Bayne v Blake [1906] HCA 54

Bayne v Blake [1906] HCA 54 - HCA 1906 case summary — Zoe

[101]

The point of illegality is properly a matter of reply. The whole matter was, however, fully investigated at the hearing before the learned Judge, and I think that this Court ought to deal with it on the footing that all necessary amendments were made to raise the question of the plaintiffs' right to have the deed of May 1886 set aside or declared invalid. The learned Judge referred to the Full Court the question of law whether the deed of indemnity was invalid as contrary to publie policy. The Full Court held that it was not invalid on that ground. he only ground of invalidity argued before them, however, was that arising upon the bare fact that it was an indemnity given to sureties to an administration bond. The plaintiffs sought to apply the analogy of an indemnity given toa surety for the appearance of a person held to bail on a criminal charge. It is settled that a contract to give such an indem- nity is void as against public poliey: Herman v. Jewchner (1); Con- solidated Exploration and Finance Co. v. Musgrave (2). I seeno reason to dissent from the opinion of the Full Court on that point. The rights of persons entitled in distribution upon intestacy ave purely civil rights, and the analogy of bail in criminal cases has no application. So far from its being contrary to public policy thata surety in respect of civil rights should be entitled to protect him- self by a contract for indemnity, the law itself ordinarily implies such a contract on the part of his principal. And it is a well-known fact that companies have for many years been in existence, the object of which is to guarantee the faithful performance of con- tracts relating to civil rights. Such companies, the business of which is to act as sureties for others, derive their income from the sums or premiums paid to them as a consideration for enter- ing into the contracts of suretyship. Before this Court, however, the objection of illegality was put on a further ground, namely, that, having regard to the provisions of the law which requires that, before a grant of administration is made, security shall be given to the Court and to the Court's satisfaction for the protec- tion of persons entitled in distribution, a contract which has the effect of a representation to the Court that such security has been given, when in reality it has not, is illegal within the rule

[105]

mother of the Misses Bayne was alive she managed her property and her household affairs by herself, and without in any way consulting her daughters or giving them any information. When she died, Miss Grace Bayne, although a twin with one of her sisters and only three years older than the other, wished and thought it her duty to take her mother's place as far as possible towards her sisters. They desired that she should do so and should have the sole and absolute control of the property without themselves inquiring of what it consisted or what was being done with it, or being in any way troubled about household affairs. The plaintiffs have told us that they were ready to obey their sister Grace in everything, to sign whatever documents she requested them, and without knowing their contents; and even went so far as to permit her to dictate what they should eat and drink, and what clothes they should wear. Messrs. Blake and Riggall, had been the solicitors of the deceased Mrs. Bayne, and after her death Miss Grace went to them, and gradually learnt, as she says, that it was necessary for her as the eldest daughter to take out letters of administration, and that for that purpose she would be obliged to enter into a bond with sureties for the performance of her duty :" and again in his judgment of 31st October: "The apparently simple issue so raised " (i.e. whether the failure of the administra- trix to realise and distribute the estate within a year constituted a violation of the bond) " really opens up the whole question of the relation between Miss Grace Bayne and her sisters in respect of the property to which they were equally entitled in distribution after payment of the debts of the deceased. What was that relation ? Thave already pointed out in my interlocutory judgment what position she wished to oceupy. 'To put it briefly in her own language, she wished to take her mother's place as far as possible towards her sisters ; and they, judging fromn their own account of what they did and said as well as what they left undone and unsaid, thoroughly acquiesced in whatever she thought right.

[126]

Mr. Blake I wrote to Miss Bayne telling her that we would act. I wrote in the name of the firm. I think I had told Miss Bayne before writing that I would ask Mr. Blake if he would act, and having communicated with him I wrote the letter (14th May) after which Miss Bayne called at the office. I told her Blake and Riggall would be prepared to act as stated in the letter if she and her sisters approved. She said they did approve and she would be glad if Blake and Riggall would act. I told Miss Bayne that she and her sisters would have to sign the same document The Union Trustee Co. had asked for. She said there would be no objection to that. I told Miss Bayne that I would like myself to go down and explain the deed to her sisters. I was very busy in the office at the time: we had a heavy litigation and I had been in Court all day and I would come down and explain to them. The document then, I believe, was engrossed. It is Exhibit 6. That document was engrossed after Miss Bayne told me she would like Blake and Riggall to act and I handed it to her. My recollection is that I handed her that document to take home to show her sisters and to read. That was before it was signed. T made an appointment then to go down to their house after they had tea, not the following day but the day after that I think. I said that I would be down at seven or seven-thirty. I went down from 7.15 to 7.30. Their house was in Victoria Parade, East Melbourne. They had the deed there. My recollection is that I saw Miss Grace Bayne first. I forget whether I was let in by a servant or not. I know I saw Miss Grace Bayne. I had seen the other two young ladies before. I think I had seen her sisters, one of them at any rate in the office. I was admitted into the house and went into a room and there were present with me Miss Bayne and the two plaintiffs. The Document Ex. 6 was on the table. Everything had been cleared off the table. It was the dining room. I forget if there was a pen and ink there but Ex. 6 was on the table. I said I had come down to read over and explain the document under Mr. Blake's instruction to them, and I read it through aloud to them. They were listening atten- tively. They were intellectual ladies as far as I could judge. I explained to them - I said: 'I suppose Grace has already

[132]

expression is used in the cases dealing with the application of the doctrine of undue influence to transactions between solicitor and client. The learned Judge was of opinion that there was no evidence of defendants having personally advised either of the plaintiffs or having in any other way acted as their solicitors. There is no doubt that they acted as the solicitors for the adminis- tratrix in all matters relating to the grant of administration. Possibly, perhaps even probably, the relation of solicitor and client did not exist between the defendants and the plaintiffs in the sense that the latter were personally liable to be sued for any costs incurred in respect of the advice given by the defendants. But, in my opinion, the confidential relationship to which the rules as to undue influence attach, may arise without the exist- ence of the formal relation of debtor and creditor. The law on this point was very fully considered in the case of Willis v. Barron (1). In that case the question was as to the validity of a deed by which the plaintiff, a married woman, had surrendered a general power of appointment without any consideration. Before executing the deed she had asked the advice of a Mr. Skinner, who was her husband's solicitor, and who was also a trustee for her. Skinner's son took a substantial benefit under the deed. Cozens-Hardy J. was of opinion that the facts did not establish that fiduciary relation of solicitor and client between the plaintiff and Skinner to which special disabilities are attached by law, and he thought that the fact of his being a trustee for her was not material (2). His judgment was reversed by the Court of Appeal (3). Lindley M.R. said that the question was whether it was the duty of Skinner to see that the plaintiff had independent advice in the transaction which was impeached. And that, he said, mainly depended upon this - whether he stood in such a confidential relation to her as rendered it his duty to take such care. After referring to the facts of the case he proceeded (4).

[212]

"It must not be forgotten that you are not to extend arbitrarily those rules which say that a given contract is void as being against public policy, because if there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contract ing, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this paramount public policy to consider - that you are not lightly to interfere with this freedom of contract." Although the phrase "void as against public policy" as used in this connection is difficult to define, and the Courts have always refused to limit its operation by exhaus- tive definition, the law recognizes certain classes of contracts as being within the prohibition. In reference to these, Anson, in his book on Contracts, at p. 212 (10th ed.), correctly expresses the law. "We may say then that the policy of the law has, on certain subjects, been worked into a tolerably definite set of rules, but no Court has any longer the power to extend its application." In other words the Courts will not declare a contract to be void as against public policy unless it comes within one of the classes of cases which the law has already recognized as being in violation of public policy. These classes are to be found enumerated in any text book on contracts. It is not necessary to mention them in detail, because there is only one of them within which the deed in question could be brought - that is the class which includes "agreements which tend to pervert the course of justice." Within that class Mr. Arthur contends that this indemnity comes, and he puts his argument in this way. The appointment of the administratrix is under order of the Court, and the execution of the bond to the Chief Justice by the administratrix and two sureties is a condition which the Court will enforce as ancillary to its order. The Court has jurisdiction to modify the bond as to the amount of penalty, the persons who are to be sureties, and their number, and it can be put in suit only under order of the Court. It is contended that under these circumstances the deed of indemnity is a fraud on the Court, because in effect it nullifies the bond as a protection

[215]

will do her duty, whereas the obligations of the sureties being practically cancelled by the indemnity, the sureties afford in real- ity no protection to the beneficiaries in the event of maladminis- tration. If it were a term of the indemnity that it should be concealed from the Court, or if it were part of the agreement under which the bond and indemnity were executed that the Court should be in any way or at any time misled as to the real nature of the obligations of the sureties towards the beneficiar it would be difficult to escape the conclusion that an indemnity executed under such circumstances would be against public policy as perverting the course of justice. But in this case I can see no evidence of any agreement to conceal the execution of the indemn- ity or the real position of the beneficiaries from the Court. Such an agreement is certainly not to be implied from the indemnity itself, nor are the circumstances of the transaction such that any such agreement must necessarily be implied from them. If the indem- nity is to be held void as being an attempt to interfere with the course of justice, it can only be so held on the ground that the transaction itself, however honestly intended and carried out, is an attempt to interfere with the course of justice. What amounts to an interference with the course of justice is well exemplitied by the cases referred to in Lownd v. Grimwade (1) by Stirling J., as follows: - * Now in Eyerton v. Earl Brownlow (2), Lord Lyndhurst says: - Tt is admitted, that any contract or engage- ment having a tendency, however slight, to affect the administra- tion of justice, is illegal and void' And he accepts that as an accurate statement of the law, though he doubtless applies it to a state of circumstances widely different from those which occur in the present case. Upon this principle it has been repeatedly held that agreements tending to affect the course of legal proceedings are illegal, even although those proceedings may not be strictly criminal in their nature. 'Thus an agreement to pay money in consideration of the withdrawal of opposition to the discharge of an insolvent has been held to be illegal: Hull vy. Dyson (3); Hills v. Mitson (4). In Elliott v. Richardson (5),

[222]

_ tration and Probate Act had been executed. No application was made to the Court in reference to the bond or the sureties. "In obedience to the requirements of the section the bond was executed, and it was certainly a compliance with the section. Its legal effect was to give a remedy against the sureties to every one interested in the administration in the event of a failure by Miss Grace Bayne to duly administer. There is no rule or principle of law which would prevent any person interested in the administration from releasing his rights against the sureties after they had accrued. There is no difference in principle between an agreement to release rights after they have accrued, and an undertaking by an individual or individuals not to insist upon rights, to be conferred under a bond about to be executed. The bond gave every beneficiary and every creditor the right against the sureties to be secured against maladminis- tration. When it was executed there were creditors, well secured no doubt, as well as beneficiaries interested in the estate. Although by the indemnity the beneficiaries had in effect given up their rights, the bond still remained as a protection to other persons interested in the estate, namely, the creditors. There are, no doubt, cases in which the law will not permit an individual to give up a statutory right although the right is for his benefit. These are cases in which the statutory right is conferred on the indi- vidual in the public interest as well as for his own benefit. Individuals are not allowed in such cases to contract themselves out of the benefit of the Statute. An instance of that class is to be found in the case of the Hquitable Life Assurance of the United States v. Bogie (1) determined by this Court at Brisbane in December last, where it was decided that a policy holder in an insurance company could not make a valid contract waiving cer- tain rights given to policy-holders in Queensland by the Life Assurance Act 1901 (Queensland). But in the Act now under consideration there are no provisions express or implied indicating an intention to confer the rights given by the bond in the public interests as well as for the benefit of those interested in the estate. Nor are the interests of the public in any way concerned in the

[236]

The fact that Mr. William Moore Skinner was an intimate friend of the Willis family, and was a trustee under the original settlement, no doubt entered into the consideration of the Court in that case. But the absence of any such facts in this case cannot affect the application of the principle of that case in so far as it lays down the law that the fiduciary relation of solicitor and client may exist although there is no formal or contractual relation of that kind. That principle I take to be this, that, where a party to a bargain with a solicitor, in which the solicitor obtains a personal benefit, regards him as his legal adviser in that transaction and is under all the circumstances reasonably justified in so regarding him, and in relying upon his advice, and where the solicitor knows, or, under all the circumstances, ought to know that the other party is so regarding him and is so relying on his advice, it will be taken by the Court that the relation of solicitor and client exists between them, although that relation has never been formally created. The facts from which the fiduciary relation can be inferred, if it is to be inferred in this case, are not in dispute. I adopt Mr. Tomlins' evidence as giving an accurate account of the interview at the plaintiffs' house when the deed of indemnity was explained to the three sisters and executed; and I may here observe that his authority to bind the defendants in all he did in this matter is clearly established. The ettect of Mr. Tomlins' evidence may be summarized as follows: - Blake and Riggall had been solicitors for the plaintiffs' mother for many years, and after her death were Miss Grace Bayne's solicitors, and were then acting for her and advising her in the business of the administration. In other words, that they were and had been for years the family solicitors. On the oceasion of his visit to the Bayne housebold Mr. Tomlins, as representing Bluke and Riggall, went expressly to explain to the plaintiffs the meaning and effect of the deed of indemnity and why they were asked to execute the deed; while there he was consulted by the plaintiffs as to whether the objects of the deed

[241]

in my opinion the doctrine relied on by the defendants cannot apply for this one reason, if for no other. Although the documents were prepared and executed under the one agreement, they are in themselves entirely separable and separate documents and between different parties. 'The deed of indemnity is between the plaintiffs and the defendants, and is invalid because the defendants have not fulfilled the obligations which their fiduciary relation to the plaintiffs imposed on thera. But the Chief Justice is a party to the bond, the promise to pay is made to him, and it cannot be treated as void without his release or concurrence. He, repre- senting as he does all parties interested in the administration, cannot be affected by the invalidity of the indemnity. The bond therefore can be enforced as if no deed of indemnity existed. The question then follows in respect of what acts of maladminis- tration have the defendants become liable under the bond. I agree that they can be liable only for such acts of maladministra- tion as the plaintiffs would be entitled to charge against their sister, the administratrix. The payment of £75 out of the estate as consideration for the defendants allowing the use of their name to the bond is clearly a breach of duty by the administratrix in which the defendants took part, and for that they must be liable. Grace Bayne's dealings with the money in the Melbourne Per- manent Building Society was also a breach of her duty for which the defendants are liable, but under that head there has been no inquiry as to the amount of damages. On that question the case must go back for investigation. As to the two remaining breaches alleged, namely, the Exhibition Street land and the mortgages and other transactions connected with it, and the purchase of Aleazar there is, I think, evidence upon which the learned Judge might well have found that the plaintiffs had so far acquiesced in those transactions that they are now prevented from treating them as breaches of duty by the administratrix. But His Honor does not seem to have investigated that issue. He has found as a fact, and the finding is obviously right, that the plaintiffs signed the authority to their sister to execute the necessary documents in these transactions. But he, apparently, did not come to any determination, in the view he took it beeame unnecessary to do

At a glance

Court

Decision date

Before

Source

Judgment (246 paragraphs)