Johnson v Agnew [1980]
House of Lords
Basic Facts: Mrs. Adeline Agnew failed to complete the purchase of Scheepcote Grange, a farm owned by Michael and Renee Johnson, for £117,000, as agreed on November 1, 1973. Although the Johnsons, facing financial difficulties, were ready by January 1974, Agnew took no action. The Johnsons sought specific performance in March 1974, won summary judgment in June, but the order was only drawn up in November. During this time, the mortgagees obtained possession and sale orders. Given the futility of enforcing against Agnew, the Johnsons abandoned the effort. The property was eventually sold for £48,000, insufficient to clear the mortgage debts, leading to the Johnsons' bankruptcy.
Issue for the Court: When should damages be assessed in cases of contract breach, particularly when specific performance has been sought?
Held: The House of Lords established key principles regarding the date for assessing damages in contract disputes, emphasizing flexibility in determining the appropriate date based on justice.
Lord Wilberforce:
Prospective Termination: Termination for breach of contract is prospective, not retrospective. A repudiatory breach discharges both parties from future performance but preserves accrued rights, allowing for damages.
Specific Performance and Termination: Seeking specific performance does not preclude the claimant from terminating the contract due to the defendant's repudiatory breach. Acceptance of such a breach does not result in rescission ab initio.
Court Oversight in Specific Performance: When a decree of specific performance is issued, the court retains jurisdiction to oversee performance and determine whether the obligation can be discharged.
Date of Damages Assessment: Common law damages are typically assessed at the date of breach, but the court may choose a different date if required by justice, especially when the innocent party continues efforts to complete the contract.
Equitable Damages: The principles for awarding common law damages also apply to equitable damages under Section 50 of the Supreme Court Act 1981, ensuring consistency in legal principles.