Hammond v Hammond

Hammond v Hammond - [2010] NSWSC 331 - NSWSC 2010 case summary — Zoe

[31]

27 The written submissions of the plaintiff's counsel on that day recited the defendant's affidavit that the assets of the estate included the death benefit. The submissions distinguished the plaintiff's position which was that there may be doubt as to whether the death benefit will be paid to the estate and that the Court should declare it as a notional estate and reduce the plaintiff's provision by any of the death benefit he received. 28 On 21 February 2007 his Honour delivered reasons for judgment: Hammond v Hammond [2007] NSWSC 106. His Honour considered the condition in the will that the remainder of the estate go to the defendant "on the condition that he ensures John my youngest son never wants for anything". After reviewing the authorities, his Honour concluded that: (a) if the defendant had accepted this gift, as it seemed he had, it imposed on him a binding equitable personal obligation to support the plaintiff "even over and above the estate assets": at [38]; (b) therefore there had been no failure to provide for the plaintiff as he had as much out of the estate as he could get, and the proceedings should be dismissed with no order as to costs: at [39]; (c) in that event, although the superannuation fund death benefit was not an asset in the estate, he probably would be prepared to make an order declaring it as notional property: at [45]. (d) if the defendant had not accepted this gift, then presumably there would be a partial intestacy with the result that the residue would pass to the three children in equal shares: at [40]; (e) because the parties had not addressed the question of an equitable personal obligation on the defendant, the proceedings were stood over to give them an opportunity to do so: at [48]-[49]. 29 The effect of the judgment was that, if the defendant had accepted the gift of the residue, as it seemed he had, he would have incurred an equitable personal obligation to support the plaintiff forever, even out of the defendant's own assets. Given that the plaintiff was disabled, the practical effect was that the defendant would receive nothing under the will for his own benefit.

[44]

51 The authorities relating to the construction of written contracts were exhaustively reviewed in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, 264 ALR 15 (Allsop P, Giles and Campbell JJA), from which the following relevant principles may be identified: (a) the underpinning legal theory concerning the formation and construction of contracts is the objective theory whereby the parties' intentions are objectively assessed and their subjective intentions are irrelevant: at [4]-[6], [50], [322]; (b) the construction of written contracts is to be undertaken by determining what a reasonable person would understand by the language in which the parties have expressed their agreement, not by determining what the parties subjectively intended. That requires consideration of the text in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction. The identification of ambiguity is not a precondition to examining legitimate surrounding circumstances: at [14]-[16], [49], [289]-[292], [305], [322]; (c) surrounding circumstances that can be taken into account must be relevant to a fact in issue, probative of the surrounding circumstances known to the parties or of the purpose or object of the transaction, including its genesis, background, context and (where relevant) the market in which the parties are operating. It is impermissible to take into account evidence which is probative of, or led so as to understand, the actual intention of the parties, including evidence of negotiations and drafts. Statements by contracting parties about their subjective intentions in entering the agreement do not assist in ascertaining the meaning of words: at [24], [51], [287]-[292], [337]; (d) regard cannot be had to anything which the parties said or did after the contract was made: at [10], [322], [327]; (e) if there is an ordinary grammatical meaning of the words used that meaning must be given significant force although read with admissible evidence of surrounding circumstances. The words used may be intractable and not to admit of departure from the conventional and grammatical use: at [53]; (f) commercial contracts should be construed in a way that does not flout business common sense. But that does not provide a licence for judicial rewriting of the contract: at [22]-[23], [360]-[361].

[45]

52 The authorities concerning rectification of written contracts were considered in Franklins and more comprehensively in the Court of Appeal's earlier decision in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65, 69 NSWLR 603 (Mason P, Tobias and Campbell JJA), from which the following relevant principles may be identified: (a) when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit: Ryledar at [1], [108]-[109], [257]. (b) the rationale of rectification of a written contract in equity is that it is unconscientious for a party to the contract to seek to apply the contract inconsistently with what that party knows to be the common intention of the parties at the time that the written contract was entered: Franklins at [1], [444], [511]; Ryledar at [1], [189], [315]; (c) it is the subjective intention of the parties that matters for rectification (as is shown by parol evidence being receivable to establish such intention in a rectification suit), but that subjective intention must be shown to be common through the parties coming to know, by some means, of each other's intention: Ryledar at [1], [189], [267]-[269], [281]-[316]. Thus, the common intention must be a consensual one: Ryledar at [1], [189], [290], [293]; (d) parties may come to know of each other's intentions through those intentions being expressly communicated or inferentially communicated by acts or words: Ryledar at [1], [189], [281]; (e) the misrecording of the common intention in the written contract may be because of a mistake as to the meaning or effect of the chosen words: Ryledar at [1], [122]-[128]; (f) the fact that words used in a contract convey a clear, unambiguous and unmistakable meaning or legal effect renders it less likely that the parties were mistaken as to that meaning or effect and less likely that they had a common intention which was fundamentally inconsistent with the words they had deliberately employed, particularly where the wording was proffered by the party seeking rectification of the contract: Ryledar at [1], [162]-[165], [257]; (g) where a written agreement results from negotiations in which the parties have been advised by lawyers, to conclude that the parties have misrecorded their common intention involves the lawyers on each side having been mistaken in expressing the intention of their client and, furthermore, mistaken in the same way. There is a measure of inherent unlikelihood of such an event happening, which is compounded if the words of which rectification are sought are clear in meaning on their face: Franklins at [460]-[461]; (h) rectification is granted only upon "clear and convincing proof" or "convincing proof": Ryledar at [1], [161], [163], [182], [186] and [225]; Franklins at [451].

At a glance

Court

Decision date

Before

Source

Judgment (79 paragraphs)

Parties

Cases Cited (7)

Cited By (1)