IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

BLUE PACIFIC
a duly incorporated company
having its registered office at Vaigaga.
Plaintiff

AND

AITOGI BANSE
of Vaivase-uta.
Defendant

Counsel: JJ Brunt for plaintiff
TK Enari for defendant

Hearing: 29 September and 24 November 2003 
Judgment: 2 December 2003

JUDGMENT OF SAPOLU CJ

Nature of proceedings

The present proceedings are concerned with a motion by the defendant who has become the judgment debtor for orders: (a) to stay execution of the warrant of committal which had been issued against her, (b) to cancel that warrant of committal, (c) to set aside the judgment which had been entered against her, (d) for a rehearing of the plaintiff’s claim against her, and (e) for costs.

The grounds of the motion are: (a) the defendant has valid defences to the claim, (b) the failure of the defendant to air her defences was due to inadvertence, and (c) the delay in bringing this motion was partly due to causes outside the control of the defendant.

Up to now the defendant has not filed a statement of defence even though the Court ordered her on 9 April 2001, upon her application, to file and serve a statement of defence by 23 April 2001 when this matter was to be re-mentioned. However, she has now raised certain defences in her affidavit of 17 March 2003 filed for the present proceedings and in the written submissions of her counsel. These defences are: (a) the contract of hire of the rental car involved in this case was made between her employer and the plaintiff, (b) the plaintiff’s claim against her is excessive, and (c) accord and satisfaction. I will deal with each of these defences later in this judgment.

Even though it is not mentioned in the defendant’s motion as a ground in support thereof, in her said affidavit of 17 March 2003, she also states that she had not been served with the plaintiff’s statement of claim for the original proceedings except a copy of the ordinary summons. She further states in the same affidavit that she had not been served with a judgment summons or the judgment summons order which had been issued against her. However, in the course of her oral testimony given in the present proceedings, she became clear in her recollection of past events and she testified that she was in fact served with a statement of claim, judgment summons, and judgment summons order. The plaintiff has also filed affidavits, one from the person who states that he had served the defendant with an ordinary summons and statement of claim and subsequently with a judgment summons after judgment by formal proof was entered against the defendant, and the other affidavit from the person who says that she served the defendant with the judgment summons order that was issued against her. Thus it is no longer an issue whether the defendant was served with any of the said documents.

In his written submissions, counsel for the defendant states that the defendant’s motion has been filed pursuant to r140 of the Supreme Court (Civil Procedure) Rules 1980 which provides that where judgment has been entered against a defendant in his absence, the defendant may apply to have that judgment set aside and for a rehearing to be granted. It is then for the Court to decide whether to set aside the judgment and order a rehearing. As no issue was raised in this connexion, there is no need to decide whether the motion is properly brought under r140. I will proceed on the assumption that the motion is in order under r140.

Background

On Saturday, 22 April 2000, at 3pm, the plaintiff, which is a rental car company, entered into a hire agreement with the defendant of Vaivase-uta for the hire of one of its rental cars, a two door GEO Sidekick Tracker, by the defendant. Even though the defendant in one of her affidavits filed in the present proceedings, states that the hire agreement was made between her employer and the plaintiff, I am satisfied by the affidavits filed by the plaintiff and from the hire agreement, a copy of which was produced by the plaintiff, that the hire agreement was made between the defendant, herself, and the plaintiff. Under the terms of the agreement, the hire by the defendant of the plaintiff’s rental car was for two days, from Saturday 22 April 2000 at 3pm to Monday 24 April at 8am when the car was to be turned in. The rate of hire was $130 per day. In terms of the agreement, the defendant also took out and paid the premiums for an insurance cover for the two days duration of the hire.

Under clause 5 of the agreement, the defendant was liable up to a limit of $1,200 for costs of repairs and loss of use of the car arising from any damage caused to the car. For any damage over and above that limit, the excess would be covered by the insurance. However, if the damage to the car was the result of the negligent or unsafe manner in which the car was used, operated or driven, the insurance would not apply and the defendant, herself, would have to pay the costs of repairs to the car including any consequential costs for loss of use at the rate of $50 per day during the period the car is being repaired. By clause 9 of the agreement, the insurance would cover any third party property damage arising from the use of the car up to a maximum of $100,000. Without insurance, the defendant would be solely liable for all third party property damage arising from the use of the car.

It is not entirely clear whether the defendant turned in the car on Monday, 24 April 2000, as she was supposed to do under the hire agreement. What is clear is that she is indebted to the plaintiff for rent for one extra day. It is also clear that the defendant continued to use the car after 24 April without paying any more premium to keep the insurance afoot. Then on 27 April, the car, whilst being driven by the defendant, became involved in a head-on collision with a taxi and both vehicles were badly damaged. As a result of that collision, the defendant was charged by the police with careless driving. She pleaded guilty and was convicted of the charge.

A letter, apparently prepared by the plaintiff, was signed by the plaintiff’s general manager and the defendant on 27 April 2000 which was the day the accident occurred. As far as relevant for present purposes, this letter provides:

"Dear Client,

Under the Car Hire agreement you signed when you hired the said vehicle, you agreed to the conditions of the insurance.

These conditions are that if you damage the said vehicle to the extent of $1,500 then you must pay the excess on the vehicle of $1,500.

This amount must be paid in 3 weeks of the damage being reported to our offices.

….

This letter serves to witness your agreement and undertaking of the conditions set out above."

I have quoted from this letter because of its relevance to the defence of accord and satisfaction raised for the defendant and with which I would have to deal later in this judgment. But four points need to be noted now in connexion with this letter. The first is that the reference to $1,500 in the letter is a mistake because under the terms of the hire agreement, the ceiling of the defendant’s liability for any damage caused to the car is $1,200 and not $1,500. I do not construe what the letter says as a valid variation of the hire agreement. What the letter says is that $1,500 is the ceiling of the defendant’s liability under the conditions of the hire agreement. That of course is contrary to what is provided in the agreement that the ceiling of the defendant’s liability for any damage to the car is $1,200. Any excess damage over and above that amount will be covered by the insurance. The second point is that it appears from the plaintiff’s statement of claim that the defendant paid to the plaintiff $1,750 for its liability under the agreement for the damage to the car even though the limit of that liability is $1,200. The third point is that both parties were mistaken when a representative of the plaintiff told the defendant that the insurance would be responsible for paying the costs of repairs to the car and she had to pay only $1,500. The defendant mistakenly believed that was the true position. However, counsel for the plaintiff pointed out during the hearing of these proceedings that it is clear from the hire agreement that the insurance which was paid by the defendant was only for two days from 22 to 24 April 2000, but the accident involving the car occurred on 27 April. So the insurance expired before the accident occurred. He further pointed out that under the hire agreement the insurance would not cover any damage to the car which had resulted from the negligent or unsafe manner in which it had been driven. And the insurer had refused to pay when it found out that the defendant had been charged by the police and convicted of careless driving as a result of the accident. It follows that when the letter already referred to was signed by the plaintiff’s general manager and the defendant on 27 April 2000 referring to the conditions of insurance and the liability of the defendant to be $1,500, they were both acting on the mistaken assumption that the insurance was still afoot and the defendant’s liability was limited to $1,500 and the insurer would pay for the excess damages to the car.

Apart from the damages to the plaintiff’s car and the question of the defendant’s liability for such damages, the plaintiff paid the sum of $1956 to the owner of the taxi that was involved in the head-on collision with plaintiff’s car whilst being driven by the defendant. It is not clear why the plaintiff paid for damage to the taxi because clause 9 of the hire agreement provides that the insurance would cover any third party property damage arising from the use of the car, but without the insurance the defendant is solely liable for such damage. As the insurance had expired before the accident occurred, the terms of clause 9 of the agreement are clear that it is the defendant who is to be solely liable for the damage to the taxi, being a third party property damage. So what has happened is that the plaintiff had paid the owner of the taxi for damage it was not liable for.

After the plaintiff had paid the taxi owner and had accepted from the defendant the sum of $1750 for what it considered to be the limit of the defendant’s liability, and the insurer had refused to pay, it sent demands to the defendant to pay up for the damage to the taxi, the costs of repairs to the plaintiff’s car, and for the consequential loss of use to the plaintiff of its car for the twenty one days it underwent repairs at the rate of $130 per day. The defendant did not pay. Thus the plaintiff brought various Court proceedings against the defendant. I will now set out a chronology of these proceedings adopting substantially the useful chronology provided by counsel for the plaintiff.

Document	
Date
	
Mention dates	
1. O/S & Statement of Claim	7th March 2001	For mention on 26th March 2001. Adjourned to 9th April 2001 for formal proof as defendant made no appearance.	
2. Formal Proof	9th April 2001	Defendant appeared and requested opportunity to find a lawyer and to file statement of defence. Defendant’s request granted and matter was further adjourned to 23rd April 2001 for defendant to file and serve a statement of defence.	
3. Statement of Defence	NONE	23rd April 2001; no appearance by defendant and no statement of defence. Judgment by formal proof entered in favour of plaintiff.	
4. Formal Proof	9th April 2001	Judgment by formal proof entered for total amount of claim of $17,366.20 inclusive of costs ordered. Defendant ordered to pay same amount.	
5. Judgment Summons & Application	Application – 28th June 2001 Judgment Summons - 28 June 2001	For mention initially on 9th July 2001 but was not mentioned until 13 August 2001. Order was granted on 13 August 2001 on Judgment Summons. Defendant as judgment debtor (JD) was ordered to pay $17678.20 in default 10 weeks imprisonment warrant to be suspended so long as JD pays $50.00 per fortnight 1st payment 7 days after service of Order.	
6. Judgment Order	31 August 2001	Served on JD on 6th September 2001 (refuse to sign)	
7. Application for Warrant of Committal	9th May 2002		
8. Warrant of Committal	21st May 2002		

Grounds in support of motion

I propose to deal with the grounds of the defendant’s motion in the following order: causes of the delay in bringing her present motion, reasons for her failure to air her defences, and her proposed defences.

According to the defendant’s motion, the delay in bringing that motion is partly due to causes outside of her control. If that is only part of the reason for the delay, then what is the other part of the reason for the delay. I would also have to assume that the causes claimed to be outside the control of the defendant are those set out in her affidavit of 17 March 2003. 

I have to say that the denials by the defendant in her said affidavit of being served with the plaintiff’ s statement of claim, judgment summons, and judgment summons order and her subsequent oral admissions in the witness stand that she was in fact served with those documents do not assist her credibility and reliability. When the defendant was asked by the Court as to why she did not appear on 26 March 2001 when the plaintiff’s claim against her was first mentioned, she said she was scared as she had not appeared before the Court previously. That is hardly a cause beyond the defendant’s control and provides no satisfactory reason for the delay on her part in bringing her present motion. Then when she appeared on 9 April 2001 when the case was called for formal proof to be provided by the plaintiff, she requested an opportunity to engage counsel and to file a statement of defence. Her request was granted and the case was further adjourned to 23 April 2001 for her to engage counsel and to file and serve a statement of defence. When the case was re-mentioned, the defendant did not appear and no statement of defence was filed or served. No explanation whatsoever has been given to show why the defendant did not appear on 23 April 2001 or filed and served a statement of defence. This absence of an explanation cannot be described as a ground beyond the defendant’s control for the alleged delay in bringing her present motion. The defendant’s failure to appear on 13 August 2001 when the judgment summons which had been served on her was first called for mention was also not explained. Likewise, no explanation was given as to why she did not take prompt action to seek a rehearing of the judgment summons order that was served on her on 6 September 2001.

The defendant then says in her affidavit that she wanted to consult a particular solicitor but she heard that that solicitor had left for overseas. But that solicitor left to take up a post overseas in August 2002, almost a whole year after the defendant was served with the judgment summons order on 6 September 2001. Again no explanation was given as to why the defendant only wanted to consult a solicitor after she had been served with a judgment order for almost a whole year. The defendant then says that she overlooked to take any further steps regarding this matter until a police officer of the police warrants section sent for her and told her to seek legal advice quickly. It would appear that the defendant knowingly neglected this matter until a police officer told her to get legal advice quickly. She then consulted a solicitor and left the matter with him. She says she subsequently did ring this solicitor once or twice to arrange an appointment but the solicitor was overseas. It was then not until the same police officer who had told her to get legal advice quickly put further pressure on her to see a solicitor that she went to see the same solicitor again. However, when the solicitor advised her to pay $50 per fortnight which is the instalment payment specified in the judgment summons order, she was not very happy about it and she changed solicitors.

I must say that it appears to me that the defendant has never had any intention of paying the claim by the plaintiff and she has not made any genuine attempt to pay that claim. She has not even made any attempt to defend the claim as evidenced by the fact that she has never filed a statement of defence even though she had requested the Court on 9 April 2001 for the opportunity to file a statement of defence and was granted that opportunity. I think it must be the threat of the warrant of committal and the likelihood of her going to prison that has finally made the defendant come to Court to seek the various orders now sought in her motion. I reject the ground of her motion that the delay in bringing her motion was partly due to reasons beyond her control.

I would also have to reject the next ground of the defendant’s motion that her failure to air her defences was due to inadvertence. Since March 2001, the defendant has been aware of the proceedings taken by the plaintiff against her but she deliberately chose not to defend any of those proceedings. On 9 April 2001 when judgment by formal proof was to be entered against her, she appeared and requested the Court to give her the opportunity to file and serve a statement of defence. The case was then adjourned to 23 April 2001 for her to do so. She did not appear on that date and has never filed a statement of defence up to now. After she was served with the judgment summons order on 6 September 2001 she did nothing about it until almost twelve months later when she wanted to consult a solicitor who had already left to take up an overseas post. She continued to do nothing until a police officer put pressure on her to seek legal advice quickly. She went and saw a solicitor but she refused to pay the judgment summons order as she was advised to do by the solicitor and she changed solicitors. This is certainly not a failure by the defendant to air her proposed defences due to advertence. That brings me to the final ground of the motion which are the defences raised in the defendant’s affidavit of 17 March 2003 and in her counsel’s written submissions.

Contract of hire was made between defendant’s employer and plaintiff

The first defence raised for the defendant is that the agreement for the hire of the plaintiff’s rental car was made between the defendant’s employer and the plaintiff. So the defendant, not being a party to that agreement, should not be liable under the agreement. The plaintiff has strongly denied this defence saying the hire agreement was made between the plaintiff and the defendant personally.

On the material placed by both parties before the Court, I have no hesitation in rejecting this defence. Apart from the defendant’s assertions in one of her affidavits filed in these proceedings that the hire agreement was made between her employer and the plaintiff, there is nothing else to show that the hire agreement was made between the defendant’s employer and the plaintiff. On the other hand, the plaintiff produced the hire agreement signed by the defendant and plaintiff’s general manager. It shows the parties to be the plaintiff and the defendant of Vaivase-uta. There is no mention of the defendant’s employer. The letter which refers to the hire agreement and its conditions and which mistakenly states the extent of the defendant’s liability to be $1,500 was also signed on behalf of the plaintiff by its general manager and by the defendant personally on 27 April 2000. There is also no reference to the defendant’s employer in that letter. The first and second to last sentences of that letter reads:

"Under the Car Hire agreement you singed when you hired the said vehicle, you agreed to the conditions of the insurance.

……

Should you fail to pay this amount within 3 weeks you will face prosecution by Blue Pacific Car Hire".

The pronoun "you" used in those sentences of the said letter signed by both the plaintiff’s general manager and the defendant clearly refer to the defendant as an individual person and to no one else. It follows there is no valid basis for the first defence raised for the defendant.

Plaintiff’s claim is excessive

The second matter raised as a "defence" for the defendant is that the claim by the plaintiff is excessive. Counsel for the defendant in his written submissions states that the plaintiff’s claim includes costs of repairs to the taxi that was involved in the collision with the plaintiff’s rental car driven by the defendant. It was submitted that the action by the plaintiff in paying the costs of repairs to the taxi does not bind the defendant. It was further submitted that the same action by the plaintiff has deprived the defendant of the opportunity to defend any action by the taxiowner particularly as the defendant maintains that either she is not liable to the taxiowner or the driver of the taxi should be liable in contributory negligence.

It is difficult to see from the material before the Court a sufficient basis for contributory negligence as submitted for the defendant. Counsel also did not show a sufficient basis for the defence of contributory negligence from the material before the Court. I will therefore give no further consideration to the issue of contributory negligence. However, the other matters raised in counsel’s submission merit further consideration. I turn now to those matters.

The effect of clause 9 of the hire agreement is that the defendant would be solely responsible for all third party property damage arising from the use of the rental car unless such damage is covered by the insurance that was paid by the defendant. The insurance that was paid by the defendant at the time of the agreement had expired before the accident, which involved the rental car and the taxi owned by a third party, occurred. The insurance therefore does not apply. In consequence, the defendant is solely responsible for the damage to the taxi owned by a third party. In terms of the agreement between the plaintiff and the defendant, the plaintiff would not be liable at all and it did not have to pay the third party for the costs of repairs to his taxi.

At common law, the relationship between the plaintiff as owner of the rental car and the defendant as the hirer of the car is one of bailor and bailee, with the owner being the bailor and the hirer being the bailee. The hire transaction between them is a bailment. See Avis Rent A Car Ltd v Mainzeal Group Ltd [1995] 3 NZLR 358 and Sumich v Auckland Rental Cars Ltd [1955] NZLR 1131. The duty of the hirer as bailee to take reasonable care of the hired chattel and his liability to the owner of the chattel as bailor for any damage caused to the chattel are discussed in those two cases. But we are not concerned with those issues in the present case. What we are concerned with here is the question of liability for damage caused to property owned by a third party arising from the use of a hired chattel by a bailee.

In Bailment (1991) 2nd ed by NE Palmer, which is perhaps the leading authority on the law of bailment, it is stated at p1573:

"The action [of a third party against the bailor] will not generally succeed where the alleged act of negligence consists in the misuse of the chattel by the bailee or his servants. The bailor has no effective control over the manner in which his bailee, with an independent possession, employs the chattel and is not vicariously answerable for the bailee’s misdeeds because the latter is not generally identifiable as his servant or agent. Thus, to take an obvious example drawn from an American case, a publisher who bails a bookrack to a retailer is not liable if the negligent positioning of the rack in the retailer’s shop causes injury to a customer. But to this general rule there are exceptions, and it seems that the owner of the chattel will be liable for its negligent operation in at least three cases: when the bailee is acting simultaneously as the bailor’s agent, as where he agrees to drive the bailor’s lorry from one place to another in return for free transportation for himself and his goods; when the bailor is guilty of personal negligence, such as by bailing a powerful car to a drunken or inexperienced driver or by giving directions for the use of the chattel which are incompatible with the bailee’s exercise of reasonable care; and when, despite the description of the contract as one of hire, possession of the chattel and the employment of its operator remain with the owner and do not pass to the hirer."

As a general rule then, the bailor will not be vicariously liable for the negligent use by the bailee of a hired chattel because the bailee is not generally regarded as a servant or agent of the bailor. The exceptions to that general principle stated in the passage just cited do not apply to the present case.

Applying the general rule to the circumstances of the present case, it cannot be said that the defendant was acting as a servant or agent for the plaintiff at the time she was driving around in the rental car and when the accident occurred. Her negligent driving cannot be attributed to the plaintiff so that the plaintiff, as bailor, cannot be vicariously liable for the defendant’s negligence. Therefore the plaintiff was not liable, under the law of bailment, to the third party, and it did not have to pay for the damage to the third party’s taxi which was caused by the negligent manner in which the defendant was driving the rental car.

The next question is whether the defendant is liable to reimburse the plaintiff for the sum of $1,956 which the plaintiff, had without the prior knowledge or consent of the defendant, paid to the third party for the damage to his taxi when the plaintiff was under no legal obligation to pay. I think the answer must be that the defendant is not liable to reimburse the plaintiff. To allow the plaintiff to enforce a claim against the defendant for the money the plaintiff had paid to the third party, without the prior knowledge or consent of the defendant, when the plaintiff was under no legal obligation to make such payment, would be tantamount to allowing the plaintiff to impose liability on the defendant even though the defendant has not had the opportunity to be heard on that liability by raising a defence or disputing the quantum of any damages the third party may claim against him. The effect of what the plaintiff has done is to concede liability on behalf of the defendant to the third party without the consent of the defendant. In so doing, the plaintiff has also compromised the defendant’s right to defend any claim by the third party if there is such a claim. It follows that the money the plaintiff paid to the third party should not have been included in its claim against the defendant.

The other part of the plaintiff’s claim which is excessive is its claim for loss of income at $130 per day for twenty one days. The total amount for this part of the claim is $2,730. Under clause 5 of the hire agreement, if the car is damaged whilst it is being hired out by the defendant, then the defendant would be liable not only for the costs of repairs to the car but also for consequential loss of use at the rate of $50 per day during the period the car is being repaired. Presumably the twenty one days for which the plaintiff has claimed for loss of income is the period the car was being repaired. I am of the view the hire agreement governs the extent of the defendant’s liability for loss to the plaintiff of the use of the car. That means $50 per day for twenty one days or a total of $1050.

It appears to me that the plaintiff’s claim for loss of income at the rate of $130 per day is based on the daily rental for the car that was hired by the defendant. But the rate of $130 per day does not take into account the operating or running expenses for the car which should be deducted to arrive at a nett income per day. In any event, the parties had agreed on the extent of the defendant’s liability for the loss of use of the car to the plaintiff whilst it is being repaired for any damage caused by the defendant, and the agreement of the parties should prevail. So the correct quantum of damages the defendant should be liable for under this part of the claim should be $1050.

There was no other matter raised in the submissions of counsel for the defendant in relation to the "defence" that the plaintiff’s claim is excessive. So I will now move on to the final defence of accord and satisfaction raised for the defendant.

Accord and satisfaction

To determine whether the defence of accord and satisfaction raised for the defendant should succeed it is necessary to refer briefly to the relevant facts again. The agreement between the plaintiff and the defendant was for the hire by the defendant of the plaintiff’s rental car for two days, from 22 to 24 April 2000. The defendant paid the insurance for the car for those two days. After two days the defendant continued to keep and use the car. She did not pay for any further insurance. Then the car became involved in a collision with a taxi on 27 April 2000. The insurance had already expired on 24 April.

Under the terms of the hire agreement, if the car is involved in a collision, the defendant is liable to pay the first $1,200 worth of damages for costs of repairs and consequential loss of use whilst the car is being repaired. The insurance will cover any damages over and above the amount of $1,200 for which the defendant is liable. On 27 April 2001, the day of the collision, the plaintiff’s general manager and the defendant both signed a letter addressed by the plaintiff to the defendant. It is important to be clear about what that letter says.

The letter expressly refers to the hire agreement between the plaintiff and the defendant. It also expressly refers to the conditions of insurance the defendant had agreed to and the extent of the defendant’s liability under those conditions. Up to that point the letter is not a new agreement between the plaintiff and the defendant. It is more a reminder to the defendant of the hire agreement she had signed, the conditions of insurance under the agreement, and the defendant’s liability and its extent under those conditions. It is only in the next part of the letter that there is anything which may be loosely described as an agreement between the plaintiff and the defendant. That part says that the amount for which the defendant is liable must be paid in three weeks of the damage being reported to the plaintiff’s office. Apart from that part, the rest of the letter cannot be described as an agreement, let alone an agreement for the defendant to pay a lesser amount in full satisfaction of the claim by the plaintiff.

It is also to be noted that the extent to which the defendant may be liable under the hire agreement is up to $1,200 for the first worth of damages. In the said letter the extent of the defendant’s liability is said to be $1,500.

The submission by counsel for the defendant is that the promise by a representative of the plaintiff to the defendant that if the defendant paid $1500 that would be the end of the matter as the insurance would pay for the rest constitutes accord and satisfaction. I suspect that this submission must be based on instructions that counsel received from the defendant. It does not, however, accurately state the facts. The letter that was signed by the plaintiff’s general manger and the defendant was signed on 27 April 2000 which was the same day the accident occurred. So the letter must have been signed soon after the accident. The defendant only very recently instructed present counsel to act for her. Her memory must have been dimmed by the passage of time so that she cannot recall with accuracy the contents of the letter she signed on 27 April 2000 soon after the accident. I therefore conclude that what actually happened as between the plaintiff and the defendant is as set out in the letter and not as set out in the submission of counsel for the defendant.

For accord and satisfaction to succeed, it is necessary for the defendant to show that the claim by the plaintiff is for an unliquidated sum or is in dispute. It is also necessary for the defendant to show, as a matter of fact, an agreement with the plaintiff by which the plaintiff agrees to accept a lesser sum in full and final satisfaction of the claim. It is then further necessary to show payment of that lesser sum and its acceptance by the plaintiff. If those requirements are satisfied then there is accord and satisfaction and the defendant is discharged from any further liability to the plaintiff.

On the other hand, if the plaintiff’s claim is a liquidated sum which is not disputed, then payment by the defendant and acceptance by the plaintiff of a lesser sum will not be satisfaction of the full claim because of the rule in Foakes v Beer (1884) 9 App Cas 605, unless one of the exceptions to that rule applies. It is important to bear in mind this distinction between accord and satisfaction on one hand and the rule in Foakes v Beer on the other.

In Law of Contract in New Zealand (1997) by Burrows, Finn and Todd, the learned authors state at p659:

"[If] a debt is unliquidated or the subject of dispute the rule in Foakes v Beer does not apply to it; acceptance by the creditor of a lesser amount than he or she is claiming ‘in full satisfaction’ does in fact satisfy and extinguish the debt. This point is now undoubtedly accepted as being correct and in accord with principle".

Then at p662 the same learned authors state:

"[It] should be re-emphasised that there can only be effective accord and satisfaction in respect of a debt which is unliquidated or in dispute. If the debt is for a liquidated sum the rule in Foakes v Beer applies to it."

A number of authorities on accord and satisfaction were cited by counsel for the plaintiff. I need only refer to some of those authorities. In Day v McLea (1889) 22 QBD 610, Bowen LJ said at p613:

"It seems to me, as a matter of principle as well as of authority, that the question whether there is accord and satisfaction must be one of fact. If a person sends a sum of money on the terms that it is to be taken, if at all, in satisfaction of a larger claim; and the money is kept, it is a question of fact as to the terms upon which it is so kept. Accord and satisfaction imply an agreement to take the money in satisfaction of the claim in respect of which it is sent."

In James Wallace Pty Ltd v William Cable Ltd [1980] 2 NZLR 187, Mc Mullin J in the New Zealand Court of Appeal said at p203:

"In that it involves the acceptance of something less than the carrying out of the contract itself, accord and satisfaction differs from a discharge by performance. It is a new agreement under which the party in default is relieved from his former liability by a promise to do something other than what he was obliged to do by the former contract. It is the essence of an accord that there must be an agreement. Whether or not there is an agreement is a question of fact, not law, to be determined from the circumstances of each case."

In Homeguard Products (NZ) Ltd v Kiwi Packaging Ltd [1981] 2 NZLR 322, it was stated by Mahon J at pp 333 – 334:

"So the moral of this case, and of similar cases, is this. When the creditor receives a cheque for a lesser sum on condition that it be accepted in full settlement of a disputed or unliquidated debt, there are only two courses open to him. He accepts the payment, and by so doing the debtor’s original obligation will be finally discharged by accord and satisfaction. The only other course is to return the cheque to the debtor, and then to proceed against him for the full amount said to be due."

Then in HBF Dalgety Ltd v Morton [1987] 1 NZLR 411, Hillyer J explained at p413:

"Accord and satisfaction has been defined as:

‘… the purchase of a release from an obligation whether arising under contract or tort by means of any valuable consideration, not being the actual performance of the obligation itself. The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which makes the agreement operative’ (British Russian Gazette Ltd v Associated Newspapers Ltd [1933] 2 KB 616 at pp 643- 644 per Scrutton J)

If an amount is owing there is an obligation to pay that amount. If there is a genuine despite as to the amount owing, or as to whether it is owing, then an agreement to accept a lesser amount, coupled with a payment of that lesser amount may be accord and satisfaction. If a debtor gives a creditor a cheque for the lesser amount, acceptance of that cheque and banking it could be evidence of such agreement.

If however the creditor’s claim is for a liquidated sum which is not genuinely disputed by the debtor, then prima facie, under the rule in Foakes v Beer (1884) 9 App Cas 605, there is no consideration for any agreement by the creditor to accept the cheque in full satisfaction. Unless one of the exceptions in Foakes v Beer applies, the creditor can recover the balance of the debt.

There must be a genuine dispute. It is not sufficient for the debtor to be reluctant to pay. That I think is made clear in the case of D & C Builders Ltd v Rees [1966] 2 QB 617."

Two other important New Zealand cases were cited by counsel for the plaintiff. These are Budget Rent A Car v Goodman [1991] 2 NZLR 715 and Magnum Photo Suppliers Ltd v Viko New Zealand Ltd [1999] 1 NZLR 395. I need not quote from those two cases but anyone interested in accord and satisfaction is advised to read and study those two cases and the other cases cited in this part of my judgment.

For the purposes of the present case, one matter that comes out very clearly from the passages quote from the authorities is the requirement that there must be an agreement between the parties for the payment of a lesser sum in satisfaction of the amount which is owing. It is that agreement which constitutes the accord. Without it there cannot be an accord and satisfaction. It is the absence of such an agreement that is fatal to the defence of accord and satisfaction raised for the defendant in this case.

The letter that was signed by the plaintiff and the defendant on 27 April 2001 cannot be described as an agreement for the payment of a lesser sum in full and final satisfaction of any liability by the defendant to the plaintiff. Furthermore, when the accident occurred, the insurance had already expired so that the defendant should be personally liable to the plaintiff for the total costs of repairs to the car and for consequential loss of use of the car. The letter of 27 April 2000 does not provide that payment of the sum of $1500 would be in full satisfaction of the defendant’s liability regardless of whether the insurance had expired or not. It is also to be noted that the liability of the defendant under the hire agreement was $1,200 assuming that the insurance was still valid and current. The letter of 27 April 2000 states that the defendant’s liability is $1,500. So how can that letter be construed as an agreement for payment of a lesser sum than the amount for which the defendant is liable to the plaintiff under the hire agreement; the amount of $1,500 is certainly not less but more than $1,200. It follows that the defence of accord and satisfaction cannot succeed.

Orders sought by defendant

There is no difficulty with the motion for an order to set aside judgment and grant a rehearing. The Court has jurisdiction to decide whether to grant or refuse such order. It is the motion for cancellation or stay of the warrant of committal that raises difficulties.

Section 15 of the Judgment Summons Act 1965 provides that whenever the money and the costs specified in a judgment order remain unsatisfied, the registrar, upon the request in writing by the judgment creditor shall issue a warrant of committal. Section 16 then makes provision for the execution of the warrant of committal. Neither s15 nor s16 contains anything regarding cancellation of a warrant of committal. It is only under s19 that the Court is given jurisdiction to cancel a warrant of committal or make other order as it thinks fit. But there are matters which must be done first before the jurisdiction of the Court to cancel a warrant of committal or make other order as it thinks fit arises.

Section 19(1) provides that a judgment debtor may, at any time before or after execution of a warrant of committal, apply to the Court for a rehearing of the judgment summons on which the judgment order was made. Section 19(2) then provides that the Court may grant a rehearing of the judgment summons and thereupon all proceedings under the judgment order shall in the meantime be stayed. Section 19(4) then provides that at a rehearing of the judgment summons, the Court may vary or cancel the judgment order, and cancel any warrant issued thereunder, or make such other as it thinks fit. So the jurisdiction of the Court to cancel a warrant of committal or make such other order as it thinks fit, would only arise at the rehearing of the judgment summons after an application for such a rehearing had been filed and a rehearing granted.

But there has been no application for a rehearing of the judgment summons and there has been no rehearing. It follows that the Court does not have jurisdiction to entertain the motion for cancellation or stay of the warrant of committal. In consequence, I will have to refuse the motion for an order to cancel or stay execution of the warrant of committal. This is not at all a satisfactory situation and it is for counsel for the defendant to consider and take appropriate action.

Decision

The history of this case has shown the defendant to have been neglectful, dilatory and evasive. Ever since March 2001 when she was served with the plaintiff’s statement of claim, she has not responded to all the proceedings that the plaintiff had served. The explanations she has given for the total lack of response on her party are totally unacceptable. It was only after the warrant of committal was issued and she was faced with the real likelihood of going to prison that she finally decided to come to Court and apply for various orders including an order to set aside the judgment that was entered by formal proof against her in her absence on 9 April 2001.

The defendant has filed affidavits in support of her motion to set aside judgment and for a rehearing to be granted. I have considered the extensive submissions put forward by counsel for the defendant and the defences raised on her behalf. I have dealt exhaustively with those defences. I have also considered the extensive submissions put forward by counsel for the plaintiff. I have decided on the defendant’s own oral admissions given in the witness stand that she was served with all the proceedings by the plaintiff. I have also decided, after full and careful consideration of all the material placed before the Court, that the defence of accord and satisfaction and the defence that the hire agreement was made between the plaintiff and the defendant’s employer and not the defendant cannot succeed. The only claimed defence which I have accepted in part is that the plaintiff’s claim is excessive. But the partial success of that defence would only require deductions in the quantum of damages in respect of two heads of damages claimed by the plaintiff. No other defence was raised.

In the circumstances, I have decided that to grant a rehearing and order the defendant to file a statement of defence would only be a pointless exercise particularly as I have received and considered all the defences raised for the defendant and the extensive submissions of her counsel on those defences. It will also only further prolong this case unnecessarily and continue to add unnecessarily to the costs of the plaintiff if a rehearing is granted and for the defendant to file a statement of defence.

I will therefore make the following order. The plaintiff is to file by Friday, 5 December 2003 an amended statement of claim to omit the sum of $1,956 it had paid the third party taxiowner for the damage to his taxi and for the amount of $2,730 claimed for loss of income to be reduced to $1050 for loss of use of the car. Consequential amendment would also have to be made to the total amount of the claim. This matter will be re-mentioned on Friday, 5 December 2003. I will then set aside the first judgment and enter a new judgment for the plaintiff on the basis of the total amount in the amended statement of claim.

Costs of $1000 are awarded to the plaintiff together with reasonable disbursements to be fixed by the Registrar.

CHIEF JUSTICE
Solicitors:
Brunt Keli Law Firm for plaintiff
Kruse, Enari & Barlow Law Firm for defendant