Laundy Hotels (Quarry) Pty Ltd v Dyco Hotels Pty Ltd

The High Court of Australia considered an appeal from the Court of Appeal of the Supreme Court of New South Wales concerning a dispute between Laundy Hotels (Quarry) Pty Ltd (the appellant) and Dyco Hotels Pty Ltd (the respondent) arising from a contract for the sale and purchase of a hotel business. The central issue was whether the vendor, Dyco Hotels, had breached a contractual obligation to carry on the business in its usual and ordinary course, particularly in light of public health orders issued in response to the COVID-19 pandemic.

The legal issues before the High Court were whether the vendor was obliged to carry on the business in the manner conducted at the time of the contract to the extent that it remained lawful, and consequently, whether the vendor was "ready, willing and able to complete and ... not in default" at the time it served a notice to complete. The Court of Appeal had found that the vendor was not entitled to issue the notice to complete because it could not comply with the contractual obligation due to supervening illegality, leading to a repudiation of the contract by the vendor.

The High Court, by majority, allowed the appeal. The Court reasoned that the contractual obligation to carry on the business in the "usual and ordinary course as regards its nature, scope and manner" did not require the vendor to act unlawfully. Instead, it required the vendor to conduct the business in the usual and ordinary way to the extent that it was lawful to do so. The imposition of public health orders did not render the vendor unable to comply with this obligation, as the vendor continued to operate the business lawfully within the restrictions. Therefore, the vendor was not in breach of the contract and was entitled to serve the notice to complete.

Consequently, the High Court set aside the orders of the Court of Appeal and ordered that the appeal to that court be dismissed. The respondents were ordered to repay the deposit and interest to the appellant, with further provisions for the calculation of additional interest.