Kaffe Pty Ltd t/s Scan Business Brokers v Vasta

[1995] QCA 155

IN THE COURT OF APPEAL	[1995] QCA 155
SUPREME COURT OF QUEENSLAND

Appeal No. 167 of 1994

Brisbane
[Kaffe Pty. Ltd. v. Vasta, Costantino and Coco]
BETWEEN:

KAFFE PTY. LTD. (ACN 010 354 688) trading as SCAN BUSINESS BROKERS

(Plaintiff) Appellant

AND:

ANGELO VASTA

(First Defendant) First Respondent

AND:

ANTONINO COSTANTINO

(Second Defendant) Second Respondent

AND:

SANTO ANTONIO COCO

(Third Defendant) Third Respondent

Macrossan C.J.
Davies J.A.

Thomas J.

Judgment delivered 05/05/1995

Judgment of the Court

APPEAL DISMISSED WITH COSTS.

CATCHWORDS: AGENCY - COMMISSION; construction of

contract.

Counsel:	Mr. P. D. McMurdo Q.C. with him Mr. M. R. Eliadis for the appellant
Mr. D. J. McGill Q.C. for the first respondent
Mr. F. L. Harrison Q.C. with him Mr. L. Boccabella for the second respondent
Mr. H. B. Fraser Q.C. with him Mr. J. C. Sheahan for the third respondent
Solicitors:	Nicol Robinson & Kidd for the appellant Barwicks for the first respondent Masinello and Associates for the second
respondent
Minter Ellison for the third respondent

Hearing Date: 10 February 1995
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 167 of 1994

Brisbane

Before Macrossan C.J.
Davies J.A.
Thomas J.

[Kaffe Pty. Ltd. v. Vasta, Costantino and Coco]
BETWEEN:

KAFFE PTY. LTD. (ACN 010 354 688) trading as SCAN BUSINESS BROKERS

(Plaintiff) Appellant

AND:

ANGELO VASTA

(First Respondent) First Respondent

AND:

ANTONINO COSTANTINO

(Second Respondent)Second Respondent

AND:

SANTO ANTONIO COCO

(Third Respondent) Third Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered the 5th day of May 1995

The substantial questions in this appeal involve the construction of a contract dated 21 December 1989 between the appellant on the one hand and, on its face, the first and third respondents on the other. The appellant, who was a commercial and industrial business broker, sued the respondents for commission owing under the contract upon the sale by the first and second respondents of their shares in Cosco Holdings Pty. Ltd. ("Cosco") to the third respondent.

The contract was in the following terms:

"TO: KAFFE PTY. LTD.	OF: 1st Floor, 'Firhall', 135 Wickham
Tce, trading as:	Brisbane Q. 4000
SCAM BUSINESS BROKERS	Licensed under the Auctioneers & Agents
Commercial and Industrial Business	Act and the Securities Industry

Brokers (hereinafter called "the agent") (Queensland) Code

1. I/we the undermentioned Vendors hereby engage and appoint you to act as my/our brokers/agents for the purpose of selling the business assets hereinafter described at the price stated hereunder or as may be agreed by me/us. I/we agree to pay you commission as set out hereunder if you introduce a purchaser who enters into a valid and enforceable Contract of Sale confirmed by me/us for the purchase of such business assets and:

(a) who completes such sale; or
(b) if such purchaser does not complete such sale and the deposit paid or some
part [init.] thereof is forfeited provided however that in no case shall you
be able to recover as commission any amount in excess of the amount of the
forfeited deposit.

2. In consideration of your Agreement to use your best endeavours to sell the business assets you are hereby appointed sole and exclusive agents for the sale of the said business assets for an indefinite period from the date hereof. I/we acknowledge that if such business assets are sold by me/us or by any other agent or person during that period I/we will be responsible for the payment to you of commission at the rate aforesaid.

3.    For the purpose of this Authority:-

(a) the business assets shall be deemed to have been sold upon the signature by any person, persons or corporation (either personally or by an agent) of a document whereby that person, those persons or such corporation becomes legally bound to purchase the said business assets at a price and upon terms which the Vendor/s shall have approved.

(b)  "purchase" includes:

(i) the acquisition of the business assets or sufficient thereof to enable the party or parties acquiring the same to carry on the business in respect of which the business assets are used from the owner of such business assets, whether or not the same are acquired in one transaction or are the subject of another transaction or other transactions;

(ii) the acquisition by a third party or parties of an interest in a partnership which is or shall be the owner, or of any shares in any corporation which is or shall be the owner, or which is the holding company (within the meaning of that term under the law of Queensland relating to companies) of the owner of the business assets.

(c) You shall be deemed to have introduced a person as a prospective purchaser if the fact that such business assets are available for purchase is made known to such person.

4. I/we undertake to pay the costs of preparing an appraisal and for

DESCRIPTION OF BUSINESS	COMMISSION CALCULATION (Commercial Property)
ASSETS:	2% of the gross sale value of all the assets
Shares in or assets of	including Goodwill, or 1% of such gross sale
COSCO HOLDINGS PTY. LTD.	value if the purchaser is the AMCOR GROUP or the BOWATER SCOTT GROUP
DATED:	21/12/89

[signature] [signature]
. . . . . . . . . . . . . .
SIGNATURE/S OF THE VENDOR/S "

The questions of construction are whether the sale was one which came within the terms of the contract and if so what the amount of commission was. The learned Trial Judge decided that the sale was not within the terms of the contract because the language of the contract referred only to a sale of all of the shares. She nevertheless went on to decide the amount of the commission which would have been payable if she were wrong in that first conclusion. And she decided against the appellant on its alternative claim, not pursued before this Court, for damages for breach of an implied term of the contract.

The learned Trial Judge also determined the question of who was liable to pay the commission if, contrary to her view, commission was payable. This involved both a question of construction (whether the contractual intention was that only a vendor of business assets would be liable to commission) and questions of authority, ostensible authority and ratification. Other defences, advanced on the assumption that the first question of construction was decided against the respondents, were argued and also decided by her Honour.

The starting point is whether the sale which took place came within the terms of the contract for if it did not the one with some typed provisions added. The standard form, suited to the sale of assets of a business, seems unsuited, except in an indirect way for which specific provision is made in cll.3(b)(ii) and 6(b), to a sale of shares in a company carrying on a business. Yet by a typed provision the business assets, for sale of which the appellant was appointed agent, are described as "Shares in or assets of Cosco Holdings Pty. Ltd."

There are, in substance, two main reasons why it is submitted that the sale does not come within the terms of the contract. The first is that the terms of the contract are unsuited to a sale of some but not all shares in Cosco;

and therefore could not have been intended to apply to such a sale. The second is that the contract, to the extent that it envisages a sale of shares, envisages one to a person other than one of the existing shareholders.

The first of these contentions focuses on cl.3(b). That contention involves the following propositions:

1.  In order to construe cl.3(b)(i), it is necessary to substitute, in the alternative, for "business assets", the terms "shares in Cosco" and "assets of Cosco", because of the description of "business assets" specifically inserted by the parties as being "shares in or assets of Cosco";

2.  The phrase in that sub-clause "or sufficient thereof to enable the party ... to carry on the business in respect of which the business assets are used" can apply only to the second alternative because shares are not used in the business; and

3.  Consequently, because the words in that phrase in the sub-clause are words of expansion and because those words only apply to "business assets", when they are "assets of" Cosco, when "business assets" are "shares in" Cosco, a sale is only effected if all of the shares are sold.

However, it does not necessarily follow from the fact of the alternative definition of "business assets" that where the business assets are the assets of Cosco, they must be all or sufficient thereof to enable the business to be carried on, that where they are shares they must be all of those shares. In the case of a sale of assets of Cosco, it was important to ensure that a sale of any of those assets during the pendency of the contract, including a sale made in the ordinary course of business of Cosco, did not entitle the appellant to commission. No such safeguard was necessary in the case of shares. Moreover cl.3(b)(ii) includes within the meaning of "purchase" the acquisition by a third party of any shares in Cosco's holding company. It would be surprising if the parties intended an acquisition of any shares in Cosco's holding company to be included yet did not intend a sale of any shares in Cosco to be included.

Clause 3(b)(i) may be read consistently with that intention by reading the qualifying phrase quoted above as containing words of limitation rather than of expansion; that is as requiring, only in the case where the business assets are the assets of Cosco, that there must be sufficient to enable the party acquiring them to carry on the business.

We would adopt that construction and consequently reject the first of the contentions stated above.

The second contention, it will be recalled, was, in effect, that the contract did not envisage a sale other than a sale to a third party; that is, in the case of shares, to a person other than one of the existing shareholders. Having accepted the first contention, her Honour did not go on to consider this one. We would accept this contention for two reasons. The first is that such indications as there are in the contract lead to that conclusion. The second is that the background facts show that the aim of the transaction was to sell the business of Cosco (either by sale of its assets or its shares) to a third party.

It is inconceivable that the parties contemplated that a sale by one or more shareholders to another or others would come within cl.1 of the contract by which "the undermentioned Vendors" agreed to pay the appellant commission if it introduced a purchaser who entered into a valid and enforceable contract for purchase of the business assets. And whilst cl.2 is intended to extend the appellant's right to commission to the case where, during the pendency of the contract, the business assets are sold by "me/us or by any other agent or person" it is difficult to see, given that these are standard form clauses to cover the circumstances of both single and multiple vendors, that this was intended to do more than to confer a right to commission when a sale, of the kind otherwise contemplated by the contract, took place. In other words its purposes were to reward the "best endeavours to sell" of the appellant, as exclusive agent, when such a sale took place and to avoid the need for it to prove that such sale resulted from its endeavours. It was not to extend the right to commission to the case where one or more shareholders sold to another or others.

Moreover, the fact that the first and third respondents are "the undermentioned Vendors" who, by the contract, assumed the liability to pay commission, indicates that it was contemplated by the parties that both would be vendors, not that one would sell to the other, as in fact occurred.

Clause 3(b)(ii), discussed in the context of the first contention, envisages two relevant possibilities; the acquisition by a third party of shares in Cosco and the acquisition by a third party of shares in a holding company of Cosco. If the second contention is to be accepted, the first of these possibilities merely duplicates the combined effect of cll.1 and 2 and the definition of business assets.

But that is an understandable consequence of the adaption of a standard form contract to this case and should not be rejected for that reason. The contrary view, that the sub- clause is relevantly intended to include a sale of narrower ambit than that already contemplated by the contract (the acquisition by a third party of shares in Cosco when the contract already contemplated the acquisition by anyone of shares in Cosco) is less likely. This sub-clause therefore lends some slight further support to the view that a sale to a third party only was contemplated by the contract.

Finally in this respect the commission calculation, when the contract was first made, provided generally for 2% commission, but only 1% commission if the purchaser was the Amcor Group or the Bowater Scott Group, two known competitors of Cosco. This was no doubt because they were known to the respondents, at the time the contract was made, as possible purchasers who needed no introduction by the appellant. It would be surprising if the parties contemplated that only 1% commission would be payable in that case, but that 2% commission would be payable if there was a sale by one or more of the respondents to another or others of them.

It is likely, in view of the provisions to which we have referred, that the parties never contemplated that if there was a sale by one or more of the existing shareholders to another or others of them, commission would be payable. Indeed the recovery of commission against the respondents, or any combination of them, in the given circumstances was neither contemplated by the parties nor stipulated for in the contract. The sustaining of the present claim would require the adoption of several awkward points of construction and some unrealistic assumptions.

That view accords with the factual context in which the agreement was made, the factual background known to the parties at the date of the contract: Prenn v. Simmonds [1971] 1 W.L.R. 1381 at 1385; Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. (1979) 144 C.L.R. 596 at 606; Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 C.L.R. 337 at 352. That was that the "partners" in the business were interested in selling it because of an "unsavoury matter" which had arisen and publicity which had ensued in respect of it.

We would therefore conclude that the parties to the contract did not contemplate that, in the event that one shareholder of Cosco sold some or all of his shares to another or the other shareholders commission would be payable. It follows that the appeal must fail.

In view of the conclusion which we have reached it is unnecessary to discuss other defences raised by the respondents or to reach a conclusion as to the amount of commission which would have been payable had the sale which took place been one contemplated by this contract.

The appeal should be dismissed with costs.

advertising

[init.] expenses to the extent of $ , % of which sum shall be set off against any

commission due to you in respect of this appointment

5.    The business assets (particulars of which are set out hereunder and are

correct) which you are authorised to sell are:-

(i)    my/our own business assets and I/we are entitled to sell the same; or

(ii) in the ownership of which owner has authorised me/us
to sell and engage you in respect of the same thereof;

I/we acknowledge that where I/we the signatory/signatories am/are not the owner/owners of the business assets I/we will be liable for payment of your commission unless the same shall be paid in full by the owner thereof.

6. The amount of Commission due shall be in respect of the gross value of all the assets included in or related to the purchase transaction including (but not limited to) goodwill, stock, debtors, plant and machinery, fixtures and fittings, vehicles, interests in trade marks, patents, processes, licences or permits, interests in land (whether freehold or leasehold) notwithstanding that:-

(a)    the actual purchase price received by me/us or interests which I/we

represent is less in value than such gross value; or

(b) Such purchase transaction is effected by means whereby a Third Party acquires an interest in a partnership which is or shall become the owner, or any share in any corporation which is the owner, or which is the holding company (within the meaning of that term under the law of Queensland relating to companies) of the owner of such assets.