Olsson v Dyson

Olsson v Dyson - [1969] HCA 3 - HCA 1969 case summary — Zoe

[5]

However, dependent upon what conclusions of fact are drawn from the evidence before the primary judge, these views do not, in my opinion, necessarily dispose of the matter. The appeal to this Court is by the deceased's executors against an order that moneys paid into court by the debtor company be paid out to the respondent. This payment into court was made by the debtor company in an action by the appellants against it for recovery of a debt claimed to be due to the deceased. The debtor company availed itself of the provisions of O. 16B of the Rules of the Supreme Court of South Australia (Interpleader). The affidavit which founded the payment into court has not been reproduced in the appeal book but doubtless it conformed to the requirements of r. 2 of that Order. Thus the debtor company acknowledged that it was under a liability for a debt for or in respect of which it expected to be sued by two parties, namely, the appellants and the respondent who made adverse claims "thereto". Whilst literally "thereto" refers to a debt, in substance, in my opinion, it indicates that each claimant asserts that the debtor company is liable to pay a fixed amount of money to that claimant. No doubt the interpleader process in general treats the debt as itself the property to the ownership of which there are adverse claims: it is also available, it seems to me, in a case where the real question is to which of the claimants has the debtor promised to pay the money in question. For example, I would think that a person who had promised to pay money through an agent for an undisclosed principal could interplead, if when sued by that principal, the agent also claimed payment of the money on the footing that the promise was made to him personally: see, for example, Meynell v. Angell; Calverley, Claimant [1] . The money is the relevant subject matter as to which there are adverse claims. For an example of a contrary kind, see Greatorex v. Shackle [2] . Rule 3 of the Order following s. 12 of the Common Law Procedure Act, 1860 U.K. allows the debtor company to interplead although the title of the claimants does not have a common origin. Although more appropriate to a contest to physical property, this rule would seem to cover the case of claimants to be paid money under different promises and not merely the case of conflicting claims to the benefit of the one promise.

[8]

When the debtor company sought to take the benefit of the interpleader provisions of the Rules of Court, it was first ordered that the respondent be substituted as defendant in the appellant's action. Thereafter it was ordered that an issue be tried between the appellants and the respondent as to "whether at the date of death of" the deceased " all moneys loaned by the deceased to" the debtor company " were payable to and recoverable by the" appellants or the respondent. This formulation, in my opinion, is wide enough to cover a contest as to whether the debtor company's direct as distinct from derivative obligation was to pay the moneys to the respondent. But in any case the form of the issue is immaterial. Its purpose is to enable the conscience of the court to be satisfied as to whom the money in court should be paid: see Peake v. Carter [1] , and cases there cited. The latter order provided for pleadings to raise the precise issues to be tried. The respondent's points of claim asserted that she was entitled to the sum in court, and after setting out the basic facts on which she relied, placed her entitlement upon an assignment of the debt due to the deceased and alternatively upon an estoppel preventing the appellants from asserting a right to the money in court. Though the Supreme Court and the parties appear to have acted on the footing that at his death the debt to the deceased which arose from the original loan was still due by the debtor company, that matter was not, in my opinion, concluded, certainly not as against the respondent, by the procedures in interpleader which had been adopted. To establish its right to the money in court as against the respondent, it seems to me that the appellants in the circumstances of this case must show that they would have succeeded in the action against the debtor company had the action as originally constituted proceeded to judgment. Thus, the executors as plaintiffs in the interpleader issue seek to enforce the promise to repay the deceased which was made to him by the debtor company at the time of the loan. I agree that if that promise was still on foot at the death of the deceased, the respondent to this appeal, for the reasons already given, must fail. The critical question to my mind, however, is whether or not that promise was still extant at that time.

[13]

The interpleader issue though not a cause is a matter falling within s. 27 of the Supreme Court Act, 1935 S.A.. It has long been the practice in interpleader proceedings under provisions comparable with O. 16B to recognize and to give effect to equitable rights. As indeed it also was under the interpleader provisions as in force before the passing of the Supreme Court of Judicature Act, 1893, and the making of the orders and rules thereunder: see Rusden v. Pope [1] ; Duncan v. Cashin [2] and Engleback v. Nixon [3] . Therefore, if appropriate claims had been made on behalf of the respondent and supporting submissions argued, the court would have been in a position to decide whether the executors could have been compelled to sue or to allow their names to be used at the instance of the respondent in a suit against the debtor company for the performance of the debtor company's promise or whether the respondent, upon the unwillingness of the executors to sue, could herself claim the specific performance of the promise to pay her. In that event the court in these proceedings, in my opinion, could have reflected its decision on those matters, that is to say, if favourable to the respondent, by treating the money in court as payable to the respondent as upon a specific performance of the debtor company's promise to the deceased. But the points not having been argued, I do not think their decision should at this stage be attempted. The general question was left open in Coulls v. Bagot's Executor & Trustee Co. Ltd. [4] . But I would observe that, in my opinion, nothing in the case of Milroy v. Lord [5] stands in the way of a conclusion favourable to the respondent. Whilst it may not be permissible to treat an intending assignor of a debt as a trustee of it, it may be possible to treat a person who has attempted a gift by way of a release of an existing indebtedness in exchange for a promise to himself to pay a sum of money to the intended donee as coming under equitable obligations in respect of the enforcement of the substituted promise, that promise being enforceable at law and as well in equity though with differing consequences. Further, it seems to me that the approach to be seen in the reasoning in Fletcher v. Fletcher [6] may go far to support a conclusion favourable to the respondent.

[30]

somewhat analogous to that of a verbal agreement not binding originally for want of the memorandum in writing signed by the party to be charged but which becomes binding by virtue of the subsequent part performance; that is to say, by analogy with Gregory v. Mighell [2] , that even assuming there was no contract the conduct of the father after making the incomplete gift was such as to bind him in conscience to make the legal situation correspond with the implication in the encouragement that he gave to his son to lay out the money. The other line of reasoning was that the father's conduct amounted to a promise that if the son should build the house the land should be the son's, and that the son, by building the house, accepted the offer and so concluded a binding contract. The only signed memorandum in the case, however, was insufficient to enable this contract to be specifically enforced, and for that reason the ultimate basis of the decision must again have been that the father's subsequent conduct in encouraging the son to build the house on the footing that the land would be his, when acted upon by the son, created an equity which bound the father to make good the son's expectation. Thus in a case of this kind what gives rise to an equity which the attempted making of the gift did not by itself create is the conduct of the intending donor after the act of incomplete gift: cf. Ramsden v. Dyson [1] ; Plimmer v. Wellington Corporation [2] . These cases are, I think, correctly explained in the judgment of Ungoed-Thomas J. in Ward v. Kirkland [3] , approved by the Court of Appeal in E. R. Ives Investment Ltd. v. High [4] . It seems to me impossible to apply the principle to the present case, for there is not the slightest evidence that after the making of the purported gift the deceased ever adverted to the question whether his purported gift might be treated by his wife as a reason for abstaining from making a testator's family maintenance application after his death or acting in any other way to her prejudice. He intended to make her a gift; he went some distance towards doing so and assumed that he had done so completely; no doubt he realized that she too assumed he had completely done so; but there the matter ended, without his thereafter offering her any encouragement or inducement to adopt a course prejudicial to herself, and without his doing anything else that can be held to have bound him in conscience to perfect the imperfect gift. 1. (1862) 4 De G. F. & J. 517 [45 E.R. 1285]. 2. (1811) 18 Ves. Jun. 328 [34 E.R. 341]. 3. (1865) L.R. 1 H.L. 129. 4. (1884) 9 App. Cas. 699. 5. [1967] 1 Ch. 194. 6. [1967] 2 Q.B. 379.

[64]

I may say at once that I fully accept the defendant's evidence, including, in particular, her evidence as to the pre-nuptial agreement, and the gift. I am also satisfied that the deceased meant to make the gift and believed that he had done all that was necessary to perfect it. I also think that the probabilities are that he meant it to compensate for his failure to carry out in full his promise to leave the defendant £20 per week, although this was never discussed between them, and it is, of course, possible that all he meant by the statement that he had "let her down" was an expression of his regret for having become ill after so short a period of married life [1] . His Honour then went on to consider whether what Dyson had done constituted a valid equitable assignment. We were referred to a South Australian Act of 1860 by which choses in action were made assignable at law: The Property Act of 1860, s. 19. This provision was supplemented by the Supreme Court Act, 1878 S.A., s. 6 (vi). The effect of these enactments was considered in Robinson v. South Australia [2] and Goldsbrough, Mort and Co. Ltd. v. Commonwealth Agricultural Service Engineers Ltd. [3] . I think it unnecessary to consider these decisions; for both the statutory provisions had been repealed long before the transactions of the present case occurred. In their stead stands s. 15 of the Law of Property Act, 1936 S.A.. It is in the well-known terms of s. 25 (6) of the Judicature Act, 1873 (now s. 136 of the Law of Property Act, 1925) of the United Kingdom. The result is that a creditor who wishes to give to a donee a debt owed to him must follow the statutory procedure: he must sign a document by which he assigns the debt to the donee; and his gift will be complete in law when express notice in writing of his having done so is given to the debtor. An oral statement to the intended donee that the debt was henceforth to be his will not suffice even if the debtor has notice of it. 1. [1967] S.A.S.R. 343, at p. 345. 2. [1928] S.A.S.R. 42. 3. [1930] S.A.S.R. 201.

[80]

It would however be contrary to principle to say that Dyson constituted himself a trustee for his wife of the debt the company owed him. His purpose was to give it to her, not to hold it himself as a trustee for her. He failed to give it to her in the way the law provides; and an imperfect gift will not be treated as a declaration of trust. But, although his statement that he gave her the debt did not make him a trustee while it was in law payable to him, a very different situation arose as soon as he made a new contract with the company that it would pay the money to her and not to him. The company's promise to him that it would pay her was specifically enforceable at his suit: Beswick v. Beswick [2] . Is it far-fetched to say that he had then become a trustee for her of his rights under the novated contract? He had told her that the debt was to be hers; and thereafter, by a new agreement with the company, he had put himself in a position to make good this statement. I appreciate that the cases on this topic of trusts of contractual obligations are not all easy to reconcile. That has been well demonstrated in textbooks and learned articles. I do not find it necessary here to go at length into the question. All that I would say is that it seems to me to be a possible interpretation of, or inference from, the facts of this case that Dyson should be regarded as holding as a trustee for his wife his right to enforce the new contract which for her benefit he had made with the company. The judgments in Lloyd's v. Harper [1] shew how in cases of this sort a trust can arise, enforceable at the instance of a person to be benefited. The use of the word "trust" is not necessary for this result. Reliance upon the concept of a trust in cases of this kind has been described sometimes as a "device" and sometimes as a "fiction". It is effective to overcome the rigidity of the obstacles the common law doctrine of privity of contract places in the way of justice to third parties. But this case can be decided, and I think it is best decided, according to purely common law principles.

[82]

Lord Denning hoped a right of action at common law could be found for a third party by looking behind Tweddle v. Atkinson [2] . This hope has proved unfounded. In Coulls's Case [3] , I gave my reasons for thinking that on historic grounds it was, regrettably, doomed to fail. That does not mean that the present doctrine was always firmly established. It was not, as Dixon J. recognized in Birmingham v. Renfrew [1] . But it is now firmly established and it binds us. It is not however a rule which is necessarily inherent in the idea of contract. It is true that it accords with the classical Roman law, although not with the modern civil law of France or Germany: see Ryan, An Introduction to the Civil Law, pp. 67-71. It is not accepted in Scots' law. And, most importantly, it has been modified or abandoned in very many jurisdictions in the United States. This means that many American decisions on novation, although based on the common law, can provide little guidance for us. But it does perhaps offer some hope that what Lord Denning could not accomplish by looking back to the past may yet be accomplished, as Lord Reid has hinted, by looking to the future. It may be that their Lordships in the House of Lords could use the law's inherent capacity for growth, as displayed in America in this field, undeterred now by their own previous decisions and by "Parliamentary procrastination": see Beswick v. Beswick [2] . And it may be that someday this Court too, expounding the common law as Australia has inherited it, will see the way clear to take the same path. But, for the present time at all events, decisions of high authority stand directly in the way. We must take the law as it is and refuse to recognize a ius tertii arising by way of contract. In jurisprudence and legal theory and for recent commentators, this may be seen as a regrettable example of the rigidity of conceptual thinking. Doubtless the common law of contract is developing in England, and along parallel lines here, by the application of old principles in new situations. But we cannot yet go further than the decisions in In re Schebsman; The Official Receiver v. Cargo Superintendents (London) Ltd. and Schebsman [3] and Beswick v. Beswick [4] in England and Coulls's Case [5] here can carry us. However, for present purposes that is far enough. We are not concerned with speculative problems of legal theory and ultimate analysis, but with a practical question, the destination of money now held in the Supreme Court of South Australia. If, as I think, the right view of the facts is that, by novation of its contract with Dyson, the company became bound to him to pay Mrs. Dyson, then the only way in which it could perform its obligation to him would be by paying her. Of course by a further novation this contract could have been cancelled by the parties to it and another new arrangement made in substitution for it. But that has not occurred. Two sentences, out of many that are pertinent in the judgments in In re Schebsman [1] are peculiarly apposite at this point. Lord Greene M.R. said [2] :

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