PACE v IRELAND, LIVINGSTONE v IRELAND [1993] NSWCA 203

PACE v IRELAND, LIVINGSTONE v IRELAND SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MEAGHER, HANDLEY and SHELLER JJA 12 August 1993, 10 September 1993

[1993] NSWCA 203

The respondents in each appeal were respectively the Licensee under a Licence to Keep Hens issued under the Egg Industry Act 1983, and the Company owning the specified quota of hens. The respondents were parties to two deeds in substantially the same terms. The other party to each deed was one or other of the first appellants and was described as the Lessee. The Lessee in each deed agreed to lease the Licence from the Licensee and to purchase the hens from the Company.

Under CL2(ii) of each deed, repayments under bank loans to be obtained by the respondents were to be made by the Lessees, and the Lessees and their interests agreed to indemnify the respondents against claims for repayment. The Lessees and their interests subsequently executed guarantees supporting the bank loans.

CLI15 of each deed provided that its term should end if the poultry farming industry were deregulated but that the termination should not affect those rights of the parties "arising prior to the date of termination".

The poultry farming industry was deregulated by the Egg Industry (Repeal and Deregulation) Act 1989 and the agreement was thus terminated. Repayments of the loans ceased and the banks demanded payment from the respondents. The Lessees argued that they were no longer obliged to indemnify the respondents because of the termination.

The trial judge held that the obligations to indemnify arose on execution of the deeds and survived the termination. It was conceded that the obligations to make repayments to the banks ceased on termination.

Held: Once the primary obligation to repay the advances to the banks ceased, so did the obligation to indemnify against a breach of the primary obligation.