Case: Dan v Barclays Australia Ltd (1983) 46 ALR 437
Outcome: cited
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.