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Case Number

Privy Council Appeal No. 56 of 1945

Advocates

Gluckstein
Bartlett
Piper
Piper Smith
Hugh Goitein
W.S. Parnell Kerr

Judges

Mr. James Stratford
Lord Normand
Justice Lord Roche

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Smart Summary

Concise, Structured Summary of the Opinion

Factual and Procedural Background

The appeal arises from a judgment of the Supreme Court of Palestine which allowed an appeal from a judgment of the District Court of Jerusalem and ordered payment of P.3,100 against the appellants; there is a cross-appeal by the respondent seeking a larger sum.

The parties entered an original agreement dated 22-12-1934 (as modified by letters of 12 and 24-1-1935) under which Father Couvreur (the appellant), on behalf of the second appellant, agreed to sell land at Latrum in two parcels: one of 863 dunams for P.13,823 (approximately) and another of 148 dunams for P.2,371 (approximately). The respondent paid a deposit of P.2,000. The balance was to be paid (as described in the agreement) with P.5,000 on 1-6-1935 and P.1,000 monthly thereafter.

The respondent failed to perform under the original contract; subsequent concessions were made. On 12-1-1938 a new agreement cancelled the previous contract and its supplements, confirmed the transfer of 148 dunams to the respondent, and provided:

Clause 3: appellant to transfer, when requested by the respondent, an additional 100 dunams as paid for and without further consideration.
Clause 4: respondent to pay P.3,100 by 12-1-1941.
Clause 5: appellant to transfer the remaining 763 dunams on payment of P.3,100.
Clause 6: respondent to prepare the transfer transaction at the Land Registry at his expense, to call upon the appellant to appear at the Land Registry and effect the transfer, and to pay the fees of transfer.
Clause 7: respondent might call on the appellant to transfer the 763 dunams in lots of not less than 60 dunams each; the transaction for sale and transfer to be prepared and followed up by the respondent at his expense in all respects.

The respondent did not pay any further money, did not request the 100 dunams, did not call the appellant to attend at the Land Registry, and took no steps to prepare the transaction during the three years ending 12-1-1941.

On 28-2-1940 the Palestinian Land Transfers Regulations, 1940 were published. Regulation 2 divided Palestine into Zones A and B; the lands in question lay in Zone A. Regulation 3 prohibited transfer of land in Zone A except in specified circumstances, subject to the Commissioner's power to permit certain transfers or mortgages. The appellant did not apply for any permit; the respondent applied for a permit on 17-3-1941 and it was granted on 17-10-1941.

In January 1943 the respondent commenced the present action. The claim was initially for damages for breach of contract; it was later amended to plead two alternative grounds: (1) that performance was prohibited by the Land Transfers Regulations and (2) alternatively that the parties by mutual consent had enlarged the time for performance until the High Commissioner's consent to transfer could be obtained. The case thus became an alternative claim for restitution (return of money paid for a consideration which had failed) or damages for breach after the permit was granted.

Issues were tried in the District Court, which found the respondent was at no time willing and able to perform, the appellant was always willing to perform during the contract's currency, time was of the essence, there had been no extension of time, and therefore the respondent could not recover damages nor restitution in respect of the 763 dunams. As to the 100 dunams, the District Court found the appellant remained willing to transfer and there had been no failure of consideration.

The Supreme Court reversed the District Court, apparently concluding that the Land Transfers Regulations frustrated the contract and (incorrectly) assuming the respondent had paid P.3,100; it ordered repayment of P.3,100. The respondent's counsel later admitted inability to support that judgment and that the assumption that any sum had been paid was erroneous.

Legal Issues Presented

Whether the Palestinian Land Transfers Regulations, 1940 operated to prohibit performance of the contract or otherwise frustrated it.
Whether the respondent had paid the P.3,100 under the 12-1-1938 agreement and, if so, whether restitution (repayment) was appropriate.
Whether the time for performance under the contract was enlarged (either by mutual consent of the parties or by implication) to allow the High Commissioner's permit to be obtained.
Whether the duty to apply for any permit required by the Land Transfers Regulations lay on the appellant (vendor) or on the respondent (purchaser) under the contract.
Whether, as a matter of contract law, a vendor must allow a purchaser a reasonable extension of time beyond a fixed deadline to obtain a permit where the contract made time of the essence.

Arguments of the Parties

Respondent's Arguments

As pleaded and tried in the District Court: performance was prohibited by the Land Transfers Regulations; alternatively, the parties mutually enlarged the time for performance until the High Commissioner's consent could be obtained.
In the appeal before Their Lordships, respondent's counsel advanced two alternative contentions (not aligned with the pleaded case): (1) that the appellant had the duty under the Land Transfers Regulations to apply to the High Commissioner for a permit to transfer the lands; and (2) that the respondent was entitled to a reasonable extension of time to allow the permit to be obtained and that the permit was in fact granted before the expiry of such reasonable extension.

Appellant's Position (as recorded in the opinion)

The appellant considered the contract at an end as regards the 763 dunams on 12-1-1941, but remained ready and willing to transfer the 100 dunams on the respondent's request.
The appellant did not apply for any permit and refused to comply with a Notarial Notice served by the respondent on 13-8-1942 calling on him to sign an application and to appear at the Land Registry.
Contractual terms (notably Clauses 6 and 7) placed on the respondent the duty to prepare and follow up all steps necessary for effecting the transfer at his expense, including calling on the appellant to appear at the Land Registry and paying fees.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
(1914) 1 KB 24 = 60 TLR 72	Authority cited in the opinion to show that the Palestine Land Transfers Regulations did not operate to frustrate the contract.	The opinion states the regulations did not have the effect of frustrating the contract and cites this case in support of that proposition; the respondent's counsel conceded he could not rely on the Supreme Court's view that the regulations frustrated the contract.
(1940) 57 TLR 47	Decision that under a CIF contract the seller had a duty to apply for a permit (in that case, for sale of butter beans under the Cereal Products Order, 1939).	The court noted the decision was inevitable for a CIF contract but held it had no application to the present contract, which bears no resemblance to a CIF contract for sale of goods.
(1943) 60 TLR 31	Decision that when importation of goods is prohibited except under licence, the duty to obtain the licence rested on the owner of the goods.	The court observed that this decision likewise was driven by the nature of those contracts and prohibitions and was inapplicable to the land-sale contract before the court.
(1916) 1 KB 402	Authority for the proposition that a purchaser may be given a reasonable time to see whether a prohibition will be maintained or a permit granted, in contracts to be carried out in a reasonable time.	The court noted that such authorities govern contracts to be performed within a reasonable time, but held they did not apply here because the present contract was to be completed within a fixed period and had been found to make time of the essence.
(1920) 36 TLR 769	Another case applying the proposition that reasonable time may be allowed in appropriate contracts.	The court treated it similarly to (1916) 1 KB 402: not applicable because the present contract was for performance within a fixed time and time was of the essence.

Court's Reasoning and Analysis

The court proceeded from the factual findings of the District Court (which were accepted by the Supreme Court) that the respondent was at no time willing and able to carry out his part of the contract during its currency, while the appellant remained willing to perform; and that time was of the essence and there was no extension of time by agreement.

The Supreme Court's reversal was founded on two errors, as identified by Their Lordships: (a) the Supreme Court treated the Land Transfers Regulations as having frustrated the contract, and (b) it proceeded on a mistaken supposition that the respondent had paid P.3,100. The respondent's counsel conceded both points.

The court then considered the alternative contentions advanced for the respondent before Their Lordships (that the appellant had the duty to apply for a permit, or that the respondent was entitled to a reasonable extension). The court held these contentions were inconsistent with the respondent's pleaded case and issues agreed for trial, and therefore could not be advanced on appeal where they had not been adjudicated below.

Turning to the merits, the court analyzed the contract wording (Clauses 6 and 7) and concluded that the contractual duty to prepare, follow up and take all steps necessary for effecting the transfer at the Land Registry rested on the respondent. The court observed the wording was broad enough to cover steps not foreseen when the contract was made, such as seeking a permit required by supervening regulations.

The court considered the precedent authorities relied upon by respondent's counsel: the CIF/import cases imposing a duty to obtain licences were inapposite because of the very different contractual incidents in those cases; and authorities permitting reasonable time were confined to contracts to be performed in a reasonable time, whereas the present contract required performance within a fixed period and expressly made time of the essence. To require the vendor to allow a reasonable time beyond the fixed period for the purchaser to do what the contract required of him would effectively create a new contract for the parties, which the court would not do.

On these bases — (i) that the District Court's factual findings showed the respondent's inability/unwillingness to perform and time was of the essence, (ii) that Clauses 6 and 7 placed the burden of procedural steps (including obtaining permits) on the respondent, and (iii) that the authorities cited by respondent's counsel did not apply — the court concluded the Supreme Court's judgment was unsustainable.

Holding and Implications

APPEAL ALLOWED; CROSS-APPEAL REFUSED.

The court ordered that the judgment of the Supreme Court be set aside and that the judgment of the District Court be restored. The respondent was ordered to pay the appellant's costs of the appeal and cross-appeal and in the Courts below.

Direct effect on the parties: the District Court's findings and dismissal of the respondent's claims (as to the 763 dunams and as to restitution) stand restored; the appellant remains willing to transfer the 100 dunams on request, and the respondent bears costs. The opinion does not articulate any broader rule or new precedent beyond applying ordinary principles of contract interpretation (assignment of contractual duties, effect of a time-of-the-essence clause, and limits on allowing reasonable extensions where performance was fixed by contract).

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Paul Couvreur And Another v. M.G. Shapiro

Lord Normand-

This is an appeal from a judgment of the Supreme Court of Palestine allowing an appeal from a judgment of the District Court of Jerusalem and inter alia decreeing for payment of 3,100 against the appellants. There is also a cross - appeal by the respondent, the purpose of which is to enable him to claim a larger sum than that awarded by the Supreme Court.

[2] By an agreement dated 22 - 12 - 1934. as modified by subsequent letters of 12 and 24 - 1 - 1935, the appellant Father Couvreur (hereinafter called the appellant) on behalf of the second appellant agreed to sell to a nominee of the respondents certain land at Latrum in two parcels, one of 863 dunams or thereby at a price of P.13,823 or thereby, and the other of 148 dunams or thereby at a price of p.2,371 or thereby. A deposit of 2.000 was paid by the respondent, and the appellant agreed to accept the balance as follows: - p.5,000 on 1 - 6 - 1935, and p.1,000 monthly thereafter. The respondent was not able to fulfil his undertakings under the agreement and various concessions were made to him by subsequent agreements. Finally on 12 - 1 - 1938, by which time the respondent had paid in all P.9,500 and had received a transfer of 148 dunams, a new agreement was made. It cancelled the contract of 22 - 12 - 1934, and all its supplements. It declared that 148 dunams had already been transferred to the respondent and by cl. 3 the appellant undertook, when requested by the respondent, to transfer to the respondent 100 dunams, adjacent to the 148 dunams already delivered, as paid for and without further consideration. By cl. 4 the respondent agreed to pay 3 100 by 12 - 1 - 1941. By cl. 5 the appellant agreed to transfer the remaining 763 dunams on payment of the 3, 100. By cl. 6 the respondent undertook to prepare the transaction of transfer at the Land Registry at his own expense and to call upon the appellant to appear at the Land Registry and effect the transfer. He also undertook to pay the fees of transfer. Clause 7 provided that the respondent might call on the appellant to transfer the 763 dunams in lots of not less than 60 dunams each. It also provided that the transaction for sale and transfer should be prepared and followed up by the respondent at his expense in all respects. No part of this agreement was ever carried out by the respondent: he paid no more money: be did not request the appellant to transfer the 100 dunams: he did not call upon the appellant to attend at Land Registry, nor did be take any step towards preparing the transaction of sale and transfer during the three years ending 12 - 1 - 1941.

[3] On 28 - 2 - 1940, the Palestinian Land Transfers Regulations, 1940, were published. Regulation 2 divided Palestine into two zones, A and B. The lands with which this appeal is concerned are in Zone A. Regulation 3 inter alia provided :

''The transfer of land situated within Zone A save to a Palestinian Arab shall be prohibited :

Provided that the Commissioner may, if he considers it desirable so to do-

(a) permit of the mortgage of such land to such companies or societies as he may approve :

(b) permit the transfer of such, land by Palestinian Arabs to religious or charitable institutions;

(c) permit the transfer of such land to persons not being Palestinian Arabs if in his opinion such transfer is necessary for the purpose of consolidating existing holdings, or of effecting the parcellation of village musha within the meaning of the Land (Settlement of Title) Ordinance;

(d) in the case of land within the said Zone owned by persons not being Palestinian Arabs, by general or special order, permit the transfer of such land to persons not being Palestinian Arabs."

The appellant took no step at any time to obtain a permit from the High Commissioner, but the respondent made an application for a permit on 17 - 3 - 1941, and it was granted on 17 - 10 - 1941.

[4] The appellant regarded the contract as at an end, so far as the 763 dunams were concerned, on 12 - 1 - 1941, but he remained ready and willing, as he still is, to transfer the 100 dunams as soon as the respondent made a request for transfer. The respondent on the other hand attempted to negotiate for a reduction of the price of the 763 dunams, but nothing came of this negotiation and in September 1941, the appellant finally decided that he would make no new agreement for the sale of the 763 dunams on any terms. On 13 - 8 - 1942, the respondent served on the appellant a Notarial Notice calling on him to sign an application to the Land Register and to appear at the Land Registry to receive the price due under the contract of 12 1 - 1938, and to effect a transfer of the 863 dunams to the respondent. The appellant did not comply with this notice.

[5] In January 1943, the respondent commenced this action. It was as originally framed an action for damages for breach of contract, the breach being the appellant's failure to transfer the lands when he was asked to transfer them. But subsequently the claim was amended and two new grounds of action were tabled;- (1) that performance of the contract was prohibited by the Land Transfers Regulations and, (2) alternatively, that the parties by mutual consent had enlarged the time for carrying out the agreement of 12 - 1 - 1938, until the consent of the High Commissioner could be obtained to the transfer of the land. The case thus became in effect an alternative case: an action for the return of money paid for a consideration which had failed, or an action of damages for breach of contract because the appellant had refused to transfer the lands when he was asked to do so after the High Commissioner had granted a permit to the respondent. Issues were agreed for the trial of the case in the District Court. The learned Judge after hearing evidence found that the respondent, on whose veracity and conduct be made severe criticisms, was at no time willing and able to carry out his part of the contract whereas the appellant was during the three years of its currency always willing to carry out his obligations under it. He also found that time was of the essence and that there was no extension of time by agreement of parties. He held therefore, as regards the 763 dunams, that the appellant was not in breach of his contract, but that the respondent was not willing to carry out his part during its currency and therefore could not recover damages; nor could he recover money paid in respect of a consideration which had failed since he had in fact paid nothing for the 763 dunams. As regards the 100 dunams he held that the appellant had always been and was still willing to execute a transfer and bad never been in breach of his contract and that there had been no failure of consideration in respect of the price paid for these lands.

[6] The Supreme Court, reversing this decision on appeal, appears to have based its judgment on the proposition of law that the Palestine Land Transfers Regulations had operated a frustration of the contract, and on the supposition that the respondent had paid p.3,100 under the contract of 12 - 1 - 1938, and on this basis the Court ordered the appellant to repay p.3,l00 to the respondent. The respondent's counsel, however, admitted that he was unable to support the judgment, and it is clear that the Palestine Land Transfers Regulations did not have the effect of frustrating the contract: (1914) 1 KB 24=60 TLR 72.1 The respondent's counsel had also to admit that the Supreme Court had fallen into error in supposing that any sum had been paid under the contract. The judgment of the Supreme Court therefore needs no further consideration, but it is important to notice that the findings of fact by the learned Judge of the District Court which have been noticed above were accepted by the Supreme Court.

7. Counsel for the respondent in the present appeal put forward an argument which turned on the two contentions: - (1) that the appellant, and not the respondent, had the duty arising, out of the Land Transfers Regulations to apply to the High Commissioner for a permit to transfer the lands; (2) that in any event the respondent was entitled to a reasonable extension of time to allow the permit to be obtained from the High Commissioner and that the permit was in fact obtained before the expiry of such reasonable extension. These contentions are inconsistent with the respondent's amended pleadings and with the agreed issues, in which the respondent's position was that the Land Transfers Regulations prohibited performance of the contract, or alternatively, that the time for performance was enlarged by mutual consent. The respondent cannot be heard to advance an argument which is irreconcilable with the case put forward in his pleadings and which has consequently not been adjudicated upon by the Courts below. But it is also manifest that neither of the contentions now put forward can be made good by the respondent. The sixth and seventh clauses of the contract expressly lay on the respondent the duty of preparing and following up in all respects the transaction for sale and transfer of the lands, and this stipulation is the inevitable sequel of the earlier provisions of the contract by which it falls to the respondent to request the appellant to transfer the 100 dunams of land, to make payment of the p.3,100 and to call upon the appellant to transfer the 763 dunams in lots of 50 dunams each. It is clear, therefore, that under the contract the duty of taking all steps necessary for effecting a transfer in his favour rested on the respondent. The wording of the stipulation is wide enough to cover a step not foreseen to be necessary at the time when the parties entered into the contract, such as obtaining a permit required by supervening regulations. Counsel for the respondent relied on (1940) 57 TLR 47,2 in which it was held that the seller under a CIF contract bad a duty to apply for a permit for the sale of butter beans under the Cereal Products Order, 1939. That is a decision which was inevitable having regard to the incidents of a 0. I. P. contract, but the contract in the present case has no resemblance to a C. I. F. contract for the sale of goods. Counsel also cited (1943) 60 TLR 31,3 which decided that when the importation of goods is prohibited except under licence, it is the duty of the owner of the goods to obtain the licence. That also was a decision which was inevitable having regard to the nature of the contract and the prohibition, but it has no application to the present contract. The proposition that a reasonable time must be allowed to see whether the prohibition against transfer would be maintained or a permit to transfer would be granted has been applied to contracts which fall to be carried out in a reasonable time, and (1916) 1 KB 4024 and (1920) 36 TLR 769,5 are cases dealing with such contracts, but here the contract fell to be completed within a fixed period and it has been conclusively found that time was of the essence. To require of the vendor that he should allow reasonable time beyond the fixed period to enable the purchaser to do what he was required to do by the terms of the contract, would amount to making a new contract for the parties.

[8] On all these grounds, therefore, their Lordships are of opinion that the appeal should be allowed and the cross appeal refused; that the judgment, of the Supreme Court should be set aside and the judgment of the District Court restored. Their Lordships will humbly so advise His Majesty. The respondent will pay the appellant's costs of the appeal and the cross appeal and in the Courts below.

Appeal allowed.

Paul Couvreur And Another v. M.G. Shapiro

Concise, Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Respondent's Arguments

Appellant's Position (as recorded in the opinion)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Paul Couvreur And Another v. M.G. Shapiro

Comments