The Club Schanck Resort Company Limted v Cape Country Club Pty Ltd [2001] VSCA 2

5. The learned judge quoted with approval from Dr I.C.F. Spry's The Principles of Equitable Remedies[1]:

"Where all parties who execute a document intend that the provisions of the document should accord with an agreement entered into by them, or with a common intention possessed by them, but due to a mistake shared by all of them it does not do so, rectification is ordered by the court, in the absence of special circumstances that make this course unjust."

9. So far as appears thereafter his Honour's order for rectification hinges on his reasoning that -

"... it was the common intention of the parties that their agreement would enable VCAT to determine the ongoing sewerage treatment charges. They were mistaken in that belief because the agreement does not achieve that objective. There are no circumstances which would render rectification unjust. Indeed, in my opinion, the reverse is the case."

13. His Honour evidently perceived a foundation and authority for that reasoning in the decision of the New South Wales Court of Appeal in Commissioner of Stamp Duties (NSW) v. Carlenka Pty. Ltd.[2], especially in the reasons for judgment of Sheller, J.A. from which he quoted extensively.

16. The case of Carlenka is said in the headnote of the report to stand for the proposition that "The court may order rectification of a document which contains words used purposely, but mistakenly as to their effect, so as to give effect to the true intention of the parties". I should not regard that as an inaccurate summary, but its economy of expression might mislead. It is important to note the limits of the judgments, which are of course to be read and understood in the light of the facts of the case.

19. The instrument of which rectification was ordered in Carlenka was, in fact, a deed poll that was executed with a view to amending a deed of trust. The amending deed was clearly and convincingly proved to have been made with the intention of achieving no more than an empowerment of the trustee to distribute income to a nominated person or company. The draftsman, however, misinterpreted the terms of the trust deed as a result of which he used terms in the amending deed poll which would have entitled a nominated beneficiary to share in a distribution of capital, thus bringing about a re-settlement and a consequent liability to stamp duty. Rectification of the deed poll was ordered by way of adding what was in effect a proviso in each of two clauses so as to exclude a distribution of capital to a nominated beneficiary. The terms of the deed poll that had caused the problem had been purposely selected but had been used under a mistaken belief that their legal effect was narrower than that which, on their proper interpretation, they were apt to support. The mistake, therefore, was not as to the contents of the deed poll but as to its effect.

22. With a view to bringing the deed poll to tax The Commissioner of Stamp Duties relied (as did the present appellant both here and at first instance) on the decision of the Court of Appeal in Frederick E. Rose (London) Ltd. v. William H. Pim Junior & Co. Ltd.[3]. That case has amused generations of law students, being made memorable on account of its revelation of a possible arcane distinction between Algerian, Moroccan and Tunisian horsebeans on the one hand and feveroles on the other, the entertaining judgment of Denning, L.J. and the exceedingly distinguished Bar representing the respondent, who failed on appeal to sustain the primary judgment. Sheller, J.A. in Carlenka took a measure of trouble to demonstrate that some of the statements contained in the judgment of Denning, L.J. in Rose v. Pim were such as to confine too narrowly the availability of equitable relief by way of rectification of instruments. In particular his Honour pointed out, by reference to authority, that the availability of that relief depends on "disconformity between the form or effect of the document executed and the intention of the parties or party who executed it", and is not confined, as Denning, L.J. had it, to cases where "the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly." Sheller, J.A. appears to have accepted, and in effect to have applied, the decision of Brightman, J. in Re Butlin's Settlement Trusts[4], who considered rectification to be available "... where the words of the document were purposely used but it was mistakenly considered that they bore a different meaning from their correct meaning as a matter of true construction." Sheller, J.A. further disapproved, by reference to authority, of the view expressed by Denning, L.J. in Rose v. Pim that proof of disconformity between the terms of a document and intention of the party or parties executing it must, in order that rectification may be ordered, be limited to evidence of outward acts.

25. There have, it is true, been decisions both before and since Rose v. Pim with which some of the dicta of Denning, L.J. expressed in that case cannot be easily reconciled. That is not to say, however, that the case was incorrectly decided. Moreover, although the judgment of Denning, L.J. in Rose v. Pim is not infrequently referred to, the other judgments in the case, if I may say so, also repay study. For example, Singleton, L.J. expressed his conclusion tersely thus -

"The oral contract between the plaintiffs and the defendants was in fact for five hundred tons of Tunisian horsebeans, and the written contract was in the same terms. In those circumstances, a claim to rectify the written contract by adding the word `feveroles' cannot succeed. The written contract is in the same terms as the oral contract. Whatever remedies the plaintiffs might have, or might have had, rectification is not one of them."[5]

"The parties had throughout a clear common intention and purpose of buying and selling horsebeans, and their written agreements faithfully embodied and exactly recorded what they had agreed. In these circumstances it seems to me that no claim for rectification can succeed. ... the fact that [the parties] were under a mistaken impression as to what their agreement would achieve does not disturb the clarity and fixity of the agreement which they in fact made. The defendants intended to offer horsebeans and the plaintiffs intended to accept horsebeans: the written agreements correctly reflected and incorporated what they had agreed. ... On the assumption that `feveroles' are different from `horsebeans', it cannot be said that the parties agreed on the sale of a commodity of the separate existence of which they had no knowledge. The defendants were selling `horsebeans', and in order to sell they would have to acquire `horsebeans'. If `feveroles' are different, then the defendants, and equally the plaintiffs, never even gave their minds at all to the question of a sale of some products which are different from `horsebeans'."

31. These extracts explain unambiguously the basis on which their authors decided the case and are, with respect, unexceptionable. Denning, L.J. did not differ from them in the result or in his application of the relevant legal principles, for he said -

"The parties no doubt intended that the goods should satisfy the inquiry of the Egyptian buyers, namely, `horsebeans described in Egypt as feveroles'. They assumed that they would do so, but they made no contract to that effect. Their agreement, as outwardly expressed, both orally and in writing was for `horsebeans'. That is all that the defendants ever committed themselves to supply, and all they should be bound to. There was, no doubt, an erroneous assumption underlying the contract - an assumption for which it might have been set aside on the ground of misrepresentation or mistake - but that is very different from an erroneous expression of the contract, such as to give rise to rectification."

35. Carlenka was not at all like Rose v. Pim or the present case. In Carlenka there was a mistake or misapprehension as to what the words used in the amending deed poll meant as a result of which the instrument had an unintended legal effect beyond that which it was intended to achieve. That is to say, the mistake or misapprehension was such as to produce a fundamental inconsistency between what the words used in the deed, when properly interpreted, were apt to achieve and what the maker of the deed had antecedently determined to achieve by using them. It is as well to understand that the unintended legal effect that it was held to be appropriate to remove by an order for rectification was not the attraction of a liability of the instrument to stamp duty: that was merely a collateral consequence of the unintended legal operation of the misapprehended meaning of the words that were used. So much is made clear in the short concurring judgment of McLelland, A-J.A., wherein his Honour said -

"In general, the remedy of rectification of an instrument is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which the instrument would have which was inconsistent with effect which the instrument as executed did have in some clearly identified way. In this context `effect' means the legal and factual operation of the instrument according to its true construction, but does not include legal or factual consequences of the operation of the instrument of a more remote, or collateral, kind (for example, its liability to stamp duty)..."

39. By comparison, in Rose v. Pim there was no mistake or misapprehension as to the meaning of the relevant words that had been used. Although there had been a mistaken impression by the parties as to what the agreement that they had made would achieve, that was not inconsistent with - in the words of Morris, L.J. it did not "disturb the clarity and the fixity of" - their agreement.

42. So, in the present case, the parties may have laboured under a common mistaken impression - or, it may be, made a common assumption or held a common expectation - that clause 2 would enable them to seek a determination by the Victorian Civil and Administrative Tribunal of the Ongoing Sewerage Treatment Charges. That is not to say however that, comparably with the position in Carlenka, the mistake resulted in a legal and factual operation of the words used in clause 2 which, upon their true construction, was fundamentally inconsistent with what the parties had determined that the clause should achieve. It is true enough that the clause failed to achieve the parties' expectation, but that was not by reason of words that were used or omitted: there were, indeed, no words that could have been used to achieve the expectation, for the Tribunal could not have jurisdiction conferred upon it by agreement that by statute it did not possess.

45. I therefore respectfully think that the learned judge was in error to reason that, because the parties had what his Honour called a "common intention...that their agreement would enable VCAT to determine the ongoing sewerage treatment charges", which intention the agreement did not satisfy, he was justified in awarding rectification as he did.

48. I take the proposition cited by the learned judge from Dr Spry's treatise to be unexceptionable but, with respect, it does not support the reasoning for which his Honour apparently relied on it. One of the authorities cited by Dr Spry for the proposition is Slee v. Warke,[6] in which the High Court took the opportunity[7] to approve the following statement of Simonds, J. in Crane v. Hengeman-Harris Co. Inc.[8]: "...let it be clear that [in a claim for rectification] it is not sufficient to show that the written instrument does not represent [the parties'] common intention unless positively also one can show what their common intention was." A logical corollary is that rectification will be ordered only to give effect to the common intention so shown. So, since the equitable doctrine of rectification exists for the purpose, in effect, of ordering actually or notionally the textual amendment of a document, it will not be available to achieve the amendment of a particular document just because the document is shown not to conform with a common intention of the parties to it. It must be shown further that words or expressions or other text inserted into or deleted from the document would give effect to the common intention. There were and are no words or expressions or other text that, if inserted into or deleted from clause 2, would give effect to the parties' common intention as the learned judge found and expressed it to be. It cannot be right to say that, in those circumstances,

the doctrine of rectification will provide, by way of the insertion of some words, for the achievement of what the court, or one of the parties, considers to be the next best thing. So much I take to be axiomatic: it has never been the office of a decree of rectification to offer, as a kind of simulacrum, the nearest alternative to the thing to which the parties actually agreed. In Re Streamline Fashions Pty. Ltd.[9] Hudson, J. made the same point, saying "...the Factoring Company had no such intention in fact and...it would not be open to the Court to rectify or treat as rectified a debenture which would operate to bind it to the acceptance of a security different in terms from that to which it agreed and intended to agree." That was exactly parallel to the reasoning in Rose v. Pim and it has equal application here.

57. This is an appeal from the order of a judge in the Trial Division which was made on 10 June 1999, whereby it was ordered that clause 2 of certain terms of settlement dated 25 June 1998 be rectified, in short, by changing the last five lines of that clause in the manner described in the order. The order was made in proceeding No. 4832 of 1999 which was commenced by originating motion filed on 19 March 1999 by Cape Country Club Pty. Ltd. ("the Club"). In that proceeding the Club had sued The Club Cape Schanck Resort Company Ltd. ("the Resort") seeking rectification of the terms of settlement. The unsuccessful defendant, the Resort, now appeals from the order made on 10 June.

61. The present dispute had its genesis in the development of a certain area of land at Cape Schanck which is subject to the Flinders Planning Scheme. Initially the development was the project of the Club only, but at some stage the Club decided to sell some of the land and part of it was sold to the Resort for a hotel site and a golf

course. By an agreement dated 29 January 1992 and styled "Service Supply Agreement", the Club agreed to receive and treat sewage discharged by the Resort from the land that it was purchasing. The agreement was entered into by the parties pursuant to the Flinders Planning Scheme which required, first, that the Club maintain and operate a self-contained "sewage treatment plant" and reticulation system as part of the overall development and, secondly, that the purchaser of any part of the land enter into a "Supply Service Agreement" and pay fees to the owner of the treatment plant to cover the costs of providing a "sewage treatment service". The Resort was such a purchaser.

65. The foregoing is taken substantially from the allegations made by the Resort in the statement of claim which it filed in an earlier proceeding No. 4024 of 1995. In that proceeding ("the Resort's proceeding") which the Resort commenced against the Club by writ filed on 5 January 1995, the Resort alleged that in the years 1992, 1993 and 1994 the Club had charged the Resort (purportedly under the Service Supply Agreement) fees which were quite excessive, thereby breaching the Service Supply Agreement and entitling the Resort to treat the agreement as having been repudiated by the Club and to avoid it. In that proceeding the Resort sought a declaration that the Service Supply Agreement had been avoided by it and was of no further force or effect, and an order that the Club forthwith repay to the Resort the amount of $566,400, being the total of the fees paid as demanded during 1992, 1993 and 1994. Although we know nothing much more about the progress of that litigation until 1997, in October 1997 mediation was attempted unsuccessfully and what followed was a series of negotiations between the Club and the Resort in an effort to settle the litigation. On 25 June 1998, the parties agreed upon terms of settlement and those were the terms of settlement which were the subject of the current proceeding, commenced on 13 March 1999, in which the Club sued the Resort for rectification.

68. Meanwhile in 1996, the Club had taken other steps towards increasing the charges it might make for the provision of the sewage treatment service. In March 1992 the Club had been granted a planning permit under the Flinders Planning Scheme for the subdivision of the land which it then owned and which was subject to the proposed development. That permit not only required "the continued management and maintenance of the sewerage [sic] treatment plant" in such a way that the whole of the development might continue to be serviced to the local Council's satisfaction; it also required the Council's consent to any increases in servicing charges "to ensure that such charges are retained at a comparative level to similar charges by public authorities". To that end, Condition 6 of the permit required that an agreement be formally entered into under s.173 of the Planning and Environment Act 1987 ("the s.173 agreement") which might be registered on the relevant land titles and to provide, not only for "the continued management and maintenance of the sewerage treatment plant", but also for the consent of the Council to any increases in servicing charges - and such an agreement ("the s.173 agreement") was duly made on 28 May 1992 between, inter alia, the Club, the Resort and the Shire of Flinders.

71. After the commencement of the Resort's proceeding in January 1995 for a refund of what were alleged to be excessive fees charged by the Club, the Club made application to the Mornington Peninsula Shire Council (the successor to the Flinders Shire Council) to approve a revised pricing policy for the operation of the sewage treatment plant. In November 1996, the Club wrote to the users of the sewage treatment plant seeking their views and the Resort replied by letter objecting to what was the Club was proposing. The matter came before the Council for decision on 21 January 1997 and the Council, acting upon the report of its officers, resolved as follows:-

"That Council agree that the proposed pricing policy as submitted by Cape Country Club is appropriate at this time but it is for the owner of the Cape Schanck sewerage treatment plant to negotiate with the customers of the service on the magnitude of the increase and the programming of its implementation and that Council will not participate in negotiating or deliberating on the terms of any customer service agreements required to give effect to the pricing policy now agreed to."

Plainly the Council approved "the proposed pricing policy" submitted to it by the Club, but whether the resolution amounted to the "consent" of the Council to increases in the servicing charges (within the meaning of the s.173 agreement) is, I think, a different question, the answer to which probably depends upon material not available to us.

76. There matters appear to have stood until mediation was attempted in the Resort's proceeding in October 1997, without success as already mentioned. There followed the settlement negotiations which ultimately led on 25 June 1998 to the entry by the Club and the Resort into the terms of settlement which are the subject of the present proceeding.

79. It will be recalled that the Resort's proceeding had been instituted for a declaration that the Service Supply Agreement which the Resort had with the Club had been avoided and for the refund of more than $550,000 in what were said to be excessive charges. Clause 1 of the terms of settlement provided that the Club should pay to the Resort the sum of $150,000. Clauses 2 and 3 were as follows:-

"2. The plaintiff and the defendant agree that the existing Supply Service Agreement is to be cancelled by the execution of these Terms of Settlement. The plaintiff and the defendant further agree that the ongoing sewerage treatment charges for 1998 and subsequent years ("the Ongoing Sewerage Treatment Charges") will be determined by no later than 20 November 1998 by negotiation between the plaintiff and the defendant and, failing agreement, either party is at liberty (at any time before or after 20 November 1998) to refer the determination of the Ongoing Sewerage Treatment Charges to the Planning Division of the Administrative Appeals Tribunal, subject to either party having the right to appeal any such determination in accordance with the provisions of the Administrative Appeals Tribunal Act 1984 (Vic). 3. The defendant agrees to continue to provide sewerage treatment services in consideration of which the plaintiff agrees to continue to pay the rate being paid by it, being the sum of $4,216.00 per annum, pending determination of the Ongoing Sewerage Treatment Charges. If the Ongoing Sewerage Treatment Charge is more or less than the sum of $4,216.00, a final adjustment will be made between the plaintiff and the defendant."

83. Two things can be said of these provisions. First, they were agreed to by the parties in June 1998, and thus nearly 18 months after the Council had already resolved upon approving "the proposed pricing policy" submitted by the Club to the Council during 1996. Secondly, they provided for the determination of treatment charges "for 1998 and subsequent years" to be paid by the Resort to the Club for the treatment service which the Club was providing. The amount of those charges was to be determined by agreement and failing agreement as provided by clause 2. Properly construed, clause 2 provided, I think, for the matter of the charges to be referred to the Administrative Appeals Tribunal for its determination; for it is "such determination" that may be the subject of appeal by either party. And that that is how clause 2 was intended to be read is confirmed by a letter dated 22 May 1998 between solicitors.

86. To resume the narrative: the terms of settlement having been exchanged, negotiation under clause 2 seems to have been accepted as pointless, for on 1 July 1998 - which was less than a week after the terms of settlement were entered into and the very day on which the Victorian Civil and Administrative Tribunal came into being - the Resort lodged with the new tribunal a Notice of Referral, seeking (inter alia) an order "fixing the appropriate level of sewerage charges". The Notice of Referral, which purported to be under s.149A of the Planning and Environment Act 1987, was in truth under s.149 and s.149A, those sections replacing the former s.149A on 1 July 1998. The document itself, the Notice of Referral, asserted in recitals that in or about September 1996 the Club had sought permission of the Council "to increase the level of sewerage charges under clause 1 of the s.173 agreement**"** and that "in or about January 1997 Council granted permission" to that end. The reference to the tribunal was precipitated, the document said, because the parties were in dispute and the Club wished to sell the treatment plant or to have it operated by some other entity.

89. On 16 October 1998, the Resort lodged with the tribunal an amended notice of referral by which the Resort described the order sought as one "fixing the appropriate method of calculation and level of sewerage charges". There can be no doubt but that the Resort was then proceeding upon the footing that the terms of settlement effectively created a power in the parties to refer to the tribunal the fixing of the sewerage charges to be made and paid for the service being provided by the Club to the Resort: yet, as the judge decided when making the order which is now under appeal (and as was common ground before us), it is perfectly plain on a reading of the relevant statute that the tribunal does not have that power in so far as it was purportedly conferred upon it simply by private treaty. And that was the submission made by the Club to the tribunal on 21 April 1999. (It should be added at this point that although clause 2 the terms of settlement referred expressly to the Administrative Appeals Tribunal the parties at all times acted upon the footing that as from 1 July 1998 that the reference must be taken to be to its successor, the Victorian Civil and Administrative Tribunal, and indeed relevant legislation expressly so provided. The later tribunal was to be taken as standing for the earlier as though expressly referred to in clause 2.)

93. Acting no doubt on its view that the tribunal did lack jurisdiction to determine the level of sewerage charges to be made and paid for the service being provided by the Club to the Resort, the Club commenced the present proceeding on 19 March 1999, seeking an order for the rectification of the terms of settlement. As first framed in this litigation, the relief being sought by the Club by way of rectification was the substitution of the following clause for the existing clause 2:-

"2. The plaintiff and the defendant agree that the existing Supply Service Agreement is to be cancelled by the execution of these Terms of Settlement. The plaintiff and the defendant further agree that the ongoing sewerage treatment charges for 1998 and subsequent years ("the Ongoing Sewerage Treatment Charges") will be determined by no later than 20 November 1998 by negotiation between the plaintiff and the defendant and, failing agreement, either party is at liberty (at any time before or after 20 November 1998) to refer the determination of the Ongoing Sewerage Treatment Charges to an arbitrator appointed by the President of the Australian Water and Wastewater Association."

The Club thus sought to substitute, for the reference to the tribunal, a reference to an arbitrator to be appointed by the designated president.

98. The Club's application came on for hearing in the Trial Division on 1 June 1999. On 10 June judgment was delivered granting the application for rectification but not in the terms just described. According to his Honour's reasons for judgment, it was in the course of the hearing before him that the Club amended its application, seeking instead to substitute in clause 2 of the terms of settlement for the concluding words (commencing "and failing agreement") the following:-

"and, failing agreement, either party is at liberty (at any time before or after 20 November 1998) to refer to the Victorian Civil and Administrative Tribunal the question of whether consent should be given to any ongoing increases in servicing charges and the decision of VCAT, subject to either party having the right to appeal to the Supreme Court of Victoria, shall determine the Ongoing Sewerage Treatment Charges."

Thus the Club changed tack. Instead of seeking to substitute for a determination of the charges by the tribunal a determination of those charges by an arbitrator, it now sought to enable either party to refer to the tribunal "the question of whether consent should be given to any ongoing increases in servicing charges" and then to provide that the decision of the tribunal "shall determine" those charges.

103. This shift in emphasis is a critical one. Under the Planning and Environment Act, s.173 entitles a responsible authority (such as the Council in this case) to enter into with the owner of land which is covered by a planning scheme, just such an agreement as was the s.173 agreement in this instance. Section 149A, as it stood until 1 July 1998, entitled either of the other parties to the s.173 agreement in this instance to apply to the tribunal for the review of the decision of the Council to grant or withhold its consent in relation to a matter to be done under the agreement. While it became common ground between the parties that the tribunal had no power to determine the sewerage charges to be made and paid for the service being provided by the Club to the Resort in this instance, it was also common ground that the question whether consent should be given to increases in the charges as mentioned in the s.173 agreement was something which the tribunal could decide: it was provided for by the old s.149A and, from 1 July 1998, by the new s.149(1)(b).

106. The foregoing is sufficient to identify the contrast between on the one hand a provision purporting to confer upon the parties a right to refer to the tribunal the determination of the charges upon which they were unable to agree and on the other hand a provision purporting to confer upon the parties the right to refer to the tribunal the question of consent to any increase in charges under the s.173 agreement. The first described a reference which could lead to no determination, for want of power in the tribunal to make the determination. The second describes a reference which, once made, the tribunal might determine because of the provision for review which is now contained in s.149(1)(b). Below, the judge emphasised the distinction between the two and largely, I think, because there was a want of jurisdiction affecting the first but not the second, the judge ordered rectification in terms of the second, in line with the amended application.

109. It is necessary to emphasise the distinction between the two forms in which the Club sought rectification, the earlier and the later, because rectification depends upon determining first whether the written word properly expresses the common intention of the parties. Rectification is possible only where the written word fails properly to give effect to the common intention[10] and, as emphasised by counsel for the Resort, there can be little doubt in this case about that common intention. As the judge said in his reasons for judgment:

"37. From the correspondence which passed between the solicitors for the parties prior to execution of the terms of settlement it was clearly the common intention of the parties that if the parties could not reach agreement as to the ongoing sewerage treatment charges then the matter could be referred to the Administrative Appeals Tribunal, now VCAT, by one of the parties to have the Tribunal make the appropriate determination. 38. The determination contemplated by the parties was not a determination as to the principles to be applied in arriving at the determination, although clearly the Tribunal would be guided by appropriate costing principles in arriving at its determination, but an actual determination of the appropriate sewerage treatment charges in dollars and cents."

By this last, I take it that the judge meant that the determination was to be of the charges to be made and not simply of the methodology by which, at some future stage, the Club might arrive at those charges. For present purposes, it is enough to emphasise that the common intention of the parties, as found by the judge, was that in default of agreement between them the determination of the charges upon which they could not agree was to be referred to, and left to, the tribunal for its decision. The correspondence between the parties leading to finalisation of the terms of settlement left no doubt that that was their common intention; yet that meant referring to the tribunal something over which it had no jurisdiction.

114. Before us the parties did not contest the findings of the judge as to their common intention: indeed counsel for the Resort emphasised that the common intention of the parties was probably best seen in clause 2 of the terms of settlement as it stood when the terms of settlement were executed and exchanged. He later explained that he did not mean thereby to make the previous correspondence irrelevant: what he meant was that the common intention of the parties as it evolved through that correspondence was perhaps best seen in the final form of the terms of settlement. It is difficult none the less to see how rectification was open if the common intention of the parties, as it evolved, was indeed seen best expressed in the terms of settlement as entered into, but I pass that by in case I have misunderstood the submission. More importantly, the common intention as found by the judge was not challenged and it seems to me that that common intention was, as a matter of fact, correctly expressed in the terms of settlement, in particular clause 2, in the form in which that document was executed. The common intention was that the parties should reach agreement themselves about the sewerage charges for 1998 and thereafter, and in default of agreement, those charges were to be determined by the Administrative Appeals Tribunal. The parties were not mistaken about their common intention or in their expression of it in clause 2 of the terms of settlement; they were mistaken only in their common assumption that the tribunal had the jurisdiction to make the determination which the parties intended it should. As Morris. L.J. said in Frederick E. Rose (London) Ltd. v. William H. Pim Junior & Co. Ltd.[11] "the fact that they were under a mistaken impression as to what their agreement would achieve does not disturb the clarity and the fixity of the agreement which they in fact made".

117. Thus far I should have thought that, on the findings made by the judge, there was no ground for rectification. And that conclusion is only the stronger when it is seen that the rectification ordered did not provide for the determination by some person of the charges to be made and paid for the service being provided by the Resort to the Club, but for the determination of quite a different matter: namely, the question whether consent should be given under the s.173 agreement to "any ongoing increases in servicing charges". I accept the submission of counsel for the Resort that the question whether consent should be given or withheld by the Council under the s.173 agreement is not the same as the question of the charges to be made and paid: the determination of those charges is a discrete matter separate from the question whether consent should be given or withheld by the Council to the increases. The determination of the charges to be levied is a matter for the parties, in this case the Club and the Resort, and plainly clause 3 of the terms of settlement supposed that the charges, determined under clause 2, would become those to be so levied. The words to be substituted in clause 2, by reason of the rectification ordered below, went on to provide that "the decision of VCAT ... shall determine the ongoing sewerage treatment charges" (subject only to any right of appeal from the decision of the tribunal), but it seems to me that the question whether consent should be given or withheld under the s.173 agreement could not per se determine what those charges should be, unless the parties themselves agreed that, if the Council (or in its place the Tribunal) gave its consent, then the charges to which consent was given should be those to be made and paid by the parties. There is no evidence in the material put before the judge that the parties did so agree.

120. The matter can be approached in another way. The common intention of the parties, which in my opinion is as expressed in clause 2 of the terms of settlement, was to refer the matter of the charges to the tribunal for its determination, should the parties be unable to agree upon them. The tribunal was to determine those charges and, as evidenced by both clauses 2 and 3 when read together, they were to become the charges to be made and paid by the Club and the Resort respectively. The question whether consent should be given to any increases in the servicing charges was different; it was a matter for the Council which was charged under the s.173 agreement with the task of seeing that the charges to be levied by the Club remained comparable with others of like kind. If confirmation of the distinction be needed, one need only refer to the fact that the Resort, in lodging its Notice of Referral with the tribunal on 1 July 1998 when seeking that the charges be fixed, recited the consent of the Council as part of that notice. I have said enough already, in the early parts of this judgment, to emphasise the distinction between the two aspects of the case and I do not repeat it. In short, I can see no warrant for the judge to order rectification along the lines that the tribunal should not only determine whether consent should be given under the s.173 agreement, but that that determination should, in some unspecified way, "determine the ongoing sewerage treatment charges".

124. Thus, for more than one reason I think, with respect, that the judge erred in ordering rectification. In his reasons for judgment the learned judge set out this passage from Dr Spry's The Principles of Equitable Remedies[12] as containing the relevant principle:-

"Where all parties who execute a document intend that the provisions of the document should accord with an agreement entered into by them, or with a common intention possessed by them, but due to a mistake shared by all of them it does not do so, rectification is ordered by the court, in the absence of special circumstances that make this course unjust.

That seems to me, if I may say so, to express the principle correctly and it is in line with what I said earlier: that rectification is possible only where the written word fails to give effect to the common intention. The judge found it to be the common intention of the parties to refer the determination of the relevant charges to the tribunal in default of agreement between them; and, as I apprehend it their mistake lay not in the expression of that common intention, but in their underlying assumption that the tribunal would have jurisdiction to make the relevant determination once the matter of the charges was referred to it - and that mistake was no ground for rectification.

129. It seems, however, that the judge saw it otherwise; for in concluding his reasons for judgment he summed up thus: -

"In the present case it was the common intention of the parties that their agreement would enable VCAT to determine the ongoing sewerage treatment charges. They were mistaken in that belief because the agreement does not achieve that objective. There are no circumstances which would render rectification unjust. Indeed, in my opinion, the reverse is the case." [My emphasis]

Here his Honour describes "the common intention" as that which "would enable" the tribunal to determine the ongoing sewerage charges. That description must, however, be read in context; for in the very next sentence his Honour characterised that "intention" as the parties' "belief" - and, with respect, I think the latter correct. The parties believed - or, it may be said, assumed - that their agreement to refer the charges to the tribunal for determination "would enable" the tribunal to make the determination, but in that they were mistaken. That was a belief or assumption underlying their intention as to the terms of settlement: it was distinct from the common intention that was supposed to find expression - and in my view did find expression - in those terms of settlement.

134. Of course that is not to deny that the parties were mistaken as the consequences of their agreement to refer determination of the charges to the tribunal. It might then be argued that, as the parties, while choosing the words of clause 2 deliberately, were mistaken as to their effect, that opened the way to rectification in reliance upon what was said by Sheller, J.A. in Commissioner of Stamp Duties (N.S.W.) v. Carlenka Pty. Ltd.[13]. Immediately after expressing the opinion that a certain dictum of Denning, L.J. in Rose v. Pim[14] "does not represent the law", Sheller, J.A. added[15]:-

"In the first place the availability of relief [by way of rectification] depends upon disconformity between the form or effect of the document executed and the intention of the parties or party who executed it." [my emphasis]

In the case under appeal the judge made much reference to Carlenka and his Honour may, I think, have been led to conclude that, because the parties here were mistaken as to the effect of their agreement to refer the matter of the charges to the tribunal for its determination, so rectification might be ordered to overcome that mistake. But if that was the approach taken, it was, I think, error.

139. If I may say so, what I have quoted from the judgment of Sheller, J.A. is apt to mislead if taken out of context and that may have happened here; for we do not know with what emphasis the matter was argued below. The most obvious case for rectification is "where particular words have been added, omitted or wrongly written as the result of careless copying or the like"[16]. In contrast it has been said that a mistake merely about the effect of the language used will not justify rectification - as was concluded by the Court of Appeal in Rose v. Pim itself and by the High Court in Maralinga Pty. Ltd. v. Major Enterprises Pty. Ltd.[17]; see also Bacchus Marsh Concentrated Milk Co. Ltd. v. Joseph Nathan & Co. Ltd per Higgins, J.[18] To that extent, then, a distinction may be drawn between mistake as to form and mistake as to effect. In Carlenka, the parties had agreed upon amending a trust deed to empower the trustee to distribute income to a certain company. The amendment was drawn and settled by solicitors and yet by mistake the words used were apt to empower the trustee to distribute not just income, but also capital, thereby attracting significant consequences for duty. Hence the application to have the amending deed rectified to achieve what had been intended and no more. The words chosen for the amendment had been chosen deliberately; it could not be said otherwise of the work of the solicitors engaged. None the less - and no doubt in part because the common intention was regarded as being to achieve a particular legal result in the way of distributing income only and the amending deed was itself necessarily complex and legalistic in nature - the amending deed was held not to have given effect to the common intention of the parties and so rectification was ordered. It was in that context that Sheller, J.A. referred in passing to the availability of rectification where there was disconformity "between the form or effect of the document executed" and the common intention.

142. In Carlenka it was not necessary to the decision to cast the principle in terms of form or effect. It was enough, as Dr Spry says, that rectification is available when there is a want of correspondence between the form in which the document has been executed and the common intention; for in Carlenka there was that lack of correspondence notwithstanding that the wording of the document had been chosen deliberately by the solicitors and the parties had obviously intended to execute the document as settled by their solicitors. In such circumstances it will doubtless be very much more difficult to establish convincingly, as a fact, the relevant disconformity when form is compared with intention; for it will ordinarily follow from the very circumstances which I have described that, as a matter of fact, the parties' intention was in accord with the words employed. Nevertheless, and despite its attraction, that conclusion is not necessarily inevitable, even in the circumstances I have posited (of solicitors settling the wording of the document) - and that is what the decision in Carlenka demonstrates. See also, in like vein, In re Butlin's Settlement Trusts[19], Thomas Bates & Son Ltd. v. Wyndham's (Lingerie) Ltd.[20], NSW Medical Defence Union Ltd. v. Transport Industries Insurance Co. Ltd.[21], Winks v. W H Heck & Sons Pty. Ltd.[22] and Bush v. National Australia Bank Ltd.[23]

145. Despite the differences in result that appear from case to case (for example, when Rose v. Pim is contrasted with Carlenka), I venture to suggest that the principle upon which rectification depends always remains the same; it depends in every case upon a want of correspondence between the form of the document (that is, in the words actually used) and the common intention of the parties at the time when the document is executed. Where the disconformity is the product of a common mistake, that mistake may be as to what words have been employed in the document or the meaning or effect of such words as appear. But whatever the common mistake, the lack of correspondence must be between the form of the document and the common intention, if rectification is to be available. In Rose v. Pim the parties were mistaken as to the effect of their words, but there was no disconformity between the words employed and what was held to be their common intention - and so rectification was not available. In Carlenka, there was a lack of correspondence between form and intention and so rectification was available. Of course, whatever the nature or source of the underlying mistake of the parties, the common intention of the parties at the time of the execution of the document remains a matter of fact, which accounts, I believe, for such variations as occur in result. The result in any given case will depend upon whether in the particular circumstances of that case there is (as a matter of fact) the requisite disconformity between the document as executed and the common intention of the parties. It is not enough that the parties have made a mistake about their document (whether the mistake be about the words used, their meaning or their effect); that mistake may serve to explain such disconformity (if any) as is seen to exist, but it cannot be a substitute for it.

148. In the case under appeal there was no disconformity between the written word and the common intention as found by the judge. Clause 2 effected just what the parties intended: to refer to the tribunal, in default of agreement between them, the determination of the "ongoing sewerage charges". Perceiving the parties' common misapprehension about the powers of the tribunal - a mistake induced, it must be said, by advice from one of the legal advisers (although whether incorrectly relayed or misapprehended we do not know) - the judge made a valiant attempt to save the parties from their mistake, but whatever remedy might otherwise be available to them rectification is not. Indeed, once it is accepted that the parties were mistaken about the powers of the tribunal if the matter of the charges were to be referred to the tribunal as set out in clause 2 of the terms of settlement, it is apparent that no form of words was capable of overcoming the mistake. The judge suggested in his concluding remarks that the parties saw their agreement as being such as "would enable the tribunal to determine" the ongoing treatment charges. If his Honour meant thereby only that the parties saw their agreement as enabling either one of them to refer the charges to the tribunal for its determination, then that was what was achieved by the language of clause 2. On the other hand, if the judge meant by his concluding remark that by their agreement the parties saw themselves as conferring upon the tribunal a jurisdiction which it did not possess according to the statutes by which it was governed, then, as Mr. Justice Tadgell observes, no form of words could have achieved that result. Either way rectification was not warranted.

152. I would therefore allow the appeal, set aside the order made for rectification and give judgment for the Resort in the proceeding No. 4832 of 1999 commenced by the Club.

157. I have had the benefit of reading the draft judgments of Tadgell and Phillips, JJ.A. and agree that the appeal should be allowed.

160. As Phillips, J.A. makes clear, the finding below, which was not challenged on appeal, was that it was the common intention of the parties at the time they signed the terms of settlement that, in default of agreement between them, either of them could effectively request the tribunal to determine the charges in question. It is also clear that clause 2 of the terms of settlement reflects that common intention.

163. Where rectification of a document is sought on the ground of common mistake, as was the case here, before the remedy is granted it must be established that the mistake is one which relates to the embodying of the parties' intention in the written agreement - see Pukallus v. Cameron[24]. As Phillips, J.A. has shown, no such mistake occurred in this case. The mistake which the parties made was to assume that the tribunal had jurisdiction or power to do what the terms of settlement contemplated. They proceeded to make the agreement on that wrong assumption, but there was no mistake as to the embodying of their common intention in the terms of settlement. They agreed that, failing agreement between them, either could request the tribunal to determine the level of the ongoing charges and that, subject to the appeal process, such a determination would be binding. What they so agreed upon was faithfully reproduced in the written agreement signed by them. Unlike the situation in Commissioner of Stamp Duties (N.S.W.) v. Carlenka Pty. Ltd.[25], the document here, on its true construction, did not wrongly state the parties' intention. Thus, there is no basis on which the court could properly rectify the terms of settlement. The situation is not dissimilar to that which prevailed in Pukallus where the parties signed a contract of sale of land which was identified by reference to title particulars, believing that the area contained a bore and some cultivated land. In fact, both lay outside the subject land. It was held that the contract could not be rectified so as to include the bore and the cultivated land because that mistake was not a mistake in the embodiment of the parties' intention in the written agreement, but was a mistake as to what features were within the boundaries of the land sold. The parties in Pukallus, like the parties in the present case, proceeded to reach an agreement on a wrong assumption but made no mistake in embodying their agreement in the document which they executed with the intention that it be binding on them.

166. In any event, the rectification as ordered by the learned primary judge cannot stand because, as Phillips, J.A. has shown, it does not reflect what the parties agreed to do. If the terms were rectified as ordered, they would create a different agreement and the court clearly has no jurisdiction to do this.

[2] (1995) 41 N.S.W.L.R. 329.

[3] [1953] 2 Q.B. 450.

[6] [1949] HCA 57; (1949) 86 C.L.R. 271.

[9] [1965] VicRp 57; [1965] V.R. 418, at 420-1.

[10] Maralinga Pty. Ltd. v. Major Enterprises Pty. Ltd. [1973] HCA 23; (1973) 128 C.L.R. 336, Pukallus v. Cameron [1982] HCA 63; (1982) 180 C.L.R. 447.

[11] [1953] 2 Q.B. 450 at 463.

[13] (1995) 41 N.S.W.L.R. 329

[14] [1953] 2 Q.B. 450 at 461

[16] In re Butlins' Settlement Trusts [1976] 1 Ch. 251 at 260 per Brightman, J.

[17] [1973] HCA 23; (1973) 128 C.L.R. 336

[18] [1919] HCA 18; (1919) 26 C.L.R. 410 at 451 , cited in Winks v. W.H. Heck & Sons Pty. Ltd. [1986] 1 Qd. R. 226 at 236 per Thomas, J.

[19] [1976] Ch. 251 at 260-261

[20] [1980] EWCA Civ 3; [1981] 1 W.L.R. 505 at 521

[21] (1986) 6 N.S.W.L.R. 740 at 747-8

[22] [1986] 1 Qd. R 226 at 234-237

[23] (1992) 35 N.S.W.L.R. 390 at 406-407

[24] [1982] HCA 63; (1982) 180 C.L.R. 447 at 457-8 per Brennan, J.

[25] (1995) 41 N.S.W.L.R. 329.