Thompson v Palmer [1933] HCA 61

Thompson v Palmer [1933] HCA 61 - HCA 1933 case summary — Zoe

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In her statement of defence the defendant stated that she did n know and therefore could not admit the matters set out in pars. 1, 4, 5, 6 and 8 of the statement of claim. The defendant also stated :

(1) that in further answer to par. 4 of the statement of claim she believed and charged it to be a fact that at all material times Clegg was solicitor for Fieldhouse and Farmer and that prior to the registration referred to in par. 7 of the statement of claim the mortgages and certificates of title referred to in par. 4 were held by Clegg with the knowledge and authority of Fieldhouse and Farmer as their solicitor for the purpose of carrying out as such solicitor the transaction set forth in the transfer ; (2) that in further answer to par. 5 of the statement of claim she believed and charged | it to be a fact that Fieldhouse and Farmer for a consideration of £1,200, paid to them as shown hereunder, by duly executing a memorandum of transfer of mortgages transferred and assigned to her the mortgages and debts thereby respectively secured and that in so far as the memorandum of transfer was filled in or completed if at all by Clegg, or by some person on his behalf, Clegg, or such person, acted as agent of Fieldhouse and Farmer and with their authority ; (3) that, contrary to the allegation in par. 6 of the statement of claim, she paid, as shown hereunder, the sum of £1,200 ; to Clegg who acted as solicitor for both parties in the transaction, and she charged it to be the fact that Fieldhouse and Farmer either prior to the receipt by Clegg from her of the consideration money authorized Clegg to receive the money on their behalf or subsequently to his receipt thereof ratified his receipt on their behalf of the money ; (4) that, in further answer to par. 6, prior to the registration of the - transfer Clegg had collected certain moneys belonging to her and to her husband and she by her husband and her husband instructed Clegg to apply out of such moneys the sum of £1,200 in satisfaction - of the consideration mentioned in the transfer, and she believed and charged it to be the fact that Clegg subsequently accounted to _ Fieldhouse and Farmer for the full amount thereof in satisfaction of the consideration money ; (5) that by way of alternative answer

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ment to have been made there is no fraud. Of two innocent ons the one who should suffer for the fraud of a third person is one whose acts or omissions enabled the fraud to be perpetrated. by executing and handing to the solicitor, the common agent, the er, in which the receipt by them of the money was acknow- , before ascertaining whether in fact such money had been iid, the trustees enabled the solicitor to impose upon the appellants, erefore the trustees, as vendors, are not entitled to, and cannot nforce, a lien for unpaid purchase money (Gordon v. James (1) ; Lo Freehold and Leasehold Property Co. v. Baron Suffield (2) ). Court of equity will deprive the holder of the legal estate of the protection that title gives him only if he is guilty of fraud or negligence forthern Counties of England Fire Insurance Co. v. Whipp (3) ). The equity raised in Gordon v. James was not raised in Young v. White (4), and, although raised in Wrout v. Dawes (5), it was not proved, for which reasons the two last-named cases are not applicable. '[Drxon J. referred to Greenwood v. Martins Bank Ltd. (6) on the ion of estoppel.] v. James (1) is not distinguishable from this case merely use the memorandum of transfer was not actually seen by the mt. That is an immaterial circumstance (London Freehold d Leasehold Property Oo. v. Baron Suffield (2) ). The appellant lulled into security by the execution and handing over by the t of the memorandum of transfer containing the receipt clause, and also by the failure of one of the trustees, during the e of a conversation with the appellant's husband, to inform he latter of the true position as to moneys outstanding. There is ot any evidence that at the time of the transaction the appellant that Fieldhouse and Farmer were trustees, or that the moneys trust moneys. The fact that the solicitor employed by her of the falsity of the receipt clause does not conclude the against the appellant. The solicitor was, in fact, the common ent for both parties (Gordon v. James; and London Freehold Leasehold Property Co. v. Baron Suffield).

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'the trustees had no knowledge or suspicion of the position until long afterwards. The loss sustained by the appellant was not in 'any way contributed to by the trustees. There is not any reason either at law or in equity why the mortgages in question should be taken to make good loss sustained by the appellant as the result of Clegg's defalcations. The onus is upon the purchaser of a property to see that the purchase money is received by the vendor. The mere fact that the trustees executed and handed to the solicitor a

transfer containing a receipt clause is not sufficient to excuse the appellant from paying the purchase money, or to deprive the respondent of the right to a vendor's lien in respect thereof. The
point that the vendor's lien had been destroyed by the conduct of the trustees or one of them, was not pleaded, nor was any evidence lirected to it. The respondent's equity, that is, vendor's lien, arises from the facts shown in the statement of claim, particularly par. 6 thereof. According to the Rules of Court, and practice, _ provided a prayer for further or other relief has been included, if a plaintiff has stated facts in his statement of claim entitling him oa particular form of relief he is not debarred therefrom merely because the specific relief claimed is not the appropriate one. It has not been shown that the trustee Farmer took any part in various ts, conversations and representations relied upon by the appellant, ticularly as to the alleged waiver or abandonment of the lien, or that he authorized Fieldhouse or any other person to act on his , therefore the defences raised are ineffective. In order to bind the trust estate the acts alleged must be the acts of all the (Luke v. South Kensington Hotel Co. (1) ). Even as against Fieldhouse the defences raised are unsupported by the evidence. 'The appellant knew that the moneys secured by the mortgages were trust moneys. The possession by the appellant of the legal estate is irrelevant. The facts present in this case are very similar to the

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Farmer were not paid the sum of £1,200 in respect of the transfe of the Gillies' mortgages. The essential factors giving rise to a estoppel are set forth in the speech of Lord Tomlin to the House Lords in Greenwood v. Martins Bank Lid. (1), and it is unnecess to repeat them. The suggestion in the present case is that representation for which Fieldhouse and Farmer are responsible, was made to Mrs. Thompson or her husband that the sum of £1,200 respect of the transfer of the Gillies' mortgages was in fact pa The facts relied upon are : (a) The title deeds were handed over to Mrs. Thompson and a transfer was executed acknowledging receipt of the sum of £1,200, But neither Mrs. Thompson nor her husband ever saw the trans Clegg accepted it on Mrs. Thompson's behalf, and certified obtaining her signature would cause delay. He lodged the trans} in the Registry, and there it remains. Gillies' mortgages, which were handed over to Mrs. Thompson, did not of course contain any receipt for the sum of £1,200 payable on the transfer of those mort: gages. Clegg's dishonest conduct in handing over the mortgages to Mrs. Thompson without payment of the £1,200 does not, without any other fact to colour the act, amount to a representation on the part of Fieldhouse and Farmer that the money had been paid. far Wall v. Cockerell (2) appears to me decisive of the case; cases of Gordon v. James (3), and London Freehold and Leaseho Property Co. v. Baron Suffield (4), turn on their own special facts. (6) Clegg in February of 1931 gave a statement to Thom showing moneys invested on his behalf in "new loans," one ¢ which was the Gillies' mortgages, and also a ch eque for £75 10s. 10d., the balance of Thompson's moneys in his hands. : : In a sense (cf. Lord Lindley in Farquharson Brothers & Co. v King & Co. (5)) Fieldhouse and Farmer enabled Clegg to make this statement, but can they be held responsible for it ? statement was of transactions which Clegg carried out or purportet to have carried out for and on behalf of Thompson or his wif Fieldhouse and Farmer gave him no authority express or imp! to prepare or make it, nor was it within the scope of any authorit

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of asking Fieldhouse, whom he knew well, why he wished to transfer the mortgages ; was there anything wrong with them? Fieldhouse appears to have replied that they were sound, but that he had been offered one large mortgage by Clegg, or Clegg's mother, and he wished to take it because it would save trouble. Clegg's chief female clerk, Mrs. Smith, whom Long Innes J. regarded as a credible witness, notwithstanding the degree to which she was implicated in Clegg's frauds, swore that Fieldhouse, who was in fact interested in a brick company at Kingswood, had in contemplation the investment of the money upon mortgages over about 13} acres of land there to be sold _ in subdivision by a building syndicate. She also said that, in December 1930, she was present at an interview between Clegg and - Fieldhouse at which the latter said that he had certain securities including the mortgages of Gillies, Wall, Jamieson, Giblett and Read, which he would be willing to transfer to Thompson, and that he wanted to call them in or transfer them over so as to obtain a certain sum of money through Clegg's office. The substance of Fieldhouse's ultimate account of his reason for executing the transfers, at any rate of Gillies' mortgage, was, that in order to obtain the money outstanding he authorized Clegg to transfer it to some " good client," that Clegg spoke about Gillies, asked Fieldhouse to sign the document, said that he had plenty of good clients, that he would have no trouble in "refinancing" it, and that he was going to "call the money up." It appears that shortly after 5th - February 1931, the date of the transfers, Fieldhouse met with an injury, which confined him to hospital until 3rd March 1931. He was then informed that disquieting rumours about Clegg were : current. He was advised to obtain all his securities and this advice he endeavoured to follow. There is no direct evidence of what took place between himself and Clegg, but Mrs. Smith says that Fieldhouse told her he wished to get all his securities together and gave the - reason why, that he arranged to come to the office and that "he went through them all" with her. Fieldhouse says that Mrs. Smith promised from day to day to get his deeds but, except for producing a few odd ones, did nothing. What he discovered does not appear,

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called " Fieldhouse and Cato," and of moneys invested for Farmer and any other moneys invested by Fieldhouse through Clegg. The instrument then assigned the assets to Fieldhouse. It contained a provision requiring him as far as concerned the settlement trust to "accept securities over the lands at Balgowlah . . . Mascot and Kingswood in accordance with the arrangements already made" and thereupon to release from the charge securities of an equal value. The references to Balgowlah and Mascot as well as Kingswood are to building estates. In exchange for this security Fieldhouse gave up the assignment executed by Clegg's mother. Mrs. Smith was asked when giving evidence to explain in effect the first condition laid down by Clegg. She said she included in the security properties which had become hers while she was in Clegg's employ: that she did so because otherwise Clegg would not allow his mother to join and that she would have given anything then to get the matter settled. The second condition for which Clegg had stipulated was evidently directed to avoiding danger from the Thompsons. After obtaining the transfers of the other mortgages and the cheque for £75 10s. 10d., Thompson had ascertained that the full amount set down as secured by Jamieson's and by Wall's mortgage was no - longer outstanding. £100 had been paid off Wall's mortgage and £175 off Jamieson's and the payments had been made to Fieldhouse. Thompson had asked Fieldhouse, early in March, to complete the transfer of Read's mortgage and to make up the shortage of £275. With the first request he promised to comply: the second he refused, on the ground that, in the security he said he had taken" from Clegg, he had received credit only for the reduced amounts and he referred Thompson to Clegg for the money. Fieldhouse says that Thompson threatened to have Clegg arrested unless Read's~ mortgage was transferred. On 27th March 1931, the day after Mrs. Clegg's and Mrs. Smith's security was executed, Fieldhouse attended an appointment at Clegg's office and executed the transfer of Read's mortgage. Thompson was represented by a solicitor.

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in the £53,550 given in the earlier assignment executed by Clegg. It nowhere appears that Fieldhouse obtained any other security or consideration for the transfer and his statement to contrary to Thompson, if made, was mistaken or false. The decree appealed from does not set aside the transfer of mortgages, but, treating it as affirmed, declares the existence of an _ equitable lien for the price. Upon the state of facts described, the first question which this declaration raises is whether, assuming the transferrors, the trustees, may be considered not to have received the price, they became upon transferring the mortgages entitled to' an equitable lien or charge thereon for the consideration money stated in the transfer. I think this question should be answered that, upon the required assumption, they would be so entitled. Indeed the existence of what may be called this prima facie equity | does not appear to have been disputed before Long Innes J., and in this Court the appellant's counsel, not merely admitted, but maintained, that an agreement between Thompson and Fieldhot to buy the mortgages was proved, although he denied that the appellant herself, Mrs. Thompson, incurred any personal liability. It must be borne in mind, however, that the respondent's primary : case was that the transfers were not in equity binding upon the trustees and that the appellant sought to meet this case by showing that Fieldhouse entered with full knowledge into the transaction - expressed by the transfers. My reason for the conclusion I have expressed upon this question is that Thompson took the transfe in the name of his wife upon the footing that moneys for which - Clegg was accountable to him would, to the extent of the considera~ tion expressed, which was the amount secured by the two mortgages, be applied either at the direction of the transferrors or in satisfaction - of some claim or demand on their part; and Fieldhouse had a corresponding expectation. I do not think that Farmer, his" co-trustee, should be treated as intending anything less than regular payment by the transferees of the money sum stated in the transfer. He was a trustee, and, in the absence of evidence, he is not to presumed, merely because he left the transaction of the business to his co-trustee, to have authorized him to commit breaches of trust in his manner of disposing of the trust property. But this is

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til immediately before the institution of the suit that the mortgagees ad not paid over the money upon the faith of the mortgage instru- s but had reason to believe that it was so paid, both from the ds of the mortgagees and the assurances of the solicitors. 'Under these circumstances," said Lord Westbury L.C. (1) " it is le to impute to the Appellant," the mortgagor "laches or muiescence, or an intention of confirming the respondents'," the s' "title." The burden of proving such a case would lie the meepondents and could not be discharged except by proving the appellant was aware of the time and manner in which the espondents' money was deposited with the solicitors "and of the et that no part of it had been applied for his own use or benefit." d Chelmsford, after expressing his entire agreement with the on of Lord Westbury, proceeded to distinguish the case from 'in which the money, at the time of the execution of the securities, cisted in the hands of the solicitors, but was afterwards misapplied. fe said (2) that the mortgagees held the deeds without having n any value for them. The mortgagor's ignorance of this fact atirely avoided the effect of the acquiescence relied upon and of » mortgagor's undoubted recognition of the validity of the mort- s. The reasons given by both the learned Lords exclude the ing grounds upon which the mortgagor might conceivably be nsidered bound : - (a) The receipt of the money by the solicitors agents. It was entrusted to them by the mortgagees as their and independently of the transaction. (b) Estoppel of the rtgagor from denying that the solicitors received it as his agents. mortgagees knew the contrary, namely, that they had entrusted to them as their agents. (c) Detriment, consisting in the loss of money, induced by the representations made by the mortgagor g the receipted mortgage or otherwise. The money had. eady been lost. A ground which is not explicitly dealt with is that of estoppel of mortgagor from denying the receipt of the money from the licitors, arising from representations inducing the mortgagees to

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olicitors to represent to the investing client that his money had eally been paid over to the trustees. Lindley LJ. (1) thought that their incautious act the trustees had enabled the solicitors to eceive the assignee, to lull him into security and to prevent his having recourse to those who got his money from him by the trick ; five years had elapsed, for some part of which time the solicitors were in good credit. Fry L.J. (2) went on the ground that the trustees had given to the solicitors, who were generally recognized their agents and who in fact received the money, the means of esenting that it had been paid over to the trustees, so that the ee did not make that inquiry and search after the money h otherwise he would have done. _ These grounds refer to the essential elements of estoppel by conduct amounting to or assisting in a representation. It is to be 'noticed that between the payment of the money to the solicitors, and the receipt from them of the deeds, a few weeks only elapsed that the money may not then have been lost. The detriment fered through inaction consisted in possible failure to prevent, as ell as to recoup, the loss. Again, the money was paid in respect of e very investment and it was a strong inducement which was furnished by the production of the receipted deed, which came to e personal knowledge of the assignee himself : and last, the trustees 'in dealing with documents possibly affecting others were guilty of want of care in failing to perceive the nature of what they signed afterwards in failing to see that they were receiving interest on a footing inconsistent with the transaction' they had supposed they e giving effect to. Lindley L.J. (3) refers to the familiar general itement which he gives in the language of Story on Agency : - e one of two innocent persons must suffer, that party shall who by his own acts and conduct has enabled the other to imposed upon. But, although as a compendious description of general results produced by the operation of independent iples, notably those of estoppel, the statement may be useful, it is not itself a rule of law. When in Lickbarrow v. Mason (4),

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