Case: Roadshow Entertainment Pty Ltd v CAN 053 006 269 Pty Ltd (Receiver &amp; Manager Appointed) (1997) 42 NSWLR 462
Outcome: considered
party was evincing loyalty to its contractual promises. In Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Ltd (Receiver &amp; Manager Appointed) (1997) 42 NSWLR 462 at 481B-C Gleeson CJ, Handley JA and Brownie AJA, in the Court of Appeal of the Supreme Court of New South Wales said: 'A party in breach of non-essential terms who has not repudiated may rescind for fundamental breach: see Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; State Trading Corporation of India Ltd v Golodetz Ltd [[1989] 2 Lloyd's Rep 277] (at 286-287). A party in breach of an essential but independent term may also rescind for fundamental breach: see State Trading Corporation of India Ltd v Golodetz Ltd (at 285-287); compare Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 50-51. Roadshow , we consider, was not, by reason of its conduct, unable to terminate on the ground of CEL/Vision's repudiation.' However, their Honours' comments were obiter, since they had already acknowledged that that was not a case where the party attempting to rescind was in breach of a condition or had otherwise repudiated. And they said that they did not need to undertake a comprehensive analysis of the effect of a breach on a party's right to rescind: see Roadshow 42 NSWLR at 479F. They recognised that, although a party in breach of a non-essential term was not prevented from rescinding for a fundamental breach or a repudiation by the other party, there may be an exception where a causal relationship existed between the breaches of non-essential terms by the party attempting to rescind and the fundamental breach relied on: Roadshow 42 NSWLR at 479G-480B referring to Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613. When Gleeson CJ, Handley JA and Brownie AJA said in the passage, which I have quoted, that a party in breach of an essential but independent term may also rescind for fundamental breach, they relied on the decision of the English Court of Appeal in State Training Corporation of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277. There, Kerr LJ (with whom Lloyd and Butler-Sloss LJJ agreed: Golodetz [1989] 2 Lloyd's Rep at 286) said that where both parties had obligations which had to be performed concurrently but neither was dependent upon the other: 'Since both obligations are (assumedly) in the nature of conditions, both parties had an equal right, so long as the other party's obligation remained unperformed, to treat the other party as having wrongfully repudiated.' In Kyrwood v Drinkwater [2000] NSWCA 126 at [154] Powell JA (with whom Meagher JA agreed at [1]; see also the dissenting view of Fitzgerald JA at [231]-[251]) said: 'In Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 it was held by this Court that, if non-compliance with a contractual obligation is to take away the defaulting party's right to terminate, there must be a direct causal relationship between the non-compliance and the failure to complete, the onus of proving which lies on the non-defaulting party, and there must be an absence of repudiation by the defaulting party prior to that time . The same approach was taken by this Court in Roadshow Entertainment Pty Ltd v CEL/Vision (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 at 479-480.' In Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 at [68] - [69] Warren CJ, with whom Buchanan and Ashley JJA agreed said: ' [68] N C Seddon and M P Ellinghaus state in Chesire &amp; Fifoot's Law of Contract (8th ed, 2002) [at 943]: A party need only be ready and willing to perform the contract in substance. A party who is in breach may nevertheless have the right to terminate, so long as the breach is not repudiatory or of an essential term or such as to deprive the other party of the substantial benefit of the contract. This is the view espoused by the learned judge below and supported by Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd (1997) 42 NSWLR 462 at 470 480 [sic]. [69] The question then becomes whether Emhill had repudiated the contract, breached an essential term of the contract or deprived the other party of the substantial benefit of the contract.' (emphasis added) While the dicta of the Court of Appeal in Roadshow Entertainment 42 NSWLR at 481B-C are of great weight, I am of opinion that on analysis, they are inconsistent with the considered, albeit equally obiter dicta views of three of the justices: Foran 168 CLR at 405-408 per Mason CJ, 424, 427 per Brennan J and 452, 454 per Dawson J.