McDonald v Dennys Lascelles Ltd
48 CLR 4571933 - 0515B - HCA
(Judgment by: RICH J)
McDonald
v Dennys Lascelles Ltd
Judges:
Rich JStarke J
Dixon J
Evatt J
McTiernan J
Subject References:
Contract
Vendor and purchaser
Installments of purchase money
Purchaser in default
Rescission
Rights of parties
Mortgages and securities
Sale of land
Default by purchaser
Default by vendor under earlier contract
Rescission of vendor's contract
Subsequent rescission by purchaser
Discharge of surety
Judgment date: 15 May 1933
SYDNEY
Judgment by:
RICH J
In this case I have had the advantage of reading the judgment prepared by my brother Dixon and I agree with his conclusion and reasons.
I desire to add that, although, upon examination, the decisions as to relief of sureties by reason of the discharge of the original debtor appear to draw no clear lines between the discharge, on the one hand, of the surety because the creditor has altered the relations between himself and the principal debtor, upon the subsistence of which the surety is entitled to rely, and, upon the other hand, cases in which the surety is relieved regardless of any fault in the creditor simply because, through the failure of the principal liability, the groundwork of the accessory obligation has disappeared, yet I cannot doubt that English law, like the civil law, does not insist upon the fulfilment of the surety's liability where the creditor has become disentitled to the benefit intended to be secured by the principal obligation.
In cases in which the bankruptcy law, or the law relating to the winding up of companies, or the law authorizing compromises and schemes of arrangement among shareholders and creditors of companies, absolves the principal debtor from liability, the object is not to disentitle the creditor from the benefit which the principal obligation was intended to secure, but merely to change the nature of his right, in the interests as well of himself as of all others who have claims of like degree against the debtor. Once it is decided, as upon the authority of Mayson v Clouet [F1] I think it must be decided, that as between purchaser and vendor the vendor cannot retain, let alone recover, an overdue instalment of purchase money after the contract has come to a premature end even by his own fault, I think it follows that no guarantee of such an instalment could be enforced by the vendor.
I do not see upon what principle a vendor's assignees can stand in any different position. The obligation in this case incurred by the appellants was that of guarantors. I have not been able to see any reason for treating it as an independent, as opposed to a collateral, obligation. It secures the same sum of money: it is described as a guarantee and, to the knowledge of the creditor, as between the appellants and the purchasers, the purchasers' liability was primary and the appellants' secondary. Of course there was nothing to prevent a contract being made between the appellants and the respondent imposing upon the latter an absolute liability to pay the sum of PD1,000 whatever happened as between the respondent and the purchasers, but it would be contrary to principle. I think, to treat a document described as a guarantee, by which due payment of a sum described as an instalment is guaranteed, as having such an independent and absolute operation.
I think the appeal should be allowed and judgment entered for the defendants.