Summergreene v. Parker
(1950) 80 CLR 304(Judgment by: Williams)
Summergreene
v Parker
Judges:
Latham C. J
WilliamsWebb
Fullagar JJ
Judgment date: 1 June 1950
Brisbane
Judgment by:
Williams
WILLIAMS J. The appellant is the defendant in an action brought in the Supreme Court of New South Wales by the respondent as plaintiff to recover 500 pounds commission for effecting the sale of the appellant's business carried on by her under the name of "The Dyeing King." Several issues arose in the early stages of the action, but there is only one left, the answer to which will determine the appeal. It is whether the respondent effected a sale of this business, and this depends primarily upon whether two letters, the first dated 20th December 1946 from Church & Co., solicitors for Messrs. A. O. Anderson and H. P. Jones to the appellant, and the second, the reply of the appellant of the next day, constituted a binding contract for the sale of the business. The text of these letters is set out in the judgment of the Chief Justice and I shall not repeat them. (at p317)
2. The letter of 20th December 1946 was written on behalf of Anderson and Jones as trustees on behalf of a company to be formed and known as "The Dyeing King Pty. Limited." It contained an offer to purchase from the appellant the business presently carried on by her under the name of "The Dyeing King" at 53 Northumberland Avenue, Auburn, and elsewhere, upon a walk-in walk-out basis including all the assets of the business (except the freehold property) as disclosed to the company's investigators upon the six conditions therein mentioned. The first condition was that the purchase price should be 8,750 pounds of which a deposit of 500 pounds should be paid forthwith and the balance upon completion. On 24th December 1946 this deposit was forwarded to the appellant enclosed in a letter from Church & Co. which stated that the deposit was paid by Anderson and Jones on behalf of a company to be formed and to be known as "The Dyeing King Pty. Limited" on that company's purchase from the appellant of the business known as "The Dyeing King." (at p318)
3. At the time of this correspondence no such company as "The Dyeing King Pty. Limited" existed although Anderson and Jones were engaged in preparing for its incorporation and these preparations had reached an advanced stage. An agent cannot contract on behalf of a principal who is not in existence and ascertainable at the date of the contract, and the contract, if contract there be, must be a contract between the agent as principal and the other party, and therefore a contract on which the agent is personally liable. In Kelner v. Baxter (1866) LR 2 CP 174 it was held that such an agent is personally liable unless it clearly appears from the terms and conditions of the alleged contract that it was not intended that the agent should be so liable. (at p318)
4. The Full Court of the Supreme Court of New South Wales, relying upon the principles enunciated in Kelner v. Baxter (1866) LR 2 CP 174 and differing from the learned trial judge, held that the two letters constituted a binding contract for the sale of the business between Anderson and Jones and the appellant and ordered judgment to be entered for the respondent for the 500 pounds claimed. (at p318)
5. I do not find anything in the letter of 20th December 1946 at variance with Anderson and Jones becoming personally liable on a contract made between them and the appellant except the sixth condition. The letter provides for the lease being granted and the assignment of the tenancies being made not to Anderson and Jones but to the company. But it is quite usual for a contract between a trustee on behalf of a proposed company as a purchaser and a vendor of property to provide that the vendor shall sell the property not to the trustee but to the proposed company. In In re Northumberland Avenue Hotel Co. (1886) 33 Ch D 16 the agreement with the trustee for the proposed company (Doyle) provided that the vendor (Wallis) who had an agreement for a building lease, should grant an under-lease to the company and that the company should erect the buildings. Nevertheless Cotton L.J. said: "that was a contract which was binding as between Mr. Wallis and the other gentleman (Doyle) whom I have mentioned, and was a contract which provided that certain things should be done by the company" (1886) 33 Ch D, at p 20 . Lopes L.J. said (1886) 33 Ch D, at p 21 : "There no doubt was an agreement between a man called Nunneley, who was agent for Wallis, and a man named Doyle, who described himself as trustee for the company."
Under such a contract the trustee for the proposed company would be personally liable to pay the purchase money and the vendor would be bound to dispose of the property sold to the company when formed by the direction of the trustee. If, in addition to a cash payment, other consideration was to move from the company to the vendor, such as the company, as in the present case, entering into a lease with and becoming the assignee of other leases from the vendor and giving the vendor the right to apply for shares in the capital of the company, the trustee would be personally liable for any damage the vendor might suffer if the proposed company failed to achieve existence, or having succeeded refused to enter into a new contract with the vendor and undertake these obligations. (at p319)
6. It was not contended that the respondent, in order to earn his commission, had to do more than effect a binding contract for the sale of the business. It has been held in England that an agent employed to effect a sale of property does not earn his commission unless a binding contract of sale is made between the vendor and a purchaser who is not only ready and willing but able to purchase the property (Martin v. Perry and Daw [1931] 2 KB 310 ; James v. Smith [1931] 2 KB 317 (n) ; Poole v. Clarke & Co. [1945] 2 All ER 445 ; Bennett and Partners v. Millett [1948] 2 All ER 929 , at p 931 ; McCallum v. Hicks (1950) 66 TLR 747 . The Full Supreme Court of Victoria refused to follow the decision of the Court of Appeal in James v. Smith [1931] 2 KB 317 (n) in Scott v. Willmore & Randell (1949) VLR 113 so that I prefer not to express an opinion on a point which was not argued. But, assuming that such an agent must prove that the purchaser is not only ready and willing but also able to perform the contract, it is sufficient if the purchaser is in a position to perform the contract at the time fixed for completion. In James v. Smith (1931) 2 KB, at p 322 , Atkin L.J. said: "I think it is sufficient if it is proved by the agent or by the purchaser that the circumstances are such that if the vendor had been ready and willing to carry out his contract, he on his part at the proper time could have found the necessary money to perform his obligation." Accordingly, where an agent for a proposed company agrees with the vendor that the purchase shall be completed by the company performing certain acts, the vendor, in the absence of evidence that the company will refuse to do so, must wait until the time fixed for completion to see whether the company is ready and willing and able to perform these acts before rescinding the contract. (at p320)
7. There is no evidence that Anderson and Jones would not have been able to incorporate the new company before 1st February 1947 or that the new company would not have been ready and willing and able to perform the first, second, third, fourth and fifth conditions in the letter of 20th December 1946. (at p320)
8. Were it not for the sixth condition in this letter, I would be of the opinion that the appeal should fail. But this condition appears to me to be at variance with any intention that Anderson and Jones should be under any personal liability. Mr. Kerrigan contended with force and plausibility, and I should be pleased if I could to accede to his argument, that this condition only related to a possible novation at a future date of the existing contract between Anderson and Jones and the appellant into a contract between her and the new company when incorporated, and did not prevent the making of a contract between Anderson and Jones and the appellant for the purchase and sale of the business on the five preceding conditions. But I am unable to place this construction on the condition. It must be taken into consideration in determining whether it is possible to read the letters so as to impose any personal liability on Anderson and Jones, and it appears to me to be decisive that the parties intended and intended only to bring a binding contract into existence between anyone when, and only when, after negotiations, all the terms and conditions of a contract of sale had been agreed upon between the appellant and the new company and those terms and conditions had been embodied in a formal document and executed by the appellant and the new company.
Condition 6 does no doubt differ from similar clauses that have been before the courts in decided cases in that it relates not to a further contract to be entered into between Anderson and Jones and the appellant but to a contract to be entered into between the appellant and the new company. If the condition had provided for a contract to be entered into between Anderson and Jones and the appellant containing usual terms of sale and these terms to be in a form satisfactory to both parties, it would be beyond doubt that such a condition could not be construed as a mere expression of the desire of the parties as to the manner in which a transaction already agreed to would in fact go through and would make the execution of a further contract a condition or term of the bargain, so that until the further contract was executed there would be no binding contract (Von Hatzfeldt-Wildenburg v. Alexander (1912) 1 Ch, at pp 288, 289 ). In the first place the meaning of the words in condition 6 "the usual agreement for sale and purchase to be entered into by you and the company containing the usual terms of sale" is quite uncertain and prevents the existence of an enforceable contract (In re Vince; Ex parte Baxter [1892] 2 QB 478 ; Scammell and Nephew Ltd. v. Ouston (1941) AC 251 ; Bishop & Baxter Ltd. v. Anglo-Eastern Trading and Industrial Co. Ltd. [1944] 1 KB 12 ). In the second place the words "these terms in a form satisfactory to you (i.e. the appellant) and the Company" clearly indicate that the letters are at most an agreement to enter into an agreement and contemplate the negotiation and execution of a formal contract between the parties.
In such a case there is no binding contract until the formal contract is executed, and if the contract is recorded in two parts until the parties have signed and exchanged their copies (Eccles v. Bryant and Pollock (1948) Ch 93 ). As I have said condition 6 does not relate to the execution of a further contract between Anderson and Jones and the appellant, but it is nevertheless an integral and essential part of the bargain between them and the appellant, and is, in my opinion, expressly at variance with any intention to attribute any personal liability to Anderson and Jones or to create any contractual relations other than a contract between the appellant and the company. (at p321)
9. I am therefore of opinion that the respondent did not effect a sale of the appellant's business to Anderson and Jones and that the respondent did not earn his commission. (at p321)
10. For these reasons I would allow the appeal. (at p321)