Elizabeth Butchery Pty Ltd v Casimaty and Howes
[1991] TASSC 126
•8 April 1991
Serial No B12/1991
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: Elizabeth Butchery Pty Ltd v Casimaty and Howes [1991] TASSC 126; B12/1991
PARTIES: ELIZABETH BUTCHERY PTY LTD
v
CASIMATY
HOWES
FILE NO/S: 2866/1985
DELIVERED ON: 8 April 1991
JUDGMENT OF: Green CJ
Judgment Number: B12/1991
Number of paragraphs: 19
Serial No B12/1991
List "B"
File No2855/1985
ELIZABETH BUTCHERY PTY LTD v CASIMATY & HOWES
REASONS FOR JUDGMENT GREEN CJ
8 April 1991
The plaintiff, a company formed by Mr D R Taylor, was the lessee and the defendant was the lessor of premises situate at 39 Elizabeth Street, Hobart upon which Mr Taylor conducted a butchery business. The third party was the defendant's solicitor.
The lease was dated 26 March 1971 and by virtue of the exercise of options to renew contained in the lease the plaintiff was entitled to possession of the premises until 25 March 1986. In 1984 or 1985 Mr Taylor decided that he wanted to go into a less demanding business than his butchery business and he instructed his solicitor Mr Brian Levis to commence negotiations with a view to obtaining a further extension of the lease so that he would be able to more readily sell his business. In this action the plaintiff claims that between 16 July 1985 and late in August 1985 negotiations took place between his agent Mr Levis and the defendant's agent the third party Mr Howes and that on 26 August 1985 those negotiations "culminated in the formation of an agreement, partly in writing and partly oral that the defendant would grant a new lease of the demised premises to Walking Nominees Pty Ltd in consideration of the plaintiff surrendering the balance of the lease of the demised premises". The plaintiff alleges that in breach of that agreement the defendant refused to execute a lease in favour of Walking Nominees Pty Ltd and claims damages. The defendant admits that she has refused to execute such a lease but denies that she entered into the agreement relied upon by the plaintiff and denies that the third party had authority to enter into such an agreement on her behalf. The defendant has taken third party proceedings against Mr Howes in which inter alia she seeks to be indemnified in respect of the plaintiff's claim. The plaintiff claims that if the third party did not have actual authority to act as the defendant's agent he had ostensible authority to do so and that the defendant is estopped "from denying that Mr Howes was not authorised to enter into the contract" by which I assume the plaintiff is intending to allege the opposite.
In view of the sometimes confusing references to various agreements which were made during the hearing it is important to emphasise that the only agreement relied upon by the plaintiff to support its claim in this action is the agreement to which I have already referred that in consideration of the plaintiff's surrender of the lease between the plaintiff and the defendant the defendant would grant a new lease to Walking Nominees Pty Ltd
Mr Taylor ceased carrying on business on 23 August 1985 and vacated the premises on 30 September 1985.
Neither Mr Taylor nor Mrs Casimaty had any relevant dealings with each other or with each other's solicitor. Thus if there was a contract it has to be found in the dealings between Mr Levis and Mr Howes. I turn first to the issue of whether assuming that Mr Levis and Mr Howes had authority to bind their clients an agreement in the terms alleged could be said to have been concluded between them.
Mr Levis gave evidence that in response to a request Mr Levis had made on 16 July 1985 Mr Howes indicated on 9 August 1985 that Mrs Casimaty would be prepared to consider granting a lease to a third party. On 15 August in response to an enquiry from Mr Levis Mr Howes said that the longest term that Mrs Casimaty would consider would be a five year term with options to renew for two further five year terms. Mr Levis told Mr Howes that that would be acceptable and said that an interested party had approached him and he would be re–drawing a draft agreement for the sale of the plaintiff's business which estate agents had presented to him. Subsequently but before 19 August 1985 Mr Levis dictated over the telephone to Mr Howes Clause VII of that draft agreement which specified the terms of a lease from the defendant to Walking Nominees Pty Ltd which under that agreement the plaintiff was undertaking to procure from the defendant. Mr Howes did not indicate that he either agreed or disagreed with the terms of the proposed lease. Mr Levis said in evidence that on 22 August 1985 Mr Howes telephoned Mr Levis and "stated that he had Mrs Casimaty with him in his office, he again requested if I would mind if he put his phone on open line so that Mrs Casimaty could hear what he was saying to me. He asked me if I could indicate who were the solicitors for the directors of Walking Nominees Proprietary Limited. I told him Robert Badenach. He asked me if I would mind ringing Robert Badenach and requesting him to telephone Mr Howes immediately while he had Mrs Casimaty present with him in his office so that he could seek satisfaction that the directors were satisfactory persons for the purpose of the lease. I telephoned Mr Badenach as requested." On 26 August having been informed by Mr Badenach that the terms of the lease from the defendant to Walking Nominees Pty Ltd had been settled Mr Levis telephoned Mr Howes and "asked him whether the terms of the lease had been agreed with Mr Badenach. He informed me that agreement had been reached and I asked Mr Howes whether Mrs Casimaty was satisfied with the Directors of Walking Nominees. He told me that she was, that he happened to know one of such Directors personally and that he could personally vouch for his suitability as a tenant". Subsequently in cross examination Mr Levis said in relation to that conversation "My recollection is that he conveyed to me that the lease had been settled. Now whether he was satisfied with it or Mrs Casimaty was satisfied with it was not really discussed and I did not discuss with Mr Howes the amendments which Mr Badenach had mentioned to me had been made to the lease. I didn't refer to those at all. I merely sought advice from him as to whether the lease had been settled and as to whether Mrs Casimaty was satisfied with the proposed tenants". On the 26 August 1985 Mr Levis received a draft of a lease from the defendant to Walking Nominees Pty Ltd with no covering letter. Mr Levis thereupon prepared a deed of surrender of the lease between the defendant and the plaintiff and arranged to have it executed by the plaintiff. At no stage did Mr Levis send a copy of the draft or the executed deed of surrender to Mr Howes nor did he ever discuss its terms with him. During the next few weeks Mr Levis had a number of conversations with Mr Howes with a view to achieving settlement of the matter but to no avail and eventually he accepted that the transaction could not be completed. Mr Levis agreed that in his experience it would have been most unusual for a solicitor not holding a power of attorney to have the authority to unconditionally bind his client to the terms of commercial transactions of the kind which are the subject of this action. Mr Levis said that he thought that Mr Howes had authority to negotiate on behalf of Mrs Casimaty but not to bind her and that he did not believe that in preparing the draft lease Mr Howes was doing anything more than preparing a document which he thought would be acceptable to his client.
Mr Howes gave evidence about the conversation he had with Mr Levis which took place before 22 August 1985 which did not differ in substance from Mr Levis' evidence. He said that on 23 August 1985 he saw the defendant and her accountant Mr Jones in his office and that he and Mr Jones read through the provisions of the draft lease to Mrs Casimaty after which she said that she would take the draft lease home and give consideration to it over the weekend. Mr Howes said that during that meeting he spoke on the telephone to Mr Badenach and to an estate agent but that he did not speak to Mr Levis. Mr Howes agreed that he sent a copy of the draft lease to Mr Badenach and possibly to Mr Levis. He agreed that during a telephone conversation with Mr Badenach on 26 August he indicated that he was agreeable to some changes being made to two of the clauses of the draft lease which had been suggested by Mr Badenach. Mr Howes believed that he had a conversation with Mr Levis on 26 August 1985 during which he may have said that the defendant was happy with the proposed tenants but he denied saying that the lease had been settled. Mr Howes said that Mrs Casimaty said that she was interested in entering into a new lease and that he was authorised to negotiate a new tenancy on her behalf if one could be found and to prepare a draft lease for her consideration but that he had no authority to commit her to a binding agreement. He said that he did not have express instructions to send a copy of the draft lease to the solicitors for either the plaintiff or Walking Nominees Pty Ltd nor did he have Mrs Casimaty's authority to agree to the alterations to the draft suggested by Mr Badenach and that his agreement to those changes was done in his capacity as one of two "solicitors trying to settle a document" Mr Howes never had any discussions with Mrs Casimaty or received any instructions from her about the terms upon which she would be prepared to accept a surrender of the lease from the plaintiff. At no stage did Mr Howes believe that Mr Levis was under the impression that Mr Howes had the authority to bind Mrs Casimaty.
Mr Badenach gave evidence to the effect that on 22 August 1985 Mr Howes telephoned him and said that Mrs Casimaty was with him and that they then had a discussion relating to the suitability of Walking Nominees Pty Ltd and its directors as tenants. Mr Badenach agreed that he had received the draft lease some time before 26 August 1985 and that on 26 August he sent it to Walking Nominees Pty Ltd for its approval. On the same day he spoke to Mr Howes on the telephone and Mr Howes agreed to some changes being made to the lease which Mr Badenach's clients had sought. Mr Badenach's understanding on that day was that the lease had been settled and that all that remained to be done was for it to be executed.
The accountant Mr Jones gave evidence in which he confirmed that he was present when Mrs Casimaty saw Mr Howes in his office. He said Mrs Casimaty was enquiring about the proposed tenants and that Mr Howes conferred with Mr Badenach on the telephone. After Mr Howes had gone through the draft lease with her she took it away so that she could go through it herself and get some other advice about it from her friends. Mr Jones did not recall a telephone conversation between Mr Howes and Mr Levis taking place on that occasion on the lines indicated by Mr Levis in his evidence but agreed that it could have taken place. Mr Jones knew nothing of anything that happened on 26 August 1985.
Mrs Casimaty gave evidence in which she confirmed that she knew that Mr Taylor had indicated that he wanted her to let the premises to others. She said that Mr Howes had read the draft lease to her but she denied that she had ever agreed to let or indicated that she might consider letting the premises to Walking Nominees Pty Ltd She said that she had never authorised Mr Howes to find another butcher or any other tenant for the shop and that she did not instruct Mr Howes to prepare the draft lease.
Irrespective of Mr Howe's actual or apparent authority to bind the defendant I am not satisfied that the plaintiff has established the existence of the agreement upon which its claim is based. Critical to the formation of that agreement was the settlement of the terms under which the lease between the plaintiff and the defendant was to be determined. Mr Levis prepared a deed of surrender but it is clear on the evidence that its terms were never discussed with let alone agreed to by the defendant or her solicitor. On the evidence there is no room for any suggestion that the defendant is estopped from denying the existence of an agreement to determine the lease. Mr Taylor acknowledged that he understood that the surrender agreement was a critically important component of the whole transaction and the evidence does not establish that anything said or done by the defendant or by Mr Howes misled Mr Levis, Mr Taylor or the plaintiff into thinking that the defendant had agreed to the terms upon which the lease was to be determined.
I am satisfied that Mr Howes had no actual authority to enter into a binding agreement on behalf of the defendant that she would lease the premises to Walking Nominees Pty Ltd, or to commit the defendant in any other way. Both Mr Howes and the defendant deny that Mr Howes had any such actual authority and quite apart from those denials the rest of the evidence is quite insufficient to affirmatively establish that Mr Howes had any such actual authority.
I am not satisfied that the plaintiff has discharged the burden of showing that Mr Howes had apparent or ostensible authority to act as the defendant's agent so that she is estopped from denying that he had her authority to bind her. The relevant principle was stated by Diplock LJ in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 in the following passage appearing at p503 which was cited with approval by Brennan J in Northside Developments v Registrar–General (1990) 93 ALR 385 at p401:
"An 'apparent' or 'ostensible' authority ... is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract."
It was properly accepted by the plaintiff that the fact that Mr Howes was the solicitor for the defendant was not sufficient to clothe him with actual or apparent authority to enter into a contract with the plaintiff. I am not satisfied that either by words or conduct Mrs Casimaty made any representations to Mr Taylor or Mr Levis or that she had authorised Mr Howes to make any representations to Mr Taylor or Mr Levis that Mr Howes had authority to enter into any agreement on her behalf. I am not persuaded that the defendant intended anyone to think that Mr Howes had such authority nor am I satisfied that the evidence is sufficient to establish that Mr Levis or the plaintiff believed that he had any such authority.
Although it was not pleaded save in reply to allegations in the defence that if there was an agreement it was unenforceable because it was not in writing, the plaintiff advanced during the hearing a somewhat diffuse claim that the defendant's conduct gave rise to a form of equitable estoppel which had the effect of binding her to the agreement relied upon. However counsel for the plaintiff properly accepted that the plaintiff's claim could not succeed on that basis in the event of my not being satisfied that the essential terms of the agreement had been agreed between the parties or their agents. I am not so satisfied and there is thus no occasion for my considering this aspect of the plaintiff's claim any further. However I do record my finding that on the evidence I am not satisfied that the defendant did or said anything or gave authority to Mr Howes to say or do anything which induced the plaintiff to believe that a concluded and binding agreement in the terms pleaded in the statement of claim had been arrived at. It may be the case that Mr Levis or Mr Taylor had that belief but I am not satisfied that if either of them did have that belief that it was induced by anything said or done by the defendant or by anything which she authorised Mr Howes to say or do.
In summary I find that Mr Howes had no actual or ostensible authority to enter into a contract with the plaintiff on behalf of the defendant; that even if Mr Howes did have such authority no agreement was reached between Mr Howes and Mr Levis as to a critical part of that agreement and that no basis for holding that the defendant is estopped from denying the existence of a binding agreement has been established.
It is unnecessary for me to resolve the apparent conflict which exists between the evidence of Mr Levis and Mr Howes as to what was said between them on 22, 23 or 26 August 1985 as my findings about the absence of any agreement to determine the lease and my findings about what Mrs Casimaty did or said or authorised Mr Howes to do or say would be unaffected even if I were to accept Mr Levis' evidence. It also follows that I do not need to consider the defence raised in the alternative by the defendant that if there was an agreement between the plaintiff and the defendant it is unenforceable as there was no memorandum or note of it in writing as required by s.36 of the Conveyancing and Law of Property Act 1884.
The plaintiff admits liability upon the counterclaim in the sum of $6,499.98.
The plaintiff's claim is dismissed. There will be judgment for the defendant against the plaintiff on the counterclaim for $6,499.98. The defendant's claim against the third party will be dismissed.
0