Adversarial anniversaries — 29 January

Some law cases are excellent examples of very good minds having very different ideas about very clear rules. BP Refinery (Westernport) Pty Ltd v Hastings Shire [1977] UKPC 1; (1977) 180 CLR 266 is such a specimen.

Before we get there, those confused by the legal citations can be comforted by the fact that I am too. What do I mean? Let’s go in steps:

There are two citations. The first means that in 1977, the first appeal heard by the UK Privy Council was this case. The second means that in 1977, this case was reported in volume 180 of the Commonwealth Law Reports at page 266.

What Commonwealth?

Ah, so the ancient English institution of the Privy Counsel hears appeals from former colonies now comprising the (British) Commonwealth?

A commonwealth which left before there was a commonwealth. Providence? Next door, I think.

Well, correct in part but irrelevantly so. The “Commonwealth” here is actually the Commonwealth of Australia. Yes, it’s a member of the Commonwealth but we’re all so rich there’s enough to go around. Do I hear Massachusetts a’breathing down my neck?

Why are the dates dressed differently?

The convention — at least in Australia and the UK — is that a citation which needs a year has the year in square brackets and one which doesn’t has it in parentheses.

Here, the balance of the first citation tells you only that this was the first appeal heard by the UK Privy Council from Australia. But the first by what measure? Well, the year. It is a different case from [1976] UKPC 1 on the one hand and [1978] UKPC 1 on the other.

Whereas the balance of the second citation — 170 CLR 266 — has its own measure. There is only one report found on the 266th page of the 170th volume of the Commonwealth Law Reports.

Why wasn’t the case heard by the High Court?

Australia has a supreme court called the High Court of Australia. Many readers, especially Americans, may find it difficult to understand why an independent nation such as Australia has appeals to the UK Privy Council.

The short answer is that one of the prices Australia had to pay in 1900 for a peaceful separation from the UK was a preservation — of sorts — of the Privy Council as a court of last resort. However, the short answer doesn’t do justice to the nuance of the federal constitutional system.

Imagine that the War of Independence ended peacefully and General Washington was made the first governor-general of the federal monarchy called the United States of America.

Don’t be silly, he’s only a viceregent. (c)

As part of the peaceful end, the US was permitted to set up a supreme court and to call it the Supreme Court. However, the federal government had to allow litigants in the supreme courts of the various states (ie the various former colonies) to appeal directly from the state supreme court to the UK’s Privy Council.

With the result that for the first 80 or so years of federation, well-heeled litigants who wanted to avoid going anywhere near the federal Supreme Court could head instead to London.

Now you have the Australian mess in a nutshell. At least until about 1986, when all appeals from any Australian court ceased. But as you will see from the year — 1977 — BP was in time. (Wonder why a company called British Petroleum wanted to go to the UK, but?)

Was the case heard by the High Court after all?

Remember I said that the case was — eventually — reported in what Australia lawyers call “the CLRs” (the ‘see-el-arrs’).

Seeing the word “Authorised” makes me think of King James.

But aren’t those reports for the High Court? In fact, no. Sometimes Privy Council decisions slip in. Just to confuse a little more, a long time ago, well before 1977, you might have been able to appeal to the Privy Council not from a state court but from the High Court itself. Very embarrassing that:

hello, we’re the last court of appeal in Australia… no, I’m sorry, you misunderstood… I didn’t actually mean the last court of appeal for an Australian matter… well actually we are… now… not always… but only in some matters…

Enough about citations and back to 29 January

On 29 January 1974, the good burghers of Hastings Shire issued a rating notice to BP’s subsidiary using the standard rates formula.

The trouble was that the amount was over three times the amount that had been paid over the years. The reason for the lesser amount was nothing particularly untoward. BP spent a lot of money building a refinery which was to operate for many years, and accordingly the local council had been happy to agree with the subsidiary — the operator — something of a rating holiday.

A refinery? Yep, and get rid of the kero lights.

Things turned sour when BP wound up the subsidiary as part of an internal rearrangement and assigned the operation to a new subsidiary. Did this mean that the rating holiday disappeared?

“Of course,” said the County Court and the Full Court of the Victorian Supreme Court, siding with the local council. Unfortunately for them, a majority of Privy Council disagreed.

Most commercial lawyers will know what the case is about. It’s about implying terms into contracts.

Implying terms into agreements is fraught with danger, because judges run the risk of imposing their own business judgment into contracts freely made.

For this reason, this decision made particularly clear the five golden rules which a court has to tick off before it implies a term. I won’t set them all out. Basically, a court has to be able to say “Of course this term is implied; it’s so bleeding obvious even a barrister would expect it”.

Next contestant: Mrs. Sybil Fawlty from Torquay. Specialist subject — implied terms.

Why have I taken the time to spell out such a well-known and easily appreciated proposition?

Because the case shows how bizarre the law makes the straightforward.

The County Court, the Full Court and the minority of the Privy Council said that there was a bleedingly obvious implied term to the effect that if the subsidiary ceased to occupy the site, the rating holiday ended. The members of the minority were Lord Wilberforce and Lord Morris of Borth-y-Gest, neither a lightweight.

And the majority? After referring with favourable emphasis to a dictum of Lord Wilberforce in an earlier case, they allowed the appeal. According to them, the bleedingly obvious implied term was not bleedingly obvious.

Lord Wilberforce (in oil, ho ho). (c) Suzi Malin; University of Hull Art Collection.

But what makes things piquant — and worthy of salt-rubbing — is the fact that not only did the majority find that the bleedingly obvious implied term did not exist, they also found that there was another bleedingly obvious term which the other judges had missed.

According to the majority, it was bleedingly obvoius that the rating holiday agreement included an implied term that if the BP subsidiary wanted to assign the benefit to another BP subsidiary, it could do so. Even leaving to one side the bleeding obvious (that the only person inside BP making decisions was BP itself), bits of the minority’s retort is worth setting out:

Of this argument we would say:
1. It was not put forward in either court below, nor taken or hinted at in the appellant’s printed case.
4. It introduces a method of interpretation which is novel and unsound…
5. The introduction of the new “implied term” cannot be justified under the normal principles. It is not necessary in order to produce business efficacy [and] is inconsistent with the expressed terms of the rating agreement… In effect it would impose upon the Shire a contractual party to which the Shire has not assented.
The site was implicitly abandoned in the 80s. (c)

Well, enjoy the 29 Januarys of your remaining years. Each 29 January, you are permitted to remind yourself of the fact that the law is obvious to all members of the Privy Council, so obvious that three of the five members apply the obvious principle twice, the second time in order to explain away the wrongness of the obviousness of the application made by every other judge on the matter including their two colleagues, once.