Huppert v Stock Options of Australia Pty Ltd

Either contemporaneously with obtaining from a writer an option on a specified number of shares in a named company or soon thereafter, the respondent itself gives an option or options to another person or other persons on shares of the same description up to the total number covered by the option obtained from the writer.

On closing with the writer for the grant to it of an option, the respondent issues a "confirmation of purchase" note setting out the terms of the option, the price, particulars of the shares and the period within which it may be exercised: but not specifying any manner by which the option may or must be exercised.

Upon the grant by it of an option, the respondent gives to its optionee an option certificate entitling the holder, if he exercises the option, to demand delivery of the shares covered by it in exchange for the stipulated price.

The respondent, some considerable time before the events giving rise to the present action, entered into an agreement with the Stock Exchange of Melbourne promising that all options "negotiated" by it would be endorsed by a member or member firm of the Australian Associated Stock Exchanges or by a member or member firm of any other Stock Exchange recognized by the Stock Exchange of Melbourne; and that it would not itself act as a writer of options. The consideration for this agreement was expressed to be the agreement of the Stock Exchange of Melbourne to permit its members to endorse, on behalf of their clients, options negotiated by the respondent.

The appellant is an investor who at the relevant time held substantial numbers of both North Broken Hill and South Broken Hill shares.

On 18th December 1963 discussions took place between the appellant and the respondent for the grant by the appellant to the respondent of options exercisable within six months on three separate parcels of such shares at stated prices. After a considerable contest of fact before it as to the terms on which the parties had agreed, the Supreme Court found that on that day the appellant did give to the respondent options over parcels of the said shares, and that it was a term of the oral agreement then made that the appellant should procure from a member of a recognized Stock Exchange for the benefit of the respondent a "guarantee" by such member that if the appellant did not perform the option agreement by delivering the shares comprised in the option upon its exercise, such member would do so: and that the procuring by the appellant of such "guarantee" would be by means of his obtaining the endorsement by such member as endorsing broker upon the written confirmation of the option agreement.

On 18th December the respondent itself granted options commensurate in numbers and description of shares with the options thus granted to it by the appellant.

In connexion with a prior transaction, the appellant had informed the respondent that Clendinnen Reed and Co., member firm of the Stock Exchange of Melbourne, were his share brokers. On 19th December the respondent issued and forwarded to Clendinnen Reed and Co. for endorsement by them confirmation of purchase notes covering the options granted by the appellant. Upon the brokers asking the appellant whether they might endorse these notes, he directed them not to do so. In conversations on that day with the respondent, the appellant both denied that he had agreed to the terms which I have set out, and stated categorically and for reasons which he then expressed that he would not in any case obtain the endorsement of a broker, as requested.

Whether the appellant's promise to obtain the broker's endorsement of the options was a promise to do so forthwith or to do so at some time during the currency of the option, this attitude of the appellant communicated to the respondent was a breach, actual or anticipatory according to the view taken of his promise, of what was an essential term of the agreement as found by the Supreme Court. In either case it amounted, in my opinion, to a repudiation of the agreement granting the options which the respondent might have accepted in discharge of the whole agreement. The respondent thereupon could have sued the appellant for that repudiation. The respondent's damages in such an action would have been the cost of obtaining similar options to those the appellant was held by the Supreme Court to have granted. In the event that such options were unobtainable, the cost of placing itself in position to perform the options it had granted might have afforded the measure of the respondent's damages. But whether it be the cost of replacement options or of becoming able itself to perform the options it had granted, the respondent would be bound to deal in the market, whether for options or shares, as at the date of the repudiation. As the option premiums and the option prices of the shares in the agreement with the appellant were probably current ruling rates or prices, or close thereto, it might be expected that the damages for repudiation before 24th December 1963 of the option agreement would not have been extensive.

But, however that may be, the respondent did not accept the repudiation by the appellant as resolving their contractual relations. It informed the appellant that it held him to his agreement.

The respondent thereafter, on 24th December 1963, commenced this action against the appellant by writ of summons claiming damages but without any statement of claim endorsed thereon or delivered therewith. This proved to be an action for the appellant's breach of contract in not obtaining the endorsement of a broker on the confirmation of purchase notes covering the options granted on 18th December 1963.

In due course the options granted by the respondent were exercised by its optionees. The respondent thereupon applied to Clendinnen Reed and Co. for the shares covered by the options granted by the appellant. On this request being referred to the appellant, it is at least clear that he would not provide the shares for delivery through Clendinnen Reed and Co. The evidence is not clear as to whether the appellant at the time the repondent applied to Clendinnen Reed and Co. for the shares was willing himself to deliver them to the respondent, or whether by that time he had decided that he would not even do that.

However, upon its failure to obtain the shares from Clendinnen Reed and Co., the respondent treated the appellant as having repudiated the whole arrangement. It bought in shares to enable it to fulfil the options it had granted. The net difference between the price it had thus to pay and the total price (including option premium) it would have had to pay the appellant was £1,707 6s. 9d. After it had incurred this expense, the respondent delivered a statement of claim in the action, claiming the added cost to itself of purchasing the shares the subject of the options as damages for the failure of the appellant to obtain a broker's endorsement on the confirmation of purchase notes. His Honour awarded the respondent the net amount of this added cost, namely £1,707 6s. 9d., for the breach of the promise to obtain such endorsement which he found had occurred by 24th December.

Two matters of fact are far from clear on the evidence. Neither is the subject of any express finding by the Supreme Court. The first is whether or not the options given by the appellant were in fact exercised by the respondent. I have already pointed out that the manner of their exercise was not stipulated by the agreement. In the event, the respondent appears to have notified the brokers Clendinnen Reed and Co. of the exercise by the respondent's optionees of the options granted by it; at the same time it applied to the brokers for the shares covered by the options granted by the appellant. The respondent appears to have done nothing else to exercise those options. But the respondent has been treated in the action as if it had duly exercised options granted by the appellant and not endorsed by any broker.

The other matter is the question whether the appellant when he learnt through Clendinnen Reed and Co. of the "exercise" of the options, although unwilling to do so through the brokers, was willing himself to deliver the shares to the respondent at the agreed prices. The only material on the point is a letter in ambiguous terms which seems to have been treated as a total repudiation by the appellant of all obligations in connexion with the shares. I must doubt the propriety of that conclusion. However, on the view I take of the case neither of these matters need be resolved.

The respondent's action commenced on 24th December must be confined to a cause or causes of action which had then arisen. It sought damages for the appellant's breach in not obtaining the endorsement of a broker upon the documents confirming the grant of the options. The respondent's pleadings do not in terms allege that the appellant promised to obtain this endorsement at or by any particular time, or "forthwith" upon the confirmation of the option agreement; and the Supreme Court has not found that it was a term, express or implied, of the oral agreement of 18th December that the endorsement should be obtained by any time. Nor was there any express evidence of such a promise by the appellant. The question remains, however, whether none the less such a term should be implied from the facts and circumstances in evidence.

Having regard to the terms of the agreement between the respondent and the Stock Exchange of Melbourne, it might have been thought that the respondent would not have been prepared to enter into contractual relationships with the appellant unless, as a condition precedent to the formation of any option agreement, a broker endorsed the appellant's offer of an option. The tender for the broker's endorsement of the confirmation of purchase notes is not, in my opinion, necessarily inconsistent with such a conclusion. In that event, failure to obtain the endorsement would preclude the existence of an option agreement; it would not give rise to a breach of agreement. But, having regard to the findings of the Supreme Court, this is not now a possible view of the matter. The promise to obtain the endorsement was a term of a concluded agreement between the parties.

It would appear from the facts that the respondent was not moved to insist on the endorsement by a broker by any doubt as to the appellant's integrity or of his ability to perform his promises. The stipulation was made merely in order to conform to the demand of the Melbourne Stock Exchange, which in its turn was designed to ensure that a broker was paid brokerage in respect of a transaction with which he otherwise had no active or significant part or function. It would seem that so long as in the end the appellant allowed the transactions resulting from the exercise of the options to be formally settled through a broker, so that the broker was paid a commission, the respondent would have been quite content.

It is true that the expression in the agreement found by the Supreme Court was that the appellant should obtain a "guarantee" of his performance of the exercised options and do so by obtaining a recognized broker's endorsement. There was no finding by the Supreme Court as to the legal consequences of such an endorsement: but the learned trial judge did find that had the brokers endorsed the options they would have considered themselves bound to deliver and would have delivered the shares the subject of the options when the options were exercised at the agreed prices, if the appellant had failed to do so. But, as I have said, a desire for the security of some broker's promise was not really the respondent's reason for insistence on these particular terms. The appellant had offered to deposit the shares the subject of the options with a bank or trustee or with the respondent pending the exercise of the options: but this was refused by the respondent no doubt because such a course would not have produced any brokerage for a broker.

It seems to me that a term that the appellant would procure the endorsement of a broker by or at any particular time should not be implied in the option agreement: it should not be implied that he agreed to do so "forthwith" upon the making of the option agreements.

The situation therefore on 24th December 1963 on the findings of the Supreme Court was that the appellant was bound at some time during the currency of the option agreement to obtain the endorsement of his option by a recognized broker: he had broken this obligation by anticipation and thus, in my opinion, repudiated the option agreement; the respondent had refused to accept such repudiation and had elected to keep the agreement on foot, that is to say, on foot for the benefit of both parties. The appellant thus retained the right subsequently to obtain an endorsement, in which event he would not have been in breach of the agreement in this respect at any time. There was therefore no actionable breach of the agreement on 24th December. Judgment, in my opinion, should have been entered for the appellant, the defendant in the action.

As this appeal was principally argued on the footing that the respondent had established a breach by the appellant prior to 24th December 1963, I should express my opinion as to whether or not, on that basis, the judgment for £1,707 6s. 9d. as damages for that breach should stand.

If the appellant's promise was to obtain the endorsement forthwith upon the tender of the confirmation of purchase notes, a question immediately arises as to whether this involved, as it were, two obligations which could be severed from each other, namely, an obligation to obtain the endorsement forthwith and an obligation in any event at some time during the currency of the option to obtain the endorsement. In relation to the agreement in this case, I find this latter suggestion an unacceptable interpretation in the context of the option agreement between these parties. It seems to me that there was only one obligation to be derived from the promise to obtain the endorsement forthwith: on that view the promise, like other promises to do an act by or on a day, is breached once and for all by a failure to perform on the day.

Thus, the failure to obtain the broker's endorsement before 24th December was a complete breach of the appellant's promise in respect of obtaining an endorsement leaving him under no further obligation in that respect, though of course he might subsequently obtain and tender it in mitigation of any damage which might flow from his existing breach.

So to regard the matter means that the respondent, by keeping the contract on foot, had on the one hand an accrued right of action against the appellant for breach of his promise to obtain a broker's endorsement and, on the other hand, retained the appellant's promise himself to deliver the subject shares to the respondent if and when the options were exercised. This view of the appellant's remaining promise would have considerable significance if the question of the due exercise of the options had to be examined or determined.

What damages, then, flowed from the failure of the appellant to obtain the required endorsement by 24th December 1963? It was not necessary, of course, that such damages as did flow should have accrued by 24th December. They could be assessed as they stood at the hearing, whether already accrued or remaining still in prospect, an estimate being made in respect of the latter.

As I have indicated, the respondent maintained the appellant's promise to deliver the shares on the exercise of the options and the payment of the price. There was no express finding that that promise was broken, though the occasion for its performance was assumed by treating the respondent as having exercised the options given by the appellant. It seems that a repudiation of this promise was inferred from the ambiguous terms of the letter to which I have already made reference. But even assuming the promise to have been broken, whether by anticipatory repudiation or by refusal to deliver the shares after exercise of the options, there is no suggestion that the respondent could not have recovered from the appellant what I might loosely call the value of the appellant's promise to deliver the shares. Thus the appellant's breach of his supposed promise to obtain the endorsement forthwith and the respondent's insistence on maintaining the contract as otherwise on foot left the respondent with the means of obtaining the shares to fulfil the options it had itself granted by duly exercising the options granted by the appellant, or of obtaining the amount of money necessary to obtain such shares by suing the appellant if he failed to perform the options he had granted. If the respondent by the appellant's refusal to deliver the shares on the exercise of the options granted by him had found it necessary to buy in shares to meet the options granted by it, the loss of the use of its money so laid out until judgment for the added cost of purchasing the shares had been recovered would, in my opinion, represent the damages which the respondent would suffer by not having an endorsement by a broker, which on the Supreme Court's finding would have resulted in delivery of the shares immediately on the exercise by the respondent of the options. But, in my opinion, the added cost to which the respondent was put to obtain the shares the subject of the options was not damage which resulted from the appellant's failure to obtain the broker's endorsement.

As there was no action against the appellant for failure to deliver the shares, there was no basis on which interest on the respondent's outlay in buying in the shares could be awarded. Thus, on the assumption that there was a breach before 24th December of the promise to obtain a broker's endorsement, the damages therefor could only be nominal.

I might mention that even if, contrary to my own inclination, the appellant's promise to obtain a broker's endorsement continued operative throughout the currency of the options, the same result as to damages would follow.

There remains the question of what it is proper to do with respect to the costs of the appeal. The points on which the appellant has succeeded according to my judgment were not taken before the Supreme Court and indeed were not originally taken in this Court. Argument presented here was directed principally to the question of the amount of the damages on the basis that there had been a breach of the agreement before 24th December 1963 in an endeavour to secure their reduction to a nominal sum. Further, an invitation by the Supreme Court to counsel to argue the question as to whether the damages should only be nominal had been rejected.

In my opinion, in the circumstances, the appellant cannot have his costs of this appeal. The question which has exercised my mind is to whether he should pay any costs of the appeal. He has succeeded here against the opposition of the respondent, which has argued the merits of the appeal, and has done so, in my judgment, unsuccessfully.

In the circumstances, I think the proper order is that there should be no order as to the costs of this appeal, and that the costs of the Supreme Court should follow the event.

In my opinion, the appeal should be allowed, the judgment of the Supreme Court set aside and in lieu thereof a judgment entered for the defendant in the action. No order as to the costs of the appeal. Costs in Supreme Court to follow the event.

In accordance with principle, the only term as to time which can be read into the appellant's promise to procure a guarantee from a member of a recognized stock exchange is a term that the guarantee should be obtained within a reasonable time having regard to all the circumstances of the case. In some circumstances, no doubt, a reasonable time for performance of such a promise would be a very short time; but the circumstances of the present case are peculiar. The substantial purpose which the respondent intended should be served by the obtaining of the guarantee was, as the appellant was acutely aware, quite a different purpose from that to which a guarantee is normally directed. The right of recourse it would give was relatively unimportant. What really mattered was that, in accordance with the agreement which had been made between the respondent and the Stock Exchange, the guaranteeing broker should be enabled to charge the appellant a commission, not really for incurring a risk by giving the guarantee - the broker could easily protect himself against that - but for the mere endorsement of the confirmation note. By this device was harmony to be preserved between the respondent and the Stock Exchange, at the cost of the appellant. Thus the appellant's promise to obtain the endorsement was not attended by the degree of urgency that might have existed if a guarantee had been required for its own sake. Probably performance at any time during the currency of the option would have been sufficient to satisfy the real object of the promise; but whether this be so or not the situation is that there was no material before the trial judge which would have supported a finding that the reasonable time had expired before the commencement of the action, and therefore no cause of action was established. The appellant's early refusal to obtain the broker's endorsement, not having been accepted as a repudiation of the entire contract (assuming that it amounted to such a repudiation), could not be sued upon as a breach; for at any stage before the expiration of the reasonable time the appellant might have retracted his refusal and obtained the endorsement, thereby duly performing his obligation.

Whether more than nominal damages could have been recovered by the respondent in an action commenced after the expiration of the reasonable time is a question upon which I express no opinion.

I agree that the appeal should be allowed, and that there should be an order that judgment in the action be entered for the defendant.

The respondent in this appeal is a company which engages in the purchase and sale of stock and share options and on 18th December 1963 it entered into three agreements with the appellant whereby he granted to it options to purchase three parcels of shares in public companies. The agreements were made orally and were confirmed by the respondent by what were called "confirmation of purchase" notes and these were tendered in evidence. There was no dispute concerning the consideration, or "option premium", agreed upon or as to the amount payable upon the exercise of each option - "the option exercise price" - and it was common ground that each option was to subsist for a period of six months from 18th December 1963. But there was a dispute as to whether the appellant was obliged by the terms of each agreement to provide what was called a guarantee for the performance of his obligations thereunder. Whether he was or was not depended upon whether, as was alleged in the statement of claim, it was a term of each agreement that the appellant "should procure from a member of a recognized stock exchange for the benefit" of the respondent "a guarantee by such member that if the" appellant "did not perform such option agreement(s) by delivering the shares or stock comprised in the same upon exercise of the option(s) conferred thereby such member would do so" (statement of claim - par. 4) and, further, that the procuring by the appellant "of such guarantee would be by means of his obtaining the endorsement by such member of a recognized stock exchange as endorsing broker upon the written confirmation of such option agreement(s)" (statement of claim - par. 5). The determination of these issues involved consideration of disputed questions of fact which were resolved by the learned trial judge in favour of the respondent. No challenge is now made to his Honour's findings in relation to these matters and the appeal has proceeded upon the basis that each agreement contained a composite term such as that alleged.

It appears from the evidence that, in practice, the method adopted for the provision of an appropriate guarantee by the grantor of an option in the "put and call" market is for him to name an "endorsing broker" to whom "confirmation of purchase" notes are forwarded and it was found by the learned trial judge that it was also a term of each agreement that such notes should be forwarded by the respondent to Messrs. Clendinnen Reed and Co., a firm of stock and share brokers whose name had been mentioned to the respondent by the appellant in connexion with option transactions entered into a day or two before 18th December 1963. Such notes, relating to the transactions in question, were sent by the respondent to that firm on the lastmentioned date. These notes set out briefly the terms of the agreements, named Clendinnen Reed and Co. as "endorsing broker" and contained a notification that "Payment of the above Premium will be made by the Company forthwith upon receipt of this Purchase Confirmation, duly Endorsed on the Original Copy below as arranged". However the appellant was unwilling that Clendinnen Reed and Co. should endorse the notes and after a discussion with him they declined, in accordance with his instruction, to do so and returned them to the respondent.

Thereupon the matter took a curious turn. Discussions took place between the respondent and the appellant in the course of which the former asserted and the latter denied that the subject agreements contained terms which obliged him to secure the endorsement of a broker to the confirmation of the purchase notes. In the result the appellant refused to secure any such endorsement but at that stage he indicated his willingness to lodge with the respondent share certificates for the shares the subject of the agreements. But he was not prepared to allow a broker to intervene in the transaction and, thereby, to assume a liability to pay a selling commission in the event of the options being exercised. Such an arrangement he obviously regarded as quite unjust and, indeed, there may have been some merit in his complaint. The respondent, however, had entered into an agreement with the Stock Exchange of Melbourne whereby, in consideration of that body "agreeing to permit its Members to endorse on behalf of their clients Options negotiated by" the appellant, it agreed "That all Options negotiated by the Company will be endorsed by a Member or Member Firm of The Australian Associated Stock Exchanges or by a Member or Member Firm of any other Stock Exchange recognized by The Stock Exchange of Melbourne", and it was not prepared to depart from this arrangement in its dealings with the appellant. However, it did not accept the refusal of the appellant to obtain the required endorsement as a repudiation of the option agreements; on the contrary, it elected to keep on foot the obligation of the appellant to deliver the appropriate share certificates when called upon to do so. However, on 24th December 1963 it caused a writ to be issued out of the Supreme Court of Victoria claiming damages from the appellant for breach of his undertaking to secure a broker's endorsement to the confirmation of purchase notes.

What happened thereafter was that in April and May 1964 the respondent purported to exercise its options in order to meet corresponding call options which it had granted in December and which had been exercised. How the respondent purported to exercise its options does not clearly appear but, on the assumption that they were effectively exercised, it seems clear enough that it was not prepared to accept delivery of the relevant share certificates and transfers directly from the appellant or in any manner that would have avoided a liability on the appellant's part to pay commission to Clendinnen Reed and Co. However this is of little consequence in the case for the claim of the respondent to damages does not in the ultimate analysis rest upon any breach constituted by the fact that the appellant refused to deliver transfers of the relevant share certificates upon the options being exercised and, indeed, if, as the learned trial judge seems to have found, there was such a refusal, the cause of action to which it gave rise accrued to the respondent several months after the issue of its writ.

The fact remains, however, that either because of the default of the appellant or because of the respondent's unwillingness to accept transfers directly from the appellant the option agreements were not carried into effect and the respondent purchased on the market shares in substitution for those the subject of the agreements in question. But at this time the market price of the shares was in excess of that specified in the agreements and the respondent incurred an expenditure which exceeded by £1,707 6s. 9d., the amount which it would have been required to pay for the appellant's shares. It was for this amount that the learned trial judge entered judgment in favour of the respondent.

Judgment for this amount followed upon the finding of the learned trial judge that the respondent had "established that the contract between it and the defendant was subject to the terms alleged in pars. 4 and 5 of the statement of claim". Stated, perhaps, a little more precisely his Honour found that "there was to be incorporated into and form part of the agreements of 18th December a term that the defendant would appoint endorsing brokers and do what was necessary to procure such appointment and authorize the brokers appointed to guarantee performance of the options if exercised and receive the customary brokerage on any sale that eventuated". It was for a breach of this term prior to 24th December 1963 that his Honour assessed damages and in doing so he said that the view that the respondent's damage "flowed from the defendant's breach committed in April or May - some months after the writ was issued - and not from the breach of 24th December - and that as far as the latter breach is concerned the plaintiff is confined to a claim for nominal damages only was adverted to but this was met in argument by Mr. Hughes by the contention that having regard to the nature of the breach of 24th December, the damage which arose following defendant's subsequent repudiation of the whole contract could and should be found to flow from the defendant's failure to perform his obligation on 24th December. This obligation was to procure endorsement by a broker who would have been bound in the events that happened - the defendant's failure to perform his contracts and to give delivery of the relevant scrip - to satisfy the defendant's obligations as guarantors". His Honour thought that these contentions gave rise to some difficult questions but he acceded to them because counsel for the appellant "clearly conceded that if the plaintiff's evidence was accepted the defendant could not escape from the proposition that the damage suffered by the plaintiff was the sum which would be required to put it in a position at the relevant time to satisfy the options, if and when they were exercised". His Honour also observed that even if those contentions "could be successfully challenged it would of course mean only a postponement of the evil day as far as the defendant is concerned". But the appellant now maintains that his Honour proceeded upon an erroneous basis in assessing damages and that the question whether a rejection of the respondent's claim at this stage would mean only a postponement of the evil day as far as the appellant was concerned must depend upon whether the options were, in fact, effectively exercised and, if they were, upon whether it could be truly said that he refused to perform his obligation to deliver the relevant share certificates and transfers in the manner called for by the agreements.

It is clear from what has been said that the respondent alleged and proved that it was a term of the agreement sued upon that the appellant "should procure from a member of a recognized stock exchange for the benefit" of the appellant "a guarantee by such member that if the defendant did not perform such option agreement by delivering the shares or stock comprised in the same upon exercise of the option conferred thereby such member would do so" and "that the procuring by the defendant of such guarantee would be by means of his obtaining the endorsement by such member as endorsing broker upon the written confirmation of such option agreement". But I observe that the word "guarantee" is not strictly appropriate to define the obligation which the agreements contemplated should be undertaken by an endorsing broker. As alleged and proved the obligation contemplated was an obligation upon the broker to assume a secondary liability for the transfer of shares to satisfy the options when exercised if the appellant should himself make default in delivery. It was not, therefore, of the same quality as obligations assumed by brokers in dealings inter se where, with respect to one another, they are liable as principals. At the most, therefore, under the agreements as proved he was bound to appoint endorsing brokers and to obtain their so-called guarantee of the performance of his contractual obligations and, no doubt, he could not have arranged this without incurring a contingent liability for commission. But, according to the contention of the appellant, his failure to do this, prior to 24th December 1963, did not result in the damage of which the respondent complains even if there was, as alleged, a subsequent effective exercise of the options and a failure on the part of the appellant to perform his obligations, in accordance with the agreements, to deliver the shares for which the exercise of the options called. If this occurred then that damage, it is asserted, resulted from the ultimate breach and cannot be recovered in this action.

In considering what relief, if any, the respondent was entitled to in the action it is necessary to scrutinize with some care the obligations which were assumed by the appellant under the agreements in question. Undoubtedly they required him to obtain "guarantees" from an endorsing broker. And it seems clear enough that the manner in which the "guarantees" were to be provided was by securing the endorsement of a broker to the confirmation of purchase notes. But it was not alleged in the statement of claim in the action that the appellant was bound to perform this obligation within any period that elapsed before 24th December 1963 and it may be observed that on this point the agreements were silent. The question whether there was any breach before the issue of the writ in the action must, therefore, depend upon whether it was implicit in the agreements that the appellant should obtain a broker's endorsement forthwith upon delivery of the confirmation of purchase notes or, at least, before 24th December 1963. I agree with the Chief Justice that in the unusual circumstances of the case there was no ground for any such implication and, accordingly, that there was no actual breach by the respondent before the issue of the writ. There was, however, evidence of conduct on his part which would have justified the respondent in terminating the agreements. But a so-called anticipatory breach does not, by itself, give rise to a cause of action; it is only where the injured party elects to treat such a breach as a ground of rescission that it may also become a cause of action for damages. However, this is by the way for even if the respondent had elected to terminate the agreements at that time the situation thus produced would not have given it any title to the damages claimed in this action. In the circumstances I am satisfied that there was no breach by the appellant prior to 24th December 1963 for which the appellant was answerable in damages.

I should add, however, that even if I were of the opinion that the appellant was, on 24th December 1963, in breach of his obligation to obtain a broker's endorsement to each note the respondent would, at the most, be entitled to such damages as resulted from the appellant's refusal to provide the necessary guarantees before that date. But on the material before us those damages would be no more than nominal. The damages of which the respondent now complains did not flow from any such breach; they must be taken to have flowed from the subsequent breaches, if any, of the agreements which it had elected to keep on foot.

In the result I agree with the order proposed by the Chief Justice.