In theory decisions from the UK are not necessarily of utility in Australia.
A timely reminder of this fact was made last week in the decision in Martin v Dee-Tech Pty Ltd  NSWSC 434.
In practice however UK cases can give insights as to the likely position in Australia and the UK decision in MWB Business Exchange Centres Limited v Rock Advertising Limited  AC 119 is a useful example how even what would otherwise be seen as abundantly obvious, is not necessarily so.
In this case there was a written agreement that had a standard ‘no oral variation (or modification)’ clause stating:
“All variations to this document must be agreed, set out in writing and signed on behalf of both parties before they take effect.”
The initial judge held that this was a clear clause which precluded an oral re-negotiation of a core term of the agreement.
This was on the basis that ‘anti-oral variation’ clauses promote ‘certainty, avoid false or frivolous claims of an oral agreement and stop a person in a large firm unintentionally creating an outcome that is inconsistent with a provision in a contract between the firm and an external party’.
An outcome that was arguably to be expected.
First appeal decision
On appeal however the above position was reversed. Instead it was held that despite the prohibition on oral amendments, an oral amendment could in fact amend that very clause and in turn the written agreement. The outcome was that an oral agreement which had been made by one party’s credit controller (apparently without proper authority) was binding on that party.
In particular it was said:
“Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived … What is excluded by one act, is restored by another. You may put it out by the door, it is back through the window. Whenever two men contract, no limitation self-imposed can destroy their power to contract again… ”
Second appeal decision
Then on further appeal, the initial judge’s decision was effectively reinstated, with the court confirming that ‘no oral variation’ clauses, while not forbidding oral variations, will cause any purported oral variation to be invalid.
The court confirmed that in order to ensure commercial certainty this outcome was appropriate, in particular allowing ‘no oral variation’ clauses to operate:
- prevents attempts to undermine written agreements by informal means, a possibility which is open to abuse, for example in raising defences to summary judgment;
- in circumstances where oral discussions can easily give rise to misunderstandings and crossed purposes, helps avoid disputes not just about whether a variation was intended but also about its exact terms;
- provides a measure of formality in recording variations and in turn makes it easier for corporations to police internal rules restricting the authority to agree them.
Interestingly however, as confirmed in Martin v Dee-Tech Pty Ltd  NSWSC 434, in Australia, while the party seeking to rely on the alleged oral representations has the onus of proof, subject to this, a ‘no-oral modification’ clause cannot prevent the parties to a contract containing it from agreeing orally to vary it (see Hawcroft General Trading Co Pty Ltd v Hawcroft  NSWCA 91 and Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd  NSWCA 87).
That is, the Australian courts have effectively (at least to date) adopted the approach of the first appeal court in the above summarised UK decision.
This said, it appears to be the case that ‘no-oral modification’ clauses under Australian law, even though not preventing valid oral modifications, will provide important context in considering whether the requisite contractual intention to modify or vary a written contract, objectively ascertained, exists (see White v Philips Electronics Australia Ltd t/as Philips Healthcare  NSWCA 115).
Matthew Burgess co-founded View in 2014, having been a partner and lawyer at one of Australia’s leading independent law firms for over 17 years.
Matthew’s passion is helping clients to successfully achieve their goals.
Matthew specialises in tax, estate and succession planning, providing strategic advice to business owners and high net worth individuals, and has been recognised in the ‘Best Lawyers’ list since 2014 in relation to trusts and estates and in ‘Doyles’ either personally or as part of View since 2015 in relation to taxation. In 2017 he was also nominated as Tax Partner of the Year (Lawyers Weekly).
While a significant focus of Matthew’s practice is on small to medium enterprises and private business owners, the growth in this area in recent years has meant that he also regularly works on transactions with listed companies.
In part leveraging off the skills he has developed working in the SME market space, Matthew has been the catalyst in developing a number of innovative legal products for advisers and their clients.
As an author, Matthew is widely recognised as an expert in his field, who constantly creates bespoke revenue related strategies for the growth, management and protection of wealth.
Matthew is regularly published in Australia’s leading monthly tax journal, The Tax Institute’s Taxation in Australia (11 articles since 2012) and the leading weekly tax journal, Thomson Reuters’ Weekly Tax Bulletin (20 articles since 2012).