Taylor, K.P. v National Westminister Finance Australia Ltd

C A T C H W O R D S

CONTRACT - bankruptcy notice - allegation of compounding - whether concluded agreement - rectification.

MISTAKE - rectification - evidence of subsequent events -

unilateral mistake

- knowledge of mistake.

Re:	Kenneth Peter Tavlor & Ors. Natlonal Westminster Finance Australia Limited

QLD BN1546 of 1985

PINCUS J.

BRISBANE

7 May 1986

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

)	QLD BN1546 of 1985

BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND )

RE:	KENNETH P?XER TAYLOR, ROBIN ANNEXTE TAYLOR, PETER SVEND HENNINGS and KAY HENNINGS

Applicants

NATIONAL WESTMINSTER FINANCE AUSTRALIA

LIMITED

Respondent

MINUTES OF ORDER

JUW;E MAKING ORDER:	PINCUS J .
DATE OF ORDER:	7 May 1986
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1. It be declared that

an agreement was made on

October 1985 between

the

applicants

and

the

respondent

which

the

judgment

debt

of 28

February 1985 was

extinguished

consideration of payments totalling $10,000.

2 . The bankruptcy notice issued against the applicants on 5 August 1985 be struck out.

m:	Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.

IN THE FEDERAL COURT

OF AUSTRALIA

GENERAL DIVISION

)	QLD BN1546 of 1985

BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF OUEENSLAND )

RE:

XENNETH PETER TAYLOR. ROBIN ANNETTE TAYLOR,

PETER SVEND HENNINGS and

KAY HENNINGS

Applicants

NATIONAL WESTMINSTER	FINANCE AUSTRALIA
LIMITED

Respondent

PINCUS J.

7 May 1986

REASONS FOR JUDGMENT

The applicants

are

judgment

debtors

who

seek

declaration that they compounded to the satisfaction

the

~udgment	credltor, the respondent.
The judgment was obtalned on 28 February 1983 in a sum

of $1,046,971.42.

A bankruptcy notice was issued on

5 August

1985 and the time

for compliance wlth it was extended

first to 25

October 1985 and then to

December 1985. According to the

applicants' case, the compounding mentioned occurred during the

first extension.

Before coming to the details, in outline the case for

the applicants is that they made

a written offer under

which the

judgment debt was to be extingulshed,

in consideration

of the

2 .

making of payments totalling

$10,000,

and that was accepted by

Mr.

B.W.

Gould

on behalf of the respondent judgment creditor.

The case for the judgment creditor is principally that, if any agreement was made, it should be rectified.

Two of

the four judgment debtors (applicants), Messrs.

Taylor and Hennings,

met Mr. Gould, an officer of the respondent,

at his office on 8 October 1985 and had a long discussion with him. At that time there was, as I have mentioned, a judgment for

a sum in excess of $1 million in favour of the respondent which

had, by accretion of interest, grown substantially since it was

entered in February

1983.

The only security the respondent had

in respect of the debt

was a second mortgage no. G111477

on a

house property.

That had been glven in

1980 to secure a loan

whlch had been

pald

out long before the alleged agreement for

compounding, but I

deduce from a memorandum

In evidence cexhlblt

6 ) that Mr. Gould was of the m e w that the mortuage was

so drawn

as	to remain avallable for security in respect of debts other

than that in relation	to	whlch it was, as	a commerclal matter,
given.

Indeed, It would be surprlsing

if it were not so drawn.

The contention of the mortgagors,

however, according to the

statement of claim

In action no.

3945 of

1985 in the Supreme

Court of Queensland, was that

if the bill of mortgage secured the

judgment

debt I have

mentioned,

then

that

was

contrary

dealings between the parties which	had taken place at the time of
execution of the mortgage.

3 .

It is clear that I am not concerned with attempts to

determine the relative strengths of the cases

of the parties in

the action 3945

1985 in the Supreme Court of Queensland.

Indeed, not enough information was placed before me to enable me

to do so.

I find, however, relying again on exhibit

6 , that the

respondent was confident that

It would succeed, in the event

of a

contest, in establishing its entitlement to have recourse to the

mortgage as securlty for the judgment debt.

The

partles do

not dispute that the question of the

mortaqe G111477 was discussed at the meeting on 8 October 1985. The primary purpose of the meeting was to reach some settlement

as to the debtors' obligaions and

it was ultimately proposed that

the

applicants

would

pay

$10,000 by Instalments,

avoid

bankruptcy.

No final agreement was come to

at the meeting, but

Mr. Gould asked Messrs. Taylor and Hennings to set out in writing

what their proposal was.

The same afternoon, according to Mr.

Gould's account, Mr. Taylor telephoned and sald that

had

discussed the position with Mrs.

Taylor and also

Mrs. Hennings

and that "they would come down next day

with a

letter together

with $500 cash In good falth to allow	me	to gain approval to
accept the offer".

The next day, Mr. and Mrs. Henninqs came to Mr. Gould's

office

with

document

signed

by all

four

appllcants.

contained a promise to pay the respondent

$10,000 by instalments,

starting with immediate payment

$500.

made it perfectly

clear that In exchange the respondent was to sign

a deed of

4 .

release applicable to every claim the respondent had against the

applicants.

It is important to note that the contemplation

of the

document dated 9 October 1985 that all claims were

to b released

was quite unambiguously set out and not, so

to speak, buried in

the fine print. Not only was there the promise to sign

a deed of

release just mentioned, but

on the second page of the document,

whlch listed

the

obligations

released,

there

were

specifically mentioned the ~udgment (identlfying it by its date) and the mortgage discussed above (as to which the identification was slightly Inaccurate, but nevertheless clear enough). The list concluded:

"Any other claims not listed In this list which

Lombard has against us now, or

might have agalnst

us In the future.

It 1 s not easy to accept that anyone readlng it would have been likely to derive the lmpresslon that it was intended to leave

unaffected

any

obligation

due

the

respondent

the

applicants.

Mr. Gould,

accordmg to Mr. and Mrs. Hennings, who

delivered the document to

him, appeared to read it before

signed a copy, as having recelved it.

I accept thelr evidence in

this

regara.

Were

not

for

the

terms

exhiblt

6, a

memorandum dictated by Mr. Gould on 10 October, I would have had some doubt whether Mr. Gould really misunderstood the effect of

the document of 9 October just discussed.

He claimed, at one

stage, that he did not read the document but paid attention only

to the part

of it which dealt with payment of the $10,000.

think his recollection about that is incorrect and that

he did

read it, but omitted

to notice what it plainly stated, namely

that it contemplated

discharge of all obligations, including

those under mortgage

G111477.

Havmg received

the

document,

Mr. Gould

solicited

authority from

his superiors to make

an agreement with the

applicants. The

authority

he sought,

however,

was

qulte

different terms from those set out In the applicants' document. The memorandum, exhibit 6, sought authorlty to accept an offer alleged to have come from "Messrs. Taylor and Hennings". The

offer was stated to Include a provision:

"That they co-operate with the auction

of the house

property, kerbside value

$130,000 with

a First

Mortgage of approxlmately

$40,000. We belleve we

would

be able to nett approximately

$70,000 from

thls source. They

wlll co-operate by vacating the

property voluntarlly; by ceaslnq all actlon in the

Courts at present, and in fact keeping the property

mowed and In good order.

It is an Irresistible lnference that when the memorandum

of 10 October 1985 was written, Mr. Gould did not have the

wrltten proposal by hlm. Not only does the latter not contain

the provislons lust quoted; the memorandum does not even set out

the parties correctly, nor the terms of the proposed payment of

the $10,000.

I mfer that for some reason Mr. Gould treated the

written document as of no importance.

On 17 October 1985 Mrs. Hennings answered

a telepone

call from Mr. Gould, who asked to speak

to her husband. On being

told that	he was unavailable, Mr. Gould told Mrs. Henninqs that
the terms	of settlement had been accepted and asked "could we

send $1,500 to him". That was the sum

to be pald on signing of

the deed of release,

provided for in the offer.

Mr. Gould

contested Mrs. Hennings' version of that conversation, but

I am

quite satisfied that what

he said was intended to, and

did,

convey to Mrs. Hennings the information that the written proposal

of 9 October was accepted.

It should be mentioned that the offer was not expressed

as one, but was drawn as

a record of

an agreement already

concluded. It is common ground. however, that

no agreement had

been concluded on the matters mentioned In the document when it

was

delivered

the

respondent.

It was treated

the

respondent as an offer and, as I have found, accepted by him on

behalf of the respondent.

Counsel for the respondent argued, as an alternative to the claim for rectification, that there was

no agreement. He put

this chiefly

the basls that Messrs. Taylor and Henninqs

intended that the

$10,000,

or the promise to pay the

$10,000,

should entirely dlscharge their obllgations, whereas Mr. Gould

intended that it should

not, but that the respondent should

retaln

Its

rights

under

the

mortgage.

I accept

counsel's

submission as to what Mr. Gould's Intention was. His dlfficulty,

however, is

that prlma facie the intentlon

the parties 1s to

be derived from the writing, although the document executed by all the applicants and dated 9 October was apparently not taken seriously in the office of the respondent. It was put forward by the applicants, at the invitation of Mr. Gould, as defining

precisely what it was they were prepared

do and what they

desired in exchange. It was, as I have found, orally accepted by

Mr. Gould on behalf of the respondent. Subject

to a point to be

discussed, it appears impossible	to	hold that there was	no
agreement.

The only

possible

escape

from

the

conclusion

just

mentioned is the view that the parties reached agreement orally with respect to the mortgage at the meeting on 8 October 1985 and

that the document of

9 October was to constitute an agreement

collateral

the

first,

oral,

agreement.

The

ssentlal

foundation of

this

a findlng

that

the

parties

reached

agreement on the mortgage at the meeting. The verslons given in

evldence on that issue were substantially opposed; no doubt

was because

of the llkellhood that rellance

on oral barqamings

would lead to difficulty that Mr. Gould asked for a written proposal, and the appllcants supplled one. The principal witness for the applicants on thls point, Mr. Taylor, seemed to me candld

enough,

but I thought

Mr.

Gould

was, if anything,

Impressive witness. But

I have found it unnecessary to reach a

conclusion as to what was said about the mortgage at the meeting,

because it seems clear that It is not open to me to hold that

there was a collateral agreement. Firstly, although there was

some faint suggestion that Messrs. Taylor and Henninqs acted as

agents for their wives at the meeting of

8 October, they clearly

did not:

Mr.

Gould

admitted

that,

after

the

meeting

of 8

October, he

was told by Mr. Taylor that the position had been

discussed

with Mesdames Taylor and Hennings and that

a letter

would accordingly be brought next day wlth $500

cash. There is

no possible basis for

a finding that anything said at the meeting

by Mr. Taylor bound, for example, Mrs. Hennings. Secondly, the writing which the applicants executed is inconsistent with the

existence of any

such collateral agreement;

I have pointed

out, it expressly contemplates a discharge of

the mortgage and,

of course,

the

debt

which

the

mortgage,

according

to the

respondent, secured.

Therefore, I find there was an agreement constltuted by

the executed document of 9 October and its oral acceptance. The prlncipal argument of counsel for the respondent was, as I have said, that the agreement was affected by either bilateral or

unllateral mistake and should be rectlfled.

argument was

addressed to document executed by one slde only is capable

the

point

whether

an agreement

recorded

In a

of rectiflcatlon; I

see no reason why it should not

be,

Counsel for the respcmdent raised no questlon of lack of

authority, presumablg because it was thought that Mr. Gould had

at least ostenslble authority to accept the terms proposed.

Counsel for the respondent also, on Instructions, waived any

objection to the agreement based on lack of conslderation; that

polnt was therefore not litigated.

Same rellance was placed, as evidencing the parties' intentions, upon the events which followed the making

the

agreement In

question. Each side had its solicitor prepare

formal

document

said

to embody

the

true

agreement.

I was

referred to authorlty that in a rectification case subsequent

acts can afford no evidence as to what the true agreement was:

Winks v. W.H. Heck & Sons Ptv. Ltd. (unreported, Queensland Full

Court,

26th

November, 1985). It

unnecessary

reach

conclusion on

that point, however, since the

subsequent events

did not in my opinion throw light upon the central issues, except

in one respect,

viz.

supporting the contention that the

respondent accepted the written offer

by mistake.

The draft

submitted on behalf of the respondent

is consistent with that

view of the

facts and it appears to me that it may be relied on

by the respondent accordingly.

I am satisfied

that Mr. Gould's

acceptance

the

written offer was mistaken, in the sense mentioned above. There

is no evldence, and indeed no suggestion was made, that anything

which was done by or on behalf of the applicants contributed to

his mlstake.

partlcular, and I think very properly, Mr.

O'Grady for the respondent disclaimed any allegatlon of sharp practice.

The contention

based

bilateral

mistake

soon

disposed of.

There is

no evidence, or basis for inference, that

any of the applicants were mistaken as to the effect of the

document to which the respondent agreed. Whatever Mr. Taylor may

have thought was the expectation of Mr.

Gould at the conclusion

of the meeting of

8 October, it is impossible to hold that

Mr.

Taylor thought the document said anything other than what it did;

still less is there any basis for thinking that the other

applicants were mistaken.

10.

In the end, then, the case for the respondent stands or

falls on the basis

of unilateral mistake.

There is room for

dispute as to the precise limits

of the relevant doctrine, but it

is at least clear that the respondent must

able to show that

the applicants knew of its mistake: Riverlate Properties Ltd. V. Paul (1975) Ch. 133 at 140, 141, Thomas Bates and Son Ltd. v. Wvndham’s (Linserie) Ltd. (1981) 1 W.L.R. 5 0 5 . See also Taylor

v. Johnson

(1983) 151 C.L.R. 422 at 432. As Mr. Mulr, for the

applicants, pointed out, It was

not even suggested to any of the

applicants that they had knowledge of

a mistake on the part of

the respondent.

There is no foundation in the evidence for

finding that Taylor,if not the other appllcants, must have been both surprised

they

did.

There

reason

thlnk

that

Mr.

and

pleased

the

respondent’s

acceptance

the written

proposal, but It appears Improbable that any of the appllcants

thought that acceptance was based, as

is the respondent’s case,

upon a misapprehenslon of the effect of the document. Mr. and

Mrs. Hennings, as

I have found, observed

Mr. Gould appear to read

the document and they had no reason to think that

he was unaware

of its effect; nor would any of the other applicants have assumed

that, having kept the document for over a week before acceptance,

the respondent had failed

to divlne its effect.

The only other defence raised

by the respondent which it

is necessary to

mention is the suggestion, rather faintly urged,

to the effect that the acceptance was ”subject to contract”.

is clear from the terms of the document that

a formal deed

release was to be prepared and that circumstance was, perhaps,

reason for the mistake which occurred;

Mr. Gould may

have thought

11.

he need not trouble himself much about the terms of the document,

because he took it that the respondent's solicitor would approve

the final version.

I hold that the document was intended to

operate

a contract

complete

itself

and

effective

immediately on acceptance by the respondent of its terms. There

was no intention that the deed of release which it mentions was

to contain any further

or different terms.

It is necessary to mention

an aspect of the way in which

the case was litigated. The contention that the written document

should

rectified

emerged

only

during

the

course

the

hearing;

pleadings

have

been

dellvered,

nor

did

the

respondent's material mention a case of mistake. Counsel for the applicants complained, and I think justly, that he had incurred some disadvantage by not being apprised at an earlier stage of

the nature of

the respondent's contention.

However, I permitted

the respondent's counsel to argue the case for rectification on

the basis

that he indicated orally, clearly enough, both the

points he was taking and those he was abandoning.

The only remaining question requiring consideration

the nature of the rellef sought. The substantial issue was

whether there was an agreement made in the terms of the document

dated 9 October 1985 under which in exchange for the applicants'

promises, the respondent agreed, inter

alia, not to proceed with

bankruptcy

proceedings

respect

the

judgment

mentioned

above. It appears to me that the appropriate course is to make declaration on that point in favour of the applicants and strike

. h

12.

the bankruptcy notice

out and that, subject to any contention

which may be

put forward by the parties, is what I propose to do.

: certlfy tbat thls and the 11

Frecedlng

pages are a trua copy of the reasons for

judgment hcrein of HIS Honour

Mr. Justice Pincus

Dafeii 7 7 ,

[1986] FCA 174

5 Jul 1986