Whitlock v Brew

Whitlock v Brew - [1968] HCA 71 - HCA 1968 case summary — Zoe

[14]

The first was that the contract of sale was uncertain in respect of two of the conditions contained in it (conditions 5 and 6), and it was therefore altogether void, so that there was no consideration for the payment of the deposit. The second was that, if there were a valid contract of sale, then when the vendor purported to rescind the contract for default, his action was ineffective to produce a rescission, because the notice of default given by him did not conform to the requirements of the contract, and his attempt to rescind amounted to a repudiation which the purchaser accepted, so that the contract thereby came to an end. The third was that, if the contract were valid and had been effectively rescinded by the vendor on account of the purchaser's default, nevertheless there were circumstances associated with the purchaser's mental health at relevant times which made it just that he should be repaid the deposit, and the Court should exercise the discretion conferred by s. 49 (2) of the Property Law Act 1958 to order its return. The action was tried by Gillard J. who rejected each of these contentions, except that cl. 5 was void. But his Honour decided that this did not invalidate the contract. Accordingly the learned judge gave judgment for Whitlock. Brew appealed to the Full Court against the judgment. As stated above, the appeal was allowed and it was ordered that judgment in the sum of $31,200 (the equivalent of £15,600) be entered for Brew. The reasons for allowing the appeal depend entirely on the view which their Honours formed on the question of the validity of cl. 5 of the special conditions and its importance to the bargain into which the parties entered. The conclusion they reached is in substance that cl. 5 is void for uncertainty, that the clause is not severable from the rest of the contract, which is therefore wholly invalid, and as a consequence no consideration for the payment of £15,600 moved from Whitlock to Brew and the sum was recoverable as money had and received to the use of Brew. 1. [1967] V.R. 803, at p. 804.

[17]

Clause 5 is not uncertain in respect of the portion of the land to which it applies. This would be ascertainable by evidence in case of dispute. The clause requires that the lease should contain terms binding the Shell Co., if it be the lessee, to use the portion of the land to be the subject of the lease for the sale of its products which are mentioned. Of course such terms are not sufficient to constitute a lease. The controversial words of the clause are those which say that the lease is also to be "upon such reasonable terms as commonly govern such a lease". The meaning of the word "lease" is not uncertain. But it cannot be held that the words quoted are sufficient to create a legally enforceable promise to grant a lease to the Shell Co. unless you can gather from such words that Whitlock and Brew had a common intention as to what would be the "terms" of the lease. In order to have a lease there must be, in addition to the parties and property, an ascertainable period for its duration, an ascertainable rent, and an ascertainable point of commencement. On behalf of Brew there is an admission that it can be inferred that the lease which Brew covenanted to grant, if accepted by the Shell Co., would be expressed to commence when Brew went into possession under the contract of sale. If Brew observed the covenant and the Shell Co. entered into a lease with him there would be no interruption in the sale of their products. The question is whether the words quoted are sufficient to indicate a consensus between Whitlock and Brew on the duration of the proposed lease to the Shell Co. and rent. I think we should presume that both Whitlock and Brew had in mind when they made the contract that the Shell Co. took leases of premises and under such leases acquired rights in respect of the sale of its products on the premises and that there were "terms" which were "common" to such leases. As Brew contended the words of the covenant were uncertain, the onus was on him of showing that there were no "terms" which were "common" to leases which the Shell Co. took of premises on which to sell its products, or that the company did not take such leases if that was the case. As regards the duration of the proposed lease, it is clear that the purpose of cl. 5, which must have been as well understood by Brew as Whitlock, was to afford some measure of protection to Whitlock in case he incurred liability to the Shell Co. under the indemnity which is mentioned above. The covenant would serve to require Brew to preserve the exclusive rights which the Shell Co. had enjoyed in respect of the petrol filling station on the land, the maintenance of which was very important to Whitlock by reason of the indemnity. In the light of the circumstances known to both parties surrounding the insertion of cl. 5 in the contract it is right, I think, to draw an inference that it was the common intention of the parties that the duration of the lease would correspond with the unexpired period of the indemnity, which Whitlock gave to the Shell Co., just as it is right to draw an inference that the common intention of the parties was that the proposed lease would commence when Brew went into possession under the contract. I think it is erroneous to hold that cl. 5 is incomplete and void on the ground that it does not mention the date of commencement or the period of duration of the proposed lease. It is enough as between Whitlock and Brew that it can be inferred from the circumstances, which explain the insertion of the covenant in the contract, when and for how long the parties may be presumed to have intended. The word "terms" where secondly used in cl. 5 should, I think, be read to include a term providing for the payment of rent by the Shell Co., because such a term could be assumed without question to be common to the leases referred to. The amount of rent is not mentioned. But it is sufficient to make the covenant certain on this matter that the parties expressly agreed that the amount of rent is to be reasonable. The final sentence of cl. 5 is not part of the covenant. The arbitrator is not to complete the covenant or to supplement any defect in it. That is not the purpose for which the arbitrator is appointed. The thing which he is appointed to do is merely to resolve "any dispute between the parties as to the interpretation or operation of this clause".

[21]

The main problem in this case arises not from any uncertainty of language in the document headed "contract of sale" but from the omission of the parties to reach a concluded agreement upon the matter to which special condition 5 is addressed. The clause contains a so-called covenant by the purchaser that immediately upon taking possession of the subject land he will grant a lease of a portion of the land to the Shell Co. of Australia Limited. The portion is defined as that which "is used" (i.e., at the date of the document) for the sale of petroleum, oils and greases and petroleum products of the Shell Co. I am prepared to assume that the vendor is right in saying, as he does, that this description is sufficient to enable the portion to be identified. As regards the term of the lease, it sufficiently appears, I think, that the commencing date is to be the date when the purchaser obtains possession. But upon no other topic does the document indicate what the provisions of the lease are to be. It does say that the lease is to be granted "upon such reasonable terms as commonly govern such a lease", and that would have been enough if evidence had established that for such a lease an ascertainable set of reasonable terms are in common use. But this has not been established, and the result is that the document does not record a consensus ad idem as to the duration of the term, the rent, or anything else except the commencing date and the premises intended to be let. Provision is indeed made for arbitration in the event of any dispute between the parties "as to the interpretation or operation of this clause", and I should have understood this as extending to any dispute as to what terms are reasonable and commonly govern such a lease, if in fact any such terms had existed. But it clearly would not authorize an arbitrator to force upon the purchaser such terms as he (the arbitrator) might think are reasonable and ought commonly to govern such a lease, for to do so would be to alter the contract.

[22]

The problem to which I have referred as the main problem is whether the fact that special condition 5 is, for this reason, of no contractual effect carries the consequence that the whole document is in like case, or whether, on the other hand, the provisions of the document apart from special condition 5 constitute by themselves a concluded contract from which that condition is properly to be considered a separate and severable provision. The document contains a provision specifically entitling the purchaser to vacant possession of the property sold upon acceptance of title and upon payment of £56,000. That sum was by a later provision made payable within forty-five days from the date of the document, the purchaser's liability to pay the balance of the purchase price, £109,000, being deferred for twenty years. Special condition 5, so far as it goes, is a direct qualification of the provision as to vacant possession, for what it sets itself to do is to saddle the purchaser's taking of possession with an immediate obligation to grant a lease to the Shell Co. It is therefore clear on the face of the document that the parties had no intention of agreeing upon a sale which would entitle the purchaser to receive vacant possession without having to grant any lease to the Shell Co.; and it follows that to treat the "contract" as binding though shorn of special condition 5 would be to turn the sale into a different sort of sale from that which the parties contemplated. Courts are of course anxious to hold parties to what they have agreed upon, but there can be no justification for holding them to something they have not agreed upon. In my opinion the decision of the Full Court of the Supreme Court that no concluded contract of sale was made between the parties is correct; and as it is agreed that if that be so the purchaser is entitled to recover the moneys he paid to the vendor under the supposed contract the Full Court's order that judgment be entered for the purchaser on his claim should be affirmed.

[30]

Portion of the land sold is used for the sale of petroleum, oils and greases and petroleum products of the Shell Co. of Australia Limited. The purchaser covenants that he will immediately upon taking possession hereunder grant a lease of that portion of the land sold as is now used for the sale of the abovementioned products to the Shell Co. of Australia Limited upon terms that the said land leased as aforesaid be used by Shell or their sub-tenant or licensee for the sale of such products and upon such reasonable terms as commonly govern such a lease. In the event of any dispute between the parties as to the interpretation or operation of this clause such dispute shall be referred to an arbitrator to be appointed failing agreement as to an arbitrator by the President for the time being of the Law Institute of Victoria and such arbitrators shall arbitrate thereon in accordance with the provisions of the Arbitration Act 1958. Both the learned judge of first instance and the Full Court thought that the omission of this clause to specify the term of, or the rent payable under, any lease to be granted by the respondent to the Shell Co. of Australia Limited meant that it was uncertain. But whilst the former took the view that it was severable from the rest of the contractual provisions the Full Court held that it was not and that the whole contract fell. Acting on the view which he had entertained the learned trial judge entered judgment in his Court for the appellant but an appeal to the Full Court succeeded and that Court directed that judgment should be entered for the respondent for $31,200 (£15,600). It is from this order that the appellant now appeals but there is also an appeal at the instance of the respondent from an order dismissing a motion made on his behalf to the Full Court seeking an amendment of that Court's order to provide for the payment of interest on the amount which the respondent had recovered. The question whether the respondent is entitled to this additional relief is raised also by a cross appeal and we shall defer consideration of these two matters until the substantive point raised by the appellant's appeal has been discussed.

[33]

When a contract contains a number of stipulations one of which is void for uncertainty, the question whether the whole contract is void depends on the intention of the parties to be gathered from the instrument as a whole. If the contract be divisible, the part which is void may be separated from the rest and does not affect its validity. Observations in the same case make it clear that in seeking to ascertain the intention of the parties to a written contract extrinsic evidence may not be resorted to except where such evidence may be called in aid in the interpretation of the written instrument. Clearly enough, it seems to us, it is not to the point to make an independent examination of extrinsic facts, even if they were within the knowledge of both parties, and upon such evidence to conclude that a particular provision was or was not of importance to them or to either of them; the question for determination is the intention of the parties as disclosed by the contract into which they have entered. Neither Phillips Case [1] nor Fitzgerald v. Masters [2] bear any resemblance to the present case. Nor does the case of Nicolene Ltd. v. Simmonds [3] , the headnote of which, as was pointed out in Fitzgerald v. Masters [5] , inaccurately states the effect of the contract then under consideration. Of course, cases may arise where a vague, uncertain or meaningless clause in a contract may simply be ignored. An elementary example of this is to be found in the last clause on p. 2 of the contract in this case. But special condition 5 does not fall into any such category; nor can it be said to be a clause inserted solely for the benefit of one of the parties and capable of being waived by him. It is, in a sense, definitive of the ultimate rights which it is contemplated the purchaser is to get under his contract. The clause provides that the respondent will immediately upon taking possession grant a lease the effect of which will be to deprive him of possession of part of the land in return for a promise to pay rent. Of course, the Shell Co. is in no way obliged to take a lease but it is clear enough from the terms of the contract that it was contemplated that it would. The case is, perhaps, not as clear as the case where a contract for the sale of land is entered into with a reservation to the vendor of an unspecified part (Pearce v. Watts [1] ). Nor are we concerned with the problem that would have arisen in the present case if there had been a conveyance from the appellant to the respondent (cf. South Eastern Railway Co. v. Associated Portland Cement Manufacturers (1900), Ltd. [2] ). The case more closely resembles Duggan v. Barnes [3] , where A agreed to sell land to B for a stated price and B undertook to grant a lease to any person who should purchase A's business. There the court had no difficulty in holding that B's undertaking was a material and inseverable part of the consideration for A's promises. In our view the same conclusion must be reached in this case and the fact that here it is the purchaser, and not the vendor, who is asserting the invalidity of the contract is of no consequence. In our opinion the appellant's appeal should be dismissed. 1. (1925) 36 C.L.R. 60. 2. (1956) 95 C.L.R. 420. 3. [1953] 1 Q.B. 543. 4. (1925) 36 C.L.R., at p. 72. 5. (1925) 36 C.L.R. 60. 6. (1956) 95 C.L.R. 420. 7. [1953] 1 Q.B. 543. 8. (1956) 95 C.L.R., at p. 427. 9. (1875) L.R. 20 Eq. 492. 10. [1910] 1 Ch. 12. 11. [1923] V.L.R. 27.

[38]

The motion to the Full Court was dismissed substantially on the ground that that Court had no power to make an order for the payment of interest in the absence of an appropriate application being made to it and that neither the claim for interest in the statement of claim nor the reference to interest in the notice of appeal constituted "an application within the meaning of s. 78". In our view this conclusion was correct. The form of s. 78, as it now stands, differs materially from the form in which it stood prior to 1962. Under the old section the court at the hearing or the jury on the trial of any issue or of an assessment of damages might, if they thought fit, allow interest to the creditor "upon all debts or sums certain hereafter recovered in any action". The express requirement that an application should be made was absent for the words "upon application" found no place in that section, or, for that matter in s. 79 though, no doubt, if a summing up omitted to direct the jury in accordance with the section and no objection was taken by the plaintiff he could not thereafter complain. Sections 78 and 79 were, however, replaced by three new sections in 1962 - s. 78, s. 79 and s. 79A. By each of these sections the power to give interest in the various cases mentioned, whether tried with or without a jury, was committed to the judge alone. The power, however, was expressed throughout these sections to be exercisable "upon application". (See ss. 78 (1), 79 (1) and (2) and 79A (1).) And when the terms of s. 78 (1) are scrutinized it is seen that the power to give interest under that section is to be exercised, if it be exercised at all, at the hearing and it is to be exercised upon application in respect of debts or sums certain recovered. The language of the section naturally supposes an application being made after "the recovery" of the debt or sum certain and that the power to give interest will, if it is exercisable at all, be exercised at the hearing. This being so, it cannot be said that the claim in the statement of claim or in the notice of appeal to the Full Court constituted an application within the meaning of the section. Accordingly we are of opinion that the Full Court's decision on the motion was right and that the cross appeal and the appeal from the order made on the motion should be dismissed.

At a glance

Court

Decision date

Before

Source

Judgment (38 paragraphs)

Parties