Abstract

Article

Admissibility of Extrinsic Evidence

The task of construing a commercial contract lies in identifying the imputed intention of the parties through its text seen in light of its context and purpose: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd at [46]-[51] and [108]-[109]; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392 at [51]- [75]; Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108 at [18] and [78].

There is a distinction between admissibility and use of evidence in support of a construction. “Construction of contracts after Mount Bruce Mining v Wright Prospecting” (2016) 90 ALJ 190 at 191-193. The word, “admissible”, can refer to a rule of evidence, or it may mean that evidence is not legitimately able to be used in some reasoning process. Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [258]. Parts of the Evidence Act recognise the distinction, and contain distinct prohibitions upon both admissibility and use. Although some rules speak of admissibility for particular purpose, they must be read together with the prohibition elsewhere upon its use, because it may be relevant and thus admissible for some other purpose: El-Haddad v R (2015) 88 NSWLR 93; [2015] NSWCCA 10.

Although evidence of the parties’ subjective intentions is not relevant to construction of a contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, evidence of the parties’ subjective intentions is relevant to issues which arise at law such as non est factum, rectification or duress, in equity, for example, equitable estoppel, rescission for innocent misrepresentation or undue influence, and under statute. It is also relevant to surrounding circumstances known to the parties, and to parties’ subjective intentions, which may not be used to construe the contract. As a general principle of construction, a provision’s meaning to be determined by objective consideration of its text, context and purpose on the footing of what a ‘reasonable businessperson would have undersood it to mean in light of its language, the to the genesis of the transaction, the circumstances which it addressed and its commercial purpose. In some cases construction is legitimately assisted by relevant evidence of surrounding circumstances. Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392; WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297; 341 ALR 467; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151. A known and communicated desire of one party is a relevant objective fact. Lahoud v Lahoud [2009] NSWSC 623 at [446]; Angas Securities Ltd v Small Business Consortium Lloyds Consortium No 9056; Taouk v Assure (NSW) Pty Ltd [2017] NSWCA 227 at [106]; Prenn v Simonds [1971] 1 WLR 1381 at 1385; Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101; [2009] UKHL 38.; Codelfa at 352.

There is a possible subtlety of the distinction. Kimberley Securities Limited v Esber [2008] NSWCA 301; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; 91 ALJR 486 C Moustaka, “The Admissibility and Use of Evidence of Prior Negotiations in Modern Contract Interpretation” [2016] UWALawRw 15; (2016) 41 UWALR 203, and the rule is not followed in some common law jurisdictions.

Evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning, but not ifit is merely to contradict the plain language of the contract. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. Here, “admissible” refers to use, rather than admissibility into evidence Righi v Kissane Family Pty Ltd [2015] NSWCA 238 at [44]; “Construction of Contracts: The High Court’s Approach” McDougall J Commercial Law Association Judges’ Series, 26 June 2015. And “ambiguous” is autological: K Lindgren, “The ambiguity of ‘ambiguity’ in the construction of contracts” (2014) 38 Aust Bar Rev 153., and is often used imprecisely: Newey v Westpac Banking Corporation [2014] NSWCA 319 at [14].

The text of a written commercial contract,that is, is the language chosen by the parties to record their bargain, has primacy, and the primary duty of a court in construing it is to ascertain its legal meaning from the words of the instrument in which it is embodied. Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109; [1973] HCA 36. Very often, the context will not approach displacing its ordinary grammatical meaning: Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [74]; Newey v Westpac Banking Corporation [2014] NSWCA 319. there is no licence for judicial rewriting of an agreementat [27]. Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5; Franklins (supra) at [23].

The general principle of construction to give a commercial agreement a commercial and business-like interpretation is constrained by its language and cannot prevail merely because the result is regarded as inconvenient or unjust. If the contract read as a whole in the background circumstances known to both parties, is unambiguous, the language must be given effect to unless it give the contract an absurd operation: Jireh International Pty Ltd v Western Exports Services Inc.; McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690; [2011] NSWCA 315; Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109. The ultimate question is whether the text, when considered in light of legitimately relevant surrounding circumstances, permits a choice of constructions between different meanings.

Whether a choice of constructions is available cannot be determined without first at least considering evidence of surrounding circumstances. In a suitable case, extrinsic evidence may be admissible even if there is no apparent ambiguity (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [8]; Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317 at [39]; Franklins Pty Ltd v Metcash Trading Ltd at [14], [63], [305]) McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690; [2011] NSWCA 315.

The commercial purpose or objects of the provision is better understood by knowing the genesis of the transaction, its background, its context and the market in which it was entered into. Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], so it is generally accepted that it is not necessary to find ambiguity before admitting evidence of surrounding circumstances: Mainteck Services Pty Ltd v Stein Heurtey SA at [71]-[85], Newey v Westpac Banking Corporation at [89]; Stratton Finance Pty Ltd v Webb [2014] FCAFC 110; 314 ALR 166 at [36]- [40]. Contra: Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd (2014) 48 WAR 261; [2014] WASCA 164 at [35]- [45] and [212]-[217], but this view originated in an application for special leave, which has doubtful status as a precedent: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [52], [112] and [119; Cherry v Steele-Park [2017] NSWCA 295.

Ambiguity is a conclusion rather than a precondition to the admissibility of evidence of surrounding circumstances. A plain meaning cannot exclude context.  Victoria v Tatts Group Ltd [2016] HCA 5; (2016) 90 ALJR 392; Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108; WIN Corporation Pty Ltd v Nine Network Australia Pty Ltd [2016] NSWCA 297; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 at [77]; Righi v Kissane Family Pty Ltd [2015] NSWCA 238 at [44];Todd v Alterra at Lloyds Ltd (2016) 239 FCR 12; [2016] FCAFC 15; Cherry v Steele-Park [2017] NSWCA 295.

This does not hustify an unrestrained advance of such evidence, and relevance is the restraint. Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251; [2001] UKHL 8; Singh v De Castro; Dhaliwal v De Castro; Brar v De Castro [2017] NSWCA 241 at [86]- [97]. It is necessary to know with some precision what the disputed questions of construction are,such as the contract’s commercial purpose. Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56.

Further, if it is claimed that the known context and common purpose of the transaction gives the words of the contract a meaning which, by language or syntax they will bear then rectification, not construction, provides the remedy. Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65

Statutory Construction

In statutory construction, the apparently plain words of a provision may wear a very different appearance in the light of the mischief which the statute was designed to overcome and of its objects: CIC Insurance Ltd v Bankstown Football Club Ltd (1987) 187 CLR 384 at 408; [1987] HCA 2.

“Under” and “in connection with” and “any”

“Under” and “in connection with” are “relational terms” covering a variety of relationships, the nature and breadth of which depend upon context and purpose. The Queen v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31]. “Under” is in the category abstractly or metaphorically to describe a conceptual relationship between the two intangible things, rather than bearing its literal meaning of a relative position in the physical world. Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65. The word, “any”, ordinarily embraces all things within the term that it qualifies, but it recognises the possibility that there may be none. Fitness First Australia Pty Ltd v Fenshaw Pty Ltd (2016) 92 NSWLR 128; [2016] NSWCA 207.

Settlement within Indemnity

 Generally, Liability policies which cover an insured’s liability for damages or compensation respond to a claim where the insured reasonably settles a claim against it and thereby agrees to pay third party damages or compensation. This is so even when the Insured’s liability to pay damages or compensation has not been determined by a court or tribunal. It is necessary to the indemnity that liability to the injured person had been established, ascertained and determined to exist, either by judgment of the court or by an award in arbitration or by agreement Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363; Weir Services Australia Pty Ltd v AXA Corporate Solutions Assurance [2018] NSWCA 100; Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14; [2003] NSWCA 331.

Exclusion as to Employment-related Benefits.

Usually, liability for non-monetary benefits such as mobile telephone costs, car travel allowances, and bonus or incentive payments are excluded. A claim for severance or redundancy payments or entitlements is excluded, but if the claim is for damages for not being given the notice of termination that the contract of employment required, it is not for a redundancy or severance payment but for damages for dismissal without due notice. Such damages include commissions on sales lost by reason of the wrongful termination if they constitute part of the claimant’s basic remuneration rather than one-off or occasional payments designed to provide encouragement so as to amount to an excluded incentive payment. Southern Classic Group Pty Ltd v Arch Underwriting at Lloyd's Ltd on behalf of Syndicate 2012 [2018] NSWSC 1272.

Exclusion of Contractual liability

Superannuation payments, are excluded. Southern Classic Group Pty Ltd v Arch Underwriting at Lloyd's Ltd on behalf of Syndicate 2012 [2018] NSWSC 1272.

Apportionment of Award and Costs when some Components not Covered

If the policy does not respond to all aspects of the claim, the insured is entitled to indemnity for the proportion of his liability that fairly represents the components of the claim to which it does respond, but the defence costs incurred by the insured are wholly recoverable. Vero Insurance Ltd v Baycorp Advantage Ltd [2004] NSWCA 390. But that part of the claimant’s costs for which the insured has established liability will be suitably apportioned between what is and what is notwithin the indemnity. Southern Classic Group Pty Ltd v Arch Underwriting at Lloyd's Ltd on behalf of Syndicate 2012 [2018] NSWSC 1272.