it Wilton v ExplDised Na Garcia y

it Wilton v ExplDised Na Garcia y - [1939] HCA 3 - HCA 1939 case summary — Zoe

[6]

Of the price of £3,500 asked for the Payneham property, only a nominal deposit was required. £200 was to be paid at the end of two years and £3,300 at the end of three years. The Yerkeys, however, made it a condition that £1,000 of the £3,300 final payment should be secured by a second mortgage over Mrs. Jones's Walker- ville property, over which there was already a first mortgage for £700. Estyn Jones agreed to buy the property, and John George Yerkey instructed his solicitors to prepare the necessary documents. These instructions were given on 14th August 1936. The solicitors, in the first instance, prepared a memorandum in the form of a letter from Estyn Jones to the Yerkeys. This contained a brief state- ment of the terms of the purchase and included the following : - "The price is £3,500. I am to procure the execution by my wife Florence May Blanche Jones of a second mortgage to you over her property at 7 Smith Street, Walkerville (subject only to the present mortgage to the Savings Bank of South Australia for £700) for £1,000 repayable at the end of three years from the date hereof with interest at 5% payable quarterly such mortgage to contain such covenants and provisions as you or your solicitors may reason- ably require." This document was signed by Estyn Jones at the solicitors' office on 17th August 1936, and, on the same day, the defendants took possession of the Payneham property. No more than a week had elapsed since Estyn Jones told Mrs. Jones that he had agreed to buy the property. At some time prior to 21st August 1936, when the documents effecting the sale were com- pleted, Jones made the following statements to his wife : - That_ he had agreed to buy the Payneham property and that he would or might get into trouble if she did not give the mortgage over the Walkerville property; that if anything went wrong and she lost the Walkerville house he would still have the property at Payneham and that the mortgage for £1,000 would not fall due for three years, At some time prior to 21st August 1936, Mrs. Jones agreed with her husband to give a second mortgage for £1,000 as a guarantee

[49]

by the highest judicial authority, see Bank of Montreal v. Stuart (1). It is true that undue influence may be more easily proved in the ease of husband and wife than in cases where no special relationship exists between the parties, but there is no presumption of such influence from the marital relationship. In the present case it appears to me that, in spite of what I have already quoted from the reasons for judgment of the learned trial judge, his Honour definitely found that there was no undue influence. He said: "I am satisfied that there was pressure as well as persuasion; but I think that Mrs. Jones knew that she was charging her property as security for the debt of her husband, and I cannot find that her will was over- borne by the stronger will of her husband. See MacKenzie v. Royal Bank of Canada (2)" (3). If the will of Mrs. Jones was not overborne by her husband's will, then her act must: be taken to have been her free and voluntary act and she can base no defence on the ground of undue influence, whatever other defences may be open to her. After Mrs. Jones had agreed with her husband that she would give the mortgage, the parties on 21st August 1936 went to the office of the solicitors who had prepared the letter already mentioned. There is no evidence that Mrs. Jones had seen the letter or that she at any stage knew anything about its terms, but it is found that she did believe that what she was about to do was to be done in pursuance of an agreement which her husband had already made and by which he was bound. All the parties went to the solicitors' office, and the agreement for sale, the bill of sale, and the mortgage were signed. Mr. von Bertouch, a solicitor, explained the documents. The learned trial judge did not think that Mr. von Bertouch, though an honest witness, was able to recollect the precise words which he used in explaining the documents, but his Honour said in his reasons for judgment : - "I accept Mr. von Bertouch's evidence that he gave an explanation of the principal terms of the mortgage ; but, on the other hand, I accept Mrs. Jones' evidence that she signed it, believing that it was such a mortgage as she was bound to give in order to comply with the contract between her husband and the plaintiffs. I think that she understood or believed that

[53]

Mrs. Jones in effect remembered nothing of the transaction. She remembered that documents were before the parties and that Mr. von Bertouch explained them, but she has no particular recol- lection of what took place. She said simply : - " I cannot remember anything at all that was said. Mr. von Bertouch did not explain anything to me." But, although she says this, her own evidence shows quite clearly that she had agreed with her husband to give a second mortgage for £1,000 as a guarantee for the performance by him of his contract to pay £1,000 at the end of three years. She admits that she understood that if her husband did not pay up at the end of three years her property might be sold and that she was pledging her Walkerville house as security for his payment in three-years' time. She stated in evidence that she did not know that she might be called upon personally to pay the £1,000. Mr. von Bertouch, however, gave evidence as to what was actually said and done on the occasion of the execution of the documents. He explained the obvious things. He went through the clauses of the mortgage. Mrs. Jones was sitting alongside her husband, who had a copy of the mortgage in his hands. Mr. von Bertouch explained that there was a joint and several covenant by Mr. and Mrs. Jones to pay £1,000 and explained that that involved a personal liability of Mrs. Jones. He stated that, if default was made in payment, the property might be sold, but that, if it did not realize the necessary amount, either or both parties would have to find the money from other sources. He expressed an opinion that, having regard to what Mr. and Mrs. Jones regarded as the value of the property, it was unlikely that the property would not realize a sufficient sum to meet the mortgage. He then explained that upon default in payment of interest the mortgagees could sue for the whole of the mortgage money even though the three years had not expired and that this was a power additional to the power of sale. The mortgage contained a provision that, though, as between Jones and his wife, Jones was

[60]

In the case of an ordinary adult person there would be little room for defence to an action brought upon a document signed in cireum- stances such as these. But it is contended that in the case of a wife whose execution of a document has been procured by the influence of her husband the law is different. In particular the contention is that, where a husband procures his wife to become a surety for him, the creditor must show that the wife understood exactly what she was doing. There must be some limit to the suggested principle. The law of guarantee is particularly complex, and it is doubtful whether any surety ever understands in its full significance the nature of the transaction into which he enters. The general rule is that if an adult person of ordinary understanding executes a docu- ment he (or, in modern law, she) is bound by it notwithstanding any misunderstanding by him (or by her) of its terms, unless that misunderstanding has been brought about by mutual mistake or by undue influence, fraud, or, in some cases, innocent misrepresenta~ tion or non-disclosure of material facts. There was no mutual mistake in the present case. The plaintiffs were under no misappre- hension as to anything. I exclude unilateral mistake not brought about by any of the causes mentioned, because such unilateral mistake is not a ground upon which a party can escape the effect of a transaction (Freeman v. Cooke (1) ), though in certain very special cases which contain an element of sharp practice a court of equity may give to a party an option between abiding by a corrected contract or having the contract annulled (Garrard y. Frankel (2) ). But in this case there is no element of fraud or sharp practice. There is no evidence whatever of misrepresentation on the part of the plaintiffs themselves. They had no direct dealings with Mrs. Jones at all. Her husband told her nothing that was untrue. He was an optimist as to his prospects of success as a poultry-farmer, but he told her no lies and did not mislead her in any way.

[104]

it is very fit in case of a married woman, that the court should know how she has disposed of her property " (1). The Master reported, in effect, that the wife had executed the deeds freely and readily without arguments or persuasion and that she appeared to know their effect (2). Lord Thurlow then said that, "if the point was open, he should have thought that a feme covert who had a separate estate, should not part with it without an examination; but a feme covert has been considered by the court, with respect to her separate property, as a feme sole; therefore, though he had been desirous of going as far as he could, he found he had gone too far upon a former occasion. If a feme covert sees what she is about, the court allows of her alienation of her separate property " (3). Lord Thurlow reached this conclusion most unwillingly, and he appears to have shared the opinion expressed by his successor, Lord Lough- borough, who said that, if the rule laid down " is to be pushed to its full extent, a married woman, having trustees and her property under the administration of this court, is infinitely worse off, and much more unprotected than she would be, if left to her legal rights ; as far as they consist of rights, which the husband cannot proprio marte affect. Such rights cannot be taken from her without a formal deed: not by implication and inference from conversation or con- duct. Upon Pybus v. Smith (4) it would be the vainest act to make a settlement upon a woman marrying under the direction of the court. The settlement was made here after a reference to the Master, and was submitted to the court, and approved; and it was stated by Mr. Lloyd, that within two days afterwards, and at the very time the settlement was submitted to this court, the transac- tion was going on, by which the effect of it was taken away from her; and she gave up the benefit of all that care, the court was taking for her protection " (Whistler v. Newman (5) ). Lord Lough- borough plainly leaned to the view that to a married woman's dealings with her husband the presumption of influence should be applied. In Milnes v. Busk (6) he had already said as much. Speaking of

[166]

but the application of these principles is necessarily qualified by considerations arising out of the position of the creditor as a third party giving value to the husband and possibly bona fide. It is almost needless to say that the equitable grounds for setting aside a voluntary disposition, while well understood, recognize the indefinite variation of form which unconscientious conduct may assume. The difficulty, if not danger, thus created of attempting to state the conditions which must be fulfilled before a given kind of conduct or of unfairness amounts to an invalidating cause is greatly increased by the introduction of the consideration that the equity must be such as ought to prevail against the claims of the creditor as a possibly innocent third party. But it is clearly necessary to distin- guish between, on the one hand, cases in which a wife, alive to the nature and effect of the obligation she is undertaking, is procured to become her husband's surety by the exertion by him upon her of undue influence, affirmatively established, and on the other hand, cases where she does not understand the effect of the document or the nature of the transaction of suretyship. In the former case the fact that the creditor, on the occasion, for example, of the actual execution of the instrument, deals directly with the wife and explains the effect of the document to her will not protect him. Nothing but independent advice or relief from the ascend- ancy of her husband over her judgment and will would suffice. If the creditor has left it to the husband to obtain his wife's consent to become surety and no more is done independently of the husband than to ascertain that she understands what she is doing, then, if it turns out that she is in fact acting under the undue influence of her husband, it seems that the transaction will be voidable at her instance as against the creditor. It is not clear how far the same principle is to be applied to a case where the wife is induced to become surety by the husband making some fraudulent or even innocent misrepresentation of fact which, though material, does not go to the nature and effect of the instrument or transaction. It may be said that the making of such a representation is no more to be anticipated by a creditor when a husband procures his wife's guarantee than when any other principal debtor procures a surety. On the other hand, the basal reason for binding the creditor with equities arising

At a glance

Court

Decision date

Before

Source

Judgment (195 paragraphs)

Parties

Cited By (23)