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Topic 3- Defences to an Action for Specific Performance (Mistake (Webster…
Topic 3- Defences to an Action for Specific Performance
1.Lack of Mutuality in the Remedy
Price v Strange
:
Facts: Parties orally agree P would carry out certain reparis o D's property in return for a new lease
No memorandum or note evidencing the agreement's essential terms
Initially, both parties complied w agreement
However when the reparis were completed D refused to allow P to continue, repudiated the agreement and carried out remaining repairs himself
Continued for a number of months to accept rent at an increased rate
Issue: P sought SP of contract
Refused by trial judge at because it was not capable of mutual enforcement
at the time it was entered into
(Note- on basis that court not grant an order for SP for contracts requiring supervision)
Held: C of A- no- look at the situation
at the date of hearing
At date of hearing P's obligation had all be performed albeit some repair actually carried out by D, so SP could be ordered against D to grant a new lease as if table were turned, SP could technically be ordered against the P
D would be recompensed by financial adjustement for repair work carried out by her
Also held: Lack of mutuality does no result in court being without jurisdiction to entertain a claim of SP but is a matter to be taken into account by court in deciding how to exercise discretion
O'Regan v White
:
Generally speaking, at any rate, it would not be even handed justice to compel SP against the one party where same remedy would not be avaialble against the other party re other matters to be by him performed under contract
Technical defence to be raised by the party against whom SP of contract sought saying 'you cannot ask me to perform obligation under the contract and order SP as at this time, if the tables were turned and I was sekking SP against P, the court would/could not order SP by the P'
COURTS WILL ONLY INTERPOSE WHERE THE REMEDY IS MUTUAL
Misrepresentation
Nature of misrepresentation
Fraudulent or negligent misrepresentation: The court will be slow to order SP
Innocent misrepresentation: may be that the qu of whether to order SP will depend more on surrounding circumstances
in particular, wheher he transaction can be characterized as fair
Smelter Corporation v O'Driscoll
Facts: P sought SP of a contract for the sale of land
D had been reluctant to sell
During the course of P's effors to persuade her, P's agent told her tha if she did no agree to seel the land to P, local authoirty would exercise its power to acquire the land compulsorily
P's agent believed this statement was true, although it wasnt
D made no effort to discover the local auhority's intentions and believed the statement was true
Held: SC upheld the decision to refuse SP
By reason of P's representation, D had been under a fundamental misapprehension about the true facts
Therefore it would be unjust to grant SP
= Maxim- he who comes to equity must come with clean hands
Depends on the application the court is hearing
Misrepresentation
= we mena a false statement that induces a person to enter into a contract, without itself becoming a term of the contract
Contract may be rescinded i.e. set aside, on the ground of misrepresentation
But even if the misrepresentation not serious enough toresult in rescission of the contract- court may nevertheless refuse to order SP of it
Re Banister
Considerations that induce court to rescind a contract
Considerations that induce court of equity to decline to enforce SP of a contract
= are no means the same
It may well be that there is not sufficient to induce the court to rescind the contract, but still suffiicient to prevent the court enforcing it
Mistake
Webster v Cecil
: D mistakely offered property for sale at 1250 instead of 2250
P knowing of D's mistake accepted
Held; SP was refused
Tamplin v James
Facts: D mistakenly assumed property being sold with a larger amount of alnd than was in fact included in sale
D had not looked at plans
Held: SP granted
If a man will not take reasonable care to ascertain what he is buying, he must take the consequences
For the most part the cases where a D has escaped on the ground of a mistake not contributed to by the P, have been cases where a hardship amount to injustice would have been inflicted upon him by holding him to his bargain
However if a man makes a mistake without any reasonable excuse he ought to be held to his bargain
Note: Mistake may be such as to prevent a contract from coming into existence in first place
justify rescission in equity
In such circumstances, SP not available
NOT ALL MISTAKES WILL PROVIDE DEFENCE TO SP
WHETHER P CONTRIBUTED TO OR KNEW OF THE MISTAKE= IMPORTANT FACTOR IN DECIDING WHETHER TO ORDER SP
Followed in
O'Neill v Ryan
:
Facts; P was former CEO of Ryanair
Instituted proceedings against Ds, claiming relief under Company Act against oppression, damages for conspiracy and fraudulent misrepresentation
Issue; Claimed D's offer to purchase his shares at a certain price was to settle the opression proceedings only
D resisted this action for SP claiming they had intended to offer to be in full ad final settlement of all claims
Held; It had to be a balance of hardship to which P ands Ds would be subjectied
Valid, enforceable contract had come into existence
P
had in no way contributed to the confusion
SP ordered
Ferguson v Merchant Banking
Facts: P sought SP of a contract for sale of land
Liquidator of D contested the action, arguing D had mistakenly included adjacent site with development potential in the sale
Held; Accepted D made a mistake
However,he considered thee had been no fundamental error and no absence of agreement on any fundamental term
therefore, D was not entitled to deprive P of the benefit of the contract
SP ordered
Frustration/Impossibility
A court will not make an order in vain
Therefore, IT WILL NOT DECREE SP IF IT IS IMPOSSIBLE FOR D TO CARRY OUT HIS CONTRACTUAL OBLIGATIONS
Neville and Sons v Guardian Builders Ltd
Facts: Parties entered into a contract whereby P agreed to build houses on a site owned by D
Only effective access to the site would be by means of a new road to be constructed along strips of land to be purchased from local authority
Difficulties arose in the negotiations of this land
Issue: D claimed these difficulties amounted to frustration
Held: reversing HC's decision that the contract had been frustrated
Blayney J: SC- HELD THERE HAD BEEN NO SUPERVENING EVENT THAT RENFERED PERFORMANCE OF THE CONTRACT FRUSTRATED EVEN THOUGH D'S DIFFICULTIES RENDERED PERFORANCE MORE ONERIOUS
Endorsed
National Carriers v Panalpina
H of L
Frustration of a contract takes place where there supervens an event which so significantly changes the nature of the outstanding contractual righs/obligations from what the parties reasonably could have contemplated at the time of its execution that it would b eunjust to hold them to the literal sense of its stipulations in the new circumstances
such case both parties discharged from performance
Aranbel v Darcy and Anor
Facts Ds purchased property from P in late 2006
Obliged to complete by March 2008
Unable to do so as result of financial difficulties
Issue; D reissted P's application for SP, arguing their impecuniosity made completion impossible
Held; HC refused to order SP, but held P was entitled to damages in lieu
Considered the effect of an order for specific performance and the rule equity does not act in vain
An order for Sp is an order which requires the relevant D to complete the contract which is the subject of teh proceedings
SP is an equtiable remedy
It has often been said equity will not act in vain
A court should therefore be reluctant to make an equitable order where there is no reasonable prospect of order being complied with
Legal impossibility in completion:
A vendor might not have tilte
There would be little point in making an order for SP against vendor who did not
However in appropriate case court may make an order for SP where satisfied that the vendor concerned has within its power to cure any problem with title
In deciding whether or not to order SP where impossibility is advanced as a defence, court should consider whether or not there is a realistic possibility of performance
Drew distinction between an inability to complete and inability to complete in the way originally intended
e.g. party intends to fund a purchase 100% by borrowing, mere fact borrowing on scale originally contemplated no longer available not end of matter- may have sufficient assets- cannot say completion is impossible
Instant case:
I am satisfied impossibility arising from lack of funds on the party of purchaser provides an equal reason for refusing SP
Burden of Proof defence of impossibility
The onus rests on the party to establish their inability to complete
Relevant date for assessing impossibility
It seems to me that an order for specific performance needs to be considered as of the date when the court is invited to make the order concerned
Even if a party had wrongfully put itself in a position where it cannot complete, it does not seem that the court should order SP in those circumstances= will remain order in vain
Murphy v Ryan
: Kelly J made clear that where the circumstances alleged to cause frustration of the contract have arise from teh act or default of a party then it cannot rely on the deoctrine
Ds had foolishly entered into an unconditional contract w/o necessary finance
At time contract entered into the Ds, with their eyes open committed unconditionally to the purchase, even though they didnt have funds
D say it is impossible to complete, contract= frustrated
Held: NO
Hardship
Supervening hardship
Patel v Ali
:
Supervening harship constituted a defence to SP- P confined to remedy in damages
Note exceptional facts
Facts: After conclusion of an agreement for sale of D's house, she became v seriously ill with bone cancer, leg amputated. Heavily pregnant with second child, then gave birth. Husband, adjudicated bankrupt and sent to prison
Spoke no English, relied heavily on support from neighbours and family who lived nearby
Held: refused order of SP- only extraordinary and persuasive circumstances can hardship supply an excuse for resisting performance for the sale of immovable property
Judged at time contract entered into generally
Roberts v O'Neill
SC rejected vendors attempt to resist enforcement of a contract for sale of public house, on the ground the very large increase in the value of the property since the date of the contract
Held: Hardship permitted to defeat SP where an existing hardship was not known at the relevant time, being the date of the contract
While recognizing there may be cases in which hardship arising after the date of the contract is such that to decree SP would result in great injury, there must be few such cases, and they could not include ordinarily business cases of hardship resulting from inflation alone
Discretionary
Third parties
Court have also been willing to take into account hardship that may be caused to third parties by ordering SP
Conlon v Murray
: SP sought against the executors of vendor's estate
Vendor had been an elderly lady who sold family famr without taking independent legal advise or proper time to consider the transaction
: Court noted if SP was ordered vendor's brother would have nowhere to live
Distinction between hardship and impossibility
Aranbel v Darcy and Anor
In this case court was satisfied fell into impossibility rather than hardship category
D purchaser could complete, but only by disposing of assets such as family home or business assets, whcih action would have significant practical consequence
there would be ovious reluctance on part of the court to require such a course of action
on other hand, court must also take account the fact an inevitable consequence of the court not ordering Sp is that an award of damages likley to be made
Damages, wil ofc, be able to be charged on any relevant property of D concerned
Likely thata any such case would require analysis to ascertain consequences of an award of damages- may be equally badly off as result of significant award of damages
Should not be confused with the defence of impossibility
Just because performance of a contract may result in hardship does not mean that such performance should be impossible
Delay
If parties have made time of the essence, different considerations apply
Union Eagle v Golden Achievement Ltd
:
Facts: Purchaser had tendered the purchase price 10 mins late under a contract that fixed a precise time for completion and in respect of which time was expressed to be of the eseence
Issue: Vendor already declared contract rescinded and deposit forfeited
Held: If a party to a contract for the sale of land were to rescind it due to the other party's failure to comply with an essential condition as to time, Equity would not intervene
Generally
Critical qu= whether as a result of P's delay, granting SP would now cause D prejudice
McGrath v Stewart
: Demonstrates maxim delay defeats equity= alive and well
Facts: P sought order for SP re a contract for the sale of land entered into in June 1998
P agreed to pay 25,000 each for two properties
Closing Date fixed was July 1998
Sale never completed,
Issue: Dispute arose as to whether or not the properties were to be sold with vacant possession
P believed he would receive vacant possession
D insisted sale subject to existing tenancies
Held; Describing delay as 'substantial'
Contract entered into 1998, present proceedings not until 2004
Court considered whether P's delay was prejudicial to the D: owing to increases in value of property, D would suffer greater financial hardship if the claim were enforced now that he would have if enforced sooner
would be inequitable to grant SP
Note= defence invoked in McGrath was delay
Defence in Roberts v O'Neil- supervening hardship
Not contended that hardship had been caused by any delay (or other fault) on P's part
Caused by something else
Distinction important
If ordering SP would cause D hardship due to P's delay in instiuting/ prosecution his action, that delay can be a defence (McGrath)
If ordering Sp would cause D hardship due to something else arising after the date of the contract and not P's fault, that hardship cannot be defence (exception= Patel)
While Equity looks unfavourably on those who sleep on their rights, mere delay itself will not often result in SP being refused, where time isnt of the essence
Aranbel v Darcy
: General principle- A P who delays unreasonably in bringing proceedings may fail to obtain SP where, by reason of delay= inequitable to grant relief
Held: Delay not defence in this case
Correspondence continued for 6 months or so before proceedings issued
Nothing doe or not done in that period could have reasonably left Ds with legitimate view the matter was not to be proceeded with
Illegality, Immorality, Contrary to Public Policy
Starling Securities Ltd v Wood
Facts: Under the counter payments were made as part of the consideration in sale of property
Held: HC refused SP
P had not come to equity with clean hands
I aam not entitled to countenance attempt to defraud the revenue by enforcing performance of this contract at the instance of one party or the other
Kavanagh v Caulfield
: HC:
Facts: Parties entered into a contract for sale of property
Prior to entering contract, P had given sum of money to charity
She claimed this was at the request of D
D argued the court should not order SP because the consideration did not reflect true consideration and the purpose of P giving money to charity was to defraud Revenue Commissioners
Issue:D sought to rely on illegality in order to defend P's action for SP
Held: The court must look at all surrounding circumstances
Whether there has been illegality of which the Court should take notice
Whether in such circumstances it would be an affront to the public conscience if by affording him he relief sought the court were seen to be indirectly assiting or encouraging a criminal act
The court must be satisfied that the contract has not been otherwise rendered ineffective
Held; From agreed facts the request to pay money to charity did indeed induce the contract
t does not follow that in itself rendered the contract illegal
While the cheque given by P's son to D it was in the name of the charity
There is no evidence of the P to Defraud
Not sufficent evidence to prove P intended o carry it out in illegal fashion
A contract based on illegality is void
Accordingly SP will not be ordered
Courts have made it clear they will not order SP of a contract with underlying illegal purpose
Burden of Proof of illegality on the D
If agreement contrary to public policy the courts= unwilling to enforce order SP
Wroth v Tyler
;
Facts: D entered contract for sale of a house
Subsequently, his wife acquired a right to occupy the property
She refused to vacate the property
Issue: P sought an order of SP
Held: Refused to order SP on two grounds of public policy
It was against PP to require a H to take legal proceedings against his W
If ordder made the W would retain right of occupation, but H and children would be subject to eviction
Splitting up family also against PP