Toohey v Golder

Case [2021] QSC 277


SUPREME COURT OF QUEENSLAND

CITATION:  Toohey v Golder & Ors [2021] QSC 277
PARTIES:  NICOLLE TOOHEY
(plaintiff)
v
ANDREW GOLDER
(first defendant)
EMMA GOLDER
(second defendant)
HIGH CHURCH PTY LTD
ABN 37 604 346 170
(third defendant)
FILE NO:  SC No 9524 of 2016
DIVISION:  Trial Division
PROCEEDING:  Claim
ORIGINATING  Supreme Court at Brisbane
COURT: 
DELIVERED ON:  28 October 2021
DELIVERED AT:  Brisbane
HEARING  15 to 18 February and 19 April 2021
DATES: 
JUDGE:  Bond JA
ORDERS:  The orders of the Court are:

1. 

Judgment for the plaintiff on her claim against the first and second defendants, in the amount of $18,668.07, exclusive of interest.

2. 

The plaintiff’s claim against the third defendant is dismissed.

3. 

Judgment for the plaintiff on the defendants’ counterclaim.

4. 

The parties will be heard on the order which should be made for interest in respect of the plaintiff’s judgment and also on the question of costs.

CATCHWORDS: 

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – ACCEPTANCE – BY WHOM – where the question was whether the plaintiff had contracted with two natural persons or the company which they had incorporated – alternatively whether the contract was to be regarded as a pre- incorporation agreement entered into for the benefit of the company – whether there was a novation by conduct which

substituted the company for the two natural persons – whether the plaintiff was estopped by a convention to the effect that the contract was between the plaintiff and the corporation and not between the plaintiff and the two natural persons

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – where the contract permitted the defendants to terminate in the event of failure to achieve a contractual revenue target – whether an email congratulating the plaintiff on reaching the revenue target constituted affirmation of the contract by the defendants, and waiver of the right to terminate – whether on the proper construction of the contract and in the facts which happened the revenue target had been reached constituted affirmation of the contract, and waiver of the right to terminate

DAMAGES – ASSESSMENT OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT – GENERALLY – where the plaintiff claimed damages for loss of commission income beyond an original contract term – whether the possibility of earning such income by exercise of a contract option or by further agreement with the defendants was so remote as to justify the conclusion that it should not be taken into account in the assessment of damages

Corporations Act 2001 (Cth), s 131

ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) (2012) 245 CLR 338; [2012] HCA 6, followed

Browning v ACN 149 351 413 Pty Ltd (in liq) (formerly known as
Enviren Constructions Pty Ltd) [2016] QCA 169, followed
Immer (No 145) Pty Ltd v Uniting Church in Australia Property
Trust (NSW) (1993) 182 CLR 26; [1993] HCA…

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Toohey v Golder [2021] QSC 277
Case
[2021] QSC 277
Decision Date

CaseChat Overview and Summary

Toohey v Golder involved a dispute between the plaintiff, Ms Toohey, and the defendants, Mr and Mrs Golder, regarding the formation of a contractual relationship. The plaintiff claimed that she had entered into a contract with Mr and Mrs Golder but was seeking clarification on whether the contract was with the individuals or with the company they had incorporated, High Church Pty Ltd. The defendants argued that the contract was with the company, either from its inception or as a result of subsequent novation or ratification. The matter was heard in the Supreme Court of New South Wales.

The primary legal issue before the Court was whether the contract was initially formed with Mr and Mrs Golder personally or with High Church Pty Ltd, and if the former, whether the contract was subsequently novated to involve High Church Pty Ltd in place of the individual defendants. The defendants attempted to rely on section 131 of the Corporations Act 2001 (Cth), which addresses contracts entered into before a company is registered. The Court found that Mr and Mrs Golder did not purport to enter into a contract on behalf of High Church Pty Ltd before its registration, and therefore the statutory provision did not apply. The Court also dismissed the argument that the contract had been novated, finding that the requirements for establishing novation had not been met.

The Court held that the defendants' argument for novation failed because it did not sufficiently address the legal requirements for novation, which involve an agreement to substitute a new contract for an old one, discharging the obligations of the original contract. The Court relied on the authoritative statement of these requirements from the High Court's decision in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW). The Court found that no such agreement existed in this case, and therefore the contract remained with Mr and Mrs Golder personally.

The final orders of the Court were that the contract remained with Mr and Mrs Golder personally, and that there had been no novation of the contract to involve High Church Pty Ltd. The Court did not find it necessary to consider whether there had been ratification of a pre-registration contract by High Church Pty Ltd.

Orders

Orders of the court

The orders of the Court are:

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The defendants’ argument sought to rely on s 131 of the Corporations Act 2001 (Cth): 131 Contracts before registration The defendants’ argument fails at the threshold because Mr and Mrs Golder did not enter into, or purport to enter into, a contract on behalf of, or for the benefit of, High Church Pty Ltd before the company was registered on 20 February 2015. Indeed, whatever might have been their subjective personal intention concerning the position of the corporate entity in carrying on the business so far as customers of the business were concerned, they made no mention of the corporate entity to Ms Toohey before its registration and, indeed, I have found they made no mention of the corporate entity to her before the contract between them was finalised. It is not necessary to consider whether there is any evidence of ratification by the company High Church Pty Ltd. The defendants sought to advance ratification of a pre-registration contract as a basis for concluding that if the contract was initially struck with Mr and Mrs Golder personally then that position might have changed subsequently. I agree with the submissions advanced on behalf of Ms Toohey that such a conclusion should only be reached by novation or estoppel. Accordingly, I turn now to address those matters. The defendants contended that the conclusion that the contract was novated so that High Church Pty Ltd became a party to it in lieu of Mr and Mrs Golder was justified by the following: For the following reasons I reject that argument. First, I have rejected Mr Golder’s evidence as to what he said at the meeting on 24 February 2015. Second, the defendants’ argument does not pay sufficient attention to what the law requires to be proved in order to establish a novation. The authoritative statement of those requirements was made in ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) (2012) 245 CLR 338 at 346 [12] and 349-350 [27] to [28], where French CJ, Crennan, Kiefel and Bell JJ described novation in the following terms (footnotes omitted): “A novation, in its simplest sense, refers to a circumstance where a new contract takes the place of the old. It is not correct to describe novation as involving the succession of a third party to the rights of the purchaser under the original contract. Under the common law such a description comes closer to the effect of a transfer of rights by way of assignment. Nor is it correct to describe a third party undertaking the obligations of the purchaser under the original contract as a novation. The effect of a novation is upon the obligations of both parties to the original, executory, contract. The inquiry in determining whether there has been a novation is whether it has been agreed that a new contract is to be substituted for the old and the obligations of the parties under the old agreement are to be discharged. Scarf v Jardine, and therefore from Roman law. The term is applied to two classes of case: where the parties to a contract make a new contract, with new obligations, impliedly rescinding an existing contract; and, more commonly, to tripartite agreements, where ‘the obligation of a third person is by express agreement accepted by one party to an existing contract with the consent of such third person and of the other party to the contract, in lieu of the obligation of such other party, who, by the new contract, is released from his obligation under the original contract’. … "Novation" is a term derived from the civil law, Lord Selborne LC observed in Lord Selborne LC in Scarf v Jardine described a novation as operating where: ‘there being a contract in existence, some new contract is substituted for it, either between the same parties (for that might be) or between different parties; the consideration mutually being the discharge of the old contract’."