Municipal Council of Sydney v Australian Metal Company Limited

The Municipal Council of Sydney (appellant) appealed from a decision of Starke J. concerning a contract with the Australian Metal Company Limited (respondent) for the supply and erection of a steam turbo-alternator. The dispute arose from the breakdown of the machinery, first in June 1914 and again shortly after repairs were made in April 1915. The parties had entered into a supplementary agreement in January 1915 to replace defective parts, with the Council agreeing not to claim damages for the initial breakdown. The appeal to the Full Court of the High Court was necessitated by new facts and legal contentions, including a proclamation by the Governor-General and a declaration by the Attorney-General under the *Trading with the Enemy Act 1914-1916* and the *Enemy Contracts Annulment Act 1915*.

The central legal issues before the High Court were whether the supplementary agreement of January 1915 and the original contract of March 1913 were rendered null and void by the operation of the *Trading with the Enemy Act 1914-1916* and the *Enemy Contracts Annulment Act 1915*. Specifically, the court had to determine if the respondent company, by virtue of the Attorney-General's declaration, constituted an "enemy subject" or was involved in "trading with the enemy" as defined by the legislation, and if so, what effect this had on the contractual arrangements between the parties.

The Court held that the proclamation and declaration, taken together, meant that any transaction with the respondent company after July 1915 was prohibited as trading with the enemy. Consequently, the respondent was deemed an "enemy subject" under the *Enemy Contracts Annulment Act 1915*. The Court found that the supplementary agreement of January 1915 was therefore null and void. While the original contract of March 1913 was also affected, the Court noted that sub-section 5 of section 3 of the *Enemy Contracts Annulment Act 1915* preserved certain rights and obligations under that contract. The Court concluded that the basis upon which the case was tried before Starke J. was fundamentally altered by these legislative provisions, requiring a re-examination of the issues.

The Court reversed the decision of Starke J. and remitted the issues, with certain modifications to reflect the impact of the legislation, for a rehearing before a Full Court. The costs of the first hearing and the appeal were to be costs in the cause, to be determined by the Court on the retrial.