Hudson Investment Group Ltd v Australian Hardboards Ltd

Hudson Investment Group Ltd (Hudson) and Australian Hardboards Ltd (AHB) were parties to a dispute before the High Court of Australia. The core of the disagreement concerned the interpretation and enforceability of a deed of settlement and release entered into between the parties. Hudson sought to enforce certain provisions of this deed, while AHB resisted this enforcement, alleging that the deed was void or unenforceable due to a fundamental mistake.

The High Court was required to determine whether a mutual mistake, alleged by AHB to have been made by both parties regarding the true nature of the underlying debt that the deed was intended to resolve, rendered the deed void *ab initio*. Specifically, the court had to consider whether the mistake was so fundamental as to vitiate consent and therefore the validity of the deed.

The High Court held that the deed of settlement and release was not void for common mistake. Gleeson CJ and Gummow J reasoned that the doctrine of common mistake applies where parties enter into a contract under a shared assumption of fact or law that is false, and this assumption is fundamental to the contract. However, in this instance, the parties had entered into the deed with full knowledge of the dispute and the potential for uncertainty regarding the precise amount of the debt. The deed itself was designed to resolve this very uncertainty by agreeing on a fixed sum. Therefore, the alleged mistake was not about the existence of a fact or law that underpinned the contract, but rather about the legal consequences or the precise quantum of a debt that the deed was intended to settle. The court found that the parties had not made a mistake as to the fundamental basis of their agreement; rather, they had deliberately chosen to resolve their dispute by agreeing to a specific settlement sum, accepting the risks associated with that resolution.

The High Court dismissed the appeal and affirmed the decision of the Full Federal Court.