Hopcroft v Edmunds (No 2)

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

HOPCROFT & ANOR v EDMUNDS & ORS (NO 2)

[2012] SASC 94

Judgment of The Honourable Justice Blue

12 June 2012

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - CONDITIONS - CONDITIONS PRECEDENT AND SUBSEQUENT

ESTOPPEL - ESTOPPEL IN PAIS - THE REPRESENTATION - BY CONDUCT

CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RELATIONS BETWEEN PRINCIPAL AND THIRD PERSONS - RIGHTS AND LIABILITIES OF PRINCIPAL IN RESPECT OF CONTRACTS OF AGENT

In 1995, the plaintiffs were suing successive Directors of Fisheries. The first three defendants were suing a fisherman and firm of solicitors. All actions concerned abalone licences.

The plaintiffs had discussions with the first three defendants concerning assistance which the plaintiffs may be able to provide to them in their action. It was proposed that the plaintiffs would provide assistance in the litigation, would become directors and shareholders of the third defendant, and would be paid a percentage of the proceeds of the litigation. The parties acted on the basis that the third defendant was the trustee of a family trust, but in fact the fourth defendant had replaced the third defendant as trustee.

A “Shareholders Agreement” was drafted by solicitors on instructions from the defendants’ accountant. It was executed by the plaintiffs but not by any of the first three defendants. The plaintiffs were made directors and shareholders of the third defendant which the plaintiffs pleaded occurred pursuant to the Shareholders Agreement. Certain payments were made to the plaintiffs which they pleaded were made pursuant to the Shareholders Agreement.

The plaintiffs claim that a contract was entered into with the first three defendants either upon their execution of the Shareholders Agreement or upon the appointment of the plaintiffs as directors of, and the issue of shares to them in, the third defendant. The plaintiffs claim that the fourth defendant is estopped from denying it is bound by the contract.

The defendants deny that any contract came into existence. In the alternative, they claim that any contract was subject to an unfulfilled condition precedent or was rescinded or terminated by them for misrepresentation or breach. They also claim that the plaintiffs’ action is statute barred.

Held, plaintiffs’ action dismissed because no contract came into existence:

(1) It was the manifest intention of the parties that the Shareholders Agreement was not to become binding until executed by all parties. In any event, the defendants’ accountant did not have authority to proffer the Shareholders Agreement to the plaintiffs on the basis that execution by the plaintiffs alone would constitute a binding agreement and there was no case of ostensible authority.

(2) The appointment of the plaintiffs as directors and the issue of shares to them (and the payments made to the plaintiffs) were not sufficiently referrable to the Shareholders Agreement as to constitute acceptance. 

If there had been a contract:

(3) The fourth defendant would have…