Copping v Commercial Flour & Oatmeal Milling Co Ltd [1933] HCA 65; (1933) 49 CLR 332; [1934] ALR 167; (1933) 7 ALJR 97 (11 May 1933)

High Court of Australia - Full court
Rich, Starke, Dixon, Evatt and McTiernan JJ
13 March, 11 May 1933

Rich J.

This case, which arises out of an obscurely expressed contract of the kind which in South Australia appears to be described as "wheat storage," has been very fully examined in the joint judgment of Murray, C.J, and Napier, J, and of Piper, J, who dissented. Upon a consideration of the views presented in these respective opinions, I find myself in agreement with the majority of the court, and I have virtually nothing to add to their judgment. Much of the judgment of Piper, J, is in accordance with their opinions, but he considered that the respondent was content to pay at least 3s. 4d. a bushel as a minimum price, which the respondent was to bear in any event. I do not think that the respondent or the appellant had any real intention as to what was to happen if the price fixed was below 3s. 4d., because they did not foresee such a disaster. I am unable to agree with Piper, J, because I think the consequences must be determined, not by seeking an actual intention which was never in fact entertained, but by considering the character of the payment. I agree with him that the 3s. 4d. was not a mere loan against the wheat or against the price, but it was an advance payment in respect of the price, a sum paid at once to be applied in discharge of the price. When the price turned out, however unexpectedly, to be less than the prepayment, it appears to me that, as to the excess, the purpose of the prepayment failed, and the appellant's right to retain it disappeared. One may speculate that, if the question had, at the time when the bargain was struck, been put to the respondent, it might have agreed that in the then unexpected event of the price falling so much, the appellant should retain the excess, but such an agreement would have added a new term to the contract, and not simply expressed one already implied therein.

I am of opinion that the appeal should be dismissed. Starke J.

An action was brought in South Australia by the Commercial Flour and Oatmeal Milling Co Ltd, the respondent, against Copping, the appellant, for the return of moneys overpaid under a contract contained in documents described as bought and sold notes, in the following forms:

-- "Sold Note. -- ... 20/1/1930. -- I" (Copping)

have this day sold to the Commercial Flour and Oatmeal Milling Company about 1,800 (all he has) bushels wheat at 3s. 4d. -- 1st advance payable per bushel when delivered. Must be sold to us before 31/12/30. We guarantee to pay 6d. under Port Adelaide as quoted by papers for growers' lots. As per sample f.a.q. To be delivered 31/3/30.

Bought Note. -- ... 20/1/1930. -- We" (the Company)

have this day bought from Mr W. B. Copping about 1,800 (all he has) bushels wheat at 3s. 4d. - 1st advance payable per bushel when delivered. Must be sold to us before 31/12/30. We guarantee to pay 6d. under Port Adelaide as quoted by papers for growers' lots. As per sample f.a.q.

About 3000 bushels of wheat were delivered pursuant to these documents, and the first advance of 3s. 4d. per bushel was paid. The market price of wheat, Port Adelaide, at the date of the contract was 4s. 11d. per bushel, but by 31st December, 1930, it had fallen to 2s. 2d. per bushel. Sixpence under this price as quoted for growers' lots, Port Adelaide, was 1s. 8d. per bushel. The claim was for the difference between the advance upon the wheat delivered at the rate of 3s. 4d. per bushel and an amount calculated at the rate of 1s. 8d. per bushel, a sum of £250 1s. 9d. The Company recovered judgment for this amount in the Local court at Mount Gambier, and the judgment was affirmed by a majority of the learned Judges of the Supreme Court of South Australia. An appeal is now brought to this court.

The bought and sold notes do not state the transaction between the parties with much precision or clearness, but it seems that they are forms in common use, and lead to but few disputes. I daresay that the property in the wheat delivered under these contracts passes to the Company, but that is not a matter upon which I desire in the present case to express any opinion. It seems clear enough, however, that the 3s. 4d. advance is intended to be a payment towards, or on account of, or in anticipation of, purchase money if and when a date of settlement is fixed under the documents and a price is ascertained. Further, it seemss clear enough that the documents enable the party who supplies the wheat to fix the date for settlement and the ascertainment of the price of the wheat, so long as it be no later than 31st December, 1930. It follows, if the price thus ascertained is less than the amount paid in advance towards, or on account of, or in anticipation of, purchase money, that there has then been an overpayment of purchase money; the amount in excess has been paid upon an unfounded supposition of fact, namely, that the purchase money would exceed the advance. In such circumstances the over-payment can be recovered - Cox v Prentice, [1815] EngR 458; (1815) 3 M. & S 344, 105 ER 641; Kelly v Solari, [1841] EngR 1087; (1841) 9 M. & W. 54, 152 ER 24.

The appeal should be dismissed. Dixon J.

The appellant, a wheat farmer at Naracoorte, in South Australia, in January, 1930, disposed of his wheat to the respondent, a Milling Company of the same place, upon terms contained in documents described as bought and sold notes. The respondent paid him a sum of 3s. 4d. a bushel upon delivery, and by the judgment under appeal it has recovered part of this sum, consisting of 1s. 8d. a bushel, as an over-payment. The question upon the appeal is whether any part of it is so recoverable. The written contract between the parties was not only inscribed upon an inappropriate printed form, but it was expressed with a compendiousness and vagueness which make the transaction fully intelligible only to those familiar with dealings between wheat farmers and millers in South Australia. The learned Judges in South Australia, who were all experienced in such matters, agreed upon the general character of the transaction, and their view is supported by the conduct of the parties. In these circumstances I think we should not venture upon a reconsideration of the general nature of the bargain, but should confine ourselves to the exact point upon which the parties are at issue, and in the decision of which a division of opinion arose in the Supreme Court of South Australia. The substance of the agreement between the parties has been held to be that the farmer should deliver to the miller the whole of his wheat of the season for the purpose of a sale at a price to be fixed by the supplier "selling" on or before 31st December, 1930, at 6d. a bushel below the price quoted for Port Adelaide for the day of such "sale," and that the miller should make or pay to the farmer on delivery a "first advance" at the rate of 3s. 4d. a bushel.

The price of wheat fell steadily throughout the year. By July it had reached a price at Port Adelaide which, after the deduction of 6d., left less than 3d. 4d. a bushel, and by the end of December the price at Port Adelaide was only 2s. 2d. The appellant did not declare a "sale" under his agreement, although on 18th November he was notified by the respondent that, if before 31st December he did not "exercise his option of selling," the Company would "take the wheat into stock at market price and credit his account with the proceeds." The amount which the respondent Company has recovered in the action is the difference between the "first advance" of 3s. 4d. and the price at Port Adelaide on 31st December, 1930, less 6d. a bushel. At the time when the contract was made, 20th January, 1930, the price of wheat at Port Adelaide was 4s. 11d., and neither party can be taken to have supposed that the price would fall below 3s. 10d. It is therefore fruitless to seek in the language of the agreement any indication of their actual intention whether, if 3s. 4d. proved a payment in excess of the price, the difference should or should not be repayable by the supplier of wheat. Probably neither of them adverted to such a possibility.

In my opinion, the question whether any excess is recoverable must be determined as a legal consequence of the character of the payment described by the parties as a "first advance." I think there can be little doubt that the meaning of the contract was that the wheat supplied should upon delivery become the absolute property of the respondent Milling Company, and that the price payable to the supplier, the appellant, should be fixed by his declaring that he sold as on the day of his declaration, or as on a subsequent day specified in his declaration. If and when he so declared a sale as on a day, the price would become immediately payable, and would be calculated at a rate per bushel 6d. below the Port Adelaide rate ruling on that day. Whether, upon the failure of the supplier, the appellant, to perform his obligation to declare a sale before 31st December, 1930, the price fixed by the Port Adelaide price of that date became payable, may be a question, but it is a separate question. The agreement supposes that a price will be fixed by a declaration, and the primary question is: What is the character of the preliminary payment called a "first advance". The fixation of the price would create an immediate liability on the part of the Milling Company to pay. The advance made is plainly on account of this liability. It is intended to operate as part payment in advance of that liability.

As Lord Campbell said, in Timmins v Gibbins, (1852) 18 QB 722 at p 726 -

It is difficult to say that there can be any case in which the debt is not antecedent to the payment. Even where the money is paid over the counter at the time of the sale, there must be a moment of time during which the purchaser is indebted to the vendor.

The payment is made in advance to be applied in discharge of an indebtedness eo instanti when it arises under the agreement. The legal character of the payment is that of money receivable in anticipation of an obligation, to be used in or towards its discharge when it is ascertained. It appears to me to be a necessary legal consequence of its character that the title of the recipient to retain it depends upon the liability arising, and, further, the title to retain the whole of it depends upon the amount of the liability being not less than the payment received in anticipation. I cannot agree that, when once it is determined that the true nature of the advance is a payment on account of the price, an implication must be made in order to enable the respondent Milling Company to recover any part of it. On the contrary, it appears to me to follow that, if in the event no price is established pursuant to the contract, the purpose for which it is paid fails, and the title to retain it fails with it, and that an implication must be made in order to enable the recipient to retain it. I think it also follows that, if a price is ascertained lower than the payment made in advance, the purpose of the prepayment fails pro tanto, and an implication is needed to rebut the primá facie consequence that the excess is repayable. The excess represents the residue of a divisible payment made to answer an anticipated demand. In respect of the residue, the consideration expected to arise has completely failed.

If, because of the failure of the supplier of wheat, the appellant, to declare "a sale" and so fix a price pursuant to the contract, no price has become payable under the terms of the contract, I think the whole payment in advance would become repayable. No doubt, the respondent, the Milling Company, would in such a state of things be responsible upon a quantum valuit for the value of the wheat which became their property, and, no doubt, this would in the case supposed afford a set-off in an action by the respondent for the total sum. But I think the better interpretation of the contract is that the supplier bound himself to name a day by declaring a sale before 31st December, 1930, so that upon each and every day up to the last he had an election, but that on the last day his duty became absolute, and therefore that he, up to that time, having elected not to declare a sale, had no option but to give the price ruling on the last day. This, indeed, was not disputed by the parties themselves.

For these reasons I think the appeal should be dismissed.

Evatt J.

During the months of February and March, 1930, the appellant, a South Australian farmer, delivered to the respondent, a miller, a large quantity of wheat in pursuance of two memoranda signed by the respective parties on 21st January preceding. These memoranda were made upon forms of the respondent, one an ordinary bought note, the other an ordinary sold note. The memorandum signed by the appellant commenced with the printed formula - "I have this day sold to" the respondent. The space left for the price per bushel was filled by the written words "3s. 4d. - 1st. ad. payable - when de-delivered," and the writing proceeded - "Must be sold to us before 31/12/30. We guarantee to pay 6d. under Pt Adelaide as quoted by papers for growers lots."

A payment of 3s. 4d. per bushel was made to the appellant at the time of the delivery of the wheat. The market price was then considerably higher than 3s. 4d., but during the later part of the year it gradually fell, and on the last day of the year it was 2s. 2d. But the farmer took no action whatever in "selling" or naming a day of sale. In these circumstances the respondent claims that the sum representing the difference between 1s. 8d., ie, 6d. less than 2s. 2d., and the "advance" of 3s. 4d. per bushel, is money payable either for money lent or money had and received to the use of the respondent.

In the first place I am of opinion that the property in the wheat passed to the miller upon delivery thereof. The learned Magistrate came to a contrary opinion, thus stating his reasons.

Mr Skewes placed considerable reliance upon South Australian Insurance Company v Randell, (1869) LR 3 P C. 101, in contending that the contract was one of sale. I think the case is distinguishable on this ground: that there it was a term of the contract that the miller should have the right to make the wheat part of his current consumable stock which he might grind, sell, or use at his will and pleasure for his own profit. It may be inferred in the present case that the plaintiff did mix the defendant's with other wheat and did grind some of it, and that it would have been impossible for the plaintiff to have returned to defendant on demand the identical wheat delivered to him (plaintiff). But as to his right to do so the contract itself is silent, and I cannot say on the evidence that defendant consented to it. The contract here was, I think, intended to be one of bailment, and I cannot see that the plaintiff by committing what may have been a conversion can have altered the original character of the contract.

It seems to me that the terms of the contract tend to negative any conclusion that the wheat was to be held by the miller as bailee. Not only were bought and sold notes signed by the two parties, but there was nothing in the contract to suggest that after delivery the risk was to remain with the farmer. In this respect the case differs in a vital respect from that of Chapman Bros v Verco Bros and Co, (1933) ALR 308.

Although I agree with the Magistrate's observations upon Randell's Case (above), I infer from all the circumstances that the intention of the parties was to transfer the property in the wheat upon delivery, the farmer being under a contractual duty to name a day of sale before 31st December, 1930.

The present contract differs in another respect also from that considered by us in Chapman Bros v Verco Bros and Co (above). In the latter case there was an express provision that if an "advance" was made to the farmer by the miller, and it happened to exceed the market price at the time of the exercise by the farmer of his option, the miller was entitled to recover the difference from the farmer. Here there is no such provision, and the controversy between the parties falls to be considered upon general principles.

It was suggested that the 3s. 4d. per bushel should be treated as a loan upon the security of the wheat delivered, and it appears that the Magistrate based his judgment upon that footing. I do not think it possible to adopt this view of the contract. On the contrary, the property having passed, it was no longer available as a security. Nor was the 3s. 4d. intended to represent a mere loan of money.

The majority of the learned Judges in the Full court of South Australia regarded the 3s. 4d. as a "provisional" payment. But Piper, J, was of opinion that the phrase "3s. 4d. first advance" was "a minimum price which the miller was to bear in any event."

The difficulty I have in adopting Piper, J's, interpretation of the contract is that, read as a whole, the promise of the miller is to pay a price fixed by reference to Port Adelaide market price, and against the price so ascertained the 3s. 4d. was intended to be placed. In the event of the price exceeding 3s. 4d., it is obvious that the miller was to be called on to pay only the amount of the excess. Yet this event is not specially provided for, the words used - "we guarantee to pay" - being in themselves consistent with a payment in addition to the 3s. 4d.

In truth the words "3s. 4d. first advance" mean, and I think clearly mean, this - that, as the sale price was not yet fixed, money was being paid by the purchaser in advance of his obligation to pay the price when it came to be fixed, and further, the sum of 3s. 4d. was the first of such payments, but was not necessarily the last.

It seems to me that the word "first" conflicts with the idea of a guaranteed minimum price of 3s. 4d. Of course, it suggests that there may be a second payment to the farmer in addition to the 3s. 4d., but it equally suggests that if and when that additional payment is made, it will retain the character of an "advance." That being so, would the sum of the two advances be also regarded as making up a new guaranteed minimum. I do not think so. In the circumstances the right conclusion seems to be that the farmer was bound to credit the miller with the first or any other advance when the adjustment of price had to be made. In other words, all advances were to be put against the price, whatever the price turned out to be, and the balance struck and accounted for.

It follows that, if the farmer had nominated the day of sale in accordance with his duty under the contract, the miller would have been entitled to be credited with the payment of 3s. 4d. per bushel, whether the price as ascertained was greater than, equal to, or less than 3s. 4d. And if the appellant had on 30th December fulfilled his duty he would have been under an obligation to pay to the respondent the sum for which he has been adjudged liable.

But I am also of opinion that, in these circumstances, the correct cause of action is for breach of contract, and the miller is not entitled to recover by the implication of a simple contract resulting in a mere debt.

The miller received consideration under the contract, he became owner of and, no doubt, used the wheat. Of necessity, therefore, he is affirming, and not disaffirming, the contract. I do not think there was a failure of any part of the consideration enabling the miller to recover as for money had and received. Nor do I think there was any mistaken assumption of fact capable of supporting a common money count. What occurred was no more than a bold display of optimism as to the future state of the wheat market.

But this view does not dispose of the case, because the appellant is liable to pay damages, and the only question is, what is the measure thereof. The case is an unusual one upon this aspect, because there has not been any failure to deliver goods on the part of a seller. On the contrary, the goods have been delivered, and the breach consists in the failure on the part of the farmer to perform the act which would at once liquidate the transaction and quantify the appellant's liability at the very amount for which he has been held liable. It seems to me that the proper measure of damages is the estimated loss to the miller which would flow directly and in the ordinary course of events from the farmer's breach of contract. But the farmer was not in breach until 31st December, 1930. The loss which would necessarily be occasioned to the miller by the farmer's failure to nominate any day of sale owing to the market price falling lower than the "advance" of 3s. 4d., and continuing to fall still lower, would be the difference between the advance and the price as at the day of breach, fixed in relation to the market and in accordance with the contract. That sum the miller would have been entitled to receive if the farmer had not committed the breach which constitutes the cause of action. But this is the precise sum of money for which liability has been affirmed in the Supreme Court of South Australia, though upon a different cause of action.

For these reasons the appeal should be dismissed. McTiernan J.

I agree with the conclusion of the majority of the learned Judges of the Supreme Court that the moneys claimed by the respondent from the appellant are recoverable as moneys had and received. It is not necessary to describe again the peculiar nature of the transaction to which these obscure and ill-drawn documents gave rise. The question whether the appellant is liable to repay the moneys sued for turns upon the construction of the contract that is contained in these documents. Particularly, the question turns upon the character which the contract impressed upon the payment which was made to the appellant as a "first advance." I adopt the general considerations presented by the contract, which guided the majority of the Supreme Court in rejecting the view that the moneys were paid in consideration of the delivery of the wheat or as a minimum price.

It has been said that the parties never contemplated that the price which would be fixed under the contract would be lower than 3s. 4d. per bushel. It is probably more correct that neither the appellant nor the respondent ever contemplated, when the contract was made, obtaining or paying for the wheat more than the price which would be fixed. But the appellant is holding a sum in excess of that price, and he claims to hold it under the terms of the contract. The moneys paid as a first advance were, in my opinion, upon the true construction of the contract, a first payment beforehand towards the discharge of the debt which would become ascertained in amount, and immediately due and payable, when the wheat was "sold" under the contract, and the appellant received it in that character. The parties having agreed that the appellant was to declare the contract price to be that ruling on any day before 31st December, 1930, and having failed to do so, I think the contract price became that ruling on the last day before the above-mentioned date - see Leake on Contracts (4th ed , 1902), at p 595. The amount which was prepaid in excess of that sum is severable and recoverable as money had and received - cf. Devaux v Conolly, [1849] EngR 1181; (1849) 8 C.B 640, 137 ER 658.

In my opinion the appeal should be dismissed. Order

Appeal dismissed, with costs.

Solicitors for the appellant: Eggleston and Eggleston for E. F. Skewes, Naracoorte

Solicitors for the respondent: Finlayson, Mayo, Astley and Hayward for W. E. Pyne, Mt. Gambier