TODBERN PTY LTD v RB KERR (GROUP) PTY LTD SUPER CENTRE DEVELOPMENT CORPORATION PTY LTD v RB KERR (GROUP) PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS, PRIESTLEY and MEAGHER JJA 4-6 April 1989, 1 September 1989 [1989] NSWCA 211 CONTRACT — oral agreement whose concluded terms were to be embodied in documents approved by the solicitor of one of the parties — whether enforceable — Masters v Cameron (1954) 91 CLR 353, Godecke v Kirwan (1973) 129 CLR 629 and Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 applied — hence parties to contract may leave even essential terms to be determined by a third party. ORDERS Each appeal is allowed; the cross-appeal is dismissed. The judgments below for the plaintiff respondent Kerr against the defendant-appellant Super Centre and for Super Centre against the defendant appellant Todbern are set aside and in lieu thereof judgments substituted for Super Centre against Kerr and for Todbern against Super Centre. Kerr must pay the costs of each defendant below, and Super Centre must pay the costs of the cross-claim. The costs payable by Kerr to Super Centre must include the costs payable by Super Centre to Todbern. Kerr must pay the costs of the appeals and cross-appeal and, if qualified, is entitled to a certificate under the Suitors Fund Act for the costs of the appeals and cross-appeal. Samuels JA These appeals and cross-appeal stem from a judgment of Carruthers Jin the Commercial List in which he determined a claim for commission made by RB Kerr (Group) Pty Ltd ("Kerr") arising from its activities as agent in the sale of leasehold premises (a shopping centre at Hurstville) from Super Centre Development Corporation Pty Ltd ("Super Centre") to Todbern Pty Limited ("Todbern"). In the court below Kerr was plaintiff and Super Centre and Todbern respectively the first and second defendants. Super Centre, by dint of a provision in the contract of sale, claimed from Todbern an indemnity against any sums which it might be required to pay to Kerr. In the event the learned judge held that Kerr was entitled to recover from Super Centre the sum of $137,000.61 for commission and interest and that Super Centre was entitled to indemnity in this amount from Todbern. Both Super Centre and Todbern appealed and Kerr filed a cross-appeal. A number of matters were argued following the variety of defences pleaded at the trial. Super Centre contended that the plaintiff could not recover any commission because of its failure to comply with s42AA of the Auctioneers and Agents Act 1941 ("the Act"), advanced two separate defences by way of estoppel and sought to rely upon s42A of the Act, submitting that no statement of claim satisfying the requirements of that section had been served. Further, there was considerable argument upon the question of how Kerr's claim for commission should be assessed, the submissions turning upon whether the subject rnatter of the sale was a ground lease attracting a lower rate of commission or leasehold premises attracting a higher rate. But there was also a defence that the evidence established that Kerr and the defendants had agreed that any commission payable to Kerr should be restricted to the sum of $75,000 payable as to $10,000 by Super Centre and as to $65,000 by Todbern, in consideration of Kerr's releasing Super Centre 2 UNREPORTED JUDGMENTS from any further claim for commission and executing an agreement in restraint of trade in Todbern's favour by which Kerr undertook not to deal in leases or subleases of non-residential premises within two kilometres of the subject property for a period of six months. The learned judge rejected the agreement to which I have just referred, the defences under the Act and the first defence of estoppel; but, having determined in Kerr's favour that the subject matter of the sale was a leasehold, found that by dint of the second defence of estoppel, which his Honour upheld, Kerr's claim to commission was limited to the sum of $112,000 which then formed the core of the judgment. I propose to consider first the issue raised by the appellants' contention that the commission to which Kerr was entitled was limited to $75,000 by dint of an agreement made between the parties. If this question is determined in the appellants' favour it will dispose of the litigation. The question depends very much upon the exact nature of the facts found. The learned judge dealt with the evidence in meticulous detail and on the appeal there was no challenge to his primary findings. It seems to me that to summarise the findings which his Honour made would not do justice to the accuracy of his recital. Moreover, I am dependent for the conclusions that I form upon his Honour's findings, to which any views of my own, formed as they must be from the written record only, must defer. However, I conceive that I am entitled to flesh out, if necessary, the conclusions of fact to which his Honour came by reference to the evidence upon which those findings were based and which his Honour must evidently have accepted. I approach the matter, therefore, on the footing that the whole of his Honour's recital of the factual background from p484 to p493 of the appeal book is incorporated in this judgment. Some parts of the history are not directly relevant to discussion of the agreement to which I have referred, but form indispensable background. It is plain that Carruthers J founded his account of the critical conversations between Mr Sproule, a director of Todbern, and Mr Salter, a director of Kerr, upon Mr Sproule's evidence in chief, from which I should add he did not significantly resile in cross-examination. His Honour's findings therefore amounted to this. Super Centre and Todbern had agreed that Todbern would pay Kerr's commission. Kerr wanted $112,000 which Mr Sproule thought excessive for the work done. He offered $50,000. Mr Salter reflected on the income tax he would have to pay on $112,000 and told Mr Sproule he would consult his accountant and see if he could devise a scheme by which Kerr would derive an equivalent benefit though accepting a smaller sum. Mr Salter's accountant proposed a means, to which Mr Salter assented, which would allow Kerr to obtain the sum of $65,000 as capital and not income and therefore free of income tax. If in addition Kerr received $10,000 by way of commission it would get something close to $112,000 after tax. Mr Sproule, in cross-examination by counsel for Kerr, was asked this question and gave this answer: "Q. Was it your understanding that the proposal which was being put forward about the restraint of trade clause and the like was a proposal which had as its object to achieve the receipt by Mr Salter's company of $65,000 tax free? Q. I believe that was Mr Salter's intention." Mr Sproule, in cross-examination, stressed that he and Mr Salter had arrived at an agreement that Mr Salter should accept $75,000 in satisfaction of his claim for commission and that the money should be conveyed to him by dint of the transaction which he had proposed on the advice of his accountant; that is to say URWDBERN PTY LTD v RB KERR (GROUP) PTY LTD SUPER CENTRE DEVELOPMENS CORPORATION PTY LTD v RB KERR (GROUP) PTY LTD (Samuels JA) $10,000 for commission and $65,000 as consideration for a covenant in restraint of trade. Mr Sproule further emphasised, and there is nothing to the contrary effect, that the scheme was "not our scheme, it was his scheme'. Mr Sproule instructed Todbern's solicitor, Mr Binnetter, that the parties had arrived at the agreement pleaded by way of defence and described above. Mr Binnetter's authority was limited to approval of the "documentation" by which the scheme proposed was to be carried into effect. Carruthers J quotes a sentence from Mr Sproule's evidence: "Get your solicitors to put up the accountant's documentation and if Michael Binnetter is happy with it we will go along with it." "It" refers to "the documentation" and not to the scheme which the documents were to effect. It seems to have been contemplated originally that Mr Isenberg, Kerr's solicitor, should draft the documents but, as it turned out, the two solicitors having agreed upon the structure of the arrangement, Mr Binnetter undertook to draft the documents, which he did. As the learned judge recounts, some time having elapsed after Mr Binnetter had despatched the draft documents to Mr Isenberg, he telephoned Mr Isenberg on 25 January to inquire whether they had been executed. It was in that conversation that Mr Isenberg raised a number of variations which his client desired to be made. The most significant arose, so Mr Isenberg said, and the learned judge found, in the context of Mr Salter's having become aware for the first time that the sale was of a leasehold, which entitled Kerr to commission at a significantly higher rate than that originally contemplated and claimed. However, Mr Isenberg said that Mr Salter would waive Kerr's entitlement to the full commission if Todbern would agree that the $65,000 payable in respect of the restraint of trade was to be free of all taxes and charges. Now, this was clearly, I think, a stipulation which lay quite outside the arrangement to which Mr Salter and Mr Sproule had come, and to which Super Centre, so far as it was affected, and Todbern, were prepared to adhere. I emphasise this point because, although the arrangement for the payment of $65,000 in return for a restraint was designed to enable that sum to be received by Kerr free of tax, it was never contemplated that Todbern should pay over the sum which might be necessary to enable a net $65,000 to be received by Kerr. According to Mr Sproule such a thing had never been discussed and, evidently, his Honour accepted Mr Sproule's evidence on this point. The learned judge's reasons for rejecting the existence of an enforceable agreement are somewhat laconic. They rest upon the answer to a question which he himself asked, perhaps exemplifying the sound judicial practice of attributing considerable weight to the answers given to questions from the bench: "Q. Is not the critical issue about all this that if your solicitors had come back to you and said 'We are not happy with this', you would not have gone on with it? A. Correct." However he did not mention the two questions and answers which followed: Q. So there really was not a binding agreement between you and Mr Salter at all? A. There was an agreement when we concluded the conversation that the fact that yes, we would go along with it and David was then to instruct the accountant who was to instruct Mr Isenberg to negotiate with our Mr Binnetter and we would then sign the documents. Q. Subject to the solicitors being happy with the documentation? 4 UNREPORTED JUDGMENTS A. We were happy. We instructed Michael Binnetter that this was the way the arrangements were to be, per our conversation with David Salter. We agreed through a three-way microphone telephone conversation that we would accept that scheme of David's that he wanted to receive his $75000 in $10000 commission and $65000 as restraint of trade. As far as we were concerned we had made the arrangement. We concluded the arrangement. We agreed that whichever way Cawood thought, yes, we were satisfied to go ahead with it and we said to David 'Okay, go ahead and get the arrangements under way.""". Counsel for Kerr then very candidly underlined the point: "Q. You had a consensus with Mr Salter. Is that a fair statement? A. We had a consensus? Q. Yes? A. We had an agreement." Of course, that Mr Sproule - and his partner Mr Cawood believed there was a binding agreement does not dispose of the point. However, to the extent that his perception is important, I think that it is clear that he thought his arrangement with Mr Salter was enforceable, and that it may safely be inferred that Mr Salter thought so too; and that it was the revelation that Mr Salter might be entitled to twice the amount of the commission he had claimed which caused him to vary his terms. His Honour seems to me to attribute to the evidence he quotes greater significance than in its full content it will bear. I do not regard this conclusion as trenching in any way upon his Honour's primacy in the evidentiary field; because my reservation is simply a matter of inference from the terms of Mr Sproule's answers to his Honour's questions. With great respect, I do not think it is open to read Mr Sproule as having "made it clear that the discussions were subject to the approval of the second defendant's solicitors." Nor do I think that his Honour has attached the proper significance to what he clearly regarded as the critical and disentitling statement. His Honour said: "One has only to note his statement to Mr Salter 'If Michael Binnetter is happy with it, we will go along with it', and his answer to the question" (and here his Honour sets out the first of the three questions to which I have just referred). It is necessary to bear in mind, as I have already observed, that the statement "If Michael Binnetter is happy with it" refers to the form of the "documentation" which it was contemplated that Mr Isenberg would furnish him. Mr Binnetter's approval did not extend to the scheme. Mr Sproule had instructed him about that; he was merely to ensure that that scheme was properly recorded. That is to say, he was merely to satisfy himself that the agreement at which the parties had arrived was punctiliously and formally embodied in a legal document. Furthermore, Mr Sproule's answer to the first question which his Honour asked of him, must also be regarded as referring to the documents and not to the scheme. Indeed, his Honour's third question puts that absolutely beyond doubt ie, "Subject to the solicitors being happy with the documentation?" Mr Sproule's answer "We were happy" means, of course, that if the solicitors were happy with the documentation then Todbern would be happy too. Todbern was already happy with the scheme to which Mr Sproule, on its behalf, with the approbation of his fellow director, Mr Cawood, had assented. It follows, in my opinion, that there was an enforceable agreement in terms of para 5 of Todbern's defence to Super Centre's cross-claim. Its effect was that, in consideration of Super Centre's agreeing to pay $10,000 to Kerr and Todbern's agreeing to purchase the property and to make a further payment of $65,000 to Kerr, Kerr agreed to forego and release any further right, claim or entitlement to URWDBERN PTY LTD v RB KERR (GROUP) PTY LTD SUPER CENTRE DEVELOPMENS CORPORATION PTY LTD v RB KERR (GROUP) PTY LTD (Samuels JA) agent's commission arising from the sale and purchase of property and to restrain its trade by not acting as a real estate agent on the negotiation, granting or taking up of any lease or sublease of non-residential premises within two kilometres of the property for a period of six months; and that these terms were to be embodied in documents to be approved by Todbern's solicitor and executed by the parties. It was in effect an agreement which fell within the second category of those discussed in Masters v Cameron (1954) 91 CLR 353 at 360. The agreement was immediately binding, since its operative terms were the subject of consensus, and the further term bound "the parties to join in bringing the formal contract into existence and then to carry it into execution": Masters ibid. As Walsh J pointed out in Godecke v Kirwan (1973) 129 CLR 629 at 639: "It may be a term of the concluded agreement and may place upon the parties an obligation, capable of being specifically enforced by the court, to sign a further contract in accordance with the agreement which they have already made"; and his Honour then referred to Niesmann v Collingridge (1921) 29 CLR 177. At 640 he went on to point out that in a case which belongs to the second of the three classes described in Masters (as I think the instant case does) the execution "of a formal contract is not a condition of the existence of a binding agreement, but is a condition of the performance of one or more of the terms of an agreement by which the parties are immediately bound." As to the responsibility vested in Mr Binnetter, Walsh J at 642 observed - referring to what had been said by Bray CJ in Powell v Jones (1968) SASR 394 at 399 - that "there is no reason in principle for holding that there cannot be any binding contract if some matter is left to be determined by one of the contracting parties." This principle has recently been affirmed in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600. In that case, Gibbs CJ, Murphy and Wilson JJ said at 604: "[I]t is also well established that the parties to a contract may leave terms - even essential terms - to be determined by a third party............ "; and their Honours refer to the cases cited in the judgment of Gibbs J (as he then was) in Godecke at 645. Sudbrook Trading Estate Ltd v Eggleton [1983] AC 444, which was applied in Booker, indicates the courts' continued adherence to the principle enunciated by the Judicial Committee in a judgment delivered by Lord Wilberforce in Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 536: "Their Lordships consider that, in modern times, the courts are readier to find an obligation which can be enforced, even though apparent certainty may be lacking as regards some term such as the price, provided that some means or standard by which that term can be fixed can be found.......... " And, among the citations which follow, there is a reference to Godecke. There is, accordingly, no objection in law to the parties remitting to a third person the responsibility of approving the formal embodiment of their agreement. As it turned out, rather than approve documents tendered by Mr Isenberg, Mr Binnetter drew the documents himself. I cannot see that this - a procedure to which Mr Isenberg assented - and which was known to the parties, affects the binding nature of their agreement. It was not contended that the document drawn by Mr Binnetter contained any terms which were irrelevant or unreasonable, or which were not designed to record and facilitate the performance of the agreement. If there had been a dispute of that kind or if, for example, the variations sought by Mr Isenberg had been of a less radical kind but Mr Binnetter had nonetheless rejected them, or had persisted in requiring terms which were objectively unreasonable, then the court would have intervened to determine the matter: see Godecke at 642-3 and at 645-6. 6 UNREPORTED JUDGMENTS A question, which was the subject of argument, was whether Todbern in it:s negotiations with Kerr, that is to say, Mr Sproule in his conversations with Mr Salter and later Mr Binnetter in his fairly brief discussions with Mr Isenberg, was authorised by Super Centre to conclude an agreement on its behalf. It was said - and the agreement was pleaded by Todbern in this way - that the contract which Todbern asserted was finally made was "tripartite", although, as it turned out, there were only two parties to each of the two documents which were intended to evidence the agreement, Kerr and Todbern to the restraint and Kerr and Super Centre to the release. I think that the question of agency or authority got rather mixed up with the question of contract or no contract. As far as authority is concerned it seems to me perfectly clear from the evidence of Mr Bott and Mr Parlby, the directors of Super Centre, and of Mr Denovan, Super Centre's solicitor, that they were well aware of, and approved, what was proposed. Mr Bott, indicated in his evid.ence that he knew that "Mr Salter was agreeing to us only paying $10,000. He was getting the rest from Todbern. I understand that to be the tone of the deed" - that is, the deed of release. He and Mr Parlby had numerous meetings with Todbern and Todbern "took it upon themselves that they would negotiate with Mr Salter as to an agreed commission and our company then negotiated a price to sell the property on the basis that we would not pay for any commission." Mr Parlby told Mr Denovan that it had been agreed that Todbern would pay to Super Centre the commission payable by Super Centre to Kerr and Mr Denovan (who had a power of attorney from Super Centre) executed the release on behalf of that company, but, in addition to any other power, pursuant, so Mr Bott said, to specific authority. Ido not think that it can be doubted that Todbern, to the extent that it required it, had authority from Super Centre to speak on its behalf in the negotiations with Kerr leading to the agreement at which the parties arrived. Accordingly, the designated decisionmaker, Mr Binnetter, did what was required of him and approved the documentation by drawing it himself; and it has not been asserted that in doing so he acted other than reasonably and within the terms of his mandate. The agreement was therefore binding and enforceable. What happened, however, was that Mr Salter, through his solicitor, Mr Isenberg, sought new terms, which were not merely variations capable of being subsumed under the terms agreed, but amounted to the requirements of a different agreement. The pleadings contained a plethora of allegations of repudiation. Kerr, having pleaded the agreement, asserted that Todbern's failure to pay the sum of $65,000 amounted to a repudiation which Kerr had accepted. Todbern pleaded the agreement, asserted that it had always been ready, willing and able to pay the said sum (there having been no time for payment fixed), but alleged that Kerr, by commencing proceedings against Super Centre claiming $285,500 with knowledge of the clause in the agreement for sale which provided Super Centre with an indemnity from Todbern in respect of commission, had repudiated the agreennent, a repudiation which Todbern had accepted or "hereby accepts". It may be the case that Todbern accepted Kerr's repudiation when Mr Binnetter rang Mr Isenberg on 8 February 1985 and informed him that Todbern would not accept the obligation to pay the tax and did not thereafter either tender $65,000 or press for the agreement to be executed. Alternatively, as the pleading has it, Kerr repudiated the agreement when on 2 May 1985 it made a demand on Super Centre for $280,500 and that repudiation was accepted by Todbern's pleading. URWDBERN PTY LTD v RB KERR (GROUP) PTY LTD SUPER CENTRE DEVELOPMENT CORPORATION PTY LTD v RB KERR (GROUP) PTY LTD (Meagher JA) The conclusion which I adopt, therefore, is that there was an agreement (which was not incidentally a claim for commission within the Act) which Kerr could have enforced to recover $75,000 but this it repudiated by its claim for the larger amount, and its repudiation was accepted by Todbern. Hence, there is no agreement upon which Kerr can rely. Any ordinary contract for commission (whatever the amount) had been discharged and replaced by the contract under which Kerr would receive $75,000. But that special contract had been terminated by Kerr's conduct, without any fault on Todbern's part. That termination could not: revive any precedent contract for commission; and the demand finally made by Kerr was a claim for commission, although in a larger sum than that originally sought. The special contract, therefore, constitutes a good defence to Kerr's claim against either Super Centre or Todbern. I would therefore allow the appeals and dismiss the cross appeal. The judgments below for the plaintiff respondent Kerr against the defendant-appellant Super Centre and for Super Centre against the defendant-appellant Todbern must be set aside and in lieu thereof judgments substituted for Super Centre against Kerr and for Todbern against Super Centre. Kerr must pay the costs of each defendant below, and Super Centre must pay the costs of the cross-claim. The costs payable by Kerr to Super Centre must include the costs payable by Super Centre to Todbern. Kerr must pay the costs of the appeals and cross-appeal and, if qualified, is entitled to a certificate under the Suitors Fund Act for the costs of the appeals and cross-appeal. Priestley JA I agree with Samuels JA. Meagher JA I agree with Samuels JA. The appeals are allowed and the cross appeal is dismissed. The judgments below for the plaintiff-respondent Kerr against the defendant-appellant Super Centre and for Super Centre against the defendant-appellant Todbern must be set aside and in lieu thereof judgments substituted for Super Centre against Kerr and for Todbern against Super Centre. Kerr must pay the costs of each defendant below, and Super Centre must pay the costs of the cross-claim. The costs payable by Kerr to Super Centre must include the costs payable by Super Centre to Todbern. Kerr must pay the costs of the appeals and cross-appeal and, if qualified, is entitled to a certificate under the Suitors Fund Act for the costs of the appeals and cross-appeal. Counsel for the Appellant: Mr RC McDougall Solicitors for the Appellant: Vereker and Partners Counsel for the Respondent: Mr MA Pembroke Solicitors for the Respondent: Geoffrey C Frumar