Placer Development Ltd v Commonwealth

121 CLR 353

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(Decision by: Menzies J)

Placer Development Ltd v Commonwealth

Court:

Judges: Kitto J
Taylor J

Menzies JWindeyer J
Owen J

Subject References:
Contract
Uncertainty
Promise to pay money
Amount payable

Hearing date: 24 April 1969; 27 June 1969;
Judgment date: 27 June 1969

SYDNEY

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Decision by:
Menzies J

MENZIES J. This special case is concerned with the meaning and application of cl. 14 of the New Guinea Timber Agreement between Placer Development Ltd (formerly Bulolo Gold Dredging Ltd ) and the Commonwealth of Australia dated 20th May 1952.

The Agreement is obviously one which was intended to create legal rights and obligations. Thus cll. 1 and 2 are as follows:

"1. This Agreement shall have no force or effect and shall not be binding on either party unless and until it is approved by the Parliament of the Commonwealth.

2. This Agreement shall commence and come into full force and effect upon the date upon which it is so approved."

Clauses 3 and 4 provide for the establishment of a company, Commonwealth-New Guinea Timbers Ltd , with shares to be issued as follows: 250,001 to the Commonwealth and its four nominees, and 249,999 to Bulolo and its nominees. Provision is made for a board of directors with Commonwealth and company representation with a final provision that, in case of disagreement, the board should decide any questions directed by the Commonwealth. The objects for which the company was to be formed were to include the acquisition of timber rights in the Territory of Papua and the Territory of New Guinea, the harvesting of logs, the sawing and milling of logs, the peeling of veneer, the manufacture of plywood, utilization of waste and the marketing of timber and timber products. From an examination of the Agreement as a whole it seems to me clearly intended to create legal rights and obligations, except where otherwise provided, and it was in terms provided that it should be interpreted in accordance with the laws of the Territory of New Guinea

In cases where it might be thought that something less than a definite legal commitment on the part of the Commonwealth was intended the appropriate language was used to indicate the character of the obligation. Thus, for instance, by cl. 9 (2) the Commonwealth undertook to do no more than use its best endeavours to do something. Similarly by cl. 7 the Commonwealth undertook to take all necessary steps and do all in its power to ensure the grant of forest permits. By cl. 11 the Commonwealth undertook to "look favourably" upon proposals for the use of replanted forest. In cl. 12 the Commonwealth undertook to "take all necessary steps and do all in its power" to ensure the grant of forest permits. Where no commitment was intended this was made clear so in cl. 13 it was provided that "The Commonwealth does not enter into any commitment with the Company" regarding certain timber "but will consider any proposal for that timber to be harvested under a further permit".

The particular clause with which we are concerned is as follows:

"14. 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."

This, as has been seen, appears in the setting of a carefully drafted Agreement which contains provisions which obviously do create legal rights and obligations and in which it is provided that certain provisions should not do so.

Four questions were submitted for answer by the Court but the first question was abandoned leaving the following questions for consideration:

"2. Whether the defendant is obliged by the terms of the said Agreement from time to time to determine an amount or rate of subsidy which will recoup the Timber Company all customs duty paid by it (and not otherwise remitted) upon the importation into Australia of plywood produced by the Timber Company?

3. Whether the defendant is obliged by virtue of Clause 14 of the said Agreement to pay to the Timber Company a subsidy of such an amount, or computed at such a rate, as will recoup the Timber Company all customs duty paid by it (and not otherwise remitted) upon the importation into Australia of plywood produced by the Timber Company?

4. (a) If the answer to question 2 and to question 3 is "No" was the defendant obliged by the terms of the agreement to pay to the plaintiff a subsidy?

(b) If the answer to (a) is "Yes" has the defendant an absolute discretion to determine the amount of subsidy including a discretion to determine a subsidy of a nominal amount or rate?

(c) If the answer to 4 (a) is "Yes" and to 4 (b) is "No" on what basis should the amount or rate of such subsidy be calculated?"

The plaintiff's principal contention was that cl. 14 requires the Commonwealth, when customs duty is paid upon the importation of the company's product into Australia and that duty is not remitted, to pay a subsidy equal to the duty so paid and not remitted. This contention is clearly untenable and needs no further discussion. How can a clause which provides that the amount of subsidy shall not exceed a particular amount be read as requiring a subsidy to equal that amount? Had the result for which the company contended been intended it could easily have been stated. I have no doubt that questions 2 and 3 must be answered "No".

Question 4 raises problems of greater difficulty. The language is plainly that of legal obligation. The conditions giving rise to obligation upon the Commonwealth are precisely stated; it is provided that "the Commonwealth will pay ... a subsidy ... of an amount or at a rate determined by the Commonwealth from time to time"; and an upper limit to the subsidy is fixed.

It appears to me that two interpretations of the clause are open. First that it creates no legal obligation at all because what it provides is an illusory promise on the part of the Commonwealth. The second is that it does create an obligation when the conditions stated are fulfilled (1) to determine a subsidy within the limit and (2) to pay the subsidy determined.

According to the former interpretation, if the Commonwealth were to determine a subsidy upon imported products it would still be under no obligation to pay the subsidy so determined; according to the latter the Commonwealth's obligation is both to determine what the subsidy is to be and then to pay it.

The latter interpretation is the one which commends itself to me. It is true that the Commonwealth is at large in determining the subsidy from time to time but it seems to me that the character of the provision would have been no different had it gone on to require the Commonwealth to take specified considerations into account in determining the subsidy. In such a case the form and amount of the subsidy would still be in the discretion of the Commonwealth. The essential question seems to me to be whether a promise to make a determination does, in the circumstances, give rise to an obligation to do so.

There are, of course, cases such as Taylor v Brewer ^[F14] and Roberts v Smith ^[F15] , where promises have been regarded as too illusory to support proceedings. These cases are, however, distinguishable. In the former the plaintiff, who had no more than a resolution "that any service to be rendered by him should be taken into consideration, and such remuneration be made as should be deemed right", failed in assumpsit to recover compensation for work done because, it was held, that the resolution imported that the committee were to judge whether any remuneration was due. In the latter, in an action for work and labour done, the plaintiff failed because he had agreed that any work which he did in the circumstances which occurred should give him no right to salary and that in such an event it should be left entirely to the other party to give such sum as he may deem right as compensation for labour done. The decision of the court was no more than that the plaintiff had failed to make out that the defendant was indebted to him. Furthermore, to refuse to accord any legal consequence to cl. 14 would seem to me to be flatly opposed to Bryant v Flight ^[F16] , where Abinger C.B. and Alderson B.-true it is against the dissent of Parke B.-decided that money was recoverable under the following promise: "I hereby agree to enter your service as a weekly manager, commencing next Monday, and the amount of payment I am to receive I leave entirely for you to determine."

In my opinion, however, the questions which we have to determine are not to be decided by reference to authorities such as those referred to above. What we are concerned with is the meaning of cl. 14 in the context of the whole Agreement. To my mind the clause does require the Commonwealth to fix a subsidy and then to pay the subsidy fixed. Here we are not concerned with whether the Commonwealth is under any obligation to pay money in the absence of a determination fixing it and I would not, of course, decide that if the Commonwealth did not fix a subsidy that a reasonable subsidy, or indeed any subsidy, became payable. Where, however, the question is whether cl. 14 does impose a contractual duty upon the Commonwealth to fix a subsidy in the circumstances stated so that the obligation to pay would thus arise, the problem is substantially one of interpretation and, in my opinion, the answer should be "Yes". I cannot understand the parties, at the time of making the Agreement, attributing any different meaning to it. Nor, either on principle or authority, is it necessary to decide the clause as so understood is illusory. I do not regard a promise by the Commonwealth to determine a subsidy, not exceeding a specified amount, if and when certain events occur, as illusory. The whole point of the clause is to require the Commonwealth to determine what subsidy it will pay in the circumstances stated. When the language of legal obligation has been used, as is the case here, it is only stern necessity that would persuade me that it is worthless. Neither in principle nor in authority do I find that necessity. If the right to obtain a discretionary determination were illusory there would be a substantial reduction in the use of the writ of mandamus. To my mind the promise of the Commonwealth to determine what subsidy should be paid was both significant and valuable and was not a mockery.

I do find some difficulty in the actual terms of question 4, and, for my own part, I would answer the question generally by saying that the answers to questions 2 and 3 being "No" the Commonwealth is obliged by the terms of the Agreement with the plaintiff (a) to determine what subsidy it will pay to the timber company upon the importation into Australia of the products referred to in the clause when duty is paid upon such importation and is not remitted, and (b) to pay to the timber company the subsidy so determined subject to parliamentary appropriation for that purpose.