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Wednesday, 25 March 1942

Senator SPICER (Victoria) .- I move -

That Statutory Rules 1942, No. 65, under the National Security Act 1939-1940 [National Security (Contracts Adjustment) Regulations], be disallowed.

This statutory rule provides in general terms for the adjustment of contracts by reason of circumstances due to the war, and the regulations under it deal with a most important subject. Contracts, past, present and future, are all within its scope. In dealing with contracts of such a wide range, the regulations touch the economic and social life of the community in a great variety of way, and it is desirable to stress that a great deal of care and caution should be exercised in interfering with the rules governing contracts, if we do not wish to cause a state of great uncertainty in the community. I have already said that these regulations apply to every kind of contract - those which were in existence when the regulations came into operation and those which may be made in the future by people who have full knowledge of the conditions that now obtain. They enable applications to be made to police magistrates and to certain courts for adjustment of contracts, in cases where there is an impossibility of performance, where the performance of the contract is likely to become impossible, or where, so far as the applicant is concerned, the further performance of the contract is rendered inequitable or unduly onerous. Those are fairly broad terms, and they obviously give to courts an extremely wide discretion. The remedies which may be applied in favour of the applicant are that the contract may be cancelled, that it may be varied, or that provision may be made for the repayment of money that has been paid under the contract.I emphasize the fact that the tribunals are given power to cancel the contract, or to order the return of money paid, or to make a new contract for parties without the consent of those parties. This is an extremely important jurisdiction.

Senator Sampson - Does it apply to leases ?

Senator SPICER - I am not ready to express an opinion offhand on that point. Personally, I have considerable doubt on the matter.

Senator Cameron - Who would apply to the magistrate in the first instance?

Senator SPICER - A party to the contract. I have said sufficient to show that the matter deserves the careful consideration of every honorable senator. I believe that there is need for some provision of this kind.

The law on the subject of impossibility of performance, I am prepared to concede, is not completely satisfactory, from the point of view of meeting the kind of circumstances with which we are now faced. The view under the common law in relation to these matters was, in substance, that if you made a promise by way of contract it was your job to perform it, and it was your duty to see that you contemplated all the possibilities that might arise to make the performance of the contract difficult; but, if you did not do that, the law was that, as the loss had to fall somewhere, it was not unreasonable that it should fall on the party who happened to make the promise. Over a period of years, there were some qualifications of that position. I could express them briefly by saying that, if, looking at a contract, the court came to the conclusion that it was based upon the continuance of a state of circumstances which was in the minds of the parties, and that that state of circumstances had ceased to exist, the court said that the contract came to an end when impossibility of performance arose. That was well illustrated by a series of cases known to lawyers as the Coronation cases. Honorable senators may remember that arrangements had been made for the coronation of King Edward VII. and that many people had either paid, or had agreed to pay, considerable sums for the right to occupy certain rooms along the route of the procession. However, the illness of the King caused the coronation procession to be cancelled, with the result that all sorts of cases arose. The decisions in those cases illustrate the view of the law in relation to this subject, and that is my only reason for referring to it.

In effect, it was held that the holding of the procession was in the contemplation of the parties when they made the contracts, and as the circumstances contemplated did not arise the contracts came to an end at that moment. In other words, persons who had paid for the right to occupy particular places along the route of the procession could not get their money back - the contracts just came to an end - whilst other people who had contracted to pay various sums for the same purpose but had not actually paid the money were not bound to pay owing to the fact that circumstances contemplated did not actually come into existence. Briefly, the decision in those cases indicates the view of the law in relation to impossibility of performance. I am prepared to concede that those decisions do not completely meet the circumstances in which traders find themselves to-day.

The real problem is how this matter should be dealt with. I propose to place before .the Senate two proposals, to neither of which I am wedded, but which I believe would be a great improvement upon the regulations which the Government has promulgated. My chief objection to the regulations as they stand is that extensive powers are given to tribunals without any right of appeal whatever, and without any principles to guide them. When it is realized that thousands of contracts may be affected by these regulations, and that in matter? in which under £200 is involved, the cases will be dealt with by police magistrate? without appeal, those police magistrates acting as the spirit moves them, it will be agreed that it is not a satisfactory position.

Senator Large - It is unkind of the honorable senator to say that police magistrates will act just as the spirit moves them.

Senator SPICER - I have no desire to be unkind, and if I have said anything to which exception is taken, I am prepared to withdraw it. When I used the words " as the spirit moves them '". I had in mind that police magistrates would deal with these regulations without anything to guide them as to principle. One police magistrate in one part of the country may give a particular decision. whereas another police magistrate dealing with precisely the same kind of contract entered into under precisely the same conditions, may give an entirely different decision, and yet both of them may act with perfect honesty of purpose. I agree that that difficulty cannot be entirely eliminated from the judicial system, but in the ordinary administration of our law we have a system of appeal, as well as the rule of precedent to guide us. In that way, a considerable degree of uniformity in regard to the principles to be applied in determining particular questions exists. The difficulty in this case is to determine what principles should be applied. I confess that [ would have great difficulty in formulating beforehand a set of principles, and 1 believe that most lawyers would find themselves in the same position.

Senator Keane - What about applying a little logic?

Senator SPICER - I have no doubt that logic would take its place - at least I should hope so - hut we should strive to obtain the greatest measure of uniformity that is possible.

Senator Large - Why not give the regulations a trial?

Senator SPICER - We could give them a trial under better auspices if we amended them than in their present form. The idea of a trial with the law of contracts does not appeal to me. Indeed, if we wished to create a state of confusion in the community, a trial would probably be the best means of doing so. It is my desire to avoid that confusion. There seem to me to be two ways in which this matter could be approached so that the difficulties to which I have referred may be avoided. I now make the suggestion, which I have placed formally before the Government in writing, that a much more satisfactory way to deal with this problem would be to create in each State a single contracts adjustments tribunal consisting of, say, a judge, a business man and an accountant - a tribunal consisting of three members. I am not concerned about its precise personnel. The tribunal unpointed in each State should then be charged with the function of considering applications that are sent to it within a limited period. People who want to have their contracts adjusted should be re quired- to make their applications for adjustment within, say, a month of certain happenings. I am convinced that such a tribunal would deal with most of the cases which are likely to arise far more expeditiously and efficiently than they will be dealt with if they are left in the hands of judges and police magistrates acting individually throughout the country.

Senator Courtice - That would mean six different kinds of tribunals throughout the Commonwealth.

Senator SPICER - That difficulty could be overcome by appointing an overriding tribunal, if necessary.

Senator Collings - That would make the arrangement even more complicated.

Senator SPICER - No. I shall illustrate what I mean by reference to a type of case which exists in the community at the moment, and which was, in fact largely responsible for these regulations. Thousands of contracts had been entered into by shopkeepers and others all over the country for the supply of neon signs. Does it not strike honorable senators as somewhat ridiculous that every one of those customers should approach a separate police magistrate, or judge, to have his case decided? Obviously, a loss has been suffered, because a commodity which was in use has suddenly become of no value. However, the whole of the loss is not suffered by those who would use those signs for business purposes, as obviously the company and its shareholders also suffer loss. If my proposal were adopted, the tribunal to be set up in Victoria would probably receive 2,000 or 3,000 applications from people who had dealings with that one company. The tribunal would be in a position to call the company before it in order to ascertain how it stood in relation to contracts into which it had entered. I have little doubt that in the course of a week a board of competent men dealing with that problem could work out a scheme which would meet the position of the people concerned. It would be in a position to determine the proper principles to apply to such cases, because it would be able to get all of the facts; and, having obtained them, it would be able to formulate principles to apply to the contracts concerned. I do not say tha t precisely the same principles would necessarily apply to every class of customer, because there might be reasons why one class of customer should be dealt with on a different basis from another. That, however, is not the only kind of case with which such a board could deal more effectively than is possible under the method provided in the regulations.

Should that proposal not be acceptable, I have an alternative proposal which I suggest is better than that set out in the regulations. The alternative proposal is that we should vest this jurisdiction in the courts of the land as courts, not as special tribunals. In other words, I suggest that there should be an alteration of the existing law to give to the existing judicial tribunals, within their respective jurisdictions, and with the normal rights of appeal, a special jurisdiction to deal with this matter. This problem was dealt with in Great Britain during the last war, although, so far as I have been able to ascertain, it has not been provided for during this war. However, it proved effective and simple when it was in operation, and I see no reason why the same method should not be effective in Australia. Sub-section 2 of section 1 of the Courts Emergency Powers Act of 1917 provides -

(2)   Where, upon an application by any party to any contract whatsoever, the court is satisfied that, owing to any restriction or direction imposed or given by or in pursuance of any enactment relating to the defence of the realm or any regulation made thereunder, or owing to the acquisition or use by or on behalf of the Crown for the purposes of the present war of any ship or other property, any term of the contract cannot be enforced without serious hardship, the court may, after considering the circumstances of the case and the position of the parties to the contract and any offer which may have been made by any party for the variation of the contract, suspend or annul the contract or stay any proceedings for the enforcement of the contract or any term thereof or any rights arising thereunder on such conditions (if any) as the court may think fit.

SenatorFraser. - Does that contain the right of appeal ?

Senator SPICER - Yes; because this is part of ordinary law, and is vested in the courts to be exercised as part of their ordinary jurisdiction. An important point is that that act does not in express language give to the courts the power to vary. It does not say to the courts that they can set to work to make a contract for people which has never been agreed to by those people at all. However, under that act, power is vested in the courts to suspend, or annul, the contracthaving regard to any offer which may have been made for variation. In other words, the law encourages parties to come to a variation of their own contract.

SenatorFraser. - That may involve a High Court decision.

Senator SPICER - What is wrong with that? I have no objection to a High Court decision if it be involved with the maintenance, on proper principles, of our social and economic system. The fear of a High Court decision is a poor reason for refusing any kind of appeal in a jurisdiction of this kind.

I wish to refer to two other matters relating to the power of variation. In Great Britain these problems are not attacked in the somewhat hasty fashion in which we have attacked them in this country.

Senator E B Johnston - It is a very protracted procedure.

Senator SPICER - It is not a very protracted procedure having regard to the nature of the subject. I am pointing out that this matter received very serious consideration in Great Britain.

Senator Collings - It is receiving serious consideration here.

Senator SPICER - Up to date it has not received any consideration at all.

Senator Collings - That is not true.

Senator SPICER - -Recently I submitted, in writing, one of the propositions which I have just put to the Senate to the Ministry and I have not had a reply. I sought an interview with the Minister in relation to the subject, but I was unsuccessful. I was told that the Minister's mind was made up. In Great Britain the proposition to vest in courts power to vary contracts is viewed with disfavour.

SenatorFraser. - That was in relation to the last, war; what about this war?

Senator SPICER - I now refer the Senate to a decision by a committee of the House of Commons in 1939 in relation to this war on this very matter. I refer to the report of the Committee on Liability for War Damage to the SubjectMatter of Contracts. That committee was dealing with the very case of impossibility in the performance of a contract arising as the result of factors of production being destroyed. It was called upon to consider the very problem with which we are dealing here, namely, the subject of variation. Paragraph 14 of that committee's report reads -

The committee agree with the Buckmaster Committee that it would be unwise to give arbitrators or the courts any general power to vary the terms of contracts. Organized trade associations may in some cases usefully have and' exercise such powers in respect of contracts between their members, but to confer a discretion to revise contracts - a discretion necessarily conferred in general terms - upon a judicial body is- in their opinion out of the question. It would in their view lead to a greater mischief in its consequences than that intended to bc obviated by it.

Senator Collings - What happened?

Senator Fraser - They did not even implement the 1917 provision.

Senator SPICER - No; the only suggestion they made was a slight implementation of the 1917 provision which had already been brought into operation in Great Britain by an amendment of the 1919 act. That is the view of that committee in- relation to the question of variation. We are asked to hand over the general power of variation in relation to thousands of contracts to police magistrates and county court judges without any right of appeal.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - Does regulation 5 mean that this tribunal can revive a contract which has been rescinded by a court?

Senator SPICER - I am inclined to think that that is so. Regulation 5 provides -

Where any , party to a contract or agreement has rescinded the contract ot agreement by reason of the default of the other party thereto in the .performance of any term or provision thereof and a tribunal is satisfied, on application by that other party, that the default was due to circumstances attributable to the war or the operation of any regulation made under the National Security Act 1930 or under that net as subsequently amended, the tribunal may make an. order reviving the contract.

At any rate, the tribunal may revive a contract which has been rescinded by the parties; and that rescission by the parties may have been implemented by an order of the Supreme Court saying that it has been rescinded. In those circumstances, if the value of the matter in issue was not more than £200, a police magistrate would be authorized to revive the contract, as the honorable senator suggests.

I now refer the Senate to the report of a committee appointed by the Parliament of Great Britain, which makes very pointed reference to the general question of cancelling contracts of this kind. I put this as indicating the very great importance of the subject-matter with which we are now dealing. In 1917 a very distinguished committee was appointed to consider the position of pre-war contracts in Great Britain, having regard to the circumstances of the war and the position in which British manufacturers and merchants found themselves. One of the remedies which was suggested to this committee, of which the chairman was Lord Buckmaster, was that all these contracts should be cancelled. The committee had this to say on that subject -

Cancellation- The committee are unable to recommend this relief. It is only natural that each person who has suffered by the war should seek a remedy that will alleviate his difficulties and leave to others the means' by which that remedy oan be reconciled with the general position of commercial mcn. But in fact each contract, however small, is nothing but one mesh in the great web of contractual obligations in which society is bound up, and it is impossible to foresee the full extent of the disaster to which any scheme of general cancellation might give rise.

I have put to the Senate two propositions which seem to me to be more satisfactory methods of dealing with this matter.

Senator E B Johnston - Would the carrying of this motion establish either of them?

Senator SPICER - That is not the point. The only way in which an honorable senator can question regulations of this kind is by moving a motion for their disallowance. If I had the power to propose amendments to these regulations I should be following such a course to-night; but honorable senators do not possess that remedy. The only remedy we possess to deal with a regulation which we find to be unsatisfactory, is to move foi its disallowance. I say frankly that I have no desire that this motion should go to a vote. My desire is that the Leader r-f the Senate should at least accept my suggestion for the appointment of a small committee to examine these regulations. All I am asking is that an investigation be made with a view to finding out whether some improvement of these regulations cannot he made.

Senator Large - To the verbiage of t he regulations?

Senator SPICER - To the application of the regulations ; that would be involved in any alteration of the verbiage. It is not merely a matter of words; it is a matter of principle. The Government itself has recognized that the regulations it introduced on the 12thFebruary were not completely satisfactory. For example, the regulations dealing with this subjectmatter contained the most extraordinary provision that a person could not be represented in these proceedings by counsel, solicitor or paid agent.

Senator Courtice - That is done in lots of cases.

Senator SPICER - Yes, but I have never understood the justification for it. Apparently, in this instance, the Government realized the error of its ways because, by means of a subsequent regulation, the original provision was amended to provide that barristers and solicitors could appear before these tribunals. Obviously, the Government realized that the regulations as originally framed were not perfect. , I understand, also, that jurisdiction has now been given to Supreme Courts for the first time, in cases where the sum at issue exceeds £2,000. I have not seen the amending regulation, but I have been informed that such a regulation is either in process of formulation or has been promulgated. To some extent that removes my objec- tion to these regulations, but it still leaves us in the position that this extraordinarily important power is vested in tribunals of the kind to which I have referred, without any right of appeal from the decisions of these tribunals. I suggest to the Government that an adjustment tribunal would be a far more satisfactory, expeditious, and less expensive way of dealing with these matters. I do not know what is going to happen when all these cases are thrown into the hands of police magistrates who have also to attend to their ordinary duties. They are busy men as it is, and these regulations will place in their hands perhaps thousands of contracts to be dealt with under a jurisdiction in which they have nothing to guide them at all. I repeat that it would be better to deal with these matters by means of a tribunal. If necessary some scheme such as that operating in Great Britain during the last war could be adopted. In that case power was given to the courts to investigate the whole of the position from the point of view of both parties.. One objection I have to these regulations is that they appear to me to be unfairly loaded in favour of the applicant For example, regulation 4 includes the following words: - . . the performance, or further performance, of a contract or agreement to which that person is a party in accordance with the terms thereof, has become or is likely to become impossible, or, so far as the applicant is concerned,has become or is likely to become inequitable, or unduly onerous . . .

That is one side of the picture, but on the other side the regulation does not provide that the tribunal should have regard also to the effect upon the other party to a contract, of any proposal to vary or cancel the contract.

Senator Courtice - What about regulation 9?

Senator SPICER - Regulation 9 authorizes the tribunals to disregard the ordinary rules of evidence and to act in accordance with " equity, good conscience and the substantial merits of the case". That is practically meaningless.

Senator Large - It is common sense.

Senator SPICER - That may be, but I am not prepared to leave the whole question to mere common sense. If some one goes to a police magistrate and says "I am the applicant; so far as I am concerned this contract is unduly onerous", that is all that concerns the magistrate. If he has to take into account the other side of the picture as well, then why not say so in the regulations? Why not specify that the police magistrate should have regard to the effect of cancellation or variation of the contract upon either party to that contract? Take for instance the neon signs contracts. When considering one of these applications, does the police magistrate have to consider what the effect of the variation and cancellation of the contract will be, having regard to the fact that thousands of other people have similar contracts? If so, then that should be specified. That seems to reinforce the arguments that I have advanced in favour of dealing with such matters by the appointment of a contract adjustment tribunal. I repeat that it is not my intention to-night to seek a vote on this motion. I do not want a vote on it, but I ask the Government to be reasonable about the matter and to realize that this is an extremely important question. Again I urge the appointment of a committee to investigate all the implications of this matter, and to make recommendations accordingly to Parliament. I have no doubt that if such a committee were appointed, its recommendations would be along the lines that I have suggested.

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