Specific performance denied for land sale due to Sale of Land Law non-compliance; damages awarded instead.

[*324] 1981 March 30

(STYLIANIDES, P.D.C. AND FR. NICOLAIDES, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Nicos Constantinides,

Plaintiff,

v.

Maria Chr. Loucaidou,

Defendant.

(Action No. 2590/79).

Contract - Breach of contract - Sale of land - Specific performance - Prerequisites provided by the Sale of Land (Specific Performance) Law, Cap. 233 not complied with - Specific performance not possible - Damages the only remedy - Measure of damages.

Damages - Breach of contract for sale of land – Measure of damages - Section 73(1) of the Contract Law, Cap. 149.

Contract - Illegality - Principles applicable - Contract for sale of land - Undertaking by seller to transfer the land in the name of any person to be indicated by purchaser - Power of Attorney by seller to third person authorising him to transfer property according to above undertaking - Whether existence of power of Attorney taints contract with illegality as contravening Laws relating to payment of transfer fees - Section

23 of the Contract Law, Cap. 149.

I. Mavronicolas, for the Plaintiff.

A. Ladas, for the Defendant.

JUDGMENT

The judgment of the Court was delivered by:-

STYLIANIDES, P.D.C.: The plaintiff by this [*325] action claims specific performance of a contract of sale dated 17.10.78 and in the alternative damages for breach of the said contract and repayment of the amount of £3,300.- purchase price.

The plaintiff in the statement of claim contends that by virtue of a contract of sale dated 17.10.78 he purchased from the defendant two plots of lands situated at Kato Lakatamia for £5,300.-. The whole amount was paid by the plaintiff.

On 22.2.79 the defendant gave irrevocable powers of attorney to a certain Andreas Meshouris of Nicosia empowering him to transfer the two plots. The one plot, namely plot No. 42, was transferred at the declared price of £2,000.- in completion of the contract but before the transfer of the second plot, i.e. plot No. 34, she revoked the power of attorney and she finally refused to perform her obligation to transfer plot No. 34.

The defendant admits the contract of sale. She admits that the sale price was paid off and alleges that she gave a power of attorney to the said Meshouris for the sale and transfer of the said plots to any person for any amount in his absolute discretion.

Meshouris did transfer the one plot, i.e plot No. 42, in the name of Theodoros Constantinides. She further alleges that the object for which the power of attorney was asked from her was to transfer the properties, [*326] subject-matter of the contract of sale, directly to a third person without first being transferred in the name of the plaintiff and thus to avoid the payment of the D.L.O. fees, and, therefore, the whole contract of sale dated 17.10.78 is tainted with illegality and is void ab initio and/or it became void from the date of the signing of the power of attorney and by counterclaim she claims a declaration that the power of attorney dated 22.2.79 she gave to Meshouris is void and of no legal effect.

The facts of this case are simple and almost uncontested. The plaintiff was the registered owner of plot 42, Sheet/Plan XXX.12.E.1, and of plot No. 34, Sheet/Plan XXX.4.E.2, of Kato Lakatamia. By a contract of sale dated 17.10.78 (exhibit No.2) she agreed to sell to the plaintiff the said pieces of land at the stipulated price of £5,300.-. £2,000.- were paid in advance and the balance of £3,300.- was payable as follows: £1,000.- on 10.12.78 and the balance of £2,300.- within three months.

The time of performance of the obligation of the parties was not made specifically of the substance of the contract and, therefore, it is not essential. (Keeble v. Stickney, (1915) A.C. 386, per Lord Parker of Waddington, 415; Jamshed v. Burjorji, (1916) 43 I.A. 26; s. 55 of the Contract Law, Cap. 149, and Pollock and Mulla, The Indian Contract Act, 7th edition).

The purchase price was paid off by

22.2.79. [*327]

The plaintiff by the said contract of sale undertook to transfer in the name of the purchaser and/or in the name of any other person or persons to be indicated by the purchaser the properties sold.

P.W.3, Meshouris, was the estate agent who brought about this contract. On 23.2.79 the defendant and Meshouris, the estate agent, attended the D.L.O., Nicosia, where the defendant was asked and gave two separate powers of attorney - (See exhibit No. 3) –to Meshouris empowering him to sell and transfer this property to any person and at any price to his discretion.

The transfer was not effected. The plaintiff stated that he intended the one plot for his son and the other for his daughter who were not available at the time as they were abroad. Later by virtue of the respective power of attorney Meshouris transferred in the name of

the son of the plaintiff on the directions of the plaintiff plot No. 42 at the declared sale price of £2,000.-. The other plot, i.e. plot

No. 34, was intended for the daughter of the plaintiff but as the plaintiff was in need of money, he authorized Meshouris to resell it to anyone else. Indeed Meshouris found another purchaser for the plaintiff as vendor and

actually:on 28.5.79 a contract of sale (exhibit No.4) was entered into between Meshouris in his capacity as agent by

virtue of the power of attorney (exhibit No.3) for the sale of plot No. 34 at £5,600.- [*328]

On 1.6.79 Meshouris and the new

purchasers attended the D.L.O. for the transfer of plot No. 34. At the D.L.O. they were confronted with a letter (exhibit No.1)

dated 26.5.79 whereby the defendant revoked the power of attorney and thus the D.L.O. did not accept the declaration of transfer. The defendant was contacted but she refused to complete the contract.

ILLEGALITY:-

It is alleged in the statement of defence, and the plaintiff and Meshouris were cross-examined on the matter, that the power of attorney was obtained from her for the purpose of transferring this plot to any new purchaser to whom the plaintiff would resell the said plot without first the property being transferred in the name of the plaintiff. By this the transfer fees which the plaintiff would pay for the transfer in his name would not be paid and thus the revenue would have been defrauded and this goes to the root of the contract and makes it illegal.

Illegality is governed by the provisions of s.23 of the Contract Law, Cap. 149.This is a replica of the corresponding section of the Indian Contract and Specific Relief Law, 1872.

The following principle relating to illegal contracts was enunciated by Atkin, L.J., in Anderson, Ltd. v. Daniel (1924) 1 K.B. 138, at p. 149:-

“The question of illegality in a contract [*329] generally arises, in connection with its formation, but it may also arise, as it does here, in connection with its performance. In the former, case where the parties have agreed to something which is prohibited by Act of Parliament, it is indisputable that the contract is unenforceable by either party. And I think that it is equally unenforceable by the offending party where the illegality arises from the fact that the mode of performance adopted by the party performing it is in violation of some statute, even though the contract as agreed upon between the parties was capable of being performed in a perfectly legal manner.”

In St. John Shipping Corporation v. Joseph Rank Ltd., (1957) 1 Q.B.267, at p. 283, Devlin, L.J. as he then was, said:-

“There are two general principles, The first is that a contract which is entered into with the object of committing an illegal act is unenforceable. The application of this principle depends upon proof of the intent, at the time the contract was made, to break the law; if the intent is mutual the contract is not enforceable at all, and if unilateral, it is unenforceable at the suit of’ the party who is proved to have it …….. The second [*330] principle is that the. Court will, not enforce a contract which is. expressly or impliedly prohibited by statute. If the contract is of this class it does not matter what the intent of the parties is; if the statute prohibits the contract, it is unenforceable whether the parties meant to break the law or not”.

In the case of Shaw v. Groom, (1970) 1 All E.R. 702, the Court of Appeal reiterated that it is a question of public policy in a wide sense and decision must be reached after a review of all the circumstances of the case and after balancing all relevant considerations. It was said that the test to be applied should be whether the contract is impliedly forbidden by the statute. An ancillary test is whether the statute is for the protection of the public.

Fees are payable on the declared sale price under the Department of Lands and Surveys (Fees and Charges) Law, Cap. 219, as amended. The provisions of ss.49-50 of Law 9/65 are relevant to the master. In the case of non payment of the proper fees the Director is empowered to amend or revoke a registration.

Section 15 of Law 9/65 provides that all fees are payable at the time that the declaration is accepted at the District Lands Office and the declaration is void and has no legal effect if the fees and charges are not paid on that day. The proviso to this section reads as follows:- [*331]

“Νοείται ότι αι διατάξεις του

παρόντος άρθρου δεν τυγχάνουσιν εφαρμογής επί των τελών και δικαιωμάτων ή

μέρους αυτών άτι να ήθελον εξακριβωθή ως εισπρακτέα μετά την ημέραν καθ’ ην η

σχετική δήλωσις εγένετο αποδεκτή.”

It is the task of the Court to consider whether the Law on its true construction is intended to avoid contracts of the class to which the particular contract belongs or whether it merely prohibits the doing of some particular act.

In Vita Food Products, Incorporated v. Unus Shipping Co., Ltd., (1939) 1 All E.R. 523, Lord Wright said:-

Each case has to be considered on its merits. Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.

‘’If the Court too readily implies that a contract is forbidden by statute, it takes it out of its own power (so far as that contract is concerned) to discriminate between guilt and innocence. If, however, the Court makes no such [*332] implication, it still leaves itself with the general power, based on public policy, to hold those contracts unenforceable which are ex facie unlawful, and also to refuse its aid to guilty parties in respect of contracts which to the knowledge of both can only be performed by a “contravention of the statute or which though apparently lawful are intended to be performed illegally or for an illegal purpose”.

Having considered the allegations set out in the defence and in the light of the statutory provisions and the judgments to which we have just referred and the contents of the contract of sale between the parties (exhibit No.2), we find no merit in the allegations of the defendant. Indeed even Mr. Ladas in his final address rather lukewarmly withdrew his such averments.

It has been proved without contest that the defendant did not perform her part of the obligation and broke her contract. The plaintiff is entitled to the remedies provided for him by Law.

The plaintiff claims specific performance. The property consists of a piece of land.

The Sale of Land (Specific Performance) Law, Cap. 233, as amended by Law 50/70, governs the specific performance for the sale of land. The prerequisites provided by the said Law have not been complied with. In a [*333] number of cases it was pronounced that specific performance may be ordered only when the requirements

and formalities provided by the said Law are complied with. (Eleni Panayiotou Iordanou v. Polycarpos Neophytou Anyftos, 24 C.L.R. 97; Eleni Andrea Avgousti

v. Njovi Papadamou & Another, (1968) 1 C.L.R. 66; Xenis Xenopoullos v. Elli Issidorou Makridi, (1969) 1 C.L.R. 488).

The plaintiff is not entitled to specific performance. The plaintiff, however, is entitled to damages.

The matter is regulated by the provisions of s.73(1) of the Contract Law, Cap. 149, which provides:-

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby which arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

“Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach”.

This section echoes the principles approved in Hadley v. Baxendale, (1851) 9 Ex. 341, and is interpreted according to the pronouncements in Koufos v. C. Czarnikow Ltd.,

(1967) 3 W.L.R., 1491, and The Heron II, (1967) 3 All E.R. 686. [*334]

The measure of damages is the difference between the contract price and the value of the property at the date

when the contract ought to have been performed. (See Engell v. Fitch, (1869) L.R. 4 Q.B. 659; Wallington v. Townsend,

(1939) 2 All E.R. 225, at p. 238).

In Ridley v. De Geerts, (1945) 2 All E.R. 654, Lord Greene, M.R. said:-

There is no question of specific performance because the respondent thought it proper to back out of this transaction when she had been offered a higher price, and she has in fact completed that purchase for £1,600.-, that is £200.- more than the appellant was to pay. The question, then is what is the measure of damages. Prima facie one would have thought on the evidence before us - and we are asked to assess the damages - the measure of damages would be the difference between the two prices, £200.-”. (See Vincent Della Tolla v. Fidias Kyriakides, 20 (II) C.L.R. 89, at p. 94).

In the present case both plots were purchased at £5,300.-. At the declaration of sale at the D.L.O. of plot No. 42 the amount of £2,000.- was declared as the purchase price. There was no disagreement in the course of the trial about this declaration or the correct amount and, therefore, the sale price of this plot, though not separately indicated in the contract, is £3,300.-. This plot was sold for £5,600.-. The plaintiff would have paid [*335] 3% commission to the estate agent plus a bonus. The estate agent has performed his mandate and, therefore, he is entitled to his commission.

With regard to the bonus, there is no liability on behalf of the plaintiff and, therefore, the amount he would have received is £5,600.- less the bonus. The damages claimed that he is entitled to are the difference between the amount of £5,600.- less the purchase price and less the bonus he had to pay out. The bonus is in the region of £200.- £300.-, as there is some discrepancy between the evidence of the plaintiff himself and his witness - the estate agent, Meshouris.

We shall take for the purpose of assessing the damages the figure most favourable to the defendant as the evidence is coming and the burden of proof rests on the plaintiff, i.e. this figure is £300.-. Thus the plaintiff is entitled to £2,000.- damages. The plaintiff is also entitled to the amount of £3,300.- which he has paid as purchase price. He is not entitled, however, to any interest as it is not stipulated in the contract.

In the result we give judgment for the plaintiff against the defendant for £5,300.- in all, i.e. £3,300.- the amount he paid and £2,000.- damages, with costs to be assessed by the Registrar.

Counterclaim dusmissed with no order as to costs.

Judgment against defendant for £5.300.- with costs. Counterclaim dismissed.