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Relief against Forfeiture and the Purchaser of Land

Published online by Cambridge University Press:  16 January 2009

Charles Harpum
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A Purchaser of land who fails to complete his contract for some reason stands to lose his equitable estate in the land and may also forfeit any deposit or other prepayments that have been made. The purpose of this article is to investigate the circumstances in which such a purchaser may obtain equitable relief against forfeiture, and to argue that the jurisdiction to give relief is broader than has been thought in recent years. The matter has been the subject of two recent decisions of such importance that an appraisal of the law seems apposite. To define the field of inquiry, it is helpful to consider two preliminary matters

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The Cambridge Law Journal , Volume 43 , Issue 1 , April 1984 , pp. 134 - 176
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Copyright © Cambridge Law Journal and Contributors 1984

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References

1 Legione v. Hateley (1983) 46 A.L.R. 1, High Court of Australia;Google ScholarScandinavian Trading Tanker Co. A.B. v. Flota Petrolera Ecuatoriana, The Scaptrade [1983] 2 A.C. 694 (H.L.).Google Scholar The two cases delimit the jurisdiction to relieve against forfeiture, positively and negatively respectively. The latter decision was not concerned with land. The cases are noted at (1983) 99 L.Q.R. 489–492. See now Ciavarella v. Balmer (1983) 57 A.L.J.R. 632, 638.Google Scholar

2 The instalment purchase of land is far less common in England than it is in, say, Australia or Canada, though there are examples in the reports: Rose v. Watson (1864) 33 L.J.Ch. 385 (H.L.);Google ScholarCornwall v. Henson [1900] 2 Ch. 298 (C.A.);Google ScholarStarside Properties Ltd. v. Mustapha [1974] 1 W.L.R. 816 (C.A.). For discussion of such contracts, see Hoggett, Brenda M. (1972) 36 Conv. 325; (1974) 37 M.L.R. 705; (1975) 39 Conv. 343.Google Scholar

3 Howe v. Smith (1884) 27 Ch.D. 89, 95, Cotton L.J.; Fry L.J. at p. 101;Google ScholarSoper v. Arnold (1889) 14 App.Cas. 429, 435, Lord Macnaghten.Google Scholar

4 For an example of such a provision, see Palmer v. Temple (1839) 9 Ad. & E. 508, especially at p. 520, Lord Denman C.JGoogle Scholar

5 Ex pane Barrell (1875) L.R. 10 Ch.App. 512, 514, Sir Mellish, G. L.J.Google Scholar

6 Ockenden v. Henly (1858) E.B. & E. 485;Google ScholarShuttleworth v. Clews [1910] 1 Ch. 177.Google Scholar

7 Hinton v. Sparkes (1868) L.R. 3 C.P. 161.Google Scholar

8 Millichamp v. Jones [1982] 1 W.L.R. 1422;Google ScholarDamon Cia Naviera S.A. v. Hapag-Lloyd International S.A. [1983] 3 All E.R. 510, not following Myton Ltd. v. Schwab-Morris [1974] 1 W.L.R. 331 (where payment of a deposit was held to be a condition precedent to the existence of a contract).

9 Linggi Plantations Ltd. v. Jagatheesan [1972] 1 M.L.J. 89 (P.C.).Google Scholar

10 Re Scott and Alvarez's Contract [1895] 2 Ch. 603 (C.A.).Google Scholar

11 McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 468, Rich J.Google Scholar

12 [1924] A.C. 980 (P.C.); Dies v. British and International Mining and Finance Corporation Ltd. [1939] 1 K.B. 724.Google Scholar

13 McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 477, 479, Dixon J.; Real Estate Securities Ltd. v. Kew Golf Links Estate Pty. Ltd. [1935] V.L.R. 114, 120, Lowe J. For a penetrating discussion of this subject, see Beatson, Jack (1981) 97 L.Q.R. 389.Google Scholar

14 McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 477, Dixon J.Google Scholar

15 McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 478, Dixon J.; Stockloser v. Johnson [1954] 1 Q.B. 476, 493, Denning L.J.Google Scholar

16 [1980] 1 W.L.R. 1129, Viscount Dilhorne, Lords Edmund-Davies and Fraser, Lords Russell and Keith dubitante. The case was concerned with a shipbuilding contract and the point discussed here did not strictly arise for decision, as the action in issue was one brought on a collateral guarantee.Google Scholar

17 [1980] 1 W.L.R. 1129, 1146–1148, Lord Fraser.Google Scholar

18 McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 478, Dixon J.; Stockloser v. Johnson [1954] 1 Q.B. 476, 493, Denning L.J.Google Scholar

19 Shaw v. Foster (1872) L.R. 5 H.L. 321, 333, Lord Chelmsford; Lord Hatherley at p. 356.Google Scholar

20 Howard v. Miller [1915] A.C. 318, 326, Lord Parker of Waddington (P.C.);Google ScholarCentral Trust and Safe Deposit Company v. Snider [1916] 1 A.C. 266, 272, Lord Parker of Waddington (P.C.);Google ScholarChang v. The Registrar of Titles (1976) 137 C.L.R. 177, 181, Barwick C.J.; Mason J. at p. 184;Google ScholarJacobs J. at p. 190 (H.C. of A.). Another school of thought takes the view that the extent of the purchaser's interest is commensurate with the equitable relief that he could obtain, and that relief might be something other than specific preformance: Legione v. Hateley (1983) 46 A.L.R. 1, 29, Mason and Deane JJ.Google Scholar

21 Shaw v. Foster (1872) L.R. 5 H.L. 321, 357, Lord Hatherley.Google Scholar

22 This is implicit in Lord Eldon's judgment in Paine v. Miller (1801) 6 Ves. 349Google Scholar, and explicit in the judgment of Jessel, M.R. in Lysaghi v. Edwards (1876) 2 Ch.D. 499, especially at pp. 506–507.Google ScholarThe view expressed in the text is supported by Oakley, A. J., Constructive Trusts, p. 120. For a different opinion that leads to difficulties, see Pettit, P. H. (1960) 24 Conv. 47.Google Scholar

23 Berkley v. Poulett [1977] E.G.D. 754, 780, Stamp L.J. In a similar vein are the remarks of Jacobs J. in Chang v. The Registrar of Titles (1976) 137 C.L.R. 177, 189–190.Google Scholar

24 Phillips v. Silvester (1872) L.R. 8 Ch.App. 173 (especially at p. 176, where the bailee analogy is implicit). Lord Selbourne L.C; Clarke v. Ramuz [1891] 2 Q.B. 456 (C.A.).Google Scholar

25 Paine v. Metier (1801) 6 Ves. 349.Google Scholar

26 S.18, r.l, and s.20(l) of that Act provide an analogy with the equitable rules for the passing of property and risk, and s.20(3) preserves any liability which a seller may have as a bailee.

27 (1844) 1 Jo. & Lat. 18, 26, cited with approval by Lord O'Hagan in Shaw v. Foster (1872) L.R. 5 H.L. 321, 349.Google Scholar

28 (1864) 33 L.J.Ch. 385, 389–390 (H.L.). The report in the Law Journal Reports is slightly fuller than that in 10 H. L.C. 672.Google Scholar

29 Burgess v. Wheate (1759) 1 Eden 177, 211Google Scholar, Clarke M.R.; Wythes v. Lee (1855) 25 L.J.Ch. 177.Google Scholar

30 Middleton v. Magnay (1864) 2 H. & M. 233, 237, Page-Wood V.-C;Google ScholarWhitbread & Co. Ltd. v. Watt [1901] 1 Ch. 911, 913, Farwell J.Google Scholar

31 Whitbread & Co. Ltd. v. Watt [1902] 1 Ch. 835, 838, Vaughan Williams L.J.; Stirling L.J. at p. 840.Google Scholar

32 Shaw v. Foster (1872) L.R. 5 H.L. 321, 338, Lord Cairns.Google Scholar

33 After the contractual completion date has passed, the unpaid vendor who remains in possession is treated analogously to a mortgagee in possession. He is strictly accountable for everything that he receives or ought to have received from the property, but is entitled to interest from the purchaser on the outstanding balance of the price: Phillips v. Silvester (1872) L.R. 8 Ch.App. 173; Plews v. Samuel [1904] 1 Ch. 464.Google Scholar

34 See Rose v. Watson (1864) 33 L.J.Ch. 385, 387, Lord Westbury. The sense of this passage is partially lost in the report in 10 H.L.C. 672, 678. This trust has some resemblance to an implied (or purchase money) resulting trust.Google Scholar

35 See, e.g., Tempany v. Hynes [1976] I.R. 101, 114–115, where Kenny J. perceived a conflict between these two distinct concepts when in fact there is none. Cf. Henchy J. at p. 109. In Irish Conveyancing Law, Chap. 11, Professor J. C. W. Wylie perpetuates Kenny J.'s error.Google Scholar

36 Whitbread & Co. Ltd. v. Watt [1901] 1 Ch. 911, 915, FarweU J. Cf. Tailby v. The Official Receiver (1888) 13 App.Cas. 523, 548, Lord Macnaghten.Google Scholar

37 Levy v. Stogdon [1898] 1 Ch. 478; Hewett v. Court (1983) 46 A.L.R. 87.Google Scholar

38 Ridout v. Fowler [1904] 1 Ch. 658, 662, Farwell J. It is clear from the report of that case in 73 L.J.Ch. 325, 326, that title had not been accepted.Google Scholar

39 Dinn v. Grant (1852) 5 De G. & Sm. 451. Subject to what is said later in this article, a purchaser who commits such a breach will usually forfeit his deposit, and so the point is mainly of relevance with regard to other part payments of the price.Google Scholar

40 Cornwall v. Henson [1900] 2 Ch. 298 (C.A.), semble. See infra, n.43.Google Scholar

41 Levy v. Stogdon [1898] 1 Ch. 478.Google Scholar

42 Whitbread & Co. Ltd. v. Watt [1902] 1 Ch. 835, 840, Cozens-Hardy L.Google Scholar

43 Cornwall v. Henson [1900] 2 Ch. 298, 305. In that case, because of the complexity of the accounts that would have to have been taken if the purchaser had sought to recover the instalments of the purchase price that he had paid, he claimed damages instead and asked for a lien for them that was refused. The case is not therefore conclusive.Google Scholar

44 See, e.g., the National Conditions of Sale, 20th ed., c.2(l), and The Law Society's Conditions of Sale, 1980 ed.,c.9.

45 Combe v. Lord Swaythling [1947] Ch. 625.Google Scholar

46 At the simplest level the difference between the two jurisdictions is essentially that between the executory and the executed: A. L. Corbin (1931) 40 Yale L.J. 1013, 1029.Google Scholar

47 And perhaps in other circumstances as well. Contrast Associated Distributors Ltd. v. Hall [1938] 2 K. B. 83 (C.A.) with Bridge v. Campbell Discount Co. Ltd. [1962] A.C. 600, 631, Lord Denning; Lord Devlin at p. 633 (H.L.).Google Scholar

48 Bridge v. Campbell Discount Co. Ltd. [1962] A.C. 600, 622, Lord Radcliffe. The modern law is enshrined in the judgment of Lord Dunedin in Dunlop Pneumatic Tyre Company Ltd. v. New Garage and Motor Company Ltd. [1915] A.C. 79, 86–88 (H.L.)Google Scholar

49 Dunlop Pneumatic Tyre Company Ltd. v. New Garage and Motor Company Ltd. [1915] A.C. 79, 97, Lord Parker of Waddington.Google Scholar

50 Commissioner of Public Works v. Hill [1906] A.C. 368, 376, Lord Dunedin (P.C.);Google Scholar, Webster v. Bosanquet [1912] A.C. 394, 398, Lord Mersey (P.C.);Google ScholarDunlop Pneumatic Tyre Company Ltd. v. New Garage and Motor Company Ltd. [1915] A.C. 79, 87, Lord Dunedin.Google Scholar

51 This follows from L. Schuler A.G. v. Wickman Machine Tool Sales Ltd. [1974] A.C. 235 (H.L.);Google Scholar and Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd. [1970] A.C. 583 (H.L.).Google Scholar

52 Stockloser v. Johnson [1954] 1 Q.B. 476, 488–489, Denning L.J. (C.A.).Google Scholar

53 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 726 (H.L.).Google Scholar

54 See the judgment of Lord Wilberforce in Shiloh Spinners Ltd. v. Harding, with which all their Lordships concurred.

55 For historical accounts, see Yale, D. E. C., Lord Nottingham's Chancery Cases, Vol. II, 79 Selden Society, Introduction 7–30;Google ScholarSimpson, A. W. B., A History of the Common Law of Contract, pp. 118–122.Google Scholar

56 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 722, Lord Wilberforce.Google Scholar

57 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 723, Lord Wilberforce; Lord Simon of Glaisdale at p. 727.Google Scholar

58 Davis v. Thomas (1830) 1 Russ & M. 506, 507, Leach M.R.Google ScholarSee too Francis's Maxims of Equity (1728), of which the twelfth maxim is that “Equity suffers not advantage to be taken of a penalty or forfeiture, where compensation can be made.”Google Scholar

59 See, e.g., t h e covenants in British Columbia Orchard Lands Ltd. v. Kilmer (1912) 17 B.C.R. 230, 231.Google Scholar

60 Shiloh Spinners Ltd. v. Harding [1973] A. C. 691 ( H.L.)Google Scholar

61 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 722, Lord Wilberforce.Google Scholar See too Davis v. Thomas (1830) 1 Russ. & M. 506, 507, Leach M.R.; Re Dixon [1900] 2 Ch. 561, 576, Rigby L.J.; J. Fonblanque, A Treatise of Equity, 5th ed., (1820), Vol. I, Chap. 6, § 4; and Turner, R. W., The Equity of Redemption, (1931), p. 40. Lord Eldon was disenchanted with the jurisdiction because of the hardship that it could cause to a vendor: Hill v. Barclay (1811) 18 Ves. 56, 60.Google Scholar

62 See, e.g., the forfeiture clause in Re Dagenham (Thames) Dock Co., ex pane Hulse (1873) L.R. 8 Ch.App. 1022.Google Scholar

63 “Where a penalty or forfeiture is designed merely as a security to enforce the principal obligation, it is as much against conscience to allow any party to pervert it to a different and oppressive purpose, as it would be to allow him to substitute another for the principal obligation”: Story, J., Commentaries on Equity Jurisprudence, 12th ed., (1877), Vol. II, p. 561, § 1316.Google ScholarSee too Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 723, Lord Wilberforce.Google Scholar

64 Starside Properties Ltd. v. Mustapha [1974] 1 W.L.R. 816 (C.A.).Google Scholar

65 Ward v. Union Bond & Trust Company, 243 F 2d 476, 480 (1957) (U.S.C.A.).Google Scholar

66 Mussen v. Van Dieman's Land Co. [1938] Ch. 253, 263, Farwell J.Google Scholar

67 Story, loc cit., supra, n.63.

68 Shiloh Spinners Ltd. v. Harding [1973] A. C. 691, 723–724, Lord WilberforceGoogle Scholar

69 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 722, Lord Wilberforce.Google Scholar

70 Contrast the position where relief is given against the forfeiture of a lease for non-payment of rent. If the tenant can pay everything that is outstanding, relief will be given and other grounds for complaint that the landlord may have against him will be ignored, because the landlord is required to comply with the procedure laid down by s.146 of the Law of Property Act 1925. That section is concerned with forfeiture for breach of covenants other than the covenant to pay rent. See Gill v. Lewis [1956] 2 Q.B. 1 (C.A.). There is of course no equivalent of s.146 that is applicable to a purchaser of land, and there may be no covenants for him to breach.Google Scholar

71 Stockloser v Johnson [1954] 1 Q.B. 476, 501, Romer L.J.Google Scholar

72 Steedman v. Drinkle [1916] 1 A.C. 275, 279, Viscount Haldane (P.C.).Google Scholar

73 Snell v. Brickies (1914) 49 S.C.R. 360, 366, Duff J. (S.C.C.).Google Scholar

74 Legione v. Hateley (1983) 46 A.L.R. 1, 32, Mason and Deane JJ.Google Scholar

75 This two-stage approach appears clearly from the judgment of Gibbs C.J. and Murphy J. in Legione v. Hateley (1983) 46 A.L.R. 1, 16: “No doubt, where the parties have chosen to make time of the essence of the contract the grant of relief against forfeiture as a preliminary to an order for specific performance will be exceptional.” (Italics mine.)

76 “The whole system of equity jurisprudence proceeds upon the ground, that a party having a legal right, shall not be permitted to avail himself of it for the purposes of injustice, or fraud, or oppression, or harsh and vindictive injury”: Story, loc. cit., p. 561, § 1316. There is an obvious analogy with the modern view of estoppel: see (1983) 99 L.Q.R. 492, and Taylor Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. [1982] Q.B. 133, 147B, Oliver J.

77 Stockloser v. Johnson [1954] 1 Q.B. 476, 490, Denning L.J.: “Two things are necessary: first, the forfeiture clause must be of a penal nature … and secondly, it must be unconscionable for the seller to retain the money.”Google Scholar

78 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 722, Lord Wilberforce.Google Scholar

79 Stockloser v. Johnson [1954] 1 Q.B. 476, 490, Denning L.J.Google Scholar

80 Stockloser v. Johnson [1954] 1 Q.B. 476, 486, Somervell L.J.; Dimensional Investments Ltd. v. The Queen, [1968] S.C.R. 93,101, Ritchie J. (S.C.C.)Google Scholar

81 Stockloser v. Johnson [1954] 1 Q.B. 476, 488, Somervell L.J.; Dimensional Investments Ltd. v. The Queen [1968] S.C.R. 93, 101, Ritchie J..Google Scholar

82 It is for this reason that courts in the United States were for so long reluctant to grant relief. For example, in Lawrence v. Miller, 86 N.Y. 131, 140 (1881), the court said, “To maintain this action would be to declare that a party may violate his agreement, and make an infraction of it by himself a cause of action.” The speciousness of this reasoning was exposed in De Leon v. Aldrete, 398 S.W. 2d 160, 163 (1966). The shift in American judicial opinion in favour of granting relief was due in large part to an illuminating article by A. L. Corbin, (1931) 40 Yale L.J. 1013.Google Scholar

83 Berry v. Mahony [1933] V.L.R. 314.Google Scholar

84 Stockloser v. Johnson [1954] 1 Q.B. 476, 501, Romer L.J.Google Scholar

85 [1914] A.C. 25, 35 (H.L.).

86 See, e.g., Weil v. Barthel, 279 P. 2d 544 (1955), Supreme Court of California.Google Scholar

87 Snelt v. Brickies (1914) 49 S.C.R. 360, 371–372, Duff J. (S.C.C.); Mussen v. Van Diemen's Land Co. [1938] Ch. 253, 261, Farwell J.Google Scholar

88 In favour of a broad equitable power, see Noakes & Co. Ltd. v. Rice [1902] A.C. 24 (H.L.); Bradley v. Canitt [1903] A.C. 253 (H.L.); Samuel v. Jarrah Timber and Wood Paving Corporation Ltd. [1904] A.C. 323 (H.L.); and Fairclough v. Swan Brewery Co. Ltd. [1912] A.C. 565 (P.C.). In each of these decisions, Lord Macnaghten was a leading exponent of the broad equitable view. In favour of a narrower view, and now usually treated as decisive, is G. & C. Kreglinger v. New Patagonia Meat and Cold Storage Co. Ltd. [1914] A.C. 25 (H.L.).Google Scholar

89 Re Dagenham (Thames) Dock Co., ex pane Hulse (1873) 8 Ch.App. 1022; Kilmer v. British Columbia Orchard Lands Ltd. [1913] A.C. 319 (P.C.).Google Scholar

90 Steadman v. Drinkle [1916] 1 A.C. 275 (P.C.); Brickies v. Snell [1916] 2 A.C. 599 (P.C.).Google Scholar

91 Lord Macnaghten's posthumous judgment in Kilmer v. British Columbia Orchard Lands Ltd. [1913] A.C. 319 was read by Lord Moulton, nine days after the former's death at the age of 83.Google Scholar

92 In the judgment of Romer L.J. in Stockloser v. Johnson [1954] 1 Q.B. 476.Google Scholar

93 36 & 37 Viet. c.66.

94 Reynolds v. Pitt (1812) 19 Ves. 134, 140, Lord Eldon. This was the usual remedy when a purchaser failed to complete on time: Binks v. Lord Rokeby (1818) 2 Swans. 222, 226, Lord Eldon.Google Scholar

95 Vemon v. Stephens (1722) 2 P.Wms. 66, Lord Macclesfield L.C.Google Scholar

96 (1873) L.R. 8 Ch.App. 1022; referred to hereafter as “the Dagenham case.”

97 (1873) L.R. 8 Ch.App. 1022, 1025, Sir W. M. James L.J.

98 (1873) L.R. 8 Ch.App. 1022, 1025.

99 Ibid.

1 In Stockloser v. Johnson [1954] 1 Q.B. 476, 496–497 Romer L.J. on analysing the record in the Dagenham case, concluded that the court gave the liquidator extra time for performance, as it seemed likely that the necessary moneys could be found.Google Scholar

2 In Stockloser v. Johnson [1954] 1 Q.B. 476, 496–497, Romer L.J. took the view that the contract had not been terminated in the Dagenham case.Google Scholar

3 This may be inferred from Car and Universal Finance Co. Ltd. v. Caldwell [1965] 1 Q.B. 525, 556, Upjohn L.J. See too Garnac Grain Co. Inc. v. H. M. F. Faure & Fairclough Ltd. [1966] 1 Q.B. 650, 675, Sellers L.J.Google Scholar

4 [1913] A.C. 319, Lords Macnaghten, Atkinson and Moulton.Google Scholar

5 (1912) 17 B.C.R. 230. The facts are gleaned from both reports.

6 By accepting this sum, the director was in contravention of his fiduciary obligations (1912) 17 B.C.R. 230, 233, Gregory J.

7 If time of the date of performance is of the essence and the parties by agreement extend that time to a later fixed date, time is also of the essence of that later date: Barclay v. Messenger (1874) 43 L.J.Ch. 449.Google Scholar

8 [1913] A.C. 319, 322.

9 This interpretation is the one adopted by Mason and Deane JJ. in Legione v. Hateley (1983) 46 A.L.R. 1, 26.Google Scholar

10 [1916] 1 A.C. 275, Viscount Haldane, Lords Parker of Waddington and Sumner, admittedly a very strong Board.

11 (1913) 7 S.L.R. 20.

12 [1916] 1 A.C. 275, 279.

13 Ibid.

14 [1916] 1 A.C. 275, 280.

15 (1874) 43 L.J.Ch. 449.

16 (1874) 43 L.J.Ch. 449, 456, Jessel, M.R. See too Buckland v. Farmer & Moody [1979] 1 W.L.R. 221, 235–236, Goff L.J.Google Scholar

17 The obvious incorrectness of the explanation has been noted: see Tropical Traders Ltd. v. Goonan (1964) 111 C.L.R. 41, 53–54, Kitto J. (where an alternative explanation was offered) and Legione v. Hateley (1983) 46 A.L.R. 1, 26, Mason and Deane JJ.Google Scholar

18 See McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 478, Dixon J.Google Scholar

19 [1916] 2 A.C. 599, Lord Buckmaster L.C., Viscount Haldanc, Lords Atkinson, Shaw and Parmoor. The case was on appeal from the Supreme Court of Canada (1913) 49 S.C.R. 360. That court had necessarily applied Kilmer. The judgment of Duff J. repays attention.Google Scholar

20 [1916] 2 A.C. 599, 604.

21 See Wilson v. Kmgsgate Mining Industries Ply. Ltd. [1973] 2 N.S.W.L.R. 713, 734, Wootten J.Google Scholar

22 [1974] 1 W.L.R. 816 (C.A.). Cf. Sport International Bussum B.V. v. Inter-Footwear Ltd. [1984] 1 All E.R. 376, 385 (C.A.).Google Scholar

23 See Harold Wood Brick Co. Ltd. v. Ferris [1935] 2 K.B. 198 (C.A.) where there was a similar provision.Google Scholar

24 [1974] 1 W.L.R. 816, 825, on the authority of the Dagenham and Kilmer cases.Google Scholar

25 The cases are collected in Legione v. Hateley (1983) 46 A.L.R. 1, 15, Gibbs C.J. and Murphy J.; Mason and Deane JJ. at p. 27.Google Scholar

26 Tropical Traders Ltd. v. Goonan (1964) 111 C.L.R. 41.Google Scholar

27 (1983) 46 A.L.R. 1, Gibbs C.J., Mason, Murphy and Deane JJ.; Brennan J. dissenting. The proceedings were brought by the surviving purchaser, her husband having died in the meantime.Google Scholar

28 Mason, Brennan and Deane JJ.

29 Gibbs C.J., Mason, Murphy and Deane JJ.

30 (1983) 46 A.L.R. 1, 13, Gibbs C.J. and Murphy J.; Mason and Deane JJ. at pp. 28–29.Google Scholar

31 (1983) 46 A. L. R. 1, 28–29, Mason and Deane JJ.

32 (1983) 43 A.L.R. 1, 15.

33 (1983) 46 A.L.R. 1, 16.

34 Ibid.

35 (1983) 46 A.L.R. 1,28.

36 (1983) 46 A.L.R. 1,32.

37 In both Legione v. Hateley and Kilmer, there were circumstances that led the purchaser to believe that the vendor would not insist upon his strict legal rights.

38 In virtually all the cases in which relief has been considered appropriate, the purchaser has tendered performance shortly after the due date. For example, in Legione v. Hateley it was tendered only four days late, and in Brickies v. Snell only three.

39 The risk that the vendor may be grossly overcompensated if the forfeiture stands emerges as one of the most important factors in the cases. Most of them emphasise the “penal” nature of the forfeiture stipulation (the Dagenham case, Kilmer, Steedman v. Drinkle, Starside Properties Ltd. v. Mustapha), meaning that the instalments of the price that have been paid could exceed any loss of bargain damages that the vendor might expect to receive. In three of the cases the purchaser had made improvements, substantial or otherwise, to the property (the Dagenham case, Kilmer and Legione v. Hateley). In Kilmer the vendors, after terminating the contract, had entered into a new contract of sale at a price that was 25 per cent, higher than that under the original contract.

40 Legione v. Hateley (1983) 46 A.L.R. 1, 32, Mason and Deane JJ.Google Scholar

41 (1983) 46 A.L.R. 1, 16, Gibbs C.J. and Murphy J.; Mason and Deane JJ. at p. 32.Google Scholar

42 In his dissenting judgment, Brennan J. concluded by saying that “the respondent has sought no remedy against the appellants for unjust enrichment, and therefore that question has not been considered” (1983) 46 A.L.R. 1, 40. It would be interesting to know on what basis such proceedings might have been brought. In his judgment, Brennan J. followed the orthodox view that specific performance could not be given to a purchaser who had failed to comply with a term of which time was of the essence.

43 (1983) 46 A.L.R. 1, 28, Mason and Deane JJ.

44 A decision of the Court of Appeal in Chancery.

45 Decisions of the Court of Appeal in Chancery should generally be followed by the Court of Appeal unless there is a sufficient reason for departing from them: Mills v. Jennings (1880) 13 Ch.D. 639, 648 (C.A.).Google Scholar

46 [1935] V.L.R. 114, Lowe J. The correctness of this decision was left open in Legione v. Hateley.Google Scholar

47 [1938] Ch. 253.

48 In the report of the case in (1937) 54 T.L.R. 225, 227, the reasons for the plaintiffs inability to pay owing to the financial crisis then prevailing in Australia are outlined more fully.

49 Time was expressly of the essence.

50 See Stockloser v. Johnson [1954] 1 Q.B. 476, 492, Denning L.J.Google Scholar

51 It is often difficult to tell whether a purchaser was able to complete or not: see, for instance Smyth v. Jessep [1956] V.L.R. 231, and Re Hoobin, deed. [1957] V.R. 341.Google Scholar

52 [1954] 1 Q.B. 476 (C.A.).

53 Waddams, S. M., The Law of Contracts (1977), p. 279.Google Scholar

54 [1954] 1 Q. B. 476, 501.

55 [1938] Ch. 253, 264, Farwell J.

56 [1954] 1 Q.B. 476, 500. The weight of Commonwealth authority is certainly against Romer L.J. on this point. See, e.g., the influential dicta in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 470, Starke J.; 478 Dixon J., at p. 478, which have always been followed in Australia.Google Scholar

57 Romer L.J. was forced to explain the Dagenham and Kilmer cases in a way that is unconvincing. He could not explain Steedman v. Drinkle and was obliged to cast doubt upon its correctness. It is surprising to find it said in Goff and Jones, The Law of Restitution, 2nd ed., p. 382, n.72, that “the balance of authority supported Romer L.J.'s analysis.” It did not.

58 [1954] 1 Q.B. 476, 495.

59 The consumer protection legislation of the 1960s and 1970s (now to be found in the Consumer Credit Act 1974, the Unfair Contract Terms Act 1977 and the Sale of Goods Act 1979) was enacted as a direct response to the “bastard laissez-faire” that infected judicial decisions in the 1950s and 1960s.

60 [1954] 1 Q.B. 476, 486, Somervell L.J.

61 [1954] 1 Q.B. 476, 489, Denning L.J.

62 [1954] 1 Q.B. 476, 490, Denning L.J.

63 Galbrailh v. Mitchenall Estates Ltd. [1965] 2 Q.B. 473, Sachs J. ; Windsor Securities Ltd. v. Loreldal Ltd., The Times, 10 September 1975, Oliver J.Google Scholar

64 Sachs J. did so because he believed that Romer L.J.'s view was supported by the decision of the Court of Appeal in Campbell Discount Co. Ltd. v. Bridge [1961] 1 Q.B. 445. The Court of Appeal may have done so inferentially, though it was not made explicit. Oliver J. did so because as Vacation Judge he considered it safer to err on the side of conservatism.Google Scholar

65 The Afovos [1980] 2 Lloyd's Rep. 469, 478–479, Uoyd J.Google Scholar

66 Smyth v. Jessep [1956] V.L.R. 230. The Australian courts have tended to reach the conclusion that relief against forfeiture may be given to a purchaser who cannot complete because of dicta in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457, 470, Starke J.; Dixon J. at p. 478, rather than because of anything said in Stockloser v. Johnson. See, e.g., Coates v. Sarich [1964] W.A.R. 2.Google Scholar

67 S.49(2) applies only to contracts for the sale and exchange of any interest in land: s.49(3).

68 (1933) 48 C.L.R. 457, 478, italics mine.

69 On t he same page Dixon J. spoke of “a forfeiture from which the purchaser is entitled to be relieved.” It is very odd that tie should have regarded an equitable remedy as available as of right.

70 For an example of this, see Coates v. Sarich [1964] W.A.R. 2.Google Scholar

71 Bridge v. Campbell Discount Co. Ltd. [962] A.C. 600, 624.

72 (1882) 21 Ch.D. 243, 258.

73 Pye v. British Automobile Commercial Syndicates Ltd. [1906] 1 K.B. 425, 430, Bigham J.Google Scholar

74 [1974] 1 M.L.J. 89 (Lords Hailsham, Hodson and Cross), on appeal from the Federal Court of Malaysia [1969] 2 M.L.J. 253.

75 Which is in the same terms as s.74 of the Indian Contract Act 1872.

76 [1972] 1 M.L.J. 89, 91, Lord Hailsham L.C., citing Wallis v. Smith.Google Scholar

77 [1972] 1 M.L.J. 89, 94.

78 [1924] A.C. 980.

79 [1972] 1 M.L.J. 89, 91.

80 [1972] 1 M.L.J. 89, 94. The Board considered that there was “nothing unusual or extortionate” in a 10 per cent, deposit [1972] 1 M.L.J. 89, 93, and this was followed and applied by Oliver J. in Windsor Securities Ltd. v. Loreldal Ltd., The Times, 10 September 1975. It has been suggested that a 50 per cent, deposit might be penal: Stockloser v. Johnson [1954] 1 Q.B. 476, 491, Denning L.J., and that if the balance of the purchase price is payable a short time after the deposit, a 334 per cent, or even a 25 per cent, deposit “might well be held to savour of a penalty”: Re Hoobin, decd. [1957] V.R. 341, 349, O'Bryan J.Google Scholar

81 [1972] 1 M.L.J. 89, 94. Lord Hailsham referred with approval to a passage in Howe v. Smith (1884) 27 Ch.D. 89, 95, where Cotton L.J. made this point.Google Scholar

82 Working Paper No. 61: Penalty Clauses and Forfeiture of Monies Paid (1975), § 65.Google Scholar

83 Cf. Windsor Securities Ltd. v. Loreldal Ltd. The Times, 10 September 1975Google Scholar

84 Working Paper No. 61, § 66.

85 See the criticisms in Waddams, loc. cit., pp. 280–281.

86 S.49(2) is considered in detail infra.

87 Dinn v. Grant (1852) 5 De G. & Sm. 451.

88 Pettitt v. Pettitt [1970] A.C. 777, 795, Lord Reid. See too Ramsden v. Dyson (1866) L.R. 1 H.L. 129, 141, Lord Cranworth L.C.; Lord Wensleydale at p. 168.Google Scholar

89 There is some authority for this suggestion: see the Dagenham case, (1872) L.R. 8 Ch.App. 1022, 1024 for t h e order proposed by Lord Romilly M.R. at first instance.Google Scholar

90 Cf. Legione v. Hateley, where the Australian High Court was strongly influenced in its view by the improvements that the purchasers had made.

91 In The Scaptrade [1983] 2 A.C. 694, 702, Lord Diplock restricted this type of relief to cases that involved the transfer of proprietary or possessory rights. See too Sport International Bussum B.V. v. Inter-Footwear Ltd. [1984] 1 All E.R. 376, 382–385 (C.A.).Google Scholar

92 Hyundai Shipbuilding & Heavy Industries Co. Ltd. v. Pournaras [1978] 2 Lloyd's Rep. 502 (C.A.); Hyundai Heavy Industries Co. Ltd. v. Papadopoulos [1980] 1 W.L.R. 1129 (H.L.).Google Scholar

93 Hyundai Heavy Industries Co. Ltd. v. Papadopoulos [1980] 1 W.L.R. 1129 (on the view of Viscount Dilhorne, Lords Edmund-Davies and Fraser).Google Scholar

94 Hyundai Shipbuilding & Heavy Industries Co. Ltd. v. Pournaras [1978] 2 Lloyd's Rep. 502, 508–509, Roskill L.J.Google Scholar

95 Sea and Land Securities Ltd. v. William Dickson and Co. Ltd. [1942] 2 K.B. 65, 69, Mackinnon L.J.Google Scholar

96 The Scaptrade [1983] 2 A.C. 694, 700, Lord Diplock.Google Scholar

97 Something of a misnomer as no element of demise is involved.

98 See, e.g., The Afovos [1980] 2 Lloyd's Rep. 469Google Scholar

99 Mardorf Peach & Co. Ltd. v. Attica Sea Carriers Corporation of Liberia [1977] A.C. 850, 873–874.Google Scholar

1 [1980] 2 Lloyd's Rep. 469.

2 Scandinavian Trading Tanker Co. A.B. v. Flota Petrolera Ecuatoriana [1983] 2 A.C. 694 (Lords Diplock, Keith, Scarman, Roskill and Bridge). Followed and applied in Sport International Bussum B.V. v. Inter-Footwear Ltd. [1984] 1 All E.R. 376 (C.A.) (a case concerned with the licensing of names and trademarks)Google Scholar

3 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 722, Lord Wilberforce.Google Scholar

4 Though as Lord Diplock recognised ([1983] 2 A.C. 694, 702–703), the penal nature of the withdrawal clause could only be relevant if the charterer were claiming back moneys which he had paid as hire, but which he alleged exceeded the value of any benefits that he had received.

5 [1983] Q.B. 529, 540–541.

6 Some of the remarks in Sport International Bussum B.V. v. Inter-Footwear Ltd. [1984] 1 All E.R. 376, 384–385 (Oliver and Ackner L.JJ.) seem to be a little too cautious about the jurisdiction.Google Scholar

7 Wolstenholme & Cherry's Conveyancing Statutes, 11th ed., (1925), Vol. I. The comment is reproduced in the 13th ed. Vol. I, p. 125.Google Scholar

8 [1895] 2 Ch. 603 (C.A.).

9 Before the Act, similar provisions were common form in contracts for the sale of land.

10 Either because it is such that the purchaser could be “turned out of possession tomorrow” (Re Scott and Alvarez's Contract [1895] 2 Ch. 603, 613, Lindley L.J.), or because the property is subject to an incumbrance that would substantially impede the purchaser's enjoyment of the land (Nottingham Patent Brick and Tile Co. v. Butler (1886) 16 Q.B.D. 778 (C.A.); Simpson v. Gilley (1923) 92 L.J.Ch. 194).Google Scholar

11 “It is impossible for a vendor, knowing of a defect in his title, either by himself or his agent to put forward conditions of sale which are to force upon a purchaser a bad title of which he knew, but which he did not disclose”: Nottingham Patent Brick and Tile Co. v. Butler (1886) 16 Q.B.D. 778, 786, Lord Esher M.R. See too Simpson v. Gilley (1923) 92 L.J.Ch. 194.Google Scholar

12 Re Scott and Alvarez's Contract [1895] 2 Ch. 603 (C.A.). See too Re National Provincial Bank of England and Marsh [1895] 1 Ch. 190.Google Scholar

13 Re Scott and Alvarez's Contract [1895] 2 Ch. 603, 614, Lindley L.J. Cf. Lopes L.J. at p. 614, who was not convinced of the injustice.Google Scholar

14 Re Scott and Alvarez's Contract.

15 The present writer knows of no case in which this has happened.

16 [1895] 2 Ch. 603, 614.

17 This might be the case if the vendor had no title at all to the land. Cf. Rowland v. Divall [1923] 2 K.B. 500 (C.A.).Google Scholar

18 If the vendor's title is wholly bad, these may be irrecoverable, because even if the forfeiture clause is penal, it will not be unconscionable for the vendor to retain such payments in the circumstances, because his loss will be something like the amount that the purchaser had contracted to pay for the land, and is likely therefore to exceed the total of any such payments.

19 Although it is doubtless true that “a decision under the subsection that the deposit should be returned to the purchaser seems to me in all normal circumstances to involve a decision that the contract is at an end” (Schindler v. Pigault (1975) 30 P. & C.R. 328, 337, Megarry J.) in the sense that it terminates the contract as regards future performance by the parties, it is suggested that there is no warrant in the section for holding that it affects accrued rights to sue for damages: see Lucas & Tait (Investments) Ply. Ltd. v. Victoria Securities Ltd. [1973] 2 N.S.W.L.R. 268, 273, Street C.J. in Equity.Google Scholar

20 Charles Hunt Ltd. v. Palmer [1931) 2 Ch. 287; Faruqi v. English Real Estates Ltd. [1979] 1 W.L.R. 963. In some cases the subsection has been employed erroneously in circumstances where it was in fact the vendor who was in breach of contract, so that the purchaser was entitled to recover his deposit as of right: see Finkielkraut v. Monohan [1949] 2 All E.R. 234, by way of example.Google Scholar

21 Universal Corporation v. Five Ways Properties Ltd. [1978] 3 All E.R. 1131, Walton J. Vaisey J. inclined to this view in James Macara Ltd. v. Barclay [1944] 2 AH E.R. 31, 32. In Australia (where opinion has been sharply divided), there is support for the narrow view in some decisions in Victoria (which has an equivalent provision): Re Hoobin, decd. [1957] V.R. 341, 350–351, O'Bryan J.; Yammouni v. Condidorio [1959] V.R. 479, Monahan J.Google Scholar

22 Universal Corporation v. Five Ways Properties Ltd. [1979] 1 All E.R. 552 (C.A.).Google Scholar

23 It will be futile if the vendor's damages for breach of contract equal or exceed the amount of the purchaser's deposit, because then the court would find itself ordering repayment of the deposit under s.49(2) with one hand, and requiring the purchaser to pay it back as damages with the other.

24 It is noteworthy that S.15(a) of the New South Wales Conveyancing (Amendment) Act 1930 added a subs. 2A to s.55 of the Law of Property Act 1919 that is very similar to s.49(2) of the Law of Property Act 1925. The draftsman obviously assumed that the subsection would have some effect outside the Scott and Alvarez situation because that had already been dealt with by s.55. The New South Wales courts have therefore necessarily taken a broad and flexible view of the jurisdiction conferred by s.55(2A): Lucas & Tait (Investments) Pry. Ltd. v. Victoria Securities Ltd. [1973] 2 N.S.W.L.R. 268, Street C.J. in Equity; Wilson v. Kingsgate Mining Industries Ply. Ltd. [1973] 2 N.S.W.L.R. 713, 734–735, Wootten J.

25 Universal Corporation v. Five Ways Properties Ltd. [1978] 3 All E.R. 1131, 1137, Walton J.Google Scholar

26 Lucas & Tait (Investments) Pty. Ltd. v. Victoria Securities Ltd. [1973] 2 N.S.W.L.R. 268, 273, Street C.J. in Equity.Google Scholar

27 (1975) 30 P. & C.R. 328, 336–337.

28 Shiloh Spinners Ltd. v. Harding [1973] A.C. 691, 723, Lord Wilberforce. Megarry J. relied upon Shiloh, which is of course a case on the first of the three types of relief against forfeiture considered earlier in this articleGoogle Scholar

29 Quaere: was the purchaser in breach of contract? Megarry J. thought not, but discussed the position under s.49(2) in the alternative in case he was wrong.

30 [1978] 3 All E.R. 1121, 1130, Mervyn Davies Q.C. sitting as a Deputy Judge of the High Court. The remarks were obiter.

31 J. T. Farrand, Contract and Conveyance, 4th ed., 205.

32 [1979] 1 All E.R. 552, applying Schindler v. Pigault.

33 [1979] 1 All E.R. 552, 555, Buckley L.J.

34 Ibid.

35 [1978] 3 All E.R. 1131.

36 For a similarly narrow view of the subsection see Michael Richards Properties Ltd. v. Corporation of Wardens of St. Saviour's Parish, Southwark [1975] 3 All E. R. 416, 424–425, Goff J.Google Scholar

37 [1979] 1 All E.R. 552, 556, Eveleigh L.J.

38 Shortly reported in The Times, 21 April 1980, Judge Mervyn Davies Q.C., sitting as a Deputy High Court Judge. The comments in this present article are based on the transcript of the judgment, of which the present writer had sight by courtesy of counsel in the case, which is gratefully acknowledged. There is much of interest in the case. It appears to be authority for the proposition that if a purchaser fails to comply with a notice to complete, which does of course make time of the essence, he does not commit a repudiatory breach. Cf. Hooker v. Wyle [1974] 1 W.L.R. 235, which, with respect, is to be preferred on this point.Google Scholar

39 It is suggested that this is precisely the sort of case in which a court should now grant relief against forfeiture and decree specific performance. It is perhaps not surprising that no argument of this kind was addressed to his Lordship in the light of Steedman v. Drinkle.

40 These considerations are set out in detail because they are wholly absent from the report in The Times.

41 It is suggested that a purchaser who failed to complete because he had been incautious in making his financial arrangements might find it difficult in normal circumstances to recover his deposit under the subsection: Guile v. Teller (1949) 99 L.J. 301.Google Scholar

42 Under the National Conditions of Sale, 20th ed., it is provided by condition 22(3), that if a purchaser fails to comply with a notice to complete, his deposit “may be forfeited (unless the court otherwise directs).” Some weight was attached to these words in parentheses in the Universal case [1979] 1 All E.R. 552, 555, Buckley L.J.; Eveleigh L.J. at p. 556 and in a number of cases they have been deleted, though it has been accepted that by so doing, the court's jurisdiction under s.49(2) is not ousted: Michael Richards Properties Ltd. v. Corporation of Wardens of St. Saviour's Parish, Southwark [1975] 3 All E.R. 416, 424–425, Goff J.; Maktoum v. South Lodge Flats Ltd., The Times, 21 April 1980.Google Scholar

43 The relevant words of the subsection are “in any action for the return of a deposit.”

44 Re Wynn, deed. [1952] Ch. 271, 276, Danckwerts J.Google Scholar

* Mr. S. R. Tromans and Professor T. G. Youdan kindly read this article and corrected several mistakes. Their help is gratefully acknowledged.