JOSEPH PERERA, Appellant, and LEWIS ABEYSEKERA, Respondent

127-NLR-NLR-V-58-JOSEPH-PERERA-Appellant-and-LEWIS-ABEYSEKERA-Respondent.pdf

505
1957 Present – Basnayake C.J., Gunasekara J., Pulie J.„ de Silva J., and
Sanson! J.~
JOSEPH PERERA, Appellant, and BEWIS ABEYSEKERA,RespondentS. C. 140—D. C. Chi late, 13,210
Contract—Informal agreement to sell immovable property—Time limit fixed forexecution oj deed oj sale—Deposit of part of purchase price—Forfeiture clause—Failure of purchaser to pay balance sum uithin stipulated period—/tight toclaim refund of deposit—Unjust enrichment—Money had and received—Prevention of Frauds Ordinance, s. 2.
"Where, under a non-notarinl Agreement to sell immovable) property, a sumof money is paid in advance by tho purchaser, but tho salo subsequently fellsthrough, the subsidiary agreement as to tho destination of tho money paidin advance is sevoroblo from tho agreement for tho salo of tho immovableproperty and is valid.
By a non-notarinl agreement tho defendant agreed to convoy to tho plaintiffcertain immovnblo property for Its. 45,000. Tho plaintiff paid Ks. 5,000in advanco and it was stipulated in tho agreement that, upon payment of thobalanco sum of Us. 40,000, tho conveyance was to bo executed on or boforoNovember S, 1949, i.o., within fifteen days from tho date of the agreement.
It was also agreed that should the plaintiff not pay the balance considerationwithin tho fixed period, ho was to forfeit the deposit of Rs. 5,000 and thatshould tho defendant fail to fulfil his part of tho agreement ho should payRs. 10,000 as compensation to the plaintiff. -"
The balance sum of Rs. 40,000 was not paid by tiro plaintiff within tho periodof 15 days specified in the agreement. In the present action instituted by I hoplaintiff for the refund of tho deposit of Rs. 5,000, tho trial Judgo found thattho failure was duo to tho filet that essential steps relating to tho investigationof tho title to tho property conld not bo completed within ihoso 15 days beemisotho defendant could not make available to tho plaintiff the titlo deeds relatingto fho property ; tho defendant therefore agreed to an extension of time,but subsequently on November 18, 1949, ho repudiated tho contract-.
It was also decided by the trial Judge that it was not intended by tho part iesthat tinro should bo of the essence of tho contract and that-, in law therefore,tho condition for tho forfeiture of tho deposit- of Rs. 5,000 meant only that thopurchaso should bo completed on or before November S, 1949, or within areasonable timo thereafter.
Held, per Gunasekara, J., Pui/le, J., and Sansoni, J. (Basnayake, C.J.,and de Silva, J., dissenting), that the plaintiff was entitled to tho return ofhis deposit of Rs. 5,COO. Although tho informal agreement relating to tho saloof immovablo property was void by virtue of tho provisions of section 2 of thoPrevention of Frauds Ordinance, tho subsidiary agreement, in tlio somocontract, as to the destination of tho doposit ofRs. 5,000 was severable andeffect could bo given to its terms according to law.
A-vIj-PPEAL from a judgment of the District Court, Chilaw. This appealwas referred under section 51 (1) of the Oourts Ordinance to a Bench,of five Judges.
H• V. Perertt, Q.C., with K. C.'de Silva and •/. .-J. D. de Siltxt, for -Defendant-Appellant."'
22 & 23I, VIII
eJ. X*. IS 67370—i ,503 (S/57)
_ N. K. G'hoksy, Q.C., with. E. G. Wikramanayake, Q.O., E. R. S. R‘Co omarasi vamy, B. A. R. Candapjpa and N. K. Rodrigo, for Plaintiff-Respondent.•
Cur. ado. vult.
April 12, 1957. Basxayakk, C.J.—
In this action the plaintiff sued the defendant on tluce causes of action.Por a first cause of action ho alleged—
to) that by agreement dated 2-1 th October 19-19 the defendant agreedto convey to him within 15 days of the execution of the agree-ment, for a sum of Rs. 45,000, a land about ten acres in extent,together with the buildings, furniture and the fibre mill thereon,{b) that ho paid to the defendant out of the consideration of Rs. 45,000a sum of Rs. 5,000 as a payment in advance,
that the failure to effect the conveyance in terms of the agreementwas due to the default of flic defendant.
For a second cause of action the plaintiff claimed a sum of Rs. 3,500being the value of fibre wrongfully apjn-opriated by the defendant and asum of Rs. S06-54 as damages. He alleged—
(а)that the defendant, in terms of the agreement, on or about 24th
October 1949, placed the plaintiff in possession of a fibre milland gave him the right to work it and dispose of the fibremanufactured b}' him,
(б)that between the 25th October 1949 and the ISth November 1949
lie brought 261,700 coconut husks for the manufacture of fibreand manufactured mattress fibre and bristle fibre, and.{>.:) that on 18th November 1949 the defendant took forcible possessionof 250 cut of mattress fibre manufactured by the plaintiffvalued at Rs. 3,500.
As an alternative cause of action the plaintiff jileaded that even if it beheld that the agreement was void in so far as it related to immovableproperty, he was entitled to recover the sum of Rs. 5,000 paid to the■defendant on 24tli October, 1949..-
He prayed—
{a) on the first cause of action or on the alternative cause of actionfor judgment in a sum of Rs. 5,000 with legal interest thereon,lb) for an order directing the defendant to deliver to the plaintiff250 cwt of mattress fibre or in default to pay the sum of.Rs. 3,500 with legal interest thereon,
for judgment in a sum of Rs. S06- 54, and
for costs.
The defendant denied that the failure to effect the conveyance withinthe time stipulated in the agreement was duo to Itis default. Whileadmitting that ho placed the plaintiff in possession of the land and thefibre mill thereon, the defendant denied that ho took forcible possessionof 250 cu t of fibre valued at Rs. 3,500. He valued the coconut husksbrought by the plaintiff at Rs. OGO'71. He prayed that the plaintiff’saction be dismissed with costs.
The agreement referred to in the pleadings is not attested in the maimerrequired bj' section 2 of the Prevention of Frauds Ordinance and issigned 011I3- by the defendant. It reads as follows :—
This 24th da}' of October 1949.
the undersigned K. Edward Joseph Perera of Wcimappuwa inChilaw District have valued the land called Molawatta in extent aboutten (10) acres situated at Wattakahya within the town of Chilawand the Blacks tone Oil Engine bearing No. IG17S1 of 50 Horse Powerand all other accessories of the Fibre Hill, all other buildings and allmaterials appertaining thereto and standing thereon for a sum ofRupees Forty-five Thousand (Rs. 45,000) of present lawful money ofCeylon, having agreed to transfer the same unto Mr. D. L. Abeyasckaraof Andiambalama in Negombo and have received on this datea sum of Rupees Five Thousand (Rs. 5,000) in cash from the saidMr. Abeyasekera as an advance.
Wherefore the balance sum of Rupees Forty Thousand (Rs. 40,000)shall be paid within 15 days from this date and shall execute a deed ofconveyance at the expense of the purchaser.
And that until the deed of conveyance is executed and the rightsare assigned, I have hereby assigned all the right, title and interest ofworking the Mill and of disposing the goods manufactured unto thepurchaser hereof from this date under a person authorised b}' me.
And that if tho balance amount is not paid and the deed of con-veyance is not executed within 15 days from this date and that thesame could not be performed the sum of Rupees Five Thousand(Rs. 5,000) paid by the said Mr. D. E. Abeyasekera as advance and theauthority assigned as aforesaid shall hereby be forfeited and null andvoid and that if I the vendor Mr. Iv. E. J. Perera neglected to executetho said deed and deliver the same, I have hereby agreed to pay a siunof Rupees Ten Thousand as compensation.”
As in my view tho translation filed of record is unsatisfactory, I set outbelow the document in its original form :—
1949so*Q®eo 24
^52^0.
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C332s?8 1 :—
:—
It is common ground that the balance of Its. 40,000 was not paid within15 days as stipulated in the agreement. It was also not disputed at thetrial and the hearing of this appeal that the last day for the payment ofthe balance sum by the plaintiff and for the execution of the deed ofconveyance was Sth November 1949. The plaintiff's notary, ProctorD. E. J. Peiris, states in his evidence that his client came to him on 27thoi’ 2Sth October 1949 and informed him of the agreement andrequested him to write to the defendant for the title deeds. In pursuanceof that request he wrote a letter to a person whose name and addresswas furnished b}1- the plaintiff, viz., W. E. I. Fernando, which is not thedefendant’s name. The letter was returned by the Post Office with theendorsement “Addressee not known IVhcn the plaintiff came to seehim a second time about the 3rd of November bringing with him theagreement pleaded b}r him, Proctor Peiris informed him that he had notgot the deeds. Tire plaintiff then undertook to get them. He came athird time a few days later and informed him that- the deeds were withDr. Pinto to whom the property was mortgaged for Rs. 10,000 and thatthey could be examined at the office of Proctor W. li. Ranasinghe atChilaw. On 7th November Proctor Peiris went to Proctor Kanasinghe’soffice with the plaintiff. There he discovered that the deeds were notwith Proctor Ranasinghe but- were in fact with Dr. Pinto. ProctorRanasinghe, however, gave him the reference to tire folios in which thedeed was registered to enable him to search the registers kept under theRegistration of Documents Ordinance ami at the same time askedProctor Peiris to write to him calling for the deeds to enable ProctorRanasinghe to obtain them from Dr. Pinto. Proctor Peiris searchedthe encumbrances and returned to Negombo and on Sth Novemberwrote to Proctor Ranasinghe requesting him to send the deeds. Thedeeds were received on 15th November with a covering letter dated12th November.-
The learned trial Judge lias accepted the evidence of Proctor Pciris.I am unab'c to reconcile his finding that it was the defendant and not theplaintiff who defaulted in carrying out the agreement with the evidenceof Proctor Pciris. To 1113- mind on his evidence there can be no doubtthat it was the plaintiff and not the defendant who defaulted. Theplaintiff who gave evidence offered no valid explanation as to why heat first gave the wrong name to Proctor Pciris. On this point his evidenceis at variance with Proctor Peiris’s and must therefore be rejected.He denies he gave any name to his proctor. He says he gave the de-fendant’s address and did not give his name, as it was in the agreoinent.But Proctor Pciris states that the agreement was brought by the plaintiffonly on the second visit, the visit after the one in which ho gave thewrong name. Neither the plaintiff nor his notary gives any satisfactoryexplanation as to why the conveyance was not prepared on the 7th orSth November after Proctor Pciris had examined the land registers.Nor is there any explanation as to why the balance money at least wasnot paid on or before Sth November as required by the agreement. For,if the balance 11101103' had heen paid within the stipulated time, thesigning of the conveyance would have been a mere formality, especiallyas the plaintiff was in possession of the land.
The learned trial Judge’s finding that it was the defendant and not theplaintiff who defaulted is not- supported by the evidence and cannottherefore be sustained.
I shall next consider whether on this view of the facts the plaintiffwould in law be entitled to claim a refund of the Rs. 5,000 paid by himeven if the agreement had been notarially attested. The agreement,though a home made one written byr the defendant’s baas in Sinhalese,is a carefully worded instrument. It states that the sum of Rs. 5,000 isreceived as an advance being part of the purchase price of Rs. 45,000.
It also provides that the balance of Rs. 40,000 shall be paid within 15cla3's of the date of its execution and that a conveyance shall be executedat the expense of the purchaser. It also makes provision for placing theplaintiff in possession of the mill pending the execution of the conveyance.
It goes on further to provide that if the balance is not paid within 15days of its execution the sum of Rs. 5,000 paid as advance shall be for-feitccl and all the rights given under the agreement shall be null andvoid and that if the vendor fails to fulfil his part of the agreement he shouldpay- Rs. 10,000 as compensation.
The deposit of money which goes to form part of the purchase priceif the sale goes through and is liable to forfeiture if it docs not, was acommon feature of contracts under Roman and Roman-Dutch Law.The deposit came to be called arrha in Roman Law and this expressionwas used by* the Roman-Dutch writers as well. Isidore whom Yoetquotes thinks the word was derived from a re—the thing on account ofwhich it is delivered. Gane the translator of Voet calls this derivationfanciful and he traces it to the Greek a.ppa.f3cov which is said to have aHebrew origin and means “ earnest ” or “ security ”. In English lawarrha is known as earnest. In Summer and Leivesley v. John BrownCo.1 it is defined as “ something given for the purpose of binding a
123 T. L. R. 745.
contract, something to bo used to put pressure on tho defaulter if he-failed to carry out his part. If the contract went through, tho thin°-given in earnest was returned to the giver, or, if money, it was deductedfrom the juice. If the contract went oil through the giver’s fault, thetiling given in earnest was forfeited.” Voet, Grotius, Van Leeuwen,Pothier, and Domat all agree tliat arrha is liable to forfeiture where thepurchaser seeks to withdraw from the purchase. It will be helpfulif I wore to set out below relevant extracts from the discussions of t-his-topic by the learned writers I have referred to above.
Voet—Boob XVIII, Title I, Section 25 {Ga tie’s translation)
But the jurists look at it in a slightly different way. In the firstplace it can consist cither of a money payment or of other tilings.If it is in money, nothing forbids its remaining in the hands of thereceiver after it lias been given by the purchaser to the seller, andhaving to be reckoned as part of the price. But if it consists of otherthings, it is clear from the passage cited below that after completion ofthe contract of purchase and sale what had been given by way ofearnest can be reclaimed by the giver in an action on the purchase orin a personal action for the recovery of what has been paid withoutcause. Then again in the second place, earnest was indeed often givenin order to mark the completion of a contract of purchase which hadfurther to be put into effect from both sides, so that thus the covenantas to the price could be more plainly proved. Yet it also was givensometimes as a token of an unfinished purchase to be later completedin writing or otherwise according to the will of the parties.
In the latter case there can be a retiring from the unfinished purchase-subject to the loss of the earnests which one has given, or, if one lias-received them, subject to tho restoration of their doubled value. Butin tho former case all change of mind has been shut out in accord with,what has been said in our foregoing remarks although one is ready tolose the earnests given, or to pay back double the value of thosoreceived.
Voet—Boob XVIII, Title 3, Section
Assuredly it is matter of reason that if an earnest has been given, or-anything else lias been disbursed by the buyer on account of thepurchase, such as on a drinking-party on the preparation of a documentof purchase, on the commission of a broker and on whatever else may belike such things, they arc lost to tho buyer and ought not to berestored to him. It came about through the buyer that lie did notcomply with tho term annexed, and he ought not to bo allowed tobreak faith with impunity.'
As to its being stated in tho passage cited below that there had becn-a special agreement that on the price nob being paid “ the buj-cr wouldlose tho earnest and the thing be unbought ”, 3-011 would not correctlyinfer from that a need of an agreement for the loss of the earnest..It is no novelt3* for such matters often to bo put also into agreements-
superfluously and for the purpose of removing doubt, though evenwithout agreement they would flow from the very provision of the-common law'.
Voel—Book XVIII, Title 3, Section 4
This commissory term becomes effective in the ordinary courseby the very passage of the time specified ; and there is no need of ademand by the seller to put the buyer in default, since the day makesfull demand in place of the human being.
Voel—Book X VIII, Title 3, Section 5
Nevertheless the effect of such an agreement falls away wheneverthe non-payment of the price on its day lias been due not to the buyerbut to the seller.
Grot ins—Book III, Gh. XIV, Sec. XXVII
Introduction to Dutch Jurisprudence (Herbert’s Translation)
“ An agreement without waiting can be entered into not only betweenparties present, but also by letters, messengers, or agents ; and thopurchase is considered as completed as soon as the price has beenreciprocally agreed on. As long as tho purchase is not fulfilled oneither the one or the other side, the one or the other may retire there-from without any loss, except that the purchaser loses his earnest ordeposit, if any has been given ; this earnest is called by us God’&money, because it seldom amounts to much more than is generallygiven on account of the poor or the church ; but if the seller has re-nounced the bargain, ho must restore the earnest (should he have;received any) twofold. ”
Grolius—Book III, Ch. XIV, Sec. XXXII
It is also frequently stipulated, that, unless the purchase moneybo paid on the day fixed, the subject shall bo considered as unbouglit(lox commissoria), in which caso also the jjurcha.se is actually effected ;but, in case of non-payment, the seller lias the choice either to allowthe purchase to stand, or take back to himself tho thing that is sold,,retaining the earnest and whatever more was paid on the purchase. ”
Van Leeuicen—Pi. I, Book IV, Ch. XX, Sec. Ill {Barber <0 Mac-Fadpcn)-
“ The conditional agreement by which it is agreed that, unless the;price be paid within a certain time, the thing should be unbought,,and this is also attached solely in the interest of the vendor, and there-fore ho has the choice either to demand the juice or to make use of th&conditional stipulation. But if he has once chosen he cannot after-wards change and if he has demanded the juice or interest he seemsto have renounced tho ‘ lex commissoria ’. ”
■■ Polhicr—Contract of Sale, Sec. 474
“ We add sometimes to the comuiissory pact, this clause, that theseller, who has received a part of the price, may, in case of a dissolutionof the contract, for default of payment within tho time limited, retain,by way of damages and interests, this part of the price, taking backtho thing sold. This clause is lawful, provided the sum is not too. considerable, and does not exceed the highest sum, in which thedamages and interests, resulting from the non-execution of thocontract-, may be estimated. ”
Domat—Pi. I, Book I. Title II. Sec. IV
Section■ 330.—
“ The earnest penny is, as it were, a pledge which the buyer givesto the seller in money, or some other tilings ; whether it. be to signifymore certainly that the sale is perfected ; or to be in place, of paymentof a part of the price ; or to r egulate the damages to be recoveredof the party who shall fail to perform the ar ticles of the sale. Thusthe earnest given in the sale has the effect which the parties haveagreed it should have. "
V
Section 331.—
“ If there be rro express agreement which regulates the effect whichthe earnest shall have, against the party who shall fail in performingthe contract of sale : if it is the buyer, ho shall lose his earnest; andif it is the seller, lie shall give back the earnest, with as much more. ”
In the instant case we have a written agreement which expresslystipulates the forfeiture of the deposit in the event of the purchaser’sdefault. It is a contract of sale to which the Lex Commissoria applies,lixccpt Polhicr all tire other writers are agreed that the full amountdeposited may be forfeited in the event of default. Pothicr alone statesthat the courts have power to mitigate the forfeiture. His view cannotbo preferred to that of the writers on Roman-Dutch Law by whoseopinion we must be guided. I hold therefore that even if this agreementhad been notarially attested and therefore of force or avail in law theplaintiff would not be entitled to claim refund of his deposit of Rs. 5,000.The plaintiff cannot have greater rights under an agreement which isnot notarially attested. Ilis claim for a refund must therefore fail.There is considerable support for this view from the judgments of theSouth African Courts which like us arc governed in matters of contractby the principles of Roman-Dutch Law.
The application of the Lex Commissoria (Commissory pact as Ganecalls it) has been discussed in a number of eases where attempt has beennnsuccrKfifullv'madc to establish that such a forfeiture is a penalty coming
within the principle stated by Lord Tomlin in the Pearl Assurance case .I shall now proceed to refer to the better known cases. I am citing atlength because my citations arc from reports which, are not availablein most of our libraries. In Cloete r. Union Corporation Ltd.*-Tindall J. states:—
" The Roman-Dutch authorities are clear that arrJia is forfeitedto the seller if the contract is cancelled owing to the buyer’s default,and no Roman-Dutch authority has been quoted which shows that thatis not the case where the arrha is a sum of money which is to be appliedin part payment of the price. In regard to Pothier’s statement insection 474 I know of no Roman-Dutch authority which is to the sameeffect. It is doubtful whether Groeneicegen in his note to Grotius(3.14.32) had in mind the case of a special stipulation. It is notpossible to read such a qualification into Voet’s statement in 18.3.3.Voel was, however, well aware that the Roman-Dutch law mitigatedthe rigour of the Roman Law in regard to penal stipulations ; he dealswith the subject in 45.1.12 and 13. But it must be observed thatVort docs mention a ceitain mitigation of the forfeiture ; he statesthat if the seller keeps the portion of the price pa id, the buyer must beallowed to retain the fruits. This alleviation of the buyer’s position,though it is inconsistent with the view that the seller’s right must betested by the actual damages suffered, certainly does involve a dis-cretion in the judge to mitigate the rigour of the forfeiture to someextent, namely, by allowing the buyer keep the fruits. ”
This question of the power of the Court to mitigate the forfeiture ofarrha was again raised in the eases of Arloio Properties (Pit/) Ltd. v. Bailey 3- and Mine Workers' Union v. Prinsloo Grey lingJ. In the former casethe Court felt itself bound to follow Cloete’s case ; but in the latter casethe whole question was reagitated by counsel and dealt with in the judg-ments. Deiiling with the argument that tire provision for forfeitureshould be treated as if it were a penalty Greenberg J.A. states atpage Sol :—
“ Tho main contention advanced on behalf of the appellant wasthat the provision for forfeiture is indistinguishable from and is in fact,a penalty and that there is no reason why, unlike other penal pro-visions, it should be enforced. But. although it was recognised inRoman Dutch Law that penalties were not enforceable (Voet, 45.1.12,
13), the validity of a provision for forfeiture contained in a lex com-missoria was not questioned and the juoper conclusion seems to meto be that a pact of this kind was considered valid, notwithstandingits penal nature. ”
This view of the law has been approved by a Bench of five Judgesof the Appellate Division in the case of Tobacco Manufacturers Com-mittee v. Jacob Green & Sons5. Schreiner J. A. states at page 4SS : —
“ Where there is provision for the payment of a sum, specified orascertainable and, if ascertainable, by calculation or assessment,
1 1034 A. C. 570.=> (1037) TI L. D. 116.
* (1020) T. F. D. 503 at 516-510.* 1018 (3) S. A. L. It. 831.
i 1053 (3) S. A. P. It. 4S0.
2*J ..V. ]! G737G <S ;77)
upon a breach of a contract the question whether the sum is a penaltyor liquidated damages must ordinarily arise. There may, no doubt,bo exceptions, real or apparent, to this generalisation. For instance,forfeitures under a lex commissoria, though they may be high 13- penalin their operation, fall outside the field. (The Hive Workers’ Union tPrinsloo and Grayling >) ”
The same question was again raised before five Judges of the AppellateDivision in the case of Baines Motors v. Piek-. That case holds that aforfeiture clause aecompan3'ing a lex commissoria in a contract of saleand pertinent to that contract is enforceable according to its tenor,unless it is designed to enforce a principal obligation which is forbiddenby the law or is conducive to immorality, and that the principles laiddown in the Pearl Assurance case. 3 in regard to a penalty in a contractof sale have no application to a forfeiture clause annexed to a com-missory pact merely because it is penal in nature. Schreiner J.A. andVan Den Hoover J.A. examine in dotail tho legal aspects of the question.Schreiner J.A. states at page 540 :
:: In particular, if what the seller selects amounts to no more thanrecover}' of tho vehicle sold and retention of what the buyer has paid hirespect of the jmrehase juice, this is simply a lex commissoria whichcan. be enforced even if it operates penally. That the actual claimof the seller is wholly within the field of tho lex commissoria is not opento question, and it follows that, if that claim can be made despite thefact that it rests upon provisions of the contract which form part of apenal total it}', the mere- fact that there is such a penal element cannotbe set up by the buyer and the exceptions to the- plea and the counter-claim should have been upheld. ”
He referred to the Minetcorkers and the Tobacco Manufacturers’ cases(supra) as supporting his view.'
Van Den Heever J.A. in a forceful judgment upholding the claimto forfeiture based on the lex commissoria states at page 546 :
:: I have come to the conclusion, therefore, that a forfeiture clauseaccompanying a lex commissoria in a contract of sale and pertinentto that contract is enforceable according to its tenor, unless it isdesigned to enforce a principal obligation which is forbidden by thelaw or is conducive to immorality. ”
In view of the fact that the question of forfeiture of deposits is asubject dealt with both by the institutional writers ancl the South AfricanCourts, it is not necessary to make more than passing reference to theEnglish Law on the subject. It would appear from the case of Hinton v.Sparkes 4 that the forfeiture of a deposit operated to the full extent of the 1
amount in deposit and in that case the Court refused to reduce the amountof forfeiture. Bovill C.J. stated at page 165 :
The intention of tho parties, as I collect it from the agreement, is,that this is to he taken as the ordinary case of payment of a deposit,which is to be forfeited on the purchaser’s failure to complete thocontract. That being so, it follows that the defendant has no answerto tho action. This view is entirely in accordance with tho decisionof the Court of Queen’s Bench in Ockenden v. Henly l. Tho numerouscases referred to as to the distinction between penalty and liquidateddamages have in my judgment no application to a contract in theform of that now in question. ”
As the main controversy' in this appeal centred round the plaintiff’sclaim for a refund of the deposit of Rs. 5,000 the decision I have reachedconcludes tho matter but the question on which this appeal has beenreferred to a bench of five Judges is whether the case of Nagur Pilchi v.Usoof 2 has been rightly' decided. Bcforo I enter on a discussion of thatcase I think I should examine the meaning and effect of section 2 of thePrevention of Frauds Ordinance (hereinafter referred to as the Ordinance).That section reads :—
No sale, purchase, transfer, assignment, or mortgage of land orother immovable property, and no promise, bargain, contract, oragreement for effecting any- such object, or for establishing any security',interest, or incumbrance affecting land or other immovable property(other than a lease at will, or for any' jmriod not exceeding one month),nor any contract or agreement for the future sale or purchase of anyland or other immovable property, and no notice, given under theprovisions of the TJicsaualamai Pre-emption Ordinance, of an intentionor proposal to sell any undivided share or interest in land held in jointor common ownership, shall be of force or avail in law unless the sameshall be in writing and signed by the party making the same, or bysome person lawfully authorised by him or her in the presence ofa licensed notary public and two or more witnesses present at the sametime, and unless tho execution of such writing, deed, or instrumentbe duly' attested by such notary- and witnesses. ”.
Tho above section declares that no transactions specified therein “ shallbo of force or avail in law ” unless it is in writing and signed by the partymaking it or some person on his behalf in the presence of a notary andtwo witnesses present at the same time, and is duly attested by thenotary and the two witnesses. The words that call for interpretationare self-explanatory and mean what they state, i. e. that a transactionwhich docs not satisfy the requirements of the section is of no force oravail in law. The words £i in law ” have in my view been used in thiscontext with the object of excluding even equitable relief to those whodo not comply with the provisions of tho statute ; for, the word “ law ”in its widest sense includes equity. (The Queen v. Darlington LocalBoard of Health)3.
According to the meaning of the material words in this context thetransactions which are obnoxious to the section ai-e not valid and haveno efficacy. The words of no force or avail in law ” are very strongwords, and have the effect of making transactions which do not satisfythe requirements of the statute null and void. Such transactions mustbe treated as if they never came into existence. It is a canon of con-struction of statutes that where by the use of “ clear and unequivocallanguage ” capable of only one meaning anything is enacted by the legis-lature, it must be enforced without regard to the consequence of suchenforcement. It would be wrong therefore to introduce the considerationswhich influenced the decisions on the Statu to of Frauds in England intothe construction of our Ordinance. Not only because the English statuteis so different from ours ; but also because in England there has beensome laxity in permitting considerations of equity to over-ride the plainwords of the statute. We should therefore guard ourselves againstadopting the attitude of the English Courts.
In the Sixth Interim Report of the Law Revision Committee (Cmd.544:9 of 1937) under the Chairmanship of Lord Wright, which re-commended the repeal of so much of section 4 of the Statute of Fraudsas remained, the members observed :
“ In the two and a half centuries during which the statute has beenin operation, widely divergent opinions have been expressed by highauthorities as to its policy ancl merits …. Mitigating expe-dients, such as the doctrine of part performance, strained constructionof its language, such as that which excluded contracts to marry fromagreements in consideration of marriage, and statutory amendments,have softened its asperities. ”
Nor can the plain meaning of the section, as has been done in some ofour decisions, be disregarded in order to bring it into line with conceptsof the English doctrine of part performance and of use and occupation.
MelJisli L.J. jcommenting on the laxity of interpretation in Englandstated in Edivards v. Edwards 1:
“ If the Legislature says that a deed shall be null and void to allintents and purposes whatsoever, how can a Court of Equity say thatin certain circumstances it shall be valid.
Even where a statute is clearly in conflict with the common law or equitythe Courts have no power to depart front the true meaning of the statute.It would appear from the case of Britain v. Rossiter 2 that in England aprovision such as our section 2 would not have been given the sameeffect as section 4 of the Statute of Frauds. The words of Cotton L.J.in that case arc as follows :—-
" If such contracts had been rendered void by the legislature, Courtsof Equity would not have enforced them ; but their doctrine was thatthe staitute did not render the contracts void, but required writtenevidence to be given of them ; and Courts of Equity were accustomedto dispense with that evidence in certain instances.
1 X. It. 24 Ch. n. 20/.' II Q- II- O- HI-
Tlic older English eases which gave equitable relief against theoperation of a statute are according to Hellish L. J. in Edwards v. Edwards(supra) no longer followed :
The Courts of Equity have given relief on equitable grounds fromprovisions in old Acts of Parliament, but this has not been done in theease of modern acts, which are framed with a view to equitable as wellas legal doctrines. ”
It has also been recognised in England that in the endeavour to miti-gate what appears to be the hardships caused by the Statute of Fraudsgreater harm has been done than could have been occasioned by a strictadherence to the words of the statute. In Jfaddison v. Alder son 1 LordBlackburn, dealing with a ease in which in a contract for the sale of landthe vendee had been put in possession, stated :
*■ This is, I think, in effect, to construe the 4th section of the Statuteof Frauds as if it contained these words, or unless possession of theland shall be given and accepted ’. Notwithstanding the very highauthority of those who have decided those cases, I should not hesitateif it was res Integra in refusing to interpolate such words, or put such aconstruction on the statute. But it is not res Integra and I think thatthe cases are so numerous that this anomaly, if, as I think, it is ananomaly, must- be taken as to some extent at least established. ”
Story in his Equity Jurisprudence, Vol. I., p. 753 (12th Ed. 1S77)cites the following remarks of Lord Redesdale in the case of Lindsay v.Lynch 2 the report of which is not available :—
The statute was made for the purpose of preventing perjuries andfrauds, and nothing can be more manifest to any person who has beenin the habit of practising in courts of equity, than that the relaxationof that statute has been a ground of much perjury and much fraud.
If the statute had been rigorously observed, the result would probablyhave been that few instances of parol agreements would have occurred.Agreements would, from the necessity of the case, have been reducedto writing. Whereas, it is manifest, that the decisions on the subjecthave opened a new door to fraud ; and that, under pretence of part-execution, if possession is had in any way whatsoever, means are fre-quently found to put a court of equity in such a situation that, withoutdeparting from its rules, it feels itself obliged to break through thestatute. And I remember, it was mentioned in one case, in argument,as a common expression at the bar, that it had become a practiceto improve gentlemen out of their estates. It is, therefore, absolutelynecessary for courts of equity to make a stand, and not carry thedecisions farther. ”
These words of caution seem to have passed unheeded in England ;but we have every reason to take them to heart and avoid the mistakesthat were made in that country.
i 2 Sch. <b Lejr. 4, G, 7.
In view of the vital difference between our statute and the Englishstatute a detailed discussion of the English cases will serve no usefulpurpose. Another reason why reference to English cases will notbo profitable is that the English Act has undergone considerable changesince the better known cases on section 4 of the Statute of Frauds weredecided and those cases are now only of academic interest. In 1925by sections 207, 209 and Schedule 7 of the Law of Property Act the words" or upon any contract or sale of lands, tenements or hereditaments orany interest in or concerning them ” were repealed. In 1954 by section 1of the Law Reform (Enforcement of Contracts) Act the following wordswere repealed :—
(a) “ whereby to charge any executor or administrator upon anyspecial promise to answer damages out of his own estate ; or ”(i>) £: or to charge any person upon any agreement made uponconsideration of marriage ”, and
(c) “ or upon any agreement that is not to be performed within thespace of one year from the making thereof. ”
The relevant portion of section 4 of the Statute of Frauds now reads :
2To action shall bo brought whereby to charge the defendantupon any special promise to answer for the debt, default or miscarriagesof -another person unless the agreement upon which such action shallbe brought, or some memorandum or note thereof, shall be in writing,and signed by the party to be charged therewith, or some other personthereunto by him lawfully- authorized. ”
As a matter of interest it might be mentioned that section 40 of theLaw of Property Act 1925 (c. 20) still retains the prohibition against thebringing of actions upon contracts for the sale of land which are not inwriting. That section reads :.
bio action may be brought upon any contract for the sale or
other disposition of land or any interest in land, unless theagreement- upon which such action is brought, or some memo-randum or note thereof, is in writing, and signed by the partyto be charged or by some other person thereunto by himlawfully authorised. ”
“ This section applies to contracts whether made before or after
the commencement of this Act and does not affect the lawrelating to part performance, or sales by the court. ”
It is sufficient to say that tLe view of Mellish L.J. in Edwards v. Edwards(supra) is shared by the South African Courts. Innes C.J. in Jolly v.Herman’s Executors 1 stated :—
“ Had the 4th section of the Statute enacted that the agreements,covered by its terms should, if not reduced to writing, be considered. void ab initio, I cannot imagine that any place would have been foundby English courts of equity for the doctrine of part performance hi^ relation to such contracts'. ”
t1 {1903) Transvaal Laic Reports S. C. 57-5, at page 523.
I shall now turn to our case of Najur Pile hi v. UsooJ1 which we havebeen invited to reconsider in this appeal. Dc Sampayo J. has in thatcase examined almost all the previous decisions of this Court. I do nottherefore propose to refer to them, beyond stating that I am in accordwith liis remarks regarding them at p. 6. He says :—
i Was certainly much impressed at the argument with the numberof them, and with the long period of time which they covered. Butwhen the cases are closety examined, it will be found that they areneither individually strong, nor collectively such as to form a cursuscuriae. None of them contains any discussion of principles orexposition of the law.
The facts of that case are ns follows :—The plaintiff advanced to thedefendant a sum of Ks. 945 on an oral agreement- for the lease to himby the defendant- of two parcels of land. The plaintiff changed hismind and later did not wish to take the lease though the defendant waswilling to execute it. The plaintiff then instituted legal proceedingsto recover the advance paid by him. The trial Judge held that thedefendant was entitled in law to retain the amount as forfeit. Theplaintiff appealed and the case came up before a bench of three Judges.Ennis J. dismissed the appeal resting his decision on a passage inHalsbury’s Taws of England (Vol. XXV, p. 402) which reads :
t: Where a deposit has been paid under a verbal contract for thesale of land, a vendor who resists the purchaser’s action on the contractby the plea of the Statute of Frauds is liable to return the deposit asmoney had and received to the use of the purchaser : but it seems thatif the purchaser sets up the Statute in order to escape from his contract,he cannot recover the deposit-. ”
He Sampaj-o J. followed the course taken b}' Ennis J. and adoptedthe principle of the English decisions and dismissed the appeal. Theother Judge Wood Benton C.J. agreed with Ennis and Be Sampayo JJ.
At p. 5 Be Sampayo J. observes :
” The more important question is whether the principle of theEnglish decisions should be adopted here. I was doubtful on thispoint, but on consideration I cannot sec why it should not. Thereis no essential difference between the English Statute and our Ordi-nance which may deprive us of the benefit of the English authorities.
It is true that section 4 of the Statute of Frauds only provides thatno action shall be brought on a contract which is not in writing asthereby required, and therefore other rights arising out of a contract,which is not void, though unenforceable may be established andsecured by action. Section 2 of our Ordinance of Frauds and Per-juries, on the other hand, declared the contract to be of no force oravail in law. At the same time, that section of our Ordinance requiresnotarial writing only for the purposes therein mentioned ; it doesnot declare a non-notarial contract to be void for other purposes,and much less illegal. Therefore, I think the two Statutes, so far as *
B ASN AY AXE, C.J.— Vcrcrct v. Abeysekera
-520
the point under consideration is concerned, are brought in essence intolino 'with each other as it may be said here, as it has been said inEngland, that the contract exists as a fact, which the Court can takecognizance of for other purposes than those stated, and that the onlyeffect of the Statute is to render the kind of evidence required indis-pensable when it is sought to enforce the contract. (Maddiaon v.Alderson (1883) L. It. 8 A. C. 475). That being so there does notappear to be any difficulty in concluding that with us also a party whoadvances money on an informal agreement is entitled to a refund onlyif the other party refuses, or is incapable of completing, the trans-action, and the consideration for the advance therefore fails. ”
With the greatest respect to so eminent a Judge as De SampayoI cannot agree with his statement that section 4 of the English Statute ofFrauds and section 2 of our Prevention of Frauds Ordinance “ are broughtin ossence into line with each other ”. A comparison of the two sectionsabove will show that there is a vast difference between the two enact-ments, and under our enactment which declares transactions contraryto it of no force or avail in law, the contract cannot be said to exist infact as it had been said in England. The learned and distinguishedJudge has failed to give effect to the language of our enactment althoughhis observations seem to indicate that he held the view that transactionscontrary to our enactment are void. It is difficult to reconcile his viewthat transactions contrary to our enactment are void with his conclusionthat in essence the enactments have the same effect. A transactionwhich is void must be regarded as if it never came into existence. Icannot sec liow such a transaction can be invoked for any purpose atall. As stated by Innes J. in Wilken v. Kohler 1 a transaction whichis void can under no circumstances confer any right of action. The c-.aseof Carl is McC-usker2 referred to in Witten's case supports the viewtaken in the latter case. Although the case of Nagoor Pilchi has hadthe approval of Bertram C.J. (Apjnihamy v. Dissanayahe. 3) I findmyself unable to agree that the reasoning of Dc Sampayo J. is sound.
I say so in all humility. This is not the first time that the correctnessof Nagur Pit-chi’s ease has been questioned. It appears to have beendone in the case of Peris v. Vicyra K Dalton J. in that case expressedsome difficulty in accepting Nagur Pifcki’s case as sound law; but asthe Bench was constituted by two Judges he felt himself bound by it.At page 279 lie stated ;
3 (1021) 23 A*. L. H. SS.
* (1026) 2S A*. L. R. 27S.
» 10J3 A. D. 133.2 1004 T. S. 917.
The first question that arises is as to the nature of tho agreementbetween the parties, and whether it was enforceable or of any effectwhatsoever. On this point we have been referred to the decisionof this Court, in Nagur Pilchi v. Usoof. In spito of the essentialdifference between the provisions of Ordinance No. 7 of 1S40 and theStatute of Frauds, the Court held that so far as the point under con-sideration is concerned the Ordinance and tho Statute are in essencein line with one.another, and that it may be said hero, as in England,that the contract exists as a fact which the Court can take cognizance
of for other purposes than those stated in the Ordinance. I mustadmit I havo the greatest difficulty in agreoing with that conclusion,but under the circumstances as the decision of a Court of t-hreo judgesit is binding upon this Court. ”. ■'..
It would appear from the foregoing remarks of Dalton J. that had henot been fettered by the binding decision of three Judges of this Courthe was inclined to hold otherwise..
Since the decision of Nagur Pitchi v. 'Usoof (supra) the Privy Councilhas had occasion to consider our section and point out the vital differencebetween it and the corresponding provisions of the "English Statute ofFrauds….
In the case of Adaicappa Cheily v. Caruppeti Chatty , the Privy Councildrew attention to the difference between the two provisions in thefollowing woi-ds :—•
" This section is much more drastic than the fourth section of theStatute of Frauds. The latter section does not render a parol agree-ment of or concerning land invalid. It merely provides that theagreement cannot be enforced in a Court of law unless it, or a note ormemorandum of it in writing, be signed by the. party to he chargedtherewith, or some person thereunto lawfully authorized, be given inevidence. Under the latter Statute if the defendant in a suit broughtto enforce the agreement has signed it, or a note of it in this manner,the agreement can be enforced though the plaintiff has not signedeither. But the party who has signed it or the-memorandum cannotsue to enforce it against the party who has not signed either. Inboth cases the contract entered into is the same. It is not illegal orinvalid, but it can only bo enforced in a Court of law if jiroved in acertain way.
“ The fourth section of the Statute of Frauds has consequently oftenbeen well described as mcre^* an enactment dealing with evidence.
In the present easo the second parol agreement is in their Lordships'view as invalid as the first …. This second agreement there-fore falls within the express words of this same section 2 of OrdinanceNo. 7 of 1SI0, and not being in writing would be invalid.
“ Evidence tendered by a party litigant relying upon an agreementas valid and enforceable, which, if admitted, would establish that theagreement was of no force or avail, is inadmissible. It would be atravesty of judicial procedure to admit it..”
In the later case of Saverimuttit v. Thangavelautham 2 the Privy Councilaffirmed the decision in Adaicappa Chatty v. Caruppen Chetty 3 and ex-tended its application to written agreements which were not attested by anotary. It stated :’•
“ It thus appears that the law of Ceylon in the generality of casesrefuses to recognise a transaction relating to immovable propertyunless the terms of the transaction have been embodied in a notarially
attested document. . Oral evidence and even evidence in writingwhich does not possess the authenticity of a notarially attested docu-ment are thus rendered of no avail in the generality of cases. It isthus evident that the aim of the Prevention of Frauds Ordinance isto prevent frauds by making evidence other than the evidence of anotarially attested document ineffective. Their Lordships think thatthe departures permitted by law from this general rule should not beextended as any undue extension would interfere seriously with theobject sought to be achieved by the statute law of Ceylon.
“ Proof of fraud entitles the Court in certain circumstances to departTrom the general rule. This principle lias found statutory recognitionin section 5 (3) of the Trusts Ordinance referred to above, and in somecases the provisions of the Prevention of Frauds Ordinance have been-relaxed on proof of fraud on the ground that the ' Statute of Fraudsmay not be made an instrument of fraud ’. It must however beremembered that this proposition has only a limited application. Forinstance it may be proved by evidence of the utmost reliability notsupported by a notarially attested document that a person has entered.into a plain and simple agreement to sell land to another for aconsideration. A breach of such an agreement is undoubtedly dis-honest, but the dishonest conduct resulting from the breach does not.amount to fraud within the meaning of the proposition that the Statuteof Frauds may not be used as an instrument of fraud. If the contrayview were taken the Ordinance would be totally ineffective. TheirLordships are of the view that ill order that the Ordinance may. notbe deprived of all efficacy it is necessary that Courts should approachwith caution the facts and the law on which any case, claimed to be anexception to the general rule referred to above, is founded. ”
It is not clear wliat our authority is for introducing the equitableprinciple of the English Courts of Equity that the Statute of Fraudsshould not be made an engine of fraud. But as observed by the PrivyCouncil in the case cited above the application of that rule to section 2 ofour Ordinance would destroy its effect. In regard to trusts in relation toimmovable property it is not necessary to introduce the English equitableprinciples in view of the express provisions of section 5 (3) of the TrustsOrdinance.-
It would appear from what has been stated above that Nagur Pitchi v.Usoof has been wrongly decided and should be set aside.
This is a convenient point at whicli to refer to the approach of theSouth African Courts to a problem such as the one which arises forconsideration here. In the case of Jolly v. Herman’s Executor1 theCourt refused to enforce an agreement eontrarr to a Besluit- to the effectthat all contracts concerning the cession of- rights to minerals orconcerning rights to. mine which did not conform-to the provisions of-the first paragraph of section 14 of Law Eo: 7 of 1SS3.should be ah initiovoid, arid no one siiould have any action whatever on such agreements."This was a case in. which the'plaintiff was granted the exclusive right toprospect for and to. work coal on a farm for t-he 'period of five years at
1 (1003) T: S. Vol. 1, p. 515: –
a fixed rental, with a right of renewal on three months' notice duly givenfor further successive periods of five years, up to an inclusive term offorty years. The rent had been paid for the first five years of the leaseand the plaintiff at the end of it tendered a year’s rent in advance andclaimed a renewal. Now section 14 of the statute referred to in theBcsluit provided that no grant of rights to minerals on any farm shall bolawful unless embodied in a notarial deed and duly registered in theoffice of the Registrar of Deeds. It was argued on behalf of the plaintiffthat the defendants (tho Executors of the original grantors) ought notto bo allowed to take advantage of the provisions of the Bcsluit, becausethey had received payment of rent under the agreement for five years,and that to allow them to contest its validity after five years,would amount to permitting a fraud on tho plaintiff. This argument•was rejected and the Court refused to apply to contracts governed bythe Beslait the doctrine of part performance applied by the EnglishCourts of Equity to certain contracts falling within the Statute ofFrauds.
This case was followed in the case of Wilkin v. Kohlerx. In thatcase the Court was called upon to interpret the words of section 49 ofthe Orange Free State Ordinance the material portion of which read :
“ No contract of sale of fixed projjerty shall be of any force andeffect unless it be in writing and signed by tho parties thereto, or bytheir agents duly authorised in writing. ”
In construing this section Inncs J". said :
“ The language of the section is perfectly plain; no unwrittencontract of the kind referred to is to be of 1 any force and effect ’.Now, a contract which is of no force and effect is void. No emphaticadjectives, and no redundant repetition, could express a conclusion ofnullity more effectually than do the simple words which the Legis-lature lias employed. Nor is there any reason why wo should refuseto give effect to these plain provisions. The language is precise andclear, and it is for the party who would water it down to show someground for so doing. ”
Dealing with the argument that the parties were free to waive the benefitof the provisions of the Ordinance, Inncs J. said :
“ Speaking generally, it is true that statutory ijrovisions introducedsimply for the benefit of an individual or a class may bo waived by thoperson or persons for whose advantage they were devised. And aright given on those lines to treat a contract as void might be exercisedor not at the pleasure of the party concerned ; the agreement wouldin effect be voidable at his option. But that principle has no operationwhere the Legislature as a matter of policy- has directed that aparticular transaction shall be void or of no force and effect. ”
Tie then goes on to state the effect of the words ‘ no force and effect ’thus :
“ A transaction which has no force and effect is necessarily voidab initio, and can under no circumstances confer any right of action.”
1 (1013) A. D. 136.
In the same case Solomons J. in dealing with the words of section 49"- stated:-.
“ The words arc very clear and precise, and in my opinion can haveonly one meaning. The effect of the provision is that a verbal con-tract of sale is of no force and effect, or, in other words, is null andvoid. For I can see no distinction in meaning between saying that acontract is of no force and effect, and saying that it is null and void.The two expressions, in my opinion, mean exactly the same thing,for that which is of no force and effect is necessarily null and void. ”
The meaning given to the words * no force and effect 5 in Wliken v. Kohler(supra) was adopted with approval in the case of Souter v. Norris 1.There the Court was called upon to interpret a provision of the PatentAct which provided that no assignment of a patent ‘ shall be of any forceor effect unless registered at the patent office ’. Kefex-ring to those wordsCiulewis J.A. stated :
“ Noxv the language used by the Legislature is clear and emphatic,,and the words used admit of no doubt as to their meaning. ”
These words and the word ‘ void ’ again came xxp for considei-ation inthe case of 3Ioscr v. Milton 2 wlici’e the Court was called upon to interpretthe following regulation :
“ No agreement for the sale of immovable property shall be of anyforce or effect xuiless—
– such agreement has been reduced to writing and signed by the
parties theroto or by their agents duly authorised in writing ;
and
the purchaser, the pui-chase price and other terms and conditions
of such agreement have been approved by the Minister. ”
In this case by a contract of sale dated 22nd June 1944 signed by bothparties the plaintiff sold to the defendant a land, stock and certainmovables for a sum of £2,500. The plaintiff received £500 from thedefendant at the time of signing of the contract and the balance on theexecution of the deed of ti-ansfer. The deed stipulated that possession ofthe pi-opcrty shoidd be taken on 1st July 1944 and that it should be atthe risk and profit of the purchaser from that date onwards. Clause 6contained the following stipulation :—
"This agreement is subject to the. approval of the Minister ofAgriculture and in the event of the Minister fixing a lower price thanthat stipulated herein or l-efusing to sanction the said sale, the vendorshall not be bound thereby and this agieement shall bo cancelled,whereupon the vendor shall immediatel3r refund to the purchaserthe said sum of £500 to be paid in terms of Clause 2 hereof. Pendingsuch refund the pui-chascr shall retain possession of the said movableswhich shall thereupon be pledged to her as security for such refund. "
The Minister approved the sale as on 13th Jidy 1944 and on 12th July1944 the defendant purchaser withdrew from the agreement; Thel033) A: Z>. it.“(1945) A- D. 517./
plaint iff vendor thereupon instituted this action elamting payment oftlic balance of tlic purchase price due and tendered transfer against suchpayment. The defendant denied liability and pleaded that the agree-ment was of no force or effect until the approval of t he Minister was given.The Hhrh Court- held against the defendant on the ground that theMinister's approval gave validity to the instrument with retrospectiveeffect-, lie successfully appealed from that decision. The appellatedivision held that he had a right to resile from the agreement before theMinister’s approval was given and that the Court had no right to enforcethe agreement.
I shall now deal with the case on the basis of tho pleadings which Ihave summarised at the beginning of this judgment in order to determinewhich of the plaintiffs causes of action arc affected by section 2 of thePrevention of Frauds Ordinance because under our procedure it isnecessarv that the determinations in a cause should be founded on a caseeither to be found in the pleadings, or involved in or consistent with thocase made thereby (1SGG) 11 Moo. Ind. App. 7 at 20). The first causeof action is clearly based on the agreement- which admittedly is not inconformity with the Prevention of Frauds Ordinance ancl is thereforeof no force or avail in law. Paragraph 4 of the plaint reads :—
The plaintiff states that the failure to effect the saicl conveyancewithin the said period was due to the default of the defendant in thatthe defendant did not make available to tho plaintiff within the saidlo days the title deeds to the said property. The plaintiff makes noclaim for damages sustained by reason of the said breach by the defen-dant of tiie said agreement but restricts his claim on this cause ofaction to a refund of the saicl sum of Es. 5,000 j>aid in advance underthe said agreement. ”
Such an agreement is inadmissible in evidence as was held by the PrivyCouncil in Adaicajipa Cheily v. Cantppen. Chctly (-supra) and cannotbe proved. His claim on the first cause of action cannot thereforesucceed.
I now come to the second cause of action. It is not disputed that infact the plaintiff was placed in possession of the mill b}' the defendant ;but lie denies tlic plaintiff’s allegation that lie brought 201,700 coconuthusks to the premises. He however admits that the plaintiff broughtcoconut husks to the value of Rs. 000/71. The learned trial Judge hasaccepted the plaintiff's evidence on this cause of action aiul given judg-ment for the full sum of Rs. 3,250, but at the hearing of this appeal it wasconceded that on the plaintiff’s own evidence he was not entitled to claimmore than the value of 144 cwt of fibre and that the amount allowedunder tin's head should be Rs. 1,S72 and not Rs. 3,250.
This claim docs not arise on the agreement nor is it based on it ; but isindependent of it-. The defendant docs not claim that he is entitled tothe husks or fibre on the premises when lie resumed possession. Thedispute was onl- as regards the quantity actually on tlicsite when thedefendant regained possession. As the amount has been agreed on nowand as there is no legal objection to the claim being sustained the plaintiffis entitled to judgment in the sum of Rs. 1,872.
On the alternative cause of action it was also contended that the sum. of Rs. 5,000 paid as advance was recoverable as money had and received.This is a principle known to the English law and is thus stated inHalsburyVol. 8 (3rd Edn) p. 235, s. 408.
“ Where one person has received the money of another under suchcircumstances that he is regarded in law as having received it to theuse of that other, the law implies a promise on his part or imposes anobligation upon him to make payment to the person entitled thereto,and in default the rightful owner may maintain an action for moneyhad. and received to his use. "
The precise nature of the action is not yet settled and Halsbury{supra) a. 409 sets out the different schools of thought thus :
“ One approach is to regard the defendant as liable because lie hasbeen unjustly benefited. Another is to regard him as liable on animplied promise to pay. A third school of thought considers that thematter is still open and that the true nature of the action has yet to-be established. Finally, it has been suggested that although the basis-of the action is an implied promise to repay, such a promise will be-implied only where an element of unjust enrichment exists. ”
Whichever view is taken it cannot be said that in the instant case the-sum of Rs.- 5,000 received by the defendant was received by him in suchcircumstances that he can be regarded in law as having received it to-the use of the plaintiff. It was clearly understood that if the plaintifffailed to carry out his part of the contract the defendant was to retainthe sum of Rs. 5,000. In such circumstances it cannot be said that thedefendant was unjustly enriched. There is nothing unjust about suchan agreement especially as it had been stipulated that if the defendantdefaulted lie should pay Rs. 10,000. The intention of the parties wasthat if the plaintiff defaulted the defendant was to be enriched to theextent of Rs. 5,000 and if the defendant defaulted the plaintiff was to beenriched in a sum of Rs. 10,000. There is no reason why that intentionshould not be given effect to. There is nothing illegal in such an agree-ment nor is it contrary- to public policy. Lord Wright in the Fibrosacase (Fibrosa Spollca Akcyjna v. Fairbairn Lawson Combe Barbour Ltcl.)quotes the analysis of the action for money had and received made byLord Mansfied in Closes v. MacFerlan-, and states :
“ This statement of Lord Mansfield has.been the’ basis of the modemlaw of quasi-contract, notwithstanding the criticisms wliich have beenlaunched against it- Like all large generalizations, it has needed andreceived qualifications in practice. There is, for instance, the quali-fication that an action for money had and received does notlie for money paifl under an erroneous judgment or for moneys paidunder an illegal or excessive distress. The law has provided otherremedies as being more convenient. The standard of what is againstconscience in tins context has become, inore or less canalized or defined,but in substance the juristic concept remains as Lord Mansfield left it. ,r
j (1013) Ay d’. 32.* (1760) 2 Burr 1005, 1012. ■
Lord Mansfield said :
" it lies for money paid by mistake ; or upon a consideration which- happens to fail ; or for money got through imposition (express, orimplied) ; or extortion ; or oppression; or an undue advantage takon.of the plaintiff’s situation, contrary to laws made for the protectionof persons under those circumstances. In one -word, the gist of this-kind of action is, that the defendant, upon the circumstances of llie-case, is obliged by the ties of natural justice and equity to refund themoney. ”
It is not necessary' to discuss the law of money had and received at anylength because the instant case is not. one that falls within the scope ofthat law. It is sufficient to quote the -words of lord Wright in the Fibrosacase {supra). At page (57 after examining the various principles governingthe law lie states :
''These principles, however, only apply where the payment is net-of such a charact-cr that by the express or implied terms of the contract,it is irrecoverable oven though the consideration fails. ■ The contractmay exclude the repayment. ”.
As I have pointed out above even if this contract had been no tar i ally-attested the plaintiff would not be entitled to recover the money as howas the defaulter. The plaintiff is therefore not entitled to rely on theground of “ money had and received ”.
I do not propose to go into the doctrine of unjust enrichment as itdoes not arise for decision here. It is sufficient to mention that it has-been discussed in a number of recent decisions both in England and inSouth Africa. The doctrine is known to Roman and Roman-Dutch.Law and the books contain many instances in which a person is not-permitted to enrich himself at the expense of another. Tho judgment ofWafcermcyer <T. A. in Jajbhay v. Cassim 1 contains a full analysis of theRoman and Roman-Dutch authorities on the subject of unjust enrich-ment. It being conceded that both under the English Law and underrour Law the Courts will intervene to prevent unjust enrichment, theonus of proving that another person has unjustly enriched .himself at>his expense is on the pex-son asserting the proposition. As was stated byMorton J. in the case of Guarantee Investment Corp'jrniion U4 r. Shaw – :
“ The plaintiffs must prove not only that the defendant- was enriched;but also that lie was unjustly enriched. ”
In the same case it is stated that:
.“ the broad principle that no one shall be unjustly enriched at the
expense of another is one which must be applied v.-iih caution. ’’
The true question that arises for consideration in cases of unjust enrich-ment is—Is there an enrichment which equity demands should be restored,to the plaintiff whose claim is not barred by legal principles ; for instance 1
because the rights between the parties are governed by contractor because the plaintiff's remedy is barred because of the in pari delictorule, no circumstances being shown why that rule should be relaxed ;or because of a turpis causa. In the case of Wilson v. Smith A another 1following the dictum of Van den Heever J. in Pncjlou'ski v. Johnston’sExecutors Kuper J. refused to grant relief on the ground of impossibilityof performance. The remarks relied on are :
“ Where as in this case, a party to a putative agreement puts theother party into possession or leaves him in possession not as lessee,but for the objects of the intended contract, I cannot see on whatequitable basis he can claim a rental or the value of use andoccupation—unless one relics upon a vague and superficial notion ofequity which is not reflected in the law. ”
Kuper J. summed up the decision thus :
“ l'uv thorn tore it seems to me that where both parties have sufferedloss from the partial execution of the contract, the applicant becausehe has been deprived of the use and occupation of the lot for somet> months, the first respondent because he has been deprived of theuse of the £400 paid in by him and he has been put to certain ex-penses in the preparation of the lease and the contemplated mortgagebond, the Court should not be astute to determine any differenceson a strict mathematical basis and should leave each party to bearhis own loss, a loss occasioned by the frustration of the contract notclue to the fault- of cither party. "
In the instant case apart from the fact that the agreement is of noforce or effect it was the plaintiff's default that prevented the sale goingthrough. There can be no unjust enrichment in such a case. The plain-tiff must bear the loss. The general rule of Koman-Dutch law is not togrant relief where the action arises on a lur-pis causa or injusla causa■on the basis of the maxini ex turpi- causa non oritur actio, llelief wasalso not granted where the parties were equally to blame for the illegalor void transaction which they sought to undo on the basis of the maximin pari delicto potior conditio possidentis. In Brandt v. Bergstedt3,where a cow had been sold on a Sunday contrary to the provisions ofOrdinance No. 1 of 1S3S and was delivered by the plaintiff to the defen-dant the following morning, the Court refused to grant relief to the plain-tiff who sought to recover the cow or its value on the basis of the maximin pari delicto mclior est conditio possidentis. Kotze J. in the course ofhis judgment referred to the following words of Lindley L.J. In thisconnexion it is well to remeniber the words of Lindley L.J. in Scott v. 'JDocring JfcXab <0 Co. wherein he says :
” No Court will allow itself to be made the instrument of enforcingtransactions which are founded on illegality, when the party invoking*he aid of the Court is himself concerned in the illegality. The Court
a (1017) C. P. D. 314.*(1S02) 2 Q. B., p. 72S.
cannot aid a party to defeat the clear intention-of an Ordinance orstatute. ”
Tiie words I have underlined are noteworthy in the present context.
It is an established rule that a Court of Justice will not recognise andgive validity to that which the legislature has declared null and void,nor will it permit anything which cannot be done directly to be doneindirectly. Principles such as that no man shall be allowed to takeadvantage of his own wrong, and that no one can be permitted to enrichhimself at the expense, of another cannot be invoked for the jmrposeof permitting persons to act contrary to or. ignore the expressrequirements of a Statute such as Section 2 of our Ordinance.
In his judgment in the Jojbhay case (supra) Watermeyer J.A. sumsup his judgment thus :
“ Under the general principle which has been discussed in this judg-ment, the Court will not assist a party to recover what he has paidor transferred to defendant in terms of the illegal contract, save inexceptional cases, but there is no reason to go further and to deprivehim of rights which he has not transferred to defendant. What hohas voluntarily paid or transferred he cannot recover, but there isno reason why he should lose what he has not intended to part with. ”
In the case of Sandcman v. Solomon 1 occurs the following quotationfrom Paulas at* p. 1-49 :
If, however, anything has actually been given in performance ofsuch a void contract, the law will not compel restitution, unless theparty be innocent. But* if the party seeking restitution of what helias given be not a wrong doer, the law will enforce restitution. Theparty claiming restitution must come Io Court with clean hands. ”
In this case Beaumont J. summarises his opinion thus :
“ But looking to the strict sense in which our law lias been inter-preted by tlie most competent authorities, there seems to be no roomfor doubt that under our law, whatever may be the practice under theEnglish law, the Court cannot take cognisance of a claim based directlyor indirectly on what the law forbids, and where both parties arc toblame it cannot help cither. ”
The plaintiff is for the above reasons not- entitled to succeed in his claimbased on unjust enrichment as well.
In view of the conclusions I have reached on tlic main questions arisingon this appeal it is not necessary to discuss at length whether the agree-ment is divisible or separable and whether time is of the essence of thecontract.
In regard to the question of the divisibility of the contract it is sufficientto say that the instrument under consideration clearly shows that the
parties intended tlie contract to be single and entire and not separable.A divisible contract is a contract the whole performance of which is-divided into two setS of partial performances, each part of each set beingthe agreed exchange for a corresponding part of the set of performances,to be rendered by the other promissor. (Williston on Contracts, Yol. 3,p. 2403, Sec. 860A)
The question whether time is of the essence of the contract generallyarises in actions for specific performance.
What is the meaning of “ time is of the essence of the contract ” ?It means that the performance by one party at the time specified inthe contract is essential in order to enable him to require performancefrom the other party. It means that time is so material that exactcompliance with the terms of the contract in this respect is essential tothe right to require countcr-perforraancc. The first point to be deter-mined in deciding whether time is of the essence of a particular contractis whether the parties have expressly made it so. By that I do not meanthat it is essential to use the very words " time is of the essence ” in thecontract, but it should appear from the expressed terms and thesurrounding circumstances taken as a whole that time is of the essenceof the contract. It is therefore primarily a matter of interpretationof the contract. If the answer to the question whether time is of theessence is in the affirmative then the defaulter cannot enforce performanceby the other party.
In this matter there is an important difference between contractsfor the sale of goods and contracts for the sale of land. Section 11 of'the Sale of Goods Ordinance provides that unless a different intentionappears from the terms of the contract, stipulations as to time of payment-are not deemed to be the essence of a contract of sale.
In English common law stipulations as to time in contracts for thesale of land were always regarded as of the essence of the contract. ThorCourt of Chancery in the exercise of its jurisdiction to decree specificperformance adopted the rule that time was not essential unless eitherit was made so by express stipulation or it appeared to be so from thenature of the contract.
In the instant case the plaintiff is not seeking to enforce specific per-formance, but a reference to the contract shows that even if the contractwas valid the plaintiff would not succeed as timi has been madean essential term. What could be clearer than these words—
“ And that if the balance amount is not paid and the deed of con-veyance is not executed within 15 days from this date and that- thesame could not be performed the sum of Rupees Five Thousand(11s. 5,000/-) paid by. the said Mr. D. L: Abcj-asckera as advanceand the authority assigned as aforesaid shall hereby be forfeited andnull and void and that if I the vendor Mr. K. E. J. Perera neglectedto execute the said' deed and deliver the same, I have hereby agreed,to pay a sum of Rupees Ten Thousand as compensation.”
The appeal is allowed with costs both here and below except in regardto the claim in respect of the coconut husks brought on the land by theplaintiff. The plaintiff's claim is allowed in respect of that item to theextent of Us. 1,872.
de SrLva, J.—I agree.
Guxasekara, J.—
I concur in the view taken by my brother Sansoni that the agreementas to the destination of the deposit of Rs. 5,000 is severable from theagreement for the sale of the mill and that it is valid. The authoritiescited in the judgment of my lord the Chief Justice make it clear thatin that view the respondent must be held to be entitled to recover thedeposit if the party in default was the appellant.
The learned district judge holds that it docs not appear to have beenintended by the parties that time should be of the essence of the contract.“ All that appears to have been contemplated ”, he says, “ was that thetransaction should be finished within a reasonable time and 15 daysappear to have been set out as an indication of what that reasonabletime was without any real intention of enforcing that limit. ” Tliisfinding is supported by the evidence, and there appears to be no sufficientground for disturbing it..
According to the appellant's own evidence in chief he had told therespondent that he would instruct- 3fr. Ranasinghe to let the respondentinspect the deeds if he came to Mr. Ranasingho’s office. The learneddistrict judge has accepted the evidence that on the morning of the8th November the respondent and his proctor, Mr. Peiris, went toMr. Raiiasinghc’s office to inspect them but Mr. Ranasinghe could notmake them available for inspection. He holds that the appellanthaving failed to see that the deeds were available for inspection cannotblame the respondent for not executing the conveyance within the periodof 15 days specified in the agreement. I see no reason to disagreewith tliis finding. It seems to me, therefore, that even upon theassumption that the parties intended that time should be of the essenceof the contract it must be held that it was the appellant’s defaidt thatprevented the execution of the conveyance by the Stb November.Moreover, even if they originally regarded the stipulation as to time tobe an essential term there can be no doubt that they later agreed to anextension of the time, and that it was by reason of the appellant's defaultthat the conveyance was not executed within the extended period. Iam unable to agree with Mr. Perera’s contention that the rpiestionwhether the parties agreed to an extension is not included in the issuestried. In my opinion it is covered by the 1st ancl I2th issues, which raisethe question as to which party was in default.
.1 agree with my lord the Chief Justice that on the second cause ofaction the respondent is entitled to only 14-4 cwt. of mattress fibre or
Es. 1,S72 as its value. The decree under appeal must be varied.accordingly. Subject to this variation the appeal must be disniissedwith costs. ~
PuLLE, J.
I fiml myself in agreement with the learned trial Judge that time wasnot of the essence of the agreement dated 29tli October, 1949. Boththe parties to the action and the person who drafted the agreementwere unfamiliar with legal niceties and I am of opinion that it would beartific ial to impute to the parties an intention that, if the deed of transfercould not owing to an unexpected event be prepared in time, therewould not be a reasonable extension of time to comjflete the transaction.The parties must be presumed to have contracted on the footing thatthe purchaser would have to take legal advice on title which oftentimesentails lengthy and laborious examination of the chain of deeds on whichthe vendor bases his title. Delays in examination of title arc unpredic-table. Again, the parties must have contemplated that the deed oftransfer should be drawn up by the piu-chaser in a form that would meetthe wishes of the vendor. There was a mortgage for Us. 10,000. Howwas this debt to be discharged if the purchaser was to get the propertyfree of encumbrances ? The agreement PI is silent because it did notprovide for all contingencies in implementing it and I think it was leftto the good sense of the contracting parties to work out details during aperiod of negotiations extending beyond the Sth Xovcmber. The eventsthat occurred on this date and thereafter up to the 19th Xovcmber, 1949,on which the learned judge has commented, support, the contention ofthe purchaser that time was not of the essence of the agreement. Onthis part of the case, for the reasons fully set out in the judgmentof Sansoni, J., I agree that the purchaser did not render himself liableto have his deposit of Rs. 5,000 forfeited.
On the second cause of action I agree with my Lord, the Clvief Justice,that the sum of Rs. 3,250 awarded as damages should be reducedto Rs. 1,872. In the result I am of opinion that subject to this reductionthe appeal should be dismissed with costs.
S.-YNSoxr, J.—
I agree with 3Iy Lord the Chief Justice that the plaintiff is entitled torecover a sum of Rs. 1,S72 as damages on the second cause of action.I agree with my brotherGunasckara and my brotherPulle that the defen-dant’s appeal fails in regard to the first cause of'action and I shall statebriefly my views on the more important questions of law argued before us.
Mr. Percra’s position was that the document PI could not lie ignoredmerely because the agreement could not. .be specifically enforced. Heirged that the condition regarding forfeiture should be enforced accordingto the terms of the agreement, and this submission was linked with his•further submission that it was .the plaintiff who was in default becauselie did not complete the purchase by Sth Xovember, 1949.
SAXSOXf, J.—Perera r. Abcysckera
333
Mr. Choksy’s first submission was that as the agreement was oneaffecting land it was altogether void, and cveit the subsidiary agreementrelating to the deposit of Rs. 5,000 was invalid and could not beconsidered. His second submission (and I think this was the one liepressed more earnestly) was that the agreement could be considered onlyin so far as it concerned the deposit of Rs. 5,000, and the Court would thenhave to decide who was in default in resjJect of that part of the agreement.He did not seriously contest the position that if the plaintiff wasin default, he could not recover his deposit. On the other hand, if thedefendant was in default and refused to wait till the agreed time forsigning the deed on Sth November had arrived he submitted that thejdaintiff was entitled to the return of his deposit.
Now I entertain no doubt on (lie question whether notice could betaken of, and effect given to, the subsidiary agreement relating to thedeposit. Just as the Privy Council in Arsccularatne v. Perera 1 decidedthat a non-notarial writing affecting land was void as an agreement toeffect a transfer of the leasehold interest, but could be referred to forthe purpose of establishing a partnership, so in my opinion the fate ofthis deposit of Rs. 5.O00 could be decided by considering the termswhich flic parties made concerning it.
The next point to be considered—and I regard it as fundamental tothe decision of tin's dispute—is whether time was of the essence of thiscontract. If it was, it would have been necessary to examine the evi-dence carefully to see in consequence of whose default the transaction ofsale was not completed by the agreed date. If it was not, then one has tosee whose default was responsible for the transaction having ultimatelyfallen through.
Mr. Perera argued that as the document PI provides that the advanceof Rs, 5,000 should be forfeited if tile plaintiff’s purchase price is not paidand the deed of conveyance not executed within fifteen days, the onlyconclusion possible is that time was regarded as the essence of this con-tract. In passing, I would remark that this document is not signed by thepurchaser but only by the seller, but I make no point of that. The issue Iwish to consider is whether such an agreement for forfeiture renders timeof the essence of the contract, and here I have been guided by certaincases to which I shall immediately refer.
1 {1027) 20 Ar. I: R. 312.
In Jamshcd Khodaram Ivariv. Burjorji Dhanjibhai – the Privy Councilhad to consider a case where the defendant agreed to sell his leaseholdinterest in a land to the plaintiff for Rs. So,000. The plaintiff paidRs. -1,000 as a deposit or earnest and the parties agreed that the convey-ance was to be prepared and received within two months from the.date ofthe agreement. It was also agreed that should the purchaser not pay thebalance consideration within the fixed period, he wa~s to have no right to thedeposit or earnest money of Its. 4,000 and any claim of his teas to be void,and the vendor was after that- date to be at liberty to re-sell. There-after the plaintiff's solicitors investigated the title of the land and theycalled for various documents, one such document being called for after
“the two months period had expired, with the result that the plaintiffwas not ready to complete the purchase within the period of two months.The defendant’s solicitors did not comply with the requisitions of theplaintiff’s solicitors, and when three months had expired after the dateof the agreement they asserted a right to put an end to the contracton the ground that time was of its essence, and to forfeit the deposit onthe ground that the plaintiff h.ad failed to complete his purchase withinthe date fixed.
In delivering the judgment of the Privy Council Pord Haldane said :
“ If these requisitions were made in time Their Lordships are ofopinion that they were proper, and that they were not adequatelyanswered. If time was not of the essence of the contract they werelegitimately made, however the matter might stand as to one or otherof them if time were of the essence. This last question therefore liesat the root of the controversy and the answer to it is decisive of theappeal. ’’
.He considered the law of England as regards contracts to sell land andsaid :
“ Under that law equity, which governs the rights of the parties incases of specific performance of contracts to sell real estate, looks notat the letter but at the substance of the agreement in order to ascertainwhether the parties notwithstanding that they named a specific timewithin which completion was to take place, really and in substanceintended more than that it should take place within a reasonable tune. ”
He added that the special jurisdiction of equity to disregard the letter■of the contract may be excluded by any plainly expressed stipulationif the languge of the stipulation “ plainly excludes the notion that thesetime limits were of merely secondary importance in the bargain, that todisregard them would be to disregard nothing that lay at its foundation ”.Again, equity will not assist where there has been undue delay on thepart of one party to the contract, and the ot her has given him reasonablenotice that he must complete within a definite time. . Hor will it exerciseits jurisdiction when the character of the property or other circumstanceswould render such exercise likely to result in injustice. In such cases,the circumstances themselves, apart from any question of expressedintention, exclude the jurisdiction. Equity will further infer ail intentionthat time should be of the essence from what has passed between theparties prior to the signing of the contract. But the construction of thecontract cannot be affected by what takes place after it has once beenentered into..
Lord Haldane, having stated these principles, applied them to t he agree-ment in question and was of the opinion-that there was nothing in itslanguage or in the subject matter to displace the presumption that timewas not of the essence of the bargain. I might add that the doctrinethat time is not of the essence of the contract does not .apply also whenthere has been a sale of-land and an agreement to rcconvey it within an
agreed period, because the title of the purchaser is practically in abe-yancc until after the expiry of the period mentioned in the agreement. Itmould only be just to the purchaser that he should know at what pointof time his title would be perfected. But I would emphasise that theprovision for forfeiture of the deposit was not considered by the PrivyCouncil to have the effect, of making time of the essence of the contractin that case..
In Ilona v. Smith, the Court of Appeal considered a ease where asum of money was paid as a deposit and in part payment of the purchasemoney on a contract for the sale of land. The contract provided that thepurchase should be completed on a day named and that if the purchasershould fail to comply with the agreement the vendor should be .at libertyto resell. It was held in that case that the purchaser could not recoverhis deposit but the reasons for this conclusion are important. Cotton,Xi.J. pointed out that there had been undue delay on the part of tliopurchaser who had been given extensions of time, and it was clear thathe was never, even at the time when he brought the action to recover thodeposit, ready with the money to perform the contract. His conductamounted to a repudiation of the contract and he could not thereforetake advantage of his own default to recover the deposit. Fry, L. J.was also of the opinion that tho purchaser could not show a readinessand willingness to complete either on tlio day fixed or within a reasonabletime after, andthero was such aprotracted default on his part as justifiedthe vendor in treating the contract as rescinded.
In Alicroulsicos v. Swart2 the Appellate Division of the SupremeCourt of South Africa considered the question as to when delay on thepart of a buyer in making provision for payment of the purchase priceof land is regarded as equivalent to total failure which entitles the sellerto regard it as terminating the contract. It was decided in that casethat Koman Dutch Law, like Fnglish Law, does not regard the mere factthat the debtor makes default on tlie stipulated date, if there is one, assufficient for this purpose. Fagan, A. J. A. said that “ where a time forthe performance of a vital term in a contract lias been stipulated for andone party is in mora by reason of his failure to perform it within that time,but time is not of the essence of the contract, tlie other party can makeit so by giving notice that if the obligation is not. complied with by acertain date, allowing a reasonable time, he will regard the contract asat an end.
In Smith v. Hammcrton 3 the principles enunciated by Lord Haldanein the case I have referred to were applied by Harman, J. That was.a case where on a contract for the purchase of a house for £3,000 theintending purchaserpaid a deposit of £300and completion of the purchasewas fixed for 4t-h April 1949. On 2-9th March the purchaser, having ex-perienced difficulty in raising the balance consideration, informed thevendor that it would not be possible for her to complete the purchase onthe date fixed as she could not raise tho money. Tlie vendor wrote on
prepared, without prejudice, t-odelay enforcing his rights until 19th April-The purchaser could not complete the sale even by 19th April and thevendor informed her that he had forfeited the deposit and he thereaftersold the property. One of the conditions of the sale adopted providedthat if the purchaser failed to complete his purchase according to theconditions his deposit should thereupon be forfeited (unless the Court, other- •wise directs) to the vendor. In an action brought by the purchaser forthe return of her deposit, Harman, J. followed the Privy Council judg-ment. He held that time was not of the essence of the cont ract and that-the condition for forfeiture referred to only meant that the purchaseshould be completed on 4th April or within a reasonable time thereafter.He also held that the vendor could not, by writing the letter of oth April,make time of the essence of the contract, for he could do so only if therehad been such delay or improper conduct on the part of the purchaseras to render it fair that if steps were not immediately taken to complete,the vendor should be relieved from his contract.
In the present ease the defendant’s conduct has been quite differentfrom that of the vendor in the ease just cited. Assuming that therewas a default on the part of the plantiff in not completing his purchaseon Stli November 1949, far from notifying the plaintiff that he wouldterminate the contract the defendant clearly indicated that he wasprepared to give the plaintiff further time to complete the purchase.He elected to treat the agreement as still subsisting and he gave no noticeto the plaintiff to complete the purchase within a stated time. I fail to-see how he can now fall back on the agreement to forfeit. It is only onthis hypothesis that he, as he admits, went several times to meet theplaintiff and the plaintiff’s Proctor. On 17th November, on receipt of atelegram from the plaintiff's Proctor, he went to Negombo in order tosign the deed of transfer, and lie went again on ISth November for thesame purpose. He made a significant admission under cioss-examinationwhen he staffed that he had told the plaintiff that he would come on theSth November to Mr. Pieris’s office at about 2 p.m. His admitted failureto wait till 2 p.m. in order to complete the transact ion puts him in default,and I think Mr. II. V. Perera conceded that it was the defendant whoultimately “cried off”. I think Mr. Perera also conceded that if time wasnot or the essence of the contract the default was on the part of thedefendant.
Could it be said that if the defendant was in default or repudiated thecontract, as he did by his letter D3 of ISth November, lie was not liableto return the deposit to the plaintiff ?■ I cannot accept any submissionwhich would lead to such an unconscionable result. The deposit wasmade on the basis that a deed of sale would be executed, and it was tobe taken as part of the purchase'price. I have already held that thepurchaser was not in default and that the vendor had no right to forfeitthe deposit. Clearly then there was a failure of consideration so far asthe plaintiff was concerned, because the money was paid on the under-standing that it was to form part of the purchase price of the land. Itwas urged that there can' be no failure of consideration in such a casewhere the contract itself is void. It is in just such a case, I think, thatthe money paid for that particular purpose can be recovered from the
payee. The payee received it for that purpose, he refused or neglected tocarry out his part of the bargain, and his duty is to return it to thepayer.
I think the principle of unjust enrichment would also apjdy. It cannotbe said in this case that there was an intention on the part of the plaintiffthat the defendant should retain the money. Such intention must bejudged in the light of the implied condition that time was not of theessence of the contract and “ if one party after receiving the benefitof the inchoate arrangement desired to retain that advantage whilerefusing to carry out his undertaking, he would be enriching himself atthe expense of another, whom a Court of law would in such circumstan-ces undoubtedly assist M—Wilken v. Kohler ’. If. however, time had beenof the essence of the contract and the plaintifF had been in default, theplaintiff would probably have been in a difficulty if he had sought torecover the deposit, for in such circumstances a Court may infer that theintention of the parties is that the defendant should retain the deposit.
For these reasons I would dismiss this appeal with costs subject to thevariation in regard to the quantum of damages.
Appeal dismissed.Decree varied.
1 (1060) J S. -4. B. R. 606.- (1016) IK. L. D. 7.