LAW2101 Lecture Notes - Lecture 4: Thomas Edward Scrutton, Hovertravel, Benizelos Roufos
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
!
TOPIC'4:'INTENTION'
OBJECTIVE'APPROACH'
‘Would'a'reasonable'person'regard'each'party'as'having'intended'to'create'legal'relations'-'to'be'bound?’'
'
Case'
Findings'
Shahid&v&Australasian&College&of&Dermatologists&
(2008)'
• Shahid&applied&unsuccessfully&for&supervised&
training&positions&with&the&College&every&year&
between&2000&and&2004.&
• Shahid&appealed&the&last&3&decisions&
(unsuccessfully)&in&accordance&with&the&College’s&
detailed&training&handbook,&and&paid&a&
substantial&fee.&
• Shahid&claimed&that&the&appeal&process&was¬&
genuine&and&effective,&and&sued&the&college&for&
breach&of&contract&(and&misleading&or&deceptive&
conduct)&
• The&College&argued&there&was&no&intention&to&
create&legal&relations&
Full'Federal'Court'(Jessup'J)'
Ø Contract'did'not'exist'each'time'application'for'
appeal'was'lodged'and'no'intention'to'be'
bound'by'training'book:'Objective&assessment&
of&facts&and&circumstances&indicates&a&mutual&
intention&to&create&legal&relations&(the&context&
was&business-like,&involves&a&weighty&matter&and&
substantial&fees&paid&for&service,&and&handbook&
outlines&a&detail&process)&&
v Bystander&would&perceive&that&the&payment&
of&$1500&or&$5000&and&the&college’s&
acceptance&of&the&amount&without&intention&
to&honour&and&fulfill&it&improbable&&
*Note:&Uncommunicated&subjective&intentions&of&the&
parties&are¬&relevant&
Trial&J&erred&in&attaching&importance&to&the&finding&
that&the&College&“regarded&itself&as&so&unfettered&by&
any&contractual&concerns"&&
'
PRESUMPTIONS'
Commercial'Transactions'
Domestic'and'Social'Agreements'
Other'Cases'
• Presumed&to&be&intended&to&
be&legally&binding&
*Note:&Onus&of&proof&lies&with&
party&denying&the&contractual&
relationship'
• No&presumptions&due&to&
Ermogenous&
*Note:&Alleging&parties&bears&onus&
of&proof'
• No&presumption&either&way:'
Onus&is&on&the&person&wanting&
to&sue&for&breach&of&contract&
to&prove&intention&
'
Case'
Findings'
Ermogenous&v&Greek&Orthodox&Community&of&SA&Inc&
(2002)&
• Archbishop&claimed&respondent&owed&him&
certain&sums&accumulated&from&his&long&service&
leaves&and&annual&leave&entitlements'
• He&could&only&claim&if&he&was&an&employee&of&the&
respondent'
Ø Approach'(Gaudron,'McHugh,'Hayne'and'
Callinan'JJ)'(High'Court):&“…we&doubt&the&utility&
of&using&the&language&of&presumptions&in&this&
context.&&At&best,&the&use&of&that&language&does&
no&more&than&invite&intention&of&identifying&the&
party&who&bears&the&onus&of&proof”&(i.e.&
contractual&obligations&for&a&minister&of&religion&
should¬&be&presumed)&
v No&legally&binding&contract&(Use&of&facts&
rather&than&relying&on&presumptions):&
Although&an&allowance&was&paid,&D’s&control&
over&the&relationship&rendered&it&a&social&
arrangement&&
Ø Prior-Presumption'(Gaudron,'McHugh,'Hayne'
and'Callinan'JJ)'(High'Court):&Presumed&that&an&
arrangement&of&remuneration&of&a&minister&will&
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
!
not&give&rise&to&legally&enforceable&obligations&
due&to&no&contract&of&employment&for&ministers&&
'
COMMERCIAL'TRANSACTIONS:'LETTERS'OF'COMFORT'
Where'an'agreement'is'made'in'a'commercial'context,'a'question'may'arise'whether'the'parties'intended'
to'make'an'honourable,'rather'than'legal,'commitment.'
Characteristics:'
• Party&A&(Bank);&Party&B&(Subsidiary);&Party&C&(Parent&Company)&
• Party&C&doesn’t&want&to&give&a&guarantee,&so&a&letter&of&comfort&is&provided&
*
Case'
Findings'
Commonwealth&Bank&of&Australia&v&TLI&
Management&
• D&contacted&P&to&inject&funds&into&Hovertravel&so&
they&mount&a&takeover&which&would&take&30&days'
• Terms:&
o “[1]&We&hereby&acknowledge&that&the&
Commonwealth&Bank&of&Australia&has&agreed&
to&make&temporary&credit&facilities&totalling&
two&hundred&and&fifty&thousand&Australian&
dollars&($A250,000)&available&to&Hovertravel&
Australia&Pty&Ltd&which&represents&payments&
for&ongoing&operating&costs&and&salaries.&
o [2]&We&confirm&that&the&company&will&
complete&takeover&arrangements&(subject&to&&
shareholders’&approval)&of&Hovertravel&Ltd&as&
soon&as&legally&possible.&These&arrangements&
include&the&injection&of&sufficient&capital&to&
repay&the&temporary&facility&as&mentioned&
above&to&takeover&date&or&within&30&days&of&
this&date.”&
Ø '
Ø Approach'(Tadgell'J)'(Supreme'Court):&&Letter&of&
comfort&contained&facts,&rather&than&promises,&
and&therefore&did¬&constitute&an&enforceable&
contract'
v No&intention&to&guarantee:'The&takeover&was&
conditional&upon&shareholders’&approval&and&
there&was&no&specified&amount&in®ards&to&
the&funds&–&No*guarantee*due*ambiguities*
and*it*being*a*statement*of*facts'
§ “We&confirm”:'Serious&
acknowledgement&of&the&D’s&intention&'
§ Relative&vagueness:&"complete",&
"takeover&arrangements"&and&"as&soon&
as&legally&possible".èThe&second&
sentence&adds&to&the&imprecision&of&the&
first.&If&the&"arrangements"&include&"the&
injection&of&sufficient&capital"&etc.'
Banque&Brussels&Lambert&SA&v&Australian&National&
Industries&
• ANI&gave&letter&of&comfort&to&BB&when&BB&
advanced&loan&to&Spedley&Security&Ltd&(SSL):&
o “it&is&our&practice&to&ensure&that&our&affiliate&
Spedley&Security&Ltd,&will&at&all×&be&in&a&
position&to&meet&its&financial&obligations&as&
they&fall&due”&–&No*guarantee*here&
Ø Approach'(Rogers'CJ)'(Supreme'Court):&“court&
should&use&a&finely&tuned&linguistic&fork”&(e.g.&
“however”&does¬&diminish&a&statement&of&
intention)'
v Breach&of&contract&(Rogers&CJ):&Definite&and&
certain&language&used&in&the&shareholding&
section&in®ards&to&providing&bank&90&days&
notice&of&disposal&on&interest&of&SHL'(i.e.90&
days&confers&clear&benefit&to&P&to&recover&
their&funds)'
Kleinwort&Benson&Ltd&v&Malaysia&Mining&Corp&Bhd&
• KB&agreed&to&provide&MMC’s&wholly-owned&
subsidiary,&MMC&Metals&Ltd&(“Metals”)&with&a&
loan&facility&of&up&to&£10&million&&
• As&part&of&the&arrangement,&MMC&gave&KB&two&
“letters&of&comfort”&which&stated:&&
o “It&is&our&policy&to&ensure&that&the&
business&of&Metals&is&at&all×&in&a&
position&to&meet&its&liabilities&to&you&
under&the&[loan&facility]&arrangements”.&&
Ø Findings'(Court'of'Appeal):'Only&when&words&
used&in&relevant&document&can&be&treated&as&
having&intended&contractual&promise&'
v No&breach&of&contract:'Just&a&statement&of&
policy/practice'
