Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 (5 August 2009)
Last Updated: 10 August 2009
NEW SOUTH WALES COURT OF APPEAL
CITATION:
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234
FILE NUMBER(S):
40190/08
HEARING DATE(S):
11 June 2009
JUDGMENT DATE:
5 August 2009
PARTIES:
Masterton Homes Pty Ltd (Appellant)
Palm Assets Pty Ltd (First Respondent)
Semavat Constructions Pty Ltd (Second Respondent)
Donovan Oates Hannaford Mortgage Corporation Limited (Receivers and Managers appointed) (Third Respondent)
JUDGMENT OF:
Allsop P Basten JA Campbell JA
LOWER COURT JURISDICTION:
Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):
50151/07
LOWER COURT JUDICIAL OFFICER:
Einstein J
LOWER COURT DATE OF DECISION:
1 April 2008
LOWER COURT MEDIUM NEUTRAL CITATION:
Masterton Homes Pty Limited v Palm Assets Pty Limited & Ors [2008] NSWSC 274
COUNSEL:
F Corsaro SC (Appellant)
M Ashhurst SC; S O'Brien (Third Respondent)
SOLICITORS:
Masterton Homes Pty Ltd, Warwick Farm (Appellant)
Donovan Oates Hannaford, Port Macquarie (Third Respondent)
CATCHWORDS:
APPEAL AND NEW TRIAL – new trial – whether the trial judge failed to resolve evidence concerning the pleaded agreement - CONTRACTS – partly written and partly oral – principles for determining whether a contract is wholly written, partly written and partly oral, or wholly oral – role of surrounding circumstances – admissibility of evidence of subsequent conduct – scope of operation of the parol evidence rule to partly written and partly oral contracts - CONTRACTS – general contractual principles – construction and interpretation of contracts – whether surrounding circumstances can be looked to without needing to find ambiguity – present state of High Court authority on whether ambiguity is a precondition to using surrounding circumstances - INTERPRETATION – construction of undertakings and court orders – admissibility of evidence of surrounding circumstances - EVIDENCE – whether evidence not cross-examined upon must be accepted by the judge or jury – circumstances when a judge can reject evidence not cross-examined - EQUITY – equitable remedies – specific performance – part performance – part performance to be pleaded in reply
LEGISLATION CITED:
Building and Construction Industry Security of Payment Act 1999
CATEGORY:
Principal judgment
CASES CITED:
Athens v Randwick City Council [2005] NSWCA 317 ; (2005) 64 NSWLR 58
Bank of Australasia v Palmer [1897] AC 540
Bolckow v Seymour [1858] EngR 873 ; (1864) 17 CB NS 107 ; 144 ER 43 ; 142 RR 272
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 ; (2001) 53 NSWLR 153
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 ; (2001) 117 FCR 424 (FC)
Broughton v Snook [1938] Ch 505
Browne v Dunn (1893) 6 R 67
Caldwell v J A Neilson Investments Pty Ltd [2007] NSWCA 3 ; (2007) 69 NSWLR 120
Carmichael v National Power Plc [1999] UKHL 47 ; [1991] 1 WLR 2042; [1999] 4 All ER 897 (UKHL)
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24 ; (1982) 149 CLR 337
Re Combined Security Systems & Designs Pty Ltd (Federal Court of Australia, Drummond J, 28 February 1995, unreported)
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Deane v The City Bank of Sydney [1904] HCA 44 ; (1904) 2 CLR 198
Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471
Evans & Associates v European Bank Ltd [2009] NSWCA 67 ; (2009) 255 ALR 171
Finucane v NSW Egg Corporation (1988) 80 ALR 486 (FCA)
Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 ; [2008] Aust Contract Reports 90-274
Gardiner v Grigg (1938) 38 SR (NSW) 524
Gillespie Brothers & Co v Cheney, Eggar & Co [1896] 2 QB 59
In re Gonin [1979] Ch 16
Gordon v Macgregor [1909] HCA 26 ; (1909) 8 CLR 316
Handbury v Nolan (1977) 13 ALR 339 (HCA)
Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90 ; (1937) 59 CLR 348
Hoyt’s Pty Ltd v Spencer [1919] HCA 64 ; (1919) 27 CLR 133
Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151
Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28 ; [1998] 1 WLR 896 ; [1998] 1 All ER 98
J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 ; [1976] 2 All ER 930
Jessop v McInteer [2003] QCA 170 (FC)
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48 ; (1985) 157 CLR 309
Kirkpatrick v Kotis [2004] NSWSC 1265 ; (2004) 62 NSWLR 567
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 ; 56 ACSR 263
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144 ; (2006) 156 FCR 1
Liverpool City Council v Irwin [1976] UKHL 1 ; [1977] AC 239
Maggbury Pty Ltd v Hafele Pty Ltd [2001] HCA 70 ; (2001) 210 CLR 181
Maggs v Marsh [2006] EWCA Civ 1058 ; [2006] BLR 395
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2008] NSWSC 274
May v Gibson (1970) 71 SR (NSW) 79
Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89 ; (1953) 89 CLR 507
Moore v Garwood [1849] EngR 1122 ; (1849) 4 Exch 681 ; 154 ER 1388 ; 88 RR 738
Nicolazzo v Harb [2009] VSCA 79
Norwest Beef Industries Ltd v Peninsular and Oriental Steam Navigation Co (1987) 8 NSWLR 568
NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451
Palmer v Bank of Australasia (1895) 16 NSWLR (L) 219
Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 ; [2007] Aust Contract Reports 90-263 (90,058)
Rogers v Wentworth (NSWCA, 18 April 1988, unreported)
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 ; (2007) 69 NSWLR 603
S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358
Saad v TWT Ltd [1998] NSWCA 199
State Rail Authority (NSW) v Health Outdoor Pty Ltd (1986) 7 NSWLR 170
Steadman v Steadman [1976] AC 536
Stones v Dowler (1860) 29 LJ Ex 122 ; 121 RR 882
Sullman v Sullman [2002] NSWSC 169 ; [2002] DFC 95-248 (77,468)
Sydney Hawthorne and Plastec Australia Pty Ltd v Harris [1995] FCA 1094
Synergy Protection Agency Pty Ltd v North Sydney Leagues’ Club Ltd [2009] NSWCA 140
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165
Torbett v Faulkner [1952] 2 TLR 659 (EWCA)
Turner v Forwood [1951] 1 All ER 746 (EWCA)
West v Mead [2003] NSWSC 161 ; (2003) 13 BPR 24,431
Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226
TEXTS CITED:
Azize, El Khoury and Finnane, Pleading Precedents, 6th ed (2009) Lawbook Co
Jenkins, Bullen & Leake’s Precedents of Pleadings, 10th ed (1950) Stevens & Sons
Lewison, The Interpretation of Contracts, 4th ed (2007) Sweet & Maxwell
Parkinson (ed), The Principles of Equity 2nd ed (2003) Lawbook Co
DECISION:
(1) Appeal allowed.
(2) Set aside the orders made on 9 April 2008 in the Court below.
(3) Third Respondent to pay the costs of the Appellant of the appeal, but to have a certificate under the Suitors' Fund Act 1951 if qualified.
(4) Remit the matter to the Commercial List of the Equity Division for retrial.
(5) Reserve the costs of the first trial, to abide the order of the judge who hears the new trial.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40190/08
SC 50151/07
ALLSOP P
BASTEN JA
CAMPBELL JA
5 AUGUST 2009
MASTERTON HOMES PTY LTD v PALM ASSETS PTY LTD & ORS
Judgment
1 ALLSOP P: I have read the reasons of Campbell JA. I agree with them, subject to some further comments upon the first of the specific matters referred to at the end of his Honour’s reasons dealing with the precedential status of the passage in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 ; 53 NSWLR 153 at 163 [24] about the use of pre-contractual conduct to construe contracts, in which Heydon JA (as his Honour then was) stated that such conduct is only admissible if the contract is ambiguous and if the conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term. The passage in Brambles to which Campbell JA refers at [112] relied on the judgment of Sir Anthony Mason in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24 ; 149 CLR 337 at 347-352, in particular at 352. Later cases in the High Court have indicated, with tolerable clarity, that one is entitled to give consideration to context, background and surrounding circumstances, without need to discover some textual ambiguity: K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48 ; 157 CLR 309 at 315 (where, though dealing with statutes, Mason J spoke of the “modern approach to interpretation”); Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; 218 CLR 451 at 461-462 [22] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52 ; 219 CLR 165 at 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; 234 CLR 151 at 160 [8] (Gleeson CJ) and 174 [53] (Gummow, Hayne, Heydon, Crennan and Kiefel JJ). Significantly, the reference in Pacific Carriers to Codelfa was to 350, not to 352.
2 In Synergy Protection Agency Pty Ltd v North Sydney Leagues’ Club Ltd [2009] NSWCA 140 , I said ( obiter ) at [22] the following (with which Tobias and Basten JJA agreed):
“[22] ... The primary judge, in his recital of principle ... appeared to adopt a principle that background or extrinsic material can only be examined once some textual ambiguity in the contract is revealed. This is not so: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; 223 ALR 560 at 573-574 [78] (Finn J), approved in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 ; Aust. Contract Reports 90-254 at 89,868 [107] (per Tobias JA, with whom Mason P and Campbell JA agreed at 89,851 [1] and 89,892 [257] respectively); see also K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48 ; 157 CLR 309 at 315 (per Mason J); and Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; 218 CLR 451 at 461-462 [22] (per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); and, with respect, the succinct but comprehensive identification of relevant authority by the Chief Justice in Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 at [7] - [13] .”
3 Unless and until the High Court identifies and corrects any perceived error in the approach taken by intermediate courts of appeal referred to by Campbell JA at [113] and by me in Synergy (that is Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; 223 ALR 560 at 53 [78] Finn J at first instance, approved on appeal [2006] FCAFC 144 ; 156 FCR 1 at 10-12 [45] - [52] , 22 [100] and 48 [238] and approved in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 ; 69 NSWLR 603 at 626 [107] and Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 ; Aust Contract Reports 90-274 at [7]-[13]), the position should be taken that the identification of ambiguity is not a precondition for examining contextual and background material otherwise legitimate to examine in furtherance of the construction and interpretation of a written contract.
4 BASTEN JA : I agree with the orders proposed by Campbell JA for the reasons his Honour has expressed. I also agree with the additional comments of the President.
5 CAMPBELL JA :
Nature of the Appeal
6 This appeal is from a judgment in the Commercial List of the Equity division of the Supreme Court: Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2008] NSWSC 274. It concerns whether the trial judge was right in the findings he made about the nature and terms of the legal obligations that came to be owed by the Third Respondent (Donovan Oates Hannaford Mortgage Corporation Limited) as a result of events that occurred on 8 December 2006 in the precincts of the Supreme Court of New South Wales. Those events culminated in the Court, by consent, making certain orders and noting certain undertakings.
7 The first and second respondents are now in liquidation, and took no active part in either the proceedings in the court below, or this appeal. I shall refer to them collectively as the “ Developers ”. The Third Respondent was third defendant in the court below.
Events Leading up to 8 December 2006
8 In the period 2003-2006 the Developers were registered proprietors of some land in Pemberton Street, Parramatta. During the period 2004-2006 the Developers engaged in a project of building nine townhouses and associated car parking upon that land, and causing a strata plan containing nine lots to be registered in relation to the land.
9 Title to the land which was being developed was under the Real Property Act 1900 , with the Developers being the registered proprietors. The Third Respondent was the financier of the project, and had two registered mortgages over the land to secure its advances.
10 The Appellant entered into a contract with the Developers under which the Appellant agreed to construct the buildings. The building contract identified the Third Respondent as the financier of the project, and made provision, in clause 2.29, that:
“If you default in payment of any monies which may be due and payable to us under the provisions of this Contract and such dispute continues for a period of 10 Business Days after we have made written demand upon you for payment, you hereby charge in favour of ourselves as a second ranking charge after the interest of the financier your interest in the land the subject of this Contract.
For the purpose of giving effect to the charge, you agree that we shall have a caveatable interest in the land the subject of the Contract as provided in Section 7D of the Home Building Act, 1989 . ”
11 The costs of the building project blew out. A progress claim that the Appellant made to the Developers on 22 March 2006 for $424,262.77 was not paid, nor was it contested within the mechanism provided by the Building and Construction Industry Security of Payment Act 1999 (the “ BACISOP Act ”).
12 The Appellant lodged a caveat, AC250662, over the titles of the development land on 20 April 2006. That caveat claimed an equitable interest pursuant to the building agreement between the Appellant and the Developers. It forbad the recording in the Register of any dealing other than a plan affecting the estate or interest claimed by the caveator.
13 The Appellant later obtained an adjudication of the payment claim under section 17 of the BACISOP Act , to the effect that the Appellant was entitled to payment of $418,526.54. The Appellant obtained a judgment in the District Court against the Developers for the adjudicated amount on 28 September 2006. Through a procedure the correctness of which it is unnecessary to examine, the Appellant also obtained a judgment against the Developers on 7 November 2006 in the Consumer Trader and Tenancy Tribunal, in the sum of $424,262.77. That judgment appears to be based upon the same unpaid progress claim as was the judgment in the District Court.
14 Meanwhile, registration of the strata plan had occurred, with the consent of the Appellant. The Third Respondent received the certificates of title to the individual lots in the strata plan on 3 October 2006.
15 On 6 November 2006 the Third Respondent served on the Appellant a lapsing notice concerning the caveat lodged on 20 April 2006. Mr David Glinatsis, a solicitor of Kreisson Legal, was by that time an external solicitor acting for the Appellant.
16 On 14 November 2006, Mr Glinatsis wrote to the Third Respondent, saying that the Appellant did not propose to take any steps to extend the operation of the existing caveat, but contending that the Appellant was entitled to lodge a caveat claiming the following interest:
“Equitable interest as chargee in the sum of $418,526.54 pursuant to the charge over the land created on 28 September 2006 as a result of a Judgment entered in the District Court proceedings number 4682/06 against the registered proprietors in the sum of $418,526.54”.
17 The letter implicitly accepted that section 7D Home Building Act 1989 did not enable any legal or equitable estate or interest in land to arise in respect of a debt owed to a builder that was not a judgment debt, but asserted that section 7D permitted there to be an equitable interest for the amount of a judgment debt once a judgment had been obtained. The letter invited the Third Respondent to consent to the lodgement of a caveat – a draft of which was enclosed in the letter – that claimed the equitable interest that I have mentioned in para [16] above. It stated that if that consent was not forthcoming by 9:00am on 16 November 2006, proceedings would be commenced seeking certain orders. That consent was not given.
18 As I understand it, the contention of the Appellant was that its charge became enforceable in the amount of the District Court judgment and on the day that the District Court judgment was obtained, that the Third Respondent had notice of that judgment and charge, and that thereafter the Third Respondent was not entitled to tack further advances onto its mortgage securities in priority to the charge of the Appellant.
19 The Appellant began proceedings in the Equity Division of the Supreme Court on 16 November 2006, and obtained leave for short service of those proceedings. The proceedings sought a declaration that the Appellant had a caveatable interest in the sum of $418,526.54 as chargee of each of the nine lots in the strata plan, and an order that it have leave to lodge a further caveat, claiming a somewhat more limited interest than that asserted in caveat AC250662.
20 The proceedings were returnable on 22 November 2006, and came before me, sitting as the Equity Division Duty Judge, on 22 November 2006. By that time the Appellant had evidently repented of its intention to take no further steps to extend the operation of the existing caveat, at least in the short term. I extended the operation of the Appellant’s caveat, by consent, until 8 December 2006, and stood the matter over to the Duty Judge’s List on 8 December 2006. I hasten to say that in this appeal my action in so doing is in no way controversial.
21 On 6 December 2006 the Appellant served Notices to Produce on each of the Developers, requiring them to produce the contracts for sale relating to units 1, 4, 5, 8 and 9 in the development.
22 On 21 November 2006 the Appellant’s solicitors served on the Third Respondent a Notice to Produce, requiring it to produce an extensive array of documents on 5 December 2006. On 27 November 2006 the Appellant served the Third Respondent with a Subpoena, requiring production of the same documents as had been referred to in the Notice to Produce.
23 As at 8 December 2006 the Developers had issued contracts to sell and received sales advices from their real estate agent for the proposed sale of units 1, 2, 3, 4 and 9. Those advices contemplated that 30% of the sales price would be paid for with “BBX dollar credits” . An amount of $174,000 was to be paid with BBX dollar credits for each of units 1-4 inclusive, and an amount of $166,500 was to be paid with BBX dollar credits for unit 9. According to a letter from the solicitor for one of the Developers, in response to the Subpoena served on that developer, none of the contracts had been exchanged.
24 The trial judge made the following finding, at [22], which neither party to the appeal criticises:
“BBX was a publicly listed barter company which used software, a web coordinator and electronic barter banking to enable individuals to trade goods and services throughout Australia and New Zealand. It was founded in 1993 and listed on the ASX. BBX facilitated the cashless trading of goods and services between member businesses: the trading which took place was underpinned by the principles of bartering, sometimes called ‘contra’. In essence BBX was a credit and debit card system (similar to other card systems) permitting member businesses to access a variety of goods and services in a less competitive marketplace. Using a currency known as BBX trade dollars, BBX allowed member businesses to conduct barter transactions.”
Uncontroversial Aspects of Events on 8 December 2006
25 Some of the events that occurred on 8 December 2006 are not the subject of any dispute. The matter was listed in the Duty Judge List before Young CJ in Eq (as his Honour then was) on that day. Three lawyers were present at court to represent the Appellant. They were Mr Geoff Moore, barrister, Mr Glinatsis, and Ms Assunta Maude. Ms Maude is an in-house solicitor for the Appellant.
26 The Third Respondent was represented at court by Mr Steven Miles, solicitor.
27 Mr Simon Newport was at the time the chief financial officer of the Appellant. He was not present at court on 8 December 2006, but Ms Maude had two telephone conversations with him to obtain instructions.
28 Mr Peter Hannaford is a solicitor, and also the managing director of the Third Respondent. He was not present at court on 8 December 2006, but Mr Miles had a telephone conversation with him on that day.
29 The legal representatives who had come to court established themselves in two conference rooms at the court, and had discussions extending over about three hours. It is common ground that those discussions resulted in agreement being reached.
30 Following the discussions between the various legal representatives on 8 December 2006, they co-operated in preparing a handwritten document containing draft orders and matters for the court to note. That handwritten document went through more than one draft before it reached its final form. The legal representatives of the parties handed the final version of the draft document to Young CJ in Eq, who initialled it and made orders and notes in accordance with it. The court’s record of those orders and notes is:
“Upon the Plaintiff by its counsel giving to the Court the usual undertaking as to damages,
BY CONSENT AND WITHOUT ADMISSIONS THE COURT ORDERS THAT:
1. The operation of Caveat AC250662 be extended to 5 pm 15 February 2007.
2. The proceedings be stood over to 15 February 2007 at 9.30 before Deputy Registrar.
3. The Notices to Produce served by the Plaintiff on the First and Second Defendants be stood over to 15 February 2007 at 9 am before Deputy Registrar.
4. The Notice to Produce and Subpoena for Production of Documents served by the Plaintiff on the Third Defendant to be stood over to 15 February 2007.
5. Costs reserved.
The Court further notes the following undertaking of the parties:
1. The undertaking of the Solicitor for the Third Defendant on behalf of the Third Defendant to the Court that in the event that any of the lots in the Schedules to the Summons are sold and a sale is completed then the Third Defendant will either:
(a) cause the First and Second Defendants to assign and/or transfer to the Plaintiff all BBX dollar credits (net of commission) reserved at settlement of each unit sold, provided that these credits are not less than BBX $100,000; or
(b) set aside the sum of $60,000.00 from the proceeds received on the discharge of its first mortgage or the proceeds received from any mortgagee sale of each unit sold into a fund to be held until agreement between the parties or until further order.
2. The agreement between the Plaintiff and the Third Defendant that the Plaintiff at settlement of any such sale will hand over at settlement a Withdrawal of Caveats in relation to the unit being sold.”
The Nature of the Dispute in the Court Below
31 By 15 February 2007 a dispute had arisen between the Appellant and the Third Respondent concerning what they had achieved on 8 December 2006. The judge described that dispute (at [21]) as being:
“i. [The Appellant] contends that:
a) the parties[‘] common intention was that sub paragraph (a) of the undertaking was to be mandatory: that is to say that the parties agreed that in the event that any of the 9 units in the development were sold and a sale completed whereunder BBX credits in excess of BBX $100,000 constituted part of the purchase price, then [the Third Respondent] was bound to take the action provided for in sub paragraph (a);
b) it was only where the credits available for assignment were in an amount less than BBX $100,000 that sub paragraph (b) would be activated.
ii. [The Third Respondent] contends that it at all times had a right to elect as between:
a) on the one hand to engage sub paragraph (a) in which event that election would be binding ( meaning that once [the Third Respondent] had paid BBX dollars across to [the Appellant] it could not somehow claim them back as only having been paid on an interlocutory basis ) (cf transcript 222.28)
b) on the other hand to engage sub paragraph (b) and to do so regardless of the fact that BBX credits in excess of $100,000 were available as constituting part of the purchase price on any particular units (in which event the agreement would only constitute an interim holding measure pending agreement between the parties or further order in the proceedings).” (Original italics)
32 The practical consequence of the different positions can be illustrated by reference to the contracts for sale of five units that were envisaged as at 8 December 2006. Under them, a total of $862,500 was to be paid in BBX dollar credits. If the Appellant’s contention were right, it would be entitled to receive all of those BBX dollar credits as the price of giving up its caveat and its claim to be paid $418,526.54 in ordinary Australian currency in priority to the Third Respondent. Further, if any of the remaining four units were sold for a price that included BBX credits in excess of BBX $100,000, the Appellant would be entitled to receive all of those BBX dollar credits as well. The Appellant would then be taking the risk that it might not be able to use the BBX dollar credits in a way that extracted from them their full face value.
33 By contrast, if the Third Respondent’s contention was right, it would always have, in relation to each unit sold, the right to obtain the release of the caveat upon setting aside $60,000 to abide resolution of the dispute about whether the Appellant had a security interest in the units that had priority over the mortgage of the Third Respondent. If the Third Respondent chose to exercise that option in relation to all nine units, the result would be that a fund of $540,000 was set aside, to provide a means of payment of the Appellant’s claim for $418,526.54 (presumably, plus interest and costs), if the Appellant succeeded in having the Court uphold that claim.
34 By the time the matter came to trial, the issues had been defined by pleadings. The relief claimed in the Appellant’s Amended Statement of Claim included:
“7. A declaration that by agreement dated 8 December 2006, between the [Appellant] and the [Third Respondent], the latter agreed that in consideration for the [Appellant], at settlement of any such sale handing over Withdrawal of Caveats in relation to the unit being sold, the [Third Respondent] would, where the number of BBX dollars credits (net of commission) reserved at settlement of any unit sold was not less than BBX $100,000, cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.
8. In the alternative to the previous paragraph, an order that the agreement dated 8 December 2006 between the [Appellant] and the [Third Respondent] should be rectified to provide that in consideration for the [Appellant], at settlement of any such sale handing over Withdrawal of Caveats in relation to the unit being sold, the [Third Respondent] would, where the number of BBX dollar credits (net of commission) reserved at settlement of any unit sold was not less than BBX $100,000, cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.
9. A declaration that the [Third Respondent] is able to cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold to the [Appellant].
10. A declaration that the number of BBX dollar credits (net of commission) reserved at settlement of each of the units sold up to 28 May 2007 (ie units 1, 2, 3, 4 and 9) was not less than BBX $100,000.
11. A declaration that the [Appellant], at the settlement of each of the units sold up to 28 May 2007 (ie units 1, 2, 3, 4 and 9,) handed over the Withdrawal of Caveats required to be handed over by the said agreement dated 8 December 2006.
12. A declaration that the [Appellant] is ready, willing and able to complete the said agreement dated 8 December 2006.
13. A declaration that the [Appellant] is entitled to have its agreement dated 8 December 2006 with the [Third Respondent] specifically performed.
14. An order that the [Third Respondent] specifically perform the agreement dated 8 December 2006 by causing the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.”
35 After referring to the discussions between the legal representatives of the respective parties on 8 December 2006, the Amended Statement of Claim continued:
“55. Following these discussions, by agreement dated 8 December 2006, the [Appellant] and the [Third Respondent] agreed that in consideration for the [Appellant], (at settlement of the sale of a townhouse erected on the Property,) handing over Withdrawals of Caveats in relation to the townhouse being sold, the [Third Respondent] would:
(a) Cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold, provided that these credits were at least BBX $100,000; or otherwise
(b) Set aside the sum of $60,000.00 from the proceeds received on the discharge of its first mortgage or the proceeds received from any mortgagee sale of each unit sold into a fund to be held until agreement between the parties or until further order. (“ the 8 December 2006 agreement ”)
Particulars
The 8 December 2006 agreement is partly oral and partly in writing. The written part is constituted by the terms of the undertakings of the parties which were noted by the Court on 8 December 2006. The Plaintiff seeks leave to refer to the Court orders made on 8 December 2006 in these proceedings as if [sic] is fully set out herein.
The oral part consists of the various conversations that took place on 8 December 2006 and which required as a term of the agreement the provision of the Undertaking by the [Third Respondent] in paragraph 1(a). The Undertaking contained in paragraph 1(b) was only included to cover the scenario where the BBX dollar credits available from the sale of a unit were less than BBX $100,000.00 for that unit.”
36 The Amended Statement of Claim then pleaded the manner in which, in the alternative, the Appellant sought that “the agreement actually reached on 8 December 2006 ... should be rectified” , the particulars of which were:
“(a) The [Appellant’s] agreement contained in paragraph 2 of the Court Orders dated 8 December 2006 was in consideration of the Undertaking contained in paragraph 1(a) and (b) of the Orders.
(b) The [Appellant’s] agreement as contained in paragraph 2 of the Orders was partly oral and partly in writing.
(c) The written part is constituted by the terms of the undertakings of the parties which were noted by the Court on 8 December 2006.
(d) The oral part consists of the various conversations that took place on 8 December 2006 and which required as a term of the agreement the provision of the Undertaking by your client in paragraph 1(a).
(e) The [Appellant] contends that the Undertaking contained in paragraph 1(b) was only provided in the event that the BBX dollar credits reserved at settlement of each Unit sold, were less than BBX $100,000.00.”
37 The Amended Statement of Claim went on to plead that the Appellant, in part performance of its obligations, had handed over withdrawals of caveats at the sale of each of the five townhouses, but that the Third Respondent had, in breach of the agreement, “repeatedly refused to cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each townhouse sold.” It pleaded the Appellant was ready willing and able to perform all its obligations under the agreement of 8 December 2006, and that it was entitled to have that agreement specifically performed.
38 (The pleading of part performance in the Amended Statement of Claim was premature, as part performance is a matter for the plaintiff in a specific performance suit to raise in reply, when and if the defence pleads that the agreement is unenforceable for lack of writing: Azize, El Khoury and Finnane, Pleading Precedents , 6 th ed (2009) Lawbook Co at 13; Jenkins, Bullen & Leake’s Precedents of Pleadings , 10th ed (1950) Stevens & Sons at 595n (a passage discarded in the methodical deletion in later editions of swathes of valuable collections of substantive law). Part performance is a matter to plead in reply because acts of part performance are circumstances that make it unconscientious for a defendant to rely on the statutory defence of lack of writing: Steadman v Steadman [1976] AC 536 at 558F-H per Lord Simon of Glaisdale, at 566E-F per Lord Salmon. Thus, the occasion to allege that there have been acts of part performance only arises once a defendant has pleaded lack of writing as a defence (see, eg, Broughton v Snook [1938] Ch 505 at 511-3 & esp 513 per Farwell J; May v Gibson (1970) 71 SR (NSW) 79 at 86B-C, 87A-D per Hope J (as his Honour then was); Steadman v Steadman at 544B-C per Lord Morris of Borth-y-Gest, at 565F-6B per Lord Simon of Glaisdale; In re Gonin [1979] Ch 16 at 30F per Walton J). As things eventuated, the defence did not raise any allegation of unenforceability of any agreement through lack of writing. However, this peculiarity of the pleadings does not affect the outcome of the appeal.)
The Scope of Evidence Called
39 The hearing below took two days, 25 and 26 March 2008. (The judgment coversheet is erroneous in identifying the hearing dates.) As well as receiving documentary evidence, the court heard oral evidence from Ms Maude, Mr Glinatsis, Mr Miles, and Mr Hannaford. An affidavit of Mr Newport was read without him being required for cross-examination. The evidence traversed in some detail the events involved in the negotiation at court on 8 December 2006. The documentary evidence included notes of various participants, and drafts that had been produced (but not necessarily shown to the opposite party) during the course of the negotiation.
40 Mr Moore did not give evidence. However, there was an express agreement between the parties that no adverse inference would be sought to be drawn from his failure to give evidence.
The Judgment Below
41 The judge (at [9]) identified the central issue in the proceedings as being one that:
“... concerns an arrangement given effect to by an undertaking given to the Court at interlocutory hearing. Both parties have addressed close submissions to the proper construction of the undertaking which constitutes the ground for [the Appellant’s] contractual claim in the proceedings.”
42 The judge also said, at [18]:
“[The Appellant’s] case is that an agreement was made on that day to resolve the issues between the parties, and which enabled [the Developers] and [the Third Respondent] to exchange and settle the existing sales contracts, and to sell the remaining units in the development. Its case is that following those discussions and in order to give effect to the agreement made, the Court was asked to note the following undertaking by [the Third Respondent’s] solicitor to the Court: [his Honour then set out undertaking 1 quoted at para [30] above.]”’
43 After setting out the uncontroversial background facts and identifying the issues in the manner I have set out above, the judge continued:
“23 The principles concerning the construction of written agreements are reasonably well known.
24 In this particular case it becomes necessary to treat with the following additional integers raised by [the Appellant]:
i. [the Appellant] contends that on a number of occasions following 8 December 2006, [the Third Respondent] made admissions consistent with the effect of the orders submitted by [the Appellant].
ii. [The Appellant] has an alternate case which is that the agreement reached on 8 December 2006 was partly oral and partly in writing.
iii. [The Appellant] has yet a further alternative case for rectification of the agreement.
25 [The Third Respondent] also contends that:
i. the rectified agreement is void for uncertainty on particular grounds;
ii. [the Appellant] is not entitled to specific performance for various reasons.”
44 The judge then set out (at [26]) various legal propositions that he said were “well established” concerning the construction of written documents. That statement of principle extended over a little more than four pages. There was further statement of principle (at [27]-[28]) relating to the operation of the parol evidence rule, and the objective approach to construction of contracts, occupying a further page. There then followed (at [29]-[34]) six pages setting out legal principles relating to rectification.
45 The judge said, at [35]:
“The claim to rectification meant that it was necessary to permit into evidence a spectrum of material which otherwise would have been unlikely to have been admissible on any basis. In order to succeed on the rectification issue, the [Appellant] was required to show that both parties intended, in their undertaking to the court of 8 December 2006, to commit to an arrangement whereby the [Third Respondent] would transfer to the [Appellant] all the BBX dollars received in every case where the amount of BBX dollars received as part of the purchase price for the sale of the unit exceeded $100,000. For clarity, this alleged agreement will be referred to below as ‘the non-elective agreement’ in contrast to the agreement which the [Third Respondent] alleges was made, in which they retained the power of election between the transfer of BBX dollars and putting money aside as an interim measure: ‘the elective agreement’.”
46 Following these remarks, his Honour referred to the scope of evidence that had been called concerning the negotiations, and concerning events after 8 December 2006.
47 The next section of the judgment below deals with the assessment of witnesses. His Honour said (at [39]) that it was a case “in which the assessment of witnesses provides limited assistance to the Court.” He was at pains to make clear that he regarded all the four main witnesses as attempting to give their best recollection of the relevant events. However, at [41] and [42] he made some findings relevant to credit:
“Ms Maude did not appear to be an objective witness whose recollection was unaffected by her client's interest. ...
Mr Glinatsis[’] evidence was coloured by the fact that he had not only read Ms Maude's version of events before giving his own evidence, but had in fact prepared Ms Maude's affidavit. Nor was he prepared to accept what seemed to be the compelling logic of the situation, which was that a possible reason for the production of the second undertaking was the fact that his document no longer reflected the intention of the parties. ...” (original emphasis)
48 Concerning Mr Miles, he found (at [44]):
“Mr Miles suffered from the difficulty that he was unable to say whether or not he had said to Ms Maude and Mr Glinatsis that [the Appellant] could have all the BBX Dollars. He also had difficulty in providing a satisfactory explanation for having written the letter to Mr Glinatsis on 10 February 2007. Having said that, there is no doubt but that the evidence which he gave was coherent and that he presented as quietly but firmly putting forward his best recollection at the time. These matters notwithstanding, he may well, even if only subliminally, have favoured his client’s interests on occasion.”
49 His Honour then went on to consider the evidence of the Appellant’s intention, and the evidence of the Third Respondent’s intention.
50 He then proceeded to an overview of the findings, noting, at [54] that:
“... there were extensive differences in the evidence as to what had happened on 8 December and in relation to their recollections of what they had believed had been the agreement reached and what exactly had been said in the precincts of the Court.”
51 His Honour turned to consider various documentary materials that could assist in resolving the differences, in particular the terms of the orders and notes that the court made on 8 December 2006, and a letter that Mr Glinatsis had written to Mr Miles on 17 January 2007 after its text was approved by Ms Maude. He considered whether the text of that letter supported the case that the Appellant was then presenting, namely that both Mr Glinatsis and Ms Maude were mistaken in misstating their understanding of the agreement in the letter. He considered whether Ms Maude’s evidence, that by the agreement made on 8 December 2006 the parties had finalised their dispute, could stand in light of the terms of the document presented to the court on 8 December 2006. He also considered whether any significance should be placed upon a draft that Mr Glinatsis had produced of a proposed undertaking that was clearly consistent with the version of the arrangement that the Appellant contended for, but differed from the form of undertaking ultimately given to the court. However, his Honour said (at [63]) that that particular matter “may be of little moment as Mr Miles was never shown this draft.”
52 Concerning the post-contractual conduct, his Honour said (at [67]) that “post-contractual conduct is not admissible on the question of what a contract means,” but is admissible on a question of whether a contract has been made at all. He ultimately concluded (at [73]) that the post-contractual conduct was “of little real assistance in terms of a determination of what were the terms of the agreement reached on the occasion in question.”
53 Next, his Honour referred (at [74]) to a submission that had been made by counsel for the Appellant about the way in which the words of the undertaking to the court could be read:
“It is important to understand that it is ‘either or’ in this sense: It is either going to go along this basis or it is going to go along this basis, but the basis, the course which is going to be chosen, depends on whether the sale involves a sale of BBX dollars of more than $100,000.
Can I read it a slightly different way using exactly the same words[?] (a) reads as follows: ‘Provided that the BBX credits in the sale are more than $100,000, then the [Developers] will cause the BBX dollars to be assigned or where the BBX dollars are not less than $100,000 then the fund is going to be set up.’ There’s the ‘either or’, your Honour.
So we say that really there is no ambiguity. It is an ‘either or’ because the ‘either or’ is going to be determined by the nature of the sale.”
54 His Honour said concerning this submission (at [75]-[76]):
“This construction places emphasis on the proviso in (a) and construes the word ‘or’ at the end of (a), as meaning ‘ or in the absence of the proviso .’ It constitutes an attempt by [the Appellant] to persuade the Court to construe the undertaking so as to remove the effect of the words ‘either’ and ‘or’ that had been inserted by the parties because these words were clearly mistakes.
It is trite that the Court has power to construe a document in the manner suggested if the word is clearly a mistake: Fitzgerald v Masters [1956] HCA 53 ; (1956) 95 CLR 420 and Nittan (UK) Ltd v Solent Steel Fabrication Ltd t/as Sargrove Automation [[1981] 1 Lloyd’s] Rep 633.”
55 He rejected this way of reading the undertaking by accepting the submission of the Third Respondent that (at [77]):
“i. such instances of construction to cope with mistakes arise where the offending words (or lack of them) causes ‘absurdity or inconsistency’ ( Fitzgerald at 426-427) or where the clerical error is obvious ( Holding & Barnes Plc v Hill House Hammond Ltd (No.1) [2001] EWCA Civ 1334 ; [2002] L & TR 7 (CA)).
ii. Where however the mistake is to the legal effect of a phrase or clause, rather than in the words themselves, then the remedy must be that of a rectification suit ( North Eastern Railway Company v Lord Hastings [1900] AC 260 ; Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 ; [2007] Aust Contract R 90-254 at [108] –[109] and AMEC Engineering Pty Ltd v Shanks [2001] SASC 257 at [23] ).”
56 He also, at [78], gave an additional reason for not accepting that way of reading the undertaking:
“The [Appellant’s] proposition clearly also suffers from the fact that Ms Maude gave evidence that she may have well said the exact words that appear in final form of the Undertaking.” (Original emphasis)
57 The judgment then, under the heading “conclusion” , said:
“79 Ultimately the proceedings require to be determined by a principled approach to the respective cases. Many of these cases present real difficulties to the court particularly where, as here, witnesses called by the [Appellant] give evidence of such strong beliefs as to the spirit and intent of the negotiations and of their not having been a shadow of a doubt that the non-elective agreement was reached.
80 [The Appellant] has simply not discharged the onus of proof which lies upon it to prove its case.
81 The undertaking does not yield to the construction for which [the Appellant] contends. The rectification claim fails the requirement that there be clear and convincing proof that the parties held a common intention contrary to the words of the instrument. Whilst it seems clear that [the Third Respondent] intended to pursue the route provided for in sub clause (a), this was not, when one reads the instrument, ultimately mandatory. And the claim that the instrument was really only part of a partially written and partially oral contract is not made out.
82 For all the morass of evidence and all the heat of the respective cross examinations, the task of the Court is to quietly and carefully stand back from the whole of the matter and to assess the strengths and weaknesses of the respective cases. Having attended to that exercise the holding is that [the Appellant’s] case has not been made out and requires to be dismissed.”
The Case Presented Below
58 I have set out in some detail the way that the reasoning in the judgment proceeded, as it needs to be compared with the case that was presented below.
59 In accordance with the procedure frequently adopted in the Commercial List, each party provided an outline of submissions to the opposite party and to the court shortly before the hearing began.
The Appellant’s Opening Written Submissions
60 The Appellant’s outline of submissions, dated 17 March 2008, summarised its contentions about the assertions that had been made by the legal representatives of the Appellant and the Third Respondent respectively during the discussions on 8 December 2006. After referring to the terms of the undertaking given to the court on that day, the submissions said, at [31]:
“Primarily, the [Appellant] contends that upon its proper construction, the Short Minutes of Order dated 8 December 2006 should be construed as imposing upon the [Third Respondent], where the credits were not less than BBX $100,000, an obligation to cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.”
61 It set out various textual matters in the undertaking that it submitted gave rise to that construction.
62 After making submissions about some admissions alleged to arise from events after 8 December 2006 the following appeared:
An alternative contention that the agreement reached on 8 December 2006 was partly oral and partly in writing
37. Primarily, the [Appellant] contends that upon its proper construction, the Short Minutes of Order dated 8 December 2006 should be construed as imposing upon the [Third Respondent], where the credits were not less than BBX $100,000, an obligation to cause the [Developers] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.
38. If the Court is minded to reject this primary contention, then the [Appellant] contends that by an agreement dated 8 December 2006, which was partly in writing and partly oral, the [Appellant] and the [Third Respondent] reached the agreement primarily contended.
39. The written part is constituted by the terms of the undertakings of the parties which were noted by the Court on 8 December 2006.
40. The oral part consists of the various conversations that took place on 8 December 2006 and which required as a term of the agreement the provision of the Undertaking by the [Third Respondent] in paragraph 1(a). The Undertaking contained in paragraph 1(b) was only included to cover the scenario where the BBX dollar credits available from the sale of a unit were less than BBX $100,000.00 for that unit.”
63 The submissions then argued for “A further alternative contention that the agreement reached on 8 December 2006 should be rectified in the manner contended” .
The Third Respondent’s Opening Written Submissions
64 The Third Respondent’s opening outline of submissions dated 19 March 2008 (which were not cast in the form of a response to the plaintiff’s opening submissions) presented a different view of what the issues in the case were to that which had been presented by the Appellant’s opening written submissions. The Third Respondent’s opening written submissions began by saying:
The Agreement
1 This case concerns the proper construction of a written undertaking which was handed up to the Court on 8 December 2006 at an interlocutory stage in the proceedings (“the Agreement”) ...
2. The Agreement is recorded as a note to Short Minutes of Order made on 8 December 2006 by Young CJ in Eq ...”
65 Having defined “the Agreement” in this way, the opening submissions then were repeatedly made by reference to that defined term. They addressed its construction by reference to the principles for construction of written contracts, and then went on to consider whether “the Agreement” could be rectified. Those submissions did not address any case that the arrangement (to use a neutral term) that the parties reached on 8 December 2006 was an agreement that was partly oral and partly written.
The Appellant’s Closing Written Submissions
66 Each party also presented the judge with closing written submissions.
67 Those of the Appellant included the following (at [7]):
“The events of 8 December 2006, and the proper construction of the undertaking given to the Court, are the core issues in dispute in these proceedings. [The Appellant’s] case is that an agreement was made that day to resolve the issues between the parties, and which enabled [the Third Respondent] to settle the existing sale contracts, and to sell the remaining units in the development.”
68 The submissions went on to set out various principles of construction, drawing extensively from cases concerned with construction of written agreements, but in the course of so doing making some more general submissions concerning language use, including that (at [11]):
“... words may seem clear and unambiguous when read in isolation, but may seem quite unclear and ambiguous when one knows the context in which they were used.”
69 The submissions concluded that discussion of principle by saying (at [28]):
“... the Court need not find any ambiguity within the four corners of the undertaking recording the agreement before it is permitted to have regard to the discussions between the parties on 8 December 2006 to determine the real nature of the agreement between the parties, the proper construction of the undertaking which [the Third Respondent’s] solicitor gave, and intended to give, the Court to give effect to that agreement.”
70 The submissions then approached the task of construing the undertaking using two different methodologies. The first was if one ignores the context in which the undertaking was reached. Approaching the matter that way, the Appellant submitted (at [32]):
“... upon its proper construction, the Short Minutes of Order dated 8 December 2006 should be construed as imposing upon [the Third Respondent], where the credits were not less than BBX $100,000, an obligation to cause [the First Respondent] to assign and/or transfer to the [Appellant] all BBX dollar credits (net of commission) reserved at settlement of each unit sold.”
71 It then set out various textual matters in support of the construction advanced by the Appellant. It also said (inconsistently with the methodology of ignoring the context) (at [33]):
“(e) this construction of the undertaking is consistent with [the Appellant] being told that the $BBX were considered to have no value to [the Third Respondent], whereas [the Third Respondent] was not prepared to part with ‘real money’ without [the Appellant] justifying its entitlement.”
72 It set out various arguments why the construction advanced by the Third Respondent should be rejected.
73 The submissions then turned to the second methodology, which involved construing the undertaking in the light of its context, and also making submissions about the agreement that had been made on 8 December 2006, without limiting what counted as “the agreement” to the writing that eventually became orders and notes of the court. The submissions said, at [34]-[35]:
“... there is no doubt as to the agreement reached between the parties on 8 December 2006. The undertaking was the document intended to provide a written record of that agreement, or alternatively to evidence the agreement made. The parties adopted the undertaking to the Court as a means of securing its performance by [the Third Respondent].
The Court must construe the undertaking in its proper context, namely as providing a documentary record of an agreement, and providing the means for its enforcement. Therefore, the Court must construe the undertaking only after making the appropriate findings (ie finding the context) as to the nature and effect of the agreement made on 8 December 2006. [The Appellant] respectfully submits that there is no ambiguity in the undertaking, once it is construed in this way, as it should be.”
74 The submissions then went into the detail of the evidence, arguing for the conclusion stated at [37] that:
“... on the probabilities, there was an agreement reached on 8 December 2006, on the terms which [the Appellant] submits, and that the undertaking was to document and give effect to that agreement.”
75 The submissions then went on to argue that the subsequent conduct of Messrs Miles and Hannaford provided a reason for rejecting the evidence that they gave concerning the events of 8 December.
76 The balance of the written submissions was taken up with submissions concerning rectification. The basis on which the rectification submissions were put was stated at [60] to be:
“If, contrary to the above submissions, the Court does not accept that the agreement reached on 8 December 2006 is open to the construction propounded by the [Appellant] but does accept that the common intention of the parties on 8 December 2006 was that there be an agreement as propounded by the [Appellant], then the Court should rectify the agreement to reflect the common intention of the parties on 8 December 2006.”
77 The submissions on rectification occupied less than a page (in a document of 24 pages).
78 The written submissions concluded with a submission that damages were an inadequate remedy.
The Final Written Submissions of the Third Respondent
79 The final written submissions of the Third Respondent stated its view of the issues, and advanced a definition (at [1]):
“This case concerns the proper construction (or rectification) of a written undertaking, which was handed up to the Court on 8 December 2006 at an application to extend a caveat before the Duty Judge (“the Agreement”).”
80 Those submissions, and a set of supplementary written submissions of the Third Respondent dated 28 March 2008, made some detailed submissions about the evidence and the credibility of witnesses, though leading to a submission that “the Court’s opinion of the witnesses is of very limited assistance to it in this particular matter” . It is not necessary to go into the detail of the Third Respondent’s written submissions any further for the purpose of this appeal.
Oral Submissions of the Appellant
81 In his oral submissions, senior counsel for the Appellant continued to submit that, construing the undertaking on its own, it was not ambiguous, and bore the meaning for which the Appellant contended. He continued, at TP 209:
“Secondly, if it is not the English, it is because of the context, along the West Bromwich line of authority. Why? Because your Honour has evidence that that was the agreement, evidence of Mr Glinatsis and Ms Maude ...”
82 Senior counsel for the Appellant referred the judge, at TP 210, to a passage in Parkinson (ed), The Principles of Equity , 2 nd ed (2003) Lawbook Co at p 974, where Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 was cited as authority for the proposition that, amongst the multitude of instruments other than contracts that can be rectified, a consent order is capable of being rectified.
The Grounds of Appeal – The Agreement Found
83 The Notice of Appeal alleged five different respects in which the judge had erred. However the Appellant’s written submissions dealt together with the four grounds numbered 1, 2, 4 and 5. Those grounds all related to the judge’s findings about the agreement made on 8 December 2008. They included that the judge: had erred in his determination of the terms of the agreement made on 8 December; should have found that the agreement was on the terms for which the Appellant contended; and had erred by failing to give proper weight or appropriate weight to the evidence as to the events on 8 December 2006.
84 The Appellant’s written submissions on appeal submitted:
“His Honour should have weighed up the [sic] assessed the whole of the evidence of Ms Maude, Mr Glinatsis and Mr Newport on the one hand against the evidence of Mr Miles on the other to determine whether the parties made the agreement as contended for by the Appellant or the agreement contended for by the [Third] Respondent. His Honour did not undertake that exercise, and did not give proper regard to Mr Newport’s evidence.”
85 In my view, that submission should succeed.
86 The only agreement that the Appellant pleaded was one that was partly oral and partly in writing. Beyond the judge’s conclusion at [81] of the judgment, that “the claim that the instrument was really only part of a partially written and partially oral contract is not made out” , there was no mention in the judgment of the Appellant’s contention that the contract was partly written and partly oral. The evidence concerning what had transpired in the negotiations was before the judge, but he did not resolve it. While he made some findings concerning credibility of evidence (which I have referred to at paras [47]-[48] above), he nowhere says that any witness’ evidence is totally rejected. He makes no findings about which of the disputed statements alleged to have been made on 8 December 2006 were made, and consequently there is no analysis of whether there was, or was not, a partly written and partly oral contract.
87 The course of development of the judge’s reasoning involved at some places a presupposition that there was an agreement wholly in writing. His reference in para [23] to the “principles concerning the construction of written agreements” would have application, as so described, only if it had been found, or conceded, that what was involved here was a written agreement. Many of the actual principles quoted at para [26] of the judgment are explicitly ones that apply to written contracts. The principles concerning the parol evidence rule that the judge quoted could be applicable only if it had first been found that the agreement here was one that was wholly in writing (see para [90] below). Similarly, his Honour’s remark at [35] that the claim to rectification let into evidence material that otherwise would have been unlikely to have been admissible on any basis seems to presuppose that the agreement in question in this case was not one that was partly written and partly oral.
88 While it was common ground between the parties that they had reached an agreement on 8 December 2006, that common ground did not extend to whether the agreement was wholly in writing, or partly written and partly oral. (Neither party contended that it was wholly oral.) Deciding whether the agreement was wholly in writing, or partly written and partly oral, was a necessary first step in analysing the legal relations between the parties that arose on 8 December 2006.
89 The common ground was not explicit about whether the agreement that was reached on 8 December was itself a contract, rather than a consensus of a non-contractual type, but the flavour of the submissions below seems to assume that the agreement was a contractual one.
90 The principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing, or partly written and partly oral, include the following:
(1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties: Gillespie Brothers & Co v Cheney, Eggar & Co [1896] 2 QB 59 at 62 per Lord Russell of Killowen CJ; Gordon v Macgregor [1909] HCA 26 ; (1909) 8 CLR 316 at 319-20 per Griffith CJ (with whom O’Connor J agreed), at 322-3 per Isaacs J; Hoyt’s Pty Ltd v Spencer [1919] HCA 64 ; (1919) 27 CLR 133 at 143-4 per Isaacs J (with whom Rich J agreed); Maybury v Atlantic Union Oil Co Ltd [1953] HCA 89 ; (1953) 89 CLR 507 at 517 per Dixon CJ, Fullagar and Taylor JJ; State Rail Authority (NSW) v Health Outdoor Pty Ltd (1986) 7 NSWLR 170 at 191G-2C per McHugh JA (with whom Kirby P at 172G-3C and Glass JA at 180G agreed on this point); Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 ; (2001) 117 FCR 424 (FC) at 505-6 [280] - [281] , 509 [293] per Allsop J (with whom Drummond and Mansfield JJ agreed); Jessop v McInteer [2003] QCA 170 (FC) at [53] per Muir J (with whom Fryberg J agreed).
(2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing: Gillespie Brothers at 62 per Lord Russell of Killowen CJ; Gordon v Macgregor at 319-20 per Griffith CJ, at 323 per Isaacs J; Hoyt’s v Spencer at 143-4 per Isaacs J; Hope v RCA Photophone of Australia Pty Ltd [1937] HCA 90 ; (1937) 59 CLR 348 at 357 per Latham CJ; Maybury v Atlantic Union Oil at 517 per Dixon CJ, Fullagar and Taylor JJ; Health Outdoor at 191D-F per McHugh JA; Carmichael v National Power Plc [1999] UKHL 47 ; [1991] 1 WLR 2042; [1999] 4 All ER 897 (UKHL) at WLR 2047B-D, F-H; All ER 901e-g, 901j-2b per Lord Irvine of Lairg LC (with whom Lords Goff of Chieveley, Jauncey of Tullichettle and Browne-Wilkinson agreed), at WLR 2049C-D, 2050B-D; All ER 903e-g, 904e-h per Lord Hoffmann (with whom Lords Goff of Chieveley and Jauncey of Tullichettle agreed); Saad v TWT Ltd [1998] NSWCA 199 at 6 per Handley JA (with whom Priestley and Powell JJA agreed); Jessop v McInteer at [51] per Muir J; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471 at 483-4 [35] - [36] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ. Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them: NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 77A-B per Gleeson CJ and Handley JA.
(3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing: Turner v Forwood [1951] 1 All ER 746 (EWCA) at 749F per Denning LJ; Heath Outdoor at 191E, 192A-C per McHugh JA; Norwest Beef Industries Ltd v Peninsular and Oriental Steam Navigation Co (1987) 8 NSWLR 568 at 570B-C per Hope JA (with whom Samuels JA agreed); NSW Cancer Council v Sarfaty at 76G per Gleeson CJ and Handley JA; Branir v Owston Nominees at 508 [287] per Allsop J; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [8] per Spigelman CJ; Nicolazzo v Harb [2009] VSCA 79 at [90] per Dodds-Streeton JA (with whom Ashley and Neave JJA agreed).
(4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact: Moore v Garwood [1849] EngR 1122 ; (1849) 4 Exch 681 at 689-90; [1849] EngR 1122 ; 154 ER 1388 at 1391-2; 80 RR 738 at 745-6 per Patteson J delivering the judgment of the Court of Exchequer Chamber; Stones v Dowler (1860) 29 LJ Ex 122 at 124; 121 RR 882 at 884 per Martin B; Bolckow v Seymour [1858] EngR 873 ; (1864) 17 CB NS 107 ; 144 ER 43 ; 142 RR 272 at CB NS 121-2; ER 49 ; RR 282 per Byles J, at CB NS [1862] EngR 1021 ; 122; ER 49 ; RR 282 per Keating J; Palmer v Bank of Australasia (1895) 16 NSWLR (L) 219 at 223-4 per Darley CJ, Windeyer and Cohen JJ (affirmed on a different ground on appeal to the Privy Council in Bank of Australasia v Palmer [1897] AC 540) ; Deane v The City Bank of Sydney [1904] HCA 44 ; (1904) 2 CLR 198 at 209 per Griffith CJ, Barton and O’Connor JJ; J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078 at 1083E-F; [1976] 2 All ER 930 at 935a-b (EWCA) per Roskill LJ; Handbury v Nolan (1977) 13 ALR 339 (HCA) at 341 per Barwick CJ, 348-9 per Jacobs J, (Aickin J agreed with both Barwick CJ and Jacobs J), at 346 per Stephen J (but dissenting as to whether the evidence established a partly written and partly oral agreement), (Gibbs J agreed with Stephen J); Finucane v NSW Egg Corporation (1988) 80 ALR 486 (FCA) at 520-1 per Lockhart J; Carmichael v National Power at WLR 2049C-50E; All ER 903f-4h per Lord Hoffmann; Lewison, The Interpretation of Contracts , 4 th ed (2007) Sweet & Maxwell at [4.02] and cases there cited. Similarly, finding the terms of a wholly oral contract is a question of fact: Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532 per Jordan CJ (with whom Nicholas J agreed); Torbett v Faulkner [1952] 2 TLR 659 (EWCA) at 661 per Romer LJ; Handbury v Nolan at 346 per Stephen J (with whom Gibbs J agreed); Maggs v Marsh [2006] EWCA Civ 1058 ; [2006] BLR 395 at [26] per Smith LJ (with whom Moses and Hallett LJJ agreed).
(5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are: Stones v Dowler at LJ Ex 124; RR 884 per Martin B; Deane v The City Bank of Sydney at 209 per Griffith CJ, Barton and O’Connor JJ; Handbury v Nolan at 341-2 per Barwick CJ, at 346 per Stephen J, at 348-9 per Jacobs J; Liverpool City Council v Irwin [1976] UKHL 1 ; [1977] AC 239 at 253C-E per Lord Wilberforce. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances: Deane v The City Bank of Sydney at 209; Handbury v Nolan at 341-2, 346, 348-9. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: County Securities v Challenger Group Holdings at [7]-[8] per Spigelman CJ.
(6) A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract: J Evans & Son v Anthony Merzario at WLR 1083C-E; All ER 934h-5a per Roskill LJ, at WLR 1084H; All ER 936c per Geoffrey Lane LJ; Hoyt’s v Spencer at 144-5 per Isaacs J; Equuscorp v Glengallan Investments at 484 [36] per Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ.
91 Mr Corsaro SC, counsel for the appellant, submitted that this Court should overturn the findings of the judge and replace them with its own findings. If one tries to start on that enterprise, it seems a sound inference that the parties agreed that they would co-operate in requesting the court to make orders and notes in accordance with the document they prepared.
92 If one then enquires whether that document appears on its face to be a complete contract, it seems to me that it is possible that on its face it contains a complete contract, but it is not clear that it is (or includes) a self-contained contract.
93 The document opens with one party giving to the Court an undertaking as to damages. An undertaking to the court (of which undertakings as to damages a sub-class) is a fundamentally different type of juristic entity to a contract: Evans & Associates v European Bank Ltd [2009] NSWCA 67 ; (2009) 255 ALR 171 at 181-2 [38] - [42] .
94 The next five numbered paragraphs of the document are court orders. Court orders are fundamentally different to contracts (though they, like undertakings, can be the product of contracts). They are said to be made by consent, but the consent would ordinarily be expected to arise from events outside the document.
95 Of the numbered undertakings that the Court then noted, the first was another undertaking given by just one party to the Court. Like the undertaking as to damages, it is a fundamentally different type of juristic entity to a contract.
96 The second undertaking noted was an undertaking in the sense that it was an undertaking between the parties, not an undertaking to the Court. There is no difficulty about such an undertaking between parties being itself contractual. However that particular undertaking is one that requires action by the Appellant alone, in handing over a withdrawal of caveat at settlement. It would not be a strained interpretation of the document to treat that promise by the Appellant as given in consideration of the Third Respondent’s giving its undertaking to the Court, and a contract consisting of a promise made by A in consideration of B performing an action (like giving an undertaking to the Court) is quite possible. But the language of the document would also be consistent with the document being entered pursuant to an agreement not all the terms of which appear in the document itself (see, eg, Jessop v McInteer at [9] per McPherson JA).
97 Without findings about what the parties said to each other, it is not possible to go further. In general terms, one can say that an undertaking to the Court could be given pursuant to a contractual agreement that has been arrived at to settle litigation, or to settle a particular claim made in litigation. It would be a matter of analysis of the particular agreement whether the giving of the undertaking was a condition precedent for the rest of the agreement coming into operation.
98 Equally, however, an undertaking could be given to the Court to implement a consensus – not in itself contractual – that had been arrived at between parties to litigation, or it could be given as the unilateral act, not required by any contract or non-contractual consensus, of one of the parties to litigation. Whether the undertaking as to damages or the undertaking numbered 1 was given in performance of a contract would depend upon findings about the circumstances in which it came to be given. When the evidence about what the parties said to each other is conflicting, it is not possible for us to resolve that conflict from the transcript. The judge’s view was that assessment of the witnesses provided “limited assistance” , not that it provided no assistance. Thus, this Court cannot make the findings of fact that Mr Corsaro seeks.
How the Judge Treated Mr Newport’s Evidence
99 The Appellant submits that the judge should have accepted Mr Newport’s evidence when it was not cross-examined on, and should then have taken it into account in deciding what contractual arrangement had been entered.
100 In his affidavit, Mr Newport deposed to having had two telephone conversations with Ms Maude on 8 December 2006. In the first of them she told him that the matter was stood down in the list and discussions were going on, and she enquired whether the Appellant would consider accepting BBX$ instead of $A. He told her that, though it was not ideal, the Appellant would be prepared to consider accepting them as part of a settlement being reached.
101 His evidence was that the second conversation occurred a short time later that morning when Ms Maude called him and said:
“Steven Miles, has told me that his client has no use for BBX$ and they would be prepared for [the Appellant] to have the benefit of all those BBX$. But if there is any sale where the amount of the BBX$ is less than BBX$ 100,000 then they are prepared to set aside from that sale price $60,000 to be held until all the units are sold. After that it will have to be determined whether [the Appellant] is entitled to those cash funds in priority to [the Third Respondent]. But if we get all the BBX$ there will not have to be an argument about priority. They will get cash funds we agree to the BBX$ and the whole matter can be resolved.
Simon, I know you are not too happy with this proposal but it will mean we can all get on with our lives, we will get enough BBX$ to cover the debt and all our costs and will avoid protracted litigation and costs.”
102 Mr Miles said he would leave it to her.
103 The judge recounted the substance of this evidence in his judgment at [48]. However, this was in a portion of the judgment that was dealing with the evidence of the intention of the Appellant.
104 The evidence of Mr Newport was admitted on the basis that it was first-hand hearsay, but without any restriction on the use that could be made of it. The expression “first-hand hearsay” picks up the terminology used in sections 62-68 Evidence Act 1995 . There is no notice of cross-appeal relating to the admission of the evidence. In those circumstances it is not appropriate to give further consideration to the basis on which the evidence was admitted.
105 While the evidence was not cross-examined on, that does not necessarily mean that the judge was obliged to accept it. A judge can reject evidence that has not been cross-examined on if, for example, it was inconsistent with other evidence that he accepted, or if it was inherently incredible: Sullman v Sullman [2002] NSWSC 169 ; [2002] DFC ¶95-248 (77,468) at [304]-[306]; Caldwell v J A Neilson Investments Pty Ltd [2007] NSWCA 3 ; (2007) 69 NSWLR 120 at 135 [96] ; Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 586-8. Nor did the rule in Browne v Dunn (1893) 6 R 67 prevent the judge from rejecting the evidence. That is because Ms Maude had given her evidence on affidavit in advance of the trial (including an account of the conversation with Mr Miles that she told Mr Newport about), and Mr Miles had replied to that affidavit in advance of the trial. Mr Miles’ reply included denying that his client was prepared for the Appellant to receive the benefit of all the BBX dollars as BBX dollars were of no use to it, and saying that he did not agree to any proposition that removed his client’s ability to choose whether to take BBX dollars or set aside cash. Exchange prior to trial of affidavits that disclose the position of the respective parties concerning a particular evidentiary matter can prevent a Browne v Dunn point being successfully raised: West v Mead [2003] NSWSC 161 ; (2003) 13 BPR 24,431 at [95]-[99]. Thus, I do not accept that the absence of cross-examination required the judge to accept Mr Newport’s evidence.
106 The Appellant also submits on the appeal that, because his Honour considered Mr Newport’s evidence only in relation to the intention of the Appellant, the judge “had no regard to its relevance to the Appellant’s objective expression of its intentions to Mr Miles.”
107 I would not regard the fact that the judge recounted Mr Newport’s evidence in the context of considering rectification as enough in itself to lead to the conclusion that the judge did not have regard to its relevance to the Appellant’s objective expression of its intentions to Mr Miles. While the intention that is relevant to the remedy of rectification is the subjective intention of the parties, that intention must also be a common intention. While it is possible for parties to have a common intention in ways other than having communicated their subjective intentions to each other ( Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 ; (2007) 69 NSWLR 603 at 660 [281] ), in the present case, the case that the Appellant was presenting was that a common intention had been formed through what the parties said to each other in the course of the discussions on 8 December 2006. I would not regard the context in the judgment in which the judge recognised the substance of Mr Newport’s evidence as in itself leading to a conclusion that he left it out of an evaluation of what the parties had communicated to each other on 8 December 2006.
108 However, the fact remains that the judge did not say whether he actually accepted Mr Newport’s evidence, or what (if any) significance it had (if accepted) for any findings about what the agreement was that was entered on 8 December 2006. Dealing with the case that the Appellant presented required that to be done.
The Grounds of Appeal – Construction of Undertaking No. 1
109 The third ground of appeal related to the judge’s construction of the first of the numbered undertakings. A contention that the Appellant wished to advance was that the construction it favoured was the correct one when the undertaking was construed in the light of the surrounding circumstances. It is well established that in construction of consent orders evidence of surrounding circumstances is admissible: Rogers v Wentworth (NSWCA, 18 April 1988, unreported), at 18-19 per Hope JA (with whom Samuels JA agreed) at 6-8 per Mahoney JA; S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358 at 387D-E per Priestley and Clarke JJA; Kirkpatrick v Kotis [2004] NSWSC 1265 ; (2004) 62 NSWLR 567 at 573-5 [39] - [45] ; Athens v Randwick City Council [2005] NSWCA 317 ; (2005) 64 NSWLR 58 at 70 [28] per Hodgson JA (with whom Santow and Tobias JJA relevantly agreed). The same principles would apply to the construction of an undertaking given to the Court consensually. (It is not necessary for present purposes to consider the extent to which surrounding circumstances can be resorted to concerning undertakings generally).
110 The particular surrounding circumstances to which the Appellant wished to point as assisting in construction of the undertaking were matters that the parties made known to each other in the course of the negotiations. It is not possible for this Court to carry out that construction exercise when findings have not been made about whether the surrounding circumstances on which the Appellant seeks to rely were ones that actually existed.
Conclusion and Orders
111 In these circumstances, I can see no alternative but for the matter to be re-tried. In circumstances where the trial judge has already formed and expressed some views concerning credit of witnesses, there may be a question in future about whether that trial should be before a different judge. Against that, the trial judge is already familiar with the evidence, and the amount involved is unlikely to be at the high end of the range of sums about which litigation occurs in the Commercial List. It is better to leave it to the parties and the ordinary processes of the Commercial List to decide who should hear the new trial, and whether the evidence at the trial that has already occurred should be treated as evidence at the new trial.
112 There are two specific matters that I should mention, which may be relevant on the retrial. The first is that in the course of stating principles relating to construction the judge said, at [27]:
“In Brambles [ Holdings Ltd v Bathurst City Council [2001] NSWCA 61 ; (2001) 53 NSWLR 153] Heydon JA stated (at 163 [24]):
‘...pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 347-352.’”
113 I doubt that that states the present Australian law. In Maggbury Pty Ltd v Hafele Pty Ltd [2001] HCA 70 ; (2001) 210 CLR 181 at 188 [11] Gleeson CJ, Gummow and Hayne JJ adopted part of the statement of Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28 ; [1998] 1 WLR 896 at 912H; [1997] UKHL 28 ; [1998] 1 All ER 98 at 114g-h concerning the manner of interpreting a written contract that made no mention of any need for there to be ambiguity before surrounding circumstances could be looked at. Other statements by the High Court in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 at 461-2 [22] , Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at 179 [40] and International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at 160 [8] and 174 [53] all give general accounts of the principles for construction of contracts that make no mention of ambiguity being a precondition for resort to surrounding circumstances. Some courts below the High Court have also adopted the approach that one does not need to find ambiguity before being able to use surrounding circumstances as an aid to construction: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 ; 56 ACSR 263 at [78] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144 ; (2006) 156 FCR 1 at 10-12 [45] - [52] , 22 [100] and 48 [238]; Ryledar v Euphoric at 626 [107]-[109].
114 The second matter that I mention, without deciding, is that there is English authority that the rule whereby subsequent conduct cannot be used as an aid to construction of a contract does not apply to a contract that is partly written and partly oral: Stones v Dowler at LJ Ex 124; RR 884 per Martin B; Carmichael v National Power at WLR 2047C; All ER 901f per Lord Irvine of Lairg LC, at WLR 2050H-1C; All ER 905c-f per Lord Hoffmann; Maggs v Marsh at [25]-[26] per Smith LJ (with whom Moses and Hallett LJJ agreed); Lewison, The Interpretation of Contracts , at [3.15]. In County Securities v Challenger Group Holdings at [18]-[28] Spigelman CJ accepted that subsequent conduct could be an aid to identification of the subject matter of a contract, and identification of “necessary terms which were not the subject of express provision in a contract not reduced to writing” . That view of the Chief Justice was not expressly agreed with (though neither was it disagreed with) by the other judges in County Securities , Beazley and McColl JJA. There is also some authority that subsequent conduct can be looked at to identify the terms of a contract not wholly in writing in Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226 at 238 per Thomas J, and in Sydney Hawthorne and Plastec Australia Pty Ltd v Harris [1995] FCA 1094 at [10] (sub nom Re Combined Security Systems & Designs Pty Ltd (unreported, Federal Court of Australia, Drummond J, 28 February 1995) at 6). Though the Australian position is not yet completely settled, there is a significant body of Australian authority, some of which is collected in Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 ; [2007] Aust Contract Reports ¶90-263 (90,058) at [59], and including authority in this Court, in favour of the view that subsequent conduct cannot be looked at as an aid to construction of a contract. The cases that favour the more restrictive view of the availability of subsequent conduct as an aid to construction would need to be looked at to decide whether the statements of principle in them were made in a context where it was a contract wholly in writing that was being considered. As well, there is (to put it neutrally) room for debate about whether it is appropriate ever to talk about “construction” of a contract not wholly in writing. When the availability of subsequent conduct as an aid to finding the terms of a partly written and partly oral contract has not been argued in the present case, and when the course that in my view this case must in future follow is such that it might (or might not) hereafter be decided that the contract in the present case is partly written and partly oral, it is not appropriate to discuss the matter further.
115 I propose the following orders:
(1) Appeal allowed.
(2) Set aside the orders made on 9 April 2008 in the Court below.
(3) Third Respondent to pay the costs of the Appellant of the appeal, but to have a certificate under the Suitors' Fund Act 1951 if qualified.
(4) Remit the matter to the Commercial List of the Equity Division for retrial.
(5) Reserve the costs of the first trial, to abide the order of the judge who hears the new trial.
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LAST UPDATED:
6 August 2009