Hoyt's Pty Ltd v Spencer

[1919] HCA 64
27 CLR 133

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(Judgment by: Knox J)

Hoyt's Pty Ltd
vSpencer

Court:

Judges:
Knox JIsaacs J
Rich J

Legislative References:
Real Property Act 1900 - The Act

Hearing date:
Judgment date: 24 November 1919

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Judgment by:
Knox J

By memorandum of lease under the provisions of the Real Property Act 1900 , and duly registered, the defendant leased to the plaintiff Company certain premises therein described for four years from 1st February 1918. The lease contained a proviso in the following words:-"Provided always that the said Cosens Spencer may at any time during the currency of the term hereby created terminate this lease by giving to the lessee at least four weeks' notice in writing of his intention so to do." During the currency of the term the defendant gave notice to determine the lease under this proviso, and the plaintiff gave up possession of the premises in accordance with such notice. Subsequently the plaintiff instituted this action in the Supreme Court against the defendant claiming damages for breach of contract.

The declaration in the action was in the following words: [His Honor read the declaration as above set out, and continued:] To this declaration the defendant pleaded several pleas, the third plea setting out in extenso the memorandum of lease referred to above, and stating that the memorandum of lease so set out was the lease alleged in the declaration to have been taken by the plaintiff Company from the defendant and was executed by the plaintiff Company under its common seal and duly registered. To this plea the plaintiff Company demurred.

The Supreme Court by majority ( Cullen C.J. and Gordon J., Ferguson J. dissenting) overruled the demurrer, and ordered that judgment be entered for the defendant on the third plea, and against this decision the plaintiff Company appealed, by leave, to this Court.

Having regard to the form in which the matter comes before us for decision, I think we must accept as admitted that an agreement was in fact made in writing between the parties in the terms set out in the declaration, and that contemporaneously with or subsequently to the making of such agreement the parties executed the memorandum of lease set out in the third plea. The question is whether on these facts a breach of the agreement alleged in the declaration affords a cause of action to the plaintiff.

From the authorities referred to during the argument the following propositions may be deduced, viz.:-( a ) When parties negotiate an agreement by parol and subsequently reduce it to writing, the writing constitutes the contract ( Knight v. Barber ^[1] ), or at any rate is conclusive evidence of its terms ( Wake v. Harrop ^[2] ), subject, of course, to the right of either party to proceed for its rectification or rescission on sufficient grounds. ( b ) A distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is valid and enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement. This proposition is illustrated by the decisions in Lindley v. Lacey ^[3] , Erskine v. Adeane ^[4] , De Lassalle v. Guildford ^[5] and other cases. ( c ) There may be a contract the consideration for which is the making of some other contract ( Heilbut, Symons & Co. v. Buckleton ^[6] ). This proposition, properly understood, in no way conflicts with the other propositions set out above. It does not say that any contract the alleged consideration for which is the making of another contract is necessarily valid and enforceable. Whether it is so or not depends, in my opinion, on the nature and contents of the two contracts. For instance, if the main contract was to buy a house for £1,000, payable as to 25 per cent, in cash on signing the contract, and as to the balance by promissory notes of equal amounts at 12, 24 and 36 months, and the so-called collateral contract made by the vendor in consideration of the purchaser signing the main contract provided that the vendor should not be entitled to receive any cash but the whole purchase money should be paid by promissory notes extending over a period of five years, it seems clear to me that the so-called collateral contract would not be valid or enforceable at law or in equity, though it might possibly afford ground for a suit in equity for rectification of the main contract or be set up as a defence to a suit by the vendor for specific performance of that contract. The reason for this conclusion is that the alleged consideration for the collateral contract is the assumption by the purchaser of the obligations specified in the main contract, which obligations are immediately varied or abrogated by the collateral contract. The result is, in effect, as if one party said: "I will sign a contract to pay you £1,000 for a house, £250 in cash and the balance by promissory notes at 12, 24 and 36 months, if in consideration of my signing that contract you will enter into an agreement with me that you will not seek to enforce payment of the £250 cash or delivery of the agreed promissory notes but will accept other promissory notes of different amounts and currency." In such a case the consideration for the so-called collateral contract is the assumption of obligations which, ex hypothesi , the purchaser does not, and does not intend to, assume. In my opinion, the application of the propositions ( a ) and ( b ), set out above, to the question for decision in the present case leads to the conclusion that the decision of the majority in the Supreme Court was correct.

The contention for the plaintiff Company may be stated as follows: "In consideration of obtaining a lease of premises for a term, we agreed (inter alia) to accept a lease giving the lessor an unqualified right to determine the lease on giving four weeks' notice, but we only consented to execute the lease in consideration of a promise by the lessor that his power to terminate the lease should be qualified by restricting its exercise to an occasion on which his lessors should request and require him to exercise it." This is tantamount to saying that under the proviso of the lease the agreement is that the lessor may determine the lease by giving four weeks' notice whenever he chooses to do so, but under the agreement sued on the lessor is bound not to determine the lease by notice unless requested and required by his lessors so to do; or, in other words, that he has the right under the proviso to determine the lease, but is liable to an action for damages for breach of the collateral agreement if he does so.

In my opinion it is impossible to maintain that the agreement on which the present action is founded would not, if valid and enforceable, modify or vary the agreement contained in the lease executed by the parties in regard to a matter expressly dealt with by a provision of the lease, viz., the right to determine it during the currency of the term for which it was granted. If this be so, it is clear that the two agreements-that on which the action is founded and that contained in the proviso in the memorandum of lease-are inconsistent, and so cannot stand together.

The question whether the agreement sued on is consistent with the proviso in the lease may be tested in another way. The agreement as alleged is that the defendant will not determine the lease by giving notice during its currency except at the request of his lessors. If the plaintiff's contention that this agreement is valid and enforceable be sound, proceedings could be taken in equity to restrain the defendant from giving notice to determine the lease unless he had been requested by his lessors to do so, although under the terms of the proviso he was entitled to give notice to determine the lease without reference to his lessors' wishes.

Consequently the agreement on which this action is founded does not fulfil the requirement of proposition ( b ) set forth above, and the reasoning of Blackburn J. in Angell v. Duke ^[7] applies. That being so, the agreement, though admittedly made in fact, cannot be used by either party as the foundation of proceedings against the other to enforce it or to recover damages for its breach.

For these reasons I am of opinion that the appeal should be dismissed.

The order will be that the appeal be dismissed with costs.