Tool Metal Manufacturing Company Ltd v Tungsten Electric Company Ltd
| Jurisdiction | England & Wales |
| Judge | Viscount Simonds,Lord Oaksey,Lord Tucker,Lord Cohen |
| Judgment Date | 16 June 1955 |
| Judgment citation (vLex) | [1955] UKHL J0616-1 |
| Court | House of Lords |
| Docket Number | Parliamentary Archives, HL/PO/JU/4/3/1034 |
| Date | 16 June 1955 |
[1955] UKHL J0616-1
Viscount Simonds
Lord Oaksey
Lord Reid
Lord Tucker
Lord Cohen
Parliamentary Archives, HL/PO/JU/4/3/1034
HOUSE OF LORDS
16th June, 1955.
My Lords,
The facts in this complicated case are fully stated in the speech of my noble and learned friend, Lord Cohen, which I have had the privilege of reading, and I do not think it necessary to trouble your Lordships by referring, except incidentally, to the events which preceded the issue of the writ in the action in which this appeal is brought.
It was in the circumstances stated by my noble friend that the Appellants, by writ issued on the 11th September, 1950, claimed from the Respondents as compensation under clause 5 of the Deed as from the 1st January, 1947, to the 26th January, 1950, a quantified sum of £84,050, and an account of compensation payable under the same clause from the 26th January, 1950, to the 27th July, 1950, when the licence terminated.
To this claim the Respondents put in a number of defences. They pleaded that the provisions of clause 5 were void on three separate grounds: ( a) because they imposed a penalty; (b) because they were an unreasonable restraint of trade; and ( c) because they contravened section 38 of the Patents and Designs Act, 1938. They also pleaded that the delivery of the counter-claim in the first action did not operate as notice to terminate the equitable arrangement which, as was held in that action, existed at any rate until such delivery and that it was a condition of its termination that the notice determining it ( a) should be unequivocal and (b) should specify the date of termination, and further that that date should give them a reasonable time to adjust their business affairs to meet the altered circumstances. To this, in effect, the Appellants replied that the delivery of the counterclaim was a sufficient intimation of their intention to reassert their legal rights and that, that intimation having been given, equity demanded nothing more than that a reasonable time should be allowed before they sought to enforce them. And they further said (nor was this denied by the Respondents) that upon this footing a reasonable time was given since the counterclaim was delivered in March, 1946, and compensation claimed from January, 1947.
Upon this part of the case I will be as brief as I can, for, having read the Opinion of Lord Cohen in which the facts of the case are set out at greater length, I am not prepared to dissent from his conclusion. It would not, however, be right in a case in which I find myself unable to agree with the decision of the Court of Appeal to say nothing on the far-reaching conclusion to which they have come.
My Lords, the decision of the Court of Appeal in the first action was based on nothing else than the principle of equity stated in this House in Hughes v. Metropolitan Railway Company, 2 A.C. 439 and interpreted by Lord Justice Bowen in Birmingham and District Land Company v. London and North Western Railway Company 40 Ch.D. 268 at p. 286 in these terms:
"It seems to me to amount to this, that if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were in before."
These last words are important, for they emphasise that the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position. I lay stress on this because I would not have it supposed, particularly in commercial transactions, that mere acts of indulgence are apt to create rights, and I do not wish to lend the authority of this House to the statement of the principle which is to be found in Combe v. Combe [1951] 2 K.B. 215 and may well be far too widely stated.
The difficulty in the present case lies in the fact that in the first action, in which it was held that between these parties the principle applies, neither of them in any pleading or other statement between the delivery of the counterclaim in March, 1946, and judgment in April, 1950, took their stand upon its existence. The Respondents asserted a binding agreement for the complete and final abrogation of any compensation: the Appellants, though willing to make some concession in regard to the past, denied any agreement in respect of any period at all. The position of neither of them was compatible with the existence of an equitable arrangement by which the right to receive and the obligation to pay compensation were suspended for a period which lasted at least until March, 1946, and for a debatable period thereafter.
My Lords, I think that at this point the issue is a very narrow one. On the one hand it is said that a plea resting on the denial of an agreement cannot be a notice determining that agreement. This is the view taken by Lord Justice Romer in which the other members of the Court of Appeal concurred. On the other hand it is urged that, since the suspensory period is due to the gratuitous willingness of the one party to forgo their rights, nothing can be a clearer intimation that they propose no longer to forgo them than a claim which, though it may ask too much, can leave the other party in no doubt that they must not expect further indulgence. The problem may perhaps be stated in this way. Did equity require that the Appellants should expressly and unequivocably refer to an equitable arrangement which the Respondents had not pleaded and they did not recognise? Or was it sufficient for them by a reassertion of their legal rights to proclaim that the period of indulgence was over? In favour of the latter view it is added that such an attitude on the part of the Appellants could not surprise the Respondents who had not hesitated to bring against them a serious charge of fraud.
My Lords, it is not clear to me what conclusion the Court of Appeal would have reached but for the authority of the case of the Canadian Pacific Railway Company v. The King [1931] A.C. 414, to which I must refer later. For my part I have, after some hesitation, formed the opinion that, as soon as the counterclaim was delivered, the Respondents must be taken to know that the suspensory period was at an end and were bound to put their house in order. The position is a very artificial one, but it was their own ignorance of a suspensory period, or at least their failure to plead it, which created the difficulty, and I do not think that they can take advantage of their own ignorance or default and say that they were entitled to a further period of grace until a further notice was given. Equity demands that all the circumstances of the case should be regarded and I think that the fair and reasonable view is that the Respondents could not, after they had received the counterclaim, regard themselves as entitled to further indulgence.
It was, however, urged on behalf of the Respondents that, even if the counterclaim could otherwise be regarded as a sufficient notice that the equitable arrangement was at an end, yet it was defective in that it did not name a certain future date at which it was to take effect. To this the reply was made that equity did not require a future date to be named in the notice, but that what it did require was that a reasonable time should be allowed to elapse before it was sought to enforce it. Here, too, the Court of Appeal favoured the view of the Respondents, again feeling themselves constrained by the decision in the Canadian Pacific Railway case. And here, too, I am forced to the opposite conclusion. Equity is not held in a strait-jacket. There is no universal rule that an equitable arrangement must always be determined in one way. It may in some cases be right and fair that a dated notice should be given. But in this case what was the position in January, 1947, which I take to be the critical date? Then for nine months the Respondents must, in my opinion, be taken to have been aware that the Appellants proposed to stand on their legal rights. It is not denied that those nine months gave them ample time to readjust their position. I cannot regard it as a requirement of equity that in such circumstances they should have been expressly notified in March of 1946 that they would have nine months and no more to take such steps as the altered circumstances required. In coming to this conclusion I do not think I run counter to any authority that was cited to us unless it be the Canadian Pacific Railway case to which I must now refer.
My Lords, in his judgment in the Court of Appeal Lord Justice Romer introduced that case with these words:
"In my opinion, although in many cases the equity, to which Hughes v. Metropolitan Railway Company gave recognition and high authority, is satisfied by merely conforming to the terms in which Lord Cairns (and subsequently Lord Justice Bowen) formulated it, there are other cases where justice requires that the resumption of legal rights which have been suspended for a period must be preceded by a notification to the other party concerned specifying a fixed period of grace during which that party can put his house in order: and that in such cases a notification such as that will be a condition precedent to the valid re-assumption of the owner's legal rights."
"Such a case", the learned Lord Justice proceeds, "was Canadian Pacific Railway v. The King."
My Lords, it is undoubtedly the fact that the Canadian Pacific Railway case decided that what I have called a "dated notice" was required in that case to terminate an...
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