Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd
98 CLR 93(Decision by: KITTO J)
Between: TALLERMAN & CO PTY LTD
And: NATHAN'S MERCHANDISE (VICTORIA) PTY LTD
Judges:
Dixon CJ
Williams J
Fullagar J
Kitto JTaylor J
Subject References:
Contract
Subsequent agreement
Earlier contract
Abrogation
Contract made outside State
Implied rescission
Intention
Judgment date: 18 February 1957
MELBOURNE
Decision by:
KITTO J
This is an appeal against an order of the Full Court of the Supreme Court of New South Wales, by which a verdict given for the plaintiff in an action on the common law side of that court was set aside and a verdict was entered for the defendant.
The writ by which the action was commenced was endorsed with a statement of the nature of the plaintiff's claim in these terms: "The Plaintiff claims the sum of Eight thousand eight hundred pounds (PD8,800.0.0) in respect of a contract made between the Plaintiff and the Defendant whereby the Plaintiff undertook to supply and the Defendant undertook to accept and pay for inter alia 1,600,000 bullets at the price of PD5.10.0 per thousand. Alternatively the Plaintiff claims from the Defendant damages for breach of a contract made between the Plaintiff and the Defendant for delivery to the Defendant by the Plaintiff of certain bullets of which the Defendant has either failed to take delivery or alternatively failed to pay for."
The writ was endorsed for service out of New South Wales and in Victoria, and it was served on the defendant in the latter State. The defendant entered a conditional appearance pursuant to a provision in the Rules of the Supreme Court enabling that to be done by a defendant who desires to apply to set aside a writ on the ground that the court has no jurisdiction to entertain the action. The rule adds that the appearance shall become unconditional if no summons to set aside the writ is taken out by the defendant within seven days of entering the conditional appearance. (See r. 518 of the Regulae Generales which were in force until 1st January 1953, and r. 6 of O. II of the General Rules of the Court which came into force as from that date.) Within the seven days the defendant took out a summons to set aside the writ, and on the hearing of the application certain orders were made by consent. Only two need be mentioned. One was an order giving the plaintiff leave to amend the second paragraph of the endorsement on the writ of the nature of the claim, in effect by substituting "the said contract" for "a contract" and by substituting "the said bullets" for "certain bullets". This amendment the plaintiff undertook to make, and the result of doing so was to make it clear that the respective claims for a liquidated amount and for damages were alternatives, both being based upon the one contract. The second order was an order dismissing the application to set aside the writ. The defendant's consent to this order amounted to an acknowledgment that the course the plaintiff had taken, of identifying the contract under which damages were claimed with that under which the liquidated sum was claimed, had so confined the issues to be litigated in the action that no objection to jurisdiction was maintainable; but, consistently with this, the consent was expressed to be without prejudice to the defendant's right to dispute the jurisdiction of the court "in respect of any cause of action based on any contract other than the contract alleged in the endorsement".
The plaintiff's declaration contained three counts. The first was a money count for PD8,800 as the price of 1,600,000 bullets, claimed as having become payable on 30th September 1952, together with storage and insurance charges. The second count alleged a contract obliging the defendant to buy from the plaintiff 1,600,000 bullets and to take delivery of and pay PD8,800 for the same not later than 30th September 1952, and a failure and refusal "to take delivery or pay for the said bullets whereby the Plaintiff lost the benefit of the said promise and the profits it would otherwise have earned and incurred storage charges for the said bullets and was otherwise damnified". The third count alleged that there was a certain contract binding between the plaintiff and the defendant relating to the sale of "certain bullets" by the plaintiff to the defendant, that a dispute existed between the parties as to certain terms of that contract, and that, in consideration that the plaintiff would waive the performance of certain matters claimed by it in the dispute and would settle the dispute on certain agreed terms, the defendant promised the plaintiff that it would buy and take delivery from the plaintiff of "the balance of the said bullets", namely 1,600,000, and pay for the same PD8,800 not later than 30th September 1952; and it went on to allege a failure and refusal to take delivery or pay the sum and a repudiation of the promise.
By a letter written on the day of service of the declaration, the plaintiff's solicitors identified the contract sued upon in the second count with that referred to in the writ, as being "the one arising from the correspondence between the respective solicitors and parties subsequent to the initial contract referred to in the third count of the declaration". The defendant's solicitors then pointed out that unless the first count also related solely to the same contract there would be a "breach of the arrangements made between counsel when we agreed not to proceed with our application to strike out the writ of summons herein for want of jurisdiction"; and the plaintiff's solicitors in reply agreed that the first count did relate solely to the same contract.
It was thus made abundantly clear, first by the terms of the order made on the application to set aside the writ, and secondly by the terms of the declaration as explained by the letters which passed between the solicitors, that the action was concerned with one alleged contract and one only; and the letters further made it clear that that contract was to be found in correspondence which took place subsequently to an initial contract between the parties. It was common ground that if in that correspondence a contract was made it was made in Sydney, and that for that reason the result of confining the issues in the manner which has been stated was that no contest as to jurisdiction remained. It was not that the parties were following the procedure approved in Ex parte Walker; Re Caldwell's Wines Ltd, [F70] at p. 192, for the application to set aside the writ had not resulted in a genuine contest as to jurisdiction being reserved for determination at the trial. There were Victorian elements in the antecedent dealings of the parties, and it may or may not be true, as the defendant's advisers seem to have supposed, that a cause of action based either wholly or partly upon those dealings would have lacked any sufficient connection with New South Wales to give jurisdiction to the courts of that State. But that was question which disappeared from the case once the ambit of the action was defined as it was.
The antecedent dealings consisted of the giving by the defendant to the plaintiff at its Melbourne address of certain written orders for Hungarian bullets, the plaintiff's acceptance of some or all of those orders, and delivery of some of the bullets ordered. Three orders were given, dated respectively 20th April 1951, 14th May 1951 and 2nd August 1951. Each was for 1,000,000 bullets to be delivered from the plaintiff's store (i.e. presumably, Melbourne store) into the defendant's store; and a blank in the form following the printed words "Date of Delivery about" was filled in with the word "Earliest". Presumably this meant at the earliest reasonably possible date: cf. Schureck v McFarlane. [F71] The evidence disclosed that in February 1952 the parties were disagreeing as to the number of bullets still outstanding under these orders. There was even a question between them as to whether the latest of the orders had been cancelled altogether. On 6th February 1952 the plaintiff's Sydney office dispatched to the defendant by rail 1,800,000 bullets. A carrier in the service of the defendant picked them up at the railway station and took them to the defendant's store, but the defendant after a brief delay took the stand that it had not accepted and was not bound to accept delivery of these bullets and re-consigned them by rail to the plaintiff. The plaintiff declined to concede the defendant's right to send them back, and they lay in the railway stores at Sydney.
It was in this state of affairs that the correspondence took place to which the plaintiff's solicitors referred in their letters explaining the meaning of the declaration. The defendant maintained that the contracts it had entered into had been made with the plaintiff's Melbourne office, that there had been an overriding agreement that notwithstanding the terms of the orders deliveries should be made as and when required by the defendant, and that in any case the consignment sent from Sydney was not in accordance with "the terms of the contract". The plaintiff, in a letter of 18th March 1952 written by its solicitors to the defendant's solicitors, denied the alleged overriding agreement, and (referring to a request which had in fact been made by the defendant to the plaintiff for a delivery of 200,000 bullets) proceeded:"We understand that your clients have recently applied to ours for delivery of a substantial quantity of the bullets in question, and this request will be complied with immediately provided that it is accepted by your clients as being entirely without prejudice to our clients' claim under their contract." They added that the bullets in the railways store were at the defendant's risk, and made a suggestion that the defendant should take delivery leaving the question of liability for storage charges to be thrashed out later.
On 21st March 1952 the defendant's solicitors replied. First, they reiterated the contention as to the overriding agreement that delivery should wait upon instructions. Next, they said that their client was prepared "without prejudice to its legal rights" to depart from that agreement to the extent that it would "undertake that delivery instructions covering the balance of bullets" would be given so that the final delivery would be made not later than 30th September 1952. Thirdly, they dealt with the request recently made for a delivery of 200,000 bullets, and complained that the request had not yet been complied with. And, finally, they rejected the proposal for the defendant to take delivery of them, and agreed that if they did it should be without prejudice to the determination of liability for the railway storage charges. On 26th March 1952 there was a letter from the plaintiff's solicitors dealing with all these matters, but all that needs to be noticed is that the offer to give delivery instructions so that final delivery should be made not later than 30th September 1952 was rejected and a counter-offer was made. On 3rd April 1952 the defendant's solicitors rejected the counter-offer and added that their client "is not prepared to vary the proposal for delivery made in our letter to you of 21st ultimo". This I construe as a renewal of the offer. On 4th June 1952 the plaintiff's solicitors wrote that they had been instructed "to accept your clients' offer contained in the letter of 21st March to the effect that delivery of the balance of this order for bullets will be accepted not later than 30th September next".
There is no need to go through the further correspondence that passed. It is common ground that although the 200,000 bullets referred to in the letters of 18th March were delivered and paid for, the defendant declined to take delivery of, or to pay for, any more bullets. The 30th September passed without any further delivery instructions having been given.
Several questions of construction arise on the two crucial letters, the plaintiff's solicitors' letter of 21st March 1952 and the defendant's solicitors' letter of 4th June 1952. The first question is, what is meant by "the balance of bullets" in the former letter. The phrase evidently had a fixed meaning for both parties, notwithstanding that differences had existed between them as to the number of bullets which the defendant was bound to take in respect of the orders it had given in April, May and August 1951. On the whole of the correspondence it seems to me reasonably clear that they were treating the conflict between them as being only upon three points: whether the defendant was bound to accept as many as 1,800,000 further bullets; whether the defendant was bound to accept deliveries otherwise than as and when it required them; and who was responsible for the storage charges in respect of the particular 1,800,000 bullets reconsigned by the defendant from Melbourne to Sydney. The letter of 21st March 1952, read in the context of the whole correspondence, seems to me to mean that the defendant, while continuing to maintain its contentions on all points, makes two offers. The first offer is that it will bind itself to give instructions for deliveries so that the balance of bullets (1,800,000 including the 200,000 recently asked for) may be delivered not later than 30th September 1952. This offer seems to me necessarily to imply that it is made on the footing that the defendant's right to nominate dates and quantities for delivery is to be conceded, subject to the qualification offered. Acceptance of it would clearly have the result that the bullets in the railway stores would be treated as not having been duly delivered to the defendant. The second offer is that if the plaintiff will take up the bullets in the railway stores, the question of the ultimate liability for storage charges will be unprejudiced by its doing so. The implication, in a letter which contained also the first offer, is that the question as to storage charges, although it depends upon whether the property in the bullets in the railway stores passed to the defendant when the bullets reached the defendant's Melbourne store, is to be determined upon the facts as they existed before the letter was written and not upon the footing of the concession which the first offer requires.
The next question is whether the two letters, on their true construction, bind the defendant to take delivery of and pay for the 1,800,000 bullets not later than 30th September 1952, or merely bind the plaintiff to treat the defendant as satisfying his existing contractual obligations if he gives delivery instructions for that quantity of bullets to be delivered not later than 30th September, accepts delivery of them accordingly, and pays for them upon delivery. The answer, in my opinion, is that the defendant's offer in the letter of 21st March 1952 is to depart from the legal rights it has been asserting, and to accept a new contractual obligation. The plaintiff's solicitors' letter of 4th June 1952 seems to me to exhibit an understanding of the offer in this sense, and to amount to an unqualified acceptance of it. The expression "the balance of this order for bullets" is quite an apt phrase to refer, in the course of commercial dealings, to the particular quantity of bullets which had become the subject of the current negotiations. The acceptance is of "your client's offer contained in the letter of 21st March"; and the words which follow, introduced as they are by the words "to the effect that" appear to be intended, not to introduce any qualification upon the acceptance, but to paraphrase the terms of the offer for no other purpose than to distinguish it from the offer to agree that if the plaintiff takes up the bullets in the railway stores its action will be treated as without prejudice to the question of liability for storage charges.
It was suggested in argument that nevertheless no binding contract resulted from the interchange of these letters, because there was no consideration moving from the plaintiff for the defendant's promise to give instructions for delivery of the full quantity of bullets by 30th September. But, as I have already indicated, the defendant's solicitors' letter of 21st March carries a plain implication that the plaintiff must agree that the defendant has the right to decide at what times and in what quantities the 1,800,000 bullets shall be delivered, subject only to the newly-offered term that it will accept delivery of the whole quantity by 30th September. The plaintiff could not understand the letter as meaning anything less; and, by accepting the offer, it necessarily gave up its former contention that the defendant was bound to accept and pay for such deliveries as the plaintiff might find itself able to make in accordance with the orders of April, May and August 1951.
The question remains whether the contract made by the letters in the period between 21st March and 4th June 1952 will by itself support the action; for the agreed limitation upon the issues to be decided precludes the plaintiff from recovering either a price under, or damages for breach of, a contract existing before that period and merely varied by the contract constituted by the letters. Before the Full Court of the Supreme Court, and again in this Court, counsel for the plaintiff essayed the task of maintaining as a proposition of law that even if the correspondence disclosed only an intention to vary existing contractual rights and obligations it must nevertheless be held to have discharged the antecedent contracts and put another in their place. Of this the Full Court would have nothing: and indeed the attempt was hopeless, for a long line of authorities has committed the law to an acceptance of the doctrine that an agreement which deals with subsisting rights and obligations of the same parties under an earlier contract may vary that contract without terminating it, and that whether it effects a variation on the one hand or a discharge on the other is a question depending upon the intention of the parties as appearing from the new agreement. As Lord Hanworth observed in Royal Exchange Assurance v Hope, [F72] at p. 191, a variation may be in strict logic a new contract, but the discharge of an old contract is a matter of intention.
Failing in this, the plaintiff fell back upon a contention that there was no earlier contract, or at least that no earlier contract was proved, because, if the orders given in 1951 were in fact accepted with the addition of the alleged term that deliveries should be made as and when required by the purchaser, there could not be an enforceable contract with respect to any bullets unless and until the purchaser should require delivery of them. It is a sufficient answer to refer to Chapman v Larin [F73] cited in Benjamin on Sale, 8th ed. (1950), p. 817; Jones v Gibbons [F74] and Electronic Industries Ltd v David Jones Ltd. [F75] The contention would have more substance if the contract had been for delivery "if" required. The nearest case in the plaintiff's favour is perhaps Moon v Camberwell Corporation; [F76] but it is plainly distinguishable.
When the letters of 21st March and 4th June are examined in order to discover the intention of the parties, it becomes clear enough that they were not making a new and substituted contract for the sale and purchase of 1,600,000 bullets, incorporating into it by implied reference the terms of their earlier contracts as to total quantity, description, quality, price, place of delivery, and all other matters except times of delivery and quantities of individual instalments. On the contrary, the intention plainly was to leave the earlier contracts standing, as contracts still unperformed to the extent of the 200,000 bullets recently asked for and a further 1,600,000, but to vary them by placing a limit upon the period within which deliveries must be required and accepted by the purchaser. All that the defendant offered in relation to the agreed balance of bullets was a limited departure from the agreement alleged by him that delivery would be made as and when required by it. For the rest, the alleged agreement as to delivery was to be accepted by the plaintiff as having been made, and was to continue in force. a fortiori all the terms of the earlier contracts on topics other than delivery were to continue in force. This may not be what was meant by the words "without prejudice to its legal rights", though the learned judges of the Supreme Court considered that it was. These words may have meant only that it was the making of the offer that was without prejudice to the defendant's legal rights. But even so, the whole tenor of the letter is inconsistent with the notion that what was being proposed was a new contract for the sale and purchase of the bullets referred to.
Since, then, the letters of March-June 1952 did not bring about a contract of sale, the plaintiff was not entitled to a verdict on the first or second count in the declaration which claim respectively a price under a contract of sale and damages for breach of a contract of sale. (There was another reason also why the plaintiff was not entitled to a verdict on the first count, namely that even if the correspondence had produced a new contract of sale the price was not made payable on a day certain irrespective of delivery, and as the property in the 1,600,000 bullets had not passed to the defendant the price never became payable: Sale of Goods Act 1923 (N.S.W.), s. 51; Benjamin on Sale, 8th ed. (1950), p. 815.) But the third count was in a different position. Although it sought damages for breach of a contract arising from the correspondence alone, it set up that contract, not as a contract of sale, but as a contract superimposed upon an existing contract of sale and binding the defendant as to the date by which it would take delivery of (and pay for) the balance of the bullets comprised in that existing contract of sale. The allegation that the defendant promised to "buy and take delivery from the Plaintiff of the balance of the said bullets" seems in the context to mean no more than that the defendant promised to do what was required under the earlier contract to enable a delivery to be made thereunder which would pass the property in the bullets to it. It will be noticed that the reference is to one earlier contract only, whereas the evidence at the trial showed that the outstanding bullets may have been comprised in more than one earlier contract. This, however, is a point upon which an amendment, if necessary, could be had for the asking, and I pass it by. It seems to me that the third count alleges exactly the contract which the correspondence proved, and the plaintiff was entitled to a verdict for damages for breach of that contract.
As to the quantum of damages recoverable the case is in an unsatisfactory state. On the view I have stated, the plaintiff was entitled at least to nominal damages. The learned judge, however, did not consider the question of damages. In the circumstances it appears to me that, while the verdict for the defendant which the Full Court of the Supreme Court ordered to be entered should stand in relation to the first and second counts, a verdict should be entered for the plaintiff on the third count and there should be an order for a new trial limited to the issue of damages under that count. Except to this extent, the appeal should be dismissed.