Case: Tallerman &amp; Co Pty ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10 ; (1957) 98 CLR 93
Outcome: cited
In Tallerman &amp; Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [1957] HCA 10 ; (1957) 98 CLR 93, Dixon CJ and Fullagar J described the distinction made between 'rescission' and 'variation' in the two House of Lords decisions as '... not a satisfactory distinction'. It appeared to be 'a matter of degree' (at 113). Taylor J said (at 144): 'It is firmly established by a long line of cases commencing at least as early as Goss v Lord Nugent [(1833) 5 B &amp; Ad 58] and ending with cases such as Morris v Baron &amp; Co and British &amp; Beningtons Ltd v North Western Cachar Tea Co Ltd and, indeed, including Goss v Lord Nugent itself that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement.' 157 The distinction between rescission and variation of contracts was indirectly an issue in Dan v Barclays Australia Ltd (1983) 46 ALR 437 (57 ALJR 442). The case concerned the construction of the terms of a guarantee of the payment of up to $500,000 owing under a bill acceptance facility which allowed for a maximum advance of $2 million. The maximum of the bill acceptance facility was increased sometime after its execution. It was held by Mason, Brennan and Deane JJ that the initial bill acceptance facility was significantly different from that subsequently granted and the guarantors were therefore not liable for interest and charges resulting from default under the later facility although, as a matter of construction of the guarantee, they were liable for the principal up to the figure specified in the guarantee. Wilson and Dawson JJ dissented. In their dissent they observed that cases dealing with the circumstances in which variation of a contract would amount to rescission did not necessarily provide the answer to the question of the construction of the guarantee in its application to 'the facility'. However they said (at 448): 'The distinction between rescission and variation is discussed in such cases as Tallerman &amp; Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10 ; (1957) 98 CLR 93; Morris v Baron and Co [1918] AC 1 and British and Beningtons Ltd v NW Cachar Tea Co [1923] AC 48. Variation of an existing contract, whilst it in one sense always gives rise to a new contract, does not always result in a substituted contract which, in order to operate, must necessarily rescind the contract which is varied. Variation may take the form of rescission of some of the terms of an existing contract but if that is to have the effect of rescission of the whole contract, the rescission must be express or by necessary implication and the determining factor must always be the intention of the parties as disclosed by contract when varied: see Tallerman &amp; Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd, supra, per Taylor J at 143-4.' Owen J in Permanent Building Society (In Liquidation) v Wheeler (1993) 10 WAR 109 observed that although the statement in Dan was in a dissenting judgment, the dissent related to the application of the test. There was no reason to doubt the authoritative force of the statement of principle (at 127): 'Many of the cases arise in the area of unenforceability due to non-compliance with a formal requirement such as writing. ... However, the authorities show that the task is to ascertain the intention of the parties as embodied in the contracts.' It was permissible, in searching for the intention of the parties, 'to look at the extent and completeness of the changes involved in the variation' (127). His Honour said further (at 128): 'That there may be "as a matter of formal logic" a new contract ... is true to a limited extent only.' In the Permanent Building Society case the parties had expressly confirmed the original agreement and made minor changes. The varied contract was therefore a 'new' contract only to the extent that it contained terms which were not present in the original agreement. 158 In Commissioner of Taxation v Sara Lee Household &amp; Body Care (Australia) Pty Ltd [2000] HCA 35 ; (2000) 201 CLR 520 at 534 reference was made in the joint judgment of Gleeson CJ, Gaudron, McHugh and Hayne JJ to the passage from the judgment of Taylor J in Tallerman and its approval by Wilson and Dawson JJ in Dan . The joint judgment in Sara Lee said, in relation to the passage from the judgment of Taylor J, (at 534 [24]): 'It accords with principle and with authority.' Callinan J also acknowledged that there may be cases in which what is expressed to be a variation of an earlier agreement as a matter of construction cannot be so regarded. 162 A contract under which a person is employed, whether directly or through a corporate entity controlled by that person, may be discharged by sufficiently significant changes to the duties and/or the remuneration of the person so employed. A discharge will occur when the changes are significant, not able to be accommodated by the terms of the original contract and not contemplated by the parties when the original contract was made. Whether there has been a discharge or a variation of the original agreement depends upon the intention of the parties discerned by reference to the terms of their second agreement. It is as Dixon CJ and Fullagar J said in Tallerman 'a matter of degree'. 163 In my opinion, Mr Elliott's appointment as managing director and chief executive officer of Energy on 29 September 2000 and Mr Brand's relinquishment of that office was of itself sufficient to constitute a discharge of the Agreement of May 1999. There was a very substantial difference between the office of managing director and executive director which supports the contention that objectively judged it was the intention of both parties to discharge the Agreement. The complete terms upon which Mr Brand provided his services as an executive director thereafter were never expressly agreed between Martech and Energy. Those terms and conditions would have to be considered in the context of the evolving commercial relationship between Mr Brand and Energy and their respective conduct. Mr Brand played a significant part in defining them himself, not least by unilaterally varying downwards his annual fee. 164 I do not accept the submission by Martech that Mr Brand was 'removed' from office by Energy on 29 September 2000. While the circumstances at the time made the course that he adopted the only practical course to take, that was a judgment he made for himself and to which he assented. I find that the Agreement was discharged consensually.