Capital Finance Australia Ltd v Nielsen [2013] QDC 183

1 DISTRICT COURT OF QUEENSLAND CITATION: Capital Finance Australia Ltd v Nielsen [2013] QDC 183 PARTIES: Capital Finance Australia Limited ACN 069 663 136 (Plaintiff) v Matthew Peter Nielsen (Defendant) FILE NO/S: 3419/12 DIVISION: Civil PROCEEDING: Trial ORIGINATING COURT: District Court in Brisbane DELIVERED ON: 16 August 2013 DELIVERED AT: Brisbane HEARING DATE: 24 June 2013 JUDGE: Kingham DCJ ORDER: 1. Judgment will be entered for Capital Finance. I will hear from the parties as to the final form of the orders and as to costs. CATCHWORDS: CIVIL – MORTGAGES – GUARANTEES – LIABILITY AS GUARANTOR – S 69(2) POWERS OF ATTORNEY ACT 1998 (QLD) – AGENCY - where the defendant‟s attorney signed a guarantee naming the defendant as guarantor – where the defendant submitted he was not bound by the guarantee due to the attorney‟s failure to comply with s 69(2) Powers of Attorney Act 1998 (Qld) – whether failure to comply with s 69(2) renders the execution of the guarantee invalid – whether the attorney‟s signature binds the defendant at common law. Powers of Attorney Act 1998 (Qld) ss 69(2) & 69(3). Property Law Act 1974 (Qld) s 56(1). Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR 517, followed. Balog v Independent Comm Against Corruption (1990) 169 -- 1 of 7 -- 2 CLR 625, applied. Caltabiano v Electoral Commission of Queensland & Anor (No 4) [2009] QSC 294, cited. Clauss v Pir [1988] Ch 267, cited. Commonwealth Bank v Muirhead [1997] 1 Qd R 567, applied. J Wright Enterprises Pty Ltd (In Liquidation) v Port Ballidu Pty Ltd [2010] QSC 213, cited. Lawrie v Lees (1880) 14 Ch D 249, distinguished. Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, applied. Re International Contract Co., Pickering‟s Claim (1871) L.R. 6 Ch App 525, applied. Teheran-Europe Co. Ltd v S.T. Belton (Tractors) Ltd [1968] 2 QB 53, applied. Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, followed. COUNSEL: Mr G.D. Beacham for the Plaintiff. Mr G.R. Dickson for the Defendant. SOLICITORS: Thynne & Macartney Solicitors for the Plaintiff. OMB Solicitors for the Defendant Background [1] Matthew Nielsen is the remaining defendant to a claim by Capital Finance Australia Limited pursuant to a loan secured by a chattel mortgage granted by Victoria Point Café. Victoria Point Café is in default under the mortgage. Capital Finance seeks judgment against Mr Nielsen for the amount outstanding, alleging he is liable as a guarantor. Mr Neilsen does not dispute Victoria Point Café is in default, but denies he is liable as a guarantor. [2] The chattel mortgage granted by Victoria Point Café provided for a number of persons to give guarantees. One of them was Mr Nielsen. He did not personally sign as guarantor. Capital Finance relies upon the signature of Shane Heal, who signed his own name adjacent to the execution clause for Mr Nielsen. At the time he did so, Shane Heal was Mr Nielsen‟s duly appointed attorney by a power of attorney pursuant to the Guardianship and Administration Act 1990 (WA). That appointment authorised Mr Heal to do anything on Mr Nielsen‟s behalf that Mr Nielsen could lawfully do by an attorney. Mr Heal‟s authority was not burdened by any condition or restriction. -- 2 of 7 -- 3 [3] Mr Nielsen gave evidence that he had no knowledge of the transaction. That is not disputed. Mr Nielsen also said he did not authorise Mr Heal, specifically, to sign this particular document on his behalf.1 Although he concedes Mr Heal held an unqualified power of attorney, he argues Mr Heal‟s signature is not effective to bind him, because it does not comply with the requirements of the Powers of Attorney Act 1998 (Qld) s69(2), which provides that the attorney must execute in a way that shows the execution is as attorney for the principal. [4] Applying general principles of the law of agency, Capital Finance argues Mr Heal‟s signature binds Mr Nielsen. It submits his failure to comply with the requirements of s69(2) did not render Mr Heal‟s signature invalid. Mr Nielsen disputes the common law of agency applies in this case. [5] The issues are: a. Does non-compliance with s69(2) render Mr Heal‟s signature ineffective to bind Mr Nielsen? b. If not, is Mr Heal‟s signature otherwise effective to bind Mr Nielsen? a.) Does non-compliance with s69(2) render Mr Heal's signature ineffective to bind Mr Nielsen? [6] Section 69 relevantly provides: “69 Execution of instrument etc. 1.) If necessary or convenient for the exercise of power given to an attorney, the attorney may- a.) Execute an instrument with the attorney‟s own signature and, despite the fact that the power of attorney was given under hand, if sealing is required or used, with the attorney„s own seal; and b.) Do any other thing in the attorney‟s own name. 2.) An instrument executed by an attorney must be executed in a way showing that the attorney executes it as attorney for the principal. 3.) An instrument executed, or thing done, in the way specified in this section is as effective as if executed or done by the principal – a.) With the principal‟s signature; or b.) With the principal‟s signature and seal; or c.) In the principal‟s name.” [7] Although I was taken to two cases in which s69(2) was referred to,2 the relevant passages were obiter and did not involve considered analysis of the validity of an act done in breach of that provision. 1 Transcript of Proceedings, Brisbane District Court, 24/06/13, 1-16 [11]-[34]. 2 Caltabiano v Electoral Commission of Queensland & Anor (No 4) [2009] QSC 294 [415] (Atkinson J); J Wright Enterprises Pty Ltd (In Liquidation) v Port Ballidu Pty Ltd [2010] QSC 213 [77]-[82] (White J). -- 3 of 7 -- 4 [8] In Project Blue Sky Inc v Australian Broadcasting Authority3 the High Court explained the approach to be adopted by the courts in determining the validity of an act done in breach of a legislative condition: “[91] An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition… [93] …A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid…In determining the question of purpose, regard must be had to „the language of the relevant provision and the scope and object of the whole statute.” [9] Applying the reasoning in Project Blue Sky the question is whether it was a purpose of the legislation that an act done in breach of s69(2) should be invalid. [10] Although s69(2) provides an instrument executed by an attorney must be executed in the way specified, it does not, expressly, state that failure to comply will render the execution invalid for all purposes. [11] Capital Finance accepts that it cannot rely on s69(3) to establish that Mr Heal‟s signature is effective to bind Mr Nielsen, because the precondition of execution in the way specified in s69(2) has not been fulfilled. However, that is a different matter to interpreting s69(2) so as to render ineffective a signature that would otherwise be effective to bind the attorney‟s principal under common law principles of agency. [12] It is Capital Finance‟s case that it does not need to rely on s69(3), because, applying the common law principles of agency, the Mr Heal‟s signature is effective to bind Mr Nielsen. [13] Legislation is presumed not to alter common law doctrines unless it can be clearly shown that the legislature intended to so do. Where two alternative constructions of legislation are open, that which is consonant with the common law is to be preferred.4 [14] The language used in s69 suggests that, to the extent it alters the common law, its purpose is remedial rather than prescriptive; conferring statutory protection in defined circumstances. 3 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. 4 Balog v Independent Comm Against Corruption (1990) 169 CLR 625, 635. -- 4 of 7 -- 5 [15] At common law, a principal is not bound on a deed by their attorney‟s signature unless the attorney signs the principal‟s name and uses the principal‟s seal.5 Further, an agent must be authorised by deed in order to be able to execute a deed on behalf of their principal.6 [16] Section 69(1)(a) authorises the attorney to sign their own name and to execute under their own seal, even though the power of attorney itself is given under hand. Section 69(3) gives full effect to the complying execution. The function of s69(2), then, is to set the precondition to statutory validity of the execution, not to invalidate a signature by an attorney that does not comply with that pre- condition. [17] A remedial interpretation of s69 is consistent with the reference in the explanatory memorandum for the Powers of Attorney Bill in relation to clause 68 (which became s69). It states: “Clause 68 enables an attorney to execute documents under seal.” [18] Accordingly, I consider the better interpretation is that non-compliance with s69(2) has the effect that s69(3) does not apply. I am not persuaded that non- compliance with s69(2) renders Mr Heal‟s signature otherwise invalid. b.) Is Mr Heal’s signature otherwise effective to bind Mr Nielsen? [19] A guarantee must be in writing.7 If Mr Heal‟s signature is effective to bind Mr Nielsen, then this requirement will have been satisfied. [20] Capital Finance argues that signature is effective, applying the common law principles of agency. There is no argument that Mr Nielsen authorised Mr Heal to act on his behalf and, given that, Mr Heal is properly regarded as his agent. [21] Mr Nielsen relied on a passage from the text by Professor Dal Pont Powers of Attorney8 in which he stated: “[9.8] The basic principles of agency law mentioned above largely translate to powers of attorney. The one exception appears to be that, at general law, an attorney is required to express himself or herself to be acting in the name of the principal and to sign, where signing is required, not the attorney‟s name but the principal‟s name.” [22] Respectfully, I do not accept that is an accurate statement of the general law of agency as it pertains to documents that need not be executed under seal. I note 5 Re International Contract Co., Pickering‟s Claim (1871) L.R. 6 Ch App 525; Bowstead & Reynolds on Agency, 19th ed (Sweet & Maxwell, London, 1996) at 8-085. 6 Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 at [206] per Young CJ; Bowstead & Reynolds on Agency, 19th ed (Sweet & Maxwell, London, 1996) at 2-040. 7 Property Law Act 1974 (Qld) s56(1). 8 Powers of Attorney, Prof. GE Dal Pont, (LexisNexis Butterworths, Chatswood, 2011) at [9.8]. -- 5 of 7 -- 6 that the two cases which Professor Dal Pont cites as authority for his proposition are Lawrie v Lees (1880) 14 Ch D 249 and Clauss v Pir [1988] Ch 267. Both deal with donees of a power of attorney. Lawrie v Lees related to the execution of deeds, the relevant passage is obiter and it cannot be taken to be stating a general proposition for the execution of a contract not under seal.9 [23] In Clauss v Pir, Judge Ferris QC said: “… as I understand the law, the correct mode in which a donee of a power of attorney should act is to express himself to be acting in the name of his principal and to sign, where signing is required, not the donee‟s name but the principal‟s name.10 [24] He did not decide that failure to identify as an attorney invalidates the signature. [25] An agent may bind its principal by executing a document in the principal‟s name or in the agent‟s name. An agent can contract on behalf of his principal in one of three ways: “(a) By creating privity of contract between the third party and his principal without himself becoming a party to the contract. The principal need not be named but the contract must show clearly that the agent was acting as such. Familiar examples are contracts made by X as agents and signed by X, the signature being claused „as agents only‟. The consequence of such an arrangement is that the third party can only sue, and be sued by, the principal. (b) By creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract. The consequence of this arrangement is that the third party has an option whether to sue the agent or the principal, although this is of little practical value if he does not know of the principal‟s existence… (c)By creating privity of contract between himself and the third party, but no such privity between the third party and his principal. In other words, in relation to the third party he is a principal, but in relation to his principal he is an agent. The consequence of this arrangement is that the only person who can sue the third party or be sued by him is the agent.” 11 [26] In Commonwealth Bank of Australia v Muirhead, McPherson JA, with whom Macrossan CJ and Davies JA agreed, said: “Unless and until constrained by higher authority, it is conceived that the rule to be followed in this country is that, in the absence of express provision or other indication to the contrary, legislation requiring “signature” of a document is not to be taken to preclude signature by agent, whether that signature is written in the name of the principal or of the agent.”12 9 Lawrie v Lees (1880) 14 Ch D 249 at 250. 10 Clauss v Pir [1988] Ch 267 at 272. 11 Teheran-Europe Co. Ltd v S.T. Belton (Tractors) Ltd [1968] 2 QB 53, 59-60 (Donaldson J); approved in Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR 517. 12 Commonwealth Bank v Muirhead [1997] 1 Qd R 567 at 572 per McPherson JA. -- 6 of 7 -- 7 [27] The question of whether or not an agent intended to bind a principal by signing in his or her own name is a question of fact, inferred from the intention of the parties as it may be deduced from the circumstances, including the nature and terms of the document and the surrounding circumstances.13 [28] Mr Heal signed the chattel mortgage in a number of different capacities. Firstly, he signed on behalf of the Mortgagor, Victoria Point Café, as a director. Secondly, he signed three times in a section entitled “SIGNATURE(S) – GUARANTOR”: against his own name as guarantor; against the name of another company, Shyfox Pty Ltd as a director; and against Mr Nielsen‟s name. Whilst his signature for Mr Nielsen was in his own name it appeared next to an execution clause which identified the guarantor as Mr Nielsen, not Mr Heal. [29] Looking at the document as a whole, and the various capacities in which he signed it, I am satisfied that when Mr Heal signed against Mr Nielsen‟s name, he did so as his agent, and would reasonably be understood to be doing so. The necessary inference from his signing his name next to Mr Nielsen‟s execution clause, in the context of his other signatures on the document in other capacities, was that he intended to create privity of contract between Mr Nielsen and Capital Finance. At the time, he held an unqualified authority from Mr Nielsen to act on his behalf. Whether or not the signature qualifies as a proper execution under s69(2) of the Powers of Attorney Act, at common law it is effective to bind Mr Nielsen as guarantor. [30] Judgement will be entered for Capital Finance. I will hear from the parties as to the final form of the orders and as to costs. 13 Bowstead & Reynolds on Agency, 19th ed (Sweet & Maxwell, London, 1996) at 9-005 & 9-036. -- 7 of 7 --