Appeal
27 Donut King appealed from the decision on ten grounds which can be summarised as follows from its written submissions:
· that the trial Judge should have characterised the bonnet logo requirement as an essential term of the agreement entitling Donut King to terminate it (grounds 1 and 2);
· that the trial Judge erred in failing to conclude that Donut King validly terminated the agreement on 22 March 1999 (grounds 3 and 4);
· that the trial Judge should have held that the agreement made in November 1997 was merely an extension of the 17 July 1997 agreement comprising the express terms of that agreement except in so far as these were varied by the letter of 21 October 1997 and the terms of discussion set out in the Points Document (grounds 5 and 6);
· that the trial Judge applied the wrong test to determine what the terms of the agreement were by referring to events and the conduct of the parties at the date of its breach rather than at the date of its formation (grounds 7 and 8);
· that the trial Judge gave undue weight to Donut King's commercial motivation for exercising its contractual right of termination on 22 March 1999 (grounds 9 and 10).
28 Central to the appeal was Donut King's contention that the change of logo to white lettering on a red background was the breach of a promise of such importance to Donut King that it would not have entered into the agreement unless it had been assured of a strict or substantial performance of the promise. This ought to have been apparent to WGR, with the consequence that Donut King might treat itself as discharged upon the breach of this promise, even of it were regarded as only slight; see per Jordan CJ in Tramways Advertising Pty Limited v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641-2; approved by the High Court in Associated Newspapers Limited v Bancks (1951) 83 CLR 322 at 337 and in Shevill v Builders Licensing Board (1982) 149 CLR 620 at 627 and 636.
29 The trial Judge did not accept this contention. Donut King attacked his reasons for this and particularly the weight he gave to the reaction of Donut King's officers and employees to the possibility that the promise would be broken. His Honour said:
"If the presentation of the Defendant's logo, in particular colours, was such an essential term of the contract, then, as the Plaintiff says, one would expect that when its presentation in another form was mooted by Gardner, the issue would be treated significantly differently to what ultimately transpired."
30 Whether the logo specification should be classified as a term requiring strict or substantial compliance, breach of which would give rise to a right to terminate was one of the main issues in the appeal; see generally Carter & Harland, Contract Law in Australia, 3rd ed, paras 731-2. As Mr Brereton SC, who appeared for WGR, put it the question was whether any departure from the colour scheme of the logo justified termination, however slight that departure was. Alternatively, if the term was an intermediate term and only substantial breach gave rise to the right to terminate, the question was whether the breach was of such gravity that Donut King was entitled to terminate.
31 As to the alternative, assertions were made that the breach caused incalculable damage to Donut King. This can be dismissed for reason that there was no evidence at all to support the assertion. Donut King referred to none. The assertion does not sit easily with Donut King's leisurely reaction to the news that the bonnet logo presentation was to be or had been changed. There was evidence, which the trial Judge accepted, that Donut King wanted to get out of the agreement with WGR for marketing reasons which had nothing to do with the bonnet logo presentation.
32 Donut King submitted that the integrity of each sponsor's logo was fundamental to its relationship with race car operators who were being sponsored for intellectual property reasons. The logo as a symbol may, like a trademark, have the important functions of distinguishing or differentiating the owner's product, of indicating the product's origin or source and its quality and, relevantly to the present case, of advertising the product. The logo's integrity must therefore be protected. But how the owner of the logo seeks to exploit it is a matter for it. General considerations of the sort I have mentioned do not much assist in answering the questions raised by this appeal.
33 Clause 5 of the July 1997 agreement provided that failure by Donut King to pay the sponsorship amount or any part of it should at the election of WGR result in an immediate forfeiture of all the sponsor benefits granted. By contrast neither the July 1997 agreement nor the later agreement contained any provision that failure by WGR to display the Donut King logo on the bonnet in accordance with the specification resulted in a forfeiture of its entitlements under the agreement. When the parties intended to make strict and literal performance of a promise essential they expressly provided for it. Clearly enough the text of the agreements suggested that the parties did not attach a requirement for strict and literal performance to WGR's promise to provide to Donut King the rights and benefits set out in the first schedule, relevantly, the Donut King Bonnet Signage in accordance with specification under penalty of forfeiture.
34 Mr Brereton pointed out that the first schedule provided for the Donut King logo to be placed on the main display fascia (left and right) of the WGR team pantech (pantechnicon). However, while the Donut King Identification document attached to the facsimile transmission of 24 June 1997 provided for "Donut King Logo Colour Lettering on white background 1400mm x 770mm" on racing and display vehicles, it provided "main display fascia left and right Donut King logo white lettering on red background or logo colours encased in white border" for the pantech. Mr Brereton submitted, and I agree, that this demonstrated conclusively that white lettering on a red background was not universally unacceptable. Consistently with this, it could not be claimed that the requirement that the logo be in pink or magenta lettering on a white background was of a significance that made performance of the promise that it would take this form on the racing cars so essential that Donut King would not have entered into the agreement unless it had been assured of a strict or substantial performance of the promise.
35 For these reasons, in my opinion, the trial Judge rightly concluded that the promise to put a logo of pink lettering on a white background was not essential and that the breach that occurred of the term did not enable Donut King to terminate the agreement. It followed that Donut King by wrongfully purporting to terminate the agreement repudiated it and was liable in damages for doing so. Donut King did not challenge the assessment of damages that followed. This conclusion means that it is unnecessary for the Court to pass upon the other grounds of appeal.