Lang v James Morrison & Co Ltd
13 CLR 1(Judgment by: Barton J)
Between: TS Lang
And: James Morrison & Co Ltd
Judges:
Griffith CJ
Barton JO'Connor J
Subject References:
Contract
Creation of
Offer and acceptance
Where offer made to one person but accepted by others and principal undisclosed
Judgment date: 27 September 1911
MELBOURNE
Judgment by:
Barton J
The first question raised on the appeal is at what date there came into existence a complete contract between the respondent company and the firm of Thomas McFarland & Co As to this I feel no difficulty. It is quite clear that the appellant's contention that a contract arose on the respondents' letter of 12th July 1907 cannot be sustained. Thomas McFarland & Co's offer of 17th April no doubt included most of the essentials of the subsequent agreement; but that it contemplated contractual relations extending over more seasons than one is evidenced by its last paragraph; "profit or loss to be equally divided between us at the close of each season." Now the respondents' short letter of 12th July says:
"Re your letter dated April 17th we have agreed to give the proposal mentioned a trial, but as there are one or two points we wish to go into further we must delay writing you full particulars until next mail."
To give the proposal a trial certainly does not mean the making of a contract to extend over several seasons. The expression of a desire to go further into one or two points shows that the proposal as a whole was not finally accepted, and that there were matters on which an understanding must precede finality. Emphasis was laid in argument on the words "we have agreed." If the appellant's construction of them were correct, the rest of the letter would so restrict their effect as to render them of small consequence. But I think their real meaning is, "we as a company have agreed among ourselves to give your proposal a trial," and this does not carry the matter any further.
Then the appellant says, if the letter of 12th July does not clinch the bargain that of 19th July does. Here, again, I fail to agree with the appellant. This letter explains that of 12th July thus: "As advised in our last, we are quite willing to give the proposal a fair trial, i.e. to go on equal risks for a season and see how it works." This of itself is enough to constitute a counter-offer. But the letter of 19th July contains several points on which the respondents require an understanding before final agreement. Of these it is enough to mention three. One is that quantities of frozen meat shipped "must be within 5 per cent. of the quantity stated"-i.e., stated in the respondents' Monday cables (see letter of 17th April). Another is that in offering 28/42 lambs, if it cannot be arranged to make them half of each grade, that is, half 28/36 and half 37/42, "an average of the parcel must be stated"; an obvious essential to the giving of that information to prospective buyers without which successful sales could not be expected. A third is that in offering weights of 42/50, which must be sold separately from others, "the average must always be cabled, as it is the first thing the buyers ask when parcels are put before them"; a step as plainly necessary as the last. It is clear that the respondents were not willing to come to terms unless these and other stipulations were accepted, and it is futile to say that these were merely proposed methods of carrying out a contract already concluded. The letter winds up thus: "Upon receipt of this letter, if in order, kindly wire us the word 'Forward,' when we will start cabling you and also establish a credit as you desire." The cabling of the word "Forward" was clearly laid down as the signal of the acceptance by Thomas McFarland & Co of a contract embodying their own proposals of 17th April together with those on the part of the respondents contained in their letter of 19th July. The word was cabled by Thomas McFarland & Co on the 26th August, and it is from that date that the contract must be taken as established. This is none the less the position because the respondents translate the word "Forward" as intimating that he, i.e., McFarland, who as far as they knew then constituted the firm of Thomas McFarland & Co, had received their letter of 19th July, and that they could start working. In that sense the word amounts to an acceptance. Nor is it any less the position because, in anticipation of an assent by cable, the respondents on the 9th August wrote that on the 8th they had mailed to Thomas McFarland & Co through the Union Bank a fresh credit for PD10,000. The contract, then, is constituted by the communications between these parties up to and including the cable of the 26th August, which must be taken as the date of the contract.
The appellant contended, however, that the communications referred to amounted to an agreement for a partnership between the respondent company and the firm of Thos. McFarland & Co, and that therefore the present proceedings were misconceived, and the claim should have been for a dissolution of partnership and an account. I am unable to say that the writings disclose a partnership. The agreement was for the periodical purchase in Victoria by Thos. McFarland & Co, with moneys of the respondents credited to them for the purpose, of live stock to be exported as frozen meat to the respondents in London. The respondents were to sell the meat. For trouble and expense to be incurred, Thos. McFarland & Co were to draw 11/2% on the proceeds of sales, and the respondents on their part 1%, and subject to these allowances the profits and losses were to be equally divided at the close of the season. It is not because of this equal division that we are to say there was a partnership. The entire capital to be employed belonged to the respondents, and the live stock to be purchased, slaughtered, frozen and shipped, and sold in England, was, when bought, the property of the respondents. In such circumstances the mere fact that profits and losses were to be divided did not carry the transaction beyond the sphere of a joint adventure. Thos. McFarland & Co reckoned on being sufficiently remunerated for their labours by the anticipated half of the surplus expected on the sales.
Apart from these two points, which were raised by the appellant at the outset, the case for the respondents as plaintiffs is based on the contention that, by certain conversations between McFarland and Lang and McFarland and Keates in Melbourne before the sending of the cabled word "Forward," a partnership in the business of frozen meat exporters was constituted, by reason of which the appellant became liable as a partner for the damages consequent on the breach of the contract for one season between the respondents and Thos. McFarland & Co The learned Chief Justice of the Supreme Court, who tried the case, has found that the appellant became a partner in that firm before the date of the sending of the cabled word "Forward," despatched on 26th August 1907. In a conflict of evidence between McFarland, who was called for the respondents, and the appellant, his Honour has accepted the version of McFarland, and has held that it establishes the partnership contended for. The appellant contends here that, even if the finding of fact be accepted, it does not warrant the conclusion of law. He says that though he was from the 10th of June 1907 a member of the firm of McFarland, Lang & Keates, who were stock and station agents, live stock exporters and general commission agents, according to their partnership deed, yet that firm had nothing to do with the business of exporting frozen meat, and made no contract with the respondents. So far the evidence supports him. But he goes on to say that there is nothing in the conversations relied on to establish that he was on 26th of August 1907, or indeed at any time, a partner of McFarland in the firm of Thos. McFarland & Co, frozen meat exporters, or that he became in any way liable under the contract between that firm and the respondents.
The gist of the conversations, as deposed to by McFarland, is that on or shortly after the receipt of the respondents' letter of the 19th July he showed it to the appellant at the office, no one else being present, as he thinks. He told Lang that it was in answer to a letter written to the respondents before the appellant came into the business (meaning presumably the business of McFarland, Lang & Co ) In that letter, he said, he had stated the outlines he would work on, and the respondents had agreed to give the plan a trial in the manner proposed. There was a discussion as to the prospects of profit or of loss. McFarland expected to make PD1,000 out of it-that is no doubt for the season. McFarland said he would have of course to control "the frozen meat branch." He said "I will have to handle this borrowing business, I am the only one in the firm who understands that"; and the appellant replied, "I agree to that." He also said "I will have to carry on under the old firm's name, it is the only name it can be carried on under, as my brands are registered under that name and the name being known on the London market." The upshot of this conversation is stated by McFarland in these words: "We agreed to cable that we would go on with the business on the plaintiffs' terms." And the cable message "Forward" was sent on 26th August.
McFarland thinks his conversations with Lang and Keates were at different times. Still he says he did not formally invite Lang to take part in the frozen meat venture till 23rd August. He seems to believe that he spoke to Lang first. His conversation with Keates, as he describes it, is even less definite than his outline of the interview with Lang. He says the appellant was not then present, it was at Keates's home at Essendon. He told Keates he had received the letter from respondents, and as the "horse business" (no doubt the business of McFarland, Lang & Co ) was not going to "pan out" as they hoped, they had better go into this affair. Keates said he would look into the matter in the morning. The next morning Keates saw the letter at the office. McFarland says-"I explained the frozen meat business to him and asked was he agreeable. To the best of my knowledge and belief he said he was. This would be about the 22nd or 23rd of August. At any rate it was before the sending of the cable message.
McFarland does not venture to say that the matter was ever discussed by the three of them together, nor is there any evidence that it was ever discussed between the appellant and Keates. He admits having previously sworn in the Insolvency Court, "I don't think Lang was in the firm when the first arrangement was made with Morrison & Co " Still, the learned Chief Justice, who heard both his evidence and that of the appellant, and had much better opportunities of comparing them as witnesses than we have, accepted McFarland's version and rejected that of the appellant, and I do not suggest that we should be justified in interfering with his conclusion of fact. McFarland is on the face of the notes of his evidence an unsatisfactory witness, but in the box the appellant may for aught we know have been less satisfactory still. But the question remains whether McFarland's evidence, being accepted, is sufficient to warrant the conclusion that before or on 26th August there was a partnership of Thos. McFarland & Co, consisting of himself, the appellant and Keates? That is the partnership on which the respondents rely. I do not now consider the question whether, if Lang had become a partner on 23rd August, he would have been bound under the contract between McFarland and the respondents. That may be so. But I cannot reach that point because the evidence does not wear the complexion of a partnership.
There is an entire absence of proof that the three even met together to discuss such a proposal. McFarland seems to have proposed to each of the others separately that he should join in the venture. Neither by conversation nor by inference from any fact in the case is it shown that the appellant and Keates agreed together, and with McFarland, to join him in the firm of Thos. McFarland & Co Had a consensus of the three been proved, yet it is not in respect of a partnership in relation to the respondents. There is not a word of evidence to show that there was any settlement of the terms of the suggested partnership. As to Lang, the gravamen of the matter is, "We agreed to cable that we would go on with the business on the plaintiffs' terms." (That, by the way, is not the message sent, for the cable telegram does not disclose Lang either as a partner of McFarland or as a co-contractor with him.) As to Keates, the substance is, "I explained the frozen meat business to him and asked was he agreeable. To the best of my knowledge and belief he said he was." I certainly do not find it possible to infer a partnership from such evidence as was given. What it proves is no more than this, that McFarland agreed with the appellant that he should join him in the risks of the venture as regards McFarland's own interest in the contract with the respondents, and that a similar arrangement was made separately with Keates. As the appellant and Keates are not shown to have made any agreement with each other, it is not easy to say in what proportion either the appellant or Keates was to share profits and losses with McFarland in respect of that person's interest in the main contract. As an agreement for a joint adventure but not a partnership the case closely resembles in principle that put by Gibbs J. in Young v Hunter, [F7] at p. 582 in these words:"I am by no means of opinion that there may not be a case where two houses shall be interested in goods from the beginning of the purchase, yet not both be liable to the vendor; as if the parties agree amongst themselves that one house shall purchase the goods, and let the other into an interest in them, that other being unknown to the vendor: in such a case the vendor could not recover against him, although such other person would have the benefit of the goods." The plain position appears to me to be this. On the facts, apart from any implication of law, the respondents made their bargain with McFarland and with him alone. That is what they understood. See, e.g., the meaning they put upon the word "Forward." Did what passed between McFarland and the appellant give the respondents the right to sue the appellant when they discovered it? I think not. The appellant cannot under the circumstances, and in the absence of a partnership, be regarded as an undisclosed principal. It is not a case of principal and agent at all. That being the position, there is no privity of contract between the present parties entitling the respondents to recover from the appellant, who contracted only with McFarland and in respect of McFarland's interest only.
There was much discussion as to the appellant's action in signing his name in the bank's signature book as a member of the firm of Thomas McFarland & Co He appears to have been a man of no business capacity or experience-a mining prospector before he joined the firm of McFarland, Lang & Co, in which he soon lost all his capital. He says that in signing the book he did not suppose that he was representing himself to be a member of Thomas McFarland & Co, and that he signed because McFarland asked him to do so; and that when he signed he did not observe that opposite the signature his name was inscribed as a member of the firm of Thomas McFarland & Co However that may be, the signature was not inscribed until 28th September, and is not evidence that he was a partner before 26th August. Young v Hunter, [F8] already cited, was a case in which some of the defendants, a firm who had not originally been parties to the contract, which was one for the purchase of goods for shipment, had been afterwards allowed by the original purchasers to have a share in the venture. The plaintiffs knew nothing of these defendants who contested the action, but sold only to the original purchasers, who had suffered judgment by default; and it was contended (unsuccessfully) that the defendants who resisted were sleeping partners of the defendants who succumbed. On this Heath J. said, and it is his entire judgment: [F9]
"The proposition of the plaintiffs' counsel, that if it be shown that at any one period of the transaction there were a partnership subsisting, it was therefore to be inferred that there had been a partnership in the particular original purchase, is wholly unfounded."
There is one more matter to which I ought to refer. It was argued, though rather faintly, by the respondents that some strength was given to the case for a partnership at the material time by two passages in the correspondence. The first is in a letter from Thomas McFarland & Co to the respondents, dated 13th August 1907, and is as follows:"We wish to inform you that we have taken Mr. T. S. Lang into partnership, but that we intend continuing the export business under the old name." The other passage is in the respondents' letter of 20th September 1907, which is in answer to the letter just quoted. It is in these words:"We note that you have taken Mr. T. S. Lang into partnership, but that the export department will be carried on under the old name." McFarland says as to this that it meant merely that he had taken the appellant into the firm of McFarland, Lang, & Co, and that Lang had not at that time anything to do with the frozen meat trade. I do not see how the two extracts can help the respondents. If McFarland is believed, he was not referring to the firm of McFarland & Co, but if he meant to do so, his statement was a misrepresentation. But, however intended, if it misled the respondents, they cannot rely on it, in the face of the rest of the evidence adduced by them, as showing that the appellant was a member of Thomas McFarland & Co on 13th August or before 23rd August; nor can it be argued to amount to a communication to them of the existence on 26th August of a certain fact relevant to this case, since at the time the statement was made to them it was not a fact in respect of the firm of Thomas McFarland & Co, and it is not pretended that McFarland was on 13th of August the agent of the appellant to bind him by any statement in respect of that firm.
I am of opinion for the reasons given above that the appeal must be allowed.