This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
Before proceeding to examine the cases in which appropriation of the purchase-money has been held to be sufficient to prevent interest from running, it may be remarked that the principle upon which these cases proceed appears unsatisfactory. Whether there is, or is not, an express stipulation for payment of interest, it is difficult to see why any dealing by the purchaser with the purchase-money, short of payment to the vendor under the contract, should prevent interest being payable. The authorities (h), however, appear to establish that appropriation may in certain cases prevent interest from running. To avoid dispute, it seems desirable that the contract or conditions should expressly provide that in all cases of delay in completion other than when caused from the wilful default or capricious refusal on the part of the purchaser, a purchaser should be allowed to determine his liability to pay interest by appropriating his purchase-money, and giving notice in writing of such appropriation to the vendor or his solicitor (i).
Appropriation of purchase-money: its effect on interest.
(e) 1922, 1 Ch. 162. See the observations of Sargant, J., at p. 168. Cf. Bennett v. Stone, 1902, 1 Ch. 226; 1903, 1 Ch. 509.
(f) Dahin v. Cope, (1827) 2 Rus. p. 176. Cf. Halkett v. Earl Dudley, 1907, 1 Ch. 590, 606.
(g) See The Golden Bread Co. v. Hemmings, 1922, 1 Ch. 162, 173.
(h) Williams v. Glenton, (1865) 34 Beav. 528; 1 Ch. 200; Re Monckton and Gilzean, (1884) 27 Oh. D. 555; 54 L. J. Ch. 257; Re Golds and Norton, (1885) 33 W. R. 333; but see Re Riley to Streat field, (1886) 34 Ch. D. 386; 56 L. J. Ch. 442.
The cases do not define satisfactorily what is a sufficient appropriation of money by the purchaser to relieve him from the liability to interest. In Winter v. Blades (k), the purchaser, upon entering into the contract, paid into his general account at his banker's a sum less than the purchase-money, but which, together with his existing balance, exceeded the purchase-money: and until completion his balance was never less than the purchase-money, except for a period of three days, when it was less by a small amount. The Court discharged the purchaser from payment of interest, in respect of the difference between his average balance for the period between the date of his notice to the vendor and completion, and his average balance for three years immediately preceding the contract. Lord St. Leonards describes the order in this case as "a singular order," and the correctness of the decision seems open to serious doubt (l).
What a sufficient appropriation of purchase-money to relieve purchaser from interest.
If a purchaser pays the money into a bank at which he has an account, it is prudent, if not essential, to make the payment to a separate account; and it should be placed on deposit, so that it would carry at least some interest (m).
Payment into bank at call.
When it appears that some considerable time must elapse before the title can be perfected, and the purchaser agrees to take possession and pay interest, he cannot, (unless there is great and unexpected delay,) by subsequently appropriating the purchase-money and giving notice, escape his liability to interest (n); but in one case(o), subsequently to the purchaser being let into possession, a difficulty arose in completing the title, and the purchaser paid, to a separate account at his bankers, a sum, as he thought, sufficient, but which was not quite sufficient to answer his purchase-money, and gave notice of the payment to the vendors, who merely objected to the form of the notice. Some months later, the purchaser having discovered his mistake, paid into the account the balance of the purchase-money with interest on such balance up to the time of such payment. It was held that the original payment into a separate account was a valid appropriation pro tanto, and relieved the purchaser from liability to interest.
Purchaser acceding to delay cannot afterwards appropriate purchase-money.
(i) See Statutory Condition No. 4 (2), in Appendix, and General Conditions of 1925, No. 7 (2). (k) (1825) 2 S. & S. 393.
(l) See Sug. 14th ed. 628; Macdonnell v. Harding, (1834) 7 Si. 178; 4 L. J. N. S. Ch. 10; Kershaw v. K., (1869) 9 Eq. p. 57.
(m) See Statutory Conditions, No. 4, in Appendix, and General Conditions of 1925, No. 7 (2).
(n) Dickinson v. Heron, Sug. 14th ed. 630, n.
(o) Kershaw v. A'., sup.
In Esdaile v. Stephenson (p), Sir John Leach laid it down that where there is an express stipulation as to the payment of interest by the purchaser it applies to every delay, however occasioned; unless, of course, the delay is owing to the gross misconduct or wilful delay of the vendor. In two subsequent cases, where the agreement was to pay interest during delay caused "by any unforeseen or unavoidable obstacles" (q), or "by any unavoidable obstacle" (r), it was held that the stipulation did not apply to delays in making out the title. Where, however, the agreement was to pay interest during delay arising "from any cause whatever except the wilful (s) default of the vendor" (t), or simply "from any cause whatever" (u), it was held, that interest was payable during delays occasioned by the state of the title; but, in the latter case, the order was made without prejudice to any application by the purchaser for compensation; and a different decision wascome to, when the expression was, "if from any cause whatever the purchase-money shall not be paid on, etc., the purchaser making default shall pay interest" (x). A condition containing the words "any cause whatever," even without anything to qualify their effect, would not, of course, authorise wilful delay on the part of the vendor (y). In a later case where, upon a sale by the Court, the expression "from whatever cause the delay may have arisen" was used, and a complete abstract, showing a good title, was not delivered, though repeatedly applied for, until eighteen months after the time fixed for completion, and the purchaser at the commencement of the delay paid the purchase-money into a bank at a low rate of interest, and gave notice thereof to the vendors, and that he should require compensation, it was held on appeal by Lord Cottenham, reversing the decision of Wigram, V.-c. (z), either that interest did not begin to run until the delivery of an abstract showing a good title; or that, if the condition bound the purchaser to pay interim interest, he was entitled to compensation for the non-performance by the vendor of his part of the contract (a).