Brownett v Newton [1941] HCA 14

[22]

ton stating that the quotation tendered by him had been accepted he board. The letter continued : - '' This company will require oximately 95 tons of cement. As a result of my conversation ou on 21st instant we will expect you to be able to supply us h either large or small quantities, without delay." On 26th ril 1938 Newton sent a letter to the company stating: "We ery much pleasure in quoting you as under : Speedite cement to ton) £5 16s., delivered to site, Broken Hill," and, on yy 1938, the secretary of the company sent him a reply ig that his quotation had been accepted by the company, 4s, 10d. per bag delivered at the factory site." The company's er account with Newton, which was put in evidence, showed jewton supplied goods to the company every month from to December 1938, the first supply having been made on bruary. Up to and including 31st July 1938 the price of ods so supplied amounted to £1,709 1s. 8d. The total price 'the goods supplied by Newton was £1,973 8s. 9d. The company payments on account totalling £950, of which the last was on 17th October. Hence, at the close of the account in 1938, a balance of £1,023 8s. 9d. was shown as owing by iy to Newton, of which £809 1s. 8d. was shown as owing et of goods supplied by Newton up to the end of July 1938. admitted on behalf of the defendants that Newton did supply ds to the company. [he company was one to which sec. 77 of the Companies Act 1936 W.)applied. It was not disputed that the statutory declara- by sec. 77 (1) (c) was never filed with the Registrar- and that the company was, therefore, throughout its career, ject to the statutory prohibition against commencing business. Newton in giving evidence stated that he first heard about certifi- 'under sec. 77 in August 1938. It appeared also that it was ed to a meeting of the board of directors of the company 'on 14th February 1939 that the provisions of sec. 77 had not n complied with. At this meeting it was resolved that, in view he insolvent position of the company's finances, the company 'ised to go into voluntary liquidation. This it did in September

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offered to supply materials to the company, and on 23rd February 1938 the following letter was sent to him by the secretary of the - company : - "TI have much pleasure to advise that the following - quote tendered by you was accepted by the board on the 22nd inst, Brighton Portland Cement, bagged 24 bags to ton at 4s. 8d. net per bag. Delivered on site Broken Hill. This company will require approximately 95 tons of cement. As a result of my conversation with you on 21st instant we will expect you to be able to supply us with either large or small quantities, without delay." Thereafter the respondent supplied and delivered to the company considerable quantities of cement and possibly other materials, for some of which he was paid, but a balance remains due to him of about £1,000. The respondent contends that the directors thus authorized and made for the company a contract or a series of contracts between him and the company for the supply of materials to the company under a promise express or implied to pay the price agreed or, if none were agreed, a reasonable price for the materials supplied. It is clear enough that there is evidence of such a contract or a series of contracts of this nature being concluded. But it is also clear that the company was precluded from making any such contract in the circumstances of this case by reason of the provisions of sec. 77 of the Companies Act 1936 of New South Wales : - " Where a com- pany having a share capital has issued a prospectus inviting the public to subscribe for its shares, the company shall not commence any business or exercise any borrowing powers unless - (a) shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription ; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, a proportion equal to the proportion payable on application and allotment on the shares offered for public subscription ; and (c) there has been filed with the Registrar-General a statutory declaration by the secretary or one of the directors, . . . that the conditions mentioned in paragraphs (a) and (}) of this sub-section have been complied with " : See In re "Otto" Electrical Manufacturing Co. (1905) Ltd. (1); New Druce-Portland Co. (Ltd.) v. Blakiston (2). The Registrar- General is required, on the filing of the declaration, to certify that the requirements of the section have been complied with, and his certificate is conclusive evidence of that fact in favour of any person dealing with the company. Further, it is provided that any contract

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y company, called Applied Concrete (Broken Hill) Ltd., to which pondent supplied cement during the period from February n to the following December. It appeared that the total of the materials supplied was £1,973, of which the company 950, leaving an unpaid balance of £1,023. The company went tidation. articles of association of the company empowered its to purchase such goods for the company. But the rs of the company to make contracts were restricted by sec. 77 1e Companies Act. The company was subject to sec. 77 (1), h provides that a company in its situation shall not com- ice business unless the conditions mentioned in pars. a, b and complied with. The last of these conditions is that " there filed with the Registrar-General a statutory declaration by or one of the directors, in the prescribed form, that the mentioned in paragraphs (a) and (b) of this sub-section been complied with." No statutory declaration was filed. (4) provides that " any contract made by a company before te at which it is entitled to commence business shall be wisional only, and shall not be binding on the company until at date, and on that date it shall become binding." If a company im business in contravention of these provisions, every who is responsible for the contravention is liable to a penalty 0 for every day during which the contravention .continues ee. 17 (6)). Referring to similar provisions, Buckley J. said in "Otto" Electrical Manufacturing Co. (1905) Ltd. (1): " The rd 'provisional' there means, I think, this, that the contract is be read as if it contained a provision that it shall not be binding e company unless and until the company becomes entitled to nce business." g no enforceable claim against the company, the respondent ought an action against the appellants. He sued on five counts, 4 which he abandoned at the trial, and on the others he was msuited. The fourth count is the only one which is now material. his is in the usual form of a count against an agent on the implied utanty that he had authority to contract with the person suing _ It varies from the usual form by alleging that the contracts tich the agent warranted he was authorized to make were " immedi- ly binding" contracts. But this verbal variation does not alter substance of the cause of action: Cf. Simons v. Patchett (2).

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(1). In Dickson v. Reuter's Telegram Co. Ltd. (2) Bramwell xplained the rule, using these words : - ' The general rule of clear that no action is maintainable for a mere statement, untrue, and although acted on to the damage of the person n it is made, unless that statement is false to the knowledge . person making it. This general rule is admitted by the 's counsel, and prima facie includes the present case. But is urged that the decision in Collen v. Wright (3) has shown t there is an exception to that general rule, and it is contended 'this case comes within the principle of that exception. I do that Collen v. Wright (3), properly understood, shows here is an exception to that general rule. Collen v. Wright ) lishes a separate and independent rule, which, without ng language rigorously accurate, may be thus stated : if a person and, by asserting that he is clothed with the necessary , induces another to enter into a negotiation with himself transaction with the person whose authority he represents e has, in that case there is a contract by him that he has the rity of the person with whom he requests the other to enter the transaction. That seems to me to be the substance of the in Collen v. Wright (3). Brett LJ. made these observations rule; " The decision in that case " (Collen v. Wright (3) ) " was upon a different and independent rule, which may be stated , that where a person either expressly or by his conduct invites to negotiate with him upon the assertion that he is filling a n character, and a contract is entered into upon that footing, he le to an action if he does not fill that character ; but the liability not from the misrepresentation alone, but from the invitation -and from the acting in consequence of that invitation " (4). be impossible, without undue length, to discuss all the cases the rule was applied. In Starkey v. Bank of England (5) dley said that the rule was disputed for the first time in that 'Tt was then affirmed again. Lord Halsbury said in that case hat what gave rise to the liability of the defendant were the cireum- ances of the power of attorney being presented to the bank " for the of being acted upon, and being acted upon on the representa- the agent had the authority of the principal, which he had (6). "That," the Lord Chancellor added, "' does import an ition - the contract being for good consideration - an undertak- the part of the agent that the thing which he represented to be

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The case js in this respect different from such cases, for example, as Firbank's Executors v. Humphreys (3), where Lindley 1.4. said "He" (the plaintiff) "could not know whether the company or had not already issued the full amount of debenture stock whic it was authorized to issue. He was justified in assuming that th directors had power to do what they did: and by giving him the debenture stock certificates they in truth represented to him that they had such power." It is true as a general proposition that a person dealing with the company would not be justified in assuming that sec. 77 (1) (c) had been complied with: See Irvine v. Union Bank of Australia (4). It would be his duty to ascertain whether i had done so or not by looking at the file in the Registrar-General's office to see if the statutory declaration had been filed or by inspecting the certificate which sec. 77 (3) requires the Registrar-General to give on the filing of the statutory declaration. This certificate is made by sub-sec. 3 of sec. 77 conclusive evidence that the require- ments mentioned in sec. 77 (1) have been complied with in favour of any person dealing with the company. But the contract alleged in the present case is one between the respondent and the appellants personally. It is collateral to the contracts which they assumed to enter into as the agents of the company. The evidence does not show that the respondent knew in fact that the requirements of sec. 77 (1) had not been complied with. For the purposes of this collateral contract there is no presumption that he must be taken to have known that the restrictions imposed on the company by sec. 77 of the Act had not ceased. The appellants on their part and the respondent on his part were free to enter into such a con- tract. Neither the Act nor any rule of law stood in the way of the respondent relying upon the representation of authority implied by the appellants' acts and the part they took in the transactions between the respondent and the company.

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was seriously pressed. This count alleged that in considera- 1 of the plaintiff entering into certain contracts with the defendants nts for the company for the sale of goods the defendants d that they were authorized to make immediately binding cts for it as its agents, that the plaintiff did enter into the said cts and was always ready and willing to perform the same e defendants were not authorized to make immediately binding cts for it whereby the plaintiff, inter alia, was not able to e the performance of the said contracts and lost the value of iterials supplied thereunder. action came on for hearing in September 1940 before Maz- ., who granted a nonsuit. The plaintiff appealed to the Full , which ordered that this be set aside and a new trial be had parties. The defendants have by leave appealed to this against the order of the Full Court. 'substantial question in issue on the appeal is whether there evidence on which the jury could reasonably find that the nts impliedly warranted their authority to make absolutely ng contracts on behalf of the company for the purchase of the already mentioned. clear that every person dealing with a company registered der the Act is bound to read the statute and its memorandum articles of association, copies of which are registered in the ¢ of the Registrar-General and available for public inspection British Bank v. Turquand (1); Mahony v. East Holyford Co. (Ltd.) (2) ). Notice is imputed to such a person of all contained therein, or, in other words, of what has been called external position of the company." 77 imposes on every company subject to its provisions the y of complying with its requirements as a condition precedent lawful commencement of the carrying on of its business. It means by which members of the public may ascertain this hikdition has been fulfilled or not. The statutory tion referred to in sub-sec. 1 (c) is open to public inspection. 3 requires the Registrar-General, on its filing, to certify e requirements of sub-sec. 1 or 2 of the section, as the case have been complied with, and provides that the certificate conclusive evidence of that fact in favour of any person ng with the company. Persons dealing with such a company ind to ascertain that the condition has been fulfilled (Peirce

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Jollen v. Wright (1) Willes J. said that "a person, who induces to contract with him as the agent of a third party by an ified assertion of his being authorized to act as such agent, ible to the person who so contracts for any damages which sustain by reason of the assertion of authority being untrue," "a person, professing to contract as agent for another, ly, if not expressly, undertakes to or promises the person rs into such contract, upon the faith of the professed agent y authorized, that the authority which he professes to have point of fact exist." As Lord Davey pointed out in Starkey of England (2), it is utterly immaterial whether the supposed nt knew of the defect of his authority or not. British Russian Gazette and Trade Outlook Ltd. v. Associated ers Ltd. (3) Scrutton L.J. said the doctrine of Collen v. (4) had been extended beyond making contracts to doing acts a legal effect by Starkey v. Bank of England (5) and Firbank's v. Humphreys (6), and Greer L.J. said: " It is clear that cases where the contract which the agent warranted he had rity to make would not, if authorized, create any legal obliga- n by his principals, the agent is none the less liable for damages 'a breach of warranty of authority " (7). the doctrine of Collen v. Wright (4) has often been applied to entered into by directors on behalf of bodies corporate | unincorporate. 's Laws of England, 2nd ed., vol. 5, p. 416, it is stated : n an agent expressly contracts on behalf of his company or es a contract in the name of the company, he is not personally to the other contracting party in the absence of fraud or tation unless he expressly or impliedly warrants an y which he has not got or a state of facts that does not exist, case the contracting party has a remedy against him." ts v. Propert (8), Chapleo v. Brunswick Permanent Building (9), West London Commercial Bank Ltd. v. Kitson (10), (5) (1903) A.C. 114. (6) (1886) 18 Q.B.D. 54. (7) (1933) 2 K-B., at p. 649. at pe (8) (1873) L.R. 8 C.P. 427.

Brownett v Newton [1941] HCA 14 - HCA 1941 case summary — Zoe

At a glance

Court

Decision date

Source

Judgment (135 paragraphs)

Cited By (1)