The party’s over: when the music stops and the lights turn on: Togher & Anor v Alexander & Ors (No.2)

This case[1] arises from a failed Melbourne music festival venture in early 2017. The issue was ultimately who should bear the losses of the investment of monies of the failed venture.

Mr Alexander, a theatrical producer, conceived the idea of putting on a Gala New Year’s Eve opera spectacular for 31 December 2016. He put this idea to Mr McClure and Mr Harkness, two Ministers of the Spirit of Christ in Action Church (SOCIA) and Grace Missions. Grace Missions is a charity that has the purpose of benefitting Aboriginal and Torres Strait Islander people, the general community in Australia and unemployed persons.

Both SOCIA and the Mission were unincorporated associations and charities registered with the ACNC. It appears that they had no constitution, but a set of unwritten rules which were never placed before the Court, although requested by the Judge. The judge found on the evidence that:

Mr McClure and Mr Harkness were both of an entrepreneurial bent; on the look-out for opportunities to raise funds, generally through the use of Grace Missions (to avoid any adverse perceptions to the Church, should the transactions prove disadvantageous) for the ultimate financial benefit of the Church.” [301]

Further, there was a finding that initially,

“Grace Missions had no bank account and no remunerative activities. It was, as I have found, a vehicle used to disguise or conceal SOCIA’s involvement in raising funds.” [326]

The matter before the Court was who should be liable for the fees payable to engaged artists and other professionals involved in the venture.

There were no formal contracts, little written evidence of the dealings and vastly different narratives of the events between the parties. During the trial all parties were self-represented.

The judge remarked after summarising the conflicting evidence at length:

“The main protagonists to this proceeding – Mr Alexander, Mr McClure and Mr Harkness – were unrepresented at trial (although Mr McClure and Mr Harkness were represented throughout the proceeding). It became evident at the trial that there was a deep animus between the parties, and that this arose not merely because of financial losses arising from the events the subject of this proceeding; but was attributable to a range of prior transactions (and even prior court proceedings) involving them. More than once, the litigants were informed, and reminded of, their statutory obligation to facilitate the overriding obligations of case management regulating civil proceedings in this state, but nevertheless all too often, they exploited the latitude extended to them as unrepresented litigants to engage their adversaries in vitriolic exchanges (especially in cross-examination) on collateral issues; as if their involvement in the trial afforded all the opportunity to settle old scores. This did not do credit to any of the main protagonists and it served to re-inforce, in my mind, the imperative of trying to establish the probabilities of what occurred primarily by reference to external or objective circumstances; rather than accepting the recollections of the litigants at face value.” [208]

The legal issues were whether Mr Alexander had an enforceable agreement with any of the parties and the terms of the agreement, if any. A range of subsidiary questions was considered in making this determination being:

  • the extent of Mr McClure’s agency to act on behalf of SOCIA Church and Mr Harkness’ authority to act on behalf of Grace Missions;
  • the capacity of the charities to contract;
  • the terms of the contract and whether sufficiently complete promises were made.

As the charities were unincorporated bodies, they could not of themselves contract having no legal standing. As common in such a situation, the committee members as individuals were joined into the action.

The judge examined the possibility of the ministers having actual or ostensible authority to bind the committees of their organisations. Further, in relation to actual authority, authority may occur due to:

  • implied actual authority,
  • incidental authority; or
  • usual authority.

It was agreed that Mr McClure was secretary and treasurer/financial officer of the SOCIA Committee and that Mr Harkness was vice-secretary and public officer of the SOCIA Committee and committee member and public officer of Grace Missions.

Express Actual Authority

There was no evidence (e.g. formal resolution) by which the Committee of SOCIA Church or the Committee of Grace Missions expressly authorised Mr McClure and Mr Harkness (respectively) to enter into any agreement with Mr Alexander. So there was no express authority, but was there some other form of authority for them to act?

The usual authority of Mr McClure as secretary, financial officer and ordained Minister to SOCIA

Mr McClure was shown on the ACNC register as secretary to the SOCIA Church. In general law there is implied authority for a person in such a position to do certain things.

The judge referred to the classic case of Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 71 as the basis of determining the authority of a company secretary. In that case the Court found a company secretary was entitled to sign contracts connected with the administrative side of the company’s affairs, but did not concede that this included contracts related to the commercial management of the company such as the sale and purchase of goods.

Judge expected that the usual role of secretary within the SOCIA Church (the functions of the secretary and financial officer) of an unincorporated not-for-profit charity would have required McClure to prepare reports to the ACNC, organise meetings, and maintain records. However, some of the responsibilities of Mr Harkness as ‘Public Officer’ might also overlap with the role of secretary. But did the authority extend to other commercial matter?

The judge made the comment that:

“The functions of a general secretary, say, of a political party may be much more extensive than the powers of a company secretary of a publicly listed company” [280]

and considered whether Mr McClure may have been permitted by the SOCIA Church committee to act as a powerful officer in the mould akin to that of a managing director of a company. However, the Judge pointed out that even a managing director of a company does not have the usual authority to enter a transaction which cannot be characterised as an ordinary business transaction.

The judge on the evidence found:

I am not satisfied that by virtue of his positions as secretary, treasurer (or financial officer) or ordained Minister, Mr McClure had express actual authority of SOCIA Church, or usual authority to bind SOCIA Church to enter into an underwriting agreement with Mr Alexander in respect to a musical event on New Year’s Eve.” [275]

Ostensible authority of Mr McClure to bind SOCIA Church

The Judge then considered whether, as a matter of implied actual authority, Mr McClure, as an agent had authority implied from the circumstances of any particular situation (Hely – Hutchinson v Brayhead Ltd [1968] 1 QB 480 at 583) including where the principal has acquiesced to a prior course of dealing. Put in the context of this case, Mr Alexander had to prove that a representation (of Mr McClure’s authority) was made by SOCIA Church, upon which he relied upon to his detriment, such that it would be unjust for SOCIA Church to resile from the making of the representation.

The judge considered whether the conduct of the SOCIA Church was such a representation.

Consideration was given to previous transactions between the parties such as the sale of Picasso paintings, real property and funded travel, as transactions evidencing Mr McClure’s authority to commit SOCIA to dealing with Mr Alexander.

It was found analogous to the conduct of the chairman of the company in Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549, who acted as a de facto managing director or chief executive and entered into large transactions on its behalf, for which he would sometimes report to the board, without seeking its prior authority or subsequent ratification and it was found that the board acquiesced to this course of dealing.

The judge further pointed to:

  • the status of Mr McClure was secretary, treasurer/financial officer and ordained SOCIA Church Minister to an outsider (individually or aggregated) is a matter to be taken into account when considering SOCIA Church’s conduct as a whole;
  • as a Public Officer to the SOCIA Church, Mr Harkness, had the usual authority to represent to third parties the authority of other agents to SOCIA Church and did this in relation to Mr McClure; and
  • when an unincorporated association has no constitution, nor a transparent set of rules that a diligent outsider may make inquiry of, it seems to me that it is inevitable that dominant members of the executive part of the association, being the committee, may take advantage of that feature to make representations of authority, to outsiders unrestrained by limitations. The association should not then be entitled, as a matter of policy, to take refuge in unexpressed, or unclear limitations upon such authority.

So the Judge concluded that Mr McClure had authority from SOCIA Church implied from a prior course of dealing and/or ostensible authority to bind SOCIA Church to enter into an agreement with Mr Alexander.

The judge then considered 2 issues:

  1. Mr Harkness’ authority to bind Grace Missions to an arrangement with Mr Alexander; and
  2. whether Mr McClure also had authority to make decisions on Grace Missions’ behalf in respect to Mr Alexander.

The evidence was that Mr Harkness was identified on the ACNC Register not only as ‘Public Officer’, but as Grace Missions’ sole ‘Responsible person’. However in evidence before the Court, a Mr Peters was claimed to be another committee member and Chairman. No evidence was received from Mr Peters. Mr Harkness’ evidence was that he appointed himself as secretary and public officer of Grace Missions.

The judge concluded that:

In the absence of rules constraining his authority and Mr Peters availability to give evidence as to any restraint upon Mr Harkness’ authority, I infer that Grace Missions acquiesced to a course of dealing in which Mr Harkness, at the behest of Mr McClure, caused Grace Missions to be used as what might be regarded as the ‘public face’ of SOCIA’s commercial activities (Hely – Hutchinson v Brayhead Ltd [1968] 1 QB 480 at 583). I find that it can be inferred or implied that Mr Harkness had implied authority to commit Grace Missions to enter into an arrangement with Mr Alexander.” [320]

It was found that the dealings between Mr Harkness and Mr McClure, Mr McClure bore all the hallmarks of acting as a ‘shadow’ committee member of Grace Missions as understood in corporate law.

In summary, it was found that Mr McClure had implied authority from Grace Missions (through Mr Harkness) to represent his authority to deal with Mr Alexander on Grace Missions’ behalf. Further, the scope of that authority included his appointing Mr Alexander to such positions so as to enable Mr Alexander to effectually deal with third parties for the purpose of putting on the event on New Year’s Eve.

Was the agreement entered into enforceable?

Mr Alexander was unable in law to sue SOCIA and Grace Missions as they were unincorporated associations. They do not have capacity to enter into contracts or to be sued.

All the committee members at the time of the contract being made were joined in the action to be the proper parties.

The judge was able, on the evidence, to identify the terms of the contract even though there was no written contract with consideration (price paid for the promise).

Damages

Had Grace Missions and SOCIA Church performed its promise, its liability was capped at $100,000 and the balance of costs to that limit was ordered to be paid.

As Mr Alexander could have, but did not, put evidence of the value of his work in relation to the one completed show, nor any other evidence to suggest a standard for calculating reasonable fees, the Judge was unable to make an award of compensation for his professional fees.

Mr Alexander claimed damages for loss of reputation. The Judge was satisfied the requirement that SOCIA/ Grace Missions (the promisor) undertook the risk that Mr Alexander might suffer a loss of reputation if the promise was breached. A sum of $30,000 was awarded for loss of reputation.

[1][2019] NSWDC 221

2019-11-27T12:31:07+00:00November 27th, 2019|