Grant v O'Leary [1955] HCA 33; (1955) 93 CLR 587 (17 June 1955)

HIGH COURT OF AUSTRALIA

GRANT v. O'LEARY [1955] HCA 33; (1955) 93 CLR 587

Vendor and Purchaser

High Court of Australia
Dixon C.J.(1), Webb(1), Fullagar(1), Kitto(1) and Taylor(1) JJ.

CATCHWORDS

Vendor and Purchaser - Sale of land - Part of purchase money paid to stakeholder - Not received by vendors - Inability of stakeholder to account - Offer of tender of balance purchase money to vendors - Call for transfer by purchasers and refusal by vendors - Right of purchasers to specific performance.

HEARING

Adelaide, 1955, June 14, 17. 17:6:1955
APPEAL from the Supreme Court of south Australia.

DECISION

June 17.
THE COURT delivered the following written judgment: -
This is an appeal from an order of Hannan A.J. dismissing an appeal from a a suit in its equitable jurisdiction for specific performance of a contract. The appellants are the vendors and the respondents the purchasers. The subject of the contract was a house in Morgan Avenue, Mitcham Park. The title was under the Real Property Act 1886. The learned judge of the Local Court, Judge Sanderson, pronounced a decree for specific performance. The decree has not been drawn up. (at p589)

2. The specific question raised by the suit is whether the purchasers or the vendors should bear the loss of a sum of 989 pounds 18s. 10d. placed under the terms of the contract in the hands of an agent as stakeholder pending the completion of the contract which, as the learned District Court Judge expressed it, never reached the hands of the appellants and is no longer available to either the vendors or the purchasers but in some way not disclosed disappeared while it was in the hands of the agent. The agent appears to have been a limited company, Frederick Proctor Ltd. The contract was dated 25th August 1954. Its terms and conditions were those contained in a printed form provided by Frederick Proctor Ltd., who were described as agents for the vendors. According to the contract in that capacity they agreed to sell, subject to the vendors' ratification, to the purchasers the piece of land already referred to for the sum of 1,950 pounds "to be paid in the manner following: - Part deposit of 10 pounds payable (on) signing thereof and balance of deposit payable on the settlement of property at Blackwood to be held by the said agent as stakeholder between the parties until settlement and the balance thereof by cash and loan of 950 pounds to be arranged". The contract proceeds, "On payment of the purchase money as aforesaid the vendor(s) will at the request and expense of the purchaser(s) sign and execute a transfer . . . of the said land and property to the purchaser(s)". The final clause of the contract provides that settlement shall be made and possession given and taken on (sic) thirty days or sooner. There is no provision making time of the essence of the contract but there is a clause enabling the vendors in default of due payment of the whole of the purchase money to resell or rescind. At the end of the contract is a form of ratification which the vendors in fact signed. Included in the ratification is the statement that the vendors agreed that the commission should be a first charge upon and payable from the deposit. (at p590)

3. The sum of ten pounds was in fact paid to the agent on the signing of the contract. The words "balance of deposit payable on the settlement of the property at Blackwood" refer to the sale of a piece of real property at Blackwood belonging to the purchasers. It would seem that it was not known how much this property would realize but it was intended that the net proceeds should be applied as part of the purchase money payable to the vendors under the contract now in question. Because of the uncertainty as to the amount of proceeds it was provided that the balance remaining should be paid by a loan of 950 pounds to be arranged and by cash. (at p590)

4. On 6th September 1954, under an authority from the purchasers, the net proceeds of the sale of the Blackwood property amounting to 989 pounds 18s. 10d., were paid to Frederick Proctor Ltd. by the agents who had sold the Blackwood property. The period of thirty days mentioned in the contract as the time for settlement expired on 24th September but on 17th September it became known that Frederick Proctor Ltd. could not account for the money and that it was irrecoverable. On 23rd September the solicitors for the purchasers notified the vendors that they were preparing the transfer of the property and would be glad if they would appoint a time within fourteen days for settlement of the matter when on receiving the unencumbered certificate of title and a signed transfer they would pay the balance under the agreement, namely 950 pounds 1s. 2d. This evoked from the solicitors for the vendors an answer which in effect said that Frederick Proctor Ltd. were the agents of the purchasers as well as stakeholders, that the vendors were prepared to transfer the house to the purchasers on payment of the full amount owing under the contract, but if the purchasers could not find the money by the date of settlement, which apparently had been named between the parties orally as 15th October, the vendors intended to treat the purchasers' failure to perform the contract as a breach of contract entitling them to rescind. To this the solicitors for the purchasers answered that they would attend on 15th October with the balance of cash due (that is to say 950 pounds 1s. 2d.) and with a small amount for adjustment of taxes, and that they would not tender the sum of 999 pounds 18s. 10d. That sum was made up of the 989 pounds 18s. 10d. and the ten pounds paid to Frederick Proctor Ltd. A formal tender, however, was waived by the vendors and the suit was instituted by the purchasers. (at p591)

5. The correctness of the decisions of the Local Court, and of Hannan A.J. on appeal therefrom, depend on the question whether under the contract the purchasers had performed all the conditions precedent entitling them to a transfer of the land. The failure to observe the period of thirty days reserved in the contract was no breach of a condition precedent, time not being of the essence of the contract, and in any case, if it were, it would have been waived. Indeed, it was not suggested on behalf of the appellants, the vendors, that the respondents', the purchasers', title to the performance of the contract was in any way prejudiced by failure punctually to observe the time. The matter upon which the appeal was argued is the effect of the provision as to payment of purchase money. So far as the sum of ten pounds was concerned, it was not denied that the term of the contract was performed when the sum was paid to Frederick Proctor Ltd. as agent for the vendors. But it was denied that the purchasers had completely discharged their obligations in respect of the purchase money by causing the proceeds of the sale of the Blackwood property to be paid to Frederick Proctor Ltd. and by tendering the balance. It was contended that on the terms of the contract the vendors came under no obligation to transfer the property until the amount placed in the hands of Frederick Proctor Ltd. was actually paid over to them. This is an interpretation of the contract which its terms will not bear. The words "balance of deposit payable on the settlement of property at Blackwood to be held by the said agent as stakeholder between the parties until settlement" plainly mean that the proceeds of the property at Blackwood were to be paid to Frederick Proctor Ltd. The word "agent" is defined to mean Frederick Proctor Ltd. The description of Frederick Proctor Ltd. as stakeholder means that that company was entrusted with the money to hold on behalf of the parties to the contract pending performance of the contract. Only in the event of the contract going off would the purchasers be entitled to the money from the company. If the contract was performed the vendors would become entitled as against Frederick Proctor Ltd. to the money to the exclusion of the purchasers. The effect of the appointment by vendor and purchaser of a stakeholder is stated by Bowen L.J. in Ellis v. Goulton (1893) 1 QB 350 : - "When a deposit is paid by a purchaser under a contract for the sale of land, the person who makes the payment may enter into an agreement with the vendor that the money shall be held by the recipient as agent for both vendor and purchaser. If this is done, the person who receives it becomes a stakeholder, liable, in certain events, to return the money to the person who paid it. In the absence of such agreement, the money is paid to a person who has not the character of a stakeholder; and it follows that, when the money reaches his hands, it is the same thing so far as the person who pays it is concerned as if it had reached the hands of the principal" (1893) 1 QB 350, at p 352 . (at p592)

6. In Christie v. Robinson [1907] HCA 19; (1907) 4 CLR 1338 the question at issue was whether the agent, whose name was Good, was constituted a stakeholder. The contract did not so describe him. Indeed the contract expressly provided that the deposit (the sum of 500 pounds) was to be paid to Good as agent for the vendor. But it contained a provision that on acceptance of the title the deposit should be paid over to the vendor. The contract went off and the purchaser sued the vendor to recover the deposit which had been paid to Good. The question whether it was recoverable from the vendor was by common consent treated as depending upon the question whether the provision had the effect of constituting Good as stakeholder. In the Supreme Court Hodges J. held that it had this effect, and on appeal the High Court, Isaacs J. dissenting, agreed in this conclusion. Griffith J. said (1) that the contention in support of the judgment was that the clause so far controlled the statement that Good was the agent of the vendor that it transmuted Good's position from that of agent for the vendor to that of stakeholder who did not hold the money in the capacity of agent for one party rather than the other. His Honour continued: "If that be so, the respondent's contention is sound, and that view commended itself to Hodges J." (1907) 4 CLR, at p 1346 . Isaacs J. described the situation as follows: - "Until title is accepted, the deposit is to remain in the hands of Good, and then, and not till then, is it to be paid over to the vendor. Up to the moment of acceptance of the title, the vendor had no vestige of right to get that deposit into his hands - he could not control its possession, he could not recover it. Any arrangement between him and Good by which it should pass into the vendor's hands would have been a distinct fraud upon the purchasers. Whatever Good's agency meant, it clearly did not extend to handing that money over to Robinson except in one event" (1907) 4 CLR, at p 1355 . (at p593)

7. It is said, however, that under the present contract the primary duty of the purchasers imposed is to pay 1,950 pounds into the hands of the vendors and that this duty is not qualified by the words requiring that the balance should be paid to the agent as stakeholder and, further, that the words "on payment of the purchase money as aforesaid" which follow mean that the purchase money must be actually paid to the vendors. This construction of the contract disregards both the purpose and meaning of the provision requiring payment to the agent as stakeholder. The purpose is to insure that the portion of purchase money representing the proceeds of the Blackwood land is placed in the hands of an indifferent person who will account for it to the vendors if and when the vendors become entitled to it. Except in the event of the vendors becoming disentitled to receive it the purchasers have parted with it beyond recall. In the events which have happened the vendors alone have any remedy against Frederick Proctor Ltd. It is nothing to the point that the remedy would prove fruitless owing to the inability of that company to meet its obligations. The words "as aforesaid" in the phrase "on payment of purchase money as aforesaid" refer back to the provisions describing how the money should be paid and they include the term that the balance of deposit shall be payable on the settlement of the property at Blackwood to be held by Frederick Proctor Ltd. as stakeholder. There is no term of the contract forming a condition precedent to the obligation of the vendors to make a transfer which the purchasers have not performed. By paying the sum amounting to 999 pounds 18s. 10d. into the hands of Frederick Proctor Ltd. and afterwards by offering to tender the balance of purchase money they performed the conditions on their part to be observed and performed. (at p594)

8. It follows that the judgment of Hannan A.J. dismissing the appeal from the Local Court was right and that this appeal must be dismissed. (at p594)

ORDER

Appeal dismissed with costs.