It did for a lease where both the original lessor and lessee have changed, and a literal construction of a clause would produce a result which is clearly "absurd"?
In the case of Westpac Banking Corporation v Tanzone, the rent review clause in the lease contained an error. The result of a literal reading of the provision was that the rent payable would increase at an extraordinary rate rather than simply increasing in accordance with CPI increases.
As the original landlord had sold the land subject to the lease, Westpac could not seek rectification against the new owner, Tanzone Pty Ltd. The New South Wales Court of Appeal found that the omission of certain words from the rent review clause was an obvious mistake producing an absurdity. For this reason, the appending paragraph had to be read as if certain words were added to it to correct the drafting error. The court stated that construing the paragraph in this manner "avoids the absurdity of the rent review clause and properly reflects the intention of the parties to be gathered objectively from the whole context of the lease".
As a result of the method of construction adopted by the Court of Appeal, it did not matter that Tanzone Pty Ltd was now the owner of the land and not the original lessor named in the lease.
In 2001, the full court of the Supreme Court of South Australia in Dockside Holdings Pty Ltd v Rakio Pty Ltd again dealt with a poorly drafted rent review clause.
Again, because of the drafting, a literal interpretation of the rent review clause would result in an increase which was clearly "absurd".
The court stated "the literal approach for which the landlord contends produces a ridiculous commercial result based upon a review process which flouts common sense. The nature of the mistake and what was intended is sufficiently clear as to justify the court in reading the document "as if" the appropriate language has been used to reflect the intention of the parties".
Other cases have indicated that the absurdity rule is not restricted to leases.
Whether the absurdity rule will apply really gets down to whether, on a literal interpretation of a clause, it would produce an absur
d result clearly indicating that a mistake had been made in the drafting.
A real benefit, if the absurdity rule applies to the construction of a clause, is where the original contracting parties have changed, and as a result rights of rectification having regard to indefeasibility / intention are not available.