Waterhouse Jnr & Anor v Unilever Australia Limited

[1993] HCATrans 337

!t

.

• ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S69 of 1993

B e t w e e n -

JOHN KNIGHT WATERHOUSE JNR, JORACILLA MANUFACTURING PTY LIMITED

Applicants

and

UNILEVER AUSTRALIA (PTY)

LIMITED

First Respondent

and

FABERGE AUSTRALIA (PTY) LIMITED

(Reciver Appointed)(In

Liquidation)

Second Respondent

and

Waterhouse	1	28/10/93
MASON CJ BRENNAN J
TOOHEY J

LABORATOIRES DE COSMETOLOGIE

DE FRANCE PTY LIMITED (Receiver

Appointed)

Third Respondent

Application for special leave
to appeal

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 28 OCTOBER 1993, AT 12.45 PM

Copyright in the High Court of Australia

MR C.A. SWEENEY, QC:  May it please the Court, I appear for

the applicant.	(instructed by Allen Allen &
Hemsley)

MR T. SIMOS, QC:  May it please the Court, I appear with my

learned friend, MR D.P. ROBINSON, for the

respondent. (instructed by Freehill Hollingdale &

Page)

MASON CJ:	Mr Sweeney.
MR SWEENEY:	Your Honours, may I hand up a list of

authorities, together with the authorities

themselves.

MASON CJ: Why do we need authority? This is a question of

fact, is it not?

MR SWEENEY: In my respectful submission, it is not,

Your Honour. Before I take Your Honours to the

authorities, may I outline the basis upon which

special leave is sought? Central to the

application and to the decisions below is the

meaning of the expression "agreed net

asset/liability value" for it was in those terms

that the consideration was expressed to be

embodied.

The trial judge held that there was no

intention to create legal relations and

principally, for that reason, he dismissed the

proceedings.

In the Court of Appeal, the view of the

majority, Mr Justice Mahoney and the President,

appears to have been that there was an intention to

create legal relations, and the applicant was

unsuccessful in the Court of Appeal because the

Waterhouse 28/10/93

court was unanimous in the view that the expression

to which I just referred could not, in the

circumstances, avail the applicant of a sufficient

degree of certainty, having regard to this

ancillary issue, Your Honour, which was an issue of

fact and upon which we were unsuccessful, namely,

whether there had been, on the facts, an antecedent

agreement reached between the parties about the

value of the net assets and liabilities.

The reason why it is an application which

raises important points is that it involves a

question of whether the approach taken in Hall v

Busst is correct or whether the approach which

appears to be taken in the American cases is to be

preferred. And to try and encapsulate something

that really will not fit in this space in one line,

it is this, Your Honours: it is the submission

that I make that once it is found that there was an intention to create legal relations, the court will

not permit the profferor of the term that is

intended to embody the agreement about price to be

heard to say that it is uncertain except in the

most extraordinary circumstances of which this case

is not contained. Now, may I develop that shortly

in a few minutes, but that is, in my submission,

the main issue?

The way in which the matter arises starts with the comments of the trial judge at the application

book, page 28, where His Honour, at about line 4,

expressed the view that it was difficult to accept

that a complex commercial transaction like this

could have been intended by the parties to have

been the subject of a binding letter agreement. In

the light of that finding, which did not survive

the view of the Court of Appeal, His Honour gave no

weight to Mr Potter's evidence about what had

happened at the meeting.

Then the same thesis comes through at the foot of page 28 when His Honour refers to the finding

which he made that, "This was an extremely complex

transaction", and that the subsequent workings

showed:

that it was unlikely in the extreme that two

commercial entities would agree to bind

themselves by the terms of a letter which

failed to deal or to deal adequately with a

number of contentious matters.

His Honour went on to construe the actual letters

against that background and to decline to find an

intention to create legal relations.

Waterhouse 3 28/10/93

In the course of that analysis, in the middle

of page 27 of the judgment, application book

page 28, His Honour refers to his conclusion, at

line 15:

agreement on many matters had to come through

the auditors.

So, just pausing there, at first instance, this was

a case which was disposed of by the court on the

basis that it was a substantial commercial
transaction; it was not possible to conceive that

the parties intended the documents to be legally

binding. The actual dollar amount of the price had

to be worked through by the auditors and,
therefore, that supported the conclusion that there

was no intention to create legal relations.

In the Court of Appeal, a different approach

was taken. Before I take Your Honours to the judgments, may I take Your Honours to the two

critical letters which are set out in the

application book at page 56, and they are embodied

in that form in Mr Justice Mahoney's judgment.

Against a background of an earlier course of dealings, one of which was that there was an

inquiry from the Waterhouse side about whether an

earlier proposal constituted a firm offer, Allen

Allen and Hemsley wrote the letter which is set out

at application book 56. At the foot of the page it

expresses increasing concern about the inconclusive

course of negotiations. Over on page 57, it says:

Your clients and their auditors have had

access to financial records -

for several months; the worldwide transaction has

been completed. Paragraph numbered (4):

no offer has been made to Mr Waterhouse.

Indeed ..... your client expressly stated that -

an earlier -

document ..... did not constitute an offer.

Paragraph (5):  "There has been a want of authority

on your side." The next paragraph refers to the

delay and the letter finishes, over on page 58:

Our client therefore requires ..... either ..... a

formal offer -

or a press release saying that the destabilizing

negotiations have come to an end. So, that

elicited the letter set out on application book,

Waterhouse 4 28/10/93

page 58, addressed to Mr Waterhouse. At page 59,

there is the critical term, line 15:

agreed net asset/liability value plus a

goodwill payment of $6.2 million.

BRENNAN J: Before you get to that, is this letter said to

be a contract? Is that the - - -

MR SWEENEY:	Yes, this is the contract.
BRENNAN J:	How can it be a contract if it is expressed to

be conditional upon the negotiation of

documentation, et cetera?

MR SWEENEY:  That point did not loom large in the Court of

Appeal.

BRENNAN J: Whether it loomed large or not, it is part of

the text of it which requires construction, does it

not?

MR SWEENEY:  Of course, I accept that, Your Honour. The

answer that I make to Your Honour's question is

that it is in that category of agreements intended

to be binding then and there but which contemplate

subsequent formal documentation in the Masters v

Cameron sense.

Now, as I said, Your Honours, at line 15 there

is the formulation of the consideration.

BRENNAN J: Is that answer consistent with line 10 on

page 59, "offer is conditional upon that advice

being satisfactory to UAL"?

MR SWEENEY:  Did Your Honour say line 10?

BRENNAN J: Line 10 on page 59.

MASON CJ: Yes: 

final taxation advice, and this offer is

conditional upon that advice being

satisfactory to UAL.

MR SWEENEY:	It is always a question in such a case whether, as a matter of construction, this document was
intended to be legally binding or if this document
was intended merely to defer the moment of legal
commitment until the subsequent formal
documentation.  The answer that the Court of Appeal
made on this document is that this document was
intended to be legally binding. That is a finding
which we have - - -

Waterhouse 5 28/10/93

BRENNAN J: Legally binding to what? If one finds that

promises which are made in the document which was

intended to be legally binding are expressed to be

promises conditional upon certain things, where

does one get a legal binding?

MR SWEENEY:	Your Honour, in my submission, if Unilever had wanted to say in the Court of Appeal that it was
entitled to escape the effect of this document
because there was no subsequent formal contract, it
is clear from the judgments that it would have been
unsuccessful on that point. I think that is really
all I can say to Your Honour in direct response to
that.

The letter goes on, importantly, in line 35,

to say:

we are unable to accurately calculate the impact of this proposal on you personally without current balance sheets for the group

companies.

The implication being that when the current balance

sheets became available, Mr Waterhouse would be

able, by applying the current balance sheets to the

formula offered at line 15 for the price, to

determine the precise monetary amount being

offered. And then, importantly, the letter goes

on:

This offer remains open for your acceptance

until 5.00 pm on 30 November 1989. To accept

this offer please sign and return the enclosed

copy of this letter.

And if Your Honours would go back to application

book, page 10, Your Honours will see from the copy

of the actual letter included in the reasons of the

trial judge, that the form of the letter had typed

on the bottom of it:

The above copy is accepted on behalf of

Faberge Australia (Pty) Limited and John

Waterhouse.

As Your Honours know from the other facts, in fact,

that acceptance was signed.

Waterhouse 6 28/10/93

MASON CJ: 

Mr Sweeney, we will adjourn until 2 o'clock at

this stage but before doing so, we will receive the
order that counsel in the earlier case want us to

make in connection with a stay.

AT 1.00 PM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

UPON RESUMING AT 2.01 PM:

MASON CJ: Yes, Mr Sweeney.

MR SWEENEY:  May I go back to the question that Your Honour

Justice Brennan asked me just before the

adjournment on the significance of "subject to

further documentation"? The subject is dealt with

by Mr Justice Mahoney at application book, page 48,

where His Honour said, at about line 18:

It was the purpose of the letter of

22 November 1989 and of the meeting of

30 November 1989 that at least a consensus be

reached between the parties.

And His Honour referred to the terms of the letter

and so on.

It is possible to envisage a case in which

parties intend to achieve a consensus which,

if intended to constitute a legally binding

contract, would be effective as such, but they

intend that that consensus shall not be

effective as a legally binding contract. They

have, in such a case, the independent

intention that the consensus shall not have

legal effect.	I do not think that the present
was such a case.	The parties intended that,

if possible, there should be a consensus.

There was not, in my opinion, any intention

that, if a consensus was arrived at which

could constitute a legally binding contract, that consensus should yet not have effect as

such.

His Honour referred to the evidence of Mr Nash to

contrary effect.

But I do not infer that he intended that, if

they arrived at a consensus which could

constitute a legally binding contract, it

Waterhouse 7 28/10/93

should yet not operate as such. The evidence

did not show that the parties formed such a

negative intention or that they thought that

what they had done operated by reference to

such an intention.

Therefore the present case turns upon whether the consensus which was arrived at

was, in its terms, capable of constituting a

legally binding agreement.

So, the only issue that we faced and lost,

from the point of view of the judgments in the

Court of Appeal, was whether the documents were capable of constituting - - -

MASON CJ: But that is an overstatement, is it not, because

neither Mr Justice Kirby nor Mr Justice - - -

TOOHEY J:  - - - Sheller.

MASON CJ: Yes, made such a specific statement as that.

MR SWEENEY:  Your Honour, there was a collection of matters

in Mr Justice Kirby's judgment but, in my
respectful submission, what His Honour said at
application book 40 makes it clear, in the opening
part of his judgment, that His Honour was, on this
aspect, in agreement with Mr Justice Mahoney. At

page 40, line 4, the President said:

Plainly, these are indications of an attempt

to achieve a level of precision and certainty

that are the usual hallmarks of a legally

enforceable agreement. To such considerations

must be added the objective fact that the

parties later agreed to two relevant

alterations to the letter of 22 November 1989.

They thereby signalled the importance which

they attached to its precise terms. Faberge,

before the date and time specified for the

return of its offer, endorsed its acceptance.

So, I would respectfully submit, Your Honour,

that when Mr Justice Kirby dealt later with - and

this is at application book, page 44 - the matters

that His Honour there set out, he was doing so in

the context of a finding of uncertainty, not a

finding of want of intent to create legal

relations. That is put beyond doubt, I submit, by

line 30, at application book 43. His Honour said:

In my view there are too many elements of uncertainty and imprecision -

so -

Waterhouse 28/10/93

BRENNAN J: Is there any dichotomy between those two things?

MR SWEENEY: There might be, perhaps, Your Honour, because

it is my submission that once the court finds a

clear intent to create legal relations, the court

will look at a provision relating to price - in

particular, for that is what this case is about -

with the clear purpose of saving the provision,

giving it effect, if it is at all possible;

whereas, if one is looking at the question of

intention to create legal relations or not, the

Court will examine all the circumstances, giving each appropriate weight rather than straining to

give effect to any particular aspect or giving any

particular aspect more importance than any other.

BRENNAN J: But to say that there is an intention to create

legal relations is only a shorthand for saying that

the legal relations that they intended to create

are those which are the subject of the contractual

consensus.

MR SWEENEY:	Yes.
BRENNAN J:	No doubt, parties who approach a complex

situation might reach agreement on only some

matters. Well then, one of two things has to

happen: either, that as to the extent of their

agreement, there is a contract which is intended to

be binding upon them or, if the other matters which

are unresolved are critical to the conclusion of

the agreement, then there is none.

MR SWEENEY:  If the matter which is not resolved is

incapable of being resolved without further work of
the parties and it is, as Your Honour says, a

critical matter, then that is the end of the

contract. But if there is an intention to create

legal relations, if the profferor of the document,

by all the circumstances, made it plain that he

acceptance, then the court will be very slow to	intended this to be an offer capable of binding	find that there pertains for the benefit of that
profferor an uncertainty in the language which he
has used which will enable him to escape.

This is put very well by one of the judges in

one of the American cases that I had copied for

Your Honours. It is behind tab 7 of our

authorities and it is at page 526 of the report in

Vigano v Wylain, a judgment of the US Court of

Appeals for the Eighth Circuit. There the court

said, at page 526, in the second column:

Wylain further argues that as a matter of

law the alleged contract is void for want of

mutuality due to a clause in the order form

Waterhouse 9 28/10/93

for individual homes which states that if

production has not started within 30 days of

receipt, Wylain might change the price or

refuse shipment entirely. The meaning of such

clause is hotly debated by the parties.

Plaintiffs argue this was a price freeze

clause while Wylain contends the clause means
exactly what it says.

And here is the relevant passage: Although the clause is not ambiguous on its

face, we are inclined to accept plaintiffs'

interpretation of it. The alternative would be to decline to enforce the clause entirely

as an attempt by an artful draftsman to create

the illusion of a contract without the

substance of one. This we could not

countenance, given the superior bargaining

power of Wylain and the fact that Wylain

prepared the document.

That approach is directly relevant to the facts of

this case. The critical letter was drafted by a

leading Australian law firm for Unilever to send to

my client. I will not trouble Your Honours with

the detail of this, but the evidence showed that in

the course of its drafting amendments were made so

as to insert the expressions "offer and acceptance"

and as Your Honours recall, the form in which the

letter actually went had the provision at the foot of the letter for the offeree to accept the offer.

Now, if the point on which this case turned in

the Court of Appeal is correct, it means that

Unilever, by artful drafting, put my client in the

position where it was proffering what the Court of

Appeal held to be a contractual document, except

for the uncertainty problem, which my client

accepted and which Unilever could then say, "Oh

well, there wasn't sufficient certainty about the

price." The point that I am making is this,

Your Honours, that when such a fact situation comes

before a court charged with the obligation of

determining contract or no and certainty or no, the

appropriate test to apply is whether the
consideration, although not described in dollar

terms, is capable of ascertainment.

The approach which the American courts appear

always to have taken on this question is the

approach espoused by Mr Justice Windeyer in one of

the two dissenting judgments in Hall v Busst. Hall

v Busst was a decision which, Your Honours recall,

came up on appeal from Queensland. Both at first

instance and in the Full Court of the Supreme Court

of Queensland, the contract was upheld. It was

Waterhouse 10 28/10/93

actually an option back to a vendor in respect of

an offshore Queensland island and the High Court,

by majority, held that the option was unenforceable

because the provision, which is summarized at
page 212 of 104 CLR - the judgment is at the back

of our hand-up folder - at about point 5:

The purchase price relating to such

option shall be the sum of Three thousand one

hundred and fifty-seven pounds four shillings

to which shall be added -

and these were the critical words, Your Honours -

the value of all additions and improvements to

the said property since date of

purchase ..... and from which shall be

subtracted the value of all deficiencies of
chattel property and a reasonable sum to cover

depreciation -

so the issue was whether the expression "the value"

was capable of sufficient certainty. The Court

held that it was not. Justices Kitto and Windeyer

dissented. Mr Justice Windeyer pointed out - and

could I just make a comment before I take

Your Honours to the key passages in the judgments.

There is a second question about Hall v Busst and

it is this:  a good deal of the reasoning tends to

suggest that Hall v Busst is applicable only to

contracts for the sale of land. It has

subsequently been applied without observance of

that limitation, if it is a limitation - and the

present case was one which is a good illustration of its having been cited and acted upon as though

it applied to all contracts.

Your Honours will see that some of the

reasoning strongly suggests that it applies only to

contracts for the sale of land and, indeed, at one

point it may be fair comment to say that the

reasoning owes something to the special character

of the land as a Queensland island and, therefore,

something regarded by at least one of

Their Honours as being intensely difficult of objective valuation.

In any event, Mr Justice Windeyer dissented,

pointing out that there was a strong body of

authority for the proposition:

that an agreement to sell land at a fair

valuation is a concluded and valued contract -

page 237 point 3. His Honour goes on at 237

point 6:

Waterhouse 11 28/10/93

if parties, intending to make a concluded

contract of sale, agree that the sale shall be

at a fair valuation of the property sold, they

have fixed the price by reference to an

ascertainable fact - the fair value.

And there is more at 238 point 4, down to about

point 6.

One of the considerations which moved

Their Honours in the majority was the concept that

it was difficult to envisage a contract where there

could be no breach unless and until a court had

determined what the price was. Mr Justice Windeyer

dealt with that by adopting the approach that that

was in fact not a correct assessment of a contract
where the price was not fixed but was

ascertainable. What His Honour did was he drew a

distinction between the ascertainment by the Court

subsequently of what a reasonable price was and the

certainty of the subject-matter and drew attention

to the fact that for example, at page 245, at the
top of the page, such a contract would found an

action for a declaration. It was not therefore

correct to characterize such a contract as being

one, the parameters of which were unidentifiable

until a court had passed upon what was a fair

price.

In the course of his reasoning, His Honour, at

244, at the last paragraph on the page, drew

attention to the law in the United States which

appears to have been in 1960 as it appears to be

now, that a contract to pay a fair price is

routinely enforced and regarded as certain.

Mr Justice Kitto also dissented and at page 227

His Honour said, at the foot of the page:

I do not regard as correct the suggestion

that stipulations such as those here in

question reserve their subject-matter for

future agreement, with the result that a

concluded contract has not been made. The

parties have agreed upon every matter which

they intend their contract to cover.

And this responds to Your Honour Justice Brennan's comment a few minutes ago:

Whatever is agreed upon by reference to

reasonableness is covered by a final consensus

ad idem, and if a subsequent agreement be made

substituting specific amounts, or times, or

whatever it may be, for those which in the

first instance were agreed upon by description

only, that will take effect as a variation.

But the fact that there is room for such a

Waterhouse 12 28/10/93

subsequent agreement, and even a business need

for such an agreement as an alternative to

litigation, does not argue that the

description is uncertain in meaning, or that

there is no concluded contract. Lord Wright's

words in relation to agreements stipulating

for reasonable times may be recalled: "Such

matters may require, as the performance of the

contract proceeds, some consultation and even

concessions ..... but there is no uncertainty

involved because, if there eventually emerge

differences between the parties, the standard of what is reasonable can, in the last resort,

be applied by the law -

The strength of the two dissents has grown

with the way in which the courts have developed a

strong tendency to uphold contracts over the 30 or

so years since the judgment in Hall v Busst was
given and, in my respectful submission, the
approach adopted by the courts in the United States

ought to be preferred. If that approach is

preferred, then so far from the judgments in the

Court of Appeal having gone the way they did, what

Their Honours would have done is they would have

given meaning to the formula used for identifying

the consideration, "agreed net asset/liability

value", which would have saved the contract.

BRENNAN J:  What is the meaning of "agreed" for which you

contend?

MR SWEENEY:  The meaning?

BRENNAN J: Yes, for which you contend?

MR SWEENEY:  The meaning for which I contended in the Court

of Appeal - and I need to take,Your Honour to this

because it is fulcrum to my argument - was that in

the context of the discussions which occurred over

that weekend, the term applied so as to allude to	an antecedent agreement which had been made about
the manner of valuation and that, broadly speaking, was this: the books of Faberge had been kept on an
historical cost basis. There was discussion
between Faberge and Unilever's representatives, the
respective auditors, about the appropriateness of
some of the accounting principles that had been
applied.

So, the meaning of the expression for which I

contended in the Court of Appeal was that the
valuation was to be done on the basis of the book
value, as it was on historical cost, with an

appropriate adjustment wherever necessary to give

effect to accepted accounting practices. Now, of

course, that argument which depended in substantial

Waterhouse 13 28/10/93

measure upon factual findings was lost in the Court

of Appeal.

Mr Justice Mahoney considered, in a passage

that I will take Your Honours to, whether

His Honour ought to examine the question of whether any other meaning could be given to it and decided

is capable of any meaning, looking at it

not to do so. In my submission, before expression

as a piece of language in a document without regard

to the evidence about negotiations, then it ought

to be given that meaning by the Court.	It is
capable of such a meaning.	Mr Justice Mahoney's

judgment clearly suggest that His Honour was

conscious that it is capable of such a meaning. In

the circumstances, it was error for His Honour not

to have given effect to the provision.

Now, it bears this meaning, Your Honours, on a

stand-alone documentary basis: it bears the

meaning that the parties agree that the purchaser

should pay the net value of assets over liabilities

to the vendor. That figure to be agreed and, in
the absence of agreement, by necessary implication,

that figure to be determined according to proper
principles. That means, in turn, that this case is

in precisely the line of country dealt with by Hall

v Busst. In the end, the fall-back effect of that
provision is that the purchaser commits to pay a

fair and reasonable price for the net value of the

assets.

If my argument about Hall v Busst, being a

decision which ought to be revisited, is correct,

such a contract is enforceable for it is
sufficiently certain. Linked in with that, of

course, is the submission that I make that

Mr Justice Mahoney, in declining to visit the

question of whether the expression was capable of

an objective meaning, declined to do something

which, having found that there was an intention to

create legal relations, the court was bound to do.

The manner of dealing with the issue arose in

this way - and it starts at application book 62 -

Mr Justice Mahoney says, at line 20:

Mr Sweeney QC submitted in substance that the

effect of the words cited was that pleaded in

cl lOA(a), and that that was that the value of

the operating assets referred to was to be

taken to be their book value as appearing in

the books and records of the relevant company

or companies. That value was to be understood
to be historic cost of the assets. There was

a qualification to that: if on investigation

Waterhouse 14 28/10/93

it should appear that the value so assigned to

assets in such books had not been calculated

in accordance with accepted accounting

principles, then an appropriate adjustment

should be made so that the value for the

purposes of the agreement was the historic

value of the assets arrived at in accordance

with such principles.

The words set forth in the letter of

22 November 1989, if they have a certain and

literal meaning, do not have that meaning.

His Honour then went on, at the foot of the page:

The contention was that, in those two

letters, what was said indicated that the

defendant or the parties were contemplating

the sale of the relevant assets at a price

based on their book value and that that book

value had been based on historic value rather

than actual value.	I am not sure that that is
correct.

And then over the page:

But even if that was what was being

contemplated at the time, that falls short of

establishing that, in the sense contended for,

the parties had, before the 30 November 1989

meeting, adopted as the meaning of those words

the meaning attributed to them in cl l0A(a) of

the statement of claim.

Then at line 14 His Honour expresses the

conclusion:

then I do not think it should be accepted that

the material relied on for the plaintiffs

established that that meaning was adopted.

And two lines later: 

I am not satisfied that the parties, reading

the letter of 22 November 1989, would have

taken the words to have the meaning suggested.

Now, first of all, Your Honours, throughout

that passage, Mr Justice Mahoney is using the

language of satisfaction, failure to be satisfied,

failure, if I may, of the appellant in the Court o f Appeal to discharge the onus of proving that

that is what the language meant. It is not, with

respect, the language of attempting to ascertain

whether the language is capable of certainty. But

for presently relevant purposes, the important

consequence of that arises at application book 66,

Waterhouse 15 28/10/93

line 15. His Honour, having rejected that

argument, says this:

I have considered whether,

notwithstanding the way in which the appeal

was conducted, the court can and should hold

that there was an agreement the terms of which

were merely those set forth in the letter of

22 November 1989, understood according to

their ordinary literal meaning. This would

involve considering whether the words "for

agreed net asset/lability value" can be given

a meaning of sufficient certainty other than

the meaning for which the plaintiffs have

contended.

In my opinion, the court should not

readily put aside a consensus intended to be

binding upon the ground that it is too

uncertain to be enforced. What would be

involved in giving effect to these words would

be deciding whether the principles involved in those words are sufficiently defined to enable

them to be applied to determine the "value" -

then further down he refers to Hall v Busst:

the court held uncertain the term "the value

of all additions -

two lines down:

There are circumstances in which a court may

place upon an agreement a meaning different

from that contended for by either parties and

radically so. The construction of a written

agreement is a matter of law and the court
cannot, in such a matter, be bound by the

contentions of the parties -

Over on application book 68, line 12 - and this is in my respectful submission, absolutely correct.	the reason why His Honour declined to do it in the
special circumstances of this case:

I accept that, as Mr Simos QC suggested, had

the matter been put differently, it may be

that the defendant would have adduced other

evidence or asked other questions which could
or would have led to a different understanding

of the matter.

Now, if that were right, Your Honours, it

would be an answer. If the contest was conducted

before the court at trial in such a manner that

Mr Simos' client was led to a position where he

could have led relevant evidence but did not, then

Waterhouse 16 28/10/93

that would be an answer. His Honour was mistaken

in concluding that the issue which he declined to

address had not been raised in the present

proceeding.

At application book 2, line 21, in

Mr Justice Needham's judgment, it made clear that

one of the allegations, in fact, the main one:

In it, the plaintiffs claimed that "the

agreement was express and in writing and made

on 30 November 1989".

That means, of course, Your Honours, that the court

was bound to determine the question of whether that

expression had a meaning, that is to say, any

meaning; not just a meaning propounded by one of

the parties. Mr Justice Mahoney was mistaken when

His Honour held that there was a special reason in

this case why the court should not do that.

So, we have the situation that the expression

is capable of being given a certain meaning. It is

embodied in a document which the court has held to
be a document intended to be binding when accepted.

It is embodied in a document which represented

itself in the strongest and plainest possible term

to be a document, the acceptance of which would

create a contract.

The so-called uncertainty is propounded for the benefit of the profferor of the document and the court should not have held that it was not

appropriate to examine the question of whether the
expression as a stand-alone piece of language was
capable of being given meaning. In my respectful

submission, the dissents in Hall v Busst are

correct.	The expression is capable of being given
a clear meaning.	The clear meaning is sufficiently

certain to be enforceable and the court should

adopt the principles embodied in the United States

cases in this area which recognize that
comparatively little is required where there is
otherwise agreement in the way of a fixing of the

price.

May I take Your Honours then to the other

cases that we have collected in the folder.

MASON CJ:	What are they going to demonstrate, Mr Sweeney?
MR SWEENEY:	They demonstrate, Your Honour, that in the

United States - - -

MASON CJ: This is a special leave application.

Waterhouse	17	28/10/93
MR SWEENEY:	Yes.	I do not undertake to persuade

Your Honours of the correctness of my point; merely

that it is a sufficiently viable point to warrant

the - - -

MASON CJ:  I realize that is what you are about but is it

necessary to take us to the cases in order to

support your case?

MR SWEENEY:  Because I am submitting that there is

sufficient doubt about the correctness of a

long-established decision of the Court, I thought

that it might be, Your Honour.

MASON CJ:  Can you ta.ke us to the passages, the specific

passages?

MR SWEENEY:  Yes, it will not take me very long. Of course,

no doubt, there are many cases but we have just got

five or six together. One of the leading cases is

Cobble Hill Nursing Home which is behind tab 1, a

decision of the Court of Appeals of New York, and

at 923, in the judgment, in the paragraph

numbered (2) in the second column, about five lines

down, the following principle is set forth which

has found its way into many of the American

textbooks:

Where at the time of agreement the parties

have manifested their intent to be bound, a

price term may be sufficiently definite if the

amount can be determined objectively without

the need for new expressions by the parties; a
method for reducing uncertainty to certainty
might, for example, be found within the

agreement or ascertained by reference to an

extrinsic event, commercial practice or trade

usage -

and there is a reference to Metro-Goldwyn-Mayer.

Then there is Litsinger Sign, behind tab 2, and at

page 619 of the judgment, the paragraphs numbered

(19, 20) contain the following observations:

If it is found that the parties intended

to be bound, the court should not frustrate

this intention, if it is reasonably possible

to fill in some gaps that the parties have

left, and reach a fair and just result.

Corbin on Contracts -

cited, I think, from memory, by Mr Justice Windeyer

in Hall v Busst.

Even though American's purported acceptance

stated the price for Litsinger's services "to

be determined," this does not indicate a mere

Waterhouse 18 28/10/93

"agreement to agree" as to an essential term
of the contract. Rather, it merely refers to

Litsinger's offer to do the work for "ordinary industry prices," a way of filling a blank on its purchase order in the absence of a

specified liquidated amount.

Now, applying Hall v Busst, of course, to such

facts, one would get the opposite result.

Then tab 3, Your Honours, is

Metro-Goldwyn-Mayer v Scheider, and over on
page 253 a passage which is cited by the court and

which is repeated frequently:

Where the parties have completed their

negotiations of what they regard as essential

elements, and performance has begun on the

good faith understanding that agreement on the

unsettled matters will follow, the court will

find and enforce a contract even though the

parties have expressly left these other

elements for future negotiation and agreement,

if some objective method of determination is

available, independent of either party's mere

wish or desire. Such objective criteria may

be found in the agreement itself, commercial

practice or other usage and custom. If the

contract can be rendered certain and complete,

by reference to something certain, the court
will fill in the gaps".

This is not the language of lack of satisfaction echoed by Mr Justice Mahoney. This is the language

of possibility. If the court can complete, the

court will.

Tab 4 has the decision in Cohen & Sons v Kuhr,

and the only relevant passage there is at page 209

where the court holds, at about point 4 in the

second column:  The "fair market value" shall be

considered to be that price offered for the

particular kind and type of sheet iron by

other sheet iron balers in Cincinnati at the

time of said offer.

Such a clause was upheld as sufficiently certain.

That judgment was affirmed on appeal, and that

is what the next tab stands for. And then could I take Your Honours to tab 6 where Portnoy's case is

set forth. That was, at 445 point 3 in the first

column, the option price, an option for a price

which would be determined by "current market value

Waterhouse 19 28/10/93

at end of final term", again, upheld as

sufficiently certain.

Over on 447, in the second column, the court dealt with the argument of uncertainty at

paragraphs (4-7):

At the outset, it should be noted that

price is an essential ingredient of every
contract for the transfer of property and must

be sufficiently definite and certain or

capable of being ascertained from the contract

between the parties.

Dropping down four lines after the citations:

However, where a contract specifies that the

price is to be measured by the "fair market

value" or "reasonable value" of the services

or property involved, courts have generally

held that the price is sufficiently certain in

order to have an enforceable obligation.

And over on the next page, at the top of 448, the

first paragraph:

"current market value at the end of the final
term." This provision, in our opinion means
fair market value and meets the necessary

standards required by law with respect to the

certainty of the purchase price so as not to

preclude specific performance of the option

agreement.

Vigano v Wylain I cited in part already. May

I just complete the citation by telling

Your Honours that the relevant clause in dispute is

at 522 at the top of the second column. It was a:

clause calling for manufacturer to sell and

deliver to distributors at their current sales

prices, and upon such terms as might be agreed

upon, any products which distributors

ordered -

and the court unhesitatingly enforced the whole of

that provision including the language "on such

terms as might be agreed upon".

We have taken out the relevant passage from

American Jurisprudence behind tab 8 which merely

illustrates what the cases I have taken

Your Honours to already show. This is, it is

respectfully submitted, a point of fundamental

importance in the development of contract law.

Waterhouse 20 28/10/93

The question of whether Hall v Busst

represents the correct standard to be applied in

circumstances where the courts are now moving

strongly towards enforcing letter agreements made

by businessmen much more so than they were in 1960

is a point of the greatest importance to many, many

commercial contracts and warrants the attraction,

in my respectful submission, of special leave.

MASON CJ:  The Court will take a short adjournment to

consider the course it will take in this matter.

AT 2.43 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.48 PM:

MASON CJ:  The Court need not trouble you, Mr Simos.

MR SIMOS: If Your Honour pleases.

MASON CJ: 

The Court has come to the conclusion that the

actual decision of the Court of Appeal was correct
and for that reason the application for special
leave to appeal is refused.

MR SIMOS: With costs, if Your Honour pleases.

MASON CJ:	You do not oppose costs, Mr Sweeney?
MR SWEENEY:	No, Your Honour.
MASON CJ:	The application is refused with costs.
AT 2.49 PM THE MATTER WAS ADJOURNED SINE DIE

Waterhouse 21 28/10/93