Case: McDonald v Dennys Lascelles Ltd [1933] HCA 25 ; (1933) 48 CLR 457
Outcome: discussed
The proper identification of this promise and its relationship to the payment of the purchase price is to be found in a number of cases of the highest authority. In McDonald v Dennys Lascelles Ltd [1933] HCA 25 ; (1933) 48 CLR 457 at 475-476, Dixon J (as he then was) quoted Sir John Salmond in Ruddenklau v Charlesworth [1925] NZLR 161 at 164-165 in expressing the relevant principle: If the purchaser refuses to complete the executory contract to buy the land, the vendor is not entitled to sue for the purchase money as a debt . He is entitled to sue for specific performance or for damages for the loss of his bargain. [emphasis added] Sir John Salmond continued: It is only when the contract has been completed by the execution and acceptance of a conveyance that unpaid purchase money may become a debt and can be recovered accordingly. [emphasis added] This general rule could be rebutted by clear intention in the contract for the payment of the purchase price, or part of it, on a fixed day, other than the day for completion. 44 That the obligation, subject to a revealed contrary intention, to pay the purchase price accrues fully only on settlement was reiterated in Sunbird Plaza Pty Limited v Maloney [1988] HCA 11 ; (1988) 166 CLR 245. In that case, the vendors sought recovery against guarantors of a contract for the sale of land in respect of which an order for specific performance had been made consequent upon repudiation by the purchaser. The proper construction of the guarantee was held not to support a conclusion that the guarantors were liable. Mason CJ (with whom Deane, Dawson and Toohey JJ agreed) said the following at 253-254: The general rule, stated by Dixon J in McDonald v Dennys Lascelles Ltd [1933] HCA 25 ; (1933) 48 CLR 457 , at p 476, is that a vendor of land cannot sue for the price before the contract is completed by conveyance, unless the price is expressed to be payable on a fixed day, not being the day fixed for completion. Here the balance of the purchase price was payable "upon settlement". Settlement has not taken place and there has been no conveyance of the property sold. Once this is accepted, the appellant is faced with a daunting task in making good the submission that the respondent guarantors are liable under their joint and several guarantee to pay the balance of the purchase price and interest thereon, notwithstanding the absence of an accrued liability on the part of the purchaser to make the payment . [emphasis added] In the same case, Gaudron J (with whose reasons in this respect Mason CJ (and so also the other members of the Court) agreed) at 267-268 also referred to McDonald v Dennys Lascelles [1933] HCA 25 ; 48 CLR 457. 45 Thus, whilst there is a promise in an executory contract to pay the balance of the purchase price on settlement, there is no "debt" ( McDonald v Dennys Lascelles ) and no "accrued liability on the part of the purchaser to make the payment" (see Mason CJ in Sunbird Plaza 166 CLR at 254), until completion. This is not to deny, however, that the purchaser's interests will be protected in equity consistent with the nature and extent of the terms of the contract of sale: Stern v McArthur [1988] HCA 51 ; (1988) 165 CLR 489 at 522-23, and that the promise can be otherwise seen as unqualified. 46 These cases were applied by von Doussa J (with whose reasons Jenkinson and Spender JJ agreed) in Gasparin v Commissioner of Taxation (1954) 50 FCR 73. That case concerned the question as to when income was derived from the sale of allotments of land. It was held that each allotment remained trading stock on hand until settlement. After referring to McDonald v Dennys Lascelles , Sunbird Plaza and Automatic Fire Sprinklers Pty Limited v Watson [1946] HCA 25 ; (1946) 72 CLR 435 at 463-464 (as to which case, see below), von Doussa J said at 77 that these cases reflected a general rule about unsettled contracts of sale. His Honours said that at the end of the year of income in question: ...there were no debts owing by the purchasers to the joint venturers. In each case the promise to pay the balance of the purchase price "at settlement" remained executory until settlement occurred at which time a conveyance was executed, accepted and delivered to the purchaser. Until these events there was no accrued liability on the part of the purchaser to pay the balance of the purchase price. [emphasis added]