(1997) 51 WIR 374

Elias v Elias (No 1)

COURT OF APPEAL OF TRINIDAD AND TOBAGO

SHARMA, GOPEESINGH AND PERMANAND JJA


26 JANUARY 1996; 23 JANUARY 1997



Specific performance - Agreement - Agreement as to price at which shares to be purchased - Litigation terminated by consent order - Collateral undertaking as to purchase of shares - One party to agreement irreversibly altering position to his detriment by entering into consent order - Specific performance of agreement - Rules of the Supreme Court 1975 [T], Order 83

An action was instituted in the High Court by a company against the respondent and a third party. The appellant was the managing director of the company. An oral agreement was concluded to settle the action on the basis of the appellant purchasing shares in the company (the shares having been bequeathed to him by will at a fixed price) at a fair valuation in accordance with the company's articles of association. The agreement was confirmed in writing. A consent order effectively disposing of the action was duly entered, the court noting a collateral undertaking given by the appellant's attorneys at law to the third party confirming the appellant's willingness to purchase the shares at a fair valuation in accordance with the articles of association. The appellant nevertheless purchased the shares at the price fixed by the will. The respondent applied for specific performance of the agreement under Order 83 of the Rules of the Supreme Court (summary judgment for specific performance). The trial judge ordered specific performance of the agreement and the appellant appealed to the Court of Appeal.

Held, dismissing the appeal, that faced with undisputed evidence in the affidavits by both parties the trial judge had properly resisted the appellant's argument for a full hearing; and, in the absence of any suggestion that the agreement had been unfair or unreasonable or that the appellant had not been adequately advised, specific performance of the agreement could properly be ordered as the respondent had irreversibly altered his position to his detriment by entering into the consent order.

(1997) 51 WIR 374 at 375

Cases referred to in the reasons

Beswick v Beswick [1966] Ch 538, [1966] 3 All ER 1, [1966] 3 WLR 396, England CA; affirmed [1968] AC 58, [1967] 2 All ER 1197, [1967] 3 WLR 932, HL.

Binder v Alachouzos [1972] 2 QB 151, [1972] 2 All ER 189, [1972] 2 WLR 947, England CA.

Appeal

Joseph Elias appealed to the Court of Appeal of Trinidad and Tobago (civil appeal 56 of 1992) against the order of Best J on 1 April 1992 ordering specific performance of an agreement whereby the appellant (the managing director of Nagib Elias & Sons Ltd) would purchase certain shares in the company at a fair valuation in accordance with the company's articles of association and High Court action 2572 of 1985 instituted by the company against Emile Elias (the respondent to the appeal) and Michael Elias would be settled. The Court of Appeal dismissed the appeal on 26 January 1996, but reserved its reasons. The facts and the grounds of the appeal are set out in the judgment of Gopeesingh JA.

B Procope SC and C Phelps for the appellant.

A Fitzpatrick for the respondent.

Cur adv vult.

23 January 1997. The following judgments were delivered.

Gopeesingh JA delivered the following reasons. After hearing arguments in this matter on 26 January 1996, the court dismissed the appeal and affirmed the trial judge's order dated and entered on 1 April 1992, save in so far as the same was amended by this court.

The appellant and respondent are brothers and the children of Nagib Elias and Linda Elias, both deceased. By her will dated 8 April 1982, Linda Elias appointed the appellant and one Robert Matouk (now deceased) executors. By that will the testatrix directed 'that 2253 shares [held by her] in Nagib Elias & Sons Ltd be transferred to Joseph Elias [the appellant], absolutely, at the minimum price of $1000 each'.

It is not in dispute that the appellant is and was, in 1985, a director of Nagib Elias & Sons Ltd. That company sued the respondent and one Michael Elias (a nephew of both the appellant and the respondent), in High Court action 2572 of 1985. In that action Michael Elias, an attorney at law, acted on behalf of the respondent and on his own behalf. In an effort to resolve what was essentially a family dispute Michael Elias entered into negotiations with attorney at law acting on

(1997) 51 WIR 374 at 376

behalf of the company in that action. These negotiations culminated in an oral agreement to the effect that the High Court action would be settled on the basis that the shares held by Linda Elias (which she had directed be transferred to the appellant) would be purchased by the appellant at a fair value in accordance with the articles of association of the company. That agreement was later confirmed by a letter written by attorney for the company in that action dated 12 July 1985. That letter reads:

'We are enclosing a copy of the consent order in the above matter (action 2572 of 1985). We have instructions from Mr Joseph Elias [the appellant] to confirm that he is prepared to purchase the shares of Linda Elias, deceased, at fair value in accordance with the articles of association.'

Pursuant to that oral agreement, confirmed by the letter quoted above, a consent order was entered into in High Court action 2572 of 1985 on the same date as that letter, namely 12 July 1985. By that consent order that action was effectively disposed of.

It is pertinent to observe that on the day before that consent order was entered into (as reflected in the trial judge's note book which we have had the opportunity of viewing), namely 11 July 1985, the following note appears:

'Undertaking will be given by company by managing director, Joe Elias [the appellant], with regard to purchase of certain shares and will be recorded in separate document but not to be included in formal order but will require court to make a note.'

On the following day, when the consent order was entered into before the judge, the following is reflected in the judge's note book:

'Resumed 12th July 1985

'No 2572 of 1985

'Appearances as before.

'Consent order dated 12th July 1985 initialled by Mr R. Nelson for [company] Mr M. Elias for defendants: Order in terms of initialled draft.

'Court also notes a collateral undertaking by letter dated 12th July 1985 from Messrs Hamel-Smith & Co to M. Elias [second defendant] containing instructions from Joseph Elias [company's managing director] to confirm that he is prepared to purchase the shares of Linda Elias, deceased, at fair value in accordance with the articles of association.'

Notwithstanding this clear commitment on the part of the appellant by way of the agreement alluded to earlier, the appellant proceeded to

(1997) 51 WIR 374 at 377

exercise the option on 18 May 1989 given him by the will and purchased the number of shares mentioned therein (2253) at the minimum price fixed by the testatrix.

Subsequently, by writ of summons dated 18 October 1989, the respondent commenced the instant action. On 19 February 1990, a statement of claim was delivered. The respondent claimed therein 'a declaration that the said agreement is a valid and subsisting agreement and is binding upon the [appellant]; specific performance of the said agreement', and other ancillary orders and costs. The appellant served his defence in March 1990. Being of the view that the defence was a sham and disclosed no defence, the respondent proceeded to issue a summons dated 20 April 1990 under Order 83 of the Rules of the Supreme Court of Judicature (1975) of Trinidad and Tobago (the English counterpart of which is Order 86), for specific performance of the agreement.

The trial judge, after reviewing both the affidavits filed in support of and in opposition to the summons and after comparing and contrasting the competing views expressed, found that it was conclusively established on the documentary evidence that attorneys who appeared on behalf of the company and the defendants in action 2572 of 1985 entered into the negotiations in question; that at the time attorney for the company acted on the clear instructions of the appellant as managing director of the company; that there was a concluded agreement entered into by the appellant and respondent; and that that agreement had been confirmed by the letter written by attorney for the company in that action on 12 July 1985. The judge concluded that the respondent was 'entitled to specific performance to enforce the contract between himself and Mr Joseph Elias [the appellant]' and gave judgment for the respondent in terms of the minutes of order attached to the summons filed on 20 April 1990.

Being dissatisfied with that decision the appellant, by notice dated 23 April 1992, filed the instant appeal. Several grounds of appeal were stated therein.

It is not in dispute that the appellant is now the sole executor of the estate in question, the other executor (Robert Matouk) having since died. The administration of the estate, therefore, from which he stands to benefit more than any other beneficiary, is solely in his hands.

In essence, senior counsel for the appellant contended that issues of fact and law arose on the affidavit evidence filed both in support of and in opposition to the Order 83 summons, which rendered it necessary that those issues be determined at a trial. The trial judge was, therefore, wrong to attempt to determine these issues without evidence being led at a trial and cross-examination thereon. The particular issues identified by senior counsel were whether, on the facts, any consideration passed from the respondent to the appellant, or vice versa. He submitted that since, on the face of the consent order entered in action 2572 of 1985, there was no reference to the undertaking reflected by the judge before

(1997) 51 WIR 374 at 378

whom the consent order was entered, at most such undertaking was collateral and could be construed as consideration. As a consequence, he contended, there was no concluded agreement between the parties. He also pointed to the fact that the fair value of the shares undertaken to be purchased by the appellant was to be ascertained in accordance with the articles of association. He further contended that the question of the bona fides of the parties could not be determined without cross-examination. It was also submitted that, having regard to all the circumstances, the question whether the respondent had the locus standi to institute the instant action was pre-eminently suited for determination at a trial.

I think it is well settled, both at common law and in equity, that -

'although, as a rule, where there is a contract for the benefit of a third person, the third person cannot sue alone in his own name, nevertheless, there is no difficulty in one contracting party suing the other for breach of the promise.'

See Beswick v Beswick [1966] 3 All ER 1, affirmed by the House of Lords on appeal at [1967] 2 All ER 1197. As Lord Denning MR put it ([1966] 3 All ER at page 7):

'Face to face with the contracting party, the defaulter has no defence. He is sued by one who has provided consideration and to whom he has given his promise to pay the third person. He has broken his promise and must pay damages. The defaulter sometimes seeks to say that the contracting party can only recover nominal damages: because it is not he, but the third person who has suffered the damage. The common law has never allowed the defaulter to escape by such a shifty means. It holds that the contracting party can recover the money which should have been paid to the third person. He can get judgment for the sum and issue a writ of fieri facias or other machinery to enforce payment: but when he recovers it, he holds the proceeds for the benefit of the third person. He cannot retain the money himself, because it belongs to the third person and not to him ... It is money had and received to the use of the third person.'

And Lord Denning went on to say (at page 8):

'These cases in equity fit in exactly with the common law. The contracting party is entitled by himself alone, or jointly with the third person, to have the contract performed according to its terms, and the court will decree specific performance of it.'

I think that it is pertinent to observe that, although the respondent has absolutely no connection with the estate of Linda Elias (his mother),

(1997) 51 WIR 374 at 379

nevertheless it is evident that the agreement into which he entered and which he seeks to have enforced, was not entered by him on behalf of the estate and he does not seek to have it enforced on the estate's behalf. Rather, he entered it for the benefit of the estate and seeks to have it enforced for the estate's benefit. It is a personal action by him based on an agreement concluded by him with the appellant, through their respective attorneys at law. Any order made in his favour consonant with the reliefs claimed would benefit the estate. On the other hand, any order made against him would affect him personally and would not bind the estate. Similarly, the appellant is sued in his personal capacity, not as executor of the estate nor as managing director of Nagib Elias & Sons Ltd.

Now it is evident that the consideration which passed from the respondent to the appellant was that he consented to action 2572 of 1985 being settled in terms of the consent order. And the consideration which passed from the appellant to the respondent was that a benefit would accrue to the third party, namely the estate of Linda Elias. Whilst the undertaking given by attorney at law on the appellant's behalf in action 2572 of 1985 was not embodied in the consent order entered into in that action, it is plain that the reason for the mutual request made to the judge on the day before this order was entered into and the resulting notation of the undertaking on the following day, was to prevent the appellant from seeking to renege from that undertaking subsequently, as indeed he has vainly sought to do, resulting in the instant action. I think that, notwithstanding his brave attempt to do so, it is worth noting that although in his defence he sought to disavow the letter written by his attorney at law on 12 July 1985 (by alleging that he was a stranger thereto and that he did not admit the agency and authority of his attorney at law to agree on his behalf, or that the consent order was in fact entered into), not only did he not specifically deny those facts in his affidavit, but when confronted with his statement made in a previous affidavit sworn in other proceedings on 3 April 1987 'that it is true that I have expressed my willingness, notwithstanding the terms of the said will, to purchase the said shares at a fair value in accordance with the articles of association of the company', he resiled from that position, confirmed that he swore the affidavit and deponed that he instructed his attorneys at law to amend his defence. Not only was this so, but in the affidavit, it is to be noted that, contrary to the submission made before this court by senior counsel for the appellant, the appellant categorically said: 'This said offer was certainly not part of or collateral to or made in consideration of the consent order referred to ...'

In the face of these apparent contradictions, therefore, was it not reasonable for the judge to have concluded as he did that -

'based upon the inconsistencies apparent on the face of the evidence presented by Joseph Elias, I have formed the opinion that he operated in bad faith with respect to the agreement concluded on 12th July 1985.'

(1997) 51 WIR 374 at 380

I think that the answer to this question must, of necessity, be in the affirmative. In the circumstances, therefore, I do not share the view expressed by senior counsel for the appellant that this question could not have been determined by the trial judge without cross-examination. Indeed, although leave to cross-examine deponents is rarely granted on an Order 83 application, no application was in fact made to cross-examine the respondent on the affidavit filed by him in the instant proceedings.

Now, whilst it is true that the fair value of the shares was to be ascertained 'in accordance with the articles of association', there was abundant evidence that shares in Nagib Elias & Sons Ltd were valued in 1989 (the year of the instant action) at $4453 per share. In fact, in a letter from attorney at law for the appellant to the respondent dated 6 November 1989, there is clear evidence that the appellant had offered this sum per share for three hundred and thirty-three shares held by the respondent in that company and that the appellant considered that offer 'to be fair, just and equitable' and that a similar offer had also been made to two of the respondent's brothers, namely George and Michael, as well as to a nephew. Is it not a reasonable inference, since this price was fixed by the appellant himself, the managing director of the company, that this value placed on a share was in accordance with the articles of association? In light of this cogent evidence, would it not have been unreasonable for the trial judge to direct that the matter proceed to trial because there was no direct evidence that that was the value placed on a share in accordance with the articles of association? I think that the answers to these questions must be in the affirmative. In any event, it cannot conceivably be argued (nor was it) that the consent order was void for uncertainty as the price of the shares was not fixed. This does not constitute, neither in fact nor in law, an obstacle as the courts will do everything to preserve the contract, especially where the appropriate machinery exists for ascertaining this.

In view of the fact that the judge, as has been demonstrated, was entitled to arrive at the conclusions at which he did on the undisputed evidence in the affidavits filed in the instant application, the remaining question is whether the respondent was entitled to seek a decree of specific performance rather than proceed to trial.

As Lord Denning MR said in Binder v Alachouzos [1972] 2 All ER 189 at page 192 in discussing the two competing considerations which arose in that case:

' ... it is important that the courts should enforce compromises which are agreed in good faith ... If the court is satisfied that the terms are fair and reasonable, then the compromise should be held binding ... Otherwise, there could never be a compromise of such an action. Every case would have to go to court for final determination and decision. That cannot be right.'

(1997) 51 WIR 374 at 381

In the instant matter there was no suggestion by the appellant that the terms of the agreement were unfair or unreasonable. Indeed, the appellant had been represented by able and competent attorneys at law when the agreement was arrived at. In the circumstances, therefore, since the respondent has performed his part of the agreement by entering the consent order in action 2572 of 1985 and his position is now irreversible, in my view it would be only reasonable to order specific performance of the agreement in question especially since his remedy at law for damages suffered by him would be nominal. The appellant should not be permitted to attempt to re-open the agreement at a trial.

In the circumstances, therefore, I agree with the decision at which the trial judge arrived. I would, accordingly, order (and do so order) that the appeal be dismissed with costs both in the court below and before this court to be taxed and paid by the appellant to the respondent.

Sharma JA. I agree.

Permanand JA. I also agree.

Appeal dismissed