Pirie v Saunders [1961] HCA 4; (1961) 104 CLR 149 (6 March 1961)

HIGH COURT OF AUSTRALIA

PIRIE v. SAUNDERS [1961] HCA 4; (1961) 104 CLR 149

Contract

High Court of Australia
Dixon C.J.(1), Fullagar(1), Kitto(1), Taylor(1) and Menzies(1) JJ.

CATCHWORDS

Contract - Oral agreement for lease of shop - Enforceability - Note or memorandum in writing - Instructions written down by solicitor in the presence of one of the defendants - Not signed by either of the defendants or by the solicitor - Authenticated signature fiction - Conveyancing Act, 1919-1954 (N.S.W.), s. 54A.

HEARING

Sydney, 1960, December 1, 2;
Melbourne, 1961, March 6. 6:3:1961
APPEAL from the Supreme Court of New South Wales. Wilfred Saunders instituted an action in the Supreme Court of New South Wales to recover damages for breach of an alleged agreement by William Thomas Pirie and Ross Anthony Cripps to grant the said Wilfred Saunders the lease of certain shop premises. The defendants denied the existence of any contract and further alleged "that the alleged agreement if any herein sued upon is a contract for the sale or other disposition of land or some interest in land and that such agreement or some memorandum or note thereof is not in writing signed by the defendants or either of them or by any other person thereunto by them or either of them lawfully authorized."

DECISION

1961, March 6.
THE COURT delivered the following written judgment : -
The respondent to this appeal was the plaintiff in an action in the Supreme appellants for the breach of an agreement to grant a lease of certain shop premises. The action was unsuccessful but on appeal to the Full Court the respondent obtained an order for a new trial and this appeal is now brought from that order. (at p152)

2. The agreement relied upon by the respondent was alleged to have been made orally in June 1954 at the office of the appellants. At this time the premises in question, together with certain other adjacent shop premises, were in course of construction. That there were discussions between the parties during or shortly prior to June 1954 was common ground as also was the fact that the discussions were concerned generally with the terms upon which the appellants would be prepared to grant a lease to the respondent upon completion of the building work. But there was a dispute as to whether these discussions ever proceeded beyond the point of negotiation. Further, it was asserted by the appellants that even if it should be held that the discussions resulted in the formation of an enforceable contract no note or memorandum thereof sufficient to satisfy the requirements of s. 54A of the Conveyancing Act, 1919-1954 (N.S.W.), had been proved by the respondent. (at p152)

3. It is quite clear from the evidence in the case that both the appellants and the respondent contemplated the preparation of a formal memorandum of lease and it is, at the very least, doubtful whether the testimony of the latter is capable of supporting the conclusion that an oral contract was made. Particularly is this so when it is seen that a draft lease was prepared and that in subsequent discussions by correspondence various amendments were proposed and accepted. But at the trial and before the Full Court the appellants appear to have been content to rest the determination of this issue upon the question whether an agreement for a fixed term to commence "from the completion of the building" did or did not specify the commencing date of the term with sufficient certainty. This bare submission was rejected and, we think rightly rejected, by the Full Court. In these circumstances we do not think it would be proper for us at this stage to enter upon a full examination of the evidence for the purpose of considering whether in fact the oral discussions between the parties are capable of being regarded as sufficient to justify the conclusion that they entered into a binding contract for the granting of a lease. (at p152)

4. The other question in the case, that is whether a sufficient note or memorandum had been proved, was answered by a majority of the Full Court in favour of the respondent. They were of the opinion that the fact that one of the appellants, acting both for himself and for the other appellant, gave certain instructions to their solicitor and "stood by" whilst the instructions were written down by the solicitor "afforded evidence that he was impliedly recognizing the writing as an authentic record of the prior oral bargain with the plaintiff which the jury found to have been made, in which case the defendants' names in the document could be regarded as 'signatures' within the meaning of the statute". (at p153)

5. It will be necessary to refer to the solicitor's notes with greater particularity but before doing so it should be mentioned that neither before the Full Court nor before us was reliance placed by the respondent upon any other document. Originally at the trial he had attempted to rely upon a form of lease sent to his solicitor under cover of a letter from the appellants' solicitor in July 1954. It became clear that, as constituting a note or memorandum of the contract sued upon, these documents were, for obvious reasons, defective and when, in the defendants' case, the solicitor's note of his instructions became, for no very apparent reason, evidence in the case it was readily seized upon to support the respondent on this issue. From that time onwards reliance has been placed on this document alone and in the circumstances it is necessary that we should examine it and see how it came into existence. (at p153)

6. According to the evidence the appellant Cripps, acting for himself and for the first named appellant, called to see their solicitor, Mr. Hargraves, in order to give him instructions to prepare a draft lease for submission to the respondent's solicitor. We are not given the details by oral evidence of what was then said but after having testified that he had received his first instructions from Cripps, Mr. Hargraves was asked whether he had made certain notes. Upon answering in the affirmative his notes were produced and tendered and admitted in evidence. The exhibit is in the following form:

"William Thompson Pirie 489 King Georges Rd.,
Ross Anthony Cripps B. Hills.

Prop : part of Lot B Princes Highway,
Sylvania Heights.
Tenant : Wilfred Saunders
27 Crystal Street,
Sylvania Heights.
Solr : T. G. W. Lees, 113 Pitt Street
Terms : 5 years. 2 years option
Rental : 5 pounds 10 0 per week
Commencement - on completion of property
Premium : 400 pounds (wants cash)
Use : Bakery shop - sells cakes and pastry
Fixtures : Right to remove provided no damage
No right to transfer without consent
Special Conditions - Check as to Board of Health
and septic tank."

Thereafter Mr. Hargraves prepared a draft lease, there were discussions by correspondence between the solicitors concerning the introduction of additional terms and finally a formal memorandum of lease was engrossed. But since the premises were not then completed this instrument did not purport to fix the commencing date of the term. Presumably this was left to be inserted after the premises had been completed but the instrument was prepared so that everything would be in readiness when it became possible to specify a commencing date. (at p154)

7. In these circumstances the Full Court, by majority, took the view that the solicitor's notes of his instructions were capable of being regarded as a sufficient note or memorandum of an earlier concluded agreement. This view was based upon the so-called "authenticated signature fiction" by which the majority meant "that if the name of the party to be charged (not being a signature in the ordinary sense of the word) is placed on the document said to constitute the written memorandum of the contract, it is to be treated as a signature for the purposes of the statute if such party expressly or impliedly indicates that he recognizes the writing as being an authenticated expression of the contract". But since they considered that the jury should have been asked to determine as a question of fact whether what took place when Cripps gave instructions to Hargraves "amounted to an authentication" of the appellant's "signatures" they directed that there should be a new trial. Possibly their Honours intended to limit the new trial to this issue but the formal order is in general terms. (at p154)

8. With respect to those members of the Full Court who thought otherwise we are of the opinion that their Honours' decision pushes too far the principle applied in Leeman v. Stocks (1951) Ch 941 and the earlier cases referred to in Neill v. Hewens [1953] HCA 92; (1953) 89 CLR 1 . The principle applied in those cases can, we think, have no application to any document which is not in some way or other recognizable as a note or memorandum of a concluded agreement. We do not mean by this that it is necessary that the written note must always appear to have been made after the making of the contract for it is clear that a written proposal or offer may by its subsequent acceptance become by the conduct of the parties recognizable as a sufficient note or memorandum of the resulting contract (Warner v. Willington (1856) 3 Drewry 523 [1856] EngR 398; (61 ER 1002) ; Smith v. Neale [1857] EngR 287; (1857) 2 CB (NS) 67 (140 ER 337) and Reuss v. Picksley (1866) LR 1 Ex 342 ). But this is not such a case. Here there is an allegation of a prior concluded contract and the solicitor's notes are said to constitute a note or memorandum of this contract. But they purport to be and are nothing more or less than a brief notation of his instructions for the preparation of a draft lease for submission to the respondent's solicitor. Neither the existence of the document nor its contents are indicative of the existence of any binding contract. Perhaps, in other words, it may be said that the enumerated particulars do not appear as a note or memorandum of a subsisting contract as distinct from bare instructions for the preparation of a formal lease. Both the document and its contents are quite consistent with the hypothesis that the parties had not made any prior binding contract and that their rights and obligations were not to be effected until the execution of a memorandum of lease in the form which, after discussion, it should finally take. That being so it in no way recognizes the existence of any binding contract and cannot therefore be regarded as a note or memorandum of any such contract (cf. Thirkell v. Cambi (1919) 2 KB 590 ). (at p155)

9. In these circumstances it is not of much consequence to enter upon a discussion concerning the view expressed by the majority of the Full Court that the appellant Cripps "stood by" whilst Hargraves noted his instructions and that these circumstances "afforded evidence that he was impliedly recognizing the writing as an authentic record of the prior oral bargain with the plaintiff". But since there is nothing in the evidence to suggest that Cripps had any knowledge of what was written down, it seems clear that no inference adverse to the appellants can be based on the so-called "standing by". Moreover even if Cripps can be said to have "stood by" there is no room for the inference that he impliedly recognized the writing as an authentic record of any prior oral bargain. Indeed, both the character and contents of the document and the circumstances in which it was composed tell conclusively against any such inference. We should add also that the nature of the document was such as to render any inquiry concerning the solicitor's authority to make it quite inappropriate. (at p155)

10. Finally, even if these objections are not properly founded, it will be seen upon examination that there are several reasons why the document could not be regarded as a sufficient note or memorandum. In the first place it does not specify the property which is to be leased beyond describing it as "part of Lot B, Princes Highway, Sylvania Heights". This alone is, we should think, a fatal objection. Secondly, it is clear that the document does not contain all the terms of the proposed lease for it contemplates the formulation of special conditions after ascertainment of the requirements of the Board of Health. Again, the agreement for breach of which the respondent sought damages was an agreement in the terms alleged in the declaration and the lease the subject of the alleged agreement was to contain, in addition to the matters specified in the declaration, "all the usual and proper covenants". But it is reasonably clear from the immediately following allegation in the declaration that "the said lease was prepared by the defendants' solicitor and all covenants were agreed to by the plaintiff and the defendants", and from succeeding allegations, that the substance of the respondent's case was that there had been a breach of an agreement to grant a lease in the form which the final engrossment took. That being so it is clear that, even if the solicitor's notes can be regarded as a note or memorandum of an agreement between the parties, it is quite insufficient to support the agreement sued upon. (at p156)

11. For these reasons the appeal should be allowed and the order of the Full Court set aside. (at p156)

ORDER

Appeal allowed with costs. Cross appeal dismissed with costs. Order of the Full Court of the Supreme Court set aside and in lieu thereof order that the appeal to that Court be dismissed with costs.