Re Continental C & G Rubber Co Pty Ltd - [1919] HCA 62

IN RE THE CONTINENTAL C. AND G. RUBBER COMPANY

PROPRIETARY LIMITED. Contract-Effect of outbreak of war-Contract to supply goods-Progress payments-

Failure of consideration-Right to recover-Mistake of fact or of law-Trading with the Enemy Act 1914-1916 (No. 9 of 1914-No. 20 of 1916), secs. 8, 9H- MELBOURNE,

Enemy Contracts Annulment Act 1915 (No. 11 of 1915), sec. 3 (5)-Enemy Con. tracts Cancellation Act 1915 (Vict.) (No. 2603), sec. 3 (5). SYDNEY,

In April 1914 the A company entered into a contract to construct certain machinery for the B company, and to erect it on land of the B company. The contract provided for the completion, erection and delivery of the whole of the machinery by 1st December 1914, and for progress payments in respect of the construction of the machinery to be made from time to time on the

27 CLR 195

certificate of the B company's engineer. The A company proceeded with the construction of the machinery, and certain progress payments were made before 4th August 1914, and others on 11th August, 28th September and 22nd December 1914 respectively. None of the machinery was ever delivered to the B company or erected on its land. After the commencement of the War, it appearing that substantially the whole of the shares of the B company were RUBBER Co. held by, and that its business was carried on mainly for the benefit or on behalf of, enemy subjects, an order was, on 13th November 1914, made by the High Court, pursuant to sec. 8 of the Trading with the Enemy Act 1914, appointing C to be controller of the B company until the end of the War or until further order. That order remained in force until 13th June 1918, when an order was made by the Minister for Trade and Customs, under sec. 9H of the Trading with the Enemy Act 1914-1916, requiring the business of the B company to be wound up, and appointing C controller to conduct the winding up. After 22nd December 1914 nothing was done either by the A company, the company or C towards terminating or completing the performance of the

Held. that the contract became null and void as from the commencement of the War, and, therefore, that the A company was not entitled to prove in the winding up of the B company for any sum by way of com- pensation or damages for the failure of the latter company and C to perform the contract that neither the B company nor C was entitled to recover from the A company the whole or any portion of the sum paid as progress payments and that neither the B company nor C was entitled to the machinery constructed by the A company in pursuance of the contract. SUMMONS.

A summons was taken out in the High Court on behalf of the Continental C. and G. Rubber Co. Proprietary Ltd. and Frederick George Wilson, its controller, for the determination of certain questions arising…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1919] HCA 62
Decision Date: 21 November 1919

CaseChat Overview and Summary

The case concerned a summons taken out by the Continental C. & G. Rubber Co. Pty Ltd and its controller, seeking determination of questions arising from the winding up of the company's business. The dispute centred on a contract entered into in April 1914 between the company and W. Anderson & Sons Pty Ltd for the construction and erection of machinery, with a completion date of 1 December 1914. Progress payments were made, but the machinery was never delivered or erected. Following the outbreak of World War I, it was discovered that the company was controlled by enemy subjects, leading to the appointment of a controller under the *Trading with the Enemy Act 1914*. The High Court was asked to determine the validity of the contract, the admissibility of a claim by the contractors for compensation and loss, the entitlement to the machinery, and the recoverability of progress payments.

The legal issues before the court were whether the contract was dissolved by the outbreak of war or by subsequent legislation, whether the contractors were entitled to prove in the winding up for compensation or damages for the company's failure to perform the contract, whether the company or its controller could recover progress payments made to the contractors, and whether the company or its controller was entitled to the machinery constructed under the contract. The court considered the impact of the *Trading with the Enemy Act 1914* and the *Enemy Contracts Annulment Act 1915* on the contractual rights and obligations of the parties.

The court reasoned that the contract became null and void from the commencement of the War, irrespective of whether this was due to common law or statutory provisions. The *Enemy Contracts Annulment Act 1915* declared enemy contracts void from the commencement of the war, with exceptions for rights and obligations relating to goods already delivered or acts already performed. The court found that no further rights had accrued to the contractors beyond the progress payments already made, and therefore, their claim for compensation or damages was dismissed. Regarding the progress payments, the court held that they could not be recovered on the grounds of failure of consideration or mistake, as the payments were made under a contract that both parties believed to be binding, and any mistake was one of law, not fact. Furthermore, the court determined that as the contract was entire and had not been fully performed, neither the company nor the controller had any legal claim to the machinery.

The court declared that the contract became null and void as from the commencement of the War, that the controller should not admit the proof of debt submitted by the contractors, that neither the company nor the controller was entitled to obtain delivery of the machinery, and that neither the company nor the controller was entitled to recover the sum of £6,000 paid as progress payments. Costs were awarded to be paid by the controller out of the company's assets.

Orders