(b) if there is no agreed time - within a reasonable time after the contract is entered into."
15 It is Aztech's case that, by virtue of s.131(1), the formal document expressed to embody an agreement among (and executed by) Mr Azzi, Atlanta and Dr Daevys came to have effect as a contract among Aztech, Atlanta and Dr Daevys. There is an explicit contention by Atlanta and Dr Daevys that the agreement embodied in the formal document terminated and ceased to be binding by operation of clause 2 of the formal document. That clause refers expressly to s.131 and I am satisfied that Atlanta and Dr Daevys must be regarded as also making an implied assertion based on s.131, with the result that they have put in issue the question whether, having regard to s.131(1), Aztech ever became bound by or entitled to the benefit of the alleged contract upon which it sues.
16 Aztech contends that Atlanta and Dr Daevys have admitted the elements which, having regard to s.131(1), are essential to a finding that a contract in terms of the formal document came to be binding among Aztech, Atlanta and Dr Daevys. The admission, it is said, is express or arises in default of traverse as mentioned in Part 15 rule 20 of the Supreme Court Rules. Even if I were wrong in thinking the defence puts in issue the whole of the s.131(1) question, I would, in this case, decline to act on any such admission. The relief Aztech seeks is of an equitable character and discretionary. The so-called defence was prepared by a lay party apparently without the benefit of legal advice. There are some elements of internal inconsistency in the relevant parts of the defence. In Termijtelen v Van Arkel [1974] 1 NSWLR 525, Hope JA said:
"However, no matter how the matter comes to be dealt with by the court, the question arises whether the court is ultimately bound to act upon admissions arising as a result of s. 38, or whether it can refuse to grant a decree to which those admissions would entitle a party and can require evidence, or act on evidence, which is before it. There is no doubt that it can require
the proof of a plaintiff's case where the defendant is an infant or a person of unsound mind, or has not been personally served with the statement of claim. I am also satisfied that, if evidence is properly before the court in the same suit, the court can act upon the basis of that evidence and refuse to act upon the admissions."
17 Even if there was an admission as to the s.131(1) elements (which, as I say, I think there was not, given that the defence expressly calls in question the aspect concerning timely incorporation and should be taken to put the s.131(1) question as a whole into issue), I would regard the admission as one that should, in the circumstances, not be permitted to preclude an examination on the merits.
Effect and operation of s.131(1)
18 I proceed, therefore, to consider the effect and operation of s.131(1) in the present context. The section causes contractual rights and obligations to arise in circumstances where the general law of contract would not recognise them. Apart from statute, it is impossible for a contract supposedly made by someone as agent for a non-existent person to be the source of benefits to or burdens on either the supposed principal (who does not exist) or the supposed agent, except to the extent that the latter might be exposed to a claim for breach of warranty of authority: Black v Smallwood (1966) 117 CLR 52. In the particular case of a company as yet unincorporated, the general law position was described in the following terms in a report of the Victorian Law Reform Commissioner ("Pre-Incorporation Contracts", Report No 8, 30 April 1979) which formed the basis for the adoption of the original version of the provisions now reflected in Part 2B.3 (s.81 of the Companies Act 1981 (Cth) and corresponding State and Territory Codes):
"1. The law lies within a small compass and can be stated briefly. A limited liability company is an artificial creature created by the law. It is both elementary and axiomatic that until the act of creation is performed it has no existence and can neither acquire nor give rights and thus be subject to obligations. Prior to its coming into existence it can have no 'agent' acting for it, and consequently cannot be held liable on the basis that any person, such as the promoter of the company, contracted as 'agent' for it. This is so even if the promoters are in fact the only members of the company after its formation.
2. Since 1866 it has been clear in English, Canadian and Australian law that a company when formed cannot adopt or ratify any act performed or obligations incurred on its behalf before incorporation and all that can be done to give binding force to such acts or obligations is to enter into a new contract on the same terms as the old."
Application of s.131(1) in this case
19 There can be no doubt, in my view, that, when Mr Azzi signed the formal document, he entered into (or, at the least, purported to enter into) a contract "on behalf of" a company not then registered, being a company of the description found in recital A of the formal document. There can equally be no doubt, as I see it, that Aztech, when it came into existence on 20 February 2003, became the company the future incorporation of which was referred to in recital A; and this is so despite the minor difference between Aztech's name as eventually registered and the name referred to in recital A (the former contains the word "Science" and the latter the word "Sciences"). The situation is therefore one described in the opening words of s.131(1):
"If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered …".
20 That being so, s.131 will be seen to have operated to cause Aztech to become bound by the contract embodied in the formal document and to be entitled to the benefit of that contract if, by the time relevant for the purposes of s.131(1), two things occurred: first, Aztech was registered and, second, Aztech ratified the contract. When I refer here to the time relevant for the purposes of s.131(1), I intend to refer to whichever of "the time agreed to by the parties to the contract" (paragraph (a)) or "a reasonable time after the contract is entered into" (paragraph (b)) is made applicable by the section to the circumstances of this case. The applicability of one of paragraph (a) and paragraph (b) rather than the other depends on whether there is what is referred to in one place as "the time agreed to by the parties to the contract" and in another as the "agreed time". If there is, paragraph (a) applies to the exclusion of paragraph (b); but if there is not, it is paragraph (b) that prevails.
21 The section refers, in paragraph (a) to "the parties to the contract". The reference to "the contract" is a reference to the contract mentioned at the start of the section, that is, the contract entered into (or purportedly entered into) by "a person … on behalf of, or for the benefit of a company before it is registered". The company not registered and therefore non-existent is in no sense a "party" to this contract. Not being a person, it cannot be a "party" to anything. The "parties" to the contract can only be the person who enters into (or purports to enter into) that contract on behalf of or for the benefit of the proposed company and the person or persons with whom the first-mentioned person enters into that contract. The reference in paragraph (a) to "the time agreed to by the parties to the contract" is accordingly a reference to any time agreed by all those persons as the time within which both registration of the company and ratification of the contract by the company are to occur. If the persons in question have not agreed a time within which both those events are to occur, the default specification ("within a reasonable time after the contract is entered into") alone is applicable (for an example of such a case, see Classic International Pty Ltd v Lagos (2002) 11 BPR 20,573).
22 In the present case, the persons relevant for the purpose just mentioned are Mr Azzi, Atlanta and Dr Daevys. In order to know whether the case is within paragraph (a) or paragraph (b) of s.131(1), it is necessary to decide whether those persons agreed a time within which registration of the company which is now Aztech and ratification of the contract by that company were to occur. The only stipulation on the subject (leaving aside, for the moment, the alleged oral agreement pleaded in paragraph 8 of the statement of claim) is found in clause 2 of the formal document itself. That clause refers to a period of 60 days "from the date hereof" (a form of words raising separate questions to which I shall come). The clause does not say, in so many words, that the parties agree upon the end of that period of 60 days as being the time by which both registration of the company and ratification of the contract by it are to occur. What it does say is that the agreement "shall be at an end" (with no party having any rights against the other) if either of the specified events does not occur within the period of sixty days. But that provision as to the agreement's coming to an end and the all rights evaporating if either event does not happen in the 60 day period carries within it, as a necessary corollary, a statement by the signatories of their agreement that the end of the 60 day period is the time by which both the events are to happen.
23 By referring to s.131 in their contract and saying that, if either of the events relevant to the section's operation did not occur within the stated period, the contract would end (so that the contractual rights and obligations of the proposed company would never arise), Mr Azzi, Atlanta and Dr Daevys were agreeing, as contemplated by s.131(1)(a), the time within which both those events were to occur in order to cause s.131 to create those rights and obligations.
24 On this basis (and subject to the question of the alleged oral agreement pleaded in paragraph 8 of the statement of claim), I view the present situation as one in which the expiry of the period of 60 days "from the date hereof" was the time agreed to by the "parties" (as contemplated by s.131(1)(a)) to be the time by which both the event of registration of the company referred to in recital A and the event of ratification of the contact embodied in the formal document were to happen. That being so, the case is within s.131(1)(a) and the time relevant for the purposes of that provision is the expiration of the period of 60 days "from the date hereof".
What was "the date hereof"?
25 The next question to be considered is the meaning, in the circumstances, of "the date hereof" in clause 2 of the formal document which, as I have said, bears two dates in connection with its execution, one (11 November 2002) being the date on which it was signed by Mr Azzi ostensibly "for and on behalf of Aztech Sciences Pty Limited" and by Dr Daevys as "the Nominee" and the other (19 December 2002) being the date on which Dr Daevys signed as director and secretary of Atlanta. The defence, in responding to paragraph 7 of the statement of claim, makes clear the contention of Atlanta and Dr Daevys that "the date hereof" was 11 November 2002. In paragraph 7 of the statement of claim and elsewhere, Aztech maintains that "the date hereof" was 19 December 2002.
26 It is, in my opinion, clear that the parties, in referring to "the date hereof", intended to refer to the date on which their contract was made. The words were, of course, included in the formal document when it was typed and before anyone signed it. At that time, no one could have predicted with any certainty the date on which the document would be signed or otherwise adopted. The document is therefore to be interpreted "as if that date, when ascertained, … were expressly designated": Amber Properties Pty Ltd v Sufigoe Pty Ltd (1994) 6 BPR 13,822 per McLelland CJ in Eq. The task here is to ascertain the date.
27 Whenever it is necessary to decide whether a contract has been made, the fundamental question is that posed by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [81]:
"In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?"
28 The cases referred to by his Honour were cases showing that analysis of the process of contract formation in terms of offer and acceptance is, as he put it, "not always necessary or sufficient". One judicial observation not referred to by Heydon J but in my opinion stating the relevant principle in a form particularly pertinent for present purposes is that of Wells J in Re The Bank of Adelaide (1979) 4 ACLR 393 at p.421:
"I may lend emphasis to what I have just said by referring briefly to the traditional analysis of the formation of a contract into offer and acceptance. Such an analysis holds good for many cases but by no means for all. Let it be supposed that A and B meet to discuss their common business interests and jointly decide that they should record their agreement on certain of those matters. It is a common practice for men in such a position to transmit heads of agreement and general instructions to a third person to draft a full agreement along the lines indicated. If, after A and B have read and discussed the draft, they agree, without more, to execute it, it would be absurd to attempt to identify, in the relevant events, a stage where A made a formal offer to B or vice versa. The truth of the matter is that A and B have agreed to adhere to a form of contract brought to their joint attention, and about which they have already held fruitful discussions. To describe what has happened in terms of offer and acceptance would be to superimpose on the true facts a framework of artificiality."
29 As the passage from the judgment of Heydon JA emphasises, questions of contract formation are to be determined by reference to the intentions of the parties, objectively ascertained; and, where a form of contract has been prepared for signature, the contract will generally be formed when all parties have positively adhered to it. The United States position applicable to cases of the present kind (which I think corresponds with our own) was stated as follows in Willard F Deputy & Co v Hastings 123 A 33 (1923):
"The authorities are uniform in holding that parties signing a contract prepared for signatures of other persons along with theirs, and intended to be signed by all of the parties named in it are not bound until all have signed it and incur no obligation, if any of those who were to have signed it refuse to do so. Herndon v Meadows , 86W. Va. 499, 103 S.E. 404; Bean v Parker , 17 Mass. 591; Wood v Washburn , 2 Pick. (Mass.) 24; Ely v Phillips , 89 W. Va. 580, 109 S.E. 808; Fish v Johnson , 16 La. Ann. 29; McDaniel v Anderson , 19 S.C. 211; Bruch v Shafer , 235 Pa. 590, 84 Atl. 515, and 45 Pa. Super. Ct. 612."
30 In the present case, two of the parties - Mr Azzi and Dr Daevys - signed on 11 November 2002 and the third party (Atlanta) executed on 19 December 2002. It is Mr Azzi's evidence that Dr Daevys expressly declined to have the contract executed by Atlanta on 11 November 2002. Two reasons were apparently given: first, that Dr Daevys had forgotten to bring the company's common seal; and, second, that he was proposing to change the shareholdings and directors. There is thus evidence to support an inference that, according to the parties' intentions, none was to be bound until the third had executed
31 That inference becomes, to my mind, overwhelming when one considers the parties' respective roles. The formal document contemplated the transfer of technology by Atlanta to Aztech (the company to be formed) and the provision of Dr Daevys' services to Aztech by Atlanta. The role in which Dr Daevys was cast by the formal document was of a subsidiary kind in that, in essence, he agreed to underwrite performance by Atlanta. The bargain contemplated by the formal document therefore lacked essential substance in the absence of assent to it by Atlanta. Unless and until Atlanta gave its assent, there was nothing upon which Dr Daevys' promises of an underwriting kind could operate.
32 In short, the whole structure of the proposed transaction and the contractual roles of the parties whose ultimate performance was envisaged (by which I mean Aztech, Atlanta and Dr Daevys) were such that there could have been no intention of the immediate parties (Mr Azzi, Atlanta and Dr Daevys) that any contractual relationship could be sourced in the formal document before all of those immediate parties had executed it as provided for in the document itself.
33 On this basis, the formal document attained contractual force among Mr Azzi, Atlanta and Dr Daevys when executed by Atlanta on 19 December 2002 and not at any earlier time. The "date hereof", as referred to in clause 2, was accordingly 19 December 2002, with the result that the period of 60 days referred to in that clause was the period that ended on 17 February 2003.
Was the s.131(1)(a) date varied?
34 Aztech had no existence until its registration on 20 February 2003. As a result, neither of the things referred to in s.131(1) had happened by 17 February 2003, being the deadline agreed to in the formal document by "the parties to the contract" (in the sense referred to in paragraph [21] above). Aztech says, however, that those persons (Mr Azzi, Atlanta and Dr Daevys) made a new and subsequent agreement as to the time within which the s.131(1) events were to occur. I have already quoted paragraph 8 of the statement of claim and set out the substance of paragraph 9. I have also referred to the denial of these matters in the defence. Paragraph 8 pleads what amounts to a variation of the original contract by a subsequent contract. The subsequent contract is not said to have had any efficacy beyond extending "the term for registration or ratification" provided for in the original. Essential to any conclusion that there was a subsequent contract which produced that effect would be a finding that the parties to the subsequent contract corresponded with the parties to the original contract.
35 The only evidence upon which Aztech relies in support of its contention that the three relevant persons made a subsequent agreement with respect to the time "for registration or ratification" (being the two events relevant for s.131(1) purposes) is the evidence contained in paragraph 10 of Mr Azzi's affidavit of 4 April 2003:
"On 14 February 2003 I was present at a test of the sub-aquatic monitor at Gosford. Also present were an employee of my company, Robert Somosi, the Second Defendant [ie, Dr Daevys], and Michael Burke, a director of the First Defendant [ie, Atlanta]. Shortly prior to that date I had been diagnosed with a condition which required the removal of my gall bladder. I was due to, and did, undergo surgery on 21 February 2003. On the day of the 14th February 2003, I was in great pain and distress and I overheard a conversation between Mr Somosi and Mr Daevys in words to the following effect:
Somosi: 'Tony is in a terrible state. He has already cancelled meetings with the solicitors and the accountants in relation to the trust and the setting up of the company (the Plaintiff). Do you mind if we take a few extra days to set everything up?'
Daevys: 'Tony looks terrible. That won't be a problem.'"
36 This account shows that there was, on 14 February 2003, a conversation between Dr Daevys and Mr Robert Somosi who is described by Mr Azzi as "an employee of my [Mr Azzi's] company". The company referred to in that way cannot be identified from the affidavit. On the date in question (14 February 2003), Aztech, of course, did not exist and paragraph 9 of the statement of claim simply cannot be correct when it says that Mr Somosi was, on that day, a party to the conversation "for and on behalf of the Plaintiff". (Nor, of course, did the words attributed to Mr Somosi show that he purported to speak on behalf of or for the benefit of the proposed company.)
37 It is, to my mind, significant that, while Mr Azzi says that he overheard the reported conversation between Mr Somosi and Dr Daevys, he does not say that Mr Somosi was acting at his request or instruction or with his authority. Mr Somosi is not represented as having been an employee of Mr Azzi (as distinct from Mr Azzi's unidentified company) and there can be no inference that he was acting within the scope of some relevant employment by Mr Azzi in saying what he reportedly said to Dr Daevys. Mr Somosi is not mentioned in Mr Azzi's affidavit at any point before the paragraph in which Mr Azzi narrates what he overheard on 14 February 2003. There are two subsequent references to him but neither could form any basis for a finding that Mr Somosi was some kind of general agent for Mr Azzi. It is also significant that Mr Azzi's evidence is merely that he overheard what Mr Somosi said. There is no suggestion that he intervened after Mr Somosi had spoken to confirm what Mr Somosi had said.
38 In these circumstances, I cannot be satisfied that Mr Azzi, being, as explained in paragraphs [21] and [22] above, one of the "parties to the contract" referred to in s.131(1)(a) became party to or subscribed to any subsequent agreement with the other "parties to the contract" (Atlanta and Dr Daevys), being an agreement fixing some new or extended time within which the events of company registration and ratification were to occur. Because the words spoken by Mr Somosi and Mr Daevys are alone relied upon as constituting (or being the source of) an agreement among Mr Azzi, Atlanta and Mr Daevys and the evidence does not show that Mr Somosi acted with the actual or implied authority of Mr Azzi, Mr Somosi's actions cannot be regarded as amounting to contractual conduct on the part of Mr Azzi.
39 Implicit in what I have just said are two propositions: first, that the word "agreed" in s.131(1)(a) refers to the making of a contract; and, second, that the relevant agreement need not form part of the "contract" with which s.131(1) is concerned. The first proposition relies on the normal expectation that "agreement" generally refers to a legally enforceable agreement (J R Bryant (Constructions) Pty Ltd v Daniels, unreported NSWCA, 20 March 1996), which expectation must be particularly strong in a statutory context such as the present dealing with matters of contract. As to the second proposition, I merely say that I accept, without deciding, that an agreement made subsequently to the contract itself may be taken as relevant for s.131(1)(a) purposes where, as here, the contract itself contained an agreement of the s.131(1)(a) kind and the subsequent agreement is said to vary that original agreement.
40 In paragraph 11 of the statement of claim, Aztech says that the time for registration or ratification was "extended by implication to 20 February 2003 or a reasonable time thereafter". The present context is one in which the parties "agreed to" a time and the inquiry is as to whether they later "agreed to" some later time. While agreement may be implied from facts, the only pertinent facts to which Aztech points are those concerning the conversation on 14 February 2003. Paragraph 11 of the statement of claim therefore does not advance matters from Aztech's point of view.
41 Paragraph 12 of the statement of claim pleads an estoppel, saying that the defendants are estopped from denying an agreement to extend the time for registration or ratification to 20 February 2003 or a reasonable time thereafter. Estoppel, however, cannot help Aztech when it comes to the question posed by s.131(1) as to "the time agreed to by the parties to the contract" - that being, of course, a question going to the very existence of the contract on which Aztech sues. I have already expressed the view that "agreed" in s.131(1)(a) connotes contract. When the question is whether a particular time originally "agreed" by the parties has been replaced by a later time "agreed" by them, the purely contractual connotation makes irrelevant any estoppel that might preclude an assertion by one or more of the parties that the later time is not the applicable time. An estoppel is not an agreement. The distinction is succinctly stated in an old American case (Forsyth v Day 46 Me 176 (1853), Supreme Judicial Court of Maine):
"The distinction between a contract intentionally assented to, or ratified in fact, and an estoppel to deny the validity of the contract, is very wide. In the former case, the party is bound, because he intended to be; in the latter, he is bound notwithstanding that there was no such intention because the other party will be prejudiced and defrauded by his conduct, unless the law treat him as legally bound."
42 Use of the word "agreed" in s.131(1)(a) shows that the provision is exclusively concerned with what is here called "the former case".