Hirsch v Zinc Corporation Limited [1917] HCA 55

Hirsch v Zinc Corporation Limited [1917] HCA 55 - HCA 1917 case summary — Zoe

[113]

concentrates which could be brought there, it was argued that there was a dislocation of the market which destroyed the basis of the contract. The dislocation of the market is evident enough, but why should that destroy the basis of the contract? The parties elected a certain method of ascertaining average prices. They might have chosen any other method, and would, I should think, have had to abide by it. In considering this branch of the case it is necessary to put aside the character of the defendants as alien enemies. Con- sidering the contract, then, as if it were one between two sets of British subjects, it is manifest that the adoption as a ratio decidendi of, such a rule for determining whether goods delivered were to be paid for or not, the latter being the result unless normal conditions were in the main sustained, would have the most widespread disas- trous effects upon the business transactions of the whole British Empire. The principle, if it became one, would not be confined to contracts which imported Public Ledger quotations. It would extend to almost anything in which the outbreak of war seriously altered the position of persons under contractual obligations to pay for goods received. For really it means that contracts for goods the prices of which are to be ascertained by methods which leave prices fairly steady in peace, but subject them to much enhance- ment or diminution or fluctuation as a result of war, are not in that result to be regarded as binding upon those who have undertaken to pay. In other words: "I have made my outlook relying on peace ; war has entirely upset that outlook. Therefore the other party is to suffer, not I. I therefore do not owe him for his goods." And then the speaker, laughing in his sleeve, might say: " Yes, and how nice it is to keep the goods." That seems to me to point to a very preposterous contention. Every contract made in peace may, in a sense, be said to have been made on the assumption that peace is likely to last. But the contention has only to be stretched a very little and it will amount to an argument that, because war seriously upsets prices, sellers must suffer but buyers may escape. If for the sake of argument the contention were allowed to rest on the ques- tion of a world's market, then was there no world's market on the outbreak of war, or did Germany as embracing by possession the

[120]

to. It consists of the Commonwealth Act No. 11 of 1915 (Enemy Contracts Annulment Act) and the Victorian Act No. 2603 (Eneniy Contracts Cancellation Act). By these Acts, this contract is declared to be null and void, as from the commencement of the War, as regards all rights and obligations thereunder, except what I may shortly describe as rights and obligations as to past acts. Except as to such rights and obligations the contract is annulled, even if under the contract otherwise it would not be so, And if we were dealing with the question presented to the English Court (1), that is, as to future performance, our answer would at once be that we have not to inquire whether on ordinary principles the contract is operative during the War, or is suspended, or is dissolved, because Parliament has said "null and void," that is, "dissolved." But there are no words declaring that rights and obligations as to past acts are to be good or bad; nothing to say that they are to be good and operative, even if otherwise they would not be so apart from the enactment. They are simply excluded from the statutory declaration of annulment as to future rights and obligations ; in other words, they are neither the better nor the worse for that partial annulment of the contract. Consequently the past deliveries are to be dealt with according to the effect which the contractual provisions relating to them would have if the legislation had not been passed. In any event, as the Enemy Contracts Annulment Act only annuls "tights and obligations " existing at the date it was passed (24th May 1915), and as at that date there were no existing rights and obligations under this contract as to future performance, and there had not been any since the commencement of the War, itis hard to see how the Act has affected this contract in any way whatever. If the obligations as to future performance had been then suspended merely, it would have annulled them, and that is really the class of contract the Act was intended to affect. But, as it is, this contract is untouched by the Act. In any case the statutory annulment of the one set of rights and obligations is by force of the exception to be disregarded when considering the other set of rights and obligations which are to be operative or suspended or dissolved (1) (1916) 1 K.B., 541.

[136]

(i.c., contravention of public interest), "be so made the subject 0 legal insurance in direct terms by a British underwriter." And t learned Chief Justice put into actual words the implied pr which he said should be taken as engrafted in the insurance ; observed, what is very material here, that more instances migh be put of similar implied exceptions arising out of the general term of the contract. Loyalty should be presumed; in other w crime should not be imputed where it is reasonably possible to avoid it: and, therefore, in assuming the innocence of the pa and the consequent validity of agreement, the first position is reached that the 17th clause did not include war as a suspensory circumstance, during the continuance of which clause 3 of the contract of 1910 required the sellers to abstain from selling concentrates, and to retain them for the benefit of the purchasers though alien enemies. It is, however, a well established rule that into every contract is read the implied condition that it is subject to the paramount and lawful requirements of the State. r instance, it is subject to any paramount requisition for pub purposes (In re Shipton, Anderson & Co. and Harrison Brother: Co. (1)). In other words, it is read as containing a necessari implied condition to that effect. It is also necessarily subject ti the operation of a declaration of war. War is a "lawful state," as Lord Wrenbury says in British and Foreign Marine Insurance v. Samuel Sanday & Co. (2); that is, it is a state established by and consequently all contracts must conform tc it. Lord Wrenbury says : - '' The declaration of war amounts to an order to eve subject of the Crown to conduct himself in such a way as he i bound to conduct himself in a state of war. It is an order to ev militant subject to fight as he shall be directed, and an order t every civilian subject to cease to trade with the enemy." A stipu tion reserving to the subject perfect freedom to render obedi to this paramount obligation must be read into every British tract as verba subaudita. Another observation of Lord Wrenbury (3 is illuminative, and goes to the root of the matter. His Lor says : - ' The common law was not a new actor which came into

[139]

same, namely, that in one state of circumstances (namely, peace) the adventure was and in another state of circumstances (namely, war) the adventure was not legal." The only novelty then was a new state of facts. And the real question is how do the parties stand contractually in the presence of the new state of facts. From the legal considerations already stated, it is right to say that every contract is presumed to contain an implied condition that on the outbreak of war it shall not be performed so as to trade with the enemy. As I view the matter, it is the proper statement and recognition of the rule of law which introduces such a condition into a contract, that forms the key to the present problem. Every document, whether a Statute, or a will, or a contract, or a letter, contains not merely what its words actually express, but also what they necessarily imply. Necessary implication is as much part of the contents of a document as its express statements. It is only on that basis that all the admittedly implied conditions above mentioned arise, and in the result it is by ascertaining and applying the necessarily implied conditions of this particular contract that the rights of the parties here are to be determined. Lord Loreburn and Lord Parker, in their judgments in F, A. Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co. (1), have written out in the clearest characters the relevant principle. Indeed, all the learned Lords in that case agreed on the principle which was enun- ciated in the earlier case of Horlock v. Beal (2), although the differences. of opinion in the later case exemplify the difficulty of applying the admitted principle to given circumstances. But the principle itself is undeniable. Lord Loreburn (3) besides stating the principle observes that " No Court has an absolving power," of course, at common law. So that while on the one hand no new contract is created, so on the other the Court cannot relieve from the obligations of a contract if they in fact exist. Lord Haldane's observations at p. 406 are relevant to this phase, and at p. 407 are important as to the effect of an indefinite interruption of performance. Lord Parker (4) states the principle applicable in these terms : -

[142]

is, of course, impossible to imply in a contract any term or condit inconsistent with its express provisions, or with the intention of th parties as gathered from those provisions," Then His Lordship refers to " The nature of the contract " as material for this purpose, also the stage to which a contract has advanced - that is, before execu- tion, or after it has been partly performed. And other matters irrelevant, however, to this case are mentioned. But the principle is that the search is not for some extraneous circumstance as such, but for some implied stipulation which, if found, the Court regards as part of the contract, and then the contract is construed accord- ingly. That principle this Court, in the recent case of Gelling Crespin (1), applied on the authority: of Horlock vy. Beal (2), the later case of the Tamplin Steamship Oo. (3) not being cited. Tt has been applied by the Court of Appeal in the late case of Scottish Navigation Co. v. W. A. Souter & Co. (4), and again in the still later case of Metropolitan Water Board v. Dick, Kerr & Co. (5). Now, that is simply taking, as in any ordinary case, the actual words | of the contract, applyifig them to the subject matter, reading them by the light which parties had (McLeod vy. McNab (6) ; Carter v. McLaren & Co. (7)) - and including in that their presumed knowledge of what the law requires in time of war - in other words, by the aid of the surrounding circumstances (Inglis v. Buttery (8) and Yorkshire Insurance Co. v. Campbell (9)), and thereby ascer- - taining the necessary implication which the parties are to be taken to have introduced into their compact. And by a "necessary implication" is meant what Bowen L.J. described in The Moorcock (10), where he said: "' The law" raises "an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have." Mellish L.J., in The Teutonia (11), after sayin;

[152]

whole, or whether it is a stipulation which applies variously to 1 different parts of the contract, or to different stages of the cont according as at the moment the War occurs it is executory, | completely executed on one side, or part-executed, and if executed then according to the extent of part-execution. answer I give is as follows. Assume the parties when making contract contemplated the possibility of this war, what must as business men, and as honest and fair-minded business men, have implicitly agreed to, on the facts before us, in order to mi the exigencies of such an event? To my mind, the neces implication guarding the best interests of both was substant inthisform: " The instant the War occurs, the law shall be observe and all obligations as to future performance shall be exting unless permitted to proceed substantially as provided; but as past deliveries, as they are from the terms of the contract quite separate from the rest of the contract, they are to be separat considered, and shall be paid for according to the terms of contract applicable to -past deliveries, provided always those te can be observed without breach of law, but without regard whether the future obligations continue or not." In other words, there was no implied understanding that the whole contract if part-executed must stand or fall together. That is to say, implication of the contract as to extinction regartling future deliveries which must involve either continued intercourse or continued unlawful contractual obligation, or such limited permissible int course as substantially alters the consensual provisions, is not necessarily attached to past deliveries which may not. The basic assumption of the appellants that the contract dissolved in toto is therefore erroneous. Substitute for that tion the proposition that the contract, in accordance with its o contemplation, is dissolved only so far as its uninterrupted perform ance is inconsistent with a state of war, and the subsequent reswmpl of performance is inconsistent with the substance of its terms pro

[156]

That brings me to the next question: What was unlawful in perfecting the plaintiffs' right to the price of the goods? The position at the outbreak of war as to the ore sued for was this. it had all been delivered. It all had to be paid for. A debt, the exact amount of which had yet to be ascertained, was owing by the appellants to the respondents. That is the dominant fact on this branch of the case. It was assumed during the argument that at the outbreak of war there was no debt, because it was not then established whether the 90 per cent. of the pro formd invoice was too much, or not enough, or exactly right. That is an error. The 90 per cent. does not affect the question we are at this point considering. The concentrates when delivered had, under the terms of the contract, to be paid for, and so the fact of a debt was fixed, though the amount of that debt payable to the sellers remained to be ascertained on the basis provided or (I add in appellants' favour) not at all. In the meantime a pro formd invoice, that is, not the real invoice, was agreed for - purely provisionally ; and 90 per cent. of the amount stated in that was to be paid - purely interim and provisionally, and not, as final payment even pro tanto. It was really a delivery of so much money in return for goods, pending the ascertainment of the debt by the receipt of the mail advices showing "the exact average market price" and subject to adjust- ment between the amount of the debt when ascertained and the money provisionally paid. As to the first 50,000 tons, the ascer- tainment of the debt was to be arrived at by the sellers reckoning values when they received by mail the stipulated London Public Ledger relating to spelter, and Sharp & Wilkins's Prices Current relating to silver. They were then to find the average market value of the concentrates for the proper period, and to adjust the debt with the provisional payment accordingly, and send in the final invoice. The final invoice showing the actual amount of the debt might thereby, when compared with the pro forma invoice,

[171]

The fundamental and all-embracing principle laid down in The Hoop (2) in 1799 was formulated in accordance with a number of prior decisions. One of these was The William (3), decided by the Privy Council in 1795, on appeal from the Vice-Admiralty Court of St. Christopher. Lord Mansfield presided, and Sir Richard Arden, then Master of the Rolls, was also present. In that case the evidence showed the course of trade between Great Britain and the French Island of Guadaloupe was that the British merchants supplied slaves, and took payment in the following years in sugar for the debt. The claimants proved that they had taken sugar during the war in payment for a debt on account of slaves sold in the previous year. Thus all the " traffic" in the narrower sense had been concluded prior to the war, and nothing remained but the simple debt, and, as to that, nothing was done in the way of intercourse but receiving payment from the alien enemy. At pp. 215-216 of the report of The Hoop the arguments are set out, and it seems quite clear that receiving payment of a debt by unlicensed intercourse with an alien enemy was, in the opinion of the Privy Council, an unlawful trading with the enemy. Kent C. in Griswold v.Waddington (4) says: - ''The law that forbids intercourse and trade must equally forbid remittances and payments. On any other supposi- tion, those propositions would be inconsistent with each other." And he states a decision to that effect. In modern times I need not go beyond referring to the judgments of Lord Reading C.J. and Warrington L.J. in Halsey v. Lowenfeld (5). Observations made in some cases cited as to the legality at common law of payment by an alien enemy must be read with such qualifications and implications as are necessary to make them consistent with the rule thus definitely established. The mere question of payment apart from intercourse is not material here. A debtor under a Victorian contract, as the parties by clause 23 have declared this to be - so far as possible, - is bound to seek out his creditor and

[181]

itself, it is relieved of any duty of deciding whether an act of "payment " accepted from an alien enemy, illegal at common law because an act of trading with the enemy, is within the thirdly enumerated class, notwithstanding it is not a breach of the firstly enumerated class - both being independently stated. The matter is serious, and to my mind not very clear. The English Act is very different. It includes the first class mentioned in our Act; it of course has no mention of our second class; and as to the third its language expressly avoids the very difficulty referred to. That language is "which at common law or by Statute constitutes an offence of trading with the enemy." At common law, trading with the enemy in any way whatever is not an offence, so far as it is permitted by the Sovereign. Consequently, the permission in the Proclamation is effective to cut out payment within its terms from the statutory offence referred to. And the English Act further adds a proviso in these terms: " Provided that any transaction or act permitted by or under any such proclamation shall not be deemed to be trading with the enemy." Powerful arguments might be used either way. On the one hand, it might be conjectured that Parliament did not intend to penalize anyone who followed the permission in the King's proclamations. It certainly would be extremely painful for a Court to hold anyone liable in such cireum- stances, and the Court would do its best to avoid such a construction if judicially possible. Conjecture as to what Parliament intended to say, of course, does not suffice. On the other hand, the Common- wealth Parliament deliberately altered the verbiage of the English Act. It cut out the word " offence," and it cut out the protecting proviso. If the third class does not cover anything included in the first, neither does the second, and that might limit the power of the Governor-General as to his proclamation. I do not express or suggest any opinion whatever as to the effect of the Act in this respect. I merely indicate the difficulty, and say that before I would declare, or indeed form, any opinion on the matter, I should desire to hear some argument upon it, and in the present instance I should desire to have some assistance from counsel on behalf of the Crown. The Act is certainly stringent, but is passed for the

[183]

public safety and welfare. It may be the stringency of lang was intentional and on a proper construction should be held leaving it to the operation of sub-clause 6 of sec. 3 to moderate It may be that it was accidental and, properly read, should not b taken literally. But if not compelled to determine the matter, think it would be inexpedient if not dangerous to do so now. I do not think there is any necessity to determine it. Lea counsel for the appellants, in taking the course they did, acte most properly. With the strongest temptation to urge every poi possible in their clients' favour, they, finding themselves unabl conscientiously to present any supporting argument based on th enactment, candidly and honourably said so. That, however, in circumstances relieves this Court from deciding it, and for th reason : - No option was in fact exercised, that is, no communication - in fact took place, and therefore no illegal act was committed (Griswold v. Waddington (1); see Evans v. Richardson (2) ). time for doing it has, however, passed for ever, and therefore th ' act of illegality, if such an act be illegal, can never be committed. The respondents do not rest their case upon the act or the necessity for the act. It is the appellants who rely upon its non-availabili but who expressly refrain from urging on their own behalf any argument based on the Statute. They do urge non-availability by reason of the common law, and that is met, if met at all, by the - terms of clause 7 of the Proclamation. To that I now address myself. s A permission by the Sovereign to engage in trade with the enemy is an act of high public policy, and intended for the public benefit. In Flindt v. Scott (3), in 1814, the Court of Exchequer Chamber, spe ing by Thomson C.B., said that licences to trade are now constr favourably to trade, "in order to effectuate the benefits intended to result from them." Two prior cases, decisions of Lord Bllen- borough, deserve notice. One is Usparicha v. Noble (4), in 1811, wl the learned Chief Justice said : - ' The Crown, in licensing the impliedly licenses all the ordinary legitimate means of attai that end. . . . For the purpose of this licensed act of tradin

At a glance

Court

Decision date

Before

Source

Judgment (251 paragraphs)