D & C Builders Ltd v Rees
| Jurisdiction | England & Wales |
| Judgment Date | 12 November 1965 |
| Judgment citation (vLex) | [1965] EWCA Civ J1112-1 |
| Court | Court of Appeal |
| Date | 12 November 1965 |
[1965] EWCA Civ J1112-1
The Master of the Rolls
(Lord Denning)
Lord Justice Danckwerts and
Lord Justice Winn
In The Supreme Court of Judicature
Court of Appeal
From his Honour Judge Trapnell Shoreditch County Court.
MR M. REYNOLDS (instructed by Messrs Merton Jones, Lewsey & Jefferies) appeared as Counsel for the Appellant.
MR S. C. ISAACS (instructed by Messrs Bishop & Co.) appeared as Counsel for the Respondents,
D. & C. Builders Ltd. are a little Company D" stands for Mr Donaldson, a decorator, "C for Mr Casey plumber. They are jobbing builders. The defendant Mr Rees, has a chop where he sells builders' materials.
In the Spring of 1964 the defendant employed the plaintiffs to do work at his premises, 218 Bride Lane. The plaintiffs did the work and rendered accounts in Hay and June, which came to £746. 13s.1d. altogether. The defendant paid £250 on account. In addition the plaintiffs made an allowance of £14 off the bill. So in July 1964 there was owing to the plaintiffs the sum of £482. 13s.1d. At this stage there was no dispute as to the work done. But the defendant did not pay.
On 31st August, 1964, the plaintiffs wrote asking the defendant to pay the remainder of the bill. He did not reply. On 19th October, 1964, they wrote again, pointing out that the "outstanding account of £480 is well overdue". Still the defendant did not reply. He did not write or telephone for more than three weeks. Then on Friday, 13th November, 1964, the defendant was ill with influenza. His wife telephoned the plaintiffs. She spoke to Mr Casey. She began to make complaints about the work and then said: "My husband will offer you £300 in settlement. That is all you'll get. It is to be in satisfaction". Mr Casey said he would have to discuss it with Mr Donaldson. The two of them talked it over. Their Company was in desperate financial straits. If they did not have the £300, they would be in a state of bankruptcy. So they decided to accept the £300 and see what they could do about the rest afterwards. Thereupon Mr Donaldson telephoned to the defendant's wife. He said to her: "£300 will not even clear our commitments on the job. We will accept £300 and give you a year to find the balance". She said; "No, we will never have enough money to pay the balance. £300 is better than nothing". He said "We have no choice but to accept". She said; "Would you like the money by cash or bycheque. If it is cash, you can have it on Monday. If by cheque, you can have it tomorrow (Saturday)".
On Saturday, 14th November, 1964 Mr Casey went to prepared collect the money. He took with him a receipt prepared on the Company' paper with the simple words: "Received the sum of £300 from Mr Rees. She gave him a cheque far £300 and asked for a receipt She insisted that the words "in completion of the account" be added. Mr Casey did as she asked. He added the words to the receipt So she had the clean receipt "Received the sum of £300 from Mr Rees in completion of the account. paid, M. Casey" Mr Casey gave in evidence his reason for giving it: "If I did not have the £300 the Company would have gone bankrupt The only reason we took it was to save the Company. She knew the position we were in"
The plaintiffs were so worried about their position that they went to their solicitors. Within a few days, on 23rd November, 1964, the solicitors wrote complaining that the defendant had "extricated a receipt of some sort or other" from them. They said they were treating the £300 as a payment on account. On 28th November, 1964, the defendant replied alleging bad workmanship. He also set up the receipt which Mr Casey gave to his wife, adding: "I assure you she had no gun on her" The plaintiffs brought this action for the balance The defendant set up a defence of bad workmanship and also that there was a binding settlement The question of settlement was tried as a preliminary issue.
The Judge made these findings; "I concluded that by the middle of August the Sum due to the plaintiffs was ascertained and not than in dispute. I also concluded that there was no consideration to support the agreement of the 13th and 14th November. It was a case of agreeing to take a lesser sum, when a larger sum was already due to the plaintiffs. It was not a case of agreeing to take a cheque for a smaller account instead of receiving cash for a larger account. Thepayment by cheque was an incidental arrangement". He decided, therefore, the preliminary issue in favour of the plaintiffs. The defendant appeals to this Court. He says that there was here an accord and satisfaction — an accord when the plaintiffs agreed, however reluctantly, to accept £300 in settlement of the account — and satisfaction when they accepted the cheque for £300 and it was duly honoured. The defendant relies on the cases of Sibree v. Tripp (1846) 15 Meeson & Welsby, p. 24, and Goddard v. O'Brien (1882) 9 Queen's Bench Division, p. 37, as authorities in his favour.
This case is of some consequence' for it is a daily occurrence that a merchant or tradesman, who is owed a sum of money, is asked to take less. The debtor says he is in difficulties. He offers a lesser sum in settlement, cash down. He says he cannot pay more. The creditor is considerate. He accepts the proffered sum and forgives him the rest of the debt. The question arises: Is the settlement binding on the creditor? The answer is that, in point of law, the creditor is not bound by the settlement. He can the next day sue the debtor for the balance: and get judgment. The law was so stated in 1602 lay Lord Coke in Pinnel's case (1602) 5 Coke's Reports, p. 117a — and accepted in 1889 by the House of Lords in Foakes v. Beer (1884) 9 Appeal Cases, p. 605.
Now, suppose that the debtor, instead of paying the lesser sum in cash, pays it by cheque. He makes out a cheque for the amount. The creditor accepts the cheque and cashes it. Is the position any different? I think not. No sensible distinction can be taken between payment of a lesser sum by cash and payment of it by cheque. The cheque, when given, is conditional payment. When honoured, it is actual payment. It is then just the same as cash. If a creditor is not bound when he receives payment by cash, he should not be bound when he receives payment by cheque. This view is supported by the leading case of Cumber v. Wane (1718) 1 Strange, p. 426, whichhas suffered many vicissitudes but was, I think, rightly decided in point of law.
The case of Sibree v. Tripp (1846) 15 Meeson & Welsby, p. 24 is easily distinguishable. There the plaintiffs brought an action far £500. It was settled by the defendant giving throe promissory notes amounting in all to £250. Those promissory notes were given upon a new contract, in substitution for the debt sued for, and not as conditional payment. The plaintiff's only remedy thenceforward was on the notes and not on the debt.
The case of Goddard v. O'Brien (1882) 9 Queen's Bench Division, p. 33, is not so easily distinguishable. There a creditor was owed £125 for some slates. He met the debtor and agreed to accept £100 in discharge of it. The debtor gave a cheque for £100. The creditor gave a written receipt "in settlement on the said cheque being honoured". The cheque was clearly given by way of conditional payment. It was honoured. The creditor sued the debtor for the balance of £25. He lost because the £100 was paid by cheque and not by cash. The decision was criticised by Lord Justice Fletcher Moulton in Hirachand Punamchand v. Temple, 1911, 2 King's Bench at p. 340, and by the editors of Smith's Leading Cases (13th Edition) Vol.1, p. 380. It was, I think, wrongly decided. In point of law payment of a lesser sum, whether by cash or by cheque, is no discharge of a greater sum.
This doctrine of the common law has come under heavy fire. It was ridiculed by Sir George Jessel in Couldery v. Martin (1881) 19 Chancery Division at p. 391. It was to be mistaken by Lord Blackburn in Foakes v. Beer, 9 Appeal Cases at p. 628. It was condemned by the Law Revision Committee 1945 Command 5449) paragraphs 20 and 21. But a remedy has bean found. The harshness of the common law has been relieved. Equity has stretched out a merciful hand to help the debtor. The Courts have invoked the broad principle stated by LordCairns in Hughes v. Metropolitan Railway (1877) 2 Appeal Cases at p. 448: "It is the first principle upon which all Courts of Equity proceed, that if parties, who hare entered into definite and distinct terms involving certain legal results, afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the par-ties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them when it would be inequitable having regard to the dealings which have taken place between the parties". It is worth noticing that the principle may be applied, not only so as to suspend strict legal rights, but also so as to preclude the enforcement of them.
This principle has been applied to cases where a creditor agrees to accept a lesser sum in discharge of a greater. So much so that we can now say that, when a creditor and a debtor enter upon a course of negotiation, which leads the debtor to suppose that, on payment of the lesser sum, the creditor will not enforce payment of the balance, and on the faith thereof the debtor pays the lesser sum and the creditor accepts it as satisfaction: then the creditor will not be allowed to enforce payment of the balance when it would be inequitable to do so. This was well illustrated during the last war. Tenants went away to escape the bombs...
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