Energy World Corporation Ltd v Maurice Hayes & Associates Pty Ltd

REASONS FOR JUDGMENT THE COURT: 1 This appeal from the judgment in Maurice Hayes & Associates Pty Ltd ACN 063 758 181 v Energy World Corporation Ltd ACN 009 124 994 [2006] FCA 783 concerns the financial ramifications of the termination of a consultancy arrangement whereby the respondent/cross-appellant Maurice Hayes & Associates Pty Ltd (the Consultant) provided the services of Mr Maurice Hayes to the appellant/cross-respondent, Energy World Corporation Ltd (the Company) (then named Energy Equity Corporation Ltd). The issues which arise on the appeal and cross-appeal are more confined than were the issues at trial. 2 The starting point for the appeal is the agreement made on 28 September 1994 between the Consultant and the Company (the Agreement) whereby the Consultant agreed to provide the services of Maurice Hayes to the Company as Chief Financial Officer for a term of four years commencing on 1 July 1994 and renewable thereafter by mutual agreement of the parties. The fee was at the rate of $128 400 per annum on an indexed basis together with other expenses. 3 The first question concerns the proper construction of sub cl 8.6 of the Agreement, forming part of cl 8 dealing with termination and, in particular, the word 'lesser'. The clause is as follows: 'In the event that the Company terminates this Agreement for any other reason other than as stated in clause 8.1 hereof or the Term (as extended or renewed) is not renewed the Company shall pay to the Consultant the Fee for the remaining period of the contract or six (6) months whichever is the lesser period.' (Emphasis added) 4 Clause 8.1 was as follows: 'The Company may by notice in writing to the Consultant terminate summarily the engagement of the Consultant under this Agreement if:- 8.1.1 in the opinion of the Company the Consultant is not carrying out the Specified Services in a manner satisfactory to the Company; 8.1.2 in the opinion of the Company the Consultant has committed or is preparing to commit a serious or persistent breach of any of the provisions of this Agreement; 8.1.3 the Consultant, goes into liquidation or receivership or suspends payment or compounds with or assigns its estate for the benefit of its creditors; and 8.1.4 the Consultant or employee is convicted of a criminal offence carrying imprisonment as a possible penalty.' 5 The Consultant argued, and the primary Judge accepted, that the word 'lesser' should be construed as 'greater' on the basis that where there is an obvious mistake the Court can give effect to the true contractual intention of the parties without there being the need for any rectification. The Company challenges that finding. 6 On 12 November 1997 the parties agreed that the term of the Agreement was extended to 30 June 2001. Notwithstanding the expiry of the term of the Agreement on 30 June 2001 services continued to be provided by the Consultant and charged for until the end of May 2003. The Consultant claimed, and the primary Judge found, that it was a term of the agreement between the parties that commenced after 30 June 2001 (the 2001 Agreement) that the Company pay the Consultant $190 000 (exclusive of GST) per annum rather than (as contended for by the Company) that it was a term of the new agreement that the Company pay the Consultant at a rate equivalent to $75 per hour plus GST. The Company challenges that finding. That is the second question. 7 The third question relates to the period of reasonable notice of termination of the 2001 Agreement. In the event that the first challenge is decided in favour of the Company and 'lesser' is construed to mean 'lesser', then the Consultant cross-appeals to contend that, as it was entitled to a period of reasonable notice of termination of the 2001 Agreement, the primary Judge erred in holding that a period of one month was a reasonable period and rather should have found that it was entitled to payment of six months' fee in lieu of notice. 8 The primary Judge said that there were no major factual disputes in the case as the differences between the parties related to the inferences that were to be drawn and the conclusions that were to be reached from primary facts which were not materially in dispute ([2006] FCA 783 at [5]). The facts are set out [2006] FCA 783 at [6]-[47]. It is unnecessary to reproduce all of those facts for the purposes of this judgment but they should be taken as having been adopted by us.