Contract p1 beswick v beswick PDF

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[1968] A.C. 58 Beswick Appellant v. Beswick Respondent House of Lords 1967 Apl. 18, 19, 20, 24, 25; June 29

*58 Beswick Appellant v. Beswick Respondent House of Lords HL Lord Reid, Lord Hodson, Lord Guest, Lord Pearce and Lord Upjohn. 1967 Apl. 18, 19, 20, 24, 25; June 29 Contract--Parties--Third party, enforcement by--Procedure--Agreement for transfer of business--Consideration from transferee including promise to pay annuity to widow of transferor--Repudiation by transferee after death of transferor--Whether promise enforceable by widow as administratrix for recovery of all arrears and continuing payments for herself in personal capacity-- Whether action maintainable at law for benefit of third party--Whether remedy of specific performance of agreement for payment of money available--Whether third person not named in agreement may sue for "benefit of agreement ... respecting ... property"--Law of Property Act, 1925 (15 & 16 Geo. 5, c. 20), ss. 205 (1) (xx). Specific Performance--Contract to pay money--Enforcement by third party-- R.S.C., Ord. 42, r. 26. By section 56 (1) of the Law of Property Act, 1925: "A person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he may not be named as a party to the conveyance or other instrument ..." By section 205 (1): "In this Act unless the context otherwise requires, the following expressions have the meanings hereby assigned to them respectively, that is to say:- ... (xx) 'Property' includes *59 any thing in action, and any interest in real or personal property: ..." By an agreement in writing made in March, 1962, P. B., then aged over 70 and in poor health, agreed with his nephew, the defendant, that he would transfer to the nephew the goodwill and trade utensils of his coal round business in consideration of the nephew's employing him as consultant at >6 10s. a week for the rest of his life; and by clause 2 the nephew agreed for the same consideration to pay to P. B.'s wife after his death an annuity charged on the business at the rate of 5 a week for life. P. B.'s wife was not a party to the agreement. The nephew took over the business and in November, 1963, P. B. died. The nephew paid one sum of >5 to the widow, then aged 74 and in poor health, but refused to pay any further sum. The widow, having taken out letters of administration to her late husband's estate, brought an action against his nephew in her capacity as administratrix and also in her personal capacity asking (inter alia) for specific performance of the agreement. Held, that the widow, as administratrix of a party to the contract was entitled to an order for specific performance of the promise made by the nephew and was not limited to recovering merely nominal damages on the basis of the loss to the estate. Held, further, that the widow was not entitled to enforce the obligation in her personal capacity, since section 56 of the Act of 1925, which was a consolidation Act, did not effect a fundamental change in the law so as to allow a third party, not a party to a contract, to enforce it, and the context of the section excluded the application of the definition of "property" in section 205 (1). Per Lord Upjohn: I find it difficult to dissent from the proposition that section 56 should be limited in its application to real property, but equally difficult to agree with it. It may be that Parliament inadvertently altered the law by abrogating the old

common law rule in respect of contracts affecting personal property as well as real property, but it never intended to alter the fundamental rule laid down in Tweddle v. Atkinson (1861) 1 B. & S. 393 ( post, p. 105E-G). Tweddle v. Atkinson (1861) 1 B. & S. 393; Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. [1915] A.C. 847; 31 T.L.R. 399 H.L.(E.) ; White v. Bijou Mansions Ltd. [1937] Ch. 610; 53 T.L.R. 88; [1937] 3 All E.R. 269; [1938] Ch. 351; 54 T.L.R. 458; [1938] 1 All E.R. 546 C.A.; In re Schebsman [1944] Ch. 83; 60 T.L.R. 128; [1943] 2 All E.R. 768 C.A.; In re Miller's Agreement [1947] Ch. 615; [1947] 2 All E.R. 78 applied. In re Engelbach's Estate [1924] 2 Ch. 348 doubted. Decision of the Court of Appeal [1966] Ch. 538; [1966] 3 W.L.R. 396; [1966] 3 All E.R. 1, C.A. affirmed in part. APPEAL from the Court of Appeal (Lord Denning M.R., Danckwerts and Salmon L.JJ.). This was an an appeal, by leave of the House of Lords, by the *60 appellant John Joseph Beswick, who was the defendant in this action, from an order of the Court of Appeal dated June 22, 1966, whereby the judgment of Burgess V.-C. made in the Chancery of the County Palatine of Lancaster (Manchester District) dated October 11, 1965, was discharged and it was declared that an agreement dated March 14, 1962, made between the appellant and Peter Beswick, the deceased husband of the respondent Ruth Beswick, the plaintiff in the action (suing personally and as administratrix of the estate of Peter Beswick), ought to be specifically performed and carried into execution and it was ordered and adjudged accordingly, and it was ordered that the appellant do pay to the respondent 175 being the arrears of the annuity mentioned in clause 2 of the agreement accrued due at the date of the issue of the writ in the action, namely, July 15, 1964, and it was also ordered that the appellant do pay to the respondent for the remainder of her life from July 15, 1964, an annuity at the rate of 5 a week in accordance with the agreement. On March 14, 1962, Peter Beswick entered into a written agreement with his nephew John Joseph Beswick, the appellant. The agreement was prepared by a solicitor. The first two clauses of the agreement were as follows: "(1) Peter Beswick to assign to John Joseph Beswick the goodwill, motor lorry, scales, weights and other trade utensils of the business of a coal merchant hitherto carried on by him in consideration of the transferee employing the transferor as consultant to the said business for the remainder of the transferor's life at a weekly salary of 6 10s. 0d. (2) For the like consideration the transferee, in the event of the death of the transferor, to pay the transferor's widow an annuity to be charged on the said business at the rate of 5 0s. 0d. per week." By clause 6 the transferee also agreed to take over the transferor's liability to certain named creditors of the transferor. The appellant duly paid the salary during the life of Peter Beswick, who died intestate on November 3, 1963. Thereafter he made one payment of >5 to the respondent and then repudiated his liability to do so. The respondent took out letters of administration to his estate on June 30, 1964, and commenced this action, claiming 175 arrears of the annuity, an order for specific performance of the continuing obligation to pay the annuity and a declaration that the appellant was liable to pay the plaintiff the annuity. C.A. Settle Q.C. and James FitzHugh for the appellant. This *61 order of the Court of Appeal gives the respondent more than she is entitled to. In this case the administratrix and the person for whose benefit the agreement was made happen to be the same person, but they might be different persons. The cause of action is between the estate of the deceased and the other party to the contract. The plaintiff in an action should be given the appropriate remedy to compensate him. Specific performance, which is an alternative remedy to damages, is given when money is not an adequate remedy. But if a plaintiff is not entitled in law to be awarded any damages, he cannot be given specific performance. Suppose X covenants with A to make a gift to a charity, which is of no benefit to A, then A cannot get an order for specific performance, though in the case of a wedding present ordered and paid for by A for delivery to B the shop is acting as A's agent. But here the agreement gave the deceased an unenforceable promise by the appellant to pay the annuity. to the

respondent, and his administratrix cannot enforce a promise which he could not have enforced himself. To take the simple case of a sale by A to B, in consideration of which B agrees to pay the purchase price of 1,000 to X. If B is in breach of his contract the only remedy for A is to sue him for damages for the breach. Those damages will only be nominal damages of 40s., since no loss is usually caused to A by the fact that X has not received the money. The present case is not one in which the estate of the deceased suffers any loss by reason of the appellant's breach of contract. It was never entitled to receive any payment from him. Further, if the respondent is to be entitled as administratrix to have this agreement specifically performed and carried into execution, then the whole agreement must be specifically performed and that must include the obligation to discharge the liabilities of the deceased to the named creditors, which must be performed for the benefit of the estate: Fry on Specific Performance, 6th ed. (1921), p. 383, n. 1. The order of the Court of Appeal does not specify whether the payments were to be made to the respondent in her personal capacity or as administratrix. If the former is the case and it is enforceable by her pursuant to R.S.C., Ord. 45, r. 9, it gives her rights not contained in the agreement. If it gives her rights as administratrix to recover more than nominal damages for her benefit in her personal capacity, the effect is to create a trust which is not created by the agreement. *62 In re Miller's Agreement [FN1] is the latest case bearing on the present problem. It indicates that the agreement conferred on the widow (the respondent) no rights enforceable at law and that section 56 of the Law of Property Act, 1925, does not enable her to enforce the covenant. What Denning L.J. said in Smith and Snipes Hall Farm Ltd. [FN2] was incorrect. In White v. Bijou Mansions Ltd., [FN3] Simonds J. and the Court of Appeal did not hold that under section 56 every person who fell within the "scope and benefit" of a contract was entitled to sue, though not a party to the contract. Section 56 replaced section 5 of the Real Property Act, 1845, which was repealed by Schedule 7 to the Act of 1925. It applied only to covenants running with the land: Forster v. Elvet Colliery Co. Ltd., [FN4] affirmed in the House of Lords: Dyson v. Forster. [FN5] Section 5 was expressed to relate to "any tenements or hereditaments," that is, the land. The Act of 1925 was a consolidating Act and that indicates that section 56 was meant to have the same effect as its predecessor. There is no authority for applying section 56 to such a case as this, and it cannot apply to this type of agreement at all. The view expressed by Denning L.J. in Drive Yourself Hire Co. (London) Ltd. v. Strutt [FN6] was incorrect. From Chelsea and Walham Green Building Society v. Armstrong [FN7] and, what Simonds J. said in White's case [FN8] it would appear that section 5 of the Act of 1945 was concerned with persons named in the indenture as parties, and that being in fact a party to the agreement was not enough. Stromdale & Ball Ltd. v. Burden [FN9] was very far removed from the present case and so was White v. John Warwick & Co. Ltd. [FN10] The appellant's case is supported by Scruttons Ltd. v. Midland Silicones Ltd. [FN11] FN1 [1947] CH. 615; [1947] 2 All E.R. 78. FN2 [1949] 2 K.B. 500, 517; 65 T.L.R. 628; [1949] 2 All E.R. 179, C.A. FN3 [1937] Ch. 610; 53 T.L.R. 88; [1937] 3 All E.R. 269; [1938] Ch. 351; 54 T.L.R. 458; [1938] 1 All E.R. 546, C.A. FN4 [1908] 1 K.B. 629; 24 T.L.R. 265, C.A. FN5 [1909] A.C. 98; 25 T.L.R. 166, H.L.(E.). FN6 [1954] 1 Q.B. 250, 269-275; [1953] 3 W.L.R. 1111; [1953] 2 All E.R. 1475, C.A. FN7 [1951] Ch. 853; [1951] 2 T.L.R. 312; [1951] 2 All E.R. 250. FN8 [1937] Ch. 610, 624-625.

FN9 [1952] Ch. 223; [1951] 2 T.L.R. 1192; [1952] 1 All E.R. 59. FN10 [1953] 1 W.L.R. 1285; [1953] 2 All E.R. 1021, C.A. FN11 [1962] A.C. 446, 467, 473, 494. It is not open to anyone to say that the House of Lords did not adopt the decisions relating to section 56. A consolidating statute like the Act of 1925 is assumed not to be intended to alter the law: Maxwell on the Interpretation of Statutes, 11th ed. *63 (1962), p. 23. The best meaning for the section was found by Simonds J. in White v. Bijou Mansions Ltd. [FN12] The result is that it has no application here and the respondent cannot recover in her personal capacity. FN12 [1937] Ch. 610. Therefore the only action with which the House is concerned is that of the respondent as the administratrix. In that capacity she is not entitled to specific performance: see Ryan v. Mutual Tontine Westminster Chambers Association. [FN13] When damages are inadequate as a remedy the court may grant specific performance to the person who has the cause of action - that last point is important. But the court cannot do so in the circumstances of the present case. It cannot grant an order for specific performance for the benefit of someone who was not a party to the contract, since nominal damages are adequate to compensate the estate for the breach of contract. Here, as in In re Schebsman, [FN14] there was no enforceable trust. Section 56 being out of consideration, the court, envisaging this as an attempt to obtain payment to someone not a party to the contract, will not grant the personal representative specific performance. FN13 [1893] 1 Ch.. 116, 124; 9 T.L.R. 72; C.A. FN14 [1944] Ch. 83; 60 T.L.R. 128; [1943] 2 All E.R. 768, C.A. Here an order in favour of the respondent in her personal capacity would infringe the rights of the creditors of the estate. Such an order should not be made and the estate is entitled to nominal damages only. That is the strict position, because the respondent in her personal capacity is not in any position to enforce her claim, for the Court of Chancery would never grant specific performance to give the benefit of a contract to a person, whether a party or not, which he could not get for himself. Hohler v. Aston, [FN15] a case of an executory contract, is distinguishable from this case, and so is Keenan v. Handley, [FN16] where the mother would now be held to have been agent or trustee for her infant daughter. Brough v. Oddie [FN17] is relied on. FN15 [1920] 2 Ch. 420, 424. FN16 (1864) 12 W.R. 930; 2 De G.J. & Sm. 283. FN17 (1829) 1 Russ. & M. 55. The courts will not grant specific performance to enforce a contract between A and B in favour of C, although it is otherwise if the contract is partly in favour of B and partly in favour of C. Peel v. Peel [FN18] was an interlocutory application and decided nothing. As to the availability of damages in a Chancery action at the time of this case and of Keenan's case, [FN19] see Fry on Specific Performance, p. 601. Adderley v. Dixon [FN20] is distinguishable. FN18 (1869) 17 W.R. 586. FN19 De G.J. & Sm. 283.

FN20 (1824) 1 Sim. & St. 607. *64 The courts will not order specific performance so as to give a party to a contract greater rights than he has under it, nor will it give a third party rights which he did not previously have; nor will money due under a contract be ordered to be paid to the promisee on the basis of a trust, which did not previously exist, for the benefit of a third party. James FitzHugh following. A promisee cannot be a trustee for himself and during his lifetime he has complete freedom to enforce a promise or not as he may think fit. On his death, a trust arises for the benefit of persons entitled to his estate. His personal representative must do his duty to that estate and enforce all rights for its benefit: In re Sinclair's Life Policy. [FN21] FN21 [1938] Ch. 799, 802, 805; 54 T.L.R. 918; [1938] 3 All E.R. 124. Here such damages as are recovered by the administratrix for the benefit of the estate she must hold for its benefit and, if the administratrix elects to take an order for specific performance, she deprives herself of the right to get damages for the benefit of the estate. It is her duty to the estate not to deprive herself of that possibility. The persons who have an interest in the estate are the persons who are beneficially entitled to its assets; the administratrix owes no duty to third parties. In this case damages cannot be considered an inadequate remedy, because the estate cannot get more. See also In re Engelbach [FN22] and In re Schebsman. [FN23] FN22 [1924] 2 Ch. 348, 355-356. FN23 [1944] Ch. 83, 100. Hugh Francis Q.C. and D. G. Nowell for the respondent. The main point is whether the administratrix of the deceased in her representative capacity and therefore as a party to the contract by representation is entitled to sue on the contract and have it specifically performed. It has always been admitted that the administratrix as such has a right to sue on the agreement but it is said that the only remedy is to recover nominal damages. But she also has the common law remedy of suing for arrears of the amounts as they fall due and for a declaration of liability for future payments. She is further entitled to the equitable remedy of specific performance, and that is asked for because it is more beneficial to the respondent and will avoid a multiplicity of actions. The Vice-Chancellor was dissuaded from finding for the respondent by Miller's case. [FN24] It is not submitted that that case was wrongly decided, since the daughters there could neither sue nor compel the personal representative of their father to sue. FN24 [1947] Ch. 615. The following submissions are made: (1) This contract is one *65 of a kind of which the courts of equity have habitually granted specific performance, it is a contract for the sale and purchase of a business, part of the price of which was the payment of an annuity to the vendor's widow. (2) The appellant has received the full benefit of the contract, and in such a case a court of equity will consider itself bound to ensure that he will fulfil his part of the agreement because elementary justice requires it: see Hart v. Hart. [FN25] FN25 (1881) 18 Ch.D. 670, 684-685. (3) The appellant's refusal to pay the respondent the annuity is unconscionable and a breach of faith; it is hard to imagine a case more appropriate for the intervention of equity. (4) The respondent is entitled to specific performance on the ground of mutuality. If

the deceased vendor and the respondent had both been killed in a road accident before the business was handed over, the defendant as purchaser could have obtained specific performance of the contract: see Mortimer v. Capper [FN26] and Jackson v. Lever. [FN27] FN26 (1782) 1 Bro.C.C. 156. FN27 (1792) 3 Bro.C.C. 605. (5) The remedies at common law are either inadequate or less convenient than the equitable remedy, since the common law remedy would entail a multiplicity of actions: see Swift v. Swift. [FN28] FN28 (1841) 3 Ir.Eq.R. 267, 278. The argument for the appellant confuses two questions: (a) whether the widow as administratrix has a cause of action, and (b) whether it is proper for the administratrix in a case of this sort to bring proceedings at the cost of the estate. In this case the respondent suing as administratrix is the only beneficiary of the estate. As to the duty of a legal personal representative with respect to the deceased's contracts, see Ahmed Angullia v. Estate and Trust Agencies (1927) Ltd. [FN29] There is no question here of any right to sue which might result in a valuable asset for the estate. No question of administration arises. The annuity was not payable to the deceased or to his estate: see In re Schebsman. [FN30] The payment of the annuity to the widow in the present case is not dependent on the payment of the debts set out in the agreement. As to this see Fry on Specific Performance, 6th ed. (1921), p. 383, n. 1, and pp. 390-2, paras. 839-842. The proper order is for specific performance of the agreement to pay the annuity and, as to the rest, the court can give liberty to apply. FN29 [1938] A.C. 624; 54 T.L.R. 831; [1938] 3 All E.R. 106, P.C. FN30 [1943] Ch. 366. Drimmie v. Davies [FN31] supports the submission that specific *66 performance is the proper remedy here. Ahmed Angullia's case [FN32] shows that the prima facie duty of the administratrix is to see that the contracts entered into by...