Munro v Cashin

[1991] TASSC 159

Serial No B45/1991
List "B"

COURT:  SUPREME COURT OF TASMANIA

CITATION:              Munro v Cashin [1991] TASSC 159; B45/1991

PARTIES:  MUNRO
  v
  CASHIN

FILE NO/S:  1307A/1988
DELIVERED ON:  23 August 1991
JUDGMENT OF:  Cox J

Judgment Number:  B45/1991
Number of paragraphs:  24

Serial No B45/1991
List "B"
File No 1307A/1988

MUNRO & ANOR v CASHIN

REASONS FOR JUDGMENT  COX J

23 August 1991

1. The plaintiffs sue the defendant for damages for breach of a written contract for the sale of a printing business and the plant and equipment thereof, and for breach of an alleged collateral oral contract in respect of a motor vehicle the subject of a lease agreement said also to be included in the sale of the business. The second–named plaintiff is the divorced wife of the first–named plaintiff. She took no part in the conduct of the sale and gave no evidence. For convenience, my references hereafter to the plaintiff, unless otherwise indicated, may be taken to refer to the first–named plaintiff.

1. Both plaintiffs were proprietors of a typesetting business in West Launceston. In 1980 they had commenced a linotype setting operation, and in 1983 had purchased an offset typesetting business from one Osborne. Both kinds of operation were then conducted by the plaintiffs under the name "Duo Typesetting" but in different parts of the building with different equipment. The offset typesetting side of the business was operated by an employee called Kathy Hawkins, who was well known in the printing industry for her competence in this field.

1. On the acquisition of the Osborne business, the plaintiffs entered into a lease agreement in respect of the equipment used by Osborne. It had a value of some $72,000.00 and was leased to the plaintiffs by General Credits Ltd There were nine items of equipment plus 164 used typefaces, and the lease provided for monthly rental payments of $1,778.00. These were paid by the plaintiff to the Brisbane Street branch of the Westpac Bank. In about February 1985 one piece of equipment, an offline CompEdit, was considered to be inadequate and the plaintiff decided to acquire a new one. With the lessor's consent, the plaintiff sold the old one for $6,000.00 which the lessor required him to deposit with it in a special investment account, and the new terminal was purchased by the lessor and leased to the plaintiffs at an additional monthly rental of $223.93. The rental of $1,778.00 under the first agreement remained unchanged, notwithstanding that one piece of equipment had been disposed of with the lessor's consent and was no longer subject to the provisions of the lease. A further two items of equipment under the first lease were also disposed of as surplus to requirement, again with the lessor's agreement, but the amounts realised being small, the plaintiffs were not required to deposit them and were permitted to keep them. Still the rental remained at $1,778.00 per month.

1. In the course of 1985 the plaintiffs experienced matrimonial difficulties culminating in divorce in August of that year. By this stage the plaintiff was in a distressed condition. He had custody of his two daughters aged 13 and 11 years, felt unable to run the house, to adequately look after the children and unable to cope with the business. With his former wife's consent, he decided to sell it. Mrs Hawkins approached him and suggested that Mr Joseph Cashin (the husband of her aunt, the defendant), who was then the manager of the Mercury newspaper in Hobart, might be interested in buying it. Mr Cashin had earlier that year appraised the business with a view to acquiring it for his employer, but had then decided against doing so. He expressed interest in acquiring the offset typing side of the business and was provided with a list of the plaintiff's customer's and trade debtors. He was aware that the equipment used in that part of the business was not owned by the plaintiffs, but was the subject of a lease or leases, and further that there was other equipment named in the lease, an offline terminal, which had been sold already and would not be included in any sale to him or to his wife for whom he intended to purchase the business. He was also conscious of the fact that the lease contained a covenant against assignment by the lessor. At his request the plaintiff arranged a meeting in Launceston with the acting manager of AGC Limited, the company which had taken over General Credits Ltd This was Lynette Murray (then Harris). The meeting was attended by Mrs Murray, the plaintiff, the defendant and Mr Cashin. It is common ground that the defendant took no active part in the negotiations. She was not called to give evidence, and I was asked by both sides not to draw any adverse inference from her failure or that of Mrs Munro to give evidence. There is some dispute as to what transpired at this meeting, but this much is clear, namely that Mrs Murray declined to give the lessors permission to an assignment of the lease and indicated that the defendant herself would not be a suitable lessee under some new arrangement for finance.

1. Shortly before this meeting took place, I find that the plaintiff was getting desperate. He was anxious to dispose of the business and realised that unless someone else took it over, he would have to carry it on or face substantial loss. The equipment in question was specialised and the market for any forced sale of it was very restricted. To walk away from it would court disaster, for over $40,000.00 was owing to AGC and that company held security by way of mortgage over his house for any loss on repossession. His best chance of solving his dilemma was to encourage Mr Cashin to take the business over and get his wife's niece, Mrs Hawkins, to manage it.

1. In October 1985 shortly before the meeting with Mrs Harris at AGC, an approach was made to the plaintiff to include, as part of the equipment in the business, a motor car. The plaintiffs had a car which they used in the business but did not intend to dispose of it. According to the plaintiff Mr Cashin telephoned him, told him he would negotiate buying the business on his own terms, and asked the plaintiff to arrange to purchase in the plaintiffs' names a new 4–cylinder motor car. The plaintiff says that he agreed to do so, that he contacted three motor vehicle dealers in Launceston who produced cars for test drives and that he left it to Mrs Hawkins to select the car. She settled for a Nissan Pulsar from Northern Motors, and finance in the form of a lease was provided by AGC Limited. This provided for a monthly rental of $274.77 from 24 October 1985. At the time of the sale by the dealer, Mrs Hawkins delivered to the dealer her own car for a sum of $5,538.00 described as "trade–in allowance". From this was deducted $2,149.00 which was owing to "Nat–West" by Mrs Hawkins, $614.49 described as "first rent AGC" and she was paid the balance of $2,774.51. The value attributed to the car in the lease agreement was its full purchase price. So it appears that Mrs Hawkins simply used the occasion to sell her own car to the dealer and paid the first monthly payment of rent plus a further unexplained amount of $339.72 to AGC retaining the balance herself. At the time of the meeting with Mrs Harris she was aware that AGC had been asked to provide finance in respect of this car to the plaintiffs and she knew something of their credit history, but it is clear that there was no mention made of the car at the meeting.

1. On 28 October 1985 the written contract was signed by the male plaintiff and the defendant. Its terms are as follows:

"AGREEMENT

This Agreement is made the twenty eighth day of October, 1985.

BETWEEN

(1)T C Munro acting with full authority and on behalf of T C and J E Munro trading as 'DUO TYPESETTING'.

and

(2)J A Cashin of 73 Windsor Street, Glenorchy, Tasmania, Australia.

WHEREAS

T C Munro has offered to sell and J A Cashin has agreed to purchase the business trading as 'DUO TYPESETTING'.

NOW IT IS HEREBY AGREED AS FOLLOWS:

1T C Munro shall undertake to pay or arrange to pay all debts incurred up to the FIRST DAY OF NOVEMBER, 1985 in the name of 'Duo Typesetting' with the exception of lease payments on plant and equipment due after the FIRST DAY OF NOVEMBER 1985 for the equipment and plant in Schedule 'A'.

2T C Munro will accept $1,000 in a cash lump sum payment and 48 instalments of $100 per week as full settlement of the sale of the business, plant, equipment and goodwill known and trading as 'Duo Typesetting'.

3T C Munro will allow a 20% commission to be retained from the Debtors list completed at 30–9–85 and presented to J Cashin on 7–10–85, plus any amount in addition to that list, from total trade debtors at 31st October, 1985 to J Cashin for collection and administration of that list of debtors and additional amounts. (Debtor' ...... applies to trade debtors.) [sic]

4T C and J E Munro will cease to have any claim outside the agreed points 1 to 3 above after the 31st day of October, 1985 or rights in any form with relation to the business trading as 'Duo Typesetting'.

5Signed this twenty eighth day of October, 1985.

T C Munro on behalf of T C & J E Munro  Witness

(signed) Trevor C Munro  K Hawkins

A Cashin  Witness

(signed) J A Cashin  Joseph A Cashin

SCHEDULE A

One only used Model 5810 CompEdit with 508 accessories (computerised typesetter.) Serial number: 2381

One only used Packoquick processor developer Serial No 054246

One only used drawing table with accessories (Regal R5 Drafting Machine)

One hundred and sixty four (164) only used typefaces

One only used CompEdit offline Terminal typesetter Serial No 58012

Received $1,000, cheque No ..... – Trevor C Munro."

1. The following week on 2 November 1985 the defendant took possession of the business and the equipment comprised in schedule A of the agreement, and Mrs Hawkins was appointed manager of the business. There is a dispute as to when the equipment was removed from the premises, the plaintiff claiming that it was not for several weeks, while Mr Cashin claimed it was all removed on Tuesday 2 November to coincide with the termination of the plaintiff's lease of the premises. I find that it was not removed for several weeks and I reject Mr Cashin's evidence on this matter. A fire insurance policy was taken out on the equipment on behalf of the defendant and Mrs Hawkins and the proposal form signed by the latter and dated 19 November 1985 gives the situation of the property as the plaintiff's premises, 44 Conaught Crescent, West Launceston. Over the next few months a total of seven $100.00 instalments was paid by the defendant to the plaintiff, while the latter accounted to the defendant for commission of about $4,000.00 owing in respect of trade debts as envisaged by clause 3 of the agreement. The defendant continued for several months to conduct the business and to use the equipment in the course of doing so. Rental in respect of each of the three lease agreements was also paid, although there is a dispute as to how much each party contributed. The lessor never gave its consent to the assignment of any of the leases nor, I find, did Mr Cashin make any serious effort to rearrange the finance so as to substitute himself or the defendant as lessee or hirer in some new lease or hire purchase agreement, and from about March 1986 no further monthly payments were made by either party in respect of the plant and equipment, while the last payment of rental in respect of the car was made in May. Finally the lessor repossessed all the equipment and the car, which were still in the possession of the defendant and Mrs Hawkins, and sold the same. At the end of the day it claimed (and, both parties agree, properly so) $40,137.25 in respect of the equipment and $4,109.65 in respect of the car. The plaintiff was forced to sell his home to discharge both debts and now claims both sums from the defendant in addition to a sum of $4,100.00 representing the purchase price of $5,800.00 less the deposit of $1,000.00 and the $700.00 paid in instalments.

1. The plaintiff's account of how the document came to be signed is significantly different from that of Mr Cashin. The former said in evidence that on 28 October 1985 he had been out to lunch and on his return found the Cashins at his place of business in West Launceston. He was quite shocked to see them as they were unexpected. Mr Cashin handed him the agreement I have set out above. It appeared to have been prepared on the plaintiff's machinery. Mr Cashin asked the plaintiff to sign it, but the plaintiff declined saying he wished to obtain legal advice before doing so. He then went to his solicitor, Mr Doolan, but Mr Doolan was away sick. Then he tried two other firms of solicitors, but no one was available or willing to see him. He returned to his premises in the mid–afternoon where the Cashins were still present with Mrs Hawkins. Mr Cashin, he said, told him that he would take over the goods in schedule A to the agreement if the plaintiff would pay $56.00 per month to make up for the goods he had previously sold (but in respect of which the rental under the lease was still calculated). The plaintiff agreed to this, and said he wanted the motor vehicle placed on the document as well. He further stated he wished the agreement to be drawn up "legally". At this Mr Cashin told him that if he did not sign the agreement by 5.00pm his staff would leave the plaintiff. When the plaintiff persisted, Mr Cashin had said, "What kind of a man do you think I am?" and had held out his hand saying, "It's a gentleman's agreement". The plaintiff shook hands with him, the document was signed and the sum of $1,000.00 paid over and its receipt acknowledged on the contract. The plaintiff said Mr Cashin has asked him to advise the members of the printing industry, with whom he had contact, that notwithstanding that his wife had purchased the business, Mrs Hawkins was the owner of it, it being understood by the plaintiff that she was to manage it for the new owner.

1. Mr Cashin's version is that he and his wife called on 28 October 1985 by arrangement with the plaintiff, that they worked out the terms of the agreement and that Mrs Hawkins reproduced it on the typesetting machine. The plaintiff did not leave the premises at all, nor indicate that he wished to take legal advice. Mr Cashin did not threaten him if the agreement were not finalised that day nor was there any discussion about including the Nissan motor car in the arrangement, or about the plaintiff contributing $56.00 per month in respect of the equipment no longer the subject of the lease. He said that there had never been any discussion, to his knowledge, about a car to be acquired for the business or for Mrs Hawkins to use in the business, and he was quite unaware that she had possession of such a car until some time later.

1. I gained the impression from his evidence and demeanour that the plaintiff is an honest man endeavouring to tell the truth as he believes it to be. However, in respect of his account of this meeting, I cannot accept it as reliable. I think his emotional state throughout that period of time distorted his recollection and that he has reconstructed a version of events in which he now no doubt believes, but which does not accord with the facts. I find that on 23 October 1985 he had briefly seen Mr Doolan, but while referring to a transaction involving the sale of the business to be completed on 1 November 1985 and in respect of which he said there were three leases, he had made no specific reference to a motor car, although he left with Mr Doolan a list of equipment originally the subject of two lease agreements, those to be included in the sale being ticked and those to be excluded because already disposed of crossed off. Mr Doolan also confirms that it was in December 1985 that the plaintiff agreed to pay an adjustment of $56.00 per month in respect of the sold items after Mr Cashin had raised this as a bone of contention in response to a letter from Mr Doolan complaining at the defendant's failure to meet the rental accruing since the sale at the end of October. Even as late as March 1986 when, in an effort to resolve doubts about the interpretation of the original agreement, Mr Doolan drafted a supplemental agreement (which was never signed), he made no mention of the car. I am, of course, not unmindful of the fact that Mrs Hawkins had possession of the car and she made payments which resulted in the discharge of the liability for rental on the car until 6 May 1986, so that the plaintiff had no cause for alarm until default was thereafter made, and furthermore he may not have had any reason to suppose that either the defendant or Mrs Hawkins would not keep the payments up in order to retain possession of the car, whatever might have been their attitude to continuing with or bailing out of the business.

1. I suspect that the plaintiff, in his commercial naivety and anxiety to dispose of the business, came to some sort of an arrangement about the car with Mrs Hawkins thinking that that might improve his chances of selling the business to the Cashins, but I am not satisfied that there was any arrangement with the defendant through Mr Cashin as pleaded in the statement of claim, and the plaintiffs' claim for the loss sustained by them when default was made in payment of rental and the car was repossessed from Mrs Hawkins cannot be recovered from the defendant.

1. The plaintiffs' claims to the balance purchase price of $4,100.00 and to indemnity in respect of their payment to AGC of $40,137.25 in respect of the equipment were based upon the following terms set out in the statement of claim and said to be a part of the written agreement cited above:

"2Pursuant to clause 2 of the contract it was expressly agreed that the defendant would pay to the plaintiffs the sum of $5,800.00 by a payment of a deposit of $1,000.00 and the balance in 48 weekly instalments of $100.00.

12Pursuant to clause 1 of the contract it was expressly agreed or alternatively implied that the plant and equipment referred to in Schedule 'A' of the contract and leased by the plaintiffs from AGC Limited was to be included in the sale of the business, that the defendant would be entitled to possession of them and to the benefit of all the rights of the plaintiffs under the lease and the defendant would make all payments due under the lease to AGC Limited and in other respects would indemnify the plaintiffs from all liabilities pursuant to the lease."

The defendant admits the existence of the term in par2 of the statement of claim and does not admit that set out in par12, and in denying breaches of each term, pleaded as follows:

"(a)That the contract was for the sale and purchase of (inter alia) the plant and equipment of the business;

(b)That the plant and equipment of the business specified in schedule 'A' of the contract was the plant and equipment that was to be sold by the Plaintiffs and purchased by the Defendant and that there was other plant and equipment of the business that was not to be purchased by the Defendant from the Plaintiffs;

(c)That at the time of the contract the said plant and equipment was the subject of a lease agreement between the Plaintiffs and Australian Guarantee Corporation Limited;

(d)That the said lease agreement related to other items of plant and equipment in addition to those listed in schedule 'A' of the contract and which were not to be sold by the Plaintiffs to the Defendant;

(e)That it was an implied term of the contract that the lease could and would be assigned by the Plaintiffs to the Defendant and that the Plaintiffs would do all things necessary to effect the said assignment including obtaining from Australian Guarantee Corporation Limited any necessary consent for the said assignment.

(f)That in breach of the contract the Plaintiffs did not assign the lease to the Defendant;

(g)That in breach of the contract the Plaintiffs did not obtain the consent of Australian Guarantee Corporation Limited to assignment of the lease to the Defendant;

(h)That in breach of the contract the lease could not be assigned by the Plaintiffs to the Defendant because the lease related to plant and equipment of the business that was not to be sold by the Plaintiffs to the Defendant under the terms of the contract."

1. In addition, in respect of the term pleaded in par2, it was alleged in the defence:

"That the sum of $4,800.00 payable pursuant to Clause 2 of the contract was the amount agreed upon by the parties to be paid by the Defendant to the Plaintiffs for the benefit of lease payments already made by the Plaintiffs in respect of the plant and equipment referred to in schedule 'A' of the contract".

1. In construing the contract, the court is not confined to assigning to the words of written instruments their plain and ordinary meaning (per Mason J in Codelfa Construction Pty Ltd v State Railway Authority of New South Wales (1981–82) 149 CLR 337 at p348). His Honour referred to the House of Lords case of Prenn v Simmonds [1971] 3 All ER 237 and said (at pp348–350):

"It was held that, although evidence of prior negotiations and of the parties' intentions, and a fortiori the intentions of one of the parties, ought not to be received, evidence restricted to the factual back–ground known to the parties at or before the date of the contract, including evidence of the 'genesis' and objectively of the 'aim' of the transaction, was admissible. Considered in the light of this evidence 'profits' meant 'consolidated profits'.

Lord Wilberforce said [1971] 1 WLR, at pp 1383–1384; [1971] 3 All ER, at pp239–241:

'The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. There is no need to appeal here to any modern, anti–literal, tendencies, for Lord Blackburn's well–known judgment in River Wear Commissioners v Adamson [1877] 2 App Cas 743, 763 provides ample warrant for a liberal approach. We must, as he said, inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view. Moreover, at any rate since 1859 (Macdonald v Longbottom (1859) 1 E & E 977 [120 ER 1177]) it has been clear enough that evidence of mutually known facts may be admitted to identify the meaning of a descriptive term.'

His Lordship went on to assert that the well–known decision of Cardozo J in Utica City National Bank v Gunn (1918) 118 NE 607 'followed precisely the English line' [1971] 1 WLR, at p 1384; [1971] 3 All ER, at p 240. There extrinsic evidence of the circumstances in which a guarantee was executed and of its object was received for the purpose of giving the words 'loans and discounts' the looser meaning of 'renewals'. Lord Wilberforce quoted with evident approval the comment of Cardozo J (1918) 118 NE, at p 608 that surrounding circumstances may 'stamp upon a contract a popular or looser meaning' than the strict legal meaning, certainly when to adopt the latter would make the transaction futile.

In Macdonald it had been held that the defendant's contract to buy 'your wool' included not only wool which the plaintiffs had on their own farms, but also wool which they had bought in from other farms, one of the plaintiffs having stated before the contract in a conversation with the defendant's agent that he had wool from those two sources. This decision was followed in Bank of New Zealand v Simpson [1900] AC 182. Lord Davey [1900] AC, at pp 188–189 quoted with approval the remarks of Lord Campbell in Macdonald (1859) 1 E & E, at pp983–984 [120 ER, at p1179]:

'I am of opinion that, when there is a contract for the sale of a specific subject–matter, oral evidence may be received, for the purpose of shewing what that subject–matter was, of every fact within the knowledge of the parties before and at the time of the contract.'

Lord Campbell, after referring to the conversation relating to the sources of the plaintiffs' wool continued:

'The two together constituted his wool; and, with the knowledge of these facts, the defendant contracts to buy "your wool." There cannot be the slightest objection to the admission of evidence of this previous conversation, which neither alters nor adds to the written contract, but merely enables us to ascertain what was the subject–matter referred to therein.'

It is apparent that the principle on which the Judicial Committee acted in Simpson is that where words in a contract are susceptible of more than one meaning extrinsic evidence is admissible to show the facts which the negotiating parties had in their mind."

1. In the present case the words in the contract are susceptible of more than one meaning in respect of the subject matter. The plant and equipment of Duo Typesetting is not defined. Other evidence showed that on the linotype side of the business there was "hot metal" equipment which the defendant was not interested in acquiring, that the plaintiff continued to use it for business purposes for some time thereafter and that he eventually ceased business altogether and sold that machinery (which was not the subject of any lease). Furthermore, he had a car (a Subaru) under hire purchase which was shown as an asset of the business in the profit and loss account, but it was common ground that this was not included in the sale, while no claim was ever made by the defendant that there was any other equipment included in the sale than that set out in schedule A. An additional feature about that plant and equipment was that it was subject to leases. This is acknowledged in clause 1 of the agreement itself. There is no provision for the plaintiff to make title to these chattels free from encumbrances, and the continuance of the lease and of the obligation to pay rent thereunder is recognised by the plaintiff's undertaking in clause 1 to pay debts "with the exception of lease payments on plant and equipment due after the 1st day of November 1985 for the equipment and plant in schedule 'A'".

1. The facts which the evidence shows the negotiating parties had in their minds at the time of the sale are that the only plant and equipment to be included in the sale was that set out in schedule A, that it was subject to leases to AGC Limited, that the rental payable under these leases had not been reduced by reason of the permitted sale of some items originally included (I find that Mr Cashin was informed of the current situation under the leases by Mrs Murray – see transcript page 224), and that the lessor was not prepared to let the plaintiffs assign the leases. The subject matter of the sale was therefore the plaintiffs' right, title and interest in the plant and equipment set out in schedule A, plus the business associated with the use of that equipment and the plaintiffs' goodwill therein, but not the book debts which were the subject of a separate clause. There can be no question in these circumstances that the plaintiffs undertook to give title to the equipment or to ensure that the lessor should give consent to any assignment. The plaintiffs gave up all the interest they had in the equipment and undertook to meet all rental payments due thereon until 1 November 1985, but for no longer. The defendant, as purchaser, entered the contract in full knowledge that that was all the plaintiffs had to sell, that they would pass possession of the equipment to her and that they could not guarantee that AGC would agree to an assignment.

1. The fact that there was other plant and equipment of the business not referred to in the contract that was not to be purchased by the defendant is of no moment. Likewise, the fact that the lease had originally covered other items of equipment not sold to the defendant is of no moment. There was no express undertaking by the plaintiffs to assign the lease, or to procure the lessor's consent thereto, and in the circumstances no such undertaking could be implied. It could not be said to be so obvious that "it goes without saying" (Shirlaw v Southern Foundaries (1926) Ltd [1939] 2 KB 206; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20). Indeed, it is quite inconsistent with the facts that the parties had in mind. Had it been raised, it would not have been assented to as of course – it would have been rejected as not being within their power, as both parties knew. An obligation to use their best reasonable endeavours to persuade the lessor to agree might have been implied, but this is not pleaded, and I find that the plaintiff could not reasonably have done more than he did to procure AGC's co–operation. I reject the evidence of Mr Cashin as to the alleged acknowledgments by Mr Munro that it was up to the plaintiffs to continue to make representations to AGC The plaintiffs' obligation was to acquiesce in the substitution of the defendant (or Mr Cashin) as lessee or hirer of the goods if AGC were persuaded by Mr Cashin to enter into such an agreement, but the latter made no attempt to do so.

1. In my opinion the defendant, having contracted to purchase the business and equipment for $5,800.00, remained under an obligation to pay that sum notwithstanding that AGC did not agree to the plaintiffs' assigning the leases. She failed to pay $4,100.00 and that sum is recoverable by the plaintiffs.

1. On the proper construction of the contract it was, in my view, the obligation of the purchaser, who was to have possession of the equipment from 1 November 1985, to meet all rental payments on it thereafter. There is an express disclaimer by the vendors of any obligation to pay debts accruing on it after that date, and it is implicit therefore that the purchaser should assume that obligation. Equally, it is implicit in such an undertaking that if the purchaser should fail to do so, she would keep the vendors indemnified against any loss her failure to pay the rent might cause. Such an implied term meets all the criteria set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (supra) at p26, namely that:

"(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract."

1. I am satisfied that it was the failure of the defendant to meet these payments which prompted the repossession, sale and claim against the plaintiffs by AGC It is true there were covenants on their part in the leases against parting with possession of the goods, but there was no evidence that this action on the part of the plaintiffs prompted AGC's termination of the lease. On the contrary, the commercial reality was recognised by Mrs Murray that provided AGC was paid out, the company would not be particularly upset as to where the money came from. It was, furthermore, secured against default and loss by a mortgage over the plaintiffs' property. Had payments continued to be made by the defendant, I can see no reason why AGC would have sought to exercise any right to terminate by reason of the breach of covenant to retain possession of the equipment. It was no part of the defendant's case that this rather than default in payment of rental prompted the repossession. In these circumstances, the plaintiffs are entitled to recover the loss sustained by them amounting to $40,137.25.

1. Much of the evidence of negotiations leading to the execution of the agreement and of the conduct of the parties afterwards was objected to. I have indicated the kind of evidence the courts may receive in construing a contract, and the evidence of the factual background to which I have referred falls within that category. Their later negotiations and interpretations of their respective obligations are not probative of the terms of the contract and I have disregarded them.

1. I have mentioned that I reject some of the evidence of Mr Cashin. Where his evidence conflicts with Mrs Murray as to the discussions which took place in her presence, I accept her evidence. She was intelligent, forthright and convincing. She had no reason to give a version of events in any way partial to either side and I had no reason to doubt the accuracy of her recall. Similarly, where Mr Cashin's evidence conflicted with that of Mr Doolan, I accept that of the latter. His account of his dealings with Mr Cashin and his own client was supported by his file notes, and there is no reason to suppose his recollection is not accurate or that he had any ulterior purpose to serve in giving a version deliberately partial to his former client. Mr Cashin, on the other hand, had reason to advance a version which would explain why he refused to pay rent on goods in his wife's possession and being used for her benefit and which, when there was a threat of repossession, he did not return to the plaintiffs, and which would also explain why he did not actively seek to regularise the defendant's possession of the goods by negotiating finance with AGC His financial position and his standing in the printing industry were such that I cannot imagine he would not have been accepted by AGC as a suitable person to substitute for the plaintiffs had he made real endeavours to achieve this result. The explanations he advanced were, however, unconvincing in my view and I do not accept them.

1. There will be judgment for the plaintiffs against the defendant for $44,237.25. The defendant's counterclaim for a return of the moneys paid by her on the basis of a total failure of consideration is dismissed.