Thomas v Hollier

[1984] HCA 35

HIGH COURT OF AUSTRALIA

Gibbs C.J., Mason, Wilson and Brennan JJ.

DAVID IAN THOMAS v. NEALE WILLIAM HOLLIER

(1984) 156 CLR 152

5 June 1984

Contract

Contract—Consideration—I.O.U.—Interpersonal I.O.U. for intercompany debt—Whether I.O.U. replaced debt—Whether consideration to support I.O.U.

Decisions

GIBBS C.J. This is an appeal from a judgment of the Court of Appeal of the Supreme Court of New South Wales which by a majority affirmed (subject to a variation which is not material for present purposes) a decision given by Cross J. in favour of the plaintiff in an action for debt.

2. The respondent (the plaintiff in the proceedings) was a director of a private company, N.J. Management Consultants Pty. Limited, which carried on business under the name of The Greystanes Sports &Toys Store. The appellant (the defendant) was a director of another private company, I.B.G.Y. Pty. Limited. On 15 December 1981, N.J. Management Consultants Pty. Limited ("the vendor") entered into a contract in writing with I.B.G.Y. Pty. Limited ("the purchaser") for the sale of the business of the store to the purchaser for the price of $32,000, plus the value of stock in trade, which the contract stated was estimated to be $43,000. The contract provided that if the value of the stock in trade exceeded $43,000, the purchaser might at its option reject such items as it might select to reduce the total value to $43,000. The sum payable for the stock in trade was to be paid on completion of the contract.

3. Settlement of the contract occurred on 18 December 1981, and on that date a cheque for $75,000 (representing the price of $32,000 plus $43,000 for stock) was paid by the purchaser to the vendor. A stocktake was taken during the weekend of 19 and 20 December 1981, and it was found that the value of the stock greatly exceeded $43,000.

4. The evidence given in the case was far from precise, but it appears that about a week after the stocktake, when the parties became aware that the value of the stock exceeded $43,000, the parties had a conversation, in the course of which the appellant said that it would be difficult for him to finance the purchase of the stock whose value exceeded $43,000 ("the excess stock") but that he was concerned that if the excess stock was taken away the store would be left a little bare. The respondent offered to provide an interest free loan for four months, until he sold his house and purchased an hotel which he intended to buy. No set terms for the repayment of the loan were mentioned - the respondent described it as "more a gentlemen's agreement" - but the respondent requested that if any moneys became available the appellant should reduce the loan as quickly as possible. In truth, what the parties described as a loan was a deferment by the vendor of the time for payment by the purchaser for the excess stock.

5. The parties met again on 14 February…