Wendt v Bruce [1931] HCA 9; (1931) 45 CLR 245 (1 April 1931)

In November 1926 Bruce entered into a contract to sell to Wendt some 1,747 acres in the Hundred of Gordon, South Australia, for the price of £9,608. The method by which the purchase-money was to be paid under the contract is unimportant. Settlement in respect of the sale and purchase was to be made on 1st March 1928, when Bruce was to hand to the purchaser a duly executed transfer of the land under the Real Property Act 1886, and Wendt was to execute certain covenants and a mortgage to Bruce, and possession was to be given and taken. At the same time, a share-farming agreement was entered into between the parties, whereby Bruce agreed to Wendt cropping for wheat, during 1927, part of the land sold, and the crop harvested was to be divided equally. Wendt entered into possession under this agreement and farmed the land. But no settlement was made under the contract of sale on 1st March 1928, the agreed date, owing to Bruce being unable to hand to Wendt a duly executed transfer of the land, pursuant to the contract. However, Wendt remained in possession of the land, and proceeded to farm part of it during 1928. This operation was outside the share-farming agreement and must be attributed to Wendt's position as a purchaser under the contract of sale. Settlement under the contract of sale had not been made on 12th October 1928, and on that date Wendt served a notice upon Bruce fixing a place, and a time, namely 5th November, for settlement, and intimating that he would treat the contract as at an end in case of default on the part of Bruce. Default was made on the part of Bruce, and no settlement was effected. Bruce alleged that the notice was unreasonable in all the circumstances of the case, but we agree with Piper J. that it was a reasonable notice, and in any case we shall so assume.

As Wendt had by his notice made time the essence of the contract—a condition of the contract, both at law and in equity—then, that condition being unfulfilled owing to the default of Bruce, Wendt had the right, if he had taken no substantial benefit under the contract, to refuse to be further bound by it; or, if he did not choose so to act, then he might stand to the contract, reserving to himself the right to bring action for such damage as he might have sustained—that is, to treat the breach, as the books say, as a breach of warranty sounding in damages only. Which course did Wendt choose? He said that he treated the contract as at an end, but he remained in possession of the land and took off the crop which he planted in 1928. Now, a man who has his option whether he will affirm a particular act or contract must elect either to affirm or to disaffirm it altogether; he cannot adopt that part which is for his own benefit, and reject the rest: he cannot blow hot and cold. And the election once made is finally made. (See notes to Smith v. Hodson[1]; Scarf v. Jardine[2].) The facts in the present case show that Wendt desired discharge from the obligations of the contract so far as they were disadvantageous to him, but that he retained possession of the land and harvested a crop to protect his own interests. It is clear, we think, that the authority for these acts must be referred to the contract which he claimed to have repudiated. The case is a typical instance of blowing hot and cold, and it is clear, in our opinion, that Wendt did not wholly disaffirm the contract. Bruce was guilty of delay in settling pursuant to the contract, but Wendt did not elect to disaffirm the contract but to keep it on foot. In these circumstances the Supreme Court of South Australia acted within its jurisdiction and discretion in decreeing specific performance, and this appeal should be dismissed. (See Hipwell v. Knight[3]; Fry on Specific Performance, 6th ed., p. 521; and compare Stickney v. Keeble[4]; Steedman v. Drinkle[5].)

Wendt counterclaimed damages for breach of the contract. It may be that he is entitled to nominal damages for default in settlement on the appointed day, but that is a matter this Court need not discuss, for further consideration of the action is reserved and his claim for damages will then be dealt with.

The question upon this appeal is whether a decree for specific performance was rightly made in a vendor's action to enforce a contract for the sale of some agricultural land. The contract was made on 19th November 1926, and was for the sale of a piece of land containing about 1,747 acres at a price of £5 10s. per acre. Of the purchase-money, £4,000 was to be paid in cash, £4,367 was to be satisfied by the purchaser taking over mortgage debts with which the land was encumbered, and the balance of £1,241 was to be secured to the vendor by a mortgage given by the purchaser. The sale was to be completed on 1st March 1928, and possession was not to be given under the contract until that date, although of the purchase-money payable in cash, £100 was paid as a deposit upon signing the contract and £900 was payable on 1st March 1927. But in the meantime the vendor was to erect a house on the land of a specified design and complete it before 1st March 1927, to lay on water, and to supply some fencing posts. Further, by another agreement of the same date, the vendor agreed that for the next wheat season, that of 1927-1928, the purchaser should cultivate 700 acres of the land as a share-farmer, and should be entitled to fallow the land which was under crop in 1926, the fallowing being "for his use after taking possession on the 1st day of March 1928 of the said block as purchaser thereof under an agreement for sale and purchase entered into simultaneously herewith by the parties hereto." Up to 1st March 1928 the parties substantially performed the provisions of these agreements. But the vendor was not then in a position to complete the contract, because his land was encumbered with greater liabilities than the contract provided for. The purchaser, who had in fact used and occupied the land for the purpose of his share-farming agreement, remained in possession, and sowed 1,400 acres of wheat for the ensuing season. The vendor's solicitors made some efforts to rearrange the encumbrances, which included other land as well as the land sold, so that the sale might be completed according to the terms of the contract. The purchaser's solicitors, after some complaints of the delay and a request for an assurance that the sale would be completed, at length on 13th October 1928 served on the vendor a notice fixing 5th November 1928 as the date for settlement, and notifying him that if he failed to complete the sale upon that day, the purchaser would treat the contract as at an end and act accordingly. At this time the vendor's attempts to rearrange the encumbrances upon his various lands so as to enable him to complete the contract were proving successful, but when the residue of the purchase-money payable in cash was tendered to him by the purchaser's solicitors on 5th November 1928 he was not in a position to carry out his contract. The vendor's solicitors, however, asked the purchaser's solicitors whether the purchaser would sign some application forms for the purposes of taking over the mortgage liabilities contemplated by the contract in a way which, although convenient, he was not strictly required to follow. His solicitors did not at once determine the contract but agreed to consult the purchaser, and after failure to comply with the notice no election to treat the contract as at an end was communicated by the purchaser or his solicitors before 12th December 1928. In the meantime the purchaser retained possession of the land. His sons had occupied the house and worked the land, but at the beginning of November they happened to be away from it. But on 19th November they returned with harvesting implements, and commenced to harvest the growing crop. The work of and incidental to harvesting continued until March of the following year. An attempt was made at the trial to show that the harvesting was done in the interests of both parties in pursuance of an arrangement made between their solicitors. The purchaser failed, however, to establish any such arrangement. The truth appears to be that the purchaser himself considered that he was entitled to the crop which he had grown, but his solicitor, fearing the legal consequences of his client's action of retaining the land and harvesting the crop, opened inconclusive discussions of the matter with the vendor's solicitors, and then allowed his client to go on with the work, expecting probably that the vendor would not be able to put himself in a position to complete at least within any short time. The action was tried before Richards J., who held that the time limited by the notice of 15th October 1928, namely, three weeks, was unreasonably short, and that the notice did not operate to enable the purchaser to put an end to the contract, but that in any case, by retaining possession and dealing with the crop, the purchaser had conclusively elected to continue the contract on foot. Upon appeal, the Full Court of South Australia affirmed this judgment upon the ground that the purchaser had after 5th November 1928 elected to keep the contract open. Angas Parsons and Napier JJ. refrained from deciding whether insufficient time had been given by the notice, but Piper J. expressed the opinion that the time was not unreasonable. In my opinion the Courts below were right in their view that the purchaser, by continuing in possession of the land and harvesting the crop, manifested an election to affirm and not to put an end to the contract and was therefore precluded from relying upon the vendor's failure to comply with his notice of 12th October 1928. It is, therefore, unnecessary for me to consider the question, which is really one of fact, whether a reasonable time was allowed by the purchaser's notice to the vendor. If one party to a sale has delayed in the performance of an act which he must do to carry out the contract and the other party notifies him that, unless he does the act within some specified time which in all the circumstances is in fact reasonable, he intends to put an end to the contract, the party not in default, if the notice is not complied with, may at his election treat the contract as at an end, so that he is discharged from its further performance, or may continue to insist upon its performance by the party in default, he himself remaining bound by the contract. But after failure to comply with a notice, the party not in default cannot himself exercise rights which he possesses only if the contract continues on foot and, after he has done so, treat the contract as nevertheless discharged by default. The law enables him to choose between rights; and that choice is exercised, whatever he may desire, when he proceeds to do what he could only lawfully do in virtue of one of the two sets of rights between which he may elect. "Whether he intended it or not, if he has done an unequivocal act—I mean an act which would be justifiable if he had elected one way and would not be justifiable if he had elected the other way—the fact of his having done that unequivocal act to the knowledge of the persons concerned is an election" (per Lord Blackburn, Scarf v. Jardine[6]). In my opinion the purchaser had no right or title to harvest the crop and deal with it if the contract were at an end. If, however, the contract were on foot and still open, he was entitled to deal with the crop as he chose. What he did was justifiable if he had elected one way, namely, not to put the contract to an end, and would not be justifiable if he had elected the other way. Before the purchaser could again put the vendor in default and obtain a new election to determine the contract, the vendor became ready and willing to perform the contract according to its terms, and therefore, in my judgment, became entitled to insist upon its performance by the purchaser.

I therefore think that the judgments below are right, and that the appeal should be dismissed with costs.

The respondent to this appeal succeeded in obtaining from the Supreme Court of South Australia an order for specific performance by the appellant of an agreement dated November 9th, 1926, for the sale and purchase of certain land. The main grounds of appeal are that the respondent committed a breach of the contract by failing to complete the same on November 5th, 1928, and that there was nothing in the subsequent conduct of the parties which sufficiently altered the situation created by breach of contract to justify an order for specific performance.

As to the first point, I agree with the judgment delivered in the Full Court of South Australia by Piper J. He came to the conclusion that the notice given by the appellant to the respondent fixing November 5th, 1928, as the date for completion was reasonable in the circumstances of the case and operated to make completion by the date mentioned as of the essence of the contract. But completion did not take place on that day, and the appellant thereupon became entitled to rescind the contract.

The contract, however, then became voidable, not void, and the appellant was at liberty to keep it on foot or to rescind it. But he was under no obligation to decide immediately. Subject to the effect of certain conduct on his part, the appellant was entitled to wait and see.

One of the critical questions in this case is whether, between November 5th, 1928, on which date the breach took place, and December 12th, 1928, when the appellant purported to cancel the agreement, the latter is to be taken as having elected to affirm the agreement and keep it in force.

Express confirmation or election there was none. It is also clear that between November 5th and November 19th the appellant was not, nor were his sons, in actual physical occupation of the subject property. It was upon the latter date that the sons entered the land with implements in order to harvest the crop of wheat which had previously been sown by the appellant. It is said that this harvesting, and the possession of the land for the purpose of harvesting, amount to a concluded election by the appellant to go on with the agreement.

Of course, entry or re-entry into occupation or possession may, under certain circumstances, evidence an unequivocal election to affirm a contract. The circumstances of each case, however, must be carefully looked at to see whether they bear such an interpretation. In the present case the evidence on this point is extremely important.

The appellant was told by his solicitor on November 5th (the day of completion and the day of breach by the respondent) that he must not take the crop off the land unless an arrangement was made to that effect. R. Homburg, the solicitor, gave evidence as follows:—

The solicitor mentioned gave evidence of an arrangement with the respondent's solicitor, prior to the harvesting of the crop by the appellant's sons:—

Mr. Homburg's brother, an auctioneer at Tanunda, swore that he informed the appellant prior to the crop being taken off as follows:—

The learned trial Judge, Richards J., said "I cannot believe that the conversations said to have taken place between the two Homburgs and between one of them and the defendant have been concocted for the purpose of the defence. The two Homburgs were very definite on the matter; and my note made at the time concerning the defendant is that he appears to be truthful and of average memory."

The learned Judge declined to find that the arrangement sworn to by Mr. Homburg, the solicitor, was in fact made with the solicitor Williamson. Yet it is clear from Williamson's own evidence that some conversation as to taking off the crop occurred on or about November 15th. In cross-examination Williamson said:—

Williamson says that it was on November 15th, also, that he was informed by Homburg that he (Homburg) "thought that he could take it that Mr. Wendt would not go on." At a later stage of the trial, Williamson was recalled and asked a number of questions by the learned trial Judge. He then said:—"My mind is not a blank as to whether the crop was mentioned as a suggestion. I remember that it was not mentioned as a suggestion. I am not prepared to deny that Homburg may have mentioned it, I do not remember a single word he said about the crop or that he mentioned it at all. On the subject of the crop my mind is a blank. I know well that it was never arranged that the crop should be taken off. I don't know that that is an important fact in this case I have not considered it." I must say that it seems to me clearly proved that the appellant would not have taken the crop off the land if he had not received an assurance by Fritz Homburg, the auctioneer, that he, the appellant, could and should do so. It is certain that this assurance was given. Objection was taken to the evidence of conversations between the appellant and the Homburgs, but I am of opinion that the evidence was properly admitted in the circumstances of the case. I am equally satisfied, and so apparently was the learned trial Judge, that Mr. R. Homburg, the solicitor, gave the message to his brother which resulted in the entry to take the crop off. The solicitor could hardly have done so had he not believed that Williamson was acquiescing in the proposed course of action. And there may have been such acquiescence by Williamson without any concluded agreement in the sense negatived by the learned trial Judge.

In these circumstances, I am not satisfied that the respondent has succeeded in proving that the harvesting of the wheat crop by the appellant was an election to affirm the contract of purchase.

Election must be gathered from unequivocal acts, and those acts should amount to a considered affirmation of the contract (Abram Steamship Co. v. Westville Shipping Co.[7]). Possession in this case was taken or retained by the appellant for the purpose of taking off the crop and for no other purpose, in the definite belief that an arrangement had been made with the respondent. And it is quite clear that the appellant intended to disaffirm the agreement between the parties.

The onus of proving election by the appellant to affirm the contract, or waiver of the breach of it, lay upon the respondent. Assuming, as I think one must, that the knowledge of his solicitor should be imputed to him, I doubt very much whether the respondent regarded the harvesting as an implied announcement by Wendt that he was going on with the purchase. If the circumstances leave the matter in dubio the doubt should, I think, in a suit of this character be resolved in favour of the appellant who, in any view of the matter, was lulled into a complete sense of security. Whilst the case is probably unique, it bears this resemblance to Lamare v. Dixon[8], that the appellant, like the defendant in that suit, was placed in a most difficult situation being almost "under duress" in the matter. "The Lord Chancellor says that this was an adhering to and insisting upon the agreement," said Lord Chelmsford at p. 422, "and undoubtedly, in a sense, that is correct. But we must have some regard to the situation in which Lamare was placed."

The work performed by the appellant in taking the crop off was very much in the nature of an operation of salvage, undertaken for the benefit of both parties.

On the evidence summarized above, election is not satisfactorily proved. No rule of law requires that possession, of itself, must be treated as conclusive of a final election. The appellant desired not to affirm but to disaffirm the contract. The respondent's solicitor was quite aware of this at the time when harvesting was started. The appellant's conduct in taking off the crop is satisfactorily explained by the evidence. He believed that he was not only performing a service necessary in the interests of both parties, but that he was carrying out a definite agreement come to by the legal representatives of both parties. Taking the crop off, in the circumstances, no doubt, "wore the aspect of an assertion of right to the benefit of the ... contract" (Westville Shipping Co. v. Abram Steamship Co.[9]). In truth, however, it was not intended as an assertion or exercise of any right under the agreement, nor do I think it was understood as such. There is no case of estoppel as distinct from election suggested, owing, I suppose, to the absence of evidence that the respondent acted on the faith of any implied representation.

The Court should not, in my opinion, have decreed specific performance, and the appeal should be allowed.

I have read the judgment of my brother Dixon, and agree with his reasons and the conclusion at which he has arrived. In my opinion the appeal should be dismissed.

[1] (1790) 2 Sm. L.C., 12th ed., 146.

[2] (1882) 7 App. Cas. 345, at p. 360.

[3] [1835] EngR 890; (1835) 1 Y. & C. (Ex.) 401: 160 E.R. 163.

[4] (1915) A.C. 386.

[5] (1916) 1 A.C., at p. 279.

[6] (1882) 7 App. Cas., at p. 361.

[7] (1923) A.C. 773, at p. 779.

[8] (1873) L.R. 6 H.L. 414.

[9] (1922) S.C. 571, at p. 584.

High Court of Australia

Wendt v Bruce [1931] HCA 9; (1931) 45 CLR 245 (1 April 1931)

HIGH COURT OF AUSTRALIA