Ray v Davies

This case concerned a dispute between a vendor, Marion Davies, and purchasers, H. S. Ray and Robert Ray, regarding a contract for the sale of land. The contract stipulated a deposit, followed by the balance of the purchase money payable by instalments over eighteen years, with interest. A key provision allowed the vendors to arrange a mortgage for the balance, with the vendors agreeing to pay the costs of such a mortgage and half the costs of its discharge, provided the mortgage term was not less than three years. The purchasers paid the deposit, took possession, and made payments for eighteen months. When the vendors arranged a mortgage, the purchasers refused to execute it unless the vendors paid a sum claimed for mortgage costs. The vendors disputed this liability, declared their intention to rescind the contract, and initiated an ejectment action. The purchasers then filed a suit seeking an injunction against the ejectment and specific performance of the contract.

The legal issues before the court were whether the purchasers' qualified refusal to execute the mortgage, based on a dispute over costs, constituted a breach entitling the vendors to rescind the contract, and consequently, whether the purchasers were entitled to specific performance. The court also considered whether there was an implied obligation on the purchasers to execute a mortgage if arranged by the vendors in accordance with the contract terms.

The High Court affirmed the decision of the Chief Judge in Equity, holding that the purchasers' refusal to execute the mortgage, even if their claim for costs was not fully justified, was a qualified refusal and did not go to the root of the contract. Therefore, it did not provide grounds for the vendors to rescind. The court reasoned that the purchasers' obligation to execute a mortgage was not a condition precedent to their right to possession, and any breach by the purchasers would be a matter for damages or compensation, not rescission. The court found that the written contract accurately reflected the parties' agreement and that the purchasers had not fundamentally failed to perform their obligations.

The appeal was dismissed, with the court ordering specific performance of the contract in favour of the purchasers, subject to any necessary compensation. The vendors were restrained from proceeding with their action of ejectment.