Bluestone Pty Ltd v Wilispa Pty Ltd [1994] QSC 173

------~-~-·-----~-- IN THE SUPREME COURT OF QUEENSLAND CAIRNS DISTRICT REGISTRY Before Mr Justice Dowsett [Re: Bluestone Pty Ltd] BETWEEN: AND: BLUESTONE PTY LTD A.C.N. 055 693 233 WILISPA PTY LTD A.C.N. 919 886 334 REASONS FOR JUDGMENT- DOWSETT J. Judgment delivered 11/07/1994 No. 88 of 1992 Plaintiff Defendant Counsel: Mr DB Fraser QC, with him Mr AN Stone for the plaintiff Mr P J Lyons QC, with him Mr RN Traves for the defendant Solicitors: Messrs MacDonnells Messrs Miller Harris & Co Hearing Dates: 31 May, 1, 2, 3, 4, 7 and 8 June, 1993. -- 1 of 15 -- IN THE SUPREME COURT OF QUEENSLAND CAIRNS DISTRICT REGISTRY Before Mr Justice Dowsett [Re: Bluestone Pty Ltd] BETWEEN: AND: BLUESTONE PTY LTD A.C.N. 055 693 233 WILISPA PTY LTD A.C.N. 919 886 334 REASONS FOR JUDGMENT- DOWSETT J. Judgment delivered 11/07/1994 No. 88 of 1992 Plaintiff Defendant At all relevant times, the directors of the defendant were John Bemard Soderberg, Esterina Soderberg (his wife) and William John Wallace. Prior to June, 1992 the defendant had been engaged for some years in property development in the Cairns area. One such development was of land at Brinsmead, which was undertaken by the defendant in joint venture with Elders Finance Limited. This land had only been partially subdivided and sold when Elders purported to terminate the joint -- 2 of 15 -- 2 venture on 23 January, 1991. The result of this was that the defendant continued to hold the land but was substantially indebted to Elders. The balance of the Brinsmead land was offered for auction in April, 1992. The auction was not successful, but negotiations were commenced with the plaintiff. Initially, the plaintiff offered $3,005,000, the offer being in the form of a draft contract executed under its common seal. Subsequently, a second offer was made at $3,200,000, also in the form of a draft contract signed by Robert John Norman on behalf of the plaintiff. Mr Soderberg received this offer on behalf of the defendant and amended the purchase price to $3,500,000. Additional terms were also inserted. Soderberg then signed the contract. That document now bears the words, "Wilispa Pty Ltd per J.B. Soderberg", immediately above Soderberg's signature. He denies that they were there when he signed. The document was returned to the plaintiff, but the counter-offer was not accepted. On Friday, 26 June, 1992 the plaintiff made a further offer to purchase at $3.5 million, again in the form of an executed draft contract. In circumstances which I will later describe in more detail, Mr Soderberg wrote his name on the contract above the printed word, "Vendor", in the space provided for execution. Under his own name, he wrote the name, "W. Wallace". His wife and Phillip James Harvey, a local real estate agent, were present at the time. Harvey took possession of both copies of the contract, sent one copy to Mr Wallace in Adelaide and gave the other to Mr Norman. Subsequently, the defendant agreed to sell the property to a third -- 3 of 15 -- -~ -- -~ ------~------ 3 party and has consistently denied any binding agreement with the plaintiff who seeks specific performance by this action. The defendant denies that Mr Soderberg was authorised to make the contract on its behalf and alternatively alleges rescission for failure of a condition, namely cl.ll of the purported contract, which provides as follows:- "Clause lla The parties here to acknowledge and agree that the Vendor is, at the date hereof, negotiating with its Joint Venturers, Elders Finance, Ltd (Elders) the amount of money payable to Elders to secure the release of Mortgage security over the property hereby sold and various collateral Securities. Clause llb This contract is subject to and conditional upon the vendor entering into an agreement with Elders with respect to matters referred to in (lla) hereof on terms and conditions satisfactory to the Vendor on or before the date 30 days from the acceptance of this contract. " In reply, the plaintiff pleads that the defendant is estopped from denying Soderberg' s authority to execute the contract and alternatively, that he had express or implied authority to do so. There is also an allegation of ostensible authority. As to cl.ll, the plaintiff alleges that the defendant may not rely upon that clause because, "the defendant took no steps or any appropriate steps to fulfil those conditions within the time specified therein." AUTHORITY Conduct said to evidence actual authority is:- -- 4 of 15 -- -------- 4 (a) The property was being developed pursuant to a joint venture agreement with Elders. (b) Pursuant to that joint venture agreement, the defendant was authorised to delegate performance of its duties to Soderberg. (c) Soderberg was authorized to execute an offer for sale of the land at $3,500,000. (d) Soderberg was authorised to execute contracts for the sale of sub-divided land. (e) Soderberg was authorised by all of the directors of the defendant to execute this contract in that they impliedly consented to such execution as binding the defendant. (f) Soderberg was authorised to execute a contract for purchase of land in 1989. In support of the pleas of ostensible authority and estoppel, the plaintiff relies upon those same matters and also:- (a) In June, 1992 Soderberg made an offer to the plaintiff to sell the land, which offer was executed, "Wilispa Pty Ltd per J.D. Soderberg". (b) Soderberg attended the auction to execute any contract of sale on behalf of the defendant. Representatives of the plaintiff were present. Actual Authority There is no evidence that the defendant expressly authorized Soderberg to sign the contract on its behalf, but the plaintiff points to actions by Soderberg which were apparently authorized by the defendant and other conduct of the directors as evidencing authority of sufficient extent to include execution of this contract. -- 5 of 15 -- -------------- 5 Clause S(b) of the joint venture agreement (See p.337 of ex.l) provides that the defendant may delegate performance of its duties and obligations under cl.SA to the person named in item 10 of the Schedule, Soderberg. The reference to cl.SA should probably be to cl.S(a). That clause spells out the duties of the defendant in connection with the management of the project. I infer that the defendant had so delegated the performance of its duties to Soderberg as he seems to have been in day-to-day control of the development. However execution of this contract was not in discharge of those duties. The joint venture had been terminated, and the assets were being realized. Authority to manage the venture on behalf of the defendant did not include disposal of the remaining land after termination of the joint venture. It is alleged that Soderberg was authorized to make the earlier counter-offer at $3.5 million by the alteration to the plaintiff's offer at $3.2 million. The document was certainly signed by him and, in its present form, suggests that he was purporting to act on behalf of the defendant. As I have said, Soderberg denies that the reference to Wilispa was present when he signed. Mr Harvey said that Soderberg executed that document after extended discussions by telephone with Mr Wallace in Adelaide in the presence of Mrs Soderberg, the third director. Mr Soderberg said that he signed, 11 as an offer and an offer only 11 , with the intention that the document would be forwarded to Mr Wallace for approval before final execution. (See p.168 of transcript.) Mr Wallace gave similar evidence. Mrs Soderberg did not remember this occasion. I did not find Soderberg or Wallace convincing on this point, but it may not matter for present purposes. The terms of that offer differed materially from those of the presently alleged contract, although the purchase price was the same. Even on -- 6 of 15 -- 6 Mr Harvey's version, Mr Soderberg's authority was to execute a contract in express terms which had been discussed and agreed with Mr Wallace, probably in the presence of Mrs Soderberg. I could not infer from that execution that Mr Soderberg was authorized to sign any other contract for the sale of this property. The plaintiff points to various contracts for the sale of subdivided land which were executed by Mr Soderberg on behalf of the defendant in the course of the development. Mr Soderberg said that he had been specifically authorized to sign such contracts, and I accept that this was so. I certainly cannot infer from the fact that he was authorized to sell subdivided allotments that he was also authorized to dispose of the balance of the land. The plaintiff alleges that the present contract was authorized by all of the directors and that Soderberg was implicitly authorized to sign on behalf of the company. This assertion depends upon my accepting the evidence of Mr Harvey as to circumstances surrounding the signing. The accounts of witnesses differed. Harvey said that he had telephone discussions with Mr Wallace on 25 and 26 June and that they had reached agreement as to certain terms. In particular, it was agreed that the contract would be conditional upon the purchaser obtaining finance within 14 days. Subsequently, on 26 June, Harvey took the contract to Norman who signed it, having first altered the finance period to 21 days. Harvey then took the altered contract to Soderberg' s home. On that day, Mr Harvey's staff sent a fax (ex.32) to Mr Wallace as follows:- 11 Regarding contracts between the abov~. the situation is that my opinion is that Bluestone will pay the $3:5 million but I have asked for amended conditions as to the settlement. New Contracts have been drawn up but -- 7 of 15 -- 7 I believe they still need a couple of days to obtain a finance approval from their Funders as I believe they were only approved to $3 million. Hopefully the contracts will reach you mid week for signature." The fax was sent at 14.52, probably before Mr Harvey saw Mr Soderberg. Mr Harvey said he had dictated it at some earlier stage that day, but that it had been superseded by events and should not have been sent. At Soderberg's home, according to Harvey, Soderberg signed both copies of the contract, but wrote beneath his name, the name, "W. Wallace". Mr Harvey said that there was no telephone call to Wallace during this visit. Mr Harvey explained the presence of Mr Wallace's name on the contract as follows:- "It was part of an ongoing process as far as I was aware. And John had asked me at that time or told me that this contract had to go to Adelaide and that Bill Wallace was going to sign it. And I believe that's why he wrote theW. Wallace there, for Bill to sign underneath." (see p.129 of transcript.) Mr Harvey said that after execution, he asked Soderberg, "Do we have a contract?". Soderberg replied, "You can tell Bob, your mate Bob, he's got a deal." Mr Harvey's theory was that Mr Wallace's signature was not needed to complete the contract, but rather was prompted by his dealings with Elders. This is difficult to accept. It is also curious that notwithstanding Mr Harvey's having agreed the finance period with Mr Wallace, he did not think it necessary to discuss with him the proposed variation of that period. Harvey said that Soderberg agreed to Mr Norman's proposal. According to Harvey, a person called Straguszi arrived at Soderberg' s home whilst he was there. Straguszi was an employee of Ray White, another real estate agency. Mr Harvey said that at Soderberg' s insistence, he hid in the bedroom until -- 8 of 15 -- '• ' 8 Straguszi had departed. He then took both copies of the contract to the airport, together with another contract described as the "Gosford contract", which had been given to Soderberg by Mr Straguszi and which Mr Soderberg was sending to Adelaide. In fact, Mr Harvey despatched only one copy of the present contract with the Gosford contract, giving the other copy to Mr Norman. Mr Soderberg's version was that before signing on 26 June, he spoke with Wallace on the telephone, particularly about the proposed variations from the terms of the previous offer at $3.5 million. Mr Wallace instructed him to sign the contract, to write below his signature, the words, "W. Wallace to sign", and to send the documents to him in Adelaide. This conversation was reported to Harvey. Mr Soderberg signed the contract and was in the process of adding the additional words when Harvey took the contract from him saying, "Why do you want to write that shit for? You know as well as I do it is not a contract until Bill has signed and perused them". As I understand it, Mr Wallace's name was written on both copies of the contract. It is a little difficult to see how Mr Harvey could have intervened physically to prevent the addition of the words, "to sign", on each copy. Perhaps Soderberg meant that Harvey intervened while he was endorsing the first document, and that he merely endorsed the second document to coincide with the first. According to Mr Soderberg, Mrs Soderberg then said that they would take the contracts to the airport for forwarding to Adelaide but Harvey said, "Don't you trust me?" in response to which Mrs Soderberg agreed that Mr Harvey should despatch the contracts. -- 9 of 15 -- 9 Mr Wallace said that he spoke to Mr Soderberg by telephone after receipt of ex.32 and that he asked that the contract be sent to him for perusal and execution. He said that he also instructed Mr Soderberg to write on the contract, "W. Wallace to sign". Mrs Soderberg was present at the signing, according to both Mr Soderberg and Mr Harvey. She recalled her husband telephoning Mr Wallace before execution of the contract and saying to Harvey that, "Bill told me to sign and put 'W. Wallace to sign', but he said you realise it is not a contract until Bill signs it and puts the common seal on it", to which Mr Harvey acceded. Both Mr and Mrs Soderberg denied that Straguszi came on this occasion, saying that he came whilst Harvey was there on an earlier occasion. Mrs Soderberg also confirmed that she had suggested that she and her husband take the documents to the airport, but that Harvey replied that he would do so. Some significance was attached to the communication to Norman of the fact of execution by Soderberg. The suggestion seemed to be that Harvey, as agent for the defendant, communicated acceptance of an offer. The plaintiff seeks to enforce a written contract. There is no allegation of a prior oral agreement. The question is whether Soderberg was authorized to bind the defendant to the written agreement, not whether Harvey was authorised to communicate acceptance of an offer. I was not particularly impressed by any of the principal witnesses in this case, namely Mr Norman, Sir Robert Norman, Mr Soderberg, Mr Wallace and Mr Harvey. I accept Mrs Soderberg and Messrs Grier and Hogan as generally honest and reliable. Although there were some gaps in Mrs Soderberg' s evidence, her account generally -- 10 of 15 -- ------------------------------------, 1 0 supported that of her husband. There are also objective facts which suggest that the accounts given by the Soderbergs and Wallace should be preferred to that of Harvey. Perhaps the most significant of these is the presence of the name, "W. Wallace", on the contract. There is no convincing reason for this other than that it indicated that Mr Wallace was to execute the contract. Mr Harvey was putting pressure upon Mr Soderberg to sign the contract and obviously had an agent's interest in sealing the bargain. The defendant was an unwilling vendor. This is especially obvious from Hogan's evidence. It was seeking overseas funds to pay out Elders, hoping that it could then continue with the development itself. Elders, however, was also pressing for a sale. Wallace, who seems to have been the real controller of the defendant, probably hoped to keep the plaintiff interested without finally committing the defendant. He was probably also trying to keep Elders at bay by assuring it of an impending sale. It is also difficult to understand why Soderberg would have sent the Gosford contract to W allace if there were already- agreement amongst the directors that the plaintiff's offer be accepted. Obviously, Harvey must have obtained the Gosford contract from Soderberg at some time, and it may be that Straguszi arrived on 26 June as Harvey said, but sending the contract to Wallace was a clear indication that the contract with the defendant was not yet in place. Overall, I preferred the evidence of the Soderbergs and Wallace to that of Harvey in all respects, save as to Straguszi's presence on 26 June and as to one other issue which I will mention later. I conclude that no actual authority to sign was conferred upon Soderberg on 26 June, although the terms of the agreement may have -- 11 of 15 -- ~--,- -----~-~----------- ·-· ·----· ----~-···--- 1 1 been substantially accepted by all three directors at that time. The parties intended that there be a written contract, and so no binding contract was formed. As I have said, the plaintiff did not allege on oral agreement. Finally, the plaintiff sought to rely upon the fact that Soderberg executed a contract to purchase land on behalf of the defendant in 1989. A transaction in 1899 offers little guidance as to the extent of Soderberg's authority in 1992. In any case, execution of that contract of purchase was expressly authorised. I am unable to infer from these matters or from their totality that there was any actual authority conferred upon Soderberg to execute this contract on behalf of the defendant. Ostensible Authority/Estoppel At the trial, the plaintiff was reluctant to acknowledge that the basis of ostensible authority is estoppel. I am content to rely upon the view expressed by the High Court in Northside Developments Pty Ltd v. Registrar-General & Ors (1989-90) 170 CLR 146, per Brennan J at p.172, Dawson J at p. 200, Toohey J at p.208 (concurring with Dawson J) and Gaudron J at pp.211-2 that ostensible authority is a special instance of estoppel. Mason CJ implicitly took the same view at pp.159-162. The additional facts said to justify a finding of ostensible authority are set out above. Reliance is placed upon the words which appear on the earlier offer at $3.5 million, "Wilispa Pty Ltd per J B Soderberg". I am inclined to reject Mr Soderberg' s claim that those words were not on the document at the time of signing, but even so, mere execution of one contract can hardly be evidence of general authority to bind the principal, even with regard to the same subject matter. -- 12 of 15 -- -~~------- ---------~~-- 1 2 Similarly, no inference can be drawn from the fact that Soderberg attended at the auction to sign any contract, even accepting that the plaintiff was aware of his presence on that occasion. At worst for the defendant, the only inference would be that he was authorised to sign a contract if the land were sold at that auction. Although it was not argued, I should add that delivery of the signed copy of the present contract to Norman was not a representation of authority. The presence of Wallace's name clearly indicated that somebody else was to sign in order that the defendant be bound. Taking all of these various matters together, I am unable to infer that there was any representation by the defendant that Soderberg had authority to bind the defendant to a contract such as this. Had I concluded otherwise, it would have been necessary to consider whether the plaintiff was aware of such representation, but that question does not now arise. CLAUSE 11 The defendant may not rely upon c1.11 if the failure to reach agreement with Elders was a result of its own conduct. See Suttor v. Gundowda Pty Ltd (1950) 81 CLR 418 at pp. 440-441. Each party to a contract must do all things necessary to enable the other party to have the benefit of the contract. See, for example, Australian Coarse Grains Pty Ltd v. Barley Marketing Board [1989] 1 Qd R 499, per Connolly J at p.507 and Ryan J at p.514, Andrews CJ concurring. After 30 June, the defendant was bound by the contract with Gosford Pty Ltd at $3,550,000 and was repudiating any obligation to the plaintiff. It is therefore wildly improbable that the defendant was nonetheless doing all things necessary on its part to enable the plaintiff to have the benefit of the alleged contract. Nonetheless, -- 13 of 15 -- --- --·~~--- -- . -·--·--·--~ "-------·----------.- ---"-----~------- . '' " 13 the defendant seeks to rely upon cl.11 in the event that there was a binding contract with the plaintiff. The plaintiff replies that the defendant failed to take appropriate steps to bring about the agreement stipulated in cl.ll as it was obliged to do. There was clearly no agreement within the time stipulated in c1.11. The onus is therefore upon the plaintiff to prove failure to take appropriate steps to reach such agreement. As it happened, the defendant had other reasons for trying to achieve that result. The Gosford contract was subject to a similar condition, although the time period was longer. In any event, the defendant probably needed such agreement to facilitate re-financing if it were to proceed with the development itself. Exhibits 7, 8, 9 and 10 all pre-date the contract and evidence ongoing attempts to reach agreement between the defendant and Elders, although one can detect the defendant's ambivalence which I have previously mentioned. Exhibit 21, an internal memorandum of Elders, probably dated 15 June, suggests that attempts were then being made by Soderberg to get a payout figure. The date of ex. 22 is unclear, but despite the date of the "Received" stamp, this note obviously related to the counter-offer by the defendant at $3.5 million and not to the contract signed on 26 June. The document at p. 406 of ex .1 , dated 17 July, 1992, suggests that Elders was not then likely to agree to a payout figure simply to facilitate completion of the plaintiff's alleged contract. The defendant's reply at p.414 of ex. 1, dated 24 July, 1992, was a reasonable response. Indeed, the proposed figure of $9.55 million was eventually adopted by Elders, but not until August or September. See Grier's evidence at p.76 11 15-50. Grier said that between June and August, Elders was trying to clarify its expectations. His evidence as to those expectations suggests that agreement was -- 14 of 15 -- ----~-~-- ------------------------- · r • , 14 unlikely at that time. By August or September, expectations had changed and agreement was possible, but I am not satisfied that it ought have been achieved in the time specified in cl.ll , nor am I satisfied that the defendant failed to take any appropriate step to achieve such agreement, although the ambivalence of attitude to which I have referred offers some cause for suspicion. In view of my decision on the question of authority, this issue is purely academic There will be judgment for the defendant in the action. I will hear submissions as to costs. -- 15 of 15 --