Tuesday, November 16, 2004

Breaking news - High Court states the obvious: "Contracts mean what they say"

In the High Court's latest decision Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55, the appellant sued the respondents for non-repayment of a series of loans that appeared to be part of a tax minimisation scheme. In turn, the respondents claimed that their conduct was authorised by a prior oral contract; an argument accepted at trial and in the Queensland Court of Appeal. In unanimously reversing these judgments, the High Court emphasised its recent theme (see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd) to the effect that if you sign a contract, you’ll be bound by it:
The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. The respondents attempted neither.

The appeal was allowed, and the case was remitted to the Supreme Court of Queensland to deal with some remaining matters.

To us at The Third Branch, the fact that you’re bound by what you sign seems like an obvious point of contract law, especially in the course of commercial transactions between commercial parties. The fact that this was not so obvious in either Queensland or New South Wales is a matter of some concern, but thankfully the High Court has now set both these jurisdictions straight.