Brien v Dwyer

Brien v Dwyer - [1978] HCA 50 - HCA 1978 case summary — Zoe

[59]

It was not necessary for the vendor, before he terminated the contract, to give notice requiring payment of the deposit within a reasonable specified time. The time for payment of the deposit was, as I have held, fixed by the contract, and the condition that the deposit be paid upon the signing of the agreement was an essential term going to the very root of the contract, the breach of which would immediately entitle the vendor to terminate the contract. In Myton Ltd. v. Schwab-Morris [18] , Goulding J. held that a clause requiring that a deposit be paid on the signing of the contract stated a condition precedent to the contract taking effect. Alternatively, he held that if payment of a deposit was not a condition precedent it was a term of so radical a nature that a failure to comply with it would entitle the other party to renounce further performance. In Alarm Facilities Pty. Ltd. v. Jackson Constructions Pty. Ltd. [19] , Wootten J. held in the case of a contract in similar terms to that in the present case that the payment of a deposit was not a condition precedent to the coming into operation of the contract, but that failure to pay the deposit constituted default under the contract. With respect I agree with Wootten J. that cl. 1 does not state a condition precedent. There is nothing in the words of the contract that suggests that payment of a deposit is a condition precedent to the coming into existence of the contract; on the contrary, a failure to pay the deposit is a breach of a term of the contract, namely the term contained in cl. 1. However, I respectfully agree with the alternative view of Goulding J. that the character and importance of a deposit indicate that the clause requiring payment of a deposit is a fundamental term the failure to perform which goes to the root of the contract and entitles the vendor to renounce further performance. A similar view was expressed by Woodhouse J. in Watson v. Healy Lands Ltd. [20] . This conclusion is supported by the final words of cl. 1, read in conjunction with cl. 16. If the vendor is entitled to terminate the agreement immediately and without notice when a cheque given in payment of a deposit is dishonoured it would be strange if he were not entitled similarly to terminate the agreement if no payment was made at all.

[65]

It does not seem to me material to consider whether the solicitor who instructed the agent to bank the cheque had authority to do so or whether the cheque was banked before or after the notice of termination was given. Nor is it necessary to consider the circumstances in which the agent withheld the cheque from presentation after 1st April 1973. The vendors were not aware until some time in May that the post-dated cheque had been accepted and held. They did not expressly authorize the agent to accept payment either on 1st April or on 10th May. In my opinion the agent had no actual or ostensible authority on either of those dates to receive payment of the deposit. The expression "agent", when used in relation to an estate agent acting for a vendor, is misleading, as has been pointed out by this Court in Petersen v. Moloney [24] , and by the House of Lords in Sorrell v. Finch [25] . Such so-called agents do not have a general authority to act on behalf of the vendor in relation to the contract. They have no general authority either to accept a deposit before a contract is made (Sorrell v. Finch [26] ) or to receive the purchase money (Petersen v. Moloney [27] ), although such authority may of course be conferred on an agent in a particular case. Conflicting opinions have been expressed as to whether an agent has a general authority to receive a deposit when a contract is made, but in the present case, as in most cases in practice, authority to do so is expressly conferred by the contract of sale. It is however clear in principle that where the contract of sale expressly provides for the payment of the deposit to the agent, the authority of the agent to receive the deposit is limited by the provisions of the contract. In the present case the authority of the agent was to receive a deposit paid in accordance with cl. 1. As I have said, the agent was authorized to accept a cheque, but not a post-dated cheque. He was authorized to accept payment of the deposit "upon the signing of this agreement", but not later. Of course, the vendor might have ratified the acceptance of a belated payment, but there was no ratification in the present case. The agent therefore had no actual or ostensible authority to accept payment on 10th May, or if it matters on 1st April, because by those dates the time specified in the contract for payment of the deposit was long past. In other words, the deposit was never paid in accordance with the contract. I do not find it possible to regard the case as one in which the default had been remedied, and the conditions of the contract fulfilled, before the notice of termination was given. At best the purchaser had offered to remedy the breach and this offer was accepted by the agent, who acted however without the authority or knowledge of the vendors. The vendors did not waive their right to terminate the agreement and in the circumstances they were not estopped from exercising that right. In my opinion the right was effectively exercised, and the Court of Appeal was right in dismissing the action for specific performance.

[93]

So, the appellant was in breach of an essential or fundamental condition. Strict performance of the condition was not waived by the respondents at any time because at no material time before termination did they know of the breach. The consequence, it was held in the Court of Appeal, was that the respondents were entitled to rescind the contract for breach. This conclusion would follow from the application of the broad principle that a party to a contract may rescind for breach of a term or condition performance of which has not been waived. But the real question is whether the general rule is an all-embracing one, necessarily applicable to the facts of the present case. The general rule was designed by the courts to meet the situation where the innocent party had suffered an injury in the performance of the contract which he was not bound to tolerate even if he could not show that the injury had caused pecuniary loss to him; he would nevertheless not be getting in the long run precisely what he had bargained for. It is seldom that a breach of an essential condition can be so wholly cured that when it is cured without the innocent party being aware of the breach he is in no worse position than if there had been no breach at all. In this respect the late payment of a deposit to a stakeholder may possibly stand alone among real, rather than fanciful, situations. So long as the deposit is not paid the vendor is undoubtedly gravely prejudiced and he can certainly rescind the contract. Further, if he learns of the non-payment before the deposit is paid, he would be prejudiced if he could not immediately resell without having first to give notice rescinding the earlier contract. But if the deposit is paid and is safely in the hands of the stakeholder before the vendor has taken any step to inquire whether or not it has been paid the vendor, once it has been paid, is in the same position as if the deposit had been paid on time. He suffers no continuing prejudice under and in the performance of the contract. It is true that he might say "If I had known, I could have rescinded and therefore I was prejudiced". But that, it seems to me, is not prejudice under and in performance of the contract. At the most he is deprived of a justification for non-performance of the contract on his part and that is not a relevant prejudice. It should be noted that failure to pay a deposit which is payable to a vendor or agent of a vendor raises different considerations. On the one hand the vendor is inevitably out of his money while the deposit is unpaid, and on the other hand he has immediate notice of the breach and is both entitled (and depending on the circumstances bound) to act in the light of that knowledge.

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Judgment (112 paragraphs)

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