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Key decisions

  • Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12
  • Kendirjian v Lepore [2017] HCA 13
  • Re Day [No 2] [2017] HCA 1


Construction of contracts – commercial purposes and commercial sense

In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 (29 March 2017) the appellant lessor had attempted to sell to the respondent lessee a parcel of land. The sale fell through due to planning restrictions. Instead, the parties decided to enter into a 99 year lease. The rent was paid up front, in the same amount as the intended sale price. In dispute was a clause requiring the lessee to ‘pay all rates taxes assessments and outgoings whatsoever which during the said term shall be payable by the tenant in respect of the said premises’. Also important was a clause acknowledging that it had been the intention of the parties to have transferred ownership of the land.

The appellant sought a declaration that the respondent was required to pay all imposts relating to the land. The respondent argued that it was obliged to pay only those imposts levied on it in its capacity as the tenant, with the lessor to pay the balance as the owner of the land. The judge at first instance made the declaration; the Court of Appeal, by majority, reversed that decision.

The High Court acknowledged that the clause was poorly drafted and could be read as supporting either position. That ambiguity allowed for consideration of words struck out of the contract. Ultimately, the key question was which construction made (more) commercial sense. That required consideration of what the reasonable businessman would have understood the contract clauses to mean. The Court held that, in the circumstances, the lease was intended to be as close to a sale as possible. As such, it made no commercial sense for the lessor to remain liable for payments of rates, taxes and other such outgoings. The respondent lessee was therefore required to pay all imposts, as if it was the owner of the land. Kiefel, Bell, and Gordon JJ jointly; Gageler J separately concurring; Nettle J dissenting. Appeal from the Court of Appeal (Vic) allowed.

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