Ray v Davies [1909] HCA 51; (1909) 9 CLR 160 (20 August 1909)

HIGH COURT OF AUSTRALIA

Ray and Another Defendants, Appellants; and Davies Plaintiff, Respondent.

H C of A

On appeal from the Supreme Court of New South Wales.

20 August 1909

Griffith C.J., O'Connor and Isaacs JJ.

Loxton (Davidson with him), for the appellants.

Harvey and Perry, for the respondent,

Griffith C.J.

This is a suit for specific performance of a contract by which the defendants agreed to sell to the plaintiff certain land and a house thereon for £675, payable £100 in cash and the remainder by quarterly instalments at the rate of twelve shillings a week, interest to be paid at the rate of 5 per cent. on the unpaid balance.

These instalments would have extended over a period of 18 years. The first clause of the agreement in writing provided that the purchaser should pay a deposit of £100. [His Honor then read the rest of that clause and also the second and fourth clauses as already set out, and continued.]

It is to be observed that the contract does not in terms create any obligation on the part of the purchaser to give a mortgage, but it may be that it is implied. It is also obvious that the words "such mortgage to be for a term of not less than three years" may indicate that the balance of the purchase money not paid at the end of that period is to become then payable, which is apparently inconsistent with the first clause. As a matter of construction I take it that the two clauses read together mean this, that if a mortgage is arranged by the vendors providing for the payment of the instalments for three years, with acceleration of payment of the balance at the end of three years, and the purchaser executes such a mortgage, the vendors agree to pay the costs of the purchaser. That seems to me to be the ordinary and plain construction of the agreement. I remark that that is the construction which was put upon it by both parties from the first, and by the learned Judge from whom the appeal is brought. The plaintiff paid the £100, entered into possession, and paid instalments as they became due. A mortgage was prepared based on the view of the contract that I have stated, and tendered for execution. Then a question arose as to the defendants' liability to pay the costs of the mortgage, and over this and other trifling differences, involving less than £4, all this absurd litigation began. The defendants refused to pay what was asked, and because the plaintiff insisted that she was entitled to the amount claimed and objected to execution of the mortgage until it should be paid, the defendants attempted to rescind the contract.

The first defence set up is that the written agreement does not represent the agreement between the parties. It appears on the evidence that there was a considerable amount of correspondence and discussion between the parties in regard to the signing of the document. A draft agreement was first prepared and was put in evidence, and it appears, upon a comparison of that draft with the completed contract, that the words which I have read, "such mortgage to be for a term of not less than three years," were inserted after the first draft was prepared, and after discussion had taken place. So that they evidently embodied the concluded intention of the parties. Upon the evidence it is, in my opinion, impossible to hold that there is any foundation at all for the contention that this document does not express the concluded agreement between the parties. The only question is as to its meaning.

The contention for the defendants is, first, that it imposed an obligation on the part of the plaintiff to execute a mortgage if the defendants could procure anybody to lend the money. If that is the true construction, the defendants might, I suppose, procure the loan at any time during the currency of the agreed period of 18 years. I will assume that there is some such obligation imposed by implication. What, then, is the substance of the contract? First of all, an absolute agreement to which effect is to be given by immediate delivery of possession. Then for a period indefinite in time there is an obligation on the part of the purchaser to execute a mortgage if its terms are in accordance with the contract. It is impossible to say that the obligation to execute a mortgage at some time indefinitely subsequent to the obligation of the vendors to put the purchaser in possession is a condition precedent to the right to have possession. No rule that has ever been laid down for the interpretation of contracts would justify holding these to be mutually dependent covenants, so that a wrongful refusal by one party after five years to fulfil one covenant would entitle the other party to re-open what had been completed five years before. It would not be so at law, and it is not suggested that equity would apply a different rule. It follows that the only remedy that the defendants could have if the plaintiff wrongly refused to execute a mortgage would be a claim for damages. They might be large or they might be very small. Whether they are entitled to any depends, first of all, upon the language of the contract, and secondly, on whether the plaintiff has broken it. Assuming that the plaintiff did break it and ought to have executed the mortgage, that is not a sufficient reason why she should not get specific performance of the contract on paying compensation. That was a matter for which the defendants might have been compensated if they had put it forward by counterclaim. If they had done so the whole matter would have been disposed of in the suit. Or they might possibly have obtained compensation by an action for damages. Regarded from any point of view it is not a ground for preventing the Court from granting discretionary relief.

I do not think it worth while to express an opinion as to whether the vendors were or were not liable to pay the two guineas to the plaintiff for the costs of the purchaser's solicitors advising her as to the proper form of the mortgage. I have heard all that Mr. Loxton has urged upon that subject, and the impression left on my mind is that in this contract the stipulation that the vendor should pay the costs of the mortgage meant that the mortgagor was not to be put to any costs in connection with the mortgage. The stipulation was entirely for the benefit of the vendors, and if they took advantage of it they were bound to indemnify the purchaser against any expense to which she might be put in connection with it.

With respect to the other item, £1 17s. 9d., I really do not feel called upon to express any independent opinion at all. But I think that the opinion of the learned Judge below is the only one that can be reasonably entertained.

O'Connor J.

I am of the same opinion, and have very little to add. The rights of both these parties are regulated entirely by the contract between them which is evidenced in writing. Their rights are to be found within the four corners of that document. Under it the respondent took possession and remained in possession for some 18 months before the issue of the writ, and had in the meantime been complying with the contract, paying instalments and interest as they became due. In pursuance of one of the clauses of the contract the vendors had obtained a mortgage which they put before her for execution. All parties agree that that was the proper way to carry out the contract, but a difference arose about the sum of two or three pounds. As to that difference I do not think it necessary to say anything more than this: as to the two guineas the appellants were probably bound to pay it; as to the other sum in dispute very likely the appellants are right. However, this dispute having arisen, the appellants took it upon themselves to rescind the contract, and issued a writ in ejectment. They had the legal title. The respondent's rights under the contract were entirely equitable, and as the law stands in New South Wales there was no defence to the action of ejectment, no matter how wrong the appellants may have been in the view which they took of their rights under the contract. The respondent was consequently driven into equity to stop the action, and asked the Court to restrain the action by injunction and to grant specific performance of the contract. As to staying the action the first matter to be determined was whether the appellants were entitled to rescind the contract. It is clear to my mind that they had no such right. After the respondent had been in possession of the property for eighteen months, fulfilling all the conditions, and ready and willing to perform all except one term that really did not go to the root of the contract, the vendors were certainly not entitled to rescind the contract, and there is no provision in the contract which affords any foundation for the argument that they were entitled to do so. Under these circumstances, whether the appellants are right or wrong as to the trifling sum in dispute which has caused the whole trouble, it is plain that the Court could not do anything else than hold that the vendors had no right to rescind, and, therefore, that the action of ejectment ought not to be allowed to proceed. The Court went beyond that and granted a decree for specific performance. There is on the evidence nothing to show that the respondent on her part failed to carry out the contract in such a way as to disentitle her to specific performance, and under those circumstances I agree that the learned Chief Judge was right as to both parts of his order, and that the appeal must be dismissed.

Isaacs J.

I agree that this appeal should be dismissed, and I agree very much in all the reasons given by my learned brothers. There is only one slight point of difference not material in this case. The contract is in writing, and unless some case is made to show that the writing did not embody the real agreement between the parties, then, apart altogether from the question of part performance, the contract must stand as written. The evidence discloses no vestige of any case whatever to show that the written document does not state the real contract between the parties, as I read the document. All that is alleged is quite consistent with the document as it now stands, and there is no mistake alleged, nothing included by inadvertence, and no circumstance whatever such as is usually recognized as a ground for rectification of the document. We therefore only have to construe it according to its terms. Now the first condition is that a deposit of £100 is to be paid on execution of the contract and the balance of the purchase money, according to the first and second conditions, in a specified manner at specified times, £575 to be paid by quarterly instalments at the rate of twelve shillings a week, the first payment to be made on the day specified. Then the purchaser is to pay interest on the balance at 5 per cent. by four quarterly instalments on the dates mentioned. As between the vendors and the purchaser that represents the terms of the contract. We can see from the document that the purchaser is not willing or not in a position to pay the whole purchase money at once, and the contract gives her about 18½ years to pay it off. In paragraph 4 there was a provision for the benefit of the vendor in these words:—"If the vendors arrange a mortgage for the balance of purchase money owing by the purchaser on the terms hereinbefore contained as to rate of interest," that is 5 per cent., "and time and manner of payment of principal and interest," that is upon 4th June and the other months mentioned in each year at 12s. per week, "such mortgage to be for a term of not less than three years," it may be for any longer term, "the vendors agree to pay the costs of such mortgage and also half the costs of the discharge of the said mortgage." I take it that you have to give effect to every part of that clause and not to allow one part to outweigh another if you can possibly help it, unless there is some absolute inconsistency, some necessary inconsistency, between the different parts of the document. Now there is no inconsistency that I can see in having a mortgage of not less than three years, and mentioning the time and manner of payment of the unpaid purchase money. It may be for the whole unexpired time over which the payments are to be distributed, but it is provided that it is not to be for less than three years. Therefore I can see no reason for acceleration of payment of the purchase money at all if that became material. There is not in the clause any express provision that the purchaser shall execute a mortgage, but there is a principle of construction expressed by Lord Blackburn, in the case of Mackay v. Dick[1], where he says this:—"I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect." I think that applies in this case, and as there is a clause here for the benefit of the vendors, and this is one of the terms of the contract, there is an implication that the purchaser shall execute a mortgage if consistent with the terms of that paragraph. Now the vendors did arrange a mortgage which, I think, speaking for myself, did not strictly agree with that term of the paragraph. But it was treated as if it did agree with it, and no objection was taken upon this ground. I am not aware that the learned Judge expressed any opinion on the point, and it is not necessary to do so. Assuming then that the mortgage was in compliance with the contract, then the purchaser was bound to execute it, and if she had absolutely refused to do so, I do not say, and it is not necessay to say, that she would have been entitled to insist upon specific performance. But she did not. There was a miserable difference about something less than £4, really as to something less than £2, and on that the vendors gave notice on 11th September 1908 that they would rescind the contract unless the document was signed. Well, as far as I can see there is no power to rescind under these circumstances. The main defence in the case was that the vendors had power to rescind and did rescind, and forfeited the whole deposit. Within six days after that they issued a writ in ejectment at common law seeking to eject the purchaser from the land, and the purchaser had no option but to go into equity and restrain them. It was not a matter of choice but of compulsion. Then the only objection is that there was not a strict compliance with the terms of the agreement. I am not sure, having regard to the duty of the appellants here, that that is a really good defence or answer. But suppose there was not a strict compliance, I do not think that the default was such as equity regards as a bar to specific performance. It was not an out and out refusal, and cannot be regarded as a refusal to perform an essential part of the contract, and, as the learned Chief Justice has said, there would have been sufficient compensation given by an action for damages if there was a cause of action at all.

For these reasons I agree with the judgment proposed, and that the appeal should be dismissed.

Appeal dismissed with costs.

Solicitor, for the appellants, S. E. Pile.

Solicitors, for the respondent, Henry Davis & Wolstenholme.

[1] 6 App. Cas., 251, at p. 263.