Claim No. HC02 C02138
Neutral Citation Number: [2003] EWHC 2178 (Ch)
In the High Court of Justice
Chancery Division

Before:

N. Strauss QC 
-------------------------------
Between:

MINISTRY OF SOUND (IRELAND) LIMITED
Appellant

- and -

WORLD ONLINE LIMITED
Respondent
--------------------------------
--------------------------------

Mr. David Lord (instructed by Messrs Tarlo Lyons) for the Appellant
Mr. Timothy Lord (instructed by Messrs Sheridans) for the Respondent

----------------------------------
Judgment 

Introduction

1.	This is an appeal against the order of Master Moncaster of 19th February 2003, dismissing the claimant’s application for summary judgment for £200,000, the last instalment due under the terms of a written agreement between the parties dated 3rd February 2000, and allowing the defendant’s application to dismiss the claim in the action.

2.	In essence the Master held, following dicta in the speech of Lord Reid in White and Carter (Councils) Ltd v. McGregor [1962] A.C. 413 at 927-30 that, in circumstances in which the defendant had by its breach of contract prevented the claimant from performing its obligations under the contract, the claimant could not sue for a debt due under the contract, but only for damages. Since the claimant accepted that it had suffered no damage, it followed that not only the claim for summary judgment but also the claim in the action must be dismissed.

3.	Counsel for the defendant has reminded me that my function is to review the decision and not to rehear the application. However, the appeal involves issues of law and construction, arising on facts which are largely undisputed. In giving permission to appeal, the Master said that he was not confident that his decision was right. I have to consider the same issues and there is no difference in this case between a review of the decision and a rehearing.

The Facts

4.	The claimant (“Ministry of Sound”), is one of a group of companies operating nightclubs under that name. The defendant (“World Online”) is an internet service provider which in February 2000 wished to attract custom by associating itself with the Ministry of Sound brand.

5.	The agreement was to last for two years. One of its main features was that Ministry of Sound was to package and distribute “Access CDs” which had been produced by World Online. Another was that it required Ministry of Sound to maintain on its website a branded Internet service (“the Branded Service”), based in part on services provided by World Online, which was to be available via the Access CDs to end users who had contracted with World Online. The Branded Service was to include a tag line specified by World Online. Ministry of Sound was to receive payments totalling £1,242,237, the equivalent of $2 million, plus 8 quarterly payments of £200,000 totalling £1.6 million.

6.	World Online’s obligations are set out in clause 3 of the Agreement and include the following:

(a)	By 3.1.1 to provide the services set out in Schedule 1 including services required for the Branded Service.

(b)	By 3.1.6 at its own cost to produce copies of Access CDs of satisfactory quality and despatch them safely and securely to the Ministry of Sound.

(c)	By 3.1.7 to maintain sufficient stocks of Access CDs and adequate distribution procedures and staff to enable them to be despatched promptly in response to requests by Ministry of Sound.

7.	Ministry of Sound’s obligations are set out in clause 4.1 of the Agreement and include the following:

(a)	By 4.1.2 to be responsible for the design, look, feel and branding of the Branded Service.

(b)	By 4.1.3 to produce the marketing and packaging material and carry out any other obligations agreed between the parties and package the Access CDs and to perform the services “as contemplated in the estimated budget scheduled in Part II in Schedule 5.”

(c)	By 4.1.4 to distribute the packaged Access CDs and provide the Branded Service to end users (this is the internet service referred to earlier).

(d)	By 4.1.5 to publicise World Online’s involvement with the Branded Service in the manner agreed between the parties, including its use in (i) all the formats set out in Schedule 3 (which relate mainly to the Access CDs) and (ii) in all business activities in which Ministry of Sound uses its own brand name set out in Schedule 4 whether now existing or to be launched.

(e)	By 4.1.8 to be responsible for the content of the website.

8.	Payment is provided for in clause 5.1 which simply states that World Online is to pay “the amounts and at the times set out in Schedule 5”, which is reproduced on the following pages of this judgment.

SCHEDULE 5 - part I
Payment Schedule

1)	Date amount due	Reference	Amount to be paid
	
	Upon signature of 
agreement	Media Forward Buy	£500,000	
	
January 3, 2000	
Sponsorship	
£121,119
	
	March 1, 2000	Media Forward Buy	£621,118
	
	SUB-TOTAL		£1,242,237

2)	Date	Reference	Amount
	
	January 31, 2000	Hard Costs of
Branding and Bundling
	£200,000
	
	April 3, 2000	Hard Costs of
Branding and Bundling
	£200,000	
	July 2, 2000	Hard Costs of
Branding and Bundling
	£200,000	
	October 3, 2000	Hard Costs of
Branding and Bundling
	£200,000	
	SUB-TOTAL		£800,000
	
	Date	Reference	Amount
	
	January 3, 2001	Hard Costs of 
Branding and Bundling
	£200,000	
	April 3, 2000	Hard Costs of 
Branding and Bundling
	£200,000	
	July 2, 2001	Hard Costs of
Branding and Bundling	£200,000

	October 3, 2001	Hard Costs of
Branding and Bundling
	£200,000	
	SUB-TOTAL		£800,000	

SCHEDULE 5 - part II

Schedule of Resources Required

	£
	
Misc		
World Online/Ministry of Sound Logo Design	5,000	
Marketing Executive
	30,000	
CD Software Design		
Clubber’s Guide to... the Internet Package Design	15,000	
Software Interface Design
	5,000	
Albums & Singles		
Inserting 3,000,000 Cards into Albums	150,000	
Inserting 2,000,000 Cards into Singles
	100,000	
Clubs & Events		
Flyer Printing	25,000	
PoS Material for CD Display
	5,000	
Ministry Magazine		
Double Page Spread	48,000	
Mounting CDs
	90,000	
Licensing		
Insertion of CDs into packaging
	6,000	
Database		
Envelope Mail outs	49,600	
310,000 mailout of CD software	155,000 	
		
Sub Total	683,600	
		
Printing 5,000,000 cards	50,000	
		
TOTAL	733,600	
Contingency	66,400	
Total Marketing Budget for 1 year	800,000	

WOL to provide Clubber’s Guide Packs £2,350,000
N.B. Does not include packs requested via phone,email, post

9.	Termination is provided for in clause 10, inter alia as follows:

“10.1 Either party shall have the right to terminate this Agreement upon written notice:
10.1.1 With immediate effect, if the other is in material breach of any material obligation ... which is not remedied within 30 days of written notice from the other party so to do …
10.1.3 Of 14 days, if any event described in clause 13.1 lasts for more than two months from the date of its commencement.. .”

10.	Clause 13.1, which is part of a section headed “General” reads as follows:

“13.1 Neither party will be obliged to carry out any obligation under this Agreement where performance of such obligation is prevented due to any cause beyond its reasonable control”.

11.	A number of features of the agreement are to be noted. The agreement does not specify a date by which the Access CDs were to be ready. Nor is there a clear provision for the number of Access CDs to be produced. However, it is agreed between the parties that the figure 2,350,000 at the foot of Schedule 5 Part II is the number or approximate number to be produced for the first year, and that by implication the quantity for the second year was to be the same. Schedule 3 provides for Access CDs to be mounted in each issue of Ministry of Sound’s monthly magazine, which had a monthly print run of 150,000. In fact, only 650,000 Access CDs were produced. The payment dates in Schedule 5 start before the date of the agreement, which is 3rd February 2000. This may be because (as is clear from clause 2), the agreement replaced an earlier agreement dated 22nd December 1999.

12.	It is common ground on the pleadings that the three payments in Schedule 5 Part 1(1) totalling £1,242,237 (or $2 million) represented what World Online was prepared to pay for the benefit of an association with the Ministry of Sound brand, as a way of introducing itself to prospective customers in the United Kingdom. The terms ‘Media Forward Buy’ and ‘Sponsorship’ are not defined in the agreement, but it is clear from (for example) clause 3.1.10 that ‘media’ includes the various methods of generating publicity resulting from the agreement, including but not limited to the Access CDs.

13.	The quarterly payments totalling £800,000 p.a. were clearly intended to compensate Ministry of Sound for the cost of providing the ongoing services required by the agreement, which is estimated in the budget for the first year set out in Schedule 5 Part 2. There was no obligation actually to incur costs of that magnitude; the obligation in clause 3.1.1 was to provide the services. Certain of the estimated costs were one-off costs which would only be incurred at the outset, and a contingency of £66,500 was included to bring the figure up to £800,000.

14.	Although the costs are referred to as “hard costs of branding and bundling”, and are clearly related in large part to the packaging and distribution of Access CDs, they also relate to other obligations in the agreement and they are not all strictly costs of “branding and bundling”. For example, the expense of designing the logo and the provision of a marketing executive would relate to publicity via all media, not only Access CDs, and there was provision for a double-page spread in the monthly magazine as well for the mounting of Access CDs.

15. 	It is relevant to identify the main continuing obligations which were unrelated to the Access CDs which World Online did not in the event provide. These were (a) the obligation in clause 4.1.5.1 and Schedule 4 to publicise the World Online brand features in all Ministry of Sound activities including nightclubs, audio recordings, tours and events and various others and (b) the obligation in clause 4.1.4 to maintain the Branded Service for end users together with the obligation in clause 4.1.8 to be responsible for the content of the website; these were of benefit to end users who had already acquired Access CDs and entered into agreements before World Online ceased to produce Access CDs.

16.	In the first six months of the Agreement, World Online produced some 650,000 Access CDs but then, according to Ministry of Sound’s solicitors’ letter of 5th September 2001, stopped providing them in August 2000, saying however that another Access CD would be produced for the second year.  This is not disputed in the later correspondence. World Online continued to pay the amounts due under the agreement, although not always promptly.  It appears from the correspondence which is part of the Ministry of Sound’s evidence on this application that there were discussions between the parties in June and July 2001 in which, at one stage, World Online said that it wished to terminate the agreement and, at another, that it wished to resurrect some other kind of promotional deal.

17. 	On 22nd August 2001, a company called Tiscali UK Limited wrote on behalf of World Online to Ministry of Sound, alleging substantial breaches of the agreement based on assumptions that it required Ministry of Sound to incur specific levels of expense, account for its expenditure and evidence its promotional activities, and requiring such breaches to be remedied within 30 days. I agree with the Master that these were strange allegations, and they are now abandoned. However, the letter shows that, until that point in time at least, World Online regarded the agreement as ongoing. Ministry of Sound’s then solicitors replied on 5th September 2001, rebutting the allegations, pointing out that much of the anticipated costs had not been incurred because the Access CDs had not been provided and therefore could not be “branded and bundled” and alleging that World Online’s breach of contract had caused damage to Ministry of Sound and its brand. On 20th September 2001 Tiscali responded, asserting that if (which was not admitted) World Online was in breach of the agreement, Ministry of Sound would be entitled to damages, but that it was not accepted that any damages had been suffered. The letter pointed out that only about 14% of the Access CDs had been produced, but that Ministry of Sound had received £1.4m, or 87.5% of the quarterly payments, in respect of the anticipated costs of the branding and bundling, the vast majority of which had not been incurred. The letter concluded by saying that, in the circumstances, and as a result of Ministry of Sound’s breaches of contract as specified in the earlier correspondence, the final payment of £200,000 due on 3rd October 2001 would not be paid. The letter did not purport to terminate the agreement, nor was Ministry of Sound asked to discontinue the Branded Service or its other publicity for World Online in accordance with Schedule 4.

18. 	The allegations of breach of contract made by World Online in the letter of 22nd August 2001 are not now pursued. It is admitted in World Online’s defence that Ministry of Sound was after August 2000 unable, due to World Online’s breach of contract, to market, package and distribute the Access CDs or comply with any other obligation which depended on delivery of Access CDs. In para. 6(3) of the Points of Claim, Ministry of Sound alleges that it complied with all its other obligations under the agreement. In response to this, World Online pleads at para. 6(3) of its Defence:

“... sub-paragraph 6(3) is not admitted but the Defendant does not rely for the purposes of their Defence and Counterclaim on any failure of performance by the Claimant of its [other] obligations pursuant to the Agreement ...”

However, in the course of the argument counsel for World Online submitted that there was no evidence to show whether after August 2000 Ministry of Sound performed the obligations under the agreement which did not require World Online’s co-operation, or if so what that involves.

19. 	On these facts, Ministry of Sound sought summary judgment for the last instalment of £200,000 on the simple ground that, World Online’s repudiation not having been accepted, the agreement remained enforceable in accordance with its terms. World Online did not allege in its Defence that it was entitled to terminate the agreement because of Ministry of Sound’s breach. Its position was summarized in paras. 11 and 13 of the Defence, where it is submitted the obligation to make the staged payments “did not arise until and/or was related to Ministry of Sound’s performance of its obligations ... and/or did not survive the release .... from its obligations to perform those obligations” and that its own failure to supply the Access CDs after August 2000 amounted to a repudiation of the contract “which Ministry of Sound had no option but to accept”. It is however now accepted that Ministry of Sound was not obliged to accept the repudiation instead, it is contended, in reliance on Decro Wall International S.A. v. Practitioners in Marketing Ltd. [1969] 1 W.L.R. 361 at 371E-G per Salmon L.J., that its remedies were restricted to damages. World Online has also counterclaimed for the repayment of the post-August 2000 instalments on the ground that they were paid as a result of a mistake of law. No application relating to the counterclaim was before the Master.

White and Carter (Councils) Ltd v McGregor

20.	In the White and Carter case, the House of Lords had to consider whether the decision of the Court of Session in Langford & Co v Dutch [1952] S.C. 15 was correct. In that case a firm of advertising contractors had agreed to advertise the defendant hairdresser’s business in an advertising film to be shown at a local cinema for £104 p.a. payable quarterly in advance, with the first payment due on the first day of exhibition. The defendant asked the pursuers to cancel the agreement a few days later, before the film had been exhibited, but they proceeded to show it and sued for the contract price. The Court of Session held that the “reasonable and proper thing” for the pursuers to have done was to have accepted the defendant’s repudiation and sued for damages, and that they were not entitled to sue for the price.

21. 	The facts of White and Carter were very similar. The contract provided for the appellants to display advertisements at their sites on the Clydebank for 156 weeks at 2s per plate per week payable annually in advance, the first payment to be made 7 days after the first display of advertisements. In the event of default in payment, the whole of the contractual payments became due. The respondents repudiated the contract on the same day. The appellants did not accept the repudiation, displayed the advertisements and sued for the price. The Court of Session, following Langford, dismissed the claim.

22. 	The House of Lords allowed the appeal by a majority of 3-2, holding that Langford & Co. v. Dutch was wrongly decided and that the appellants were entitled to disregard the repudiation of the contract, perform it and sue for the price. Lord Reid said, in the passages at pages 427 and 429-430 cited in the Master’s judgment:

“The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848 and has been authoritatively stated time and again in both Scotland and England. If one party repudiates it in the sense of making it clear to the other party that he refuses, or will refuse, to carry out his part of the contract, the other party, the innocent party, has an option. He may accept that repudiation and sue for damages and breach of contract, whether or not the time for performance has come, or he may, if he chooses, disregard or refuse to accept it and then the contract remains in full effect…

Of course, if it had been necessary for the defendant to do or accept anything before the contract could be completed by the pursuers, the pursuers could not, and the Court would not, have compelled the defendant to act. The contract would not have been completed and the pursuer’s only remedy would have been damages. But the peculiarity in that case, as in the present case, was that the pursuers could completely fulfil the contract without any cooperation of the defender. …

… [The decision in Langford could only be supported on one or other of two grounds.  It might be said that because in most cases the circumstances are such that an innocent party is unable to complete the contract, and earn the contract price without the assent or cooperation of the other party, therefore in cases where he can do so, he should not be allowed to do so. I can see no justification for that. The other ground would be that there is some general equitable principle relevant to public policy which requires this limitation as the contractual rights of the innocent party. It may well be that if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.” (my emphasis).

23.	Lord Hodson, with whom Lord Tucker agreed, said at pages 444-5:-

“It is settled as a fundamental rule of the law of contract that repudiation by one of the parties to a contract does not itself discharge it. See Viscount Simon’s speech in Heyman v. Darwins Ltd citing with approval the following sentence from a judgment of Scrutton L.J. in Golding v. London and Edinburgh Insurance Co. Ltd: “I have never been able to understand what effect the repudiation of one party has unless the other party accepts the repudiation.”

In Howard v. Pickford Tool Co. Ltd. Asquith L.J. said: “An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind.” These are English cases but that the law of Scotland is the same is, I think clear from the authorities, of which I need only refer to one, namely, Howie v. Anderson, where language to the same effect is to be found in the opinions of the Lord President and Lord Moncrieff.

It follows that, if, as here, there was no acceptance, the contract remains alive for the benefit of both parties and the party who has repudiated can change his mind but it does not follow that the party at the receiving end of the proffered repudiation is bound to accept it before the time for performance and is left to his remedy in damages for breach. 

Mr. Bennett, for the respondent, did not seek to dispute the general proposition of law to which I have referred but sought to argue that if at the date of performance by the innocent party the guilty party maintains his refusal to accept performance and the innocent party does not accept the repudiation, although the contract still survives, it does not survive so far as the right of the innocent party to perform it is concerned but survives only for the purpose of enforcing remedies open to him by way of damages or specific implement.

This produces an impossible result; if the innocent party is deprived of some of his rights it involves putting an end to the contract except in some cases, unlike this, where, in the exercise of the court’s discretion, the remedy of specific implement is available.

The true position is that the contract survives and does so not only where specific implement is available. When the assistance of the court is not required the innocent party can choose whether he will accept repudiation and sue for damages for anticipatory breach or await the date of performance by the guilty party. Then, if there is failure in performance, his rights are preserved.

It may be unfortunate that the appellants have saddled themselves with an unwanted contract causing an apparent waste of time and money. No doubt this aspect impressed the Court of Session but there is no equity which can assist the respondent. It is trite that equity will not rewrite an improvident contract where there is no disability on either side. There is no duty laid upon a party to a subsisting contract to vary it at the behest of the party so as to deprive himself of the benefit given to him by contract. To hold otherwise would be to introduce a novel equitable doctrine that a party was not to be held to his contract unless the court in a given instance thought it reasonable so to do. In this case it would make an action for debt a claim for a disciplinary remedy. This would introduce an uncertainty into the field of contract which appears to be unsupported by authority either in English or Scottish law save for the one case upon which the Court of Session founded its opinion and which must, in my judgment, be taken to have been wrongly decided.”

24.	Lord Morton and Lord Keith dissented, holding that Langford was correctly decided and that it was unreasonable for the contractors to continue to perform the contract, when the advertisers no longer required their services. Therefore, they could recover only damages, and were obliged to take reasonable steps to mitigate their loss

25.	Thus, the majority in White and Carter established or confirmed the general principle that a party to a contract is not obliged to accept a repudiation of the contract by the other party, and is entitled to continue to perform it and claim the price In so doing, the majority further established that there was no general equitable jurisdiction enabling the court to prevent the unreasonable exercise of rights to enforce a contract However, this was subject to the two exceptions introduced in Lord Reid’s speech, and adopted in later cases, in which the innocent party’s unfettered right to enforce in contract is qualified, namely where he cannot perform without the assent or co-operation of the party in breach and where he has no legitimate interest in performing; in such cases, he will only be able to claim damages.

26.	The decision in White and Carter has been criticized, mainly on the ground that the performance of unwanted contractual services is wasteful: see for example the article by Dr. Nienaber, 1962 Cambridge Law Journal 213 and Cheshire and Fifoot, Law of Contract 14th ed. pp.685-7. However, such a situation is hardly uncommon.  For example, if a company leases expensive equipment, with no right to sub-lease, and then has no further use for it, there is no way in which it can force the owner, before the end of the period of the lease, to accept the return of the equipment and minimize its loss by leasing it to another available customer whom it has found, however estimable. It would remain liable for the rent for the full period. Nor do I think that the position would be any different if the rent covered both the use of the equipment and the lessor’s maintenance obligations which, since they were unwanted, it would not have the expense of performing.

The decision of Master Moncaster

27.	The Master, having rejected an argument based on clause 13 to which I will refer below, held that the quarterly payments of £200,000 were in respect of the “hard costs of branding and bundling” and continued as follows

“Therefore, on the face of the contract, those payments were, in my judgment, payments for services and therefore, under general principles, in my view, if the services ceased to be rendered then payment for them was not due. If none of the services were supplied, if there was a complete cesser of the rendering of the services described as the hard costs of branding and bundling it would, I think, be quite clear that payment would not be due, notwithstanding the fact that it was due to the repudiatory breach of the defendant that the claimant was unable to perform the services. In such a case, payment can only be claimed for services in the exceptional circumstances where the innocent party can completely fulfil the contract without the cooperation of the other party.”

28. 	Having referred to the material passages in Lord Reid’s speech in White and Carter, he said:

 “Therefore, had performance of the services of Ministry of Sound come entirely to an end, I should have thought that it would follow that the contractual payments were no longer due because the contractual service had not been performed, and therefore the remedy was in damages only.

The difficulty, it seems to me, with this case is that the claimant has been able to perform part of the contract without the cooperation of the defendant. For example, it has continued to display the World Online logo on its website and elsewhere I think perhaps, but it has been unable to carry out the substantial part of the services, namely those relating to the CDs, because of the failure of the defendant to provide the CDs.

Lord Reid talks about being unable to complete the contract and earn the contract price. Therefore, the test, I think, must be whether the contract has been substantially performed or not. The fact that Ministry of Sound continued to be able to provide some rather minimal services cannot, in my judgment, make the payment for the services still due. The evidence again, is not entirely satisfactory because it was not really directed to this point, but it does appear to be clear that Ministry of Sound did cease to provide the substantial and onerous services required of them under the contract after the ending of the delivery of the CDs. Therefore, in my judgment, the liability to make the payments has ceased. It is plain that this is not a contract of which a specific performance would ever have been ordered - it is inconceivable that an order would ever have been made requiring World Online to supply the CDs - and therefore the payments, it follows, in my judgment, of the quarterly sums cease because the services ceased to be performed.”

The submissions of the parties

29.	Counsel for World Online submitted that the Master was correct, except for what he said about substantial performance. This, he submitted, was a doctrine of somewhat doubtful validity which related only to entire contracts (or contracts containing an entire obligation), and this was not such a contract. Therefore, he submitted, relying on the reference by Lord Reid at 429 to the pursuer being able to “completely fulfil” the contract, any inability to perform without World Online’s co-operation was fatal to Ministry of Sound’s claim. Its only claim was for damages; it could not recover in debt even for that which it did do. The main argument of principle advanced in support of this conclusion was that the obligations of performance and payment were interdependent and that, since the court would not order specific performance of World Online’s obligations, Ministry of Sound could not perform its obligations so as to earn payment.

30. 	Counsel for World Online submitted that, as soon as it broke the contract in August 2000 by ceasing to produce Access CDs and thereby prevented the contract from being performed, Ministry of Sound ceased to be able to earn the quarterly payments and was not entitled to them, but only to damages if and to the extent that loss was suffered. Although the applications before the court only concerned the final instalment, the same argument, based on what he referred to as “the co-operation limb” of White and Carter, would have applied to all the instalments falling due after Ministry of Sound’s performance of its packaging and marketing obligations was thwarted in August 2000, if World Online had not (as it claims mistakenly) paid them. Doubtless the reason why there is no application for summary judgment for repayment of the earlier instalments is that it is recognised that the claim to recover the payments based on mistake of law raises arguable issues of fact and law. Counsel for World Online further submitted, in the alternative, that the ‘no legitimate interest limb’ of White and Carter also applies because Ministry of Sound, having already been considerably overpaid, has no legitimate interest in recovering the final instalment; this was because, as counsel for the Ministry of Sound conceded, it would represent a windfall.

31. 	Counsel for Ministry of Sound’s submissions were in essence as follows:

(a) 	Clause 13.1 entitled his client to disregard its obligations in relation to the Access CDs because, once World Online ceased to produce them, it was impossible to perform them for a reason beyond its control; the Master was wrong to reject this argument.

(b) 	Even if this was wrong, White and Carter was distinguishable, because the obligation to pay the quarterly payments on their due dates was unconditional and not dependent upon the performance by Ministry of Sound of its contractual obligations.

(c) 	In any event, further distinguishing White and Carter, the agreement did not become a “dead letter” at any stage; even after the August/September 2001 correspondence, Ministry of Sound was able to and did perform the contractual obligations which were not linked to the missing Access CDs; World Online received the contracted for publicity throughout the two year period of the agreement, save to the extent that it chose not to.

32. 	The submissions of both parties present some difficulty. In the case of Ministry of Sound, this has already been referred to. It is clear from its admission that it has suffered no damages that it is claiming a windfall, and it is not in general the function of contract law either to penalise the party in breach or to overcompensate the innocent party. However, it is not difficult to think of instances where this happens. For example, where the structure of the contract provides for payment to be made earlier than performance, termination following breach will have this effect, save to the extent that a restitutionary claim based on failure of consideration is possible (a point to which I revert below).

33. 	Two difficulties arise from World Online’s argument. First, its submissions involve the proposition that, at a time when it was simply not producing the Access CDs, without making it clear that they would never be produced, and when other parts of the agreement were continuing normally for the benefit of both parties, Ministry of Sound was not entitled to the quarterly payments on the due dates because it could not perform a substantial part (or indeed a small part) of the contemplated contractual services without co-operation. That would no doubt be so in a White and Carter type of contract, where the right to a particular payment is dependent upon the performance of specified contractual obligations. But it is difficult to see why it should be so in this type of contract, in which payments are simply due on specified dates, or why the contractor’s right to payment on those dates should be affected by the other party’s breach of contract; and if that is so for the payments due between October 2000 and July 2001, it is difficult to see why the explicit repudiation of the contract in the August/September 2001 correspondence should make any difference, if an unaccepted repudiation is indeed a thing “writ in water” as is suggested by Lord Hodson, referring to dicta in earlier cases.

34. 	Secondly, there is the point which concerned the Master. If World Online’s argument is right, Ministry of Sound is not entitled to any payment at all in respect of the ongoing services, which they were not even asked to discontinue. The position would be the same whether these represented the major part of its contractual obligations or only a small part. The Master referred to them as insubstantial or “rather minimal” and it is clear from the correspondence (see for example Ministry of Sound’s letter of 5th September 2001, para. 14) that the maintenance of the Branded Service and other publicity involved little or no ongoing effort or cost; but it does not necessarily follow that their value to World Online was minimal. I agree with counsel for World Online that the agreement is not an entire contract, and that the doubtful doctrine of substantial performance does not apply to it. But whatever the value of the ongoing services it does not seem right that Ministry of Sound should not be entitled to any payment at all for them, but only to damages if it can prove that it incurred loss in providing them.

Clause 131

35. 	Counsel for Ministry of Sound’s first submission is that, whatever might otherwise have been the effect of World Online’s breach, Ministry of Sound is entitled to rely on clause 13.1 of the agreement and that this entitles it to payment. World Online’s refusal to provide Access CDs is plainly “beyond (Ministry of Sound’s) reasonable control” and it therefore follows that it is not obliged to carry out any of the obligations of the agreement, performance of which has thus been prevented. From that it further follows that Ministry of Sound’s entitlement to be paid does not depend (even if it would otherwise have depended) on the performance of those obligations.

36. 	Although it is common ground on the pleadings that Ministry of Sound was prevented from performance of Access CD-related obligations by a cause beyond its control within clause 13.1, namely World Online’s failure to produce the Access CDs (see Particulars of Claim para. 6(2); Defence paras. 6(1), (3) and (4)), counsel for World Online submitted otherwise in para. 48 of his skeleton argument and in any event I think that I must be free to consider for myself whether as a matter of construction this is correct. The Master thought that it was probably a force majeure clause, not intended to apply to breaches of contract, and in my view any other conclusion would be inconsistent with the separate provisions of clause 10 relating to termination.

37. 	If counsel for Ministry of Sound’s argument were right, the position would be that, where one party was in material breach of contract, this would give rise to two separate and overlapping rights of termination. Under clause 10.1.1, the innocent party would be entitled to serve a 30 day written notice requiring the breach to be remedied, in default of which he would be entitled to serve a further written notice terminating the agreement with immediate effect. In addition, under clause 10.1.3, he would be entitled to serve a 14 days’ notice terminating the agreement, once the breach had continued for more than 2 months. Further, this latter right of termination could be exercised by either party, and therefore on this construction would entitle the party in breach to rely upon its own default as a ground for termination. None of this makes any sense, and it cannot have been intended by the parties.

38.	In my opinion, therefore World Online’s breach of contract in failing to produce the Access CDs was not a cause beyond the reasonable control of Ministry of Sound within the meaning of clauses 10.1.3 and 13.1 of the Agreement; these provisions relate to force majeure circumstances only. The same conclusion was reached on the construction of a similar provision by Stable J. in Dies v. British and International Mining and Finance Corporation Ltd. [1939] 1 K.B. 724.

39.	The Master, having said that it seemed to him much more likely that clause 13.1 was simply a force majeure clause, went on to hold that, even if it did cover a case in which one party was prevented from performing its part of the bargain by the breach of the other party, its only effect would be to excuse the innocent party from its obligation to perform, so that it would not be in breach and could not be liable in damages; however it did not necessarily follow that it could recover payments due under the contract which depended upon performance. I agree with him on this too.

Performance impossible without World Online’s co-operation 

40. 	Having decided that the issue in this case cannot be resolved by reference to clause 13, it is necessary to revert to World Online’s main submission that this is a straightforward case in which Ministry of Sound has been prevented by World  Online’s breach from performing its side of the bargain and that I should simply apply White and Carter and later authorities in which it has been followed, which are of course binding on me, and hold that it cannot sue for the remuneration due under the agreement It does not seem to me to be quite so simple. The contracts in both Langford and White and Carter were contracts containing entire obligations. The contractor was not entitled to be paid on specific dates. Their right to payment was dependent on the prior completion of specific contractual obligations, namely the display of advertisements. Therefore, if the advertiser had been in a position to prevent the display of advertisements, for example, by withholding material which was to form part of the advertisements, in the absence of a decree of specific performance, which the court would not have granted, the contractor could not fulfil the contractual pre-condition to payment. This would be so whether the advertiser was seeking to terminate the contract or was merely delaying it for some reason,

41 	Counsel for World Online stresses the passages in Lord Reid’s speech cited at para. 24 above and his reference to the inability to complete the contract

“... in most cases the circumstances are such that an innocent party is unable to complete the contract and earn the contract price without the other party’s assent or co-operation …”.

He submits that the exception to the general rule that the innocent party can elect to affirm the contract and enforce it applies in any case in which he cannot perform any outstanding contractual obligation without co-operation. In any such case, his only remedy is damages. I do not think that Lord Reid can be taken as having expressed a general principle of such width applicable to all contracts. The words “and earn the contract price” are equally important and in my view the question is whether the innocent party can, without the other party’s assent or co-operation, do whatever the contract requires him to do in order to be entitled to the sum which he is claiming. Whether this involves the performance of all or any outstanding obligations depends on the terms of the contract and the operation of the principle of dependent provisions.

42. 	For example, if in Langford the initial advertisement had, appeared, entitling the contractor to the first quarterly payment, but the advertiser had then repudiated the contract and withheld co-operation which was essential to subsequent advertisements, the contractor would have been entitled to the payment even if he had accepted the repudiation, because in accordance with the express terms of the contract it fell due before termination. A fortiori, this would be so if he does not accept the repudiation. However, this would now at least arguably be subject to a restitutionary claim by the advertiser based on partial failure of consideration. Where there is a total failure of consideration, such a claim may be made even by the party in breach (except where the sum was paid as a deposit), see Chitty para. 30-061. Although such a claim has never previously been thought to be available to the party in default except where performance was divisible or in cases of total failure of consideration, Lord Goff said in Goss v. Chilcott [1996] A.C. 788 at 798 “at least in those cases in which apportionment can be carried out without difficulty, the law will allow partial recovery on the ground” (i.e. failure of consideration). So in Langford, even if performance was not held to be divisible, it might have been easy to calculate the proportion of advertisements which did not appear.

43. 	To take another illustration, suppose in White and Carter the advertiser had been able to prevent performance on some sites, for example because they were on his land, to which he could refuse admittance, but not on other sites, there seems to be no reason why the contractor should not have displayed the advertisements where he was able to, and claimed the contractual price of 2s per week for those advertisements, and damages in respect of the others if he could prove loss.

44. 	Thus it may be that Lord Reid’s remarks were directed at the facts of the case before him and that he was considering the simple situation which would have arisen if, when the contract in question was repudiated on the day the contract was made the advertiser had been able to prevent any performance at all.  If so, what he said cannot be taken as applying to all the more complex possible situations which could have arisen on different facts or in relation to different kinds of contract.

45. 	In the present case, the relationship between the payments due and the services to be rendered is more nebulous. Clearly, the payments represent the price payable for the performance of the ongoing contractual obligations, which are partly but not entirely related to the Access CDs. But, as counsel for Ministry of Sound submits, they are due on specified calendar dates and not (as in both Langford and White and Carter) dependent on the prior performance of specific contractual obligations. The obligations themselves cannot easily be related to particular dates or periods within the term of the contract. For example, it is not clear when the Access CDs were to be made available, or in what quantities, and it may well be that the parties did not expect them to be ready by the time of the earliest quarterly payment dates. Indeed the first payment was due immediately. World Online was to comply with Ministry of Sound’s requests, and a large quantity of Access CDs had to be ready for mounting in the monthly magazines, so that the regular performance of services was contemplated, but there was no precise schedule and no way of defining precisely what performance was required in any given quarter. The last payment, with which this appeal is concerned, is payable before the services for the remaining months of the agreement are performed and therefore at least in part in advance of performance. Further, this is a case in which Ministry of Sound was able to perform some of the ongoing contractual obligations without the co-operation of World Online; however no specific part of the payments due under the agreement are attributable either to those which could be performed or to those which could not.

46.	The facts relating to the repudiation are also less clearcut than in Langford and White and Carter, in both of which the advertisers expressly repudiated the contract immediately after it was made. In this case, World Online was in breach of contract over a long time, but until at least September 2001 both parties treated the contract as a continuing one. Although it may be that Ministry of Sound could have treated World Online’s breach as repudiatory earlier than this it did not do so, and such performance of its contractual obligations as was possible up to then certainly cannot be regarded as unwanted or wasted. Counsel for World Online sought to support his argument by the example of an artist who is commissioned to paint a portrait over two years with regular sittings, in which the subject changes his mind before the first sitting and refuses to pose. But, this case more closely resembles one in which the subject turns up for the first few sittings and then apparently wants to carry on, but without making the necessary arrangements for sittings, and only much later says that he no longer wants the portrait. Even that is not an exact analogy, as there are not (as in the present case) separate parts of the contract which could be performed without his co-operation.

47. 	Another feature of the facts of this case which is relevant is that Ministry of Sound’s interest in the contract continuing was not only financial, since its name was associated with World Online’s publicity. This is particularly so in relation to some of the obligations which could be performed without the provision of further Access CDs. World Online has contracted to give existing end users, who already had Access CDs, access to the Branded Service on Ministry of Sound’s website; the premature termination of the Branded Service might therefore be detrimental to Ministry of Sound as well as to World Online. Although it was World Online which had wished to associate itself with Ministry of Sound, the publicity resulting from the agreement affected both.

48. 	In my view, the following issues arise on these facts on the ‘co-operation limb’ of the argument:

(1)	The ambit of the co-operation exception to the general principle. Was the Master right to hold that, in any case in which the payments are “for services”, as a matter of general principle payment ceases to be due if they cease to be rendered, even if due to the other party’s repudiatory breach? Or is this so only if by the terms of the contract (as in White and Carter and Langford) the right to payment is dependent on the performance of services which cannot be performed?

(2)	What is the position if the innocent party is able to, and does, perform some but not all of the services?

(3)	If the party in breach is liable to make the payment, does he nevertheless have a cross claim based on total or partial failure of consideration?

(1)	The ambit of the co-operation exception

49. 	In order to decide these questions, it is necessary to consider the principle underlying the inability of the contractor to recover where the party in breach withholds co-operation. The fullest discussion of the topic is to be found in Carter on Breach of Contract 2nd ed., 1991, at paras. 1119 et seq.. In essence, the principle is that the breach of contract does not convert a dependent obligation into an independent one; if the right to the payment claimed is dependent upon the performance of contractual obligations, the prevention of performance by the other party’s breach of contract does not alter the position. Thus the matter depends upon the nature of the contractual right, not the circumstances of the breach, which is why counsel for World Online is in my view right to say that, if his argument is correct, the Ministry of Sound had no more right to the earlier instalments than it has to the unpaid final instalment.

50.	I do not think that a right to payment is to be treated as “dependent” on the performance of services, as the Master held, solely because the payment was to be made in return for services. It is dependent only if the right to payment is conditional upon the prior or simultaneous performance of services or other contractual obligations (common examples are contracts for the sale of land or goods). That this is the meaning of “dependent” in this context is illustrated by the early case of Pordage v. Cole (1607) 1 Wms Saunders 319 mentioned at paras. 115, 122 in Carter in which it was held that an obligation to pay £775 on a specified date “for all the plaintiffs lands” was independent of the plaintiff’s obligation to convey the lands, so that the plaintiff could recover the payment without any conveyance, because the contract specified a date for payment. Dependency in this contract denotes a pre-condition to the right of payment.

51. 	The distinction is between a right to payment which is dependent on performance, and one which is supported only by the other party’s promise to perform: see per Dixon J. in the Australian case of Automatic Fire Sprinklers Proprietary Ltd v. Watson (1946) 72 CLR 435 at 464:

“In certain forms of executory contract where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of or reward for the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the word is not done, the relation of master and servant ceased, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance: Cp. Plaimar Ltd v. Waters Trading Co Ltd.

It is nothing to the point that the seller remains ready and willing to deliver the goods and refuses to treat the rejection as discharging the contract but, on the contrary, “keeps it open.” Even so the price is not payable, for the reason that it is for the goods that the price is to be paid and until they are accepted there is no indebtedness. It is, of course, open to contracting parties to make what agreement they like about the matter. They may, if they choose, contract for payment of a sum certain at a time certain and make it clear that the payment is independent of the transfer of the goods. But that is not how an agreement to sell is ordinarily understood.”

52. 	It is clear that, at least in common contracts such as the sale of goods and sale of land, there is a presumption that promises are mutually dependent, so that the right to payment arises simultaneously with transfer of property: see Carter para. 123. No doubt the same is true of many contracts for services, for example building contracts, in which it is common for rights to payment to arise on the completion of the specified stages of the work, or against architects’ certificates as to work done, so that if the employer prevents the builder from entering the property, he cannot earn any further right to payment. However, there are examples of independent promises in these common types of cases, of which perhaps the best known arises where, in a contract for the sale of goods, the price is payable on a certain day irrespective of delivery, a principle now embodied in section 49(1) of the Sale of Goods Act: see Benjamin on Sale para. 16-020 et seq. In such a case, even where the buyer makes it clear that he does not want the goods and will not accept them, the seller can sue for the price see Dunlop v Grote (1845)2 Car. and K. 153.

53 	The position is less clear where payments are not due in return for what Dixon J called “definite services”. The contract in this case is one in which payments are made in consideration for the performance, not of one obligation to be fulfilled at one moment in time as in a contract of sale, or on a series of obligations to be independently certified, as in a building contract, but rather of numerous obligations of varying degrees of importance to be performed over the whole period of the contract. Further, early instalments are, or are likely to be, entirely in consideration for promised future performance, and all the later instalments are due in consideration of performance which is partly in the past and partly in the future. So this contract, and doubtless many others, fall somewhere between the two categories of case identified by Dixon J.

54.	With reference to the passages in Lord Reid’s speech relied on, it would in my view be surprising if a party to a contract of this kind could not sue in debt whenever  anything remained to be done to complete the contract which could not be done without the co-operation of the other party.  Lord Reid’s choice of words suggests strongly that he was referring to contracts containing entire obligations of the kind which he was considering. In a contract such as the present one, even if the contractor has in some way failed to perform the contract due to his own fault, he remains able to recover in debt, subject to a reduction in respect of the non-performance or a set-off in respect of the other party’s claim for damages: see Hoenig v. Isaacs [1952] 2 All E.R. 176; Hanak v. Green [1958] 2 Q.B. 9. The contracting party cannot be in a worse position because his inability to perform is due, not to his own fault, but to the other party’s breach of contract.

55.	The difficulty is well brought out by World Online’s argument in this case according to which the right to payment in each quarter is dependent on full (not even substantial) performance. Thus Ministry of Sound would be unable to recover, even if World Online was preventing performance of only a minor part of the contract. Yet it is impossible to define precisely what has to be done or when. It cannot have been intended that any failure to perform on the part of Ministry of Sound before the date when an instalment becomes due, would preclude recovery. If that is right, it would be illogical if the position were different because the failure to perform was due to World Online’s failure to co-operate. Although there is a presumption that obligations to pay are dependent (see Carter para. 123), the main examples of such contracts to which he refers are contracts for the sale of land or goods, where the expectation of the parties is that clearly defined obligations will be performed simultaneously with payment. Although in a contract such as the present one, payment is “in return for” services, I do not think that this makes the right to payment dependent in the relevant sense.

56.	Counsel for World Online relied on the position of an employee as an example of the principle underlying the co-operation exception in White and Carter. If he is right, this important because a contract of employment is similar to the present contract, in that it ordinarily consists of a large number of duties of varying degrees of importance. It has been settled for a long time that an employee who is wrongfully dismissed, cannot by refusing to accept his dismissal claim his wages and that his only remedy at common law is to claim damages for breach of contract: see for example Denmark Productions Ltd v. Boscobel Productions Ltd [1969] 1 Q.B. 699 at 726, 737.

57.	Nevertheless, although the reason for this is a matter of some controversy, I do not think that it results from the operation of the principles underlying White and Carter, since the results are different:

(a)	An employee who has been dismissed before the end of the contractual period cannot claim wages because they are not yet due: see Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch. d. 339. He cannot overcome this by refusing to accept the employee’s repudiation and making himself available for work, irrespective of whether he would be able to carry out his duties without the employer’s co-operation. 

(b)	By contrast, an employee will still be entitled to his wages if he remains in employment at the end of the relevant contractual period, even if he has not fulfilled all his obligations under the contract: see Horcal v. Gatland [1984] B.C.L.C.	549. This would be so, even if he has been prevented by the employer from carrying out any duties e.g. because he has been suspended, or sent on gardening leave during his notice period.

58.	The reason why an employee cannot continue to carry out duties under his contract of employment and treat it as subsisting is probably that his right to do so depends upon his status as an employee, which is destroyed by the dismissal, as was explained by Brightman L.J. in Gunton v. Richmond-upon-Thames L.B.C. [1980] I.C.R.755 at 778:

“It is clear beyond argument that a wrongfully dismissed employee cannot sue for his salary or wages as such, but only for damages. It is also, in my view, equally clear that such an employee cannot assert that he still retains his employment under the contract. If a servant is dismissed and excluded from his employment, it is absurd to suppose that he still occupies the status of a servant. Quite plainly he does not. The relationship of master and servant has been broken, albeit wrongfully by one side alone. The same would apply to a contract for services, such as an agency. If a two year agency contract is made between principal and agent, and the principal wrongfully repudiates the contract of agency after only one year, quite plainly the agent cannot hold himself out as still being the agent of the principal. He is not. The relationship of principal and agent has been broken. I do not think it follows, however, from the rupture of the status of master and servant, or principal and agent, that the contract of service, or the contract of agency, has been terminated by the wrongful act of the master or the principal. What has been determined is only the status or relationship. So in the result the servant cannot sue in debt for his wages, which he is wrongfully deprived of the opportunity to earn; or for his fringe benefit, such as the house which the carpenter in Ivory v. Palmer [1975] I.C.R. 340 had the right to occupy as part of emoluments. As the relationship of master and servant is gone, the servant cannot claim the reward for services no longer rendered. But it does not follow that every right and obligation under the contract is extinguished. An obligation which is not of necessity dependent on the existence of the relationship of master and servant may well survive; such as the right of the master in Thomas Marshall (Exports) Ltd v. Guinle [1979] Ch. 227 that the servant should not during the term of the contract deal on his own account with customers of the plaintiff company.”

I do not think that the authorities relating to the position of the dismissed employee assist in the resolution of this issue.

59.	Counsel for World Online has relied on this aspect of the argument on 3 further authorities. The first is Decro Wall to which I have already referred, in which the Court of Appeal rejected an argument that it was possible in some circumstances for a contract - breaker to bring a contract to an end: see per Salmon L.J. at 370C-G and per Sachs L.J. at 375F-G. Both referred to Lord Reid’s statement in White and Carter to the effect that in most cases the contract-breaker could restrict the other party’s remedy to damages by preventing him from earning his remuneration, but they did not consider the issue which arises in this case, namely whether this applied in cases in which performance was not a precondition to entitlement to the payment claimed. Nor did Megarry J in Hounslow L.B.C. v. Twickenham Garden Developments Ltd [1971] 1 Ch. 233 at 250-4 in which he held that the employer could effectively prevent builders from earning this remuneration under an R.I.B.A. contract by refusing to allow them on site. The third case is The Alaskan Trader [1984] 1 All E.R. 129, but on this aspect of the matter what Lloyd J. said at 138-9 is hardly conclusive:

“I turn last to the alternative ground on which the arbitrator based his decision, that this was a contract which called for co-operation between the parties, and therefore fell within Lord Reid’s first limitation. Counsel for the charterers argued that a time charter is a contract for services, to be performed by the owners through the master and crew, and through the use of their vessel. As a contract for services, it is, as Lord Diplock pointed out in The Scaptrade [1983] 2 All ER 763 at 766, [1983] 3 WLR 203 at 207 - 

‘the very prototype of a contract of which before the fusion of law and equity a court would never grant specific performance ...’

As in any other contract for services the owners earn their remuneration for performing the services required. If they are wrongfully prevented from performing any services, then, as in any other contract for services, the only remedy lies in damages. The fact that the owners’ remuneration in this case, called hire, is payable in advance makes no difference. Counsel for the owners, on the other hand, argued that the owners earned their hire simply by holding the vessel and the services of their master and crew at the charterers’ disposal. He concedes that in the case of master and servant, where the master has wrongfully dismissed the servant, the servant cannot earn remuneration by holding himself at the disposal of his master. He is confined to his remedy in damages. But counsel for the owners submits that a time charter is different. In view of my decision on the legitimate interest point, it is unnecessary for me to decide between these rival arguments, or to explore the nature of a time charter contract any further. All I will say is that, at first blush, there seemed much to be said for the argument of counsel for the charterers. I say no more, because in The Odenfeld Kerr J found a similar argument unimpressive.”

60. 	Counsel for World Online stressed the fact that the instalment due on 3rd October 2001 was wholly or mainly in respect of future performance and therefore prospective. Therefore, he submitted, there could be no accrued right to it. On the other hand, it might be argued that a right to payment in advance of performance is by definition dependent not on performance but on willingness to perform. Lloyd J’s judgment records the different judicial views on this and other points.

61.	As is apparent from the above, I do not find this issue at all easy.  The commercially just result would be to restrict the innocent party to its claim for damages.  But I am far from convinced that, as a general rule, English contract law in this area is designed always to achieve the commercially just result: see paras 26 and 32 above. For the reasons I have set out I am of the view that Lord Reid’s reference to circumstances in which there is “anything” left to do under the contract which requires co-operation indicate that he had in mind only contracts in which the right to payment depended on full prior performance. In my opinion, therefore, the final instalment remains due for payment.

(2)	Partial performance possible without co-operation

62. 	As to the second question, if what Lord Reid said (contrary to my view) applies to contracts of the present kind, then its application would prevent the instalment from falling due if any outstanding obligation could not be performed without the withheld co-operation. The apparent injustice of the innocent party being unable to claim for the services which he does provide could be met by permitting a quantum meruit claim (although there is no such claim in this case): see Planché v. Colburn (1831) 8 Bing. 14.

(3)	Failure of consideration

63. 	As to the third question, it seems to me at least arguable that, even if World Online is liable for the final instalment, it has a cross-claim based on failure of consideration, on which it could rely as a defence to avoid circuity of action. Whilst the traditional view is that a party to a contract (whether the innocent party or the contract breaker) can only recover payments made under it where there has been a total failure of consideration, the dictum of Lord Goff in Goss v. Chilcott referred to at para. 42 above suggests that this may no longer be so, and recent authority suggests that there may be circumstances in which recovery for partial failure may be allowed: see D.O. Ferguson & Associates v. Sohl (1992) 62 B.L.R. 95 (C.A.) in which, as the editorial note indicates, Hirst L.J. “robustly” described as a total failure of consideration what might move conventionally have been seen as a partial failure. See also White Arrow Express Ltd v. Laney’s Distribution Ltd [1995] T.L.R. 69 and Baltic Shipping Co. v. Dillon (1993) 111 A.L.R. 289. I raised this issue with the parties in writing, after the hearing, but despite counsel’s helpful submissions, I think that it is too complex to attempt to resolve on a summary application. Also, in this context it may be relevant to know whether the ongoing services which have been provided are minimal as the Master thought: I do not think that it is possible to tell from the evidence.

‘No legitimate interest’

64.	On this issue, counsel for World Online relied on the decision of the Court of Appeal in Attica Sea Carriers Corporation v. Ferrostaal Poseidon Bulk Reederi G.m.b.H. [1976] 1 Lloyd’s Reports 250, in which the main ground of the decision was that, on the true construction of the charter party, the charterers were entitled to terminate the charter hire at the end of the period, even though they had not carried out repairs. The Court further held that, even if that had not been so, the insurers would not have been entitled to insist on the charterers keeping the vessel and sue for the charter hire indefinitely, until the repairs were effected. In The Odenfeld [1978] 2 Lloyd’s Report 357 at 373-4, Kerr J. said that the decision was of limited application: any fetter on the innocent party’s rights of election whether to keep the contract alive applied “only in extreme cases, viz, where damages would be an adequate remedy and where an election to keep the contract alive would be wholly unreasonable”.

65.	In The Alaskan Trader, Lloyd J. summarised the position as follows at 136-7:-

“In addition to arguing that what Lord Reid had said about legitimate interest was only a quotation from counsel, and in any event obiter, arguments with which I have already dealt, counsel for the owners submitted that Lord Reid was, quite simply, wrong. It seems to me that it would be difficult for me to take that view in the light of what was said by all three members of the Court of Appeal in The Puerto Buitrago. Whether one takes Lord Reid’s language, which WaS adopted by Orr and Browne LJJ in The Puerto Buitrago, or Lord Denning MR’s language in that case (‘in all reason’), or Kerr J’s language in The Odenfeld (‘wholly unreasonable ... quite unrealistic, unreasonable and untenable’), there comes a point at which the court will cease, on general equitable principles, to allow the innocent party to enforce his contract to its strict legal terms. How one defines that point is obviously a matter of some difficulty, for it involves drawing a line between conduct which is merely unreasonable (see per Lord Reid in White & Carter v. McGregor [1961] 3 All ER 1178 at 1182, [1962] AC 473 at 429-430, criticising the Lord President in Langford & Co Ltd v. Dutch 19S2 SC 15) and conduct which is wholly unreasonable (see per Kerr J in The Odenfeld [1978] 2 Lloyd’s Rep 357 at 374). But however difficult it may be to define the point, that there is such a point seems to me to have been accepted both by the Court of Appeal in The Puerto Buitrago and by Kerr J in The Odenfeld

I appreciate that the House of Lords has recently re-emphasised the importance of certainty in commercial contracts, when holding that there is no equitable jurisdiction to relief against the consequences of the withdrawal clause in a time charter see Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana, The Scaptrade [1983] 2 All ER 763, [1983] 3 WLR 203. I appreciate, too, that the importance of certainty was one of the main reasons urged by Lord Hodson in White & Case v McGregor in upholding the innocent party’s unfettered right to elect. But, for reasons already mentioned, it seems to me that this court is bound to hold that there is some fetter, if only in extreme cases; and, for want of a better way of describing that fetter, it is safest for this court to use the language of Lord Reid, which, as I have already said, was adopted by a majority of the Court of Appeal in The Puerto Buitrago.”

66. 	In the present case it seems to me that the point does not arise. What may be objectionable is not the claim for payment but the wastefulness involved in the innocent party’s insistence on providing the unwanted performance of the contract. For example, in the Attica case, the result of the owners’ insistence on leaving the vessel with the charterers would have been that it could not have been used by anyone for an indefinite period. Here, in the main, Ministry of Sound’s case is that it is entitled to payment irrespective of performance, which was impossible without co-operation. No waste was involved. To the extent that Ministry of Sound has performed, there is nothing unreasonable about it. As I have already said, it was not asked to refrain from performing the obligations which were not dependent on the Access CDs and anyhow it was entitled to do so since it had an interest in ensuring that contracts with end users were fulfilled: see paras. 15, 17 and 47 above. In these circumstances, there is nothing unreasonable in Ministry of Sound’s limited performance of the contract, or in its claiming payment if it is entitled to it

Specific performance a discretionary remedy

67.	As counsel for World Online pointed out in the course of argument, Ministry of Sound’s claim for payment is a claim for specific performance, and it is therefore appropriate to consider whether there are discretionary reasons why it might be refused. In the Attica case, Lord Denning M R would have refused an order on the simple ground that damages would be an adequate remedy, but it is not easy to reconcile this with White and Carter and Kerr J in The Odenfeld and Lloyd J. in The Alaskan Trader considered that the ratio of Attica was as set out at paras. 64-5 above.

68.	Another possible discretionary reason for withholding the remedy is want of mutuality. The leading case is now the decision of the Court of Appeal in Price v Strange [1978] Ch. 337. That decision seems to me to be inconsistent with World Online’s basic contention that the co-operation exception applies generally and not only where the performance prevented by the contract-breaker is a pre-condition to the right to payment. There was an oral agreement between the plaintiff, who was holding over on the expiration of a tenancy, that he would be granted a new lease in consideration for doing certain repairs to the premises. After he had done some of the work, the landlord refused to let him continue with it. It was held that the court had a discretion to order specific performance of the agreement for an underlease, irrespective of whether the court could have ordered specific performance of the plaintiff’s obligation to do the repairs. The Court of Appeal granted specific performance of the agreement for a new lease, subject to an adjustment as to the rent. If counsel for World Online’s main submission was right, the Court of Appeal would in that case have held that, since the plaintiff could not complete his side of the bargain without the defendant’s assent or cooperation, his only remedy was damages.

69.	However, I do consider that World Online may arguably derive support from this decision for the proposition that the court has a discretion to refuse an order of specific performance of the obligation to pay the instalment, on grounds of want of mutuality at the time of the hearing, in circumstances in which World Online could not have obtained an order for specific performance of Ministry of Sound’s obligations. See also the discussion of the point in Jones and Goodhart on Specific Performance 2nd ed. pp. 38-9. If this is right, notwithstanding what was said in White and Carter, the court may in some cases have a general equitable discretion as to the remedies available to the innocent party who refuses to accept a repudiation, in circumstances which fall short of being an “extreme case”.

70. 	The proposition that the court has a discretion to refuse the remedy of specific performance on the ground of want of mutuality, if correct, would hold good irrespective of whether the innocent party’s performance could be thwarted by the other party. A different question would arise, namely whether if the other party had been seeking to enforce the contract (e.g. in White and Carter seeking to compel the advertisement of its products) the remedy of specific performance would have been available. Thus there may be some tension between this and the decision in White and Carter that there was no general equitable discretion, absent a want of legitimate interest in performance, to refuse to allow the innocent party to claim payment.

71.	Given what I think can fairly be described as a degree of judicial reluctance over the last 40 years to apply White and Carter outside the strict limits of its ratio, I think that there is scope for argument as to the ambit of the court’s discretion.  For example, it may be that White and Carter is distinguishable on the ground that want of mutuality is not a relevant consideration in Scots law (I do not know one way or the other) or on the ground that in that case the pursuer’s obligations could have been the subject of an order for specific performance, so that there was no want of mutuality.

72. 	World Online’s argument was not put on the basis that the court should exercise a discretion to refuse specific performance, and it is in any event probably not a point which it would have been appropriate to try to resolve on a summary judgment application, either as a legal issue or on the facts.

Conclusion

73. 	In my opinion, for the reasons set out above, World Online is liable for pay the instalment due on 3rd October 2001, but arguably (a) Ministry of Sound should not be granted the remedy of specific performance on the ground of lack of mutuality or because damages would be an adequate remedy if loss had been suffered or (b) World Online would have the right to recover the payment or part of it on the ground of failure of consideration, which right could be relied upon as a defence. These points depend on difficult issues of law, on which I have not heard full argument, and on facts about which there is little evidence. It follows from my conclusions that I should allow the claimant’s appeal against the Master’s order dismissing the claim, but dismiss its application for summary judgment.

74. 	I do not propose to go further and grant declarations on any of the issues argued before me or finally determine any of them. This is because (a) all the issues, other than the Clause 13 issue, concern fundamental and complex questions of contract law and would benefit from fuller argument than was possible on this application (b) in circumstances in which the action has to proceed to trial anyhow on the counterclaim, and may well result in an appeal, it is undesirable to have the additional expense and delay which would be involved in an interlocutory appeal, which would be inevitable and (c) on certain points, notably the extent of the services provided which were unrelated to the Access CDs, the outcome may depend on detailed evidence. Therefore it will be open to both parties to argue all the issues at trial. I had originally thought that it would be possible to determine the issues raised before me, but regrettably I have been driven by attempting to do so to conclude that it is not.

75. 	I will hand down judgment, but if the parties can provide a signed draft agreed order including further directions by 4 p.m. on the previous working day, there will be no need to attend. My provisional view is that the costs before the Master and of the appeal should be costs in the case.

N. Strauss QC
Deputy Judge Ch.D

15th September 2003