Keith Charles Stanley v Motor Traders' Association of New South Wales [2004] NSWIRComm 30 (27 February 2004)

Last Updated: 4 March 2004

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Keith Charles Stanley v Motor Traders' Association of New South Wales [2004] NSWIRComm 30

FILE NUMBER(S): IRC 2571

HEARING DATE(S): 19/02/2004

DECISION DATE: 27/02/2004

PARTIES:

APPLICANT:

Keith Charles Stanley

RESPONDENT:

Motor Traders' Association of New South Wales

JUDGMENT OF: Schmidt J

LEGAL REPRESENTATIVES

APPLICANT:

Mr RF Crow of counsel

SOLICITORS:

Workplace Law

RESPONDENT:

Mr JP Phillips SC

SOLICITORS:

Bamford Associates

CASES CITED: A & J Inglis v John Buttery & Co [1878] 3 App Cas 552

B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates (1994) 35 NSWLR 227

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Gordon v MacGregor (1909) 8 CLR 316

Harvey v Phillips (1956) 95 CLR 235

Hickman v Berens [1895] 2 Ch 638

Lief Investments Pty Ltd v Conagra International Fertiliser Co (Mason P, Sheller and Beazley JJA; Unreported; 17 June 1998)

LEGISLATION CITED: Industrial Relations Act 1996

JUDGMENT:

- 6 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: Schmidt J

DATE: 27 February 2004

MATTER NUMBER IRC 2571 OF 2003

KEITH CHARLES STANLEY v MOTOR TRADERS' ASSOCIATION OF NEW SOUTH WALES

Application under section 106 of the Industrial Relations Act 1996

JUDGMENT

1 This judgment concerns a motion filed by the respondent on 16 December 2003. The matter was commenced by the filing of a summons pursuant to s106 of the Industrial Relations Act 1996 ('the Act'). It came before me for conciliation on 15 December, when a settlement was arrived at. The parties were represented at the conciliation by their respective solicitors. Terms of settlement were signed by the parties' solicitors. They provided:

1) Verdict to the Applicant in the sum of $87,370, payable in 21 days to the Applicant

2) Respondent to pay the Applicant's legal fees of $14,000 incl GST within 21 days, payable to Workplace Law Pty Ltd.

3) No other orders.

2 The terms were placed on the file and orders were later entered accordingly. A certificate was issued pursuant to s109 of the Act, certifying that agreement had been reached in the conciliation.

3 On 15 December, after the conciliation, the two solicitors spoke about the settlement. A disagreement emerged about what had been agreed, leading the respondent to file its motion on 16 December. The orders sought were:

1. An order staying the proceedings such that judgement may not be entered pending the final determination of this Notice of Motion and that this order be made in chambers instanter exparte.

2. The time for service of this Notice of Motion be abridged.

3. An order that the orders of Justice Schmidt made 15 December 2003 in these proceedings be rescinded or set aside.

4. In the alternative, that the following order be made:

5 That the Applicant acknowledges payment by the Respondent in the sum of $6,589.80 and gives a credit to the Respondent in the sum of $11,861.64 in reduction of the verdict herein.'

5. In the further alternative, that the judgement entered herein be permanently stayed as to the sum of $18,451.44.

4 The matter came before the Court on 17 December, when, after hearing the parties a stay of the orders was granted, on terms, relating to the sum in dispute between the parties.

5 At the hearing in February, evidence was called from the parties' solicitors, Mr Christopher Bryett and Mr Brian Williamson.

6 The evidence revealed that the nub of the parties' dispute concerned whether or not they had agreed that the amount of $87,370 specified in the written terms would be reduced by a figure of $18,451.44.

The parties' respective cases

7 The case advanced for the respondent by Mr Phillips SC was that the Court's order must be rectified or set aside, because it contained a 'latent ambiguity in relation to the words in the order based upon the surrounding circumstances of the events which occurred on that day, which led to those orders being made'.

8 It was accepted that the normal rule in the case of a document which on its face appeared to have a plain meaning was that parties cannot introduce parol evidence into the construction of what amounts to context. It was also accepted that the terms of settlement had the force of contract, in the present circumstances. It was submitted, however, that what had to be determined was whether the written words properly recorded the contract, a matter of construction. Nothing flowed from the fact that orders had been made.

9 Reliance was particularly placed upon the approach of Kirby P, as he then was, in B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates (1994) 35 NSWLR 227. In this case, it was submitted that the evidence showed that the surrounding circumstances were such that the parties understood their offers were being advanced in the context of the adjustments which the respondent was insisting upon and that it was therefore unnecessary that they be identified.

10 It was submitted to be a distraction to have regard to the fact that the amount of the adjustment had regard to a longer period than the notice upon which the parties finally agreed, the evidence establishing, as it submitted it did, that the parties had agreed upon such a deduction. Reliance was placed upon the fact that it was common ground as to what the calculation of the adjustments was.

11 It was further submitted that the latent ambiguity in the words which the parties used was revealed by the evidence of the surrounding circumstances of the negotiations. They showed that the express figures used into the written documents, had to be understood as being subject to agreed adjustments being made.

12 While Mr Bryett had conceded that it would have been more prudent if the adjustments had been reflected in the written document, it was also relevant that Mr Williamson had also conceded that what he had said in relation to the applicant's final offer, was not what that document had been intended to convey. The evidence showed that in Mr Williamson's mind the figure was a complete one, while in Mr Bryett's, it was subject to adjustments. It was on that basis that Mr Bryett later executed the settlement.

13 It was submitted that it was not necessary to come to a conclusion adverse to either Mr Williamson or Mr Bryett, in order to find the parties' intentions. Regard could be paid to the objective evidence. It could be concluded that there was not a meeting of the minds, in which event the parties would be bound by their written document. The conclusion which was urged, however, was that Mr Bryett had conveyed a final figure to Mr Williamson, based upon an error in what was earlier conveyed to him by Mr Williamson. Mr Bryett agreed to a sum based upon a course of negotiations which involved the sum being subject to adjustments.

14 It was accepted that it was a difficult point, but the circumstances were submitted to be exceptional, involving a clear sense of injustice between the parties in relation to the consequences. It was relevant, in that context, that the matter was raised by Mr Bryett immediately after returning to his office after the conciliation and that the matter was pursued, immediately upon the misunderstanding being revealed.

15 The case advanced for the applicant by Mr Crow of counsel from the outset, was that the evidence of Mr Bryett was strictly not admissible, because there was in fact no ambiguity in the parties' written agreement. It followed that the consent orders could not now be impeached. The motion did not raise the suggestion that the agreement had been invalidated for reasons such as illegality, misrepresentation, duress, mistake, undue influence, abuse of confidence or fraud. This was because such grounds did not exist.

16 That the respondent had a different understanding of the agreement was not to the point. The question of construction raised depended upon evidence of precontractual conduct, which was only admissible if the contract was ambiguous and the conduct threw light upon the genesis of the contract. Evidence was not admissible in order to raise an ambiguity, but only to resolve it. Here, the evidence did not show any ambiguity in the written contract. The terms were unambiguous. The respondent was seeking the insertion of an entirely new term. This was inconsistent with the public interest in litigation being brought to an end by parties adhering to the bargains which they made in settlement of proceedings. In that context, it was relevant that the parties had each been legally represented at the conciliation.

17 The Court was obliged to have regard to the written terms of the parties' contract. It had a discretion to make orders accordingly and did so, consistently with s174 of the Act. The evidence had demonstrated nothing which was sufficient to warrant the orders being set aside, rescinded or supplanted, as the motion sought.

18 In the alternative, it was accepted that consent orders might be set aside, in limited circumstances, which did not here arise. Nor were any such grounds relied upon in the motion.

19 Nor had the respondent asserted in its motion that the agreement contained additional parol terms. The evidence did not disclose the existence of such terms. To the contrary, it showed that the terms of settlement comprised a valid and complete contract. There was simply no provision for the deductions that the respondent sought to make.

20 The evidence of pre-contractual conduct was simply inadmissible. It could only arise in relation to the question of construction, if the contract was ambiguous. The evidence could not be led to raise an ambiguity, only to resolve it.

21 There was clear evidence of an intention to settle the matter by payment of the sum specified in the written terms. That contract had a plain meaning. It was a valid and complete contract signed by the parties' solicitors. There was no provision made for the deductions which the respondent now sought. That required the insertion of an entirely new term.

22 An order for indemnity costs was sought. Even if there had been an oversight or error on the part of the respondent, it was unconscionable that its failure to pay proper attention to the drafting of the written record of the terms of the settlement, could now have an adverse costs consequence for the applicant. In any event, the case brought had not been made out and it was unreasonable and unfair in the circumstances that the applicant had to bear additional costs, even if it were as the result of the inattention of the respondent's representative at the conciliation.

23 In reply it was submitted for the respondent that there would be no indemnity costs order. The matter raised was plainly important and one which the respondent had the right to have ventilated, particularly given that there were concessions made in the cross examination which were relevant.

Consideration

24 The resolution of the controversy which has arisen requires, amongst other things, a consideration of the evidence given by Mr Bryett and Mr Williamson. Regrettably, their respective versions of the crucial discussions, in which they were the only participants, are entirely inconsistent. No one else present at the conciliation was called to give evidence.

25 The evidence showed that the negotiations were progressed by reference to a number of written documents. The sum referred to in the respondent's motion, $18,451.44, comes from a document prepared by Mr Bryett at the conciliation, reflecting his assessment of the applicant's best case scenario in the litigation. It included a period of 26 weeks' notice and a similar period for redundancy. It included two deductions. They were $6,589.90, reflecting the payment made to the applicant for 5 weeks' notice of the termination of his employment and $11,861, reflecting money which the applicant earned in other employment, which he obtained during such a 26 week notice period. The two figures total $18,451.44, although that figure does not appear on the document.

26 The evidence showed that the applicant viewed his prospects as better than the assessment made by Mr Bryett. The negotiations commenced on the basis of a compromise claim prepared by Mr Williamson prior to the conciliation, which also took account both of the 5 weeks' notice payment and the applicant's earnings in other employment.

27 The parties each made three offers to each other. It was common ground that the matter of the deduction now in issue was discussed at various points in the negotiations. What was in issue was whether or not the matter was again discussed in relation to the final offers.

28 The applicant's third offer accepted the figure earlier proposed by the respondent for redundancy and persisted in a claim for 26 weeks' notice. The respondent replied with its third offer, which was for a little less than 20 weeks' notice. The final sum in the terms executed by the parties was for the same total figure as the applicant's third written offer, although the components making up that sum differed slightly.

29 It was the respondent's case that even though not referred to in either the applicant's third offer or their final written offer, or in the terms of settlement which they each signed, the parties' legal representatives discussed and agreed that what would be paid to the applicant was the agreed sum of $87,370, less the 'adjustment' which the respondent had always insisted on, of $18,451.44. Curiously, this 'adjustment' apparently did not have regard to the fact that it had originally been calculated in part by reference 26 weeks' notice and that the respondent's final offer was for less than 20 weeks' notice.

30 It was the applicant's case that there had been no such discussion or agreement.

31 Both Mr Bryett and Mr Williamson were cross examined about their version of the discussions in question. While they each made concessions in their cross examination in relation to various matters, they were adamant that their own version of the discussion at that point was accurate.

32 The terms upon which the parties resolved their differences were reduced to writing and the Court asked to make orders accordingly. It did so, in exercise of the discretion given by s174 of the Act.

33 The question raised by the respondent's motion is the proper construction of those terms. The grounds advanced were:

1. The orders were made on the basis that the parties had agreed to settle the matter when this was not the case.

2. The Respondent's offers were made on the basis that it would be entitled to a credit for the amount earned by the defendant during what became the agreed notice period and for the initial payment by the Respondent to the Applicant of 5 weeks wages at the time of severance.

3. The Respondent has now indicated that this was not his understanding.

34 The respondent submitted that the agreed words, 'verdict for the applicant in the sum of $87,370', contained a latent ambiguity, which must be resolved by the reading in of the additional words 'less $18,451.44'.

35 The starting point for a consideration of the proper construction of the words in question is the High Court's judgment in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, where it was observed at 352:

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 in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

36 This principle has oft been discussed and applied. In Cheeseman & Associates, Kirby P discussed the way in which extrinsic evidence is admissible to resolve ambiguity, including in those cases where extrinsic evidence shows that the ordinary meaning of a word was not that which the parties chose, when they used the word in a written text. At p236, Kirby P said:

'Words with fixed meanings used in a written contract cannot ordinarily be explained by oral evidence which contradicts the language of the written contract ... [i]f the surrounding circumstances of the date of the written document show that the parties intended to use a word not in its primary or strict sense but in some secondary meanings the court may construe it according to those circumstances and intention of the parties. The intention is of course, that which is objectively derived and not the unknowable subjective ruminations of those involved. The rule is stated as one of general application. It is clearly provided to prevent the primary rule from becoming a source of injustice. It is designed to deal with the situation which arises when ambiguity dos not appear on the face of the instrument but can otherwise be shown by clear evidence.'

37 This scenario was described by Mr Phillips SC in his submissions as 'latent ambiguity', as opposed to 'patent ambiguity'. It was argued that such latent ambiguity had here been demonstrated to exist, on the evidence led.

38 This submission raised directly the question of whether the oral evidence called by the respondent impermissibly sought to contradict the language of the parties' written contract, or whether it showed an intention by the parties to use the phrase in question 'not in its primary or strict sense', as discussed by Kirby P.

39 The question, so posed, readily reveals the answer. The agreement which the parties entered is plainly not ambiguous on its face. It required a verdict in favour of the applicant for a specified sum, payable within a specified time. The evidence that the parties intended that sum to be reduced by another figure, not referred to in the terms of settlement which the parties signed, directly contradicts the ordinary meaning of the words used by the parties in their written agreement. The suggestion that another unspecified sum was to be deducted from the stated amount of the verdict, can only be directly contradictory to the words by which the parties chose to reflect their agreement.

40 That being the case, it follows that strictly, the evidence of the prior negotiations was not admissible.

41 The view that the words in question were ambiguous, can only result from evidence establishing an intention that the words in question have other than their ordinary meaning. Such an intention was denied by the applicant. The onus plainly fell on the respondent to establish that the parties intended to use the written words which they selected to reflect their agreement, other than in their primary or strict sense.

42 That onus could only have been met by Mr Bryett's evidence as to what was discussed by the parties' legal representatives being preferred, over that given by Mr Williamson. I am unable to come to that view. Not only did Mr Williamson deny such a discussion or agreement, even the respondent's final written offer, which led the parties to reduce their agreement to writing, did not support Mr Bryett's version of events. The parties altered the figures comprising the final sum in the terms which their lawyers signed, but not the sum itself. Neither the offer nor the final settlement made any reference to any adjustment or deduction from the verdict sum.

43 Indeed, nor did the applicant's third offer refer to any adjustments. That was what led to the respondent's third offer. Mr Bryett asked whether the applicant's offer had regard to adjustments and Mr Williamson said that it did not. In cross examination, he explained that in reality, this was inaccurate, given the applicant's starting point for the negotiations and the concessions made. Nevertheless, the fact remains that despite being told that there had been no such adjustment, neither the respondent's final written offer, nor the executed terms referred to any adjustments being deducted from the agreed sum. Furthermore, Mr Williamson denied that they had either been discussed again, or agreed.

44 As long ago as 1878, Lord Gifford observed in A & J Inglis v John Buttery & Co [1878] 3 App Cas 552 at 577 that:

'Now, I think it is quite fixed - and no more wholesome or salutary rule relative to written contracts can be devised - that where parties agree to embody, and do actually embody, their contract in a formal written deed, then in determining what the contract really was and really meant, a Court must look to the formal deed and to that deed alone. That is only carrying out the will of the parties. The only meaning of adjusting a formal contract is, that the formal contract shall supersede all loose and preliminary negotiations - that there shall be no room for misunderstanding which may often arise, and which do constantly arise, in the course of long, and it may be desultory conversations, or in the course of correspondence or negotiations during which the parties are often widely at issue as to what they will insist on and what they will concede. The very purpose of a formal contract is to put an end to the disputes which would inevitably arise if the matter were left upon verbal negotiations or upon mixed communings partly consisting of letters and partly of conversations. The written contract is that which is to be appealed to by both parties, however different it may be from their previous demands or stipulations, whether contained in letters or in verbal conversation. There can be no doubt that this is the general rule, and I think the general rule, strictly and with peculiar appropriateness applies to the present case.'

45 These words were quoted with approval by the High Court in Gordon v MacGregor (1909) 8 CLR 316 at 323-4 and more recently by the Court of Appeal in Lief Investments Pty Ltd v Conagra International Fertiliser Co (Mason P, Sheller and Beazley JJA; Unreported; 17 June 1998 at 11).

46 In Harvey v Phillips (1956) 95 CLR 235, the High Court considered circumstances in which a compromise or formal judgment of a court might be set aside. Reference was there made to Hickman v Berens [1895] 2 Ch 638, where consideration was given to circumstances where a settlement was arrived at in circumstances where one party's legal representative was under a misapprehension and believing he had conceded one thing, had in fact conceded another. In those circumstances, the client was not held to the settlement, which the court set aside. This, however, was not such a case. To the contrary, it was the respondent's case that a particular agreement had been reached between the parties and that it had been reflected in the written agreement, albeit in ambiguous terms. As I have found, the respondent did not make out such a case, on the evidence.

47 Nor was there evidence that Mr Bryett had not acted in accordance with his authority to agree to the terms signed, given the instructions he received at the conciliation. Rather, the question raised on the motion concerned the proper meaning of those terms. That issue must be approached on the basis earlier outlined. The evidence was not such that the view could properly be taken that the parties intended to do anything other than to agree upon the unambiguous terms of the written settlement, which were not only executed by their legal representatives, but were thereupon presented to the Court to be given effect by way of order, which was made accordingly.

48 It follows that the respondent's motion must be refused and the stay dissolved.

49 The applicant also sought an indemnity costs order in his favour. I do not accept the submission made, that the circumstances are such that a departure from the normal approach to the fixing of costs is warranted. The law is well settled. I am not satisfied that the evidence showed that the respondent's conduct was such that it was deserving of such criticism, that it should be reflected in a costs order.

50 The question brought before the Court concerned an alleged latent ambiguity in the terms of settlement, reflective of an agreement allegedly reached by the parties' legal representatives. The respondent did not make out the case, but I am not satisfied that this amounts to undeserving conduct by the respondent, such that it would be unreasonable and unfair that the successful applicant should be out of pocket as a result. As the authorities have made clear, such a conclusion requires a cautious approach, particularly in my view, when it depends upon a consideration of what the parties' legal representatives have done. In this respect, it is relevant that each of the solicitors who gave evidence, made relevant concessions in their cross examination.

Orders

51 It follows that the respondent's motion must be dismissed and the partial stay of the order granted on 17 December dissolved. For the reasons given, I order accordingly.

52 The respondent is also ordered to pay the applicant's costs of the motion, as agreed or assessed.

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LAST UPDATED: 27/02/2004