JOHNSON AND ANOTHER RESPONDENTS AND AGNEW APPELLANT

[HOUSE OF LORDS]

1978 Dec. 11, 12, 13, 14, 18, 19, 20; 1979 March 8

Lord Wilberforce, Lord Salmon, Lord Fraser of Tullybelton, Lord Scarma

Vendor and Purchaser – Specific performance – Alternative remedies – Purchaser’s failure to comply with order for specific performance – Sale by mortgagees – Vendors claiming difference between purchase price and sum realised by mortgagees – Alternative claim by vendors for damages – Chancery Amendment Act 1858 (21 & 22 Vict. c. 27), s. 2 1

In November 1973, when they were in arrears with the repayments of mortgages on their properties, the plaintiff vendors entered into a written agreement for the sale of the properties. The price agreed to be paid by the purchaser under the agreement was in excess of the sums required to discharge the mortgages and a loan raised by the vendors to enable

• 1     Chancery Amendment Act 1858, s. 2: “In all cases in which the court of Chancery has jurisdiction to entertain an application… for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same court, if it shall think fit, to award damages to the party injured, either in addition to or in substitution for such… specific performance, and such damages may be assessed in such manner as the court shall direct.”

[1980] A.C. 367 Page 368

them to buy another property. The purchaser failed to complete, and in November 1974 the vendors obtained a summary order for specific performance. In July 1975, the order for specific performance not having been carried out, the mortgagees of the properties enforced their securities by selling the properties. The proceeds realised by the mortgagees were insufficient to discharge the mortgages in full, and the vendors moved for an order that the purchaser should pay the balance of the purchase price to the vendors, credit being given for the sums realised by the mortgagees’ sales. The judge made no order on the motion. The Court of Appeal allowed the vendors’ appeal, holding that the order for specific performance should be discharged and damages awarded in lieu.

On appeal by the purchaser: –

Held, dismissing the appeal, (1) that although a vendor had to elect at the trial whether to pursue the remedy of specific performance or that of damages, if specific performance was ordered the contract remained in effect and was not merged in the judgment, so that, if the order was not complied with, he might apply to the court to put an end to the contract and, if he did so, he was entitled to damages appropriate to the breach of contract (post, pp. 392F-G, 393F, 394D-E, 397H – 398B, 399D-E).

Henty v. Schröder (1879) 12 Ch.D. 666; Barber v. Wolfe [1945] Ch. 187; Horsler v. Zorro [1975] Ch. 302 and Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, C.A. overruled.

McKenna v. Richey [1950] V.L.R. 360 applied.

(2) That, although damages might be awarded under section 2 of the Chancery Amendment Act 1858 in some cases in which they could not be recovered at common law, the Act did not warrant the assessment of damages otherwise than on a common law basis, and in the case of breach of a contract of sale, if the innocent party reasonably tried to have the contract completed, damages should be awarded as at the date when the contract was lost, so that in the present case the date for the assessment of damages should be that on which the remedy of specific performance became aborted (post, pp. 400B-C, G – 401A, C-E).

Decision of the Court of Appeal [1978] Ch. 176; [1978] 2 W.L.R. 806; [1978] 3 All E.R. 314 affirmed.

The following cases are referred to in their Lordships’ opinions:

Austins of East Ham Ltd. v. Macey [1941] Ch. 338, C.A.

Barber v. Wolfe [1945] Ch. 187; [1945] 1 All E.R. 399.

Barker (John) & Co. Ltd. v. Littman [1941] Ch. 405; [1941] 2 All E.R.

Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, C.A.

Buckland v. Farmar & Moody [1979] 1 W.L.R. 221; [1978] 3 All E.R. 929, C.A.

Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319; [1976] 2 W.L.R. 822; [1976] 1 All E.R. 881, C.A.

Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26.

Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77.

Grant v. Dawkins [1973] 1 W.L.R. 1406; [1973] 3 All E.R. 897.

Hall v. Burnell [1911] 2 Ch. 551.[1980] A.C. 367 Page 369

Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613; [1935] 2 K.B. 198, C.A.

Henty v. Schröder (1879) 12 Ch. D. 666.

Heyman v. Darwins Ltd. [1942] A.C. 356; [1942] 1 All E.R. 337, H.L.(E.)

Hickman v. Haynes (1875) L.R. 10 C.P. 598.

Holland v. Wiltshire (1954) 90 C.L.R. 409.

Horsler v. Zorro [1975] Ch. 302; [1975] 2 W.L.R. 183; [1975] 1 All E.R. 584.

Hutchings v. Humphreys (1885) 54 L.J.Ch. 650.

Hythe Corporation v. East (1866) L.R. 1 Eq. 620.

Jackson v. De Kadich [1904] W.N. 168.

Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851, H.L.(E.).

Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331; [1972] 2 W.L.R. 1175; [1972] 2 All E.R. 393, H.L.(E.).

McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457.

McKenna v. Richey [1950] V.L.R. 360.

Malhotra v. Choudhury [1980] Ch. 52; [1978] 3 W.L.R. 825; [1979] 1 All E.R. 186, C.A.

Mayson v. Clouet [1924] A.C. 980, P.C.

Morel Brothers & Co. Ltd. v. Earl of Westmorland [1904] A.C. 11, H.L.(E.).

Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; (1868) L.R. 3 Q.B. 272.

Radford v. De Froberville [1977] 1 W.L.R. 1262; [1978] 1 All E.R. 33.

Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214.

Scarf v. Jardine (1882) 7 App.Cas. 345, H.L.(E.).

Singh (Sudagar) v. Nazeer [1979] Ch. 474; [1978] 3 W.L.R. 785; [1978] 3 All E.R. 817.

Sweet v. Meredith (1863) 4 Giff. 207.

United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1; [1940] 4 All E.R. 20, H.L.(E.).

Watson v. Cox (1873) L.R. 15 Eq. 219; 42 L.J.Ch. 279.

Wroth v. Tyler [1974] Ch. 30; [1973] 2 W.L.R. 405; [1973] 1 All E.R. 897.

The following additional cases were cited in argument:

Bain v. Fothergill (1874) L.R. 7 H.L. 158, H.L.(E.).

Baker v. Williams [1893] W.N. 14; 62 L.J.Ch. 315.

Betts v. Gallais (1870) L.R. 10 Eq. 392.

Biggin v. Minton [1977] 1 W.L.R. 701; [1977] 2 All E.R. 647.

Bosaid v. Andry [1963] V.R. 465.

Carrick v. Young (1819) 4 Madd. 437.

Chapman, Morsons & Co. v. Auckland Union Guardians (1889) 23 Q.B.D. 294, C.A.

Clark v. Wallis (1866) 35 Beav. 460.

Davenport v. Rylands (1865) L.R. 1 Eq. 302.

De Brassac v. Martyn (1863) 9 L.T. 287; 2 New Rep. 512.

Denmark Productions Ltd. v. Boscobel Productions Ltd. [1969] 1 Q.B. 699: [1968] 3 W.L.R. 841; [1968] 3 All E.R. 513, C.A.

Denton v. Stewart (1786) 1 Cox Eq.Cas. 258.

Dominion Coal Co. Ltd. v. Dominion Iron and Steel Co. Ltd. [1909] A.C. 293, P.C.

Dreyfus v. Peruvian Guano Co. (1889) 43 Ch.D. 316, C.A.[1980] A.C. 367 Page 370

Dutch v. Warren (1720) 1 Stra. 406.

Eastwood v. Lever (1863) 4 De G. J. & S. 114.

Elmore v. Pirrie (1887) 57 L.T. 333.

Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77.

Fibrosa Spolka Akcyjna v. Fairbairn Lawson Coombe Barbour Ltd. [1943] A.C. 32; [1942] 2 All E.R. 122, H.L.(E.).

Foligno v. Martin (1853) 16 Beav. 586.

Fritz v. Hobson (1880) 14 Ch.D. 542.

Gray v. Fowler (1873) L.R. 8 Ex. 249.

Greenaway v. Adams (1806) 12 Ves. 395.

Griffiths v. Vezey [1906] 1 Ch. 796.

Hargreaves & Thompson’s Contract In re (1886) 32 Ch.D. 454, C.A.

Hindley v. Emery (1865) L.R. 1 Eq. 52.

Hipgrave v. Case (1885) 28 Ch.D. 356, C.A.

Hirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, P.C.

Howard v. Pickford Tool Co. Ltd. [1951] 1 K.B. 417, C.A.

Johnstone v. Milling (1886) 16 Q.B.D. 460, C.A.

King v. Hoare (1844) 13 M. & W. 494.

Lavery v. Pursell (1888) 39 Ch.D. 508.

Lazenby Garages Ltd. v. Wright [1976] 1 W.L.R. 459; [1976] 2 All E.R. 770, C.A.

Lowe v. Hope [1970] Ch. 94; [1969] 3 W.L.R. 582: [1969] 3 All E.R. 605.

Luck v. White (1973) 26 P. & C.R. 89.

Moses v. Macferlan (1760) 2 Burr. 1005.

Newcomb v. Bonham (1681) 2 Cas. in Ch. 58.

Phelps v. Prothero (1855) 7 De G.M. & G. 722.

Public Trustee v. Pearlberg [1940] 2 K.B. 1; [1940] 2 All E.R. 270, C.A.

Robinson v. Harman (1848) 1 Exch. 850.

Simpson v. Terry (1865) 34 Beav. 423.

Stickney v. Keeble [1915] A.C. 386, H.L.(E.).

Tamplin v. James (1880) 15 Ch.D. 215, C.A.

Tate & Lyle Ltd. v. Hain Steamship Co. Ltd. (1936) 55 L1.L.Rep. 159, H.L.(E.).

Tito v. Waddell (No. 2) [1977] Ch. 106; [1977] 2 W.L.R. 496; [1977] 3 All E.R. 129.

Todd v. Gee (1810) 17 Ves. 273.

Tredegar Iron and Coal Co. Ltd. v. Hawthorn Bros. & Co. (1902) 18 T.L.R. 716, C.A.

Ward (R. V.) Ltd. v. Bignall [1967] 1 Q.B. 534; [1967] 2 W.L.R. 1050: [1967] 2 All E.R. 449, C.A.

White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413; [1962] 2 W.L.R. 17; [1962] 1 All E.R. 1178, H.L.(Sc.).

APPEAL from the Court of Appeal.

This appeal from an order of the Court of Appeal (Buckley and Goff L.JJ. and Sir David Cairns) dated December 13, 1977, raised two principal questions for decision: (1) Is a remedy in damages available to the vendor of land who takes an order for specific performance which by reason of the purchaser’s continued default proves abortive? (2) If so, and if the property has diminished in value between the contractual completion date and the date on which the vendor abandons his order for specific performance, by reference to what point in time is the vendor’s loss to be measured? The former question required consideration of whether in the given situation[1980] A.C. 367 Page 371

the remedy of damages, if available at all, was available at common law or under the Chancery Amendment Act 1858 (Lord Cairns’ Act) or both, and the second question required consideration whether the measure of damages under Lord Cairns’ Act was different from that at common law.

The respondents in this appeal, Michael Charles Johnson and Renee Marie Johnson, were on November 1, 1973, the owners of a property known as Sheepcote Grange, Woodburn Common, Mitcham, Buckinghamshire. They had mortgaged the property as security for moneys lent to them in two separate parts. Upon Sheepcote Grange itself there was a first legal charge to the Provincial Building Society to secure a principal sum of £15,600 and interest thereon, a second legal charge to Economic Insurance Co. Ltd. to secure a principal sum of £4,400 and interest thereon, and a third legal charge to Barclays Bank Ltd. to secure payment on demand of all sums due to it. On the other part of the land, referred to as the grazing land, there was a first legal charge to Arrowfield Finance to secure the principal sum of £6,000 and interest thereon and a second legal charge to Barclays Bank Ltd. to secure payment on demand of all sums due to it. In the latter part of 1973 the respondents found themselves in difficulty in meeting all their financial commitments and had fallen somewhat in arrear with their mortgage repayments. They therefore placed Sheepcote Grange, including the grazing land, on the market and by a contract dated November 1, 1973, the appellant, Adeline Agnew, agreed to buy it for £117.000. The contract was made by reference to the Law Society’s General Conditions of Sale (1973 Revision) and it provided that the appellant should pay a deposit of £11,700 and that completion should take place on or before December 6, 1973. In fact the appellant was allowed to pay only £3,000 by way of deposit.

At an auction held later on November 1, 1973, the respondents agreed to buy a property known as Wyebridge Stores, Coves End Road, Bourne End, Buckinghamshire, for £34,000 and this purchase was duly completed in December 1973, the entire purchase money being provided by Barclays Bank Ltd. who were given a legal charge on that property also.

Had the appellant completed her purchase of Sheepcote Grange on December 6, 1973, or at any time before the property was sold by the mortgagees, the respondents could have repaid all their creditors, both secured and unsecured, and would have been left with a surplus of several thousand pounds after doing so.

The facts are stated in the opinion of Lord Wilberforce.

J. H. Hames Q.C. and J. K. S. Denniston for the appellant. The Court of Appeal was right in holding that the vendors, by their election to enforce the contract have made an irrevocable choice, but it was wrong in holding that, despite that choice, the court had power to award them damages under the Chancery Amendment Act 1858 (Lord Cairns’ Act). If the Court of Appeal were right the court would have jurisdiction to discharge an order for specific performance already made from which there was no appeal and that is not so. All the rights of the respondents under the contract, including their right to damages for the appellant’s failure to complete, have merged in the order for specific performance and cannot be revived. Mere non-compliance with an order is not a[1980] A.C. 367 Page 372

ground for discharging an order. Even assuming that there was jurisdiction to do so it would have been wrong to discharge the order in this case. Even if it were validly discharged, it would be wrong for the court to award damages under Lord Cairns’ Act. As a matter of jurisdiction the power to make an order under that Act does not create a new type of damage. Damages are either compensatory damages as at common law, or are of a proprietary nature as in equity. In the present case it would have been wrong to exercise that discretion in favour of the vendors. If the court awarded damages here under Lord Cairns’ Act they would be compensatory in their nature, like common law damages, and damages under the Act are not such damages.

The question arises whether an election is the exercise of a right (as the appellant contends) or of a remedy (as the respondents contend). An election is a choice between incompatible rights, irrevocable by reason of its consequences. In Tomlins’ Law Dictionary (1793) “remedy” is correctly defined as the action or means given by law for the recovery of a right. Reliance is placed on the second definition of “right” in Stroud’s Judicial Dictionary, 4th ed., vol. 4 (1974), p. 2394, as the challenge or claim for a thing taken wrongfully.

When vendors are dependent on the receipt of the purchase money they should tell the purchaser and make it a condition of the contract. Here the purchaser did not and could not know the particular importance which the vendors were attaching to the receipt. The facts in this case do not support the inference that the purchaser could not have failed to realise that the failure to complete the purchase punctually would be a major factor contributing to the enforcement of the mortgagees’ securities so as to debar the purchaser from contending that the vendors were responsible for the sales by the mortgagees.

The purchaser failed to complete on the contractual date and at that point of time the vendors were entitled as of right to claim damages for breach of contract or they had a right to ask for specific performance. They did neither, but 15 days later served notice to complete. The purchaser failed to complete on January 21, 1974, in accordance with the notice, the last fault which can be laid at her door. At this stage the vendors could have sold the property to a third party. Instead they claimed specific performance. They could also have treated the contract as repudiated. But by going to the court they were allowing the court to provide new machinery for completion. They gave no indication of urgency and did not mention their financial troubles. In June 1974 the master made an order for specific performance. The vendors had proceeded in a leisurely way. When the purchaser realised that she was in breach she tried to complete and in October 1974 she had every reason to believe that she could raise the finance. The vendors took no steps to implement the order of 1974. That was not the fault of the purchaser. It was not unreasonable of the purchaser to assume that they had abandoned it. It was not her fault that the mortgagees exercised their powers of sale. It was the duty of the vendors to protect the property for the purchaser. In that they did not do so they were in breach of their duties as trustees.

It is submitted: (1) as a matter of general law one must distinguish between an ordinary and a repudiatory breach of contract; the former only[1980] A.C. 367 Page 373

gives the plaintiff a right to damages but both the plaintiff and the defendant continue to be bound by their respective contractual obligations as the contract continues in law.

1.  (2)     As a matter of general law repudiatory breach of contract gives the innocent party a legal right either (i) to keep the contract alive, thus continuing to hold himself out as intending to perform his contractual obligations and holding the other party to his, or (ii) alternatively to treat himself as freed from any further obligation under the contract and to claim damages. Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349, 350. The contract is not at an end for all purposes, e.g. an arbitration clause may still be enforced.
2.  (3)     The right to elect between these alternatives arises the moment the repudiatory breach has been committed, though it is necessarily exercised after the breach. The right to elect arises before it is actually exercised and therefore cannot be the exercise of a remedy; it is the exercise of a right. It is a corollary of the previous proposition that the right arises before the election.
3.  (4)     Having made his election, the vendor may or may not need the remedies made available for the implementation of his rights. If he elects to affirm the contract he faces the problem that there is no contractual machinery to fix a date for completion. The parties could agree that completion should take place at any date. Alternatively, the vendor could apply to the court and by issuing a writ for specific performance indicate his readiness to complete on a date decreed by the court.
4.  (5)     As one would expect, an election between incompatible rights gives rise to consequences at law that are themselves incompatible, so that the vendor who affirms the contract not only indicates to the purchaser that he intends the purchaser to comply with his obligations but also that the vendor himself will comply with his obligations. Thus he must preserve the land as trustee for the purchaser. If the vendor elects to treat the contract as at an end, the trust determines and from then onwards he holds the land beneficially for himself free from contractual obligations. He also has the right to monetary compensation on the basis that the contract has been wrongfully brought to an end by the purchaser; that right to damages arises from the moment when the election takes place.
5.  (6)     If the vendor elects to affirm the contract he does not waive the repudiatory breach of contract but merely the right to treat it as a repudiatory breach, so that in a sense he has waived the repudiatory consequences, and the damages are assessed on the basis that the contractual obligations are at an end.
6.  (7)     The fact that the court has power to award damages, whatever jurisdiction that power stems from (the common law or Lord Cairns’ Act), does not alter the legal facts, (i) the consequences that flow in law from the breach of contract, whether ordinary or repudiatory, (ii) the need in the case of a repudiatory breach for an election and (iii) the consequences that flow from the election.
7.  (8)     What amounts to an election is a question of fact involving the application of principles of law. It can be express or implied but it must be unequivocal and a vendor who expressly or impliedly continues to press for fulfilment of the contract by the other party after knowledge of a

[1980] A.C. 367 Page 374

1.  repudiatory breach is deemed to have elected to affirm the contract. The issue of a writ for specific performance has been held not to be unequivocal enough to constitute an election but obtaining an order for specific performance has been held to constitute an unequivocal election to affirm the contract. Here the vendors made their unequivocal election when they obtained judgment in June 1974. The latest possible date is when the judgment was entered.
2.  (9)     There is a long-established line of authority that an election to affirm a contract, once made with knowledge of the relevant facts, is as final and irrevocable as an election to treat the contract as at an end.

The irrevocability of an election does not turn on whether or not the vendor took the wrong course. However one looks at the matter, there are important consequences, whichever way the election is made. As a consequence of the irrevocability of the election, vendors who elect to affirm a contract can never again rely on the original repudiatory breach of contract to treat the contract as at an end, though a situation may arise when a further repudiatory breach may give the right to treat the contract as at an end. But in the present case reliance is placed only on the first repudiatory breach. Save in two reported cases the court has never allowed a party who has elected to affirm a contract to go back to reliance on the original breach.

The following authorities are relied on: Halsbury’s Laws of England, 4th ed., vol. 9 (1974), pp. 383-385, paras. 556-558; Williams on Vendor and Purchaser, 4th ed., vol. 2 (1936), pp. 1025-1026; Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26; Scarf v. Jardine(1882) 7 App.Cas. 345; Johnstone v. Milling (1886) 16 Q.B.D. 460; Hirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, 509-510; Tate & Lyle Ltd. v. Hain Steamship Co. Ltd. (1936) 55 L1.L.Rep. 159, 173-174, 178, 182.

Once a date is fixed for completion and time is made of the essence, the purchaser, by failing to comply, is in effect repudiating the contract. He thus gives the vendor the chance to accept the repudiation and not to be bound by the contract but to hold him to liability for damages. For the purposes of election, even if it be held that there is a continuing day-by-day breach the principle of the irrevocability of the vendor’s election to go on with the contract is unaffected. Suppose a vendor has given a purchaser notice to complete on January 1, 1978, and there is no completion. If the purchaser is in continuing breach, there has been a daily repetition of it. But if on February 1 the vendor issues a writ for specific performance, then by so doing he is requiring the purchaser to complete on a day to be specified by the court itself. Assume that thereafter there is a continuing breach, say, till May 1, when the judge is ready to make an order for specific performance, the vendor may decide to go back to reliance on repudiatory breach, but, if he takes the order for specific performance, he waives all breaches up to that time. Suppose the court’s order requires completion on July 1 and the purchaser is ready to complete on that date, the vendor cannot then decide to rely on his original right to accept the repudiation. If the election is final, it must be final either way, whether the breach is continuing or not continuing. Taking an order for specific performance wipes out the previous repudiatory consequences of the breach.[1980] A.C. 367 Page 375

United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1, 3, 18-19, 21, supports the general principle that, where rights are inconsistent, then, if one chooses one, one cannot subsequently choose the other. See also Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373; Howard v. Pickford Tool Co. Ltd. [1951] 1 K.B. 417, 421 and Denmark Productions Ltd. v. Boscobel Productions Ltd. [1969] 1 Q.B. 699, 731.

The problem of considering the cases referred to in the Court of Appeal is that in hardly any of them is there any indication whether the cause of action was founded on a repudiatory breach of contract or an ordinary breach. The cases may be classified thus: (a) the cases before 1879 when the courts were prepared to grant damages without considering the question of election; (b) the cases after 1879 and (c) the modern cases in which the matter has been fully considered.

In category (a), see Foligno v. Martin (1853) 16 Beav. 586; Sweet v. Meredith (1863) 4 Giff. 207; Simpson v. Terry (1865) 34 Beav. 423; Clark v. Wallis (1866) 35 Beav. 460; Gray v. Fowler(1873) L.R. 8 Ex. 249, 255, 257 and Watson v. Cox (1873) L.R. 15 Eq. 219; 42 L.J.Ch. 279.

Category (b) starts with Henty v. Schröder (1879) 12 Ch.D. 666 where it was said that a vendor could not at the same time obtain an order to have the agreement rescinded and claim damages for breach of the agreement. There was only argument in support of the motion and the matter was never fully considered. The use of the word “rescinded” is ambiguous but the judge was using it in the limited sense of treating the contract as at an end. That which gave rise to a claim to have the order discharged was a breach of the order itself. Lord Cairns’ Act was in force but no claim was made that damages under it should be awarded. That point was not considered one way or the other.

If there is no repudiatory breach there can be no question of election. The practical problem in cases such as this, where a vendor has obtained an order for specific performance but failed to enforce it, is how to clear the title so that he is free to sell to another. Several subsequent cases can be criticised in detail but one must put oneself in the position of a judge solving that problem. In Henty’s case the court was directing its mind to that problem. All that was needed was a short declaratory judgment. But out of this problem has arisen a line of authority. In the cases the judges were reacting to a particular situation; their decisions are not always consistent but they form a pattern. See Hutchings v. Humphreys (1885) 54 L.J.Ch. 650, 652; Baker v. Williams[1893] W.N. 14; 62 L.J.Ch. 315; Hall v. Burnell [1911] 2 Ch. 551, 552, 554, 555; Public Trustee v. Pearlberg [1940] 2 K.B. 1, 8, 19, 22-23 and Barber v. Wolfe [1945] Ch. 187, 189-190. In each of these cases the court was faced with a practical problem and they reflect the desire of the vendor to be freed from the agreement so as to be able to sell the land.

Examples of category (c) are Lowe v. Hope [1970] Ch. 94; Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, 327, 329, 331 and Biggin v. Minton [1977] 1 W.L.R. 701, 702-703.

A vendor suing for specific performance delegates to the court the task of setting a date for completion and there is no obligation on the purchaser to complete on any other date, just as there is no obligation on a purchaser to complete on any date other than that specified in a valid[1980] A.C. 367 Page 376

incentive to hasten completion but he cannot be compelled to complete earlier. If he fails to complete on the date fixed the obligation is broken once and for all. If the failure to complete were a continuing breach the purchaser could thereafter insist on completing and the vendor would be obliged to agree. But if the vendor has served a notice making time of the essence he is entitled to treat failure on the part of the purchaser as a final repudiation of the contract. If the vendor elects to treat it as bringing the contract to an end he is entitled to damages. The vendor’s rights after the breach arise by virtue of the repudiation, and the election he makes.

R. V. Ward Ltd. v. Bignall [1967] 1 Q.B. 534, 548 and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349-350.

When a vendor has elected to affirm the contract he faces the problem that he intends to be bound by it but he has no contractual way of fixing a completion date and he must apply to the court to frame new machinery for completion and determine a new date. There was not here a continuing breach: see Luck v. White (1973) 26 P. & C.R. 89, 95-96 and Singh (Sudagar) v. Nazeer [1979] Ch. 474, 479. To suggest that there was such a breach would lead to strange results: the purchaser would be entitled to require the vendor to complete any day and presumably the vendor would be entitled to rely on it after the issue of the writ and the fixing of a date by the court, and to say that, whatever he has waived in the past, he has not waived the last day of the breach.

After the order of the court the obligations are governed by it and after that any breach cannot be a breach of contract and is a breach of the order of the court. It is on the original breach that the respondents in this case rely.

The election to affirm a contract is as irrevocable as the election to end it. In any event, the election here by the vendor in taking an order for specific performance waives the repudiatory consequences of the original breach. Nothing in Lord Cairns’ Act alters the position.

On the point of the merger of the contract with the court’s order, it is accepted that it is the general view of Chancery practitioners that there is no merger of the obligations in a contract for the sale of land and the obligations under an order for specific performance. The judgment usually says: “Let the contract be specifically performed.” This would seem to keep the contract alive and the title remains vested in the vendor. But, if it is so, it departs from the rule applicable to all other cases where the cause of action merges in the judgment: see Halsbury’s Laws of England, 3rd ed., vol. 22 (1958), p. 781, para. 1661; 4th ed., vol. 9, p. 416, para. 604 and King v. Hoare(1844) 3 M. & W. 494, 504, 507.

Here the contract merged in the order of 1974 and the court cannot subsequently award damages for breach of that contract since all the rights of the respondents under the contract, including their right to damages for the purchaser’s failure to complete, merged in the order and cannot be revised. So far as Austins of East Ham Ltd. v. Macey [1941] Ch. 338 is authority to the contrary it was wrongly decided.[1980] A.C. 367 Page 377

Alternatively, once the order for specific performance has been obtained, a plaintiff has put it into the hands of the court how the contract is to be carried out. Although it is accepted for the purposes of this particular contention (but without prejudice to the argument already submitted) that the contract itself does not merge in the order and the order is made by reference to the rights of the parties under the contract, it is the provisions of the order and not those of the contract which govern the future performance of the contract: Singh (Sudagar) v. Nazeer [1979] Ch. 474. The original breach of contract by the defendant remains relevant insofar as it gives the plaintiff a right to damages in addition to specific performance, but, since the obligations of the defendant to complete the contract are now governed by the order, the defendant does not commit any new breach capable of being treated by the plaintiff as a repudiation of the contract unless he commits a breach of the order. See Austins’ case [1941] Ch. 338, 340-341, 358.

As to discharge of an order for specific performance, such an order will not be discharged in circumstances which will cause injustice to a party to the litigation, nor where the parties cannot be put back into the same position as when the order was made, nor on the ground of the original repudiatory breach, but only by reason of a failure to comply with the order. When, as here, the vendor has put it out of his own power to convey the land it would be wrong to discharge the order and seek to put the parties back into a position which cannot be restored. Now the purchaser cannot complete because the land has been sold. The vendors did nothing to enforce the order they had obtained. The purchaser is no longer in breach of the contract or of the order of the court. The vendors could have obtained an attachment order or sequestered the purchaser’s property, but they did not. In those circumstances it would be wrong to discharge the order at their suit: see John Barker & Co. Ltd. v. Littman [1941] Ch. 405, 412.

A plaintiff who seeks specific performance always risks that the court’s order will not be complied with, but that is the case with any court order. A party seeking to have it set aside must show that he has been diligent in seeking to enforce it and cannot ask for it to be discharged simply because he has changed his mind. The reason why courts have discharged orders for specific performance of contracts for the sale of land is that the vendor wanted to sell the land to another and was in a difficulty. All that is needed in such cases is a declaration that the order shall not be enforced.

The evidence before the court indicates that the purchaser is not at fault. If her submissions on the facts are held to be wrong, she should have the opportunity to deal with the questions relating to damages under Lord Cairns’ Act by putting in further evidence.

On the question of damages there are two heads: (1) could the Court of Appeal make an order for damages under Lord Cairns’ Act in the circumstances of this case? (2) How should those damages be measured? Three possible cases arise: (a) When the court is asked to make an order for damages in addition to specific performance: that does not arise here. (b) When it is invited to make an order for damages in substitution for specific performance. (c) When the court is asked to make an order for damages after an order for specific performance has[1980] A.C. 367 Page 378

been made and in discharge of that order. It is not disputed that the court has jurisdiction under (a) and (b), but it is disputed that it has power under (c) to make such an order.

The jurisdiction to make an order for damages is exhausted once an order for specific performance has been made. In any event, when the order for damages under Lord Cairns’ Act was made the vendors were no longer owners of the land and could not have conveyed it to the purchaser. Whatever the nature of damages under Lord Cairns’ Act they are only granted as a matter of discretion and should not have been granted here. Whatever their nature, once they are granted in lieu of specific performance, they have all the characteristics of common law damages. The jurisdiction to make an order for damages in lieu of specific performance is exhausted once an order for specific performance has been made when there is no jurisdiction to make an order for damages in substitution for that order. It is a simple matter of the wording of section 2 of the Act.

The crucial words in section 2 of Lord Cairns’ Act are that when the court has jurisdiction “to entertain an application” for an injunction or for specific performance it may “if it shall think fit” award damages in addition to “or in substitution for” the injunction or specific performance. The words would not appear to cover the discharge of an order for specific performance. They suggest that the jurisdiction arises at the time the court entertains the application and not after. The damages are expressed to be in substitution for, not in lieu of, the injunction or specific performance. On the application for specific performance the court can give judgment instead. The court will not award damages under the section if the remedy of specific performance is not available to the plaintiff. The party who seeks the remedy must be in a position to get specific performance and convey the property at the time he issues his writ. If it be held that the court has jurisdiction to discharge an order for specific performance the time for that purpose must be the date of the application, i.e. when the notice of motion is served. See De Brassac v. Martyn (1863) 9 L.T. 287, 288. Davenport v. Rylands (1865) L.R. 1 Eq. 302, 307 may appear somewhat against the appellant but in the present case the vendors could not have sued at law.

Although damages in addition to specific performance may be awarded for a breach of contract which does not amount to a repudiation of the contract, damages in lieu of specific performance (i.e. damages intended to compensate the plaintiff for the failure of the defendant to complete his purchase) can only be awarded where the defendant has committed a breach of contract which the plaintiff has already elected, or is still entitled to elect, to treat as a repudiation. An award of damages under Lord Cairns’ Act in substitution for, rather than in addition to, specific performance can only be made on the footing that the plaintiff has been, or is entitled to be, discharged from his own obligations under the contract, and he cannot treat a breach of contract by the defendant as so discharging him, unless he is entitled at the date of his election to be discharged, to treat the breach as a repudiation of the contract by the defendant. There is nothing in Lord Cairns’ Act which authorises the court to ignore these basic principles of the law of contract. When the court is considering[1980] A.C. 367 Page 379

the discharge of the order for specific performance it must not consider matters prior to that order.

The relevant cases are Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77, 91; Betts v. Gallais (1870) L.R. 10 Eq. 392; Tamplin v. James (1880) 15 Ch.D. 215; Hipgrave v. Case (1885) 28 Ch.D. 356, 360-361, 362 and, Lavery v. Pursell (1888) 39 Ch.D. 508, 519.

The jurisdiction to award damages under Lord Cairns’ Act can be exercised if at the time there was power to make an order for specific performance. Here the appropriate time was when the vendors applied to have the order for specific performance discharged.

The question arises how the damages should be assessed. Till 1974 there is no authority to suggest that damages under Lord Cairns’ Act should be assessed otherwise than in the same manner as common law damages. Its wording does not suggest that there should be a new type of damages. It is a procedural Act creating no new jurisdiction to award damages on a different basis. It would be wrong to read into the words more than a procedural provision. When the old Court of Chancery exercised jurisdiction it did not as a general rule give damages.

From the passing of the Act in 1958 till Wroth v. Tyler [1974] Ch. 30 there was no case in which damages were assessed under it otherwise than on a common law basis. For the practice of the Court of Chancery, see Newcomb v. Bonham (1681) 2 Cas. in Ch. 58; Denton v. Stewart (1786) 1 Cox Eq.Cas. 258; Greenaway v. Adams (1806) 12 Ves. 395; Todd v. Gee (1810) 17 Ves. 273 and Elmore v. Pirrie (1887) 57 L.T. 333, 335.

In Wroth v. Tyler [1974] Ch. 30, 56-57, 59-60 it was held that damages under Lord Cairns’ Act might be awarded when there was no claim in law at all and that their quantum was not limited by the rules at law; reliance was there placed on Fritz v. Hobson (1880) 14 Ch.D. 542; Chapman, Morsons & Co. v. Auckland Union Guardians (1889) 23 Q.B.D. 294 and Dreyfus v. Peruvian Guano Co. (1889) 43 Ch.D. 316. But the court does not have jurisdiction to direct that damages under Lord Cairns’ Act should be assessed on a basis different from that on which they could be assessed at common law and in so far as Wroth v. Tyler [1974] Ch. 30 is authority to the contrary it is wrong and should be overruled. In that case the judge did not have jurisdiction to award damages in the way he did. It was not open to him to assert a jurisdiction which he did not have because it had not been conferred on him. He did not do bad justice but he made bad law. The so-called “Lord Cairns’ Act damages” are no different from common law damages. They are not sui generis, a species on their own. In the case of an action for breach of contract the plaintiff recovers in respect of the damage he has sustained. An injunction is dealing with the future. In Wroth v. Tyler[1974] Ch. 30 the judge had the material to assess the damages at common law but he thought he had jurisdiction to award another style of damages allowing something extra but the Act was never intended to confer that.

Grant v. Dawkins [1973] 1 W.L.R. 1406, 1409-1411 followed the previous case and goes no further. Goff J. put a date which was arbitrary and had nothing to do with the contractual relationship.

Horsler v. Zorro [1975] Ch. 302, 307-310, 312-313 underlines the difficulty of treating Lord Cairns’ Act as establishing a separate head of[1980] A.C. 367 Page 380

performance one cannot get damages because one has made one’s election. The use of the word “rescission” has caused confusion.

Tito v. Waddell (No. 2) [1977] Ch. 106, 334-335; Radford v. De Froberville [1977] 1 W.L.R. 1262, 1285 and Malhotra v. Choudhury [1980] Ch. 52, 79A-D and Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214, 216.

When the date for the performance of a contract arises the plaintiff has a claim for damages if he treats the unperformed contract as at an end; he must make up his mind to elect to claim damages within a reasonable time, but when he has done so he must mitigate them.

In summary: (1) once a party has elected to affirm a contract he has made his final election; (2) nothing in Lord Cairns’ Act allows him to resile from his election; (3) the court must exercise its discretion and in deciding whether or not to exercise it in the vendor’s favour must consider whether, after a repudiatory breach he has failed to do anything to enforce the contract.

The court cannot make an order the effect of which would be to put the parties in a position essentially different from that in which they were when the matter first came before the court. The parties cannot be put back in the same position as when the order which it is sought to discharge was made. If the court decides that damages are to be awarded at all, the ordinary common law principles apply and damages are assessed as at the date of the breach.

As to the vendor’s claim that they are entitled to resile from their election and claim damages, by a second election, for the repudiatory breach, the problem arises from the fact that from January 1974 they indicated that they would affirm the contract. In May they took out a summons claiming specific performance and in June they took judgment. That was an unequivocal indication of their final decision to affirm the contract. Thereafter for over two years they consistently took steps which did not contradict their affirmation of the contract, including their notice of November 1976 when they sought an order for the payment of the balance of the purchase price and an inquiry as to damages. Their alternative claim for a declaration that they were entitled to treat the contract as repudiated first raised the point of their right to resile from the contract. If their affirmation of the contract during all those years is to be ignored, what happens to the doctrine of mitigation of damages? While they were affirming the contract the vendors were under a duty to preserve the property for the purchaser and in allowing the property to be sold they were themselves in breach. In the summer of 1975 the mortgagees sold the land piecemeal for less than it would have fetched if it had been sold all together. It was the vendors’ lack of diligence which was responsible for the sale. They should not be entitled to damages.

P. J. Millett Q.C. and Dirik Jackson for the respondents. Two questions arise: (1) whether in the events which have happened the vendors are entitled to damages for breach of contract, and (2) if so, what is the proper measure of damages.[1980] A.C. 367 Page 381

The first question raises various questions long ago settled and but for certain lines of authority in the Chancery Division the answer would be clearly in the affirmative. These authorities are a legacy from the time before the law of contract was fully developed. In this field Chancery has remained loyal to rules which are now out of line with the modern law of contract. There are two lines of authority, which may or may not be distinct. One line stemming from Henty v. Schröder, 12 Ch.D. 666, apparently lays down the rule that after specific performance has been ordered there can be no award of damages. The basis of the rule is not clear. The other line of authority culminating in Horsler v. Zorro [1975] Ch. 302 proceeds on the basis that one of the remedies for breach is setting aside the contract ab initio. But there is no such remedy and it may be that this fallacy is at the root of the Henty line of cases.

It is submitted: (1) When a vendor of land obtains a decree of specific performance which, by reason of the purchaser’s continued default proves abortive, the vendor is entitled to apply to the court for an order discharging the decree, treating the contract as discharged, forfeiting the deposit and awarding damages at common law. (2) He is entitled as an alternative to damages for breach at common law to damages under Lord Cairns’ Act. (3) Whatever the jurisdiction under which the damages are awarded the measure of them is the same. It is the difference between the contract price and the value of the land, not at the contractual date fixed for completion, but at the later date when the contract was finally lost, i.e., the date of the order discharging the decree of specific performance or, if earlier, as here, the date on which the decree was rendered abortive by the purchaser’s default, the date on which the mortgagees exercised their power of sale. (4) If, contrary to the vendors’ contentions, the measure of damages at common law is restricted by reference to the contractual date for completion, then it is not so restricted under Lord Cairns’ Act and the vendors are entitled to opt for the more favourable measure.

The breach here consists of the total failure on the purchaser’s part to perform her contractual obligations, i.e., pay the purchase money. There is only one breach of contract, the failure to pay it on the contractual date fixed for completion, December 6, 1973. There is no fresh or daily breach, only a continuing state of breach which has never been over-ridden by the decree for specific performance and continued unremedied till the date of the sale by the mortgagees. What Sir John Pennycuick said in Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, 331 is correct.

The foundation of the vendors’ case is that the contract was lost by the purchaser’s default. It was never frustrated; one or other party must be in breach and liable to damages accordingly and it was the purchaser. Buckley L.J. correctly assessed the facts in the court below [1978] Ch. 176, 192-193, as did Goff L.J. at p. 199. On those facts it was the purchaser’s failure to complete that caused the mortgagees to exercise their power of sale. The fundamental fact is that the purchase price exceeded the sums needed to redeem the mortgages. Right up to the time the contract was lost the vendors were entitled to redeem and to use the money received from the purchaser for that purpose. Through not getting it the vendors lost the property to the mortgagees. The[1980] A.C. 367 Page 382

purchaser failed to comply with the notice to complete. On the application to the master for an order for specific performance her solicitors were present. The evidence contradicts the suggestion that before the mortgagees had exercised their powers of sale the purchaser had raised the money and was ready to pay it.

The consequences of this breach were very severe for the vendors. The land fetched too little to clear the mortgages and the respondents are insolvent so that their only resort lies in their rights against the purchaser. It does not lie with the purchaser to complain of the vendors’ delay in pressing their claim.

The contract was lost by reason of the purchaser’s breach of contract and there is no reason why she should not be liable for damages at common law. If the vendors had not obtained an order for specific performance they could clearly have treated her actions as repudiatory and obtained damages for total non-performance. The purchaser relies on the alleged doctrine of irrevocable election, but there is no such doctrine. All depends on the circumstances of the case and the consequences of what is done. An election to accept repudiation is irrevocable. Thereafter the innocent party cannot seek specific performance, because the wrongdoer has been discharged from all further obligation to perform the contract. But the converse is not correct. A party seeking specific performance has only made up his mind for the time being to ask for it in the hope that the wrongdoer will perform his obligations. A decision to kill the contract is permanent and irrevocable; a decision to keep it alive is temporary and revocable.

Suppose a seller of goods is in default, e.g., because they are not up to sample, then if the buyer rejects them he is accepting the repudiation and can sue for damages for total non-performance, but if he accepts substituted performance he cannot sue for non-performance, though he can sue on the basis of partial performance. In the case of late delivery, a form of substituted performance, the buyer is entitled to reject the goods, treating the contract as at an end and buying replacement goods elsewhere. If he accepts late delivery, he will have a right to damages on the basis of partial performance but not of non-performance. The seller has no right to demand the acceptance of substituted performance. If a buyer waits for a seller who does not turn up at the agreed time he does not lose his right to call the contract off at any time.

The same principles apply to the sale of land. There are only two differences: (i) time not originally to be of the essence, (ii) the remedy of specific performance is available. If the purchaser fails to complete on the day fixed by the contract he is in breach of contract, but the vendor is not entitled to treat the breach as repudiatory and the purchaser has not lost his right to purchase, so that he may turn up with the money and insist on completion. But, once time has been made of the essence, the vendor is entitled to treat the breach as repudiatory. Contrary to the appellant’s contentions the purchaser’s obligation under the contract never changes. The obligation to complete on the original date always remains.

Where a purchaser fails to complete after the expiry of a notice making time of the essence, the vendor may elect between two alternative[1980] A.C. 367 Page 383

of the contract and claim damages at common law, both parties being thereupon discharged from further performance of the contract; this course is often described as “rescission” of the contract, but it is not the same type of rescission as that which occurs when the contract is rescinded ab initio on the ground of some inherent defect: Heyman v. Darwins Ltd. [1942] A.C. 356, 361. (ii) Alternatively, he may refuse to treat the contract as discharged and claim specific performance with damages in addition for any loss to him arising from the delay.

Despite the existence of authority to the contrary, there is no third alternative consisting of “rescinding” the contract ab initio. Rescission ab initio is not a remedy for breach.

If the vendor elects to accept the repudiation, his decision to do so is irrevocable. This follows, not from any particular significance to be attached to the word “election,” but from the consequences of the choice he makes. The vendor cannot, after electing to accept the repudiation, claim specific performance of obligations which ex hypothesi have been discharged.

If the vendor elects for specific performance, he does not waive the breach. Indeed he relies on it and may claim damages for it. The original breach continues to subsist until there is performance or the contract is discharged by later acceptance of the repudiation or by order of the court.

In an action for the purchaser’s breach of contract the vendor may seek both alternative remedies. It may be at the trial he must elect between the two, but there is authority for saying that he can ask the court to grant specific performance, but if, for some reason, it declines to do so, to award damages at common law. Be that as it may, a judgment for damages on the footing that the contract is discharged will prevent the vendor from claiming performance if the contract thereafter for the reason already stated and also because the contract has merged in the judgment for damages.

If the vendor takes a decree for specific performance, the contract is not merged in the judgment and the original breach of contract continues to subsist so long as the purchase price remains unpaid. All that happens is that the court reinforces the provisions of the contract with the enforcement powers which the vendor can bring into play if the purchaser fails to complete the contract.

If the decree is not obeyed the vendor again has a choice: (i) He may apply to the court to enforce the decree, in particular by the enforcement of the vendor’s lien on the land. (ii) Alternatively, he may apply to the court to dissolve the decree and “rescind” the contract. However, if the Court of Appeal’s decision in Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319 is correct, the vendor cannot, if at this stage he elects for rescission, obtain damages at common law. That case was wrongly decided.

In the authorities which deny the vendors’ right to damages at common law, it is possible to discover three bases for this denial: (1) that a vendor cannot have rescission and damages at the same time, the Henty v. Schröder, 12 Ch.D. 666, basis; (2) that a vendor has made an irrevocable election the Swycher [1976] Ch. 319 basis; (3) that a vendor is released from a decree of specific performance only as a matter of discretion and that in exercise of that discretion the court will not permit him to have[1980] A.C. 367 Page 384

below. None of the remedies which support the rule denying the vendors a remedy in damages at common law is binding on the House of Lords and they are all unsound.

Henty v. Schröder, 12 Ch.D. 666, 667, has for a century represented an anomaly in the English law of contract to which the House of Lords should deliver the coup de grace. In that case it was held, without reasons given, that the vendor who was abandoning an order for specific performance with which the purchaser had not complied “could not at the same time obtain an order to have the agreement rescinded and claim damages against the defendant for breach of the agreement.” At the time of this statement there were authorities in complete conflict with it: Sweet v. Meredith, 4 Giff. 207 and Watson v. Cox, L.R. 15 Eq. 219. It is possible that Henty v. Schröder, 12 Ch.D. 666, was really a procedural decision only; it was delivered at a time when to get damages in Chancery a separate bill had to be filed: see Hythe Corporation v. East (1866) L.R. 1 Eq. 620. The form of judgment in that case is set out in Seton’s Judgments and Orders, vol. 3, p. 2219. Or it is possible that Sir George Jessel M.R. was confusing the type of rescission which the vendor was seeking with rescission ab initio where there is an inherent defect in the contract and where damages are not available because the contract is treated as wholly avoided. Alternatively, he may have had in mind the theory, which was once current but is now exploded, that rescission ab initio is a remedy for breach of contract. Be that as it may, that decision was followed in a number of cases and was carried to its logical conclusion in Jackson v. De Kadich[1904] W.N. 168 in a refusal to declare that a vendor who had abandoned an order for specific performance was entitled to forfeit the deposit which the purchaser had paid. In Hall v. Burnell[1911] 2 Ch. 551, Eve J. refused to follow that case. This is inconsistent with the contract having been rescinded ab initio, for the right to forfeit the deposit arises under the contract. In Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613, Swift J. treated Henty v. Schröder, 12 Ch.D. 666, as an authority, not on the law of contract, but on the practice of the Chancery Division at the time it was decided. Nonetheless it was treated as good law in Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302, although the rule is inconsistently applied, for while denying the claim to damages, the courts have awarded conveyancing costs. Yet these are damages: In re Hargreaves & Thompson’s Contract (1886) 32 Ch.D. 454. The rule has been rejected in Australia: McKenna v. Richey [1950] V.L.R. 360 and Bosaid v. Andry [1963] V.R. 465.

However Henty v. Schröder, 12 Ch.D. 666, is interpreted, it cannot stand as a part of the modern law of contract. If, as Megarry J. interpreted it in Horsler v. Zorro [1975] Ch. 302, it supports the theory that rescission ab initio is a remedy for breach of contract, then this is a remedy which finds no support except in cases following Henty v. Schröder and no place at all in any of the leading textbooks on the law of contract. Since the Court of Appeal’s decision in the present case Goff L.J. has rejected the[1980] A.C. 367 Page 385

theory in Buckland v. Farmar & Moody [1979] 1 W.L.R. 221. It was also explicitly rejected in Australia by Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457. If, on the other hand, Henry v. Schröder, 12 Ch.D. 666, purports to be a decision that in no circumstances can a litigant have both rescission and damages it conflicts with innumerable dicta at every level of authority, e.g., Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373, 378-379, 398, 399; Fibrosa Spolka Akcyjna v. Fairbairn Lawson Coombe Barbour Ltd. [1943] A.C. 32, 52, 53, 65, 67 and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349-350. In fact Henty v. Schröder, 12 Ch.D. 666, has only survived as an authority in the law of contracts for the sale of land, but there is no reason or authority for treating such contracts on a different basis in this respect from any other contract. Mayson v. Clouet [1924] A.C. 980 is authority to the contrary and Dixon J.’s classic statement in McDonald’s case, 48 C.L.R. 457, 476-477, was made in a case concerning a contract to sell land. In McKenna v. Richey [1950] V.L.R. 360, O’Bryan J. awarded the vendor damages at common law in precisely the situation which existed in Henty v. Schröder, 12 Ch.D. 666, and which exists in the present case. Henty v. Schröder is thus deprived of any legal or logical basis and cannot stand as the foundation of the practice which the Court of Appeal has sanctioned in this case.

The fallacy that rescission ab initio is available as a remedy for breach of contract can be traced back to Dutch v. Warren (1720) 1 Stra. 406 (see the editor’s footnote), explained in Moses v. Macferlan (1760) 2 Burr. 1005, 1010-1011, 1013.

In the early 19th century the courts were in a dilemma. If the buyer did not complete the seller could sell the property elsewhere and then sue for damages. But how could the seller sell elsewhere if the contract was still subsisting? On the other hand, if it was said that the contract no longer subsisted, how could there be damages for breach of the contract? The courts went through many contortions to solve the problem. It was finally solved by the doctrine of accepted repudiation: see Benjamin on Sale, 8th ed. (1950), p. 938 and Boston Deep Sea Fishing and Ice Co. v. Ansell, 39 Ch.D. 339, 365. The injured party can accept the repudiation as going to the root of the contract and, while being himself discharged from further performance, can sue for damages. The heresy that he cannot have damages ought to have been killed by Mayson v. Clouet[1924] A.C. 980, 985-986. Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373, 378-379, 398-399 (which sets out the modern view of discharge by repudiation); the Fibrosa Spolka case [1943] A.C. 32, 52, 65, 67, 73-74; Holland v. Wiltshire (1954) 90 C.L.R. 409, 416 (Dixon C.J.); the Lep Air Services case [1973] A.C. 331, 349- 350; Lowe v. Hope [1970] Ch. 94. It was nailed in McDonald’s case, 48 C.L.R. 457, 469-470, 476-477. The law is not correctly stated in Williams on The Contract of Sale of Land (1930), pp. 119, 121 and Williams, Vendor and Purchaser, 4th ed., pp. 1003-1004, 1010, 1025, 1026, both cited in Horsler v. Zorro [1975] Ch. 302, 309, 310, 314 and both based ultimately on Moses v. Macferlan, 2 Burr. 1010.

Horsler v. Zorro [1975] Ch. 302, 307, 309, 313-314, should be overruled The criticisms of that decision in the article by Mr. Michael[1980] A.C. 367 Page 386

Albery Q.C., “Mr. Cyprian Williams’ Great Heresy” (1975) 91 L.Q.R. 337 are fully justified. The “heresy” has been rejected by the Court of Appeal in Buckland’s case [1979] 1 W.L.R. 221, 232F, 238. The House of Lords should give it the coup de grace.

The doctrine of irrevocable election begs the question, since one who elects for specific performance does not elect for an empty decree but for the fullness of the remedy. If the courts allow damages to be substituted for an abortive decree, as the respondents contend, then this is what they elected for. In any case, the doctrine is inapplicable, for it is conceded that a claimant can elect; he can elect to have the decree dissolved and the contract “rescinded.” Why can he not have the damages to which he is entitled following this election?

The passage in Williams on Vendor and Purchaser, 4th ed., p. 1025 on which the appellants rely was an invention of the author unsupported by the citations in the footnote. Dominion Coal Co. Ltd. v. Dominion Iron and Steel Co. Ltd. [1909] A.C. 293 has nothing to do with the proposition in the text: see pp. 310-311. Nor have the other cases cited by Williams. See also Stickney v. Keeble[1915] A.C. 386, 415-416. The most important case cited is Scarf v. Jardine (1882) 7 App.Cas. 345; but that was a case of election between inconsistent rights, not remedies. There is no doctrine of irrevocable election between inconsistent remedies: United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1.

As to the question whether damages are available under Lord Cairns’ Act, it is common ground that the mere fact that damages are available at common law does not preclude them from being available under the Act which was intended to prevent suitors being bandied about from one court to another. The Act may have started by being procedural only, but in time it developed a life of its own. It was early recognised that it gave jurisdiction to the Chancery courts to award damages which the common law courts could not, e.g., damages for breach of a restrictive covenant when the defendant was not the original covenantor: see Eastwood v. Lever (1863) 4 De G.J. & S. 114, 128 and Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851, 856. The appellant relied on Rock Portland Cement Co. Ltd. v. Wilson, 52 L.J.Ch. 214, but that was only a decision that the rule in Bain v. Fothergill (1874) L.R. 7 H.L. 158 applied equally to damages under Lord Cairns’ Act and at common law. Some of the reasoning in that case cannot stand. Similarly some of the obiter dicta in Elmore v. Pirrie, 57 L.T. 333, cannot stand. It is enough to found jurisdiction to award damages if at the relevant date there was jurisdiction to order specific performance or grant an injunction. The appellant’s argument confuses jurisdiction with discretion. Hindley v. Emery (1865) L.R. 1 Eq. 52 was a case of damages being granted in substitution for specific performance. It is some authority for the proposition that an injunction and specific performance should be treated in the same way. Here the court should in its discretion grant damages: see McKenna v. Richey [1950] V.L.R. 360, 372-373. The respondents challenge the correctness of the approach in Horsler v. Zorro [1975] Ch. 302, 307. Lord Cairns’ Act does not require a plaintiff to claim specific performance in order to give the court jurisdiction to entertain a claim for damages. He must plead enough to found[1980] A.C. 367 Page 387

the jurisdiction. Here the jurisdiction to award damages under the Act subsists.

As to the measure of damages, it is the same both at common law and under Lord Cairns’ Act. The object of damages is to put the innocent party in the position he would have been in if the contract had been performed: Robinson v. Harman (1848) 1 Exch. 850, 855. A plaintiff’s duty to mitigate damages only arises when he ceases to attempt to enforce the contract. The breach is tied to the contractual date of completion but in a proper case assessment would be related to the later date on which the sale was lost. In cases where the remedy of specific performance are not available so that the damages were common law damages the date would be the latest date on which the plaintiff, acting reasonably, is waiting for the defendant to perform his contract voluntarily. Where the remedy of specific performance is available and is properly sought, there is no basis for treating the plaintiff as acting unreasonably in refusing to accept the breach as a repudiation. Accordingly, there is no reason to fix an earlier date than the date on which he abandons the claim for specific performance. Normally that would be the date of the hearing but here it is the date after which specific performance was no longer possible.

As to the measure of damages on a breach of contract, see McGregor on Damages, 13th ed. (1972), para. 631, p. 446; Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275, 281; L.R. 3 Q.B. 272. It is always justifiable to wait at least as long as specific performance is available. Ogle v. Earl Vanewas applied in Hickman v. Haynes (1875) L.R. 10 C.P. 598. See also Tredegar Iron and Coal Co. Ltd. v. Hawthorn Bros. & Co. (1902) 18 T.L.R. 716 and Radford’s case [1977] 1 W.L.R. 1262, 1285-1286. The plaintiff’s right being subject to his duty to mitigate damages, how long after the breach is it reasonable for him to wait for voluntary performance? The right approach appears from Lazenby Garages Ltd. v. Wright [1976] 1 W.L.R. 459, 462.

At common law if there is a rising market and the plaintiff does not call off the contract until the market has risen he cannot claim damages as at the earlier time. The converse is true in the case of a falling market.

It is the respondents’ primary contention that the measure of damages is the same under the Act as at common law and that it is not limited to the date of breach. If for any reason common law damages are so limited, damages under the Act are not so limited. The words of Lord Cairns’ Act are at large. They enabled the Court of Chancery to give damages where they could not be given at common law. The court can take into account matters which have arisen since the writ. There is nothing new in equity giving a better remedy than the common law in this or in other matters.

Jackson following. The argument for the appellant assumes that time was not of the essence. But the respondents could have started an action for specific performance without serving a notice to complete. Without any such notice they could go straight ahead to obtain an order. If the order proves abortive they are not debarred from obtaining damages: see Griffiths v. Vezey [1906] 1 Ch. 796 and Public Trustee v. Pearlberg [1940] 2 K.B. 1. The appellant’s inaction was an added factor in the sale going off.[1980] A.C. 367 Page 388

As to the jurisdiction under Lord Cairns’ Act, it was at first assumed to be procedural but it has gone beyond that: compare Lord Sumner’s dissenting opinion in the Leeds Industrial case [1924] A.C. 851, 865 et seq. with the views of the majority.

In some circumstances in the case of a breach of contract the innocent party is not bound to act so as to mitigate damages: see the Tredegar Iron case, 18 T.L.R. 716, and White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413.

On the question whether a party can get damages under Lord Cairns’ Act after he has ceased to pursue the remedy of specific performance, the House of Lords would render a service to the law if it held that there was jurisdiction under the Act to grant damages even though the remedy of specific performance was not being pursued and had not been claimed in the writ.

If the House of Lords takes November 26, 1974, when the order for specific performance was drawn up, as the last reasonable date when the respondents could have been pressing for specific performance, the date by reference to which damages are to be assessed should be selected on the basis that they were given a reasonable opportunity to achieve a sale of the property. Not less than three months after November would have been a reasonable time, a period not unusual for putting land on the market and completion of the sale.

Hames Q.C. in reply. The main issue in this case is whether the election to affirm this contract was the exercise of a right (as the appellants say) or of a remedy (as the respondents say).

In seeking an order for specific performance the respondents unequivocally affirmed the contract. That was irrevocable. If such an election is not binding a vendor can resile from his election at any time. Suppose a vendor gets an order for specific performance thereby affirming the contract and the purchaser comes forward with the money due, offering to pay it, but meanwhile property values have gone up, then, according to the respondents’ argument, the vendor could change his mind. It would be an extraordinary situation if he could go back to his original rights which arose on the purchaser’s breach of contract and which he waived. Nothing supports so wide a proposition. The vendor could then choose the market price he preferred and the purchaser would be subject to a punitive situation.

The argument is false. An election between incompatible rights is final, once it is made. The finality of the election is not dependent on its consequences. To hold that would be a complete departure from principle.

By issuing his writ the vendor has indicated that he is prepared to accept a date fixed by the court, so that performances will be at such time and in such manner as the court determines. He is accepting a substituted date and cannot resile from it. He loses the right to completion on a date chosen unilaterally by himself.

As to the passage in Williams on Vendor and Purchaser, 4th ed., p. 1025, there is some support for the proposition in the text in Phelps v. Prothero, (1855) 7 De G.M. & G. 722, 734, cited in the footnote and also in Carrick v. Young. 4 Madd. 437.[1980] A.C. 367 Page 389

When the appellant failed to complete on December 6, 1973, there was not a continuing breach so that she was under a continuing obligation to complete.

A seller or buyer accepting substituted performance is making an irrevocable election and the same is true in the case of an order for specific performance on a sale of land because relying on an order of the court is accepting substituted performance.

On the contractual date for completion there was imposed on the purchaser an obligation to complete. On a breach the vendor’s only right was to claim damages. He had no right to demand completion on a later date. The claim in damages continued to run even though the breach was complete. After a while it would have been statute-barred. There is a similarity between the ordinary law of sale of goods and sale of land. In each case there is an obligation to complete the contract but in the case of land there is machinery for fixing another date and under the equitable remedy of specific performance the court can fix a substituted date. In the present case to obtain the fixing of another date the respondents could either rely on condition 19 of the conditions of sale or apply to the court or fix one by agreement. The respondents would have had a claim in damages for delay in completion, though the claim in damages might be discharged, say, if the purchaser gave a cheque for the amount due, offering to complete later. If the purchaser failed to complete on the new date there would be a new claim for damages. In Luck v. White, 26 P. & C.R. 89, 95-96, there is a clear indication that there is not a continuing breach and that another date for completion must be fixed either by the parties or by the court.

There are two kinds of damages (a) the ordinary damages for breach of contract and (b) damages for loss of the bargain. Nothing ends the claim for damages for delay. What is lost when a contract is affirmed is the right to damages for loss of the bargain. It is not disputed that the respondents might be entitled to the former but, though they claimed them in their notice of motion, they never pressed the claim. The right to damages for loss of the bargain went when the respondents affirmed the contract, though it might be revived if there was a further repudiatory breach.

It is for the party who seeks to have an order for specific performance discharged to satisfy the court that it should be discharged. Here it was for the respondents to show why the court should exercise its discretion as they asked.

The effect of discharge of the order for specific performance is not to discharge the election. Theoretically there are three possible effects of discharging the order: (a) the election itself might be discharged, as the respondents contend; (b) a new repudiatory breach might be constituted, so that the contract might be treated as at an end; (c) it might (as the appellant contends) relieve both parties of the need to comply with the order for specific performance, without discharging the consequences of making the order.

The first possibility is eliminated because it ignores the finality of an election. Taking the order is evidence of an election to affirm the contract, though there may be other evidence of what happened before and after at[1980] A.C. 367 Page 390

which the court would look. If the contract is affirmed all that is given up is the right to damages for the repudiatory breach. That is final. By affirming the contract the vendors are representing that they can preserve the land for the purchaser. By discharging the order for specific performance one does not unmake the effect of the election by a retrospective legal fiction. The discharge of the order for specific performance is an escape route to allow the vendor to sell the land elsewhere.

It is accepted that in many of the English authorities the word “rescission” is used and so it is hard to be sure of their exact scope. In some cases the word “damages” is used ambiguously. In some cases, though the reasoning may be at fault, the decision itself was right. Reliance is placed on Scarf v. Jardine, 7 App.Cas. 345, 360-361 and Clough’s case, L.R. 7 Ex 26, 34-35. The one case against the appellant is McKenna v. Richey [1950] V.L.R. 360, 361-362, 365, 369-370, 372, 376. In that case the plaintiff never had an unconditional order for specific performance; it may never have been effective. The election itself was not unequivocal. Bosaid v. Andry [1963] V.R. 465 merely followed that case, going no further. Both of those decisions are challenged.

Lord Cairns’ Act did not create a new type of damages apart from common law damages. It helps to fill a gap where common law damages may not have been available, for example, where a tort had been threatened but not committed. On the question whether damages could be awarded under this Act at a time when there was no power to order specific performance it is accepted that the cases on jurisdiction are against the appellant, indicating that the relevant time is the date of the writ. But the time for the exercise of the discretion is when it is sought. On this point there is not much difference between the appellant and the respondents.

If the respondents were so dependent on receiving the money they should have made time of the essence. Their delays are incompatible with the urgency alleged. There was nothing to alert the appellant as to the urgency. It is wrong to blame her for the action of the mortgagees. The respondents were trustees to preserve the property for her.

Although the date of the breach is the moment of time from which the damage flows the vendor may make up his mind within a reasonable time whether or not to go on with the contract, but in a case of urgency the vendor must make a speedy election, speedier than in other cases.

Their Lordships took time for consideration.

March 8.LORD WILBERFORCE. My Lords, this appeal arises in a vendors’ action for specific performance of a contract for the sale of land, the appellant being the purchaser and the vendors respondents. The factual situation is commonplace, indeed routine. An owner of land contracts to sell it to a purchaser; the purchaser fails to complete the contract; the vendor goes to the court and obtains an order that the contract be specifically performed; the purchaser still does not complete; the vendor goes back to the court and asks for the order for specific performance to be dissolved, for the contract to be terminated or “rescinded,” and for an order for damages. One would think that[1980] A.C. 367 Page 391

the law as to so typical a set of facts would be both simple and clear. It is no credit to our law that it is neither. Learned judges in the Chancery Division and in the Court of Appeal have had great difficulty in formulating a rule and have been obliged to reach differing conclusions. That this is so is due partly to the mystification which has been allowed to characterise contracts for the sale of land. as contrasted with other contracts, partly to an accumulated debris of decisions and text book pronouncements which has brought semantic confusion and misunderstandings into an area capable of being governed by principle. I hope that this may be an opportunity for a little simplification.

I must state the facts in some detail because the sequence of events may be important. I repeat however that such additional elements as appear in the relevant history do not take the present case away from the normal. Many sellers of one property commit themselves concurrently to buying another: indeed to do so is often the main reason for the sale. Many sellers of property have incumbrances on that property. The law should be able to accommodate such matters without indigestion.

The contract for sale was dated November 1, 1973. The property sold was called Sheepcote Grange, Woodburn Common. Bucks.; it consisted of the grange itself and some grazing land. On the grange there was a first legal charge to a building society for £15,600 and two other charges. On the grazing land there was a first legal charge to a finance company for £6,000 and a second legal charge to a bank. The purchase price under the contract was £117,000 and so was ample to pay off the charges and to leave the vendors with money to buy another property. In fact on November 1, 1973, they contracted to buy one for £34,000, and raised the purchase money by loan from a bank. If the first contract had been completed according to its terms, no difficulty would have arisen: the bank loan would have been discharged from the purchase price.

The contract was made by reference to the Law Society’s General Conditions of Sale (1973) and provided for completion on December 6, 1973. A deposit of 10 per cent. was to be paid but the purchaser only paid £3,000. Before December 6, 1973, the purchaser had accepted the vendors’ title (this of course disclosed the existence of the mortgages) and a form of conveyance was agreed. However the purchaser did not complete on that date. On December 21, 1973, the vendors’ solicitors served a notice, under condition 19, making time of the essence of the contract and fixing January 21, 1974, as the final date by which completion was to take place. The purchaser failed to complete on that date. On March 8, 1974, the vendors issued a writ claiming specific performance and damages in lieu of or in addition thereto and alternatively a declaration that the vendors were no longer bound to perform the contract and further relief. On May 20, 1974, the vendors issued a summons under R.S.C., Ord. 86 for summary judgment for specific performance, and the order sought was made in the usual form on June 27, 1974. It was not however drawn up and entered until November 26, 1974.

Meanwhile action was taken by the vendors’ mortgagees. The building society obtained an order for possession of the grange on August 22, 1974, they sold it on June 20, 1975, and completion took place on July 18, 1975,[1980] A.C. 367 Page 392

The finance company obtained an order for possession of the grazing land on March 7, 1975; they sold it on April 3, 1975, and completion took place on July 11, 1975. Thus by April 3, 1975, specific performance of the contract for sale had become impossible. The vendors took no action upon the order for specific performance until November 5, 1976, when they issued a notice of motion seeking (a) an order that the purchaser should pay the balance of the purchase price and an inquiry as to damages or (b) alternatively a declaration that they were entitled to treat the contract as repudiated by the purchaser and to forfeit the deposit and an inquiry as to damages.

On February 25, 1977, Megarry V.-C. dismissed the motion. He rejected the first claim on the ground that, as specific performance was no longer possible, it would be unjust to order payment of the full purchase price. The second claim was not pressed, on the ground that it was precluded by authority: Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319.

The vendors appealed to the Court of Appeal who again rejected each alternative: they followed the previous decision in Swycher’s case. However they held that the vendors could recover damages under the Chancery Amendment Act 1858 (Lord Cairns’ Act), which enables the court to award damages in addition to or in substitution for specific performance. They accordingly made an order discharging the order for specific performance and an order for an inquiry as to damages. They fixed the date on which damages should be assessed as November 26, 1974, being the date of entry of the order for specific performance. The purchaser is now appealing against this order.

In this situation it is possible to state at least some uncontroversial propositions of law.

First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance.

Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial he will however have to elect which remedy to pursue.

Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance. This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance.

At this point it is important to dissipate a fertile source of confusion and to make clear that although the vendor is sometimes referred to in the above situation as “rescinding” the contract, this so-called “rescission” is[1980] A.C. 367 Page 393

quite different from rescission ab initio, such as may arise for example in cases of mistake, fraud or lack of consent. In those cases, the contract is treated in law as never having come into existence. (Cases of a contractual right to rescind may fall under this principle but are not relevant to the present discussion.) In the case of an accepted repudiatory breach the contract has come into existence but has been put an end to or discharged. Whatever contrary indications may be disinterred from old authorities, it is now quite clear, under the general law of contract, that acceptance of a repudiatory breach does not bring about “rescission ab initio.” I need only quote one passage to establish these propositions.

In Heyman v. Darwins Ltd. [1942] A.C. 356 Lord Porter said, at p. 399:

“To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position. Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded.”

See also Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, 365, per Bowen L.J.; Mayson v. Clouet [1924] A.C. 980, 985, per Lord Dunedin and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 345, per Lord Reid, 350, per Lord Diplock. I can see no reason, and no logical reason has ever been given, why any different result should follow as regards contracts for the sale of land, but a doctrine to this effect has infiltrated into that part of the law with unfortunate results. I shall return to this point when considering Henty v. Schröder (1879) 12 Ch.D. 666 and cases which have followed it down to Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302.

Fourthly, if an order for specific performance is sought and is made, the contract remains in effect and is not merged in the judgment for specific performance. This is clear law, best illustrated by the judgment of Sir Wilfrid Greene M.R. in Austins of East Ham Ltd. v. Macey [1941] Ch. 338, 341 in a passage which deals both with this point and with that next following. It repays quotation in full.

“The contract is still there. Until it is got rid of. it remains as a blot on the title, and the position of the vendor, where the purchaser has made default, is that he is entitled, not to annul the contract by the aid of the court, but to obtain the normal remedy of a party to a contract which the other party has repudiated. He cannot, in the circumstances, treat it as repudiated except by order of the court and the effect of obtaining such an order is that the contract, which until then existed, is brought to an end. The real position, in my judgment, is that so far from proceeding to the enforcement of an order for

[1980] A.C. 367 Page 394

specific performance, the vendor, in such circumstances is choosing a remedy which is alternative to the remedy of proceeding under the order for specific performance. He could attempt to enforce that order and could levy an execution which might prove completely fruitless. Instead of doing that, he elects to ask the court to put an end to the contract, and that is an alternative to an order for enforcing specific performance.”

Fifthly, if the order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract. This proposition is as stated in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 (and see Singh (Sudagar) v. Nazeer [1979] Ch. 474, 480, per Megarry V.-C.) and is in my opinion undoubted law, both on principle and authority. It follows, indeed, automatically from the facts that the contract remains in force after the order for specific performance and that the purchaser has committed a breach of it of a repudiatory character which he has not remedied, or as Megarry V.-C. puts it [1979] Ch. 474, 480, 790, that he is refusing to complete.

These propositions being, as I think they are, uncontrovertible, there only remains the question whether, if the vendor takes the latter course, i.e., of applying to the court to put an end to the contract, he is entitled to recover damages for breach of the contract. On principle one may ask “Why ever not?” If, as is clear, the vendor is entitled, after, and notwithstanding that an order for specific performance has been made, if the purchaser still does not complete the contract, to ask the court to permit him to accept the purchaser’s repudiation and to declare the contract to be terminated, why, if the court accedes to this, should there not follow the ordinary consequences, undoubted under the general law of contract, that on such acceptance and termination the vendor may recover damages for breach of contract?

I now consider the arguments which are said to support the negative answer.

(1) The principal authority lies in the case of Henty v. Schröder, 12 Ch.D. 666, 667 in which Sir George Jessel M.R. is briefly reported as having laid down that a vendor “could not at the same time obtain an order to have the agreement rescinded and claim damages against the defendant for breach of the agreement.” The unsatisfactory nature of this statement has often been remarked upon. It is unsupported by reasons, and is only reported in oratio obliqua. It is in direct conflict with previous authorities – Sweet v. Meredith (1863) 4 Giff. 207; Watson v. Cox (1873) L.R. 15 Eq. 219 (more fully in 42 L.J.Ch. 279); yet no reason is given why these authorities are not followed, nor is it said that they are overruled. If it were not for the great authority of the Master of the Rolls, I can hardly believe that so fragile and insecure a foundation for the law would ever have survived. Explanations have been canvassed – that Sir George Jessel was confusing discharge of a contract by accepted repudiation with rescission ab initio, a desperate hypothesis; that (much more plausibly) the statement was procedural in character, the emphasis[1980] A.C. 367 Page 395

being on “at the same time”; there was indeed authority, at that time, that in order to obtain damages a separate bill had to be filed: see Hythe Corporation v. East (1866) L.R. 1 Eq. 620. But it is not profitable to pursue these: the authority, weak as it is, is there and has been followed: it is necessary to see what strength it has gained in the process.

At first instance, it has been followed usually uncritically. In Hutchings v. Humphreys (1885) 54 L.J.Ch. 650 it was followed by North J. but upon a misapprehension as to what was ordered in Watson v. Cox. In Jackson v. De Kadich [1904] W.N. 168 – if contrary to sound practice this report is citable at all – Farwell J. (logically enough, if Henty v. Schröder, 12 Ch.D. 666 was right) appears to have decided that a vendor who did not proceed with an order for specific performance could not forfeit the purchaser’s deposit, but in Hall v. Burnell [1911] 2 Ch. 551 Eve J. took a different view. In Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613 (on appeal [1935] 2 K.B. 198) Swift J. treated Henty v. Schröder, 12 Ch.D. 666 as depending on Chancery procedure at the time (1879). In recent times it has been treated as good law in Barber v. Wolfe [1945] Ch. 187and Horsler v. Zorro [1975] Ch. 302 but in each of these cases the judgment is discoloured by the erroneous conception of rescission ab initio: see [1945] Ch. 187, 189; [1975] Ch. 302, 309, 311, as a remedy for breach of contract. Horsler v. Zorro was itself firmly doubted, for this reason, by Goff L.J. in Buckland v. Farmar & Moody [1979] 1 W.L.R. 221, 237, in a passage with which I respectfully agree. Finally, Henty v. Schröder was endorsed by the Court of Appeal in Capital and Suburban Properties Ltd. v. Swycher (“Swycher’s case”) [1976] Ch. 319, but on a new basis which I shall shortly consider, and in the present case.

Textbook authority in general supports the decision. Fry on Specific Performance, 6th ed. (1921) p. 548 mentions the proposition with lack of enthusiasm but the main pillars in this case are Mr. T. Cyprian Williams’ books on The Contract of Sale of Land (1930) and on Vendor and Purchaser, 4th ed. (1936). In the former work (p. 121) he firmly commits himself to the theory of rescission plus restitutio in integrum as remedies for breach of the contract. In the latter, a well-known book of reference on conveyancing matters, he equally firmly denies a right to damages. The learned author writes, at pp. 1025-1026 of vol. 2:

“And if he obtains an order for specific performance of the contract, that will be a bar to his recovering damages for the breach; for in equity the plaintiff suing on a breach of contract was required, as a rule, to elect which remedy he would pursue; and a man entitled to alternative remedies is barred, after judgment on the one, from asserting the other.”

See also p. 1004.

My Lords, this passage is almost a perfect illustration of the dangers, well perceived by our predecessors but tending to be neglected in modern times of placing reliance on textbook authority for an analysis of judicial decisions. It is on the face of it a jumble of unclear propositions not logically related to each other. It is “supported” by footnote references to cases (two of this House and one of the Privy Council) which are not[1980] A.C. 367 Page 396

explained or analysed. It would be tedious to go through them in detail, but I am satisfied that, with the exception of the reference to Henty v. Schröder, they fail to support the text: it is enough to mention that the decisions cited of this House are Scarf v. Jardine (1882) 7 App.Cas. 345, a case of choosing between two inconsistent rights (see United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1, 30, per Lord Atkin), and Morel Brothers & Co. Ltd. v. Earl of Westmorland [1904] A.C. 11, an instance of the rule that after suing an agent, and obtaining judgment, you cannot sue the principal. Neither of these cases in any way bears upon one such as the present.

The state of authority then, so far as English law is concerned, is that, starting from a judgment in which no reasons are given, and which may rest upon any one of several foundations, of which one is unsound and another obsolete, a wavering chain of precedent has been built up, relying upon that foundation, which is itself unsound. Systems based upon precedent unfortunately often develop in this way and it is sometimes the case that the resultant doctrine becomes too firmly cemented to be dislodged.

This is however the first time that this House has had to consider the right of an innocent party to a contract for the sale of land to damages on the contract being put an end to by accepted repudiation, and I think that we have the duty to take a fresh look. I should certainly be reluctant to invite your Lordships to endorse a line of authority so weak and unconvincing in principle. Fortunately there is support for a more attractive and logical approach from another bastion of the common law whose courts have adopted a more robust attitude. I quote first from a judgment of Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457 which with typical clarity sets out the principle – this, be it observed, in a case concerned with a contract for the sale of land. Dixon J. says, at pp. 476-477:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach.”

Closer to the present case, in Holland v. Wiltshire (1954) 90 C.L.R. 409 the High Court was directly concerned with a question of damages for[1980] A.C. 367 Page 397

breach of contract for the sale of land. The purchaser having failed to complete, the vendor claimed damages. Dixon C.J. said, at p. 416:

“The proper conclusion is that the vendor proceeded not under the contractual provision but on the footing that the purchasers had discharged him from the obligations of the contract. It follows that he is entitled to sue for unliquidated damages. Some suggestion was made for the defendants appellants that once the contract was treated by the vendor as discharged he could not recover for breach. This notion, however, is based on a confusion with rescission for some invalidating cause. It is quite inconsistent with principle and has long since been dissipated. It is enough to refer to the note upon the subject in Mr. Voumard’s Sale of Land in Victoria (1939), at page 499.”

Voumard’s Sale of Land – judicially approved – p. 508 – is explicit that damages can be recovered.

Then, in a case very similar to the present, McKenna v. Richey [1950] V.L.R. 360, it was decided by O’Bryan J. in the Supreme Court of Victoria that, after an order for specific performance had been made, which in the events could not be carried into effect, even though this was by reason of delay on the part of the plaintiff, the plaintiff could still come to the court and ask for damages on the basis of an accepted repudiation. The following passage is illuminating, at p. 372:

“The apparent inconsistency of a plaintiff suing for specific performance and for common law damages in the alternative arises from the fact that, in order to avoid circuitry of action, there is vested in the one court jurisdiction to grant either form of relief. The plaintiff, in effect, is saying: ‘I don’t accept your repudiation of the contract but am willing to perform my part of the contract and insist upon your performing your part – but if I cannot successfully insist on your performing your part, I will accept the repudiation and ask for damages.’ Until the defendant’s repudiation is accepted the contract remains on foot, with all the possible consequences of that fact. But if, from first to last, the defendant continues unwilling to perform her part of the contract, then, if for any reason the contract cannot be specifically enforced, the plaintiff may, in my opinion, turn round and say: ‘Very well, I cannot have specific performance; I will now ask for my alternative remedy of damages at common law.’ This, in my opinion, is equally applicable both before and after decree whether the reason for the refusal or the failure of the decree of specific performance is due to inability of the defendant to give any title to the property sold, or to the conduct of the plaintiff which makes it inequitable for the contract to be specifically enforced….“

And later the learned judge said, at p. 376:

“It is an appropriate case for a court of equity to say: ‘As a matter of discretion, this contract should not now be enforced specifically, but, in lieu of the decree for specific performance, the

[1980] A.C. 367 Page 398

court will award the plaintiff such damages as have been suffered by her in consequence of the defendant’s breach. That is the best justice that can be done in this case.'”

The learned judge in his judgment fully discusses and analyses the English cases but nevertheless reaches this view.

My Lords, I am happy to follow the latter case. In my opinion Henty v. Schröder, 12 Ch.D. 666, cannot stand against the powerful tide of logical objection and judicial reasoning. It should no longer be regarded as of authority: the cases following it should be overruled.

In particular Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302 cannot stand so far as they are based on the theory of “rescission ab initio” which has no application to the termination of a contract on accepted repudiation.

The second basis for denying damages in such cases as the present is that which underlies the judgment of the Court of Appeal in Swycher’s case. This is really a rationalisation of Henty v. Schröder, 12 Ch.D. 666, the weakness of which case the court well perceived. The main argument there accepted was that by deciding to seek the remedy of specific performance the vendor (or purchaser) has made an election which either is irrevocable or which becomes so when the order for specific performance is made. A second limb of this argument (but in reality a different argument) is that the vendor (or purchaser) has adequate remedies under the order for specific performance so that there is no need, or equitable ground, for allowing him to change his ground and ask for damages.

In my opinion, the argument based on irrevocable election, strongly pressed by the appellant’s counsel in the present appeal, is unsound. Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity. It is easy to see that a party who has chosen to put an end to a contract by accepting the other party’s repudiation cannot afterwards seek specific performance. This is simply because the contract has gone – what is dead is dead. But it is no more difficult to agree that a party, who has chosen to seek specific performance, may quite well thereafter, if specific performance fails to be realised, say, “Very well, then, the contract should be regarded as terminated.” It is quite consistent with a decision provisionally to keep alive, to say, “Well, this is no use – let us now end the contract’s life.” A vendor who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract – what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under control of the court which control involves the power, in certain events, to terminate it. If he makes an election at all, he does so when he decides not to proceed under the order for specific performance, but to ask the court to terminate the contract: see the judgment of Sir Wilfrid Greene M.R. in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 quoted above. The fact is that the election argument proves too much. If it were correct it would deny the vendor not just the right to damages, but the right to “rescind” the contract, but there is no doubt that this right exists: what is in question is only the right on “rescission,” to claim damages.[1980] A.C. 367 Page 399

The authority most relied on to support this argument is in the end the passage already quoted from Williams on Vendor and Purchaser, 4th ed. – I have commented on this. The cases cited relate to different situations where an election might well be regarded as creating a new situation from which subsequent departure would be impossible. Cases relating to acceptance of defective goods, or to waiver or enforcement of forfeiture, or to a decision to sue one set of parties rather than another: Scarf v. Jardine, 7 App.Cas. 345, or to a case of fraud, to be asserted or waived: Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26, are examples, and there are many others, where an election creates, or recognises, a situation from which consequences flow and when the election is irrevocable. But this is clearly not such a case, or the right to “rescind” after an order for specific performance would not have been recognised.

So far as regards the subsidiary argument, it is equally the case that it proves too much, for if correct it would result in a denial of the undoubted power to “rescind.” Moreover the argument is itself refuted by the action taken by the Court of Appeal itself, for after allowing the vendors to rescind they awarded damages under Lord Cairns’ Act. So clearly there was nothing inappropriate or unnecessary in granting the vendors “rescission” and damages. As Goff L.J. pointed out, it was not possible to leave the vendors to “work out” the decree for specific performance – their only remedy (if any) must lie in an award of damages.

In my respectful opinion therefore Swycher’s case [1976] Ch. 319, whether it should be regarded as resting upon Henty v. Schröder, 12 Ch.D. 666, or upon an independent argument based on election was wrongly decided in so far as it denied a right to contractual damages and should so far be overruled. The vendors should have been entitled, upon discharge of the contract, on grounds of normal and accepted principle, to damages appropriate for a breach of contract.

There is one final point, on this part of the case, on which I should make a brief observation. Once the matter has been placed in the hands of a court of equity, or one exercising equity jurisdiction, the subsequent control of the matter will be exercised according to equitable principles The court would not make an order dissolving the decree of specific performance and terminating the contract (with recovery of damages) if to do so would be unjust, in the circumstances then existing, to the other party, in this case to the purchaser. (To this extent, in describing the vendor’s right to an order as “ex debito justitae” Clauson L.J. may have put the case rather too strongly: John Barker & Co. Ltd. v. Littman [1941] Ch. 405, 412.) This is why there was, in the Court of Appeal, rightly, a relevant and substantial argument, repeated in this House, that the non-completion of the contract was due to the default of the vendors: if this had been made good, the court could properly have refused them the relief sought. But the Court of Appeal came to the conclusion that this non-completion, and the ultimate impossibility of completion, was the fault of the purchaser. I agree with their conclusion and their reasons on this point and shall not repeat or add to them.

It is now necessary to deal with questions relating to the measure of damages. The Court of Appeal, while denying the vendors’ right to[1980] A.C. 367 Page 400

damages at common law, granted damages under Lord Cairns’ Act. Since, on the view which I take, damages can be recovered at common law, two relevant questions now arise. (1) Whether Lord Cairns’ Act provides a different measure of damages from the common law: if so, the respondents would be in a position to claim the more favourable basis to them. (2) If the measure of damages is the same, on what basis they should be calculated.

Since the decision of this House, by majority, in Leeds Industrial Co-operative Society Ltd. v. Slack[1924] A.C. 851 it is clear that the jurisdiction to award damages in accordance with section 2 of Lord Cairns’ Act (accepted by the House as surviving the repeal of the Act) may arise in some cases in which damages could not be recovered at common law: examples of this would be damages in lieu of a quia timet injunction and damages for breach of a restrictive covenant to which the plaintiff was not a party. To this extent the Act created a power to award damages which did not exist before at common law. But apart from these, and similar cases where damages could not be claimed at all at common law, there is sound authority for the proposition that the Act does not provide for the assessment of damages on any new basis. The wording of section 2 “may be assessed in such manner as the court shall direct” does not so suggest, but clearly refers only to procedure.

In Ferguson v. Wilson (1866) L.R. 2 Ch. 77, 88, Turner L.J. sitting in a court which included Sir Hugh Cairns himself expressed the clear opinion that the purpose of the Act was to enable a court of equity to grant those damages which another court might give; a similar opinion was strongly expressed by Kay J. in Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214, and Fry on Specific Performance, 6th ed. p. 602 is of the same opinion. In Wroth v. Tyler [1974] Ch. 30, however, Megarry J., relying on the words “in lieu of specific performance” reached the view that damages under the Act should be assessed as on the date when specific performance could have been ordered, in that case as at the date of the judgment of the court. This case was followed in Grant v. Dawkins [1973] 1 W.L.R. 1406. If this establishes a different basis from that applicable at common law, I could not agree with it, but in Horsler v. Zorro [1975] Ch. 302, 316 Megarry J. went so far as to indicate his view that there is no inflexible rule that common law damages must be assessed as at the date of the breach. Furthermore, in Malhotra v. Choudhury [1980] Ch. 52the Court of Appeal expressly decided that, in a case where damages are given in substitution for an order for specific performance, both equity and the common law would award damages on the same basis – in that case as on the date of judgment. On the balance of these authorities and also on principle, I find in the Act no warrant for the court awarding damages differently from common law damages, but the question is left open on what date such damages, however awarded, ought to be assessed.

(2) The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. Where the contract is one of sale, this principle normally leads to assessment of damages as at the date of the breach – a principle recognised and embodied[1980] A.C. 367 Page 401

in section 51 of the Sale of Goods Act 1893. But this is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances.

In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost. Support for this approach is to be found in the cases. In Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; L.R. 3 Q.B. 272 the date was fixed by reference to the time when the innocent party, acting reasonably, went into the market; in Hickman v. Haynes (1875) L.R. 10 C.P. 598 at a reasonable time after the last request of the defendants (buyers) to withhold delivery. In Radford v. De Froberville [1977] 1 W.L.R. 1262, where the defendant had covenanted to build a wall, damages were held measurable as at the date of the hearing rather than at the date of the defendant’s breach, unless the plaintiff ought reasonably to have mitigated the breach at an earlier date.

In the present case if it is accepted, as I would accept, that the vendors acted reasonably in pursuing the remedy of specific performance, the date on which that remedy became aborted (not by the vendors’ fault) should logically be fixed as the date on which damages should be assessed. Choice of this date would be in accordance both with common law principle, as indicated in the authorities I have mentioned, and with the wording of the Act “in substitution for… specific performance.” The date which emerges from this is April 3, 1975 – the first date on which mortgagees contracted to sell a portion of the property. I would vary the order of the Court of Appeal by substituting this date for that fixed by them – viz. November 26, 1974. The same date (April 3, 1975) should be used for the purpose of limiting the respondents’ right to interest on damages. Subject to these modifications I would dismiss the appeal.

LORD SALMON. My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Wilberforce. I agree with it, and for the reasons which he gives I also would dismiss the appeal, subject to the variation of the order of the Court of Appeal which he has proposed.

LORD FRASER OF TULLYBELTON. My Lords, I have had the great benefit of reading in draft the speech prepared by my noble and learned friend, Lord Wilberforce. I entirely agree with it and, for the reasons given by him, I also would dismiss this appeal, subject to the alteration of date which he has proposed.

LORD KEITH OF KINKEL. My Lords, I have had the great benefit of reading in draft the speech of my noble and learned friend, Lord Wilberforce. I agree entirely with the reasoning and conclusions therein contained, and that the appeal should accordingly be dismissed subject to variation, in the manner which he proposed, of the order of the Court of Appeal.[1980] A.C. 367 Page 402

LORD SCARMAN. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Wilberforce. I agree entirely with his reasoning and conclusions. I agree that the appeal should be dismissed, subject to the variation proposed by my Lord in the order of the Court of Appeal.Appeal dismissed.

Solicitors: Bircham & Co.; Ward Bowie.

F. C