72 The issue that arises in this instance is whether the severance of the offending part of clause 1, thereby preventing Gwydir from relying upon the second alternative for a longer period over which to pay the $300,000, would materially alter the terms of the bargain between the parties. In determining this issue it is appropriate to compare the weight that the uncertain, and therefore unenforceable, aspect of the consideration bears in relation to the consideration as a whole: DW Greig and JLR Davis Law of Contract (Lawbook Company, Sydney, 1987) at 371.
73 In Fitzgerald v Masters (1956) 95 CLR 420 the executors of the estate of the late John Martin Fitzgerald (the deceased), the appellants in the High Court, appealed from an order made in the Supreme Court of New South Wales that they, as executors of the will of the deceased, specifically perform an agreement in writing dated 5 March 1927, entered into between Rupert Clarence Masters, as purchaser and the deceased as vendor, of certain land in Dubbo, New South Wales. The contract recited that a deposit of £200 had been paid and that the balance of the purchase money was to be paid "in instalments of £10 or more, at the option of the purchaser, per month", the first of such payments to be made on or before 1 April 1927. Clause 2 of the contract provided that Masters was entitled to equal possession of the Homestead Farm with the deceased and was equally liable for the rents, rates, taxes, mortgage payments, including interest, and costs of any improvements or repairs. Clause 3 provided for transfer of one half interest in the Homestead Farm to Masters when he had paid the full amount of £850 to the deceased and provided that Masters complied with clause 2 of the contract. Clause 8 provided: "The usual conditions of sale in use or approved of by the Real Estate Institute of New South Wales relating to sales by private contract of lands held under the Crowns Lands Act shall so far as they are inconsistent (sic) herewith be deemed to be embodied herein". The appellants claimed that the document executed by the parties was not effectual to bring a contract into existence in that the terms were so uncertain that the "sale" could not be enforced. That argument was based on clause 8 of the contract. Mc Tiernan, Webb and Taylor JJ said at 438:
In the circumstances of the case it [clause 8] must be regarded simply as a compendious provision inserted by way of more abundant caution to cover such incidental matters as did not obtrude themselves for the consideration of the parties. But their intention that they should be bound by the declared terms is clear. And it is equally clear that they intended their agreement to subsist even if the provisions of cl. 8 should fail to incorporate some term or terms from an identifiable form containing "usual conditions". But it is said that if the provisions of cl. 8 proved to be nugatory, not because of the failure to find not inconsistent terms in an identifiable form, but because of the non-existence of any such form, the conclusion should be reached that the parties failed to agree. The suggestion does not carry conviction to our minds. Clause 8 was merely an appendage to the parties' declared agreement and there is nothing to show that it was intended to serve any purpose beyond providing for possible contingencies the nature of which they do not appear even to have contemplated. That they did not contract by reference to the provisions of any known form speaks eloquently that they mistakenly assumed the existence of some form of contract such as that described in cl. 8 does not affect the matter.
74 The primary consideration for the agreement was that Gwydir would pay MacDonald $500,000 in exchange for an exclusive licence to use "the MacDonald System" in New South Wales. The amount of $500,000 was payable in any event and although of the option of having an extra three months to pay the balance of $300,000 would probably not be appropriately described as a "mere appendage", its absence does not in my view materially alter the nature of the parties' bargain.
75 There may be a question of whether the provision in the Licensing Agreement, "in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months" is a "term" within the meaning clause 35 of the Agreement. It was not submitted that such provision was not a "term" within the meaning of that clause and, in any event, I am satisfied that this provision would fall within that description. I am satisfied that it is appropriate to sever the provision in clause 1 which provide that, "in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months". Accordingly by 17 July 2001 Gwydir was in default of its obligations under the Licensing Agreement. Gwydir is entitled to a reduction in the amount owing of $100,000 by reason of the non-delivery of the Head. I am also satisfied that Mr Miller's submission that all monies paid, including the amount for the Head, should be taken into account in relation to Gwydir's liability to MDH in respect of the $500,000. By reference to the Payment Schedule extracted earlier, the amount owing is therefore reduced to $500,000 of which $395,000 had been paid. Gwydir had failed to pay $105,000 then owing to MDH.
76 The next question that arises is whether MDH was entitled to terminate the Licensing Agreement. MDH claimed that Gwydir's non-payment of the fee under clause 1 of the Licensing Agreement was a breach of a fundamental term entitling it to treat such breach as a wrongful repudiation of the Licensing Agreement and to terminate it. Clause 24.2 (a) provided that MDH could terminate the Agreement if Gwydir failed to "fulfil or perform any one of the material duties, obligations or responsibilities" under the Agreement and if such failure was not cured within the time specified in the "Time to Cure Default Notice" from MDH.
77 In its original Summons, filed on 18 March 2005, MDH claimed that on or about 20 June 2001, Gwydir was in breach of the provisions of clauses 1 and 4 of the Licensing Agreement (C 10). Gwydir denied that contention without particularising the basis of such denial (C 13). MDH claimed that by reason of Gwydir's breaches of clauses 1 and 4 of the Licensing Agreement it had wrongfully repudiated the Agreement and had evidenced an intention no longer to be bound by it (C 13). It claimed that on or about 17 July 2001 MDH notified Gwydir that it had accepted its wrongful repudiation of the Agreement and its unwillingness to be bound by it and terminated the Licensing Agreement (C 14). In its original Defence dated 22 July 2005, Gwydir denied it had wrongfully repudiated the Licensing Agreement, without particularising the basis of that denial, and also denied that MDH was entitled to terminate the Agreement, however at that stage it indicated that it would rely upon s 106 of the Industrial Relations Act, a claim which as I have already said was later abandoned (C15 and 16).
78 MDH reiterated the claims in relation to wrongful repudiation in its Amended Summons filed on 18 October 2006 (C 10-16). In its Amended Defence, filed on 24 October 2006 and further amended on 26 October 2006, Gwydir abandoned the claim in relation to s 106 of the Industrial Relations Act, referred to the fact that it would rely upon the matters pleaded in the cross-claim, and denied it had wrongfully repudiated the Licensing Agreement and that MDH was entitled to terminate it (C 13-17). There was no reference in the respective pleadings, nor was there any written or oral submission made by or on behalf of Gwydir that MDH was not entitled to terminate the Licensing Agreement by reason of any failure to comply with clause 24.2(a) of the Licensing Agreement. The defendants' defence as run at trial and put in final submissions was that: Gwydir was entitled to make quarterly payments rather than bi-monthly payments because business performance was lower than expected and was therefore not in default as at 17 July 2001; even if the payments were due bi-monthly the next instalment was not due until 19 June 2001; the Hire Agreement was terminated on 18 June 2001 having the effect of terminating the Licensing Agreement on the same day thus wrongfully terminating the Licensing Agreement prior to the next instalment of $100,000 being due to MDH.
79 As I have said earlier, the parties have not burdened the Court with a copy of the letter of 18 June 2001. However the detail of the letter was not relied upon other than for fixing the date. Mr Miller submitted that when the Hire Agreement was brought to an end it was impossible for Gwydir to exploit its purported exclusive rights in New South Wales because it did not have access to the equipment essential for that exploitation. It was also submitted that the termination of the Hire Agreement made it impossible for MDH to comply with its obligations under clause 4 of the Licensing Agreement. It was submitted that because termination of the Hire Agreement effectively destroyed the substratum of the Licensing Agreement, rescission of the Hire Agreement would terminate the Licensing Agreement.
80 I do not accept that the termination of the Hire Agreement, assumed to be on proper grounds, terminated the Licensing Agreement. The Licensing Agreement was between MDH and Gwydir. The Hire Agreement was between GEP and Gwydir. There is no doubt that on termination of the Hire Agreement Gwydir was obliged to return to GEP the equipment the subject of the Agreement (cl 11). The Hire Agreement does not refer to the Licensing Agreement. Clause 4 of the Licensing Agreement was a lease arrangement between MDH and Gwydir that did not depend upon anything in the Hire Agreement between GEP and Gwydir. MDH was obliged to lease the Head to Gwydir independently of anything in the Hire Agreement. There is nothing expressly or by implication in either the Licensing Agreement or the Hire Agreement to suggest that the parties intended that when the Hire Agreement was terminated, the Licensing Agreement would thereby be terminated. In a practical sense, it would certainly make life more difficult for Gwydir to continue with its Licensing Agreement once it lost the entitlement to the Hire Agreement, however it was in a position to consider alternative commercial arrangements either with MDH or GEP for the hire of relevant equipment. I am not satisfied that the parties intended that the termination of the Hire Agreement terminated the Licensing Agreement. I am also not satisfied that the Licensing Agreement was frustrated by the termination of the Hire Agreement. Accordingly the Licensing Agreement remained on foot until 17 July 2001.