Flowers and 1 Other v Vescio and 2 Others

[2006] NSWCA 342

New South Wales

Court of Appeal

CITATION:	FLOWERS and 1 Other v VESCIO and 2 Others [2006] NSWCA 342
HEARING DATE(S):	26 October 2006
JUDGMENT DATE:	6 December 2006
JUDGMENT OF:	Beazley JA at 1; Santow JA at 2; Bryson JA at 65
DECISION:	Appeal dismissed with costs (see Orders at [64])
CATCHWORDS:	CONTRACT – Recovery of a specified sum of money under a repudiated contract settling litigation between the parties – competing contractual principles in McDonald & Anor v Dennys Lascelles Ltd (1933) 48 CLR 457 at respectively 476 and 477 in relation to recovery of damages for breach – whether contract was predominantly to settle litigation with an uncompleted sale being merely incidental and whether the occasion had yet arisen requiring transfer of property pursuant thereto – effect of failure to complete sale by party seeking to claim damages and claiming to be ready, willing and able to complete sale – whether party seeking to recover damage had an accrued right to receive payment of a specified sum before contract was repudiated by the other party and that repudiation accepted – anticipatory breach – meaning of the word “upon” payment of a sum – accord and satisfaction and distinction between an accord executory and an accord predicated upon the doing of the thing promised – distinction between damages for loss of bargain and recovery of a stipulated sum.
CASES CITED:	Amco Wrangler Ltd v Sukkar (1985) 1 NSWLR 577 Hyundai Heavy Industries Co ltd v Papadopoulos [1980] 1 WLR 1129 McDermott v Black (1940) 63 CLR 161 McDonald & Anor v Dennys Lascelles Ltd (1933) 48 CLR 457 Re Murphy (1947) 47 SR(NSW) 433
PARTIES:	John FLOWERS (First Appellant) Angela FLOWERS (Second Appellant) Leo VESCIO (First Respondent) Zena VESCIO (Second Respondent) Costa GOUMAS (Third Respondent)
FILE NUMBER(S):	CA 40130/06
COUNSEL:	D McGOVERN, SC/ M ZAMMIT (Appellants) P BEALE (First and Second Respondents) J L TREW, QC/ A G JAMIESON (Third Respondent)
SOLICITORS:	Bertock & Associates (Appellants) McGrath Dicembre & Company (First and Second Respondents) Wood Marshall Williams (Third Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 6587/02
LOWER COURT JUDICIAL OFFICER:	J C Gibson DCJ
LOWER COURT DATE OF DECISION:	6 February 2006

CA 40130/06
DC 6587/02

BEAZLEY JA
SANTOW JA
BRYSON JA

6 DECEMBER 2006

John FLOWERS and 1 Other v Leo VESCIO and 2 Others

Judgment

1 BEAZLEY JA: I agree with Santow JA.

2 SANTOW JA:

INTRODUCTION
This appeal ultimately depends on which of two competing principles applies in adjudicating a claim to recover a stated sum of money ($180,000) under a repudiated contract settling litigation between the parties. The resolution of this question depends on the proper characterisation and construction of that contract.

3 The two competing principles were stated by Dixon J in McDonald & Anor v Dennys Lascelles Ltd (1933) 48 CLR 457 in these terms:

“the seller may [not] both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer”. (at 477)

The appellants rely on that principle.

4 Then earlier at 476-7:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.”

The respondents rely on that principle.

5 The relevant contract was constituted by a deed of settlement settling litigation related to the respondents’ claimed entitlement to further shares in an incorporated business. The deed of settlement also provided for the transfer of the respondents’ existing shares for no additional consideration to the parties obliged to pay the stated sum (the appellants). The deed of settlement was however terminated by the appellants’ failure to pay that stated sum and that breach being accepted as repudiation by the respondents. The respondents in those circumstances and by reference to the terms of the deed of settlement treated themselves as no longer bound to transfer their shares to the defaulting parties though able and willing to do so. The appellants at trial unsuccessfully sought to dispute this and to rely on those shares not having been transferred in order to resist recovery of the $180,000.

6 In determining which of the two competing principles applies, one must do so by reference to the proper characterisation and construction of the deed of settlement. This turns on two questions. First, was the deed of settlement a contract characterised as predominantly one of sale, or was it predominantly to settle litigation, the sale being merely incidental? Second, as a matter of construction, and in the events that happened,

(a) was the obligation of the appellants to pay the stated sum in settlement of the litigation dependent upon the respondents first transferring the relevant shares, and

(b) had the occasion yet arisen requiring that transfer, in the absence of the appellants indicating how the shares were to be held?

7 Bearing on these questions of characterisation and construction is the principle of accord and satisfaction. Was the appellants’ promise to pay the respondents the $180,000 in return for settling the litigation merely an accord executory? The appellants would answer this in the affirmative. They therefore submit that the only consequence of the appellants’ failure to pay was revival of the settled litigation, with any damages limited to those for loss of bargain. The respondents successfully submitted at trial to the contrary; that actual performance in paying the $180,000 was required, so that they were entitled to recover the whole $180,000 (plus interest) from the appellants.

8 The factual circumstances briefly were these. The respondents had at trial claimed a sum of money under a deed of settlement which the appellants failed to pay thereby breaching the deed of settlement. There had earlier been a breakdown of relations between the parties, who were participants in a Palm Beach liquor and provisions business. That had led to litigation, which the deed of settlement settled. As part of the settlement arrangements the appellants (defendants in the litigation) were required to pay $180,000 to the respondents (plaintiffs in the litigation). It was undisputed that this sum was never paid, leading to the respondents accepting the appellants’ repudiation and so terminating the deed of settlement.

9 At trial, the respondents successfully took the position that they were not obliged under the deed of settlement to transfer their shares in the business because of the appellants’ failure to pay the $180,000, though they had remained able and willing to do so. The appellants contend on appeal that the trial judge, Gibson DCJ, wrongly awarded damages in the sum of $180,000, when:

(a) payment of the $180,000 should have been conditioned on transfer of the shares, and

(b) the true measure of any damages was in any event loss of bargain, not $180,000.

10 On appeal the respondents separately contended, pursuant to a notice of contention, that the trial judge’s judgment could be supported on alternative grounds, namely that:

(a) the respondents possessed an accrued right to receive payment of the debt no later than 4pm on 19 August 1999, and

(b) (i) the obligation to pay the debt was independent of the other obligations under the deed of settlement, and

(ii) the deed of settlement was fundamentally directed to settlement of the litigation so that transfer of the respondents’ shares was merely incidental.

SALIENT FACTS

11 In the proceedings below the trial judge awarded the respondents $180,000.00, plus interest from 19 August 1999. He did so pursuant to the deed of settlement executed on 19 May 1999 to settle prior court proceedings (“the 1998 proceedings”) and by reference to the appellants’ failure to make that payment.

The 1998 Proceedings

12 The dispute arose out of an earlier business arrangement made in October 1997. The parties to it were the original six defendants (of which Mr and Mrs Flowers are the appellants) and the original three plaintiffs Mr and Mrs Vescio, and Costas Goumas, who are the respondents. The parties were to acquire the title to the property and business known as “Palm Beach Cellars”. The acquisition was via two companies Palm Beach Cellars & Food Supplies Pty Ltd and Castlemoon Pty Ltd with funds secured by a mortgage to the National Australia Bank. The deal involved various share transfers such that the shareholdings in the companies would reflect the financial contributions made to the purchase by particular parties. According to the ASIC records as at 11 May 2005, the respondents had a “beneficial holding” of one-third of the issued capital in each case (Blue, 224 and 231).

13 The acquisition of the business went ahead but the relationships between the parties quickly soured.

14 On 21 January 1998 Castlemoon leased the property to the sixth defendant for a period of five years from 1 October 2007. Castlemoon did so without the knowledge or consent of the respondents and without a meeting of directors or shareholders.

15 On 9 July 1998 the respondents as plaintiffs commenced proceedings against the appellants and the other defendants. They sought various orders and declarations relating to the share capital in the companies and sought to void the lease and claim an entitlement to profits and damages. Significantly amongst the plaintiffs’ claims was a declaration that the plaintiffs were entitled to 50% of the share capital of Castlemoon and Palm Beach Cellars (Blue, 119-130) as against the 33⅓% they held. The matter went before Bryson J in the Equity Division of this Court.

16 The parties then negotiated the deed of settlement, which was signed on 19 May 1999. Under the deed of settlement the appellants promised to pay $180,000 to the respondents by 19 August 1999, time being of the essence. The respondents agreed

(a) to relinquish all interest in the two companies,

(b) transfer their shares to Mr and Mrs Flowers and Mr and Mrs McIntosh “upon” receiving the $180,000, and

(c) release them and the companies from all liabilities and causes of action (see deed of settlement cl 2 and cl 5).

17 The appellants did not pay the $180,000 required of them under the deed of settlement on the due date or at all. Nor did the respondents transfer the shares or relinquish their other claims. On 23 February 2000 the solicitors for the Vescios sent a letter to the appellants accepting the failure to pay as repudiation of the deed of settlement. Mr Goumas accepted the repudiation in February 2002 bringing the deed of settlement to an end.

18 There was no contact between Mr Goumas and the Vescios between May and August 1999. Mr Goumas moved to Merimbula for a fresh start. He was found to be at all times willing to transfer the shares in expectation of getting his share of the settlement money. There was also no contact between the Vescios and the appellants between May and August 1999.

The 2002 Proceedings

19 By statement of claim filed on 16 August 2002 (para 20 at Red, 5), the respondents claimed severally “$180,000” and “Damages from breach of Deed 19 May 1999”.

20 The first and second defendants (the McIntoshes) did not appear at the hearing. The fifth and sixth defendants (Castlemoon and Palm Beach Cellars) were merely passive participants. The proceedings effectively revolved around the defence of Mr and Mrs Flowers, the now appellants.

21 On the last working day before the hearing the appellants applied for leave to amend their defence. The additional ground to be added was that if the failure to pay amounted to repudiation, which was accepted to terminate the contract, the respondents could not enforce the liability because it was conditional on the share transfers. The judge then hearing the matter, Sidis DCJ, refused leave.

The First Instance judgment

22 The trial judge considered that the proper construction of the deed of settlement was that the $180,000 was payable as consideration for the discontinuation of the litigation, by way of compromise. The share transfer was merely ancillary; judgment [40]. In so doing she distinguished the principle in McDonald & Anor v Dennys Lascelles Ltd (supra).

23 The trial judge considered the deed of settlement was a special type of contract, where the consideration (by way of property or payment) must be seen as involving the compromise of legal rights by releasing the party from a cause of action that might otherwise exist; judgment [43]. The trial judge rejected the view that the contract was for the purchase of shares, and considered that it was for the appellants, in making such a case, to bring evidence as to the value of the shares; judgment [44]. The trial judge held that specific performance was not an appropriate remedy as the share transfer was not the purpose of the contract; judgment [47]. The “Settlement Sum” was a liquidated sum and damages were the appropriate remedy; judgment [52].

The assertion that the Plaintiffs were not ready, willing and able to transfer all their shares

24 The trial judge accepted the respondents’ evidence that they were ready, willing and able to transfer the shares pursuant to the deed of settlement at all relevant times; judgment [57]. The trial judge considered it inappropriate to consider the defence more closely, given that it had not been properly pleaded; judgment [58].

The defence of anticipatory breach

25 The trial judge rejected this defence as it required that the appellants were ready willing and able to pay the settlement sum when due and Mrs Flowers admitted in evidence that this was not the case; judgment [60]-[61].

Some general comments on the evidence

26 Given the lack of contact between the parties between May and August 1999 the necessary forewarning implicit in a defence of anticipatory breach could not be established; judgment [62]. The key evidential dispute on this issue was in regard to whether Mr Goumas decided after August 1999 to retain the shares and operate the business 50/50 with the appellants (as they asserted) or whether he was consistent in his intention to start afresh in Merimbula. The trial judge accepted the latter proposition, and drew strongly adverse conclusions on the credibility of the appellants, particularly Mrs Flowers.

27 The appellants attacked the credibility of Mr Goumas at the hearing. Her Honour discussed the history of the hostility between the parties, and dealt with the challenges to Mr Goumas’ credibility. The trial judge accepted the evidence of Mr Bullow, the solicitor for Mr Goumas, without reservation; judgment [88]. She therefore concluded that there was no anticipatory breach and that Mr Goumas at all times was looking to remove himself from the business arrangements; judgment [89]. She also accepted the evidence of the first respondent, Mr Vescio, without reservation; judgment [91].

Summing up the Trial Judge’s Findings

28 The appellants were never in a position to pay the Settlement Sum; judgment [105]. There was no discussion prior to August 1999 that could amount to an anticipatory breach; judgment [105] and that defence was rejected; judgment [111].

29 The respondents were ready, willing and able to transfer the shares; judgment [106].

Damages

30 The submissions received failed to deal with the question of calculating damages in favour of the respondents. Counsel for the respondents argued for damages arising from loss of a chance (being the chance of getting back the value of the respondents’ properties mortgaged to NAB to help fund the business). The breach of the deed of settlement (cl 6) was by the appellants failing to cause to be released those properties from NAB’s securities and their individual guarantees. The result was that NAB retained the proceeds of the investment properties securing the loan (namely an interest in a Black Stump franchise and a property at Dee Why). Whereas, the respondents lost the chance to invest those funds derived from the two properties (as they would have done if the business had generated enough money to pay off the NAB); judgment [117] and [121]. The trial judge rejected this claim (for the loss of a chance) on the basis that the motivation to sell the properties and exit the business venture came from a number of sources, not simply the matters being litigated; judgment [124]. The claim for loss of chance lacked proper evidentiary foundation; judgment [128]. There is no cross-appeal on this finding.

31 The trial judge awarded judgment for the respondents in the sum of $180,000 plus interest and costs, concluding that the respondents had a cause of action in contract and the appellants had breached that contract; judgment [119].

Grounds of Appeal

32 The grounds of appeal are as follows:

(1) The trial judge erred in holding that the respondents were entitled to claim, as a liquidated sum, the amount of $180,000 (“the Sum”) pursuant to the deed of settlement.

(2) In the alternative, having found that:

(i) the appellants failed to pay the Sum pursuant to the deed of settlement;

(ii) the respondents accepted the appellants’ repudiation of the deed of settlement for failing to pay the Sum;

(iii) the respondents, pursuant to the deed of settlement, were required to transfer their shares in Castlemoon and Palm Beach Cellars to the appellants upon payment of the Sum; and

(iv) the respondents did not transfer their shares in Castlemoon and Palm Beach Cellars to the appellants either prior to or subsequent to the respondents’ acceptance of the appellants’ repudiation and therefore the trial judge ought to have held that the respondents were not entitled to claim the Sum.


DISPOSITION

33 The starting point is the proper characterisation of the deed of settlement and its proper construction. The trial judge based her conclusion in favour of the respondents upon a successful claim for damages. However, I consider that the only proper basis for recovery of the $180,000 by the respondents depended upon their establishing that they possessed, in terms of the notice of contention, an accrued right to receive payment of the debt on the stipulated date and time, such that the accepted repudiation of the deed of settlement did not vitiate that right. The respondents must also show that payment of the $180,000 was not dependent upon any continuing obligation to be performed by the respondents, specifically transfer of their shares.

34 The essence of the appellants’ case was that the deed of settlement, following its termination by repudiation and acceptance, left no accrued and unconditional right to receive payment of the $180,000. The appellants instead sought to characterise the deed of settlement, despite its title, as essentially one for the sale of property (the shares owned by the respondents) in return for payment of the sum of $180,000, albeit with related other obligations pertaining to settlement of the litigation. They sought to invoke the principle enunciated by Dixon J in McDonald & Anor v Dennys Lascelles Ltd at 477; “the seller may [not] both retain what he has received, or recover overdue instalments, and at the same time treat himself as relieved from the obligation of transferring the property to the buyer”.

35 The respondents for their part eschew any characterisation of the repudiated contract as fundamentally one of sale as distinct from a contract fundamentally to settle litigation. In that more general context, the respondents were left with an accrued right to receive payment of $180,000 at the time the deed of settlement came to an end by reason of the respondents’ acceptance of the appellants’ breach. The respondents invoke the principle earlier stated by Dixon J in Dennys Lascelles at 476-7:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected.”

36 The appellants also invoke the distinction drawn by Dixon J in McDermott v Black (1940) 63 CLR 161 at 184-5:

“…, that of accord and satisfaction there are two cases, one where the making of the agreement itself is what is stipulated for, and the other, where it is the doing of the things promised by the agreement. The distinction depends on what exactly is agreed to be taken in place of the existing cause of action or claim. An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed.”

37 The appellants contend the trial judge was in error as treating the Deed as demonstrating accord and satisfaction; judgment [50]. The appellants submit that the deed of settlement demonstrated “an accord executory” and that it “did not operate to discharge existing rights and duties unless and until the accord was performed”; appellants’ written submissions dated 7 August 2006 at para 14 (Orange, 7).

38 The essence of the appellants’ argument was therefore two pronged:

(a) (i) payment of the sum of $180,000 under the Deed was dependent upon transfer of the shares simultaneously, and
(ii) as the latter had not occurred, the discharge of the deed of settlement left the respondents with no accrued right of an unconditional kind to receive payment of the debt, and
(b) being an accord executory,
(i) failure by the appellants to pay the sum of $180,000 meant that so far as the respondents were concerned the accord was without satisfaction, thus

(ii) denied of legal effect, the only consequence was that the original cause of action in the Supreme Court proceedings was not discharged following the repudiation of the Deed of Settlement and its acceptance, so

(iii) leaving the respondents without recourse for the $180,000 but with the right to re-assert their original claim in the Supreme Court proceedings which they failed to do.

39 Turning to the deed of settlement itself, it is abundantly clear that its proper characterisation is a deed to settle litigious claims. That emerges not only from its title as a “deed of settlement” and its description of the parties as “Plaintiffs” and “Defendants” but from its recitals:

“The Plaintiffs commenced proceedings by Summons dated 8 May 1998 issued in the Supreme Court of New South Wales Equity Division matter number 2332/98 (“the Proceedings”). A Statement of Claim was filed on 9 July 1998 and an Amended Statement of Claim was filed in the Proceedings on 17 May 1999.

The Defendants defended the Proceedings and deny and continue to deny each of the allegations made by the Plaintiffs therein.

The Plaintiffs and the Defendants have agreed (where relevant denying liability) to settle the Proceedings on the terms set out in this Deed.”

40 This is reinforced by what is said under the heading “Consideration” in clause 2 of the deed of settlement which, with the ensuing clause 3, renders payment of the Sum ($180,000) consideration for various releases. Thus clause 2 provides:

“ CONSIDERATION

(a) The Defendants agree to pay to the Plaintiffs’ solicitors the sum of one hundred and eighty thousand dollars ($180,000.00) (“the Sum”) to be paid within ninety days being no later than 4:00pm 19 August 1999 in which regard time is of the essence.

(b) Upon payment of the Sum the Plaintiffs agree to relinquish all claims to any interest in the parties of the eighth and ninth Part to this Deed, and in the business and/or the property known as Palm Beach Cellars and Food Supplies Pty Limited and located at 1109 Barrenjoey Road, Palm Beach.”

41 Clause 3 then provides that “in consideration of the payment of the Sum” the Plaintiffs release and discharge the Defendants in relation to claims, etc. based upon or in any way relating to the Proceedings (as defined). Significantly, clause 4, providing for the Defendants to give a similar release to the Plaintiffs operates immediately upon “execution of this Deed”. Thus clause 4 is expressed to be not “in consideration of the payment of the Sum” but “in consideration of the execution of this Deed”. The clause 4 release is in no way predicated on payment of the Sum nor indeed on transfer of the shares owned by the Plaintiffs in clause 5. Clause 5 is in these terms:

“ CASTLEMOON AND PALM BEACH CELLARS

In further consideration of the payment of the Sum, LV agrees to:

(a) formally resign as a Director of Castlemoon by signing simultaneously with the execution of this Deed the Notice of Resignation annexed hereto and marked “A”; and

(b) the Plaintiffs agree to transfer all shares held by them in Castlemoon and Palm Beach Cellars to either BM, VM, JF and/or AF or a nominee of either of them by executing standard share transfer forms upon payment of the Sum.”

42 It is not disputed that at no time has there been any direction or request from the appellants or on their behalf as to how the relevant shares are to be transferred as between the named individuals (the McIntosh’s and the Flowers) or to a nominee of either of them. That means that clause 5(b) was never triggered by the appellants even if it were open them to do so.

43 Clause 6 places a further obligation on the Defendants. It is not said to be either deferred or in any way dependent upon the Plaintiffs transferring their shares. That obligation was in terms that the Defendants will cause to be released all securities and guarantees provided by the Plaintiffs and held by the NAB in respect of the indebtedness of Castlemoon and Palm Beach Cellars as well as an associated company Internet Wines Pty Limited. That was never done by the appellants either.

44 Finally, clause 7 emphasises again that the fundamental purpose of the deed of settlement was to terminate the proceedings launched by the respondents as plaintiffs:

“ DISMISSAL OF PROCEEDINGS

The parties shall take all steps to seek and obtain orders dismissing the Proceedings with no order as to costs and to vacate any cost order previously made in the Proceedings by providing their solicitors with instructions to sign and file a Notice of Discontinuance in the form of annexure “B” and which Notice of Discontinuance shall be handed up to the Court upon payment of the Sum to the Plaintiffs’ solicitor or the release of the securities and guarantees contemplated by paragraph 6 of this Deed whichever occurs the later.”

45 Clause 2(b), in referring to the Plaintiffs agreeing to relinquish any interest in the two companies must be understood by reference to that commercial purpose of the deed of settlement. Clause 2(b) does not contemplate that the Plaintiffs give up their one-third interest in the two companies. Rather it contemplates their giving up “all claims” to any interest beyond that, namely the difference between a one-third interest and a half interest in those companies. They do so only “upon payment of the Sum”. Otherwise, clause 5(b) would be redundant insofar as it provides expressly for the transfer of the relevant shares constituting the one-third existing interest held by the Plaintiffs in the two companies. Clause 5(b) is essentially concerned to dispose of the Plaintiffs’ residual one-third interest; it is certainly not a central feature of the deed of settlement.

46 Thus the appellants’ argument that the obligation to pay the sum of $180,000 in clause 2(a) was somehow conditioned upon transfer of the relevant shares finds no support in clause 2(b). This is quite apart from the fact that any obligation in clause 2(b) is predicated “upon payment of the Sum”, it being of course the case that that Sum was never paid.

47 I have already drawn attention to the distinction expressly drawn between clause 3, where the Plaintiffs’ release of the Defendants is predicated as being “in consideration of the payment of the Sum”, and clause 4 where the reciprocal release from the Defendants is predicated as being “in consideration of the execution of this Deed”. That clearly shows that the person drafting the document was conscious of the difference between clause 3, predicated upon performance of an act (payment of the $180,000), and clause 4, predicated upon making a promise (via execution of the deed).

48 The words “upon payment of the Sum” were said by the appellants to be synonymous with the word “simultaneously”. The appellants did so with reference to the various possible constructions of the word “upon” brought out by Kirby P in Amco Wrangler Ltd v Sukkar (1985) 1 NSWLR 577 at 580 citing Jordan CJ in Re Murphy (1947) 47 SR(NSW) 433 at 436:

“… There is no substance in this [argument]. The word ‘upon’ in different cases, may undoubtedly either mean before the act done to which it relates, or simultaneously with the act done or after the act done, according as reason and good sense require the interpretation, with reference to the context, and subject matter of the enactment…. In its present context the word obviously means ‘after’: it would make nonsense of the sub-section to give it any other meaning.”

49 Kirby P went on to conclude, as I would in the present case, that the word “upon” (in the relevant Supreme Court Rule) “dealt with the sequence of events and did not impose a peremptory condition as to time. Specifically … it did not mean ‘immediately upon’”.

50 I would similarly conclude that the reference to “upon payment of the Sum” where appearing both in clause 2(b) and later in clause 5(b) in each case carries a sequential meaning. That is to say the relevant obligation of the “Plaintiffs” is in each case predicated upon prior payment of the sum of $180,000. That is to say, the respondents were never obliged to give up their claim under clause 2(b) or to transfer their one-third interest under clause 5(b).

51 I therefore consider that clause 5(b) cannot be construed as conditioning the obligation to make payment of the sum of $180,000 upon the respondents’ transfer of their shares constituting their one-third interest in Castlemoon and Palm Beach Cellars.

52 Rather, on the expiration of 4pm on 19 August 1999, the respondents possessed an accrued and unconditional right to receive payment of $180,000. That obligation was in no way dependent upon the obligation to transfer the Plaintiffs’ shares in Castlemoon and Palm Beach Cellars in clause 5(b). There never was such an obligation under clause 2(b).

53 There are further considerations which support that interpretation were they needed. First, it has not been shown that the $180,000 bears any relationship to the value of a one-third interest in shares in Castlemoon and Palm Beach Cellars, whatever that value might have been. Certainly the agreement does not apportion the $180,000 between the value of the one-third interest in the shares and the value of the claims given up. There is indeed some suggestion that the trial judge found that value to be low. The trial judge referred to “significant financial losses to these companies [that] can only be explained by fraud” at [133]. However, (as suggested in argument on appeal) that the companies went into liquidation four years later is beside the point when it comes to their sale value at the time of the deed of settlement.

54 The second point is that the clause 5(b) obligation could not in any event operate until the respondents were directed or requested to execute the share transfer forms so as to indicate how the shares were to be held as between the named persons or the nominee. That never occurred.

55 There was some suggestion that a subsequent set of consent orders whereby the McIntoshes, indeed the McIntoshes only, agreed to pay interest to the Plaintiffs on the sum of $180,000 from 19 September 1999 somehow cancelled out the time of the essence obligation in clause 2(a). The short answer is that those orders (Blue, 52) post-date the deed of settlement. So they could not, under well-accepted principles of interpretation, affect its construction. In any event the orders relate only to two of the defendants so could not have any bearing on Mr and Mrs Flowers as third and fourth defendants.

56 It follows that the deed of settlement, though incidentally dealing with sale of the respondents’ shares upon payment of $180,000, does not invoke the principle that an unpaid vendor is disentitled to enforce payment, yet retain his title to the property in question. Rather, it invokes the principle stated earlier by Dixon J in Dennys Lascelles that “rights are not divested or discharged which have already been unconditionally acquired” when a contract is discharged by acceptance of repudiation.

57 One may compare the present case by analogy to the instalment contract for the construction of a ship in Hyundai Heavy Industries Co ltd v Papadopoulos [1980] 1 WLR 1129. There too the contract gave rise to rights not divested or discharged by termination of the contract as those rights had been unconditionally acquired prior to that time. Thus the judgment of Lord Edmond-Davies at 1141 cites the passage from Dixon J’s judgment in McDonald & Anor v Dennys Lascelles Ltd to which I have earlier made reference.

58 I do not consider there is any basis for disallowing the respondents’ reliance on the notice of contention which it sought to file at the hearing of the appeal. As a matter of pleading, though the pleadings left something to be desired, clearly enough the plaintiffs claimed not only damages “arising from breach of deed” but, severally, $180,000; see para 20 of the Amended Statement of Claim.

59 The Amended Defence does not assist the appellants insofar as it takes issue with the claim of the respondents for $180,000 or in damages, doing so disjunctively. Moreover, it is clear from the submissions that the Plaintiffs’ case was based upon, inter alia, accord and satisfaction (see, for example Black, 481). The latter’s only relevance must be that the obligation had already accrued to pay the $180,000 and was in no way dependent upon any other obligation such as to transfer the shares.

60 Moreover, the Defendants at trial distinguished between the claim for $180,000, and damages, though the distinction could have been brought out more clearly (see, for example Black, 460-462).

61 The trial judge, with respect, did not dispel this source of confusion when referring by way of heading to “The Plaintiffs’ claim for damages”. That heading introduced paragraph [113] quoted below, and the following paragraphs, from which I quote [119].

“113. As indicated earlier in this judgment the plaintiffs’ claim is for $180,000, being the sum payable under the deed, as well as damages arising from the breach of the deed of 19 May 1999. One of the problems with the case as presented by the Plaintiffs is that Mr Beale, in his written submissions of 10 August 2005, provided no submissions at all as to how any sum other than the $180,000 was claimed and effectively devoted about half a sentence (in paragraph 23) of his further submissions of 10 September 2005 to this point.

…..

119. The plaintiffs clearly have a cause of action in contract and I have found that the third and fourth defendants are in breach of that contract and I do not have any difficulty with seeing that the loss of $180,000 arises from that breach of contract. The question is what other losses, if any, have been suffered by the plaintiffs and whether or not they are causally linked or too remote. I also note there is a plea of failure to mitigate and this is an issue which I have dealt with separately in the course of considering the quantum of damages.”

62 The language of “damages” is apt to confuse. Essentially, the respondents in the court below were entitled to succeed in recovering $180,000 as a speciality debt created by clause 2(a) of the Deed on the basis that it had arisen as an accrued and unconditional right independent of other obligations, prior to the time of discharge by acceptance of the appellants’ repudiation. The appellants could not be said to be prejudiced in the way in which they conducted their case by the way in which the respondents articulated their claim below. The considerations and evidence could not have been any different whether the claim be one simply of damages for loss of bargain or, as was clear enough from the pleadings, for the sum of $180,000.

Conclusion

63 I would allow the respondents to rely upon the contentions contained in their notice of contention. Upon that basis I consider that the respondents are entitled to recover the sum of $180,000, plus interest from 19 August 1999.

OVERALL CONCLUSION

64 I consider that this appeal should be dismissed with costs. I propose orders as follows:

(1) Appeal dismissed.

(2) Appellants to pay the respondents’ costs of the appeal and to be entitled to a certificate under the Suitors Fund Act, if qualified.

65 BRYSON JA: I agree with Santow JA.

**********