Deane v City Bank of Sydney [1904] HCA 44

Queere, whether a covenant, or a binding agreement by a creditor not to

'sue the principal debtor for a certain time, operates to discharge a surety, even if made without his consent,

the rule as to the discharge of sureties by dealit between the creditor and the principal debtor, considered.

Australian Joint Stock Bank v. Bailey, 18 N.S.W. LR. (L.), 103, d tinguished,

A binding agreement by a bank to allow an increase of the limit of creditor's overdraft during a specified period, may, under some ci amount to a giving of time so as to release the guarantors of tl

The construction of a contract partly oral and partly in wr tion of fact for the jury, who, in construing it, may 'conversations and the documents, but all the surrounding circumstances.

A new trial will not be granted where it is clear that a second trial mt have the same result as the first,

Decision of the Supreme Court, (1904) 4 S.R. (N.S.W.), 152, refusing SFant « new trial, affirmed, but on a different ground.

W), 182. 'was an action brought by the respondent bank on a

ce bond for £20,000, dated 13th December, 1888, which

maranteeing an overdraft, which the respondent bank proposed sgaut in favourof the Burwood Land, Building and Investment ny, Limited, The guarantors were directors of the com- and their liability under the bond was limited to £10,000

and the company "without the consent or knowledge of the defendants and the other sureties," for good and valuable

to sue it for a certain time then agreed upon, being a time than the period of credit which the bank ought to given the company for payment of the debt; that the bank pursuance of the agreement did give time, and forbear to sue diving the time agreed upon. Issue was joined upon this plea. s given by the appellant that the fillowing conversation took place between him and the general 'manager of the bank : - " I had an interview before receiving the Hiter of the 15th January, 1892. I told him we were about to draw a little more largely on the Burwood account, and asked if 'would allow a further overdraft to the extent of £20,000. I told him we would give further security, and we should want to te on the aecount at once. He said that up to the 30th June recould operate on that account while the securities were being ed. 'That ended the conversation and I left." On 15th y the following letter was written by the general manager

ange tins © Our interview of this morning in connec Irltng Society,

n with the Burwood Thave pleasure in stating that the bank is prepared to further company to the extent asked, viz. £7,500 in addition to the existing #f £12,500, such excess to be granted until 30th June next, when by your

from a decision of the Supreme Court, (1904) 4 S.R. H. ©. or A.

H.C. of A. own showing ordinary revenue should enable you to easily repay the extra amount

. to the appellant asking to have the debt reduced in terms of

required, 'To support the whole advance generally you wre to give security op the bank forms over the lands as set out in the statement you supplied me with"

On 2ist January, 1892, the company executed mortgages tp secure £20,000, and the appellant and the other directors signed a promissory note, payable on demand, for £20,000, and the eom- pany jointly and severally with the directors executed a bond to secure £25,000, also payable on demand. 'The company afterwards went into liquidation. On 12th February, 1894, the bank wrote

the guarantee. Shortly afterwards the appellant and the two other defendants made arrangements to reduce the liability by instalments. Ultimately the whole £10,000 was paid by them, 'The action was to recover interest upon so much of the £10,000 as remained unpaid after April, 1894.

At the trial before Owen J. the appellant and his co-defendants contended that by the agreement of 15th January, 1892, the bank had given time to the company until the 30th June following, and that, this having been done without the assent and knowledge of all the sureties, the whole of the sureties, including the ap- pellant, were exonerated. His Honor ruled that the construction ' of the agreement was one of law for himself, not one of fact for the jury, and held that it did not amount to a giving of time. The jury found a verdict for the plaintiff for £3,023 18s. 8d.

The appellant and the other defendants moved to make absolute arule nisi for a new trial on several grounds, of which those material to this appeal were, that His Honor was in error in refusing to leave to the jury asa question of fact what agreement 'was made between the bank and the Burwood Land and Investment Company on or about the 15th January, 1892, with reference to the company's overdraft, and the granting of time for the payment thereof, and that His Honor was in error in deciding as a question of law that the agreement made between the bank and the com pany at the date mentioned, with reference to the company's ovel~ draft, was not an agreement binding the bank to give time to the company for the payment of the overdraft.

The Full Court (consisting of Dariey C.J., Simpson J. and Pring J.), discharged the rule with costs.

'ontmact upon which the appellant relies as a giving of time,

vjatverit was, was contained partly in the conversation between "jim and the manager of the bank, and partly in the letter written "iy the manager next day. Being partly oral and partly in writ- vee mle evidence on the point should have been left to the « jts construction was a question of fact for them: Moore

supplement it. The Judge having taken the matter from the y, there should be a new trial, if the terms of the arrangement capable of the construction that they amounted to an agree-

is that time was to be given for the payment of the yy. 'The letter contemplates that until 30th June the bank "would not call up the overdraft. Otherwise the extension of the itof the overdraft for that period would be idle. Fresh security to be given for the "excess," or "further assistance." A agreement was held sufficient to entitle the debtor to in the ereditor by injunction from calling up the liability in ch of the agreement: Re Cracknell (5). Rouse v. Bradford ing Co. Ltd. (6), which was relied upon by the Court below, led upon the particular facts of the case, and does not decide amatter of law that in no case can an agreement to extend limit of an overdraft for a specified period amount to a of time. General expressions in a judgment are not to be

iblish that the agreement proved by the letter and conversa- may have amounted to a giving of time under the cireum- because in that case a verdict either way would not

fon and Sheppard (with J. L. Campbell), for the appellant. H.C. or A.

H.C. or A. be disturbed: Metropolitan Railway Co. v. Wright (1). The jury 1904,

has not had an opportunity of giving a verdict on the point,

If the agreement was a giving of time, all the sureties are dis. charged, including the appellant.

[{Grirrira C.J. - How do you get over the difficulty that the appellant assented to the giving of time?]

Tt is necessary that all the sureties should consent. It a proved that the consent of one at least was not obtained. He therefore is discharged, and, if one is discharged, all must be, in- ed, the appellant's position is materially changed for the worse, because his right to contribution is cut down. Assent does not prevent a surety from taking advantage of an alteration in the instrument of surety- ship: Australian Joint Stock Bank v. Bailey (2).

'The rule is that when one surety is released, all are released: Ellesmere Brewery Co. v. Cooper (3). 'The appellant knew that his co-sureties would be released unless their consent was obtained, and therefore the Court must infer that he only assented on the understanding that their consent would be obtained. The failure to doso was the fault of the bank, whose duty it was to do nothing to prejudice any surety.

[Grirerra C.J. - The principle that a man cannot take advant- age of his own wrong seems to apply here. A surety who asks for a favour from a creditor, which is granted, surely cannot after- |

wards say that the result of the favour was to release him]

'The favour was for the debtor, not for the surety, and the ap- pellant was only acting as a director for the company at the time. _ 'The bank must be presumed to have been content to take the consequences of its action, if it did not take proper measures to preserve its rights. The bank brought its action on the old bond, against all the sureties, but its contention now is that the appet lant consented, not to a continuance of the old liability, but to @ totally different one. 'The onus is on the bank to establish that; it should not be presumed in the absence of positive evidence. Each of several co-sureties is to be presumed to undertake only

(1) 11 App. Cas., 152, (2) 18 (3) (1896) 1. Q.B., 75.

ineipal and Surety, Ist ed., p. 268.] iGuurerra CJ. referred to Mayhew v. Crickett (1) in which a-surety was held, by virtue of a subsequent promise to tohave assented to the giving of time so as to bind him-

"The Iunk did not stipulate for the reservation of its rights

inst the sureties, and the appellant was therefore justified in suming either that the consent of all was to be obtained, or filing that, all were to be released. In Mayhew v. Crickett, " (i)itmust be taken that the surety ratified the giving of time rth the full knowledge of the fact that neither he nor any "of the other sureties were any longer bound, and therefore tint he was making himself solely liable, Here the appellant must be treated as being in the same position as he would have en if the bank had actually promised to obtain the consent of

• the other sureties before giving time, and had failed to doso. In y ease it was for the jury to say what it was to which he did nt, and the ease should go back to have that question deter-

{Gxrim# C.J - On this plea the defendant had to prove tisease. If he gave no evidence to support it the plaintiff must layea verdict. If on the other hand your plea is a bad plea, the intiff is entitled to take advantage of that now, although there misnodemurrer. He may retain his verdict on ahy grounds, 'mithis Courtmay make the order which the Supreme Court 'ought to have made.]

Ttis not shown on the facts that the plaintiff must have judg- 'mat, 'The evidence is the other way, that, if the old bond was 'entinue, it was to continue on the same terms as before, with 'same number of sureties.

'(Gurr C. - There was some evidence of a subsequent 'sent to the giving of time.]

'That assent would be on the assumption, which the appellant "Sratitled to make, that all the sureties were still bound. tis

and soveral liability, [He referred to Rowlatt on Law of H-C.0r A.

the duty of the ereditor to see that all necessary steps for execution of a bond are taken, and that the failure to get signature of one surety, who had agreed to sign, released ¢I others: Fitegerald v. M'Cowan (1).

Dr. Cullen (Gordon K.C. with him), for the respondent. 'was no question for the jury to try. All parties acted upon the letter, as containing the substance of the agreement, The appel- lant in his evidence said: "In pursuance of that letter we gave mortgages &e." The evidence of the conversations was only tendered in order to allow the jury to pronounce upon the legal effect of the document.

[O'Connor J. - Your argument is on the assumption that the letter is the econtract.]

'The words of the letter and the other evidence show that the whole agreement was contained in the letter. There was no dis pute as to the words used at the conversation, and the letter merely states the substance of it. If the letter is capable of only one construction, the jury will not be allowed to construe it, simply because the same arrangement was also the subject of a conversation. The only question is the legal effect of admitted words. The Supreme Court has put the only possible construe tion upon the words of the letter, and, as no reasonable jury could find that the coversation in any way varied the effect of it, this Court will not interfere. The cases cited for the appellant are not applicable, because they are cases where there were disputes as to what was actually said, or where the written documents were in conflict with the conversations that were sworn to.

[Grirriri C.J. - But it is a question of fact whether the agree ment is contained in the letter only, or in both the letter and the conversation. The letter here purports to be a record of an actual conversation, and refers to it in terms. If there is a verbal offer and a written acceptance, the whole contract must go to the Jury.)

'The letter was the result of the negotiations reduced to writing, and was only capable of the construction that it was not a giving

alefeet of such an arrangement is, not a giving of time, but iy the extension of the limit of the overdraft, without the sus- jonof the ereditor's right to call up the liability at any moment. he letter was the only evidence, the Court could construe it in wother way, and that construction is strengthened by a con- of the surrounding circumstances. Palmer v. Bank of fralasia (2) is not in point, because there the writing was only of the transaction, and the Court held that oral evidence

¢n Neilson v. Harford (3); and, where the undisputed yersations cannot alter its effect, the jury would be acting anasonably if they construed the letter in any other way.

"(Gurr C.J. - How can you say that any particular form sqoken words, except perhaps "yes" and "no," can have only ame meaning in law ?]

'The words proved are capable of only one meaning in the minds 'f reasonable men, and therefore the meaning is practically a uuiter of law, and any other verdict than that which has been

, and is not released. 'The case of one of several its is the same as that of a sole surety : Story Equity Juris-_ lence, see. 164 (v) p. 98. Nothing can be done to prejudice Without his consent, but it does not follow from that that, ise one surety, who has been so prejudiced, is released, all are Tt must be assumed' that when a surety gives his to an extension, he does so with knowledge of the

au that the other sureties would be released by the giving of HMlesmere Brewery Co. v. Cooper (4), is distinguishable.

Wty Ac, 5, ee io M. & W., i. MENS LR (L.), 219; 507) (3) af

ous v. Bradford Banking Co. Ltd. (1), shows that the Ho" A.

Tn that case several persons agreed to execute a joint and s bond, which was afterwards executed by all except one,

signed were discharged, because the liability under the bond actually executed was different from what they had inte to undertake when they signed it, and that, as it was for th

principal debtor, all his co-sureties are also discharged, evenif assented to the extension. In Woodcoc

who knew of the transaction upon which relianee was placed asdi charging the sureties, and prepared the documents in connects

had sued on the bond before June they would have been restrai a Ford v. Beech (2) is a distinct authority that a plea that bank had agreed not to sue for a limited time would be a bad plea. Bolton v. Buckenham (3), cited by White and Tudo and by Leake on Contracts as an authority for the proposi that a covenant not to sue discharges the sureties, was not a ¢4 of a covenant not to sue, but one in which a fresh mortgage We given in place of an old one.]

The plea does not show a ground for an unconditional injune tion in Equity, and is therefore bad.

[O'Coxxor J. - Supposing that the agreement was not legally binding, but had been acted upon, would it not be inequitable to sue in violation of it? 'The securities were given in pursuance it, Was that not acting on the faith of it 7]

'The taking of the fresh securities by the bank was not act upon it in the sense of abandoning the right to sue, because mortgages gave the bank an immediate right to sue, and wet therefore inconsistent with an agreement not to sue. The ag

(1) 1 Dr., 521, 2) 11.Q.B., 852, (3) (1891) 1 Q.B., 278. |

to sue was assented to by discharge him : Moss v. Hall (1).

win C,1. - 'That is the only authority, if it is an author- for the proposition that a covenant not to sue the principal discharges the surety if given without his consent. It ns to be quite ineonsistent with the prineiple upon which the rine of release is based, that nothing is to be done to the pre- soe of the surety without his consent.]

Rowse v. Bradford Banking Co. Ltd. (2) Lindley LJ. deals ih the effect of giving time upon the liability of sureties.

in in reply. A Court of final appeal will not decide on a : Mackay v- nneveial Bank of New Brunswick (3); Borough of Randwick 'Australasian Cities Investment Corporation (4). Tt was ing of time without the discharged. 'That was decided

n Australian Joint Stock Bank v. Bailey (5), which was never ined by the Privy Council. If the appeal is dismissed on

is point, the appellant is shut out from giving evidence on a nt which was never raised till now. Issue was joined on the on the assumption that it raised a good equitable defence.

We have already ex- al an opinion to that effect in another case. You may what evidence could be given.]

mlaw. It might be proved that the assent to the giving of Was subject to the condition that the assent of the other should be obtained. If there is any question for the jury

because evidence that was unnecessary on the law as it at the time of trial, was not given.

Grirrira CJ. This is an appeal from a judgment of th Supreme Court of New South Wales refusing to make absolute, rule nisi for a new trial in an action brought by the City Bun of Sydney against Deane and others, sureties under a cash bond given to secure an advance to the Burwood Land, Buil and Investment Co., the principal debtors. 'The question befor us arises on an equitable plea in the following words Honor read the plea as set out above.] The evidence offered prove the agreement consisted of a conversation between th manager of the plaintiff bank and the appellant Deane (who one of the directors of the company, and its solicitor), followed by a letter written to him the next day by the manager of the b together with other cireumstances. At the trial before Mr. i Owen, His Honor ruled that the alleged agreement was conta in the letter, and refused to leave any question to the jury asto the agreement, holding that it was a matter of law for himto determine. It was contended before the Supreme Court for the

contained partly in the conversation and partly in the letter, it construction was a question of fact for the jury, and a new tri was asked for on that ground. The learned Judges seem to have differed in opinion somewhat on this point, Darley C.J., and Sin son J., being of opinion that the agreement was contained in th letter only, while Pring J. is reported to have said that the whd evidence of the agreement was to be found in the conversatia and that the letter was immaterial, but that, the terms of th conversation being exactly stated, and uncontradicted, the learn

ho presi vie FiThe agreement here having been proved solely by

J evidence, which was not contradicted, I am of opinion that Fie Honor was right in deciding its meaning asa question of law, Jin refusing to leave it to the jury." Yow it is well settled law that, when an agreement is made evidence, its construction is a matter for the jury, that if, on the other hand, the agreement is in writing, then tis for the Court, not the jury, to construe it. I cannot help ng that, although His Honor is reported to have said this, Je really meant was that, if upon the evidence as toa verbal ment there was nothing to warrant the jury in placing any one construction upon it, there would be no real question for jury, and the Judge would be practically bound to treat the tion as a matter of law, and in that sense what he said nsquite right. The evidence of the conversation is set out in judgment of Darley C.J. [His Honor then read from the judg- wat the conversation as set out above and proceeded]: It is other well known rule of construction, that, when a contract is in writing and partly verbal, all the circumstances may be vd at and considered for the purpose of construing the con- «i, and even to vary the written documents, and the whole is one for the jury. In the present case the first question what is the agreement? Is it the writing, or the verbal con- tion, or is it to be gathered from the conversation and the with all the other circumstances? Possibly it was open to lejmy to find that the agreement was contained in the writing, 'Int whether it was or not was a preliminary question of fact for Jury to determine on the evidence. If the question were one fir this Court, I should be disposed to say that the agreement contained in both. We think that, upon the evidence, there material on which the jury could have found either that the iif bank made an agreement for valuable consideration to further time to the principal debtor, or that it did not. We une that such an agreement for extension of time in the case cash eredit bond would be a binding agreement under the

'ded at the trial was right in construing them, H- ©. oF 4.

rule commonly known as the rule in Rees v. Berrington 'Phe best that can be said in favour of the plaintiffs viey that it was a question of fact. In either view there y question of fact which should have been left to the jury that upon that point it would appear that the defendants primé facie entitled to a new trial, to have the question of f determined by a jury, But that does not conclude the eu Supposing that the question had been left to the jury, and ¢h had found in the defendants' favour (for the defendants are enti to be placed in the position in which they would have tue that had happened), let us deal with the case on that footiy It is necessary first to look at the plea itself more closely to whether it affords any defence to the action, or whether, evenift jury had found in his favour on the issue raised, the plain would not have been entitled to judgment, non obstante verell Because, if so, we cannot send the case to a new trial uponan immaterial issue.

'The plea is that a binding agreement had been made atl executed, giving time to the principal debtor without the kno jedge or assent of the sureties, with the consequence of discharg- ing those sureties. The material words of the plea are " without the consent of the defendants and the other sureties." We are toll

on this supposition, that if the ereditor giv debtor, without the consent ce all ie aah, all the sureties

one of the sureties did not know of or assent: to the gi by the bank. The assumption on which this plea wi that the extension of time granted to the principal debtor wit the consent of all the sureties, operates as a discharge even of # sureties who had knowledge of it and assented to it. But there no such rule. and, when one considers the pri

the doctrine, it is clear that there cannot be any such rule, doctrine is nowhere better stated than by Blackburn J. in case of Polak y. Everett (2). He says: "It has been establishe

itday, without a single case going to the contrary, that on ye principles 'of equity a surety is discharged when the creditor, jout his assent, gives time to the prineipal debtor, because by ring he deprives the surety of part of the right he would have fiom the mere fact of entering into the suretyship, namely, we the name of the creditor to sue the principal debtor, and if isright be suspended for a day or an hour, not injuring the arty to the value of one farthing, and even positively benefiting

by the principles of equity, it is established " He then makes some

"That this is the foundation of the rule appears Ioughborough L.C., in the case of Rees v. Berrington (1 'the clearest and most evident equity, not to carry on any tion without the privity of him who must necessarily have neem in every transaction with the principal debtor. You 'mot keep him bound, and transact Mis affairs (for they are as h his as your own) without consulting him. You must let

of his engagement." Bit, when he is consulted as to the proposal to give time and nts to it, he cannot complain; « fortiori when the time is gimathisown request. Volenti non fit injuria. Again, it is a tiled rule that, even if the extension of time i given without consent of the surety, but he afterwards assents to it, and ' ses to pay, his liability revives. 'The authority for that is 4 ee of Mayhew v. Crickett (2), which was a case of one of Jeint sureties. There is therefore neither principle nor t for the proposition that, when a creditor gives time to me principal debtor at the request of a surety, that surety can n, or say that he is discharged thereby. So that, taking 'Plea, and reading. it as it was intended, it is clearly bad. (0 2Ve, 540, at p. 543,

slong time, beginning with Rees v. Berrington to the H.C. oF 4.

• 1f on the other hand, the plea is read distributively that

extension was given to the company without the consent of sureties severally, there was no evidence of it, because appellant has proved that the extension was granted at his request. Therefore, whichever way the plea is construed, appellant fails, because upon one construction it is a bad and the respondent would be entitled to judgment non veredicto, even if the appellant obtained a verdict; and, upon other, it is not supported by the evidence, because the appell own evidence negatives it.

We are told, however, that this is rather hard on the appell because the plea was pleaded in reliance upon the case of tl Australian Joint Stock Bank v. Bailey (1). That was a caseis which an instrument of suretyship was altered after exeeuti with the consent of some but not all of the sureties, and Supreme Court held that the bond was thereby rendered against them all. That is an entirely different proposition from the one now set up, viz., that one surety, who requests that time he given to the principal debtor, may take advantage of it as dis. charging himself. That ease, therefore, has no bearing upon present case. Then it was suggested that, if the matter had been left to the jury, or if there were a new trial, it might be possible for the appellant to convince the jury that there wasa term to be implied from the conversation (which was given in detail) that it was intended that the original bond should remain in full force as against all the sureties. If it was part of the arrangement that the original bond was so to remain in fore, then the rights would be reserved against the sureties, and there would be nothing in the defence, because the sureties were not discharged. If, on the other hand, that was not a term of the agreement, then, whatever the arrangement was, it was made at the request of the defendant, and he cannot take advantage of it as discharging him. So that, from whatever point of view it is regarded, the position of the defendant is hopeless. It was sug gested that it might be shown that one term of the agreement was that the bank should obtain the consent of the other sureties to the extension of time. It would be very strange indeed if

caiatal the sureties to do something which they could have vewithout their consent, by merely stating that they reserved rights against the sureties. On all points therefore the w fails, and we are not justified, after trial, when the plain- clearly entitled, whatever the verdict, to judgment, either +r want of evidence for the defendant, or non obstante veredicto, 'alowing the whole matter to be re-opened. If the appellant iy my equitable defence, it is a different one altogether from dst which he has set up. Whether he would be allowed to set ina Court of Equity is a matter with which we have no nhere. If he can set it up, he may still do so; if not, it wuld be for reasons which make it equally unjust for us to allow hin to set it up now. Twilladd a few words as to the case of Rouse v. Bradford ing Co, Ltd. (1), on which the Supreme Court relied for proposition that an agreement to extend the limit of an for a specified time does not suspend the rights of the rand so discharge the sureties. That was a case of an iraft, but it depended entirely upon its own facts. In that the overdraft was not secured by a bond. It was a simple debt due both by the principal and surety, and the House found as a fact, upon the terms of the agreement, that it misnot an agreement to give time to the debtor. But it does that no such agreement can be made in the case of an We have already said that in our opinion the jury have found on the evidence that there was such an agree-

For these reasons we are of opinion that the defendant's appeal ils and must be dismissed, but, under the circumstances, with-

tors for the respondent, Lumsdaine and Leibius. CA W.

(1) (1894), A.C, 586. mild be $0, that the bank should agree to ask for the con- H.C. or A.