BP Refinery (Westernport) Pty Ltd v Shire of Hastings

What happened?

An oil refinery was established at Crib Point after tripartite negotiations between the State, the Shire and the BP group, and the rating agreement that induced it gave preferential rates for more than forty years. Some years later the BP group reorganised, and the company that held the site went out of occupation while another group company went in. The Shire said a term should be implied that the agreement ended when the original company ceased to occupy — which would have cut the concession from forty years to five and a half.

What did the Court decide?

The appeal was allowed and the implied term rejected. Their Lordships accepted the force of the argument that the term was not necessary for business efficacy, but decided the case on a simpler ground: a group of companies may restructure over forty years, the identity of the occupying member could not have mattered to the Shire, and to imply a term stripping away concessions that had induced massive capital expenditure would be wholly unreasonable and inequitable. Lord Wilberforce and Lord Morris dissented.

Why does this case matter?

The list is the most quoted passage in Australian contract law, and its own case shows how it is meant to be used. The appellant's principal argument was not what decided it: their Lordships said they felt the force of it, then set it aside and answered the question on a different footing altogether.

That is the habit worth taking away. The ground they chose — that the term would have been unreasonable and inequitable — is the one students treat as throat-clearing before the real analysis begins. Here it was the real analysis. An answer that marches through the list in order will usually spend all its effort in the wrong place.

It also shows where the answer comes from. The reasoning is soaked in the commercial setting: a forty-year horizon, a corporate group, an inducement to build a refinery. Implication is not deduction from the words alone.

Exam and application relevance

Say which condition fails and why, rather than working through all five at equal length. Take the first seriously: ask whether the party would really be taken to have assented to this term operating against itself, given what the deal was for. And keep it separate from a term implied by law, which is about the class of contract rather than these parties' presumed intention.

Check your understanding

Their Lordships accepted that the term might not have been necessary for business efficacy. Why did they not decide the case on that ground?