Gaudron J said (p 666):
"There is no very precise formulation of the necessary import of conduct before it will be characterised as repudiatory. In Carr (at 349) Fullagar J (with whom Dixon CJ, Williams, Webb and Kitto JJ agreed) expressed the issue in terms of the only legitimate inference being that the party in breach was not going to perform the contractual obligation at all or was not going to perform it unless and until convenient so to do. His Honour characterised (at 351) the conduct under consideration in that case as such that "[a] reasonable man could hardly draw any other inference than that the building owner does not intend to take the contract seriously, that he is prepared to carry out his part of the contract only if and when it suits him". The thrust of the observations in Carr is that for conduct to be characterised as repudiatory it should either convey an intention not to be bound at all or give rise to uncertainty as to whether the contractual obligation will be performed. But a less restricted view has developed. In Shevill (CLR at 625-6) Gibbs CJ (with whom Murphy and Brennan JJ agreed) referring, inter alia, to the decision in Carr , identified the manifestation of an intention "to fulfil the contract only in a manner substantially inconsistent with [the] obligations and not in any other way" as conduct constituting repudiation. That statement was accepted as correct in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33 and 44; 57 ALR 609. It was expressly recognised in Carr (at 349) that breach which did not itself entitle the other party to rescind might remain unremedied for so long and in such circumstances as to constitute repudiation. See also Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 at 339-40; Tabali , per Brennan J."
50 A right to rescind depends on the importance of the term repudiated. The criterion was stated by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, pp 641, 642. His Honour said:
"The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor: Flight v. Booth ; Bettini v. Gye 7 ; Bentsen v. Taylor, Sons & Co. (No. 2) ; Fullers' Theatres Ltd. v. Musgrove ; Bowes v. Chaleyer 0 ; Clifton v. Coffey 1 . If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight."
51 Failure to perform an obligation which is fundamental or essential on a stipulated date or, if no date be stipulated, within a reasonable time does not entitle the other party to bring the contractual obligations to an end unless the time of performance is expressly or impliedly made essential by the contract or is made essential by an effective notice to complete. (Laurinda p 664; Carr p 348-349; Balog v Crestani (1975) 132 CLR 289 p 296.)
52 As to the issue of intention, the relevant acts and circumstances are the following.
53 In the agreement the provisions as to interest were cl 2.2 and cl 11. Clause 2.2 required payment of the balance at the expiration of 12 months from the date of the agreement or on completion of the sale of the plaintiffs' real property in New Zealand whichever was the sooner. It also provided:
"… However, after the expiration of 6 months from the date of this agreement, the remaining balance of the purchase price, if any, will be subject to interest at commercial bank rates."
54 Clause 11 provided that the balance of the purchase price owing six months after the date of the agreement would attract interest at commercial bank rates, payable monthly.
55 The first instalment of $400,000 towards the purchase price of $1,500,000 was paid in accordance with the agreement on 20 September 2006, the date on which it was signed. Interest on the balance was to be incurred from 21 March 2007.
56 I have set out above the evidence of the conversation at the meeting on 1 April 2007 about the purchase price under the agreement. The evidence shows, and I find, that Tracey proposed, in effect, that the purchase price be varied to the amount of $700,000. The evidence also shows that Bill replied that he would have his external accountants look at the figures after which he would let them know his response to the proposal. It also shows that Bill intended that this should happen. Bill accepted that he left the plaintiffs with the impression that he would consider their proposal and come back to them. The evidence was that he neither referred the matter to his accountant, nor responded to the proposal.
57 Relevantly, the first communication to the plaintiffs after the meeting was Mr Green's letter of 12 April 2007 which included a demand for interest as follows:
"As you are aware, under the agreement you are now paying interest on the balance of monies owing. We are instructed by Bill and Jennifer that 'without prejudice' to their rights under the agreement that for the first three (3) months commencing 25 th April 2007 that they will accept interest at the rate of 2.5% per annum …".
58 It was in response to this letter that, on 19 April 2007, Chris had the following telephone conversation with Mr Green:
"… I also told him, "We have had discussions with Bill and Jennifer and are in negotiations regarding the purchase price as a lot of the information we were told was incorrect and we don't believe it is worth what was in the agreement and therefore the interest will not be on the full amount. We will also need some paper work with details on the amount and where to pay it to before any interest can be paid." Tim Green said, "I will have to go back to Bill and talk to him and come back to you."
59 Bill's evidence was that on 23 April 2007 his solicitor informed him that he had been told by the plaintiffs "… that (they) would not be paying any interest". He then instructed his solicitor to write to the plaintiffs to inform them they were in breach and had repudiated the agreement.
60 Doubtless in accordance with Bill's instructions, Mr Green sent the letter of 23 April 2007 in which he referred to his conversation with Chris, and stated:
"We confirm your advices that you will not be paying interest to our clients in the terms of the agreement.
Your conduct constitutes a repudiation of the agreement. Our clients reserve their rights under the agreement and at law …"
61 As the authorities hold, the issue of repudiation turns on whether, viewed objectively, the conduct of the relevant party was such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal of the contract as a whole or of a fundamental obligation under it (Laurinda p 567-568). In this case, the conduct relied upon by the sellers was Chris' statement to Mr Green on about 19 April 2007 which included the words (affidavit 23.05.09):
"… we don't believe it is worth what was in the agreement and therefore the interest will not be on the full amount. We will also need some paper work with details on the amount and where to pay it to before any interest can be paid."
62 In my opinion it was not reasonably open for the sellers, in the circumstances known to them, to conclude from the conversation with Mr Green that the plaintiffs refused to be bound by the agreement and no longer intended to continue with it. In other words, Chris' statement provided no reasonable basis for Bill to treat what was said as repudiatory conduct which entitled the sellers to rescind. Reasonableness on Bill's part required him to take into account that Chris was responding to the claim in the letter of 12 April 2007 for interest payable on the remaining balance of the original purchase price at a time when he had not yet responded, as he had said he would, to the plaintiffs' proposal that the price be reduced. He should also have taken into account that until he made a response, the amount upon which interest was to be calculated was left uncertain. In my opinion, Chris' statement could be reasonably understood to be no more than the plaintiffs' explanation for declining to pay interest calculated on the remaining balance of the purchase price stipulated in the agreement whilst the proposal was still under negotiation. Furthermore, in my opinion his words "… we will also need some paper work with details on the amount and where to pay it to before any interest can be paid", reasonably understood, demonstrated acceptance of the obligation to pay interest upon finalisation of the amount of the purchase price. Taken as a whole, what was said to Mr Green was incapable of evincing a repudiatory intention.
63 Accordingly, I find that the sellers were not entitled to terminate the agreement, and that by Mr Green's letter of 23 April 2007 they had repudiated and put an end to it.
64 If it was necessary to do so, I would also uphold the plaintiffs' alternative case that the failure of the sellers to give an effective notice to complete disentitled them to terminate. Relevantly, the agreement contained no provision which allowed either party to terminate or rescind if the other defaulted in the performance of their obligations thereunder. Furthermore, nowhere was it provided that time was of the essence with respect to the payment of interest or for compliance with other conditions, for example, cl 3 under which the sellers were obliged to execute share transfers and convene a company meeting upon the payment of the deposit. In my opinion the stipulation in cl 11 that interest was payable monthly did not operate to make time of the essence. The condition fails the test of essentiality stated in Tramways Advertising Pty Ltd p 641, 642. It is well settled that the failure by one party to fulfil his promise within the stipulated time does not entitle the other party to rescind and that, generally, he may only do so after giving a notice requiring performance within a specified reasonable time and after non-compliance with that notice (Balog p 296-297). In this case it was necessary to give notice to the plaintiffs limiting the time for payment of interest and stating that upon non-compliance the sellers would terminate the agreement. It was common ground that they did not do so.
65 It follows that the plaintiffs are entitled to damages, if any, suffered as a consequence of the sellers' breach. It also follows that the sellers' cross-claim against them must be dismissed.
Damages
66 The plaintiffs' claim for damages is for the recovery of $400,000 paid with interest. They also claim damages for items described as consequential loss.
67 The payment of $400,000 was made in accordance with cl 2.1 of the agreement as the first instalment of the purchase price. The agreement was wrongfully terminated seven months later, before the sellers had transferred their shares to the plaintiffs. In my opinion, the plaintiffs are entitled to recover the amount paid, with interest, on the basis of a total failure of consideration alternatively, as monies had and received by the sellers to the use of the plaintiffs.
68 I have not overlooked the sellers' submission that there was no total failure of consideration. It was put (T p 435) that the sellers provided partial consideration in that the agreement facilitated the plaintiffs' entry into the business of the company which allowed them to participate in its operation, and thus went beyond an agreement limited to the sale and purchase of shares. In other words, as I understood it, the submission was that as the plaintiffs had been involved with the company's operations for some time, they had received a substantial part of that for which the instalment was paid.
69 The short answer to the submission is that the plaintiffs' management activities with the company were under separate employment contracts between each of them and the company to which the sellers were not parties. In my opinion it cannot be said that such benefits which the plaintiffs may have derived under the employment contracts should be taken as partial consideration under the agreement with the sellers for the purchase of shares in the company. The submission must be rejected.
70 The plaintiffs also claim damages being costs and expenses incurred in moving from New Zealand to Nambucca Heads in August 2006 and in returning to New Zealand after termination of the agreement in April 2007. The plaintiffs described these items as relocation expenses.
71 The items were listed in a document entitled "2nd Updated Schedule of the Plaintiffs' Damages" which, with the plaintiffs' supplementary submissions, were sent to the court on 28 July 2010. These documents will remain with the court file. The items were for costs and expenses in the total amount of $33,389.84 incurred between 28 August 2006 and 15 May 2008.
72 The items for the period between 28 August 2006 and 20 April 2007 include expenses relating to transport of the plaintiffs' horses and personal belongings from New Zealand to Australia, and related insurance, and for conveyancing costs for the purchase of property at Missabotti. The items for the period 3 May 2007 and 15 May 2008 include the plaintiffs' fares to return to New Zealand, transport costs to New Zealand for their horses and personal belongings, and costs related to the sale of, and departure from, the Missabotti property.
73 During final submissions, and after some vacillation (T p 366, 392) the plaintiffs submitted (T p 438, 439) that the losses were claimable under both the agreement and the employment contract. However, it is reasonable to understand from the supplementary submissions of 28 July 2010 (pars 32-40) that these claims are made only under the employment contracts. However, for the avoidance of doubt, I deal with these items on the basis that they are claimed to be losses resulting from the breach of either contracts.
74 In support, the plaintiffs relied on the principle in Hadley v Baxendale (1854) 2 CLR 517; (1854) 9 Exch 341 that consequential loss for breach of contract is claimable if it may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. In Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 Deane, Dawson JJ said (p 380):
"… The general principle underlying the ascertainment of damages for breach of contract is that a successful plaintiff is entitled to the monetary sum which provides reasonable compensation for the breach 'without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept'."
75 The onus is on the plaintiffs to prove their loss. Although quantum was not contested, the sellers denied liability.
76 The plaintiffs relied upon Bill's evidence in cross-examination as follows (T p 297, l 49- p 298, l 1 - 1 14):
"Q. During the course of your discussions in New Zealand on the occasion of Tracey's father's 60s birthday you were aware, were you not, that their plans were to sell their property in New Zealand and come to Australia?
A. Yes.