The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 25 of 1994

 

E. Johnson & Co. (Barbados) Limited Appellant

v.

N.S.R. Limited Respondent

 

FROM

 

THE COURT OF APPEAL OF BARBADOS

 

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 9th July 1996

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Present at the hearing:-

Lord Goff of Chieveley

Lord Jauncey of Tullichettle

Lord Nolan

Lord Steyn

Lord Hoffmann

  ·[Delivered by Lord Jauncey of Tullichettle]

 

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This appeal raises two broad questions, namely (1) whether the initiation of compulsory purchase procedure after parties have exchanged contracts for the sale of land but before the contractual date for completion has the effect of preventing completion of the sale, and (2) if it does not, what remedies are open to the vendor where the purchaser has refused to complete and the land has subsequently become vested in the acquiring authority.

 

1. Compulsory purchase in Barbados is governed by the Land Acquisition Act, c.228 ("the Act").  The three sections with which this appeal is primarily concerned are 3, 4 and 5.

"3.(1) Whenever it appears to the Minister that any land is likely to be required for any purposes for which the Crown is authorised by any Act to acquire land or for any purposes which, in the opinion of the Minister, are public purposes, a notification to that effect shall be published in three successive issues of the Official Gazette and of a daily newspaper in this Island under the hand of the Permanent Secretary to the Minister.

(2)  Thereupon it shall be lawful for the Chief Surveyor to do all or any of the following things, that is to say -

 

(a)to enter upon and survey and take levels of any land in any locality to which the public purposes relate;

 

(b)to dig or bore into the sub-soil of such land;

 

(c)to do all other acts necessary to ascertain whether the land is adapted to such purposes;

 

(d)...

 

(e)...

 

(f)where otherwise the survey cannot be completed, the levels taken or the boundaries or line of the work marked, to cut down and clear away any standing crop, fence, tree, or bush;

 

(g)...

 

(h)to do all such other acts as may be incidental to or necessary for any of the purposes aforesaid.

 

  (3) ...

 

  (4) ..."

 

"4.(1) When the notification mentioned in section 3 has been published in relation to any land it shall be lawful for the Governor-General to authorise the Chief Surveyor, without waiting for the formal vesting of the land in the Crown, to do any work on the land connected with the use to which the land is intended to be put on acquisition and thereupon the Chief Surveyor may proceed with such work accordingly.

 

  (2) ..."

 

"5.(1) Whenever the Minister has decided, with the approval of both Houses, that any land should be acquired it shall be lawful for the Governor-General whether all or any of the powers conferred by section 3 have been exercised or not, by notification published in the Official Gazette and in a daily newspaper in this Island to declare the land to have been acquired for any of the purposes mentioned in section 3.

 

  (2) A notification published in the Official Gazette under subsection (1) shall describe the land with precision, either in words or by reference to a map or plan which shall be kept at the office of the Chief Surveyor and shall be open to inspection by the public, and shall be conclusive evidence that the land is required for the public purposes stated therein and upon the publication of the notice as aforesaid, the land shall vest absolutely in the Crown free from all estates, liens and encumbrances.

 

  (3) ..."

 

2. Section 9 empowers the Minister responsible for lands to abandon the acquisition at any time before compensation has been paid.

 

3. By agreement dated 5th July 1989 the respondent ("NSR") agreed to buy and the appellant ("Johnsons") agreed to sell a piece of land for the sum of $570,000 with a completion date of 30th September 1989.  A deposit of $57,000 had already been paid by NSR.  On 7th September 1989 a notice under section 3 of the Act was published and on 11th October 1989 after sundry correspondence NSR gave notice to Johnsons purporting to rescind the agreement on the following grounds:-

"(i)Misrepresentation.

 

(ii)Frustration due to Section 3(1) Notice under the Land Acquisition Act Chapter 228.

 

(iii)Failure to complete.

 

(iv)Defective title."

 

4. Thereafter on 27th October 1989 NSR raised an action in the High Court seeking return of the deposit of $57,000 and Johnsons counterclaimed for specific performance of the agreement of 5th July 1989.  Before the action came to trial there was published on 9th July 1990 a notice under section 5 of the Act which had the effect of vesting the land in the Crown.

 

5. After trial in the High Court Woodbine Davis J. (Acting) on 30th September 1992 made the following order:-

"1. That the court has no jurisdiction or power to make any order or give any relief to either the Plaintiff or the Defendant on their Statement of Claim or Counter-Claim respectively and

 

2.  That each party should bear its own costs."

 

6. It appears from his judgment that the reason for his refusal to exercise jurisdiction was because the land was vested in the Crown by virtue of section 5 and compensation was therefore payable.  Johnson appealed and the Court of Appeal held first that the judge could not be said to have exercised his discretion wrongly in refusing Johnsons' claim for specific performance.  This was a misunderstanding since the judge's order proceeded upon the basis that he had no jurisdiction to grant the claim and hence no discretion to exercise. The Court of Appeal secondly held that the section 3 notice did not by itself frustrate the contract, that fault for non-completion on 30th September 1989 could not be laid only at the door of NSR but that NSR were in breach from 30th October to 9th July 1990. Nevertheless the Court of Appeal held that NSR should neither forfeit the deposit nor pay damages.  Before the Board Mr. McCombe Q.C., for NSR, did not seek to maintain that Johnsons were in any way responsible for non-completion on 30th September 1989 and the appeal proceeded on the basis that if the first general question were answered in the negative Johnsons were entitled to a remedy subject only to a technical argument in relation to the proceedings in the courts below.

Mr. Briggs Q.C., for Johnsons, argued in the first place that the service of the section 3 notice neither frustrated the contract nor rendered it impossible for his clients to give vacant possession of the land on the completion date. Consideration of these submissions requires in the first place an analysis of the precise effect of publication of a section 3 notice.  This is three-fold, namely,:-

(1)It is a warning that the land is likely to be required for Crown purposes;

(2)It empowers the Chief Surveyor to enter on the land for certain limited purposes none of which involves taking possession of the land or any part thereof, and

(3)It enables the Governor-General to authorise, under section 4, the Chief Surveyor to do work on the land before it vests in the Crown by publication of a section 5 notice.  However it provides no certainty that the land will be acquired and section 9 makes provision for abandonment of the compulsory purchase procedure at any time before payment of compensation.

Is this three-fold effect such as to render the obligation to give vacant possession "incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract"?  (Davis Contractors Ltd. v. Fareham Urban District Council [1956] AC 696, Lord Radcliffe at page 729).  Their Lordships  consider  that  the answer  must  be "no".  On  the

conclusion of a contract for sale of land the risk passes to the purchaser.  It will be presumed, in the absence of specific provision to the contrary, that the purchaser has agreed to accept the normal risks incidental to land ownership.  The risk of interference with land-owning rights by the Crown or statutory authorities is always present.  The land may be needed for the construction of a road or an airport, wayleaves for power lines or for gas or oil pipes may be required, restrictions may be imposed on the use of the land by planning legislation or the peace and quiet which the owner had hoped to enjoy may be shattered by a noisy local development. These are some of the examples of the ways in which a landowner is at risk of having his rights and enjoyment removed or curtailed.  A threat of compulsory purchase, and publication of a section 3 notice can amount to no more than that, does not radically alter the nature of the contract of sale.  What it does is simply to increase the likelihood of an existing albeit remote risk becoming an eventuality. In Hillingdon Estates Co. v. Stonefield Estates Ld [1952] Ch. 627, Vaisey J., in the context of a notice to treat served by an acquiring authority after conclusion of a contract for sale but before completion, remarked at page 634:-

"No doubt these departmental interferences and interventions do make a very great difference to ordinary life in this country, but that does not mean that, whenever such interference or intervention takes place, parties are discharged from bargains solemnly entered into between them.  In my judgment, it is the duty of the parties, in such a case as this, to carry out their obligations; and I cannot see that there is in this case any reason at all for supposing that there is either an implied term of this contract that it should be frustrated in the event which has happened, or that there has been such a destruction of the fundamental and underlying circumstances on which the contract is based as to justify my saying that the contract did not exist, or ceased to exist at the date when the notice to treat was served."

Their Lordships consider that these observations are equally applicable to the position in this case after the publication of the section 3 notice.  In Amalgamated Investment and Property Co. Ltd v. John Walker & Sons Ltd [1976] 3 All E.R. 509 a building was entered in the statutory list of buildings of special architectural or historical interest a few days after the date of a contract for its sale.  The listing had the effect of dramatically reducing its market value.  The Court of Appeal held that the risk of a building being listed was one that every owner and purchaser must recognise that he is subject to with the result that the contract was not frustrated.  It follows that a section 3 notice does not amount to a frustrating event.

 

7. That however does not dispose of the first question because Mr. McCombe had two further arguments.  First he submitted that the abolition of the equitable doctrine of conversion by section 213 of the Property Act 1979 meant that no risk of any statutory interference passed to NSR on completion of the contract.  Their Lordships reject this argument.  As Sir George Jessel M.R. said in Chandler v. Pocock [1880] 15 Ch.D. 491 at page 496 the rule "works a conversion for the purpose of devolution".  Section 213 relates to matters of devolution mortis causa or inter vivos succession where the difference between real and personal estate is of importance but it does not affect the normal rule of the passing of the risk on conclusion of a contract for sale of land.  Mr. McCombe further argued that publication of the section 3 notice prevented Johnsons giving vacant possession to the land on 30th September 1989 from which it followed that no remedy was available to them.  It is no answer to this contention to say that because the risk of intervention has been accepted by NSR they must accept the risk of not obtaining vacant possession.  The position is very clearly set out in Cook v. Taylor [1942] Ch. 349 where Simonds J. draws the distinction between supervening events of which the purchaser has expressly or impliedly accepted the risk and events which disable a vendor from performing specific obligations which he has undertaken in the following passage at pages 353-354:-

"... it is said that, even if the vendor was not in a position to give vacant possession at the date fixed for completion, that was an incident subject to which the purchaser took the property.  It is said that, as from the date of the contract, the property became in equity the property of the purchaser and he took it subject to any misfortune such as flood, fire or requisition by the appropriate authority. I think the answer is that the two cases of flood or fire, on the one hand, and requisition by the appropriate authority on the other, are quite different matters.  By this contract the vendor, as I have held, agreed to give vacant possession of the property on a particular day.  That was his bargain, he must fulfil it and cannot insist on the purchaser performing some bargain which he did not enter into.  That is quite different from the case where there is no express bargain in relation to flood or fire, where the property is in equity the property of the purchaser, and where it may be that, through flood, or fire, the property is no longer in the position in which it was when the contract was entered into.  Of that misfortune the purchaser must bear the brunt; it is otherwise where there is a term of the contract which the vendor is unable to fulfil."

 

8. The crucial question is whether the possession which Johnsons were in a position to give on 30th September 1989 was something other than "vacant possession" within the meaning of the contract.

 

9. Mr. McCombe argued that the rights conferred on the Chief Surveyor by section 3(2) of the Land Acquisition Act prevented Johnsons giving vacant possession.  A number of authorities said to support and negate this proposition were referred to in argument.  In In re. Winslow Hall Estates Company v. United Glass Bottle Manufacturers, Limited's Contract [1941] Ch. 503, after a contract for sale had been concluded but before the completion date a notice of intention to requisition the land under regulation 51(1) of the Defence (General) Regulations 1939 was given to the vendors.  Possession was not taken by the Government until after the completion date. Bennett J. held that the vendors were not prevented from giving vacant possession on that date.  In Cook v. Taylor (supra) Simonds J. held that service of a requisition notice under regulation 51(1) followed by the handing over of the keys to the acquiring authority between contract date and completion date deprived the vendor of the ability to give vacant possession on the latter date.  In James Macara Limited v. Barclay [1945] K.B. 148, which was another case involving regulation 51(1) Uthwatt J., giving the judgment of the Court of Appeal, observed at page 154 that actual entry on the land was not necessary for the due exercise of the power to take possession and later stated:-

"What is required is that the immediate interest - an interest in possession - entitling the Crown to control of the land should be at the disposition of the Crown."

 

10. In each of these three cases the issue was whether the acquiring authority had possession or the right to immediate possession at completion date.  When it had, the vendor could not then give vacant possession.  In this case the Crown had no right to immediate possession on 30th September 1989 and there was no certainty at that date that it would ever seek to acquire such a right.  Indeed although a section 5 notice was served on 9th July 1990 their Lordships were informed that no work on the land has since been carried out.

 

11. Mr. McCombe referred to two further authorities.  In Korogluyan v. Matheou (1975) 30 P. & CR. 309 Whitford J. at page 316 expressed the view obiter that where there had been a compulsory purchase order, followed by a notice to treat and a notice to enter, the vendor was not in a position to give vacant possession in the sense in which those words ought sensibly to be construed.  Whether those views were right or wrong they cannot throw any light on the effect of a section 3 notice.  The second case was Cumberland Consolidated Holdings Limited v. Ireland [1946] K.B. 264 in which a vendor left in the cellars of a warehouse rubbish including bags of hardened cement which affected the value of the property and precluded the proper use of the cellar.  Lord Greene M.R. at page 271 said:-

"But it appears to us that what he bargains for is not merely the right in law, but the power in fact to exercise the right.  When we speak of a physical impediment we do not mean that any physical impediment will do.  It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property."

 

12. On no conceivable view could it be said that publication of a section 3 notice had an effect remotely comparable to that of the rubbish in the cellar.  For all the foregoing reasons their Lordships have no hesitation in concluding that Johnsons were in a position to give vacant possession of the land to NSR on 30th September 1989 from which it follows that NSR were in breach when they purported to rescind the contract on 11th October 1989.  The second question now falls to be considered.

 

13. What then is the appropriate remedy for Johnsons?  Mr. Briggs argued that Johnsons were entitled to an order for specific performance on 11th October 1989, that the reason why they were unable to give vacant possession after publication of the section 5 notice was due to NSR's breach in refusing to complete timeously and that accordingly Johnsons should be placed in the same position as they would have been had NSR performed its obligations under the contract.  Such an order would provide for (i) payment by NSR of the contract price, less the deposit, but plus the monthly increments of $5,000 in terms of clause 2 of the agreement until the date of the order, and (ii) Johnsons taking such steps as were necessary to enable NSR to receive the statutory compensation.  At the end of the day NSR would also be in the position in which they would have been had they fulfilled their contractual obligations.

 

14. The researches of counsel had discovered no case in which specific performance of a contract of sale of land had been ordered where the vendor was unable at the trial to convey the land.  However reliance was placed by Mr. Briggs on Eastern Counties Railway Company v. Hawkes (1855) V H.L.C. 331 (E.R. X 928) in which a railway company agreed to purchase land from a tenant for life and to take powers in their Special Act to enable him to make a good title to the fee simple.  Their Special Act gave them these particular powers as well as general powers of compulsory acquisition which would have enabled them to obtain a good title under the Railway Clauses and Land Clauses Acts 1845. However, the railway company took steps neither to exercise their powers nor to acquire the land and the tenant for life filed a bill for specific performance.  The railway company argued that he could not give a fee simple title but the House of Lords rejected this argument  on  the  ground  that any  inability  on the part of the

tenant for life to give a full title was due to the railway company's breach of contract in failing to exercise their statutory powers.  Although none of the reports of the various stages of the case disclosed the terms of the order for specific performance it is interesting to note that when the case came before the Vice-Chancellor (3 De G. and SM. 743) it was argued by the railway company that a good title to the land which was subject to the tenancy for life could not be given.  The matter was referred to the Master who found that a good title could be made and thereafter it was again submitted that the plaintiff could only convey the life estate.  The Vice-Chancellor overruled the objection thereby confirming the order of specific performance already made.

 

15. In that case the tenant for life was at all material times in a position to convey his life estate and the fact that he could not convey an enlarged interest was solely due to the inactivity of the railway company.  In the present case Johnsons have since 9th July 1990 been unable to convey the land or any interest therein.

 

In In re. Scott v. Alvarez's Contract [1895] 2 Ch 603 the discretionary nature of the remedy of specific performance in the context of a contract for the sale of land was emphasised by Lindley L.J. at page 612 and by Rigby L.J. at page 615.  On that page he said:-

"That is the main part of the doctrine of specific performance - that the purchaser is actually to get the land; and, if a case arises in which he cannot get the land in any substantial sense, it seems to me the doctrine of specific performance is not applicable.  After all, the question to what extent a Court of Equity will go is very largely one of authority as to what has been done before; and if I found there were cases in which, although the purchaser was not to get the land which he offered to buy, or something which is a mere semblance of a title was forced on him, I should have to consider those cases very carefully and see whether we are bound by them or not.  But, so far as the authorities that have been cited to us are concerned, I do not think a single case has been cited in which a purchaser was bound to take a mere semblance of a title ..."

 

16. It does not appear that the state of the authorities on this matter has altered during the last hundred years.  In Price v. Strange [1978] Ch. 337 reference was made to the proposition stated in Fry on Specific Performance 6th ed. at page 219 that:-

 

 

"A contract to be specifically enforced by the court must, as a general rule, be mutual, - that is to say, such that it might, at the time it was entered into, have been enforced by either of the parties against the other of them."

 

17. Both Goff L.J. at pages 354E, 356G and 357A and Buckley L.J. at pages 361C and 367H concluded that Fry's proposition was wrong and that the time of judgment was the tempus inspiciendum for determining whether or not it would be appropriate to make an order for specific performance.  It is of course true that in this case it was NSR's breach which resulted in no conveyance taking place prior to 9th July 1990 but that factor although undoubtedly relevant to an exercise of discretion does not appear to their Lordships to be conclusive of the issue in favour of Johnsons.

 

18. In normal circumstances an order for specific performance of a contract of sale will contain two components, (1) that the purchaser should pay the price and (2) that the seller should grant a conveyance.  Such an order could not be pronounced in the present case since the obligation to convey is no longer capable of performance.  What Johnsons seeks is an order requiring them to do something, taking the necessary steps to enable NSR to receive compensation, which was not an obligation undertaken by them in the contract.  Their Lordships would be reluctant to extend the normal ambit of an order for specific performance to this extent unless it were the only means of doing justice between the parties.  Such is not the case here where a remedy in damages is available to Johnsons.  Accordingly the discretion of the Board will be exercised to refuse to make the order sought by Johnsons.

 

19. The remaining question is whether Johnsons are now entitled to damages for breach of contract.  NSR argued that since Johnsons had claimed damages neither at the trial nor before the Court of Appeal the Board should exercise its discretion to make no award.  (It was assumed by both parties that the law as stated in Lord Cairns' Act applied in Barbados.)  Their Lordships see no reason for adopting this course. Considerable injustice could result to Johnsons if they were only to receive compensation based, as it has to be by section 11 of the Act, on agricultural market value.  On the other hand no injustice would result to NSR by having the proper measure of damages now awarded by the courts in Barbados. It is accordingly appropriate that Johnsons should receive an award of damages.

 

20. It only remains to consider the appropriate measure which involves not only the amount of damages but the date at which they fall to be assessed.  In Johnson v. Agnew [1980] A.C. 367 Lord Wilberforce at page 401A said:-

 

"In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost."

 

21. In this case Johnsons acted reasonably in refusing to accept NSR's repudiatory breach on 11th October 1989 and in pursuing the remedy of specific performance. However, this became impossible as a result of publication of the section 5 notice on 9th July 1990 which must accordingly be the date when the contract was lost and at which damages must be assessed.

 

22. The measure will be (contract price of $570,000 + monthly increment of $5,000 per month from 30th September 1989 to 9th July 1990 as provided for in clause 2 of the contract) - (deposit of $57,000 + such compensation as is payable to Johnsons under section 10 of the Land Acquisition Act) together with interest on the resultant figure at the appropriate rate from 9th July 1990.  Sections 10(2) and 14 of the Act provide for determination of compensation by a judge and it would therefore be highly convenient if Johnsons' claim for damages could be dealt with at the same time by the same judge. Such procedure would undoubtedly produce the fairest result to both parties.

 

23. NSR, in the course of argument, suggested that claim to compensation might be time-barred under section 21 of the Act.  In view of a letter from a Government official that a limitation point would not be taken their Lordships think it unlikely that the claim is endangered. However, if it should turn out to be barred, the loss would fall on NSR who could perfectly well have submitted a claim for compensation ob majorem cautelam within the limitation period of two years.

 

24. In the whole circumstances their Lordships will humbly advise Her Majesty that the appeal should be allowed and that the case should be remitted back to the Court of Appeal to make the appropriate arrangements for assessment of the amount of damages payable.  The appellant is entitled to its costs in the Court of Appeal and before their Lordships' Board.

 

© CROWN COPYRIGHT as at the date of judgment.