In the recent decision of Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23 (4 March 2016), the Victorian Court of Appeal considered what regard Courts should have to words that parties have deleted when negotiating the terms of a contract.

In Gee Dee a standard form lease was amended by the parties as follows:

“pay all rates taxes assessments and outgoings whatsoever excepting land tax which during the said term shall be payable by the Landlord or tenant in respect of the said premises (but a proportionate part to be adjusted between Landlord and Tenant if the case so requires).”

It was common ground that the clause was ambiguous as, without the deleted words, it could be read as requiring the tenant to pay all rates, taxes, assessments and outgoings, however, it could also be read as requiring the tenant to only pay the rates, taxes, assessments and outgoings payable by the tenant.  Given its ambiguity, regard could be had to the surrounding circumstances known to the contracting parties at the time the lease was executed, including the deletions from the lease.

The Court of Appeal considered the following matters, that:

  1. the traditional approach at common law is that deleted words are not to be considered in interpreting a contract;
  2. some authorities provide that courts may have regard, to some extent, to parts of a contract which have been struck out but which remain legible, for the purpose of construing the operative language of the instrument;
  3. the existing authorities do not provide, when construing a contract, for immediate resort to be had to words struck out;
  4. in Australia the current position is that there is a distinction between draft clauses or words which have been rejected in negotiations and clauses or words which appear in the contract but have been struck out, as evidence of negotiations is always irrelevant to the process of construction, but a deliberate and mutually agreed deletion of a standard form term may throw light on the parties’ intentions in cases of ambiguity;
  5. authorities regard struck out language as secondary, even if not strictly extrinsic, material which can be used as an aid to construction without forming part of the language being construed; and
  6. deleted words are nothing more than an aid in the process of construction, to the extent (if any) to which they might assist and they do not need to be understood together with the contractual words as one harmonious whole. If the words deleted do not assist in resolving the ambiguity, then they must, like other extrinsic aids to construction, be put to one side.

The Court of Appeal held that the striking out of the words “Landlord or” was a strong indication that the parties considered, and rejected, the possibility that the tenant should pay rates, taxes, assessments and outgoings payable by the landlord.