M1 & Ors v L1 & Ors

M1 & Ors v L1 & Ors - [2007] NSWSC 346 - NSWSC 2007 case summary — Zoe

[6]

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Baulderstone Hornibrook Engineering Pty Ltd v Kayah Holdings Pty Ltd (1997) 14 BCL 277 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Bos v Helsham (1866) L.R. 2 Ex. 72 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Capricorn Inks Pty Ltd v Lawter International (Australasia) Pty Ltd [1989] 1 Qd R 8 Re Carus-Wilson & Greene (1886) 18 Q.B.D. 7 Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643 Fletcher Construction Australia Ltd v MPN Group Pty Ltd [Unreported, Supreme Court of New South Wales, Rolfe J, 14 July 1997] Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 HIH Casualty and General Insurance (NZ) Limited (in liquidation) v General Reinsurance Australia Limited [2004] NSWSC 659 International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyd's Rep 344 Investors Compensation Scheme Pty Ltd v West Bromwich Building Society [1998] 1 WLR 896 Ipswich Borough Council v Fisons Plc [1990] 1 Ch 709: CASES CITED : Lakatoi Universal Pty Ltd v Walker [2000] NSWSC 113 Lee v The Showmen's Guild of Great Britain [1952] 2 QB 329 London Export Corporation Ltd v Jubilee Coffee Roasting Co. [1958] 1 W.L.R. 271 Magill v National Australia Bank Ltd [2001] NSWCA 221 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246; (2001) 210 CLR 181 Meehan v Jones (1982) 149 CLR 571 Natoli v Walker [(1994) 217 ALR 201 Panmal Constructions Pty Ltd v Warringah Formwork Pty Ltd [2004] NSWSC 204 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Prenn v Simmonds [1971] 1 WLR 1381 Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203; (1991) 26 NSWLR 184; Re Dawdy and Hartcup (1885) 15 QBD 426 Savcor Pty Ltd v State of New South Wales and Another (2001) 52 NSWLR 587 Sea Containers Ltd v ICT Pty Ltd [2006] NSWSC 134 Zeke Services Pty Ltd v Traffic Technologies Ltd [2005] QSC 135

[52]

"The background knowledge which a reasonable person in the position of the parties will be regarded as having, for the purposes of the construction of contracts, includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man with the proviso that it should have been reasonably available to the parties." 17 To similar effect is the observation of Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 76 ALJR 246 at 248 (para 11), quoting with approval Lord Hoffmann in Investors Compensation Scheme [1998] 1 WLR 896 at 912-913 to the effect that interpretation of a written contract involves the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting. 18 Clearly primacy must be given to the actual words used in a written contract per McColl JA in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [66] et seq. 19 Gibbs J's statement in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 that "the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyd's Rep 344 at 350 per Neill LJ (with whom Roch and Auld LJJ agreed) that the primary focus is the agreement itself which "must speak for itself, but must do so in situ and not be transported to a laboratory for microscopic analysis". 20 There is abundant authority that "the court should be astute to adopt a construction which will preserve the validity of the contract": per Mason J, Meehan v Jones (1982) 149 CLR 571 at 529; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132, per Kirby P. Further the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of a contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the document that the court must attend looking in that regard to the whole of the document to discern the parties' intent. 21 Hence I take it as axiomatic that:

[62]

[For example, the Wise Man could decide to resolve the issues by employing mediation leading to a binding agreement. Alternatively, the Wise Man could have made a decision based upon submissions, whether written, oral or both, without any evidence. Alternatively, the Wise Man could conduct a hearing in a more conventional sense.] 25 To my mind another likely indicator to the same end concerns the context where pointed emphasis was given in the Deed to the significance to the parties of confidentiality being observed in relation to any disputes between them. This further suggests a crucial significance in the distinction between the appointment of the Wise Man whose deliberations would be private and on the other hand even the slightest possibility that arbitral proceedings could in one way or another end up eroding the prospects of maintenance of that confidentiality. 26 In Re Dawdy and Hartcup there was before the Court an agreement between landlord and tenant for the letting of a farm which provided that the tenant should be paid at the expiration of the tenancy, the usual and customary valuation, as between outgoing and incoming tenant, in the same manner as he had paid on entering the premises. It was agreed between the parties that, when any valuation of the covenants should be made between the tenant and landlord, or his incoming tenant, the persons making such valuation should take into consideration the state, condition and usage of the farm, and if not left in a proper and creditable state, should determine what sum of money should be paid to the landlord as compensation and should deduct such sum from the amount of the valuation. On the expiration of the tenancy, there being no incoming tenant, the landlord and tenant respectively appointed a valuer. The valuers could not agree upon the amount of the valuation, and they appointed an umpire, who held a sitting and heard witnesses, and then made and published an award in writing. The holding by the Court of Appeal was that the agreement did not contain any submission to arbitration but that it provided only for the appointment of valuers. 27 Lord Esher MR [with whose reasons Mathew J and Lord Coleridge CJ concurred] observed that the question was whether there was at any time, a written submission to arbitration. 28 Lord Esher MR made the point that the proceedings could be clearly distinguished from In Re Hopper Law Rep 2 QB 367 and in doing so made the following observations (at 431):

[78]

"Mr Drummond Q.C. in effect challenged the statement of Real J. in the Full Court in [ Re King & Acclimatisation Society [1913] St.R.Qd. 10,] that "such an arbitration is a quasi-judicial proceeding" pointing to the fact that, in the London commodity markets, there are associations of traders who conduct arbitrations without any of the panoply of a judicial or quasi-judicial hearing or proceeding: see London Export Corporation Ltd v Jubilee Coffee Roasting Co. [1958] 1 W.L.R. 271; Mustill & Boyd: Commercial Arbitration , at 50-51. No doubt cases of that kind can be found , but as a general proposition it remains true that the proceeding is an arbitration if the parties intend that they should have the right to be heard if they so desire: Hammond v Wolt [1975] V.R. 108, 112." [Emphasis added] 43 Dealing with the decision in Balderstone it suffices to observe that clearly the Court has a jurisdiction in a particular case to determine that a purported submission of a dispute for the determination of an expert may, depending upon particular circumstances, be against public policy if it purported to oust the jurisdiction of the Court and if the prescribed procedure was entirely unsuited to the resolution of disputes arising out of a contract. The decision was one on its own facts. If the decision be regarded as authority for the proposition that in every circumstance the purported submission of a dispute for the determination of persons eminently capable of determining the dispute by reason of their specialised knowledge must be regarded as an ouster of the jurisdiction of the Court, in my respectful view that proposition does not reflect the state of the law. 44 Clearly enough the ultimate question requires one to look at the instrument by which the parties have stipulated the measure of agreement which has been reached. And equally clearly, the question of whether or not the parties have elected to appoint an expert or an arbitrator in the particular circumstances treated with in the authorities has often been found to be one of some difficulty. At the end of the day the decision in the present reasons rests upon:

[97]

"As will be explained, that Act amended s 38…to confine most narrowly the cases in which appeals to the Supreme Court from an award of an arbitrator would be permitted. The policy behind the amendment, as explained in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 221 ff (Promenade), was to promote the finality or arbitral awards even at the price of denying a party its usual entitlement to the determination of the dispute by a court of law, that, is the precise assignment of the parties legal rights after a detailed scrutiny of the relevant facts and application of the relevant law." [See also 212-214] 56 A manifest error of law is "evident or obvious rather than arguable": Promenade Investments Pty Ltd v State of New South Wales (1991) 26 NSWLR 184 at 226F. It was also held in that case that there "should…before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law. As Kirby P said in Natoli (1994) 217 ALR 201 at 214: "What is in issue is a preliminary impression. It should not require a great deal of argument. The precondition to curial intervention is the easy demonstration that the primary decision-maker was 'clearly wrong'…". 57 The policy considerations were also examined in Panmal Constructions Pty Ltd v Warringah Formwork Pty Ltd [2004] NSWSC 204 at [7] et seq. Dealing with the issue 58 Here again the submissions advanced by the defendant are of substance and are adopted. The first question of law: "The relevant taxation authorities" 59 Mr Ellicott had to decide whether the expression "the relevant taxation authorities" in clause 12.1(d)(v) of the Deed meant the ATO and the IRS, [as contended for by the defendants], or whether it included the AAT, the Federal Court and the High Court, [as contended for by the plaintiffs]. Mr Ellicott, after having received detailed written and oral submissions, decided that the phrase meant the ATO and the IRS (par.156). His decision was based on reading the words in their context in the Deed (par.157). 60 Mr Ellicott's decision is not seen to contain a manifest error. The Deed Poll executed pursuant to clause 7.2 of the Deed referred to the ATO and the IRS (clause 4.2(e)). He held that the parties had, in effect, provided their own dictionary as to the meaning of "the relevant taxation authorities". Notwithstanding Clause 8 of the Deed Poll having provided that it was to be read in conjunction with the Deed and that to the extent of any inconsistency, the Deed was to prevail:

[99]

(ii) Mr Ellicott is not shown to have committed a manifest error when construing the subject phrase in the context of the whole of the two interrelated instruments. 61 I accept that there appears to be no commercial sense in the parties agreeing to limit disclosure to the ATO and the IRS pursuant to the Deed Poll but at the same time permitting disclosure under the Deed on a far wider basis to the AAT, the Federal Court and the High Court (and similarly in the United States). Such a construction would seem to defeat the purpose of the confidentiality clauses in the Deed Poll and the Deed. That reasoning also leads into Mr Ellicott's reasoning in relation to reading the words in their context in the Deed. 62 Mr Ellicott's other reason was the use of the word "to" in the phrase "to the relevant taxation authorities". That is, tax payers make a disclosure to the ATO. In contrast an appeal or the seeking of a review in the court or the AAT is not ordinarily a disclosure to the court or the AAT. 63 In the result the plaintiffs have not established a manifest error of law on the face of what they contend to be the award. If there was an error of law, it was not manifest "in the sense that there was little or no doubt that error it was" [cf Mahoney JA in Natoli v Walker at 223]. The second question of law: the operation of clauses 6.5, 6.6 and 8.3 of the Deed on the rights of appeal or review 64 Mr Ellicott did not decide that, as matters currently stand, clauses 6.5, 6.6 and 8.3 of the Deed prevented an appeal by the plaintiffs to the Federal Court. It was an issue he specifically declined to answer [par.179]. Therefore, as there was no decision, there can be no manifest error of law. 65 The reasoning was that clauses such as 6.5, 6.6 and 8.3 may constrain the appeal or review procedures the parties may adopt. He stated that if the plaintiffs appealed to the Federal Court they might infringe either clauses 6.5 or 8.3 because it might, directly or indirectly, harm the defendants' business or their relationship with their clients or prospective clients or it may be injurious to their commercial or reputational interests because it would involve the disclosure of damaging confidential material. 66 The reasoning is clear and to my mind likely does not throw up any, let alone any 'manifest', error. Mr Ellicott stated that clauses 6.5, 6.6 and 8.3 and 12 must be read together [par.174]. 67 He then reasoned that [par.175]:

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