Equitable Principle Law Report, November 12 COURT OF APPEAL Before the M1AS1ER OF THE ROLLS. LOItD JUSTICE DANCkwLRiS anid LORD JUSTICE WINN The COURT dismissed this appeal by Mr. Sidney Rees, trading as B. Saunders & Son, of Brick Lane, London, E.l. against the decision, on May 5, 1965, of Judge Trapnell at Shoreditch County Court, that the pay- ment of ?300 by cheque by the defendant to the plaintiffs, D. & C. Builders Ltd., was not a payment in full satisfaction of a debt of ?482 13s. Id. Nir. Martin Reynolds appeared for the defendant; Mr. S. C. Isaacs for the plaintiffs. JUDGMENT The MASTER OF THE ROLLS said that D. & C. Builders Ltd. werc a little company. D. stood for 'Mr. Donaldson. a decorator, C. stood for Mr. Casey, a plumber. They I were jobbing builders. In the spring of 1964 the defendant employed the Plain- tiffs to do some work at his premises. In July, 1964. the work had been completed and the plaintiffs were owed the sum of ?482 13s. Id. At this stage there was no dispute as to the work done but the defen- dant did not pay. In both August and October. 1964. the plaintiffs wrote to the defendant asking him to pay the bill. The defendant did not reply. Then, on November 13, 1964, the defendant was ill with influenza. His wife telephoned the plaintiffs and made complaints about the work and then said, " My husband will offer you ?300 in settle- ment. That is all you'll get. It is to be in satisfaction." Mr. Casey said that he would bave to talk it over with MIr. Donaldson. They talked it over. Their company Was in desperate financial straits. If they did not have the ?300. they would be in a state of bankruptcy. so they decided to accept the ?300 and see what thley could do about the rest afterwards. Thereupon Mr. Donald- son telephoned the defendant's wife. He said that they would " accept the ?300 and give you a year to find the balance". She said, " No, we will never have enough money to pay the balance. ?300 is better than nothing ". He said: "We have no choice but to accept." She said: " WVould you like the money by cash or by cheque. If it is cash, you can have it on Monday. If by cheque, you can have it tomorrow (Saturday)." On Saturday, November 14, 1964, Mr. Casey went to collect the money. She gave him a cheque for ?300 and insisted that, on the receiPt, the words "in completion of the account" be added to "Received the sum of ?300 from Mr. Rees ". The plaintiffs were so worried about their position that they went to their solicitors. They brought this action for the balance: the defendants set up a defence of bad workmanship and also that there was. a binding settlement. The question of settle- ment was tried as a preliminary issue. The Judge decided that preliminary issue in favour of the plaintiffs. This case was of some consequence for it was a daily occurrence that a merchant or tradesman, who was owed money, was asked to take less. The debtor said that he was in difficulties. The creditor was considerate and accepted the proffered sum and forgave him the rest of the debt. The question arose: Was thc settlement binding on the creditor'? The answer was that. in point of law, the creditor was not bound by the settlement. He could the next day sue the debtor for the balance and get judgmnent. The law wvas so stated in 1602 by Lord Coke in Pinnel's Case ((1602J 5 Co. Rep. 11 7a). Now, suppose that the debtor, instcjd of paying the lesser sum in cash. paid it by checue. Was the position any differeni ' No sensible distinction could be dra%%n between the payment of a lesser sum by cash and payment of it by cheque. If a creditor was not bound when he received payment by cash. he should not be bound when he received payment by cheque. Goddard v. O'Brien Qi88Ul 9 Q.B.D. 1.' was wrongly decided. A MERCIFUL HAND The doctrine of the conunon law had come under heavy fire, but a remedy had been found. The harsliness of the comnion law had been relieved. Equity had stretched out a merciful hand to help the debtor. The courts had invoked the broad prii- ciple stated by Lotd Cairns in Hughes v. Mtetropolitan Railway (118771 2 A.C. 43Ji. 448): '-It is the first principle upon which ali courts of Equitv proceed, that if parties. who have entered into definite and distinct terms involving certain legal results, after- wards by their ow-n act . . . enter upon a course of negotiation which has the cf'cct of leading one of the Parties to suppose that the strict rights arising under the con- tract will not be enforced . . . the person who otherwisc might cnforce those rights will not be allowed to enforce them whcn it would be inequitable having regard to the dealings which have taken placc between the parties." This principle had b:en applied to cascs where a creditor agrced to accept a Icscr sum in discharge of a greater in Central London Properties Trust Ltd. v. High Trecs Ltd. ([1947] K.B. 130). That case caused at the time some eYebrows to be raised in hiigh places. But they have been lowered sinc,. The solution was so obvliously just that no- one could well gainsay iL In applying this principle. however, tfic qualification had to be noted that the credi- tor was only barred from his legal rights when it would be inequitable for him to insist upon them. Whtre there had becn a true accord under which the creditor voluntarily agteed to accept the lesser stint in satisfaction and the debtor acted upon that accord by paying the lesser sum and the creditor accepted it. then it was inequil- able for the creditor afterwards to insist on the balance. But he was not bound unless there was a true accord bctween them. H IELD TO RANSOM" In the present case there was no trnc accord. The debtors wife had held thc c-reditor to ransom. She knew that the credi- tor needed the money to meet his o%% n commitments. There was no reason in la%v or in equity why the plaintiffs should not enforce the full amount of the debt due t:) them. LoRD JusiIcE DANU;WERt1S and lUmR Jt'STICE WINN delivered concurring judg- ments. Solicitors.-Mlessrs. Met-lol JonCe, Lewsey & Jefferies: Messrs. Bischoff & Co. EQUITABLE PRINCIPLE D. &d C. BUILDERS LID- v RFFS