Bennett v Strauss

1. [1]

   McCOLL JA: I agree with Barrett AJA’s reasons and with the orders his Honour proposes.

2. [2]

   SACKVILLE AJA: I agree with the orders proposed by Barrett AJA and with his Honour’s reasons.

3. [3]

   Mr Bennett’s submissions on the appeal seemed to assume that his cross-claim failed because the primary judge did not appreciate that the doctrine of ratification can operate retrospectively. The claim did not fail for that reason and I do not think the primary judge made the rather basic error attributed to him.

4. [4]

   The reason Mr Bennett’s claim failed was that the primary judge correctly found that Mrs Strauss’s daughter, Lara, had not purported to enter into a concluded agreement with Mr Bennett on behalf of Mrs Strauss. That finding was fatal to Mr Bennett’s case based on ratification.

5. [5]

   BARRETT AJA: This appeal concerns an alleged sale and purchase of an interest in land and the question whether the alleged vendor became bound by contact through the agency of a third person.

6. [6]

   The first respondent, Mrs Strauss, was the registered proprietor, as one of several tenants in common, of an undivided one-tenth interest in land near Mullumbimby. The land is sufficiently described as “Lot 16”. The appellant, Mr Bennett, alleged in Equity Division proceedings determined by Darke J that in June 2014 he entered into a contract to purchase Mrs Strauss’s interest in Lot 16. [1] His case was that Mrs Strauss’s daughter, Lara, the second respondent, had contracted with him as agent of Mrs Strauss or, if Lara did not have Mrs Strauss’s authority when she made the contract, that Mrs Strauss later ratified the agreement apparently made by Lara as her agent.

7. [7]

   Darke J found that Lara had not acted with Mrs Strauss’s authority and that there had been no effective ratification by Mrs Strauss of any agreement for sale made by Lara. Mr Bennett’s claims were therefore dismissed. [2]

8. [8]

   In this Court, Mr Bennett challenges only the decision concerning ratification.

Persons and background

1. [9]

   Mrs Strauss purchased her undivided interest in Lot 16 in September 1998. She and her co-owners were parties to a “multiple occupancy” arrangement under which each was permitted to occupy and build a house on a defined part of the lot. Mrs Strauss never lived in the house erected on the part of Lot 16 allocated to her.

2. [10]

   Lara and Mr Bennett married in 1997. Lara lived in Mrs Strauss’s house on Lot 16 with Mr Bennett and their children from 1999. After their separation and subsequent divorce in 2006, Lara continued to live in the house while Mr Bennett lived in rental accommodation elsewhere.

3. [11]

   Lara later formed a relationship with Mr Hartmann, another member of the Lot 16 community. He lived in a nearby house on the lot. Lara and Mr Hartmann married but for some time after the marriage continued to live separately in their respective houses.

4. [12]

   Mr Bennett gave evidence that, on several occasions from early 2014, Lara told him that she was thinking of moving in with Mr Hartmann and that, if she did so, Mrs Strauss’s house would be available for Mr Bennett to purchase. He said that, in about early June 2014, Lara told him that she was going to move out of Mrs Strauss’s house and asked whether he was interested in purchasing the property. He said that he was. A proposal then developed.

Mr Bennett’s case

1. [13]

   Mr Bennett’s case at trial was that in June 2014 he entered into a contract with Mrs Strauss and Lara for the purchase by him of Mrs Strauss’s undivided interest in Lot 16. He contended that Lara had the actual authority of Mrs Strauss to make the contract on her behalf.

2. [14]

   Mr Bennett pleaded in the alternative that if Lara lacked authority, Mrs Strauss later ratified the contract purportedly made on her behalf by Lara. The acts said to constitute ratification by Mrs Strauss were her provision of two receipts in relation to money paid by Mr Bennett.

3. [15]

   The essential terms of the contract as pleaded by Mr Bennett were that:

The primary judge’s findings

1. [16]

   Mr Bennett had no relevant dealings or conversations directly with Mrs Strauss. [4] He gave evidence of conversations with Lara in which purchase terms were settled, with Lara having said words to the effect that she was acting for Mrs Strauss. Lara denied having spoken any such words. The primary judge also had before him other conflicting evidence about relevant events and conversations.

2. [17]

   Core findings made by his Honour were, first, that Lara did not have Mrs Strauss’s authority (either actual or ostensible) to enter into a sale transaction; secondly, that although Mr Bennett understood Lara to have made an oral agreement for the sale of Mrs Strauss’s interest to him on the terms he alleged, any agreement made by Lara with Mr Bennett was not purportedly or professedly made by her on behalf of Mrs Strauss; and, thirdly, that Mrs Strauss signed two receipts which Lara gave to Mr Bennett. [5]

3. [18]

   The first receipt, received by Mr Bennett via Lara in August 2014, was handwritten by Mrs Strauss and in these terms:

4. [19]

   Mr Bennett was not satisfied with this receipt. He said that he had given Lara $60,000 in cash by way of the first instalment and therefore asked her to have Mrs Strauss provide a receipt for $60,000. Lara agreed to do so. Mrs Strauss later provided through Lara a handwritten receipt as follows:

5. [20]

   The primary judge found that Mr Bennett had handed $60,000 in cash to either Lara or Mr Hartmann some time before the first of the receipts was issued, that Lara had then passed on $30,000 to Mrs Strauss, giving the remaining $30,000 to Mr Hartmann to make improvements to his nearby house on Lot 16 (by then occupied by him and Lara), and that, after the relationship between Lara and Mr Hartmann broke down in September 2014, Mr Hartmann delivered $30,000 to Mrs Strauss. [6]

6. [21]

   Some time before Mr Hartmann thus handed cash to her, Mrs Strauss attempted to give to Mr Bennett the $30,000 cash she had earlier received. Mr Bennett refused to accept it. He said that differences that had emerged between Lara and Mr Hartmann had “nothing to do with our deal” which “should go ahead”. Mrs Strauss replied that there was not a deal, that there was no contract, that no regular arrangements for sale had been made, that she wanted her house back and that she wanted Lara to live in it again. [7]

The primary judge’s reasons

1. [22]

   It is convenient to set out the relevant part of the primary judge’s reasons in full: [8]

2. [23]

   The primary judge thus identified two fatal obstacles to the success of Mr Bennett’s case based on ratification. First, his Honour found that Lara did not represent to Mr Bennett, in her interchanges with him about the land, that she was acting with the authority of Mrs Strauss. Rather, she made it clear to him that she would need to deal with Mrs Strauss (adding, however, that Mrs Strauss was likely to accept whatever Lara put to her). His Honour, however, proceeded to deal with the possibility that, contrary to this primary finding, Lara had represented to Mr Bennett that she was acting for Mrs Strauss with the consequence that there was a purported making of an agreement with Mr Bennett by Lara on behalf of Mrs Strauss. On that footing, he considered the second difficulty standing in the way of effective ratification to be the principle that there can be no ratification of the act of a purported agent unless the ratifying principal has full knowledge of all material circumstances under which the act was done. His Honour found that Mrs Strauss was unaware of the material fact that Lara had purported to conclude a contract on her behalf as agent.

Grounds of appeal

1. [24]

   In challenging the primary judge’s conclusion on ratification, Mr Bennett advances several grounds which may be summarised as follows:

   1. (1)

      The primary judge erred in holding that any principle for which Keighley, Maxsted and Co v Durant [1901] AC 240 is authority had any application to the facts as found.

   2. (2)

      If any such principle was applicable, it required a finding of ratification by Mrs Strauss.

   3. (3)

      The primary judge erred in not considering the principle that a relationship of principal and agent can be formed retrospectively by ratification and in failing to hold that principle governed the case before him in such a way that the actions of Mrs Strauss retrospectively constituted Lara as her agent so that Mrs Strauss’s conduct ratified the agreement.

   4. (4)

      The primary judge erred by (a) finding that Mrs Strauss did not have full knowledge of all material circumstances of the agreement and (b) failing to find that Mrs Strauss was aware that Lara had purported to conclude a contract on Mrs Strauss’s behalf as agent.

Mrs Strauss’s contentions

1. [25]

   Several contentions are advanced by counsel for Mrs Strauss. The first is that, on the facts as found by the primary judge, no sale agreement was made between Lara and Mr Bennett, with the result that there was nothing capable of being ratified by Mrs Strauss.

2. [26]

   Secondly, Mrs Strauss contends that Lara never said to Mr Bennett that she was acting for Mrs Strauss and therefore that, if any agreement was made between Lara and Mr Bennett, it was not one purportedly made by an agent on behalf of a principal.

3. [27]

   Thirdly, Mrs Strauss submits that, even if an agreement for sale was made between Lara and Mr Bennett and Lara had represented to him that she was acting for Mrs Strauss, Mrs Strauss was not aware of Lara’s having done so. On this basis, ratification was not possible because Mrs Strauss did not have full knowledge of all material circumstances (one of those circumstances being that Lara made such a representation to Mr Bennett).

Some factual matters

1. [28]

   It is necessary to return to events following the point referred to at [10] above.

2. [29]

   On 15 June 2014, Lara told Mrs Strauss that Mr Bennett was willing to purchase the property and that she would be moving in with Mr Hartmann. Mrs Strauss replied, “I am a bit lost for words. I need time to think about this”. [9]

3. [30]

   Some ten minutes later, Lara sent a text message to Mr Bennett asking how much notice he needed to give to his landlady and saying: [10]

4. [31]

   A discussion between Lara and Mr Bennett took place on the afternoon of the same day. Mr Hartmann was also in attendance. The primary judge’s findings concerning the meeting were as follows: [11]

5. [32]

   There was conflicting evidence as to whether at the meeting on the afternoon of 15 June 2014 Lara said that she was acting for Mrs Strauss. Mr Bennett’s evidence was that Lara said that she was, but Lara denied having spoken such words. The primary judge found that Lara did not make any such representation to Mr Bennett. His Honour said: [12]

6. [33]

   At the same time, it was not relevantly disputed that Mr Bennett knew that it was Mrs Strauss, rather than Lara, who owned the property and that Mrs Strauss would have to agree to any sale to him.

7. [34]

   In mid-June 2014, Lara spoke to Mrs Strauss words to the following effect: [13]

8. [35]

   Some time in the period 21 to 28 June 2014, there was further conversation between Lara and Mrs Strauss. In response to a question put by Lara, Mrs Strauss did not object to Mr Bennett moving into the house. Indeed, the primary judge found that he may already have done so and that Lara chose not to tell Mrs Strauss because she was “very anxious about overwhelming her mother with the whole thing” and was “scared that she wasn’t going to agree to it”. [14]

9. [36]

   At all events, Mrs Strauss’s ultimate non-objection to Mr Bennett’s moving into the house came in the context of statements by Mrs Strauss to Lara in the period 21 to 23 June 2014: “This is all a bit sudden. What is going on?” and “This is moving too fast. I have not had time properly to think about this”. [15]

10. [37]

    Mrs Strauss accepted in cross-examination that she was told by Lara in the course of that telephone conversation that “the proposed price was $240,000 and that it would be paid in instalments”. [16] She did not accept that she was told the amount and timing of the instalments. She said that she “asked about a legal proposal being put into effect”, to which Lara replied that she would “see about that”. [17]

11. [38]

    There was a further discussion between Lara and Mrs Strauss on 28 June 2014. [18] Mrs Strauss gave evidence that Lara said to her on that occasion:

12. [39]

    Mrs Strauss’s reply was:

13. [40]

    Lara deposed that, at some point in late July 2014, she had a conversation with Mr Bennett in which she raised the issue of having the sale documented once her mother agreed to it. It was during this conversation that Mr Bennett asked Lara to arrange a receipt for the money he had paid.

Possible characterisation of events

1. [41]

   There can be no doubt that, on or about 14 June 2014, Lara and Mr Bennett settled, as between themselves, terms on which Mr Bennett would buy the property. Each knew full well that Mrs Strauss was the owner and that there could be no sale transaction without her assent. In these circumstances, Lara assumed the role of intermediary. After the terms had been settled, she said that she would deal with her mother and would speak to her as soon as possible.

2. [42]

   The question is whether, at that point, Lara could be said to have made a contract with Mr Bennett on the agreed terms and on the footing that, in so doing, she was acting for Mrs Strauss or, alternatively, whether Lara’s undertaking to Mr Bennett was merely to convey to Mrs Strauss the basis upon which Mr Bennett was prepared to contract with Mrs Strauss.

3. [43]

   The facts permitted at least two legal theories to be propounded. The first is that a contract was made immediately between Lara and Mr Bennett on or about 14 June 2014, with Lara having either acted or purported to act with the authority of the person known to both of them to be the only possible vendor, namely, Mrs Strauss. The other is that a contract did not come into existence at that point and that Mr Bennett, by having Lara later take $60,000 cash to Mrs Strauss, had merely made an offer to Mrs Strauss to purchase the property on the terms agreed by him and Lara.

4. [44]

   In formulating his statement of cross-claim, Mr Bennett did not embrace the second possible formulation. Rather, he adopted the proposition that Lara had entered into a contract with him in June 2014. [19] His principal contention was that Lara had Mrs Strauss’s actual authority to enter into a contract for sale and did so as Mrs Strauss’s agent in June 2014. The secondary contention was that, if Lara had acted in June 2014 without Mrs Strauss’s authority, a contract made by Lara at that time was later ratified by Mrs Strauss so as to become binding on Mrs Strauss by force of the ratification. On either basis, there was, on Mr Bennett’s case, a contract between Lara and Mr Bennett made in June 2014.

5. [45]

   The matter was dealt with by the primary judge on those bases alone. Because his Honour rejected both contentions and Mr Bennett does not seek to challenge on appeal the conclusion that Lara did not act in June 2014 with Mrs Strauss’s authority, this Court must deal solely with the issues of ratification raised by the notice of appeal.

Legal principles

1. [46]

   Counsel on both sides referred to a number of decided cases concerning ratification. The essential principles are not, I think, in doubt. [20]

2. [47]

   In the first place, ratification causes a relationship of principal and agent to come into existence retrospectively. [21] Thus, where a person (A) has acted without the authority of another person (P) in making a contract on their behalf with a counterparty (C), that other person (P) may, by subsequent conduct, [22] cause the first person (A) to be regarded as having been his or her agent when the contract was made, even though a relationship of principal and agent did not exist at that past time.

3. [48]

   Where such a counterparty (C) seeks to enforce such a contract against the supposed principal (P), it is essential that the acts of the actor (A) in truth amounted to the immediate making of a contract. [23] Only if the counterparty (C) establishes that the acts of the actor (A) were of that quality is there any question of the supposed principal (P) being fixed with contractual liability through ratification.

4. [49]

   The counterparty (C) must next establish that the person who acted (A) did not “assume” or “profess” or “purport” to act in his or her own right and for his or her own benefit, [24] but rather “assumed” or “professed” or “purported” to act for the supposed principal (P). [25] That supposed principal will usually be an ascertained person but it may not be necessary for the person’s precise identity to be known at the time of the contract. [26]

5. [50]

   There can be no ratification by an undisclosed principal, that is, where the actor (A) appears to be contracting for themself and the counterparty (C) has no notice that the actor is acting in a representative capacity. This was authoritatively established in Keighley Maxsted & Co v Durant.

6. [51]

   Only if all these conditions are satisfied in relation to the course of conduct between the actor (A) and the counterparty (C) does any question arise as to whether subsequent conduct of the supposed principal (P) amounted to ratification causing, first, the actor (A) to be seen retrospectively as the agent of the supposed principal (P) (who, in turn, comes to be seen retrospectively as the principal for whom the actor acted) and, secondly, the rights and liabilities under the contract made between the actor (A) and the counterparty (C) to be seen retrospectively as rights and liabilities as between the counterparty (C) and the now recognised principal (P).

Discussion

1. [52]

   The central submission made by counsel for Mr Bennett is that the primary judge erred by failing to recognise the true legal effect of acts of Mrs Strauss as acts of ratification. The acts Mr Bennett relied on are the giving by Mrs Strauss of the two written receipts acknowledging receipt of money from Mr Bennett.

2. [53]

   Let it be assumed that those acts of Mrs Strauss were capable of amounting to ratification of everything that Lara had done vis-à-vis Mr Bennett. Contrary to submissions by counsel for Mr Bennett, it does not follow that this compels a finding that the purported ratification caused a contractual relationship to become binding between Mrs Strauss and Mr Bennett. That would be the result of acts of ratification on the part of Mrs Strauss only if the dealings (to use a neutral word) between Lara and Mr Bennett had given rise to a contract for the sale and purchase of the interest in land (which both knew was owned by Mrs Strauss), with Lara having purported to contract (on behalf of Mrs Strauss) as vendor with Mr Bennett as purchaser.

3. [54]

   Written submissions filed by counsel for Mr Bennett say:

4. [55]

   The notion that ratification retrospectively causes one person to become the agent of another is, I think, apt to confuse unless considered in context. Acts of ratification potentially alter what would otherwise be the legal significance of past conduct of the putative agent. In a situation where it is sought to establish contractual liability of the ratifying person, the past conduct of the putative agent is necessarily the making of a contract. The ratifying acts cause the putative agent to be clothed with the ratifying party’s authority in such a way that the maxim qui facit per alium facit per se applies retrospectively to alter the character of the putative agent’s past conduct. [27] Ratification causes that the past conduct to acquire, with effect back to the time it was engaged in, a legal significance that it lacked before the ratification. Where the past conduct is the making of a contract by the putative agent, the ratifying acts cause that contract to become retrospectively the source of rights and obligations of the ratifying party. [28] It follows that it is only where the past conduct of the putative agent was effective to create such rights and obligations, as between the putative agent (in an avowed representative capacity) and a third party, that ratification causes the ratifying party to be fixed with those rights and obligations as if the contract had been made with his or her authority.

5. [56]

   The primary judge found that any agreement of Lara on 14 June 2014 to terms of a sale to Mr Bennett was not purportedly or professedly given on behalf of Mrs Strauss. [29] That finding acknowledged the possibility that there was acquiescence by Lara in terms of a sale but denied that acquiescence any contractual character or significance. Thus understood, the finding is, in my respectful opinion, clearly correct. It is also consistent with his Honour’s statement that there was nothing in the conversations between Lara and Mrs Strauss to indicate that Lara had purported to conclude a binding contract on Mrs Strauss’s behalf. [30] Both Lara and Mr Bennett knew that Mrs Strauss owned the property and that it could not be sold except by her assent. His Honour also found that Lara did not have – and knew that she did not have – Mrs Strauss’s authority to sell; and that she would not have made a dishonest representation that she did have that authority. Those findings were fully justified by the evidence.

6. [57]

   On the facts so found (and particularly in the absence of what Lara knew would have been a dishonest representation that she was acting in a representative capacity for her mother), the conduct Lara engaged in towards Mr Bennett was not contractual conduct as regards a sale by or on behalf of Mrs Strauss. It was conduct by which Lara did no more than undertake to promote with her mother the cause of Mr Bennett as a potential purchaser upon the terms settled between Lara and him. There was no contract avowedly made by Lara for Mrs Strauss (or at all) and therefore nothing to which any subsequent act of Mrs Strauss could have imparted any contractual efficacy (either in her favour or against her) according to doctrine of ratification.

7. [58]

   The central submission made on Mr Bennett’s behalf therefore cannot be accepted.

8. [59]

   I return briefly to the other grounds of appeal summarised at [25] above and note that:

9. [60]

   It remains to say something about the challenge to the primary judge’s finding that Mrs Strauss did not have full knowledge of all material circumstances of the agreement and the contention that his Honour should have found that Mrs Strauss was aware that Lara had purported to conclude a contract on Mrs Strauss’s behalf as agent. It is, I think, sufficient to observe that, for reasons I have stated, there was no contract concluded (or purportedly concluded) on Mrs Strauss’s behalf by Lara of which Mrs Strauss could possibly have been aware. That being so, the challenge leads nowhere.

10. [61]

    There is no need to decide whether Mrs Strauss’s supposed acts of ratification (the giving of the two receipts) were of such a nature and quality as to be capable of amounting to ratification. It can be said, however, that while receipt of purchase money by an allegedly ratifying vendor under an established but unauthorised sale by an agent will generally amount to ratification, [32] the acts of Mrs Strauss did not demonstrate approval or endorsement of any pre-existing sale contract. The receipts did not identify the purchase price and other terms of sale. While there were references to “instalment” and “part payment of the purchase price” and a description of the property, such references were merely consistent with an intention to acknowledge advance receipt of money in connection with a possible future sale or projected sale.

Conclusion

1. [62]

   No relevant error on the part of the primary judge has been shown. I therefore propose orders as follows: [33]

   1. (1)

      Appeal dismissed.

   2. (2)

      The appellant pay the respondents’ costs of the appeal.