Trevilyan v Donaldson

[1997] SASC 6502

TREVILYAN  v  DONALDSON & ANOR

Magistrates Appeal
Olsson J

Introduction

The appellant, who was defendant at first instance, appeals against a judgment entered against him on 27 October 1997 by a stipendiary magistrate.  By that judgment the appellant was required to pay the respondents $25,225.60 plus interest, being moneys held to be payable to them in terms of an agreement made between the parties.

The notice of appeal raises a number of separate issues, but it is convenient to identify and discuss them later in these reasons.

The facts

The appellant is the duly appointed legal personal representative of Edward Clyde Trevilyan deceased.  In that capacity he was, at all material times, the owner of a dairy farm (known as No.1 Dairy) and herd of some 300 cows, located in what I take to be the Myponga area.  He testified that he, personally, was a farm manager of some 15 - 20 years’ experience.

He was introduced to the respondents in July 1995 by one Handscombe - a farm consultant who had advised both parties in relation to their separate dairy activities.

As I understand the evidence it was to the effect that the appellant, who was personally involved in the conduct of other farming activities, urgently needed assistance in the conduct of No.1 Dairy.  This was being run by the appellant and a farm hand called Stacey.

Following their introduction the parties entered into a written share farming agreement (“the Agreement”) which seems to have been drawn up by, or with the involvement of, Handsombe.  As the learned magistrate recognised, this was a document which was as noteworthy for its  obscurity and ambiguity, as it was for its relative brevity.

As that document is both short and also critical to a consideration of the issues arising between the parties I will reproduce it in full.  It reads as under:

“DAIRY SHARE FARMING

BETWEEN
ROGER  TREVILYAN - FARM MANAGER
ON BEHALF OF ESTATE E.C. TREVILYAN
AND
GRAHAM &  RICKI DONALDSON - SHARE FARMERS

AGREEMENT  TERM - 5 years from 1st June 1995

The agreement to be reviewed on 31st January 1996 and then annually on 31st January.  This agreement can be terminated with three months notice from either owner or share farmer.  If terminated within 12 months monthly payment will be based on average monthly milk returns for the previous twelve months.

As herd numbers increase the agreement will become more performance oriented with increased sharing of costs.

RESPONSIBILITIES

SHARE FARMERS AND OWNERS WILL DEVELOP AND AGREE ON A FARM DEVELOPMENT PLAN BY 31ST JANUARY 1996

OWNERS

·...... Owners receive 80% milk sales.

·      Owners receive proceeds from dairy stock sales and any increase in dairy stock numbers.

·...... Owners provide fully equipped to dairy Authority standards.

·      Owners will provide a house rent free to an agreed standard.

·...... Owners supply at least 300 milking cows from 31st January 1996.

·      Owners to supply at least 80 heifers per annum with an average pre calving weight of 550 kg.

·...... Owners supply vehicles and machinery needed to run the property other than by special agreement.

·      Owners pay all costs other than those specified for the share farmers.

·...... Owners will improve dairy facilities to cope with increasing cow numbers.

·      The aim will be to tighten the calving pattern sufficiently to dry the herd off for at least 4 weeks per annum.

............. SHARE FARMERS

.................. The share farmers will be responsible solely to the farm manager, Roger Trevilyan

·...... Share farmers receive  20% milk sales.

·      Share farmers receive proceeds from dairy stock sales and any increase in dairy stock numbers related to any livestock they keep on the property.

·...... Cow numbers owned by the Donaldsons will be limited to 20 in the first instance, subject to annual review.

·      Share farmers pay no farm expenses initially.

........................... It is expected that a share of grain used for the dairy herd will be included from 31st January 1996, subject to negotiation.

·      Share farmers will be required to provide a motor bike after the initial period up to 31st January 1996.

·...... Share farmers required to provide labour for all milking, calving, heat detection, artificial insemination, stud and herd records, feed mixing subject to a new system being installed.

·      Clint Donaldson will be available to assist the share farmers with their responsibilities.

·...... Share farmers provide labour for calf rearing to meet target weights at 12 weeks.

·      Share farmers responsible for maintaining total plate counts and somatic cell counts below maximum statutory levels and according to targets established with the manager by negotiation.

·...... Share farmers assist with general farm work e.g. hay making, silage, feeding out.

·      Share farmers to make themselves available for AI training prior to the 1996 mating season.

·...... Share farmers will provide their own personal accident and sickness insurance.

·      Sharefarmers will maintain the house and garden in a clean and tidy manner.

................................................................

SIGNATURES

ROGER TREVILYAN on behalf of	GRAHAM DONALDSON
ESTATE E C TREVILYAN	RICKI DONALDSON

DATE .....................................

Witness

............................................................

In  the course of his careful and definitive reasons for decision the learned magistrate pointed out that the Agreement presents as something of an enigma.  Although it purports to evidence a five year term commencing on 1 June 1995, the respondents did not embark upon the undertaking until 1 August 1995; and  the Agreement was not actually signed “until three or four weeks later”.  So much was common ground between the parties.

The learned magistrate also directed attention to the fact that the Agreement, in terms, obviously contemplated that further negotiations were to take place between the parties, “after the initial period up to 31 January 1996”.  He also adverted, by way of example, to what he described as nebulous topics such as “a share of grain used for the dairy herd”, targets for “total plate counts” and “somatic cell counts” and the “Farm Development Plan”, which posed obvious questions as to what had been intended by the parties.

The learned magistrate noted that it was accepted by the parties at trial that, in respect of any termination of the Agreement attracting the operation of its initial paragraph, the proper calculation of the relevant monthly payment based on average monthly milk returns would have been an amount of $6,306.40.

Having embarked upon their duties on 1 August 1995 the respondents attended to their duties under the Agreement.  Some problems arose from time to time in relation to the dairy operations, particularly with regard to chronic mastitis in the herd and escalating somatic cell counts in the milk.  These were the subject of ongoing discussions between the parties and various attempts at remedial action.  The detail of those aspects will require further exploration in due course.

However, on or about 1 February 1996, the appellant wrote to the respondents in these terms:

“Estate E.C. Trevilyan
1/2/96

Dear Graham,

It is with regret that we feel that we must terminate our arrangements with you from the end of February.  Current indications lead us to believe that you will not handle the 1996 calving and milking season to our satisfaction.  However if you can address our concerns to our satisfaction by 12th February we are willing to reconsider this decision.

We spoke about some of our concerns on 30/1/96 - need for 2  people in the dairy; cows being stirred up by dogs and people; times between milkings; taking cows in and out to the paddocks.

The major problems that are not being addressed are

(1).... High somatic cell counts above maximum statutory levels - 767,000 on 28/1/96, coupled with the likelihood of us loosing (sic) our milk license for having counts of over 500,000 for 3 months.

(2).... Provision of 2 people, other than yourself, for milking and herd management from the beginning of calving till the end of December.  One of those people must be experienced and competant (sic) based on what has happend (sic) over the last 6 months we do not believe that Judd and Clint should be those 2 people.

(3)     Your payment of 20% of grain costs from 31st Jan 1996.

(4).... Forward planning needs improvement.  If June/July calvers are to be induced to come in  the middle of April, they should have been targeted for drying off.  You should have a good idea when all cows are calving.

(5).... Any AI course needs to be done before calving starts so that you can manage the herd properly.

(6).... We are currently unsure of the arrangements for calf rearing.

Roger Trevilyan (Signed)  Elaine Trevilyan           

[Farm Manager  [Financial Manager,
Estate EC Trevilyan]                Estate EC Trevilyan]

The learned magistrate accepted that this notice came to the respondents without warning, although it did follow a meeting held between the appellant, his sister Elaine, Handscombe and Mr Donaldson late in January 1996.  At that time discussion took place concerning the topics of the somatic cell count, the use of dogs and the shared percentage of grain.  In certain respects the meeting proved inconclusive.

The respondents were required by the appellant to and did leave the Myponga property on 28 February 1996.  Their claim was that there was no legal warrant for termination of the Agreement on other than three months’ notice and that, in any event, they also had an entitlement under the Agreement to payment for the month of January 1996, which they had not received.  The appellant did not dispute that they were entitled to credit for working in January and February 1996, but disputed any other liability.

It should also be recorded, at the outset, that during the continuance of the Agreement, the statutory limit for somatic cell counts was 500,000 units and that no variation of that figure was ever agreed.

These, then, are the bare outline facts.  However, I must direct attention to some other matters of detail emerging from the evidence, which necessarily impact on the issues to be considered.

It is beyond question that, over a substantial period of time, there had been a chronic situation of mastitis and high somatic cell counts in No.1 Dairy.  The graph appended to exhibit P2 discloses that, from December 1991 up to the commencement of the actual term of the Agreement the somatic cell count had almost consistently been well above the maximum statutory level.  Indeed, it appears that the licence for No.1 Dairy had been rescinded for that reason.  As I interpret the graph it had only been brought back under some degree of control in mid 1994, although the graph varied very substantially over and under the 500,000 level after that time.

This formed the backdrop to the specific Sharefarmer’s responsibility in the Agreement “for maintaining total plate counts and somatic cell counts below maximum statutory levels and according to targets established by the Manager [i.e. the appellant] by negotiation”.

Initially, after 1 August 1995, the respondents were able to keep the somatic cell count under 500,000.  However, in the month of December of that year, the count exceeded that figure and it remained in excess of it up to and including March 1996.

A great deal of evidence was led before the learned magistrate as to what was done to address both the mastitis and the high cell count.  The learned magistrate made these findings in that regard.

The cell count commenced to rise in October 1995.  The respondents commenced to treat the cows with penicillin.  However, the overall cell count continued to rise.  After discussion of the situation with the appellant he sought professional veterinary advice.  Dr Beath, or his partners, visited the property several times.  The doctor wrote a letter dated 23 October 1995 advising the following regime:

“(1).. Cows that have had cell counts above 200,000 or have had clinical mastitis - Enduro in all quarters.

(2).... Cows that have had cell counts always below 200,000 should be given Orbenin DC in all quarters at dry off.

(3).... Any cow with consistently high cell counts *(over 700,000)* should be culled.  If this is not feasible, treat by drying off early; treat with Enduro and repeat in 21 days (*remember that cows calving within 35 days of treatment have to have milk discarded for 21 days post calving.”

Ongoing dialogue occurred.  The learned magistrate summarised the evidence of Mr Donaldson, with apparent acceptance of it, in this manner:

".........                   In addition, Mr Donaldson had asked Elaine Trevilyan, the farm manager’s (i.e., defendant’s) sister, to go through the ‘test figures’ for the last three years from ‘Hiscol’.  Exhibit P6, apparently dated November 1995, was a copy of the list (summary) she had produced.  The third column apparently represented Elaine Trevilyan’s summary of problems encountered regarding individual cows, and ‘SCC’ represented somatic cell count of cows listed by their individual ear tag identification numbers.  The top cow on the list attained a somatic cell count of 2.24 million and, according to Mr Donaldson, ‘We had cows in the herd up to 9 million’ (I note also the terms of Exhibit P1, p.2, in this connection.

Mr Donaldson said that he discussed the (Exhibit P6) list and Dr Beath’s letter, and inquired whether the herd should be culled.  With assistance from the defendant, all cows in the list were separated and Dr Beath conducted a pregnancy test.  All cows in calf stayed on the farm and the remainder were sold (Mr Donaldson thought 13 out of 69 were sold).

Mr Donaldson said he discussed these problems with the defendant, who wanted to keep the cow numbers at a high level.  Mr Donaldson said that there were ‘astronomical’ problems with cell counts which this policy caused.  Disease was being spread to other cows in the herd.  Finally, a lease/purchase arrangement was made by the defendant with Allen Gower, but this had been the defendant’s decision.

Mr Donaldson said that the result of the antibiotic treatment was pleasing in the short term but somatic cell counts had started to climb up.  The alternatives were daily treatment of the cows which were affected (which was a costly exercise) or culling of cows.

After October 1995, cows were identified in the herd suffering from clinical mastitis and antibiotic treatment in the mammary system was employed.  The defendant purchased a product (‘Uddermint’) which, it was claimed, assisted in the treatment of mastitis.  Dr Beath had described it as ‘witch doctor stuff’.

As to the continuing antibiotic treatment, Mr Donaldson said he discussed this with the defendant and received instructions not to treat the cows any further because of the cost factor (‘let it go and we’ll see what happens’).”

[It should be noted that exhibit P6 set out a formidable list of animals which had exhibited a very high cell count over a long period of time.]

In the course of his reasons for decision the learned magistrate made these comments:

"                   It must be a significant fact (as Mr Donaldson said and as Exhibit P12 indicates) that during September 1995 an increase occurred in somatic cell count (446, by comparison with 432 for August 1995).  In October, the declining cell count trend, which had commenced in May 1995, reversed (481).  The figure in November (476) was of about the same order of magnitude.

The plaintiffs’ performance under the share farming agreement extended over a six month period before notice of termination was given. The evidence demonstrates that the defendant was aware of somatic cell count figures at least within a matter of days after the end of each month (and well prior to that on one occasion, according to Exhibit P7).  In any event, the uncontradicted evidence of Mr Donaldson was to the effect that he discussed the troubling matter of rising somatic cell counts with the defendant during the month of October 1995.  However unwelcome the news may have been, it cannot have come as a surprise to the defendant that during the months of December 1995 and January 1996, somatic cell counts in excess of the statutory maximum were detected.  These two months represent one third of the plaintiffs’ entire period of performance under the share farming agreement.  By any standard, that must be regarded as a significant proportion.  However, the first warning to the defendant of an increasing somatic cell count, came with the September 1995 figures.”

...

".........                   Mr Hentschke was of the view that in intractable cases of elevated somatic cell count, culling of the herd (along with other measures) was the appropriate action to address the problem.  Indeed, overall, Mr Hentschke described as an appropriate batch of measures to address the problem of escalating somatic cell count, steps which corresponded with the actions of the plaintiffs following detection of rising somatic cell counts.  It is difficult in these circumstances to describe the conduct of the plaintiffs as being contrary to their obligations under the share farming agreement, although undoubtedly somatic cell counts rose above the statutory maximum.

Mr Donaldson said that the defendant interfered in the process he undertook in addressing the rising somatic cell count problem.  Not all cattle were culled.  Mr Donaldson was given directions to discontinue medication and to use Uddermint.  Major consequences resulted.  The evidence of Mr Donaldson to the effect that the defendant wanted to keep the cow numbers at a high level, was not disputed.  Nor was Mr Donaldson’s evidence to the effect that there were ‘astronomical’ problems with cell counts which this policy caused.  Disease was being spread to other cows in the herd.  A lease/purchase arrangement was made by the defendant with Allen Gower.  Finally, Mr Donaldson said he discussed continuing antibiotic treatment with the defendant and received instructions not to treat the cows any further because of the cost factor (‘let it go and we’ll see what happens’.)

The evidence of the plaintiffs, summarised in the previous paragraph, was not satisfactorily refuted by the defendant.  Although, I cannot say that the defendant, as the ‘party not in breach, has failed to comply with the requirements of the share farming agreement (in that no apparent breach of the obligations of the ‘OWNERS’ has been demonstrated) nevertheless the effectiveness of the ‘dry cow therapy’, culling and antibiotic treatment was dependent upon the defendant’s cooperation.  I conclude that the defendant did not cooperate completely towards its fulfilment.”

These findings need to be viewed against the background that it was always accepted that it was the appellants’ obligation, under the Agreement to bear the cost of all veterinary treatment and medication prescribed for the herd.  (“Owners to pay all costs other than those specified for the sharefarmers.”)  It also goes without saying that it was his prerogative alone, as owner, to cull any stock.

In the course of his submissions Mr Robertson, of counsel for the appellant, contended that the learned magistrate fell into error when, elsewhere in his reasons, he opined that the appellant would have known of the specific December 1995 cull count by about 14 December (see reasons p13.5).  Plainly this was an erroneous construction of the relevant Dairy Vale statements.  The precise cull count for December would not have been issued by Dairy Vale until mid January.

However, I do not consider that this invalidates the conclusions which I have above recited.  The evidence compellingly established that the appellant maintained a close, ongoing oversight over the escalating problem and the seriousness of it, even if he did not know precise, up to date figures at given points in time.  Patently there was continuing dialogue between the parties, because the appellant had an essential part to play in the strategy to be adopted, including consideration of relative cost implications and what animals should be either culled or dried off and treated.

Finally, it will be recalled that the purported notice of termination of the Agreement contained a substantial list of complaints against the respondents, some of which bore very directly on the vexed question of how it was that the mastitis problem (and associated cull count) was persisting and escalating.  As I read the notice of termination all of these complaints, in their totality were relied upon in justification of the giving of it.  No attempt was made to rank the alleged misdeeds or shortcomings in any order of priority.

I see no point in plumbing those complaints to the depths.  Each of these factual topics were separately addressed in the reasons published by the learned magistrate.  He rejected all but the existence of the high cell count as not having been established (as to their validity) to his satisfaction.

As he put it, if there was to be any justification for the notice it could only have been on the basis that what occurred in relation to the cell count constituted a breach by the respondents of a fundamental term of the Agreement, entitling the appellant to elect to rescind it.

It is beyond question that such conclusion was fairly open to the learned magistrate and that his reasoning as to the various topics was well supported by the evidence.  No basis, consistent with well settled principle related to appeals, was shown for overturning the factual assessments made by the learned magistrate.  Indeed Mr Robertson made no submission in that regard.  I therefore put the assertions of the appellant concerning them to one side.

On the basis of the factual findings made by him the learned magistrate held that:

(a).... the appellant had not discharged the onus of proving both the existence, in all of the circumstances, or lawful exercise of a right to terminate [rescind] the Agreement for either fundamental breach by or common law repudiation on the part of the respondents.

(b)the actual repudiation of the Agreement by the appellant, by the notice of 1 February 1996, entitled the respondents to the equivalent of three months’ payment on the basis prescribed by the initial paragraph of it, plus payment for the month of January of that year, ie four months’ payments.

(c)The respondents’ entitlement was thus $25,225.60 (ie 4 x $6,306.40), plus interest.

(d)The counter claim did not raise matters of substance and ought to be dismissed.

Accordingly he entered judgment on that basis.

The present appeal disputes the validity of those findings and that judgment.

The issues

In the final analysis the issues arising on the appeal were of simple compass, albeit attended with some difficulty.

The key propositions advanced by Mr Robertson really came to this:

1. The failure of the respondents to ensure that somatic cell counts did not exceed the statutory maximum constituted a breach, by them, of a fundamental term of the Agreement.  The appellant was entitled to elect to rescind it.  The notice of 1 February 1996 effectively and lawfully achieved that result.  On that basis the amount due to the respondents was $3,602.80, against which $3,257.66 (being damages sustained by virtue of the breach, plus interest) had to be set off;

1. even if that was not so and the respondents were entitled to treat the actions of the appellant as an unlawful repudiation of the Agreement, then the maximum amount recoverable would be $4,490.20 in respect of January 1996 and 20% of actual milk sales for the following three months, ie the averaging provision in the initial paragraph of the Agreement was inapplicable, because it should be read as disjunctive from the sentence preceding it;

1. on any view there had been an actionable breach on the part of the respondents which entitled the appellant to claim $3,257.66 loss sustained, even if the appellant was not entitled to rescind, or had not effectively rescinded, the Agreement.

I commence my consideration of these issues by making the observation that it was common ground that the learned magistrate was undoubtedly correct when he assessed that the obligation of the respondents to maintain total somatic cell counts below maximum statutory levels constituted an essential or fundamental term of the Agreement.

The test to be applied is whether the relevant contractual promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of at least substantial performance by the promisee.  Dover Fisheries Pty Ltd v British Research Pty Ltd (1995) 63 SASR 557 at 575). An alternate formulation is that articulated by Latham CJ in Luna Park (NSW) Limited v Tramways Advertising Propriety Limited (1938) 61 CLR 286 at 302:

"... a term of the contract which ... [goes] ... directly to the substance of the contract or ... [is] ... so ‘essential to its very nature that its non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all.’ ”

........ In the event of breach the promisee may, generally speaking, elect to treat the contract as being at an end and may sue for damage sustained.  (Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) SR (NSW) 632 at 641-3). A communicated election of that type is at once operative and is final and irrevocable (Newbon v City Mutual Life Assurance Society Ltd (1934-35) 52 CLR 723 at 733). The contract is at an end.

The promisee does not lose his right of election merely by insisting that the breach be remedied.  However, if he does so, he cannot thereafter elect to rescind without giving reasonable notice of intention to do so, absent remedial action in relation to the breach by the party in default.  (Walker v Earl of Dudley [1907] 1 Ch 590 at 600.)

Any act of election must be unequivocal (Immer (No 145) Pty Limited v The Uniting Church in Australia Property Trust (NSW) (1992-93) 182 CLR 26 at 30 (“Immer”)), although the right of election is not lost by the affording of an opportunity to rectify the breach Immer at 30). Conduct must be unequivocal in the sense that it is consistent only with the exercise of one of two sets of rights and inconsistent with the exercise of the other. The party having the right of election must not do anything which affirms the continuance of the contract (Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646, 656).

Subject to what is said above, such an election must be made promptly after knowledge of the breach has come to the attention of the promisee, otherwise waiver or affirmation of the contract may be imputed to the promisee, or an estoppel may arise against the promisee.  (See Champtaloup and Anor v Thomas and Anor [1976] 2 NSWLR 264 at 273, Majek Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 1) [1987] 10 NSWLR 49 at 54.)

In the instant case there is no doubt that, as a matter of fact, the stage was reached, by December 1995, at which the somatic cell count had exceeded the statutory maximum.  This would, prima facie, suggest a breach of a fundamental term on the part of the respondents.

However, the situation was rather more complex than at first sight might appear.  As is readily apparent, the format of the Agreement left a great deal to be desired.  It was as remarkable for what it did not say as it was for what it did spell out.

Particularly given the long history of high somatic cell counts;  the fact that the appellant owned the herd, the No1 Dairy property and the dairy improvements; as well as the further fact that it is obvious that the Agreement was entered into on the basis (actually put into practice) that the appellant was to pay the cost of medication, treatments and veterinary fees, it is patently obvious that the respondents could not discharge their contractual responsibilities without very substantial co-operation from the appellant - both as to culling chronically infected cattle and also paying for appropriate advice and treatment.  Moreover, it is clear on the evidence that the appellant took it unto himself, at times, to actually tell the respondents what he wanted to be done, or to instruct that certain treatments actually be discontinued - although it is not always easy to determine precisely when some of these incidents occurred.

As the learned magistrate recognised, the Agreement was in reality, a form of contract where concurrent performance was involved.  If, for example, the health of the herd could only be assured by effective culling of so-called chronic “millionaire” animals (i.e. those with very high, ongoing cell counts) and the appellant failed to cause this to happen, or if the appellant declined to sanction and pay for necessary veterinary or medication treatment, or insisted on an ineffective treatment regime, then the respondents were placed in an impossible position in which they could never effectively meet their “responsibilities”.

This was truly a situation attracting the dictum of Lord Blackburn in Mackey v Dick (1881) 6 App Cas 251 at 263:-

“[Where] it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.  What is the part of each must depend on [the] circumstances.”

In Butt v McDonald (1896) 7 QLJ 68 at 70-1 Griffith CJ expressed the concept thus:-

“It is a general rule applicable to every contract that each party agrees to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

At to this topic there are many useful references, of which Thompson v ASDA-MFI Group P/c [1988] Ch 241 at 253, Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596 and J.F. Burrows, “Contractual Co-operation and the Implied Term” (1968) 31 MLR 390 are but a few examples.  In Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 at 592, Gibbs J spoke of the implied obligation to take all reasonable steps to render a contract efficacious. (See also the many authorities referred to in Cheshire and Fifoot’s Law of Contracts, Seventh Australian Edn p 349.

The learned authors of “Contract Law in Australia, 3rd Edn”, Carter and Harland make the point  that, where co-operation is essential to performance, a promisor who does not perform because of the other party’s failure to co-operate will have a valid excuse for not performing.

No specific authority is given for that proposition, although I would have thought it to be based on considerations of fairness and common sense.  It may be that some analogy can be derived from the reasoning expressed in Sprague v Booth [1909] AC 576 at 580. A non co-operating party is, in such circumstances, doctrinally estopped from asserting default or breach by the other party.

In the course of his reasons the learned magistrate made the point that the appellant, being aware of the apparent breach of the Agreement, for a not inconsiderable period, did not elect for rescission until 1 February 1996.  More importantly, he became “deeply involved in the plaintiffs’ initiatives to deal with the matter of the rising somatic cells”.  I have already recited the specific findings of the learned magistrate as to that involvement and, in particular, the failure of the appellant to co-operate completely in achieving fulfilment of a proper remedial management regime.  He concluded that, in the circumstances, the appellant could not be heard to complain of fundamental breach by the respondents and seek to rely on it as a basis for rescission of the Agreement.

All that need be said in that regard is that, even leaving to one side the question of when the appellant first became aware of the actual cell count for December, there was ample evidence on which to base the findings made.  I see no basis for quarrelling with the essential thrust of the conclusion arrived at.

That alone rings the death knell of the primary contentions advanced on behalf of the appellant.

However, there is another more potent answer to his case, even if it be assumed that the purported rescission evidenced a timely election by the appellant.

But a glance at the notice of termination reveals that the stances sought to be adopted by the appellant were, from a legal viewpoint, mutually inconsistent.

Exhibit P7, relevantly, expressed three concepts, namely:-

.it constituted an unequivocal rescission of the Agreement by virtue of the respondents’ alleged breaches of contract;

.it sought to do so with effect from a future date, then some four weeks hence;  and

.it offered potential re-consideration if “you can address our concerns to our satisfaction by 12th February”.

As the authorities to which I have referred render abundantly clear, a promisee alleging breach of a fundamental term of a contract cannot behave in an inconsistent manner.  Either the promisee must elect to rescind, thereby immediately terminating the contract, or must elect to affirm and claim damages for breach of contract.

That is not to gainsay the promisee’s prerogative of giving to the promisor due warning of an intention to rescind, if remedial action is not taken within a reasonable time.  But that was not what occurred in the instant case.  Here we had an absolute rescission (or “termination”), albeit at a future date - one which was not qualified by the expressed, vague willingness to reconsider in certain circumstances.

As I understand the authorities, if an election to rescind is lawfully to be made, it must be unequivocal, immediate and communicated to the relevant promisor.  Such an election is no more and no less than an unqualified statement to a promisor to the effect - “You have committed a breach of a fundamental term of our contract entitling me to bring it to an end and I now do so.”

What the appellant here sought to say was - “You have committed a breach of a fundamental term of our contract entitling me to bring it to an end and I am doing so, but you are to continue to discharge your responsibilities under it for another four weeks when, I have decided, that rescission will become effective.”  This was in no sense, a mere warning of intended cancellation if a breach was not remedied.  It was an unequivocal rescission, said to be operative at a future date.

In my view such an approach is utterly inconsistent with the giving of notice of exercise of election to rescind for fundamental breach.  An election must be made unequivocally and unconditionally and operates instantly.  There is no principle known to me whereby a promisee can elect, but nominate a future date for its operation.  That would be to seek both to affirm the contract for the interim period, but to terminate it at a time to suit the promisee.  The two concepts are, logically, mutually exclusive.  If this were to be possible where would the line be drawn?  Presumably the nominated date could be four months hence, rather than four weeks.  To state the proposition is to demonstrate how untenable it is.

I consider that what happened in the case at bar is that, in communicating exhibit P7 and then insisting upon carrying it into effect, the appellant ineffectively purported to exercise an election and then, later, unilaterally repudiated the Agreement - at a time when his only lawful option was to have terminated it on three months’ notice.  I agree with the learned magistrate that, in the circumstances, the appellant became liable both to pay the respondents for the month of January and also make proper monthly payments for a period of three months thereafter.

Like the learned magistrate I do not read the last sentence of the initial main paragraph of the Agreement as being disjunctive from the sentence which precedes it.  On an ordinary reading of the paragraph the two sentences are plainly intended to relate to one another.  I construe the paragraph as meaning that if, within 12 months, the arrangement is terminated (as, indeed, it was), then the respondents were entitled to receive monthly payments based on average monthly milk returns for the previous twelve months.

On the other hand, that formula is restricted in its application to the three month period, whereas per incuriam, the learned  magistrate sought also to apply it to the month of January 1996.

There is no dispute that, given the conclusions to which I have come, the correct calculation of moneys due to the respondents is as under:-

January  $4,490.20
                  February  $6,306.40
                  March  $6,306.40
                  April  $6,306.40

Having regard to the conclusions which I have expressed the appellant is disentitled to his counterclaim of $3,257.66.  The learned magistrate correctly assessed that the very reason why the purported election was non maintainable on the merits was an effective answer to any claim for damages.  The appellant cannot be heard to assert breach on the part of the respondents by virtue of his own conduct and involvement in relation to the somatic cell count.

Conclusion

It follows that the appeal in relation to the counterclaim must be dismissed.

The appeal against the judgment on the respondents’ claim will be allowed for the purpose of substituting for the specified judgment sum an amount of $23,409.40 plus interest and costs.

I will hear counsel as to the precise form in which my order ought to be expressed and the proper calculation of interest.