Supreme Court
Action No. 223 of 1997
January 24, 2000
Shanks, J.

Mr. Denys Barrow, S.C. and
Mr. Andrew Marshalleck for the Applicant
Mr. Michael Young, S.C. for the Respondent

Sale of land - Respondent failing to comply
with terms of Agreement as to payment of
installments - Applicant declaring Sale
Agreement as null and void - Whether
Applicant entitled to avoid Agreement

J U D G M E N T

This is a re-hearing of an Originating Summons ordered to be retried by the Court of Appeal on the 5th of February, 1999. By their summons, the applicant, Flynagen Limited claims a Declaration that the contract for the sale of Parcel 353, Block 1, Santa Elena Registration Section by the Applicant to the Respondent contained in written Agreements dated 21st February, 1995 and 17th May, 1995 has been validly rescinded and is void and of no effect. There is also a counterclaim by the Respondent counterclaiming for various things including a declaration that the Applicant was in breach of the Agreement for the purchase of parcel 353 by failing to take steps necessary to transfer title, claiming an Order for specific performance of the Agreement or Damages; claiming a declaration that the provision for the forfeiture of deposits are in the nature of a penalty and claiming alternatively to specific performance of the whole that the Respondent is entitled to have specific performance of a 7 acre portion of parcel 353 and claiming further and other relief.

The evidence I have is an affidavit of Mr. John Burks, of the Applicant dated 7th May, 1997, an Affidavit of Mr. Arnold of the Respondent dated the 1st of September, 1997, a further affidavit of Mr. Burks of the 4th of September, 1997 and an affidavit of Jeremy Courtenay of the 9th of September, 1997. I have also had written and oral submissions from Mr. Barrow and Mr. Marshalleck for the Applicant and Mr. Young for the Respondent who have been extremely helpful including on a number of factual points and on the procedures in relation to Land Registration and Division of parcels of lands.

The facts are these. The Applicant owned a parcel 314 in Block 1 of Santa Elena Registration Section which was approximately 50 acres. They agreed to sell 36 acres of that Parcel to the Respondent and an agreement was made between them dated 21st of February, 1995 and I will quote the relevant bits. The price was $250,000.00 U.S. A deposit of $25,000.00 was paid in the first instance and the balance being $225,000.00 U.S. was to be paid 120 days after the signing of the agreement, that is the 21st of February, 1995 and completion was to take place at the offices of W.H. Courtenay and Co. on the date on which the balance was due, that is 120 days after the signing of the agreement. The purchaser was given license to enter the land to effect a subdivision of the parcel 314 into two parcels one of 36 acres and the other of 14 acres. The purchaser was, under Clause 5(3) to use its best efforts to conclude arrangements with someone called Godfrey Blades for his continued use and occupation of a portion of the 36 acres in such a manner as not to interfere with their use and then the important Clauses are first Clause 7 which is as follows: "(1) In case the purchaser shall fail to pay any of the deposit or balance of the purchase price as set forth in Clause 2(1) hereof within fourteen (14) days after the day upon which the same shall become due the whole of the balance of the purchase price money then remaining unpaid shall become immediately payable and the title of the vendor to the property shall become free from all equities in favour of the purchaser the vendor retaining by way of liquidated damages for such default the deposit paid by the Purchaser under the provisions hereof. (2) Should the purchaser have paid any portion of the balance of the purchase price it shall be refunded such sum. "And then in Clause 8, there is provision for the service of a notice by the Purchaser "should the Vendor fail to perform any act;" giving him 7 days to comply with the agreement and Clause 8 (2) says. "Should the Vendor fail to comply with such notice the Agreement shall become null and void and all rights of the Vendor shall cease and determine but without prejudice to any right or remedy available to the Purchaser in respect of the Vendor's breach of contract." And then Clause 9 requires legal fees and stamp duty to be paid by the Purchaser.

On the 9th of March, 1995, the Purchaser had a survey carried out with a view to subdivision but he then had problems with raising the balance of the money for the 36 acres plot and so the parties made a new Agreement dated 17th May, 1995. That Agreement recited that the Purchaser had requested the Vendor to accept a revised payment schedule which is set out in the second schedule of the Agreement. Clause 1 states, "The Purchaser will pay to the Vendor Two Hundred and Twenty-five thousand Dollars ($225,000.00) in the currency of the United States of America being the balance of the Purchase price for the Property and an additional Thirty thousand Dollars ($30,000.00) in the currency of the United States of America in accordance with the payment schedule contained in the Second Schedule hereto and will transfer the two properties described in the Third Schedule (those are Parcels 325 and 326) in consideration of the Agreement of the Vendor to accept payment of the monies due hereunder in accordance with the payment schedule and in consideration of the Agreement to the Vendor to transfer title to the Purchaser upon the execution hereof." Clause 2 provides that the Purchaser agrees that so soon as title to the Property shall be vested in it the Purchaser will deposit its land certificate for the Property with the Vendor to the intent that the freehold property to which the same relates may be equitably charged to secure payment of the amounts listed the Second Schedule and Clause 3 says that, "The Purchaser covenants not to otherwise charge or encumber the Property without the written consent of the Purchaser." Clause 7 provided that, "(1) The Vendor hereby agrees that upon the Purchaser's obtaining the approval of the Land Subdivision and Utilization Authority pursuant to section 3 of the Land Utilization Act, for the further subdivision of the Property it will at the cost of the Purchaser release from the said charge that portion thereof containing seven acres situate on the shore of the Four Mile Lagoon which is outlined in the blue on the attached map. (2) The Vendor and the Purchaser further agree that should the title document for the said seven acre portion come into the possession of the Vendor, it will deliver the said document to Mark Wingler and shall be discharged by the Purchaser from all liability for so doing." Those seven acres which were at some point to be released to the Respondent or to Mark Wingler were to be used, it is common ground, by the Respondent to raise money but the time scale within which the Respondent would obtain title to the seven acres was clearly open to doubt. (There came into existence on the 17th of May, at the same time as the Supplemental Agreement, a Loan Agreement between the Respondent and Mr. Wingler which is exhibited.) The Second Schedule to the Supplemental Agreement contains a number of dates requiring payments. The first was May 17th, when $80,000.00 had to be paid, May 17th being the date of the Agreement. The next date was July 31st, when $30,000.00 had to be paid and then another $30,000.00 to be paid on August 31st and the full amount had to be paid in further installments by the end of 1995 with a final installment of $25,000.00. In fact, the $80,000.00 required to be paid on the 17th of May, 1995 was paid on that date and further sum of $6,000.00 was paid at some other time which I do not know.

On or before the 17th of May, the Applicant executed and delivered to W.H. Courtenay and Co. a document of transfer of title to what became Parcel 353 and on that date W.H. Courtenay and Co. wrote a letter to the respondent stating as follows:

"We write to confirm that we hold executed transfer documents whereby The Applicant, Flynagen Ltd. will transfer the above-captioned property, Parcel 353 to Corozal Free Zone Development Company Limited, the Respondents.

We are to release the transfer documents upon completion of the following:

Of course at this stage, that is the 17th of May, 1995 the only agreed amounts to be paid were the $80,000.00 which I have already said was in fact paid but, as the letter says, before title could be transferred there also needed to be sub-division approval and there needed to be a Land Certificate. Sub-division Approval was in fact obtained at some stage but there is no evidence before me and no one was able to help as to when that happened. So far as the Land Certificate in relation to Plot 353 is concerned, this required first of all that the Land Certificate in relation to Plot 314 had to be lodged with the Land Registry before they would issue a Land Certificate for 353. Unfortunately, it emerged, presumably around this date, the 17th of May, that the Applicant had lost the Land Certificate for Plot 314 and Mr. Burkes swore an affidavit to the Land Registry to obtain a replacement Land Certificate on the 25th of July, 1995. Having put in that affidavit, it was then possible for the Applicant to obtain a Land Certificate in relation to Parcel 353 and this was issued on the 31st of August, 1995 and lodged with W.H. Courtenay and Co. At that point, the Applicant was in a position to perform its obligation to deliver title and the Respondent could, upon payment of legal fees, stamp duty and so forth have been registered as the owner of Plot 353 if they had taken steps to do so. In fact, they never took any steps to make this happen but it is noteworthy that had they been registered as the owners of the land, that land would automatically had been equitably charged to the Applicant and remain subject to that charge until the seven acre parcel was obtained by the Respondents. There is no evidence before me that they took any steps to obtain any approval in relation to the seven acre parcel any more than they took any steps to see that they were registered as the owners of Parcel 353.

On the 23rd of August, 1995, W.H. Courtenay and Co., acting now for these purposes only for the Applicant, wrote a letter to the respondent complaining that they had failed to make a payment of $30,000.00 which was due on the 31st of July and stating that if they failed to pay that sum and the further $30,000.00 due on the 31st of August by the 31st of August then the deposit of $25,000.00 would be forfeited and that Applicant would look to their legal remedies.

As I have already said, only a further $6,000.00 was paid and I have no evidence whatsoever as to what occurred between the 23rd of August, 1995 and the date of the further letter from W.H. Courtenay and Co. dated the 17th of June, 1996. That letter of the 17th of June, 1996 complained of the lack of payment of all the further installments due totaling some $167,000.00 and stated that this sum must be paid in full and that if it was not paid by the 24th of June 1996 the Applicant would exercise all of its legal remedies. That sum was not paid and on the 28th June, 1996 W.H. Courtenay wrote to the Respondents stating that they regarded the Agreement for the sale of Plot 353 as at an end and they would rely on all legal remedies. In fact, the Applicant didn't have to do very much themselves because the land was still registered in their own name and they had received the deposit and some $86,000.00 and a parcel of land. I will come to that parcel of land in a moment. So the ball was in the Respondent's court. The only action taken by the Respondents was on the 9th of September, 1996 to lodge a caution at the Land Registry in relation to the whole of Plot 353. This had the effect of preventing the Applicant from selling or charging the land that was registered in their name. They therefore issued on the 6th of May, 1997, this Originating Summons seeking a declaration that the Agreement for sale had been validly brought to an end by letter of 28th of June, 1996. The current position on the ground is as follows: Plot 353 as I say is still registered in the Applicant's name subject to a caution by the respondent. The seven acre site is apparently still occupied by Godfrey Blades who is the name mentioned in the original Agreement and subject to a caution put on by Godfrey Blades in respect to the whole 36 acres. Plot 325 which was to have been transferred to the Applicant by the Respondent under the Supplementary Agreement was in fact transferred to the Applicant but was later sold to a third party and is no longer in the ownership of the Applicant or the Respondent. Plot 326 is still owned by the Respondent but cannot now be transferred to the Applicant because it is also subject to a caution by another third party. That is the factual background.

It seems to me that there are three main issued to be resolved here. The first is, was the contract properly terminated by the letter of the 28th of June, 1996? Second, if it was not properly terminated, should the Respondent have specific performance of the Agreement and if not of the whole Agreement can they have Specific Performance in relation to the seven acre Plot and thirdly, if the contract was properly terminated, what are the consequences for the future.

The first question, is the contract properly terminated? There is no doubt that the Respondents failed to pay the sums due in accordance with the schedule to the Agreement and there is no doubt that the Applicant exercised their rights under either Clause 7 or 8 of the main Agreement to terminate it by reason of nonpayment. That much is accepted, so if nothing else was in issue, it would be clear that the Applicant is entitled to their declaration, but the Respondent says that they were not liable to make the payments in accordance with the schedule because there was an existing breach of the obligation on the Applicant to transfer title of the property upon execution of the Supplementary Agreement which was on the 17th of May, 1995 and the Respondent says that the breach of the Applicant entitled them not to make payment under the schedule. It certainly is the case until the 31st of August, 1995 there may, and I stress the word may, have been a technical breach by the Applicant of their duty to convey title because they had not at that stage obtained the necessary Land Certificate in relation to Plot 353, though, as I have said, we do not know when the sub-division approval which was the Respondent's responsibility was in fact obtained.

After the 31st of August, 1995, the Applicant was in a position to transfer title but it was never required to do so and no complaint about the failure to transfer title was ever raised. This is very odd because the normal procedure as I understand it is for the Purchaser to serve on the Vendor some kind of Notice to complete requiring Vendor to convey title by a stipulated date. I can only read this failure by the Respondent to serve any kind of notice or to raise the matter at all particularly given the letters of the 23rd of August and 17th of June, 1996 as a waiver of the requirements to transfer title, such waiver to remain effective until some further notice was served. I therefore reject the suggestion that the Applicant was in breach of contract by failing to deliver title and reject any claim to damages in respect thereof and furthermore reject the suggestion that any such breach entitled the Respondent to withhold payments under the schedule. But even if I had found a breach by the Applicant, I do not believe that such a breach would have entitled the Respondent to delay the scheduled payments. The law on dependent promises is set out in Chitty, Vol. 1, 28th edition at paragraph 25-034 where there is a quotation from a case called Stavers v. Curling to this effect, "The question whether covenants are to be held dependent or independent of each other, is to be determined by the intention and meaning of the parties as it appears on the instruments, and by the application of common sense to each particular case; to which intention, when once discovered, all technical forms of expression must give way."

In this case, Mr. Young says that the promise to transfer title and the promise to pay monies under the schedule were dependent on one another. The transfer of title led to the later release of seven acres which could be used to raise money (in particular $125,000.00 from Mr. Wingler) to pay the monies due under the schedule.

The problem with this is first of all, that the $125,000.00 was not sufficient to pay the amount outstanding due under the schedule which was some $175,000.00 and secondly and more importantly, that while the schedule lays down clear specific dates for the payments to be made at the point the Agreement was made on the 17th of May, 1995, no one could predict how soon the necessary approval or sub-division for Parcel 353 or the seven acre site would take place. It therefore seems clear to me that the parties could not have intended payment under the schedule to be dependent on the transfer of title either to the Parcel 353 or on some subsequent date to the seven acre site. In these circumstances, I find for the Applicant on the first issue. They were entitled to and did terminate the Agreement on the 28th of June, 1996 by reason of the failure of the respondent to make payments required by the schedule.

The second issue was whether the Respondent should have specific performance. In the light my finding on the first issue, this just doesn't arise but just in case this matter goes any further, I would have refused specific performance of the whole Agreement for at least two reasons. One is that it is no longer possible for the Respondent to convey plot 326 which is one of the requirements on their side under the Supplementary Agreement and secondly because although Mr. Young is instructed that they are ready willing and able to pay, I would be skeptical in relation to the financial side of the Agreement given the history of this matter and the lack of evidence from them as to their financial position. I am being urged particularly by Mr. Young to order some kind of specific performance of the Agreement only in relation to the seven acre plot which was of particular interest to his client and which they were to have obtained clear title to at an earlier stage under the Supplementary Agreement. As far as I am aware, I don't have power to order specific performance of one part of a much wider Agreement. So that would be the first objection to that. The second objection is that there would have to be mutuality and there is simply no way under the Agreement to work out which part of the consideration relates specifically to the seven acre plot and I don't think therefore it is possible to make an order in relation to that plot.

That leads to the third main issue, which is what should happen in the future given that the contract is properly terminated. First, the deposit of $25,000.00. In my view this is clearly to be kept by the Applicant. That is the position both under Clause 7 of the main Agreement and under the general law. Mr. Young's counterclaim requests a Declaration that the provisions in the Agreement resulting in forfeiture of deposits are in the nature of a penalty. That, seems to me, simply can't be. This is a deposit which represents 12 percent of the total purchase price as originally laid down and much less than 12 percent of the purchase price as under the Supplementary Agreement. Everyone knows what a deposit is and is clearly not returnable. Next the balance of money, ($86,000.00) and the land provided by the Respondent (plot 325). The normal position in my understanding would be that those monies and land would need to be returned given that the Agreement has come to an end and there is a deposit expressed to represent liquidated damages and that is certainly consistent with Clause 7(2) of the main Agreement which I have already read.

Mr. Barrow does not dissent from that in general. But he says that his client should be able to keep $30,000.00 and as I understand it the two plots of land because the $30,000.00 and the two plots were given specifically as consideration for the extra time which was given to the Respondent to pay for Plot 353 and the extra time was given so there has not been any failure of consideration in relation to the $30,000.00 and the two plots and he relies on Clause 1 of the Supplementary Agreement which I have already read in full.

I don't think that Clause 1 of the Supplementary Agreement can be read as simply as Mr. Barrow would wish or that the obligations can be divided up simply in this way. The fact is that the Respondent, no doubt by his own fault, has ended up in reality with nothing and has had to pay a deposit of $25,000.00. There is no claim anywhere by the Applicant for damages for delay of payment or any suggestion that they have suffered loss specifically as a consequence of the delay and I therefore order the return of the whole $86,000.00 and of a sum of money to represent plot 325 which it seems to me needs to be valued on some kind of assessment as of today's date.

Mr. Barrow also claims (though this is not in his summons) damages under Section 134 of the Land Registration Act. Given my findings on the first issue, it seems to me that the Applicant is almost certainly entitled to such damages as they flow from the wrongfully placed caution put over plot 353 to which his clients were at all times after June, 1996 entitled to free of any charge. As I say, no claim of this nature was included in the summons and although it seems to me there is a liability, Mr. Young has been taken to some extent by surprise and it would be unfair to him to make any final finding on that and therefore I will order that there be a hearing in relation to the claim under Section 134 which will no doubt only be addressed to the question of damages but at which Mr. Young will have the right to make any submissions on liability he wishes.

So at the moment I would be minded to make a Declaration in terms of paragraph 1 of Mr. Barrow's summons and secondly to order the payment to the Respondent now or fairly soon of $86,000.00, thirdly to order some kind of assessment of the value of Lot 325 as of today's date and for that sum to be paid by the Applicant to the Respondent, fourthly to order a hearing probably at the same time in relation to the damages under section 134 of the Land Registration Act with Mr. Young's position reserved in relation to liability. I will hear submissions on those points and on the type of order I should make and on costs whenever anybody is ready.

[After argument] The cost of the Originating summons and of the counterclaim will be paid by the Respondents.

----------OO----------