Year of Decision: 1982
Jurisdiction: high_court_of_australia
Key Words:
Breach of contract
Landlord\'s losses for remainder of term


A lessee of the respondent was constantly late with payments of rent, but its actions did not allow a conclusion that it was unwilling to comply with its obligations under the lease. The respondent exercised its right under cl 9(a) to forfeit the lease and re-enter the premises. This right was expressly given “without prejudice to any action or other remedy which the Lessor has or might or otherwise could have for arrears of rent or breach of covenants or for damages as a result of any such event”. The respondent then sued the appellants, guarantors of the lessee, and in the Supreme Court of New South Wales recovered the arrears of rent and damages assessed as its loss on rents for the remainder of the term of the lease


On appeal to the High Court of Australia, Held The respondent was entitled to recover the arrears of rent, but was not entitled to the damages since:— (i) Clause 9(a) did not indicate any intention to give to a lessor who exercised the right to re-enter the same rights as would have been available to him if he had accepted a repudiation of the contract or had rescinded it on the ground that the lessee had committed a breach of an essential term. The rights of the lessor were limited to the recovery of arrears of rent and damages for breaches and other events that occurred before re-entry. (ii) It was not possible to conclude from the evidence that there was a fundamental breach of the contract which would have entitled the respondent to rescind it under the general law and to recover damages for total breach.


Repudiation is an ambiguous word and is used in various senses. We are, of course, concerned only with a case in which it is admitted that there was a valid and binding contract. Such 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 (Freeth v Burr (1874) LR 9 CP 208 at 213 ) or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way (Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at 72 ; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 351 ). In such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance, and sue for damages

The difference in the current case

The present case was not one of this kind. There is nothing to suggest that the lessee had any intention other than to fulfil the contract, according to its terms, to the best of its ability. However, if one party, although wishing to perform the contract, proves himself unable to do so, his default in performance will give the other party a right to rescind the contract, if the breach goes “so much to the root of the contract that it makes further commercial performance of the contract impossible”

the breach goes “so much to the root of the contract that it makes further commercial performance of the contract impossible

Mahoney JA said that he thought that the right to terminate for fundamental breach should be seen as, in principle, distinct from the right to terminate for repudiation. For present purposes, it is immaterial whether repudiation and fundamental breach are treated as separate categories, for in either case the innocent party can rescind the contract and recover damages to compensate him for the failure to perform the contractual obligations.   Relevant Cases  Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 at 64 . There is high authority for treating such cases as a form of repudiation of the contract: Suisse Atlantique Societe d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 at 421–2 ; Federal Commerce v Molena Alpha [1979] AC 757 at 778–9 . In Honner v Ashton [1979] 1 BPR 9478 at 9490

Interpretation of clause 9(a)

In my opinion these words refer, distributively, to the three different sorts of circumstances in which the provisions of cl 9(a) take effect. First there is the case in which the rent has been unpaid for 14 days; in that case the lessor can recover the arrears of rent. The second case is that in which the lessee commits or suffers to occur any breach or default in the performance of the covenants, and in that case the remedy preserved is for breach of covenants. Thirdly, events may occur (such as liquidation and bankruptcy) which do not amount to breaches of covenants. It would appear that it is to such events, and to no other, that the words “damages as a result of any such event” refer. It is true that the word “events”, where it first occurs in the clause, refers to the non-payment of the rent and to the breaches of covenants as well as to the other events mentioned, but if it had this wide meaning in the phrase “any such event”, the reference to “breach of covenants”, at least, would be redundant. If this view of the clause is correct the only remedy of the respondent in the present case was to recover arrears of rent.
Case No:HCA 47
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