Ardeshir H. Mama Vs. Flora Sassoon - Court Judgment

Blanesburgh, J.

1. This suit, commenced on January 10, 1920, in the High Court of Judicature at Bombay, was, in its inception, a simple action by a purchaser for the specific performance of a contract for the sale of certain valuable hereditaments on Malabar Hill in Bombay with claims for damages additional or alternative all in terms of Section 19 of the Specific Belief Act, 187 7. The defences to the suit wore that there never had been any concluded contract for the sale of the property : if there had been such a contract it had been entered into on behalf of the defendant by an agent with no authority to bind her to its terms. There is in the defendant's written statement no suggestion that the plaintiff's right was not a right to specific relief, if any existent contract binding upon the defendant was established. And the case, indeed, was one in which upon proof by the plaintiff of the facts alleged by him, he became entitled as of right under Section 12(o) of the Act to the specific relief which he sought.

2. But that right of the plaiutiff would be dependent upon his having been himself up to the date of decree ready and willing to perform the contract on his part and in para. 9 of his plaint ha alleged that he had throughout been so ready and willing : an allegation which imports a continuous readiness and willingness up to the time of the hearing: see per Lord Selborne in Hipgrave v. Case (1885) 28 Ch D 336.

3. On March 19, 1924, nine months or more before the trial, the plaintiff's solicitors formally notified the defendant to the effect that the plaintiff had decided to abandon his claim for specific performance; that he would instead, at the trial claim damages against the defendant for her breach of contract, and that he assessed these damages at Rs. 7 lacs. By that time, the plaintiff, as explained to the Board by his counsel, had found it inconvenient any longer to retain in readiness for completion of the purchase the money payable under the contract, and this was the explanation of his decision to convert his claim against the defendant into one of a character which could be successfully maintained without further financial strain upon himself. Their Lordships do not doubt the correctness of his statement, but they are not convinced that the glittering prospect of very heavy damages claimable in the special circumstances of the case may not largely have influenced the plaintiff's decision.

4. He did not, before the trial, make any application to amend his pleadings. The view of his advisers apparently was that he could maintain his now claim for damages on his plaint as it stood, But, on objection taken at the trial that this was not possible, the plaintiff's counsel then sought, and in spite of opposition. was permitted by the learned Judge to make in his plaint Lord an amendment presumably designed, whether effectively is another matter, to convert the suit into one for damages for breach of contract only. And it was upon that footing that the trial proceeded, and the learned Judge being ultimately of opinion that there did exist a concluded contract for sale duly authorized by, and accordingly binding upon the defendant, and that that contract had been repudiated by her, made a decree dated January 22, 1925, by which ho ordered the defendant to return the deposit paid by the plaintiff, and further awarded the plaintiff, according to a measure which he explained in his judgment, the sum of Its. 7 lacs as damages for the defendant's breach of contract.

5. The defendant appealed to the High Court in its appellate jurisdiction. The appeal was successful. That Court held that the defendant's agent had not been shown to have had authority to bind her by the contract alleged, and by decree dated October 5, 1925, it discharged with the costs of appeal the order of the trial Judge except as to the return of the deposit, leaving each party to bear his or her costs of suit in the Court of first instance.

6. It is from this decree that the plaintiff now appeals, In addition, however, to the ground just stated on which that decree was based, a point of great importance was broached by the Chief Justice of Bombay who presided. He posed the question whether even if the Court had agreed with the learned trial Judge that there was in existence a binding contract for sale, his award of damages would not still have had to be set aside for the reason that as the plaintiff had by his solicitors' letter of March 19, 1924, in effect intimated that he was no longer either willing or ready to perform the contract on his part the plaintiff hid not only thereby renounced, but as from that moment had disentitled himself to a decree for specific performance, and had thus brought upon himself the untoward consequence that there was under the statute in the circumstances of the case no power left in the trial Judge to award him in the suit any damages at all.

7. In his argument before the Board counsel for the respondent placed this view of the matter in the forefront of his argument and it was fully dealt with by Mr, Upjohn in his reply for the appellant. In these circumstances their Lordships think that, whether or not this appeal can be disposed of without further reference to it, they ought to express their views upon so important a question of practice now that it has been raised and fully argued. In such a matter certainty is more important than anything else. A rule of practice, even if it be statutory, can when found to be inconvenient be altered by competent authority. Uncertainty in such a matter is at best an embarrassment and may at its worst be a source of injustice which, in some cases, may be beyond judicial remedy, Accordingly in this judgment, their Lordships will deal with all the matters in controversy to which they have referred, irrespective of the question whether the last of them of necessity now calls for determination at their hand [After discussing in detail the facts of the case the judgment proceeded,]

8. And but for the special circumstances set forth at the commencement of this judgment, their Lordships would be content to leave the case there.

9. But they go on for the reasons already given to consider the very important question of practice discussed by the learned Chief Justice in his judgment.

10. If there had been a contract binding upon the respondent would it have been permissible in the circumstances to restore the learned Judge's award of damages against her ?

11. The answer to this question depends upon the true construction and effect of the Specific Relief Act, 1877, and, in particular, of its Part II, Oh. 2, which deals with the specific performance of contracts. The Act, like the Indian Contract Act, 1872, is a code. The chapter in question is a codification, with modifications deemed to be called for by Indian conditions and procedure, of the then existing rules and practice of the English law in relation to the doctrine of specific performance. In the present case, it will aid the interpretation of the relevant sections to have in mind what the English system on which the Act is based was in its origin and in its fullness at the date of codification. Even a summary account of that system-necessarily incomplete and quite elementary, will serve, as their Lordships believe, to throw a light upon certain provisions of the Specific Relief Act, from lack of which a full appreciation of their meaning has not consistently been manifested.

12. According to the common law of England, the only legal right which aross upon the non-performance of a contract in favour of the party injured by. Its breach was a claim for damages. The inadequacy in many cases of that remedy for the purposes of justice supplied the incentive to a Court of Conscience, as the Chancellor's Court has been called, to decree, when applied to in particular cases, the more complete remedy of specific performance. As a result of a long course of decisions by Chancellors and other equity Judges, there was gradually evolved in England a body of settled principles and rules governing the exercise of that jurisdiction, so that in course of time its limits were settled almost as definitely as if they had been embodied in a statute. By 1877, and in most respects long before, this stage had been reached. It need hardly be recalled that amongst the contracts to which an order for specific performance was always regarded as peculiarly appropriate were contracts relating to land or an interest therein, such, for instance, as the contract alleged in the present case. It is, however. interesting to note that this appropriateness is re-affirmed in Section 12 of the Indian Act, so closely does it follow the parent system.

13. All this is, historically, the explanation of the fact, that in relation to a contract to which the equitable form of relief was applicable, a party thereto had two remedies open to him in the event of the other party refusing or omitting to perform his part of the bargain. He might either institute a suit in equity for specific performance, or he might bring an action at law for the breach. But-and this is the basic fact to be remembered throughout the present discussion-his attitude towards the I contract and towards the defendant differed fundamentally' according to his choice.

14. Where the injured party sued at law for a breach, going, as in if the present case, to the root of the contract, he thereby elected to treat the contract as at an end and himself as discharged from its obligations. No further performance by him was either contemplated or had to be tendered.

15. In a suit for specific performance on the other hand, he treated and was required by the Court to treat the contract as still subsisting. He had in that suit, to allege, and if the fact was traversed, he was required to prove a continuous readiness and willingness, from the date of the contract to the time of the hearing, to perform the contract on his part. Failure to make good that averment brought with it the inevitable dismissal of his suit. Thus it was that the commencement of an action for damages being, on the principle of such cases as Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26 and Law v. Law (1905) 1 Ch. 140 a definite election to treat the contract as at an end, no suit for specific, performance, whatever happened to the action, could thereafter be maintained by the aggrieved plaintiff He had by his election precluded himself even from making the averment just Lord referred to proof of which was essential to the success of his suit. The effect upon an action for damages for breach 0f a previous suit for specific performance, will be apparent after the question of the competence of the Court itself to award damages in such a suit has been touched upon.

16. Whether or not the Court of Chancery ever assumed jurisdiction in the matter it was not in accordance with its practice to award damages for breach of contract. That was, as Lord Eldon said, 'purely at law'. But experience showed that cases from time to time occurred in which, although the contract was one of which specific performance might, quite consistently with principle be decreed, damages were the more adequate remedy, and it became obviously expedient that in such a case the Court should not be compelled to send the plaintiff to law, but should be permitted itself to dispose of the case.

17. Accordingly in 1858, Lord Cairns' Act was passed. It is convenient to cite its second section, for it is important to note the correspondence of the words of that section as judicially interpreted with the provisions of Section 19 of the Specific Relief Act upon which so much now turns, The words, so far as here relevant, are these:-

In all oases in which the Court of Chancery has jurisdiction to entertain an Application for... thes pecific performance of any covenant, contract, or agreement, it shall be lawful for the same Court, if it shall think fit, to award Damages to the party injured, either in addition to or in substitution for such... specific performance, and such damages may ho assessed., as the Court shall direct.

18. The limited effect of the section was not long left in doubt, wide as are apparently its terms. In a series of decisions it was consistently held that just as its power to give damages additional was to be exercised in a suit in which the Court had granted specific performance, so the power to give damages as an alternative to specific performance did not extend to a case in which the plaintiff had debarred himself from claiming that form of relief, nor to a case in which that relief had become impossible. In the present instance, their Lordships are disposing of a case in which the plaintiff had debarred himself from asking at the hearing for specific; performance, and in such circumstances, notwithstanding Lord Cairns' Act, the result still was that with no award of damages-the Court could award none-the order would be one dismissing the suit with no reservation of any liberty to proceed at law for damages. See per Lord Selborne, Hipgrave v. Case. (1885) 28 Ch. 356. In other words, the Sassoost plaintiff's rights in respect of the contracfc were at an end.

19. From all of which it appears that in England in a suit like the present, after the appellant had written his letter of March 19, 1924, if that letter is to be interpreted as their Lordships think it should be, he could neither have obtained a decree in the suit nor damages anywhere else.

20. The change in this matter effected in England by the Judicature Act was one in procedure only. It enabled every Division of the High Court to give both legal and equitable remedies, but it did not alter the construction or effect of a claim framed under Lord Cairns' Act-see Hipgrave v. Case Ibid, p. 361, nor the principles upon which the systems now combined were before the Act, separately administered. Accordingly, an order dismissing an action for specific performance which before the Act would have been unqualified, remained after the Act a decree which excluded the posssibility of legal relief. And here their Lordships would draw attention for convenience sake, to the definite-ness with which the position is retained for India by Section 29 of the Specific Relief Act.

21. Bearing in mind this statement ox the existing operation of the English system at the time of the passing of the Specific Relief Act, their Lordships now proceed to an examination of the relevant provisions of that statute.

22. And, first, very notable is the fact that in the Act, the distinction between the two kinds of action is maintained, a distinction obvious in England where originally they had to be brought in different Courts, but not no necessarily called for, when, as in India, both legal and equitable relief may be obtained in one. Tins distinction, however, is clearly indicated in Section 24(c), which enacts that specific performance of a contract cannot be enforced t in favour of a person 'who has already chosen his remedy and obtained satisfaction for the alleged breach of contract' : and even more directly is it manifested in Section 29 already referred to which enacts that the dismissal of a suit for specific performance of a con tract...'shall bar the plaintiff's right to sue for compensation for the breach of such contract,'

23. Although so far as the Act is concerned, there is no express statement that the averment of readiness and willingness is in an Indian suit for specific performance as necessary as it always was in England (Section 24(&) is the nearest), it seems invariably to have been recognised, and, on principle, their Lordships think Lord rightly that the Indian and the English requirements in this matter are the same. See, e.g., Karsandas v. Chhotalal : AIR1924Bom119 , 1050. And, with this fact in view, Section 19 of the Act becomes in the present investigation all important. The section is as follows:-

Any person suing for the specific performance of a contract may also ask for compensation for its breach, either in addition t:, or in substitution for, such performance.

If in any such suit the Court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant and that the plaintiff is entitled to compensation for that breach, it shall award him compensation accordingly.

If in any such suit the Court decides that' specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

Compensation awarded under this section may ba assessed in such manner aa the Court may direct.

Explanation.-The circumstance that the contract has become incapable of specific performance does not preclude the Court from exercising the jurisdiction conferred by this section.

24. Now the close correspondence of the terms of this section with those of Section 2 of Lord Cairns' Act, coupled with the presence in the Act of Section 24(c) and Section 29 already noted, indicating that the old distinction in case of breach of contract between the equitable and the legal form of remedy is still maintained and that the old conditions under which each could be asked for are being preserved, lead their Lordships to the conclusion that, except as to the case provided for in the explanation-as to which there ' is introduced an express divergence from Lord Cairns' Act, as expounded in England-'-see Ferguson v. Wilson (1866) L.R. 277 the section embodies the same principle as Lord Cairns' Act, and does not any more than did the English Statute enable the Court in a specific performance suit to award 'compensation for its breach'.where at the hearing the plaintiff has debarred himself by his own action from asking for a specific decree.

25. And on looking at the plaint in this suit, their Lordships can have no doubt, any more than the English Court of Appeal had with reference to the statement of claim in Hipgrave v. Case, that it is framed with reference to Section 19, and that the alternative claim for damages thereby made is in the plaint conditioned just as it is conditioned in the section. It follows that in their Lordships' judgment there was after the letter of March 19, 1924, no power left in the trial Judge, without an apt and sufficient amendment of the plaint to award the plaintiff at the hearing any relief at all. And they are further of opinion, that the amendment in the plaint, as actually then made, did not, on its Lord true construction, make any difference in this respect. For that amendment properly construed, did not, as it should have done to be effective, operate to convert the suit into one for the recovery of damages for breach of contract. The retention of paragraph 9 of the original plaint, with its allegation that the plaintiff 'is as he has been throughout ready and willing to perform his said contract,' coupled with the retention also of the claim for specific performance seems to their Lordships to involve that conclusion. Accordingly, even on the claim, m actually amended, there was, in their view, no power left in the trial Judge to award damages.

26. But their Lordships recognise that it was the intention of the appellant, by the amendment which he asked for, to convert his suit into one for damages simpliciter. They recognise also, that it was the intention of the learned trial Judge that the amendment he allowed should actually have that result. Their Lordships, therefore, proceed to inquire whether the learned Judge had at the stage in the suit, when he allowed the amendment, any power to make such an order.

27. Upon this, their Lordships are of opinion that he had the power. Whether it was one to be exercised in the circumstanoea is another matter. But that the learned Judge had the power is deducible from this consideration. Section 29 of the Statute, as already shown, makes the dismissal of a suit for specific performance of a contract a bar to a right to sue for compensation for breach, That enactment implies that prior to such dismissal the right is not barred. Here when the amendment was allowed, the suit had not been dismissed, and in their Lordships' view there was thus power in the Judge to allow to be made by amendment of the pending suit a claim that might have been brought forward in a new suit then commenced.

28. But their Lordships are of opinion that the intended amendment in the present case-whether rightly allowed or not-was allowed without any proper appreciation of its serious effect upon the position of the parties to the suit. For four years that suit had been pending as a specific performance action: the rights in those circa instances given to the plaintiff by Section 27(b) of the Statute, had made it impossible for the defendant by unconditional sale to deal with the property in suit. In other words, the plaintiff had, in effect, for four years and without any undertaking in damages on his part, held an effective injunction against the defendant's dealing with that property in derogation of his claim thereto as purchaser. An amendment which deprived the Court of the power to compel him to accept a decree, on pain of having his action dismissed if he did not, was not one lightly to be granted.

29. In other words, that the Court should have the power of granting such an amendment in a proper case is salutary and indeed necessary. The possibility that the power will be exercised may, in certain cases, be the only effective check upon a defendant to a specifics performance suit, who by delay, expensive appeals and ether devices, sets himself to starve a relatively impecunious plaintiff into submission by making continued performance of the contract on his part, beyond his power. And such a power is possessed by the Court in England, and in a proper case and under suitable conditions it may be used, see Nicholson v. Brown [1897] W.N. 52. But it in one to be most carefully and jealously exercised in all the circumstances of each individual case and with due regard to its effect upon the position both of the plaintiff and the defendant. If the defendant is to be prevented by the possible exercise of the power from starving a plaintiff out of his rights, the plaintiff must not, by its ill-considered exercise, be permitted to turn his suit into a gamble for himself at the defendant's expense. Indeed, so serious in many cases is the exercise of this power that to their Lordships it would appear to be a wise precaution for a Judge before allowing any such amendment in a contested case to require the plaint to be actually remodelled in a form appropriate to an action seeking compensation for a breach of contract and nothing else. The extent and propriety of what is asked for will thus be made apparent, and the amendment will be allowed or refused with a due appreciation of the position.

30. Their Lordships have said enough to show how difficult would have been the task had it been necessary for them in the present case to pronounce definitely whether or not the award of the learned trial Judge as to damages could stand either in whole or in part. Further serious questions as to the measure of damage chosen by him-to which they have not alluded-would have also been involved.

31. It is, however, unnecessary for them to go further than they have done in the discussion of the question for the reason that they have discussed it on principle aad the propriety of the order of the learned Judge no longer effectively arises by reason of the conclusion reached by their Lordships on the other part of the case.

32. Returning accordingly to the opinion expressed by them as to the non-existence of any contract between the parties, their Lordships, for the reasons given in support of that opinion, will humbly advise His Majesty that this appeal should be dismissed and with costs.