Good faith was introduced into Australian law through the case of Renard
Constructions (ME) Pty Ltd v. Minister for Public Works.
28 This became the
foundational reference for the concept in Australia. In Renard, Priestley JA referred
to good faith as a phrase without general meaning as it is “an excluder”. In other
words, good faith excluded heterogeneous forms of bad faith; therefore, a party
breaches its duty of good faith by acting in bad faith. In Australian law the doctrine
of good faith is essentially derived from the U.S.
Furthermore, in BP Refinery (Westernport) Pty Ltd v. Hastings Shire Council,
29 it
was held that for an implied term to be adopted into a contract it must: (1) be
reasonable and equitable to do so, (2) must give the contract business efficacy, (3) be
so obvious that ‘it goes without saying’, (4) be capable of clear expression and
reasonably certain in its operation; and (5) be consistent with the express terms of the
contract.
However, there has been a series of criticism against Priestly J’s adoption of the
excluder definition of good faith. As suggested by Baron
30 (1) it would be unreasonable for the courts to circumscribe [a party’s express right to terminate a contract]
by implication of a term of good faith; (2) the contract in Renard was already
“commercially effective without the imposition of the term”; (3) in the pursuit of
commercial interests, the implication of good faith would not have been obvious “at
the time of entry into contracting”; (4) it has been argued by academics that good
faith is “too amorphous to be useful” and at the time of Renard, the implied term of
good faith was not capable of clear expression, and; (5) the implied term of good
faith was “inconsistent with the rights and obligations expressed in the contract”.
31
As discussed above, similar to the US approach, good faith is not very clearly
defined in Australian law. It can be argued that in Australia, identifying bad faith in
contract law is more feasible than proving good faith (or lack thereof). In the case of
South Sydney District Rugby League Football Club Ltd. v. News Ltd.
32 a “core
meaning” thesis of good faith was devised. Unlike the excluder thesis adopted by
Priestley J. in Renard, Finn J. in South Sydney expressed that acting in good faith
was described in terms of loyalty to a contract.
33 While the concept of good faith is
crystallized and embodied in the civil law systems, in common law jurisdictions, the
concept is highly interpretative and malleable given a particular context. This
difference in approach between the common law and the civil law is linked with a
fundamental difference in their underlying philosophical approaches.
28 (1992) 26 NSWLR 234.
29 (1977) 180 CLR 266.
30 Baron (2002), pp. 54–81.
31 Capuano (2005), pp. 29–48.
32 [2000] FCA 1541.
33 Capuano (2005), p. 31.
Good Faith in Maritime Law Contracts
121
Constructions (ME) Pty Ltd v. Minister for Public Works.
28 This became the
foundational reference for the concept in Australia. In Renard, Priestley JA referred
to good faith as a phrase without general meaning as it is “an excluder”. In other
words, good faith excluded heterogeneous forms of bad faith; therefore, a party
breaches its duty of good faith by acting in bad faith. In Australian law the doctrine
of good faith is essentially derived from the U.S.
Furthermore, in BP Refinery (Westernport) Pty Ltd v. Hastings Shire Council,
29 it
was held that for an implied term to be adopted into a contract it must: (1) be
reasonable and equitable to do so, (2) must give the contract business efficacy, (3) be
so obvious that ‘it goes without saying’, (4) be capable of clear expression and
reasonably certain in its operation; and (5) be consistent with the express terms of the
contract.
However, there has been a series of criticism against Priestly J’s adoption of the
excluder definition of good faith. As suggested by Baron
30 (1) it would be unreasonable for the courts to circumscribe [a party’s express right to terminate a contract]
by implication of a term of good faith; (2) the contract in Renard was already
“commercially effective without the imposition of the term”; (3) in the pursuit of
commercial interests, the implication of good faith would not have been obvious “at
the time of entry into contracting”; (4) it has been argued by academics that good
faith is “too amorphous to be useful” and at the time of Renard, the implied term of
good faith was not capable of clear expression, and; (5) the implied term of good
faith was “inconsistent with the rights and obligations expressed in the contract”.
31
As discussed above, similar to the US approach, good faith is not very clearly
defined in Australian law. It can be argued that in Australia, identifying bad faith in
contract law is more feasible than proving good faith (or lack thereof). In the case of
South Sydney District Rugby League Football Club Ltd. v. News Ltd.
32 a “core
meaning” thesis of good faith was devised. Unlike the excluder thesis adopted by
Priestley J. in Renard, Finn J. in South Sydney expressed that acting in good faith
was described in terms of loyalty to a contract.
33 While the concept of good faith is
crystallized and embodied in the civil law systems, in common law jurisdictions, the
concept is highly interpretative and malleable given a particular context. This
difference in approach between the common law and the civil law is linked with a
fundamental difference in their underlying philosophical approaches.
28 (1992) 26 NSWLR 234.
29 (1977) 180 CLR 266.
30 Baron (2002), pp. 54–81.
31 Capuano (2005), pp. 29–48.
32 [2000] FCA 1541.
33 Capuano (2005), p. 31.
Good Faith in Maritime Law Contracts
121