Paterson v McNaghten [1905] HCA 21; (1905) 2 CLR 615 (30 June 1905)

[His Honor, having stated the facts as already set out, continued]: Owen J. in his judgment referred to the well known rule laid down in Jorden v. Money[1]; and Chadwick v. Manning[2], that in order to create an estoppel a representation must be of an existing fact and not of a mere intention; and he thought that the waiver of notice set up by the appellant amounted to no more than an expression of intention by the wife not to avail herself of the failure to give notice and not to set up the deed as valid. If this were the true effect of a waiver this reasoning would be conclusive. But, as I will presently show, the doctrine of waiver rests on other grounds. The learned Judge then dealt with the power of the wife to waive the notice, and thought that she had no such power by reason of the restraint on anticipation, referring to the case of Bateman v. Faber[3] in which Lindley M.R. said: "A married woman cannot by hook or by crook—by any device, even by her own fraud (the cases go that length)—deprive herself of the protection which the restraint on anticipation throws around her." If the doctrine of restraint on anticipation applies to this case, this reasoning is also unanswerable. The learned Judge also thought that the wife's waiver could not in any case bind the trustee.

A. H. Simpson J. came to the same conclusion, but with reluctance. He rested his judgment entirely on the doctrine of restraint on anticipation.

I will deal first with the question of restraint on anticipation. In In re Ridley, Buckton v. Hay[4] the doctrine was considered and expounded by Jessel M. R. He said:

Similar considerations arise when the rule that a person sui juris may rescind or release an executory contract comes in conflict with the rule of restraint on anticipation. It is clear that the doctrine by which the separate estate of a married woman could be made inalienable was, when first invented by Lord Thurlow [See note to Pybus v. Smith[5]], a rule attaching an incident to property, i.e., to property of a specific kind, namely, separate estate already existing. It could not, at that time, have extended to make an executory contract by a married woman not relating to existing separate estate irrevocable, because at that time she could not make any such contract at all. The proposal, therefore, to apply the doctrine to the case of an executory contract of a married woman not relating to existing property, and not relating to property at all, except so far as the chose in action created by the contract itself is property, is an extension of the original doctrine to a case which it was not originally intended to cover. Now, it is, in general, as much an incident of a contract between persons sui juris that it may be rescinded or released as it is an incident of property that it may be alienated, and under the Married Women's Property Act married women are persons sui juris for all purposes except as to separate estate subject to restraint on anticipation. Two cases were cited to us in which, as against judgment creditors, moneys payable under a deed of separation to a trustee for the benefit of the wife with restraint on anticipation were assumed to be within the doctrine. The point was not raised in either case. But it does not follow that, because the doctrine should be held to apply to such a case, the power of a married woman to rescind an existing contract may be destroyed by a stipulation in the contract that it shall be for her benefit without power of anticipation. The distinction between a completed gift of property and a gift which is only complete by way of contract was adverted to by Cotton L.J. in Nicol v. Nicol[6]. No authority was cited to us to show that an executory contract to which a married woman is a party, and which does not amount to a complete gift of existing property, can be made irrevocable by the use of the magic formula "without power of anticipation" with regard to her rights under the contract. Very singular consequences would follow from so holding. The suggested doctrine is clearly not part of the original doctrine as laid down by Lord Thurlow and as expounded in Tullett v. Armstrong[7] and Hood Barrs v. Heriot[8]. No trace of it is to be found in any book with which I am acquainted, and I should hesitate a long time before laying down such a rule.

But, even supposing the existence of such a rule in general, regard must be had in every case to the terms of the instrument under which the claim is set up. The words "with restraint on anticipation" or analogous words have, it is true, a definite meaning as applied to property assigned or created as separate estate; but, if the words are used with reference to a different subject-matter, or if the context is inconsistent with that meaning, I do not think that we are necessarily bound to give them the usual meaning. The deed now in question is a deed of separation. Now, it is, in general, an incident of such a deed that it may be put an end to by resumption of cohabitation. Bowen L.J., in Nicol v. Nicol[9], stated the rule thus:—"I think that the true principle is that a renewal of cohabitation will put an end to all or any of the provisions of a separation deed, so far as the language of the deed, properly construed by the light of surrounding circumstances, shows that its provisions were only intended to take effect whilst the separation lasted," adding that Lord Eldon in Bateman v. Countess of Ross[10] had suggested that there is a presumption that the separation deed is intended to end on a reconciliation.

In the present case it is expressly provided that the deed shall end in that event. But, I cannot think that in the absence of this express stipulation the deed would not have come to an end on reconciliation. The separate use is a necessary incident of such a deed. If this is the correct view, a stipulation in such a deed as to restraint on anticipation would not prevent the married woman from rescinding the deed in one manner, namely by returning to cohabitation. It is further provided by the deed now under consideration that the husband may at any time put an end to it of his own motion, unless his wife and the trustee and he mutually agree to modify it. I have great difficulty in thinking that the words "she shall not have power to anticipate the same" in such a context were intended to make the deed irrevocable by any action on the part of the wife short of reconciliation.

It appears to me, as at present advised, that the question of the revocability of a contract is an entirely different question from that of the incidents attaching to the rights arising from it while it subsists in full force, and that the latter question does not govern the former. I know of no reason why under a power authorizing a married woman to make an appointment with power of revocation she should not make a revocable appointment in her own favour for her separate use without power of anticipation. The case of an executory contract seems the same in principle.

If, therefore, it were necessary to decide the case on this ground, I should be strongly disposed to hold that the wife had power to rescind or release this deed at any time, before as well as after the times appointed for payment. It was suggested that the covenant by the trustee to indemnify the husband would prevent the wife from releasing or otherwise putting an end to the deed without his consent. But what I have already said is a sufficient answer to this argument. It is obvious that the incidental liability of the trustee under his covenant would come to an end with the rest of the deed. Moreover a cestui que trust if sui juris, can ordinarily bind the trustee by his contract as to the trust.

It is not, however, in the view which I take of the pleadings and findings of the jury, necessary to rest my decision on this ground. If, indeed, the equitable plea is regarded merely as a plea of waiver of a condition precedent, the difficulty, if it be one, arising from the inability of the wife to rescind the contract would be fatal. For, as Sir W. Grant M.R. said in Stackhouse v. Barnston[11]:—"A waiver is nothing; unless it amount to a release. It is by a release, or something equivalent, only, that an equitable demand can be given away. A mere waiver signifies nothing more than an expression of intention not to insist upon the right; which in equity will not without consideration bar the right any more than at law accord without satisfaction would be a plea." But, if there is a consideration, the waiver is good in equity as well as at law. In every case of waiver of a condition precedent there is consideration. When the party entitled to a right upon the performance of a condition refrains from performing it at the request of the other party, he would alter his position for the worse unless the request were held to imply a promise not to take advantage of his inaction. The consideration is that at the request of the other party he refrained from doing the act which would have been a performance of the condition, and would have perfected his right. In Selwyn v. Garfit[12], Bowen L.J. said:—"What is a waiver? ... Waiver is consent to dispense with the notice. If it could be shewn that the mortgagor had power to waive the notice, and that he knew that the notice had not been served, but said nothing before the sale and nothing after it, although this would not be conclusive, there would be a case which required to be answered." In In re Thompson and Holt[13], Kekewich J. gave effect to this doctrine, and held that a mortgagor had waived the notice required by the Conveyancing Act to be given before the sale by the mortgagee and could not take advantage of its absence. A good illustration is afforded by the case of Wing v. Harvey[14] in which it was held that the receipt by an insurance company of premiums upon a policy of insurance with knowledge of the failure of the insured to comply with a condition, non-performance of which rendered the policy void, prevented the company from setting up the condition.

In the present case, however, it is not necessary to have recourse to this principle. For there is no doubt that a restraint on anticipation imposes no restriction upon a married woman with respect to income already accrued due: Hood Barrs v. Heriot[15]. The concluding averments of the equitable plea set out that the appellant paid other moneys to his wife and entered into other arrangements with her "from time to time," that the said moneys were so paid and the said arrangements entered into by him "on the faith and understanding that the arrangement in the deed was at an end and the covenant void," and that she "accepted the said moneys and entered into the said other arrangements on the same faith and understanding." I read this as an allegation that each payment, including the last, was made and accepted on these terms. This amounts, in effect, to a statement that Mrs. Paterson (on whose behalf the plaintiff is suing), on every occasion on which a payment was made to her under the substituted arrangements, agreed to accept the payment on the terms of those substituted arrangements, including those set out in the orders of the Court, in satisfaction of all instalments then due, and further agreed not to set up the failure to give notice under clause 4 of the deed, and not to set up the deed as creating a subsisting obligation. This is clearly a good discharge in equity of all instalments then accrued due, and in my opinion would also be a good discharge at common law by way of accord and satisfaction, but for the equitable considerations involved by reason of the nature of the plaintiff's claim, and the fact that Mrs. Paterson's right to the chose in action vested in the plaintiff is equitable only.

"If accord is a question of agreement, there must be either two minds agreeing, or one of the two persons acting in such a way as to induce the other to think that the money is taken in satisfaction of the claim, and to cause him to act upon this view": per Bowen L.J., in Day v. McLea[16]. The defence in the present case is not open to the objection founded on the doctrine that mere payment of a smaller sum cannot be a satisfaction of a larger sum already due, for the altered arrangements as to the custody of the child and the appellant's altered responsibility as to him were an additional consideration sufficient to exclude the application of that rule.

I read the finding of the jury as a finding that this part of the plea was substantially proved, and, having regard to the declaration, I think that this defence extends to all the instalments sued for except the first. The date of the last credit is apparently 9th September, 1903, while the last instalment under the deed must have fallen due on 1st July. I am, therefore, of opinion that, quite irrespective of the doctrine of restraint on anticipation, the appellant has established his defence, except as to the £100 due on 1st April, 1895. The decision of the learned Chief Justice at the trial was therefore right, and the rule to increase the verdict should have been discharged.

I have had the opportunity of reading the judgment which the learned Chief Justice has just delivered, and I entirely concur in it.

It having been admitted by Mr. Gordon that the verdict was properly entered for the plaintiff for £100, the question for our consideration is whether the plaintiff is entitled to have that verdict increased to the amount claimed. The whole controversy turns upon the equitable plea, and the facts found specially by the jury in reference to it. The plaintiff has urged upon several grounds that neither the plea in itself nor the facts found with regard to it afford any defence to the action. As to the ground that the clause in restraint of anticipation makes it impossible even for Mrs. Paterson herself to consent to the deed coming to an end, either by express act on her part or by waiver of any of its conditions, I entirely concur in the view of my learned colleague the Chief Justice. His reasoning, which I altogether adopt, would justify the conclusion that the doctrine of restraint against anticipation cannot be so applied as to prevent a wife from exercising her right of agreeing to modify or rescind a deed of separation such as this, merely because it contains a provision restraining anticipation of the moneys payable to her during separation. But, in the view that I take of the case, it is not necessary to decide that question. I do not wish, without necessity, to express a final conclusion upon a new point of so much importance in the law of married women's property. I prefer to base my decision upon a ground which is entirely free from that difficulty.

Equitable pleas are allowed by sec. 95 of the New South Wales Common Law Procedure Act 1899, which repeats the words of the earlier Statute first authorizing equitable pleas. The section provides that "the defendant in any action in which if judgment were obtained he would be entitled to relief against such judgment on equitable grounds may plead the facts which entitle him to such relief by way of defence." It has been held that the facts alleged in the plea must be such as would entitle the defendant to a perpetual and unconditional injunction against the defendant in a Court of Equity. The test to be applied to the plea is therefore this—does it set out facts which would justify a Court of Equity in granting a perpetual and unconditional injunction against the plaintiff proceeding upon a judgment for her claim? It is plain from the form of the plea that it was intended to put forward as the ground of defence an equitable rescission of the deed. For the purposes of this judgment, I assume that such a rescission would be contrary to the law of restraint against anticipation, and that, if the plea rested upon that ground only, it would be no answer to the action. But at the end of the plea, no doubt, as showing a consideration for the waiver alleged, and a change of the defendant's position on the faith thereof, there occurs the following statement of facts:—"And the defendant paid other moneys" (meaning moneys other than those covenanted to be paid) "to the said Mary Stewart Paterson, and entered into other arrangements with her from time to time, and the said moneys were so paid, and the said arrangements entered into by the defendant on the faith and undertaking that the arrangement in the said deed was at an end, and the said covenant void, and the said Mary Stewart Paterson accepted the said moneys and entered into the said other arrangements on the same faith and undertaking, and is now estopped by her conduct, and the plaintiff is estopped by her conduct from now setting up and suing upon the said deed." The allegation as to estoppel is merely a statement of an inference in law. The jury specially found in substance that these facts had been proved by the plaintiff. It is immaterial that some of the other facts alleged in the plea, and found by the jury, are no answer to the action. The defendant is entitled to hold the decision of the Chief Justice in the Court below in his favour if he can show that, taking the pleadings and all the facts found, there is sufficient ground for a perpetual unconditional injunction against the plaintiff. It is clear that the Court of Equity would treat the suit as if Mrs. Paterson were plaintiff, and would enforce against McNaghten all the equities available against her. It is also plain that the moneys claimed by her were at the time the action was brought, all free from the restraint against anticipation. Hood Barrs v. Heriot[17] is a distinct authority that restraint on anticipation does not apply to income accrued due. As each monthly payment became due it was free to be dealt with by Mrs. Paterson in any manner she thought fit. In adjudicating, therefore, upon Mrs. Paterson's rights to these moneys a Court of Equity would not be in any way hampered by the clause in the deed restraining anticipation. It was urged that clause 8 of the deed of separation imposing an obligation upon Gill, the trustee, would make it impossible to relax any provisions of the deed unless he were a party to the suit. I cannot assent to that argument. I am assuming that Mrs. Paterson could not in Equity be held to have consented to the rescission of the deed, and that the Court of Equity would, on the application for an injunction, treat it as subsisting. It is also said that her waiver cannot bind Gill. It is not necessary that Gill should be bound for the purpose of an injunction on the facts then under consideration. The jurisdiction of an Equity Court is over the person, and it will sometimes restrain a party from inequitably taking advantage of a provision in a deed which for all other purposes, and in respect of other parties, is treated as being in full force. If Mrs. Paterson or her trustee were inequitably seeking to enforce the deed, the Court would restrain her or her trustee from proceeding.

The principle upon which the Court of Equity will restrain the inequitable use of a provision in a deed is well illustrated by Wing v. Harvey[18]. That was a suit against an insurance society for payment of money on a life policy taken out by the assured at the instance of his creditor and assigned to the latter. One condition of the policy was that, if the assured should go beyond the limits of Europe without the licence of the directors, the policy should be void, and all moneys paid thereunder should become forfeited. The assured, without the licence of the directors, did go beyond the limits of Europe, to Canada, lived there for some years, and died there. The society set up this breach of condition as a defence. It was proved by the plaintiff that the representative of the society, who had been in the habit of receiving the premiums while the assured was in England, was informed of the breach of condition by the agent of the assured, and, in answer to the question whether it would be safe to continue paying premiums under the circumstances, stated that the policy would be perfectly good, if the premiums were regularly paid. On this assurance, made at the time of each payment, the premiums were regularly paid until the death of the assured. The Court, Knight Bruce L.J. and Turner L.J., holding that the society was bound by the acts of their representative, decided that the defence was ineffectual, as there had been a waiver of the forfeiture. Knight Bruce L.J., in the course of the argument, states the principle of the decision[19]: "The party pays and the agent receives the premiums upon the faith and condition that the policies are to be considered as valid and subsisting; and the argument is, that although the money was paid on those express conditions, the person paying it is to be in the same position as if he had paid it unconditionally. How can he be now reinstated in his position? If he had been informed in 1835," (the date of the breach of condition) "that the forfeiture would be insisted on, he might have insured the life at another office: not so now, the life having dropped." The principle of that decision may well be applied in this case. The jury have found that Mrs. Paterson accepted the notice to her solicitor, instead of to Gill, as a good notice to determine the deed; that she exonerated the defendant from giving notice to Gill; that she accepted the moneys paid as the plea alleges from time to time, and the other arrangements made since April, 1895, on the faith and understanding that the arrangement in the deed was at an end, and the covenant for payment therein void. A waiver, a statement, a promise may be inferred from conduct as well as from words. The series of arrangements and proceedings that took place after the notice to Mrs. Paterson's solicitor were absolutely inconsistent with the respective rights of Mrs. Paterson and her husband under the deed, and it must be taken that the payments from time to time made by the defendant to his wife from that time on for over eight years were made upon the express condition understood between them, that, as far as they were both concerned, the deed was at an end. Upon the faith of that condition he altered his position, omitted to give the notice to Gill, which he otherwise would have given, entered into arrangements, and made payments, solely on the faith of the deed being at an end. That altered position and those benefits are the consideration for the waiver of her rights by Mrs. Paterson. She has received the benefit of the consideration, the defendant cannot be reinstated in the position of advantage as to the notice which he gave up, and, in so far as a Court of Equity could interfere, it would not permit the party who has received these benefits as a consideration for waiving rights, to still insist upon their enforcement. Assuming that a Court of Equity would not, upon the facts, allow the deed by reason of the restraint against anticipation to be treated as at an end for all purposes, I have no doubt that it would grant a perpetual and unconditional injunction against Mrs. Paterson's assertion of any rights under the deed in respect of the moneys accrued due at the commencement of the action on the ground that she had, for valuable consideration, waived those rights. Holding these views, I am of opinion that the facts stated in the equitable plea, and found by the jury in the defendant's favour, are a complete answer to the plaintiff's claim, except in respect of the £100 for which the verdict has been entered. I agree with my learned brother the Chief Justice that the plaintiff is not entitled to have the verdict increased, as ordered by the Supreme Court, and that the appeal must be upheld.

Appeal allowed with costs. Order of the Supreme Court appealed from discharged and rule nisi for increase of verdict discharged with costs. Both parties undertaking that the costs and other moneys due from either party shall be set off against the costs and other moneys due from the other in respect of the proceedings in the Supreme Court and the High Court, execution to issue for balance only.

[1] 5 H.L.C., 185.

[2] (1896) A.C., 231.

[3] (1898) 1 Ch., 144, at p. 149.

[4] 11 Ch. D., 645, at p. 648.

[5] 3 Bro. C.C., 340; and see 1 Ves., 189.

[6] 31 Ch. D., 524, at p. 527.

[7] [1838] EngR 886; 1 Beav., 1; 4 My. & C. 390.

[8] (1896) A.C., 174.

[9] 31 Ch. D., 524, at p. 529

[10] 1 Dow., 235.

[11] [1805] EngR 88; 10 Ves., 453, at p. 466.

[12] 38 Ch. D., 273, at p. 284.

[13] 44 Ch. D., 492.

[14] 5 De G. M. & G., 265.

[15] (1896) A.C., 174.

[16] 22 Q.B.D., 610, at p. 613.

[17] (1896) A.C., 174.

[18] 23 L.J., Ch., 511.

[19] 23 L.J., Ch., 511, at p. 514.

High Court of Australia

Paterson v McNaghten [1905] HCA 21; (1905) 2 CLR 615 (30 June 1905)

HIGH COURT OF AUSTRALIA