SUPREME COURT OF QUEENSLAND CITATION: Tropac Timbers P/L v A-One Asphalt P/L [2005] QSC 378 PARTIES: TROPAC TIMBERS PTY LTD ACN 108 304 990 (plaintiff/respondent v A-ONE ASPHALT PTY LTD ACN 059 162 186 (defendant/applicant) FILE NO: 8279 of 2005 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Application Supreme Court, Brisbane DELIVERED ON: 14 December 2005 DELIVERED AT: Brisbane HEARING DATE: 13 December 2005 JUDGE: ORDER: Muir J The application be dismissed CATCHWORDS: CONTRACTS GENERAL CONTRACTUAL PRINCIPLES DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH REPUDIATION AND NON- PERFORMANCE WHAT AMOUNTS TO REPUDIATION ANTICIPATORY BREACH plaintiff/respondent and defendant/applicant entered into contract for sale of land by defendant to plaintiff on completion date plaintiff refused to pay balance of purchase price claiming defendant had failed to perform obligations under clause 6 of contract defendant terminated contract on plaintiff s alleged repudiation applicant seeks summary judgment whether applicant s obligations under clause 6 are concurrent and reciprocal with obligations of respondent to pay purchase price whether a party having repudiated a contract and whose repudiatory conduct remains on foot is able to terminate contract for a breach by the other party Uniform Civil Procedure Rules 1999 (Qld), r 293 Cooper v Ungar (1958) 100 CLR 510 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 623 Foran v Wight (1989) 168 CLR 385 Geraldton Building Co Pty Ltd v Christmas Island Resort Pty
2 Ltd (1992) 11 WAR 40 Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 Beard v Wratislaw [1993] 2 Qd R 494 Kyrwood v Drinkwater [2000] NSWCA 126 Roadshow Entertainment Pty Ltd v CEL/Vision Pty Ltd (1997) 42 NSWLR 462 Wight v Foran (1987) 11 NSWLR 470 COUNSEL: SOLICITORS: M M Varitimos for the plaintiff /respondent P Dunning SC with him M Wilson for the defendant/applicant Cranston McEachern for the plaintiff/ respondent Paul Everingham & Co for the defendant /applicant Introduction [1] The plaintiff and the defendant entered into a contract dated 6 July 2005 for the sale of a parcel of land at Narangba by the defendant to the plaintiff. The date for completion stated in the contract is 31 August 2005. The contract is in the standard form approved by the Real Estate Institute of Queensland and the Queensland Law Society. Clause 4 of the standard conditions provides, inter alia: The balance of the Purchase Price shall be paid on the Date for Completion in exchange for: (a) (b) possession a properly executed transfer for the Land in favour the Purchaser capable of immediate registration (after stamping) [2] Clause 34.5 provides, where the purchase price does not include GST, that the Purchaser must on the Date for Completion pay to the Vendor in addition to the Purchase Price an amount equivalent to the amount payable by the Vendor as GST on the Supply of the Property. [3] Clause 34.9 provides that: Where GST is payable on the Supply of the Property, the Vendor must give to the Purchaser a Tax Invoice at the Date for Completion. [4] On the date appointed for completion, the plaintiff respondent failed to pay the balance purchase price on the grounds that the defendant applicant had failed to perform its obligations under clause 6 of the contract. It required the applicant to remove all organic fill, building rubble, machinery fittings and improvements from the land prior to completion and to compact it if needed to a size and standard suitable for a tilt slab industrial shed construction. [5] On 25 August 2005 the solicitors for the applicant advised the solicitors for the respondent that the applicant was not prepared to remove any fill, rubble and machinery and was not prepared to compact the land. [6] The respondent s solicitors wrote to the applicant s solicitors on 26 August 2005 pointing out that the requirements of special condition 6 were to be fulfilled prior to
3 completion and stating that their client insisted that the applicant perform its obligations under the clause. When the respondent failed to settle on 31 August 2005 at a time previously arranged for settlement, the applicant, by a letter that day from its solicitors, purported to terminate the contract on the grounds of the respondent s alleged repudiation. [7] Counsel for the applicant concedes that there is a triable issue as to whether the respondent was in breach of its obligations under clause 6. The application [8] The respondent commenced these proceedings seeking specific performance of the contract. The applicant applies for summary judgment under rule 293 of the Uniform Civil Procedure Rules. Its case is the essence of simplicity. It is that, assuming breach by the applicant of an essential term entitling the respondent to terminate the contract, the respondent had to either terminate the contract in reliance on the breach, or proceed with the contract and sue for damages. By its conduct, it is said, it unequivocally elected to terminate by refusing to settle and the contract was terminated from that time. Alternatively, if any breach of clause 6 did not entitle the respondent to terminate the contract, its refusal to settle on the due date was repudiatory conduct which the applicant was entitled to accept and which justified termination of the contract. The GST point [9] The respondent argues that the obligation under clause 34.9 had to be performed on or prior to completion. The applicant s argument was that the tax invoice was required to be provided, not or prior to settlement but on the Date for Completion. The obligation was thus capable of fulfilment prior to the applicant s termination of the contract and it was not in breach. [10] I do not propose, for present purposes, to analyse the nature of the obligations imposed on the applicant under clause 34.9. Whether or not the respondent can gain any comfort from an alleged breach of clause 34.9 depends on factual issues which it is unnecessary, if not impossible, for me to determine for the purposes of this application. A critical issue in that regard is whether the conduct of the respondent by making it plain that it would not settle without completion of the works required by clause 26, relieved the applicant of any obligation to have ready a tax invoice. At best for the respondent, no such invoice was required until on, or immediately after, completion. Relevant principles of law [11] Counsel for both parties placed heavy emphasis on Jeppesons Road Pty Ltd v Di Domenico. 1 Whether Jeppesons Road is of any assistance in resolving the issues under consideration depends on whether the applicant s obligations under clause 6 are concurrent and reciprocal with the obligation of the respondent to pay the balance of the purchase price under clause 4. If the obligations are of this nature then, it is plain, on the authority of cases including Jeppesons Road, Beard v Wratislaw 2 and Foran v Wight 3 that the performance of the respondent under clause 1 2 [2005] QCA 391. [1993] 2 Qd R 494.
4 4 was conditional upon the performance of the applicant under clause 4 and clause 6. Having regard to the matters et out below, it is unnecessary for me to decide the nature of the obligations imposed by clause 6. [12] The leading Australian authorities on the principles under consideration are DTR Nominees Pty Ltd v Mona Homes Pty Ltd 4 and Foran v Wight. The contract under consideration in the former case contained a special condition requiring the vendors to obtain registration of a right of way before completion. Two days before the date specified for completion, the vendors solicitors informed the purchasers solicitors that the right of way had not been registered and that the vendors would not be able to settle on the due date. After the date for settlement, the purchasers purported to terminate the contract. The vendors argued that the purchasers were unable to terminate as they lacked the funds necessary to enable them to settle and were thus not ready, willing and able to settle. The majority concluded that the purchasers, in the light of the intimation from the vendors that it would be useless for the purchasers to tender performance, had done sufficient to show that they were ready, willing and able to settle. [13] Mason CJ dissented, but only on the basis of his conclusion that the purchasers had not been ready, willing and able to settle. His Honour said: 5 Accordingly, in relation to termination for actual breach, the principle is that established by the earlier decisions - the plaintiff is required to show that he was ready and willing to perform the contract if it had not been repudiated by the plaintiff (sic). In other words, the requirement is that the plaintiff be ready and willing to perform except to the extent the defendant dispensed with his performance. In the case of an anticipatory renunciation accepted by the plaintiff, the requirement of readiness and willingness extend only up to the time of acceptance because then the earlier repudiation results in an early termination of the contract. Accordingly, in the case of actual breach, the requirement of readiness and willingness is more stringent; it continues through to the time for performance. That is because the termination of the contract does not antedate the time for performance. Subject to this difference and to the possibility of a difference in the onus of proof, the principle to be applied in the case of actual breach is consistent with that to be applied in the case of termination for anticipatory breach. [14] DTR Nominees Pty Ltd v Mona Homes Pty Ltd was a case of anticipatory breach. In the course of their joint reasons Stephen, Mason and Jacobs JJ, with whom Aickin J agreed, said: A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach, and indeed could profit from his misinterpretation of the contract, as the appellant seeks to do in this case when it claims forfeiture of the deposit and damages. By 3 4 5 (1989) 168 CLR 385. (1978) 138 CLR 623. 168 CLR 385, 408.
5 insisting on its incorrect interpretation of the contract to the point of claiming to rescind because the respondents were relying on the different but correction interpretation, the appellant by that stage showed that "definitive resolve or decision against doing in the future what the contract" (required) which is referred to by Dixon CJ in Rawson v Hobbs (1961) 107 CLR 466, at p481. Whether or not the respondents could by then have rescinded certainly the appellant could not do so. (at p433) [15] As is apparent from Mason CJ s reasons in Foran v Wight, the reasoning in DTR Nominees is applicable to a purported termination for actual breach. [16] Brennan J s statement of principle in Foran v Wight is somewhat similar to that of Mason CJ: Where a party claims to be entitled to rescind an executory contract on account of the other party's repudiation (whether by way of anticipatory breach or incapacity), the first party must show not only the other's repudiation but his own readiness and willingness up to the time of rescission to perform his essential obligations under the contract: Rawson v Hobbs, at p480-p481. Readiness or willingness imports capacity to perform as well as disposition to perform: De Medina v Norman (1842) 9 M & W 820 at p827 ( 152 ER 347, at p350). Since a party's right to rescind an executory contract for the other party's repudiation is limited to cases where the first party is ready and willing to perform, neither party is treated as without fault where both would be at fault were the contract to continue until the time for performance arrives. [17] Dawson J (in Foran v Wight) also acknowledged the necessity for the party wishing to terminate to be substantially ready and willing to perform its obligations. His Honour said: 6 All that the purchasers were required to show was that at the time of the repudiation, that is, at the time they were absolved from future performance, there was not a substantial incapacity on their part or a definitive resolve or decision against the performance of their obligations. The question whether the purchasers satisfied this onus is not without some difficulty because the trial judge directed his attention to the situation on the date stipulated for settlement rather than the situation two days before. However, the purchasers did not have to prove that they could have raised the amount needed to complete the financing of their purchase by the time stipulated for settlement. They merely had to prove that, at the time of the defendants' repudiation, two days before the settlement date, they were not incapacitated from raising that amount and had not resolved or decided against doing so. That was a relatively light burden to discharge and, upon the evidence, I think that the plaintiffs did discharge it. There is nothing in the trial judge's findings which requires a contrary conclusion. 6 At 453.
6 [18] In the Court of Appeal, 7 McHugh JA, in considering the ability of a party in breach to enforce or terminate the contract, said: 8 A party who wishes to enforce a contract must himself be able to perform it on the date on which performance was due by the defendant: Hensley v Reschke (1914) 18 CLR 452 at 460, 467-468, 473 and Australian National airlines Commission v Robinson [1977] VR 87 at 91. A party in breach of a fundamental obligation not only cannot sue, he cannot rescind for the other party s breach: Morris v Baron & Co [1918] 1 AC 1 at 29, 41; Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd [1981] AC 909 at 981-982, 987-988 and Paal Wilson & Co A/s v Partenreederei Hannah Blumentahal [1983] 1 AC 854 at 909. This rule applies to a party who is is not ready, willing and able to perform his obligations on the settlement of a contract for the sale of land. If he cannot perform his obligation, he cannot rescind the contract even though the other party has failed to perform his anterior obligations at the settlement: Philip Maurice (Realty) Pty Ltd v Impala Properties Pty Ltd (1975) 1BPR 9141. [19] If one thing is clear from the above statements of principle, it is that a party who has repudiated a contract and whose repudiatory conduct remains on foot, is not in a position to terminate the contract for a breach by the other party. He cannot show that he was ready and willing to perform the contract except to the extent that the other party dispensed with his performance. [20] Reliance was placed by the applicant on clause 13.1 of the contract which expressly gave the applicant the right to terminate the contract if the respondent failed to pay the balance purchase price as provided in clause 4. [21] As a general principle, where a contract is terminated in reliance on such a contractual right, the parties rights are primarily defined by the contract and not by the general law. 9 But the provisions of clause 13.1 do not abrogate or circumvent the principle that a party guilty of repudiatory conduct cannot rescind for the other party s breach. No such exception to the application of the principle may be gleaned from any of the cases. In this case, the fact that the applicant s conduct was repudiatory (if that be established on trial) relieved the respondent from any obligation to tender the purchase price. Conclusion [22] The existence of the principle just stated requires the dismissal of the summary judgment application as there is a question as to whether the applicant s conduct was repudiatory. That question is not able to be determined on this application. Indeed, no argument addressed it. It is also undesirable for me to give an advisory opinion on the following questions which may or may not arise on trial. 7 8 9 Wight v Foran (1987) 11 NSWLR 470. At 487-488. Cooper v Ungar (1958) 100 CLR 510, 514 and Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 51.
7 1. Whether non compliance with a non essential term does not remove the defaulting party s ability to terminate in the absence of a direct causal relationship between the non compliance and failure to complete. 10 2. Whether a party in breach of an essential but independent term may rescind for fundamental breach 11 or whether a breach by the terminating party does not preclude termination unless it was so serious as to give the other party the right to terminate the performance of the contract. 12 [23] The applicant s obligations under clause 6 could be performed at any time up to the moment of completion. Their non-performance affected the quality and value of the land, potentially to a substantial degree. Having regard to these considerations, the argument that the obligations under clause 6 were independent and separate from the respondent s obligation to pay the purchase price seems rather bold. It is however unnecessary for me to decide this point and it is possible that there may be findings of fact on the trial which bear on it. [24] It will be ordered that the application be dismissed and I will hear submissions on costs. 10 11 12 See Roadshow Entertainment Pty Ltd v CEL/Vision Pty Ltd (1997) 42 NSWLR 462 at 479-480; Kyrwood v Drinkwater [2000] NSWCA 126 paras [153] and [154]. Roadshow Entertainment Pty Ltd at 481 and Kyrwood v Drinkwater at para [154]. J W Carter and D J Harland Contract Law in Australia 4 th ed para [1978].