Later decisions that cite White & Carter (Councils) Ltd v McGregor
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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> White & Carter (Councils) Ltd v McGregor [1961] UKHL 7 (06 December 1961) URL: https://www.bailii.org/uk/cases/UKHL/1961/1962_SC_HL_1.html Cite as: 1962 SC (HL) 1, [1962] AC 413, [1962] 2 WLR 17, [1961] UKHL 7, [1961] 3 All ER 1178, 1962 SLT 9 |
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06 December 1961
| White & Carter (Councils)Limited |
| v. |
At delivering judgment on 6th December 1961,—
LORD REID .—[His Lordship gave the narrative quoted supra, and continued]—
My Lords, the pursuers supply to local authorities litter bins which are placed in the streets. They are allowed to attach to these receptacles plates carrying advertisements, and they make their profit from payments made to them by the advertisers. The defender carried on a garage in Clydebank and in 1954 he made an agreement with the pursuers under which they displayed advertisements of his business on a number of these bins. In June, 1957, his sales manager made a further contract with the pursuers for the display of these advertisements for a further period of three years. The sales manager had been given no specific authority to make this contract and when the defender heard of it later on the same day he at once wrote to the pursuers to cancel the contract. The pursuers refused to accept this cancellation. They prepared the necessary plates for attachment to the bins and exhibited them on the bins from November 2, 1957, onwards.
The defender refused to pay any sums due under the contract and the pursuers raised the present action in the Sheriff Court craving payment of �196 4s. the full sum due under the contract for the period of three years. After sundry procedure the Sheriff-Substitute on March 15, 1960, dismissed the action. He held that the sales manager's action in renewing the contract was within his apparent or ostensible authority and that is not now disputed. The ground on which he dismissed the action was that in the circumstances an action for implement of the contract was inappropriate. He relied on the decision in Langford & Co. v. Dutch, [21] and cannot be criticised for having done so.
The pursuers appealed to the Court of Session and on November 2, 1960, the Second Division refused the appeal. The present appeal is taken against their interlocutor of that date. That interlocutor sets out detailed findings of fact and, as this case began in the Sheriff Court, we cannot look beyond those findings.
The contract was for the display of advertisements for a period of one hundred and fifty-six weeks from the date when the display began. This date was not specified but admittedly the display began on 2nd November 1957, which seems to have been the date when the former contract came to an end. The payment stipulated was two shillings per week per plate, together with five shillings per annum per plate, both payable annually in advance, the first payment being due seven days after the first display. The reason why the appellants sued for the whole sum due for the three years is to be found in clause 8 of the conditions:
"In the event of an instalment or part thereof being due for payment, and remaining unpaid for a period of four weeks or in the event of the advertiser being in any way in breach of this contract then the whole amount due for the one hundred and fifty-six weeks or such part of the said one hundred and fifty-six weeks as the advertiser shall not yet have paid shall immediately become due and payable."
A question was debated whether this clause provides a penalty or liquidated damages, but on the view which I take of the case it need not be pursued. The clause merely provides for acceleration of payment of the stipulated price if the advertiser fails to pay an instalment timeously. As the respondent maintained that he was not bound by the contract, he did not pay the first instalment within the time allowed. Accordingly, if the appellants were entitled to carry out their part of the contract notwithstanding the respondent's repudiation, it was hardly disputed that this clause entitled them to sue immediately for the whole price and not merely the first instalment.
The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848, and it has been authoritatively stated time and again in both Scotland and England. If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party, has an option. He may accept that repudiation and sue for damages for breach of contract, whether or not the time for performance has come; or he may, if he chooses, disregard or refuse to accept it and then the contract remains in full effect.
In Howie v. Anderson Anderson sold shares to be delivered on 8th January 1847; on 31st October 1846, his agent intimated to Howie that he refused to go on with the transaction. Howie refused to accept this repudiation. Anderson pleaded that Howie ought to have gone into the market and bought other shares on 31st October, but it was held that damages must be awarded on the price ruling on 8th January Lord Justice-Clerk Hope said:
"I do not understand exactly what is meant by the plea that the contract was broken and at an end on 31st October, merely because the defender, in pursuance of his scheme of acting wrongfully, gave notice that he would not fulfil the contract … He had no power to alter the date of the fulfilment of the contract: he had no power to affect the extent of the rights and claims of the pursuer, as on the day when the contract was to be fulfilled. That very intimation was a wrongful act—the commencement of the wrong which was consummated by the actual failure of delivery on the 8th of January. The bargain continued to subsist as a binding contract to be fulfilled at the proper time by the defender, after his intimation of the 31st October, exactly as if that intimation had not been made."
Lord Medwyn said:
"… the defender cannot plead that the buyer was bound to go into the market to make a new time-bargain, merely because this might have lessened the damages to him if he acted improperly in refusing to implement the bargain. The breach of bargain was properly on the 8th of January, because that was the day on which it was to be fulfilled by delivery of the stock."
I need not refer to the numerous authorities. They are not disputed by the respondent, but he points out that, in all of them, the party who refused to accept the repudiation had no active duties under the contract. The innocent party's option is generally said to be to wait until the date of performance, and then to claim damages estimated as at that date. There is no case in which it is said that he may, in face of the repudiation, go on and incur useless expense in performing the contract, and then claim the contract price. The option, it is argued, is merely as to the date as at which damages are to be assessed.
Developing this argument, the respondent points out that, in most cases, the innocent party cannot complete the contract himself, without the other party doing, allowing or accepting something, and that it is purely fortuitous that the appellants can do so in this case. In most cases, by refusing co-operation, the party in breach can compel the innocent party to restrict his claim to damages. Then it was said that, even where the innocent party can complete the contract without such co-operation, it is against the public interest that he should be allowed to do so. An example was developed in argument. A company might engage an expert to go abroad and prepare an elaborate report, and then repudiate the contract before anything was done. To allow such an expert then to waste thousands of pounds in preparing the report cannot be right if a much smaller sum of damages would give him full compensation for his loss. It would merely enable the expert to extort a settlement giving him far more than reasonable compensation.
The respondent founds on the decision of the First Division in Langford & Co. v. Dutch . There, an advertising contractor agreed to exhibit a film for a year. Four days after this agreement was made the advertiser repudiated it, but, as in the present case, the contractor refused to accept the repudiation and proceeded to exhibit the film and sue for the contract price. The Sheriff-substitute dismissed the action as irrelevant and his decision was affirmed on appeal. In the course of a short opinion, Lord President Cooper said:
"It appears to me that, apart from wholly exceptional circumstances of which there is no trace in the averments on this record, the law of Scotland does not afford to a person in the position of the pursuers the remedy which is here sought. The pursuers could not force the defender to accept a year's advertisement which she did not want, though they could of course claim damages for her breach of contract. On the averments the only reasonable and proper course which the pursuers should have adopted, would have been to treat the defender as having repudiated the contract and as being on that account liable in damages, the measure of which we are, of course, not in a position to discuss."
The Lord President cited no authority, and I am in doubt as to what principle he had in mind. In the earlier part of the passage which I have quoted, he speaks of forcing the defender to accept the advertisement. Of course, if it had been necessary for the defender to do or accept anything before the contract could be completed by the pursuers, the pursuers could not and the Court would not have compelled the defender to act, the contract would not have been completed and the pursuer's only remedy would have been damages. But the peculiarity in that case, as in the present case, was that the pursuers could completely fulfil the contract without any co-operation of the defender. The Lord President cannot have meant that, because of non-acceptance, the contract had not been completely carried out, because that, in itself, would have been a complete answer to an action for the contract price. He went on to say that the only reasonable and proper course which the pursuers should have adopted would have been to treat the defender as having repudiated the contract, which must, I think, mean to have accepted the repudiation. It is this reference to "the only reasonable and proper course" which I find difficult to explain. It might be, but it never has been, the law that a person is only entitled to enforce his contractual rights in a reasonable way, and that a Court will not support an attempt to enforce them in an unreasonable way. One reason why that is not the law is, no doubt, because it was thought that it would create too much uncertainty to require the Court to decide whether it is reasonable or equitable to allow a party to enforce his full rights under a contract. The Lord President cannot have meant that.
The only principle I can think of which he may have had in mind is the principle invoked by Lord Watson in a well-known passage at the beginning of his speech in Grahame v. Magistrates of Kirkcaldy :
"It appears to me that a superior Court, having equitable jurisdiction, must also have a discretion, in certain exceptional cases, to withhold from parties applying for it that remedy to which, in ordinary circumstances, they would be entitled as a matter of course."
But Lord Watson went on to say:
"In order to justify the exercise of such a discretionary power there must be some very cogent reason for depriving litigants of the ordinary means of enforcing their legal rights. There are, so far as I know, only three decided cases, in which the Court of Session, there being no facts sufficient to raise a plea in bar of the action, have nevertheless denied to the pursuer the remedy to which, in strict law, he was entitled. These authorities seem to establish, if that were necessary, the proposition that the Court has the power of declining, upon equitable grounds, to enforce an admittedly legal right; but they also show that the power has been very rarely exercised."
Langford & Co. v. Dutch is indistinguishable from the present case. Quite properly the Second Division followed it in this case as a binding authority, and did not develop Lord Cooper's reasoning: they were not asked to send this case to a larger Court. We must now decide whether that case was rightly decided. In my judgment it was not. It could only be supported on one or other of two grounds. It might be said that, because, in most cases, the circumstances are such that an innocent party is unable to complete the contract and earn the contract price without the assent or co-operation of the other party, therefore, in cases where he can do so, he should not be allowed to do so. I can see no justification for that.
The other ground would be that there is some general equitable principle or element of public policy which requires this limitation of the contractual rights of the innocent party. It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself. If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it might be said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed to insist on it. And, just as a party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him. If I may revert to the example which I gave of a company engaging an expert to prepare an elaborate report and then repudiating before anything was done, it might be that the company could show that the expert had no substantial or legitimate interest in carrying out the work rather than accepting damages: I would think that the de minimis principle would apply in determining whether his interest was substantial, and that he might have a legitimate interest other than an immediate financial interest. But if the expert had no such interest, then that might be regarded as a proper case for the exercise of the general equitable jurisdiction of the Court. But that is not this case. Here, the respondent did not set out to prove that the appellants had no legitimate interest in completing the contract and claiming the contract price rather than claiming damages; there is nothing in the findings of fact to support such a case, and it seems improbable that any such case could have been proved. It is, in my judgment, impossible to say that the appellants should be deprived of their right to claim the contract price merely because the benefit to them, as against claiming damages and re-letting their advertising space, might be small in comparison with the loss to the respondent: that is the most that could be said in favour of the respondent. Parliament has on many occasions relieved parties from certain kinds of improvident or oppressive contracts, but the common law can only do that in very limited circumstances. Accordingly, I am unable to avoid the conclusion that this appeal must be allowed and the case remitted so that decree can be pronounced as craved in the initial writ.
LORD MORTON OF HENRYTON .—The facts of this case have already been fully stated. It is plain that the respondent (defender in the action) repudiated the contract of 26th June 1957 immediately after his sales manager had entered into it, and some months before the time for performance of it by the appellants, and persisted in his repudiation throughout. Notwithstanding this, the appellants proceeded with the preparation of plates advertising the respondent's garage business and, as the Sheriff-substitute held, they "made no effort to procure another advertiser to take up the advertising space included in said contract and thus minimise their loss." The plates were first exhibited on the litter bins on 2nd November 1957, and they remained on display during the whole of the contract period of one hundred and fifty-six weeks. The defender throughout made it clear that he did not want the advertisements and refused to pay for them. The present action is brought to recover £196, 4s., the full sum payable under the contract. Alternatively, the appellants claim the same sum as liquidated damages. The respondent contends that, in the circumstances of the present case, the only remedy of the appellants was damages, to be assessed according to ordinary principles.
I think that this is a case of great importance, although the claim is for a comparatively small sum. If the appellants are right, strange consequences follow in any case in which, under a repudiated contract, services are to be performed by the party who has not repudiated it, so long as he is able to perform these services without the co-operation of the repudiating party. Many examples of such contracts could be given. One, given in the course of the argument and already mentioned by my noble and learned friend, Lord Reid, is the engagement of an expert to go abroad and write a report on some subject for a substantial fee plus his expenses. If the appellants succeed in the present case, it must follow that the expert is entitled to incur the expense of going abroad, to write his unwanted report, and then to recover the fee and expenses, even if the other party has plainly repudiated the contract before any expense has been incurred.
It is well established that repudiation by one party does not put an end to a contract. The other party can say:
"I hold you to your contract, which still remains in force."
What then is his remedy if the repudiating party persists in his repudiation and refuses to carry out his part of the contract? The contract has been broken. The innocent party is entitled to be compensated by damages for any loss which he has suffered by reason of the breach, and in a limited class of cases the Court will decree specific implement. The law of Scotland provides no other remedy for a breach of contract, and there is no reported case which decides that the innocent party may act as the appellants have acted. The present case is one in which specific implement could not be decreed, since the only obligation of the respondent under the contract was to pay a sum of money for services to be rendered by the appellants. Yet the appellants are claiming a kind of inverted specific implement of the contract. They first insist on performing their part of the contract, against the will of the other party, and then claim that he must perform his part and pay the contract price for unwanted services. In my opinion, the appellants' only remedy was damages, and they were bound to take steps to minimise their loss, according to a well-established rule of law. Far from doing this, having incurred no expense at the date of the repudiation, they made no attempt to procure another advertiser, but deliberately went on to incur expense and perform unwanted services with the intention of creating a money debt which did not exist at the date of the repudiation.
The only cases cited in which a claim of the kind now put forward has been considered are Langford & Co. v. Dutch, when it was rejected by the Court of Session, and White & Carter (Councils) Ltd. (that is, the present appellants) v. Harding The latter case is, I think, distinguishable from the present case; but, if it cannot be distinguished, it was, in my opinion, wrongly decided by the Court of Appeal. The former case is directly in point, and was, in my opinion, rightly decided, and rightly followed by the Court of Session in the present case.
The facts in Langford's case have been stated by my noble and learned friend, Lord Reid. The Court of Session held that the law of Scotland did not "afford to a person in the position of the pursuers the remedy which is here sought." These words are quoted from the short opinion of Lord President Cooper, and he continued:
"The pursuers could not force the defender to accept a year's advertisement which she did not want, though they could of course claim damages for her breach of contract."
These two sentences embodied, I think, the basis of the learned Lord President's opinion, but he added:
"On the averments the only reasonable and proper course which the pursuers should have adopted, would have been to treat the defender as having repudiated the contract and as being on that account liable in damages, the measure of which we are, of course, not in a position to discuss."
I think that this last sentence was merely a comment on the behaviour of the pursuers, which applies with equal force to the appellants in the present case. The course of action followed by the appellants seems to me unreasonable and oppressive, but it is not on that ground that I would reject their claim. I would reject it for the reasons which I have already given.
In my opinion, the appellants' alternative claim for the same sum of £196, 4s. as liquidated damages should be rejected for the reasons which will shortly be given by my noble and learned friend, Lord Keith of Avonholm.
I would dismiss the appeal.
LORD TUCKER .—I have had the advantage of reading the opinion prepared by my noble and learned friend, Lord Hodson. I am in complete agreement with the reasons he gives for allowing the appeal.
LORD KEITH OF AVONHOLM .—The issue in this case is of some general importance in contract law. It is whether, where one party has contracted to perform certain services for a money price to be paid by the other contracting party, he can, when his time of performance arrives, insist on performing these services so as to earn his price, against the will of the other party who wrongfully insists on repudiating the contract.
Much argument and citation of authority was advanced on the topic of anticipatory repudiation. That, in my view, was largely beside the point. There is no doubt that there was here an anticipatory repudiation, for the contract was repudiated by the defender on the very day on which it was made, and some months before it could come into operation. But the pursuers did not choose to act on that repudiation and sue the defender for what has sometimes been called an anticipatory breach. The real question at issue is what were the rights of parties when the contract fell to be put into operation, the defender having maintained his repudiation throughout.
I should first state the submission made by Mr Johnston for the pursuers (the appellants) in the words used by him. "Where one party, to a contract," he said, "intimates that he refuses to implement the obligations he has undertaken, the innocent party has the option of accepting the repudiation and rescinding the contract and availing himself at once of the remedies open to him OR he may ignore the repudiation and wait until the time for performance arrives before setting in train proceedings for remedy. The innocent party has truly a choice. He is not compelled to accept repudiation. The guilty party cannot rid himself of his contractual liability or limit his liability under the contract by repudiating it and insisting that such repudiation be accepted by the innocent party. If the innocent party chooses not to accept, he may go on and await the date of the performance by the guilty party, and, if it is not tendered, his rights as at that date are preserved to him."
There are certain refinements in this submission and certain questions which it does not answer. A number of cases were cited which were intended to illustrate the submission. These are all cases where the successful litigant obtained damages or escaped damages in actions for breach of contract. The appellants, it is to be observed, are suing primarily for a debt, not for damages for breach of contract. Nor is there any difficulty in seeing, in the circumstances of the cases, what was the date or time of performance. In many of the cases it was either the date of tender and refusal to take delivery of the subject matter of the contract—Braithwaite v. Foreign Hardwood Company —or the date of failure to deliver—Mersey Steel and Iron Co. Ltd. v. Naylor, Benzon & Co., Johnstone v. Milling, Howie v. Anderson, Avery v. Bowden . I take one case in this branch of law for a passage relied on by Mr Johnston for the appellants in Frost v. Knight . A man had promised to marry a lady in two years. Before that time elapsed, he intimated that he did not intend to abide by his promise. An action of damages for breach was raised within the two years. Cockburn, C.J., stated the alternative option in these words:
"The promisee, if he pleases, may treat the notice of intention [to repudiate] as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance."
There could be no difficulty here about the date of performance. It was on the expiry of the two years. But there is some ambiguity in the words "the time when the contract is to be executed." Do they mean the time when the contract is to become operative by the action of either of the parties, as the case may be, or the time when the defaulting party would have been bound to carry out his obligations under the contract? In the latter case, there may be two times of performance, the time when the complaining party has to perform his obligations on the one hand and the time when the defaulting party has to perform his on the other. This dichotomy does not come to the surface in any of the cases, so far as I have observed. The position again is stated, quite generally, in a passage in Mayne on Damages, (11th ed., pp. 141–142) in a chapter entitled Time to which Damages are Calculated:
"If before the time for performance arrives one party absolutely and definitely repudiates the contract, the other party is entitled either to wait till the time arrives, and then bring his action, or to treat the contract as broken, and sue for the breach at once."
If I understand aright, counsel for the appellants would read time of performance as time of performance by the defender after the appellants had discharged their part of performance under the contract. Their claim then becomes a claim, not for damages for breach of contract, but for a debt due by the defender under the contract. In other words, there would be an anticipatory repudiation by the defender which the appellants were not bound to accept as a breach of contract and which did not cease to be anticipatory until the moment when the defender was due to make payment under the contract. This, I think, goes beyond anything that has been decided in the cases where anticipatory repudiation has been considered. It makes an arbitrary distinction and one differing in its consequences according as performance is first called for under the contract from the repudiating party, or from the other party. In the former case, there is a plain breach of contract making the repudiating party liable in damages, unless where a claim for specific implement is available. In the latter case, according to the submission made, he is liable contractually for a debt at least where the consideration for performance by the other party is expressed in money. The law of Scotland has always stressed the mutuality of contracts, and it should follow, in my opinion, that the consequences of breach of contract by either party should correspond. I would state the position in the case of an anticipatory repudiation not accepted by the other party as a breach of contract thus:—If the contract is to take operative effect in the first place by performance of the repudiating party and he maintains his repudiation by refusing, or failing to give performance, the other party has a cause of action for either damages or specific implement. If performance is first to be given by the other party and the time for his performance has arrived he must tender performance, in the sense of showing that he is now ready and able to give performance, and if this tender is still rejected by the repudiating party his only cause of action again arises to him as at that date.
I would refer first to contracts for the sale of goods which were touched on in the course of the debate, for the reason that one of the remedies provided to the seller by the Sale of Goods Act, 1893, is an action for the price. This, however, applies only in two cases. One is where the property in the goods has passed to the buyer. But property cannot pass without the intention of the buyer as well as that of the seller and, except in some such cases, as fraud or lack of consensus in idem, or breach of contract by the seller, no question of repudiation can arise. The contract is completed and finished apart from delivery and nothing remains but payment of the price. The only other case is where parties have contracted for payment on a day certain, irrespective of delivery or the passing of property. This is a clear case of a contractual debt unconditioned by any question of performance by the other party. A much closer parallel with the present case is a contract to sell future, or unascertained goods. In this case, there can be no appropriation of, and therefore passing of, property in the goods without the assent of both buyer and seller. If therefore the buyer repudiates the contract before appropriation, or refuses his assent to appropriation, there can be no passing of property. The seller is then confined to an action of damages for breach of contract. This, of course, is a rule of statute. But the Act is largely declaratory of English law, though not of Scots law. So the rule can only be treated as an analogy, but it is an analogy which seems to me to make a hole in the principle contended for by the appellants.
Repudiation of a contract is nothing but a breach of contract. Except where it is accepted as an anticipatory breach, and as a ground for a claim of damages, a repudiation can never be said to be accepted by the other party, except in the sense that he acquiesces in it and does not propose to take any action. Otherwise, he founds on it as a cause of action.
The late Professor Gloag in his work on Contract, (2nd ed., p. 592), considering the rights arising on breach of contract, said:
"The primary rights of the creditor in a contractual obligation may be said to be to secure performance by invoking the assistance of the Court to compel it, or, where that remedy is inappropriate, to obtain compensation in damages."
It may be said that the learned author has here in mind an obligation other than the mere payment of money. But payment of money is often linked with another obligation as, for instance, to accept delivery, and the Courts will not enforce acceptance of delivery unless in certain cases where they may order specific implement. They will merely give damages for failure to take delivery. Nor will they give a decree ad factum prœstandum for the payment of money. Here the appellants are saying:
"We shall do something which the Courts will not enforce. We shall force our services on an unwilling defender and then sue him for the price."
This point receives additional force in the circumstances of this case. The contract was to come into operation on 2nd November 1957, when the previous contract expired. But it involved, in the absence of other advertising matter supplied by the defender, the display by the appellants of at least the name, business and address of the advertiser. I should hesitate to say that any contractor was entitled to display these particulars of the defender against his wish, even if the withholding of his assent be in breach of contract.
Some play was made by counsel for the appellants with an expression used by Asquith, L.J., in Howard v. Pickford Tool Co. Ltd. :
"an unaccepted repudiation is a thing writ in water."
A graphic phrase, or expression, has its uses even in a law report and can give force to a legal principle, but it must be related to the circumstances in which it is used. Howard was a managing director with a six years' contract of service. He thought that the company with which he was serving had shown by the conduct of its chairman that it no longer intended to be bound by its agreement. He brought an action which, as amended, sought a declaration that the company by so acting had repudiated the contract and excused the plaintiff from further performance of his obligations under it. Evershed, M.R., said:
"It is quite plain … that if the conduct of one party to a contract amounts to a repudiation and the other party does not accept it as such but goes on performing his part of the contract and affirms the contract, the alleged act of repudiation is wholly nugatory and ineffective in law."
Asquith, L.J., said:
"An unaccepted repudiation is a thing writ in water and of no value to anybody; it confers no legal rights of any sort or kind."
The declaration was held to be academic and the claim struck out. These observations must be read in the light of the facts to which they relate. They were directed to an alleged repudiation, unaccepted by the man, who said there was a repudiation before any cause of action had arisen. At best, the case was no more than one of an intended repudiation, for performance was going on. The servant was still serving, and the employer was continuing to employ him. What the Court was saying was that the plaintiff had, at that time, no cause of action. But in the case of repudiation of a contract when performance is tendered, or due to be given by the other party, the repudiation cannot be said to be writ in water. It gives rise immediately to a cause of action. This does not involve acceptance of the repudiation. There has been a breach of contract which the complaining party denied the other had any right to commit. I know of no authority for saying that the offended party can go quietly on as if the contract still continued to be fully operative between both parties. He is put to his remedy at the date of the breach. It has been said that, when an anticipatory repudiation is not treated as a cause of action, the contract remains alive. It does until the contract would become operative, when the repudiation, if still maintained, then becomes a cause of action and all pleas and defences then existing are available to the respective parties.
The party complaining of the breach also has a duty to minimise the damage he has suffered, which is a further reason for saying that, after the date of breach, he cannot continue to carry on his part of an executory contract. A breach of a contract of employment will serve to illustrate the nature of this duty. A person is engaged to serve for a certain period, say three months, to commence at a future date. When that date arrives, the prospective employer wrongfully refuses to honour the engagement. The servant is not entitled to see out the three months and then sue the recalcitrant employer for three months' wages. He must take steps by seeking other employment to minimise his loss. It is true, of course, that a servant cannot invoke a contract to force himself on an unwilling master, any more than a master can enforce the service of an unwilling servant. But if the appellants' contention is sound, it is difficult to see why, by parity of reasoning, it should not apply to a person who keeps himself free to perform the duties of his contract of service during the whole period of the contract and is prevented from doing so by the refusal of the other contracting party. Yet in Hochster v. De La Tour, from which the whole law about anticipatory repudiation stems, Lord Campbell plainly indicated that, if the courier in that case, instead of accepting, as he did, the repudiation of his engagement as a cause of action, before it was due to commence, had waited until the lapse of the three months of the engagement, he could not have sued as for a debt. The jury, he said, would be entitled to look at all that might "increase or mitigate the loss of the plaintiff down to the day of trial." There is no difference in this matter between the law of England and the law of Scotland—Ross v. M'Farlane .
I now turn to two cases which were relied on by the appellants' counsel, which may seem to come nearer the present case, but which, I think, are clearly distinguishable.
The first is Wright v. Melville . There a man hired a phaeton selected by himself for a period of five weeks at five guineas a week. After he had had it for two or three days he took it back, saying that he would take another, which he did not do, and afterwards refused to pay the stipulated hire. Best, C.J., charged the jury that, if the plaintiff had sold the phaeton within the five weeks (which was alleged) he could not recover, but, as he did not appear to have done so, he was entitled to the stipulated five guineas a week. Verdict was entered accordingly. This plainly was a contract of hire for a fixed period which had been commenced and under which rent then became due. There was no question of repudiation or breach at the date of performance. The case was distinguished in National Cash Register Co. Ltd. v. Stanley, for this reason, as is stated in the case which I next mention.
The other case is White and Carter (Councils) Ltd. v. Harding, in which Morris, L.J., gave the judgment of the Court with which the Master of the Rolls and Ormerod, L.J., agreed. Copies were provided during the hearing of this appeal. The form of contract there was identical with that in the present case. The contractors were the present appellants. But the circumstances in which the claim arose were different. The advertiser, the defendant, entered into the contract on 13th November 1956. Nothing was done under the contract until 8th May 1957, when the advertising plates were first displayed by the contractors. The defendant was then asked for payment under the contract, and, as he refused to pay, he was sued in the Westminster County Court for the full one hundred and fifty-six weeks under condition 8 of the contract and judgment issued against him. On two separate occasions, one in November 1956, and the other in April 1957, before the plates had been exhibited, he asked to be released from his contract, but the plaintiffs did not agree to do so. Morris L.J., held that there had been no termination or repudiation of the contract by the defendant prior to the exhibition of the plates only requests to be released. Some two months after the display of the plates the defendant wrote to the plaintiffs with a cheque for £81 which he asked to be accepted in payment for the first year's advertising. He also asked to be allowed to withdraw from the remainder of the contract. The plaintiffs refused to accede to this and returned the cheque for £81. The learned Lord Justice, in these circumstances, held that the claim was a claim for debt, under the contract, and upheld the judgment of the County Court judge. He referred to the case of National Cash Register Co. Ltd. v. Stanley, and to Karsales (Harrow) Ltd. v. Wallis, in which that case was approved. Of the case of the National Cash Register Co. Ltd. v. Stanley he said:
"That seems to me, if I may say so with respect, to have been an entirely correct decision. The payment there was to be for use and hire of the register. The defendant refused to take the register. He refused to have the use of it and refused to hire it. Therefore, the provisions of the contract were not put into operation; they were not put into operation because of the defendant's own breach, for which the remedy lay in damages."
In my opinion, the case relied on is, on its facts, quite a different case from the present and is of no assistance to the appellants.
This brings me to the case of Langford & Co. v. Dutch . I took part in the judgment in that case, although the only opinion delivered in the case was given by the Lord President (Lord Cooper), with whom I and the other Judges of the Division concurred. The judgment was not a reserved judgment and the case was not, I think, so fully argued as the case now before your Lordships. It is, if rightly decided, determinative of the present appeal and is, so far as I am aware, the only other case in which the question raised on this appeal has ever been considered. The circumstances were practically indistinguishable from those in the present case, and the pursuers were suing, as here, for recovery of a debt under their contract. The Lord President said that the only reasonable and practical course, which the pursuers should have adopted, would have been to treat the defenders as having repudiated the contract and as being on that account liable in damages. He made reference to the absence of any specialty in the case which would justify the pursuers in claiming the remedy which they sought. What he had in mind, I think, were circumstances like those in International Correspondence Schools Ltd. v. Irving, which he referred to as highly special on its facts. I do not need to go further than to summarise the circumstances of that case in the Lord President's own words:
"… the contract there in question was one for the provision of tuition by a correspondence course, and the tuition offered was in terms of the contract a unum quid, while the circumstances disclosed that part delivery of this unum quid had already been effected before the respondent first declined to proceed further with the contract."
International Correspondence Schools Ltd. v. Irving was thus governed by the same reasoning as prevailed in Wright v. Melville and White and Carter (Councils) Ltd. v. Harding .It is unnecessary to consider whether the case was rightly decided. Even if it were, it has no application, in my opinion, to the present case. I have reconsidered the decision in Langford & Co. v. Dutch in the light of the further argument on this appeal. I have come to the conclusion that it was rightly decided, and that the Second Division in the present case was bound to follow it.
I find the argument advanced for the appellants a somewhat startling one. If it is right, it would seem that a man who has contracted to go to Hongkong at his own expense and make a report, in return for remuneration of £10,000, and who, before the date fixed for the start of the journey, and perhaps before he had incurred any expense, is informed by the other contracting party that he has cancelled or repudiated the contract, is entitled to set off for Hongkong and produce his report in order to claim in debt the stipulated sum. Such a result is not, in my opinion, in accordance with principle or authority, and cuts across the rule that where one party is in breach of contract the other must take steps to minimise the loss sustained by the breach.
It may be put also in another way, that the pursuers are precluded from carrying on with their performance by the notice from the defender, albeit in breach of contract, that he does not intend to pay them if they do. Lord President Dunedin said very much this in Municipal Council of Johannesburg v. D. Stewart & Co. (1902), Limited, in the following passage:
"When two parties are bound together under contract, of course each must perform to the other his mutual stipulations. If one of the parties is in breach of a stipulation of the contract, what is the position of the other? … If the stipulation which is broken goes to the root and essence of the contract the other party is entitled to say—now you have so broken the contract that I am entitled to say that it is at an end through your fault, I shall not perform any more of my stipulations, because you have precluded me, and I shall claim damages."
There remains for consideration the alternative case made for the appellants upon condition 8 of the contract. Their claim is, that, in respect of the defender's repudiation and breach of contract, he is liable in damages, and that under the clause the damages are fixed at three years' rent which, they say, is liquidated damages, and not a penalty. But the clause, in my opinion, is only intended to take effect after the contract comes into operation. This is clear in the first event mentioned in the clause, because there can be no failure of payment until the advertising plates have been displayed in terms of the agreement. This could not happen on the hypothesis, which must be accepted on this part of the case, that the pursuers were not entitled to go on with the contract. The clause is, in my opinion, just a debt clause ancillary to the conditions for the payment of rent and providing for instant payment of the whole rent in the event of failure in punctual payment of the instalments. No very convincing suggestions were given as to what was meant to be covered by the second event. But, in my opinion, this also must refer to some breaches in the course of performance of the contract, which will again involve instant payment of the full rent. I fail to see how the clause can be at one and the same time a contractual clause, sounding in payment of debt, and a damages clause for repudiation of the contract. The clause, accordingly, has, in my opinion, no operation here, and I find it unnecessary to consider whether, if it had, it is a clause for liquidated damages or for a penalty.
I would dismiss the appeal.
LORD HODSON . [His Lordship stated the facts and continued]—The claim of the appellants has always been for a debt due under contract made for good consideration, they being always ready to perform the contract and having performed it according to its terms, never having accepted the attempt of the respondent to cancel or repudiate. They succeeded before the Sheriff-substitute in proving the authorising of Mr Ward, but failed to obtain judgment on the ground that there was an honest mistake by one of the respondent's employees, and that the contract was repudiated by him on the day on which it was entered into and before the appellants had time to do anything about it.
In the Court of Session it was held that "the defender not being due and resting-owing to the pursuers in the sum sued for decree should not be granted and the action dismissed with expenses." Both Courts held that they were bound by the decision of the First Division in Langford & Co. v. Dutch to reject the claim and leave the appellants to their remedy, if any, in damages for breach of contract.
I need not refer to the facts in Langford & Co. v. Dutch, which is, in my opinion, indistinguishable from the present case, and accordingly prima facie binding on both Courts. The Lord President (Cooper) in that case said that, apart from wholly exceptional circumstances, the law of Scotland did not afford to a person in the position of the pursuers the remedy they sought. They could not force the defender to accept unwanted advertisements, although they could claim damages for breach of contract. On the averments, the only reasonable and proper course, according to the Lord President, would have been to treat the defender as having repudiated the contract and as being on that account liable in damages. The other members of the First Division agreed with the Lord President. This is tantamount to saying that the pursuers should have accepted the repudiation of the defender which, in my judgment, the appellants, who are in the same position as the pursuers in Langford & Co. v. Dutch, cannot be compelled to do.
It is settled as a fundamental rule of the law of contract that repudiation by one of the parties to a contract does not itself discharge it. See Viscount Simon's speech in Heyman v. Darwins Ld., citing with approval the following sentence from a judgment of Scrutton, L.J., in Golding v. London and Edinburgh Insurance Co. Ltd. :
"I have never been able to understand what effect the repudiation of one party has unless the other party accepts the repudiation."
In Howard v. Pickford Tool Co. Ld., Asquith, L.J., said:
"An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind."
These are English cases, but that the law of Scotland is the same is, I think, clear from the authorities of which I need only refer to one, namely, Howie v. Anderson, where language to the same effect is to be found in the opinions of the Lord President and Lord Moncreiff.
It follows that, if, as here, there was no acceptance, the contract remains alive for the benefit of both parties, and the party who has repudiated can change his mind, but it does not follow that the party at the receiving end of the proffered repudiation is bound to accept it before the time for performance and is left to his remedy in damages for breach.
Mr Bennett, for the respondent, did not seek to dispute the general position of law to which I have referred, but sought to argue that, if, at the date of performance by the innocent party, the guilty party maintains his refusal to accept performance, and the innocent party does not accept the repudiation, although the contract still survives, it does not survive so far as the right of the innocent party to perform it is concerned but survives only for the purpose of enforcing remedies open to him by way of damages or specific implement.
This produces an impossible result; if the innocent party is deprived of some of his rights, it involves putting an end to the contract except in cases, unlike this, where, in the exercise of the Court's discretion, the remedy of specific implement is available.
The true position is that the contract survives and does so not only where specific implement is available. When the assistance of the Court is not required, the innocent party can choose whether he will accept repudiation and sue for damages for anticipatory breach, or await the date of performance by the guilty party. Then, if there is failure in performance, his rights are preserved.
It may be unfortunate that the appellants have saddled themselves with an unwanted contract, causing an apparent waste of time and money. No doubt this aspect impressed the Court of Session, but there is no equity which can assist the respondent. It is trite that equity will not rewrite an improvident contract where there is no disability on either side. There is no duty laid upon a party to a subsisting contract to vary it at the behest of the other party so as to deprive himself of the benefit given to him by the contract. To hold otherwise would be to introduce a novel equitable doctrine that a party was not to be held to his contract unless the Court in a given instance thought it reasonable so to do. In this case, it would make an action for debt a claim for a discretionary remedy. This would introduce an uncertainty into the field of contract which appears to be unsupported by authority, either in English or Scottish law, save for the one case upon which the Court of Session founded its opinion and which must, in my judgment, be taken to have been wrongly decided.
The appellants were given leave to amend their claim by praying in the alternative for the same sum, namely, £196, 4s., as liquidated damages for breach of contract, on the footing that the repudiation must be treated as if accepted. The respondent resisted the alternative claim on the ground that the sum sued for, being a penalty and not liquidated damages, the appellants were not entitled to decree therefor.
The only material obligation which the respondent was bound to fulfil was to pay the sum of money claimed and it is difficult to see how damages should be assessed for breach of this obligation. It is, however, unnecessary in view of the opinion I have expressed to consider the question whether the sum claimed is recoverable as a genuine pre-estimate of probable or possible interest in the due performance of the contract or is irrecoverable as a penalty.
I would allow the appeal.
[1962] SC(HL) 1 The permission for BAILII to publish the text of this judgment
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