Georgallis v Manly-Warringah Sea Eagles Limited

Case •

[2016] NSWDC 340

•

09 November 2016

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Georgallis v Manly-Warringah Sea Eagles Limited [2016] NSWDC 340
Hearing dates:25 October 2016
Date of orders: 09 November 2016
Decision date: 09 November 2016
Jurisdiction:Civil
Before: Dicker SC DCJ
Decision:

Judgment for the plaintiff in the sum of $44,478.65

Catchwords: Contract – employment contract – whether right of termination with three months’ notice after expiry of probationary period – ambiguity – proper approach to construction
Legislation Cited: Australian Consumer Law
Cases Cited: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Co-Operators Life Insurance Co v Gibbens 2009 SCC 25
Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Fitness First Australia Pty Ltd v Fenshaw Pty Ltd [2016] NSWCA 207
Fitness First Australia Pty Ltd v Fenshaw Pty Ltd [2016] NSWSC 47
Fitzgerald v Masters (1956) 95 CLR 420
Halford v Price (1960) 105 CLR 23
J Fenwick & Co Pty Ltd v Federal Steam Navigation Co Ltd (1943) 44 SR(NSW) 1
Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184
McCann v Switzerland Insurance Ltd (2000) 203 CLR 579
Newey v Westpac Banking Corporation [2014] NSWCA 319
North v Marina [2003] NSWSC 64
Category:Principal judgment
Parties: Steven Georgallis (Plaintiff)
Manly-Warringah Sea Eagles Limited (Defendant)
Representation:

Counsel:
B Debuse (Plaintiff)
D Robertson (Defendant)

  Solicitors:
Marsdens Law Group (Plaintiff)
Unsworth Legal (Defendant)
File Number(s):2015/00348497

Judgment

  1. These proceedings relate to a claim by the plaintiff for damages for breach of contract.

  2. The plaintiff was the former Assistant Coach of the Manly-Warringah Sea Eagles National Rugby League (“NRL”) team. He had prior lengthy experience as a first grade rugby league player and coach of various rugby league teams at a high standard or professional level.

  3. On 4 December 2013 a contract of employment was entered into between the plaintiff and the defendant company (“the Contract”). The Contract has as a term the period 14 November 2013 to 31 October 2016. It is uncontroversial that the defendant purported to terminate the services of the plaintiff under the Contract on 7 September 2015 with a three months’ notice payment.

The pleadings

  1. The plaintiff pleads in his Statement of Claim filed on 26 November 2015 that the termination of the plaintiff’s employment constituted a breach of the Contract giving rise to damages: see paragraphs 17-21 of the Statement of Claim. The plaintiff claims that, subject to an obligation to mitigate, he was entitled to his remaining stipulated benefits under the Contract.

  2. The defendant denies that there was a breach of contract and asserts that the plaintiff was properly terminated pursuant to Clause 25.3 of the Contract: see paragraphs 8-9 and 12-13 of the Defence filed on 11 March 2016.

  3. It may accordingly be seen that the issue between the parties relates to the proper interpretation of the Contract entered into between the parties.

  4. In the Statement of Claim filed 26 November 2015, the plaintiff also relies on causes of action in estoppel and misleading and deceptive conduct. The estoppel relied upon was both representational estoppel and conventional estoppel. The defendant denied that the plaintiff was entitled to any relief under these additional causes of action.

  5. At the commencement of the final hearing, the plaintiff still relied on causes of action for representational estoppel and misleading or deceptive conduct under Section 18 of the Australian Consumer Law.

  6. Near the end of the submissions, the plaintiff abandoned all causes of action except for the cause of action against the defendant for breach of contract.

The oral evidence

  1. Oral evidence was given in the proceedings by the plaintiff, Mr Stephen Gigg, the former General Manager of Football for the defendant and Mr Geoff Toovey, the former Head Coach of the Manly-Warringah Sea Eagles first grade NRL team. Much of the evidence of these witnesses and the affidavits which they provided was relevant to the abandoned causes of action in estoppel and for misleading or deceptive conduct. This evidence provides little assistance on the contractual issue.

The background facts

  1. The relevant background facts are as follows:

  1. In or around mid-2013, the plaintiff was employed by the West Tigers NRL team as Assistant Coach. His contract was due to expire in November 2013 and he was looking for new coaching employment opportunities;

  2. At that time the plaintiff retained as an agent Mr Sam Ayoub. Mr Ayoub was responsible for assisting the plaintiff to obtain a new rugby league coaching contract so the plaintiff would have football coaching employment after the termination of his West Tigers contract;

  3. The plaintiff became aware that the defendant was looking for an Assistant Coach. The two previous Assistant Coaches of the defendant’s team had recently left the defendant;

  4. Although the precise circumstances are not entirely clear, the defendant through the efforts of Mr Ayoub, began considering the plaintiff for the position of Assistant Coach;

  5. At the time, the Head Coach, Mr Geoff Toovey, was remaining as Head Coach of the defendant’s team. The plaintiff would be assisting Mr Toovey in the role of Assistant Coach;

  6. Although Mr Ayoub and the plaintiff had pursued a number of alternative possibilities for assistant coaching employment, it was clear by some time in October 2013 that there was no other potential offer on the horizon at a professional level for the plaintiff except the potential offer from the defendant;

  7. It is clear from the affidavit evidence that there were discussions between representatives of the defendant including Mr Gigg and the plaintiff and Mr Ayoub from late October 2013. At that time the plaintiff was in Greece as head coach for the Greek National Rugby League team. He returned to Australia on 30 October 2013;

  8. Emails which were admitted into evidence, show that there were discussions prior to Mr Gigg forwarding to the plaintiff on 13 November 2013 a document setting out what were described as the “general terms” that the defendant was offering to a successful assistant coach candidate;

  9. The emails which were admitted into evidence show negotiations between the plaintiff and Mr Ayoub on the one hand and Mr Gigg on behalf of the defendant on the other hand in the period between 13-14 November 2013 which appeared to have resulted in agreement as to a contractual arrangement at 11.39pm on 14 November 2013;

  10. A formal contractual offer was prepared by the defendant and forwarded from the Human Resources Manager of the defendant (Mr Adam Rixon) to Mr Gigg on 15 November 2013 which was then onforwarded to Mr Ayoub and then from Mr Ayoub to the plaintiff on 17 November 2013;

  11. The draft Contract was in the form of a letter from Mr David Perry, the General Manager of the defendant, to the plaintiff dated 14 November 2013 and amounted to an offer of employment to the plaintiff as Assistant Coach with the defendant. As indicated above, the offer was accepted by the plaintiff by him signing the offer letter on 4 December 2013;

  12. The plaintiff then proceeded in his duties as Assistant Coach to the defendant’s team for the remainder of 2013 and the 2014 and 2015 rugby league seasons;

  13. It is not in dispute that the plaintiff was terminated from his position as Assistant Coach of the defendant’s team on 7 September 2015. The plaintiff received three months’ payment in lieu of notice together with all his other entitlements;

  14. Following his termination, the plaintiff was unemployed between 7 September 2015 and 5 November 2015. In about November 2015 he secured employment as a coach with the Penrith Panthers Football Club at a lower remuneration;

  15. The parties have agreed that if the plaintiff is successful in his action for breach of contract that the proper amount of damages he should be awarded is the sum of $44,478.65.

Relevant provisions of the Contract

  1. It is not in dispute that the final version of the Contract is that which is attached to the email which is Annexure D to the plaintiff’s affidavit affirmed 26 April 2016.

  2. The fact the Contract is in the form of an offer of employment in a letter from the defendant to the plaintiff dated 14 November 2013 which has been signed by the plaintiff on 4 December 2013 has already been referred to above. It is necessary to make reference to some of the provisions in the Contract for the purpose of determining the issues between the parties in these proceedings.

  3. Clause 1 of the Contract provides as follows:

“1.   COMMENCEMENT AND TERM

1.1   This Contract will commence on 14/11/2013 and terminate 31/10/2016.”

  1. Accordingly, Clause 1.1 provides for a specific period relating to the fulltime employment of the plaintiff as Assistant Coach to the defendant’s team.

  2. Clause 2 of the Contract provides as follows:

“2.   POSITION

2.1   Your position is ASSISTANT COACH. You will be employed on a full time basis.

2.2   Your duties and responsibilities are set out in the Position Description attached to this Contract.

2.3   You are required to carry out other duties reasonably required by MWSE [the defendant] that you are skilled and capable of performing.

2.4   You may also be required to perform duties from time to time for MWSE's Related Entities.

2.5   MWSE may alter your position, Position Description and responsibilities in accordance with the needs of the business. You may also be redeployed to another position having regard to your skills, experience and competency. You agree that the terms of this Contract continue to apply to any altered position unless varied in writing in accordance with this Contract.”

  1. It may accordingly be seen that under Clause 2.5, the defendant has the right under the Contract to alter the plaintiff’s responsibilities and permits him to be redeployed to another position if required.

  2. Clause 3 of the Contract provides as follows:

“3.   REPORTING

3.1   You will report to Geoff Toovey, the Head Coach. However, MWSE may change your reporting arrangements in accordance with the needs of the business.”

  1. Clause 6 of the Contract related to the plaintiff’s remuneration and referred to the annual salary to be paid to the plaintiff in each of the 2014, 2015 and 2016 years together with certain bonuses and other payments.

  2. Clauses 8.4 and 8.5 of the Contract provide as follows:

“8.4   MWSE may direct you to not attend work and not to undertake any of your work duties at any time, provided that MWSE provides you with payment of your entitlements under your remuneration package during the period of suspension

8 5   The circumstances in which MWSE may give you such a direction include, but are not limited to, circumstances in which MWSE is carrying out an investigation into allegations of misconduct, whether or not such allegations have been made against you.”

  1. Clause 9 of the Contract is headed “Probationary Period” and is an important clause in relation to the dispute between the parties. Clause 9 provides as follows:

9.   PROBATIONARY PERIOD

9.1   You will initially be on a probationary period of 6 months, concluding 14th May 2014.

9.2   During this probationary period, you will have an opportunity to ascertain whether you are satisfied with the job and you must satisfy the Company that you have the qualities necessary for, and are capable of performing, those duties assigned to you at the level required by the Company.

9.3   At least two weeks before the end of the probationary period your employment will be reviewed by the Company. If your employment has been satisfactory to the Company and you, your employment will continue in accordance with the terms of this agreement. If this is not the case your employment will cease at the end of the probationary period unless it is terminated earlier in accordance with clause 9.4 below.

9 4   During the probationary period, you or the Company may terminate your employment by giving one-week notice. If the Company enacts the termination, the Company will pay you a sum equal to your Remuneration for three months (3) in lieu of notice.”

  1. Clause 25 is the central clause in dispute between the parties. Clause 25.3 to Clause 25.8 is as follows:

25.   RESIGNATIONS AND TERMINATION

25.3   Except where your employment is terminated for reasons of serious and willful misconduct, MWSE may terminate your employment by giving the period of 3 months notice under clause 9 1.

25.4   MWSE may elect to pay you in lieu of part or all of your notice period.

25.5   Alternatively, MWSE may require you not to report for work, or provide you with altered duties, during part or all of your notice period.

25.6   MWSE may terminate your employment at any time without notice or payment in lieu of notice in the case of serious misconduct. Serious misconduct will include, but is not limited to:

25.6.1   ongoing breach of your obligations as set out in this Contract without rectifying such breach within 7 days of receiving notice of the breach;

25 6.2   performing your work in a manner reasonably considered by MWSE to be unprofessional;

25 6.3.   engaging in conduct which MWSE reasonably considers is likely to damage MWSE's reputation; or

25.6.4   committing any act of dishonesty such as embezzlement, theft or fraud involving MWSE's assets or property.

25.7   On termination of your employment by any means, MWSE will pay to you:

25.7.1   your salary - payable to you up to and including the date of termination;

25.7.2   payment in lieu of any accrued untaken annual leave lo which you are entitled up to and including the date of the termination, and

25.6.3   any other benefits due to you under this Contract.

25.8   If your employment is terminated summarily without notice or payment in lieu of notice, you will only be paid up to the date of termination.”

  1. Clauses 27.13 to 27.16 of the Contract are as follows:

“27.13   This Contract supersedes and replaces all prior representations and agreements concerning your employment with MWSE.

27.14   Any amendment or addition to this Contract must be in writing, and signed by both parties.

27.15   Each provision of this Contract is severable from the others and the severance of a provision does not affect the remainder of the Contract.

27.16   This contract is governed by the laws of Australia – NSW.”

  1. Clause 28 of the Contract is entitled “Entire Agreement” and provides as follows:

“28.   ENTIRE AGREEMENT

28.1   This Contract sets out all of the terms of your employment contract with MWSE. This Contract supersedes and replaces all prior representations, contracts and agreements (whether oral or in writing) concerning your employment with MWSE.

28.2   If there are any other matters that you have relied on in our discussions or other communications to date or there are any other matters you wish to discuss, please let MWSE know before you sign the Contract. MWSE's representative may then consider them and discuss them with you. If agreed, the terms set out in this Contract will be amended, to ensure that it contains all the agreed terms.

28.3   Once you sign this Contract, you are confirming it is complete and no agreed terms are missing.”

  1. It is clear from the evidence, the form of the Contract and its contents that the draft of the Contract was prepared by the defendant, was forwarded to the plaintiff’s agent Mr Ayoub for his consideration and contains wording and clauses which are clearly designed for the benefit of the defendant. Examples include a probationary period (Clause 9), drugs and alcohol issues (Clause 15), adherence to the defendant’s policies (Clause 16), confidential information (Clause 23), intellectual property and moral rights (Clause 24) and post-employment obligations (Clause 26).

  2. The resume of the plaintiff which is Annexure A to his 26 April 2016 affidavit shows that the plaintiff has no legal qualifications and has a background, apart from his football experience, as a teacher with qualifications in physical education. There is no evidence that Mr Ayoub, the plaintiff’s agent, has any legal qualifications or expertise.

Applicable contractual principles

  1. The parol evidence rule limits the matters which a court can take into account in the interpretation of a contract.

  2. In Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Mason J stated at 347 as follows:

“The broad purpose of the parol evidence rule is to exclude extrinsic evidence (except as to surrounding circumstances), including direct statements of intention (except in cases of latent ambiguity) and antecedent negotiations, to subtract from, add to, vary or contradict the language of a written instrument.”

  1. Evidence of surrounding circumstances is admissible in aid of the construction of a contract: Codelfa at 348.

  2. The general principles were stated by Mason J at 352 of Codelfa as follows:

“The true rule is that 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 it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”

  1. In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) stated at [52] as follows:

“[52] The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 ; (2011) 282 ALR 604.”

  1. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court said the following at paragraph [35]:

“[35]Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

  1. In Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 Leeming JA (with whom Ward and Emmett JJA agreed) stated a number of important general principles relating to contractual construction at [73]-[85]. His Honour said as follows at paragraphs [80]-[84]:

“[80] Mason J [in Codelfa at 352] was indicating that there are very real limits to the extent to which grammatical meaning can be displaced by contextual considerations. However, in order to determine whether more than one meaning is available, it may be necessary first to turn to the context.

[81] Fourthly, what I have called “context“ was formerly described as the “surrounding circumstances“, and then, influenced by Lord Wilberforce in decisions such as Prenn v Simmonds [1971] 1 WLR 1381 at 1384 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, as the “matrix of facts“. See Byrnes v Kendle [2011] HCA 26 ; 243 CLR 253 at [98]–[100] (Heydon and Crennan JJ) and J Carter, The Construction of Commercial Contracts (Hart Publishing, 2013), pp 8–9.

[82] Although Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114 referred to a “fundamental change“ in the approach espoused by Lord Wilberforce, the “modern“ contextual approach had nineteenth century precursors, at least in relation to commercial contracts. Without seeking to be exhaustive, the Earl of Selborne had deprecated and rejected the “extreme literalism“ in the mercantile contract construed in McGowan v Baine [1891] AC 401 at 403 (contrast the (dissenting) speech of Lord Bramwell, who had required “necessity, or [something] approaching to it“ in order to displace the “primary and natural meaning of the words“: see at 409). To the same effect was Lord Herschell’s rejection of a process of construction by reference to dictionary meaning, and insistence that contractual language must be “construed in a business fashion“ and “interpreted in the way in which business men would interpret them“ in Southland Frozen Meat and Produce Export Company Ltd v Nelson Brothers Ltd [1898] AC 442 at 444. The approach adopted by Lords Selborne and Herschell anticipated what was popularised by Lord Wilberforce in the following century. Professor Carter has examined the evolutionary process at pp 17–20 of his book referred to in the previous paragraph.

[83] Fifthly, the approach endorsed in Woodside avoids the difficulty of identifying what is meant by “ambiguity“, itself an ambiguous term, whose perception “differs from one judicial eye to the other“: B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 234. The various meanings of “ambiguity“ in this context are described by M Walton, “Where now ambiguity?“ (2011) 35 Aust Bar Rev 176 and D Wong and B Michael, “Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?“ (2012) 86 ALJ 57 at 67–69.

[84] Sixthly, the approach to construction of written commercial contracts reflected in Woodside at [35] accords with what had been said in familiar passages in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; 218 CLR 451 at [22] (construction “requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction“); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; 219 CLR 165 at [40] (“The meaning of the terms … normally requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction“); and the endorsement in Wilkie v Gordian Runoff Ltd [2005] HCA 17 ; 221 CLR 522 at [15] of the proposition that “Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure“. It means also that the Australian approach mirrors that adopted in England, New Zealand, Singapore and Hong Kong: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 ; [2009] 1 AC 1101; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5 ; [2010] 2 NZLR 444; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27; 3 SLR(R) 1029 (where the court’s reasons delivered by V K Rajah JA for the court survey much of the English decisions and academic literature); Fully Profit (Asia) Ltd v Secretary for Justice [2013] HKCFA 40 ; 6 HKC 374.”

  1. A useful recent statement of general principles in relation to contractual construction was by Darke J in Fitness First Australia Pty Ltd v Fenshaw Pty Ltd [2016] NSWSC 47 at [57]-[60] which is as follows:

[57] The meaning of the terms of a commercial contract is to be determined objectively, by what a reasonable business person would have understood those terms to have meant. That determination requires consideration of the language used by the parties, the surrounding circumstances known to them, and the commercial purpose or objects to be secured by the contract (see Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ; [2004] HCA 35; BC200404838 at [22] ; Electricity Generation Corporation (ABN 58 673 830 106) (t/as Verve Energy) v Woodside Energy Ltd (ABN 63 005 482 986)(Matter No P47/2013) (2014) 251 CLR 640 ; [2014] HCA 7; BC201401090 at [35] ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (Matter No S99/2015) (2015) 89 ALJR 990 ; [2015] HCA 37; BC201509888 at [47] ). The subjective beliefs or understandings of the parties are not relevant to such questions of construction (see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 ; [2004] HCA 52; BC200407463 at [40] ).

[58] It has been held by the Court of Appeal that the statement of the principles in Electricity Generation Corporation (ABN 58 673 830 106) (t/as Verve Energy) v Woodside Energy Ltd (ABN 63 005 482 986) (Matter No P47/2013) (supra) at [35] endorses and requires a contextual approach to the construction of commercial contracts, so that the existence of any ambiguity in the contractual language is to be evaluated having regard to the surrounding circumstances and commercial purposes or objects (see Newey v Westpac Banking Corporation [2014] NSWCA 319; BC201407530 at [89] , citing Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633 ; [2014] NSWCA 184; BC201404487 at [71] ). However, there are limits upon the extent to which those matters may be used as an aid in the construction of a written agreement. Those matters do not, for example, permit the Court to depart from the ordinary meaning of the words used by the parties merely because the Court regards the result as inconvenient or unjust (see Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 ; BC7300063 ; McGrath v Sturesteps (2011) 81 NSWLR 690 ; [2011] NSWCA 315; BC201107717 at [17] , cited in Newey v Westpac Banking Corporation (supra) at [90] ). If, after considering the contract as a whole and the circumstances known to the parties, the Court concludes that the language of a contract is unambiguous, the Court must give effect to that language unless to do so would give the contract an absurd operation (see Newey v Westpac Banking Corporation (supra) at [91] , citing Jireh International Pty Ltd t/as Gloria Jean’s Coffee v Western Exports Services Inc [2011] NSWCA 137; BC201103717 at [55] ).

[59] It is well recognised that words may be supplied, omitted or corrected in a written agreement where it is clearly necessary to avoid an absurdity or inconsistency (see Fitzgerald v Masters (1956) 95 CLR 420 at 426–427 and 437 ; BC5600420 ). Any such absurdity or inconsistency must be identified by reference to the text of the agreement as understood in its factual and legal context (see Newey v Westpac Banking Corporation (supra) at [85] , citing Wyllie v Tarrison Pty Ltd [2007] NSWCA 184; BC200706011 at [46] ).

[60] As stated by Bathurst CJ in McGrath v Sturesteps (supra) at [18] , there are exceptional cases where, to use the words of Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 ; [2009] UKHL 38 at [15]–[16], something has clearly gone wrong with the language so as to interpret it in accordance with the ordinary rules of syntax makes no commercial sense. In such cases, the Court is entitled to depart from the ordinary meaning of the words in order to give effect to what objectively speaking the parties intended. The Court thus acts in accordance with the principle that a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience (see Electricity Generation Corporation (ABN 58 673 830 106) (t/as Verve Energy) v Woodside Energy Ltd (ABN 63 005 482 986) (Matter No P47/2013) (supra) at [35] ; Zhu v Treasurer of New South Wales (2004) 218 CLR 530 ; [2004] HCA 56; BC200407561 at [82] ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (supra) at [51] ).”

  1. Fenshaw went on appeal to the Court of Appeal: [2016] NSWCA 207. Although the appeal was allowed their Honours did not criticise Darke J’s statement of general principles in their judgment.

  2. The factual background to the matter has already been set out above. The surrounding circumstances or the “context” of the Contract as that term seems to be preferred in more recent appellate decisions include the following:

  1. The defendant was seeking to retain an Assistant Coach to help the existing Head Coach of the first grade team, Mr Toovey;

  2. The defendant club had a professional rugby league football team. That was the team for which Mr Toovey was the Head Coach and the plaintiff was contemplated to be the Assistant Coach;

  3. As Assistant Coach, the plaintiff’s position had a subordinate role to that of the Head Coach, Mr Toovey;

  4. The nature of professional sport is such that persons involved playing for professional teams are elite athletes and are highly skilled. Similarly, coaching staff are highly experienced and skilled. The potential for changes from one season to another in the performance and success of teams is clear. Similarly, the potential for disputes between a club and/or its coaching staff and/or its players is equally clear. The club seeks to achieve the greatest success possible for its professional sporting team and the players and coaching staff similarly have an interest in the same objective.

  5. However, where success is not achieved, there is potential for substantial disputes between key parties. That may include the position of assistant coach, although that job is of a lower level of profile and significance to that of the Head Coach at the time of the Contract, Mr Toovey.

  1. In summary, the defendant contends that the proper construction of Clause 25.3 of the Contract, is that it gives it the right to terminate the plaintiff’s employment on giving three months’ notice. Putting to one side that argument, the defendant would have a number of potential options available to it if it no longer wished the plaintiff to act in the role as Assistant Coach during the Contract term:

  1. It could seek to negotiate a termination of the plaintiff’s Contract;

  2. It could terminate the plaintiff during the probationary period under Clause 9 of the Contract;

  3. It could alter his position and responsibilities, having regard to his skills, experience and competency under Clause 2.5 of the Contract;

  4. It could direct the plaintiff not to attend work and not to undertake any of his work duties under Clause 8.4 of the Contract.

Submissions on behalf of the defendant

  1. The defendant made comprehensive written and oral submissions.

  2. In summary, the defendant submitted as follows:

  1. The contractual issue arising in the proceedings was entirely a matter of the proper construction of the Contract, that is whether the reference in Clause 25.3 to Clause 9.1 signifies that the three months’ notice can only be given during the probationary period or whether, on its proper construction, the Contract permits the giving of three months’ notice by the defendant at any time after the probationary period expires;

  2. The parol evidence rule clearly excludes all evidence of prior contractual negotiations in determining the contractual issues. That conclusion was reinforced by the entire agreement clause in Clause 28 of the Contract;

  3. The proper construction of the Contract is a matter to be discerned on the face of the Contract itself without recourse to external sources;

  4. Clause 25.3 of the Contract was clear, that is three months’ notice to be served or paid out at the defendant’s option may be given at any time by the defendant. The reference to Clause 9.1 in Clause 25.3 was an obvious mistake arising from “sloppy drafting” rather than a deliberate intention to limit the circumstances in which notice might be given;

  5. Clause 9 deals with the probation period whereas Clause 25 relates to termination generally. There is no reason to read Clause 25 down by reference to the probation other than the mistaken reference to Clause 9.1 in Clause 25.3. There is no reference to a three month notice period in Clause 9.1. The closest is in Clause 9.4 which provides that one week’s notice may be given during the probation period but that if the defendant gives such notice the plaintiff will be entitled to three months’ pay;

  6. The construction put forward by the plaintiff, that there is no right to give three months’ notice, would render Clauses 25.3, 25.4 and 25.5 entirely superfluous;

  7. Although the defendant’s construction requires the words “under Clause 9.1” to be ignored in Clause 25.3, this is the preferred construction to the plaintiff’s which would lead to Clauses 25.3, 25.4 and 25.5 being rendered entirely superfluous. Such an approach is consistent with the overall proper interpretation of the Contract;

  8. Although theoretical possibilities could be contemplated for some work for Clauses 25.3, 25.4 and 25.5, a forced construction of unusual circumstances would not be consistent with a proper commercial reading of the Contract;

  9. While it is accepted that the Contract was drafted by the defendant, the contra proferentem rule cannot overcome the clear terms of the Contract. The contra proferentem rule is not a basis for manufacturing ambiguity where none exists and is a principle of last resort. Here, both Mr Ayoub and the plaintiff read the final version of the Contract and accepted it. The comments of Kirby J in McCann v Switzerland Insurance Ltd (2000) 203 CLR 579 at [74] were relied upon on the contra proferentem argument.

  1. The plaintiff submitted in summary as follows:

  1. Clause 25.3 of the Contract was clear and was restricted to the defendant terminating the plaintiff’s employment by giving the period of three months’ notice under Clause 9.1. This is what the clause expressly states and there is no proper basis for ignoring the term “under Clause 9.1” in Clause 25.3 to allow Clause 25.3 to have a general operation;

  2. The reference to “under Clause 9.1” in Clause 25.3 should in its contractual context be construed as an objectively intended reference to “under Clause 9.4” or “under Clause 9”;

  3. Clause 25 does not commence with a subclause numbered 25.1. It seems likely that subclauses had been removed from the Contract numbered 25.1 and 25.2. What these dealt with is unclear. There is no other clause in the Contract which has a similar error in numbering;

  4. Clauses 25.4 and 25.5 did have work to do. They could either relate to the period of one week’s notice referred to in Clause 9.4 or to a circumstance where the defendant chose to terminate the plaintiff’s employment with notice under one of the grounds in Clause 25.6 but then decided to terminate early in the notice period;

  5. Having regard to the terms of Clause 9 relating to a probationary period there was no reason commercially for interpreting Clause 25.3 as giving the significant power to the defendant to terminate on three months’ notice where the plaintiff was not given a similar right to terminate on three months’ notice. Such a construction on a key issue was unfair and unlikely to be the correct objective interpretation of the Contract;

  6. The alternative construction contended for by the defendant is that the words “under Clause 9.1” in Clause 25.3 should be ignored. It was submitted that there was no logic in that approach. If Clause 9 was ignored then there would be no substantial commercial purpose in the probationary period as three months’ notice could be given at any time;

  7. The construction for which the plaintiff contends is commercially consistent with attracting talent to the defendant club providing for stability and consistency of decision making. It is also consistent with limiting the extent to which the club might have continuing contracts rendering the club open to unfair dismissal actions in respect of positions that potentially require change and flexibility. A fixed term contract for a period approaching three years in Clause 1.1 fulfils the purpose of planning but does not expose the club to potential unfair dismissal claims which are inherently involved in continuing contracts;

  8. Even if the construction propounded by the plaintiff renders Clauses 25.4 and 25.5 surplus, the plaintiff’s construction should still be preferred because of the express reference to Clause 9 in Clause 25.3 of the Contract;

  9. The Contract on its face was clearly prepared by the defendant for the plaintiff as it is in the form of a letter addressed to him and contains provisions which are clearly for the benefit of the defendant. The contra proferentem rule applies in the case of ambiguity and where one party has responsibility for putting forward the whole contract, the contract will be construed against him or her where there is doubt, even if the other party has had a hand in the drafting process. Reliance was placed on the comment of Binnie J in Co-Operators Life Insurance Co v Gibbens [2009] SCC 25 at [29]:

“Whoever holds the pen creates the ambiguity and must live with the consequences.”

  1. See also the comment of Fullagar J in an insurance document context in Halford v Price (1960) 105 CLR 23 at 34.

Consideration

  1. It is necessary to construe the Contract as a whole to determine the proper construction of Clause 25.3 of the Contract.

  2. It should be noted that the crucial Clause 25.3 has prior to it in the Contract no Clauses 25.1 and 25.2.

  3. The following question therefore arises for consideration: why does Clause 25 commence with Clause 25.3 and what relevance does this have? There is no evidence as to this matter. Accordingly, there is no evidence that the parties have refused to include in the Contract a provision which would give effect to the presumed intention of persons in their position as was discussed by Mason J at pages 352-353 of Codelfa.

  1. The defendant submits that nothing can be drawn from this omission and it is possibly the result of a computer formatting error. The plaintiff seeks to draw some comfort that Clauses 25.3-25.5 may be the residual result of the deletion of some other clauses dealing with another circumstance in which there could be a resignation or termination as that is the subject matter of the clause.

  2. While Clause 9 deals with the probationary period and Clause 25 deals with resignations and termination, the clauses are not, in my opinion, necessarily exclusive and deal with entirely separate subject matter. It is clear that Clause 9 in Clauses 9.3 and 9.4 deals with two separate circumstances in which the employment of the plaintiff may be terminated or brought to an end. It is also clear that Clause 9 does not deal with all aspects of a decision by the defendant to terminate the employment of the plaintiff. The first sentence of Clause 9.4 permits either the plaintiff or the defendant during the probationary period to terminate the plaintiff’s employment by giving one week’s notice. The rights of the defendant in relation to that period of one week are not set out in Clause 9. For example, is the defendant able to pay the plaintiff in lieu of the plaintiff working out that period of one week or can it direct him not to turn up for work? Circumstances can readily be contemplated where the relationship has broken down during the probationary period and the defendant has a replacement assistant coach who they wish to start immediately and it also wishes the plaintiff to no longer turn up for work. The machinery for achieving this is not in Clause 9. The defendant points to the powers in the defendant in Clause 2.5 of the Contract. However, it may be that the defendant does not wish the plaintiff in such a scenario to be present at the defendant’s work premises at all.

  3. In my view, nothing can be clearly drawn from the failure to have a Clause 25.1 and a Clause 25.2 in the Contract. However, the absence of these clauses, in circumstances where all the other clauses in the Contract are correctly numbered, raises concerns about the accuracy of what appears in Clause 25 of the Contract. It is further noted that the Contract was obviously not carefully reviewed by either the plaintiff or Mr Ayoub or the defendant. An example is the reference in Clause 23.5 to “Clause 0”. I also note, in passing, that Clause 25.3 refers to “serious and wilful misconduct” whereas Clause 25.6 refers only to serious misconduct which may arise in circumstances which are not wilful. This seems to be another oversight.

  4. If not all circumstances relating to the rights of the parties concerning termination in the probationary period are set out in Clause 9, then the parties may well have intended Clause 25 to govern the rights of the parties if the termination provisions in Clause 9 were put into effect and Clause 9 did not expressly cover a situation.

  5. I now turn to Clause 25.3. For ease of reference I repeat the clause:

“25.3   Except where your employment is terminated for reasons of serious and willful misconduct, MWSE may terminate your employment by giving the period of 3 months notice under clause 9 1.”

  1. The defendant submits that that part of the clause which reads “under clause 9.1” was included by obvious error. The plaintiff says that it was not included by error. The plaintiff submits that while the reference to Clause 9.1 is incorrect what was obviously intended was a reference to Clause 9 generally or to Clause 9.4 in particular.

  2. In my view, the submission of the defendant that the words “under clause 9.1” were the result of “sloppy drafting” and were included by way of error is not persuasive. First, the reference to Clause 9.1 is obviously specific and there is no other clause in the Contract which refers to three months’ notice or three months’ pay in lieu of notice other than Clause 9 and specifically Clause 9.4.

  3. Secondly, Clause 25.3 of the Contract has at the end of it the phrase “by giving the period of three months notice under Clause 9.1” (emphasis added). The use of the phrase “the period of three months notice” as opposed to “a period of three months notice” or simply “three months notice” appears to have been deliberate and intended to introduce a cross-reference. The only similar use of notice terminology in the Contract is in Clause 9.4 which uses the expression “by giving one-week notice”. In my view, this reinforces the argument that there was an objectively presumed purpose specifically to refer to Clause 9 at the end of Clause 25.3 of the Contract.

  4. There obviously is an ambiguity in Clause 25.3 on either party’s case. It is further noted that under Clause 9:

  1. There is no three months’ notice period referred to in Clause 9.1 of the Contract; and

  2. Clause 9.4 itself refers to three months’ payment in lieu of notice not a period of three months’ notice as referred to in Clause 25.3, although in financial terms the results are similar.

  1. In conclusion, I am not persuaded that the reference in Clause 25.3 of the Contract to “under Clause 9.1” was a complete error and the words should simply be ignored.

  2. However, the whole of Clause 25 needs to be considered in determining the proper construction of the Contract.

  3. Clause 25.6 of the Contract permits the defendant to terminate the plaintiff’s employment at any time without notice or payment in lieu of notice in the case of serious misconduct. Clause 25.6 merely gives the power the exercise of which by the defendant is not mandatory. This is clear by the use of the words “MWSE may terminate your employment … in the case of serious misconduct”. One can readily contemplate circumstances where there were breaches of the non-fraud grounds set out in Clauses 25.6.1 and 25.6.2 which would give the power to the defendant to summarily dismiss the plaintiff or otherwise terminate his employment but where the defendant would not wish to exercise that power to summarily dismiss or terminate without notice. Examples could include where conflict existed between the plaintiff as assistant coach and the head coach or between the plaintiff as assistant coach and a key player and the plaintiff was not turning up regularly to perform his duties. In those circumstances the defendant may wish to terminate the plaintiff for breach of the Contract but upon notice, for example if other football teams within the defendant’s football club were in the finals or themselves had coaching vacancies and the defendant wished to make use of the plaintiff’s experience and qualifications for a limited period. Circumstances may arise where a notice period of say two or three months had been given for a breach of the obligations in Clause 25.6.1 or 25.6.2 and then circumstances changed such that the provisions in Clauses 25.4 or 25.6 had work to do.

  4. As stated above, there is also clearly work to be done for Clauses 25.4 and 25.5 in relation to the one week notice period referred to in Clause 9.4.

  5. The defendant submitted that such an approach seeks artificially to create a scenario in which Clauses 25.4 and 25.5 have work to do whereas the defendant’s construction of Clause 25.3 is the more logical construction.

  6. I am not persuaded by this submission. I have already set out my opinion in relation to Clause 25.3 being that its wording does not suggest that the concluding words “under Clause 9.1” were included as “sloppy drafting” or by error. Further, Clause 25 is by its heading and content a clause which deals with resignations and termination. As counsel for the defendant said in his comprehensive oral submissions, there are various clauses relating to termination in the Contract including two rights of termination in Clause 9. It is therefore in my opinion reasonably open to conclude that not all the consequences of the termination scenarios referred to in Clause 9 were covered within Clause 9 and that Clauses 25.4 and 25.5 have general work to do.

  7. Although it is not entirely clear, it appears that Clause 25.3 is part of a general termination clause which reminds the reader of the power to terminate under Clause 9. It is accepted that the Contract is ambiguous. It has clearly not been drafted with care because on any view there are errors in it: Clause 23.5 and 25.3. However, taking into account the Contract as a whole, in my opinion the above interpretation is more likely to be that which a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction. The defendant was clearly seeking to secure the services of the plaintiff for the term in Clause 1.1.

  8. Accordingly, I reject the defendant’s submitted construction of Clause 25.3. In my opinion, this clause did not give the defendant a general right to terminate the plaintiff on three months’ notice. The reference to “under clause 9.1” in Clause 25.3 should probably have been a reference to Clause 9. The court has power to correct words in a contract during the interpretation process to avoid an inconsistency. Something clearly went wrong in the preparation process in relation to the drafting of Clause 25.3 of the Contract: see Fitzgerald v Masters (1956) 95 CLR 420 at 426-7; Newey v Westpac Banking Corporation [2014] NSWCA 319 at [85].

  9. The defendant accordingly, under the Contract, did not have the contractual right to terminate the plaintiff as it did. The act of termination constituted a breach of contract by the defendant for which the defendant is liable in damages.

  10. Although I have held that the construction advanced by the plaintiff is to be preferred, I accept that the defendant’s construction is an arguable construction in relation to the Contract. There is accordingly ambiguity in the Contract which is not helped by the omissions and errors in the Contract described above.

  11. To the extent there is any doubt in relation to the proper construction of Clause 25.3, in my opinion the contra proferentem rule assists the plaintiff. I accept that the rule can be applied only in cases of doubt, after other interpretative tools have failed and as a rule of last resort. Here the Contract was put forward by the defendant and clearly had numerous terms which favoured the defendant as have been discussed above. The right to terminate outside the probationary period is a significant one which can have a substantial effect on the plaintiff’s reputation and financial position. In those circumstances, in my opinion, the rule applies such that any doubt in the construction of Clause 25 should be construed against the defendant who put the Contract forward to the plaintiff. I rely on the comments of Jordan CJ in J Fenwick & Co Pty Ltd v Federal Steam Navigation Co Ltd (1943) 44 SR(NSW) 1 at 5, the comments in Halford, above, at 34 per Fullagar J and the detailed analysis of Campbell J in North v Marina [2003] NSWSC 64 at [57]-[78].

  12. The fact that both the plaintiff and Mr Ayoub reviewed the Contract does not in my view alter the position. The plaintiff was not legally qualified and there is no evidence that Mr Ayoub was legally qualified or experienced. The defendant, as an entity of substantial resources, and the proposer of the Contract clearly had the opportunity to review it properly and ensure that it was drafted clearly to achieve its objectives. Accordingly, any doubt in clause 25.3 should in the circumstances be construed against the defendant.

  13. As stated above, damages have been agreed between the parties. I accordingly enter judgment for the plaintiff in the sum of $44,478.65. I will hear the parties in relation to the question of costs. My preliminary view, subject to submissions, is that the defendant should pay the plaintiff’s costs of the proceedings as agreed or assessed.

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Decision last updated: 12 December 2016

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