Muriti v Prendergast - [2005] NSWSC 526

No judgment structure available for this case.

CITATION:
Muriti v Prendergast [2005] NSWSC 526

HEARING DATE(S): 23, 24, 25, 26 May 2005

JUDGMENT DATE :

2 June 2005

JURISDICTION:
Equity Division

JUDGMENT OF:
Burchett AJ at 1

DECISION:
Motion for leave to terminate contract for alleged repudiation following a specific performance order dismissed; declarations and orders made in respect of contractual rights and obligations

CATCHWORDS:
CONTRACT - repudiation - requirement of leave to terminate following specific performance order - whether insistence on particular views of the contract evinced repudiatory intention - repudiation, being a serious matter, not lightly to be found - construction of contract - effect upon construction of conduct subsequent to contract - effect on obligations under a lease of its having a retrospective commencement date - whether interest could be payable from a date before the execution of the lease in the absence of a specific term to that effect - effect of a waiver of the right to timely payment of rent upon a claim to interest upon that rent as a claim not consistent with the waiver.

CASES CITED:
Carter and Harland, Contract Law in Australia (4th ed, 2002) section 712
Meagher Gummow and Lehane's Equity Doctrines and Remedies (4th ed., 2002) 699-700
Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337
D.T.R. Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423
Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623
Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corporation of India (the "Kanchenjunga") [1990] 1 Lloyd's Rep 391
Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1985) 157 CLR 17 at 33
Ross T Smyth & Co Ltd v T.D. Bailey, Son & Co [1940] 3 All ER 60
Shevill v The Builders Licensing Board (1982) 149 CLR 620
Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326

PARTIES:
Vincent Carl Muriti (First Plaintiff)
Keanlong Pty Limited (Second Plaintiff)
John Francis Prendergast (First Defendant)
Rolcross Pty Limited (Second Defendant)
Worthbrook Pty Limited (Third Defendant)
Laon Pty Limited (Fourth Defendant)

FILE NUMBER(S):
SC 5094 of 2004

COUNSEL:
Mr J Stevenson SC with him Mr G Curtin (Plaintiffs)
Mr CRC Newlinds SC with him Mr PE Newton (Defendants)

SOLICITORS:
Henry Davis York (Plaintiffs)
Phillips Fox (Defendants)

LOWER COURT JURISDICTION:

- 14 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BURCHETT AJ

THURSDAY 2 JUNE 2005

5094/04 VINCENT CARL MURITI AND KEANLONG PTY LIMITED V JOHN FRANCIS PRENDERGAST, ROLCROSS PTY LIMITED AND WORTHBROOK PTY LIMITED

JUDGMENT

1 Mr Muriti (the First Plaintiff) and Mr Prendergast (the First Defendant) operated a large Mercedes Benz dealership (referred to as Marshalls Motors or simply as Marshalls) and an associated vehicle repair business (referred to as Perfect Auto Body or Perfect) through a network of companies and trusts. Because of an incident which was alleged to have taken place involving Mr Prendergast, DaimlerChrysler Australia Pacific Pty Limited (Daimler) gave notice of termination of its relationship with Marshalls and Perfect, but it indicated it would be prepared to continue the relationship if Mr Prendergast disposed of his interest and ceased his involvement in the businesses in favour of Mr Muriti. Under strong pressure from Daimler to reach a binding arrangement within a short period, Mr Prendergast and two of the companies representing his interests (Rolcross Pty Limited and Worthbrook Pty Limited) entered into an agreement (called Heads of Agreement) with Mr Muriti and a company representing his interests (Keanlong Pty Limited), which was executed on 4 August 2004. What this agreement set out to do was to separate the operating businesses from the function of holding property so that Mr Muriti’s interests would acquire sole ownership of those operating businesses while Mr Prendergast’s interests would acquire sole ownership of the properties on which those businesses were carried on, appropriate leases being entered into. Settlement was to take place “by no later than 30 September 2004.”

2 The arrangements were complex, and unfortunately delays and disagreements dogged the efforts of the parties to conclude the matter. In particular, Mr Muriti asserted that the Heads of Agreement document did not reflect the mutual intention of the parties in some very important respects. This not being conceded, proceedings were brought for rectification, in which White J delivered judgment in favour of Mr Muriti on 11 April 2005 and orders rectifying the agreement were made. The very detailed findings contained in that judgment relieve me of the task of a full elaboration of the facts, but it is necessary to note that, at an earlier stage, Windeyer J made on 24 September 2004 certain consent orders which both sides agree should be understood as involving an effective variation of the agreement, and as requiring it to be specifically performed, the date of settlement being put back to “no later than 29 October 2004”. So far as this new settlement date was concerned, the expectation of the parties again proved vain, largely, but not solely, because of the rectification suit.

3 In the brief period which has elapsed since the making of the rectification orders, the parties have demonstrated strong disagreements about a number of issues which need clarification before settlement can proceed. These disagreements have brought the matter back for further hearing before me. At this hearing, Mr Prendergast and the other defendants have maintained pursuant to a notice of motion that the agreement has been repudiated by Mr Muriti and the other plaintiff and that the court should grant the defendants leave to terminate it. Leave is admitted to be required because of the specific performance order; pace Meagher Gummow and Lehane’s Equity Doctrines and Remedies (4th ed., 2002) 699-700. The plaintiffs, on the contrary, oppose leave on the ground that there has been no repudiation and seek declarations that their contractual rights and obligations do in fact match the contentions the defendant would brand as repudiatory.

4 The principle upon which a party may be held to have repudiated a contract is not in doubt. In Australia, it is usual to state it by reference to the judgment of Fullagar J in Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 349-351, where his Honour spoke of “conduct of the promisor with respect to his promise [that] amounts to a refusal to be bound by the contract”; conduct that “showed that the [party] intended to take steps towards the performance of his duty if and when it suited him and not before”; and conduct that had “given [the other party] the right to believe that the contract would not be performed according to its true construction”. In Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1985) 157 CLR 17 at 33, Mason J said:

“What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.”

Shevill v The Builders Licensing Board

Ross T Smyth & Co Ltd v T.D. Bailey, Son & Co

Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited

5 These statements of the principle do not suggest that the mere assertion of a wrong view of the meaning of a stipulation in the contract is likely to be found repudiatory. But the point was made explicit by Lord Wright (with whom Viscount Maugham, Lord Atkin, Lord Romer and Lord Porter agreed) in Ross T Smyth v Bailey at 72, where the failure of parties to make a contractual payment, “not because they were either unwilling or unable to pay, but in a mistaken view of the legal position” was said to be “significant” in a case held to involve no repudiation. The same view was expounded at some length in the joint judgment of Stephen, Mason and Jacobs JJ in D.T.R. Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423 at 431-433. Their Honours (with whom Aickin J agreed) declined to infer a repudiatory intention “from the appellant’s continued adherence to an incorrect interpretation of the contract”.

6 In the present case, the defendants seek to say that the plaintiffs’ adherence to certain views of the contract was both incorrect and so indefensible that a repudiatory intention is the proper inference: cfTrawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 355.

7 The first matter urged in support of this argument relates to the amount payable on settlement in respect of the consideration for which the contract provides. In order that the point may be understood, it is necessary to set out certain terms of the contractual documents as rectified. It should be noted that, in those terms, “JFP” refers to Mr Prendergast, “VCM” to Mr Muriti, “Rolcross” to Rolcross Pty Limited, “Keanlong” to Keanlong Pty Limited, “Santee” to Santee Pty Limited, a company 50% of the shares in which is owned by Rolcross and 50% by Keanlong, and “the Partnership Properties” is an expression referring to six properties in Parramatta and Alexandria owned in different shares by the interests controlled by Messrs Prendergast and Muriti and on which the operating businesses are conducted. Clauses 3, 4, 5, 7 and 10 of the Heads of Agreement as rectified (provisions inserted by the orders for rectification being shown in block letters and provisions deleted in italics enclosed within square brackets) are as follows:

3. Nature of Contract

This Agreement is a legally binding contract between the parties from the date on which it is signed.

It is the intention of the parties to negotiate and execute collateral documents to implement the transactions referred to in this Agreement after the date of this Agreement. The parties will do this acting reasonably and in good faith in order to complete the transactions at the earliest possible date. Nothing in those collateral documents will alter or supersede the obligations created by this Agreement.

JFP and VCM agree that the commercial terms referred to in this Agreement are acceptable to each of them and that no substantive commercial negotiations will be required for the transactions to be documented, executed and completed.

4. Sale of interests in Marshalls and Perfect

(a) Rolcross will sell and Keanlong will buy all of the units in the PGM Unit Trust and all of the shares in Santee held by Rolcross for a price which is the sum of the following amounts:

(iii) 50% of the pre tax trading profits of the PGM Unit Trust for July 2004 and 50% of the after tax profits of Santee for July 2004 as shown in the management accounts of those companies - estimate $220,000.

(b) VCM and JFP will cause Marshalls to approve the transfer of units in the PGM Unit Trust and cause Santee to approve the transfer of its shares from Rolcross to Keanlong on or before completion of the transactions contemplated by this Agreement.

5. Payment to Rolcross

(a) Keanlong agrees that the minimum aggregate amount payable by it to Rolcross under clauses 4, 7 and 10 of this Agreement will be $14,200,000.

[by the relief from debt of the entities which own the Partnership Properties by repayment of sums totalling $5,100,000 due to Marshalls and Perfect on or before completion of the transactions contemplated by this Agreement]

(iv) as to the balance of $4,100,000 in cash on completion of the transactions contemplated by this Agreement.

(c) For the purposes of this Agreement special purpose financial reports for the PGM Unit Trust and Santee for the year ended 30 June 2004 will be prepared by Einfeld Symonds Vince, Chartered Accountants, as soon as practicable after the date of this Agreement on the same basis as the financial reports for those entities for the year ended 30 June 2003 with the inclusion of work-in-progress as at 30 June 2004 of approximately $2,000,000 and a provision for tax on that work in progress and the inclusion of seven twelfths of the annual Mercedes Benz bonus to Marshalls for calendar year 2004 and agreed by Bedford Titley, Chartered Accountants. The determination of those firms will be made by them as experts not as arbitrators and their joint decision will be final and binding on the parties.

(d) For the purposes of this Agreement, the management accounts of the PGM Unit Trust and Santee for July 2004 must be agreed by Einfeld Symonds Vince and Bedford Titley as soon as practicable after the date of this Agreement for the purposes of determining the amount referred to in clause 4(a)(iii) and the determination of those firms will be made by them as experts not as arbitrators and their joint decision will be final and binding on the parties.

(e) Any amount payable by Keanlong to Rolcross pursuant to clauses 4, 7 or 10 of this Agreement in excess of the minimum of $14,200,000 will be determined by reference to the special purpose financial reports referred to in paragraph (c) and the management accounts referred to in paragraph (d) and will be agreed by Einfeld Symonds Vince and Bedford Titley acting as experts and not as arbitrators and the joint decision of those firms will be final and binding on the parties.

…

7. Sale of plant and equipment

(a) Rolcross and Worthbrook will sell and Keanlong will purchase an 80% interest in all of the plant and equipment, furniture and fittings owned by Rolcross, Worthbrook and Keanlong and used by Marshalls in its business for a price equivalent to 73.5% of the written down value of those items as shown in the books and records of the Benzcorp Partnership as at 30 June 2004.

(c) Keanlong will pay the amounts due under this clause to Rolcross and Worthbrook on the date of completion of the transactions contemplated by this Agreement.

…

10. Repayment of Loan Accounts

VCM AND JFP WILL, ON OR BEFORE THE DATE OF COMPLETION OF THESE HEADS OF AGREEMENT, DO ALL SUCH THINGS AND EXECUTE ALL SUCH DOCUMENTS AS ARE NECESSARY TO CAUSE:

(a) ALL LOANS WHICH ARE OWED BY THE ENTITIES WHICH OWN THE PARTNERSHIP PROPERTIES TO VCM, OR TO THE ENTITIES THAT WILL ON COMPLETION OF THESE HEADS OF AGREEMENT BE OWNED OR CONTROLLED BY VCM, TO BE PAID;

(b) ALL LOANS WHICH ARE OWED BY ANY ENTITY THAT WILL ON COMPLETION OF THESE HEADS OF AGREEMENT BE OWNED OR CONTROLLED BY VCM TO THE ENTITIES WHICH OWN THE PARTNERSHIP PROPERTIES, TO BE PAID;

(e) ANY SECURITY GIVEN BY ANY SUCH ENTITY FOR ANY SUCH LOANS TO BE RELEASED AND DISCHARGED.

[ (a) VCM will cause the outstanding net balance of the loan accounts of JFP and any entity owned or controlled by JFP with Marshalls, Perfect and any entity interested in the Partnership Properties as at 30 June 2004 to be repaid on or before the date of completion of the transactions contemplated by this Agreement.

(b) JFP will cause the outstanding net balance of the loan accounts of VCM and any entity owned or controlled by VCM with any entity interested in the Partnership Properties as at 30 June 2004 to be repaid on or before the date of completion of the transactions contemplated by this Agreement. This debt may be off set to reduce the amount payable under paragraph (a) of this clause.

(c) The parties will cause the debts due by the entities which own the Partnership Properties to Marshalls and Perfect to be repaid on or before the date of completion of the transactions contemplated by this Agreement.

(d) JFP will prior to completion cause Laon Pty Limited to do all things and sign all documents necessary to unwind its indebtedness to Perfect Auto Body Canberra Pty Limited and/or Santee Pty Limited.]

8 Reading together the provisions that have been set out, one would understand the expression “the minimum aggregate amount” in cl 5(a) and “[t]he minimum amount” in cl 5(b) to mean that the price fixed by cll 4, 7 and 10 and ascertained utilising cl 5(e) will not in any case be less than $14.2 million. The provision for a determination in cl 5(e) relates only to an amount “in excess of the minimum of $14,200,000”. The lack of precision involved in the contemplation of the possibility of a higher figure is due to the fact that the agreement had to be reached so hastily, and thus before all relevant information could be made available to the parties. But it was expected to be available shortly and so it was agreed (by cl 2(g)) that “settlement shall be completed by no later than 30 September 2004”.

9 Progress towards settlement proving tardy, the consent orders for specific performance were obtained on 24 September on the basis (expressed in the orders) that settlement would take place by 29 October 2004. In the orders, the court noted certain further agreements of the parties, as follows:

”5. In the event of any failure by Messrs Einfeld Symonds Vince and Grant Thornton, Chartered Accountants, to agree in terms of clause 5(c), (d) and (e) of the Heads of Agreement by 29 October 2004, then the minimum sum of $14.2 million is to be paid on completion of the transaction and any dispute as to any additional sum is to be resolved by a partner of Lonergan Edwards & Associates, appointed by the Managing Partner of that firm (the costs of that determination to be borne equally by the parties) and any such determination shall be made by that partner as an expert, not as an arbitrator, and that decision will be final and binding upon the parties and, failing determination by Lonergan Edwards, by a partner of such firm of Chartered Accountants as is appointed by the Court.

6. Any sum in excess of $14.2 million determined to be payable is to be paid within seven days of that determination.

7. The parties will, by their solicitors, settle the terms of any collateral documents (including the leases referred to in the Schedule to the Heads of Agreement) as referred to in clause 3 of the Heads of Agreement so as to enable settlement to take place as soon as possible an [sic], in any event, no later than 29 October 2004.

8. In the event that the terms of the leases are not agreed or settled by 29 October 2004, the lessees shall continue in possession and pay rent under the terms to that point agreed. The lessee is not to carry out any structural alterations to the leased premises, shall not assign, sublet or otherwise part with possession of the leased premises, and shall effect appropriate insurances until the terms of the lease have settled.”

10 The event contemplated by the variation of the agreement noted as cl 5 in the orders did occur, that is to say, the accountants did fail “to agree in terms of clause 5 (c), (d) and (e) of the Heads of Agreement by 29 October 2004”. This being so, what the clause provides is that “the minimum sum of $14.2 million is to be paid on completion of the transactions and any dispute as to any additional sum is to be resolved by [an appointed partner of Lonergan Edwards and Associates]”. Then the fixing of the time for payment of the minimum sum of $14.2 million, that is, on completion, is followed by the fixing by cl 6 of the time for payment of “[a]ny sum in excess of $14.2 million determined to be payable” – it is to be paid “within seven days of that determination”, that is, of the appointed partner of Lonergan Edwards and Associates.

11 Clauses 5 and 6 noted in the orders of 24 September cut the Gordian knot of the difficulty of ascertaining the precise figure for payment under particular clauses of the contract at a settlement date fixed in the very near future by dividing the amount payable into two sums, one payable on completion and the other at a deferred date. This seems a clear solution, easy to apply, the clarity of which might be thought to have been its chief commercial attraction.

12 But the question raised on behalf of the defendants fastens upon the expression in cl 5 “and any dispute as to any additional sum”. It is said the failure to agree was not on the basis no excess was payable, but, some ascertained amount being beyond debate, related to its full extent. According to the defendants, the sum, or the minimum sum, to be paid on settlement would have to be augmented to embrace so much of an excess over $14.2 million under consideration as is not in contest between the parties. Not only does the argument insist upon this as the true meaning of the contract; it asserts the plaintiffs’ adoption of a contrary view is so baseless that the court should infer they have repudiated their obligations.

13 On the face of the Heads of Agreement and the further clauses agreed as noted on 24 September 2004, there appear to me to be grave difficulties about this argument. What triggers the provision fixing the minimum sum of $14.2 million as the amount to be paid on completion under cl 5 of the terms noted by Windeyer J is any failure of the named accountants “to agree in terms of clause 5(c), (d) and (e) of the Heads of Agreement by 29 October 2004”. It is “then” that the payment of the $14.2 million (an amount reiterated in cl 6) is provided for. The referral of “any dispute as to any additional sum” follows as a consequence. Furthermore, the failure to agree in terms of cl 5(c), (d) and (e) is a failure to finalize certain accounts and to determine their result – it is not a failure to agree on certain items while agreeing on others.

14 Counsel for the defendants put emphasis on the words “the minimum sum” in cl 5 of the terms noted on 24 September, which he contended would include any amount not itself in dispute that would form part of an excess over $14.2 million, even though the final figure constituting the excess remained in doubt. But cl 5 does not simply refer to “the minimum sum”; it refers to “the minimum sum of $14.2 million”. In any case, cl 6, which refers to the same amount, calls it “[a]ny sum in excess of $14.2 million”, without any reference to the source of that figure in the minimum sum contemplated by the Heads of Agreement.

15 In my opinion, subject to one matter to be considered, not only is it impossible to characterize the plaintiffs’ stance as evincing, or providing any evidence of, a repudiation: that stance is in accordance with a correct view of the relevant contractual obligations. Pursuant to the plaintiffs’ counter motion, I shall make a declaration to that effect.

16 The matter still to be considered is the defendants’ contention that the plaintiffs have changed their view on the question of the amount of the minimum payment on settlement, and this change of view should be taken as evidencing lack of bona fides from which repudiation could be inferred. The argument was not that the obligations of the parties had actually been varied or that the terms of the contract could be construed in the light of the conduct of the parties, although it was put there had been “a clear and unambiguous admission”. It was not suggested that the court could or should depart from the principle stated by way of a quotation from Lord Wilberforce in the judgment of Mason J in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 348:

or subsequent to the contract

Contract Law in Australia

alio intuitu

17 The next question relates to rent and interest on rent. Subclauses (a) and (b) of cl 8 of the Heads of Agreement are particularly relevant:

(a) Rolcross, Worthbrook and Keanlong will grant to Marshalls and Marshalls will accept a lease of the Marshalls Properties commencing on 30 July 2004 on the terms and conditions set out in the schedule to this Agreement which leases [sic] must be executed by the parties on completion of the transactions contemplated by this Agreement.

(b) Rolcross, Worthbrook and Keanlong will grant to Perfect and Perfect will accept a lease of the Perfect Properties commencing on 30 July 2004 on the terms and conditions set out in the schedule to this Agreement which leases [sic] must be executed by the parties on completion of the transactions contemplated by this Agreement.

18 This aspect of the agreement was also the subject of variation by terms noted by Windeyer J on 24 September 2004 as appears from cll 7 and 8 of those orders set out earlier in these reasons. If those clauses are referred to, it will be seen that, settlement being intended to take place no later than 29 October 2004, cl 7 of the terms noted in the orders required the solicitors for the parties to settle the terms of the leases by that date. Then cl 8 provided for the possibility, which eventuated, of a failure of the solicitors to agree on the terms of the leases, and to settle them, by 29 October 2004. In that case, the lessees would “continue in possession and pay rent under the terms to that point agreed”.

19 Initially the respondents contended there had been repudiation by an insistence on the proposition that neither rent nor interest was payable. However, in argument it was conceded that, until some time in April 2005, the defendants had acquiesced in payment of rent being deferred until settlement, nor was it shown that, even after that, any demand was made for the payment of rent prior to settlement. In a formal letter written as recently as 28 April 2005, the defendants’ solicitors made it clear they sought payment on settlement “as a usual and mechanical consequence of entry into the leases on settlement”. Reference was also made to the consent orders, in general terms. The plaintiffs, if ever they wavered at all, have done no more than question the legal position, and their stance is that rent will be paid upon entry into the leases at settlement. The real issue is whether they will also be liable for interest on rent since 30 July 2004.

20 Interest is claimed on the basis that it is a “[n]ormal commercial term” established to be such by the expert determination which has settled all terms of the leases except one that is yet to be determined. It is also said that the obligation under cl 8 of the terms noted in the consent orders of 24 September, to “pay rent [after 29 October 2004] under the terms to that point agreed”, carried an obligation also to pay interest as a term then accepted. However, I have difficulty in seeing how, on that basis, an obligation to pay interest could reach back beyond 29 October 2004 to 30 July 2004. Clause 8 looks to the position on and from 29 October 2004; it is not concerned with the past which it treats as governed by whatever the Heads of Agreement or the pre-existing arrangements provided. Unless and until cl 8 did so, no obligation to pay interest was imposed by the Heads of Agreement, cl 3 of which was actually inconsistent with a collateral document such as a lease altering the obligations imposed by it.

21 No doubt for these reasons, the emphasis of the argument on behalf of the defendants was placed on the retrospective commencement date of the leases to be executed upon settlement. But no authority was cited for the proposition that entry into a lease in 2005 in respect of a term commencing on 30 July 2004 would, without more, not only require rent to be paid on entry into the lease but would also require interest to be paid back to 30 July 2004 on the basis that rent due then, although the lease did not then exist, had been unpaid. The form of leases as now settled, except for one clause, provides:

“3.1 Payment of Rental

4.4 Interest on Overdue Payments

22 It is because cl 3.1 literally requires the first payment to be made “on the Commencement Date”, ie 30 July 2004, although not only was the lease not executed then, its ultimate form was unknown, that the defendants rely on this clause. In my opinion, however, the provision cannot operate of its own force before the execution of the lease, and upon the execution of the lease, in the absence of some much stronger indication than is given by this language, the rent up to the date of execution would simply become payable.

23 The Heads of Agreement do not contemplate any further obligation in this respect. However, as I have shown, the terms noted in the orders of 29 October do deal with the matter, but, so far as the payment of rental is concerned, it is accepted by counsel for the defendants that there was, at least until very recently, a waiver of payment until settlement. And the evidence does not suggest there has, even now, been any withdrawal of that waiver and making of a demand for payment of rent before settlement. Both Mr Muriti and Mr Prendergast, on behalf of the companies concerned, authorised various payments (totalling well over $600,000) in accordance with previous practice in the businesses, treating them as payments of rent, without concerning themselves with the strict obligations (which would have applied if they had not been waived) of Marshalls and Perfect to pay rent under the agreement noted on 29 October 2004.

24 What is now demanded is that, on settlement, there should be a payment of interest on the full amount of rent calculated under the leases from 30 July 2004 to settlement. Since interest will be payable, when the leases are executed, under cl 4.4 “on any moneys due and unpaid under this Lease … computed from the date on which the moneys became due and payable”, my conclusion about the date when rent will be due under the leases disposes also of the claim for interest under the leases.

25 But that leaves the question whether interest is payable by virtue of cl 8 of the terms noted in the orders of 29 October 2004. The interest clause had been proposed before that date and the plaintiffs’ solicitors had indicated their acceptance of a clause in these terms. That being so, I think it fell within the expression “the terms to that point agreed”. It is true cl 4.4 refers to moneys due “under this Lease”, ie the one to be created. But, on a reasonable construction of cl 8, I think a liberal view of the language of cl 4.4 is required in its application to the terms on which possession continued from 29 October 2004. However, cl 4.4 does require the moneys to become “due and payable” and to remain “due and unpaid”. Because payment was waived, there is difficulty about applying such a clause in the period following 29 October 2004. Indeed, Mr Prendergast himself signed documents on the basis that certain other substantial payments that were made (referred to above) were effectively payments of rent. They were not, but that he treated them as such is strong confirmation of waiver of the strict requirements of the agreement. At all events, waiver was, as I have said, conceded in argument. And it would not be “consistent with his having waived his right” to insist on payment of rent before settlement, to adopt the words of Lord Goff of Chieveley (with whom Lord Keith of Kinkel, Lord Brandon of Oakbrook, Lord Templeman and Lord Griffiths agreed) in Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corporation of India (the “Kanchenjunga”) [1990] 1 Lloyd’s Rep 391 at 399, for the first defendant or the companies which were his alter ego and on behalf of which he made the decisions, to insist now upon a right to interest that could only have accrued on moneys by virtue of their being and remaining “due and payable”.

26 It follows that the plaintiffs’ contentions about their liability in respect of rent and interest cannot support the defendants’ case on the issue of repudiation. To the contrary, the plaintiffs’ contentions are correct.

27 The only other basis on which repudiation was argued was the proposition that the defendants, through their solicitors, had refused to commit themselves to a statement of the precise amount payable on settlement. But I need not consider this as a separate point at any length. Now that the other questions have been disposed of, it is clear the defendants were seeking settlement on a view of the rights and obligations of the parties the plaintiffs were entitled to contest. There was nothing repudiatory in their response even if, with hindsight, as almost always happens, one can think of ways in which they might have expressed themselves better.

28 If I had taken a different view of the merits of the legal arguments, the defendants’ case would have required me to consider whether any legally incorrect position contended for by Mr Muriti was so contended for in good faith and honestly. Mr Muriti gave evidence and was cross-examined. I have no hesitation in accepting his evidence and rejecting the proposition that his contentions with respect to the contract, or any of them, evinced bad faith or any intention other than an intention to perform the contract according to its true interpretation.

29 The final issue arises under cl 11 of the Heads of Agreement:

(a) JFP [ie Mr Prendergast] will resign as a director of Marshalls, Perfect, Marshalls Motors Wholesale Pty Ltd, Perfect Auto Body Works Pty Limited, Perfect Auto Body Canberra Pty Limited, Santee Pty Limited, Elesium Pty Limited and any related companies, effective 30 September 2004 or upon completion whichever occurs sooner and hereby resigns as an employee of Marshalls and Perfect and ceases all daily retail involvement in the businesses of Marshalls and Perfect with effect from 30 July 2004.

(b) VCM [ie Mr Muriti] will resign as a director of Botany Road Developments Pty Limited and cease all involvement in the business of that company with effect from 30 September 2004 or upon completion whichever occurs sooner.

(c) VCM will cause Marshalls and Perfect to pay all accrued statutory leave entitlements due to JFP in connection with his past employment (less tax) on the effective date of his resignation.

30 The plaintiffs seek an order requiring Mr Prendergast to perform his obligations under this clause, Mr Muriti offering for his part to resign as a director of Botany Road Developments Pty Limited. The agreement is quite clear, and no reason appears why cl 11 should not be complied with. The plaintiffs allege recent misconduct on the part of Mr Prendergast as a director of both Marshalls and Perfect, to which there does not seem to be any answer. But the allegation, if not irrelevant, is certainly unnecessary, for the obligation arises from cl 11 without more. In my opinion, a mandatory order should be made, but subject to Mr Muriti also performing his obligations under cl 11 (b) and (c).

31 The only formal order I make at this stage is to direct the plaintiffs to bring in, on a date to be fixed, short minutes of orders appropriate to be made to reflect these reasons. When the short minutes are brought in, I shall also hear any submissions as to costs.

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Citations

Muriti v Prendergast [2005] NSWSC 526

Most Recent Citation

Muriti v Prendergast [2006] NSWSC 286

Cases Citing This Decision

2

Prendergast v Rolcross Pty Ltd (in liq) [2008] NSWSC 146

Muriti v Prendergast [2006] NSWSC 286

Cases Cited

7

Statutory Material Cited

0

Carr v JA Berriman Pty Ltd [1953] HCA 31

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24

Bowes v Chaleyer [1923] HCA 15

CITATION:	Muriti v Prendergast [2005] NSWSC 526
HEARING DATE(S):	23, 24, 25, 26 May 2005
JUDGMENT DATE :	2 June 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Burchett AJ at 1
DECISION:	Motion for leave to terminate contract for alleged repudiation following a specific performance order dismissed; declarations and orders made in respect of contractual rights and obligations

CATCHWORDS:	CONTRACT - repudiation - requirement of leave to terminate following specific performance order - whether insistence on particular views of the contract evinced repudiatory intention - repudiation, being a serious matter, not lightly to be found - construction of contract - effect upon construction of conduct subsequent to contract - effect on obligations under a lease of its having a retrospective commencement date - whether interest could be payable from a date before the execution of the lease in the absence of a specific term to that effect - effect of a waiver of the right to timely payment of rent upon a claim to interest upon that rent as a claim not consistent with the waiver.
CASES CITED:	Carter and Harland, Contract Law in Australia (4th ed, 2002) section 712 Meagher Gummow and Lehane's Equity Doctrines and Remedies (4th ed., 2002) 699-700 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 D.T.R. Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623 Motor Oil Hellas (Corinth) Refineries S.A. v Shipping Corporation of India (the "Kanchenjunga") [1990] 1 Lloyd's Rep 391 Progressive Mailing House Proprietary Limited v Tabali Proprietary Limited (1985) 157 CLR 17 at 33 Ross T Smyth & Co Ltd v T.D. Bailey, Son & Co [1940] 3 All ER 60 Shevill v The Builders Licensing Board (1982) 149 CLR 620 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326
PARTIES:	Vincent Carl Muriti (First Plaintiff) Keanlong Pty Limited (Second Plaintiff) John Francis Prendergast (First Defendant) Rolcross Pty Limited (Second Defendant) Worthbrook Pty Limited (Third Defendant) Laon Pty Limited (Fourth Defendant)
FILE NUMBER(S):	SC 5094 of 2004
COUNSEL:	Mr J Stevenson SC with him Mr G Curtin (Plaintiffs) Mr CRC Newlinds SC with him Mr PE Newton (Defendants)
SOLICITORS:	Henry Davis York (Plaintiffs) Phillips Fox (Defendants)