NEW SOUTH WALES COURT OF APPEAL
CITATION: KYRWOOD & ORS. v. DRINKWATER & ORS. [2000] NSWCA 126 revised - 27/04/2007
FILE NUMBER(S):
40886/97
HEARING DATE(S): 01/02/00
JUDGMENT DATE: 25/08/2000
PARTIES:
Caddyrack Pty. Limited, Terry Kyrwood, Geoffrey Kyrwood, Caddyrack International Pty. Limited, Gedrot Pty. Limited and Gavros Pty. Limited (Appellants)
Peter Westgarth Drinkwater, John Francis Drinkwater, Lustray Pty. Limited, Caddyrack Inc. (Respondents)
JUDGMENT OF: Meagher JA Powell JA Fitzgerald JA
LOWER COURT JURISDICTION: Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S): ED 3970/96
LOWER COURT JUDICIAL OFFICER: Young J
COUNSEL:
R.W. White SC and A McInerney (Appellants other than Caddyrack Pty. Limited and Caddyrack International Pty. Limited (both now in liquidation)
B.A.J. Coles QC and M. Ashhurst (Respondents)
SOLICITORS:
Wood Roberts Solicitors (Mayfield) (Appellants other than Caddyrack Pty. Limited and Caddyrack International Pty. Limited)
Hansens Solicitors (The Junction) (Respondents)
CATCHWORDS:
CONTRACT - Repudiation and non-performance - Termination - Breach by other party to contract - Right of other party to terminate - Not available if causal relationship between other party's breach and first party's repudiation or if other party's breach itself amounted to repudiation. D
LEGISLATION CITED:
DECISION:
(By majority) Appeal dismissed
JUDGMENT:
11IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40886/97
ED 3970/96MEAGHER JA
POWELL JA
FITZGERALD JA25 August 2000
KYRWOOD & ORS v. DRINKWATER & ORS.
JUDGMENT
MEAGHER JA: I agree with Powell JA.
POWELL JA: This is an appeal by four of the six defendants - the other two are said (T.1) now to be in liquidation - against Judgments delivered by Young J on 25 September 1997, 23 October 1997 and 28 November 1997 and against orders made by his Honour pursuant to those Judgments on 23 October 1997 and 28 November 1997, in proceedings which had been brought by the Respondents following the breakdown of an agreement made in July 1996 between the personal Respondents - Peter Drinkwater and John Drinkwater - and the personal Appellants - Terry Kyrwood and Geoffrey Kyrwood. That agreement had been intended to effect a settlement of the disputes which had arisen between the Messrs. Drinkwater and the Messrs. Kyrwood and companies controlled by them respectively concerning the activities of two companies, Caddyrack Pty. Limited ("Caddyrack") - which had been the First Defendant in the proceedings before Young J - and Caddyrack Inc - the Fourth Respondent - which companies had been formed at the behest of the Messrs. Drinkwater and the Messrs. Kyrwood for the purpose of having manufactured, and marketing, a product which came to be called a "Caddyrack" which had been invented by Geoffrey Kyrwood.
Although the principal issues debated on the hearing of the appeal were whether or not the Messrs. Kyrwood had repudiated their obligations under the agreement of 26 July 1996 and whether the Messrs. Drinkwater had validly terminated that agreement, by reason of the Messrs. Kyrwood's repudiation of their obligations under it, a proper understanding of the circumstances which gave rise to the execution of that agreement…
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- Case
- [2000] NSWCA 126
- Decision Date
CaseChat Overview and Summary
The court was required to determine whether the doctrine of repudiation and non-performance applied in circumstances where the party seeking to terminate had itself breached the contract, or where the other party's breach was causally linked to the first party's repudiation. A further question arose as to whether mutual obligations between parties to an arbitration agreement were interdependent, and if so, how that impacted the ability to rely on the other party's breach as repudiation.
The majority of the court held that the right to terminate for repudiation was not available if the first party's own breach caused or contributed to the other party's repudiatory conduct, or if the other party's breach itself amounted to a repudiation. The court drew upon English House of Lords decisions in *Bremen Vulkan Schiffbau und Maschinerfabrick v South India Shipping Corporation Ltd* and *Paal Wilson and Co A/S v Partenreederei (The Hannah Blumenthal)*. These cases established that where both parties owe mutual obligations to progress an arbitration, neither party can rely on the other's delay or breach as a repudiation if that delay or breach is a consequence of their own failure to fulfil those mutual obligations. The court found that the concept of mutual obligations was essential to the reasoning in these authorities.
By majority, the appeal was dismissed.
Orders
Orders of the court
(By majority) Appeal dismissed
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Further, there was no reference in State Trading Corporation of India [59] to the decisions of the House of Lords in Bremen Vulkan Schiffbau und Maschinerfabrick v South India Shipping Corporation Ltd [60] or Paal Wilson and Co A/S v Partenreederei (The Hannah Blumenthal). [61] In the second of those decisions, the House of Lords reversed a decision of the Court of Appeal [62] was a member of the Bench. which had not applied the earlier House of Lords decision. In both Bremer Vulkan [63] and Paal Wilson, [64] there was no suggestion that the parties’ “mutual” obligations were interdependent. In Bremer Vulkan, [65] the plaintiffs were respondents to an arbitration commenced by the defendants in which they claimed to have been seriously prejudiced by the inordinate and inexcusable delay of the defendants in prosecuting the arbitration. The plaintiffs sought injunctions restraining the defendants from continuing with the arbitration. It was held by the trial judge that the defendants’ conduct constituted a repudiatory breach of the agreement to submit the dispute to arbitration and injunctions were granted. The defendants’ appeal was dismissed by the Court of Appeal, which held that the plaintiffs were entitled to treat the defendants’ conduct as a repudiation of the arbitration agreement and, as they had elected to rescind it, the injunctions were correctly granted. The House of Lords allowed an appeal. By three to two majority, it was held that, since both parties were under an obligation to keep the arbitration procedure moving forward, both were under an obligation to apply to the Lord Diplock was again a member of the Bench which decided Paal Wilson, [68], but the leading judgment was delivered by Lord Brandon of Oakbrook. There, plaintiffs sought and initially obtained a declaration that an arbitration agreement had been discharged by reason of frustration because of the other parties’ delay. That decision was upheld by a majority in the Court of Appeal. The House of Lords upheld an appeal on the basis that the operation of the doctrine of frustration was excluded by the “default” of each of the parties. Lord Brandon of Oakbrook said: [69]“The Court of Appeal in Bremer Vulkan had held that the claimant had been guilty of such inordinate and inexcusable delay in proceeding with the reference there concerned as to amount to a repudiation of the agreement to refer; that the respondents were entitled to accept, and had accepted, that repudiation as such; and that the agreement to refer had accordingly been discharged by breach. What Lord Diplock was saying was that, since the delay concerned was the consequence of breaches on the part of both the claimant and the respondent of their mutual obligation owed to one another, neither could rely on the other’s conduct as amounting to repudiation. … Lord Diplock’s mutual obligation concept was an essential part of the ratio decidendi of the Bremer Vulkan case in your Lordships’ House.”