McDermott v Black [1940] HCA 4

McDermott v Black [1940] HCA 4 - HCA 1940 case summary — Zoe

[107]

The question of misrepresentation was raised for the first time in a letter written by the respondent Black to the appellant on 24th June 1937. He wrote that he had agreed to buy the shares upon representations which he stated. They covered the three misrepre- sentations now in question. He went on to say that the appellant had refused to allow Black's auditor to inspect the company's books, and his letter concluded with a request for the production of the accounts so that he, Black, might be " satisfied or otherwise as to the representations " and with a statement that until compliance _he would not pay any further money. This evoked from the appel- lant's solicitors an immediate denial of the representations and a threat to enforce the*contract. The date fixed for payment was next day. Black replied : - ''I again say that your client did make the representations mentioned to him in my letter of 24th inst. If they are not correct then I want my money back. If they are correct and Mr. McDermott will permit my auditor to examine the books and documents of the company and such audit supports Mr. McDermott's statements I will fulfil my part of the agreement and pay the balance of the money. If Mr. McDermott will not agree to this then I will have no alternative but to issue a writ against him for the return of my bonds for £2,000." To this the appellant's solicitors replied in a letter the effect of which was again to deny the making of the representations alleged, which the letter called " misrepresentations," to accuse the respondent Black of manufac- turing grounds for delay, and to require him to complete on that day. On 28th June, two days after the date fixed for settlement had passed, Black in answer wrote an argumentative letter, in the course of which he said that as the appellant's solicitors called the representations " misrepresentations"" he was led to believe that they were misrepresentations and made by their client. The letter ended with a statement that Black's own allegations were genuine and if McDermott would give him an audited statement covering

[108]

three years and showing that his representations were substantially true he, Black, would go on. During these communications Black had consulted a solicitor, who now took up the correspondence. On 30th June he wrote a more conciliatory letter explaining Black's desire for the production of the books on the ground that he wished to enlist the financial support of others for the transaction and suggesting that further time be given. A week later an interview took place between the respective solicitors. No evidence was given as to what passed, but Black's solicitor wrote on 9th July saying that his client wanted a further week in order to make arrangements. He continued : - "I feel confident that matters can be arranged, and if so, I will induce Mr. Black to withdraw his allegations against Mr. McDermott. If a further week be given then I think that the parties will require further time not exceeding a month in which to finalize the whole matter. You will treat this letter as without prejudice but I am doing my best to arrange an amicable settlement and with a view to carrying out the original contract except in so far as time is concerned." Six days later Black's solicitor again wrote. He referred to his last letter and went on to say that Black had instructed him "to withdraw all allegations imputing anything improper to Mr. McDermott" and that an accompanying letter would explain the whole matter. The accompanying letter said: ''My letter herewith is conditional upon Mr. McDermott agreeing to three weeks' time from to-day in which to pay the balance of £14,000 in order to complete the transac- tion. Please let me have an immediate reply." An interview or interviews then took place, and more letters followed. An attempt was made on the part of the appellant to impose a further condition that the deposit should be increased, but at length his solicitors wrote : - " In the circumstances he is prepared to accept the with- drawal and to grant three weeks further time as stated in your further letters" ; and on 29th July, in response to a request for confirmation, Black's solicitor wrote that his client instructed him to say that he intended completing the purchase within the time mentioned.

[116]

is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The dis- tinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one. The decision of the Court of Appeal in British Russian Gazette &e. Ltd. and Talbot vy. Associated Newspapers Ltd. (1), though doubt- less some of the reasons display less zeal for principle than for reform, does not appear to me to be inconsistent with the received doctrine that no new cause of action is given by an accord executory. In that case, the agreement constituting the accord was made as a compromise of three several causes of action vested in three persons respectively. It was made by one of them purporting to act not only on his own behalf but also as agent for the other two. In fact he had no authority to do so, and he was held liable for damages for breach of warranty of authority. This result might perhaps be supported, even if the agreement were an accord executory, on the ground that, at all events, the opposite party had acted to some extent on his representation of authority, but the intention of the parties appears to have been that the agreement of compromise should itself have been accepted as in satisfaction of the causes of action, so amounting to an accord and satisfaction. The case, therefore, provides no more than a late illustration of the doctrine, finally established perhaps by Flockton v. Hall (2), that of accord and satisfaction there are two cases, one where the making of the agree- ment itself is what is stipulated for, and the other, where it is the doing of the things promised by the agreement. The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or,

[119]

In the present case, an extension of time to the 5th August 1937 is the thing promised. From the nature of the concession, the extension consisted not.so much in allowing time to elapse as in the waiver de praesenti of insistence on the plaintiff's observing the time named in the contract and of the consequences of non-observ- ance, whatever they might be. What the plaintiff sought was a concession in the nature of a variation of the contractual terms fixing the time for completion. There is little difficulty, therefore, in regarding the defendant's agreement to postpone, and not the actual lapse of time, as the thing looked for by the plaintiff. The point of difficulty in the present case appears to me to lie elsewhere. The difficulty is to be sure of an intention on the part of the plaintiff to discharge the defendant from any liability, that is, an intention to take the agreement to extend the time in replacement or satis- faction of any existing right or claim against the defendant or, at all events, of the right or claim put in suit by the present action. The " withdrawal of all allegations imputing anything improper to " the defendant conditionally upon the latter's agreeing to three- weeks' further time for payment of the balance of purchase money clearly amounts to an election to affirm the contract. It does, I think, imply a promise not to revive the allegations. But it must be acknowledged that, standing alone, it would not be easy to spell out of it an intention to treat the extension as satisfying a claim. The correspondence, however, not only adverts expressly to misrepre- sentations, but on that ground Black threatened to sue to recover the bonds. An action for deceit is but the legal description of the remedy for misrepresentation which the respondent Black appears to have contemplated. Accordingly should it not be taken as a possible liability, among others, to which the withdrawal should be understood as putting an end? On the whole I think that this

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question should receive an affirmative answer. The untechnical and inexact expression, " withdraw allegations," no doubt causes some difficulty. But it must be borne in mind that the purpose was to settle or compromise a very definite dispute. On the one side, the appellant McDermott, if time was of the essence as in such a contract it may have been, was in a position to rescind and forfeit the deposited bonds. On the other side the respondent Black had formulated a claim to disaffirm the contract and recover his bonds and he had threatened to issue a writ unless he was satisfied of the truth of the representations, the falsity of which, if made, had never been denied. It was at this stage that his solicitor suggested an amicable settlement based upon the withdrawal of his client's allegations. In these circumstances, it would be natural for the appellant McDermott to suppose that the proposal was that the contract should be completed on the footing that Black waived all claims based on the alleged misrepresentations. It would be futile for Black to withdraw allegations which he was to be at liberty to revive. The purpose of the withdrawal was not that of social amenity but to complete and close a business transaction. Fias recantatis amicus opprobriis is but an idle sentiment which could have no place in the moratory tactics of Mr. Black, and would be unheard by Mr. McDermott. The question propounded was whether the contract should be carried into effect and time be allowed to. Black for that purpose or whether the latter should persist in his claim that it should be avoided and his bonds returned. The with- drawal of the allegations of improper conduct meant, in my opinion, that he would make no claim based upon misrepresentation but would accept the promise of further time instead. Hstoppel can, I think, be put aside. But I think that, consistently with principle, the agreement to withdraw in consideration of a grant of time can be regarded as an accord and satisfaction. I am prepared to hold that on this ground the respondent Black's cause of action is answered, founded, as it is, on the three misrepresentations with- drawn.

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for which he bargained. But like all other titles to equitable relief the prima-facie right to restrain the breach of an agreement not to sue or not to set up specified matters is subject to the well-known rules or principles upon which courts of equity act. Relief would not be granted if the agreement were unfairly obtained or oppressive. The stipulation, whether express or implied, must be sufficiently certain and not too vague and indefinite. The consideration must not be illusory or inadequate. There are two points at which these principles touch the plaintiff's agreement to withdraw the allegations of improper conduct. In the first place, though an implication against reviving the allegations appears to me quite certain, the extent and nature of the promise to be implied may be said to be too doubtful. It may be thought insufficiently clear that the parties intended to stipulate that the plaintiff should not be at liberty to include the misrepresentations referred to in an action of deceit. Conflicting views have been suggested of the nature and extent of the undertaking to withdraw the allegations of improper conduct. For instance, it has been said that it was directed only against aspersion on character, against further contumely or insult. Another view put forward was that its purpose was to destroy in advance the probative value of Black's assertions. It has also been explained on the ground that it was desired to fix Black with an affirmance as opposed to a disaffirmance of the contract. Notwith- standing these rival interpretations of the agreement to withdraw the allegations, I am of opinion that the parties should be understood as stipulating that the respondent Black would not base any cause of action upon the allegations he withdrew. But so to interpret their contract is one thing: it is another thing to say that the construction or implication is sufficiently clear and definite to form the ground of an injunction. Upon the latter question the opinion of Martin J. that the language of the agreement is far too vague and the difference in the views of the withdrawal that have been put forward must shake any confidence that otherwise might be felt. But it is necessary to distinguish between the difficulties that are encountered in interpreting the meaning of the parties to a negative stipulation and the vagueness or indefiniteness of the stipulation when interpreted. In the present case I think the

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Judgment (143 paragraphs)