SUNBIRD PLAZA PTY LTD v MALONEY
166 CLR 24577 ALR 205
(Judgment by: GAUDRON J)
Between: SUNBIRD PLAZA PTY LTD
And: MALONEY
Judges:
Mason C.J.
Deane J.
Dawson J.
Toohey J.
Gaudron J.
Subject References:
Contract
Judgment date: 17 March 1988
Canberra
Judgment by:
GAUDRON J
Under a contract of sale made 27 May 1981, Sunbird Plaza Pty. Ltd. ("the appellant") agreed to sell and Boheto Pty. Ltd. ("the purchaser") agreed to purchase a home unit on the Gold Coast for the sum of $148,500 .00. A deposit of $14,850.00 was paid on exchange of contracts, and the balance purchase price was payable on settlement. No settlement has yet taken place.
Annexed to the contract of sale was a guarantee executed by Cyril Gardner Maloney and Margaret Mary Cussan ("the respondents") by which they jointly and severally guaranteed:
"... THE PERFORMANCE BY the said abovementioned Purchaser OF ALL THE TERMS AND CONDITIONS of the Contract including the payment of all moneys payable hereunder by the said abovementioned Purchaser."
Clause 3(a) of the contract of sale between the appellant and the purchaser provided that:
"Settlement shall take place within 14 days after notice from the Vendor or its Solicitors to be (sic) Purchaser or his Solicitors that the relevant Building Unit Plan has been registered at the Real Property Office, Brisbane ..."
Clause 10 provided that "Time shall be of the essence of this Contract".
The Building Unit Plan was registered on 10 June 1982. The purchaser's solicitors were so advised on 11 June 1982 and were informed that settlement was due within fourteen days. By letters and notice dated 24 June 1982 and received by the appellant's solicitor on 25 June 1982, the purchaser gave notice stating that it thereby "voided" the contract. The appellant elected to treat the contract as still on foot and instituted proceedings against the purchaser for specific performance in the Supreme Court of Queensland. An order for specific performance was made. As at the time of the hearing of this appeal that order had not been complied with, and no application had been made by the appellant for its discharge.
The question which arises on this appeal is whether the appellant is entitled to look to the respondents as guarantors for payment of the money payable by the purchaser to complete the contract. To this end the appellant commenced proceedings in the Supreme Court of Queensland. At first instance Connolly J. found for the appellant and entered judgment in its favour in the sum of $224,167.01. The judgment sum was made up of the balance purchase price payable under the contract ($133,650.00), interest thereon at the rate of $58.59 per day from 26 June 1982 - the day following the day on which settlement should have taken place in accordance with the contract - and an amount of $6,673.00 for rates, levies and stamp duty on the contract. Although it is not expressly so stated in his Honour's reasons for judgment, it would seem that the inclusion of interest in the judgment sum was made by reference to the terms of the order for specific performance, which in turn gave effect to the provisions of cl.7 of the contract which provided for interest on the balance of the purchase price at the rate of sixteen per centum from the date provided for payment by cl.3 until the date of payment. That judgment was set aside on appeal by the Full Court of the Supreme Court of Queensland (Kelly S.P.J., Matthews and Shepherdson JJ.) and in lieu it was ordered that the respondents (defendants in the action) have judgment in the action. From that judgment and order the present appeal is brought.
In the Full Court Kelly S.P.J., with whom Matthews J. agreed, held that the appellant was only entitled to recover damages from the respondents for breach of their contract of guarantee. His Honour further held that damages were not recoverable whilst the contract between the purchaser and the appellant remained on foot. Shepherdson J. was of the view that the respondents were obliged by their guarantee to pay the balance purchase price if the purchaser failed to do so. However, his Honour found that the purchaser had rescinded the contract and accordingly no moneys were payable.
In this Court the primary argument advanced on behalf of the appellant was that the balance purchase price was a debt payable by the purchaser notwithstanding that the contract had not been completed by conveyance and that the respondents' guarantee required them to discharge the indebtedness of the purchaser. Alternatively, it was argued that under the guarantee the respondents assumed a liability to pay the balance purchase price if the purchaser failed to do so. Finally, it was submitted that a claim for damages based on breach of the guarantee would lead to the same judgment as was entered at trial.
The appellant's primary argument may be disposed of shortly. Under the contract of sale the purchaser agreed to pay the balance purchase price "upon settlement". A contractual provision in that form would normally be expected to attract the operation of the general rule that a vendor of land is not entitled to sue for the purchase price payable under a contract which has not been completed by conveyance. The general rule may be excluded by a contrary intention expressed in the contract. In McDonald v. Dennys Lascelles Ltd. (1933) 48 CLR 457 , the position was put by Dixon J. as follows (at p 476):
"The general rule, however, that in an executory contract for the sale of land the vendor cannot sue for the price is excluded whenever a contrary intention is shown by the express terms of the contract. And it seems established by authority that a contrary intention is sufficiently shown in all cases in which by the express terms of the contract the purchase money or any part thereof is made payable on a fixed day, not being the agreed day for the completion of the contract by conveyance. In all such cases the purchase money or such part thereof becomes, on the day so fixed for its payment, a debt immediately recoverable by the vendor irrespective of the question whether a conveyance has been executed and notwithstanding the fact that the purchaser may have repudiated his contract."
It is unnecessary in the present case to consider the nature of the debt thus recoverable, and the precise circumstances in which a debt thus recovered may be retained by a vendor who does not give a conveyance of the property: see McDonald v. Dennys Lascelles Ltd., at pp 477-478; Automatic Fire Sprinklers Pty. Ltd. v. Watson (1946) 72 CLR 435 , at pp 464-465 and Legione v. Hateley (1983) 152 CLR 406 , at pp 456 and 458.
It was argued on behalf of the appellant that cl.3(c) of the contract made it clear that the purchaser, although entitled to a transfer, was not entitled to a conveyance. This being so, the argument ran, the contract evinced an intention that the balance purchase price was recoverable as a debt as and from the time fixed by the contract for settlement.
Even if it be correct that the purchaser is not entitled to a conveyance, that does not alter the fact that under the contract the balance purchase money is payable "upon settlement", and not upon the date fixed by the contract for settlement. It is not to the point (if it be the case) that as at the date fixed by the contract for settlement, the appellant had done everything on its part necessary for settlement to take place, for the contract makes it clear that settlement can only take place with the active participation of the purchaser. For example, by cl.3(c), if the Certificate of Title is unavailable then the purchaser is to accept an undertaking that the Certificate will be produced to permit registration of the Memorandum of Transfer, and by cl.3(g) the purchaser is required to produce a copy of notice "completed in every respect in accordance with the requirements of ... Section 53(2)(a) (of the Building Units and Group Titles Act 1980 (Q.)) and duly executed by the Purchaser". Settlement, quite plainly, did not occur. The balance purchase price thus did not become a debt payable by the purchaser to the appellant, and as such, payable by the respondents pursuant to their guarantee.
The argument that the respondents themselves became liable to pay the balance purchase price was made by reference to what was claimed to be the nature of the guarantee having regard to its commercial purpose. In this context it was submitted that the obligation arising under a guarantee is not merely an obligation to pay damages in the event of breach, but may encompass an obligation to perform the contractual terms guaranteed.
Certain statements can be found in the decided cases suggesting that the obligation of a guarantor is to discharge the primary obligation of the party guaranteed. In Hyundai Heavy Industries Co. Ltd. v. Papadopoulos (1980) 1 WLR 1129 , at pp 1142-1143; [1980] 2 All ER 29 , at p 40, Lord Edmund-Davies adopted as correct a statement by Roskill L.J. in Hyundai Shipbuilding & Heavy Industries Co. Ltd. v. Pournaras (1978) 2 Lloyd's Rep 502, at p 508 in relation to a guarantee of payment of instalments due under a ship-building contract that the object of the guarantee there under consideration was:
"to enable the yard to recover from the guarantors the amount due irrespective of the position between yard and buyers, so that the yard gets its money from the guarantors without difficulty if the yard cannot get it from the buyers."
See per Lord Fraser of Tullybelton (at p 1152; p 47 of All E.R.) where the statement of Roskill L.J. was also adopted as correct.
In Neptune Oil Co. Pty. Ltd. v. Fowler (1963) 63 SR(NSW) 530, it was said in relation to an action on a guarantee for payment of money lent by a money-lender who was subject to the provisions of the Moneylenders and Infants Loans Act 1941 (NSW) (at pp.535-536):
"It is submitted that this is an action to enforce a guarantee and not for the recovery of money lent. We do not think there is any substance in this submission. The very object of requiring the guarantee in the first place was to ensure that the plaintiff, if it could not recover the money lent from the principal debtor, would be able to recover it from the guarantor. Although the action is to enforce a guarantee it is nevertheless for the recovery of the money lent."
Where there is a guarantee of payment of a debt there will commonly be an exact correspondence between the obligation of the guarantor and the obligation of the principal debtor. In those circumstances it is appropriate to speak of the guarantor's obligation as an obligation to discharge the primary obligation of the party guaranteed. But even if there is an exact correspondence, that correspondence is not the result of any meaning attributed in law to the word "guarantee". Nor is it the result of legal conception as to the nature of a guarantee. The correspondence, if it exists, derives from the terms of the contract of guarantee. The position is as stated by Lord Reid in Lep Air Services Ltd. v. Rolloswin Investments Ltd. (reported sub nom Moschi v. Lep Air Services Ltd.) (1973) AC 331, at pp 344-345:
"I would not proceed by saying this is a contract of guarantee and there is a general rule applicable to all guarantees. Parties are free to make any agreement they like and we must I think determine just what this agreement means.
With regard to making good to the creditor payments of instalments by the principal debtor there are at least two possible forms of agreement. A person might undertake no more than that if the principal debtor fails to pay any instalment he will pay it. ...
On the other hand, the guarantor's obligation might be of a different kind. He might undertake that the principal debtor will carry out his contract. Then if at any time and for any reason the principal debtor acts or fails to act as required by his contract, he not only breaks his own contract but he also puts the guarantor in breach of his contract of guarantee. Then the creditor can sue the guarantor, not for the unpaid instalment but for damages. His contract being that the principal debtor would carry out the principal contract, the damages payable by the guarantor must then be the loss suffered by the creditor due to the principal debtor having failed to do what the guarantor undertook that he would do."
The appellant relied on Ross v. Gilmer and Gilmer (1932) NZLR 507 and Western Dominion Investment Company Ltd. v. MacMillan (1925) 2 DLR 442 as examples of guarantees which were worded in similar terms to the guarantee presently under consideration and which were held to oblige the guarantors to make payments of purchase moneys payable under contracts for the sale of land.
In Gilmer the contract was an instalment contract. The vendor was not the registered owner of the land. The contract specified a fixed date for completion by conveyance. That date was fixed by reference to the time at which the vendor would himself take title. The contract further provided that all purchase moneys should become immediately due and payable in the event of default being made in the payment of any instalment. Default occurred. As the purchase moneys became a debt payable on default the question was not whether the guarantee obliged the guarantor to discharge the purchaser's contractual obligation, but whether the guarantor was liable under the terms of the guarantee to make payment in respect of the unpaid debt of the purchaser. The case therefore is of no assistance to the appellant.
The decision in Western Dominion Investment is also of no assistance to the appellant. That case concerned the assignment by an unpaid vendor company of its contractual rights under an instalment contract for sale to a third party. The directors of the vendor company gave their "joint and several personal convenants for the due fulfilment by the purchaser named in the said agreement of the covenants on his part therein expressed or implied" (p 443). It is not clear from the report of the case, either at first instance or on appeal ((1925) 4 D.L.R. 562), as to what terms were contained in the agreement for sale. However, it is clear from the report of the case at first instance (p 444) that the unpaid instalment was treated as a debt due and payable by the purchaser. Moreover, the guarantee itself was construed, not as a promise to perform the contractual obligations of the purchaser, but as a promise to pay the principal debt: see the report at first instance, at p 445.
The decisions in Gilmer and Western Dominion Investment recognized in clear terms that the question of the effect of the guarantees there in question was to be answered by the construction of the guarantees given. So it is in the present case.
The guarantee does not in terms oblige the respondents to pay the balance purchase price in the event of the purchaser's failure to complete the contract. In a context where, as here, the purchase price is payable by the purchaser upon settlement and is not recoverable as a debt prior to settlement, a promise of "performance by the ... purchaser of all the terms and conditions of the contract including the payment of all moneys payable ..." does not, standing alone, import an obligation that the respondents will themselves pay the balance purchase price if the purchaser fails to do so. Such an obligation, if it exists, must be spelt out from the word "guarantee" in its particular contractual setting. In my view, the contractual setting does not permit of such an exercise when regard is had to cl.11.
Clause 11 of the contract enabled the purchaser to nominate another purchaser in its place. If the nominee purchaser is a company the nomination must be accompanied by the guarantee of two or more directors "(i)n the form of the Guarantee set out in the Fourth Schedule of this Agreement", that is, in the form executed by the respondents. The clause then provided that upon nomination of another purchaser :
"... this Contract will continue in full force as if made between the Vendor and the nominee PROVIDED THAT the purchaser undertakes and guarantees the due and punctual payment of all moneys payable hereunder including but without limitation purchase moneys, rates and other adjustments and moneys payable pursuant to Clause 7 of this Agreement and in the manner and at the times and places herein provided AND ALSO the due and punctual performance and observance by the nominee or nominees of each and every of the terms conditions and agreements hereof ..."
Clause 11 itself recognizes and points to the difference in form between the respondents' guarantee and the guarantee to come into operation in the event of the purchaser nominating another purchaser in its place. By that latter guarantee the would-be guarantor (the original purchaser) expressly "undertakes ... the due and punctual 1 payment of ... purchase moneys ... in the manner and at the times and places ... provided". In the light of that express undertaking in the form of guarantee incorporated into cl.11 there is no basis for reading into the quite differently worded guarantee given by the respondents an obligation on their part to pay the balance purchase price in the event of the purchaser's failure to do so in accordance with the contract.
As the balance purchase price was not recoverable from the respondents either by reason that it was a debt owed by the purchaser and covered by the guarantee or by reason that the respondents assumed an obligation to pay if the purchaser failed to make payment in accordance with the contract, I turn to consider the appellant's submission that a claim for damages based on the respondents' breach of their contract of guarantee would lead to the same judgment as was entered at trial. In this context it is relevant to note that the appellant's amended statement of claim included a claim for damages. However, it seems that both at first instance and in the Full Court the appellant argued its case on the basis of a contractual obligation on the part of the respondents to pay the balance purchase price , and not on the basis of their liability in damages for breach of contractual obligation to ensure that the purchaser would perform its obligations under the contract.
Assuming that the contract remains on foot, there can be no doubt that the respondents are in breach of their contract of guarantee. The purchaser did not discharge its obligation to settle in accordance with the contract and thereby put the respondents in breach of their guarantee.
Where, as here, a guarantor merely promises that another person will perform obligations under a contract, the damage flowing from the breach of the contract of guarantee must be the same as the damage flowing from the breach of the guaranteed obligation.
The damages which the law recognizes as flowing to and recoverable by a vendor of land for breach by a purchaser of his obligation to purchase are damages for loss of bargain and consequential loss. But there is no loss of bargain whilst the contract remains on foot. It is for this reason that a vendor must bring his contractual obligation to sell to an end before he can maintain an action for damages for loss of bargain: see Buchanan v. Byrnes (1906) 3 CLR 704 , at p 715; Ogle v. Comboyuro Investments Pty. Ltd. (1976) 136 CLR 444 , per Gibbs, Mason and Jacobs JJ., at p 458 and Progressive Mailing House Pty. Ltd. v. Tabali Pty. Ltd. (1985) 157 CLR 17 , per Mason J., at p 31 (Wilson and Deane JJ. agreeing generally and Dawson J. agreeing) but cf. Barwick C.J. in Ogle, at p 450, where it was suggested that termination is not an essential element of a claim for loss of bargain damages except in the case of anticipatory breach. The idea that termination of the contract is necessary before damages for loss of bargain can be obtained underlies the distinction made by Lord Diplock in Photo Production Ltd. v. Securicor Ltd. (1980) AC 827, at p 849 between the "general" secondary obligation to pay damages arising from the breach of any contractual obligation and an "anticipatory" secondary obligation to pay damages which only arises on termination of the primary contractual obligations.
An "innocent" vendor may bring his contractual obligations to an end notwithstanding that he has obtained an order for specific performance, provided that the order is first vacated, for a contract for sale of land does not merge in a judgment for specific performance: Austins of East Ham Ltd. v. Macey (1941) Ch 338, at p 341; Johnson v. Agnew (1980) AC 367, at pp 393-394.
In the present case the appellant did not bring its contractual obligations to an end, and thus has not put itself in the position where its bargain has been lost so that damages for such are recoverable either from the purchaser or from the respondents as guarantors. Accordingly, in my view, it was correctly held by Kelly S.P.J. and Matthews J. that the appellant was not entitled to the judgment entered in its favour at first instance. It remains to be considered whether the respondents are entitled to judgment in the action as ordered by the Full Court of the Supreme Court of Queensland .
As previously noted, the appellant's statement of claim included a claim for damages. In this Court the appellant sought to rely upon that claim in the context of the argument advanced on its behalf that a claim for damages based on breach of the guarantee would lead to the same judgment as was entered at first instance. However, at no stage has the appellant sought to make a case in damages against the respondents. That case, as was recognized by Kelly S.P.J., is a case which may be put in the event that the appellant brings its contract with the purchaser to an end. That case not having been put, the mere failure of the appellant to sustain its verdict does not entitle the respondents to judgment in the action. It thus becomes necessary to consider whether they are entitled to judgment in the action by reason that the purchaser brought its contractual obligations to an end by its notice dated 24 June 1982 as was argued on behalf of the respondents.
The respondents' argument that the purchaser brought the contract to an end was made by reference to cll.4 and 5(b) of the contract for sale. Before turning to these provisions it is appropriate to note the relevant facts. By letters and notice dated 24 June 1982 and delivered to the appellant's solicitors on 25 June 1982, the purchaser notified the appellant's solicitor that it thereby "voided" the contract on the ground of the appellant's failure to comply with sub-ss.(1), (2) and (3) of s 49 of the Building Units and Group Titles Act. That particular ground was found against the purchaser in the proceedings for specific performance and is not now relied upon.
Although, by reason of the judgment given in the action by the appellant against the purchaser for specific performance, it is no longer open to the purchaser to claim that its contractual obligations were brought to an end, it was claimed on behalf of the respondents, and no contrary argument was put on behalf of the appellant, that as the respondents were not parties to that action, it is open to them to argue that the purchaser in fact brought its contractual obligations to an end.
It was contended on behalf of the respondents that although the purchaser was not entitled to terminate its contractual obligation on the ground specified in its notice of 24 June 1982, nonetheless the notice was effective to terminate its obligations because the appellant was then in breach of its obligations under cll.4 and 5(b) of the contract. It is not in dispute that if the appellant was then in breach of an obligation entitling the purchaser to bring its contractual obligations to an end, the notice effected that result notwithstanding that the purchaser did not know of or rely upon that breach: see Shepherd v. Felt and Textiles of Australia Ltd. (1931) 45 CLR 359 .
Clause 4 of the contract provided:
"CAR SPACE
4. The vendor will ensure that prior to settlement the By-laws of the Body Corporate brought into existence upon the registration of the Building Units Plan will be so amended as to, inter alia, together with any notice required to be given pursuant to such By-Laws, grant to the proprietor for the time being of the said unit the exclusive use of the said unit (sic) the exclusive use for car parking and/or storage of that part of the common property outlined in BLUE on the plan in the CAR SPACE SCHEDULE hereto being the Ninth Schedule."
It seems from the judgment of Shepherdson J. in the Full Court that, although a resolution had been passed by 25 June 1982 to amend the by-laws, the amended by-laws were not registered until 13 July 1982. By s 30(3) of the Building Units and Group Titles Act an amendment to the by-laws has no effect until registered. Thus, as at the date fixed by the contract for settlement (25 June 1982) the by-laws had not been amended so as to give the purchaser exclusive use of the car space for which it contracted. It was argued on behalf of the respondents that the appellant's failure to have the by-laws amended by 25 June 1982 was a breach of an essential term, time having been made of the essence by cl.10, upon which the notice forwarded by the purchaser acted so as to bring the purchaser's contractual obligations to an end.
In Dainford Ltd. v. Smith (1985) 155 CLR 342 this Court considered a clause not relevantly different from cl.4 of the contract between the appellant and the purchaser. In that case Brennan J. (at p 365) said:
"The vendor's obligation was to ensure that a by-law ... was brought into existence 'prior to settlement'. 'Settlement' in the contract is used to describe the event of settlement, not the date fixed for settlement. For example, provision is made for interest 'on late settlement'. The vendor was not in breach of its obligation under cl.5(a) of the contract unless, being called on by the purchasers to settle, the relevant by-law was not then in existence. The purchasers did not call on the vendor to settle. They refused to settle on the date fixed by the vendor's solicitors. It follows that the vendor's failure to ensure that the relevant by-law was brought into existence is not an actual breach of its obligations under cl.5(a)."
Mason J. (at p 353) agreed with his Honour's remarks on this aspect of the case.
Although there are some differences between the contract under consideration in Dainford Ltd. v. Smith and the present contract (including that in the present contract time was of the essence), cl.4 clearly operates by reference to the event of settlement and not the date fixed by the contract for settlement. There could be no actual breach of cl.4 without the purchaser having attended for settlement on 25 June 1982. Even had the purchaser so attended, perhaps no actual breach would have been established until it was clear that the provision could not be complied with on that day. Moreover it cannot be said that the appellant was in actual breach of its obligation under cl.4 merely because, as matters transpired, it is evident that the appellant was not in a position on 25 June 1982 to discharge its obligation. Nor did that inability constitute an actual breach of the appellant's obligation under cl.3(a) to settle by conveyance or transfer on 25 June 1982. The notice given by the purchaser's solicitors was a clear intimation that it was useless for the appellant to make a tender of settlement. The appellant was thereby freed of its obligation to make tender of settlement: see Mahoney v. Lindsay (1980) 55 ALJR 118; 33 ALR 601 . Being freed of that obligation, the appellant could not commit an actual breach of it.
The respondents' argument that the appellant was in breach of cl.4 was made by reference to Hoad v. Swan (1920) 28 CLR 258 , which also concerned a contract for the sale of land in which time was made essential. The fact that time was made essential does not convert a non-breach of cl.4, which operates by reference to the event of settlement, into a breach thereof. However, it does raise the question whether failure to comply with cl.4 on or before 25 June 1982 amounted to an anticipatory breach by the appellant of its obligation under cl.3(a) constituted by inability to settle by conveyance or transfer on 25 June 1982, that is, within fourteen days after notice of registration of the Building Unit Plan, which time was made essential by cl.10.
When time has been made of the essence, a clear inability or unwillingness to perform an obligation at the stipulated essential time is an anticipatory breach entitling an innocent party to bring his contractual obligations to an end. But may a party who purports to terminate on a ground which proves to be unavailable assert, by reference to the principle in Shepherd v. Felt and Textiles, that he has brought his contractual obligations to an end because, at the time when he gave notice relying on an alleged actual breach, there was an anticipatory breach in the sense of inability to perform the obligations made essential by the contract, even though he was not aware of it at the time? That question is further complicated if, as here, the breach is subsequently "cured".
In Brien v. Dwyer (1978) 141 CLR 378 Jacobs J. adverted to the consequence of the "curing" of the breach of an essential term, saying (at p 403):
"The question whether a party can rescind a contract for a breach of an essential condition which has been wholly cured before he is aware of the breach has never, so far as I have been able to discover, been the subject of judicial decision."
His Honour expressly recognized that that question might arise in application of the principle in Shepherd v. Felt and Textiles saying (at p 404) by reference to the facts in Panchaud Freres SA v. Etablissements General Grain Co. (1970) 1 Lloyd's Rep. 53:
"The facts in the present case would be closer to the facts in the case to which I have referred if the vendor had sought to rescind on another ground, if the parties had been locked in dispute, and if then the vendor had discovered that the deposit had been paid late. The rule which in ordinary circumstances operates quite fairly would seem to me to operate unfairly if he should then be able to rescind when at the time of his discovery of the breach he can still get everything under his bargain which he was entitled to have."
Despite the apparent unfairness of the consequence adverted to by Jacobs J., the question is, I think, to be ascertained by reference to the principle which underlies the decision in Shepherd v. Felt and Textiles. That principle is stated in Taylor and Another v. Oakes Roncoroni and Company (1922) 127 LT 267, at p 269; 27 Com. Cas. 261, at p 266 thus:
"It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not."
That statement was cited with approval by Dixon J. in Shepherd v. Felt and Textiles (at p 378).
In Taylor v. Oakes Roncoroni purchasers under a contract for sale of goods sought to bring their contractual obligations to an end on a ground which was not substantiated. Thereafter they attempted unsuccessfully to justify their action by reference to the sellers' inability to perform their contractual obligations. Nothwithstanding the generality of the principle he had earlier enunciated, Greer J., relying on Braithwaite v. Foreign Hardwood Company [1905] 2 KB 543 , stated (at p 269 of LT; pp 265-266 of Com Cas):
"(The buyers are) not released from liability by proving that if (they) had not repudiated the contract, but called for its performance, the (sellers) would have been unable or unwilling to perform it ..."
The decisions in Taylor v. Oakes Roncoroni and Braithwaite are criticized in Carter, Breach of Contract (1984), at pars 920-929, as having "no rational legal justification" (see par.929). See also Dawson, "Waiver of Conditions Precedent on a Repudiation" (1980) 96 Law Quarterly Review 239. The decision in Braithwaite was said by Lord Sumner in British and Beningtons Ltd. v. N.W. Cachar Tea Co. and Others (1923) AC 48, at p 70 to be "not quite easy to understand". In Universal Cargo Carriers Corporation v. Citati [1957] 2 QB 401 , at pp 445-446 Devlin J. adopted Lord Sumner's analysis of Braithwaite and held that a party to a contract who sought to terminate his contractual obligation for a wrong reason might thereafter justify his action on the basis of an anticipatory breach, at least if the other party had at the time when notice was given "become wholly and finally disabled" from performing his contractual obligations (see p 446). Whether such action may be justified on the basis of unwillingness to perform the contractual obligations may raise other considerations: see Afovos Shipping Co. SA v. Pagnan (1983) 1 WLR 195 ; [1983] 1 All ER 449 , per Lord Diplock at p 203; p 455 of All ER
It is clear from Rawson v. Hobbs (1961) 107 CLR 466 , in which Dixon C.J. (at pp 480-481) also adopted Lord Sumner's criticism of Braithwaite, that there is no absolute prohibition on a party to a contract relying on an anticipatory breach constituted by inability to perform to justify termination of his contractual obligations notwithstanding that he previously relied on an incorrect ground. In Rawson v. Hobbs a contract for sale of conditional leases provided that if the Minister should refuse consent to the necessary instrument of transfer then either the vendors or the purchasers might annul the contract by notice to the other. It was ascertained by the purchasers that the Minister's consent could not be given, and relying on the contract provision they gave notice annulling the contract. The notice expressed itself to be without prejudice to the other rights of the purchasers. It was held by Dixon C.J. (p 480) and Windeyer J. (p 491) that the contract only spoke to a refusal of consent to an actual instrument of transfer, and not to a future refusal. However, the notice was held effective to bring the purchasers' contractual obligations to an end on the basis of the vendors' inability to discharge their contractual obligations when the time for performance would arrive.
There is an apparent tension between the principle in Shepherd v. Felt and Textiles and the principle that an "innocent" party may rely on an anticipatory breach to bring his contractual obligations to an end. The latter principle was stated in the joint judgment of Stephen, Mason and Jacobs JJ. (Aickin J. agreeing) in D.T.R. Nominees Pty. Ltd. v. Mona Homes Pty. Ltd. (1978) 138 CLR 423 , at p 433 as follows:
"A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach, and indeed could profit from his misinterpretation of the contract ..."
The tension appears to arise because notice based on a wrong ground may amount to repudiation or an absence of readiness or willingness to perform the terms of the contract, thus depriving the notifying party of his "innocent" status. However, not every notice based on a wrong ground has this effect. Rawson v. Hobbs and D.T.R. Nominees provide examples of notices which did not.
The question which arises when termination of contractual obligations is sought to be justified on the basis of anticipatory breach constituted by inability to perform the contract, if not relied upon at the time, is, as was explained by Dixon C.J. in Rawson v. Hobbs (at p 481), whether, up until the point when the party elects to treat himself as no longer bound, he is "ready and willing to proceed with the contract and, as and when the time comes to do his part, so far as it is of the essence, to perform the contract on his side" or, expressed in negative terms, whether that party was acting under "a substantial incapacity or definitive resolve or decision against doing in the future what the contract (required)". Because that factual question falls for determination by reference to the situation immediately prior to and not at the time of or subsequent to the giving of notice there is, in my view, no reason why the termination of contractual obligations may not be justified by reference to an anticipatory breach constituted by inability to perform, not with standing that it was neither known nor relied upon at the time, and notwithstanding that the breach is subsequently "cured".
To justify termination by a party of his contractual obligations by reference to an anticipatory breach constituted by an inability to perform if not known or relied upon at the time, it is necessary to establish, not only that up until the point of termination the terminating party was ready, willing and able to perform the contract on his part, but also that at that time the other party was wholly and finally disabled from performing its contractual obligations when the time for performance, so far as it is of the essence, should arrive. That total disability must be proved "in fact and not in supposition" - per Devlin J. in Citati at p 450.
In the present case there is no finding that the purchaser was ready and willing to perform the contract on its part prior to the giving of notice "voiding" the contract. Although it was found at first instance and by Shepherdson J. in the Full Court that as at 25 June 1982 the appellant had not ensured the amendment of the by-laws so as to provide for exclusive use of the car space, there is no finding as to whether at the time when the notice was received the appellant was wholly and finally disabled from performance on 25 June 1982 of its obligation under cl.4. For example, it may have been possible for the appellant to obtain registration of the amended by-laws in the time remaining on that day if it had sought so to do. The absence of findings on the above matters is not surprising, given that the respondents sought to make their case by reference to an actual breach of cl.4 and not by reference to anticipatory breach of cl.3(a). Given the way in which the case was conducted it is not appropriate for this Court to proceed to make its own findings of fact. Unless the respondents are otherwise entitled to their judgment in the action, this issue must be remitted to the Supreme Court of Queensland for determination.
The second and final matter which was advanced on behalf of the respondents as having brought the purchaser's obligations under its contract to an end was the appellant's alleged breach of cl.5(b).
Clause 5(b) provided:
"The vendor's solicitors shall deliver to the Purchaser or the Purchasers Solicitors shortly before the date of completion a Certificate of the Body Corporate under Section 40(1)(c) of the (Building Units and Group Titles) Act so that such certificate shall be dated as close in time as possible to the date of completion yet giving to the Purchaser or the Purchasers Solicitors prior to completion adequate notice of the contents thereof. The said Certificate shall not in any circumstances be dated more than fourteen (14) days prior to the date of completion."
No such certificate was provided to the purchaser or its solicitor prior to 25 June 1982, the day fixed by the contract for settlement. The contract recognized that, notwithstanding that time was made of the essence, the contract might not be completed at the time stipulated by cl.3(a) for settlement. Thus in cl.7 it is provided:
"Should there be any delay in payment of the balance of the purchase money or any instalment thereof by virtue of default on the part of the Purchaser then without prejudice to any other rights of the vendor the Purchaser will pay to the Vendor at completion a sum for liquidated damages equivalent to interest at the rate of sixteen per centum (16 %) per annum on the monies so owing from the date for payment thereof until payment shall have been made."
In cl.7 "completion" clearly referred to the act of settlement taking place as agreed between the appellant and the purchaser or their solicitors, notwithstanding that the date fixed by the contract for settlement had passed. Clause 5 was concerned with adjustment of outgoings referable to the unit. Those adjustments were to be made at completion. Settlement might, as was expressly contemplated by cl.7, take place after the date fixed by the contract for settlement. On the other hand, the parties might, by agreement, settle before the fixed date. In this context "date of completion" clearly means the date arranged between the parties or their solicitors as the date on which settlement will take place. There was no such arrangement. There was thus no breach of cl.5(b). It follows that the respondents are not entitled to judgment in the action on the basis that the purchaser brought its contractual obligations to an end by reason of a breach by the appellant of cl.5(b) of the contract.
In the light of the above conclusions I would allow the appeal, but only to the extent necessary to set aside the order of the Full Court that there be judgment in the action for the respondents (defendants). The matter should be remitted to the Supreme Court of Queensland to determine whether the contractual obligations of the purchaser were terminated by reason of anticipatory breach of cl.3(a), and in the event that they were not so terminated, to enable the appellant to take such further action as it may be advised in relation to its claim for damages. I would make no order as to costs.