Daikyo (North Queensland) Pty Ltd, Hazama, Sawai v KKL Investments Pty Ltd
[1995] QCA 25
•24/02/1995
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 261 of 1993
Brisbane
[KKL Investments v. Daikyo (North Queensland)& Ors.]
BETWEEN:
KKL INVESTMENTS PTY. LTD.
(Plaintiff) Respondent
AND:
DAIKYO (NORTH QUEENSLAND) PTY. LTD.
(First Defendant) First Appellant
AND:
MASAO HAZAMA
(Second Defendant) Second Appellant
AND:
YUICHI SAWAI
(Third Defendant) Third Appellant
AND:
TATSUHIKO TANAKA
(Fourth Defendant) Fourth Appellant
AND:
SONTAM PTY. LTD.
(Fifth Defendant) Fifth Appellant DAVIES J.A. PINCUS J.A. CULLINANE J.
Judgment delivered 24/02/1995
Joint reasons for judgment of Davies J.A. and Cullinane J.
Separate reasons of Pincus J.A. concurring as to the orders
made.
ORDERS: Appeal allowed; judgment below set aside and, in lieu, enter judgment for the appellant. Further:
1. An account to be taken of dealings between respondent and appellants with respect to rental income warranty for period from 1 February 1992 on the following bases:
(a) respondent to pay to appellants the sum referred to in cl.2(a) of the rental warranty deeds for
period to 29 June 1993;(b) respondent entitled to all rental income for period to 29 June 1993;
(c) amounts previously deducted from such rental income for purposes other than those specified in cl.2(a) should be allowed against the appellants.
2. Respondent to pay appellant judgment sum plus interest from the date of payment at the rate fixed under s.73 Common Law Practice Act.
3. Respondent to pay appellant monies received by respondent from Omega Development Corporation Pty. Ltd. in respect of rentals after 29 June 1993 plus interest at the said rate.
4. Respondent to pay appellants' costs of appeal.
5. The parties may, within seven (7) days, make written submissions as to form of above orders.
6. No orders to be taken out until further order.
| CATCHWORDS: | AGENCY - whether ostensible authority to make representations |
| DAMAGES - ASSESSMENT - whether tortious or contractual basis; whether misleading or deceptive conduct inducing contracts; whether election to unilaterally repudiate contracts; construction of deeds - s.52 Trade Practices Act | |
| Counsel: | Mr. P. A. Keane Q.C. with him Mr. S. L. Doyle for the appellants |
| Mr. I. Hanger Q.C. with him Mr. R. Perry for the respondent | |
| Solicitors: | Clayton Utz for the appellants Gadens Ridgeway for the respondent |
Hearing Date: 23 September 1994
| IN THE COURT OF APPEAL | [1995] QCA 025 |
| SUPREME COURT OF QUEENSLAND |
Appeal No. 261 of 1993.
Brisbane
| Before | Davies J.A. Pincus J.A. Cullinane J. |
[KKL Investments P/L v. Daikyo (Nth Qld) P/L & Ors.]
BETWEEN:
KKL INVESTMENTS PTY LTD
Respondent (Plaintiff)
AND:
DAIKYO (NORTH QUEENSLAND) PTY LTD
First Appellant (First Defendant)
- and -
MASAO HAZAMA
Second Appellant (Second Defendant)
- and -
YUICHI SAWAI
Third Appellant (Third Defendant)
- and -
TATSUHIKO TANAKA
Fourth Appellant (Fourth Defendant)
- and -
SONTAM PTY LTD
Fifth Appellant (Fifth Defendant)
REASONS FOR JUDGMENT - PINCUS J.A.
Judgment delivered 24/02/1995
I have read the joint reasons of Davies J.A. and Cullinane J. in which there is to
be found an explanation of the issues in the case. I agree with those reasons, with the
reservation that I have dealt in a slightly different way with one issue, that of damages.
Damages
On the findings, the respondent was induced by Sterling's representation that it
"would definitely be given building contracts" to "enter into the contracts with an effective
nine percent guarantee". In the context, this means that what Sterling said induced the
respondent to enter into not only the contracts for sale, but the "rental warranty deeds"
dealing with assignment of rental income and promises to pay rental income warranty.
Although the contracts for sale were made months before the execution of the deeds,
the primary judge appears to have treated them as interdependent; his Honour said in
effect that the contracts for sale did not "fully reflect the overall agreements between the
parties" and, as I understand his Honour's view, the "overall agreements" included both
the contracts for sale and the deeds.
On that basis, Sterling's misleading statement entitled the respondent to such
damages as flowed from the respondent having entered into all these transactions.
The leading authority on the measure of damages in cases of this sort still
appears to be the decision of the High Court in Gates v. City Mutual Life Assurance
Society Limited (1986) 160 C.L.R. 1. It was there remarked (p. 14) that there is "much
to be said for the view that the measure of damages in tort is appropriate in most, if not
all, Pt V cases, especially those involving misleading or deceptive conduct and the
making of false statements". Despite the words "much to be said", after Gates the tort
measure was routinely applied in such cases. In Wardley Australia Ltd v. Western
Australia (1992) 175 C.L.R. 514 the principal judgment contains (p. 526) some
discussion which appears to me similar in effect to that in Gates, but with less certainty; that is, the statement in Wardley suggests that it may in the future become clear that
departures from the Gates measure are often permissible; see also per Brennan J at
534 and per Toohey J at 554. But in Sellars v. Adelaide Petroleum NL (1994) 179
C.L.R. 332 the measure of damages in a claim for damages for a breach of s. 52 of the
Trade Practices Act 1974 was discussed and it was said in the principal judgment (p.
348) that:
"In the context of contraventions of s. 52(1) in the form of misleading conduct constituted by misrepresentations, acts done by the representee in reliance upon the misrepresentations amount to a sufficient connection to satisfy the concept of causation. And, if those acts result in economic or financial loss, it will ordinarily be recoverable under s. 82(1). So, in a case such as the present, the applicant is entitled to recover 'a sum representing the prejudice or disadvantage [the applicant] has suffered in consequence of his altering his position under the inducement' ."
That is perhaps a reaffirmation of Gates and provides no discouragement to
those who favour the tort measure of damages. Here, the primary judge has assessed
the loss as being the difference between the cost to the plaintiff (now respondent) of the
rent guarantee it in fact gave, and the cost to the respondent of the rent guarantee which
the respondent's witness Kellahan said would have been given if there had not been a
promise of building work.
That difference cannot be equated to the "prejudice or disadvantage...suffered in
consequence of [the respondent's] altering his position under the inducement". To
assess that prejudice or disadvantage one must compare the claimant's position as
altered under the inducement with its unaltered position. But the difficulty with the
primary judge's view, with respect, is that the unaltered position cannot be determined
simply by answering the question: What would the plaintiff have been prepared to do but for the inducement? What must be ascertained is the financial situation which would
have existed if there had been no inducement. The evidence of Kellahan that the
respondent would, but for the inducement, have offered a lesser rent guarantee does
not establish the unaltered financial position, for two reasons. First, there was no
finding, and no evidence upon which a finding could be based, that the respondent
could have achieved a sale at the same price, but with a lower rental guarantee.
Secondly, there was no evidence to exclude the hypothesis that these transactions were
advantageous to the respondent, even though induced by misleading conduct.
This second reason is based on the assumption ordinarily made in these cases
that what has to be compared with the altered position, where the claimant has been
induced to sell property, is that which the claimant would have enjoyed but for the sale:
the prima facie measure is value minus price paid: Gates at p. 12. This rule does not
exclude the possibility of assessing damages by comparing the altered position, not
with that in which there has been no sale, but with that in which there has been a sale at
a different price. But the cases must be rare in which the evidence is such as to enable
the Court to make a finding that but for the misleading statement there would still have
been a sale, but one on different terms, which the Court is able to define. That is, in
essence, what the judge has attempted to do here.
The assessment was sought to be defended on various bases, but the only one
which requires comment is the contention that the case might have been one where a
contract measure was appropriate. If so, then that would not assist the respondent, for
the contract measure would require an assessment of the value of the promise to give
building work. Such an assessment would be impossible here; there is no means of
determining how much and what sort of building work would have been given.
In my view, the case was one in which there was no reason to depart from the
basic rule as to quantification of loss applicable to sales induced by misleading
conduct, namely the difference between the value of what was sold, with accompanying
promises, and the consideration received. I agree that the appeal should be disposed
of as set out in the joint reasons of Davies J.A. and Cullinane J.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 261 of 1993
Brisbane
| Before | Davies J.A. Pincus J.A. Cullinane J. |
[KKL Investments v. Daikyo (North Queensland)& Ors.]
BETWEEN:
KKL INVESTMENTS PTY. LTD.
(Plaintiff) Respondent
AND:
DAIKYO (NORTH QUEENSLAND) PTY. LTD.
(First Defendant) First Appellant
AND:
MASAO HAZAMA
(Second Defendant) Second Appellant
AND:
YUICHI SAWAI
(Third Defendant) Third Appellant
AND:
TATSUHIKO TANAKA
(Fourth Defendant) Fourth Appellant
AND:
SONTAM PTY. LTD.
(Fifth Defendant) Fifth Appellant
JOINT REASONS FOR JUDGMENT - DAVIES J.A. AND CULLINANE J.
Judgment delivered the 24th day of February 1995
By four separate agreements entered into in December 1990 between the respondent and each appellant, the respondent sold to each appellant certain lands situated in central Cairns. Some months later, deeds were entered into between the respondent and each appellant. The deeds were not in evidence but the relevant provisions thereof are set out in para.15B of the further amended statement of claim:
"1. Assignment of Rentals
On settlement of the Contract the Purchaser will assign to the Vendor the right to receive the rental income, if any, of the property for a period of three (3) years from the date of such settlement (hereinafter referred to as 'the Rental Income Warranty period'). The parties will each execute such documents as are necessary to give effect to such assignment.
2. Rental Income Warranty
(a) Upon and subject to completion of the Contract the Vendor agrees to pay to the Purchaser by calendar monthly instalments at all times calendar monthly in advance an annual sum during the Rental Income Warranty period calculated as follows:
The sum of the following amounts:-
(i) The amount of ............(being 9% of the Purchase Price);
(ii) The amount of Local Authority rates and charges levied in respect of the land by the Cairns City Council;
(iii) The amount of any Fire Levy in respect of the land and building under the Fire Safety Act;
(iv) The amount of any insurance premium for the insurance of the improvements on the land for the full insurance value;
LESS
(v) The amount of any rent collection fee paid by the Vendor or for which the Vendor is legally liable to any rental collection agent in respect of rents actually received by the Vendor from any tenant in the building, not exceeding 5% of the rent actually received.
(b) If any lettable space in the building is vacant on the date of completion or becomes vacant during the Rental Income Warranty period then in any such case the Purchaser will give notice in writing to the Vendor and will not enter into any lease or tenancy agreement in respect of the vacant area without the consent of the Vendor, which consent will not be unreasonably withheld, and will not be refused unless the Vendor or its nominee enters into or agrees to enter into a lease of the vacant area on the terms and conditions set out below in this clause.
... (f)
The provisions of this Deed are for the benefit of the Purchaser. The Purchaser may by notice in writing waive the provisions of this Deed (but only if it waives the whole of the provisions) at any time whereupon the obligation of the Vendor to pay the amount referred to in Sub-Clause (a) for any period after the date of waiver will cease and the Vendor will re-assign to the Purchaser the right to collect the rental from the tenants of the building as provided for in Clause 1 hereof."
The respondent instituted proceedings against the appellants claiming damages under s.52 of the Trade Practices Act 1974 for misleading and deceptive conduct inducing the contracts and deeds. The respondent also sought a declaration that the deeds had been rescinded by the respondent because of the appellants' repudiation of them with the consequence that the respondent was under no further liability under cl.2(a) thereof. An alternative claim was made that the appellants had waived their rights under the deeds pursuant to cl.2(f) thereof.
The respondent succeeded in its s.52 claim and was awarded damages in the sum of $156,000.
It also obtained a declaration that it had duly rescinded the deeds by its acceptance of the appellants' repudiation, the election to accept the repudiation being made in the respondent's pleading. The effect of the learned trial Judge's findings was that the respondent's obligation to pay the moneys under the rental income warranty ceased upon its election but that it continued to be entitled to the rentals pursuant to the assignment contained in cl.1.
An account was ordered of the dealings between the parties, such account to be taken on the basis that all rental moneys received should have been accounted for to the respondent except for the deductions authorised in cl.2 of the deeds. Although it was not expressly referred to in the judgment, it was accepted before us that the account would also include a consideration of the moneys due by the respondent to the appellants pursuant to the deeds. It was accepted that there were substantial moneys owing by the respondent to each appellant. A counter-claim in respect of these moneys was dismissed.
A declaration was made that moneys held in the account of an agent, Omega Development Corporation Pty. Ltd., were payable to the respondent. There is no dispute that these moneys insofar as they represent rentals up until the time at which the appellants say the deeds were determined, should be paid to the respondent but the appellants claim to be entitled to these moneys insofar as they represent rentals after that time.
By their appeal, the appellants seek orders that:
(a) The award of damages against the first appellant under s.52 be set aside;
(b) The declaration that the respondent had elected to rescind the deeds because of the appellants' repudiation thereof be set aside and in lieu thereof the appellants seek a declaration that they were entitled as from 29 June 1993 to receive the rentals because:
(i)
the appellants were entitled to and did rescind the deed because of the respondent's repudiation thereof;
(ii)
alternatively to (i) the appellants terminated the deeds in the exercise of their right to unilaterally do so contained in cl.2(f) of the deed and that thereupon the appellants became entitled to the rentals;
(iii)
alternatively to (i) and (ii), cll.1 and 2 of the deeds are interdependent and not independent terms and even if the learned trial Judge's finding that the respondent was entitled to and did rescind the deeds because of the appellants' repudiation, the appellants thereupon became entitled on the proper construction of the deeds to receive the rentals;
(c) the appellants are entitled to moneys in the account of Omega Development Pty. Ltd. insofar as they represent rentals after 29 June 1993;
(d) the account ordered by the learned trial Judge should, in its terms, expressly refer to a consideration of moneys due by the respondent to each appellant under cl.2(b).
Claim under Section 52
The finding under s.52 was made against the first appellant only. It attacks the finding on two grounds. The first is that the finding of ostensible authority on the part of the man, Sterling, ought not to have been made. Secondly, the first appellant says that the evidence did not support a finding that the respondent suffered any loss.
The learned trial Judge accepted the evidence of Kellahan, a director of the respondent. He gave evidence of his negotiations with Sterling on behalf of the appellants which led to the agreement embodied in the contracts and deeds. Sterling, according to Kellahan, made the representation which induced the respondent to enter into the agreement. The representation, shortly stated, was that if the respondent entered into the agreement on the terms which it ultimately did, an associated company would award the respondent contracts to build houses in a residential development to the north of Cairns which it then planned.
Sterling was described in his business card as "Manager Real Estate" of the first appellant (ex.26). He was the person who on behalf of the first appellant conducted the negotiations for the contracts and deeds. In the course of such negotiations, he agreed on the first appellant's behalf to an increase in the purchase price of the lands from $4.9 million to $5.2 million in exchange for a rental warranty which represented a 9 percent return on the purchase price.
The respondent had sought a somewhat lower warranty which
could be met out of rentals then being received.
The learned trial Judge's findings on the question of ostensible authority, appear at p.422:
"There is a question whether Peter Sterling had actual authority to make that representation on behalf of the first defendant, but that question aside, he certainly had ostensible authority to make it. The first defendant printed business cards for him holding him out as 'Manager, Real Estate, Daikyo Group'. He was employed by the first defendant at a high level on a substantial salary responsible next to the North Queensland Manager and on administrative matters to the General Manager. He had an office at the first defendant's Cairns headquarters. The defendants concede that he had authority to negotiate the sale contracts. His ostensible authority also extended to making that representation which induced them."
The first appellant challenged this finding on two grounds. The first was that the evidence did not support the conclusion that Sterling had the ostensible authority of the first appellant. The second was that Kellahan in his evidence said that Sterling had told him that he (Kellahan) would have to see another person (Ramsay), who was the project manager of the residential development, about building contracts.
As to this latter matter, Kellahan's evidence was that he had received assurances in relation to the building contract, from Sterling both before and after he was referred by Sterling to Ramsay. All of these took place before the contracts and deeds were entered into. It is clear that after speaking to Ramsay and providing the information which Ramsay sought, Kellahan had not received any assurance from Ramsay that the respondent would be awarded building contracts. He again took the matter up with Sterling. At p.17 Kellahan gave the following evidence:
"I think you were going to look at your diary to give us the next event that occurred. Try the 26th of September if you are having difficulty finding it?-
I spoke to Peter Sterling and I just rang him following up on the conversation with Don Ramsay and I asked Peter, 'How did we go with Don?' and he said - I have written it down there - 'Okay.' and he said
- I have written it down there - 'Okay.' and he said the first contracts would be coming out for construction March/April 1991 which was into next year."
At pp.19 and 20 he said:
"What happened then? Who was present and what happened?-- Well, that was - that was with Peter Sterling and Ian Beattie and they said they would pay 5.2 million for the property. That was finalised. We've agreed on the finalisation
of the actual apportionments at 92A to 100 Lake Street and we discussed the actual rental returns because we had to - the reason why the price went from 4.9 because that was based on the rental of just under 8 percent, 7.95 I think it was. I said, 'We can't - definitely can't do that.' And after some negotiations, the 5.2 was agreed and we said we would give them another percent.
Basically that was agreed at that point in time, the deal was agreed.
All right. Well, now, there was some heads of agreement prepared then?-- Am I allowed to say anything about the actual building contracts at this stage or----
You can give us evidence of conversations you had?-Right.. Well, Ian Beattie went out of the office at one stage in that last meeting and once again I said to Peter, 'Well, are we going to still get the building contracts?', because that was the main issue because we weren't going to get enough rental to pay the 9 percent, and he said we'd get the building contracts.
Did you think at the time you would get a rental return of 9 percent?-- No. We had to subsidise, and that's the reason why the main thrust of the thing with the building, we had to get building works. With our size company, because KKL - those properties, they were going to loose [sic] those properties, so therefore they had only the income coming from those properties.
I would like you to tell me what you told Sterling about it. Did you have conversations with Sterling about that?-- Yes.
Tell us that?-- I said to Peter we would have to get building contracts to make up the difference of what we were getting so that we could pay the 9 percent in the agreement. Once again, he said the building contracts were okay."
Ramsay was called by the appellant to give evidence.
He had very little recollection of any dealings with Kellahan, or for that matter about relevant events generally.
When the dealings between Kellahan and Sterling are looked at as a whole, it does not seem to us that the reference by Sterling of Kellahan to Ramsay poses any difficulty to a finding that Sterling had the ostensible authority of the first appellant. The learned trial Judge was entitled to conclude that it was Sterling whose representations Kellahan relied on in entering into the agreements on behalf of the respondent.
As to the first of the matters raised, we are satisfied that the learned trial Judge was justified in reaching the conclusion that Sterling had the ostensible authority of the first appellant to make the representations relied upon by the respondent, and we agree with his reasons for so concluding.
Damages
The learned trial Judge's findings on this subject appear at p.424 of the record:
"As would be obvious from what I have said already, the first defendant did not give the plaintiff any building contracts. As a result, the plaintiff should be compensated in damages. I accept from Mr. Kellahan's evidence that but for that representation, the plaintiff would not have sold the property with a nine per cent guaranteed rent return, but would probably have sold it for eight per cent return approximating the 7.95 per cent it was receiving. The proper measure of its loss is therefore one per cent of purchase price which is $52,000 for each of the relevant three years, yielding $156,000."
We have already set out evidence of negotiations as to a price and a rental warranty, and how the final purchase price and rental warranty figure were arrived at.
The evidence upon which the learned trial Judge made his finding as to damages is very brief indeed.
Counsel for the respondent identified it as being what was said by Kellahan at p.50:
"It was so important for you to get this building work that you wouldn't have entered into these contracts without that promise?-- I would have entered into a contract at 7. - just under 8 percent 7.95."
To this might be added his evidence at p.29:
"And it's also your case that had these representations not been made to you your company wouldn't have sold the properties, correct?-- Not at 9 percent."
This, we think it can fairly be said, represents the sum total of evidence on the subject of damages and it must, in view of the learned trial Judge's finding, have constituted the basis of the assessment.
No attempt was made, either below or in this Court, to prove damages upon the usual basis; by comparing the respondent's position after the transaction with the position in which it would have been had there been no sale at all. Moreover there was no evidence upon which any such assessment could have been made.
To justify the finding which his Honour made it is necessary to assume that had the agreements not been entered into, the respondent would have been able to sell the properties at the same price but subject to a liability to pay a sum which represented an 8 percent rather than a 9 percent return. The evidence in our view does not warrant such a conclusion being reached. We have already set out the passages which refer to the course of negotiations.
There is in our view, nothing in the evidence which would justify the assumption which is necessary for the finding as to damages to be supportable that the respondent, whatever Mr. Kellahan's assertion, would have been able to achieve such a result. The course of negotiations in the present case does not support such a conclusion and there is no other evidence which supports it.
Before us it was suggested that the finding might be justified as an assessment of the loss of a commercial opportunity on the respondent's part. However, there was no evidence directed towards this question and it would seem clear that the learned trial Judge did not assess damages on this basis. Furthermore, the evidence in our view did not permit the conclusion to be reached that there had been such a loss.
The evidence in summary does not provide any basis for the conclusion that any loss has been suffered by the respondent as a consequence of its entering into the agreement. Although in its written outline, the respondent was inclined to contend that this may have been an exceptional case in which damages might have been assessed by reference not to the tortious measure which is accepted as the usual measure, but by reference to the contractual measure, there was no evidence before the Court which would have enabled any loss to be identified on this basis.
Repudiation
The appellants challenged the learned trial Judge's finding on this question and contend that he ought to have concluded that the respondent had repudiated the deeds by its failure to make payments in accordance with cl.2. Exhibit 57 sets out the history of the respondent's payments.
There is no doubt that the respondent was late in its payments and fell substantially into arrears.
In April 1992, the parties entered into what the learned trial Judge described as an administrative arrangement pursuant to which the rentals were paid to the appellants, and the respondent was obliged to meet the shortfall. This arrangement was terminated in May 1993 (ex.9) when the respondent notified the agents that the moneys were to be paid to it. The learned trial Judge's findings on the question of repudiation appear at p.427-8:
"As to the plaintiff's dilatory and short payments, the payments were late and with substantial arrears accruing although the payments were made regularly. But the oral evidence showed that in discussions
between Mr. Kellahan for the plaintiff and Mr. McInnes for the defendants in March and April 1993 in particular, Mr. Kellahan was not refusing to pay, requests for more time were being considered, and the general tenor of the face to face negotiation was friendly. It was plainly not a case of a party refusing to meet its contractual obligation or renouncing it in the Shevill sense.
It was simply seeking more time to pay in a situation of a current financial stringency. I am, in any event, satisfied that the claims made by the defendants in their solicitor's letter of 23 April (Exhibit 7) which concern the amount of thealleged arrears were overstated for reasons which I will explain later. The plaintiff's conduct was not to this point repudiatory. See Shevill 149 CLR at 624 and 666, and Trinity Point per Pincus JA at page 10.
The plaintiff's conduct in commencing proceedings in the Court was not repudiatory either because accompanied by an unequivocal assertion that pending a Court's determination one way or the other the contract was to be regarded as remaining on foot, see Spettabile (1919) 121 LT 628 at 633 and 635. And Woodar, (1980) 1 WLR 277 at 283 and 295."
As we have said, the learned trial Judge accepted the evidence of Kellahan. McInnes gave evidence which was largely confirmatory of Kellahan's evidence about the various discussions and proposals as to payment.
It was Kellahan's evidence, which was accepted, that the reason for the respondent falling into arrears was because of the difficult position in which it found itself when it did not receive the promised building contracts, and also, it would seem, because there were difficulties experienced with the tenanting of the buildings. Although he received letters of demand from the appellants' solicitors and McInnes, he was engaged in discussions throughout with McInnes who was favourably disposed to allowing an extended period (12 months at one point in the discussions) to pay the arrears.
Kellahan said that he and McInnes were of the view that as the buildings were becoming either fully or almost fully tenanted, the rentals would be sufficient to discharge the whole or substantially the whole of the respondent's ongoing obligations. Kellahan gave evidence which suggested an explanation or at least the hope that the respondent would be able to meet all its obligations under the deeds, including the payment of arrears. The respondent terminated the administrative arrangement apparently because of a dispute as to the deductions which the appellants were making from the rental. The learned trial Judge has found that the appellants were demanding sums from the respondent to which they were not entitled. From April 1993, no moneys were paid. Proceedings were shortly after instituted by the respondent who proposed that the moneys be paid into Court pending the resolution of the dispute.
Where a party to a contract which obliges it to make periodical payments, falls into arrears, the question of whether such conduct amounts to repudiation will involve a close consideration of all the surrounding circumstances.
Taking the evidence here as a whole, we are of the view that it was open to the learned trial Judge to reach the conclusion which he did, and we do not think there is any basis for disturbing it.
Construction of Deeds
The appellants contend that by their letter of 29 June 1993 they exercised the right conferred by cl.2(f) of the deed to determine the deed entitling them to receive the rentals from that time.
The letter, which was from the appellants' solicitors to the respondent's solicitors, relevantly stated:
"We note the request in your 7 June letter that our clients, the owners of 92A, 94, 96-98 and 100 Lake Street, Cairns, agree to the investment of rental monies collected and held by Omega Development Corporation Pty. Ltd.
You had written to Omega Developments on 6 May 1993 asserting a right to these rentals under the terms of certain Rental Warranty Agreements between your client and our respective clients. Your client is seeking to avoid its rental warranty obligations in its Supreme Court action No. 45 of 1993 but has continued to assert that it is somehow still entitled to rely on these agreements to claim rental monies. As your client has by its actions made it perfectly clear that it does not propose to meet its obligations under the Rental Warranty
Contracts our respective clients accept that repudiation in respect of each of the Rental Warranty Agreements and each of the Rental Warranty Deeds is hereby rescinded. Each of our clients reserves its right to damages and will be counter claiming in Action Writ No 45 of 1993 for those damages.
The Rental Warranty Deeds having been terminated there is no basis for your client asserting any rights to the rental monies being held by Omega Management. We propose to notify Omega Management accordingly and direct that rentals held and future rentals be paid to Daikyo Real Estate Pty. Ltd.
Please provide us with your confirmation by return that your client does not assert any right to the rental monies. We will otherwise be obliged to bring separate proceedings for those rental monies.
We await your response."
Clause 2(f), whilst expressed in terms of a waiver, in our view confers on the appellants the unilateral right to determine the deed.
The letter clearly purports to do so and in our view is effective to do so.
The appellants having an unqualified right to determine the deed unilaterally, no question of the justification therefore arises. It is in our view immaterial that if no such right existed, the appellants' actions in determining the contracts might amount to repudiation.
The deeds were determined by the letter of 29 June 1993. Our attention was drawn to the pleadings. Each party
appears to have taken the opposite position to that for which it must contend. However, this does not raise any obstacle to the Court's determining the question. The matter
could not conceivably have been affected by any evidence and
it was not suggested otherwise.
As the deeds were determined on 29 June 1993 it is unnecessary to consider whether had the deeds been determined, as the learned trial Judge found, by the respondent's election to rescind for the appellants' repudiation, the respondent's right to retain the rentals continued notwithstanding its release from the obligations contained in cl.2(a).
There was agreement between the parties as to what orders should be made in the event of such findings.
We would set aside the judgment for damages in favour of the respondent.
We would declare that the respondent is not entitled to rental from the properties referred to in the statement of claim after 29 June 1993 but is entitled to the rental prior to that date. We would further declare that the respondent is liable to pay to the appellants the sums provided for in cl.2(a) of the rental warranty deeds up to 29 June 1993. We would order that an account be taken of the dealings between the respondent and the appellants with respect to the rental income warranty referred to sub-para.2 of para.15B of the further amended statement of claim for the period since 1 February 1992 on the following bases:
(a) the respondent is liable to pay to the appellants the sum referred to in cl.2(a) of the rental warranty deeds for the period up to 29 June 1993;
(b) the respondent is entitled to all rental income from the properties in relation to the period up to 29 June 1993;
(c) amounts previously deducted from such rental income for purposes other than those specified in cl.2(a) should be allowed against the appellants.
The judgment sum has been paid and the moneys held by Omega Development Corporation Pty. Ltd. have been paid to the respondent. We would order that the appellants recover the judgment sum together with interest from the date of payment thereof at the rate fixed pursuant to s.73 of the Common Law Practice Act from the respondent and that the appellant in each case recover the moneys paid by Omega Development Corporation Pty. Ltd. to the respondent insofar as such moneys represent rentals after 29 June 1993 in accordance with its entitlement thereto together with interest at the said rate.
The respondent should pay the appellants' costs of the
appeal.
The parties may, within seven days make written
submissions with respect to the form of the above orders.
These orders are not to be taken out until further order.
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