Stockloser v Johnson
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE ROMER |
| Judgment Date | 12 February 1954 |
| Judgment citation (vLex) | [1954] EWCA Civ J0212-3 |
| Court | Court of Appeal |
| Date | 12 February 1954 |
[1954] EWCA Civ J0212-3
Lord Justice Somefveel
Lord Justice Denning, and
Lord Justice Romer
In the Supreme Court of Judicature
Court of Appeal
MR F.W.BENEY, Q.C. and MR HAROLD BROWN (instructed by Messrs Lovell, Son & Pitfield, agents for Messrs Pitfield & Oglethorpe, Petworth, Sussex) appeared on behalf of the Appellant (Plaintiff).
MR NEIL LAWSON and MR J.M.HOLDEN (instructed by Messrs Kenneth Brown, Baker, Baker) appeared on behalf of the Respondent (Defendant).
LORD JUSTICE SOMERVELL: In the present case the Plaintiff claims the return of instalments paid under two agreements. He failed to complete the agreements by paying the fall instalments under them. There was a clause providing that in those circumstances the other party might rescind on notice, as he did, and retain the instalments already paid. The Plaintiff alleges that this amounts to the exaction of a penalty from which he is entitled to be reloaded.
It is not the ordinary penalty case in which the Plaintiff is seeking to recover a sum of money provided for inthe event of a breach or breaches. It is however submitted that a right to retain installments of a purchase price may be penal and if so the law will assist the person penalized to recover the money. The Plaintiff has, on any view, first to satisfy the Court that the provision was penal or in the nature of a penalty.
The facts are a little complicated but may be summarised as follows: The subject matter of the agreement was plant and machinery installed in two chalk quarries, one known as Washington and the other as Playhatch. Prior to 1949 the Defendant leased the Washington quarry from a Mr. Goring and had installed the plant at Washington and himself worked the quarry. A name "Agrilime" was used in disposing of the chalk, but I do not think this enters into the case. In November, 1949, the Defendant ceased to operate the quarry which was let by Goring to the Renown Lime Quarries Limited on the 10th November, 1949. The lease was for 21 years and provided for a minimum rent and royalties. By Deed dated 1st March, 1950, the Defendant let his plant and machinery to Renown for the same period as the lease, or rather for so long as the Company should be the lessees of the premises less the last five months. In consideration of this Renown were to pay royalties, to operate the plant and to keep it in good order, fair wear and tear excepted.
The quarry "Playhatch" was leased by its then owner to the Defendant in 1943 for seven years with an option to renew. The Defendant installed plant and machinery. The Defendant in 1948 granted a licence to Dow-Mac (Quarries) Limited, who had apparently already been working the quarry, to use his plant and machinery in consideration of the payment of royalties for the period of his lease and for the further period of the option which was in fact exercised and extended the period to 1957.
The Plaintiff approached the Defendant early in 1940 with a view to taking over the benefit of the Washington hiring agreement and purchasing the machinery. There was correspondence between the solicitors and it is perhaps relevant to note thateach side were legally advised. An agreement was arrived at in April, 1950, for the sale of the plant and machinery with the benefit of the hiring agreement. The purchase price was to be £11,000 and to be paid in the following instalments: £2,500 on the signing of the agreement, eight half yearly instalments of £750 and a final payment in June, 1954, of £2,500. Clause 5 provided that if the purchaser made default in an instalment for a period exceeding 28 days the vendor was entitled on giving 14 days' notice to rescind, "to retake possession of the plant, machinery and appliances specified in the Schedule hereto and again to enter into enjoyment of the said agreement and the fruits there of as though this agreement had never been executed, And in such event all payments made here under by the purchaser to the vendor shall be forfeited to the vendor who shall retain the same". Clause 6 is important and reads as follows: "The purchaser shall be entitled to the benefit of the said agreement and the plant, machinery and appliances specified in the Schedule hereto as from the First day of January One thousand nine hundred and fifty but until the completion of the purchase by the purchaser and the payment by him of the whole of the instalments hereinbefore stipulated he shall not become the owner of the said plant, machinery and appliances neither shall he sell charge or otherwise dispose of the same or any part thereof nor of the benefit of this agreement".
A little later the two parties negotiated a similar agreement with regard to the "Playhatch" plant. The price was stated to be £14,000 but £3,000 of this sum represented an amount that Dow-Mac had paid in advance in respect of royalties, which was to be treated as a deposit so that the actual amount to be paid by the Plaintiff was, as in the Washington case, £11,000. The instalments were somewhat differently arranged. The agreement having been made in June, 1950, a first instalment of £1,250 was to be paid on 25th December, 1950. This was followed by quarterly payments of £750 which completed the transaction on25th March, 1954. There was a provision that if the plant for any reason required rebuilding or reinstating the payment of any instalments then remaining duo was to be postponed until the plant was rebuilt or reinstated. The clauses which I have quoted from the Washington agreement were, with the necessary changes of date, A in the same terms in this agreement. The. Plaintiff apparently found difficulty from the outset and owing to bad weather the royalties were less than he had anticipated. The December instalments for 1951 were unpaid. The Defendant gave notices on the 25th February rescinding the agreements. The Plaintiff has never B at any time expressed his readiness or ability to make further payments if the Defendant were willing to waive his right to rescind. Prior to the notice of rescission the Plaintiff had carried out some negotiations with Renown with a view to purchasing their interest in the quarry. I do not myself think anything turns on this. In April, 1952, the Defendant acquired Renown's lease and the learned Judge relied on this as will appear later.
The first question of construction is whether on the vendor operating clause 5 as it is in the Washington case, the Plaintiff became liable to account for and pay over the royalties he had received in addition to forfeiting his instalments. If he did the clause would plainly, I think, be penal in its nature. I am quite clear, however, that it cannot be so construed. Reliance was placed on the words "As though this agreement had never been executed". I am doubtful whether these words add anything, but if it was intended that the vendor should not only keep the instalments but get back the royalties it would have had to be expressed in much plainer words.
The figures for royalties in the years previous to the agreement in the Washington agreement were as follows: To 31st January, 1948, £3,047. 6s. 4d. To 31st January, 1949, £2,603. lis. 6d. To 31st January, 1950, £2,359. 14s. Od. If one takes a rough figure of £2,500 a year and takes the position at the end of 1951, 1952 and 1953, the comparison between instalments
and royalties works out as follows: At the end of 1951 the instalments paid would he £5,500 and the royalties £5,000. At; the end of 1952 the instalments paid would be £7,000 and the royalties £7,500, at the end of 1953 the instalments paid would be £8,500 and the royalties £10,000. In fact, of course, the figures were quite different. The bad weather reduced the royalties and the Plaintiff was unable to find the money. On the agreement as I have construed it, however, it would seem quite absurd to suggest that this provision was penal in its nature.
The position under the Playhatch contract would be more favourable to the Defendant. The figures of output were somewhat larger but the average yearly instalments of the price were something over £3,000 a year. We have not the date when the advance payment for royalties was exhausted.
Many authorities were cited to the learned Judge. It was contended that the penalty law as laid down in Kemble v. Farrant (6 Bingham, 141), Dunlop Pneumatic Tyre Company Limited v. New Garage & Motor Company Limited (1915 Appeal Cases, page 79) had no application to the present claim and therefore the sums were irrecoverable. It was contended, on the other hand, that the clause was penal in its nature and should be disregarded, the Plaintiff being entitled to recover the sums subject to a cross claim for damages, or the restoration of thestatus quo.
The learned Judge reviewed the authorities and decided the case on lines which I will summarise. (1) In the absence of any provision to the contrary a seller who rescinds must repay any part of the purchase pride already paid notwithstanding the default of the buyer. ( Dies v. British & International Company, 1939, 1 King's Bench, page 724). (2) Here there was a provision to the contrary and it was not unconscionable for the Defendants to retain the money. (3) The instalments could not be regarded as deposits. (4) The instalments could not be regarded as a preestimate of liquidated damages, but were provisions of a penal nature. (5) There was a distinction between cases in which theCourt was asked to assist in recovering a penalty and cases such as the present in which the Plaintiff sought to recover back sum properly paid as instalments. In the latter case two conditions must be satisfied. First, the effect of the clause must be penal applying the principles laid down in Dunlop's case (1915 Appeal Cases, page 79, at page 86). Second, the Court must be satisfied that in the circumstances of that...
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