Choppy waters for party seeking to invoke termination clause
01 November 2022
Another reminder of the importance of getting termination right. Although the notice sent talked about anticipatory repudiatory breach, in fact the breach relied on was of an express provision which required actual, rather than a prospective, breach.
Kawasaki formed a joint venture and ceased supplying its subsidiary, K Line Europe. Consequently, K Line could not perform its service agreement with Kemball [Ed: that's a lot of Ks]. Kemball has already unsuccessfully sued Kawasaki for inducing K Line’s breach. This time Kemball was suing K Line for breach of contract.
Kemball terminated on the basis that K Line had committed a “wilful, persistent or material breach”. Crucially, Kemball did not actually seek to terminate for wrongful repudiation at common law, nor did it invoke a provision for termination where the other party “threatens to cease to carry on business”.
The court found that Kemball could only rely on the contractual termination mechanism if there was actual, rather than prospective, breach when giving the notice of termination. This was the effect of the word “commits” as defining the trigger for the giving of a notice. The position would have been different had Kendall relied on the provision where a party “threatens to cease” business. The court found that where the parties intended to confer a power to terminate for prospective as opposed to present or past conduct, they adopted language that made that explicit.
Judgment: Kemball v K Line