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[1983] HCA 11
High Court of Australia
1978-07-14
Deane JJ, Murray J, Murphy J
Original judgment source is linked above.
High Court of Australia Gibbs C.J. Mason, Murphy, Brennan and Deane JJ. Legione v Hateley [1983] HCA 11
ORDER Allow the appeal. Set aside the order of the Full Court of the Supreme Court of Victoria and the order of Murray J. No order as to costs of the proceedings in this Court. Remit the case to the Supreme Court of Victoria for determination of the respondent's claim to be relieved from the forfeiture of her interest under the contract of sale. In the event that the respondent succeeds in obtaining an order for the enforcement of the contract on the further hearing of the proceedings in the Supreme Court of Victoria, no order as to the costs of the appeal from Murray J. to the Full Court of the Supreme Court. In the event that the respondent fails to obtain such an order for the enforcement of the contract, order that the respondent pay the appellants' costs of the appeal to the Full Court. Reserve costs of the proceedings at first instance, including the costs of the hearing before Murray J., and costs of the proceedings on remitter to the Supreme Court, to be dealt with by the judge of the Supreme Court before whom the matter comes on further hearing.
The appellants were the vendors under a contract of sale executed on 14 July 1978. The purchasers were the respondent Mrs. Hateley and her husband, who died after the present proceedings were commenced. The contract was for the sale of certain land in Victoria for a price of $35,000. A deposit of $6,000 was paid and the contract provided for payment of the residue "on the 1st day of July, 1979 or such earlier date as shall be agreed between the parties". The purchasers agreed to pay interest on the residue at the rate of 8 per cent per annum calculated from 1 July 1978, adjusted and payable quarterly. Clause 3 of the copyright conditions of sale, as amended by cl. 5 of the special conditions, provided that if the purchasers made default in the payment of purchase money or interest, they should pay interest at the rate of 14 per cent on the amount in default. Clause 5 of the copyright conditions of sale, so far as its provisions are material, was in the following terms:
(1) Time shall be of the essence of this contract in all respects but the liberty of either party to enforce any right or remedies hereunder or at common law (other than any given to the vendor by conditions 3 and 4 or his right to sue for any moneys already fallen due) arising out of the default of the other in performing or observing any of the terms and conditions of this contract shall be restricted as follows: - Neither shall be entitled to enforce any of the said rights and remedies other than those excepted above unless he gives to the other a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good and the proper legal costs occasioned by it to the party giving the notice are paid, both within a period of not less than fourteen days from the date of giving of the notice and the other fails within that period to remedy the default and pay those costs.
(2) If the notice also states that unless the default is so remedied and the costs paid the contract will be rescinded pursuant to this sub-clause, then if the default is not remedied and the costs paid within the said period -
(a) the contract shall become rescinded upon the expiry of the period
(c) If the notice was given by the vendor he may -
(ii) proceed to take or recover possession of the land sold and within a reasonable time thereafter
(iii) exercise the option which is hereby given to him either: to retain the land sold and sue the purchaser for damages for breach of contract and pending the determination of the amount of those damages to retain all instalments of purchase money and interest paid or: to resell the said land by public auction or private contract in which event any deficiency between the price payable hereunder and that contracted to be paid by the purchaser upon that resale plus the vendor's costs and expenses of the resale and those occasioned by the default specified in the notice shall upon demand be paid to him by the present purchaser as liquidated damages
The facts, so far as they are relevant to the matters which now fall for decision, are as follows. In reciting them it will be convenient to refer to the appellants as the vendors and to Mr. and Mrs. Hateley as the purchasers. The contract entitled the purchasers to vacant possession of the land upon acceptance of title and payment of the deposit. After the purchasers had taken possession of the land, they erected a dwelling house on it, but there is no evidence that the vendors knew that they had done so. They had expected to raise the purchase money by the sale of another property, but that sale fell through. On or about 14 June 1979 the solicitors for the purchasers received a letter from the solicitors for the vendors, pointing out that the contract fell due for completion on 1 July, asking them to send a transfer of land for perusal, and concluding with the words, "Please arrange to settle on the due date." In reply to that letter the solicitors for the purchasers wrote on 29 June, informing the solicitors for the vendors that the sale of the purchasers' property had fallen through and requesting an extension of three months in order that the purchasers might arrange to find other purchasers for their property. On 12 July, the solicitors for the vendors wrote in reply saying that their clients would not extend the due date for completion, and suggesting that the purchasers obtain bridging finance. In the meantime, of course, the time fixed by the contract for completion had expired and the price had not been paid.
On 26 July the solicitors for the vendors sent to the solicitors for the purchasers a notice which had been signed by the vendors and which, omitting formal parts, read as follows:
We, Salvatore Legione (Farmer) and Nunzia Legione (Married Woman) both formerly of Gembrook Road Nar Nar Goon but now both of 106 Mallawa Drive Palm Beach in the State of Queensland (hereinafter called "the Vendors") hereby give you notice that you have made default under a Contract of Sale dated July 14, 1978 in respect of all that piece of land comprising 10 acres 3 roods and 19 perches or thereabouts and being part of Crown Allotment 81a 2 Parish of Nar Nar Goon and being the whole of the land more particularly described in Certificate of Title Volume 8930 Folio 710 being property situate in Gembrook Road Nar Nar Goon.
Your default consists of your failure to pay the residue of purchase money being the sum of twenty nine thousand dollars ($29,000-00) which was due to be paid on July 1, 1979 in accordance with the terms of the said Contract of Sale. Your default further consists of your failure to pay interest for the quarter ended July 1, 1979 which interest is now payable at the rate of fourteen per cent (14%) per annum. It is the intention of the Vendors to exercise their rights and remedies arising out of such defaults unless those defaults are remedied and the proper legal costs of the Vendors' Solicitors Messieurs Macpherson & Kelley of 229 Thomas Street Dandenong occasioned by your default and in connection with this Notice are paid within a period of fifteen days from the date of giving of this Notice.
Unless the defaults are so remedied and the costs paid the said Contract of Sale will be rescinded pursuant to Condition 5(2)(a) of the said Contract of Sale.
The Vendors' Solicitors' costs of seventy five dollars ($7500) are the proper legal costs occasioned to them by the reason of the said defaults up to the time of service of this Notice upon you.
The Vendors require interest at the rate of fourteen per cent (14%) in accordance with Special Condition 5 of the Contract of Sale.
It is common ground that the time fixed by this notice expired at midnight on 10 August.
On 7 August the solicitors for the purchasers wrote to the solicitors for the vendors enclosing a transfer of land signed by the purchasers for signature by the vendors. On 9 August, Mr. Gardiner, a member of the firm of solicitors acting for the purchasers, telephoned the solicitors for the vendors. The conversation which he then had is so important that it is necessary to set out in full the evidence which he gave with respect to it. That was as follows:
Tell the Court what you recall of the conversations in respect to proposed settlement on or about 9 August 1979 - Well the only conversation that relates to that, that I remember was one on 9 August 1979 when I telephoned Macpherson and Kelley, asked to speak to the persons dealing with the matter and was put on to a Miss Williams of that firm. I told Miss Williams that my clients had arranged bridging finance from the A.N.Z. Bank at Pakenham. I told her that the bank required approximately a week in which to carry out their usual title searches, but they would be ready to settle on the following Friday - which was 17 August. Miss Williams said to me "I think that'll be all right but I'll have to get instructions", and that's the substance of that conversation as far as I recollect it. No evidence was called on behalf of the vendors, and there is no other evidence with regard to this conversation. The evidence does not reveal what position Miss Williams occupied, but in a letter from the solicitors for the vendors, dated 22 August 1979, it was stated that she was the secretary of a Mr. Overell who was a partner in that firm.
On 9 August, the day on which this conversation took place, the solicitors for the purchasers wrote to the solicitors for the vendors a letter in the following terms:
We refer to our telephone conversation of today's date and confirm that the A.N.Z. Bank Limited at Pakenham is providing the balance of settlement moneys in this matter and we confirm that the bank should be in a position to settle on the 17th August 1979.
We advise that you will be receiving the sum of $30,188.24 which is made up as follows: Balance required to finalise terms contract of sale $29,000.00 Plus one quarter's interest due 1st July 1979 $ 580.00 Plus interest on one quarter's interest until the 17th August 1979 $ 10.45 Plus interest on balance of principal from 1/7/79 to 17/8/79 on $29,000 $ 522.79 Plus costs on rescission notice $ 75.00 $30,188.24 Kindly confirm that the above is in order.
On 13 August the solicitors for the vendors wrote to the solicitors for the purchasers, acknowledged their letters of 7 and 9 August, and stated that the transfer of land had been sent to their clients in Queensland for signing, but went on to say that they did not agree with the purchasers' calculation of interest which was not in accordance with special condition 5 and copyright condition 3. However, before that letter was received by the solicitors for the purchasers, the solicitors for the vendors wrote, on 14 August 1979, and caused to be delivered by hand, a letter, which commenced as follows: We refer to our letter of August 13 and advise that we have now received instructions from our clients. They decline to sign the Transfer of Land as the Contract of Sale has been rescinded. Default Notices were served on your clients on July 27, the Contract therefore became rescinded on August 11. The letter went on to demand immediate possession of the land. On the same day the solicitors for the purchasers replied denying that the contract had been validly rescinded for the following reasons:
The letter concluded by saying that the solicitors proposed to attend at the office of the solicitors for the vendors on the following day and to tender a bank cheque for the amount owing. In fact they did tender a bank cheque for $30,188.24 on 15 August but the tender was rejected. Mrs. Hateley gave evidence that bridging finance had been obtained from the bank, and that funds were available to enable settlement to be effected on 9 August 1979.
The purchasers commenced an action in the Supreme Court of Victoria claiming specific performance of the contract of sale, and the vendors counterclaimed for a declaration that the contract had been validly rescinded. After Mr. Hateley's death, an order was made to enable the action to be continued by the respondent on her own behalf and as executrix of her late husband. The action was tried by Murray J., who held that the notice of rescission was valid and effective and that the contract was rescinded when the time specified in the notice expired. He rejected the arguments that the vendors had waived their rights, and that the statement of Miss Williams gave rise to a promissory estoppel. He accordingly dismissed the purchasers' claim for specific performance and made a declaration that the contract had been validly rescinded and made certain other orders in favour of the vendors. On appeal the Full Court, by a majority, held that the vendors were estopped from asserting that the contract of sale had been rescinded before 15 August 1979, when the tender was made. If that was the case, no reason existed for refusing specific performance. The Court accordingly allowed the appeal.
Before we turn to the main question in the case, viz. whether the vendors were, in the circumstances, precluded from asserting that the contract was rescinded when the period specified in the notice of rescission expired, it is convenient to mention that in argument before us counsel for the purchasers sought to submit that the judgment of the Full Court should be upheld on two other grounds. First, it was submitted that the notice of rescission erroneously claimed too much and was therefore ineffective. This argument had been rejected both by the learned trial judge and in the Full Court. It appears that the notice was in error in stating that the purchasers' default included their failure to pay interest at the rate of 14 per cent for the quarter which ended on 1 July 1979. Under the provisions of the contract to which reference has been made, that interest was payable at the rate of 8 per cent only, and interest at the rate of 14 per cent would have become payable only in respect of a period subsequent to 1 July 1979 if the interest for the last quarter had not been paid within seven days of that date and the vendor had made a demand under cl. 3 of the copyright conditions as amended by cl. 5 of the special conditions. The notice therefore specified a non-existent default as well as a real default. However, in Green v. Sommerville [1] , Mason J., with whom Murphy and Aickin JJ. agreed, held that a notice which required the party to whom it was given, under threat of rescission, to rectify two alleged defaults when under the contract only one of those defaults provided a foundation for rescission, was not invalidated by the presence of the additional unauthorized requirement [2] . Barwick C.J. and Wilson J. took a different view [3] . The decision in that case accords with that of Gowans J. in Gair v. Smith [4] . We did not consider it appropriate to allow this question, so recently decided in this Court, to be reopened. This submission therefore fails. A second argument advanced on behalf of the purchasers was that the notice of rescission effected a forfeiture against which the purchasers were entitled to be relieved. Relief of that kind was not sought in the pleadings or in argument in the Supreme Court. We reserved for later decision, if necessary, the question whether in the circumstances the purchasers should be permitted to raise the matter for the first time in this Court. Although, for the reasons which we are about to give, we would hold that the purchasers must in any case succeed, it will nevertheless be necessary to consider that question.
We return then to the first question on the appeal. All three of the learned judges of the Full Court appear to have agreed as to the nature of the principle which governed the case, but they differed as to its application to the facts. Mr. Black, who argued the case very clearly for the vendors, did not suggest that the majority of the Full Court had erred in holding that the doctrine of promissory estoppel is part of the law of Victoria; his submission was that certain of the essential elements, which must exist before such an estoppel can arise, were absent in the present case.
The principle which the majority of the Full Court applied was stated by Lord Cairns in Hughes v. Metropolitan Railway Co. [5] , as follows:
it is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. In Birmingham and District Land Co. v. London and North Western Railway Co. [6] , Bowen L.J. said that the principle amounts to this: if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before. The doctrine has undergone a considerable development in recent times, particularly since Central London Property Trust Ltd. v. High Trees House Ltd. [7] . It was affirmed by the House of Lords in Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [8] . In Ajayi v. R. T. Briscoe (Nigeria) Ltd. [9] the Judicial Committee said that the principle "is that when one party to a contract in the absence of fresh consideration agrees not to enforce his rights an equity will be raised in favour of the other party". Their Lordships continued: This equity is, however, subject to the qualifications (1) that the other party has altered his position, (2) that the promisor can resile from his promise on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position, (3) the promise only becomes final and irrevocable if the promisee cannot resume his position. Neither the House of Lords nor the Privy Council has however had occasion to review the whole sequence of cases and reduce them to a coherent body of doctrine: see Woodhouse Ltd. v. Nigerian Produce Ltd. [10] . Nor has this Court had occasion to do so. At a time before the principle had undergone its present development, it was said in this Court, in Barns v. Queensland National Bank Ltd. [11] , that the principle laid down in Hughes v. Metropolitan Railway Co. [12] requires that "there must be something in the nature of what is called a consideration". However the Court went on to say [13] : The suggested consideration is that Nott at the request of the mortgagees refrained from taking steps which might, and upon the evidence probably would, have resulted in his saving the property for his beneficiaries. We have some difficulty in saying that this is not a sufficient consideration to bring this case within the rule laid down in Hughes v. Metropolitan Railway Co. This seems to us very close to the present doctrine, which more frankly recognizes that it is not necessary to put the label of consideration on the action or inaction of the party who has altered his position in the belief induced by the other party. 1. (1877) 2 App. Cas. 439, at p. 448. 2. (1888) 40 Ch. D. 268, at p. 286. 3. [1947] K.B. 130. 4. [1955] 1 W.L.R. 761; [1955] 2 All E.R. 657. 5. [1964] 1 W.L.R. 1326, at p. 1330; [1964] 3 All E.R. 556, at p. 559. 6. [1972] A.C. 741, at p. 758. 7. (1906) 3 C.L.R. 925, at p. 938. 8. (1877) 2 App. Cas. 439. 9. (1906) 3 C.L.R., at p. 939.
Having regard to the course which the argument took, this is not an appropriate case in which to consider fully the limits of the principle. However, there will be an estoppel in the present case if the following facts are established - (1) that Miss Williams, by saying that she would get instructions, induced the solicitors for the purchasers to believe that the vendors' right to rescind the contract would be kept in abeyance until the instructions were obtained and communicated, and intended that those solicitors should act on that belief; (2) that the vendors are bound by the conduct of Miss Williams; (3) that the solicitors for the purchasers, acting on the faith of that inducement, desisted from paying the balance of the purchase price within the time specified in the notice of rescission, although they would otherwise have made payment within that time; (4) that it would be inequitable to allow the vendors to rescind the contract without first informing the purchasers that no extension of time would be granted and then giving the purchasers a reasonable opportunity to make the payment.
It is of course clear that neither the solicitors, nor Miss Williams, had any actual authority from the vendors to make any representation to the purchasers that the vendors' rights would be kept in abeyance. But the vendors had authorized the solicitors to act for them in completing the sale. Within reasonable limits, the solicitors, having been entrusted by the vendors with the conduct of the negotiations, must be treated as having the authority which, within the course of the negotiations, they purported to exercise: cf. Crabb v. Arun District Council [14] . "The solicitor is to be regarded as the alter ego of the client and the rights of the other party to the contract cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with his client": Sargent v. A.S.L. Developments Ltd. [15] ; see also at p. 649. It was of course the conduct of the vendors that gave the solicitors ostensible authority to act on their behalf. The authority extended to actions carried out in the ordinary course of business by such members or employees of the firm as ordinarily acted for it. When the solicitors selected or permitted Miss Williams to speak on their behalf, in their capacity as solicitors for the vendors, her words bound the vendors. It was no doubt to be expected that if Miss Williams was employed as a secretary, she would promptly communicate the conversation to a member of the firm, who, if he wished to resile from what she had said, could have informed the purchasers' solicitors accordingly. Similarly one would have expected the solicitors to communicate promptly with the vendors - the fact that the vendors were in Queensland does not mean that they were incommunicado - and, again, to inform the purchasers' solicitors of any change of attitude. If there was any lack of diligence on the part of the vendors' solicitors - and we do not suggest that there was - that cannot affect the position of the purchasers.
The statement by Miss Williams was in our opinion both intended and likely to induce a belief in the mind of the purchasers' solicitors that the vendors would not enforce their strict legal rights until they indicated their intention to do so. In one sense, the statement made by Miss Williams may have seemed only tentative and provisional. However, it was made in the context of a conversation between parties who knew that the time fixed by the notice of rescission was about to expire, and that if the purchasers did not settle within that time the contract would be at an end. There would have been no point in Miss Williams obtaining instructions, if, by the time they had been obtained, the rescission of the contract had taken effect. The position would have been quite different if Miss Williams had said: "I have no instructions - the only safe thing for you to do is to settle within the time specified in the notice." But when Miss Williams said that she thought it would be all right, and that she would have to get instructions, she must have meant, and the purchasers' solicitors were entitled to believe, that the position was being left in abeyance until the instructions were received. If that were not so, the conversation would have been a futility. We should add that we consider that Miss Williams acted quite reasonably in doing what she did.
It was submitted that there was no evidence that the purchasers' solicitors believed that the matter was left in abeyance and that the vendors' rights would not be enforced until some further communication was made and the purchasers were given an opportunity to make payment. However, it seems to us that the facts lead to the inference that the solicitors had such a belief and acted on it. Funds were available on 9 August, and it is impossible to suppose that the purchasers' solicitors would not have made payment on that or on the following day, if they had thought that the vendors intended to insist on their legal right to treat the contract as rescinded if payment had not been made within the time specified in the notice. The terms of the letter sent by the purchasers' solicitors on 9 August support this view. The inaction of the purchasers, which altered their position, was because they believed, on the faith of the conversation, that the matter was in abeyance. It would be inequitable to allow the vendors to treat the contract as rescinded without first informing the purchasers that they must complete forthwith and giving them a reasonable opportunity to do so.
The vendors had the legal right to treat the contract as rescinded if payment was not made by midnight on 10 August. But for the reasons which we have given, the conduct of their agents made it inequitable to allow them to enforce that right without first giving reasonable notice to the purchasers of their intention to do so if payment was not made. They gave no notice but claimed to treat the contract as rescinded. The purchasers forthwith made a tender of payment. The vendors were estopped from treating the contract as rescinded when the tender was made.
For these reasons we consider that the purchasers were entitled to specific performance and that the appeal should be dismissed.
However, it appears that the other members of the Court would hold that the vendors were not estopped from treating the contract as rescinded. It therefore becomes necessary for us to consider the further question whether the purchasers should be relieved against the forfeiture of their interest in the land that will occur if the vendors are successful in the present proceedings.
It is first necessary for us to decide whether the purchasers should be allowed to raise this question, since they did not take the point in the Supreme Court. Although, as will appear, we consider that the evidence as it stands makes out a strong case for relief, we are unable to say that we have before us all relevant facts which could possibly have been given in evidence if the question had been raised in the Court below. Nevertheless, the case is an exceptional one for a number of reasons. First, as we have already said, in our opinion the purchasers should for other reasons succeed in their appeal. Secondly, a claim for relief against forfeiture could not have succeeded in the Supreme Court, which would have felt itself bound by two decisions of the Privy Council, which we shall later discuss, to refuse relief. Thirdly, the existing evidence shows that the purchasers should be granted relief and the possibility that further evidence will place a different complexion on the matter seems remote. In these circumstances we agree in thinking that the successful purchasers should be allowed to endeavour to maintain their success, although on a new ground, and although, since new evidence could possibly affect the matter, it will be necessary to remit the case to the Supreme Court.
There is no doubt that when the purchasers executed the contract and paid the deposit the beneficial ownership of the land passed to them subject to the payment of the purchase money. The effect of cl. 15 of the copyright conditions of sale was to deprive the purchasers of their interest in the land once a notice had been given under that clause and the default in payment to which the notice referred had not been remedied within the time limited in the notice. In saying that we of course assume, contrary to our own opinion, that no estoppel had occurred. In these circumstances it is manifest that the condition brought about a forfeiture of the purchasers' interest in the land.
In Shiloh Spinners Ltd. v. Harding [16] Lord Wilberforce said:
There cannot be any doubt that from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property. The jurisdiction has not been confined to any particular type of case. The commonest instances concerned mortgages, giving rise to the equity of redemption, and leases, which commonly contained re-entry clauses; but other instances are found in relation to copyholds, or where the forfeiture was in the nature of a penalty. Although the principle is well established, there has undoubtedly been some fluctuation of authority as to the self-limitation to be imposed or accepted on this power. There has not been much difficulty as regards two heads of jurisdiction. First, where it is possible to state that the object of the transaction and of the insertion of the right to forfeit is essentially to secure the payment of money, equity has been willing to relieve on terms that the payment is made with interest, if appropriate, and also costs (Peachy v. Duke of Somerset [17] and cases there cited). Secondly, there were the heads of fraud, accident, mistake or surprise, always a ground for equity's intervention, the inclusion of which entailed the exclusion of mere inadvertence and a fortiori of wilful defaults. Later, after discussing some of the authorities, his Lordship went on [18] : But it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result. The judgment of Lord Wilberforce was concurred in by all members of the House in that case except Lord Simon of Glaisdale who took a wider view, holding that "equity has an unlimited and unfettered jurisdiction to relieve against contractual forfeitures and penalties" [19] . It was held in that case that there was power to relieve against the exercise by the covenantee (the assignor of a leasehold interest) of a right of entry on failure by the covenantor to perform certain stipulations as to fencing and support of buildings. 1. [1973] A.C. 691, at p. 722. 2. (1721) 1 Stra. 447 [93 E.R. 626]. 3. [1973] A.C., at p. 723. 4. [1973] A.C., at p. 726.
In the light of those statements of principle it is difficult to see any reason why the power of courts of equity to relieve against forfeiture should not be available in a case such as the present. On behalf of the vendors three reasons were advanced in support of the view that the Court cannot grant relief. It was said, first, that equity will not relieve against the forfeiture of a purchaser's interest in land under a contract of sale where that interest is lost consequent upon a discharge of the contract, secondly, that the power to grant relief against forfeiture is not exercised except to grant relief against a penal provision in a contract and, thirdly, that equity does not intervene to grant specific performance (whether to effect relief against forfeiture or otherwise) where the parties have stipulated in their bargain that time shall be of the essence and the party seeking specific performance is in default.
It is convenient to deal first with the second of these submissions. It is true that in some cases concerning relief against forfeiture the courts have spoken of relief against penalty. That may have been because "penalty" and "forfeiture" were regarded as synonymous or because a forfeiture for breach of a covenant or condition may be regarded as a penalty for the breach. But except in the sense that a provision for forfeiture can be described as a penalty it is unnecessary that the condition which provides for forfeiture should be a penal one before the jurisdiction of equity can be invoked. From early times the courts of equity granted relief against forfeiture of a lease where the breach was by non-payment of rent. No additional penal element was required. It is a short step to hold that relief may be granted against forfeiture of the interest of a purchaser who has defaulted in payment of the purchase money, and that step has been taken in a number of cases to which reference will shortly be made. However, if it is necessary to describe the condition as penal, cl. 5 answers that description, in that the purchaser who fails to comply with the notice is punished by forfeiture.
The first and third of the vendors' submissions may be considered together. Before 1916 there was consistent authority in favour of the view that equity would relieve a defaulting purchaser against forfeiture of his interest in the land, even when he had failed to comply with a condition of which time was of the essence. In Vernon v. Stephens [20] , the plaintiff had agreed to purchase a manor, and after he had made default in payment had entered into orders by consent by which it was agreed that if he did not pay the money by a certain day he would give up the contract and lose whatever he had already paid. He again made default, but, having brought an appeal for specific performance, was granted relief on payment of principal, interest and costs. In re Dagenham (Thames) Dock Co.; Ex parte Hulse [21] was a similar case. Under an agreement for sale it was provided that on failure to pay the balance of the purchase money by a certain day, in respect of which time was to be of the essence of the contract, the vendors could repossess the land without any obligation to repay any part of the purchase money. It was held that the provision was a "penalty" from which the court would relieve, and the vendors were refused an order giving them liberty to issue execution in an action for ejectment. That decision was followed and applied by the Judicial Committee in Kilmer v. British Columbia Orchard Lands Ltd. [22] . There an agreement for sale provided that instalments of purchase money were to be paid on specified dates and declared time to be of the essence of the contract; in default of punctual payment of any instalment the agreement was to be null and void and all payments made under it were to be forfeited to the vendor. Default having been made, the vendor sued for a declaration that the agreement for sale was null and void and the purchaser counter-claimed for specific performance. The trial judge, whose decision was restored by the Judicial Committee, dismissed the action and decreed specific performance on the counter-claim. In McDonald v. Dennys Lascelles Ltd. [23] , Starke J. appears to have thought that relief in the two last-mentioned cases was given against forfeiture of the instalments of the purchase money. However Dixon J., with whom Rich and McTiernan JJ. agreed, said that the view adopted in those cases "seems to have been that relief should be granted, not against the forfeiture of the instalments, but against the forfeiture of the estate under a contract which involved the retention of the purchase money" [24] . It may have been this dictum that led Mr. Fullagar, as he then was, to submit in Real Estate Securities Ltd. v. Kew Golf Links Estate Pty. Ltd. [25] that "equity relieved the defaulting purchaser from the forfeiture of his interest in the land, and not of the moneys he had paid". Lowe J. agreed that in In re Dagenham (Thames) Dock Co.; Ex parte Hulse the relief given was from forfeiture of the purchaser's interest in the land, and that a similar explanation might be true ofKilmer v. British Columbia Orchard Lands Ltd., but he rejected the argument that the only relief that could be given to the purchaser was against forfeiture of his interest in the land; we are not concerned with that aspect of the matter. In our opinion it seems clear enough that in the cases mentioned equity did relieve against the forfeiture of the purchaser's interest in the land, but subsequent cases have rendered it doubtful whether relief can be given when the purchaser has failed to perform within the time stipulated an obligation in a case in which time was of the essence of the contract.
The first of these later cases was Steedman v. Drinkle [26] . The contract in that case contained a provision that if the purchaser should make default in any of the payments to be made the vendor should be at liberty to cancel the agreement and retain any payments made under it. It also provided that time was to be of the essence of the contract. The defaulting purchaser claimed specific performance and alternatively relief against forfeiture. The Judicial Committee held that "the stipulation in question was one for a penalty, against which relief should be given on proper terms" [27] , but that there was no justification for decreeing specific performance. Their Lordships said [27] :
Courts of Equity, which look at the substance as distinguished from the letter of agreements, no doubt exercise an extensive jurisdiction which enables them to decree specific performance in cases where justice requires it, even though literal terms of stipulations as to time have not been observed. But they never exercise this jurisdiction where the parties have expressly intimated in their agreement that it is not to apply by providing that time is to be of the essence of their bargain. They distinguished Kilmer v. British Columbia Orchard Lands Ltd. [28] by saying that it appeared that the Board in that case had concluded that the stipulation as to time had ceased to be applicable, because the vendor had extended time for payment. The case was followed in Brickles v. Snell [29] , although there the respondent abandoned any argument based on Kilmer v. British Columbia Orchard Lands Ltd., see at p. 605. These cases have naturally been followed in Australia and it has been accepted that where a condition making time of the essence of the contract has not been waived it is not possible to grant specific performance to a purchaser who is in default: Crabb v. Gleeson [30] ; Stranger v. Aitken [31] ; Bull v. Gaul [32] ;Wilson v. Kingsgate Mining Industries Pty. Ltd. [33] ; Tropical Traders Ltd. v. Goonan [34] . In the last mentioned case, which was a decision of this Court, counsel appears not to have made any submission to the contrary, see p. 48; his contention was that the granting of an extension of time by the vendor amounted to a binding election not to exercise the right to rescind. The Court did not discuss the question that now arises. 1. [1916] 1 A.C. 275. 2. [1916] 1 A.C., at p. 279. 3. [1916] 1 A.C., at p. 279. 4. [1913] A.C. 319. 5. [1916] 2 A.C. 599. 6. [1920] V.L.R. 189, at pp. 193-194. 7. (1922) 43 A.L.T. 405. 8. [1950] V.L.R. 377, at p. 381. 9. [1973] 2 N.S.W.L.R. 713, at p. 733. 10. (1964) 111 C.L.R. 41, at p. 58.
The three decisions in the Judicial Committee do not provide satisfactory authority on this question. It appears from the passage from McDonald v. Dennys Lascelles Ltd. [35] , which has already been cited, that Dixon J. doubted the explanation of Kilmer v. British Columbia Orchard Lands Ltd. which was given in Steedman v. Drinkle and Brickles v. Snell. We respectfully share those doubts. The reasons for judgment in Kilmer v. British Columbia Orchard Lands Ltd. can only be read as saying that their Lordships intended to relieve against the forfeiture of the estate, and did not think it necessary to deal with the argument based on waiver, although in truth there may have been a waiver on the facts of the case. Further, in Steedman v. Drinkle [36] , it was accepted that it was correct for the Board in Kilmer v. British Columbia Orchard Lands Ltd. to relieve against the forfeiture of the moneys paid but it was not explained why if that were so it was not possible also to relieve against the forfeiture of the estate and thus to permit specific performance. It may have been thought that the matter was sufficiently discussed in Stickney v. Keeble [37] , the judgments in which case had quite recently been given in the House of Lords, but although that case contains an authoritative discussion of the maxim that in equity the time fixed for completion is not of the essence of the contract, and shows that that maxim has no application to cases in which the parties have stipulated that the time fixed should be essential (cf. at pp. 401-402 and 415-416) it does not deal specifically with the question of relief against forfeiture. Kilmer v. British Columbia Orchard Lands Ltd. [38] and In re Dagenham (Thames) Dock Co.; Ex parte Hulse [39] have more recently been accepted as correctly decided: see Starside Properties Ltd. v. Mustapha [40] , although without discussion of the present question. For all these reasons, it seems to us that we should reconsider the correctness of the principle adopted in Steedman v. Drinkle and Brickles v. Snell.
A court of equity will grant specific performance notwithstanding a failure to make a payment within the time specified by the contract if there is nothing to render such an order inequitable. The fact that time for the performance of the stipulated obligation is of the essence of the contract generally makes the grant of specific performance inequitable in such a case. However, if it is just to relieve against the forfeiture which is incurred when the vendor retains payments already made under the contract, it is difficult to see why it should be unjust to relieve the purchaser against the forfeiture of the interest in the property that results in exactly the same circumstances. No doubt where the parties have chosen to make time of the essence of the contract the grant of relief against forfeiture as a preliminary to an order for specific performance will be exceptional. Nevertheless on principle we can see no reason why such an order should not be made if it will not cause injustice but will on the contrary prevent injustice. If relief against the forfeiture is granted, the objection to the grant of specific performance is removed.
In the present case the circumstances revealed by the existing evidence indicate that it would be unjust for the vendors to insist on the forfeiture of the purchasers' interest in the land. Important among those circumstances is the fact that the purchasers have erected on the land a house of considerable value and if the contract is rescinded the vendors will receive an ill-merited windfall. Further there are the facts that the purchase moneys were tendered only four days after the notice expired, and that the late payment was explained by the terms of the letter from the vendors' solicitors. The breach by the purchasers was neither wilful nor apparently serious. To enforce the legal rights of the vendors in these circumstances would be to exact a harsh and excessive penalty for a comparatively trivial breach. However, an opportunity should be given to the vendors to establish whether they have suffered damage as a result of the purchasers' failure. Moreover it will be necessary for the court to consider what terms should be imposed on the purchasers as a condition of the grant of relief. Clearly they should be required to pay the balance of the purchase price and interest, although at what rate will be a matter that requires consideration. Whether the purchasers should in addition be required to pay anything in respect of damages or costs depends on the evidence and argument that may be adduced.
As we have already indicated, in our opinion the appeal should be dismissed. However, in the circumstances we concur in the order that the case be remitted to the Supreme Court for determination of the respondent's claim to be relieved from the forfeiture of her interest under the contract of sale.
The detailed facts are set out in the judgment of Gibbs C.J. and Murphy J. Except to the extent necessary for the purposes of discussion, it is unnecessary that we repeat them. The primary issue which presently arises for determination is whether Mr. and Mrs. Legione, who were vendors under a contract for the sale of certain land at Nar Nar Goon in Victoria to Mrs. Hateley and her late husband as purchasers, are, as a result of a telephone conversation between their solicitor's secretary and the solicitor for the purchasers, estopped from asserting that the contract is at an end. The basis of the propounded estoppel is an alleged representation as to the approach which the vendors would adopt if, pending receipt and communication by the vendors' solicitors of instructions, the purchasers were to disregard the requirements of a notice of rescission which had been served upon them. In the event that the issue as to estoppel is determined adversely to Mrs. Hateley, it will be necessary to consider whether the appeal should nevertheless be dismissed on a ground raised, on Mrs. Hateley's behalf, for the first time on the hearing of this appeal. That ground is that the circumstances were such that Mr. and Mrs. Hateley were entitled, upon appropriate terms, to be relieved of any forfeiture of their interest under the contract in the subject land and the improvements thereon.
It is customary to recognize three general classes of estoppel, namely, of record, of writing and in pais (see, e.g., Coke's Littleton, 352a). Estoppel in pais includes both the common law estoppel which precludes a person from denying an assumption which formed the conventional basis of a relationship between himself and another or which he has adopted against another by the assertion of a right based on it and estoppel by representation which was of later development with origins in Chancery. It is commonly regarded as also including the overlapping equitable doctrines of proprietary estoppel and estoppel by acquiescence or encouragement.
Notwithstanding their diverse origins, one may discern a common principle underlying the established emanations of estoppel in pais. The classic statement of that principle is that of Dixon J. in Thompson v. Palmer [41] :
The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct, as in Yorkshire Insurance Co. v. Craine [42] ; cp. Cave v. Mills [43] ; Smith v. Baker [44] ; Verschures Creameries Ltd. v. Hull and Netherlands Steamship Co. [45] ; and Ambur Nair v. Kelu Nair [46] ; or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption. But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted. 1. (1933) 49 C.L.R. 507, at p. 547. 2. [1922] 2 A.C. 541, at pp. 546-547. 3. (1862) 7 H. & N. 913, at pp. 927-928; [158 E.R. 740, at pp. 746-747]. 4. (1873) L.R. 8 C.P. 350, at p. 357. 5. [1921] 2 K.B. 608, at p. 612. 6. (1933) 60 I.A. 266, at p. 271.
For present purposes, two comments need to be made upon the above "statement of the recognized grounds of preclusion" (per Dixon J. in Grundt v. Great Boulder Pty. Gold Mines Ltd. [47] ). The first is that the reference to an "unjust" departure was not seen by Dixon J. as a charter for idiosyncratic concepts of justice and fairness. His Honour made that clear in his judgment in Grundt's Case [48] where, shortly before referring to his judgment in Thompson v. Palmer, he said:
The justice of an estoppel is not established by the fact in itself that a state of affairs has been assumed as the basis of action or inaction and that a departure from the assumption would turn the action or inaction into a detrimental change of position. It depends also on the manner in which the assumption has been occasioned or induced. Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it. But the law does not leave such a question of fairness or justice at large. It defines with more or less completeness the kinds of participation in the making or acceptance of the assumption that will suffice to preclude the party if the other requirements for an estoppel are satisfied. 1. (1937) 59 C.L.R. 641, at p. 676. 2. (1937) 59 C.L.R., at pp. 675-676.
The other comment is that Dixon J.'s remarks in Thompson v. Palmer do not distinguish between an assumption founded upon a representation of existing fact and an assumption founded upon a representation as to future conduct. At the time when Thompson v. Palmer was decided the doctrine of consideration was thought to be a significant obstacle to the acceptance of an assumption founded upon a representation (or promise) as to future conduct as a basis of an ordinary estoppel by representation. Moreover, such an acceptance would have been contrary to authority which, at the time, must have appeared compelling to any Australian Court (see, e.g., Jorden v. Money [49] ; Chadwick v. Manning [50] ; George Whitechurch Ltd. v. Cavanagh [51] ; Yorkshire Insurance Co. Ltd. v. Craine [52] ; but cf. Greater Sydney Development Association Ltd. v. Rivett [53] ). Dixon J.'s subsequent judgment in Grundt's Case [54] perhaps suggests that his reference in Thompson v. Palmer to an assumption founded upon a direct representation should be construed as a reference to an assumption founded upon a representation of fact. But this is by no means clear. His Honour referred on no less than five occasions to the "state of affairs" assumed by the parties [55] , once as part of the larger expression "the facts or state of affairs assumed" by the parties [56] . And it may be that he took a broad view of what was a representation of fact or a representation of existing fact. After all, much judicial ingenuity had been employed in seeking to demonstrate that a statement of intention with respect to a future occurrence could amount to a statement of present fact.
Be this as it may, there is strong authority in equity for a limited doctrine of promissory estoppel - representations (or promises) as to future conduct - restricted to precluding departure from a representation by a person in a pre-existing contractual relationship that he will not enforce his strict contractual rights. In Hughes v. Metropolitan Railway Co. [57] a question arose as to the effect of subsequent negotiations for a surrender of lease upon a lessor's entitlement to insist upon compliance with the terms of a notice to repair. In the course of his speech holding that the lessor was not entitled to forfeit the lease, Lord Cairns L.C. made the following comments which have commonly been seen as the source of an equitable doctrine of promissory estoppel [58] :
if parties who have entered into definite and distinct terms involving certain legal results - certain penalties or legal forfeiture - afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties. (See also, to the same effect, per Lord Blackburn [59] .) In Birmingham and District Land Co. v. London and North Western Railway Co. [60] , Bowen L.J., after quoting the above passage from the speech of Lord Cairns L.C., said: The truth is that the proposition is wider than cases of forfeiture. It seems to me to amount to this, that if persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe that such rights will either not be enforced or will be kept in suspense or abeyance for some particular time, those persons will not be allowed by a Court of Equity to enforce the rights until such time has elapsed, without at all events placing the parties in the same position as they were before. That is the principle to be applied. 1. (1877) 2 App. Cas. 439. 2. (1877) 2 App. Cas., at p. 448. 3. (1877) 2 App. Cas., at p. 452. 4. (1888) 40 Ch.D. 268, at p. 286.
However, the generality of the comments of Lord Cairns L.C. and Bowen L.J. is by no means consistent with statements in the House of Lords, the Privy Council and this Court which assert, without any qualification, that there must be a misrepresentation of existing facts, and not of mere intention, in order to found an estoppel against a person who seeks to enforce a legal right. In particular, in Chadwick v. Manning [1] , Lord Macnaghten, speaking for the Privy Council in an appeal from a decision of the Supreme Court of New South Wales (Owen C.J. in Eq.) to the effect that the appellant was estopped from enforcing an indemnity which the respondent had executed in his favour, said:
His Honour's judgment, it will be seen, is rested entirely on the doctrine of equitable estoppel by representation
Assuming, however, that Mr. Chadwick is chargeable with a representation which may have misled Sir William, it appears to their Lordships that the conclusion at which his Honour arrived is in direct conflict with the law laid down by the House of Lords in Jorden and Wife v. Money [2] . The headnote to that case, the accuracy of which was not challenged by the learned counsel for the respondents, is in the following words:
"Where a person possesses a legal right, a Court of Equity will not interfere to restrain him from enforcing it, though, between the time of its creation and that of his attempt to enforce it, he has made representations of his intention to abandon it. Nor will equity interfere, even though the parties to whom these representations were made have acted on them, and have, in full belief in them, entered into irrevocable engagements. To raise an equity in such a case, there must be a misrepresentation of existing facts, and not of mere intention."
(See also, e.g., the specific statements in Craine v. Colonial Mutual Fire Insurance Co. Ltd. [3] , and Yorkshire Insurance Co. Ltd. v. Craine [4] , to the effect that a representation to raise estoppel must be "of an existing fact", statements which are usually followed by the concession that a statement of intention may amount to a statement of fact.) In Marquess of Salisbury v. Gilmore [5] , MacKinnon L.J. attempted a reconciliation of the comments of Bowen L.J. with what "the voices of infallibility, by a narrow majority" had held in Jorden v. Money, by the process of distorting a representation as to future conduct into a strait jacket of present descriptive fact: a statement of intent to pull down a building at a future time was treated as a statement that the building "is doomed to demolition" at that future time. 1. [1896] A.C., at p. 238. 2. (1854) 5 H.L.C. 185 [10 E.R. 868]. 3. (1920) 28 C.L.R. 305, at p. 324. 4. (1922) 31 C.L.R. 27, at p. 38. 5. [1942] 2 K.B. 38, at p. 51.
In our view, nothing is to be gained either by such attempts at forced reconciliation or by an analysis of the relevant cases aimed at showing that statements of the kind found in Chadwick v. Manning were not necessary to the actual decision in the particular case. It is preferable to acknowledge that a choice has to be made between these statements and the clear acceptance, in subsequent cases in the Privy Council and the House of Lords, of a doctrine of promissory estoppel which may operate to preclude the enforcement of rights at least between parties in a pre-existing contractual relationship (see Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [6] ; Ajayi v. R. T. Briscoe (Nigeria) Ltd. [7] ; Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [8] ). The clear trend of recent authorities, the rationale of the general principle underlying estoppel in pais, established equitable principle and the legitimate search for justice and consistency under the law combine to persuade us to conclude that promissory estoppel should be accepted in Australia as applicable between parties in such a relationship (see Reed v. Sheehan [9] ).
Since the parties in the present case were in a pre-existing contractual relationship, it is unnecessary to consider whether, as apparently envisaged by Denning J. in Central London Property Trust Ltd. v. High Trees House Ltd. [10] , the doctrine of promissory estoppel should be accepted as a general doctrine applicable regardless of the existence of that relationship. Nor is it necessary, for the purposes of the present case, to consider whether the doctrine of promissory estoppel should be treated as an extension of estoppel in pais into a field where the doctrine of consideration otherwise predominates or whether it should be seen as an independent equitable doctrine. In either case, it is clear that there is general correspondence between the "grounds of preclusion" of an ordinary estoppel by representation and the "grounds of preclusion" of a promissory estoppel and that a number of rules which have been established as applicable to estoppel in pais are also applicable to promissory estoppel. Two of those rules are presently relevant.
First, it has long been recognized that a representation must be clear before it can found an estoppel in pais (Low v. Bouverie [11] ; Newbon v. City Mutual Life Assurance Society Ltd. [12] ; Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [13] ). "Every estoppell, because it concludeth a man to alleadge the truth, must be certaine to every intent, and not to be taken by argument or inference" (Coke's Littleton, 352b). In Western Australian Insurance Co. Ltd. v. Dayton [14] , Isaacs A.C.J., referring to the requirement that a representation must be "unambiguous" if it is to found an estoppel in pais said:
The word "unambiguous" is explained by Kay L.J. in Low v. Bouverie [15] , the word and its explanation occurring on the same page. The Lord Justice says: "It is essential to shew that the statement was of such a nature that it would have misled any reasonable man, and that the plaintiff was in fact misled by it". Bowen L.J. says [16] : "It must be such as will be reasonably understood in a particular sense by the person to whom it is addressed". This is confirmed in George Whitechurch Ltd. v. Cavanagh [17] by Lord Brampton and in Bloomenthal v. Ford [18] by Lord Herschell. The requirement that a representation must be clear before it can found an estoppel is, in our view, applicable to any doctrine of promissory estoppel (see Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd.; China-Pacific S.A. v. Food Corporation of India [19] ). In the Woodhouse Case Lord Hailsham of St. Marylebone L.C. (with whose speech Lord Pearson agreed) commented [20] : Counsel for the appellants was asked whether he knew of any case in which an ambiguous statement had ever formed the basis of a purely promissory estoppel, as contended for here, as distinct from estoppel of a more familiar type based on factual misrepresentation. He candidly replied that he did not. I do not find this surprising, since it would really be an astonishing thing if, in the case of a genuine misunderstanding as to the meaning of an offer, the offeree could obtain by means of the doctrine of promissory estoppel something that he must fail to obtain under the conventional law of contract. I share the feeling of incredulity expressed by Lord Denning M.R. in the course of his judgment in the instant case when he said [21] : "If the judge be right, it leads to this extraordinary consequence: A letter which is not sufficient to vary a contract is, nevertheless, sufficient to work an estoppel - which will have the same effect as a variation." In the Court of Appeal [22] , Lord Denning M.R. had proceeded to refer to the higher standard of clarity required of a promissory representation relied upon to found an estoppel if compared with that required when a representation is put forward as an agreed variation of contract: If the representation is put forward as a variation, and is fairly capable of one or other of two meanings, the judge will decide between those two meanings and say which is right. But, if it is put forward as an estoppel, the judge will not decide between the two meanings. He will reject it as an estoppel because it is not precise and unambiguous. There is good sense in this difference. When a contract is varied by correspondence, it is an agreed variation. It is the duty of the court to give effect to the agreement if it possibly can: and it does so by resolving ambiguities, no matter how difficult it may be. But, when a man is estopped, he has not agreed to anything. Quite the reverse. He is stopped from telling the truth. He should not be stopped on an ambiguity. To work an estoppel, the representation must be clear and unequivocal. That is clear from Low v. Bouverie [23] and Canadian and Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamships Ltd. [24] . 1. [1891] 3 Ch. 82, at pp. 106, 113. 2. (1935) 52 C.L.R. 723, at p. 738. 3. [1972] A.C., at pp. 755-756, 768, 771. 4. (1924) 35 C.L.R. 355, at p. 375. 5. [1891] 3 Ch., at p. 113. 6. [1891] 3 Ch., at p. 106. 7. [1902] A.C., at p. 145. 8. [1897] A.C., at p. 166. 9. [1981] Q.B. 403, at pp. 429-430. 10. [1972] A.C., at p. 757. 11. [1971] 2 Q.B. 23, at pp. 59-60. 12. [1971] 2 Q.B., at p. 60. 13. [1891] 3 Ch. 82. 14. [1947] A.C. 46.
The second of those rules is that a person will not be estopped from departing from an assumption or a representation "unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted" (per Dixon J. in Thompson v. Palmer [25] ; and see Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [26] ; Grundt's Case [27] ; Fontana N.V. v. Mautner [28] ). Again, we are of the view that this general rule is applicable to any doctrine of promissory estoppel (see Ajayi v. R. T. Briscoe (Nigeria) Ltd. [29] ; Spencer Bower and Turner, Estoppel by Representation, 3rd ed. (1977), pp. 391-394).
Ultimately, in the view we take, the question whether there is a promissory estoppel in the present case depends upon whether the suggested representation was made to the solicitor acting for Mr. and Mrs. Hateley and, if it was, whether Mr. and Mrs. Hateley, through that solicitor, acted on it with the result that they were placed in a position of material disadvantage if departure from the representation were permitted. As we followed the argument, the suggested representation was to the effect that the vendors would not rely on any right to treat the contract as at an end provided that settlement took place either on 17 August 1979 or within a reasonable time after the solicitor for Mr. and Mrs. Hateley was advised that the vendors were not prepared to extend the time for settlement until that day (whichever was the earlier). If what was said on 9 August 1979 by Miss Williams of the firm of solicitors acting for the vendors to Mr. Gardiner, who was the solicitor acting for Mr. and Mrs. Hateley, amounted to such a representation, it was within the ostensible authority of the solicitor for the vendors to make it on behalf of the vendors. It is true that the evidence indicates that Miss Williams was but the secretary of that solicitor. She was, however, the person to whom Mr. Gardiner was connected when he asked to speak to the person dealing with the matter. More importantly, examination of the correspondence between solicitors indicates that it was Miss Williams who had signed in her own name, on behalf of the vendors' solicitors, a letter advising that the vendors were not prepared to extend the due date for completion of the contract of sale and a subsequent letter enclosing a copy of the notice of rescission.
The evidence is unsatisfactory on the question whether, if there were a representation to the suggested effect, Mr. and Mrs. Hateley, through their solicitor, adopted it as a basis of action or inaction and thereby placed themselves in a position of material disadvantage if departure from the representation were permitted. Part of the reason for this may be a failure by the pleadings to allege this necessary component of any promissory estoppel. Mr. Gardiner did not give express evidence as to whether he had interpreted what Miss Williams said as constituting a representation to the relevant effect or whether he had acted upon any such representation. On the day before he had the telephone conversation with Miss Williams, he had written to Mr. and Mrs. Hateley in terms which indicate that he already assumed that settlement would take place on 17 August 1979. Overall, however, the evidence seems to us to warrant a finding that Mr. Gardiner acted on the representation and, as a result of so acting, failed to arrange settlement prior to the expiry of the time for settlement allowed by the notice of rescission. That being so, the issue as to the existence of a promissory estoppel finally resolves itself into the question whether a representation to the relevant effect was ever made by Miss Williams on behalf of the vendors to Mr. Gardiner on behalf of Mr. and Mrs. Hateley.
The only evidence as to the conversation between Mr. Gardiner and Miss Williams is that of Mr. Gardiner. His evidence was as follows:
I told Miss Williams that my clients had arranged bridging finance from the A.N.Z. Bank at Pakenham. I told her that the bank required approximately a week in which to carry out their usual title searches, but they would be ready to settle on the following Friday - which was 17 August. Miss Williams said to me, "I think that'll be all right but I'll have to get instructions". Mr. Gardiner was called as a witness on behalf of Mr. and Mrs. Hateley. The above account of the content of the conversation between himself and Miss Williams was given in his evidence in chief. He was not cross-examined upon it.
The requirement that a representation as to existing fact or future conduct must be clear if it is to found an estoppel in pais or a promissory estoppel does not mean that the representation must be express. Such a clear representation may properly be seen as implied by the words used or to be adduced from either failure to speak where there was a duty to speak or from conduct. Nor is it necessary that a representation be clear in its entirety. It will suffice if so much of the representation as is necessary to found the propounded estoppel satisfies the requirement. Thus, a representation that a particular right will not be asserted for at least x days is not rendered, for the purposes of promissory estoppel, unclear or equivocal merely because the words used are equivocal as to whether the relevant period is x days, x plus one day or x plus two days. If what is said or done amounts to a clear and unequivocal representation that the particular right will not be asserted for a period of at least x days, a representation to that effect can be relied on to found an estoppel.
The context of the telephone conversation between Mr. Gardiner and Miss Williams is supplied by the past failure of Mr. and Mrs. Hateley to abide by the terms of the contract between themselves and the vendors, by the consistent attitude of the vendors that they required observance of their contractual rights and by the fact that the conversation was between a solicitor and another solicitor's secretary. Under the contract, settlement should have taken place on 1 July 1979. Prior to that date, the solicitors for the vendors had written pointing out that that was the date fixed by the contract for completion and requesting a transfer of the land for perusal and signature by their clients. Mr. and Mrs. Hateley had failed to comply with a specific request in that letter to settle on the due date. On 12 July 1979 the solicitors for the vendors had written to the solicitors for Mr. and Mrs. Hateley advising that a request to extend the due date for completion by three months was rejected. In that letter the solicitors for the vendors advised that the vendors had made certain commitments relying upon the completion of the transaction in accordance with the contract of sale. On 26 or 27 July 1979 the notice of rescission was served.
The first thing to be noted about what was said in the conversation between Mr. Gardiner and Miss Williams is that Miss Williams' comments were in reply to statements made to her by Mr. Gardiner. Those statements were to the effect that "the A.N.Z. Bank at Pakenham", from whom the purchasers were said to have arranged bridging finance, "required approximately a week in which to carry out their usual title searches, but they would be ready to settle on the following Friday - which was 17 August". In other words, on his own account of the conversation, Mr. Gardiner did not inquire of Miss Williams whether the vendors would allow a further period of time for settlement. He "told" her that the bank "required" the further time for searches after which they would be "ready to settle". It was in reply to those statements of Mr. Gardiner that Miss Williams commented that she thought that that would be all right but that she would have to get instructions. Plainly that statement could not be treated as an agreement or representation that the vendors would extend the time for settlement until 17 August 1979. Nor can that statement properly be seen as containing any representation that, pending communication of instructions, the purchasers could, with impunity, disregard the time allowed for settlement by the notice of rescission. To the contrary, Miss Williams' statement that she thought it would be all right but would have to get instructions intimated that she was not in a position to agree to what was, on a fair interpretation of Mr. Gardiner's account of the conversation, being put to her as a fait accompli.
It follows that Miss Williams did not, either by her words or her conduct, make to Mr. Gardiner, on behalf of Mr. and Mrs. Hateley, any clear and unequivocal representation to the effect of that suggested as the basis for a promissory estoppel. The only representation in Miss Williams' answer to the statement that the bank "required" a further week to carry out title searches and that they would be "ready to settle" on 17 August was the express representation that she personally thought that that would be all right but that she would have to get instructions. It is, in our view, impossible properly to read into that statement any representation to the effect that, unless they were advised to the contrary, the purchasers could, with impunity, disregard the expiry of the time fixed by the written notice of rescission which had been served upon them. Indeed one can do no more than speculate as to what Miss Williams would have said if Mr. Gardiner had expressly raised the question of waiving compliance with the notice pending receipt and communication of instructions.
In the result, we are of the view that there was no basis, in the evidence, for a finding that the vendors were estopped, as against Mr. and Mrs. Hateley, from asserting that the contract was at an end on the expiry of the time allowed by the notice of rescission.
We turn to the respondent's submission that she is entitled to relief against the forfeiture of her interest in the land upon terms that she pay to the appellants the amount of $30,188.24 that was tendered to them on 15 August 1979 and not accepted, being the balance of the purchase moneys under the contract. As the respondent did not advance a case for relief against forfeiture in the courts below, there is a question whether she should now be allowed to make this submission. Before examining this question it will be convenient to consider the respondent's case for relief against forfeiture.
Two Privy Council decisions are daunting obstacles confronting the respondent's case - Steedman v. Drinkle [30] and Brickles v. Snell [31] . They stand seemingly as authority for the proposition that specific performance, even by way of relief against forfeiture, is never ordered when a stipulation as to time, which is of the essence of the contract, has not been observed. However, three years before those decisions, the Privy Council in Kilmer v. British Columbia Orchard Lands Ltd. [32] had ordered specific performance of a contract by way of relief against forfeiture at the suit of the purchaser, notwithstanding that the vendor had elected to treat the contract as at an end following the purchaser's default in making due payment of an instalment of the purchase price, the contract containing a provision that time was to be of the essence.
The principle which the Judicial Committee applied in Kilmer's Case had been enunciated in In re Dagenham (Thames) Dock Co.; Ex parte Hulse [33] , where the Court of Appeal in Chancery (James and Mellish L.JJ.) held that a provision in a contract entitling the vendor to rescind for late payment, forfeit instalments of purchase price already paid and retake possession, time being of the essence of the contract, was a penalty against which relief should be granted by requiring completion on terms that the purchaser pay the balance of the purchase price with interest for late payment. Mellish L.J. expressed the principle in this way [34] :
where there is a stipulation that if, on a certain day, an agreement remains either wholly or in any part unperformed - in which case the real damage may be either very large or very trifling - there is to be a certain forfeiture incurred, that stipulation is to be treated as in the nature of a penalty. James L.J. spoke of it as "an extremely clear case of a mere penalty for non-payment of the purchase-money", agreeing that it was a penalty from which the company was entitled to be relieved on payment of the residue of the purchase money with interest [34] . 1. (1873) L.R. 8 Ch. App. 1022. 2. (1873) L.R. 8 Ch. App., at p. 1025. 3. (1873) L.R. 8 Ch. App., at p. 1025.
In Kilmer's Case in the judgment prepared by Lord Macnaghten and delivered by Lord Moulton the views of James and Mellish L.JJ. were repeated and applied. Their Lordships said [36] :
It seems to be even a stronger case, for the penalty, if enforced according to the letter of the agreement, becomes more and more severe as the agreement approaches completion, and the money liable to confiscation becomes larger. 1. [1913] A.C., at p. 325.
Kilmer's Case was explained in Steedman v. Drinkle and Brickles v. Snell as a case in which the vendor had waived the due payment of the overdue instalment so that the purchaser's breach of contract was not a breach of an essential condition. Unfortunately Kilmer's Case does not easily lend itself to this explanation. Waiver was one of the arguments advanced in support of the appeal. It was not, however, reflected in the judgment, where their Lordships set out the provision making time of the essence in respect of payment of instalments and forfeiting all instalments paid in the event of any delay in payment and noted that the relevant payment was by the terms of the agreement to be made on or before 14 June 1910, that it was extended to 7 July 1910, and that on 9 July the vendor declared that the deal was off. In the absence of any reference in the judgment to a waiver of time being of the essence - and there is no reference - it is difficult to conclude that the judgment turned upon any finding to that effect. Indeed, the report contains no reference to material which could sustain the conclusion that there had been a waiver of the essentiality of prompt payment. The extension of the time for payment from 14 June to 7 July would not involve such a waiver. So much had been decided in Barclay v. Messenger [37] , more recently followed by this Court in Tropical Traders Ltd. v. Goonan [38] where Kitto J., with whom Taylor and Menzies JJ. agreed, accepted the explanation of Kilmer's Case offered in Steedman v. Drinkle and Brickles v. Snell, supplementing that explanation by reference to facts stated in the Law Journal report of Kilmer's Case [39] .
Much earlier Dixon J. in McDonald v. Dennys Lascelles Ltd. [1] had questioned the correctness of the traditional explanation of Kilmer's Case. He said that the view adopted in the Dagenham (Thames) Dock Case [2] :
" seems to have been that relief should be granted, not against the forfeiture of the instalments, but against the forfeiture of the estate under a contract which involved the retention of the purchase money: and this may have been the ground upon which Lord Moulton proceeded in" [Kilmer's Case], "notwithstanding the explanation of that case given in Steedman v. Drinkle and Brickles v. Snell ". 1. (1933) 48 C.L.R., at p. 478. 2. (1873) L.R. 8 Ch. App. 1022.
Apart from Steedman v. Drinkle and Brickles v. Snell, statements in the judgments in Mehmet v. Benson [3] , and inPetrie v. Dwyer [4] , appear to support the proposition that specific performance of a contract cannot be obtained by a purchaser once the contract has been rescinded in consequence of his breach of an essential term. The proposition does not, however, appear to have been in issue in either case.
The question has not been raised as an issue in recent times, no doubt because the doctrine enunciated in Steedman v. Drinkle and Brickles v. Snell has been thought to hold the field. However, Farwell J. in Mussen v. Van Diemen's Land Co. [5] expressed the opinion that specific performance, with or without compensation, would be ordered at the suit of a purchaser wherever possible, so long as he was able and willing to complete. He said [6] :
There are no doubt cases where there has been a failure to pay the instalments and to complete the contract, and the purchaser has then come forward and said: "I am here and now ready and willing to complete the contract and to pay the price originally stipulated by the contract and to carry out its terms," and then the Court has said that it is inequitable and against conscience that the vendor should refuse specific performance and claim to retain the money already paid. That is because the Court has said that if the plaintiff is willing to carry out his contract, notwithstanding the fact that temporarily at any rate he was unable to do so, if he is willing and able to carry out his contract, it being the primary intention of the parties that the sale should take place, it would be against conscience for the defendant to say: "I will not give effect to the primary intention of the parties, but I will refuse to complete, and I will retain the money which has been paid to me." Although it is not entirely clear that his Lordship was directing his remarks to a contract in which due payment was of the essence, it seems that his comments were intended to embrace this situation, because the contract with which he was dealing was of that kind. In particular, it appears plainly enough from his judgment that Farwell J. was of the view that the plaintiff in that case would have been entitled to relief if it had appeared that what the defendant company sought to do was unconscionable. 1. [1938] Ch. 253. 2. [1938] Ch., at pp. 263-264.
Farwell J. thought that relief against forfeiture of instalments of purchase money already paid would only be granted to a purchaser who was willing and able to complete the contract. In this respect a majority of the Court of Appeal (Somervell and Denning L.JJ., Romer L.J. dissenting) held otherwise (Stockloser v. Johnson [7] ). But this aspect of Farwell J.'s judgment is not material to the question now under consideration; nor is the answer to this question dependent on the correctness of his Lordship's opinion in respect of relief against the forfeiture of instalments of purchase money.
Underlying the approach taken in the Dagenham (Thames) Dock Case [8] and Kilmer's Case [9] is an expansive view of the equitable jurisdiction to relieve against forfeiture. This in turn conforms to the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct - see Story, Commentaries on Equity Jurisprudence, 12th ed. (1877), vol. 2, par. 1316.
It has been thought by some that the equitable jurisdiction to relieve against penalties and forfeitures is a branch of the jurisdiction to relieve in cases of accident. This view has been strongly contested - see Pomeroy's Equity Jurisprudence, 5th ed. (1941), vol. 2, par. 433, p. 206, n. 18 - on the ground that the correct foundation of the jurisdiction was expressed by Lord Macclesfield L.C. in Peachy v. Duke of Somerset [10] :
The true ground of relief against penalties is from the original intent of the case, where the penalty is designed only to secure money, and the Court gives him [the obligee] all that he expected or desired The principle as expressed by Lord Macclesfield was modified and extended by Lord Thurlow L.C. who, in Sloman v. Walter [11] , expressed it in this way: The rule, that where a penalty is inserted merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the deed, and the penalty only as accessional, and, therefore, only to secure the damage really incurred, is too strongly established in equity to be shaken. 1. (1721) 1 Str. 447, at p. 453 [93 E.R. 626, at p. 630]. 2. (1783) 1 Bro. C.C. 418, at p. 419 [28 E.R. 1213, at p. 1214].
It is, however, doubtful whether these comments, appropriate as they may have been to relief against penalties, were intended to apply with equal force to all cases of relief against forfeiture. There is more to be said for the view that when the equitable jurisdiction is invoked to relieve against a forfeiture which is not in the nature of a penalty, equity looks to unconscionable conduct, as Farwell J. indicated in Mussen's Case [12] , in the passage already quoted, especially when unconscionable conduct is associated with fraud, mistake, accident or surprise.
A penalty, as its name suggests, is in the nature of a punishment for non-observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation (see, generally, O'Dea v. Allstates Leasing System (W.A.) Pty. Ltd. [13] ). On the other hand, forfeiture involves the loss or determination of an estate or interest in property or a proprietary right, e.g., a lease, in consequence of a failure to perform a covenant. When non-payment of rent or a fine is made the occasion for forfeiture of an estate or interest in property it may be proper to treat the forfeiture as being similar in character to a penalty because it is designed to ensure payment of the rent or fine. There is, however, a real distinction between "penalty" and "forfeiture" and it is unfortunate that the terms have been frequently used in a way which blurs it. The claims made by the purchasers in Steedman v. Drinkle [14] and Brickles v. Snell [15] were for relief against the "forfeiture" of instalments of purchase money. The relevant contracts, like the modern contract of sale, permitted the vendor to "forfeit" instalments of purchase money. In this situation, despite the use of the word "forfeit", relief is granted on the footing that the contractual provision entitling the vendor to retain the instalments is in substance a penalty, or in the nature of a penalty, because it is designed to ensure payment of the entire purchase price and it exceeds the damage which he suffers by reason of the purchaser's default.
The respondent's claim here is of a different kind to that involved in Steedman v. Drinkle and Brickles v. Snell. She seeks relief against forfeiture of her equitable interest as purchaser under a binding contract for sale. Forfeiture of the purchaser's interest, usually the consequence of the vendor's rescission for breach of an essential term, occurs under the general law regulating the rights of vendor and purchaser. Such a forfeiture is to be distinguished from a contractual forfeiture which is designed to ensure performance of a principal obligation. True it is that condition 5 expressly regulated the vendor's right of rescission in the present case and provided for rescission on non-compliance with the prescribed notice on expiration of the time limited. However, the presence of this contractual stipulation, which merely regulates the vendor's common law right to rescind, does not alter the essential character of the forfeiture of the purchaser's interest which occurs when rescission takes place. No doubt the risk of forfeiture is a strong inducement to completion of the contract, that being the primary intention of the parties, but it is incorrect to describe the rescission for which condition 5 provides and the forfeiture of the purchaser's interest which it entails as a penalty or as being in the nature of a penalty.
In this Court it has been said that the purchaser's equitable interest under a contract of sale is commensurate only with her ability to obtain specific performance of the contract (Brown v. Heffer [16] ). On this view the loss of the respondent's equitable interest, from which she presently seeks to be relieved, was occasioned by her failure to comply with an essential condition of the contract, payment of the balance of the purchase price on 10 August 1979, the date fixed for completion by the appellant's rescission notice, time being of the essence by virtue of condition 5. Upon the expiration of the time fixed by the notice the contract came to an end.
A competing view - one which has much to commend it - is that the purchaser's equitable interest under a contract for sale is commensurate, not with her ability to obtain specific performance in the strict or primary sense, but with her ability to protect her interest under the contract by injunction or otherwise (Tailby v. Official Receiver [17] ; Redman v. Permanent Trustee Co. of New South Wales Ltd. [18] ; Hoysted v. Federal Commissioner of Taxation [19] ; Pakenham Upper Fruit Co. Ltd. v. Crosby [20] ; Jordan, Chapters on Equity, 6th ed. (1945), p. 52, n. (e)). If this view were to be adopted and applied, the respondent's inability to obtain specific performance in the primary sense would not entail the loss of her equitable interest. She would retain that interest so long as she was entitled to make out a case for relief against forfeiture.
However, for the purposes of this case we are prepared to accept the correctness of the statement in Brown v. Heffer. It then becomes necessary to look behind the authorities to the reasons which have been put forward to sustain the view that rescission in consequence of breach of an essential term is an absolute bar to relief against forfeiture of the purchaser's interest. Before doing so, we should make one comment on the authorities. Steedman v. Drinkle and Brickles v. Snell deny the exercise, rather than the existence, of jurisdiction to relieve against forfeiture of the purchaser's interest under a contract when he is in breach of an essential term and the contract has been brought to an end. If the purchaser in this situation fails to obtain relief it is because he is unable to bring himself within the principles according to which relief is granted or refused, not because there is an absence of jurisdiction to grant him relief.
The rule that relief is never granted in respect of forfeiture by operation of law has no application to a forfeiture which occurs in consequence of a voluntary act done in the exercise of a legal right for, as we have seen, it is against such an act that relief is ordinarily granted. In this case rescission was the consequence of the respondent's non-compliance with a notice given by the appellants in exercise of the right conferred by condition 5. However, condition 5 does not affect the intrinsic character of rescission - essentially it is a voluntary act done by way of exercise of a legal right bringing about a legal consequence, the termination of the contract. Of course, if relief be granted against the vendor's voluntary act, the legal consequence flowing from that act - the rescission - is displaced and the purchaser's equitable interest is either continued or renewed.
Next there is the problem presented by the suggested unavailability of specific performance. Relief against forfeiture of the purchaser's interest under a contract for sale ordinarily involves an order for specific performance of the contract against the vendor, subject to compensation, that is, to the imposition of such terms as will fairly compensate him for insistence on completion of the contract in the altered circumstances occasioned by the purchaser's breach. The critical question then is: Should specific performance ever be ordered when the purchaser is in breach of an essential condition? The argument in favour of a negative answer is forceful. If parties expressly or impliedly stipulate that performance of a term is essential to their bargain then it would ordinarily be unjust to the innocent party to require him to complete notwithstanding a breach of that term. Generally speaking equity expects men to carry out their bargains and "will not let them buy their way out by uncovenanted payment" (Shiloh Spinners Ltd. v. Harding [21] , per Lord Wilberforce). Nor will it remake the parties' contract simply because it transpires that as things have happened one party has made a bad bargain.
But if there be fraud, mistake, accident, surprise or some other element which would make it unconscionable or inequitable to insist on forfeiture of the purchaser's interest under the contract because he has not performed in strict accordance with its terms there is no injustice to the innocent party in granting relief against forfeiture by means of specific performance with or without compensation. Cheney v. Libby [22] provides an illustration of an unconscionable rescission. There the Court ordered specific performance of a contract for the sale of land, time being of the essence, when the purchaser had failed on the due date to pay an instalment of purchase price in dollars, the stipulated mode of payment. The purchaser had been misled by the vendor's conduct into thinking that another form of payment would be accepted because it had been accepted by the vendor in the past. Once he knew the vendor refused to accept the payment, the purchaser promptly tendered payment in dollars, though the due date for payment had passed. The Court said [23] :
Even where time is made material, by express stipulation, the failure of one of the parties to perform a condition within the particular time limited, will not in every case defeat his right to specific performance, if the condition be subsequently performed, without unreasonable delay, and no circumstances have intervened that would render it unjust or inequitable to give such relief. The discretion which a court of equity has to grant or refuse specific performance, and which is always exercised with reference to the circumstances of the particular case before it, (Hennessy v. Woolworth, [24] ) may, and of necessity must, often be controlled by the conduct of the party who bases his refusal to perform the contract upon the failure of the other party to strictly comply with its conditions. After noting that forfeiture of the contract would enable the vendor "to take advantage of his own wrong" [25] , the Court went on to say [26] that the provisions of the contract - "cannot be applied where the efficient cause of the failure of the party seeking specific performance to comply strictly and literally with the contract was the conduct of the other party". 1. (1890) 134 U.S. 68 [33 Law. Ed. 818]. 2. (1890) 134 U.S., at p. 78 [33 Law. Ed., at p. 823]. 3. (1888) 128 U.S. 438, at p. 442 [32 Law. Ed. 500, at p. 502]. 4. (1890) 134 U.S., at p. 79 [33 Law. Ed., at p. 823]. 5. (1890) 134 U.S., at p. 80 [33 Law. Ed., at p. 824].
The foregoing discussion indicates that the Judicial Committee in Steedman v. Drinkle and Brickles v. Snell gave more weight to the value of enforcing contracts according to their strict terms and less attention to the fundamental principle which underlies the exercise of the equitable jurisdiction to relieve against forfeiture than we are disposed to give them. That the Judicial Committee did so is readily understandable because in the early part of this century overriding importance attached to the concept of freedom of contract and to the need to hold parties to their bargains. These considerations, though still important, should not be allowed to override competing claims based on long standing heads of justice and equity. The result of the two decisions was to enunciate an inflexible rule that specific performance will never be granted where there is a breach of an essential condition, thereby diminishing the utility of the remedy in cases of relief against forfeiture. A preferable course is to adjust the availability of the remedy so that it becomes an effective instrument in situations in which it is necessary to relieve against forfeiture of the purchaser's interest under a contract for sale. The rule would then be expressed by saying that it is only in exceptional circumstances that specific performance will be granted at the instance of a purchaser who is in breach of an essential condition.
Whether the exceptional circumstances exist in a given case hinges on the existence of unconscionable conduct. It is impossible to define or describe exclusively all the situations which may give rise to unconscionable conduct on the part of a vendor in rescinding a contract for sale. None the less it may be said that where the conduct of the vendor, though not creating an estoppel or waiver, has effectively caused or contributed to the purchaser's breach of contract there is ground for exercising the jurisdiction to relieve. And if it also appears that the object of the rescission is not to safeguard the vendor from adverse consequences which he may suffer as a result of the contract remaining on foot, but merely to take unconscientious advantage of the benefits which will fortuitously accrue to him on forfeiture of the purchaser's interest under the contract, there will be even stronger ground for the exercise of the jurisdiction.
In the ultimate analysis the result in a given case will depend upon the resolution of subsidiary questions which inevitably arise. The more important of these are: (1) Did the conduct of the vendor contribute to the purchaser's breach? (2) Was the purchaser's breach (a) trivial or slight, and (b) inadvertent and not wilful? (3) What damage or other adverse consequences did the vendor suffer by reason of the purchaser's breach? (4) What is the magnitude of the purchaser's loss and the vendor's gain if the forfeiture is to stand? (5) Is specific performance with or without compensation an adequate safeguard for the vendor?
In the present case we can answer the first two of these questions favourably to the respondent by reference to the evidence. Although we have concluded that the statement made on 9 August 1979 by Miss Williams to Mr. Gardiner was not sufficiently clear and unequivocal to ground an estoppel against the appellants, it nevertheless created the impression in Mr. Gardiner's mind that settlement would take place on 17 August or such earlier date, being a reasonable time, as might be advised if the appellants were not prepared to extend the time for completion until 17 August. Granted that this was not the impression that Miss Williams intended to convey by her words and that it is not the construction which we place upon them, the words were capable of being understood in the sense in which Mr. Gardiner understood them.
We have already found that Mr. Gardiner acted in reliance on the statement made by Miss Williams as he understood it. The consequence is that the purchaser's breach was inadvertent and not wilful. In this context it seems that the breach was not a serious breach, though its impact on the vendor's position remains to be ascertained.
Of course we know that forfeiture will entail the loss by the respondent and the acquisition by the appellants of the value of the dwelling house which the respondent and her husband erected on the land at a cost of $35,000 after going into possession. In the absence of countervailing circumstances this consequence in itself might tend to suggest that the rescission was, in the circumstances of inadvertent breach, unconscientious and that the appellants are acting unconscionably in insisting that the rescission should stand.
However, the evidence as it presently stands does not enable us to answer question 4 fully or to answer questions 3 and 5 above. It is a deficiency that presents a very real problem in deciding whether the respondent should be allowed to argue a case in favour of relief against forfeiture. The normal rule is that a party will not be permitted to argue a point, neither raised on the pleadings, nor fought at the trial, when further evidence might possibly affect the result. In this case, however, the Court has decided that the respondent should be at liberty to raise the point on this appeal. An important factor in that decision was the consideration that an investigation of the issue at first instance would have been abortive in view of the decisions in Steedman v. Drinkle [27] and Brickles v. Snell [28] which were binding on the Supreme Court.
The conclusion which we have reached is that the Court had jurisdiction to relieve against forfeiture in the circumstances of this case, that there is a serious question to be tried in the exercise of that jurisdiction and that the decision in the case will ultimately depend on considerations to which the parties have not had the opportunity of directing evidence.
We would therefore remit the case to the Supreme Court for determination of the respondent's claim to be relieved from the forfeiture of her interest under the contract of sale. In all the circumstances, there should be no order as to costs of the proceedings in this Court. In the event that the respondent succeeds in obtaining an order for the enforcement of the contract on the further hearing of the proceedings in the Supreme Court of Victoria, there should be no order as to the costs of the appeal from Murray J. to the Full Court of the Supreme Court. In the event that the respondent fails to obtain such an order for the enforcement of the contract, the respondent should be ordered to pay the appellants' costs of the appeal to the Full Court. The costs of the proceedings at first instance, including the costs of the hearing before Murray J., and the costs of the proceedings on remitter to the Supreme Court, should be reserved to be dealt with by the Judge of the Supreme Court before whom the matter comes on further hearing.
The purchasers were in breach of their contractual obligation to pay the residue of the purchase price on 1 July 1979. Time was of the essence of the contract. However, the vendors' right to rescind for breach was restricted by cl. 5 of the 1964 Copyright Conditions of Sale incorporated into the contract. The relevant parts of cl. 5 provide:
(1) Time shall be of the essence of this contract in all respects but the liberty of either party to enforce any right 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 this contract shall be restricted as follows: - Neither shall be entitled to enforce any of the said rights and remedies unless he gives to the other a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good and the proper legal costs occasioned by it to the party giving the notice are paid, both within a period of not less than fourteen days from the date of giving of the notice and the other fails within that period to remedy the default and pay those costs.
(2) If the notice also states that unless the default is so remedied and the costs paid the contract will be rescinded pursuant to this sub-clause, then if the default is not remedied and the costs paid within the said period -
(a) the contract shall become rescinded upon the expiry of the period
Pursuant to cl. 5, a notice signed by the vendors was given to the purchasers on 26 July 1979. The notice specified two defaults: the failure to pay the residue of the purchase price on 1 July 1979 and the failure to pay interest at the rate of 14 per cent per annum for the quarter ended 1 July 1979. The rate specified was higher than the rate to which the vendors were entitled, but the notice was not thereby invalidated: Green v. Sommerville [29] . The default in payment of the residue was truly stated. The notice accorded with the requirements of sub-cl. (1). A statement was indorsed on the notice, in accordance with sub-cl. (2)(a), that the contract would be rescinded unless the default therein specified was remedied and the costs thereby demanded were paid within fifteen days from the giving of the notice. It is common ground that the time for compliance with the notice expired at midnight on 10 August 1979, and that that time passed without the default in payment of the residue of the purchase price being remedied or the costs being paid. Unless the notice ceased to have the effect which sub-cl. (2)(a) accorded to it, the contract became rescinded at midnight on 10 August, and the purchasers' tender of performance on 15 August was lawfully rejected.
It was submitted, however, that a telephone conversation on 9 August between Mr. Gardiner, solicitor for the purchasers, and Miss Williams, an employee in the office of the solicitors for the vendors, was effective both to keep the contract on foot despite the notice and to preclude the vendors from denying that it was on foot when the purchasers tendered performance on 15 August. The circumstances in which the conversation occurred are described in other judgments, but I recall the relevant passage from the evidence of Mr. Gardiner:
I told Miss Williams that my clients had arranged bridging finance from the A.N.Z. Bank at Pakenham. I told her that the bank required approximately a week in which to carry out their usual title searches, but they would be ready to settle on the following Friday - which was 17 August. Miss Williams said to me, "I think that'll be all right but I'll have to get instructions", and that's the substance of that conversation as far as I recollect it.
Miss Williams did not in terms extend the time for compliance with the notice, but she expressed her expectation that the vendors would agree to accept performance on 17 August, and that statement clearly implied that she expected that the time for compliance with the notice would be extended by the vendors and that the contract would be kept on foot thereby. But she expressed no more than her expectation. She made no promise or representation on behalf of the vendors that they would extend the time or would keep the contract on foot until 17 August; on the contrary, she said that she had to obtain the vendors' instructions. A principal is not bound by an act of an agent who declares that he has no authority from his principal to bind him by that act (Lysaght Bros. & Co. Ltd. v. Falk [30] ).
In the event, the vendors refused to accede to Mr. Gardiner's request for completion on 17 August. The respondent submits that the vendors were nevertheless bound to complete the contract when the purchasers tendered performance on 15 August, though the time for compliance with the notice had then expired. The submission is that Miss Williams, in saying "I think that'll be all right but I'll have to get instructions", gave Mr. Gardiner to understand that the contract would not "become rescinded" pending the obtaining of instructions or during a reasonable time thereafter. When this conversation took place, time was running out under the notice: there were less than forty-eight hours before the contract was to "become rescinded".
Could Miss Williams' statement have been understood reasonably by Mr. Gardiner as making a promise or representation that, although the time for compliance with the notice might expire, the contract would not become rescinded while instructions were being obtained and for a reasonable time thereafter? The courtesies commonly observed by solicitors negotiating on their clients' behalf may give rise to an expectation that the status quo will be maintained as between their clients while instructions are being obtained, but whether a conversation which engenders such an expectation amounts to a promise or representation binding on the clients depends upon all the relevant circumstances. A relevant circumstance is the known limits of a solicitor's authority in the matter. Negotiations between solicitors are negotiations between agents, and the known limits of the authority - albeit the apparent or implied authority - of the respective agents define the ambit of their negotiations and thus shape the promises or representations binding upon the clients which can be inferred from the course of the negotiations. Generally speaking, when a party gives a notice to another party to secure or to facilitate the exercise of the first party's rights - such as the notice given by the vendors to the purchasers in the present case - the solicitor for the first party has no apparent or implied authority to countermand or qualify the effect of the notice in order to grant an indulgence to the other party. The solicitor for the party who gives the notice has no apparent or implied authority in such a case to make a binding promise or representation affecting the operation of the notice; he would need his client's instructions to permit him to do so. The solicitor for the other party must be taken to know of that limitation in the absence of facts showing a wider authority.
In the present case the vendors, by indorsing the notice with a statement in accordance with sub-cl. (2)(a), had elected to rescind the contract for breach of the purchasers' obligation to pay the residue of the purchase price on 1 July. The enforcement of the rescission was restricted by the operation of sub-cl. (1). By virtue of that sub-clause the purchasers, though in breach of their obligation to pay the residue of the price on 1 July, were entitled to complete the purchase within the time specified in the notice. The vendors' solicitors were authorized, either expressly or impliedly, to complete the purchase and receive the price if the purchasers tendered performance within that time. But once the vendors had elected to rescind the contract and had communicated that election to the purchasers by indorsing the notice with a statement in accordance with sub-cl. (2)(a), the vendors' solicitors cannot be taken to have authority to countermand the notice and to bind the vendors to performance of the contract after the time specified by them in the notice. Without any indication of a wider authority, it is not possible to infer that an undertaking by the vendors' solicitors to obtain further instructions amounted to a promise or representation that the notice would be countermanded or its operation suspended so as to keep the vendors bound by the contract after the time for rescission had passed. It is not necessary to consider what the position may have been if Miss Williams had represented that she had instructions authorizing her to extend the time for compliance with the notice. The question whether a statement by a solicitor that he has authority wider than his apparent or implied authority estops his client from denying the extent of the authority claimed does not arise upon the facts of the present case. This case turns on the anterior question, namely, whether it is to be inferred that Miss Williams, though she did not say so expressly, promised or represented on behalf of the vendors that the time for compliance with the notice was to be extended and the contract was to be kept on foot while she was obtaining instructions and during a reasonable time thereafter. Having regard to the limit upon her apparent or implied authority at the time - a limit which Mr. Gardiner must be taken to have known - no such promise or representation can be inferred. If Miss Williams' statement that she expected that the vendors would agree to the extension sought by Mr. Gardiner lulled him into believing that the vendors would not insist upon the rescission which was then imminent, his belief was induced by his sharing of Miss Williams' expectation as to what the vendors' instructions would be, not by any promise or representation made by her on the vendors' behalf.
It follows that, in my opinion, Murray J. at first instance was right to refuse the respondent a decree of specific performance, and that the appeal to the Full Court ought to have been dismissed. That appeal was allowed by a majority of the Full Court, and the respondent now seeks to maintain the Full Court's judgment in reliance upon a ground not argued before Murray J. or before the Full Court. The respondent seeks relief against the forfeiture of her interest in the land the subject of the contract of sale. She went into possession, as she was entitled under cl. 7 of the contract of sale, after paying the deposit in July 1978 and she erected a dwelling on the land at a cost of $35,000. If she is required to give up possession of the land, she will lose the benefit of that expenditure. The respondent submits that where default is made in the timeous payment of the residue of the purchase price under a contract of sale of land where time is of the essence and the vendor rescinds the contract, the consequential loss of the purchaser's interest in the land is a forfeiture against which equity can and will relieve in a proper case.
Reliance is placed upon the decision of the Court of Appeal in Chancery in In re Dagenham (Thames) Dock Co.; Ex parte Hulse [31] which was followed by the Judicial Committee in Kilmer v. British Columbia Orchard Lands Ltd. [32] . In Kilmer , a purchaser, who had paid upon execution of a contract of sale the first instalment of $2,000 towards the purchase price of $75,000, failed to pay punctually the second instalment of $5,000. When the vendor rescinded for the purchaser's default, the purchaser sought relief against forfeiture of his interest in the land, despite a stipulation that time was of the essence of the contract. It appears that the vendor had extended the time for payment of the second instalment but payment had not been made within the extended time. Lord Macnaghten said that the case came within Dagenham Dock, to which he referred [33] :
In the case of In re Dagenham (Thames) Dock Co.; Ex parte Hulse, Mellish L.J. expresses himself as follows: "I have always understood that where there is a stipulation that if on a certain day an agreement remains either wholly or in any part unperformed - in which case the real damage may be either very large or very trifling - there is to be a certain forfeiture incurred, that stipulation is to be treated as in the nature of a penalty." That was a case like this of forfeiture claimed under the letter of agreement and a cross action for specific performance. James L.J. seems to have been of the same opinion. "In my opinion," he says, "this is an extremely clear case of a mere penalty for non-payment of the purchase-money." He ends by stating that he agreed with the Master of the Rolls that it was a penalty from which the company were entitled to be relieved on payment of the residue of the purchase-money with interest. 1. (1873) L.R. 8 Ch.App. 1022. 2. [1913] A.C. 319. 3. [1913] A.C., at p. 322.
Specific performance was decreed against the vendor, the purchaser being required to pay the due instalments of the purchase price and interest. Where conveyance is the real consideration for payment of the price, it would be a penalty for the vendor to exact the price without conveying. Ordinarily a vendor who does not convey is denied the right to recover or retain the price or instalments of the price in excess of a reasonable deposit either because conveyance is treated as a condition of the obligation to pay the price or because a payment of the price or of an instalment of the price in advance of conveyance is treated as "a provisional payment defeasible by the subsequent failure, for any cause, of the real consideration" (per Dixon J. in Automatic Fire Sprinklers Pty. Ltd. v. Watson [34] ). And thus the purchaser has relief against the forfeiture of the price in excess of a reasonable deposit. But where there is a stipulation which entitles the vendor to retain the whole of the price or of an instalment of the price though he does not convey, the penalty can be avoided by directing conveyance upon payment of the balance (if any) of the price. Dagenham Dock and Kilmer may be seen as instances where relief was given against forfeiture of the estate under a contract which involved the retention of the purchase money by the vendor in the event of default by the purchaser. At all events, that was the explanation which Dixon J. propounded in McDonald v. Dennys Lascelles Ltd. [35] .
In the present case, the contract contains no special stipulation involving retention of the purchase money by the vendors, and there is no ground for relieving the defaulting purchaser against forfeiture of her interest in the land rather than against forfeiture of the payments of instalments of the purchase price. Indeed, the only rights which the purchaser acquired in the land were her rights under the contract and her interest in the land, being an equitable interest, is commensurate with the relief which equity would give her by way of enforcing the executory contract of sale - usually by a decree of specific performance: Brown v. Heffer [36] ;Redman v. Permanent Trustee Co. of New South Wales Ltd. [37] . Under an executory contract in which time is of the essence and which contains no special stipulation involving retention of the purchase money by the vendor, a purchaser who fails to pay the balance of the price at the stipulated time and who thereby loses his right to a decree to enforce the contract, loses his interest in the land. He is not entitled to the land as purchaser otherwise than under the contract; he has no entitlement to relief against forfeiture of his interest in the land independent of his right to a decree to enforce the contract. That proposition inheres in two judgments of the Privy Council which were decided shortly after Kilmer . In the first, Steedman v. Drinkle [38] , a defaulting purchaser prayed in aid the judgment in Kilmer , and Viscount Haldane explained that judgment in this way [39] :
Courts of Equity, which look at the substance as distinguished from the letter of agreements, no doubt exercise an extensive jurisdiction which enables them to decree specific performance in cases where justice requires it, even though literal terms of stipulations as to time have not been observed. But they never exercise this jurisdiction where the parties have expressly intimated in their agreement that it is not to apply by providing that time is to be of the essence of their bargain. If, indeed, the parties, having originally so provided, have expressly or by implication waived the provision made, the jurisdiction will again attach.
In the case referred to [that is, Kilmer ] this appears to have been what happened. Kilmer, who was the purchaser, counter-claimed for specific performance. This Board held that as regards the company's claim the stipulation for forfeiture on which it was founded was in the nature of a penalty, against which relief ought to be granted on terms.
So far the decision, which merely applied a well-known principle, is easy to follow, and in their Lordships' opinion so far it governs the present case. But the Board went on to decree specific performance. As time was declared to be of the essence of the agreement, this could only have been decreed if their Lordships were of opinion that the stipulation as to time had ceased to be applicable. On examining the facts which were before the Board it appears that their Lordships proceeded on the view that this was so. The date of payment of the instalment which was not paid had been extended, so that the stipulation had not been insisted on by the company.
The same explanation of Kilmer was given by Lord Atkinson in delivering the judgment of the Board in the second case, Brickles v. Snell [40] . Holding that the Board "must have been of opinion that the stipulation as to time being of the essence of the contract did not apply as the facts stood" [41] in Kilmer , Lord Atkinson said [42] :
This was the feature which distinguished that case from the later case of Steedman v. Drinkle. In the latter the purchaser made default in the payment of an instalment of the purchase-money. The vendor did not give any further time for the payment of it; on the contrary, he took advantage of the default immediately and cancelled the agreement. The Board decided that, as time was expressly made of the essence of the contract, specific performance of it could not be decreed in favour of the purchaser who was in default, but held that the forfeiture of the money paid under the contract was a penalty from which relief might be granted on proper terms. This explanation of Kilmer was adopted by Kitto J. in Tropical Traders Ltd. v. Goonan [43] . 1. [1916] 2 A.C. 599. 2. [1916] 2 A.C., at p. 604. 3. [1916] 2 A.C., at p. 605. 4. (1964) 111 C.L.R. 41, at p. 53.
The relief to which a defaulting purchaser is entitled if he loses his right to specific performance is relief against the forfeiture of the purchase price other than a reasonable deposit (McDonald v. Dennys Lascelles Ltd. [44] ; Mayson v. Clouet [45] ; Linggi Plantations Ltd. v. Jagatheesan [46] ). The purchaser has no entitlement to relief against forfeiture of the equitable interest that he would have had but for his default and that he has lost by reason of that default.
The respondent lost her interest in the land because she did not pay the residue of the price at the time she had promised, though she had agreed that time was of the essence of her contract. There is no equitable jurisdiction to relieve against the consequences of failure to pay the residue of the purchase price by the due date when the parties have agreed that the time of payment is of the essence of their contract (cf. per Lord Wilberforce in Shiloh Spinners Ltd. v. Harding [47] ). The purchaser, having lost her right to specific performance, has lost the benefit of the expenditure which she outlaid in putting a dwelling on the land. The appellants have obtained the benefit of that expenditure, but that circumstance does not destroy or sterilize the stipulation that time should be of the essence of the contract. If it had been possible to relieve the respondent against forfeiture of her interest in the land, the vendors' position would have required consideration (see Shiloh Spinners Ltd. v. Harding [48] ). The question whether it would have been unjust to the vendors to foist a late payment of purchase moneys upon them would have required consideration. That question was not investigated at the trial and it cannot be investigated on appeal to this Court. However, as I am unable to uphold the new argument relied on by the respondent, I would allow the appeal and restore the judgment of Murray J.
Perhaps it should be mentioned that the respondent has sought no remedy against the appellants for unjust enrichment, and therefore that question has not been considered.
Legione
Hateley