Dale v McHugh

[1990] TASSC 147

Serial No B70/1990
List "B"

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Dale v McHugh [1990] TASSC 147; B70/1990

PARTIES:  DALE
  v
  McHUGH

FILE NO/S:  338/1987
DELIVERED ON:  23 October 1990
JUDGMENT OF:  Underwood J

Judgment Number:  B70/1990
Number of paragraphs:  14

Serial No B70/1990
List "B"
File No 338/1987

DALE & ORS v McHUGH

REASONS FOR JUDGMENT  UNDERWOOD J

23 October 1990

1. The plaintiffs are partners in the business of licensed real estate agents known as Weedon Real Estate. The corporate defendant was the proprietor of a business which distributed the products of Cadbury Schweppes in the 003 telephone district. The other defendant, Mr J A McHugh, and his wife were and are the sole shareholders and directors of the corporate defendant. The business was conducted by Mr McHugh for the corporate defendant. On 1 December 1986 the business was sold to Messrs Crosby & Rumney. The plaintiff's claim against both defendants is for commission on the sale. Principally it is founded on contract but the plaintiffs also rely on quantum meruit and the principle enunciated by the High Court in Waltons Stores (Interstate) Limited v Maher & Anor (1987) 164 CLR 387. The first issue for resolution then is whether there was a contract between the plaintiffs and the defendants or either of them. There is no written evidence of any such contract.

1. Apart from one matter, there was no substantial conflict between the evidence for the plaintiffs and the evidence for the defendants. In 1985, a Mr Robinson asked Mr McHugh if he was interested in selling the business. Trading figures up to 30 June 1985 were given to Mr Robinson. The negotiations dragged on. Mr Robinson requested more up–to–date figures, so figures up to the end of March 1986 were prepared and also given to Mr Robinson. He made an offer to Mr McHugh. The latter rejected it as he considered it to be far less than what he thought the business was worth. Mr McHugh decided to seek an independent opinion of the value of the business. He accordingly approached a Mr Dudgeon with whom Mr McHugh had had previous business dealings when Mr Dudgeon owned a shop. He had heard that Mr Dudgeon had gone into the real estate business and accordingly sought him out. He found that Mr Dudgeon was then employed by the plaintiffs as a real estate agent. At that time another person had expressed an interest in buying the business. Mr McHugh explained all this to Mr Dudgeon and asked him to assess the value of the business. He gave him the trading figures which had earlier been given to Mr Robinson. Mr Dudgeon considered the material handed to him and later telephoned Mr McHugh with his opinion of the value of the business. That opinion coincided with Mr McHugh's opinion. Mr Dudgeon said to Mr McHugh that, if the current prospective purchaser did not buy the business, he might know someone who would. Mr McHugh told him that he was not particularly anxious to sell the business, but if he was offered a price that was acceptable to him he would do so.

1. The person Mr Dudgeon had in mind was a Mr Foot who had earlier called at the plaintiffs' offices to see if any suitable businesses were listed for sale in their books. Either at the time Mr Dudgeon gave Mr McHugh his opinion of the value of the business or during a subsequent telephone conversation, Mr Dudgeon mentioned Mr Foot's name and his interest in the business. He suggested that he should tell Mr Foot about Mr McHugh's business and Mr McHugh either expressly or impliedly agreed to him doing this. I accept the evidence of Mr McHugh, whom I considered to be a thoughtful, precise and accurate witness, that Mr Dudgeon subsequently spoke to Mr McHugh and told him that Mr Foot was an interested purchaser but would probably want the business at a price lower than Mr McHugh thought it was worth. Mr McHugh told him that he was not interested in selling at a lower price. This was the last contact between Mr Dudgeon and Mr McHugh about this matter, for in June 1986 Mr Dudgeon left the plaintiff's employ.

1. In either June or July 1986 Mr Dale, the first named plaintiff, picked up a file that Mr Dudgeon had made concerning the defendant's business and telephoned Mr McHugh to enquire if he was still interested in making a sale to Mr Foot. Mr Dale could not recall this telephone conversation but I accept the evidence of Mr McHugh that it did take place and I also accept his evidence that he told Mr Dale that he was not interested in selling the business to Mr Foot.

1. According to Mr Dale, on 19 June 1986, he visited Mr McHugh at his business premises. Mr McHugh denied that there had been any such visit. He said that, apart from meeting Mr Dale by chance when he went to the plaintiffs' office to collect the figures he had left with Mr Dudgeon, he did not see Mr Dale until after the dispute about payment of the commission had arisen. It is not necessary to make any finding as to whether or not this meeting took place, for on the evidence of Mr Dale, no contractual arrangement was then entered into. Mr Dale said that he assumed that his firm had been appointed the defendants' agent by discussions which had earlier occurred between Mr McHugh and Mr Dudgeon. He said that with this assumption in his mind, he asked Mr McHugh when he visited his premises if the latter would appoint the plaintiffs exclusive agents. He said that Mr McHugh declined to do so and said that Mr McHugh said that there was another agent involved. Mr Dale assumed from Mr McHugh's refusal that the plaintiffs' appointment was one in common with other agents. I have some reservations about the claim that Mr McHugh said there was another agent involved, for this was not the case. In any event, according to Mr Dale's evidence, nothing was said by Mr McHugh which could be construed as a request to Mr Dale to act as his agent and the latter said that could not recall anything he had said about finding a purchaser of the business.

1. There were no further dealings between the plaintiffs and Mr McHugh until after a Mr Harvey commenced employment with the plaintiffs in July 1986. Mr Harvey agreed that Mr McHugh did not, in any conversation with him, appoint him or his employer to act as agent in the sale of the business but Mr Harvey did telephone Mr McHugh and ask if the business was still for sale. Mr McHugh told him that it was, but it was not to be advertised. Mr Harvey knew two people who might be interested in buying the business and arranged a meeting at the defendants' premises between these people and Mr McHugh on 14 October 1986. Mr Harvey attended that meeting but nothing came of the discussions. Mr McHugh told Mr Harvey that he was not all that anxious to sell the business but would do so if he was offered the right price. He also told Mr Harvey that as he was about to install a computer and the busy summer season was about to commence, he did not want to be involved in any drawn–out negotiations.

1. Messrs Crosby and Rumney asked the plaintiffs if they had any suitable businesses for sale on their books and Mr Harvey prevailed upon Mr McHugh to meet Mr Crosby to discuss the matter. The meeting took place at the defendant's premises on or about 21 October 1986. It was attended by Mr Harvey, Mr McHugh, Mr Crosby and his accountant. Thereafter there were several meetings between Mr Crosby and Mr McHugh, none of which were either arranged or attended by Mr Harvey, and ultimately agreement for sale was reached. Solicitors were instructed by the parties to draw up an agreement which provided for completion on 1 December 1986.

1. On or about 14 November 1986, following discussions with his accountants, Mr McHugh telephoned Mr Harvey and asked who was to pay the commission. Mr Harvey told him that he was as he had instructed the plaintiffs to act as agents. I find that Mr McHugh disputed the correctness of that proposition. Thereafter, written and oral demands by the plaintiffs for payment of the commission were refused.

1. From the foregoing recital of the facts it is clear that the plaintiffs have failed to establish the existence of an agreement between them and the defendants, or either of them, that the plaintiffs would act as agent for the defendants in the sale of the business. Mr Dudgeon was engaged to provide an opinion with respect to the value of the business and there is no evidence to suggest that he was also appointed to act as agent for the defendants or either of them to sell the business.

1. In order to succeed in contract, the plaintiffs must establish "a contract between the defendant[s] and [the plaintiffs] that the defendant[s] would employ the plaintiffs as [their] agents to introduce a purchaser on the terms that if they did so, they should receive a pecuniary reward", per Griffiths CJ in Dolphin v Harrison, San Miguel Proprietary Ltd (1911) 13 CLR 271. See also Smith v Stallard & French (1919) 21 WAR 19 and Chapple v Moss & Richardson (1920) 22 WAR 74. As was observed by Lord Russell of Killowen in Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at p129, commission contracts "are subject to no peculiar rules or principles of their own"; a passage cited with approval by Barwick CJ in L J Hooker Ltd v W J Adams Estates Pty Ltd (1972) 51 ALJR 413 at p419. The evidence clearly establishes that Mr McHugh did not ask the plaintiffs or their employees either expressly or impliedly to find a purchaser for the business. Cf (for example) Jones v Lowe [1945] 1 KB 73 and McCullum v Hicks [1950] 2 KB 271. The only request he made was to Mr Dudgeon to provide an opinion with respect to the value of the business and thereafter Mr McHugh merely acceded to requests by the plaintiffs' employees to speak to persons whom those employees considered might be interested in purchasing the business and, in the case of Mr Harvey, to introduce them to him. The plaintiffs' claim insofar as it is founded in contract fails.

1. Insofar as the plaintiffs' claim is based on estoppel it also fails. Waltons Stores (Interstate) Ltd v Maher (supra) has no application to this case. Although it is clear that Messrs Dale and Harvey believed that there was a contract between the plaintiffs and Mr McHugh, there is no evidence to suggest that the latter was aware of this belief and subsequently acted unconscionably by permitting the plaintiffs to act to their detriment.

1. The plaintiffs' alternative submission was that if there was no contractual relationship with either defendant, one or both had been unjustly enriched by the plaintiffs' services, namely the introduction of persons which resulted in the sale of the business to those persons, and accordingly, the law imposed an obligation on the defendants, or either of them, to make restitution by payment of a reasonable sum for the provision of those services. An implied contractual relationship is not the foundation of a claim in quantum meruit. All the justices in Pavey and Matthews Pty Ltd v Paul (1987) 61 ALJR 151 reached the conclusion, albeit for slightly different historical reasons, that the true basis of an action for quantum meruit is restitution and unjust enrichment. Settlement by the High Court of the long disputed basis of an action on a quantum meruit does not assist resolution of the disputed claim in this case. Deane J said at p165:–

"To identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. The circumstances in which the common law imposes an enforceable obligation to pay compensation for a benefit accepted under an unforceable agreement have been explored in the reported cases and in learned writings and are unlikely to be greatly affected by the perception that the basis of such an obligation, when the common law imposes it, is preferably seen as lying in restitution rather than in the implication of a genuine agreement where in fact the enforceable agreement left no room for one."

This view is shared by Lord Goff and Professor Jones in "Law of Restitution" (3rd Ed) p15:–

"In fact, as one might expect, a close study of the law of restitution reveals, as with contract and tort, a highly developed and reasonably systematic complex of rules".

See also Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] AC 32 at pp62, 63.

1. At best, the plaintiffs' case on the basis of unjust enrichment is that, under the mistaken belief that there was a contractual obligation to pay commission on the happening of certain events, the plaintiffs' conferred a benefit on either or both defendants by which either or both were enriched, i.e. the introduction of the purchasers of the business, and that it would be unjust to permit either or both to retain that benefit.

1. However, Mr McHugh did not ask the plaintiffs to confer any benefit. He made it clear each time he was asked if his business was for sale that he was not anxious to sell, but if "offered the right price" would consider doing so. Cf Brewer Street Investments Ltd v Barclay's Woollen Co Ltd [1954] 1 QB 428. Moreover, Mr McHugh did not freely accept any benefit knowing that it was conferred under the mistaken belief it had to be paid for. The services rendered by the plaintiffs were those which might reasonably have been rendered pursuant to an agency contract with the purchasers. It was established in Falcke v Scottish Imperial Insurance Company (1886) 34 Ch D 234 that generally, there is no right to recover remuneration for benefits conferred if the recipient of such benefits neither requested them nor received them in circumstances in which he knew or ought to have known that they were to be paid for. See also Macclesfield Corporation v Great Central Railway [1911] 2 KB 528. This is such a case and accordingly there will be judgment for the defendants against the plaintiffs.