Case: Hall v Busst (1960) 104 CLR 207
Outcome: considered
v Kirwan [1973] HCA 38 ; (1973) 129 CLR 629 involved an agreement for the sale of land which contained a provision that, if required, a further agreement would be executed containing the agreed terms and such other terms as the seller's solicitors may 'reasonably require'. Despite this provision, it was held that there was a binding contract. Walsh J, with whom Mason J agreed, stated at 642: ' It is clearly established that a binding agreement may be made which leaves some important matter, e.g. the price, to be settled by the decision of a third party'. Gibbs J concurred but cast the principles slightly more narrowly in some respects (646-8). He stated at 648 that the fact that the further agreement contemplated in the case before him would contain additional covenants and conditions if the vendor's solicitors reasonably required them did not mean that the parties had not reached complete agreement. This case was decided after Hall v Busst (1960) 104 CLR 207, an authority relied on by ASIC . I will now turn to the cases cited by ASIC in support of its submission that the framework agreements were unenforceable because they were uncertain due to a lack of essential terms such as price: Hall v Busst 104 CLR 207; Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd (1994) 2 VR 106 at 168-177 per Tadgell J; Faulkner v Thomas [2000] TASSC 159 at [34] ; and Southern Cross Financial Group (Newcastle) Pty Ltd v Rodrigues (2005) 66 IPR 166 at [36], [44]. The judgment of the High Court in Hall v Busst 104 CLR 207, illustrates how judges have disagreed as to the enforceability of a contractual clause dealing with the issue of price, where the clause leaves an aspect of the price for determination at a later time. This judgment is in relative terms an old decision, but the High Court was divided 3-2 which underscores the difficulty in construing such clauses and in a case such as the present case the unfairness which would attach to fixing on one opinion over others where those others were reasonably based and honestly held. The dispute involved a contract of sale in relation to an island off the coast of Queensland. The contract included an indenture which included an option which was in effect (in the words of Dixon CJ at 212) an option for the buyer of the land to take the land back with a refund of the sale price payment for the additions and improvements at their value less deficiences and depreciation. The clause referred to "the value of all additions and improvements to the said property" and "the value of all deficiences of chattel property and a reasonable sum to cover depreciation of all buildings and other property". The appeal to the High Court was brought on the ground that the price payable on the exercise of the option under the indenture was prescribed or expressed in terms which left it uncertain so that the option was unenforceable. Dixon CJ held at 217 that the price described in the relevant clause was unascertained and was too uncertain to be the basis of an enforceable contract. His Honour said: There could be no external standard of value of additions and improvements to the island: no standard yielding a figure reasonable fixed or ascertainable. Still less would it be possible to find an external standard for the reasonable sum to cover depreciation even if one knew what 'other property' is referred to. Fullagar J also held that the clause was uncertain because the price was not fixed with certainty. However, his Honour stated (222) that it would be sufficient if the sale was expressed to be for a price or value to be fixed by a named or described person. It was not sufficient for the sale to be expressed to be "for the value of the land" or "for the fair value of the land" or "for a reasonable price". Menzies J took a similar view, stating that no means of authoritative determination was provided by the agreement, and the necessity for further agreement revealed that there was no binding contract (231). Kitto J dissented stating that the meaning of the clause providing for additions and subtractions to the price did not seem to be uncertain, and that the value of the additions, improvements and deficiencies were capable of being ascertained when the time arrived. The provision as to "a reasonable sum to cover depreciation" appeared to his Honour to be definite in meaning and capable of being rendered certain in application, and he referred to a number of authorities. Windeyer J also dissented, saying that the parties expressed their intention in language that was sufficiently certain to create legal obligations. His Honour stated, following reference to a range of authorities (245): When parties agree to sell for a reasonable price or at a fair valuation they do not leave an essential term of their bargain for further agreement, so that their agreement is incomplete. It is complete. They have fixed the price by a measure that the law knows. If they disagree as to what sum of money fills that measure, a court will determine it, at common law by a jury. Faulkner v Thomas [2000] TASSC 159 concerned a partnership agreement which included a clause containing an elaborate mechanism for the determination of the purchase price of the assets and goodwill of a deceased partner, with the price to be fixed by a valuer. Underwood J held at [34] that the rule imposed on the valuers for the ascertainment of the value of the goodwill was completely meaningless by virtue of the omission of a dollar figure from a particular subparagraph of the clause. Underwood J stated that the rule that had to be applied for the ascertainment of the value of the goodwill was incomplete in just the same way as if a contract specified that "the purchase price of the goods sold is $____". Accordingly, the uncertainty created by this omission rendered the whole contract void for uncertainty. Underwood J went on in that paragraph to state: "It is not for the Court to supply the omission upon some notions of general fairness" and cited Hall v Busst as authority for that proposition. In the present matter, my view is that the pricing mechanism in the framework agreements is arguably certain for reasons I will explain below. In Southern Cross Financial Group 66 IPR 166 , Young CJ in Eq stated at [36] that in a contract for the sale of any article there are at least three basic requirements: precise identification of the parties to the contract; the property to be sold; and the price at which it is to be sold. In connection with the price requirement, his Honour referred to the analysis of Fullagar J in Hall v Busst 104 CLR at 222, and stated at [44] that this analysis made it quite clear that with "very, very, very few" exceptions, a contract to sell property at fair value is not binding and is incomplete. The exceptions included 'an industry which has a measure of what a fair value is or there is some other criteria'. I would add that Fullagar J stated at 222 that it would be sufficient if the sale was expressed to be for a price or value to be fixed by a named or described person. The CREC Framework Agreement did not simply state that the infrastructure items would be transferred at fair value or in like terms. Rather, the agreement expressly provided a pricing mechanism. Further, Southern Cross Financial Group 66 IPR 166 is distinguishable from the present matter because Young CJ found that the case was one where the parties intended there not to be a concluded contract unless and until a formal document had been executed .