DTR Nominees Pty Ltd v. Mona Homes Pty Ltd
138 CLR 42319 ALR 223
(Judgment by: Murphy J)
DTR Nominees Pty Ltd
v Mona Homes Pty Ltd
Judges:
Stephen J.
Mason J.
Jacobs J.
Murphy J.Aickin J.
Subject References:
Contract
Judgment date: 26 April 1978
Sydney
Judgment by:
Murphy J
The appellant/vendor ("D.T.R.") and the respondents/purchasers ("Mona Homes") were parties to a land development contract. During the course of performance, the parties asserted completely opposed interpretations of D.T.R.'s obligation under the contract. The obligation was (as Mona Homes contended) to develop the land by one subdivision into thirty-five lots. D.T.R. claimed that it was entitled to develop the land in stages, and in breach of its obligations had obtained registration with the council of a subdivision of nine lots. Mona Homes described D.T.R.'s asserted view as one which no reasonable person could honestly hold.
Mona Homes rescinded and claimed damages. D.T.R. treated this notice of rescission as a repudiation and itself rescinded and claimed damages.
In proceedings brought by Mona Homes in the Supreme Court of New South Wales for a declaration that they had validly rescinded (D.T.R. made a cross-claim for a declaration that it had validly rescinded), the major point of contention was the construction of the contract. The primary judge, Wootten J. upheld D.T.R.'s contentions on the meaning of the contractual obligations and upheld its claim to rescind. This was reversed by the New South Wales Court of Appeal which accepted Mona Homes' contentions and upheld their claim to rescind as valid. In my opinion, Mona Homes' interpretation of the contractual obligations is correct. It is unnecessary to add to what is said in the joint reasons of Stephen, Mason and Jacobs JJ.
The majority of the Court of Appeal held that D.T.R. had broken an essential term of the contract and referred to Jordan C.J.'s statement in Tramways Advertising Pty. Ltd. v. Luna Park (NSW) Ltd. (1938) 38 SR (NSW) 632, at pp 641-642 (which was approved in Associated Newspapers Ltd. v. Bancks (1951) 83 CLR 322 , at p 337 ):
"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 a 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, at p 377 (131 ER 1160, at pp 1162-1163); Bettini v. Gye (1876) 1 QBD 183 , at p 188; Bentsen v. Taylor Sons & Co. (No. 2) [1893] 2 QB 274 , at p 281; Fullers' Theatres Ltd. v. Musgrove (1923) 31 CLR 524 , at pp 537-538; Bowes v. Chaleyer (1923) 32 CLR 159 ; Clifton v. Coffey (1924) 34 CLR 434 , at pp 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."
This "test" is so vague that I would not describe it as a test. It diverts attention from the real question which is whether the nonperformance means substantial failure to perform the contractual obligations. The inquiry into the motivation for entry into the contract is not the real point. Numerous purchasers may enter into similar contracts with widely different motives. What does it matter if Mona Homes would have entered the contract even if the terms were as D.T.R. claimed them to be? However, Mona Homes did not found their entitlement to rescind on breach by D.T.R. of an essential term. Rather they claimed that what D.T.R. did, and what it said it would do, in purported performance, amounted to a repudiation of the contract. This is a question of fact. The history has been set out in the joint judgment.
Mona Homes were entitled to a performance by D.T.R. of its obligations. It is irrelevant whether D.T.R.'s asserted interpretation of its obligations is one that no reasonable person could honestly hold; in this respect this case is to be distinguished from cases which involve a contract of service or other continuing relationship where such considerations may be crucial. Once the proper construction of the obligations is established, it is clear that D.T.R.'s partial performance and its intended performance was not what was promised and not substantially what was promised. D.T.R. has insisted through to this Court on its right to perform in a way which was not on the proper interpretation a performance of its obligations. At the time of the notice of rescission by Mona Homes, it had become apparent from D.T.R.'s conduct and assertions that D.T.R. did not intend to perform the contract substantially according to its correct interpretation (even if this was through an honest but mistaken view by D.T.R.). Mona Homes were then entitled to be relieved from their obligations. They were entitled to rescind as they did and to claim damages.
The appeal should be dismissed.