No. 28. Mersey Steel and Iron Co. v. Naylor, &c., 9 Q. B. D. 665, 666.

* LINDLEY, L. J. I am also of opinion that the judg- [* 665] ment of Lord COLERIDGE in this case cannot be supported. The first question is, whether the defendants are entitled, apart from any question of set-off, to any damages by reason of the breach by the plaintiffs of a contract on their part. Lord COLERIDGE held that they were not, on the ground that there had been such a refusal to perform the contract as to amount to a rescission of it. Whether there was such a refusal depends entirely on the correspondence. The view which the LORD CHIEF JUSTICE took of it is stated in these words: "Here the defendants, while insisting on future deliveries, positively refused to pay for the iron already delivered, and for all which might subsequently be delivered, unless the plaintiffs fulfilled a condition which the defendants in my opinion had no right to impose."

Now, without pausing to remark on the terms in which that conclusion is expressed, I confess it appears to me that the correspondence does not bear that interpretation. The alleged refusal arose in this way. It appears that the advisers of the defendant company took a view which was untenable, that is to say, they took the view that the defendants could not properly pay certain money which they owed to the plaintiff company, by reason of the pendency of the petition to wind up the company. This view was taken uuder the impression that there was something in sect. 153 of the Companies Act, of 1862, which rendered such a payment improper. It was overlooked that sect. 153 applies to dispositions by the company of its property, and not to payments to the company. The distinction is obvious, and not only obvious in the language of sect. 153, but there is a case In re Barned's Banking Company, Ex parte The Contract Corporation, L. R. 3 Ch. 105, in which it was held by Lord CAIRNS that a transfer of shares to a company which was being wound up was not within sect. 153, and exposed the company to calls with respect to the shares. The advice therefore was mistaken advice. However it was given, and the consequence of that advice was that the defendants declined, or refused, I will use that word for the moment, to pay what they owed. But they did not so decline or refuse as to warrant the inference which, according to the case of Freeth v. Burr, L. R. 9 C. P. 208, is necessary to disentitle* them from [* 666] insisting on the contract, the inference, I mean, that they

abandoned the contract or repudiated it, and would not go on with

No. 28. Mersey Steel and Iron Co. v. Naylor, &c., 9. Q. B. D. 666–670.

it. The inference is quite the other way. The true inference to be drawn from the correspondence is that they were ready enough to pay, but felt embarrassed, and did not know how to pay. Whether they ought to have been embarrassed is quite another matter. Acting honestly, and having got the advice which they did, they felt embarrassed and hesitated about paying. It was not such a refusal to pay as brings the case at all within the principle of Freeth v. Burr.

Now, I certainly do not pretend to reconcile all the cases on this subject. I have tried in vain to reconcile Hoare v. Rennie, 5 H. & N. 19, Simpson v. Crippin, L. R. 8 Q. B. 14, and Honck v. Muller, 7 Q. B. D. 92. I can understand each case by itself, but there is very considerable difficulty in reconciling them. It is not, however, necessary to do that; what we have to do is to extract from the cases some intelligible principle by which to be guided, and it appears to me that the principle is stated accurately in Freeth v. Burr, by Lord COLERIDGE himself in delivering his judgment in that case. What he says as to the result of the cases is, "The true question is whether the acts and conduct of the parties evince an intention no longer to be bound by the contract." I think that is the fair way of testing each of these cases, and it appears to me that Lord COLERIDGE either lost sight of that in deciding this case or drew an incorrect inference from the correspondence. Taking that as the true test, it appears to me, that the true and fair construction of the important letters of the 10th of February, the 17th of February, and the 1st of March, is this, that the defendants refused, or declined, or hesitated, to pay, not as is stated in Freeth v. Burr, “evincing an intention no longer to be bound by the contract,” but evincing a difficulty suggested to them by their solicitor; a difficulty which they did not see their way to get out of. I believe that is the true construction and true effect of those letters. Therefore, upon this point, which is the only point upon which the LORD CHIEF JUSTICE decided this case, I am unable to agree with him. . .

[670]

BOWEN, L. J. —I am of the same opinion. With regard to the first point whether the plaintiffs were justified here in refusing to deliver further, and in treating the contract as determined by reason of the non-payment and the conduct of the defendants, I desire to say that I think the true test is the one laid

No. 28. Mersey Steel and Iron Co. v. Naylor, &c., 9 Q. B. D. 670, 671.

down in Freeth v. Burr, L. R. 9 C. P. 208. Nor do I understand that the LORD CHIEF JUSTICE really desired to depart from the principle which is to be found in the judgment of that case, a judgment which was delivered by himself. I think there has been a mistake in the shorthand notes of his judgment in the present instance, and that he did not mean to say that the test was whether the conduct of one party to the contract was inconsistent with the contract, because of course every breach of contract is inconsistent with the contract, but that the test was whether the conduct of one party to the contract was really inconsistent with an intention to be bound any longer by the contract. Now in the cases where the Court has to determine whether that principle of law applies, the facts may approach nearer to the line, or may be at a greater distance from it; and the difficulty is that the Judges have had to draw inferences from the particular facts in order to determine whether the principle applies. Nondelivery of a single parcel would not be necessarily, of course, sufficient to intimate that the person who does not deliver intends no longer to be bound, but I am far from saying that non-delivery of a single parcel might not in particular contracts, and under particular circumstances, be sufficient. So as to non-payment. Nonpayment of itself is certainly not necessarily evidence of an intention no longer to be bound by the contract, but I do not say there might not be circumstances under which the Court would be entitled to draw that inference from it. If Lord BRAMWELL, in Honck v. Muller, 7 Q. B. D. 92, is to be understood as saying that the doctrine can no longer be applied when the contract has been part performed, it seems to me that his observation goes beyond what can be supported, for, as the MASTER OF THE ROLLS has pointed out, many of the cases where one party was treat the conduct of the other as putting an contract, were cases in which the contract had been part performed. A fallacy may possibly lurk in the use of the word "rescission." It is perfectly true that a contract, as it is made by the joint will of two parties, can only be rescinded by the joint will of the two parties, but we are dealing here, not with the right of one party to rescind the contract, but with his right to treat a wrongful repudiation of the contract by the other party as a complete renunciation of it.

*

allowed to [* 671] end to the

With regard to Hoare v. Rennie, 5 H. & N. 19, I think that the

No. 28. Mersey Steel and Iron Co. v. Naylor, &c., 9 App. Cas. 437-439.

true explanation of that case is that the plea was a special plea, which set out various facts from which two different inferences might quite well be drawn, and as one or the other is drawn, the decision would appear correct or the reverse. Upon the first point in the case, I agree with the MASTER OF THE ROLLS and LINDLEY, L. J., in thinking that the correspondence in this case does not show such a refusal on the part of the defendants to be bound in future by the contract as entitled the plaintiffs to consider the contract at an end. . . .

[* 672] * MINUTES OF ORDER. - Discharge the judgment. Declare that the defendants are entitled to set-off against the £1713, admitted to be due to the plaintiffs, such damages as they, the defendants, may have sustained by reason of the failure or refusal of the plaintiffs to deliver to the defendants the remainder of the blooms deliverable under the contract. Reference to ascertain the amount of such damages. Order the plaintiffs to pay the defendants' costs of the appeal. Reserve further consideration, and the costs of the action to follow the event.

[HOUSE OF LORDS.]

The plaintiffs appealed to the House of Lords, and, after argument, the following opinions were delivered:

[9 App. Cas. 437-447]

Earl OF SELBORNE, L. C. : —

After dealing with and expressing con

currence with the Court of Appeal on the point as to set-off and counter-claim:—

[438]

Upon the other point, I do not think it desirable to lay down larger rules than the case may require, or than former authorities may have laid down for my guidance, or to go into possible cases differing from the one with which we have to deal. I am content to take the rule as stated by Lord COLERIDGE in Freeth v. Burr, L. R. 9 C. P. 208, which is in substance, as I understand it,

that you must look at the actual circumstances of the case [* 439] in order to see whether the one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is, so as to see whether it amounts to a renunciation, to an absolute refusal to perform the

No. 28. Mersey Steel and Iron Co. v. Naylor, &c., 9 App. Cas. 439, 440.

contract, such as would amount to a rescission if he had the power to rescind, and whether the other party may accept it as a reason for not performing his part; and I think that nothing more is necessary in the present case than to look at the conduct of the parties, and see whether anything of that kind has taken place here. Before doing so, however, I must say one or two words in order to show why I cannot adopt Mr. Cohen's argument, as far as it represented the payment by the respondents for the iron delivered as in this case a condition precedent, and coming within the rules of law applicable to conditions precedent. If it were so, of course there would be an end of the case; but to me it is plain beyond the possibility of controversy, that upon the proper construction of this contract it is not and cannot be a condition precedent. The contract is for the purchase of 5000 tons of steel blooms of the company's manufacture; therefore it is one contract for the purchase of that quantity of steel blooms. No doubt there are subsidiary terms in the contract, as to the time of delivery, "Delivery 1000 tons monthly commencing January next;" and as to the time of payment, "Payment net cash within three days after receipt of shipping documents;" but that does not split up the contract into as many contracts as there shall be deliveries for the purpose, of so many distinct quantities of iron. It is quite consistent with the natural meaning of the contract, that it is to be one contract for the purchase of that quantity of iron, to be delivered at those times and in that manner, and for which payment is so to be made. It is perfectly clear that no particular payment can be a condition precedent of the entire contract, because the delivery under the contract was most certainly to precede payment; and that being so, I do not see how, without express words, it can possibly be made a condition precedent to the subsequent fulfilment of the unfulfilled part of the contract, by the delivery of the undelivered steel.

But, quite consistently with that view, it appears to me, according to the authorities and according to sound reason and

*

principle, that the parties might have so conducted them- [* 440] selves as to release each other from the contract, and that

one party might have so conducted himself as to leave it at the option of the other party to relieve himself from a future performance of the contract. The question is whether the facts here justify that conclusion? Now the facts relied upon, without reading all