Saad Nora v Pr ic Brokers)

Saad Nora v Pr ic Brokers) - [1929] HCA 24 - HCA 1929 case summary — Zoe

[45]

As to the first ground, it is clear on inspection of the deed, without more, that the firm's business extended beyond selling on commission. It necessarily included selling partnership land at a profit. With respect to the second ground, both sec. 23 of the Act and general principles of law (see Const v. Harris (1) ) establish that the actual scope of the firm's business for the purposes of this proceeding was not necessarily limited by the provisions of the deed. In applying the facts to the first and second propositions, a very strong case is made for the appellants that the partners appellant were entitled to have had from their former partner the opportunity of joining in any such venture, if it were a real venture. It would be no answer that, as was suggested for the respondents in argument, one partner alone could not in the first instance have bound his firm by the purchase. If judicial authority were necessary for that position, the opinion of Joshua Williams J. in Gibson v. Tyree (2) is quite clear. Personally, I find it unnecessary to enter into the detailed consideration of facts and law required to pursue those first two positions to a conclusion. I find the third ground so plain and conclusive that nothing more is necessary. For this purpose the essential facts may be thus stated : - The partnership - and I assume it for this purpose to have been one for land and estate agency strictly - had sold certain land to one J. N. Spreckley, and was in course of disposing of it for him on commission and of completing the agency work in connection with the undertaking. Spreckley began to purchase about 1921, and began to sell about 1922. The lands he bought were called respectively " Belgravia " and " White- thorn" and '' Whitethorn Township Estates," and some land at Frankston. Throughout the whole of his transactions with the firm, and until after Porter's death, so far as appears from the evidence, including the affirmative testimony of the appellants, Spreckley was ostensibly the sole principal in respect of the land he bought and sold. He paid the deposits on the three estates to the firm by his own cheque. His subsequent payments to the vendor

[47]

that is, a man named Cox, who, by agreement with the firm, shared with the firm profits of the sales to Spreckley - were made by deductions from amounts standing to Spreckley's credit in his account in the firm's books, as receipts from his purchasers. In June 1925 Porter instructed some employees of the firm to make a statement of accounts in respect of the three estates, up to 31st March 1925. These accounts, as completed by the firm's employees, showed nothing but Spreckley's situation with the firm so far as the agency had proceeded. They showed as to Belgravia and Whitethorn Township the various allotments so far sold by the firm for Spreckley, the names of the purchasers of these allotments, the contract price for each, the portion of that price so far paid, the amounts overdue, the interest overdue and the balances of actual payments so far made. Those balances totalled £8,733 16s. 6d. in respect of Belgravia and £557 9s. 11d. in respect of Whitethorn Township. As to Whitethorn, which appeared on the second sheet, only the headings were written by the employee. Porter himself, as to Whitethorn, wrote in the lots sold, the purchasers, the amounts of interest overdue and the balances representing receipts, totalling £3,324. He then, in consultation with Spreckley, as will be seen, on 27th June 1925, wrote in certain words respecting Spreckley's unsold land. First of all, some land at Frankston - also formerly Cox land - was priced partly at so much per lot and partly at so much per acre, and treated as probably fetching £2,750 in all. Belgravia unsold lots, fifteen in all, were priced per lot, and treated as probably fetching £2,925 in all. That is, the land yet unsold was treated as producing £5,575. To this were added £8,730 (Belgravia), £3,324 (Whitethorn), £557 (Whitethorn Township), and a total arrived at of £18,186. A deduction was made of £1,930 for two mortgages, and of £650 to " R.S.P.," that is, the second respondent, and a trial balance struck of £15,606. That represented gross receipts, actual and expected, from the sale of the Spreckley land by the firm of Birtchnell Bros. & Porter. Then Porter wrote as covering the whole : - ' Divide half each of profits. Mr. Spreckley made note of this and placed with his papers. June 27th 1925." "No, 1 J. N. Spreckley to be refunded out-of-pocket moneys and interest to date. Afterwards equal division. J. N. Spreckley and John

[105]

with a client the profits derived from the business which the firm Co. Lr. conducted on the client's behalf. But in my opinion the inference - jicn g. that the partners when they met and concurred in these projected transactions made on each occasion a separate verbal contract outside the partnership enterprise is opposed to the terms of the partnership instruments as well as to all business probabilities. The partnership articles dated 27th June 1908 specifically mention real estate belonging to the firm or in which the firm may have an interest and moneys which may be owing or thereafter accrue due and owing by any person to the firm for or in respect of the sale or contemplated sale of any properties in respect of which the firm may have a contract or contracts for the division or application of the proceeds of such sale. The articles of 16th June 1913 recite that the firm has acquired large interests in real estate and includes the real estate and the interests in real estate in its capital. In addition it appears that general agreements existed with one or two clients by which the firm engaged to perform the work of subdividing land acquired for that purpose for the client upon profit-sharing terms. In these circumstances I think it is clear the fiduciary obligations of the partners extended to all profit- sharing arrangements with clients. "It follows that the late John Porter was not at liberty to conceal from his partners information that a client was ready to or likely to share profits with the firm or secretly to turn to his own account any opportunity of such profit- sharing or, whilst ostensibly performing as a partner the work of subdividing and selling land for a client, to share with that client the profits derived from the transaction. I am at a loss to under- stand the suggestion that in some way the plaintiffs precluded themselves by the conduct of their case at the trial from relying upon this duty. According to the Judge's notes Mr. Ham, who

[142]

will engage in some particular kind of activity or transaction for the joint advantage only. In some degree it arises from the very fact that they are associated for such a common end and are agents. for one another in its accomplishment. Lord Blackburn found in this consideration alone sufficient reason for the fiduciary character of the partnership relation (Cassels v. Stewart (1) ). The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partner- ship exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm. Once the subject matter of the mutual confidence is so determined, it ought not to be difficult to apply the clear and inflexible doctrines which determine the accountability of fiduciaries for gains obtained in dealings with third parties. Of the duties imposed by these doctrines, one which is material for the decision of this case is that which forbids a partner from withholding from the firm any opportunity of advantage which falls within the scope of its undertakings, and from using for his own exclusive benefit. information, knowledge or resources to which the firm is entitled. (See Dean v. MacDowell (2); Aas v. Benham (3); and cf. Trimble v. Goldberg (4), and also secs. 33 and 34 of the Victorian Partnership Act 1915.) Another duty of present materiality is that which requires a fiduciary to refrain from engagements which conflict, or which may possibly conflict, with the interests of those whom he is bound to protect. (Aberdeen Railway Co. v. Blaikie Bros. (5).) Moreover, in considering such a matter it is important to remember that, in the language of James L.J., "the general principle that . . - no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal . . . is an inflexible rule, and must be applied inexorably by the Court, which is not entitled . . . to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the - (2) era) 8 Gk Dee 3s," Men, ce eee a

[153]

money under arrangements which entitled them to a share of the profits in addition to a selling commission. Before 1922, during the partnership, interests were acquired by the partners in the profits of thirty-three speculations. In four of these cases the land was bought by the partners as owners. In the remaining twenty-nine cases they became entitled to a share in the profits only. Thirteen of these fell under an agreement or arrangement made with a speculator named Benjamin Cox. Five were speculations of another client. The firm's balance-sheet for the year ending 30th June 1921 included on the assets side under the heading " Sundry estates at a Valuation" twenty-one of such speculations, the value of which to the firm is set down at £48,189 16s. 4d. No doubt in some of these cases the firm supplied some of the capital needed for the acquisition of the land, although in many it contributed only its services in finding, cutting up, and converting into money the land. It is true that in every case but three the transaction was entered into only after discussion among and with the concurrence of all three partners, and in those three cases the approval of all was subsequently given. But this does not necessarily show more than that these transactions were so important that one partner would or could not embark upon them on his own responsibility. Irvine C.J. said : " Each of these transactions was entered into as a separate venture on its own merits and as the subject of a separate verbal agreement." But it seems almost undeniable that they were part of the business. Indeed, together with the transaction now in question they came to be a principal part of the business. A consideration of the terms of the partnership articles, the contents of the balance-sheet and the evidence as to the manner in which the transactions were dealt with in the books, a comparison of this material with the entries of the cash book put in for the period commencing July 1924, and a collation of the entries in Porter's

[156]

was established under articles dated 19th September 1889, which described the business to be carried on as that of "estate and financial agents and auctioneers." In a variation of the partnership articles made 27th June 1908, a provision is made which supposes that the firm itself has acquired or will acquire interests in land. This provision created a charge in case of death "upon the share of such deceased partner in any real estate belonging to the said firm, or in which the said firm may have an interest and also upon the share of such deceased partner in any moneys which may be owing or may thereafter accrue due and owing by any person or persons or company to the said firm for or in respect of the sale or contemplated sale of any properties in respect of which the said firm may have a contract or contracts for the division or application of the proceeds of such sale or contemplated sale." It does not appear from the evidence in how many estates the partners had become interested before this date, but it seems clear that in the case of at least four parcels of land their interest had then been acquired. In 1906 the partners had entered into an agreement with Benjamin Cox, a relative of one of the plaintifis by marriage, by which he agreed to them acting as his agents irrevocably in the subdivision and sale of any property, which his attorney under power might purchase on his behalf, and agreed that they should take a share of the profits. This agreement was acted under, and in 1912 its terms were embodied, varied and explained in a new agreement. In June 1913, fresh articles of partnership were entered into between John Porter and the plaintifis, and these first recited that they had for many years carried on at Melbourne in the State of Victoria in copartnership the business of land and estate agents, and had acquired large interests in real estate in the said State, and then went on to provide that the capital of the partner- ship should consist of the net value (among other things) of the real estate and all other assets of the business. This is a recognition by the articles of partnership of the long-continued course of business which the agreements with Benjamin Cox seem so well

[164]

of the firm's for some fifteen to twenty years, before his death, and through the firm he bought land and sold it in subdivision, giving terms to the purchasers. The firm collected the instalments and accounted to him periodically. John Porter is described as of Belmore Road, and lived in a residence called " Belmore Grange." Belmore Road runs east and west through Balwyn at a distance of two miles from the Surrey Hills Railway Station. At right angles to it, running north to Doncaster Road (a road running south-west to north-east) is a road about a mile in length called at first "Whitethorn Road," but afterwards renamed " Greythorn."" On the east side of this road is a large area of land running almost from Belmore Road to Doncaster Road, and containing over 250 acres. The whole of this land had, at some date before 1921, become available for subdivisional sale, and under the general description of " Whitethorn Estate " was in the firm's hands. It was subdivided into 61 blocks of 1 to 3 acres in area, and these the firm was offering for sale as sole agents. Of this land 12 acres 1 rood and 27 perches, situated at the corner of Whitethorn Road and Doncaster Road (subdivided into two blocks), was, at some time before 1921, given the separate name of " Whitethorn Township Estate." This area was further subdivided into building lots, but when, does not appear, save that it must have been before 1921. Adjoining it were two blocks, numbered 8 and 9, which together contained 10} acres. In 1921 these 10} acres had been acquired by Spreckley. Land situated in the vicinity, but not, it would seem, forming part of Whitethorn Estate, had already been acquired by Benjamin Cox, and had been brought under the terms of his profit-sharing agreement with the firm. At some date, not precisely fixed by the evidence, but between 4th August 1920 and 2nd October i922, 'Cox's attorney brought under this agreement lots 26 to 32 of Whitethorn Estate and afterwards, but between the same dates, lots 19 to 25. The total area of these lots is 48 acres 3 roods 10

[166]

perches. They lie on the northern side of the Whitethorn Estate, and correspond with the land afterwards called " Belgravia Estate." Between 7th March and 21st June 1921 Porter tried to induce Spreckley to buy this land or some part of it, and on the last date, in his own language, he " eventually got him to look at the proposition from a common-sense standpoint " and after seeing Belmore Grange and returning and lunching in the city, Spreckley agreed "to buy under certain conditions." Two days afterwards a deposit of £400 was paid, leaving a balance of purchase-money owing to Cox amounting at least to £3,240. The subdivision of this area was put in hand immediately, and in September 1921 the estate was. named " Belgravia." From this time forward, Porter was much occupied in planning the subdivision of Belgravia and in selling its allotments, which were 95 in number. Many efforts were made by Porter to sell Spreckley's 10} acres at Whitethorn, lots numbered 8 and 9. At length, in December 1923, one Johnstone bought them. In what circumstances and when Spreckley bought the remainder of Whitethorn Estate (i-e., parts other than lots 8 and 9 and Belgravia lots 19-32) does not clearly appear from the diaries, and is not a matter dealt with by the evidence. One witness swore that Cox was vendor of Belgravia only. However this may be, it is quite clear that Whitethorn Estate was in the firm's hands for sale in subdivision before parts of it were further subdivided into building lots, and it is clear that in the process of further subdivision. fresh names were given to parts which were offered for sale - such as Clifton Estate, Highbury, Mt. Prospect Estate and Grand View Estate. The 104 acres, when subdivided on behalf of Johnstone, seem to have become the Clifton Estate. Porter showed considerable activity in dealing with these various estates, although in 1924 his. health appears to have begun to fail. There are very many entries in his diaries of visits of inspection with buyers, and a considerable number of records of interviews with Spreckley. Spreckley ratified contracts of sale when made, and such ratifications are repeatedly recorded. According to oral evidence payments to Spreckley were made by the firm, but little appears about them in the diary (a payment of £300 is, however, noted on 5th September 1924). Little or nothing else is noted of what was transacted at the interviews.

At a glance

Court

Decision date

Before

Source

Judgment (198 paragraphs)

Parties