[9] This is not to say that the exercise is formal and literalistic. On the contrary, common law and statutory principles of construction frequently demand consideration of background, purpose and object, surrounding circumstances, and other matters which may throw light on the meaning of unclear language.
92 The principles have of course been laid down over an extended period of time and the above restatement of them is naturally followed. In Lakatoi Universal & Walker [2000] NSWSC 113 at 420 - 421 which drew upon some earlier restatements by Gleeson CJ of the principles, the proper approach was summarised as follows:
· There is of course no doubt but that the court is entitled to inquire beyond the language and to "see what the circumstances were with reference to which the words were used, and the object appearing from those circumstances, which the person using them had in view".
[ Prenn v Simmonds [1971] WLR 1381 at 1384 per Lord Wilberforce]
· Hence it is that "the commercial, or business object, of the transaction, objectively ascertained, may be a surrounding fact" [Prenn at 1385]. As Lord Wilberforce points out, Cardozo J thought so in Utico City National Bank v Gunn (1918) 118 NE 607.
"And if it can be shown that one interpretation completely frustrates that object, to the extent of rendering the contract futile, that may be a strong argument for an alternative interpretation, if that can reasonably be found. But beyond that it may be difficult to go: it may be a matter of degree, or of judgment, how far one interpretation, or another, gives effect to a common intention: the parties, indeed, may be pursuing that intention with differing emphasis, and hoping to achieve it to an extent which may differ, and in different ways. The words used may, and often do, represent a formula which means different things to each side, yet may be accepted because that is the only way to get 'agreement' and in the hope that disputes will not arise. The only course then can be to try to ascertain the 'natural' meaning. Far more, and indeed, totally dangerous is it to admit evidence of one party's objective - even if this is known to the other party. However strongly pursued this may be, the other party may only be willing to give it partial recognition and in a world of give and take, men often have to be satisfied with less than they want. So, again, it would be a matter of speculation how far the common intention was that the particular objective should be realised ." [ Prenn at 1385]
· In Prenn, Lord Wilberforce upon a close examination of the agreement and of the surrounding circumstances was able to hold that "the appellant's construction does not fit in any way the aim of the agreement, or correspond with commercial good sense, nor is it, even linguistically, acceptable". His Lordship was however able to hold that the converse of each of those propositions applied to the respondent's interpretation. [Prenn at 1389]
· Lord Reid, Lord Donovan and Lord Pearson expressed agreement with Lord Wilberforce's speech. Lord Diplock however, whilst agreeing with the statement by Lord Wilberforce "as to the principles to be applied in the interpretation of a written agreement, and as to the reasons which underlie the rule that evidence is not admissible of the negotiations between the parties or any purpose which either of them hoped to achieve by it does not appear from the words used in the agreement and the surrounding circumstances", was less confident that the application of those principles to the written agreement contended for on behalf of the respondent was to be preferred to the alternative meaning which had commended itself to the Vice-Chancellor. His Lordship then added "but such doubts as I have are not strong enough to justify my differing from the remainder of your Lordships". [Prenn at 1390]
· Hence, even accepting as clear, the statement of principle laid down by Lord Wilberforce, one can see how difficult at times, can be an attempt to apply those principles to specific facts. Lord Diplock's comment makes plain that different minds may see an application of the principles in different ways.
· The general test of objectivity is pervasive in the law of contract. Two passages from speeches of Lord Diplock illustrate the point (as Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549).
· In Gissing v Gissing [1971] AC 886, his Lordship said:
'As in so many branches of English Law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.'
· In Ashington Piggeries v Christopher Hill [1972] AC 441 at 502, his Lordship said:
'In each of the instant appeals the dispute is as to what seller promised to the buyer by the words which he used in the contract itself and by his conduct in the course of the negotiations which led up to the contract. What he promised is determined by ascertaining what his words and his conduct would have led the buyer reasonably to believe that he was promising. That is what is meant in the English Law of contract by the common intention of the parties. The test is impersonal. It does not depend upon what the seller himself thought he was promising, if the words and conduct by which he communicated his intention to the seller would have led a reasonable man in the position of the buyer to a different belief as to the promise; nor does it depend upon the actual belief of the buyer himself as to what the seller's promise was, unless that belief would have been shared by a reasonable man in the position of the buyer. The result of the application of this test to the words themselves used in the contract is still "the construction of the contract".'
Findings as to what was the agreement between the parties
93 It has to be remembered that the court determines issues of fact on the basis of all of the evidence and not on the basis of only sections of the evidence. The evidence here throws up a number of versions of conversations given by a number of relevant witnesses and the task of the court is by reference to the whole of the evidence, including the documentary material, to determine on the balance of probability what was said as between the parties and what documents were seen or received by the parties or known by them to exist, in terms of having been read or otherwise brought home to the parties.
94 Here the three groups of parties from each of whom evidence has been adduced are clearly enough the plaintiff, the defendants and Inglis.
95 The evidence given by Mr Foote, already set out, discloses that in the course of his cross-examination in relation to paragraph 10 of his affidavit wherein he had set out a conversation which he had had with Mr Orton on the afternoon of 3 April and before the auction, there was more to the conversation then he had set out in the affidavit.
96 His evidence in the witness box was that in this conversation there was a reference to their earlier conversation but he could not recall the exact words as to what was said. Apparently, at least on his evidence given in the witness box, this involved whether Mr Orton had spoken to Mr Inglis. Mr Foote was not able to recall what Mr Inglis had said in the discussion which he had with Mr Inglis in relation to the 5 conditions [being those which are set out in the x-ray condition document which Mr Foote said he had never seen]. He did have some recollection of discussing the nominated conditions with Mr Inglis but could not remember the conversation exactly.
97 Further Mr Foote in the witness box was asked about whether he had had one or more conversations with Mr Inglis prior to the commencement of the sale and recalled having had a brief such conversation in which Mr Inglis had reaffirmed that the purchaser had to make prior arrangements with the vendors. This was apparently, so Mr Foote said in giving evidence in the witness box, not the conversation which he had referred to in paragraph 8 of his affidavit, but was a subsequent conversation not being one set out in the affidavit.
98 Whilst it is certainly difficult to determine on the balance of probabilities whether to accept as reliable the evidence given by Mr Orton as to the conversations which he had with Mr Foote on 28 March, on 1 April and on 3 April or whether to accept as reliable, the evidence given by Mr Foote as to the conversations of 28 March and 3 April and as to having no recollection of the conversation of 1 April, it seems to me that on the balance of probabilities it is appropriate to accept as reliable the evidence given by Mr Orton. Clearly enough Mr Foote, as one of this country's top five bloodstock agents by quantity of sales, inspected every horse in the sale and had numerous conversations with numerous persons. Taking that into account as well as taking into account the difficulties which he had in cross-examination of recalling the number of conversations and importantly the detail of the conversations which he had had with Mr Inglis and taking into account his failure to include in his affidavit a conversation which he appeared to recall while giving evidence in the witness box and which apparently included discussion, although he could not recall the conversation exactly, of the nominated conditions, it seems to me that Mr Orton's evidence should be accepted as the more reliable in terms of the above described conversations.
99 It is then necessary to consider the probabilities insofar as the conversations which Mr Inglis had with Mr Orton and Mr Foote are concerned. Here again it is difficult to determine the probabilities but this is a task which the court must face up to.
100 In standing back from the evidence given in this regard there is clear substance in the plaintiff submission that the surest guide to the content and effect of relevant conversations which Mr Inglis had with vendors and purchasers would be the written version of the x-ray condition which Inglis had circulated to vendors and purchasers during and in the days preceding the sales. Of course both Mr Inglis as well as Mr Darcy were involved in circulating the document. Mr Inglis when speaking with vendors and purchasers, on his evidence which in this regard, save in the respect concerning discussions with Mr Orton about the post x-ray control and custody of horses, I accept as reliable, sought to accurately relate to them what was set out in the document. In this respect he made absolutely clear when speaking with vendors and purchasers that, as the written notice emphasises, the terms and conditions of the 2002 Australian Easter Yearling Sale remained the same. The plaintiff submits and I accept, that in addition to the relevant concessions which Mr Inglis made in the course of his cross-examination, the inherent likelihood of this matter being impressed upon the parties, including Mr Foote is further emphasised by the fact that these words had been capitalised in the document, obviously to stress their importance.
101 Further in the course of his cross-examination already set out, Mr Foote in giving evidence that he did not see the x-ray condition document which he was shown in the witness box, referred to a letter from Aushorse and also to a letter he thought from the Hong Kong Jockey Club which had been sent around the sale ground and which he briefly saw. He thought that there was an attachment to "their" letter and it outlined the conditions. The evidence did not include either of these letters. The court is forced to infer what the material in the missing letters is likely to have included. To my mind on the probabilities, in standing back from all of the evidence, it seems reasonable to infer that these letters and probably more particularly the attachment to apparently one of them, is likely to have at the least set out the relevant conditions.
102 On the evidence given by Mr Inglis, every attempt was made to avoid confusion and doubt as to what the x-ray condition was about. The evidence is certainly replete with considerable evidence that Mr Inglis spoke both to vendors and purchasers using the x-ray condition document and speaking to it. His office had a list "and everybody-the senior person at every stud was notified and given a copy of [the x-ray condition document". The list was ticked off. Every stud would have had or been told about the document and given a copy of the document. To my mind the probabilities very strongly favour the inference from the evidence that both the vendor as well as the purchaser would either have received the x-ray condition document, or been informed of what it contained. The matter was very important and informality in the context in which the auctioneer was anxious for precision, should not be inferred. It is difficult to see that the auctioneer could have done much more than it did in the circumstances, to ensure full and complete circulation of the x-ray condition document. Effectively this amounts to a finding which to an extent flies in the face of the evidence given by both Mr Foote as well as Mr Orton.
103 That being the finding one moves next to assessing the reliability of the evidence given by Mr Inglis and as to what he said to those to whom he spoke about the x-ray condition and circumstance. As I have earlier indicated I accept that the surest guide to the content and effect of such conversations is the written version of that notice. Having said that I am prepared to accept that Mr Inglis's evidence should be accepted as reliable where he said that what he had stated was that the new condition being adopted or introduced providing that both purchaser and vendor agreed, was that x-raying would be allowed and the sale would not be completed on the horses where the x-ray condition applied until such time as the x-rays had been cleared. His evidence was given confidently. It seems to be supported by the evidence given by Ms Carnes albeit after the event. In that regard in her conversation with Mr Orton she was quite clear that she had asked him to confirm that the sale was "subject to x-ray". Under cross-examination Mr Orton conceded that this could have been said.
104 A further question which arises concerns the state of the evidence as to what was said in relation to what was to happen to the colt following the x-rays having been carried out. Here Mr Orton gave evidence that in their discussions, Mr Inglis did not tell him that the horses would stay at the Inglis premises until such time as the x-rays were proved satisfactory or unsatisfactory. All that he had discussed with Mr Inglis was that the horses had to be x-rayed at the Randwick Equine Centre and "they had to be done before the horses left the ground." [Transcript 75.43 as corrected by consent by reference to sound recording]
105 This is a not unimportant point because the defendants case would have it that the evidence proves that a term clearly communicated, in whatever way, to the vendor as well as to the purchaser, was that the colt was to remain in the custody and control of the auctioneer or the vendor or at the auctioneer's premises until the x-rays had not only been carried out but the results thereof also notified. In doing the best that I am able, in terms of an assessment of all of the evidence, I am unable to find that this was communicated to the plaintiff. Mr Orton's evidence in this regard given quite firmly, is accepted as reliable. All that he was aware of in this regard, was that the x-rays would have to take place at the Randwick Equine Centre. To the extent that the evidence given by Mr Inglis [that he would typically inform those to whom he spoke that the horses would be in Inglis control until the x-rays were cleared, that is to say until Inglis had received notification, that the horses had passed or failed under the conditions], may be said to conflict with the evidence given by Mr Orton that he had not been so informed, this is an area in respect of which Mr Orton's evidence is preferred as the more reliable. Of course it is clear that the x-ray condition which Mr Inglis was so very careful to circulate and to endeavour to accurately relate to vendors and purchasers did not refer at all to the horses being required to be kept at the Inglis premises until the x-rays were proved satisfactory or unsatisfactory and/or notification took place accordingly. So that insofar as one is able to regard the evidence given by Mr Inglis as reliable by reason of his care in speaking to the x-ray condition document, this plank of reliability is not present on this very precise issue.
106 Hence even on the defendants' case which would have it that the relevant agreement was comprised by the Inglis Conditions of Sale and the oral communications of relevance, as it cannot be established on the evidence that an important part of the alleged oral agreement was ever communicated to the plaintiff, an important plank of the case is seen to be missing. It is of course trite that every term of an agreement, whether oral or in writing, needs to be clear and in the case of an alleged oral term, the courts finding of fact as to what was said is determinative. Whatever part the oral discussions should properly be held to have played in relation to the formation of the relevant agreement which may have bound the parties, on the evidence there is no place in the agreement for any express term that the colt was to remain in the custody and control of the auctioneer or the vendor or at the auctioneer's premises until the x-rays had not only been carried out, but the results thereof also notified. Nor can such a term be discerned treating with the issue as one of construction. Nor applying the BP Refinery (Westernport) (1977) 52 ALJR 20 at 26] tests, can such a condition be implied. To my mind such an implication is not reasonable and equitable; it is not necessary to give business efficacy to the contract which will be, it seems to me, effective without it; it is not so obvious that it goes without saying.
107 With those findings it is now possible to deal with a number of other matters which are determinative of the proceedings.
Construction of clause 5.1 - advertent failure
108 I reject as of no substance the plaintiffs contention that, for cl. 5.1 to operate, there must have been an advertent failure by the vendor to disclose to the auctioneer prior to the sale that the lot showed signs of being a wobbler (or being addicted to wind sucking), and an advertent failure to disclose that fact by the auctioneer at the time of the sale. This construction cannot be supported by the common sense of the situation and falls well outside the commercial construction of the document.
109 In what follows a number of the plaintiff submissions are accepted as correct and adopted.
Construction of clause 5.1- sale takes place on fall of hammer
110 An auction is an invitation to treat. The bidder is not a conditional purchaser and is no more than an offeror. No contract may come into existence unless and until his bid is accepted, usually by the fall of the hammer: AGC (Advances) Ltd v McWhirter (unreported Supreme Court of New South Wales, 1977, Holland J)
111 While general mercantile law may regard a sale as taking place on completion of an agreement whereupon title passes, it is quite clear that the term "sale" is consistently used in the Inglis Conditions of Sale in a different sense. In the Inglis Conditions of Sale, including in cl. 5.1, a "sale" is regarded as taking place on the fall of the hammer. It is thus not to the point that title in a horse may not pass until the purchase price has been paid. The operative 7-day time provision in cl. 5.1 begins to run from the date of the "sale" (ie the fall of the hammer) not from completion or passing of title.