Summers v Cocks [1927] HCA 46; (1927) 40 CLR 321 (22 November 1927)

On the whole I am of opinion that this appeal should be dismissed so far as it relates to specific performance. There is great weight in the various considerations of which Mr. Davy in his able argument made the most. But when the circumstances are balanced as a whole, it seems to me the learned Chief Justice of Western Australia adopted the right course in refusing specific performance. In previous cases—most recently Fullers' Theatres Ltd. v. Musgrove[1] and Norton v. Angus[2]—I have stated my view of the duty of the Court in relation to that remedy; and I need not repeat it. I would, however, further refer to the judgment of Lord Parker of Waddington in Stickney v. Keeble[3] Applying the principles there stated, I think there are elements in the present case which should induce the Court to withhold its hand from granting the remedy asked for; and leave the appellant to recover such redress as the law absolutely entitles her to. It is stated in the judgment of McMillan C.J. that the vendor "certainly misled the purchaser as to the attitude of the Board, though without any fraudulent intent, and he did not inform him on 14th January" (should be 12th January) "that he had received a summons which showed that his licence was not then a perfectly clean one." It was the solicitor who, in Summer's absence, next day told defendant of the summons. Now, although the day for completion was 12th January, yet the summons was served on 11th January, and the position of the licence was then certainly precarious. The attitude of the Board was a material circumstance in gauging the chances of the licence, and, from the nature of the property, great candour was necessary. Moreover, according to practice, as we were told, though I say nothing as to the correctness of the practice, the compensation paid on delicensing is altogether incommensurate with the value of the property as a hotel. Reviewing the situation as a whole, and seeing that the respondent was in no way chargeable with fault in leading to the result of delicensing, I arrive at the conclusion stated. But this is a case where specific performance could be granted, and should be granted but for the attendant circumstances, which confer discretion on the Court to exclude the application of its jurisdictional power. I adopt the statement of my brother Starke as to the facts and reasoning leading both to the defendant's breach of contract and to the refusal of specific performance. The Court may, under the Judicature Act, substitute for the specific remedy that of damages. To this the appellant is justly entitled failing specific performance if she desires to have an inquiry.

The order of the Court should be as follows:—Appeal allowed. Judgment of 15th July 1927 discharged. Declare that the plaintiff is not entitled to specific performance of the agreement dated 11th December 1926 in the pleadings mentioned and adjudge accordingly. Order that inquiry be made in Supreme Court, if so required by the plaintiff by notice in writing delivered to the defendant or his solicitor within two months of the date of this order, what sum ought to be allowed and paid by the defendant to the plaintiff by way of damages for non-performance of such agreement. Order parties abide their own costs of this appeal. Reserve costs of action and of the inquiry (if made) to be dealt with by the Supreme Court of Western Australia. Remit cause to the said Supreme Court to be dealt with in accordance with this judgment.

Judgment has been entered for the defendant in an action for specific performance, brought by vendor against purchaser. The action was tried before the Chief Justice of the Supreme Court; and his grounds for refusing relief to the plaintiff are (1) that at the time fixed for the performance of the contract (12th January 1927) the plaintiff was not in a position to complete the contract; and (2) that, even if the contract is good at law, the Court should not in its discretion grant specific performance, because, it is said, the vendor had omitted to disclose a material circumstance.

As to the first ground, the contract being for the sale of a hotel, it is not disputed that time was of the essence of the contract (see Day v. Luhke[4]; Cowles v. Gale[5]).

The facts have been stated, and I need not repeat them in detail. The time fixed for completing the contract was 12th January 1927; and, so far as I can find, no one has pointed out any duty imposed by the contract on the plaintiff which the vendor, Summers, was not on that date ready and willing to perform. He had actually procured from his mortgagee an instrument discharging his mortgage, had executed the transfer of the land in favour of the purchaser, and was ready to hand over the furniture, plant and stock. Even as to the publicans' general licence, the vendor and the purchaser had jointly signed the application to the Licensing Court for transfer; for under the Licensing Act of 1911 any transfer has to be made by the Court, not by the parties; and the transfer is at the discretion of the Court (sec. 56). It is contended, however (defence, par. 3 (b)) that "at the time for performance of such agreement the plaintiff was not in a position to complete same"; and this contention is based on the fact that on 11th January the vendor had received a summons from the Licences Reduction Board to show cause why the hotel should not be deprived of its licence under sec. 89 of the Act. This summons, it is said, made all the difference, and prevented the vendor from establishing that he had a "clean" licence, available for the purchaser on 12th January. On 17th February the Board deprived the hotel of its licence as from 31st December 1927—the expiration of the current period. The licence could not be renewed for any time subsequent (sec. 95), but the licence held good until the current period ended. The licence was a "clean and valid" licence, though, if an order should be made for deprivation, it would be for a shorter term than was hoped.

Now, when one looks at the contract, dated 11th December 1926, it is easily seen that there is no condition to the effect that the contract is not to take effect in the event of the Licences Reduction Board exercising its power to deprive the premises of the licence. The purchaser made his contract subject to that risk; and if the summons had been served on 13th January, the day after the day fixed for completion, the damage done to owner would have been the same. This seems to me to be a sufficient answer to the first ground stated by the learned Judge.

As for the second ground, that specific performance should be refused because the vendor had omitted to disclose a material circumstance, if the material circumstance referred to is the fact of the receipt of the summons, there is some misapprehension as to the facts. The summons was received by Summers on the evening of 11th January, and, according to Mr. Abbott, the plaintiff's solicitor, it had been disclosed to the defendant and his solicitor on or before the 12th. Mr. Abbott says: "On 12th" January "O'Dea" (solicitor) "and Cocks" (defendant) "came to my office after I had seen my client" (Summers). "They asked if Summers were there. I said: No, that I had full authority to act. They asked what was proposed to be done with respect to the notice" (summons) "served. I said It did not concern us. It was then suggested by Cocks that the matter should remain in abeyance till after hearing of summons." Yet, according to the judgment below, Summers "did not inform him" (the purchaser Cocks) "on 14th January that he had received a summons." But the purchaser knew of the summons on the 12th.

It was not contended that the Licensing Court would not consent to transfer the licence such as it was: no such point has been taken either in the pleadings or in argument. There is no doubt that the existence of this summons from 11th January onwards would impair the value of the hotel in the market; but this fact is not a ground for the statement that the vendor was not in a position to complete his contract on 12th January. All that the vendor had to show, under the contract, was that on 12th January he had a valid and effectual licence on that date (Tadcaster Tower Brewery Co. v. Wilson[6]); and this is shown. As for the ulterior action of the Court and the Board, the purchaser took the risk. As the Chief Justice rightly says: "There is always a possibility that the licence may be determined, and the purchaser buys the house and the licence with the ordinary risks attaching to it." Subject to any express stipulations, gains from the property and losses to the property fall to the purchaser from the date he becomes owner; and he was the owner, in equity, of this real property, although the formal conveyance has not been executed.

The law on the subject seems to be undoubted. It is summarily stated by Jessel M.R. in Lysaght v. Edwards[7]:—"The moment you have a valid contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial ownership passes to the purchaser ... If anything happens to the estate between the time of sale and the time of completion of the purchase it is at the risk of the purchaser. If it is a house that is sold, and the house is burnt down, the purchaser loses the house. ... It it is a garden, and the river overflows its banks without any fault of the vendor, the garden will be ruined, but the loss will be the purchaser's." (And see Mortimer v. Capper[8]; Poole v. Shergold[9]; Revell v. Hussey[10]; Paine v. Meller[11]; Rayner v. Preston[12]; Castellain v. Preston[13]; Fry on Specific Performance, 6th ed., 429, 637.)

The cases of Counter v. Macpherson[14], Taylor v. Caldwell[15], Day v. Luhke[16], Cowles v. Gale[17], Howell v. Coupland[18] and Krell v. Henry[19] show certain exceptions which emphasize the rule by showing its qualifications. The position becomes obvious in cases of the sale of shares falling in value after the sale.

To sum up the position as it appears to me:—The vendor was on 12th January 1927 in a position to give the hotel with a valid, subsisting licence in accordance with his contract—a licence which was operative, at the very best, till the end of December 1927. In the contract there was no warranty that the Licensing Court would transfer the licence to the purchaser: the purchaser took that risk. In the contract there was no warranty or condition that the Licensing Court would not refuse to transfer the licence or to renew the licence, or that the Licences Reduction Board would not forbid the renewal: the purchaser took those risks. The parties were contracting as to a hotel under the Licensing Act of 1911, and must be taken to know what could happen under that Act (secs. 56, 63). In effect, the purchaser has said to the vendor: "Whatever licence you have, whatever be the chance of transfer to me and of renewal to me, I will buy it." Then the ordinary rule applies that if after the contract events happen which enhance or depreciate the value of the thing sold, in the absence of stipulation or condition to the contrary the purchaser is entitled to the benefit of any enhancement and must submit to the burden of any depreciation. The vendor did all that was incumbent on him to do under the contract, and the purchaser cannot refuse to complete on the ground that his bargain is a bad one. The case of In re Ward and Jordan's Contract[20] does not affect this position. It is enough for the present purpose to say that that was a case of alleged misrepresentation at the making of the contract, not a case of something happening after the contract which tended to depreciate the value of the subject matter of the contract.

As for the second point—that even if the contract "stands at law," this is not a case in which the Court will, in its discretion, grant specific performance—I confess that I am at a loss. I do not clearly understand the learned Judge. The refusal to grant specific performance is based solely on the statement that "there was an omission to disclose a material circumstance." What was the material circumstance? If what is referred to is a failure, at the time of the contract, to disclose that the Board intended to deprive the hotel of the licence, the simple answer is that the vendor did not know of the intention, or even of an intention to issue the summons to show cause. The contract was made on 11th December and the summons was served on 11th January; and there is not any evidence that the vendor knew before 11th January of either intention. On 30th September, after the members of the Board (who happened also to form the Licensing Court) had inspected the premises, the Chairman wrote saying that a septic tank which the Court had ordered to be installed had not yet been provided, and that for the time being the septic tank need not be proceeded with; but that is all. The memorandum made by the Chairman after the inspection, explaining the reason for suspending the order for the septic tank, was not communicated to the vendor, was objected to at the trial, and was certainly not evidence; nor does his Honor express himself as relying on it. If, however, what is referred to is the omission to keep the premises in proper repair, the premises were inspected for a week before his contract by the purchaser; and he saw the condition of the premises. The condition of the premises was, no doubt, taken into consideration in the price to which the vendor agreed—£4,000 instead of £5,500 as first proposed by the vendor.

For my part, therefore, I see no reason why the prayer for specific performance should be refused. I regret to find that in this opinion I am differing from my learned brothers, who, in allowing the appeal, think that the vendor should be left to recover damages in lieu of specific performance. I understand that specific performance of the contract is to be refused, as a matter of discretion, because of some alleged hardship to the defendant. That one party or the other must suffer hardship because of the order of the Licences Reduction Board is obvious; but why should the plaintiff be the party to suffer? The hardship is not due to any conduct or misconduct of the plaintiff. Where is there any evidence of any want of candour? No one specifies any want of candour. The purchaser, as I have said, took the risks; and, as I understand, it is not the practice of chancery Courts in modern times to refuse specific performance by reason of events subsequent to the contract for which the plaintiff is not responsible (Fry, Specific Performance, 6th ed., p. 201).

I am of opinion that the appeal ought to be allowed, and specific performance directed.

On 11th December 1926 one Summers sold to Cocks for £4,000 cash, free from all encumbrances, certain land in Perth on which was erected the building known as the Cecil Hotel, and also certain furniture. Possession was to be given on 12th January 1927 and all rates, taxes and assessments and licence fees were to be adjusted to that date. McMillan C.J., who tried the action, held that Summers was not in a position to complete the contract because he could not on the date on which possession should have been given and the sale completed transfer a "clean" licence to the hotel. On that day, however, there was a general publican's licence in existence in the name of Summers, authorizing him to sell and dispose of liquor on the premises. This licence, unless forfeited in the meantime, remained in force until 31st December 1927. On 11th January 1927 the Licences Reduction Board, pursuant to powers in the Licensing Act 1911-1922, sec. 84, enabling it to reduce the number of licences in the State, summoned the vendor to show cause why the hotel premises should not be deprived of its licence; and on 17th February 1927 the Board decided to deprive the premises of the licence. It was then the duty of the Board to assess the compensation payable in respect of the premises deprived of its licence; and on the payment or tender of such compensation the Board causes notice of its decision to be published in the Gazette, and at the expiration of the current period for which the licence was granted the licence ceases, becomes void and cannot be renewed (Licensing Act, secs. 87-95). It is quite true that the Board, in deciding what premises should be deprived of their licences, considers (amongst other things) the character of the accommodation and the manner in which the business has been conducted (sec. 88), but this power to reduce the number of licences in no wise aflects the validity or efficacy of any licence. The licence to the Cecil Hotel was not liable to forfeiture or suspension for any contravention of the Act (cf. secs. 175, 116) and was therefore what is called a "clean" licence (Tadcaster Tower Brewery Co. v. Wilson[21]). Consequently, the decision of the learned Chief Justice on this point cannot, I think, be supported.

The Chief Justice, however, also held that if there was a contract enforceable at law, this case was not one in which the Court should, in the exercise of its discretion, grant specific performance. The discretion is, of course, judicial, exercisable according to rules more or less settled and fixed by the Courts of equity. The Licences Reduction Board, in considering whether the number of licences in the State should be reduced and in determining which licences should cease to be in force, has many matters to consider (see Act secs. 84, 88), but it is common knowledge that the character of accommodation afforded by any licensed premises and the manner in which the business has been and is being conducted as a place of accommodation and refreshment for the public weigh heavily with the Board (see sec. 88). In the present case the Chief Justice found that the omission of Summers to keep the hotel premises in a proper state of repair led to the premises being deprived of their licence. Moreover, he found also that Summers sold the property because he knew that the licence was in some jeopardy, and that he was wanting in candour towards the purchaser. In my opinion it would be unsafe and wrong for us to disturb these findings of the Chief Justice, who saw and heard the witnesses. If they are correct, the Chief Justice acted within the limits of his judicial discretion in refusing specific performance. Summers or his personal representative is, nevertheless, entitled to his or her remedy in law upon the contract, and I have no doubt that but for his decision that Summers was not in a position to complete the contract according to its terms, the Chief Justice would have directed an inquiry as to damages. A statute corresponding to the Judicature Act is in force in Western Australia and there was ample jurisdiction in the Supreme Court of Western Australia to direct such an inquiry in this action. It is now the duty of this Court to give the directions that the Supreme Court ought to have given. The compensation payable under the Licensing Act will affect the amount of damages payable by Cocks, but that is not a question on which we need enter.

[1] [1923] HCA 12; (1923) 31 C.L.R. 524, at pp. 548, 549.

[2] [1926] HCA 35; (1926) 38 C.L.R. 523, at p. 533.

[3] (1915) A.C. 386, at p. 419.

[4] (1868) L.R. 5 Eq. 336.

[5] (1871) L.R. 7 Ch. 12.

[6] (1897) 1 Ch. 705, at p. 710.

[7] (1876) 2 Ch. D. 499, at pp. 506, 507.

[8] [1782] EngR 68; (1782) 1 Bro. C.C. 156.

[9] [1786] EngR 176; (1786) 2 Bro. C.C. 118.

[10] (1813) 2 Ball & B. 280.

[11] [1801] EngR 400; (1801) 6 Ves. 349.

[12] (1881) 18 Ch. D. 1, at p. 6.

[13] (1883) 11 Q.B.D. 380, at p. 385.

[14] [1845] EngR 489; (1845) 5 Moo. P.C.C. 83.

[15] [1863] EngR 526; (1863) 3 B. & S. 826.

[16] (1868) L.R. 5 Eq. 336.

[17] (1871) L.R. 7 Ch. 12.

[18] (1874) L.R. 9 Q.B. 462; (1876) 1 Q.B.D. 358.

[19] (1903) 2 K.B. 740.

[20] (1902) 1 Ir. R. 73.

[21] (1897) 1 Ch. 705.

High Court of Australia

Summers v Cocks [1927] HCA 46; (1927) 40 CLR 321 (22 November 1927)

HIGH COURT OF AUSTRALIA