B + B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Limited

[1995] HCATrans 207

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry  
  Sydney  No S162 of 1994

B e t w e e n -

B + B CONSTRUCTIONS (AUST) PTY LIMITED

Applicant

and

BRIAN A. CHEESEMAN & ASSOCIATES PTY LIMITED (IN LIQUIDATION)

Respondent

Application for special leave to appeal

DAWSON J
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 14 AUGUST 1995, AT 12.11 PM

Copyright in the High Court of Australia

MR B.A.J. COLES, QC:   If the Court pleases, I appear with my learned friend, MR C.R.C. NEWLINDS.  (instructed by Kemp Strang & Chippindall)

MR R.W. WHITE:   If the Court pleases, I appear for the respondent.  (instructed by Lane & Lane)

DAWSON J:    Mr Coles.

MR COLES:   If your Honours please.  Your Honours, the proceedings concern the construction of a building agreement, which we accept is not a matter which your Honours would ordinarily be particularly concerned about as one raising a special leave point.  However, your Honours, we seek to identify certain matters of principle which inform this particular proceeding and ought to dictate that conclusion.  Your Honours, the parties were relevantly a builder and subcontractor respectively.  The agreement made provision for variations, it being a lump sum agreement.  Those variations contemplated being deletions, additions, changes and the like to the works.

Those events in fact occurred and, indeed, gave rise to some dispute between the parties.  Whilst the contract was in the course of performance and over the period the builder, in fact, paid various amounts by way of materials or wages and the like to or for the benefit of the subcontractor in circumstances where, in the ordinary course, one would anticipate, and indeed the parties had anticipated, the builder’s total liability over the lump sum contract would be reduced accordingly.

Later, the parties made a supplementary agreement in the context of their dispute as to various items of variations in which they redefined the lump sum, or the contract sum as they referred to it, and they specified that that redefined sum included all variations.  The builder contended, and still contends, that - its contention is that on that redefined sum, the same contemplated credit should be given for the amounts paid on account of the subcontractor, whilst the subcontractor contends - - -

DAWSON J:    That is all the point, is whether variations included back charges?

MR COLES:   That is right.  It was the point of construction in the case.

DAWSON J:   Well, now, where is the point of principle?

MR COLES:   The point of principle there, your Honours, is firstly this, that in the particular situation of the contract, there was, the applicant contends, no obvious or apparent ambiguity, and the first point of principle ‑ - -

GUMMOW J:   That is not a special leave point.

MR COLES:   The point we seek to agitate - - -

GUMMOW J:   The question really is, do you challenge what is said in cases like Air Great Lakes in Justice McHugh’s judgment?

MR COLES:   No, we do not, your Honour, no.  What we say, your Honours, is that in point of principle, where there is no obvious ambiguity, then the Court should not admit and cannot admit evidence of surrounding circumstances, in effect, in order to create an ambiguity which does not otherwise exist.  Both Mr Justice Bryson and, I think, Mr Justice Mahoney each thought and, indeed, it is probably hard to disagree with the proposition, that the word “variations” were used in the variation agreement did not bear an ordinary plain or natural meaning of the kind that would have embraced the back charges.

Indeed, that very proposition was distinctly underpinned by the other circumstance that the parties had in the main contract itself, given a specific definition to what were variations and a specific definition of the contract sum in circumstances which, indeed, would not themselves have conduced the conclusion that the back charges were included in the conception of variations.  What the Court did, however, is instead of taking the plain word - and we would submit “variations” not only should have been but, indeed, was regarded as a plain enough word by both Mr Justice Bryson and Mr Justice Mahoney - one should have taken that plain word and applied the principle for which this Court’s decision in Codelfa is clear authority, namely - - -

DAWSON J:   But you could not possibly look at this contract without looking at the matrix of facts in which it came into existence, could you?

MR COLES:   Yes, but, even so, when one looks at those matrix of facts, one is left at the end of the day with a word which has a plain meaning, and when one finds a word with a plain meaning, one does not seek to extract from the matrix of surrounding fact any meaning adverse to or in derogation of the plain meaning.  Now, it is true, your Honours - and this is perhaps a matter which we would seek to agitate if leave were granted - Codelfa does not, itself, explore the content of the expression “plain meaning of a word” where used in - - -

GUMMOW J:   That is why I asked you about Air Great Lakes, it does, you see.

MR COLES:   There is, we would put to your Honour, some contemporary collision between the notion of a plain meaning of a word on the one hand and the concept that seems to have gripped the imagination of the Court of Appeal, namely, that one ought these days, in effect, recognise that words are virtually always inherently ambiguous.  We say if that is so, then little content is left in the proposition for which Codelfa is supposedly authority, namely, that one does not omit evidence of surrounding circumstances when a word has plain meaning.

McHUGH J:   But you always have these problems.  Take a commercial contract - a series of purchases for, say, $1,000 each.  Now, let it be supposed that for their own reasons the parties were operating under a tent system, and when they said that there was a purchase for $1,000, they understood between themselves that they meant $10,000 and they were doing it for taxation or some other reasons.  Now, why could you not call oral evidence to show that both parties understood $1,000 in this contract would mean $10,000?

MR COLES:   Well, in that particular situation, it is possible - one might be able to accept one can, but there is, however, in our respectful submission, a difference here when plainly enough the word in question does not bear the meaning which is supposedly to be attributed to it.  There is - - -

McHUGH J:   What about the word “month”?

MR COLES:   “Month” is a good illustration because “month” inherently mainly in a calendar month or a lunar month.  Somebody’s wool may mean wool on board such and such a ship or in two or more places, but a variation is a variation, in our respectful submission, as a meaning of English, and it only ceases to be so in the context of this particular case.  This is, in our respectful submission, an extreme instance of a court adopting as a process of construction a course which entails looking, firstly, at the surrounding circumstances to find the ambiguity before focussing in on that ambiguity and seeking to resolve it.

That leads to our second point, if I may proceed straight to it, your Honours.  The second point of criticism of the decision of the Court of Appeal and, indeed, Mr Justice Bryson, is that - and the second point of principle which, in our respectful submission, has been perhaps elided in the consideration of the instant case, is the proposition that before one admits evidence of surrounding circumstances to resolve a supposed ambiguity, even if one is entitled to do so in the circumstances contrary to my first submission, that evidence so admitted should at least enjoy the quality of being, itself, unambiguous or, at the very least, less ambiguous than the particular term or expression which it is sought to clarify or explain.

That is so, we would put, your Honours, especially where it is sought by extrinsic evidence to displace a natural - the meaning of a word and its natural meaning and, a fortiori, in this particular case, because it is an exceptional case in one sense, that sense being that the very term in question itself was the subject of an explicit and defined meaning in the primary contract between the parties which the instant agreement sought to vary.  Now, one does not contend - - -

DAWSON J:   That was for the purpose of that agreement though, was it not?

MR COLES:   For the purpose of that agreement of which the subject agreement, the agreement in suit, was plainly a supplementary or varying agreement and there would be - indeed, Mr Justice Mahoney, I think, accepted that there would be little against the proposition that one would need to read the two instruments together.  It is put against us that the earlier agreement is, itself, an extrinsic factor which one would have recourse.  We would answer that, your Honours, by saying that that is not really having recourse to extrinsic or antecedent or surrounding circumstance.  That is simply reading the two together.

McHUGH J:   Yes.  Take the definition of “variations” itself.  It included increases or decreases from the subcontract works.  Now, increases and decreases, they seem to have a plain meaning, but supposing the parties understood those terms to mean more than 10 per cent.  Now, could they give evidence to show that increases or decreases in the definition of “variation” meant changes of more than 10 per cent?

MR COLES:   On the principle I am putting there, your Honour, they could do so provided - and the evidence could be received - if it enjoyed the requisite quality of being, itself, unambiguous, because plainly enough, to admit other ambiguous evidence to resolve a supposed ambiguity is simply to multiply one’s collection of ambiguous questions.  So we would contend, your Honours, for some - and, again, another aspect that Codelfa did not really define or add content to, apart from the plain meaning question, what is the supposed natural meaning or what is understood to be the commonly accepted or mutually shared meaning.

That brings me really, your Honours, to our third point that, in any event, the evidence of surrounding circumstances, so admitted, quite apart from its quality of lack of ambiguity, should itself reveal a mutual or common or shared intention amongst the parties rather than be simply reflective of individual statements, whether they be statements of intention or statements of fact or statements of anything else, and that one needs, in regarding the extrinsic evidence, to ascertain whether that falls within part of the objective framework of the facts rather than, as may well be the case in other instances of which we contend the present as one, simply a series of perhaps disconnected or ad hoc or occasional references which are merely reflective of the use of language loosely, or the non-contractual use of terms in a non-contractual context.

So, in our submission, it is really erroneous to say that - we would then say, your Honours, that when one looks at these other matters in the present case, and by “other matters” I mean the list of them which Mr Justice Kirby set out in his own judgment, there were some six altogether which he regarded as the relevant circumstances, those other particular matters, we would say, firstly, are primarily incidental - raise really incidental questions.  The precise significance arising as it did really in the context of a rectification suit really remained, or do remain unexplored.  They are, in themselves, no less ambiguous in point of content  than the expression they seek to resolve.

We would really contend that they are ultimately individually more ambiguous and they do not fall readily, we would say, within the Codelfa notion of a mutually known fact.  Some are statements by one side, in effect, seized upon by the other.  Some are, in one instance, a conversation or a statement made orally but, in our respectful submission, analysed in their best light from the respondent’s point of view, at best, they appear to be statements directed to other considerations in other contexts at other times when the parties were not focussing their attention to the very topic of varying a formal agreement which they had made. 

If statements of that kind be admissible, your Honours, then one is confronted with the not unimportant apprehension that in the process of the construction of agreements, particularly, I suppose, supplemental ones, there is a great opportunity for loose expressions or occasional references of a non-formal kind to be simply seized upon and one is then led, in the process of construction later on, to an extended task of examination of those

collateral circumstances which is the very object of the rule which precludes evidence of surrounding circumstances in such cases to exclude.

In summary, we say, your Honours, that one should expect when one is construing a contract no less an attribution of naturalness to the terms used and no less a contradiction of those terms than one would, for example, find in the analogous process of implying a term in a contract.  So that, in effect, as with implied terms, the terms derived as a process of construction should, at very least, not conflict with the express terms and in the present case, which I put to your Honours is really an a fortiori one, even if one accepts the respondent’s categorisation of them, the one single feature qualifying for description as an extrinsic circumstance, which was inescapably of a commonly shared mutually known an unambiguous kind, was the fact that the parties had defined the very term in the formal agreement which they had made.

Now, to seek short of rectification to displace that, in our respectful submission, really bypasses the process or, really, misuses the process of construction and, ultimately, leads to a dilution of the proper province of rectification and, in our respectful submission, those considerations are of sufficient significance to justify your Honours granting special leave in this case.

DAWSON J:   Thank you, Mr Coles.  We need not trouble you, Mr White. 

Any appeal in this matter would not enjoy sufficient prospect of success to warrant the granting of special leave to appeal.  Special leave is accordingly refused.

MR WHITE:   If Your Honours please, I ask for costs.

DAWSON J:   You cannot say anything about that, Mr Coles?

MR COLES:   We do not resile from the attitude contained in our statement, your Honour.

DAWSON J:   With costs.

AT 12.27 PM THE MATTER WAS CONCLUDED