Hamilton Is Enterprises Ltd v Hattersea P/L

[1997] QCA 373

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 10588 of 1996.

Brisbane

[Hamilton Is. Enterprises Ltd v. Hattersea P/L]

BETWEEN:
  HAMILTON ISLAND ENTERPRISES LIMITED
  (ACN 009 946 909)

(Respondent)  Appellant

AND:
  HATTERSEA PTY LTD
  (ACN 010 619 673)

(Applicant)  Respondent

___________________________________________________________________

Pincus J.A.
McPherson J.A.
Derrington J.

___________________________________________________________________________

Judgment delivered 24 October 1997

Separate Reasons for Judgment of each member of the Court, Pincus and McPherson JJA concurring as to the order to be made, Derrington J dissenting.
___________________________________________________________________________

APPEAL DISMISSED EXCEPT TO THE EXTENT OF ADDING, AFTER THE WORDS "IT BE DECLARED THAT" IN THE PRIMARY JUDGE’S ORDER, THE WORDS "SUBJECT TO THE EFFECT, IF ANY, OF CL. 15.1 OF THE SAID AGREEMENT".  APPELLANT TO PAY FOUR-FIFTHS OF THE RESPONDENT’S COSTS OF THE APPEAL, TO BE TAXED.
_________________________________________________________________________

CATCHWORDS:     CIVIL - construction of a licence agreement - scope of respondent’s exclusive rights under the licence - whether a business to arrange wedding services and receptions included arranging for a photographer - clause in licence dealt with overlap of sole rights of concessionaires which respondent contended below was inapplicable - whether respondent lost its rights under the clause by not sufficiently raising it below.

Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 C.L.R. 589

Counsel:Mr H B Fraser Q.C., with him Mr D M Logan, for the appellant.

Mr S Doyle Q.C., for the respondent.

Solicitors:Minter Ellison for the appellant.

Barker Gosling for the respondent.

Hearing date:               8 September 1997.

REASONS FOR JUDGMENT - PINCUS J.A.

Judgment delivered 24 October 1997

This is an appeal from a judgment of the Supreme Court on a construction summons.  The appellant granted a licence in 1992 permitting the licensee (called a "Concessionaire" in the licence agreement) to carry on a wedding services business on Hamilton Island;  the respondent obtained an assignment of the rights of the concessionaire by a deed made in 1994;  the licence expires in the year 2002. 

The judgment under appeal decided a dispute between the appellant and the respondent with respect to the scope of the respondent’s rights under the licence.  The respondent successfully contended before the primary judge for a wider view of the scope of the business it is licensed to conduct than that view which was put forward on behalf of the appellant.  The respondent obtained an order that:

"On the proper construction of a written Licence Agreement dated 10 April 1992 between Hamilton Island Enterprises Pty Ltd and Vicki Ellen Brown it be declared that:

(a)the applicant is entitled, in carrying on the business described in Schedule 3 to the said Licence Agreement, to arrange the provision of photographic services and video services (being the making of a photographic or video record of wedding services, wedding blessings and wedding receptions) to clients of the business;

(b)The applicant is entitled, in carrying on the business described in Schedule 3 to the said Licence Agreement, to arrange the provision of the said photographic services and video services, at the choice of the applicant, by itself providing same, or by engaging others to do so. "

The source of the dispute is that the licence defines the business which the holder of the licence is entitled to conduct in terms which do not expressly include making provision for the taking of photographs or video recordings of weddings or of activities associated with weddings;  I shall call these for short "photo services".  The primary judge held that, although not expressly mentioned, photo services were, on the proper construction of the licence, intended to be caught by the language used to describe the business the respondent is entitled to carry on.  It was not submitted here or below that, whether under the Trade Practices Act 1974 or under the general law, any question of illegality affects the restrictions the licence imposes on the respondent’s activities on Hamilton Island.

The licence agreement begins by identifying land of which the appellant is lessee from the Crown and it then grants to the concessionaire a licence to conduct in a defined area "the Business set out in Schedule Three hereto" and to use the defined premises in connection with the conduct of that business.  One finds within Schedule Three the following language ("H.I.E." is the licensor):

"The permitted Business is:

a.Wedding suit and gown hire

b.Provision of floral accessories

c.Liaise with Resort Activities regarding bookings

d.Conducting and arranging Church services

e.Arranging Wedding receptions when required

H.I.E. undertakes to always have available on Hamilton Island a fully maintained vehicle suitable for use by the Bridal party similar to the Rolls Royce currently in use, and the Concessionaire will pay H.I.E. sixty dollars ($60) per hour for the hire of this vehicle.

H.I.E. will make available All Saints Church on Hamilton Island for the use of the Wedding services and will maintain and keep clean in all respects the Church at H.I.E.’s expense and will give the Concessionaire priority use of the Church for such services at no cost to the Concessionaire."

Schedule Three also states that the permitted business name is "Hamilton Island Wedding Services".

It was contended for the respondent by Mr S Doyle S.C. that four of the items describing the permitted business are themselves descriptions of businesses rather than activities;  he excluded item (c), "Liaise with Resort Activities regarding bookings".  The argument advanced by Mr H Fraser Q.C., who led Mr D Logan for the appellant, was to the effect that each of the items is intended to describe an activity, being a permitted component of the permitted business and that these activities are comprehensively described.  It does not appear to me that anything of much consequence turns on whether one chooses to characterise the items listed as businesses rather than activities;  if they are said to be businesses, that is so only in the sense that each could, if carried on in isolation, constitute an entire business.

Whether item (a), for example, is thought of as a business or as an activity, it is possible rationally to debate its width.  The argument for the respondent was to the effect that an item such as (a) would include matters closely associated with hiring wedding attire - such as cleaning or arranging for the cleaning of such attire.  It is convenient to defer further discussion of this point until reference is made to Schedule Two.

Clause 1.2 of the agreement requires that the concessionaire deliver at certain intervals to the licensor:

".01a gross sales certificate specifying with reasonable accuracy the gross turnover of the Business during that Accounting Period and the elements of that turnover in accordance with the categories set out in Schedule Two and setting out the calculation of the total licence fee payable for that Accounting Period in accordance with the provisions of Schedule Two".

It is contemplated by this provision that a certificate will be delivered specifying the turnover of the whole business during an accounting period and that the certificate will, in addition, specify the elements of that turnover in accordance with certain categories.  Schedule Two reads in part as follows:

"  SCHEDULE TWO

(Page 1, Clauses 1.1, 1.2, 3.4.02, 8.4 & 15.1)
  LICENCE FEES

The Concessionaire shall pay to HIE by way of Licence fee the following Percentages of the Gross Turnover of the Business:-

Description of Relevant  Percentage

Services or Stock  of Turnover

contributed to Turnover  payable

Wedding Services  (E)                  15%

and Wedding Blessings

(E)indicates that the Concessionaire has the exclusive right during the period of the Licence to provide those services or sell those items so marked on Hamilton Island.

(NE)indicates that the Concessionaire does not have the exclusive right during the period of the Licence to sell those items so marked on Hamilton Island and that they may be sold by HIE and/or any other Concessionaire of the HIE. "

The opening words, beginning with "The Concessionaire shall pay . . . ", consistently with cl. 1.2, contemplate that a licence fee will be exacted on the whole of the turnover of the business in accordance with certain percentages;  one would assume that the reference to percentages, in the plural, is explained on the basis that percentages might vary in accordance with the different categories of business.  However, it will be noted that there is only one percentage mentioned, 15%, and only one category, namely "Wedding Services and Wedding Blessings".  That is a description which does not correspond precisely with any of the five items mentioned in Schedule Three, but which has the closest connection with item (d), "Conducting and arranging Church services".  Mr Fraser made alternative submissions with respect to the meaning of "Wedding Services and Wedding Blessings" in Schedule Two, the first being that this is intended to be a reference to the whole of the permitted business and the second being that it is intended to refer only to item (d) in Schedule Three.  The significance of the choice between these  alternatives is that whatever is included in the expression "Wedding Services and Wedding Blessings" in Schedule Two is the subject of an exclusive right;  so that if the expression is held to be a reference to the whole of the permitted business, one would tend to be more cautious about reading into the descriptions of the items set out in Schedule Three rights to activities not specifically mentioned there.

There is no overwhelmingly persuasive reason for preferring either of Mr Fraser’s submissions concerning the reach of "Wedding Services and Wedding Blessings" in Schedule Two.  In favour of the narrow view - that the expression refers to item (d) in Schedule Three - there is the consideration that a careless drafter could have used the expression as a way of referring to "Conducting and arranging Church services".  An argument to the contrary is that it is difficult to think of any reason why, as a matter of practical business, the parties should have agreed that a percentage of turnover should be payable only in relation to item (d) rather than (as the language of cl. 1.2 contemplates) on the turnover of the whole business.  It is my view that "Wedding Services and Wedding Blessings" was probably used as a loose reference to the whole of the business of the respondent with the permitted business name "Hamilton Island Wedding Services".

So that the respondent’s argument has to overcome the handicap that because of the meaning given to "(E)" in Schedule Two, namely that it indicates an exclusive right to provide services, whatever width is given to items (a) to (e) in Schedule Three is given exclusively.  If those items are read as including the provision of certain photo services, then the right to provide those services is, by virtue of the language of Schedule Two, exclusively given to this concessionaire. 

Wedding services tend to follow a pattern in our society, but the minimum requirements prescribed by law are quite modest; ss. 41 to 50 of the Marriage Act 1961 say what has to be done when a marriage is solemnised, but most of these provisions do not affect validity: see s. 48. Those special features commonly associated with a wedding service such as expensive clothing for the main participants, floral and other decorations for the church or other place at which the ceremony takes place, (sometimes) printed services or menus, transport in prestige vehicles, music during the ceremony and at the reception, and of course the taking of photographs or video recordings, are none of them essential; they are a matter of social custom. This is, to my mind, a weakness in the appellant’s argument about items (a) to (e) in Schedule Three that these descriptions are to be read as exhaustively stating the extent of the permitted business. It would be odd to read the reference, for example, in item (d) as covering only arranging that which the law or ecclesiastical requirements make essential for a church service; one would expect the person undertaking to arrange a wedding to provide at least some of those amenities which commonly go with a wedding. Similarly, wedding blessings could not be thought to be arranged satisfactorily if the arrangement was for nothing but a blessing. Even more clearly, a person asked to make complete arrangements for a wedding reception would ordinarily be expected to provide, not merely a place at which the wedding guests might be received after the wedding, but at least some of the other matters to which I have referred. The question whether a particular activity should be regarded as part of the business permitted to the respondent under the licence will, in my view, depend upon the closeness of its connection with what is mentioned in items (d) and (e); that will be a matter of degree and it is hardly feasible for this Court to give a decision which will answer all problems which may arise with respect to the scope, relating to photo services, of the permitted business. But that photo services are included in both (d) and (e) is, in my opinion, the better view. Photos or videos are a practically universal feature of wedding ceremonies and wedding receptions. One is dealing with ordinary and not technical language; if, before a wedding, an anxious inquirer were to ask if all proper arrangements had been made, that would be taken to include the hire of a photographer. There is no reason why provision for the taking of photographs and videos should be any the less part of the responsibilities of one in the business of arranging weddings than any other usual feature, such as arranging for catering, for any necessary printing, or for music.

Mr Doyle pointed out that arranging photo services was precisely what the respondent was doing, without complaint, until a dispute about price and perhaps other matters came into being with the arranged photographer, an entity trading as "Fast Photos".  What caused the dispute was not that the respondent was arranging to have photos and videos taken in relation to wedding services and wedding blessings, but that the way in which it proposed to arrange this changed.  This is not of course decisive;  if the respondent was not entitled to arrange for the provision of photo services, as part of its business, it was not entitled to get Fast Photos to do the work.  But what has occurred points to the practicalities of the situation, as the parties might reasonably have expected them to be at the time the contract was made;  a business which undertook to arrange, comprehensively, wedding services and receptions would be expected in one way or another (unless the contrary was expressly or implicitly stipulated) to achieve the result that a competent photographer was on the spot to record these events.  That would no doubt particularly apply to customers coming from overseas to have their weddings blessed;  they would not expect to be put to the trouble of seeking out a suitable photographer.

Some of the material before us discriminates between the arranging of photo services, and the provision of photo services by the respondent itself.  Holding that the latter is included within the permitted business would be a more far-reaching step than holding that the respondent may properly arrange for photographers who are themselves in that business to do the work.  But if this further step were not taken then there would, particularly as the respondent is incorporated, be an artificial distinction in force, between the obtaining of photo services from an employee of the respondent and the obtaining of those services from an independent contractor.  It does not seem likely that the parties to the licence agreement would have had such a distinction in mind;  for example, it would be odd if, in arranging weddings and receptions, the respondent could not, if that were convenient, have work such as decorating or cleaning the church or the place at which the reception was to be held done by its own employees.

I am of the view that, subject to a point to be discussed now, the declarations made by the learned primary judge should be upheld.  The appellant relied upon provisions of cl. 15.1 to the effect that "any overlap of sole rights in regard to any two or more Concessionaires" should be dealt with in a particular fashion.  Clause 15.1 reads as follows:

"If the parties are unable to agree as to whether or not any particular service or item of stock falls within one of the exclusive or non-exclusive categories listed in Schedule Two hereto then the sole arbiter of the point in dispute shall be HIE or its agent for that purpose whose decision shall be binding on the Concessionaire.  If there is any overlap of sole rights in regard to any two or more Concessionaires, then upon receipt of written notice of that overlap from any of the Concessionaires concerned, HIE will use its best endeavours within the next 28 days from receipt of that notice to rectify or remedy that overlap.  If the overlap cannot be remedied or rectified within that time then the sole rights will remain with the Concessionaire to whom they were first given, and the Licence held by the other Concessionaire will be varied accordingly. 
HIE will negotiate compensation with the other Concessionaires involved, and failing agreement the amount thereof will be determined by an accountant nominated by HIE, but will be restricted to a sum representing the present value of the estimated loss of direct operating profits during the remaining period of the licence, and no compensation will be allowed or awarded for any loss on acquisition of capital items or consequential losses."

The evidence was that Fast Photos, the business referred to above, had been granted a licence including an exclusive right to provide certain photographic services on the island;  that grant would, if the view I have taken as to the scope of the respondent’s right be correct, overlap that right.  We have been provided with copies of the written submissions made to the learned primary judge from which it appears that the respondent contended there that clause 15.1 is inapplicable because the respondent’s rights relating to photo services are not exclusive.  In argument addressed to the primary judge, the appellant’s counsel implied - although that is not as clear as it might be - that the facts bringing cl. 15.1 into operation had been proved.  In this Court, the appellant’s counsel said that there might well be factual questions involved, as yet undetermined.  The respondent contended here, as I understood Mr Doyle, that the facts necessary to bring cl. 15.1 into operation had not been proved;  he intended to refer to whether there had been a use of best endeavours to rectify or remedy the overlap.   

There was discussion before us of the possibility that the respondent lost any rights it might otherwise have had under cl. 15.1, by not sufficiently raising the matter below:  Port of Melbourne Authority v. Anshun Pty Ltd (1981) 147 C.L.R. 589 was mentioned. It appears to me that the Anshun principle cannot ordinarily operate in respect of a point which may depend upon resolution of a factual issue where, as in the present case, the application is one brought to decide a question of construction, under O. 64 r. 1A of the Supreme Court Rules.  It is true that lawyers will sometimes, where that is a convenient course, acquiesce in the judge exercising jurisdiction under that rule deciding a matter in a way which involves a factual conclusion.  But in the present case, it does not appear that either side pressed the judge to go into any factual question;  nor did counsel invite this Court to decide such a question.  Since, in my view, there is such an overlap as cl. 15.1 contemplates, that clause has potential operation and the appellant’s right to take advantage of it, subject to establishing the necessary factual foundation, should be preserved.  I would dismiss the appeal except to the extent of adding, after the words "it be declared that" in the primary judge’s order, the words "subject to the effect, if any, of cl. 15.1 of the said agreement".  It is regrettable that the dispute cannot be finally resolved, by our order, and one can only hope that no further litigation will be necessary.  If the cl. 15.1 point is eventually fought out, all questions relating to it would in my view be open, except those expressly dealt with in these reasons.

As to costs, the appellant has had only the limited success just mentioned, but it should be noted that the addendum to the declarations depends in part upon the view that, contrary to the opinion of the primary judge, there is an overlap of sole rights within the meaning of cl. 15.1.  I would recognise that circumstance by limiting the respondent to four-fifths of its costs of this appeal.

REASONS FOR JUDGMENT - McPHERSON J.A.

The Licence Agreement is, in the particular respect that brings this question for determination before the Court, susceptible of more than one interpretation.  Having, however, read the reasons of Pincus J.A., I am persuaded that the interpretation his Honour places upon it is, for those reasons, the one to be preferred.  It is unfortunate that it does not necessarily mean the end of this litigation; but there is no escape from that consequence once that interpretation is adopted.

I agree that the appeal should be allowed to the extent only of varying the order in the manner specified by Pincus J.A.  I also agree, and for the reason his Honour gives, with the proposed order as to the costs of the appeal.

REASONS FOR JUDGMENT - DERRINGTON J

The facts, including the relevant terms of the licence, and the issues are set out in the judgment of Pincus JA.

Though it probably makes no difference, the list in Schedule Three of the licence under the heading “The Permitted Business” is a list describing the parts of the entire business rather than a list of mere activities.  Because of that heading, the list purports to describe the business.  Further, if it did not describe the business, the intention of the licence that the business would be described in Schedule Three would be disappointed. The description is apt for describing the parts of a business of that kind, and there is no good reason why it should not be treated as a description of a business by reference to its parts for greater precision.

For the reasons given by Pincus JA and as a matter of common experience, the arranging of wedding photographs is ancillary to the business of arranging the ceremony and reception.   It is connoted by the reference to arranging, which is different from conducting.  This does not appear to be disputed by the appellant and that is probably the reason for its attempt to establish that the list contained in Schedule Three is a list of specific activities that excludes this activity by omission.

For present purposes, it might be accepted that the description in Schedule Two of the licence to “Wedding Services and Wedding Blessings” encompasses item d in the list of the permitted business in Schedule Three, that is, “Conducting and arranging Church services”, which would include arranging photographic services in relation to them.  It is not necessary to decide whether the description of other parts of the business in Schedule Three also comes within it.

When the relevant licence was granted to the respondent’s predecessor, Fast Photos already had an exclusive licence to conduct the business of providing photo services on the Island and there is a real chance that the respondent knew this.  In those circumstances the description of the business as “arranging” church services, including ancillary services, should be construed in its primary sense of organising the provision of the service rather than that the licensee itself should conduct the service.  This then fitted comfortably in with the scheme whereby Fast Photos had the exclusive right to provide the service.

The distinction between arranging the service and actually conducting it is observed by the rest of that description.  As it was intended that the licensee should also have the licence to conduct the church services directly, that was provided for by the inclusion of the reference to “conducting . . Church services.”  Conducting church services does not encompass taking photographs of it in the same way as arranging them involves arranging for them to be photographed, for there is a difference in the concepts involved.

There may be a similar scheme in relation to that part of the business described in item e in Schedule Three as “Arranging Wedding receptions when required”.  Note that this does not include “conducting” them.  The respondent is licensed to arrange them by organising the venue, the catering, the music and, among other things, the photography of the event with others who are also probably licensees for the provision of those services.  It is unlikely that it maintains facilities to provide wedding banquets only and, conformably with the same expression, “arranging”, in item e of the description of the business, probably arranges the receptions for the catering and provision of premises by other licensees who have the facilities to provide that service.  It would not be surprising if the respondent similarly arranged for the music at the reception to be provided by other licensees, but the provision of the music at the wedding services could well be regarded as an integral part of the service that the licensee was licensed to “conduct”.

In the result, unfortunately I do not share the view of the majority that the respondent is authorised to engage in the business of providing photographic services itself.  In my view, it is entitled only to engage others to do it as part of its business of making arrangements for it.  In practice, that is what happened.  Fast Photos were engaged by the respondent for that work until the recent dispute that has led to this litigation.  It is even questionable whether the respondent has the technical resources available to conduct such a business.

One practical difficulty with the construction of the respondent’s licence in this way is that no service provider other than Fast Photos is authorised to provide photographic services on the island.  The authorisation under the respondent’s licence to make arrangements does not require it to engage Fast Photos, even though the practical effect of its exclusive licence may make it the only source of that service.  Accordingly, although there is no limitation upon the respondent’s rights to arrange the  photographic services from some other source, in a practical sense they may not be available. 

Fast Photos may be entitled to require the licensor to exclude any activity by others arranged by the respondent in conflict with its exclusive licence.  There is possible argument in reply that it may refuse to do so if Fast Photos does not supply its services at a reasonable quality and price in conformity with its covenant in clause 11.5 of its licence agreement to operate a first-class business.  This conclusion would avoid any need for further litigation other than the resolution of any of these factual issues, which may be in contention.

The result of the above reasoning is that the appeal should be dismissed in respect of paragraph (a) of the declaration but should be upheld in respect of paragraph (b) thereof.  That should be amended to read–

“(b)The applicant is entitled, in carrying on the business described in Schedule Three of the said licence agreement, to arrange the provision of the said photographic services and video services by engaging others to do so.”

Because the difference is negligible, the appellant should pay the respondent’s costs of this appeal but  limited to four fifths thereof.