South Dowling P/L v Cody Outdoor Advertising P/L

South Dowling Pty Ltd (the Licensor) and Cody Outdoor Advertising Pty Ltd (the Licensee) were parties to a Signage Rights Deed which granted the Licensee rights to display advertising for a period of 10 years. Clause 7 of the Deed obliged the Licensor, upon selling the land subject to the signage rights, to ensure that the purchaser entered into an agreement with the Licensee on terms that preserved the Licensee's rights and obligations under the Deed. The Licensor agreed to sell the land and subsequently transferred it to a company associated with the purchaser without ensuring that either the purchaser or the transferee entered into such an agreement with the Licensee. The Licensee treated this conduct as a repudiation of the Deed, accepted the repudiation, and ceased its use of the signage. The Licensor and the transferee later proposed a Novation Deed, which the Licensee refused to execute. The matter came before the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether the Licensee's acceptance of the Licensor's conduct as a repudiation of the Signage Rights Deed was effective. This involved determining whether the Licensor's failure to ensure the purchaser or transferee entered into an agreement preserving the Licensee's rights constituted a breach so fundamental as to entitle the Licensee to terminate the contract.

The Court of Appeal held that the Licensor's actions amounted to a repudiation of the Signage Rights Deed. The failure to secure the purchaser's or transferee's agreement to preserve the Licensee's rights under clause 7 was a breach of a fundamental term of the contract. The Licensee's acceptance of this repudiation was therefore effective, entitling it to terminate its obligations under the Deed. The Court found that the subsequent offer of a Novation Deed was irrelevant to the effectiveness of the prior acceptance of repudiation.

The appeal was dismissed, and the Licensor was ordered to pay the Licensee's costs.