Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd

In the Court of Appeal of New South Wales, Donau Pty Ltd (as assignee of ASC AWD Shipbuilder Pty Ltd) appealed against a decision concerning a ship construction contract, while ASC AWD Shipbuilder Pty Ltd cross-appealed. The dispute centred on the interpretation of the contract, specifically regarding the date it was to come into effect and the validity of a purported termination.

The primary legal issues before the Court of Appeal were: (1) whether the parties reaching agreement on a particular matter constituted a condition precedent to the contract coming into effect, and if so, which of two specified dates was the relevant date for commencement; (2) whether ASC had elected to affirm the contract, and if not, whether its right to terminate had been exercised within a reasonable time; and (3) the scope of a release clause in a subsequent contract, particularly whether it captured fees from the commencement of the original contract or only the second contract.

The Court of Appeal reasoned that the contract's commencement date was not contingent on the parties reaching agreement on a particular matter, but rather on the earlier of two specified dates. It held that the later date, which provided a right to terminate if agreement was not reached, was not the relevant date for commencement. Regarding termination, the Court found that ASC had not elected to affirm the contract and that its right to terminate was exercised within a reasonable time, with the point at which reasonable time was to be assessed being the date of termination. The Court also determined that the release clause in the second contract, which set "all" fees at a certain rate until a particular date, did not capture fees from the commencement of the original contract.

Consequently, the Court of Appeal allowed the appeal with costs, dismissed the cross-appeal with costs, and set aside the orders of the primary judge. The Court ordered that ASC pay Forgacs’ costs of the proceedings at first instance and directed the parties to bring in short minutes reflecting the amount due to be paid by ASC to Forgacs, including any interest component, with liberty to apply if agreement could not be reached.