Johnson's Tyne Foundry Pty Ltd v Shire of Maffra

Johnson's Tyne Foundry Pty Ltd v Shire of Maffra - [1948] HCA 46 - HCA 1948 case summary — Zoe

[18]

But in Victoria the interpretation of s. 501 has been settled for a long period. The section was included in its present form in the Local Government Act 1874. In 1881 in Shire of Gisborne v. Murphy [1] Higinbotham J. said that the terms of s. 169 of the Act of 1874 (which were the same as those of s. 501 in the present Act) were in form permissive only, but that, as no other mode or form was provided by the Act and as the corporation derived its power to make contracts wholly from the Act, the words must be regarded as mandatory. The result was that "a contract made otherwise than in the manner prescribed, cannot be sued on, at least in a court of law," though if a contractor could bring himself within the equitable doctrines of part performance, and the claim was not "simply for payment of a sum of money," he might have a remedy in equity. (In the present case the claim is a claim simply for a sum of money.) In 1882 in President, &c., of Shire of Leigh v. President, &c., of Shire of Hampden [2] the same rule was applied by Holroyd J., speaking for the Full Court. In 1883, in Mayor &c of Richmond v. Edwards [3] it was again held by the Full Court that contracts by municipal corporations must be made in one of the modes or forms prescribed by the Act and that if they were not so made they were not binding upon the corporation. In 1885 in London v. Shire of Wodonga [4] it was said: "it is absolutely necessary that a person who seeks to enforce in a court of justice a claim founded upon an alleged contract with a municipality, should prove that a valid contract, based on good consideration, has been made with him by the council, that such contract is for a purpose authorised by the Act, and lastly, that it has been made in the form or mode prescribed by the Act, as an essential condition of contracts by which the ratepayers shall be bound." Again in 1890 in Jenkins v. Mayor &c. of Melbourne [5] it was held by the Full Court that the section was mandatory. It is more than sixty years since the first of this series of decisions was given.

[23]

In my opinion the councillors made a contract with the plaintiff company for necessary repairs to the roller. The council decided that the repairs should be done and the engineer had the authority of the council to ask the plaintiff company to do the repairs. The contract with the company was made through the agency of the engineer, but it was nevertheless made by the councillors, the offer to the company being made on behalf of the councillors, and not on behalf of the engineer himself. If a servant of the owner of a motor car is authorized to arrange for the car to be put into running order and he does so, the contract is made by the owner though he acts through an agent, and even though he did not specify the person who was to be employed for the purpose of doing the repairs. (In fact, in the present case, the mayor, in the presence of the councillors, told the engineer to see whether the plaintiff company would undertake the work of repairing the roller - but this was done without any formal resolution to that effect and it cannot be regarded as truly the act of the councillors in a council meeting.) Here the councillors who gave the authority to the engineer made a contract by making the offer to the company through the engineer, which offer the company accepted. The contract was made before the work began. It was not made when the repaired roller was re-delivered to the council. It was a parol executory contract. I hesitate to refer to further English authorities because of the division of opinion which they manifest. But in Pauling v. London and North Western Railway Co. [1] , a decision upon s. 97 of the Companies Clauses Consolidation Act, a company was held liable upon a contract made by parol where the actual contract was made by a servant of the company in accordance with authority given to him. Section 97 provided that the directors might contract by parol on behalf of the company where private persons could make a valid parol contract and it was held that the servant of the company acted within his authority and therefore bound the company by a parol contract. The basis of the decision was that in such a case the directors made the contract.

[62]

But at common law although it was always possible for a corporation to contract by using its seal, it was not by any means invariably indispensable. There was an early recognition that unless the purposes of the corporation were to be defeated it must in some situations be able to make simple contracts through its servants and agents. Thus in matters by their nature of such immediate urgency that they could not await the formality of a seal it was not necessary. The example given is that of an authority to a bailiff to distrain cattle damage feasant. But, to take another example, it could be hardly supposed that at common law a chartered corporation that sent ships to sea would not be bound by a salvage agreement, otherwise valid, because the seal was not affixed. Another case in which a corporation may be bound by a simple contract made by its servants or agents acting within the scope of their general authority is when the subject of the contract is a matter of daily or regular occurrence and of no special significance. Thirdly, a trading corporation from its very nature must contract through its servants and agents in the ordinary course of its business as other traders do and the common law always recognized that such a corporation might be bound by contracts not under seal made in the course of trade. Fourthly, gradually it came to be settled that any corporation might become liable if for a purpose for which the corporation was established it obtained the benefit of goods or services in pursuance of a simple contract made by or under the authority of the managing body. The acceptance of the executed consideration was treated as implying a promise to pay enforceable by a common money count. The course of authority under which this application of the general principle came to be established can be seen in the two lists of cases given by counsel in Nicholson v. Bradfield Union [1] and from Lawford v. The Billericay Rural District Council [2] ; Douglass v. Rhyl Urban Council [3] ; Craven-Ellis v. Canons Ltd. [4] .

[82]

(1) Section 501 first appeared in Victoria as s. 169 of the Local Government Act 1874. It was obviously copied from s. 56 of the Commissioners Clauses Act 1847 Imp. (10 and 11 Vict., c. 16). This section appears to have been copied mutatis mutandis from the Companies Clauses Consolidation Act 1845 Imp. (8 and 9 Vict., c. 16), s. 97. The sections of these English Acts, like the Victorian Act, employ the word "may." "May," unlike "shall," is not a mandatory but a permissive word, although it may acquire a mandatory meaning from the context in which it is used, just as "shall" which is a mandatory word, may be deprived of its obligatory force and become permissive in the context in which it appears. But I can find nothing in the language of the particular sections or general context of the English or Victorian Acts which requires that the word "may" should be read in a mandatory sense, and the provision which appears in the second sub-section of each of the sections of these Acts that all contracts made in accordance with the first sub-section shall be effectual in law is in terms non-exclusive and therefore tends to the contrary. It has been decided in several cases that s. 97 of the Companies Clauses Consolidation Act is permissive and not mandatory: Homersham v. Wolverhampton Waterworks Co. [1] . Lowe v. London and North Western Railway Co. [2] . Pauling v. London and North Western Railway Co. [3] ; Wilson v. West Hartlepool Railway Co. [4] . In the last-mentioned case [5] Turner L.J. said: "There remains, then, the question whether this contract ought to be held binding on the company, having regard to the statutory provisions as to contracts by companies. These provisions are contained in the 8 and 9 Vict., c. 16, s. 97. The Legislature has in this section pointed out modes in which the powers of directors to contract may lawfully be exercised, and has enacted that all contracts made according to those provisions shall be binding and effectual; but it has not said that contracts made in other modes shall not be binding and effectual, where there is power so to make them; and certainly it has not said that any equity which may have existed in this Court before these provisions were introduced shall no longer exist. The Act, it is to be observed, is in the affirmative, and affirmative Acts are not generally to be construed so as to take away pre-existing rights or remedies. Had this been intended, I cannot but think that it would have been expressed." Committees occupy the same place in the Companies Clauses Consolidation Act as the two commissioners and two councillors occupy in the other two Acts. The former Act allows the directors of a company to delegate their powers to make contracts to committees of their members just as the latter Acts authorize the commissioners and councillors to delegate their powers to make contracts to two or more commissioners or councillors.

[85]

The same view of the operation of s. 169 was taken in President &c., of Shire of Leigh v. President, &c., of Shire of Hampden [4] ; Mayor &c. of Richmond v. Edwards [5] ; London v. Shire of Wodonga [6] ; Jenkins v. Mayor, &c., of Melbourne [7] . But all these decisions appear to be based on the passage which I have cited from Shire of Gisborne v. Murphy [8] . In President, &c., of Shire of Leigh v. President, &c., of Shire of Hampden [4] Holroyd J., delivering the judgment of the Full Court, referred at p. 377 to a passage in the judgment of Cotton L.J. in Hunt v. Wimbledon Local Board [9] relating to the passage which I have cited from the judgment of Turner L.J. in Wilson v. West Hartlepool Railway Co. [10] and said that " Cotton L.J., alluding to the analogous section (97) of the " Companies' Clauses Consolidation Act 1845 " (8 and 9 Vict., c. 16), assumes it to be permissive in substance as well as in form ; but this was only a dictum, unconsidered, and offered as a possible explanation of a judgment of Turner L.J., of which his lordship evidently disapproved." With all respect to Holroyd J., I cannot find in the judgment of Cotton L.J. any suggestion that he disapproved of the opinion of Turner L.J. that s. 97 of the Companies Clauses Consolidation Act 1845 was permissive and not mandatory. His criticism is directed to the suggestion that even if the section was mandatory the Court of Equity could give relief if the contract was capable of being specifically performed and there had been part performance of the contract. One can understand this criticism, because it would seem to be clear that a contract which can only be effectual if made in a certain form would not be a contract at all unless it was made in that form and would not be enforceable either at law or in equity: Hoare v. Kingsbury Urban Council [1] ; W. Higgins Ltd. v. Northampton Corporation [2] . I read the remarks of Cotton L.J. as approving the opinion of Turner L.J. in relation to the permissive character of s. 97 of the Companies' Clauses Consolidation Act, but pointing out the vital distinction between the word "may" in that section and the word "shall" in the Public Health Act with which he was concerned.

[91]

There remains the question of costs. The appellant asks for what has come to be known as a Bullock order. This is an order which is sometimes made where a plaintiff joins two defendants and claims that one or other is liable jointly or in the alternative for the amount or part of the amount claimed. If the plaintiff succeeds against one defendant and fails against the other, the order relieves the plaintiff from having to bear the costs of the successful defendant either by ordering the unsuccessful defendant to pay to the plaintiff the costs which the plaintiff is ordered to pay to the successful defendant or alternatively, and this is the modern form of order, by ordering the unsuccessful defendant to pay the costs of the plaintiff and of the successful defendant. Here the appellant is suing to recover the sum to which it claims to be entitled for repairing the roller. The respondent was not content to rely on its statutory defences. It pleaded that it did not request the appellant to do the alleged work or to provide the alleged materials or any part thereof or to pay the money alleged or any part thereof. In its particulars it stated that Hallows reported to a meeting of the councillors of the shire that the boiler needed a new throat plate and complete set of boiler stays for which the estimated cost was £300, and the shire at such meeting resolved that this work should be undertaken at such estimated cost. Part of the case for the respondent was therefore that at most Hallows only had authority to order very limited and specific repairs to be done to the roller. But Hallows had sent the roller to the appellant, according to the letter of 5th September 1945 for repair, and had at least authorized the appellant to do the repairs itemized in its letter of 1st October 1945, and these repairs represented the major part of the appellant's claim. In these circumstances it was reasonable for the appellant to sue both the respondent and Hallows. The latest case where a Bullock order is discussed would appear to be Hong v. A. & R. Brown Ltd. [1] . In that case the Court of Appeal said that it is a matter of discretion for the judge whether or not such an order should be made, and the fact that it was reasonable for the plaintiff to join the successful defendant when the action started does not entitle the plaintiff to such an order if in the opinion of the judge it is not reasonable that the unsuccessful defendant should be penalized by having to pay two sets of costs. In the present case, in view of the respondent's attempt to limit its liability in any event to a liability to pay for a small part of the repairs and its claim that Hallows had no authority to order the balance, it was reasonable for the appellant to join both defendants in the action and not unreasonable that the respondent if it failed, as in my opinion it did, on this issue should be penalized by having to reimburse the appellant for Hallow's costs. In several cases where it was doubtful whether the agent was authorized by the principal to make the contracts sued on claims against the principal have been joined with claims against the agent for damages for breach of warranty of authority: Honduras Inter-Oceanic Railway Co. v. Lefevre & Tucker [1] ; Bennetts & Co. v. McIlwraith & Co. [2] ; Sanderson v. Blyth Theatre Co. [3] . A Bullock order was made in the last-mentioned case. An example of such an order made on appeal is afforded by Riches v. London General Omnibus Co. [4] .

At a glance

Court

Decision date

Before

Source

Judgment (93 paragraphs)

Parties

Cited By (10)