Re Combulk Pty Limited v Tnt Management Pty Limited [1993] FCA 89; (1993) 113 ALR 214 (1993) 41 FCR 59 (12 March 1993)

FEDERAL COURT OF AUSTRALIA

Re: COMBULK PTY. LIMITED
And: TNT MANAGEMENT PTY. LIMITED
No. G569 of 1992
FED No. 126
Number of pages - 20
Principal and Agent - Trade Practices
[1993] FCA 89; (1993) 113 ALR 214
(1993) 41 FCR 59

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Neaves(1), Beaumont(1) and Burchett(1) JJ.

CATCHWORDS

Principal and Agent - agent acting in own interest does not bind the principal where third party had notice.

Trade Practices - representation - misleading and deceptive conduct - whether conduct of agent was conduct of principal.

Trade Practices Act 1974, ss.52(1), 84(2).

Companies (Vic.) Code s.68A(3)(c) and (d)

Lysaght Bros. and Co. Ltd. v. Falk (1905) 2 CLR 424.

Trade Practices Commission v. Queensland Aggregates Pty. Ltd. (No. 3) (1982) 61 FLR 52.

HEARING

SYDNEY, 22 February 1993
12:3:1993

Counsel and Solicitors for Appellant: Mr A.S. Martin instructed by

Townsend and Partners

Counsel and Solicitors for Respondent: Mr W.H. Nicholas QC with
Mr M.A. Pembroke instructed
by Ebsworth and Ebsworth

ORDER

THE COURT ORDERS:

Appeal dismissed, with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

INTRODUCTION
NEAVES, BEAUMONT AND BURCHETT JJ. This is an appeal from orders made by Einfeld J. dismissing a claim for damages made in proceedings alleging contraventions of ss.52(1) and 53(g) of the Trade Practices Act 1974 ("the Act"). (See [1992] FCA 342; (1992) 37 FCR 45).

2. By its amended statement of claim, the appellant, Combulk Pty. Limited, alleged that, by letter dated 28 August 1987, the respondent, TNT Management Pty. Limited -

"by its agent and employee one Walter Gardin,
Manager, Resources and Development, Latrobe
Valley" -

represented to Dr. Bowman Irani, Combulk's managing director and principal shareholder, that:

(i) The respondent, and other members of its group of companies,
carried on the business of bulk loading of goods into ships;
(ii) all of the bulk loadings into ships effected by the
respondent or by its group would be carried out by utilising
a loading system known as the "Rocon" system;
(iii) the approximate loading needs of the respondent and its group in
the period from 1988 to 1995, together with the rates of
remuneration offered to Combulk, would be as specified in the
letter. (The terms of the letter are set out below.)

3. Combulk alleged that, at the time, the respondent knew or ought to have known that Combulk was proposing to acquire the Rocon loading system for use at ports in the State of Victoria; that, in reliance upon the representations, Dr. Irani caused Combulk to be incorporated on 31 August 1987; and that in further reliance upon the representations, Combulk exercised an option to purchase a Rocon loading system and took certain other action.

4. It was then alleged that, contrary to the provisions of s.52(1) of the Act, the making of the representations alleged was misleading or deceptive conduct in that:

"(i) the respondent and other companies in the TNT group of
companies did not then, or at any material time
thereafter, carry on the business of bulk loading
goods into ships, and proposed only to explore the
feasibility of commencing to carry on such business;
(ii) The respondent did not then, or at any material time
thereafter, have any, or any substantial, bulk loading
needs requiring the use of the Rocon Loading System;
(iii) The amounts and rates stated in the said letter were
not based upon any, or any substantial, orders or
foreshadowed orders received by the respondent from
existing customers, but were merely the respondent's
projections of business that might possibly be
obtained from existing and new customers.
(iv) the respondent had not made a firm decision to utilise
the applicant's (i.e. the appellant's) services,
including the provision of the Rocon Loading System,
in order to effect any or all of the bulk loadings of
ships by the respondent and/or other companies in the
TNT group;
(v) the respondent did not intend to utilise the
applicant's services, including the provision of the
Rocon Loading System, in order to effect any or all of
the bulk loadings of ships by the respondent and/or
other companies in the TNT group;
(vi) since the making of the said representations the
respondent only used the applicant's services
including the provision of the Rocon Loading System
for the loading of goods to the value of $29,698.70 in
September or October, 1987 when it was conducting a
trial of the said System.
(vii) the respondent did not have reasonable grounds for
making the said representations or any of them".

5. Alternatively, Combulk alleged, for similar reasons, that the respondent had made false or misleading statements concerning the need for Combulk's services, contrary to the provisions of s.53(g) of the Act.

THE FINDINGS OF FACT MADE BY THE TRIAL JUDGE
6. There was little dispute about the facts. Einfeld J. made findings which may be summarised as follows:

(1) Dr. Irani was introduced to Mr Gardin in March 1987 by Mr Mohsin
Chakera, a solicitor, with a view to their setting up a corporate
joint venture to import transport technology. Subsequently, a
company, Ly-Tek (Australia) Pty. Limited, was incorporated. In
this connection, in April 1987, Mr Gardin provided Dr. Irani with
a report commissioned by the Coal Corporation of Victoria which
discussed the Rocon loading system.
(2) In late July 1987, Mr Gardin asked Dr. Irani to meet with Mr Don
Scruggs, the managing director of Rocon International Ltd. At
that time, in the absence of Mr Scruggs, Mr Gardin described the
Rocon system to Dr. Irani and went on to say:
"Rocon has had the system at the Port of Geelong for
18 months, but the Port of Geelong Authority won't buy
it as they have no capital expenditure budget. I have
an option to buy the system, but unless I give Don
Scruggs $100,000 today, the deal is off. I can't come
up with the money. If you give Don $10,000 today, I
think we can secure an option and we will both make a
lot of money. TNT is very interested in the Rocon and
will give us a lot of business. They are presently
arranging a trial shipment for the Coal Corporation of
Victoria." (Emphasis added)
(3) At the meeting with Mr Scruggs on 1 August 1987, Mr Scruggs
asked for an option fee of $100,000. This was rejected by Dr.
Irani, who said:
"I won't agree with that but I would like to stretch
the time for the option fee to ten weeks to give
Walter time to arrange equity partnership or the
purchase of the system by TNT from me."
(4) Mr Scruggs agreed to this. Mr Gardin said that, if a trial
shipment of coal was successful, the respondent was likely to
purchase the system from Dr. Irani.
(5) At the meeting on 1 August 1987, Mr Scruggs drew up an option
agreement, which was then executed by Dr. Irani, providing, inter
alia, as follows:
"1.1 The rendering to ROCON of a cash payment price of
$485,000.00..., with payment of $10,000.00, upon
execution of this agreement which secures for COMBULK
a 15 day option, renewable up to five times, at the
discretion of COMBULK for an additional option fee
payable by COMBULK to ROCON for each such renewal,
with each such renewal being by written notification
to ROCON...on or before the date due..."
(6) Dr. Irani paid the sum of $10,000 at the meeting. On 16 August,
he paid a further sum of $10,000 to extend the option for another
15 days.
(7) In late August, Dr. Irani said to Mr Gardin:
"I have paid out $20,000 on your assurances that TNT will
require the usage of the System frequently. Moss Chakera
has advised me to seek assurances from TNT of its usage of
the Rocon before I can fund this deal any further. I need
this assurance and the trial shipment to proceed effectively
before I exercise the option to purchase the Rocon."

7. Mr Gardin replied:

"I will ask TNT to send you a letter setting out what it
considers will be its requirements."
(8) On 28 August, Mr Gardin handed Dr. Irani the letter sued on in
the amended statement of claim. The letter, signed by Mr Gardin
but on the respondent's letterhead, was in these terms:
"ROADFAST HEAD OFFICE
16-24 COSGROVE ROAD,
ENFIELD...
A DIVISION OF TNT MANAGEMENT PTY. LIMITED
...
Dr. B. IRANI,
Managing Director,
COMBULK Pty. Ltd.,
4-12 Blackwood St.,
North Melbourne
Dear Dr. Irani,
Re Contract loading of bulk goods with your "Rocon"
It is with pleasure that we confirm that all our bulk
loadings into ships will be done with your loading device.
Our approximate needs are as follows:
Product 1988-1990 1995 Rate
Briquettes 150,000 tonne 300,000 tonne $3/tonne
Char 70,000 tonne 120,000 tonne $3/tonne
Grain
(Loose/Bags) 200,000 tonne 300,000 tonne $3/tonne
Kaolin 30,000 tonne 40,000 tonne $3.50/tonne
Scrap steel 30,000 tonne 50,000 tonne $3.50/tonne
Feldspar 40,000 tonne 70,000 tonne $3.00/tonne
Malt 20,000 tonne 40,000 tonne $3.50/tonne
Silicon Sand 20,000 tonne 40,000 tonne $3.50/tonne
Other Bulk
commodities 20,000 tonne 50,000 tonne $3.50/tonne
The rate will be fixed for 6 months after which the normal
C.P.I. increases as related to Port Bulk operations will be
paid. You will be given a minimum of 14 days notice for
each loading.
We like (sic) to advise that starting from the 12th of
September 1987, loading will commence with grain and
Briquettes.
Please confirm your acceptance of the above tonnage and
rates.
Yours faithfully
(sgd)
Walter Gardin
Manager
Resources and Development
LaTrobe Valley"
(9) On 31 August, Dr. Irani paid Rocon another $10,000 for a further
15 day option. On 14 September 1987, Combulk entered into a lease
of 250 containers for a term of 90 days. On 15 September, Dr.
Irani made a fourth payment of $10,000 to Rocon under the option
agreement.
(10) The "trial" shipment took place on 23 September. The Coal
Corporation paid the respondent for this. The respondent paid
Combulk three dollars per tonne of briquettes loaded with the
Rocon system and $4.03 per tonne for the supply of containers.
(11) On 30 September, Combulk paid the fifth option fee. On 15 October
1987, Combulk exercised the option to purchase and paid the
further sum of $386,500, the purchase price having been reduced to
$436,500 by agreement between the parties.
(12) Although the "trial" shipment appeared to have proceeded
successfully, the respondent did not again retain Combulk's
services.

THE TRIAL JUDGE'S REASONS FOR DISMISSING COMBULK'S CLAIM
8. As has been noted, Combulk's claim that it was misled by the statements made in the letter dated 28 August, and thereby induced to pay out substantial amounts to buy the Rocon system and to lease the containers, substantially without return or recoupment, was dismissed by Einfeld J. In essence, his Honour dismissed Combulk's application for relief for the following reasons:

(A) The representations in the letter - (i) that all of the bulk
loadings into ships effected by the respondent (or any other
member of its group) would be carried out with Combulk's loading
system and (ii) that the approximate loading needs of the
respondent (or of any other member of its group) in the period
1988 to 1995 and the rates of remuneration to be offered to
Combulk, would be as specified in the letter - were false and
misleading. These were representations with respect to future
conduct and, by virtue of the provisions of s.51A(1) of the Act,
where a corporation does not have reasonable grounds for making a
representation of that kind, the representation shall be taken to
be misleading. Moreover, although it is provided by s.51A(2) that
the corporation shall, unless it adduces evidence to the contrary,
be deemed not to have had reasonable grounds for making the
representation, the respondent had not adduced any evidence on the
point.
(B) The real issue for determination was whether the representations
were made by the respondent. His Honour accepted the respondent's
submission that "the assurances contained in the letter were in
truth Gardin's, not TNT's, assurances and were understood by Irani
as such".
(C) Nor could Combulk rely upon s.84(2) of the Act. In the form of
that provision as it stood in August 1987, it was there provided
that conduct engaged in on behalf of a body corporate by a
director, servant or agent of the body corporate within the scope
of the person's actual or apparent authority is to be deemed, for
the purposes of the Act, to have been engaged in also by the body
corporate. However, Einfeld J. held that s.84(2) could not apply
where, as here, the third party had notice that the servant or
agent of the body corporate was acting outside the scope of his
actual or apparent authority. His Honour found that Mr Gardin
"was clearly acting in breach of his fiduciary obligations (to the
respondent). He acquired a beneficial interest in Combulk for the
purpose of 'making lots of money'... His attitude was merely that
if TNT did use the system, Combulk and therefore Gardin himself
would benefit financially." His Honour found that Dr. Irani knew
that Mr Gardin had a conflict of interest: Dr. Irani knew that
Mr Gardin "was most anxious that Combulk obtain the system in the
context of Gardin's own interest in Combulk." (There was
evidence, to be referred to later, that Mr Chakera held a
substantial shareholding in Combulk upon trust for Mr Gardin.)

THE ARGUMENTS ADVANCED ON BEHALF OF COMBULK IN SUPPORT OF THE APPEAL
9. In support of its appeal, Combulk makes the following submissions:

(1) Mr Gardin, as manager, Resources and Development, of Roadfast, a
division of the respondent, had either the express or implied
actual authority of the respondent to make the representations
found by the primary Judge. In particular, reliance is placed
upon the respondent's internal memorandum dated 3 July 1987
describing a change in Mr Gardin's employment position so that he
could undertake consulting work as follows:
"Recently (Mr Gardin) has been given the opportunity
to do some consulting work in his own right. He is
most concerned to continue to develop projects on our
behalf and believes that his new activity will offer
further opportunities for work for TNT.
The final result is that we have agreed that he should
continue to be employed by TNT Roadfast and also
engage in consulting work in his own right.
Consequently his present salary package...has been
reduced..."
(2) The respondent failed to call evidence on the question whether Mr
Gardin had authority to make the representations. Thus it should
be inferred that this evidence, if called, would not have assisted
the respondent's case. This inference is supported by the
circumstance that although, by letter dated 7 November 1991, the
respondent's solicitors had foreshadowed an amendment to its
defence so as to deny the agency of Mr Gardin, the respondent's
solicitors later stated that they had received instructions not to
press the amendment proposed.
(3) Mr Gardin's actions were not rendered beyond his authority to act
for the respondent by reason of the circumstance that the
arrangements proposed with Combulk were, in part, for the benefit
of Mr Gardin by reason of his beneficial interest in the shares
in Combulk. Reliance is placed upon the reasoning of Morling J.
in Trade Practices Commission v Queensland Aggregates Pty. Ltd.
(No. 3) (1982) 61 FLR 52 at 65-6, to which reference is made
below. It is said that there was no evidence that Combulk had
notice that, in making the representations, Mr Gardin exceeded
his actual authority.
(4) Then, it is said that Mr Gardin had implied authority to make the
representations being something that was necessary for, or
ordinarily incidental to, the effective execution of his express
authority.
(5) It is further submitted that the relevant authority, and thus
liability on the part of the respondent, was created by virtue of
the provisions of s.84(2) of the Trade Practices Act. Reliance is
also placed upon s.68(A)(3)(c) and (d) of the Companies (Victoria)
Code, to which reference will be made below.

CONCLUSIONS ON THE APPEAL
10. In order to understand the questions which arise for determination on the appeal, reference should be made to some further facts established in the evidence.

11. At the trial, an affidavit sworn by Mr Chakera was read on behalf of Combulk. In his affidavit, Mr Chakera, who is a director of Combulk, gave the following evidence:

(1) In late 1986 or early 1987, Mr Chakera discussed with Mr Gardin,
whom he had known for some time, the establishment of an
import/export business. Mr Gardin said that he had contacts with
the Russian trade delegation and also knew people who were
interested in setting up a corporate vehicle to import Russian
technology. Mr Gardin asked whether Mr Chakera knew of any
person who might be interested in investing in the project. Mr
Chakera said that Dr. Irani, a friend and a client, could be
interested.
(2) In April 1987, at the suggestion of Mr Gardin, Mr Chakera
attended a meeting of potential investors including Dr. Irani.
Thereafter, several companies were incorporated, apparently for
the purpose of providing a corporate structure to deal in Russian
technology.
(3) At about this time, on several occasions, Mr Chakera invited Mr
Gardin to become a director of the companies that were being
incorporated. Mr Gardin said:
"My employment contract with TNT does not allow me to
have outside interests. You look after my interests.
I trust you implicitly."
(4) Subsequently, Ly-Tek (Australia) Pty. Limited was incorporated.
Dr. Irani and Mr Chakera were appointed directors. Shares were
issued to Dr. Irani. Shares were also issued to Mr Chakera, who
held them in trust for Mr Gardin.
(5) Earlier, in February 1987, Mr Chakera was present at a meeting
with Mr Gardin and Mr Scruggs. At the meeting, which was held
at the home of Mr Gardin, Mr Scruggs showed a film demonstrating
the Rocon system. Mr Gardin then said:
"This is a great device. Anybody who acquires it will
make a fortune."
(6) Towards the end of July 1987, either Mr Gardin or Dr. Irani
instructed Mr Chakera to reserve the company name "Combulk Pty.
Limited". This was done on 29 July 1987.
(7) On 4 August 1987, Dr. Irani showed Mr Chakera a document dated 1
August 1987, purporting to be an agreement made between "Combulk
Pty. Ltd. and/or its assigns" and Rocon International Limited and
Australian Rocon International Pty. Limited. The "agreement" was
purportedly executed by Dr. Irani, as "Managing Director", on
behalf of Combulk and by Mr Scruggs on behalf of Rocon. As has
been seen, under the "agreement", Combulk purported to purchase
the Rocon unit.
(8) Late on 4 August, Mr Chakera saw Mr Gardin when the following
conversation took place:
"(Mr Chakera) said:-
'Why did you drag Irani into the Rocon
purchase after I explicitly told you not to?'
Mr Gardin replied:-
'Don't worry Moss. TNT is very interested in
utilizing the Rocon Loading System. The money
that will be generated from its use is
incredible. There is a fortune to be made. I
will get Irani an equity partner to limit his
exposure, possibly TNT'."
(9) At the end of August, Mr Chakera -
"...submitted incorporation documentation for Combulk
Pty. Limited to the Corporate Affairs Commission,
noting Dr Irani and (Mr Chakera) as directors and Dr
Irani as majority shareholder and (Mr Chakera) as
another shareholder as trustee for Mr Gardin."

12. In his oral evidence, Mr Chakera said that he was "inclined to believe" that Mr Gardin instructed him to reserve the name "Combulk Pty. Ltd."

13. In his affidavit evidence, Dr. Irani said that in the course of his discussion with Mr Gardin on 1 August 1987, Dr. Irani asked Mr Gardin why Mr Chakera was not present and Mr Gardin replied:

"He (Mr Chakera) would only throw a spanner in the works.
He will interfere with the negotiations and the deal will
fall through. We can sign it in the name of Combulk as Moss
(Mr Chakera) has been asked to incorporate the company."

14. In our opinion, in the circumstances mentioned, Mr Gardin had no authority to bind the respondent in respect of any statement made in the letter dated 28 August 1987 ("the August letter").

15. It is well established that it is not within the scope of an agent's authority to bind his or her principals by a contract which, although made ostensibly on their behalf, is, to the knowledge of the other party, really made for his or her own benefit, even though the contract is of a kind which he or she had general authority to make; and that, therefore, when an agent purports to make such a contract, and the party with whom he or she is dealing is aware of the circumstances, the principal is not bound (see Lysaght Bros. and Co. Ltd. v Falk [1905] HCA 7; (1905) 2 CLR 421).

16. In the present case, it is not suggested that a contract was purportedly made by Mr Gardin on behalf of the respondent. Rather, it is said that Mr Gardin made a representation on behalf of the respondent. Although the distinction between a contract, on the one hand, and a representation, on the other, clearly exists, it is not, in our view, a distinction which is material for present purposes. The well established principle as to the scope of the agent's authority in the special circumstances found in Falk's case, for instance, is applicable also where a representation is made by the agent and no contract is made.

17. In Falk's case, Griffith C.J. said (at 429):

"It is not enough that a man should be the agent of another
to enable him to make any contract on his behalf; he must
make it as his agent. For example: suppose the case of a
person authorized to sign a promissory note, per proc., and
he makes a promissory note in payment of his own private
debt and gives it to his own creditor. Clearly that is not
within his authority. The promissory note is not the note
of his principal, because the person taking it knows that
the agent is not acting for his principal, but for himself.
Again, the master of a ship is agent for the shipowner, and
may sign a bill of lading on behalf of the owner for goods,
but if the master were to sign a bill of lading for goods
not put on board the ship, he would not be acting for the
owner; and although he had authority to sign bills of
lading, a contract made by him in such a way is not the
contract of his principal."

18. Griffith C.J. went on to say (at 430-1):

"It is manifestly unimportant whether the agent tells the
person with whom he is dealing that he has no authority to
make the contract, or whether the circumstances under which
he makes it are, to the knowledge of the other party, such
as to show that he had no such authority. In either case
the agent is acting beyond the scope of his authority, and
the other person knows it. The rule was put very plainly by
Lord Esher M.R., in The British Mutual Banking Co. v
Charnwood Forest Railway Co.... That was an action against a
company to recover damages for fraudulent
misrepresentations, alleged to have been made by an agent of
the company when acting within the scope of his authority.
Lord Esher said... : 'The rule has often been expressed in
the terms, that to bind the principal the agent must be
acting 'for the benefit' of the principal. This, in my
opinion, is equivalent to saying that he must be acting
'for' the principal, since if there is authority to do the
act it does not matter if the principal is benefited by it.
I know of no case where the employer has been held liable
when his servant has made statements not for his employer,
but in his own interest.'
The same principle applies here. If the agent has acted in
his own interest, he does not bind his employer. But there
is an exception to this rule in the case of a person dealing
bona fide with the agent without knowledge of the limitation
of his authority. That is based upon the principle of
estoppel; but there can be no estoppel if the person
dealing with the agent knows the actual facts, and knows
that the agent is acting in his own interests and not in the
interests of his employer."

19. O'Connor J. said (at 439):

"Every authority conferred upon an agent, whether express or
implied, must be taken to be subject to a condition that the
authority is to be exercised honestly and on behalf of the
principal. That is a condition precedent to the right of
exercising it, and, if that condition is not fulfilled, then
there is no authority, and any act purporting to have been
done under it, unless in a dealing with innocent parties, is
void. Further, it is quite clear that if a person dealing
with an agent has knowledge that there has been a fraudulent
exercise of the authority, then as far as he is concerned,
he is not allowed to say that the authority exists."

20. In Bowstead on Agency (15th ed. (1985) by F.M.B. Reynolds) it is stated (Article 77 - p 303):

"No act done by an agent in excess of his actual authority
is binding on the principal with respect to persons having
notice that in doing the act the agent is exceeding his
authority."

21. Falk's case is cited for this proposition. The commentary reads (at 304):

"The problem is to know what constitutes notice and when
there is a duty to inquire. It is often said that neither
constructive...nor presumed...notice apply in commercial
transactions. This certainly excludes the full doctrine of
constructive notice of equitable interests in land, whereby
a person may be deemed to have notice of matters which would
have come to his knowledge if such inquiries and inspections
had been made as ought reasonably to have been made... But
there can be no doubt that in many situations where it is
relevant to know whether one person has knowledge of
another's interests, including those raising the doctrine of
apparent authority, the court may infer from the
circumstances that the person concerned must have known of
the interest, or at least must have been suspicious to the
extent that further inquiries would have been appropriate in
the context."

22. In our view, the reasoning in Falk's case is applicable here. In substance, if not in form, the relationship between Dr. Irani and Mr Gardin was that of joint venturers. Each, through the corporate vehicle of Combulk, was endeavouring to make a profit out of the dealings proposed with the respondent. Combulk knew, or must be taken to have known that, in purporting to write the August letter on behalf of the respondent, Mr Gardin had exceeded his authority. Combulk must have known that Mr Gardin had no authority to advance his own commercial interests, through his beneficial shareholding in Combulk, at the expense of the respondent. In short, Combulk must have known that in providing the August letter, Mr Gardin was, in truth, acting on his behalf and not on behalf of the respondent.

23. In our opinion, the provisions of s.84(2) of the Act could not assist Combulk. Whatever the meaning of the expression "on behalf of" in this context (see Trade Practices Commission v TNT Management Pty. Ltd. (1984) 6 FCR 1 per Franki J. at 15; Walplan Pty. Ltd. v Wallace [1985] FCA 479; (1985) 8 FCR 27 per Lockhart J. at 37; Synman v Cooper (No. 2) (1990) 25 FCR 470), this provision can have no application where, as here, the representee, Combulk, must be taken to have known that Mr Gardin was really acting in his own interest and not that of the respondent.

24. As has been said, Combulk relies also upon the provisions of s.68A(1) and (3) of the Companies Code. By that provision, a person having a dealing with a company is entitled to assume, inter alia:

"68A(3) ...
(c) that a person who is held out by the company to be an
officer or agent of the company has been duly
appointed and has authority to exercise the powers and
perform the duties customarily exercised or performed
by an officer or agent of the kind concerned;"

25. However, by s.68A(4) it is provided:

"68A(4) Notwithstanding sub-section (1), a person is not
entitled to make an assumption referred to in sub-section
(3) in relation to dealings with a company if -
(a) he has actual knowledge that the matter that, but for
this sub-section, he would be entitled to assume is
not correct; or
(b) his connection or relationship with the company is
such that he ought to know that the matter that, but
for this sub-section, he would be entitled to assume
is not correct,
and where, by virtue of this sub-section, a person is not
entitled to make a particular assumption in relation to
dealings with a company, sub-section (1) has no effect in
relation to any assertion by the company in relation to the
assumption."

26. It follows from the conclusions we have expressed in respect of the general law principles, that the exception contained in s.68A(4) is applicable here.

27. As has been noted, Combulk relies upon the decision and reasoning of Morling J. in the Queensland Aggregates case. There, it was held that a company had engaged in the practice of exclusive dealing by reason of the activities of its operations manager in making offers of employment to cartage contractors on condition that they purchase a vehicle from a third party. It was held that the circumstance that the manager received the sum of $300 from the third party for each vehicle so acquired did not mean that the activities of the manager vis-a-vis the cartage contractors were not binding on the company.

28. There is a fundamental difference between what is involved in the present appeal and what was involved in Queensland Aggregates. In the present appeal, the question is whether a party dealing with a dishonest agent, knowing the agent is acting in his own interest rather than in that of his employer, and indeed colluding in the concealment of the facts from the employer, can rely upon an action purportedly taken by the agent in the course of the performance of his authority. As has been said, the law will not support reliance on the agent's acts in those circumstances. But there is no doubt at all that an innocent third party may hold an employer bound by the fraudulent act of a servant or agent, even though committed solely for the servant's benefit: Lloyd v Grace, Smith and Co [1912] UKHL 1; (1912) AC 716; Kooragang Investment Pty Ltd v Richardson and Wrench Ltd (1981) 2 NSWLR 1 at 5. Queensland Aggregates was concerned neither with a claim by a person who had colluded with a fraudulent servant, nor with a claim by a person who had innocently relied upon the actions of a fraudulent servant as being authorized. It was concerned with whether the employer was bound by a dishonest agent's actions for the purposes of a prosecution for exclusive dealing under the Trade Practices Act. Morling J. decided the question by reference to the cases binding the employer of a dishonest agent at the suit of an innocent third party. This is clear from his reference (at 64) to both Kooragang and Lloyd v Grace Smith and Co, and his reference (at 65) to Briess v Woolley (1954) AC 333 at 348, where Lord Reid referred to -

"(t)he general principle of vicarious liability for
fraudulent misrepresentations..." (our emphasis)

29. Having regard to the fact that Morling J. decided Queensland Aggregates on the analogy of a line of cases concerned with the position of innocent third parties, which is quite irrelevant to the present problem, the appellant gets no help from his reasoning.

30. Finally, although Einfeld J. did not need to express a view on the question, it would follow from the foregoing that Combulk could not have established, for the purposes of the Act, that it had relied on the August letter in any relevant sense.

31. The appeal is dismissed, with costs.