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I am replying to the issues raised by Duncan Sheehan on 22 July. My first point is that it is not part of my argument, as such, that, in order to protect the expectation interest, the law restricts the type of mistake that will avoid a contract. By extension, it is not part of my argument, as such, that the expectation interest requires equal protection in the non-contractual gift case. Conversely, my argument is based on the proposition that it is an implied rule or principle of the common law that whenever a person manifests an irrevocable intention to alter his rights and obligations - whatever that alteration may be - that intention is binding (although not necessarily enforceable). It is also my argument that the decision in the contractual mistake case Smith v Hughes is consistent with that principle (see my reply of 23 July to Lionel Smith), and that the decisions in the voluntary gift cases mentioned by Duncan Sheehan are also consistent with that principle. By implication, I am not of the view that the test in relation to mistake is far less strict in the voluntary instruments cases than in a contractual case. Conversely, my view is, of course, that the test is the same in both types of case. Moreover, it is my view that the same test applies in a spontaneous gift case (see my discussion of the case where the donor would not have made a gift if he had realised that his enemy was on the board of the donee charity).

In the voluntary instrument case Lady Hood of Avalon, provision was made for daughter A in exactly the same amount as the provision which had earlier been made for daughter B. However, it was readily apparent to an objective observer that when the second provision was made Lady Hood had forgotten that she and her husband had earlier made a smaller provision for daughter A; and that the solicitor who drew the subject instrument was unaware of that earlier provision. It was therefore possible for a reasonable observer to draw from the facts the inference that Lady Hood could not have intended to make a greater provision to A than to B, and that she had therefore manifested by her conduct an irrevocable intention to make provision for the difference, notwithstanding that she executed an instrument which made provision for a larger amount. It is noted that the decision in the Australian case Muschinski v Dodds can also be explained on the basis that it could be concluded from the facts that M could not have intended to make a gift to D of the legal interest in the subject land, notwithstanding that she had placed him on title to the land. By contrast, in the case where the donor was unaware that his enemy was on the board of the donee charity, an objective observer could not have drawn from the surrounding circumstances the inference that the gift was conditional upon the donor not having this particular enemy of the donor on the board of the charity, and that the gift was thus revocable by the donor should he discover that that person was on the board. It can therefore be concluded that the donor manifested an irrevocable intention to make an unconditional gift, and that that intention was binding, and enforceable.

I should add, briefly, my account of the interest protected by the rule that a manifested irrevocable intention to alter rights and obligations - whatever the alteration may be - is binding. Quite clearly, that rule is based on the avoidance of the dashed expectations which would be suffered by a person affected by such an intention should the intention not be binding. Indeed, it is difficult to see how we could have any difficulty with the argument that the only justification which can be raised for the protection of the interest of a donee in an unencumbered-chattel gift case is the prevention of the dashed expectations which would be suffered by the donee if the donor were free to revoke the gift. However, we also have, under the common law, the contradiction inherent in the proposition that if a manifested, provable, irrevocable intention to abandon a right to recover an amount owing is not evidenced by a deed under seal that intention is not enforceable. Because of that anachronistic evidential rule of thumb, which unfortunately has taken on a doctrinal colouration over the centuries, we have had great difficulty appreciating that an informally-evidenced intention to release is binding (and should be enforceable). Moreover, it should be binding because a release of a debt is tantamount to the creditor making a gift to the debtor of the amount owing, thereby enabling the debtor to pay the debt, with the gift and the repayment being in the nature of an accounting set-off. It may also be noted that, because of the attachment by the common law to its indefensible rule on the release of debts, the common law has developed indefensible alternatives under which a release is effective if there is a token promise by the debtor, or if the release has been relied upon.

It is further noted, as background, that two of the majority judges in The Commonwealth v Verwayen held that the Commonwealth's (informally-evidenced) manifested irrevocable intention to abandon its rights to raise its statutory defences was binding, without more; and that, as a matter of logic, the other two majority judges agreed with them when (in the absence of evidence of any conventional reliance detriment) they held that the Commonwealth was estopped because of the dashed-expectations detriment that the plaintiff would suffer if the Commonwealth was allowed to depart from its intention.

I shall leave Svenska International for another day because it would take too long to provide the argument in support of my view that, in separating out the change of position defence from its origins in the doctrine of estoppel, we should take the point that the change of position defence is inherently based on a counterclaim in tort, and that it was not pleaded as such in the early change of position cases because at that time the common law rules of procedure did not allow a counterclaim to be pleaded in the same proceedings as that in which the claim was heard. I note, however, that if my view on the change of position defence is correct, then it would have been open to a party such as Svenska International to have argued that, when engaging in consequential hedging transactions, it acted reasonably in reliance upon the (false) statement by the council that the money paid to it under the (void because ultra vires) contract was paid to it in the discharge of a legal obligation. As that question of fact was not canvassed at the trial it is difficult now to reach a conclusion on it.

Fergus Farrow