Foran v Wight

168 CLR 385
88 ALR 413

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(Decision by: DEANE J)

Between: Foran
And: Wight

Court:

Judges: MASON CJ
BRENNAN J

DEANE JDAWSON J
GAUDRON

Subject References:
Vendor and Purchaser

Judgment date: 15 November 1989

Canberra

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Decision by:
DEANE J

The facts and issues involved in this appeal are set out in other judgments.

On the trial judge's findings, the respondents ("the vendors") unambiguously informed the appellants ("the purchasers"), through their respective solicitors, that they would not complete the sale of the subject block of land within the time which the contract made of its essence. That advice constituted repudiation of the contract by anticipatory breach of an essential term. The purchasers did not, at that stage, elect to rescind the contract. As they were entitled to do, they allowed it to remain on foot. The vendors neither withdrew nor qualified their advice that they would not complete within the stipulated time. For so long as that time had not expired, that advice constituted a continuing repudiation by anticipatory breach. When that time expired without any tender of settlement by the vendors or withdrawal or qualification of their advice that they would not complete within it, the continuing repudiation of the contract by anticipatory breach had run its course. The question arises whether, notwithstanding the failure of the purchasers to tender performance or to be ready and able to complete on the stipulated date, the vendors' repudiation of the contract by anticipatory breach was translated into repudiation by actual breach. In my view, it was.

In the ordinary case of a contract for sale of land, the contractual obligations of the parties to complete the sale are concurrent and conditional in the sense that the vendor is not obliged to convey the land and the purchaser is not obliged to pay the purchase price otherwise than upon concurrent performance by the other party. Neither vendor nor purchaser will be guilty of breach of contract if he fails to complete within the time or upon the day fixed by the contract unless the other party tenders performance of his concurrent obligations. The position is, however, different if one party has unambiguously informed the other party that he will not perform his obligations within the time made of the essence of the contract. In such a case, the refusal to perform constitutes an intimation to the other party that the tender of performance of his concurrent obligations will be nugatory and futile. If the refusal continues until after the time allowed for performance, the refusing party's failure to complete within the stipulated time will constitute an actual breach of the contract notwithstanding that the other party has acted on the information and refrained from going through the motions of tendering performance (see Mahoney v. Lindsay (1980) 55 ALJR 118; 33 ALR 601 ). In Peter Turnbull & Co. Pty. Ltd. v. Mundus Trading Co. (Australasia) Pty. Ltd. (1954) 90 CLR 235 , Dixon C.J. explained that position by saying (at pp 246-247) that, in such a case, the innocent party, who "acts upon" the express or implied intimation that "it is useless ... to perform" is "dispensed from" performance. Kitto J. explained (at p 252) that what was meant "by saying that fulfilment of the condition has been dispensed with is that (the refusing party's) conditional obligation is to be treated, for the purposes of an action for non-performance, as if it had been made absolute by a fulfilment of the condition ." Elsewhere in his judgment (at p 251), Kitto J. stated that he was "supposing ... a case ... where in all the circumstances the refusal necessarily conveys to (the other party) that he need not trouble to fulfil a condition ...". Both Dixon C.J. and Kitto J. referred, with approval, to Lord Campbell C.J.'s statement in Cort v. The Ambergate Etc. Railway Company [1851] 17 QB 127 , at p 148 (117 ER 1229, at p 1237) which identified the applicable doctrine as "waiver". The line between the somewhat arbitrary doctrine of waiver and the doctrine of estoppel by conduct has always been a vague one (see Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305 , at pp 326-327) and the former doctrine is being increasingly enveloped and rationalized by the latter. At least in cases such as Peter Turnbull & Co., where the focus is upon action by one party "upon" what was conveyed to that party by the other party, the applicable primary doctrine should be seen in a modern context as that of estoppel. The present is such a case.

In the present case, the unequivocal and unqualified advice that the vendors would not complete the contract until after the stipulated date was in response to a request by the purchasers' solicitors to the vendors' solicitors to nominate a time for completion on that day. To adapt words used by Kitto J. in Peter Turnbull & Co., at p 251), that advice necessarily conveyed to the purchasers that it would be pointless for them to trouble to fulfil the condition of performance of their concurrent obligations within the time which the contract made of the essence: it was "a continuing intimation that the condition need not be observed, and it did not become any the less an intimation to that effect because (the purchasers) chose not to determine the contract before its time." The purchasers acted on the faith of that intimation that performance within the stipulated time would be futile and was unnecessary. They ceased their efforts to arrange finance with the consequence that they were neither ready nor able to complete the purchase within the time allowed by the contract.

In these circumstances, the law will not allow the vendors to depart from the state of affairs upon the basis of which they had, by their conduct, induced the purchasers to act. The doctrine of estoppel by conduct explained by Dixon J. in Thompson v. Palmer (1933) 49 CLR 507 , at p 547, and Grundt v. Great Boulder Pty. Gold Mines Ltd. (1937) 59 CLR 641 , at p 679, is applicable to preclude the vendors from asserting that the purchasers' failure to tender performance or to have the purchase price ready and available on the stipulated day either constituted a failure to discharge a contractual obligation upon the performance of which the vendors' own obligations remained conditioned or placed the purchasers themselves in breach of contract. In that regard, it is unnecessary to decide whether the vendors' representation related to a present or future state of affairs or whether the purchasers are seeking to use estoppel as a sword rather than a shield. In Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 CLR 387 , at pp 444-452), I explained in detail the reasons which led me to conclude that the assumed state of affairs under an estoppel by conduct can provide the factual foundation of a cause of action and that estoppel by conduct (in its emanation commonly described as "promissory estoppel") may preclude departure from a represented or assumed future "state of affairs" in at least certain categories of case. A case such as the present which involves a representation between parties in a pre-existing contractual relationship that one party is dispensed from strict performance of the contract clearly falls within one such category of case (see Legione v. Hateley (1983) 152 CLR 406 , at pp 434-435). In any event, I am now prepared to take the step which I refrained from taking in Waltons Stores (at p 452) and to accept that the doctrine of estoppel by conduct extends, as a matter of general principle, to a representation or induced "assumption of fact or law, present or future" (cf. Moorgate Mercantile Co. Ltd. v. Twitchings (1976) QB 225, at p 242). Once it is recognized that promissory estoppel is properly to be seen as no more than an emanation of the general doctrine of estoppel by conduct (see Waltons Stores, at pp 451-452), there remains no valid reason in principle why that general doctrine should not apply to a representation of future fact. Nor is there any valid reason why that general doctrine should be inapplicable to a case where the representation relates to the state of the law. In that regard, the distinction between a representation of fact and a representation of law is, in the context of the principles constituting the doctrine of estoppel by conduct, essentially illusory unless one subscribes - and I do not - to the view that law has no factual existence at all. In the area of estoppel by conduct, the essential distinction which must be observed if the doctrine is to be kept confined within what is justified by the notions of good conscience which inspire it is not the distinction between present and future fact or between fact and law. It is the distinction between a representation of fact and a representation of opinion. A representation can found an estoppel by conduct only to the extent that it is clear. It can, however, be reduced to what is clear by discarding so much of its content as is equivocal or ambiguous. That being so, a representation of future fact and a representation of law will often, upon analysis, involve no more, for the purposes of the doctrine of estoppel by conduct, than a representation of present opinion. In a case where that is so, any estoppel founded upon the representation will ordinarily be of no use to the representee since it will extend no further than precluding a denial that the represented opinion was truly held (cf. Waltons Stores, at p 451).

In Thompson v. Palmer, Dixon J. (at p 547) identified the object and operation of estoppel by conduct as being "to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment". His Honour went on (ibid.) to stress that the party who has induced the assumption is not bound to adhere to it "unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted". In the present case, the learned trial judge found that the purchasers had not proved on the balance of probabilities that, were it not for the vendors' intimation that it was unnecessary that they do so, they would have been able to arrange the balance of the purchase price in order to be ready and able to complete within the stipulated time. On the appeal, the purchasers sought to impugn that finding. However, it is unnecessary to pursue that question. It is clear from the evidence that there was, at the least, a real chance that, if they had not been induced to cease their efforts to arrange finance by the vendors' intimation, the purchasers would have been able to obtain the balance of less than $10,000 of the purchase price ($75,000) which was not already covered by the deposit ($7,500), the arranged loan ($56,000) and the money available in Mrs. Foran's bank account (at least $1,783). In these circumstances, the purchasers would be placed in a position of significant and unjust material disadvantage if the vendors were permitted to depart from that intimation in that they would have been induced to lose the benefit of a real chance that they would have actually tendered performance within the time fixed by the contract and thereby avoided any need to establish what might have happened but for the vendors' intimation. The detriment of the loss of that real chance which would be sustained by the purchasers if the vendors were permitted to assert that the purchasers remained obliged to tender performance or to become ready and willing to perform within the stipulated time is adequate to sustain the estoppel upon which the purchasers rely to establish their right to rescind. The operation of that estoppel is, as has been said, to preclude departure by the vendors from their intimation that it was unnecessary that the purchasers tender performance or be ready and able to perform on the day fixed for completion. As has been seen, one of the effects of that estoppel is that, as between the parties, the condition of concurrent performance by the purchasers can be disregarded with the result that the vendors' refusal to complete the sale on or before that day constituted a repudiation of the contract by breach of an essential term. Another is that the purchasers were effectively relieved of any obligation to be ready and able to perform on the day fixed for completion. That being so, it was not a prerequisite of the purchasers' right to rescind that they establish on the balance of probabilities that they would in fact have been ready and able to perform or have tendered performance in the hypothetical situation which would have existed in the event that the vendors' intimation had not been given.

In these circumstances, it is strictly unnecessary that I express any view on the question whether one party to a contract is precluded from rescinding it by accepting a repudiation of the contract by the other party if he is not in a position to prove that he is, or but for the repudiation would have been, ready, willing and able to perform the contract. However, in view of the discussion of that question in other judgments, it would seem desirable that I indicate that, notwithstanding some statements of authority to the contrary, I do not accept the proposition that a party must incur the expense necessary to put himself in a position where he can positively demonstrate actual or potential readiness and willingness to perform a contract before he can accept the repudiation of the other party and thereby rescind. In my view, that proposition is unjustified by either principle or common sense. Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach. It does not, of itself, preclude rescission of the contract by acceptance of the other party's repudiation. Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party. Indeed, it is difficult to see why, as a matter of principle or common sense, actual breach or even repudiation by one party to a contract should prevent that party from rescinding the contract by accepting a repudiation of the contract by the other party. Put differently, it is difficult to see why the law should insist that, even though both parties to a contract have repudiated it, the contract must hang like an albatross around their necks unless and until they can reach a new agreement about its termination. The point can be illustrated by the hypothetical example of express repudiation by each party to a contract followed by acceptance of the other's repudiation and unilateral rescission of each of them. How can it be said that, in those circumstances, the law continues to require that each perform the contract?

It follows from what has been said above that the purchasers were entitled to rescind the contract. This they did. Upon rescission, the purchasers were entitled to obtain restitution of the deposit which they had paid. Their claim for the return of the deposit was not founded on the rescinded contract. Nor did it represent a claim for damages for the vendors' breach of its terms. It was a claim founded in the equitable notions of fair dealing and good conscience which require restitution of a benefit received as, or as part of, the quid pro quo for a consideration which has failed (cf. per Lord Wright, Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] AC 32 , at pp 64-66; Muschinski v. Dodds (1985) 160 CLR 583 , at pp 618-620). If it be necessary to clothe that claim in a nomenclature, the appropriate one in a modern context is "restitution " for, or of, "unjust enrichment". The benefit whose receipt falls into one of the categories of case which the law characterizes as unjust enrichment may be actual. Alternatively, it may be constructive as, for example, where it involves full or partial performance of something requested to be done. The benefit constituting the unjust enrichment in the present case was actual in that it would seem to be common ground that the deposit which the purchasers seek to recover was actually received by or on behalf of the vendors.

If the purchasers had sustained other loss caused by the vendors' repudiation of the contract, it would have been open to them to claim damages for breach of contract. Such a claim would, however, have succeeded only if the purchasers could discharge the onus of establishing that such further loss had been in fact sustained by them and had been caused by the vendors' breach. The learned trial judge's finding that the purchasers had not established on the balance of probabilities that they would, but for the vendors ' repudiation, have been able to complete the contract would, while it stands and subject to the possible effect of any relevant estoppel, preclude them from discharging that onus. They do not, however, seek to recover such additional damages.

I would allow the appeal, set aside the judgment of the Court of Appeal and restore the judgment of Justice Needham.