Aviacion Colombiana Limitada Aviaco Ltda v Commonwealth of Australia [1987] ACTSC 40 (15 June 1987)

SUPREME COURT OF THE ACT

AVIACION COLOMBIANA LIMITADA AVIACO LTDA v. COMMONWEALTH OF AUSTRALIA
S.C. No. 871 of 1986
Practice and Procedure - Principal and Agent

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Practice and Procedure - application for summary judgment - whether writ specially endorsed - whether endorsement identifies cause of action - whether endorsement sufficient to permit plaintiff to obtain judgment in its favour - no objection taken by defendant to deficiencies in endorsement - onus on defendant to show serious issue to be tried - Rules of the Supreme Court of the ACT - Order 4 Rule 5, Order 15.

Principal and Agent - express appointment of agent by defendant - authority of agent to perform certain tasks and contractually bind defendant in circumstances - International Paper Company v. Spicer.

International Paper Company v. Spicer [1906] HCA 75; (1906) 4 CLR 739 at 747.

Louis Joseph Argento and Another v. Cooba Developments Pty. Ltd. (unreported, Federal Court of Australia, 17 February 1987).

HEARING

CANBERRA
15:6:1987

ORDER

The application for summary judgment be dismissed.

The matter of costs be reserved.

DECISION

This is an application for summary judgment under Order 15.

2. At the outset it must be stated that there is considerable doubt as to whether the case is appropriate for an application for summary judgment. An application for summary judgment under Order 15 may be made only where a defendant appears to a writ of summons specially endorsed with or accompanied by a statement of claim under Order 4 Rule 5. It appears to me that it is open to question whether the writ of summons is specially endorsed. The relevant parts of the endorsement which it bears are as follows:

"STATEMENT OF CLAIM

1. The Plaintiff is a corporation incorporated
pursuant to the laws of the Republic of Colombia
and is entitled to sue in the abovementioned
corporate name.
2. On or about the 1st day of February 1983,
the Defendant agreed to sell to the Plaintiff and
the Plaintiff agreed to buy from the Defendant
two Hercules AC130 Aircraft, payment for which
was to be made by the Plaintiff in the currency
of the United States of America.
3. The Plaintiff's claim is for $US985,000.00
being an amount paid by the Plaintiff to the
Defendant for a consideration which has wholly
failed.
AND the plaintiff claims:-
1. $US985,000.00"

3. The prescribed form for a specially endorsed writ of summons is that contained in Form 2 of the First Schedule to the Rules of the Supreme Court. The prescribed form clearly requires a statement of the plaintiff's claim followed by particulars. The endorsement on the writ of summons in the present case does not purport to furnish particulars. Furthermore, Order 15 Rule 1(1) requires the plaintiff to verify the cause of action. Hence it is essential that the endorsement identify the cause of action upon which the plaintiff sues and which needs to be verified under Order 15 Rule 1(1). There is considerable doubt in my mind as to whether the present endorsement does identify the cause of action. Counsel for the plaintiff from the bar table stated that the plaintiff sues for moneys had and received, and this may well be so. Although the cause of action is not identified as moneys had and received in the endorsement, it may be argued that the claim described in the endorsement as a claim "for an amount paid by the Plaintiff to the Defendant for a consideration which has wholly failed" is necessarily a claim based on the common money count best expressed in the terms "money received by the defendant for and to the use of the plaintiff".

4. The endorsement is further deficient as a statement of claim insofar as proof of the facts alleged in it would not entitle the plaintiff to a judgment in its favour. It avers three matters only, the incorporation of the plaintiff, the agreement for sale of two aircraft, and an amount paid by the plaintiff to the defendant for a consideration which has wholly failed. Although it might be inferred that the plaintiff alleges that the sum stated was in fact paid by the plaintiff to the defendant, the endorsement is silent as to how it comes about that the consideration is alleged to have wholly failed.

5. No point was taken by the defendant at the hearing as to the deficiencies in the endorsement. There may have been pragmatic reasons for the defendant declining to do so. Witnesses were in attendance from the Republic of Colombia for the purposes of being cross-examined and an objection to the endorsement may have resulted only in an adjournment and the incurring of further considerable costs. However, the jurisdiction of the court to take the serious step of empowering a plaintiff to enter judgment without a hearing on the merits is not to be lightly undertaken, and the failure of the defendant to rely upon any deficiency in the endorsement on the writ may not necessarily deter the court from declining to order summary judgment. In Louis Joseph Argento and Another v. Cooba Developments Pty. Ltd. (unreported, Federal Court of Australia, 17 February 1987), a decision of a Full Court of the Federal Court of Australia sitting on appeal from this Court, the deficiency in the endorsement had not been relied upon in the Supreme Court but drew the attention of the Federal Court during the hearing of the appeal. Fisher J. took the view that non compliance with the requirements of Order 15 Rule 1(1) as to the formalities of the endorsement was not fatal to the application for summary judgment, Gallop J. took the view that it was, and Neaves J. preferred not to express a definitive opinion. In the circumstances I shall follow the middle course adopted by Neaves J. and decide the application by a consideration of the issues which were argued on behalf of the parties who were, after all, each represented by senior counsel.

6. In order to satisfy the provisions of Order 15 Rule 1(1), the plaintiff relied upon the affidavit of Mr. Frank Battiston Posada, who described himself as general manager and legal representative of the plaintiff. Mr. Battiston attended court and was cross-examined. I shall say something about the cross-examination in a moment. The affidavit of Mr. Battiston deposes to the following facts.

7. On 23 February 1982 by a document signed by the Minister of State the defendant appointed agents to sell some aircraft. These are the terms of the appointment:

"The Commonwealth of Australia has appointed Ford
and Vlahos, Attorneys-at-law of San Francisco
California as sole agents to sell on behalf of
the Commonwealth of Australia 10 C130A Hercules
Aircraft presently in Australia together with
associated spares.
This will involve arranging for the inspection of
the aircraft and spares in Australia and
subsequently
the implementation of escrow procedures
approved by the Commonwealth."

8. This document was shown to Mr. Battiston by a Mr. John J. Ford III in Mr. Ford's office in San Francisco in January 1983. Mr. Ford is a member of the firm Ford and Vlahos. Negotiations were commenced between Mr. Ford and Mr. Battiston for the purchase of two C-130A Hercules aircraft and associated spare parts. Later that month Mr. Battiston and Mr. Ford travelled to Australia with other persons and inspected the aircraft and the spare parts. They were accompanied at the inspection by RAAF personnel who are unidentified and whose authority to act on behalf of the defendant is not the subject of evidence. They were also accompanied by a Mr. Hocking. The affidavit does not establish that Mr. Hocking had any authority to act on behalf of the defendant.

9. On 1 February 1983 a document bearing the heading "Agreement to Purchase Aircraft and Spare Parts and for 'Get Ready', Ferry and Training" was signed in Sydney by Mr. Battiston and a Mr. Louis Carlos Herrera on behalf of the plaintiff on the one hand and by Mr. Ford on the other. Mr. Ford's signature appears beneath the words "Ford & Vlahos, Sole Agent for Sale of Lockheed C-130A Aircraft and Spare Parts for the Commonwealth of Australia". A copy of the document is annexed to these reasons for judgment. It is not necessary to refer to its provisions at this stage. Its heading reflects the nature of the document.

10. Subsequently an account described as an escrow account and entitled "Australian C130A Escrow Account" was established with Barclays Bank of California in San Francisco. The signatures of both Mr. Ford and Mr. Battiston were necessary for any drawing to be made on that account. Between 12 January 1983 and 1 January 1984 the plaintiff paid a total of US$985,000.00 into the escrow account. The whole of the US$985,000.00 was withdrawn at various times and in varying amounts on the signatures and with the approval of Mr. Ford and Mr. Battiston. Mr. Battiston states in his affidavit that the money withdrawn was paid to the defendant. However, that statement is, in my view, to be treated as an allegation only and is certainly not conclusive on the question of fact whether the defendant received the money withdrawn. Apart from that statement of Mr. Battiston the evidence does not permit of a conclusion that any part of the money withdrawn made its way ultimately to the defendant. It was paid in the first instance either in whole or in part to Mr. Ford. It was subsequently expended in whole or in part in connection with the preparation and maintenance of the aircraft, ferrying the aircraft to the United States and obtaining necessary consents from the Government of the United States and the Republic of Colombia. If any part was not expended by Mr. Ford then it must have been retained by him.

11. On or about 29 October 1983 the two aircraft were flown from Australia to Taiwan for the purposes of servicing and thence to California where they arrived on or about 3 November 1983. On or about 18 November 1983 the plaintiff established an irrevocable letter of credit for the purpose of payment for delivery of the two aircraft. On or about 1 December 1983 the Australian Government became aware that the Government of the United States had refused permission for the aircraft to be used by the plaintiff. On 24 February 1984 the Government of the United States made the plaintiff aware of its refusal. The delivery of the aircraft to the plaintiff has not taken place. Efforts by the plaintiff to obtain repayment through Mr. Ford or from Mr. Ford have been unsuccessful.

12. Mr. Battiston's affidavit also deposes to a number of conversations with Mr. Ford in which Mr. Ford held himself out to have full authority to bind the defendant in all matters concerned with the sale or proposed sale of the two aircraft. A number of documents were tendered in evidence from which the inference is capable of being drawn that from at least early April 1983 the defendant was aware of the dealings between Mr. Ford and the plaintiff and that as a result Mr. Ford was at all times armed with the requisite authority to act on behalf of the plaintiff, or if he at any time stepped beyond the bounds of his authority, the subsequent conduct of the defendant was such that Mr. Ford's actions were ratified by the defendant.

13. There being no particulars of the plaintiff's claim pleaded or furnished I conclude that the agreement or contracts upon which the plaintiff relies is or are partly in writing, partly oral and partly to be implied from conduct.

14. I think that the affidavit of Mr. Battiston, notwithstanding some contradictions in his oral evidence whilst under cross-examination, is capable of establishing that the defendant, through its agent Mr. Ford, entered into a contractual relationship with the plaintiff whereby the defendant agreed to sell the two aircraft to the plaintiff, that the plaintiff was at all times ready, willing and able to complete the purchase, that a total sum of US$985,000.00 was paid by the plaintiff at the defendant's request in pursuance of the agreement, that the sale was subject to "end use" approval of the Government of the United States and that delivery in accordance with the sale has not taken place because of the refusal of the Government of the United States to give its approval.

15. There was no suggestion that Mr. Battiston's evidence is not sufficient to verify the cause of action as required by Order 15 Rule 1(1), that cause of action being moneys had and received by the defendant to the use of the plaintiff following a payment by the plaintiff to the defendant for a consideration which has wholly failed. Mr. Battiston also swears in his affidavit that there is in his belief no defence to the action. Accordingly, the plaintiff has met the requirement of Order 15 Rule 1(1).

16. The onus, therefore, falls upon the defendant to satisfy the court that it has a good defence to the action on the merits, or discloses such facts as are deemed sufficient to entitle the defendant to defend the action generally: Order 15 Rule 1(2). The Court does not of course have to decide whether or not the defendant will or would ultimately succeed in resisting the plaintiff's claim on the matters raised as "a good defence to the action on the merits". It is sufficient that the defendant show that there is a serious issue to be tried and that it would be unjust to allow the plaintiff to have judgment at this stage and without that issue being tried in the ordinary way.

17. The defendant has not filed and did not tender a statement of defence. As I have already indicated, the statement of claim endorsed on the writ is deficient as a pleading. I have set out what I understand to be the nature of the plaintiff's claim in the light of the endorsement on the writ, the evidence, and the submissions put on behalf of the plaintiff. An affidavit was filed on behalf of the defendant sworn on 20 May 1987 by Mr. Christopher John Akeroyd, a senior officer of the Commonwealth, who states that he is familiar with the circumstances which give rise to the proceedings. Numerous documents were annexed to Mr. Akeroyd's affidavit and further documents were tendered in evidence on behalf of the defendant. I may summarize that documentary evidence by saying that in June 1981 an authorised officer of the Commonwealth executed a number of documents entitled "Sellers Escrow Instructions" relating to the two aircraft in question and these were dispatched to Mr. Ford prior to the appointment by the Minister on 23 February 1982 of Messrs. Ford and Vlahos as sole agents to sell the aircraft. Those escrow instructions were renewed from time to time throughout the period in question, and were accompanied by bills of sale to be completed and delivered to any end user approved by the United States of America, Department of State, upon payment to the Commonwealth of moneys deposited with Barclays Bank of California. The terms of the bills of sale included conditions that the bills were subject, amongst other things, to necessary governmental approvals, inspections, preparations for flight and the like, being the responsibility of Mr. Ford. The escrow instructions also included under the heading "General Provisions" the following terms amongst others:

"4. Inspection of aircraft to be subject to
receipt by you of the sum of at least
$200,000.00 and notification to
Commonwealth of name of proposed End-User
and end use and details of persons forming
inspection team;
5. Costs, fees or other compensation to any
agents shall be to the account of the
End-User;
. . . . . .
7. Funds to be transferred to the Commonwealth
upon delivery of aircraft Bill of Sale."

18. In his oral evidence under cross-examination, Mr. Battiston stated that at the time of the signing of a cheque for $100,000.00 to be drawn on the escrow account (on about 3 February 1983), he had been informed by Mr. Ford that the money was required by the Australian Government to commence maintenance work upon the aircraft ("making of the aircraft"). Mr. Battiston also made some statements which rather conflicted with this to the effect that Mr. Ford stated that the $100,000 was part of the sum "to pay for the planes". In relation to the signing of a cheque on the escrow account for $500,000 on about 23 May 1983 he said that this was "to give it to the Government". The remainder of $385,000 was, according to Mr. Battiston's evidence under cross-examination, "to pay for the aircraft and its spare parts". He said that Mr. Ford did not ask that the money be released for paying for training or ferrying costs. In contrast, however, there was in evidence a written declaration from Mr. Battiston (exhibits 8 and 9) in which the following two statements were made:

"These funds, product of the transfer from Banco
Ganadero, we deposited in an Escrow Account in
Barclays Bank of San Francisco with the explicit
order that funds could only be withdrawn with my
signature and that of the General Manager of the
company, Mr. Luis Carlo Herrera, and that they
would be used for the purchase of the Hercules.
. . . . . Mr. Ford stated that in order to bring the
planes to the United States, we would have to
transfer the funds from the bank to Australia and
pay for the costs needed to repair the planes,
training of the crews in China and the ferry.
Under these conditions, the planes could be
placed in the United States. Thus, the General
Manager, Luis Carlos Herrera, consulted with
Mr. Bravo and instructed me to transfer funds
from Barclays Bank to Mr. Ford. I was very clear
and told them that withdrawing the funds from the
bank would mean losing the security that the bank
had given us of returning the funds to the
transfer agent, the Banco Ganadero in Panama in
the event the sale did not go through."

19. There was also in evidence a document in the handwriting of Mr. Ford undated and in the following terms:

"Received withdrawal order dated 7 February 1983
executed by Frank Battiston and Luis Carlos
Herrera drawn on Barclays Bank C-130A Hercules
Australian Escrow Account in the amount of
US$100,000.00 for costs, fees, expenses allocable
to C-130A Get Ready Programme."

20. There is a further document dated 20 January 1984 purporting to be a "statement" delivered by Mr. Ford to the plaintiff in which certain sums are shown as having been expended on ferrying and training, although other sums are shown as having been expended on "purchase price" and on account of "spares". In his oral evidence Mr. Battiston stated that he had never been shown the escrow instructions by Mr. Ford and had not seen them at all until "now when I come to Australia". I took him to mean by this that he had not seen them until he came to Australia for the hearing.

21. On all this material it was submitted on behalf of the defendant that there were two major issues to be tried. The first related to the authority of Mr. Ford as agent for the Commonwealth. It was submitted that his authority was limited by the terms of the Minister's document of 23 February 1982 and that nothing said or done on behalf of the Commonwealth at any stage had enlarged that authority.

22. In my view the authority of the selling agent as conferred by the Minister's document of 23 February 1982 is expressed to be restricted insofar as it is subject to arranging for the inspection of the aircraft and spare parts in Australia and also to the implementation of escrow procedures approved by the Commonwealth. Accordingly, it was not within the authority of the agent to enter into a contract for the sale of the aircraft without prior inspection by the intending purchaser. Equally in my view the terms of the document are such that it was not within the agent's authority to enter into a contract on behalf of the Commonwealth for the sale of the aircraft unless that was done by means of "escrow procedures", which procedures were approved by the Commonwealth. I do not think that the document is open to the interpretation that it was within the scope of the authority of the agent to approve those procedures on behalf of the Commonwealth, but it is not necessary for me to decide the question. The point is that it is at least arguable that the agent's authority did not extend to entering into a contract on behalf of the Commonwealth unless the contract contained provision for escrow procedures approved by the Commonwealth. The agreement itself dated 1 February 1983 did not make provision for the implementation of escrow procedures approved by the Commonwealth. The factual material before me is capable of leading to a conclusion that the escrow procedures that were in fact entered into were not approved by the Commonwealth. In those circumstances I reach the conclusion that there is a real issue to be tried as to whether the agreement of 1 February 1983 was the type of agreement to which Mr. Ford was authorised to enter into on behalf of the Commonwealth.

23. In International Paper Company v. Spicer [1906] HCA 75; (1906) 4 CLR 739 at 747, Griffith C.J. said that there were three questions to be tried in the circumstances of that case. I think that the circumstances there were not so very different from those in the present case and that the same three questions fall to be tried. They are whether the alleged principal so conducted itself as to enable the alleged agent to hold himself out to be the agent for the purpose of making such a contract as that sued upon, whether the alleged agent did so hold himself out, and whether the plaintiff in dealing with the alleged agent believed him to be such an agent.

24. On the material before me, the third question would have to be resolved in the plaintiff's favour. In the absence of evidence contradicting that of Mr. Battiston, the second question also would have to be resolved in the plaintiff's favour. However as far as the first question to be answered is concerned, there is a serious issue, and that alone would be sufficient to justify refusing to order summary judgment.

25. A further defence is raised on the part of the defendant. It is submitted that there is a real issue as to whether the payment of moneys from the escrow account amounted to payment to the defendant so that it could be concluded that the money was received by the defendant to the use of the plaintiff. The evidence is conflicting and in my view it would be necessary to receive a good deal more factual material before it could be decided whether the payments from the escrow account or any of them amounted to payments in respect of the purchase price of the aircraft or whether those moneys were paid in anticipation of the eventual completion of the purchase and sale. The terms of the agreement of 1 February 1983 on the face of it provides for a purchase price of $1 million for each aircraft and associated spare parts. Paragraph 1 provides for the deposit of $3,000 on one of the aircraft "to be applied as a deposit on the purchase and delivery of said aircraft and the spare parts associated therewith". Paragraph 2, however, provides that the buyer shall deposit the additional sum of $300,000 "to secure delivery of the second aircraft" and spare parts. In contrast to paragraph 1 the additional sum of $300,000 is not to be applied as a deposit on the purchase and delivery but "to secure delivery". By the terms of paragraph 3 the buyer is required to deposit a further sum of $387,500 for each aircraft "so as to constitute a total purchase price of $3,375,000 for the two aircraft and spare parts". I would consider that without a full hearing of all the dealings between the parties it is impossible to conclude with confidence that the total sum was intended to be treated as a true purchase price and that it was not intended that some part of the total be applied towards the expense of consummation of the purchase and sale. Alternatively, if the total sum and its constituents represented a true purchase price, it is at least arguable that the sums paid out with the consent of the plaintiff lost that characteristic. If they were not paid as part of the purchase price and were utilised as part of the cost and expense of making the contract between the parties effective, then again I do not think it can be concluded without a proper hearing on the facts that they were received by the defendant, or if received by the defendant were received to the use of the plaintiff.

26. In my view the defendant has made out a defence on the merits and discloses facts as are sufficient to entitle it to defend the action generally. Accordingly the application for summary judgment is dismissed. I shall hear the parties on costs.