Lang v James Morrison & Co Ltd

13 CLR 1

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(Decision by: Griffith CJ)

Between: TS Lang
And: James Morrison & Co Ltd

Court:

Judges:
Griffith CJBarton J
O'Connor J

Subject References:
Contract
Creation of
Offer and acceptance
Where offer made to one person but accepted by others and principal undisclosed

Hearing date: 20 September 1911; 21 September 1911; 22 September 1911
Judgment date: 27 September 1911

MELBOURNE

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Decision by:
Griffith CJ

This is an appeal from a judgment of the learned Chief Justice of Victoria in favour of the respondents inan action brought originally by them against three persons, J. W. McFarland, T. S. Lang (the appellant), and one Keates. McFarland and Keates became insolvent, so that the effective judgment is against the appellant. The plaintiffs, who were merchants in London carrying on the business of receiving and disposing of frozen meat from abroad, by their statement of claim alleged that the three, McFarland, Lang and Keates, during the period material to be considered, carried on business in Melbourne under the name or style of Thomas McFarland & Co and also under the name or style of McFarland, Lang & Co It appears that in the year 1897 the firm of Thomas McFarland & Co was registered in Victoria under the Registration of Firms Act 1892, which requires the registration of firm names, as carrying on the business of stock and station agents and meat exporters, the sole member of the firm being Thomas McFarland. On 13th Sept. 1905 a change in the constitution of that firm was registered by J. W. McFarland, who was registered as the sole member of the firm. The plaintiffs had some dealings with him while he carried on that business. On 10th June 1907 J. W. McFarland, Lang & Keates entered into partnership. An indenture of partnership was drawn up which provided, amongst other things, that the business of the partnership should be that of stock and station agents, live stock exporters and general commission agents. The business of exporting meat was not part of the business of the partnership, and it appeared that Lang and Keates had refused to have anything to do with that business. Lang was to bring in all the capital of the firm, PD1,500, and the partners were to share equally in the profits and losses. That partnership was duly registered under the Registration of Firms Act on 28th August 1907.

The statement of claim, after setting out that the three defendants carried on business under the two firm names, alleged an agreement in writing constituted by a letter of 17th April 1907 from the defendants to the plaintiffs, a letter of 19th July 1907 from the plaintiffs to the defendants, and a cablegram of 26th August 1907 from the defendants to the plaintiffs, by which it was agreed, in brief, that the defendants should during the ensuing exporting season-that is, I believe, the spring and summermonths-engage in the business of buying cattle, sheep and lambs in Melbourne, freezing their carcases, and shipping them to London to be sold by the plaintiffs, that for those purposes the plaintiffs should open a credit at the Union Bank in Melbourne to be operated upon by the defendants to the extent of PD10,000, and that, after allowing certain charges to the plaintiffs and the defendants respectively, any profits or losses arising from the business should be equally divided.

Before referring to the letters I would remark that the plaintiffs had had dealings with J. W. McFarland, as Thomas McFarland & Co, in the business of meat exporting, and knew he he was still a member of that firm.

The letter of 17th April, the first one relied upon, contained a proposal from Thomas McFarland & Co, that is, J. W. McFarland alone, to the plaintiffs, giving in outline the way in which he suggested that the proposed business should be carried on. On 12th July the plaintiffs acknowledged that letter in these terms:

"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."

It was suggested by Mr. Cohen that that was an acceptance of the terms of T. McFarland & Co's proposal. I do not construe it in that way. It seems to me that the words "we have agreed to give the proposal mentioned a trial" mean with the context "we, the directors of the company, have agreed amongst ourselves to take up your proposal, but we have not not yet settled the terms." Then on 19th July followed a letter from the plaintiffs in which they discussed the matter at length and said:

"Referring to your letter dated 17th April, 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."

The proposal made by J. W. McFarland as T. McFarland & Co did not limit the matter to one season, but proposed an arrangement of indefinite duration. The plaintiffs then went on to prescribe a number of conditions necessary for the working of the contract, to which it is not necessary to refer in detail, and concluded by saying-

"Upon receipt of this letter, if in order, kindly wire us the word 'Forward' when we will start cabling you and alsoestablish a credit as you desire."

It was contended that that letter of itself constituted a complete acceptance of the offer made by T. McFarland & Co It is clear that it did not. It proposed various modifications, and the concluding words I have just read show clearly that it was not intended to be an acceptance until the word "Forward" had been cabled.

On 27th August J. W. McFarland sent by cablegram in the name of Thomas McFarland & Co the word "Forward." That was entered by the plaintiffs in their books, and with it what they understood to be the translation of it, thus-"Forward' means that he has received our letter of 19th July and we can start working." The result was that on those documents there was on that day a complete contract between J. W. McFarland trading as Thomas McFarland & Co and the plaintiffs the terms of which were to be collected from those three documents.

Some discussion took place as to whether the relation between J. W. McFarland, trading as Thomas McFarland & Co, and the plaintiffs was that of partners, or that of principal and agents. It is not necessary to assign the transaction to any particular formal category, but the real substance of the transaction was that the plaintiffs and Thomas McFarland & Co agreed to enter into a joint adventure. They were not partners as against third parties, but each party had certain rights against the other. So far the case is clear.

The plaintiffs contend that, before the cablegram of 27th August was sent, J. W. McFarland had taken Lang and Keates into partnership with him, and that he sent the word "Forward" on their behalf as well as his own. Upon that point there was a great conflict of evidence, to which I will refer later. Suppose, however, that fact were established, it would not establish the contract alleged. An offer from A. to B. accepted by B. and C., or accepted by B. as agent for B. and C., is not an acceptance of the original offer, but is a new offer, an offer by B. and C. to make a contract on the terms of the original offer, and neither party is bound by the new offer until it is accepted. That is clearly established by Boulton v Jones. ^[F1] Now it is not suggested that the plaintiffs were ever informed of Keates' inclusionin this new firm. It is suggested that they were informed of Lang's inclusion by a letter dated 13th August 1907 from J. W. McFarland to them. He said in the name of Thomas McFarland & Co "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." That statement, so far as it was relevant, was untrue. J. W. McFarland had taken Lang and Keates into partnership with him in another branch of business and under another firm name, but they had nothing to do with Thomas McFarland & Co as meat exporters. On 20th September the plaintiffs acknowledged that letter in this way "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." Nothing was said about Keates. It seems to me that those two letters are ambiguous. They are not, at any rate, enough to establish a case of substitution, even if the facts were as they are alleged. When J. W. McFarland said "We have taken Mr. T. S. Lang into partnership," he says he meant he had taken Lang into partnership in another business. He said he meant what he said in one sense, and, if the plaintiffs understood it in another sense, curious questions might arise. But the letters are still ambiguous, and not enough to establish a case of substitution; certainly not in any contract made on 26th August, for at the earliest the plaintiffs would not have assented until the day on which the letter of 13th August was received by the plaintiffs, about a month after it was sent. Moreover, the contract supposed to have been substituted was a contract with different persons, and not with the three persons now sued. So that the plaintiffs have not established the case made in the statement of claim.

But a contract may be implied from a course of dealing. I think that if, for instance, J. W. McFarland had died and his business had been carried on by his executors or by persons who had bought the business, and they had accepted orders from the plaintiffs intended to be carried out on the terms of the contract made with Thomas McFarland & Co, a contract of agency would be implied to be performed on the terms of those letters. That would cover some but not all of the transactions in question in this action, but the damages would be quite different from thoseawarded. Then the form of action would have been for damages arising out of breach of the express directions, and there could not have been any claim against the persons who carried on that business founded on the want of skill which J. W. McFarland was understood to have, and which undoubtedly was the basis of the contract between him and the plaintiffs. Moreover, the case made for the plaintiffs was not that there was a series of implied contracts, but that there was one continuous contract extending throughout the exporting season or until the PD10,000 credit was exhausted. There is no case of holding out by Lang himself.

I will assume, however, that a new case is open and that the plaintiffs are entitled in this action to establish that at sometime, no matter when, J. W. McFarland was, in performance of his contract with the plaintiffs, acting as agent for the defendants in such a sense as to make them liable. Then it is necessary to consider what the evidence was. There was a great conflict of evidence. The story told on behalf of the plaintiffs was flatly contradicted by Lang. On an appeal from a Judge of first instance on a question of fact a Court of Appeal is in a somewhat difficult position. The rules are well known and are laid down in Coghlan v Cumberland ^[F2] in the Court of Appeal in England and in this Court in McLaughlin v Daily Telegraph Newspaper Co Ltd, ^[F3] at p. 247. When a case depends entirely upon the credit due individual witnesses who contradict one another, a Court of Appeal is very reluctant to differ from the Judge of first instance who had the advantage of seeing and hearing them; but when the evidence is in writing and there is no question of the credibility of witnesses or of the weight to be given to their statements, then a Court of Appeal is bound to exercise its own judgment, and the test is not whether there was any evidence to go to a jury, but whether, on consideration of the whole evidence, the plaintiff has established his case.

Now the Court is, of course, not bound by any errors of fact into which the learned Judge of first instance has fallen. The case that is set up is that before 26th August 1907 McFarland, Lang and Keates formed a new partnership, or, in other words, agreed to become members of the firm of Thomas McFarland & Co of which Lang and Keates were not previously members. J. W. McFarland was called as a witness, and he said that when he received the plaintiffs' letter of 19th July he discussed the matter with Lang and Keates, either at the same time or at different times. He said:

"I think it was at different times. I am sure I did discuss it with Lang.

He said-'Do you think it a safe business?'

I-'After years of experience in it, I think it is.'

He-'What is the most you can lose?'

I-'I hope to make PD1,000.'

He-'If the worst comes to the worst PD500 ought to cover all the losses.'

We agreed to cable that we would go on with the business on the plaintiffs' terms. I cannot remember anything else about it."

It appears that about that time J. W. McFarland was very ill and was so for several days. It does not appear where the conversation took place, at his office or where he was lying in bed. The whole matter is extremely vague, and depends on the statement "we agreed to cable that we would go on with the business on the plaintiffs' terms." It is suggested, of course, that the word "Forward" was sent by J. W. McFarland as agent for Lang and Keates, but it would appear from what I have already read that the three partners never even met to discuss the terms of the contract, which is very singular. It is also singular that no one knows what the terms of the new partnership were to be, except what could be conjectured from that conversation. The point, however, is not that it does not appear what the terms of the new partnership were, but that it does not appear from the evidence that they ever were settled at all. This alleged change in the constitution of Thomas McFarland & Co was never registered. It appeared further that J. W. McFarland had sworn in the Court of Insolvency that Lang was never a partner with him in Thomas McFarland & Co As to the way in which business was carried on after this new partnership was formed, these three persons occupied the same room, but they kept separate banking accounts. Neither Lang nor Keates operated on the account of Thomas McFarland & Co They kept separate books, and the books were kept by different persons, except a press copy book which was used to keep copies of letters and invoices. Neither Lang nor Keates ever took any part in the business of the new firm except that on two occasions Lang signed letters in the name of Thomas McFarland & Co He says they were dictated to a typewriter by J. W. McFarland who had to go away and requested him to sign them. Lang also signed a cablegram with the firm name under the same circumstances. The business carried on between Thomas McFarland & Co and the plaintiffs was never discussed with Lang or Keates. Only one transaction was the subject of discussion, and that is one which took place during the absence of Lang from Victoria, when J. W. McFarland had misappropriated PD279 of the moneys upon which he could draw under the contract with the plaintiffs, and applied it to the purposes of the firm of McFarland, Lang & Co The defendant Lang denies the whole story. He says he never entered into the partnership and never had anything to do with it. Against all those facts I have referred to there is one solitary bit of evidence which can be relied upon to corroborate the present story of J. W. McFarland, not that which he swore to in the Court of Insolvency. That is, that it appears that on 10th September J. W. McFarland went to the Union Bank, which was the bank of both firms, and entered his name in the signature book. It was already there and why he went then does not appear. What was written in the book on that occasion, as appears from an examination of the book itself, which we have seen, is "Thomas McFarland & Co, Frozen Meat Exporters, 12 Temple Court, Collins Street, Melbourne" with the ordinary signature "Thos. McFarland & Co"; whether "J. W. McF." now in the book was then there or not does not appear. The next entry in that book was made on 16th September. On 28th September Lang went to the bank and signed his signature "Thos. McFarland & Co " under J. W. McFarland's signature, and on 8th October Keates went and did the same thing. No explanation of this transaction is given by J. W. McFarland; why it was done, why Lang and Keates respectively signed the book, why J. W. McFarland signed on 10th September, if the partnership, as we are told now, was formed in August, is nowhere explained. Lang said in his evidence:

"I went to West Australia on 30th September 1907. Before I left I went to the Union Bank and I signed my name as McFarland, Lang & Co on 28th September. I also signed one as for Thomas McFarland & Co McFarland told me to go there and sign as the bank wanted my signature. I went alone. I do not remember anything said or read to me. When I signed I did not observe that it was stated opposite the signature that I was a partner in Thomas McFarland & Co"

The names of the three persons now alleged to be members of the firm of Thomas McFarland & Co are now written in the bank's book, but it is clear that they were not written there when J. W. McFarland went and signed his name there on 10th September. When they were written does not appear. Lang says they were not put there when he signed opposite to where they now are. That is the only isolated fact I can find to corroborate the story told by J. W. McFarland as against the course of dealing between the parties and the sworn testimony of the appellant.

Now in order to establish that there was a partnership it is necessary to prove that J. W. McFarland carried on the business of Thomas McFarland & Co on behalf of himself, Lang and Keates, in this sense, that he was their agent in what he did under the contract with the plaintiffs-not that they would get the benefit, but that he was their agent. That appears from Ex parte Tennant; In re Howard, ^[F4] particularly the judgment of Cotton L.J. ^[F5] Upon the evidence in the case it appears to me that at best, taking the plaintiffs' version of it, it is equally consistent with a partnership, and with a subsidiary agreement, namely, to give Lang and Keates an interest in J. W. McFarland's share in the joint venture. It is analogous to a sub-partnership, but that is not sufficient to establish privity of contract between Lang and Keates and the partners in the joint venture. On that subject the decision of Jessel M.R. in Alfaro v De La Torre ^[F6] may be read with advantage. Upon the whole I am of opinion that the great weight of the evidence is that, if any agreement was made, that was the agreement, and not an agreement for another partnership. But I think it right to say that the great preponderance of the evidence is that there was no complete agreement at all.

For these reasons I think the plaintiffs failed to establish their claim, and that they must have redress against the person to whom they gave credit, and not against persons with whom they subsequently thought they could establish a contract.