MAKHRAS vy SLEIMAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, PRIESTLEY and MEAGHER JJA 3 February 1989, 23 February 1989 [1989] NSWCA 135 CONTRACT — dissolution of partnership — sale of partnership property — shops and flats at Granville — agreement to sell by tender — each partner to lodge a tender price to purchase property — object to "sort out now once and for all who is going to buy the property" — specific time and place of deposit of tender provided — held: (1) Upon the agreement of counsel that the issue on the appeal should be reduced to the above point which, although different to that litigated at first instance, could be determined on appeal without any prejudice or disadvantage to either party — the agreement of the solicitors, understood against the background of past difficulties of settling the affairs of the partnership, was tO the effect that the highest tender provided at the time and place specified was to be accepted as final. Spencer v Harding (1870) LR 5 CP 561 considered and applied — Orders of Young J varied but appeal otherwise dismissed with costs. PARTNERSHIP — dissolution — sale of partnership property agreement as to procedure for tender — agreement between solicitors specifying precise time and place for tender to sort out purchaser — whether amounts to agreement that highest bid would be accepted — held: In the circumstances it did. ORDERS 1. Leave to appeal granted; 2. Appeal dismissed; 3. Orders of Young J stand except that, by consent of the parties, order 5 is varied by changing the date "26th March" presently appearing to "16 March"; 4. The appellant to pay the costs of the first and second respondents of the appeal; and 5. The third respondent's costs of the appeal to be paid out of the assets of the partnership. Priestley JA In 1985 Mr Makhras commenced proceedings for a declaration that the partnership between him and Mr and Mrs Sleiman was dissolved. A declaration of dissolution as at 10 October 1985 was made on 4 November 1985. Mr Star was appointed receiver and manager of the partnership business. On 26 March 1987 two notices of motion in the partnership proceedings came on for hearing before Young J. Orders were made by consent pursuant to the first notice of motion. One of these orders conferred power on Mr Star to convert the property of the partnership into money. This order took effect as if made on 4 November 1985. The second notice of motion concerned property of the partnership consisting of two shops and two flats at Granville. The order sought was that Mr Star be directed to sell that property to Mr and Mrs Sleiman for $157,000. Mr and Mrs Sleiman's claim was based upon their contentions that Mr Star had asked the former partners, through their solicitors, to lodge tenders for the purchase of the property; had put a deadline upon the lodgement of tenders; Mr and Mrs Sleiman had made a tender for $157,000 within the nominated time and Mr Makhras had not. The material upon which these contentions were based will be set out in more detail later. Mr Makhras opposed Mr and Mrs Sleiman's claim on the ground that he had not made a tender within the stipulated time because he had been lulled into a false sense of security by Mr Sleiman who, he said, had agreed that Mr Makhras should buy the property. At some point after the tender deadline had passed Mr Makhras offered $159,000 to the receiver for 2 UNREPORTED JUDGMENTS the property. Mr Sleiman denied any agreement to sell the property to Mr Makhras. Because of the dispute, Mr Star had decided to put the property up for auction; it was this decision that led to Mr and Mrs Sleiman's application to the court. Evidence was given before Young J by Mr Makhras and witnesses called in his case, and by Mr Sleiman concerning the "lulling" issue. Young J did not accept the case put forward on this issue by Mr Makhras, and held that no conduct by Mr Sleiman had lulled Mr Makhras into thinking that it was unnecessary for him to comply with Mr Star's tender requirements. He referred to one valuation of the property, on an unencumbered basis, of $150,000 which was in evidence, and to another earlier one, not in evidence and said: "(i) both parties had agreed with the receiver on a method of disposing of the property; (ii) that the price offered of $157,000 was more than the two valuations; (iii) it was only $2,000 less that the price which the other partner was willing in September to pay and (iv) that this $2,000 would be in all probability only about half of the cost of advertising an auction." For these and other reasons which he set out Young J concluded that the partnership, more likely than not, would be getting about the maximum price for the property if sold at $157,000. Since Mr Sleiman's tender complied with the conditions laid down by the receiver in accordance with what the parties had themselves decided upon as the way of disposing of the property, Young J concluded that he should direct the receiver to sell the property to Mr Sleiman, or alternatively Mr and Mrs Sleiman for $157,000. In stating his reasons, he said that the sale should be on such terms and conditions as the receiver considered appropriate, with liberty to any party to apply. However, the direction he finally made was in accordance with par | of the second notice of motion which asked "that John Edward Star as receiver and manager of the partnership business sell to the defendants Yousef Sleiman and Theresa Sleiman the property at 30-32 South Street, Granville for the sum of $157,000". No formal order was entered before an application for leave to appeal came before the Court of Appeal on 7 September 1987. That application was stood over after the Court made some comments about the state of the proceedings. The parties appeared again before Young J on 25 September when, without any initiating document, counsel for Mr Makhras asked Young J to withdraw his reasons of 26 March 1987 and take up the hearing again. Young J declined to embark on such a course without a formal notice of motion and evidence. In the course of the day's proceedings he was recorded as saying that what he had intended when on the earlier occasion he had referred to the sale being on such terms and conditions as the receiver considered appropriate was that the receiver would use the normal 1986 edition of the Law Society form of contract and that either party would have liberty to apply if they considered any of the conditions in the contract inappropriate. The proceedings were stood over to 15 October 1987. On that day Mr Star was by consent joined as a party and the judge ordered that the formal order resulting from the proceedings of 26 March 1987 should not be entered until further order. There was then some delay, apparently because of costs problems. Eventually there was filed on behalf of Mr Makhras a notice of motion dated 12 April 1988 asking that the judgment and reasons of Young J made on 26 March 1987 be set aside on certain terms. The application was heard by Young J on 27 October 1988 and on that day he dismissed it. Orders were entered on 14 December 1988, disposing of the second notice of motion of March 1987, the substantive order being that: URJ MAKHRAS v SLEIMAN (Priestley JA) 3 "Upon payment to John Star as Receiver and Manager of the sum of... $157,000 the plaintiff shall sign all documents and do all things necessary to transfer to the Receiver who will then transfer to the First and Second Defendants all his right title and interest in the property..." This order is an elaboration of that previously made in accordance with par | of the second notice of motion of March 1987. Like the earlier order, it makes no reference to the 1986 edition of the Law Society form of contract, which had been mentioned in passing by Young J on 25 September 1987. The order, in both its first and final form was one declaratory rather of an open contract subject to the conditions of sale set out in the Third Schedule to the Conveyancing Act, than to the one at one point contemplated by Young J. As I understood the submissions made in this Court, counsel for both sides agreed that if there was a contract it was an open one. Upon the matter coming on for hearing in this Court, it was agreed that rather than take up time with the question whether leave to appeal should be granted, the Court should deal at once with the substance of what Mr Makhras wished to argue in the appeal. Although the notice of appeal which was before the court contained many grounds, Mr Douglas QC, counsel for Mr Makhras, with what was, in my opinion, sound judgment, narrowed the argument to one issue. He submitted there was no evidence that the parties had agreed with the receiver on a method of disposing of the property and argued that the only conclusion on the materials before the Court was that no binding contract for the sale of land, even on his Honour's findings of fact, had ever come into existence. This single issue itself could have raised a number of complications but for what became a matter of common ground between counsel. Mr Tobias QC, counsel for Mr and Mrs Sleiman, pointed out that the only issue actively litigated before Young J had been whether Mr Makhras had refrained from tendering because the conduct of Mr Sleiman had lulled him into thinking it was not necessary to do so. It seems clear from the record of everything that took place before Young J that the parties and the judge all proceeded on the footing that there was an agreement for sale of the property, pursuant to the tendering process, which would go ahead unless Mr Makhras made good his assertion that because he had been lulled into not tendering the judge should prevent the sale. The parties appear not to have paid any attention at the hearing to the nature of the contract which they were assuming would otherwise go ahead. Had any questions been raised about this aspect of the case, it seems certain that either or both sides would have found it either necessary or highly desirable to call further evidence. Those having been the circumstances, counsel for Mr and Mrs Sleiman contended that the court should not allow any argument on matters of law which would be likely to have been the subject of further evidence had any point been taken about them before Young J; counsel for Mr and Mrs Sleiman did, however, concede that there was one point about which no further evidence could have been given so far as his side of the record was concerned and that he could not object to counsel for Mr Makhras putting submissions to this Court on this particular point. The easiest way of making clear precisely what counsel for Mr and Mrs Sleiman was conceding is by first setting out the evidence relevant to the point. Mr Mackey, the solicitor for Mr and Mrs Sleiman, swore an affidavit which was read before Young J in which he recounted a conversation by telephone which took place on 18 August 1986 between him and Mr Vouris, an employee of the receiver, as follows: 4 UNREPORTED JUDGMENTS MR VOURIS: "We have to sort out now once and for all who is going to buy the property. We can then after receipt of proceeds of sale determine the apportionment. We have decided to invite each partner to lodge a tender price to purchase the property. Please speak to your client and have any tender into our office no later than 4.00 pm this Friday the 22nd (of August 1986). I then said to Mr Vouris, MR MACKEY: 'OK I will get instructions. You know from my letter that he is extremely interested in purchasing as he runs the fruit business there. I think he has already seen his bank about finance. The only problem as I see it is that Joe (one of the Defendants) may be looking for some allowance back to him by the Plaintiff at the time of settlement of the purchase for half the payments he had made to Custom Credit over and above the rents as Peter (the Plaintiff) said he was paying his share of this and you and I both know that he hasn't been." The account in Mr Mackey's affidavit continued that, having sought instructions from Mr and Mrs Sleiman, he then lodged appropriate tender papers at the receiver's office before 4 pm on 22 August 1986. In an affidavit by Mr Makhras's solicitor, she first mentioned that a conference held on 16 May 1986 between Mr Vouris, Mr Mackey, herself and the parties to try and effect a settlement had not achieved that result. She then said "I agree that the Plaintiff was aware about the proposal to tender the purchase of the property". Her recollection of the deadline for receipt of tenders was that it was 4 pm on 29 August 1986. It was some time after 29 August 1986 that Mr Makhras submitted his tender of $159,000. What counsel for Mr Makhras wished to argue was that as it was common ground that the receiver did not in any way communicate acceptance of the tender by Mr and Mrs Sleiman to them, no contract to sell the property to them could ever have come into existence. Counsel for Mr and Mrs Sleiman conceded that notwithstanding that the point had never been taken before Young J, it was open to be argued before this Court provided that the argument was limited to a consideration by the Court of the meaning of what occurred between Mr Mackey and Mr Vouris on 18 August 1986, in the conversation above set out. It was this area of the evidence which Mr Tobias conceded could not have in any way been supplemented to his clients' advantage. His answer to the new argument was that in the circumstances known to both parties at the time of the conversation between Mr Vouris and Mr Mackey, the conversation should be interpreted as a statement by Mr Vouris that the highest reasonable offer in the receiver's office by 4 pm on 22 August 1986 would be accepted by the receiver, thus bringing into existence an open contract. If he was wrong in this submission, he further conceded that the Court must hold that there had been no concluded agreement for the sale of the property. He insisted however, that unless counsel for Mr Makhras could make good an argument based on a contrary interpretation of the conversation between Mr Vouris and Mr Mackey, the judge's finding of such a concluded contract could not be upset, and that because of the way the matter had been dealt with before Young J, the argument for Mr Makhras could not range any more widely. In the same spirit of sensible concession that prevailed throughout the argument before this Court, counsel for Mr Makhras said he could not contest what had been said about the way the matter had been dealt with below, and agreed that his case stood or fell upon the construction of the conversation between Mr Vouris and Mr Mackey. URJ MAKHRAS v SLEIMAN (Priestley JA) 5 The case having been reduced to this issue by counsel, the question for resolution can be shortly stated. Did what Mr Vouris said to Mr Mackey on 18 August 1986 amount to an offer by the receiver to sell the property to the person lodging the highest tender in the receiver's office by 4 pm on 22 August 1986. That the case can be dealt with by such an approach is shown by the authorities briefly discussed by Greig and Davis in The Law of Contract, 1987 at 260. One of the cases, Spencer v Harding (1870) LR 5 CP 561, provides a particularly clear illustration. In that case a trade circular was issued offering to the wholesale trade for sale by tender certain stock in trade. The circular nominated a time and place when the tenders would be received and opened. The plaintiffs in the case were the highest tenderers, their tender not having been accepted. Willes J said that the question was whether the circular amount ed to an offer to enter into a contract or on the other hand was nothing more than a mere proclamation that the defendants were ready to chaffer for the sale of the goods and receive offers for their purchase. He indicated that if the circular had said "We undertake to sell to the highest bidder", there would have been a good contract. On the facts before him he said there was a total absence of any words to intimate that the highest bidder was to be the purchaser. Keating and Montague Smith JJ concurred. I do not think Willes J was saying there had to be words explicitly saying the highest bidder was to be the purchaser; if that meaning could be derived from the words used between the parties, either explicitly or by implication, it seems clear he would regard a contract as having been made. In turning to the critical conversation in the present case, it must be borne in mind that amongst the various matters known to the parties was that all efforts to settle the partnership affairs had, to the time of the conversation been unsuccessful. In the circumstances it seems undeniable that the opening words of Mr Vouris were directed to the importance of ensuring that a sale be effected by the tender process so that all parties would know "once and for all who" was "going to buy the property". The whole point of the procedure, in the circumstances that had arisen between the parties, was to achieve finality. This could most readily be done by making an arrangement by which once 4 pm on 22 August arrived, it was then and there known who the purchaser of the property was. This seems clearly to have been Mr Vouris's assumption in the second sentence of what he said to Mr Mackey: "We can then after receipt of the proceeds of sale determine the apportionment." It seems clearly to have been assumed that by close of tender time the identity of the purchaser would be known and there would then be receipt of proceeds of the sale to that purchaser followed by apportionment between the parties. In the circumstances of the present case, it seems to me proper to read the relevant words as clearly carrying the meaning, as they did not in Spencer, "We undertake to sell to the highest bidder". There might be difficulties in reaching this conclusion if the issue between the parties had not been reduced in the way it was by counsel. In other circumstances it may have been possible to argue that Mr Makhras's solicitor's understanding of the arrangement was not shown to be the same as that of Mr Mackey, and complications could have arisen from such a finding. Also, the concept of Mr Star being the vendor could cause difficulty. In the circumstances of the appeal however, it is not appropriate for the Court to investigate such matters. Although I have said that this position arises because of the issue as it was eventually presented to this Court following the mutual concessions by counsel, neither of whom had appeared below, this does not indicate any criticism of either counsel. 6 UNREPORTED JUDGMENTS Their concessions stemmed from the way the proceedings had been conducted before Young J; each side was doing no more, in my opinion, than recognising the strait jacket cast over the appeal by the way the proceedings at first instance had been conducted. Such limitations on appeals are necessary both in fairness to the parties to proceedings and also in the more general public interest in the efficiency of litigation. Such efficiency is not, in general, promoted by allowing points to be run on appeal which were never in contest at the trial; although there are exceptional cases where the courts will permit this to be done. The parties made the only issue before Young J the question whether a contract, otherwise assumed to be binding, should not go ahead because of the "Julling" allegation. That having been decided adversely to Mr Makhras, and the bare point of law argued on the appeal having also been decided against him, the position that remains is that the contract the parties were assuming to be on foot should go forward with whatever difficulties an open contract may in the circumstances entail, through the mechanism ordered by Young J for bringing it to completion. In light of these conclusions I propose that leave to appeal be granted and the appeal dismissed, leaving the orders made by Young J standing, subject, by consent of the parties, to changing the date 26th March presently appearing in O.5 to 16th March. The appellant should pay the costs of the appeal of the first and second respondents. The third respondent's costs of the appeal should be paid out of the assets of the partnership. Counsel for the Appellant: FM Douglas QC and RE Montgomery Solicitors for the Appellant: Colin Daley Quinn and Dwyer Counsel for the 1st and 2nd Respondent: MH Tobias QC and A Cohen Solicitors for the Ist and 2nd Respondent: John C Mackey and Co Counsel for the 3rd Respondent: Mr Harrison Solicitors for the 3rd Respondent: PA Somerset and Co