Remedies: Actions for debt

Question 1

What is an action for debt

Answer 1

A remedy where parties can claim payment when a debt has accrued

Question 2

What are the requirements for an action for debt?

Answer 2

1. Contract must contain an obligation to pay
2. The right to payment must have accrued
   - full consideration has been provided by one party
   - If contract specifies due date, payments can be claimed on that date

Question 3

Is there a requirement to mitigate loss for an action for debt?

Answer 3

No - you can recover for avoidable loss

Question 4

What are the two types of obligations?

Answer 4

entire and divisible

Question 5

What is an entire obligation?

Answer 5

An obligation which must be wholly performed for a party to claim payment

Question 6

What is a divisible obligation?

Answer 6

A contract where the parties intend it to be divided into parts. Each part must be wholly performed to claim payment.

Question 7

How do we determine if the contract is an entire or divisible obligation?

Answer 7

Issue of construction: Did the parties intend that the performance and price would be divided into corresponding parts or did they intend the entire obligation to be performed before any entitlement to payment would arise?

Question 8

Cutter v Powell (1795) principle

Answer 8

A higher rate can be an indication of an intention that the obligation is whole - makes up for the chance of failure.

Question 9

Cutter v Powell (1795) facts

Answer 9

• Contract between shipmaster and sailor
• Evidence in note:
○ Ten days after the ship, “Governor Parry’, myself master arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty guineas, provided he proceeds, continues and does his duty as second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793
• Sail from Jamaica on 2nd August
• Arrived in Liverpool 9th October.
• Mr Cutter died on 20th September - thrown into ocean
Issue: Can Mr Cutters heir still claim payment for the period he was alive and working on the ship?

Question 10

Cutter v Powell (1795) decision

Answer 10

• Entire contract
• 30 pounds for entire voyage was more than going rate for second rate being paid for the month
• Rate was high
• Premium as compensation for chance sailor does not complete voyage
• Hadn’t accrued the purchase price
• Heirs got nothing

Question 11

Steele v Tardiani 1946 CLR facts

Answer 11

• Men cut firewood for 8 shillings per tonne
• Cut to 6 feet lengths and 6 inch widths
• No fixed number of tonnes
• Any party entitled to terminate at any time
• Plaintiffs cut 1500 tonnes - widths varied from 6 inches to 15 inches
• Boss took wood and sold it
• But didn’t pay them because the width requirement were wrong
Issue: • Entire or divisible?

Question 12

Steele v Tardiani 1946 CLR decision

Answer 12

• Infinitively divisible - Dixon
• Intention that performance and price would be divided into parts
• 8 shillings for every tonne and part tonne that was substantially within the requirements
• The right to that payment had accrued
• Fact that not all correct size didn’t take away right for payment
• Another contract for wood not cut correctly
○ 8 shilling per tonne - cost of rectification

Question 13

Supreme Court Act 1986 (Vic) s53

Answer 13

Definitions
(1) In this Division—

“annuities” includes salaries and pensions;

“dividends” includes all payments that are made by the name of dividend bonus or otherwise out of the revenue of trading or other public companies and are divisible between all or any of the members of those companies, whether the payments are usually made or declared at a fixed time or otherwise but does not include payments in the nature of a return or reimbursement of capital;

“rents” includes rent service, rent charge and rent seck and all periodical payments or renderings in place of or in the nature of rent.

(2) For the purposes of this Division the divisible revenue referred to in the definition of dividends is to be taken to have accrued by equal daily increment during and within the period for or in respect of which the payment of the revenue is declared or expressed to be made.
(3) Nothing in this Division renders apportionable any annual sums made payable in any policies of assurance.
(4) This Division does not extend to any case in which it is expressly stipulated that no apportionment is to take place.

Question 14

Supreme Court Act 1986 (Vic) s54

Answer 14

Rents etc. to accrue from day to day and be apportionable.
All rents, annuities, dividends and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) are to be considered as accruing from day to day and are apportionable in respect of time accordingly.
(these are divisible contracts)

Question 15

Nemeth v Bayswater Rd 1988 principle

Answer 15

Rent accrues daily (s54 Supreme Court Act)

Question 16

Nemeth v Bayswater Rd 1988 facts

Answer 16

• A had hired aircraft $2,200 per calendar month
• Payable at the end of the month
2 weeks into a contract - the plane crashed: contract frustrated

Question 17

Nemeth v Bayswater Rd 1988 decision

Answer 17

• Under common law rule: hirers would not have to pay anything: the right to payment had not yet accrued
• RENT Under the Supreme Court Act s54: Pay for each of the days they had use of the aircraft - at the end of the month
○ Right to payment accrues
○ Obligation to pay is when it would have been

Question 18

Hoenig v Isaacs [1952] principles

Answer 18

• Work which is complete with defects: accrued payment minus cost of fixing defects
• Work which is incomplete: no payment accrued

Question 19

Hoenig v Isaacs [1952] facts

Answer 19

Contract to redecorate a flat in London and furnish for £750
Decorate finished job and claimed balance
Defendant refused to pay because of defects in the work
To fix job would be total of £55 (8% purchase price)

Question 20

Hoenig v Isaacs [1952] decision

Answer 20

• Court made distinction between work which isn’t finished and work finished with defects
○ When contract for work to be done for lump sum and job is abandoned - not entitled to anything
○ But when job is finished but fails to comply with every aspect - party will be entitled to payment minus costs for rectification
• Denning: Unless breach goes to root of the matter the employer cannot resist payment of the contract
• Measure is amount the work is worth less because of the defects
• Upheld first instance judgement - but had the decision been the other way in the first instance they would have agreed with that too

Question 21

Bolton v Mahadeva [1972] principle

Answer 21

If the defect means that something cannot perform the purpose at all it will not be substantially complete

Question 22

Bolton v Mahadeva [1972] facts

Answer 22

• Plaintiff contracted to install heating and hot water service in house for £560
  
  • Equipment didn’t work properly - didn’t heat house and emitted fumes into house
  • Trady refused to fix defects - claimed payment as debt
  • Could be fixed for about 1/3 of the contract price

Question 23

Bolton v Mahadeva [1972] decision

Answer 23

• Question: whether defects in workmanship were in such character and amount that the plaintiff couldn’t be said to have substantially performed the contract
  
  • Nature of defects and proportion of repairing them in relation to contract price were relevant
  • Very different to Hoenig v Isaacs
  • Contract hadn’t been substantially performed
  • General ineffectiveness for primary purpose that lead to conclusion that it hadn’t been substantially performed

Question 24

Is substantial performance sufficient for payment to have accrued?

Answer 24

If the work is completed but with few defects payment can be claimed, minus cost of fixing defects (Hoenig v Isaacs)

Question 25

McDonald v Dennys Lascelles (1933) CLR principle

Answer 25

If no consideration has been provided payment cannot be held. E.g. instalment contract for land falls through: all instalments must be repaid

Question 26

McDonald v Dennys Lascelles (1933) CLR fact

Answer 26

• Complicated facts - don’t worry about them too much
• Anticipatory breach, purported to terminate
• Vendor for Denny’s Lascelles took that as repudiation

Question 27

McDonald v Dennys Lascelles (1933) CLR decision

Answer 27

If contract specifies instalments then each instalment becomes a debt owing at the time it is due

1. The total failure of consideration rule
	a. Since the purchaser didn't get anything in exchange for the instalments they were entitled to repayment of the instalments
2. Equitable rule: relief against forfeiture
	a. Doesn't need to be considered here because rule 1 applies
	b. If no total failure of consideration, apply the principles for this rule of equity

Question 28

Bot v Ristevski [1981] VR principle

Answer 28

The consideration for a deposit is the promise of seriousness in continuing with the sale. Therefore can be retained even if sale doesn’t continue.

Question 29

Bot v Ristevski [1981] VR facts

Answer 29

Part deposit paid
Remainder of deposit to be paid 7 days later?
After initial limited part paid but before full deposit paid - purchasers repudiated the contract
Vendors accepted repudiation and tried to claim remainder of deposit

Question 30

Bot v Ristevski [1981] VR decision

Answer 30

• A vendor’s right to retain or recover a deposit is not conditional in the same sense as their right to retain or recover purchase money.
  
  • It will not be defeated or divested by the subsequent discharge of the contract.
  • A “vendor who discharges the contract in consequence of a purchaser’s repudiation of it can recover a deposit that should have been paid before the contract was discharged”.
  • Purchaser liable to pay remainder of deposit

Question 31

Section 49 Property Law Act 1958

Answer 31

(1) A vendor or purchaser of any interest in land, or their representatives respectively, may apply to the Court, in respect of any requisitions or objections, or any claim for compensation, or any other question arising out of or connected with the contract (not being a question affecting the existence or validity of the contract), and the Court may make such order upon the application as to the Court may appear just, and may order how and by whom all or any of the costs of and incident to the application are to be borne and paid.
(2) Where the Court refuses to grant specific performance of a contract, or in any action for the return of a deposit, the Court may, if it thinks fit, order the repayment of any deposit.
(3) This section shall apply to a contract for the sale or exchange of any interest in land.

Courts can order deposits back.

Question 32

White and Carter (Councils) Ltd v McGregor [1962] principle

Answer 32

“[I]f it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.”

Question 33

White and Carter (Councils) Ltd v McGregor [1962] facts

Answer 33

• Contract with rubbish bin company
• Allowed to display advertisements on rubbish bins
• Mr McGregor renewed the contract
• Didn’t have authority to renew contract and didn’t want to renew
• Mr McGregor wrote to plaintiff and
• Company could affirm, fulfil own obligations, then sue for contract price as a debt
• Prepared advertisements, put them on bins
• White and Carter didn’t take any steps to mitigate - by finding another advertisement
• Mr McGregor was outraged -
○ Claimed he had repudiated before they did anything
○ White and Carter is not entitled to carry on and sue for the debt

Question 34

White and Carter (Councils) Ltd v McGregor [1962] decision

Answer 34

• Where there’s a repudiation the aggrieved party has a choice about whether the accept repudiation and terminate the contract or elect to affirm the contract
  
  • Only works if aggrieved party is able to fully perform their obligations
  • No cooperation is needed from Mr McGregor
  • May well have been unreasonable to do this
  • Never been the law that a person has been entitled to exercise his contractual rights in a reasonable way
  • No rule that a court will not accept when you try to exercise your rights in an unreasonable way
  • “[I]f it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.”
  • On the facts, the exception isn’t satisfied
  • Rubbish bin company shouldn’t be deprived of claiming contract price merely because they’d get a small benefit

Question 35

Clea Shipping Corp v Bulk oil International Ltd (‘The Alaskan Trader’) (No 2) [1983] principle

Answer 35

“[I]f it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.”

• If the party does something to indicate they completed solely for the money and it had no benefit to themselves otherwise the court may refuse the payment.

Question 36

Clea Shipping Corp v Bulk oil International Ltd (‘The Alaskan Trader’) (No 2) [1983] facts

Answer 36

2 year charter contract
Half way boat suffered serious engine break down
Was going to take several months
Charterers repudiated contract
Owner refused to accept, fixed ship and handed back to charterers
Boat sat there for the rest of the contract - fully equipped
Charterers kept paying charter fee but refused to admit they were liable
At the end of the contract charterers took it to arbitration

Question 37

Clea Shipping Corp v Bulk oil International Ltd (‘The Alaskan Trader’) (No 2) [1983] decision

Answer 37

Court applied no legitimate interest exception
• Certainty is important
• Important to allow innocent party to make a decision to accept repudiation
• Also important to hold that there is some fetter/limit on that power - the no legitimate exception
• The exception allows the court to refuse to permit an innocent party to enforce their strict contractual rights where it would be unjust to allow them to do so
• Owner had no legitimate interest to leave the ship ready when they knew it wasn’t being used - just saddling an extra cost on the purchasers
• Decisive factor: they sold it for scrap
○ If they had kept it they may have needed to keep the crew employed for future charter etc.
○ It was clear the charterer was not going to use the boat