COMPANIES AT LAW

King Country Chronicle, Volume XXIV, Issue 3238, 4 December 1930, Page 5

COMPANIES AT LAW

COMMISSION ON SALES. A “GENTLEMAN’S AGREEMENT.” Commissions which were alleged to be due under a “gentleman’s agreement” between Uvo auctioneering companies formed the basis of a claim for £BB6 commenced in the Supreme Court at Hamilton on Tuesday before Mr. Justice Herdman. The plaintiff was the New Zealand Loan and Mercantile Agency Company, Ltd. (Mr. Swarbrick), and the defendant company Abraham and Williams, Ltd. (Mr. Gordon, Taumarunui). The plaintiff company in its claim stated that on September 26, 1928, and November 22, 1929, it sold certain stock and chattels to James Tatham, farmer, of Te Kuiti, and also sold some stock on behalf of Tatham, and received the proceeds of the sale. At that time it was agreed that plaintiff should charge defendant and that the latter should pay the money ow ing to plaintiff for stock and chattels sold by the plaintiff company to Tatham. In consideration of the agreement plaintiff agreed to pay defendant a commission of £1 per cent, on the price of all stock sold by plaintiff to Tatham.

Mr. Swarbrick said Tatham gave a bill of sale over all his stock to Abraham and Williams, Limited. It would thus' be necessary for him to obtain its permission before selling any stock.

AGREEMENT BETWEEN AUCTIONEERS.

In outlining the procedure adopted by auctioneering firms in the district, Mr. Swarbrick said that where a customer had given a security to one firm he could, with the firm’s permission, buy through other auctioneers. If he did so, however, the stock he bought immediately came under the original bill of sale, and the vendors lost all claim on the stock. The firm holding the mortgage then paid over the price of the stock to the vendors, and received in return a rebate commission of 1 per cent. This agreement was not embodied in any written document, but was merely a “gentleman’s agreement.” MORTGAGED HIS STOCK. Counsel said that Tatham had mortgaged all his stock to Abraham and Williams. From time to time he bought certain stock through the Loan Company, and Abraham and Williams had been given a rebate commission. In February one of the Loan Company’s agents bought 382 sheep for Tatham at Whakatane, while Tatham himself bought through the Loan Company 1274 sheep. The whole mob was driven in one lot to Te Kuiti and was eventually sold. Abraham and Williams received the proceeds, £2OOO, and also £lO2 commission on the sale, and out of the profits Tatham got £142 9s. . There was also a number cf cattle bought by Tatham through the Loan Company and debited to Abraham and Williams, over which there v r as a dispute in regard to commission., A rift in the lute between the two companies occurred on February 20, 1929, when Abraham and William stated that they were not paying in the meantime for certain stock purchased by Tatham, until they had seen him. * At that very time Abraham and Williams were actually in the process of selling this stock for Tatham and one would have expected, having sold the stock, that they would have paid. UNDER SECURITY TO FIRM. James Tatham said that at the end of 1928, the whole of his stock was under security to Abraham and Williams. It was arranged that any stock brought from another company was to be charged to Abraham and Williams. He did not always have to obtain permission before he purchased stock. He saw the agent for the Loan and Mercantile Company, and witness suggested that he might buy some ewes for him. He dealt at both the Te Kuiti and Taumarunui branches.

Cross-examined by Mr. Swarbrick, witness said he went to Whatawhala and purchased 1274 sheep. Nealon came back with 382, but thought the rest were too dear. He later saw Luxford about 750, Luxford saying tq buy them, and he eventually secured the lot. Abraham and Williams were aware of the deal. The batch, of 1656 were brought by road. Luxford met him in Kihikihi and made him an offer for the sheep. Witness refused to sell and he wanted them' for the Te Kuiti ewe fair. They were looking too rough on arrival. About 600 were sold a week afterwards to Mr. King, the manager of the New Zealand Bank; 150 were sold to one of Dalgety and Company’s clients. The balance, 906, were sold in one lot. Abraham and Williams sold the whole lot. A gross profit of £246 15s was made on the deal, out of which sum a commission was paid to Abraham and Williams.

Mi\ King’s explanation was that he would not pay the Loan and Mercantile Agency Company because it had kept him waiting before, continued witness.

Witness said he was present at a meeting of Messrs. Westfield and Tapp in the Loan and Mercantile Agency Company’s office. Mr. Thynne was not there. Westfield and witness went to see Thynne about Newton King’s and the Loan and Mercantile Agency Company’s accounts. Mr. Thynne said he would pay them both right away, and told witness to tell Tapp so. Westfield said he would issue a writ unless paid. Cross-examined by Mr. Gordon, Tatham said that sometimes Thynne wanted to buy all in sight and sometimes very few. They always talked over the matter of large purchases, 1000 or more; but not necessarily smaller amounts. Abraham and Williams made trouble about payment to Newton King on one occasion. He did not know that Abraham and Williams’ had told Newton King not to give him any stock without their written authority. Nealon was to buy 800- to 1000 two-tooth ewes. Witness did not remember who it was who had given him authority to purchase the 1774 sheep. About the

same time witness bought a large number of sheep at the Awakino fair for Abraham and Williams. He had no authority from Abraham and Williams to make the deal although he had previously bought for them there. Witness denied that he had an account with the Loan and Mercantile at the time. He knew nothing about 1274 sheep being debited to any account of his. Witness, in crossexamination, said that he had been made bankrupt by Abraham and Williams, but was unable to state the exact amount owing to them. STOCK AGENT’S EVIDENCE. Charles Reginald Westfield, stock agent, Awakino stock agent for Newton King, Ltd., said that his company had sold stock to Tatham in the beginning of 1929. The account was forwarded to Abraham and Williams. In March his company became a little perturbed over the nonpayment of the account. Witness met Messrs. Thynne and Tapp subsequently, when it was considered that the stock should be sold through Abraham and Williams, who held security. He and Tapp had been given to understand that they would be paid in due course. Witness subsequently saw Mr. Thynne. On April 10, in conversation with Mr. Thynne, Abraham and Williams’ agent, Mr. Thynne had promised to pay £4OO as a progress payment. On a later occasion Mr. Thynne had told him that the account would be settled right away, and the money was duly received May 13. Cross-examined witness admitted that his firm had previous trouble with Tatham. His company had later sold Tatham sheep to the value of £IOOO. In a case of a person secured by a certain firm, purchasing stock through another firm, the word of that person would often be taken that the firm securing him, would honour his account. If such a debt was repudiated it would be repudiated at once.

Earnest William Henry Tapp, Te Kuiti, agent for the Loan and Mercantile Agency, said he was present at neither deal —Gisborne or Whakatane. He was on holiday at the time. DID NOT REPUDIATE ACCOUNT. On March 13 Westfield and witness saw Thynne about their outstandingaccounts, and Thynne agreed to sell Tatham’s stock and to divide the proceeds between Newton King and Abraham and Williams to square up the debts. In answer to His Honour, witness said he was unaware at that time of any threat of legal action against Abraham and Williams. The arrangement was that everything was to go through Abraham and Williams. Albert John Nealon, auctioneer for the New Zealand Loan and Mercantile Agency Company at Te Kuiti, said Tatham approached him to purchase 800 or 1000 two-tooth ewes at Gisborne. Witness knew that Tatham was secured to Abraham and Williams, and he saw Mr. Luxford, Te Kuiti agent for Abraham and Williams, who later gave him instructions to proceed with the purchase.* Later Tatham joined witness at Whakatane, when he sold Tatham 1272 sheep. He did not communicate with Abraham and Williams about this lot. Tatham informed him that he had arranged with Abraham and Williams about the purchase. Tatham signed for the purchase and the account was sent to Abraham and Williams.

Arthur Wakefield Ward, Hamilton manager for the Loan Company, said that subsequent to the purchase of the sheep at Gisborne, he saw Thynne at Pio Pio, where they discussed Tatham’s account. Thynne said that payment would be made after Tatham’s sheep had been sold. He did not remember whether Thynne asked him not to sell any more stock to Tatham. Thynne did not repudiate the account, but said that after the property was sold payment would be made within a few days. There was no repudiation of the account until November.

Describing the custom amongst members of the Auctioneers’ Association, witness said that where one firm sold stock to a client whose property was secured to another firm, the practice was to debit the account to the firm holding the security. This was the custom throughout the whole province. Abraham and Williams were members of the Auctioneers’ Association. Witness had been president of the association until quite recently. His Honour asked if the understanding referred to was recorded in the minutes of the association. Witness thought it was. Witness added that if a debit was not, accepted by a mortgagee firm, the selling firm was to be promptly notified.

His Honour thought it was necessary. for such an arrangement to be proved. CHARGED WITH COST OF SHEEP. Cross-examined by Mr. Gordon, witness said that when Nealon bought the 1274 sheep for Tatham, the amount was debited to Abraham and Williams in order to simplify books. The account was later retransferred in the books to Abraham and Williams. Mr. Gordon: Why did you do that? To show that Abraham and Williams were responsible -for the amount. Mr. Gordon: But you had already shown that earlier.

Witness agreed that a cheque for £BSO was received from Walter Tatham in April. This was credited to Abraham and Williams by mistake. A rebate commission of 1 per cent, was to be paid by the Loan Company to Abraham and Williams on all stock sold by the Loan Company to Tatham. He did not know whether that commission had ever been paid to Abraham and Williams in connection with the 1874 sheep. Mr. Gordon: Abraham and Williams repudiated the sale and refused the rebate commission. His Honour said there seemed to be not doubt that the plaintiffs sold the 1274 sheep to Tatham and that at that time Tatham was secured to Abraham and Williams. The 1274 sheep after being delivered were suld by Abraham and Williams either on Tatham’s or their own behalf and instead of paying the Loan Company’s account they retained the money.

Abraham and Williams did not, until the following November, repudiate the account, their manager, Mr. Thynne in the meantime, promising to pay it. NO AGREEMENT. Mr. Gordon contended that there was no agreement between the various stock firms binding them to the arrangement explained by Mr. Swarbrick. There was only an understanding that where possible, with safety, such an arrangement should be observed. The minute book of the Auckland Auctioneers’ Association was put in. This showed that it was agreed among members of the association to grant a rebate commission to a mortgagee firm where stock was sold to the mortgagor. Mr. Abraham, principal of Abraham and Williams, was in the chair at the meeting when that agreement was minuted. His Honour: It seems to be a matter of honour only and not of actual contract.

Mr. Swarbrick said it was purely a “gentlemen’s agreement.” John Tait chief bookkeeper for the New Zealand Loan and Mercantile Company, stated that the purchase of 1274 sheep was first charged to Abraham and Williams. A statement in the middle of February was sent to Abraham and Williams, including this debit. On March 26, that £ll7l was transferred to J. Tatham’s account in order to facilitate the reconciling of Abraham and Williams’ account each month as they were putting J. Tatham’s affairs in order. On March 26, 1274 sheep were transferred to Tatham’s account. Witness’ firm still held Abraham and Williams liable, as that firm was taking over all Tatham’s purchases. Abraham and Williams were accustomed to honour Tatham’s account. A pay ment of £750 was received from Abraham and Williams on April 15. No further payment was made, and on June 30 that amount was transferred back to Abraham and Williams’ account. Subsequently several further statements were sent out. He understood that Abraham and Williams had taken exception to one of these statements on February 10.

Witness, in cross-examination, said that statements were sent out to all auctioneering firms twice a month. On March 26 a credit not for £1771 had been sent to Abraham and Williams. Witness did not know who had issued the instructions for crediting that amount to Abraham and Williams. On February 20 he had received a communication from Abraham and Williams, in which they stated that they were doing nothing about the 1274 sheep at present. After the account had been transferred to Abraham and Williams’ account Tatham did not receive further statements, but he would know that the account had not been settled from another source.

In opening the case for the defence counsel agreed that the claim was narrowed down to the purchase of the 1274 sheep, other items being incidental. Plaintiff, it was held had agreed to pay defendant a commission of 1 per cent. His Honour: You hold that a contract can succeed only if a contract is proved? Apparently your company had purchased 1274 sheep at Whakatane on account of this man Tatham. Tatham took charge of the sheep. It was quite true he had dealt with Abraham and Williams and had done business through them. On the face of things,- Tatham was responsible in the first place for payment for the sheep. There may have been a custom in existence by which stock agents agreed to take over certain liabilities, but there was no binding agreement in law that His Honour was aware of. Mr. Gordon told His Honour that the agreement referred to was a verbal one. The last witness had admitted that Abraham and Williams had refused to accept the debit for the sheep and also the subsequent credit for the 1 per cent, rebate commission. The result, he submitted, was that on plaintiff’s own evidence his claim must fail, and he asked leave to move a non-suit.

His Honour: You say that no contract has been proved between the parties?—Yes, sir. NO AUTHORITY. Counsel said Luxford had no authority to give instructions for the purchase of stock. Luxford said he would get in touch with Thynne and he got the limit of his authority. Luxford said he told Nealon that Abraham and Williams would accept liability for not more than 800 ewes. They had always been ready and willing to accept this liability. Abraham and Williams were very definite that they would have nothing to do with wethers. It would be shown in evidence that no authority was given by any of Abraham and Williams’ men to the Loan Company to purchase the 1274 sheep. Abraham and Williams refused both the debit and the credits put through to them by the Loan Company as soon as the notes arrived.

DEBIT ACCOUNT REPUDIATED

When witness received the invoice relating to Tatham’s purchases from the plaintiff company, he immediately repudiated the debit account submitted by the plaintiff company for 1274 sheep sold to Tatham. He told Tatham and the plaintiff company’s representatives that Abraham and Williams would not pay the account. Witness considered that Tatham had made his own arrangement with the Loan Company. His Honour said that if Abraham and Williams were not liable for the 1274 sheep, they were not liable for anything. Mr. Swarbrick agreed that this was so. His Honour said a minute of the Auctioneers’ Association meetingshowed that'there was an honourable understanding between firms, but it was not considered wise to make a binding arrangement. The position, therefore, was left open, and the firm could do what they liked. To Mr. Swarbrick: Witness gave authority in November, 1929, to the Loan Company to buy 500 sheep for Tatham. He thought the number should have been 800, but actually the number bought was 2500, which was greatly in excess of the number authorised!.

In answer to His Honour, witness said the Loan Company sold 1274 sheep to Tatham, and with respect to these sheep the Loan Company claimed £1731, less certain payments the defendant company had made, from Abraham and Williams, Limited. The defendant company repudiated payment, because it had not authorised the purchase by Tatham of so many sheep. Witness said that on May 10 he paid Newton King, Limited, in full, and he believed that Tatham owed the Loan Company only £l5O, which he was prepared to pay. Witness found that £BSO was owing. Witness admitted that he had previously agreed to pay Tatham’s account with Newton King, Limited, and the Loan Company when Tatham’s stock was realised. A statement was received from the Loan Company in July showing that £BB6 was owing on account of Tatham. He did not write to the Loan Company repudiating the account, because it had been previously explained by telephone that the Loan Company repudiated the claim. Legal argument will he heard today.—Waikato Times.