Killworth v Hutchings
[1988] TASSC 84
•5 May 1988
Serial No B16/1988
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: Killworth v Hutchings [1988] TASSC 84; B16/1988
PARTIES: KILLWORTH
v
HUTCHINGS
DENNIS
FILE NO/S: 916/1985
DELIVERED ON: 5 May 1988
JUDGMENT OF: NETTLEFOLD J
Judgment Number: B16/1998
Number of paragraphs: 20
Serial No B16/1988
List "B"
File No 916 of 1985
KILLWORTH v RIDLEY, HUTCHINGS AND DENNIS
REASONS FOR JUDGMENT NETTLEFOLD J
5 May 1988
The defendants are sued as the trustees for the time being of the United Ancient Order of Druids Friendly Society Grand Lodge of Tasmania duly registered under the provisions of the Friendly Societies Act 1888 ("the Society").
By an Indenture of Conveyance made the 31 day of December 1969 one Mary Cowell as vendor conveyed to Johannes George Ris and the plaintiff, then the wife of Johannes George Ris, as purchasers land and premises situate at and known as 349 St. Leonard's Road, Launceston ("the property").
By an Indenture of Mortgage of the same date the said Johannes George Ris and the plaintiff as mortgagors granted and conveyed to the then trustees of the Society as mortgagees the property for an estate in fee simple in possession free from encumbrances subject to the proviso for redemption therein contained to secure the repayment of the principal sum of $4,000.00 ("the mortgage").
The mortgage contained (inter alia) the following covenants:–
(1) to pay to the mortgagees the principal sum on the 19th day of December 1972.
(2)in the meantime and so long as the principal sum or any part thereof shall remain unpaid pay interest thereon at the rate therein specified.
The said Johannes George Ris died on 6 April 1980. The plaintiff contends that she has repaid the whole of the principal sum and interest secured by the mortgage and she seeks a declaration to that effect and an order requiring the Society to reconvey the property to her.
At the compulsory conference the parties reached the following agreement:–
"The only issues of fact for determination are whether the payments the subjects of the receipts listed under Item 1 in Annexure 'E' were paid to New Century Land & Finance Co. Pty. Ltd. andor Ralph & Guy as the agents for the Defendants. It is agreed between the parties that if any one or more of such payments were so paid then they were all so paid. The parties have further agreed that if such payments were paid to New Century Land & Finance Co. Pty. Ltd. and/or Ralph & Guy as agents for the Defendants then the Plaintiff has repaid in full the moneys secured by the Mortgage referred to in paragraph 3 of the Statement of Claim. The parties have further agreed that if such payments were not so paid to the agents of the Defendants then the amount secured by the mortgage is $4,000.00 capital and interest."
In order to finance the acquisition of the property the plaintiff and her late husband, Mr Ris, obtained a loan from a company known as "The New Century Land & Finance Company Pty. Ltd." of the sum of $2,500. The repayment of that sum was secured by a second mortgage over the property, also dated 31 December 1969. The second mortgage contained the following covenant:–
"(p) That until repayment in full of the said principal sum the Mortgagors will pay the sum of at least $14.00 on the Friday of each and every week commencing on Friday the 26th day of December 1969 all such weekly sums to be applied by the Mortgagee on each of the half yearly interest days hereinbefore appointed firstly in payment of all interest due and payable under the 1st Mortgage secondly in payment of all interest due and payable hereunder calculated with half yearly rests on the said half yearly interest days and thirdly in reduction of the principal sum hereby secured."
The New Century Land and Finance Company Pty Ltd ("New Century") was in substance owned by a firm of estate agents called Ralph and Guy, the sole proprietor of which was one Roland Boyer Ralph. The principle purpose of New Century was to facilitate the earning of commission by Ralph and Guy by supplying second mortgage finance to purchasers. Unfortunately Mr Ralph got into financial difficulties in 1983 and became a bankrupt. New Century went into receivership in August 1983 and later went into liquidation. A number of the creditors of New Century lost their money. The moneys the subject of the dispute in this action were paid by the plaintiff to New Century but were not paid over to the Society. This case, therefore, belongs to that sad class of case where one of two innocent parties must suffer because of the default of a third party.
When the plaintiff and her late husband purchased this property they were no strangers to Mr Roland Ralph. They had financed the purchase of their home through him, by means of a first mortgage to private investors and a second mortgage to New Century. The arrangement on that occasion with Ralph was that they paid instalments to New Century and New Century applied the instalments to paying interest in the first mortgage, interest on the second mortgage and the balance of the instalment going towards repayment of the principal owing under the second mortgage (this statement ignores the reference to insurance which is not relevant for present purposes).
The plaintiff said that she found Mr Roland Ralph a very kind man and, since they had their own home financed with him, "naturally when this problem came up concerning my mother, we went to him and asked him for advice, could he help us". This quotation refers to the fact that the property at 349 St. Leonard's Road was being purchased as a home for the plaintiff's mother. The plaintiff said that, when they saw Roland Ralph about the purchase of 349 St. Leonard's Road, he agreed to find the necessary mortgages. Her understanding of the arrangement with Ralph was that they were to pay $14 per week to New Century, $6 off the principal of the second mortgage and $8 to cover the interest on both mortgages and "when the second mortgage repaid start with the first mortgage". She referred to the letter dated 9th December 1969 to Messrs. Clarke and Gee, solicitors, from Mr Ralph (see P2) and said that letter set out the position exactly.
The plaintiff proceeded to make payments in accordance with this arrangement. Her evidence is to the effect that the principal sum secured by the second mortgage had been repaid by 1978. By that stage her payments to New Century had been reduced to $10 per week because the payments of interest on the first mortgage were being made direct to the office of the Society. At that stage she spoke to Mr Fred Ralph, an employee of Ralph and Guy, by telephone and asked for advice as to what she should do. He advised her to carry on and the payments would be deducted from the principal amount of the first mortgage. She accepted that advice and continued making payments to New Century.
On 28 July 1981 Mr FPC Ralph wrote to the plaintiff the following letter (D5):–
"Further to our telephone conversation of even date we advise that your account stood in credit $1,397.45 as at 1 July 1981.
Your first mortgage to the UAOD is $4,000.00."
The plaintiff gave evidence that she understood that the payments made to Ralph and Guy were credited to her account and interest was allowed to her on any credit balance in the account.
In 1969 Mr Roland Ralph was the Grand Treasurer of the Society and a member of the management committee of the Society. On 20 October 1980 he was appointed Acting General Secretary and held that office, the office of Grand Treasurer and the office of committee member until some time in 1983. Mr Roland Ralphf's evidence was that the plaintiff's application for this loan from the Society would have gone to the management committee. He did not have authority to approve the loan on behalf of the Society.
Mr Roland Ralph agreed that he told the plaintiff that money would be accumulated to repay the first mortgage "because the first mortgagee does not want its money by instalments". He said he told the management committee about this system of accumulating funds to pay off the first mortgage, but he does not recall a motion ever having been passed about that subject. He denied that he held himself out to the plaintiff or the late Mr Ris as the agent of the Society.
The plaintiff must fail in her action unless she proves that New Century was the agent of the Society with actual or apparent authority to receive payments by instalments in reduction of the principal sum owing under the first mortgage to the Society, so that a payment to New Century is to be treated as a reduction, to the extent of the payment, of the amount owing (Pole & Anor v Leask (1863) 33 LJ Ch 155 at 162; Robinson v Tyson (1888) 9 NSWR 297). There is a further rule which directs that the burden of proof is on the plaintiff and that is the rule in Young v Queensland Trustee Ltd (1956) 99 CLR 560: that rule is that in an action for money lent where the defence of payment is raised, the onus of proving payment lies upon the defendant. The accident that here, the pleadings take a somewhat different form makes no difference.
The plaintiff has failed to discharge that burden. The Society did not authorise Mr Roland Ralph or his company New Century to receive payment of the principal sum by instalments or to receive any payment having the character of a repayment of part of the principal sum. As Mr Roland Ralph said, in effect, it would be unusual for a first mortgagee to agree to receive back the principal sum by a long series of small instalments. The plaintiff is unable to point to any resolution of the management committee constituting New Century the agent of the Society to receive any payment having that character. Nor is she able to point to any decision of the Society clothing any person with authority to bind it to an arrangement whereby a payment to New Century has the effect of a discharge pro tanto of the principal sum secured by the first mortgage.
Unfortunately for the plaintiff, her case is no better on the aspect of apparent (or ostensible) authority. She cannot bring her case within the law stated in Article 76 of Bowstead on Agency, 15th ed, 284. That article reads:–
"APPARENT (OR OSTENSIBLE) AUTHORITY
Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of such other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no actual authority."
She cannot point to a representation of authority in New Century to receive any instalment in part discharge of the debt, which is binding on the Society and on the faith of which she acted in making the payments in question (see also Freeman and Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd & Anor [1964] 2 QB 480 at 505 and 506 and Amagos Ltd v Mundogas SA The Ocean Frost [1986] 2 All ER 385).
The action is dismissed.
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