Court allows appeal dismissing specific performance claim after prior action deemed acceptance of repudiation.

[*572] 1971 April 30

(VASSILIADES, P., TRIANTAFYLLIDES, L0IZ0U,JJ. )

APPELLATE JURISDICTION

Tanis Beit,

Appellant-Defendant,

v.

Elias Ioanni Papa and another

Respondents-Plaintiffs.

(Civil Appeal No.4865).

Contract

- Sale of land - Breach of contract by repudiation before time of performance - Piling and discontinuance of action for damages and specific performance - Whether subsequently to such action steps for specific performance can be taken under section 2 of the Sale of Land (Specific Performance) Law, Cap.232 - Filing of first action treated as acceptance by innocent party of the repudiation of the Contract by the other party.

Contract

- Breach of, by repudiation before time of performance- Anticipatory breach - Innocent party entitled to sue for breach of contract without waiting for the time fixed for performance and is absolved from further performance of his own part of the contract - And if the innocent party does sue without waiting for the time fixed for performance then the contract is determined.

Anticipatory breach - See under "Contract".

Specific performance - See under "Contract".

Sale of Land - See under "Contract".

Sale of Land (Specific Performance) Law, Cap. 232 - Section 2 - See under "Contract".

A.Dana, for the Appellant.

E. Liatsos with D. Liveras, for the Respondents.

REASONS FOR JUDGMENT

TRIANTAFYLLIDES, P.: On the 31st March, 1971,judgment [*573] was given in this appeal by the then President of the Court Mr. Justice Vassiliades, Mr. Justice L. Loizou and myself as follows:-

"(a) The order of the trial Court to the effect that the property of the appellant at Kormakitis (under registration No.8354) be registered in the name of the respondents, by way of specific performance of the contract of the 19th January, 1969, is set aside.

(b) In lieu of such order there will be judgment against appellant and in favour of respondents for £900 damages (including the £200 already paid by respondents to appellant under the provisions of the said contract).

(c) The appellant to pay to the respondents all the costs in the District Court and the respondents to pay one half of appellant's costs in the appeal.

(d) Reasons for judgment will be given later."

There shall now be given the reasons for the above judgment of the Court:

This is an appeal by the appellant-defendant against the decision of a Full District Court in Kyrenia in civil action No.50/69. By virtue of such decision it was ordered, on the 18th December, 1969, that immovable property of the appellant- 25 defendant at Kormakitis village under registration No. 8354 be registered in the name of respondents-plaintiffs by way of specific performance of a written contract for the sale of [*574] such property which is dated the 19th January, 1969,

The salient facts of the case are as follows:-

The appellant, being the registered owner of the property in question, agreed to sell and transfer it to the respondents for the sum of £4,650 by virtue of the said contract.

It was provided in the contract that upon the signing of the agreement £200 would be paid by way of part payment of the sale price and the balance of £4,450 would be paid on the 20th February, 1969, when the transfer to the respondents would take place. The said £200 were duly paid and a copy of the contract was deposited, by the respondents, on the 7th February, 1969, at the District Lands Office in Kyrenia; Kormakitis being a village in the Kyrenia District.

By a clause in the contract it was provided that in case or repudiation of the agreement by either of the parties then the party at fault would pay to the other party £700 damages.

Towards the end of January, 1969, a co-villager of respondents, Iossif Skordi, met the appellant at a coffeeshop at Ayia Erini village and told him on behalf of the respondents that they had the balance of the purchase-money ready and that they wanted the appellant to transfer the property in their names at once. The appellant replied to him that he had changed his mind and he offered to return the deposit of £200 to the respondents through this witness.

On the 13th February, 1969, and, later, on the 18th February, 1969, Mr. A. Liatsos, an advocate in Kyrenia acting for the respondents, saw the appellant in Kyrenia

and called upon him to appear before the District Lands Office [*575] there and declare that he had agreed to sell the property concerned

to the respondents; Mr. Liatsos tried to serve on him a notice to that effect but appellant refused to accept service.

On the 15th March, 1969, the action which has given rise to the present appeal was instituted; by the writ of summons the respondents have claimed specific performance of the contract of the 19th January, 1969.

During the course of the afore-mentioned events another action had been filed, on the 24th January, 1969, by the respondents against the appellant, in the District Court of Kyrenia (No. 23/69), by virtue of which the respondents were claiming, in the alternative, specific performance of the contract of the 19th January, 1969, or £700 agreed damages, plus the £200 already paid to the appellant by way of part payment.

In an affidavit, sworn on the date when the said action was filed, one of the two respondents, Antonis Shimi, stated that he had information that the appellant intended to sell the property in question to a third person in breach of the agreement of the 19th January, 1969, The affidavit was sworn in support of an application for an interim order preventing the appellant from alienating the said property; and the interim order was granted.

On the 5th February, 1969, the appellant entered an appearance in the first action, No.23/69, and that action remained pending until the 15th March, 1969, when the second action, No.50/69, was filed. On that date, and before any [*576] pleadings had been filed by either side in action No.23/69, the advocate of the respondents filed a notice of discontinuance of action No.23/69 and such action was accordingly dismissed, the discontinuance was expressly stated to be without prejudice to the rights of the respondents.

A basic legal issue which has to be determined is whether after the filing of action No.23/69 there remained in force the contract of the 19th January, 1969 - otherwise than for its purpose of enabling the respondents to claim damages for its breach by the appellant - so that subsequently to such action steps could be taken under the provisions of section 2 of the Sale of Land (Specific Performance) Law, Cap. 232, in order to render it possible for the respondents to seek, later, in action No. 50/69 and obtain, eventually, an order for specific performance of the contract.

The learned trial judges, in relation to action No.23/69, referred to Order 15, rule 1, of the Civil Procedure Rules, which provides, inter alia, that discontinuance of an action at any time before receipt of the defendant's defence shall not be a defence at any subsequent action and they, therefore, held that no question of res judicata arose as a result of the discontinuance of action No.23/69. In our opinion, however, the matter does not end there. The filing by the respondents of action No.23/69 has to be treated, in the light of all the circumstances of this case, as acceptance by the respondents of the repudiation by the appellant of the contract of the 19th January, 1969 and as resort by the respondents to

whatever remedy was open to them at the time under the law; [*577] thus, as a result of such acceptance the said contract came to an

end except for the purpose of enabling the respondents to claim damages and the refund of their deposit, there being no dispute that when action No.23/69 was filed they Were not entitled, under Cap.232, to an order for specific performance.

Where a contract is to be performed on a future date, as in the present case, and one of the parties repudiates the contract by showing that he does not intend to perform it, by way of anticipatory breach of contract, as it has happened in the present case, the other party is entitled to sue him for breach of contract without waiting for the time fixed for performance and is absolved from further performance of his own part of the contract; and if the innocent party does sue without waiting for the time fixed for performance then the contract is determined (see Halsbury's Laws of England, 3rd ed., vol. 8, p. 203, para. 344).

In Johnstone v. Milling, 16 Q,B.D. 460, Lord Esher M.R. said (at p. 467):-

" Accordingly the defendant has recourse to the doctrine laid down in several cases cited, the best known of which is perhaps the case of Hochster v. De la Tour.* In those cases the doctrine relied on has been expressed in various terms more or less accurately; but I think that in all of them the effect of the language used with regard to the doctrine of anticipatory breach of contract is that a renunciation of a contract, or, in other words, a total refusal to perform it by one party [*578] before the time for performance arrives, does not, by itself, amount to a breach of contract but may be so acted upon and adopted by the other party as a rescission of the contract as to give an immediate right of action. When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares his intention then and there to rescind the contract. Such a renunciation does not of course amount to a rescission of the contract, because one party to a contract cannot by himself rescind it, but by wrongfully making such a renunciation of the contract he entitles the other party, if he please, to agree to the contract being put an end to, subject to the retention by him of his right to bring an action in respect of such wrongful rescission. The other party may adopt such renunciation of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation. He cannot, however, himself proceed with the contract on the footing that it still exists for other purposes, and also treat such renunciation as an immediate breach. If he adopts the renunciation, the contract is at an end except for the purposes of the action for such wrongful renunciation; if he does not wish to do so, he must wait [*579] for the arrival of the time when in the ordinary course a cause of action on the contract would arise. He must elect which course he will pursue. Such appears to me to be the only doctrine recognised by the law with regard to anticipatory breach of contract."

Also, in the same case, Bowen L.J. said (at pp.472-473):-

"We have, therefore, to consider upon what principles and under what circumstances it must be held that a promisee, who finds himself confronted with a declaration of intention by the promisor not to carry out the contract when the time for performance arrives, may treat the contract as broken, and sue for the breach thereof. It would seem on principle that the declaration of such intention by the promisor is not in itself and unless acted on by the promisee a breach of the contract; and that it only becomes a breach when it is converted by force of what follows it into a wrongful renunciation of the contract.

Its real operation appears to be to give the promisee the right of electing either to treat the declaration as brutum fulmen, end holding fast to the contract to wait till the time for its performance has arrived, or to act upon it, and treat it as a final assertion by the promisor that he is no longer bound by the contract, and a wrongful renunciation of the contractual relation into which he has entered. But such declaration only becomes a [*580] wrongful act if the promisee elects to treat it as such. If he does so elect, it becomes a breach of contract, and he can recover upon it as such.

Upon looking to the reason of the thing it seems obvious that in the latter case the rights of the parties under the contract must be regarded as culminating at the time of the wrongful renunciation of the contract, which must then be regarded as ceasing to exist except for the purpose of the promisee's maintaining his action upon it; it would be unjust and inconsistent with all fairness that the promisee should be entitled to bring his action as upon a wrongful renunciation of the contract, and yet to treat the contract as still open and existing with regard to the future.

Such being the reason of the thing, the authorities seem all to be the same way. In Hochster v. De la Tour *, Lord Campbell thus expresses the doctrine: But it is surely much more rational and more for the benefit of both parties that, after the renunciation of the agreement by the defendant, the plaintiff should be at liberty to consider himself absolved from any future performance of it, retaining his right to sue for any damage he has suffered from the breach of it.' In the passage cited by my Brother Cotton from Frost v. Knight , Cockburn, C.J., points out that there are these two alternatives open to the promisee, and that it is a condition essential to his right to sue [*581] upon a repudiation of the contract before the time for performance as upon a breach that he should thenceforth treat the contract as at an end except for the purpose of being sued upon."

In Hey man and Another v. Darwins. Limited, (1942) A.C. 356, Viscount Simon L.C, said (at p. 361):-

"If one party so acts or so expresses himself, as to show that he does not mean to accept and discharge the obligations of a contract any further, the other party has an option as to the attitude he may take up. He may, notwithstanding the so-called repudiation, insist on holding his co-contractor to the bargain and continue to tender due performance on his part. In that event, the co-contractor I has the opportunity of withdrawing from his false position, and even if he does not, may escape ultimate liability because of some supervening event not due to his own fault which excuses or puts an end to further performance: a classic example of this is to be found in Avery, v. Bowden . Alternatively, the other party may rescind the contract, or (as i t is sometimes expressed) 'accept the repudiation, by so acting as to make plain that in view of the wrongful action of the party who has repudiated, he claims to treat the contract as at an end, in which case he can sue at once for damages." [*582]

In the same case Lord Wright said (at p. 379):-

"But perhaps the commonest application of the word 'repudiation' is to what is often called the anticipatory breach of a contract where the party by words or conduct evinces an intention no longer to be bound and the other party accepts the repudiation and rescinds the contract. In such a case, if the repudiation is wrongful and the rescission is rightful, the contract is ended by the rescission but only as far as concerns future performance. It remains alive for the awarding of damages either for previous breaches or for the breach which constitutes the repudiation."

A recent case which we consider as distinguishable from the present one is that of Garnac Grain Co. Inc. v. H.M.F. Faure & Fairclough, Ltd. and Bunge Corporation, (1967) 2 All E.R. 353. In that case Lord Pearson (at p. 360), after referring to the views of Viscount Simon L.C. and Lord Wright in the Heyman case(supra), held that where one party to the proceedings had rescinded a contract and the other party had issued a writ against the first party claiming (a) a declaration that the contract, the benefit of which had been assigned to him, was "valid and subsisting ", and (b) damages for breach of such contract, and where that writ was not ever served, the issue of such writ, as framed, did not - in the light of all the surrounding circumstances in that particular case - lead to the view

that the party at whose instance the writ was issued was treating the [*583] contract as not continuing in force. We think that the Garnac

case is entirely different from the one before us because it is clear, from all material considerations in the present case, that the respondents elected to treat the contract as repudiated and to fall back on their remedy in damages; they claimed specific performance as an alternative remedy, but as things stood then they could not have obtained an order for specific performance, under Cap. 232, and that is the reason why there followed the already referred to developments which culminated in the filing of action No.50/69.

As indicated already we formed the opinion that once action No.23/69 was filed the relevant contract between the parties came to an end, except in so far as it could be the basis of a claim for damages, and it was not possible on the strength of such contract to take any further steps which would later entitle the respondents to obtain an order for specific performance in action N0.50/69.

The respondents are, however, entitled to damages in lieu of specific performance and we have no difficulty in holding that such damages are the damages agreed upon between the parties to the contract (see Xenopoullos v. Makridi

(1969) 10 J.S.C. 1186). That this is so has been conceded by counsel for appellant. Also, they are entitled to the refund of their deposit of £200.

For these reasons there was given the judgment delivered in these proceedings on the 31st March, 1971.

Appeal allowed.

* 2 E. & B. 678; 22 L.J. (Q.B.)455.

* 2 E. &

B. 678; 2 L.J. (Q.B.) 455.

Law Rep. 7 Ex. 111.

(1855) 5 E. & B. 714.