Agency

Question 1

What does ‘agency’ mean?

Answer 1

The concept of agency can involve a wide range of relationships between the person granting the authority (the principal) and the person acting pursuant to it (the agent). At its broadest it is said the relationship of agency will cover any situation where a person (the agent) consents to act on behalf of another (the principal) pursuant to a grant of authority by the principal. 1 At its strictest, ‘agency’ is used to describe those relationships where one person has the authority to create legal relations between the principal and a third party: International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644 at 652; Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 at [54]; Community Association DP270447 v ATB Morton Pty Ltd (2019) 19 BPR 39277; [2019] NSWCA 83 at [79]; Dewar v Ollier [2018] WASC 212 at [220]. 2 A third description, of high authority, falls somewhere in between: … an agent is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his
Traves, Samantha. Commercial Law, LexisNexis Butterworths, 2020. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/deakin/detail.action?docID=6253959.
Created from deakin on 2023-08-06 06:18:53.

Question 2

What is THE first question to ask?

Answer 2

When assessing whether A was the agent of P, ask “Was A the agent of P FOR THE PURPOSE OF THE PARTICULAR, IDENTIFIED ACT?”

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52, the High Court considered whether an ‘agent’ for a corporation had authority to contract on terms that included an exclusion of liability of the other contracting party.

Young CJ in Eq in the intermediate court neatly defined the issue at [77]: There is always a danger in merely asking the question, ‘Was X the agent for Y?’ As the High Court made clear in Petersen v Moloney (1951) 84 CLR 91 at 94, the vital question is ‘Was X the agent of Y to make the contract?’

Question 3

What was the issue in Beazley v Seed & Grain Sales Moree Pty Ltd?

Answer 3

The issue was whether a contract for the sale of land was enforceable. Court held that although there was prima facie strongly arguable case that a contract had come into existence, the contract was ORAL and would only be enforceable if there was a note or memorandum in writing signed by one of the vendors and purchasers setting out the agreed terms. THE AGENT had written letters to the vendors and purchasers setting out the terms. It was argued that these = ‘note or memorandum in writing signed by the agent of the vendors’.

Question 4

Was the argument in Beazley v Seed & Grain Sales accepted by the court? Why/Why not?

Answer 4

The argument was REJECTED on several grounds. 1. When the agent signed the document, HE WAS NOT yet an agent of the vendor. The note sent was not in his capacity as AGENT but on his on behalf as the other party to the contract of agency. 2. The agent didn’t have authority to send to the vendors a report that the contract had concluded. Young J : “The only way one can explain it is that it is part of the normal process of estate agents to inform their client and their client’s solicitor that a deal has been done. However, saying this does not show that there has been some implied or ostensible authority conferred on the agent, it merely shows, in my view, that the agent has done something in performance of his contract of agency.”

Question 5

Issue of authority of employee to make pre-contractual representations - what did McHugh J find in State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170?

Answer 5

Held “ no incongruity exists between finding that a person has authority to make the representations concerning the manner in which a general contractual provision will be enforced and in finding that he has NO AUTHORITY to make, vary or terminate the contract. One deals with THE WAY RIGHTS WILL OR HAVE BEEN ENFORCED. The other with the CREATION, VARIATION OR EXTINCTION OF LEGAL RIGHTS.

Question 6

What factors do the courts taken into account when determining the existence of an agency?

Answer 6

In addition to any written or oral agreement, the court will have regard to ALL the circumstances, including the commercial context of the relationship : Investec Bank (Aust) Ltd v Colley (2012) 91 ACSR 597; [2012] NSWSC 813.

The true extent of the agent’s authority may extend beyond the express grant, while an agent has such authority as to be inferred from the conduct of the parties and the circumstances of the case: Cousens v Grayridge [2000] VSCA 96, citing Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502– 3 and Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 560.

A written agreement will be indicative of the intention of the parties, but it is of itself not conclusive. The question of the scope of an agent’s authority, which may be beyond or indeed narrower than the written or oral authority, will ultimately depend upon all of the surrounding circumstances, although a provision limiting the scope of an agency must be given its proper weight: South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at [134].

Question 7

Who is required to have ‘capacity’ - P, or A? Can an INFANT or minor be an agent?

Answer 7

The principal must have legal capacity to perform the act which they are performing through an agent ( Christie v Permewan, Wright & Co Ltd (1904) 1 CLR 693 at 700), and whatever a person has capacity to do themselves they may do by an agent: Bevan v Webb [1901] 2 Ch 59 at 77. An infant can appoint an agent to do an act on their behalf which the infant could lawfully do themselves: G(A) v G(T) [1970] 2 QB 643 at 652. A corporation has the capacity and powers of an individual.

By contrast, an agent does not need contractual capacity to act as the agent for another: Watkins v Vince (1818) 2 Stark 368. Thus, an infant can as agent bind a principal, 5 although the infant must have sufficient capacity to understand the nature of the agency and give their consent to act.

Question 8

Are there statutory limitations/requirements for some agents?

Answer 8

YES. There are specific situations where agents are required to have certain qualifications or licences. An obvious example of this is the restrictions which apply in acting as a solicitor or a real estate agent. If this occurs, the conduct will be unlawful and the solicitor/agent may incur a statutory penalty but the agent’s act will not be invalid: Legal Profession Act 2007 (Qld); Property Agents and Motor Dealers Act 2000 (Qld).

Question 9

P will only be bound by the acts of A where the acts are within the agent’s authority. What are the TWO exceptions to this?

Answer 9

1. where P has HELD OUT A as having authority (OSTENSIBLE) and 2. Where P later ratifies the acts.

Question 10

If A performs act but lacks authority - what can P do?

Answer 10

A may be liable to P for breach of duty to the P and the 3rd Party for BREACH OF WARRANTY of Authority.

Question 11

What is a BREACH OF WARRANTY of AUTHORITY?

Answer 11

An action which may be brought by a 3rd party against a person who purports to act as an AGENT, where that person does not have the authority, which BY THEIR ACTIONS, they warrant they possess.

Question 12

What are the ways in which an authority may be granted, and an Agency created?

Answer 12

1. P may expressly grant to A authority to do a particular Act
2. The relationship between P & A may be such that P IMPLIEDLY AUTHORISES A to do a particular act. ACTUAL authority is IMPLIED as distinct from express.
3. By operation of law
4. By operation of statute or
5. By ratification.

Question 13

What does AGENCY require to exist?

Answer 13

Agency requires the CONSENT, either express or implied, of P and of A. Poulet Frais Pty Ltd v Silver Fox Co Pty Ltd (ATF Baler Family Trust) [2005] FCAFC 131 at [124].

Question 14

What is ACTUAL authority?

Answer 14

Actual EXPRESS authority may be conferred in writing or by words. It may take the form of written or oral contract, or POA , or a scribble on a piece of paper.

Director - may be authorised to act in certain circumstances on behalf of the company by its articles. **It cannot be inferred from mere fact of directorship that that director has ACTUAL authority of the company : Dawnlite Pty Ltd v Riverwalk Realty Pty Ltd [2013] QSC 243 at [50].

Question 15

How will courts determine SCOPE of A if agency arisen by way of contract?

Answer 15

Scope of A’s authority will be determined by construing the terms of the contract.

Question 16

How do courts construe agency if created by POA?

Answer 16

Deed will STRICTLY be construed : Tobin v Broadbent (1947) 75 CLR 378.

Question 17

How have courts interpreted a ‘benefit clause’ in a POA?

Answer 17

A benefits clause that authorises an attorney to ‘execute an assurance of other document, or to do any other act, whereby a benefit is conferred on her’ has been held to mean what it says and ‘PERMIT AN ATTORNEY TO ACT OTHERWISE THAN IN THE INTERESTS OF P and EG make gifts of the P’s estate to the attorney herself: Misek v McBride [2017] NSWSC 406 [146] - [148].

Question 18

What if a POA does not contain a benefits clause?

Answer 18

A will be subject to any relevant statutory restrictions which provide that a prescribed POA does NOT AUTHORISE an attorney to do an act which benefits the attorney: Smith v Smith [2017] NSWSC 408 [14]-[15].

Where the statutory provision describes the authority which the POA in a prescribed form confers, in which case the extent of the authority will depend upon the proper construction of the statute: Spina v Permanent Custodians Ltd (2008) 13 BPR 25, 463; [2008] NSWSC 561 [108].

Question 19

What was the relevant statutory provision in Spina v Permanent Custodians Ltd (2008) 13 BPR 25, 463; [2008] NSWSC 561 construed to mean?

Answer 19

The relevant provision was held to vest the power in the agent to do anything which the principal could do, the policy behind the provision being to avoid argument about, or the necessity for inquiry into, the agent’s authority. See also Taheri at [127].

Question 20

Do ACTUAL authority and OSTENSIBLE authority overlap?

Answer 20

Actual may overlap with Ostensible in the sense that a P may be as bound as against a 3rd Party T by the conduct of his/her A within the A’s ostensible authority, EVEN IF IT EXCEEDS A’s Actual authority : Curtis v Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17 at 28; Day v Day [2013] EWCA Civ 280; [2014] Ch 114 at [26].

The general law principles of ostensible agency have been held to be preserved by legislation governing POA: Dimitrovski v AET Ltd [2014] NSWCA 68 at [17].

Question 21

When addressing an issue of authority, what is it prudent to first ask?

Answer 21

First ask whether there is ACTUAL express authority.

Question 22

What is ACTUAL IMPLIED AUTHORITY (AIA)?

Answer 22

AIA is founded in the consent of P to A acting for them, and consent of A to do so, but consent is INFERRED from the relationship between, OR the conduct of, the parties as opposed to express words.

Question 23

How can AIA arise?

Answer 23

AIA may arise in number of ways:
1. Act by A is NECESSARILY OR NORMALLY INCIDENTAL to the act EXPRESSLY authorised (incidental authority).

2. Because the act is one which A of the type concerned would USUALLY have the authority to do. “usual authority”.
3. Because the act is in accordance with reasonable business practice applicable to the particular transaction (customary authority). Thus, an agent has implied authority to act in accordance with the usages and customs of the particular market or business in which the agent is employed. Sometimes the rules of a market (for example, the rules of the stock exchange) are expressly incorporated into the contract made by the agent with the third party.

Before a trade, custom or usage may form the basis for the implication of terms into a contract, it must be shown that the usage or customer is notorious, certain and reasonable.

4. Because of the conduct of the parties and the circumstances of the case. This will be of particular importance where the parties have a history of dealings between them.

Question 24

What is case authority(ies) for Incidental Authority?

Answer 24

In Mullens v Miller (1882) 22 Ch D 194, Bacon VC observed that where an agent was authorised to lease a property, there would be implied authority to describe the property to prospective lessees. This can be contrasted with Fairmede Pty Ltd v Von Pein [2004] ANZ ConvR 382; [2004] QSC 220 where it was held that an agent authorised to sell property did not have implied authority to make representations as to how vendors would respond to requests for extensions of time under the contract.

Question 25

What is case authority(ies) for Usual Authority?

Answer 25

MD usual authority would include employing others to provide services to the company, guaranteeing loans made to the subsidiary of the company and agreeing to indemnify other guarantors ( Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549), borrowing money and giving security over the company’s property and authorising agents to enter into contracts on behalf of the company: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72.

contrast to: An ordinary director, on the other hand, does not have implied authority to bind the company: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; Re Haycraft Gold Reduction and Mining Co [1900] 2 Ch 230.

A real estate agent has implied authority to find a purchaser, but not to bind the vendor to terms with the purchaser: Brien v Dwyer (1978) 141 CLR 378 at 387 per Barwick CJ, 395 per Gibbs J; Petersen v Moloney (1951) 84 CLR 91 at 94– 5; Markson v Cutler [2007] NSWSC 1515; Hillam v JPSF Pty Ltd [2017] NSWSC 1510 at [47].

A solicitor has no implied authority to make a contract on behalf of a client: Nowrani Pty Ltd v Brown [1989] 2 Qd R 582; IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205; Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313.

Moreover, a solicitor has no authority (absent an express grant, or a grant through a course of conduct between the parties) to receive on behalf of a client a revocation of an offer, and the revocation will be ineffective if so given: Singer v Trustee of the Property of Munro [1981] 3 All ER 215 at 218; compare Magripilis v Baird [1926] St R Qd 89 at 91 and 96; Kent v Hogarth [1995] QCA 472; Wright v Somerton [2004] QSC 231; Tan v Russell [2016] VSC 93.

On the other hand, a solicitor instructed to take ‘whatever steps were necessary to complete the purchase’ was held to have actual implied authority to exercise the option and conclude the contract on behalf of the client: Nguyen v Taylor (1992) 27 NSWLR 48.

However a solicitor who had authority only to receive a notice, thereby playing merely a passive role, was held not to have authority to make a contract: Papantoniou v Stonewall Hotel Pty Ltd (2018) 19 BPR 38,547; [2018] NSWCA 85 at [65].

Question 26

What is the principle re ‘usual authority’? Is it case law or statutory?

Answer 26

Whether A has ‘usual authority’ will depend upon the nature of the relationship between P and A. Attention must first be given to characterising the nature of the relationship.

Whether or not that relationship includes ‘usual authority’ will often depend on case law.

Question 27

What is case authority(ies) for Business practice/ Customary Authority?

Answer 27

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226.

That is, it is necessary to identify evidence of usage within the particular market or area of business which shows a person who holds such a position customarily holds such an authority.

Question 28

What are the case authorities for AIA & Conduct of parties/circumstaces of the case?

Answer 28

For example, if a board of directors of a company allows one of its directors to enter into contracts of a particular type over a period without seeking the sanction of the board, that may result in a finding of actual implied authority to enter into a similar contract in the future: Hely-Hutchinson .

In Hely-Hutchinson , the Court of Appeal held that, on the facts, actual authority was to be implied from the conduct of the parties and the circumstances of the case. Authority was implied from the circumstances that the board of directors by its conduct had acquiesced in Richards (the company’s putative agent) acting as its chief executive and committing the company to contracts without the necessity of sanction by the board.

Question 29

Did the court in Bank of NZ v Fiberi PL (1992) 8 ACSR 790 FOLLOW or DISTINGUISH from Hely-Hutchinson?

Answer 29

The case was followed in Bank of New Zealand v Fiberi Pty Ltd (1992) 8 ACSR 790 at 809, 8 where it was held:

The inference that actual authority has been conferred by the conduct of a board of directors turns upon what the directors have acquiesced in, what they have been permitting to happen without demur, what the position is as they have allowed it to be. The inference cannot be drawn from conduct of which they were wholly unaware and had no reason to suspect or anticipate.

Question 30

In view of the fact that implied authority can depend upon the conduct of the principal in acquiescing to a particular course of conduct by the agent over some time, evidence of such previous conduct and/or transactions may be relevant to determining the scope of the implied authority.

What were the facts in Cousens v Grayride [2000] VSCA 96? How did the court find?

Answer 30

In that case, the Victorian Court of Appeal held that evidence relating to previous mortgage transactions, in which the fraudulent broker had been involved on behalf of the principal, was relevant in establishing that the broker had implied authority from the principal to receive the net proceeds of the final loan for the purpose of applying them to the investments agreed upon between the principal and the broker. The fact that the broker did not in fact use the moneys for that purpose was irrelevant.

Question 31

How was EFM PTY LTD V New Zealand Steel (Australia) PL [1998] VSC 194 similar to Cousens v Grayride?

Answer 31

The court took into account previous negotiations and dealings the 3rd party had had with the agent, and HELD that the agent had IMPLIED AUTHORITY to enter into the particular supply contract in question. Despite probably taking advice from his superior on aspects of the proposed agreements, A generally entered into such contracts w/out any approval process first followed (considered unsurprising due A’s great depth of knowledge and experience in the area).

Question 32

Can authority implied from actual authority be inconsistent with the concept of agency as a whole?

Answer 32

No. Any authority implied from an actual authority must not be inconsistent with the substantial character of agency - i.e. an implied authority arising from an actual authority to sell must not be inconsistent with the substance of the transaction that the person concerned has been engaged to facilitate, negotiate or effect: Marriott v General Electric Co Ltd (1935) 53 CLR 409; Smith v Peter and Diana Hubbard Pty Ltd [2006] NSWCA 109 at [71].

Question 33

What were the facts in these cases and how did the outcomes differ - Marriott v General Electric Co Ltd (1935) 53 CLR 409; Smith v Peter and Diana Hubbard Pty Ltd [2006] NSWCA 109 at [71].

Answer 33

Smith - HELD that the substantial character of the agency - to transact the sale through a particular entity - was at variance with a direction to make a payment to an entity the name of which bore no relationship to that of the vendor or the nominated entity and who in fact had no relationship.

Marriot A was HELD not to have implied authority to add a term to a contract which gave equal representation on the board to the contracting parties when the substance of the agreement was P was to acquire 51% of the issued shares. The actual authority had been to ‘sign and complete’ on P’s behalf such documents as may be necessary to complete the agreement.

Question 34

What did the court say in when considering the EXTENT of A’s authority :Marriott v General Electric Co Ltd (1935) 53 CLR 409

Answer 34

In considering the extent of the agent’s authority, the court said at 418:

The agency was special and not general. To bind the respondent company the transaction must fall within the ambit of the authority even though that ambit is ascertained by reference to the construction placed upon the authority by the appellant. The authority thus construed might enable the inclusion in the document of additional terms which extended or amplified the operation of the agreement they were intended to effectuate; but it could not allow the introduction of provisions at variance with the substantial character of that agreement.

Question 35

What was the principle established re AIA in Fray v Voules (1859) 1 El & El 839?

Answer 35

Actual implied authority in an agent to enter a particular transaction cannot exist where there are express directions from the principal to the agent to the contrary.

Question 36

How was this principle varied in Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1274] - where P has nevertheless adopted or ratified the prohibited transaction?

Answer 36

However, this does not preclude implied authority being established due to a course of dealing where initially the principal expressly forbade the agent from performing the particular task. If, for example, the principal in such circumstances nonetheless adopts the transaction and gives effect to it then, in the absence of contrary evidence, it may be inferred that the agent was impliedly authorised to perform similar type tasks in the future:

Question 37

How did the court address the issue where P had given instructions to A which prevent the implication being made - is P bound ?

Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374.

Answer 37

If the principal has given instructions to the agent which prevent the implication being made, then the principal will not be bound by the acts of the agent under this head of authority, although there may still be a case of ostensible authority: Waugh v HB Clifford & Sons Ltd [1982] 1 Ch 374. For example, a solicitor or barrister may in a particular case have ostensible authority vis-à-vis the opposing litigant to compromise an action where he or she has no implied authority vis-à-vis his or her own client: Waugh at 387. The distinction between the two types of authority needs to be properly understood.