McDermott v. Black
(1940) 63 CLR 161(1940) 13 ALJR 558
(Decision by: Latham CJ)
McDermott
v Black
Judges:
Latham CJRich J
Starke J
Dixon J
McTiernan J
Judgment date: 11 March 1940
Decision by:
Latham CJ
The plaintiff Black made an agreement with the defendant McDermott to purchase for £16,000 four thousand shares in a company which conducted a dance hall. He delivered to the defendant Commonwealth bonds to the value of £2,000 as an initial payment. Before he made any further payment he wrote to the defendant complaining that the defendant had made certain misrepresentations -- four in number. The defendant in his subsequent correspondence admitted that if the alleged statements had been made they were misrepresentations, but denied that he had made them. After further correspondence between the solicitors for the parties the plaintiff withdrew the allegations of misrepresentation and the defendant agreed to allow an extension of time for completion of the contract. The plaintiff did not pay the balance of purchase money within the extended time, and the defendant determined the contract. The plaintiff sued the defendant for rescission of the contract, for restitution and, alternatively, for damages. One, Swann, was joined as a defendant, it being alleged that he also made material misrepresentations to the plaintiff which induced the plaintiff to enter into the contract.
The learned trial judge (Martin J) found that certain of the misrepresentations alleged in the correspondence were made by McDermott, that they were false to his knowledge, that they were material, and that they induced the plaintiff to enter into the contract. He gave judgment for the plaintiff for the return of the bonds with interest at four per centum from the day on which they were handed over until judgment or, alternatively, for payment of £2,000 with the said interest. The liability of Swann was reserved for further consideration. Swann was served with a notice of appeal but did not appear upon the appeal.
The defendant contends that the arrangement for withdrawal of the allegations made by the plaintiff and for an extension of time constituted a bar to the maintenance of the action. It was argued that this arrangement amounted either to a release of any cause of action based upon these allegations or to an agreement not to sue in respect of them. The learned judge found that another misrepresentation was made, which was not mentioned in the correspondence, and the allegation of which therefore was not withdrawn by the plaintiff. As to this misrepresentation the defendant contends that the learned judge made his finding under the misapprehension that it was corroborated by a particular witness and that, as the finding was made upon the basis of this mistake, this court may properly set it aside.
The first question which arises relates to the character and legal effect of the arrangement (to use a relatively non-committal term) for the withdrawal of allegations of misrepresentation. The learned judge held that the alleged arrangement was "too vague a thing to-be enforceable as a contract."
I am unable to agree that a withdrawal of damaging allegations is a matter so vague as to be incapable of being an element in a contract. Such a withdrawal, especially when, as in this case, the withdrawal is evidenced by writing, may be regarded as of real value and importance as an abandonment of serious imputations against the character of the person in respect of whom they are made.
It has been contended by the defendant that no agreement, vague or otherwise, was made, because an examination of the correspondence shows that at no point was there an acceptance of an offer which still remained open. The relevant correspondence begins on 9th July 1937 with a letter from the plaintiff's solicitor in which he refers to the difficulties which have arisen between the parties and, stating that he is endeavouring to arrange an amicable settlement, says: "I feel confident that matters can be arranged, and if so, I will induce Mr Black to withdraw bis allegations against Mr McDermott." On 15th July 1937 the defendant's solicitor wrote the following letter to the plaintiff's solicitor: -- "Referring to my letter of 9th instant herein written without prejudice to you Mr Black saw me to-day and has instructed me to withdraw all allegations imputing anything improper to Mr McDermott. The accompanying letter will explain the whole matter."
The accompanying letter was in the following terms: "My letter herewith is conditional upon Mr McDermott agreeing to three weeks' time from to-day in which to pay the balance of fourteen thousand pounds in order to complete the transaction." The reply from the plaintiff's solicitor, dated 21st July, did not accept this offer but required a further payment by way of deposit on 23rd July. This was plainly a counter-offer.
On 23rd July the plaintiff's solicitor wrote objecting to the endeavour "to impose other conditions which were not provided for in the contract," and said that his client wished to go on with the contract and to complete his payments on or about 6th August. On 24th July the defendant's solicitors wrote a letter in which they stated that their client had reconsidered the position and that in the circumstances he was "prepared to accept the withdrawal and to grant three weeks further time." The three weeks asked for on 15th July would expire on 5th August.
On 28th July the defendant's solicitors wrote asking for a note confirming the plaintiff's intention as to completing his purchase "in accordance with the terms indicated in such letter" (the letter of 24th July). On 29th July the plaintiff's solicitor sent such a note. The letter stated that the plaintiff "instructs me to inform you that he intends completing the purchase within the time mentioned in the letter to you of 15th instant" -- that is, by 5th August.
This correspondence shows that on 28th July the defendant's solicitors asked the plaintiff to state whether or not he would complete his purchase in accordance with the term indicated in a particular letter, namely, the letter of 24th July which referred to the proposed three-weeks' extension of time. The correspondence showed that this extension of time, originally suggested by the plaintiff, was sought only upon the basis of a withdrawal of the allegations contained in the correspondence. On 29th July this proposal was accepted by the plaintiff. Thus, in my opinion, an agreement was made between the parties whereby the defendant agreed to extend the time for completion to 5th August in consideration of the plaintiff withdrawing the allegations of misrepresentation which he had made in his earlier letters and whereby the plaintiff withdrew the allegations in consideration of receiving that extension of time.
It is now contended that the withdrawal of the allegations (or the promise to withdraw the allegations) amounted to an agreement to release any cause of action based upon the misrepresentations or at least to an agreement not to sue upon them. This agreement was made for consideration, namely, an extension of time (which was in fact given), and therefore is binding upon the plaintiff and, it is urged, is accordingly a reply to the present action. In my opinion this contention seeks to attach a meaning to the word "withdraw" which it is not fairly capable of bearing. The withdrawal of injurious imputations has a plain and simple meaning. The imputations in question are withdrawn in the sense that they are retracted or taken back. If the other party concerned wishes to safeguard himself against any repetition, he may, if he can, obtain a release of any rights of action based upon the imputations or he may obtain an agreement not to sue. He may, on the other hand, be content with having the evidence of withdrawal which he will be in a position to produce if ever the allegations should be repeated. In a case where allegations are withdrawn and the parties accordingly expect a transaction to go through without further difficulty, they may be content to allow the matter to stand at a withdrawal without obtaining either a release of rights of action or an agreement not to sue.
In this case the plaintiff and defendant were content to rest upon the simple withdrawal of the allegations. The allegations were withdrawn, and the extension of time was duly given, and accordingly the contract which was actually made was in fact performed. I am of opinion that though the arrangement is not so vague as to be incapable of amounting to a contract, the agreement to withdraw the allegations and the actual withdrawal of the allegations did not amount to or imply any promise binding the plaintiff in the future never to rely upon the allegations as a cause of action -- though the fact that he had withdrawn his statement that the misrepresentations were made would be a matter for consideration by a tribunal in determining whether the plaintiff was speaking the truth when he revived them. For the reasons which I have stated I am of opinion that the agreement relied upon by the defendant does not constitute an answer to the plaintiff's claim in the present case. It is therefore unnecessary for me to consider the argument for the defendant relating to the further representation which was not included in the correspondence and which therefore was not withdrawn. The judgment can be supported upon the basis of the representations made in the correspondence, upon which, as I have already said, the plaintiff is not, in my opinion precluded from relying.
The judgment is framed upon the basis of rescission of contract and restitution. In fact the contract was determined by the defendant on the ground of breach by the plaintiff in failing to pay the purchase money. This had been done before the plaintiff renewed his allegations of misrepresentation, added other similar allegations, and claimed his money back. The judgment should, it is argued, have been for damages for deceit and not for the return of the bonds or for a sum of money with interest. It is not disputed, however, that upon any basis the amount recoverable by the plaintiff, if he is entitled to recover damages at all, would amount to the sum of £2,000 with interest. I think that the judgment should be amended so as to become a judgment for the plaintiff for damages, such damages to be calculated by adding to the sum of £2,000 interest at the rate of four per centum per annum from 28th May 1937 up to 30th August 1939 (the date of judgment), that is, for £2,180 12s.
Subject to this variation the appeal should, in my opinion, be dismissed.