[1968] AC 58
House of Lords
The facts are stated in the judgement of Lord Reid.
Lord Reid
My Lords, before 1962 the respondent's deceased husband carried on business as a coal merchant. By agreement of Mar 14, 1962, he assigned to his nephew, the appellant, the assets of the business and the appellant undertook first to pay to him £6 10s per week for the remainder of his life and then to pay to the respondent an annuity of £5 per week in the event of her husband's death. The husband died in November, 1963. Thereupon the appellant made one payment of £5 to the respondent, but he has refused to make any further payment to her. The respondent now sues for £175 arrears of the annuity and for an order for specific performance of the continuing obligation to pay the annuity...
It so happens that the respondent is administratrix of the estate of her deceased husband and she sues both in that capacity and in her personal capacity. So it is necessary to consider her rights in each capacity.
For clarity I think it best to begin by considering a simple case where, in consideration of a sale by A to B, B agrees to pay the price of £1,000 to a third party X. Then the first question appears to me to be whether the parties intended that X should receive the money simply as A's nominee so that he would hold the money for behoof of A and be accountable to him for it, or whether the parties intended that X should receive the money for his own behoof and be entitled to keep it. That appears to me to be a question of construction of the agreement read in light of all the circumstances which were known to the parties. There have been several decisions involving this question... I think that Re Schebsman, Ex p Official Receiver, The Trustee v Cargo Superintendents (London), Ltd was rightly decided and that the reasoning of Uthwatt, J, and the Court of Appeal supports what I have just said. In the present case I think it clear that the parties to the agreement intended that the respondent should receive the weekly sums of £5 in her own behoof and should not be accountable to her deceased husband's estate for them. Indeed the contrary was not argued.
Reverting to my simple example the next question appears to me to be, where the intention was that X should keep the £1,000 as his own, what is the nature of B's obligation and who is entitled to enforce it? It was not argued that the law of England regards B's obligation as a nullity, and I have not observed in any of the authorities any suggestion that it would be a nullity. There may have been a time when the existence of a right depended on whether there was any means of enforcing it, but today the law would be sadly deficient if one found that, although there is a right, the law provides no means for enforcing it. So this obligation of B must be enforceable either by X of by A. I ... consider the position at common law.
Lord Denning, MR's view, expressed in this case not for the first time, is that X could enforce this obligation. But the view more commonly held in recent times has been that such a contract confers no right on X and that X could not sue for the £1,000...
... So for the purposes of this case I shall proceed on the footing that the commonly accepted view is right.
What then is A's position? I assume that A has not made himself a trustee for X, because it was not argued in this appeal that any trust had been created. So, if X has no right, A can at any time grant a discharge to B or make some new contract with B. If there were a trust the position would be different. X would have an equitable right and A would be entitled and indeed bound to recover the money and account for it to X. And A would have no right to grant a discharge to B. If there is no trust and A wishes to enforce the obligation how does he set about it? He cannot sue B for the £1,000 because under the contract the money is not payable to him, and, if the contract were performed according to its terms, he would never have any right to get the money. So he must seek to make B pay X.
The argument for the appellant is that A's only remedy is to sue B for damages for B's breach of contract in failing to pay the £1,000 to X. Then the appellant says that A can only recover nominal damages of 40s because the fact that X has not received the money will generally cause no loss to A: he admits that there may be cases where A would suffer damage if X did not receive the money, but says that the present is not such a case.
Applying what I have said to the circumstances of the present case, the respondent in her personal capacity has no right to sue, but she has a right as administratrix of her husband's estate to require the appellant to perform his obligation under the agreement. He has refused to do so and he maintains that the respondent's only right is to sue him for damages for breach of his contract. If that were so, I shall assume that he is right in maintaining that the administratrix could then recover only nominal damages, because his breach of contract has caused no loss to the estate of her deceased husband.
If that were the only remedy available the result would be grossly unjust. It would mean that the appellant keeps the business which he brought and for which he has only paid a small part of the price which he agreed to pay. He would avoid paying the rest of the price, the annuity to the respondent, by paying a mere 40s damages...
The respondent's second argument is that she is entitled in her capacity of administratrix of her deceased husband's estate to enforce the provision of the agreement for the benefit of herself in her personal capacity, and that a proper way of enforcing that provision is to order specific performance. That would produce a just result, and, unless there is some technical objection, I am of opinion that specific performance ought to be ordered. For the reasons given by your lordships I would reject the arguments submitted for the appellant that specific performance is not a possible remedy in this case.
Lord Pearce
My Lords, if the annuity had been payable to a third party in the lifetime of Beswick, senior, and there had been default, he could have sued in respect of the breach. His administratrix is now entitled to stand in his shoes and to sue in respect of the breach which has occurred since his death.
It is argued that the estate can recover only nominal damages and that no other remedy is open, either to the estate or to the personal plaintiff. Such a result would be wholly repugnant to justice and common-sense. And if the argument were right it would show a very serious defect in the law.
In the first place, I do not accept the view that damages must be nominal. Lush, LJ, in Lloyd's v Harper said:
'Then the next question which, no doubt, is a very important and substantial one, is, that Lloyds, having sustained no damage themselves, could not recover for the losses sustained by third parties by reason of the default of Robert Henry Harper as an underwriter. That, to my mind, is a startling and alarming doctrine, and a novelty, because I consider it to be an established rule of law that where a contract is made with A for the benefit of B, A can sue on the contract for the benefit of B, and recover all that B could have recovered if the contract had been made with B himself.'
(See also Drimmie v Davies.) I agree with the comment of Windeyer, J, in Bagot's Executor and Trustee Co, Ltd v Coulls in the High Court of Australia that the words of Lush, LJ, cannot be accepted without qualification and regardless of context, and also with his statement:
'I can see no reason why in such cases the damages which A would suffer upon B's breach of his contract to pay C$500 would be merely nominal: I think that in accordance with the ordinary rules for the assessment of damages for breach of contract they could be substantial. They would not necessarily be $500; they could I think be less or more.'
In the present case I think that the damages, if assessed, must be substantial. It is not necessary, however, to consider the amount of damages more closely, since this is a case in which, as the Court of Appeal rightly decided, the more appropriate remedy is that of specific performance.
The administratrix is entitled, if she so prefers, to enforce the agreement rather than accept its repudiation, and specific performance is more convenient than an action for arrears of payment followed by separate actions as each sum falls due. Moreover, damages for breach would be a less appropriate remedy since the parties to the agreement were intending an annuity for a widow; and a lump sum of damages does not accord with this: and if (contrary to my view) the argument that a derisory sum of damages is all that can be obtained be right, the remedy of damages in this case is manifestly useless.
The present case presents all the features which led the equity courts to apply their remedy of specific performance. The contract was for sale of a business. The appellant could on his part clearly have obtained specific performance of it if Beswick senior or his administratrix had defaulted. Mutuality is a ground in favour of specific performance.
Moreover, the appellant on his side has received the whole benefit of the contract and it is a matter of conscience for the court to see that he now performs his part of it. Kay, J, said in Hart v Hart:
'... when an agreement for valuable consideration... has been partially performed, the court ought to do its utmost to carry out that agreement by a decree for specific performance.'
What, then, is the obstacle to granting specific performance?
It is argued that, since the respondent personally had no rights which she personally could enforce, the court will not make an order which will have the effect of enforcing those rights. I can find no principle to this effect. The condition as to payment of an annuity to the widow personally was valid. The estate (though not the widow personally) can enforce it. Why should the estate be barred from exercising its full contractual rights merely because in doing so it secures justice for the widow who, by a mechanical defect of our law, is unable to assert her own rights? Such a principle would be repugnant to justice and fulfil no other object than that of aiding the wrongdoer. I can find no ground on which such a principle should exist.