Home | Cases | Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd

 

Key information

Court
High Court of Australia

Judges
Gleeson CJ
Gummow J
Hayne J
Callinan J
Heydon J

Appeal from
Supreme Court of NSW

Issues
Terms - construction - signature

Full case
AustLII

AustraliaToll (FGCT) Pty Ltd v Alphapharm Pty Ltd

[2004] HCA 52; 219 CLR 165; 79 ALJR 129; 211 ALR 342

 

Facts

Finemores (which was taken over by Toll, explaining the case name) entered into a signed contract with Richard Thomson Pty Ltd (said to be acting for Alphapharm) to store and transport goods being imported for Alphapharm. It was alleged Finemores performed this contract negligently, causing loss to Alphapharm.  Finemores sought to escape liability by relying upon an exclusion clause in its contract with Richard Thomson.

Held (at first instance and on appeal to the NSW Court of Appeal)

Finemores could not rely on the exclusion , both because it did not form part of the contract and because Thomson has not been acting for Alphapharm when entering into the contract.

Held (High Court)

Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ (Joint Judgment)

On the issue of what terms were included in the contract between Finemores and Richard Thomson (whether or not that contract was binding on Alphapharm) their Honours noted the significance with which a signature is viewed by the law.  They noted the established position that where a document is signed then – absent fraud – it is immaterial whether or not the signatory read the agreement signed or even knew its contents.  Conversely, where a written document is not signed independent evidence must prove the defendant assented to it.

Quoting Latham CJ in Wilton v Farnworth:

"In the absence of fraud … a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions."

Their Honours noted that in signing a document you are effectively making a representation to the world that you have either read and understood the contents or are willing to take the chance of being bound by whatever terms might be contained in the document.  They noted that this ‘representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.'

These principles accord with the decision in L'Estrange v F Graucob Ltd where Scrutton LJ held that ‘[w]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not’.

Quoting Professor Atiyah, their Honours accepted that the value of signatures would be greatly reduced if they did not provide conclusive evidence of contractual liability (at least barring exceptional circumstances).  It would be reasonable for the other contracting party to rely on such a signature as evidencing such contractual intent.

Their Honours also noted that the special significance attached to signing a document is not limited to contractual documents but to a variety of legal documents which may impact on a person’s legal liability.  The commitment made by a signatory of such document ‘enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.’

Hardship that such a strict rule could potentially cause may be ameliorated as a result of specific legislative exceptions – as a result there is no reason to depart from the general common law rule where these exceptions do not apply.

As a result, in this case, the terms and conditions on the credit application formed part of the contract for storage of goods.  It is not necessary for Finemores to establish it did what was ‘reasonably sufficient’ to give Richard Thomson notice of the terms and conditions (even though the Court thought they could do this on the facts in any event).  Such a requirement would involve a ‘serious qualification to the general principle concerning the effect of signing a contract without reading it.’  This principle, which applies to the ‘ticket cases’ where terms are sought to be incorporated through unsigned notices or documents, does not apply where a document is signed – if it did there would be a ‘danger of subverting fundamental principle based on sound legal policy.’  Absent misrepresentation or mistake no such enquiry need be made.

… where a person has signed a document, which is intended to affect legal relations, and there is no question of misrepresentation, duress, mistake, or any other vitiating element, the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms. Furthermore, it may be asked, where would this leave a third party into whose hands the document might come?

Their Honours accepted three circumstances in which a persons signing a document might nevertheless not be bound

  1. ‘if the document signed was not a contract but merely a memorandum of a previous contract which did not include the relevant term.’
  2. non est factum
  3. misrepresentation

In such cases it may be important to know if the signatory ‘was given sufficient notice of its contents.’  But there were no such vitiating elements in this case.  Consequently, it was reasonably for Finemores to treat the signature as an assent to the conditions provided on the document signed.

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