Louinder v Leis

[1982] HCA 28

High Court of Australia|1979-11-02|Before: Brennan JJ, Mason J, Harman J, Fry J, Wootten J

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At a glance

Source facts

Court

High Court of Australia

Decision date

1979-11-02

Before

Brennan JJ, Mason J, Harman J, Fry J, Wootten J

Source

Original judgment source is linked above.

Judgment (98 paragraphs)

[1]

High Court of Australia Gibbs C.J. Stephen, Mason, Wilson and Brennan JJ. Louinder v Leis [1982] HCA 28

[2]

The facts of this case are set out in the judgment of Mason J. which I have had the advantage of reading. I agree with the conclusion reached by Mason J., and in general with his reasoning, but would state for myself briefly why I consider that the appeal should be dismissed.

[3]

The contract for the sale of the land in question from the appellant to the respondent did not fix any date for completion, and did not contain any stipulation that time should be of the essence of the contract. However, by cl. 4, it was provided that within twenty-eight days from the delivery of the vendor's statement of title the purchaser should at his own expense tender to the vendor for execution the appropriate assurance of the property. The statement of title was delivered on 2 November 1979, but, on 8 February 1980, when the appellant gave to the respondent a notice to complete the contract, the respondent had not tendered a transfer for execution. However, at the hearing at first instance no reliance was placed on the failure of the respondent to tender a transfer. Before the Court of Appeal, the appellant sought to argue that the failure of the respondent to tender a transfer within the time allowed by the contract was a breach of contract which provided sufficient justification for the giving of the notice to complete. Since the facts concerning the failure to comply with cl. 4 were not examined at first instance, and since evidence could possibly have been given that the appellant had waived the non-compliance (as indeed the evidence suggests), thus preventing the appellant's argument from succeeding, the Court of Appeal was correct in holding that it was not open to the appellant to take this point for the first time on appeal.

[6]

What right then had one party to limit a particular time within which an act was to be done by the other? It appears to me that he had no right so to do, unless there had been such delay on the part of the other contracting party as to render it fair that, if steps were not immediately taken to complete, the person giving the notice should be relieved from his contract. Fry J. was there dealing with a case in which no time had been fixed by the contract for completion of the contract, as he himself pointed out immediately before the passage which Harman J. cited. It appears from the examination of the authorities by Wootten J. in Winchcombe Carson Trustee Co. v. Ball-Rand [6] that the cases before Smith v. Hamilton were cases in which no time for completion had been fixed by the contract, or in which a time originally fixed had been waived. Further, the judgment of Harman J. contains what has since been demonstrated to be an error of principle. His Lordship said, after referring to the condition that the purchase should be completed on 4 April [7] : But it is agreed that that date, except in special circumstances, is not an essential part of the contract, and therefore the condition is, I think that the purchase shall be completed on April 4 or within a reasonable time thereafter. Both before and after Smith v. Hamilton it was said in a number of cases that a clause providing for completion on a fixed date should, when time was not of the essence of the contract, be construed as meaning that completion could take place within a reasonable period after the date fixed. It has been convincingly shown by the House of Lords in Raineri v. Miles [8] that this view was erroneous. It was there held that the breach of a contractual provision as to time which was not of the essence of the contract was a breach of the contract and entitled the injured party to damages, notwithstanding that the rules of equity would relieve the party in breach to the extent of allowing him to obtain specific performance. Once one rejects the notion that a clause providing for completion on a specified day means that completion may take place within a reasonable time thereafter, it is apparent that a party who fails to complete on the specified day is guilty of delay, within the meaning of the contract, whether or not the delay would, in the absence of the provision fixing the time, be regarded as unreasonable. In principle, it seems to me that such delay entitles the innocent party to treat the contract as at an end provided that, if time is not of the essence of the contract, he first gives a reasonable notice which is not complied with. I therefore respectfully agree with the statement in Neeta (Epping) Pty. Ltd. v. Phillips [9] that where a contract of sale of land contains a stipulation as to time which is not of the essence of the contract, and one party is in breach or guilty of unreasonable delay, the party not in default may give a notice fixing a reasonable time for completion and making that time the essence of the contract. In my opinion this case laid down no new principle, in spite of the body of opinion to the contrary. The judgment of Fullagar J. in Carr v. J. A. Berriman Pty. Ltd. is in my opinion consistent with this view. In his clear statement of principle, Fullagar J. [10] did not suggest that, where there was a failure to perform on a specified day, it was necessary that there should in addition have been unreasonable delay before the party not in default became entitled to give a notice. 1. (1953) 89 C.L.R. 327, at pp. 348-349. 2. (1975) 132 C.L.R. 289, at p. 296. 3. [1951] Ch. 174. 4. [1951] Ch., at p. 181. 5. (1879) 13 Ch.D. 589, at p. 599. 6. [1974] 1 N.S.W.L.R. 477. 7. [1951] Ch., at p. 183. 8. [1981] A.C. 1050. 9. (1974) 131 C.L.R. 286, at p. 299. 10. (1953) 89 C.L.R., at pp. 348-349.

[52]

By virtue of s. 13 of the Conveyancing Act 1919 N.S.W. stipulations in contracts as to time which would not have been of the essence of such contracts in a court of equity "shall receive in all courts the same construction and effect as they would have heretofore received in such court". There has been an element of uncertainty affecting the operation of s. 13 arising from the long-standing controversy as to the true principle underlying equity's attitude to time stipulations. In Seton v. Slade [39] Lord Eldon offered two alternative explanations. The first is that equity construes the contract differently by treating the time stipulation as formal only so that it is satisfied by compliance within a reasonable time. The second is that equity exercises a jurisdiction similar to relief against forfeitures and penalties, construing the contract as it would be construed at common law, but restraining the parties from an unconscionable exercise of their legal rights. The true position is that equity and common law differed not so much in the construction of the contract as in the consequences which they assigned to a breach of it. As Lord Cairns L.J. said in Tilley v. Thomas [40] : "The legal construction of the contract is, and must be, in equity the same as in a Court of law." See also Rolt L.J. [41] . To the same effect are the speeches of Lord Atkinson and Lord Parker of Waddington in Stickney v. Keeble [42] , Lord Parker pointing out "that it was only for the purposes of granting specific performance that equity in this class of case interfered with the remedy at law" [43] . Equity departed from the common law in insisting that a breach of a stipulation as to time only entitled the innocent party to rescind where time was of the essence of the contract. It was otherwise at common law. Consequently equity would intervene in appropriate cases to prevent the innocent party from enforcing his common law right to rescind and to assert her own rule. It follows that in such cases the operation of s. 13 converts the character of a time stipulation from essential to nonessential; it does not otherwise alter its terms or its construction. Thus the time stipulation is not read as if it called for performance by the stipulated date or "within a reasonable time" or "within a reasonable time thereafter".

[96]

It is to be observed that the contract for purchase had limited no time for completion, and that, therefore, according to the rule in this country, each party was entitled to a reasonable time for doing the various acts which he had to do. What right then had one party to limit a particular time within which an act was to be done by the other? It appears to me that he had no right so to do, unless there had been such delay on the part of the other contracting party as to render it fair that, if steps were not immediately taken to complete, the person giving the notice should be relieved from his contract. It has been argued that there is a right in either party to a contract by notice so to engraft time as to make it of the essence of the contract where it has not originally been of the essence, independently of delay on the part of him to whom the notice is given. In my view there is no such right. It is plain upon principle, as it appears to me, that there can be no such right. That which is not of the essence of the original contract is not to be made so by the volition of one of the parties, unless the other has done something which gives a right to the other to make it so. You cannot make a new contract at the will of one of the contracting parties. There must have been such improper conduct on the part of the other as to justify the rescission of the contract sub modo, that is, if a reasonable notice be not complied with. His Lordship posits a case of "such delay on the part of the other contracting party as to render it fair that, if steps were not immediately taken to complete, the person giving the notice should be relieved from his contract." If his Lordship had meant that a party might be relieved from his contract before the contractual time for completion had expired, what principle could support it? But the context shows that his Lordship did not mean that. He had in mind a case where the contractual time had expired but the contractual time, being a reasonable time, was not of the essence of the contract at law. 1. (1879) 13 Ch. D. 589. 2. (1879) 13 Ch. D., at p. 599.