Peter Robinson v Kim Maree Day Sca [1992] ACTSC 20; (1992) 106 FLR 423 (4 March 1992)

SUPREME COURT OF THE ACT

PETER ROBINSON v. KIM MAREE DAY
S.C.A. No. 115 of 1991
Contract
[1992] ACTSC 20; (1992) 106 FLR 423

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Higgins J.(1)

CATCHWORDS

Contract - Construction and interpretation - Lease agreement - Terms ambiguous - Meaning of "unforeseen circumstance" - Admissibility of parol evidence - Objective circumstances.

Codelfa Construction Pty Ltd v State Rail Authority of (NSW) [1982] HCA 24; (1982) 149 CLR 337

NZI Capital Corporation Pty Ltd v Child and Ors (1991) 23 NSWLR 481

Norwest Beef Industries Ltd v Peninsular and Oriental Steam Navigation Co (1987) 8 NSWLR 568

HEARING

CANBERRA
4:3:1992

Counsel for the Appellant: Mr I. Harvey

Instructing solicitors: Messrs Gallens Crowley and

Chamberlain

Counsel for the Respondent: Mr B. Meagher

Instructing solicitors: Messrs Colquhoun Murphy

ORDER

1. The appeal be upheld.

2. The verdict entered by the learned Magistrate on 6 September 1991 be set aside and that a verdict for the appellant be substituted.

DECISION

For many years the appellant conducted a business on behalf of Canberra Sports Car Centre Pty Ltd from premises at 19 Lyell Street, Fyshwick. The owner, the appellant's landlord, was a retired barrister. He let the premises to the appellant, on a monthly tenancy, at a rental of $730.00 per month.

2. The respondent is the widow of the late Graham Day ("Mr Day"). Before 2 June 1989, Mr Day had conducted a used car business from premises on the corner of Newcastle and Wollongong Streets, Fyshwick. The rent there was $2,200.00 per month. He was concerned that a proposed rental increase would threaten the profitability of his business. The respondent was pregnant and he wanted, understandably, to spend less time at his business. He approached the appellant. There was a discussion concerning the possibility of Mr Day moving his business to the Lyell Street premises.

3. The discussion culminated in the production of two letters written and signed by the appellant. It is contended that the discussion, although given in evidence before the learned Magistrate, should not be regarded as relevant to the construction of the two documents. That contention implicitly asserts that those documents constitute the agreement between the appellant and Mr Day.

4. The appellant's account of what happened was not challenged. The respondent confirmed that the appellant's version of the discussions leading up to the production of the two letters accorded with what her late husband had told her of them.

5. The appellant told Mr Day during these negotiations that the landlord had told him that he had no plans to sell or re-develop the block. The landlord was, he said, happy to let the appellant remain in occupation on the same terms indefinitely. The appellant also told Mr Day, who wanted assurance of at least two years occupancy, that the landlord had told him that he could not foresee any difficulty with that prospect but in the "unforeseen circumstance" of his death, he could not guarantee to the appellant the continued usage of the yard. That decision would then be a matter for his family and his estate.

6. As a result, the appellant says, he told Mr Day that he could see no problem for two years, subject to the qualification expressed by the landlord. The appellant conducted a second business on the same land, storing and maintaining repossessed vehicles. That secondary business was then returning approximately $32,000.00 per annum. However, Mr Day did not wish to take on extra work. The appellant decided to move that business and took other premises. As a result of the discussion of those matters, the appellant asked for a "premium" of $10,000.00 as well as the payment of $750.00 per month to cover the rental due to the landlord. The $10,000.00 was to cover, it seems, the expected diminution in return from the storage and maintenance business as a result of increased cost at other premises over the two years for which Mr Day was to be "guaranteed" continued occupancy.

7. The appellant's evidence was that the $10,000.00 premium was discussed in the following terms:-

"As far as I was concerned he could have three years ...
but that ... if an unforeseen circumstance on the rental
of the premises came up and I couldn't fulfil my
obligation that I would treat it on a pro rata basis at
$2,500.00 per six months."

8. The appellant then wrote out two letters. Exhibit B was intended, he said, to serve as a receipt for the $10,000.00.

9. Exhibit A was, the appellant said, intended to "explain" the payment of the $10,000.00. Exhibit B was also described by the appellant as "the agreement on the lease". It was not intended, he said, to "include the $10,000.00".

10. The text of the two exhibits are as follows:-

"Exhibit A
Friday 2nd June 1989
Mr Graham Day,
For the consideration of $10,000.00 I am
prepared to relinquish the month to month lease I have at
19 Lyell Street Fyshwick. For this consideration, subject
to any nominal increases in rental I will guarantee a
minimum of 2 years at the premises. Should any unforeseen
circumstance crop up, the consideration could be deemed to
cover two years on a pro-rata basis, that means $2,500.00
for every 6 months.
(Sgd) Peter Robinson"
"Exhibit B
Friday 2nd June 1989
Mr Graham Day,
As per our previous discussions I am prepared to
sub-let to you the premises at 19 Lyell Street Fyshwick
for a minimum period of 3 years from 1.6.1989.
The present on going arrangement is a month to
month tenancy with the landlord, Mr R.G. Bailey, who is
aware and quite happy with the variation. He could not
foresee any increase in the $730.00 / month rental and
although he could not give any guarantees I have been
dealing with him on the same basis since approximately
1970 and during this time we have had no disagreements
whatsoever.
On a sub-lease basis I would charge you $750.00 / month
payable in advance, and in return will pay him monthly in
advance.
Yours faithfully, (Sgd) Peter Robinson"

11. The appellant was asked what he understood was intended by the "pro rata" reference in exhibit A. He answered,

"If I could not fulfil my agreement with Mr Day I knew
that it would be very unfair to have charged Mr Day
$10,000.00 to occupy the premises for six months."

12. Tragically, Mr Day died, on either 30 or 31 July 1989, by his own hand.

13. The respondent, as executrix of his estate, sued the appellant for a return of $7,500.00 of the $10,000.00 premium.

14. She contended that Mr Day's suicide was an "unforeseen circumstance". It followed that,

"the consideration could be deemed to cover two years on a
pro rata basis, that means $2,500.00 as for every six
months".

15. Her case was that $7,500.00 was refundable as occupation had been terminated as from Mr Day's death. Only the first six months had been partly used. Whether he was obliged to or not, the appellant took possession of the premises on Mr Day's death. He effectively relet the premises to a Mr Higgs. The appellant did not seek to make any claim against Mr Day's estate as a result of the termination of the agreed arrangement.

16. The appellant's argument, of course, was that the "unforeseen circumstance" referred only to a prospective inability, through no fault of his, to continue to provide the premises to Mr Day for the guaranteed period of two years.

17. His Worship found, quite rightly in my view, that neither party, on 2 June 1989, had in contemplation that Mr Day would die within two months. As a matter of construction, his Worship held that the interpretation contended for by the appellant should be rejected. He characterised that contention as being that the only unforeseen circumstance contemplated (itself an interesting paradox),

"was that (the landlord) should, by one method or another,
no longer be in a position to give his lease to the
(appellant) and that affected the (appellant's) ability to
sub-lease to (Mr Day)".

18. If that was all that was intended, his Worship concluded, words less all-embracing than "any unforeseen circumstance" should have been chosen to activate the "pro rata" concession.

19. Unfortunately, his Worship did not address the positive question as to what the words used by the appellant and agreed to by Mr Day did mean.

20. Clearly enough, they were not intended to embrace an "unforeseen circumstance" that had no relationship to the continued capacity of the parties to carry out their agreement. The real question was whether it embraced such an "unforeseen circumstance" as termination of the agreement by Mr Day or only termination by the appellant as a result of his loss of tenure.

21. There is an issue raised as to whether his Worship should have given effect to the discussion preceding the agreement. The respondent contended that such discussion could not be used to construe the written words of exhibits A and B.

22. Prima facie, evidence as to the true intention of the parties to an agreement is not admissible to contradict or vary the terms of a written contract nor to supply omissions from it. Mason J. in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337, 352 said,

"The true rule is that evidence of surrounding
circumstances is admissible to assist in the
interpretation of the contract if the language is
ambiguous or susceptible of more than one meaning. But it
is not admissible to contradict the language of the
contract when it has a plain meaning. Generally speaking
facts existing when the contract was made will not be
receivable as part of the surrounding circumstances as an
aid to construction, unless they were known to both
parties, although, as we have seen, if the facts are
notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the
evidence of prior negotiations. Obviously the prior
negotiations will tend to establish objective background
facts which were known to both parties and the subject
matter of the contract. To the extent to which they have
this tendency they are admissible. But insofar as they
consist of statements and actions of the parties which are
reflective of their actual intentions and expectations
they are not receivable."

23. The Court is to look to -

"the objective framework of facts within which the
contract came into existence, and to the parties' presumed
intention in this setting".

24. A specific refusal to include a particular term might, his Honour said, be receivable in evidence. The parties should not be presumed to have intended a meaning they have expressly rejected. In NZI Capital Corporation Pty Ltd v Child and Ors (1991) 23 NSWLR 481, Rogers C.J. Comm D gave effect to that qualification. His Honour received evidence of refusal to include a term which, in the absence of such evidence, would have otherwise been taken to have been implied.

25. Evidence is also receivable to establish whether or not the writing tendered in fact constitutes the entire agreement between the parties (see Norwest Beef Industries Ltd v Peninsular and Oriental Steam Navigation Co (1987) 8 NSWLR 568, 570 per Hope J.A.). In the present case, it was not contended that there were any other terms than those expressed in writing in exhibits A and B, and the oral evidence supports the identification of both documents as containing the relevant contractual terms.

26. It is quite clear to me that evidence of the nature and extent of the tenure enjoyed by the appellant over the subject premises was relevant and admissible. It was one of the objective circumstances which that evidence showed was known to both parties. It followed that, from the view point of both the appellant and Mr Day, circumstances could arise during the term of the agreement which would prevent the appellant from being able to continue to grant Mr Day occupation of the subject premises for the full term of three years. It seems to me that it was not intended that any "unforeseen circumstance" would include a choice by either the appellant or Mr Day to terminate the arrangement unilaterally during either the two year period the appellant guaranteed to provide to Mr Day or the three year minimum period of occupation referred to in Exhibit B.

27. I agree that the range of events to which the phrase "any unforeseen circumstance" was applicable is wider than termination of the appellant's right of occupation of the subject premises by reason of the death of the landlord.

28. However, having regard to the objective background facts, it is clear to me that the parties could only have intended "unforeseen circumstance" to mean some unexpected and unanticipated event which would end the appellant's legal capacity to continue to give Mr Day the benefits he had agreed to give to him.

29. The suicide of Mr Day, though unexpected and unanticipated, did not and could not affect the appellant's power to give occupation of the subject premises. If Mr Day's estate had desired the use of the premises for the balance of the three year period, the appellant could not have prevented that use.

30. It seems to me quite clear that, if Mr Day had decided that his business was no longer profitable, and had vacated the premises in question, he could not have resisted a claim by the appellant for damages. He could not have claimed a credit for the return of any part of the premium. To suggest otherwise would deprive the arrangement of any sensible commercial efficacy.

31. I agree with the learned Magistrate that the "unforeseen circumstance" contemplated by the agreement is not confined to that in fact referred to by the appellant in conversation with Mr Day. It was necessary, however, to consider what limitations upon those words were intended. That question can be answered, not by reference to the subjective intention of the parties but by reference to the objective circumstances in which the arrangement was set. As a result of so doing, I conclude that the words in question were intended to refer to circumstances which might cause a cessation of the appellant's tenure. They were not intended to cover, nor do they cover, a cessation of occupation by reason of some act of Mr Day. It follows that the right to a refund of the unexpended portion of the premium was not activated by reason of Mr Day's death.

32. The respondent's claim, accordingly, should have been dismissed. I uphold the appeal and substitute a verdict for the appellant for the judgment entered by the learned Magistrate.

33. I will hear the parties as to costs.