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JUDGMENT
[1] This appeal concerns a parcel of land ("the Property") situate at
Prospect, St. James on the West Coast of Barbados. The Property is owned by
the appellant, Mr Vernon Hope. In 1996 Mr Hope agreed to sell it to Mr Shaka
Rodney, the first respondent. Mr Rodney subsequently assigned his rights and
interests under that agreement to a company called Portfolio Investments Inc.
("Portfolio"). In July, 2000 Mr Rodney and Portfolio instituted these
proceedings against Mr Hope for specific performance of the agreement. The
trial judge, Kentish J, dismissed the action. The Court of Appeal upheld the
subsequent appeal of Mr Rodney and Portfolio. Mr Hope has now appealed the
judgment of the Court of Appeal. For the reasons we give here, we have
determined that his appeal cannot succeed.
THE ESSENTIAL BACKGROUND FACTS
[2] The contract between Mr Hope and Mr Rodney is contained in a formally
drawn agreement dated 6th December, 1996 ("the Agreement"). The purchase
price originally agreed was $395,000, ten per cent of which was paid as a
deposit to Mr Hope's attorney-at-law. Completion was fixed for 28th February,
1997.
[3] The contract was not completed on the scheduled date. Neither party was
then in a position to complete. Mr Hope was not in possession of all the
requisite documents. But even if he had them, Mr Rodney was then in no
position to pay off the balance of the purchase price.
[4] At some stage Mr Rodney executed an assignment of the agreement to
Portfolio, a company of which Mr Rodney was a director and shareholder. The
deed of assignment is undated. During the trial before Kentish J it was
agreed that it should be dated 28th February, 1997. After the assignment was
effected, further negotiations ensued between the parties. Mr Hope was able
to have Portfolio, represented by Mr Rodney, agree to an increase in the
purchase price of the Property to $430,000.
[5] On 4th May, 1998, Mr Hope issued a notice to Portfolio making time of
the essence and requiring the transaction to be completed on or before 26th
May, 1998. Portfolio did not tender the balance of the purchase price but on
the said 26th May it informed Mr Hope that it was ready, willing and able to
complete. On the 3rd June, 1998 Portfolio's attorney-at-law attended the
Chambers of Mr Hope's lawyers waving his cheque book. Portfolio's lawyer
indicated that his client was ready to close the transaction. Mr Hope's
lawyer responded that he was awaiting further instructions from Mr Hope.
Those instructions came two days later when Mr Hope indicated that
completion of the sale had been placed "on hold".
[6] On 31st August, 1998 Portfolio issued Mr Hope with its own notice to
complete the contract. A period of 28 days was given within which Mr Hope
was required to complete. Mr Hope ignored this notice. No further initiative
was taken on the matter by either side until Mr Rodney and Portfolio
launched these proceedings in July 2000 claiming an order for specific
performance.
[7] The claim for specific performance was stoutly resisted by Mr Hope on
four principal grounds. First of all, the defence alleged that as a result
of the purchaser failing to complete on or before 26th May, 1998, the vendor
was entitled to treat the contract as being at an end and to forfeit the
purchaser's deposit. Secondly, Mr Hope denied that there had been any valid
assignment of the Agreement. Thirdly, the defence alleged that the action
should be dismissed on account of delay and laches in the instituting of
proceedings. Fourthly, it was claimed that the purchasers were not entitled
to specific performance because it had not been demonstrated that either
Portfolio or Mr Rodney was truly ready, willing and able to come up with the
balance of the purchase price.
THE FINDINGS OF THE TRIAL JUDGE
[8] The trial judge found that the notice served by Mr Hope on 4th May, 1998
was ineffective. The judge noted that neither party to the contract was in a
position to complete on the original date fixed for completion. As a result,
the judge reasoned, as at 4th May, 1998 the contract was an open one. Basing
herself on
British and Commonwealth Holdings plc v. Quadrex Holding Inc,[FN1] the judge
found that in such circumstances Mr Hope could only validly make time of the
essence if (a) he himself was ready, willing and able to complete, (b) the
purchasers had been guilty of unreasonable delay and (c) the served notice
had given the purchaser a reasonable time within which to complete. The
judge rightly held that Mr Hope's notice floundered on the second of these
conditions as it was only on the very day of its issue, 4th May, that Mr
Hope had overcome all obstacles to the passing of a good title. The first of
the issues raised on the defence was therefore decided in the purchaser's
favour.
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[FN1] [1989] 3 All E R 492
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[9] On the assignment issue, the trial judge found for the vendor. She held
that the assignment was invalid because no express notice of it had been
given to Mr Hope as required by statute. It was on the strength of this
finding that she dismissed Portfolio's claim for specific performance. This
determination of the trial judge and the challenge to it in the Court of
Appeal were the focus of a considerable portion of the legal argument in the
courts below. The issue is now entirely moot. Mr Shepherd QC, counsel for Mr
Hope before the Court of Appeal and this Court, rightly conceded to this
Court that the assignment could not properly be challenged on the ground
that no proper notice of it was given. The relevant statute[FN2] speaks not
of the need to give a notice in writing but rather of the requirement to
give express notice in writing. No formal requirements had therefore to be
met in the giving of notice and on the facts of this case Mr Hope had been
sufficiently made aware in writing that there had been an assignment from Mr
Rodney to Portfolio.[FN3]
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[FN2] Section 214 of the Property Act Cap 236 of the Laws of Barbados
[FN3] See: Van Lynn Developments, Ltd v Pelias Construction Co Ltd [1968] 3
All E R 824
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[10] Having dismissed the claim for specific performance because of her
finding that the contract was not validly assigned to Portfolio, the trial
judge might have ended her judgment there and then without consideration of
the other two defences raised by the vendor. Wisely, the judge thought that,
in case she was held to be wrong on the assignment point (as turned out to
be the case), she should determine the two other issues raised by the
defence as well.
[11] The pleaded issues of laches and delay were fully argued at the trial.
The judge decided this point in favour of the purchaser. She found that
although it might be said that the purchaser had waited an unreasonable
length of time before commencing its action for specific performance, the
vendor had neither pleaded nor proved that he had been prejudiced by the
delay. In the circumstances, the judge ruled that the defence of laches and
delay was untenable. This finding of the judge is unchallenged as there was
no appeal on this point.
[12] Finally, as to the readiness and ability of the purchaser to complete
the transaction, the judge treated this issue as being entirely bound up
with the notice to complete that was served by the purchaser. The focus of
the judge, and indeed the focus of counsel for the vendor at the trial,
centred exclusively on whether, on a balance of probabilities, Portfolio was
ready, willing and able to complete when it served its own notice dated 31st
August 1998. Ultimately the judge held that Portfolio had not shown "that it
had the requisite funds to pay the balance of the purchase price" (our
emphasis) at the time when it issued its notice to complete. On this basis
the judge held that Portfolio's notice to complete was bad.
THE HEARING BEFORE THE COURT OF APPEAL
[13] Ground (iii) of the notice of appeal to the Court of Appeal alleged
that "the learned judge erred in refusing to consider whether the proffering
of a cheque by [Portfolio's] Attorney-at-Law was a valid tender" and ground
(v) claimed that "the decision of the learned Judge is against the weight of
evidence". Despite these two grounds, however, the submissions to the Court
of Appeal appear to have been made exclusively on the issue of the validity
of the assignment. No challenge was made by the purchaser to the specific
finding of the judge that during the period 31st August - 28th September
1998, when the purchaser's notice was running, there was not available to Mr
Rodney or to Portfolio sufficient funds to pay the balance of the purchase
price. Mr Thornhill, counsel for Portfolio, franklyadmitted to this Court
that he had taken the view that if he succeeded in the Court of Appeal on
the assignment point, then that court would be bound to allow the appeal and
order specific performance of the contract.
[14] The Court of Appeal did just as counsel for the purchaser expected. The
judgment of the court concentrated entirely on the validity of the
assignment. The court correctly held that the assignment was valid and,
without expressing any view as to the readiness and ability of the purchaser
to complete, the court reversed the trial judge and made the order for
specific performance. The court did not appear to consider whether, even if
the assignment was valid, the purchaser had indeed demonstrated that it was
entitled to specific performance.
THE SUBMISSIONS BEFORE THIS COURT
[15] Mr Shepherd's submissions on behalf of the vendor were directed at
exploiting this lacuna in the judgment of the Court of Appeal. Counsel
indicated to us that the trial judge had found that Portfolio had not
demonstrated any financial ability to complete at the material time. He
submitted that Portfolio ought not to be allowed to take the benefit of the
equitable remedy of specific performance without first having shown its own
readiness to complete during the currency of its notice. Counsel argued in
two ways. Firstly, he stated, since Portfolio had been unable to complete at
the time which it had by its notice stipulated for completion, the company
was not entitled to specific performance. Secondly, even though it was not
necessary for a claim for specific performance to be hinged on a valid
notice to complete, Portfolio was still not entitled to the remedy as it had
failed to show that it was financially able to complete at any relevant time.
In making these submissions counsel relied on Quadrangle Development and
Construction Co Ltd v Jenner[FN4] and Straits Engineering Contracting Pte
Ltd v Merteks Pte Ltd[FN5]. Citing Coslake v Till[FN6] and Macbryde v Weekes[FN7]
counsel contended that "the relevant time" for this purpose is the time when
the notice to complete becomes effective and time becomes of the essence or
when the party seeks relief and when the decree is to be awarded. According
to counsel the party seeking specific performance must show that it has the
necessary finance at the time which it maintains is the time for closing or
at the time when it is seeking the court's assistance.
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[FN4] [1974] 1 WLR 68
[FN5] [1996] 4 LRC 259
[FN6] (1826) 1 Russ 376; 38 ER 146
[FN7] (1856) 22 Beav. 533; 52 ER 1214
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[16] In answer to these submissions counsel for the purchaser submitted that
the time for completion had not yet arisen and that therefore the time for
testing Portfolio's financial capacity had not yet arrived.
REASONS FOR DECISION
[17] The plain fact is that as a consequence of the trial judge's finding
that neither the vendor's nor the purchaser's notice to complete was valid,
the contract was still in existence after the expiry of the second of those
notices. Each side at that point in time was and remains to this day under
an obligation to perform the Agreement. But crucially, the vendor had
indicated a distinct unwillingness to complete. The vendor laboured under
the misapprehension that because the purchaser had not complied with his
notice to complete of 4th May, 1998, he could treat the contract as at an
end. This continuing stance of the vendor is reflected in his defence and
counterclaim in which he erroneously regards the contract as having been
terminated and also claims a right to forfeit the purchaser's deposit.
Unfortunately for the vendor, that notice of 4th May, 1998 has been held to
be invalid.
[18] In light of the vendor's misguided view on the matter, and
notwithstanding the invalidity of the purchaser's own notice to complete,
the purchaser was entitled to seek specific performance, as he did, by
launching this action in July, 2000. The invalidity of both notices to
complete effectively produced a stalemate. This deadlock together with the
vendor's repudiation of the contract by his indication that he did not
intend to perform his side of the contract, provided a sufficient basis for
the institution of these proceedings by the purchaser. Bringing this action
was one method by which the purchaser could bring matters to a head. A valid
notice to complete is not a prerequisite to the institution of a claim for
specificperformance. It was so held in Woods and others v Mackenzie Hill Ltd[FN8]
and Hasham v Zenab.[FN9]
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[FN8] [1975] 2 All E R 170
[FN9] [1960] A.C. 316
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[19] In this Court, counsel on both sides with the benefit of hindsight
accepted that as at the date of the trial the contract between Portfolio and
Hope was an open one. There was no date for completion. The critical
questions to be answered are: what, for the purposes of this action, is the
relevant time with respect to which the purchaser has to demonstrate that it
is or will be ready, willing and able to complete and secondly, what exactly
is it that the purchaser has to demonstrate.
[20] At the trial before Kentish J the vendor's counsel regarded the
relevant time as the period commencing on the date of the purchaser's notice
to complete and ending at the expiry of that notice. All the
cross-examination of the purchaser and its witnesses was directed to the
purchaser's financial ability at that period. This cross-examination
ultimately persuaded the trial judge to hold ineffectual the purchaser's
notice to complete, but it left untouched the issue of the purchaser's
readiness and ability to complete at the time the writ was filed or at the
date of the trial or at the time when specific performance was ordered or
was to take place.
[21] In assessing the validity of the purchaser's notice to complete the
trial judge made a determination of that party's readiness, willingness and
ability to perform its contractual obligations at the date of service of its
notice to complete. It is true that a party who gives notice making time of
the essence may be in fundamental breach if he is not willing and able to
complete within the time stipulated in the notice but the other party is.
But the situation that faced the trial judge in this case was that both
notices to complete were ineffective; in each case the party served had
failed to respond to the other's notice, and a claim for specific
performance was brought almost two years after the expiry of the later of
those two ineffectual notices. In these circumstances the trial judge was
required to go beyond an assessment of the purchaser's readiness,
willingness and ability to perform its contractual obligations at the date
of service of its notice to complete.
[22] The critical difference between this case and the cases cited by Mr
Shepherd[FN10] is that in each of those cases the court was looking backward,
looking at a particular date for completion that had already elapsed and
assessing what the position of the purchaser was on that date. Was he on
that date ready, willing and able to complete? Here, since both notices were
held to have been ineffectual, there is no date for completion of the
contract, no date on which a party was bound to complete or else lose his
right to enforce the contract. A date is still to be fixed for completion.
The court is still looking to the future.
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[FN10] Quadrangle Development and Construction Co Ltd v Jenner; Straits
Engineering Contracting Pte Ltd v Merteks Pte Ltd; Coslake v Till, supra
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[23] In a contract for the sale of land the purchaser's fundamental
obligation is to pay the purchase price to the vendor in return for the
executed transfer documents at the time fixed for completion if this time is
expressly made of the essence by the contract or by a valid and effectual
notice to complete. If a purchaser files a claim for specific performance,
the purchaser is not under an obligation to have the purchase monies in hand
at the time the claim is filed. In such a case (as the present one) the
vendor will have indicated that he is not willing to perform his side of the
bargain.
[24] So what was the obligation of the purchaser in this case? First of all
the purchaser was required to demonstrate that it was disposed to fulfil its
side of the contract. Portfolio satisfied this obligation by pleading in
paragraph 10 of its claim that it is and was at all material times ready,
willing and able to complete. Secondly, in the circumstances of this case
Portfolio had to support that pleading by demonstrating by evidence at the
trial that it had the capacity to raise the required funds; by showing that
in the event specific performance was ordered it had the ability to come up
with the balance of the purchase price at such time thereafter as a proper
deed of transfer was tendered to it in accordance with the Court's order.
[25] The judge made no analysis along these lines of Portfolio's ability and
we consider ourselves at liberty to peruse the evidence in order to make our
own. The evidence suggests that first of all, Mr Rodney's attorney-at-law, a
family friendand father figure to Mr Rodney, had been prepared to advance
Portfolio the purchase monies. This was no idle promise. It was set out in
writing and indeed the attorney-at-law actually attempted to complete the
purchase on 3rd June, 1998 with his own funds. Secondly, there was
unchallenged evidence that in the expectation of closing the transaction, Mr
Rodney had secured credit facilities from the Caribbean Commercial Bank.
Those facilities were approved on 20th July, 1998 and made available until
31st May, 1999. In keeping with the arrangements made, the bank was
committed to advance to Portfolio a total of $430,000 and a sum of $330,000
was deposited to Portfolio's account on or about 15th July, 1998. Bank
financing was clearly available to the company, to be secured on the
property.
[26] The trial judge's findings on readiness and ability should have been
different if instead of ascertaining whether Portfolio "had the requisite
funds to pay the balance of the purchase price", the focus of inquiry had
been on whether Portfolio had demonstrated the capacity as at the date of
the trial to raise the purchase monies. In circumstances like those in the
instant case the relevant time at which the plaintiff purchaser must have
the capacity to complete by paying off the purchase price is when he deploys
his evidence in support of his claim for specific performance i.e. at the
trial or at the hearing of an application for summary judgment.
[27] The following extract from the judgment of Walton J in Rightside
Properties Ltd v Gray[FN11] neatly illustrates the answer to the two
questions posed above at [19]. Rightside was a case where the vendor had
wrongfully repudiated a contract for the sale of land and the purchaser,
having initially brought an action for specific performance elected at the
trial to claim damages instead. In the course of his judgment the judge
stated that:
"...It appears to me that in consequence [of the vendor's wrongful
repudiation] the plaintiffs were never at any time under any obligation to
show that they were "able" to perform their part of the contract. "Ability,"
in this connection, means arranging the finance, which, under modern
conditions, could be done either by arranging a mortgage or a sub-sale, and
doubtless there are other methods as well. But they all involve some form of
preparation on the part of the person raising the finance; and it appears to
me pessimi exempli if the vendor was in a position to say, "Because you were
not on a particular day ready with your finance, you cannot claim damages
against me. True it is that it would have been perfectly useless for you to
make the preparations because I told you I was not going to complete, but I
can now huff you for having failed to carry out this perfectly useless
exercise." This is the morality of a game, not of a serious legal contest.
But even if I am wrong in my conclusions on this point, it is surely only at
the "material" time(s) that the purchaser must be ready with his finance.
One of such times must have been the time when completion ought to have
taken place ...
Had the plaintiffs claimed specific performance, I think the trial would
then have been another "material time" and the plaintiffs might have had to
show their financial ability to complete at that date. But, as they elected
the other way, the date of the trial cannot, in my judgment, be material for
this purpose".
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[FN11] [1975] Ch. 72 at 88
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[28] In this case as we have pointed out above there was sufficient evidence
to support a finding that at the trial Portfolio had demonstrated its
capacity to raise the balance of the purchase price. In the circumstances
and for the above reasons we are of the view that the Court of Appeal was
right to order specific performance.
[29] Accordingly, the appeal is dismissed. The order for specific
performance made by the Court of Appeal is replaced by the following: Mr
Hope is ordered within forty-five days upon payment made to him by Portfolio
of the balance of the purchase price to do all acts and things necessary to
convey to Portfolio the property more particularly described in the Schedule
to the Agreement. The costs in this Court and the courts below are to be
paid by the appellant to the respondents certified fit for two
attorneys-at-law. |
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