Smith v Perpetual Trustee Co Ltd and Delohery [1910] HCA 39

Smith v Perpetual Trustee Co Ltd and Delohery [1910] HCA 39 - HCA 1910 case summary — Zoe

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Smith, of Sydney, in the State of New South Wales, being about to leave the said State and reside in New Zealand, do hereby constitute and appoint Alfred Henry Delohery, of Sydney afore- said, solicitor, my true and lawful attorney for me and in my name to ask, demand, receive, sue for, and recover all money pay- able, or hereafter to become payable to me by the trustees of the estate of the late Captain Charles Smith, and on receipt of the payment thereof for me and in my name to offer receipts and dis- charges for the same to sign and deliver . . . and to operate on an account opened in my name in the King Street branch of the Commercial Banking Company at Sydney for the purpose of liquidating and paying all my just debts, and to sign all cheques to be drawn on such account." The power of attorney concludes with the usual declaration that "it shall continue in force until notice of my death, or of the revocation hereof shall have been received by the said A. H. Delohery." The account mentioned in the power of attorney had in fact been opened on 2nd September in the name of the appellant, who gave his own signature to the bank and also an authority to Delohery to operate upon it. Delohery was at that time a creditor of Smith. By a letter of the same date addressed to the respondent company, the trustees under the will, the appellant informed them that he had instructed Delohery to pay his creditors out of his income as it fell due, and proceeded, " Will you please pay all future income as it falls due to me in my grandfather's estate to Mr. A. H. Delohery per- sonally or to his credit in his special account at the Commercial Banking Co., King Street branch, and his receipt will be a sufficient discharge for such payment. In case I am also entitled to a por- tion of the corpus in such estate, you will please also pay the same to Mr. A. H. Delohery in like manner, and he is authorized by me to give you a receipt for the same." The reference in the letter to the account in the Commercial Banking Co. was not quite accurate. In one sense it was Delohery's special account, but it was in fact, as described in the power of attorney, an account opened in the name of Smith himself. The contention of the respondent company is that a power of attorney given by a debtor to his creditor to receive money due to him is irrevocable, and operates as an assignment of all moneys to be dealt with under it, and the case of Wilkin-

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son v. Wilkinson (1) was relied upon to support that contention, In that case a power of attorney, which was given to a creditor, empowered him to receive certain rents, and out of them to reim- burse himself all sums advanced by him to the maker of the power of attorney, and in the next place to pay them to another creditor until his advances were repaid. Sir T. Plumer MR. was of opinion that that power of attorney operated as an equit- able "A power of attorney given to a creditor is not revocable. It (7.e., the power of attorney in ques- ig a right to receive and withhold the rents until the debts are paid; and the bankrupt had no longer dominion over the property." The last words indicate the governing element in the matter, namely, that the maker intended to part with dominion over the property. Refer- ence was also made to the case of Burn v. Curvalho (2). In every case regard must be had to the whole of the circumstances. - If a mere request to a debtor to pay the debt to a creditor of the person making the request were necessarily an equitable assign- ment, extraordinary consequences would follow. A cheque given by a debtor to his creditor might be an equitable assignment. No doubt a power of attorney given as part of a transaction which amounts to an equitable assignment is irrevocable, but you must first ascertain the nature of the transaction. No particular form of words is necessary to constitute an equitable assignment, As Lord Macnaghten points out in William Brandt's Sons & Co. v. Dunlop Rubber Co. (3), an equitable assignment does not always on the face of it purport to be an assignment, or use the language of an assignment. "It may be addressed to the debtor. It may be couched in the language of a command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain. All that is necessary is that the debtor should be given to understand that the debt has been made over by the ereditor to some third person, If the debtor ignores such a notice, he does so at his peril. If the assignment be for valuable consideration and communicated to the third person, it cannot be revoked by the ereditor or safely

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disregarded by the debtor." But in every case there must be an intention to assign. That may conclusively appear on the face of the document. or it may be proved by extrinsic circumstances. In my opinion the test in each ease is whether the debtor intends to part with his dominion over the property. That is the test suggested by Sir T. Plumer, and it is clearly stated by night Bruce V.C. in Wilding v. Richards (1). In that case several documents were in question, and the observations of the learned Vice-Chancellor were made with regard to the last of them : - "An instrument in favour of creditors, though in form a deed of trust, may have been intended to be an instrument, in effect, of agency - a mere direction to a person in the situation of steward or agent, or in an analogous position, as to the mode of distributing or applying the property of the person executing the deed; without any intention on his part of creating in any other person a right against it. Itis established that in such cases, if the Court, having the deed before it, is satisfied that the intention was so, the intention is to have effect given to it, though, in form, the deed be a deed of trust." A fortiori where there is no docu- ment purporting to be a deed of trust. In the present case the power of attorney and the letter to the Perpetual Trustee Co. are both ambiguous, in the sense that they are certainly open to the construction that Smith was merely appointing an agent to collect money for him and pay his debts out of it. Taken by themselves, apart from the fact that Delohery himself was a creditor of the appellant, they primd facie show a mere authority creating the relation of principal and agent. It was contended, however, that the fact that Delohery was a creditor is conclusive. The fact that there is in existence a debt which would be a good con- sideration for a proinise by the debtor is one question; whether a promise was made in consideration of that debt is quite another. To constitute an agreement the debt and the promise must be connected together, either expressly or by circumstances showing intention to connect them in such a way that the debt is treated as consideration for the promise.

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Smith's interest under the will, and that if so given it would operate as an equitable assignment and would be irrevocable, as to which I express no opinion, the question still remains: Does me Was the real relation that of assignor and assignee, or of principal ' and agent? - would the money received by Delohery be his money subject of course to the trust, or would it still be appellant's i money, to be dealt with according to his instructions ? _ To answer this question it is necessary to examine the facts, 4 The appellant was indebted to a very large extent. He had asked Delohery to help him in making arrangements with his creditors, and on 2nd September he had arranged to borrow £250 from Delohery's brother on the security, as I understand from the evidence, of a covenant to pay, and an assignment of a life policy, - On the same day the account was opened at the Commercial Bank _ and the power of attorney was prepared, Smith was very careful throughout the transaction, and had been careful in previous transactions, to inquire whether any documents that he signed would affect his interest under his grandfather's will. It is therefore clear that he did not intend to do anything which would operate as an assignment under the will. I agree that parties cannot effectually agree that that which is in law an , assignment shall not be an assigment. That was the decision in - Oldham vy. Oldham (1), where the written documents showed on their face a complete agreement to assign. But when the ques- tion whether a transaction which is not in form an assignment nevertheless operates in law as an assignment or not depends upon the intention of the parties, an agreement that it shall not so operate is, in my opinion, decisive. I have shown that this may be so even in the case of a deed which is open to two con- structions: Wilding v. Richards (2). Upon the evidence in this case it is clearly established that the intention of the parties was that the relation between Smith and Delohery should be that of principal and agent, and not that of assignor and assignee. Another point raised in the pleadings was as to the effect of a_ writ of foreign attachment taken out by a creditor in an action

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ments which amounts to a transfer or a trust for creditors. The respondents then are forced to supplement the documents them- selves with evidence of extrinsic circumstances, and it therefore lies upon the respondents to show that, taking all things into consideration, the intention of the appellant was to assign his interest or charge it in favour of one or more of his creditors. 'The evidence relied on is that of Delohery and his diary. The appellant was not called, and gave no evidence even on commis- sion. If the onus lay upon him by reason of the apparent effect of the documents I should find it very difficult to say that the oral testimony was sufficient to break down a case otherwise established. But the appellant's absence cannot supply the lack of necessary evidentiary material of a positive nature to alter the apparent character of the instruments themselves, and while Delohery's sworn evidence is opposed to an assignment or charge, and indicative of agency only, his diary, though affording con- siderable ground for speculation, is not sufficient to outweigh the rest of the case. Consequently with regard to assignment the condition stated by Lord Macnaghten in William Brandt's Sons & Co. v. Dunlop Rubber Co. (1) is not satisfied. The respondents have not shown that they were given to understand that the appellant's interest was made over by him to Delohery. And with regard to the charge the respondents have equally failed to show that the appellant gave to his creditors or any of them a right to payment out of or security over the fund. An equit- able assignment (per Lord Hardwicke in Wright v. Wright) (2) and an equitable charge (per Chitty J. in Brown, Shipley & Co. vy. Kough) (3) both depend upon contract, and require valuable consideration to support them: Fullerton v. Provincial Bank of Ireland (4). In my opinion it cannot be maintained here that such an agreement is satisfactorily shown. Conjecture or sus- picion is of course not suflicient - but the respondents' case cannot well be pressed further. And it is an important circumstance in considering the probabilities that Delohery not only was alive to the necessity of guarding Smith against any assignment or charge which he knew would create a forfeiture, but for his own

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But it is urged that this was a power of attorney to be used for the benefit of Smith's creditors ; and that, at the very least, Delohery, being one of Smith's creditors, the power of attorney {and letter) constituted an equitable assignment to him. There are, it must be admitted, numerous expressions in reported cases which seem, until the facts are examined, to favour the view that a power of attorney given to a creditor is not revocable, and is a binding equitable assignment. Generally speaking, these are cases in which the power is given to the creditor in his capacity as creditor ; and the receipt of the money by him is pro tanto a satisfaction of his debt. The transaction is virtually a making over to the creditor of some specific asset of the debtor towards payment of that creditor's debt. Indeed, I cannot recall any such ease - except perhaps, the peculiar case of Oldham v. Oldham (1), in which money to be received by the creditor was not to be kept by the creditor. The recipient of the power is always, or nearly always, the ultimate payee. But in the present case nothing was further from the minds of the parties to the transaction than that Delohery was to keep the money received. He would receive as agent for Smith ; and it was incumbent on him to distribute the net proceeds (deducting his own charges: see his diary) as dividends among all the creditors pro ratd. He certainly was not to keep out of the receipts the amount owing to himself (I include his brother) in priovity to the other creditors. We have again to refer to first principles: did Smith appropriate - make over - put out of his control - this money coming to him under the will, in whole or in part ? and I cannot find any evidence that he did. The learned Judge does not find that there was any sham or unreality in the documents or in the actions of the parties, but seems to base his judgment on the reported cases, as if they bound him to find an equitable assignment as a matter of pure law, instead of basing his judgment on all the facts and

At a glance

Court

Decision date

Before

Source

Judgment (108 paragraphs)

HENRY CHARLES SMITH . . . . APPELLANT; DEFENDANT, ' axp THE PERPETUAL TRUSTEE CO. LTD. axp) p H.C.orA. ALFRED HENRY DELOHERY Jc 1910. PLAINTIFFS,

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