Hoyt’s Pty Ltd v Spencer
Hoyt’s Pty Ltd v Spencer
(1919) 27 CLR 133 (High Court of Australia)
Case details
Court
High Court of Australia
Citations
Hoyt’s Pty Ltd v Spencer
(1919) 27 CLR 133 ➤
[1919] HCA 64
Judges
Knox CJ
Isaacs J
Rich J
Appeal from
Supreme Court of New South Wales
Cullen CJ
Gordon J
Ferguson J (dissenting)
Trial
Supreme Court of NSW
Issues
Terms
Collateral Contracts
Overview
Facts
The defendant (Spencer) leased premises to the plaintiff (Hoyts) for four years from 1 February 1918. The lease included the 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.”
Spencer gave notice to terminate the lease under this provision and Hoyt’s gave up possession, but subsequently brought action claiming damages for breach of contract.
Supreme Court
Majority ordered judgment for defendant.
On appeal to High Court
Accepted a lease agreement was made in writing with the term set out above.
Chief Justice Knox relied on the following propositions (among others) when reaching his conclusion.
(a) When parties negotiate an agreement by parol and subsequently reduce it to writing, the writing constitutes the contract … or at any rate is conclusive evidence of its terms …
(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.
Justice Isaacs made consistent observations, noting in relation to claims that agreements are partly oral and partly written:
To the extent to which the parties have deliberately agreed to record any part of their contract, that record stands unimpeachable by oral testimony.
And in relation to collateral contracts, the alleged collateral contracts must not alter the rights under the main contract:
A principle that must govern the bargain of a contractual promise made in consideration of entering into the main contract is that the parties shall have and be subject to all (not some only) of the respective benefits and burdens of the main contract.
…. a collateral contract, which may be either antecedent or contemporaneous … being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it; consequently, where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract, it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made; …
Justice Rich agreed with the reasons given by Knox and Isaacs.
Appeal dismissed
High Court of Australia
Chief Justice Knox
[138] ‘From the authorities referred to during the argument the following [139] propositions may be deduced, vis: (a) When parties negotiate an agreement by parol and subsequently reduce it to writing, the writing constitutes the contract … or at any rate is conclusive evidence of its terms … 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. (c) There may be a contract the consideration for which is the making of some other contract …. 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 … 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 [140] in the main contract, which obligations are immediately varied or abrogated by the collateral contract. … 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.’ [emphasis added]
[His Honour concluded that on the basis of these propositions the decision of the majority of the Supreme Court was correct and continued:]
‘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 when ever 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 lase, viz., the right to determine it during the currency of the term for which it was granted. If this be so, [141] 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 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’.
[Emphasis added]
Justice Isaacs
[141] … ‘The declaration is founded on an agreement consisting of a promise of the defendant upon a consideration given by the plaintiff. The consideration is either the promise of the plaintiff to take a lease or the actual taking of the lease. [Although his Honour considered it immaterial, he concluded consideration would be the actual taking of the lease].
Now, the consideration is stated to be that the plaintiff would take a lease and become lessee for the term mentioned “upon certain terms.” That, in view of the plea and demurrer, is the same as if those terms were set out in the declaration. The declaration avers that the plaintiff took a lease “upon the said terms," [142] and says “yet” the defendant broke his promise. In other words, it avers that the defendant, being entitled to the consideration agreed upon, received that consideration, and yet broke his promise. There is no denial-in fact it is conceded as the very groundwork of the action, as indeed it must be-that the defendant is entitled to have to the full every part of the consideration mentioned, which by the admission on demurrer includes the terms of the proviso, undiminished, unaltered, and unqualified, by anything which took place up to the time of the making of the lease. Putting the argument in the best form for the appellant, it amounts to this: the respondent Spencer was to have the unqualified right as a matter of property to resume possession whenever he chose to exercise his power in terms of the proviso, but he was under a personal contractual obligation, by virtue of the collateral promise, not to exercise his property right except in accordance with the collateral promise. The answer to that, however, is that the argument rests on a fallacy. A lease is a contract. …
[143] … The parties here are bound by the terms of the bargain personally, as well as in point of interest in the property; and the terms of the contract regulate and define their respective rights with reference to the property. The promise relied on is itself an open variation or qualification of the right conferred by the proviso in the lease; and it is an undeniable fact that by just so much the rights of the respondent are less than the agreed consideration for the promise. Nevertheless, the appellant insists that the promise must be strictly adhered to, and that the respondent, by exercising the power that incontestably exists under the unqualified proviso, has committed an actionable breach of agreement. The mere statement of the matter seems to me to answer the contention. But as the argument has occupied the attention of two Courts and concerns a topic of the law-collateral agreements-which touches every phase of contract … I think it desirable to state the way in which I view it.
When two parties are entering into contractual relations with respect to a given subject matter, they may (apart from special technical requirements) elect to conclude their bargain without writing, or they may elect to record it in writing, and, if in writing, they may further decide to have it under seal. But in whatever form they determine to leave their bargain, they may further agree to have one contract only, or to have separate and distinct contracts. All that is for the parties themselves to resolve upon. If they determine to make one contract only, then the terms they decide to include are the only terms that affect them contractually. It connotes that all else is abandoned. And that is the case whatever the form of the contract. If the matter is not committed to writing, though the principle is clear, the evidence is manifestly open to great dispute. But if the parties agree to commit their agreement to writing, then what is written is the conclusive record of the terms of their agreement, and, unless it can be shown that the document was not intended as the complete record of their bargain, no oral evidence can be admitted to alter or qualify it. I have [144] stated my views on this point in Gordon v. Macgregor … This principle applies even to the case where the agreement is partly written and partly verbal. To the extent to which the parties have deliberately agreed to record any part of their contract, that record stands unimpeachable by oral testimony …. It may be that the parties have, in their discretion, chosen to record a single bargain in several documents contemporaneously, or so close in point of time that they are treated as being contemporaneously executed. In that case, … ambiguities and even inconsistencies have to be resolved and reconciled as best the Court can. … In such case, if there be an action on the whole agreement as one entire indivisible agreement, the whole of the documents are read together, and the words of one may have to be modified by the words of another. And if in this case the plaintiff were suing on one entire indivisible contract into the composition of which both the proviso in the lease and the promise alleged in the declaration entered, the plaintiff's position would be that [ambiguities and inconsistencies would have to be resolved and reconciled by the Court]. But the plaintiff is not suing upon such an entire indivisible contract. The contract contained in the lease … has the force of a deed. It could not be contended that the promise sued on … was intended to be part of the one contract along with the proviso. If such were the appellant's contention the remedy would have been a suit for rectification or injunction at the proper time. At all events this is not the claim in the declaration. The claim is on the basis that there was no mistake in framing the main contract of lease, that that contract is complete in itself and correctly recorded, and that its only function [145] now is as the sole consideration for the independent collateral agreement sued on. Ferguson J [dissenting in the Court below] truly says that no question arises here as to admissibility of evidence, such as parol evidence to affect a written document, or evidence of any kind to affect a deed, or evidence proper to found a claim for rectification of the lease, or in any other way. All the observations in the authorities as to parol evidence are beside the question, because it is to be assumed that the "agreement" as pleaded is established in fact. The only question on this demurrer is as to its legal effect; and up to this point I entirely agree with the view taken by Ferguson J. At one point I diverge; and that is, what is the legal force and effect to be given to the promise pleaded, having regard to the consideration on which it is alleged to be based, namely, the making of the lease with all the terms it contains? The contract contained in the lease is, as observed, complete in itself. It contains the mutual covenants and considerations or the parties, and it stands entirely on its own footing. A transferee would take it upon the very terms of the document and upon no others. And in that document the plaintiff says : “I Hoyt's Proprietary Limited the within named lessee do hereby accept this lease as tenant subject to the conditions restrictions and covenants above ser forth." But, though complete in itself as a contract, it might well play another part as consideration for another promise. … Lord Moulton states the law in distinct terms. He says: - “It is evident, both on principle and on authority, that there may be a contract the consideration for which is the making or some other contract. ‘If you will make such and such a contract I will give you one hundred pounds,' is in every sense of the word a complete legal contract. It is collateral to the main contract, but each has an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract." … But though [this passage supports the appellant] in principle, yet the same principle destroys his case. The main contract here, when utilized to form the consideration for the collateral contract, must be taken exactly as it is. Its provisions do not change according as it is considered as an independent contract or as a consideration [146] for the collateral contract. A principle that must govern the bargain of a contractual promise made in consideration of entering into the main contract is that the parties shall have and be subject to all (not some only) of the respective benefits and burdens of the main contract. When the collateral promise is truly consistent with the main contract, that principle has full play. The main contract is not then interfered with. The collateral contract alters, as every contract must, the contractual relations of the parties; but it does not alter, and from the simple statement of the bargain is not intended to alter, the contractual relations which are established by the main contract. When both are worked out, it may be that in the final outcome the parties are in the same position as if those contractual relations had been varied. But the practical result cannot affect the independence and legal effect of each contract; and that is what we are here concerned with.
…
[147] The truth is that a collateral contract, which may be either antecedent or contemporaneous … being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it; consequently, where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract, it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made; …
[148] It only remains to consider whether the alleged promise does leave the contractual rights of the respondent under the main contract unimpaired. Ex concessis [from what has been conceded already], it does not. The very argument on which the claim is founded is that but for the additional promise the respondent had the power by virtue of the proviso to do what he did. And the plaintiff's case is that that power was cut down by the further promise. There is at once a conflict between the two, with the result that the appellant, though in one breath conceding the full extent of the proviso as a consideration, yet, in the next, cuts it down almost to the point of rendering it nugatory.
…
[Emphasis added]
Justice Rich
Agreed with the reasons given by Chief Justice Knox and Justice Isaacs.