PLAINTIFF AND DEFENDANT, Misrepresentation-Fraud-Withdrawal of allegations-Conditional upon extending
time for completion-Contract-Uncertainty-Accord and satisfaction at law Release of cause of action in equity.
A purchaser was induced by fraudulent misrepresentations made by the pletion, the purchaser by letter complained of the misrepresentations, but in a later letter he withdrew all allegations imputing anything improper to the vendor conditionally upon the vendor granting him an extension of time to complete the contract. This extension of time was granted, but the purchaser refused to complete on the extended date, whereupon the vendor rescinded the contract. The purchaser then sued the vendor for damages for deceit, relying on the misrepresentations which he had withdrawn.
Held that the withdrawal of the allegations in consideration of an extension of time for completion was not too vague to constitute a contract.
Held, further, by Starke, Rich, Dixon and McTiernan JJ. (Latham C.J. dissenting), that the withdrawal of the allegations amounted to a promise not to sue in respect of the misrepresentations or to a release of any cause of action in respect of them, and, accordingly, constituted a complete defence to an action for deceit based on the misrepresentations, either as an accord and satisfaction at law, or, since the Judicature Act, a release of the cause of action by an agreement, enforceable in equity, not to set up the cause of
Decision of the Supreme Court of Victoria (Martin J.) reversed.
On 16th May 1937, by an agreement in writing, William Seymour McDermott agreed to sell to John Black four thousand shares in Younger Set Pty. Ltd. for the sum of £16,000, of which £2,000 was to be paid on or before 24th May 1937, and the balance on or before 31st May 1937, on which date the transaction was to be completed. At the same time, by another agreement in writing, McDermott agreed to sell to Francis Swann the balance of shares in Younger Set Pty. Ltd., namely, one thousand shares, for the sum of £4,000.
McDermott, who was the managing director of the company, held or controlled all the shares and managed the business of the company which consisted in conducting a dance hall known as the "40 Club." Swann was the floor manager of the dance hall prior to the signing of the above-mentioned agreements. McDermott had fallen into ill-health, and it was proposed that Swann should arrange a syndicate to take over the business of the company. On 14th May 1937 Swann, who was unknown to Black, called upon the latter to interest him in the venture and to obtain his assistance to arrange the finance to buy McDermott's shares. Black was at that time carrying on business as an estate and financial agent, and
SO attractive was the project shown to be by Swann, that Black decided to visit the place of business of the company. On Saturday night, 15th May, Black attended…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
McDermott v Black [1940] HCA 4
Case
[1940] HCA 4
Decision Date
CaseChat Overview and Summary
The case of McDermott v Black involved a dispute arising from a contract for the sale of shares. William Seymour McDermott (the vendor) agreed to sell 4,000 shares in Younger Set Pty. Ltd. to John Black (the purchaser) for £16,000. Black paid a deposit of £2,000 in Commonwealth bonds and was granted an extension of time to complete the purchase. Subsequently, Black alleged that he was induced to enter the contract by fraudulent misrepresentations made by McDermott and a Mr. Swann. McDermott denied these allegations and sought completion of the contract.
The central legal issues before the High Court were whether an agreement reached between the parties, evidenced by correspondence, constituted a valid contract that barred Black's claim for deceit, and whether the trial judge's findings of misrepresentation were sufficiently supported by evidence. Specifically, the court had to determine if Black's withdrawal of allegations imputing impropriety to McDermott, in consideration of an extension of time to complete the contract, amounted to an accord and satisfaction at law or a release of his cause of action in equity. The court also considered whether the trial judge erred in finding that certain misrepresentations were made by McDermott, particularly one not mentioned in the correspondence.
A majority of the High Court (Starke, Rich, Dixon, and McTiernan JJ.) held that the withdrawal of allegations by Black, in exchange for an extension of time to complete the contract, constituted a binding agreement. They reasoned that this withdrawal was not too vague to form a contract and amounted to a promise not to sue or a release of Black's cause of action in deceit. This agreement served as a complete defence to Black's action, either as an accord and satisfaction at law or as an enforceable agreement in equity not to pursue the claim. Latham C.J. dissented, finding that the withdrawal, while not too vague to be a contract, did not amount to a release of a cause of action, and that the contract had been rescinded by McDermott due to Black's breach.
The High Court, by majority, reversed the decision of the Supreme Court of Victoria. The appeal was allowed, and the judgment for Black was set aside, with the case remitted for a new trial on the issue of damages, or alternatively, the court ordered that Black's claim was barred by the agreement reached between the parties.