Amos v Citibank Ltd

[1996] QCA 129

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 243 of 1994

Brisbane

[Amos v. Citibank Limited]

BETWEEN

EDWARD AMOS

(Defendant) Appellant

AND

CITIBANK LIMITED

(Plaintiff) Respondent

McPherson J.A.
Davies J.A.

Ambrose J.

Judgment delivered 10/05/96

Joint reasons for judgment of McPherson J.A. and Ambrose J. Separate reasons of Davies J.A.

All concurring as to the order.

APPEAL DISMISSED WITH COSTS.

CATCHWORDS	CONTRACT - Accord and satisfaction - No accord - Offeror knowing that offeree intending not to accept. Smith v. Hughes (1871) L.R. 6 Q.B. 597 and Crown v. Clarke (1927) 40 C.L.R. 227 followed.
CONTRACT - Accord and satisfaction - Requirement of honest belief in the claim to be compromised. Miles v. New Zealand Alford Estate Co. (1885) 32 Ch.D. 266; Wigan v. Edwards (1973) 47 A.L.J.R. 586.
CONTRACT - Consideration - A promise to pay, or the payment of, a lesser amount than that owing is not sufficient consideration. Foakes v. Beer (1884) 9 App.Cas. 605 followed. Williams v. Roffey Bros & Nicolls (Contractors) Ltd. [1991] 1 Q.B. 481 distinguished.
Counsel:	E.J. Lennon Q.C. for the appellant
R.G. Bain Q.C. for the respondent
Solicitors:	Keller Nall & Brown for the appellant
Clayton Utz for the respondent
Hearing Date:	28 March 1996
IN THE COURT OF APPEAL	[1996] QCA 129
SUPREME COURT OF QUEENSLAND
Appeal No. 243 of 1994
Brisbane
Before	McPherson J.A. Davies J.A. Ambrose J.

[Amos v. Citibank Limited]

BETWEEN

EDWARD AMOS

(Defendant) Appellant

AND

CITIBANK LIMITED

(Plaintiff) Respondent

JOINT REASONS FOR JUDGMENT - McPHERSON J.A. & AMBROSE J.

Judgment delivered the 10th day of May 1996

The facts material to the determination of this appeal are sufficiently set out in the

appellant's written outline of argument in support of the appeal. In essence, they are that

on 8 December 1989 the appellant, who is an estate agent, executed an instrument in the

form of a bill of sale over a Jaguar motor car in order to secure his liability to the

respondent Citibank Limited under a loan to purchase that vehicle. The instrument

provided for repayments of principal and interest of the loan by 60 monthly instalments in

specified amounts. The appellant having, as it was alleged, defaulted in payment of one

or more such instalments, the respondent exercised its election to call up the whole amount

owing. When the amount was not paid, the respondent instituted proceedings in the District Court at Brisbane to recover the vehicle or its value. This appeal is brought against

the judgment given in favour of the respondent as plaintiff in the action.

The appellant's defence raised two distinct but not unrelated matters. One was that

the arrangement made in December 1989 between him and the respondent was that the

transaction was to be a hire purchase agreement and not a bill of sale; that the nature of

the instrument he executed was misrepresented to him; and that the respondent's action

in calling up the principal and interest of the loan was contrary to the hire purchase

legislation and accordingly invalid. The other matter of defence was that, as regards the

unpaid instalment or instalments, an accord and satisfaction had been arrived at between

the parties which precluded the respondent from relying on non-payment as the occasion

for calling up the full amount under the bill of sale.

In giving judgment for the respondent, the learned trial judge rejected the testimony

of the appellant and his supporting witness. His Honour did so in direct and emphatic

terms. He found that the appellant had made up the story about a hire purchase agreement

as a "ploy" or a "ruse" invented to avoid his contractual obligations, adding "I think his

claims had no substance and that he knew that". He concluded by saying that the

appellant's evidence should be rejected where it conflicted with the body of evidence

adduced by the plaintiff.

Confronted by these credibility findings, Mr Lennon Q.C. for the appellant confined

himself on appeal to a point of law which, he submitted, arose in relation to the alleged

accord and satisfaction. To constitute an accord and satisfaction, there must be both

agreement and consideration; but, Mr Lennon submitted, both elements could and should

as a matter of law, and despite the trial judge's adverse credibility findings, be held to be

present in this case.

To understand the points at issue, it becomes necessary to travel into the facts a

little further. On 5 November 1990 the defendant sent a closely typed two-page letter to

Citicorp Australia Limited in Sydney. It dealt with various subjects, and in particular

referred to the appellant's claim that he had entered into a hire purchase agreement with

the respondent. The final paragraph of the letter was as follows:

"Your solicitors have advised my solicitors that 'arrears', including $1182.76 due on the 8.11.90, totalling $4866.31 are due. I dispute that this is the correct sum of alleged arrears or the correct instalment as the hire purchase agreement which you now assert to be a bill of sale clearly shows that instalments are $1182.06 each. In fact, there are no arrears as I was not liable to pay any instalments until such time as I received a signed copy of the hire purchase agreement and I only received that from you on the 2.11.90. Therefore, I attach hereto my cheque for $1200.00 in full and final settlement of payment of the sum of $4866.31."

What happened after that is not in dispute. On its reaching the office of Citicorp in

Sydney, the cheque referred to in the final paragraph was, in accordance with the daily

practice of that company in dealing with incoming mail, detached from the letter and

banked immediately. It was not until some time later that the reference in the letter to a full

and final settlement was adverted to and addressed in correspondence passing between

the solicitors for the parties. A cheque dated 21 November 1990 for $1200, by way of

refund of the amount paid, was sent by the solicitors for the respondent and received by the

appellant's solicitor on 22 November 1990.

On this basis the appellant argued that an agreement or "accord" had come into

existence between the parties. The accord was, it was submitted, constituted by the

appellant's offer in the final paragraph of the letter to settle the dispute with the respondent,

which was accepted by the conduct of the respondent in banking the cheque and receiving

the proceeds. The orthodox approach to the formation of contract being in law an objective

one, the only inference capable of being drawn from this conduct was that the respondent had accepted the offer to settle on the terms in which it was expressed in the letter

forwarding the cheque, which was "in full and final settlement" of the respondent's claims.

There is more than one obstacle to the appellant's submission on this point. One

that immediately springs to mind is that the "offer" contained in the letter dated 5 November

was addressed and directed not to the respondent, but to Citicorp Australia Limited. The

two companies are associated but they are separate entities, Citicorp being described "as

part of the Citibank N.A. Group". The justification advanced on behalf of the appellant for

addressing his letter of 5 November 1990 to Citicorp rather than the respondent Citibank

is derived from the bank deposit book (ex 37) supplied to the appellant. It invites the holder

"if it's more convenient" to make payment by mail addressed to Citicorp Australia Limited,

at the address in Sydney to which the letter was sent.

It is, of course, one matter to invite payment to be made "for convenience" to a

particular person or place, and quite another to infer from such an invitation that the person

designated at that place also has a general authority to vary the terms of the contract

pursuant to which the payment is made. It was not shown that Citicorp had authority to vary

the terms of the bill of sale in favour of the respondent either at all or to the extent of

accepting in full and final settlement an amount less than the full instalment owing under that

instrument. The point is, it may be acknowledged, a technical one; but certainly no more

technical than the defence itself. As it is, the fact that the appellant, who lives in Brisbane,

had, until the payment in question was made to the Sydney office of Citicorp, been

corresponding with the Melbourne head office of the respondent was one of the matters on

which the trial judge relied in arriving at his credibility finding against the appellant.

Turning to matters of more substance, it is correct to say that the approach of our law to the formation of contracts is, generally speaking, objective. It is, however, true only as a general proposition to which there are some notable exceptions. See, on this, the

observations in the joint judgment of Mason A.C.J., Murphy and Deane JJ. in Taylor v.

Johnson (1983) 151 C.L.R. 422, at 429-432, which may perhaps be thought to have

retreated to some extent from the objective approach in its utmost strictness. It was a case

of mistake where, on any view, the law has always been that a person may not take

advantage of a mistake which, at the time of formation of the contract, he knows the other

party has made in expressing his offer. Well known examples are Smith v. Hughes (1871)

L.R. 6 Q.B. 597; and Hartog v. Colin & Shields [1939] 3 All E.R. 566. See, in addition, A.

Roberts & Co. Ltd. v. Leicestershire County Council [1961] Ch.555; Johnstone v.

Commerce Consolidated Pty. Ltd. [1976] V.R. 463; affd [1976] V.R. 724; and Majestic

Homes Pty. Ltd. v. Wise [1978] Qd.R. 225. They are cases of rectification, but in their own

way each gives effect to the principle, adopted by Hannen J. in Smith v. Hughes (1871)

L.R. 6 Q.B. 597, 610, that a promise is to be performed "in that sense in which the

promisor apprehended at the time the promisee received it", which his Lordship took as

meaning that "a promiser is not bound to fulfil a promise in a sense in which the promisee

knew at the time the promiser did not intend it". So, in this case, the appellant was and is

not entitled to insist on the respondent's conduct in banking the cheque as constituting

acceptance of the offer to settle if at the time he knew that the respondent did not intend to

accept and be bound by that offer.

Perhaps more directly to the point in the present context are the cases concerning

"unilateral" contracts, in which acceptance is constituted by an act done in return for a

promise. An offer to pay a reward in return for an act is the most prominent illustration. At

least in Australia, it is clear that a person who performs an act which is specified as the price of a reward offered is contractually entitled to the reward only if, in doing the act, he

knew of and relied on that offer. See Crown v. Clarke (1927) 40 C.L.R. 227, in particular

at 244, where, adopting Langdell on the Contracts, 2nd ed., at 988, Starke J. said that in

his opinion:

"... the true principle applicable to this type of case is that unless a person performs the conditions of the offer acting upon its faith or in reliance upon it, he does not accept the offer and the offeror is not bound to him. As a matter of proof any person knowing of the offer who performs its conditions establishes prima facie an acceptance of that offer."

See also Veivers v. Cordingley [1989] 2 Qd.R. 278, 291-292.

The present case is one in which the "full and final settlement" condition specified

by the appellant in his offer has been performed or fulfilled by the respondent as offeree

without its being aware of or intending to accept the offer to settle contained in the letter of

5 November 1990. In one way, it is thus the converse of the case put by Starke J. in Crown

v. Clarke. By banking the cheque, the respondent complied with the terms of the offer (as

the appellant claims it to be) but without intending to do so; and the appellant knew that the

respondent was not intending to act on the faith of, or in reliance upon the offer. The result

here is that it is the offeree (rather than as in Crown v. Clarke the offeror) who claims not

to be bound by the terms of the offer; but, from the standpoint of the principle involved, that

can make no difference to the result. The appellant cannot hold the respondent bound by

an act which he knows, and knew all along, was not intended to operate as acceptance of

his offer. Because of his actual knowledge of the real intention of Citibank, any inference,

which might otherwise have been drawn, that banking the cheque involved acceptance of

the offer is not available to him because he knew it was not in fact intended to have that

effect.

Any such conclusion necessarily depends on the trial judge having made the

requisite findings. However, no doubt exists on that score. On its own, his Honour's finding

that the appellant's story about the hire purchase agreement being a "ploy" or ruse invented

to avoid his contractual obligation might not be sufficient; but, as appears from his reasons

for judgment, the learned judge also accepted the submission of counsel for the respondent

at the trial, which was that the appellant "was endeavouring to go about matters

inconspicuously, i.e. in such a way so as to put the plaintiff [respondent] off guard". I read

this as a finding that the appellant, knowing in advance that the respondent had no intention

of accepting the cheque in full and final settlement, deliberately adopted a method of

presenting it which he expected would lure the respondent into banking it without adverting

to the accompanying condition or "offer". That being so, the case falls within the principle

discussed above, which precludes an agreement or "accord" from arising between the

parties.

A decision to that effect means that it is not strictly necessary to consider a further

matter argued by the appellant, which is that the compromise or "settlement" of a valid

indebtedness is capable of being effected by payment of less than the full amount of the

debt. When the letter of 5 November 1990 was written, the amount due to the respondent

was $4,866.31; whereas the amount of the cheque tendered and banked was only $1,200.

Having regard to his Honour's finding that the appellant's claim of a hire purchase

transaction "had no substance", and that the appellant knew that was so, it is not possible

for the appellant to maintain that he held an honest belief in the claim to be compromised:

cf. Miles v. New Zealand Alford Estate Co. (1885) 32 Ch.D. 266; Wigan v. Edwards

(1973) 47 A.L.J.R. 586, 595. Bereft of that support for it, the appellant is confronted by the decision in Foakes v. Beer (1884) 9 App.Cas. 605, holding that in law the consideration

for discharging an indebtedness in a particular sum cannot consist of a promise to pay, or

the payment of, a lesser amount of money.

In response to that well settled proposition, the appellant relies on the decision

of the Court of Appeal in England in Williams v. Roffey Bros. & Nicholls (Contractors) Ltd.

[1991] 1 Q.B. 481, which is said to evince a more "sophisticated" approach to the matter

of consideration than that displayed in Foakes v. Beer. In Williams v. Roffey, the plaintiff,

a carpenter who had agreed for a fixed price to do work on flats being renovated by the

defendant head contractor, found that he was financially unable to complete the work at that

price. The Court of Appeal held that the promise, which was then made by the head

contractor, to pay an additional amount for each flat completed was supported by

consideration consisting of the advantage that would accrue to the head contractor from

in fact having the work completed, or the detriment that it would otherwise suffer if the

plaintiff did not complete the work.

In circumstances in which a contract of that character remains at least to some

extent executory on both sides, it is not difficult to identify as the consideration the

commercial benefit which results from having performance in fact carried out, or,

conversely, the detriment likely to be suffered if it is not. See also Musumeci v. Winadell

Pty. Ltd. (1994) 34 N.S.W.L.R. 723, which is a further instance of that kind, where the

decision in Williams v. Roffey was followed at least in part. But it is a different matter

where, as here, the subject matter of agreement is not a contractual obligation which is still

to be performed, but simply a debt which has arisen, become due, and is payable forthwith

by one party to the other. It may be that, as Peter Gibson L.J. has said, "when a creditor and a debtor, who are at arms length, reach agreement on the payment of a debt by

instalments to accommodate the debtor, a creditor will no doubt always see a practical

benefit to himself in so doing": see Re Selectmove Ltd. [1995] 1 W.L.R. 474, 481, where,

however, it was held that the decision in Foakes v. Beer prevented the enforcement of such

an agreement. In Re Selectmove Ltd. [1995] 1 W.L.R. 474, the Court of Appeal declined

to extend Williams v. Roffey to an alleged agreement to pay the whole debt by instalments

in the future. Even that is not the case we are now called on to consider. Here the debtor

claims no more than that the creditor has agreed, and is consequently bound, to accept a

sum less than the amount that was and is incontrovertibly due to him. In those

circumstances, and in the absence of anything resembling an estoppel, the common law

rule continues to prevail that some valuable consideration in law must be shown for the

creditor's promise to release the unpaid balance of the debt.

What happened after the letter of 5 November 1990 was that, because only $1200

had been received by the respondent, the appellant's payment of instalments under the bill

of sale, to use counsel's phrase, "got out of kilter". Further correspondence ensued. Then

on 2 March 1991, the appellant sent another letter to Citicorp Australia Limited in Sydney.

The procedure resorted to by the appellant in November 1990 was repeated. The letter

of 2 March 1991 asserted that a dispute still existed about the nature of the transaction and

the amount, if any, owing under it. The appellant enclosed a cheque on this occasion for

$1500, "in full and final settlement" of all amounts owing including principal, interest,

instalments, costs, stamp duty, and so on.

The learned judge remarked that much of what he had already said in his reasons about the tender made in November 1990 was relevant to the appellant's conduct on this occasion. He added that the respondent had not strictly complied with the method of

acceptance specified in the appellant's letter of 2 March 1991. It is not necessary to

investigate the point because the learned judge also found that at the date of that letter no

bona fide dispute existed between the parties. Unless some such dispute existed, no

question of its settlement, or of an accord and satisfaction, was capable of arising: Wigan

v. Edwards (1973) 47 A.L.J.R. 586, 595. The only "dispute" to which the appellant could

point was the one that he had attempted, unsuccessfully as the judge had held, to

manufacture in or by means of the letter and cheque forwarded on 5 November 1990.

Since, in order for it to be given effect, there had to be a dispute that was bona fide, no

accord and satisfaction arose from the letter of 2 March 1991 or the events which

accompanied or followed it.

The other matters referred to in the appellant's written outline were abandoned at

the hearing of the appeal. It follows that the appeal should be dismissed with costs.

After these reasons had been prepared, but before they were delivered, the

respondent mortgagee applied for an order that costs in its favour be taxed and paid on

a solicitor and own client basis. Reliance was placed on cl.12 of the bill of sale, which

purports to entitle the mortgagee to recover costs from a mortgagor on that basis if the

mortgagor takes any legal action against the mortgagor because of a breach of any terms

and conditions of the bill of sale. Clause 12 is in the following terms;

"Should the mortgagee take any legal action against the mortgagor because of a breach of any of the terms or conditions (express or implied) of this Bill of Sale, the mortgagee shall be entitled to recover from the mortgagor, court costs and reasonable legal practitioner's fees (on solicitor and own client basis) incurred in enforcing this Bill of Sale, but only if the same are permitted by any applicable law. Also the mortgagee shall be entitled to recover any costs and expenses of and incidental to seizure and/or sale of any chattels hereto and any enforcement proceedings in respect hereof of any nature whatsoever."

It is the general practice to award to a successful mortgagee the costs of

proceedings for redemption or foreclosure if the terms of the mortgage so provide. That

is so because costs are payable as a matter of contract and, in the taking of the accounts

in such proceedings, it is the contract between the parties that governs the account: see

Westpac Banking Corporation v. Daydream Island Pty. Ltd. [1985] 2 Qd.R. 330, 332-333;

and also ex p. Prackert [1987] 2 Qd.R. 560, 562, and the authorities cited there, particularly

National Provincial Bank of England v. Games (1886) 31 Ch.D. 582, 592-593, 595.

In the present action to recover the vehicle and amounts owing, the respondent

mortgagee incorporated in para 8A of its plaint the terms of cl.12 of the bill of sale, and, as

part of the relief sought, claimed costs on a solicitor and own client basis. Thus, as a

matter of contract, which was pleaded and relied on in the action, the respondent is entitled

to recover the costs of this appeal on a solicitor and own client basis as specified in cl.12,

and the Court so orders.

REASONS FOR JUDGMENT - DAVIES J.A.

Judgment delivered the 10th day of May 1996

I have had the advantage of reading the reasons for judgment of McPherson J.A. and Ambrose

J. I adopt their statement of the relevant facts, of the judgment below and of the course of argument

before this Court. And I agree with them that this appeal must be dismissed.

That must be so for any one of the following reasons: there was no bona fide dispute between

the parties either in November 1990 or in May 1991 which could have been compromised; the act

relied on by the appellant to constitute acceptance of his offer, in each case, was not an act of the

respondent or of anyone authorised by the respondent to accept any such offer, but an act, merely of

receipt of money, by an associated company of the respondent designated by it as a convenient person

to whom payments under the Bill of Sale could be made; and there was no agreement on either

occasion between the parties because the appellant knew that the respondent did not intend, by the

receipt of money, to be bound by the terms stated in the appellant's letter. I adopt the reasons of

McPherson J.A. and Ambrose J. in each of these respects.

I therefore do not consider it necessary to deal with the question whether, as well, the appellant

failed because of absence of consideration for either of the agreements said to constitute the accord.

I agree with the order as to costs proposed by McPherson J.A. and Ambrose J. for the reasons

they have given.