Summers v Cocks

[1927] HCA 46

40 C.L.R.] OF AUSTRALIA.

321

State.

The real effect of refusing to exercise our jurisdiction is to H-

assist the respondent in evading the payment of the alimony

ordered, and merely because the Victorian law requires notice of

J ones

V.

any apphcation for an attachment in Victorian suits.

J ones.

My opinion is that we should proceed notwithstanding the preliminary objection.

Higgins J.

Summoyis dismissed with costs.

Solicitor for the appHcant, W. H. Drew, Sydney, by Crisp <Sc Crisp.

Sohcitors for the respondent, P. J. Ridgeway <& Schilling.

Coni

f*

B. L.

Raufy

\ra m

Coiuintction

Piytldv

* wk>I19M)2

OdRTB

[HIGH COURT OF AUSTRALIA.]

SUMMERS .A p p e l l a n t

;

P l a in t if f ,

COCKS

R e s p o n d e n t .

D e f e n d a n t ,

ON APPEAL FROM THE SUPREME COURT OF

WESTERN AUSTRALIA.

Vendor and Purchaser—Contract—Sale of hotel—Specific performance— Orounds for

H . C. o r A.

refusal— Hotel deprived of licence— Vendor’s conduct— Want of candvur on part

1927.

of vendor— Discretion of Court—Damages— Licensing Act 1911-1922 (W .A.)

{No. 32 of 1911—N o. 39 of 1922), secs. 84-95.

P e r t h ,

Sept. 12, 13,

In December 1926 S. sold to C. certain land in Western Australia on which

14.

was a hotel in respect of which S. held a publican’s licence for the year 1927.

Sydney ,

Possession was to be given to the purchaser on 12th January 1927.

On 11th

Nov. 22.

January the Licences Reduction Board, pursuant to powers conferred by

sec. 84 of the Licensing Act 1911-1922 (W.A.) enabling it to reduce the number

of licences in the State, summoned S. to show cause why the hotel should

Starke JJ.

VOL. XL.

21

322 HIGH COURT

[1927.

H. C. OF A.

not be deprived of its licence ; and on 17th February the Board decided to

1927.deprive the hotel of its licence as from 31st December 1927. In an action brought in the Supreme Court against S. for specific performance of the

Summers

V.contract it was held tha t the vendor was not, on the day for giving

Cooks.possession, in a position to give a clean licence to the purchaser and therefore could not complete the con trac t; and, consequently, tha t the vendor was not entitled to a decree for specific performance. On appeal to the High Court, Hdd, by the whole Court, tha t the licence which existed at the date for giving possession was a clean licence, and tha t its validity or efficacy was not affected by the exercise of the power given by the statute to reduce the number of licences ; and, therefore, tha t the contract was binding on the purchaser.

Decision of the Supreme Court of Western Australia (McMillan C.J.) on tha t point reversed.

In the action above referred to, the trial Judge found tha t the vendor had sold the property in December because he knew the licence was then in some jeopardy, and th a t he was wanting in candour to the purchaser, and that through the vendor’s omission to keep the premises in proper repair the licence was lo s t; and held tha t on the facts the vendor’s conduct was such tha t the Court should, in the exercise of its discretion, refuse to grant specific

•

performance of the contract.

On appeal to the High Court,

Held, by Isaacs A.C.J. and Starke J. (Higgins J. dissenting), that the findings of the trial Judge should not be disturbed and tha t they afforded a good ground for his refusal, in the exercise of his discretion, to grant specific performance of the contract.

Decision of the Supreme Court of Western Australia (McMillan C.J.) on tha t point affirmed.

A p p e a l from the Supreme Court of Western Australia.

By an agreement dated 11th December 1926 John Ruthven Sunomers sold to Ernest Edward Cocks, for £4,000, certain land at Carrington, Western Australia (including a building thereon known as the Cecil Hotel) and also certain furniture, &c. ; and possession was to be given to the purchaser on 12th January 1927. On the last-mentioned date Summers held a publican’s Hcence authorizing him to sell and dispose of liquor on the premises, which would, unless forfeited or suspended in the meantime, remain in force until 31st December 1927. On 11th January 1927 the Licences Reduction Board, pursuant to powers in the Licensing Act 1911­ 1922 (W.A.), sec. 84, enabling it to reduce the number of licences in the State, summoned Summers to show cause why the hotel should not be deprived of its licence, and on 17th February the

40 C.L.R.] OF AUSTRALIA.

323

Board decided to deprive the premises of the licence as from R-

̂

1927.

31st December 1927. Cocks having refused to perform the contract,

'

Summers brought an action in the Supreme Court in which he

SUMMBBS

V.

claimed (1) specific performance of the agreement and (2) further

Cocks.

or other relief. Summers died before the hearing of the action, which was thereupon carried on by his executrix, Isobel Summers.

The action was heard by McMillan C.J., who, on 15th July 1927, held that the defendant was entitled to judgment on the ground that Summers was not in a position to give a clean licence on the day fixed for completion and that time in such cases as this was of the essence of the contract; and that, consequently, the vendor could not complete the contract. He also found that Summers took effectual steps to sell the property because he knew the licence was in much greater jeopardy than a licence in ordinary circumstances would be, and that Summers was wanting in candour towards the defendant; and his Honor said that on the facts of the case he did not think it would be just to grant a decree of specific performance, which would make the purchaser carry a burden which, in his opinion, should be borne by the vendor, through whose omission to keep the premises in proper repair the licence was lost. His Honor therefore held that, even if there was a contract enforceable in law, the Court should, in the exercise of its discretion, refuse to grant specific performance; and he gave judgment for the defendant.

From that decision the plaintiff now appealed to the High Court. Further facts and the arguments sufficiently appear in the

judgments hereunder.

Davy and Abbott, for the appellant.

Keenan K.C. and P. O'Dea, for the respondent.

Cur, adv. vuU.

The following written judgments were delivered :—

Nov. 22.

Isaacs A.C.J. On the whole I am of opinion that this appeal should be dismissed so far as it relates to specific performance. There is great weight in the various considerations of which Mr. Davy in his able argimient made the most. But when the circumstances are balanced as a whole, it seems to me the learned Chief Justice

324 HIGH COURT

[1927.

H. C. or A. of Western Australia adopted the right course in refusing specific

performance. In previous cases—most recently Fullers’ Theatres Ltd.

SUMMEBS

V. Musgrove (1) and Norton v. Angus (2)—I have stated my view of

V.

Cooks.the duty of the Court in relation to that remedy; and I need not

repeat it.

I would, however, further refer to the judgment of Lord

Isaacs A.C.J.

Parker of Waddington in Stickney v. Keeble (3). Applying the principles there stated, I think there are elements in the present case which should induce the Court to withhold its hand from granting the remedy asked fo r; and leave the appellant to recover such redress as the law absolutely entitles her to. I t is stated in the judgment of McMillan C.J. that the vendor certainly misled the purchaser as to the attitude of the Board, though without any fraudulent intent, and he did not inform him on 14th January ” (should be 12th January) “ that he had received a summons which showed that his licence was not then a perfectly clean one.” I t was the soHcitor who, in Summer’s absence, next day told defendant of the summons. Now, although the day for completion was 12th January, yet the summons was served on 11th January, and the position of the hcence was then certainly precarious. The attitude of the Board was a material circumstance in gauging the chances of the hcence, and, from the nature of the property, great candour was necessary. Moreover, according to practice, as we were told, though I say nothing as to the correctness of the practice, the compensation paid on dehcensing is altogether incommensurate with the value of the property as a hotel. Reviewing the situation as a whole, and seeing that the respondent was in no way chargeable with fault in leading to the result of dehcensing, I arrive at the conclusion stated. But this is a case where specific performance could be granted, and should be granted but for the attendant circumstances, which confer discretion on the Court to exclude the apphcation of its jurisdictional power. I adopt the statement of my brother Starke as to the facts and reasoning leading both to the defendant’s breach of contract and to the refusal of specific performance. The Court may, under the Judicature Act, substitute for the specific remedy that of damages. To this the appellant is justly entitled failing specific performance

if she desires to have an inquiry.

^

(1) (1923) 31 C.L.R. 524, at pp. 548, 549.

(2) (1926) 38 C.KR. 523, at p. 633.

(3) (1915) A.C. 386, a t p. 419.

325

40 C.L.R.]

OF AUSTRALIA.

The order of the Court should be as follows :—Appeal allowed.. .

1927.

Judgment of 15th July 1927 discharged.

Declare that the plaintiff

SUMilEBSV.

is not entitled to specific performance of the agreement dated 11th

December 1926 in the pleadings mentioned and adjudge accordingly.Cocks.

Order that inquiry be made in Supreme Court, if so required by the

Isaacs A.C.J.

plaintiff by notice in writing delivered to the defendant or his sohcitor within two months of the date of this order, what sum ought to be allowed and paid by the defendant to the plaintiff by way of damages for non-perfoimance of such agreement. Order parties abide their own costs of this appeal. Reserve costs of action and of the inquiry (if made) to be dealt with by the Supreme Court of Western AustraUa. Remit cause to the said Supreme Court to be dealt with in accordance with this judgment.

H ig g in s J. Judgment has been entered for the defendant in an action for specific performance, brought by vendor against purchaser. The action was tried before the Chief Justice of the Supreme Court; and his grounds for refusing relief to the plaintiff are (1) that at the time fixed for the performance of the contract (12th January 1927) the plaintiff was not in a position to complete the contract; and (2) that, even if the contract is good at law, the Court should not in its discretion grant specific performance, because, it is said, the vendor had omitted to disclose a material circumstance.

As to the first ground, the contract being for the sale of a hotel, it is not disputed that time was of the essence of the contract (see Day v. Luhke (1); Cowles v. Gale (2)).

The facts have been stated, and I need not repeat them in detail. The time fixed for completing the contract was 12th January 1927 ; and, so far as I can find, no one has pointed out any duty imposed by the contract on the plaintiff which the vendor. Summers, was not on that date ready and willing to perform. He had actually procured from his mortgagee an instrument discharging his mortgage, had executed the transfer of the land in favour of the purchaser, and was ready to hand over the furniture, plant and stock. Even as to the pubhcans’ general licence, the vendor and the purchaser had jointly signed the application to the Licensing Court for transfer ;

(1) (1868) L R . 5 Eq. 336.

(2) (1871) L.R. 7 Ch. 12.

326 HIGH COURT

[1927.

H . C. OF A. for under the Licensing Act of 1911 any transfer has to be made by

the Court, not by the parties ; and the transfer is at the discretion

Stjmmebsof the Court (sec. 56). I t is contended, however (defence, par. 3

V.

Cooes.(b)) that “ at the time for performance of such agreement the HIggina J.plaintiff was not in a position to complete same ” ; and this conten­

tion is based on the fact that on 11th January the vendor had received a summons from the Licences Reduction Board to show cause why the hotel should not be deprived of its hcence under sec. 89 of the Act. This summons, it is said, made all the difference, and prevented the vendor from estabhshing that he had a “ clean ” hcence, available for the purchaser on 12th January. On 17th February the Board deprived the hotel of its licence as from 31st December 1927—the expiration of the current period. The hcence could not be renewed for any time subsequent (sec. 95), but the hcence held good until the current period ended. The hcence was a “ clean and valid ” licence, though, if an order should be made for deprivation, it would be for a shorter term than was hoped.

Now, when one looks at the contract, dated 11th December 1926, it is easily seen that there is no condition to the effect that the contract is not to take effect in the event of the Licences Reduction Board exercising its power to deprive the premises of the hcence. The purchaser made his contract subject to that risk ; and if the summons had been served on 13th January, the day after the day fixed for completion, the damage done to owner would have been the same. This seems to me to be a sufficient answer to the first ground stated by the learned Judge.

As for the second ground, that specific performance should be refused because the vendor had omitted to disclose a material circumstance, if the material circumstance referred to is the fact of the receipt of the summons, there is some misapprehension as to the facts. The summons was received by Summers on the evening of 11th January, and, according to Mr. Abbott, the plaintiff’s solicitor, it had been disclosed to the defendant and his solicitor on or before the 12th. Mr. Abbott says : “ On 12th” January “ O’Dea ” (sohcitor) “ and Cocks " (defendant) “ came to my office after I had seen my chent ” (Summers). “ They asked

if Summers were there.

I said : No, that I had full authority to act.

40 C.L.R.] OF AUSTRALIA.

327

They asked what was proposed to be done with respect to the R-

^ ^

.

1927.

notice ” (summons) “ served. I said ‘ I t did not concern us.’ I t

‘

was then suggested by Cocks that the matter should remain in

Sttmmeks

V.

abeyance till after hearing of summons.” Yet, according to theCooks.

judgment below, Smnmers “ did not inform him ” (the purchaser

Higgins J.

Cocks) “ on 14th January that he had received a summons.” But

the purchaser knew of the summons on the 12th.

It was not contended that the Licensing Court would not consent to transfer the licence such as it was : no such point has been taken either in the pleadings or in argument. There is no doubt that the existence of this summons from 11th January onwards would impair the value of the hotel in the m arket; but this fact is not a ground for the statement that the vendor was not in a position to complete his contract on 12th January. All that the vendor had to show, under the contract, was that-on 12th January he had a valid and effectual licence on that date (Tadcaster Tower Brewery Co. v. Wilson (1) ); and this is shown, ka for the ulterior action of the Court and the Board, the purchaser took the risk. As the Chief Justice rightly says : “ There is always a possibility that the licence may be determined, and the purchaser buys the house and the licence with the ordinary risks attaching to it.” Subject to any express stipulations, gains from the property and losses to the property fall to the purchaser from the date he becomes owner ; and he was the owner, in equity, of this real property, although the formal conveyance has not been executed.

The law on the subject seems to be undoubted. I t is summarily stated by Jessel M.R. in Lysaghi, v. Edwards (2) ;—“ The moment you have a vahd contract for sale the vendor becomes in equity a trustee for the purchaser of the estate sold, and the beneficial owner­ ship passes to the purchaser . . . . If anything happens to the estate between the time of sale and the time of completion of the purchase it is at the risk of the purchaser. If it is a house that is sold, and the house is burnt down, the purchaser loses the house. • . . It it is a garden, and the river overflows its banks without any fault of the vendor, the garden will be ruined, but the loss

(1) (1897) 1 Ch. 705, at p. 710.

(2) (1876) 2 Ch. D. 499, at pp. 506, 507.

328 HIGH COURT

[1927.

H. C. OF-4. ^ 1] purchaser’s.” (And see Mortimer v . Capper (1 ) ; Pooh

V. ShergoU (2) ; Revell v. Hussey (3); Paine v. Meller (4); Rayner

SummersV. Preston (5); Castellain v. Preston (6); Fry on Specific Performance,

V.

Cooks.

6th ed., 429, 637.)

The cases of Counter v. Macpherson (7), Taylor v. Caldwell (8),

Higgins

3 .

Day V. Luhke (9), Cowles v. Gale (10), Howell v. Coupland (11) and Krell V. Henry (12) show certain exceptions which emphasize the rule by showing its qualifications. The position becomes obvious in cases of the sale of shares falling in value after the sale.

To sum up the position as it appears to me :—The vendor was on 12th January 1927 in a position to give the hotel with a valid, subsisting licence in accordance with his contract—a hcence which was operative, at the very best, till the end of December 1927. In the contract there was no warranty that the Licensing Court would transfer the licence to the purchaser: the purchaser took that risk. In the contract there was no warranty or condition that the Licensing Court would not refuse to transfer the hcence or to renew the hcence, or that the Licences Reduction Board would not forbid the renewal: the purchaser took those risks. The parties were contracting as to a hotel under the Licensing Act of 1911, and must be taken to know what could happen under that Act (secs. 56, 63). In efiect, the purchaser has said to the vendor; “ Whatever hcence you have, whatever be the chance of transfer to me and of renewal to me, I wiU buy it.” Then the ordinary rule apphes that if after the contract events happen which enhance or depreciate the value of the thing sold, in the absence of stipulation or condition to the contrary the purchaser is entitled to the benefit of any enhance­ ment and must submit to the burden of any depreciation. The vendor did all that was incumbent on him to do under the contract, and the purchaser cannot refuse to complete on the ground that his bargain is a bad one. The case of In re lA'ard ani Jordan’s CarUrad

(13) does not affect this position.

I t is enough for the present

(1) (1782) 1 Bro. C.C. 156.(8) (1863) 3 B. & S. 826.

(2) (1786) 2 Bro. C.C. 118.(9) (1868) L.R. 5 Eq. 336.

(3) (1813) 2 BaU & B. 280.(10) (1871) L.R. 7 Ch. 12.

(4) (1801) 6 Ves. 349.

(11) (1874)L,R. 9Q.B. 462; (1876)1

(5) (1881) 18 Ch. D. 1, a t p. 6.

Q.B.D. 358.

(6) (1883) 11 Q.B.D. 380, a t p. 385.(12) (1903) 2 K.B. 740.

(7) 1845) 5 Moo. P.C.C. 83,

(13) (1902) 1 Ir. R. 73.

40 C.L.R.] OF AUSTRALIA.

329

purpose to say that that was a case of alleged misrepresentation at R-

the making of the contract, not a case of something happening after

̂

the contract which tended to depreciate the value of the subject

SUMMEBS

V.

matter of the contract.

Cocks.

As for the second point—that even if the contract “ stands at law,” this is not a case in which the Court will, in its discretion, grant specific performance—I confess that I am at a loss. I do not clearly understand the learned Judge. The refusal to grant specific performance is based solely on the statement that “ there was an omission to disclose a material circumstance.” What was the material circumstance ? If what is referred to is a failure, at the time of the contract, to disclose that the Board intended to deprive the hotel of the hcence, the simple answer is that the vendor did not know of the intention, or even of an intention to issue the summons to show cause. The contract was made on 11th December and the summons was served on 11th January ; and there is not any evidence that the vendor knew before 11th January of either intention. On 30th September, after the members of the Board (who happened also to form the Licensing Court) had inspected the premises, the Chairman wrote saying that a septic tank which the Court had ordered to be in.°talled had not yet been provided, and that for the time being the septic tank need not be proceeded with ; but that is all. The memorandum made by the Chairman after the inspection, explaining the reason for suspending the order for the septic tank, was not communicated to the vendor, was objected to at the trial, and was certainly not evidence; nor does his Honor express himself as relying on it. If, however, what is referred to is the omission to keep the premises in proper repair, the premises were inspected for a week before his contract by the purchaser ; and he saw the condition of the premises. The condition of the premises was, no doubt, taken into consideration in the price to which the vendor agreed—£4,000 instead of £5,500 as first proposed by the vendor.

Siggius J.

For my part, therefore, I see no reason why the prayer for specific performance should be refused. I regret to find that in this opinion I am differing from my learned brothers, who, in allowing the appeal, think that the vendor should be left to recover damages in heu of

330 HIGH COURT

[1927.

H. C. O F A,

specific performance. I understand that specific performance of

1927.

the contract is to be refused, as a matter of discretion, because of

SUMMEBSsome alleged hardship to the defendant. That one party or the

V.

Cocks.other must suffer hardship because of the order of the Licences

Reduction Board is obvious; but why should the plaintiff be the party to suffer ? The hardship is not due to any conduct or mis­

Higgins J,

conduct of the plaintiff. Where is there any evidence of any want

of candour ? No one specifies any want of candour. The purchaser, as I have said, took the risks ; and, as I understand, it is not the practice of chancery Courts in modern times to refuse specific performance by reason of events subsequent to the contract for which the plaintiff is not responsible {Fry, Specific Performance, 6th ed.,

p.201). I am of opinion that the appeal ought to be allowed, and specific

performance directed.

S t a r k e J. On 11th December 1926 one Summers sold to Cocks for £4,000 cash, free from all encumbrances, certain land in Perth on which was erected the building known as the Cecil Hotel, and also certain furniture. Possession was to be given on 12th January 1927 and all rates, taxes and assessments and hcence fees were to be adjusted to that date. McMillan C.J., who tried the action, held that Summers was not in a position to complete the contract because he could not on the date on which possession should have been given and the sale completed transfer a “ clean ” hcence to the hotel. On that day, however, there was a general pubhcan’s licence in existence in the name of Summers, authorizing him to sell and dispose of hquor on the premises. This hcence, unless forfeited in the meantime, remained in force until 31st December 1927. On 11th January 1927 the Licences Reduction Board, pursuant to powers in the Licensing Act 1911-1922, sec. 84, enabhng it to reduce the number of hcences in the State, summoned the vendor to show cause why the hotel premises should not be deprived of its hcence; and on 17th February 1927 the Board decided to deprive the premises of the hcence. I t was then the duty of the Board to assess the compensation payable in respect of the premises deprived of its hcence ; and on the payment or tender of such compensation the

40 C.L.R.] OF AUSTRALIA.

331

Board causes notice of its decision to be published in the QazeUe,

H. C. or A.

and at the expiration of the current period for which the licence

1927.

was granted the licence ceases, becomes void and cannot be renewed

StrMMBRS

V.

(Licensing Act, secs. 87-95). I t is quite true that the Board, in Cocks.

deciding what premises should be deprived of their hcences, considers

Starke J.

(amongst other things) the character of the accommodation and the manner in which the business has been conducted (sec. 88), but this power to reduce the number of licences in no wise afiects the vaUdity or efficacy of any hcence. The hcence to the Cecil Hotel was not liable to forfeiture or suspension for any contravention of the Act (cf. secs. 175, 116) and was therefore what is caUed a “ clean” hcence (Tadcaster Tower Brewery Co. v. Wilson (1)). Consequently, the decision of the learned Chief Justice on this point cannot, I think, be supported.

The Chief Justice, however, also held that if there was a contract enforceable at law, this case was not one in which the Court should, in the exercise of its discretion, grant specific performance. The discretion is, of coirrse, judicial, exercisable according to rules more or less settled and fixed by the Courts of equity. The Licences Reduction Board, in considering whether the number of licences in the State should be reduced and in determining which licences should cease to be in force, has many matters to consider (see Act secs. 84, 88), but it is common knowledge that the character of accommodation afforded by any hcensed premises and the manner in which the business has been and is being conducted as a place of accommodation and refreshment for the public weigh heavily with the Board (see sec. 88). In the present case the Chief Justice found that the omission of Summers to keep the hotel premises in a proper state of repair led to the premises being deprived of their licence. Moreover, he found also that Summers sold the property because he knew that the licence was in some jeopardy, and that he was wanting in candour towards the purchaser. In my opinion it would be unsafe and wrong for us to disturb these findings of the Chief Justice, who saw and heard the witnesses. If they are correct, the Chief Justice acted within the limits of his judicial discretion in refusing specific performance. Summers or his personal representative

(1) (1897) 1 Ch. 705.

332 HIGH COURT

[1927.

H.C. OF A.is, nevertheless, entitled to his or her remedy in law upon the

1927. contract, and I have no doubt that but for his decision that

StjmmebsSummers was not in a position to complete the contract according

V.

Cooks.to its terms, the Chief Justice would have directed an inquiry as to

damages.

A statute corresponding to the Jud'icaiure Act is in force

Starke J.

in Western Austraha and there was ample jurisdiction in the Supreme Court of Western Austraha to direct such an inquiry in this action. I t is now the duty of this Court to give the directions that the Supreme Court ought to have given. The compensation payable under the Licensing Act will affect the amormt of damages payable by Cocks, but that is not a question on which we need enter.

In the result I agree with the order armounced by my brother

Isaacs.

Order as set out in the judgment of Isaacs A.C.J.

Sohcitors for the appellant, Abbott & Abbott.

Sohcitors for the respondent, O’Dea & O’Dea.