Grainger v Roombridge P/L T/A Laguna Noosa
[2007] QCA 276
•24 August 2007
SUPREME COURT OF QUEENSLAND
CITATION:
Grainger v Roombridge P/L T/A Laguna Noosa [2007]
QCA 276PARTIES:
PETER GRAINGER
(respondent/applicant)
v
ROOMBRIDGE PTY LTD ACN 056 960 957
TRADING AS LAGUNA NOOSA
(appellant/respondent)FILE NO/S:
Appeal No 2601 of 2007
DC No 189 of 2006DIVISION:
Court of Appeal
PROCEEDING:
General Civil Appeal
Application for Leave s 118 DCA (Civil)ORIGINATING COURT:
District Court at Maroochydore
DELIVERED ON:
24 August 2007
DELIVERED AT:
Brisbane
HEARING DATE:
10 August 2007
JUDGES:
Williams and Keane JJA and Atkinson J
Separate reasons for judgment of each member of the Court, each concurring as to the orders madeORDER:
1. Application for leave to appeal refused
2. Applicant to pay respondent's costs of the application to be assessed
CATCHWORDS:
INTERPRETATION – ADMISSIBILITY OF EXTRINSIC EVIDENCE IN RELATION TO INSTRUMENTS – WHEN EVIDENCE ADMISSIBLE – TO PROVE INTENTION OF PARTIES – LATENT AMBIGUITY – where applicant employee agreed with respondent employer to work as real estate agent – where agreement provided that respondent would advance weekly sum of money to applicant and applicant would repay moneys under certain circumstances – whether moneys advanced were repayable as loan – whether terms of agreement were ambiguous so that extrinsic evidence could be admitted to resolve ambiguity
PROFESSIONS AND TRADES – AUCTIONEERS AND AGENTS – CONSTRUCTION OF STATUTORY PROVISIONS – QUEENSLAND – REMUNERATION – where agreement provided that applicant would work for commission only – where agreement registered and approved in accordance with the Property Sales Award Queensland - State – where the Award provides for minimum remuneration and provides that in certain circumstances employer and employee may elect to opt out of minimum remuneration provisions – whether agreement invalid under the Award
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 377, applied
Lincolnshire Sugar Co Ltd v Smart [1937] AC 697, cited
London Financial Association v Kelk (1884) 26 Ch D 107, citedCOUNSEL:
A C Barlow for the applicant
G D Beacham for the respondentSOLICITORS:
WHD Lawyers for the applicant
Sykes Pearson & Miller for the respondent
WILLIAMS JA: I have had the advantage of reading the reasons for judgment of Keane JA and I agree with all that is said therein. I agree with the orders proposed.
KEANE JA:
The applicant, Mr Grainger, was previously employed by the respondent, Roombridge Pty Ltd. Roombridge claimed to recover from
Mr Grainger moneys paid to him during the course of his employment. That claim was rejected at first instance by a magistrate, but was upheld by a District Court judge. Mr Grainger now seeks leave to appeal pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld) against the decision of the learned District Court judge.
It is convenient in this case to consider the merits of Mr Grainger's arguments in order to determine whether an appeal would have sufficient merit to warrant the grant of leave. I will, therefore, set out the material terms of the employment agreement and the decision of the learned District Court judge before turning to a consideration of the applicant's arguments in this Court.
The agreement
It is common ground that Mr Grainger was employed by Roombridge as a real estate salesperson pursuant to the terms of a written agreement dated 15 October 2004. It was common ground that the parties had elected to make the agreement pursuant to stage 2 of the Property Sales Award Queensland – State ("the Award"). The written agreement contained the following material terms:
·"Commission: The Employer will pay the Employee commission based on the following proportions of the gross office commission received by the Employer where the Employee listed or sold the contracted property:
List Sell
Auction 24.5 % 20 %
Sole/Exclusive Agency 22.25 % 22.25 %
Multilist % %
Open Listing 4.25 % 40.25 %"
·"This page forms part of the Employment Agreement between Roombridge Pty Ltd and Peter Grainger.
1. Roombridge Pty Ltd agrees to pay Peter Grainger $600 per week (after tax) for a period of six months from 11 October 2004, being the date of commencement of his employment with Roombridge.
2. If for any reason, Peter Grainger leaves the employment of Roombridge at any time within the six months period referred to in point 1 of this annexure, he agrees to repay to Roombridge any shortfall in the total of the weekly amounts advanced compared to any commissions from sales he would be entitled to receive during this period.
3. This Employment Agreement will be reviewed at the expiration of the six month period referred to in point 1 of this annexure."
·"Clause 17 – Variation
17.1Any variation to the terms of this Agreement during the life of the agreement is to
(a)be in writing, signed and lodged for registration with the Property Sales Association of Queensland;
(b)conform with the requirements of the Award applicable to the existing agreement; and
(c)amend or replace the existing Agreement for the remainder of the life of the existing Agreement."
It is to be noted that the provisions in relation to commission were the only provisions relating to the remuneration of Mr Grainger. Roombridge's position was that this arrangement as to remuneration was authorised under the provisions of the Award relating to Stage 2 Employment.
The Award provides relevantly:
·"STAGE 2 EMPLOYMENT
2.4 Application, Flexibility, Intent
2.4.1 Flexible Employment Arrangements
Stage 2 Employment allows employers and employees covered by this Award to arrive at arrangements which differ from the provisions of Stage 1 Employment and, subject to such arrangements being registered as prescribed, to apply those arrangements in lieu of clauses 2.1 to 2.3.
2.4.2 Statement of Intent
Stage 2 Employment is designed to recognise the unique nature of the Real Estate Industry, and practices and procedures which have been accepted and proven over time, including the payment of total or partial commission based on transactions and performance.
2.5 Opting Out of Stage 1 Employment
2.5.1 Qualifying to Opt Out
Where it can be demonstrated that an employee:
…
(b) can demonstrate a personal work history:
…
(ii) in the case of someone who holds a Real Estate Agent's Licence,
which would provide a reasonable expectation of an earning capacity in excess of 115% of the award rate of pay prescribed for a Property Sales Person;
…
the employee and the employer may freely elect to alter in part or totally the provisions of clauses 2.1 to 2.3, subject to the conditions set out in clause 3."
…
·"3.23Stage 2 Employment
(a)Where an employee is employed under clauses 2.4 and 2.5 the written Agreement reached in accordance with clause 2.5 shall:
(i)be subject to approval, by the Secretary of the PSAQ, as meeting the requirements of clause 2.5;
(ii)apply for no longer than 12 months (or such longer period as may be approved by the Secretary of the PSAQ, at the Secretary's sole discretion, for administrative purposes);
(iii)be re-registered in:
(A)its current form; or
(B)a re-negotiated form,
at least every 12 months, as per the provisions of clause 2.5 and clause 3.2;
(iv)provide conditions which, overall, provide at least equal benefits to the average good employee as set out in clauses 2.1 to 2.3."
·"3.3 Failure to comply
Failure to comply with the registration and approval requirements of clause 3 shall:
…(c)mean that any agreement entered into between the parties shall be operative only to the extent that the agreement does not conflict with the provisions of this Award."
The learned District Court judge summarised the evidence which was given in relation to the genesis of the terms in the annexure to the employment agreement. His Honour said:[1]
[1]Roombridge Pty Ltd T/as Laguna Noosa v Grainger [2007] QDC 012 at [16] – [17].
"Mr Forsyth gave uncontested evidence that prior to meeting
Mr Grainger he was contacted by him as a result of an advertisement run by Laguna Real Estate seeking real estate agents. Mr Grainger contacted him from NSW 'and said he was interested in coming up and selling real estate in, and shifting to, Noosa'. He then met with Mr Grainger in person who eventually decided he would like to work for Laguna Real Estate.Mr Forsyth said in evidence:
'We had a discussion in my office in relation to Peter working for Laguna Real Estate. It was then brought up that he would be making a - the trip up to Noosa and the cost of coming up would be significant, and he'd have to settle in and so forth and so on. So he asked me whether we would advance him a sum of money on a weekly basis until he got settled. And I discussed that with Olivia Miller, my partner, and we agreed to do that on a contractual basis.'"
His Honour also made a finding in relation to later dealings between the parties. His Honour said:[2]
[2]Roombridge Pty Ltd T/as Laguna Noosa v Grainger [2007] QDC 012 at [18].
"The employment agreement was then executed on 15 November 2004. On 5 May 2005 there was a meeting between Mr Forsyth,
Ms Miller and Mr Grainger. Mr Forsyth gave evidence:'It was in relation to Peter's performance over the period of time that he'd been with us. We were concerned that he wasn't performing to the standard that he indicated that he could perform with us. We discussed various aspects of his performance, his prospecting, his - what he had coming up and so forth and so on. He indicated to us that he was just about to turn around the corner, and he believed that he could turn that corner and bring some sales in. Olivia and I discussed it and we went along with that, and decided to keep him in that employment on the same basis that we employed him.
He asked us to - well, basically, he - Peter asked us if we would basically leave his current situation as is, and really wanted us to believe in him and believe that he could turn the corner and gain some sales for our company.'"
The decision of the District Court
The learned District Court judge held that the terms of cl 1 and cl 2 of the annexure to the written agreement were ambiguous, entitling him to have regard to the evidence of the negotiation to which reference has been made. On this basis, his Honour rejected the submission made on behalf of Mr Grainger to the effect Roombridge's entitlement to recover any part of the weekly payments of $600 made to Mr Grainger ceased entirely after he had been employed for six months. His Honour went on to reject the further argument that the agreement was invalid insofar as it obliged Mr Grainger to work for commission only. In relation to these points, his Honour concluded:[3]
"It is clear when one has regard to the extrinsic circumstances both prior to the execution and on 5 May 2005, the parties intended that the $600 per week be treated as an advance against commission to be earned by Mr Grainger, who on the basis of his own signed acknowledgement in the application to register the agreement as a Stage 2 type agreement, was prospectively an employee who could demonstrate 'a reasonable expectation of an earning capacity in excess of 115% of the Award rate'.
I think this also answers Mr Barlow's second point in relation to construction. In argument he initially advanced what I thought to be a surprising argument that no agreement under stage 2 which provided for remuneration on a commission only basis could be lawful. He modified his argument during discussion to add the proviso that no such agreement was lawful unless in its terms it provided conditions 'which, overall, provide at least equal benefits to the average good employee as set out in Clauses 2.1 to 2.3'. Such an assessment could only be made prospectively and given the way in which I have construed the $600 payment, and bearing in mind that Mr Grainger was the holder of a Real Estate Licence and on his acknowledgement 'would provide a reasonable expectation of an earning capacity in excess of 115% of the Award rate'; even in the absence of evidence bearing directly on the matters in 3.2.3(a)(iv); I hold that this agreement does not offend against this section of the Award. The Award itself acknowledges the unique nature of the Real Estate Industry, and acknowledges that employers and employees may opt for an agreement for remuneration by commission only. The standard terms and conditions, (clause 8.2), which is part of the agreement, also anticipates remuneration in whole by commission, which, on the construction I have favoured, this agreement in fact was.
I also agree with Mr Beecham that Mr Grainger can derive no comfort from Clause 3.3 of the Award. In my view this clause does not apply because on the uncontested evidence there was no failure here to register or have the agreement approved.Mr Barlow, in arguing that the agreement could be construed on its own terms, submitted that the 5 May meeting lead to an agreement that the employee would continue to pay (by way of salary) $600 per week (as per Clause 1 of the Annexure) but that, as more than six months had elapsed, Clause 2 had no further operative effect. There is an obvious failing in this argument as Clause 1 itself is limited to a six month application in its own terms. In any event, on the approach I favour, the parties then agreed to continue the employment on the same basis as previously i.e. including Clause 2 and that included the agreement that the $600 was to continue to be an advance against commission earned."[3]Roombridge Pty Ltd T/as Laguna Noosa v Grainger [2007] QDC 012 at [24] – [27].
The arguments in this Court
It is argued that the learned District Court judge erred in construing the terms of the written employment agreement by reference to oral discussions between the parties. It is argued that the written agreement is unambiguous, and that his Honour's reference to extrinsic evidence was unfounded. It is also argued that cl 2 of the annexure to the written agreement was invalidated by the Award.
Ambiguity?
As to the first argument, it is said that the terms of the annexure were free from ambiguity, and there was, therefore, no occasion for reference to evidence of the parties' intentions extraneous to the written agreement. But it is apparent from the text of the annexure that the $600 per week was paid as an "advance"; and in ordinary parlance, the word "advance" may refer to a loan or to a transaction other than a loan.[4] The word "advance" is ambiguous. As Lord Macmillan said in Lincolnshire Sugar Co Ltd v Smart:[5]
"I agree that the word 'advance' is ambiguous and may either refer to pre-payments of what will become due in the future or be a polite euphemism for loans, but when 'advances' are declared to be 'repayable' (though only conditionally) they certainly lean to the side of loans."
[4]London Financial Association v Kelk (1884) 26 Ch D 107 at 136.
[5][1937] AC 697 at 703 – 704.
In this case, it is an obvious characteristic of the "advances" referred to in the annexure that they are repayable by the borrower, albeit on the terms of the annexure: cl 2 of the annexure expressly provides for "repayment".
The argument agitated on Mr Grainger's behalf treats the expiration of the six month period as terminating the obligation to repay the loan altogether if Mr Grainger is still in employment with Roombridge at that time. An alternative reading of the clause, which is at least arguable, is that the expiration of the six month period merely removes the limit on Mr Grainger's obligation to repay the shortfall between commissions earned by him and the amounts advanced to him during that period.
The balance of cl 2 of the annexure can thus be understood as limiting
Mr Grainger's obligation to repay the loan to the shortfall between the amounts so advanced in the first six months and commissions received by Mr Grainger if he were to cease employment within that time but leaving Mr Grainger's repayment obligations in respect of the loan unlimited after the expiration of that period.
Adding force to this interpretation is the consideration that the commercial issue addressed by the annexure is the allocation of the risk that Mr Grainger's commissions will not reach $600 per week during the first six months of his employment. There was no guarantee from the employer that his commissions would reach this level, but the terms of the annexure were apt to afford Mr Grainger a measure of support as an employee whose remuneration was entirely dependent upon the earning of commissions; that support was clearly intended to be temporary. After the expiration of that period of temporary support, the risk of earning sufficient remuneration by commission was wholly Mr Grainger's. There was no evident intention that the advances should then become a gift. It is, therefore, arguable that the better view was that, thereafter, during the continuation of Mr Grainger's employment with Roombridge, the advances made became fully repayable.
Even if this were not the better view of the effect of the bare text of the annexure, it is clear that cl 2 of the annexure is, at best for Mr Grainger, sufficiently ambiguous to warrant attention to the extrinsic evidence summarised in paragraph [7] above. In Codelfa Construction Pty Ltd v State Rail Authority of NSW,[6] Mason J said:
"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."
[6](1982) 149 CLR 337 at 352.
Once reference is made to the evidence of the discussions referred to in paragraph [7] above, the intention of the parties becomes clear beyond argument; and
Mr Grainger's argument can be seen to be devoid of merit. This evidence tends to establish the subject matter of cl 2 of the annexure, so as to make it clear that the $600 payments were to be made by way of a temporary financial accommodation provided by Roombridge to Mr Grainger, until Mr Grainger had the opportunity to settle in to his new employment. The character of the $600 payments as a loan, and the effect of cl 2 as a temporary limitation on Mr Grainger's obligation to repay the advances made to him, becomes clearly apparent. The circumstances in which the limitations on the obligation to repay the loan were to apply did not occur. The loans are, therefore, fully repayable.
Validity
The second argument advanced on Mr Grainger's behalf must also be rejected. There was no suggestion that the agreement was not registered and approved in accordance with cl 3.3 of the Award; and cl 2 of the annexure to the agreement is not contrary to any provisions relating to remuneration contained either in the agreement or the Award. That is because the annexure was, in truth, concerned to afford Mr Grainger a measure of temporary financial support: it did not purport to state the basis of his remuneration.
On Mr Grainger's behalf, it was argued that the Award did not permit an agreement under which the employee's remuneration was limited to commissions even in the case of Stage 2 Employment. This argument is plainly untenable. The preamble to the Award expressly contemplates that Stage 2 Employment may be structured on the basis that the entitlement to "wages" may be "negotiated away". Further, the Award itself contains provisions, such as cl 1.6.8 and cl 2.4.2, which expressly postulate remuneration of employees "wholly … on the basis of commission".
Conclusion and orders
The decision of the learned District Court judge was clearly correct. That I would reach the same decision by somewhat different reasons is of no consequence to my view that the application for leave to appeal should be refused.
Mr Grainger should be ordered to pay Roombridge's costs of the application for leave to appeal to be assessed.
ATKINSON J: For the reasons given by Keane JA, I agree that the application for leave to appeal should be refused and that the applicant should pay the respondent's costs of the application.
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