McDermott v. Black
(1940) 63 CLR 161(1940) 13 ALJR 558
(Judgment by: Starke J)
McDermott
v Black
Judges:
Latham CJ
Rich J
Starke JDixon J
McTiernan J
Judgment date: 11 March 1940
Judgment by:
Starke J
The appellant (McDermott) sold to the respondent (Black) 4,000 fully paid one pound ordinary shares in the capital of Younger Set Pty Ltd for £16,000, of which sum £2,000 was to be paid on or before 24th May 1937, and the balance of the purchase money on or before 31st May 1937. The sum of £2,000 was not paid on or before 24th May, but, a few days later, Commonwealth bonds of the face value of £2,000 were delivered and accepted in satisfaction of the sum of £2,000 mentioned in the contract. The time for payment of the balance of the purchase money was extended to 26th June 1937.
When the respondent's attention was drawn to the fact that the balance of purchase money was payable on or before that day, he alleged that the agreement was procured by various representations which he called upon the appellant to prove. The appellant denied the representations and called upon the respondent to complete the contract. The respondent did not do so, but his solicitor intimated that he was instructed "to withdraw all allegations imputing anything improper to" the appellant, "conditional upon" the appellant "agreeing to three weeks time from" 15th July 1937 "in which to pay the balance of £14,000 in order to complete the transaction." Ultimately, the appellant agreed to accept the withdrawal and to grant three-weeks' further time as required by the respondent.
The respondent did not pay the balance of purchase money on the appointed day, and the appellant gave notice that he required payment on a day which he fixed, otherwise he would proceed to dispose of the shares elsewhere, and, in the event of any loss, hold the respondent responsible in damages to make good the loss. But the respondent did not pay on the day appointed (11th August 1937), and the appellant, about the same day, elected to rescind the contract for breach thereof and communicated his election to the respondent.
In November of 1937 the respondent issued his writ in this action. By his statement of claim he alleged that the agreement which he made with the appellant was procured by false and fraudulent representations and that upon discovering the falsity of the representations he had avoided the contract. And he claimed a declaration that the contract was so avoided, return of the Commonwealth bonds with interest thereon or, alternatively, rescission of the contract and damages.
His claim for a declaration that he had avoided the contract or, alternatively, for rescission, may be dealt with summarily. The respondent affirmed the contract when he withdrew his allegations of impropriety against the appellant and accepted an extension of time to complete it, and, in any case, the contract was rescinded in August 1937 by the appellant owing to breach on the part of the respondent. So the respondent's cause of action must be limited to damages for deceit.
At the trial Martin J, who tried the action, found that the appellant had made certain false and fraudulent representations to the respondent, which had induced him to enter into the contract, and he gave judgment in his favour. The judgment does not follow the usual form and is rather inappropriate in a common-law action for deceit. It ordered delivery up of the Commonwealth bonds together with interest thereon or, if the bonds were no longer held by the appellant, that he pay to the respondent the sum of £2,000 and interest thereon.
The appellant denied that he had made the representations, but he also relied upon the withdrawal of all allegations imputing anything improper to him in return for the giving of three-weeks' extension of time to complete the contract. This agreement was relied upon as an accord and satisfaction or as an agreement for valuable consideration, absolute and unqualified, not to sue, which operates as a release. But the learned trial judge said that the language of the agreement was far too vague for that and afforded no defence. Vagueness, as has been said, is a misleading term. An agreement may be so vague in its terms that it cannot be understood, and in that case it is of no effect in law or in equity (per Bowen LJ, Re Clarke; Coombe v Carter). [1] But an agreement is not vague because it is wide in its terms or presents difficulties in its interpretation (Tailby v Official Receiver). [2] "If it is possible to discover" the meaning of the agreement "by construction ... it cannot be said that it ought not to be enforced because it is too vague" (In re Kelcey; Tyson v Kelcey). [3]
The meaning of the agreement is, I think, fairly clear. The respondent desired to go on with his contract if he could raise money to complete it, but he required further time in order to do so. The appellant did not require that all imputations upon his character should be withdrawn before he would negotiate about an extension of time. It was the respondent who suggested that he would withdraw all imputations upon the appellant if he were given further time. A business arrangement was proposed, and an interpretation should be given to it that best effects the intention of the parties and makes it efficacious. A withdrawal of allegations of false representations on the part of the appellant would be useless from a business point of view if it had only an evidentiary value or was but an affirmation of the agreement, still leaving the appellant open to an action for damages for deceit. Consequently, the respondent's proposal that he would withdraw all allegations imputing anything improper to the appellant means, I think, that he would not bring any action against the appellant in respect of those allegations if an extension of time were granted to him of three weeks from a specified date so that he might complete the contract. And this proposal was accepted by the appellant.
The arrangement was, in effect, the release from an obligation to pay damages for deceit in return for a valuable consideration -- an extension of time -- which is in law an accord and satisfaction. "There is no doubt that the general principle is that an accord without satisfaction has no legal effect and that the original cause of action is not discharged as long as the satisfaction agreed upon remains executory ... . If, however, it can be shown that what a creditor accepts in satisfaction is merely his debtor's promise and not the performance of that promise the original cause of action is discharged from the date when the promise is made" (Morris v Baron & Co; [4] British Russian Gazette & c Ltd and Talbot v Associated Newspapers Ltd). [5] The satisfaction in the present case was the promise of the appellant to extend the time, but, whether this is so or not, the promise was actually performed.
Another view of the arrangement is that it operated in equity, if not at law, as a release of the cause of action for deceit. An absolute covenant not to sue amounts to a release, whilst a covenant not to sue for a limited time has no such effect (Bullen and Ledke on Pleading, 3rd ed (1868), pp 669,670; Walmesley v Cooper; [6] Ford v Beech; [7] Ray v Jones). [8] But for the common-law rule that the release of a cause of action once accrued must be by deed under seal (Harris v Goodwyn), [9] the arrangement might, I apprehend, have been pleaded as a release at common law. A parol agreement, however, which amounts in terms to a release, made for consideration, can be pleaded as a defence upon equitable grounds (Bullen and Leake on Pleading, 3rd ed p 669) -- Cf. De Pothonier v De Mattos; [10] Keyes v Elkins; [11] Edwards v Walters. [12] Consequently, the agreement in the present case might be so pleaded and sustained because the promise not to bring any action was an absolute covenant not to sue and therefore operated as a release. It was a promise for valuable consideration -- an extension of time -- and so binding in equity.
Some suggestion was made that this promise was procured, as well as the original contract, by the fraudulent statements found by the trial judge, but no evidence was adduced in support of the suggestion.
Another suggestion was that the arrangement only operated in respect of false statements of which the respondent was aware at the time of the arrangement: Cf. S Pearson & Son Ltd v Dublin Corporation. [13] But the respondent agreed to withdraw all allegations imputing anything improper to the appellant, and I see no equitable ground for relieving him of that promise, especially as in his answers to interrogatories he did not impute the statements now relied upon by him to the appellant and the trial judge did not explicitly find the appellant made those statements but only that he probably did so.
This appeal should, therefore, be allowed and the action dismissed as against the appellant.