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Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Van Laun & Co v Neilson Reid & Co [1904] ScotCS CSIH_4 (17 May 1904)
Cite as: (1904) 12 SLT 86, [1904] ScotCS CSIH_4, (1904) 6 F 644

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17 May 1904

Van Laun & Co.
Neilson Reid & Co.

Lord President.—The Lord Ordinary has in this case sustained the first plea in law for each of the defenders, which is that the statements of the pursuers are irrelevant; and the question which we have to decide is whether the Lord Ordinary was right in holding the statements of the pursuers to be irrelevant. The pursuers in the first place set out what may be termed the communings between the parties. In articles 1 and 2 of the condescendence it is alleged that there were numerous meetings and representations made, and at the end of article 2 it is stated that the pursuers were instructed by each of the three firms to arrange for an amalgamation of their different businesses, and that they undertook the work. This is certainly a somewhat general allegation, but in the next article of the condescendence it is stated that the terms upon which the pursuers were employed by the firms mentioned were contained in a memorandum of agreement, a copy of which was handed to, and approved of by, each of the firms. The first head of the alleged agreement is that “The undersigned firms agree that they will enter into a proper legal contract, when prepared, with Messrs H. T. Van Laun & Company, for the purpose of placing in their hands the conduct of the amalgamation of their business.” This document quite recognises that there is to be a proper legal contract, and that that legal contract is to contain the expression, and the only binding expression, of the agreement, and in the ordinary case where it is arranged that a legal contract in certain terms is to be entered into, an action ex contractu will not lie unless and until that legal contract has been entered into. Whether there might or might not be a claim of damages for breach of the obligation to enter into an agreement is another matter which it is not necessary now to consider. The heads of agreement provide that a valuer is to be agreed upon by the firms, that accounts are to be taken, and that other things proper to such an arrangement are to be done; and article 5 contains this stipulation,—“The payment of the commission of 212 per cent is only payable in the event of the amalgamation going through.” This I take to mean that it is only in the event of an amalgamation, thereby meaning an amalgamation of the nature and character specified, being effected, that the commission is to be paid. The stipulation appears to me to amount to this—“No contract, no payment.” The Lord Ordinary has apparently proceeded upon the view that the condition, upon which the payment of the commission was to depend, had not been fulfilled, and that consequently the action cannot be maintained. It seems to me that the view which his Lordship has thus taken is the correct one, and that, inasmuch as the condition for earning of the commission has not been fulfilled, no action could lie for the commission, and that no ground is set out for an action of another kind, apparently of the nature of an action of damages. The case made by the pursuers is that the amalgamation ultimately effected was the result of the efforts of the pursuers, and that, but for their intervention, there would not have been any amalgamation. But this does not seem to me to meet the points that the only liability undertaken was a very guarded one, and that if the conditions of a pactional claim for commission have not been fulfilled, there are no averments of anything which would create liability for payment. I therefore think that the Lord Ordinary is right in the result at which he has arrived, and that his interlocutor should be adhered to.

Lord Adam.—The claim here is for no less than £34,207 subdivided in certain sums among the three defenders, and that is on the footing that a certain agreement set forth on record was a binding agreement. £34,000 is the commission at the rate of 212 per cent on the price paid by the amalgamated company to the three companies which subsequently amalgamated. That is the amount of the commission claimed, and that is claimed on the footing that there was an agreement whereby the pursuers were entitled to demand that sum from the defenders. That agreement and the terms of it there is no doubt about, because the terms of it are distinctly stated in condescendence 3; and the question is whether the agreement is a binding agreement in the terms set forth in the record. Now, the circumstances in this case are these: The pursuers were not employed by the defenders originally; they went at their own instance, and for their own purposes, and for their own emolument, no doubt, to the three companies, now the defenders here, and entered into certain negotiations with them with the view of getting them to enter into an agreement to amalgamate their respective businesses together. The negotiation of the whole matter was at the instance of the pursuers, and after some negotiations, which we have set forth in this record, the pursuers say that their offer to try to arrange the amalgamation was accepted upon certain terms which are set forth in a memorandum which they quote. Now, supposing it was a binding agreement, the first thing that appears on the face of it is this, that it was an agreement by which “the undersigned,” that is, the three firms, agreed to enter “into a proper legal contract, when prepared, with Messrs H. T. Van Laun & Co. for the purpose of placing in their hands the conduct of the amalgamation of their businesses, the basis of the amalgamation being”—and then the bases are set forth; and the last of them was this: “The payment of the commission of 212 per cent is only payable in the event of the amalgamation going through.” These were the terms on which the defenders agreed to the employment of the pursuers—that if the negotiations failed the pursuers were not to get any payment. That was the form of the agreement set forth by the pursuers themselves. Now, the agreement is not signed by the parties, there are no “undersigned,” and it appears to me there is no averment whatever on this record of facts and circumstances which would make out rei interventus in order to supply the want of the signatures. That is the position of this agreement. I have no doubt from this that it is an agreement which the defenders were perfectly entitled to resile from. It never was signed, and there are no facts and circumstances amounting to rei interventus averred on this record, and therefore I cannot see how 212 per cent commission can be claimed on such an agreement. I think under the agreement the defenders were quite entitled to say, “We have changed our minds as to this; we are going to drop the amalgamation,” because the agreement was only an agreement to be binding when put into a proper legal contract which they did not enter into, and they did not propose to enter into any other. How a claim in these circumstances for 212 per cent commission can be enforced, as if an agreement had been concluded and had been a binding agreement, I cannot see. Therefore I agree with your Lordship that on that ground there is no case.

Then, again, the next ground is for breach of contract. But if there was no contract there can be no breach of contract, and therefore there can be no claim on that head.

The third head, and at first I thought there was something in it, is the claim for quantum meruit. I thought there was something in this on the authority of the cases before us, but it appears to me there is an essential distinction between this case and the cases of Kennedy and Walker, Donald, & Company. The ground of decision in these cases was that the party claiming had introduced a party, from which introduction business followed, and it is the benefit to the party against whom commission is claimed, derived from the introduction, that makes him liable. But here it is just the other way. There was no introduction by the pursuer of these companies to each other. All of them knew each other perfectly well before, but the pursuers seemed to think that if they made some suggestion that they would be better to amalgamate their businesses they would do it. But that is not the case of a person who is entitled to remuneration because he has introduced one individual to another, and because as a consequence and as a result of that introduction business has been done. As I understand, a party who introduces another is entitled in such circumstances to remuneration; but that is not the case here. These pursuers in pursuit of their own business make a certain suggestion to these three defenders—“It would be a good thing for you if we put our heads together and tried to amalgamate the businesses.” That is the case here, and the whole case, and I do not see any ground for a claim for quantum meruit. Therefore I agree with your Lordship.

Lord Kinnear.—I also agree with your Lordships and with the Lord Ordinary. I think the case was put in a very clear view by Mr Salvesen's statement of the pursuers' position, which, however, was entirely in accordance with the statement that had been previously made on their behalf by Mr Hunter. I assent to the view taken by both counsel that the memorandum of agreement which is mentioned in the third article of the condescendence is not to be treated as a written contract. The pursuers' case, as their counsel have stated, is quite clearly averred—that they and the defenders made an agreement by which the defenders employed them to arrange an amalgamation of their businesses; and so far as the averments in the condescendence go, that appears to have been a verbal contract. But then the pursuers go on to allege that the terms on which they were employed by the said firms—that is, the terms of the contract previously alleged—were contained in a memorandum of agreement, a copy of which was handed to and approved of by each of the said firms; and the said agreement, they say, is as follows. Therefore the pursuers' averment is that the terms of the contract between them and the defenders are those expressly set out in this memorandum. Now, the first of these terms is that the firms agree that they will enter into a proper legal contract, when prepared, with the pursuers for the purpose of placing in their hands the conduct of the amalgamation of their businesses. That is the first term of their contract, and it appears to me to follow of necessity from that that no binding obligation had been contracted between the parties, or was intended to be contracted between the parties, until a formal written contract should be executed. The meaning of the words “a proper legal contract” does not seem to me to be open to doubt. It must mean a contract which is in itself valid and binding in law upon the parties, and therefore it must be a written instrument duly executed according to law. Now, the general rule of law is beyond all question—that when parties agree that their arrangements are to be embodied in a formal written contract to be executed there is a locus pœnitentiœ until the execution of that written document is completed, and either party may resile until the written instrument is duly executed. I take that to be clear law. Now, the only way in which the law to that effect can be avoided is by rei interventus, and that is the ground upon which the pursuers mainly maintain their case. But then there is to my mind no relevant averment of rei interventus at all. The only averment is a very general one that the pursuers and the defenders acted on this agreement, which was treated by all parties as binding on them. That in itself comes to nothing. It is indispensable that specific facts should be alleged which in themselves are referable to the agreement and cannot reasonably be referred to any other ground of action except an incomplete contract which is supposed to be set up by the parties, and there is no specific averment of specific facts whatever. In the immediately following article there is a little more detail, but it comes to very little more. It is said that prior to the agreement the pursuers had brought the different firms together through their representatives. That, of course, cannot be rei interventus to set up an incomplete agreement, because the actings of parties prior to the agreement can never be actings under the agreement. But then they go on to say,—“Thereafter”—and I think that might be fairly read as meaning after the verbal contract had been completed—“he had several meetings with representatives of the different firms and was at considerable trouble and expense in endeavouring to effect a successful amalgamation.” I cannot see that the fact that the pursuers' agent came to visit the defenders and their representatives, and had meetings with them, and so endeavoured to make them come together, is a fact or facts shewing that the parties had dispensed with the stipulation that they had previously made, that before they should be bound an agreement in writing should be completed and executed. There is nothing in the mere general averments of meetings between the pursuers and their firms to shew that the defenders had agreed to substitute, or substituted, a verbal contract or informal writing for the formal writing they had stipulated for as indispensable before they should be bound, and therefore it seems to me to follow quite clearly that when they intimated in January 1900 that they were not going to amalgamate—that they did not see their way to amalgamate—and thereafter either refused or failed—I do not know which is the most accurate description of the facts—to execute a written contract for the purpose of placing the pursuers in a position of conducting amalgamation between them, they were entirely within their right. They had stipulated in effect that they had right to resile until the written contract was executed, and before the written contract was executed they said, “We are not going on.”

Now, that appears to me to be an end of the case as it was originally presented to the Lord Ordinary, and I rather think pursuers' counsel would not dispute that if that was the sound view of the contract it exhausted the case before the Lord Ordinary. But then they have proposed an amendment by which they add two other grounds of action. In the first place they propose the alternative conclusion for damages, and Mr Hunter said that this was intended to displace the Lord Ordinary's ground of judgment by following what the Lord Ordinary himself had suggested might be a sound ground of action. I think that the Lord Ordinary has been misunderstood, for he makes no suggestion, and I cannot conceive that he should have made any suggestion, that there could be any claim of damages if his view of the contract, which is the view your Lordships have adopted, is sound. That is not what he has said. But he has said that while he is of opinion that the defenders were entitled to resile, he still thinks that if that were wrong, and they were barred from resiling, the pursuers would not have a claim for payment of commission. And that, I suppose, stands on the obvious ground that the commission was only to be payable when the amalgamation was carried through by the pursuers, and they concede that they did not carry it through. But in that view his Lordship suggests that they might have an action for implement of the contract, or for damages for breach of the agreement. But that assumes an agreement, and his Lordship's opinion is entirely consistent with that which has been already expressed, and which I entertain—that there was no binding contract between the defenders and the pursuer which can base a claim for damages for breach of contract.

The second alternative is a claim for remuneration quantum meruit for specific services rendered by the pursuers to the defenders, but then there can be no claim for quantum meruit any more than for specific stipulated remuneration unless upon a contract of employment distinctly expressed or implied, upon which services were rendered. And that just sends us back to the original question, whether there is any relevant averment of employment on record or not, and on the ground stated it appears to me there is not, and therefore the whole ground for a claim quantum meruit falls just as the ground for a claim of stipulated commission falls. A claim for quantum meruit might possibly remain if there was a contract for service, but no specific stipulation as to what the remuneration for service was to be. But the specific contract set forth by the pursuers excludes, in my opinion, a claim of quantum meruit just as it excludes the original claim, because primarily the stipulation of arrangement between the parties was that there should be no liability by either party to the other until a formal written contract was executed. I quite agree with what your Lordships have said with reference to such cases as Walker, Donald, & Company, and others that have been referred to. I think the Lord President in the case of Walker, Donald, & Company, puts his ground of judgment at the close of his decision very distinctly when he says,—“Notwithstanding that there has not been actual employment beforehand by a shipbuilder of a broker, yet if a broker brings a customer to a shipbuilder, and the shipbuilder accepts the employment, that entitles the broker to commission.” No doubt it does, but on a distinct statement of employment. If a man whose business it is to conduct certain business on commission comes to another and undertakes to introduce him to a third person, who will stand towards him in the position of principal in the agreement, that is just accepting an offer to do business for the principal. It is no great matter whether the shipbroker expressly stated that it was business of any kind—it is an offer to do the business of a broker. If that offer is accepted, there is a completed contract of employment, and there can be no doubt as to the liability of the person who has given such employment, but there is no room for the application of that principle in the present case at all, because there was no undertaking, according to the pursuers' own statement, to employ him to make any agreement between the one set of defenders and the other set of defenders, except that they might enter into such an arrangement, but on the condition that a written contract should be entered into before they undertook that obligation.

I therefore agree with your Lordships in thinking that the judgment is right, and that we should adhere to it.

LORD M'LAREN was absent.

6 F 644

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