Percy v Eynaud
[2004] QDC 9
•9 January 2004
DISTRICT COURT OF QUEENSLAND
CITATION: Percy & Anor v Eynaud [2004] QDC 009
PARTIES:
MATTHEW REX PERCY
First Plaintiff
and
coolco airconditioning pty ltd
(ACN 073 800 361)
Second Plaintiff
and
michael victor eynaud
Defendant
FILE NO: D1119/2000
DIVISION: Civil
PROCEEDING: Trial
ORIGINATING COURT:
Southport
DELIVERED ON:
9 January 2004 DELIVERED AT: Southport
HEARING DATE: 3, 4, 5, 6 & 7 February 2003
JUDGE: Alan Wilson SC DCJ
ORDER: 1. Declare that the agreement between the parties was lawfully rescinded by the first Plaintiff, for himself and the second Plaintiff, on 23 June 2000
2. Further declare that all parties are exonerated and discharged from all further claims and obligations remaining or outstanding under or by reason of the agreement
3. The counterclaim is dismissed.
CATCHWORDS: CONTRACT – BREACH OF CONTRACT – MISREPRESENTATIONS – RELIEF – whether defendant induced contract by fraudulent or innocent misrepresentations – whether breach of restraint of trade clause – appropriate relief
Cases considered:
Alati v Kruger (1955) 94 CLR 216
Derry v Peek (1889) 14 App Cas 337
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17
Snarski v Barbarich (1969) WAR 46
Vadasz v Pioneer Concrete (1995) 184 CLR 102
COUNSEL: Mr D M Logan for the plaintiffs
Mr G J Radcliff for the defendantSOLICITORS: Robbins Watson for the plaintiffs
Fitz-Walter Lawyers for the defendant
Until early in the year 2000 the first plaintiff Mr Percy and the defendant Mr Eynaud had been friends and business partners in the air-conditioning industry. After 1992 they worked in partnership and, from 1996 conducted their business through the company which is the second plaintiff, in which they each held one share. The business (“Coolco”) was involved in the sale, installation, maintenance and servicing of air-conditioning equipment in residential and commercial buildings of all sizes and in coolrooms, and the like. As the business had developed, both were involved in quoting for jobs although the first plaintiff tended more towards domestic and commercial work in residential premises and the defendant more frequently attended to quotes for coolrooms, freezers, refrigeration systems and service contracts, and also supervised and attended to the service and maintenance work performed by Coolco.
Their joint involvement was extinguished by the terms of a contract dated 17 February 2000 (Exhibit 1) under which Mr Eynaud sold his share in the company to Mr Percy for $135,000 payable by instalments: a first instalment of $85,000 on 31 March 2000, $25,000 on 1 October 2000, and the balance of $25,000 on 22 December 2000.
Under the contract Mr Eynaud agreed to the following restraints on his future commercial activity:
Agreement for restraints
7.1 From the day of completion the Vendor covenants with the Company to observe and perform and not to commit any breach of the restraints specified in paragraph 7.3 of this clause.
Reasonableness of restraints
7.2 The Vendor acknowledges and agrees that each of the restraints is reasonable as regards the nature of the conduct restrained and the duration and scope of the restraint and that the restraints are reasonably necessary for the future protection of the business and goodwill of the Company and the value of the Purchaser’s interest in the Company.
The restraints
7.3 A. Completion
(a) The Vendor covenants with the Company that the Vendor will not carry on or be engaged, concerned or interested, directly or indirectly, in the capacity specified in paragraph (b) in the business specified in paragraph (c) within the areas specified in paragraph (d) for the period specified in paragraph (e).
(b) As:
(i) sole trader;
(ii) partner;
(iii) director or shareholder;
(iv) manager;
(v) employee;
(vi) agent; or
(vii) consultant.
(c) Sale, supply and/or installation of airconditioners and airconditioning equipment.
(d) Within the following radius from the business premises:
(i) 100 kilometres;
(ii) 75 kilometres;
(iii) 50 kilometres;
(iv) 40 kilometres;
(v) 25 kilometres;
(vi) 15 kilometres;
(vii) 10 kilometres;
(viii) 5 kilometres.
(e) During the following period commencing on the day of completion of the sale of shares to the Purchaser:
(i) 36 months;
(ii) 24 months;
(iii) 12 months.
(f) The Vendor separately enters into each of the covenants resulting from combining separately each of the capacities in paragraph (b) with each business or activity in paragraph (c), with each geographical area in paragraph (d), with each period in paragraph (e), with the Company.
(g) Each of those covenants constitutes an independent and separate restraint imposed on the Vendor under this deed.
(h) If any of those covenants is or will become unenforceable, that does not affect the validity and enforceability of the other covenants imposed under this clause, which remain binding on the Vendor.
The claim and counterclaim in the action also referred to other parts of the contract. First, under clause 17.5 it was agreed Mr Eynaud could keep a Nissan vehicle until 10 June 2001 and pay all the running costs, but the second plaintiff would pay the lease payments until that date. Second, under a handwritten clause inserted on page 14a of the contract the parties agreed:
Any funds forthcoming from the present action between Coolco Pty Ltd and V & R Constructions & City Pacific Developments including $15,000 in Robbins Watsons Trust Account will be disbursed at the rate of
40% Michael Eynaud
60% Coolco Pty Ltd
Michael Eynaud agrees to pay 40% of all cost (sic) after 31/3/00.
Only one instalment, the first of $85,000 on 31 March 2000, was ever paid. In these proceedings Mr Percy and Coolco, and Mr Eynaud each allege the other is guilty of contractual wrong and seek a variety of remedies. In particular, Mr Percy alleges he validly rescinded the contract because he discovered Mr Eynaud was guilty of making fraudulent or innocent misrepresentations about his own future business plans which induced the plaintiffs to enter into the agreement. Mr Percy claims to be entitled either to the return of the $85,000 he has already paid or, at least, absolution from further payment of contractual instalments.
Mr Eynaud asserts he was not guilty of any misrepresentation and Mr Percy’s failure to pay a subsequent instalment (or fulfil two other contractual obligations involving payments by the plaintiffs) entitled him to rescind on 9 November 2000 as, he claims, he lawfully did; and, to claim relief including payment of the balance instalments under the contract and those other payments (or, under an amendment to his pleading sought after the hearing concluded, damages for breaches constituted by those non-payments).
To a significant extent the case turns upon credit issues, although the parties also disagreed vehemently about the meaning and effect of the contract, and its legal consequences. It is appropriate to expose my findings about credit, and the basis for them, before considering the issues. Both Mr Percy and Mr Eynaud gave evidence, and Mr Percy appeared the more credible. Some significant events had been recorded by him in his diary but even without it he presented, in the witness box, as someone who had a reasonably good memory and, certainly, a much clearer and more convincing recollection of events than Mr Eynaud, who clearly had little recall of dates or the substance of conversations.
Not surprisingly, serious attacks were made in cross-examination upon the credit of each of them. For the defendant it was asserted that Mr Percy’s diary, which contained no other references to conversations with any other persons save the defendant, was a fabrication but this was not put to him directly and he satisfactorily explained the format and contents of the diary during cross-examination[1]. I am satisfied, in particular, that his diary note of a conversation with Mr Eynaud on 23 June 2000 (Exhibit 12) in which, he says, he rescinded the contract by reason of Mr Eynaud’s misrepresentations was made contemporaneously, and is a reasonably accurate record of what was said.
Mr Percy was also pressed in cross-examination about the conduct of these proceedings in the latter part of 2000 when his original pleadings were attacked in this Court and, as was conceded on his behalf, required substantial amendment and exposed him to an adverse costs order. His pleadings (and those of the second plaintiff) have undergone substantial amendment from time to time but I am not persuaded that was a consequence of any untruthfulness, wrongdoing or error on his part but is explained, as he said and I accept, by errors and misunderstandings on the part of the solicitor who first acted for him.
One of the breaches raised against the plaintiffs involved the alleged non-payment of rent to the landlord of the second plaintiff’s business premises after Mr Eynaud’s departure. Mr Percy did say, initially, that he had no knowledge about the matter but, when permitted to give rebuttal evidence on the last day of the trial he swore positively about the issue. I thought his explanation for the discrepancy was satisfactory and plausible and was not persuaded it detracted from his credit [2].
In contrast, Mr Eynaud’s recollection of the period leading up to the contract was shown to be wrong in significant respects. His version of the circumstances surrounding a holiday around the Australia Day long weekend shortly before the contract was signed was entirely incorrect, to a degree which established he had a very poor memory[3]. It was also clear that he had instructed his legal advisers that around the time he left Coolco he had the opportunity to work with a company called Air Rite, and this proposition was pressed upon the first plaintiff in cross-examination[4]. As other evidence established, however, Mr Eynaud had left that business in controversial circumstances involving significant estrangement from its principal[5] and his attempt to explain this was unconvincing[6]. These errors occurred notwithstanding his evidence that he was a diligent diarist and had his diaries for recent years but could not find his year 2000 diary and, in any event, was quite certain that it contained no relevant entries[7].
Inconsistencies between Mr Eynaud’s pleading, and his evidence, also damaged his credit. His defence and counterclaim always asserted the handwritten clause at page 14a of the contract (which Mr Percy alleged the parties had drafted and inserted in the document) was not, in truth, properly part of their agreement. Mr Eynaud capitulated on the point, without argument, during his cross-examination[8].
Mr Eynaud’s pleading also emphasises a reference, in the contract, to the air-conditioning “industry” as opposed to Coolco’s specific “business” and the amended defence and counterclaim, while conceding Mr Eynaud had said some things in pre-contractual discussions about his future intentions in respect of the “air-conditioning industry” specifically alleged those statements were in fact “…words of a similar nature but with reference to the specific ‘business’ and not the ‘industry’”. Statements to this effect were pressed upon the first plaintiff in cross-examination by Mr Eynaud’s counsel but during his own evidence-in-chief, despite his own counsel reverting to the matter a number of times, Mr Eynaud simply did not swear up the issue or the conversations in this way and, ultimately, his evidence was, clearly, that when referring to the “business” in those discussions he meant the entire air-conditioning industry[9].
His evidence about another matter, an advertisement in the Yellow Pages, was also unconvincing. Prior to 31 March 2000, when the first payment of $85,000 was due under the contract Mr Eynaud had taken steps to purchase a business called South Coast Refrigeration & Air-Conditioning (Qld) Pty Ltd (‘South Coast Refrigeration’) including steps to advertise that business in the Yellow Pages. As ultimately published the advertisement (Exhibit 36) clearly showed the new business was involved in the sales, service and installation of air-conditioning. This was said to be in direct breach of restraints agreed in the contract between the parties. Mr Eynaud attempted, during his evidence, to convey the impression that time and circumstances prevented him making all the changes he wished to before the advertisement was published[10] but in truth, as he reluctantly but eventually conceded, he approved the final version and made no further attempts to change it[11]. These matters are discussed further in the context of the issues between the parties but, for present purposes, serve to expose the reasons which lead me to prefer Mr Percy’s evidence to Mr Eynaud’s.
Misrepresentation
The plaintiffs assert that they were induced to enter into the contract of 17 February 2000, and to make the first payment of $85,000 in reliance upon representations from Mr Eynaud that he intended to leave the air-conditioning industry. I accept Mr Percy’s evidence that on 2 February 2000 Mr Eynaud said to him that “he wanted to get out of the industry” and “he had a gutful of the industry and he wished to leave the industry. He didn’t know what he was going to do”. That evidence is confirmed by Mr Percy’s diary entry for that day and, indeed, Mr Eynaud’s own evidence that he told Mr Percy on that occasion that he was “leaving the business and he was sick of the business” and that by “the business” he meant the air-conditioning industry[12]. A further statement to similar effect was made by Mr Eynaud to Mr Percy on 11 February 2000.
There is corroboration that Mr Eynaud made statements to this effect around this time. On 17 February 2000, at the time the agreement was signed, Mr Eynaud said to one of the witnesses that he was “leaving the industry”. He said words to much the same effect to a Mr Ian Freese on 29 February. At a barbeque on that day Mr Eynaud also made a number of similar statements[13] the gist of which was that he wanted to leave the industry and do something completely different and he didn’t know what he would do. Similar statements were made to a Ms Anne Harding in late 1999, and in January 2000. Around this time he also made some statements to the effect that he might consider working for suppliers of air-conditioners and air-conditioning equipment but although work of that kind might arguably have been in breach of clause 7.3A(c) they did not, I accept, concern Mr Percy unduly or give rise to suspicions on his part.
On the day of the payment of the first instalment of $85,000, 31 March 2000, Mr Eynaud again told Mr Percy that he was unsure what he was going to do. On any view that statement was false because, as I accept, he was at that time in an advanced stage of negotiations for the acquisition of South Coast Refrigeration.
It is not surprising that Mr Percy, as he said and I accept, was influenced by and relied upon these statements. He and Mr Eynaud had been involved in the Coolco business together since 1993 and Mr Percy, as a director and principal of that business, was the beneficiary of its established goodwill. Inevitably Mr Percy saw Mr Eynaud’s representations that he was leaving the business and would not, then, be a competitor in any form as an important matter I accept his evidence that but for the representations the plaintiffs would not have entered into the agreement, or paid the first instalment.
Less than a month after the contract was signed, on 13 March 2000, Mr Eynaud contacted business brokers to enquire about the purchase of South Coast Refrigeration. The next day he signed a confidentiality agreement, spoke to the broker again on 16 March, and inspected the business on 22 March. This was a business based on the Gold Coast and serving Gold Coast clients: its 2000 advertisement in the Yellow Pages said it was a business “Serving the entire Gold Coast and Northern Rivers”.
On about 27 March Mr Eynaud asked Mr Percy to give permission for him to install two air-conditioners at premises at Mt Gravatt and he told Mr Percy this was a job for a friend. In fact, it was for a client, and the charge was at full commercial rates[14].
On the day Mr Eynaud received the final payment of $85,000, 31 March, he approved the advertisement for South Coast Refrigeration in the yellow pages, mentioned earlier. On 7 April 2000 he entered into the contract to purchase that business. Settlement was effected on 26 April and on 27 April he registered the business name, describing it as “Refrigeration sales and service/aircond repairs and maintenance” (Exhibit 41).
The evidence clearly established that Coolco’s business involved both the sale of air-conditioners, and air-conditioning systems and equipment, and service and repairs; and, Mr Eynaud was in charge of the service department[15]. The restraint clause is in respect of “carrying on or being engaged, concerned or interested, directly or indirectly, in the capacity of sole trader, manager or agent” in the business of “sale, supply and/or installation of air-conditioners and air-conditioning equipment”. The phrase ‘air-conditioning equipment’ includes parts and components for air-conditioners and the restraint clause, then, includes the business of service and repair of them.
The defendant called a Mr Chandler, a licensed plumber with, however, as I accept some lengthy experience in the air-conditioning industry in an attempt, as I understood his evidence, to establish that if the defendant did no more than service and repair air-conditioners, even if he installed some parts in the course of that work, that would not amount to a breach of the restraint clause. Ultimately however, it was clear that the particular words have no special meaning in the industry. Mr Chandler did not qualify as an expert, and I preferred the evidence of Mr Percy that “air-conditioning equipment” has its ordinary dictionary meaning and includes parts and components for air-conditioners and, hence, that the restraint clause includes the business of service and repair of air-conditioners.
In late April 2000 Mr Eynaud became aware of Mr Percy’s purchase of the new business and on 28 April his solicitors sent a letter reminding the defendant of the restraint clause and requiring him not to engage in any air-conditioning work; and, demanding that he change the name to delete any reference to air-conditioning. The defendant did not respond. On 10 May, however his solicitors wrote[16] confirming the purchase of South Coast Refrigeration and saying that it does not “sell, supply or install air-conditioning”. The letter made no reference to “air-conditioning equipment”. After other, unrelated correspondence there was a conversation between Mr Percy and Mr Eynaud on 23 June 2000 in which the former alleged the latter was in breach of the clause and guilty of misrepresentations and Mr Percy said, according to Mr Eynaud and as I accept, that he was “entitled to do whatever I like”. In particular, as Mr Eynaud went on to say, he believed he was entitled to work in Brisbane and install air-conditioning there – within the 100km radius provided by the restraint clause[17].
The clear inference from all these events is, firstly, that Mr Eynaud did not intend leaving the air-conditioning industry at the time of the representations; and, that it was his intention and belief in February and March 2000 that he was entitled to, and would or could, engage in the business of service and repair of air-conditioners and, indeed, engage in the sale of new air-conditioners provided he did not undertake the work personally but referred it to another person.
I am satisfied that he was considering leaving Coolco from at least January 2000 or even earlier and engaged in conduct which is reasonably categorised as deceitful in that statements he made suggesting his plans were uncertain (but which involved leaving the ‘industry’) masked his true intention (which was not to leave the industry or, at least, not to preclude future involvement in it); and, secondly, that by his subsequent conduct he evinced a clear intention not to be bound by the terms of the contract providing for the restraint of trade.
That Mr Eynaud was aware the steps he was taking to purchase the new business might not sit comfortably with his statements to Mr Percy, or his contractual obligations, is independently confirmed by the evidence of Ms Jacqueline McKeating who said that, while she had heard Mr Percy make a number of statements to the effect that he was going to get out of the industry, there was a social occasion at which she overheard a conversation between Mr Percy and his wife when he said he had been to look at a business; and, when Ms McKeating asked for more information he said “I don’t think I should say any more”; and, another conversation in February or March 2000 when Mr Percy and his wife both told her not to mention anything they had said to her about the purchase of a business, to Mr Percy or his wife.
Representations will be categorised as fraudulent if they are made either without belief in their truth, or with a reckless indifference to the truth[18]. It is obvious Mr Eynaud made a number of pre-contractual statements about his intentions which were either untrue or, if he is given the benefit of the doubt, in respect of which he was simply uncaring about their truth, or otherwise. In other words, he simply did not have an honest belief in the truth of what he was saying[19]. The speed with which he moved to contact business brokers, to investigate the business South Coast Refrigeration, and to decide to purchase it even before the first large instalment was paid under the contract point strongly to that conclusion.
Reliance by the plaintiffs is clearly established. Mr Percy’s unchallenged evidence is that the plaintiffs would not have entered into the sale agreement or paid the first instalment if the representations had not been made.
Even if I had not been persuaded the representations could fairly be categorised as fraudulent the plaintiffs have on any view established innocent representations, relied upon by Mr Percy and inducing the agreement and the payment of the first instalment, and that would be sufficient to entitle the plaintiffs to rescind. For the sake of completeness, I am also satisfied there has been a breach of an essential term, the restraint clause.
The Plaintiff’s Remedy
In mid-April 2000 Mr Percy learned of Mr Eynaud’s acquisition of the new business, and something of its nature. At his instigation correspondence passed between their solicitors[20]. Later in April Mr Percy says, and I accept, that there were telephone conversations between them when Mr Eynaud enquired, among other things, if he was interested in quoting for a job for Mr Eynaud’s new business. Mr Percy prepared a quote, and sent it to Mr Eynaud[21]. During May and June their solicitors exchanged further correspondence about the litigation mentioned at page 14a of the contract and on 23 June 2000 they spoke on the telephone.
Mr Percy says and I accept that the conversation was heated, and traversed a number of matters[22]. After a discussion about the payment of legal costs concerning the collection of the debt mentioned at page 14a Mr Percy says Mr Eynaud told him that he would have to pay the balance instalments under the contract itself “…because I’ve got something big over you”. After a further short, heated exchange Mr Percy says, and I accept, that he said to Mr Eynaud “I’m not paying one more cent until this is sorted out”. He then said, as I also accept, that he meant the fact that Mr Eynaud had not left the industry but had embarked upon a new business, South Coast Refrigeration. He said to Mr Eynaud “We made the agreement in good faith. I’ve honoured the agreement today. You’ve installed two air-conditioners… You’ve bought South Coast Refrigeration and Air-Conditioning. You’ve changed the licence numbers in the telephone ads and you’ve used the licence numbers that Coolco paid for in that ad”.
In the context of the events related earlier Mr Percy’s statements are properly categorised as words signifying a termination of the contract by the first plaintiff on behalf of himself, and the second plaintiff. Mr Eynaud’s conduct in acting in breach of the representations he had made, immediately going into business in breach of the restraint of trade clause and, as I am also satisfied, failing to pay his contribution to the costs for the ongoing litigation referred to at page 14a constitute acts properly categorised as repudiations of the contract, evincing a clear intention no longer to be bound by it and, indeed, comprising breaches of its essential terms[23]. Hence, the plaintiffs’ termination was proper and lawful.
Under the general law proof of a fraudulent misrepresentation would entitle the plaintiffs to rescission ab initio, so long as they can be restored to their original positions. Here, however, the parties’ positions have substantially changed. In particular, the second plaintiff’s business is now quite different from its form and nature in February 2000[24] and the first plaintiff has subjected himself to new, significant guarantees[25]. In those circumstances the plaintiffs reasonably contended that practical justice could be achieved between the parties here by allowing the plaintiffs to retain the share and the full interest in the business, and the defendant to retain the instalment of $85,000 already paid but, otherwise, rescinding the sale agreement insofar as it required any further payment of instalments, or further monies under clause 17.5(a) (relating to the Nissan vehicle). The solution is an attractive one. It achieves practical restitution and justice between the parties, in the sense that the share plainly had value (and Coolco has continued to trade successfully) but the defendant, by his conduct, negated his entitlement to the full purchase price[26].
Even if the opposite conclusion was to be reached and it be held that the defendant’s repudiation was not accepted by the plaintiff on 23 June 2000, the pressing alternate conclusion is that the plaintiffs would be relieved of consequences which would otherwise attach to their failure to complete subsequent contractual obligations including, in particular, payment of the later instalments. At least, it would constitute a good defence to a claim for non-payment of them, or of the car lease payments. A particular consequence of either conclusion is that the defendant, as a result of his earlier repudiation, could not validly terminate on 9 November 2000, as he claimed. Finally, on any view the contract must have been at an end when the proceedings were issued on 20 December 2000[27].
A remedy based on equity is appropriate here notwithstanding, too, the provisions of clause 13 of the contract which, in the event of rescission under the express right contained in it, direct that the rescission is affected ab initio and the parties shall be restored to their pre-contract position. For the reasons set out earlier, that would not constitute a just resolution in the circumstances arising here by the time of trial.
The plaintiffs also established that the defendant had not paid $2,847.62 for his share of legal costs arising under the extra term inserted at page 14a of the contract. The clear need to impose a remedy which fairly adjusts and reflects the position of the parties in a way which acknowledges the defendants contractual wrong but, also, subsequent events and dealings between the parties and their present positions means this relatively small sum should, like claims by the defendant under ancillary provisions in his counterclaim, be ignored for those purposes.
The Defendant’s Counterclaim
The defendant counterclaims for the two unpaid instalments of $25,000 each as monies “due and owing pursuant to the agreement” and also for $8,354.38 under clause 17.5 of the contract (concerning lease payments on the Nissan vehicle). The defendant asserted that he had lawfully terminated the agreement on 9 November 2000 because of the plaintiff’s failure to make the contract payment of $25,000 on 1 October 2000, failed to meet car payments and had also failed to fully pay rent owed by the second plaintiff to its landlord, Port Jibe Pty Ltd. On any view the contract must, however, have been terminated by 20 December 2000, two days before the last instalment of $25,000 became payable but there is no alternate claim by the defendant for damages referrable to those unpaid instalments but based upon the plaintiff’s alleged repudiation of the contract or breaches of essential terms. In written submissions in response defence counsel sought leave to amend the counterclaim to plead damages of that kind.
In light of the conclusions reached earlier it is unnecessary to decide that point. It is appropriate, however, to address the questions of the car payments, and the alleged shortfall in rent. The claim in respect of the car is for damages for breach of clause 17.5 but the contract was validly terminated by the plaintiffs in June 2000 and, up to that point, all monies had been paid. Even if the contract was not terminated until a date towards the end of the year the defendant would only be entitled to monies due up to that point. After termination, the second plaintiff was discharged from further performance of the obligation and could not be in breach of that term of the contract. At 9 November 2000 the total sum owing was $3,827.06[28]. Nor, relevantly, is it pleaded that clause 17.5 was an essential term the breach of which would entitle the defendant to terminate. It is clear, then, that while a technical breach may have been established it was not a breach of a term permitting the defendant to end the contract.
So far as the unpaid instalments are concerned the equitable relief afforded the plaintiff ought properly include relief from the payment of any further instalments after it accepted the defendant’s repudiation and rescinded on 23 June 2000.
The counterclaim also alleged that under an agreement to lease dated 13 April 1999 the second plaintiff agreed to pay rent of $1,150 per calendar month to Port Jibe Pty Ltd, a company of which the wives of the first plaintiff and the defendant were shareholders and directors. The lease was said to be oral but to have been reduced to writing by a letter from the defendant to the solicitors for the first and second plaintiffs of 14 April 1999. It was then alleged that rent had been short-paid up to September 2000, and not paid at all thereafter. That failure was said to constitute a further breach of the contract.
While there is historical evidence that the second plaintiff had paid Port Jibe monthly payments of $1,000[29] there is no evidence of any oral or written agreement to lease, or to pay rent under a lease of $1,150 per calendar month. The document relied upon by the defendant[30] was not signed and was, I accept, simply prepared for the purposes of obtaining a bank loan for Port Jibe to purchase the property. It was not, however, sent to Robins Watson (the solicitors acting for Port Jibe), nor responded to by them in any way which would establish an agreement. Rather, as Mr Percy said and I accept[31] he and Mr Eynaud agreed at the time of acquisition of the premises to pay $1,000 per month rent. It appears, then, that as at 9 November 2000 rent had been overpaid by $2,000[32] and the second plaintiff was not in arrears at that date. Even if that conclusion is wrong and the true rent was $1,150 the shortfall as at the time the defendant purported to terminate, 9 November, was only $550.
It is neither alleged nor pleaded that clause 10, which obliges the second plaintiff to continue to conduct its business and affairs with reasonable care and skill and as a going concern is an essential term, such that any breach would entitle the defendant to terminate. Plainly, either a breach has not occurred or it was a very minor matter upon which the defendant could not properly rely as a basis for termination.
Relief
I am satisfied the parties should simply be left in the position they had reached about the time these proceedings commenced, a remedy which is achieved by declaratory relief confirming lawful rescission by the plaintiffs on 23 June 2000 and exonerating all parties from any further payments under or in respect of the contract. I will hear submissions about costs.
[1] T 155.1-.5
[2] T 121.8-.9; T 336.8-338.2
[3] T 185.9-186.1; T 228.5-.7
[4] T 130.5
[5] T 138.48-139.10
[6] T 297.7
[7] T 246.6-248.2
[8] T 190.5-.7
[9] T 233.5-.7
[10] T 275.5
[11] T 298.4
[12] T 233.1.16, T 235.2
[13] T 51.6
[14] T 193.6, T 220.6
[15] T 49.2
[16] Exhibit 8
[17] See Exhibit 47
[18] Derry v Peek (1889) 14 App Cas 337
[19] See, e.g. Snarski v Barbarich (1969) WAR 46
[20] Exhibit 4 (bundle of correspondence)
[21] Exhibit 5
[22] T 73-76
[23] Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17 at 33
[24] T 88
[25] T 89.2
[26] Vadasz v Pioneer Concrete (1995) 184 CLR 102 at 111; Alati v Kruger (1955) 94 CLR 216 at 223-4
[27] Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 570; Alati v Kruger (supra) at 222
[28] Exhibit 37
[29] Exhibit 43
[30] Exhibit 38
[31] T 307-308
[32] Exhibit 43
0
5
0