Coulls v Bagot's Executor and Trustee Co Ltd
(1967) 119 CLR 460(Judgment by: Windeyer J)
Between: Coulls
And: Bagot's Executor and Trustee Co Ltd
Judges:
Barwick CJ
McTiernan J
Taylor J
Windeyer JOwen J
Subject References:
Contract
Indemnity and Contribution
Equity
Judgment date: 21 March 1967
Sydney
Judgment by:
Windeyer J
1. The question in the first of these appeals is whether Mrs. Coulls, the widow of Arthur Leopold Coulls deceased, is since his death entitled to moneys becoming due and payable by O'Neil Construction Pty. Ltd. (which I shall call the construction company) under the contract which has been called the royalty agreement. (at p489)
2. In the Supreme Court, and at first before us, the question was put as a choice between regarding the last clause of this agreement as an irrevocable assignment by the deceased, or as a mere authority by him to the construction company to deal in the way specified with moneys which were his, an authority revocable by him during his life and revoked by his death. (at p489)
3. When the document was executed the Watergully land belonged to the deceased. His wife had no proprietary interest in it. It had once been hers, but she had sold it to him some years before they were married. Only he could sell the stone that was on it. If she was to participate in the price for which it was sold, that could only be by his assent. In cross-examination she was asked : "You did not pay your husband any moneys for the right to receive those royalties?" She replied : "No. It was a gift to me." There is no doubt about that, but the question is, How was this gift effected? A right to receive the royalties could be conferred by assignment or in other ways. When A by contract with B secures a promise from B, he may, if he wishes to benefit C, assign to him his contractual right. But, as it was put in an American case, La Mourea v. Rhude (1940) 209 Minn 53 ; 295 NW 304, at p 307 , "instead of waiting to do it by assignment, A may, at the outset, exact from B the same promise in favour of C". (at p489)
4. The learned judge in the Supreme Court regarded the royalty agreement as a contract between the deceased, Coulls, and the construction company, and an immediate assignment by him of the royalties to accrue under it. But the last clause is not expressed as a transaction between the deceased and his wife. It does not purport to be an assignment to her of a legal chose in action pursuant to the statute in that behalf. And if it could be read as an attempted equitable assignment it would fail for want of consideration ; for a legal chose in action is now assignable at law, and there is no equity to perfect an imperfect voluntary gift. If therefore it was an attempted assignment it was ineffectual, and the appellant would succeed in his appeal. But I unable to read the last clause as an attempted assignment. What then is its effect? (at p490)
5. The appellant contends that it is nothing more than a mandate by the deceased to pay to his wife moneys to which he was to become entitled. If that were all that it was, it was revocable by him at any time, and was revoked on his death in respect of all moneys not already paid pursuant to it. A mere mandate given by a creditor to his debtor to pay the debt to a third party can be countermanded before it is acted upon ; and it is terminated by the death of the creditor. The argument is that there was such a mandate in this case. The words "I authorise" are apt for that ; and, although not composed by a lawyer, the document as a whole is carefully worded. It can, I appreciate, be read as a contract between the deceased and the construction company, followed by a revocable direction by him to the company as to the payment of royalties becoming due to him under the contract. But, with respect for the opinion of those who hold this view of the document, I have come to the conclusion that it is not what on its true construction it means. (at p490)
6. I think that the last clause must be read as part and parcel of a contract by which, in consideration of the grant by the deceased of the sole right to take stone from the land, the construction company promised to pay in the way provided. I think that the promise of the company was to pay for the stone at the rate stipulated, such payments to be made to the husband and wife jointly during their lives and thereafter to the survivor. Several factors lead me to that conclusion. The document was signed not only by the deceased and the representative of the construction company, but also by the wife. I can see no reason for her signature except upon the basis that she had an interest in the performance of the contract. It is not, I think, altogether incongruous that a contractual term as to the manner of payment should be introduced by the words "I authorise". It was the deceased who could stipulate how his stone was to be paid for. His expression, "I authorise", should I consider be read as equivalent to a requirement by him. It can hardly have been intended by him that an arrangement expressed to continue in favour of the survivor of himself and his wife should be destroyed if he died first.
It is true that a mandate by a living person which is revocable in his lifetime cannot become irrevocable on his death, except by means of a will duly executed. But I do not from that deduce that this was an ineffectual attempt by the deceased to give to a revocable mandate a quality which it could not have. I deduce rather that the clause as to payment was not revocable by the deceased. The case of In re Williams ; Williams v. Ball (1917) 1 Ch 1 on which the appellant relied, does not, as I read it, contain anything which controverts this. That was a case of a man who had insured his life attempting to make a gift of the proceeds of the policy to another person by an authority to her to draw them if he should predecease her. The question was whether there was a complete and effectual assignment to her. It was held that there was not, that the authority given by him was revocable during his lifetime, and that therefore it was revoked by his death. The insurance company was not in any way a party to the transaction between the policy holder and the purported assignee. There was no promise on its part to pay her. The case was not even one of a mandate or authority given by a creditor to his debtor to pay a third person, which is what is contended for here. It was simply an authority given by the policy holder to a third person to receive the policy moneys. (at p491)
7. I therefore conclude that in the present case it was a term of the contract that, as from the death of Coulls (he having predeceased his wife), all moneys becoming due under the agreement should be payable to the respondent, Mrs. Coulls. That being so, the answer to the question in the originating summons : "Is O'Neil Construction Pty. Ltd. entitled or bound to pay the royalties under the agreement to Doris Sophia Coulls the deceased's widow?", must I think be "Yes. It is entitled to do so ; and it is bound to do so". That is because that is what it must do to perform its contract. (at p491)
8. Whether by agreement between Coulls and the construction company the royalty agreement could have been varied in his lifetime without the concurrence of Mrs. Coulls, or could now without her consent be varied by agreement between the executor and the company, is a question which I shall consider later. While the royalty agreement stands, the executor cannot require that payments which under it are to be made to Mrs. Coulls should not be made to her : and, if the executor intercepted any payments destined for her, it could not lawfully withhold them from her : In re Schebsman (1944) Ch 83 . (at p492)
9. Nevertheless it was argued that, because Mrs. Coulls had furnished no consideration for the promise of the construction company to pay the royalties to her, she could not herself enforce its promise, and that therefore it could not be said to be bound to pay her. In a practical sense this proposition lacks reality ; for the company does not dispute its liability to pay the royalties ; and, on the hypothesis under consideration, namely that its undertaking was to pay the survivor of Coulls and his wife, it has no obligation to pay anyone except Mrs. Coulls. However, I think I must examine the argument, which raised some fundamental questions. (at p492)
10. As I have said, I read the document as an undertaking by the company to pay royalties in the stipulated manner. The transaction can then be analysed, in terms of contract, in either of two ways. One is that the company (by its agent O'Neil) promised Coulls and his wife, for valuable consideration (actually provided by him but on behalf of both of them), that it would pay the royalties to them for their joint lives and afterwards to the survivor. (at p492)
11. The other analysis is that the company (by O'Neil) promised Coulls alone for consideration moving from him alone that it would pay the royalties to him and his wife for their joint lives and afterwards to the survivor. In my view the former analysis is, for reasons I shall give, the correct one. However, as I appreciate that the other is open and derives some support from the heading of the document, I shall consider the consequences of each to shew why in my opinion the ultimate answer in this case is the same in whichever way the contract be viewed. (at p492)
12. My reasons for saying that the promise by the construction company was made to Coulls and Mrs. Coulls as joint promisees are as follows. Mrs. Coulls was present when the agreement was drawn up : she wrote the document from dictation : she, Coulls and O'Neil all took part in a discussion of how an arrangement for payment to the deceased and herself jointly and then to the survivor solely should be expressed. She said in her evidence:
"The words 'joint tenancy' came to be written in because first my husband said I was to have the income, all the income ; but after discussion I did not think that was quite fair, so he said while he lived we would share it and then there was a discussion about the correct term. There was a discussion between all three of us, not one of us knew the correct term, we couldn't find a dictionary. We didn't know whether joint tenancy or tenancy in common was the apt expression. That is why the words at the end were added." (at p493)
13. This evidence could not be used to contradict or explain the document if there were any doubt about its meaning. But, taken with the fact of Mrs. Coulls being one of the signatories to the document, and with the fact that the promise was to pay the deceased and her jointly during their lives, it does I think aid the conclusion which I draw from its terms, that she and he were joint promisees. On that basis she was not a stranger to the contract, but a party to it with him. (at p493)
14. Still, it was said, no consideration moved from her. But that, I consider, mistakes the nature of a contract made with two or more persons jointly. The promise is made to them collectively. It must, of course, be supported by consideration, but that does not mean by considerations furnished by them separately. It means a consideration given on behalf of them all, and therefore moving from all of them. In such a case the promise of the promisor is not gratuitous; and, as between him and the joint promisees, it matters not how they were able to provide the price of his promise to them. That is the position as I see it. It accords with the very old decision in Rookwood's Case (1589) Cro Eliz 164 (78 ER 421) and with general principle. (at p493)
15. On this view, that Coulls and Mrs. Coulls were joint promisees, an action against the construction company would, during their joint lives, have had to be brought in the names of both. If one had refused to be joined as a plaintiff, he or she could, after an offer of indemnity against costs, have been made a defendant: Whitehead v. Hughes (1834) 2 Cr & M 318 (149 ER 782) ; Cullen v. Knowles [1898] 2 QB 380 ; Rodriguez v. Speyer Brothers [1919] AC 59 , at pp 103, 104 . After the death of either of two joint promisees an action on a contract can be brought by the survivor alone: see Halsbury's Laws of England, 3rd ed., vol. 8, p. 67. Therefore Mrs. Coulls, on the basis that she is a surviving joint promisee, could now bring an action on the contract; and in respect of moneys becoming due and payable under it since the death of her husband recover them for herself alone. (at p493)
16. I turn now to the other view of the transaction - as a contract between Coulls and the construction company that it would pay the royalties to himself and his wife during their joint lives and afterwards to the survivor of them. (at p493)
By the common law of England only those who are parties to a contract can sue upon it. For us that statement is incontrovertible. But what exactly is meant by it? Is there a useful distinction between denying a right of action to a person because no promise was made to him, and denying a right of action to a person to whom a promise was made because no consideration for it moved from him? The change the learned authors of Cheshire and Fifoot on Contract made in their sixth (1964) edition, p. 65, from their earlier editions illustrates the question. Now, after a recantation of earlier opinion, they say that
"So long as consideration is an essential feature of English law it would seem to be immaterial whether a person is forbidden to sue on the ground that he has given no consideration or on the ground that he is a stranger to the contract. They are but two ways of saying the same thing".
Yet a distinction was from an early date made, verbally at least, between the two matters. Actions of assumpsit were sometimes said to fail because the promise sued on was not made to the plaintiff - a very early example is Jordan v. Jordan (1595) Cro Eliz 369 (78 ER 616) . In other cases they were said to fail because, as it was put in Bourn v. Mason and Robinson (1669) 1 Vent 6, at p 7 (86 ER 5, at p 6)
". . . the plaintiff did nothing of trouble to himself or benefit to the defendant but is a mere stranger to the consideration".
And sometimes it was said of an unsuccessful plaintiff that he was not privy to either the promise or the consideration. The two matters were stated separately, and each was said to be fundamental, by Lord Haldane in the well-known passage in his speech in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] AC 847 , at p 853. And Lord Wright, in Vandepitte v. Preferred Accident Insurance Corporation of New York [1933] AC 70 , at p 79 also stated them separately when he said that
". . . no doubt at common law no one can sue on a contract except those who are contracting parties and (if the contract is not under seal) from and between whom consideration proceeds".
Doubtless the two requisites merge in the strict view of a contract as a bargain, a promise for which the promisee has paid the price. Yet the question as posed by Williston has perhaps not been firmly and finally answered:
"Does the law require that promises shall be paid for by the promisee, or does it merely require that the promise shall be paid for by someone?": Williston on Contracts, 3rd ed., vol. 1, s. 114. (at p495)
17. In the United States the question does not now arise in the same way as it does for us. There, in most but not in all jurisdiction, third persons (both donee-beneficiaries and creditor-beneficiaries as they are called) are now able to sue directly upon contracts made by others for their benefit. This rule, now accepted by the Restatement of the Law of Contracts, was arrived at only after much conflict among courts and commentators, as the following passage, from the judgment in Tweeddale v. Tweeddale (1903) 116 Wis 517; 93 NW 440, at p 442 shews:
"It is useless to endeavour to review the authorities touching the subject before us with a view of harmonizing them upon any one single theory as to the principle upon which the liability to the third person is based, or as to what are the essential elements to effect it. There is as much confusion, probably, in the judicial holdings in respect to the matter, as on any question of law that can be mentioned. . . . There is confusion not only between different courts, but confusion in the decisions in many jurisdictions in the same court." (at p495)
18. On whatever foundation the American doctrine be put, it cannot, I think, be accepted as a part of the common law as we have inherited it. For us the rule prevails that a plaintiff who sues on a promise must shew a consideration for it provided by him. It may be a mistake to regard the judgments in Tweddle v. Atkinson (1861) 1 B & S 393 (121 ER 762); 30 LJNS (QB) 265 - reported somewhat differently in 1 B. & S. 393 and in 30 L.J. N.S. 265 - as the apotheosis of this rule. That came later, in the House of Lords, in Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] AC 847 , reiterated in Midland Silicones Ltd. v. Scruttons Ltd. [1962] AC 446 . Nevertheless Lord Denning M.R. has said that the common law allowed a person for whose benefit a contract was made to sue on it, that the decision in Tweddle v. Atkinson was a mistaken departure from this the true rule, "settled law for two hundred years before 1861". His Lordship seems to have modified his views recently, in Beswick v. Beswick (1966) 1 Ch 538, at p 553 . Instead of condemning Tweddle v. Atkinson as an unfortunate and wrong decision, he now regards it as explainable and distinguishable, while adhering to his view of the common law. His Lordship's assertions - vigorously and insistently made, if I may say so - must put one upon respectful and careful inquiry, notwithstanding that they have been disputed by other judges and by commentators. (at p495)
19. But at the commencement of the inquiry come some misgivings about the method and purpose. To wish that the law of England recognized the tertius and allowed a ius quaesitum tertio, as Scots law does, or recognized a stipulation pour autrui, as French law does, or to regret that the common law has not developed in England as it has in America is an attitude that I can appreciate. But it is it seems to me another thing to hope that the desired result can now be brought about by looking back to the sixteenth and seventeenth centuries. I do not, I hope, undervalue the history of a legal doctrine as an aid to an understanding of it. But I am unable to think that looking at the common law "in its original setting" necessarily determines what it is in the setting of today. The history of much of our law is a story of development over centuries. The process still goes gradually on. The law of today is a living law. I would not suggest we should arrest its growth. But is a rule, which for a century or more has been said to be a fundamental principle of the common law and which has been asserted as such upon the highest authority, to be now condemned as a mistaken aberration because at some earlier stage in the history of our law a different rule prevailed? I think not. The common law develops, but not by looking back to an assumed golden age. I have said elsewhere that
". . . the only reason for going back into the past is to come forward to the present, to help us to see more clearly the shape of the law of to-day by seeing how it took shape": Attorney-General (Vict.) v. The Commonwealth (1962) 107 CLR 529 , at p 595.
And I developed this view in a passage in what I wrote in Commissioner for Railways (N.S.W.) v. Scott (1959) 102 CLR 392 , at p 447 . I shall not repeat it. Statements made by courts hundreds of years ago about the doctrine of consideration ought not I think to be taken as pronouncements of the law today, ignoring all that has been said in the meantime, ignoring all changes in social conditions and men's ways. It is I think equally erroneous - and for this even Holdsworth (History, vol. 8, pp. 12, 13) can be cited - to suppose that the earlier statements were not authoritative pronouncements of the law at the time they were made because those who made them did not see the shape of things to come. (at p496)
20. In 1885 Lord Bowen, then Bowen L.J., said:
"It was supposed at one time in the history of our common law, that there was an exceptional class of cases, in which where a contract was made for the benefit of a person who was not a contracting party, that is to say, a stranger, it could be enforced by that person at law. It would be mere pedantry now to go through the history of that idea: it is sufficient to say that in the case of Tweddle v. Atkinson (1861) 1 B & S 393 (121 ER 762); 30 LJNS (QB) 265. . . . the true. common law doctrine has been laid down": Gandy v. Gandy (1885) 30 Ch D 57, at p 69.
I would leave it at that, were it not for the statements still being made that in 1861 the Court of Queen's Bench subverted the common law and that we should now struggle to restore the faith. Because of these I have ventured upon the pedantry which Lord Bowen deprecated, and in particular upon an examination of the case of Dutton v. Poole (1677) 2 Levinz 210 (83 ER 523); T Raym 302 (83 ER 156) , on which Lord Denning has persuasively relied. (at p497)
21. It is true that in the reports of the sixteenth and seventeenth centuries many cases may be found in which third persons, not themselves promisees, from whom no consideration had moved, successfully sued in assumpsit . Those that I have looked at are Disborne v. Denabie and other cases in 1 Rolle Abr. 31 pl. 5; Lever v. Heys (1599) Moore (KB) 550 (72 ER 751) ; Provender v. Wood (1657) Hetley 30 (124 ER 318) , where it was said that "the party to whom the benefit of a promise accrews, may bring his action"; Starkey v. Mill (1651) Style 296 (82 ER 723) ; Thomas v. Thomas (1655) Style 461 (82 ER 863) ; Hornsey v. Dimocke (1672) 1 Vent 119 (86 ER 82) ; Bell v. Chaplain (1663) Hardres 321 (145 ER 478) ; Bafeild v. Collard (1646) Aleyn 1 (82 ER 882) . In the last two cases it was said that either the party to the promise or the person to be benefited might sue. (at p497)
22. However, soon after those decisions another current was running, and with some force. In editions of Selwyn's Nisi Prius, published many years before 1861, there was a heading "Consideration must move from Plaintiff", for which Bourne v. Mason (1669) 1 Vent 6 (86 ER 5); 2 Keble 454, 457, 527 (84 ER 285, 287, 330) ; Crow v. Rogers (1726) 1 Strange 592 (93 ER 719) and Price v. Easton (1833) 4 B & Ad 433 (110 ER 518) were cited. Bourne v. Mason (1669) 1 Vent 6 (86 ER 5); 2 Keble 454, 457, 527 (84 ER 285, 287, 330) came before the Court of King's Bench on several occasions, and produced enough discussion of principle to make it worth while looking at each of the references in Keble's Reports. Buller's Nisi Prius, 7th ed. (1817) 133 (a), stated that " assumpsit lies only for the person to whom the promise was made and not for those who are strangers and for whose benefit it was intended", citing Ritly v. Dennett 1 D'Anv. Abr. 64. . As late as 1812 counsel argued that " assumpsit may be brought either by the person to whom the benefit accrues, or by the person to whom the promise is made". But the proposition did not then go unquestioned: Phillipps v. Bateman (1812) 16 East 356, at p 370 (104 ER 1124, at p 1129). (at p498)
23. The fact is that the early cases are conflicting, because during the sixteenth, seventeenth and eighteenth centuries the doctrine of consideration in the common law was still in process of formation. Whether, and in what circumstances, third parties should be allowed to bring assumpsit was still debatable. The law was not in fact "settled" either way during the two hundred years before 1861. But it was, on the whole, moving towards the doctrine that was to be then and thereafter taken as settled. And with the growth of the rule that consideration must move from the promisee there went a hardening of the meaning of consideration. For the common lawyers it was not something evidencing an intention to be bound by a simple promise, rather it was an essential of an action of express assumpsit . Whatever influence Roman and Canonist ideas of causa may perhaps at one stage have had, consideration came to be the material price of a bargain, not the origin of a moral obligation. (at p498)
24. The true explanation of the decision in Dutton v. Poole (1677) 2 Levinz 210 (83 ER 523); T Raym 302 (83 ER 156) is not, I think, that the judges of the King's Bench in 1677 thought that an action of assumpsit might be brought by a person who was not privy to the promise and who had furnished no consideration. The case was twice argued. The report in Levinz's Reports shews, in an entertaining way, doubts, differences and dissents among the judges of the King's Bench. True, in the Exchequer Chamber the point taken was, according to the report in Thomas Raymond's Reports (p. 302), that
". . . the promise is made to Sir Edward Poole and the action is brought by Grizel and her husband, to whom the payment was agreed to be made, which ought not to be".
That was in a sense a procedural objection; but, having regard to the form of the action of express assumpsit , it was more than merely procedural. Yet the Exchequer Chamber upheld the judgment. The case really turned however upon the expansive views of consideration then held, arising from close relationship and from the moral claims of a daughter to her portion. It is not at all surprising that Lord Mansfield warmly approved the decision. It accorded with his view that a moral obligation provided consideration for a binding promise, a notion not finally dispelled from the law until Eastwood v. Kenyon (1840) 11 Ad & E 438 (113 ER 482) . Today on the same facts as in Dutton v. Poole (1677) 2 Levinz 210 (83 ER 523); T Raym 302 (83 ER 156) the defendant could I imagine be compelled to make good his promise by an order for specific performance - not however in an action by Grizel, but by her father's representative, the defendant having obtained the land with the timber on it. Moreover today a court of equity would I imagine in a suit by the father's representative charge the land with the amount the defendant had promised to pay. Until Lord Denning recalled it, Dutton v. Poole (1677) 2 Levinz 210 (83 ER 523); T Raym 302 (83 ER 156) had been forgotten or disregarded in England. In Tweddle v. Atkinson (1861) 1 B & S 393, at p 399 (121 ER 762, at p 764) , Blackburn J. had said of it:
"We cannot overrule a decision of the Exchequer Chamber; but there is a distinct ground on which that case cannot be supported . . . natural love and affection are not a sufficient consideration whereon an action of assumpsit may be founded."
In 1918 Pound J., in the Court of Appeals of New York, while upholding in certain cases the right of the third party to bring an action, remarked that Dutton v. Poole (1677) 2 Levinz 210 (83 ER 523); T Raym 302 (83 ER 156) had been "long since repudiated in England": Seaver v. Ransom (1918) 224 NY 233, 120 NE 639 . And in this Court, Fullagar J. said that it "must be taken to have been long since overruled": Wilson v. Darling Island Stevedoring and Lighterage Co. Ltd. (1956) CLR 43, at p 67 . (at p499)
25. For these reasons I must respectfully, and I may add somewhat regretfully, say that I cannot from an excursion into history reach the conclusion that Lord Denning has. Whether we like them or not, the rules relating to consideration seem to me a stubborn part of our law. They cannot be displaced by courts by head-on collision. Fortior et potentior est dispositio legis quam hominis. Where then does the law now stand? (at p499)
26. Suppose that A makes a contract with B that, for consideration moving from A, B will pay $500 to C, and that B fails to do so, C cannot sue B at law. Nor can he seek relief in equity unless A has become a trustee for him of his, A's, rights under the contract. (I leave out of consideration any statutory modification of these rules.) It is, however, equally certain that A can sue B for damages; for, by not paying C, B has broken his contract with A. (Alternatively A may sue B for specific performance in a case where that remedy is available.) Two questions arise. If A sues. for damages, what damages can he recover from B? Secondly - for whom does he get them, himself or C? (at p500)
27. In Beswick v. Beswick (1966) Ch 538, at p 554 Lord Denning M.R. said:
"Although the third person cannot as a rule sue alone in his own name, nevertheless there is no difficulty whatever in the one contracting party suing the other party for breach of the promise."
So far, I suppose no-one could disagree. But his Lordship goes on to say:
"The third person should, therefore, bring the action in the name of the contracting party, just as an assignee used to do";
and he concludes that by this means the third party can obtain what the promisor had promised to pay him. (at p500)
28. That again I must respectfully take leave to doubt. In the first place, it supposes that the damages which the promisee suffered because the contract with him was broken are to be measured by, and equated with, the benefits which the third person would have got had it been performed. In the second place, it assumes that the plaintiff brings his action on behalf of the third person, who becomes entitled to its fruits. For reasons which will appear, I cannot accept either proposition. In the third place, I doubt whether the case of an assignee suing in the name of his assignor, according to the practice before the Judicature Act, provides a sound analogy. That kind of action was brought to recover a debt due from the defendant to the assignor, who had assigned it to the assignee, who thereupon became entitled to sue for it in the assignor's name. On this I venture to refer to what I said in Norman v. Federal Commissioner of Taxation (1963) 109 CLR 9 , at p 27 . But equity has not come to the aid of third persons for whose benefit contracts were made in the same way as it did for assignees of debts. In Tweddle v. Atkinson (1861) 30 LJ (NS) QB 265, at p 267 Blackburn J. said:
"I should think that a court of equity would say that the sum, if recovered by the father, would be a trust fund for the son."
But, as we know now, this was not to be the general rule in such cases. It may be that, if, instead of authorizing John Tweddle to sue the contracting parties in his own name, the document in Tweddle v. Atkinson had authorized him to sue either one in the name of the other, and he had sued his father-in-law Atkinson in his father's name, the result would have been different. I should say here that since I wrote what appears above I have learnt that an appeal to the House of Lords is now pending in the case of Beswick v. Beswick [1968] AC 58 . Until the opinions of their Lordships be known any expressions of agreement or disagreement with anything said in the judgments in the Court of Appeal must therefore be somewhat tentative; but, on the particular hypothesis as to the transaction in the present case which I am now considering, it is not possible to avoid the matter which was argued before us. I shall therefore deal with it as I now see it. (at p501)
29. The question which presents itself at this point is what is the measure of damages for breach of a promise to confer a benefit upon a third party? Take the case supposed above - a contract by A with B under which B is to pay $500 to C. A sues B for breach of contract. There are authorities which say that he could recover only nominal damages, because it is C who has suffered not he: see West v. Houghton (1879) 4 CPD 197 ; Viles v. Viles (1939) SASR 164 ; but cf. Drimmie v. Davies (1899) 1 IR 176 . As Else-Mitchell J. remarked in Cathels v. Commissioner of Stamp Duties (1962) SR (NSW) 455, at p 472 , the cases on this point are "conflicting and unsatisfactory". No difficulty would arise if a statement of Lush L.J., in Lloyd's v. Harper (1880) 16 Ch D 290, at p 321 , could be accepted without qualification and regardless of its context. He said:
"I consider it to be an established rule of law that where a contract is made with A for the benefit of B, A can sue on the contract for the benefit of B and recover all that B could have recovered if the contract had been made with B himself."
But I think we must take it that when the learned Lord Justice spoke of a contract for the benefit of B he was thinking of a contract of which A was a trustee for B - that is to say of a case in which A held his legal rights under a contract as a trustee for B. In such a case of course the question disappears: but the case I have supposed, a contract by A with B that B will pay C $500, is a transaction at law devoid of any equity in C. Yet I do not see why, if A sued B for a breach of it, he must get no more than nominal damages. If C were A's creditor, and the $500 was to be paid to discharge A's debt, then B's failure to pay it would cause A more than nominal damage. Or, suppose C was a person whom A felt he had a duty to reward or recompense, or was someone who, with the aid of $500, was to engage in some activity which A wished to promote or from which he might benefit - I can see no reason why in such cases the damages which A would suffer upon B's breach of his contract to pay C $500 would be merely nominal: I think that, in accordance with the ordinary rules for the assessment of damages for breach of contract, they could be substantial. They would not necessarily be $500; they could I think be less, or more. That is as I see it. I realize that (as Messrs. Goff and Jones mentioned in their work the Law of Restitution and as Mr. Treitel has recently emphasized) there are statements in Cleaver v. Mutual Reserve Fund Life Association [1892] 1 QB 147 (by Lord Esher at p. 153 and by Fry L.J. at pp. 157, 158) which suggest that the promisee could recover not unliquidated damages but the sum which the promisor had agreed he would pay to the third party: but I find difficulty in seeing how this could be so. (at p502)
30. Suppose that A does recover substantial damages for B's failure to perform his promise to A to pay C $500 - the next question is does he recover these damages for himself or for C. Notwithstanding the statements in Beswick v. Beswick (1966) 1 Ch 538 suggesting that he would recover them for C, I do not see why this should be. On the hypothesis of a purely contractual right with no trust attached, why should A hold for C the proceeds of his action? He sued at law for damages he himself suffered, not as the representative of C. C had no right of action. A, not being a trustee of his contractual rights, might, had he wished, have released B from his contract, or declined to sue him for breach of it; or by agreement between A and B the contract could have been varied. C could not have complained. Why then is it said that proceedings brought by A to enforce his legal right give C a right against A when previously he had none? (I leave out of consideration the possibility of a bargain between A and C supported by consideration moving from C.) Of course A, whose purpose had miscarried because of B's breach of contract, might make over any damages he recovered to C: but that would not be because C had a right to them, but because A still wished to give effect to his plan to confer a benefit on him. In a case in which specific performance was an available remedy, A might choose to seek that form of redress against B, and thus obtain a judgment that B pay C $500. But that would not be because A was enforcing a right of C, but because he was enforcing his own right against B by obtaining an order that B perform his contract with him, A. For this reason - and always on the assumptions that there was no trust and that the transaction was as between A and C wholly gratuitous - I am not persuaded that C could force A to seek redress from B, or dictate to him what form of redress, specific performance or damages, he should seek. (at p502)
31. On the interpretation of the royalty agreement now under consideration Coulls, or his executor, could in my opinion obtain an order for specific performance by the construction company of its promise to pay the royalties. This agreement can be regarded as specifically enforceable because of the interests in land involved. That suffices, in this case, but I would be prepared to go further. The decision in Beswick v. Beswick (1966) 1 Ch 538 points out the way and, as at present advised, I would follow it. I do not think it is really a new way, although it is perhaps now more easily seen. It seems to me that contracts to pay money or transfer property to a third person are always, or at all events very often, contracts for breach of which damages would be an inadequate remedy - all the more so if it be right (I do not think it is) that damages recoverable by the promisee are only nominal. Nominal or substantial, the question seems to be the same, for when specific relief is given in lieu of damages it is because the remedy, damages, cannot satisfy the demands of justice.
"The Court", said Lord Selborne, "gives specific performance instead of damages only when it can by that means do more perfect and complete justice": Wilson v. Northampton and Banbury Junction Railway Co. (1874) 9 Ch App 279, at p 284.
Lord Erskine in Alley v. Deschamps (1806) 13 Ves Jun 225, at pp 227, 228 (33 ER 278, at p 279) said of the doctrine of specific performance:
"This Court assumed the jurisdiction upon this simple principle; that the party had a legal right to the performance of the contract; to which right the courts of law, whose jurisdiction did not extend beyond damages, had not the means of giving effect."
Complete and perfect justice to a promisee may well require that a promisor perform his promise to pay money or transfer property to a third party. I see no reason why specific performance should not be had in such cases - but of course not where the promise was to render some personal service. There is no reason today for limiting by particular categories, rather than by general principle, the cases in which orders for specific performance will be made. The days are long past when the common law courts looked with jealousy upon what they thought was a usurpation by the Chancery Court of their jurisdiction. (at p503)
32. Nevertheless I fail to see how allowing a promisee to obtain an order for specific performance by a promisor of his promise to pay moneys or transfer property to a third person can give the third person himself any right to enforce a contract to which he was not a party. The promisee has a choice of remedies. But, unless he be a trustee of his contractual rights, he can, if he chooses, abandon both. On the hypothesis that Mrs. Coulls was not a party to the contract, that the contract was only with her husband, it seems to me that there is a logical hiatus in saying that she could compel proceedings to enforce it. (at p504)
33. The situation thus created does not fit quite neatly into a classification of rights and reciprocal remedies. It suffices, however, to refer to the analysis by Du Parcq L.J. in In re Schebsman (1944) Ch 83 , which I respectfully adopt. The primary obligation of a party to a contract is to perform it, to keep his promise. That is what the law requires of him. If he fails to do so, he incurs a liability to pay damages. That however is the ancillary remedy for his violation of the other party's primary right to have him carry out his promise. It is, I think, a faulty analysis of legal obligations to say that the law treats a promisor as having a right to elect either to perform his promise or to pay damages. Rather, using one sentence from the passage from Lord Erskine's judgment which I have quoted above, the promise has "a legal right to the performance of the contract". Moreover, we are concerned with what Fullagar J. once called "a system which has never regarded strict logic as its sole inspiration": Tatham v. Huxtable (1950) 81 CLR 639 , at p 649 . (at p504)
34. For these reasons I conclude that, even on the hypothesis that Mrs. Coulls was a third person to be benefited but not a party to contract, the answer to the question in the originating summons is still that the construction company is bound to pay the royalties to her, for, whatever difficulties she might have in compelling it to do so, it would break its contract if it did not do so. (at p504)
35. I sum up my opinion as follows: (at p504)
36. The construction company was bound by contract to pay the royalties to Coulls and his wife during their lives and to the survivor after the death of either. (at p504)
37. Whether the contractual promise of the company was with Coulls and his wife jointly or with Coulls alone, the result for the purposes of this originating summons is the same. (at p504)
38. I need express no opinion about the scope and effect of the South Australian enactment corresponding to s. 56 (1) of the English Law of Property Act, 1925. I find difficulty in seeing in it a complete reversal of the rule that only those who are parties to a bargain can enforce it at law. But the question is debatable and it will it seems soon be considered by the House of Lords. There is as yet no authority upon it in this Court, and this case can be decided without making one. (at p504)
39. I do not think that Mrs. Coulls is required to elect between her right to the royalties and the benefit of cl. 7 of the will. I do not wish to add anything to what the Chief Justice has said for that conclusion. (at p504)
40. I would therefore dismiss the appeal in this case, but answer the questions in the originating summons as the Chief Justice proposes instead of as they were answered in the Supreme Court. (at p505)
41. As to the appeals concerning the mortgage: I agree that they should be dismissed. I do not wish to add anything to the reasons for that conclusion which are given in the judgments of the other members of the Court. (at p505)
42. I agree in what the Chief Justice has said about the testator's family maintenance proceedings and the order for costs made therein. I would dismiss that appeal also. (at p505)