Council UH v AC & F Co Ltd - Case Summary PDF

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Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Introduction On August 1963 the Council served on the Company a notice claiming that its cost had varied in other respects than provided for in the supply agreement and notifying a variation of charges. The Company disputed the Council’s right to vary the charges. An arbitration followed. During its course a consultative opinion of the Supreme Court of New South Wales was sought by the Arbitrator, under the Arbitrator Act 1902 (NSW). The Supreme Court unanimously advised the arbitrator that cl. 5 of the agreement was meaningless and void for uncertainty. The arbitrator has since awarded that the Council was not entitled to increase either its demand charge or its energy charge. The Council appealed to this Court. Issue: was the concept of ‘council’s costs’ sufficiently certain? Facts    

UH purchased electricity in bulk and on-sold it to AC The agreement provided for automatic changes in rates according to changes in the basic wage and cost of coal. The agreement contained a further clause that permitted the council to vary the amount it charged if the council’s costs varied in any other way The agreement also contained an arbitration clause

Outcome Barwick CJ determined that the appeal should be allowed. McTiernan J, Kitto J, Menzies J, Windeyer J all agreed with the Chief Justice in that the appeal should be allowed. Reasons for Deciding [mention judge] In this case the contact itself provided the means of resolution of any question as to what items constituted supplier’s costs, namely the decision of an arbitrator. 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 criterion by reference to which differences of the parties as to the propriety of an increase in charges could be resolved. The arbitrator found that a statement prepared by the Council showing items of expenditure was correct. He found that the cost of supplying electricity to the Company had increased by an amount which would justify an increase in the energy charge from 1.9025d. to 2.3125d. There were no items of expenditure on which the arbitrator’s finding were based which could not be regarded as items of supplier’s costs within the meaning of that expression in cl 5 of the agreement. Rules / Gems / Quotable Quotes 

Uncertainty only arises where the language is so obscure it is not capable of any definite or precise meaning.

Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429    

However, a clause does not have to be capable of only one meaning. Here, the arbitration clause provided sufficient certainty in relation to the variation of the council’s costs, to which a precise and definite meaning could be prescribed. So yes, the concept is sufficiently certain and the contract is enforceable. The courts do not take a narrow or pedantic approach to the requirement of certainty....