Taylor v Van Dutch Marine Holding Ltd & Ors

A judgment obtained against an agent bars a later contractual claim against an undisclosed principal where both claims arise from the same cause of action. The bar operates automatically and does not depend on an informed election or satisfaction of the judgment. It does not apply to misrepresentation claims against the principal where the principal and agent are joint tortfeasors, because the former rule releasing joint tortfeasors has been abolished by the Civil Liability (Contribution) Act 1978.

An agency agreement authorising the ordinary conduct of a yacht-selling business did not authorise an exceptional, high-cost bridging loan supported by security the agent could not provide. An agent’s principal is not liable for representations outside the scope of the agent’s actual or apparent authority.

Mr Taylor lent US$1,591,040 to Van Dutch Marine Holding Ltd and related defendants. After the loan was not repaid, he obtained default judgment against the first four defendants. He subsequently joined the fifth to seventh defendants, alleging that the original defendants had acted as their undisclosed agents and that the defendants had conspired to conceal the ownership of Van Dutch assets.

The principal issues were whether the default judgment barred contractual claims against an alleged undisclosed principal under the principle associated with Kendall v Hamilton, whether an agency agreement authorised the loan and related representations, and whether the additional defendants were liable in misrepresentation, conspiracy, unjust enrichment or proprietary claims.

1. Contractual claims and the judgment bar. The court held that the principle associated with Kendall v Hamilton is properly understood as a rule of merger. Agent and undisclosed principal are alternatively liable on one cause of action arising from the same contract. Judgment against one bars a later action against the other while the judgment subsists, even if it was obtained in ignorance of the principal’s existence and remains unsatisfied. The rule is not based on election in the ordinary sense.
2. Scope of the rule. The rule applied to contractual claims against Rhino based on the same causes of action as the default judgment. It did not apply to misrepresentation claims against an alleged principal. Such liability would be joint tortious liability, and the former rule releasing joint tortfeasors had been abolished by section 3 of the Civil Liability (Contribution) Act 1978.
3. Agency. The 2007 Agency Agreement and 2013 Nominee Agreement continued to operate together. The Nominee Agreement concerned exploitation of Rhino’s intellectual property, moulds and tools. The Agency Agreement authorised VDML to buy and sell yachts and to undertake acts incidental to that business. It did not authorise the exceptional bridging loan actually negotiated, which carried onerous interest and purported to grant security over assets belonging to other companies. VDML therefore lacked authority to contract on Rhino’s behalf.
4. Contract and misrepresentation. The Heads of Terms were binding only between the stated parties and excluded enforcement by or against others. The proposed Loan Agreement was never concluded. None of the additional defendants was a contracting party. Although representations had been made concerning the group structure, asset ownership, solvency, repayment prospects and security, no additional defendant had authorised or adopted them. Apparent authority was unavailable because there had been no holding out by the additional defendants.
5. Conspiracy and other claims. The alleged unlawful means conspiracy was not proved. There was no combination involving the additional defendants, no established unlawful means intended to injure Mr Taylor, and no proved loss caused by the alleged conspiracy. In practice, a conspiracy based on negligent misrepresentation could not be established: an agreement to make a representation would require knowledge of what was to be represented and, where falsity was essential, a case akin to deliberately false statements. The unjust enrichment, constructive trust, proprietary and tracing claims also failed or did not arise.
6. Disposition. The claims against the additional defendants were dismissed.