needed to conclude an agreement by exchange by facsimile or delivery was not
– sorry, there
was no other overt act required from Mr Johns. In other
words, the delivery by facsimile or exchange could be effected by the
intermediary.
There was nothing more which needed to be done overtly on the
part of Mr Johns. But that is really why those arming cases –
a principle
picked up in BNP but not directly applied – take into account the
very circumstance that you provide the intermediary with the means of making
the representation and you do not take sufficient steps to protect against
that position.
It is the arming which permitted Mr Drummond to make the representation. If he did not have a signed document, then nothing he could have said would have been persuasive. If he had a document which had on it stamped “Draft” or a document which Mr Johns had written on it “Not to be released”, then Mr Johns would be completely protected. What we say is there has been a grafting by Justice Hodgson onto the normal principles of ostensible authority, based on the Heid v Reliance type of case, assuming that there had to be an original. We say there is just no basis for that distinction because on the facts the intermediary did use the original. That was the only means by which he could send the facsimile, and his Honour found that the sending of the facsimile was a sufficient indication reasonably to convey that this was a contractual step.
Of course all agents acts on instructions, and that is why arming an intermediary with such a document exposes the principle to relying on the honesty of the intermediary in circumstances where there is no conception that the person receiving such a document would go behind the back of the intermediary and qua directly of the principle, not in circumstances where the document has been executed, as found and unchallenged before the Court of Appeal, in such a way as to indicate an intention to enter into legal relations.
So the reason
for granting special leave, we would submit, your Honours, is firstly it
has worked a substantial injustice but, two,
it sets up a false principle which
would have dangerous implications in a wider commercial sphere; namely, if the
intermediary simply
uses the document by the well-known means of exchange by
facsimile is safe, but if perchance he happens to run into the solicitor
on the
other side or the agent on the other side and delivers it, then a different
outcome. That is not a circumstance which the
Court should contemplate, in our
submission. For those reasons we seek a grant of special leave.
GLEESON CJ: Thank you, Mr Bannon.
The decision of the Court of Appeal in this case was fact specific. The case turned on the application of established principles to the particular facts and circumstances and, in our view, does not raise an issue suitable to a grant of special leave to appeal and the application is dismissed with costs.
AT
12.16 PM THE MATTER WAS CONCLUDED
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