Grant v John Grant & Sons Pty Ltd

Grant v John Grant & Sons Pty Ltd - [1954] HCA 23 - HCA 1954 case summary — Zoe

[5]

The plaintiff, a company, sues upon the common money counts, for work done, money paid, money had and received and money found due on accounts stated. The deed upon which the defendant's plea of release depends is one to which a number of persons are parties including the plaintiff company and the defendant. Five persons including the defendant are grouped as parties of the first part and are described for the purposes of the instrument as the "H. C. Grant Family". Then the party of the second part is the plaintiff company. Three persons form the parties of the third part and they are described as the "W. A. Grant Family". The party of the fourth part is a company called Hawkesbury Sandstone Pty Ltd In the recitals it is stated to be a partly owned subsidiary of the plaintiff company. The party of the fifth part is a company called Grant Bros. (Engineers) Pty Ltd which the recitals say was incorporated with certain members of the H. C. Grant family as its members. According to the recitals the H. C. Grant family and the W. A. Grant family, being shareholders in the plaintiff company, became involved over a long period in disputes: the result was litigation which reached this Court: see Grant v John Grant & Sons Pty Ltd [1] . Thereafter further disputes arose in respect of which again litigation was threatened. The recital gives no particulars of the disputes. It is recited that after protracted negotiations the H. C. Grant family and the W. A. Grant family had resolved to settle their disputes on the terms and conditions afterwards mentioned in the deed. This recital forms the foundation of the first replication, which alleges that never at any material time was there any dispute between the parties to the deed called the H. C. Grant family and the W. A. Grant family concerning the money claimed in or the subject of the suit. There are two other recitals to be mentioned. One is that Hawkesbury Sandstone Pty Ltd was indebted to the plaintiff company to the extent of £9,468. The other deals with the shareholding in the plaintiff company of the H. C. Grant family which aggregated 28,548 shares. There is no recital concerning the shares of the W. A. Grant family, no doubt because that is not material to the subsequent provisions of the deed, which embodies a compromise or settlement proceeding on the basis that the W. A. Grant family shall take over the share interests of the H. C. Grant family. The operative part of the deed begins with a clause requiring that Hawkesbury Sandstone Pty Ltd should pay its debt of £9,468 to the plaintiff company; and another clause provides that the plaintiff company shall transfer its shares in Hawkesbury Sandstone Pty Ltd to Grant Bros. (Engineers) Pty Ltd for a consideration of £5,515. The shares in the latter company being in the hands of the H. C. Grant family, the result would be to leave Hawkesbury Sandstone Pty Ltd under the control of that group and unfettered by its debt to the plaintiff company. In accordance with this division of the interests, formerly combined, of the respective families, a clause provided that W. A. Grant himself should resign from the board of directors of Hawkesbury Sandstone Pty Ltd and H. C. Grant from the office of permanent director of the plaintiff company and from the board. It is provided too that H. C. Grant and his wife shall pay £3,832 to the plaintiff company in full satisfaction of their indebtedness to it. There follow clauses providing for the allocation between the respective companies or groups of certain current contracts and for the sale by the plaintiff company of a number of items of plant at prices amounting to £2,283 (presumably to Grant Bros. (Engineers) Pty Ltd though this is not stated). Another clause requires W. A. Grant to sign a form of letter, set out, addressed to the plaintiff company's bank with a view of procuring the bank to release securities lodged by H. C. Grant in support of the plaintiff company's overdraft. There is a general clause which may be described, perhaps somewhat loosely, as a covenant for further assurance and the deed concludes with the release with which this appeal is concerned. It is in the following terms: - "Each of the parties hereto hereby releases the other and others of them from all sums of money and accounts and civil actions proceedings claims and demands whatsoever which any of them at any time had or has at or prior to the completion against the other for or by reason or in any (sic.) respect of any act, cause, matter or thing and without limiting the generality thereof the H. C. Grant family releases the defendants in the hereinbefore recited litigation from all costs in respect of the said litigation." In order to take the liabilities for which the plaintiff company sues the defendant under the common money counts out of the operations of this release the three replications set up certain states of fact. That set up by the first replication simply is that the plaintiff company was party to the litigation in the deed mentioned as having gone on appeal to this Court and that between the two parties to the deed described as the H. C. Grant and the W. A. Grant families there was no dispute at any material time concerning the moneys claimed in the present action. The defendant's demurrer to this replication was upheld by the Supreme Court.

[12]

It was decided in the Supreme Court that the second replication was good and sufficient because when these principles were applied the release should be construed as not including liabilities which were not the subject of any dispute between the actual releasor or the actual releasee. The defendant's demurrer to this replication was accordingly overruled. In the present case, of course, the release was mutual and the parties to it were numerous. The construction means that in the case of any two of the parties to the deed a claim by one against another is not to be considered as released if it was not the subject of any dispute between them at or before the time of the transaction which the deed embodies. It is difficult to see why in principle the two states of fact relied upon in the first replication and in the second replication should not be combined as supplying considerations relevant to the interpretation and application of the release clause. Indeed, it may be suggested that the matters pleaded in these two replications are no more than circumstances which must be taken into account in applying the release and that in the end the whole matter depends upon the interpretation of the release according to settled rules of construction which apply to releases. That means, in other words, that they are circumstances material to construction and might have been given in evidence under a simple traverse of the allegation that the claims put in suit had been released. The principles involved seem really to be no more than special applications of the very general principle expressed by Bacon: "It is a rule, that general words shall never be stretched too far in intendment, which the civilians utter thus: Verba generalia restringuntur ad habilitatem personae, vel ad aptitudinem rei." ( Bacon, Maxims of the Law, Regula III). "All words, whether they be in deeds or statutes or otherwise, if they be general and not express and precise, shall be restrained unto the fitness of the matter or person." (Ibid. Regula X).

[14]

From a very early time the Court of Chancery applied its special doctrines to the unconscientious reliance upon the general words of a release. In his Historical Sketch of the Equitable Jurisdiction of the Court of Chancery, at p. 246, Sir Duncan Kerly said: "The peculiar construction of releases in equity, which restricts their operation to matters within the contemplation of the parties, rests also partly on mistake of expression, and partly on mistake going to the substance of the transaction. This construction accorded with principles settled before the present period, and was, in fact, a development of the rule that words are to be understood secundum subjectam materiam, for "the chief and governing rule of construction is drawn from the end or cause"." He refers to "A Treatise on Equity", published anonymously in 1737, which Sir William Holdsworth attributed to Henry Ballow (see History of English Law, vol. 12, p. 191) and quotes the following: "General words in a release of all demands, or the like, shall be restrained by the particular occasion, and shall be intended only of all demands concerning the thing released.": see Fonblanque's Fifth Ed. of the Treatise, p. 440. Story in his Equity Jurisprudence, s. 145, said simply that the court restrains the instrument to the purposes of the bargain and confines the release to the right intended to be released or extinguished. Sir Frederick Pollock, in his Principles of Contract, 13th ed. (1929), p. 412, after referring to the power assumed by courts both of law and equity to put a restricted construction on general words when it appears on the face of the instrument that it cannot have been the real intention of the parties that they should be taken in their apparent sense, proceeds: "Courts of equity went farther, and did the like if the same conviction could be arrived at by evidence external to the instrument." The learned author then says: "This jurisdiction in modern times a well established one, is exercised chiefly in dealing with releases. "The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given." This includes the proposition that in equity "a release shall not be construed as applying to something of which the party executing it was ignorant." There is at least much reason to think that it matters not whether such ignorance was caused by a mistake of fact or of law."

[15]

Two statements of Lord Hardwicke may be quoted. In Cole v Gibson [1] he spoke of "it being common in equity to restrain a general release to what was under consideration at the time of giving it", and in Ramsden v Hylton [2] he said: "it is certain that if a release is given on a particular consideration recited, notwithstanding that the release concludes with general words, yet the law, in order to prevent surprise, will construe it to relate to the particular matter recited which was under the contemplation of the parties, and intended to be released" [3] . Turning to equity, his Lordship continued: "It is impossible to imply within the general release that which neither party could have under consideration, and which it is admitted neither side knew of." Lord Keeper Henley (afterwards Earl of Northington) in Salkeld v Vernon [4] said that a release ex vi termini imports a knowledge in the releasor of what he releases, unless upon a particular and solemn composition for peace persons expressly agree to release uncertain demands. These doctrines are well illustrated by a decision of Lord Langdale in Lindo v Lindo [5] . An intestate had given bills for the repayment of a loan of £1,687 advanced for the purpose of enabling him to pay losses incurred by him in speculations in the funds, speculations which were alleged to be illegal under Sir John Barnard's Act 7 Geo. II c. 8. After payment of all the other debts of the intestate the assets remaining in his estate amounted to £533. The administrator agreed with the sole next-of-kin and with another relative of the deceased that this balance should be applied by the administrator towards payment of the supposedly illegal debt and that the other relative should contribute another £384 of the debt and that the rest should be made up by the administrator. A deed recited the facts and that the next-of-kin had agreed to give up all claim to any residue or surplus and it witnessed that the next-of-kin released to the administrator all his rights, &c., in and to the personal estate of the intestate as his next-of-kin or otherwise. Subsequently the intestate's mother died and upon her death a sum of £1,333 6s. 8d. fell into the intestate's estate. This amount the administrator claimed to retain for his own benefit. Lord Langdale held that the release did not have an operation which would enable him to do so. His Lordship said: "It has been considered that the general words of release are to be restrained by the contract and intention of the parties, that contract and intention appearing by the deed itself or from any other proper evidence that may be adduced upon the occasion" [1] . This decision was followed in Turner v Turner; Hall v Turner [2] by Malins v C. It is a case which turned, interestingly enough, on the unexpected accrual to the intestate estate of the artist J. W. M. Turner of a large sum representing the proceeds of sale of some of his prints. A question as to the operation of a release arose out of a compromise made in relation not to the estate of the artist but that of a descendant named T. P. Turner. The estate of T. P. Turner deceased seemed insufficient to pay debts and legacies and the beneficiaries effected a compromise of their rights which they embodied in a deed. The deed, after reciting that after the death of certain annuitants in the estate of J. W. M. Turner there would be a further distribution from his estate amongst his next-of-kin, of which the late T. P. Turner was one, went on to release the executrix of the estate of all claims, the executrix paying debts and legacies. Nine years later the executrix challenged a sale which at an earlier date had been made of some of J. W. M. Turner's prints. The sale was set aside and the prints subsequently realized a sum which when divided amongst the next-of-kin or the legal personal representatives meant that the estate of T. P. Turner was increased by an amount of £9,065. This sum the executrix claimed as hers beneficially in consequence of the release but Malins v C. held that the general words of the release did not cover it. His Honour said: "In a case of this kind it is the duty of the court to construe the instrument according to the knowledge of the parties at the time, and according to what they intended, and not to extend it to property which was not intended to be comprised within it it has always been the rule of this court to construe releases and documents of that kind with regard to the intention of the parties and to refer in such cases to the state of the property which was known at the time" [3] . The principle was briefly stated by Lord Justice Farwell in Cloutte v Storey [4] . "It is not in accordance with principle or authority to construe deeds of compromise of ascertained specific questions so as to deprive any party thereto of any right not then in dispute and not in contemplation by any of the parties to such deed" [1] .

[23]

The facts stated in the third replication if true would show that the plaintiff company did not know of the defendant's liability it now seeks to enforce, did not intend to release it as part of the transaction and did not know of any intention on the part of the defendant that it should be released. The allegation that the defendant knew of the obligation but did not inform the plaintiff company may be introduced as bearing upon the unconscientiousness of the defendant's reliance upon the general words of the release, but it does not seem to be essential to the application of the governing principle of equity. Doubtless it was not meant as an allegation of non-disclosure where a duty of disclosure existed. It is not the avoidance of the transaction for non-disclosure that the plaintiff wants, but the limitation of the operation of the general words so as to exclude the causes of action sued upon. It was argued for the defendant that at best the facts pleaded gave rise to an equity to have the contract contained in the deed rescinded. To put it in another way, that to restrict the operation of the release so as to exclude the claim in the action on the grounds disclosed by the pleadings would be to alter the contract to the prejudice of one party and that it must therefore either stand or be wholly set aside so that the parties might be remitted to their former position; and for this contention reliance was placed upon Urquhart v Macpherson [1] . It may at once be conceded that there may be cases where the reasons for precluding the defendants from relying upon the release go to validity of the contract or where it would not be in accordance with the principles of equity to deny to the defendant his legal right under the release except as part of a rescission of the whole transaction. But they are cases depending on mistake, failure in a duty of disclosure, misrepresentation or other ground of avoidance. They are not cases depending on the equity to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances. It is under that principle that the facts alleged in the third replication bring the case. This does not necessarily mean that the equitable consequences flowing from those facts cannot be qualified or affected by additional matter; for equities are not the products of completely rigid categories. But standing alone as the allegations do they afford an equitable answer to the plea of release?

[31]

If the defendant had discharged this onus of proof it would still have been open to the plaintiff to prove as a bar to the release that it was ignorant of the existence of the claims in the action when the release was executed. But according to Moore v Weston [1] the plaintiff would also have had to prove that the defendant was aware of the plaintiff's ignorance at that time: see also Board of Fire Commissioners (N.S.W.) v Dunlop [2] . Moore v Weston [1] was referred to in the argument but not in the judgment in Dunlop's Case [2] ; but it appears from the reasons for judgment of Sir Phillip Street C.J. [3] that the court relied for the equity against the defendant on the allegation by the plaintiff that the defendant was aware of the plaintiff's assumption of the restricted nature of the release when it was executed. This allegation was not usual in such cases. As appears later, I think it entailed a risk of revealing fraud on the part of the defendant and possibly of defeating the equity relied on, which assumes that the release is valid, but subject to the equity. Moore v Weston [1] distinguished Lyall v Edwards [4] on a ground which seems to me to have been beyond question, i.e. that the claim in Lyall's Case [4] was for tort, while the release relied on was of debts or of claims ejusdem generis. It is noted that Martin B. was a member of the court in both cases and that he and Wilde B. expressly relied on that ground in Lyall's Case [4] . But it appears that Moore v Weston [1] was not in line with earlier authorities to which the joint judgment refers, although, as noted by their Honours, in Ramsdem v Hylton [5] Lord Hardwicke said, in speaking of the position in equity, "It is impossible to imply within the general release that which neither party could have under consideration and which it is admitted neither side knew of" [6] . The italics are mine. Similarly in Lyall's Case [4] Martin B. said that "if a release is given for a particular purpose, and it is understood by the parties that its operation is to be limited to that purpose a Court of equity will interfere and confine it to that which was in the contemplation of the parties at the time it was executed" [7] . The italics are mine. These quotations suggest that there is no equity if only one party was ignorant of the claim; but Moore v Weston [1] decided there was an equity if one party was aware of the other's ignorance.

At a glance

Court

Decision date

Before

Source

Judgment (38 paragraphs)

Parties