SOMMERS v PEARSE

In a form of Defence - apparently filed in November 1991 - Mrs Sommers, having asserted that the purchase price for "Rayleigh Park" was, not $650,000.00, but $700,000.00, alleged, inter alia, that the Agreement for Sale was illegal and unenforceable by either party, and, in an accompanying Cross-Claim, Mrs Sommers sought an Order for the withdrawal of the Caveat lodged on behalf of Mr Pearse.

Both the original Points of Claim and the original Defence were amended during the course of the hearing before McLelland J in respects which it is not now necessary to record. However, it is to be noted that in pursuance of leave granted by His Honour at the conclusion of the oral evidence, there appears later to have been delivered to McLelland J further Amended Points of Claim in which it was alleged (inter alia):-

2. On or about the 16 April, 1988 the plaintiff agreed to purchase and the defendant agreed to sell the said land and property for the sum of $650,000.00.

2A. On or about the 16 April, 1988 the Plaintiff agreed with the defendant that in consideration of the defendant agreeing to sell to the Plaintiff the said land for the sum of $650,000 the plaintiff would pay the defendant the sum of $50,000 such sum to be payable within a reasonable time after completion of the sale of the said property.

2B. On or about the 20 April. 1988 the Plaintiff Paid to the defendant the sum of $4,000 in Performance of the said agreement for the sale of Raleigh Park.

2C. On or about the 9 June. 1988 the plaintiff Paid to the defendant's agent Mr Gordon the sum of $6,000 Pursuant to the agreement described in para3 above.

3. The defendant has been requested by the plaintiff to complete the said agreement for sale of Raleigh Park but has neglected and refused and continues to neglect and refuse so to do.

4. The plaintiff is ready, willing and able and hereby offers to do anything remaining to be done on its part to complete the said agreement to sell the property.

4A. The plaintiff is further ready, willing and able to pay to the defendant the sum of $50.000 upon completion of the said contract for sale of the property in accordance with the agreement described in para3 above."

In his Judgment, McLelland J dealt with the various issues which had been argued before him in the following way: -

In all the circumstances, I am not prepared to make a finding that the plaintiff in executing the contract in the form which it took was intending to defraud the Crown by evading the payment of additional stamp duty. I consider it probable that the oral part of the agreement reached between the plaintiff and Mr Gordon as the defendant's (at least ostensible) agent was that the additional $50,000 would not be payable on settlement but could be paid by the plaintiff within a reasonable time.

The defendant contends that the plaintiff has not shown that at material times he was ready and willing to complete the purchase.

Since the defendant repudiated the contract before the contractual date for completion arrived, and such repudiation has continued up to the hearing, the plaintiff is not obliged to prove that as at any time before the hearing he had, or was in a position to obtain, the purchase price (see Davis v Spalding (1974) 231 Estates Gazette 373; Traurig v Farrow Mortgage Services (8 August 1988, Young J, unreported)). I am satisfied that the plaintiff is presently ready and willing to complete the purchase and to pay the balance of the $700,000.00.

Counsel for the defendant has further sought to resist the plaintiff's claim on the basis that the contract which the plaintiff is seeking to enforce is not the contract which the evidence shows was the true contract between the parties. On the final analysis this argument insofar as it is relevant to the facts as found depends upon the proposition that the plaintiff has continued to assert that the agreement for the additional $50,000.00 was collateral to the contract for sale, whereas the true analysis of the position is that it was part of the contract for sale. I do not consider that there is any substance in the defendant's argument on this point, since the plaintiff has at all material times conceded the matter of substance, namely that he is obliged to pay the additional $50,000.

Nor is there any substance in the defendant's contention that the plaintiff is precluded by delay from obtaining equitable relief. After the defendant's repudiation of the contract, the plaintiff continued to assert his rights and

commenced these proceedings within a reasonable time. It has not been shown that any delay in the matter coming on for hearing is attributable to the default of the plaintiff, nor that the plaintiff has suffered any prejudice by reason of any such delay.

The plaintiff is entitled to an order for specific performance....

The formal Order of the Court, which was later entered, was, so far as is relevant for the purposes of this Judgment, limited to the following:-

1. The agreement for sale of land entered into on 16th April, 1988 between the Defendant as vendor and the plaintiff as purchaser be specifically performed and carried into execution.

In her Notice of Appeal, which was, by leave, amended on the hearing of the Appeal, Mrs Sommers took a number of grounds of appeal; however, it seems to me that, in substance, those grounds of appeal come down to two, they being:-

1. that McLelland J ought, first, to have found that the true purchase price was, not $650,000.00, but $700,000.00, and, second, to have held that, because, in entering into the Agreement for Sale in the form which it took, Mr Pearse intended to defraud the revenue, the Agreement for Sale, if not illegal and void, was at least unenforceable by Mr Pearse;

2. that, whether there be one contract - the purchase price being $700,000.00

• or two contracts - one in which the purchase price was $650,000.00, and a collateral one for the payment of $50,000.00 for "expenses" - Mr Pearse was disentitled to an Order for specific performance as, so it was submitted, he had failed to demonstrate that, at all relevant times, he was willing and able to perform the totality of the obligations cast upon him.

So far as concerns the first of these attacks upon His Honour's Judgment, it seems to me, as I have earlier foreshadowed, that, even if one accepts, as I do, the principle that, if a transaction is structured in a particular way in order that an unlawful purpose might thereby be effected, the person who is, or the persons who are, privy to that purpose is not, or are not, able to seek the aid of the Court to enforce the transaction, at least if the unlawful purpose has been given effect to (see, for example, Alexander v Rayson [1936] 1 K.B. 169; Effie Holdings Properties Pty Ltd v 3A International Pty Ltd [1984] NSW Conv R55-174; cp Tanotti v Corsaro 84 ATC 4269) that principle has no room for application in the present case, in which His Honour has declined to find that, in executing the Agreement for Sale in the form which it took, Mr Pearse was intending to defraud the revenue. This was a stance which, as it seems to me, it was clearly open to His Honour to take on the evidence which was placed before him, and, as his decision to adopt it appears clearly to have been affected by his assessment of the weight to be given to the evidence of each of Mr Pearse and Mrs Sommers, it ought not to be disturbed (see Abalos v Australian Postal Commission (1990) 171 CLR 167).

So far as concerns the second of these attacks Upon His Honour's Judgment, it seems to me that, to a large extent, it is deprived of substance by His Honour's conclusions. I say this since, if, as His Honour concluded, the purchase price for "Rayleigh Park" was $650,000.00 rather than $700,000.00, Mr Pearse's agreement to pay Mrs Sommers $50,000.00 as "expenses" being collateral to the Agreement for Sale, Mrs Sommers' refusal to complete the Agreement for Sale constituted a repudiation of it, it following - as Mr R.C. McDougall QC, who appeared with Miss J.A. Needham for Mrs Sommers, seemed to concede - that

Mr Pearse was not obliged to establish that, as at the contractual date for completion, he was ready, willing and able to complete the Agreement for Sale. This notwithstanding, Mr McDougall submitted, first, that it was incumbent on Mr Pearse, both to plead, and to establish by evidence, that, both at the commencement of the proceedings, and at the hearing, he was ready, willing and able to complete the Agreement for Sale and to perform his obligations under the collateral agreement to pay "expenses"; and, second, that, as - so it was submitted

• Mr Pearse had, both failed to plead, and failed to establish by evidence, that he was ready and willing do so, the proceedings ought to have been dismissed.

In the course of developing his submissions, in this respect, Mr McDougall referred, first, to what was said by Windeyer J in Mehmet v Benson ((1964-1965) 113 CLR 295, 314-315), and, then, to the decision of Lord Chelmsford LC in Hawkins v Maltby ((1867) LR 3 Ch App 188, 194-195), although I confess that, at the time, I was unable to discern, as I still am unable to discern, how the passages to which Mr McDougall drew our attention were said to provide support for his submissions in this respect.

Thus, in the passage in the Judgment of Windeyer J to which Mr McDougall referred, His Honour said: -

".. It is necessary that the plaintiff in an action for specific performances should allege in his pleading and prove at the hearing his readiness and willingness to perform the contract on his part: and readiness involves an ability to perform it:

Ellis v Rogers ((1884) 29 Ch D 661, 667); McDonald v McMullen ((1908) 25 WN 142); Alan v Preston ((1988) 38 SR 475); Bando v Goldberg ((1944) 62 W.N. 87); King v Poggioli ((1923) 32 CLR 222, 247).

At the date when the suit is commenced the plaintiff must then be in a position to say that he is ready and willing to do at the proper time in the future whatever in the events that have happened the contract requires that he do: see Fullers' Theatres Ltd v Musgrove ((1923) 31 CLR 524, 549). And he must show too that he performed or been ready and willing to perform the terms of the contract on his part: see Fry on Specific Performance, 6th ed (1921) at 435. But if, notwithstanding earlier breaches, the contract remained on foot, then it seems to me a plaintiff is not necessarily barred from having a decree for specific performance if those breaches, not having resulted in a valid rescission, can be made good by the payment of interest. An allegation in the terms of para5 of the statement of claim is not a novelty in equity pleading: see, for example Van Heythuysen, Equity Draftsman, 2nd ed by Hughes (1928), vol 1, at 15. No doubt it negatives any suggestion that the plaintiff had ever repudiated the contract. But,generally speaking, it is I think sufficient that the plaintiff in a purchaser's suit should allege that he is presently ready and willing and offers to pay the purchase money and that it is not strictly necessary in every case for him to go further: see e.g. Drewry, Forms of Claims and Defences in the Chancery Division (1876) at 12. If some conditions had earlier been waived in the plaintiffs favour and therefore not complied with, it is inappropriate to allege that he was always ready and willing to perform, the contract on his part according to its terms. However that may be, I do not think that in this case the appellant should have been refused specific performance because he did not prove all that he alleged....

while the passage in the Judgment of Lord Chelmsford L.C. - which passage, given McLelland J's findings, seems to have nothing to say which is relevant to the present case - was as follows:-

But then comes another question, upon which I feel compelled to come to a conclusion in favour of the decree, though upon totally different grounds from those mainly relied upon in the argument. It is clear that a Plaintiff must proceed secundum allegata et probata. Now by this bill the Plaintiffs seek specific performance of an agreement with the Defendant for the sale of these forty shares in consideration of the sum of Pounds 202.10s, and that particular contract the Plaintiffs pray that the Defendant may be decreed specifically to perform. But, is there proof of any such contract? The only proof given is this transfer, which is expressed to be in consideration of Pounds 145 paid to the Plaintiff Hawkins by the Defendant; and if I were to make a decree for specific performance of the contract alleged by the bill, I should compel the performance of the contract into which the parties never entered. The proof of the contract alleged in the bill entirely fails, and it is, therefore, impossible that the Plaintiffs should be entitled to relief on his bill. Whether upon a bill properly framed the Plaintiffs would have been entitled to relief, it is unnecessary to say; but, under the circumstances, I feel myself compelled to say that the Plaintiffs have failed in their proof of the contract of which they seek specific performance, and therefore I must affirm the decree and dismiss the appeal, but certainly without costs, and without prejudice to any other bill which may be filed."

It will readily be observed that, although, in his Judgment, Windeyer J referred to the then need for a plaintiff seeking specific performance to include in her, or his, pleading both an allegation of readiness and willingness and, where appropriate, an offer to pay the purchase price, His Honour did not exclude the possibility of a plaintiff obtaining a decree for specific performance notwithstanding past breaches on her, or his, part - indeed, as Barwick C J had earlier said in Mehmet v Benson ((supra) at 307), although relevant to the question, past defaults do not, without more, establish that the plaintiff was not, in the relevant sense, ready and willing to perform the contract.

So far as concerns the course taken by Lord Chelmsford L.C. in Hawkins v Maltby (supra), it is to be observed that although the taking of a similar course in any case in which the agreement proved at the trial varies from that alleged by the plaintiff may well be appropriate (see, for example, Joynes v Stratham (1746) 3 Atk 388; Legal v Miller (1750) 2 Ves Sen 299; Lindsay v Lynch (1804) 2 Sch and Lef 1; Jeffrey v Stephens 6 Jur (NS) 947) it will not always be so; on the contrary, as was pointed out by Lord Cottenham L.C. in London and Birmingham Railway Company v Winter ((1840) Cr and Ph 57,61) in a case in which a variation is set up, and established by a defendant:-

".. it will depend on the particular circumstances... whether that is to defeat the Plaintiff's title to have a specific performance, or whether the Court will perform the contract, taking care that the subject matter of this parol agreement or understanding is carried into effect, so that all parties have the benefit of what they contracted for."

(see also, Smith v Wheatcroft (1878) LR 9 Ch D 223).

However, while these passages may not provide support for Mr McDougall's submissions in this respect, the questions remain: what is the relevance to Mr Pearse's claim for specific performance of the Agreement for Sale of his (Mr Pearse's) agreement to pay "expenses", and what, if any, is the course which the Court may, or ought, to take in respect of that agreement?

The decision in London and Birmingham Railway Company v Winter (supra) and the later decisions in Martin v Pycroft ((1852) 2 De G M and G 785); Smith v Wheatcroft (supra) and Scott v Bradley ([1917] 1 Ch 850) would suggest that,

in cases in which, either, a term of an oral agreement benefiting any party has been omitted from a memorandum, or formal record, of that agreement, or, there has been a parol variation of a formal agreement, and the relevant term, or variation, was one benefiting the defendant in a suit for specific performance, the Court, in concerning itself to see "that all parties may have the benefit of what they contracted for" should refuse specific performance unless the plaintiff is prepared, either, to undertake to the Court to perform the term, or variation, or, to submit to an Order to the same effect. It would, however, seem that, if the term sought to be raised be found to be, not a term, or variation, of the agreement of which specific performance is sought, but an independent, or collateral, agreement, the Court will not require such an undertaking, or submission, as the price of an Order for specific performance.

Although it is strictly not germane to the present issue, it might, perhaps, be of use to note, here, that the approach to terms omitted from a memorandum, or formal record, of an oral agreement or parol variations of a written agreement, to which I have just referred has now been extended, as appears from the following passage in Williams on Vendor and Purchaser (4 Ed (1936) Vol 1 at 4): -

"Tt is essential, however, whether the writing given in evidence is of a formal or an informal nature, that the terms of the agreement sought to be proved thereby shall be sufficiently ascertained therein. The parties to the contract and the property to be sold must therefore be sufficiently described, and the price, or the means of ascertaining it, be stated; and any other terms of the bargain (except, of course, such as are implied by law, as that a good title shall be shown) must be defined. It appears, however, that if a stipulation, which is to the detriment or for the benefit of one of the parties exclusively, is omitted from the memorandum, that party may submit to perform it or waive the benefit of it (as the case may require), and may with such submission or waiver specifically enforce the contract as stated in the memorandum."

(An example of a case in which a plaintiff, by waiving a term not contained in a memorandum, was able to obtain specific performance is provided by the decision of Younger J (as he then was) in North v Loomes [1919] 1 Ch 378; cp Hawkins v Price [1947] 1 Ch 645; Burgess v Cox [1951] 1 Ch 383).

Although McLelland J, in his Judgment, has not dealt directly with the question, it seems to me that, as it was Mr Pearse's agreement to pay "expenses" which induced Mrs Sommers to enter into the Agreement for Sale, the agreement to pay "expenses" is to be regarded as collateral to the Agreement for Sale (see, for example, De Lassalle v Guildford [1901] 2 KB 215). Accordingly, although, during the course of argument, I was inclined to view that, even if the appeal were otherwise dismissed, the Orders made by McLelland J ought to be amended so as to incorporate an Order that Mr Pearse carry out the agreement to pay "expenses", what I have earlier written would indicate that such an Order is not necessary. However, as the matter was dealt with by McLelland J upon the basis that Mr Pearse conceded that he was, and is obliged to pay the additional $50,000.00, it is unnecessary to express a concluded view on the matter.

For these reasons, I propose the following formal Orders.

ORDER that the Appeal be dismissed. ORDER that the Appellant pay the Respondent's costs of the Appeal.

Counsel for the Appellant: R C McDougall QC and Miss J A Needham Counsel for the Respondent: C J Birch

Solicitors for the Appellant: Robert Johns and Company (Bowral) by their City Agents Turner Whelan

Solicitors for the Respondent: Nicholas Angelos and Co (Newtown)