BuildLaw Issue 26 December 2016 | Page 19

Decision

The Court of Appeal upheld the trial judge’s finding of wrongful termination by DCT. In making its decision, the Court of Appeal discussed the concept and application of repudiation, stating it “is a serious matter and is not to be lightly found or inferred”. The Court of Appeal considered that while renunciation can be by words or conduct, the threshold for conduct to amount to renunciation is high and must communicate renunciation of either the contract as a whole or a fundamental obligation under it. Gleeson J held that a “party must demonstrate its intention to no longer be bound by the contract or state that it intends to fulfil the contract in a substantially inconsistent manner with its obligations, for that party’s conduct to constitute a renunciation of its contractual obligations”.

Vinergy International (PVT) Ltd v Richmond Mercantile Ltd FZC [2016]

Background

In 2008, Richmond Mercantile Limited FZC (Richmond) and Vinergy International (PVT) Limited (Vinergy) entered into a long-term supply agreement for the supply of bitumen by Richmond to Vinergy. 39 shipments took place, however in 2012 Richmond terminated the contract following a number of disputes over allegations that Vinergy had committed three breaches amounting to repudiation of the contract. The repudiatory breaches alleged by Richmond were breach of the exclusivity clause by secretly contracting with another supplier for bitumen, failure to pay an invoice for an extended period, and failure to pay demurrage for certain shipments.
The termination clause of the contract permitted either party to terminate on “failure of the other party to observe any of the terms herein”, provided that a remedy period of 20 days minimum was given by the aggrieved party for any breaches capable of being remedied. Richmond did not give notice in accordance with the contract, asserting that the common law right to terminate for repudiatory breach was not limited by any clause of the contract, and also that the termination clause only applied to breaches capable of remedy. In response, Vinergy claimed Richmond’s termination was unlawful and repudiatory itself, given the termination was not conducted in accordance with the contract.
When the matter came before the Arbitration Tribunal, the Tribunal found Richmond had lawfully terminated the contract. Vinergy appealed to the High Court.

Decision

The High Court upheld the Arbitration Tribunal’s decision that Richmond’s termination was lawful and was not hindered by the termination clause in the contract. In reaching their decision, the High Court considered whether Richmond could “rely on an unhindered common law right to terminate [the contract] by reason of a repudiatory breach so as to completely bypass the notice and remedy requirements in the termination clause”. In finding the termination clause did not limit Richmond’s common law right to accept a