Placer Development Ltd v Commonwealth
121 CLR 353(Judgment by: Taylor J, Owen J)
Placer Development Ltd v Commonwealth
Court:
Judges:
Kitto J
Taylor JMenzies J
Windeyer J
Owen J
Subject References:
Contract
Uncertainty
Promise to pay money
Amount payable
Judgment date: 27 June 1969
SYDNEY
TAYLOR AND OWEN JJ. The questions raised by the case stated are concerned with the meaning and effect of cl. 14 of the Agreement of 20th May 1952, made between The Commonwealth of Australia and Bulolo Gold Dredging Ltd whereby it was agreed, inter alia, that a timber company, to be known as Commonwealth-New Guinea Timbers Ltd , should be formed and that the shares in the proposed company should be held by the contracting parties in the proportions specified. The objects of the timber company were to include the acquisition of timber rights in the Territory of Papua and the Territory of New Guinea and the harvesting of logs, the sawing and milling of timber, the peeling of veneer and the manufacture of plywood in the Territories.
The manner in which the timber company was to be formed and controlled is set out in the Agreement which is an annexure to the case stated, and the facts relating to its formation and subsequent activities are as set out in the latter instrument. It is sufficient here to say that the plaintiff, formerly known as Bulolo Gold Dredging Ltd , seeks declarations concerning its rights under cl. 14 of the Agreement and, there being no dispute as to the facts, the case has been stated raising questions for the decision of this Court.
Clause 14 is as follows:
"If customs duty is paid upon the importation into Australia of the plywood, veneers, logs and other products of the Timber Company, and is not remitted, the Commonwealth will pay to the Timber Company a subsidy upon the exportation of these products from the Territory for entry into Australia of an amount or at a rate determined by the Commonwealth from time to time, but the amount of subsidy paid shall not exceed the amount of customs duty paid and not remitted."
It is the plaintiff's primary contention that the effect of this clause is to subject the Commonwealth to an obligation to the plaintiff to pay to the timber company a subsidy, or subsidies, equal to the amount of customs duty paid by it upon the importation into the Commonwealth of the commodities referred to in cl. 14 less the amount of duty remitted. Alternatively, it claims that the Commonwealth became bound to the plaintiff to fix, from time to time, an amount or rate of subsidy and, thereupon, to pay a subsidy or subsidies to the timber company accordingly. On the other hand the Commonwealth denies that it is under any obligation to fix or pay any amount by way of subsidy.
It may be noticed that in the four years from 1st July 1953 to 30th June 1957 the timber company paid customs duty on all of its products which were imported into Australia and received by way of subsidy sums the total amount of which equals the duty that had been paid. No duty was remitted during this period. During the next two years it did not pay duty on all of its products so imported. Apparently owing to an alteration in the appropriate customs tariff about two-thirds of its products were imported into the Commonwealth free of duty and, in respect of the balance, it paid duty amounting approximately to $312,602 and received by way of subsidies $280,000. During the remaining four years with which the case stated deals-from 1st July 1959 to 30th June 1963 - over seventy-five per cent of the timber company's products were imported into the Commonwealth free of duty and it paid customs duty on the balance. There was no remission of any part of this duty and no payments by way of subsidy were made in respect of the goods upon which duty had been paid.
Whatever obligations, if any, cl. 14 might be thought to have imposed upon the Commonwealth one thing is, we think, certain. It is that there is no ground whatever for asserting that it was obliged to pay in subsidies amounts equal to the amount of customs duty paid by the timber company and not remitted. To give to the clause a construction having this effect would be directly in face of the plain wording of the clause for it is obvious that no subsidy was to be paid until after importation and payment of customs duty and the clause expressly provides that the amount of the subsidy paid shall not exceed the amount of customs duty paid and not remitted.
It was sought to support this primary submission of the plaintiff by the contention that cl. 14 contemplates the determination, from time to time, of an amount or rate in advance of projected importations or series of importations and that the concluding words of the clause were merely intended to ensure that payment in accordance with such determinations should not, in the ultimate result, exceed the amount of duty paid and not remitted. But we can see nothing in the clause which purports to require that anticipatory determinations shall be made. Nor, even if this proposition were to be accepted, would its acceptance enable a construction to be adopted which would oblige the Commonwealth to pay subsidies equal to the amount of customs duty paid and not remitted. No doubt the clause was framed as it is bearing in mind that changing circumstances-including, as happened in this case, tariff changes-might render the payment of subsidies no longer appropriate. Further, we add that if it had been intended that the Commonwealth should be obliged to pay subsidies equal to the amount of duty paid and not remitted this could, and, no doubt, would have been expressed in simple language.
The alternative submission, in substance, asserts that the clause creates two separate obligations. First of all, it is said, it casts an obligation upon the Commonwealth to consider and fix an amount or rate from time to time and, thereupon, an obligation to pay subsidies in accordance with the determination. But a promise to pay an unspecified amount of money is not enforceable where it expressly appears that the amount to be paid is to rest in the discretion of the promisor and the deficiency is not remedied by a subsequent provision that the promisor will, in his discretion, fix the amount of the payment. Promises of this character are treated by Pollock (Principles of Contract, 12th ed. (1946), pp. 38, 39) not as vague and uncertain promises-for their meaning is only too clear-but as illusory promises and he gives as illustrations Taylor v Brewer [F7] and Roberts v Smith [F8] . In the first of these cases the plaintiffs failed in their claim for remuneration for their assignor's services where he had performed work upon the basis [F9] : "... that any service to be rendered by him should be taken into consideration, and such remuneration be made as should be deemed right." In the second case the plaintiff failed in his claim for remuneration for services rendered where the terms upon which he was engaged provided that [F10] : "It is distinctly agreed and understood that if the company is not formed and carried out, that part of your letter which alludes to your salary be null and void, and that at the expiration of three months it is entirely left to me" (the employer) "to give unto you such sum of money as I may deem right as compensation for labour done in the event of the company not being carried out." The first-mentioned case was referred to by Cussen J. in Beattie v Fine [F11] , where he had to consider the rights of a lessee under a clause in a lease which provided for an option of renewal for a further term of five years "at the rental to be agreed upon by the lessor". His Honour regarded the clause as illusory and rejected the submission that he should treat it as containing two separate promises [F12] :
"... one of which gave the lessee the right to exercise the option without naming any rental, and that, in the absence of agreement by the lessor, the result would be that the lessee would be entitled to retain possession of the land and be under an obligation to pay as rent either (1) the amount which a jury or the Court should fix as reasonable, or (2) the amount which a jury or the Court should fix as that which the lessor, acting bona fide, would or ought to have agreed to."
His Honour rejected the submission on a number of grounds observing finally that [F13] :
"... the authorities seem to show that no contractual obligation at all attaches to the lessor in such a case as this. The matter is discussed under the heading "Illusory promises' in Pollock on Contracts, 9th ed., at p. 49, where several cases are cited, and the weight of authority seems to be against there being any such obligation."
This is, we think, the position here. Obviously there is a complete absence from the clause, and from the Agreement as a whole, of any indentifiable criteria by which it can be said the parties intended the amounts or rates to be determined; this is left solely to the discretion of the Commonwealth. This being so the clause amounts to no more than a promise to pay what, in all the circumstances, the Commonwealth in its discretion thinks fit and, as such, is wholly unenforceable.
We would answer the questions 2, 3 and 4 (a) raised by the case stated in the negative.