Collector of v SSeS tes

Collector of v SSeS tes - [1925] HCA 18 - HCA 1925 case summary — Zoe

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of the amended statement of claim was made, and that the respondent believed it. I think it must also be taken that the learned Judge found that the respondent was induced by that representation to take up the policies. Accepting these findings of fact, the question is whether the respondent at the time of instituting these proceedings was entitled to rescind the contract. The respondent's right to rescission was disputed by the appellant on two grounds, namely, (a) that the respondent with full knowledge of the facts had elected to affirm the contracts and (b) that his right was barred by the condition contained in the proposals referred to above. As to (a) I think the finding of Macfarlan J. that the respondent became aware of the true position of affairs in February 1922, a short time after he had paid the last of the three premiums on the policies, is amply justified by the evidence. It is proved also that at that time he knew the effect of the decision in Goodfellow's Case (1). Until November 1922 nothing was said or done by the respondent amounting to an unequivocal statement or act showing that he intended either to affirm or to repudiate the contract. In fact there is no evidence that during that period the respondent said or did anything relevant to this question. In November 1922 the respondent's mother at his request inquired at the office of the Company whether the respondent could get a loan of £1,000 on his policies to buy some property at St. Kilda, and was informed that from £500 to £650 would be the maximum amount that could be advanced as the Company must have a margin, that the property would have to be valued and that a valuation fee would have to be paid. Mrs. Phillips communicated this information to the respondent, and apparently the valuer went to inspect the property, for early in December 1922 Mrs. Phillips took to the office of the Company a memorandum written by the respondent in the following words : - * The Secretary, L.C.A., Queen Street, Melbourne. - Dear Sir, - Your valuer (Mr. Leith) having seen the premises 6 & 8 Pattison Street which are to be sold by public auction 6th December 1922, will you advise me of the maximum amounts your Company will loan me to purchase one or both of these houses should I apply for a loan on my policies, Numbers 40048-9 ?"" 'This memorandum

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sixth edition, it is said : - '"It seems on general principles clear that one party to a contract can never defend himself against it by setting up a misunderstanding on his part as to the real meaning and effect of the contract, or any of the terms in which it is expressed. To permit such a defence would open the door to perjury and to destroy the security of contracts. Whether the objection to such evidence is derived from the doctrine that every person who becomes a party to a contract, contracts to be bound in case of dispute by the interpretation which a Court would put on the language used, or from any other doctrine, the objection seems to be certainly valid." Phillimore L.J. says in Eastes v. Russ (1) : - '* The second defence T have been wholly unable to grasp, and I am not sure that I shall state it correctly now, for the argument seemed to me so elusive, but as I apprehend it it was to the effect that there is a rule of law that when the construction of an agreement is not absolutely clear and the form of the agreement is such that it is proposed or drafted by one side and accepted by the other the acceptor is to be allowed to say that he mistook the true meaning of the words. If that is the argument I think it is unsound and bad law." That is very much in point, and is not inconsistent with the principle that, where one party misleads the other as to the meaning of words, the party so misled may defend himself (see per Lindley L.J. in Wilding v. Sanderson (2) ). Nor is it in conflict with the law as to essential mistake or as to equitable relief. In Preston v. Luck (3) Cotton LJ. points the distinction very clearly. He says : - ' Where parties enter into a written contract, what they have agreed to must depend on the construction of that contract. It is very true that in some cases, if the party against whom specific performance is sought to be obtained, satisfies the Court by clear evidence that what he on the terms of the contract appears to have contracted for was not in his mind the thing in respect of which he was bargaining, the Court will refuse specific performance, but that is only because in cases of specific performance the Court does not grant that special equitable relief if it finds, for any reason, that it would be what is called a hardship or unreasonable to compel the defendant specifically to

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intention, and so no consensus ad idem. Falck v. Williams (V sometimes misapprehended. It is a decision not really upe " construction " as above defined but upon interpretation. Thoug the word "construction" is there used, a telegraphic code y employed including the words "begloom" and " estcorte." rendering the coded telegram into ordinary English, the defend: accepted the plaintift's offer thinking " estcorte " connected what went before, while the plaintiff intended it to relate to wha followed it. The plaintiff sued for non-performance as he intended and failed. Lord Macnaghten pointed out that when the mes was sent there were three matters under consideration - a Barcelon matter, a Liverpool matter and a Fiji matter. The written communications did not in themselves unambiguously select one of the three as the subject matter so as to constitute a contract whatever the defendant intended. Then, in attempting to wri out the coded telegram in expanded form, it was found that the was no such obviousness as led to but one conclusion. There room for the defendant's honest misapprehension as to subj matter ; and, that having occurred, the plaintiff failed. There was no contract in fact. Further, on the question as to whether defendant could be heard to say so, it appears that, though thi plaintiff's agent was in fault in not sending a clearer telegram, ye as I understand the reasoning of Lord Macnaghten, the circumstance were such that the recipient could see that the plaintiff might possibl be intending the Fiji matter, and so the defendant, if he had be maintaining his " construction,' could not have succeeded it establishing identity of offer and acceptance. But both Raffles Wichelhaus (2) and Falck vy. Williams are irrelevant to a ca like the present, where the subject matter is not in dispute where the terminology of the instrument is not in contro' the sole question being the legal effect of the mutually agreed word in their accepted signification. In my opinion the broad proposition on which Goodfellow's Case (3) was based cannot be sustained al the first ground of the plaintiff's claim should be denied.

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express or implied there is created an obligation sufficiently definite to be measurable by the Court. This essential, it is said, is absent from the covenant in the policy to make a loan. It is said the term of the loan, the availability of funds and the discretion given to the directors as to approving of the security, are all so vague and indefinite that a Court cannot properly apply to the clause a legal standard of obligation. The present is not a case where the alleged breach of that clause is directly in question. Such a case may arise and therefore, as in my opinion its determination is not necessary, I pass by its construction, merely saying that for the purposes of this case I shall assume it is so uncertain as to be in itself void. Nevertheless, I do not hold that upon that assumption the life assurance covenant is also void. The two are distinct covenants. They have been treated by the parties, to a great extent at all events, as separate and independent. The life assurance covenant comes into operation immediately ; the second is intended not to operate for three years, and even then, if the insured so wishes, it may never operate. I agree with the contention of learned counsel for the Company that, if the life had dropped within three years, the Company would not have been absolved from paying merely because

assumedly - the lending clause was too vague for legal obligation. No doubt, as Mellish L.J. said in Wilkinson v. Clements (1), "as a general rule all agreements must be considered as entire. Generally speaking the consideration for the performance of the whole and each part of an agreement by one party to it is the performance of the whole of it by the other." But, in that case, which in principle and up to a certain point bears considerable resemblance to this, there were divisible obligations, and the contract was so treated. It may well be that the respondent could refuse, if so bound, to pay future premiums unless the second clause is binding, but at the trial he refused rescission unless he could recover the premiums already paid. That is quite different: it is one thing to liberate the Company from any future responsibility, even under the first clause, and quite another to have had the benefit of that responsibility in the past. There being no element of uncertainty in the first clause and the risk having been incurred by the Company during

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an uncontrolled and unfettered discretion, but a discretion to be exercised reasonably and only for the purpose of securing the Company against loss in connection with the advance. The view of the Supreme Court was that the relevant clause was ambiguous, that " standing by themselves " the words used therein would have a natural significance such as contended for by the Company, that is, would import an agreement to advance £500 on a property approved by the directors as being of sufficient value to give, with the premiums already paid, a reasonable margin of security over that amount, but that in connection with the policies in question, they were literally capable of meaning that the directors' approval is limited to an approval of the house as being substantially worth the money paid for it - the Company's margin of security being provided for by the premium already paid. The learned Judges resolved this ambiguity by calling in aid the direct evidence of the parties as to their intention and as to their understanding of the clause. That method is, I think, contrary to English law as now settled. Learned Judges and authors have said that the question is: What is the meaning of the words used by the parties? (Cf. Wigram's " Extrinsic Evidence," 5th ed., p. 9; Doe d. Gwillim v. Gwillim (1); Rickman v. Carstairs (2).) Others have insisted that the object of interpretation is to ascertain the intention and meaning of the parties (Thayer, Preliminary Treatise on Evidence, ch. x., p. 390 - the Parol Evidence Rule; Principles of Legal Interpretation by F. Vaughan Hawkins (App. C. to Thayer, p. 577). And others again have pointed out that it is " not the meaning of the words alone, nor the meaning of the writer alone, but the meaning of the words as used by the writer" (see Law Quarterly Review, vol. xx., article by Phipson on" Extrinsic Evidence in aid of Interpreta- tion," at p. 254). But, whatever the true principle be, all agree that "direct evidence of the intention of the parties is inadmissible " except in the case of equivocation where the description of a person or "thing is equally applicable in all its parts to more than one" (Charter v. Charter (3); Watcham v. Attorney-General of the East Africa

At a glance

Court

Decision date

Before

Source

Judgment (123 paragraphs)

Parties