Davison v Vickery's Motors Limited (In Liquidation) [1925] HCA 47

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hearing the authority of Vickery to make the contract on behalf of the Company was not disputed and therefore should now be assumed. For the appellant that was contested, it being maintained that all that was conceded at the hearing was that Vickery agreed as representing the Company, and not that he had authority to do so. I, however, consider the point is immaterial. If Vickery's authority depended on some resolution or other act of the board of directors or on any circumstances within the scope of the articles of association, I might have hesitated, in view of the observations of Weigall A.J., to act onthe absence of evidence of actual authorization. But that is not the case. The articles are in evidence, and were put in evidence by the Company. It is a question of law (see Smith v. Hull Glass Co. (1) and Totterdell v. Fareham Blue Brick and Tile Co. (2) ) whether the agreement made by Vickery professing to act for the Company was when made a contract between the Company and Davison and binding them both. Reference to the articles will show that that is not legally possible. Not even a majority resolution of shareholders in general meeting would have given Vickery such authority (Grant v. United Kingdom Switchback Railways Co. (3) ). "The Court is bound to give judgment according to law," said Jessel M.R. in Chilton v. Corporation of London (4). Neither pleadings nor admissions can alter the law. Lord Loreburn L.C., in Gramophone Co. v. Magazine Holder Co. (5), said: " A Court of justice can never be bound to accept as true any fact, merely because it is admitted between the parties." The whole. House refused to act on an admission. In the case at bar the supposed admission - even assuming it was made - is contrary to law, having regard to the Companies Act 1915 and the articles made under it. What in view of that situation is the duty of this Court now that the point has been pressed at the bar? We are, I apprehend, bound, if by nothing else, at least by the express direction of the Privy Council. That we have in two cases, the latter adopting and reaffirming the former. In Yorkshire Insurance Co. v. Craine (6) (1) (1849)8C.B. 668; (afternew trial) (4) (1878) 7 Ch. D. 735, at 740. (1852) 11 C.B. 897. (5) (1911) 28 R.P.C. 221, at p. 225.

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Vickery and explained his position, and intimated that he couk not go on with the transaction of Saturday night, and asked that the whole transaction should be cancelled." Davison in his affidavit says he told Vickery "that as my mother would not go on I was. not in a financial position to do so and that the whole matter should be dropped." In his oral evidence in cross-examination he said ; - _ "T told Vickery I could not go on and that it would have to he cancelled. I said the whole matter would have to. be dropped." - Morey admits in par. 7 of his affidavit that to him Davison said "the contract would have to be annulled."" Vickery in his cross- examination says: "We would not have bought the car if he would not have bought the shares, and conversely he would not have bought the shares if we would not have bought the car." | Weigall A.J. in his judgment says: 'I have accepted as honest the evidence by or for Davison, but as already indicated some of the opposing evidence I entirely distrust." Having regard to the finding of the learned primary Judge, to his appreciation of the - witnesses, and to the evidence itself in relation to the circumstances, it is plain why no contest was raised before us as to the fact of | retractation. Vickery knew that the basis of the bargain, as he states it, had disappeared - that Davison, as Mellish L.J. in Dickinson v. Dodds (1) phrased it, had "not remained in the same mind" to contract. If any vagueness be found in Davison's intimation

and I do not find it vague - it was entirely owing to Vickery - leading Davison to think that he (Vickery) had been already authorized on Saturday to conclude a bargain between Davison and the Company. Vickery, however, as representing the Company on Monday - for if he represented the Company to notify the allotment he represented it also to receive the withdrawal - knew - perfectly well from what Davison said that he insisted so far as he could on cancellation. After that any step by the Company to notify adoption of Vickery's agreement was useless unless the case is to be governed by the case of Bolton Partners v. Lambert (2). It can only be so governed if the Company validly ratified Vickery's act in making the agreement on its behalf. Mr. Dizon, to establish this, relied not merely on the events of the 14th but (1) (1876) 2 Ch, D. 463, at p. 474. (2) (1889) 41 Ch. D. 295.

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back of the ratification. Lindley L.J. certainly says the case is governed by Bolton Partners v. Lambert, but, as he also thought there was no repudiation, he evidently applied that case to another point. Bowen L.J. also said there was no repudiation. But it is most important to observe that Bowen L.J., though he does not mention Bolton Partners v. Lambert, says something directly opposed to it in this respect. He says (2): "Original contract, from my point of view, there was none, they not having been authorized agents to make it." I therefore do not regard the Portuguese Mines Case (3) as a reaffirmation of the relevant point in Bolton Partners v. Lambert. In 1896, in Dibbins v. Dibbins (4), Bolton's Case was cited and distinguished, the present point not arising. In 1899, in In re Tiedemann and Ledermann Freres (5), the point did arise, and the Divisional Court (Darling and Channell JJ.), bound of course by the Court of Appeal, followed Bolton's Case. In 1895 it was adversely criticized by Chatterton V.C. in Athy Guardians v. Murphy (6). Tn 1898 there had arisen the case of Fleming v. Bank of New Zealand (7). It is sufficient to say that Bolton's Case was relied on. Pennefather J., as primary Judge, distinguished it on the facts, but said that if it were exactly in point he would hold himself bound by it in spite of the hostile criticism in Fry on Specific Performance. In the Court of Appeal before three Judges, one of the learned Judges, Denniston J., in a dissenting judgment, doubted whether Bolton's Case could be distinguished, and said he should hesitate very much to disregard the decision in that case. The other Judges did not mention it. The matter went to the Privy Council (8). Bolton Partners v. Lambert and subsequent references were discussed. The question was therefore directly brought under the notice of the Board. Lord Lindley, one of the Court that decided Bolton's Case twelve years before, after stating the reasons for allowing the appeal, said (9): - ' The above view of the case renders it unnecessary to consider any question of ratification, or to dwell on the

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decision of Bolton Partners v. Lambert (1), and its application to the facts of this case. The decision referred to presents difficulties ; and their Lordships reserve their liberty to reconsider it if on some future occasion it should become necessary to do so." In my opinion, those observations, especially from one of the authors of the decision, shake it severely, and leave the case entirely open for any superior Court of the Empire, subject to the revision of the Privy Council, to consider the matter foritself. I cannot think itis required of this Court at all events that it should blindly follow any decision of an English Court of Appeal that it believes to be wrong, and more particularly a decision that the Privy Council itself has seriously doubted. This Court has heretofore not adopted that course. In Brown vy. Holloway (2) it did not hesitate to express an opinion contrary to repeated decisions of the English Court of Appeal on the subject of a husband's liability for a wife's torts. That independent opinion of this Court was not considered unimportant by the House of Lords in Edwards v. Porter (3), even although the majority of the House differed from it. In Brown v. Holloway the Court made the position very plain. Griffith C.J. said (4) : - '' This Court is not formally bound by the decision of the Court of Appeal in Harle v. Kingscote (5), although the learned Chief Justice was no doubt right in following it. And although it is, I think, expedient that the High Court should follow decisions of the Court of Appeal under ordinary cireumstances, I do not think that it ought to do so when the decision in question has been doubted and regarded as open to question by the Court itself, and when it is founded on reasoning which does not commend itself to us. If, therefore, it were necessary to rely on this point I should be prepared to decline to follow the case of Seroka v. Kattenburg (6) and Earle v. Kingscote." O'Connor J. said (7) : - '' There are therefore now standing two decisions of the English Court of Appeal against the view of the statute whidl Mr. Graham has put forward, a view which after full consideratio of the matter I believe to be right. The question then arises what extent, if at all, is this Court obliged under these circumstance (1) (1889) 41 Ch, D, 295, (4) (1909) 10 C.LR., at p. 98. (2) (1909) 10 C.L.R. 89. (5) (1900) 2 Ch. 585

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or committed the otherwise tortious act. Three examples will illustrate the error. First, suppose A (principal) purchases B's horse for £10, delivery and payment in a week. Next day B sells to C. C gets no title. Next, suppose X authorized by A makes the same bargain for A with B, and B similarly sells to C. C again gets no title. Thirdly, suppose X, unauthorized by A, makes the same bargain for A with B, and B, before ratification by A, sells to C. © gets and retains title, even though A subsequently ratifies. That demonstrates that A's ratification is not regarded precisely as if A had personally made the bargain. It is, of course, trite law that ratification by a principal constitutes the person who professed to be his agent to be pro hac vice actually in Jaw his agent and retrospectively invests him with authority ab ante to act for the ratifying principal. See per Lord Sumner in Union Bank of Australia Ltd. v. McClintock (1). Parke B., in Buron v. Denman (2), said: "If an act be done by a person as agent, it is in general immaterial whether the authority be given prior or subsequent to the act." Why, then, the distinction in the instances supposed ? It is especially necessary to answer this question, having regard to the multifarious parts played by incorporated companies in our daily life. The root of the matter is that, whether it be in contract or in tort, ratification means not the adoption of the transaction itself but merely the adoption of the relationship of agency assumed by the professing agent in the transaction. That adoption is taken as a fact actual or imputed. The result of it, however, when once established is a matter of law and varies according to the circumstances, including those existing at the time the fact occurs. If the principal himself is said to effect the adoption, two questions must always be answered before it can be said that the ratification is effectual, namely, (1) Has he in fact adopted the relationship of agency as assumed by his professing agent ? and (2) In the circumstances will the law regard that adoption as relating back to the origination of the transaction? If the ratification is said to be effected, not by the principal personally, but by some agent of his, three questions must be answered, namely : - (1) Was the alleged ratifying agent authorized

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authority to make the agreement of the 12th and then simply act on it as being bownd to allot the shares in accordance with the agreement, it is clear Davison's withdrawal was a fatal interposition between the application and the allotment. The case of the Company, however, must rest on the finding that Vickery purported to bind, if he did not actually bind, the Company to allot the shares. Dealing with the matter on that footing, ratification necessarily means the adoption in the way indicated of his bargain, not the making of a new one (Hunter v. Parker (1) ). It means the abandon- ment of the directors' duty of discretion to allot shares on the mere footing of an application which would enable them to decline altogether or to accede in part. It isthe act of Vickery which, if validly ratified, would become the Company's act ab initio (Seignior and Wolmer's Case (2) ), and would be treated as the Company's contract at the time Vickery agreed. That point it is desirable to make utterly clear and emphatic. Bolton Partners v. Lambert (3) assumes, and so far rightly assumes, that it is the act of the professing agent which, assuming subsequent ratification, binds the principal; not that upon ratification the act of the professing agent disappears, and the law assumes that the principal himself personally made the contract. If the latter were the legal outcome, the maxim quoted would be entirely beside the question. But the whole matter is part of the law of agency, and authority at the time of the contract must appear either actually or fictionally. The fiction invests the professing agent with the necessary authority, and the principal who ratifies may ratify either with full knowledge of all the circumstances or with the intention to ratify without inquiry into the cireum- stances but to rest content with the discretion and judgment of the person assuming to act for him. In either event the principal is bound by his now duly authorized agent. But where was the authority of the two directors at Wagga on 14th January to stand in the place of the Company for the purpose of thus constituting Vickery the Company's agent as on the 12th to sell the shares as on that date? That is to say, what article enabled the two directors

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(Signed) H. G. Peacock, director of Vickery's Motors Ltd." But under the articles there is no power to appoint a proxy fora meeting. There is this power to appoint a "substitute": "82, Any director may appoint a person (whether a member of the company or not) to act as his substitute during any temporary absence illness or incapacity not exceeding twelve months at any one time and such substitute shall be entitled to act as a director in his place as fully and effectually as he himself could do provided : that any person so appointed may be debarred from acting by a majority of the remainder of the directors."" In my opinion, a proxy to act at a single meeting of directors is not the same thing as a_ substitute to act during any temporary absence, illness or incapacity - not exceeding twelve months. Whoever is appointed as a substitute must be in a position to act at any moment, at any place, during a defined period ; for instance, he may be required to join in signing a cheque (art. 75 (1) ), or to sign a resolution in writing instead of attending a meeting (art. 81); or to make a quorum for a directors' meeting on any day during a defined period. " Proxy" is not a technical word; but the appropriate meaning seems to be that suggested in the Oxford Dictionary, (2b) "a writing authorizing a - person to vote instead of another, at an election, a meeting of share- holders, &c., or as formerly in the House of Lords." (See also the provisions for " proxy" for shareholders, in these articles.) It is enough to say that here there is nothing to show any intention to - allow Morey to use his own discretion, free from instructions ; and I think Morey was not validly appointed to act as a director under - art. 82. Nor does art. 80, in my opinion, affect the position, making as it does, all acts done by any meeting of the directors or by any person acting as chairman or as a director valid, '' notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such director or person acting as aforesaid." This articles does not apply so as to validate acts done by a person : acting as a proxy for a director, although it may apply to a defect in the appointment of a person who acts as if he were a director in his own right.

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cated to Davison. The grounds of appeal, both to the Supreme Court and to this Court, again raise this controversy, but want of authority on the part of Vickery to make the agreement on behalf of the Company is not explicitly taken, though it may perhaps be "covered by the general objection that the judgment is bad in law. No one, I suppose, disputes the authority of an appellate Court to consider questions raised, for the first time, before it, but such questions "ought to be most jealously scrutinized. The conduct of a cause at the trial is governed by, and the questions asked of the witnesses are directed to, the points then suggested. And it is obvious that no care is exercised in the elucidation of facts not material to them" (Owners of Ship Tasmania vy. Smith - The Tasmania (1)). It is less difficult to induce a Court of Appeal to consider a question of law raised for the first time upon the construction of a document or upon undisputed facts, than a new question of fact. But a party cannot be allowed to take his chance of a finding in his favour upon the fact of an agreement, and then, on appeal, for the first time dispute the authority of the person who negotiated that agreement. Such a party is and ought to be bound by the course of the trial (Wilson v. United Counties Bank Ltd. (2) ). In the present case, the articles of association were not put in evidence for the purpose of proving or disproving Vickery's authority, and no care whatever was exercised in elucidating his authority : it was accepted by all parties, or at all events not disputed. Again, it is quite clear that Davison contested the fact of any agreement with him, and took the chance of a favourable finding on that issue. And finally, in his notice of appeal, Davison has not explicitly raised the question of Vickery's authority (see Wilson v. United Counties Bank Ltd. (3) ). Under circumstances such as these, Davison ought not, in my opinion, to be allowed to raise that question in this Court. The appeal should therefore be dismissed.

Davison v Vickery's Motors Limited (In Liquidation) [1925] HCA 47 - HCA 1925 case summary — Zoe

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Judgment (183 paragraphs)

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