Johnson v Agnew

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Wilberforce,Lord Salmon,Lord Fraser of Tullybelton,Lord Keith of Kinkel,Lord Scarman
Judgment Date08 Mar 1979
Judgment citation (vLex)[1979] UKHL J0308-2

[1979] UKHL J0308-2

House of Lords

Lord Wilberforce

Lord Salmon

Lord Fraser of Tullybelton

Lord Keith of Kinkel

Lord Scarman

Johnson and Another
(Respondents)
and
Agnew
(Appellant)

Upon Report from the Appellate Committee to whom was referred the Cause Johnson and another against Agnew (Spinster), That the Committee had heard Counsel as well on Monday the 11th as on Tuesday the 12th, Wednesday the 13th, Thursday the 14th, Monday the 18th, Tuesday the 19th and Wednesday the 20th days of December last upon the Petition and Appeal of Adeline Agnew of the Glebe Country House, Philleigh-in-Roseland Cornwall praying that the matter of the Order set forth in the Schedule thereto, namely an Order of Her Majesty's Court of Appeal of the 13th day of December 1977 might be reviewed before Her Majesty the Queen in Her Court of Parliament and that the said Order might be reversed, varied or altered or that the Petitioner might have such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament might seem meet; as also upon the Case of Michael Charles Johnson and Renee Marie Johnson lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal (Civil Division) of the 13th day of December 1977 complained of in the said Appeal be, and the same is hereby, Varied by leaving out the words "26th November 1974 (being the date of entry of the said Order for specific performance dated 12th November 1974)" and inserting "3rd April 1975 (being the first date on which the mortgagees contracted to sell a portion of the property)" and by substituting "3rd April 1975" for "26th November 1974" in each of the two instances where the latter date subsequently appears: And it is further Ordered, That the Appellant do pay or cause to be paid to the said Respondents the Costs incurred by them in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments if not agreed between the parties: And it is further Ordered that the Respondents' Costs be taxed in accordance with the provisions of Schedule 2 to the Legal Aid Act 1974: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the Chancery Division of the High Court of Justice to do therein as shall be just and consistent with this Judgment.

Lord Wilberforce

My Lords,

1

This appeal arises in a vendors' action for specific performance of a contract for the sale of land, the appellant being the purchaser and the vendors respondents. The factual situation is commonplace, indeed routine. An owner of land contracts to sell it to a purchaser; the purchaser fails to complete the contract; the vendor goes to the court and obtains an order that the contract be specifically performed; the purchaser still does not complete; the vendor goes back to the court and asks for the order for specific performance to be dissolved, for the contract to be terminated or "rescinded", and for an order for damages. One would think that the law as to so typical a set of facts would be both simple and clear. It is no credit to our law that it is neither. Learned judges in the Chancery Division and in the Court of Appeal have had great difficulty in formulating a rule and have been obliged to reach differing conclusions. That this is so is due partly to the mystification which has been allowed to characterise contracts for the sale of land, as contrasted with other contracts, partly to an accumulated debris of decisions and text book pronouncements which has brought semantic confusion and misunderstandings into an area capable of being governed by principle. I hope that this may be an opportunity for a little simplification.

2

I must state the facts in some detail because the sequence of events may be important. I repeat however that such additional elements as appear in the relevant history do not take the present case away from the normal. Many sellers of one property commit themselves concurrently to buying another: indeed to do so is often the main reason for the sale. Many sellers of property have incumbrances on that property. The law should be able to accommodate such matters without indigestion.

3

The contract for sale was dated 1 November 1973. The property sold was called Sheepcote Grange, Wooburn Common, Bucks.; it consisted of the Grange itself and some grazing land. On the Grange there was a first legal charge to a building society for £15,600 and two other charges. On the grazing land there was a first legal charge to a finance company for £6,000 and a second legal charge to a bank. The purchase price under the contract was £117,000 and so was ample to pay off the charges and to leave the vendors with money to buy another property. In fact on 1 November 1973 they contracted to buy one for £34,000, and raised the purchase money by loan from a bank. If the first contract had been completed according to its terms, no difficulty would have arisen: the bank loan would have been discharged from the purchase price.

4

The contract was made by reference to the Law Society's General Conditions of Sale (1973) and provided for completion on 6 December 1973. A deposit of 10 per cent was to be paid but the purchaser only paid £3,000. Before 6 December 1973 the purchaser had accepted the vendors' title (this of course disclosed the existence of the mortgages) and a form of conveyance was agreed. However the purchaser did not complete on that date. On 21 December 1973 the vendors' solicitors served a notice, under condition 19, making time of the essence of the contract and fixing 21 January 1974 as the final date by which completion was to take place. The purchaser failed to complete on that date. On 8 March 1974 the vendors issued a writ claiming specific performance and damages in lieu of or in addition thereto and alternatively a declaration that the vendors were no longer bound to perform the contract and further relief. On 20 May 1974 the vendors issued a summons under R.S.C. 0.86 for summary judgment for specific performance, and the order sought was made in the usual form on 27 June 1974. It was not however drawn up and entered until 26 November 1974.

5

Meanwhile action was taken by the vendors' mortgagees. The building society obtained an order for possession of the Grange on 22 August 1974, they sold it on 20 June 1975 and completion took place on 18 July 1975. The finance company obtained an order for possession of the grazing land on 7 March 1975; they sold it on 3 April 1975 and completion took place on 11 July 1975. Thus by 3 April 1975 specific performance of the contract for sale had become impossible. The vendors took no action upon the order for specific performance until 5 November 1976 when they issued a notice of motion seeking ( a) an order that the purchaser should pay the balance of the purchase price and an inquiry as to damages or ( b) alternatively a declaration that they were entitled to treat the contract as repudiated by the purchaser and to forfeit the deposit and an enquiry as to damages.

6

On 25 February 1977 Megarry V-C dismissed the motion. He rejected the first claim on the ground that, as specific performance was no longer possible, it would be unjust to order payment of the full purchase price. The second claim was not pressed, on the ground that it was precluded by authority ( Capital and Suburban Properties Ltd v. Swycher, [1976] Ch.319 C.A.).

7

The vendors appealed to the Court of Appeal who again rejected each alternative: they followed the previous decision in Swycher's case. However they held that the vendors could recover damages under the Chancery Amendment Act 1858 (Lord Cairns' Act), which enables the court to award damages in addition to or in substitution for specific performance. They accordingly made an order discharging the order for specific performance and an order for an inquiry as to damages. They fixed the date on which damages should be assessed as 26 November 1974, being the date of entry of the order for specific performance. The purchaser is now appealing against this order.

8

In this situation it is possible to state at least some uncontroversial propositions of law.

9

First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance.

10

Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial he will however have to elect which remedy to pursue.

11

Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance. This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance.

12

At this point it is important to dissipate a fertile source of confusion and to make clear that although the vendor is sometimes referred to in the above situation as "rescinding" the contract, this so-called "rescission" is quite different from rescission ab initio, such as may arise for example in...

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