Howe v Smith

(1884) 27 Ch.D. 89
[1881 H. 3315.]

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(Judgment by: Bowen LJ)

Between: Howe
And: Smith

Court:

Judges: Cotton LJ

Bowen LJFry LJ

Subject References:
VENDOR AND PURCHASER OF DEPOSIT
Purchaser's Failure to complete

Case References:
Palmer v. Temple - 9 Ad. & E. 508.

Hearing date: 31 March 1884; 1 April 1884
Judgment date: 29 May 1884

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Judgment by:
Bowen LJ

I am of the same opinion.

The purchaser in this case has no right, according to our decision pronounced on a previous day, to insist on the specific performance of the contract for the sale of the property. But it was urged at the last moment by Mr. Pearson that at all events in the alternative he was entitled to the return of his deposit money; and treating the pleadings as amended for that purpose, we agreed to consider that alternative claim as if it had been raised on the pleadings in the way in which, whatever may have been the practice before the Judicature Act, I myself can see no reason why it should not be raised now. We have, therefore, to consider whether under the circumstances of this special case the purchaser has lost his right to the return of this deposit money.

The question as to the right of the purchaser to the return of the deposit money must, in each case, be a question of the conditions of the contract. In principle it ought to be so, because of course persons may make exactly what bargain they please as to what is to be done with the money deposited. We have to look to the documents to see what bargain was made. If any authority were wanted to prove that in each case it is a question of construction (I do not thing it is wanted) it would be found in Palmer v. Temple, the case to which Lord Justice Cotton has referred, and which - whatever may be the value of the case as an authority on the construction of the contract in that case, as to which I agree with everything that has fallen from Lord Justice Cotton - adopts the principle that in each case we must consider what was the bargain. At page 520 there is this observation:

"The ground on which we rest this opinion is, that in the absence of any specific provision, the question, whether the deposit is forfeited, depends on the intent of the parties to be collected from the whole instrument."

In the present case we have in the first place, turning to the language of the instrument, a description of the manner in which the money is staked or deposited. It is a deposit, and it is to be both a deposit and in the nature of part payment, and there is further a special clause in the contract at which we ought to look to see if any light is thrown by it on the language of the provision that the money is deposited as a deposit.

We may however pass by that special clause, for I think it does not really deprive the deposit in this case of the character which it would bear if there were no special clause - because, in my opinion, that clause merely fixes the amount which the vendor is to receive in the event of his insisting on his rights under the special clause. We have therefore to consider what in ordinary parlance, and as used in an ordinary contract of sale, is the meaning which business persons would attach to the term "deposit." Without going at length into the history, or accepting all thathas been said or will be said by the other members of the Court on that point, it comes shortly to this, that a deposit, if nothing more is said about it, is, according to the ordinary interpretation of business men, a security for the completion of the purchase?

But in what sense is it a security for the completion of the purchase? It is quite certain that the purchaser cannot insist on abandoning his contract and yet recover the deposit, because that would be to enable him to take advantage of his own wrong. Mr. Pearson said the rule is different when the purchaser does not insist on abandoning his contract, but, on the contrary, is desirous, at the moment he appears before the Court, of completing it, and therefore neither the principle nor the decisions apply - that this is not a case where the purchaser is receding from the contract, but on the contrary he is seeking to enforce it. It seems to me the answer to that argument is that although in terms in a case like the present the purchaser may appear tobe insisting on his contract, in reality he has so conducted himself under it as to have refused, and has given the other side the right to say that he has refused, performance. He may look as if he wished to perform, but in reality he has put it out of his power to do so - he has, in the language of the Roman law, receded from his contract.

In every case at law, it seems to me, the question whether time is of the essence of the contract must depend, just as the question of the deposit must depend, on the contract itself. It is not necessary in the present instance to consider whether under this special contract time was of the essence of the contract or not, because the Judicature Act has placed the matter as regards such proposition on the footing on which it would have been treated in Equity before the Judicature Act. But it is obvious that the party may lose his right to insist on specific performance before an equitable tribunal, without at the same time having necessarily so acted as to justify the other side in saying the contract is altogether at an end. As I understand, speaking with a due consciousness of my own ignorance on the point, all that a Court of Equity does when it refuses specific performance on the ground of lapse of time is to leave the parties to their remedy at law. It refuses it because it would be unfair that the relief should be given. It does not follow as a matter of law on principle that because specific performance is refused therefore the whole contract is at an end in law. We have to look to the conduct of the parties and to the contract itself, and, putting the two things together, to see whether the purchaser has acted not merely so as to break his contract, but to entitle the other side to say he has repudiated and no longer stands by it.

Now, looking to see whether the conduct of the purchaser has not in the present instance brought him within that definition, I think it is impossible, viewing the case from first to last, to doubt that he has so dealt with his bargain as to give the vendor a right to allege, if he chooses so to say, that the contract is at an end, that the purchaser has receded from the bargain, and that the deposit money is liable to be retained by the vendor. Therefore the appeal fails.