Anberton Pty Ltd v Buller Ski Lifts Pty Ltd
[2006] VSC 106
•24 March 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7691 of 2005
| ANBERTON PTY LTD (ACN 004 461 081) | Plaintiff |
| v | |
| BULLER SKI LIFTS PTY LTD (ACN 006 242 066) | Defendant |
---
JUDGE: | DODDS-STREETON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 7 and 8 February 2006 | |
DATE OF JUDGMENT: | 24 March 2006 | |
CASE MAY BE CITED AS: | Anberton v Buller Ski Lifts | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 106 | |
---
CONTRACT – Construction of agreement – Whether agreement giving pass holders the right to use the defendant’s ski facilities without charge and to nominate any person from time to time to do so in its place included the right to nominate multiple persons for reward – Relevant principles of construction – Relevance of factual matrix – Held agreement conferred entitlement to nominate multiple persons for reward.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D.G. Collins S.C. with Ms L.J. Hannon | Middletons Lawyers |
| For the Defendant | Mr P.R. Hayes Q.C. with Mr J.D. Armstrong | Arnold Bloch Leibler |
TABLE OF CONTENTS
INTRODUCTION.............................................................................................................................. 2
SUMMARY OF FACTS AND EVIDENCE................................................................................... 3
PRINCIPLES OF CONSTRUCTION........................................................................................... 13
The plaintiff’s main contentions................................................................................................... 16
The defendant’s main contentions............................................................................................... 18
APPLICATION................................................................................................................................. 20
Construction of Clause 4(b)........................................................................................................... 20
Relevance of Factual Matrix........................................................................................................... 24
CONCLUSION................................................................................................................................. 29
HER HONOUR:
INTRODUCTION
In this proceeding the plaintiff, Anberton Pty Ltd (“Anberton”) seeks declaratory relief in relation to the extent of its entitlements under an agreement dated 29 June 1995 (“the agreement”) with the defendant, Buller Ski Lifts Pty Ltd (“Buller”). The defendant operates ski lifts and tows at an alpine ski resort at Mt Buller in Victoria, on land leased from the State of Victoria. Skiers pay to use its ski facilities. The plaintiff is the holder of five passes (“orange passes”). Under the agreement, an orange pass permits the holder to use the defendant's ski lifts and tows without charge. It is not disputed that it also entitles the holder to nominate at least one other person to use the ski facilities in the holder’s place without charge during the ski season.
The parties are in dispute over the scope of the plaintiff’s entitlement to, and the terms on which it may, nominate other parties to use the ski facilities under the orange pass.
The plaintiff claims that the agreement, on a proper construction, entitles it to make multiple nominations of individuals for reward, who may each, at any one time, use the orange pass in the holder’s place, whether or not the extent of the nominations is such that they constitute the carrying on of a business of trading in nominations for reward.
The defendant, however, contends that the plaintiff’s entitlement under the agreement is restricted to personal use of the ski lifts and tows by the holder itself, and a single specified nominee for each ski season, or, at most, use by the “family and friends” of the holder. It does not entitle the plaintiff to nominate for reward. Alternatively, if it does entitle the plaintiff to nominate for reward, such entitlement is very limited and does not extend to the carrying on of a business of the sale of the right to use orange passes.
Whatever the scope of the holder’s rights under the orange pass, the rights subsist until 31 December 2041 or such later date as the lease of the alpine resort land terminates. The plaintiff is one of 44 orange pass holders (collectively entitled to a total of 129 orange passes), all of which executed identical agreements with the defendant at about the same time. The construction of the relevant provisions of the plaintiff’s agreement will therefore apply to the other orange pass agreements.
The defendant further alleged that during the 2005 ski season (and probably prior to that time), the plaintiff used its orange passes to carry on a business of trading in nominations for reward, in breach of the agreement. It conceded that it retained possession of an orange pass of the plaintiff lost by a Ms Crossman (a nominee of the plaintiff) on 5 July 2005, and resisted the plaintiff’s claim that the defendant must return that orange pass. At trial, the issue of the lost orange pass was not pursued.
The defendant, by counterclaim, alleges that the plaintiff has been unjustly enriched by its conduct of a business of trading in orange pass nominations for reward. It seeks restitution of the moneys obtained by the plaintiff and related declarations.
SUMMARY OF FACTS AND EVIDENCE
The defendant is currently the sole operator of 25 ski lifts at the Mount Buller Alpine Resort in Victoria. It also operates related ski resort machinery, equipment, premises and services. It meets the cost of its operations from revenue, including revenue from the sale of lift tickets. The defendant’s business is conducted on land leased from the State of Victoria. The lease will expire on 31 December 2041.
Mt Buller Ski Lifts Pty Ltd, the corporate entity which originally established ski lift facilities, was incorporated in about 1958.
The plaintiff, Anberton, a family investment company, was a member of Mt Buller Ski Lifts Pty Ltd. The guarantors of funding for Mt Buller Ski Lifts Pty Ltd were issued with Guarantor Passes. A Guarantor Pass entitled the holder to use the ski lifts free of charge for life. That entitlement was non-transferable. Mr Hume, a director of the plaintiff, and his wife, were each holders of a Guarantor Pass.
In August 1978, the articles of association of Mt Buller Ski Lifts Pty Ltd were amended by the introduction of article 154. Article 154 provided:
“(a)There shall be attached to each 4000 shares in the capital of the Company the right in the holder to for the time being of such shares for the holder or his nominee (from time to time) without payment to use the ski tows and ski lifts owned and operated by the Company.
(b)The right to such use of the ski tows and ski lifts shall not be separable from the shares to which it relates and shall only be capable of being transferred to the transferee of, and with, the shares to which it relates.
(c)Without restricting the foregoing, the use of the ski tows and ski lifts shall be subject to such regulations as the Board shall from time to time determine.”
The rights provided for by article 154 were attached to “Gold Passes”.
In November 1984, MacMahons Holdings Limited (“MacMahons”) made a takeover offer pursuant to which it acquired all the issued shares in Mt Buller Ski Lifts Pty Ltd. The ski lift business was henceforth merged in, and carried on by, the defendant company, then under the name of Bourke Street Ski Lift Company Ltd (“Bourke Street”).
The takeover offer pursuant to which MacMahons acquired the shareholding in Mt Buller Ski Lifts Pty Ltd contained provisions in relation to the Gold Passes and the Guarantor Passes.
Clause 13 of MacMahon’s takeover offer provided that, in addition to the cash consideration per parcel of shares payable if the takeover scheme were successful, the offeror would issue “for each parcel sold by you to the Offeror a Gold Pass in lieu of your existing Gold Pass or Gold Passes which shall be surrendered by you to the Offeror at the time of the issue to you of the new Gold Pass or Gold Passes as aforesaid”.
The takeover offer further stated:
Clause 13(b): “That a Gold Pass issued to you as aforesaid shall confer upon you the same skiing rights and privileges which attach to the holder of each Parcel as prescribed by Article 154 of the Articles of Association of Mt Buller and which were attached to any Gold Pass held by you at the date of this offer and in addition thereto you shall hereafter be entitled to use free of charge all of the ski tows and ski lifts for the time being and from time to time operated by Mt Buller or by the Offeror or any other company or companies under the control of the Offeror at Mt Buller.”
Clause 13(c): “That any Gold Pass issued to you as aforesaid shall be transferable upon the same terms and conditions which were attached to any Gold Pass held by you at the date of this offer … “
Clause 13(d): “That it will not sell nor cause suffer or permit to be sold all or any of the ski tows and ski lifts at Mt Buller … without first having obtained from any purchaser a legally binding undertaking that the purchaser will continue to honour the skiing rights and privileges attaching to any Gold Pass … and further that such purchaser will not in turn sell any such ski tow or ski lift without first having obtained from any prospective purchase a covenant in like terms.”
Clause 14: “In the event of the takeover scheme being successful, the Offeror undertakes to honour and preserve the skiing rights and privileges presently conferred upon and granted by Mt Buller to the Directors and Guarantor hereinafter named.”
The “skiing rights and privileges” prescribed by article 154 and attached to any Gold Pass held at the date of the takeover offer therefore remained intact, as a term of the takeover. Article 154(a) provided for the right of the holder or his nominee from time to time without payment to use the ski lifts. The terms of clause 13(b) of the takeover offer begged the question whether the Gold Pass rights and privileges prescribed by article 154, which it preserved, included a right to nominate multiple persons for reward.
After the takeover by MacMahons, Mr McDonald, MacMahon’s Chief Executive Officer, took steps to limit the ability of Gold Pass holders to nominate others to use their Gold Passes.
Mr McDonald and Mr Monester, the director and general manager of Bourke Street from February 1987, formed the view that Gold Pass holders were trading in the Gold Passes. Messrs McDonald and Monester discussed possible means of restricting such use. Mr McDonald instructed Mr Monester to stamp out commercial trading in Gold Passes.
The letter of Mr Monester to Gold Pass holders dated 9 June 1988 stated that the Gold Passes were “being offered for commercial exploitation”, which was “detrimental to the interest of the company and totally contrary to the spirit and intent of the Gold Pass concept.” The letter asserted that “the concept was enshrined in the company’s Articles which made it plain that the privilege conferred was limited to the holder of the pass and the holder’s specific nominee. It was never intended that this privilege could be offered freely in the market place for commercial gain”.
In 1988, Gold Passes were imprinted with the words “not for commercial use or sale”; “liable for confiscation for unauthorised use”; “persons using the lifts … do so entirely at their own risk”.
At some stage during the period of MacMahon’s control, the Gold Pass holders formed a Gold Pass Committee to represent them.
By a letter to the defendant dated 4 July 1988, Home Wilkinson & Lowry, the solicitors for the Gold Pass holders, asserted that Gold Pass holders “believed that they were entitled to full transferability both as to usage and ownership and, regardless whether such transferability is by gift, sale or otherwise of the Gold Passes.” The letter further stated that the sale of Gold Passes was not “illegal or improper or an abuse of the existing system”. It requested that new Gold Passes be issued without the imprinted prohibition. The defendant did not accede to that request.
In 1990, the defendant again issued the Gold Passes bearing the words “Not for commercial use or sale”. Certain Gold Pass holders wrote to the defendant objecting to that wording.
In 1991, the Gold Passes also bore a notation purporting to prohibit commercial exploitation.
In his witness statement, Mr Hume asserted that following the take over by MacMahons, a dispute had arisen between Gold Pass holders and the defendant over whether title to the Gold Pass could be transferred more than once. Further, in 1988, the defendant attempted to limit the use of Gold Passes to the Gold Pass holder only. Although Mr Hume’s witness statement included an assertion that Bourke Street again tried to limit the Gold Pass holders’ right to nominate for reward in 1993, at trial Mr Hume corrected that date to 1991.
In 1992, Mount Buller Investments Pty Ltd, a company within the Grollo Group, acquired 80% of the issued shares in Bourke Street. It acquired the remaining 20% of the issued shares in Bourke Street in 1993.
In August 1994, Mr Hume met with Mr Grollo, a controller of the Grollo Group. Mr Hume testified that the issue of transferability of Gold Passes was the only matter discussed at the meeting. Following that meeting, further meetings took place in October 1994 with Mr Mullally, a lawyer employed by Mount Buller Investments Pty Ltd, and Mr Braids, a manager of the defendant. Correspondence passed between the defendant and Gold Pass holders in relation to disputed matters over Gold Passes.
A draft offer prepared by BSL and dated 5 October 1994 was provided to Mr Hume at a meeting with BSL representatives on 5 October 1994.
The draft offer relevantly stated:
“Buller Ski Lifts Ltd (BSL) acknowledges that:
Gold Passes (GPs) are transferable by the original holders only to a third party whether for consideration or otherwise; and
that the holder of a GP can nominate another person to use the GP whether for consideration or otherwise.
However BSL does not acknowledge that a third party to whom a GP has been transferred from an original holder can then re‑transfer the GP to another party whether for consideration or otherwise.
Without prejudice and without any admission that BSL is liable in any way to any holders of GPs, BSL hereby offers to holders of GPs the opportunity to have some certainty as to their rights and their ability to transfer their GP on the following terms:
1.BLS will establish and maintain a register of holders of GPs and their nominees. An annual administration fee of $100 per GP will be charged for clerical costs;
2.Holders of GPs will have an unlimited right to transfer and re‑transfer GPs (whether for consideration or otherwise) subject to:
(a)Completion of a transfer form to be provided by BSL; and
(b)Payment of a $1,000 transaction fee each time a GP is transferred;
3.Holders of a Gold Pass will only be able to nominate one natural person to use the Gold Pass for a particular season by completing a nomination form to be provided by BSL and to be lodged by the holder with BSL by no later than 1 May each year. Nomination cannot be for any period less than the entire ski season and nominees cannot nominate any other persons. The sale or hire of Gold Passes for daily, weekly, monthly or other periods (other than for the entire ski season) is strictly forbidden.
This offer is subject to:
(a)being formally documented in a legally binding deed; and
(b)the unanimous acceptance of the offer, and the execution of such deed, by ALL holders of GPs by no later than 5.00pm on 1 December 1994.”
The draft offer was not executed. It was referred to the Gold Pass Committee. Mr Hume gave evidence that the plaintiff did not agree to clause 3 of the draft offer. He stated that the plaintiff and other Gold Pass holders agreed to only three provisions of the draft offer, being the annual fee, second and subsequent transfers of title and the matters subsequently included in clause 4(b) of the agreement.
Further negotiations resulted in the preparation of a draft of the agreement. A final version of the agreement was forwarded to Mr Hume by [the defendant] on 20 February 1995, under cover of a letter of the defendant’s General Manager, Stephen Braids, dated 20 February 1995, which stated that “the wording … has been agreed to by Rodney Davidson.” Mr Davidson was a member of the Gold Pass Committee.
Mr Hume gave evidence that he sought that the words “for reward” be included in the proviso of clause 4(b) in the draft agreement, but not in the introductory part of clause 4(b), as that was intended to accord with article 154.
The agreement between the plaintiff and the defendant, (then Buller Ski Lifts Limited (“BSL”)), was executed on 29 June 1995. It relevantly provides:
“THIS AGREEMENT is made on 29 June 1995.
BETWEEN
BULLER SKI LIFTS LIMITED
(A.C.N. 006 242 066)
of 20-30 Chifley Drive, Preston
in the State of Victoria (“BSL”)
AND
The person specified in
Schedule A of this Agreement (the “Holder”)
RECITALS
A.The Holder was previously a member of Mt Buller Ski Lifts Pty. Ltd. and as such was entitled to one Gold Pass (as hereinafter defined) for each 4,000 shares owned with their supportive loan of $6,000. The rights of the Holder with respect to the Gold Passes were prescribed in Article 154 of the Articles of Association of Mr Buller Ski Lifts Pty Ltd.
B.On 6 November 1984 a takeover offer of Mt Buller Ski Lifts Pty. Ltd. was made by MacMahon Holdings Limited. Clause 13 of the takeover offer provided as follows:-
“13. Additional Benefits and Entitlements.
In the event of the takeover scheme being successful the Offeror undertakes that in addition to the cash consideration per Parcel payable to you as hereinbefore mentioned in Clause 1 hereof it will do the following:-
(a)Issue or cause to be issued to you for each Parcel sold by you to the Offeror a Gold Pass in lieu of your existing Gold Pass or Passes which shall be surrendered by you to the Offeror at the time of the issue to you of the new Gold Pass or Passes as aforesaid.
(b)That a Gold Pass issued to you as aforesaid shall confer upon you the same skiing rights and privileges which attached to the holder of each Parcel as prescribed by Article 154 of the Articles of Association of Mt Buller and which were attached to any Gold Pass held by you at the date of this offer and further and in addition thereto you shall hereafter be entitled to use free of charge all of the ski tows and ski lifts for the time being and from time to time operated by Mt Buller or by the Offeror, or any other Company or Companies under the control of the Offeror at Mt Buller.
(c)That any Gold Pass issued to you as aforesaid shall be transferable upon the same terms and conditions which were attached to any Gold Passes held by you at the date of this offer.
(d)That it will at your request forthwith do sign, and execute and complete and cause to be signed, executed and completed all such further documents and assurances as may be necessary to give legal effect to the abovementioned skiing rights and privileges.
(e)That it will not sell nor cause suffer or permit to be sold all or any of the ski tows and ski lifts at Mt Buller operated by Mt Buller or by it or any other Company or Companies under its control without first having obtained from any purchaser a legally binding undertaking that the purchaser will continue to honour the skiing rights and privileges attached to any Gold Pass issued as aforesaid, and further that such purchaser will not in turn sell any such ski tow or ski lift without first having obtained from any prospective purchaser a covenant in like terms.”
C.To clarify clause 13 of the Takeover document MacMahon Holdings Pty. Ltd. wrote a letter dated 13 November 1984 to the Secretary, Mt Buller Ski Lifts Pty. Ltd. which stated:
“We write to confirm that under the terms of the Part A Offer our Company guarantees the following aspects of the Offer:-
(a)That the new Gold Passes will not in any way be linked to shareholding and will be fully transferable at any time.
(b)That the covenant regarding continuity of the Gold Pass rights continue if there were a future disposal in any way of the lifting systems at Mt Buller and would include any disposal by way of compulsory acquisition by Government when compensation would arise.
(c)That Gold Passes will issue annually.
D.Following the takeover of Mt Buller Ski Lifts Pty. Ltd. by MacMahon Holdings Limited and the subsequent takeover of the Ski Lift operations by BSL, there arose various disputes as to the rights of the holders of Gold Passes with respect to transferability and the use of their respective Gold Passes.
E.In settlement of the disputes between the parties to this Agreement in relation to the rights of the Holder with respect to Gold Passes, the parties agree to the terms and conditions of this Agreement.
…
4.RIGHTS AND CONDITIONS OF ORANGE PASSES
The parties agree that Orange Passes will confer rights and be subject to the terms and conditions prescribed by this clause; namely:
(a)the Holder may transfer title to any Orange Passes (issued to it in accordance with clause 3) by complying with the requirements of clause 6;
(b)the Holder is entitled to nominate for each Orange Pass issued to it in accordance with clause 3 any person (hereinafter referred to as the “Nominee”) as being allowed to enjoy in place of the Holder the rights of the Holder pursuant to this clause for any period of time as allowed by the Holder PROVIDED THAT the Nominee will not have any right of nomination for reward or any consideration whatsoever or of transfer to any other person of the rights of the Holder;
(c)the Holder or its Nominee from time to time will, subject to clause 4(b), be entitled (for each Orange Pass validly held by them) to use free of charge all of the present and future ski tows and ski lifts from time to time operated by BSL within the Mount Buller Alpine Resort as and when same are operating during the year for which the relevant Orange Pass is issued PROVIDED HOWEVER that for the avoidance of doubt it is hereby expressly stated that an Orange Pass will not give the Holder any rights to use any ski tows or ski lifts which BSL may operate in the Mount Stirling Alpine Resort or any mechanical aerial link between the Mount Buller and Mount Stirling Alpine Resorts;
(d)BSL will not be obliged to issue any replacement Orange Pass for any Orange Pass that may be lost during the year PROVIDED HOWEVER that BSL will issue a replacement Orange Pass for each Orange Pass that has been defaced or damaged upon the surrender to BSL of the defaced or damaged Orange Pass;
(e)the Orange Pass will have no usage conditions printed on it other than disclaimer conditions identical to conditions current for ski lift tickets that year or any other words prescribed by BSL pursuant to clause 4(g);
(f)each Holder and any Nominee will abide by all directions, rules and regulations from time to time relating to the proper usage of the ski lifts and ski tows by the general public (including, without limiting the generality of the foregoing, those relating to safety);
(g)BSL may from time to time by sending written notification to the Holder at the Holder’s address in the Register of Orange Pass Holders issue or prescribe such reasonable directions, procedures, rules or regulations as it in its sole discretion deems necessary for the purposes of:
(i)verifying the identity or entitlement of persons using Orange Passes (irrespective of whether such persons are Holders or Nominees); or
(ii)preventing or detecting breaches of conditions relating or applying to Orange Passes, AND
such directions, procedures, rules or regulations may, at BSL’s sole discretion, apply to all Holders or Nominees, a particular class of Holders or Nominees or to particular individual or corporate Holders or Nominees;
(h)if the Holder or any of its Nominees (in respect of any Orange Passes held by the Holder) does not comply with clause 4(f) or any directions, procedures, rules or regulations issued or prescribed by BSL pursuant to clause 4(g) on 5 or more occasions during the validity of the annual Orange Passes, BSL may inform the Holder in writing of that fact and that, unless a written submission from the Holder in writing of that fact and that, unless a written submission from the Holder within 7 days convinces it otherwise, it may in its sole discretion immediately cancel the validity of all Orange Passes held by that Holder and suspend the entitlement of the Holder to any Orange Passes for a period of 12 months from the date of cancellation of the Orange Passes currently held by the Holder.
… “
Mr Blampied, the general manager of Buller Ski Lifts Pty Ltd from 1996, gave evidence that although he had reviewed the company’s files (which were incomplete) and had made inquiries, he could not identify any correspondence dated between 1991 (or 1992) and 2005 in which the defendant had disputed the Gold Pass holders’ right to nominate for reward.
Mr Blampied testified that he became aware of the practice of nomination for reward only in about 2002 or 2003, when his suspicions about the practice and its extent were confirmed.
It was not disputed that the plaintiff and other Gold Pass holders continued to nominate persons to use their Gold Passes for reward throughout the period commencing in 1991 or 1992 and continuing up to 2005.
Mr Hume gave evidence that, from 1961, the passes to which Anberton was entitled were used by his family and others who were nominated, sometimes for reward. It was not disputed that the plaintiff currently arranged for nomination for reward of multiple persons to use its orange passes, through agents conducting a ski lodge at Mt Buller, who received a commission for their services. Mr Hume gave evidence that the plaintiff had received $4,000 (less expenses of $150) for the year ended 30 June 2003, $2,000 (less expenses of $170) for the year ended 30 June 2004 and $10,000 (less expenses of $4,028) for the year ended 30 June 2005 from nominating persons to use its orange passes.
Mr Blampied gave evidence that the defendant imposed no restrictions on the number of day tickets that are sold by the defendant each day and that there was always the capacity to accommodate an extra 140 skiers. He stated that “we never have too many skiers”, even at the busiest times of the year. Further, Mr Blampied, during cross‑examination, estimated that in 1996 the total revenue of the company was between $12-13 million, and, by 2005, had increased to $18 million.
PRINCIPLES OF CONSTRUCTION
Pursuant to the well-established principles of Codelfa Construction Pty Ltd v State Rail Authority of New South Wales,[1] where there is ambiguity, the Court may have regard to extrinsic evidence of the “factual matrix”.
[1](1982) 149 CLR 337.
In the absence of ambiguity, the language of the agreement, construed in its total context, must be given their usual, every day meaning. The principles of construction are not in dispute.
I recently summarised the principles applicable to commercial contracts in Unique Life‑Style Investments Pty Ltd v Robertson and anor[2] and for convenience, repeat the relevant paragraphs.
[2][2004] VSC
Relevant authority establishes that the modern approach to the construction of commercial agreements of business people is, generally, to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction, unless irremediable obscurity or a like fundamental flaw indicates that there is, in fact, no agreement. In the case of ambiguity, it is permissible to have regard to extrinsic evidence of the “factual matrix”[3] or surrounding circumstances in determining the meaning of contractual terms. While evidence of each party’s subjective intention is inadmissible, the objective background of facts notorious or known to the parties (extending to purposes and assumptions of fact on which the parties have concurred in the course of negotiations) is admissible.[4]
[3]Reardon Smith Line Ltd v Ynngar Hansen-Tangen [1976] 1 WLR 989 at 997; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.
[4]Ellinghaus M.P., Seddon N.C., Cheshire & Fifoot’s Law of Contract, 8th ed., Lexis Nexis Butterworths, Australia, 2002 at 10.32.
In Hillas & Co Ltd v Arcos Ltd,[5] Lord Wright stated:
“Businessmen often record the most important agreements in crude and summary fashion. Modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects.”[6]
[5][1932] All ER 494.
[6]At 503-4.
In Biotechnology Australia Ltd v Pace,[7] Kirby J, in acknowledging the difficulty of reconciling the competing principles, stated as a general observation that:
“The determination of every case depends upon its own facts. The meaning of the agreement between the parties must be discovered objectively. Where there is suggested ambiguity or vagueness or where it is urged that a term is illusory, it may sometimes be both necessary and appropriate to have regard to extrinsic evidence in order to give meaning to that to which the parties have agreed; see, eg Kell v Harris (1915) 15 SR (NSW) 473 at 479; 32 WN (NSW) 133 at 136 and Raffles v Wichelhaus (1864) 2 H&C 906; 159 ER 375.
The court will endeavour to uphold the validity of the agreement between the parties: see Hillas & Co Ltd v Access Ltd. The court will attempt to avoid frustrating the wishes of the contracting parties so far as those wishes may be ascertained from the agreement between them: see Meehan (at 589); see also Barwick CJ in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437 where his Honour said that: ‘ … In the search for that intention no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.’
But the court will not do so, where, in effect, it is asked to spell out, to an unacceptable extent, that to which the parties have themselves failed to agree. Nor will the court clarify that which is irremediably obscure … ”. [8]
[7][1988] 15 NSWLR 130.
[8]At 136.
Consistently with the above principles, in MLW Technology Pty Ltd v May,[9] Gillard AJA, (with whom Winneke P and Buchanan JA agreed), stated:
“The court, in construing contracts between businessmen and also their actions, should proceed in a common sense, non-technical way. How would the businessmen construe the agreement in the light of the commercial purpose of the setting … “[10]
[9][2005] VSCA 29.
[10]At [76].
His Honour referred[11] to Lord Wright’s observations in Hillas,[12] and to Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd[13] in which Lord Steyn, noting that the law had moved on from a strict technical approach, stated:
“Since then there has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such documents … It is better to speak of a shift towards commercial interpretation. About the change in approach to construction there is no doubt. … In determining the meaning of the language of commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial contract is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is generally hostile to technical interpretations and undue emphasis on niceties of language.”[14]
[11]At [77] – [81].
[12][1932] All ER 494.
[13][1997] AC 749.
[14]At 770-771.
The meaning of “carrying on a business” was similarly undisputed. It is a question of fact to be determined by reference to factors which principally include:
(a)the purpose and intention of the tax payer, including an intention to make a profit from the activities;
(b)repetition and regularity of the activities;
(c)the activities being carried on in a systematic and business-like manner.
The plaintiff’s main contentions
The plaintiff’s primary contention is that clause 4(b) contains no ambiguity. Rather, it argues that clause 4(b) employs clear and unequivocal language, which does not, in terms, restrict the holder’s right to nominate any number of persons, nor prohibit it from nominating such persons for reward, although it does expressly impose restrictions on the entitlements of the nominee.
The plaintiff submitted that if and to the extent to which the plaintiff’s exercise of its unrestricted entitlement amounts to the carrying on of a business, it is authorised to do so under the terms of the agreement.
The plaintiff alternatively submitted, as a subsidiary argument, that if clause 4(b) were ambiguous in the relevant sense, the factual matrix supported the construction for which it contends, because the dispute over nomination for reward had been resolved in the pass holder’s favour prior to the execution of the agreement.
The plaintiff conceded that there was a dispute over the issue of nomination for reward during the period of MacMahon’s control, but submitted that there was no correspondence or other evidence of a dispute over nomination for reward between about 1991 and the date of execution of the agreement in 1994, although a dispute over the transferability of Gold Passes remained outstanding.
It also relied upon the draft offer, which acknowledged that Gold Pass holders “can nominate another person to use the GP whether for consideration or otherwise” and the absence of evidence of any subsequent challenge to the practice of nomination for reward until about 2005.
Mr Collins, senior counsel for the plaintiff, argued that any ambiguity should be resolved on the basis that, as at the date of entry into the agreement, the parties’ agreed position was that nomination for reward was permissible.
Mr Hayes, senior counsel for the defendant, submitted that evidence of the parties’ prior negotiations was not admissible in order to construe the written agreement, which expressly provided that “this agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and extinguishes all prior agreements and understandings between the parties with respect to the matters covered hereby and all representations or warranties previously given.”
The defendant’s objections to admissibility were not wholly consistent, however, as in some instances it led evidence of the same matters to which it raised objection when led by the plaintiff.
In my view, evidence of concurrence on the question of nomination for reward would be admissible. I do not, however, consider that the draft offer, whether alone or in combination with the lack of evidence of a dispute over nomination for reward between about 1991 and 2005, establishes that the parties had agreed that nomination for reward was permissible.
The draft offer was never executed. The force of the acknowledgement it contains is, in my view, dependant upon execution of the document. Further, the acknowledgment states only that the holder can nominate “another” person for reward, which is not inconsistent with the statement in clause 3 of the draft offer that “holders of GPs will only be able to nominate one natural person to use the GP for a particular season”. It is not disputed that the plaintiff and other Gold Pass holders did not agree to clause 3 of the draft offer.
The draft offer, moreover, states that it is “without prejudice and without any admission that BSL is liable in any way to any holders of GPs” and indicates that it provides “the holders of GPs the opportunity to have some certainty as to their rights”.
The draft offer, even if executed, would not, given the terms of clause 3, permit the conclusion that the parties were agreed that multiple persons could be nominated for reward or that they had agreed (independently of the execution of the draft offer) that even one person could be nominated for reward.
Further, the absence of any correspondence or other evidence of a dispute over nomination for reward during the period 1991 to 1994 or from 1994 to 2005 does not, in my opinion, establish that the pre-existing dispute on that issue had been settled by the agreement of the parties. It is equally consistent with the dispute subsisting without manifestations of direct conflict. The resolution of an explicit and persistent dispute between commercial parties would be likely to be by an express, documented agreement, rather than effected by a course of dealing or acquiescence. The draft offer, and the pass holders rejection of clause 3, clearly indicated that the parties were not agreed on the right to nominate multiple persons for reward as at October 1994.
In my opinion, the evidence does not establish that the dispute over whether Gold Pass holders were entitled to nominate for reward was resolved prior to the execution of the agreement. Rather, it appears probable that the commercial exploitation of Gold Passes by holders remained a matter of contention, although the parties avoided direct confrontation on the issue.
The defendant’s main contentions
The defendant contended that clause 4(b) was ambiguous in relation to two fundamental issues, which ultimately overlapped.
(a)First, it was ambiguous on the number and frequency of permitted nominations. It provided no guidance as to whether one person only, or multiple persons, could be nominated.
(b)Secondly, it was ambiguous on whether the right to nominate extended to nominations for reward, or alternatively, nominations for reward on a scale and pattern amounting to the conduct of a business in trading nominations.
The defendant’s construction of clause 4(b) shifted somewhat during the course of argument. The defendant initially argued that when construed by reference to relevant extrinsic evidence, clause 4(b) conferred an entitlement only to nominate a single person for a ski season without reward. Ultimately, however, Mr Hayes, senior counsel for the defendant, did not press the argument that clause 4(b) permitted the nomination of only one person for each ski season. He effectively conceded that the clause permitted the nomination of multiple persons, but argued that in accordance with the spirit of the agreement, such multiple nominees should, at most, be limited to family and friends of the holder.
Mr Hayes made plain that the question of multiple nominations was subsidiary to the defendant’s principal submission that clause 4(b) precluded commercial exploitation of the nomination right on a scale sufficient to compete with the defendant. He conceded that a “one off” payment to cover administration costs might be permissible. The defendant’s fundamental concern was not the number of nominations, but the orange pass holders’ repeated receipt of money in return for nomination, in circumstances where the defendant itself conducted the ski lift business and incurred the related costs. The defendant argued that, in such a context, irrespective of the number of nominations permitted pursuant to clause 4(b), nominations for reward should not be permitted, or at least, not permitted on such a scale and with sufficient regularity as to constitute a business. Mr Hayes argued that because clause 4(b) did not positively state that multiple nominations for reward in the nature of carrying on a business could be made, it was ambiguous. It was silent on the critical distinction between, on the one hand, the exercise of a right of nomination and, on the other hand, the use of the right of the nomination in order to carry on a business. The defendant argued the grant of the entitlement to conduct a business was so significant that it would require clear words, in the absence of which clause 4(b) should be construed as providing merely personal skiing privileges.
Mr Hayes conceded that there was “no magic” in the concept of carrying on a business, which, in the present case, was a mere “label” for an unrestricted right to make multiple nominations for reward.
APPLICATION
Construction of Clause 4(b)
Clause 4(b) contains no statement, in terms, that the holder is entitled to nominate multiple persons. In my opinion, however, the language of clause 4(b), in permitting the holder to nominate “any person … for any period of time as allowed by the holder” indicates, according to its ordinary meaning, an entitlement successively to nominate a number of different persons for such periods of time within the ski season as the holder specifies. There is no express or implied limitation to any particular number, or to any particular class, of persons. If only one person could be nominated for each season, as initially asserted by the defendant, the reference to “for any period of time as allowed by the Holder” would have little purpose. Further, clause 4(h) refers to non‑compliance by “the Holder or any of its Nominees (in respect of any orange passes held by the Holder) with regulations during the validity of the annual Orange Passes”, thus also contemplating the possibility of more than one nominee in respect of each orange pass during a single ski season. Clause 4(c) refers to “the Holder or its Nominee from time to time” apparently contemplating multiple nominees throughout each ski season. Further, the language of clause 4(d) provides no basis for a requirement that nominees (whatever the permitted number) be “family and friends” of the holder. As Mr Collins pointed out, corporate holders, such as the plaintiff in the present case, would have no “family and friends”.
According to the Oxford English Dictionary,[15] “nominate” relevantly signifies “to name”, “fix”, “appoint” or “specify”.
[15]Second Edition, Vol X pp.472-3.
The holder’s right to nominate in clause 4(b) therefore literally indicates a right to appoint or to specify another in the holder’s place to enjoy the holder’s rights pursuant to “this clause”. The holder’s rights pursuant to “this clause” are the rights pursuant to clause 4 in its entirety, including the holder’s rights under clause 4(b) itself. The holder’s rights pursuant to clause 4(b) are subject to the proviso in clause 4(b) and to any other “terms and conditions prescribed by this clause”, that is, clause 4 as a whole.
The holder’s right to nominate (that is, to appoint or specify another to enjoy the rights of the holder in the holder’s place) is unqualified in the principal, introductory part of clause 4(b). It is silent as to any terms or conditions which apply to the nomination, and hence, implicitly, to the right to nominate itself. Read literally, then, the principal, introductory part of clause 4(b) grants the holder an unrestricted right to name, specify or appoint nominees, whether for reward or otherwise. It is not limited to a right to nominate for which no reward, payment or consideration may be sought or exacted.
The holder’s rights under clause 4(b) are, however, subject to the proviso in clause 4(b) and to any other relevant terms and conditions prescribed by clause 4.
The proviso in clause 4(b) imposes a limitation on the holder’s right to appoint. While in terms the proviso appears to restrict the rights of the nominee, as no nominee is party to, or has rights under, the agreement, the proviso in fact functions to limit the rights of the holder granted under clause 4(b), by restricting the terms on which it can nominate. Absent the proviso, the holder could grant the nominee rights identical to the holder’s own entitlement, including the right to nominate other persons to enjoy such identical rights. The proviso, however, expressly provides that the nominee will have no right of nomination for reward or for any consideration whatsoever or of transfer to any other person of the rights of the holder. The holder has the right to transfer the orange pass set out in clause 4(a). In my view, the holder also has a right to nominate for reward pursuant to the literal terms of the introductory part of clause 4(b). The more limited rights of the nominee under the proviso are in contrast to the greater rights of the holder itself.
The proviso in clause 4(b) performs the usual function of a proviso, in reducing or qualifying the preceding subject matter. The fact that the proviso expressly excludes the right to nominate “for reward or any consideration whatsoever” indicates that the term “nominate”, when used by itself in clause 4(b), bears its ordinary meaning. It does not signify any restriction on the terms on which the holder must deal with the nominee. It is not, in my opinion, subject to a gloss or qualification to its literal meaning which restricts nomination only to nomination which is not for reward or any consideration. Were that the case, it would have been unnecessary for the drafter of clause 4(b) to exclude nomination for reward or for consideration from those holder’s rights which are to be enjoyed by the nominee. The express exclusion of nomination for reward, or any consideration, in the proviso to clause 4(b), indicates that, absent such an express exclusion, the term “nomination” in clause 4(b) refers to the act of appointment or specification of a person to enjoy the holder’s rights and encompasses an entitlement to do so on any lawful terms, including for reward or other consideration.
On the defendant’s construction, the term “nominate” would bear two inconsistent meanings in the context of the same clause. In the principal part of clause 4(b), which grants the entitlement to the holder, it would not bear its literal meaning of “to name, appoint or specify”, but an artificially narrow meaning, of “to name, appoint or specify but not for reward or consideration”. In the proviso to clause 4(b), however, the term “nominate” would bear its ordinary literal meaning of “to name, appoint or specify”, thus rendering it necessary expressly to exclude appointment for reward or consideration.
Clause 4(b) as a whole operates rationally on the basis that “nominate” bears its ordinary literal meaning consistently throughout, with the proviso functioning expressly to exclude rights which would otherwise apply.
In my opinion, the literal meaning of clause 4(b) construed as a whole, in the context of the clause 4 and the agreement in its entirety, is clear and unambiguous, and would be understood by reasonable commercial persons to incorporate the right to nominate multiple persons for reward.
The defendant’s assertion of ambiguity assumes that the grant of the right to do or enjoy a particular specified act or privilege, without more, neither implicitly incorporates nor precludes the right to do so on all lawful terms, but is necessarily ambiguous, justifying reference to extrinsic evidence in order to determine the legitimate scope of the grant. On that approach, only those terms of usage which are expressly set out would unequivocally attach to a right literally granted in general terms. That approach, if correct, would render ineffectual the use of general comprehensive terms in the context of grants, necessitating voluminous drafting and creating significant uncertainty.
Mr Hayes argued that where a right was granted in general terms, the grantee, as a principle of construction, bore the burden of establishing that particular usages were encompassed by the generality of its terms.
In my opinion, where general terms are employed to describe a right or privilege their generality should prima facie be given effect. The grantor would, in the ordinary case, bear the onus of establishing that the literal generality was subject to any particular restriction.
Further, in the present case, Clause 4 commences with a statement that the parties agree that orange passes will “confer rights and be subject to the terms and conditions prescribed by this clause”. That statement fortifies the view that a general statement of a right attached to the orange passes would grant an unrestricted right, save as prescribed by Clause 4. The fact that the parties entered the agreement with an unresolved dispute over the right to nominate for reward, also supports that conclusion. The terms of clause 4 are in marked contrast to clause 3 of the draft offer prepared by the defendant in October 1994, which clearly specified the restrictions applicable to the right to nominate.
Relevance of Factual Matrix
The defendant, having asserted ambiguity, relied upon the background knowledge reasonably available to the parties at the date of execution of the agreement, including the commercial purpose, in order to resolve the alleged ambiguity in its favour and to support its contention that the plaintiff’s construction is “capricious, unreasonable, inconvenient and unjust”.
It also relied on the same background matters to support its alternative argument that the agreement contains an implied term that the plaintiff would not use the orange passes to carry on the business of trading nominations for reward, on the basis of the principles of BP Refinery (Western Port) Pty Ltd v Shire of Hastings.[16]
[16](1997) 180 CLR 266; (1977) 45 LGRA 62; (1997) 16 ALR 363; (1997) 52 ALJR 20.
Although I have concluded there is no ambiguity, in deference to the arguments of counsel, I now consider the matters advanced in support of the defendant’s contention that the relevant extrinsic evidence indicated that clause 4(b) does not confer a right to nominate for reward.
The defendant, in its written submissions, relied on the following five factors (set out in sub-paragraphs (i) – (v) below) known to the parties at the date of entry into the agreement.
(i)“Each pass holder signed the “Orange Pass Agreement” in identical terms, although on different dates. This resulted in 44 holders being entitled to 129 Orange Passes.”
(ii)“The defendant was the sole operator of the ski lifts at Mt Buller. It maintained and operated the ski lifts at its expense and gained revenue from the sale of tickets to the public.”
The defendant advanced the matters in paragraphs (i) and (ii) in support of its fundamental objection that the rights of holders to nominate multiple persons for reward was an “unnatural” consequence of an orange pass, which could not have been intended, as it permitted the conduct of a business in competition with the defendant, although the latter operated the ski lifts and bore the associated costs. As such, the defendant argued that, unless its construction prevailed, the holders of orange passes would obtain a windfall profit at its expense.
In my view, however, the evidence did not establish that the capacity of the plaintiff to exact a reward for nomination would result in a corresponding loss of revenue to the defendant.
The maximum annual potential loss of revenue to the defendant from the use of each orange pass is capped at the total sum payable for use of its ski facilities by one person for each day of the skiing season. The defendant is necessarily exposed to such potential loss from the permitted use by the holder. The maximum potential loss is the same whether the holder uses the pass itself, whether it nominates a single nominee or successive multiple nominees and whether or not such nomination is for reward.
In order to establish that the defendant would incur a loss from the plaintiff's nomination for reward, it is necessary to establish that the defendant would receive fees for usage of its ski facilities if the plaintiff could not nominate for reward, which it would not otherwise receive.
In my opinion, the defendant’s claim that “every person who obtained use of an Orange Pass to use the defendant’s facilities is a lost customer” was not established by the available evidence.
The defendant ultimately conceded, or did not seriously dispute, that the plaintiff is entitled to nominate multiple persons pursuant to clause 4(b). If the plaintiff nominated multiple persons (or indeed a single nominee) to use the ski facilities for each day of the ski season without charging them, there is no evidence that the persons thus nominated would otherwise have been prepared to pay the defendant for the usage of its facilities.
The defendant argued, however, that the holder would not in practice make as many nominations if it were not entitled to charge for them, as it would have no financial incentive to do so; and that fewer nominations by the holder would result in more persons paying the defendant for the use of its facilities.
The defendant’s assertion of the plaintiff's windfall at its expense assumes that the persons who are currently nominated by the plaintiff for reward would not receive nomination by the plaintiff without charge and would consequently then pay the defendant to use its ski facilities.
If it were established that some or all of the persons who would pay the plaintiff for the use of the orange pass would otherwise pay the defendant for use of its ski facilities, the defendant's consequent loss of revenue would not compel a construction that clause 4(b) prohibits nomination for reward, or justify an implied term to that effect.
As Mr Collins pointed out, there was no evidence that even maximum usage of the nomination right, whether for reward or not, would have a significant adverse impact on the profitability of the defendant’s operations or would render its business unviable. Similarly, it would not create unacceptable congestion on the ski slopes. Further, the plaintiff’s existing entitlements under the Gold Passes (albeit of disputed ambit) were exchanged for the orange passes pursuant to the agreement, a commercial transaction by which the parties resolved their disputed mutual rights and obligations. The defendant obtained control of the ski lift business only on the basis that the plaintiff's existing rights were preserved. The rights under the orange passes and the antecedent Gold Passes were not conferred gratuitously and cannot be viewed as a “windfall”.
Although the holders’ entitlement to nominate for reward under the orange passes is undesirable from the defendant’s perspective, that does not render the plaintiff’s construction untenable or the agreement irrational or unworkable.
(iii)As at June 1995, the Alpine Resorts Act 1983 (Vic) prohibited the establishment of a business undertaking in writing within an Alpine resort without the written authority of the Alpine Resorts Commission.
The Alpine Resorts Act 1983 s.25(1) provided:
“After the commencement of this section no person or body, whether corporate or unincorporated, shall establish any business undertaking within an alpine resort without the authority in writing of the Commission.”
The legislation was repealed in 1997.
As at the date of the agreement, the plaintiff did not have the written authority of the Alpine Resorts Commission to establish a business undertaking. There is no evidence as to whether any other orange pass holder which entered an identical agreement had such written authority.
The defendant contended that “no reasonable person would understand the agreement to mean that the Orange Pass Holders were entitled to carry on a business which they could not otherwise enjoy”.
Mr Hayes also submitted that the illegality of establishing a business without necessary authority supported the contention that, on a proper construction of clause 4(b), nomination for reward was precluded, or alternatively, that a restriction to that effect should be implied.
In my opinion, the existence of the legislation at the date of execution of the agreement, does not support the defendant’s construction or the implication of a prohibition on nomination for reward. Assuming that an unrestricted ability to nominate for reward amounts to a right to conduct a business of trading in nominations, the legislation does not impose an absolute prohibition on the establishment of a business, but merely requires that authority be obtained. There is no evidence on which to conclude that it was apparent, at the date of the agreement, that such authority could never in the future be obtained. Further, modifications to or repeal of legislative restrictions would be an obvious possibility over the lengthy term of the agreement.
Therefore, were clause 4(b) ambiguous, the existence of the legislation would not, in my view, mandate or support a construction that unrestricted nomination for reward was precluded. Nor would it support an implied term to that effect.
(iv)“A sale of a lift ticket by the defendant included terms and conditions of usage, safety requirements which, inter alia, limited the defendant’s liability to customers for loss and injury. The terms and conditions were printed on lift tickets and were displayed where tickets were sold.”
Mr Hayes submitted that, given the contemporary legal obligations imposed on those engaged in the potentially hazardous business of operating ski tows, the defendant's lack of a direct contractual relationship with nominated users, and its consequent incapacity to limit liability, supported the construction that nomination for reward was not permitted under clause 4(b).
Mr Hayes conceded that non-paying nominees would also lack a direct contractual relationship with the defendant and the same problem would apply. Although (as the defendant in effect conceded) multiple non‑paying nominees are permissible under clause 4(b), Mr Hayes argued that the problem was “a matter of extent”, as more nominations would occur if the plaintiff were permitted to charge.
The evidence did not establish that more nominations would occur if a reward were permitted. It is clear that the absence of a direct contractual relationship between the defendant and nominees was, to some extent, always contemplated as a necessary incident of the nomination right. I have concluded that multiple nominations may be made under clause 4(b). There is no evidence that the plaintiff's capacity to obtain a reward for nomination aggravates the defendant's exposure to the problem posed by the absence of a direct contractual relationship with nominees. Further, clause 4(3) provides for the inclusion of disclaimer conditions on the orange passes and by clause 4(g), nominees are subject to the defendant’s reasonable directions, procedures, rules and regulations, non‑compliance with which entitles the defendant to cancel the orange pass under clause 4(h).
I am not persuaded that the possibility of nominated users who had no direct contractual relationship with the defendant requires a construction that clause 4(b) does not permit multiple nominations for reward, or the implication of a term prohibiting such nominations.
(v)“the precursor to the Orange Passes were Gold Passes and … for many years there had been an unresolved dispute between some of the Gold Pass Holders and the then operator of the ski lifts as to the entitlements granted by the Gold Passes”.
The unresolved dispute over the existence and scope of the plaintiff’s entitlement to nominate for reward does not, in my opinion, support the defendant’s construction, particularly in circumstances where Gold Pass holders, in October 1994 had rejected clause 3 of the draft offer, which contained clearly specified restrictions on the right to nominate.
CONCLUSION
It follows that, in my view, the plaintiff has established its claim. The counter‑claim should be dismissed.
---
1
2
0