Short v City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148 (22 August 1912)

Short Plaintiff, Appellant; and The City Bank of Sydney Defendants, Respondents.

Though this case has been elaborately and exhaustively argued on behalf of the appellant, we did not think it necessary to hear counsel for the respondents in support of the judgment appealed from.

I am of opinion that the reasons given by their Honors of the Supreme Court are amply sufficient to sustain their conclusions, and I confess that I do not think I can usefully add to them.

A new point suggested itself during the argument, namely, whether under the agreement between the appellant and the Farmers' and Settlers' Co-operative Association the appellant retained during its currency the right to demand and obtain immediate and unconditional possession of the wheat. The further question then arose whether, if he had not retained that right, the liquidation had not ipso facto restored it to him, or whether he was not at any rate entitled then to put an end to the agreement and dispose of his wheat so as to give immediate possession to a purchaser.

I do not think it necessary to decide these questions in view of my agreement with the conclusion of the Supreme Court that there had not been any conversion on the part of the respondents so as to sustain the third count, nor any such inducing of the association to break its contract with the appellant as could have supported the fourth count.

As to the trover, the plaintiff is in a serious difficulty as to the very foundation of his right to recover. On the construction of his contract with the society he had no right to resume the possession of the wheat for eight months so long as the contract stood. For the consideration of free storage, and the other duties undertaken by the society, the plaintiff agreed to allow the society that period to dispose of his produce unless he shortened the time of sale. And as he had not on the assumption of an existing contract any right to have possession of the goods—at all events in the absence of any unauthorized dealing with them by the society, which is not suggested—it is plain his action must on that assumption fail: Lord v. Price[1].

But the company had been compulsorily ordered to be wound up, and this dates from May 2, 1908. The contract was one of a nature which in my opinion entitled the appellant to put an end to it when compulsory liquidation was ordered. The capital of the company, its yearly turn over, its opportunities, cable arrangements in connection with the London market, the personal experience and judgment of the persons controlling its operations, the solvency of the company with respect to the receipt of money in payment for the wheat, were all obviously material elements inducing the making of the contract. This brings the case very much within the words of Cockburn C.J. in British Waggon Co. v. Lea[2]. There, though the company went into liquidation, the Court held the respondent was not entitled to terminate a contract which involved the mere letting of waggons to him and keeping them in repair. But, said the learned L.C.J., on the authority of Robson v. Drummond[3] "where a person contracts with another to do work or perform service, and it can be inferred that the person employed has been selected with reference to his individual skill, competency, or other personal qualification, the inability or unwillingness of the party so employed to execute the work or perform the service is a sufficient answer to any demand by a stranger to the original contract of the performance of it by the other party, and entitles the latter to treat the contract as at an end, notwithstanding that the person tendered to take the place of the contracting party may be equally well qualified to do the service."

These observations would apply to the case of a contract like the present made by a company whose affairs were afterwards conducted by an official liquidator merely for the purpose of winding up, because the business personality, so to speak, of the company is for all practical purposes entirely different from that of the company while under the ordinary regime of its directors. The substance of the service would be different. Therefore the appellant could have put an end to the whole contract so far as it remained unperformed. If he did not, his trover count must fail for the reason stated. If he did his trover count might succeed, but, if there was no contract his fourth count for inducing the breach of contract must disappear.

The Supreme Court, expressly assuming that he retained the property in the wheat, and tacitly assuming his right to possession, thought there was no evidence of conversion by the defendant. They relied on England v. Cowley[4] which is a distinct authority. See also Burroughes v. Bayne[5]. The appellant sought to escape the doctrine of the first mentioned case by urging that there was evidence sufficient to go to the jury to establish an arrangement between the respondent, the society, and Terry, whereby Terry agreed to hold the wheat henceforth for the respondent. Had there been such evidence it would have been one step on the way (see Turner v. New South Wales Mont de Pieté Deposit and Investment Co. Ltd[6] where I dealt with the consequences of such an arrangement). But there is no such evidence. It is plain that the parties thought the signature of Terry, in his assumed capacity of warehouseman, was sufficient to secure the bank's right to realize on the goods when necessary by carrying on his responsibility to the Bank on endorsement of the certificate, and there is no scrap of evidence he ever did more. His character of storeman of the goods for the society remained unaltered, and it is not suggested that the society itself became bailee for the Bank, and so the Bank never had possession actual or constructive of the goods.

It was not really contended that an assertion of right by the Bank—apart from its actual or constructive possession—would amount to conversion. Such a position would be manifestly untenable.

There is yet another difficulty in the appellant's path on the trover count. I mean that the goods were not specific. There was a larger bulk of wheat at Darling Island, and the wheat claimed by the plaintiff was not identified or appropriated. The argument that the Bank had laid claim to all wheat held by the society at Darling Island, even though unrepresented by certificates advanced upon, has not sufficient basis in fact. The expressions referred to cannot reasonably bear that meaning, and trover lies only in respect of specific property: Orton v. Butler[7]. On all grounds then the claim on trover fails.

Then as to the count for inducing the breach of contract. To sustain this at all, the former assumption of renunciation of the contract must be abandoned, or there was no contract to break. And if that be abandoned—then, though there was a contract, there was no breach, because the society was entitled on the construction of the contract to refuse delivery on Lindley Walker's order or appellant's direction. That related to 6,000 bags, and the demand was consistent with a claim, notwithstanding the contract, to have that direction complied with. In fact that claim was insisted on at the bar. And what is decisive is this—that the balance, 1,205 bags, were not demanded, but were left on free storage, which is inconsistent with a termination of the contract as a whole—and a partial renunciation is impossible. But again there are other fatal flaws in the plaintiff's case.

Apart altogether from the question of justification, I see no evidence of the allegation that the defendant "knowingly induced or procured" any breach of the contract, assuming there was a breach.

The word "knowingly" is essential. In Fosset v. Breer[8] the word is "sciens." In Blake v. Lanyon[9], it is laid down it must be "after notice." So also in Lumley v. Gye[10]. In Bowen v. Hall[11] Brett L.J., speaking for himself and Selborne L.C., says "with knowledge of the contract." In Mogul Steamship Co. v. McGregor, Gow & Co.[12], Bowen L.J. says:—"Intentional procurement of a violation of individual rights, contractual or other." In Quinn v. Leathem[13] Lord Macnaghten had previously spoken of "a violation of legal right committed knowingly."

In Glamorgan Coal Co. v. South Wales Miner's Federation[14], Romer L.J. says:—"Knowingly procured another to break his contract"; and in the same case Stirling L.J., says[15]:—"The federation wilfully and with notice of the contracts procured some men to break their contracts" and calls that an "interference with contractual relations." In the same case in the House of Lords: South Wales Miners' Federation v. Glamorgan Coal Co.[16], Lord Halsbury L.C., speaks of "An intentional breach of contractual rights." Lord Macnaghten says[17], that the federation "induced and procured a vast body of workmen, ... to break their contracts of service, and thus ... knowingly and intentionally inflicted pecuniary loss on the plaintiffs." Lord James says[18]:—The defendants purposely procured an unlawful act to be committed. Lord Lindley says[19]:—"The federation by its officials are clearly proved in this case to have been engaged in intentionally assisting in this concerted breach of a number of contracts," and[20] he speaks of the "intention to commit an unlawful act." In Read v. Friendly Society of Operative Stonemasons of England, Ireland and Wales[21], Collins M.R. says:—"The defendants did knowingly and for their own ends induce the commission of an actionable wrong."

But to constitute that cause of action, the defendant must have induced or procured the doing of what he knew would be a breach of contract. A bonâ fide belief reasonably entertained that it was not a breach of contract would be fatal to the claim. If the defendant did not know of the existence of the contract, he could not induce its breach; if he reasonably believed it did not require a certain act to be performed, his inducing a party to the contract to do something inconsistent with it could not be regarded as an inducement or procurement knowingly to break the contract; if he believed on reasonable grounds that the contract had been rescinded, or performance waived, when in fact it had not, he could not be said to knowingly procure its breach. If this were not so, no man would be safe in the ordinary transactions of life, because he might find contrary to his knowledge or belief and expectation that some contract or enterprise he entered into was inconsistent with the contractual or other obligation of the party with whom he was agreeing or dealing. No doubt every man must be understood to intend the natural consequences of his acts; but that means having regard to the circumstances with which he is or is assumed to be acquainted. And the terms of an agreement and its true construction, for it may be very complicated, and the acts of the parties in relation to it are circumstances without knowledge of which reasonably brought home to the mind no man can be said to intend consequences regarding the breach of the agreement.

All that the Bank did here was to insist on what it believed to be its rights as between the society and itself, and it in no way counselled or induced or procured the society to break its agreement with Short. The Bank certainly made claims beyond its legal rights, but not by way of inducing or procuring the society to break any contract with its clients. There is nothing to support the notion that the Bank supposed what it demanded would involve any breach of the society's contractual obligation with Short. The directors in their interviews with the Bank never hinted at such a result. The Bank's claim was alio intuitu. I prefer to deal with this phase because if the Bank was coercing the society into conduct which the bank knew would be a breach of contract I should be in a difficulty to find a legal justification for it. Therefore I do not put my judgment on justification. The view of Street J. is, as I read it, in substance that which I have expressed. I see no possible ground for supporting either of the counts, and think the appeal should be dismissed.

Solicitors, for the appellant, Links & Wragge, Gunnedah, by E. Pritchard Bassett & Co.

[1] L.R. 9 Ex., 54.

[2] 5 Q.B.D., 149, at p. 153.

[3] [1831] EngR 312; 2 B. & Ad., 303.

[4] L.R. 8 Ex., 126.

[5] [1860] EngR 449; 5 H. & N., 296.

[6] [1910] HCA 15; 10 C.L.R., 539, at p. 559.

[7] 5 B. & Ald., 652.

[8] (1673) 3 Keble, 59.

[9] 6 T.R., 221.

[10] [1853] EngR 15; 2 E. & B., 216.

[11] 6 Q.B.D., 333, at p. 337.

[12] 23 Q.B.D., 598, at p. 614.

[13] [1901] UKHL 2; (1901) A.C., 495, at p. 510.

[14] (1903) 2 K.B., 545, at p. 573.

[15] (1903) 2 K.B., 545, at p. 576.

[16] (1905) A.C., 239, at p. 244.

[17] (1905) A.C., 239, at p. 245.

[18] (1905) A.C., 239, at p. 252.

[19] (1905) A.C., 239, at p. 253.

[20] (1905) A.C., 239, at p. 255.

[21] (1902) 2 K.B., 732, at p. 738.

High Court of Australia

Short v City Bank of Sydney [1912] HCA 54; (1912) 15 CLR 148 (22 August 1912)

HIGH COURT OF AUSTRALIA