MALPAS V__OASE. Judgment. Enox C.J. The respondent aucd the appellant in Rquity (1) for a deo- laration that and agreement of the lth of April 1921 wae. not binding on the appellant and had besn duly reagindsd or in the alternative for rescission of the agrsement by the Court, and (2) for repayment of £3000 paid by the respondents to the appellant in pursuance of such agredment. The ground allegad for relief was that the repondent had been induced to enter into the agreemsnt by representations of fact which were untrue. The agreeneat in question is in the words follow- ing viz:- "Memorandwa of agreement made the lth day of April 1921 betwaen Edward Malpas of Darlinghurst Sydney gentleman (hereinafter called vendor) of the one past, and Walter Tucker Case, of Darling Point Sydney, builder (hereinafter oalled purchaser) of the other part Whereas the said Vendor is intereeffinder /Sertain memorandum of agreom ment dated 30th March 1921 angnade between the said vendor of the first part Aloc.Lorimore of the ascond part and Harry Fremantle Davis of the } 2. . third part for the dale of a cepret process for tanning hides sheep & lamb skine and fur skins end known es thefDamas" process now it is : agreed as foliows:- That the seid vendor shall sell and the esid pur- ehaser ahdll purchase one foutth share of the vendor's interest under the said agreement 'in the said process for the sum of £3000, Such sum to be payable on the signing hereof." The sum of £3000 was paid by the respondent to the appellant on the day on which the agreement was signeds The interest of the appellant under the qreement between Lorimore, Davie, and himself was a one-fourth share in the worlds right: of a certain secret (known as the Demas process, and by that agreement Lorimore and Davis undertook certain obligations with a view to the use of the provess in Austrblia and the sale of the right to use it slsewhar The ground of defence prinoipally relied on was that the agreement maz in question was made in part performance of another agreement between Ke the parties for the sale byrespondent to the appellant of certain 3. ; 2and and buildings that the two agreements were dependent upon one an- other, that after knowledge of the untruth of the represebhations the respondent completed the agreement for gale of the land and building ) and that he was therefore not in a position tojane for reacisaion of the other agreement. At the hearing Street C.J. in Equity made a deorse for rescission of the contract and repayment to the respondent of £3000 with interest. , The deoree was based on the following findin, vast- (1) That material (representations were made (2) That euch "representations formed a material part of the induo: menté on which the respondent acted In entering into the agre. ment. (3) That the agreement which the respondent sought to rescind was separate from and independent of the agreement for the aale by the respondent of tha lend and building, and that the ad- herence of the respondent to the latter agreement did not prevent him from obtaining rescission of the formers (4) That the responaent had not waived his right to rescind the Ug agreement reaating to the process. (5) phat the respondent was not esftopped by his conduct from pbtaining the rescission claimed by him. It was not alleged that the /repreaentat ions complained. of were un- true to the knowledge of the appellant or were made fraudulently, and the case was throughout treated as one of innocent representations On the hearing of the appeal Mr Loxton for the appellant contended that even if the agreenontamnxtsx above referred to were separate and indep- endent the respondent was not entitled to a deoree for rescission be- cause the agreement for eale of the proceas was not executory but haa been completely executed. This defence was not specifically raised on the pleadings and Mr Maughan for the respondent insisted that it had not been raised on the hearing of the suit in the Suprene Court. We have been favoured nitnine learned Judges notes of argument from which if appears that Mr Loxten argued that whether there were two trana-actia) or ome the suit must fail and that if the transactions were separate the only remedy was by action for deceit. It 18 clear that if the 5. point wae taken, it was not seriously pressed on the attontion of the Court for Mr Loxton admits that no authorities wera alted in appaual support of his contention. It is. cme however that in the Supreme | A Court counsel argued that whether the transactionSwers separute or | depondent on one mether the suit sould not be maintained an the groun¢ of innocent misraprseentation and in my opinion this arguusnat was well founded, Tha agreement which the reapendent aought to have rascinded waa glearly exeouted vand not executory - there was nothing remaining te be done under it. The consideration £3000 hada been paid and not- hing further wos necessary tc pass to the respondent the intercet whiol the appellant agreed to acell to him. On the signing of the contract and payment of tha consideration the respondent became entitled to one-fourth share <a the interest of the appelzant under bis agreement with Lorimors and Davie in the secret process and nothing regaaned for the appellant to de which would wore effeotually vest in the respondent whet be had bought. Tha Sazxan agreoment being executed and not wee & excoutory the decision in Seddon v_ Nwi.Galt Gowpany Limited (1905) 2 Gh. 326 whiea vas not olted in tha Supreme Court, ahova taat it cane not wa cesdinded or ost agide oa the rand thet it «as wrought about py ai innocent alsrepreaontation, | Wiere a contrast has been comple- taly executed there vamniot te zeseigien fox wiarcpréssniatloa unless froavdulentiy made. Leake on Qowirusta 6th oi. at p, 200 woe also Ealebury Lava cf Euglena XK ppra. 1751,1752. Assuring therefore in the responacata favour the vorrectneas of the finding that this wae & separate ond independent agreement I think the faotf that tha, age at vas fully exsouted preoludesihe responden feom odtalaing a dvorss for reacdaaion. The view whish I take on thie point wake 1$ unnecsasary fom we to express an opinion on the other qusstiona argusd before us. Ta wy opinion the appeal suguld be vllowad and the sult dismiase MALPAS v__CASE. oDeH ees : ISAACS J FRIGH 3 The nature end facts of this case may be eucoiutiy stated, Case, a ete Fi bullder and contractor, was erecting @ block of flete in Rushedtter' 8 _Bay,whion, when finished would cost him between £15,000 and £14,000 He had arranged ® twilding loan of £6,000 on the mortgege security of the. property, to be advanved as the building Progressed, The flate were being erected for sale in a completed state. Malpes had retired frou business in 1916, He hed money of Mrs Yeapes invested to some extent in Broken Hill shares,which,in 1920 were 8 source of snxiety, He had personally sequired from a man named Davis,certain interests in @ secret leather tenning Exegene, now known 8s the Damas Tenning Pro= -cess. N@lpes & Davis sgreed with a men henea Lor imore that he should neve @ holf-shere in the World's Righte = the process, he under- . ~tsking in considerstion therefor ,to secure sifficient working capi- "tal in a certain limited company owning the Australian Rights,and %o hand over to Malpss 8nd Davis respectively 20,000 shares in the 'company. ean I rng ase But Malpas and Davis each retained s quarter share in the Worlds Rights of the project, and,therefore,Halpas hed a quarter share to eae he pleased. The process was said to be one to tan and adress leather in houre instead of wetks, snd in days instead of months. The seoret recipe was deposited in @ gealed envelope in a Bank, In 1920 Mr and Mra Case became friendly with Mr Malpas ond irs Malpas Malpas mentioned to Case his interest in the process, and in the eourse of several conversations between them he ateted thet Lorimer was engaged in certain negotiations for the disposal of ths process, @s to which it is unneoesesry to say more than that in the first place these atatements were intended to influence, nd were calculated to influence, ond 414 in faot influence Case to enter later into the transsotion which ultimately emerged, in the second plece, they were not true, and in the third plece theywere meade in absolute good faith, MGlpes honestly believing them to be true. In the meantime whoever April initiated the project, it happened, es Street J has found,that in/1921 Malpes 'had money to invest on behalf of Mrs Malpes end he offered "to buy the flats for £15,000, if the plaintiff(that is Case) would "pay from him for £3,000 a fourth share of his orld Rights in the "leather process". this wae agreed to on the 12th April, and. it was same agreed et the/time on the defendants suggestion that two contracts should be drawn up.. Very neh turns on thet dinonatiuae thet it was agreed that "two contracts should be drawn up"... 0f course for @ ome purposes the two coniracts mst be treated as sepsrate, but does thet mesn they were sen srated for all purposes? Street J hes deter- -mined they were, end his judgment on this point: is contained in a few words. Hig Honor, sayst- * —tenscentodklacdictanntzed becocHocagaan "It was at the defenaent's request thet "two separate agreements were madc, ond it was at his request "thet the agreement for the sale of the flats was made with "Mrs Malpas snd not with him. In theae circumstances I do not think thet he can now be heard to say thet the contrect with "herg, which is unconditional in its terms, is. so connected "with the plaintiff's agreement with him that the pleintizr ae "having edhered to the former cannot now rescind the latter. "The trensactions must be looked st sg separate transactions". That sppears to ue to be unsusteinable, It makes the result depend 6 : ; entirely on form and disregara/the substanee. The true test for the purpose of the equitable interposition sought in this case is not in what form the parties resolved to record their mutual dealings, but whet was the governing intention when proceeding to marxy record the — sever-al parts of the transaction, A eondition upon which a contract is ever to have effective opera- ution may even st law be extraneous to the written document ¢ (Pym v Campbell,6 E end B.p.370),. Within their respective ambits the con- and in this respect their expressed terms nfisty -traets here were of course to be distinctA But they were to gome the. inte existencel, 8 constituent parts of .one transaction, which would be incomplete if cither were wanting. The promise. by Case to. pur- -chase the process interest and the promise by Malpas to purchase the flats were mutually dependent.on each other being. crested. Once the s¢veral oontracte: were: launched they would aeverally. pursue their respective courses end: bear their respective rights and: obli- ~getions;but each pre-supposes the binding character of the other to begin with, which is only another wey of stating its: existence in lew, Majpee,we must suppose, had sufficient business reasons: for requiring £3,000 to be provided by the process sele to furnish the meens of paying for the flats: and Case equaliy must be taken to have needed the sale of the flets to enable him to purchase the process interest. It consequently follows that the mere agreed term of the combined transaction to segregate the two component parts of it into two documents ,each when once binding carrying its own future operation separstely, does not amount to an originel indspendenes of origin, Then comes the next step. For reasons casily understandable Malpas and re Malpes desired thet the flats, which were to be meinly actual purchased with her money én the mekaxk control of Melpas, who eeted ae her businese representative, should be placed at once into her own name, To this, Case assented without a eingle word to alter the fundomental basis on which the combined trensaction had so far proceeded, If he hed any intention to depart from. that basig he should have stated it. Case mst ohave known Perfoetly well that Malpss hed no intention of departing from the depend ins eondition of the process Porches? The words of Blackburn J in Smith vy Bughes(Z.R..6. Bs atep.607) would apply even if there were nothing more. There it is salds- " Iz whatever 38 man's resi "intention may be, he te conducts himself that a resgonsble man "would believe that he was assenting to the terms proposed by the "other party, and that other party upon that. belief enters into the "contract with him, the man thus conducting himself would be "equally bound as if he heé intended to agree to the other party's "terme", - Hee? * But Shere is very mucy more to bind Case, Ho one in his position could have doubted that a5 for as intention went, neither Malpas nor Mire Malpas, who wes manifestly simply séopting 011 that Melpss was doing for her, intended to release Cage from the eross oblige : -tion of the other branch of the united transaction. Ana Further, it ig definitely established by Case's own acts and stetenents thet ag fully understood, and at the time intended that the originel Q i stipulation of mutual dependence was adgered to, That appears beyond question by the following pieces of evidence: First, fxh.D. in which Csge in his own handwriting throughout saye: " Received "of Baward Malpas Eeqre the eum of three-thousand pounds (£3,000) "on account of Flats,New South Hesd Road Derling Point", The fact that he acknowledged he received the part purchase money from ur Malpag end not Mrs Melpae indicetes that he did not then regerd Malpas a6 unconnected with the flats sgreement, The sum of £5,000 was so paid. wes not st that time due or payable under the. flats con- tract, The way in which 16 was pela - or treated es paid = is eon- -clusive of the real intention of both parties. Not only was it not then due to Gase, but the method of conventions p syment adopted wag thet Case drew his cheque for £5,000, handed it to Malpas who immediately returned it, and it was destroyed, Nothing was 6814 shout payment on Sccount of Mra Malpas, and so little impression dia thia simulated payment make on the mind of Oape that he altogether forgot a cheque passed, He thought as he e@1a in croes-examination thet he had merely given a receipt for £3,000. Thia ie his evidence:- Q. There was @ cheque paid at thie time was there not? A.No. {.When dia you pay your cheque for £23,000 for this interest, A: 1 did not pay @ gheque. I gave M/elpas a receipt for £3,000 on account of the flete,: Q: You understood « when you did that,that thot was carrying out the errangement between you ond Mr Malpas? A: Yes. Q: So thet there is no question that this srrengement of yours being discherged from lisbility to put the £3,000 in in actual cash was in pert payment of your flats? Ar Yess A little further ont- Q: There is no question about this thet so fr fer as the flats were concerned - I mean et your first negotiations - Lt was quite clearly put to you 1 do not esre whieh it was,dut if you bought an interest in this process for £3,000, they would buy your flats. A:Yee, che game evening, April 14, Mr Melpas wrote to Mr and Mrs see "On the completion of the flats end the setis- " eactory handing over 'to_me ef same 1 will hand you each ' oertifi-~ "_oate for 1,000 sheres in Super 'Leathers Limited he. "That was purely g ratuitous but it shews thet it wae well understood that the mere taking of the flats contract in Mrs Malpas' nome - elthough no aoubt 'phe could not deny liability as the 'contracting perty to. thet agree- : - ment "in no way deatroyed the governing condition which Malpes : made ®s to the process agietuens: Hothing cen ore eteonely evidence he fect that this idea of complete severance pesioaliy of the two gontracte; is of late origin then Case's own letter to Kelpas of August 11,1921 in which misrepresentation 1 alleged for the firet time, It is headed "Plate New South Road and Oswald Street" and beginas- "Will be completed this week, you will remember when "we 'made the agreement for sale 3s part 'payment 'for Flate you gave "nae an interest in the Worlds Rights in a secret process for tanning "esther for £5,000, 1 gave you @ receipt worded on Account of "Flats for £3,000", He then recounts misrepresentations and saysi= "l am not prepared to sign the transfer of the Flats to you only "subject to the following conditions", The conditions are:="A third "mortgage for £3,000 for 3 yesrs, the first 14 months without 'ine "eterest, After thet to carry 7% end adds:- If the sale of the pro- Me nee gots before, the sevond mortpage will automatically 'cut itself "gat ° THet is 9 clear admission that the process begen was really part of the consideration of the flats vargain, thet. ite value fixed at £3,000 was on agreed mode of discherging pro tanto Fa (9 "the price of the flate, that in substance the process interest was noorpena in part peyment and 011 the rest was formality, It follows that th® process bargain being scoording to the actual intention of the weukkiux porties, an integral and inseparable part of the transaction, Cese, cannot treat it as if it were entirely independent, and disavow 1t while adhering to the flats contracte That would be spproprieting o and reprobating. 4n instructive ease, the dora? necbuse it is st common 1 sw is Hayne v Cummings(16 C.B. (nsly annie ia instructive for the sake of principle. There the Court construed the word "covenant" to meen "condition", Thet in itself is not in point, but the srinoipis on which the Court acted is very relevant, Willes J,said(p.427) "any event "on the happening of which another event is to take plece is @ son- "ea@ition". Byles J, after ststing that there was no covenant or con- -dition, strictly so called to which the proviso for re-entry gould apply,seid:- "what then are we to do? Are we to defeat the just in- -tention of the parties by a rigid application of the rules of law?" After quoting the celebrated observations of Lord Hobsrt commending judges who are astute to effectuste the just intention of the parties, the learned judge proceeded to Gonstrue the word covenant aocorsing) y ' a in order to prevent it being inoperative. To set aside the process contrect sb initiof is to render the original condition altogether inoperative by txatingtreating the process bergain as if it head never bean made. It 13 to leave the parties os if, after the filets con- -tract@ was signed, Case, without any reason but his own will, refused to ehter into the process @greement. Cou%&@ he cling to one snd re- -pudiate the other? We think decidedly not, a to have ettemptea to do so would have been fraudulent. No ground whatever is made for ter- -minsting the flats contract. Mrs Malpas is not even joined as 8 perty and if she were, the most formidable obstscles to rescission would exist. Restitutio in integrum being manifestly impossible even if it were offered.(See our judgment in Fullers Theatre v Musgrove, 31 C.L.R. at. pp.541-543), the suit which ie based entirely on innocent misrep- presentation must fail, even assuming the contract to be still excoutory, As to the question of the application of the doctrine of Seddon's Cage ( 1905,1.Ch.p.526), there ere very interesting problems particulerly 96 to the nature of the interest SOld,which may, we think, soeeee, pb le pe more appropristely deferrea until they become necessary to be considered, The @ppeal should in our opinion be allowed with coats.