Canning v Temby [1905] HCA 45; (1905) 3 CLR 419 (26 October 1905)

At the trial the plaintiff failed to prove a valid agreement in writing to pay the purchase money on or before 1st September, as alleged in the statement of claim, and plaintiff's counsel then fell back on the doctrine that, where no time for completion is specified in a contract, the law implies that it is to be performed within a reasonable time. That is, no doubt, a sound proposition, and if the first of September was a reasonable time for completion by the purchaser, having regard to all the circumstances of the case, and having regard also to the true meaning of the term, then the plaintiff's cause of action was complete, and it was only a matter of assessment of damages. It is clear that the vendor in the present case cannot maintain a suit for specific performance since she has no longer any title, but that is no answer to an action for damages for a breach of contract by the other party. McMillan J., who tried the case, was of opinion that, under the circumstances, the first of September was not a reasonable time, so that the contract could not be construed as a contract to pay the purchase money on or before 1st September; he was also of opinion that the contract alleged was not proved, and for these reasons he gave judgment for the defendants. The case was then brought to the Full Court, where judgment was delivered by Parker J., with whom Burnside J. concurred. Parker J. agreed that, under the circumstances, it could not be said that the first of September was a reasonable time in the sense that an action would lie for damages for mere non-payment by that date. He was also of opinion that in this case time was not of the essence of the contract; and he applied the equitable doctrine that, when time is not originally of the essence of a contract, notice must be given by one party to the other fixing a reasonable time for completion, which had not been done. The appeal was therefore dismissed. The equitable doctrine is under the Judicature Act to be applied in common law actions as well as in proceedings for equitable relief. At common law it was said that, in the case of the sale of land, time was of the essence of the contract. That doctrine, however, only applied when a date for completion was named in the contract. It was held that when a date is so mentioned, there are mutual promises to complete on the appointed day, and that, on failure of either party to do his part on that day, he lost all rights under the contract, and became himself liable to an action for damages. The Equity Courts, on the other hand, treated a failure to complete on the appointed day as a failure in a collateral matter, analogous to failure to pay off a mortgage upon the due date, in which event the mortgagee's title would at law become absolute. At common law, if an action were brought for damages for failure to complete on the prescribed date, the party in default had no answer to the claim; but it was a complete answer to the action to say that the plaintiff was, himself, not ready and willing to perform the contract upon that date. In equity, however, that would not be an answer to a claim for specific performance by a party who had not been ready to complete on the appointed day, unless it appeared to the Court that it would be unjust not to allow the defendant to take advantage of the plaintiff's failure. The doctrine, therefore, that time is not of the essence of a contract is a doctrine applied in relief of a party who is himself technically, but not substantially, in default, so as to allow him to claim specific performance in a proper case, although at law he could not maintain an action. The Courts of Equity never held that a party who had made default in performance of his contract was not liable for damages for the breach, but they treated the stipulation as to time not as a condition, but as an independent term of the contract, the breach of which might be compensated for by damages. Of course, a party asking specific performance of a contract, notwithstanding that he was himself in default, could only obtain that relief on doing what was fair to compensate the other party for any loss by reason of his default. When time was not originally of the essence of the contract, either party desiring to fix a definite time for completion, so as to entitle himself to rescind the contract on failure to complete within the time, was required to give notice to the other party to complete by a named day, which was required to be reasonable, i.e., at not too short an interval. The effect of this notice, however, was not to confer an offensive right or complete a cause of action, but to confer a defensive right in equity as well as at law to take advantage of the other party's default. I do not think, therefore, that the plaintiff's failure to give a notice appointing a day for payment of the purchase money is material to her claim for damages for breach of contract except so far as such a notice, if given and not attended to, would have been an element in considering whether the purchaser had failed to perform his contract within a reasonable time. In one sense, of course, time is always of the essence of a contract to be performed within a reasonable time. But that is not the sense in which the term "of the essence" is used. In my opinion the only question in this case is whether the plaintiff has made out a case at law. The learned Judges were, as I have already said, of opinion that, under the circumstances, it could not be said that the 1st of September was a reasonable time for completion in the sense that the defendants by mere non-payment upon that date committed a breach of contract. What is a "reasonable time" must depend upon circumstances. In the case of a contract for the sale of mining shares of uncertain value, where no time for completion is specified, it would clearly be necessary that the purchaser should be ready and willing to complete and pay within a tolerably short time, and that the vendor should be ready and willing to transfer within a similar time. So, in the case of the purchase of an option, if both parties knew that the option would only last for a few days, and no time was specified, it must be taken that it was in the contemplation of the parties that a reasonable time was a period not later than the expiration of the option. From the point of view of rescission of a contract "reasonable time" has a somewhat different meaning, as I have shown, but that is only relevant to specific performance. Can it then be said in this case that the first of September was a reasonable time in the sense that either party failing to complete by that date would commit a breach of contract? It is very difficult to say that it was. The money, as both parties knew, was to come from London, and might or might not be here at the time appointed for redemption of the mortgage. Again, the title of the plaintiff was incomplete; she was not the registered proprietor of the land, and it was necessary before she could transfer to register a conveyance from her husband to her, which had been made some time before. It appears also that there was a second mortgage upon the property, of which she at that time was ignorant. Under these circumstances I agree with the learned Judges in the Supreme Court that it cannot be said that there was an absolute breach of contract by the mere failure to pay upon the 1st of September.

There is another answer to the plaintiff's claim arising upon the terms of the contract itself. By the acceptance of the offer it was made a term that payment was to be made "on delivery of title deeds and transfer." I take that to mean that payment was to be made as soon as the vendor was ready to deliver the title deeds and transfer. When that time would be was a matter within the knowledge of the plaintiff and not of the defendant. The law as to the construction of a stipulation as to a matter of that sort was thus declared by Lord Abinger C.B. in the case of Vyse v. Wakefield[1]: "The rule to be collected from the cases seems to be this, that where a party stipulates to do a certain thing in a certain specific event which may become known to him, or with which he can make himself acquainted, he is not entitled to any notice, unless he stipulates for it; but when it is to do a thing which lies within the peculiar knowledge of the opposite party, then notice ought to be given to him. That is the common sense of the matter, and is what is laid down in all the cases on the subject; and if there are any to be found which deviate from this principle, it is quite time that they should be overruled." In the later case of Makin v. Watkinson[2], Bramwell B. referred to that rule, and showed that it was derived from very ancient authority, the earliest of which was in the time of James I. He said: "If we look to the reason of the rule, it is, that when a thing is in the knowledge of the plaintiff, but cannot be in the knowledge of the defendant, but the defendant can only guess or speculate about the matter, then notice is necessary."

Applying the rule formulated in those cases to this particular contract, I think that the statement of claim is defective (and the defect could not be cured), in not averring that notice was given to the defendants that the plaintiff was ready and willing to execute a conveyance upon a date mentioned in the notice, and that such time was a reasonable time to enable the defendants to find the money. For these reasons I am of opinion that the plaintiff's claim fails, both as a matter of pleading and upon the evidence.

It was further contended that, under the circumstances of the case, the statement made by the purchaser on 26th August, to the effect that he had not received the money and could not do anything until he did, may be treated as an absolute refusal to perform the contract. If it could have been so treated, the plaintiff had the option to treat it accordingly and bring her action forthwith. She did not, however, do so, and it appears that she still continued negotiations with the purchaser up to the middle of September, having apparently arranged with the mortgageee that, if the money should be paid before the end of September, he would not enforce the foreclosure. In Johnstone v. Milling[3], the Court of Appeal dealt with this doctrine. I will read a passage from the judgment of Lord Esher M.R.[4]:—"When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares his intention then and there to rescind the contract. Such a renunciation does not of course amount to a rescission of the contract, because one party to a contract cannot by himself rescind it, but by wrongfully making such a renunciation of the contract he entitles the other party, if he pleases, to agree to the contract being put an end to, subject to the retention by him of his right to bring an action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation. He cannot, however, himself proceed with the contract on the footing that it still exists for other purposes and also treat such renunciation as an immediate breach. If he adopts the renunciation, the contract is at an end except for the purposes of the action for such wrongful renunciation; if he does not wish to do so, he must wait for the arrival of the time when in the ordinary course a cause of action on the contract would arise. He must elect which course he will pursue."

So in the present case, if the letter of 26th of August could be, and had been, treated as an unequivocal renunciation of the contract, the plaintiff might at once have brought an action upon it. But I cannot see that that letter can be construed as such a renunciation. On the contrary, it was, to my mind, an expression of intention to carry out the contract if the money came, and not a refusal to carry out the contract in any event. The words are "If I do not get the money before leaving here, will probably get it in Adelaide, and if so will do as agreed." That, so far from being a renunciation, is an expression of intention to perform the contract, if possible. Further, in my opinion, the conduct of the plaintiff is inconsistent with the idea of her treating the latter as a refusal. On 5th September, in reply to the wire from Melbourne, she wrote: "If I can save the property now (and with your kind help I hope I shall do so) I am certain that we shall be able to sell the property within a few months for a good sum." On both grounds therefore this point fails, and the plaintiff is thrown back upon the terms of the original contract. For the reasons which I have given, I think that she could not sue for damages upon that contract until after the refusal of the defendant to pay the purchase money within a reasonable time after notification by her that she was ready to complete the transfer. At common law I think the plaintiff has not made out any case, and, in my opinion, the doctrines of equity do not come into the matter.

I am of the same opinion. The doctrine which guides the Court in decreeing specific performance, where time is not of the essence of the contract, has no application in a case like this, where the contract can be enforced only on common law principles. It is clear that the plaintiff has altogether failed to establish a right to succeed. Whether the 1st September was a reasonable time or not for the performance of this contract it is unnecessary in my judgment to consider, because the contract contains a condition precedent to completion that there should be a delivery of title deeds and transfer by the plaintiff before payment. Not only is the statement of claim defective in failing to allege the performance of this condition, but, passing that over, there is no evidence of its performance. In view of the surrounding circumstances this is perhaps a case of great hardship upon the plaintiff, who has made an abortive contract, and has thus failed to save a valuable property. The plaintiff, however, was bound to deliver title deeds and transfer in order to become entitled to payment, and also on the authority of Rippingall v. Lloyd[5], she was, at any rate, bound to notify the purchaser of her readiness and ability to do so. That was a case in which it was held that, where a vendor covenanted to deduce a good title at A, B, or C, on or before a certain date, a plea that he was ready to deduce a good title at that time was held bad for want of an averment of notice to the covenantee of the place at which he would be ready to deduce title. So here, before the plaintiff could establish a claim to damages for non-payment, she was bound to show that she had given the purchaser the proper opportunity to make it by notifying him of her readiness to deliver the title deeds and transfer, being then able so to do. This she has failed to show. In my opinion therefore the action fails, and the appeal must be dismissed.

I also am of opinion that the Supreme Court of Western Australia arrived at a right conclusion in this matter. The plaintiff in stating her cause of action alleges that John Temby specially agreed with her that the purchase money should be paid on or before the 1st of September, 1902, so that the plaintiff could prevent an order for foreclosure over the land in question being made absolute. The plaintiff on that statement of claim cannot succeed unless she proves that such a contract was entered into by John Temby. The contract is in writing, and the only reference to payment are these words: "Payment to be made on delivery of title deeds and transfer." Although the time mentioned by the plaintiff, the 1st September, was not specified in the contract, she endeavours to maintain that it was a term of the contract by showing that it is an implied term of the contract that payment should be made within a reasonable time, and she contends that, under the circumstances proved, the 1st September was a reasonable time; in other words, that there could be no completion within a reasonable time, unless on or before the 1st September. As it is admitted there was no completion on or before the 1st September, she insists therefore that the defendant has failed to carry out the contract. Before I refer to the expression "reasonable time" I wish to make some observations as to the contention that time was of the essence of this contract. There are only two sets of circumstances in which that doctrine can be applied; one, where a specific date for completion is stated in the contract; the other, where, although no specific date is mentioned in the contract, a notice has been given by the party who wishes to insure completion within a specified time that the completion must take place within the period notified otherwise the contract will be rescinded. In Macbryde v. Weekes[6] there was a contract of the latter kind under the consideration of the Court, and it was there held that, although there was no time for completion stated in the contract, it would be taken that the completion must be within a reasonable time, and that it was open to the party seeking completion to give notice that there must be completion on or before a certain date. Under such circumstances it was for the Court to say whether the date mentioned in the notice was a reasonable date for completion; and if the Court held that it was a reasonable date, then that date became the date for the completion of the contract, and the Court would hold, if the other circumstances so justified, that there must be a completion on that date, and that time in respect of that date became of the essence of the contract. As neither of these sets of circumstances arise here, the doctrine is inapplicable. The case then is that of a contract which must be completed within a reasonable time, and in the construction of contracts of that kind there is no difference in rules of construction at law or in equity. Sir John Romilly M.R., in the case of Parkin v. Thorold[7], states very concisely the view which the Court of Equity takes of the interpretation of contracts. He says, "A contract is undoubtedly construed alike both in equity and at law; nay more, a Court of law is the proper tribunal for the determining a construction of it; and if a serious doubt should arise as to the effect of the words contained in a contract, a case would be directed to a Court of law for its opinion" (this practice has been altered) "as to the true construction to be put upon the words, which construction would be adopted in equity. But Courts of Equity make a distinction in all cases between that which is matter of substance and that which is matter of form; and if it find, that by insisting on the form, the substance may be defeated, it holds it to be inequitable to allow a person to insist upon such form, and thereby defeat the substance."

It was upon that ground that the Court of Equity took upon itself to examine a stipulation as to time of completion and to determine whether it was a matter of form and substance. The doctrine can have no application here because, as I have said, there is no time fixed for completion in the contract, nor has a notice been given fixing the time for completion within the doctrine of the case I have mentioned. Now, a Court of Equity and a Court of Law look at a contract to be completed within a reasonable time in exactly the same way. The Court of Equity will no more permit an unreasonable delay in carrying out the contract than will a Court of Law; the case therefore stands in the same position as if this were an action at common law for failing to complete a contract within a reasonable time. The plaintiff has failed, in my opinion, to establish that, under all the circumstances of the case, a reasonable time for completion means on or before the 1st September. Both parties no doubt were aware of the vital importance of completing the matter by the 1st September, but both parties also knew that the money had to be arranged for in England, and that the payment was to come from England, and they must have been aware that the time of the remittance of that money was uncertain, and the evidence taken altogether would appear to show that, although it was of the utmost importance that this purchase should if possible be completed on the 1st September, both parties were aware of circumstances which might, without default on either side, make the completion on the exact date impossible. Then again, look at the conduct of the parties—and we may look at their conduct after the making of the contract as well as before in order to determine what was in their minds as to date of completion when the contract was made, and what was their view at that time of completion by the 1st September being essential to a reasonable compliance with the contract. We find, all through from the time of the making of the contract, Temby indicating by correspondence and conduct that he was doing his best to get the money by the 1st September, and that he would complete by that date if possible, whilst on the part of the plaintiff there was no expression of surprise or protest as to delay in completion, nor did she at any time in the correspondence after that date take up the position that the contract had been broken by failure to complete on the 1st September. She seemed rather to hope and expect that the money would arrive, although after that date, in time to save the property from the threatened foreclosure. Indeed, when we look at the plaintiff's letter of the 5th September, it is quite evident that, so far from insisting that the purchase should have been completed on the 1st of September, she was expecting relief under some different arrangement which was then guiding the actions of both parties. The plaintiff then writes: "If I can save the property now ... I am certain we shall be able to sell the property within a few months for a good sum. As you are aware it is a valuable estate and your principal and interest will be paid you in full." That was written only four days after the date upon which it is alleged Temby was bound to complete the contract. I need not refer in more detail to the written words or conduct of the parties. The whole correspondence and actions of the parties prove conclusively to my mind that there was no understanding that the 1st September was to be the date of completion, or that it was ever within their contemplation that completion by that date was the only reasonable compliance with the contract. McMillan J. who had the advantage of hearing the evidence has given strong reasons, in which I entirely agree, for his decision upon the facts. With regard to the second point mentioned by my learned brother the Chief Justice, that under the terms of this contract the plaintiff could not succeed, whether completion by the 1st September was reasonable or not, without notifying that she was ready and willing upon that date to carry out her part of the contract, I entirely concur with his reasons and his conclusions. I agree that the appeal must be dismissed.

[1] [1840] EngR 274; 6 M. & W., 442, at p. 452.

[2] L.R. 6 Ex., 25, at p. 30.

[3] 16 Q.B.D., 460.

[4] 16 Q.B.D., 460, at p. 467.

[5] 2 N. & M., 410.

[6] [1856] EngR 796; 22 Beav., 533.

[7] [1852] EngR 535; 16 Beav., 59, at p. 66.

High Court of Australia

Canning v Temby [1905] HCA 45; (1905) 3 CLR 419 (26 October 1905)

HIGH COURT OF AUSTRALIA