Amalgamated Television Services Pty Ltd v Television Corporation Ltd

[1969] HCA 50

HIGH COURT OF AUSTRALIA

Barwick C.J., McTiernan, Menzies and Windeyer JJ.

AMALGAMATED TELEVISION SERVICES PTY. LTD. v. TELEVISION CORPORATION LTD.

(1969) 123 CLR 648

14 October 1969

Contract

Contract—Agreement in writing—Construction—Duration—Express term for three years' operation "at the least" and for withdrawal on notice—Not of indefinite duration.

Decisions

October 14.
The following written judgments were delivered:-
BARWICK C.J. Groups of companies controlling television stations in Australia entered into an agreement for the co-operative control of the buying and the allocation amongst them and their television stations of television programmes produced outside Australia. The question whether the agreement came to an end at the expiry of three years from the date of its commencement or whether it continues in indefinite operation subject only to the ability of any of the parties to withdraw from the agreement on two years' written notice has arisen between some of these parties. The answer is to be found in the meaning of an article in the agreement which is as follows :

" ARTICLE VIII DURATION OF THIS AGREEMENT AND COSTS

1. This agreement shall operate at the least for a period of three years from the date hereof during which period no party may withdraw from it or cease to be bound by its obligations and it may be extended from time to time by the unanimous decision of the parties for such period or periods as they may unanimously decide. 2. A party wishing to withdraw from this agreement upon or at any time after the expiration of three years from the date hereof must give two years' prior notice expiring upon or at any time after the expiration of three years from the date hereof of its intention so to do and at the expiration of such notice (unless the same shall have been withdrawn in the interval) it shall cease to be a party to this agreement and to be bound by its obligations except as provided in cl 3 of this article. Such notice of intention to withdraw shall be in writing and shall be given to all other parties and to the chairman. 3. A party whether or not it withdraws from this agreement at the conclusion of three years from the date hereof or subsequently thereto after having given the requisite notice in accordance with cl 2 of this article shall remain bound for a period of seven years from the date of the expiration of its notice of intention to withdraw from this agreement to observe the provisions of article V hereof. 4. The costs of the preparation and completion of this agreement payable to Messrs. Dudley Westgarth and Co., including their disbursements in relation thereto, the Chairman's and the Deputy Chairman's remuneration and expenses and all other costs and expenses incurred in the operation of this agreement (but excluding travelling and other expenses of the representatives of the parties incurred in attending meetings of the Committee and any costs incurred by the parties individually in relation to this Agreement and its operation) shall be paid in equal shares by the parties hereto." (at p651)

2. No party up to the present has given a notice of withdrawal under cl. 2 of the article and no agreement has been reached by the parties extending either the operation of the agreement or the period of three years mentioned in cl. 1 of art. VIII. In a suit in the Supreme Court of New South Wales, brought by parties to the agreement against the appellant, the learned Judge in Equity has held that the agreement remains binding on the parties after the expiration of three years from its signature; that is to say, his Honour has held that the agreement did not expire on 23rd March 1969, that being the end of the period of three years from the date of the agreement. (at p651)

3. The elements in art. VIII which have given rise to difficulty have been the presence of the words "at the least" in the first line of cl. 1 and the presence of cl. 2 but particularly perhaps the presence of the words "upon or" in the second line of cl. 2. The competing constructions are, that of the appellants, that the article means that the agreement is to operate for a term of three years certain and thereafter for such period or periods upon which the parties unanimously agree, and that during that period of three years no party is entitled to withdraw from the agreement : that is to say, the agreement must in any event remain binding on all the parties for the whole of a term of three years. On this construction, cl. 2 is to operate in the event that the parties either before or after termination of the term of three years agree upon the extension of that term for some further period. The appellants suggest that an operation which can be given to cl. 2 in so far as it refers to "upon or at any time after the expiration of three years" is the case where there may have been an agreement in the first year of the agreement's operation to extend the agreement for a period beyond the expiry of the three years in which case a party who though it had agreed to the extension decides to withdraw at the end of the term of three years could do so by giving a notice within the term of three years : or a notice to withdraw may be given in anticipation of a possible extension of the period of operation of the agreement. (at p651)

4. The respondent's construction is that cl. 1 does not set a term of three years for the operation of the agreement but merely fixes a period during which no party may withdraw from the agreement and provides for an extension of that period by unanimous agreement from to time. On this view, the word "it" in the expression "it may be extended" does not refer to the agreement but to the period of three years. This construction of cl. 1 of the article is said to be assisted by cl. 2 because cl. 2 in this submission contemplates that the agreement will be running on after the expiration of three years and provides for the giving of notice expiring on the termination of the three years, as well as thereafter. (at p652)

5. It cannot be doubted that the meaning of the article is not unambiguously clear. Indeed during argument the respondents seemed to depart from the construction which I have already attributed to them and to take the stand that the words "at the least" perform the function of preventing the agreement from expiring at the end of the first three years and of ensuring that it is an agreement of indeterminate duration from which parties might withdraw under cl. 2 but not otherwise free themselves of its obligations. On this view, no meaning is to be attributed to the words "it may be extended" and no effect in construction of the article is to be given to them at all. In short, this alternative submission was that art. VIII is to be read as if the words "it may be extended etc." were not in cl. 1 of the article. (at p652)

6. It may readily be conceded that a provision in a contract which concedes that its term may be extended by unanimous agreement of the parties is not a source of right. Parties would have that right without there being any such clause. But to say that is not to deny that the provision has legal significance in the construction of the whole document. The article cannot be construed by eliding these words from cl. 1 altogether. They are there and, in my opinion, they are critically significant in the construction of the article. (at p652)

7. It seems to me that the choice in the construction of the article is between reading the word "it" in cl. 1 as referring to the agreement and its operation or to the period of three years during which no withdrawal may take place. If the expression "it may be extended" is referable to the agreement and its operation then the words "at the least" are no more than emphatic of the stipulation that the agreement is to endure without withdrawal for at least three years. The draftsman had in mind, on that view, that he was intending to provide that no withdrawal might take place during the initial three years but for a right to withdraw therefrom, thereupon and thereafter. It would seem to me quite natural that the draftsman should use the words " at the least" when he chose to express the term of the agreement by the expression "this agreement shall operate". I would myself find no difficulty in concluding that the expressions "this agreement shall operate at the least for a period of three years" and "it may be extended from time to time by the unanimous decision of the parties for such period or periods as they may unanimously decide" provide for a duration for the agreement of three years which would only be extended if the parties unanimously agreed on that course. In default of an agreement to extend, the agreement would expire by effluxion at the end of three years. (at p653)

8. On the other hand, if "it" in cl. 1 of the article is read as referring to the period of three years during which no party may withdraw from the agreement, it becomes necessary to depart from the grammatical sense of the clause. Quite clearly, the withdrawal, said to be from "it", is a withdrawal from the agreement - not from a period of three years. Also the obligation by which the withdrawing party is to cease to be bound are those of the agreement, identified as "its" obligations. To read "it" after the conjunction with what precedes as a reference to the period of years and not to the agreement is to make a considerable departure from the grammatical sequence. Further, if the clause is read as permitting an extension of the period during which no withdrawal from the agreement may take place, it would be necessary to remould cl. 2 of the article so as to make the reference to three years in that clause to read in each place where it appears "three years or such other period as the parties may from time to time determine". For example, if the parties in the first year were to agree to extend to six years the period during which there could be no withdrawal it would not be possible to give effect to the words of cl. 2 as they now stand, contemplating as they do that an effective notice may be given expiring at the end of the period of three years. (at p653)

9. I find insuperable difficulty in reading the provision for extension as a reference to the period during which no party may withdraw. Not only does a grammatical reading of cl. 1 demand otherwise but I cannot think that a draftsman instructed to make the agreement indeterminate and to provide for the period during which no party might withdraw to be susceptible of lengthening from time to time would have expressed his instructions in the form in which the article now is. (at p653)

10. In my opinion, cl. 2 is not the paramount clause of the article. A construction which treated the power of extension as referable to the period of withdrawal would, it seems to me, make cl. 2 the paramount clause. If it matters, though I am not much impressed by the importance of the heading, such a construction would indeed make the clause as a whole deny the heading because it would not really be providing directly for the duration of the agreement. Neither the existence nor the exercise of the right of withdrawal of one of many parties to an agreement controls the duration of the agreement in a proper use of that expression though of course the withdrawal of all but one of those parties will make the operation of the agreement impossible. On the other hand, if cl. 1 is read as a dominant clause in the sense I have indicated, namely, that it provides for a period of operation of three years with a power thereafter to extend the term of operation of the agreement, the heading can easily sit with cl. 2. That clause as its terms suggest is then but a subsidiary machinery clause providing a method by which one or more parties at the same or at different times may cease to be bound by the obligations of the agreement. (at p654)

11. In my opinion, the proper way to read art. VIII is that the agreement will endure with all its parties bound for three years but that it will be capable of extension by unanimous agreement for a further period or periods. A notice of withdrawal may be given during that three years to operate at the end of three years or at any subsequent time, i.e., during any period for which the operation of the agreement may have been extended. If no agreement is made to extend the operation of the agreement beyond the period of three years, the agreement then expires by effluxion. (at p654)

12. In my opinion, the appeal should be allowed. (at p654)

McTIERNAN J. I am of the same opinion as the Chief Justice and concur in his Honour's reasons. (at p654)

MENZIES J. This case must, I think, be decided simply upon the construction of the documents in question without the aid of presumptions such as have been the subject of consideration in cases relating to the termination of contracts of indefinite duration such as Llanelly Railway and Dock Co. v. London and North-Western Railway Co. (1873) 8 Ch App 942; (1875) LR 7 HL 550; Winter Garden Theatre (London) Ltd. v. Millennium Productions Ltd. (1948) AC 173; Martin-Baker Aircraft Co. Ltd. v. Canadian Flight Equipment Ltd. (1955) 2 QB 556; and In re Spenborough Urban District Council's Agreement ; Spenborough Corporation v. Cooke Sons &Co. (1968) Ch 139 I have found the agreement under consideration, and art. VIII thereof particularly, full of difficulties but I have eventually reached the conclusion that, in the circumstances, it did expire on the 22nd March 1969. I accept the reasons of the Chief Justice as leading to this conclusion. (at p655)

2. Accordingly, I think that the appeal should be allowed. (at p655)

WINDEYER J. I agree that this appeal should be allowed. (at p655)

2. I have felt oppressed, as the learned trial judge was, by what he called the "lack of harmony" between cll. 1 and 2 of art. VIII of the agreement. I agree in his view that the clauses must be read together, and as far as possible as a connected whole. However, it seems to me that, so read, cl. 1 is the dominant provision, and that cl. 2 does not cut down or qualify its operation determining the duration of the agreement. It seems to me that cl. 2 must be read as having effect if, within the period of three years stipulated by cl. 1, the parties unanimously agree to extend the duration of their agreement beyond three years. Clause 2 would then enable a party which had agreed to the extension but had afterwards regretted its decision, to escape by giving the necessary notice. (at p655)

3. The case is far from clear. The arguments which we heard demonstrated that that at all events is so. But in the end it is a question of the construction of the agreement. I agree generally in the analysis that the Chief Justice has made. I am thereby relieved from myself commenting in detail on the verbiage and syntax of the provisions in question. I wish only to make two observtions. (at p655)

4. The first is that I cannot read the agreement as one of indefinite duration terminable in respect of a particular party on two years' notice of withdrawal. If that were the true construction, it would be necessary to consider the bearing, in the circumstances, of decisions to which my brother Menzies has referred and of basic questions which arise in the case of a contract of unspecified duration - a matter very recently discussed in 85 Law Quarterly Review, 392. (at p655)

5. My other observation is that, saying that the agreement ceased to operate at the expiration of three years, does not, in the view I take, mean that any then accrued obligations or rights or restrictions under it came to an end, or that any covenants then operative ceased to have effect. I agree that the injunction whereby the present appellants were restrained from thereafter negotiating for the purchase of, or purchasing, what are described in the deed as "designated programmes" cannot stand. But saying that does not free the appellants from obligations or restrictions which have attached in respect of programmes which were purchased and allocated during the said period of three years. (at p656)

Orders

Appeals allowed with costs. Decretal Orders of the Supreme Court of New South Wales set aside and in lieu thereof order that the suits be dismissed with costs.