The New South Wales Court of Appeal decision in Ryledar Pty
Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 provides a detailed
examination of the current law on the equitable remedies of
rectification and estoppel by convention.
Euphoric Pty Ltd (Euphoric) contracted to
supply Ryledar Pty Ltd (Ryledar) with various
gasoline and oil products. Ryledar was to receive a contractual
rebate on those gasoline and oil products at a rate of 6.2 cents
per litre for all of its Sydney Metropolitan stores and 6.0 cents
per litre for all stores outside the Sydney Metropolitan area
Over time, Ryledar began opening more stores in the state of New
South Wales and the Agreement was amended to reflect that the 6.0
cents per litre rebate was now to be applied to Wollongong, Central
Coast and Newcastle locations as well as any town on or east of a
straight line connecting Newcastle, Bilpin, Katoomba, Bowral and
Wollongong (the Amended Agreement).
Notwithstanding the recorded terms of the Amended Agreement,
Euphoric adopted a practice of extending the 6.0 cents per litre
rebate to each new store that was opened by Ryledar, regardless of
the store's location.
When Euphoric had a change of management, it notified Ryledar
that it intended to return to the terms of the Amended Agreement
and cease applying the rebate to locations outside of the area
described. Ryledar refused to pay for the gasoline and oil products
and continued to withhold payment of the outstanding amounts as a
result of Euphoric's refusal to extend the 6.0 cents per litre
rebate to each new store. Euphoric commenced legal proceedings for
recovery of the amounts.
Ryledar advanced two primary arguments:
that it was the common intention of both parties that the
rebate would apply to all stores in New South Wales and that the
Amended Agreement should be rectified to reflect that common
that Euphoric should be estopped from denying that the rebate
applied across all stores.
The New South Wales Court of Appeal rejected both of
Ryledar's primary arguments.
The Court held that, to obtain rectification, Ryledar must be
able to show that "the common intention for which it contends
must be established by clear and convincing proof".
The Court found that the language that was used in the Amended
Agreement and the definition of the geographic areas were clear and
unambiguous so that the Court could not find a reason to believe
that the parties intended the rebate to apply to a wider area than
the strictly defined area within the terms of the Amended
Agreement. The Court found that the parties had "purposely
used the words which are now sought to be rectified" and, in
fact, it was Ryledar who had proposed the particular amendments to
the Amended Agreement which Ryledar was now seeking to resile from.
Therefore, in the circumstances, the Court was not convinced that
the parties were in complete agreement as to Ryledar's alleged
Ryledar, in the alternative, sought to argue that there existed
an estoppel by convention based on Euphoric's continued conduct
in not enforcing the terms of the Amended Agreement. The Court also
rejected this argument. The Court found that, for the same reasons
as outlined above, there was no evidence of an assumed state of
affairs by the parties which they would be estopped from denying.
It was clear from the evidence that Euphoric had continued to
extend the rebate to Ryledar purely on a "commercial
basis" and Ryledar could not establish that there was an
intention for the rebate to apply to the whole of New South
The decision provides a helpful dissection of the equitable
remedies of rectification and estoppel by convention. On a very
practical note however, the following are a few tips that can be
taken from the decision:
Record all important terms of an agreement in writing
– the task of establishing a right based on the conduct
or representations of another party is difficult. Ideally, this
right should be confirmed in writing by embodiment within the terms
of the agreement. If this is not possible, commercially speaking,
it should be kept in mind that the practice may cease to be
available at some time in the future and the relevant commercial
implications should be factored into financial and other
Intentions should be clearly expressed - if there is a current
practice of providing services or benefits to contractual parties
beyond the obligations contained within the relevant written
agreements, ensure that intentions are clearly communicated and
that the other party is not left with the mistaken impression that
the intention is to provide those services indefinitely or is to be
a permanent change to the parties' contractual
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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This was an interlocutory decision about the appointment of a tutor for the child appellant, to carry on his proceedings.
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