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Council of the Upper Hunter County District
v Australian Chilling & Freezing Co Ltd

High Court of Australia [1968] HCA 8; (1968) 118 CLR 429

Overview

This case considered the issue of uncertainty in relation to contractual terms. Australian Chilling & Freezing Co Ltd argued that a clause in its contract with Council, which allowed the Council to vary charges in response to variable costs, was uncertain and therefore void.

The High Court held the clause was not uncertain, observing that a contract will not be void for uncertainty simply because it may be construed in more than one way.

Light bulb plugging itself into electrical outlet

 

Facts

The Council obtained electricity supply in bulk and subsold it within certain municipal areas, including Aberdeen. The Australian Chilling & Freezing Co Ltd (ACF) conducted woks in Aberdeen and entered into an agreement with the Council for supply of electricity.

Clause 5 stated

"if the Supplier's costs shall vary in other respects than has been herein before provided the Supplier shall have the right to vary the maximum demand charge and energy charge ...".

Council sought to increase its charges pursuant to this clause, but ACF alleged the clause was void for uncertainty, placing reliance on the term ‘supplier’s costs’. 

The matter proceeded to arbitration (pursuant to cl 18 of the agreement). The arbitrator sought an opinion of the Supreme Court of NSW; the Court of Appeal Division advised the arbitrator that cl 5 was void for uncertainty. On that basis the arbitrator concluded the Council was not entitled to increase its energy charge.

A claim was then made before the Supreme Court which affirmed its earlier opinion that cl 5 was void for uncertainty.

An appeal was made to the High Court.

 

High Court

Barwick CJ

A contract is not automatically void for uncertainty just because it may be construed in more than one way:

[para 9] ... a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application.  The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. ... In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved. ...

[para 10] I do not think there is any uncertainty or for that matter ambiguity in the expression "supplier's costs" in cl. 5, however wide may be the area of possible disagreement as to its denotation in a particular case. A contract to build a bridge at cost could not, in my opinion, be held void for uncertainty: it could not properly, in my opinion, be said to be meaningless: nor is it, in my opinion, ambiguous. Endless might be the arguments pro and con as to whether or not in marginal cases some item of expenditure is as claimed a cost, or as to how much of an expenditure is a cost, of the particular activity. But to my mind, generally speaking, the concept of a cost of doing something is certain in the sense that it provides a criterion by reference to which the rights of the parties may ultimately and logically be worked out, if not by the parties then by the courts. There are no elements in the circumstances of this contract to deprive the concept of that certainty. ...

[para 11]  In this case the contract itself provided the means of the resolution of any question as to what items constituted supplier's costs, namely, by the decision of an arbitrator whose judgment as to whether or not there had been a variation in items of expenditure which were embraced in what he found to be the supplier's costs was agreed to be final and binding, subject of course to the terms of the Arbitration Act, and thus to the possibility of a case stated for the opinion of the Court. Of course, if the words "supplier's costs" were meaningless, the presence of the arbitration clause would not save the clause. But, as I have said, cl. 5 provides a certain criterion by reference to which the differences of the parties as to the propriety of an increase in charges could be resolved. ...

[emphasis added]

Chief Justice Barwick observed that a ‘narrow or pedantic approach’ to interpretation should not be taken. In this case there was no uncertainty even though there may be scope for disagreement about what constituted suppliers costs in individual cases.