Supreme Court of Canada
Battle v. Willox, (1908) 40 S.C.R. 198
Date: 1908-05-05
Joseph Battle (Plaintiff) Appellant;
and
Hervey Willox (Defendant) Respondent.
1908: March 13; 1908: May 5.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Maclennan and Duff JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Contract—Share of profits—Absolute or conditional undertaking—Construction of contract—Damages.
A contract between W. and B. recited that W. owned land to be worked as a gravel-pit; that he was about to enter into contracts for supplying sand therefrom; and that he had requested B. to assist him financially to which B. had consented on certain conditions; it then provided that “the said W. is to enter into contracts as follows” naming five corporations and persons to whom he would supply sand to a large amount at a minimum price per yard; that B. would indorse W.’s note to the extent of $5,000 and have 60 days to declare his option to take a one-fourth interest in the profits from said contracts, or purchase a one-third interest in the property and business; that each party would account to the other for moneys received and expended in connection with the property; that if either party wished to sell his interest he would give the other the first choice of purchase; and that “each of the parties hereto agrees to carry out this agreement to the best of his ability according to the true intent and meaning of the same and to do what he can of mutual benefit to the parties hereto.” B. indorsed notes as agreed. W. entered into two of the five contracts, sold a quantity of sand and then sold the property, without notice to B., who brought an action claiming his share of the profits that would have been earned if the five contracts had been entered into and fully carried out.
Held, Fitzpatrick C.J. and Maclennan J. dissenting, that the undertaking by W. to enter into the five contracts was absolute and having by the sale put it out of his power to perform it he was liable to B. who was entitled to damages on the basis of the contracts having been carried out.
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Held, also, Duff J. hesitante, that the clause quoted did not modify the rigour of the absolute covenant by W. to procure these contracts in any event.
Judgment of the Court of Appeal (10 Ont. W.R. 732) reversed, and the judgment of the Divisional Court (9 Ont. W.R. 48) reversing that of Anglin J. (8 Ont. W.R. 4) restored.
APPEAL from a decision of the Court of Appeal for Ontario reversing the judgment of a Divisional Court which reversed that of Anglin J. on appeal from the report of a Master to whom the case was referred for assessment of damages.
The parties to the appeal entered into an agreement in the following terms—dated Sept. 8th, 1904.
“Whereas, the said Willox is the owner of parts of lots 4 and 17 of the Township of Stamford in the County of Welland, and the same is intended to be worked as a gravel pit.
“Whereas, the said Willox is about to enter into certain contracts hereinafter referred to for the supply to certain persons and corporations of sand from said gravel pit.
“Whereas, the said Willox has requested the said Battle to assist him financially in the development of said gravel pit, and in the carrying out of the said contracts, and the said Battle has consented upon certain conditions.
“Now this agreement witnesseth that in consideration of the hereinafter mentioned mutual covenants, promises and conditions, the parties hereto do hereby mutually covenant, promise and agree to and with each other in manner and form following, that is to say:—
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“1. The said Willox is to enter into contracts as follows:—With the Canadian Niagara Construction Company, Limited, for the supply of from 15,000 to 25,000 yards of sand; with M.P. Davis, for the supply of about 25,000 yards; with A.C. Douglass, for the supply of about 10,000 yards; with H.D. Symmes, for the supply of about 10,000 yards; with the Electrical Development Company, Limited, for the supply of about 15,000 yards; all at a price not less than 85 cents a yard delivered at their respective works, unless otherwise agreed to between the parties hereto.
“2. The said Battle is to become indorser on promissory notes made by the said Willox not exceeding in amount the sum of $5,000 in consideration whereof the said Willox hereby grants the said Battle the right to elect at any time within the next 60 days from the date hereof, between taking a one-fourth interest in all the profits arising out of the above mentioned contracts, and to purchase upon payment to the said Willox of the price or sum of $5,000, a one-third interest in the gravel pit together with a one-third interest in all the business done or transacted since the date hereof, or in prospect of being done or transacted. The intention being in the event of the said Battle availing himself of the latter option that he will share as a one-third partner in all business done from the date hereof.
“3. The said Willox hereby agrees to give and does give to the said Battle a lien upon the gravel pit being parts of lots 4 and 17 in the Township of Stamford aforesaid for any and all moneys the said Battle may be called upon to pay because of his acting as indorser as aforesaid. In the event of the said Battle being called upon to pay as herein mentioned, and his
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electing to take a one-third interest as above mentioned then the said payments shall be allowed and credit given the said Battle on account of the purchase price of $5,000 before referred to.
“4. Each of the parties hereto agrees to account to the other for any and all moneys received or expended in connection with the said gravel pit so long as this agreement shall last, and to keep proper and correct accounts of his dealings in respect of the same and to allow the other to inspect the said accounts.
“5. In the event of either party desiring to sell his share or interest he shall first offer the same to the other party for the same price or sum that the party desiring to sell has offered his share or interest for sale, and the other party shall have one week within which to purchase the same.
“6. Each of the parties hereto agrees to carry out this agreement to the best of his ability according to the true intent and meaning of the same and to do what he can of mutual benefit to the parties hereto.”
The respondent, Willox, entered into contracts for supplying sand with M.P. Davis and A.C. Douglass in Sept., 1904, and considerable quantities were delivered thereunder. In Dec., 1904, he sold the property for $35,000 and out of the proceeds paid notes indorced by Battle pursuant to his agreement. The latter then brought an action claiming as damages the profits he would have received if the five contracts had been procured. The only defence pleaded was that Battle had not carried out the contract on his part and had released defendant from performance thereof.
At the trial consent minutes of judgment were filed by counsel adjudging defendant guilty of a breach of said contract by reason of his having put
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it out of his power to perform the same by selling the property and referring it to a Master to assess the damages. The reference declared that defendant should pay to the plaintiff one‑fourth of all or any profit which would have arisen from the contracts in the said paragraph (par. 1 of the agreement) mentioned.”
The Master assessed the damages on the basis of defendant having undertaken to procure the five contracts mentioned in the agreement absolutely and in any event considering that the judgment pursuant to which the reference was made had so determined. On appeal from his report Mr. Justice Anglin set it aside and sent it back to have the damages assessed on a different basis and evidence admitted tendered by defendant of his inability to procure three of the contracts, which the Master had refused to receive. An appeal to the Divisional Court resulted in the judgment of Mr. Justice Anglin being reversed and on a further appeal to the Court of Appeal it was restored and the decision of the Divisional Court reversed. The plaintiff then appealed to the Supreme Court of Canada.
T.F. Battle for the appellant.
Collier K.C. and Griffiths for the respondents.
THE CHIEF JUSTICE (dissenting).—I am of opinion that this appeal should be dismissed with costs.
DAVIES J.—The questions involved in this appeal depend upon the true construction of the contract entered into between the plaintiff and the defendant in September, 1904.
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Another difficult question arose out of the reference made by the learned trial judge to the Master in order to have the damages assessed.
I feel strongly inclined to the opinion expressed by the majority of the Divisional Court that the Master was right in holding that the defendant’s liability was settled by the trial judge to have been an absolute one extending to all the five contracts mentioned in the agreement sued on and that it was not open to him on the reference to receive evidence of the refusal of several of the five parties to enter into their contracts and so enable defendant to escape the damages he was otherwise liable for.
I do not desire, however, to base my judgment on that ground but upon the true construction of the agreement itself, and on this ground I concur in the unanimous judgment of the Divisional Court and the dissenting judgments of Chief Justice Moss and Riddell J., in the Court of Appeal, and think the Master bound under the contract to assess the damages as he did, on the ground that the defendant’s covenant sued on was an absolute one.
The question is really whether the covenant or agreement entered into by the defendant was an absolute one with respect to the entering into of the five several contracts with the parties mentioned for the supply to each of them of the specified number of yards of sand and at the prices named, or whether it was a qualified agreement conditional on the several parties respectively entering into their contracts and binding on him to the extent only that they did so enter.
I am of the opinion that it was an absolute undertaking on defendant’s part on the faith of which the
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plaintiff entered into an absolute covenant on his part to furnish the funds
necessary for the development of the gravel-pit and in the carrying out of the said contracts.
I think the fact that almost immediately after the contract sued on was entered into the defendant applied to plaintiff to carry out his covenant and indorse promissory notes made by the defendant to the amount of $5,000, and that the plaintiff indorsed these notes when requested to do so shews very strongly what the parties themselves thought was the nature of their mutual and respective covenants, which fact would be important if the language of the covenant is held to be ambiguous.
The majority judgment of the Court of Appeal is avowedly based largely upon the application to the clause of the agreement sued on of its sixth clause which provides that each of the parties agrees to “carry it out to the best of his ability according to the true intent and meaning of the same.” The argument is that the general clause qualifies the absolute character of the language used in the first clause defining what the defendant bound himself to do and reduced the covenant down to one to do his best only. I cannot think that such is the meaning or intention of this sixth clause. I prefer to accept the construction placed upon it by the Chief Justice and Riddell J. who held that the clause obviously applied and should be confined to the case as it would be if and when the parties became partners as provided in the agreement. The clause never was intended to qualify the mutual covenants of the parties respecting their primary undertakings which were the essence of the contract entered into and were absolute in their terms. But it was a clause peculiarly applicable to the con-
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ditions which would exist if and when these primary undertakings were carried out and the partnership relations assumed. If it had been intended to qualify the absolute language used in the mutual covenants of clauses one and two, one would have supposed that the few simple words necessary to do so would have been used in the clauses themselves or if inserted in any other part of the agreement would have been put in clear and unambiguous language. As the Chief Justice pertinently says:—
In the case of no partnership the words have no suitability or special fitness to the plaintiff
or to his covenant, and it seems a somewhat forced construction which attempts to apply them to the defendant’s undertaking to enter into contracts with five specified companies for specified quantities of sand at specified prices.
Assuming the sixth clause not to apply to the respective covenants of the parties then the question is reduced to this: Were these covenants absolute ones or were they conditional only?
This does not seem to me to be a case coming within the rule of construction formulated by Blackburn J. in Taylor v. Caldwell, and accepted by a majority of the Court of Appeal in Nickoll & Knight v. Ashton Edridge & Co., as to this contract contemplating the continued existence of some particular specified thing in which case the perishing of the thing without default of the defendant before breach would excuse performance by the party contracting. Nor does it come within the extension of that rule in Howell v. Coupland. It is more analogous to such
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a case as Kearon v. Pearson, 1861, in which the thing contracted for is possible in itself and the contracting party is unable to perform it only through causes beyond his own control such as in that case an unexpected sudden frost, and in the case before us the refusal of the third parties to enter into the contract which the defendant had covenanted would be entered into. In such case, as said by A.L. Smith, M.R., in delivering judgment in Nickoll & Knight v. Ashton Edridge Co. at p. 133, it is the party’s own fault for undertaking unconditionally to fulfil a promise. In the case then before him in which he was delivering judgment the promise made as the court construed it, was a conditional one only.
And so here it comes back to the question: Was the promise of defendant to enter into these five contracts an absolute or merely a conditional promise? Unless clause six of the agreement applies to and modifies the covenant it must, in my opinion, be held an unconditional promise.
The very essence of the covenant was the obtaining by the defendant of the five specified contracts set out, and the refusal of all or any of the parties to enter into them might easily have been anticipated or guarded against.
This covenant sued on formed the consideration for the covenant by plaintiff to indorse defendant’s note for $5,000. That he should have absolutely bound himself so to indorse and assume all the risk of the third parties refusing to enter into their contracts would seem very strange. We cannot imply any qualification of an absolute covenant such as
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this. The nature of the covenant and the circumstances would not warrant such an implication. If the parties had intended any qualification of the language used it is their own fault not to have expressed it; but I think their subsequent conduct in obtaining plaintiff’s indorsement of the $5,000 note a good indication of what they themselves thought the agreement meant.
I would allow the appeal and restore the judgment of the Divisional Court with costs in all the courts.
IDINGTON J.—I think the appeal should be allowed and the judgment of the Divisional Court of the 10th January 1907 be restored with costs of this appeal and that to the Court of Appeal for Ontario.
I read the covenant as absolute.
The reasoning relied upon to qualify such absolute terms as used was rejected in the somewhat analogous case of Watson v. Charlesworth and in appeal, Charlesworth v. Watson.
The Courts there held that the incorporation in the covenant itself of words of similar import to those in the subsequent covenant here relied upon to qualify could not be held as qualifying or restricting a covenant otherwise absolute.
MACLENNAN J. (dissenting).—I am of opinion that we ought to dismiss this appeal. I agree entirely with the reasons for judgment given by the majority of the learned judges in the Court of Appeal, and also with those of Mr. Justice Anglin.
It was urged very strongly before us that the re-
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spondent should have pleaded that he had been unable to procure the three contracts in question, and not having done so, was precluded from proving it in the Master’s office.
I think it is an answer to that argument that there is no allegation in the statement of claim that those contracts had not been procured. And it is entirely consistent with the statement of claim that they had. The case alleged by the appellant is that the respondent had sold his sand pit, and failed to sell sand to the amount of 75,000 yards; and also that by selling he made it impossible to carry out his contract. Not a word about the agreements, or some of them, not having been procured.
The respondent failed to prove the various defences set up by him, and the judgment at the trial was a declaration that the defendant had been guilty of a breach of the contract, by reason of having put it out of his power to perform it by selling the sand pit. To this was added a reference to assess the damages suffered by reason of that breach.
It is evident that the question whether the respondent could or could not have obtained the contracts, became material for the first time on the question of damages, and that the master’s office is the proper place for the inquiry.
DUFF J.—Not a little difficulty arises upon the construction and effect of clause 6; and it has been with some hesitation that I have come to the conclusion that this part of the agreement does not relax the stringency of the earlier clause. Of this last mentioned clause—after the most attentive consideration of Mr. Collier’s concise and forcible argument—I
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think the construction advanced by the appellant is the true construction. The reasons which have led me to this opinion are compactly stated by Riddell J. in the court below; and it would be a superfluity to add anything to what he has said.
Appeal allowed with costs.
Solicitor for the appellant: Thomas F. Battle.
Solicitors for the respondent: Griffiths & McGuire.
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