Stage Club Ltd v Millers Hotels Pty Ltd

Stage Club Ltd v Millers Hotels Pty Ltd - [1981] HCA 71 - HCA 1966 case summary — Zoe

[43]

Their Lordships consider that this case was rightly decided on its facts. But in their Lordships' view it would not be right to suggest that it can be used as authority for the view that a signature on a balance sheet is in all circumstances an acknowledgment of an existing liability, within the meaning of s. 23(4) of the Limitation Act, 1939. Nor is it possible to suggest that it is an authority for the view that the signature on the balance sheet is an effective acknowledgment within the Act of 1939 of the existence of the debt at the date of signature. No question arose in Jones v. Bellgrove Properties Ltd. as to the precise date to which the acknowledgment related, though Birkett J. had taken as effective the date of the annual general meeting for the reason that this was the date when the liability was acknowledged. In the Court of Appeal this date was accepted without question. So regarded, the case is therefore not inconsistent with the principle that the acknowledgment must be of an existing liability. This principle seems indeed to have been accepted in English law as early as 1849 (see Howcutt v. Bonser [41] ). See also Preston and Newsom, Limitation of Actions, 3rd ed. (1953), p. 240. Later in their opinion, their Lordships said [42] : the question has never been properly considered whether a signature on a balance sheet, which must of necessity be made some time after the date to which the balance sheet has been made up, can amount to an acknowledgment of an existing liability. There may be cases where it would be proper to assume that the liability persisted up to the date of signature, which would then be an acknowledgment of an existing liability, though their Lordships venture to think that, if the effect of the English Limitation Act is the same as that of the Indian Act, some further consideration may have to be given to the general question whether and in what circumstances balance sheets may operate as acknowledgments of debts comprehended therein. In any case, their Lordships find it difficult to see in the cases cited any justification for the acknowledgment, consisting of the signature of the balance sheets, being taken to be of the continued existence, at the date of the signature, of the debt stated in the balance sheet. The appellant naturally relies on this decision to support its second proposition, that to be effective an acknkowledgment must be of an existing liability, and that of their nature balance sheets will seldom meet that requirement. However, the decision was not regarded as persuasive in two recent cases in the High Court in England, to which I now turn. 1. [1965] A.C. 470. 2. [1949] 2 K.B. 700. 3. [1965] A.C., at p. 484. 4. (1849) 3 Ex. 491 [154 E.R. 939]. 5. [1965] A.C., at p. 485.

[45]

Suppose that a trader, B, buys his goods from a trader, S, and has a running account with S for his purchases. Suppose that on January 7, 1973, S sends B a half-yearly account made up to December 31, 1972, and requests B to confirm that the account is correct, which B does by a letter signed on January 14, 1973. It would seem quite contrary to justice and to common sense that the letter of January 14 should be incapable of being an effective acknowledgment for the purposes of the statute merely because it acknowledges the liability as at December 31 and not the liability as at January 14. Having examined the earlier English cases to which I have referred, Brightman J. then made a detailed examination of the record in Bertram's Case [45] , and continued [46] : It will thus be seen that both the trial judge and the Court of Appeal proceeded on the basis that, to take a demand out of the Indian Limitation Act on the ground of acknowledgment, the language of the debtor must amount to an admission of a debt subsisting at the time of the signature of the acknowledgment. He proceeded to show that in the proceedings before the Judicial Committee neither party challenged this proposition. The respondent filed a written case, but did not appear on the hearing. The learned judge concluded that, the proposition not being a live issue, it was not surprising that their Lordships adopted the interpretation consistently adopted by the Indian courts and expressed as undoubted law in the leading Indian text. Brightman J. continued [47] : It is therefore perfectly apparent that the Judicial Committee were looking at the English cases only to see whether they supported the view of the Court of Appeal for Eastern Africa that the signature of directors on a balance sheet amounted to an acknowledgment of a liability existing at the date of signature. The answer to that question was clearly no. It is true that in the course of discussing the English cases for the purpose which I have indicated, the Judicial Committee added that they were not inconsistent with the principle that an acknowledgment must be of an existing liability, and they added that this principle seemed indeed to have been accepted as early as 1849 in Howcutt v. Bonser [48] . He reviewed Howcutt and concluded that the case did not seem to him "to have been necessarily based on the principle that an acknowledgment must be of an existing liability". He then followed "the clear current of English authority", and held that a company's balance sheet, duly signed by the directors, was capable of being an effective acknowledgment of the state of the company's indebtedness. He held the debt to be acknowledged as at the date of the balance sheet, with the result that the cause of action should be deemed to have accrued as at that date. The claim was upheld. 1. [1975] 1 Ch. 52. 2. [1975] 1 Ch., at p. 66. 3. [1965] A.C. 470. 4. [1975] 1 Ch., at pp. 67-68. 5. [1975] 1 Ch., at p. 69. 6. (1849) 3 Ex. 491 [154 E.R. 939].

[56]

I now address myself to the three propositions on which the case for the appellant rests. The first objection is that the balance sheets were not signed by the debtor company or its agent. It appears that the balance sheet for the year ending 31 December 1971 was signed by Mr. Walker in the capacity of a director of the Club, thereby raising the question of personal disqualification referred to in In re The Coliseum [63] and In re Transplanters [64] . If Millers was obliged to rely solely on this particular balance sheet to answer the defence based on the Act it would be necessary to consider whether the signature of the other director was sufficient to satisfy the requirement in s. 54(4) that the acknowledgment "be signed by the maker". However, as I have said, it is common ground that if either of the two balance sheets answers the description of an acknowledgment within the meaning of s. 54 Millers is entitled to succeed. Mr. Walker's signature does not appear on the earlier balance sheet. As I understand it, Mr. Handley takes a different point. He relies on s. 162(12) of the Companies Act 1961 N.S.W., as it existed prior to its amendment in 1971, which requires that every balance sheet shall be accompanied by a statement signed "on behalf of the directors" by two directors of the company. The statement is signed, not on behalf of the company, but on behalf of the directors. But in my opinion this provision does not deny the collective agency of the board of directors in the management of the company. It merely prescribes the procedure by which the board will discharge its responsibility in relation to the balance sheet, without undermining in any way the character of the document, when signed, as the company's document. I can see no reason in the present case to doubt that the balance sheets were written documents signed by the Club's agent. Such a conclusion is consistent with every one of the balance sheet cases determined in England during the present century, for in none of those cases is there any suggestion that the signature of directors does not bind the company save where a particular director is disqualified by interest.

[84]

"Subject to subsection (2)," [which is not material to these proceedings] "on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against his successors, extinguished". Section 63(1) distinguishes the Act from the Limitation Act of 1623. The Act extinguishes substantive rights which, under the old law, might have been revived after the expiry of the limitation period. Under the old law, the survival of the original cause of action was essential to support an acknowledgment which, by judicial dispensation, extended the statutory limitation period though it had already expired, and allowed a creditor to sue for a debt if the debtor had acknowledged liability within six years before the bringing of the action. In Spencer v. Hemmerde [10] Lord Sumner, observing that the terms of an acknowledgment must not be so limited or conditioned as to negative "the technical implication of a new assumpsit to call the old one out of abeyance", explained how the implication of the new assumpsit might be reconciled with the absolute terms of the statute 21 Jac. I. c. 16, s. 3. He preferred [11] the school of thought which said - that the original loan and the subsequent promise formed one continuing transaction; that the creditor had made the loan once and for all, while the debtor had not finished promising as long as he went on promising, and therefore his assumpsit was still in being till within six years of the action. The explanation wears an aspect of unreality, but at least it hangs together, and explains why the only practical point now is the unconditioned and uncontrolled character of the acknowledgment, and not its intention in truth or its novelty as a fresh cause of action in law. 1. (1837) 2 M. & W. 461, at p. 464; [150 E.R. 839, at p. 840]. 2. [1922] 2 A.C. 507. 3. [1922] 2 A.C., at p. 535.

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