Raineri v Miles
| Jurisdiction | England & Wales |
| Judge | Viscount Dilhorne,Lord Edmund-Davies,Lord Fraser of Tullybelton,Lord Russell of Killowen,Lord Keith of Kinkel |
| Judgment Date | 24 April 1980 |
| Judgment citation (vLex) | [1980] UKHL J0424-1 |
| Date | 24 April 1980 |
| Court | House of Lords |
[1980] UKHL J0424-1
Viscount Dilhorne
Lord Edmund-Davies
Lord Fraser of Tullybelton
Lord Russell of Killowen
Lord Keith of Kinkel
House of Lords
My Lords,
On the 14th June 1977 the appellants entered into an agreement with the respondents whereby it was agreed that the appellants should sell their house at Guildford to the respondents for £25,500. The sale was subject to the Law Society's Conditions of Sale 1973 "so far as the same are not varied by or inconsistent with the following conditions … with the exclusion of Conditions 6(1) and 16(4)".
It was a condition of the agreement (referred to in the Conditions of Sale as a Special Condition), that the purchase should be completed "on or before the 12th July 1977 … when vacant possession shall be given to the Purchasers."
Also on the 14th June 1977 the appellants agreed to buy a house. At the last moment their arrangements for the financing of the purchase of this house broke down with the result that they were unable to complete its purchase on the 12th July. In consequence they did not complete the sale of their house and give the respondents vacant possession on that day.
On the 14th June the respondents had agreed to sell their house at Ealing to Mr. Raineri. The date fixed for the completion of this sale was also the 12th July. Late on the 11th July the respondents' solicitors were told of the appellants' decision not to complete the next day. Mr. Raineri's solicitors were then told that there was likely to be delay in the completion of the sale of the respondents' house to him. Mr. Raineri had already left his house at Warrington and was then on his way to London. On his arrival at the respondents' house he was told that they were not completing the sale but he was allowed to store his belongings in the garage there pending actual completion.
Condition 19 of the Law Society's General Conditions of Sale, so far as material, reads as follows:—
"19(1) This condition shall apply in every case except where the Special Conditions provide that time is to be of the essence of the contract in respect of the date fixed for completion.
(2) If the sale shall not be completed on the date fixed for completion either party may on that date or at any time thereafter (unless the contract shall first have been rescinded or become void) give to the other party notice in writing to complete the transaction in accordance with this condition but such notice shall only be effective if the party giving the same at the time the notice is sent is either ready, able and willing to complete or is not so ready, able and willing by reason of the default or omission of the other party to the contract.
(3) Upon service of an effective notice pursuant to the preceding clause it shall be an express term of the contract that the party to whom the notice is given shall complete the transaction within twenty-eight days after the day of service of the notice (excluding the day of service) and in respect of such period time shall be of the essence of the contract but without prejudice to any intermediate right of rescission by either party.
(4) ….
(5) If the vendor does not comply with the terms of an effective notice served by the purchaser under this condition, then the purchaser may elect either—
( a) to enforce against the vendor without any further or other notice under the contract such rights and remedies as may be available to the purchaser at law or in equity, or
( b) ….
(6) …."
As the Special Condition did not provide that time was to be of the essence of the contract, this condition applied and on the 13th July 1977 the respondents gave the appellants notice to complete the transaction. On the 11th August, within the twenty-eight days, the sale was completed. On that day the sale by the respondents of their house to Mr. Raineri was also completed.
Also on that day Mr. Raineri issued a writ against the respondents. He claimed specific performance of his agreement with them and damages in addition to or in lieu of specific performance and damages for breach of contract. The respondents joined the appellants as third parties and the question to be determined in this appeal is whether the appellants are liable to indemnify the respondents against their liability to Mr. Raineri.
This depends on whether their failure to complete on or before the 12th July 1977 was, although it was common ground that time was not of the essence of the contract, a breach of contract. The language of the Special Condition is clear and unambiguous; but the appellants say that read with condition 19 it really meant that the transaction was to be completed on or before the 12th July or within a reasonable time thereafter.
It was also common ground that section 41 of the Law of Property Act 1925 applied. That section which replaced section 25(7) of the Judicature Act 1873 which was to the same effect, reads as follows:—
"Stipulations in a contract, as to time or otherwise, which according to rules of equity are not deemed to be or to have become of the essence of the contract, are also construed and have effect at law in accordance with the same rules."
So the stipulation in the agreement in this case as to the time for completion must by Act of Parliament be construed and have effect in accordance with the rules of equity. What exactly does this mean?
In Stickney v. Keeble [1915] A.C.386 Lord Parker of Waddington said:—
"… in a contract for the sale and purchase of real estate, the time fixed by the parties for completion has at law always been regarded as essential. In other words, Courts of law have always held the parties to their bargain in this respect, with the result that if the vendor is unable to make a title by the day fixed for completion, the purchaser can treat the contract as at an end and recover his deposit … equity having a concurrent jurisdiction did not look upon the stipulation as to time in precisely the same light. Where it could do so without injustice to the contracting parties it decreed specific performance notwithstanding failure to observe the time fixed by the contract for completion, and as an incident of specific performance relieved the party in default by restraining proceedings at law based on such failure.
This is really all that is meant by and involved in the maxim that in equity the time fixed for completion is not of the essence of the contract, but this maxim never had any application to cases in which the stipulation as to time could not be disregarded without injustice to the parties, when, for example, the parties for reasons best known to themselves, had stipulated that the time fixed should be essential, or where there was something in the nature of the property or the surrounding circumstances which would render it inequitable to treat it as a non-essential term of the contract.
It should be observed, too, that it was only for the purposes of granting specific performance that equity in this class of case interfered with the remedy at law."
Lord Parker went on to say that section 25(7) of the Judicature Act 1873 could not mean that:—
"the rules as to time laid down by Courts of Equity in certain cases, for certain purposes, and under certain circumstances only shall be applied generally and without inquiry whether the particular case, purpose or circumstances are such that equity would have applied the rules."
My Lords, in the light of Lord Parker's observations it cannot, I think, be doubted that if the respondents had sought to treat the contract as terminated on account of the appellants' failure to complete on the 12th July and the appellants had sought specific performance, that would have been granted and they would have been relieved from the consequences of their failure to complete. Equity would then have treated the time for completion as not of the essence of the contract. There is also no doubt that if the appellants after notice had failed to complete within twenty-eight days, the court would have granted an order of specific performance to the respondents.
The question for decision in this appeal is not whether equity would or would not have granted specific performance, and as I see it, not as to the application of the rules of equity. Our task is to construe the Special Condition of the contract. Its meaning cannot differ according to whether it is construed at common law or in equity. There is no question of equity re-writing the contract.
That condition must not be viewed in isolation. So viewed the answer is obvious. So viewed, completion on or before the 12th July was a term of the contract and failure to do so a breach. So construed, one reverts to the position before the Judicature Act 1873 when at common law time was of the essence and for the purposes of specific performance, equity did not so regard it; and the dichotomy between rules of equity and rules of common law which my noble and learned friend Lord Diplock said in United Scientific Holdings Ltd. v. Burnley Borough Council [1978] A.C. 904 at p.924 it was a major purpose of the Supreme Court of Judicature Act 1873 to do away with, persists.
In four reported cases the contract has been construed as containing a term that completion should take place on the day fixed and damages have been awarded for breach of contract in failing to complete on that date ( Jaques v. Millar (1877) 6 Ch.D.153: Royal Bristol Permanent Building Society v. Bomash (1887) 35 Ch.D.390: Jones v. Gardiner [1902] 1 Ch.191: Phillips v. Lamdin [1949] 2 K.B.33).
One must, however, in construing the Special Condition have regard to the other provisions of the contract and the surrounding circumstances and an alternative view of the condition is that in the light of the other provisions,...
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