#7294 - Actions For Debt

Actions for debt

Debts and Liquidated Sums

“A debt recoverable under an indebitatus account was not and is not now conceived of simply as a cause of action for breach of a duty or obligation. In other words it is a mistake to regard the liability to pay a debt of a kind formerly recoverable in debt or indebitatus as no more than the result of a breach of contract...which the creditor must affirmatively allege and prove” – Young v Queensland Trustees Ltd (1956) 99 CLR 560

Requirements of an Action for Debt

Generally actions for debt only arise upon executed consideration - i.e. performance of the contract by the party claiming payment (e.g. price of goods sold and delivered) but sometimes it may be recovered as a debt/liquidated sum where payable on a fixed day whether or not consideration has been furnished (payment by instalments).
- What amounts to sufficient performance of a plaintiff’s contractual obligations to entitle payment depends on the distinction between entire and divisible obligations and on the doctrine of substantial performance
Entire obligations – ones that must be wholly performed for the plaintiff to be able to entire any of the payment for performance specified in the contract – i.e. performance is a condition precedent to the defendant’s obligation to pay
Divisible obligations – contracts are likely to be divisible where work under the contract and its payment is divided by corresponding segments. Where it is divisible the plaintiff will be entitled to payment for each segment or part of the work fully performed.

Steele v Tardani (1946) 72 CLR 386

Facts: The plaintiffs were 3 Italian internees who had been released from internment and permitted to accept employment from the defendant. The plaintiffs weren’t employed to cut any specified amount but were paid at a price per ton and both were entitled to terminate at any time. The trial judge found that the contract was to cut the wood to certain specifications. He held that the defendant was liable to accept and pay for firewood cut into proper dimension and to pay fair price for other firewood because he had accepted the benefit of making the allowance for the cost of splitting some of the wood to the specifications.

Issue: To what extent is the defendant liable to the plaintiff

Ratio (Dixon J):

The contract in this case is infinitely divisible – for the amount per ton fixed eight shillings is a rate to be applied to the firewood cut into the specifications required by the contract
As such it is impossible for the plaintiffs to recover in respect of timber not split according to the specifications UNLESS there are grounds for treating them as dispensed from the necessity of doing so. To recover under quantum meruit the plaintiffs must show circumstances removing their right to remuneration from the exact conditions of the special contract.
For this purpose it is not enough that the work is beneficial to him merely because the timber is turned into valuable firewood. Furthermore ‘taking the benefit’ is only relevant where it is open to the beneficiary to either accept or reject the benefit of the work (so not so in repair/building contracts – in which case acquiescence has to be inferred)
The evidence showed that all the timber cut, whether or not to specification, was sold by the defendant and thus the defendant must pay reasonable sum for that which he took and sold even though it didn’t strictly comply with the requirements.
Furthermore there was evidence to suggest that his reliance upon the diameter was an afterthought (huge sentence p720)

Latham CJ said that in order to recover, the plaintiffs have to claim upon a quantum meruit which can only be allowed on evidence of afresh contract – on this it is not sufficient that he sold the firewood, and the only way to defeat the claim is not if he allowed the firewood to decay on the ground. But agreed with the second set of evidence of Dixon J.

Legislation

The right to payment for work under a contract not fully performed may be affected by legislation.

Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406

Facts: Under an agreement for hire of an aircraft the appellants agreed to pay $2,200/month payable at the end of each month. On 16^th of February the aircraft crashed and the contract was frustrated.

Issue: What are the appellants liable to pay

Ratio (McPherson J):

Under the Property Law Act 1986 all rents/dividends/periodical payments in the nature of income would be considered as accruing from day to day and the apportioned part of any such rent will only be recoverable when the entire portion of the apportioned part forms part becomes due and payable and not before
Under this section the apportioned part is not payable until the entire portion is due and payable – which would be on February 28^th hence the monthly payments due must be apportionable and due in respect of the period running from the 1^st to the 16^th of February.

Substantial Performance

Where a party has substantially performed his/her obligations under the contract the doctrine of substantial performance may allow recovery of the contract price, less a payment of damages to the other party as compensation for incomplete work.

Hoenig v Isaacs [1952] All ER 176

Facts: The plaintiff was an interior decorator who was employed by the defendant to decorate a flat and provide it with furniture including a wardrobe and bookcase to the sum of 750. The plaintiff claimed to have carried out the work in compliance with the contract and demanded the balance of 350. The defendant alleged the work was performed negligently/unskilfully. The official referee held that the door of a wardrobe required replacement and the bookshelf was too short and had to be remade. He further held there was substantial compliance and the defendant was liable to 750 less loss of remedying defects

Ratio (Somervell LJ):

Fulfilment of every term is not necessarily a condition precedent in a contract for a lump sum (Boone v Eyre [1779])
Contrasted the position of sale of goods (stipulations are conditions if not all performed the party may repudiate) with erection of land (builder can recover nothing on lump sum if work is completed half way through and hard to recover on quantum meruit since nothing can be inferred from the fact that the builder stays on the land)
The referee referred to H Dakin & Co Ltd v Lee as laying down the principle that the price must be paid subject to a set-off/counterclaim if there was substantial compliance – agreed with this. The buyer cannot reject if he proves only the breach of term collateral to the main purpose.
Whether there was substantial compliance is a question of fact and this case was on the borderline – chose not to disturb

Ratio (Denning LJ):

Whether or not entire performance was a condition precedent depends on the true construction of the contract
The defendant claimed that the plaintiff may only recover quantum meruit because he sought to have the goods re-valued (since they were overvalued) important to the doctrines, the starting point is very different
A lump sum contract does not necessarily imply performance is a condition precedent and where the contract provides for a specific sum to be paid on completion the courts lean against a construction that would deprive the contractor of any payment because of minor defects.
The promise is therefore construed as a term but not a condition, and not every term when breached absolves the contractor of a right to pay unless it goes to the root of the contract – but the parties may make entire performance a condition precedent, e.g. in the case of retention money
But here the balance is not to be regarded as retention money which is usually only 10-15%, here it was 50%
Even if entire performance was a condition precedent it was waived because the contractor did not refuse to accept the work but rather entered into possession and used the furniture as his own, including the defective terms – this is a clear waiver of the condition precedent

Order: Appeal dismissed

Bolton v Mahdeva [1972] 1 WLR 109

Facts: The plaintiff agreed to install a heating/hot-water system in the defendant’s home for 560. The defendant alleged the work was improperly done and that the plaintiff had wholly failed to perform the contract. The trial judge held the defendant was entitled to a set of 174.50 for the defects. There were other amounts to be taken into account and judgement was given to the plaintiff for 431.50. The defendant appealed.

Ratio (Cairns LJ):

The question is whether or not the defects in workmanship were of such a character that the plaintiff cannot be said to have substantially performed his contract – both the nature of the defects and the proportion between the cost of rectification and the contract price is to be taken into account
It is impossible to say that the contract was substantially performed – if the heating system was such that it doesn’t heat the house adequately....and if the putting right of those defects is not something which can be done by slight amendment then the contract has not been substantially performed

Ratio (Sachs LJ):

Agreed with Cairns LJ on principle – but not only because the work was shoddy but the general ineffectiveness of it for its primary purpose
The rule of recovery on not substantial performance does not work on a contractor IF only he is prepared to remedy the defects before seeking to resort to litigation to recover the lump sum.

Order: Appeal allowed

In Zemperoni...

#7294 - Actions For Debt - Contracts 2

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