Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365 (28 February 1969)

HIGH COURT OF AUSTRALIA

OLSSON V. DYSON [1969] HCA 3; (1969) 120 CLR 365

Assignment - Gift - Contract - Interpleader

High Court of Australia
Barwick C.J.(1), Kitto(2), Menzies(3), Windeyer(4) and Owen(5) JJ.

CATCHWORDS

Assignment - Equitable assignment - Chose in action - Gift - Non-compliance with statutory requirement for legal assignment - Purported parol assignment of debt.

Gift - Imperfect gift - Chose in action - Non-compliance with statutory requirement for legal assignment - Purported parol assignment of contract debt.

Contract - Novation - Direction by creditor for payment of debt to third party - Whether tripartite contract or contract for benefit of third party - Rights of third party.

Interpleader - Circumstances in &which proceedings available - Nature of orders &which may be made.

HEARING

Adelaide, 1968, September 12, 13;
Melbourne, 1969, February 28. 28:2:1969
APPEAL from the Supreme Court of South Australia.

DECISION

1969, February 28.
The following written judgments were delivered:-
BARWICK C.J. I have had the advantage of reading the reasons for judgment reasons he gives, that there was no assignment, legal or equitable, of a debt owing to the deceased by R. T. E. Constructions Limited (the debtor company). The terms of s. 15 of the Law of Property Act, 1936 (S.A.) were not fulfilled. There was no consideration to support an inchoate assignment. There is no equity to perfect an imperfect gift. A gift of a thing assignable at law is imperfect if it is not effective as a legal assignment. Nor is there any basis for regarding the deceased as having been at his death a trustee of a debt due to him by the debtor company. Consequently, the respondent could not succeed as the assignee or as the cestui que trust of the debt created by the loan by the deceased to the debtor company. (at p368)

2. I further agree that this is not a case to which the rationale of such cases as Dillwyn v. Llewelyn [1862] EngR 908; (1862) 4 De G F & J 517 (45 ER 1285) can be applied. Nor, in my opinion, after due consideration, can the deceased's evident desire be effectuated by the use of an estoppel. I also agree that there is no sound basis to infer a tripartite agreement, to which the deceased, his wife, and the debtor company were parties by which a novation of that kind took place. Thus the respondent cannot succeed as upon a promise made to her by the debtor company. (at p369)

3. However, dependent upon what conclusions of fact are drawn from the evidence before the primary judge, these views do not, in my opinion, necessarily dispose of the matter. The appeal to this Court is by the deceased's executors against an order that moneys paid into court by the debtor company be paid out to the respondent. This payment into court was made by the debtor company in an action by the appellants against it for recovery of a debt claimed to be due to the deceased. The debtor company availed itself of the provisions of O. 16B of the Rules of the Supreme Court of South Australia (Interpleader). The affidavit which founded the payment into court has not been reproduced in the appeal book but doubtless it conformed to the requirements of r. 2 of that Order. Thus the debtor company acknowledged that it was under a liability for a debt for or in respect of which it expected to be sued by two parties, namely, the appellants and the respondent who made adverse claims "thereto". Whilst literally "thereto" refers to a debt, in substance, in my opinion, it indicates that each claimant asserts that the debtor company is liable to pay a fixed amount of money to that claimant. No doubt the interpleader process in general treats the debt as itself the property to the ownership of which there are adverse claims : it is also available, it seems to me, in a case where the real question is to which of the claimants has the debtor promised to pay the money in question. For example, I would think that a person who had promised to pay money through an agent for an undisclosed principal could interplead, if when sued by that principal, the agent also claimed payment of the money on the footing that the promise was made to him personally : see, for example, Meynell v. Angell ; Calverley, Claimant (1862) 32 LJ QB 14 The money is the relevant subject matter as to which there are adverse claims. For an example of a contrary kind, see Greatorex v. Shackle (1895) 2 QB 249 Rule 3 of the Order following s. 12 of the Common Law Procedure Act, 1860 (U.K.) allows the debtor company to interplead although the title of the claimants does not have a common origin. Although more appropriate to a contest to physical property, this rule would seem to cover the case of claimants to be paid money under different promises and not merely the case of conflicting claims to the benefit of the one promise. (at p369)

4. A debtor, who acknowledges his indebtedness and claims no interest in the money he is prepared to pay into court, may be allowed to interplead. Thus it seems to me that the debtor's acknowledgment of a debt in the amount of money paid in can be ambiguous and can cover both the case of an obligation to pay the plaintiff to which obligation another lays claim, and that of an obligation to pay either the plaintiff or the claimant as upon a promise to the one or to the other according to the proper legal conclusion to be drawn from the proven facts. (at p370)

5. When the debtor company sought to take the benefit of the interpleader provisions of the Rules of Court, it was first ordered that the respondent be substituted as defendant in the appellant's action. Thereafter it was ordered that an issue be tried between the appellants and the respondent as to "whether at the date of death of" the deceased ". . . all moneys loaned by the deceased to" the debtor company ". . . were payable to and recoverable by the" appellants or the respondent. This formulation, in my opinion, is wide enough to cover a contest as to whether the debtor company's direct as distinct from derivative obligation was to pay the moneys to the respondent. But in any case the form of the issue is immaterial. Its purpose is to enable the conscience of the court to be satisfied as to whom the money in court should be paid: see Peake v. Carter (1916) 1 KB 652, at p 656 , and cases there cited. The latter order provided for pleadings to raise the precise issues to be tried. The respondent's points of claim asserted that she was entitled to the sum in court, and after setting out the basic facts on which she relied, placed her entitlement upon an assignment of the debt due to the deceased and alternatively upon an estoppel preventing the appellants from asserting a right to the money in court. Though the Supreme Court and the parties appear to have acted on the footing that at his death the debt to the deceased which arose from the original loan was still due by the debtor company, that matter was not, in my opinion, concluded, certainly not as against the respondent, by the procedures in interpleader which had been adopted. To establish its right to the money in court as against the respondent, it seems to me that the appellants in the circumstances of this case must show that they would have succeeded in the action against the debtor company had the action as originally constituted proceeded to judgment. Thus, the executors as plaintiffs in the interpleader issue seek to enforce the promise to repay the deceased which was made to him by the debtor company at the time of the loan. I agree that if that promise was still on foot at the death of the deceased, the respondent to this appeal, for the reasons already given, must fail. The critical question to my mind, however, is whether or not that promise was still extant at that time. (at p371)

6. The deceased was not content to give or to attempt to give the money due to him to his wife by his own sole activity. Whether by chance or by design he involved the debtor company in his arrangements. That he wished to divest himself of the benefit of that company's promise to pay him is clear enough: so is his intention that the money it represented should be paid by the debtor company to his wife. As a layman he knew nothing of the legal forms he should use. The analysis and interpretation of what he did ought to be resolved as a matter of substance. He told the debtor company that he had given the money to his wife and that the company should pay her the principal and interest. By speaking of gift, he ought not to be confined to an assignment of the debt as the means of effecting the gift: though if he had not made any arrangements with the debtor company, assignment or trusteeship would have been the only mechanism available to effect his intention. The debtor company was willing not to pay the deceased and to pay the respondent: it did so thereafter, no doubt considering itself obliged to do so by reason of what had passed between it and the deceased. But there is no evidence of anything expressly said by the representative of the debtor company when informed by the deceased of the changed situation which he contemplated. (at p371)

7. What then in substance did the deceased bring about when he thus involved the debtor company? What passed between him and the representative of the debtor company cannot, in my opinion, be regarded as notice of an assignment. There had been no assignment and the deceased in any case knew nothing of the need for notice. It could not be interpreted as a mere revocable mandate. I do not think it should be regarded as a mere indication that if the debtor company paid the respondent, the deceased would regard his debt as thereby pro tanto satisfied. The deceased intended, it seems to me, to quit the debtor company as from the time of their conversation from all further liability to him personally. He was regarding the money as no longer his but the respondent's. Thus, if there were no assignment, no revocable mandate, no indication that payment to the respondent in the future would be accepted as a satisfaction, in my opinion, it is permissible to infer from his conversation with the representative of the debtor company, the acquiescence of the debtor company in the deceased's proposal and the subsequent conduct of that company that the deceased intended that the company should be obliged to pay the respondent and that the debtor company accepted the obligation of paying the respondent the principal and interest. Implicit in such a situation is the termination of the obligation of the debtor company to the deceased. Expressed in terms of legal consequence, it could be said either that upon the promise of the debtor company to pay the respondent, the deceased released the debt due to him or that the deceased accepted that promise, as distinct from its performance, in satisfaction of his debt: see text and cases cited in Smith's Leading Cases, 13th ed., vol. 1, pp. 384-385. (at p372)

8. The real question in the case, in my opinion is whether these inferences should be drawn. Not without some hesitation but in the end with sufficient confidence, I have come to the conclusion that they should be drawn, according as I think they do with the realities of the situation disclosed by the evidence. I would regard these as inferred facts rather than as implications, though it may well be that they could be implied in order to account for the situation which the deceased evidently intended to create. Thus, whilst no promise to the respondent could be inferred, I would conclude that upon a proper analysis and interpretation of the evidence, there was in substance a promise given to the deceased by the debtor company to pay the respondent the principal and interest which formerly it owed the deceased. (at p372)

9. Upon that footing, it seems to me that the executors cannot succeed in the interpleader issue. The promise they assert no longer exists. On the other hand, the respondent could not herself enforce at law the promise made to the deceased. Further, unlike the widow in Beswick v. Beswick (1), she is not the executor of the will of the deceased and could not obtain specific performance in her own name as executor of the promise to pay. The executors, in my opinion, could compel the performance of the promise to the deceased to pay the respondent: but that would result in a payment to the respondent and not in a payment to the executors: and, in any case, that is not the claim they were prosecuting against the debtor company. (at p372)

10. The interpleader issue though not a cause is a matter falling within s. 27 of the Supreme Court Act, 1935 (S.A.). It has long been the practice in interpleader proceedings under provisions comparable with O. 16B to recognize and to give effect to equitable rights. As indeed it also was under the interpleader provisions as in force before the passing of the Supreme Court of Judicature Act, 1893, and the making of the orders and rules thereunder: see Rusden v. Pope (1868) LR 3 Exch 269 ; Duncan v. Cashin (1875) LR 10 CP 554 and Engleback v. Nixon (1875) LR 10 CP 645 Therefore, if appropriate claims had been made on behalf of the respondent and supporting submissions argued, the court would have been in a position to decide whether the executors could have been compelled to sue or to allow their names to be used at the instance of the respondent in a suit against the debtor company for the performance of the debtor company's promise or whether the respondent, upon the unwillingness of the executors to sue, could herself claim the specific performance of the promise to pay her. In that event the court in these proceedings, in my opinion, could have reflected its decision on those matters, that is to say, if favourable to the respondent, by treating the money in court as payable to the respondent as upon a specific performance of the debtor company's promise to the deceased. But the points not having been argued, I do not think their decision should at this stage be attempted. The general question was left open in Coulls v. Bagot's Executor & Trustee Co. Ltd. [1967] HCA 3; (1967) 119 CLR 460, at p 479 But I would observe that, in my opinion, nothing in the case of Milroy v. Lord [1862] EngR 951; (1862) 4 De G F & J 264 (45 ER 1185) stands in the way of a conclusion favourable to the respondent. Whilst it may not be permissible to treat an intending assignor of a debt as a trustee of it, it may be possible to treat a person who has attempted a gift by way of a release of an existing indebtedness in exchange for a promise to himself to pay a sum of money to the intended donee as coming under equitable obligations in respect of the enforcement of the substituted promise, that promise being enforceable at law and as well in equity though with differing consequences. Further, it seems to me that the approach to be seen in the reasoning in Fletcher v. Fletcher [1844] EWHC J69 (Ch); [1844] EWHC J69 (Ch); ([1844] EngR 791; 1844) 4 Hare 67 (67 ER 564) may go far to support a conclusion favourable to the respondent. (at p373)

11. However, a difficult question arises as to whether on my view of the facts the interpleader issue can be disposed of without deciding those questions. The claim of the appellants is to recover a debt due to the deceased. The claim of the respondent is to be entitled to the sum of money in court. The attitude of the debtor company evinces no intention not to pay the respondent conformably to its arrangements with the deceased. True enough, it may be that it paid in on the assumption that the respondent may be the assignee of the original debt which apparently it assumed it still owed. But the matter is not to be concluded upon what the debtor company may have thought nor for that matter by what the respondent alleged to be the legal situation arising from the facts which have now been evidenced in the interpleader proceedings: see Peake v. Carter per Pickford L.J. (1916) 1 KB, at pp 660, 661 (at p374)

12. I would conclude that the debtor company was willing to perform whatever obligation towards the respondent to which it was subject. It paid into court so that the obligation with respect to the money that the court decided it to be under could be performed. It disclaims any interest in the money. Therefore, without deciding whether, if the debtor company had been unwilling to pay the respondent, the appellants could have been compelled to proceed against it for the performance of the promise to pay or whether on their refusal to do so the respondent could in equity enforce that performance, the money in court can, in my opinion, properly be ordered out to the respondent in performance by the debtor company of that promise. This, to my mind, is the proper course to pursue. (at p374)

13. This result will be achieved by affirming the actual order of the Supreme Court, as distinct from that Court's findings and reasons therefor. (at p374)

14. Accordingly, in my opinion, this appeal for these reasons should be dismissed. (at p374)

KITTO J. This appeal is against an order of the Supreme Court of South Australia (Chamberlain J.) (1967) SASR 343 made upon the trial of an interpleader issue as to whether a debt of 2,000 pounds which at the death of one Dyson had been owing to him by a company called R.T.E. Constructions Limited for money lent and interest thereon was payable to his executors or to his widow. The widow's claim, which succeeded in the Supreme Court, rested primarily upon an assertion that the deceased in his lifetime had made her a gift of the debt and accruing interest. She proved that on an occasion in December 1961 her husband told her she "could have the 2,000 pounds". She added: "He just simply said it would be mine." Asked to state what he had said, her reply was that he said: "You can have the 2,000 pounds that I have loaned to Tom", and "I will advise Tom to pay the interest to you." (It was common ground that "Tom" was a Mr. Francis, the managing director of the debtor company, and that in the two sentences last quoted the reference was to that company.) No document was executed. The company's receipt for the loan was already in Mrs. Dyson's keeping and it remained there. Mr. Francis in the following February called upon the deceased for the purpose of paying interest on the loan and was given to understand, by some form of words, that the deceased had given the widow the principal sum so that the loan money was hers and interest should be paid to her in future. This was done, a cheque for each subsequent interest payment being posted to her. The deceased died on 9th July 1962. The loan, for which no period had been agreed and which was therefore repayable on demand, was not called up either in the deceased's lifetime or afterwards, until the executors, who appear to have known nothing of the matter at first, learned of it in 1964 and then claimed the debt, but not past interest, for the estate. (at p375)

2. It has not been contended that the testator's words amounted to a declaration of trust, and it would not be right, I think, to construe them as such. So far as can be gauged from the scanty evidence, the deceased evinced no intention of taking any obligation upon himself with respect to the debt, but, on the contrary, thought that his words to his wife and his instructions to the company were sufficient to make the debt hers in every sense and for all purposes. His whole intention seems to have been to make an immediate gift, and the rule is well established by such cases as Milroy v. Lord [1862] EngR 951; (1862) 4 De G F & J 264 (45 ER 1185) and Richards v. Delbridge (1874) LR 18 Eq 11 that words which express an intention of making a gift by a transfer of property cannot properly be construed as a declaration of trust, great though the temptation may be to find a way of giving effect to the general intention of benefaction. (at p375)

3. Considered as an intended gift by assignment, the deceased's endeavour to vest the debt in his wife must plainly be held ineffectual. It was ineffectual as a legal assignment, for a debt for money lent (leaving aside Crown debts) cannot be assigned at law except as provided by statute, and there is no statute applicable to this case. In particular, the general provision in s. 15 of the Law of Property Act, 1936 (S.A.) enabling debts to be assigned in the manner there provided is inapplicable here, for there was no "writing under the hand of the assignor". There was no valid assignment in equity either, for property which is assignable at law but is not assigned in the manner which the law requires for a legal assignment of it cannot be held in equity to be assigned unless by reason of some fact or circumstance which a court of equity regards as binding the legal owner in conscience to hold the property upon trust for the assignee. A promise for valuable consideration to assign the property is enough for this purpose, for equity, regarding that as done which ought to be done in return for the consideration given, holds the assignee to have an equitable interest commensurate with the legal interest which specific performance of the promise would give him. But there is no equity to perfect an imperfect gift: because of the absence of consideration a purported assignment, if incomplete as a legal assignment, effects nothing in equity. True it is that some subsequent conduct of the intending donor, encouraging or inducing the intended donee to act to his prejudice on the footing that the property or some interest in it has become his, may make it unconscionable for the donor to withhold the property or interest from the donee, and equity may on that ground hold the donee to be entitled to the property; but that is another matter, and must be considered separately. (at p376)

4. One submission that was made on behalf of the widow was that consideration for the assignment may be found by deducing from the evidence that the deceased, who by an oral antenuptial agreement had promised to leave her an annuity of 20 pounds a week but had made a will leaving her only 780 pounds a year, in effect offered her, and she accepted, an assignment of the debt by way of substituted performance of his promise as to the deficiency. The evidence, however, will not support such a view of the facts. It is true that the deceased had said on several occasions that he had "let her down", and although his meaning was never made clear - his speech was affected by a recent stroke - he may have been referring to the insufficiency of his will to carry out his promise concerning the annuity. This is a mere guess and not a very likely one, for if he had a sense of guilt in relation to his will he could easily have executed a codicil or a new will. But even assuming that he was expressing regret for having left his wife less than he had promised her, one may search the evidence in vain for anything to suggest that the making of the purported gift of the debt had anything to do with it, and may search again in vain for anything to suggest that Mrs. Dyson at the time expressed, or in fact had, any intention of accepting an assignment of the debt in lieu of what the will failed to leave her. (at p376)

5. It would be out of the question, as the evidence stands, to hold that any tripartite agreement was made by the deceased, the widow and the company, by which the deceased released the company from the debt in consideration of its promising to pay Mrs. Dyson. The managing director, Mr. Francis, the only person who took any part in the relevant events as representing the company, gave evidence in the case but did not say that he had promised Mrs. Dyson anything; and her own evidence was that she had no discussion with Mr. Francis on the occasion when the deceased told Mr. Francis that he had given the debt to her. (at p377)

6. A further question arises in reference to the same occasion, in February 1962. Mr. Francis had brought a cheque for the interest.

"The indication in words", Mr. Francis said in his evidence, "was
that he (the deceased) had given the money, that is the principal,
to Mrs. Dyson and I would pay her the interest in future and the
loan moneys were hers. Mrs. Dyson was in the room at the time he
said this, well present in the room. I think the conversation took
place in the hall and Mrs. Dyson was in the adjacent lounge near the
hall. I was aware that - she was aware of the facts that had been
spoken. I handed over the cheque on this occasion and I couldn't say
whether it went to Mr. or Mrs. Dyson. The interest thereafter was
paid to Mrs. Dyson. The interest from February 1962 has been paid to
Mrs. Dyson. She has been paid personally and she has been paid by me
posting the cheque to her." (at p377)

7. If it were right to construe this evidence as proving that the deceased requested the company to agree that it would owe the amount of the debt and future interest to Mrs. Dyson instead of to him and that the company so agreed, then even though Mrs. Dyson were no party to the contract so established she might perhaps be entitled in equity as cestui que trust to enforce the company's promise. But the only conclusion fairly open on the evidence is that the deceased presented Mr. Francis with a fait accompli (as he believed): he asserted that his wife had become the owner of the debt, and that the company had to govern itself accordingly, not to choose whether or not it would give the deceased a new promise to pay Mrs. Dyson in place of its original promise to pay him. (at p377)

8. Next it is said on behalf of the widow that the antenuptial promise by the deceased to leave her 20 pounds a week, though for lack of writing it was unenforceable at law, was enough to give her good prospects of success if she had applied under the Testator's Family Maintenance Act (S.A.) for additional provision out of the deceased's estate, and that in reliance upon the purported assignment as being effectual she abstained from taking any proceedings for an order under that Act. The learned judge evidently accepted evidence that she gave to the effect that it was her belief in the efficacy of the assignment that led her to desist from making such an application; and on the footing that this was so an argument is submitted, expressed in terms of estoppel, that the executors will not now be allowed to deny her title to the debt owed by the company. In so far as this refers to estoppel properly so called, it is a sufficient answer, even if the assumption be made that all the necessary elements of estoppel are present, that the negative proposition which is asserted is not the same as the positive proposition that the widow is entitled to the money as against the company; and the question in the interpleader proceedings is, which of the parties was entitled, at the time of the payment into court, to be paid by the company. As the debt was never assigned to the widow at law or in equity, and a mere estoppel is not equivalent to an assignment, the only question to which the conduct of the deceased or the executors may give rise seems to be that which has been foreshadowed above, namely whether any such conduct plus a change of position for the worse on the part of the widow in reliance upon it created an equity in the widow to have the debt made over to her. If it did, the company was in equity bound to make the payment to her. (at p378)

9. The principle which a contention to this effect invokes is that for which Dillwyn v. Llewelyn [1862] EngR 908; (1862) 4 De G F & J 517 (45 ER 1285) is usually cited. In that case a father, having made an incomplete gift of land to his son for the express purpose of the son's building a house on the land, thereafter assented to and approved of the son's proceeding with the building. The decision was that the conduct of the father after the making of the incomplete gift, together with the son's expenditure thereby induced, entitled the son in equity to call on the father's executors "to complete the gift" (as Halsbury's Laws of England puts it: 3rd ed., vol. 18, p. 399, par. 758). The judgment seems to contain two concurrent lines of reasoning. One treats the case as

"somewhat analogous to that of a verbal agreement not binding
originally for want of the memorandum in writing signed by the party
to be charged but which becomes binding by virtue of the subsequent
part performance";

that is to say, by analogy with Gregory v. Mighell [1811] EngR 580; (1811) 18 Ves Jun 328 (34 ER 341) , that even assuming there was no contract the conduct of the father after making the incomplete gift was such as to bind him in conscience to make the legal situation correspond with the implication in the encouragement that he gave to his son to lay out the money. The other line of reasoning was that the father's conduct amounted to a promise that if the son should build the house the land should be the son's, and that the son, by building the house, accepted the offer and so concluded a binding contract. The only signed memorandum in the case, however, was insufficient to enable this contract to be specifically enforced, and for that reason the ultimate basis of the decision must again have been that the father's subsequent conduct in encouraging the son to build the house on the footing that the land would be his, when acted upon by the son, created an equity which bound the father to make good the son's expectation. Thus in a case of this kind what gives rise to an equity which the attempted making of the gift did not by itself create is the conduct of the intending donor after the act of incomplete gift : cf. Ramsden v. Dyson (1965) LR 1 HL 129 ; Plimmer v. Wellington Corporation (1884) 9 App Cas 699 These cases are, I think, correctly explained in the judgment of Ungoed-Thomas J. in Ward v. Kirkland (1967) 1 Ch 194 , approved by the Court of Appeal in E. R. Ives Investment Ltd. v. High (1967) 2 QB 379 It seems to me impossible to apply the principle to the present case, for there is not the slightest evidence that after the making of the purported gift the deceased ever adverted to the question whether his purported gift might be treated by his wife as a reason for abstaining from making a testator's family maintenance application after his death or acting in any other way to her prejudice. He intended to make her a gift ; he went some distance towards doing so and assumed that he had done so completely ; no doubt he realized that she too assumed he had completely done so; but there the matter ended, without his thereafter offering her any encouragement or inducement to adopt a course prejudicial to herself, and without his doing anything else that can be held to have bound him in conscience to perfect the imperfect gift. (at p379)

10. Finally it was suggested that either on some ground of estoppel or on the principle just discussed the executors, by reason of conduct on their own part, may be bound to acknowledge the widow's title to the debt. But there is no evidence that they did anything to induce the widow to alter her position for the worse in the belief that the debt was hers. In particular, they had nothing to do with her omitting to apply for a testator's family maintenance order. So far as appears, they knew nothing of the debt or of the purported gift until more than two years had elapsed from the deceased's death, and when they became aware of the facts they promptly challenged the validity of the gift. (at p379)

11. Accepting both the encouragement and the warning in the statement of Isaacs J. in Anning v. Anning [1907] HCA 13; (1907) 4 CLR 1049, at p 1070 that there must always be a desire on the part of any court, if it be possible to see its way to do so in accordance with law, to carry out the real wishes of an intending donor, I can find nothing in this case but an incomplete and therefore nugatory attempt to make a gift. In my opinion the appeal should be allowed and an order made for the payment of the moneys in court to the executors. (at p380)

MENZIES J. I agree with the judgment of Kitto J. (at p380)

2. With respect to those who take a different view, I cannot regard the events which happened as producing the result that the debt was discharged in 1961. It can hardly be doubted that it was always intended by debtor and creditor alike that the debtor should remain a debtor until discharged by payment. After 1961 was there not still in existence a debt which carried interest? Furthermore, had the creditor gone into liquidation after the date of the supposed discharge in 1961, would the only claim upon the liquidator have been an unliquidated claim by the original debtor for nominal damages? (at p380)

3. The question, as I see it, is whether the respondent became the creditor or otherwise entitled to the debt. The judgment of Kitto J., in my opinion, establishes that she did not in 1961 or at any later time. (at p380)

WINDEYER J. The events out of which this appeal arises were as follows - so far as it is necessary to narrate them for the purpose of this judgment. (at p380)

2. The respondent, Mrs. Ethel Pearl Dyson, is the widow of one Ernest Edward Dyson who died on 9th July 1962. He had married the appellant in May 1960. He was then a widower, she a widow. Neither of them was young. He was a man of some means. In February 1961 Dyson lent 2,000 pounds to a company, R.T.E. Constructions Limited, which I shall call "the company". It carried on business as a builder. It is a private company, wholly controlled at all relevant times by one Thomas William Francis. A receipt for 2,000 pounds given by the company is the only documentary record of this loan. The money was lent for an indefinite period and upon an oral agreement between Francis, on behalf of the company as borrower, and Dyson, the lender, that interest at the rate of eight per centum per annum would be paid half-yearly. The first instalment of interest was paid by Francis calling upon Dyson at his home and delivering a cheque to him for the amount due. In September 1961 Dyson suffered a stroke and was for some weeks in hospital; but he had returned home, to the house where he and his wife were living. He was there until his death, in rather poor health but well able to manage his affairs and to make his intentions and wishes known. (at p380)

3. The next happenings, which began in December 1961, are best related in the words of the evidence given by the respondent and by Francis in the court below. Mrs. Dyson said:

"My husband told me I could have the 2,000 pounds that he had
invested or loaned to the R.T.E. Constructions - Mr. Francis. He
just simply said it would be mine. He said, 'You can have the 2,000
pounds that I have loaned to Tom'. He said, 'I will advise Tom to
pay the interest to you'. He didn't hand me something during that
discussion. I had already had the receipt - he had given it to me to
put away for him before that. He did not make any mention about the
receipt. He knew I had it - he had given me the receipt to put away
for him, to keep for him. I just put it in the deed box that I had
my papers in. All the papers were there together in the desk and in
the box. My papers were in it and his papers also. I received my
first payment of interest when Mr. Francis brought a payment around
in February and gave it to Mr. Dyson. I was not actually present
then. My husband gave it to me after - he gave the cheque to me
after. I was not present at any discussion between my husband and
Mr. Francis concerning this debt. It was after Mr. Francis left that
he gave me the cheque and told me to pay it into my account."

Later she said:

"I did not have any discussion with Mr. Francis on that occasion.
As far as this loan, or the interest, was concerned, my husband told
me that he had advised Mr. Francis to pay all other interests to me
and after that the other cheques were always paid to me. He always
brought them and gave them to me. The next cheque would have been
received in about the middle of the year 1962, in July I think it
was. That was posted to me in an envelope addressed to me, Mrs.
Dyson."

Francis said:

"The second amount of interest was for the full period of six
months from the 1st July to the end of December. I went to Dyson to
give him the cheque for that interest - I think it was February I
went to him. I had a discussion with him and he said something to me
when I handed him the cheque. I can't remember the exact words but
the indication in words was that he had given the money, that is the
principal, to Mrs. Dyson and I would pay her the interest in future
and the loan moneys were hers. Mrs. Dyson was in the room at the
time he said this, well present in the room. I think the
conversation took place in the hall and Mrs. Dyson was in the
adjacent lounge near the hall. I was aware that - she was aware of
the facts that had been spoken. I handed over the cheque on this
occasion and I couldn't say whether it went to Mr. or Mrs. Dyson.
The interest thereafter was paid to Mrs. Dyson. The interest from
February 1962 has been paid to Mrs. Dyson. She has been paid
personally and she had been paid by me posting the cheque to her.
When I heard from Mr. Dyson that he had given the principal
of the loan to Mrs. Dyson I did consult the lass who made the
cheque out the next time - the initials were the same. I
subsequently did tell the accountant that the loan was now
Mrs. Dyson's and not Mr. Dyson's."

And later, in cross examination,

"Q. You never, in fact, had any written communication
from Mr. Dyson about passing this loan over to Mrs. Dyson? A. No.
Q. You know that Mr. Dyson died in July 1962? A. About
that time.
Q. Remember making payments of interest just before
his death? A. Not specifically, but interest would have been paid about

that time. I don't recall if I took the cheque or posted it. If the cheque was taken I always took it myself to Mrs. Dyson." (at p382)

4. The respondent had no reason to think that the company's indebtedness to her husband had not become an indebtedness to her. The company continued to pay the interest to her for two years after her husband's death and never questioned that the capital indebtedness was hers. (at p382)

5. By his will executed on 27th May 1960, that is some ten days after the marriage, Dyson had appointed the present appellants his executors, given an annuity of 780 pounds to his wife and left the residue of his estate to his sons by his first marriage. The respondent in her evidence said that in conversations which her husband had with her before their marriage he had promised that if to marry him she gave up her position as a postmistress, with its emoluments and pension, he would provide an annuity of 20 pound a week for her. It was suggested at the trial that it was because he had left her only 780 pound a year by his will that, to make up the difference, he gave her the company's debt to him of 2,000 pounds. This may have been so, but it was not established by the evidence. So far as appears, his "gift" of the 2,000 pounds was independent of and not intended to fulfil any prior agreement. It was not claimed that it was referable to any undertaking given before marriage until the respondent's lawyers began looking for some consideration to support an equitable assignment. That appears from the correspondence in which the matter now in question was first raised. This correspondence was as follows. (at p382)

6. On 13th May 1964 the solicitors for the executors sent a letter to the respondent, the relevant part of it being:

"As you are aware the Investigation Branch of the Income Tax
Department have, over a lengthy period, been making a most detailed
examination of the late Mr. Dyson's affairs.
The investigation has, amongst other things, brought to notice the
fact that on or about 15th February 1961, Mr. Dyson lent to R.T.E.
Constructions Limited, the company which built the house at 5 Ross
Street, Everard Park, a sum of 2,000 pounds.
According to the information which has been given us the above
loan is not evidenced by writing of any kind. According to Mr.
Francis (of R.T.E. Constructions Limited), Mr. Dyson got him to
write out a cheque for the 2,000 pounds which he (Mr. Dyson) then
signed and handed to him intimating that he (Mr. Francis) need not
pay the amount back until he found it convenient to do so.
It was arranged between Mr. Dyson and Mr. Francis that until such
time as the loan was repaid R.T.E. Constructions Limited should pay
interest thereon at the rate of 8% per annum by half-yearly
payments. We are informed by Mr. Francis that interest has in fact
been paid on this basis.
Mr. Francis states that about twelve months after the loan was
made Mr. Dyson informed him when he went to make an interest payment
that he wished all future interest to be paid to you as he had
passed over the debt to you. Mr. Francis states however, that he
never had anything in writing from Mr. Dyson to this effect but that
he has, as desired by Mr. Dyson, since made all interest payments
to you.
The loan principal is, we understand, still owing and we gather
from our conversation with Mr. Francis that his company has no
present intention of repaying it unless it has to do so.
Will you please let us know whether the above facts are correct
and whether there is, to your knowledge, anything in writing to
indicate that Mr. Dyson intended you to have the loan money.
On the facts as at present known to us there would appear to be
grave doubt as to whether there was ever a legally effective gift of
the loan from Mr. Dyson to yourself. If there has in law been no
effective gift it will, as you will readily appreciate, be the duty
of the executors to get in the loan moneys as portion of the late
Mr. Dyson's estate and to look to you for reimbursement of the
interest which you have received since the death of the late Mr.
Dyson, unless all the residuary beneficiaries expressly direct them
to refrain from doing so."

The respondent replied to this immediately as follows:

"Replying to your letter of 13th May 1964, re gift to me of 2,000
pounds from my late husband.
The information you received from Mr. Francis is quite correct.
Mr. Dyson made me a gift of this money in Dec. 1961, he advised
Mr. Francis to that effect and the interest was to be paid to me
half-yearly, which Mr. Francis has done.
I have nothing in writing to this effect. I did not know a gift
from husband to wife had to be covered by a written statement.
However if you wish to deprive me of this money there is nothing I
can do about it as I have nothing in writing." (at p384)

7. The next thing that happened was that on 2nd December 1964 the present appellants, who are the executors and trustees of Dyson's will, commenced an action against the company claiming the sum of 2,000 pounds for moneys lent by the deceased, repayable on demand, together with interest from 21st July 1964. The company then commenced proceedings in accordance with the interpleader procedure of the Supreme Court of South Australia. An order was made that the company pay the sum of 2,000 pounds and any accrued interest into the Supreme Court, and that the present respondent be substituted for the company as defendant in the action which the present appellants had brought. It was further directed that an issue be tried whether at the date of Dyson's death the money lent by him to the company, and interest since the date of his death, was "payable to and recoverable by the plaintiffs as executors of the will of the deceased or the claimant". It is not surprising that the question when put in this form was taken by the learned judge at the trial, Chamberlain J., to be whether Dyson had effectively assigned to his wife the company's debt to him. The arguments before his Honour and the arguments in this Court revolved round the law concerning the assignment of debts. But the question which arises on the facts as I see them is not whether there was an assignment by Dyson to his wife of the debt the company owed him. As I see the matter, it is whether there was not a novation of his contract with the company. But, before I come to that, I think I should consider the approach his Honour took. He expressed his finding on the facts as follows:

"I may say at once that I fully accept the defendant's evidence,
including, in particular, her evidence as to the pre-nuptial
agreement, and the gift. I am also satisfied that the deceased meant
to make the gift and believed that he had done all that was
necessary to perfect it. I also think that the probabilities are
that he meant it to compensate for his failure to carry out in full
his promise to leave the defendant 20 pounds per week, although this
was never discussed between them, and it is, of course, possible
that all he meant by the statement that he had 'let her down' was an
expression of his regret for having become ill after so short a
period of married life" (1967) SASR 343, at p 345

His Honour then went on to consider whether what Dyson had done constituted a valid equitable assignment. We were referred to a South Australian Act of 1860 by which choses in action were made assignable at law: The Property Act of 1860, s. 19. This provision was supplemented by the Supreme Court Act, 1878 (S.A.), s. 6 (vi). The effect of these enactments was considered in Robinson v. South Australia (1928) SASR 42 and Goldsbrough, Mort and Co. Ltd. v. Commonwealth Agricultural Service Engineers Ltd. (1930) SASR 201 I think it unnecessary to consider these decisions; for both the statutory provisions had been repealed long before the transactions of the present case occurred. In their stead stands s. 15 of the Law of Property Act, 1936 (S.A.). It is in the well-known terms of s. 25 (6) of the Judicature Act, 1873 (now s. 136 of the Law of Property Act, 1925) of the United Kingdom. The result is that a creditor who wishes to give to a donee a debt owed to him must follow the statutory procedure: he must sign a document by which he assigns the debt to the donee; and his gift will be complete in law when express notice in writing of his having done so is given to the debtor. An oral statement to the intended donee that the debt was henceforth to be his will not suffice even if the debtor has notice of it. (at p385)

8. This is simply the result of a general rule that to make a gift of any thing the intending donor must actually give it to the donee in a way which the law recognizes. The owner of a thing does not effectively give it away by simply saying "it is yours as a gift". He must not only say it is a gift, he must give it to the donee, who must, by words or conduct, accept it. How a thing can be given away depends on what it is. Since the decision in Cochrane v. Moore (1890) 25 QBD 57 , it is certain that if it be a chattel capable of manual delivery the donor must deliver it to the donee by actually handing it over, or else do some act which in the eye of the law amounts to delivery of possession, as for example handing over some indicia of ownership or the means of obtaining possession. If the donor means to give some thing which is not a chattel, but is an intangible thing such as a share in a company or a debt owing to him or other chose in action, he must give it by some way which the law provides for the transfer of a thing of that kind. In such a case his gift is not of rights of ownership in respect of a visible and tangible thing, but of rights to be asserted against a person or persons natural or artificial. (at p386)

9. If there were consideration for an intended, but incomplete, assignment, the Chancellor would compel the assignor to make good his intention and complete the transfer in due form of law. And because this could be compelled in equity, and equity treated as done that which ought to be done, it came to be said that an assignment incomplete in law was valid in equity if supported by some consideration recognized in equity for the purpose. But a gift is, by its very name, an assignment without consideration. So much is I suppose trite. I have said it because, for want of remembering it, arguments were it seems advanced which led the learned trial judge to a conclusion that a pure gift of a debt could be effective although the creditor donor had not executed any written assignment. His Honour sought to support this proposition by reasoning mistakenly from the judgment I delivered in the case of Norman v. Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9 I adhere to all that I there said about equitable assignments in general. (I should note, however, that the reference to Professor Bailey's articles should be to the Law Quarterly Review, vols. 47 and 48, not 27 and 28 as printed.) (at p386)

10. There is no equity to perfect an imperfect gift. This sentence, extracted from the well-known judgment of Turner L.J. in Milroy v. Lord [1862] EngR 951; (1862) 4 De G F & J 264 (45 ER 1185) has become an aphorism. People have deplored it and regretted that the Chancery Court did not display a more benevolent attitude in some cases where intended generosity was frustrated because of a failure to give effect to good intentions by doing what law required. But, because equity does not assist a volunteer, the rule stands firm. It would perhaps be better expressed by saying that an intending donor cannot be compelled to perfect his intended gift. To put it in those words rather than in the more brief form commonly used is desirable in the case of an assignment of a debt by way of gift. For if the assignor does all that the statute requires him to do on his part to effect the assignment it will be regarded as effective in equity. He must execute an instrument under his hand which is an absolute assignment in writing. Why? Because the statute so requires. Express notice in writing of the assignment must be given to the debtor to make it effective at law: because the statute so requires. But that notice need not be signed by the assignor or given by him. Why not? Because the statute does not so require. It can be given by the assignee and the gift will then be complete in law. In the meantime the assignor is bound in equity, notwithstanding that the assignment is by way of gift, for he has done all that the law required of him to complete his gift. Equity interposes to prevent his retracting it. But this does not mean that if he omits to do what he must to do make a gift, the omission can be overlooked and the gift take effect. It seems to me that his Honour's view that there was an effective assignment by Dyson of the debt to his wife must be held erroneous. (at p387)

11. His Honour also apparently accepted an argument put for the respondent that the attempted assignment was not by way of gift but was in performance of an ante-nuptial contract. There was evidence of some such agreement as is alleged; but, as I have said, I think there was no evidence that the attempted assignment of the debt was made in satisfaction of a contractual obligation. His Honour's decision cannot be supported on that ground. (at p387)

12. An alternative argument put to his Honour, as it was to us, was that the respondent could rely upon a promissory estoppel. It was said that, relying on the gift of 2,000 pounds, she had not sought, while there was still time for her to have done so, to bring proceedings under the Testator's Family Maintenance Act (S.A.), or to make a claim against her husband's estate based on his failure to perform his promise made before marriage. The whole subject of promissory estoppel as a new and growing chapter of our law is interesting. I have been helped in my consideration of it by Sir Alexander Turner's recent edition of Spencer Bower on Estoppel by Representation. But I have not been able to see how in this case any estoppel could be relied upon by the respondent to give her a cause of action. She might perhaps turn to estoppel in answer to a claim against her by the appellants if these proceedings be regarded as of that nature. However, I can leave that altogether aside. It is not necessary to resort to it in order to do justice to the respondent. Her case is based on the undisputed intention of her husband to make a gift to her of the company's debt to him, and on his belief that he had done so. To give effect to her claim is thus to meet the demands of justice. And in my view it is what the law requires because, as I see it, the husband carried his intention into effect by a novation of his contract with the company. Whether this was so or not depends upon what view one takes of the facts. (at p387)

13. First I should notice one view which was pressed by the appellants. This was that the transaction between the creditor, Dyson, and the debtor, the company, was a revocable mandate. It was said there was merely an authority given by Dyson to the company, as his agent, to pay to his wife a debt due to him. If that were all that the facts shewed, the authority was revocable by him at any time, and it would have been revoked by his death. But was that all? The question of mandate is one of fact. It depends in every case upon ascertaining the nature of the transaction between the creditor and the debtor. If what the creditor intended by his words and deeds was to assign his debt to a third party the result cannot be a mere mandate to the debtor. I cannot construe Dyson's statements to the company that it was to pay the interest to his wife as it accrued due, because he said he had given the debt to her, as an instruction by him that the company was to pay her the interest only until he countermanded the instruction, on the basis that he had not given the debt to her. The facts do not support the proposition that Dyson meant to give, or that the company thought he had given, a mere mandate. (at p388)

14. In my view the facts establish a novation of the contract between Dyson and the company. That the result of a novation may be the same, or much the same, as if there had been an effective assignment is not surprising. At one stage of the history of our law, when debts were not freely assignable at law, novation was a common method of circumventing the common law rule and accomplishing the same result as can now be accomplished directly by assignment pursuant to the statute. Novation can still be used as it was in earlier times. It can still be the means to the end which the law now allows to be reached by other means. The ultimate distinction, in juristic analysis, between a transfer of a debt by assignment and by novation is simple enough. Novation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effective to give enforceable rights or obligations to a third person he, the third person, must be a party to the novated contract. The assignment of a debt, on the other hand, is not a transaction between the creditor and the debtor. It is a transaction between the creditor and the assignee to which the assent of the debtor is not needed. The debtor is given notice of it; for notice is necessary to complete an assignment pursuant to the statute or in the case of an equitable assignment to preserve priorities. But the debtor's assent is not required. He is not a party to the transaction. (at p388)

15. In Scarf v. Jardine (1882) 7 App Cas 345, at p 351 Lord Selborne said novation "means this - the term being derived from the civil law - that there being a contract in existence, some new contract is substituted for it, either between the same parties (for that might be) or between different parties; the consideration mutually being the discharge of the old contract". In that sense "novation" means simply a new contract standing in the place of the old. It may be a new contract between the parties to the old contract, A (in this case Dyson) and B (in this case the company); or it may be a contract between them and a new party, or parties, e.g., between A, B and C (in this case the respondent). It is in the latter sense that the word is most often used in common law countries in connexion with the transfer of debts from one creditor to another. As put in Corbin on Contracts, vol. 6, p. 189, speaking of the law in the United States:

"All novations are substituted contracts; and the converse is also
true that all substituted contracts are novations, unless we follow
the more usual custom of using the word novation only in cases where
the substituted contract involves a substituted debtor or creditor
as a new party."

The present case must I think be decided by seeing what was the result as a matter of contract law of the transaction between A (Dyson) and B (the company). As I see the undisputed facts, two interpretations of them are open. (at p389)

16. One is that Dyson made an agreement with Francis, acting as agent for the company: that this agreement was in effect that, in consideration of Dyson's promise to release the company of its obligation to pay him, the company promised him, he acting for both himself and his wife, that it would accept her as its creditor in his place. That seems to me to be a possible interpretation of the facts. It is true that the respondent, although apparently within earshot, was not present at the conversation between Dyson and Francis. Therefore, unless her husband was her agent to accept the undertaking of the company to pay her, there was no privity of contract between her and the company. But she had been made aware by her husband of what he proposed for her benefit; she knew that he intended to give effect to his intentions by a transaction with Francis; and she left it to him to do so. That being so, it is not impossible that he should be regarded as having been her agent as well as acting on his own account, and that in both capacities he accepted the promise of the company to pay the debt to her and to treat her as the creditor. It is true that no consideration moved from her: but that I think does not matter if she and her husband were in fact joint promisees of a promise by the company to pay the amount of its indebtedness to her: she becoming the creditor in place of her husband in consideration of his promise not to sue for the debt himself: see Coulls v. Bagot's Executor and Trustee Co. Ltd. [1967] HCA 3; (1967) 119 CLR 460 (at p390)

17. If both privity between promisor and promisee and consideration moving from the promisee are essentials of a valid contract, there is a serious theoretical difficulty in every case of novation when the only consideration for the debtor's assumption of an obligation to a new party is the extinguishment of his obligation to the original creditor. This question is adverted to in Williston on Contracts, revised ed. (1938), vol. 6, p. 5243. I can only say that it arises in every case of simple novation when a new creditor is substituted for the former creditor. Allowing the new creditor to sue in the old creditor's name could never be more than a formal device in such a case, because ex hypothesi the obligation of the debtor to the original creditor had been contractually extinguished. (at p390)

18. Quite apart from the question whether the extinguishment of a prior obligation by B to A can provide consideration for a promise by B to C, is the question whether there can be an implied as distinct from an express extinction of the prior obligation. This was a problem for early Roman law too - and it is of some significance that much of the learning concerning novation, as well as the word itself, has an origin in Roman law: see e.g. Wilson v. Lloyd (1873) LR 16 Eq 60, at p 74 Justinian met the difficulty by providing that a stipulation should not operate as a novation unless the parties expressly declared that their object in making the new contract was to extinguish the prior obligation: Institutes, Bk. III, 29, 3. However, the requirements of our law are satisfied by a tacit agreement to extinguish the former obligation, and this is inferred when an inconsistent obligation is by agreement substituted. That this occurred in this case is, I think, the proper inference to be drawn from the unquestioned facts. It is true that Dyson did not converse with Francis in terms of offer and acceptance as in a textbook on contract law. Dyson did not expressly offer to relinquish his right as a creditor in consideration of the company promising to pay the money to his wife. He simply told Francis that, as he had made over the debt to his wife, all amounts falling due were thenceforth to be paid to her. To this proposition Francis tacitly, and the company by its conduct, assented. (at p390)

19. But, although I think that the company did undertake, and for good consideration, to pay to the respondent instead of to Dyson the money it had previously owed him, I am not convinced that this undertaking should be regarded as having been given to him and to her jointly, he being her agent in the transaction. I have said that that is a possible view of the facts, but I now put it aside. On the whole I do not think the facts warrant an inference of a tripartite agreement. The other view, and I think the correct view of the facts, is that the transaction was between the company and Dyson alone: that in legal effect it amounted to the company agreeing with him that, in consideration of his releasing it from its obligation to him, it would hold itself bound to pay to his wife any moneys which it would have had to pay to him. Considering the matter now on that basis, what then is the result? (at p391)

20. It is the old and much discussed question of a contract for the benefit of a third party - a contract between A and B that B will pay money to C. I stated my views on this topic in what I wrote in Coulls's Case [1967] HCA 3; (1967) 119 CLR 460 I shall not go over the ground again. The judgments since delivered in the House of Lords in Beswick v. Beswick [1967] UKHL 2; (1968) AC 58 enable me to adhere to what I said. But before coming to the common law result in the present case, it is necessary to ask whether a trust can be spelt out of the undisputed facts. Can Dyson be held to have at any stage constituted himself a trustee for his wife of his contractual rights? There is, of course, no doubt that, as Lord Wright said in Vandepitte v. Preferred Accident Insurance Corporation of New York:

". . . a party to a contract can constitute himself a trustee for
a third party of a right under the contract and thus confer rights
enforceable in equity on the third party" (1933) AC 70, at p 79 (at p391)

21. It would however be contrary to principle to say that Dyson constituted himself a trustee for his wife of the debt the company owed him. His purpose was to give it to her, not to hold it himself as a trustee for her. He failed to give it to her in the way the law provides; and an imperfect gift will not be treated as a declaration of trust. But, although his statement that he gave her the debt did not make him a trustee while it was in law payable to him, a very different situation arose as soon as he made a new contract with the company that it would pay the money to her and not to him. The company's promise to him that it would pay her was specifically enforceable at his suit: Beswick v. Beswick [1967] UKHL 2; (1968) AC 58 Is it far-fetched to say that he had then become a trustee for her of his rights under the novated contract? He had told her that the debt was to be hers; and thereafter, by a new agreement with the company, he had put himself in a position to make good this statement. I appreciate that the cases on this topic of trusts of contractual obligations are not all easy to reconcile. That has been well demonstrated in textbooks and learned articles. I do not find it necessary here to go at length into the question. All that I would say is that it seems to me to be a possible interpretation of, or inference from, the facts of this case that Dyson should be regarded as holding as a trustee for his wife his right to enforce the new contract which for her benefit he had made with the company. The judgments in Lloyd's v. Harper (1880) 16 Ch D 290 shew how in cases of this sort a trust can arise, enforceable at the instance of a person to be benefited. The use of the word "trust" is not necessary for this result. Reliance upon the concept of a trust in cases of this kind has been described sometimes as a "device" and sometimes as a "fiction". It is effective to overcome the rigidity of the obstacles the common law doctrine of privity of contract places in the way of justice to third parties. But this case can be decided, and I think it is best decided, according to purely common law principles. (at p392)

22. On that view of the case the result may be stated as follows. The appellants, as Dyson's executors, can enforce his contracts, including his contract with the company that it would pay his wife the respondent. But that does not mean that they can recover from the company the sum it contracted with him to pay to her. If the company had failed to perform its novated contract with Dyson while he was alive, he could have recovered damages for breach of contract. Since his death the appellant could do so. These damages would be measured by his loss, not his wife's loss, flowing from the company's breach of its contract with him to pay her. These damages could not I think be more than nominal in this case. Alternatively Dyson, or he being dead his executors, could by obtaining an order for specific performance compel the company to perform its contract with him by paying his wife. Mrs. Dyson could not herself have sued, nor can she now sue directly for the money - that is assuming, as I now am, that no promise was made by the company to her either directly, or indirectly through her husband. No consideration moved from her. (at p392)

23. Lord Denning hoped a right of action at common law could be found for a third party by looking behind Tweddle v. Atkinson [1861] EngR 690; (1861) 1 B & S 393 (121 ER 762) This hope has proved unfounded. In Coulls's Case [1967] HCA 3; (1967) 119 CLR 460 , I gave my reasons for thinking that on historic grounds it was, regrettably, doomed to fail. That does not mean that the present doctrine was always firmly established. It was not, as Dixon J. recognized in Birmingham v. Renfrew [1937] HCA 52; (1937) 57 CLR 666, at p 686 But it is now firmly established and it binds us. It is not however a rule which is necessarily inherent in the idea of contract. It is true that it accords with the classical Roman law, although not with the modern civil law of France or Germany: see Ryan, An Introduction to the Civil Law, pp. 67-71. It is not accepted in Scots' law. And, most importantly, it has been modified or abandoned in very many jurisdictions in the United States. This means that many American decisions on novation, although based on the common law, can provide little guidance for us. But it does perhaps offer some hope that what Lord Denning could not accomplish by looking back to the past may yet be accomplished, as Lord Reid has hinted, by looking to the future. It may be that their Lordships in the House of Lords could use the law's inherent capacity for growth, as displayed in America in this field, undeterred now by their own previous decisions and by "Parliamentary procrastination": see Beswick v. Beswick [1967] UKHL 2; (1968) AC 58, at p 72 And it may be that someday this Court too, expounding the common law as Australia has inherited it, will see the way clear to take the same path. But, for the present time at all events, decisions of high authority stand directly in the way. We must take the law as it is and refuse to recognize a ius tertii arising by way of contract. In jurisprudence and legal theory and for recent commentators, this may be seen as a regrettable example of the rigidity of conceptual thinking. Doubtless the common law of contract is developing in England, and along parallel lines here, by the application of old principles in new situations. But we cannot yet go further than the decisions in In re Schebsman; The Official Receiver v. Cargo Superintendents (London) Ltd. and Schebsman (1944) Ch 83 and Beswick v. Beswick [1967] UKHL 2; [1967] UKHL 2; (1968) AC 58 in England and Coull's Case [1967] HCA 3; (1967) 119 CLR 460 here can carry us. However, for present purposes that is far enough. We are not concerned with speculative problems of legal theory and ultimate analysis, but with a practical question, the destination of money now held in the Supreme Court of South Australia. If, as I think, the right view of the facts is that, by novation of its contract with Dyson, the company became bound to him to pay Mrs. Dyson, then the only way in which it could perform its obligation to him would be by paying her. Of course by a further novation this contract could have been cancelled by the parties to it and another new arrangement made in substitution for it. But that has not occurred. Two sentences, out of many that are pertinent in the judgments in In re Schebsman (1944) Ch 83 are peculiarly apposite at this point. Lord Greene M.R. said (1944) Ch, at p 92:

"The trustee" (here read the appellants as executors) "could,
presumably, release the company from its undertaking, but this would
do no more than deprive the trustee of the right to sue for damages
for its breach. The fact that such a release can be effected is no
argument for saying that the trustee can claim the moneys as his
own." (at p394)

24. The issue which, by interlocutory order, the Supreme Court directed to be tried was formulated as whether the money in question was "payable to and recoverable by the plaintiffs (the present appellants) or the claimant (the present respondent)". As I see the facts, the rights of the parties being governed by a novated contract, the money was not, strictly speaking, "recoverable" by either party at common law. Dyson had ceased to be a creditor of the company; but his wife had not become a creditor in strict sense of law. Unless there were a trust - a question I have left undecided - she could not compel the company to perform its contract with her husband and pay the money to her. But for the company to pay it to anyone else would have been a breach of its contract. This unsatisfactory situation has been recognized in other cases. It points out a deficiency in our law as it stands, and emphasizes the superiority of the American doctrine which is succinctly stated in the Restatement, Contracts, vol. ii, s. 426. But the question in this case being to whom should the money in the Supreme Court go, the answer I think must be, to the person to whom the company had bound itself to pay it, Mrs. Dyson. Only thus can justice be done and the needs of justice met that promises should be honoured and bargains kept. The maxims Fides servanda est, and Pacta sunt servanda today express a principle of justice as much as ever they did; and, in the facts in this case, I think they provide a sufficient answer in law to the question we have to decide. I am unable to decide it by following the path of his Honour the trial judge; but I reach the same ultimate conclusion; I would therefore dismiss the appeal. (at p394)

OWEN J. I have had the opportunity of reading the judgment of my brother Kitto. I agree with it and have nothing to add. For the reasons which he has given I am of opinion that the appeal should be allowed. (at p395)

ORDER

Appeal allowed. Costs of both parties to be paid out of the deceased estate of Ernest Edward Dyson, those of the appellant as between solicitor and client. Order of the Supreme Court of South Australia in so far as it ordered that the moneys standing in court to the credit of an account entitled "No. 1534 of 1965 Olsson v. Dyson - debt due from R.T.E. Constructions Pty. Ltd. be paid out of court to the respondent or to the solicitors upon production of the written authority" be set aside and in lieu thereof order that the said moneys be paid out to the appellants or their solicitors upon production of their written authority.