Scanlan's New Neon Limited v Tooheys Limited [1943] HCA 43

Scanlan's New Neon Limited v Tooheys Limited [1943] HCA 43

The governmental orders prohibiting the illumination of neon signs did not frustrate the lease agreements because neither party was prevented from performing the essential promises of their contract and the risk of such governmental restrictions was either assumed or did not go to the foundation of the contract. The obligation to pay rent subsisted regardless of the lessees’ inability to use the signs as illuminated advertisements.

Parties
Appellant; Plaintiff: Scanlan's New Neon Limited; Respondent; Defendant: Tooheys Limited; Appellant; Defendant: Caldwell; Respondent; Complainant: Neon Electric Signs Limited
Jurisdiction
Australia
Procedural Posture
Contract Dispute (multiple Appeals) / High Court of Australia Appellate Review From Supreme Courts of New South Wales and Victoria
Outcome
Appeal allowed in Scanlan's New Neon Ltd. v. Tooheys Ltd.; appeal dismissed in Caldwell v. Neon Electric Signs Ltd.
Legal Topics
Frustration of Contract, Implied Terms, Governmental Orders and Contractual Obligations
Contract Law Frustration of Contract Implied Terms Governmental Orders and Contractual Obligations

Case Brief

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Parties

Scanlan's New Neon Limited

Appellant; Plaintiff

Tooheys Limited

Respondent; Defendant

Caldwell

Appellant; Defendant

Neon Electric Signs Limited

Respondent; Complainant

Procedural Posture

Contract Dispute (multiple Appeals) / High Court of Australia Appellate Review From Supreme Courts of New South Wales and Victoria

Legal Issues

  1. 1 Whether governmental orders prohibiting the illumination of neon advertising signs frustrated lease/hire contracts for such signs, discharging lessees from future rental obligations.

Ratio Decidendi

The governmental orders prohibiting the illumination of neon signs did not frustrate the lease agreements because neither party was prevented from performing the essential promises of their contract and the risk of such governmental restrictions was either assumed or did not go to the foundation of the contract. The obligation to pay rent subsisted regardless of the lessees’ inability to use the signs as illuminated advertisements.

Court Disposition

Appeal allowed in Scanlan's New Neon Ltd. v. Tooheys Ltd.; appeal dismissed in Caldwell v. Neon Electric Signs Ltd.

Orders

  • In the New South Wales appeal (Scanlan's New Neon Ltd. v. Tooheys Ltd.), appeal allowed with costs; judgment restored for the plaintiff for rental sums claimed.
  • In the Victorian appeal (Caldwell v. Neon Electric Signs Ltd.), appeal dismissed with costs.