Berowra Holdings Pty Ltd v Gordon; Brighton Und Refern Plaster v Boardman

The High Court of Australia considered appeals from decisions of the Supreme Court of New South Wales in two separate matters, *Berowra Holdings Pty Ltd v Gordon* and *Brighton Und Refern Plaster v Boardman*. Both appeals concerned the interpretation and application of section 18 of the *Contracts Review Act 1980* (NSW) (the Act), which permits a court to refuse to enforce a contract or a provision of a contract if it is found to be unjust. The primary dispute in *Berowra Holdings* involved a loan agreement and a guarantee, while *Brighton Und Refern Plaster* concerned a building contract.

The central legal issue before the High Court was the proper approach to determining whether a contract or a provision thereof is "unjust" within the meaning of section 18 of the Act. Specifically, the Court had to consider the scope of the court's power to review contracts for injustice, the factors that may be taken into account in such a review, and the circumstances in which a court should exercise its discretion to refuse enforcement or vary the contract.

The High Court held that section 18 of the Act requires a two-stage inquiry. First, the court must determine whether the contract or a provision of it is unjust in the circumstances relating to the contract at the time it was made. This involves considering the matters enumerated in section 9(2) of the Act, which include the bargaining power of the parties, the relative economic circumstances of the parties, and whether the contract was subject to undue influence or unfair pressure. Second, if the contract is found to be unjust, the court must then decide whether to exercise its discretion to refuse to enforce the contract, declare it void, vary its provisions, or make any other order it deems just. The Court emphasised that the focus of the inquiry is on the circumstances at the time the contract was made, although subsequent events may be relevant to the exercise of the discretion.

In *Berowra Holdings*, the High Court found that the primary judge had erred in finding the guarantee unjust, and accordingly, the appeal was allowed. In *Brighton Und Refern Plaster*, the Court upheld the Supreme Court's finding that the building contract was unjust and that the discretion to vary the contract had been properly exercised, and therefore, that appeal was dismissed.