Case: Foran v Wight [1989] HCA 51 ; (1989) 168 CLR 385
Outcome: followed
The requirements to be proved by a party, which has properly brought a contract to an end by accepting a wrongful repudiation by the other party to an executory contract and seeks damages, was considered in Foran v Wight [1989] HCA 51 ; (1989) 168 CLR 385, although that was not the precise point of the case. Such a party must establish that it was ready and willing to carry out the contract on its part at the time of acceptance of the repudiation and readiness and willingness includes capacity. However, in a situation in which the wrongdoer relieves the other party from actual performance in the future, that task is not particularly demanding. In Psaltis v Schultz [1948] HCA 31 ; (1948) 76 CLR 547 Dixon J said (at 560): 'It is enough that he is not presently incapacitated from future performance and is not indisposed to do, when the time comes, what the contract requires.' 202 In Foran v Wight Mason CJ said (at 408 409): '... in the case of termination for anticipatory breach the plaintiff will generally be able to show at the time of termination that he would have been able to perform at the time for performance by demonstrating that he was not then disabled or incapacitated from such performance.' [emphasis added] Brennan J said (at 425): 'To speak of an incapacity which is "substantial" and of a resolve or decision which is "definitive" is to import a test of degree. A test of degree inevitably gives rise to differences in the evaluation of facts and produces some uncertainty in the resolution of concrete cases. Yet, in the great variety of circumstances to which the test might be applied, it is impossible to posit terms of greater precision. Lord Sumner's phrase "wholly and finally disabled" is too demanding a test of incapacity to accord with reasonable commercial practice but it is indicative of the range which the test of substantiality connotes. The test of incapacity, ... as an element in readiness and willingness, is an exacting test though it must be expressed as a matter of degree.' Deane J said (at 437): ' ... I do not accept the proposition that a party must incur the expense necessary to put himself in a position where he can positively demonstrate actual or potential readiness and willingness to perform a contract before he can accept the repudiation of the other party and thereby rescind. In my view, that proposition is unjustified by either principle or common sense. Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach. It does not, of itself, preclude rescission of the contract by acceptance of the other party's repudiation. Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party.' Dawson J said (at 452 453): 'Even where a party has been absolved by the repudiating party from performing his future obligations under the contract he must show that at the time of the repudiation he was ready and willing to complete the contract had it not been repudiated. But in proving his readiness and willingness where he has been absolved from tendering performance he may not have to prove a great deal. For example, in Cort v. Ambergate Rly Co. ((1851) 17 Q.B. 127 [117 E.R. 1229]) the plaintiffs could and did prove that they were ready and willing to manufacture railway chairs in accordance with their contract at the time it was repudiated by the defendants. But they were not required to prove that they had taken steps to manufacture the chairs in order to be able to tender them.' Later his Honour said (in the context of the conveyancing case) (at 454): 'All that the purchasers were required to show was that at the time of the repudiation, that is, at the time they were absolved from future performance, there was not a "substantial incapacity" on their part or a "definitive resolve or decision" against the performance of their obligations. ... They merely had to prove that, at the time of the defendants' repudiation, two days before the settlement date, they were not incapacitated from raising that amount and had not resolved or decided against doing so. That was a relatively light burden to discharge and, upon the evidence, I think that the plaintiffs did discharge it. There is nothing in the trial judge's findings which requires a contrary conclusion.' Both Deane J and Dawson J point out that, in establishing the quantum of damages, the innocent party may have to go further. 203 I am satisfied that Goldspar had the ability to carry out the contract properly construed. There is no reason of substance to doubt the technical competence of Goldspar. It had already delivered hundreds of poles and those concerned, particularly Rawson-Harris, had a considerable amount of expertise in the field. An attack was made upon the financial ability of Goldspar to carry out the contract. It can be concluded that the company was in a somewhat precarious financial position. However, a proprietary company of this kind, in essence, depends upon the situation of those backing it. The critical point is that Goldspar had met all reasonable requirements up to the time of termination, including the payment of the deposit to Capral. Furthermore, the position of Goldspar would have been quite different if the Council had scheduled for deliveries in a proper sequence from the commencement of the year 1999 2000 with the consequent cash flow. Goldspar had a backer, apart from Rawson-Harris, who had assisted as required and who had taken a role in the commercial negotiations with the Council. 204 There was also a substantial attack upon the readiness and willingness of Rawson-Harris to carry out the contract as properly construed. The cross-examination of Rawson-Harris provides support for the view that he was fed up with, and highly suspicious of, Khreich and the relevant Council officers, at least by 5 October 1999 and did not change his attitude thereafter. He was also reluctant to accept the results of the Expert Determination as far as the amounts due to Goldspar were concerned and held a view about intellectual property which was inconsistent with that of the Council and with the finding ultimately made in this case. Those views influenced the positions he took as events developed following the first 'order' of 19 October 1999. The cross-examination also gave support to the conclusion that Rawson-Harris was inclined to hold firm to his own position and not lightly give ground. I should say that I regard Rawson-Harris as essentially an honest witness although tending to be unnecessarily argumentative. 205 A good deal of the impact of the cross-examination is removed, however, when the context is understood. As I have already said, by October 1999 Rawson-Harris had every reason to be deeply suspicious of Council officers and Khreich, who had been the mouthpiece of the Council in relation to this contract. I am not concerned about the fact that Rawson-Harris was not convinced by the Expert Determination, notwithstanding that it was subsequently upheld in the Supreme Court of New South Wales. It is not unreasonable that a losing party might not be convinced by the result of a lay determination. I would say the same concerning the question of intellectual property. Although I found that issue substantially against the interests of Rawson-Harris, I can understand that his position was honestly and firmly held. In my opinion, the critical matter to understand is that Goldspar was on sound ground both legally and, more particularly, commercially in having sought advance notice of firm requirements prior to or within a reasonable period after the commencement of the relevant period on 1 July 1999 but which still had not been provided by 5 October 1999. Furthermore, the requirements, when given on 19 October 1999, were both legally and commercially, indefensible. As I have already said, Orders No 1 and No 2 did nothing to alleviate the substance of the problem. Thus, Rawson-Harris was faced with the position that was quite unreasonable from a legal and commercial viewpoint, tenaciously defended by Khreich on behalf of the Council. 206 It was, no doubt, possible that, faced with this situation, Rawson-Harris might have been tempted to play a cat and mouse game and simply await the inevitable termination of contract which was so clearly flagged. He did not take that course. Goldspar undertook a substantial contractual commitment to Capral backed by payment of a substantial sum of cash and made arrangements with anodisers and others in order to actually commence the delivery of poles in early April. That is not consistent with Goldspar not being ready and willing to carry out the contract. I am unimpressed by arguments concerning the position that Rawson-Harris was taking as to the terms upon which delivery would take place. At the time of termination the Council was persisting in conduct which, in my opinion, was in breach of its contractual obligations and in bad faith. It does not lie in its mouth to complain about steps Rawson-Harris took to seek to protect Goldspar's financial position which could not help but have been badly affected by the manner in which the Council had conducted itself in relation to this contract. I have already referred to the tendency of parties to take negotiating positions. The premature repudiation by the Council meant that Rawson-Harris was never called upon to take a final position on any debatable issue.