CFA Group v Mars Trading - [2001] NSWSC 112

No judgment structure available for this case.

CITATION: CFA Group v Mars Trading [2001] NSWSC 112

CURRENT JURISDICTION: Equity Division
Commercial List

FILE NUMBER(S): SC 50020/00

HEARING DATE(S): 26/02/01, 27/02/01

JUDGMENT DATE:
8 March 2001

PARTIES :

CFA Group Services Pty Limited - First Plaintiff
CFA Administration Pty Limited - Second Plaintiff
Mars Trading Pty Limited - First Defendant
Yengrin Pty Limited - Second Defendant
Macadamia Properties Pty Limited - Third Defendant
Ellicott Pty Limited - Fourth Defendant
Carbest Pty Limited - Fifth Defendant
Graham Edward Hayes - Sixth Defendant

JUDGMENT OF: Rolfe J

COUNSEL : Mr S.T. White/Ms N. Obrart - Plaintiffs
Mr I.M. Wales SC - Defendants

SOLICITORS: Clayton Utz
Helliars City Solicitors

CATCHWORDS: Penalty: Held that on a proper construction of the Agreement and in all the circumstances the requirement to pay a greater amount did not constitute a penalty - Breach: Held no breach of contract and that, in any event, the breach alleged was not essential and did not go to the root of the contract - Damages: Held that the plaintiffs had established that the difference between the original contract price and the ultimate sale price was the proper amount of damages, and that the defendant had not established that there was a failure by the plaintiff to mitigate - Non-Fulfilment of Conditions: Held that the defendants' conduct dispensed the plaintiffs from the obligations of fulfilling conditions.

CASES CITED: Cheshire & Fifoot "Law of Contract", 7th Australian Edition
O'Dea & Ors v All States Leasing System (WA) Pty Limited & Ors (1983) 152 CLR 359
Multiplex Constructions Pty Limited v Abgarus Pty Limited & Anor (1992) 33 NSWLR 504
W.T. Malouf Pty Limited v Brinds Limited (1980) 52 FLR 442
Amev Finance Limited v Artes Studio Thoroughbreds Pty Limited (1989) 15 NSWLR 564
Tramways Advertising Pty Limited v Luna Park (NSW) Limited (1938) 38 SR (NSW) 632
Sacher Investments Pty Limited v Forma Stereo Consultants Pty Limited & Ors [1976] 1 NSWLR 5
TCN Channel Nine Pty Limited v Hayden Enterprises Pty Limited (1989) 16 NSWLR 130
Goldburg v Shell Oil Company of Australia Limited (1990) 95 ALR 711
Peter Turnbull & Company Pty Limited v Mundus Trading Company (Australasia) Pty Limited (1954) 90 CLR 235
Mahoney v Lindsay & Ors (1981) 55 ALJR 118

DECISION: (1) Judgment for the First Plaintiff against each of the First, Fifth and Sixth Defendants in the sum of $868,390.89, inclusive of interest, in respect of the Kernel Sale Agreement and any payment by one will be a pro tanto discharge of the obligation of the other.; (2) Judgment for the First Plaintiff against each of the First, Second (to a limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $787,471.22, inclusive of interest, in respect of the breach of the Sale Agreement for Converys Lane and any payment by one will be a pro tanto discharge of the obligations of the others.; (3) Judgment for the Second Plaintiff against each of the First, Second (to the limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $112,495.88, inclusive of interest, in respect of the breach of the Sale Agreement for Dunoon and any payment by one will be a pro tanto discharge of the obligations of the others.; (4) Judgment for the Plaintiffs against each of the Fourth, First, Second (to a limit of $900,000), Third, Fifth and Sixth Defendants in the sum of $762,316.91, inclusive of interest, in respect of the breach of the Option Deeds and any payment by one will be a pro tanto discharge of the obligations of the others.; (5) Judgment for the First Plaintiff against each of the First, Second (to a limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $7,936.76, inclusive of interest, in respect of the breach of the Plant, Equipment and Names Sale Agreement and any payment by one will be a pro tanto discharge of the obligations of the others.; (6) Judgment against all Defendants in respect of the Plaintiffs’ costs of $105,727.26 and any payment by one will be a pro tanto discharge of the obligations of the others.; (7) The Defendants pay the Plaintiffs’ costs.; (8) Exhibits be returned at the expiration of twenty eight (28) days from to-day’s date unless within that time an appeal against this decision has been brought.

I N D E X

PARA

Introduction
(a) The Parties 1
(b) The Agreements 3
(c) A Consideration Of Some Correspondence 19
(d) Further Agreements 27

The Proceedings 39

The Issues 40

The Way In Which The Case Proceeded 47

Evidence As To The Circumstances In Which Provision
Was Made For The Increased Price 49

Evidence As To The Availability Of Nut In Shell 52

Did Clause 2.7 Constitute A Penalty? 60

Repudiation Of The Contract 77

Damages 86

Failure By The Plaintiffs To Mitigate Their Loss 122

The Failure To Exercise The Option Agreements 127

Carbest Pty Limited 162

Conclusions 164

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

ROLFE J

THURSDAY, 8 MARCH 2001

50020/2000 - CFA GROUP SERVICES PTY LIMITED & ANOR v MARS TRADING PTY LIMITED & ORS

JUDGMENT

HIS HONOUR:

Introduction

1 The plaintiffs, CFA Group Services Pty Limited, (“Group Services”), which was formerly known as Macadamia Plantations of Australia Pty Limited, and CFA Administration Pty Limited, (“Administration”), which was formerly known as Pacific Gold Macadamias Pty Limited, for which Mr S.T. White of Counsel and Miss N. Obrart of Counsel appeared, were, at all material times, wholly owned subsidiaries of Consolidated Foods Australia Limited, (“Consolidated Foods”). Group Services and Administration owned certain assets comprising two macadamia nut processing plants at 1277 Dunoon Road, Dunoon, (“Dunoon”), and 37 Converys Lane, Wollongbar, (“Converys Lane”), the plant and equipment associated with them and macadamia nut plantations, known generally as the Missingham properties, all in the Lismore district of Northern New South Wales. They carried on the business of producing macadamia nuts and kernels for local and export sale. Some of the product was value added by being coated with chocolate and, perhaps, in other ways. The macadamia nut plantations provided about a quarter of the nuts required by the processing plants each year, the balance being purchased from growers in the locality.

2 In 1999 Consolidated Foods decided that Group Services and Administration should sell all these assets and cease to be involved in that business. This led to five agreements being entered into by Group Services and Administration, one of which is dated 2 October 1999 and the others of which are dated 21 October 1999, whereby certain of the defendants, for whom and which Mr I.M. Wales of Senior Counsel appeared, agreed to purchase all the assets and others agreed to guarantee the performance of those agreements.

3 On 2 October 1999, Group Services, as vendor, entered into an agreement with the third defendant, Macadamia Properties Pty Limited, (“Macadamia Properties”), as purchaser, and the sixth defendant, Mr Graham Edward Hayes, as “indemnifier”, by which Group Services agreed to sell to Macadamia Properties “up to 132 tonnes of macadamia nut kernel”, which was more fully described, for a price defined as “To-day’s Purchase Price” of $5.68 per kilogram.

4 The clause in this Agreement, which has given rise to a dispute in these proceedings, is clause 2.7:-

“Notwithstanding any other provision in this Agreement, the purchaser must pay the default purchase price of $12 per kilogram (‘Default Purchase Price’) on all macadamia nut kernel delivered in accordance with this Agreement, instead of Today’s Purchase Price, if:

(a) the Purchaser fails to pay Today’s Purchase Price in accordance with clauses 2.3 and 2.6;

(b) the Purchaser fails to deliver to the Vendor the cheque in accordance with clause 2.4;

(c) the Additional Agreements are not executed on or before the Execution Date provided that the Purchaser has been given drafts of the Additional Agreement (sic) three (3) days prior to the Execution Date; or

which payment or the balance thereof shall be made within fourteen days of the first occurrence of any of the events referred to in this clause.”

5 Group Services also alleged, in relation to this Agreement, that there was a breach by Macadamia Properties of its obligations under clause 2.7(a).

6 It is common ground that the Additional Agreements, which were defined generally as the interdependent agreements for the sale of the business and its assets, did not settle by the settlement dates or at all. The reason for that not happening, however, is not common ground. The plaintiffs allege that the reason was the defendants’ failure to comply with Notices to Complete, which entitled them to terminate certain of the agreements and, in respect of several Option Agreements, acquitted them of the obligation of exercising the Put Options granted in their favour. The defendants assert that there were anticipatory breaches of the Agreement to which I shall refer next, which they accepted as a repudiation of that Agreement pursuant to which they terminated it. They submitted that the consequence of that termination was that the other interdependent agreements were also terminated.

7 The essential dispute in relation to the first mentioned Agreement is that the requirement to pay the Default Purchase Price of $12 per kilogram, in lieu of the Contracted Purchase Price of $5.68 per kilogram, amounted to a penalty such that it is unenforceable.

8 The next agreement to which I shall refer is a Sale Agreement by which Group Services agreed to sell to the first defendant, Mars Trading Pty Limited, (“Mars Trading”), the “Assets”, which were defined as meaning and including individually and collectively:-

“(a) the Goodwill;

(b) the Stock;

(c) the Business Records;

(d) the rights and benefits of the Vendor under the Business Contracts; and

(e) the rights attaching to the operation of the Plantation Lands management business,

but excludes the Excluded Assets.”

9 “Business” was defined as meaning the growing of macadamia nuts, managing the plantations and the wholesale supply of those nuts to third party customers, processing macadamia nuts into macadamia kernel and value adding the nuts generally in the way to which I have referred. The “Business Completion Date” was defined as the date on which completion of all matters, except for the transfer of the rights to manage and operate the Plantation Land management business, occurred under the Agreement.

10 “Excluded Assets” were defined as the kernel supplied or to be supplied by Group Services to Mars Trading under the Kernel Sale Agreement; plant and equipment; the factory land; the plantation land; the brand names and trademarks; cash on hand and funds held with any bank or financial institution; and any debts owed to Group Services.

11 “Related Agreements” were defined as meaning:-

“(a) Kernel Sale Agreement;

(b) Plant, Equipment and Names Sale Agreement;

(c) Plantation Land Agreements;

(d) Factory Land Agreements; and

(e) Option Deeds.”

12 Clause 17.1, which is headed “Cross-Default”, provided:-

“If a purchaser in this Agreement or a Related Agreement (‘Relevant Purchasers’) defaults in performing its obligations under this Agreement or a Related Agreement (as the case may be), then that act is deemed to constitute a default and repudiation by each Relevant Purchaser which will entitle the Vendor under this Agreement and the vendors of each of the Related Agreements (‘Relevant Vendors’) to exercise all rights:

(a) under the Vendor Securities;

(b) under any guarantees and indemnities granted under this Agreement or the Related Agreements; and

(c) to which the Vendors are entitled at law or in equity.”

13 Clause 7 dealt with completion and provided that on the Business Completion Date completion was to take place at the offices of Clayton Utz on 22 November 1999, and that on the Plantation Land Completion Date, being “the transfer of the right to manage and operate the Plantation Land management business”, completion was to take place at those offices on 4 February 2000 and, in respect of both dates, “on such other date(s) as the parties may agree in writing”. No such “other date(s)” were agreed.

14 Clause 7.2 provided that if Mars Trading did not complete on the dates stated or as otherwise agreed, Group Services may issue a Notice to Complete fixing a time for completion of the matters that were to occur on either of the dates, and that the Notice of Complete would be deemed to be sufficient as to the time if a period of fourteen days from the date of notice was allowed for completion. It was provided that if Mars Trading did not comply with the Notice to Complete issued by Group Services in accordance with the clause, Group Services had the rights set out in clause 17.

15 Clause 7.3 is headed “Interdependence of Related Agreements”, and stated:-

“Completion of the sale and purchase of the Plantation Land, the Factory Land, the Plant and Equipment and the Brand Names and Trademarks under the Related Agreements are interdependent and must be completed simultaneously on the Business Completion Date, except for completion of the purchase of the:

(a) right to manage and operate the Plantation Land management business, under this Agreement;

(b) Plantation Land under the Plantation Land agreement; and

(c) Plant and Equipment - Plantation Land and the purchase of consumables relevant to the management of the Plantation Land under the Plant Equipment and Names Sale Agreement;

which are to complete on the Plantation Land Completion Date (scheduled for 4 February 2000).”

16 Clause 18 provided for the giving of notice which, to be valid, must be in writing and, inter alia, deemed such notice to have been duly served, given or made in relation to a person if delivered or posted or sent by facsimile to specified numbers. It also deemed service to have been effected on certain dates. It is not in issue that the notices given were served conformably with this Agreement.

17 Mr Hayes; the third defendant, Yengrin Pty Limited, (“Yengrin”); the fourth defendant, Ellicott Pty Limited, (“Ellicott”); and Macadamia Properties were also parties to this Agreement as guarantors of the obligations of Mars Trading.

18 The principal issue, which arises under this Agreement, and indeed a principal issue in the case, is whether the defendants were entitled to terminate it for an anticipatory breach, which, as they submitted, constituted a repudiation which they accepted. “Stock” was defined as meaning, inter alia:-

“… all the stock-in-trade of the Business owned by the Vendor at the Specified Time including ……

(a) all the Vendor’s stock of macadamia “nut in shell” at the Dunoon factory, located at 1277 Dunoon Road, Dunoon, New South Wales which is estimated to be 500 tonnes (and will be an amount no more than 75 tonnes above or below 500 tonnes);

………………………………………..

exclusively relating to the Business but excluding work in progress and finished goods in relation to the Business.”

“Specified Time” was defined as midnight at the end of the Business Completion Date, which was defined as the date on which completion of all matters (except for the transfer of the rights to manage and operate the Plantation Land management business) occurred under this Agreement.

19 In a letter from Gadens to Clayton Utz, the solicitors for the plaintiffs, of 20 December 1999, it was confirmed that Gadens acted for all defendants, save the fifth. There was reference to the various agreements entered into on 2 and 21 October 1999 and to various Notices to Complete certain agreements. The letter continued:-

“We note that pursuant to the Notice to Complete the Business Sale Agreement you have stated that your client is ready willing and able to sell and assign to our client all of the Assets specified in that agreement. We further note that under the Business Sale Agreement your client is required to provide our client with not less than 425 tonnes of nut in shell upon completion.

Our client has been advised that your client has processed between 240 to 250 tonnes of the nut in shell and is not in a position to provide our client 425 tonnes of nut in shell in accordance with its obligations under the Business Sale Agreement. This is a clear anticipatory breach and repudiation of your client’s settlement obligations under the Business Sale Agreement and the Related Agreements.

Our client has instructed us to accept your client’s repudiation of the Business Sale Agreement and the Related Agreements and reserves all rights which it has arising out of your client’s repudiation. We are also instructed to formally confirm and put your client on notice that our client holds your client responsible for all loss and damage sustained by our client as a result of the repudiation of the contract by your client.

We further note pursuant to the Business Sale Agreement our client was granted the right to access to the premises, staff and records of the Business. Your client is aware that it was our client’s intention to on-sell the Plantation Land to a third party and accordingly our client had the right to access the Plantation Land to permit prospective purchasers of the Plantation Land to inspect it. Our client has repeatedly requested and been denied access to the land, and this has frustrated its ability to complete the transaction. Our client views this as a clear breach of your client’s obligations and reserves all of its rights, including any damages that it has suffered as a result of your client’s breach. In addition, our client has been denied access to the Factories which has also frustrated completion.

In the circumstances we request that by no later than 5.00 pm to-day you confirm to us the following:

1. That your client accepts that our client has lawfully terminated the contract as a result of your client’s anticipatory breach and repudiation of the contract;

2. That your client will return to us no later than 5.00 pm on 21 December 1999 the Vendor Securities, as defined in the Business Sale Agreement and Related Agreements.

Should we not hear from you within the time specified we shall treat that as an acceptance of our client’s stated position.

20 On the same day Gadens wrote a “without prejudice” letter to Clayton Utz, which referred to the other letter of that date and continued:-

“Notwithstanding our client’s acceptance of your client’s anticipatory breach and repudiation of the Business Sale Agreement and the Related Agreements, our client has instructed that it is prepared to allow the agreements to remain on foot, on the following terms and conditions:

· Purchase of the factories together with plant and equipment thereon at the agreed price of $2m, settlement to take place on or before 28 February 2000.

· Payment of interest at 8% per annum on the purchase price of $2m from confirmation of this proposal until settlement, the first month’s payment of $13,333 to be made on confirmation of this proposal.

· Settlement of the purchase of the plantations not later than 31 March 2000.

· Payment of kernel already taken on confirmation of this proposal.

We also advise that our client has advised us that it has received preliminary financing approval from both the Bank of Queensland and Colonial State Bank and anticipates finalising its financing arrangements early in the new year.

Please advise us by no later than 5 pm this afternoon, 20 December 1999 whether your client is prepared to accept the terms and conditions stated above.”

21 The letter makes certain points clear. First, as at 20 December 1999, nothing more than “preliminary financing approval” had been obtained from two banks and there was nothing more than an anticipation that financial arrangements would be concluded early in 2000. Secondly, extensions of time were being sought, no doubt because of the necessity to conclude financial arrangements, and there was a preparedness to pay interest as a price for that. Thirdly, the letter was making a new offer or, perhaps, a counter offer.

22 On 22 December 1999, Clayton Utz sent Notices of Termination of the Contracts for Sale of Dunoon and Converys Lane, of the Sale of Business Agreement, and of the Plant and Equipment, Brand Names and Trademarks Agreement.

23 On 22 December 1999 Clayton Utz advised, in writing, that in accordance with clauses 9(a)(v) and (vi) of the Option Deeds dated 21 October 1999 between Group Services and Administration, as vendors, and Ellicott, as purchaser, for the various plantations that Ellicott:-

“is not entitled to exercise the Call Options granted under the Option Deeds and any exercise or purported exercise by Ellicott Pty Ltd or any nominee of Ellicott under the Option Deeds will not be effective.”

24 On 22 December 1999, Clayton Utz wrote a further letter to Gadens:-

“1. Contrary to your assertion, our client is in a position to provide your client with 425 tonnes of nut in shell in accordance with its obligations under the Business Sale Agreement. Your client’s assumption that our client does not have the requisite amount of nut in shell is incorrect. Our client strongly rejects your assertion that there has been an anticipatory breach on the part of our client or repudiation of our client’s settlement obligations under the Business Sale Agreement or Related Agreements.

2. Our client rejects that it has breached its obligations under the Business Sale Agreement to provide your client with access in accordance with clause 6.2 of that agreement. On the contrary, your client has never complied with clause 6.2(a) of the Business Sale Agreement in giving at least 48 hours written notice to our client of its requirement for access with the details required by clause 6.2(b). We are instructed that your client has verbally requested access on two occasions. One was for access at 6 am on a Saturday morning and access was given to your client at around 8 am on that morning. The other request was a verbal request to the site manager which request the site manager was not permitted to accede to because the requirements of clause 6.2 of the Business Sale Agreement had not been complied with. Further, at that point in time one of your client’s cheques had been dishonoured.

3. We are instructed to strongly reject your client’s assertion that it has lawfully terminated the Business Sale Agreement and Related Agreements as a result of an alleged anticipatory breach and repudiation of those agreements on the part of our client. Our client reserves its rights under the Notices to Complete served upon the Purchasers and Guarantors under the Business Sale Agreement and Related Agreements on 6 December 1999 and under the Business Sale Agreement and Related Agreements generally. Our client will not return the Vendor Securities (as defined in the Business Sale Agreement and Related Agreements) to your client in accordance with your client’s request.

4. Our client is surprised that your client is raising the allegations outlined in your facsimile of 20 December 1999 one day before the Notices to Complete expire when we have not previously received notice from you of any of those allegations during the whole period since the contracts were exchanged on 21 October 1999 until 20 December 1999. During that time Clayton Utz has written to you on 8 November 1999, 16 November 1999, 17 November 1999 and 19 November 1999 and telephoned you on 8 November 1999, 12 November 1999, 16 November 1999 (several times), 17 November 1999 and 19 November 1999 and at various other times endeavoured to procure from you the necessary settlement documentation and to ascertain whether your client was in a position to settle this matter and has not received a response to any of those facsimiles or telephone calls. In addition, your client has not refuted any of the allegations of default under the Business Sale Agreement and Related Agreements on the part of your client set out in the various Notices to Complete served by our client upon your client on 6 December 1999.

We reiterate that our client reserves its rights in respect of such default under those Notices to Complete and under the Business Sale Agreement and Related Agreements generally.

5. Our client is not prepared to enter into negotiations with your client in relation to your ‘without prejudice’ letter dated 20 December 1999 seeking a variation of the Business Sale Agreement and Related Agreements.”

25 On 24 December 1999, Gadens responded to Clayton Utz stating:-

“1. We are instructed that your client was not in a position to provide our client with the NIS in accordance with the business sale agreement. The supply of the NIS was an essential term of the agreement between the parties. This is clearly evidenced in the agreement itself and also by the extensive negotiations between the parties regarding this matter. We reiterate our client’s acceptance of your client’s repudiation of the agreement and the related agreements accordingly.

2. There was constant written and verbal communication between our respective clients in relation to the obtaining by our client of access to the plantation. Although there may not have been strict compliance with the business sale agreement by our client (which is not admitted), we are instructed that your client repeatedly refused verbally to even contemplate our client having access to the plantation and the factories. This was clearly not an act done in good faith given your client’s understanding of our client’s intention to onsell the property. With respect, your comment in relation to our client’s cheque being dishonoured is not relevant in the circumstances as at the time our client was negotiating with your client a variation of the terms of the agreement.

3. We demand that your client immediately returns the vendor’s securities on the basis that the business sale agreement and related agreements are no longer on foot due to your client’s repudiation and denial of access as has been previously communicated to you.”

26 The alleged failure by Group Services to give access to the land was not pursued as a basis for alleging breach by it of the Agreement. Reliance was placed, in this regard, solely upon the alleged failure of Group Services to have at least 425 tonnes of nut in shell at the Dunoon factory. In the end, it was not contended that there was such a failure, because the uncontradicted evidence established that Group Services had an agreement with another supplier to provide it with nut in shell to the extent necessary to make up at least 425 tonnes on settlement, if settlement took place. The argument put forward in this regard by Mr Wales was confined to asserting that this did not constitute a compliance by Group Services with its contractual obligations, those obligations being to sell nut in shell, as I understood the argument, which was at the Dunoon factory when the Agreement was entered into. The defendants proffered no evidence in support of this, nor of the allegation in the letter of 24 December 1999 that there had been extensive negotiations between the parties “regarding this matter”. Mr Pearce said in cross-examination that he was not aware of conversations with Mr Hayes when he inspected the nut in shell: Tp.24. Finally, a proper construction of the agreement does not support their contention.

27 The next Agreement of 21 October 1999 was one whereby Group Services contracted to sell Converys Lane to Macadamia Properties for $1.2m. The contract was in the form of the 1996 edition and the payment of a deposit was not required.

28 Clause 9 of the printed Agreement provided, under the heading “Purchaser’s Default”:-

“If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice and after the termination -

9.1 keep or recover the deposit (to a maximum of 10% of the price);

9.2 hold any other money paid by the purchaser under this contract as security for anything recoverable under this clause:

9.2.1 for 12 months after the termination; or

9.2.2 if the vendor commences proceedings under this clause within 12 months, until those proceedings are concluded; and

9.3 sue the purchaser either -

9.3.1 where the vendor has re-sold the property under a contract made within 12 months after the termination, to recover -

· the deficiency on re-sale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax payable on anything recovered under this clause); and

9.3.2 to recover damages for breach of contract.”

29 Clause 15 provided for the parties’ completing by the completion date and, if they did not, for the right of a party to serve a Notice to Complete if it was otherwise entitled to do so. The completion date is stated to be that referred to in clause 42.1 in the typed conditions, viz 22 November 1999, subject to clause 42.1(b). That clause made completion of this contract interdependent such that it must be completed simultaneously with the Related Agreements with certain exceptions, which are specified. Clause 42.2 provided for cross-defaults, essentially in the terms to which I have referred.

30 Clause 42.1(c) provided that notwithstanding any other provision in the contract, the parties acknowledged that a period of fourteen days following the date of service of the Notice to Complete was to be deemed a reasonable time for completion under the notice.

31 Special Condition 35 named the guarantors, namely Mars Trading, Yengrin, Macadamia Properties, Ellicott and Mr Hayes, and recorded that Group Services entered into the contract at their request and on condition that they guarantee to it the due performance and observance by Macadamia Properties of its obligations. The guarantee given by Yengrin was limited to a maximum amount of $450,000.

32 Clause 35.2 provided that the guarantors would indemnify Group Services against all and any liability of Macadamia Properties, such indemnity being “a separate, distinct and principal obligation of the guarantors” and “not to be construed otherwise”.

33 The contract for the sale of Dunoon by Administration to Macadamia Properties provided for a purchase price of $350,000 and no deposit. Otherwise, relevantly for present purposes, it was in the same terms as the contract for the sale of Converys Lane, the guarantors and indemnifiers being the same.

34 An Option Deed was entered into between Group Services and Administration, as vendors, and Ellicott, as purchaser, on 21 October 1999. It recited that Group Services was the registered proprietor of Macadamia Plantations Missingham property, which was defined as “part of 89 Missingham Road, Dunoon”, and being the land in Deposited Plan 755703 FI 8/755703, and that Pacific Gold was the registered proprietor of Pacific Gold Missingham property, which was defined as “part of 89 Missingham Road, Dunoon”, and being the property in Deposited Plans 755703 and 550768 and FI’s 1/550768 and 103/755703; that the vendors had agreed to grant the purchaser an option to purchase the property; and that the purchaser had agreed to grant to the vendors an option requiring the purchaser to do so. The “Related Agreements” were defined, but did not include the Contract for Sale of Converys Lane.

35 The vendors were entitled, pursuant to clause 2.2, to require the purchaser to purchase the property subject to the terms of the Deed, clause 4.1 providing that the Put Option may be exercised by the vendors at any time within the Put Option Period, time being of the essence, by the delivery of certain specified documents. The “Put Option Period” was defined as commencing at 5:01 pm (Sydney Time) on 21 January 2000 and ending at 5 pm on 27 January 2000. Clause 9 provided for cross-defaults, and the contract to be entered into was annexed to the Option Deed.

36 The sale price for the first mentioned piece of land was $14,390 and for the second $2,433,247.

37 Another Option Deed was entered into on 21 October 1999 between the same vendors and purchaser, which recited that Group Services was the registered proprietor of the Macadamia Plantations Dunoon property, which was defined as “part of 1306 Dunoon Road”, and comprised the land in Deposited Plans 755703 FI’s 98/755703 and 99/755703, and that Administration was the registered proprietor of the Pacific Gold Dunoon Property, which was defined in the same way and was the land in Deposited Plans 755703, 542420 and 543296 and FI’s 1/755703, 3/542420 and 1/543296. Subject to that and the necessary changes in relation to the different properties this Option Deed was essentially in the same terms as the other. The respective purchase prices were $719,498 and $1,832,865.

38 The final agreement entered into on 21 October 1999 was a Sale Agreement for plant and equipment, brand names and trademarks used in the nut in shell business, the Pacific Gold business and the Plantation Management business. Group Services was the vendor and Yengrin was the purchaser. Mars Trading, Macadamia Properties, Ellicott and Mr Hayes were guarantors. “Related Agreements” were defined, and the purchase price was apportioned as to $1 for the brand names and trademarks; $50,000 for the plant and equipment - Plantation Land; and $399,995 for the plant and equipment - remaining business. The agreement provided for completion on 22 November 1999; for the right to give a Notice to Complete; for interdependence of Related Agreements; and for the parties’ various obligations. There was a cross-default provision in the terms to which I have referred.

39 By a Summons filed on 6 March 2000, which was amended by an Amended Summons filed in Court on 26 February 2001, the plaintiffs sought relief, generally speaking, in relation to the failure of Mars Trading to pay the default purchase price of $12 per kilogram in respect of the kernel consequential upon the non-completion of the other agreements, and relief in relation to the losses it suffered by on-selling the assets, which it alleged the defendant purchasers had been contractually obliged to purchase. The plaintiffs re-sold to a Mr Findlay Andrews or interests he controlled. The original purchase price for Dunoon was $350,000. It was sold for $250,000. The original purchase price for Converys Lane was $1.2m. It was sold for $500,000. The total of the original purchase prices if the options had been exercised was $5m. Mr Andrews paid $4,320,000 for the same land. The purchase price under the agreements for the sale of the other assets amounted to $450,000 and Mr Andrews paid $500,000.

40 Mr Wales’ written list of topics and propositions of law indicated that the issues were far more restricted than appeared on the pleadings. Under the heading “Business Sale Agreement” he wrote:-

“As at the time for completion stipulated in the notices to complete, the plaintiffs had put it out of their power to comply with their obligation to supply the contracted amount of nut in shell (‘NIS’).

This was an anticipatory repudiation which was accepted by the defendants.

Further, it follows that the plaintiffs’ notices of termination were, in fact, a repudiation by the plaintiffs of their obligations under the contracts.”

41 Under the heading “Contract for Sale of 1277 Dunoon Road, Dunoon”, he wrote:-

“Completion of this contract was interdependent with completion of (inter alia) the Sale of Business Agreement, see Special Condition 42.1 at page 24 of those Special Conditions, and the definition of ‘Related Agreements’ in clause 29.1 at page 4.

By reason of the plaintiffs’ default in relation to the Business Sale Agreement (as to which, see below), the defendants validly terminated this agreement.

Jampco Pty Limited v Cameron (No 2)

Advance Commercial Finance Limited v Aarons

42 In relation to the Option Deeds, it was submitted that the plaintiffs conceded that they had not exercised their Put Options and, therefore, it was submitted that they were not entitled to rely upon them as no contracts had come into existence.

43 In relation to the Sale Agreement for plant and equipment and brand names and trademarks it was stated that there was no additional comment. The same observation was made in relation to the Deed of Mortgage of Contractual Rights; the charge granted by the fifth defendant; the charge granted by Yengrin; the mortgage granted by Lassgol Pty Limited; the mortgage granted by Macadamia Properties; the Deed of Mortgage; the Contract of Sale of part 89 Missingham Road; the Contracts of Sale of Dunoon Road and Converys Lane; the Business Sale Agreement; and the Contracts for Sale of land.

44 Finally, in relation to the Macadamia Nut Kernel Agreement the question raised was whether the requirement to pay $12 per kilogram, whereas the contractual price was stipulated at $5.68 per kilogram, constituted a penalty in that it could not be “a genuine or a reasonable pre-estimate of damages, which the plaintiffs would sustain in the event of breach by the defendants”.

45 In final addresses Mr Wales re-stated the issues thus:-

“1. The payment sought under the Nut Kernel Agreement was a penalty and therefore not enforceable to the extent that it exceeded $5.68 per kilogram.

2. Whether, as at 21 December 1999, Group Services had in store the nut in shell ‘as required’.

3. On the assumption that there was a valid termination on 22 December 1999, what damages the plaintiffs had proved; the primary argument being whether they had fulfilled their duty ‘whatever it is to the defendants’ in respect of the sale to Mr Andrews.”

“4. The effect of the failure by the plaintiffs to exercise the Put Option.”

46 Mr Wales expressly stated that all other issues raised in the Defences were not being pursued. This remained the position. However, my Associate received an e-mail from Mr Wales dated 1 March 2001. It stated:-

“I appreciate that no leave was given to lodge additional written submissions. Nevertheless, I ask that one additional argument be noted.

It was submitted on behalf of the plaintiffs that the letter of 20 December 1999 from Gadens to Clayton Utz (Annexure ‘D’ to Miss Goulden’s statement) constituted a repudiation by the fourth defendant of its obligations under the Option Deeds. It is put on behalf of the defendants that any such repudiation was not accepted by the plaintiffs, and the various agreements between the defendants and the plaintiffs were affirmed.

That affirmation took place by means of a letter from Clayton Utz to Gadens dated 22 December 1999 which is Annexure ‘G’ to the affidavit of Miss Goulden. That letter was sent to Gadens by facsimile at 11.01 am: see the time shown on the transmission report at page 3 of Annexure ‘G’.

The various notices of termination, although also dated 22 December 1999, were sent later in time. The transmission reports attached to the statement of Mr Robert Edward Archer show that the notices of termination were sent by fax at 16.25 hours, i.e. 4.25 pm - see the very top of the second last page of the annexures to the statement.”

“Without notice of any further written submissions being made, I received a copy of a letter from Mr Wales SC to his Honour dated 1 March 2001.

In response to the submission contained in the above letter, the plaintiffs submit that on a proper reading of Annexure ‘G’ to the affidavit of Ms Goulden there was no affirmation by the plaintiffs and, as a consequence, the plaintiffs were entitled to forward the various notices of termination to the relevant defendants on 22 December 1999.

I would be grateful if you would forward this letter to the attention of his Honour at a convenient opportunity.”

“I have referred your e-mail and confirmatory letter of 1 March 2001 and Mr White’s response of the same date to his Honour.

He has asked me to advise you and Mr White that he is not prepared to consider the proposed further submission in relation to affirmation unless and until the defendants are granted leave to amend their defences, the plaintiffs have an opportunity to reply to any amended defences if leave is granted and he is in receipt of full oral submissions from both parties.

47 At the outset Mr Wales stated that he would be tendering no statements of any witnesses. During the hearing he tendered some documents. Mr White then read the statements of Ms Goulden of 23 June 2000, (Exhibit A); the statement of Mr John Underhill of 23 June 2000, (Exhibit C); the statements of Mr Mark Pearce dated 26 June 2000 and 23 February 2001, (Exhibits D and E respectively); the statement of Mr Bryan Raphael dated 6 July 2000, (Exhibit G); the statements of Mr Allen Ennew dated 29 December 2000 and 21 February 2001, (Exhibit J); and the statement of Mr Michael Bowen dated 30 June 2000, (Exhibit K). Mr Wales stated that he took no objection to any of these statements and that in relation to Ms Goulden, Mr Underhill and Mr Bowen he did not require them for cross-examination. I stated that, in those circumstances and conformably with my usual practice, I did not require those statements to be verified. Mr Wales agreed that they should be accepted as evidence and he did not require them to be verified. Mr Wales said he required Mr Pearce and Mr Ennew for cross-examination and their statements were admitted subject to verification. He said he may require Mr Raphael for cross-examination but, during the hearing, he stated that he did not. Accordingly, for the reasons given and with Mr Wales’ concurrence, his statement was not required to be verified.

48 I shall deal with two evidentiary matters at the outset. The first relates to the way in which clause 2.7 of the Agreement for Sale of Macadamia Nut Kernel of 2 October 1999 came into existence. The second relates to the allegation that there was insufficient nut in shell to meet the requirements of the definition of “stock” in the Sale Agreement of 21 October 1999.

49 It is clear from the Agreement to sell the kernel that on 2 October 1999 the parties had in mind the entry into the “Additional Agreements” defined in that Agreement. This, of course, is reinforced in clause 2.7. The evidence of Mr Pearce, which was not sought to be contradicted on this point, was that the sale price for kernel from the 1999 season, which this was, was approximately $12 per kilogram, and that the price of $5.68 per kilogram “was a considerable reduction from the market price at the time”: Exhibit 25(a)(1). Although this paragraph was, originally, not read, Mr White subsequently tendered it and Mr Pearce was recalled for cross-examination, but he was not challenged on these aspects. In sub-paragraph (5) he said:-

“Shortly thereafter, Mr Teng, Mr Bowen and myself had a telephone conference with Mr Green as Mr Graham Hayes’ adviser in relation to the sale the subject of these proceedings during which a conversation took place to the following effect:

MB: ‘We are putting in a provision for a default purchase price of $12 into the Kernel Agreement because we are exposed if the sale of MPA’s business to Mr Hayes and his interests fall through and we are left with selling kernel to you at the substantially reduced rate of $5.68 which as you know was discounted to take into account the larger transaction.’

MJG: ‘It shouldn’t effect us anyway, so that’s fine’.”

“MB” and “MJG” are, respectively, Messrs Bowen and Green.

50 In his statement, (Exhibit K), Mr Bowen said that he was involved in negotiations for the sale; that he reviewed a draft of the Agreement and, upon doing so, became concerned that the discounted price for kernel of $5.68 per kilogram could lead to Group Services being exposed in the event that the sale of the whole of its business to the defendants did not proceed. He raised that with Messrs Teng and Pearce and said:-

“I am worried about the price of $5.68 per kilogram in the Kernel Agreement with Mars Trading. If the rest of the sale doesn’t go through then this discounted price will leave us [MPA] exposed commercially. We will need to include a default purchase price which will be triggered in certain circumstances to cover that risk.”

“I then telephoned Max Green, the adviser for Mr Hayes and his interests (being the other defendants in these proceedings) in relation to the proposed sale of MPA’s business to the Defendants. That telephone call was a conference call from Mr Teng’s office in the presence of Mr Teng and Mr Pearce. During the course of that telephone conference Mr Green and I had a conversation to the following effect:

MB: ‘I am including a default purchase price of $12 in the Kernel Agreement because we will be at risk of loss in the event that the sale MPA’s business falls through and MPA’s left with an agreement to sell kernel to Mars at the discount rate of $5.68 per kilogram’.

MJG: ‘I don’t have a problem with that’.”

51 In these circumstances, there cannot be the slightest doubt that:-

(a) The market price for the relevant kernel at the time was in the order of $12 per kilogram.
(b) The price of $5.68 was a heavily discounted one.
(c) The discount was given because of the overall arrangement it was contemplated the parties would enter into and complete.
(d) Mr Bowen discussed with Mr Hayes’ representative, Mr Green, the matter in the terms to which I have referred, making it very clear to Mr Green why the provision was being inserted in the contract.
(e) Mr Green agreed with that course.
(f) The clause was inserted into the contract.
The question will then arise as to whether there was a penalty.

52 So far as the availability of the necessary amount of nut in shell, I do not think, in the end, that Mr Wales submitted that the nut in shell could not have been acquired to comply with the requirements of the contract. If he did, I would reject the submission.

53 The Agreements were required to be settled on 22 November 1999. They were not and, in paragraph 10 of his statement of 26 June 2000, Mr Pearce stated that on or about 26 November 1999 he spoke to Mr John Underhill, Administration’s Business Unit Manager, who told him that he, Mr Underhill, was worried about deterioration of the nut in shell that was being held for sale “to Hayes if settlement doesn’t occur when it is supposed to”. Mr Underhill continued that the expected life of the product would vary, but that it was possible that it may be of a substantially reduced value if left unprocessed past January 2000.

54 Upon being advised of this the Consolidated Foods’ Board authorised the processing of the nuts and, in the first week in December 1999, Mr Pearce discussed with Messrs Teng and Underhill the requirement to supply a minimum of 425 tonnes of nut in shell on settlement. Mr Underhill told him that some of the nut in shell processors had a large surplus of it and that they could presumably supply to Administration any needed “if we process some of the NIS we have at the moment”. Mr Pearce agreed, but told Mr Underhill to make sure that arrangements were in place to obtain an appropriate amount of nut in shell from another supplier if necessary.

55 Mr Pearce said that in late November or early December 1999, Mr Underhill telephoned him and told him that one other nut in shell processor had verbally confirmed that he could supply sufficient top up in December 1999 to the 425 tonnes needed. Mr Pearce asked Mr Underhill to obtain written confirmation and, on 21 December 1999, he received a facsimile transmission from International Macadamias Limited addressed to Mr Underhill stating:-

“As per our discussions earlier I am able to confirm the following points. MPC are able to supply to you 150-200 tonnes of nut in shell. Pricing will be based on 33% sound kernel recovery at 4% moisture. We will hold this stock for you for uptake prior to the 31st of December 1999. This sale is subject to confirmation of price and delivery schedules.”

56 Mr Underhill’s statement, Exhibit C, confirmed these matters in paragraphs 14 to 17. He discussed the matter with Mr Raphael whose evidence, Exhibit G, confirmed the other side of that agreement.

57 In my opinion, there can be no doubt on the uncontradicted evidence that Group Services was able to comply with the requirements of the Agreement in relation to the stock of kernel.

58 The question then is whether, on a proper construction of the Agreement, that met the contractual requirement.

59 The matter was argued as one of penalty, rather than one providing for the adjustment of the purchase price in the event of certain events happening or not happening, which did not constitute a breach of contract.

60 The reason, so it seems to me, is that the Notice of Demand, which is part of Annexure B13 to Ms Goulden’s statement, asserted, in paragraph 4, that there had been a breach, inter alia, of clauses 2.7(a) and (d) and, accordingly, clause 2.7 required the payment of the default purchase price.

61 In Cheshire & Fifoot “Law of Contract”, 7th Australian Edition, the authors state, in paragraph 23.35, that the parties to the contract may stipulate the sum payable by way of damages in the event of a breach, which will be accepted by the Court and awarded as liquidated damages without proof of actual loss, unless it constitutes a “penalty”. They continue:-

“A sum fixed by the contract is a penalty only if it is ‘out of all proportion’ or ‘extravagant, exorbitant, or unconscionable’ in the circumstances. In this formula the leading criterion is clearly ‘unconscionable’, since it embraces the others.”

62 The authors also point out that in assessing whether there is a penalty, the Court is entitled to consider the nature of the parties’ relationship.

63 As the evidence stands in the present case, if there was a breach the loss the plaintiffs would have sustained would be the difference between the discounted price at which they agreed to sell, as part of the larger overall transaction which did not come to fruition, and the market price, which was established, and there was no issue on this point, at $12 per kilogram. Put another way, but for the overall transaction a discount would not have been given and the sale price would have been in the order of $12 per kilogram. Accordingly, the loss was the difference between the proved sale price on the open market of $12 per kilogram and the discounted price of $5.68 per kilogram.

64 Obviously, Mars Trading wished to purchase the kernel. It accepted the discounted price on a very precise factual basis, viz the completion of the other agreements, and agreed that in the event of that factual basis not coming to pass by reason of its breach, it would pay the additional amount. That additional amount equated to the market price at the time. Accordingly, if one were to ask the question whether there was anything penal or unconscionable about the requirement to pay $12 per kilogram in the circumstances, such question must be answered in the negative. This conclusion is, in my opinion, consistent with the authorities.

65 The question of penalties was considered in detail in O’Dea & Ors v All States Leasing System (WA) Pty Limited & Ors (1983) 152 CLR 359. The facts giving rise to that case are well known and far removed from those of the present and, therefore, I do not propose to recite them.

66 At p.368, Gibbs CJ said:-

Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited

‘The question whether a sum stipulated is a penalty for liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach.’

Campbell Discount Co Ltd v Bridge

67 At p.373, his Honour said:-

“The question whether a contractual provision amounts to a penalty depends on all the surrounding circumstances existing at the time of the making of the contract as well as on the terms of the contract itself, and it is therefore not always possible to apply a decision given upon one contract to another case even though that case concerns a contract in identical terms …”.

68 Murphy J was of the view that the provisions of the contract permitted the lessor to recover grossly in excess of any genuine pre-estimate of its loss and were a trap for an unwary or unfortunate lessee such as to be unenforceable because “they are unconscionably harsh”: p.375. Wilson J was also of the view that it was impossible to conclude that the clause reflected on the part of the parties a genuine pre-estimate of damage: p.383. Brennan J came to the same conclusion at p.391.

69 Deane J adopted what had been said by Lord Dunedin in Dunlop Pneumatic Tyre Co and, at p.400, accepted that the question as to whether a stipulated sum was a penalty or liquidated damages was one of construction. He considered that properly understood that statement was unobjectionable, and continued:-

“That question” (the true operation of the provision) “must however be determined as a question of substance which cannot be foreclosed by statements of the parties in their agreement, no matter how genuine they may be, as to their intention in stipulating the sum. Parties to an agreement may have subjectively intended to make a pre-estimate of damages in the event of breach. If, however, that pre-estimate is either extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach or, judged as at the time of making the contract, is unreasonable in the burden which it imposes in the circumstances which have arisen, it is a penalty regardless of the intention of the parties in making it.”

70 His Honour considered that viewed in the light of that statement the provisions of the contract constituted a penalty. However, when one looks to the facts of the present case, there is, in my opinion, nothing to suggest any extravagance or unconscionability in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.

71 The various authorities were considered by Cole J at some length in Multiplex Constructions Pty Limited v Abgarus Pty Limited & Anor (1992) 33 NSWLR 504. His Honour considered, inter alia, whether evidence concerning the circumstances in which an alleged penalty clause came into existence is relevant to unconscionability and therefore admissible. The contention of the builder was that evidence of pre-contract negotiations was not admissible in determining whether a clause provided for a penalty or not, that being a matter of construction. His Honour was of the view that such evidence was admissible. After referring to a passage from the judgment of Samuels JA in W.T. Malouf Pty Limited v Brinds Limited (1980) 52 FLR 442 at p.462, he said, at p.508:-

“It follows, in my view, that evidence is admissible to establish the circumstances in which the parties came to agree to the clause, at least for the purpose of negating any attack upon the clause based upon an intention of the parties not to draft a clause constituting a genuine pre-estimate, or to draft a clause in disregard of whether it was a pre-estimate or not.”

72 Of course, I am not concerned with a question of admissibility of evidence as all the evidence to which I have referred was led without objection. However, the point his Honour is making, at least in part, is that one can look at the evidence to negate an attack upon the clause based upon an intention of the parties not to draft one constituting a genuine pre-estimate and having regard to all the circumstances. His Honour then quoted from the judgment of Clarke JA in Amev Finance Limited v Artes Studios Thoroughbreds Pty Limited (1989) 15 NSWLR 564, at p.573:-

“The onus is cast on the Court, as I understand the authorities, to look to the substance of the transaction and determine whether or not the contractual obligation reflects the expression of a genuine pre-estimate of the damage likely to flow from the breach.”

“.. a genuine pre-estimate means a pre-estimate which is objectively of that character; that is to say, a figure which may properly be so called in the light of the contract and the ‘inherent circumstances’. It will not be enough merely that the parties honestly believed it to be so.”

73 At pp.509-510 Cole J said, after quoting again from Clarke JA:-

“His Honour there contemplates two alternative attacks, the first based upon extravagance of damage, and the second based upon unconscionability or imposition of an unreasonable burden upon a party. Whether a burden is unconscionable may well depend upon the circumstances of the parties at the date of the contract, their perceptions at that time regarding their respective positions should breach of contract occur at a later and perhaps distant time, the equality or inequality of bargaining position at the date of contract, and the willingness or unwillingness of a party to accept an imprecise or in some respects ill-defined obligation to pay damages as the price of obtaining what presumably was regarded as a profitable contract. The relationships between the parties at the time of contract concerning the proposed clauses and its imposition touch upon these matters, as does the question of their understanding of the likely imposition generated by the clause. In my view these matters, and thus evidence relating to them, are admissible in order that the Court may weigh any question of unconscionability, quite apart from an imperical examination of whether damage under the clause is excessive.”

74 As his Honour pointed out at pp.512-513, if one is to have regard to all the circumstances, including the nature of the subject matter of the agreement in determining as a matter of degree whether a clause is penal or compensatory, one must know of the relationships between the parties at the time of the contract, the genesis of the clause and the discussions concerning it. He added that one should also know of the bargaining position of the parties, but that is not a matter which was put in issue in this case.

75 In my opinion, when one has regard to all the relevant circumstances, the clause cannot be described as providing for the payment of a penalty, either on the basis that it is not a genuine pre-estimate of damages nor unconscionable.

76 It was not in issue that if that be so the principal sum payable was $768,907. Demand was made for its payment on 6 December 1999 and, in my opinion, Group Services is entitled to interest thereon from that date to the date of judgment, namely Thursday, 8 March 2001 in accordance with the Supreme Court rates. The figure is $99,483.89 and there shall be judgment for Group Services against Mars Trading and Mr Hayes, in respect of this claim, in the sum of $868,390.89.

77 I have set out the basis upon which it was alleged that there was a repudiation of the contract by the plaintiffs entitling the termination of the Sale Agreement. The first question is whether, on a proper construction of the Agreement, the ability of Group Services to buy in sufficient nut in shell to be able to sell the stated amount of nut in shell at “the Specified Time” means that Group Services was able to comply with the contractual obligation. The second question is whether that obligation was of such a character as to allow the termination of the Sale Agreement for breach of an essential term. The matter also has to be considered, in my opinion, in the context of the concluding words of the definition “but excluding work in progress …”, and in the light of the clearly implied obligation to provide stock of equivalent quality. The evidence is that if certain of the nut in shell had not been processed it would have deteriorated. There is no provision in the Agreement, nor is there any sensible reason why one would imply such a provision, that it be the nut in shell, whatever its quality may be at the time of settlement, provided the deterioration was not the cause of any lack of care on the part of Group Services. I cannot imagine that Mars Trading was intending to buy deteriorated nut in shell. Furthermore, it was appreciated that the stock excluded work in progress, which indicates that some of the nut in shell may be the subject of work in progress.

78 However, I consider there is a more fundamental problem in the path of the purchaser. In order to fall within the definition of “stock” the nut in shell must be owned by Group Services at “the Specified Time”, i.e. at “midnight at the end of the Business Completion Date”. The “Business Completion Date” meant:-

“The date on which completion of all matters (except for the transfer of the rights to manage and operate the Plantation Land management business) occurs under this Agreement.”

79 The completion date, as I have noted, was provided in clause 7.1 as 22 November 1999. Completion did not take place on that date and Group Services issued a Notice to Complete expiring on 6 December 1999. Therefore, so it seems to me, the nut in shell to which reference is being made is that owned by Group Services at “the Specified Time”, not at the time the contract is entered into or some other time.

80 In the result I have come to the conclusion that that for which the parties were contracting was nut in shell of the quantity specified and in the same, or substantially the same, condition as that in the factory at the date the contract was entered into and of basically the same type. That, in my opinion, is a sensible commercial construction of the Agreement.

81 It is necessary to bear in mind that Mars Trading and Mr Hayes did not lead any evidence to suggest that there was some inherent quality about the nut in shell described in the definition of stock, which made it necessary that it be that particular nut in shell, whatever its condition may have been at the time of completion, and not equivalent nut in shell brought in to replace some, which either may have deteriorated or had been used in work in progress because, if it had not, it would have deteriorated. I have referred to the unsuccessful attempt to elicit evidence from Mr Pearce about Mr Hayes’ position in this regard.

82 I was not referred by the parties to any provision in this Agreement providing for the circumstances of termination. In these circumstances the right to terminate is governed by general law principles and it is clear that there will not be a right to do so for any breach, but only for a serious one. What amounts to a serious breach has to be considered in the whole context of the case. Essentially, however, the breach must be of an essential term, or going to the root of the contract, or amount to a repudiation by dint of inability or unwillingness to perform an essential term of the contract or to perform without breach going to its root.

83 In Tramways Advertising Pty Limited v Luna Park (NSW) Limited (1938) 38 SR (NSW) 632 at pp.641-2, Jordan CJ said:-

“The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.”

84 The breach on which Mars Trading sought to rely is certainly not, in my opinion, one of an essential term or one going to the root of the contract. If it had had such significance the defendants could have called evidence to establish that. Furthermore, it was an anticipatory breach, and to justify termination for an anticipatory breach the party, allegedly in breach, must manifest an inability or unwillingness to perform before any performance is due. That breach will amount to repudiation if the inability or unwillingness relates either to the whole contract or an essential term or goes to its root. In the present case Mars Trading has not established an inability or unwillingness on the part of Group Services to perform the contract before performance was due, nor that that inability or unwillingness related either to the whole or an essential term of the contract or went to its root. To the contrary, Group Services was careful to ensure that it was in a position to do so.

85 In the result, Mars Trading was not entitled to terminate the Agreement. In these circumstances, it seems to me that there was no anticipatory breach by Group Services entitled Mars Trading to treat the Agreement as at an end by accepting the alleged repudiation. Rather, the conduct of Mars Trading and the other defendants constituted a breach of contract, which entitled the plaintiffs to terminate the Agreements. The refusal of the defendants was made more clear in the letter from Gadens of 24 December 1999.

86 The plaintiffs claim damages in the Amended Summons as against the purchasers by pleading, after the allegations of breach:-

“In the premises by reason of the wrongful repudiation of the .. agreement by the .. defendant, the .. plaintiff has terminated the .. agreement and has suffered loss and damage.”

87 In his statement, Exhibit D, Mr Pearce said that shortly after 22 December 1999, negotiations were recommenced with Mr Andrews, who had been interested in purchasing the various assets and had previously carried out due diligence of the business when it was put on the market in about September 1999. He said that in early January 2000 an agreement was reached with Mr Andrews and simultaneous exchange and settlement occurred on 7 January 2000. He referred to the Agreements, which are Exhibits to the statement of Ms Goulden. He continued that the majority of what was included in the proposed sale to the defendants was sold to Mr Andrews, save for certain packaging and raw materials and the kernel, the subject of the Kernel Agreement, and that in relation to it the plaintiffs took the view that it could be re-sold to third parties through other businesses within the Consolidated Foods Group at a price equivalent to $12 per kilogram. He recalled that Mr Andrews was not concerned whether or not the kernel was part of the sale.

88 Mr Andrews was not interested in purchasing the packaging and raw materials, which carried the brand name “Pacific Gold”.

89 In paragraph 21, Mr Pearce said that the plaintiffs had no alternative but to attempt to sell these items to third parties, which had, in the absence of the sale of the “Pacific Gold” brand name and the associated Inventory as a going concern, a substantially reduced value. He said that in the event the Inventory items were sold to Mr Andrews for $7,654 and to Sun Coast Gold Macadamias (Aust) Limited for $12,301.80, leaving a shortfall of $57,055.20. These figures were not challenged. The balance of the raw materials was sold to third parties at a loss, but no claim has been included for this as it was sold to related entities of Consolidated Foods.

90 He annexed a summary of the amounts which would have been received from the defendants and which were received under the agreements with Mr Andrews. In this statement he said the net shortfall was $1,487,055.20 and, in his opinion, the major factors contributing to it were market deterioration between September and December 1999 and, in particular, the lack of competing offers in December 1999, as opposed to September 1999 when there were three interested buyers being Mr Hayes, Mr Andrews and one other. He said that as the business was no longer an operating concern, because it had ceased production in November 1999 in preparation for completion of the sale to the defendants, it had also lost value.

91 In paragraph 24, Mr Pearce said that the plaintiffs incurred legal costs of $105,727.26 in relation to the Sale Agreements with the defendants and paid valuation fees to Richard Ellis.

92 In relation to the legal fees, the short submission for the defendants was that these would have been to the account of the plaintiffs in any event and if legal fees were to be recovered, the proper amount was the amount paid in respect of the preparation of the agreements to sell to Mr Andrews, as to which there was no evidence.

93 I do not see why Mr Wales’ submission in this regard should be accepted. The plaintiffs paid out the money to have contracts prepared in the expectation that the defendants would complete them. They did not and, in consequence, the plaintiffs derived no benefit from the payment. Rather it was a wasted payment, which situation was caused by the defendants’ breaches of contract. In these circumstances I do not see why the defendants should not be liable to pay the costs by way of damages. Whilst they were payments, which had to be made in any event, the wrongful refusal of the defendants to complete the Agreements meant that the benefit of them was lost to the plaintiffs. I was not referred to any evidence as to when the accounts were paid such as to enable a calculation of interest to be made.

94 In his further statement, Exhibit E, Mr Pearce re-visited paragraph 21 of his statement, Exhibit D, and said that the shortfall of $57,055.20 was obtained by using the figure of $77,011, which Mars Trading was to pay to Group Services for packaging under the Business Sale Agreement as a starting point and deducting $7,600 received from Mr Andrews and $12,301.80 received from Sun Coast Gold Macadamias (Aust) Limited. He continued that $77,011 was the net realisable value of the packaging, as recorded in the management accounts of Group Services, that it was entitled to receive from Mars Trading pursuant to clause 5.4(c) of that Agreement. That provided that the value of stock must, relevantly for present purposes, be determined by the bought in items of stock being valued at the lower of cost and net realisable value. This, as I understand it, explains how the figure of $57,055.20 was obtained.

95 The defendants submitted, firstly, that there was no sufficient evidence to establish the loss for which the plaintiffs contended. They asserted that it was insufficient to look at the price the defendants were prepared to pay and the price Mr Andrews in fact paid and to calculate the loss by deducting the latter from the former.

96 The evidence, however, went a deal further than this. Before going to that I should also note that the defendants raised an argument, upon which I am satisfied they carried the onus, that the plaintiffs failed to mitigate their damages because the prices obtained were not at a proper and a market place value, nor obtained as a result of a properly conducted marketing campaign with reasonable care being taken to ensure that a proper and reasonable price was obtained for the property.

97 However, before going to the question of mitigation, Mr Wales submitted that the evidence of damage was insufficient and that there was a lacuna in it, which precluded the plaintiffs from recovering any damages.

98 The starting point, in my opinion, for a consideration of the amount of damages, is to compare the prices the defendants were to pay and the prices paid by Mr Andrews. Each of these transactions was carried out between vendors and purchasers acting at arm’s length.

99 There is, of course, a fairly gross discrepancy in those figures. I have set out Mr Pearce’s evidence-in-chief. I should also refer to the evidence of Mr Ennew, (Exhibit J), who is a qualified valuer in the area. He expressed the opinion in his statement of 29 December 2000, having inspected extracts from the Contracts of Sale entered into between the plaintiffs and Mr Andrews, which disclosed a sale price for Dunoon of $250,000, for Converys Lane of $500,000, for part of 89 Missingham Road, Dunoon and part of 1306 Dunoon Road, Dunoon of $3,685,920, and for part of 89 Missingham Road, Dunoon and part of 1306 Dunoon Road, Dunoon for $634,080, that based on his knowledge of the Lismore area, and in particular, macadamia property and associated sales during the period between August and December 1999 “I can say that the fall in the projected price of nut in shell, which is a dominant factor in the industry, caused the market to stall”. He then made reference to two recent sales, which he said in cross-examination could be ignored and, in paragraph 5, concluded:-

“In my opinion the purchase price contained in each of the Findlay Andrews sale agreements was a fair and reasonable price for the subject properties having regard to the quiet state of the market.”

100 Those purchase prices showed a loss on Dunoon of $100,000; a loss on Converys Lane of $700,000 and a loss on the plantations of $680,000, a total of $1,480,000. As figures I did not understand them to be attacked.

101 In cross-examination Mr Pearce agreed that he was directly involved in the events leading to Mr Andrews’ purchase of the properties, he having received a telephone call from him on about 23 November 1999 stating that he was still interested in doing so. He advised Mr Teng of that and he recalled preparing a confidential memorandum to him concerning that continuing interest. He agreed he analysed the offer and that that analysis, based on the initial telephone call, showed that the plaintiffs were some $400,000 worse off.

102 Mr Pearce said it was general knowledge in the district that the defendants had not settled, but he denied that to his knowledge Mr Andrews knew the contract prices.

103 Mr Pearce agreed that as at 23 November 1999 it seemed to him a distinct possibility that the defendants would not settle at all in which event the plaintiffs would be saddled with the various assets they wished to sell. He said that the other interested party, namely Mr Tim Bennett, was spoken to and that he said that he would not be able to have the funds to put an offer until March 2000. Mr Bennett, however, had only shown an interest in the plantations.

104 Mr Pearce agreed that the availability of the properties was not advertised nor circularised to the industry internationally, although he said that the major international interest would be in Hawaii where Consolidated Foods was aware that the main company involved in this activity was looking to sell out at the time.

105 Mr Pearce explained, Tp.12, the reasons why it would be extremely risky to advertise the properties for sale, and he said that the industry knew that the defendants had defaulted and that Consolidated Foods was seeking to re-sell. This evidence was inherently probable and I accept it as truthful. No evidence was called to contradict it.

106 Commencing at Tp.14, Mr Pearce pointed out a number of commercial reasons why purchasers should not be sought in a public way. They were the plaintiffs’ having made staff redundant so that if a sale was not achieved the plaintiffs would be left to reactivate the business; obtaining export contracts without sales staff; inability to buy in the nut in shell from local growers given that the plaintiffs would not have been viewed as “a long term prospect”; and nervousness on the part of Consolidated Foods’ Bank, which had been advised in July 1999 that capital was being raised and borrowed moneys would be repaid. Further, there had been several bad production years and Mr Andrews had indicated that if there was a general tender process he would not participate in it. In all these circumstances, the plaintiffs wished to on-sell as soon as possible to an available purchaser for all the assets. Mr Pearce also explained that another processor in the district, the Peninsula Group, had gone into liquidation as a result of which local growers had not been paid, which made them sceptical of supplying product to processers, which could not offer long term stability. In this regard he said that normally the processing plants used 2,000 to 2,300 tonnes per annum of which the plaintiffs’ own plantations grew about 600 or 700 tonnes.

107 Mr Pearce also explained that Mr Andrews’ refusal to be involved in the general tender was as a result of his having had previous discussions with Consolidated Foods, which had progressed a substantial way, after which Consolidated Foods accepted a higher bid from the defendants. In those circumstances he said Mr Andrews was reluctant to be involved with protracted discussions with Consolidated Foods again and as he understood it wanted to deal with the company in a relatively straightforward manner.

108 Mr Pearce was asked about the market deterioration of which he spoke. He referred to the fact that the liquidator of Peninsula Group had a number of plantations of about the same size as those of the plaintiffs on the market; that there had been a continued reduction of the sale price of macadamia kernels and a continued reduction in demand, particularly from Japanese customers.

109 Mr Ennew had prepared various valuations for Consolidated Foods in August 1999. He agreed that was done before Contracts for Sale of the properties were exchanged, but he said he was not aware, when he prepared his valuations, that that was being done in anticipation of a sale of the properties. There was no reason I could see not to accept this evidence. When asked what he understood the purpose for the valuations was, he said that he assumed that as the valuations were based on market value, asset value and fire sale value, it was for the purpose of Consolidated Foods “assets for example their books, the market value to know what the properties were worth and the fire sale value, to give them an idea what the position would be if they were keen to sell them”.

Afric

138 His Honour said that the plaintiff might have obtained a ship, but that it appeared to him that the defendant had adopted an attitude “clearly importing that the plaintiff need take no such course. It was involved in the persistent refusal to find oats in Sydney and the effort to effect the substitution of Melbourne as the place of shipment in the Afric”. At p.246 his Honour said:-

Hotham v East India Co

139 In disagreeing with what Owen J had said in the Full Court, Dixon CJ said, at p.248:-

“The reason why my conclusion differs from his Honour’s is that I think that the defendant unmistakably intimated to the plaintiff that it was useless to take the steps requisite if the defendant was to deliver fob Sydney because the defendant could not do so and so impliedly intimated to the plaintiff, when time still allowed the plaintiff to find another February ship and to give fourteen days’ notice of the ship and of the shipping date or dates, but the plaintiff need not do so.”

140 At p.250 Kitto J said:-

“The doctrine of anticipatory breach is, of course, applicable as soon as A has communicated to B his refusal to carry out the contract. Under that doctrine B is put to his election. He may, if he chooses, treat the contract as brought to an end in consequence of A’s default, and recover damages from A for loss of the benefit of the contract. Alternatively, he may treat the contract as continuing on foot, in which case it will remain in force for the benefit of both parties, just as it would if the refusal had never been declared. If A persists in his refusal, B may at any time while the refusal continues elect to treat the contract as at an end and sue for damages; but unless and until he does so the contract remains on foot, and A may withdraw his refusal and require B to perform the contract on his part, subject only to giving B reasonable notice of his change of intention … or he may take advantage of any supervening circumstances of such a character as to discharge the contract .. . But suppose that A’s refusal is never retracted; that B does not elect while the period specified by the contract of performance is unexpired to treat the contract as determined by reason of the refusal; and that no event occurs during that period to discharge the contract. I am supposing, of course, a case like the present where in all the circumstances the refusal necessarily conveys to B that he need not trouble to fulfil a condition to which A’s obligations under the contract are subject, because even if he does A will still not perform his obligations. Is it true in such a case to say that A’s continued refusal must not be allowed any significance in an action by B against A, in which B seeks damages for not getting what he bargained for and A seeks to defend himself by relying upon the condition which he has all along shown that he was not concerned to have fulfilled? What does it matter for the purposes of that action that the refusal was not treated as ending the contract and as founding an action for anticipatory breach? The damages claimed are not for loss of the contract by premature termination, but for loss of the benefit which performance of the contract in accordance with its terms by both parties would by now have produced B but for the fault of A. It is a cause of action which the facts I have assumed make out, unless the non-fulfilment of the condition is an answer to it; and as to that the inescapable fact is that A’s refusal was a continuing intimation that the condition need not be observed, and it did not become any the less an intimation to that effect because B chose not to determine the contract before its time. The intimation having continued until the time came when A would certainly have been in default if the condition had been fulfilled, the law, as I understand it, treats A’s obligation as absolute, and holds B entitled to damages, for not having got what A promised he should have in the event of the condition being fulfilled.”

141 These principles were applied by Gibbs J, with whom Stephen, Murphy Aicken and Wilson JJ agreed, in Mahoney v Lindsay & Ors (1981) 55 ALJR 118. In that case the respondents obtained a decree for specific performance of two contracts for the sale of land under which the appellant was the vendor and they were the purchasers. Each contract required completion to take place no later than 29 June 1979. There was a third contract for the sale of the goodwill of a business carried on on the land contracted to be sold, which contained a provision that all three contracts were interdependent on, and conditional upon, the due completion of the other contracts.

142 The respondents gave a Notice to Complete when the appellant was giving indications of a desire to get out of the contract.

143 The respondents’ solicitor spoke to the appellant’s solicitor on 28 and 29 June to make an appointment for completion and was told, on each occasion, that the latter did not have instructions to settle. The conversation was not in issue.

144 At p.119, Gibbs J recorded the submission of the appellant that the evidence of those telephone conversations was insufficient to support the inferences drawn by the trial Judge, because at the time they took place there was further time on 29 June for the appellant’s solicitor to obtain instructions to complete.

145 There was evidence that the respondents were in a position to complete, and his Honour noted the main argument of the appellant as being that in the circumstances it was not proved that they had been absolved from their obligation to seek out the vendor and tender the purchase money. His Honour said:-

“However, if one party to a contract prevents the other from fulfilling a condition of the contract, that is equivalent to performance by the latter.”

146 He said that the law was stated by Dixon CJ in Peter Turnbull and quoted some of the passages to which I have referred.

147 Gibbs J continued, pp.119-120:-

“In the present case it was submitted that the appellant’s solicitor did not expressly intimate that the appellant would not complete, or that it would be useless for the respondents to make a tender. With all respect to that argument, I find it sufficient to say that in the circumstances to which I have referred it was open to the learned trial Judge to infer that the appellant’s solicitor, acting on behalf of the appellant, did impliedly indicate that it was useless for the respondents to attend with the purchase money, since the appellant did not intend to perform his part of the contracts.

I agree with the Court of Appeal that the appellant had dispensed the respondents from fulfilment of the condition of the contracts and that the respondents were entitled to specific performance.”

148 One looks to the facts in relation to the present case. Clause 4.1 provided that the vendors may exercise the Put Option at any time within the Put Option Period, time being of the essence, in the manner stated.

149 By their letter of 20 December 1999, Gadens purported to terminate the Business Sale Agreement and the Related Agreements in consequence of the plaintiffs’ alleged repudiation and sought confirmation that the plaintiffs accepted the lawful termination as a result of their anticipatory breach and repudiation of the contract.

150 The “without prejudice” letter, which purported “to allow the agreements to remain on foot” was, in law, a counter offer.

151 On 22 December 1999, the solicitors for the plaintiffs gave Notices of Termination of the contracts on the basis that there had been a failure to complete by the time stipulated in them. Each Notice of Termination concluded:-

HEREBY GIVEN NOTICE

152 On the same date the plaintiffs’ solicitors wrote in relation to the Option Deeds and stated that pursuant to clauses 9(a)(v) and (vi) Ellicott was not entitled to exercise the Call Options and that any purported exercise “will not be effective”. That was a reference to the cross-defaults provisions in the Option Deeds.

153 The plaintiffs’ solicitors also wrote their letter of that date, which I have quoted. The response was the letter from Gadens dated 24 December 1999, which I have also quoted. Paragraph 3 was as clear an indication of a continuing refusal by the defendants to complete the contracts as there could be.

154 There is no evidence of any further correspondence which changed that position. In my opinion, consistently with the authorities to which I have referred, that dispensed the plaintiffs from the obligation of exercising the Put Option.

155 The pleading, in the Amended Summons, concerning the Option Deeds commences at paragraph 58 in which they are identified. In paragraph 59, it was pleaded that it was an express term of the Option Deeds that in consideration of the payment of the Put Option Fee by the plaintiffs, Ellicott irrevocably granted to them the option to require it to purchase the land for the prices, under the First Option Deed, of $14,390 and $2,433,247, and under the Second Option Deed of $719,498 and $1,832,865.

156 In paragraph 60, it was pleaded that it was a further express term of those Deeds that if a purchaser under any of the Related Agreements did not complete them, such default would be deemed to constitute a default and repudiation by the purchaser of them which would entitle the plaintiffs to exercise their rights at law or in equity.

157 In paragraph 61, it was pleaded that various of the Sale Agreements did not settle by the settlement dates and, in paragraph 62, that in the premises:-

“Pursuant to the First and Second Option Deeds the first and second plaintiffs were denied the opportunity to exercise the Put Options granted by the fourth defendant under the First and Second Option Deeds and, as such, the contracts for sale in respect of the Missingham Road plantation land and the Dunoon Road Plantation land did not proceed thereby causing the First and Second Plaintiffs to suffer loss and damage.”

158 In paragraph 62A damages were claimed in the sum of $680,000 being the total purchase price to have been paid by Ellicott to the plaintiffs had the Put Options been exercised less the proceeds of sale of the land the subject of them to Mr Andrews.

159 Ellicott pleaded to these various allegations by admitting paragraphs 58, 59 and 60 and, in answer to paragraph 61, admitting that the Agreements referred to therein did not settle by the settlement dates but asserting:-

“… this for the reasons as outlined in the defences of the first, second and third defendants”.

160 In paragraph 6 it pleaded to paragraph 62, which contained essentially the same allegation as in paragraphs 62 and 62A, thus:-

“In answer to paragraph 62 of the Contentions Ellicott says that it was a condition of any obligation on the part of Ellicott to be bound under the terms of the First and Second Option Deeds that there be notice of exercise of the option given by the first and second plaintiffs to Ellicott and no such notice was given whereby there would be an obligation on the part of Ellicott to be bound or liable under the terms of the agreement. Ellicott denies that the first and second plaintiffs suffered loss and damage and in any event Ellicott says that the first and second plaintiffs failed to mitigate their loss and damage in that the sale to Findlay Andrews was not at a proper and market place value nor was it as a result of a properly conducted marketing campaign with reasonable care being taken by the first and second plaintiffs to ensure that a proper and reasonable price was obtained for the property.”

161 The principal issue raised by Ellicott was the failure to give notice. However, as I have said, I am of the view that in the circumstances the plaintiffs were dispensed from this obligation in consequence of the conduct of the defendants.

162 I have not, thus far, mentioned the fifth defendant, Carbest Pty Limited. On 21 October 1999 it entered into a Deed of Mortgage of Contractual Rights, as mortgagor. Group Services was the mortgagee. As trustee of the M & N Trust No 1 it transferred and assigned absolutely all the Mortgaged Property, i.e. the property so defined, as security for the due and punctual performance, observance and fulfilment of all the Obligations and the Collateral Liabilities and the payment in full to the Mortgagee of all the Secured Money, subject to clauses 2.2 and 10.9.

163 The pleading against it alleged the entry into the mortgage and various terms thereof pursuant to which it allegedly became liable to pay Group Services the “Secured Money”, i.e. all money the payment or repayment of which from time to time forms part of “the Obligations or Collateral Liabilities”. By its defence it admitted the mortgage and its terms; relied upon the defences of the second to fourth defendants, which, relevantly for present purposes have failed; and said that, therefore, it was under no obligation to pay Group Services the Secured Money. On my findings and conclusions it is.

164 1. In my opinion, the defendants have not established that the price of

$12.00 per kilogram was a penalty. There will, accordingly, be judgment for Group Services against Mars Trading, as purchaser, and Mr Hayes, as indemnifier, in respect of this Agreement for $868,390.89 inclusive of interest.
2. I do not consider that the plaintiffs breached the Business Sale Agreement in the manner alleged or at all. It was not submitted, if this conclusion was reached, that the plaintiffs did not terminate all the agreements properly, save for the Option Agreements.
3. The plaintiffs have satisfied me that the defendants’ conduct dispensed them from the need to exercise the Put Options, that conduct constituting a fulfilment of the conditions. The plaintiffs were both vendors under the proposed contracts and Ellicott was the purchaser, its obligations being guaranteed and indemnified by Mars Trading, Yengrin (to a limit of $450,000 in respect of each transaction), Macadamia Properties, Ellicott and Mr Hayes. The shortfall was $680,000 on which the plaintiffs are entitled to interest from 7 January 2000 to 8 March 2001, which is $82,316.91. There will be judgment for the plaintiffs in the sum of $762,316.91 inclusive of interest.
4. There will be judgment for Group Services in respect of Converys Lane for $700,000 on which interest will run from the date of termination, viz 22 December 2000, which is $87,471.22. The judgment for Group Services, inclusive of interest, will be for $787,471.22.
5. There will be judgment for Administration in respect of Dunoon for $100,000 on which interest will run from the date of termination, viz 22 December 2000, which is $12,495.88. The judgment for Administration, inclusive of interest, will be for $112,495.88.
6. There will be judgment for Group Services against Yengrin under the Sale Agreement for equipment and plant for the difference between $57,055.20 and the increased sale price of $50,000 i.e. $7,055.20 together with interest from 22 December 2000, which is $881.56. The judgment for Group Services, inclusive of interest, will be $7,936.76.

165 I order:-

pro tanto

**********

Last Modified: 03/09/2001

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CFA Group v Mars Trading [2001] NSWSC 112

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CITATION:	CFA Group v Mars Trading [2001] NSWSC 112
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50020/00
HEARING DATE(S):	26/02/01, 27/02/01
JUDGMENT DATE:	8 March 2001
PARTIES :	CFA Group Services Pty Limited - First Plaintiff CFA Administration Pty Limited - Second Plaintiff Mars Trading Pty Limited - First Defendant Yengrin Pty Limited - Second Defendant Macadamia Properties Pty Limited - Third Defendant Ellicott Pty Limited - Fourth Defendant Carbest Pty Limited - Fifth Defendant Graham Edward Hayes - Sixth Defendant
JUDGMENT OF:	Rolfe J

COUNSEL :	Mr S.T. White/Ms N. Obrart - Plaintiffs Mr I.M. Wales SC - Defendants
SOLICITORS:	Clayton Utz Helliars City Solicitors
CATCHWORDS:	Penalty: Held that on a proper construction of the Agreement and in all the circumstances the requirement to pay a greater amount did not constitute a penalty - Breach: Held no breach of contract and that, in any event, the breach alleged was not essential and did not go to the root of the contract - Damages: Held that the plaintiffs had established that the difference between the original contract price and the ultimate sale price was the proper amount of damages, and that the defendant had not established that there was a failure by the plaintiff to mitigate - Non-Fulfilment of Conditions: Held that the defendants' conduct dispensed the plaintiffs from the obligations of fulfilling conditions.
CASES CITED:	Cheshire & Fifoot "Law of Contract", 7th Australian Edition O'Dea & Ors v All States Leasing System (WA) Pty Limited & Ors (1983) 152 CLR 359 Multiplex Constructions Pty Limited v Abgarus Pty Limited & Anor (1992) 33 NSWLR 504 W.T. Malouf Pty Limited v Brinds Limited (1980) 52 FLR 442 Amev Finance Limited v Artes Studio Thoroughbreds Pty Limited (1989) 15 NSWLR 564 Tramways Advertising Pty Limited v Luna Park (NSW) Limited (1938) 38 SR (NSW) 632 Sacher Investments Pty Limited v Forma Stereo Consultants Pty Limited & Ors [1976] 1 NSWLR 5 TCN Channel Nine Pty Limited v Hayden Enterprises Pty Limited (1989) 16 NSWLR 130 Goldburg v Shell Oil Company of Australia Limited (1990) 95 ALR 711 Peter Turnbull & Company Pty Limited v Mundus Trading Company (Australasia) Pty Limited (1954) 90 CLR 235 Mahoney v Lindsay & Ors (1981) 55 ALJR 118
DECISION:	(1) Judgment for the First Plaintiff against each of the First, Fifth and Sixth Defendants in the sum of $868,390.89, inclusive of interest, in respect of the Kernel Sale Agreement and any payment by one will be a pro tanto discharge of the obligation of the other.; (2) Judgment for the First Plaintiff against each of the First, Second (to a limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $787,471.22, inclusive of interest, in respect of the breach of the Sale Agreement for Converys Lane and any payment by one will be a pro tanto discharge of the obligations of the others.; (3) Judgment for the Second Plaintiff against each of the First, Second (to the limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $112,495.88, inclusive of interest, in respect of the breach of the Sale Agreement for Dunoon and any payment by one will be a pro tanto discharge of the obligations of the others.; (4) Judgment for the Plaintiffs against each of the Fourth, First, Second (to a limit of $900,000), Third, Fifth and Sixth Defendants in the sum of $762,316.91, inclusive of interest, in respect of the breach of the Option Deeds and any payment by one will be a pro tanto discharge of the obligations of the others.; (5) Judgment for the First Plaintiff against each of the First, Second (to a limit of $450,000), Third, Fourth, Fifth and Sixth Defendants in the sum of $7,936.76, inclusive of interest, in respect of the breach of the Plant, Equipment and Names Sale Agreement and any payment by one will be a pro tanto discharge of the obligations of the others.; (6) Judgment against all Defendants in respect of the Plaintiffs’ costs of $105,727.26 and any payment by one will be a pro tanto discharge of the obligations of the others.; (7) The Defendants pay the Plaintiffs’ costs.; (8) Exhibits be returned at the expiration of twenty eight (28) days from to-day’s date unless within that time an appeal against this decision has been brought.