LJ Hooker Ltd v WJ Adams Estates Pty Ltd

LJ Hooker Ltd v WJ Adams Estates Pty Ltd - [1977] HCA 13 - HCA 1977 case summary — Zoe

[34]

I should now express my own view of the meaning and effect of the agreement of 6th May. The parties to the agreement were to negotiate separately to become the purchaser of the whole of the property of the respondent. Quite clearly, neither was negotiating on behalf of both. It is noticeable that the parties to the agreement were careful not to have agreed that one would negotiate on behalf of both. It was agreed that each should negotiate independently, though each promised that its negotiation would be conducted on the footing of agreed terms of purchase. Clause (d), it seems to me, means precisely what it says: that when one company had become the purchaser, it should complete the purchase and thereafter carry out the redevelopment of the site jointly with the other company on the basis of equality. Each was to seek terms of sale upon which both had agreed but which are not disclosed. However, I think it can be inferred from the terms of cl. (d) that the negotiated terms of sale should not call for the payment of more than $500,000 up to the time that title was to be transferred to the purchaser. That clause did not mean, in my opinion, that each party was to contribute half a million dollars to the purchase price: or, for that matter, $250,000 to that price. The purpose of the clause, rather, it seems to me, was to ensure that not more than half a million dollars would be called for in cash under the contract of sale, the balance being found by mortgage or other source of finance. The "completion of purchase" within the meaning of that clause, in my opinion, was the point at which the land was to be transferred in terms of the contract to the purchaser. In fact, the contract which was ultimately entered into did provide that, upon payment of $500,000, the land should be transferred to the purchaser, the balance of the price being secured by mortgage to the vendor in the terms of the contract of sale. The expression "equity capital" in cl. (d) might in some contexts mean the amount which shareholders were to contribute to the capital of a company and it is a possible view that this is what the words mean in this case. That meaning is not inconsistent with the clause also providing that the amount of cash to be paid under the purchase up to the time of transfer of the property to the purchaser should be no more than $500,000. Having regard to the mutual intention and obligation to redevelop the property jointly, a limitation on the amount of cash required to acquire the property would be reflected in the ultimate cost of the redevelopment. No doubt the cost of the land, though not acquired jointly, would be included in the total cost of the redevelopment.

[35]

It is said that the effect of the agreement was to make the actual purchaser the agent of itself and company A to purchase the property in their joint interest. I cannot so interpret what took place in the making of the agreement. Its terms are to an extent somewhat ambiguous. They contemplate that either of the parties to the agreement might become the purchaser and, in that event, there was thereafter to be a joint redevelopment upon the land. Clause (c) of the agreement, in my opinion, means that that company which became the purchaser should itself complete the purchase. It does not impose upon the other company any obligation at that point to contribute to the purchase price, though, as I have said, cl. (d) has its influence upon the amount of the cost of the redevelopment which the other company (in the result company A) would in due course be required to share. As appears from the facts, the way in which company A contributed to the redevelopment was by subscription to the capital of the purchasing company. This indicates that the carrying out of the agreement did not necessarily involve placing title legally or equitably in the joint names of the two companies, nor did it involve the contribution by company A of any cash to the actual purchase price as distinct from the cost of redevelopment. This method of executing the agreement was, in my opinion, the method which its language contemplated. But I reach that conclusion in point of construction quite apart from the subsequent conduct of the parties. In my opinion, it is not correct to say that the property was purchased by the two companies as tenants in common. The property was purchased by the one company, subject to a contractual obligation attaching at the time of purchase to redevelop the land in association with the other company on a joint basis. The manner in which this was to be effectuated was not, in truth, fully worked out by the parties to the agreement but such indications as there are in the document, in my opinion, point in the direction that the parties contemplated that each would have equal shareholding in a company which would hold the title to the land and effect the redevelopment.

[38]

The appellant began the present proceedings in the Supreme Court of New South Wales to recover from the respondent $28,480 as commission on the sale of land. The respondent was the owner of land in Sydney which was the site of Adams Hotel. In September 1965 the respondent placed the land in the hands of the appellant, a company which carries on business as a real estate agent, "to locate a satisfactory purchaser at a satisfactory price". The appellant introduced the property to Mr. Loblay, a real property developer who conducted his operations through a number of companies which he and a fellow director, Mr. Harvey, apparently control. Mr. Loblay made several unsuccessful offers to buy the land, but by April 1968 was willing to pay $1.8m., the price which the respondent required. However, in the meantime Mr. Hoyle, the respondent's solicitor, had commenced negotiations with another developer, Stocks & Holdings Ltd. ("Stocks & Holdings"). The appellant had played no part in introducing that company to the respondent. By May 1968 Stocks & Holdings was also willing to buy the land for $1.8m. By this time separate negotiations were being conducted by Mr. Hoyle, on behalf of the respondent, directly with Stocks & Holdings and, through the agency of the appellant, with Mr. Loblay. The learned trial judge found that Mr. Loblay and Stocks & Holdings "were each willing and able to purchase and viewed independently each would, apart from the intervention of the other, have probably done so". However, before either set of negotiations was concluded, each of the two prospective purchasers learnt that the other was in the field. On 6th May 1968 there was a meeting between Mr. Loblay and Mr. Graf (the managing director of Stocks & Holdings) and an agreement was made which was reduced to writing. The agreement was expressed to be between Stocks & Realty (Sydney) Pty. Ltd. ("Stocks & Realty") (which is a subsidiary of Stocks & Holdings) and Ann Arbor Investments Pty. Ltd. ("Ann Arbor") (which is a company controlled by Messrs. Loblay and Harvey). It was agreed that each company would seek to purchase the property and that each would continue to negotiate with the respondent "on terms and conditions mutually agreed and fully disclosed between them". The agreement contained the following provisions:

[50]

With all respect, I consider that a finding that the purchase by Stocks & Realty was brought about by the acts of the appellant is insupportable. The appellant did not introduce Stocks & Realty (or Stocks & Holdings) to the respondent or to the land, and played no part in influencing Stocks & Realty to enter into the agreement of 6th May or into the contract to buy the land. The reasoning in Burchell v. Gowrie and Blockhouse Collieries Ltd. does not lead to any different conclusion. In that case the sale was effected to "agents or co-adventurers" of the person introduced by the agent, acting in the same interest as the person originally introduced [24] . It was held that the acts of the agent were an effective cause of the sale which actually took place. The case shows that an agent may be instrumental in bringing about a sale notwithstanding that his negotiations have been with one person and that the sale is made to a different person. Asprey J.A. correctly and succinctly stated the position when he said, in Moran v. Hull [25] , "if the agent's efforts with A result in a sale to A, B and C, the agent has earned his commission". It would be equally true to say that if the agent's efforts with A result in a sale to B, the agent has earned his commission. Illustrations of this latter proposition may be found in two Canadian cases, Stratton v. Vachon & Wilson [26] (where the purchase was made by associates of the person introduced by the agent, although the latter person took no part in the purchase) and McBrayne v. Imperial Loan Co. [27] (where the purchase was by a company with which the person introduced by the agent was associated). See also Gunn v. Showell's Brewery Co. Ltd. and Crosswell's Ltd. [28] where the agent was employed to purchase, and the purchaser was a new company promoted by the person for whom the agent was acting. But Burchell v. Gowrie and Blockhouse Collieries Ltd. [29] does not establish that if an agent introduces A as a possible buyer, and a sale is later made to B, who happens to be a co-adventurer of A, but whose association with A did not cause him to make the purchase, the sale must necessarily be held to have resulted from the agent's efforts. If as a result of the interest which the appellant had excited in Mr. Loblay that gentleman had himself interested Stocks & Realty in the land, with the result that that company bought the property, the appellant might well have been an effective cause of the sale. But that was not the case; Stocks & Holdings was willing to buy the land before Messrs. Loblay and Graf had their discussion, and after 6th May continued to negotiate with the respondent in the same way as it had been doing before. The endeavours made by the appellant to sell to Mr. Loblay did not result in the sale to Stocks & Realty.

[114]

On its face the sale which took place was from the respondent to Stocks & Realty (Sydney) Pty. Ltd. Loblay and Harvey's company, Ann Arbor Investments Pty. Ltd., on the exchange of contracts became, in my opinion, entitled to a one-half equitable interest in the property as a result of the collusive agreement of 6th May 1968. I read cl. (c) of that agreement as providing that whichever of the two parties thereto should sign the contract of sale it would both complete the purchase and carry out the redevelopment of the site "jointly on a basis of equality". Both the purchase of the site and the re-development were to be part of a joint venture. Before completion of the purchase each party was required to provide in cash approximately $500,000. The use of the words in cl. (d) "equity capital" shows that the parties intended that this would be in return for the issue of shares in the purchaser company. An equal shareholding on each side was intended. The clear inference is that the consequent $1,000,000 would go in payment of part of the purchase price of the property. It may also be inferred that the balance of the purchase price and the costs of redevelopment, subject to the obtaining of funds by sale and lease back under cl. (e), would be borrowed on security because there is a promise in cl. (h) to give personal guarantees if necessary. Now if before redevelopment the joint venture had terminated for any reason, it is quite clear that the party who happened to have been the purchaser could not have claimed beneficial ownership of the whole property. Equity would have required that the property be held in trust for both parties jointly, subject to any necessary winding up of the joint venture in accordance with the principles governing such a venture. It is not to the point that the agreement of 6th May was not as a whole specifically enforceable. Once the property was purchased equity would fasten on to the property the rights in respect of the property intended by the parties.

[115]

Thus Ann Arbor Investments Pty. Ltd. became entitled to a one-half interest in the whole of the property. No question arises in this case of a contract going off after exchange. The purchase was completed through the medium of the company Stocks & Realty (Sydney) Pty. Ltd. in which by the time of completion Ann Arbor Investments Pty. Ltd. held fifty per cent of the shares. Under the implied contract which existed between the appellant and the respondent and which I have enunciated under (1) above, the consideration upon which the implied promise to pay commission depended became executed, provided that there was the requisite causal relation between the purchase and the actions of the appellant. The facts that the interst of Ann Arbor Investments Pty. Ltd. was a one-half interest, that it was an equitable interest and that the transaction of sale and purchase was in the name of a nominated company do not take the events which happened outside the terms of the implied contract; nor does the fact that the Loblay interest was not known to the respondent, unless for that reason or any other reason in addition or alternative thereto there is not the necessary causal relationship between the location by the appellant of Loblay and Ann Arbor Investments Pty. Ltd. and the subsequent purchase of the one-half interest. To this I now turn. The phrase that is time honoured in this context is "effective cause" or "efficient cause", that the agent was an effective cause or the effective cause. See Anderson v. Densley [62] . The inquiry is a factual one and it probably does not matter in the long run whether the definite or indefinite pronoun is used before the words "effective cause". Thus in Burchell v. Gowrie and Blockhouse Collieries Ltd. [63] Lord Atkinson used the phrases "the effective cause" and "an effective cause" without distinction between them. In almost any factual situation a result will have more than one cause and if there could only be one effective cause in relation to a sale within the meaning of the implication, then there are plenty of events in this case which would have strong claims for the title in competition with the appellant's actions. "Effective cause" means more than simply "cause". The inquiry is whether the actions of the agent really brought about the relation of buyer and seller and it is seldom conclusive that there were other events which couuld each be described as a cause of the ensuing sale. The factual inquiry is whether a sale is really brought about by the act of the agent: Green v. Bartlett [64] quoted in Burchell's Case [65] .

At a glance

Court

Decision date

Before

Source

Judgment (138 paragraphs)

Parties