Contracts 2 Presentation

1
Contracts 2 Presentation

• Laurinda Pty Ltd
• v
• Capalaba Park Shopping Centre Pty Ltd
• (1989) 166 CLR 623

Presented By Chun-chi Hung August 2004
2
Material Facts

• Lessor Capalaba (C), Lessee Laurinda (L)
• Agreement Lease of a shop forming part of a
  retail centre for a period of 6 years.
• C advised L on two occasions that the executed
  copy of the lease would be available in the near
  future, which were misleading.
• 21 Aug 1986 ? In view of unexplained delays, L
  sent a notice requiring completion of the
  registration within 14 days.
• 3 Sep 1986 ? Cs solicitor replied that they
  had referred the letter to C for further
  instructions.
• 5 Sep 1986 ? L terminated the agreement on the
  ground that C had repudiated the agreement or
  was in breach of an essential term as a result of
  Cs failure to register the lease.
• 31 Oct 1986 ? L commenced action for
  declaration that the lease had been validly
  rescinded, recovery of 2,317 and damages and
  interest. C denied the claim contending that
  Ls termination was wrongful, and claimed unpaid
  rent, damages and interest.

3
Prior Proceedings Issues

• Proceedings
• Trial Judge (Connolly J) ? The letter of 21
  August was not an effective notice to
  complete. However, the agreement for the
  lease had been validly terminated by L for
  Cs repudiation.
• Full Court ? Reversal of the trial judges
  decision.
• High Court ? The Court found in favour of L.
  Hence appeal is allowed.
• Issues
• 1) Whether the agreement for the lease had been
  validly terminated by L for reasons of
  unreasonable delay and hence repudiation.
• 2) Whether the notice to complete sent on 21
  August was effective.
• a) Does the letter have to notify C that L
  would terminate the contract in the event of
  non-compliance?
• b) Is the time period stipulated in the letter
  reasonable? How do we assess reasonableness in
  this regard?

4
General Principle in Repudiation
Does the letter need to specify termination in
the event of non-compliance?
What is Reasonable Time?
CONTRACT
Damages
Time is of the Essence
Time is NOT of the Essence
Notice to complete issued by innocent party
Requires performance within a reasonable period
of time
Compliance
Non-Compliance
Right to rescind arises when stipulated days
passed
Right to rescind not necessarily arise when
reasonable time expires
Repudiation Inferred
Other Circumstances
Right to Rescind
5
Delay Repudiation

• Delay will amount to repudiation if the
  defaulting party evinces an intention no longer
  to be bound by the contract or shows that he
  intends to fulfil the contract only in a manner
  substantially inconsistent with his obligations
  and not in any other way. (Shevill, Progressive
  Mailing)
• If the inference is that the defaulting party
  intends so to delay performance that the promisee
  will substantially deprived of the benefit of the
  promise, repudiation can be inferred (Progressive
  Mailing)
• To provide a firm basis for the inference of
  repudiation, it is prudent for the promisee to
  give a notice to complete.
• The result of non-compliance with the notice is
  that the party in default is guilty of
  unreasonable delay in complying with a
  non-essential time stipulation. The unreasonable
  delay amounts to repudiation and this justifies
  rescission. (Louinder v Leis)
• In the present case, given the absence of an
  effective notice means that other evidence must
  be examined to determine whether a clear
  inference of repudiation should be drawn, given
  the long and unexplained delay of C from March to
  September 1986, in conjunction with dishonoured
  assurances, continued failure to produce a lease
  and continued refusal to properly address the
  lessees requirement, it amounted to repudiation.

6
Effective Notice Issue (1)

• (Deane and Dawson JJ) It seems to us, in modern
  circumstances, a notice will be adequate to
  convey such a warning, if, but only if, it
  conveys either that the time fixed for
  performance is made the essence of the contract
  or that the party giving the notice will, in the
  event of non-compliance, be entitled to rescind.
• (Brennan J) The letter falls short of
  communicating Ls intention to treat the end of
  the 14-day period as of the essence for
  performing of Cs obligation to complete
  registration. For this reason, the letter was not
  an effective notice to complete.
• (Mason CJ) Balog v Crestani (1975) ? It is not
  necessary that the notice should state that the
  party will treat the contract as at an end in the
  event of compliance. It is sufficient if the
  notice indicates that the party giving it may
  choose to rely on his rights in the event.
• The notice must convey a definite and specific
  intent to require strict compliance with the
  terms of the contract within a reasonable time so
  that the recipient will be made aware that the
  party giving notice may elect to treat the
  contract at the end in the event of
  non-compliance.
• In present case, C was aware L wished to dispose
  its business and the matter is urgent. The
  surrounding circumstances made it clear to C that
  given the expiry of a reasonable period, L would
  regard the contract as at the end.

7
Effective Notice Issue (2)

• (High Court) In determining whether the time
  limited by the notice was reasonable is a
  question of fact and it falls to be determined by
  reference to evidence, which is rather
  indefinite.
• There is no clear evidence that the appellants
  were pressing C before 21 Aug to complete
  performance.
• However, it is also relevant to consider the
  time C already had to complete the contract.
• Given the evidence provided by Cs solicitor,
  Mr. Lockhart, it is sufficient to raise a serious
  doubt in the mind of the court as to the prospect
  of having the lease stamped and lodged for
  registration within the period of 13 days limited
  by the notice.

8
Summing Up What does Capalaba stand for?

• Where time is not of the essence, breach of the
  time provision does not give rise to right to
  terminate unless the promisee serves a notice
  requiring performance within a reasonable time.
• A notice will not be required where the delay
  itself constitutes a repudiation.
• A mere delay in performance will not amount to
  repudiation. The delay must be unreasonably long
  so that the only reasonable inference to be drawn
  is that the defaulting party does not intend to
  perform the contract substantially in accordance
  with its terms.
• The notice is not required to be in any form
  but should have the following
• (1) What the promisor must do to perform the
  contract.
• (2) A reasonable time in which the contract must
  be completed.
• (3) The consequences of not performing in
  accordance with the notice