J.N. Roland Deneault & Scott Ltd Lowe, Bingham & Matthews v. Yangtzekiang Garment Manufacturing Co Ltd
Read the full judgment text of CACV 39/1976 on BabelCite. This Court of Appeal judgment.
1. The plaintiffs, the Yangtzekiang Garment Manufacturing Company, carry on business on premises situated at No. 22 Tai Yau Street, San Po Kong, Kowloon. In 1975 they were anxious to expand their premises and wanted to purchase the adjoining premises at No. 20 Tai Yau Street. No. 20 Tai Yau Street was jointly owned by the two defendants, J.N. Roland Deneault and Scott Limited.
|
CACV000039/1976
-----------------
Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 16th June, 1977. ----------------- JUDGMENT ----------------- 1. The plaintiffs, the Yangtzekiang Garment Manufacturing Company, carry on business on premises situated at No. 22 Tai Yau Street, San Po Kong, Kowloon. In 1975 they were anxious to expand their premises and wanted to purchase the adjoining premises at No. 20 Tai Yau Street. No. 20 Tai Yau Street was jointly owned by the two defendants, J.N. Roland Deneault and Scott Limited. 2. On July 22nd, 1975 Mr. Deneault and a Mr. Young representing the two defendants met a Mr. Chan and a Mr. Leung who represented the plaintiffs. It was then agreed that the defendants would sell No. 20 Tai Yau Street to the plaintiffs for $2,200,000. There was further discussion as to other terms of the proposed sale. It was agreed that a deposit of $300,000 would be paid, that vacant possession should be given in four months. And there was an agreement about the liability for certain architects' fees. 3. On July 23rd, 1975 a letter in the following terms was sent to the plaintiffs by each of the defendants accompanied by a duplicate:-
The plaintiffs signed the duplicates and "agreed and confirmed the purchase" in each case. 4. On July 24th, 1975 the plaintiffs, through their solicitors, sent a letter to the defendants setting out further terms of the sale. But before a reply was received the plaintiffs' solicitors sent another letter to the defendants' solicitors setting out the terms of the sale which were in some respects different from those contained in the letter of July 24th. 5. On July 29th, 1975 the defendants' solicitor forwarded an agreement for the sale of the premises to the solicitors for the plaintiffs. This was returned to the defendants' solicitors having been signed on behalf of the plaintiffs together with a cheque for $300,000 for the deposit. 6. On August 1st, 1975, the defendants wrote to the plaintiffs informing them that "the proposed sale and purchase has fallen through" and the plaintiffs' cheque for $300,000 for the deposit was returned. 7. On August 7th, 1975 the plaintiffs issued a writ for specific performance of the agreement contained in the two letters dated July 23rd, 1975. The action was given the number O.J. 1923 of 1975. The plaintiffs claimed specific performance of the contract contained in the letters of July 23rd and for damages in the alternative. In their claim, the plaintiffs refer to the letter of August 1st, 1975 in which the defendants stated that the sale had fallen through. 8. The defendants delivered a defence and counterclaim on September 17th, 1975. The defence denies that the letters of 23rd July, 1975 contained an agreement for the sale of the property. The defence admits that the defendants letter of August 1st which stated that the defendants would not proceed with "the sale", was sent to the plaintiffs and in paragraph 5 of the defence the terms of that sale or proposed sale are set out. 9. Paragraph 5 of the defence reads (in part) as follows:-
10. They then pleaded that the agreement was an oral agreement only, that it was not reduced to writing and was not evidenced by any proper or sufficient memorandum signed by the defendants. Hence the agreement was unenforceable by reason of section 5 of the Law Amendment and Reform (Consolidation) Ordinance. 11. The defendants also pleaded, in the alternative, that if there were an existing enforceable agreement of purchase and sale between the parties the plaintiffs were in breach of the terms - this referred to the payment of the deposit of $300,000 'forthwith'. Because of this breach the defendants had exercised their right to terminate the agreement which they did in their letter of August 1st, 1975. 12. The defendants counterclaimed for declarations that there was no enforceable agreement between the parties in existence and that the agreement for sale which was referred to in paragraph 5 of the defence was unenforceable in law. 13. Upon receipt of the defence and counterclaim the plaintiffs discontinued their action O.J. 1923 of 1975. But they commenced a second action, the present action, O.J. 2389 of 1975. 14. In the new Statement of Claim the plaintiffs aver that the parties came to an agreement for the purchase and sale of the property in the terms as set out in paragraph 5 of the defence as pleaded in the first action, the action which was discontinued by the plaintiffs. The Statement of Claim sets out the terms of agreement as stated in paragraph 5 of the defence but there is one difference which is of some significance. In the defence to the first action, the defendants pleaded that a deposit of $300,000 was to be paid 'forthwith'. In the second Statement of Claim the word 'forthwith' has been omitted. 15. Paragraph 3(b) of the plaintiffs Statement of Claim in O.J. 2389 of 1975 reads thus:-
16. They also pleaded that they had paid the deposit of $300,000 to the defendants' solicitors but they admitted that this had been returned to them. 17. By an amendment the plaintiffs pleaded in the alternative that the two letters of 23rd July constituted a legally binding and enforceable agreement of sale and purchase, namely the plaintiffs incorporated the subject matter of their Statement of Claim in O.J. 1923 of 1973 into their new Statement of Claim in O.J. 2389 of 1975. 18. The defendants pleaded to the new Statement of Claim and again pleaded that the plaintiffs were in breach of the terms of the agreement referring to the payment of the deposit 'forthwith'. The defendants also alleged that it was a term of the agreement that the agreement was "subject to contract". The defendants again seek to rely upon the provisions of section 5 of the Law Amendment and Reform (Consolidation) Ordinance and specifically plead that their defence and counterclaim in the first action, O.J. 1923 of 1975 do not and cannot constitute a sufficient memorandum so as to satisfy that Ordinance. 19. In the counterclaim the defendants again pray for certain declarations. 20. I intend to deal first with the question whether the two letters dated July 23rd constitute a valid enforceable agreement. The trial judge found for the defendants on this issue. 21. This issue was the subject matter of a respondents notice. The plaintiffs' case is that the parties intended that the letters should be a binding agreement apart from any oral agreement which had been reached or was in the process of being reached. Mr. Leggatt, for the plaintiffs, pointed to the clear words of the letters themselves and remarked that on their face there was a clear agreement to purchase and to sell named premises for an agreed price. The purpose of such an agreement was, he said, to ensure that neither party would resile from the central or main issue, namely, the sale of No. 20 Tai Yau Street for $2,200,000. This agreement would be binding until a formal agreement incorporating all the other minor terms was completed and signed. Then it would be superseded by that formal agreement. 22. The trial judge took the view that the letters were never intended to reflect the whole agreement between the parties. With respect, that is so, but were they not an agreement between the parties as to the essentials of the sale, a holding agreement as it is sometimes called? I think that this was the clear intention of the parties. an intention to be deduced from the letters themselves. The wording goes for beyond mere negotiation. The words are "agrees to sell for a consideration of ($2,200,000)". And that agreement was "agreed and confirmed" by the plaintiffs. There may have been an oral agreement between the parties but that is not to say that these letters were part of such an oral agreement or evidenced such an oral agreement. The parties intended to draw up a formal agreement embodying all the terms of the oral agreement no doubt. But that would come later. The case of Branca v. Cobarro(1) to which we were referred deals with a comparable situation. In my view, the letters stand alone and are a valid agreement and enforceable as such. 23. It was the contention of the defendants that the purpose of the letters was to enable the plaintiffs who are a public company to issue a cheque for the deposit. However, the witness who gave this evidence, Mr. Young, who was called by the defendants, stated that the letters were to "prove the purchase" by the plaintiffs of the property. This appears twice in Mr. Young's evidence. There are two answers to this, I think, first the letters make no mention of the deposit which they would have done had that been the intention behind them and, secondly, the golden rule is that where a document discloses unambiguously what was agreed by the parties extrinsic evidence is not admissible to add to its terms. (See Beckett v. Nurse(2)). 24. Mr. Neill, for the defendants, asked a rhetorical question. He said: Did the defendant vendors intend when they signed the letters to give up their rights to have a deposit, to have the use of the architects' plans, and to be given vacant possession? The answer is surely No. Those matters were for further negotiation. What was agreed and agreed unequivocally was that the plaintiffs should purchase and the defendants should sell 20 Tai Yau Street for $2,200,000. 25. It follows, therefore, that I am of the opinion that if this appeal is to be dismissed, the judgment of the trial judge could be varied and an order of specific performance of the agreement contained in the two letters of 23rd July, 1975 made in favour of the plaintiffs. 26. The trial judge found that the defence pleaded in the first action was a sufficient memorandum in writing of an oral agreement to satisfy the Ordinance. The defendants strenuously deny this. 27. The first point taken by the defendants is that the true construction of paragraph 5 of the defence which is relied upon by the plaintiffs as a memorandum in writing for the purpose of the Ordinance shows that the oral agreement was "subject to contract". It will be as well to repeat the relevant words:-
28. The defendants' point is that these words are equivalent to the well-known phrase "subject to contract". I do not think that this is so, the words are not equivalent. In my view they are no more than a recognition by the defendants that the agreement, complete and unconditional in itself, would be reduced to writing; a formal written agreement would be drawn up. The transaction was being conducted between lawyers and a lawyer drafted the defence. If "subject to contract" had been intended, those words would have been used. 29. The case of Rossiter v. Miller(3) dealt with a similar transaction. In that case there was a sale of land and one of the conditions required that a purchaser should execute a written contract embodying the conditions. A dispute ensued, and the proposed purchaser sought to avoid the purchase on the grounds that no written contract had been drawn up and that to do so was one of the conditions of the agreement. It was held that this was not so and that the correspondence between the parties showed that there was a binding agreement. 30. The following is an extract from the judgment of Lord Gordon at p.1154. It is quoted to illustrate the point that though each case will depend upon its own facts there are cases where the drawing up of a formal agreement is only for the purpose of recording what the parties have already agreed. 31. Lord Gordon states as follows:-
32. The case of Branca v. Cobarro (Supra)(1) is another such illustration. The test appears to be "Do the words in question show an intention on the part of the parties to the oral agreement that the execution of a written contract is a condition of or part of that agreement, namely, that there will be no agreement unless and until a written contract is executed; or are the words in question no more than an expression that what has been already agreed is to be incorporated in a formal contract which is to be executed?" 33. In Chillingworth v. Esche(4) the words were "subject to a proper contract to be prepared by the vendors' solicitors." It was held that these words were conditional and that they showed that no firm contract had been constituted. With respect, this must be right. The well-known phrase "subject to a proper contract" being used. At page 114, Sargent. L.J. had this to say:-
34. In the present case the words are not a strong as those used in Chillingworth v. Esche(4). They do not show that there was a condition which was unfulfilled, or that a term of the contract was that a formal contract would be executed and until that was done there was no contract, or that the agreement was an agreement conditional upon a formal contract being executed. 35. A very ingenious point was taken by Mr. Neill for the defendants. On October 7th, 1975, the defendants amended their counterclaim in the first action, O.J. 1923 of 1975 and specifically pleaded that the agreement was "subject to contract". The plaintiffs at this time had already discontinued that action. 36. It is trite law that amendments to pleadings take effect from the date of the delivery of the pleading which is amended. Thus, so goes the argument, the defendants, ever since the delivery of their defence and counterclaim, have been relying on a memorandum which contained the provision that it was "subject to contract". 37. In my view, the amendment of October 7th only amended and affected the defence and counterclaim. The memorandum which was the original unamended defence and counterclaim was and is not affected by the amendment. The words of the memorandum cannot be retroactively amended though the words of the pleading can. 38. There is also the further point that the amendment of October 7th, 1975 was to the counterclaim and paragraph 5 of the defence on which the plaintiffs rely as being a memorandum was not amended and could not have been since that action had already been discontinued. 39. A further contention of the defendants was that the memorandum relied upon by the plaintiffs was false in a material respect. A memorandum will only be a good memorandum if it contains all the terms agreed orally between the parties and does not contain a term which in not agreed. 40. There are two aspects to this proposition, (1) if a memorandum includes a term which has not been agreed orally the memorandum will be had, and (2) if the memorandum omits a term which has been orally agreed, it is likewise a bad memorandum. We are here concerned with the first of these aspects. 41. The old case of Cooper v. Smith(5) is authority for that proposition. That was an action for goods sold and delivered. It was sought to rely on a letter as a memorandum evidencing an oral contract in which a different date for the delivery of the goods was stated from the date which had been agreed orally. Le Blanc, J. held that the letter was a had memorandum. He said at page 108:-
42. Paragraph 5 of the defence to the first action contains the word 'forthwith'. In the statment of claim in the second action when setting up the defence as pleaded in the first action as the memorandum on which they are seeking to rely, the plaintiffs omitted the word 'forthwith'. 43. This word was used in the following context:
44. At the trial there was a conflict of evidence whether it was agreed that the deposit was to be paid forthwith i.e. immediately. The judge dealt with this conflict in his judgment and found in favour of the plaintiffs namely that there had been no such stipulation. The defendants' point is that the inclusion of the word 'forthwith' in the memorandum is the inclusion of a term which was not part of the oral agreement and that on the authority of Cooper v. Smith(5) and like cases this renders the memorandum bad. 45. The judge went on to hold that the inclusion of the word 'forthwith' was of no consequence. He said that if the word 'forthwith' was omitted the terms of the contract would not be altered. For 'forthwith' only means in the present context "within a reasonable time". And that if the oral agreement was that a deposit should be paid simpliciter that could only mean that it must be paid within a reasonable time. 46. In reaching this conclusion the judge relied on the case of The Hillingdon London Borough Council v. Cutler(6). 47. The facts in that case are very different from the facts in the present case. That case was concerned with the making of demolition orders by a Local Authority. The particular orders in question had to be made 'forthwith' by virtue of the provisions of the Housing Act, 1957. Lord Harman had this to say as to the meaning of that word at page 135:-
48. In the older case of In re Southam, Ex parte Lamb(7) which is mentioned in that part of Lord Harman's judgment which I have quoted above, it was stated that 'forthwith' is an indeterminate or inexact term. Its meaning depends on the individual circumstances of each case and that 'forthwith' really meant "without delay" in any particular case. 49. I agree with the trial judge on this point. I do not think that the inclusion of the word 'forthwith' makes any difference to the obligation under the contract. But I also agree that the facts of the present case show that the deposit was indeed paid 'forthwith' i.e. within a reasonable time. The date of the oral agreement was July 22nd, 1975, and the deposit of $300,000 was paid on August 1st, 1975. 50. The defendants also raised another connected point. In paragraph 5 of the defence on which the plaintiffs rely as being a good memorandum the following words appear:-
51. The building, the subject matter of this action, was some five storeys high, and it was intended by the plaintiffs that upon completion of the sale they would increase the height of the building by the addition of more storeys. And apparently there were plans in existence to accomplish this. The evidence was that if the plaintiffs made use of the plans already made and approved by the Public Works Department they would pay Mr. Y.K. Kan, the architect, for any supervisory work which they engaged him to do; for the payment of any other work by another architect they would themselves be responsible. Such work would include the obtaining of a fresh approval by the Building Authority. 52. The defendants contention is that the evidence of the oral agreement as to this differs materially from the wording of the relevant paragraph of the defence which I have quoted above. 53. I do not think there is anything in this point. In my view, in each case, both as regards the evidence of the oral agreement and as regards the pleading all that was stated and intended was that the plaintiffs would purchase the building with the benefit of the existing plans for the rebuilding and that if they made use of those plans then they. the plaintiffs, would pay the architect. If not, then the plaintiffs would pay for their own architect. 54. I now pass to another point. It is, of course, the case for the plaintiffs that the defendants in the first action pleaded the terms of the oral agreement thus furnishing a memorandum thereof of which the plaintiffs seek to take advantage. This was done by way of defence and counterclaim. The contention of the defendants is that it was necessary to plead the oral agreement as they did. And that therefore the plaintiffs should not be allowed to rely upon this since to do so would have, in effect, the same result as repealing the Ordinance. Thorp v. Holdsworth(8) is relied upon for this proposition. That case is authority for the general rule that pleadings must not be evasive. 55. The Statement of Claim was for the specific performance of "an agreement made by correspondence". No mention was made of an oral agreement. There was no claim in respect of such an agreement. A proper and honest defence to such a claim would be that the correspondence relied upon by the plaintiffs did not constitute a binding agreement. 56. Paragraph 1 of the defence reads (in part) as follows:-
That paragraph was a sufficient and proper defence to the Statement of Claim. It was quite unnecessary for the defendants to plead the oral agreement by way of a defence. It has always been the case for the defence that the oral agreement was an unenforceable agreement because of the Ordinance. Why therefore plead that such an unenforceable agreement existed? The answer seems to be that the defendants counterclaimed for certain declarations, one of which was that there was no binding agreement between the parties. 57. But, in any event, it was not necessary for the defendants to set out the terms of the oral agreement in the manner they did. Paragraph 7 of the defence to the Statement of Claim in the first action was a sufficient compliance with Order 18 of the Rules of the Supreme Court. It reads as follows:-
And that paragraph cannot be considered to be a memorandum. 58. If further and better particulars had been ordered, I think that the court would, upon the defendants protesting that such particulars would supply their opponents with a memorandum in writing, have made an order under Order 18 rule 3 so as to prevent the plaintiffs from relying on the particulars as a memorandum. 59. The headnote of Hardy v. Elphick(9) reads thus:-
60. That case dealt with a different issue from that which is now before this court but the facts of the two cases are startlingly similar. In the present case, the two actions dealt with the same events but different transactions. The plaintiffs did not rely on the existence of an oral agreement in the first action. Holding as I do that it was unnecessary for the defendants to plead the oral agreement as they did I agree with the judge and, in my opinion, Hardy v. Elphick(9) is a decision in favour of the defendants. 61. Nor can it be said in the present case that the second action was an abuse of the process of the court nor that that point was taken before us on this appeal. The two actions were different. It was not a case of the plaintiffs bringing the same action twice. 62. In my view paragraph 5 of the defence in the first action is a sufficient memorandum to satisfy the Ordinance. There is one further point that if it is to be relied upon, a memorandum must be in existence at the time of the commencement of the action. See Lucas v. Dixon(10). In that case there were Order 14 proceedings for non acceptance of goods. The defendants made an affidavit in opposition in which he set out all the terms of the oral agreement between the parties. The court held that the plaintiff could not rely on the affidavit as a memorandum in writing of the oral contract so as to satisfy the Statute of Frauds. 63. Bowen, L.J. said this:-
64. And he drew attention to the fact that section 4 of the Statute of Frauds does not render oral contracts void or illegal but only makes them unenforceable unless they are proved in a certain manner. Another case on the same point is In re Holland(11). 65. In that case, Stirling. L.J. had this to say:-
66. This, of course, is exactly what happened in the present case. The plaintiffs discontinued the first action and commenced the second action, which was a different action. at a time when the memorandum, i.e. the defence in the first action, was in existence at the time of the commencement of the second action to which this appeal relates. 67. I am of the opinion that the trial judge was right in this case. The pleading was a sufficient memorandum of the oral agreement so as to comply with the provisions of the Ordinance. It follows, therefore, that I would dismiss this appeal.
Representation: Neil, Q.C. Oswald Cheung, Q.C. & E. Chan (Johnson, Stokes & Master) for appellants. Leggatt, Q.C. & D. Chang (Yang, Yu, Yuen & Co.) for Respondent. (1) (1947) K.B. 854. (2) (1948) 1 K.B. 535. (3) (1878) 1 App.Cas.1124. (4) (1924) 1 Ch.97. (5) (1812) 15 East 102. (6) (1968) 1 Q.B. 124. (7) (1881) 19 Ch. D. 169. (8) (1876) 3 Ch.D. 637. (9) (1974) Ch. 65. (10) (1889) 22 Q.B.D. 357. (11) (1902) 2 Ch. 460.
-----------------
----------------- Coram: Briggs. C.J., Huggins and Pickering, JJ.A. Date of Judgment: 16th June, 1977. ----------------- JUDGMENT ----------------- Huggins, J.A.: At a meeting held on 22nd July 1975 the plaintiff Respondent orally agreed to purchase and the Appellants (the defendants in Action No. 2389 of 1975) agreed to convey New Kowloon Inland Lot No. 4735, situate at and known as 20 Tai Yau Street, Kowloon. The Appellants were tenants in common in equal shares. There was a subsequent exchange of letters in the course of which the fact of agreement was recorded, and the Vendors' solicitors submitted a draft agreement in writing. The Purchaser signed this draft but on the same day on which it was returned for signature by the Vendors and on which the deposit was paid the Vendors' solicitors wrote to say that the proposed sale and purchase had "fallen through". The Purchaser brought an action (which has been throughout described as "the first action") to enforce the agreement of sale and purchase. It joined as 2nd defendants a firm which had acted as agents for the Vendors but, although this firm has been erroneously cited as appellants, it is accepted that they are in no way involved in this appeal. The Statement of Clam in the first action based the Purchaser's claim upon the agreement alleged to have been contained in two letters in the correspondence. The Vendors in their Defence denied that the letters constituted the alleged or any agreement but went on to plead that an oral agreement had been reached and they set out the terms of that agreement, adding that it was unenforceable for want of a memorandum in writing. In the alternative the Vendors alleged that any agreement contained in the correspondence did not fully record the material terms of the agreement between the parties. Finally they alleged that the Purchaser was itself in breach of the agreement, if any, and by reason thereof not entitled to enforce it. The Vendors counterclaimed against the Purchaser (but not, of course, its agent) inter alia a declaration that there was no binding and enforceable agreement for the sale of the property to the Purchaser. The Purchaser thereupon discontinued its first action in accordance with 0.21 r.2 and served a fresh writ claiming specific performance of the oral agreement admitted in the Defence and Counterclaim in the first action but going on to claim, as in the first action, specific performance of the agreement alleged to be contained in the two letters as an alternative. It then alleged that the Defence and Counterclaim in the first action constituted a sufficient memorandum of the oral agreement for the purposes of s.5 of the Law Amendment and Reform (Consolidation) Ordinance. The Vendors denied the existence of a sufficient memorandum of the oral agreement, they again denied that the two letters constituted a binding agreement and they alleged that if there was any enforceable agreement the Purchaser was in breach of it and by reason thereof not entitled to enforce it. 2. The trial judge gave judgment for the Purchaser both on the counterclaim in the first action and on the claim and counterclaim in the second action. He held in favour of the Vendors that the two letters did not constitute a binding agreement in writing but ordered specific performance of the oral agreement which he found to have been made and of which he held the Defence and Counterclaim in the first action to be a sufficient memorandum to satisfy the statute. He also held that the Purchaser was not in breach of that agreement so as to disentitle it to an order for specific performance. In brief the Vendors contend on their appeal first that there was never a binding oral agreement at all because, on the evidence, it was never intended to be binding; secondly that the document relied upon by the Purchaser as a memorandum was not a sufficient memorandum; and thirdly that the judge was wrong to hold that the Purchaser had not been in breach of the agreement. The Purchaser by a Respondent's Notice and Supplementary Notice seeks to reverse the judge's decision that the two letters did not constitute a separate agreement in writing. Was the oral agreement a binding contract? 3. The basis of Mr. Neill's first contention is that if, as the judge held, the Defence and Counterclaim in the first action did constitute a sufficient memorandum that memorandum shows the agreement to have contained a "term" that "a formal contract of sale and purchase drawn up by the solicitors of the plaintiffs and the 1st defendants should be signed by both the plaintiffs and the 1st defendants". This, he submits, is properly to be construed as meaning that the agreement was "subject to contract", and on the authorities an agreement "subject to contract" is not a binding agreement: see Tiverton Estates Ltd. v Wearwell Ltd. 1975 Ch. 146. The ultimate question is whether the term which I have read does make the signature of a formal agreement a condition precedent to the parties' being bound or whether it is nothing more than a statement of intention that a binding oral agreement already concluded shall be expressed in a formal document for the purposes of record: Chillingworth v Esche 1924 1 Ch. 97. This being a matter of the construction of the particular agreement I do not think it necessary to consider in detail the cases which have been cited to us, although I will mention, for the purpose of distinguishing it, one case where the words of the agreement bore a striking similarity to the term which the judge found to have been included here. In support of the construction for which he contends Mr. Neill relies upon the use of the word "term" as being in the context synonymous to "condition", but that seems to me to attach an unwarranted connotation to the word. The "one" case" to which I referred was Bartlett v Greene (1874) 30 L.T. 553. A letter of acceptance stipulated: "a formal contract to be signed by me when prepared by the solicitors [for the purchaser] and when approved by the solicitors [for the vendor]", a provision which had no counterpart in the memorandum setting out the terms of the vendor's offer to sell. It was held that no action was maintainable. Lord Coleridge, C.J., regarded the necessity for the approval of the vendor's solicitor as being the conclusive factor, for he thought the intention of the parties was that the formal contract should contain terms other than those which had already been agreed either expressly or by implication. Grove, J., took a similar view, adding:
In our case the parties were agreed as to the necessity for a written contract but there was no reference to "approval" and in my view there is in the agreement as found by the judge nothing which is inconsistent with what the words of the alleged memorandum convey on the face of them, namely that the formal contract should be no more than a reduction into precise legal language of the existing bargain. Mr. Neill then puts forward what I hope he will forgive me for describing as a metaphysical argument. It runs like this: the "Defence and Counterclaim" relied upon by the purchaser has been amended and by virtue of 0.20 r.5 of the Rules of the Supreme Court the pleading is thereafter to be treated for all purposes as having effect in its amended form from the date of the original document: the "Amended Defence and Counterclaim" included the addition of an allegation that the oral agreement was subject to contract: that document not only replaced the original "Defence and Counterclaim" as a pleading but replaced it as the document on which the Purchaser relied or at least as the only document on which the Purchaser could rely: the amended pleading must now be taken to be the alleged memorandum of the oral agreement and that memorandum itself states that the oral agreement was "subject to contract": therefore the oral contract is not binding. In my view it is nothing to the point that by the time the "Amended Defence and Counterclaim" was filed the first action had been discontinued and only the Vendors' counterclaim remained. I do not dissent from the view that the defence as such was not amended because it was no longer capable of amendment and that it may properly be considered in its unamended form even as a pleading (Farr, Smith & Co. v. Messers, Ltd. 1928 1 K.B. 397, 405) but I think the answer to Mr. Neill's argument is that the Purchaser does not rely upon the "Amended Defence and Counterclaim". He does not strictly rely upon a pleading at all: he relies upon a document which was, and still is, and (by reason of the manner in which amendments to pleadings are effected) will always remain. headed "Defence and Counterclaim". True it is that that document is no longer effective either as a defence or as a counterclaim. Had the appeal been upon other grounds it may well be that it would properly have been omitted from the record submitted to this court. The fact that it has been included is sufficient proof of its continued existence as a document. 4. The "Amended Defence and Counterclaim" can fairly be referred to as evidence that the "Defence and Counterclaim" was not an accurate memorandum. As it seems to me where two or more documents are produced, each of which purports to set out a different record of the same oral agreement, the court of trial will have to decide which, if any, is a correct record. Here the judge clearly thought the "Amended Defence and Counterclaim" contained what was in reality an attempt to construe the oral agreement rather than a mere record of that agreement. He decided that the term of the oral agreement relating to the signing of a formal written agreement was as recorded in the original "Defence and Counterclaim". What is in effect submitted is that that finding was clearly wrong on the evidence. Mr. Neill points out that the formal judgment as submitted to, and signed by, the Registrar was for specific performance of "the agreement pleaded in para.1 of the [Purchaser's] statement of claim endorsed on the writ of summons in [the second action]". That paragraph differs from the memorandum alleged to be constituted by the Defence and Counterclaim in the first action in these respects:
The prayer was for specific performance of the agreement pleaded in "para.1 and 2" (sic, save that the emphasis is mine). When one reads the reasoned judgment it becomes apparent that the formal judgment was wrongly drawn up: the learned judge clearly found that "the parol agreement of 22nd July" included the term relating to signature of the formal written agreement and that was the agreement of which he ordered specific performance. As we shall see later he thought the inclusion of the word "forthwith" was immaterial. 5. Of slightly more consequence is the fact that the draft agreement which was in due course submitted by the Vendors' solicitors for the Purchaser's signature did contain terms which were not agreed orally on 22nd July and recorded in the alleged memorandum. That, however, does not indicate conclusively that there was not a binding oral agreement in the terms found by the judge and that the additional terms appearing in the draft were not put forward for acceptance or rejection by the Purchaser as it was advised. If there was a binding oral agreement, the Purchaser was bound to sign an agreement containing the terms which had been agreed, but no more, That does not mean that the parties were not at liberty to graft further terms on to that oral agreement if they thought fit. 6. Then there was evidence that the Purchaser's own solicitors sent to the Vendors' solicitors a letter which purported to set out the terms of the oral agreement and which stated that the agreement was "subject to the contract". There was, as one would expect, much cross-examination of the persons responsible for the sending of that letter and the substance of their evidence was that this part of the letter was written out of habit and without instructions. It was for the judge to decide whether he accepted that explanation, and he did. 7. In my view there was evidence upon which the learned judge could find that neither the words "subject to contract" nor any equivalent words were included in the oral agreement and I see no reason to doubt the correctness of that decision. He has been criticised for having decided "what was agreed on 22nd July subject to a contract to be subsequently prepared and executed" before he proceeded to consider whether or not the document relied upon did constitute a memorandum. That on the face of it begged the question which we are now considering, but in the event I do not think the judge erred. If it could be shown that the alleged memorandum contained material terms which had not been agreed, or omitted terms which had been agreed, then (subject to possible exceptions) it was an insufficient memorandum. What not only in effect but in fact the judge was doing was inquiring whether such additions and omissions could be proved. He posed himself these questions: "Was the oral agreement subject to contract?" "Was deposit to be paid forthwith?'. Those specific discrepancies were alleged between the agreement and the alleged memorandum and I think it was proper for him to deal with them as he did. If the words "subject to contract" had been agreed on 22nd July it is unlikely that the case would have reached this court. Only when the judge was satisfied that those words had not been used and that the actual term agreed was correctly recorded in the alleged memorandum was it necessary for him to construe the memorandum. That is why I referred earlier to "the ultimate question". 8. On the question of construction I have not the slightest doubt that the judge came to the right conclusion. There is nothing here to show that the operation of the acceptance of the terms in fact agreed should be suspended until the formal written contract was signed: see Rossiter v Miller (1878) 3 A.C. 1124. The object of the formal agreement was not to allow further negotiation but, as I have said, to place on record the accord already reached. Was the "Defence and Counterclaim" a sufficient memorandum?
9. Having concluded that the judge was justified in holding that there was a binding oral agreement. I turn to consider the sufficiency of the alleged memorandum. That brings me back to the finding by the judge - which prima facie shows that the oral agreement was not in precisely the same terms as the alleged memorandum - to the effect that it was never agreed on 22nd July that a deposit was to be paid "forthwith", for the judge expressly said that he did not believe the witnesses who testified that the deposit was to be paid immediately or forthwith or that time was of the essence in paying the deposit. Mr. Neill, of course, submits that that is fatal. Mr. Leggatt seeks to meet the point in two ways. First he says that in the context the word "forthwith" added nothing to the agreement and secondly he argues that, since any difference which the inclusion of that word in the agreement might make was to the benefit of the Vendors and to the detriment of the Purchaser, it was open to the Purchaser to accept the more onerous term and it had in fact done so by paying forthwith. The two contentions are bound up together to this extent, that the question of fact whether payment was made forthwith depends upon the correct interpretation of the word "forthwith" in this agreement. It is comparatively easy to state in general terms what that word means and any difficulty lies in its interpretation in the particular circumstances of each case. As was said by Harman. L.J. in Hillingdon London Borough Council v Cutler 1968 1 Q.B. 124, 135: "it may involve action within days: it may not involve action for years". Any attempt. therefore, to extract more from the decided cases than the general meaning can be of little value. As I understand him Mr. Neill submits in effect that here the word means "immediately and with no more delay than is necessary to fetch a cheque book or to collect cash from the bank". He emphasizes the commercial nature of the transaction and says that the deposit was obviously intended as an earnest of the Purchaser's ability and willingness to pay: that being so, a promise to pay forthwith was substantially different from a simple promise to pay. Mr. Leggatt would have none of that. He contended that the word added nothing and that an obligation to pay forthwith was merely one to pay within a reasonable time in all the circumstances of the case: this was a case of part payment before completion. He did not accept that the concept of a deposit as an earnest of ability and willingness to pay had any relevance here, for payment was to be to a stakeholder and it was expressly provided that the stakeholder should continue to hold the money until a written agreement had been signed by the parties. At most, he suggested, the word indicated an indefinably greater degree of urgency so that. as I understand his argument, it had no legal effect and the discrepancy between the agreement and the memorandum was immaterial. 10. We are concerned to ascertain the intention of the parties from the words they have used. We must not force other words into an unnatural meaning merely in order to give some effect to the word "forthwith" but, on the other hand, we must not assume that that word was superfluous and was not intended to have some significance. None of the cases cited to us laid down that "forthwith" can never mean anything other than simply "within a reasonable time". I think "forthwith" does import a greater measure of urgency and, though the difference may not be quantifiable, that does not mean that the word has no effect. The conclusion I have reached is that where the word "forthwith" appears one must approach the question What is a reasonable time? with a greater bias towards promptitude than would be the case if it were not there. With this reservation that the presence of the word "forthwith" is a factor to be taken into account, I accept Mr. Leggatt's contention that the test is What is reasonable in all the circumstances? On the other hand I think a "deposit" normally carries with it the concept of earnest and it is so defined in Jowitt's Dictionary of English Law: see also Myton Ltd. v Schwab-Morris 1974 1 W.L.R. 331, 336B. It is thus distinguishable from a mere "part payment in advance". I think the fact that the stakeholder was to hold the money until the formal agreement was signed was relevant to a decision as to the length of time contemplated for payment but it did not negative the element of earnest. In that I think I differ from the learned judge in the court below. Also relevant in my view is the fact that the Vendors each wrote to the Purchaser (one writing by his agent) on 23rd July and asked for confirmation that the Purchaser agreed to purchase at the price agreed on 22nd July: they obviously had not, expected payment of the deposit before those letters were written. In fact payment was not tendered until 1st August, by which date it appears that the Vendors had received and accepted a better offer. The judge took the view that the deposit was paid "well within the meaning of 'forthwith'", being "precisely ten days from the date of the agreement with an intervening weekend". He went on to say that no harm was done and one inevitably asks oneself whether his finding was influenced by that "absence of harm". It is not for the courts to vary agreements simply because there have been breaches of contract which caused no harm. Moreover, if payment was late, I think Mr. Neill is justified in claiming that his clients did suffer harm, because they were entitled either to be paid the deposit at the stipulated time or to sell elsewhere. It may be that had I been trying the case and the word "forthwith" had been agreed I would have taken a stricter view of the obligation imposed by the agreement, but I am unable to say that the judge was wrong in view of the considerable sum of money involved. It was for him to decide what was reasonable and this court should be slow to interfere. 11. In view of all this was this difference between the agreement and the memorandum material? There can be no doubt that the payment of a deposit, whether or not a condition precedent to the obligation to convey, "is a term of so radical a nature that the defendants' failure to comply with it would entitle the plaintiff to renounce further performance": see Myton Ltd. v Schwab- Morris (supra). In my view a provision as to the date of payment of a deposit is equally material and once it is accepted that the word "forthwith" did add something to the term specifying the time of payment. I think it must follow that the difference was material. (ii) The architect's fees point: 12. There was another difference alleged between the oral agreement and the memorandum relied upon. The judge found that in the oral agreement provision was made about who was to pay the architect's fees for plans (relating to four additional storeys) which the Vendors had had drawn up and which had been approved by the Public Works Department. That finding is recorded in these terms:
The memorandum records the agreement as follows:
Mr. Leggatt seeks to meet this apparent conflict by saying that the memorandum is merely expressed in infelicitous terms. In so far as he submits that "subject to the existing plans" must mean "with the benefit of the existing plans" I would go along with him without hesitation. On the other hand the memorandum does not mention payment. As to that Mr. Leggatt says it is a collateral term and not one of substance. I cannot agree: the term was one of substance although minor in proportion to the subject matter of the sale and purchase: see Scott v Bradley 1971 Ch. 850. It also was "an essential part of the bargain": see Hawkins v Price 1947 1 Ch. 645. That the trial judge was of the same opinion appears from his statement:
He does not appear to have commented elsewhere on the substantiability of this difference between the terms of the oral agreement as he found them and those set out in the alleged memorandum: in considering the memorandum he seems to have confined himself to the addition of the word "forthwith" and mentioned the architect's fees only in passing. Can an "insufficient" memorandum be relied upon on equitable grounds? 13. As a last resort Mr. Leggatt says that, by paying the deposit within the time prescribed (albeit incorrectly) by the memorandum, the Purchaser has adopted the heavier burden imposed by the memorandum and the Vendors are not entitled to complain, whilst by agreeing to pay the architect's fees he is accepting the terms of the oral agreement. As to the architect's fees this argument is based upon Scott v Bradley 1971 Ch. 850 and as to the deposit it is based upon a parity of reasoning to that which found favour in Scott v Bradley. There, in spite of the fact that a material term was shown to have been omitted from the alleged memorandum, because it was a term which benefited the defendant and because the plaintiff agreed to be bound by it, the court held that the plaintiff was entitled to a decree of specific performance of the oral agreement. That is the last of a line of cases which has established (1) that a note or memorandum must contain "every term which is really a substantial part of the bargain and is to that extent material" and (2) that, where a material term is omitted, specific performance will be granted only when the term is for the exclusive benefit of one of the parties and the plaintiff is willing to submit to it or to waive it, as the case may be. I agree that Scott v Bradley applies to the omission of the term relating to the architect's fees but Mr. Leggatt asks us to extend the equitable principle upon which the second of these conditions is based to cases like the present where the note or memorandum has not omitted, or not only has omitted, a material term which has been orally agreed but has included a material term which has not been orally agreed. There is direct authority that where the alleged memorandum includes an additional term it is not sufficient to satisfy the statute: Roe v R.A. Naylor Ltd. (1918) 119 L.T. 359. In that case Swinfen Eady, M.R., said at p.361:
Mr. Neill says that that rule is absolute and that there has been no reported attempt to impose the gloss which has been successfully imposed in cases where a term has been omitted. Mr. Leggatt's submission is nevertheless that, if Equity will intervene in the one case, a fortiori it can intervene in the other. I confess that I do not see why the proposition should be "a fortiori", but that there is an equal justification for the intervention of Equity is an attractive argument. In both cases the memorandum is not a true record of the terms agreed. In both cases parol evidence is introduced to prove that the memorandum is not a true record, thus (as it seems to me) ignoring the plain words of the statute, which require a memorandum of the oral agreement and not of part of that agreement or of some other agreement (actual or desired). In both cases Equity would be fulfilling its basic function of preventing the use of a legal principle (in this instance the statute) to produce injustice and the actual terms of the oral agreement would be enforced. If we take this further step we may in effect be lowering s.5 into its grave, but the earth would still not have been shovelled in, because some writing would yet be required in every case and the plaintiff would still have to be prepared to accept the burden of the additional term or to waive its benefit (as the case might be), but, provided that the writing was clearly referable to the occasion of the oral contract in question, the parol evidence of that contract would be what mattered, whereas the manifest intention of the Legislature was that greater reliance should be placed on the written word than on fickle memory. It can also be said that in cases where the memorandum omits a term the writing is true as far as it goes, but that where the memorandum adds a term it is in fact a false document. Sometimes a half truth may be more dangerous than a lie, but not here. On the present point it is remarkable that in none of the cases cited to us has there been anything but one bare hint that Equity would in effect close its eyes to that part of an alleged memorandum which is false. If the result is that an oral agreement which has in truth been made cannot be enforced, that is what the Legislature has provided. The "one bare hint" appeared in Nesham v Selby (1872) L.R. 13 Eq. 191, where, although there were further complications, the facts were basically similar to those in our case: two letters relied upon as constituting a sufficient memorandum contained conditions which the plaintiff did not admit to have formed part of the alleged oral agreement. The difference was that there the plaintiff was not willing to be bound by the additional terms: here the Plaintiff is willing to be bound. The decision in Nesham v Selby was, inter alia, that the inclusion in the memorandum of a term which had not been agreed was fatal. Lord Romilly, M.R., said at p.194:
It seems to be implicit from this that if the lessor is willing to take the other stipulations suggested by the lessee he may be able to enforce the oral agreement and not merely a new agreement as to which the lessee's letter constitutes the offer. I have sought long for some more persuasive reason why Equity should not take the further step proposed and have come upon none. After some wavering I have come to the conclusion that we ought to take it and that, subject to the undertaking which the Purchaser has indicated through his counsel that he is prepared to give as to the architect's fees, we should hold the "Defence and Counterclaim" in the first action to be a memorandum on which the Purchaser is entitled to rely. This, however, is also subject to one further question. Will Equity bar the use of a "Defence" as a memorandum? (The "pleading" point). 14. It is common ground that on the authority of Lucas v Dixon (1889) 22 Q.B. 357 the existence of a memorandum in writing is one of the ingredients of the cause of action on an oral agreement, so that the memorandum must exist at the date action is brought upon the agreement. It follows that, there having been no memorandum when the first action was brought. that action could never have been successfully based upon the alleged oral agreement. From there Mr. Neill argues that it would be unjust to allow the Purchaser to rely in the second action on the Defence and Counterclaim in the first, because, in order to meet the claim in the first action, the Vendors had no alternative but to plead the oral agreement which they said had been reached. Mr. Leggatt equally declined to argue that it was sufficient for the Vendors to plead by way of defence a mere denial of the agreement in writing alleged, because it was part of their case that there had been an oral agreement in terms different from those of the agreement in writing alleged in the Statement of Claim and they sought to give evidence of the terms of that oral agreement: a complete denial would, he said, have been misleading. I would emphasise that the claim in the first action was based upon an agreement in writing and not upon an oral agreement (as para.3 of the written summary of the Appellants' argument on their "Contention C" might suggest). Of course the existence or otherwise of the written agreement was entirely independent of any oral agreement concluded on some other occasion (a matter on which I shall hereinafter enlarge) and neither the existence of the oral agreement nor its terms were vital to the proper defence of an action on the "letters": all that was necessary was to deny that the "letters" constituted a binding contract, although such a defence was, in the circumstances of this case, doomed to failure. Basically this is a very different case from Thorp v Holdsworth (1876) 3 Ch. 637, the leading case on evasive pleading, for there the defendant denied "that the terms of the arrangement between himself and the plaintiffs were definitely agreed upon as alleged". In the case at bar the issue on the claim was not whether there had been any agreement at all between the parties relating to the sale and purchase of the property but that which is now before this court by virtue of the Respondent's Notices, namely whether the two "letters" were a contract in writing. It was only because of the contention raised by para.7 of the Defence that the oral agreement became relevant to the Purchaser's claim at all. That paragraph read:
In my view that was a misconceived contention not only because the oral and the written agreements could (if so intended) co-exist as different contracts but also because the contention assumed that the "letters" were intended to be not an agreement in themselves but a memorandum of the oral agreement which recorded fully the terms of that oral agreement - which clearly they were not. Nevertheless, I agree that once the Vendors decided to advance such a defence they were forced to plead the terms they alleged had been orally agreed, because para.7 was pregnant with the affirmative allegations that terms as to the payment of a deposit and of the purchase price and as to the dates of completion and delivery of vacant possession had been agreed, and particulars could have been ordered. However, as I have said, such a defence was not only unnecessary but was misconceived, and therefore the Vendors were not compelled to plead in a form capable of being relied upon as a memorandum of the oral agreement. It would have been otherwise if the first action had been brought upon the oral agreement, for then it would not have been upon to the Vendors both to deny the oral agreement alleged and to adduce evidence of a different oral agreement made on the same occasion, unless the different oral agreement had been pleaded. Once the different oral agreement was pleaded the giving of particulars of its terms would have been inevitable. Mr. Leggatt submitted that the Vendors would, if asked for particulars, have been able to decline to give particulars voluntarily without an undertaking that the Defence and the particulars would not be relied upon as a note or memorandum of the oral agreement alleged by the Purchaser, and further that if an order for particulars was sought the Registrar should not have ordered particulars save upon a condition that the Defence and the particulars should not be so used. I do not think any counsel would advise the giving of an undertaking of that sort or that 0.18 r.12(3) of the Rules of the Supreme Court could properly be invoked in the manner suggested. There could never be any obligation on the Vendors to file a counterclaim and, therefore, it seams to me to be immaterial that they were themselves relying upon the oral agreement (in the terms they alleged) for the purpose of their counterclaim, but if they wished to rely upon the oral agreement by way of defence they were obliged to set out its terms. 15. If I be wrong and if the Vendors were in a real sense "forced" to plead the oral agreement, is it unjust that a form of pleading which is thus forced upon a defendant should be used against him in a second action? Mr. Neill submits that it is, because a trap is thereby set, particularly for the litigant in person, and he further argues that the effect would be to go far towards repealing s.5. Reliance is placed upon Hardy v Elphick 1974 Ch. 65 where the defendant in a first action brought against him for specific performance denied any oral agreement but pleaded in the alternative that, if there was such an agreement, the letter relied upon as a note or memorandum of that agreement did not contain the whole of the contractual terms. As in the present case the plaintiff brought a second action, in which he relied upon further and better particulars of the defence in the first action together with the letter as being the memorandum in writing. The defendant applied under 0.18 r.19 that the second action be struck out as an abuse of the process of the court. That application was dismissed, but the plaintiff was given leave to discontinue the first action. The Court of Appeal upheld the judge's order on the ground that the second action was based upon a different cause of action from that in the first action. The court was not required to decide whether the pleading in the first action could be relied upon as constituting a sufficient memorandum, but the learned Lords Justices did make some observations on the subject. Buckley, L.J. appears to have been impressed by the fact that in that case the defendant had denied the oral agreement entirely and the judge suggested that the defendant could "have gone on merely to plead that, if (which he denied) any oral agreement had been concluded between the plaintiff and himself, he would rely upon [the section] in respect of such agreement". With respect that was clearly right, but Russell, L.Y. took the matter a step further when he said at p.75F:
He went on to refer to Jackson v Oglander (1865) 2 H. & M. 465 where the Vice-Chancellor had remarked that to make use of an admission "extorted" by reason of the fact that the defendant was required (as he was in the case before him) to answer and to swear to the truth of his answer and to sign it would in effect repeal the statute. Orr, L.J. agreed
If there be a trap it is, as it seems to me, with respect, a trap which calls for the formation of no Society for the Protection of Unhappy Pleaders - whether they be lay or professional: if there has been an oral agreement there is nothing unjust about its being enforced. Section 5 was not designed to defeat plaintiffs who have in fact made the oral agreements they allege but rather to protect defendants who have not made the agreements alleged against them: the preamble to the Statute of Frauds 1677 reads:
What is unjust is that an unscrupulous litigant who knows very well that he has entered into an oral agreement (whether the one alleged against him or one in different terms) should be able, by dint of a legal technicality, to gain an advantage over his opponent (and over more scrupulous litigants) by a false denial or by refraining from a frank admission. Much as, I regret the inadequacy of our legal system the fact remains that no system of human justice can be perfect and the injustice to which I refer is similar to that which inevitably occurs where a defendant who knows that he has been negligent but also knows that the plaintiff cannot adduce evidence to prove that negligence files a Defence denying or not admitting negligence. In Jackson v Oglander. (supra) no point was taken that the answer was not in existence at the time action was brought and the Vice-Chancellor dealt with the case "as if [the defendant] had denied the agreement". From this the learned compilers of the report conclude:
No reason is given by the Vice-Chancellor beyond the implicit reason that to hold otherwise would be unjust and that it would "in effect repeal the statute". For the reasons I have given I do not think the effect would be to "repeal" the statute and I think that the object of the statute would be better achieved by allowing a plaintiff to rely on a pleading as a note or memorandum than by rejecting the pleading as being an insufficient note or memorandum. The counterclaim in the first action. 16. Mr. Neill argues that on any view of the law there was no basis for the dismissal of the Vendors' counterclaim in the first action, by which they sought inter alia a declaration that there was "no binding agreement enforceable by the [Purchaser] against [the Vendors] in relation to the sale of the property". As it will later be seen that I would hold that the two "letters" constituted a binding, enforceable agreement. it follows that in my judgment any argument based on the judge's decision that the only valid agreement was on oral agreement which on any view was not enforceable in the first action must fail. The judge having ordered specific performance of the oral agreement, the position of the counterclaim in the first action is more complex and, as I understand Mr. Leggatt's argument. it runs like this the "pleading" was a sufficient memorandum as soon as it was signed and not merely when it was filed or served, but the "action" was brought by the Vendors when they served the Defence and Counterclaim, and in the nature of things the document as a document must have existed before that: therefore there was a sufficient memorandum before action brought and the Purchaser had a binding, enforceable agreement. I think that is right, but even if it is not I would hold that the judge was entitled, in the exercise of his discretion at the date of the judgment, to refuse a declaration which was then untrue. To grant a declaration merely that there had been no enforceable agreement at the date of the Counterclaim would have been bootless. The alleged repudiation. 17. One other matter must be mentioned on the appeal. It was contended by Mr. Neill that the Vendors were entitled to, and did, repudiate the contract on the ground of the Purchaser's failure to pay the deposit unconditionally. The learned judge held that the letter of 1st August 1975 which accompanied the Purchaser's cheque for the deposit but which appeared to make the payment conditional did not entitle the Vendors to repudiate. The material part of that letter was in these terms:
As I understood him Mr. Neill did not seek to argue that this "condition" was a sufficient ground for repudiation but submitted that his clients did not need to rely upon it because there were other, and valid, grounds to support their repudiation. I think the judge's decision on this point was correct. The "letter" agreement. 18. I come now to deal with the point raised by the Respondent's Notices, Mr. Leggatt contends that if he fails to persuade the court to uphold his client's right to specific performance of the oral agreement nevertheless the judge was wrong to refuse specific performance of a contract "contained in two letters both dated 23rd July 1975, by Messrs. Lowe, Bingham & Matthews on behalf of [the Vendors]", by which is meant not the letters themselves but copies of those letters each bearing an endorsement made by the Purchaser. Although it had been orally agreed that the parties would sign a formal agreement to be "drawn up by the solicitors of the plaintiffs and the first defendants" (para.5 of the Defence in Action 1975 No.1923), the Vendors or their agents appear to have feared that the Purchaser might change his mind before the formal agreement could be prepared, so letters in identical terms were addressed to the Purchaser by each of the Vendors. The material part of those letters was:
On the copies an official of the purchasing company placed the company's signature below the words "We Agree and Confirm the above purchase". The learned judge gave short shrift to the contention that these letters constituted a contract in writing and concluded the matter by saying:
Unfortunately some earlier observations cast doubt upon what he meant by "the agreement". If, of course, the letters were never intended to have any legal effect at all and were merely a sham or if they were not intended by either side to be an agreement, his conclusion was unassailable. However, in the previous paragraph he had said:
With respect I find this not as clear as it might have been. The only fact which the learned judge says is established is that the parties did not intend the "letters" to reflect the whole agreement "reached between them". By that he must be referring to the oral agreement concluded on 22nd July and what in effect he is saying is that the letters do not constitute a memorandum of that oral agreement. That is manifestly right, but equally clearly they were never intended by either party to be such a memorandum. The learned judge never says what he does think the purpose of the "letters" to be: he merely states what, "at the most", the intention could be on the evidence first of the Purchaser, secondly of "the Defendants' witnesses" and thirdly of "the 1st Defendant". Mr. Leggatt seizes upon the closing words of the passage cited and submits that the purpose was to prevent the Purchaser from slipping out of its agreement, a purpose to be achieved by the Vendors' proposing to the Purchaser an open contract in writing and inviting its agreement and confirmation: when the Purchaser accepted, by signing the letters, there came into being "a holding contract" with a separate and distinct existence from that of the oral agreement, that being an agreement which at the time was unenforceable for want of a sufficient memorandum. Strictly the existence of a holding agreement would only prevent the Purchaser from evading the purchase and would not prevent it from "slipping out of" the (unenforceable) oral contract, but what the 1st Defendant actually said was that he asked the Purchaser to sign "so [he] could hold them to that bargain if they tried to slip out", the emphasis being clearly in the context upon "that" rather than upon "bargain". so that the witness was referring not to the oral agreement but to the "letter agreement". Mr. Neill concedes that theoretically such a holding contract was possible, and has not argued that the letters did not contain the necessary elements of an open contract, but he contends that the judge has rejected the "letters" as being a holding agreement, that such rejection is a finding of fact and that, on well established principles, we ought not to interfere with that finding. The difficulty I see here is that the existence or otherwise of an independent holding contract is a question of mixed fact and law and it does not appear to me that the learned judge's judgment sufficiently investigates either the facts or the law. Thus he nowhere says directly that he disbelieves the 1st Defendant when he gives the reason for his agents' writing one of the letters: on the contrary he expressly refers to that evidence as though it might be true. At the same time I see nothing in the judgment to indicate that the learned judge seriously considered the possibility of an independent holding contract: he rejected the "letters" as being a sufficient memorandum of the oral contract. In his conclusion (cited above) it is not clear what was "the agreement" to which he was referring. Did he mean the "letters" were never intended to represent the oral agreement - the only agreement which had previously been reached by the parties and which the letters could "represent" - or did he mean they were never intended "to constitute the only agreement between the parties"? Or, yet again, did he mean they were never intended "to constitute an agreement between the parties"? If he meant the first of these alternatives - and that is doubtful because, although the memorandum would be part of the cause of action, the action would not be brought "on them" he was merely repeating his previous conclusion that the letters were not a sufficient memorandum of the oral agreement. If the second is the right interpretation it is not inconsistent with Mr. Leggatt's argument. Only if the third is the right interpretation was there a finding which would inhibit us from deciding that there was an independent holding contract. Mr. Neill points to the evidence of Mr. Benedict Young that:
and construes that as meaning that the "letters" were not intended to constitute a contract in themselves. He would therefore ask us to conclude that the judge did find that the "letters" were not intended to be a holding contract and should not be construed as one, and to say that such finding is supported by the evidence. He argues that the parties were unlikely to make a holding agreement because that would involve their "giving up" various rights which the oral agreement bestowed upon them by substituting an open contract, but a holding contract would not be in substitution for the oral agreement - or for the intended formal written contract: it would complement the one until, but only until, the signing of the other. Mr. Leggatt says that the language of the letters themselves shows that they were intended to be an agreement and not merely a memorandum of the oral agreement. If the judge found otherwise that argument of necessity challenges the finding, but Mr. Leggatt submits that the judge did not find otherwise and rests his case upon that submission. In effect he asks us to supply a finding - which he says is inevitable upon the evidence - that the "letters" were intended to be a holding contract. He contrasts Beckett v Nurse 1984 1 K.B. 535 and Branca v Cobarro 1947 1 K.B. 854 and I think those cases are clearly distinguishable on the terms of the documents. 19. There are earlier passages in the judgment to which I must refer, for I think it is necessary to bear in mind that, on the judge's findings. the only writing contemplated by the parties at the time of the oral agreement was the formal agreement "to be drawn up by the solicitors". The "letters" cannot have been intended as a compliance with the term in the oral agreement for the signature of such an agreement. Under the heading "Evidence" the judge said:
which might suggest that he was referring to the formal agreement. but he then set out the evidence of the various witnesses as to the reasons for having the "letters" - not the formal agreement. Thereafter he starts with a new heading, "The Letters of 23rd July as Forming a Contract", and it was under that heading that he included the passages I have previously cited from his judgment. It is true that under the heading, "Was the Oral Agreement Subject to Contract?", the learned judge says:
but that seems to me to relate unquestionably to the formal agreement. The "letters" would appear to have no bearing on the issue whether the oral contract was subject to contract. The judge does not refer in his judgment to the evidence of Mr. Chan (the Managing Director of the Purchaser) and Mr. Leung (the Finance Director) that "someone suggested we should exchange a letter to each other to confirm the sale" and that "each of us thought it was a necessary procedure". Although Mr. Chan was cross-examined about his expecting the signature of "an agreement with a lot of terms and conditions", he went on to say that that was why he signed the "letters" and he may well have been in some confusion between the letters, the formal agreement and even the ultimate deed of assignment. Indeed, it seems to me there may have been some misunderstanding between the two sides, the Purchaser wishing to do everything "in Chinese fashion" and the Vendors wanting something more formal. However, we are bound by the judge's finding that they agreed to the signature of a formal agreement to be drawn up by the solicitors. 20. I confess that I have had greater difficulty in relation to this part of the case than have the other members of the court, who are in no doubt that there was an independent holding contract. I have no doubt what I would find, upon the evidence as it appears before us in the written record, if I were required to make a finding without having regard to the judgment and my uncertainty stems from the manner in which the learned judge has approached the matter and stated his conclusions thereon. Assuming, as I must on the findings, that the writing contemplated by the parties in their oral agreement was the formal agreement and not the "letters", I do not think there remains any evidence which would have justified the judge in finding that the "letters" were never intended to constitute an agreement between the parties - they do not appear to refer back to any previous agreement and the plain words suggest a proposal and acceptance of a new agreement - and I am not persuaded that the judge has made any finding inconsistent with that view. I would therefore concur somewhat reluctantly that the "letters" constituted an independent holding contract. 21. There was some discussion as to the order which should be made if the Purchaser succeeded on its Respondent's Notices, but on the view I take nothing will now turn upon this. I merely observe that the Notices asked that "the judgment should be affirmed on the ground .... that the two letters pleaded in the Statement of Claim constituted a binding and enforceable agreement" and pleaded that in so far as he had held otherwise the judge erred in fact and in law. With respect I think the pleaders were themselves in error because the fact that the two letters constituted a binding and enforceable agreement would not justify affirming an order for specific performance of the oral contract, though it would justify affirming the dismissal of the counterclaims. However, no point has been taken on the form of the Notices and I would treat then as asking for an order in the terms of prayer (aa) in the Statement of Claim. Conclusion. 22. In the result I agree with the learned Chief Justice, although for slightly different reasons, that the respondent Purchaser must succeed both on the appeal and on the Respondent's Notices. It will be sufficient that it keeps its order for specific performance of the oral agreement, although I would direct that the formal judgment be amended to read "specific performance of the contract pleaded in paras. 1 and 2 of the Statement of Claim", that being what no doubt had been sought in the first prayer and what the learned judge intended should be granted. 16th June, 1977. Representation:
-----------------
-----------------
----------------- Coram: Briggs, C.J., Huggins & Pickering, JJ.A. Date of Judgment: 16th June, 1977. ----------------- JUDGMENT ----------------- Pickering, J.A. : Included in the Defence and Counterclaim in the original action was the following paragraph:
2. The first paragraph of the Counterclaim commenced with the words "the first defendants repeat paragraphs 1 to 8 above" so that the contents of paragraph 5 were adopted in the Counterclaim. 3. Upon receipt of this pleading the Plaintiffs discontinued the original action and commenced another action relying upon the foregoing extract from the original Defence and Counterclaim as constituting a Note or Memorandum of the oral contract for sale under section 5 of the Law, Amendment and Reform (Consolidation) Ordinance. The judge in the court below held that it did so constitute a Note or Memorandum. Mr. Neill, for the Appellants, quotes Tiverton Ltd. v. Wearwell Ltd.(1) as authority for the proposition that a statutory Memorandum or Note must recognise the existence of a binding contract, the corollary being that if the document contained the words "subject to contract" or words having equivalent effect, the Ordinance is not satisfied. In this regard counsel points to the final clause of paragraph 5 of the Defence which reads:
and urges that since the signing of a formal contract is said, in the alleged Memorandum, to be an actual term of the Agreement that is equivalent to saying that such signing was a condition precedent so that paragraph 5 cannot constitute a valid Memorandum. 4. For the contrary view Mr. Leggatt cited Rossiter v. Miller(2) and Branca v. Cobarro(3) for the proposition that the oral contract was unconditional, its terms being fixed and not subject to approval by either party and it not being the intention that those terms should, or might be, varied by the formal contract which it was proposed to enter into - that agreement being only for the purpose of more formally setting forth the conditions upon which the parties had agreed. For my part I would accept these authorities for the proposition that upon its true construction the term pleaded at the end of paragraph 5 of the Defence in the first action did not contain words apt to introduce a condition precedent to the oral contract but rather that the term merely looked to the signing of a formal document embodying a contract already concluded. 5. Mr. Neill's argument as to the inefficacy of paragraph 5 as a Note or Memorandum was however by no means concluded. On the 7th October, 1975 the Defendants amended their Defence and Counterclaim in the first action, and specifically paragraph 10 of the Counterclaim, by adding the following underlined words:
6. It is Mr. Leggatt's contention that since, by that date, the first action had been discontinued, there was no paragraph 5 of the Defence left to be amended. To this Mr. Neill rejoins that, whatever may have happened to the Defence, the Counterclaim remained in existence and that, since paragraph 10 thereof had stated that the first defendants repeated paragraphs 1 - 8 of the Defence, paragraph 5 still existed in the Counterclaim so as to be capable of amendment. The importance of this is of course the statement in the amended paragraph 10 of the Counterclaim that the Agreement pleaded in paragraph 5 thereof was "subject to contract". The effect of that phrase in an agreement for the sale of land was not in dispute between the parties. It is a term of art well understood by lawyers as meaning that whilst there is an agreement in principle, no binding contract has been or will be reached between the parties until such time as the formal contract is drawn up and signed. The dispute was not as to the meaning of the phrase but as to whether that phrase had been effectively incorporated in the alleged Memorandum. 7. In this respect Mr. Leggatt relied upon the case of Farr, Smith & Co. Ltd. v. Messers Ltd.(4) the headnote of which reads in part:
In that case it was held that paragraph 3 of the original unamended Defence, which was signed by counsel, constituted a sufficient Note or Memorandum in writing of the contract signed by an agent of the party to be charged, to satisfy s.4 of the Sale of Goods Act, 1893, inasmuch as the new departure with regard to the parties and the cause of action when the action was reconstituted must be treated as the commencement of the action within the meaning of the rule in Lucas v. Dixon(5). 8. Mr. Leggatt has seized upon the words "the original unamended Defence" almost as though they implied that any amendment to the Defence in that case was ineffective. The amendment however was not ineffective. It was merely that the amendment in that case, though effective for its own purposes. did not have the effect of making any difference to the contents of the Memorandum relied upon. In the present case the amendments if it ever became effective, could have made the difference of incorporating in the alleged Memorandum the statement that the agreement for sale was subject to contract. In Farr, Smith & Co., Ltd.(4) whether the Defence was looked at amended or unamended, the Memorandum remained the same and there is no magic for our present purposes in the reference in that case to the "original unamended defence". 9. But did the attempted amendment in the present case ever become effective? The answer must be "yes and no" and in so far as it is "no" the answer is fatal to the Appellants' contention. It is true that by the time the amendment came to be made the Defence as such had gone but the whole of the Defence had been repeated in the Counterclaim as though there set out in extenso et seriatim so that the contents of paragraph 5 of the original Defence subsisted in the Counterclaim as a Memorandum which was capable of amendment and was amended by the subsequent plea that the oral agreement had been subject to contract. The Defence however was lifeless as a pleading and incapable of amendment by any further plea though it still breathed as a document. The Respondents are relying, for the existence of the Memorandum, upon the Defence and Counterclaim and each contained, the one explicitly the other by reference, the Memorandum. That contained in the Counterclaim was amended by the subsequent plea of "subject to contract" but that in the document which had formally constituted the Defence was incapable of any such amendment and remained as a Note or Memorandum Of an agreement which was not said to be "subject to contract" and I would uphold the learned judge's finding that the agreement was not subject to contract. 10. Mr. Neill claims that it is incorrect to say that the Defence as such become incapable of amendment after the first action was discontinued. He asked us to envisage that paragraph 5 of the Defence had alleged fraud and claimed that the Agreement was voidable; to assume further that the Appellants had counter-claimed for damages for deceit; that the Plaintiff company had discontinued the action leaving the Counterclaim to go forward; that the Appellants had then become aware that the charge of fraud was without foundation and ought not to have been made. In such circumstances, counsel argued, the Appellants would be obliged to amend the Defence to strike out the allegation of fraud and also to take out the Counterclaim based on fraud. That, as I see it, is not what would happen. Rather would the Appellants have amended their Counterclaim by deleting from it those paragraphs which had alleged fraud. But the Defence in the discontinued action would have been incapable of amendment for one cannot continue to plead in an action which has no further existence. The Defence as a document however would have continued to exist unadorned by any allegation of "subject to contract". 11. It was Mr. Neill's further contention that if the Memorandum relied upon is not in accordance with the true contract it is a bad Memorandum and that accordingly if the alleged Memorandum contained a term which had not been agreed orally it was a bad Memorandum. In support of this proposition counsel cited the cases of Cooper v. Smith(6) which related to the inclusion of an unagreed term as to the due date for delivery of goods, Smith v. Surman(7) where an unagreed term as to quality had been included, Nesham v. Selby(8) which concerned with the inclusion of unagreed terms regarding a tenacy and Roe v. Naylor(9) where an unagreed condition was included in a sold note. The principle could be expressed, the argument went, by saying that the Plaintiff cannot avail himself of the alleged Memorandum as evidence of the contract for one purpose, to bind the Defendant within the Statute, and renounce it for another purpose; but he must take it all together and was not permitted to take as much of the alleged Memorandum as suited his purpose and to reject the rest. If the alleged Memorandum was shown, as a result of the oral evidence given at the trial, to contain a term or terms not within the oral agreement effect must be given to that finding and the Memorandum would be bad. Counsel cited as an instance of the rigour of the rule that the Memorandum must correspond to the contract, the case of Smith v. MacGowan(10) where three contracts were made orally at an auction but only one Memorandum was created. The Memorandum was held to be bad. 12. Applying the foregoing principles to the facts of the present case, it was Mr. Neill's complaint that the Plaintiffs, in the Statement of Claim in the second action, while plainly trying to plead themselves within paragraph 5 of the Defence in the first Action, deliberately dropped, in their recital of paragraph 5 of the original Defence, the word "forthwith" in sub-paragraph (b) of that paragraph. That is to say that whereas in the original Defence it had been pleaded that the deposit of $300,000 was to be paid by the Plaintiffs to the first Defendant's solicitors "forthwith", the word "forthwith" had been omitted in the Amended Statement of Claim in the second action. At the trial there had been a conflict of evidence as to whether there existed a stipulation that the deposit should be paid "forthwith" or "immediately" and the learned judge had found that nothing had been orally stipulated as to payment "forthwith". The result. in Mr. Neill's submission, was that the alleged Memorandum was false in a material respect and so could not be relied upon by the Plaintiffs. 13. Mr. Leggatt's reply to this well assembled argument was that on its true construction the word "forthwith" in the context of paragraph 5 of the Defence was equivalent to "within a reasonable time" and he quoted In re Southam Ex parte Lamb(11) and Hillingdon London Borough Council v. Cutler(12) for this proposition. Performance within a reasonable time, Mr. Leggatt contended, would in any event be implied so that the Memorandum in fact corresponded with the oral agreement. But if "forthwith" connoted some greater degree of urgency than, "within a reasonable time" the difference was indeterminate and immaterial and the phrase was no more than an injunction to get on with the matter. Moreover a term was not required to be evidenced by the Note or Memorandum if it was not material in the sense of representing "a substantial part of the bargain". For this proposition counsel relied upon the case of Hawkins v. Price13) where Evershed, J. (as he then was) had held that if a term was really a substantial part of the bargain and to that extent material, then, unless there was a Note or Memorandum of it, prima facie, the Plaintiffs must fail to establish that there was, within section 40, subsection (1) of the Law of Property Act, 1925, a Note or Memorandum of the agreement. Furthermore, the argument continued, a term in an oral agreement not reproduced in a Memorandum could be conceded by the party for whose exclusive benefit it existed (Scott v. Bradley(14)). Conversely a term in a Memorandum could be complied with which was in excess of what was contained in the oral agreement since all that happens in such a case is that the party to be charged gets something more than what was originally agreed. It was not a case of taking one term and rejecting the rest but of complying with all stipulations suggested by the other side. 14. The case of Scott v. Bradley(14) is of particular importance in this somewhat subtle area of the law. In that case, which related to an oral agreement for the sale and purchase of a freehold property, the Memorandum relied upon omitted what was held to be a material term to the effect that the purchaser would pay half the vendor's legal costs incurred in the sale. Upon the purchaser consenting to be bound by the omitted material term, specific performance of the contract was ordered against the vendor. The case does appear to go far to alleviate the rigour of the old rule to the effect that if the alleged Memorandum omits a term which has been agreed orally, it is a bad Memorandum. This rule was exemplified in such cases as Crane v. Naughton(15), Thirkell v. Cambi(16), Johnson v. Humphrey(17) and Hawkins v. Price(13). In Tiverton v. Wearwell(1) Lord Denning, M.R. remarked obiter that the omission of a term regarding vacant possession was vital to the validity of the Memorandum in that case but it does not appear that Scott v. Bradley(14) was cited to the Court. 15. The doctrine which has been impinged upon by Scott v. Bradley(14) related to the omission of a term resulting in a bad Memorandum. What we are faced with here is not an omission but the inclusion of the unagreed word "forthwith" in relation to the payment of the deposit. However I cannot think that there is any difference in principle between the omission of an agreed term and the insertion of an unagreed term provided that in either event the party seeking to rely upon the document agrees to be bound by that term. As a matter of both logic and equity, Scott v. Bradley(14) may be taken to have impinged both upon the circumstance where a term has been omitted from the Memorandum and upon that where an additional term has been inserted. If therefore the unagreed stipulation "forthwith" be a material term, I would hold the Memorandum valid subject to the Respondent company paying the deposit of $300,000 "forthwith" - as to the meaning of which I will come. 16. But is the stipulation that the deposit had to be paid "forthwith" a material term and is it necessary that it should so be material before its inclusion might invalidate the alleged Memorandum? On the authority of Hawkins v. Price(13) I would hold that it is so necessary. In that case Evershed J., as he then was, feeling his way somewhat cautiously, said:
I would respectfully adopt that view and adopt it in regard to the converse situation, that is, not to a material term omitted from the Memorandum but to such a term added thereto. But having adopted Evershed, J.'s view, it falls for me to consider whether or not in the present case the stipulation that the deposit should be paid "forthwith" was in fact a material term. The deposit was approximately 14% of the purchase price and the question is whether or not it would have been of moment to the Appellants that the deposit should be paid immediately to solicitors as stakeholders. It does not appear to me that this would have been the case. The payment of a deposit is a normal incidental to the sale and purchase of land and its payment to a stakeholder a common requirement. The money, in the hands of the stakeholder. is not available to either party until either the sale is completed or the deal has gone off when it will be either handed on or refunded; so that payment "forthwith" would not have benefited the Appellants by placing the money in their hands for utilisation or for the bearing of interest and, provided that the deposit was paid on or before the signing of the formal contract contemplated, it could have been of no great moment to the Appellants as to the actual date upon which it was so paid. They had no reason to distrust the proposed purchaser having reached a detailed oral agreement with the managing director of the purchasing company and everybody concerned being apparently well satisfied at the conclusion of the negotiations. The Appellants had no reason to doubt the good faith of the Respondents, no anxiety that the latter would resile from their agreement which anxiety could only be allayed by payment of the deposit. I would therefore hold the Memorandum valid despite the inclusion therein of the unagreed word "forthwith" as being an immaterial additional term. If that view be wrong however and the stipulation material, I would yet, subject to what I shall have to say later, hold the oral agreement valid upon the basis of the Memorandum and order specific performance of the agreement upon the Respondents' undertaking to pay the deposit "forthwith". The meanings of that term are legion and largely vary according to the exigencies of the particular case as can be confirmed by a glance at any judicial dictionary. For present purposes, and somewhat arbitrarily, I would require payment by the Respondents of this not insubstantial sum within four days. 17. A further respect in which the alleged Memorandum is said to have departed from the oral agreement is in relation to plans which had in the past been prepared by an architect for the Appellants in connection with a proposed upward extension of the building. Paragraph 5(f) of the Defence in the original action (being part of the alleged Memorandum) reads:
18. The actual finding of the learned judge in regard to what was agreed between the parties about the plans was that should the Respondents proceed with the development and engage the architect who had drawn the plans and had them approved by the Public Works Department, the Respondents would be responsible for any fees due to him for supervising the work to be done, whereas if the architect was not engaged by the Respondents to that end, then the fees due to him for obtaining the approval of the Public Works Department would be paid by the Respondents. This is far from the Appellants' strongest point and I agree with Mr. Leggatt that the term in the Memorandum as to payment for the architect's plans did not differ materially from what was agreed because "subject to the ..... plans" means with the benefit of the plans subject to payment for them. In any event the Respondents remaining ready and willing to pay the architect's fees, specific performance could be ordered with a proviso for payment of the architect's fees by the Respondents. 19. I have thus far expressed my view that the alleged Memorandum could be relied upon in the second action because the result of the retrospective amendment was not to incorporate in the Memorandum an assertion that the oral agreement was subject to contract; and I have concluded that the addition of the word "forthwith" to the alleged Memorandum did not add a material term and that the reference to architect's fees was substantially in accordance with what had been orally agreed. I have also indicated that if those latter views be wrong, I would order specific performance subject to payment of the deposit within four days and to payment by the Respondents of the architect's fees. But Mr. Neill had a further weighty contention which was that in any event the Defence and Counterclaim in the first action could not be relied upon in the second action to satisfy the Ordinance. The argument was that paragraph 5 of the Defence in the first Action, that is the paragraph incorporating the alleged Memorandum, was properly pleaded in the form in which it was, it being the pleader's duty to plead honestly and not evasively so that his opponent will know the real case which he has to meet. For this proposition counsel cited the case of Thorp v. Holdsworth(18) and 0.18 r.8; accordingly, he said, the pleading in paragraph 5 of the Defence in the first action was necessary in order to enable the defendants to call evidence and the Court should not adopt a rule the effect of which was to encourage evasions and unnecessary non-admissions; moreover the pleading formula suggested by the judge, which was:-
did not satisfy the requirement of non-evasion and was in any event an example of a negative pregnant of which particulars could have been ordered; the judge's decision went far to repeal the Ordinance. In Hardy v. Elphick(190 all three Lords Justices had intimated obiter a fairly clear view that the plaintiff in that case would fail at the eventual trial on a Memorandum which consisted of a letter and further and better particulars of the Defence in an earlier action; the old practice in equity had been that if the defendant admitted the contract but at the same time set up the Statute his admission did not operate (Lucas v. Dixon(5)) and the same practice should be applied by this Court; for the purposes of the rule in Lucas v. Dixon it should be held that the memorandum had to be in existence when the first of the two consolidated actions was commenced; when the plaintiffs discontinued their first action this had left the defendants' counterclaim standing (0.15 r.2(3)) and on any view of Lucas v. Dixon the defendants were entitled to have judgment on their counterclaim but the judge had dismissed the counterclaim; the issues in the two actions were the same apart from the effect, if any, of the later commencement date of the second action and the same result should be arrived at in both sets of proceedings, the Court should find that the statutory requirements had not been satisfied and that the Appellants had been entitled to judgment. 20. To all these matters Mr. Leggatt retorted that a Defendant who invokes the Ordinance is not normally bound to plead the terms of the oral agreement and in the present instance the Appellants could have relied upon paragraph 7 of their Defence and omitted paragraph 5. It will be recalled that in the first action the claim was based upon a contract said to arise out of an exchange of letters between the parties on the day following the oral agreement. Paragraph 7 of the Defence in that Action was as follows:
21. If the Appellants, the argument went, had been compelled to plead the terms of the oral agreement that was because, in order to allege that the letters did not contain the whole of the oral agreement, the Appellants elected to assert the oral agreement - not merely by way of Defence but also by way of Counterclaim; if the Appellants had in fact been obliged to particularise the oral terms omitted from the letter agreement they would have been entitled to have asked the Respondents for an undertaking that the particulars given would not be treated as a Memorandum for the purposes of the Ordinance - thereby raising an estoppel and if no such undertaking was forthcoming they could have refused the particulars except pursuant to an order of the Court under 0.18 r.12(3) that any particulars given were not to be so treated. It followed, in Mr. Leggatt's submission. that the pleader could have honestly and sufficiently pleaded to the Respondents' claim and yet avoided providing a Memorandum; as matters stood however the Memorandum was a sufficient Memorandum, the second action was not vexatious being brought on a different cause of action from the first (Hardy v. Elphick(19)); moreover Mr. Leggatt disputed Mr. Neill's assertion that the old Chancery practice was that when a defendant admitted an oral agreement whilst at the same time relying on the Statute, his pleading could not be used as a sufficient Memorandum in a subsequent or reconstituted action; the rule was and is, counsel asserted, that if a defendant admits the agreement but pleads the Statute that pleading cannot be used as a Memorandum in the same proceedings because the Memorandum must be in existence at the time of action brought (Lucas v. Dixon(5)); the policy of the courts should be to uphold bargains admittedly reached and not to be astute to save a party from the consequences of a dilemma of his own making; substantial justice could be done in the present case by holding the Appellants to their bargain. 22. The efficacy of the two expedients, suggested by Mr. Leggatt to protect the pleading from constituting a Memorandum, appears to me to be very much in doubt. Any request to the Respondents for an undertaking that the particulars given would not be treated as a Memorandum for the purpose of the Ordinance was almost inevitably doomed to failure for there is no reason why the Respondents' solicitors should have so gratuitously prejudiced their clients. The second suggestion was that particulars of the oral terms should have been refused, except pursuant to an order of the Court under 0.18 r.12(3) that any particulars given were not to be treated as a Memorandum. I consider that the likelihood of any such order being made to be slight in the extreme since it would be a bold Registrar or Judge who, prejudging the issue in this case, would undertake in effect to suspend the operation of the Ordinance if in fact the particulars given did amount to a sufficient Memorandum. 23. It was not possible, as I see it, to throw a defensive pallisade around the pleading in either manner suggested. That being so, should paragraph 5 of the original Defence have been pleaded at all and is Mr. Leggatt right when he suggests that paragraph 7 would have sufficed without the inclusion of paragraph 5? I do not think that he is for whilst paragraph 7 is a perfectly good pleading, following as it did paragraph 5, yet had paragraph 7 stood to be interpreted without the assistance of paragraph 5 the former paragraph would have cried out for particulars which the Appellants would have been obliged to supply. 24. If that view be right there would appear to be merit in Mr. Neill's contention that the Appellants were obliged to plead as they did. The suggestion then, however, is that since they were virtually forced into the position of having to provide a Memorandum in their pleadings, the Ordinance should not extend to that Memorandum. This is a contention which requires very careful scrutiny. It appears to be accepted that this is the first occasion upon which the same plaintiff has been given judgment upon the strength of a Memorandum contained in his opponent's earlier Defence in another action and that in itself may be of significance, though not necessarily conclusive, having regard to the centuries which have elapsed since the enactment of the Statute of Frauds, the precursor of the Ordinance with which we are concerned. The point fell for discussion in Hardy v. Elphick(19) where a second action was commenced relying upon a Memorandum constructed from a letter combined with further and better particulars of the Defence in the original action. The issue in Hardy v. Elphick(19) was whether or not the second action should be dismissed as an abuse of the process of the court and the merits of relying upon a Memorandum constructed partly from the pleadings in the earlier action were not at that stage directly in issue. Nonetheless all three judges expressed their view upon the point. Russell, L.J. said at p.75:
Orr, L.J. agreeing, put the matter thus:-
25. Buckley, L.J., having observed that the two suits were founded upon different causes of action, was less emphatic, saying:
26. These extracts were of course obiter but it is clear that Russell and Orr L.JJ. were of the view that the particulars in the earlier action would not, in the event, be found capable of contributing to an effective Memorandum, whilst Buckley, L.J. considered that if the defendant had been compelled, in the earlier action, to plead material constituting a Memorandum that would be a substantial ground for arguing it oppressive to allow the plaintiff to take advantage of the Memorandum in a later action. 27. Why that should be so is not immediately apparent. It is instructive to compare the situation in the present case with that obtaining in certain of the earlier cases. In Goode v. Job(20) and Barkworth v. Young(21) affidavits sworn in previous actions were held to be nonetheless sufficient Memoranda. In Lucas v. Dixon(5) Fry, L.J. was of the view that since the affidavit, said to contain the Memorandum, had only come into existence after the commencement of the action, the plaintiff could only avail himself of it by discontinuing the action and commencing another. But if affidavits sworn in earlier proceedings are capable of constituting a Memorandum for the purposes of the Ordinance, is there any reason in principle why the Defence should not have the same quality? Mr. Neill would have it that the mischief lies in the use, as a Memorandum, of material which a party is compelled, in fairness to his opponent and in compliance with 0.18 r.(8), to plead. It is tempting to ask if a party be obliged to plead the truth, is there any reason why subsequently, he should not be taxed with the truth? And, of course, Mr. Neill's point applies equally to the affidavit cases for an affidavit, by definition, should contain the truth. It may perhaps be argued that there is less inevitability about an affidavit in that one may take the calculated risk of not filing an affidavit whereas it is imperative to file a Defence unless the cause is to be conceded. The arguments for and against the legitimacy of a Memorandum contained in the Defence in an earlier action are nicely balanced but there is one consideration which prompts me, not without hesitation, to the view that such a Memorandum is subject to the bar sinister. That is, the comparative ease with which such a Memorandum can be extracted. It is easy to envisage circumstances in which a plaintiff who has an oral agreement but lacks a Memorandum of it, could start a bogus action alleging the oral agreement but misstating its terms or alleging a written agreement where none existed, and so forcing a Defence upon the lines of: "No such Agreement as is pleaded was made. What happened was .... and there is no Note or Memorandum thereof in writing signed by the Defendant." If the recital of what it is alleged happened is to be interpreted in a second action as a Note or Memorandum, the Defence has been led into a trap. The fact is that the Statute is not concerned with the bare truth; it is concerned with the bare truth supported by a Note or Memorandum; and to allow that document to be brought into existence in the manner which I have exemplified - an occurrence not difficult to bring about - would, in the words of Russell, L.J. in Hardy v. Elphick(19), go far to repeal the Statute. It is primarily for this reason that I would respectfully support the view of the three learned Lords Justices in that case and hold that a Note or Memorandum contained in the Defence in an earlier action cannot be relied upon in a subsequent action. Additionally, I am not uninfluenced by the fact that in the 300 years which have elapsed since the enactment of the Statute of Frauds, there can be found no single case in which the contrary view has obtained as against the same plaintiff in the two actions. Certainly, in the present case, the Respondents having pleaded the letter agreement, the Appellants, if they were not to be bound by that agreement, were obliged to set out faithfully all that had really happened - that is, to plead the oral agreement. 28. Whether that very small group of cases in which an affidavit in an earlier action has been held to contain a valid Note or Memorandum be correctly decided, and whether the view of Fry, L.J. in Lusas v. Dixon(5) be valid, I am not required to decide. It may be that the affidavit cases are marginally on the right side of validity by reason of the slightly greater freedom of action of a defendant in regard to supplying or not supplying an affidavit as compared with his positive obligation to file a Defence. 29. The Appellants' final attack upon the learned judge's conclusion related to payment of the deposit. It will be recalled that the oral agreement of the 22nd July, 1975 provided for a deposit of $300,000 to be paid to the Appellants' solicitors as stakeholders pending the signing of an Agreement for Sale and Purchase; the finding in the court below was that nothing had been stipulated about payment of that deposit "forthwith" or "immediately". In fact on the 1st August, 1975 the Respondents' solicitors wrote to the Appellants' solicitors returning, in duplicate, the Agreement for Sale and Purchase duly signed on behalf of their clients and requesting that it be signed by the Appellants. With that letter they enclosed a cheque for $300,000, the deposit money, with the proviso:-
30. Mr. Neill submitted that the provision as to payment of the deposit was one of fundamental importance and that the proviso which I have recited entitled the Appellants to withdraw from their bargain. In support of this proposition counsel quoted the case of Myton Ltd. v. Schwab-Morris(22) where it was held that the payment of a deposit upon the signing of a contract for the sale or lease of land was a condition precedent to the contract taking effect. In the present case the learned judge had found that the proviso accompanying the cheque for the deposit did not amount to repudiation of the contract on the part of the Respondents and Mr. Leggatt supported that finding arguing that the Appellants had not accepted the proviso as repudiation having, before the receipt of the cheque for the deposit, already decided to sell elsewhere. As it seems to me the proviso which accompanied the cheque did not amount to repudiation of the contract but was an unjustified exabundante cautela device which, had the Appellants been themselves minded to go on with the sale, would never have been accepted by their solicitors. In the case of Spettabile Consorzio Veneziano &c. v. Northumberland Shipbuilding Co.(23) Lord Atkins said:
In the present case no such intention was demonstrated, rather was the despatch of the cheque for the deposit an earnest of an intention to perform the contract provided that the Appellants could make good title. In Myton Ltd. v. Schwab-Morris(22) the deposit was never paid, the cheque in respect thereof being twice dishonoured. In the present case the deposit was paid though with a proviso which was never treated as, and was inconsistent with, repudiation. The learned judge was, with respect, right in finding that that proviso did not entitle the Appellants to withdraw from their bargain. 31. For these reasons I would allow the appeal. 32. The Respondents however have not remained passive upon this appeal but have counter-attacked with Respondent's Notices contending that the judgment in the court below should be affirmed upon the ground, additional or alternative to those relied on by the learned judge at first instance, that the two letters pleaded in the Statement of Claim themselves constituted a binding and enforcible agreement. The letters referred to were forwarded by the Appellants to the Respondents upon the 23rd July, 1975 that is, the day following the oral agreement for sale and they were in the following form:
Copies of both letters were returned to the Appellants each being endorsed "We Agree and Confirm the above purchase", the endorsement being signed on behalf of the Respondent company. These letters were held by the learned judge as not intended to reflect the whole of the agreement between the parties so that no action was sustainable upon them. 33. Mr. Leggatt, for the Respondents, claims that the letters constitute an agreement separate and distinct from the oral agreement with an independent life of its own subsisting as a holding Measure, until the formal agreement contemplated by the oral agreement, was signed. He contended that the agreement constituted by the letters was to be distinguished from a situation in which an agreement was partly oral and partly in writing; from a case where a written agreement was intended to supersede an oral agreement; and from a situation in which the question for consideration was whether a document constitutes a sufficient Memorandum. Why, Mr. Leggatt asks rhetorically, was the letter agreement entered into? The answer was because it was intended to bind and not as the learned judge held, "to facilitate the Plaintiffs in arranging for the deposit of $300,000 and, according to the 1st Defendants, to prevent the Plaintiffs from slipping out of their Agreement". The letters counsel urged, were from their very language intended to constitute an agreement and their effect could not be destroyed by showing that there was in addition an oral agreement which was subject to contract. Counsel likens the Letter agreement to the situation which obtained in Brance v. Cobarro(3) where an agreement for the sale of a farm contained in the clause:
It was held that the agreement in that case remained effective until the "fully legalised Agreement" was drawn up and signed. With respect, it does not appear to me, that the situation obtaining in the present case, as a result of the exchange of letters, is truly comparable with that found in Branca v. Cobarro(3) for the reason that in that case the so called provisional agreement contained all the terms which were subsequently to be incorporated in the "fully legalised Agreement drawn up by a solicitor". In the present case the formal agreement contemplated by the parties was to include other matters such as the completion date, the date for vacant possession and certain stipulations regarding the architect's plans. That however may be of no moment if it emerges that the letter agreement has in fact an independent existence from the oral agreement and that is, as it seems to me, what the letter agreement is, an independent agreement which does not purport to record the whole of what was agreed. Had it been intended so to do extrinsic evidence relating to the letters would have been admissible but on the authority of Beckett v. Nurse(24) I would hold that not to be the case. In Beckett v. Nurse(24) the document relied upon was held not to constitute a contract but to be a receipt which did not show that it was intended to contain all the terms agreed between the parties; therefore it was open to the Defendant to give evidence to show that the oral agreement between the parties contained terms not appearing in the document which could not, in that event, constitute the necessary Note or Memorandum of the oral contract. In that case Tucker, L.J. said that if the document was a contract, the judge would have been clearly right in disallowing any evidence to very, add to or contradict that contract. That is precisely the position here. The letters do in fact constitute a contract in writing for the sale of the property at a specified price and that contract, whatever may have been the intention of the parties in making it, existed independently of the oral contract between them. 34. Mr. Neill for the Appellants argues that having concluded an oral contract for sale which was intended to be formalised it would be wildly unlikely that the parties would then, before such formalization, enter into a written contract. For my part I do not find it so unlikely as Mr. Neill suggests and it is in any event what happened. Mr. Neill argues further that since the letters do not contain certain of the terms agreed orally, the unlikely intention of the parties in exchanging the letters appeared to have been that the vendors were for example giving up their rights to a deposit and the purchasers their right to vacant possession and certain architect's plans. I think the answer to this is, as was put forward by Mr. Leggatt, that the parties would not be losing any rights but would simply not have conferred upon them by the letter agreement that which would later be conferred by the formal Contract. 35. For these reasons I would allow the Respondents' cross - appeal and add only that I am not attracted by Mr. Neill's somewhat technical argument as to why it could not be allowed. That contention was to the effect that the Respondent's Notice had argued that the "judgment" in the court below should be affirmed on the grounds put forward. The judgment however had been for specific performance of the oral agreement which agreement had included terms not found in the exchanged letters for example, deposit, vacant possession, completion date and architect's plans. Thus, Mr. Neill Claimed, the request for the "judgment" to be affirmed on the basis of the letter agreement was, in his own words, "a total non-starter." This argument placed too narrow an interpretation on the wording of the Respondent's Notice which, though unfelicitous, is clearly seeking that the learned judge's conclusion, rather than the minutiae of the matter, should be upheld. It would be wrong in my view for this Court to deprive the Respondents of the fruits of a successful cross-appeal upon any such ground. 36. Cautiously however, Mr. Leggatt told us that if, in exercising its equitable jurisdiction to grant specific performance, the Court would only do so on condition that the Respondents consent to be bound also by the other terms of the oral bargain, the Respondents would so consent. 37. I see no reason to impose any such condition. The Respondents have succeeded upon the basis of an independent written contract and independent their success should remain. 38. Since I have held that there was a binding agreement for the sale of the property, albeit written, it is unnecessary to deal with the arguments addressed to us as to why the counterclaim should have succeeded. That counterclaim asked for a declaration to the contrary effect and for relief consequential upon such a declaration. 39. As I have indicated, I would allow both the appeal and the cross-appeal and order specific performance of the contract contained in the two letters of 23rd July, 1975. Representation: Neill, Q.C., Oswald Cheung, Q.C. & E. Chan (J.S.M.) for appellants Leggatt, Q.C. and D. Chang (Y.Y.Y.) for respondent. (1) [1975] Ch. 146 (2) [1878] 6 A.C. 1124 (3) [1974] K.B. 854 (4) [1928] 1 K.B. 397 (4) [1928] K.B. 397 (5) [1889] 22 Q.B.D. 357 (6) [1812] 15 East 102 (7) [1829] 9 B & C 561 (8) L.R.7 Ch. App. 406 (9) [1938] 119 LT 359 (10) [1938] 3 All E.R. 447 (11) [1881] 19 Ch. 169 (12) [1968] 1 Q.B. 124 (13) [1947] Ch. 645 (14) [1971] Ch. 850 (15) [1912] 2 I.R. 318 (16) [1919] 2 K.B. 590 (17) [1946] 174 LT 324 (18) [1876] 3 Ch. 637 (19) [1974] Ch. 65 (20) 28 L.J. (Q.B.) 1 (21) 4 Ovaw. 1 (22) [1974] 1 W.L.R. 331 (23) 121 LT 628 @ 634 (24) [1949] 1 K.B. 535 |