Fitzgerald v Brock Real Estate
[2009] SASC 183
•11 September 2009
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
FITZGERALD v BROCK REAL ESTATE & ORS
[2009] SASC 183
Judgment of The Honourable Justice Gray
11 September 2009
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - OTHER MATTERS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY - OTHER MATTERS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - AUTHORITY OF AGENTS - CONSTRUCTION AND EXTENT OF AUTHORITY - AUTHORITY CREATED BY OTHER MEANS - OTHER CASES
Appeal against findings of Magistrate dismissing claim of plaintiff, the purchaser of a property, pursuant to alleged collateral contract - cross-appeal by vendors against finding of Magistrate that there was collateral contract of limited terms - appeal by real estate agent against finding of collateral contract and against Magistrate's finding that vendors entitled to be indemnified by real estate agent as collateral contract entered into beyond agent's authority - whether collateral contract in terms found by Magistrate - whether agent acted within authority.
Held: appeal by purchaser discontinued - cross - appeal of vendors allowed - Magistrate's finding of collateral contract set aside - appeal of real estate agent dismissed.
Trade Practices Act 1974 (Cth); Fair Trading Act 1987 (SA); Misrepresentation Act 1972 (SA), referred to.
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; Dare v Pulham (1982) 148 CLR 658; Gould & Birbeck & Bacon v Mount Oxide Mines (1916) 22 CLR 490; Household Fire Insurance Co v Grant (1987) 4 Ex D 216; Outer Suburban Property Ltd v Clarke [1933] SASR 221; Butcher & Anor v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, considered.
FITZGERALD v BROCK REAL ESTATE & ORS
[2009] SASC 183Magistrates Appeal
GRAY J:
This appeal arises out of a contract for the sale and purchase of a suburban house property and an alleged collateral contract related to that sale.
Introduction
The plaintiff, Alison Fitzgerald, the purchaser of the property, claimed damages arising from a salt damp condition that affected the property. She made her claim against the vendors, Richard and Karina Goodall and their real estate agent, Brock Real Estate, in deceit, breach of the Trade Practices Act 1974 (Cth), breach of the Fair Trading Act 1987 (SA), breach of the Misrepresentation Act 1972 (SA) and pursuant to an alleged collateral contract.
Following a trial, a Magistrate dismissed all of the claims of Ms Fitzgerald excepting one. The claim that succeeded arose from a collateral agreement found to have been formed between Ms Fitzgerald and Mr and Mrs Goodall through the ostensible authority of Pauline Kelly of Brock Real Estate. The Magistrate ultimately concluded that Mr and Mrs Goodall were entitled to be indemnified by Brock Real Estate as the collateral agreement was entered into by Ms Kelly, beyond her actual or implied authority.
The Magistrate published two sets of reasons. The first, on 31 October 2008, addressed all issues with the exception of the claims of Mr and Mrs Goodall to an indemnity from Brock Real Estate. That issue was dealt with in separate reasons, published on 21 April 2009.
It is important to record at the outset that the Magistrate found the existence of a collateral agreement in materially different terms to those propounded by Ms Fitzgerald and in circumstances where Brock Real Estate and Mr and Mrs Goodall denied the existence of any collateral agreement. The question of a collateral agreement as found by the Magistrate formed no part of any party’s pleaded case and was only mentioned in passing in one paragraph of Brock Real Estate’s closing submission.
It is against this background that Ms Fitzgerald appealed with respect to her rejected claims. Brock Real Estate appealed, complaining of the findings of a collateral contract and additionally the Magistrate’s refusal to find that Mr and Mrs Goodall had authorised the collateral agreement as found. Otherwise, Brock Real Estate rejected each of the complaints advanced by Ms Fitzgerald. Mr and Mrs Goodall also complained about the finding that there was a collateral contract, but supported the judgment of the Magistrate in finding that Ms Kelly had acted in an unauthorised manner.
On the day that the appeal was listed for hearing, the Court was advised that a settlement had been reached between Ms Fitzgerald and Brock Real Estate. The terms of the settlement included the payment of an unspecified sum and in addition provided an indemnity as to costs. In these circumstances, Ms Fitzgerald discontinued her appeal. This left two issues for determination on the appeal. The question whether there was a collateral agreement in the terms found by the Magistrate and whether Ms Kelly acted within her authority.
Having regard to the terms of the settlement, Brock Real Estate abandoned its case at trial and on appeal that there had been no collateral contract. It now supported the collateral contract as found by the Magistrate. Effectively, Brock Real Estate was a party directly involved in the question of the extent of Ms Kelly’s authority and the real party in issue standing in the shoes of Ms Fitzgerald on the existence of the collateral contract.
The Trial
Against this background, it is convenient to turn to the primary findings of the Magistrate.
It is evident that the Magistrate accepted Mr and Mrs Goodall as credible and reliable witnesses. He also found both Ms Fitzgerald and Ms Kelly to be honest witnesses. However, it appears that where there were differences between their accounts, he accepted the account of Ms Kelly, and rejected that of Ms Fitzgerald.
In 2001, Mr and Mrs Goodall placed their property on the market, through Ms Kelly of Brock Real Estate. The property was advertised for sale. Ms Fitzgerald made an offer to purchase the property. The offer was accepted and a contract for sale on the purchase was signed on 18 July 2001. Ms Fitzgerald immediately instructed a building inspector to inspect the property. He reported that there was evidence of rising damp in the property, excluding an area described as “the extended area”. In the course of the report, it was observed:
There were intermittent readings of rising damp (salt damp) when tested with an electronic moisture meter indicating the original DPC (damp proof course) is failing to prevent moisture rising into the masonry walls from the footing. Whilst there is no serious break down caused by the salt in the rising damp, there is potential for damage to occur in future and it maybe [sic] necessary to have the walls treated. I have included with this report a brochure from Ace Waterproofing Pty Ltd who treat walls with the Tech Dry method that installs a chemical DPC. The brochure describes the method. According to the owner, the western wall has been treated in a manner similar to that described in the brochure, however, it hasn’t been treated by Tech Dry and on viewing the work including testing with an electronic damp meter, the indication is the treatment is not giving adequate protection. Apparently the work was carried out over six months ago and by now one would expect the process of drying out to have completed above the new DPC. It maybe [sic] prudent to ask the vendor for a comment from the tradesmen who carried out the work, a trade warranty would usually accompany this type of treatment and the time expired still falls into the statutory warranty period.
The extended area is protected by a modern DPC and it appears to have been correctly installed.
…
There were intermittent readings of rising damp (salt damp) in the walls of the hallway and I have highlighted the areas on the floor plan. These walls have not been treated and will eventually need treatment.
Following the receipt of advice from the building inspector, Ms Fitzgerald telephoned Ms Kelly. Ms Fitzgerald’s evidence was that she said that the building inspector had identified a salt damp problem, and she would cool off unless this could be fixed. Ms Fitzgerald claimed that Ms Kelly replied that she would speak to Mr and Mrs Goodall and that she was later advised by Ms Kelly that the tradesman who had performed earlier work by way of salt damp treatment, would return and fix the problem before settlement. As a consequence, Ms Fitzgerald said that she did not cool off and proceeded to settle on 28 September 2001.
Some 18 months later, signs of salt damp appeared in internal walls of the house, leading to Ms Fitzgerald’s claim.
Ms Kelly in evidence provided a materially different account of her conversations with Ms Fitzgerald. She claimed that Ms Fitzgerald said that the building inspector had reported that injections down the western wall were too far apart, and if this was fixed by Mr and Mrs Goodall she would not cool off. Ms Kelly spoke to Mr Goodall and told him that a building inspector’s report had revealed that injection holes in the western wall were too far apart and had not been correctly done, but if this was rectified, Ms Fitzgerald would not cool off. She claimed that Mr Goodall told her that the work would be redone before settlement. Ms Kelly then telephoned Ms Fitzgerald and told her that Mr and Mrs Goodall would arrange for the tradesman to return to fix the salt damp treatment in relation to the holes in the wall.
Mr Goodall’s account was that during the period between signing the contract and expiry of the cooling off period, he met Ms Fitzgerald’s building inspector onsite. At this time, the building inspector expressed the view that there was damp evident in the western wall and that the salt damp treatment to that wall had not been correctly performed. He was later spoken to by Ms Kelly, who asked him to contact the tradesman and arrange for him to re-treat the wall in the manner suggested by the building inspector. He agreed to do so. Mr Goodall then made contact with the tradesman, who agreed to re-treat the wall. Mr Goodall telephoned Ms Kelly and informed her that the tradesman had agreed to return and re-treat the western wall before settlement. Mr Goodall acknowledged that he had been told, that if this were not to happen, Ms Fitzgerald would cool off.
The Magistrate preferred the evidence of Ms Kelly to that of Ms Fitzgerald and found that the discussion about salt damp related only to the western wall and not the entire house. The judge found that Mr Goodall did arrange for the tradesman to re-treat the wall and that the re-treatment occurred prior to settlement.
When dealing with the Trade Practices Act claim, the Magistrate concluded:
The Third Representation alleged is Ms Kelly told Ms Fitzgerald the tradesman had been back to complete the work and they had fixed the salt damp problem. Ms Kelly’s evidence was she said she was not a salt damp expert and she could not say if the problem had been fixed. The plaintiff denies Ms Kelly added any such qualification. I am satisfied Ms Kelly told the plaintiff the tradesman had returned but I am not satisfied Ms Kelly said the problem had been fixed and if she qualified her statement. Again there are competing versions of a conversation which took place years before the witnesses gave their evidence. There is nothing in the evidence which would cause me to prefer one version over the other. I find only that Ms Kelly told Ms Fitzgerald the tradesman had returned to do the work and so I am not satisfied the Third Representation was made.
The Magistrate then turned to the claim with respect to the collateral contract. In this respect, the Magistrate noted:
The plaintiff pleads Ms Kelly, acting as agent of and capable of binding the second defendants, entered into a collateral contract with Ms Fitzgerald. The essence of the contract was the second defendants would ensure the salt damp treatment would be carried out to the whole house. The consideration for this promise was the plaintiff would not cool off. The first defendant and the second defendants deny the existence of the contract. The first defendant says Pauline Kelly told the plaintiff the tradesman would return to fix the problem before settlement. These words are not a promise the work would be done satisfactorily and the only promise the words convey is the tradesman would return and re-treat the western wall. The first defendant submits if Ms Kelly’s words are capable of amounting to a promise, such promise must be limited to guaranteeing the adequacy of the treatment to the western wall.
…
The circumstances here are different, but the principle is equally applicable. I found the plaintiff did not communicate she required the entire house be salt damp treated even though that may have been her intention. Her expectations were not made plain to Ms Kelly who understood the plaintiff to be referring to the western wall only.
And then concluded:
I am of the view however that there was a collateral contract to the effect the re-treatment of the western wall would be effective. Based on advice from Edwin Young the plaintiff was aware the salt damp treatment to the western wall was not giving adequate protection. Although she may not have intended it, she asked for the wall only to be re-treated. What she wanted was for the wall to be treated so that the salt damp treatment [sic] was eliminated. It is inconceivable she would have been satisfied with a re-application of the original treatment which was only partially successful. She was entitled to expect the re-application of siloxane would be entirely effective. I find Ms Kelly in her role as agent bound the second defendants to a collateral contract that the western wall would be re-treated so as to fix the salt damp problem. Ace Waterproofing found some dampness in the wall and this constituted a breach of the collateral contract.
These findings led the Magistrate to dismiss Ms Fitzgerald’s claims, save for a finding in her favour with respect to the existence of a collateral contract between Ms Fitzgerald and Mr and Mrs Goodall requiring them to effectively re-treat the western wall.
At a later hearing, the Magistrate addressed the claim of Mr and Mrs Goodall to be indemnified by Ms Kelly, as a consequence of having acted, although within her ostensible authority, in excess of her actual or implied authority. The Magistrate concluded Ms Kelly acted outside her authority and in that respect made the following specific findings:
Mr Goodall’s answers in cross-examination remained consistent with his evidence-in-chief and I am satisfied he said no more to Ms Kelly than the tradesman would return and treat the western wall. The second defendant says Ms Kelly was not authorised to represent anything more than this to the plaintiff and in particular she was not authorised to represent to the plaintiff the salt damp problem would be fixed. The second defendant says Ms Kelly advised the plaintiff the salt damp problem would be fixed, and in so doing she exceeded her authority. The second defendants say they did not have the expertise to determine if the salt damp treatment was satisfactorily carried out. The plaintiff’s evidence was Ms Kelly told her the tradesman would return and fix the problem, and in her evidence Ms Kelly said she informed the plaintiff the vendors would get the tradesman to come back and do the work properly and the problem would be rectified. I am satisfied Ms Kelly made the promise and the plaintiff understood and accepted the offer.
I find Mr Goodall did not at any time advise Ms Kelly the tradesman would fix the salt damp treatment. I find Mr Goodall said no more than the tradesman would return and re-treat the work. I find Ms Kelly did not convey to the plaintiff the exact instructions she received from Mr Goodall. I find Ms Kelly conveyed more than she was authorised to by telling the purchaser the salt damp treatment would be rectified. I find Ms Kelly exceed her authority.
As a consequence, the Magistrate ordered that Brock Real Estate indemnify Mr and Mrs Goodall.
The Appeal
The Issues
As earlier observed, the Magistrate found that an oral collateral contract had been entered into between Ms Fitzgerald and Mr and Mrs Goodall. Mr and Mrs Goodall were bound by the contract entered into by Ms Kelly of Brock Real Estate acting as their ostensible agent. As earlier noted, Brock Real Estate and Mr and Mrs Goodall at trial contended that there was no collateral contract entered into at all. However on appeal, Brock Real Estate changed its position and accepted the Magistrate’s finding of a collateral contract limited to the western wall. Although Ms Fitzgerald discontinued her appeal, the question of whether the Magistrate was correct to conclude that there had been a collateral contract entered into remained an issue on appeal.
As earlier observed, Ms Fitzgerald did not plead a collateral contract in the terms found by the Magistrate. Ms Fitzgerald’s plea was that the collateral contract required Mr and Mrs Goodall to re-treat the property so as to remove all salt damp problems throughout the entire house.
The Pleaded Case and the Evidence
On the hearing of the appeal, counsel for Mr and Mrs Goodall complained that the suggestion that only the western wall was to be treated, was not the case advanced or addressed at trial and that there had been a denial of procedural fairness as a consequence. It was accepted that a reference was made to the possibility of such a contract in the submission of Brock Real Estate, but it was contended that the issue was not advanced in any real sense. It was pointed out that it was not an issue addressed by Mr and Mrs Goodall at all at trial. The question only arose following the publication of the Magistrate’s first judgment.
The consequences of a divergence from a pleaded case has been the subject of a number of authoritative discussions.
In Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd[1] the High Court of Australia considered the function of pleadings in the context of whether a bank’s failure to appear at trial estopped it from relying on its pleaded defence. In the course of their joint judgment, Mason CJ and Gaudron J stated:[2]
[1] Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279.
[2] Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 - 287.
The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v. Dunn; Mount Oxide Mines.
Brennan J summarised the object of pleadings in the following way:[3]
In Thorp v Holdsworth, Jessel M.R. stated the object of pleadings:
“The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules of Order XIX. was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing.”
When the pleadings bring the parties to the issue, the court’s function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v. Moscrop.)
Brennan J reiterated the rule as laid down by the High Court in Dare v Pulham:[4]
Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon v. [Mount Oxide Mines Ltd. (In liq.)]; Sri Mahant Govind Rao v. Sita Ram Kesho.
[3] Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 287-288.
[4] Dare v Pulham (1982) 148 CLR 658 at 664.
The rationale for confining parties to their pleaded case was explained by Isaacs and Rich JJ in Gould & Birbeck &Bacon v Mount Oxide Mines:[5]
Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest.
These authorities indicate that the purpose of pleadings has its genesis in procedural fairness and the public interest in the finality of litigation.
[5] Gould & Birbeck &Bacon v Mount Oxide Mines (1916) 22 CLR 490 at 517.
Although these authorities demonstrate that the pleaded case forms the foundation for argument and the consequent findings, disparity between the evidence and the particulars will not prevent a verdict based on the evidence. As stated by the unanimous High Court in Dare v Pulham:[6]
But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v. Irvings Pty. Ltd., though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v. Public Transport Commission (N.S.W.)).
[6] Dare v Pulham (1982) 148 CLR 658 at 664.
Notwithstanding the lack of any pleadings, the question of a limited collateral contract was adequately raised for determination by the Court. The evidence before the Magistrate directly raised the question as to whether Ms Fitzgerald had only referred to the western wall and the matter was raised during closing submissions. In the present proceedings the parties gave evidence about the extent of the request of Ms Fitzgerald and the issue was raised during final submissions. I reject the submission that any procedural unfairness arose.
Collateral Contract –Ad Idem
The lack of any pleading of a collateral contract as found by the Magistrate, was compounded by the vagaries of Ms Fitzgerald’s evidence. She gave evidence as follows:
Q.Did he tell you whether or not any salt damp treatment had been done by the owners in respect of the property to his knowledge; do you recall.
A.I recall that he said the treatment had been – the treatment that they’d done the drill holes were too far apart.
Q.Does that exhaust your recollection on that.
A.Yes.
This was an incorrect understanding of the position. It was being suggested that holes needed to be drilled in the mortar bricks in the wall so that Siloxane could be inserted to create a barrier through which the damp could not penetrate.
As a consequence, Ms Kelly did not appear to have a clear understanding of the problem with the western wall. She gave evidence as follows:
Q.Did Ms Fitzgerald contact you about that building report at a time after the contract had been signed.
A.Yes.
Q.And how did you [sic] communicate with you on that occasion.
A.It would have been prior to the cooling off period finishing that she said that she had Adelaide Building Inspections, Edwin Young, do a building report on the property and that she was told that the injections down the western wall weren’t close enough or weren’t done correctly and needed to be done correctly, and could I communicate with the owner that if this was to be done properly, then she would not cool off.
Q.And do you recall what you said to her in response to that.
A.That’s what I said to her. I said that obviously I will contact the vendor and get back to her.
…
Q.And what did you say to Mr Goodall.
A.Exactly what I was told, that the building report revealed that the holes were too far apart and weren’t done correctly and that if he was to fix them up, then she wouldn’t cool off.
Q.And what did Mr Goodall say to you.
A.He said that he would do that before settlement.
…
Q.How soon after you had spoken to Mr Goodall did you get back to Ms Fitzgerald.
AWithin the cooling off period.
Q.And what did you say to Ms Fitzgerald when you called her on that occasion.
A.That the vendors will fix up the – that – you know, fix up the salt damp treatment in relation to the holes in the wall, getting them closer together, get the guy back and do it properly.
Mr Goodall understood that what was required was for the tradesman to return and re-treat the wall before settlement.
In his paper “Striking a Bargain”,[7] the noted academic Horst Lucke highlighted that the “meeting of the minds” is fundamental to the concept of contract, quoting Thesiger LJ in Household Fire Insurance Co v Grant:[8]
Now, whatever in abstract discussion may be said as to the legal notion of it being necessary in order to the effecting of a valid and binding contract, that the minds of the parties should be brought together at one and the same moment, that notion is practically the foundation of English law upon the subject of formation of contracts.
Commenting some years later, Professor Lucke noted that the logic of the following judicial observation seemed inescapable:[9]
It seems to us that the very essence of a formal contract is the mutuality of consent to the precise form of words that binds the parties as the authentic expression of their common intention…we think that it might be difficult to say that the parties were ad idem until they were agreed upon the form of words that was to bind them.[10]
[7] Horst K Lucke, ‘Striking a Bargain’, (1962) 1(3) Adelaide Law Review 293 at 300.
[8] Household Fire Insurance Co v Grant (1987) 4 Ex D 216 at 220.
[9] Horst K Lucke, ‘Arrangements Preliminary to Formal Contracts’ (1967) 3(1) Adelaide Law Review 46 at 50.
[10] Outer Suburban Property Ltd v Clarke [1933] SASR 221 at 225 (Angas, Parsons & Napier JJ).
Similarly, in Barrier Wharfs Ltd v W Scott Fell & Co Ltd[11] Higgins J of the High Court said:
There is no contract unless the two parties mutually consented to be bound one to the other by one agreement.
[11] Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650.
The mutual consent of contracting parties has conventionally been demonstrated by offer and acceptance. As McHugh JA stated in Empirnall Holdings Pty Ltd v Machon Paull:[12]
The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror.
[12] Empirnall Holdings Pty Ltd v Machon Paull (1988) 14 NSWLR 523 at 534.
Although overt offer and acceptance are not required for a contract to exist, the conduct of the parties must be such that it is clear that they intended to contract with each other; further, the conduct said to demonstrate a binding contract must be seen to have constituted the parties’ mutual communication of their “respective assents to being legally bound by terms capable of having contractual effect”.[13] The mutuality of assent or consensus of the parties has been emphasised on a number of occasions.[14] As Mahoney JA stated in Air Great Lakes Pty Ltd v K s Easter (Holdings) Pty Ltd[15] when identifying three questions to consider in determining whether parties have made a binding contract:
…did the parties arrive at the consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?
[13] Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 627 (McLelland J) as cited in Kriketos v Livschitz [2009] NSWCA 96 at [113].
[14] See Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 660-661 (Higgins J); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [71]-[81] (Heydon JA); Kriketos v Livschitz [2009] NSWCA 96 at [113] (McColl JA).
[15] Air Great Lakes Pty Ltd v K s Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 326.
In the circumstances outlined above, it would appear that the parties’ minds were not at ad idem.
It is to be recalled that the Magistrate accepted the evidence of Ms Kelly and rejected that of Ms Fitzgerald where they differed. It follows from the above extracts from the evidence that there was no collateral contract that the re-treatment would be effective or entirely effective. Not only did the pleadings fail to assert or particularise a contract in the terms as found by the Magistrate, the above analysis demonstrates that the evidence did not support such a contract.
The Magistrate’s conclusions further demonstrate that the evidence did not support a collateral contract that the re-treatment would be effective. The Magistrate concluded that the agent did not make a statement that the salt damp would be eliminated, rather, that “[t]he vendors would fix up the salt damp treatment in relation to the holes in the wall, getting them closer together; get the guy back and do it properly”.
However, as earlier noted, the Magistrate observed:
Although [Ms Fitzgerald] may not have intended it, she asked for the wall only to be re-treated. What she wanted was for the wall to be treated so that the salt damp treatment [sic] was eliminated. It is inconceivable [Ms Fitzgerald] would have been satisfied with a re-application of the original treatment which was only partially successful. She was entitled to expect the re-application of siloxane would be entirely effective.”
The Magistrate correctly concluded in this passage in accordance with his acceptance of Ms Kelly’s evidence, that Ms Fitzgerald asked for the wall only to be re-treated. Any further thoughts that she may have had were not conveyed to Ms Kelly, and accordingly, could not form part of any contract. This passage in the Magistrate’s reasons demonstrates that the parties’ minds were not at ad idem.
The evidence demonstrates that not only were the parties minds not at ad idem in relation to the result of the treatment to be undertaken, their minds were not ad idem as to the scope and nature of the work.
In these circumstances there was no collateral contract, whether at large, or in the terms found by the Magistrate. The Magistrate’s conclusion that there was a collateral contract that bound Mr and Mrs Goodall through the ostensible agency of Ms Kelly, should be set aside.
Authority – Agency
Counsel for Brock Real Estate attacked the Magistrate’s conclusion that Ms Kelly acted outside her authority. It was submitted that the evidence when viewed in its context, established an implied authority for Ms Kelly to make a representation that the salt damp would be eliminated. It was emphasised that the relevant context was Mr and Mrs Goodall’s awareness of Ms Fitzgerald’s intention to cool off if the problems with the western wall were not fixed. Counsel contended that it was in this context that Mr Goodall instructed Ms Kelly to tell Ms Fitzgerald that he would arrange for the tradesman to return and “fix the problem”. Counsel submitted that the relevant inference to be drawn from those words was that Mr Goodall represented that the salt damp problem in the western wall would be eliminated.
An analysis of the cross examination discloses that it was not put to Mr Goodall that he had said that he would arrange for the tradesman to attend to fix the problem of salt damp or to eliminate the salt damp. Mr Goodall’s account, which was not directly challenged, was that he said that he would arrange for the tradesman to return to re-treat the wall. Whether the re-treatment would eliminate salt damp is another matter entirely and does not appear to have been discussed. At no point does the evidence establish that Mr Goodall represented that the salt damp treatment would be successful in permanently eradicating the salt damp problem. Counsel for Brock Real Estate conceded that in a practical sense, such permanent elimination of salt damp is almost impossible.
Counsel for Mr and Mrs Goodall drew attention to the following statement of Gleeson CJ, Hayne and Heydon JJ in Butcher & Anor v Lachlan Elder Realty Pty Ltd to support their contention that Ms Kelly exceeded her authority:[16]
It is also a matter of common experience — and it was certainly the fact here — that real estate agents, while they carry out tasks on behalf of their principals, are not agents in the sense of creating legal relationships between their principals and others. Here, the agent was obviously an agent for the vendor, but only in a limited sense. The legal relationship to be created by any contract of purchase was to be created by the purchasers directly — by bidding at the auction and then signing a contract.
This formulation of the nature of a land agent’s authority supports the conclusion that if Ms Kelly had in fact guaranteed the elimination of the salt damp problem, such a guarantee would have exceeded her authority.
[16] Butcher & Anor v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [42].
The Magistrate was entitled to act on the evidence of Mr and Mrs Goodall and to reach the conclusions as set out above. There was ample evidence to support the Magistrate’s findings. Having regard to that body of evidence, I am satisfied that not only were those findings open but that they were appropriate findings on the evidence before the Court. The Magistrate was correct to conclude that Ms Kelly had exceeded her authority.
Conclusion
As earlier observed, the appeal of Ms Fitzgerald has been discontinued. The appeal by Brock Real Estate challenging the Magistrate’s order for indemnity is dismissed. The cross-appeal of Mr and Mrs Goodall is allowed. The finding of the Magistrate that there was a collateral contract formed through the ostensible agency of Brock Real Estate is set aside.
I will hear the parties as to costs.