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Morley v. Richardson

65 CLR 512

(Judgment by: McTiernan J)

Between: Morley
And: Richardson

High Court of Australia

Rich J
Starke J
McTiernan J
Williams J

Subject References:
Commercial contract
Whether speculative transaction by way of gaming or wagering

Legislative References:
Gaming and Betting Act 1912 No 25 - s 16

Hearing date: 13 April 1942
Judgment date: 30 April 1942


On Appeal from the Federal Court of Bankruptcy.

Judgment by:
McTiernan J

In my opinion these appeals should be dismissed.

Each appellant gave evidence directly proving that he was invited by the respondent (Brown) to bet with him on the price of wheat. But Judge Lukin considered that no credit should be given to either appellant as a witness, and rejected his evidence. There are no grounds for setting aside this opinion, and the question whether the contracts were wagering contracts falls to be decided on facts about which there can be no dispute, and on the evidence of the respondent Brown, which Judge Lukin accepted as being truthful. The course of dealing between each appellant and the respondent (Brown) was that each appellant entered into a long series of contracts with the respondent (Brown) for the purchase of wheat warrants from him covering a very large quantity of wheat and into a series of counter contracts for the resale of the wheat warrants so purchased, and that differences were paid from time to time upon settling accounts, but nothing was ever received or delivered under any of the contracts.

From these facts standing alone the conclusion might be reached that, despite the form of the contracts, the parties did not intend, when entering into these contracts, to buy and sell wheat warrants or wheat; but that it was their common intention to wager or bet on the price of wheat by making contracts for the purchase and repurchase of wheat, and agreeing that the party against whom the differences stood should pay: Cf. Grizewood v Blane. F14 But Judge Lukin accepted the evidence of the respondent (Brown), which gives a detailed account of his part in the transaction. He saidthat what he did was to resell to the Morleys wheat that he had bought "from Sydney houses." It was sold at a price enabling him to make the equivalent of a commission. The respondent (Brown) denied that any agreement was made outside the written contract to repurchase the wheat sold to the Morleys. The respondent (Brown) was a buyer as well as a seller of wheat. The question of the tender or delivery of warrants never arose, because the Morleys always sold the wheat included in their purchase before the date for tender arrived. The respondent (Brown) was willing either to sell or to buy from them. He repurchased from the Morleys when the wheat market dropped. It is of course not unlikely that the Morleys would be anxious to resell in order to prevent their losses from growing when they saw a downward trend in the price, and the respondent was the available buyer. His profit was not the whole amount of the loss sustained by the Morleys. He said: "I would not get the amount of the loss sustained by the Morleys. I would have paid that to the Sydney merchants at the then market price, getting perhaps the commission." The amount of the commission that the respondent aimed at making was a farthing a bushel, but sometimes he made a halfpenny a bushel.

If the evidence of the respondent (Brown) be accepted-and I see no grounds upon which it can be rejected-it is impossible to reach the conclusion that the contracts are not what they purport to be, that is, genuine commercial transactions. The evidence clearly proves that both appellants were speculators. But that is not enough upon which to arrive at the conclusion that the respondent (Brown) was wagering with them (Thacker v Hardy; F15 Forget v Ostigny). F16 It is necessary for a wagering contract that the intention to wager shall be common to both parties (Carlill v Carbolic Smoke Ball Co). F17 The contracts being real commercial transactions, it was legitimate for the parties to set off their respective liabilities under the contracts (Thacker v Hardy). F18 Cotton L.J. said in Thacker v Hardy: "the essence of gaming and wagering is that one party is to win and the other to lose upon a future event, which at the time of the contract is of an uncertain nature-that is to say, if the event turns out one way A will lose, but if it turns out the other way he will win". F19 This statement was adopted by Lord Watson in Forget v Ostigny: F20 See also Carlill v Carbolic Smoke Ball Co F21 and Richards v Starck. F22 It was not the essence of the transactions in the present case that one party was to win and the otherto lose according as the price of wheat rose or fell. The evidence shows that the respondent (Brown), whose business it was to transact such business, entered into the transactions with the intent of realizing only the equivalent of a commission. The evidence does not show that he was wagering with either respondent for a stake equivalent to the difference between the contract price in the contracts under which the appellants bought and those under which they sold back to him.

It follows that the ground upon which the annulment of the sequestration order is sought fails.

Case Judgement
Table of contents
  Judgment by Rich J
  Judgment by Starke J
  Judgment by McTiernan J
  Judgment by Williams J

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