#6759 - Barton V. Amstrong - Restitution of Unjust Enrichment BCL

Barton v. Amstrong

Facts

Barton seeks a declaration that a deed dated January 17, 1967, made between the appellant and the first 14 respondents (including Amstrong) and certain deeds ancillary thereto had been executed by him under duress exerted by the first respondent, Alexander Ewan Armstrong, and were void so far as concerned him.

The case is the outcome of a struggle between Armstrong and Barton for control of the fourteenth respondent, Landmark Corporation Ltd., a public company. Barton was the managing director of Landmark and was a substantial shareholder in it - though his holding was less than that controlled by Armstrong.

The principal activity of Landmark was the development through the medium of the eighth respondent, Paradise Waters (Sales) Pty. Ltd. (hereinafter called "Sales"), and the ninth respondent, Paradise Waters Ltd., of a building estate near Surfer's Paradise in Queensland which was to be known as "Paradise Waters."

The "Paradise Waters" project involved the expenditure of large sums in dredging and forming canals to provide water frontages for the lots into which the land was to be subdivided for sale. This expenditure was being financed by advances made by United Dominions Corporation (Australia) Ltd.

In the middle of 1966 relations between Armstrong and Barton which hitherto had been not unfriendly began to deteriorate. In particular Barton resented what he considered to be the undue interference of Armstrong in the day-to-day business of the company and the use by Armstrong of office facilities for purposes of his own unconnected with the company's affairs.

About December 20, U.D.C. threatened to appoint a receiver under its first mortgage unless the sum owing to it was reduced by 60,000 dollars and Armstrong agreed to make an advance of 300,000 dollars to finance the project. The cash payment made by Landmark under the deed denuded it of most of its liquid assets; U.D.C. refused to change its mind with regard to the financing of the Paradise Waters project; and Barton failed to obtain finance from any other source. Consequently Landmark was soon in serious financial difficulties. At this point, Barton felt that Paradise Waters was looking like an impossible project.

Eventually agreement was reached on the following basis: (a) Landmark should transfer to Armstrong for 60,000 dollars a penthouse listed at 80,000 dollars; (b) Landmark should pay Armstrong 140,000 dollars in cash within seven days; (c) the balance of 300,000 dollars owing in respect of the 400,000 dollars debt and the 100,000 dollars cash consideration for the 40 per cent. interest in Sales with interest at 12 per cent. should be paid within a year and secured by a second mortgage on the Paradise Waters property; (d) Armstrong to have an option until March 15, 1967, to buy 35 blocks of the estate at 50 per cent. of the list price; (e) Armstrong's 300,000 shares to be purchased for 180,000 dollars - the purchase price being payable over three years without interest; the purchasers to be Barton and nine others acceptable to Smith each of whom would guarantee payment of his part of the purchase price while Barton guaranteed the whole.

On January 10, without having previously served any letter of demand Barton commenced the present suit alleging that Armstrong on behalf of himself and the Armstrong companies had coerced hum into agreeing to the matters dealt with by the deed of January 17, 1967, by threatening to have him murdered and by otherwise exerting unlawful pressure on him.

It was found on evidence that when U.D.C. went back on its promise to advance the money needed to pay off the debt to Armstrong and further said that it was not prepared to go on advancing money to enable the development to be completed it must have been obvious to Barton that unless U.D.C. could be induced to change its mind again or the necessary money could be obtained from some other source the Paradise Waters project was "finished" so far as Landmark was concerned even it Landmark itself could survive.

In his judgment the judge lists a number of acts done and statements made by Barton both before and shortly after the documents in question were executed which indicate that he was optimistic as to the future once Armstrong was out of the way. Thus on January 3, 1967, he told Smith that once Armstrong was out of the way he was sure that U.D.C. would give the company finance and after the deed was executed he said to Armstrong's solicitor (Mr. Grant) "Now we have got rid of Armstrong nothing will stop us" and told Smith that he thought that the deal was "a miracle."

Issue

Whether it was necessary for Barton in order to obtain relief to establish that he would not have executed the deed in question but for the threats.

Holding

Had Armstrong made a fraudulent misrepresentation to Barton for the purpose of inducing him to execute the deed of January 17, 1967, the answer to the problem which has arisen would have been clear. If it were established that Barton did not allow the representation to affect his judgment then he could not make it a ground for relief even though the representation was designed and known by Barton to be designed to affect his judgment. If on the other hand Barton relied on the misrepresentation Armstrong could not have defeated his claim to relief by showing that there were other more weighty causes which contributed to his decision to execute the deed, for in this field the court does not allow an examination into the relative importance of contributory causes.

Their Lordships think that the same rule should apply in cases of duress and that if Armstrong's threats were "a" reason for Barton's executing the deed he is entitled to relief even though he might well have entered into the contract if Armstrong had uttered no threats to induce him to do so.

What was the state of Barton's mind when he executed the deed is, of course, a question of fact and a question the answer to which depended largely on Barton's own evidence. The judge who heard him give evidence was in a better position than anyone else to decide whether fear engendered by Armstrong's threats was "a" reason for his executing the deed. It was submitted that the decision of Street J. in favour of Armstrong amounted to a finding that fear engendered by the threats was not such a reason and that as that decision had been affirmed by a majority of the Appeal Division the Board should not disturb it. But this case, as their Lordships see it, is not one to which the rule as to "concurrent findings" is applicable.

But even so Barton must have realised that in parting with all Landmark's liquid assets to Armstrong and in agreeing himself to buy Armstrong's shares for almost twice their market value in the hope that when Armstrong was out of the way U.D.C. would once more provide finance he was taking a very great risk. It is only reasonable to suppose that from time to time during the negotiations he asked himself whether it would not be better either to insist that any settlement with Armstrong should be conditional on an agreement with U.D.C. or to cut his own and Landmark's losses on the Paradise Waters project altogether rather...