Vendor and purchaser — Contract for grant of lease — Conditional contract — Performance of conditions — Provision that if conditions were not satisfied by a specified date either party might ‘at any time thereafter’ rescind the agreement — Not all conditions satisfied by specified date — Purchaser gave notice of recission some four months after specified date — Questions as to purchaser’s entitlement to rescind — Dearth of English authorities on particular point — Australian cases cited — Conclusion that words ‘at any time thereafter’ mean what they say
company in this case had acquired a docklands site for redevelopment and had
entered into an agreement with the defendant company to grant a lease to the latter
of a particular flat, one of 22 flats into which an old warehouse was being
converted — The premium payable for the leasehold flat was £465,000 and there
was a deposit of 10% of that sum — The conversion scheme was subject to a large
number of consents, approvals and conditions required by different authorities,
including planning and listed building permissions, building regulations and
approval of steps taken in response to conditions — The agreement between the
plaintiff and defendant companies stipulated that the plaintiff (described in
the agreement as the vendor) should use all reasonable endeavours to satisfy
all the various conditions and requirements and that, if they had not been
satisfied before June 30 1988, either party might ‘at any time thereafter’
serve written notice on the other rescinding the agreement — In fact not all
the consents had been obtained or the conditions fulfilled by June 30 1988 and
some were not implemented by the date when the defendant company gave formal
notice of rescission — The defendant’s claim to rescind was challenged by the
plaintiff in the present proceedings
facts a question of some general interest was raised as to the position in
regard to a right of rescission where there is a condition precedent to the
performance of a contract to grant a lease and the condition is required to be
performed by a fixed date — If the right of rescission is expressed to be
exercisable at any time after that fixed date, is it nevertheless no longer
exercisable if the condition is satisfied after the fixed date but before the
right to rescind is exercised? It
appeared that no English authority gave the answer to this question and certain
Australian decisions cited by counsel did not provide clear guidance —
Accordingly, Knox J had to resolve the problem by reference to general
principles
considered that if the right of rescission were to be regarded as not
exercisable where the condition was
result of one of two alternative arguments — The first would be the apparent
incompatibility between a right of rescission and a contract which had become
unconditional — The second was the assumed need for an implied term qualifying
the right to rescind ‘at any time thereafter’ by the addition of words
indicating that the time must be before the condition was satisfied — The judge
was not persuaded by either argument — So far as the suggested incompatibility
was concerned, there was no substance in the objection; the concept of a vested
but defeasible right was one which was quite common in property law — He saw no
need for an implied term and came to the conclusion that the words ‘at any time
thereafter’ should be given their plain and natural meaning — That conclusion
was fatal to the plaintiff’s case — He accordingly dismissed the plaintiff’s
action and gave judgment in favour of the defendant’s counterclaim for a
declaration and the return of the deposit of £46,500 with interest
The following
cases are referred to in this report.
Aberfoyle
Plantations Ltd v Cheng [1960] AC 115;
[1959] 3 WLR 1011; [1959] 3 All ER 910
Gange v Sullivan (1966) 116 CLR 418
Mardorf
Peach & Co Ltd v Attica Sea Carriers
Corporation of Liberia [1977] AC 850; [1977] 2 WLR 286; [1977] 1 All ER
545; [1977] 1 Lloyd’s Rep 315, HL
Perri v Coolangatta Investments (Proprietary) Ltd (1982) 149 CLR
537
Property
& Bloodstock Ltd v Emerton (No 2) [1967]
2 All ER 839
Sandwell
Park Colliery Co Ltd, Re [1929] 1 Ch 277
Suttor
v Gundowda Proprietary Ltd (1950) 81 CLR
418; [1950] ALR 820
The plaintiff
company, Millers Wharf Partnership Ltd, sought in these proceedings to enforce
an agreement for the grant to the defendant company, Corinthian Column Ltd, of
a lease of Flat 2A Millers Wharf, St Katharine’s Way, London E1. The defendant
company claimed that it had effectively rescinded the agreement and
counterclaimed for a declaration to that effect and the return of the deposit.
Nicholas
Patten QC and Timothy Harry (instructed by Hardwick & Co) appeared on
behalf of the plaintiff; John V Martin (instructed by Wilson-Smith & Co)
represented the defendant.
Giving
judgment, KNOX J said: In this action between Millers Wharf Partnership
Ltd as plaintiff and Corinthian Column Ltd as defendant, the basic facts were
not the subject of dispute. There was an agreement that the proof of evidence
of a Mr Brian Ingwell should stand as evidence and I take the basic facts from
that document.
The plaintiff
in this action is a company that was acquired for the purpose of purchasing and
carrying out a redevelopment of an existing warehouse, Millers Wharf, fronting
the Thames near St Katharine Docks. The development consisted of converting
Millers Wharf into 22 flats. The original drawings for the development were prepared
by Terry Farrell Partnership, who were architects to the development from the
outset until the end of 1987. At this point Pascal Watson of 146 Buckingham
Palace Road became project architects. MWPL purchased the site in approximately
June 1987. There then follows a description of the site by reference to a plan
on which there are five different coloured pieces of land. The warehouse itself
(which was the subject of the redevelopment) is a substantial site edged red,
and that was acquired freehold. The second part of the site was edged green on
the plan referred to and consisted of a jetty in front of the warehouse and
fronting, obviously, on to the river. That was acquired leasehold from the Port
of London Authority, which owned the freehold. To the right of the warehouse
and of the jetty was first an area, reading from north to south, edged blue.
This was a public highway falling under the jurisdiction of the London Borough
of Tower Hamlets, which is the local highway authority. Next, below that to the
south, comes an area edged brown on the plan called Alderman’s Stairs, which is
a listed structure. The part of the stairs up to the front wall of the
warehouse also falls under the jurisdiction of the London Borough of Tower
Hamlets as highway authority. That part of the stairs in front of the front
wall of the warehouse falls under the jurisdiction of the Port of London
Authority. Finally, to the south of Alderman’s Stairs, is the final area of
land, edged yellow on the plan, which is a causeway to which access is gained
by going down the stairs. That, too, falls within the jurisdiction of the Port
of London Authority.
When the
plaintiff acquired the warehouse and jetty there was an existing planning
permission. This had been granted in 1983 to Land Securities Management Ltd. As
Millers Wharf itself is a listed building, Land Securities Management Ltd had
also obtained listed building consent.
The
development contemplated by Land Securities Management Ltd was, again, a
redevelopment of the warehouse. However, when the plaintiff purchased the
warehouse and jetty there were sufficient differences between the scheme
contemplated by the plaintiff and that which was the subject of the existing
planning permission and listed building consent that a fresh application for
planning permission and listed building consent was necessary. That fresh
application for planning permission and listed building consent was therefore
submitted to the London Docklands Development Corporation, which was the
relevant planning authority, on July 14 1987. Those applications were made on
behalf of the plaintiff by Terry Farrell Partnership.
The redevelopment
contemplated by the plaintiff not only involved conversion of the warehouse but
also involved works to the Alderman’s Stairs and the jetty. Essentially it was
contemplated that the jetty would become a public footpath. The public would
then be given a direct means of access to the jetty from the Alderman’s Stairs.
No direct means of access to the jetty from the stairs existed at the outset
because such was the angle of the stairs at the point where they became level
with the jetty that they were some 3 ft or 4 ft below the level of the jetty.
The scheme
contemplated by the plaintiff, therefore, envisaged rebuilding the stairs to a
sufficient level to create direct access and also creating a passageway through
the corner of the warehouse.
At a planning
meeting held at the London Docklands Development Corporation on September 14
1987, attended by Terry Farrell Partnership, the corporation determined that
the proposed works to the stairs did not fall within the ambit of the existing
planning application. A supplementary planning application was therefore made
on September 25 seeking planning permission and listed building consent for the
works to the stairs and jetty.
The London
Docklands Development Corporation wrote on November 23 to those representing
the plaintiff, reporting the decision of the corporation. The letter includes
the following:
Further to our
recent telephone conversations, I can confirm that your applications for
planning permission and listed building consent for the development of the
above site were considered by the Corporation’s planning committee on the 10th
November 1987 and that the committee resolved as follows:
1 The Corporation enter into a supplemental
agreement to revise the s52 agreement attached to application TH/83/118 for the
provision of a public riverside walkway and link to St Katharine’s Way.
2 The applicant having entered into the said
agreement, the Corporation do thereupon consent to the development set out in
the application for planning permission and listed building consent, subject to
the following conditions.
The first one
was the standard one:
The
development hereby permitted must be commenced not later than the expiration of
five years from the date of this permission.
The only other
one which I need read in full is the one numbered 3, which reads:
Full details,
including colour and samples of the facing materials to be used on the
building, should be submitted to and approved by the local planning authority
before any work on site is commenced, such details to relate in particular to:
(a) penthouse roof cladding and walls;
(b) riverside walkway;
(c) Alderman’s Stairs.
Pausing there
for a moment, the evidence before me was that that condition was common form
down to but not including the passage that reads: ‘such details to relate in
particular to’ (a), (b) and (c). So far as the latter is concerned, it
obviously was specifically directed to this particular proposal, and the
evidence was that the penthouse roof cladding and walls were to be a new
structure otherwise than in brick, which was of what the original warehouse was
built and which it was not, apart from amendments to openings such as windows
and doors, proposed to alter.
By the time
that resolution was passed, the agreement which is the subject of these
proceedings had been made. It was dated October 7 1987 and was made between the
plaintiff and the defendant. The
that the vendor (which is the name given to the plaintiff) proposed to
redevelop the property known as Millers Wharf, St Katharine’s Way, London E1
(that is defined as ‘the estate’). Second, that a company named Millers Wharf
Management Co Ltd (‘the management company’) had been formed for the purpose of
managing the common parts of the estate. Third, that there was an intention in
the plaintiff that shares in the management company should be issued to the
purchasers of flats in the estate.
The operative
part of the agreement, so far as material, reads as follows. Clause 1 is the
critical clause in this case:
1(a) This agreement is conditional on:
i. The grant
of a planning permission satisfactory to the vendor to permit the redevelopment
of the estate in accordance with the plans prepared on behalf of the vendor and
so as to enable the vendor to comply with its obligations herein.
ii. The
vendor obtaining all other permission, consents and approvals required for such
redevelopment of the estate.
The vendor
shall use all reasonable endeavours to satisfy such conditions, but if they
have not been satisfied on or before 30th June 1988, either party may at any
time thereafter serve written notice on the other rescinding this agreement
with effect from service of such notice, whereupon National Condition 10(2)
shall apply.
Clause 2
contains the main obligations to grant the lease which is in issue. It reads in
subpara (a):
Subject to
the terms of clause 1, the vendor shall grant as beneficial owner and the
purchaser shall accept a lease (‘the lease’) of the property (‘the Property’)
known as flat 2A Millers Wharf, St Katharine’s Way, London E1, the approximate
position of which is shown by red edging on plan no 2 attached to the lease.
Then there was
the usual provision for the lease to be in an attached draft lease form. Clause
3 contained the consideration, a premium to be paid by the purchaser for the
grant of the lease of £465,000, and it provided that a deposit of 10% of that
sum, in addition to any preliminary deposit paid to the vendor’s agents, should
be paid to the vendor or the vendor’s solicitors as agents for the vendor on or
prior to the exchange of the agreement.
There was then
a proviso which allowed a variation in the amount of the premium if the gross
floor area of the property after completion of its construction varied by more
than 5% from the area shown red on the plan mentioned above.
Clause 4
contained the vendor’s obligations in relation to its building operations. It
reads as follows:
The vendor
will, at its own expense, complete the construction of the property in
accordance with the provisions of the schedule hereto.
The schedule
contained three paragraphs. (a) reads:
The property
will be constructed:
i in a good and workmanlike manner;
ii in accordance with the provisions of the
planning permission and other consents to be obtained by the vendor pursuant to
clause 1 and/or relevant building regulations;
iii in accordance with the brief specification
attached hereto.
The brief
specification had obviously been provided by a third party, the Philip Pank
Partnership, and it gave details of the standard to which the redevelopment
work was to be conducted. It was prefaced by two paragraphs under the heading
‘Generally’ which read as follows:
All materials
and workmanship will conform with the relevant requirements of the building
regulations, London Building Acts and other by-laws, rules and regulations
issued by the local authority;
All internal
and external structural works, including beams, columns, external walls,
internal walls and partitions, fireproofing, means of escape, drainage and all
services and the like will be carried out under the supervision of the district
surveyor, environmental health officer, drainage inspectorate and the fire
officer;
All works
will comply with the requirements of the planning department and permissions
received from the local council.
Going back to
the schedule which was annexed to the agreement, para (b) reserved to the
plaintiff the right to make variations. It reads:
The vendor
shall be entitled without obtaining the approval of the purchaser and without
any right of compensation or rescission accruing to the purchaser to make such
variations involving departure from the specifications and plans for the
property as shall be required by the vendor or the planning authority provided
that:
i the quality of the fixtures and fittings to
be supplied by the vendor are of no less quality; and
ii the location of the property within the
building of which it forms part remains substantially similar.
The third
paragraph need not be read: it dealt with the car park access and the pathways.
The only other provision that needs to be read is the provision for completion,
which by clause 5(a) was to take place 14 days after the purchaser or his
solicitors were notified in writing by the vendor or its solicitors that the
property had been completed pursuant to clause 4 thereof and vacant possession
of the property should be given to the purchaser on completion of the grant of
the lease.
On January 6
1988, plans for building regulation approval were deposited. In February 1988
the building work started. On March 9 1988 the London Borough of Tower Hamlets,
which was the local authority to whom the plans for building regulation passing
had been submitted, rejected them. They wrote a letter dated in March 1988
which, so far as material, reads as follows:
Notice of
Rejection of Plans. Premises, Millers Wharf, St Katharine’s Way, E1. Date of
deposit of plans, 6th January 1988
— then there
is the number of the plans and the numbers of the applicant’s plans were also
attached —
Proposed
Building Work or Material Change of Use: conversion of warehouse into flats
with additional sixth storey.
The plans
deposited have been rejected under s16 of the Building Act 1984 for the
following reasons:
The plans are
defective in that they do not contain sufficient information to determine
whether the proposed work will comply with the requirements of regulation 4(a),
(b), (c), (f), (h), (j) and (k) as in attached list.
The plans
show that the proposed work would contravene regulation 4(b) as specified in
the attached list.
The attached
list was a very lengthy one, but it was common ground that the real thrust of
that rejection was concerned with the fire precaution work which, the local
authority took the view, was defective from the point of view of the building
regulations. In particular, in the list of contraventions under the heading
‘Flat 2A’ the following was found:
If the front
door is located at the head of the stairs, then the travel distance to the
common stair is greater than 15 metres and not acceptable; or, if the front
door is at the foot of the stair, then travel distance from the bedroom is
greater than 7.5 metres. An alternative escape route is required.
And there were
other requirements and shortcomings in relation to the plans specified by the
local authority.
On March 31
1988, there was a formal grant of the planning permission which was
foreshadowed in the resolution that I read earlier passed by the London
Docklands Development Corporation on November 10 of the preceding year. This
grant reads:
The London Docklands
Development Corporation as the local planning authority within the meaning of
the above-mentioned Acts and Order in the pursuance of its powers thereunder
hereby permits the following development.
Location:
Millers Wharf, St Katharine’s Way, E1.
Description:
Conversion and extension of existing warehouse to form 22 residential units
involving partial demolition of a listed building and alterations to the listed
Alderman’s Stairs.
The permission
was stated to be granted subject to specified conditions which were in fact the
same conditions as the one that had been mentioned in the resolution of
November 10 of the previous year. In particular, it included condition number
three, which I have already read once and need not read again.
At the same
time, listed building consent was granted in very similar terms. It is not
necessary to read that in any detail. All that needs to be mentioned is that it
was made subject to conditions which repeated some but not all of the
conditions attached to the planning permission. It did, in particular, repeat
condition number three regarding the submission of full details, including
colour and sample of facing materials, which I have read and do not repeat.
Third and
last, there was made on the same day a section 52 agreement between the
plaintiff (described as ‘the Developer’) of the first part, the London
Docklands Development Corporation (which is called ‘the Corporation’) of the
second part and the London Borough of Tower Hamlets (called ‘the Council’) of
the third part. It recited that the developer owned the warehouse in fee simple
and had the benefit of a lease of the jetty, that the corporation was the local
planning authority and that the council was the highway authority. It then
contained a series of definitions of which I need read only some. The site was
defined as ‘the land shown edged red and edged green on the plan’. The
delineation and colouring of the various pieces of land are as I described them
at the beginning of this judgment by reference to the map, which is in fact
annexed to this
part of the development on part of the site which is shown edged blue on the
plan’. The jetty was ‘the jetty edged green on the plan’. The works were
‘Alderman’s Stairs edged brown on the plan’. The works were ‘the construction
of the walkway and the works to the jetty’ as thereinafter described. The
causeway was ‘the causeway which is edged yellow on the plan’.
The operative
part of the agreement need be read only so far as clause 3 thereof is
concerned. That contained this covenant by the developer (which is, of course,
the plaintiff):
The developer
hereby covenant and undertake with the Corporation separately with the Council
so as to bind the site as provided for in the beforementioned statutory
provisions that upon implementation of the development the developer will:
(a) take all necessary steps and diligently lay
out, construct and otherwise complete in a proper and workmanlike manner all necessary
works for the provision to the reasonable satisfaction of the Corporation and
the Council of the walkway across the site and so that the expression ‘all
necessary steps’ shall include inter alia application for all consents,
approvals and licences required by statute or otherwise.
(b) take all necessary steps and diligently lay
out, construct and otherwise complete in a proper and workmanlike manner all
necessary works for the alterations to the stairs so as to provide access from
the walkway to the stairs to the reasonable satisfaction of the Corporation and
the Council.
And the same
definition of ‘all necessary steps’ was added.
(c) take all necessary steps and otherwise
complete in a proper and workmanlike manner all necessary work to refurbish,
resurface and light the jetty and to connect the jetty to the walkway to be
provided on the adjoining development on the land to the west of the site to
the reasonable satisfaction of the Corporation and the Council and to refurbish
and resurface the causeway.
Again, the
same definition of ‘all necessary steps’ was added. Then (d) I need not read,
but (e) reads:
Not to
commence works of demolition, construction, development or rebuilding on the
site or any part thereof in pursuance of the development until the plans and
specifications of the works have been approved by the Council and the
Corporation, such approvals not to be unreasonably withheld or delayed.
On May 9 the
plaintiff reacted to the rejection of the plans for building regulation
purposes by appealing against that rejection. On May 13 the plaintiff took an
alternative measure to surmount the difficulty posed by the rejection of the
plans submitted for building regulation passing by sending in revised plans for
building regulation approval. They involved a modification of the access to the
flat that was proposed to be sold to the defendant, and that in fact had the
effect of reducing by an extent, which was not insignificant, the square area
of the flat. The revised plans thus submitted were treated by the authority,
Tower Hamlets, as having been deposited three days later, on May 16.
That was the
state of affairs which obtained when June 30 came and went, June 30 being the
date by which the conditions mentioned in clause 1(a)(i) and (ii) of the agreement
had to be satisfied. At that stage planning permission and listed building
consent had been obtained, but there was attached to each of them the condition
three, which in turn required a consent which had not yet been obtained, ie the
one relating to facing materials. Second, the building regulation plans had not
yet been passed. The first edition had been rejected and an appeal had been
lodged against that rejection. The later plans, with modifications, had been
submitted but had not yet been passed. Third, the approvals that were required
pursuant to the section 52 agreement in clause 3(a), (b), (c) and (e) had not
yet been obtained.
The events
after June 30 which are relevant start with July 8, when the London Borough of
Tower Hamlets passed the modified plans for building regulation approval. That
was done by a letter of that date which said, inter alia:
The plan has
been passed under s16 of the Building Act 1984 subject to (certain further
conditions).
On July 26 the
London Borough of Tower Hamlets approved the works pursuant to the section 52
agreement that were proposed. The letter dated that date to the plaintiff’s
representatives said:
I confirm
that the details of the parapet wall as shown on your drawing are acceptable.
On August 9
the London Docklands Development Corporation similarly gave an approval
pursuant to the section 52 agreement by a letter of that date to the
plaintiff’s agents, saying:
Thank you for
your letter of 4th August and accompanying drawings detailing the lighting
proposals for the jetty and walkway at Millers Wharf. I can advise you that the
proposals as set out (on certain drawings which are identified) are acceptable.
This approval is given in pursuance to clause 3(f)(i) of the s 52 agreement and
does not negate the obligation of the developer to secure the various detailed
approvals required by the conditions of the planning permission and listed
building consent for this development.
On September 5
the plaintiffs were persuaded that it was necessary for them to apply for
planning permission in respect of the revisions that had been brought about to
comply with the original rejection of the plans submitted under the building
regulations. In the event, nothing turns on that particular application, but it
was in fact ultimately granted but later. The works involved were described as
‘repositioning of internal fire escape and elevation or alterations in the
course of construction involving alterations to a listed building’.
It was only on
October 26 1988 that the defendant, through its solicitor, exercised what it
claimed to be its right to rescind. The letter from the defendant’s solicitors
to the solicitors then acting for the plaintiff included the following:
Under the
terms of the agreement of the 7th October relating to the flat and to the car
parking space, the same is conditional upon the grant of planning permission
satisfactory to your clients and to your clients obtaining all other
permissions, consents and approvals required. The contract thereafter provides
that if these conditions have not been satisfied on or before the 30th June
1988 either party may at any time thereafter serve written notice on the other
rescinding the contract.
Your clients
have not obtained all other permissions, consents and approvals required for
the redevelopment in the terms of clause 1(a)(ii) of each contract. Our client
is therefore exercising his right to rescind both agreements.
And there is a
formal rescission of the two agreements which were involved. I have only so far
referred to the agreement relating to the flat. There was a separate but
similar one relating to the car parking space on which there are no separate
considerations that were argued before me.
Finally, the
letter asks for a return of the deposit, which is what condition 10(2) of the
National Conditions of Sale, 20th ed, which was incorporated in the contract,
provides for if the right to rescind is properly exercised.
After the
right of rescission certain events occurred. The London Docklands Development
Corporation gave planning permission for the fire escape provisions. An appeal
against the rejection of the plans for building regulation purposes was
successful on November 17 1988. On October 3 1989 the London Docklands
Development Corporation gave written consent to the works that were required by
condition three attached to the planning permission and to the listed building
consent.
There were
three grounds in the end advanced and insisted on on behalf of the defendant in
support of its claim to have successfully rescinded. The first was that
planning permission and listed building consent was given only conditionally on
March 31 1988 and that one of those conditions, number three, itself required
an approval to be given. Either, it was submitted, this was an element in the
requirement of condition 1(a)(i) as a planning permission or it was within the
provisions of clause 1(a)(ii) as another consent required for redevelopment of
the estate in accordance with the plans prepared on behalf of the vendor and so
as to enable the vendor to comply with its obligations therein.
Second,
building regulation plans were not passed until after June 30 1988. Third, the
consents required by clause 3(a), (b), (c) and (e) of the section 52 agreement
were not obtained until after June 30 1988.
As regards the
first of those three grounds for rescission, since the consents were not given
until after the notice to rescind was given, the only way in which the
plaintiff can rebut this defence is by showing that, as a matter of
construction, those consents are not within the provisions of clause 1(a)(i) or
(ii).
So far as the
consents attached to the section 52 agreement are concerned, it was accepted by
the plaintiff (and I see no reason to doubt that the concession was a perfectly
proper one) that they were indeed ‘other consents’ within the meaning of clause
1(a)(ii) and the rebuttal to the defence on this score was therefore limited to
the proposition that the conditions became satisfied before the rescission
notice, which was therefore too late.
This latter
point involves the proposition that where there is a condition which is not a
promisory condition but which is precedent to the obligation of performance of
a contract to grant a lease and is required to be performed by a fixed date, a
right of rescission expressed to be exercisable at any time after that fixed
date will no longer be exercisable if the condition is satisfied after the fixed
date but before the right to rescind is exercised. It is submitted that the
failure of the condition before the fixed date only rendered the
voidable and became not only unconditional but enforceable.
The researches
of counsel on each side failed to discover any authority in English law which
either supports or rejects that proposition. I was referred at the outset to
the well-known Privy Council authority of Aberfoyle Plantations Ltd v Cheng
[1960] AC 115, where the Privy Council set out the general principles in
the opinion of the board which was delivered by Lord Jenkins. Those principles
are quoted in the headnote, but I take them from the opinion at p 124, where
Lord Jenkins said:
But, subject
to this over-riding consideration, their Lordships would adopt, as warranted by
authority and manifestly reasonable in themselves, the following general
principles: (i) Where a conditional contract of sale fixes a date for the completion
of the sale, then the condition must be fulfilled by that date; (ii) where a
conditional contract of sale fixes no date for completion of the sale, then the
condition must be fulfilled within a reasonable time; (iii) where a conditional
contract of sale fixes (whether specifically or by reference to the date fixed
for completion) the date by which the condition is to be fulfilled, then the
date so fixed must be strictly adhered to, and the time allowed is not to be
extended by reference to equitable principles.
And reference
was made, notably, to Re Sandwell Park Colliery Co Ltd [1929] 1 Ch 277,
a decision of Maugham J.
The Aberfoyle
decision does not, in my judgment, govern any issue disputed in these
proceedings. First of all, it is accepted on behalf of the plaintiff that time
was of the essence in relation to the coming into operation of the right to
rescind immediately after June 30 1988 and there is therefore no question in
relation to that aspect of the matter. Second, the question whether what Lord
Jenkins said regarding the foundation for the general principle was directed to
there not being any contractual bonds at all between the parties or, on the
other hand, to there being a contractual relationship but not one of sale and
purchase, does not arise for decision in the present case. That makes it
unnecessary for me to decide whether to follow the detailed analysis of
Ungoed-Thomas J in Property & Bloodstock Ltd v Emerton [1967]
2 All ER 839, which was approved by Sachs LJ in the Court of Appeal [1968] Ch
94 at p 191, or, on the other hand, the doubts expressed by Danckwerts LJ in
that latter court at p 116, with whose judgment Sellers LJ agreed.
Whether the
former or the latter provides the correct analysis of the jurisprudential basis
for what the Privy Council held to be the general principles applicable in
relation to conditional contracts is not a matter that arises for decision
here. The reason for that is that it is common ground between the parties that
in this case the plaintiff and the defendant were contractually bound to each
other before June 30 1988, the date limited for the satisfaction of the
conditions. That must clearly be right since mutual obligations were imposed by
the agreement of October 7 1987. The defendant was obliged to pay and did, I
understand, pay the deposit and, perhaps more important, the plaintiff was
placed under a specific obligation to use all reasonable endeavours to satisfy
the conditions and there is no doubt but that that had contractual force.
On the question
of principle mentioned earlier, there are certain matters that are agreed
between the parties. First of all, it is common ground that the contract became
voidable and not automatically void by the non-satisfaction of the conditions
on or before June 30 1988. Second, as I have already mentioned, it is accepted
that time was of the essence as regards the arising of the right to rescind on
June 30 1988 and that a satisfaction, even the next day, would have been
inadequate if a notice to rescind had been served before the condition was
satisfied. Third, the defendant accepted that on the happening of the condition
— and I am now looking at the section 52 condition where approval was given by
the two authorities on July 26 and August 9 respectively — the contract did
become unconditional. But the fourth point which is in issue is whether there
remained a right to rescind after the happening of those conditions connected
with the section 52 agreement.
It should also
be observed that there is no relevant claim that there was a waiver or
affirmation of the contract after knowledge of the right to rescind was
acquired by the defendant. Indeed, the evidence was that, so far as the section
52 agreement was concerned and the consents given pursuant to it, the defendant
had no knowledge of such matters until discovery in these proceedings took
place.
The question
therefore is one of principle, but it was submitted on behalf of the plaintiff
that although English authority is lacking there is authority in cases decided in
the High Court of Australia. The first of these was Suttor v Gundowda
Proprietary Ltd (1950) 81 CLR 418. That was a case concerned with a
contract for sale by Suttor, the appellant, to Gundowda Proprietary Ltd, the
plaintiff, of certain pastoral, that is to say, non-arable, land. The
particular clause in issue that contained the condition that was in issue read
(it is set out at p 421):
In the event
of the consent of the Treasurer not being obtained within two months of the
date hereof or within such further period as may be mutually agreed upon by the
parties hereto, this contract shall be deemed to be cancelled, and upon the
vendor returning to the purchaser any deposit paid herein neither party shall
be under any further liability to the other for any sum for damages, cost or
otherwise.
The date of
the agreement was October 20 1947 and the treasurer who was referred to appears
to be a government official who was required to give his consent to certain
transactions under legislation then in force in New South Wales.
The relevant
defence and the answer to it are at p 423 in the report. The defence was that
the consent of the treasurer was not obtained before the expiration of a
two-month period. The facts in relation to that are stated at p 423:
With respect
to the defence that the contract came to an end under its own terms, it
appeared that the consent of the Delegate of the Treasurer to the contract of
20th October was obtained on 5th January 1948. The two-month period referred to
in cl 12 of that contract expired on 20th December 1947. The defendant
therefore submitted that the contract was to be deemed to be cancelled upon the
expiry of that period, and in effect then came to an end. There were three
answers put forward on behalf of the plaintiff to that submission. It was said
that the time fixed in cl 12 was not of the essence of the contract, and that
although the consent was not obtained within two months that did not bring the
clause into operation at once, but still allowed a reasonable time to obtain
the consent; further that there was an agreement between the parties within the
terms of cl 12 itself to extend the time for a reasonable time beyond 20th
December; and further that after 20th December the defendant by a clear
recognition of the continued existence of the contract forbore to assert the
provision of cl 12 against the plaintiff and waived the cancellation which that
clause might have brought about.
The evidence
on this aspect of the matter is stated at p 425:
On 27th
December 1947, Mr McManamey with a Mr Allworth went to Gundowda at the
defendant’s invitation. Allworth was interested in the plaintiff company and
its finances. He was an accountant with some knowledge of pastoral accounts and
was, apparently, the accountant to the company or person who was providing the
finance for the transaction. His evidence was taken before the suit commenced
as he then had but a short time to live, and he died some little time after the
evidence was taken. He and McManamey stayed at Gundowda until 31st December
1947, and there were a number of conflicts between them and the defendant as to
what occurred during their stay. Their evidence showed that they and the
defendant all treated the contract as still being on foot, and that the
defendant had been informed that consent would be obtainable within a very
short time, and that he led them to believe that the contract would be
completed by him.
Then there is a
statement of what the various matters that were the subject of the negotiations
were, which are not particularly important for the purposes of this decision.
The case was
heard at first instance by Roper CJ in equity and he decided this on the facts:
His Honour
accepted the evidence of McManamey and Allworth on the matters relating to the
delay in obtaining the consent of the Delegate to the Treasurer, the extension
of time therefor . . .
and the other
matters that I did not mention specifically but which were the subject of the
negotiations between McManamey and Allworth and the vendor.
So far as the
law was concerned, his Honour said this:
If time were
of the essence in cl 12 of the contract it appeared to his Honour that it was
no longer of the essence in the light of that conduct by the parties and that
any cancellation under cl 12 was in fact waived by the defendant.
And then he
proceeded to deal with the fairly numerous other defences.
When the
matter came to appeal from the Chief Justice’s grant of specific performance of
the contract, the argument that was addressed by the appellant was as follows —
it is at p 428.
There was not
any waiver before 20th December 1947. All the conversations and actions are
consistent with the fact that the contract was then on foot. After 20th
December there was not any waiver. There cannot be a waiver of a condition in a
contract which has legally come to an end. There was not any finding of
estoppel. Everything was consistent with negotiations for a new contract or a
variation of the old one which would in fact be the making of a new contract.
The onus is upon the respondent to prove that there was an extension of the old
contract.
That is
sufficient as a background for a consideration of what was
were, first, that time was not of the essence, second, that there was an
agreement to extend time and, third, that after time had run out there was a
recognition of the continued existence of the contract and a waiver.
The evidence
which was accepted was that the defendant, with knowledge of the fact that the
date for avoidance or rescission had passed, went on negotiating terms on the
footing that the contract was still going to be completed by him and at first
instance there was a specific holding that there was a waiver. It was against
that holding that the argument in the High Court of Australia was directed,
namely to the proposition that there was no such waiver.
Against that
background I turn to the judgment of the court, which consisted of Latham CJ
and Williams and Fullagar JJ, and I take it up at p 440, where the judgment of
the court says this:
So far as cl
12 is concerned, there are, in our opinion, two answers to the contention of
the appellant.
In the first
place McManamey was at Gundowda from 29th November to 8th December 1947 and he
gave evidence of conversations between himself and the defendant which his
Honour accepted and which are quite sufficient to prove an oral agreement prior
to 20th December that the time for the Treasurer’s consent should be extended
for a reasonable period after that date.
Then the court
decides that the Statute of Frauds, because not pleaded, is irrelevant. Going
on a little later in the judgment:
In the second
place, although cl 12 in terms provides for an automatic avoidance of the
contract on the occurrence of a specified event, that is (even if no agreement
for an extension of time were made) by no means the end of the matter. The
effect of contractual provisions of this character was discussed and explained
in New Zealand Shipping Co Ltd v Societe des Ateliers et Chantiers de
France . . . .
And his
Lordship continues with a quotation from Lord Atkinson’s judgment in that case,
which I need not read. It is to the effect, stated in the judgment of the High
Court of Australia, picking it up at p 441:
But we are of
opinion that the New Zealand Shipping case requires the same
construction to be given to the contract in both classes of case. The provision
in question is to be construed as making the contract not void but voidable.
The question of who may avoid it depends on what happens. If one party has by
his default brought about the happening of the event, the other party alone has
the option of avoiding the contract. If the event has happened without default
on either side, then either party may avoid the contract. But neither need do
so, and, if one party having a right to avoid it does not clearly exercise that
right the other party may enforce the contract against him. This is, we think,
the view of Lord Shaw and Lord Wrenbury in the New Zealand Shipping case,
and it is consistent with what was said by Lord Finlay L-C.
They then turn
to what actually happened at Gundowda between December 27 and 31 1947 and in
relation to that they say:
The
construction of cl 12 which we have adopted is that the clause did not
automatically cancel the contract of 20th October 1947 but only brought it to
an end if after that date one of the parties exercised its option to cancel it.
On 6th January 1948 the defendant’s solicitor wrote to the plaintiff’s
solicitors that cl 12 of the contract spoke for itself and this may have been
intended to be a notice that the defendant considered the contract to be
cancelled. But there was no clear statement that the contract was considered by
the defendant as cancelled until 15th January 1948 when the defendant’s
solicitor wrote to the plaintiff’s solicitor that ‘the consent of the Treasurer
was not obtained within the period of two months from the date of the contract
and therefore the contract is no longer effective after 20th December 1947’.
But this letter was obviously written on the view, with which we do not agree,
that cl 12 effected an automatic cancellation of the contract when the
Treasurer had not consented by 20th December 1947. His Honour accepted the
evidence of McManamey and Allworth of the events that occurred at Gundowda
between 27th and 31st December 1947, and it is clear from this evidence that
the defendant was treating the contract as still on foot although he was asking
for certain variations to which McManamey agreed provided the directors of the
plaintiff approved. Before the defendant’s solicitor purported to cancel the
contract the consent in writing of the Treasurer to the transfer had been
obtained on 5th January, 1948, and the cancellation was therefore too late.
Treating the
contract as still on foot, in my judgment, refers to the waiver argument, and I
do not read it as a decision that where there is an express right to rescind
and no question of waiver the happening of the condition upon which the right
to rescind depends destroys of itself the right of rescission. Accordingly, I
do not find an authority which in any event would not be technically binding
upon me but would be treated by me with the greatest respect that determines
the issue that I have to decide as a matter of principle.
The other
Australian authority which is arguably relevant to this issue is Perri v
Coolangatta Investments (Proprietary) Ltd (1982) 149 CLR 537. The
headnote states the facts conveniently shortly:
A contract for
the sale of land was made on 7 April 1978. It fixed no time for completion. A
special condition provided that the contract was subject to the purchasers’
completing the sale of their property at Lilli Pilli. On 17 July 1978 the
vendor gave a notice requiring the purchasers to complete by 8 August 1978.
They did not do so, and on 10 August 1978 the vendor gave them notice
rescinding the contract. On 29th September 1978 he sued them claiming a
declaration that the contract had terminated on or about 10 August 1978. The
purchasers did not complete the sale of the Lilli Pilli property until 13 June
1979. They cross-claimed for specific performance of the contract.
Held (1) that
the special condition made the completion of the sale of the purchaser’s
property a condition upon which their obligation to complete the purchase of
the vendor’s property depended . . . . (2) That the special condition obliged
the purchasers to complete the sale of their property within a reasonable time.
and Aberfoyle
was applied for that purpose.
(3) by Gibbs CJ and Stephen and Brennan JJ, that
a reasonable time for the fulfilment of the special condition had expired by
September 1978, and it had then been open to the vendor to avoid the contract
without first giving any notice limiting a reasonable time for completion. It
had done so by commencing proceedings.
Wilson J held
that reasonable time had expired on July 17 1978 and therefore the contract was
terminated on August 10 and, at the other extreme, Mason J took the opposite
view, that a reasonable time had not expired by July 17 1978 and that the
notice of August 10 did not rescind the contract, and accordingly he dissented
from the judgment of the remainder of the court, that the contract had been
avoided before the purchaser’s claim was instituted for specific performance.
The headnote
also contains a proposition attributed to Gibbs CJ and Stephen, Wilson and
Brennan JJ. The proposition that is set out under their names reads:
When the time
has elapsed for performance of a condition which is not a promissory condition,
but a condition precedent to the obligation to complete a contract of sale,
either party, if not in default, can elect to treat the contract as at an end
if the condition has not been fulfilled or waived. Notice does not have to be
given calling on the party in default to complete the contract or fulfil the
condition.
Gibbs CJ, at p
541, said:
In my opinion
special condition 6 made the completion of the sale of the property at Lilli
Pilli a condition precedent to the performance of certain of the obligations of
the parties under the contract, including the obligation of the respondent to
complete the sale.
He then makes
observations about conditions precedent and the necessity for a point of time
to which they are either precedent or, if they are subsequent, subsequent and
continues:
However,
provided the effect of a condition is clearly understood, its classification
may be merely a matter of words. The condition in the present case was not a
condition precedent to the formation of a binding contract. It is clear that a
binding contract came into existence immediately upon signature, and that the
parties to it were from that moment subject to certain obligations. For
example, the appellants became liable to pay a deposit. Further, there was implied
a promise by the appellants that they would do all that was reasonable to find
a buyer for the Lilli Pilli property and to complete a sale to him.
Pausing there
for a moment, those are obviously points of similarity with the present case,
where it is common ground that there was a binding contract and it is equally
common ground that the plaintiff was under an obligation to obtain the
consents.
There then
follows, in Gibbs CJ’s judgment, a passage in which he discusses the question
whether in the Aberfoyle decision there was thought to be a condition
which prevented the formation of a binding contract at all. I need not go into
that aspect of the matter. It will suffice for me to state the Chief Justice’s
conclusion, where he said at p 543:
Nevertheless,
it probably does not matter in the present case whether the condition is
described as ‘precedent’ or ‘subsequent’ provided that it is understood that
its non-fulfilment did not prevent a binding contract from coming into
existence but did have the effect that the respondent was under no obligation
to complete the sale unless the condition was fulfilled or waived.
He then stated
the question that he saw as being the one for decision.
The question
then arises whether the respondent was entitled to terminate the contract
without first giving to the appellants a notice requiring them to fulfil the
condition, or to perform the contract, within a reasonable time.
He then refers
to Aberfoyle as authority that no notice is needed when the contract
expressly states the time by which the condition is to be fulfilled, and
discusses the question whether and to what extent that should apply in a case
such as the one before him where there was
After that
discussion, he refers to an earlier case, to which I too was referred, Gange
v Sullivan (1966) 116 CLR 418, which I have found of no assistance in
deciding this particular problem. Gibbs CJ quoted from the judgments of some of
the judges in that case. He then said this, which is the first of the passages
particularly relied upon by the plaintiff:
The authority
principally relied on by the Court
meaning in
that case the court in Gange v Sullivan
was Suttor
v Gundowda Propriety Ltd, a case of condition subsequent. It was not
suggested in either of those cases that it was necessary to give any notice to
complete The non-fulfilment of the condition gave the party not in default a
right to avoid the contract, but if that party did not exercise the right the
other party might enforce the contract against him. In Suttor v Gundowda
Propriety Ltd the attempt to cancel the contract was made too late, since
the condition had been fulfilled in the meantime. It appears to have been
assumed that no notice to complete need be given before the right to avoid the
contract, was exercised. In both cases however a time for fulfilment of the
condition was expressly fixed by the contract.
It is first to
be observed that what Gibbs CJ was looking at was the question of necessity for
a notice. Second, it is to be observed that in describing the effect of Suttor
v Gundowda in terms that the condition had been fulfilled in the
meantime and therefore the attempt to cancel the contract was made too late, it
is entirely explicable on the footing that there was either, on the one hand, a
waiver, or, on the other, an extension of the time for the satisfaction of the
condition, which were the two grounds that were pleaded and, in my judgment,
specifically upheld in the judgment of the High Court of Australia in the
Suttor case.
His lordship
in the Perri v Coolangatta case continues:
Suttor v Gundowda Propriety Ltd and Gange v Sullivan are
consistent with Aberfoyle Plantations Ltd v Cheng and support the
view that where a conditional contract fixes the date by which the condition is
to be fulfilled the contract may be terminated if the condition has not been
fulfilled when that date arrives, and that it is unnecessary to give any prior
notice to the other party. The question is whether a similar conclusion should
be reached when no time for fulfilment of the condition is fixed by the
contract, and it accordingly must be performed within a reasonable time. There
is little authority on the question, and it must be approached from the standpoint
of principle.
There too, in
my judgment, it is clear that what the learned Chief Justice was primarily
concerned with was the necessity or lack of necessity for a notice calling for
completion. Second, the reference to ‘when the date arrives’ is clearly, as a
matter of English, a reference to the date when the condition had to be
fulfilled. His lordship was not in any way concerned with the effect of the
satisfaction of the condition after the specific date that was mentioned in the
contract.
Finally, at p
546, there is this passage when the Chief Justice has come to the conclusion
that a notice is not necessary where there is no time specifically fixed for
the satisfaction of the condition any more than there is when time is fixed. He
said:
For these reasons
I consider that when the time has elapsed for performance of a condition which
is not a promissory condition, but a condition precedent to the obligation to
complete a contract of sale, either party, if not in default, can elect to
treat the contract as at an end if the condition has not been fulfilled or
waived, and that it is not necessary first to give a notice calling on the
party in default to complete the contract or fulfil the condition.
That, of
course, is the passage from which the quotation in the headnote is taken. The
reference to non-fulfilment as well as waiver does not, in my judgment, amount
to a statement of principle that satisfaction of a condition after a fixed date
for its occurrence has passed of itself destroys an express right of
rescission. The point was not in terms argued either in the Suttor case
or in Perri v Coolangatta. What Gibbs CJ said (and other members
of the court agreed with) was in any event clearly obiter in the Perri
v Coolangatta case because there was no fixed time in that case. For
all those reasons, it does seem to me that the plaintiff does not find such a
clear statement of principle in these Australian cases as I think would be
requisite to shed light on a matter unaffected by any English authority. Accordingly,
I have to deal with the case on general principles rather than by reference to
specific authority as a guide.
The argument
for the defendant was primarily based on what was claimed to be a close analogy
between the case with which I am concerned and the situation that arises where
a party to a contract is in breach of an obligation going to the root of the
contract to do an act by a certain time, whereupon the other party, the
innocent party, has an election whether to treat the contract as at an end because
of that repudiatory breach. The latter right is not lost on the authorities if
before the repudiation is accepted the act which was not done in time is done,
albeit late. I was referred to Mardorf Peach & Co Ltd v Attica
Sea Carriers Corporation of Liberia [1977] AC 850. I need not refer to that
authority because the proposition as such was not disputed. What was disputed
was that the analogy was an exact one, or one which I should treat as binding
or useful. I accept the plaintiff’s argument on this score: that the analogy is
less than perfect because the court does undoubtedly deal differently with
cases where there has been a breach of contract on the one hand and cases where
a condition which is not dependent on fault on either side is not fulfilled on
the other.
I do not find
that the analogy is sufficiently close, although undoubtedly there is
considerable similarity, for me to treat it as a guide without further
consideration of the principles involved. It seems to me that the most
satisfactory way of resolving the puzzle is, first of all, to look at what the
condition itself provides. I need not repeat clause 1(a)(i) and (ii) which sets
out what the conditions are, but the remainder of the clause reads as follows:
The vendor
shall use all reasonable endeavours to satisfy such conditions but if they have
not been satisfied on or before the 30th June 1988 either party may at any time
thereafter serve written notice on the other rescinding this agreement.
And then the
consequences are set out.
If the right
of rescission is to be lost on the occurrence of the condition after June 30
1988, it seems to me that it can be on only one of two alternative arguments.
The first is that there is a repugnance between a right of rescission and an
unconditional contract so that the two are incapable of co-existing. The second
is that it would be right, as a matter of construction, by implication, to
qualify the right to rescind at any time thereafter by making it one to rescind
at any time thereafter but before the condition is satisfied. There are many
ways in which the necessary implication could, as a matter of grammar, be
inserted into the sentence. The latter way of advancing the case was not, in
fact, argued on behalf of the plaintiff and, in my judgment, entirely
justifiably.
The first
argument can perhaps usefully be tested by looking at what the position would
be if, immediately after the words ‘on or before the 13th June 1988’ there had
been included the words ‘but before the 27th October 1988′. In such circumstances,
it would of course have been plainly unarguable that one could imply an earlier
date. But that would only exclude that aspect of the matter. It would not
necessarily exclude an argument based on a repugnance between a right of
rescission on the one hand and the existence of an unconditional contract for
sale and purchase or grant and receipt of a lease on the other. But, in my
judgment, there is no such repugnance between those two. The concept of a
vested but defeasible right is one which is quite common in property law.
Examples which come to mind are class gifts, which are capable of expanding
after members of the class have obtained a vested interest, and perhaps more
common interests which are vested under a trust subject to being defeated by
the exercise of trustees’ overriding powers of appointment.
The two
conceptions of, on the one hand, a right of rescission so as to avoid a
contract and on the other hand a contract which has become unconditional due to
the happening of an event satisfying a condition precedent are quite separate
as a matter of law. I am satisfied that they can perfectly well co-exist at one
and the same time and upon that basis I do not see that there is any necessity
for saying that this clause which says ‘at any time thereafter’ should not be
treated as meaning what, in terms, it says.
I have, of
course, not dealt with the case which might well be common if there was a
significant amount of delay after the right to rescind arose or something that
amounted either to waiver by, or an estoppel against, the party with the right
to rescind. An affirmation of the contract as, in my judgment, happened in the
Suttor case would be another example. None of that is in issue in the present
case and it is only in relation to the mere happening of the condition with
which I am concerned. On that score, I see no reason for not giving the
provisions of the clause their natural meaning and that, in fact, is fatal to
the plaintiff’s case.
The other two
grounds upon which the defendant relied were very fully and carefully argued
before me, but in the circumstances it does not seem to me to be necessary or
indeed useful for me to express my views upon them. I propose, subject to
counsel’s submissions as to
on the counterclaim for the refund of the deposit, but I will hear counsel on
the form of order.
The
plaintiff’s action was dismissed and the defendant’s counterclaim for the
return of the deposit of £46,500 with interest was allowed; the plaintiff to
pay costs on the standard basis.
