Evans v Line and Tone Limited HC Wellington AP 20/01 [2001] NZHC 691; (2001) 7 NZBLC 103,411 (31 July 2001)

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IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY AP 20/01

BETWEEN RODNEY FREDERICK EVANS
Appellant

AND LINE & TONE LIMITED (In Liquidation)
First Respondent

AND KENNETH ROBERT CLARK
Second Respondent

Hearing: 30 July 2001

Appearances: D L Mathieson, QC, for appellant
C B Hall with S Kennedy-Good for first respondent
J L Marshall for second respondent (leave to withdraw)

Judgment: 31 July 2001

JUDGMENT OF DOOGUE J

Solicitors:
Mackay & Gilkison, Wellington, for appellant
Bell Gully, Wellington, for first respondent

[1] Line & Tone Ltd (in liquidation) (“the company’) sued Mr Evans, the appellant, for breach of a contract to purchase its business. The District Court found there was a contract and that Mr Evans was in breach of it and awarded damages to the company in the sum of $106,225. In addition, the District Court found that the contract was brought about through the agency of Mr Clark, the second respondent. The Court further found that two cheques presented by Mr Clark to the liquidators were presented as agent for Mr Evans in the purchase of the business. The cheques were dishonoured. The District Court found that there was consideration for such cheques in that Messrs Fisk and Traveller, the liquidators of the company (“the liquidators”), would not have agreed to sell the business to Mr Evans without them and that they were tendered by Mr Clark for the purpose of ensuring the completion of the contract. The District Court accordingly awarded the company the same sum in damages against Mr Clark. As, however, Mr Clark took no benefit from the transactions other than his professional fees as an accountant, the District Court found that he was entitled to be indemnified by Mr Evans in respect of that judgment.

1. There was no contract, in that the clear intention of the parties was to have a contract in writing and no such contract was ever concluded.

2. If there were a contract, then it failed because of the non-satisfaction of a Special Condition 3 in that certain leases or contracts had not been “arranged” by 19 December 1997, the “date of possession” provided for, in terms of the condition.

3. If there were a contract, then it failed because he never agreed to the deletion of Special Condition 4 relating to the lease of the premises of the business.

5. The company was not entitled to judgment against Mr Clark upon the cheques as there was no consideration for them as Mr Clark received no benefit from them and, in any event, as there was no contract there was no possible consideration for them. Even if there was a contract, it did not become unconditional and the liquidators were not entitled to hold the cheques.

6. This Court is entitled to draw a different inference as to whether Mr Clark was the agent of Mr Evans than that drawn by the District Court Judge. It is submitted that on the evidence Mr Clark had no authority to bind Mr Evans and his wife.

[3] Mr Clark supports the position taken by Mr Evans but otherwise abides by the decision in the court below, and Mr Marshall was given leave to withdraw.

[5] This judgment will first briefly sketch the background to the dispute and the appeal and then deal with the points of appeal in the order raised on behalf of Mr Evans.

[6] The company conducted a photographic and printing business in Wellington. It got into financial difficulties. On 4 December 19997 the shareholders voted by special resolution to place the company in liquidation. The liquidators were appointed on that day. The liquidators, having considered the state of the business, recommended to the directors on about 6 December 1997 that it would realise more as a going concern. That advice was accepted and the company was immediately advertised for sale on that day. The company continued to trade.

[7] Early in the week commencing 15 December 1997, Mr Clark, who was the accountant to the company, got in touch with a Mr Kitching, a director and administration manager of the company, and said that he thought he had a client who was interested in buying the business. Mr and Mrs Evans were named. Mr Clark was their accountant and business adviser. They visited the company’s premises and there were discussions and enquiries. As a result, Mr Clark spoke to Mr Fisk on 15 December to enquire whether the liquidators would consider any offer as a time limit for the sale had expired. Mr Fisk indicated that any offer would be considered. He wrote to Mr Clark on 18 December 1997 making it clear that the liquidators were not prepared to consider trading the business of the company past 19 December 1997 but that the liquidators were still interested in receiving any offer from Mr Clark’s clients. In addition, the letter made clear staff were being advised their employment would cease at 5.00 p.m. on 19 December 1997.

[8] On 19 December 1997, Mr Fisk received an unsigned version of a proposed agreement for sale and purchase from Mr Clark. It was in a standard form of agreement for the sale and purchase of a business approved by the Real Estate Institute of New Zealand and the Auckland District Law Society. The liquidators had that perused by their solicitors. The solicitors made certain suggestions. Mr Fisk spoke to Mr Clark and advised him of what needed to be changed. Mr Fisk, whose evidence was preferred to that of Mr Clark, said that Mr Clark agreed to all the amendments proposed and said that he would make the changes and meet the liquidators at about 4.30 p.m. with the offer signed by Mr Evans. It was part of the arrangement that a post-dated cheque would operate as security for the giving of possession. There was no discussion about the lease of the premises.

[9] Mr Clark met with the liquidators about 4.30 p.m. on 19 December 1997. He had with him two copies of the form of sale and purchase agreement signed by Mr Evans, with Mr Evans being shown as purchaser as agent and with a possession date for that day. Mr Fisk said that Mr Clark told him he had full authority to correct the document and that he could initial any changes made but “for the sake of consistency he would take the contract back to Mr Evans to initial the amendments”. The Judge accepted that the amendments reflected the earlier discussions of Mr Fisk and Mr Clark and were accepted by Mr Clark, who said that he had simply overlooked them in preparing the final signed offer. Special Condition 3, set out later, remained. Special Condition 4, also set out later, was deleted. Mr Fisk’s evidence was that the liquidators would not have signed the contract if there was any doubt as to whether or not the changes had been agreed to on behalf of Mr Evans.

[10] The liquidators were given two cheques for payment of deposit and the balance of the purchase price by Mr Clark. He had been given two cheques by Mr Evans which he knew he could not use. Both Mr Clark’s cheques were drawn on a disbursement account of Mr Clark. The liquidators understandably asked Mr Clark about that and his reply was that it was the only cheque book he could find at the time. The first of the cheques was dated 19 December 1997 for $15,000, being 10% of the total purchase price of $150,000, and the other cheque was post-dated 23 January 1998 for the balance of $135,000.

[11] From the liquidators’ point of view they now had an unconditional contract for the purchase of the business. Mr Clark had Mr Evans’s authority to deal with them as he did. He would not have given them the cheques otherwise. In addition, Mr Clark announced to the staff that Mr Evans had bought the business and that they should all come in to work on Monday as usual.

[12] It was never at any time in contention that Mr Evans was intending to purchase the business on behalf of himself and his wife. The following Monday, 22 December 1997, it was Mrs Evans who visited the business and took a number of steps, including the completion of letters to customers about the change of ownership of the business and the handing of holiday pay to staff members, only consistent with affirmation of the contract and affirmation of Mr Clark’s actions. Mrs Evans remained in control of the business until 24 December 1997, when she told the staff that they should take the usual Christmas break and return to work on 5 January 1998.

[13] On 5 January 1998 the staff returned to work and Mr Kitching had a three hour meeting with Mr and Mrs Evans. There was never any suggestion that there were any difficulties about the purchase.

[14] It was not until 12 January 1998 that the liquidators and the staff learned that over the holiday period Mr and Mrs Evans had changed their views about the purchase. On that day the liquidators received a communication from Mr Clark which stated:

“The counter-offer is not accepted and the Evans’s do not wish to proceed with any further negotiations.”

[15] On further enquiry the liquidators were informed that Mr and Mrs Evans were seeking to avoid the purchase of the business upon the basis that the amendments made to the contract prior to signature by the liquidators constituted counter-offers and, as they were not accepted by Mr Evans, there was no contract in existence. The liquidators also learned that the cheque for $15,000 had been stopped, and subsequently the cheque for $135,000 was also stopped.

[16] In accordance with their earlier decisions prior to the meeting of 19 December 1997 and advised to Mr and Mrs Evans through Mr Clark, the liquidators elected not to re-employ the staff and not to endeavour to sell the business as a going concern. Instead the liquidators disposed of the assets of the business of the company. Credit for such sales in the sum of $43,775 was ultimately given by the Judge in the judgment sum.

[17] Where necessary other aspects of the facts will be referred to under the subheadings relating to the points on appeal. It is necessary to note, however, that Willy DCJ, for cogent and understandable reasons, preferred the evidence of the witnesses called for the company, including the liquidators, in preference to that of Mr and Mrs Evans and Mr Clark. That view is understandably not challenged on appeal. It was a view well open to the Judge.

[18] The principal point of appeal for Mr Evans is that there was no contract between him and the company because both parties, it is submitted, intended that neither of them should be bound until a written document containing all the terms of their agreement was executed and that no such document was ever executed.

[19] The Judge found that on his finding of facts there was very little room left for doubt that, irrespective of any question of agency, Mr Evans committed himself to the terms of the written contract and it was only later, when he looked at the books of the company, that he decided to resile from his bargain. He took the view that the absence of Mr Evans’ initials was no more than a bare technicality which was inconsistent with the behaviour of both Mr Evans and his wife. He found that the business common-sense of the transaction was that Mr Evans clearly intended to buy the company’s business on the terms set out in the agreement for sale and purchase and took significant steps to give effect to that intention. The Judge was satisfied that the meaning of the written words of the agreement accorded closely with the way in which Mr Evans and his wife conducted themselves in relation to the purchase of the business.

[20] The submissions for Mr Evans seek to convince the Court that the strong presumption that the written contract was intended to contain all the terms of the bargain was not negated by the evidence but was reinforced by the way the parties approached the negotiation. The judgment is criticised upon the basis that it did not approach what Mr Evans says was the crucial question in the present case, namely: what was the intention of the parties as to the manner in which they would become bound?

[21] The submissions for Mr Evans address, as apparently did the submissions to the District Court, cases making clear that the presumption is that the parties intended all the terms of their contract would be embodied in a documentary form.

[22] However, with all respect to the submissions for Mr Evans, the Judge in his judgment makes clear that he accepted that the contract was formed at the time of the meeting between Mr Clark and the liquidators, that contract reflecting what had been earlier agreed, and that it was subsequently affirmed by the conduct of Mr Evans and his wife. In those circumstances reference to the cases relied upon for Mr Evans was and is irrelevant.

[23] It seems to me to be almost inevitable that the Judge had to decide as he did. Mr Clark and Mr Evans knew that unless a contract was entered into on 19 December 1997 the liquidators’ notice of termination to the staff would be effective and the business would be closed that day. It is clear from the evidence accepted by the Judge that the liquidators only accepted the offer of Mr Evans upon the basis that the amendments to the document were already agreed. That was the nature of the communication they received from Mr Clark, and they were entitled to accept his explanation given that he was also prepared to tender cheques not only in respect of the deposit payable but the post-dated cheque for the balance of the purchase price. Upon any basis the Judge was entitled to find that the parties intended to form the contract at that time and that it was not dependent on Mr Evans taking any further steps. The simple answer to the question posed on behalf of Mr Evans is that the parties intended to be bound by the document as executed by the liquidators. Mr Evans knew that if that were not so there would be no contract and no business to buy. This was not a case of a company intending to continue to trade. It was not a case where the parties could possibly have contemplated anything occurring in respect of the contract after the crucial meeting on 19 December 1997. The subsequent actions of Mr Evans and his wife are only consistent with that view. The very payment of the staff by Mr and Mrs Evans is an acknowledgement that they were in operational control of the business and responsible for the staff. Mr and Mrs Evans knew that the liquidators had no intention of making any further payments to the staff. They paid an account of the business. The liquidators and the company had no further role in respect of the business from 19 December 1997.

[24] It is quite impossible for this Court to say that the Judge was not entitled to reach the conclusion upon the evidence which he accepted that an unconditional contract was formed on 19 December 1997. It was inherent in that conclusion that he accepted, as he was entitled to do, that the contract was in the form then concluded and it was never the intention of the parties that it was necessary for the completion of the contract that Mr Evans should initial the amendments previously approved. The whole time-frame of the negotiations made it inconceivable that there was any intention that the contract was dependent upon Mr Evans initialling the amendments.

[25] It is also of some significance that it was not until 12 January 1998 that Mr Evans first raised the issue of the alleged counter-offer. By then Mr and Mrs Evans had been in control of the business not only to Christmas 1997 but from 5 January 1998.

[26] For Mr Evans it is said that the facts are irreconcilable with him and his wife taking over the business. To the contrary, the agreement was clear that the date of possession was 19 December 1997, and indeed the agreement had been amended from 20 December to 19 December to give effect to that. It is also clear that from that date Mr and Mrs Evans had control of the business. How they exercised that control was a matter for them.

[27] There is simply no factual merit in the first point of appeal. It is contrary to the whole basis upon which the agreement was predicated. Either there was the unconditional contract on 19 December 1997, with Mr and Mrs Evans taking control from the liquidators as they did, or the liquidators would not have accepted Mr Evans’s offer.

[29] The second point taken for Mr Evans is that, if there was a concluded contract on 19 December 1997, it was subject to special condition 3, which provided:

“This agreement is subject to arranging by date of possession, the following lease or IWS contracts on terms and conditions acceptable to the Purchaser.

(a) UDC Finance	Image Letter (IWS)	$2731.58 ($25761.14)
(b) Marac	Computer Equipment Lease	$2827.91 ($32488.94)
(c) Marac	Computer Equipment Lease	$ 633.55 ($ 9968.22)
(d) Marac	Computer Equipment Lease	$2087.66 ($46360.76)
(e) Xerox Finance	Docu Colour 40/40	$8265.37 ($343939.82)”

[30] The principal submission for Mr Evans is that there is no sufficient evidence to show that all five contracts had been arranged by 19 December and that in context that would necessarily involve the finalisation of their continuance or otherwise and, if they were to continue, their precise financial terms.

[31] The Judge does not deal directly with special condition 3, although he expresses the clear view that there was an unconditional agreement for sale and purchase.

[32] The Judge’s position is perhaps understandable as at no time did Mr Evans, in resiling from the contract, endeavour to rely upon the failure of this condition. However, Mr Evans now says that there was no agreed extension of the date by which the five contracts had to be arranged and no evidence to support a waiver by him, the special condition being inserted for his benefit. Mr Evans points to evidence from Mr Clark as to prompt and reasonable steps being taken to negotiate with the companies. He therefore says that he was entitled to rely on the non-satisfaction of special condition 3 as a reason for avoiding the contract when there was no representation by or on his behalf that the special condition had been satisfied. However, it is submitted for the company that it is implicit not only in the findings of the Judge but in what occurred that Mr Evans waived the condition by his conduct, and that was not only clear and unambiguous but the intention to waive the condition had to be known to the liquidators from that conduct. The company points to three items of conduct in particular as evidence of waiver, namely providing the liquidators, through Mr Clark, with the two cheques equalling the purchase price, taking possession of the business and behaving as if he were the new owner, and taking no step at the critical time to notify the liquidators that the contract was at an end for non-performance of the condition.

[33] It was also open to the Judge to treat the condition as waived when the critical date was the very date upon which the contract was being agreed and signed and no point was taken on Mr Evans’s behalf in respect of the condition. If the condition was not being waived, then at the very least one would have expected an extension of the period for performance of the condition to have been sought by Mr Clark or Mr Evans and it was not. The very tendering of the cheques speaks loudly in favour of waiver. The contract was being performed. The hiring of the staff for the continuation of the business again speaks against the condition being at large.

[34] The Judge was fully entitled to accept that the parties knew and agreed on the day that the contract was unconditional. Mr Evans and Mr Clark knew the liquidators would not have agreed to sell unless that was the case. Mr and Mrs Evans could not have acted as they did unless the condition was waived. The facts are compellingly in favour of the conclusion the condition was clearly and unambiguously waived through conduct.

[36] Special condition 4 was addressed by the Judge. The document as originally drawn read in respect of special condition 4:

“4. The purchaser arranging a new lease or an assignment of the existing lease with Trans-Pacific Post, on terms and conditions satisfactory to them, by 20.12.97.”

[37] There was disagreement between the parties as to whether the deletion of the clause, which is what occurred, was agreed or not. The liquidators had deleted the clause and said that it was something that Mr Clark represented to them that he had authority to agree to. Mr Clark had denied that. However, the Judge accepted the evidence of Mr Evans that Mr Clark had told him there needed to be a change to clause 4, which could only have been its deletion. The Judge was accordingly satisfied that the liquidators made known to Mr Clark that they would not complete a sale which was conditional upon special condition 4 and that Mr Clark informed Mr Evans of this and he did not dissent. The Judge was of the view that that was against the background of Mr Clark’s representation to the liquidators that he was authorised to initial any agreement amendments on behalf of Mr Evans and in the context of Mr Evans knowing that Mr Clark was going to be meeting with the liquidators to determine the agreement on his behalf.

[38] It is submitted for Mr Evans that he never agreed to the deletion of special condition 4 from the contract. It is submitted that the Judge fallaciously confused an absence of dissent by Mr Evans with consent by him. It is submitted that there is no evidence showing on the balance of probabilities that Mr Clark agreed to the deletion of the clause.

[39] However, the Judge was plainly entitled to infer the consent of Mr Evans to the deletion of this special condition from his conduct. That he did not dissent when informed by Mr Clark that the liquidators would not complete a sale which was conditional upon special condition 4 nor record any reservation about the deletion of the provision in contemporaneous communication was part of that conduct.

[40] In any event, the Judge was satisfied that Mr Evans knew that the clause was to be deleted and did not instruct Mr Clark otherwise in respect of the essential meeting when the contract was concluded. For Mr Evans not to take steps with the knowledge that he had to protect his position if he sought to be protected can only give rise to an inference that he consented.

[42] It is submitted for Mr Evans that there was no justification for the Judge departing from the normal measure of damages, namely the contract price less the market price at the contractual time fixed for completion. The date of settlement was to be 21 January 1998 and it is said there was no evidence as to the value of the business at that date. It is said that there was no justification for the Judge to award as damages the contract price of $150,000 less the sum recovered by the liquidators for the assets of the company at auction of $43,775.

[43] The Judge’s approach to damages had been that, as the liquidators had determined if the business could not be sold as a going concern prior to Christmas 1997 not to continue the business but to close it and dispose of its assets, the normal measure of damages could not apply. On the facts that was a view clearly open to the Judge. Mr Evans knew that if he had not bought the business it would no longer be a going concern. It was only his purchase of the business which retained it as an entity. When he failed to complete the purchase, he could not expect the liquidators to recommence the business which he had had possession of for more than three weeks. This was simply not a case to which the normal measure of damages could apply.

[44] For Mr Evans it is submitted that the break-up price of the business upon which the Judge has worked could not be adopted as the company had not proved that it was impossible at 21 January 1998 to sell the business as a going concern. York Glass Co Ltd v Jubb (1926) 134 Law Times 36 (CA) was accordingly said to have no application to the circumstances of this case. It is said that the liquidators gave up their attempt to sell the business and sent the employees home.

[45] York Glass Co Ltd v Jubb is an example of it being proper to take the breakup price at which the property and the business were sold. In that case it was because it was no longer possible to sell the property and business at a higher price as a going concern. While the facts are undoubtedly different, the principle is the same in the present case. The staff were no longer the employees of the company but of Mr and Mrs Evans. Mr and Mrs Evans had taken possession of the business. If Mr and Mrs Evans had not purchased the business, it would not have been sold as a going concern. Mr and Mrs Evans as purchasers could have no reasonable expectation that if they did not complete the purchase the liquidators would have the company undertake further liabilities in respect of the continuation of the business to enable it to be sold as a going concern. As already noted, it was simply not a case to which the normal measure of damages could possibly apply. The only approach available to the Judge was to do as he did and to give Judgment for the contract price less the break-up price at which the property of the business was sold.

[47] Mr Evans claims that there was no basis for the Judge to uphold the company’s claim against Mr Clark upon his cheques. He submits that there was a total failure of consideration for the cheques because no contract came into existence and because no benefit was to accrue to Mr Clark as a result of his giving the cheques and no promise was given to him. Further it is submitted that Mr Clark could not be liable for any antecedent liability of Mr Evans as any antecedent liability must be that of the drawer of the bill and not that of a stranger. It is further submitted in the alternative that if the contract was in existence it did not become unconditional and the liquidators would have been required as stake-holders to return the cheques to Mr Clark.

[48] I have already upheld the judgment of the District Court Judge that there was a contract and that it became unconditional. It is unnecessary, therefore, to deal with those parts of the arguments for Mr Evans any further.

[49] The Judge held that as agent for Mr Evans Mr Clark presented the two cheques drawn on his disbursement account to the liquidators in payment for the purchase of the business. It was common ground that they were bills of exchange under the Bills of Exchange Act 1908 (“the Act”). It was common ground that s 55 of that Act applied. That section provides:

(a) Engages that on due presentation it shall be accepted and paid according to its tenor, and that if it is dishonoured he will compensate the holder or any indorser who is compelled to pay it, provided that the requisite proceedings on dishonour are duly taken:

(b) Is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.

(c) Engages that on due presentment it shall be accepted and paid according to its tenor, and that if it is dishonoured he will compensate the holder or a subsequent indorser who is compelled to pay it, provided that the requisite proceedings on dishonour are duly taken:

(d) Is precluded from denying to a holder in due course the genuineness and regularity in all respects of the drawer’s signature and all previous indorsements:

(e) Is precluded from denying to his immediate or a subsequent indorsee that the bill was at the time of his indorsement a valid and subsisting bill, and that he had then a good title thereto.”

[50] The Judge then addressed the provisions of s 27(1) of the Act, which provides:

(b) An antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at future time.”

[51] The Judge was satisfied there was no failure of consideration for the cheques. He noted that under s 30 of the same Act there was a presumption that consideration had passed. He took the view that the fact that Mr Clark elected to draw the cheques on his own account for reasons which were confined to the business arrangements between Mr Clark and Mr Evans was of no consequence to the company. In exchange for receiving the cheques from Mr Clark the company had agreed to transfer the business assets to Mr Evans.

[52] It is, as noted, first submitted for Mr Evans that there was no consideration as Mr Clark received no benefit from writing the cheques which were to meet Mr Evans’s obligations if the contract was concluded. It is submitted that there was no evidence that any fee payable to Mr Clark in his capacity as accountant to Mr Evans depended on the contract being concluded. Thus it is said there was no consideration to support a simple contract under s 27(1)(a) of the Act.

[53] Alternatively it is submitted that there was no consideration in respect of any antecedent debt or liability for the purposes of s 27(1)(b) as upon the authorities the antecedent debt or liability must be that of the promisor or drawer of the cheque and not of a stranger to the bill: see, for example, Yan v Post Office Bank Ltd [1994] 1 NZLR 154, 162.

[54] For Mr Evans it is acknowledged that in some cases the relationship between the antecedent debt of the third person and the giving of the bill to the creditor is so close that as a result it amounts to consideration, i.e. benefit to the drawer or detriment to the promisee: see Bonior v Siery Ltd [1968] NZLR 254, 258. It is submitted, however, that there is closeness only if it can be said that there is benefit to the drawer or detriment to the promisee and that here there was neither. It is submitted Mr Clark did not make the payment to benefit himself and he received no promise from the liquidators to himself.

[55] For the company it is submitted first that there was consideration, as the Judge found, in that the Judge was entitled to infer that Mr Clark was able to charge Mr Evans as a result of the contract and that the nature of any fee which might result did not of itself matter. Secondly it is submitted that in any event there was a sufficiently close relationship between the debt owed by Mr Evans to the company and the bill to constitute valid consideration under s 27(1)(b) of the Act, and reliance is placed upon the decision of this Court in Wrightson Farmers Finance Ltd v Alan Hiscox Ltd (unreported, AP 34/95, Palmerston North Registry, 22 September 1995, Heron J). In that case it was held that, although case law had treated s 27(1)(b) as applying only to the antecedent liability of the drawer of the bill, the words of the statute did not say that. It was held that the actions of an agent with recourse to his principal in respect of a payment made on behalf of his principal were hardly the type of party or the type of transaction the section was designed to protect. This the Judge held gave a commercial reality to the particular transaction and resulted in the cheques being required to be honoured in circumstances where most people in commerce and generally would expect them to be honoured. The Judge noted that cases of anxious volunteers desirous of assisting gratuitously were entirely different.

[56] Given the results already indicated in respect of this appeal, I do not intend to traverse the detail of the relevant cases and argument in quite the same way as I might otherwise have done. However the matter is approached, I am satisfied that the Judge was entitled to find that Mr Clark was liable upon his cheques. Contrary to the submissions for Mr Evans, by tendering the cheques he achieved, as he knew he was doing, the completion of the contract on behalf of the company by the liquidators with Mr Evans his principal. In doing so he was achieving a direct and indirect benefit for himself. He was achieving a direct benefit in that with the liquidation of the company he would no longer be receiving an income stream from it, but with the business being purchased by his client, Mr Evans, it was reasonable to infer that he would be achieving an income stream through Mr Evans in respect of the business. It was unnecessary for a contract as to fees to be spelt out. It was a reasonable inference that Mr Clark would benefit from the continuation of the business by his client. In any event, Mr Clark would benefit indirectly from his client, Mr Evans, in that he had achieved Mr Evans’s objective and could expect to be asked to perform further services for him. This was not a gratuitous action but one in which Mr Clark was advancing his goodwill with Mr Evans, who he knew would reimburse him for his cheques.

[57] If it became necessary to consider s 27(1)(b) of the Act, then, despite the submissions on behalf of Mr Evans that the Wrightson Farmers Finance Ltd v Alan Hiscox Ltd case is distinguishable, I would have held the reasoning of that case is applicable to the present circumstances. There is no doubt that the circumstances of that case are stronger than in the present case in various respects as Wrightson Farmers Finance Ltd were stock and station agents acting as bankers for the person on whose behalf they were issuing their cheques and received security over stock purchased as a result. Nevertheless, the basis upon which Heron J distinguished earlier cases is equally applicable to the present case. Mr Clark was not voluntarily making a gratuitous payment on behalf of a stranger. He was advancing the interests of his client, deliberately lending himself to his client’s interests and expecting the liquidators to deal with his client in reliance upon his cheque. Leaving aside the issue of whether Mr Clark was the agent of Mr Evans for the purposes of the contract, it is clear that he was the agent for Mr Evans in tendering the cheques in payment of the sums owing under the contract. There was thus the same closeness as occurred in the Wrightson Farmers Finance Ltd case. It would seem entirely wrong in principle that a vendor induced to enter into a contract in reliance upon the cheques of the agent of the purchaser should not be able to sue the agent upon those cheques. None of the cases referred to go that far, and, like Heron J in the Wrightson Farmers Finance Ltd case, I would not be prepared to construe s 27(1)(b) in a way which gave rise to such a conclusion.

[59] The Judge found that if it were necessary for the company to rely upon the actions of Mr Clark in bringing the contract into existence then he was satisfied that on the evidence Mr Clark acted throughout as the agent of Mr Evans, enjoying his actual authority to do so. He was satisfied on the facts as he found them to be that Mr Evans instructed Mr Clark to act on his behalf in respect of the contract, he himself being busy in other commercial activities, and in reliance upon Mr Clark’s considerable business and accounting experience and skills. He further held that in any event Mr Evans ratified Mr Clark’s actions.

[60] It is submitted for Mr Evans that this Court can draw a different inference from the primary facts from that drawn by the District Court Judge. The submission effectively asks this Court to accept certain of the evidence of Mr Clark impliedly rejected by the District Court Judge in reaching the findings that he did and to reach a different conclusion from that of the District Court Judge.

[61] Once again, given the conclusions already reached, it is unnecessary to traverse this head of appeal in quite the detail that would otherwise be necessary.

[62] Upon the facts, given that the District Court Judge preferred the evidence of the liquidators and the witnesses for the company to that of Mr Clark and Mr and Mrs Evans, there was ample evidence from which the Judge was entitled to infer that Mr Clark was authorised to act as Mr Evans’s agent in the formation of the contract between the company and Mr Evans. The facts were only consistent with such a conclusion given the conduct of Mr and Mrs Evans and Mr Clark. First Mr Clark expressed an interest on their behalf. Secondly, Mr and Mrs Evans visited the business premises and made their own investigations and enquiries. Thirdly, Mr Clark was asked to draft the agreement for sale and purchase and conduct the negotiations with the liquidators on behalf of Mr Evans. Mr Clark represented Mr Evans in the negotiations not only with the liquidators but with others. Fourthly, Mr Clark, at the request of Mr Evans, met with the liquidators and negotiated the final terms of the contract. Fifthly, Mr Evans either asked or knew that Mr Clark would be giving cheques to the liquidators in respect of the purchase price. Sixthly, Mr Clark, at the request of Mr Evans, advised the staff after the agreement had been concluded that Mr and Mrs Evans would be employing them.

[63] In any event, it is clear that Mr Evans acquiesced in the contract with the full knowledge of it, and ratification could be implied from his conduct. Not only were the staff told that Mr and Mrs Evans were taking the business over but Mr and Mrs Evans paid the staff and paid one of the accounts of the business. They entered into possession of the business and controlled it from 19 December until 12 January. For Mr Evans it is said that these actions were merely confusion. A single action, quickly repented of, might have come within that category, but not the course of conduct that occurred subsequent to the making of the contract on 19 December 1997.

[65] The appeal is dismissed. The company is entitled to its costs on a category 2 column B basis under the Third and Fourth Schedules to the High Court Rules together with its reasonable disbursements to be fixed by the Registrar in the event of disagreement.

High Court of New Zealand Decisions

Evans v Line and Tone Limited HC Wellington AP 20/01 [2001] NZHC 691; (2001) 7 NZBLC 103,411 (31 July 2001)