RODRIGO AND OTHERS
v.ST. ANTHONY'S HARDWARE STORES LTD.
SUPREME COURT.AMERASINGHE, J.DHEERARATNE, J.
P. R. P. PERERA, J.
S.C. APPEAL NO. 44/94
C. COLOMBO 3253/ZLDECEMBER 8, 16 AND 29. 1994.
Agreement to sell – Specific performance – Agent for vendors – Section 114illustration (f) of the Evidence Ordinance.
Where in an agreement to sell land two of the conditions were completion of thesale before a fixed date and tender of draft deed approved by the vendors atleast a week before the signing of the deed of transfer and where negotiationswere conducted by one brother (1st defendant) on behalf of his brother (2nddefendant) and mother (3rd defendant), all living in one house –
The 1st defendant had held himself out as the agent of the other defendantsand the other defendants by their own conduct held out that the 1st defendantwas their sole spokesman in relation to the transaction so much as to induceGnanam, Managing Director of the plaintiff company and the lawyers for thecompany that the 1st defendant was a sufficient medium through which noticecould reach the other defendants. The 1st defendant did not give evidence andthe court is entitled to draw the presumption that had he given evidence, suchevidence would have been unfavourable to the case of the defendants – seesection 114 illustration (f) of the Evidence Ordinance.
The draft deed of transfer was received by 1st defendant four days prior tothe date fixed for signing the transfer. There was no uncertainty in relation to thevendors and vendee, the subject matter of the sale and the consideration. Therewas sufficient compliance on the part of the plaintiff in regard to the stipulation ofnotice of the draft. Although a plaintiff who breaks an essential term of theagreement cannot claim specific performance, trivial breaches do not disentitle aparty from claiming relief.
Time was of the essence of the contract only in respect of the last date forsigning the deed of transfer and in no other respect. On the last date for signing,
the defendants were not available and wanted a further date to sign the deed oftransfer.
The plaintiff was entitled to a decree for specific performance.
Cases referred to:
Smith v. Hamilton (1950) 2 All ER. 928.
Roberts v. Berry (1853) 3 Ch. 284.
Dyster v. Bandall and Sons (1926) 1 Ch. Div. 932.
APPEAL from judgment of the Court of Appeal decreeing specific performance.
H. L de Silva, P.C. with Gomin Dayasiri and J. de Costa for defendant-appellants.
Romesh de Silva, PC. with Palitha Kumarasinghe and Geethaka Goonewardenefor plaintiff-respondent.
February 13, 1995.
The defendants are the owners of the land called Fiscalwatta inextent 39A. 2R. 21P, the subject-matter of this action. The first andsecond defendants are brothers who own the said land in theproportion of 1/3 and 2/3 respectively, subject to the life interest intheir mother the third defendant. At all times material to this action,the defendants were residing together in one house. By agreementNo. 1483 of 3.11.78 (P4) the defendants agreed to sell Fiscalwatta tothe plaintiff limited liability company for a consideration ofRs. 2,000,000 within 180 days from the date of execution of thatagreement; a sum of Rs. 50,000 was accepted by the defendants aspart of the consideration. By agreement No. 1527 dated 6.2.79 (P5)the defendants accepted a further sum of Rs. 150,000 as part of theconsideration. As the parties were "unable to complete thetransaction for the sale of the said property within the time limitspecified" in P4 and P5, they entered into a fresh agreement No.1574 dated 2.5.79 (P6). Two covenants of P6 which are material tothis action read as follows:
The date of completion of the sale of the said property shallbe fixed by the purchaser and notified by it to the vendors providedhowever that it is the essence of the contract created by thesepresents that the sale shall be made and completed within a periodof ninety days of the execution of these presents, that is 31st July1979.
(5) The said deed of transfer shall be drawn in accordance withthe provisions of this agreement and in the customary form and shallcontain covenants on the part of the vendors to warrant and defendtitle to the said property. A draft of the said deed shall be submittedto the vendors for their approval at least 7 days prior to the date ofthe sale fixed by the purchaser.
An extent of about six acres out of the property was acquired bythe state after execution of the agreement P6 but this eventuality wasprovided for by covenants No. 14 and 17.
The transaction of sale failed to take place on or before 31*7.79and the plaintiff filed action against the defendants on 13.8.79seeking specific performance of the contract. The learned trial judgeheld that the plaintiff was willing and ready to purchase the saidproperty and has informed the defendants accordingly; the lapse onthe part of the plaintiff was that he did not give seven days notice ofthe draft deed; and that the defendants had taken advantage of thelapse on the part of the plaintiff to submit the required draft within therequired time. These primary findings of fact reached by the trialjudge who had the advantage of hearing the witnesses are amplysupported by the evidence led at the trial and I am inclined to thinkthat they should not be lightly disregarded. However, the learned trialjudge dismissed the plaintiff’s action on the basis that insofar as thedefendants were entitled to seven days notice of the draft deedaccording to P6 and the plaintiff failed to give them that period ofnotice, the defendants could not have been compelled to sign thedeed of transfer on 31 st July 79.
The Court of Appeal reversed the judgment of the trial judge andgranted the relief prayed for by the plaintiff and the defendants havenow appealed to this court on certain questions of law which areformulated in the following terms;
Since the last day under the agreement for the completion ofthe sale was 31st July 1979 and the completion of the sale by thatdate was declared by the agreement itself to be of the essence of thecontract; and since the plaintiff fixed such last date as the day for thesigning of the deed of sale, but failed to submit the draft deed withinthe agreed time for approval of the defendants, was the Court ofAppeal in error in taking the view that the submission of draft deed forapproval was not of the essence of the contract?
In the circumstances set out above, was it necessary thatclauses 3 and 5 be read together, in order to understand therespective duties and obligations of the parties?
Was the view taken by the Court of Appeal that the 1stdefendant was the agent of the other two defendants incorrect andinconsistent with the express terms of the written agreement?
W Has the Court of Appeal given adequate consideration to thequestion whether a party in default is entitled to ask for specificperformance of the contract?
(questions No. 5 to 7 are repetitive and were not pursued)
First I shall consider the question whether the plaintiff has breachedcondition No. 5 of the agreement on the assumption that notice to thefirst defendant was adequate notice to other defendants as well; thequestion of adequacy of notice will be adverted to later in thisjudgment. It is submitted on behalf of the defendants that clauses 3and 5 of the agreement should be read together; that since time isthe essence of the contract in terms of clause No. 3 the same shouldapply to clause No. 5 and therefore the plaintiff was in breach of thecontract if he did not submit the draft deed to the defendants withinthe time-frame stipulated. There is no doubt that the parties haveexpressly agreed that time should be the essence of the contract inrelation to clause No. 3; the question therefore is whether we shouldextend the same to clause No. 5. Consideration of the factual detailsof the transaction becomes essential for our decision. As mentionedearlier, the defendants had been already benefited under thecontract by the receipt of a sum of Rs. 200,000.
On 18.7.79 by letter P7 witness Mathew of the firm of lawyersrepresenting the plaintiff company wrote to the 1st defendantrequesting him to meet Gnanam, the managing director of the plaintiffcompany on 23.7.79 “for the purpose of finalizing the terms of saleetc." Gnanam testified to the fact that he met the 1st defendant onthe 23rd and directed him to Mathew. According to Mathew the 1stdefendant approved the draft and told him that his brother the 2nddefendant will come with their lawyer the following day and approvethe same. The 2nd defendant failed to meet Mathew on the 24th. Withthe letter marked P9 dated 24th which actually reached the 1stdefendant on the 27th, a copy of the draft deed was sent to the 1stdefendant by Mathew. The letter P9 fixed the time of executing thedeed of sale in accordance with the agreement P6 at 5.30 p.m. onthe 31st. There is no doubt that the 1st defendant did receive thedraft deed and this is confirmed by letter produced marked P21 sentby the 1st defendant dated the 27th and received by Mathewprobably on the 30th evening in which he stated inter alia, “pleasenote that the draft transfer deed was received by me only on th£27thof July 1979 and you have failed to send it in time as is clearlystipulated in the agreement. Therefore, please note that the lapse ison your part and you are responsible for the same". The draft deed ofsale had to be drawn up in accordance with the provisions of theagreement; there was no uncertainty in relation to the vendors andvendee, the subject-matter of the sale and the consideration. Thedraft deed of transfer was received by the 1st defendant four daysprior to the date fixed for signing the transfer. I am of the view thatthere was sufficient compliance on the part of the plaintiff with regardto clause No. 3.
In Smith v. Hamilton (,) an agreement for the sale of a land,contained a condition which provided that “in respect of objections,requisitions and replies, time shall be the essence of contract”,Harman J, held that the inference is that in no other respect time shallbe the essence of the contract. (See also Roberts v. Berry)™. On thesame analogy it seems to me that time was made essence of thecontract by express agreement of the parties in relation to clauseNo. 3 only and in no other respect.
The 1st defendant, as observed earlier is the elder brother of the2nd, both of them being children of the 3rd; they lived in one and thesame house. It is the evidence of Gnanam that at all times it was the1st defendant who acted on behalf of the other vendors. Allcorrespondence by the lawyers of the plaintiff was with the 1stdefendant. The evidence of the 2nd defendant reveals that he wasaware of letter P7 written by Mathew to the 1st defendant on 18.7.79;he knew that the 1st defendant met Gnanam on the 23rd andfinalized the terms of the sale. The 2nd defendant further stated thatthe 1st defendant showed him the draft deed sent along with theletter P9 and further that the telegram P10 sent to the plaintiff’slawyers on 27.7.79 that no postponement was required for signing ofthe deed was sent after the 1st defendant discussed the matter withhim. It is clear that it was after the defendants made themselvesunavailable to sign the deed of transfer on the 31st, that the 2nd and3rd defendants attempted to show by their letters P16 and P17, bothdated 2nd August 1979, that they had “nothing to do" with the 1stdefendant. There was sufficient evidence led at the trial to concludethat during the times material to the transaction not only did the 1stdefendant hold himself out as the agent of the other defendants butthe other defendants by their own conduct held out that the 1stdefendant was their sole spokesman in relation to the transaction somuch as to induce belief in Gnanam and the lawyers of his companythat the 1st defendant was a sufficient medium through which noticecould reach the other defendants. The 1st defendant's failure to giveevidence in these circumstances is quite significant and court isentitled to draw the presumption that, had the 1st defendant givenevidence on this matter, such evidence would have beenunfavourable to the case of the defendants. (See section 114illustration [f] of the Evidence Ordinance). It is also noteworthy thatMathew in his evidence stated that on 31.7.79 defendant’s lawyer,Gunasekera, told him that his clients had gone to Anuradhapura andthat they wanted a further date to sign a deed of transfer; althoughGunasekera was present in court when this evidence was given (it isso recorded) he was not called by the defence to contradict Mathew.
It is submitted on behalf of the defendants that the plaintiffcompany is not entitled to a discretionary remedy in the nature ofspecific performance because of the breach of condition No. 5 of the
agreement. I have already held that there was sufficient complianceby the plaintiff company in regard to that condition on considerationof all attendant circumstances. Wessels – The Law of Contract inSouth Africa 2nd Edition Vol. 11 para 3135 states:
“the court will not decree specific performance where theplaintiff has himself broken the contract or made a materialdefault in the performance of his part." (Lawson sec. 472 P522)
Weeramantry on Contracts Vol. 11 page 969 states "Although aplaintiff who breaks an essential term of the agreement cannot claimspecific performance, trivial breaches do not disentitle a party fromclaiming such relief." (See also Dyster v. Randall and Sons)m. For theabove reasons, the judgment of the Court of Appeal is affirmed andthe appeal is dismissed with costs.
AMERASINGHE, J. -1 agree.
P. R. P. PERERA, J.-1 agree.
RODRIGO AND OTHERS v. ST. ANTHONY ‘S HARDWARE STORES LTD