Green v Sommerville

High Court of Australia|1979-07-01|Before: Wilson JJ

High Court of Australia Barwick C.J. Mason, Murphy, Aickin and Wilson JJ. Green v Sommerville [1979] HCA 60

Vendors, the now appellants, sold a residence to a purchaser, the now respondent. The price, $26,000, was payable as to $2,600 by way of deposit and as to the balance on a day certain, namely 10th November 1976. This payment was to be made against delivery of the certificate of title and of a registrable memorandum of transfer of the land to the purchaser. Though not expressly stated in the contract, described as an "Offer and Acceptance", it seems to me clear enough from its terms that rates and taxes were to be adjusted as at the date of completion, on which date possession of the land was to be given and taken.

If for any reason not attributable to the Vendor, the balance of the purchase money or any instalment thereof is not paid by the Purchaser on the due date for payment or within 7 days thereafter then the Purchaser shall pay to the Vendor interest on the amount so unpaid (in addition to any other interest payable under the Contract) at the rate of 12% per annum from the due date of payment to the actual date of payment but this provision shall be without prejudice to the rights of the Vendor under Condition 16 hereof.

(1) Time shall be the essence of the Contract in all respects but neither party shall be entitled to enforce any rights or remedies hereunder or at common law arising out of the default of the other in performing or observing any of the terms and conditions of the Contract (other than the right of the Vendor to sue for any moneys already due) until he has given to the other party a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good within the period stipulated in the notice and the other fails within that period to remedy the default. Any notice given under this paragraph shall not prejudice the right of either party to give any further notice under this paragraph. The period stipulated in the notice shall be not less than 14 days from the date of service of the notice or if the Contract is a Terms Contract not less than the period of notice prescribed in Section 6 of the Sale of Land Act 1970:

(2) If the notice states that unless the default is so remedied the Contract will be rescinded, then if the default is not remedied before the expiration of the stipulated period, the following shall apply: -

(a) The Contract shall be rescinded automatically upon the expiration of the stipulated period but without prejudice to the rights of the parties under this Condition or otherwise under the Contract.

The respondent did not pay the balance of purchase money on the due date. She had depended on the completion of a sale by herself of other land to provide the wherewithal to pay the purchase money. The appellants took no action on non-payment of the purchase price, probably having formed the opinion that the respondent would be able to settle within a short time. This, however, did not happen.

After the lapse of one month from the day set for the payment of the balance of the purchase money, the respondent was let into possession of the land as a tenant at $30 per week rent. She claimed before the primary judge that it was agreed when she was thus let into possession that the rent which she would pay would be in lieu of any interest accruing under cl. 11 of the general conditions. But this was found against her by the primary judge. She may be treated for the purposes of the resolution of this appeal as having been in possession until a date in the month of October 1977.

No settlement of the purchase having taken place by 13th May 1977, the appellants gave to the respondent on that day a notice purporting to be given under cl. 16 of the general conditions. The notice recited that the respondent had defaulted in payment of the balance of the purchase money on the date nominated in the contract and proceeded to "call upon you to remedy such default and to fulfil your part of the said Offer and Acceptance within fourteen days of the receipt of this notice". Apart from adjustment of rates and taxes, the only other obligation of the contract to which the latter part of this notice could refer was the payment of interest on the balance of purchase money.

Following on the giving of this notice, a date for the settlement of the transaction was fixed by the parties at which time the appellants refused to accept the balance of purchase money then tendered by the respondent. The appellants contended that the respondent was bound as well to pay interest at the agreed rate for the whole period from the date fixed by the agreement for the payment of the balance of the purchase price to the date of settlement without any deduction or allowance in respect of the rent which had been paid by the respondent during her occupancy of the land. The appellants then treated the contract as rescinded in terms of the notice of 13th May.

The respondent thereafter commenced a suit in the Supreme Court of Western Australia for specific performance. The primary judge dismissed the suit. From this dismissal the respondent appealed to the Full Court of the Supreme Court which allowed her appeal and ordered specific performance.

Some discussion took place in the hearing of the appeal as to the form of the pleadings and as to the manner in which the suit and the appeal to the Full Court had been conducted. However, in the view I take of the matter nothing in the pleadings nor in the conduct of the case precludes this Court from deciding the case between the parties according to law.

The first question to my mind is as to the availability of cl. 16 to support the notice given by the appellants on 13th May. The law is, as I apprehend it, that a vendor, who has a right to take steps unilaterally to rescind the contract for the default of the purchaser, loses the right to rescind out of hand if, notwithstanding such default, he treats the contract as continuing on foot. Tanner v. Smith [1] , Samuel v. McGillivray [2] and Tropical Traders Ltd. v. Goonan [3] are illustrative of this principle.

(1840) 10 Sim. 410 [59 E.R. 673]. 2. (1888) 14 V.L.R. 784, at pp. 790-791. 3. (1964) 111 C.L.R. 41, at p. 55.

In my opinion, it is abundantly clear that the appellants did treat this contract as remaining on foot, notwithstanding the default in payment of the balance of the purchase money. Not only did they not take any action on that undoubted default, preferring the completion of the contract though at a subsequent date, but they admitted the respondent, as I think because she remained a purchaser, into possession of the land, at an agreed weekly rental pending completion. In my opinion, therefore, the vendors were not entitled on 13th May 1977, to use the non-payment of the purchase price on the agreed date as a ground for giving a notice which could result in the unilateral rescission of the contract.

The matter may be approached in another way. Whilst cl. 16 would have been apt to make time so much of the essence of the contract in relation to the payment of the balance of the purchase money as to warrant the giving of the notice for which that clause provides, the clause could not be effective, in my opinion, to make some time other than that specified in the contract as of its essence. Equity was always jealous of making time of the essence and it would not seem to me consonant with equitable principle to allow a vendor, whilst maintaining the contract on foot after a radical default as in this case, to treat time none the less as continuing of the essence, so as to apply automatically to some substitute date for performance. This question, so far as I know, is not the subject of decision of any court of high authority. It is touched upon in footnote 12 to p. 302 of Voumard's Sale of Land, 3rd ed. (1978). But, in principle, equity, in my opinion, would not allow time to be of the essence by virtue of a clause such as cl. 16 in respect of some date not specified in or necessarily involved in the contract. Thus, it seems to me that if the vendors, having kept the contract on foot, wished to rescind out of hand, they would first have to make time of the essence by a suitable notice and thereafter rescind for non-compliance with it.

There is a further way in which the matter may be approached, namely, by considering the appropriateness of the notice of 13th May 1977. Clause 16 allowed only of a notice to remedy a default in respect of which time could be said to be of the essence. The only relevant default of this kind in this case was the non-payment of the purchase price. It could not be said, in my opinion, that the non-payment of interest was a default of this kind. But the notice does not confine itself to requiring the remedy of default in the non-payment of the purchase price. It requires the performance of the contract in whole. This, as I have mentioned, in substance meant and, in any case, involved the payment of interest. On this perhaps narrow ground I would think the notice does not conform to cl. 16. Being too large, it is ineffective as a notice under the clause.

As in my opinion the notice of 13th May 1977 was for these reasons ineffective to permit of a unilateral rescission of the contract, the purported rescission of the appellants does not stand in the way of the specific performance of the contract.

It is a condition precedent to success in a purchaser's action for specific performance that the purchaser should, at the institution of the suit, be ready and willing to perform the contract. It is quite true in this case that the respondent took an erroneous view of her obligation in respect of payment of interest on the unpaid money. Indeed, as the Full Court decided, both parties adopted erroneous views in relation to that matter. None the less, in my opinion, on the facts as they appeared before the primary judge, it could not be said that the respondent was unwilling to perform the contract according to that construction of it which the Court might put upon it. The adoption by a party of an erroneous construction of the contract is not necessarily fatal to the proposition that, none the less, the party remains ready and willing to perform the contract according to its terms properly construed. In my opinion, the Full Court was not in error in concluding that the respondent was ready and willing to perform the contract.

The Full Court decided that the appellants were not entitled to recover interest upon the balance of purchase money without any allowance being made for the rent which the appellants had received from the respondent in respect of her occupation of the land. I need say no more of this matter than that I agree with the Full Court in thinking that the appellants must give the respondent credit against the interest payable on the unpaid balance of purchase money for the amount of rent which she had paid for her occupation of the land.

Accordingly, I am of opinion that the Full Court was not in error in ordering specific performance of the "Offer and Acceptance" on the terms determined by the Full Court.

This appeal, which arises out of a purchaser's action for specific performance of a contract for the sale of land, raises questions as to the validity of the vendor's notice of rescission, the essentiality of the purchaser's contractual obligation to pay interest on the unpaid balance of the purchase price, and the readiness and willingness of the purchaser to complete the contract according to its terms. An account of the facts, which are not uncomplicated, is an essential preliminary to an examination and determination of the questions of law.

The contract of sale was dated 5th October 1976. By the contract the appellants (defendants) agreed to sell and the respondent (plaintiff) agreed to buy certain land known as No. 80 Fremantle Road, Mandurah, on which was erected a dwelling-house, and some furniture for $26,000.00 of which $2,600.00 was paid as a deposit. The balance of the purchase price was to be paid on 10th November 1976 when, subject to that payment, possession was to be given and taken. The contract was in the form of an instrument described as an "Offer and Acceptance". It contained eight Conditions and one Special Condition. Condition 8 incorporated The Law Society of Western Australia General Conditions for the Sale of Land (1974 Revision) ("the General Conditions").

By cl. 11 of the General Conditions it was provided that, if for any reason not attributable to the vendor, the balance of the purchase money was not paid by the purchaser on the due date for payment or within seven days thereafter, the purchaser should pay to the vendor interest at the rate of 12 per cent per annum from the due date of payment to the actual date of payment.

The respondent's ability to pay the balance of the purchase price was dependent upon the sale of a property which she owned at West Swan and upon her receipt of the proceeds of that sale. As this money was not forthcoming, she could not complete on 10th November 1976, the stipulated date.

In December 1976 the respondent was living in other premises in Mandurah. However, she was required to vacate those premises before Christmas. She then approached E. J. Armstrong & Associates, the appellants' agents, and requested that she be let into possession of the property the subject of the contract, notwithstanding that she was then unable to pay the balance of the purchase price. The appellants, through Mr. Armstrong, agreed to let her into possession at a weekly rental of $30. At this stage the parties clearly proceeded on the footing that the respondent's inability to complete was temporary. So it was, but her inability was to persist for longer than the parties then expected.

The agreement reached between the respondent and Mr. Armstrong ultimately became a bone of contention. The respondent thought that by the agreement the appellants had agreed to accept rent in lieu of the interest payable under cl. 11. The appellants and Mr. Armstrong denied this claim.

The respondent remained in possession of the premises and paid rent from 16th December 1976 until 18th March 1977. According to the respondent, on or about 16th March 1977 Mr. Green, one of the appellants, asked her to leave because the matter "had been going on too long". Two days later she packed a suitcase and went to Perth, leaving some possessions in the house. She did not thereafter occupy the house. None the less, for reasons which remain obscure, it was common ground between the parties that the respondent had remained in possession of the property from 16th December 1976 until at least 11th October 1977. Indeed, it was common ground on the pleadings that she was in possession as a tenant at the date of the issue of the writ which commenced her action for specific performance.

Mr. Green's version of the conversation is that it took place at or about 3rd April when the respondent was about three weeks behind with the rent. He told the respondent that he "would be issuing a letter of default as from 4th April". On that day the appellants' agents sent to the respondent a notice informing her that she had defaulted in payment of the balance of purchase price on 10th November 1976 and that the appellants would exercise their rights unless the default was remedied within fourteen days. On 20th April the agents sent a further notice informing the respondent that the contract was rescinded as from that day and the deposit forfeited. The notice required the respondent to vacate the property.

For reasons which are unexplained, the appellants placed no reliance on these notices. On 13th May the appellants gave the respondent a further notice that she was in default under the contract. This notice stated:

Hereby give you notice that you the said Glenda Joyce Sommerville (hereinafter called "the Purchaser") have made default under the Offer and Acceptance in that you have failed to make payment of the sum of Twenty three thousand four hundred dollars ($23,400.00) on the 10th day of November 1976 as specified in the said Offer and Acceptance. And further take notice that the said Maxwell Kevin Richard Green and Barbara Green (hereinafter called "the Vendors") hereby call upon you to remedy such default and to fulfil your part of the said Offer and Acceptance within fourteen (14) days of the receipt of this Notice This notice and the two earlier notices were evidently issued in reliance on cl. 16 of the General Conditions, to which I shall refer later.

It appears that the appellants, with the assent of the respondent, fixed 30th May 1977 as the date for settlement of the contract in consequence of the third notice to which I have referred. Arrangements were made by both parties for settlement on that date. However, they were unable to agree upon the amount to be paid by the respondent on settlement. The appellants claimed that the amount due from the respondent was $24,993.50, made up of $23,400.00 (balance of purchase price), $47.18 (adjustments to rates and taxes) and $1,546.32 (interest at 12 per cent from 10th November 1976 to 30th May 1977). The respondent claimed that the amount due on settlement was $23,938.30, being the balance of purchase price already mentioned and $538.30 representing interest from 17th March 1977 until 30th May 1977. Neither party seems to have considered that outstanding rent was payable on settlement. The amount of $23,938.30 was tendered on behalf of the respondent in discharge of her obligations under the contract. The tender was rejected on the ground that it was not the amount due under the contract.

As the parties could not resolve their difference, the appellants then gave the respondent a notice of rescission dated 7th June 1977. This notice stated that the contract was rescinded on the ground that the default specified in the notice dated 13th May had not been remedied.

On 20th July 1977 the respondent commenced her action for specific performance. By their defence the appellants pleaded that the contract had been finally rescinded by the notice dated 7th June and they denied that the respondent was ready and willing to perform the contract. They filed a claim for mesne profits.

The suit was heard by Brinsden J. who found for the appellants. The crucial issue, as he saw it, lay in the difference between the amount tendered by the respondent on settlement and the amount alleged by the appellants to be due. Central to this difference was the oral agreement between the respondent and Mr. Armstrong on which the respondent based her claim that interest was to be waived if she paid rent at the rate of $30 per week. His Honour dealt with the oral agreement in this way:

in my view the evidence falls far short of establishing any such agreement. The only witness who gave evidence for the plaintiff concerning this agreement, was the plaintiff, whereas the defendants were both called together with Mr. Armstrong and one of his employees and from their collective testimony, if believed, it appears that at no time did the defendants agree to waive interest for any period while the plaintiff was in possession as tenant or at all, but expected to be paid the interest and the rent. I have no doubt that the evidence of the defendants and their witnesses is to be preferred and I make a finding that there was no agreement that by accepting the plaintiff as tenant, the defendants agreed to forego any portion of their entitlement to interest provided by cl. 11. I might add in this regard that in reaching this conclusion, I am not to be thought as basing my finding upon the belief that the plaintiff was untruthful, for I think her position during all relevant periods, was as described by Mr. Armstrong, namely that she was in a bad nervous condition by reason of being under a considerable amount of pressure. In short, she wasn't well and I think, not really capable of understanding or handling the business side of this transaction.

However, the primary judge went on to hold that, under the general law, the appellants were not entitled on settlement to insist upon payment of both interest and rent. He observed:

Up to the date fixed for completion, the vendor was entitled to receive the rents and profits on his own behalf, but thereafter, though he was entitled to interest on the purchase money, he became a trustee, for the purchaser, of the rents received after the date of completion. If of course, the sale went off, then he would hold those rents for himself. His Honour went on to say that the appellants should have credited the respondent with the rental money received by them. None the less he went on to find that the amount of interest which the respondent was liable to pay to the appellants far exceeded the aggregate of the amount of rent actually paid and the interest which she tendered. Consequently, even if the rents had been credited, her liabilities under the contract, including rent, exceeded $23,938.00, the amount of her tender. In the result, it was held that she failed to comply with the notice of 13th May and that as from 30th May the contract was at an end. The suit for specific performance was dismised.

In the Full Court a very different view prevailed. Burt C.J. (with whom Wallace and Jones JJ. agreed) held that the appellants had not validly rescinded the contract because the breach specified in the notices of 13th May and 7th June, namely the respondent's failure to pay the balance of the purchase price on 10th November 1976, was no longer available to the appellants. His Honour reached this conclusion because he took the view that the appellants had elected not to rescind upon the respondent's failure to pay the balance of the purchase price on 10th November 1976. His Honour said:

It was, I think, a case in which the respondents had by conduct elected not to rescind. They did that by agreeing that the appellant could and by allowing her to occupy the premises as a tenant paying rent pending completion. If this is so, then as it seems to me it was not open to them some six months later to rescind upon the ground specified it being that the appellant had failed to pay the balance of the purchase price on 10th November 1977. It then followed that the contract remained on foot as at the date of the writ.

According to Burt C.J., the respondent was ready, willing and able to pay the balance of the purchase price and by tendering the balance she remedied the breach of contract which occurred on 10th November 1976, thereby making good the matters complained of in the notice of 13th May. Her refusal to pay interest as well as rent went to an "inessential term" and amounted to no more than an assertion of a wrong view of the contract. In the result, the appeal was allowed and an order for specific performance made.

The appellants challenge the correctness of the Full Court decision on two grounds: (1) that the defence of election was not an issue raised on the pleadings, that it was not explored at the trial, that it arose for the first time during the course of argument in the Full Court and that had it been tested as an issue the evidence may have thrown new light upon it; and (2) that the payment of interest was not, as the Full Court thought, an "inessential term" of the contract and that, as a consequence, the finding that the respondent was ready and willing to perform the contract according to its terms was erroneous.

It is convenient for me to begin by examining cl. 16 of the General Conditions which was the basis for the appellants' notice dated 13th May 1977. The clause provides:

(1) Time shall be the essence of the Contract in all respects but neither party shall be entitled to enforce any rights or remedies hereunder or at common law arising out of the default of the other in performing or observing any of the terms and conditions of the Contract (other than the right of the Vendor to sue for any moneys already due) until he has given to the other party a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good within the period stipulated in the notice and the other fails within that period to remedy the default. Any notice given under this paragraph shall not prejudice the right of either party to give any further notice under this paragraph. The period stipulated in the notice shall be not less than 14 days from the date of service of the notice or if the Contract is a Terms Contract not less than the period of notice prescribed in Section 6 of the Sale of Land Act 1970.

(a) The Contract shall be rescinded automatically upon the expiration of the stipulated period but without prejudice to the rights of the parties under this Condition or otherwise under the Contract.

The clause goes on to provide that if the notice is given by the vendor he may forfeit the deposit, except so much as exceeds 10 per cent of the purchase price, retain all interest paid by the purchaser and proceed to take possession of the property sold. It also entitles the vendor to retain the property and sue the purchaser for damages or resell the property.

Now, it will be seen from the terms of cl. 16 (1) that it disentitles a party from enforcing rights arising for breach of the contract unless he first gives a notice specifying the default and stating his intention to enforce his rights unless the default is made good within a period stipulated in the notice and the other party fails to remedy the default. It follows that, to comply with cl. 16 (1), the notice must require the party to whom it is given to remedy the breach specified within the time stipulated. The automatic rescission for which cl. 16 (2) provides takes place at the expiration of the stipulated time when the breach is not remedied.

The notice dated 13th May 1977 went beyond cl. 16 (1). It not only required the respondent to remedy within fourteen days the breach complained of, namely non-payment of the balance of the purchase price on 10th November 1976, it also called on the respondent "to fulfil your part of the said Offer and Acceptance within fourteen (14) days of the receipt of this Notice". The effect of the inclusion of the requirement to complete did not invalidate the notice. However, the inclusion of the additional requirement could not itself provide a foundation for a rescission under cl. 16 (2). Although a failure by the respondent to remedy the breach specified within the fourteen days would bring into operation an automatic rescission pursuant to cl. 16 (2), the failure on her part to complete the contract in respects other than the payment of the balance of the purchase price due on 10th November 1976 would not attract any consequences under that clause. This follows from the fact that the sole purpose of cl. 16 (2) is to bring about rescission for failure to rectify the breach of contract specified in a notice given pursuant to cl. 16 (1).

Once this view is taken of the clause and of the notice dated 13th May, it is evident that the notice could not ground the rescission which the appellants asserted in their later notice of 7th June. The respondent remedied the requirement in the earlier notice that the balance of the purchase price due on 10th November 1976 be paid. This she did by tendering an amount in excess of $23,400.00 on 30th May 1977, the date for settlement subsequently agreed upon by the parties. Her failure to complete the contract by making payment of all the interest due on 30th May 1977 was not to the point. For the reasons already given, it did not give rise to an automatic rescission under cl. 16 (2).

The case pleaded by the respondent in her reply directly challenged the validity of the rescission set up by the appellants, though the case pleaded was that the promise to pay the balance of the purchase price on 10th November 1976 was varied by the oral agreement by which the respondent was let into possession. The trial was fought on the footing that the rescission was in issue. The ground on which I have held the rescission to be ineffective was not specifically pleaded. However, as the rescission was in issue and as the ground which I have taken does not depend for its validity on findings of fact not litigated at the trial, I consider that the matter comes within the rule that the judgment appealed from may be supported on a ground not previously argued. When a question of law is raised for the first time, even in a court of last resort, "upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient, in the interests of justice," to decide it (Connecticut Fire Insurance Co. v. Kavanagh [4] , per Lord Watson; Suttor v. Gundowda Pty. Ltd. [5] ). In this instance the conclusion that cl. 16 (2) did not bring about a rescission emerges from an examination of the notice dated 13th May 1977 read in the light of cl. 16, and from the respondent's tender of the balance of the purchase price on 30th May, this fact being common ground between the parties.

[1892] A.C. 473, at p. 480. 2. (1950) 81 C.L.R. 418, at p. 439.

This brings me to consider the respondent's obligation to pay interest under cl. 11 of the General Conditions. Was the respondent's tender on 30th May 1977 of interest amounting to $538.00 instead of $1,156.32 (being $1,546.32 less $390.00 the rent actually paid) a breach of an essential term of the contract or, as it is sometimes put, of a term which was interdependent with the appellants' obligation to convey?

The answer to this question depends upon the contract and it is strangely silent upon the point, as it is upon other matters, such as adjustment of rates and taxes and other outgoings. Clause 11 of the General Conditions makes no mention of the time for payment of interest. It merely provides that the purchaser shall pay interest from the due date for payment to the actual date of payment. Likewise, cl. 3 of the General Conditions, which deals with " payment and settlement " makes no mention of interest. It provides:

settlement of the sale and purchase shall be effected by payment of the balance of the purchase money by bank cheque or cheques on the settlement date stipulated in the Contract (but subject to Condition 15 if applicable) against receipt from the Vendor of a proper registrable transfer of the Property in favour of the Purchaser together with the duplicate certificate(s) of title relating thereto Had the contract provided for the payment of interest together with the balance of purchase price on settlement or had it conditioned the performance of the vendor's obligations on such payment, it would have been easy to reach the conclusion that payment of interest was interdependent with the vendor's obligation to transfer. Yet the contract does neither of these things. Clause 3 merely provides that settlement will be effected by payment of the balance of the purchase money against the transfer and certificate of title. Clause 3 is therefore inconsistent with the notion that the payment of interest is interdependent with the appellants' obligation to deliver a registrable transfer, for it proceeds upon the footing that the counterpart obligation to the purchaser's right to a transfer of the interest in the land is the payment of the purchase price, the payment of interest being a compensation for late payment (see Mehmet v. Benson [6] ).
1. (1965) 113 C.L.R. 295, at p. 308.

Nevertheless the respondent was, in my opinion, in breach of contract by failing to pay on 30th May 1977 the interest which was then due. The implication to be gathered from the contract is that interest was payable either on the day fixed for settlement, if not upon earlier demand. But, as I have said, the failure to pay interest was not a breach of an obligation interdependent with the appellants' obligation to transfer.

For present purposes it is not necessary to explore the precise difference between the expressions "interdependent obligation" and "essential term". An obligation may be essential, yet not interdependent with an obligation imposed on the other party to the contract, although in general, under a contract for the sale of land not on terms, an obligation imposed on a purchaser by an essential term will be interdependent with the vendor's obligation to transfer. The contrast between a term which is "essential" and one which is "trivial" is often employed. But it does not mean that a term which is not trivial is essential. The obligation to pay interest, though not a trivial term, is for reasons already explained, not an essential term.

Clause 16 made time of the essence of the contract in all respects. Consequently, the completion of the contract on 10th November 1976 was of the essence. However, in the events which happened, the effect of cl. 16 was not to make the payment of interest on 30th May 1977 an essential obligation. The agreement by which the respondent was let into possession amounted to a variation of the contract. She was let into possession because she was the purchaser, and not otherwise. One consequence of the agreement was that the payment of the agreed rent was to be credited in payment of the interest payable under the contract, if the contract was ultimately completed. Another consequence was that the date for settlement fixed for the contract was abandoned, the time for completion being extended indefinitely. The notice of 13th May 1977 in terms required completion within fourteen days, that is, on or before 27th May. But it was subsequently arranged by the parties that settlement should take place on 30th May. However, there was no agreement making time of the essence in this respect and the appellants did not by notice attempt to make time of the essence.

Does the respondent's failure to pay the amount of interest due on settlement, though not a breach of an essential term, disentitle her to specific performance on the ground that she was not ready and willing? In my opinion, it does not. It is well settled that a plaintiff in a suit for specific performance is not required to show that he has strictly complied with all his obligations under the contract; it is enough that he has performed and is ready and willing to perform the substance of the contract (Fullers' Theatres Ltd. v. Musgrove [7] ). In Mehmet v. Benson [8] , the purchaser was in default in payment of instalments of purchase price and interest under a terms contract. Yet he succeeded in a suit for specific performance. Barwick C.J. said [9] :

It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations. Here the substantial thing for which the defendant bargained was the payment of the price: and, unless time be and remain of the essence, he obtains what he bargained for if by the decree he obtains his price with such ancillary orders as recompense him for the delay in its receipt. To order specific performance in this case would not involve the court in dispensing with anything for which the vendor essentially contracted.

Of course, the plaintiff must not by his unreadiness or unwillingness to perform have disowned his obligation to do so, or abandoned his rights to the benefit of the contract. But it is the essential terms of the contract which he must be ready and willing to perform. He seeks a transfer of the interest in land, the subject of the contract: the counterpart obligation is the payment of the price.

(1923) 31 C.L.R. 524, at p. 550. 2. (1965) 113 C.L.R. 295. 3. (1965) 113 C.L.R., at pp. 307-308.

if, notwithstanding earlier breaches, the contract remained on foot, then it seems to me a plaintiff is not necessarily barred from having a decree for specific performance if those breaches, not having resulted in a valid rescission, can be made good by the payment of interest. But, generally speaking, it is I think sufficient that the plaintiff in a purchaser's suit should allege that he is presently ready and willing and offers to pay the purchase money and that it is not strictly necessary in every case for him to go further. 1. (1965) 113 C.L.R., at pp. 314-315.

In Mehmet v. Benson [11] the plaintiff offered to pay the full balance of the purchase price before the contracted time. In the present case, the respondent alleged her readiness and willingness to perform the contract but, by insisting that it was agreed that the payment of interest should be waived, she was insisting on a mode of performance of the contract to which she was not entitled. What is more, she did not in her statement of claim offer to perform the contract on its true construction. However, in the circumstances of this case I do not think that these considerations are inconsistent with a finding that the respondent was ready and willing to perform the contract at the commencement of the suit. First, the respondent was, on the view which I take of the contract, ready and willing to perform her essential obligation under the contract, that is, by paying the balance of the purchase price. Secondly, it is a general principle of the law of contract that the court will not readily infer from a party's insistence on a wrong construction of a contract that he is unwilling to perform it according to its true construction. This principle applies to the plaintiff's readiness and willingness in a suit for specific performance (Sweet & Maxwell Ltd. v. Universal News Services Ltd. [12] ). Although there is, as far as I am aware, no recorded instance of the application of this or of a similar principle to circumstances in which the plaintiff, as here, has insisted on an oral variation of the contract which is determined against her, I can see no reason why the principle should not apply to a case in which there is a dispute as to the nature and effect of an oral agreement and the view for which the plaintiff contends is bona fide held by her. The fact is, as the primary judge found, that both parties maintained an incorrect view as to the amount of interest payable. In this situation I agree with Burt C.J. in the Full Court when, quoting the observations of Stephen, Mason and Jacobs JJ. in D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. [13] , he said that it was a case in which the respondent "though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor". It was not a case in which the plaintiff persisted in an untenable view of the contract. Nor was it a case in which it could be said that the respondent came with unclean hands. This is important because the concept of readiness and willingness is an exemplification of the maxim "He who comes to equity must come with clean hands".

(1965) 113 C.L.R. 295. 2. [1964] 2 Q.B. 699, at p. 734. 3. (1978) 138 C.L.R. 423, at p. 432.

In the result I do not find it necessary to consider the additional ground taken by Wallace J. in the Full Court that, by reason of the oral agreement, the contract was a "terms contract" within the meaning of s. 5 of the Sale of Land Act, 1974 W.A. and that as a consequence the notice dated 13th May 1977 gave inadequate time for remedying the breach specified. Likewise, I have no need to consider the effect of the notices dated 4th and 20th April 1977.

I agree with Mason J. The appeal should be dismissed.

I have had the advantage of reading the reasons for judgment prepared by my brother Mason and am in agreement with his conclusions. Those conclusions necessarily follow from the authorities to which he refers, and there is nothing that I can usefully add.

I, too, would dismiss this appeal. The facts of the case, and the various principles of law applicable thereto, are canvassed in the reasons for judgment of my brethren. It is therefore possible for me to state summarily the conclusions to which I have come, and which dictate for me the fate of the appeal.

Although cl. 16 (1) of The Law Society's General Conditions for the Sale of Land provided that time was to be of the essence of the contract in all respects, the conduct of the vendors in letting the purchaser into possession and taking no immediate action to rescind the contract on her default in payment of the balance of the purchase price on 10th November 1976 constituted a waiver of their right to the benefit of that provision.

That waiver did not disable the vendors at a later date, given an unreasonable delay on the part of the purchaser in payment of the balance of the purchase price, from seeking to bring about either completion or the rescission of the contract.

The notice of demand of 13th May 1977 was directed to this end and was prima facie valid despite the earlier waiver by the vendors of their rights under cl. 16 (1). By this time the purchaser had defaulted in payment of the balance of the purchase price for an unreasonable length of time after the waiver, and the notice gave the purchaser sufficient time to comply with the demand (not less than 14 days).

Unfortunately, the notice demanded too much. The vendors were entitled to demand the payment of the balance of the purchase price under threat of rescission, but not the payment of interest. The obligation to pay interest was clearly a contractual obligation, but it was not an obligation which entitled the vendors to rescind in the event of default.

In view of the importance to the purchaser of a notice of demand of this nature, such notice must be framed in strict conformity with the vendor's rights. The present notice failed in this respect and it was, therefore, ineffective.

In any event, by tendering on 30th May 1977, the agreed date, a sum of money exceeding the balance of the purchase price the purchaser successfully answered the threat of rescission. The notice of rescission dated 7th June 1977 was of no effect.

On 20th July 1977 the date on which the purchaser instituted her suit for specific performance, she was ready and willing to perform the contract.

At a glance

Court

Decision date

Before

Source

Judgment (77 paragraphs)

Parties