HIGH COURT OF SOLOMON ISLANDS
CIVIL CASE CASE NUMBER 078 OF 1999
<
BARBARA
KIERE AND ELLISON KIERE
v
class="MsoNormal" aal" align="center" style="text-align:center; margin-top:1; margin-bottom:1">HAN SIN CONSTRUCTION LIMITED
HIGH COURT OF SO ISLANDS
(PALMER J.)
CIVIL CASE NUMBER 078 OF 1999
HEARING: 8 OCTOBER 1999
JUDGEMENT: 24
NOVEMBER 1999
C.
ASHLEY FOR THE PLAINTIFINTIFFS
A. RADCLYFFE FOR THE DEFENDANT
PALMER
J.: The Plaintiff,
Barbara and Ellison Kiere are wife and husband. They entered into a Deed of
Sale (hereinafter referred to as "the Deed") with Han Sin
Construction Limited (hereinafter to as "Han Sin") for the
sale of a block of land within Parcel Number 191-011-50. The fixed-term
estate in the said Parcel vas owned by
Han Sin. Their plan was to have the
said land subdivided so that title can vest in the Plaintiffs in respect of
that part
of the land, the subject of the Deed, when the purchase price had
been completed. That Deed was dated 9 October 1999.
Th description of the area orea of land the subject of the Deed is not in dispute.
It is covered under Clause 1 of the Deed.
It is also not in dispute that an
incomplete residential building was still in the process of being completed
on the said
portion of land at the time of signing of the Deed (Clause 2).
The purchase price of $250,000-00 is clearly stated in Clause 3. Clause 4 of
the Deed not only specified what the deposit
was to be, ($70,000-00),
but acknowledged it had been paid at the time of signing of the Deed.
Sub-clause 4.1 required inter alia, payment of
first instalment of
$55,000-00 on completion of building. Sub-clause 4.2 provided for payment of
the balance ($125,000-00) within two years from date of payment of
$55,000-00. Clause 6 provided for the rental payments received to be shared
equally
between the parties and for the half share of the Plaintiffs to be
deducted towards payment of the balance of $125,000-00. This
arrangement was
to be reviewable after every six months.
The
residential building on the said property was completed on or about 15
December 1998 (see affidavit of Ellison Kiere filed 8 October 1999
Exhibit "EK 19" at paragraph 3) and put out for rent on or
about 22nd December 1998. Payment of the first instalment of $55,000-00 fell
due on or about
the same date (22nd December 1998). Plaintiffs
however, have only paid up $30,000-00 of that amount. They had failed
accordingly to comply fully with Sub-clause
4.1; $25,000-00 remained
outstanding. There had thus been partial compliance. This is not disputed by
the Plaintiffs. By
letter dated 12 January 1999, the Defendant through its
Director, Lydia Yeo, gave notice of intention to terminate the Deed
(a
copy of said letter is annexed to affidavit of Lydia Yeo filed 8 October
1999). Shortly thereafter, by letter dated 1 February 1999, the
Respondent purported to terminate the Deed by having a cheque for
the sum of
$100,000-00 paid to the Plaintiffs; being refund of part of the purchase
price paid up to that point of time.
The PThe Plaintiffs now come to Court seeking inter alia, an
order for specific performance of the Deed, primarily on the ground
that
breach of Sub-clause 4.1 did not entitle the Defendant to have the Deed
terminated; merely to sue for damages. The
Defendant argue [sic] on the
other hand, it was entitled to have the Deed terminated for breach of
Sub-clause 4.1.
THE ISSUE:
The
issue which arises for determination turns on simple contractual principles,
whether Sub-clause 4.1 is a condition or
a warranty. A breach of a condition
will entitle the innocent party to treat himself as discharged from further
performance
under a contract and to claim damages for loss sustained by the
breach (see Chitty on Contracts 26th Edition paragraphs 787 and 1727).
The case authority Milichamp and
Others v. Jones [1982] 1 W.L.R 1422, relied on by learned Counsel for
the Defendant, pertained to the issue of breach of a condition (payment of
deposit) which
entitled a vendor to treat the contract as discharged and to
sue for damages. A breach of a warranty on the other hand does
not entitle
him to treat himself as discharged.
At paragraph 794 of Chitty on Contracts (Ibid), the
learned Author states:
"In the modern law, the reason why a breach of a
condition entitles the innocent party to treat himself as discharged has
been said to be that conditions
"go so directly
to the substance of the contract that their non-performance may fairly be
considered by the other party as
a substantial failure to perform the
contract at all" (Wallis,
Son and Wells v. Pratt & Haynes [1911] UKLawRpAC 21; [1910] 2 K.B. 1003, 1012). And the
reason why any breach of condition has this effect has been put on the
ground that the parties are to be
regarded as having agreed that any failure
of performance, irrespective of the gravity of the event that has in fact
resulted
from the breach, should entitle the other party to elect to put an
end to all primary obligation of both parties remaining unperformed
(Photo
Production Ltd v. Securicor Transport Ltd. [1980] UKHL 2; [1980] A.C. 827)."
The
learned Author then went on to explain how a condition may be differentiated
in a contract:
lass="MsoNormal" sal" style="margin-left:36.0pt;tab-stops:112.5pt 222.75pt right 464.5pt; margin-top:1; margin-bottom:1">"The parties may, by express words or by
implication of law, agree that a particular stipulation is to be a condition
of
their contract. But they may also be held to have done so by necessary
implication arising from the nature, purpose and circumstances
of the
contract, and in this respect "There
is no way of deciding that question except by looking at the contract in the
light of the surrounding circumstances,
and then making up one's mind
whether the intention of the parties, as gathered from the instrument
itself, will best be
carried out by treating the promise as a warranty
sounding only in damages, or as a condition precedent by the failure to
perform which the other party is relieved of his liability"
(Bentsen v. Taylor, Sons & Co.
[1893] UKLawRpKQB 122; [1893] 2 Q.B. 274, 281)."
SUB-CLAUSE
4.1 A CONDITION OR WARRANTY?
class="MsoNormal" sal" style="tab-stops:112.5pt 222.75pt right 464.5pt; margin-top:1; margin-bottom:1">Sub-clause
4.1 dea1 deals specifically inter alia, with payment of a specific amount as part
of the purchase price, at a
particular point of time. It provides that the
sum of $55,000-00 was to be paid by the time the residential building was
completed and before the residential building was put out for rent.
Sub-clause 4.2 in turn provided for the payment of the
remainder within a
period of two years from date of payment of $55,000-00. The period of two
years therefore was anticipated
to run from the date of completion of the
building and before it was put out for rental. In the circumstances of this
case,
it would be around 22nd December 1998 and to expire around 22nd
December 2000. That would have been the time span anticipated
under the Deed
for the Plaintiffs to complete payment of the remainder of the purchase
price; $125,000-00. The effect is
this, provided the $55,000-00 was paid on
due date, the Deed would have been enforceable against the Defendant right
up
to December 2000. Looked at from this perspective, there is no way the
failure to pay, $55,000-00 can be regarded as a condition
which entitles the
Defendant to treat itself as discharged from further performance of the
Deed. I am not satisfied it
can be said the breach of Sub-clause 4.1 goes so
directly to the substance of the Deed that its non-performance may fairly be
considered by the Defendant as a substantial failure to perform the Deed at
all. As at time of breach the Plaintiffs had
paid $100,000-00 towards the
purchase price. This meant not the full amount of $55,000-00 was outstanding
as on 22nd December
1998; only part of it, $25,000-00. It is not correct
therefore to say the Plaintiffs had not complied with Sub-clause 4.1. There
had actually been partial compliance. But even if they had managed to comply
with Sub-clause 4.1, they would not have been
required to pay up on the
balance until December 2000. It wasn't the case therefore where the payment
of $55,000-00 was
so vital to the performance of the contract, or went to
the root of performance of the Deed such that further performance was
not
possible. It covered only a portion of the Deed. A failure on the part of
the Plaintiffs to pay that part of the purchase
price therefore, cannot in
my respectful view be regarded as a condition, a crucial term in the Deed,
breach of which entitles
the Defendant to have the Deed terminated. The
partial breach committed by the Plaintiff cannot under ordinary contractual
principles be regarded as amounting to a repudiatory breach of the Deed. I
find the words of the Earl of Selborne L.C. in
Mersey
Steel and Iron Co. v. Naylor, Benzon
& Co. (1884) 9 App.Cas. 434 at page 441 so apposite to the
circumstances of this case:
"I cannot ascribe to
their [the Plaintiffs'] conduct, under these circumstances, the character of
a renunciation of the contract,
a repudiation of the contract, a refusal to
fulfil the contract."
I am not convinced nor satisfied, the partial breach
committed by the Plaintiffs indicate an intention on their part to throw
up
the contract altogether, so as to set the Defendant free. The evidence
couldn't be any clearer. The Plaintiffs acknowledged
they did not fully
comply with Sub-clause 4. 1, but made clear where reason for that failure
lie. Basically they needed
more time to have their loan application
processed and approved. They intended to comply with the terms of the
contract
and maintained that position in spite of their failure to pay the
full amount of $55,000-00 on the due date. The Director of
the Defendant,
Lydia Yeo was aware of this (see Exhibit "EK 6" annexed to the
affidavit of Ellison Kiere filed 4th March 1999). The loan application
of the Plaintiffs for the sum of $150,000-00 was subsequently approved on or
about 20 January 1999
(see Exhibit "EK 3" of same affidavit of
Ellison Kiere). That would not only have paid for the remaining
$25,000-00, but also for the balance of $125,000-00, which would have meant
the time period stipulated in the Deed would have been shortened greatly to
the benefit of the Defendant.
I accept the Defendant was not
obliged to accept the reason given by the Plaintiffs for the delay in
payment of the balance
of $25,000-00. Unfortunately, that did not give the
Defendant right to turn around and seek to have the Deed terminated. The
Defendant's remedy lies only in a claim for damages. The effect of this
meant the Deed was still on foot and the parties
obliged to perform their
obligations where applicable. In conclusion, I find Sub-clause 4.1 to be a
warranty and that its breach did not amount to repudiatory breach that would
entitle
the Defendant to have the Deed terminated.
class="MsoNormal" sal" style="text-align:justify; margin-top:1; margin-bottom:1">FURTHER
PERFORMANCE OF THE DEED
lass="MsoNormal" sal" style="margin-top: 1; margin-bottom: 1">Despite
its breach, tch, the Deed was capable of being performed and the Plaintiffs were
right in demanding that its terms
be complied with. There is no evidence to
suggest the Plaintiffs did not acknowledge they owed the Defendant the sum
of
$25,000-00 as at 22nd December 1998. Even if the Plaintiffs had not paid
the sum of $55,000-00 by date of completion of the
building, as provided for
in Sub-clause 4.1, that would not have affected the further performance of
the Deed. All it would
have meant would have been that all rental payments
received for rental of that house (Clause 6 of the Deed) would have
gone into the pocket of the Defendant alone without any being apportioned to
the Plaintiffs. In this instance,
$30,000-00 of the $55,000-00 had been
paid, as at time of completion of the building and before it was rented out.
That
comes to approximately 54 % of $55,000-00. Rental payments received in
respect of the property accordingly should be apportioned
on a pro rata
basis; that is if the rental for the property was for $3,850-00 per month
the Plaintiffs would only be entitled
to an amount which is 54% of half of
that amount ($3,850-00 ¸ 2 X 54% = $1,039.50). In my respectful view, the rate of 54% of half the
amount of the rental received for the said property should apply until
the
balance of $25,000-00 is paid, plus any damages which the Defendant might
claim in respect of the said breach.
THE FINDINGS OF
THE COURT:
lass="MsoBodyText"Text" style="margin-top: 1; margin-bottom: 1">I find there had been wrongful
repudiation of the Deed by the Defendant.hat extent, the Plaintiffs are
entitled to damages.
Ats. At the same time I find the Plaintiffs only partially
complied with Sub-clause 4.1 of the Deed. The Defendant in turn would
be
entitled to its claim for damages in respect of that partial breach.
It was
suggestedested the remedy for specific performance should not be granted in view
of the breach committed by the Plaintiffs
in that they did not come with
clean hands. Whilst that may be true, the partial breach committed is fully
compensatable
in damages. In other words, damages would be an adequate
remedy. That would adequately address the partial breach complained
of by
the Defendant. Secondly, that breach did not give the Defendant the right to
repudiate the Deed, which meant the
Defendant too had acted contrary to the
terms of the Deed. That in my respectful view balances out any injustices
which
might have been suffered by the Defendant as a result of the partial
breach committed by the Plaintiff.
The
Defendant is obliged to perform its part of the bargain, in particular, the
requirements of subdivision and registration
stipulated in Clause 8 of the
Deed. The Plaintiffs have until December 2000 to come up with the remainder
of the money
currently owing.
THE COUNTER-CLAITHE DEFENDANT
In the counter-claim of the
Defendant, one of rders sought was for the Plaintiffs to vacate the
property and remove their
furniture.ture. What must be understood by the parties
is that the Deed is still on foot and therefore whatever rents had been
received to date must be accounted for in the manner stated in this
judgment, until the balance of $25,000-00 is paid.
Only when that had been
done will the Plaintiffs be entitled to a half share of the rent, subject of
course to whatever
mutual arrangements (if any), may be entered into by the
parties hereafter. The question whether the Plaintiffs reside in the
property and pay rental is a matter between the parties themselves to agree
upon. What they must bear in mind is that the
terms of the Deed apply to the
circumstances of this case whether the property is rented by the Plaintiffs
or not. I see
no need therefore at this point of time to make any orders for
the Plaintiffs to vacate the said property if they are in current
occupation
of the property.
class="MsoNormal" sal" style="tab-stops:92.25pt 120.75pt 281.25pt right 466.4pt; margin-top:1; margin-bottom:1">The second order sought in the counter-claim was for
damages for breach of contract as specified in paragraph 4 of the affidavit
of Lydia Yeo filed 4 October 1999. Sub-paragraph 4(a) sought orders for
payment of half share of the insurance premium
of $901-00. In his affidavit
evidence filed 8th October 1999, at paragraph 2(b), Ellison Kiere deposed he
had paid the
amount of $1,600-00 towards the insurance premium for the
property. No evidence in rebuttal had been filed. I am not satisfied
on the
balance of probabilities the order sought in respect of this claim should be
granted.
lass="MsoBodyText"Text" style="margin-top: 1; margin-bottom: 1">The third order sought, for
damages, as specified in sub-paragraph 4(b) r the amount of $23,267-00,
being part of a loan
obtaiobtained by the Defendant to off-set the non-payment of
the $25,000-00. In my respectful view that claim is directly related
to the
breach of Sub-clause 4.1 and therefore judgment should be entered in favour
of the Defendant. The Plaintiffs however
are entitled to have the principal
amount of that loan off-set from the amount of $25,000-00 still outstanding
in the Deed.
class="MsoBodyText"Text" style="margin-top: 1; margin-bottom: 1">The fourth order sought pertains
to rental payments claimed by the Defendant still owing. I have already set
out in my judgement
what the true position in law is between the parties The
parties accordingly should work out between themselves what their position
should be regarding rental payments received to date. Any outstanding
matters may be raised by way of summons for chambers
hearing.
The following orders in s in my respectful view should be
made.
THE ORDE ORDERS OF THE COURT:
(A) CLAIM OF THE PLAINTIFF
1. DECLARE THE DEFENDANT HAD WRONGLY REPUDIATED THE
DEED OF SALE DATED 9TH OCTOBER 1998.
2. CONSEQUENTIALLY DECLARE THE PLAINTIFFS ARE ENTITLED
TO DAMAGES FOR WRONGFUL REPUDIATION TO BE ASSESSED IF NOT AGREED.
3. CONSEQUENTIALLY GRANT ORDER FOR SPECIFIC PERFORMANCE
OF THE DEED OF SALE DATED 9TH OCTOBER 1998.
(B) COUNTER-CLAIM OF THE DEFENDANT:
1. REFUSE ORDER TO HAVE PLAINTIFFS VACATE PROPERTY THE
SUBJECT OF THIS DISPUTE.
2. ENTER JUDGMENT FOR THE DEFENDANT FOR THE SUM OF
$23,267-00, PAYABLE IN THIRTY (30) DAYS. THE PRINCIPAL AMOUNT OF THE LOAN
IS
TO BE OFF-SET FROM THE AMOUNT OF $25,000-00.
3. DECLINE ORDER FOR PAYMENT OF INSURANCE PREMIUM.
4. DECLINE ORDER FOR MESNE PROFITS.
(C) COSTS
THE APPROPRIATE ORDER FOR COSTS IN THE CIRCUMSTANCES OF
THIS CASE IS FOR THE PARTIES TO BEAR THEIR OWN COSTS.
THE
COURT
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