Later decisions that cite Greer v Kettle
Lorp ATKIN. My Lords, I have had the opportunity of reading the opinions which are about to be delivered by my noble and learned friends Lord Russell of Killowen and Lord Maugham. I agree with them, and I have nothing to add. Perhaps I may also say now that my noble and learned friend Lord Macmillan has also had an opportunity of reading those opinions, and he also concurs in them. LorRD RUSSELL OF KILLOWEN. My Lords, the main question for our decision in this appeal is whether a company called Mercantile Marine Finance Corporation, Ld. (to which I will refer, for brevity's sake, as "' Mercantile Marine "') is entitled to prove in the liquidation of another company called Parent Trust and Finance Company, Ld. (to which I will refer as ''Parent Trust"), for a principal sum of (1) (1841) 8 M. & W. 209. (6)4 On B. 7ore (2) (1849) 7 C. B. 310. 1937 ~— GREER v. KETTLE. 162 HOUSE OF LORDS [1988] H.L.(E.) 150,000/., together with interest thereon. There are certain 1937 subsidiary questions in regard to interest, but these naturally Greer only arise in the event of Mercantile Marine being entitled Kerrie, to prove for the principal sum. Lod Rus! ene claim arises under an agreement of guarantee dated of Killowen. March 20, 1929, and made between Parent Trust and Mercantile Marine, the guarantee relating to a sum of 250,000/. which had been advanced by Mercantile Marine to a company called Austin Friars Trust, Ld. (to which I will refer as Austin Friars), under an agreement of charge also dated March 20, 1929, and made between Austin Friars and Mercantile Marine. The case presents this feature, namely, that no evidence is available of the circumstances in which the loan was made or the guarantee given, except what appears from the docu- ments themselves. The documents and certain admissions by the parties are the only materials which we can consider in deciding this appeal. By the agreement of charge, Mercantile Marine advanced the sum of 250,000/. to Austin Friars; Austin Friars agreed to repay it on June 20 then next with interest at the rate of 8 per cent. per annum, and charged certain securities mentioned in the schedule thereto with the repayment of the said advance and interest. The schedule contained the following items, namely: (I.) 275,000 shares of 1/. each fully paid in Iron Industries, Ld. ; (2.) 50,000 ordinary shares of Ios. each fully paid in Retail Trade Securities, Ld.; (3.) 25,000 ordinary shares of 1/. each fully paid in Corporation and General Securities, Ld. The agreement of guarantee must be referred to in greater detail. In it Mercantile Marine is called '' the Corporation,"' while the words "the guarantors'? mean Parent Trust. It contains one recital only, which runs thus: '' Whereas the "corporation have at the request of the guarantors advanced "to the Austin Friars Trust Ld. (hereinafter called 'the "" Dorrowers ') the sum of Two hundred and fifty thousand "pounds on the security of a charge dated March 20 One "thousand nine hundred and twenty-nine on the shares "particulars of which are set out in the schedule hereto." A. C. AND PRIVY COUNCIL. The schedule is an exact repetition of the schedule to the agreement of charge, and therefore includes the 275,000 shares in Iron Industries, Ld. The rest of the agreement consists of the following words: "In consideration of the corporation "having at the request of the guarantors advanced to the "borrowers the said sum of Two hundred and fifty thousand "pounds the guarantors hereby covenant with the corporation "that in the event of the borrowers failing to repay the said "sum of Two hundred and fifty thousand pounds and interest "as provided in the said charge on June 20 next forthwith to "repay to the corporation the said sum of Two hundred and "fifty thousand pounds together with all interest due and to "become due thereon or on any judgment which may be "recovered hereunder at the rate of eight per cent. per annum "Provided however that should the interest rate of the Bank "of England at any time be increased from the amount pre- "vailing at the date hereof whilst the said loan or any part "thereof is outstanding then the interest secured thereby is "to be increased by a similar amount and that whatever may "now or hereafter be the position between the borrowers and "the guarantors as sureties the guarantors shall be considered "and be liable as principal debtors for all moneys secured by "the said charge and that the guarantors and their successors "shall not be released nor shall their liability hereunder be "affected by time being given to the borrowers or by the "corporation omitting or neglecting to protect the security "created hereby or by the said charge or by any other arrange- '"'ment or dealing between the borrowers and the corporation "in reference to the said security or by any other act omission "matter or thing whatsoever whereby but for this provision "the guarantors as sureties only would have been so released."' It is this document, and this document alone, which is the foundation of the claim of Mercantile Marine. The subsequent events in no way affect the question of the liability of Parent Trust ; but for the sake of completeness they should be stated. Austin Friars did repay 100,000/. of the loan ; and on two separate occasions in the year 1929 Mercantile Marine, at the request of Parent Trust, extended the time for repayment 163 H. L. (E.) 1937 —— GREER v. KETTLE. Lord Russell of Killowen. 164 HOUSE OF LORDS [1988] H.L.(E.) by Austin Friars of the balance of the loan for the time being 1937 unpaid, in consideration whereof Parent Trust covenanted Greer with Mercantile Marine that the guarantee should remain in Kerriz, ull force and effect in every respect for the reduced sum. Lond Ruse! SUbSequently to these extensions of time it was for the first of Killowen. time discovered that the 275,000 shares in Iron Industries, Ld., had not been validly issued, and that accordingly the debt, the payment of which Parent Trust had guaranteed, had never been secured on any of those 275,000 shares. On the one hand the fact that the 275,000 shares had not been validly issued is admitted by Mercantile Marine ; on the other hand Parent Trust do not dispute that Mercantile Marine believed that those shares were validly issued, and that they had obtained a valid and effectual charge thereon. In these circumstances it would seem that the legal rights and liabilities of these parties depend upon the true construc- tion and effect of the agreement of guarantee; and indeed this view was not, I think, disputed by either side. For Mercantile Marine it was contended (1.) that upon its true construction the agreement for guarantee merely states or postulates that there has been executed by Austin Friars a document or paper answering the description given— namely, a document or paper bearing the particular date and purporting to charge the scheduled shares or stating that they were charged; or (2.) alternatively that, if upon its true construction the agreement for guarantee required that the loan to Austin Friars should be a secured loan, then that requirement had been fulfilled, because the loan was in fact secured on the scheduled shares other than the 275,000 shares in Iron Industries, Ld. These arguments were advanced before your Lordships in all seriousness, but I confess that I find it difficult to treat them with equal gravity. As regards the first alternative, the agreement according to its plain language does not merely assert the execution or existence of a document or piece of paper which answers the description given ; it asserts the existence of a security, and of a security more particularly described—namely, a security EEO A. C. AND PRIVY COUNCIL. which consists of a charge on (amongst other shares) the 275,000 shares in Iron Industries, Ld. This is the plain meaning of the words used : and an appreciation of this plain meaning destroys also the alternative contention, which can only be founded upon the view that nothing is asserted beyond the fact that Austin Friars have given some security. Once it is realized that the debt which Parent Trust are undertaking to guarantee is a debt described as a debt the repayment of which by the principal debtor is secured by a charge on (amongst other shares) the 275,000 shares in Iron Industries, Ld., the case (apart from the question of estoppel, to which I will refer) becomes in my opinion a simple one. It is not a case, as Bennett J. seems to have treated it, of seeking to imply a condition, the implication of which is alleged to be inconsistent with other provisions in the docu- ment. /In other words, as Romer L.J. said, it is not a case of Parent Trust being released from a contractual engagement. It is a case of an attempt to impose upon them a liability which they have never undertaken. The only debt, the repay- ment of which by the principal debtor they undertook to guarantee, was a debt secured by a charge on the 275,000 shares in Iron Industries, Ld., and a debt so secured never in fact existed. The language of Knight Bruce L.J. in Evans v. Bremridge (1) may well be applied to the present litigants. In that case it was sought to make a surety liable who became a surety on the footing that a co-surety would join in the covenant with him. The co-surety had not done so, and the surety was held to be under no liability. As the Lord Justice truly said : "' The defendants seek to charge the plaintiff with "a contract, into which he did not enter.', The alleged liability of Parent Trust having never existed, the appellants cannot derive assistance from the concluding words of the agreement which purport to provide that the liability of Parent Trust shall not be affected by the happening of the events therein specified. From these conclusions Mercantile Marine seek to escape by (1) 8 De G. M. & G. roo, 108. 165 H. L. (E.) 1937 —— GREER v. KETTLE. Lord Russell of Killowen. 166 HOUSE OF LORDS [1988] H.L.(E.) relying upon the doctrine of estoppel by recital in a deed. 1937 They contend that the recital which, on this view of the case, Greer alleges that the debt of the principal debtor is secured by a Kerrz, charge on 275,000 shares in Iron Industries, Ld., estops Parent eames Ueestirom alleging that the debt was not so secured; and of Killowen. that the result of applying this rule of evidence is that on the evidence in the case it is impossible to say that Parent Trust is free from liability. My Lords, in support of this view various authorities were cited, commencing with Lainson v. Tremere. (1) That was a case decided at common law on demurrer. In an action on a bond the condition of which was stated to be the payment of the rent of 170/. under a certain indenture of lease, the defendant pleaded that the rent reserved by the lease was 1401. and that he had paid that sum under the lease. The plaintiff made replication that the defendant had not paid the 170/. mentioned in the condition. On demurrer to that replication, the replication was held to be good, Lord Denman stating that in a Court of law the obligor was estopped from saying that the rent was not 170/. a year, and that upon the pleadings the defendant could not get rid of the estoppel with the result that there must be judgment for the plaintiff. How the difference between the two documents arose or which was the correct sum in fact is not stated. If, however, that decision is relied upon as applicable to a case of a mis-statement arising from mutual mistake, or as an authority for the pro- position that in all circumstances statements in deeds estop all parties to the deed from ever alleging and proving the true facts, I would not, speaking for myself, be prepared to accept it as authoritative at the present day. Indeed, if it were, serious inroads might be made in the jurisdiction to rectify deeds. Later decisions, however, put the matter on what seems to be the sounder basis. In Young v. Raincock (2) Coltman J. said: '' Where it can be collected from the deed, that the "parties to it have agreed upon a certain admitted state of "facts as the basis on which they contract, the statement (1) 1 A. & E. 792. (2)'7 Go B; 310, 338: A. C. AND PRIVY COUNCIL. "of those facts, though but in the way of recital, shall estop "the parties to aver the contrary."' So, too, in Stroughill v. Buck (1) a recital in a deed between the plaintiff and defendant that money had been advanced by the defendant to one Ogle was held to be the language of the defendant only and not to estop the plaintiff from proving that no money had been so advanced: and it was stated that where a recital is intended to be an agreement of both parties to admit a fact it estops both parties; but it is a question of construction whether the recital is so intended. My Lords, approaching this document from that angle I find no difficulty in saying that Parent Trust are in no way estopped. There is no trace in the language of the document of any agreement that a particular state of facts shall, whether true or not, be an admitted state of facts, or that the contract shall be based on that admission. The recital is a statement as to matters which would normally be within the knowledge of Mercantile Marine and not within the knowledge of Parent Trust, namely, that Mercantile Marine had made a loan to Austin Friars and had obtained from Austin Friars the stated security. There is nothing before us to suggest that Parent Trust were present when those transactions took place. Itisno doubt true that Parent Trust requested Mercantile Marine to make the loan on the stated security ; but that fact does not make the recital in any way the statement of Parent Trust, or an assertion by them that there was a charge on the 275,000 shares. It is from first to last a statement by Mercantile Marine that they have complied with a request of Parent Trust, i.e., a statement by Mercantile Marine that they have advanced 250,000/. to Austin Friars on the security of the shares specified in the schedule, which include the 275,000 shares in Iron Industries, Ld. There is nothing to estop Parent Trust from asserting the non-existence of a charge on those shares. For the reasons which I have endeavoured to indicate I agree with the decision and reasoning of the Court of Appeal, and I would dismiss this appeal with costs. (1) 14 Q. B. 781. 167 H. L. (E.) 1937 —_— GREER v. KETTLE. Lord Russell of Killowen. 168 HyL. (EB) 1937 —— GREER v. KETTLE. HOUSE OF LORDS [1938] In these circumstances, the subsidiary questions need not be discussed. LorD MAuGcHAM. My Lords, the facts in this appeal have been sufficiently stated in the opinion of my noble and learned friend Lord Russell of Killowen and it is unnecessary to repeat them. As he has pointed out the appellants raised two main points on the appeal, apart from a third point which arose on the construction and effect of the final clause of the guarantee of March 20, 1929. My Lords, on these contentions I do not think I can usefully add anything to that which has been said by my noble and learned friend Lord Wright in delivering the leading judgment in the Court of Appeal and by my noble and learned friend opposite in the opinion to which I have referred. There was, however, yet another point raised by the appellants, namely, the contention setting up against the Parent Trust and Finance Co., Ld., and their liquidator, an estoppel by deed. Relying on the recital in the guarantee which was to the effect that the Mercantile Marine Finance Corporation, Ld. (the guaranteed company), had at the request of the Parent Trust and Finance Co. (the guarantors) advanced to the borrowers (the Austin Friars Trust, Ld.) the sum of 250,000/. on the security of a charge dated March 20, 1929, on the shares, particulars of which were set out in the schedule to the deed, they contended that the Parent Trust was estopped from alleging that the said loan was not secured as stated in the recital or that the charge was in any respect ineffective. A number of authorities were referred to in support of this contention. It is a point of considerable general importance, and I hope your Lordships will pardon me if I examine the particular doctrine of estoppel invoked in this case with a little elaboration. My Lords, it is, I think, worth pointing out that for over two hundred years a recital in a deed was not considered to be so direct an affirmation as to amount to an estoppel (Co. Litt. 352 ; Law, or a Discourse thereof, by Sir H. Finch (1678), p. 33). This doctrine was not distinctly overruled till the year A. C. AND PRIVY COUNCIL. 1834, when, in the cases of Lainson v. Tremere (1) and Bowmanvy. Taylor (2), it was held to be unsound. Both cases were argued on demurrer, and there was therefore no statement of the facts beyond that contained in the pleadings. In Lainson v. Tremere (1) the action was on a bond for 1000l. The condition recited that by a lease of even date between the plaintiff's testator and the defendant the testator demised premises to the defendant at the yearly rent of 170/., and the condition itself was payment to the testator of that sum. This figure of 1701. was no doubt a mistake, for the reddendum in the lease was for a sum of 140/. only. The plaintiff, however, sued not on the lease but on the bond, and the Court held that the defendant was estopped by the recital in the bond from saying that the rent was not 170l. a year. The plaintiff accordingly was held entitled to judgment on that footing— a very remarkable result. The case of Bowman v. Taylor (2), which was decided in the same year, calls for a little examination. The estoppel was founded on a recital in an indenture of May Io, 1824, con- taining a grant by the plaintiff of a licence to the defendants to use an invention for which the plaintiff had obtained letters patent in the form in use in 1824. The action was for breach of a covenant by the defendant to pay certain royalties. The defendant pleaded (amongst other things) that the plaintiff was not the true and first inventor and that the supposed invention was not a new invention. The deed, however, recited that the plaintiff had invented improve- ments and obtained letters patent for them, and the defendants were held estopped from denying that the plaintiff was the true and first inventor. There was accordingly judgment for the plaintiff. My Lords, I do not doubt the correctness of the result; but I do doubt whether the recital could properly be taken to be a statement on behalf of the licensee who could have had little knowledge as to possible anticipations of the invention. The decision may be explained on the ground that the deed was entered into on the footing that the recital, whether true or not, must be taken during the (r)er Avada st 792: @)i2 Aw E278; A. C. 1938. 3 N 169 H. L. (E.) 1937 — GREER v. KETTLE. Lord Maugham. 170 H. L. (E.) 1937 GREER v. KETTLE. Lord Maugham. HOUSE OF LORDS [1938] continuance of the licence as true. The question of estoppel in relation to licences to use a patent has been the subject since 1834 of nearly a score of decisions in varying circum- stances, of which Clark v. Adie (1) is perhaps the most authoritative. The decision of the House of Lords in that case was not based on the narrow ground adopted in Bowman v. Taylor (2), but on the much wider ground that the licensee of a patent right is bound on the same principle and in the same way as a tenant who has taken a lease of lands from another and who is estopped during the lease from denying his landlord's title. It seems to be clear that having so recently adopted the view that a recital might operate as an estoppel, the Courts had not at that time worked out the qualifications which might prove to be necessary unless great injustice was to result. Subsequent cases laid down that the recital must relate to specific facts, must be certain, clear and unambiguous, and would not avail persons who were not parties or privies to the deed. In Stroughill v. Buck (3), following Young v. Raincock (4), another and a very important qualification was laid down. Patteson J., in his judgment in Stroughill v. Buck (3), stated it thus: '' When a recital is intended to "be a statement which all the parties to the deed have "mutually agreed to admit as true, it is an estoppel upon all. "But, when it is intended to be the statement of one party "only, the estoppel is confined to that party, and the intention "is to be gathered from construing the instrument." My Lords, in agreement with the Court of Appeal and with the opinion of my noble and learned friend Lord Russell of Killowen I think that this statement of the law is correct ; and I also agree with them in coming to the conclusion that upon the true construction of the recital contained in the guarantee of March 20, 1929, read in conjunction with the charge of even date mentioned in the recital, the fair inference is that the recital is intended to be the statement of the Mercantile Marine and not to be that of the Parent Trust (1) (1877) 2 App. Cas. 423. (3)) 14 ©. B. 78147787. (2) 2 A. & E. 278. (4) 7 C. B. 310. A. C. AND PRIVY COUNCIL. and Finance Co. The latter accordingly are not estopped from relying on the admitted fact that the charge was not secured on the 275,000 fully paid shares of the Iron Industries, Ld., for the simple reason that these shares had never been issued. My Lords, this conclusion is sufficient for the determination of the present appeal; but it is easy to imagine a deed so framed, perhaps by inadvertence, that such a conclusion, as a mere matter of construction, might be impossible even in a case of acommon mistake ; and it seems to me to be desirable to point out that there was another road, not depending on a perhaps ill-framed recital, leading more certainly in such a case to the same result. Estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in a deed must be taken as binding between parties and privies and therefore as not admitting any contradictory proof. It is important to observe that this is a rule of common law, though it may be noted that an exception arises when the deed is fraudulent or illegal. The position in equity is and was always different in this respect, that where there are proper grounds for rectifying a deed, e.g., because it is based upon a common mistake of fact, then to the extent of the rectification there can plainly be no estoppel based on the original form of the instrument. It is at least equally clear that in equity a party to a deed could not set up an estoppel in reliance on a deed in relation to which there is an equitable right to rescission or in reliance on an untrue statement or an untrue recital induced by his own representation, whether innocent or otherwise, to the other party. Authority is scarcely needed for so clear a consequence of a rectification order or an admitted or proved right to such an order. The well known rule of the Chancery Courts in regard to a receipt clause in a deed not effecting an estoppel if the money has not in fact been paid is a good illustration of the equity view: see the cases cited in Halsbury's Laws of England, 2nd ed., vol. 10, p. 289. The decision of Lord Romilly in Brooke v. Haymes (I) is (a) Ub, IR © 18, PG 3 N 2 I7I H. L. (E.) 1937 — GREER v. KETTLE. Lord Maugham. 172 H. L. (E.) 1937 eH GREER Vv. KETTLE. Lord Maugham. HOUSE OF LORDS [1938] even more closely in point, and it may be added that the statement of the law in that case appears never to have been doubted. The headnote begins as follows: ' A party "to a deed is not estopped in equity from averring against "or offering evidence to controvert a recital therein contrary "to the fact, which has been introduced into the deed by "mistake of fact, and not through fraud or deception on his "part." In a simple case of this kind it would be unnecessary, as that case shows, to counterclaim for rectification, though in a case of any complexity it would certainly be desirable to do so. Since the Judicature Act, 1873, the rule in equity must prevail. It would seem to be clear that the case of Lainson v. Tremere (x), if it were tried on the facts at the present day, would be differently decided, and that in all those cases where the party against whom an estoppel by deed is sought to be raised has a right to rectification which would, so to speak, destroy the alleged estoppel, or a right to rescission on equitable grounds, he has an aswer to the estoppel which would not have been open to him at common law. In the present case, apart from the ground on which the estoppel was held to fail in the Court of Appeal, I have myself no doubt that the same result might have been reached on the simple ground that the recital was inserted, so far as the shares in question were concerned, by a common mistake not alleged to have been induced by the Parent Trust and Finance Co. My Lords, as I have said, I agree in all respects with the decision and the reasoning of the Court of Appeal, and I concur in the proposed motion. LorpD Rocue. My Lords, I concur. Appeal dismissed.