Specific performance denied due to Sale of Land Law; damages awarded for breach of contract.

[*341] 1973 October 10

(PIKIS, AG. P.D.C.)

IN THE DISTRICT COURT OF FAMAGUSTA

Dionysios Christodoulou,

Plaintiff,

and

Michalakis Kyriakou Marathefti,

Defendant.

(Action No. 2924/72).

Damages - Contract - Sale of land - Breach of Contract - Specific performance not available due to non-compliance with the provisions of the Sale of Land (Specific Performance) Law, Cap. 232 - Measure of damages - Section 73(1) of the Contract Law, Cap. 149.

A. Arghyrides, for the Plaintiff.

Defendant absent.

JUDGMENT

The following judgment was delivered by:-

PIKIS, AG. P.D.C.: On 20th September, 1972, [*342] the defendant agreed to sell to

the plaintiff a building site at Famagusta, situate at Ifestos Street, Ayios Loukas quarter, for £1,700.-. The Agreement was reduced in writing

and contained the following terms: -

A sum of £700. - was paid on the date of execution of the contract and the “balance would be paid within a period of a year. In accordance with clause 4, the defendant undertook to transfer the property in the name of the defendant forthwith.

The parties are Cypriots, apparently residing in the United Kingdom and the Agreement was concluded in London.

On 4th October, 1972, the plaintiff, by a letter posted the same day, notified the defendant to come forward at the Lands Registry and convey the property, as agreed, in his name, a request that met with the refusal of the plaintiff. Soon afterwards, the plaintiff discovered that the defendant had transferred the said same property to another

party, a certain Demetrios Georghiou Asprou, for the sum of £1,800.-, thus putting it beyond his reach to comply with the terms of the

Agreement in question.

The present Action was instituted on 31st October, 1972, asking for a return of the deposit, damages for breach of contract and interest. The defendant, though served, failed to enter an appearance and subsequently showed total disinterest in the fate of the proceedings thus the Action was heard in his absence. [*343].

The evidence adduced on behalf of the plaintiff consists of -

(a) the evidence of the plaintiff surrounding the circumstances of the execution and breach of the contract;

(b) the testimony of an official of the Lands Registry concerning the ownership of the subject property and its disposal by the defendant to a third party on 9th October, 1972, evidenced by the declaration of sale (exhibit 3); and

(c) the evidence of Mr. Pandelides, a land valuer, on the value of the property at the date of breach as well as at the date of hearing. This witness, after making a study of price trends in the value of land in the area and thereafter relying on the method of direct comparison, formed the opinion that the market value of this building site was, at the date of breach, £2,265.-, whereas at the date of hearing, a year later, its value rose to £2,525.-.

In the light of the evidence before me, I find that the defendant is guilty of breach of a fundamental term of the contract in that he failed, as agreed, to transfer the property in the name of the plaintiff at the stipulated time. Further evidence of the breach may be derived from the fact that he sold the property to a third party, thus putting it beyond his reach, to complete his side of the [*344] bargain. At the time of agreement the defendant had a good title to the property and there was no obstacle to his transferring the property in the name of the plaintiff, other than his desire, apparently prompted by a motive of higher profit, to break the agreement. I accept the evidence of Mr. Pandelides as to the market value of the land at the date of breach and at the date of hearing.

Learned counsel for the plaintiff, in a short, but none the worse for that, submission, invited the Court to award damages to the plaintiff on the basis of the difference between the contract price of the land and its value at the date of hearing. He relied for support on a recent decision .of Megarry J. in Wroth v. Tyler (1973) 1 All E.R., 897, the facts of which were briefly as follows:-

The defendant, to the knowledge of his wife, agreed to sell his bungalow to the plaintiff for £6,000.-. Before completion, the wife of the defendant registered a charge on the property, thus imposing an impediment on the title of the defendant to the property, in consequence of which the defendant withdrew from the transaction. The plaintiff asked for an order of specific performance and claimed damages in the alternative. At the time of breach, the value of the house was £7,500.-, whereas at the date of hearing it had risen to £11,500.-. The learned judge, whilst refusing an order for specific performance, awarded the plaintiff damages amounting to £5,500.-, principally basing his judgment on the principle of restoring the innocent party to the substantial position he would have [*345] enjoyed, had the contract been performed. There was evidence that at the date of breach the plaintiff did not have and could not raise the extra £1,500.- needed to buy a comparable bungalow. Though this is a judgment of first instance, it bears the stamp of Megarry J., a man of great learning, if I may say so with the greatest respect, and merits close examination because of its implications on the general principle of the Law of Contract that damages must be assessed as at the date of breach.

General rule regarding the date of assessing damages in a breach of contract action

In Cyprus the matter is regulated by the provisions of section 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”.

Section 73 (above) reproduces in statutory form the common law rules governing the measure of damages [*346]

where a contract is broken and echoes the principles approved in Hadley v. Baxendale (1854), 9 Ex. 341, a decision of respectable antiquity that

has stood the test of time for over a century. The principles adopted in the above case, subject to certain refinements and ramifications, are still today the basic rules that govern an award of damages in a breach of contract action. Damage may be recovered if -

(a) it flows naturally from the breach; or if

(b) it is of a type that could reasonably be said to have been within the contemplation of the parties as likely to result if either party defaulted.

It is impermissible to award damage for a type of loss, the incidence of which could not be said to be within the contemplation of the parties at the time of agreement, unless one of the contracting parties expressly communicated the possibility of such fact occurring to the other party at the time of agreement, thus making him privy to

the special value the contract had for him. In the opinion of Lord Reid, in Koufos v. C. Czarnikow Ltd. (1967) 3 W.L.R., 1491 (H.L.) -

“The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would have realized that such loss was sufficiently likely to result from the breach of contract to make [*347] it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation”.

In another decision of the House of Lords, The Heron II

(1967) 3 All E.R., 686 (H.L.), it was emphasized that the defendant will be liable for damage reasonably foreseeable as likely to occur, even in the most unusual case, unless the risk is so small that a reasonable man would, in the totality of the circumstances, feel justified in neglecting it.

The market value of the property at the date of breach is normally the measure to go by, in assessing the damage suffered by the aggrieved party. The object of the exercise is to restore the plaintiff, in the same position he would have been, had the contract been performed.

In Lloyd v. Stanbury, Brightman J. listed the items of damage that may be recovered in an action for breach of contract, under the following: heads: -

1. Legal costs of approving and executing of the contract.

2. Costs of performing an act required to be done by the contract, notwithstanding that the act is performed in anticipation of the execution of the contract.

3. Damage for any other loss which ought to be regarded as within the contemplation of the parties. [*348]

It is the contention of the plaintiff that in so far as the defendant, by a unilateral act, made it impossible for the plaintiff to obtain a decree of specific performance, the plaintiff should be put in no worse position than he would have been had the defendant not defaulted, in which case and provided he first registered the property with the L.R.O. he would have a right to ask for the specific performance of the contract, in accordance with the provisions of Cap. 232, as amended by the provisions of Law 50/70.

It is well settled that in Cyprus no contract for the sale of land can be specifically enforced unless the conditions of Cap. 232 are first fulfilled. (See Xenopoulos v. Makridi

(1969) 10 J.S.C., 1186 - Avgousti v. Papadamou and Another (1968) 3 J.S.C., 243 - Iordanou v. Anyftos,

24 C.L.R., 97).

It is, therefore, fairly obvious that the plaintiff never acquired a right to have the subject contract specifically enforced, having himself partly to blame in showing lack of vigilance in registering the contract of sale with the L.R.O. The present case is distinguishable from the decision in Wroth v. Tyler (supra), firstly on the ground that whereas in Wroth’s case the plaintiff had a right, subject to the discretion of the Court, to a decree of specific performance, in the instant case the plaintiff never acquired a similar right.

In contrast to the facts of the present case, the buyer in Wroth v. Tyler had an equitable right to specific [*349] performance, which remedy, though eventually refused for reasons unconnected with the conduct of the plaintiff, it was held that he should be placed in no worse position than he would he, had specific performance been granted.

Megarry J. felt that if he gave vent to the rules of assessment of damage in a breach of contract case, whereby damages are assessed as at the date of breach, the rule, though sound in the ordinary case and sufficient to do justice to the loss of the innocent party, if applied in that case it would work an injustice to the plaintiff in the light of evidence that he could not at the time raise £1,500.- to buy a similar house and in the result defeat the vital principle on which the rules of assessment of damage were built, which lay in restoring the plaintiff to the position he would have enjoyed, had the contract been performed. The principle, as it emerges from the judgment in Wroth v. Tyler, is that in an action for specific performance, where specific performance is refused in the exercise of the Court’s discretion, this should not be done at the expense of the innocent party and the refusal of the Court to award specific performance must not place the plaintiff in a worse position than he would have been had specific performance been granted. In such circumstances, according to the above judgment, the task of the Court is to hold an inquiry into the loss that will befall the plaintiff as a result of the fact that the remedy of specific performance is withheld from him, thus ensuring that the damages awarded are a realistic substitute for an order of [*350] specific performance. In arriving at these conclusions, reliance was placed on the

decision in Leeds Industrial Co-operative Society Ltd., v. Slack (1924) A.C., 851 and the fact that section 2 of Lord Cairns Act (1858), survived the repeal of the Law.

In Wroth’s case, specific performance was refused on the ground that the order would involve the plaintiff in protracted and uncertain litigation, factors that justified the refusal of the order.

Though there are dicta in the

decision of the Supreme Court in Hji Yanni v. Attorney-General

(1970) 1 J.S.C., p. 82, supporting the view that where specific performance is refused in the exercise of the Court’s discretion, damages should he awarded along similar principles to those applied by the Chancery Division of the High Court in England, including the principle that found favour with Megarry J, in Wroth’s case (supra), the matter does not fall for consideration in the present case and feel it unnecessary to express a concluded view on the matter. The remedy of specific performance has never been open to the plaintiff and he must contend himself with damages recoverable for the breach of the contract. It would be far fetched to contend that the act of the defendant, in parting with the land subsequent to the execution of the contract and before completion, thereby depriving the plaintiff of the right to register the contract in question, takes the present case out of the ordinary rules governing an action for damages for breach of contract. [*351]

The measure of the damage is the market value of the property at the contractual time for completion, less the

contract price. (See Diamond v. Campbell Jones (1961) Ch. 22). The price at which the building site was resold by the

defendant, though relevant in that it sheds light on the market value of the property at the relevant time, it is not conclusive of the fact and in the face of satisfactory evidence otherwise establishing the market value of the land at the time, such evidence becomes of secondary importance.

In the result, the plaintiff is entitled to damages amounting to £565.-. In addition, he is entitled to be refunded in the amount of £700.-, paid by way of deposit. The claim of the plaintiff for interest cannot he sustained, on the general principle that no interest is recoverable in the absence of agreement to that end. Perhaps it is right that the Law should be amended in a way giving power to the Court to award interest to a successful Litigant on the amount he recovers, when it is just and equitable so to do. Even if I had power to award interest to the plaintiff, the award would be unjustified and interest would be refused, in the absence of evidence establishing that plaintiff suffers damage by parting with the amount of £700.- for a period of one year.

Judgment for the plaintiff for £1,265.-, plus costs to be assessed by the Registrar. The costs will [*352] include the expenditure incurred by the plaintiff in traveling to Cyprus for the purpose of prosecuting his claim, amounting to £69.-. Order accordingly.

Judgment and order for costs as above.