Ogle v Comboyuro Investments Pty Ltd

High Court of Australia|1976-07-01|Before: Murphy JJ

High Court of Australia Barwick C.J. Gibbs, Mason, Jacobs and Murphy JJ. Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21

The respondent sold land to the appellant under a contract in writing which contained a clause (cl. 25) which required settlement of the transaction by the appellant within fourteen days of the completion of another contract under which the respondent was purchasing the same land from its then registered proprietor. The respondent gave notice to the appellant on 8th October 1974, that completion of that contract was to take place that day and that, consequently, the appellant was due to settle the subject contract on Tuesday, 22nd October 1974. In respect of the completion of the subject contract, time, by its express terms, was of the essence of the contract.

In its notification of 8th October, the respondent, whilst retaining time as of the essence, gave the appellant the option of settling on any one of the days 21st, 22nd or 23rd October. The appellant did not choose any of these days and did not complete on any one of them. By 23rd October, he therefore would have been in radical breach of his contract with the respondent.

However, on 17th October and 18th October, the respondent's solicitors called the attention of the appellant's solicitors to statements by the appellant that indicated that he did not intend to complete the contract at any of the times indicated by the respondent in its letter of 8th October. The respondent's solicitors in their letter said that if no replies were received to its correspondence - which in truth called for reply - counsel would be briefed on the question whether there was a clear anticipatory repudiation of the contract by the appellant: and that, in the event that counsel's view was in the affirmative, a writ for specific performance would be issued on the following Monday, which was 21st October. A letter from the appellant's solicitors received in the interim, so far from indicating an intention to settle, raised the possibility of setting up misrepresentation inducing the contract. The appellant's solicitors replied in substance that they took this letter as indicating a refusal to settle and that, failing a statement by the respondent to the contrary, the writ would be issued first thing on the Monday morning. To this letter there was no reply. The respondent's anxiety for certainty is understandable. A suit for specific performance was commenced on 21st October 1974. That suit was based on the appellant's anticipatory breach of the contract. But the respondent did not accept it on the basis of a termination of the contract. It treated the contract as still on foot. The writ was sent to the appellant's solicitors under cover of a letter in which it was said that the respondent remained ready, willing and able to settle on any one of the days 21st, 22nd or 23rd October.

On receipt of the writ and this letter, the appellant's solicitors wrote the same day, reiterating the possibility of raising inducing misrepresentation but giving no indication of any willingness to complete on any of the suggested days.

On 7th November, the appellant unsuccessfully applied for summary judgment in the suit for specific performance. However, leave to add to the writ an alternative claim for damages, i.e. for loss of bargain, was given to the respondent. That amendment was made on 20th November. In opposing summary judgment, the appellant asserted that he was not obliged to complete the contract at all.

On 14th November, the respondent, whilst indicating its own willingness to complete the contract and maintaining that time remained of the essence, informed the appellant that it had decided to accept the appellant's repudiation of the contract and to proceed for damages, unless it received within a time specified the appellant's undertaking to complete on a date which the appellant might reasonably nominate, time being acknowledged by the appellant as of the essence. On the following day, the respondent's solicitors amplified their letter by pointing out that the respondent was not departing from its position that settlement was overdue or that time was of the essence: and that it was not offering to substitute another day for settlement for the day prescribed by the contract.

It is clear from this correspondence that, without departing from its situation as a party entitled to sue for damages for breach of the contract, the respondent was prepared to afford the appellant an opportunity to remedy its breach.

On 18th November, the respondent terminated the contract on the basis of the appellant's repudiation of it. The respondent notified the termination on 19th November.

When the respondent's suit for specific performance with its alternative claim for damages was about to be heard, the appellant notified the respondent that it would be contended that, because the writ had not been amended to include the alternative claim for damages until a date after the alleged acceptance of the appellant's repudiation of the contract, the cause of action on which the suit was founded was not complete at the date of the issue of the writ. For this reason, it was said, the respondent must fail.

Thereupon, the respondent was given leave to discontinue its suit for specific performance with its alternative claim for damages. A suit commenced by a writ issued on 12th February 1975, claiming only damages for breach of contract was brought on for hearing. In this suit, the respondent alleged the repudiation by the appellant on or about 18th November 1974, the respondent's election thereupon to terminate the contract and the communication of that election to the appellant on 19th November 1974. Alternatively, it was alleged in the suit that the appellant had repudiated the contract on or about 21st November 1974, and that the respondent had elected to terminate the contract and had notified that election to the appellant on the same day, 21st November 1974. The appellant's defence to this suit was a denial of the paragraphs of the statement of claim which alleged that repudiation on the alternative dates and the acceptance of the repudiation. It was alleged in par. 3 of the defence that "On or about 18th November 1974, the plaintiff sold the land the subject of the contract to one John Blackburn, which sale was the subject of a letter and notice referred to in par. 3 (b) of the statement of claim". This was a reference to a sale by the respondent to the registered proprietor of the land which it had bought from that registered proprietor under the contract which is referred to in cl. 25 of the contract. I shall refer later to the circumstances of this sale. It was then alleged by pars 4 and 5 of the statement of defence that, at the respective times of the alleged repudiation and acceptance, the suit for specific performance was pending, there being no other claim in it at those dates than the claim for specific performance. For this reason, the appellant said that in point of law it was not competent for the respondent to rescind the contract as alleged in the statement of claim.

In giving his reasons for judgment, the learned trial judge said, "I would myself have no doubt that the defendant's conduct up to 21st November led irresistibly to the inference that he did not intend to perform the contract at all." With that conclusion I am fully in accord. His Honour also found that the appellant, being in breach of the contract by 23rd October 1974, continued at all material times to be in breach but that he did not commit any fresh or different breach after 23rd October. His Honour thought that thereafter there was merely a failure to remedy the breach already committed. With that conclusion I agree. However, his Honour concluded that, although the appellant committed no fresh breach, it was legitimate for the respondent to regard him as having finally repudiated the contract at that time, that is to say, by 18th November 1974, as alleged in par. 3 of the statement of claim. This finding also has my agreement.

But I would add that the appellant was in breach of the contract on 22nd October or, at latest, 23rd October, in failing to complete. That breach could have been waived or the respondent been estopped from relying on it. But, in my opinion, it ought not to be held that the respondent did waive that breach or do anything to estop itself from relying upon it. It was submitted in argument by counsel for the appellant that the respondent could not sue upon that failure to complete without first rescinding the contract. However, in my opinion, that submission was erroneous and misconceived. Where a promisor has failed to perform his promise, he may without more, be sued for such damages as flow from the breach. Where the promise which is not performed is the promise to complete a purchase, the damages will include the loss of the benefit of the performance of that promise, properly referred to as damages for loss of bargain. There is no need first to rescind the contract in order to recover damages in that case, which is a case of actual, as distinct from anticipatory, breach or repudiation. In the latter case, there must of course be an acceptance of the anticipatory breach or repudiation and thus a termination of the contract, as from that time. But it is otherwise in the case of an actual breach.

Here the appellant failed to perform his promise to complete. That failure not being waived and the respondent not being estopped from relying upon, was sufficient to support the verdict in this case, without resort to any question of rescission. However, the respondent relied on the subsequent repudiation of the contract by the appellant, presumably not realising that the failure to complete provided the necessary basis for a claim to damages for loss of bargain. The trial judge has found the appellant's repudiation and the respondent's acceptance of it. Having called attention to the effect of the failure to complete, which really left no room for repudiation, I shall consider the case on the footing of the judge's findings.

It seems to me that the case on these findings can be resolved by the application of well-known and well authenticated propositions of the law of contracts. Where a promisor has so conducted himself prior to the date for performance of his promise that the promisee may reasonably form the opinion that the promisor does not intend to perform the promise, the promisee may terminate the contract in the sense of putting an end to his own and the promisor's further obligation to perform thereunder. He may, of course, not choose to regard the promisor's attitude or conduct as warranting the termination of the contractual obligations of further performance, but instead he may insist on the performance of the promisor's promise according to its terms. If he takes the latter course, the promisor, if he performs his promise at a subsequent time, will not be liable in any respect for conduct which might have been treated as an anticipatory breach or a repudiation of the contract. Further, he may rely to his advantage on conduct of the promisee subsequent to the time at which the promisee chooses not to terminate the contract.

But if the promisee chooses to treat the contract as at an end, in so far as it requires further performance on the part of either party to it, the promisor will be quit of any obligation further to perform the contract, assuming of course that he does not successfully contest the right of the promisee so to treat the contract as at an end. However, the promisee's right to damages for any breach which has occurred up to the date of the termination of the contract, including the anticipatory breach or repudiation of it, remains. It is also a consequence of the acceptance of the repudiation that the contract, being duly terminated, may not be revived except by consent of the parties. It will not be revived, if duly terminated by the unilateral action of the promisee.

Now, in this case, as the learned trial judge found, the respondent was entitled in all reason to regard the appellant as having repudiated the contract on 18th November: that is to say, the appellant had by that time indicated that he did not propose in any event to perform his promise. In truth, in my opinion, this was really no more than an indication that the appellant did not intend to remedy the actual breach which was complete on 22nd or 23rd October. That breach, as I have pointed out, remained available to the respondent without any need to rescind the contract. However, treating the appellant, as the trial judge did, as having repudiated the contract, the respondent was entitled to treat it as no longer calling for performance on the part of either the appellant or the respondent. It notified to the appellant on 19th November its acceptance of the repudiation. It is clear that the respondent did not then lose its right to damages for the breach of the contract which had occurred by the appellant's failure to settle on or before 23rd October, or for the breach of the contract by the repudiation of the appellant. The action in which judgment has been given for the respondent was an action in which it sought damages for the breach by repudiation of the contract by the appellant. As well, as I have pointed out, it had the benefit of the breach on or before 23rd October, which breach remained available to it throughout. I should have thought that, on either basis, this appeal should fail.

However, some submissions have been raised by the appellant with which I should deal. It is said that, because a suit for specific performance was on foot, there could be no claim for damages for repudiation and for this we were referred to some cases which depended upon procedures formerly obtaining in Chancery and to a case in the Court of Appeal, Public Trustee v. Pearlberg [11] . The cases in Chancery and the case in King's Bench, in which they were cited, were all cases which dealt with a contractual right to rescind in the sense of treating the contract as inoperative from its beginning. They were none of them cases which involved the termination of a contract resulting from an accepted repudiation. Further, the first three cases which are referred to in Public Trustee v. Pearlberg depend on the understandable rule of the Court of Chancery that no case at law antithetic to the basis of a suit in Chancery could be permitted. But, once the suit in Chancery was disposed of, the reason for denying the cause of action at law disappeared. These procedural rules of Chancery really had no place in the Judicature system. Thus, within that system, as in the Supreme Court of Queensland, a plaintiff could sue concurrently for specific performance and, in the alternative, for common law damages, ultimately choosing between the remedies. It cannot be said as of these times that a suit for specific performance and an alternative claim for damages for loss of bargain cannot co-exist in point of procedure.

Consequently, I question the validity of the conclusions in Public Trustee v. Pearlberg. But however that might be, I am unable to accept so much of the views of Luxmoore and Goddard L.JJ. as would carry over these rules and considerations of the Court of Chancery into the common law as to rescission of contracts upon accepted anticipatory breach.

It being found that the appellant had repudiated by 18th November, that there had been an election to terminate and that notification of such termination had been given, it seems to me no point arises out of the fact that there was a suit for specific performance subsequently commenced and later abandoned. Even if the Chancery rule were applied, on abandonment of the suit the right to damages was exercisable. But, in any case, as I have indicated, the commencement of the suit for specific performance did not terminate the right to damages for failure to complete by a time made essential to the contract or to revive the contract if it had been duly terminated. The point intended to be made by the appellant in relation to the suit for specific performance was misconceived and of no validity. If the contract was duly terminated, no unilateral act of the respondent could displace that termination. Only a consensual act could do so. Thus, it seems to me that the respondent's suit for specific performance did not alter the rights of the parties. To that suit as originally founded, the appellant would have had a complete defence in the fact of the due termination by the respondent upon the appellant's repudiation. Of course, if that termination had been wrongful, and the appellant had treated and accepted it as a repudiation by the respondent, the consequential termination of the contract by the appellant would equally have afforded the appellant a defence to the claim for specific performance. But the termination by the respondent being lawful, the right to damages for the appellant's repudiation and breach remained quite unimpaired. The claim for damages was made as early as November 20th, if not before. It was quite open to the respondent to have the benefit of that claim notwithstanding the existence as of that date of the claim for specific performance.

In one other submission with which I should deal some weight was placed by the appellant's counsel on the decision of this Court in Carr v. J. A. Berriman Pty. Ltd. [1] . I find great difficulty in finding anything of benefit to the appellant in the decision of that case. It is quite true that in that case this Court thought that, by reason of a breach additional to the breach which had been relied upon in the Court below, the conclusion was warranted that there was a repudiation by the building owner of his promise under the contract; that, by the second breach, he had demonstrated intention not to be bound by the contract. The Court in so concluding allowed the first breach to be regarded as giving colour and significance, on the issue of repudiation, to the second breach on which, in the long run, the Court seemed to found itself.

It is true, as pointed out by counsel for the appellant, that in Carr v. J. A. Berriman Pty. Ltd., the Court indicated that the attempt to terminate the contract on the part of the builder was a repudiation on his part, if in truth there was no repudiation by the building owner which warranted the termination of the contract by the builder. No doubt, in general, an unwarranted termination of a contract in consequence of a purported acceptance of what is wrongly claimed to be repudiation will be regarded as a repudiation by the person giving the notice of termination. But it seems to me not necessarily to be so in all cases and in all circumstances. What is said in Carr v. J. A. Berriman Pty. Ltd. should be read in relation to the facts of that case.

However, assuming that the giving of a notice of termination as upon a repudiation to the appellant was unwarranted in this case, and that the respondent's attempted termination of the contract could be regarded as itself a repudiation by the respondent, that repudiation would need to have been accepted by the appellant if any rights were to accrue to him from the unwarranted giving of a notice of termination. No case of a repudiation by the respondent accepted by the appellant was made on the pleadings or in the evidence, nor do I find any trace of it in the judgments of the Court below. Paragraph 3 of the statement of defence cannot be read, in my opinion, as counsel for the appellant proposed, as an allegation of an accepted repudiation of the contract by the respondent. But, in any case, as I have indicated, I agree with the findings of the primary judge, quite apart from the failure to complete on 22nd or 23rd October, that there was a repudiation by the appellant and that the giving of the notice to terminate the contract consequent upon that repudiation was justified. Consequently, no question of a repudiation of the contract by the respondent arises.

I must now deal with an alternative submission made on behalf of the appellant. Strictly having regard to the conclusion I have so far expressed, the point it seeks to raise is not available to him. The point is that in fact the time for settlement had not arrived by 21st November or, for that matter, at all, because there had been no settlement of the contract between the respondent and the registered proprietor of the land, Blackburn, on 8th October or at all. If, in truth, the appellant had repudiated the contract on 18th November (putting on one side the breach on 22nd or 23rd October), and the respondent had accepted it and notified to the appellant the consequential termination of the contract on 19th November, it matters not when the contract would thereafter in truth fall for completion. It had been repudiated and for that reason terminated so far as further performance was concerned.

However, I shall briefly express my further reasons for rejecting the submission. The contract between the respondent and Blackburn, the registered proprietor, became the subject of litigation in the Supreme Court of Queensland. Upon a suit for specific performance, brought by the respondent against Blackburn, being called on for hearing, it was settled on terms. In consequence, there were two settlement documents agreed upon by the parties: but the substance of the settlement was that the respondent would settle for the land on 8th October, paying the balance of the purchase price, namely, $149,000. The respondent promised Blackburn that forthwith after completion of the contract between it and Ogle, it would pay Blackburn, in addition to the price, $40,000. In the event that the respondent was unable to obtain completion of the contract between itself and Ogle, the respondent promised that it would resell the land to Blackburn for the price paid for it by the respondent. The respondent did complete the contract to purchase the land from Blackburn, paying the agreed price. But, when the appellant repudiated the subject contract, the respondent by a notice of 18th November called upon Blackburn to purchase the land in accordance with the terms of settlement. Thereafter, there was further litigation between the respondent and Blackburn, resulting in the completion of the repurchase of the land on 8th January 1975.

It is quite clear from these facts that the contract between the respondent and Blackburn was completed on 8th January. It is nothing to the point that, in order to gain the concurrence of Blackburn to that completion, the respondent had to agree that in default of completion of the subject contract with the appellant, it would sell to Blackburn.

The appellant ("purchaser") on 6th February 1974 agreed to purchase certain land from the respondent ("vendor"). The agreement was subject to the following condition:

This Contract of Sale is subject to the completion within twelve (12) calendar months from the date hereof (or within such extended time as the Vendor may allow in writing) of the Contract of Sale between the Vendor herein and the present registered proprietor of the land (hereinafter referred to as "the proprietor") for the acquisition of the lands hereby agreed to be sold such Contract being dated the Twelfth day of November 1972.

It is hereby agreed by the parties hereto that should the Contract of Sale between the Vendor and the proprietor referred to in this Clause be not completed within twelve (12) calendar months from the date hereof (or within such extended time as the Vendor may allow in writing) then this Contract shall be at an end and all monies paid by the Purchaser hereunder shall be refunded by the Vendor to the Purchaser.

Payment of the balance of purchase money - $337,000 - was to be made within fourteen days of the completion of the sale referred to in the above clause. By cl. 23 time was expressed to be of the essence of the contract.

On 8th October 1974 the prior sale was completed and on the same day the purchaser was notified accordingly. Settlement was requested within fourteen days. During the period of fourteen days the vendor, for reasons which it is not necessary to state in detail but which related at least partly to a claim that prior to contract certain representations had been made to the purchaser by a representative of the vendor, came to the conclusion that the purchaser did not intend to complete at the agreed time and informed the purchaser that action would be taken for specific performance. The writ was issued on 21st October, the vendor at the same time informing the purchaser by letter that it was ready to complete on that day or on 22nd or on 23rd October. On 21st October 1974 the purchaser stated in a letter from its solicitors that it intended to comply with its contractual obligations but it took no steps to do so.

On 7th November the vendor applied for summary judgment for specific performance. In opposition to the summary judgment affidavit evidence was presented by the purchaser that prior to contract various representations had been made to him by a Mr. Stephens acting on behalf of the vendor. It is not clear whether this was intended to foreshadow a defence of misrepresentation or hardship or both. Nothing more has ever been heard of these claims but summary judgment was refused on 11th November. At the same time the vendor was granted leave to amend the writ by adding a claim for damages for breach of contract. This amendment was made on 20th November 1974. Meanwhile by letter on 14th November the vendor requested performance and indicated its readiness and willingness to complete. That letter was as follows:

Your client's refusal to perform at any time the Contract sued on is obvious. This was so at the time the action was commenced and the position has been emphasised by his conduct since, including his opposition to a Declaration that the Contract ought to be performed and the submissions made before Dunn J. by counsel on behalf of your client in opposition to our client's application for such declaration. Our client remains ready willing and able to complete the contract and continues to assert that time is of the essence; however, it has determined to accept your client's repudiation and proceed for damages unless: -

It receives by noon tomorrow an unequivocable and unconditional undertaking that your client will settle that contract;

The date nominated by your client for settlement is reasonable;

It is acknowledged that time is of the essence in respect of that date.

By letter of the following day the vendor made it clear that it regarded settlement as overdue, that time was of the essence and that the vendor was willing to settle immediately and it requested nomination of a time for settlement. Nothing other than a formal reply was ever received to these letters.

On 18th November pursuant to an arrangement between them the vendor required Blackburn, the vendor under the prior contract of sale to it, settlement of which had taken place on 8th October, to re-purchase the land and the re-purchase was completed on 8th January 1975.

Meanwhile on 17th December 1974 the statement of claim in the proceedings pending between the vendor and the purchaser was delivered. By it damages only were claimed for breach of the contract. The vendor claimed that the purchaser had repudiated the contract and that the vendor accepted the repudiation alternatively on 14th, 15th, 19th or 21st November.

The purchaser notified the vendor that it would claim at the hearing that the cause of action had not, on these allegations, accrued at the date of the writ. So, another action for damages was commenced on 12th February 1975 and on 14th February 1975 the earlier proceedings were by leave discontinued. The proceedings commenced on 12th February are the subject of this appeal. By the statement of claim in this action the vendor alleged repudiation by the purchaser on 18th November 1974 with rescission on 19th November or alternatively repudiation on or about 21st November 1974 with rescission by the vendor on the same day. The purchaser raised two issues in his defence. First he denied that he had repudiated the contract; secondly, he denied that the vendor could rescind the contract at the dates alleged because on those dates there was pending in the court an action for specific performance, and indeed at the earlier date for specific performance alone. (It is to be remembered that the alternative claim for damages was not indorsed until 20th November and that the statement of claim claiming damages alone was not delivered until 17th December.)

That the purchaser on 18th November and 21st November was in breach of contract is clear. Completion ought to have taken place at the latest by 23rd October and it had not done so as a result of the purchaser's failure to complete. The commencement of the action for specific performance did not waive the breach of contract. It waived reliance by the vendor on the breach of contract as the breach of a fundamental term thereof entitling the vendor to rescind. It has been submitted that events thereafter up to 18th November were no more than a continuation of a preceding breach, reliance upon which as a ground for rescission had been waived. We do not agree. By the time of the repudiation and rescission alleged in the current statement of claim, it had become clear that the purchaser had no intention of completing within a reasonable time, or probably at all. Much reliance was placed by the purchaser on the decision of this Court in Carr v. J. A. Berriman Pty. Ltd. [2] in support of the proposition that continuance of a breach which the other party had not elected to treat as a ground for rescission could not thereafter be a ground for such rescission unless a further breach amounting to repudiation of the contract was proved. See also Larking v. Great Western (Nepean) Gravel Ltd. (In liq.), per Dixon J. [3] . But in Carr v. J. A. Berriman Pty. Ltd. Fullagar J. enunciated the further principle that "a failure to remedy the breach might continue so long and in such circumstances as to evince an intention no longer to be bound by the contract". Fullagar J. continued [4] :

In other words, the only legitimate inference might be that he is saying: "Not only have I broken my contract by not doing the thing on the due day, but I am not going to do the thing at all", or "I am not going to do the thing at all unless and until I find it convenient to do it". In this way a right to rescind might arise which is not based on breach of the particular promise as such. That promise, even if essential to begin with, has become non-essential by reason of the election of the promisee, but the promisee may nevertheless be able to establish that the conduct of the promisor with respect to his promise amounts to a refusal to be bound by the contract. When this principle is particularly applied to contracts for the sale or purchase of land and where the breach is a failure to complete on the due date, a party who has waived a right to treat that failure to complete on the due date as the breach of an essential term may nevertheless thereafter call on the other party to complete and a failure on the part of the latter to complete on or by a further named day fixed reasonably ahead or even a continued long failure to complete will amount to a refusal to be bound by the contract (Holland v. Wiltshire, per Kitto J. [5] ) and a repudiation thereof entitling the other party to rescind and to claim damages for loss of the bargain. In this particular context there is no different in consequence between regarding the conduct subsequent to the actual breach as a further breach of the contract and regarding it as a refusal to be bound by the contract and consequently a repudiation thereof. Or it may perhaps better be said that the first breach is a failure to complete on the due date and the later breach is a failure to complete at all. 1. (1953) 89 C.L.R. 327. 2. (1940) 64 C.L.R. 221, at p. 237. 3. (1953) 89 C.L.R., at p. 349. 4. (1954) 90 C.L.R. 409, at p. 420.

If after a purchaser fails to complete at the time fixed for completion, when that time is an essential term of the contract, a vendor elects to treat the contract as on foot, there will not usually be a basis for regarding the contract as repudiated by a purchaser until a further time has been fixed in a way that shows an intention on the part of the vendor to make that further time of the essence of the contract. See Balog v. Crestani, per Gibbs J. [6] , for the analogous principle applicable where time was not originally of the essence of the contract. These circumstances must be distinguished from the circumstances where the breach of the agreement is not unconditionally waived but further time is allowed on condition that completion takes place at the further nominated time. See Holland v. Wiltshire, per Dixon C.J. [7] .

(1975) 132 C.L.R. 289, at pp. 296-298. 2. (1954) 90 C.L.R., at p. 415.

Thus although mere delay will be no more than an omission to remedy the past breach which has been waived as a ground for rescission, there are cases where the purchaser by further unreasonable delay or by a further act expressly evinces an intention no longer to be bound by the contract. Either the further delay or the further act may constitute a repudiation of the contract. In our opinion the trial judge was entitled to find that by 21st November the purchaser had evinced an intention no longer to be bound by the contract and had thereby repudiated the contract. We have no doubt that on the evidence he was correct in so finding.

We have not so far particularly considered the effect in this connexion of there having been current during this period from 21st October to 20th November the action for specific performance. There are two aspects to be considered - the effect of the action on legal rights under the contract and the application of any principle of equity which would curtail or suspend the legal rights of the vendor.

By commencing an action for specific performance the vendor elected not to rescind for failure to complete on the agreed day, completion on that day being an essential term of the contract. In Mayson v. Clouet [8] , Lord Dunedin stated the law as follows:

The law is quite plain. If one party to a contract commits a breach then if that breach is something that goes to the root of the contract, the other party has his option. He may still treat the contract as existing and sue for specific performance; or he may elect to hold the contract as at an end - i.e., no longer binding on him - while retaining the right to sue for damages in respect of the breach committed. This legal effect was discussed by Goddard L.J. in Public Trustee v. Pearlberg [9] : If one contracting party, either expressly or by conduct, repudiates a contract, the other can either accept the repudiation and treat the contract as rescinded, or can refuse to do so, and regard the contract as still alive, so that his rights will fall to be determined when the time for performance arrives. He cannot, however, insist on performance and at the same time adopt the remedies open to him on rescission. Applying that rule to a case where equity would entertain a claim for specific performance, it follows that if a vendor, by applying for that remedy, asserts that he regards the contract as subsisting, he loses his right to forfeit a deposit, on the footing that the contract has been rescinded by the purchaser's default. Goddard L.J. then stated the alternative course open to the vendor in a way with which we with respect would not agree if it was intended as a comprehensive statement of the law. 1. [1924] A.C. 980, at p. 985. 2. [1940] 2 K.B. 1, at pp. 22-23.

But he may resile from the position he has thus taken up, and if he abandons his action by discontinuing it in the manner provided by the Rules of Court he can, if the purchaser is still at fault, accept the repudiation and forfeit the deposit. In our opinion this last statement, if it is thereby meant that the action for specific performance must be abandoned before the repudiation is accepted, is too wide. It may be correct in those cases where the fault of the purchaser is the original continuing breach but not in those cases where the purchaser commits a further breach of contract or evinces an intention never to complete and thus impliedly repudiates the whole contract.

It does not follow that so long as the action for specific performance is on foot the vendor cannot ever rescind at law for further breach or, on the distinction drawn in Carr v. J. A. Berriman Pty. Ltd. [10] for further refusal or neglect which amounts to a repudiation. Legal rights are not affected at law by the mere existence of an action for specific performance though they are affected by the election involved in its institution. However, in equity a party would not in certain circumstances have been allowed to rescind a contract if his action for specific performance was still pending. That is the effect of the decision in Warde v. Dixon [11] . It is a very understandable rule of equity and is unaffected in principle by the introduction of the Judicature system.

(1953) 89 C.L.R. 327. 2. (1858) 28 L.J. Ch. 315.

A party to a contract who commences proceedings for specific performance thereby submits the dispute to the court in exercise of an equitable jurisdiction. In specific performance there must be mutuality and it is in equity inconsistent with him continuing to seek specific performance that he should rescind the contract. In many circumstances it would be inequitable of him to do so. If the dispute between the parties to the contract is one which relates to title or to the mode of completion of the contract or if there is a genuine dispute between the parties on the meaning and effect of the contract, then in those cases and in others, as for instance Public Trustee v. Pearlberg [12] a party who has commenced proceedings for specific performance cannot be allowed to rescind without first discontinuing his action for specific performance. It may be that he would need to give the defendant a further chance to perform the contract by fixing a fresh date for completion if not to do so would mean that the defendant who had impliedly concurred in having the parties' rights determined in equity was thereby prejudiced and an inequitable advantage was thereby obtained at law by the plaintiff. It would be an inequitable advantage if the plaintiff could rely on the delay while the action for specific performance was pending as a refusal to perform and as a repudiation justifying rescission.

But is this a rule applicable to all cases where an action for specific performance is or has been pending? That is the basic question in the present case. It seems to us that it is not. If a party has by his conduct shown and continues to show an intention never to complete the contract, especially where his conduct by express act or by implication is not consistent with an intention to perform the contract pursuant to any judgment for specific performance, then it must be open to a vendor to rescind even if there is current an action for specific performance. If there is a further breach of an essential term or some further conduct amounting to a repudiation while the action for specific performance is pending, the existence of the action will not then prevent the vendor electing to rescind but he will on such an election lose the right which he previously had to specific performance and will be limited to damages for the breach. The damages will be those which result from the breach which entitled the vendor to rescind and those which flow from any earlier breach which had been waived as a ground for rescission. Damages for the latter breach would not be for loss of the contract but for breach of a term which must be treated as non-essential, e.g. for delay.

If the law were otherwise it would place a party in circumstances such as the present in an impossible position. A vendor commences proceedings for specific performance. He thereby offers to perform and keeps the contract on foot. However, delay on the part of the purchaser makes it practically impossible for the vendor to retain the land. He has to sell it. Thus it is put out of the power of the vendor to perform the contract on his part. In those circumstances he has no alternative but to discontinue his claim for specific performance and to claim damages for breach of contract instead. However, if he has to rely on some further act or default of the purchaser after the discontinuance before he can rescind or if he cannot rescind after he has elected to discontinue his claim for specific performance but before it is actually discontinued, he may no longer be in a position himself to perform the contract and thus at the time of a later rescission he may be unable himself to perform a condition precedent. Thus he would be deprived of his right to sue for damages because he could no longer himself complete as a result of the delay which had compelled him to re-sell the land. We do not believe that the rule of equity was ever intended to apply in such circumstances.

In the circumstances of the present case we do not consider that it was necessary for the vendor to discontinue its claim for specific performance before rescinding. The purchaser by his conduct after 23rd October in the light of his conduct prior to that date had by 18th November evinced a clear intention that he would never perform the contract by the last mentioned date. This was accepted as a repudiation and there was rescission.

The rule of equity applied in Warde v. Dixon [13] through to Public Trustee v. Pearlberg [14] was correctly applied in those cases but it has no application to the facts disclosed in the present case where the purchaser had made it clear that he would never complete the contract. It may be that before the Judicature system was introduced a plaintiff would have had to discontinue his proceedings in equity before he could pursue his action for damages at law. That can no longer be necessary but the point does not arise in the present case. The proceedings the subject of the present appeal were commenced after the vendor had abandoned its claim for specific performance.

(1858) 28 L.J. Ch. 315. 2. [1940] 2 K.B. 1.

Lastly it was submitted that the prior contract between Blackburn and the present vendor was never completed within the meaning of cl. 25 of the contract between the present vendor and the purchaser. The basis for this submission is that the present vendor paid to Blackburn a different price or consideration for the land from the price in the contract of 12th November 1972. It is clear, however, that the real substance of cl. 25 was a condition not that the contract should be completed without variation of the consideration payable by the present vendor to Blackburn, if the present vendor should agree, but that the lands should be conveyed by Blackburn pursuant to their contract, with or without variation of the consideration, so that the vendor might complete the sale to the purchaser.

This appeal from the Court of Appeal of Queensland arises from an action in the Supreme Court for damages for breach of contract of sale of land following recission by the respondent (vendor) for repudiation by the appellant (purchaser).

Whether there was repudiation entitling the respondent to rescind is a question of fact. There was ample and convincing evidence of repudiation and rescission prior to commencement of the action on 12th February 1975. The purchaser had persistently neglected and refused to complete. The words of Kitto J. in Holland v. Wiltshire are applicable [15] :

The purchasers were refusing, deliberately and finally, to complete the purchase The contract unquestionably stood repudiated by the purchasers, and the vendor, at any time while the repudiation continued, was entitled to treat the contract as no longer binding upon him. 1. (1954) 90 C.L.R. 409. at p. 421.

The correspondence, the proceedings for specific performance (including those for summary judgment) and the conduct of the defendant in relation to them were part of the factual material. On this question of fact, the trial judge was correct in concluding that there was repudiation by the purchaser and that the plaintiff was entitled to rescind and to obtain damages.

During the hearing of the appeal, many judicial observations were referred to as though they were propositions of law. Judicial conclusions of fact or observations on facts are too often treated as propositions of law. This applies to many cases of repudiation and rescission. The warnings in Qualcast (Wolverhampton) Ltd. v. Haynes [16] , an English negligence case, are relevant to other cases in which a judge decides fact as well as law. Lord Denning said [17] : " " we ought to beware of allowing tests or guides which have been suggested by the court in one set of circumstances, or in one class of cases, to be applied to other surroundings", and thus by degrees to turn that which is at bottom a question of fact into a proposition of law see Harris v. Associated Portland Cement Manufacturers [18] by Lord Atkin."

[1959] A.C. 743. 2. [1959] A.C., at p. 761. 3. [1939] A.C. 71, at p. 78.

There is no rule that a contract cannot be rescinded for repudiation while a suit (or action) for specific performance is in existence. The conduct of the defendant in his defence (for example, pleading that he is unable to or refuses to complete) or otherwise may entitle a plaintiff to rescind for repudiation.

The remaining point was not well founded. On the facts, the respondent's contract with Blackburn was completed.

At a glance

Court

Decision date

Before

Source

Judgment (67 paragraphs)

Parties