Bennett v Strauss

[2016] NSWCA 324

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Bennett v Strauss [2016] NSWCA 324
Hearing dates:	31 October 2016
Date of orders:	24 November 2016
Decision date:	24 November 2016
Before:	McColl JA at [1] Sackville AJA at [2] Barrett AJA at [5]
Decision:	1. Appeal dismissed.  2. The appellant pay the respondents’ costs of the appeal.
Catchwords:	CONTRACTS – general contractual principles – formation of contract – principal and agent – ratification – plaintiff alleged that a daughter made a contract representing that she acted with the authority of her mother – finding of lack of authority not challenged – whether circumstances such that subsequent acts of mother could constitute ratification – not shown that daughter’s conduct was contractual in nature – requirements for ratification not met
Legislation Cited:	Contracts Review Act 1980 (NSW) Conveyancing Act 1919 (NSW), s 54A
Cases Cited:	Black v Smallwood (1966) 117 CLR 52; [1966] HCA 2 Bolton Partners v Lambert (1889) 41 Ch D 295 Cavenagh Investment Pte Ltd v Kaushik Rajiv [2013] SGHC 45; [2013] 2 SLR 543 City Bank of Sydney v McLaughlin (1909) 9 CLR 615; [1909] HCA 78 Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 Davison v Vickery’s Motors Ltd (1925) 37 CLR 1; [1925] HCA 47 Dempsey v Chambers, 154 Mass 330, 28 NE 279 (1891) Firth v Staines [1897] 2 QB 70 Foster v Bates (1843) 12 M & W 226; 152 ER 1180 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; [1907] HCA 38 Hunter v Parker (1840) 7 M & W 322; 151 ER 789 Jones v Peters [1948] VLR 331 Keighley, Maxsted and Co v Durant [1901] AC 240 McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835; [1906] HCA 1 National Australia Bank Ltd v Dionys [2016] NSWCA 242 National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] Lloyd’s Rep 583 Phoenix Assurance Co Ltd v Berechree (1906) 3 CLR 946; [1906] HCA 6 Quarante Pty Ltd v The Owners Strata Plan No 67212 [2008] NSWCA 258 Saunderson v Griffiths (1826) 5 B & C 909; 108 ER 338 Spiro v Lintern [1973] 1 WLR 1002 Taylor v Smith (1926) 38 CLR 48; [1926] HCA 16 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 Watson v Davies [1931] 1 Ch 455 Watson v Swann (1862) 11 CB (NS) 756; 142 ER 993 Wilson v Tumman (1843) 6 Man & G 236; 134 ER 879
Texts Cited:	F R Mecham, “The effect of ratification between the principal and the other party” (1906) 4 Michigan Law Review 269 T G Pappas, “Rescission by third party prior to principal’s ratification of agent’s unauthorized action” (1948) 2 Vanderbilt Law Review 100
Category:	Principal judgment
Parties:	Ian Bennett (Appellant) Marguerita Strauss (First Respondent) Lara Hartmann (Second Respondent)
Representation:	Counsel: J Priestley SC (Appellant) P W Gray SC/N J T Smith (Respondents)   Solicitors: Universal Law (Appellant) Wall & Company Lawyers (Respondents)
File Number(s):	CA 2016/109998
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2016] NSWSC 262 Date of Decision: 17 March 2016 Before: Darke J File Number(s): 2016/349518

Judgment

1. McCOLL JA: I agree with Barrett AJA’s reasons and with the orders his Honour proposes.

2. SACKVILLE AJA: I agree with the orders proposed by Barrett AJA and with his Honour’s reasons.

3. Mr Bennett’s submissions on the appeal seemed to assume that his cross-claim failed because the primary judge did not appreciate that the doctrine of ratification can operate retrospectively. The claim did not fail for that reason and I do not think the primary judge made the rather basic error attributed to him.

4. The reason Mr Bennett’s claim failed was that the primary judge correctly found that Mrs Strauss’s daughter, Lara, had not purported to enter into a concluded agreement with Mr Bennett on behalf of Mrs Strauss. That finding was fatal to Mr Bennett’s case based on ratification.

5. BARRETT AJA: This appeal concerns an alleged sale and purchase of an interest in land and the question whether the alleged vendor became bound by contact through the agency of a third person.

6. The first respondent, Mrs Strauss, was the registered proprietor, as one of several tenants in common, of an undivided one-tenth interest in land near Mullumbimby. The land is sufficiently described as “Lot 16”. The appellant, Mr Bennett, alleged in Equity Division proceedings determined by Darke J that in June 2014 he entered into a contract to purchase Mrs Strauss’s interest in Lot 16. [1] His case was that Mrs Strauss’s daughter, Lara, the second respondent, had contracted with him as agent of Mrs Strauss or, if Lara did not have Mrs Strauss’s authority when she made the contract, that Mrs Strauss later ratified the agreement apparently made by Lara as her agent.

   1. Strauss v Bennett [2016] NSWSC 262 (“Primary judgment”).

7. Darke J found that Lara had not acted with Mrs Strauss’s authority and that there had been no effective ratification by Mrs Strauss of any agreement for sale made by Lara. Mr Bennett’s claims were therefore dismissed. [2]

   2. Mr Bennett’s claims were advanced by a statement of cross-claim filed in possession proceedings brought against him by Mrs Strauss.

8. In this Court, Mr Bennett challenges only the decision concerning ratification.

Persons and background

9. Mrs Strauss purchased her undivided interest in Lot 16 in September 1998. She and her co-owners were parties to a “multiple occupancy” arrangement under which each was permitted to occupy and build a house on a defined part of the lot. Mrs Strauss never lived in the house erected on the part of Lot 16 allocated to her.

10. Lara and Mr Bennett married in 1997. Lara lived in Mrs Strauss’s house on Lot 16 with Mr Bennett and their children from 1999. After their separation and subsequent divorce in 2006, Lara continued to live in the house while Mr Bennett lived in rental accommodation elsewhere.

11. Lara later formed a relationship with Mr Hartmann, another member of the Lot 16 community. He lived in a nearby house on the lot. Lara and Mr Hartmann married but for some time after the marriage continued to live separately in their respective houses.

12. Mr Bennett gave evidence that, on several occasions from early 2014, Lara told him that she was thinking of moving in with Mr Hartmann and that, if she did so, Mrs Strauss’s house would be available for Mr Bennett to purchase. He said that, in about early June 2014, Lara told him that she was going to move out of Mrs Strauss’s house and asked whether he was interested in purchasing the property. He said that he was. A proposal then developed.

Mr Bennett’s case

13. Mr Bennett’s case at trial was that in June 2014 he entered into a contract with Mrs Strauss and Lara for the purchase by him of Mrs Strauss’s undivided interest in Lot 16. He contended that Lara had the actual authority of Mrs Strauss to make the contract on her behalf.

14. Mr Bennett pleaded in the alternative that if Lara lacked authority, Mrs Strauss later ratified the contract purportedly made on her behalf by Lara. The acts said to constitute ratification by Mrs Strauss were her provision of two receipts in relation to money paid by Mr Bennett.

15. The essential terms of the contract as pleaded by Mr Bennett were that:

1. the purchase price was $240,000;

2. the price was to be paid by four instalments of $60,000, the first immediately and the others annually thereafter; and

3. Mrs Strauss was to transfer unencumbered title to Mr Bennett on payment of the final instalment. [3]

3. The alleged agreement was not in writing and it was accepted that the requirements of s 54A(1) of the Conveyancing Act 1919 (NSW) were not satisfied. Mr Bennett relied on certain acts as evidence of part performance (s 54A(2)). Because the primary judge found against Mr Bennett on the question whether Mrs Strauss had become party to an oral contract, his Honour had no occasion to determine the question of part performance: see Primary judgment at [117].

The primary judge’s findings

16. Mr Bennett had no relevant dealings or conversations directly with Mrs Strauss. [4] He gave evidence of conversations with Lara in which purchase terms were settled, with Lara having said words to the effect that she was acting for Mrs Strauss. Lara denied having spoken any such words. The primary judge also had before him other conflicting evidence about relevant events and conversations.

    4. Until those referred to at [19] below.

17. Core findings made by his Honour were, first, that Lara did not have Mrs Strauss’s authority (either actual or ostensible) to enter into a sale transaction; secondly, that although Mr Bennett understood Lara to have made an oral agreement for the sale of Mrs Strauss’s interest to him on the terms he alleged, any agreement made by Lara with Mr Bennett was not purportedly or professedly made by her on behalf of Mrs Strauss; and, thirdly, that Mrs Strauss signed two receipts which Lara gave to Mr Bennett. [5]

    5. Primary judgment at [97], [104]-[105], [109], [114], [116].

18. The first receipt, received by Mr Bennett via Lara in August 2014, was handwritten by Mrs Strauss and in these terms:

“July 2, 2014

[Mrs Strauss’s address]

This is to confirm that I have received the sum of $30,000 from Ian Bennett, being the 1st instalment on the property at [address].Marguerita Strauss.

(Sgd) M Strauss.”

19. Mr Bennett was not satisfied with this receipt. He said that he had given Lara $60,000 in cash by way of the first instalment and therefore asked her to have Mrs Strauss provide a receipt for $60,000. Lara agreed to do so. Mrs Strauss later provided through Lara a handwritten receipt as follows:

“Aug 2014

This is to confirm that I have received the sum of $60,000 part payment of the purchase price on the property at [address], for the 1/10th share belonging to myself. Marguerita Strauss.”

20. The primary judge found that Mr Bennett had handed $60,000 in cash to either Lara or Mr Hartmann some time before the first of the receipts was issued, that Lara had then passed on $30,000 to Mrs Strauss, giving the remaining $30,000 to Mr Hartmann to make improvements to his nearby house on Lot 16 (by then occupied by him and Lara), and that, after the relationship between Lara and Mr Hartmann broke down in September 2014, Mr Hartmann delivered $30,000 to Mrs Strauss. [6]

    6. Primary judgment at [54], [70].

21. Some time before Mr Hartmann thus handed cash to her, Mrs Strauss attempted to give to Mr Bennett the $30,000 cash she had earlier received. Mr Bennett refused to accept it. He said that differences that had emerged between Lara and Mr Hartmann had “nothing to do with our deal” which “should go ahead”. Mrs Strauss replied that there was not a deal, that there was no contract, that no regular arrangements for sale had been made, that she wanted her house back and that she wanted Lara to live in it again. [7]

    7. Primary judgment at [67]-[69].

The primary judge’s reasons

22. It is convenient to set out the relevant part of the primary judge’s reasons in full: [8]

    8. Primary judgment at [110]-[117].

“In this context, ratification can give rise to an agency relationship, or at least the ramifications of an agency relationship, in circumstances where an agent professes to act on behalf of a principal although no agency relationship exists, or where the acts of an agent on behalf of its principal are outside the scope of the actual authority of the agent. This type of ratification occurs when the unauthorised acts of the purported agent or agent are later ratified by the principal. The example of an agent exceeding the scope of its actual authority may be put aside in the present case.

The general principle is described in P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (20th ed 2014, Sweet & Maxwell) at Article 13, 2–047 as follows:

Where an act is done purportedly in the name or on behalf of another by a person who has no actual authority to do that act, the person in whose name or on whose behalf the act is done may, if the third party had believed the act to be authorised, by ratifying the act, make it as valid and effectual, subject to the provisions of Article 14 to 20, as if it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all.

(see also G E Dal Pont, Law of Agency (3rd ed 2013, LexisNexis Butterworths) at [5.1]).

In Keighley, Maxsted and Co v Durant [1901] AC 240 Lord Macnaghten (at 247) described the doctrine of ratification as a fiction by which ‘a person ratifying the acts of another who, without authority, has made a contract openly and avowedly on his behalf, is deemed to be, though in fact he was not, a party to the contract’.

It is necessary, in order for the doctrine to operate, that the act said to be ratified by the principal is one that was purportedly or professedly done on behalf of the principal (see Keighley, Maxsted and Co v Durant (supra) at 246-247 per Lord Macnaghten and 259 per Lord Robertson; see also Howard Smith and Co Limited v Varawa (1907) 5 CLR 68 at 82 per Griffith CJ and 84 per Isaacs J).

In this case, Mr Bennett claims that Mrs Strauss ratified the making of an agreement on her behalf by Lara Strauss. However, I do not think that it can be concluded that any agreement by Lara Strauss on 15 June 2014 to the terms of a sale to Mr Bennett was an agreement purportedly or professedly made on behalf of Mrs Strauss. I have not accepted that Lara Strauss said she was acting for her mother. Rather, Lara Strauss made various statements which made it clear that she would need to deal with her mother about the matter. Even if she was indicating that her mother was likely to accept whatever she put to her, the fact remains that Lara Strauss was stating that she would be seeking her mother’s assent to the agreement. Any such agreement would only be made if such assent was forthcoming. I do not see this case as one where a contract is purportedly made by an agent on behalf of a principal. On this basis, Mr Bennett’s claim that an agreement for sale was entered into on about 15 June 2014 must fail.

I should add that if (contrary to my findings) Lara Strauss had said that she was acting for her mother so that it could be said that she purportedly or professedly made an agreement on behalf of Mrs Strauss, there would have been another difficulty standing in the way of the operation of the doctrine of ratification. There can be no ratification of the act of a purported agent unless the ratifying principal has full knowledge of all material circumstances under which the act was done (see Taylor v Smith [1926] HCA 16; (1926) 38 CLR 48 at 59 per Higgins J; P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (supra) at Article 16, 2-069; G E Dal Pont, Law of Agency (supra) at [5.8]).

In my opinion, it would have been necessary to at least show that Mrs Strauss was aware (when she gave the receipts) that Lara Strauss had purported to conclude a contract on her behalf as agent. That was not established. The evidence concerning the conversations between Mrs Strauss and Lara Strauss from 15 June 2014 demonstrates that Lara Strauss was seeking her mother’s assent to a proposed sale, and Mrs Strauss was giving consideration to the matter. There was nothing in those conversations to indicate that Lara Strauss had already purported to conclude a binding agreement on her mother’s behalf.

For the foregoing reasons, the agreement for sale alleged by Mr Bennett has not been established.”

23. The primary judge thus identified two fatal obstacles to the success of Mr Bennett’s case based on ratification. First, his Honour found that Lara did not represent to Mr Bennett, in her interchanges with him about the land, that she was acting with the authority of Mrs Strauss. Rather, she made it clear to him that she would need to deal with Mrs Strauss (adding, however, that Mrs Strauss was likely to accept whatever Lara put to her). His Honour, however, proceeded to deal with the possibility that, contrary to this primary finding, Lara had represented to Mr Bennett that she was acting for Mrs Strauss with the consequence that there was a purported making of an agreement with Mr Bennett by Lara on behalf of Mrs Strauss. On that footing, he considered the second difficulty standing in the way of effective ratification to be the principle that there can be no ratification of the act of a purported agent unless the ratifying principal has full knowledge of all material circumstances under which the act was done. His Honour found that Mrs Strauss was unaware of the material fact that Lara had purported to conclude a contract on her behalf as agent.

Grounds of appeal

24. In challenging the primary judge’s conclusion on ratification, Mr Bennett advances several grounds which may be summarised as follows:

1. The primary judge erred in holding that any principle for which Keighley, Maxsted and Co v Durant [1901] AC 240 is authority had any application to the facts as found.

2. If any such principle was applicable, it required a finding of ratification by Mrs Strauss.

3. The primary judge erred in not considering the principle that a relationship of principal and agent can be formed retrospectively by ratification and in failing to hold that principle governed the case before him in such a way that the actions of Mrs Strauss retrospectively constituted Lara as her agent so that Mrs Strauss’s conduct ratified the agreement.

4. The primary judge erred by (a) finding that Mrs Strauss did not have full knowledge of all material circumstances of the agreement and (b) failing to find that Mrs Strauss was aware that Lara had purported to conclude a contract on Mrs Strauss’s behalf as agent.

Mrs Strauss’s contentions

25. Several contentions are advanced by counsel for Mrs Strauss. The first is that, on the facts as found by the primary judge, no sale agreement was made between Lara and Mr Bennett, with the result that there was nothing capable of being ratified by Mrs Strauss.

26. Secondly, Mrs Strauss contends that Lara never said to Mr Bennett that she was acting for Mrs Strauss and therefore that, if any agreement was made between Lara and Mr Bennett, it was not one purportedly made by an agent on behalf of a principal.

27. Thirdly, Mrs Strauss submits that, even if an agreement for sale was made between Lara and Mr Bennett and Lara had represented to him that she was acting for Mrs Strauss, Mrs Strauss was not aware of Lara’s having done so. On this basis, ratification was not possible because Mrs Strauss did not have full knowledge of all material circumstances (one of those circumstances being that Lara made such a representation to Mr Bennett).

Some factual matters

28. It is necessary to return to events following the point referred to at [10] above.

29. On 15 June 2014, Lara told Mrs Strauss that Mr Bennett was willing to purchase the property and that she would be moving in with Mr Hartmann. Mrs Strauss replied, “I am a bit lost for words. I need time to think about this”. [9]

    9. Primary judgment at [42].

30. Some ten minutes later, Lara sent a text message to Mr Bennett asking how much notice he needed to give to his landlady and saying:[10]

“We’re ready … 2 weeks? A month? Let’s do it! ASAP.”

10. Primary judgment at [36].

31. A discussion between Lara and Mr Bennett took place on the afternoon of the same day. Mr Hartmann was also in attendance. The primary judge’s findings concerning the meeting were as follows:[11]

“It is not necessary to resolve all of the conflicts and variances between the respective versions of what was said. It seems clear enough that during the course of the discussion it was suggested that Mr Bennett could purchase the property for $240,000, and Mr Bennett signified that he was content with that price, although he would need to pay it in instalments. There was agreement about that amongst those present. There is some divergence about what was then said about the instalments. I think it likely that Mr Bennett said that he could pay $60,000 within a very short period, and further payments of $60,000 each year for the next three years. On this matter, I prefer the evidence of Mr Bennett (which is supported by that of Mr Hartmann) to that of Lara Strauss. I am also prepared to accept Mr Bennett’s evidence that there was discussion about the costs of completing a boundary adjustment (which was then in train), and that it was agreed that these costs would be included in the price of $240,000, such that Mrs Strauss would have to bear those costs. I consider that the price to be paid, the timing of each payment, and what was included within the price would have been matters of close concern to Mr Bennett, and I think his version of what was said on these matters is likely to be more accurate than that of Lara Strauss. I do accept Lara Strauss’ evidence that in the course of the discussion it was agreed that Mr Bennett would move into the property almost straight away.”

11. Primary judgment at [94].

32. There was conflicting evidence as to whether at the meeting on the afternoon of 15 June 2014 Lara said that she was acting for Mrs Strauss. Mr Bennett’s evidence was that Lara said that she was, but Lara denied having spoken such words. The primary judge found that Lara did not make any such representation to Mr Bennett. His Honour said:[12]

“I am not satisfied that Lara Strauss said words to the effect that she was acting for her mother. That would have been a false statement. Mrs Strauss deposed that at no point did she ever authorise Lara Strauss to act as her agent in relation to the sale of the property. I accept that evidence, which was not challenged in cross examination. I do not think that Lara Strauss would have lied about that matter. Lara Strauss was favourably disposed to the idea of the sale, even enthusiastic about it. However, it is difficult to see how the making of a false statement as to the existence of authority would have served to promote the objective of the sale going ahead. I note that Lara Strauss’ denial that she said she was acting for her mother was not challenged in cross examination. On this issue, I prefer Lara Strauss’ evidence to that of Mr Bennett.”

12. Primary judgment at [97].

33. At the same time, it was not relevantly disputed that Mr Bennett knew that it was Mrs Strauss, rather than Lara, who owned the property and that Mrs Strauss would have to agree to any sale to him.

34. In mid-June 2014, Lara spoke to Mrs Strauss words to the following effect:[13]

“We are all getting on wonderfully well together. [I]f I move in with Hartmann it will work out better. The children will be happy. It has been decided that [Mr Bennett] should buy your house, it would be a perfect solution for [Mr Bennett] to buy your house and he is prepared to buy it.”

13. Primary judgment at [49].

35. Some time in the period 21 to 28 June 2014, there was further conversation between Lara and Mrs Strauss. In response to a question put by Lara, Mrs Strauss did not object to Mr Bennett moving into the house. Indeed, the primary judge found that he may already have done so and that Lara chose not to tell Mrs Strauss because she was “very anxious about overwhelming her mother with the whole thing” and was “scared that she wasn’t going to agree to it”. [14]

    14. Primary judgment at [100].

36. At all events, Mrs Strauss’s ultimate non-objection to Mr Bennett’s moving into the house came in the context of statements by Mrs Strauss to Lara in the period 21 to 23 June 2014: “This is all a bit sudden. What is going on?” and “This is moving too fast. I have not had time properly to think about this”. [15]

    15. Primary judgment at [46] and [50].

37. Mrs Strauss accepted in cross-examination that she was told by Lara in the course of that telephone conversation that “the proposed price was $240,000 and that it would be paid in instalments”. [16] She did not accept that she was told the amount and timing of the instalments. She said that she “asked about a legal proposal being put into effect”, to which Lara replied that she would “see about that”. [17]

    16. These are words of the primary judge: Primary judgment at [51].

    17. Primary judgment at [51].

38. There was a further discussion between Lara and Mrs Strauss on 28 June 2014. [18] Mrs Strauss gave evidence that Lara said to her on that occasion:

“If you agree to [Mr Bennett] buying the house can you let us have the money to finish [Mr Hartmann’s] house? We need to finish the bedrooms for the children and it will all work out.”

18. Primary judgment at [53].

39. Mrs Strauss’s reply was:

“It looks like you and your family are finally getting on. Let’s see what happens.”

40. Lara deposed that, at some point in late July 2014, she had a conversation with Mr Bennett in which she raised the issue of having the sale documented once her mother agreed to it. It was during this conversation that Mr Bennett asked Lara to arrange a receipt for the money he had paid.

Possible characterisation of events

41. There can be no doubt that, on or about 14 June 2014, Lara and Mr Bennett settled, as between themselves, terms on which Mr Bennett would buy the property. Each knew full well that Mrs Strauss was the owner and that there could be no sale transaction without her assent. In these circumstances, Lara assumed the role of intermediary. After the terms had been settled, she said that she would deal with her mother and would speak to her as soon as possible.

42. The question is whether, at that point, Lara could be said to have made a contract with Mr Bennett on the agreed terms and on the footing that, in so doing, she was acting for Mrs Strauss or, alternatively, whether Lara’s undertaking to Mr Bennett was merely to convey to Mrs Strauss the basis upon which Mr Bennett was prepared to contract with Mrs Strauss.

43. The facts permitted at least two legal theories to be propounded. The first is that a contract was made immediately between Lara and Mr Bennett on or about 14 June 2014, with Lara having either acted or purported to act with the authority of the person known to both of them to be the only possible vendor, namely, Mrs Strauss. The other is that a contract did not come into existence at that point and that Mr Bennett, by having Lara later take $60,000 cash to Mrs Strauss, had merely made an offer to Mrs Strauss to purchase the property on the terms agreed by him and Lara.

44. In formulating his statement of cross-claim, Mr Bennett did not embrace the second possible formulation. Rather, he adopted the proposition that Lara had entered into a contract with him in June 2014. [19] His principal contention was that Lara had Mrs Strauss’s actual authority to enter into a contract for sale and did so as Mrs Strauss’s agent in June 2014. The secondary contention was that, if Lara had acted in June 2014 without Mrs Strauss’s authority, a contract made by Lara at that time was later ratified by Mrs Strauss so as to become binding on Mrs Strauss by force of the ratification. On either basis, there was, on Mr Bennett’s case, a contract between Lara and Mr Bennett made in June 2014.

    19. Mr Bennett pleaded that “the cross-claimant [Mr Bennett] entered into an agreement with the first cross-defendant [Mrs Strauss] and the second cross-defendant [Lara] for the purchase of the Land (the ‘Agreement’)” on specified terms; that “the second cross-defendant [Lara] entered into the Agreement both in her own right (in respect of any interest she had in the Land) and as agent for the first cross-defendant [Mrs Strauss] (in respect of the first cross-defendant’s interest in the Land) having the actual authority of the first cross-defendant to enter into the Agreement on her behalf”; and, in the alternative, “if the second cross-defendant [Lara] did not have the authority of the first cross-defendant [Mrs Strauss] at the time she entered into the Agreement with the cross-claimant [Mr Bennett], by reason of or as evidenced by the matters pleaded at paragraphs 25 to 28 below, the first cross-defendant [Mrs Strauss] subsequently ratified the Agreement”. Paragraphs 25 to 28 referred to the giving of the written receipts.

45. The matter was dealt with by the primary judge on those bases alone. Because his Honour rejected both contentions and Mr Bennett does not seek to challenge on appeal the conclusion that Lara did not act in June 2014 with Mrs Strauss’s authority, this Court must deal solely with the issues of ratification raised by the notice of appeal.

Legal principles

46. Counsel on both sides referred to a number of decided cases concerning ratification. The essential principles are not, I think, in doubt. [20]

    20. The principles have been developed, in the main, in cases of the present kind where an attempt is made to establish liability on the part of the supposed principal.

47. In the first place, ratification causes a relationship of principal and agent to come into existence retrospectively. [21] Thus, where a person (A) has acted without the authority of another person (P) in making a contract on their behalf with a counterparty (C), that other person (P) may, by subsequent conduct,[22] cause the first person (A) to be regarded as having been his or her agent when the contract was made, even though a relationship of principal and agent did not exist at that past time.

    21. In Taylor v Smith (1926) 38 CLR 48; [1926] HCA 16 at 59, Higgins J spoke of the giving of authority by a principal to an agent “either prospectively or retrospectively (by ratification)”. [Emphasis added.] In Roman law, the principle of ratification was expressed by the maxim omnis ratihabitio retrotrahitur et mandato priori comparatur (“every ratification relates back and is comparable to prior authority”), although it was pointed out by Holmes J in Dempsey v Chambers, 154 Mass 330, 28 NE 279 (1891) that Coke preferred the stronger version now more commonly encountered in which comparator is replaced by aequiparatur (“is equivalent to”).

    22. While silence or inaction might amount to such conduct (City Bank of Sydney v McLaughlin (1909) 9 CLR 615; [1909] HCA 78 at 625 (Griffith CJ)), cases of silence and inaction are likely to be more readily analysed by reference to principles of estoppel: see, for example, Spiro v Lintern [1973] 1 WLR 1002; Cavenagh Investment Pte Ltd v Kaushik Rajiv [2013] SGHC 45; [2013] 2 SLR 543.

48. Where such a counterparty (C) seeks to enforce such a contract against the supposed principal (P), it is essential that the acts of the actor (A) in truth amounted to the immediate making of a contract. [23] Only if the counterparty (C) establishes that the acts of the actor (A) were of that quality is there any question of the supposed principal (P) being fixed with contractual liability through ratification.

    23. Much depends on characterisation of events. The immediate making of a contract is to be contrasted with the situation where the person supposedly acting as agent merely informs the counterparty that he or she cannot enter into a contract binding on the supposed principal except subject to the supposed principal’s approval. In that case, there is no contract or contractual relationship until the approval is given: Watson v Davies [1931] 1 Ch 455 at 468 (Maugham J).

49. The counterparty (C) must next establish that the person who acted (A) did not “assume” or “profess” or “purport” to act in his or her own right and for his or her own benefit,[24] but rather “assumed” or “professed” or “purported” to act for the supposed principal (P). [25] That supposed principal will usually be an ascertained person but it may not be necessary for the person’s precise identity to be known at the time of the contract. [26]

    24. It was said by Tindal CJ in Wilson v Tumman (1843) 6 Man & G 236; 134 ER 879 at 882 that “an act done for another, by a person not assuming to act for himself, but for such other person, although without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him”. [Emphasis added.] Very similar words are found in the judgment of Herring CJ in Jones v Peters [1948] VLR 331 at 335, a case upon which counsel for Mr Bennett placed particular reliance.

    25. This requirement may be traced to at least Saunderson v Griffiths (1826) 5 B & C 909; 108 ER 338 at 340 where Holroyd J doubted the notion that the supposed principal could ratify where a person acting without authority neither named that principal nor “professed to act” on their behalf. In Firth v Staines [1897] 2 QB 70 at 75, Wright J made explicit that which may have been only implicit in Tindal CJ’s formulation in Wilson v Tumman (above) by stating that an agent acting without authority must, as a precondition to valid ratification, “purport to act for the principal”. That requirement was subsequently confirmed by the House of Lords in Keighley, Maxsted & Co v Durant [1901] AC 240 at 246, and has since been consistently recognised and adopted in Australia: see, for example, McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835; [1906] HCA 1 at 857; Phoenix Assurance Co Ltd v Berechree (1906) 3 CLR 946; [1906] HCA 6 at 959; Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; [1907] HCA 38 at 82 and 84; Davison v Vickery’s Motors Ltd (1925) 37 CLR 1; [1925] HCA 47 at 19; Quarante Pty Ltd v The Owners Strata Plan No 67212 [2008] NSWCA 258 at [109]-[110]; National Australia Bank Ltd v Dionys [2016] NSWCA 242 at [124].

    26. In Foster v Bates (1843) 12 M & W 226; 152 ER 1180 at 1183, Parke B observed: “the sale was made by a person who intended to act as agent for the person, whoever he might happen to be, who legally represented the intestate’s estate; and it was ratified by the plaintiff after he became administrator”. In Watson v Swann (1862) 11 CB (NS) 756; 142 ER 993 at 999, Willes J said: “It is not necessary that he be named; but there must be such a description of him as shall amount to a reasonable designation of the person to be bound by the contract”. See also National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] Lloyd’s Rep 583 at 592-7; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 at 276. The person afterwards sought to be established as principal through ratification must, however, exist at the time the unauthorised act is committed: Black v Smallwood (1966) 117 CLR 52; [1966] HCA 2.

50. There can be no ratification by an undisclosed principal, that is, where the actor (A) appears to be contracting for themself and the counterparty (C) has no notice that the actor is acting in a representative capacity. This was authoritatively established in Keighley Maxsted & Co v Durant.

51. Only if all these conditions are satisfied in relation to the course of conduct between the actor (A) and the counterparty (C) does any question arise as to whether subsequent conduct of the supposed principal (P) amounted to ratification causing, first, the actor (A) to be seen retrospectively as the agent of the supposed principal (P) (who, in turn, comes to be seen retrospectively as the principal for whom the actor acted) and, secondly, the rights and liabilities under the contract made between the actor (A) and the counterparty (C) to be seen retrospectively as rights and liabilities as between the counterparty (C) and the now recognised principal (P).

Discussion

52. The central submission made by counsel for Mr Bennett is that the primary judge erred by failing to recognise the true legal effect of acts of Mrs Strauss as acts of ratification. The acts Mr Bennett relied on are the giving by Mrs Strauss of the two written receipts acknowledging receipt of money from Mr Bennett.

53. Let it be assumed that those acts of Mrs Strauss were capable of amounting to ratification of everything that Lara had done vis-à-vis Mr Bennett. Contrary to submissions by counsel for Mr Bennett, it does not follow that this compels a finding that the purported ratification caused a contractual relationship to become binding between Mrs Strauss and Mr Bennett. That would be the result of acts of ratification on the part of Mrs Strauss only if the dealings (to use a neutral word) between Lara and Mr Bennett had given rise to a contract for the sale and purchase of the interest in land (which both knew was owned by Mrs Strauss), with Lara having purported to contract (on behalf of Mrs Strauss) as vendor with Mr Bennett as purchaser.

54. Written submissions filed by counsel for Mr Bennett say:

“[A]lthough it may have been true that before the giving of the receipts by Mrs Strauss to Bennett, the position was only that Lara Strauss was seeking her mother’s assent to a proposed sale, and Mrs Strauss was giving consideration to the matter and that there was nothing in those conversations to indicate that Lara Strauss had already purported to conclude a binding contract on her mother’s behalf, all that changed when Mrs Strauss ratified Lara’s actions and [sic] giving of the receipts. That brought about the situation that Lara retrospectively became her mother’s agent.”

55. The notion that ratification retrospectively causes one person to become the agent of another is, I think, apt to confuse unless considered in context. Acts of ratification potentially alter what would otherwise be the legal significance of past conduct of the putative agent. In a situation where it is sought to establish contractual liability of the ratifying person, the past conduct of the putative agent is necessarily the making of a contract. The ratifying acts cause the putative agent to be clothed with the ratifying party’s authority in such a way that the maxim qui facit per alium facit per se applies retrospectively to alter the character of the putative agent’s past conduct. [27] Ratification causes that the past conduct to acquire, with effect back to the time it was engaged in, a legal significance that it lacked before the ratification. Where the past conduct is the making of a contract by the putative agent, the ratifying acts cause that contract to become retrospectively the source of rights and obligations of the ratifying party. [28] It follows that it is only where the past conduct of the putative agent was effective to create such rights and obligations, as between the putative agent (in an avowed representative capacity) and a third party, that ratification causes the ratifying party to be fixed with those rights and obligations as if the contract had been made with his or her authority.

    27. In Davison v Vickery’s Motors Ltd, Isaacs J said at 19: “On ratification, and not before, the agreement is as a general rule deemed by a fiction to have been made by his antecedent authority to the person actually making it”. In Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [20], it was said by Gleeson CJ, Gaudron, McHugh and Hayne JJ that, although the principle of retrospective ratification “is sometimes described as operating upon the basis of a fiction, it is a well settled rule of common law”.

    28. The question whether the counterparty may withdraw from the contract before ratification is probably unsettled, despite the decision of the English Court of Appeal in Bolton Partners v Lambert (1889) 41 Ch D 295: see the observations of Isaacs J in Davison v Vickery’s Motors Ltd at 14-17; F R Mecham, “The effect of ratification between the principal and the other party” (1906) 4 Michigan Law Review 269; T G Pappas, “Rescission by third party prior to principal’s ratification of agent’s unauthorized action” (1948) 2 Vanderbilt Law Review 100.

56. The primary judge found that any agreement of Lara on 14 June 2014 to terms of a sale to Mr Bennett was not purportedly or professedly given on behalf of Mrs Strauss. [29] That finding acknowledged the possibility that there was acquiescence by Lara in terms of a sale but denied that acquiescence any contractual character or significance. Thus understood, the finding is, in my respectful opinion, clearly correct. It is also consistent with his Honour’s statement that there was nothing in the conversations between Lara and Mrs Strauss to indicate that Lara had purported to conclude a binding contract on Mrs Strauss’s behalf. [30] Both Lara and Mr Bennett knew that Mrs Strauss owned the property and that it could not be sold except by her assent. His Honour also found that Lara did not have – and knew that she did not have – Mrs Strauss’s authority to sell; and that she would not have made a dishonest representation that she did have that authority. Those findings were fully justified by the evidence.

    29. Primary judgment at [114].

    30. Primary judgment at [116].

57. On the facts so found (and particularly in the absence of what Lara knew would have been a dishonest representation that she was acting in a representative capacity for her mother), the conduct Lara engaged in towards Mr Bennett was not contractual conduct as regards a sale by or on behalf of Mrs Strauss. It was conduct by which Lara did no more than undertake to promote with her mother the cause of Mr Bennett as a potential purchaser upon the terms settled between Lara and him. There was no contract avowedly made by Lara for Mrs Strauss (or at all) and therefore nothing to which any subsequent act of Mrs Strauss could have imparted any contractual efficacy (either in her favour or against her) according to doctrine of ratification.

55. The central submission made on Mr Bennett’s behalf therefore cannot be accepted.

56. I return briefly to the other grounds of appeal summarised at [25] above and note that:

1. the primary judge made reference on two occasions to the decision of the House of Lords in Keighley, Maxsted & Co v Durant but did not identify any particular “principle” drawn from that case as a foundation of his decision; [31]

2. the two propositions stated by his Honour in the context of his references to Keighley, Maxsted v Durant are unexceptionable; and

3. while the primary judge did not use words such as “retrospectively” and “relate back” in his discussion of ratification, the whole tenor of that discussion makes it perfectly clear that his Honour fully appreciated the principles and, in particular, the retrospective effect that ratification, of its very nature, produces.

   31. Primary judgment at [112] and [113].

60. It remains to say something about the challenge to the primary judge’s finding that Mrs Strauss did not have full knowledge of all material circumstances of the agreement and the contention that his Honour should have found that Mrs Strauss was aware that Lara had purported to conclude a contract on Mrs Strauss’s behalf as agent. It is, I think, sufficient to observe that, for reasons I have stated, there was no contract concluded (or purportedly concluded) on Mrs Strauss’s behalf by Lara of which Mrs Strauss could possibly have been aware. That being so, the challenge leads nowhere.

61. There is no need to decide whether Mrs Strauss’s supposed acts of ratification (the giving of the two receipts) were of such a nature and quality as to be capable of amounting to ratification.  It can be said, however, that while receipt of purchase money by an allegedly ratifying vendor under an established but unauthorised sale by an agent will generally amount to ratification,[32] the acts of Mrs Strauss did not demonstrate approval or endorsement of any pre-existing sale contract. The receipts did not identify the purchase price and other terms of sale. While there were references to “instalment” and “part payment of the purchase price” and a description of the property, such references were merely consistent with an intention to acknowledge advance receipt of money in connection with a possible future sale or projected sale.

    32. See, for example, Hunter v Parker (1840) 7 M & W 322; 151 ER 789.

Conclusion

62. No relevant error on the part of the primary judge has been shown. I therefore propose orders as follows:[33]

1. Appeal dismissed.

2. The appellant pay the respondents’ costs of the appeal.

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33. This result makes it unnecessary to consider whether this Court should deal with certain issues that would be relevant if the appeal were allowed. Those issues include the question of part performance noted at footnote [3] above and defences propounded by Mrs Strauss, including by reference to the Contracts Review Act 1980 (NSW).

Endnotes

Decision last updated: 24 November 2016