Thomas v Hollier

Thomas v Hollier - [1984] HCA 35 - HCA 1981 case summary — Zoe

[14]

The decision of the appeal must depend on what inferences should properly be drawn from the meagre evidence presented by the parties. There is no question of credibility because the appellant in evidence agreed that the account of the conversations given by the respondent was substantially correct. The document signed by the appellant on 14 February 1982 was an acknowledgement that the appellant was indebted to the respondent in the amount of $48,296.71. The matter thus acknowledged was entirely within the knowledge of the appellant, who said in evidence that it was not a mistake that he had signed in his own name and that he had done so deliberately. The document is strong, although not conclusive, evidence of the existence of the debt on which the respondent sued. The appellant's evidence that he signed the document because the respondent needed it is equivocal. On the one hand, it may mean that the appellant, out of friendship, signed a document which he knew to be false, for the purpose of assisting the respondent to mislead the bank. That is not a view which should readily be accepted when neither party has alleged fraud against the other. On the other hand, it may mean that the appellant, knowing that the respondent's position vis-à-vis the bank would be strengthened if the money due for the excess stock was owed by the appellant personally to the respondent personally, agreed to assume a personal liability. That interpretation of the evidence is open, and is supported by the fact that no reply was sent by the appellant to the letter dated 20 July 1982 from the respondent's solicitors. The failure to answer a letter may amount to an admission if there are circumstances which render it more reasonably probable that a man who denied the assertions made against him in the letter would answer those assertions than that he would not: see Wiedemann v. Walpole [1] ; Young v. Tibbits [2] ; and Lustre Hosiery Ltd. v. York [3] . The letter of 20 July 1982 was written by a solicitor; it enclosed a copy of the acknowledgement executed on 14 February 1982 and threatened the institution of proceedings unless payment was made within seven days. It would have been easy enough for the appellant to have stated that the acknowledgement of his liability did not represent the true facts, if that had been the case, and it is unlikely that he would have allowed the solicitor's assertions to pass unchallenged if they had been erroneous. The appellant's failure to reply to the solicitor's letter is therefore an admission - although perhaps not in itself strong evidence - of its correctness. The evidence of the subsequent payment of $1,000 and the receipt given for it points in both directions, as Samuels J.A. said in the Court of Appeal, and does not seem to advance the case one way or the other. Finally, the specific defence pleaded was not that the respondent was not owed the debt, but that the debt was owed by the purchaser company. However, if the respondent is personally entitled to payment that must be because of an agreement evidenced by the document of 14 February 1982, and under that agreement the appellant was the person liable to pay. Little, if any, weight should however be placed on the form of the defence.

[16]

On the evidence the proper inference to be drawn was that on 14 February 1982 the appellant had agreed to assume liability for the debt formerly owed by the purchaser, and had agreed to pay it to the respondent. There is no direct evidence that the respondent gave any promise in return, but it is inconceivable that either party intended that the purchaser should remain liable once the appellant had assumed liability. It can readily be inferred that the parties understood and intended that the new liability was to be in substitution for the old or, in other words, as Hutley J.A. said in the Court of Appeal, the proper inference was that the parties agreed to replaced intercompany liability with interpersonal liability. This meant, not only that the appellant promised to be personally liable to the respondent for the agreed amount, but also that the respondent promised that the vendor would no longer hold the purchaser liable for that amount. It meant also that the respondent promised to do whatever was reasonably necessary to bring about that result; such a promise, if not made in terms, was necessarily implied - it was necessary to give business efficacy to the arrangement, it was so obvious that it went without saying and it was of course reasonable. This promise by the respondent amounted to consideration given by the respondent to the appellant and was sufficient in law to make the appellant's promise binding. It was submitted on behalf of the appellant that there was no evidence that the respondent had authority from the vendor to discharge that company's rights against the purchaser, but it is immaterial whether or not that submission is correct. The evidence suggests that the respondent had power to control the decisions of the vendor, but it does not matter whether or not that was so, or whether or not the vendor was bound by the respondent's conduct; the promise given by the respondent to the appellant amounted to consideration and it was a consideration that moved from the respondent, notwithstanding that what he promised was to act so as to cause another person, namely the vendor, to discharge or release the purchaser from its obligation to that other person.

[38]

The appellant's appeal to the Court of Appeal was dismissed by majority (Hutley and Mahoney JJ.A., Samuels J.A. dissenting), subject to a reduction in the amount of the judgment to take account of the repayment of $1,000 made in March 1982. Each of their Honours took a different view of the conclusions that were to be drawn from the facts. Hutley J.A. found it unnecessary to consider whether the learned trial judge was wrong in finding that the "loan" could be called up at any time. His Honour took the I.O.U. to be an admission of a personal debt as between the appellant and the respondent and found sufficient consideration for the debt to lie in the inference that the parties, in order to satisfy the bank manager, were agreeing to replace intercompany liability with interpersonal liability. Samuels J.A. could see no evidence or any other ground to support the finding of Cross J. that on 14 February 1982 the "loan" from the vendor company to the purchaser company was due and payable. His Honour approached the matter on the footing that as a friend the appellant was prepared, by signing the I.O.U., to bind himself to pay the amount in satisfaction of what the bank manager required. However, his Honour also came to the conclusion that the parties never directed their minds to the question of consideration or the question of substituting a debt evidenced by the I.O.U. for the debt which had arisen from the contract of sale. The former debt, therefore, was unenforceable for want of consideration. Mahoney J.A. appears to have proceeded on the view that cl. 2 of the written contract conferred on the vendor company the right to require immediate payment for the whole of the stock notwithstanding that its value exceeded the estimate of $43,000. His Honour was unable, on that premise, to find an enforceable variation of the written contract whereby the vendor company relinquished that right and undertook to extend interest-free terms for four months. Against the background provided by this view of the course of events, his Honour found sufficient consideration for the appellant's personal promise in a holding out by the vendor company that it would, at least for the time being, continue to refrain from demanding payment of the balance owed for the stock.

[39]

The diversity of judicial opinion in the Supreme Court as to the conclusions that are to be drawn from the deceptively simple history of the transaction underlines the difficulty of the point in issue and induces caution in seeking a solution. Although counsel for the appellant sought to widen the scope of the argument by resisting the conclusion that the I.O.U. evidenced the existence of a personal debt, the evidence as a whole furnishes no support for any alternative proposition. In our opinion, the point of substance in the appeal is the same as that canvassed in the Court of Appeal, namely, whether there was any consideration for the promise that was made. Two alternative propositions in support of an affirmative answer to that question have found support in the Supreme Court. Both the learned trial judge and Mahoney J.A. have found the consideration to lie in an informal abstention on the part of the vendor company for an indeterminate period from exercising its right to make immediate demand for payment of the debt by the purchaser company. But that proposition depends wholly on the correctness of the finding that at all times prior to the making of the personal promise by the appellant the vendor company was entitled to demand immediate payment of the debt owed by the purchaser company in respect of the excess stock. With all respect to their Honours, we agree with Samuels J.A. that there is no evidence to sustain such a finding. On the contrary, there is in our opinion very strong evidence pointing the other way. The stock was valued at approximately $95,000 compared with the estimate of $43,000 in the contract. In this event, the purchaser company was entitled in accordance with the provisions of cl. 2 to decline to accept more than $43,000 worth of stock; furthermore, it was entitled to select the items which were to be rejected in order to bring the total value down to $43,000. The purchaser company was therefore in a powerful position to bargain a compromise with the vendor company. The latter company could find itself in a parlous predicament with no shop and more than $50,000 worth of rejected stock on its hands. It is therefore not surprising that the vendor company should offer four months interest-free terms for payment of the stock value in excess of $43,000. Then, on 14 February 1982, when the total value is ascertained, the parties agree on a variation to cl. 2 of the contract. Induced by the marking down of stock below market value and the offer of interest-free terms, the purchaser company agrees to buy all the stock. In our respectful opinion, it is inconceivable that the vendor company would insist on a right to demand immediate payment for all stock that the purchaser company should agree to take in excess of a value of $43,000 when the latter was not obliged to take any of it and had expressed some disinclination to do so.

[40]

The alternative basis to a finding of the existence of consideration was that favoured by Hutley J.A. As we have said, his Honour drew the inference that the parties, in order to satisfy the bank manager, agreed to replace intercompany liability with interpersonal liability. With all respect, we think this is more speculation than inference. There is no evidence to suggest that either of the parties contemplated that changes might result to the legal relationship between the vendor and purchaser companies in consequence of the appellant's giving of a personal I.O.U. They were friends, the bank manager wanted evidence of the existence of the debt owed to the client company which the bank was being asked to accommodate financially and wanted it in the form of a personal I.O.U. and so the appellant was willing to do what was asked of him. It is one thing to infer from this a willingness on the part of the appellant to assume a personal liability but it is quite another to inter an intention to thereby relieve the purchaser company of its liability. Only that very day the extent of the liability of the purchaser company to the vendor company for the stock had been finally determined together with the arrangement for interest-free terms. Yet that variation of the original agreement is said to have been immediately displaced by the assumption by the appellant of a personal liability for an equivalent sum payable on demand. In our opinion, there is no evidence to support such an inference. Nor is there any evidence to show that the respondent had the authority of the vendor company to relinguish the rights of that company against the purchaser company. We are also inclined to regard the manner of payment in March 1982 of $1,000 in reduction of the debt as militating against the inference which Hutley J.A. was prepared to draw. That payment was made by cheque drawn "A/c Payee only" by the purchaser company in favour of the vendor company and was paid to the credit of the latter's account. Although the receipt was framed in a personal way the fact that the payment was made to the vendor company in reduction of the debt is quite inconsistent with an inference of a prior agreement to extinguish that company's liability.

At a glance

Court

Decision date

Before

Source

Judgment (52 paragraphs)

Parties