001-NLR-NLR-V-57-THAHEER-et-al-Appellants-and-ABDEEN-Respondent.pdf
THE
NEW LAW REPORTSOF CEYLONVOLUME LV11
1955Present :Graliaen J., Pulle J. and SansonI J.THAHEER el al., Appellants, and ABDEEN, Respondent,S C. 3S9—D. C. Colombo, 19,176
Contract—Agreement to sell immovable property—Specific performance—Principlesapplicable—Covenant to pay liquidated damages.
Specific performa-nco cannot, bo claimod in a contract whicli provides for thosubstituted obligation of payment of an agreed sum by way of liquidateddamages.
In a contract for the solo pf certain residential premises, clouso 8 providedas follows :—
“ 8. In the event of tho purchaser being ready and willing to complototho said salo in terms hereof and tho vendors'failing refusing or neglecting 'to oxocufo and causo to bo executed tho said deed of transfer as aforesaidthen and in such caso tho vendors shall repay forthwith tlio said deposit ofrupees twelve thousand tivo hundred (Its. 12,500) together with interestthereon at five per centum per annum from tho date hereof to dato of pay-ment and shall also pay to tho purchaser a sum of rupees fifteen thousand(Rs. 15,000) as liquidated and ascertained damages and not as a penaltynnd tho vendors shall refund to the purchaser tho said deposit of rupeestwelve thousand fivo hundred (Rs. 12,500). ”
Clause 9 provided further that, should tho purchaser default for any reason,ho would, though liable to pay an agreed sum to tho vendors as liquidateddamages, bo entitled to a refund of his earlier deposit.
Held, that tho purchaser was not entitled to claim specific performenco oftho contract in tho event of tho vondors failing,' refusing or neglecting toexeculo and cause to bo executed a conveyance of tho premises.
^.PPEAL from a judgment of the District Court, Colombo.
V. Percra, Q.G., with E. J. Cooray and N. C.'J. Ru-siomjec, for thedefendants appellants.
S.Xadesan, Q.C., with G. T. Eamet rq wick re me and J. Scnalhiraja,for the plaintiff respondent.
Cur. adv. vult,
Lvri
Zr—T-dlS, P <5135—1,393 (9/55)
June 10, 1955. Gbatiaen* J.—
This appoal came before t-lio present Bench in view of a difference ofopinion between the Judges before whom it was originally argued.
Tho plaintiff claimed a decree against the 1st and 2nd appellants andagainst the other appellants (as subsequent transferees of the 1stappellant’s interests) for specific performance of a contract No. 40S0dated 3rd October, 1947, for tire sale of residential premises called“ Barnes House ” in Barnes Place, Colombo.
The contract sought to bo enforced had been entered into betweenthe plaintiff (as “ purchaser ”) and seven out of eleven co-owners of thepremises including the 1st and 2nd appellants (described as the “vendors ’’)whereby the purchaser agreed to buy, and tho “vendors” undertookto sell “and cause to be sold” the entire premises on or before31st .December, 1947, for an aggregate sum of Its. 92,000 out of whichBs. 12,500 had already been paid to tho “ vendors ” by way of deposit.Vacant possession of the entire premises by an agreed date was alsostipulated. In my opinion, the obligation of the “ vendors ” was singleand indivisible and no individual vendor could be said to have fulfilled hispart of tho contract if lie merely conveyed his share of the propertytogether with the limited rights of occupation which a co-owner enjoys.I would therefore rejoct the argument that the contract was severablein any respect.
The remaining four co-owners wero not parties to the contract, and,as they were minors at the time, their interests could not bo sold withoutthe authority of tho District Court of Colombo. In tho result, tho“ vendors ”, in binding themselves to sccuro for tho purchaser a singleconveyance passing title to the entire premises in exchange for a compositeconsideration, had undertaken to produce a result which it was notwholly within their power to achieve.
Clause S of the contract provides as follows :—
“ S. In the ove-nt of tho purchaser being ready and willing to com-plete tho said sale in terms hereof and the vendors failing refusingor neglecting to execute and cause to bo executed the said deed oftransfer as aforesaid then and in such case the vendors shall repayforthwith the said deposit of rupees twelve thousand fivo hundred* (Rs. 12,500) together with interest thereon at fivo jier centum perannum from the date hereof to dato of payment and shall also pay tothe purchaser a sum of rupees fifteen thousand (Rs. 15,000) as liquidatedand ascertained damages and not as a penalty and tho vendors shallrefund to tho purchaser tho said deposit of rupees twelve thousandfivo hundred (Rs. 12,500).”.
Tho leamod District Judgo held in favour of the purchaser that clause8 merely fixed tho amount of compensation which would bo payableby tfie " Vendors " in the nyciyt of tho purchaser electing to cixforco one
1 {1912) S. A. .-4. D. 313.
of the alternative remedies available to him upon a breach of theircontraetnal obligation ; ancl that the purchaser was not precluded fromenforcing instead the other remedy of specific performance.
The only question which was argued before vs was whether, upon aproper interpretation of the document read as a whole, tho plaintiffcould claim specific performance of tho contract (or, if he so chose, ofa part of the contract) in the event of all or any of tho “ vendors ” failing,refusing or neglecting to execute and cause to bo executed a conveyanceof the entire premises within tho stipulated period. Mr. H. V. Peroravery properly conceded that, if clause S must not be construed as pro-viding the only legal remedy available to the purchaser upon a breachby tho vendors ” for whatsoever reason, this was an appropriate casefor ordering specific performance having regard to tho events which hadoccurred between 3rd October, 1D47, and 31st December, 1047. Diu'ingthis interval the District Court had in fact sanct ioned a sale of the minors’shares at a proportionate price, and their curators as well as the othervendors (except tho 1st and 2nd appellants) woro willing to execute,and ultimately signed, the draft conveyance tendered by tho purchaser.The refusal of tho 1st and 2nd appellants to join in tho conveyancoalone prevented the completion of the transaction. No valid groundstherefore exist for denying specific performance unless it was not availableto the purchaser upon a proper interpretation of the contract.Accordingly, the appellants can only succeed if we adopt theirsubmission as to the legal effect of clause S.
In this country, the right to claim specific performance of an agreement 'to sell immovable proport}' is regulated by the Roman-Dutch law, andnot by the English law. It is important to bear in mind a fundamentaldifference between the jurisdiction of a Court to compel performanceof contractual obligations under these two legal systems. In England,the only common law remedy available to a party complaining of a breachof an executory contract was to claim damages, but the Courts ofChancery, in developing the rules of equity, assumed and exercisedjurisdiction to decree specific performance in appropriate cases. Underthe Roman-Dutch law, on the other hand, tho accepted view is thatevery party who is ready to carry out his term of the bargain jtri/nafacie enjoys a legal right to demand performance by the other party ;and this light is subject only to tho over-riding discretion of tho Court'to refuse the remedy in the interests of justice in particular cases.Farmers' C’o-opera/ire Society r. Barry ; Woods v. Walters – ; Lee'sRoman -Dutch Law {6th erf.) 266…
So much for tho distinction between English law and Roman-Dutchlaw on this topic. But in either system, tho terms of a particular contractmay expressly or by necessary implication exclude the remedy. Forinstance, tho equitablo remedy would not bo available in England iftho seller hail bound himself cither to convey tho property or, at hiselection, to pay a sum of money by way of substituted performance.
Fry on Specific Performance (Gth ocl.) chapter 3. Similarly, Wesscls onContract 'para 1460 explains that under the Roman-Dutch law, “ ifone of (two) alternative promises is the performance of an act and theother the payment of money, we must gather from the contract and thecircumstances whether tho payment of money is intended merely asa penal clause or whether it. is to operate as a liquidated debt ….If tho payment of tho money is not to he construed to bo a penal clause,but as an alternative prestation, then directly tho performance of theact becomes impossible or tho promisor refuses to carry it out or cannotdo so, the money is due A distinction is drawn in paragraphs 1453and 1454 of tho text-book between conjunctive, alternative and faculta-tive obligations. “ In the facultative obligation, thero is a promise todeliver some definite thing or to perform some definite act, but at thesame time tho debtor reserves to himself tho right of performing hiscontract by somo othor prostation o.g. I promise to dolivor A, but Irosorvo to myself the right of delivering B instead. Tho primary objectof tho obligation is A, but I have tho powor (facultas) of substituting B ”.The author also observes (para 147S) that “ if tho contract is silent asto whether the choice belongs to tho debtor or the creditor, tho lawpresumes that it lies with the debtor. It is the person that has to makotho payment who is ontitled to the choice ”.
So much for the general principles ; but it is their application to par-ticular cases which often presents enormous difficulties. The questionalways is, of course, What is the contract ? “ The Courts must, in all cases,look for their guide to the primary intention of tho parties, as it may begathered from the instrument upon the effect of which they are to decide,and for that purpose to ascertain the precise uaturo and object of theobligation ”,—Banger v. G. If'. B.1. I would also ropeat what I hadoccasion to observe recently in a similar context, namely, that tho inter-pretation of any particular voids appearing in one written instrumentis seldom of much assistance as a precedent for deciding the true moaningof some other written instrument. Sivasambu v. Kathiresar Ambagar -.
I now proceed to consider whether clauso 8 (as Mi-. Nadesan contends)entitles tho purchaser to elect at his option to enforce his legal remedyof damages against tho defaulting “ vendors ” but loaves it open tohim to enforce tho alternative remedy of specific performance if lie soprefers ; or whether (as Mr. H. V. Perera argued) clause 8 imposes asubstituted obligation in tho ovent of failure or refusal by the “vendors’*’to perform tho primary obligation, namely, the conveyance by the“ vendors ” and certain others of the entiro property for Rs. 92,000.
The conclusion which I have reached is that the Ianguago of clauso Sis not open to tire construction contended for on bohalf of tho purchaser.Tho parties must clearly* have appreciated on 3rd October, 1947, thatfailuro on the part of tho “ vendors ” to socuro a convoyanco of the entiro
(1SS J) 5 II. L. C. 73.2 (10-52) 55 K. L. It. 170 at ITS.
property to the purchaser on or before 31st December, 1 947, in terms ofthe contract could result from a variety of causes, l'or example,
iho sanction of the District Court to the proposed sale might not
bo obtained or not bo obtained in time ;
the title of the premises might not bo “ deduced to the satisfaction
of Mr. John Wilson ”—Clause 5 ;
one or more of tho “ vendors " might back out of the transaction
during the interval between tho date of the contract and thedate fixed for completion.
In the first of theso contingencies, specific performance of tho indivisibleobligation to secure tho sale of the entire property would in tho verynature of things have been impossible, because the “vendors” couldnot be compelled to achieve a result which it was beyond their powerto bring about. Clause 8 certainly provides the purchaser’s only remedyin that particular contingency, namely, that tho vendors “shall forthwith ”(the words are imperative, and exclude tho notion of an option beinggranted to either of tho parties) refund the part consideration previouslydeposited with them, and also pay an agreed sum by n ay of liquidateddamages.
What then if the vendors should, for some other reason equally withintho contemplation of the parties, default in tho performance of theirprimary obligation ? Clause S equally provides that in any such contin-gency the deposit must "forthwith ” be refunded and a like sum paidto the purchaser by way of compensation.
It follows from this analysis that what was clearly intended to constitutea substituted obligation upon tho first contingency xeferred to mustequally have been intended to constitute the sole obligation arising'upona default in any other contemplated contingency. Ifad it boon thointention of tho jiarties that the substituted obligation provided byclause S should represent the purchaser’s sole remedy in one situation,but that the alternative legal remedy of specific performance (i.e., underthe general law) should nevertheless be reserved to him at his optionin another, it would have been a simple matter to insert in the contractexpress terms making separate provision for cac-Ji separate contingency.
It is only in the absence of agreement to the contrary that tho Koman–jDutcli law confers on a purchaser under an executory contract tho rightto elect one of two alternative legal remedies under the Roman-Dutchlaw, namely, specific performance or damages. But wo have hero acategorical stipulation that if the primary obligation is not fulfilled forany reason whatsoever, two specified sums shall immediately becomedue. To my mind, tho stipulated return of the deposit, being part ofthe purchase price, necessarily implies that the primary obligation tosell is then to be regarded as having come to an end. This negatives anintention that tho purchaser could still demand, if ho so chose, siiccificperformance. It is also significant that, if one considers tho relevantissue of mutuality, clause 9 provides that, should tho purchaser himselfdefault for any reason, ho would, though liable to pay an agreed sum2*
to tho vondors as liquidated damages, bo entitled to a refund of liisearlier deposit. ClausoD tliorcfore denies to tho “ vondors ” by necessaryimplication the alternative legal remedy of specific performance.
Mr. JSTadesan strongly relied on Lotig v. Bowring 1 and other Englishdecisions to tho effect that in England, notwithstanding an expresscovenant to pay liquidated damages, the jurisdiction of a Court of equityto ordor specific performance had not been ousted. I certainly agreethat a provision for the payment of liquidated damages may, in particularcontracts, legitimately bo construed as having been inserted to securetho performance by the defaulter of his primary obligation. But in myopinion this is not such a case. Moreover, the historical developmentof the remedy of specific performance in England explains why the Courtsof Chancery in the country have always assumed that their equitablejurisdiction to act upon the conscience of a defaulting party could not beousted unless the contract clearly so indicated. Accordingly, it may wellbo that the insertion of a clause providing for liquidated damages in anEnglish contract would prima facie bo regarded as applying only to asituation where the innocent party is content to enforce his commonlaw remedy against the defaulter. Be that as it may, I think that ina system of law which recognises that two alternative legal remediesare prima facie available to the innocent party as of right, an agreementproviding that, in the event of a breach, the defaulter shall forthwithbe obliged to pay e,?i agreed sum by way of compensation, raises, in myopinion, a prosumption that tho parties intended to ride out- recourseto tho other legal remedy.
For theso reasons I have come to the conclusion that tho plaintiffhas misconceived Lis remedy. I would allow tho appeal and dismissthe plaintiff’s action against the appellants with costs in both Courts.In tho absence of an alternative prayer in the plaint-, we arc not requiredto consider whether the plaintiff is entitled to any other form of reliefagainst all or any of the t: vendors ”.
I should mention that Mr. Kadesan had reused a preliminary objectionto the constitution of the 2nd appellant's appeal on two grounds, namely,that the petition of appeal had been signed by a proctor before his appoint-ment had been filed in Court as required by Section 2-1 (1) of the Code,and that the revocation of an earlier proxy in favour of another proctorhad not yet been sanctioned in terms of Section 24 (2). I would rejectthis objection. Tho revocation of the first proctor’s authority, and theappointment of the second proctor had both preceded the filing of thep>etition of appeal, and the further formalities required by Section 2-1hacl also been complied with before the expiry of the time limit forpreferring an appeal to this Court. Apart from that, even if the 1stappellant alone had appealed, Section 7G0 of the Code would in thisease have operated to the benefit of the 2nd appellant.
Pl lt.k J.—I agree.-
Saxsoxi J.—I agree.Appeal allowed.
1 {ISG3) 33 Beaton 6S3.