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{{context|details=which country or countries this applies to|date=March 2024}}
{{short description|Judgment of the Privy Council}}
{{Use Australian English|date=April 2018}}
{{Use dmy dates|date=April 2018}}
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| keywords = General contractual principles, Construction and interpretation of contracts, Implied terms
| opinions='''(3:2)''' a term should be implied in the contract to permit the assignment of the rights within the BP group.<br>
<small>Viscount Dilhorne, Lord Simon and Lord Keith</small>}}
'''''BP Refinery (Westernport) Pty Ltd v Shire of Hastings''''' is a leading [[Judgment (law)|judgment]] of the [[Judicial Committee of the Privy Council|Privy Council]] which summarised the test for whether a term should implied
==Background==
In 1963
BP decided to restructure its Australian operations and on 15 December 1969 wrote to the Shire of Hastings stating "I hope I may assume that there will be no difficulty over transferring" the rights and privileges including the Rating Agreement to BP Australia Ltd.<ref name="UKPC"/> That the Rating Agreement would transfer was apparently so obvious to BP that it did not wait to hear the position of the Shire of Hastings before transferring the assets to BP Australia Ltd. Under the Rating Agreement the rates would have been $50,000 however the Shire of Hastings said the Rating Agreement no longer applied and assessed the rates in excess of $150,000.<ref>[https://trove.nla.gov.au/newspaper/article/110857272 BP wins rate appeal to Privy Council] ''[[Canberra Times]]'' 29 July 1977 page 3</ref>▼
▲In 1963 BP Refinery (Westernport) Pty Ltd <ref>as the name suggests a subsidiary of [[BP|British Petroleum Co Ltd]].</ref> reached an agreement with [[Henry Bolte]], the then [[Premier of Victoria]] for the establishment of the [[Westernport Refinery|Westernport oil refinery]] and construction of port facilities at [[Crib Point, Victoria|Crib Point]], in [[Western Port]], [[Victoria (Australia)|Victoria]] ("the Refinery Agreement").<ref>[http://www.austlii.edu.au/au/legis/vic/hist_act/wra1963308/ ''Westernport (Oil Refinery) Act'' 1963] (Vic).</ref> The [[Parliament of Victoria]], on the same day it ratified the Refinery Agreement, amended the ''Local Government Act'' 1958 to allow local councils to agree on the rates payable for industrial land.<ref>[http://www.austlii.edu.au/au/legis/vic/hist_act/lgia1963423/ ''Local Government (Decentralized Industries) Act'' 1963] (Vic), inserting section 390A.</ref> In 1964 the [[Shire of Hastings]] and BP Refinery entered into a Rating Agreement, which set out the rates payable for the following 40 years, and was approved by the Governor ("the Rating Agreement").<ref>{{cite web |url=http://www.austlii.edu.au/au/other/vic_gazette/1964/48/1964_1837 |title=Victorian Government Gazette No 48, 3 June 1964 |page=1837}}</ref>
▲BP decided to restructure its Australian operations and on 15 December 1969 wrote to the Shire of Hastings stating "I hope I may assume that there will be no difficulty over transferring" the rights and privileges including the Rating Agreement to BP Australia Ltd.<ref name="UKPC"/> That the Rating Agreement would transfer was apparently so obvious to BP that it did not wait to hear the position of the Shire of Hastings before transferring the assets to BP Australia Ltd. Under the Rating Agreement the rates would have been $50,000 however the Shire of Hastings said the Rating Agreement no longer applied and assessed the rates in excess of $150,000.
===The first set of appeals===
An appeal against the assessment by BP
BP could have sought leave to appeal the decision to the [[High Court of Australia]]<ref>{{cite Legislation AU|Cth|act|coaca430|Constitution|73}}.</ref> or to the Privy Council,<ref name="Gleeson">{{cite web |url=http://www.hcourt.gov.au/assets/publications/speeches/former-justices/gleesoncj/cj_18jun08.pdf |title=The Privy Council - an Australian Perspective |author=The Honourable Murray Gleeson |author-link=Murray Gleeson |date=18 June 2008 |publisher=High Court of Australia}}</ref> but did not do so.<ref name="UKPC"/> Instead it took steps for BP
===The decision of the County Court===
BP refinery was unsuccessful in its appeal to the County Court, where the judge held:
===The decision of the Supreme Court of Victoria===
BP
#it was an implied condition of the rating agreement that it should continue in operation only so long as BP
#if the agreement had not come to an end by the operation of such an implied term, the letter from BP
#it was unnecessary to determine the third - "wider and more difficult" - point argued on behalf of the Shire of Hastings - namely, that there had been a repudiation or fundamental breach of the rating agreement by BP
==The Appeal to the Privy Council==
===The majority decision===
The majority of the Privy Council, [[Reginald Manningham-Buller, 1st Viscount Dilhorne|Viscount Dilhorne]], [[Jack Simon, Baron Simon of Glaisdale|Lord Simon]] and [[Henry Keith, Baron Keith of Kinkel|Lord Keith]], cited with approval a passage from the judgement in ''Prenn v Simmonds'' in which Lord Wilberforce said "In order for the agreement ... to be understood, it must be placed in its context. The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations."<ref>''Prenn v. Simmonds'' [http://www.austlii.edu.au/cgi-bin/LawCite?cit=1971%203%20ALL%20ER%20237 [1971] 3 All ER 237]; [1971] 1 WLR 1381.</ref>
# it must be reasonable and equitable;
# it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
# it must be so obvious that "it goes without saying";
# it must be capable of clear expression;
# it must not contradict any express term of the contract.<ref name="UKPC"/>
The test for the implications of terms was not controversial, citing three well known cases for its authority
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* the Refinery Agreement contained provision for assignment within the BP group in Australia.<ref name="UKPC"/>
The majority held that the term found by the Supreme Court of Victoria, that the agreement would end once BP
Instead they found that an entirely different term, said to make the Rating Agreement accord with the Refinery Agreement to permit the assignment of the rights within the BP group.
That the majority found that what was obvious to the County Court, the judges of the Supreme Court and indeed two of their colleagues, was wrong and that those judges had missed what should have been obvious.<ref>{{cite web |url=https://medium.com/the-jurisprude/adversarial-anniversaries-29-january-5649c87c10ee
===The dissenting judgement===
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* The 1973 decision of the Supreme Court was not the subject of appeal;
* BP Australia paid rates on the ordinary basis;
* The argument which the majority upheld, was not put forward in either court below and was inconsistent with the decision of the Full Court in the 1973 case concerned with BP
* The definition of Company adopted by the majority contradicted the definition in the Rating Agreement.
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===In Australia===
*''Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd'' [[Anthony Mason (judge)|Mason J]] accepted and applied Lord Simon's formulation, holding that "[t]he fact that such a provision would provide a greater protection for the respondent is not a sufficient reason for implying it".<ref>{{cite AustLII |litigants=Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd |year=1979 |court=HCA |num=51 |parallelcite=(1979) 144 [[Commonwealth Law Reports|CLR]] 596 |courtname=auto}} at p. 605-6 per Mason J.</ref>
*''[[Codelfa Construction Pty Ltd v State Rail Authority of NSW]]'' Implication of a term in fact in a contract, by reference to what is necessary to give it business efficacy, was described as raising issues
*''Hospital Products Ltd v US Surgical Corporation'' where [[William Deane|Deane J]] noted that the test formulated by Lord Simon was "concerned with the question whether a term should be implied in a formal contract which was complete upon its face and care should be taken to avoid an over-rigid application of the cumulative criteria which they specify to a case such as the present where the contract is oral or partly oral and where the parties have never attempted to reduce it to complete written form."<ref name="Hospital Products">{{cite AustLII |litigants=Hospital Products Ltd v US Surgical Corporation |year=1984 |court=HCA |num=64 |parallelcite=(1984) 156 [[Commonwealth Law Reports|CLR]] 41 |courtname=auto}}.</ref>
*''[[Byrne v Australian Airlines Ltd]]'' held that the implication of a term in fact is based upon the presumed or imputed intention of the parties. It is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention. That the inclusion of a term of an [[industrial award|award]] as a term of the contract would, if it were breached, support an action for damages by the employee was not a ground for saying that the term was necessary for the reasonable or effective operation of the contract. That is the proposed term went to remedies for breach and not to the question of obligations.<ref name=Byrne>{{cite AustLII |litigants=[[Byrne v Australian Airlines Ltd]] |year=1995 |court=HCA |num=24 |parallelcite=(1995) 185 [[Commonwealth Law Reports|CLR]] 410 |courtname=auto}}.</ref>
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*''Philips Electronique Grand Public SA v British Sky Broadcasting Ltd'', [[Thomas Bingham, Baron Bingham of Cornhill|Sir Thomas Bingham]] MR described Lord Simon's formulation as a summary which "distil[led] the essence of much learning on implied terms" but whose "simplicity could be almost misleading". Sir Thomas then explained that it was "difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully-drafted contract but have omitted to make provision for the matter in issue", because "it may well be doubtful whether the omission was the result of the parties' oversight or of their deliberate decision", or indeed the parties might suspect that "they are unlikely to agree on what is to happen in a certain ... eventuality" and "may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur".<ref name="Phillips">''Philips Electronique Grand Public SA v British Sky Broadcasting Ltd'' [http://www.austlii.edu.au/cgi-bin/LawCite?cit=1995%20EMLR%20472 [1995] EMLR 472] at p. 481-2</ref> Sir Thomas went on to say this at p 482:
*''[[Attorney General of Belize v Belize Telecom Ltd]]'', a case decided by the Privy Council, [[Lord Hoffmann]] said:
...
27. The Board considers that this list [in ''BP Refinery (Westernport) v Shire of Hastings''] is best regarded, not as series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so.
* ''[[Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd]]'' [[Lord Neuberger]] (with whom [[Lord Sumption]] and [[Lord Hodge]] concurred) questioned whether Lord Simon's first requirement, reasonableness and equitableness, adds anything in that if a term satisfies the other requirements it is likely to be reasonable and equitable. Business necessity and obviousness could be alternatives, although it would be a rare case where only one of those two requirements would be satisfied. Lord Neuberger thought "to speak of construing the contract as a whole, including the implied terms, is not helpful, not least because it begs the question as to what construction actually means in this context."<ref>{{cite BAILII |litigants=[[Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd]] |year=2015 |court=UKSC |num=7 |courtname=auto}}.</ref>
===Criticism of the test===
The criterion of
==References==
{{Reflist
[[Category:Australian contract case law]]
[[Category:1977 in United Kingdom case law]]
[[Category:1977 in Australian law]]
[[Category:Judicial Committee of the Privy Council cases on appeal from Australia]]
[[Category:English implied terms case law]]
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