Gelling v Crespin [1917] HCA 44; (1917) 23 CLR 443 (6 September 1917)

At the trial the plaintiff recovered a formal verdict for £3,328 2s. 6d., all questions of law and fact being reserved for the Supreme Court of this State, who set aside the verdict and entered a verdict for the defendants. The present appeal is against that judgment.

The following summary is from the judgment delivered by Street J. for the Full Court, which consisted of the learned Chief Justice of the State, and Street and Gordon JJ.:—"On 30th July 1914 Lindley Walker & Co., a firm of grain brokers carrying on business in this State and in Victoria, negotiated a sale, in Sydney, of 15,000 bags of wheat from a firm named Aitken Brothers to the defendants. The subject matter of the contract, and the price to be paid, were described in the bought and sold notes in the following terms:—15,000 bags wheat f.a.q. of season 1914-15 of State where delivery is made. Three shillings and ten pence farthing per bushel on trucks, Adelaide, Melbourne, or Sydney, at sellers' option. The sellers' option as to the place of delivery was to be declared by 1st December 1914, and 5,000 bags were to be delivered in each of the three months of January, February and March 1915. On 17th August 1914 Lindley Walker & Co., again acting as brokers, negotiated, in Victoria, a sale of a similar quantity of wheat from the defendants to Gelling & Sons Ltd. The bought and sold notes were in identical terms, except as to price, with those employed on the purchase by the defendants from Aitken Brothers. On 30th November 1914 Aitken Brothers notified the defendants that they proposed to deliver at Sydney under their contract, and on 2nd December the defendants wrote to Gelling & Sons Ltd., notifying them of a similar election under their contract. Nothing turns upon the circumstance that the latter notice was a day or two late."

The price of the wheat sold by Gelling & Sons Ltd. to the respondents was 4s. 0¼d. a bushel.

On 11th December in the same year there came into operation the Wheat Acquisition Act 1914, which empowered the Governor to declare by notification published in the Gazette that any wheat therein described or referred to was acquired by His Majesty, and enacted that upon such publication the wheat should become the absolute and unencumbered property of His Majesty, and that the rights and interests of every person in the wheat at the date of the publication should be taken to be converted into a claim for compensation. Pursuant to that authority on 24th December 1914 a notification was published acquiring all wheat then in New South Wales other than wheat actually in transit to other States of the Commonwealth. No wheat was delivered either by Aitken Brothers to the defendants, or by the defendants to Gelling & Sons Ltd. Gelling & Sons Ltd. are now in liquidation, and the plaintiff is the assignee of their rights under their contract. The action by the appellant is for non-delivery of the wheat sold to Gelling & Sons Ltd. by the respondents, whereby the purchasers were deprived of the profit which would otherwise have accrued to them.

The first plea was withdrawn during the argument before us. The second plea had already been abandoned. The pleas remaining to be considered are the third and fourth. The third was that the contract was one with respect to wheat which was the subject matter of a certain other contract made in the State of New South Wales prior to the passing of the Wheat Acquisition Act for the sale of New South Wales 1914-15 wheat to be delivered in that State, that the last-mentioned contract had not at the date of the passing of the Act or at all been completed by delivery, nor under such last-mentioned contract had any portion of the wheat relating to such contract been delivered at the said date or at all. I do not think that this plea, which relies on sec. 8 (2) of the Wheat Acquisition Act, is sustained. Both the contracts were probably made in Victoria, and therefore escape the provisions of sec. 8. However that may be, I think the respondents have failed, as I shall presently show, to prove the essential allegation in this plea that the contract sued on was in respect of wheat which was the subject matter of a certain other contract as described, by which the respondents mean their purchase from Aitken Brothers.

But the defence on which the respondents mainly rely is stated by their fourth plea, which sets up that the contract was for the delivery of wheat grown in the State of New South Wales (duly declared by the respondents as the State in which delivery would be made under the contract); that after contract and before breach the Governor, acting under the Acquisition Act made the notification already mentioned, which acquired all wheat in the State of New South Wales other than wheat actually in transit on its date to Australian States outside New South Wales; that the wheat the subject matter of the contract, being wheat then in New South Wales and not at the date of the notification actually in transit, was compulsorily acquired under the Act and notification, whereby the defendants were unable to deliver any of the wheat.

It will be seen that the respondents rely for this main part of their defence on two branches: first, that on their electing Sydney as the place of delivery, the contract became one for the delivery of wheat grown in New South Wales, and next, that the compulsory acquisition of the wheat described in the Governor's notification rendered it impossible for them to perform that contract.

As to the first branch I agree with the Full Court in thinking "that the contract must be read as if the wheat stipulated for were f.a.q. wheat, of season 1914-15, of the State of New South Wales," i.e., grown in that State. The reasons given by their Honors of the Supreme Court for their opinion on this point are quite satisfactory to me, and I see no necessity for adding to them. With the opinion of their Honors on the second branch, namely, the question of impossibility, I find myself, with great respect, unable to agree.

The attempt of the respondents to show that the wheat sold by them to Gelling & Sons Ltd. was the specific wheat purchased from Aitken Brothers has, I think, failed. It is true that the two contracts were in identical terms, but that mere fact does not confine a description of the subject matter, expressed so as to refer to a certain class of wheat, to any specific parcel of such wheat. It must be established in the first instance, if it is sought to prove that the two were identical, that the grain sold by Aitken Brothers was some specific parcel. Aitken's sale, like that of the respondents, was in general terms, and would be satisfied, as theirs would be, by the delivery of any wheat grown in New South Wales which answered the description of f.a.q. wheat of the season 1914-15. It is fruitless, therefore, to attempt to identify as something specific wheat sold by either Aitken Brothers or the respondents in those general terms. An attempt was made to identify them by means of the letter of the brokers' manager to the respondents of 2nd February 1915, five months after the contract now sued upon. This, if admissible, does not seem to me to carry the case any further. If it is admissible, so also is the telegram sent by the brokers to Gelling & Sons Ltd. on 15th August, which the manager of Gelling & Sons Ltd. admitted that he had seen. That was simply that "Crespin offer five thousand sacks each month January February and March Sydney Melbourne or Adelaide, sellers' option declared December four shillings one farthing per bushel, advise you to accept the offer no prospect of doing better"; the answer to which was as follows: "in reply to your letter of yesterday you may buy Golding's contract hundred cash" (the letter clearly referred to Golding's contract because there was no such letter as to Crespin's offer) "also Crespin's line three States four shillings one farthing per bushel, do better if possible." From these telegrams it is plain that Gelling & Sons Ltd. at the time of their acceptance had no knowledge of the Aitken transaction, and therefore could have no knowledge of any assumed identity of Aitkens' parcel with Crespins'. But in point of law the contract created by the bought and sold notes could not be varied by the parol evidence tendered by the respondents at the trial. Pitts v. Beckett[1] was relied on. That went entirely on the question of the broker's authority to sign the contract sued on, and is not at all applicable to the present case. The case of Gordon v. Macgregor[2] is in favour of the appellant rather than the respondents.

We must take the case, then, as resting on the bought and sold notes of 17th August, and upon these it is impossible to contend with success that the contract sued on was for the sale of specific goods.

The respondents, nevertheless, maintain that they have established the defence that they were excused from their contract by the impossibility of delivery. It is not necessary to inquire whether such a defence is maintainable where the article sold is not specific, for if it were maintainable it has not been proved. As has been stated, the notification of 24th December 1914 relied on contained a proviso which prevented it from operating on all wheat then in the State of New South Wales, because the proviso expressed that the declaration of acquisition should not extend to wheat then actually in transit to States of the Commonwealth other than New South Wales. Moreover, any of the wheat untouched by the proviso could have been sold by the Government after acquisition, had they so chosen, and the fact that they refused to sell could not establish impossibility as a defence, any more than it would have done in the case of any other possessor of wheat not compulsorily acquired, who declined to sell. The respondents admitted that the "cornering" of the market by any private speculator would not have given them a defence. The acquisition by the Government does not appear to me to be of greater avail to them by reason of its having been a compulsory purchase. But even supposing that the Government's retention of its wheat had established any impossibility, that would only have been pro tanto, and the contract, for all that appears, could have been satisfied by purchases of wheat then in or in transit to other States. The respondents say that as there was a limitation of the quantity of wheat available caused by the notification the onus was shifted to Gelling & Sons Ltd., so that they would have to show that there was sufficient wheat in or in transit to other States to enable the sellers to satisfy their contract. I am by no means of that opinion. Even supposing that the Government's acquisition could be held to establish a partial impossibility, it was still for the respondents to show that their contract was impossible of performance because sufficient other wheat could not be obtained, and this they have not shown. But they would have to show it for the purpose of establishing what they call practical impossibility in relation to a mercantile contract, and the authorities cited do not help them in the absence of evidence to bring this case within them. I think it unnecessary either to canvass the numerous cases cited or to discuss the evidence any further. I think that the plaintiff should hold his verdict and that the appeal should be allowed with costs.

The first question to be determined is: What is the contract? The respondents say the contract includes a verbal stipulation made, it is said, between the brokers' Melbourne manager, and Wiseman, the respondents' Melbourne manager, in the course of negotiations. This is put in two ways. First, that the bought and sold notes countersigned by the parties are no more than memoranda of the verbal contract, and the verbal stipulation referred to is omitted. Then it is urged that even if the countersigned documents were intended as the reduction of the contract itself to writing, it is open to the defendants to rely on the verbal stipulation referred to. There is no doubt of the materiality of the stipulation in question. It is directed to make the contract between the present parties dependent on a contract between Aitken and the respondents.

But the answers to the respondents' contention are these. The countersigned documents, according to their own internal content and the evidence relating to them, were written and signed for the purpose of reducing the agreement to writing. The bargain is a written agreement. There is not, and, according to the New South Wales procedure in such a case, there could not be, any claim for rectification. The document being the agreed record of the contract, the authorities are clear that it is conclusive and that prior negotiations are inadmissible for the purpose of qualifying it. Some of the most important authorities are collected in Gordon v. Macgregor[3]. The latest, and for us perhaps the most authoritative on the subject, is Yorkshire Insurance Co. v. Campbell[4].

The next step is to construe the written contract. The first important passage is the description of the wheat sold, namely "Fifteen thousand (15,000) bags wheat f.a.q. of season 1914-15 of State where delivery is made." The view taken by the Supreme Court as to this is clearly right. It means, when coupled with the declared option, that the wheat was to be wheat grown in New South Wales in the season 1914-15 and to be fair average quality according to the standard for New South Wales of that season. The appellant's contention that any wheat would do, so long as it was equal to fair average quality of that season's New South Wales wheat, is an inadmissible interpretation.

But the respondents went further, and contended that it must be not only wheat grown in New South Wales, but also wheat which the seller was to procure in New South Wales. It was said this was shown by the fact that it was to be placed "on trucks Sydney," the inference being that it was to reach Sydney from the country districts of the State. But certainly it could be procured in Sydney so far as the contract was concerned; and the strict answer is that the contract leaves it open to the sellers to procure the wheat where they please, so long as it complies with the description and they place it where prescribed. This eliminates the New South Wales expropriation as a sufficient justification for failure to deliver, even disregarding the point as to the Board being at liberty to sell.

But then, say the respondents, at least the contract left it open to them to buy the wheat either in New South Wales or elsewhere, and as the opportunities for buying in New South Wales were so extensive proportionately to the opportunities of getting 15,000 bags of New South Wales wheat elsewhere, the deprivation of the opportunity within the State so altered the contemplated situation as to go to the root of the contract and relieve the sellers from liability to deliver. There was considerable discussion as to what would constitute an impossibility sufficient to exonerate a party from performance. The case of Horlock v. Beale[5] contains several authoritative passages on this point. See per Lord Atkinson at pp. 496 et seqq; per Lord Shaw at pp. 512-513; and per Lord Wrenbury at pp. 525 et seqq. The result of what is there said may, I think, be stated in the following formula, which reconciles most if not all the cases of authority: Exoneration of a party charged with a breach of contract all depends, not upon purely external causes preventing the operation of the contract, but upon the construction of the contract itself. The question always is this: Was the obligation which is said to have been broken absolute, or was it conditional upon an event which has failed? If upon its true construction—regard being had to all circumstances which legitimately enter into construction — the contract is found by the appropriate tribunal to include a condition express or implied that the parties must be taken to have regarded as essential to performance by one or both of them, the obligation is not absolute and the non-fulfilment of the condition relieves any party for whose benefit it exists of his obligation of performance.

If the present contract itself on its true construction would be satisfied—as it would be—by delivery of wheat to be wholly procured entirely outside New South Wales so long as it complied with the stated description, it is impossible to imply the suggested condition as one which the parties are to be taken to have regarded as essential to its performance by the sellers. The expectation by the sellers that any particular source or sources would be available to them may have operated as a material inducement to them to enter into the contract; but that is very different from a condition which the Court construing the written contract must assume was assented to by both parties. Another condition suggested was that the wheat should be "commercially procurable" either inside or outside New South Wales. It is unnecessary to pronounce upon this as a condition, because, taking it at its best for the respondents, they have the onus of establishing its non-fulfilment. And so the whole matter resolves itself into a pure question of fact upon the evidence in this particular case.

It is clear from the evidence that what is termed "a fair quantity" of New South Wales wheat was at the time of the Proclamation in transit beyond the State, and went out up to the beginning of January 1915, that is, for about a week. The evidence says it went out in "small quantities" making up in all "a fair quantity," but that is quite comparative, and when millions of bushels are in question "a fair quantity" may easily far exceed 15,000 bags. The actual quantity and quality of that wheat are left practically undetermined. The return which the Chairman of the Wheat Acquisition Board said he could easily give was not in evidence or accounted for. The answer of Mr. Wiseman referred to in the judgment appealed from, which was as follows: "The action of the Government in acquiring the whole of the wheat in New South Wales prevented us from supplying wheat in New South Wales under the contract," when read with the rest of his evidence, is manifestly confined to the wheat within New South Wales actually taken by the Government. From his answers to the three preceding questions it is plain he based the answer relied on upon his view of the contract, that the wheat he had sold to Gelling was the identical wheat he had bought from Aitken, and for that or some other reason, the wheat he sold was not in course of transit on 24th December. There is little doubt he answered as he did assuming a construction of this contract, and very likely assuming in that connection that he could rely on the prior negotiations. In that view his answer could be read as strictly accurate, but otherwise not. The question and answer following strengthen the impression stated as to his meaning.

In the result, the respondents have failed to adduce evidence to substantiate the "commercial impossibility" of procuring outside New South Wales wheat to satisfy the contract, that is assuming, but certainly without deciding, that that fact if proved would afford a sufficient defence in law.

The appeal should, therefore, be allowed, and the judgment of Ferguson J. restored.

My learned brother Rich has authorized me to state that he agrees with this judgment.

[Note.—Since delivering this judgment I have seen the case of Tennants (Lancashire) Ltd. v. C. S. Wilson & Co. Ltd.[6], decided by the House of Lords, to which case I refer on the question of "commercial impossibility".—I.A.I.]

Appeal allowed. Judgment appealed from discharged with costs. Judgment entered for plaintiff for £3,328 2s. 6d. with costs. Respondents to pay costs of this appeal.

[1] [1845] EngR 474; 13 M. & W., 743.

[2] [1909] HCA 26; 8 C.L.R., 316.

[3] [1909] HCA 26; 8 C.L.R., 316, at pp. 322-323.

[4] (1917) A.C., 218, at p. 225.

[5] (1916) 1 A.C., 486.

[6] 33 T.L.R., 454; (1917) A.C., 495.

High Court of Australia

Gelling v Crespin [1917] HCA 44; (1917) 23 CLR 443 (6 September 1917)

HIGH COURT OF AUSTRALIA