New South Wales Court of Appeal CITATION : KYRWOOD & ORS. v. DRINKWATER & ORS. [2000] NSWCA 126 revised - 27/04/2007 FILE NUMBER(S) : CA 40886/97 HEARING DATE(S) : 01/02/00 JUDGMENT DATE : 25 August 2000 PARTIES : Caddyrack Pty. Limited, Terry Kyrwood, Geoffrey Kyrwood, Caddyrack International Pty. Limited, Gedrot Pty. Limited and Gavros Pty. Limited (Appellants) Peter Westgarth Drinkwater, John Francis Drinkwater, Lustray Pty. Limited, Caddyrack Inc. (Respondents) JUDGMENT OF : Meagher JA at 1; Powell JA at 2; Fitzgerald JA at 163 LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT ED 3970/96 FILE NUMBER(S) : LOWER COURT Young J JUDICIAL OFFICER : R.W. White SC and A McInerney (Appellants other than Caddyrack Pty. Limited and Caddyrack International Pty. Limited (both now in liquidation) COUNSEL : B.A.J. Coles QC and M. Ashhurst (Respondents) Wood Roberts Solicitors (Mayfield) (Appellants other than Caddyrack Pty. Limited and Caddyrack International Pty. Limited) SOLICITORS : Hansens Solicitors (The Junction) (Respondents) CATCHWORDS : CONTRACT - Repudiation and non-performance - Termination - Breach by other party to contract - Right of other party to terminate - Not available if causal relationship between other party's breach and first party's repudiation or if other party's breach itself amounted to repudiation. D Burns Philp Hardware Limited v. Howard Chia Pty. Limited (1987) 8 NSWLR 642 Butt v. McDonald (1896) 7 QLJ 68 Dimond v. Moore (1931) 45 CLR 159 DTR Nominees Pty. Limited v. Mona Homes Pty. Limited (1977-1978) 138 CLR 623 Fitzgerald v. Masters (1956) 95 CLR 420 Foran v. Wight (1989) 168 CLR 385 Hume v. Rundell (1824) 2 Sim & St 174; 47 ER 311 CASES CITED: Laurinda Pty. Limited v. Capalaba Park Shopping Centre Pty. Limited (1988-1989) 166 CLR 623 Lloyd v. Lloyd (1837) 2 My & Cr 192; 40 ER 613 Mackay v. Dick (1886) LR 6 App Cas 251 Nina's Bar Bistro Pty. Limited v. MBE Corporation (Sydney) Pty. Limited [1984] 3 NSWLR 613 Reardon Smith Line v. Hansen Tangen [1976] 1 WLR 989 Roadshow Entertainment Pty. Limited v. CEL/Vision (ACN 053 006 269) Pty. Limited (1997) 42 NSWLR 462 Satellite Estate Pty. Limited v. Jaquet (1968) 71 SR 126 Tramways Advertising Pty. Limited v. Luna Park (NSW) Limited (1938) 38 SR 632 DECISION : (By majority) Appeal dismissed 11IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40886/97 ED 3970/96 MEAGHER JA POWELL JA FITZGERALD JA 25 August 2000 KYRWOOD & ORS v. DRINKWATER & ORS. JUDGMENT 1 MEAGHER JA: I agree with Powell JA. 2 POWELL JA: This is an appeal by four of the six defendants - the other two are said (T.1) now to be in liquidation - against Judgments delivered by Young J on 25 September 1997, 23 October 1997 and 28 November 1997 and against orders made by his Honour pursuant to those Judgments on 23 October 1997 and 28 November 1997, in proceedings which had been brought by the Respondents following the breakdown of an agreement made in July 1996 between the personal Respondents - Peter Drinkwater and John Drinkwater - and the personal Appellants - Terry Kyrwood and Geoffrey Kyrwood. That agreement had been intended to effect a settlement of the disputes which had arisen between the Messrs. Drinkwater and the Messrs. Kyrwood and companies controlled by them respectively concerning the activities of two companies, Caddyrack Pty. Limited ("Caddyrack") - which had been the First Defendant in the proceedings before Young J - and Caddyrack Inc - the Fourth Respondent - which companies had been formed at the behest of the Messrs. Drinkwater and the Messrs. Kyrwood for the purpose of having manufactured, and marketing, a product which came to be called a "Caddyrack" which had been invented by Geoffrey Kyrwood. 3 Although the principal issues debated on the hearing of the appeal were whether or not the Messrs. Kyrwood had repudiated their obligations under the agreement of 26 July 1996 and whether the Messrs. Drinkwater had validly terminated that agreement, by reason of the Messrs. Kyrwood's repudiation of their obligations under it, a proper understanding of the circumstances which gave rise to the execution of that agreement and the various matters dealt with in it, calls for a more extended record of the background facts than the statement of the issues debated on the hearing of the appeal would otherwise seem to call for. 4 The product known as a "Caddyrack" is a golfing accessory which fits on the top of golf bags for the purpose of organising and protecting clubs within golf bags. The product, as I have already indicated, was invented by Geoffrey Kyrwood. In February 1994 Geoffrey Kyrwood, his brother Terry Kyrwood and the Messrs. Drinkwater, entered into what was described as an "Exploitation Agreement" (Blue AB 398), which Agreement, after reciting that Geoffrey Kyrwood had assigned to each of Terry Kyrwood and the Messrs. Drinkwater a one-quarter share in the invention and that he, Terry Kyrwood and the Messrs. Drinkwater, had jointly filed an application for a patent to the invention, provided (inter alia) that the parties agreed that the subject matter of the patent application would only be jointly exploited by them and would not be exploited by any one of them acting other than in the furtherance of the joint exploitation of the invention with the full knowledge and consent of the remaining parties. 5 On 28 June 1994, Caddyrack was incorporated pursuant to the provisions of the Corporations Law. Although they were not the corporators, the Appellants Gedrot Pty. Limited ("Gedrot") and Gavros Pty. Limited ("Gavros") which were respectively trustees of the family trusts of Geoffrey Kyrwood and Terry Kyrwood - and the Third Respondent, Lustray Pty. Limited ("Lustray") - which was a trustee for the family trusts of the Messrs. Drinkwater - came to hold the issued shares in the capital of Caddyrack in the proportions 25% on the part of each of Gedrot and Gavros and 50% on the part of Lustray. 6 In the evidence which was tendered on the hearing before Young J it was said (Blue AB 18-19) that at about this time it was agreed between the Messrs. Drinkwater and Messrs. Kyrwood that the benefit of the application for the patent and the benefit of the application for the registered design in respect of the "Caddyrack" would be held by an overseas company in which each of the Messrs. Drinkwater and the Messrs. Kyrwood would hold the shares in the issued capital in equal proportions. 7 Despite this, it would appear that, on 10 October 1994, the Messrs. Drinkwater and the Messrs. Kyrwood executed an assignment to Caddyrack of the patent application, the invention the subject of the application and the right to apply for or obtain corresponding letters patent for the invention in any country (Blue AB 653-654). 8 Although the time at which it did so is not entirely clear, it seems clear enough that, at some time between the date of its incorporation and December 1994, Caddyrack had International Tool & Gauge NSW Pty. Limited ("ITG") manufacture what came to be known as "the Australian tool" - a two part injection mould to be used for the manufacture of the "Caddyrack", which then took the form of a 9 slot golf club holder - the cost of that mould being in the order of $100,000.00. Although the "Caddyrack" itself is not large, the two parts of the mould are far larger than might be imagined - each part of the mould is about 600 mm square on one face and about 150 mm deep and each part has cavities carved into it, the two parts being connected to the arms of an injection moulding machine which clamps the two halves together so that plastic might be injected into the cavities in the mould. The two parts together weigh something of the order of a tonne and when clamped together need to be moved with a forklift (Black AB 54). The Australian tool was capable of producing only right handed Caddyracks. 9 Production of Caddyracks using the Australian tool commenced in December 1994. Caddyrack did not itself produce the Caddyracks but subcontracted the injection moulding of the product and also subcontracted the task of putting the various components in boxes for distribution and sale, Caddyrack's activities being limited to advertising and marketing the product (Black AB 53-54). 10 Although the evidence does not clearly demonstrate that this was so, it seems tolerably plain that, at some time prior to February 1995, the Messrs. Drinkwater and Messrs. Kyrwood had agreed that steps should be taken to have Caddyracks manufactured and marketed in the United States. 11 On 7 February 1995 Mr. Berrey, the managing director of ITG forwarded to John Drinkwater by facsimile a letter providing a quote for the production of an injection mould to produce a modified Caddyrack, that mould to be manufactured in such a way that "the finned area (could) be interchanged with left and right hand inserts", the mould to come complete with right hand inserts; to produce a complete set of left hand inserts; and providing for extra pattern costs, the total cost being $99,790.00 and the terms of payment being 30% with order, 30% after 60% progress and 25% after 80% process and the balance on approval (Blue AB 736). At the foot of the quotation is the handwritten addition "extra $20,000.00 for USA modifications". A further quotation dated 6 March 1995 provided for extra pattern work. 12 Thereafter, on 6 April 1995, Peter Drinkwater wrote to ITG confirming Caddyrack's order for completion of the "right and left handed tool". 13 It would seem that, at about the same time, the Messrs. Drinkwater and the Messrs. Kyrwood at a meeting of directors of Caddyrack resolved that a company should be set up in America, that company to be known as Caddyrack Inc, for the purpose of marketing Caddyrack products in the United States and ultimately for the purpose of manufacturing such products, that company to be managed by John Drinkwater (Blue AB 92). 14 Shortly thereafter John Drinkwater went to the United States to arrange for the setting up of Caddyrack Inc and to oversee the introduction of Caddyracks into the United States market (Blue AB 92). 15 At a meeting of the directors of Caddyrack held on 8 May 1995 Peter Drinkwater "confirmed an overdraft facility in the order of $500,000 was to be established to provide initial working capital for the US operations and (that) he had currently been discussing with their local bank to organise facilities at which it was confirmed that there were no problems at (that stage)". (Blue AB 533) 16 Caddyrack Inc was incorporated in May 1995, at which time John Drinkwater had himself appointed as president and sole director of the company. 17 On 15 May 1995, Caddyrack entered into an agreement with the internationally known golfer Greg Norman whereby, in consideration of the payment to him of the sum of $1 million payable by instalments over the first year, Greg Norman granted to Caddyrack the exclusive right and licence to use in the United States, his signature or likeness in connection with the advertisement, promotion and sale of Caddyracks. The agreement provided for payment of those sums being guaranteed by the Messrs. Drinkwater and the Messrs. Kyrwood, but a copy of the agreement which is with the papers (Blue AB 656-662) while bearing the signature of Peter Drinkwater and each of the Messrs. Kyrwood, does not bear the signature of John Drinkwater. 18 On 1 June 1995, Caddyrack assigned to 505 Pty. Limited - a company which, since it had the same registered office as Caddyrack, appears to have been incorporated, or the shares in which appear to have been acquired, at the behest of, or by, the Messrs. Drinkwater and the Messrs. Kyrwood or Caddyrack - the benefit of Application B640,821 which had been made for the registration of the trademark "Caddyrack" in Class 28 of the Register (Blue AB 663-664). 19 On 1 July 1995, Caddyrack assigned to Golf Products Promotions Limited ("Golf Products") a company incorporated in the island of Guernsey in the Channel Islands, presumably at the behest of the Messrs. Drinkwater and the Messrs. Kyrwood or Caddyrack - the benefit of the applications for letters patent which it had made in (inter alia) Australia, the Republic of South Africa and Thailand (Blue AB 665-666) and, on the same day, assigned to Golf Products the benefits of registered design number 122985 which it had earlier obtained in respect of Caddyrack (Blue AB 667). 20 It is said (Blue AB 92) that, in or about July or August 1995, Caddyrack acquired 57% of the issued share capital in Caddyrack Inc, the remaining shareholders being Gavros, Gedrot, Golf Products, Lustray, David Drinkwater and ITG, the directors of Caddyrack Inc being the Messrs. Drinkwater and David Drinkwater. 21 It is also said (Blue AB 420) that prior to 17 June 1996, the issued shares in Caddyrack Inc were held as follows: (i) Caddyrack 60,000 shares; (ii) Gavros 5,000 shares; (iii) Gedrot 5,000 shares; (iv) Lustray 10,000 shares (5,000 on behalf of each of the Messrs. Drinkwater); (v) ITG 2,083.5 shares; (vi) Golf Products 20,000 shares; (vii) David Drinkwater 2,083.5 shares. 22 It is suggested (Blue AB 190) that the shares in Caddyrack Inc which had been issued to ITG had, in some way, been substituted for the amount previously agreed upon for the making of the injection mould for the US tool. 23 The moneys which were subscribed for the shares in the capital of Caddyrack Inc which were allotted in July or August 1995 were insufficient to provide working capital for the conduct of the business of Caddyrack Inc in the United States, as the meeting of the directors of Caddyrack held on 8 May 1995 (see para 14 (above) had foreshadowed. The minutes of a meeting of directors of Caddyrack held on 5 June 1995 contain the following (inter alia) (Blue AB 534): "3. Peter advised that the US company was 100% in the name of John Drinkwater and he was the only director at this stage. It was noted that the transfer of shares etc needed to be undertaken as soon as possible. 4. The $500,000 loan was primarily approved. It was noted that this loan was to be on the basis $250,000 Kyrwood; $250,000 Drinkwater. Peter advised that he would put in the necessary funds to start with as this would make the accounting a lot simpler for the payment of interest and fees." 24 It is said (Blue AB 272) that, either at the meeting of 5 June 1995 or at the meeting of directions of 26 June 1995 to which I shall next refer, Peter Drinkwater said to the Messrs. Kyrwood: "I have obtained approval for a $250,000 interest only loan. I will provide my home as security. You two will need to come up with a similar amount as soon as possible." to which the Messrs. Kyrwood replied: "Yes. We should be able to do that within a month." and that, Peter Drinkwater then said: "The company will be responsible for all interest and charges." to which the Messrs. Kyrwood replied: "Of course." 25 The minutes of the meeting of directors of Caddyrack held on 26 June 1995 record the following (inter alia) (Blue AB 283): "MATTERS DISCUSSED (i) Directors advised the maximum amount they are prepared to personally raise as capital for Caddyrack operations is $500,000.00. (ii) Agreed the US operation must stand on its own as a business and must meet its own cash flow requirements. ……… (iv) Finance facilities are: $150,000 OD $250,000 Drinkwater $250,000 Kyrwood Agreed to reduce overdraft to NIL and budget for $100K as final amount available to US operations. Work on the concept of no OD for Australian operations. (v) As a result of (iv) US operations will have working capital contributions; Cash $100K Stock 20,000 units plus Dollars already sent" 26 It is said (Blue AB 272-273) that, in late June or early July 1995, Peter Drinkwater attended at the Jesmond Branch of the National Australia Bank and signed papers for a $250,000.00 loan, to be deposited into the account for Caddyrack which was held at that branch of the bank, and a mortgage over his property at 44 Skye Point Road, Coal Point. In an Affidavit sworn by him in June 1997, Peter Drinkwater swore (Blue AB 273-4) that he had never personally paid any interest of charges in respect of that loan and that during the period July 1995 to February 1996 he saw monthly bank statements in respect of the account maintained by Caddyrack at the Jesmond Branch of the National Australia Bank, each of which statements contained a direct debit for interest and charges on the loan which had been made. 27 On 14 August 1995, Caddyrack, the Messrs. Drinkwater and the Messrs. Kyrwood, entered into what has been described as "the Shareholders Agreement" (Blue AB 606). Since the agreement recited (Blue AB 607): "Certain questions have arisen between the Company and the Directors in relation to the business conducted by the company known as 'CADDYRACK PTY. LIMITED' In order to promote continuity and the harmony in the operation and management of the company and to reduce and to reduce (sic) the possibility of resorting to litigations (sic) the parties have entered into this agreement." one can but assume that, even by that stage, certain tensions had arisen between the Messrs. Drinkwater and the Messrs. Kyrwood as to the company's future. 28 The agreement provided (inter alia): "NON COMPETITION 11. No director shall at any time during the term of his directorship and for a period of one year after the termination of his office, whether directly or indirectly, and whether as a principal, agent, director of a company, servant or otherwise, carry on or be engaged or concerned or take part in the business of supplying/making caddyracks and in the event of a failure to observe or perform his obligations under this clause, he shall be liable for liquidated damages for its consequential loss. RESTRICTION ON SOLICITING CUSTOMERS 12. No director shall at any time during the term of this agreement and for a period of 1 year after his resignation or removal from office either on his own account or for any person, firm or corporation contact, solicit the custom of or endeavour to entice away from the Company any person, firm or company who at any time during or at the termination of his office was a client or customer of or in the habit of dealing with the Company. CONFIDENTIAL INFORMATION 13. All records, materials, information, trade secrets and copies of them which are obtained or reviewed by a Director in the course of his directorship are confidential and shall remain the exclusive property of the Company. No Director shall at any time during the term of or at any time after the termination of his office, disclose any of such confidential information to any person other than the Directors and authorised servants or agents of the Company and other than as may be required by law and then only following notice to the Company and he shall not after the termination of his office use the contents of any such records or information for any purpose whatsoever. ……… DIRECTORS' SHAREHOLDING AND INSURANCE 15. No Director shall charge or in any way encumber his shareholding in the Company unless with the written consent of the Board of Directors is first obtained. 16(i) Upon the removal or resignation or death of a Director/Shareholder the surviving Shareholders shall purchase the share owned by the deceased Shareholder in the capital of the company. In the event of the death or the total and permanent disablement of a Director/Shareholder the shares owned by that deceased Shareholder shall be purchased by means of life assurance effected by the Company/Shareholders and the parties hereto agree to execute an agreement in the form annexed hereto and marked with the letter 'A'. (ii) For the purpose of valuing the shareholding the goodwill of the business of the Company shall be determined by multiplying by two(2) the average of the profits derived by the Company during the previous two years. 'Profit' shall mean the sales effected during the previous two years after deduction of expenditure incidental to the conduct of the business plus the sum of $2.00 for every rack sold during that period.. (iii) In the event of a death of a Director/Shareholder, the Company shall pay to his legal personal representative (or the Trustee of the Family Trust of that Director/Shareholder if directed by his legal personal representative) in addition to the value of the shareholding, a monthly amount equivalent to fifty cents for every for every rack sold during each month for a period of ten years from the date of death. ……… 18. Upon resignation or removal of a Director the shareholding of that Director shall be purchased by the remaining Shareholders in the following manner: 25% of the purchase price payable within one month of the date of resignation or removal and the balance payable by thirty-six equal monthly instalments with no interest to accrue on the unpaid balance however interest shall accrue at the prime lending rate imposed by Banking Institutions at the particular time upon amounts not paid in accordance with the provisions herein and such interest shall accrue until such payment is made except in the case of default by the Company pursuant to this clause. ………" The agreement also provided (Cl 19 Blue AB 610) a means of resolving any deadlock arising at directors meetings, and, as well(Cl.11 Blue AB 611), provided for a process of dispute resolution to be followed. 29 Although the evidence does not clearly demonstrate when it was that this occurred, it would seem likely that it was at about this time when Peter Drinkwater, who had been appointed general manager of Caddyrack when John Drinkwater had gone to the United States to set up operations there, went to the United States to join John Drinkwater to assist him (Blue AB 275). About a month later Geoffrey Kyrwood went to the United States where he stayed for a time before returning to Australia in late 1995. Peter Drinkwater stayed in the United States until January 1996 when he returned to Australia (Blue AB 275). While he was in the United States Peter Drinkwater received no remuneration from Caddyrack (Black AB 67). 30 It would seem that Caddyrack Inc began marketing Caddyracks in the United States in the latter part of 1995, the Caddyracks until February 1996 having been manufactured in Australia using the Australian tool. In this early period, Caddyrack Inc employed as a sales manager one Chris Phillips and utilised the services of an American company known as All Counties Secretarial to process its sales, invoices, receipts and payments for Caddyracks sold in the United States. 31 As from about February 1996, Caddyracks marketed by Caddyrack Inc in the United States were manufactured in the United States using the US tool which had been produced by ITG pursuant to the order which had been delivered to that company during 1995. The Caddyracks produced using the US tool were better than those produced in Australia using the Australian tool and, as will be apparent from what I have earlier recorded, in addition to right handed Caddyracks, it was possible by the comparatively minor adjustment of the mould also to produce left handed Caddyracks. The Caddyracks which were manufactured and marketed in the United States after February 1996 were not manufactured by Caddyrack Inc but were manufactured for it by the United States company Performance Engineered Products Inc. 32 The underlying tensions between the Messrs. Drinkwater and the Messrs. Kyrwood to which I have earlier referred appear to have surfaced at, or shortly after, the time of Peter Drinkwater's return to Australia in early 1996. That this was so is made clear by the minutes of a meeting of the directors of Caddyrack held on 14 February 1996 at which both of the Messrs. Drinkwater and both of the Messrs. Kyrwood were present. Those minutes record the following (Blue AB 25): "MATTERS DISCUSSED The focus of the meeting was to resolve the management structure of the company as the Kyrwoods and Drinkwaters acknowledged that both parties have different management styles. Peter Drinkwater advised that in order for the Company to have any chance of success there had to be a change. This was acknowledged by all. A number of different options were tabled and discussed at length. Peter offered that he and John resign from the day to day management and allow the Kyrwoods to run the operations. In principle this was accepted as being the only alternative due to the circumstances. The following were agreed to: 1. Peter and John to resign as directors; 2. Personal asset security from Peter and John to be transferred to the Kyrwoods as priority; 3. Remuneration of the outgoing directors was set at - $1,000.00 per week for three months - $500.00 per week for second three months - Nil thereafter 4. Shareholding to remain unchanged; 5. Peter and John to be available to undertake duties on a task by task basis as directed by the Directors; 6. A monthly meeting would be held so that the Directors could report to shareholders in regard to company activities; 7. Terry Kyrwood was appointed Secretary." Those minutes were prepared by the Company Secretary, Mr. Abrams. 33 The Messrs. Kyrwood took the stand that the Messrs. Drinkwater had resigned as directors at that meeting whereas, the stand taken by the Messrs. Drinkwater was that they had offered to resign subject to the fulfilment of certain conditions which conditions were not thereafter met so that they remained directors. 34 Shortly thereafter John Drinkwater and Terry Kyrwood went to the United States to deal with the affairs of Caddyrack or Caddyrack Inc. 35 In their absence, Geoffrey Kyrwood asked Mr. Abrams to prepare a form of notice to the Australian Securities Commission regarding the fact that the Drinkwaters had resigned as directors as from 14 February 1996. Mr. Abrams caused that document to be prepared following which Mr. Geoffrey Kyrwood signed it and Mr. Abrams then caused it to be lodged with the Commission. Thereafter a member of Mr. Abrams' staff caused the Register of Directors of Caddyrack to be changed to record the resignation of the Drinkwaters as at 14 February 1996 (Blue AB 35). 36 On 18 March 1996, there was a meeting between the Messrs. Drinkwater, Geoffrey Kyrwood and Mr. Abrams, that meeting not being a meeting of directors or a meeting of shareholders of Caddyrack, but, rather, just a meeting of the four men concerned to discuss the affairs of the company. A memorandum prepared by Mr. Abrams recorded agreement in principle about a number of enumerated matters including the following (Blue AB 35-36):- "3. Drinkwater property security to be returned unencumbered … ……… 6. Salary package for Drinkwaters $900 plus vehicle per week for 3 months; $500 per week for next three months. 7. Point 6 commences when deeds are returned (whilst there are outstanding wages, will continue to be paid). ……… 12. Drinkwaters to resign as directors … ……… 14. Should the above not be fulfilled then the shares will revert back to the Drinkwaters." It is said (Blue AB 36) that during the course of the meeting there was an adjournment while Geoffrey Kyrwood telephoned Terry Kyrwood in America following which Geoffrey Kyrwood told the resumed meeting that the Messrs. Kyrwood agreed to the various matters which Mr. Abrams was later to record in his memorandum. 37 Although the materials which are before the Court do not clearly demonstrate that this was so, it seems tolerably plain that, after 14 February 1996, the Messrs. Kyrwood excluded the Messrs. Drinkwater from any part in the activities of Caddyrack and continued to assert that they were no longer directors of Caddyrack. That this was so seems to be made clear by the fact that, on 22 May 1996, there was filed on behalf of the Messrs. Drinkwater a Summons in Proceedings No. 2205 of 1996 in the Equity Division of the Court, in which Summons the Messrs. Drinkwater sought against the Messrs. Kyrwood and Caddyrack the following (inter alia) relief (Blue AB 26-27): "1. A declaration that the Plaintiffs are directors of Caddyrack Pty. Limited ACN 065 368 032. 2. An order that the Defendants complete all or any documents required to up date the records held by the Australian Securities Commission to reflect the declaration made in Order 1. 3. An order that the Defendants file the documents referred to in Order 2 with the Australian Securities Commission to up date the records held by such Commission. 4. Until further Order the Defendants not exclude the Plaintiffs from any Directors' Meetings held by the Third Defendant. 5. Until further Order the Defendants give notice to the Plaintiffs of any Directors Meetings held by the Third Defendant in accordance with the Memorandum and Articles of Association of the Third Defendant. 6. An Order that any resolutions passed by the Third Defendant between 14 February 1996 and the date of those Orders at which the Plaintiffs or each (sic) of them were excluded or not provided with notice in accordance with the Memorandum and Articles of Association of the Third Defendant are invalid." 38 The Summons appears to have come before Brownie J on 4 July 1996, by which time there appears to have been filed on behalf of the Messrs. Kyrwood - Caddyrack was separately represented - a Cross-Claim, the relief sought in which is not revealed by the materials which are before the Court. On that day, having given certain directions as to the further conduct of the proceedings and having noted certain undertakings, Brownie J ordered that the issues raised by the Summons be separated from the issues raised in the Cross-Claim, fixed the hearing of the issues raised by the Summons for 15 and 16 July 1996 and granted leave "to the Defendants" to file a Notice of Motion returnable for 15 July 1996 seeking such directions as they might be advised as to the conduct of the Cross-Claim (Blue AB 245-247). 39 The separated issues were thereafter heard by Brownie J who delivered his Judgment (Blue AB 30) on 16 July 1996. Towards the end of his Judgment (Blue AB 37) Brownie J said: "Subject then to what might now be submitted as to the form of relief to be granted, I propose to make a declaration in terms of paragraph 1 of the summons and orders as set out in paragraphs 2 to 6 together with an order for costs of the determination of these issues. Paragraphs 4 and 5 of the summons are cast in terms more generally found in relation to interlocutory injunctions than a permanent injunction. However, in the circumstances of this case, that might be an appropriate form of relief, coupled with a grant of liberty to apply, or the reservation of further consideration." Although the engrossment of Brownie J's Judgment does not record that this occurred, it is likely that, before his Honour made his formal orders, there was discussion as to the form of relief to be granted as the engrossment of his Judgment continues (Blue AB 37-38): "I make the following declaration and orders: 1. I make a declaration in terms of paragraph 1 of the Summons. 2. I make orders in terms of paragraphs 2 and 3 of the Summons. 3. I order the first and second defendants to pay the plaintiffs' costs of determining the separate issues. ……… 6. I stand the proceedings including the defendants' Notice of Motion over until 30 July 1996 before the Registrar. 7. I grant liberty to any party to apply on three days notice." 40 Before passing on to the events which followed delivery by Brownie J of his Judgment in proceedings No. 225 of 1996 in the Equity Division of the Court, I pause to record that similar tensions to those which had arisen between the Messrs. Drinkwater and the Messrs. Kyrwood in relation to the affairs of Caddyrack appear to have arisen between them in relation to the affairs of Caddyrack Inc - according to the Messrs. Kyrwood those tensions were due to the fact that John Drinkwater was making decisions in relation to Caddyrack Inc without their consent or knowledge (Blue AB 524). As a result, so the Messrs. Drinkwater would suggest (Blue AB 524), they, together with Mr. Berrey and Mr. Reuthliger - who seems to have been an officer of ITG - on 21 May 1996 forwarded to Caddyrack Inc for the attention of John Drinkwater a letter reading (inter alia) as follows (Blue AB 537):: "You are not authorised to incur any debts or enter into any contracts to bind either Caddyrack Inc or Caddyrack Pty. Ltd. in anyway whatsoever without the written prior approval of a majority of shareholders of the appropriate company." On the same day, the Messrs. Kyrwood, Berrey and Reuthliger forwarded to Caddyrack for the attention of John Drinkwater a letter (Blue AB 538) requesting that a meeting of the shareholders of Caddyrack Inc be scheduled for the purpose of: "1 Formulate and set the by-laws of the company. 2. Terminate sole director and elect new officers." 41 On 3 June 1996, John Drinkwater forwarded by facsimile addressed to each of David Drinkwater, ITG, Caddyrack, Gavros, Gedrot, Lustray and Golf Products - the latter in care of Brien Cornwell, who was also the solicitor for Caddyrack - a letter (Blue AB 540) advising the Caddyrack Inc was in urgent need of funds - he estimated that $40,000.00 "should be sufficient to see (Caddyrack Inc) through to the stage were (sic) (he could) stabilise the position of the Company and have the Company return to supporting itself through regular income" and indicating that he proposed "to sell" additional shares in the capital of Caddyrack Inc, those shares to be offered to all shareholders on the ratio of their current shareholding and indicating that if some shareholders chose not to take up the offer, a further offer would be made to those shareholders, if any, who did, and, in the event that no shareholder chose to take up the offer, an offer would be made to any potentially interested third parties. At the same time, John Drinkwater forwarded by facsimile to Brien Cornwell a further letter (Blue AB 543) indicating that, as Golf Products was owned as to one-quarter each by the family trusts of each of the Messrs. Drinkwater and Messrs. Kyrwood, that company would not be able to apply for shares in the proposed issue as it would be unable to reach a majority decision. 42 On 5 June 1996, Brien Cornwell forwarded by facsimile to John Drinkwater, a letter (Blue AB 544-545) in which he suggested that the "Notice of Meeting (sic) in regard to issue of additional shares in Caddyrack Inc would be invalid for (a variety of) reasons" which he then set out. 43 On 9 June 1996, John Drinkwater forwarded by facsimile to the Messrs. Kyrwood, a letter (Blue AB 546) which, so far as is relevant for present purposes, was as follows: "I would also like to acknowledge your decision not to participate in the recent call for capital and inform you that Lustray Pty. Ltd. & David Drinkwater were the only shareholders who chose to take up the offer. This call is not yet finalised, as the required funds have not been obtained, but the immediate crisis has been averted. The shareholding as of today is that, between them, Lustray and David Drinkwater now own 52% of the shares in Caddyrack Inc. I have appointed Mr. David Drinkwater and Mr. Ray Berry as the 2 additional Directors required by the By Laws and I am awaiting their signed consent forms." 44 Although it is suggested (Blue AB 421) that the share issue was irregular and contrary to United States corporations law, it is said that, as from June 1996, the shareholding in Caddyrack Inc was recorded as being: (i) David Drinkwater 5283.5 shares (ii) ITG 2032.5 shares (iii) Caddyrack 60000 shares (iv) Gavros 5000 shares (v) Gedrot 5000 shares (vi) Lustray as trustee for the Peter Drinkwater family trust 43800 shares (vii) Lustray as trustee for the John Drinkwater family trust 51,400 shares (viii) Golf Products 20000 shares. A total of 192116 shares. 45 It is also convenient here to record two further developments: 1. in an Affidavit sworn by him on 5 June 1997 (Blue AB 594 et seq), Mr. Berrey deposed (inter alia) as follows: "3. ITG became dissatisfied with Caddyrack Inc's performance of its agreement with ITG. I complained about the prospectus which John Drinkwater had given me. I expressed my unhappiness to the Drinkwaters and the Kyrwoods. 4. In June 1996 I was informed by John Drinkwater that I had been appointed a director of Caddyrack Inc. He had not sought my prior approval and when he later asked for my consent, I declined. At about this time, I became aware of a dispute between the Kyrwoods and the Drinkwaters in relation to the Caddyrack businesses." 2. on 19 July 1996 Paul B. Erickson the Chief Operating Officer and General Counsel of Great White Shark Enterprises Inc - which clearly enough is a corporation formed a the behest of Greg Norman - forwarded by facsimile to each of Craig Doyle - a partner in the firm of McDonald Johnson, the solicitors for the Messrs. Kyrwood - and Phillip Hewitt - a solicitor in the employ of Messrs. Hansens, the solicitors for the Messrs. Drinkwater - a letter (Blue AB 306) in the following terms: "I am writing this letter to both of you in your capacities, as I understand them, as the respective counsel for Kyrwoods and the Drinkwaters who are guarantors under the agreement dated as of May 15,1996 between Caddyrack Pty. Limited and Greg Norman. As you are aware, the sum of US$500,000.00 was due June 1, 1996 and has not been paid. This sum is personally guaranteed by John Drinkwater, Peter Drinkwater, Jeffrey (sic) Kyrwood, and Terrence Kyrwood. Please be advised due to the default in payment, all rights of Caddyrack to the promotional use of the Norman Identification as referred to in the Grant of Endorsed Rights in the agreement has terminated. Any product that is in the possession of Caddyrack on which the Norman Identification is used must be destroyed. I further instructed our Australian solicitors Corrs Chambers to undertake an action for collection of the balance due under the contract including an action against the guarantors." 46 Having recorded those matters, I now return to the strict order of the narrative. 47 Although it would appear that the Messrs. Drinkwater and the Messrs. Kyrwood met on a number of occasions following the delivery of Brownie J's Judgment and before 24 July 1996, it is doubtful whether any of those meetings could properly be characterised as a meeting of directors and there is considerable dispute as to whether any matters of any relevance were decided - as best as one can judge it from such materials as are before the Court, and in the absence of any relevant findings of fact made by Young J, it would appear that all that occurred were acrimonious and inconclusive discussions as to the possibility, and the manner, of settling the disputes which had arisen between the Messrs. Drinkwater and the Messrs. Kyrwood. The chronologies which have been filed on behalf of both the active Appellants and the Respondents would suggest that, among those meetings, was one held on 24 July 1996 which meeting was attended by the Messrs. Drinkwater, the Messrs. Kyrwood and Mr. Brien Cornwell. 48 On 25 July 1996, Mr. Cornwell, having first telephoned Mr. Hewitt, forwarded to Mr. Hewitt a draft of an agreement which he had prepared as the possible basis for a settlement and invited the Messrs. Drinkwater and Mr. Hewitt to comment on it (Blue AB 189) - although the materials which are before the Court do not demonstrate that this was in fact so, one assumes that Mr. Cornwell made a similar telephone call to Mr. Doyle and forwarded a copy of the draft agreement to him in order that the Messrs. Kyrwood and Mr. Doyle might comment on it. 49 Having apparently considered with the Messrs. Drinkwater Mr. Cornwell's draft, Mr. Hewitt then prepared a fresh draft agreement and forwarded it by facsimile to Mr. Cornwell's office (Blue AB 189, 195-200). According to Geoffrey Kyrwood (Blue AB 487-488), on the same day Mr. Peter Drinkwater gave him a copy of what he (Geoffrey Kyrwood) believed to have been a copy of the agreement which had been prepared by Mr. Hewitt. 50 Further, according to Mr. Kyrwood, (Blue AB 488) at some stage on 25 July 1996 he had a conversation with Mr. Peter Drinkwater in the course of which he (Geoffrey Kyrwood) said: "We still have to make some arrangements in relation to ITG. I have promised them that they will be paid for the tool in the US." to which Peter Drinkwater replied: "Well, he knew the risks. He got his 2% shareholding in Caddyrack Inc." to which he (Geoffrey Kyrwood) replied: "Well I insist that we look after Ray Berrey (of ITG). You cannot ignore the fact that ITG has a claim on the tool." 51 According to Mr. Berrey (Blue AB 595-596), on 25 July 1996 he was telephoned by Peter Drinkwater who said: "What will it cost to alter the Australian dye (sic) so that the Caddyracks will have the same look as the Caddyracks made in America?" to which he replied: "We can amend the dye (sic) to give a similar cosmetic appearance but we cannot make the Australian dye (sic) exactly the same. In addition, the Australian die will not make left handed Caddyracks." Then, so he says, Mr. Berrey "gave Peter Drinkwater an outline of what (ITG) would do to upgrade the Australian dye (sic) … (and) told him that some aspects of the product would not look exactly the same as the American product." Mr. Berrey also says that he told Peter Drinkwater: "It will cost between $15,000.00-$18,000.00 to upgrade it. The product will look similar but you will not be able to make left handed Caddyracks." to which Peter Drinkwater said: "$20,000.00 would cover it then?" and he replied in the affirmative, following which Peter Drinkwater said: "How long would it take to do the work?" to which he replied: "About 12 weeks." 52 Mr. Berrey also says (Blue AB 596) that on 26 July 1996, Geoffrey Kyrwood telephoned him and that, when he (Geoffrey Kyrwood) telephoned him, he (Mr. Berrey) "had a conversation with him about the possible upgrading of the tool, how much it would cost and how long it would take. I also recall having a discussion with him concerning the terms on which ITG would agree to be paid for the American tool and who would have the ownership of the tools until ITG had been paid its $120,000.00." 53 The several conversations to which I have just referred and of which Geoffrey Kyrwood and Mr. Berrey gave evidence are difficult to reconcile with the evidence given by Mr. Doyle in an Affidavit sworn by him on 2 April 1997 and also with an Affidavit sworn by Mr. Hewitt sworn on 2 May 1997. 54 In his Affidavit, Mr. Doyle deposed (inter alia) (Blue AB 293-294): "12. During the meeting I recall that John Drinkwater said words to to the following effect: 'I will need a letter from you (referring to the Kyrwoods) relinquishing any interest you may have in the US Tool. If this is not done, I will not be able to do anything in the US.' Geoff Kyrwood said the following words, or words to the following effect: 'You must think I am mad John. I am not going to release the US Tool and be left with the inferior Australian Tool.' I said: 'What is so inferior about the Australian tool?' Geoff Kyrwood said: 'It does not have a left hand insert and is the old style mould.' I said: 'Can it be made the same as the US Tool?' Geoff Kyrwood said: 'It can never be the same but it can be made better than it is.' John Drinkwater said: 'Well there won't be any agreement unless the US Tool is relinquished. I need to be able to manufacture caddyracks anywhere that I want to' Geoff Kyrwood said: 'John, if I am going to relinquish the Tool, how am I going to get left handed racks?' There was then discussion between the parties as to how the Australian Tool could be upgraded. Either John Drinkwater or Geoff Kyrwood then suggested that the Tools could be swapped after the Australian Tool had been upgraded. Subsequently, there was a further conversation between Geoff Kyrwood and John Drinkwater to the following effect: Geoff Kyrwood said: 'I have spoken to Ray Berry (of ITG) he says that the upgrade will cost about $20,000.00. He says the job will take about 3 months.' Geoff Kyrwood said: 'I suppose you want me to pay for the upgrade John?' John Drinkwater said: 'Yes, but you don't think I should pay for it?' Geoff Kyrwood said: 'Well, we have agreed to pay ITG for the US Tool. You don't expect us to also pay for the upgrade.' Peter Drinkwater said: 'That's your problem Geoff. You should not have agreed to pay for the US Tool. They agreed to take the shares - they knew the deal.' There was then further discussion following which agreement was reached that the Drinkwaters would pay up to $20,000.00 for the upgrading of the Australian Tool following which there would be an exchange of the US Tool with the Australian Tool with each party being responsible for freight." 55 In his Affidavit, Mr. Hewitt deposed (Blue AB 190): "4. I refer to the Affidavit of Craig Gerald Doyle ('Doyle') dated 2 April 1997 and my affidavit dated 12 November, 1996. In respect of paragraph 12 of Doyle's Affidavit, the conversation was not in those terms but in words to the following effect: Geoff Kyrwood: 'Ray doesn't want the tool staying in America. He will commence legal proceedings.' Peter Drinkwater: My brother put in his $40,000.00. Ray has received his shares for the tool. That's nothing to do with us.' Geoff Kyrwood: 'We're going to pay Ray for the US tool.' Peter Drinkwater: 'That's your problem Geoff.' Geoff Kyrwood: 'No deal will be done without Ray.' John Drinkwater: 'Don't let the deal go because of Berry.' Peter Drinkwater: 'We will take the Australian tool and you can take the US tool.' John Drinkwater: 'But the Australian tool is not as good as the US tool.' Geoff Kyrwood: 'It can be upgraded.' John Drinkwater: 'Provided you pay.' Geoff Kyrwood: 'We're already paying Norman. What about you?' Hewitt: 'I have to talk to my clients to see if we can resolve this new problem.' The Drinkwaters and myself retired to another room. On our return, I said 'As I understand it, the expected cost is between $15,000.00 and $18,000.00. What about the Kyrwoods pay anything over and above $20,000.00.' Although the version of that conversation given by Peter Drinkwater in an Affidavit sworn by him on 5 May 1997 (Blue AB 214-215) differs in some minor respects, it is in substance the same as that given by Mr. Hewitt in his Affidavit. 56 The conversation on 26 July referred to in the Affidavits of Mr. Doyle and Mr. Hewitt to which I have just referred was but one of a number of conversations which took place at varying times between the Messrs. Drinkwater, Messrs. Kyrwood, Mr. Doyle, Mr. Hewitt and Mr. Cornwell on that day, each of those conversations involving discussions as to the terms of the drafts of an agreement which it was proposed be executed by the Messrs Drinkwater and the Messrs. Kyrwood with a view to settling their differences. According to Peter Drinkwater (Blue AB 215) after one such draft had been produced and read by him, he said: "It still does not state in here that I will get my house back within two (2) weeks." to which Mr. Cornwell said: "I will put in the words 'within fourteen (14) days'. Is that satisfactory?" and he then replied: "Yes, that will do." 57 The agreement, the alleged breaches of which gave rise to these proceedings, appears to have been engrossed in its final form at about 9.00 p.m. following which it was executed. 58 No doubt because of the speed with which the agreement was drafted and finalised and the varying hands which appear to have had a part in the drafting of it, the agreement is anything but a shining example of the draftsman's art. Although the provisions of the agreement which appear to have attracted the greatest attention at trial are cll. 6, 10 and 12, it is as well that I set it out in full. It is as follows (Blue AB 39-43): "THIS AGREEMENT dated 26 day of July 1996. BETWEEN: PETER DRINKWATER and JOHN DRINKWATER (hereinafter also referred to as 'the Drinkwaters.') AND: GEOFFREY KYRWOOD and TERENCE KYRWOOD (hereinafter also referred to as 'the Kyrwoods.') WHEREAS: 1. The Drinkwaters and Kyrwoods are directors and/or shareholders in Caddyrack Inc and Caddyrack Pty Limited. 2. The parties have the authority to bind their respective shareholders to do all acts and sign all transfers and the like, in order to complete the terms of this agreement as expeditiously as possible. 3. The parties either directly or indirectly have the collective rights to the patent and trademark for the golfing accessory known as 'the caddyrack.' 4. The shareholders of Caddyrack Pty Limited are the parties (sic) respective Family Trusts. 5. Caddyrack Pty Limited owes certain monies (sic) to Greg Norman and/or Great White Shark Enterprises under a contract dated May 1995; and 6. The parties are desirous of settling all matters between themselves and settling the repayment of the debt to Great White Shark Enterprises. IT IS HEREBY AGREED AS FOLOWS: 1. The Drinkwaters will: 1.1 have the exclusive non assignable rights to the patent and trademark of the nine slot rack and bag in Continental North and South America and including Hawaii; 1.2 have the exclusive rights to marketing, manufacturing and distribution of the nine slot caddyrack and caddyrack bag in Continental North and South America including Hawaii; 1.3 take responsibility for half the debt payable to Great White Shark Enterprises. Caddyrack Inc is not liable to pay any monies (sic) to Great White Shark Enterprises Incorporated until the later of the following dates: (a) the date which is ten (10) months after the date of this agreement; or (b) the date when Caddyrack Pty. Limited has paid its half of the monies (sic) due to Great White Shark Enterprises Incorporated. 1.4 transfer all shares owned or controlled by them or their respective family trusts in Caddyrack Pty. Ltd, to the Kyrwoods or their assigns, except that Peter Drinkwater or his wife or child or an entity controlled by Peter Drinkwater retain five per cent (5%) of the issued shares in Caddyrack Pty. Ltd. 1.5 resign as directors of Caddyrack Pty. Limited; 1.6 Each of the above sub clauses shall not merge on completion. 2. Peter Drinkwater is to: 2.1 have the exclusive non assignable rights to the patent and trademark of the nine slot rack and bag in Korea except for the initial order of five hundred (500) units where the value of the sale is to be paid to Caddyrack Pty. Ltd; 2.2 have the exclusive rights to marketing, manufacturing and distribution of the nine slot caddyrack and caddyrack bag in Korea; 3. The Kyrwoods will: 3.1 have the exclusive non assignable rights to the patent, trademark and nine slot rack and bag in the balance of the world (excluding the Americas and Korea). 3.2 have the exclusive right to the marketing, manufacturing and distribution of the nine slot caddyrack and caddyrack bag in this designated area; 3.3 have the responsibility for the payment of half the debt for Great White Shark Enterprises with responsibility for that half share commencing from the date of this agreement; 3.4 transfer all shares owned or controlled by them, or their respective family trusts in Caddyrack Inc to the Drinkwaters or their nominees and all parties will authorise the director of Golf Products Promotion Limited and Caddyrack Pty. Limited to transfer all shares in Caddyrack Inc to John Drinkwater and Peter Drinkwater. 3.5 Each of the above sub clauses shall not merge on completion. 4. Caddyrack Pty. Limited will be responsible for the patent registration and maintenance of the patent and trademark both domestically and internationally during the life of the patent. 5. All parties are to have the non exclusive rights for any developments of the existing product, eg seven or eight slot racks etc. If in the event that either party develops and markets a similar rack (ie seven or eight slot unit) in the non exclusive market, the margin between the new product wholesale and/or distributor price will not be less than 84% of the wholesale/distributor price of the nine slot caddyrack during the period of the Great White Shark debt. Wholesale price is defined as in United States of America and Australia the price to retail shop eg US$29.50 and AUS$37.50. Distributor price is defined as the price paid by the distributor anywhere else in the world. The developer of the seven or eight slot unit agrees to sell at cost plus fifty per cent (50%) to the other party, (the cost price allows a maximum of $1.00 AUS as the royalty payment until the tool is paid for) with each party having the right to use the trademark in its exclusive area. 6. The Kyrwoods will replace within fourteen (14) days the security over the residential property of Peter Drinkwater at 44 Skye Point Road, Coal Point currently held by the National Australia Bank provided all conditions in this agreement have been satisfied. Peter Drinkwater is to make that property or any substitute property available for security for Caddyrack Pty. Limited if required and Peter Drinkwater is to have priority security by way of a fixed and floating charge over the assets of Caddyrack Pty. Limited the security to be released within twelve (12) months from the date of advance. If Peter Drinkwater fails to provide such security then his shares in Caddyrack Pty. Limited will be transferred to the Kyrwoods. 7. If Caddyrack Inc fails to meet and maintain its commitment to its agreed $250,000 US owing to Great White Shark, the rights in Clauses 1.1 and 1.2 of the agreement vest in Peter Drinkwater, Terence Kyrwood and Geoffrey Kyrwood as tenants in common in equal shares between them. In this event, any sum still owing to Great White Shark Enterprises is to be paid by Peter Drinkwater, Terry Kyrwood and Geoff Kyrwood equally. Any payment made to Great White Shark by Caddyrack Inc will be refunded to the directors of Caddyrack Inc by Peter Drinkwater, Terry Kyrwood and Geoff Kyrwood in equal shares. These three parties are then to have the exclusive non assignable rights as set out in Clause 1.1 and 1.2 of this agreement. Similarly if Caddyrack Pty. Limited fails to meet its obligations under the Great White Shark agreement all its interests are to vest in the Drinkwaters or their nominee. 8. Caddyrack Inc. is to supply left handed caddyracks at cost as required to Caddyrack Pty. Limited. Cost is defined as actual manufactured cost from the injection moulder. 9. All loans between the companies are to be written off. All actions currently pending are to cease with any costs to be paid in accordance with the order of the court with payment of taxed costs being deferred for eight (8) months from the date hereof. 10. The parties agree that they will not, nor will their agents or servants, do any act or say anything that will be derogatory to the reputation or product of the other party. Both parties agree not to be active in any way in marketing or distributing into the other parties (sic) country for a period of six (6) months. 11. This agreement is subject to satisfactory arrangements being met (sic) for the repayment of the debt to Great White Shark Enterprises. The parties agree that terms not more onerous than the following are satisfactory arrangements for repayment of the debt to Great White Shark Enterprises:- (a) The sum of US$20,000 per month for six months; (b) The sum of US$30,000 per month for six months; (c) The balance of US$200,000 by six equal payments over six months. Provided that Caddyrack Pty. Limited is liable only for the first US $250,000 and Caddyrack Inc is liable for the balance. 12. That Drinkwaters pay to International Tool and Gauge up to $20,000 for the upgrading of the Australian tool and when the upgrade is complete will exchange the United States tool for the Australian tool with each party being responsible for freight. 13. When the United States tool is in Australia, Caddyrack Pty. Limited agrees to be bound on the same basis as Caddyrack Inc in Cl 8 hereof. 14. John Drinkwater agrees that he will not move the tool in the United States for a period of three (3) months provided that the Kyrwoods and International Tool and Gauge provide a letter relinquishing all interests (if any) in such tool within seven (7) days of the date hereof. This clause will not merge on completion. 15. This agreement is also conditional upon International Tool and Gauge Pty. Limited agreeing to transfer its shares in Caddyrack Inc to John Drinkwater or his nominee." 59 Although the versions given by Peter Drinkwater (Blue AB 215) and Mr. Doyle (Blue AB 294-295) differ in their detail, it seems to be clear that, while the parties were having a drink following the execution of the agreement, it was agreed that Mr. Cornwell should deal with Great White Shark Enterprises concerning the proposal for paying the outstanding debt to that organisation by instalments. 60 It also seems clear enough that, at the same time, John Drinkwater produced and had the Messrs. Kyrwood sign a letter addressed to Mr. Phillips (Blue AB 308) which letter was in the following terms: "RE: CADDYRACK PTY. LTD. & CADDYRACK INC Dear Mr. Phillips, The dispute between the Drinkwaters and the Kyrwoods was settled today. Settlement provides for the Drinkwaters to be the sole owners of Caddyrack Inc and have the exclusive rights to the Americas and the Canadian and the Korean market place. Further, we have agreed not to be active in any way in marketing and distributing in America for a period of six (6) months. Accordingly, any previous instructions to the contrary are withdrawn." and a further letter (Blue AB 309) addressed to a number of persons, who appear to have been officers of Performance Engineered Products Inc, which letter, when signed by the Messrs. Drinkwater, the Messrs. Kyrwood, Mr. Cornwell, Mr. Doyle and Mr. Hewitt, was in the following terms: "From Caddyrack RE: SHAREHOLDERS' DISPUTE Gentlemen, We are finally able to inform you that we have signed an agreement to settle our dispute. The basis of settlement is that the Kyrwoods, Caddyrack Pty. Limited and Golf Promotions Products have no interest in Caddyrack Inc and the Drinkwaters in Caddyrack Pty. Limited. John Drinkwater will be in the US on Monday, 29th and will contact you forthwith." 61 In the Affidavit which he swore in the proceedings, Mr. Berrey deposed (inter alia) (Blue AB 596-597): "9. After 26 July 1996 I had a further discussion with Geoff Kyrwood in relation to finalising the terms on which ITG would be paid the $120,000.00. I recall saying to Geoff: 'What do you want me to do in relation to upgrading the Australian dye (sic)?' Geoff Kyrwood said: 'Part of the agreement with the Drinkwaters is that they will pay for the upgrading and then there will be an exchange of tools. I suggest that you contact John Drinkwater.' 10. A few days after 26 July 1996 I recall I rang John Drinkwater. I said to him: 'Is the change in the Australian dye (sic) going ahead?' John Drinkwater said: 'Yes' I said: 'I will need some money up front before we start work. I will need $10,000.00 now and the balance on completion of the upgrade.' John Drinkwater said: 'Well, that has to be sorted out.'" 62 On 29 July 1996, Mr. Cornwell wrote to Mr. Erickson a letter (Blue AB 310) which was in the following terms: "RE: CADDYRACK DEBT This is by way of confirmation of my verbal offer on behalf of Caddyrack Pty. Limited and the four guarantors for the outstanding US$500,000.00 owing to Great White Shark Enterprises Inc: 1. The sum of US$20,000.00 for 6 months. 2. The sum of US$30,000.00 then for 6 months. 3. The balance of $US200,000.00 by six equal monthly instalments of US$33,333.33 per month. 4. That all existing stock bearing the endorsement (approximately 10,000 units) will be sold as expeditiously as possible. 5. At your discretion I will undertake as your 'unpaid agent' to provide an audit report of stock numbers on a regular basis. The above schedule of payments is realistic achievable by the parties. It would be appreciated if you could advise if this is acceptable by Great White Shark Enterprises Inc." A copy of the letter which is in the Court papers bears the handwritten endorsement "Agreed - Paul Erickson". 63 On 31 July 1996, Mr. Doyle forwarded by facsimile addressed to Sanders Simpson Freed, who appear to have been the solicitors for ITG a letter (Blue AB 311) which was in the following terms: "RE: CADDYRACK PTY. LIMITED & INTERNATIONAL TOOL & GAUGE I refer to my discussion with you on 30 July 1996 and enclose the last page of an agreement entered into between the parties, paragraphs 12, 14 and 15 concern your client. Is your client prepared to give the letter required in paragraph 14? If so, please arrange for us to receive this letter as a matter of urgency." 64 On 1 August 1996 McDonald Johnson wrote to Hansens a letter (Blue AB 315-316) which was in the following terms: "RE: CADDYRACK PTY. LIMITED We refer to the agreement made on 26 July 1996 and now enclose the following: 1. Transfer from Lustray Pty. Limited as trustee for the John Drinkwater Family Trust to Gavros Pty. Limited of nine (9) shares. 2. Transfer from Lustray Pty. Limited as trustee for the John Drinkwater Trust to Gedrot Pty. Limited of one (1) share. 3. Transfer from Lustray Pty. Limited as trustee for the Peter Drinkwater Family Trust to Gedrot Pty. Limited of eight (8) shares. 4. Resignation of Director to be signed by Peter Drinkwater. 5. Resignation of Director to be signed by John Drinkwater. You might have these documents signed and then held in escrow pending settlement of the conditions set out in the Deed. We suggest that a formal settlement then take place, attended by the National Australia Bank so that all matters can be concluded. Also, we suggest that the Intellectual Property be transferred to the individuals to be exploited on the terms set out in the Deed of 26 July, 1996. We are submitting a Deed under separate cover." 65 On 2 August 1996, Mr. Berrey forwarded to Mr. Doyle by facsimile a letter (Blue AB 313) which was in the following terms: "TO WHOM IT MAY CONCERN, International Tool & Gauge hereby relinquishes any interest in the die to make Caddyracks currently situated at Performance Engineering Products in the United States provided that: 1. The die remains in Performance Engineered Products until 26 October, 1996; and 2. We have upgraded the die currently situated in NSW within that period (we will use our best endeavours to do so); and 3. The agreement between the Kyrwoods and Drinkwaters dated 26 July, 1996 becomes unconditional. 4. Which ever (sic) tool in Australia remains the property of International Tool & Gauge until a total of $120,000.00 has been paid." 66 On 2 August 1996, Mr. Reuthlinger, forwarded to John Drinkwater by facsimile a letter (Blue AB 599) in the following terms: "International Tool & Gauge Pty. Ltd. requires a deposit of $10,000.00 for the modification on the Caddyrack Aus. mould as instructed and as agreed to be paid for by Caddyrack Inc. As set down in the agreements between the KYRWOODS and DRINKWATERS. Balance of payment ($10,000.00) to be paid to International Tool & Gauge Pty. Ltd. on completion of modification. Looking forward to an urgent reply." 67 On 2 August 1996 the Messrs. Kyrwood forwarded by facsimile to John Drinkwater a letter in the following terms (Blue AB 314): "We have satisfied I.T.G. with arrangements for the USA tool. They have acted accordingly by relinquishing their interest in such tool, but for you to abide by our agreement you are responsible for the payments of any alterations to the Australian tool. I.T.G. have indicated that they cannot commence alterations without a deposit from you. Please cooperate with them so that the three months schedule for transfer of these tools can be achieved." 68 Caddyrack International Pty. Limited ("International"), which was the Fourth Defendant in the proceedings and which, as I have earlier (see para. 1 (above)) indicated, was formed at the behest of the Messrs. Kyrwood, was incorporated on 5 August 1996. The registered office of International on its incorporation was the same as that of Caddyrack. 69 On 5 August 1996, McDonald Johnson forwarded by facsimile to Hansens, a letter (Blue AB 317) which was as follows: "RE: CADDYRACK PTY. LIMITED We refer to our letter of 1 August, 1996 and enclose a copy of draft Minutes for a proposed meeting of the directors to be held at the offices of Rees Pritchard at 3.00 pm on Wednesday 7 August, 1996. At that meeting it is proposed that a discharge of the mortgage over your clients (sic) property be handed over in exchange for signed Transfers and Resignations. Please confirm these arrangements as a matter of urgency." to which letter Hansens replied on 6 August 1996 as follows (Blue AB 325): "RE: CADDYRACK PTY. LIMITED We refer to your letter of 1 August in regard to the above. Could you please confirm that the outstanding matters between Caddyrack Pty. Limited and Great White Shark Enterprises have been finalised. Upon written finalisation of same our clients will be in a position to execute the transfers and resignations requested." 70 Despite the apparently promising progress being made toward settlement, matters began to deteriorate thereafter. 71 As best as one can judge it, on 6 August 1996 John Drinkwater forwarded by facsimile to the Messrs. Kyrwood a letter (Blue AB 507) in the following terms: "Part of the deal was that you were to obtain a letter from ITG, within 7 days, confirming that they have no interest in the US tool. As yet I have not received this confirmation from ITG. Please attend to in and avoid defaulting on the deal. In regard to the payment for the modification of the Australian tool, it was to be taken care of by you and when it was completed and test run only then was I to pay for it and exchange the tools. I received a fax from Heinz on Aug 2 which indicates that you told him that I would be paying the deposit as set out in our agreement. This is not true and you know it. It was your responsibility to get the tool altered and then we would pay and exchange." to which letter Terry Kyrwood replied by facsimile on 7 August 1996 in the following terms (Blue AB 508): "Attached a facsimile from ITG which was sent to PEP and Brien Cornwell on 2 August, 1996. In regard to the payment for modifications of the Australian Tool I bring your attention to clause 12 of the agreement of the 26th July, 1996. You are totally responsible for payment of any such modifications. If you are not prepared to co-operate maybe you could forget about modifications and have the tools exchanged now. Please arrange delivery of the lap top computer and printer to Caddyrack Pty. Ltd. as soon as possible and advise when dispatched and by which courier company." 72 On 7 August 1996, McDonald Johnson forwarded by facsimile to Hansens a letter (Blue AB 326) in the following terms: "RE: CADDYRACK PTY. LIMITED Thank you for your letter of 6 August, 1996. We enclose a letter from Brian Cornwell to Paul Erickson dated 29 July, 1996. You will see that Paul Erickson has signed the letter agreeing to the arrangements. Settlement cannot take place today because the National Australia Bank is not ready. We hope that it is ready tomorrow when we will contact you as soon as we can to arrange the necessary directors meeting." 73 On 8 August 1996, McDonald Johnson forwarded by facsimile to Hansens a letter (Blue AB 328) in the following terms: "RE: CADDYRACK PTY. LIMITED The National Australia Bank has advised that it cannot take the mortgage of Peter Drinkwaters (sic) at 44 Skye Point Road, Coal Point because it secures other financial arrangements of Peter Drinkwater. The National Australia Bank, however, is prepared to provide a letter acknowledging that the loan involving Peter Drinkwater and Caddyrack Pty. Limited has been extinguished and that the property no longer secures this loan. We trust that this will suffice. We will contact you as soon as we have this letter so that settlement can take place. We still hope that settlement can take place on 9 August, 1996." 74 The letter from the National Australia Bank which was foreshadowed in this letter is dated 9 August 1996 and addressed to Peter Drinkwater in care of McDonald Johnson. It was in the following terms (Blue AB 327): "This is to confirm the National Australia Bank, Toronto has no interest in your property at 44 Skye Point Road, Coal Point relative to advances afforded to CADDYRACK PTY. LIMITED. We also confirm we will today pay in full a loan for $250,000 plus charges at our Jesmond branch in the name of Peter Westgarth DRINKWATER, account No. 64.826-5706 which funds were raised for the purpose of injection into the Company, Caddyrack Pty. Limited. This action will be taken upon telephonic advise (sic) from Terrence and Geoffrey KYRWOOD and their Solicitor Craig Doyle that all conditions have been ratified relative to the agreement to be finalised by today between Terence and Geoffrey KYRWOOD and Peter and John Drinkwater." Later events would seem to demonstrate that, notwithstanding the terms of this letter, no such sum was ever paid by the National Australia Bank to the credit of Peter Drinkwater's account. 75 9 August 1996 saw the outbreak of a rash of letters passing between Hansens and McDonald Johnson. Although, in the materials which are before the Court, those letters have not been assembled in an ordered fashion, they appear to me to have been forwarded in the order which I set out below. 76 What appears to have been the first in point of time of such letters was one (Blue AB 333-334) from Hansens to McDonald Johnson in the following terms: "RE: CADDYRACK PTY. LIMITED We refer to the above matter and are instructed by our client John Drinkwater that the following matters have not been attended to in accordance with the agreement between the parties: (i) John Drinkwater has not yet received the letter from International Tool & Gauge set out at clause 14 of the agreement of 26 July last; (ii) Confirmation in writing of the exact nature of any agreement with Great White Shark Enterprises; (iii) Confirmation that International Tool & Gauge will upgrade the Australian tool and upon completion Drinkwaters to pay up to $20,000.00 in respect thereto; (iv) Your clients agreed to return the assets of Caddyrack Inc to our clients. This has not occurred. Our client has paid US$5,500.00 to Chris Phillips in regard to alleged outstanding commissions. Please forward a cheque in this sum immediately; (v) Please forward a cheque in the sum of the Australian equivalent of US$23,800.00 for racks supplied from the US to Sandpiper Canada; (vi) The Kyrwoods have not returned the original Greg Norman print nor golf clubs owned by Inc and/or John Drinkwater." 77 The next letter in point of time appears to have been one (Blue AB 335-336) from McDonald Johnson to Hansens in the following terms: "RE: CADDYRACK PTY. LIMITED Thank you for your letter of 26 July 1996. Enclosed are copies of letter from the National Australia Bank dated 9 August 1996 and from International Tool & Gauge dated 2 August 1996. The International Tool & Gauge letter has been faxed to the United States and provided to Brian (sic) Cornwell who we understood was to give you a copy. We believe that these letters satisfy the obligations of the Kyrwoods under the Agreement dated 26 July 1996. Kyrwoods want to settle this afternoon. We suggest 4.00 pm at the registered office of the company at 10 Murray Street, Hamilton. Please arrange for Peter Drinkwater to be present. In response to the matters raised in your letter of today we make the following additional comments (adopting your numbering): (ii) This has previously been provided to you. As Brian (sic) Cornwell acts for the company, please contact him. (iii) See enclosed letter. (iv) We understand that all assets have been made available to Caddyrack Inc. Any moneys owned to Chris Phillips would be owed by Caddyrack Inc. and would have nothing to do with our clients. (v) We do not understand the significance of this request. There is nothing in the Agreement of 26 July 1996 from which date arrangements were made for territories. (vi) The Greg Norman print has previously been given to John Drinkwater. We do not have instructions on the golf clubs. In any event, we cannot believe that your client would be raising such trivial matters in the context of the arrangements set out in the Agreement of 26 July 1996. Please have your client contact our client direct re the matters set out in paragraph (vi) of your letter." The letter from the National Australia Bank referred to in the second paragraph of this letter would appear to be that to which I have earlier (see para. 73 (above) - see also Blue AB327) referred, while the letter from International Tool & Gauge referred to in the same paragraph would appear to be that to which I have earlier (see para. 64 (above) - see also Blue AB313) referred. 78 The next letter in point of time appears to have been one (Blue AB329-330) from Hansens to McDonald Johnson, which was in the following terms: "RE: CADDYRACK PTY. LIMITED We refer to your facsimile of today's date. Our clients (sic) instructions are that: (i) Your clients cannot have bound Caddyrack Inc in their dealings with Chris Phillips. They have not co-operated in the return of assets of Caddyrack Inc to John Drinkwater. (ii) The letter from International Tool & Gauge is not in accordance with clause 14 of the agreement. (iii) Sandpiper Canada have been supplied with 500 racks from Inc, the payment of which has been forwarded to Caddyrack Pty Limited. Accordingly, monies (sic) remain outstanding to 'Inc' from 'PL'. (iv) The print and the golf clubs remain outstanding in contravention of the undertakings given by your clients to the Supreme Court. (v) Notwithstanding the provision of a letter apparently signed by Paul Ericsson, (sic), there appears (sic) to be no complete documents setting out the terms of the agreement. Our clients (sic) instructions are that until these matters and the matters covered in the accompany (sic) letter in respect of Peter Drinkwater are satisfied there can be no finalisation. Accordingly no settlement can take place this afternoon." 79 The "accompany letter" was in the following terms (Blue AB 331-332): "RE: CADDYRACK PTY. LIMITED We refer to the above matter and are instructed by our client Peter Drinkwater that the following matters require finalisation: (i) Confirmation in writing of the agreement on the Great White Shark deal; (ii) That Peter Drinkwater purchase the Hilux on the average of 3 wholesale prices or alternatively pay out the lease at his option; (iii) That the Kyrwoods supply a status report on the patent now and a report every 3 months; (iv) That as agreed to by your clients, Caddyrack P/L shall supply to our client Peter Drinkwater materials, packaging and advertising. Our client is agreeable that after the first container has been shipped to Korea that our client be billed for work done by Leslie Pickering in respect of distribution etc of Caddyracks to Korea and 10% on cost. We await your advice in respect of what arrangements the National Australia Bank have made with your clients in regard to the outstand (sic) security provided by Peter Drinkwater for Caddyrack Pty. Limited. Your early attention to the above matters is requested." 80 Thereafter, on 13 August 1996, McDonald Johnson forwarded by facsimile to Hansens a letter (Blue AB 337-338) which was in the following terms: "RE: CADDYRACK PTY. LIMITED Thank you for your letters of 9 August 1996. As you know the parties entered into an Agreement dated 26 July 1996. That Agreement was entered into after extensive negotiations and with all parties having the benefit of independent legal advice. I acted for the Kyrwoods and you acted for the Drinkwaters. The Agreement dated 26 July 1996 was conditional on: 1. Satisfactory arrangements being met (sic) for the repayment of the debt to Great White Shark Enterprises (clause 11). 2. International Tool & Gauge providing a letter relinquishing all interests (if any) in the tool situated in the United States (clause 14). 3. International Tool & Gauge agreeing to transfer its shares in Caddyrack Inc to John Drinkwater or his nominee (clause 15). Satisfactory arrangements have been made with Great White Shark Enterprises Inc. We refer you to our letter to you of 7 August 1996 enclosing a copy of a letter from Cornwells, signed by Paul Erickson on behalf of Great White Shark Enterprises. Separately, we have had Paul Erickson confirm to us in writing that the arrangements are satisfactory. If you have any concerns, we suggest you write direct to him in view of the fact that he has been writing to you. The letter we sent to you from International Tool & Gauge states 'International Tool & Gauge hereby relinquishes any interest it has in the die to make Caddyracks currently situated at Performance Engineering Products in the United States …'. This satisfies the condition in clause 14. International Tool & Gauge have now separately advised us that it is happy to transfer its shares in Caddyrack Inc and is awaiting on the appropriate documentation. May we suggest you send it to them or contact them direct should you have any queries. We do not propose to otherwise comment on the matters raised in your two letters of 9 August 1996 as they are clearly outside the terms of the Agreement dated 26 July 1996. However, we understand that Mr. Kyrwood, Mr. Drinkwater and Mr. Cornwell have had a 'without prejudice' meeting to consider what arrangements our clients may be prepared to make to assist your client with the rights he has under clause 2 of the Agreement. Naturally, any further agreement in that regard would not effect of existing Agreement as it would be totally separate. The Kyrwoods are ready, willing and able to complete the Agreement dated 26 July 1996 and have carried out their relevant obligations under that Agreement. In particular, Caddyrack Pty. Limited has made the first payment to Great White Shark Enterprises Inc and has paid a substantial amount of money to protect the patent. The Kyrwoods have also put in place the arrangements with the National Australian (sic) Bank (see the bank's letter dated 9 August 1996). Please make immediate arrangements for Peter Drinkwater and John Drinkwater to attend a meeting with the Kyrwoods to effect the resignations and transfer the shares. If this meeting has not taken place by 5.00 pm Thursday 15 August 1996 we have instructions to commence proceedings in the Supreme Court for specific performance of the Agreement dated 26 July 1996." 81 Although it does not appear to have loomed large in any of the Judgments which were delivered by Young J in these proceedings at first instance, it seems to have been the fact (see Judgment Young J, 25 September 1997 pp. 31-33; see Red AB 66-68) that, from a date shortly after the incorporation of International, the Messrs. Kyrwood were diverting orders, which had been directed to Caddyrack, to International and were making arrangements for that company to enter the United States market and, in particular, to have a stand at the Orlando Golf Show and to have International listed in the 1997 PGA Merchandise Show Directory and Buyers Guide (see Blue AB 749-453, 771-775). 82 The war of words between Hansens and McDonald Johnsons resumed on 15 August 1996 when Hansens forwarded by facsimile to McDonald Johnson a letter (Blue AB 339) reading as follows: "RE: CADDYRACK INC We refer to the above matter. We have been advised by Brien Cornwell that the share transfers in respect of Golf Products Promotion Limited have not yet been returned. Further the letter from International Tool and (sic) Gauge, clause 14, is a conditional letter, such conditions not been (sic) canvassed in the agreement. There also remains a number of outstanding issues in respect of John Drinkwater which we are currently awaiting instructions (sic). Could you please take instructions from your clients in regard to the above matters." 83 Although the circumstances in which it did so are not revealed by the materials which are before the Court, it would appear that, at about this time, Mr. Cornwell's firm became involved in the disputes between the Messrs. Drinkwater and the Messrs. Kyrwood as to the carrying out of the terms of the agreement of 26 July 1996. Thereafter, on 29 August 1996 Hansens wrote to Cornwells a letter (Blue AB 509, 747) which read as follows: "RE: CADDYRACK INC AND CADDYRACK PTY. LIMITED We refer to your letter of 21 August last in regard to the above matter. We have been able to take instructions from John Drinkwater on 27 August. He instructs us that he has been required to pay monies (sic) to Chris Phillips to retrieve items that were returnable to Caddyrack Inc under the orders of the Court. These items were compiled from a list setting out the assets of Caddyrack Inc held by the Kyrwoods. This list was annexed to an Affidavit used by the Kyrwoods in recent Court proceedings. On our instructions the Kyrwoods have deliberately allowed those assets to remain with or go to Phillips. They have not honoured their undertaking to the Court. Our client Caddyrack Inc is also out of profit in respect of the Sandpiper sale. The agreement signed on 26 July last does not envisage any undertaking from Caddyrack Inc to pay for refurbishment of the tool. Our client instructs us to advise that in the circumstances they shall retain the current tool in America and supply left handed Caddyracks at cost as required to Caddyrack Pty. Limited pursuant to clause 8 of the agreement. Caddyrack Pty. Limited can then upgrade the Australia (sic) tool if and when it is required. Could you please take instructions from the Directors of Caddyrack Pty. Limited in regard thereof." A copy of that letter is said (Blue AB 492) to have been made available to Geoffrey Kyrwood. 84 On 3 September 1996 Hansens wrote again to Cornwells, on this occasion as follows (Blue AB 341-342): "RE: P & J DRINKWATER AND G & T KYRWOOD We refer to the above and note your advice that you are in receipt of a duly executed share transfer in favour of Peter and John Drinkwater from Golf Products Promotions Limited. Please provide a copy of the share transfer. You might also provide us with a copy of the unconditional letter set out in clause 14 of the agreement from International Tool and Gauge. We are instructed that the original share certificates in Caddyrack Inc. for International Tool and Gauge and Caddyrack Pty. Limited were forwarded to your clients. We understand the transfers of such shares are contained in the back of the certificate. Could you please forward us the original certificate in respect of International Tool and Gauge Pty. Limited or alternatively confirm that same has been previously forwarded to International Tool and Gauge, whereupon we shall contact them. Please confirm the situation in respect of the National Australia Bank under clause 6 of the agreement. Upon completion of the above items, we believe the parties are ready to finalise the terms of the agreement." 85 On 5 September 1996, McDonald Johnson forwarded by facsimile to Hansens a letter (Blue AB 343-344) reading as follows: "RE: CADDYRACK PTY. LIMITED & CADDYRACK INC. Thank you for your letter of 29 August, 1996 addressed to Brien Cornwell. We cannot see how the payment of monies to Chris Phillips has any relevance to our clients. The undertakings given to the Court concerning the assets of Caddyrack Inc was (sic) as follows: 'The first and second defendants through their Counsel until 16 July, 1996 to deliver … to Caddyrack Inc. within seven (7) days or advise Caddyrack Inc. of the location of such assets in Annexure 'D' to the Affidavit of T. Kyrwood as are in the possession of the first and second defendants.' The assets which you write about were not in the possession of our client (sic). Even if they were, our clients advised Caddyrack Inc of their location. As previously advised, we cannot see how the Sandpiper sale is relevant. You might refer us to the appropriate Clause of the Agreement dated 26 July, 1996. Clause 12 of the Agreement dated 26 July, 1996 requires 'the Drinkwaters to pay to International Tool & Gauge up to $20,000.00 for the upgrading of the Australian Tool and when the upgrade is complete will exchange the United States of America Tool for the Australian Tool with each party being responsible for the freight. You will see that the Drinkwaters are liable to pay for the refurbishment of the Tool. Please confirm that they have made arrangements for payment of the sum of $20,000.00 to International Tool & Gauge. The Kyrwoods do not have to release the mortgage over Peter Drinkwater's house until all conditions have been satisfied. They will do this at settlement, as previously advised. They want the arrangements concerning the Tool as set out in the agreement to be complied with. The proposal set out in the penultimate paragraph of your letter is not acceptable. The Kyrwoods require compliance with the Agreement of 26 July, 1996 and they are ready, willing and able to complete that Agreement. In fact, the Kyrwoods have been waiting for sometime (sic) for you to confirm that you have signed Share Transfers and Resignations. The Kyrwoods have performed their obligations of the Agreement of 26 July, 1996 in some cases at great expense. If the Drinkwaters are not prepared to complete that Agreement then the Kyrwoods will be forced to seek specific performance. Please make an appointment for settlement." 86 Hansens returned to the fray on 9 September 1996 with a letter (Blue AB 345-346) which was as follows: "RE: CADDYRACK INC. & CADDYRACK PTY. LIMITED We refer to your letter of 5 September last in regard to the above. Clause 6 of the agreement requires the Kyrwoods to replace the security over Peter Drinkwater's property at 44 Skye Road, Coal Point, within 14 days of the date of the agreement. This clause is not contemporaneous (sic) with other clauses in the agreement and clearly stands alone. We note this has not occurred yet. Clause 12 provides for our clients to pay up to $20,000.00 for any upgrade. It does not require the payment of $20,000.00 to International Tool and Gauge. It does not speak of a deposit. The undertaking by John Drinkwater not to move the tool in the United States is conditional upon the Kyrwoods and International Tool and Gauge providing a letter 'relinquishing all interests (if any) in such tool within 7 days of the date hereof'. Neither your clients nor International Tool and Gauge have provided such letter. We have not been advised the condition precedent in clause 15 has been satisfied and we await your advice. Your clients are, sofaras, (sic) we can ascertain, not in a position to complete the agreement, and infact (sic) remain in breach thereof. Our clients reserve their right (sic) in regard thereto." 87 To that letter McDonald Johnson replied on 11 September 1996 as follows (Blue AB 347-348): "RE: CADDYRACK PTY. LIMITED & CADDYRACK INC Thank you for your letter of 19 (sic) September 1996. We disagree with your interpretation of Clause 6. You will see that it has a proviso which you have not mentioned. Clearly, it does not stand alone. Clause 12 states 'that Drinkwaters pay to International Tool & Gauge up to $20,000.00 for the upgrading of the Australian Tool (etc)'. As to Clause 14, the Kyrwoods provided the letter on settlement and International Tool & Gauge provided the letter within seven (7) days. The last sentence in paragraph 3 of your letter is clearly incorrect. With respect, so is your interpretation of many Clauses of (sic) the Agreement. As to Clause 15, we are instructed that International Tool & Gauge has provided a letter agreeing to transfer shares in Caddyrack Inc. Nonetheless, as your client is the Chairman of that company and, as previously suggested by us, why don't you contact International Tool & Gauge or, better still, send them the appropriate documentation. You will see that our clients are not in breach of the Agreement and have done everything possible to get your clients to complete. We hold the Sharescript (sic) for the interests owned by our clients (or their associates) in Caddyrack Inc together with signed Transfers. These will be available at settlement. Once again we invite you to make a time for settlement." 88 What I can only describe as the tiresome bickering between Hansens and McDonald Johnson continued in two further letters which passed between them (Blue AB 349-350 and 351-354) the detailed contents of which - except for the matters which I set out below - I do not consider it necessary to record in this Judgment. However, McDonald Johnson's letter of 23 September 1996 to Hansens concluded with the following (Blue AB 354): "Your clients appear to be reluctant to comply with the mechanics in the agreement dated 26 July 1996. A meeting was set up on 7 August 1996 for settlement. This meeting was cancelled by your clients when they advised that they would not be attending. On 15 August 1996 you advised that there were outstanding matters and that you were taking instructions from John Drinkwater. You conveyed those instructions to us, it seems, on 29 August 1996 but still made no appointment to settle. On 5 September 1996, we once again asked you to make an appointment for settlement as we did on 11 September 1996. Our clients have at all times been ready to complete the bargain. They have had a facility on hold with the National Australia Bank in the sum of $250,000.00 since early August in order to discharge the mortgage over Peter Drinkwater's house. This has substantially disadvantaged them as they have been unable to use those funds yet have not obtained the benefit of the Agreement. Enclosed by way of service is a Notice requiring the Drinkwaters to complete the Agreement in accordance with its terms. If this Notice is not complied with then the Kyrwoods will either commence proceedings for damages and/or seek specific performance of the Agreement in the Supreme Court." The accompanying Notice (Blue AB 355-356) provided (inter alia) as follows: "Take notice that: (1) The Kyrwoods are ready, willing and able to complete the Agreement and will hand over executed share transfers of the shares in Caddyrack Inc and will replace the security over the residential property of Peter Drinkwater at 44 Skye Point Road, Coal Point and will exchange the die situated in Australia for the die situated in the United States (or arrange for it to be freighted simultaneously); (2) You, the Drinkwaters, are required to attend at the offices of Caddyrack Pty. Limited at 10 Murray Street, Hamilton at 3.00 pm on 10 October, 1996 with: (i) signed Resignations as Directors; (ii) signed Transfers in Caddyrack Pty. Limited; (iii) the die used for the manufacture in caddyracks located in the United States (or arrange for it to be freighted simultaneously). In default of you complying with this Notice on or before 3.00 pm on 10 October, 1996 the Kyrwoods will either sue you for damages and/or seek specific performance of the Agreement." 89 On 30 September 1996, Hansens wrote to McDonald Johnson a letter (Blue AB 358-359) which read, in part, as follows: "RE: CADDYRACK PTY. LIMITED & CADDYRACK INC. We refer to your letter of 24 September last in regard to the above. Clause 14 of the agreement does not provide for International Tool and Gauge to impose conditions in the agreement between the Kyrwoods and the Drinkwaters. Whatever arrangements arrived at (sic) between your client and International Tool and Gauge is (sic) a matter for those parties. We note your reference to the obligation to pay up to $20,000.00 in clause 12 of the agreement as being John Drinkwater's obligation. Clause 6 of the agreement provided for the Kyrwoods to replace the security over Peter Drinkwater's house within 14 days of the date of the agreement. This has not occurred. On our instructions your clients have consistently said that they will not do that until they are satisfied that the agreement has been complied with so far as they are concerned. Clause 12 so provides that when any upgrading of the tool is complete the respective tools will be exchanged. Clearly until the upgrade is complete no exchange can take place. ……… We hold resignations of our clients as Directors of Caddyrack Pty. Limited and the share transfers previously forwarded. We are instructed by our client (sic) that they have been advised by International Tool and Gauge that the earliest any completion of an upgrade of the Australian tool would be complete is approximately 4 months. In light of that your client should release the security over Peter Drinkwater's property as you clearly acknowledge that any monies payable in respect of the upgrade are to be paid by John Drinkwater only. Any costs incurred by our client in defending any action commenced by your clients in respect of their failure to comply with the agreement shall be sought on an indemnity basis." 90 Before turning to record the events of 10 October 1996, I should first record that the versions of those events given by, on the one hand, Mr. Hewitt and, on the other, Mr. Doyle, conflict and that, although Young J does not appear to have been particularly impressed by any of those who attended the meeting scheduled for 3.00 pm on 10 October 1996 and who gave evidence (see Red AB 57-58), his Honour concluded (Red AB 58-59): "However, there is little purpose in saying which of the principal actors were the better witness. I will content myself with saying that I was more comfortable in accepting their evidence if it was supported by other evidence. In actuality, it was the evidence of the solicitors which was more determinative of the case. Mr. Doyle, solicitor, gave his evidence in a very belligerent manner. He gave a poor impression in the witness box. It was difficult to believe that a person who is a solicitor whose letterhead describes him as an accredited specialist in business law would take some notes of a meeting which was obviously a vital meeting, annex those to his affidavit, yet never make any note of vital conversations at the meeting. (See Affidavit DA 22/N)" (See Blue AB 590) "In my view, where the evidence of Mr. Hewitt and Mr. Doyle conflict (sic), I must prefer the evidence of Mr. Hewitt." 91 It would appear that, on 10 October 1996, but before Peter Drinkwater and Mr. Hewitt attended the meeting, a meeting of directors of Lustray was held by tele-conference between Peter Drinkwater and John Drinkwater, at which meeting it was resolved that Mr. Hewitt be appointed an alternative director of Lustray for the purpose of signing share transfers of Lustray's shares in Caddyrack Pty. Limited (Blue AB 191, 201). 92 Shortly before 3.00 pm on 10 October 1996, Peter Drinkwater and Mr. Hewitt attended at the offices of Rees Pritchard at 10 Murray Street, Hamilton (Blue AB 62). At the time, Mr. Hewitt had with him the signed resignations of Peter Drinkwater and John Drinkwater as directors of Caddyrack and share transfers in respect of the shares in Caddyrack held by Lustray except for the transfer of 5% of those shares in accordance with clause 1.4 of the agreement of 26 July 1996 (Blue AB 64, 757-761). 93 At approximately 3.05 pm the Messrs. Kyrwood arrived. At that time Mr. Hewitt inquiries whether Mr. Doyle was to attend the meeting, to which Terry Kyrwood replied "He is on his way." 94 When Mr. Doyle arrived at approximately 3.25 pm, Peter Drinkwater, Mr. Hewitt and the Messrs. Kyrwood and Mr. Doyle then moved into a room where they were joined by Stephen Pritchard and a clerk from the office of Brian Cornwell who, so Mr. Hewitt said (Blue AB 63), he believed was in attendance to hand over a number of share certificates of Caddyrack Inc, which certificates were being held by Brian Cornwell. 95 In his Judgment (Red AB 44-45) Young J recorded what then is said to have occurred in the following way: "Mr. Hewitt says that he told Mr. Doyle, 'This meeting was called by you to complete the agreement of 26 July. It was supposed to occur at 3.00 o'clock. You served the Notice to Complete requiring us to be here at 3.00 pm to complete the agreement. It is now 3.25 and you have now only just arrived. I reserve my clients' rights in respect of your failure to comply with your own Notice.' The parties then agreed to talk off the record, following which Peter Drinkwater and Phillip Hewitt left the room. Upon their return to the room, the clerk from Mr. Cornwell's office had left and the package she had been carrying, which Mr. Hewitt thinks contained share transfers, was in the possession of Steven (sic) Pritchard. Mr. Doyle then said to Mr. Pritchard, 'Do we have all the share transfers for Caddyrack Inc?'. Stevn (sic) Pritchard looked through the documents that had been given to him by Brian (sic) Cornwell's clerk and said 'No, I don't have the share transfer for Caddyrack Pty. Ltd in Caddyrack Inc. I do not know where it is. It may be with Brian (sic) Cornwell.' Mr. Hewitt says that during the time he was at the offices of Rees Pritchard, no one on the Kyrwoods side made any reference to the notice of 24 September or required him to hand over any document or thing. The parties then agreed to hold further discussions the next day, which I assume came to no resolution." 96 According to Mr. Hewitt (Blue AB 191-192) part of the discussion which preceded the off the record discussion was to the following effect: HEWITT: "If the matter is going to settle, the most important thing for Peter is to get his house back." DOYLE: "We don't have to release the house until we have the tool." HEWITT: "That is not what the agreement says. The agreement is that Peter's house is to be released and the transfer of the shares and the resignations handed over irrespective of whether or not the tools have been exchanged. My client needs his house. He needs that to continue in business. As your clients know he has no other employment. He needs the security to be released otherwise he can't borrow any further monies against it." DOYLE: "My clients are not prepared to do that. They believe they will never get the US tool back if they release the house." HEWITT: "What if my clients make installment (sic) payments for the upgrade of the tool?" DOYLE: "No. Without the tool there will be no release of the house. GEOFF KYRWOOD: "We can't trust John Drinkwater. We must have the house." 97 In fact, the following day, McDonald Johnson forwarded to Hansens a draft Deed of Guarantee and Indemnity and a draft Mortgage which had been proposed during the course of the off the record discussions as a possible means of enabling the July agreement to be settled (Blue AB 191-193, 195-200). 98 On 15 October 1996, McDonald Johnson forwarded to Hansens a letter (Blue AB 73-75), written by Roger Norris, Mr. Doyle's partner - Mr. Doyle being on leave - which letter commenced: "RE: KYRWOOD AND DRINKWATERS - CADDYRACK PTY. LIMITED - CADDYRACK INC. We refer to our recent telephone conversation in this matter in which you advised that you were obtaining comments from your clients in relation to the draft Deed collection by you from Craig Doyle on 11 October 1996. Please note that our clients no longer wish to proceed with negotiations as envisaged by the draft." Then, after a great deal of self-justificatory material, the letter continued: "Immediately the upgrade is complete, the US Tool will be transported to Australia at your clients' expense as envisaged by the agreement and immediately upon its inspection in Sydney by a representative of ITG and he being satisfied that the Tool is capable of producing marketable product, our clients will comply with clause 6 by payment to the National Australia Bank of $250,000.00 in return for which payment the bank will confirm that it has no interest in Mr. Drinkwater's property at 44 Skye Point Road, Coal Point relative to advances afforded to Caddyrack Pty. Limited. ………" 99 On 16 October 1996, Hansens forwarded by facsimile to McDonald Johnson a letter (Blue AB 76-77) in the following terms: "RE: DRINKWATERS & KYRWOODS - CADDYRACK PTY. LIMITED We refer to your letter of 15 October last and your notice of 24 September making time of the essence. The writer and Mr. Peter Drinkwater attended the offices of Rees Pritchard at 3.00 pm on 10 October ready, willing and able to complete the agreement. Your clients were unable to complete the agreement for various reasons including inter alia they did not have the share transfer transferring shares held by Caddyrack Pty. Limited to John Drinkwater and Peter Drinkwater in accordance with clause 3.4 of the agreement dated 26 July. Further, your clients were unable to settle at the appointed time of 3.00 pm. Accordingly, your clients have not been ready, willing and able to settle the matter since August 1996. We confirm that the writer reserved our clients' rights in relation to such failures at the commencement of the meeting at approximately 3.30 on 10 October last. Following that statement 'without prejudice' negotiations were undertaken so as to ascertain if an alternative settlement could be effected. We note that your clients now refuse any alternative form of settlement. Our clients rely on your clients' failure to complete the agreement in accordance with your notice and that you have thereby repudiated the agreement of 26 July 1996. If the parties are unable to reach an alternative settlement arrangement by 5.00 pm 17 October 1996 our client will rely on the repudiation of 26 July agreement by your clients on 10 October 19196 and seek damages." 100 As one might have expected, this was not the end of the matter. On 16 October 1996 McDonald Johnson wrote to Hansens a letter (Blue AB 78) which was in the following terms: "RE: CADDYRACK PTY. LIMITED We refer to your letter of 16th October 1996. Your letter does not contain a correct account of the facts nor of the legal situation. Our Clients have never repudiated the agreement of 26th July 1996 and as noted in our letter of 15th October 1996 regard it as being on foot. None of the 'negotiations' of the 10th October 1996 or subsequently attempt to alter the substance of the agreement between the parties but merely seek to achieve a settlement procedure acceptable to all. Please let us have a response to the proposal set out in our letter of 15 October 1996." which letter was followed by a further letter from McDonald Johnson to Hansens dated 22 October 1996 (Blue AB 79-80) in the following terms: "RE: CADDYRACK PTY. LIMITED - DRINKWATERS & KYRWOODS We refer to our letter of 15 October 1996 and your letter of 16 October 1996. Since 26 July 1996 your clients have done nothing to complete their obligations under that agreement. We have not heard from your client (sic) in any way in relation to the procedure for settlement set out in our letter of 15 October 1996 nor have we received from your client any other proposal. The agreement of 26 July 1996 is still on foot and our clients have been ready, willing and able to settle same since early August 1996, whereas your clients have taken no steps to implement the settlement arrangements notwithstanding that the 3 months envisaged to modify the Australian Tool to your clients' requirements will expire on 26 October 1996. Your clients have made no contact with ITG in relation to modification of the Tool. Our clients are ready, willing and able to comply with all their obligations under the Deed. Our clients are the owners of the US Tool pursuant to the agreement, the completion of which is only being delayed by your clients failing to comply with their obligations under it. In these circumstances, where your clients take no steps to implement the agreement reached, do not rely to correspondence, make no settlement proposals despite the suggestion in your letter of 15 October 1996 and generally act with disregard to the agreement reached, it appears that our clients will have no alternative but to go back to the Court seeking Orders. In the circumstances our clients will make such an application if the agreement is not settled in accordance with its terms within the next 3 days. This notice may appear to be short but your clients have had plenty of notice. They have indicated that they have been ready, willing and able to settle the matter since August 1996, but have done nothing." 101 On 24 October 1996 Hansens forwarded by facsimile to McDonald Johnson a letter (Blue AB 762) which was in the following terms: "RE: CADDYRACK PTY. LIMITED We refer to your letter of 22 October last in regard to the above. Our clients reserve their right to answer other matters raised in such letter. However, so far as nothing having been received in respect of the 'without prejudice' discussions on 10 and 11 October, the position is as set out in our letter of 16 October. It remains a fact that notwithstanding the issue of the Notice to Complete by you, presumably on your clients (sic) instructions, your clients were not in a position to settle the matter at 3.00 pm on 10 October last." 102 On 28 October 1996, McDonald Johnson wrote to Hansens a letter (Blue AB 81-83) which commenced: "RE: CADDYRACK PTY. LIMITED We refer to your letter of 28 October 1996 in which you rejected the proposal we made on 24 October 1996 to simplify the settlement of the matter. Similarly the discussions held on 11 October 1996 were held with a view to simplify the settlement of the matter as indicated in our letter of 16 October 1996. As indicated in our letter of 22 October 1996, our clients remain, ready, willing and able to settle the agreement of 26 July which is still on foot." then, after referring to the fact that, enclosed with the letter were a number of share transfers of shares in Caddyrack Inc, after making a number of assertions and demands which I do not consider necessary to reproduce, the letter continued (inter alia): "When all the above matters have been attended to, when the US Tool is in Australia and provided that there have been no breaches of any other conditions with the agreement by your clients (such as sale of product outside of the exclusive area), our clients will comply with clause 6. ……… Compliance with clauses 12 and 1.4 is totally in the hands of your client. If something is not done immediately to have clause 12 implemented by ITG and for the American Tool to be exchanged with the Australian Tool, then our clients will have to consider their position. One such consideration will be to cease servicing the National Australia Bank loan to your client, as the continued payment of that outgoing (in respect of which our clients have no legal obligation) solely depends on your clients' implementation of the agreement which ought to have been concluded by now." to which letter, Hansens replied on 30 October 1996 by letter (Blue AB 84-85) which letter contained the following (inter alia): "As set out in our letter of 16 October 1996, our client (sic) considers that your client (sic) repudiated the agreement of 26 July 1996 by issuing a Notice to Complete and then failing to be able to complete and/or complete at the appointed time set out in such Notice. ……… Our client Peter Drinkwater will hold your clients responsible for any loss and/or damage and costs incurred in the event that they cease servicing the National Australia Bank loan, the benefit of which continues to be received by your clients." 103 Finally, on 30 October 1996, McDonald Johnson wrote to Hansens a letter (Blue AB 86-87) which, so far as is relevant, was as follows: "Our clients deny having repudiated the agreement made on 26 July 1996. They have never had any intention of repudiating it. On the contrary, our clients have at all times complied, and continue to comply with their obligations under the agreement. Those obligations which are not yet due for implementation by our clients are in hand and our clients are ready, willing and able to comply with all such conditions subject to the terms of the agreement. ……… In your letter of 30 October 1996 you returned the share transfers to us. For what reason we do not know. Please be advised that the share transfers are held in our file. Pursuant to the agreement they are the property of your clients and may be collected by you or your clients at any time." 104 Peter Drinkwater first became aware of the existence of International and of the fact that it was marketing Caddyracks on 7 November 1996 when, at the Aussie Golf Warehouse in Newcastle, he purchased a Caddyrack which was enclosed in a box bearing the name of International and the address, telephone and facsimile numbers used by Caddyrack. The Caddyrack which Peter Drinkwater purchased bore the "Patent Pending Number" which had been allotted when the application for the patent for Caddyrack was made and also bore the "Registered Design Application Number" which had been allotted when the application to register the design of Caddyrack was made in December 1994. 105 Although the materials which are before the Court do not contain a copy of the Summons which was filed to commence the proceedings, it is agreed between the parties that that Summons was filed on 11 November 1996. 106 In the Amended Statement of Claim (Red AB 3-12) which was filed on behalf of the Respondents, there were sought a wide variety of declarations and orders which, except to the extent to which I set out below, I do not think it necessary to record in detail. Suffice it to say that there were sought orders the effect of which would be to give effect to clause 6 of the Agreement of 26 July 1996 and the following (inter alia) particulars orders: "(vi) A declaration that Gavros Pty. Limited and Gedrot Pty. Limited hold their shares in Caddyrack International Pty. Limited on trust for Caddyrack Pty. Limited. ……… (viii) In the alternative to order (vi) an order that Caddyrack International Pty. Limited account to Caddyrack Pty. Limited for the profits obtained by Caddyrack International Pty. Limited from the sale of the Caddyrack products. (ix) An order that an accounting of profits be taken by the Master to determine the profits made by Caddyrack International Pty. Limited from the sale of the Caddyrack products. ……… (x) An order that Gedrot Pty. Limited and Gavros Pty. Limited purchase the shares in Caddyrack Pty. Limited owned by Lustray Pty. Limited for an amount determined by this Court. (xi) In the alternative to order (x) an order that the second plaintiff purchase the shares in Caddyrack Pty. Limited owned by the fifth and sixth defendants for an amount determined by this Court. (xii) In the alternative to orders (ix) and (x) the first defendant be wound up pursuant to s.260 of the Corporations Law. ………" Although I would have thought that the inclusion of prayers for relief under the general law in a proceeding in which there were prayers for relief - such as (x), (xi) and (xii) - pursuant to the provisions of the Corporations Law, was irregular (see SCR Part 80A - now replaced by the Corporations Law Rules) no point appears ever to have been taken in that respect. 107 In addition to filing a Defence putting in issue all relevant allegations in the Amended Cross-Claim, the Appellants, together with Caddyrack and International, filed an Amended Cross-Claim in which they sought orders requiring the performance in specie by the Plaintiffs of what were claimed to be the Plaintiffs' obligations under the Agreement of 26 July 1996. 108 The proceedings were heard by Young J over a number of days in June and September 1997, his Honour delivering his first Judgment (Red AB 35-69) on 25 September 1997. 109 In that Judgment, Young J turned, first, to deal with the question of what was alleged by the Respondents to have been the repudiation by the Kyrwoods of the agreement made 26 July 1996. This question, in his Honour's view, involved the following sub-questions: 1. whether, on its proper construction, clause 6 of the Agreement required the Kyrwoods to procure the discharge of the mortgage over Peter Drinkwater's home within 14 days of the date of the Agreement even though the upgrade of the Australian tool had been completed and the exchange of the US tool for the Australian tool had not even been arranged let alone taken place; 2. if so, whether the construction mistakenly placed by the Kyrwoods on clause 6 and their refusal to procure the discharge of the mortgage prior to the exchange of the US tool for the Australian tool taking place constituted a repudiation by the Kyrwoods of their obligations under the agreement. So far as the first question is concerned, his Honour concluded (Red AB 54): "The conditions referred to in clause 6 do not cover the matters in clause 12 because the parties knew that these were likely to take some 12 weeks and this is just incompatible for something happening within 14 days. Furthermore, there is nothing in clause 12, as opposed to clauses 11 and 15, which suggests that it is a condition or that it is a matter which is to happen concurrently with clause 6. Accordingly, the construction of clause 6 put by the Drinkwaters is the correct one. It follows that in reaching the opposite conclusion, the Kyrwoods have been asking for the agreement to be performed in a way differently to its true construction." So far as the second question is concerned, his Honour concluded (Red AB 64-65): "I bear at the forefront of my mind the oft repeated dictum that repudiation is not to be lightly inferred. I also bear in mind that the present contract was, in one sense, a provisional contract which did not spell out precisely the obligations of the parties because they intended that the contract would be replaced with a more detailed document in the near future. When this expectation was not realised, it was always a real possibility that someone would misunderstand the contract. However, in my view the activities of the Kyrwoods which I have outlined show that they have moved beyond mere misunderstandings and taken the deliberate course of stating that they will only perform the contract in a particular way. Within the principles I have already discussed, that is a repudiation …" 110 In the course of his consideration of the question whether the conduct of the Kyrwoods could be regarded as repudiatory, Young J also considered the question whether the conduct of the Messrs. Drinkwater in relation to the upgrading of the Australian tool was such as to deprive them of the right to terminate the agreement in reliance upon the repudiatory conduct of the Messrs. Kyrwood. In the course of his discussing the question of the proper construction to be accorded to clause 6, Young J had earlier written (Red AB 50): "The Drinkwaters say that they were not to pay the bill of ITG but merely to contribute to its payment so that there was no obligation for them to pay money until the upgrading was effected. I must say that I do not agree with this last submission. It is not at all unusual for a supplier for ask for a substantial deposit for work of this nature and it seems to me that, so long as a demand is made for a deposit which is commercially reasonable, under a clause such as clause 12 there is an obligation to pay it. However, this conclusion has little bearing on the ultimate decision in this case." 111 Having discussed the principles to be discerned from the cases as to whether a breach of contract or absence of readiness or willingness to perform a term of the contract precluded a party from termination for breach on the part of the other party to the contract, his Honour concluded (Red AB 64): "The present case is not one where there were interdependent conditions. The case was not one where a person had to use exertion to obtain the release of a plan or the like. The matter of the tool was completely independent of the matter of removing the charge over Peter Drinkwater's home. The mere fact, if it be the fact, that the Drinkwaters were in breach of contract of clause 12 would not, within the meaning of the maxim, be a wrong which would prevent them from relying on clause 6. At the very worst there would be an action for breach of warranty against the Drinkwaters." That being so, his Honour held (Red AB 65) that it was open to the Messrs. Drinkwater to accept the repudiation and put an end to the contract. 112 Next, Young J dealt with the submission made on behalf of the Messrs. Kyrwood to the effect that the Messrs. Drinkwater had affirmed the agreement of 26 July 1996, a submission which he disposed of in the following way (Red AB 65): "Affirmatory conduct could be relevant for either or both of two reasons. First, it, together with other evidence, could convince a trier of fact to reach the conclusion that the contract was not terminated. For this purpose, conduct after termination is irrelevant. Secondly, such conduct could also operate as an estoppel; see eg Franklin v. Manufacturers Mutual Insurance Ltd (1936) 36 SR (NSW) 76. However, estoppel plays no part in this case as the Kyrwoods have not shown any reliance or proved any detriment. Accordingly, I do not consider that the case is affected by any principle of 'affirmation'." 113 I pass over the views expressed by Young J as to the effect of the Messrs. Kyrwood taking part in the Orlando Trade Fair for that is not the subject of any submission on this appeal. 114 Finally, Young J dealt with the consequences which flowed from the actions of the Messrs. Kyrwood in redirecting the business activities and opportunities of Caddyrack to International, which activities, so it was submitted on the part of the Messrs. Drinkwater, constituted a breach of fiduciary duty. Having considered that question and, in particular, the submissions which had been made on behalf of the Messrs. Kyrwood that any fiduciary duty owed by the Messrs. Kyrwood was owed to Caddyrack, which was not a plaintiff, and not to the individual shareholders such as the Messrs. Drinkwater, his Honour concluded (Red AB 68): "In the instant case, the matter is really academic. Either there is a fiduciary duty owed by the Kyrwoods to the Drinkwaters, or else it is one which is owed to Caddyrack Pty. Ltd. Although Caddyrack Pty. Ltd. is not a plaintiff in the present proceedings, if an order is made under s. 260 that there be a buyout then the Court can order that in valuing the shares for the purposes of a buyout, the expert valuer can proceed on the basis that certain transactions are to be ignored or that Caddyrack International Pty. Ltd. is to be regarded as a wholly owned subsidiary of Caddyrack Pty. Ltd. It is quite clear that this sort of order is within the scope of the section; see Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] AC 324 and Re Bright Pine Mills Ltd [1969] VR 1002." 115 His Honour then concluded (Red AB 68-69): "I think I should stop here. I believe that the appropriate course is to publish these reasons and to ask for short minutes to be brought in. I would expect that the short minutes would contain a declaration that the contract contained in the deed of 26 July 1996 had been terminated as at the appropriate date and an order that a valuer be appointed to value the shares of Caddyrack Pty. Ltd. on the appropriate basis and that within a certain time after the publication of the valuation the Drinkwaters (or perhaps the Kyrwoods) be at liberty to purchase the opposing party's shares at that valuation. Doubtless when the short minutes are brought in there will be some discussion as to the details of the order and perhaps even discussion as to who should buy out whom. I note that Mr. Coles QC said that his clients would rather be the buyer than the seller, but I have no note of what Mr. Campbell QC said about that matter. As the Kyrwoods have failed to date, my inclination would be that they should pay the costs of the proceedings to date with further costs being reserved. I will not consider it at all amiss if on that date, after discussion, counsel ask me to find any further fact or to proceed further with some aspect of the case before the valuation is carried out." 116 When the proceedings were listed before Young J in October 1997 for the purpose of his Honour dealing with the Short Minutes which had he had contemplated would be brought in, little progress had been made as appears from his Honour's Judgment on 23 October 1997 (Red AB 70-71) in which his Honour said: "I gave reasons for judgment in this matter on 25 September 1997. The companies involved are companies which appear to be trading profitably and exploiting a product for which there is a demand. I am conscious that the Court should not wind up such enterprises if there is any other viable course open. I had contemplated that the parties would be able to work out some arrangement whereby the shares could be valued and one of the parties could buy the others out. However, the two sets of short minutes that were handed up this morning show that the parties would seek to value different things, that both parties want to be the buyer and that it is extremely difficult for the parties to work out a regime for the purchase or sale of each others interest. It seems then that if the path of permitting one side to buy the other side out is to be followed, there will need to be a lengthy and extensive inquiry before the Master. This will take time and whilst it is happening something has to be done to ensure that the business of the company is running in the interests of the company as a whole rather than in the interest of one party. Both parties have shown in the past that they will, if they can, take any commercial advantage open to them to prefer their own interests. There are some existing undertakings as to the running of the business and it is also agreeable to both parties at the moment that Miss Lesley Pickering continue as manager. It seems to me that the only way out of the present deadlock is to appoint a liquidator. This is, under the Act, a course of last resort. The interim arrangement could hold together for a further 21 days during which the parties may be able to realise that further battles are only likely to mean that both of them will lose to the benefit of the legal or accounting professions or the person who buys the business." 117 The formal Declarations and Orders made by Young J on 23 October 1997 were as follows (Red AB 82-83): "THE COURT DECLARES that: 1. The agreement between the First Plaintiffs, Second and Third Defendants dated 26 July, 1996 was validly terminated by the Plaintiffs on 16 October, 1996. 2. The assets and undertaking of the Fourth Defendant are held on trust for the First Defendant. THE COURT ORDERS THAT: 3. The Cross-Claim be dismissed. 4. The First Defendant be wound up. 5. Errol George Chant be appointed as liquidator to the First Defendant. 6. Order 5 to be suspended until 13 November, 1997. 7. Order 6 is made on the condition that the existing undertakings by the Defendants as to the operation of the relevant businesses are to continue in force until 11.00 am on 13 November 1997 and Ms. Leslie Pickering is to continue as manager. 8. The Second and Third Defendants to pay the Plaintiff's (sic) costs of these proceedings to date save that each party is to pay its own costs of 26, 27 and 28 May, 1997. 9. Further consideration reserved. 10. Liberty to apply on two days notice. 11. Direct the plaintiff (sic) to notify Mr. Chant of these orders today." 118 As the Judgment which Young J was to deliver on 28 November 1997 (Red AB 72-81) records, in the period which passed between 23 October 1997 and that day, the matter was relisted before his Honour on a number of occasions, on one of which his Honour must have stayed, until further order, the operation of the order which he had earlier made for the winding up of Caddyrack. That this was so appears from the opening paragraphs of Young J's Judgment of 28 November 1997 which were in the following terms: "There have been some significant developments in this matter since I delivered my reasons on 25 September 1997. The matter has come back into my list on, I think, three previous occasions for the parties and myself to work through short minutes which will reflect the reasons and allow the commercial divorce between the Drinkwaters and the Kyrwoods. On 23 October 1997 after the parties could not agree on anything, I ordered that the first defendant be wound up and I stayed this order until 13 November 1997 in case commercial sense might prevail. It did in one sense in that the parties agreed that the appropriate order was not the winding up but that the Kyrwoods would be the buyers of the Plaintiffs' shares in the Caddyrack companies at a fair valuation. The issues thus left for determination are: (A) Whether an order can be made in these proceedings that the defendants pay out the mortgage over Peter Drinkwater's property in favour of the National Australia Bank Ltd; (B) At what date should the valuation of shares take place; and (C) Though this is really not a troublesome issue, what steps should be taken for the interim management of the company pending the consummation of the sale or pending an appeal." Having posed those questions, his Honour proceeded to deal with, and determine, them in a manner reflected by the formal orders made by him that day. 119 The formal orders which were made that day were as follows (Red AB 84-85): "THE COURT ORDERS THAT: 1. Unless within 14 days of these orders the Defendants make such other arrangement as is acceptable to Peter Drinkwater for the release of the mortgage presently held by the National Australia Bank over the property known as 44 Skye Point Road, Coal Point which secures the said loan account, the First and Forth (sic) Defendants are to pay to Peter Drinkwater within 14 days of these orders an amount equivalent to the balance then owing including any fees and charges payable under the National Australia Bank Limited loan account No. 683315446 (BSB number 082 654). 2. The Fifth and Sixth Defendants purchase the shares which the Second Plaintiff (or in the alternatives the First Plaintiffs) hold in the First Defendant (the 'Shares') at a valuation to be agreed or assessed in accordance with orders 3 to 5 herein. THE COURT DIRECTS THAT: 3. For the purposes of determining the value of the Shares in order 2 the appropriate date from which the Shares are to be valued in (sic) 25 September 1997. 4. Within 21 days of these orders each party is to serve on the other a detailed proposed of valuation for the 'Shares' together with any expert reports which are said to support such valuations. 5. All parties to provide within 48 hours of written notification, any records of the first or Fourth Defendants or Third Plaintiff which are in their possession and which relate to the valuations referred to in order 5. 6. That in the event that the parties fail to agree as to the value of the Shares, order that the Master hold an inquiry and thereafter certify the value of the Shares. THE COURT ORDERS THAT: 7. Reserve further consideration. 8. Each party to bear own costs from 25 September 1997 to 28 October 1997." 120 On 22 December 1997, there was filed a Notice of Appeal on behalf of all six Defendants. However, as an Amended Notice of Appeal was filed on the hearing of the appeal on behalf of the Second, Third, Fifth and Sixth Defendants, it is unnecessary to set out the grounds taken in the original Notice of Appeal. 121 In the Amended Notice of Appeal, the grounds which were taken were as follows: "1. That his Honour erred in finding that the appellants repudiated the Agreement. 1A. His Honour erred in holding that the notice of 24 September 1996 made time essential or that the Kyrwoods were estopped from denying that it made time essential. 1B. That the Kyrwoods did not breach or repudiate the Agreement by not completing on 10th October 1996. 1C. His Honour erred in his construction of cl. 6 of the Agreement of 26th July 1996. 1D. His Honour erred in failing to hold that the Drinkwaters were in breach of cl. 12 of the Agreement and had repudiated their obligations under that clause and their implied obligations to co-operate to do all things necessary to enable the exchange of tools to take place. 1E. His Honour erred in failing to hold that by reason of such breach and repudiation and being unable, unready or unwilling to complete, the respondents were not entitled to terminate the agreement. 2. That his Honour erred in finding that the issuing of the notice dated 24 September 1996 was conduct sufficient to amount to a repudiation of the Agreement. 3. That his Honour erred in determining that the respondents could rely on the conduct of the appellants as repudiatory when such conduct was brought about by the non-performance of the Agreement by the respondents. 4. His Honour erred in not finding that the Respondents affirmed the Agreement by developing the eight slot rack under the name 'Clubrack'. 5. That his Honour failed to consider the totality of evidence filed on behalf of the appellants and wrongly failed to direct himself to that evidence and found against the appellants. 6. That his Honour should have found that the Agreement was valid and subsisting and granted the appellants the relief as sought in their cross-claim. 6A. His Honour erred in holding that the Kyrwoods had breached their fiduciary duty and that justification for their conduct could not be maintained because the Agreement had been breached in terminated. 7. That his Honour erred in holding that in the circumstances of this case the loan from the first respondent to the first and fourth appellants was repayable immediately it was made. His Honour should have found that before such monies were repayable a demand was necessary and that as no demand was made prior to the commencement of the proceedings his Honour erred in ordering the money to be repaid." 122 For their part, the Respondents filed a Notice of Contention (Red AB 91) which was in the following terms: "In addition to the reasons given by His Honour Justice Young in support of his finding that the Appellants repudiated the Agreement dated 26 July 1996, His Honour could also have held that the Appellants did not have a bona fide mistaken view as to the proper construction of that agreement of the type considered in DTR Nominees Pty. Limited v. Mona Homes Pty. Limited (1978) 138 CLR 423." 123 Before the appeal came on for hearing, two matters of importance occurred, they being: 1. as I have earlier noted, Caddyrack and International were both ordered to be wound up, the liquidators of those companies, although aware of the pendency of the appeal, having taken no action in relation to the appeal beyond appearing, on one occasion, before the Registrar (T. 1); 2. the inquiry before the Master to determine the valuation of the Respondents' shares in Caddyrack had been completed, the amount payable by the Messrs. Kyrwood to the Messrs. Drinkwater or Lustray being "a very substantial sum" (T. 1). 124 When the appeal was called on for hearing, Mr. R.W. White SC appeared with Mr. A. McInerney for the Messrs. Kyrwood, Gedrot and Gavros, while Mr. B.A.J. Coles QC appeared with Mr. M. Ashhurst for the Respondents. 125 Despite the form of the Amended Notice of Appeal, the written submissions which were filed on behalf of the Messrs. Kyrwood, Gedrot and Gavros commenced with the following: "TRIAL JUDGE'S REASONING AND ISSUES ON THE APPEAL 1. The orders of 28 November 1997 that Gedrot Pty. Limited and Gavros Pty. Limited purchase the shares of Lustray Pty. Limited (Red AB 84.R-85) were made pursuant to the former s.260 of the Corporations Law. The trial Judge appears to have found that the Kyrwoods conducted the affairs of Caddyrack Pty. Limited oppressively in that they redirected the business activities and opportunities of Caddyrack Pty. Limited to Caddyrack International Pty. Limited in breach of their fiduciary duty to the company or the Drinkwaters. His Honour found that they could not rely on the agreement of 26 July 1996 ('the Agreement') as justification for their conduct given his finding that the Kyrwoods had breached (repudiated) that agreement and it had been terminated (Red AB 66.Q-67.H, 68.R). The orders under s. 260 may also have been made on the basis that, as the defence that the parties had already settled their differences by contract failed, the company was deadlocked and there must be a 'commercial divorce' (Judgment of 28 November 1997, Red AB 73J). 2. The reasoning supporting the decision of the declaration that Caddyrack International Pty. Limited held its assets and undertaking on trust for Caddyrack Pty. Limited (Red AB 82.H) must also have been that the Kyrwoods breached their fiduciary duty to Caddyrack Pty. Limited by deflecting corporate opportunities to Caddyrack International Pty. Limited, and that the justification of their actions based on the Agreement failed because of the Kyrwoods breach and the subsequent termination of that Agreement by the Drinkwaters (Red AB 66.S-67.I). 3. The respondents have not contended that the orders should be upheld on any other basis. 4. It was essential to the trial judge's reasoning that the Kyrwood repudiated the Agreement and that the Drinkwaters accepted that repudiation and terminated the Agreement (Red AB 64.U-65.E). It appears from the first declaration made that his Honour found that the Drinkwaters terminated the agreement on 16 October 1996 (Red AB 82). 5. Accordingly, the central issues raised by the appeal are: * whether the Kyrwoods repudiated the Agreement; * whether the Drinkwaters were precluded from terminating the Agreement by reasons of the repudiation, because they were themselves in breach of cl. 12 and the duty to co-operate to do all things necessary to enable the exchange of tools to take place and were not ready, willing and able to complete; * whether the Drinkwaters elected to affirm the agreement of 26 July 1996. 6. His Honour appears to have found there was repudiation by an actual breach justifying termination (failure to complete when time had been made essential) (Red AB 59.F-59U), and a persistent maintenance of an untenable construction on an essential matter (refusal to discharge security until the American tool was received) (Red AB 54.N, 55.G, 55, 64.V)." Although those written submissions contained (at pp. 20-21) a short submission on "Affirmation: The Development of Clubrack", the whole of the oral submissions advanced by Mr. White on the hearing of the appeal were directed to the first two of the "central issues raised by the appeal" identified in the passage of the written submissions which I have set out above. 126 Since it is the failure of the Messrs. Kyrwood to procure the discharge of the mortgage on Peter Drinkwater's home with fourteen days of 26 July 1996 and their subsequent refusal to procure that discharge until the US tool had been delivered to Caddyrack in Australia which constitutes the primary basis upon which the Respondents rely to establish repudiation by the Messrs. Kyrwood it is necessary first to determine what is the proper construction to be accorded to cl. 6 of the Agreement. By way of preface to a consideration of that question, I record: 1. that, as I have earlier (para. 31) noted, at the meeting of directors of Caddyrack held on 14 February 1996, one of the matters that were agreed to was: "2. Personal asset security from Peter and John to be transferred to the Kyrwoods as priority." 2. that, as I have earlier (para. 55) noted, during the course of the discussions which led to the formulation of the agreement of 26 July 1996, Peter Drinkwater said to Brian Cornwell: "It still does not state in here that I will get my house back within two (2) weeks." to which Mr. Cornwell replied: "I will put in the words 'within fourteen (14) days'. Is that satisfactory?" to which Peter Drinkwater assented; 3. that, as is apparent from what I have also earlier (para. 50, 53) noted, both the Messrs. Drinkwater and the Messrs. Kyrwood appreciated that upgrading the Australian tool, which needed to be done before the Australian tool and the US tool were exchanged, would take about three months; 4. finally, that as I have also noted (para. 57), the Agreement of 26 July is anything but a shining example of the draftsman's art. 127 The matters to which I have just referred lead me next to note the following as principles to be had regard to and, if necessary, applied, when construing a document such as that with which the Court is now concerned to deal. They are: 1. as a general rule, the meaning of a document is to be sought for in the document itself; 2. the document is to be construed as a whole, the objective being so to construe the instrument as, if it be possible, to produce a consonant whole (see, for example, Hume v. Rundell [1] ; Lloyd v. Lloyd [2] ); 3. if, in any case, it is clearly necessary so to do in order to avoid absurdity or inconsistency, then, words may generally be supplied, omitted or corrected ( Fitzgerald v. Masters [3] ); 4. should the context in which it appears in the instrument render the meaning to be attributed to some word or phrase doubtful, then the court which is called upon the interpret the instrument may admit evidence of surrounding circumstances in order to identify the meaning to be attributed to that word or phrase (see, for example, Riordan Smith Line v. Hansen-Tangen [4] ; DTR Nominees Pty. Ltd v. Mona Homes Pty. Ltd. [5] and Jacobs JJ ; Burns Philp Hardware Ltd. v. Howard Chia Pty. Ltd. [6] 128 It is to be observed, at the outset, that, while clause 6 of the Agreement appears to impose on the Messrs. Kyrwood an obligation within fourteen days of the date of execution of the agreement to replace the security over Peter Drinkwater's house, many of the provisions in the later clauses of the agreement relate to matters which are to, or may require to be, done at a point or points of time well beyond fourteen days of the execution of the Agreement. Thus, clause 8 appears to impose on Caddyrack Inc the obligations whilesoever the US tool is under its control, to supply left hand Caddyracks to Caddyrack at cost. Further, clause 11 appears to impose on Caddyrack - assuming the appropriate arrangements have been made - to make payments over the better part of 12 months towards the discharge of the debt to Great White Shark Enterprises and to impose on Caddyrack Inc the obligation thereafter to make payments in discharge of the balance of that debt, while clause 7 appears to impose on Peter Drinkwater and the Messrs. Kyrwood, the obligation to pay the balance of that debt in the event that Caddyrack Inc fails to do so. Further still, clause 12, upon which the Messrs. Kyrwood place so much stress, appears to impose upon the Messrs. Drinkwater, the obligation to pay, up to the sum of $20,000.00, thecost of upgrading the Australian tool - that cost not being fully ascertainable until the upgrading has been completed - a process which the parties contemplated to take some three months - and thereafter to exchange the US tool for the Australian tool. Finally, clause 13 appears to impose on Caddyrack the obligation, following the exchange of the Australian tool for the US tool, to supply left handed Caddyracks at cost as and when required by Caddyrack Inc. 129 If the provisions of clauses 7, 8, 12 and 13 and so much of clause 11 as appears to impose on Caddyrack and Caddyrack Inc the obligation to make payments in reduction of the debt to Great White Shark Enterprises are to be regarded as conditions required by clause 6 to be fulfilled before the Messrs. Kyrwood were to be required to replace the security over Peter Drinkwater's home, that result would seem to render absurd the use in clause 6 of the opening words "the Kyrwoods will replace within fourteen days". 130 This being so, it seems to me that, if there are other provisions in the Agreement which might properly be described as conditions and which might have been complied with within fourteen days of the execution of the Agreement of 26 July, then the phrase "provided all conditions in this agreement have been satisfied" appearing in clause 6 of the Agreement ought to be held to be restricted to those other provisions and should not be held to extend to the provisions of clauses 7, 8, 12 and 13 and so much of clause 11 as imposes on Caddyrack and Caddyrack Inc the obligation to make payments in reduction of the debt to Great White Shark enterprises. 131 There are, as it seems to me, two provisions of the Agreement which might properly be regarded as conditions and which could - as, indeed they appear to have been - have been fulfilled within fourteen days, they being the first sentence of clause 11 and the provisions of clause 15 - although the Agreement by John Drinkwater contained in clause 14 is conditional upon there being provided within seven days a letter of the type described, that condition would not seem to me to be a condition within the meaning of clause 6. 132 The letter of 13 August 1996 from McDonald Johnson to Hansens (Blue AB 337-338) which I have earlier (see para. 79) set out would indicate that the Messrs. Kyrwood accepted that the conditions contained in the first sentence of clause 11 and in clause 15 had been fulfilled. That being so - and as the Messrs. Kyrwood do not appear then to have disputed - they then became obliged to replace the security on Peter Drinkwater's home. 133 I turn, then, to the question whether the Messrs. Kyrwood are, in the light of all the circumstances, to be regarded as having repudiated the Agreement. Young J's conclusion that they were so to be regarded appears to be founded upon one or other - or perhaps both - of two bases, they being: 1. that, having given the notice which accompanied McDonald Johnson's letter of 23 September 1996 (Blue AB 355-356), and not being in a position on 10 October 1996 then to "complete" the Agreement, they are to be regarded as having repudiated the Agreement (see Red AB 59-60) - which is the less clear of the two bases; and 2. that, as the conduct of the Messrs. Kyrwood demonstrated that they were determined to fulfil their obligations only at a time and in a way which suited them, they were to be regarded as having repudiated the agreement (Red AB 54-57, 64-65). 134 As what I have earlier recorded makes clear: 1. that the Messrs. Kyrwood did not within fourteen days of 26 July 1996 replace the security over Peter Drinkwater's home; 2. that, by the Notice which accompanied McDonald Johnson's letter of 23 September 1996, the Messrs. Kyrwood made clear that, before they would replace the security over Peter Drinkwater's home, they required the US tool to be exchanged for the Australian tool, or, that arrangements for the US tool to be freighted to Australia be made on or prior to 10 October 1996 even though, by that date, the time for upgrading the Australian tool which the parties had earlier contemplated, had not expired; and 3. that, at the meeting on 10 October 1996, the Messrs. Kyrwood made it clear that unless they had in fact received the US tool they would not replace the security on Peter Drinkwater's house (see para. 95) a stance which was confirmed by the letter of 15 October 1996 from McDonald Johnson to Hansens (Blue AB 73-75) (para 97 (above)). 135 Two questions now arise, they being: 1. is clause 6 of the Agreement to be regarded as a condition, or essential term, the breach of which would, without more, have enabled the Messrs. Drinkwater to regard themselves as discharged from further performance of the Agreement; and 2. if not, was the conduct of the Messrs. Kyrwood up to and including the meeting of 10 October 1996 sufficient to demonstrate that they had repudiated the Agreement. 136 Notwithstanding the time stipulation contained in clause 6 of the Agreement, it does not follow that that clause is to be regarded as a condition or an essential term of the Agreement. The general principle to be applied when dealing with time stipulations is that a contractual term specifying the time for the performance of a contractual obligation is not to be construed as a condition unless, either, the parties have expressly so provided, or, the nature of the subject matter or the surrounding circumstances indicate that time was intended to be of the essence of the contract. If, therefore, a time stipulation is not to be regarded as a condition, breach of it will not justify the promisee treating himself as having been without more discharged from further performance; however, the breach remains a breach of contract capable of giving rise to a claim for damages and may, in an appropriate case, entitle the promisee to give a notice to complete, noncompliance with which - if the time allowed for completion be reasonable - will justify the promisee in then treating himself as discharged from further performance. 137 The general test to be applied in determining whether or not a term of a contract is to be regarded as essential may be found in the Judgment of Jordan CJ in Tramways Advertising Pty. Limited v. Luna Park (NSW) Ltd.[7] where his Honour said [8]: "The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor: Flight v. Booth ((1834) 1 Bing. (NC) 370, 377; 131 ER 1160, 1162-1163), Bettini v. Gye ((1876) 1 QBD 183, 188), Bentsen v. Taylor, Sons & Co. (No. 2) ([1893] 2 QB 274, 281) , Fullers Theatres Limited v. Musgrove ((1923) 31 CLR 524, 537-538), Bowes v. Chaleyer ((1923) 32 CLR 159), Clifton v. Coffey ((1924) 34 CLR 434, 438, 440). If the innocent party would not have entered into the contract unless assured of a strict and literal performance of the promise, he may in general treat himself as discharged upon any breach of the promise, however slight." 138 Although it seems tolerably plain that securing the release of the mortgage on his home was a matter of some importance to Peter Drinkwater, it does not seem to me that it could be said that Peter Drinkwater would not have entered into the Agreement unless assured of a strict and literal performance of the provisions of clause 12 - important though that clause was, it was part of an overall agreement designed to enable the Messrs. Drinkwater and the Messrs. Kyrwood to sever their commercial arrangements. This being so, I conclude that clause 6 was not to be regarded as a condition, or an essential term, of the Agreement, it following that the failure of the Messrs. Kyrwood to comply with the provisions of that clause did not, without more, justify the Messrs. Drinkwater in treating themselves as discharged from further performance of the agreement. 139 The question which then arises is whether, in the light of all that occurred up to and including 10 October 1996, the Messrs. Kyrwood are to be regarded as having repudiated the Agreement 140 There having been no express repudiation by the Messrs. Kyrwood of the Agreement, it is convenient, first, to indicate the circumstances in which a court will be justified in implying repudiation. A succinct statement in this regard is to be found in the joint Judgment of Gavan Duffy CJ and Starke J in Dimond v. Moore[9]: "Before examining the facts it is desirable to state the rule of law applicable to this branch of the case. A convenient statement of that rule may be found in the Judgment of Lord Alverstone MR in the Court of Appeal in Rhymney Railway v. Brecon & Mythyr Tydfil Junction Railway ((1900) 69 L.J.Ch. 813, 818):- 'It will be well to consider … what conduct on the part of one party to a contract justifies the other party in treating it as at an end. If there is a distinct refusal by one party to be bound by the terms of the contract in the future, the other party may … treat the contract as at an end … Short of such refusal … the true principle … is that you must ascertain whether the conduct of the party who has broken the contract is such that the other party is entitled to conclude that the party breaking the contract no longer intends to be bound by its provisions.' See General Bill Posting Co. v. Atkinson ([1900] AC 118). A refusal by one of the parties to an agreement 'to recognise it as subsisting' may evince an intention no longer to be bound by it. Compare Marsden v. Sambell ((1880) 43 L.T. 120)." 141 In Satellite Estate Pty. Limited v. Jaquet [10] Asprey JA with whom Wallace P agreed said [11]: "'Repudiation' is a word which has a number of meanings (see Heyman v. Darwins Ltd. ([1942] AC 356, per Lord Wright at pp. 378-379 and per Lord Porter at p. 398). Where one party to a contract persists in maintaining that it will only perform an obligation of essential importance in accordance with an untenable instruction of that obligation, that should be regarded as amounting to a total repudiation of the contract on the part of that party (see Withers v. Reynolds ((1831) 2 B & Ad. 882; 109 ER 1370); Morris v. Baron & Co. ([1918] AC 1, 41) per Lord Parmoor; Summers v. The Commonwealth ((1918) 25 CLR 144, 152) per Isaacs J; Martin v. Stout ([1926] AC 359, 363-364); Dimond v. Moore ((1931) 45 CLR 159, 169, 184-185); Luna Park (NSW) Ltd. v. Tramways Advertising Pty. Ltd. ((1938) 61 CLR 286, 304-305) per Latham CJ). The case may be different where there is a bona fide dispute as to the true construction of 'a not very perspicuous document' (cf. Sweet & Maxwell Ltd. v. Universal News Services Ltd. ([1964] 2 QB 699), but in the present case the respondent was claiming wilfully to be entitled to perform the contract in a manner to which it knew it had no shadow of right ( Carr v. J. A. Berriman Pty. Ltd. (1953) 89 CLR 327, 351) per Fullagar J; Robert A. Munro & Co. v. Meyer ([1930] 2 KB 312, 331); see Corbin on Contracts vol. 4, par. 973 at pp. 910-911). 142 In DTR Nominees Pty. Limited v. Mona Homes Pty. Limited[12] Stephen, Mason and Jacobs JJ said [13] "… the respondent's case as pleaded … was not one of rescission for actual breach of essential term, but one of rescission for repudiation and renunciation for so-called 'anticipatory breach'. Their case is accordingly to be considered on that footing. The relevant question therefore is whether the events which we have recounted evidence an intention on the part of the appellant to repudiate or to renounce the contract or more precisely whether such an intention is to be inferred from those events. For the respondents it was submitted that such an intention should be inferred from the appellants continued adherence to an incorrect interpretation of the contract. It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of the contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson LJ observed in Sweet & Maxwell Ltd. v. Universal News Services Ltd. ([1964] 2 QB 699, 734): 'In the last resort, if the parties cannot agree, the true construction will have to be determined by the court. A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments …' In this case the appellant acted on its view of the contract without realising that the respondents were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement." 143 To these statements of principle might be added the observations of Mason CJ in Laurinda Pty. Limited v. Capalaba Park Shopping Centre Pty. Limited[14]: "In Shevill v. Builders Licensing Board ((1982) 149 CLR 620, 625-626) Gibbs CJ stated that: '… A contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way …' See also Progressive Mailing House Pty. Ltd. v. Tabali Pty. Ltd. ((1985) 157 CLR 17, 33, 40). There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way. But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the parties' obligations and not in any other way." Similar observations were made by Brennan J [15] and Deane and Dawson JJ [16] . 144 The fact that the Messrs. Kyrwood did not within fourteen days of 26 July 1996 replace the security over Peter Drinkwater's home coupled with the fact that, although having given the notice which accompanied McDonald Johnson's letter of 23 September 1996, they were not in a position to settle on 10 October 1996, and coupled with the further fact that, on 10 October 1996, they made it clear that, unless they had in fact received the US tool, they would not replace the security on Peter Drinkwater's house, in my view evinced an intention on their part to fulfil the Agreement only if and when it suited them. This being so, I conclude that Young J was correct in holding that the Messrs. Kyrwood had repudiated the Agreement. 145 This then raises the question whether, as the Messrs. Kyrwood assert, the Messrs. Drinkwater were precluded from terminating the Agreement by reason of their repudiation because, as they (the Messrs. Kyrwood) would have it, the Messrs. Drinkwater "were themselves in breach of cl. 12 and the duty to co-operate to do all things necessary to enable the exchange of tools to take place and were not ready, willing and able to complete". 146 It is thus necessary to determine at the outset whether, upon its proper construction, or as the result of the implication into it of a term to that effect, cl. 12 of the Agreement imposed on the Messrs. Drinkwater a duty to cooperate to do all things necessary to enable the exchange of tools to take place. 147 As is the case with most, if not all, of the provisions of the agreement, the drafting of cl. 12 leaves much to be desired. However, it is clear, particularly when it is coupled with cl. 13, that cl. 12 contemplates that the Australian tool - which, if not in the possession, was under the control, of Caddyrack - was to be delivered to ITG, which was to be commissioned for the purpose, in order to be upgraded, and then to be sent to the United States in exchange for the US tool which was to be forwarded to Caddyrack. It is equally clear that that object could not be attained without the co-operation of both Caddyrack - or the Messrs. Kyrwood - and the Messrs. Drinkwater, for Caddyrack would need to deliver the Australian tool to ITG, Caddyrack - or the Messrs. Kyrwood - or the Messrs. Drinkwater would need to commission ITG to carry out the update, Caddyrack would need to forward the Australian tool to the United States when the upgrade was completed and the Messrs. Drinkwater - or Caddyrack Inc - would need to forward the US tool to Australia. This being so, it seems to me that the case is one which calls for the application of the general rule enunciated by Lord Blackburn in Mackay v. Dick [17]: "… Where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there be no express words to that effect." to which might be added the observation of Griffith CJ in Butt v. M'Donald [18] : "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract." 148 As cl. 12 appears to impose on the Messrs. Drinkwater the obligation to pay - up to the sum of $20,000.00 - ITG for the cost of upgrading the Australian tool, it seems to me that cl. 12 ought so to be construed as to impose on the Messrs. Drinkwater the obligation, first, to commission ITG to carry out the upgrade, and to undertake to pay up to the sum of $20,000.00 for that being done, and, further, to comply with such conditions as to the payment of the cost as might reasonably have been required by ITG as a condition of accepting the commission to carry out the upgrade. The terms as to the payment of a deposit set out in the letter (Blue AB 599 - para. 65 (above)) forwarded by facsimile by Mr. Reuthlinger to John Drinkwater on 2 August 1996 appear to me to have been reasonable. 149 As the Messrs. Drinkwater did not, nor did Caddyrack Inc, thereafter commission ITG to carry out the upgrade or agree to the terms of payment indicated by Mr. Reuthlinger in the letter of 2 August 1996, I conclude that the Messrs. Drinkwater failed to comply with the obligation imposed on them by cl. 12 of the Agreement. 150 The question which then arises is whether the Messrs. Drinkwater were, by reason of that breach, disentitled from accepting the repudiation by the Messrs. Kyrwood and terminating the agreement. 151 In his work on Breach of Contract, Professor Carter, in Chapter 10 - Exercise of the Right to Terminate - when dealing with "impediments to termination" states the principle in the following way (op cit 1 Ed. p.347; 2 Ed. 345-346): "BREACH NOT NECESSARILY AN IMPEDIMENT Article 57(1) The fact that a party who has elected to terminate performance of the contract was, at the relevant time, in breach of contract or not ready and willing to perform contractual obligations, does not necessarily operate to impede the effectiveness of the election. (2) In deciding whether a breach of contract or absence of readiness or willingness precluded termination, regard may be had to: (a) the terms of the contract; and (b) the relevant circumstances, including - (i) the nature of the breach; and (ii) the extent to which the party in question was not ready and willing to perform. Breach by the promisee may or may not be an impediment to termination. Similarly, the fact that the promisee was not ready and willing to perform, while not always an impediment to termination, may operate as such." 152 The way in which, at trial, the Messrs. Kyrwood sought to rely upon the breach by the Messrs. Drinkwater of the provisions of clause 12 is revealed in the following passage from Young J's Judgment (Red AB 60): "Mr. Campbell QC's next point is that what he calls 'the prevention principle' operates so that the Drinkwaters cannot take advantage of a situation that has been brought about by their own wrong to justify a termination. Mr. Campbell QC says that the prevention principle 'has been recognised most often in the context where a party who is himself in breach of a clause of a contract and has thereby contributed to delay is not entitled to rely on a liquidated damages clause in a contract ( Dodd v. Churton [1897] 1 QB 562, 566, 567, 568; SMK Cabinets v. Hili Modern Electrix Pty. Ltd. [1984] VR 391; Aurel Forms Pty. Ltd. v. Graham Karp Developments Pty. Ltd. [1975] VR 202; Percy Bilton Ltd. v. Greater London Council [1982] 1 WLR 794)'. However he puts that the proposition has been more widely articulated in cases such as New Zealand Shipping Co. v. Societe des Ateliers et Chantiers de France [1919] AC 1. He further submits that the principle applies to stop a person relying upon his own wrong as a basis for alleging that a contract is terminated or frustrated, and also to stop a person relying on his own wrong to obtain a benefit under a continuing contract citing for this last proposition: Alghussein Establishment v. Eton College [1988] 1 WLR 587, 594 and TCN Channel 9 Pty. Ltd. v. Hayden Enterprises Pty. Ltd. (1989) 16 NSWLR 130, 147. The 'role' which Mr. Campbell QC attributes to the Drinkwaters is their non-co-operation in paying the $10,000.00 deposit to have the Australian tool modified. There is no doubt that there is some such principle as Mr. Campbell QC submits. I do not consider that there is any general principle that a person cannot take advantage of his or her own wrong, though there are a series of instances where this is the result. In most situations, the reason is that there is an interdependence between the failed act and the wrong of the other party. Where there is no such interdependence, the principle does not apply. The problem comes about by treating a maxim as if it was of universal application. It should be remembered that in Cheall v. Association of Professional Executive Clerical and Computer Staff [1983] 2 AC 180, 189, Lord Diplock said, 'This rule of construction, which is paralleled by the rule of law that a contracting party cannot rely upon an event brought about by his own breach of contract as having terminated a contract by frustration, is often expressed in broad language as : 'a man cannot be permitted to take advantage of his own wrong'. But this may be misleading if it is adopted without defining the breach of duty to which the pejorative word 'wrong' is intended to refer and the person to whom the duty is owed." 153 As I have earlier (para. 110) recorded, having discussed the principles to be discerned from the cases, Young J concluded that it was open to the Messrs. Drinkwater to accept the Messrs. Kyrwood's repudiation of the Agreement and put an end to it. 154 I agree with Young J that the breach by the Messrs. Drinkwater of the provisions of cl. 12 did not disentitle them to determine the Agreement. In Nina's Bar Bistro Pty. Ltd. v. MBE Corporation (Sydney) Pty. Ltd. [19] 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. [20] where in the Judgment of the Court, the following passages appear [21] : "As a general rule, a party in breach of a non-essential term is not prevented from rescinding for a fundamental breach or repudiation by the other party: see J. W. Carter, Breach of Contact 2nd ed. (1991) at 347 and Halsbury's Laws of Australia vol. 6 'Contract' (1992) par. 110-9520, by the same author. The question is whether there is an exceptional qualification to this general rule which prevented Roadshow from rescinding. Such an exception or qualification might exist if there were a causal relationship between the breaches of non-essential terms by the party attempting to rescind, and the fundamental breach relied upon: see Nina's Bar Bistro Pty. Ltd. (formerly Mytcoona Pty. Ltd.) v. MBE Corporation (Sydney) Pty. Ltd. (at 614, 620-621, 632); and compare Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418 at 440-442. ……… Readiness and willingness to perform imports capacity to do so: see De Medina v. Norman (1842) 9 M & W 820 at 827; 152 ER 347 at 350 and Foran v. Wight (at 391, 424, 451). By early October at the latest, CEL/Vision were no longer ready and willing to perform their obligations under the agreement until 31 December 1994 when they could terminate without breach. In the words of Lord Sumner in British & Benningtons Ltd. v Northwestern Cachar Tea Co Ltd. [1923] AC 48 at 71-72, referred to by Dixon CJ in Rawson v. Hobbs (1961) 107 CLR 466 at 481, CEL/Vision had 'become wholly and finally disabled from performing essential terms of the contract'. They had 'a substantial incapacity' which would prevent them 'doing in the future what the contract requires' and had 'neither the means nor the intention of performing': see also Foran v. Wight (at 404-406, 409, 424-425 and 453). The incapacity of a party to perform essential terms of a contract may involve an anticipatory breach: see Universal Cargo Carriers Corporation v. Citati [1957] 2 QB 401 at 436 per Devlin J; Foran v. Wight (at 406, 423-424). 'The injured party is allowed to anticipate an inevitable breach' per Devlin J (at 438). It is arguable that Roadshow might have rescinded before 6 December relying on CEL/Vision's incapacity due to insolvency. However this could have imposed the heavy onus of proof on Roadshow and it wisely elected to wait. A party in breach of non-essential terms, who has not repudiated may rescind for fundamental breach: see Hong Kong Fir Shipping Co. Ltd. v. Kawasaki Kasen Kaisha Ltd. [1962] 2 QB 26; State Trading Corporation of India Ltd. v. Golodetz Ltd. (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 (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." 155 In my view there was no causal relationship between the failure of the Messrs. Drinkwater to comply with the provisions of cl. 12 of the Agreement and the repudiation by the Messrs. Kyrwood of the Agreement. 156 On the hearing of the appeal, the Messrs. Kyrwood also sought to rely on what was alleged to be the fact that the Messrs. Drinkwater were not ready, willing and able to complete the Agreement. 157 In their written submissions, counsel for the Messrs. Kyrwood put the matter in the following way: "NO TERMINATION POSSIBLE AS THE DRINKWATERS WERE NOT READY, WILLING AND ABLE TO COMPLETE 42. Because the Drinkwaters were not ready, willing and able to complete in accordance with cl. 12, they could not rescind (even assuming time had been made essential and the Kyrwoods had failed to complete). ( Foran v. Wight (1989) 168 CLR 385 per Mason CJ at 408.6; per Dawson J at 451.9). 43. The question of readiness and willingness may go to the larger question of whether non-completion proceeds from the wrongful act of the Drinkwaters. ( Peter Turnbull & Co. v. Mundus Trading Co. (A'asia) Pty. Ltd . (1954) 90 CLR 235 per Kitto J at 254; Pontifex v. Williamson (1854) 1 CB at 90-91; 135 ER at 470; Cort v. Ambergate Rly Co (1851) 17 QB at 144; 117 ER at 1236 ('the meaning of such an averment of readiness and willingness must be that non-completion of the contract was not the fault of the plaintiffs and they were disposed and able to complete if it had not been renounced by the defendants')). This is an aspect of the 'prevention principle' (that the Drinkwaters could not take advantage of a situation brought about by their own wrong). 44. If, as suggested in Carter & Harland , Contract Law in Australia, 3rd ed. para. 1978, the absence of readiness and willingness to perform by the promisee must be in respect of a breach of repudiation which would permit the promisor to terminate, that requirement is satisfied in the present case." 158 It is to be noted, at the outset, that, whereas the present case was one of repudiation or anticipatory breach, what was involved in Foran v. Wight was a case of actual breach, the purchaser not having elected to accept the earlier repudiation by the vendor but having waited until the time for completion had passed before terminating. Although this fact does not affect the general principle to be applied, it does affect the application of that principle to the present case, as the following passage from the Judgment of Mason CJ [22] makes clear: "On this aspect of the case it remains for me only to mention the alternative approach advocated in such cases as Pontefax v. Wilkinson ((1845) 1 CB 75; 135 ER 464) and adopted by Lord Campbell CJ and Kitto J, namely, to ask whether the contract went off through the wrongful default and conduct of the plaintiff or defendant. If the issue is to be looked at in this way, the result would be no different, as indeed the discussion in the judgments makes clear. Insistence on the plaintiff being ready and willing is a means of ensuring the plaintiff will not succeed in an action for breach of contract if the contract has gone off through his wrongful default or conduct. The burden this places on a plaintiff will vary from case to case. But it will generally be true to say that a plaintiff relying on anticipatory breach or claiming the benefit of some dispensation with complete performance will be faced with a burden capable of being displaced without undue expense or inconvenience. Moreover, it would be arbitrary and unjust if a plaintiff who could not show that he did not cause the contract to go off were able to succeed in an action against a defendant who has been open and forthcoming about the difficulties he is facing in his own performance. There are therefore good reasons in policy for the position revealed by the authority. Accordingly, in relation to termination for actual breach, the principle is that established by the earlier decisions - the plaintiff is required to show that he was ready and willing to perform the contract if it had not been repudiated by the plaintiff (sic). In other words, the requirement is that the plaintiff be ready and willing to perform except to the extent the defendant dispensed with his performance. In the case of an anticipatory renunciation accepted by the plaintiff, the requirement of readiness and willingness extend only up to the time of acceptance because then the earlier repudiation results in an early termination of the contract. Accordingly, in the case of actual breach, the requirement of readiness and willingness is more stringent; it continues through to the time for performance. That is because the termination of the contract does not antedate the time for performance. Subject to this difference and to the possibility of a difference in the onus of proof, the principle to be applied in the case of actual breach is consistent with that to be applied in the case of termination for anticipatory breach. The difference in the onus of proof arises because 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. As Dixon CJ noted in Rawson v. Hobbs ((1961) 107 CLR at p. 481) one 'must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires, is counted as an absence of readiness and willingness.'" 159 Although, as I have earlier indicated, it is my view that the Messrs. Drinkwater were, by mid-October 1996, in breach of the obligations cast upon them by cl. 12, I do not consider that the evidence reveals that, at that time, they had exhibited a definitive resolve or decision against doing in the future what the Agreement required. As will be apparent from what I have earlier written, they were in a position on 10 October 1996 to deliver to the Messrs. Kyrwood the transfers of the shares in the capital of Caddyrack which were held on their behalf, or on behalf of their family trusts, and although - because they appear then to have been of the view that it was for Caddyrack or the Messrs. Kyrwood to commission ITG to upgrade the Australian tool - they had not themselves commissioned the upgrade nor paid the deposit sought by ITG, it is clear that they accepted that it was their obligation to pay - up to the sum of $20,000.00 - the cost of the upgrade and that, at the meeting of 10 October 1996, Mr. Hewitt offered, on behalf of the Messrs. Drinkwater instalment payments towards the upgrade of the tool and, later, on behalf of Peter Drinkwater, offered the Messrs. Kyrwood security over his home for the payment of the instalments which had earlier been suggested - the latter offer appears at first to have been accepted (see para. 96), but rejected some days later (para. 97). 160 In the result, therefore, I conclude that, at the time of the repudiation by the Messrs. Kyrwood, the Messrs. Drinkwater remained ready and willing to perform the obligations which were cast on them by the Agreement, and were accordingly entitled to terminate the Agreement. 161 Although, as I have earlier (para. 124) noted, the written submissions which were filed on behalf of the Appellants contained a short submission on "Affirmation: The Development of Clubrack", the whole of the oral submissions advanced by Mr. White on the hearing of the appeal were directed to the first two of the "central issues raised by the appeal" to which I have earlier (para. 124) referred. This being so, I do not consider it necessary to deal with the question of "affirmation". 162 For the reasons which I have recorded above, I propose that the Appeal be dismissed with costs. 163 FITZGERALD JA: The comprehensive judgment of Powell JA has enabled me to express my judgment more briefly than would otherwise have been possible. For example, letters and other documents which I have referred to but not reproduced are set out in his Honour's reasons. Further, his Honour has set out the amended grounds of appeal and the contents of the Notice of Contention. For convenience, I have referred to Peter Drinkwater and John Drinkwater and their family company / family trusts as the "Drinkwater interests" and Terrance Kyrwood and Geoffrey Kyrwood and their family companies / family trusts as the "Kyrwood interests". Broadly stated, the Kyrwood interests are the appellants and the Drinkwater interests are the respondents in this appeal. The companies to which most reference is made are Caddyrack Pty Ltd ("CPL"), Caddyrack International Pty Ltd ("International"), [23] Caddyrack Inc. ("Inc.") and International Tool and Gauge NSW Pty Ltd ("ITG"). Two other companies, 505 Pty Ltd and Golf Products Promotions Ltd, appear to have been subsidiaries of, or at least controlled by, CPL. 164 The Drinkwater interests and the Kyrwood interests joined in a commercial venture to exploit a golf accessory known as a "caddyrack". CPL was formed for that purpose. Inc. was later formed to operate in the United States of America. 165 Two tools were obtained from ITG for the manufacture of caddyracks. The first tool, which was obtained in 1994, was used in Australia by or on behalf of CPL (the "Australian tool"). The other tool, which was better, was obtained in 1995 and used in the United States by or on behalf of Inc. (the "United States tool"). Only right-handed caddyracks could be manufactured with the Australian tool. Both right-handed and left-handed caddyracks could be manufactured with the United States tool. It seems that ITG had been issued shares in Inc. either in lieu of, or as security for, payment for the United States tool, which cost approximately $120,000 166 After a long history of disputes, the Drinkwater interests and the Kyrwood interests appeared to have resolved their differences by a poorly drafted agreement dated 26 July 1996 (the "Settlement Agreement"). Broadly stated, the Settlement Agreement aimed at: (a) dividing future operations between the Drinkwater interests and the Kyrwood interests, with the Drinkwater interests owning Inc. and the Kyrwood interests owning 95% of the shares in CPL; (b) recovering ITG's shares in Inc. and paying ITG for the United States tool; (c) improving the Australian tool and exchanging the tools between the Drinkwater interests and the Kyrwood interests, with CPL (the Kyrwood interests) obtaining the United States tool and Inc. (the Drinkwater interests) obtaining the Australian tool; (d) apportioning responsibility for a $500,000 debt owed by CPL to Great White Shark Enterprises between the Drinkwater interests and the Kyrwood interests; and (e) releasing a mortgage over Peter Drinkwater's home which had been given to secure a borrowing of $250,000 by CPL from the National Australia Bank. 167 So far as presently material, the Settlement Agreement provided that: (a) CPL was to "be responsible for the patent registration and maintenance of the patent and trademark both domestically and internationally during the life of the patent"; (b) the Drinkwater interests were to transfer most of their shares in CPL to the Kyrwood interests and resign as directors of CPL; (c) the Kyrwood interests were to transfer all of their shares in Inc. to the Drinkwater interests and join with the Drinkwater interests in authorising CPL and Golf Products Promotion Ltd to transfer their shares in Inc. to the Drinkwater interests; (d) the Drinkwater interests were to have exclusive rights [24] "to the patent and trademark of the nine slot rack and bag" and "to marketing, manufacturing and distribution of the nine slot caddyrack and caddyrack bag" in "Continental North and South America…including Hawaii," and, subject to a presently irrelevant qualification, similar rights in relation to Korea; (e) the Kyrwood interests were to have similar rights [25] "in the balance of the world"; (f) whichever of Inc. and CPL had the United States tool from time to time was "to supply the other with left handed caddyracks at cost as required"; and (g) the Drinkwater interests and the Kyrwood interests were each to pay half of CPL's debt to Great White Shark Enterprises, although the Drinkwater interests were not required to make any payment until the Kyrwood interests had satisfied their obligation or 10 months had elapsed from the date of the Settlement Agreement. If either party failed to meet its obligations to Great White Shark Enterprises, the "rights" in respect of the caddyrack and the obligations to make payments to Great While Shark Enterprises were to be adjusted between the Drinkwater interests and the Kyrwood interests. 168 In addition, clauses 5, 6, 12 and 14 of the Settlement Agreement provided: "5. All parties are to have the non exclusive rights for any developments of the existing produce, eg seven or eight slot racks etc. If in the event that either party develops and markets a similar rack (ie seven or eight slot unit) in the non exclusive market, the margin between the new product wholesale and/or distributor price will not be less than 84% of the wholesale/distributor price of the nine slot caddyrack during the period of the Great White Shark debt. Wholesale price is defined as in United States of America and Australia the price to retail shop eg US$29.50 and AU$37.50. Distributor price is defined as the price paid by the distributor anywhere else in the world. The developer of the seven or eight slot unit agrees to sell at cost plus fifty per cent (50%) to the other party, (the cost price allows a maximum of $1.00 AUS as the royalty payment until the tool is paid for) with each party having the right to use the trademark in its exclusive area. 6. The Kyrwoods will replace within fourteen (14) days the security over the residential property of Peter Drinkwater at … Coal Point currently held by the National Australia Bank provided all conditions in this agreement have been satisfied. Peter Drinkwater is to make that property or any substitute property available for security for [CPL] if required and Peter Drinkwater is to have priority security by way of a fixed and floating charge over the assets of [CPL] the security to be released within twelve (12) months from the date of advance. If Peter Drinkwater fails to provide such security then his shares in [CPL] will be transferred to the Kyrwoods. …… 12. That Drinkwaters pay to International Tool and Gauge up to $20,000 for the upgrading of the Australian tool and when the upgrade is complete will exchange the United States tool for the Australian tool with each party being responsible for freight. 14. John Drinkwater agrees that he will not move the tool in the United States for a period of three (3) months provided that the Kyrwoods and International Tool and Gauge provide a letter relinquishing all interests (if any) in such tool within seven (7) days of the date hereof. This clause will not merge on completion." 169 The Settlement Agreement was : (a) "subject to satisfactory arrangements" with Great While Shark Enterprises for the payment of its debt, being arrangements which required: (i) $20,000 per month for six months; (ii) $30,000 per month for six months; and (iii) the balance of $200,000 "by six equal payments over six months"; and (b) "conditional upon [ITG] agreeing to transfer its shares in [Inc] to John Drinkwater or his nominee." 170 Although no provision was made in the Settlement Agreement for payment to ITG for the United States tool (or its shares in Inc), the Kyrwood interests did not dispute that it was orally agreed in the negotiations leading up to the Settlement Agreement that they would pay ITG for the United States tool which they were to receive under the Settlement Agreement. 171 Clause 14 of the Settlement Agreement is puzzling. Although the tool referred to seems to be the United States tool, which the Kyrwood interests were to receive under the Settlement Agreement, clause 14 required letters "relinquishing all interests (if any) in such tool within 7 days…." from both ITG and the Kyrwood interests. A possible explanation is that, at the date of the Settlement Agreement, the tool which was most accessible to ITG was the Australian tool, which the Drinkwater interests were to receive under the Settlement Agreement. [26] In any event, nothing important turns on this obscurity. 172 The provisions of the Settlement Agreement which were central to the parties' dispute were clauses 6 and 12. The trial judge held that clause 6 was not "subject to a condition that it [was] not to come into effect" until the Drinkwater interests' had complied with their obligations under clause 12, and that the two clauses were not interdependent. Nonetheless, once the Settlement Agreement had become unconditional, the Kyrwood interests' obligation under clause 6 and the Drinkwater interests' initial obligation under clause 12, i.e., to arrange and pay for the upgrading of the Australian tool, were effectively required to be performed contemporaneously. Clause 6 provided for the mortgage over Peter Drinkwater's house to be discharged (and replaced) "within fourteen … days". Once the Settlement Agreement had become unconditional, clause 12 imposed an immediate obligation on the Drinkwater interests to arrange and pay for the Australian tool to be upgraded. It was estimated that that would take 12 weeks. The tools were to be exchanged "when the upgrade is complete". 173 After a brief lull following the Settlement Agreement, the parties soon resumed hostilities. After an exchange of correspondence and at least one further meeting, the Drinkwater interests sued the Kyrwood interests in the Equity Division on 11 November 1996. The Kyrwood interests cross claimed. The pleadings were amended at the beginning of the trial on 10 June 1997, when the Drinkwater interests filed an Amended Statement of Claim, the Kyrwood interests filed an Amended Defence to the Amended Statement of Claim and an Amended Cross Claim, the Drinkwater interests filed an Amended Defence to the Amended Cross Claim and the Kyrwood interests filed an Amended Reply to the Amended Defence to the Amended Cross Claim. 174 The trial took place on 10, 11, and 12 June and 22 September 1997. The trial judge's reasons for judgment were published on 25 September, when the parties were directed to bring in short minutes. Once again, they were unable to agree. The matter was relisted on a number of occasions. On 23 October 1997, the trial judge published further reasons and made orders which he suspended until 13 November "to give the parties one last opportunity". The parties agreed on some matters and disagreed on others. There was another hearing on 27 November 1997, and a further judgment on the following day. 175 The trial judge held that the Kyrwood interests repudiated the Settlement Agreement, and his Honour's first order declared that the Settlement Agreement was validly terminated by the Drinkwater interests on 16 October 1996. That declaration was based on a conclusion that the Drinkwaters had not affirmed the Settlement Agreement consequent upon its repudiation by the Kyrwoods but had accepted that repudiation. 176 The trial judge described one consequence of the termination of the Settlement Agreement in the following paragraph: "In terminating the contract, the Drinkwaters were excused performance of any obligation that had not at that stage become crystallised and were entitled to sue in damages for the defaults before that time including loss of bargain." 177 Inconsistently, a little later his Honour seems to have held that an activity undertaken by the Kyrwood interests in the United States from 24 - 28 January 1997 was a breach of the Settlement Agreement which he had found had been terminated some months earlier. 178 However, the trial judge placed more importance upon the termination of the Settlement Agreement in connection with the Drinkwater interests' allegation of a breach of fiduciary duty by the Kyrwood interests. His Honour found that, when the Settlement Agreement was terminated, CPL "remained in the joint control of the Drinkwaters and the Kyrwoods" and the Kyrwood interests' acquisition of (most of) the Drinkwater interests' shares in CPL pursuant to the Settlement Agreement "now never can be put into effect". His Honour also found that "the Kyrwoods [had] redirected the business activities and opportunities of [CPL] to [International], a company controlled by [the Kyrwood interests] in which the Drinkwaters have no interest", and that that "deflection of corporate opportunities cannot be justified" when CPL "has … remained in the joint control of the Drinkwaters and the Kyrwoods…". [27] 179 Accordingly, the next order made by the trial judge was a declaration that "[t]he assets and undertaking of [International] are held on trust for [CPL]". 180 His Honour went on to dismiss the Kyrwood interests' Cross Claim (which sought specific performance of the Settlement Agreement) and, ultimately, in lieu of an order that CPL be wound up, ordered the Kyrwood interests to purchase the Drinkwater interests' shares in CPL at their value at 25 September 1997 (the date of his initial reasons for judgment). [28] 181 In his reasons for judgment delivered on 28 November 1997, the trial judge returned to the Drinkwater interests' claim in their Amended Statement of Claim for an order that the Kyrwood interests "procure a discharge of the Mortgage" over Peter Drinkwater's home. 182 Because the Settlement Agreement had been terminated, his Honour effectively treated that claim as a claim against CPL on the basis of the original arrangement under which Peter Drinkwater had provided the mortgage on behalf of CPL. It was held that "[t]he terms of the arrangement were that the security would be discharged … on demand". 183 From both the trial judge's reasons for judgment and the notice of appeal, it seems that, while contending that the Settlement Agreement had been terminated, the Kyrwood interests also opposed the Drinkwater interests' claim that the mortgage be discharged on the ground that "[t]here was no formal demand made prior to the institution of the suit". 184 The trial judge held that the Drinkwater interests were entitled to succeed notwithstanding the absence of a demand before suit on the authority of Ogilvie v Adams. [29] His Honour made the following order: "3. Unless within 14 days of these orders the defendants make such other arrangement as is acceptable to Peter Drinkwater for the release of the mortgage presently held by the National Australia Bank over the property known as 44 Skye Point Road Coal Point which secures the said loan account, [CPL and International] Forth defendants are to pay to Peter Drinkwater within 14 days of these orders an amount equivalent to the balance then owing including any fees and charges payable under the National Australia Bank Limited loan account number 683315446 (BSB number 082 654)." 185 As is apparent from the Amended Notice of Appeal and the Notice of Contention, the parties have chosen to limit the issues which this Court is required to consider. The major issue is whether or not the Settlement Agreement was validly terminated by the Drinkwater interests for the Kyrwood interests' repudiation of the agreement. 186 Shortly after the parties executed the Settlement Agreement, "satisfactory arrangements" were made with Great White Shark Enterprises. In accordance with the Settlement Agreement, the Kyrwood interests caused CPL to make payments to Great White Shark Enterprises. As required by the arrangement with Great White Shark Enterprises, those payments continued after the Drinkwater interests instituted the present litigation. 187 On 1 August 1996, the Kyrwood interests' solicitors forwarded forms for the transfer of shares in CPL by the Drinkwater interests to the Kyrwood interests and for the resignation of Peter Drinkwater and John Drinkwater as directors of CPL. The letter which forwarded those forms proposed that they be signed and held in escrow and that "a formal settlement then take place, attended by the National Australia Bank so that all matters can be concluded." 188 On 31 July 1996, the Kyrwood interests had approached ITG for a letter relinquishing any interest it might have in the tool referred to in clause 14 of the Settlement Agreement. A reply was received by facsimile on 2 August in the following terms: "TO WHOM IT MAY CONCERN, International Tool & Gauge hereby relinquishes any interest in the die to make Caddyracks currently situated at Performance Engineering Products in the United States provided that: 1. The die remains in Performance Engineered Products until 26 October, 1996; [30] and 2. We have upgraded the die currently situated in NSW within that period (we will use our best endeavours to do so); and 3. The agreement between the Kyrwoods and Drinkwaters dated 26 July, 1996 becomes unconditional. 4. Which ever tool in Australia remains the property of International Tool & Gauge until a total of $120,000.00 has been paid." 189 On the same day, 2 August 1996, the Kyrwood interests wrote to the Drinkwater interests as follows: "We have satisfied I.T.G. with arrangements for the USA tool. They have acted accordingly by relinquishing their interest in such tool, but for you to abide by our agreement you are responsible for the payments of any alterations to the Australian tool. I.T.G. have indicated that they cannot commence alterations without a deposit from you. Please cooperate with them so that the three months schedule for transfer of these tools can be achieved." 190 ITG also wrote to the Drinkwater interests that day as follows: "International Tool & Gauge Pty. Ltd. requires a deposit of $10,000.00 for the modification on the Caddyrack Aus. mould as instructed and as agreed to be paid for by Caddyrack Inc. As set down in the agreements between the KYRWOODS and DRINKWATERS. Balance of payment ($10,000.00) to be paid to International Tool & Gauge Pty. Ltd. on completion of modification. Looking forward to an urgent reply." 191 On 5 August 1996, the Kyrwood interests' solicitors wrote to the Drinkwater interests' solicitors as follows: "RE: CADDYRACK PTY. LIMITED We refer to our letter of 1 August, 1996 and enclose a copy of draft Minutes for a proposed meeting of the directors to be held at the offices of Rees Pritchard at 3.00pm on Wednesday 7 August, 1996. At that meeting it is proposed that a discharge of the mortgage over your clients property be handed over in exchange for signed Transfers and Resignations. Please confirm these arrangements as a matter of urgency". 192 On 6 August, the Drinkwater interests' solicitors replied as follows: "RE: CADDYRACK PTY. LIMITED We refer to your letter of 1 August in regard to the above. Could you please confirm that the outstanding matters between Caddyrack Pty. Limited and Great White Shark Enterprises have been finalised. Upon written finalisation of same our clients will be in a position to execute the transfers and resignations requested." 193 The Kyrwood interests' intention to perform the Settlement Agreement was confirmed by letters from their solicitors to the Drinkwater interests' solicitors dated 7 and 8 August, which provided: (a) Letter dated 7 August 1996: "RE: CADDYRACK PTY LIMITED Thank you for your letter of 6 August, 1996. We enclose a letter from Brian Cornwell to Paul Erickson dated 29 July, 1996. You will see that Paul Erickson has signed the letter agreeing to the arrangements. Settlement cannot take place today because the National Australia Bank is not ready. We hope that it is ready tomorrow when we will contact you as soon as we can to arrange the necessary directors meeting." (b) Letter dated 8 August 1996: "RE: CADDYRACK PTY. LIMITED The National Australia Bank has advised that it cannot take the mortgage of Peter Drinkwaters (sic) at 44 Skye Point Road, Coal Point because it secures other financial arrangements of Peter Drinkwater. The National Australia Bank, however, is prepared to provide a letter acknowledging that the loan involving Peter Drinkwater and Caddyrack Pty. Limited has been extinguished and that the property no longer secures this loan. We trust that this will suffice. We will contact you as soon as we have this letter so that settlement can take place. We still hope that settlement can take place on 9 August, 1996." 194 When those letters were written, less than a fortnight had passed since the parties had made the Settlement Agreement. Although there were matters still to be attended to, the Settlement Agreement could have been performed at that time with the Drinkwater interests' cooperation. However, the Drinkwater interests were unwilling to arrange and pay for modification of the Australian tool (which, until it was modified, limited the Kyrwood interests' production capacity) or to exchange the United States tool for the Australian tool until it had been modified (if at all). There was little incentive for the Drinkwater interests to exchange the superior United States tool for the Australian tool. On the other hand, it was obviously important to the Kyrwood interests to obtain the superior United States tool (which could be used to manufacture both right handed and left handed caddyracks) at the earliest opportunity. Until that occurred, they had only the less satisfactory, unmodified Australian tool. The Kyrwood interests could only obtain timely performance of the Drinkwater interests' obligation to exchange the United States tool for the Australian tool if there was timely performance by the Drinkwater interests of their obligation to arrange and pay for the upgrading of the Australian tool or the Drinkwater interests waived or lost their right to postpone the exchange of the tools until the Australian tool had been upgraded. 195 On 6 August 1996, the Drinkwater interests had written a patently inaccurate and provocative letter to the Kyrwood interests as follows: "Part of the deal was that you were to obtain a letter from ITG, within 7 days, confirming that they have no interest in the US tool. As yet I have not received this confirmation from ITG. Please attend to it and avoid defaulting on the deal. In regard to the payment for the modification of the Australian tool, it was to be taken care of by you and when it was completed and test run only then was I to pay for it and exchange the tools. I received a fax from Heinz on Aug 2 which indicates that you told him that I would be paying the deposit as set out in our agreement. This is not true and you know it. It was your responsibility to get the tool altered and then we would pay and exchange." 196 The Drinkwater interests no longer seek to maintain that position. Their Notice of Contention did not challenge the trial judge's rejection of their proposition "that they were not to pay the bill of ITG but merely to contribute to its payment so that there was no obligation for them to pay money until the upgrading [of the Australian tool] was effected" or his Honour's conclusion that there was an obligation on them to pay the deposit required by ITG. 197 The Kyrwood interests were prepared to proceed and leave the Drinkwater interests to attend to modification of the Australian tool if and when they chose to do so provided that the Kyrwood interests received the United States tool as the Settlement Agreement envisaged. On 7 August 1996, the Kyrwood interests wrote to the Drinkwater interests as follows: "…. In regard to the payment for modifications of the Australian Tool I bring your attention to clause 12 of the agreement of the 26th July, 1996. You are totally responsible for payment of any such modifications. If you are not prepared to co-operate maybe you could forget about modifications and have the tools exchanged now. ….." 198 On 9 August 1996, the Kyrwood interests again sought completion of the Settlement Agreement. They were prepared to make the necessary payment to the National Australia Bank to discharge CPL's debt which was secured on Peter Drinkwater's house, and their solicitors' letter of that day enclosed the letter from the National Australia Bank which had been foreshadowed in their letter of 8 August [31]. However, three letters of 9 August from the Drinkwater interests' solicitors introduced new obstructions to performance of the Settlement Agreement, including additional matters which were not the subject of the agreement. Importantly, the Drinkwater interests' refusal to arrange and pay for the upgrading of the Australian tool or to exchange the United States tool for the Australian tool until it had been modified continued. 199 Notwithstanding that the Drinkwater interests had not arranged with ITG to upgrade the Australian tool or made the payment which ITG required, the Kyrwood interests made another attempt to obtain completion of the Settlement Agreement by a letter from their solicitors dated 13 August 1996. That letter concluded: "The Kyrwoods are ready, willing and able to complete the Agreement dated 26 July 1996 and have carried out their relevant obligations under that Agreement. In particular, Caddyrack Pty Limited has made the first payment to Great White Shark Enterprises Inc and has paid a substantial amount of money to protect the patent. The Kyrwood's have also put in place the arrangements with the National Australia Bank (see the bank's letter dated 9 August 1996). Please make immediate arrangements for Peter Drinkwater and John Drinkwater to attend a meeting with the Kyrwoods to effect the resignations and transfer the shares. If this meeting is not taken place by 5.00pm Thursday 15 August 1996 we have instructions to commence proceedings in the Supreme Court for specific performance of the Agreement dated 26 July 1996." 200 On 15 August 1996, the Drinkwater interests' solicitors wrote to the Kyrwood interests' solicitors stating that there were "a number of outstanding issues in respect of John Drinkwater which we are currently waiting instructions" and asking that instructions be obtained from the Kyrwoods. The letter did not identify the "outstanding issues". 201 On 29 August 1996, a letter was written by the Drinkwater interests' solicitors to Cornwells, a firm of solicitors who had acted for the joint venture between the Kyrwood interests and the Drinkwater interests. That letter contained the following paragraphs: "… The agreement signed on 26 July last does not envisage any undertaking from Caddyrack Inc to pay for refurbishment of the tool. Our client instructs us to advise that in the circumstances they shall retain the current tool in America and supply left handed Caddyracks at cost as required to Caddyrack Pty. Limited pursuant to clause 8 of the agreement. Caddyrack Pty Limited can then upgrade the Australia (sic) tool if and when it is required. ……" 202 Not surprisingly, that gross departure from the Settlement Agreement was unacceptable to the Kyrwood interests. Their solicitors wrote a letter dated 5 September 1996 to the Drinkwater interests' solicitors which referred to their letter of 29 August 1996 to Cornwells and said: "…. Clause 12 of the Agreement dated 26 July, 1996 requires 'the Drinkwaters to pay to International Tool & Gauge up to $20,000.00 for the upgrading of the Australian Tool and when the upgrade is complete will exchange the United States of America Tool for the Australian Tool with each party being responsible for the freight. You will see that the Drinkwaters are liable to pay for the refurbishment of the Tool. Please confirm that they have made arrangements for payment of the sum of $20,000.00 to International Tool & Gauge. The Kyrwoods do not have to release the mortgage over Peter Drinkwater's house until all conditions have been satisfied. They will do this at settlement, as previously advised. They want the arrangements concerning the Tool as set out in the agreement to be complied with. The proposal set out in the penultimate paragraph of your letter is not acceptable. The Kyrwoods require compliance with the Agreement of 26 July, 1996 and they are ready, willing and able to complete that Agreement. In fact, the Kyrwoods have been waiting for sometime (sic) for you to confirm that you have signed Share Transfers and Resignations. The Kyrwoods have performed their obligations of the agreement of 26 July, 1996 in some cases at great expense. If the Drinkwaters are not prepared to complete that Agreement then the Krywoods will be forced to seek specific performance. Please make an appointment for settlement." 203 The correspondence barrage continued, without significant change in the position of either party until 23 September 1996. On that day, the Kyrwood interests' solicitors served a notice requiring completion of the Settlement Agreement in the following terms: "Take notice that: (1) The Kyrwoods are ready, willing and able to complete the Agreement and will hand over executed share transfers of the shares in Caddyrack Inc and will replace the security over the residential property of Peter Drinkwater at 44 Skye Point Road, Coal Point and will exchange the die situated in Australia for the die situated in the United States (or arrange for it to be freighted simultaneously); (2) You, the Drinkwaters, are required to attend at the offices of Caddyrack Pty. Limited at 10 Murray Street, Hamilton at 3.00pm on 10 October, 1996 with: (i) signed Resignations as Directors; (ii) signed Transfers in Caddyrack Pty. Limited; (iii) the die used for the manufacture in caddyracks located in the United States (or arrange for it to be freighted simultaneously). In default of you complying with this Notice on or before 3.00pm on 10 October, 1996 the Kyrwoods will either sue you for damages and/or seek specific performance of the agreement." 204 The Drinkwater interests' solicitors reply dated 30 September 1996 provided (in part): "RE: CADDYRACK PTY. LIMITED & CADDYRACK INC. We refer to your letter of 24 September last in regard to the above. Clause 14 of the agreement does not provide for International Tool and Gauge to impose conditions in the agreement between the Kyrwoods and the Drinkwaters. Whatever arrangements arrived at (sic) between your client and International Tool and Gauge is (sic) a matter for those parties. We note your reference to the obligation to pay up to $20,000.00 in clause 12 of the agreement as being John Drinkwater's obligation. Clause 6 of the agreement provided for the Kyrwoods to replace the security over Peter Drinkwater's house within 14 days of the date of the agreement. This has not occurred. On our instructions your clients have consistently said that they will not do that until they are satisfied that the agreement has been complied with so far as they are concerned. Clause 12 so provides that when any upgrading of the tool is complete the respective tools will be exchanged. Clearly until the upgrade is complete no exchange can take place. …. We hold resignations of our clients as Directors of Caddyrack Pty. Limited and the share transfers previously forwarded. We are instructed by our client (sic) that they have been advised by International Tool and Gauge that the earliest any completion of an upgrade of the Australian tool would be complete is approximately 4 months. In light of that your client should release the security over Peter Drinkwater's property as you clearly acknowledge that any monies payable in respect of the upgrade are to be paid by John Drinkwater only. Any costs incurred by our client in defending any action commenced by your clients in respect of their failure to comply with the agreement shall be sought on an indemnity basis." 205 Of course, the Settlement Agreement was not completed on 10 October. Reliance has been placed by the Drinkwater interests on their solicitor's account of part of the conversation which took place that day. In the passage which follows, Mr Hewitt is the Drinkwater interests' solicitor and Mr Doyle is the Kyrwood interests' solicitor: "Hewitt: "If the matter is going to settle, the most important thing for Peter is to the get his house back." Doyle: "We don't have to release the house until we have the tool." Hewitt: "That is not what the agreement says. The agreement is that Peter's house is to be released and the transfer of the shares and the resignations handed over irrespective of whether or not the tools have been exchanged. My client needs his house. He needs that to continue in business. As you (sic) clients know he has no other employment. He needs the security to be released otherwise he can't borrow any further monies against it." Doyle: "My clients are not prepared to do that. They believe they will never get the US tool back if they release the house." Hewitt: "What if my clients make instalment payments for the upgrade of the tool?" Doyle: "No. Without the tool there will be no release of the house." Goeff Kyrwood: "We can't trust John Drinkwater. We must have the house." 206 Mr Hewitt made reference to the possibility that the Drinkwater interests might "make instalment payments for the upgrade of the [Australian] tool" but did not promise or offer to do so, and the Drinkwater interests continued to ignore their obligations under clause 12 of the Settlement Agreement notwithstanding that most of the 12 week period for the upgrade of the Australian tool had elapsed. Further, the demand for Peter Drinkwater's house to enable him to borrow against it for his business (with the implication that he had no other property to offer as security) ignored his obligation under clause 6 to "make [his house] property … available for security for [CPL] if required…" in those circumstances. The Kyrwood interests' belief that "they [would never get the U.S. tool … if they [released] the house" was amply justified. Any other inference from the Drinkwater interests' attitude to that point would have been extremely naive. 207 On 15 October 1996, the Kyrwood solicitors modified their position but still insisted on postponement of performance of their obligation under clause 6 until they received the United States tool. Their solicitors wrote a letter that day to the Drinkwater interests' solicitors which included the following: "… Our clients are ready willing and able to comply with clause 3.4 and we enclose a copy of the relevant share transfers. Please confirm that your clients are, as indicated in your letter of 6 August 1996 ready to comply with clauses 1.4 and 1.5. Subject to the above, the only difficulty with settlement seems to be the logistics of implementing clause 12 and the exchange of the Australian and US Tools. Clause 12 of the Agreement relates to upgrading the Australian Tool. This clause was inserted to meet your client's apparent requirement that when the Australian Tool was moved to America it would be capable of producing a product with an appearance as close to the American product as possible. The requirement for the upgrade is a requirement solely to meet your clients' needs and, if no longer required by your client, our client is happy to dispense with it. During the 3 months originally envisaged as the time required to carry out the modifications, our client has always had the die available so that ITG could do the work. However, it appears that little, if any, contact has been made by your clients with ITG to carry out any upgrading of the Tool. To assist in reaching a settlement our client is still prepared to assist your client in carrying out any upgrades it requires by making the Tool available to ITG provided that each separate upgrade is carried out independently of the others so that at the completion of each separate upgrade, our client can use the Tool for production of product whilst the upgrading is being carried out. Your client can have the opportunity to inspect the Tool at the conclusion of each upgrade stage and would, of course, have the option of cancelling any further upgrades at any time. We suggest therefore that your client provide to ITG immediately a specification of the upgrades it requires (if any) and at the same time provide us with a copy of that specification. Your client should also make satisfactory financial arrangements with ITG and advise us when those arrangements have been completed. As far as our client is concerned the upgrade work can commence immediately and be completed with minimal inconvenience to any party. As we understand it it will take ITG about 3 Months to do the work. The upgrade work should be completed by ITG on their certification to your client that the upgrades have been complete and that the die will produce saleable product. Immediately the upgrade is complete, the US Tool will be transported to Australia at your client's expense as envisaged by the agreement and immediately upon its inspection in Sydney by a representative of ITG and he being satisfied that the Tool is capable of producing marketable product, our clients will comply with clause 6 by payment to the National Australia Bank of $250,000.00 in return for which payment the Bank will confirm that it has no interest in Mr Drinkwater's property at 44 Skye Point Road, Coal Point relative to advances afforded to Caddyrack Pty Limited. The balance of the terms of the agreement speak for themselves. Please confirm your client's agreement with this proposal, whereupon we implement the share transfers forthwith and the resignation as Directors forthwith and assist your client to set in motion the modification of the Tool." 208 On 16 October 1996, the solicitors for the Drinkwater interests wrote a letter which concluded as follows: "…. Our clients rely on your clients' failure to complete the agreement in accordance with your notice and that you have thereby repudiated the agreement of 26 July 1996. If the parties are unable to reach an alternative settlement arrangement by 5.00pm 17 October 1996 our client will rely on the repudiation of 26 July agreement by your clients on 10 October 1996 and seek damages." 209 The Kyrwood interests' solicitors replied that day, denying that the Kyrwood interest had repudiated the Settlement Agreement, and reiterating that they were willing to procure the discharge of the mortgage provided that the tools were exchanged. 210 On 22 October 1996, the Kyrwood interests' solicitors wrote a further letter, part of which stated: "…. The agreement of 26 July 1996 is still on foot and our clients have been ready, willing and able to settle same since early August 1996, whereas your clients have taken no steps to implement the settlement arrangements notwithstanding that the 3 months envisaged to modify the Australian Tool to your clients' requirements will expire on 26 October 1996. Your clients have made no contact with ITG in relation to modification of the Tool. Our clients are ready, willing and able to comply with all their obligations under the Deed. Our clients are the owners of the US Tool pursuant to the agreement, the completion of which is only being delayed by your clients failing to comply with their obligations under it. In these circumstances, where your clients take no steps to implement the agreement reached, do not rely to correspondence, make no settlement proposals despite the suggestion in your letter of 15 October 1996 and generally act with disregard to the agreement reached, it appears that our clients will have no alternative but to go back to the Court seeking Orders." 211 Although the Drinkwater interests increasingly relied on the refusal of the Kyrwood interests to complete the Settlement Agreement on 10 October 1996 after they had issued a notice requiring completion that day, the correspondence between 22 and 30 October 1996 was generally repetitive of earlier assertions [32]. 212 The Drinkwater interests argued that, if the trial judge's declaration that they terminated the Settlement Agreement on 16 October 1996 is incorrect, they terminated the agreement by their solicitors' letter dated 30 October 1996. That letter repeated the Drinkwater interests' assertion that the Kyrwood interests had repudiated the Settlement Agreement, returned transfer of shares in Inc. in favour of the Drinkwater interests and foreshadowed an extremely limited claim for damages by the Drinkwater interests if the Kyrwood interests did not continue "servicing the National Australia Bank loan." 213 The Drinkwater interests did not allege repudiation by the Kyrwood interests, acceptance of that repudiation or termination of the Settlement Agreement in either their initial Statement of Claim in the Equity Division in November 1996 or even the Amended Statement of Claim delivered on 10 June 1997, the first morning of the trial. Nor were damages claimed for breach of contract. On the contrary, as Powell JA has noted in his reasons for judgment, the Amended Statement of Claim continued to seek "orders the effect of which would be to give effect to the clause 6 of the [Settlement] Agreement." Thus, para 17(ii) of the Amended Statement of Claim alleged that it was an express term of the Settlement Agreement that the Kyrwood interests "would procure a discharge" of the mortgage over Peter Drinkwater's house and the first order sought in the prayer for relief was an order that the Kyrwood interests" procure a discharge "of that mortgage within 28 days …". The first pleaded allegation by the Drinkwater interests that the Kyrwood interests had repudiated the Settlement Agreement was made in the Drinkwater interests' Defence to the Kyrwood interests' cross claim for specific performance of the Settlement Agreement. That was also the first occasion on which it was alleged that the Drinkwater interests had accepted the Kyrwood interests' repudiation of the Settlement Agreement. The allegation initially made, and accepted by the trial judge, was that the Drinkwater interests had accepted the Kyrwood interests' repudiation of the Settlement Agreement on 16 October 1996. It was only when the Amended Defence to Cross Claim was delivered by the Drinkwater interests on the first day of the trial (10 June 1997) that reliance was also placed by the Drinkwater interests on their solicitors' letter of 30 October 1996. 214 The Drinkwater interests' "multiple choice" approach to their claim that they terminated the Settlement Agreement for the Kyrwood interests' repudiation of that agreement disguised some weaknesses. There appear to be four matters put forward by the Drinkwater interests as repudiation by the Kyrwood interests and there are two letters from their solicitors which are relied on by the Drinkwater interests as acceptance of the Kyrwood interests' repudiation. Shortly stated, the various matters upon which the Drinkwater interests' based their claim that the Settlement Agreement was terminated for the Kyrwood interests' repudiation of the agreement were: (a) Repudiation [33] by the Kyrwood interests : (i) Their requirement that clause 12 of the Settlement Agreement be complied with as a condition of their compliance with clause 6: see the Kyrwood interests' solicitors' letter of 5 September 1996. (ii) Their notice of 23 September 1996 requiring completion of the Settlement Agreement on 10 October 1996 on a basis to which they were not entitled: in particular, requiring that the United States tool be "freighted simultaneously" with completion in exchange for the Australian tool and performance of clause 6. (iii) Their refusal to complete the Settlement Agreement on 10 October 1996 except on the basis that the United States tool be "freighted simultaneously" with completion in exchange for the Australian tool and performance of clause 6. (iv) Their continued refusal after 10 October 1996 to perform clause 6 of the Settlement Agreement until they received the United States tool. (b) Acceptance of the Kyrwood interests' repudiation of the Settlement Agreement by the Drinkwater interests: (v) Their solicitors' letter of 16 October 1996. (vi) Their solicitors' letter of 30 October 1996. Neither letter expressly asserted that the Settlement Agreement was terminated. 215 It is unnecessary to consider whether the Kyrwood interests repudiated the Settlement Agreement by adopting the position set out in their solicitors letter of 5 September 1996. [34] If they did, the Drinkwater interests elected not to terminate the Settlement Agreement for that reudiation: see, for example, the letter from their solicitors dated 30 September 1996. 216 The Kyrwood interests' notice of 23 September 1996 also preceded the Drinkwater interests' solicitors letter of 30 September 1996. However, on 10 October 1996, the date which the Kyrwood interests had themselves fixed for completion of the Settlement Agreement, they refused to complete unless the United States tool was "freighted simultaneously" from the United States to the Kyrwood interests in Australia. Although they had modified their position (by their solicitors' letter of 15 October 1996) prior to the Drinkwater interests' solicitors' letter of 16 October 1996, the Kyrwood interests continued to insist that performance of their obligation under clause 6 be postponed until the United States tool arrived in Australia. 217 The trial judge declared that the Settlement Agreement was terminated by the Drinkwater interests on 16 October 1996, presumably by their solicitors' letter that day which concluded: "If the parties are unable to reach an alternative settlement arrangement by 5.00pm on 17 October 1996 our client will rely on the repudiation of [the Settlement Agreement] by your clients on 10 October 1996 and seek damages. 218 However, the statement by the Drinkwater interests in their solicitors' letter of 16 October 1996 that, they would rely on the Kyrwood interests' repudiation on 10 October 1996 and "seek damages" if an alternative settlement arrangement had not been made by 5.00pm on the following day, was not a sufficiently clear and unequivocal [35] communication that the Settlement Agreement was either immediately terminated or would be automatically terminated at 5.00pm on the following day unless the parties had previously reached an "alternative settlement arrangement". Their solicitors' letter of 16 October 1996 stated the Drinkwater interests' then intention to terminate the Settlement Agreement at 5.00pm the following day unless there were "alternative settlement arrangements", but did not irrevocably commit them to termination unless they withdrew that decision prior to that time. Their option to require performance or terminate was not restricted to that period but remained open until they elected to follow one course or the other or their right of election was lost by effluxion of time. [36] 219 As at 30 October 1996, the Kyrwood interests still maintained their insistence that performance of their obligation under clause 6 of the Settlement Agreement be postposed until the United States tool was "freighted". They did not argue that, once the 12 week period required for the upgrading of the Australian tool has passed without any attempt by the Drinkwater interests to have it upgraded, they were entitled to the United States tool (in exchange for the Australian tool although it had not been upgraded) so that their position was no longer a repudiation of the Settlement Agreement after 26 October 1996. 220 If, contrary to my opinion, the Settlement Agreement had been terminated by the Drinkwater interests' solicitors' letter of 16 October 1996, their letter of 30 October 1996 is immaterial. There is no suggestion that the parties agreed to revive the Settlement Agreement after 16 October 1996, and neither could do so unilaterally. On the other hand, if - as I think - the Drinkwater interests' solicitors' letter of 16 October 1996 did not terminate the Settlement Agreement, there is no suggestion that they did so unless their letter of 30 October had that effect. 221 That letter asserted that the Kyrwood interests had repudiated the Settlement Agreement, returned transfers of shares in Inc. in favour of the Drinkwater interests which the Kyrwood interests' solicitors had submitted with their letter of 28 October and contained the following paragraph: "Our client Peter Drinkwater will hold your clients responsible for any loss and/or damage and costs incurred in the event that they cease servicing the National Australia Bank loan, the benefit of which continues to be received by your clients." 222 Confirmation that the letter was not a clear and unequivocal assertion that the Settlement Agreement was at an end but merely a refusal to complete while the Kyrwood interests continued to insist on exchange of the tools at the time of completion was provided by the Drinkwater interests' claim for specific performance of clause 6 of the Settlement Agreement in the Statement of Claim which they filed at the commencement of their Equity Division proceeding about a week later. 223 Even if the Drinkwater interests purported to terminate the Settlement Agreement by their solicitors' letters of 16 or 30 October 1996, the question remains whether they were entitled to do so. It is not in dispute that, unless the Drinkwater interests were entitled to terminate the Settlement Agreement, their solicitors' letters of 16 October and 20 October 1996 were ineffective to bring the agreement to an end. [37] 224 The Kyrwood interests had been ready, willing and able to perform clause 6 of the Settlement Agreement within the 14 days referred to in that clause. As early as 6 August 1996, i.e., within 11 days of the Settlement Agreement, the Drinkwater interests denied their obligation to perform clause 12. The Kyrwood interests still sought to proceed, and remained ready, willing and able to perform clause 6. Timely performance of the Drinkwater interests' obligation to arrange and pay for the upgrading of the Australian tool became impossible. Timely performance of the Drinkwater interests' obligation under clause 12 to exchange of the United States tool for the Australian tool became impossible unless the exchange took place without waiting for the Australian tool to be upgraded. The importance of the United States tool to the Kyrwood interests was obvious, as was the incentive for the Drinkwater interests not to exchange the tools. On 29 August, the Drinkwater interests categorically rejected their entire obligation under clause 12. The material portion of their solicitors' letter merits repetition: "… The agreement signed on 26 July last does not envisage any undertaking from Caddyrack Inc to pay for refurbishment of the tool. Our client instructs us to advise that in the circumstances they shall retain the current tool in America and supply left handed Caddyracks at cost as required to Caddyrack Pty. Limited pursuant to clause 8 of the agreement. Caddyrack Pty Limited can then upgrade the Australia tool if and when it is required. ……" 225 The Drinkwater interests' refusal to arrange and pay for the upgrading of the Australian tool or to exchange the United States tool for the Australian tool until it had been upgraded accompanied by their solicitors' letter of 29 August 1996 was a plain indication that they did not intend to be bound by the Settlement Agreement or to perform it unless, to the extent that and when it suited them to do so. That constituted a repudiation of the Settlement Agreement by the Drinkwater interests, which was affirmed by their continued refusal to arrange and pay for the upgrading of the Australian tool or to exchange the United States tool for the Australian tool. 226 At the time when the Drinkwater interests' repudiated the Settlement Agreement (which was no later than 29 August 1996), the Kyrwood interests remained ready, willing and able to perform that agreement. 227 The Kyrwood interests did not act to terminate the Settlement Agreement, which remained in existence for the benefit of both the Drinkwater interests and the Kyrwood interests. 228 The Drinkwater interests' repudiation of the Settlement Agreement persisted up to and including 30 October 1996. At that time, they still had not taken any step to perform any part of clause 12 of the Settlement Agreement. Their ongoing refusal to perform their obligation to pay ITG "for the upgrading of the Australian tool" and exchange the United States tool for the Australian tool caused the Kyrwood interests to believe that, if they performed their obligations under the Settlement Agreement, and their obligation under clause 6 in particular, without receiving the United States tool, "they would never get [it]". The Drinkwater interests' repudiation of the Settlement Agreement was the effective cause of the Kyrwood interests' repudiation of that agreement although it did not legally entitle them to adopt that position. 229 The hypothesis upon which it has been declared that the Drinkwater interests terminated the Settlement Agreement is that at the material date, 16 October 1996, the Kyrwood interests' position constituted a repudiation of the Settlement Agreement. The same reasoning would lead to a conclusion that, if the Settlement Agreement was not terminated on 16 October, the Kyrwood interests continued to repudiate it on 30 October. 230 On both those dates, the Drinkwater interests also continued to repudiate the Settlement Agreement. The Drinkwater interests' repudiation of the agreement had commenced on 29 August 1996, preceded the Kyrwood interests' repudiation of the agreement and continued throughout the Kyrwood interests' repudiation of the agreement. The question for determination is whether the Drinkwater interests were entitled to terminate the Settlement Agreement for the Kyrwood interests' repudiation of that agreement when the Kyrwood interests were themselves repudiating the agreement; that is to say, when the Drinkwater interests were not themselves ready, willing and able to perform the Settlement Agreement. [38] 231 In Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd Receiver and Manager Appointed, [39] this Court held that Roadshow had been entitled to terminate its contract with the respondent. However, Roadshow had not repudiated [40] or even breached the contract. [41] Further, Roadshow's obligation was not a condition precedent to the obligations repudiated by the respondent and was independent of those obligations. [42] Understandably, the Court emphasised that "a comprehensive analysis of the effect of a breach on a party's right to rescind" was not required. [43] 232 Two (obiter) propositions are deducible from Roadshow, namely that: (a) "A party in breach of non-essential terms who has not repudiated may rescind for fundamental breach" [44] (emphasis added) or for "repudiation by the other party". [45] However, that "general rule" might be subject to an "exception or qualification" which would prevent the party in breach from terminating the contract "if there were a causal relationship between the breaches of non-essential terms by the party attempting to rescind, and the fundamental breach relied upon" [46] (or, presumably, the other party's repudiation). (b) "A party in breach of an essential but independent term may also rescind for fundamental breach." [47] 233 The authority relied upon in Roadshow [48] for proposition (b) in the preceding paragraph was State Trading Corporation Ltd of India v Golodetz Ltd [49]. The leading judgment in that case, which was delivered by Kerr LJ, contains a statement which was unnecessary for the decision of either case. His Lordship said: [50] "… . Neither obligation was dependent upon the other and both had to be performed concurrently … . 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." According to that passage, a party which is itself repudiating a contract, i.e., not ready, willing and able to perform the contract, can terminate it for the other party's fundamental breach or repudiation, at least unless both parties are in breach of interdependent essential terms 234 It is unlikely that the Court in Roadshow [51] intended to endorse the full ambit of what had been said by Kerr LJ in State Trading Corporation of India, [52] especially without any discussion of Foran v Wight, [53] which was referred to at the same point in Roadshow, [54] or DTR Nominees Pty Ltd v Mona Homes Pty Ltd [55], which had been referred to a little earlier. Proposition (b) extracted above from Roadshow [56]can be limited to a party who had earlier breached an essential but independent term but was ready, willing and able to perform the contract at the time when he or she acted to terminate it for the other's breach. That was the basis on which Lennon v Scarlett and Co [57] was explained in DTR Nominees Pty Ltd v Mona Homes Pty Ltd.[58] 235 Further, there was no reference in State Trading Corporation of India [59] to the decisions of the House of Lords in Bremen Vulkan Schiffbau und Maschinerfabrick v South India Shipping Corporation Ltd [60] or Paal Wilson and Co A/S v Partenreederei (The Hannah Blumenthal). [61] In the second of those decisions, the House of Lords reversed a decision of the Court of Appeal [62] was a member of the Bench. which had not applied the earlier House of Lords decision. In both Bremer Vulkan [63] and Paal Wilson, [64] there was no suggestion that the parties' "mutual" obligations were interdependent. 236 In Bremer Vulkan, [65] the plaintiffs were respondents to an arbitration commenced by the defendants in which they claimed to have been seriously prejudiced by the inordinate and inexcusable delay of the defendants in prosecuting the arbitration. The plaintiffs sought injunctions restraining the defendants from continuing with the arbitration. It was held by the trial judge that the defendants' conduct constituted a repudiatory breach of the agreement to submit the dispute to arbitration and injunctions were granted. The defendants' appeal was dismissed by the Court of Appeal, which held that the plaintiffs were entitled to treat the defendants' conduct as a repudiation of the arbitration agreement and, as they had elected to rescind it, the injunctions were correctly granted. The House of Lords allowed an appeal. By three to two majority, it was held that, since both parties were under an obligation to keep the arbitration procedure moving forward, both were under an obligation to apply to the arbitrator to prevent inordinate delay. Since the plaintiffs had made no such application, they were not entitled to treat the defendants' breach as giving them the right to treat the agreement as at an end. One of the majority, Lord Diplock, stated that the parties were "under a mutual obligation to one another to join in applying to the arbitrator for appropriate directions to put an end to the delay." [66] Later, his Lordship said: [67] "For failure to apply for such directions before so much time had elapsed that there was a risk that a fair trial of the dispute would not be possible, both claimant and respondent were … in breach of their contractual obligations to one another; and neither can rely upon the other's breach as giving him a right to treat the primary obligations of each to continue with the reference as brought to an end." 237 Lord Diplock was again a member of the Bench which decided Paal Wilson, [68], but the leading judgment was delivered by Lord Brandon of Oakbrook. There, plaintiffs sought and initially obtained a declaration that an arbitration agreement had been discharged by reason of frustration because of the other parties' delay. That decision was upheld by a majority in the Court of Appeal. The House of Lords upheld an appeal on the basis that the operation of the doctrine of frustration was excluded by the "default" of each of the parties. Lord Brandon of Oakbrook said: [69] "The Court of Appeal in Bremer Vulkan had held that the claimant had been guilty of such inordinate and inexcusable delay in proceeding with the reference there concerned as to amount to a repudiation of the agreement to refer; that the respondents were entitled to accept, and had accepted, that repudiation as such; and that the agreement to refer had accordingly been discharged by breach. What Lord Diplock was saying was that, since the delay concerned was the consequence of breaches on the part of both the claimant and the respondent of their mutual obligation owed to one another, neither could rely on the other's conduct as amounting to repudiation. … Lord Diplock's mutual obligation concept was an essential part of the ratio decidendi of the Bremer Vulkan case in your Lordships' House." 238 In DTR Nominees Pty Ltd v Mona Homes Pty Ltd, [70] purchasers sought a declaration that they had validly rescinded a contract for the sale of land and the vendor cross claimed seeking a declaration that it had validly rescinded the contract. Broadly stated, the purchasers alleged that the vendor's failure to lodge a plan in accordance with a term of the contract was a repudiation of the contract and the vendor alleged that the purchasers' purported rescission constituted a wrongful repudiation of the contract, which it had accepted. Both parties accepted that the contract was at an end, but there was a dispute as to who was entitled to the deposit. The purchasers succeeded. 239 A majority of the High Court held that the vendor had breached the contract by not lodging the plan in accordance with the relevant term but that the term was not an essential term in the sense that its breach entitled the purchasers to terminate the contract. Further, the vendor did not repudiate the contract by requiring the purchasers to complete when they were not obliged to do so. Accordingly the purchasers' attempt to terminate the contract was ineffective. 240 It was also held that the purchasers' attempt to terminate the contract was not a repudiation of the contract which entitled the vendor to rescind, because the purchasers did not evince an intention not to proceed with the contract properly interpreted. However, both parties had abandoned or abrogated the contract by their conduct before the commencement of proceedings. Accordingly, the deposit was repayable to the purchaser. 241 Stephen, Mason and Jacobs JJ delivered a joint judgment with which Aickin J agreed. The passage in the joint judgment which is material for present purposes is as follows: [71] "But the question remains whether the appellant was entitled to rely on this ineffective rescission of the contract by the respondents as itself a repudiation of the contract and thereupon to rescind as it purported to do by its letter of 25th July 1974. This is the question raised by the cross-action. In our opinion the appellant could not rely on the respondents' purported rescission as a repudiation. The respondents purported to rescind only upon the basis that the appellant would not complete the contract as correctly interpreted. They were in error in regarding themselves as entitled to rescind at the stage when they purported to do so but they were not in error in their interpretation of the contract. The actions of the parties must now be considered in the light of the true interpretation of the contract. The purported rescission of 19th July did not evince an intention not to proceed with the contract correctly interpreted; it did no more than evince an intention not to proceed with the contract on the basis of the incorrect interpretation then being advanced by the appellant. That cannot be regarded as a repudiation which would entitle the appellant to rescind when it was itself the party in error. A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach, and indeed could profit from his misinterpretation of the contract, as the appellant seeks to do in this case when it claims forfeiture of the deposit and damages. By insisting on its incorrect interpretation of the contract to the point of claiming to rescind because the respondents were relying on the different but correction interpretation, the appellant by that stage showed that "definitive resolve or decision against doing in the future what the contract" (required) which is referred to by Dixon C.J. in Rawson v. Hobbs (1961) 107 CLR 466 , at p 481 . Whether or not the respondents could by then have rescinded certainly the appellant could not do so. (at p433) The appellant never accepted that the contract be performed according to its correct interpretation and thus the facts are different from those in Lennon v. Scarlett & Co. (1921) 29 CLR 499 . There a plaintiff had, after the making of the contract, sought to insist on additional terms. The defendant then called off negotiations, in effect purporting to rescind. It was held that the attempt by the plaintiff to add new terms did not amount to a repudiation. It was further held that the defendant had repudiated. But the difference between that case and the present case is that there the plaintiff, after the defendant`s purported rescission, offered to complete the contract on its true terms. The defendant declined to do so. By that tim the plaintiff was willing to complete the contract according to its true terms and he could therefore treat the defendant`s act as a repudiation and could rescind accordingly". 242 Although the majority judgment in DTR Nominees Pty Ltd v Mona Homes Pty Ltd [72] stated that only an "innocent party", that is a party "willing to perform the contract on its proper interpretation", can terminate a contract for the other party's "anticipatory repudiation", [73] it is apparent from both the circumstances of the dispute in that case and the explanation [74] which was there given for the decision in Lennon v Scarlett and Co [75] that the same principle is applicable if the repudiation of the party other than the party seeking to terminate is not an anticipatory repudiation. 243 Foran v Wight [76] involved a contract for the sale of land which was due to be completed on a specified date with time of the essence. A special condition required the vendors to obtain registration of a right of way before completion. Two days before the date specified for completion, the vendors' solicitor told the purchasers' solicitor that the vendors would not be able to settle on the specified date because the right of way had not been registered. Neither party attempted to settle on the specified date. Two days later, the purchasers gave the vendors a notice of rescission. The purchasers succeeded in their claim for a declaration that they had rescinded the contract and for the return of the deposit. The vendors' cross-claim that the purchasers were not entitled to terminate the contract and that the vendors had validly terminated the contract and were entitled to the deposit failed. The vendors' contention that the purchasers' notice of rescission was invalid on the ground that the purchasers were not ready and willing to complete on the specified date for want of funds was rejected. The basis for the rejection of the vendors' contention was that the need for the purchasers to be ready, willing and able to complete the contract had been dispensed with by the vendors' solicitors' statement that they would not be able to complete that day. However, a majority [77] approached the matter on a different basis from the other members of the Court. of the High Court accepted that, but for that dispensation, the purchasers could not have terminated if they had not been ready and willing to perform the contract. [78] 244 Mason CJ dissented in the result only because he considered that the purchasers had not been ready, willing and able to complete. The following passages from his judgment are sufficient for present purposes: "Accordingly, in relation to termination for actual breach, the principle is that established by the earlier decisions - the plaintiff is required to show that he was ready and willing to perform the contract if it had not been repudiated by the plaintiff. In other words, the requirement is that the plaintiff be ready and willing to perform except to the extent that the defendant dispensed with his performance. In the case of an anticipatory renunciation accepted by the plaintiff, the requirement of readiness and willingness extends only up to the time of acceptance because then the earlier repudiation results in an early termination of the contract. Accordingly, in the case of actual breach the requirement of readiness and willingness is more stringent; it continues through to the time for performance. That is because the termination of the contract does not antedate the time for performance. Subject to this difference and to the possibility of a difference in the onus of proof, the principle to be applied in the case of actual breach is consistent with that to be applied in the case of termination for anticipatory breach. The difference in the onus of proof arises because 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." [79] … "However, in the present case, the anticipatory breach of the vendors was not accepted. The case is one of termination for actual breach. The time for determining whether or not the purchasers would have been ready and willing to perform the contract had it not been for the dispensing conduct of the vendors is therefore the time for performance. The purchasers have not discharged the onus of showing that at that time they would have been so ready and willing. It follows that the purchasers are unable to justify their termination by reference to the ordinary principles of contract law. It is necessary now to turn to the doctrine of estoppel in order to ascertain whether the application of that doctrine enables the purchasers to succeed." [80] … "The purchasers cannot by invoking the doctrine of estoppel avoid the need to show that the vendors' conduct caused them not to perform the contract. The contract went off for two reasons: first, because the purchasers lacked the financial resources to complete on the appointed day; secondly, because the vendors were unable to complete on the appointed day as the right of way could not be registered in time. Accordingly, the failure of the contract was as much due to the purchasers' incapacity as that of the vendors. But in order to terminate the contract the purchasers needed to show that the vendors were at fault. The consequence is that the purchasers did not validly terminate the contract. In this situation it might at first seem just and fair that the purchasers should recover their deposit but it is conceded that, if the purchasers did not validly terminate, the vendors' later termination of the contract was valid and it was not contested, in this event, that the purchasers' claim to recover the deposit should fail." [81] 245 Brennan J held that, at the time when the vendors' solicitor told the purchasers' solicitor that the vendors would not be able to complete on the specified date, the purchasers were, in the material sense, ready and willing to complete. The vendors' indication that they were unable to complete on the specified date dispensed with the purchasers' obligation to tender performance. His Honour's opinion that a party seeking to terminate for another's repudiation must be ready, wiling and able to complete is encapsulated in the following passage: "Where a party claims to be entitled to rescind an executory contract on account of the other party's repudiation (whether by way of anticipatory breach or incapacity), the first party must show not only the other's repudiation but his own readiness and willingness up to the time of rescission to perform his essential obligations under the contract: Rawson v. Hobbs, at pp 480-481. Readiness or willingness imports capacity to perform as well as disposition to perform: De Medina v. Norman (1842) 9 M & W 820 at p 827 ( 152 ER 347 , at p 350). Since a party's right to rescind an executory contract for the other party`s repudiation is limited to cases where the first party is ready and willing to perform, neither party is treated as without fault where both would be at fault were the contract to continue until the time for performance arrives." 246 Deane J agreed that the vendors could not rely on the purchasers' omission to perform on the specified day because of the vendors' indication that they could not complete at that time. His Honour added: [82] "In these circumstances, it is strictly unnecessary that I express any view on the question whether one party to a contract is precluded from rescinding it by accepting a repudiation of the contract by the other party if he is not in a position to prove that he is, or but for the repudiation would have been, ready, willing and able to perform the contract. However, in view of the discussion of that question in other judgments, it would seem desirable that I indicate that, notwithstanding some statements of authority to the contrary, 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." Nothing in that passage suggests his Honour considered that a party which was itself repudiating a contract could terminate that contract. 247 Dawson J's judgment contains the following passage: [83] "In this case, the purchasers did not accept the vendors' repudiation of the contract but terminated the contract for actual breach. But the vendors' implied intimation to the purchasers that there was no point in their attempting to tender the purchase price on the due date was sufficient to alter the nature of the readiness and willingness which the purchasers were required to prove, that being put in issue by the vendors. They were not required to show that upon the day stipulated for settlement they were ready and willing to tender the purchase price. They were absolved from the obligation of placing themselves in a position to be able to tender the purchase price upon that day by reason of the representation of the vendors two days earlier. 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. The question whether the purchasers satisfied this onus is not without some difficulty because the trial judge directed his attention to the situation on the date stipulated for settlement rather than the situation two days before. However, the purchasers did not have to prove that they could have raised the amount needed to complete the financing of their purchase by the time stipulated for settlement. 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." 248 In this Court, McHugh JA had also recognized that a party who is repudiating a contract is not entitled to terminate it for the other party's repudiation. [84] 249 The Drinkwater interests' repudiation of the Settlement Agreement, which commenced no later than 29 August 1996 and continuing past 30 October, precluded them from terminating the agreement for the Kyrwood interests' repudiation. 250 In the circumstances, it is unnecessary to consider proposition (a) from Roadshow. [85] However, a party who is not itself repudiating a contract cannot terminate if that would involve taking advantage of its own wrong;[86] for example, as was indicated in Roadshow, because of the causal relationship between the conduct of the party seeking to terminate and the other party's repudiation. Arguably, a wider test is appropriate in which consideration is given to the terms of the contract and the total conduct of the respective parties, including any breaches of contract and the importance of the terms breached. It is now established that the Court has power to grant relief in respect of an unconscionable or inequitable termination. [87] 251 The position adopted and persisted in by the Drinkwater interests, the importance of the United States tool to the Kyrwood interests and the causal relationship between the Drinkwater interests' attitude and conduct and the Kyrwood interests' repudiation of the Settlement Agreement precluded the Drinkwater interests from terminating the agreement. Even if they were not, at the time, repudiating the Settlement Agreement, the Drinkwater interests were plainly not ready, willing and able to perform it according to its terms. 252 The declaration that the Settlement Agreement was terminated by the Drinkwater interests in October 1996 was wrongly made. As I understand the position, the Drinkwater interests do not dispute that, if they did not validly terminate the Settlement Agreement in October 1996, the appeal should be allowed and the orders made by the trial judge should be set aside. It is unnecessary to consider whether the orders sought by the Kyrwood interests in their notice of appeal would be appropriate if the appeal was allowed since the other members of the Court consider that the appeal should be dismissed. END NOTES 1. (1824) 2 Sim & St 174 at 177; 57 ER 311 at 312 per Leach V-C. 2. (1837) 2 My & Cr 192 at 202; 440 ER 613 at 617 per Lord Cottenham LC. 3. (1956) 95 CLR 420, 426-427 per Dixon CJ and Fullagar J. 4. [1976] 1 WLR 989, 995-996 per Lord Wilberforce. 5. (1978) 138 CLR 423, 429 per Stephen. 6. (1987) 8 NSWLR 642) 7. (1938) 38 SR 632 8. supra at 641-642 9. (1931) 45 CLR 159, 166 10. (1968) 71 SR 126 11. supra at 149 12. (1977-1978) 138 CLR 423 13. supra at 431-432 14. (1988-1989) 166 CLR 623, 634 15. supra at 647-648 16. supra at 657-659 17. (1881) LR 6 App. Cas. 251, 263 18. (1896) 7 QLJ 68, 70-71 19. [1984] 3 NSWLR 613 20. (1997) 42 NSWLR 462 21. supra at 479-480 22. (1989) 168 CLR 385, 407-409 23. CPL and International are now in liquidation. 24. It is not clear how long these rights were to continue: see cl. 10 of the Settlement Agreement. 25. It is not clear how long these rights were to continue: see cl. 10 of the Settlement Agreement. 26. See the letter dated 2 August 1996 from ITG, which is referred to below. 27. The trial judge did not hold that this conduct by the Kyrwood interests was itself a repudiation of the Settlement Agreement, and the Drinkwater interests' Notice of Contention did not assert that his Honour should have done so. 28. Although each party had wanted to purchase the other's shares in CPL, they eventually agreed that the Kyrwood interests would purchase from the Drinkwater interests. A "very substantial sum" is involved, although CPL is now in liquidation. 29. (1981) VR 1041. Reference was also made to Stage Club v Millers Hotels Pty Ltd (1981) 150 CLR 535, 569 per Brennan J. 30. As all parties were aware, ITG estimated that the modification of the Australian tool could be completed in about 12 weeks. 31. This is elaborated upon in the letter from the Kyrwood interests' solicitors to the Drinkwater interests' solicitors dated 23 September 1996. 32. A letter dated 28 October 1996 from the Drinkwater interests' solicitors to the Kyrwood interests' solicitors is missing from the appeal record and might not have been tendered. 33. As to what constitutes repudiation, see, for example, Laurinda Ltd v Capabala Park Shopping Centre Pty Ltd (1988) 166 CLR 623. 34. Under the Settlement Agreement, both the Kyrwood interests' obligation under clause 6 and the Drinkwater interests' obligation under clause 12 to arrange and pay for the upgrading of the Australian tool were overdue for performance at 5 September 1996. Compare Morris v Baron and Company (1989) 1 AC 9 and Fercometal SARL v Mediterranean Shipping Co SA (1989) 1 AC 788. 35. Vitol SA v Norelf Ltd (1996) AC 800, 810-811. 36. cf Holland v Wiltshire (1954) 90 CLR 409. 37. Neither party suggested that the Settlement Agreement had been mutually abrogated or abandoned: see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Paal Wilson and Co v Partenreederei (The Hannah Blumenthal) (1983) 1 AC 854. 38. The present case is not concerned with the exercise of a power to terminate which is expressed in the contract or which arises from the non-fulfilment of a condition to which performance of the contract is subject. The source of the power to terminate asserted by the Drinkwater interests is the common law. 39. (1997) 42 NSWLR 462. 40. 42 NSWLR 462, 479F. 41. 42 NSWLR 462, 481C-F. 42. 42 NSWLR 462, 479G. 43. 42 NSWLR 462, 479F. 44. 42 NSWLR 462, 481B; cf 479G. 45. 42 NSWLR 462, 479G. 46. 42 NSWLR 462, 480A. 47. 42 NSWLR 462, 481B-C. 48. 42 NSWLR 462 49. (1989) 2 Lloyd's Law Reports 277. 50. (1989) 2 Lloyd's Law Reports 277, 286, 2nd column, 1st paragraph. 51. 42 NSWLR 462. 52. (1989) 2 Lloyd's Law Reports 277. 53. (1989) 168 CLR 385. 54. 42 NSWLR 462, 478B. 55. (1978) 138 CLR 423. 56. 42 NSWLR 462, 481B-C. 57. (1921) 29 CLR 499. 58. (1978) 138 CLR 423, 434. 59. (1989) 2 Lloyd's Law Reports 277. 60. (1981) AC 909. 61. (1983) 1 AC 854. 62. Kerr LJ 63. (1981) AC 909 64. (1983) 1 AC 854. 65. (1981) AC 909. 66. (1981) AC 909, 986. 67. (1981) AC 909, 987-988. 68. (1983) 1 AC 854 69. (1983) 1 AC 854, 909. 70. (1978) 138 CLR 423. 71. 138 CLR 423, 433-434. 72. 138 CLR 423. 73. 138 CLR 423, 433. See also page 437. 74. 138 CLR 423, 434. 75. (1921) 29 CLR 499. 76. (1989) 168 CLR 385. 77. Gaudron J 78. See also Holland v Wiltshire (1954) 90 CLR 409. 79. 168 CLR 385, 408. 80. 168 CLR 385, 409. 81. 168 CLR 385, 413. 82. 168 CLR 385, 437. 83. 168 CLR 385, 453. 84. See Wight v Foran (1987) 11 NSWLR 470, 487-488. See also Thors v Weekes (1989) 92 ALR 131, 143-144 per Gummow J. 85. 42 NSWLR 462. 86. See, for example, New Zealand Shipping Co v Societe des Ateliers et Chantiers de France (1919) AC 1; Alghussein Establishment v Eton College (1988) 1 WLR 587. 87. Foran v Wight 162 CLR 385, 394 per Mason CJ and cases cited. Revision Reasons Hyperlinked End Notes added - 27/04/07 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.