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Decisions of the Superior Courts of New South Wales, 1788-1899

MacDermott v. Smart [1841] NSWSupC 112

land titles - conveyancing - equity - appeal

Supreme Court of New South Wales

Dowling C.J., 10 September 1841

Source: Sydney Herald, 13 September 1841[1] 


            This case had been previously argued by the Attorney-General, the Solicitor-General and Mr. Broadhurst for the plaintiff; and Mr. Foster and Mr. Windeyer for the defendant, and now came on for judgment.

            His Honor said, this case came on for hearing on the 23rd July, and 20th and 21st August last, respectively. The bill prayed that the defendant might be declared to have sold the messuage and premises therein mentioned to one Samuel Farneaux Mann, on account of complainant, and that an account might be taken of the money received by the defendant in respect of the said sale, and that all such money as the defendant might have received on such account beyond the sum of £2,400, might be decreed to be paid to complainant with interest, and that complainant might have such other relief in the premises as the Court should seem meet. On the part of the complainant the ground alleged for equitable relief was, that in the transaction which is the subject of the suit, the defendant was acting as agent for the sale on the complainant's behalf, whereas it is alleged on the part of the defendant that he was abona fide seller on his own account, independent of any fiduciary character. If the proposition affirmed by the complainant be unsatisfactorily established, it is conceded that he is entitled to no relief. Before I go more at large into the subject of the suit, it may be convenient to premise with a precis of the case brought before the Court. The plaintiff, as was alleged, had employed the defendant as an auctioneer, to sell the estate in question, the latter making an advance thereupon in the mean time for £1,500 by notes of hand at short dates; in the event of no sale the plaintiff to return the notes, paying a bonus of £40 for the accommodation. That defendant having represented to plaintiff that no purchases could be found, and plaintiff being distressed for money, was induced to sell the estate to the defendant himself for £2,400, the £1,500 advanced to go in part payment, and the residue to be paid to plaintiff by short bills. That in the mean time, and before the defendant became a buyer on his own account, he had in fact found a purchaser in Mr. Mann, at the price of £3,425, to whom he agreed to sell it, on his own account, before the conveyance to himself, upon a credit for £1,000 of one month, and the remainder at two years, with interest at 10 per cent. The plaintiff did not know of the negotiation and sale to Mann, until after it was effected, but subsequently and with full knowledge thereof, he perfected the sale to the defendant by executing conveyances. The relief sought by the bill, was to compel payment to the plaintiff of the profit ultra the £2,400 made by the defendant in the sale to Mann, on the ground of fraud. The main questions in the cause were - first, whether in fact the defendant could be [considered as] the agent of the plaintiff in the transaction with Mann; and, secondly, whether, assuming that fact to be established, the plaintiff was not now barred of relief in equity, by having executed conveyances to the defendant with notice of the alleged fraud. The facts as they appeared on evidence on both sides touching the primary question of agency, appeared to be these:-- In August, 1837, the complainant, a merchant in Sydney, and Mr. George Robert Nichols, an attorney of the Supreme Court, became joint purchasers of the premises mentioned in the bill, situate in George-street, at the price of £2000; in January, 1838, they agreed to sell the property and divide the profits; application was made on the subject in the early part of that month to the defendant, then carrying on the business of an auctioneer; the complainant was at this time much in want of money; it is the practice of Sydney auctioneers to advance money on property entrusted to them for sale; in the interview with the defendant the property in question was described as the property of the complainant; Mr. Nichols was no party to the present bill, but had executed a release of all supposed interest in the subject of the suit, and was examined as a witness. According to his recollection of the conversation with Mr. Smart, there was a talk of cutting up the land into three lots and selling it by auction. The complainant was to have an advance of money on the security of the title deeds in the mean time; no final agreement was entered into at that time, the defendant saying that he would employ Mr. Rogers, the attorney, to draw it up, as to the advance, and something was said about a commission and a bonus in case no sale took effect. Mr. Nichols understood the agreement was to be reduced into writing by Mr. Rogers; in about a week afterwards, Mr. Nichols being in the complainant's office, the defendant came in, and the complainant asked him if there were any offers for the land, whether it was likely to sell? and the defendant said the times were bad, the money market was in a bad state, and he did not think the land would bring as much money as the complainant supposed; the complainant asked him the reasonwhy he had not advertised it and he said he did not think it would sell. At this time the complainant was much in want of money or negociable bills. On the subsequent sale of the land to the defendant by the complainant, the latter and Mr. Nichols realized a profit of £400, which they divided between them; the defendant in fact advanced to the complainant £1500 by his notes of hand at three and six months, which were paid at maturity.

            His Honor then, at considerable length, went through the whole of the evidence, and concluded as follows:--

            I have now gone, I fear with too much prolixity, into a detail of the facts disclosed in the detailed evidence of the different witnesses. Their evidence is spread over a great space, and has involved the process of a careful analysis. In judging of the effect of the evidence I have endeavoured to place myself in the position of a jury called upon to find facts and draw conclusions resulting from various detached and minute circumstances. I have weighed the evidence of Mr. Nichols with a cautious observance of the fact that he was originally interested, and that he is now the plaintiff's solicitor, and that in this and other transactions he has, it is acknowledged, no friendly feeling towards Mr. Smart. I have borne in mind also the infirmity of Mr. Rogers' memory, touching the content of the important memorandum of the 8th January, 1838; and I have remarked upon the somewhat singular circumstance, that the absence of that document, traced as it was to the possession of the defendant, immediately previous to the filing of this bill, has not been satisfactorily accounted for. I own, however, that in the review of the whole case, I have attached more importance to the evidence of Mr. Mann and Mr. Hughes, as disinterested witnesses, than to the evidence of the other gentlemen examined, who, however respectable and honourable as private gentlemen, have had their testimony observed upon with some degree of asperity at the Bar. Applying my mind to the whole of this case, with an anxious desire to do justice between the parties, I am constrained to find, that the defendant was employed by the plaintiff as agent for the sale of the property on the plaintiff's account, and for his advantage; and that violating his fiduciary duty, he abused his trust, by clandestinely selling the estate on his own account and advantage to the prejudice of the plaintiff. It may be that the plaintiff asked no more than £2400 of the defendant for the property, and would have been content in the first instance with that sum; but the question is, would he have been content to take it, if he had not been lulled into the ssurance, when distressed for money, that Mr. Smart could not find any other purchaser, and that he had tried every one that was likely to purchase? Would he have been content to take it if he had been told on Saturday, the 13th January, that Mr. Smart had been previously in private treaty for himself with Mr. Mann, who was prepared to give £3,425 for the property, with a prompt payment of £1,000 within a month, and the rest in two years? These are the questions in this cause. It is the withholding of this information on the part of Mr. Smart, whose fiduciary character remained undetermined, at the time he contracted with Mr. Mann, which constitutes the gist of the fraud, and which is properly within the cognizance of a Court of Equity. It is not necessary to consider the question whether an auctioneer may not himself, under circumstances, purchase property originally entrusted to him for sale. It was once indeed, held, that an auctioneer may buy property he is employed to sell, but this doctrine was much questioned by Lord Eldon, who expressed a strong opinion against the validity of such a sale. (Anon. 15th January, 1840. 1 Mad. Ch. P. 113.) But the principle of my decision is, that the connexion between the parties, as principal and agent, was not clearly dissolved at the time the defendant became a purchaser of the estate, and his fiduciary character not ended when he dealt with Mr. Mann. It is a general rule in a Court of Equity, that he who bargains in matters of advantage with a person placing confidence in him, is bound to show that a reasonable use is made of that confidence. This rule applies to trustees, attorneys, or any one else. (Per Lord Eldon, Gibson v. Jeyes 6 Veg. 278). This is founded on considerations of public policy, in order to preserve and enforce the confidence reposed in an agent, and to guard against the temptations to a lapse from the strictest integrity. The same principle is laid down (Exparte Lacey, S. B. 626, Fox v. Macreth, Bro. C. C. 400, Webb v.Rorke, 2 Sch. and Lef. 661. Although there may be no general rule that a trustee to sell shall not be himself the purchaser, yet he shall not thereby gain profit to himself. If, therefore, a trustee to sell purchases himself, and afterwards sells at a profit, he shall be decreed to account for that profit with costs. (Whichcote v. Lawrence, 3 Ves. 739), In Exparte Bennet, 10 Ves. 380, the general principle was carried to a great extent. There the Solicitor to Commission of Bankruptcy was employed by a bona fide purchaser, General Harris, to purchase the estate, and it was held that he could not purchase it for himself or for another, In Hunter v. Atkins, 3 Mylne and Keene 135, the Lord Chancellor thus Mylne and Keene 135, the Lord Chancellor thus defines the rule applicable to questions of this nature:- "I take the rule to be this; there are certain relations known to the law, as attorney guardian, and trustee; if a person standing in these relations to client, ward, or cestuique trust, takes a gift, or makes a bargain, the proof lies upon him that he has dealt with the other party, the client, ward, &c., exactly as a stranger would have done, taking no advantage of his influence or knowledge; putting the other party on his guard, bringing everything to his knowledge which he himself knew. In short the rule rightly considered is, that the person standing in such relation, must, before he can take a gift, or even enter into a transaction, place himself exactly in the same position as a stranger would have been in, so that he may gain no advantage whatever from his relation to the other party, beyond what may be the natural and unavoidable consequence of kindness arising out of that relation." Applying this rule to the present case, can it be said that the defendant has not derived an undue advantage from his situation, in the absence of any severance of his connection with the plaintiff as an agent for the sale? He has concealed facts which the plaintiff ought to have known, before he was induced to conclude the bargain with himself. This is the principle on which the Court is [constrained to act in the] present case; indeed, the principle of the numerous cases cited, as applicable to the facts of this case when established, were not controverted, and it is scarely necessary to cite them at large. It is sufficient barely to mention that Exparte James, 8 Ves. 337; Chalmers v. Bradley, 1 Jac. and Walk. 51; Pratt v. Backer, 1 Jun. 1;Huguenin v. Basely, 14 Ves. 300; Whitcomb v. Minchin, 5 Mad. 91; and many others, establish the searching doctrine upon which Courts of Equity will enforce duties of imperfect obligation between man and man in matters of plain honesty and good conscience. On the whole, therefore, in this anxious and somewhat embarrassing case, I am of opinion, first, that whether the defendant was or was not employed to sell by auction, his fiduciary character has been made out, and consequently that in Equity the sale to Mr. Mann must be taken to have been effected on account of the complainant; and secondly, that under all the circumstances, the subsequent execution of the conveyance to the defendant does not amount to a confirmation. On these grounds I must pronounce a decree in term of the prayer of the Bill with costs, but I think the Master, in taking the account, may be restrained from allowing interest upon the money which the defendant is called upon to refund. I would, however, add, that this decision does not import the imputation of a corrupt motive in the transaction. It aims only at the correction of a too keen desire on the part of the defendant to make a favourable bargain for himself, under too tempting opportunity of turning the transaction to speculative account. In conclusion, I cannot but express my admiration of the ability and learning displayed at the Bar in the discussion of a case of considerable difficulty, and in this colony of some novelty. I persuade myself that this decision will have a salutary effect in awakening attention to the obligations and liabilities of persons so frequently called upon in this Colony to assume a fiduciary character for the benefit of others.

Dowling C.J., Burton and Stephen JJ, 29 October 1841

Source: Australian, 30 October 1841

            Before their Honors the three Judges.

            In the case of Macdermott v. Smart, which his Honor the Chief Justice decided in favour of the plaintiff, on the 10th September, the defendant Smart appealed against that decision.

            Mr. Foster and Mr.Windeyer appeared for the appellant, and the Attorney-General, the Solicitor General and Mr. Broadhurst for Mr. Macdermott.

            The petition of the appellant, the bill filed by the plaintiff, and the defendant's answer, together with the cross bill, and answers thereto, were read, and also, the evidence given on the trial, together with various letters and other documents connected with the cause.

            The grounds of the appeal against the decree of his Honor the Chief Justice, as set forth in the petition to the Judges by Smart, are as follows:-

            "That your petitioner conceives himself aggrieved by the said Decree, inasmuch as it appeared by the documentary evidence in the cause that the account given by your petitioner of the arrangement between himself and the said complainant, was the correct one, and that the said complainant's account thereof was altogether incorrect. That there was no positive evidence sufficient, in a Court of Equity, to weigh against the direct oath of your petitioner, purging himself of the fraud imputed to him; that there was no evidence of any kind given by competent witnesses of the fiduciary employment of your petitioner, suggested by the said complainant. That the only witness who spoke to the contents of the agreement between your petitioner and the said complainant, not only did not establish the said complainant's version thereof, but directly proved that it did not contain any engagement of your petitioner as the auctioneer of the complainant, as contended for on his behalf; that the said complainant neither proved the agreement suggested in his bill, nor gave any secondary evidence thereof; that it appearing by the evidence that George Robert Nichols, an attorney of this honorable Court, was a joint proprietor of the said premises with the said complainant, and jointly interested with him in the result of the said suit up to the time of hearing, ought to have been made a party to the bill; that the said George Robert Nichols was improperly admitted to give evidence against your petitioner; that it appeared in evidence that the said George Robert Nichols and the said complainant had improperly, and taking advantage of the fiduciary situation of one or both of them, obtained the premises in question, and did not therefore come into court with clean hands; that the evidence in the cause not only shewed the said complainant to have been well acquainted with your petitioner's negotiation and sale to the said Samuel Furneaux Mann after it was effected, and to have perfected the sale to your petitioner by executing the conveyances, but that both he and his professional partner well knowing all the facts, and their rights under them, urged on and assisted in the sale and conveyance of the premises by your petitioner to the said SamuelFurneaux Mann on divers occasions, during a period of about twelve months, subsequent to the sale thereof, to your petitioner; that your petitioner apprehends that, supposing there was sufficient evidence, in a Court of Equity, to fix upon him a fiduciary character in his dealings with the said complainant, there was a still greater amount of evidence, and of the least exceptionable description, to bar the complainant having the relief he sought; that your petitioner apprehends that there was no such satisfactory evidence in the cause as could fix a defendant on Equity with a fraud, and that, in the absence of such evidence, he was entitled to a Decree in his favour; that your petitioner conceives himself further aggrieved by the said Decree, in this, that the main fact of his fiduciary employment being, at all events, matter of contest and in dispute on the evidence, was not so established as to enable a Court of Equity, which cannot decide disputed matters of fact to deal with it.

            Your petitioner, therefore, appeals to your Honors from the said Decree, and humbly prays that the cause may be heard before your Honor, and that the said Decree may be wholly reversed and the plaintiff's bill dismissed, with costs; or, in case your Honors shall not be pleased wholly to reverse the same, then that the said Decree may be altered, or varied in such manner as to your Honors shall seem just; and that, in the mean time, all further proceedings in the said cause may be stayed."

            After the reading of the various documents and papers, above referred to, the counsel were heard in support of the appeal. The speeches occupied the Court until after three o'clock, when the Attorney-General suggested an adjournment.

            Their Honors concurred in the expediency of such a course, as there were three counsel to hear against the appeal, and then the reply.

            The Court was accordingly adjourned to Friday next.

            In the mean time we shall defer giving a report of the speeches of Mr. Foster and Mr. Windeyer, until after the others shall have been delivered.

Dowling C.J., Burton and Stephen JJ, 5 November 1841

Source: Sydney Gazette, 6 November 1841

Before the three Judges in Banco

            On this case being called, the Attorney General rose and said he begged leave to express his sense of the kindness of the court in postponing the further hearing of the case until to-day. He thought it was not requisite to detain the court with any remarks upon the appeal itself, and therefore he would not trespass longer on the consideration of the court than the importance of the case demanded. The appeal was in fact, little more than a repetition of the previous proceedings, mixed up with a little misrepresentation, some illiberal criticism, and concluding with an unprovoked libel on Mr. Nichols. He should proceed, therefore, at once to the manner in which his friends had conducted the case, and to what was stated by his Honor the Chief Justice in the decree which he had made. The first question was, whether Smart had been employed as an agent for the sale of the land? and the second, whether Macdermott was barred from all relief by furthering the execution of the conveyance to Mann? The main question was as to Smart's fiduciary character, either as an auctioneer or an agent in any other manner, and which he denied, alleging that he was a purchaser. In coming to a decision on that question, it was manifest that the document which had been so often mentioned was of the greatest importance; that document would, no doubt, have served as a torch to light them through the intricate crevices of the case. That document had been traced, into the possession of the defendant, and upon him alone rested the blame of its non-production. As to the incompetency of Nichols, as a witness, the other side had contended that he ought to have been made a party to the suit; but that he submitted was not the case; for, in the first place, it was unnecessary that he should be so; and, secondly, he could not; it was impossible. The fee simple of the property was in Macdermott alone, and though Nichols might have a subordinate interest, yet he could not contract. The learned gentleman then quoted a variety of cases in confirmation of his argument, that Macdermott was the only party who could contract. The bill was founded on the contract with Macdermott alone, and he alone was entitled to sue. Another objection taken by his friends, was, that the release which Nichols had executed, did not remove his incompetency as a witness in the suit. The only thing to be considered, was, whether he had any interest; but what interest he had been possessed of he had surrendered, and he was therefore a qualified and competent witness. The court would observe that these proceedings were not commenced until December 1839, and he thought it was quite evident that it was only about that time that Macdermott first became acquainted with the sale to Mann. There was nothing positive to show, that he knew of it prior to the commencement of the action for slander. Macdermott had commenced by asking for the document, whichshewed, that when he commenced the suit, he was anxious to obtain it, in order to set it forth in his bill, and in order to shew what was the answer to his application, he would read the letter of Mr. Rogers, in answer to that of Mr. Nichols. The learned gentleman then read the letter, in which Mr. Rogers said that he had left the document along with Macdermott and Smart, when it was first drawn up. He (the Attorney General) prayed the attention of the court to that letter, and he would ask what must be their opinion of Rogers, when there was abundant proof from his own evidence, that he had the document in his own possession on the 19th of December, 1839, which was the very date of the letter he had just been reading. Rogers' recollection of the contents of this document was such, that he only knew it to be a memorandum of deposit, and could only recollect the contents of it from Smart's versions of it. His friend had spoken of the document as being unable to support the declaration; but there was no proof of that assertion; and the reason why they did not make any use of it in their action for slander, was, because if they had produced it, then Macdermottwould have had the opportunity of setting it forth in his bill. The action for slander was not abandoned till January, 1841, though an attempt had been made to show that it was abandoned long before. The whole transaction, from beginning to end, had been only to throw dust into the eyes of Macdermott, and frighten him if possible from proceeding. There was another topic upon which his friends had touched, and that was, that the case might be sent to a jury by ordering an issue; but that was not a case that could be sent to a jury; and, even if it was, what evidence more could a jury have than that which had already been before the Court? There might be other topics worthy of attention, but, as he was to be followed by two learned colleagues, he would not trespass upon the time of the Court any longer; the case was however one of great importance, particularly to his client, who had passed through a fearful and expensive ordeal, which none but a man of independent wealth and great moral courage could have endured. The case had taken up four days in the first hearing, and since then there had been an intermediate case, in which his client had been arraigned on a charge of perjury, no doubt got up for the purpose of influencing this appeal; but of that charge he had been acquitted; he had gone through it with honor; he had received the congratulations of his fellow citizens; and the Judge who tried the case had told him he was happy at the result. His home, however, had not been made desolate; he was not sent forth into exile or to prison, branded with the foul name of perjurer, as Smart would not have cared if he had been; and he (the Attorney General) now implored the Court not to deprive him of the advantage which the decree would give him; a decree made after four days' argumentation; a decree which, in his conscience, he believed to be a just and righteous one, and which in the Courts at home would command universal deference.

            The Solicitor General then rose and said, after the manner in which the Attorney General had gone through the case, his labour was considerably shortened. There had been clearly made out a concealment of facts, and he trusted the court would keep that in view. His learned friends had never met that point, but had attempted to argue Macdermott out of it by points of law; they had first talked about Nichols not being made a party to the suit; then they had objected to his evidence; and now they had come to the conclusion that the case ought to be sent to a jury. The document which was said to be lost might, had it been produced, have shown the character in which Smart was employed, and it was for his friends to produce that document. That document did not contain all the terms stipulated upon betweenMacdermott and Smart. The document itself had been asked for, but it never was produced; and if it was, as they now wanted to make out, a document which would have destroyed Macdermott's case, they ought to have produced it. In whatever character Smart had been employed he had by a concealment of facts inducedMacdermott to sell him property for £2400, for which he ought otherwise have obtained, and for which Smart did obtain £3400; and was not Macdermott entitled to relief? It was something extraordinary that his friends should be able to produce the memorandum of the contract and not of the agreement; it was, however, clear that that document was in existence long after 1838. The learned gentleman then read the evidence of Mr. Rogers, and commented upon it at some length and with great severity, and said it was such as could not be relied upon; not that he imputed any wilful motive to Mr. Rogers, but that he believed his impressions of the transaction were not correct. His friend Mr. Windeyer had stated that the defendant denied all the allegations contained in Macdermott's bill, and that his answer was fully corroborated by the evidence, while Macdermott had not proved anything; but he (the Solicitor General) thought the evidence was sufficient to show that the property had been put into Smart's hands for sale, without taking into account the evidence of Nichols at all. - Mann's evidence was, in his opinion, sufficient for the purpose, and he would read it to the court. That evidence, he contended, was a positive contradiction of Smart'sanswer, and was moreover corroborated by a part of the evidence of Hughes. But he would now call the attention of the court to some of the absurdities and inconsistencies of Smarts answer; from which it was quite clear that the statements contained therein were not to be depended on, they were too inconsistent and absurd to obtain credence. The learned gentleman then commented on the various points in Smart'sanswer, concerning the confirmation of the fraud, that was sought to be fixed on Mr.Macdermott, because he had joined in the release to Mann; but Macdermott could not have sought relief until the property had been so conveyed as no fraud would otherwise have existed. To confirm a fraud the acts must amount to a release from the fraud, which they did not in this case. With respect to the evidence of Nichols, the case was sufficiently established without him, and if it had been left out, would have made no difference. In the 3rd of Chitty on Appeals, the Lords had expressed their opinion that an appeal could not be founded or any evidence being rejected, unless such evidence was material in the case, which Nichols' was not.

            Mr. Broadhurst then followed on the same side; respecting the necessity of Mr. Nichols being a party to the suit, he contended that Mr. Nichol's claim was grounded on his own assertion alone, and Mr. Macdermott might at any time disprove this. Had Nichols then been made a party and his claim contested, it would have involved Smart in a controversy with which he had nothing to do. As he was not a necessary party to the suit, he was not disqualified as a witness, as the interest he had in the suit did not disqualify him. The release to him, was a sufficient bar to the claim of Mr. Nichols. In the case of Walton v. Shelly, quoted in Gressley on evidence, Justice Buller had given it as his opinion, that the competency of a witness should go to his credibility, and no objection could be made to him, unless he was interested in the result of the case, or could turn the verdict in some way to his advantage; on the question as to whether the defendant was entitled to any equity, the prayer of the bill was not for relief against the plaintiff, specially as an auctioneer; but it was a prayer for relief generally, and under the prayer for general relief, the party was entitled to whatever relief the court might deem the case required. Lord Reedsdale had held that the shifts of fraud were numerous, but that equity could reach it under any form. With respect to the confirmation of the fraud by Macde[r]mott, he contended thatacquies[c]ence and confirmation were different. The learned gentleman then quoted a number of cases in support of his argument.

            The court adjourned for the appellant's reply on the first Friday after term (next Friday week).

Dowling C.J., Burton and Stephen JJ, 19 November 1841

Source: Australian, 20 November 1841



            After the Chief Justice had been occupied for sometime in hearing sundry motions in Equity, their Honors Mr. Justice Burton and Mr. Justice Stephen took their seats on the bench, and proceeded to the business specially fixed for the day.

            Macdermott v. Smart. - Mr. Foster replied to the counsel who appeared against the appeal in the above case on Friday week last. The case had already occupied much of their Honors' time, and he was unwilling to detain them longer, but the case was one of the highest importance to his client. If the decree which had been made in the case by his Honor the Chief Justice, were confirmed, no one who thought at all about the matter could form any conclusion other than that the defendant Smart had been guilty of perjury. Such being the case, he hoped that unless their Honorswere satisfied that the facts alleged in the plaintiff's bill were clearly made out, they would hesitate and consider well before they decided upon affirming the decree. The other side had found great difficulty in establishing the fact that Smart was employed as an auctioneer on the 8th January, 1838, and the Attorney General had quoted a great many cases to shew that the onus probandi laid with Smart. His friends the Solicitor General and Mr. Broadhurst had gone further; they said that this was not the whole of their case, that it was not necessary to establish Smart's employment as an auctioneer; they relied on other points, such as the alleged concealment of facts by Smart, but he submitted that unless the other side succeeded in clothing Smart with the fiduciary character of auctioneer at the time, at which he disposed of the property, there was nothing either in law or in equity, binding him to acquaint Macdermott with any bargain, between himself and a third party, such as Mann. That allegation in the bill which to him appeared the most important, had not been substantiated. True that the bill prayed for general relief, but then they must adhere to the facts set forth in the bill; and then it was alleged, that the property had been put into Smart's hands for sale by him as an auctioneer, and that they could not now go away and clothe him with any other fiduciary character, than that of an auctioneer, nor could they even interrogate him as to whether he had been employed in any other fiduciary character. The bill charged that Smart had been employed as an auctioneer, and unless Macdermottsubstantiated this allegation, his case must fall to the ground. They had come prepared to dispute the allegation, and it was for Macdermott to establish it if he could. Nichols' evidence on this point, however, could not be received, as he was prepared to shew, and, indeed, it would be contrary to law to receive it. But even if it could be, if it were received, and that evidence contained anything which should induce the Court to affirm a decree in direct contradiction of the statement, on oath, by the defendant, this evidence would be of no benefit to the other side. Mr. Rogers was the only person present when the property first came into Smart's hands; true, that there was then drawn up some document or agreement, which was not now forthcoming, and a great deal of prejudice had been got up on this account; such however should not have been the case; and for himself he believed, that had the document been produced it would not have had the slightest effect, either one way or the other. Mr. Rogers' account of it was, that it was a mere memorandum of deposit of deeds to secure an advance made upon certain properties, and it was clear that it could have been nothing else. If its contents could in any way have been beneficial to Macdermott he would have had a copy of it at the time. The document could have been nothing more than a memorandum, shewing that Smart had advanced money, and that the deeds had been placed in his hands to secure it. Nothing was said of the document in Macdermott'sbill; his friends had not interrogated him upon it. The Attorney-General had contended that it was for Smart to prove that he was not employed as an auctioneer, and had certainly quoted a number of cases to support this position, and he, Mr. Foster, admitted, that if a trustee or any other person holding a fiduciary character purchased a property on which he had any influence, by virtue of that character, then indeed, he must prove that he had not taken any advantage of his position; here however, the other side had failed to fix Smart with any fiduciary character, and until that was done, he could not be called upon to prove that he was not so entrusted or employed. He had carefully gone through the evidence, and it certainly appeared to him, that Mann's evidence went much further to support Smart's case, than it did to supportMacdermott's. And although Nichols' evidence amounted to very little, that little was rather in favour of Smart than of Macdermott. The arguments of his learned friend, as to Macdermott's putting £500 into the pocket of a stranger instead of into his own, were perfectly puerile and absurd in a case like this. Such inducements were held out to induce persons to purchase every day. No proof whatever had been adduced to prove that the property had been put into Smart's hands for sale by auction; the only evidence attempted to be brought to bear upon that point was Nichols, and it was far too vague to be relied upon, and the statements which had been made by Mann were so various, that they plainly shewed how little reliance could be placed on any one's recollection of what had passed in conversation; so far, however, as those statements went, they rather supported Smart's case than Macdermott's. The learned counsel went over the same ground as was taken in support of the appeal, contending that at the utmost the case ought to have been sent to a jury; that Nichols was not a competent witness, but should have been made a party to the suit. The learned counsel submitted that the decree should not be affirmed, but that their Honors should direct an issue to be tried by a jury in the terms of the petition of the appellant.

            Their Honors took time to consider, and the Court adjourned to Thursday next.

Dowling C.J., Burton and Stephen JJ, October 1841

Source: Sydney Herald, 30 October 1841


            BEFORE  Their Honors Sir JAMES DOWLING Chief Justice, Mr. JusticeBURTON, and Mr. Justice STEPHEN. - On appeal.

            The Clerk of the Court having read the petition of appeal, and the bill and answers in the case, which disclosed the particulars with which the public are already well acquainted, -

            Mr. FOSTER rose to address the Court. He said he was sure their Honors could perceive the importance (not merely in a pecuniary point of view) of this case to the defendant, but also to his moral standing; and that if their Honors thought that it should be rescinded, they would give a rehearing to the defendant before they confirmed the decree which convicted him of fraud. The chief issue to be tried in the present hearing, was, whether the defendant had been employed by McDermott as an auctioneer to sell the property, which was the subject of the suit. But before this matter was discussed, there was a preliminary point to be settled. In Cooper's Chancery Practice, and other authorities in Equity, it was laid down, That in order to do full and complete justice among parties, all who are in any manner or degree interested in the result, must be made either plaintiff, or defendant, in the suit. Nichols, the attorney of Mr. McDermott, ought to have been made a party in the present case, for he had sworn that he was interested in the result of the suit, and if Mr. McDermott had died, or the proceedings in the suit had been discontinued, and Mr. Nichols had subsequently brought an action against Smart, how could they have defended the action? Mr. Foster contended that on this ground alone, they were entitled to have the decree which had been made in favor of McDermott reversed. It was clear that Nichols not having been made a party, could not be bound by the decree, and that he ought therefore to have been a part for this purpose alone. But independently of this objection, it was clear there was no sufficient evidence of fraud against Smart, to justify the decree which had been made. The great matter for enquiry was, what had passed on the 8th day of January, on the visit of Smart t[o] Mr. Rogers; how much prejudice had been excited against Smart in consequence of the non-production of the instrument which contained the particulars of the agreement which had been come to between Smart and M[c]Dermott.  It was in evidence on oath that that instrument was lost. That being, so secondary evidence was a[d]missable of the contents of the paper. Mr. Rogers in his evidence, a[n]d on the production of the book containing the memorandum of the transaction had distinctly said, that the fifteen hundred pounds had been advanced by Smart, on the property conveyed to him for securing the sum lent. With the exception of this, there was no evidence either the one way or the other, whether the transaction was as above described; or as alleged by McDermott that Smart had merely been employed as an Auctioneer by [Mc]Dermott, to sell the property on account of the latter. Smart, in his answer, had sworn that he was not employed as an Auctioneer; this under some circumstances might not have great weight as being the evidence of an interested party, but Smart in this point was not contradicted by one single witness and therefore there was no reason for disbelieving his solemn asseveration. But if the paper lost had rally been of such very [g]reatimportance to the complainant, why had he not in his bill interrogated on this point; not only was this not done, but the bill throughout made not the least mention of the instrument.

Mr. Justice STEPHEN - Unless the complainant had been aware, at the time of drawing the bill, of the loss of the instrument, it was not very likely he would inter[r]ogate about it.

Mr. FOSTER resumed, and in reply to his Honor's objection, said, that if the paper had been of such importance towards establishing the complainant's case, surely more reference in the bill would have been made to it. But supposing Mr. Smart had been employed to sell [as a]n auctioneer, how was it, that the property had never been [?] for the purpose ??] though Mr. Nichols, in his evidence, had said that Smart was only to be an auctioneer in the business, he (Mr. Foster) thought that since it appeared, that there had been some talk about having another auctioneer, Mr. Nichols might have misapprehended what passed on the occasion. Mr. Foster contended that even if a better case had been made out against them, they were still entitled to an issue to try the facts; before the decree of fraud should be substantiated against them. But even if their Honors should not agree with him (the learned gentleman) in this, he, the learned council still contended that the conduct of McDermott had been such since the transaction of which he now complained, that he was precluded from now appealing to Court of Equity. After the deception admitting it for the purpose of the argument to be one, he McDermott had, acting under the professional instructions of Mr. Nic[h]olsthe attorney, conveyed to Smart and could not now revoke what he had don[e] with his e[y]es open and with professional assist[a]nce to advis[e] him as to what he was about. Several authorities were cited in support of this [p]osition, among others, the case of a man who was caught in bed with his neighbour's wife when the husband rushed in and dragging the offender to an adjoining r[oo]m ex[t]orted from him, at theswor[d]'s point, a p[rom]isso[r]y note for £[?]00. When the note became d[ue] it was first renewed and s[u]bsequ[e]ntly th[e] p[a]rty who had given it executed in its stead, to the husb[a]nd, a bond for the same amount [u]pon t[h]e m[att]er afterwards coming before Lord Chancellor Cowper on the validity of the bond, his l[o]rdship decided that al[t]hough the original note having been given by a party und[e]r duress was v[o]id yet the bond having b[e]en af[t]er[w]ards execut[e]d by the same party, when he wasperf[e]ctly free to ac[t] or refrain a[n]d fully acquainted w[i]th his rights, the bond must be allowed to have effe[c]t Mr. Fos[t]er c[o]ntended that [the] case ci[t]ed w[a]s i[n] p[o]i[n]t with the pre[s]en[t]. M[c]Dermo[t]t bef[o]re conveying to [S]mart k[n]ewa[l]l the facts - N[ichols], hi[s] adviser a[t] the same time knew all the l[a]w, and by p[u]ri[t]y of r[e]as[o]ning with what h[a]d be[e]n advan[c]ed by Lord Chancell[o]r Cowper. McDe[r]m[o]tt cou[l]d not go ba[c]k to any a[l]leged illegallity, o[f] which h[e] had or might have complained before th[e] conveyance by which such ill[e]galit[y] w[a]s waived.

            Mr. WINDEYER followed on the same side and said that he would first address himself shortly to the preliminary objection, which Mr. Foster had before advanced. Mr. Nichols had b[e]en [a] partn[e]r in the matter in question with Mr. McDermott, and therefore, in the first place he ought to have been made a party to the bill; and in the next place, not having been a party, his evidence should not ha[v]e been taken, for his [p]artner M[c]Dermott, in the suit. And as to the release of Mr. Nichols, which had been spoken to what was it? It set out [t]hat [a] su[i]t in equity w[a]s p[e]nding, and that in consideration of £200, Nichols sold to McDermott, his (Nichols') chance of benefit from the anticipated result of the suit, and by this process thought to make himself, Mr. Nichols, a pure and competent witness in the cause. Where a witness was produced, who was shewn to be a partner with the defendant, he was rejected, although a release was offered by the defendant and although the witness proffered would have given evidence, which would have made himself exclusively liable. If the de[f]endant's Counsel had been aware of Nichols's interest, they would of course have taken care that he [s]hould have been a party. But the knowledge of his interest, only coming out in the course of the cause, they, the defendant's advisers, had of no time in which to make him a party. The defendant's case had on that account been much damnified and if they had known before the t[r]ialwhat they knew after it they would of course have taken care to have prepared their [e]vidence accordingly. But even looking at Nichols's evidence, what did it amount to? In no point did it positively contradict the evidence of Smart in his answer. For Nichols would not positively swear, that the property was to be sold by auction; he merely said that "something was said about a sale by auction"; in this, Nichols's evidence w[as] perfectly consistent with the terms of Smart's answer; for he had said something had passed about selling through the agency of some other auctioneer, when the property w[a]s cut up into allo[t]ments.  Then, how had the complainants proceeded to prove their case? First, they had put Mr. Johnson into the box to prove the notice to the defendant to produce the agreement, which had been lost; and that not being produced, Mr. Rogers is then placed in the box, to give secondary evidence of its contents; what did his evidence amount to? He said that the document in question was merely a memorandum of a deed of grant deposited with Mr. Smart, to secure an advance of £1,500. If the document which had been so much discussed, had been of such consequence to the complainant's case, as since its loss, it had by the complainant, been asserted to be, how was it, that it had never been mentioned in the b[i]ll?

            Mr. Justice BURTON. - I believe there is no allegation in the bill that the terms on which the property was to be sold, had ever been reduced into writing.

            Mr. WINDEYER - Not a word, your Honour; and nothing would be more likely than that if the terms had been set out in the document, some account, or at any rate, some reference to that document, should have been made in the bill of the complainant. The complainants had many books before them, but not in one of them would it be discovered that Mr. Nichols (interested as a partner as he was) should not have been joined as a complainant. Mr. Nichols had proved that about six months before, they, (himself, complainant, and McDermott) had bought the property for £400 less than they sold it for to Smart; - that being pressed for ready money, they went in company to Smart's - it might have been the intention of the parties to sell it by public auction, and for the sake of the profession, he (Mr. Windeyer) thought it likely, that what Nichols and McDermott had been discussing before seeing Smart, he (Nichols) might have suffered, had become the subject of discu[s]sion, when talking to Smart himself. But how strange was the evidence of Mr. Nichols in other points, subsequently when seeing Smart in his office, al[t]hough he (Nichols) knew there had been no advertisements and no preparations for the sale, he yet puts the extraordinary question: Well, has there been any bidders? Mr. Nichols had been called on to prove the employment of Smart as an auctioneer, but all he had ventured to say on oath was, that something in the interview with Smart had been said about a sale by auction; but merely "something had been said about a sale," was not evidence to convict Mr. Smart of fraud. Where was there any writing of Mr. Sm[a]rt's, contradicting his allegations in his answer? There was nothing on which could be founded an indictment for perjury. Then look how those allegations of Smart were fully borne out by Mr. Rogers, called by the counsel of the complainant, as their witness. Mr. Rogers distinctly swore that the document lost was merely as described by Mr. Foster;furtherthemore, there was the memordandum of the transaction in Mr. Rogers' book; a book which Mr. Rogers had not before him when he swore to the fact; but when this book containing the memorandum is produced, at the request of the complainant's counsel, it is found in the memorandum alluded to (made at the time of the meeting of Nichols, Smart, Rogers, and M[c]Dermott), that Mr. Rogers' evidence previously given, is fully borne out, on the production of the memorandum itself. Then, as to Mann's evidence, Mann merely said this, that he, Smart, had said in his (Man[n]'s) hearing that he, Smart, had the power of purchasing the property himself; and, further, that Hughes had gave to him, Mann, and on the part of McDermott had offered to him (Mann) the property for the price of £2,400. [T]his sum was the very same as that which had been offered by M[c]Dermott. Mr. Hughes had confirmed the same story M[a]nn tells Hughes when he calls, that he (Mann) has already purchased the property of Smart. Hughes returns to McDermott complaining that he had been sent on a fool's errand, at the same time informing the latter of what Mann had said: upon this, McDermott exclaims, "then I'm done, by God." This, according to a familiar interpretation, might be considered by many to mean that the speaker had been cheated; but at the same time it might be fairly presumed to express the annoyance McDermott felt at Sm[a]rt having found [so much more liberal] a purchaser [than he] (McDermott) had found in selling to Smart. Then the evidence of the witnesses being looked at, establishing that when it was found that Smart would have a difficulty in conveying to Mann without his M[c]Dermott'[s]) clearing up some objections made to the title, Mr. Norton sends to M[c]Dermott for this purpose: McDermott complies, and the conveyance thus given by McDermott's own assistance, after the same party had complained of being done, was fully effected by Smart to Mann, afforded as strong a case of abandonment of any right of complaint, supposing it had existed, as he the learned Counsel, had ever met with; and he, (Mr. Windeyer) fully trusted that their Honor's would be of the same opinion.

Mr. Windeyer not having concluded his address before three o'clock, Mr. Justice Burton observed that the past five hour's argument having been rather a severe tasking of the attention of the opposite counsel he thought it would not be equity to call on them for their arguments, at that advanced hour of the day; and their Honors the Chief Justice, and Mr. Justice Stephen being of the same opinion, only a short notice was afterwards taken, when the Court adjourned its equity sittings until 10 o'clock next Friday.

Dowling C.J., Burton and Stephen JJ,  5 November 1841

Source: Sydney Herald, 6 November 1841


BEFORE their Honours the CHIEF JUSTICE, and Justices BURTON andSTEPHEN on appeal.

The Attorney General said, that the main question in the case was whether the defendant Smart had in the business alluded to, been the agent of the plaintiff. It must be manifest to the Court that there was one document which, if it had been produced, would have thrown a clear light upon all the obscurities of this case. He (the Attorney-General) would show that the onus p[r]ob[a]ndi lay on the defendant, and he was bound to have produced the document in question. But before he (the learned gentleman) addressed himself to this part of the case, he would advert to an objection which the other side had made, against Mr. Nichols having been heard as a witness. Now, it was clear, that there had been a conveyance of the fee, - Nichols was acestui qui trust. - this was a matter of contract, and the rule respecting parties was, that they only were to be parties in the trial who had been parties to the contract. Who had been the parties to the contract here? Macdermott and Smart. These latter, then, were alone properly made parties in the writ, and the objection of the other side against the competency of Nichols as a witness, by the necessary consequence, fell to the ground. But the other side had taken another objection to Mr. Nichols as a witness; they had contended that the release which had been put in did not relieve Mr. Nichols from his incompetency. No doubt if a person were a party to a record, or had either direct or indirect interest, no release could remove an incompetency thus arising. But here no such grounds of incompetency existed. Nichols was neither a party to the record, nor had he an interest; he was merely a cestui qui trust, who had released to his trustee, and then had no interest whatsoever in the event of the decree. The learned counsel then reverted to the consideration of the document to which in opening he had alluded. No doubt the plaintiff had not set up any special mention of this document in his bill; he was not bound to do so; he had a right to assume that a document of such consequence would be at all times ready to be produced by Smart; it was, as it were, the anchor which would hold fast the conscience of Smart; and he was therefore bound at all times to produce the document, if required by the other party. What was the history of this document? It had been prepared by Mr. Rogers, was left with Mr. Smart, and Mr. Macdermott could not know sufficiently about it to set it out with particularity in his bill. True he had endeavoured when he first took proceedings against Smart to procure an attested copy of this document and wrote to Mr. Rogers, requesting to be furnished with and at the same time offered to pay for one. To this Mr. Rogers had returned for answer to the effect that he had no such document by him. He admitted he had drawn and been paid for it, and he had even frequently used it in consultations; and yet, on his examination he had said that all he knew of its contents, beyond the fact of its being a memorandum of deposit, was what was derived from conversations with Smart. Such had been the impressiveness of Smart'sstyle of communicating ideas, that it had done more than the making of the document and repeated references could do. Such peculiarity of memory as this had never been known since the days of the renowned Majochi of "Non mi ricordo" celebrity. The plaintiff had made every effort to get possession of this document; but Smart had determined from the beginning it should never be used for Mr. McDermott's case. Then as to the admissibility of Mr. Nichols as a witness, it had been decided that a trustee might purchase of a cestui qui trust where the transaction was open, fair, andbona fide throughout. Gipson v. Jays, 6 Vesey, was a leading one on this subject. The defendant had agreed with an old lady about ninety years of age, that he would give her fifty pounds a year in consideration that the lady would give the defendant power to deal with and enjoy the lady's property in the funds. This agreement was set aside on the ground that any party acting in any fiduciary character whatsoever is bound to consult her interests in all point, and at all times be able to give the fullest explanation when called upon [o]f the real character of the transaction. Now did not McDermott's and Nichols' accounts of the transaction fix Smart with a fiduciary character in acting for McDermott. But what sort of explanation had Smart given? The document which would show whether he held that character or not was carefully kept back, and Mr. Rogers' memory could not supply the terms of it. They (the plaintiff's counsel) had therefore a right to consider the present case one in point with the authorities he had cited, and Smart not having supplied the explanations which would purge his fiduciary character of suspicion, the decree for McDermott must stand. But it had been said by the other side, why had McDermott if he had been defrauded, why had he on the 3th January exe[cu]ted a conveyance to Smart? To t[h]is question there was a[n] amply sufficient answer. McDermott wanted money, was unacquainted with his rights, - and there were cas[e]s in equity which decided that where a man was in this situation the Court could not allow him to be bound by his act. To this it mig[ht be seen, a]s it had been said, that Nichols, at any rate, was acquainted with the law, and might have communicated his knowledge to McDermott; but there was no evidence before the Court, of this being the fact. The other side had said that this case ought to go to a jury to decide the fact as to the character in which Smart had acted; but this happened to be precisely such a case as the Court would not send to a jury. The relation and the consequences of the relation between trustee and cestue qui trust, were matters exclusively for equity jurisdiction, and the learned gentleman cited various authorities confirmatory of their principle. The case was a most important one. The Attorney-General would now leave what more might be said for his client to the two learned gentlemen, who should follow him. Mr. M[c]Dermott had gone with character untarnished through a most painful and expensive ordeal, and he, the Attorney-General trusted that their Honors would see no necessity for revising their decree.

            The Solicitor-General said, that the manner in which the learned Attorney General had treated the case, would considerably shorten his (the Solicitor-General's)labours. He would endeavour, without echoing or repeating the arguments of his learned leader, to give the broad view of the case. It had been first said that McDermott was precluded by his own acts, from coming to this Court for relief. Then it had been asserted that the suit could not be maintained, because Mr. Nichols had not been made a party. Mr. Foster had only taken the case in one point of view. That gentleman said that the gravamen of the plaintiff's case was that Smart had been employed as an auctioneer. But that was not the whole of their case. They did not depend exclusively on that fact, or on the contents of the lost document; although those contents, would have been an important part of their proof. It had been asked of them, why had they not interrogated about this document? For the simple reason, that they never supposed that the question of agency, would have been disputed by the other side; and because they merely knew of the existence of the document, but were not so minutely acquainted with it contents, as to be able to interrogate about it in the bill. But this was only part of the case. The learned counsel then commented at considerable length on Mr. Rogers account of the lost instrument. It had been contended by the other side, that the document could not contain any reference to the employment of Smart as an auctioneer, because Mr. Rogers had said that an action had been commenced by Smart against Mr. Dermott for slander, and that the proceedings were abandoned because they (Smart's professional advisers) could not find any evidence of Smart's employment of an auctioneer. The document not being before the Court on what evidence was the Court to decide. Dismissing all consideration of the document, was there any evidence of Smart's employment as an auctioneer? Mr. Mann's evidence would establish such employment, without looking at Mr. Nichols' evidence. According to Mann's evidence Smart had offered him (Mann) an allotment of the land on certain terms; at the same time saying that he (Smart) had the land from McDermott for sale; and that the latter had requested him (Smart) to buy it himself; but he should not do so, as money was then scarce with him. Part of Hughes' evidence corroborated that of Mann. M[c]Dermott had told Hughes that he (McDermott) had the land for sale, and had tried to sell to a great number in vain. Hughes had also said that after his return from Mann, McDermott had exclaimed, "he was done," and the fair interpretation of this expression was, that M[c]Dermott was deceived by Smart's breach of his fiduciary character, could they, looking at the view of the case as presented by Smart's story, believe that McDermott had gone to Smart and said you shall have this property for £2,500, and you will make £500 by reselling it to Mann, who wants the property very badly? Could they believe such a story as this; and yet this was the story, by which it was attempted to show that Smart was a purchaser and not an agent. And as to the argument that McDermott had waived any objection by his conveyance, that was already ably disposed of by the learned Attorney General. The Soli[c]itor General then commented at length on the evidence, and concluded by observing that there were no tenable grounds whatsoever advanced by the other side for setting aside the decree of the Court which had been already pronounced.

            Mr. Broadhurst followed on the same side and said that in arguing that Nichols was a necessary party in the suit, the opposite counsel appeared to have misapprehended the rule regulating parties to suits in equity. The rule was that parties to the contract only were to be made parties in the suit. There was no employment of Smart by Nichols; and as for the admission of the latter at the trial that he was interested, this could not be conclusive of his being interested in such a manner as to require him to be a party. Mr. Nichols' claim was not so established as to require the Court to look upon him as a proper party in the suit. There might have been disputes (on further inquiry) between Nichols and M[c]Dermott and the result might be that Nichols' claim would be disallowed. But even supposing that Nichols had such an interest, it was clear the release had, at once got rid of his disability, and of the objection from the other side. Then as to his competency as a witness, Mr. Justice Butler had said, that the true line of distinction between competent and incompetent witnesses, was, could the witness gain or lose anything by the result of the cause? Nichols could gain nothing here by the suit; the validity of the release had never been disputed, and it was clear, that in any subsequent proceeding that release would be anestoppel to him. But if this were not so, the objection of the other side came too late. They had treated Nichols as a witness by cross-examining him, and they could not now object to him in that character which they had once acknowledged in him, after full knowledge of the grounds of objection. The learned gentleman quoted several cases in confirmation of this position, and then went into the consideration of the question, whether there was any equity in the complainant's bill. The complainant's counsel did not depend exclusively on the establishing Smart's agency, as supporting the complainant's case; if it could be shown (without reference to the question of agency) that Smart in the transaction with Mann, had behaved-fraudulently in respect to McDermott, that would be a good case for the complainant. By the advance of the £1,500 by Smart on the property, it was clear that the relation of equitable mortgagor and mortgagee was created between Smart and McDermott. Smart by refusing to purchase, elected to take upon himself the character of trustee, with which the advance on the deposit of the deed of grant had clothed him. In the first volume of Brown's Parliamentary Cases was an authority, Meed v. Webb, showing that where in a treaty of agreement either party committed a wilful and industrious concealment of an important fact, a Court of Equity would set the transaction aside. The present case ran on all fours with that authority. Did not Smart wilfully and industriously conceal from M[c]Dermott the fact of the advanced price that might be got from Mann for the property? and what did this amount to but a fraud on McDermott? The price agreed to be given by Smart for the property, was grossly inadequate, and although mere inadequacy would not afford ground for setting aside a contract, yet accompanied by such circumstances as had existed in the present case, it would vitiate the transaction. The evidence was that Smart had said to Mann, after closing with him, "I must now go and arrange with McDermott," clearly shewing, that he (Smart) was fraudently[sic] making use of his secret knowledge, of Mann being willing to pay the advanced price. Then as to the argument on the other side respecting M[c]Dermott's presumed acquiescence; the decisions were uniform on this point, that the party acquiescing shall be fully acquainted with the law of his case at the [?] now, what proof was there, that McDermott was possessed of this knowledge, at the time he conveyed to Smart? Great pains had been taken by the [ot]her side, to show that Mr. Nic[h]ols h[a]d been so [fre]quently in the company of McDermott, that the la[t]ter must have acquired a knowledge of the law, but there was no evidence in the depositions, showing any suchintim[acy] between these parties. The ev[i]d[e]nce taken [alto]gether, perfectly warranted the de[cree] which had been [made], and nothing h[a]d b[e]en advanced by the other side to disturb that decision.

            The learned gentleman not having concluded many minutes before four o'clock, the Cour[t] adjourned the further hearing of the case unti[l] next Friday.

Dowling C.J., Burton and Stephen JJ,  19 November 1841

Source: Sydney Herald, 21 November 1841[2]


Mr. FOSTER in commencing his reply, observed that, although the present case had taken up a most unusual space of time, it was only because it was a most momentous one. The counsel on the other side had all found the difficulty of sustaining the allegation that Smart had taken upon himself the character of an auctioneer on the 8t[h] of January, 18--, and therefore they had gone on to say, that that was not the only fact charged upon him, and that bad faith, deception and fraud, independently of the fact of agency, had been also charged upon the same party. Now he (Mr. Foster) contended, that the plaintiff, having in his bill, originally charged only the breach of defendant's duty in his fiduciary character, was now precluded from starting fresh charges in no way referred to in any part of the plaintiff's pleadings. The only use of pleadings was that they should present all the issues which are to be tried and settled between the parties. If any evidence not properly referable to the issue were received, that evidence most clearly was improperly received Mr. Nichols' evidence was precisely of this description, and should not have been taken on the trial. The learned gentleman then referred to the evidence of Mr. Rogers respecting the lost document, about which so much had been said, observing that clear and satisfactory as that evidence was, it was clear that if the document had been of such consequence and contained the terms of the contract, there would have been two copies of it, it would have been referred to in the bill as particularly as its alleged importance would demand; but this had not been done; only when the plaintiff discovers that the document is lost, does he, as an afterthought insist upon the instrument as being of such vital importance, and forthwith the defendant is called upon to show that the instrument was not of the importance described in the plaintiff's arguments. What was there in the rest of the case strengthening the account the plaintiff gave of the instrument admitting that Mr. Nichols' evidence was properly receivable, what did it amount to? Mr. Nichols merely said that in the interview he and McDermott had with Smart, "some conversation had taken place about a sale and an advance, and that Smart had said the times were bad, and he did not think it would sell." That was the sum and substance of what Nichols had said as affording to the plaintiff any ground for the attempt to fix Smart with a fiduciary character. Then as to the puerile argument of the other side, founded on the expression McDermott had been said to have uttered that he was not on speaking terms with Mann, and would not offer the property to him, although from him so much more could be got for it. What was to be deduced from such an expression? The plaintiff's counsel had said that it was absurd to suppose that McDermott, because he was not on speaking terms with Smart would give up the chance of getting fro[m] him £500 more than he could get from any other person. Such an argument as this was puerile, when it was well known to every man, that this was the constant style of sellers of property in Sydney and everywhere else; holding out as an attraction the high degree of probability of some other person giving the purchaser a great profit on his purchase, as an inducement to parties to buy. The learned gentleman next argued, that nothing had been advanced by the other side, that had affected [h]is arguments, that Mr. Nichols' evidence should not have been taken, and that he should not have been made a party. The cases by which that argument had been met were altogether different from the present. They were all cases of trustees and cestui qui trusts; in which one party is beneficially interested, and the other not so; but this was a clear case of partnership. Mr. Nichols had said, speaking of himself and McDermott, "we bought the property, and were to have a joint profit and loss in it. McDermott and I agreed to sell the property."  Here was a partnership; such a community of profit and loss, as would prevent Nichols being a witness, and created a disability from which no release could discharge him. Then McDermott conveys with knowledge of all the circumstances of the alleged fraud, being advised to do so by his partner, and told that if he chose he might afterwards apply to the Court to set aside the transaction. It had been alleged on the other side, with the view of avoiding the difficulty arising out of this circu[m]stance, that McDermott had conveyed whilst wanting money, and, therefore, whilst under a certain species of duress. If want of money, the learned gentleman contended, were to be considered duress, almost every business transaction where a party sells from the want of money, might with as muchcolour of reason be set aside. The learned gentleman then cited several cases strengthening the position he had taken and concluded by expressing his confidence that the defendant's counsel had shown such a case to the Court as would satisfy their Honors of the propriety of reversing the decree.

            At the conclusion of Mr. Foster's address the Court adjourned until ten o'clock this day.


[1]               See also R. v. McDermott, 1841.

[2]              See also Sydney Gazette, 20 November 1841.


Published by the Division of Law, Macquarie University