Expectation Pty Ltd v Pinnacle VRB Ltd

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JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE FULL COURT (WA)

CITATION:   EXPECTATION PTY LTD -v- PINNACLE VRB LTD [2002] WASCA 160

CORAM:   STEYTLER J

MILLER J
HASLUCK J

HEARD:   6 MARCH &

17 APRIL 2002

DELIVERED          :   19 JUNE 2002

FILE NO/S:   FUL 103 of 2001

BETWEEN:   EXPECTATION PTY LTD

Appellant

AND

PINNACLE VRB LTD
Respondent

Catchwords:

Contract - Condition precedent - Whether failure to satisfy renders contract void or voidable

Contract - Implied terms - Implication that each party will do all that is necessary on its part to enable the other party to have the benefit of the contract - Whether party in breach can terminate for breach by the other - Circumstances in which defaulting party can terminate contract

Legislation:

Corporations Law, s 249D, s 249F

Rules of the Supreme Court (WA), O 63 r 9(2)

Result:

Appeal allowed

Category:    A

Representation:

Counsel:

Appellant:     Mr D M Stone

Respondent:     Mr H Jolson QC, Mr G S Clarke & Mr J L Evans

Solicitors:

Appellant:     Williams & Hughes

Respondent:     Keogh & Co

Case(s) referred to in judgment(s):

Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd [1981] AC 909

Butt v M'Donald (1896) 7 QLJ 68

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

Foran v Wight (1989) 168 CLR 385

Gange v Sullivan (1966) 116 CLR 418

GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631

Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Ltd [2000] VSC 415

Kyrwood v Drinkwater [2000] NSWCA 126

Mackay v Dick (1881) 6 App Cas 251

Mehmet v Benson (1965) 113 CLR 295

Newmont Pty Ltd v Laverton Nickel NL [1983] 1 NSWLR 181

Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613

Paltara Pty Ltd v Dempster (1991) 6 WAR 85

Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537

Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Ltd, Receiver & Manager Appointed (1997) 42 NSWLR 462

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

Sprague v Booth (1909) AC 576

State Trading Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277

Summers v The Commonwealth (1918) 25 CLR 144

Suttor v Gundowda Pty Ltd (1950) 81 CLR 418

Case(s) also cited:

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349

Alghussein Establishment v Eton College [1988] 1 WLR 587

Carr v JA Berriman Pty Ltd (1953) 89 CLR 327

Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Coulton v Holcombe (1986) 162 CLR 1

Drinkwater v Caddyrack Pty Ltd, unreported; SCt of NSW (Young J); 25 September 1997

Garry Rogers Motors (Aust) Pty Ltd v Subaru…

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Details
Case
[2002] WASCA 160
Decision Date

CaseChat Overview and Summary

The dispute in Expectation Pty Ltd v Pinnacle VRB Ltd arose from a contract between the parties, specifically a Letter Agreement, which included a condition precedent that certain obligations be fulfilled before performance could be demanded. The case was heard in the Supreme Court of New South Wales. The central legal issues revolved around whether the failure to satisfy the condition precedent rendered the contract void or voidable, and if an implied term existed that each party would do all that was necessary to enable the other to benefit from the contract. Another issue was whether a party in breach could terminate the contract due to the other party's breach.

The court examined the nature of the breach and its implications for the contract's validity and termination rights. It was established that if non-compliance with a contractual obligation negates the defaulting party's right to terminate, there must be a direct causal relationship between the non-compliance and the failure to complete the contract, with the onus of proof on the non-defaulting party. The court scrutinised the trial judge's findings and noted that it was unclear whether the breach occurred before or after a specific date, 31 July 2000. Although the trial judge found that little effective work had been done after the extension of time to 31 July, he also noted that nothing effective happened thereafter in finalising the collaboration agreement. The court found that the trial judge did not affirm the Letter Agreement on 2 August 2000 and did not find that the condition precedent was waived after 31 July 2000.

The court concluded that the failure to satisfy the condition precedent did not automatically render the contract void or voidable. It held that the onus was on the non-defaulting party to prove a direct causal relationship between the breach and the contract's failure. The court found that the trial judge's reasoning did not clearly establish whether the condition precedent was breached before or after 31 July 2000, leaving some ambiguity in the timeline of events. The court also noted that the trial judge's finding that no further extension was sought or granted after 31 July 2000 was inconsistent with a waiver of the condition precedent. The final orders of the court would depend on a clearer understanding of the breach's timeline and its causal relationship with the contract's failure.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MILLER J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: MILLER J

If non‑compliance with a contractual obligation is to take away the defaulting party's right to terminate, there must be a direct causal relationship between that non‑compliance and the failure to complete the contract, with the onus of proof lying upon the non‑defaulting party: see Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 and Kyrwood v Drinkwater [2000] NSWCA 126, pars 154, 232. It is not clear from the trial Judge's reasons whether his Honour found that the parties had, by 31 July 2000, breached the obligation contained in cl 6 of the Letter Agreement (or an implied obligation to co‑operate) or whether the breach which he found occurred after that date. While the trial Judge said that little effective work appeared to have been done after the extension of time to 31 July was negotiated (and this was done on about 30 June 2000), he also said that, although the facsimile of 2 August "provided the affirmation that the parties would negotiate in good faith to finalise the collaboration [sic] agreement", it seemed to him that "thereafter nothing effective happened in that regard on either side". That being so, it might be the case that his Honour considered that the obligation to which I have referred was breached only after 2 August 2000, although it is not entirely clear what was intended by the reference to an "affirmation" and whether his Honour considered that there had been a prior breach. There was, in this respect, no plea of any affirmation (or, as I understand it, even any contention that there was an affirmation, no breach of the kind found having been alleged against Expectation). Also, while Expectation pleaded, in par 13.10 of its Reply, that on or about 2 August 2000 Pinnacle waived all conditions precedent to performance of the Letter Agreement that had not by that date been fulfilled, the only contention which appears to have been advanced by it at the trial in this respect was that the exchanges in early August had given rise to a variation of the Letter Agreement in a number of respects and that this variation had the effect of waiving the condition precedent. However, the contention that any variation was agreed upon was, as I have said, rejected by the trial Judge. I should add that, contrary to what is said in ground 4.3(f) of the grounds of appeal, the trial Judge did not find that, on 2 August 2000, both parties affirmed the Letter Agreement. All that he found (as I read his judgment) was, as I have said, that Mr McLernon's facsimile transmission to Mr Wantrup dated 2 August 2000 (which the trial Judge found to have been "legally ineffectual"), "provided the affirmation that the parties would negotiate in good faith to finalise the collaboration [sic] agreement". The trial Judge, as I read his reasons, made no finding that the condition precedent was waived after 31 July 2000. Rather, his finding (in par 161) that, after 31 July 2000, no further extension was sought or granted seems to me to be inconsistent with the notion that there was a waiver.