Richards v H.E.B. Enterprises Ltd and Bodden Jr
| Jurisdiction | Cayman Islands |
| Judge | (Williams, J.) |
| Judgment Date | 02 August 2018 |
| Court | Grand Court (Cayman Islands) |
| Date | 02 August 2018 |
(Williams, J.)
Land Law — contract of sale — repudiation — if contract for sale of land by instalments terminated for purchaser’s repudiatory breach, “rescission” in contract means rescission de futuro unless contract clearly provides for rescission ab initio — vendor entitled to damages for any loss caused by breach unless express contrary provision in contract — under common law, purchaser entitled to recover money paid in part performance (including interest payments) other than deposit, unless parties agreed payments to be forfeited
Held, ruling as follows:
(1) When a purchaser defaulted on a contract for the purchase of land by instalments, the first enquiry must be to the terms of the contract and then to the vendor’s actions to determine which particular remedy hepurported to exercise. The traditional use of the term “rescission” was where there was a defect in the formation of a contract entitling one of the parties to extinguish the contract ab initio. Where a contract was brought to an end by one party’s acceptance of the other’s repudiatory breach, the contract would be rescinded de futuro, not ab initio, unless the contract clearly provided for rescission ab initio. In the present case, the court was satisfied that the defendants’ email of April 18th, 2016 constituted notice for the purposes of cl. 6 of the agreements. In the absence of a clause by which the parties contemplated rescission ab initio, it was clear that rescission in default in sale of land matters normally meant that the vendor was terminating the contract de futuro for breach because the power to do so was conferred on him by the contract. The provision in cl. 6 that the defendant “may at its option rescind” referred to the now common interpretation and use of “rescind” in default in sale of land contracts. The court was satisfied that the parties’ intention, as shown in the agreements, was that cl. 6 would provide the avenue to rescind when accepting a repudiatory breach arising out of the plaintiff’s failure to comply with the agreement. The court was satisfied that the defendants invoked cl. 6 by the email, and that cl. 6 was the governing clause. The court would therefore consider whether cl. 6 was drafted in such a way as to exclude or restrict the defendants’ right to recover damages not provided for in the clause, in particular the retention of interest payments made by the plaintiff (paras. 75–80).
(2) In the absence of any contrary express provision in the contract, if a vendor elected to treat a contract as being terminated as a result of the failure of the purchaser to pay the purchase price or an instalment of the purchase price, he was entitled to recover damages for the breach if he suffered loss as a consequence. It was agreed that cl. 6 provided that the deposit (and interest thereon) should be forfeited to the defendants, who were at liberty upon written notice to rescind the contract and resell the property and retain the full sale price. It was agreed that the defendants could also retain out of the other payments made to them an amount sufficient to compensate for any work done to the premises at the plaintiff’s request which involved a deviation from or amendment to the basic plan, or any substitution by the plaintiff in respect of the fixture and fitting. If that was all cl. 6 provided, it would not take away from the defendants or in any way restrict their rights which, according to general legal principles, they would have on any breach of contract by the plaintiff. Clause 6 conferred on the defendants several separate rights, any of which they could choose to exercise or not. The power to rescind contained in cl. 6 was a power which, when exercised, would bring the contract to an end. However, cl. 6 did not stop there. The clause provided that “no further right of action shall arise in respect thereof nor shall any party hereto have any further rights, demands, actions, claims for damages the one against the other and the Vendor may resell the Strata Lot and keep the full price absolutely.” It was clear from the words used that the parties intended that actions and recovery for breach be restricted to that set out inthe contract. If cl. 6 had not contained such wording, the defendants would arguably have retained a wider right to sue the plaintiff for damages for breach of contract. The court considered whether, if it were wrong in determining that the termination was by rescission as meant in cl. 6 and the right to claim damages was restricted by cl. 6, that would change the position in relation to the contested claim to the interest payments. The common law position was that, in the absence of an express or implied agreement to forfeit payments as liquidated damages on termination, a purchaser was entitled to recover the money he had paid in part performance. The court rejected the defendants’ submissions that the agreements were made up of a sale/purchase agreement and a separate loan agreement. It was no more appropriate for the defendants to retain the interest payments separately than it was for them to retain the whole or any part of the principal payments. Clause 6 clearly did not alter the common law position concerning the retention of instalment payments which included interest. The plaintiff was therefore entitled to recover the interest payments. The defendants would be ordered to repay the instalment payments, made up of the principal and interest, to the plaintiff subject to the agreed and ordered set-off amounts (paras. 83–89; paras. 103–109).
(1)Bank of Boston Connecticut v. European Grain & Shipping Ltd., [1989] A.C. 1056; [1989] 2 W.L.R. 440; [1989] 1 All E.R. 545; [1989] 1 Lloyd’s Rep. 431, referred to.
(2)Barber v. Wolfe, [1945] Ch. 187; [1945] 1 All E.R. 399, considered.
(3)Chartbrook Ltd. v. Persimmon Homes Ltd., [2009] UKHL 38; [2009] 1 A.C. 1101; [2009] 3 W.L.R. 267; [2009] 4 All E.R. 677; [2010] 1 All E.R. (Comm) 365; [2009] Bus. L.R. 1200; [2009] B.L.R. 551; [2010] 1 P. & C.R. 9; [2009] 3 E.G.L.R. 119, referred to.
(4)Heyman v. Darwins, [1942] A.C. 356; [1942] 1 All E.R. 337, dicta of Viscount Simon approved.
(5)Howard v. Pickford Tool Co. Ltd., [1951] 1 K.B. 417, followed.
(6)Howe v. Smith (1881), 27 Ch. D. 89, applied.
(7)Investors Compensation Scheme Ltd. v. West Bromwich Bldg. Socy., [1998] 1 W.L.R. 896; [1998] 1 All E.R. 98; [1998] 1 BCLC 531; [1997] C.L.C. 1243, considered.
(8)Jamaican Redevelopment Foundation Inc. v. Real Estate Bd., 2009HCV5152, Jamaican Supreme Ct., [2011] 5 JJC 1202, referred to.
(9)Johnson v. Agnew, [1980] A.C. 367; [1979] 2 W.L.R. 487; [1979] 1 All E.R. 883; (1979), 38 P. & C.R. 424, followed.
(10)McDonald v. Dennys Lascelles Ltd., [1933] H.C.A. 25; (1933), 48 C.L.R. 457, followed.
(11)McKenna v. Richey, [1950] V.L.R. 360, referred to.
(12)Marley v. Rawlings, [2014] UKSC 2; [2015] A.C. 129; [2014] 2 W.L.R. 213; [2014] 1 All E.R. 807; [2014] 2 FLR 555; [2015]1 F.C.R. 187; [2014] W.T.L.R. 299; (2014), 16 ITELR 642, dictum of Lord Neuberger considered.
(13)Mayson v. Clouet, [1924] A.C. 980, followed.
(14)Stockloser v. Johnson, [1954] 1 Q.B. 476; [1954] 2 W.L.R. 438; [1954] 1 All E.R. 630, considered.
(15)Workers Trust & Merchant Bank Ltd. v. Dojap Invs. Ltd., [1993] A.C. 573; [1993] 2 W.L.R. 702; [1993] 2 All E.R. 370; (1993), 66 P. & C.R. 15; [1993] 1 E.G.L.R. 203, referred to.
The plaintiff sought a declaration that agreements had been rescinded.
In 1994, the plaintiff entered into an agreement for sale with the first defendant for an uncompleted strata lot within a commercial strata development. The first defendant acted at all times through the second defendant. Pursuant to cl. 3 of the agreement, the price for the strata lot was CI$120,000. A deposit of CI$3,000 was to be paid on execution of the agreement and the balance of CI$117,000 was to be paid in monthly instalments over 20 years with interest at 12% per annum. Title was to pass to the plaintiff once the final payment was made. The plaintiff entered into a second agreement with the first defendant in 1997 for a second property within the same strata development. Pursuant to cl. 3, theprice for the second property was CI$150,000. A deposit of CI$7,500 was to be paid on execution of the agreement and the balance in monthly instalments over 20 years with interest at 12% per annum. Title would pass to the plaintiff once the final payment was made. The properties were held in the second defendant’s name and each was used by the plaintiff as a shop. The plaintiff was responsible for paying the strata fees during the owner-financed period.
Clause 6 in each agreement, under the heading “Default,” provided that the defendants “may at its option rescind” the agreement by written notice if the plaintiff failed to complete the agreement as provided in cl. 3 and at the specified times. Clause 6 went on to provide that the defendants might then—
“forfeit and keep absolutely as liquidated damages the deposit hereof and all or any interest accrued thereon and may in addition keep absolutely out of any further sum paid by the [plaintiff] such amount as is sufficient to compensate the [defendants] for any work done to the Strata Lot by the [defendant] at the request of the [plaintiff] . . . and no further right of action shall arise in respect thereof nor shall any party hereto have any further rights, demands, actions, claims for damages the one against the other and the [defendants] may resell the Strata Lot and keep the full price absolutely.”
The plaintiff paid the deposits and made some contracted payments, including strata fees. He subsequently failed to make the payments in compliance with cl. 3. The contracts stipulated that time should be of the essence. By April 2016, no payment had been made in accordance with the first agreement for 14 months, no payment towards the strata had...
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H.E.B. Enterprises Ltd and H.E. Bodden Jr v Richards
...fees on the two shops. There is no document evidencing such agreements, but the judge makes brief findings about them in his judgment (2018 (2) CILR 84, at paras. 5 and 56). It appears that the buyer’s obligation to pay stratafees (a form of service charges) was only finally accepted by the......