Notice to complete sale of land not complied with, and vendor elects to accept supposed repudiation and treat contract as discharged by non-performance–Notice in fact insufficient–‘At least 21 days’ notice’ means 21 days excluding day of service and date for completion–Further points concerning receipt by post and validity of service on a solicitor outside normal working hours–Vendor’s election itself a repudiation available for acceptance (and ultimately accepted) by purchaser–Extended discussion of relationship between law and equity in a case of the kind–Purchaser need not show himself ready, able and willing to complete–Instead of preparing for a completion which ex hypothesi will not take place, he may simply accept the repudiation and sue for damages
This was a
claim by Rightside Properties Ltd, of 56 Haymarket, London W1, against Mr
Bernard Gray, of 5 Salem Road, Paddington, London W2, for damages for breach of
a contract of sale of 53 Bassett Road, North Kensington, London W10, for
£50,000.
Mr R Ellis
(instructed by Randall, Rose & Co) appeared for the plaintiffs, and Mr N C
H Browne-Wilkinson QC and Mr M Blythe (instructed by Allen & Son)
represented the defendant.
Giving
judgment, WALTON J said that on April 25 1972, in consideration of £50, the
defendant gave the plaintiffs an option to purchase 53 Bassett Road for
£50,000. This option was exercised by a letter from the plaintiffs dated April
30 1972, and it was common ground that the effect of that letter was to bring
into existence a contract by correspondence within the meaning of section 40 of
the Law of Property Act 1925, and that that contract was accordingly governed
by the Statutory Form of Conditions of Sale 1925. By condition 1 of that form,
the date for completion was fixed at the first day after the expiration of
seven weeks from April 30 1972, or (as that was a Sunday) the next following
working day, namely June 19 1972. Completion did not in fact take place on that
date, and by letter dated June 23 1972, enclosing a notice therewith, the defendant’s
solicitors wrote to the plaintiffs’ then solicitors as follows:
‘We have
discussed this matter with our client and in the circumstances have agreed that
your clients should, despite their actions so far, be given the opportunity to
complete the contract. Accordingly we enclose herewith by way of service upon
you a notice to complete the transaction in accordance with No 9 of the
Statutory Conditions of Sale.’
Condition 9
provided as follows:
(1) If the purchaser shall neglect or fail to
perform his part of the contract the vendor may give to the purchaser or to his
solicitor at least 21 days’ notice in writing specifying the breach and
requiring the purchaser to make good the default before the expiration of the
notice.
(2) If the purchaser does not comply with the
terms of the said notice (a) the deposit money, if any, shall, unless the court
otherwise directs, be forfeited to the vendor, or, in the case of settled land,
to his Settled Land Act trustees; (b) the vendor may resell the property without
previously tendering a conveyance or instrument of transfer to the purchaser;
and the following provisions shall apply.
(3) Any resale may be made, by auction or private
contract, at such time, subject to such conditions, and in such manner generally,
as the vendor may think proper, and the defaulting purchaser shall have no
right to any part of the purchase money thereby arising.
The notice
enclosed was dated June 23 1972, which was a Friday. It was signed by the
defendant’s solicitors, and required completion ‘within 21 days from the date
hereof.’ The plaintiffs did not comply
with the notice, and after the expiration of the period thereby limited, namely
on July 20 1972, the defendant’s solicitors wrote to the plaintiffs’ then
solicitors making it perfectly clear that he regarded the contract as ended. In
substance, he purported to accept a repudiation by the plaintiffs of the
contract, and his solicitors added that it was not reasonable for Rightside to
expect the date for completion to be extended beyond the expiry of the notice
to complete. If, of course, the notice given to Rightside was for any reason
bad, the letter of July 20 1972 was prima facie itself a wrongful
repudiation of the contract by the defendant, a repudiation which the plaintiffs
were entitled, if they were so minded, to accept. They did not, however, do so
at once. Indeed, they had on June 29 1972 entered into a contract to resell the
property to one Leslie Ratcliffe for £53,000. By a coincidence, also on July 20
1972, Mr Ratcliffe’s solicitors had written to Rightside’s then solicitors
asking for authority to inspect the register, a request which placed
Rightside’s solicitors, in the circumstances, in a near impossible position.
The defendant himself was also in a difficult situation; he had counted on
receiving the proceeds of sale of 53 Bassett Road in time to enable him to
complete a subsequent auction purchase into which he had entered, and the delay
in completion had embarrassed him. Neither side knew of the difficulties in
which the other had been placed.
The present
proceedings were begun by Rightside on December 15 1972, claiming specific
performance of the contract or alternatively damages for breach. The statement
of claim was delivered only after there had been an application to strike out
the action for want of prosecution, but thereafter matters progressed normally.
The defence and counterclaim, as finally amended, pleaded the terms of
condition 9 of the statutory conditions of sale, and then continued: ‘By letter
dated June 23 1972, the defendant’s solicitors gave notice to the plaintiffs
pursuant to the said condition 9 requiring the plaintiffs to complete the said
contract within 21 days. Wrongfully and in breach of contract the plaintiffs
failed to comply with the said notice.’
And the conclusion was stated that Rightside were not entitled to the
relief claimed, or alternatively to equitable relief. Rightside’s reply and
defence to counterclaim, as finally amended, was basically that the notice
actually given did not give Rightside 21 days’ notice as required by condition
9, and further or alternatively that the period of 21 days was in the
circumstances unreasonably short. On opening the case for Rightside, counsel at
once elected to accept the repudiation of the contract contained in the letter
of July 20 1972, and to abandon the claim to specific performance. He
indicated, in relation to the disputed condition 9 notice, that he would argue
simply that the requirements of the condition had not been complied with, and
that he did not intend to pursue the allegation that 21 days’ notice was
unreasonably short. As the case proceeded, therefore, he (counsel) called only
one witness, Rightside’s former solicitor, Mr Freeman. A cautious and
impressive witness, Mr Freeman was unable to say whether the notice dated June
23 1972 was received by his firm in the course of the sole post delivered on
Saturday June 24 or by either of the two posts delivered on Monday June 26; the
original of the letter did however bear what appeared to be his firm’s date
stamp of June 26 1972. The defendant’s solicitor, Mr Lavender, proved that the
letter was signed by him on Friday June 23, and that had the settled routine of
his firm been followed, the letter would have been put into the post with a
first-class stamp late on Friday evening.
He (his
Lordship) thought that the onus of showing that Rightside’s solicitor received
the notice at any earlier date than June 26 1972 rested on the defendant, and
that it had not been discharged. The only proper inference to be drawn from the
evidence was that the letter in question, with its enclosure, would not have
been delivered on the Saturday morning in the ordinary course of post, and was
therefore delivered on the following Monday, June 26. If that were so, then
there could be no pretence that the notice was a valid notice. Even making the
assumption most favourable to the defendant, moreover, namely that the notice
was delivered on June 24, the length of the period specified, when reckoned
from that date, could only have been 20 days. Hence, the notice was, on any
footing, too short by at least one day. Counsel for Rightside had additionally
submitted that it did not matter when the letter enclosing the notice was
delivered; what mattered was when, as a matter of ordinary routine, it could be
expected that it would be opened by the solicitor. It would be absurd, he said,
if service on a solicitor (as expressly envisaged by condition 9) could be
validly effected out of normal working hours; and Saturday was not a normal
working day for most solicitors. He (Walton J) was inclined to think that that
submission was correct: see Papillon v Brunton (1860) 5 H & N
518. It would seem the height of absurdity if a notice, whose function was
always to draw some fact to the attention of another party for action or
information, could be served at a time when it would, as a matter of ordinary
routine, be utterly impossible for it to convey any information to anyone.
Counsel also said that in any event a notice requiring something to be done ‘within
21 days’ did not give the period of ‘at least 21 days’ referred to in condition
9: the formula ‘at least’ indicated that the period allowed must be exclusive
both of the day of service and of the day of expiry of the notice. Here again,
this appeared to be correct: see Young v Higgon (1840) 6 M &
W 49 at 54, and In re Railway Sleepers Supply Co (1885) 29 Ch D 204.
It was thus
plain that the notice enclosed with the letter of June 23 1972 was wholly
invalid for any purpose. The defendant could not attempt to say that the notice
was given under the general law, and not under condition 9 at all. He must be
bound by his own solicitor’s description of the notice they were serving on his
behalf, and otherwise the notice would be a ‘tricky’ notice, and effect would
not be given to it in equity at all. In any case, the contractual time for
completion was June 19 and the notice was sent only four days thereafter. He
(his Lordship) was unaware of any case in which a notice under the general law
served such a short time after the expiration of the contractual date for
completion had ever been held to be good. It was not merely delay in performing
the obligation of completion, but unreasonable delay which under the general
law entitled the other party to make time of the essence of the contract. He
(Walton J) did not consider four days’ delay to have been unreasonable on any
view of the case. There was also the point that condition 9 did exist and
plainly precluded service of a notice of shorter length under the general law.
Setting the notice aside,
never became of the essence of the contract, nor was there ever any such
unreasonable delay on the part of Rightside as would amount to repudiative
delay on their part. Hence, the contract was still in being when, on July 20
1972, the defendant repudiated it; such repudiation discharged Rightside from
any obligation which might otherwise have rested on them to perform any
conditions precedent on their part, such as proving their ability and readiness
to pay the purchase money; they had finally accepted the repudiation, which had
not in the meantime been withdrawn, as it might have been; and accordingly they
were now entitled to damages for fundamental breach by the defendant of the
contract.
Counsel for
the defendant said, however, that this was far too simple a way of looking at
the matter. He began by submitting that at law, as distinct from the position
in equity, time was of the essence. On this basis, his analysis of events was
as follows: (a) by their failure to complete on June 19 1972 Rightside had
repudiated their obligations under the contract; (b) by the terms of his letter
of July 20, the defendant accepted that repudiation, and thus brought the
contract to an end; but (c) that this was subject to Rightside being able to
show that they were entitled to specific performance–presumably as at the date
when the letter of July 20 was sent–in which case it would be the defendant and
not Rightside who had repudiated the contract. And that involved, said counsel,
Rightside showing that either on June 19 or within a reasonable time
thereafter, they were ready, willing and able to perform their part of the
contract. This did not seem to square with section 41 of the Law of Property
Act 1925, which was the same as section 25 of the Judicature Act 1873 and read:
‘Stipulations
in a contract, as to time or otherwise, which according to rules of equity are
not deemed to be or to have become of the essence of the contract, are also
construed and have effect at law in accordance with the same rules.’
Nevertheless
counsel relied on two cases which he said established his proposition. The
first was Howe v Smith (1884) 27 Ch D 89, a purchaser’s action
for specific performance which became one for the return of a deposit. It was
found that the purchaser had by persistent delay repudiated the contract. Fry
LJ said at p 103:
The 25th
section of the Judicature Act 1873 enacted that stipulations in contracts as to
time, which would not before the passing of the Act have been deemed to be of
the essence of such contracts in a court of equity, should receive in all
courts the same construction and effect as they would theretofore have received
in equity. The effect of this clause is, in my opinion, that the purchaser
seeking damages is no longer obliged to prove his willingness and readiness to
complete on the day named, but may still recover if he can prove such readiness
and willingness within a reasonable time after the stipulated day; and the
inquiry therefore arises whether the purchaser in the present case could aver
and prove such readiness and willingness within a reasonable time.
Fry LJ’s words
were approved by Lord Atkinson in Stickney v Keeble [1915] AC 386
at 404, an action for the return of a deposit by a purchaser who had served a
valid notice to complete. After commencement of the action, the vendor had put
it out of his own power to give specific performance by selling elsewhere, though
specific performance was not requested. Lord Parker of Waddington observed that
this fact would formerly have been fatal to any claim of the vendor’s to relief
in equity from the consequences of the repudiation at law, and that section 25
of the Act of 1873 was not to be interpreted as justifying any other result. He
(Walton J) thought that statement of Lord Parker’s apt in the circumstances of Stickney
v Keeble, but the doctrine could not be wrenched out of context. As Lord
Parker himself had said, section 25 (now section 41) meant that where equity
would formerly have disregarded a stipulation as to time and restrained an
action at law based on the breach thereof, the courts constituted by the Act of
1873 were to disregard it in like manner. Applying that principle, could there
be any equitable reason why, in a case where, at a time before the purchaser
became in unreasonable delay beyond the date fixed for completion–the case
here–the vendor repudiated the contract, the purchaser should not simply accept
such repudiation as discharging him from all further performance under the
contract, including that of preparing for completion, which ex hypothesi
would then never take place? In such a
case equity must simply follow the law, and could not be so esoteric as to
place on the purchaser the burden of showing that, ex hypothesi at a
time after repudiation, he was in a position to complete the contract which it
was then quite certain would never be completed. In his (Walton J’s) judgment,
in equity as well as at common law, the wrongful repudiation by one party of
his obligations under the contract entitled the other to accept such
repudiation, and thereby put an end to the contract, and such other was, as a
consequence, discharged from performing any conditions precedent which it would
otherwise fall on him to discharge. Accordingly, Rightside were never at any
time under an obligation to show that they were in a position to perform their
part of the contract. Even if this were wrong, it was surely only at the
‘material’ time or times that a plaintiff must show this. One of those times
must have been the date for completion, and it appeared sufficient for the
plaintiffs to point to the fact that they had entered into a valid contract for
a subsale whose time for completion spanned the time for completion of the
contract now in question.
Even this was
not the end of the matter, because counsel for Rightside submitted that even at
common law, time was not of the essence of the date for completion. On the true
construction of the contract here, that was to say, the date for completion was
not of the essence. The true inquiry was as to the effect which the parties had
agreed a failure to complete on the day fixed for completion was to have. Was
it a fundamental term of the contract, subject only to the saving hand of
equity, or was it to be a merely venial breach, not in any sense
fundamental? He (his Lordship) thought
counsel for Rightside was correct in submitting it was the latter. The
provisions of condition 9 were intelligible only on such a basis, for they did
no more than provide for the consequences of a fundamental breach after–and
only after–the service of such a notice as was thereby envisaged. There never
was such a breach by Rightside as would have been equivalent to a fundamental
breach of the contract, even apart from the doctrines of equity. It followed
that Rightside were entitled to the damages claimed for the defendant’s
wrongful fundamental breach of contract by repudiation.
Judgment was
entered for Rightside and an inquiry into damages ordered. The plaintiffs were
awarded three-quarters of their costs.
