McDermott v Black

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while not too vague to be a contract, did not amount to a release of a cause of action, and that the contract had been rescinded by McDermott due to Black's breach.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.