Murphy v Maughan [1848] NSWSupC 57 (1 December 1848)

---

[specific performance, clean hands]

Murphy v. Maughan

Supreme Court of New South Wales

Manning J., December 1848

Source: Sydney Morning Herald, 30 December 1848, in Supreme Court Collection, Vol. 2, pp 153-154

MURPHY v. MAUGHAN.

His Honor the Primary Judge, Mr. Justice MANNING, delivered the following judgment herein:---

This was a suit instituted by the plaintiff as trustee of the estate of Mr. E. Turner, of Maitland, for the specific performance of an agreement alleged to have been made by the defendant with Mr. Turner for the release of part of a mortgaged estate, from the debt due thereon, in consideration of the payment of £1000 of such debt six months before it came due.

It appeared in evidence that in 1837, the defendant being desirous of going to England, sold to Mr. Turner 1230 acres of land near Maitland, known as "Lowth Park," for £7000, of which £1000 was paid in cash, and £6000 secured by a mortgage term of 500 years upon the same estate, conditioned for the payment of £1000 in March 1839 (which was collaterally secured and duly paid), and £5000 in March 1847, with interest in the mean time at 8 per cent. It was expressly arranged that no more than £5000 should remain on mortgage, because of the fluctuations to which property in the colony was liable; and the interest was made at 8 per cent., instead of 10 or 12½ which were then current rates, in order that the defendant during his absence from the colony might be more sure of regular payments. Mr. Turner also purchased from the defendant live and dead stock to the amount of £1000, for which he was to pay in cash irrespectively of the mortgage.

He however made default in such payment, and the defendant was in consequence detained in the colony. Mr. Turner then made repeated applications to the defendant, to borrow £1000 for him, for the purpose of paying for the stock; and as a matter of accommodation to him, an arrangement was ultimately made for the loan by Mr. James Mitchell, to Turner, of £1000 at 12½ per cent. for three years, to be secured by a mortgage from the defendant of the whole estate. Accordingly such mortgage was given, and Turner executed an Indenture of further charge to the defendant for the same principal and interest, and to fall due about the same time. The defendant shortly afterwards quitted for England, leaving Messrs. Robert, John, and C. Campbell, his agents under power of attorney authorizing them to receive moneys on his account, and upon the discharge of any mortgage or other debt to release the securities. The power was not legally sufficient to support the surrender presently mentioned.

In the year 1840, land at Maitland having risen enormously in market value, and a part of the Lowth Park Estate having been much improved by draining, Mr. Turner proposed to Messrs. Campbell to pay off the £1000 due to Mr. Mitchell, and to pay 10 in lieu of 8 per cent. on the £5000, on obtaining a release of 260 acres (which he did not distinctly specify) of the mortgaged land, so as to enable him to effect sales. This was agreed to by Messrs. Campbell, and a deed purporting to be a surrender of the mortgaged term, in so far as it related to the 260 acres, was executed by Mr. R. Campbell in the name of the defendant. The £1000 was paid to the defendant's solicitor, and by him paid over to Mr. Mitchell; and six promissory notes for £100 each, payable in six successive years, were given by Mr. Turner to Messrs, Campbell, on account of the defendant, for the additional interest of 2 per cent. annually upon the £5000.

The 260 acres were the most valuable part of the estate, as proved by Mr. Turner, who, upon being examined as a witness in this cause, said, "At any time I would rather have had the 260 acres than all the rest of the farm." Shortly after the execution of this deed, Mr. Turner sold portions of the 260 acres for many thousand pounds; and he also sold the remainder of the estate for £11,000, inclusive of and subject to the mortgage debt, to third parties, who for several years paid interest at the rate of 8 per cent. to Messrs. Campbell, who remitted it to the defendant. Mr. Turner became insolvent in 1842, and no part of the six bills having been paid, they were proved upon his estate by Messrs. Campbell, but no dividend was ever received or declared.

Mr. Maughan was informed of the various transactions as they occurred, by letters from Messrs. "Campbell & Co." (of which firm Mr. C. Campbell is not a member); and he replied in terms approving of the appropriation of the £1000, and of the acceptance of the six bills for the additional interest, and also indicated that though very doubtful as to the prudence of the surrender and of the power of his attorneys to execute it, yet that he was prepared to rely upon their discretion, and to sanction their dealings on his behalf. This acquiescence, if it may be so called, does not appear to have been communicated to Mr. Turner or the plaintiff, or to have been in any way acted upon.

The case was argued before me on the 7th ultimo by Mr. Broadhurst and Mr. Lowe, for the plaintiff, and the Solicitor-General and Messrs, Donnelly and Fisher for the defendant. The following authorities were referred to:--- Larkins v. Hunter, and Doe dem. Maughan v. Turner (Judgments of this Court), Cockerill v. Cholmeley, 1 Russell and M. 418; Dunbar v. Tredenrick, 2 Ball and B. 317; Roche v. O'Brien, 1 Ball and B. 339; Murray v. Palmer, 2 Sch. and Lef. 486; Molony v. L'Estrange, 1 Beattie, 413, Story on Agency, sec. 243.

It was not my intention to have delivered Judgment in this case until those of Carr v. Maughan, and Bloxsome v. Maughan, should have been heard; but as they cannot now come on till after the vacation and circuit, and as after a frequent review of the facts of this case I am satisfied that it may be disposed of upon grounds in some respects peculiar to itself, it has appeared to me right to announce my decision without further delay.

I have compared the evidence in this case with the affidavits upon which the full Court decided in Bloxsome v. Maughan, upon the appeal against an order for an injunction to restrain the proceedings at law; and although there are several important points of difference, yet it appears to me that the view taken by the Court was such, that the decision ought to govern this case.

But further, my own opinion is that whatever rights (if any) might have been acquired by persons such as the plaintiffs in the other suits, who purchased from Turner upon the faith of the deed of surrender and of the circumstances connected with it, yet that this plaintiff, as the representative of Mr. Turner and his creditors, has no right to demand a confirmation of Mr. Campbell's imperfect deed. As no question of reputed ownership can arise for the benefit of creditors, in respect of real estate, this cause may be considered as if Mr. Turner were himself the plaintiff; and it appears to me quite demonstrable that he could have no equitable right to the specific performance here prayed. It would not be competent to him now to say that he has given consideration for the surrender. The payment of the £1000 in December, 1840, was nothing more than a discharge of his own debt, some years after it had become due, although a few months before the expiration of the time with which he had been accommodated.

It certainly relieved the defendant from his own liability; but as to between him and Mr. Turner, that liability ought not to have been imposed upon him, and it was incurred only by way of guarantee for Turner. Then the additional interest of the two per cent. on the £5000, was relied upon as a consideration, although not mentioned in the bill. Assuming for the present, that as against third parties purchasing from Turner, the giving and accepting of these promissory notes might be regarded as amounting to some consideration, yet as they were dishonoured at maturity and still remain totally unpaid, the make himself could not call upon the defendant to perform the agreement (assuming Mr. Campbell's act to have amounted to an agreement by him) for which he consideration had thus entirely failed.

The case does not however rest merely upon the absence of consideration for the alleged agreement; for it appears to me, that as between the defendant and Mr. Turner, the following facts and considerations materially affect the equities of the case. Mr. Turner's express and distinct arrangement with the defendant was, that from March, 1839, the whole estate should stand as a security for £5000 only, and he knew that the additional debt of £1000 was one which he was bound unconditionally to discharge out of his own funds, and that the arrangement with Mr. Mitchell was for his own accommodation, and was only temporarily to affect the defendant's securities. Under these circumstances, I cannot regard it as altogether justifiable on his part, to arrange with the defendant's agent, behind his back, for the release of part of the security for his own exclusive benefit. Still less is such an arrangement to be defended, when it is considered that he well knew (what the agent may not have known) that the 260 acres released was the most valuable part of the estate.

It is true that the state of things which enabled Mr. Turner to effect a sale of the remainder of the estate for £6000 beyond the mortgage debt, probably produced a bona fide conviction in the minds of both himself and Messrs. Campbell, that the security left to the defendant was still ample, and that the arrangement would therefore benefit Mr. Turner without operating to the prejudice of the defendant; but, however this may affect the question of the moral propriety of the transaction, it does not justify the act done.

The result has been to enable Mr. Turner to receive the whole proceeds of the 260 acres (except the small portion now in suit) as well as the £6000 on the remainder of the estate, --- amounts equivalent to about double the mortgage debt --- without reducing the mortgage, or giving to the defendant any thing which the former can insist upon as a benefit in return for the diminution of the security. The defendant might have agreed to this personally, for a man may deliberately give away his own property if he will; but even in such a case it would be difficult to enforce the specific performance of an agreement to that effect, as between the original parties to it. But in this case the defendant cannot be said to have done more than yield an unwilling assent to the act of his agent, without full knowledge of the particulars, or any certain notion of the extent to which he was legally bound; so that he cannot be said to have deliberately surrendered his rights, or confirmed that which had been done in his name (see Roche v. Brien, and Cockerill v. Cholmeley, supra); and that assent, such as it is, rather goes to relieve the agents from responsibility than to confer any title upon the person to whom they assumed to surrender, and who is not shown to be in any way brought in connexion with it.

Upon these grounds I am of opinion that this suit for a specific performance cannot be sustained, and that it must be dismissed with costs.