Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Ltd

[2003] HCATrans 530

[2003] HCATrans 530

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M14 of 2003

B e t w e e n -

HOWTRAC RENTALS PTY LTD

Applicant

and

THIESS CONTRACTORS (NZ) LIMITED

Respondent

Application for special leave to appeal

McHUGH J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 12 DECEMBER 2003, AT 1.36 PM

Copyright in the High Court of Australia

MR G. GRIFFITH, QC:   If your Honours please, I appear for the applicant with my learned friend, MR C.J. HORAN.  (instructed by Giannakopoulos Solicitors) 

MR J.H. KARKAR, QC:   If the Court pleases, I appear with my learned friend, MS C.M. HARRIS, for the respondent.  (instructed by Deacons) 

McHUGH J:   I have informed the parties that I hold shares in Leighton Holdings, which is the principal of Thiess Contractors (New Zealand), and I understand the parties have no objection to my sitting. 

MR GRIFFITH:   No objection, your Honour. 

McHUGH J:   Yes, Mr Griffith. 

MR GRIFFITH:   Your Honours, we are required to satisfy the Court, firstly, that we have identified an issue ripe for the attention of this Court, and, secondly, that this is an appropriate vehicle for that issue to be determined by the Court.  We would hope on the first aspect that our written submissions, in identifying the issue which we say is ripe for the attention of this Court, are sufficient at least ‑ ‑ ‑

McHUGH J:   This is the point as to whether evidence of post‑contractual conduct of a party is admissible for the purpose of construing a contract? 

MR GRIFFITH:   Yes, your Honour. 

McHUGH J:   Is not the difficulty about it, though, Mr Griffith, that it was not argued before the trial judge and it does not appear to have been argued in the Court of Appeal either? 

MR GRIFFITH:   Well, your Honour, that is the issue of whether or not this is an appropriate matter. 

McHUGH J:   Yes. 

MR GRIFFITH:   So, your Honour, could I pass directly to that, because I expected your Honours may well take me fairly quickly to that.  One can say several things about that.  Firstly, at the level of the primary judge and also the Court of Appeal of this State, it is plainly the case that it is not open to contend to the contrary, absent some authoritative direction from this Court. 

HAYNE J:   I understand that, but we then would be called on to determine the issue without knowing what precisely was the evidence sought to be tendered. 

MR GRIFFITH:   Your Honour, that is not entirely so because, although his Honour Justice Gillard did refer to the fact that he was obliged not to have regard to conduct after the making of a contract for the purpose of construing a contract, evidence was received which covered evidence dealing with those issues. 

I would like to take your Honours briefly to pages 112 and following of the application book to demonstrate the way it is put that there is a sufficiency of evidence to see that this issue is clearly raised as a matter which enables the Court to see that it is a matter to be resolved, having regard to the circumstances between the parties but which in final resolution may lead to the appropriate order were the appeal allowed on its merits instead of substituting the order of Justice Gillard, an order for the matter to be remitted for further determination in accordance with the directions of the Court. 

HAYNE J:   No, it would be remitted for retrial, would it not?  It would be a whole fresh trial. 

MR GRIFFITH:   Your Honours, that would be a matter for argument and for the Court. 

HAYNE J:   What other conclusion could there be? 

MR GRIFFITH:   Your Honour, it could go back to the trial judge and it could be the case that the evidence already given could be taken as evidence already for the purpose of resolving the matter. 

HAYNE J:   What prompts my comment is what appears at page 48, where there is the joint assumption of the parties that the evidence is not to be admitted.  Both parties order their affairs, assumedly, on that basis. 

MR GRIFFITH:   In the context, your Honour, that there was binding authority which permitted a contrary course. 

HAYNE J:   I understand that. 

MR GRIFFITH:   Your Honours, could I take you to pages 112 to 117, and seek to attach myself to the discussion there made in the learned primary judge’s judgment which indicates that there is a clear matter of subsequent conduct which, in our submission, has obvious forensic effect with respect to the issue of the proper construction of the terms.  It is to be remembered that his Honour the primary judge disposes the matter on the issue of construction of the term itself.  At page 112, paragraph 290 in the judgment, Justice Gillard refers to Mr Collinson relying on post‑contract conduct, and again referring to the matter your Honour Justice Hayne referred to, indicating that “the authorities are clear”.  Then his Honour goes on: 

But again in any event if the court was permitted to look at it, the evidence is equivocal and does not support the Thiess contention to the exclusion of the Howtrac contention.  Mr Collinson submitted that almost all of the subsequent conduct evidence supported the construction of Thiess.  I disagree. 

His Honour there discusses, down to paragraph 296 on page 113, why he regarded the evidence relied upon by Mr Collinson for Thiess as not being unequivocal in favour of the proposition made by counsel for Thiess. 

McHUGH J:   Both parties seem to have changed their position entirely.  At the trial, it seemed to be Mr Collinson who was wanting to get this evidence in, and it was Mr Golvan who said that: 

we are not contending that this material is relevant to the construction of the agreement.  It is well established that subsequent conduct can’t be used ‑ ‑ ‑

MR GRIFFITH:   Indeed, your Honour.  I wish to make the point that the paragraph Justice Hayne took me to is not all that is said on this issue of post‑contract conduct.  Indeed, although this is not before the Court, I am sure my learned friend would not demur at my reading it – we have copies for the Court.  On the written submissions of Thiess as appellant before the Court of Appeal, in paragraph 55 it is put:  “Evidence of the conduct of the parties after formation of the contract is inadmissible in construing the contract.”  Then, after citations:  “Although Thiess contends that the subsequent conduct of the parties strongly supports a Thiess construction, no submissions are made in relation to that evidence.”

To that, your Honours, there are two paragraphs in the respondent’s submissions referring to post‑contract conduct and documents to deal with that point which was raised in that way by the appellant itself.  I refer to that, your Honours, as confirming your Honour the presiding Justice’s observation that it is strange that one has this inversion and continuing discussion about it. 

Your Honours, could I take you to the parts on which we particularly rely.  His Honour, having said the evidence relied on by Mr Collinson is equivocal so far as his contention is concerned, goes on: 

As against this evidence, is compelling evidence supporting the Howtrac contention. 

His Honour there discusses, in the rest of that paragraph and paragraph 298, the fact that detailed and daily records were kept by both parties, not just merely by Howtrac as to standby hours.  At paragraph 299 he says: 

The evidence overwhelmingly points to the conclusion that Howtrac recorded standby from the very beginning of the job and recorded it throughout.  One of its main purposes was to provide information to enable standby to be calculated ‑ ‑ ‑

McHUGH J:   But, Mr Griffith, is not the problem this, that the course of the trial and the tender of evidence may have been quite different?  I mean, Mr Collinson expressly said that his cross‑examination was going to be severely reduced if the judge was going to rule that evidence of subsequent conduct was not relevant.  So, on that basis, it would appear that if we took the case on, we would not have all the evidence that may have been led at the trial. 

MR GRIFFITH:   Your Honours, the issue is how will we ever right the principle if, at the level of trial and at appeal, the Court of Appeal level, you are met with just a blanket one‑sentence assertion that, of course, the evidence is inadmissible? 

McHUGH J:   Well, you just have to take the objection, formulate what the evidence is that you are going to tender and get the judge to rule on it and then bring it up.  It is unfortunate this happened in the area of res ipsa loquitur 30 or 40 years ago. 

MR GRIFFITH:   Your Honour, that is the counsel of perfection, with respect. 

McHUGH J:   No, this Court said it, I think, in Piening v Wanless, a res ipsa case.  They said, well, you did not take these points.  It is no good saying there are other authorities on the point.  If you want to challenge them, you have to challenge them at the trial. 

MR GRIFFITH:   Your Honour, could I indicate that whilst accepting the complete force of your Honour’s statement, I wish by the rest of this reference to persuade your Honours there is sufficient here to enable the Court to act with confidence that, were special leave granted and the principle was that post‑contract conduct is a matter which, in appropriate cases, may have regard with respect to the construction of uncertain provision, this is sufficient to satisfy the Court that there is such evidence there as to justify the matter, if you like, going for retrial.  That is what I seek to do by referring to this part of the transcript.  If your Honour is not satisfied with his Honour the primary judge’s expression, then the difficulty you express remains.  We must accept that.

So, to paragraph 299, Justice Gillard finds that there is evidence overwhelmingly pointing to a view that both parties engaged in the conduct of daily recording of standby times, which is conduct entirely consistent with Howtrac’s construction and inconsistent with the Thiess construction which was upheld by the Court of Appeal. 

The second point, your Honours - and it is necessary to understand the form of this.  Paragraph 300 says: 

In addition, Thiess made a claim on the proprietor, ECNZ –

which is the Electricity Commission of New Zealand –

on 10 March 1998 for time related delay costs associated with the variation works –

and that included: 

a claim for standby costs incurred in relation to Howtrac in the sum of $187,674.50.  A profit margin of 12% was added.  The claim for standby costs was based on two invoices submitted by Howtrac to Thiess –

Then, your Honours, the letter is set out at the top of page 115.  It is stated that, in confirmation of “verbal advice”: 

Howtrac, for standby hours have been paid at $60AUD. 

It is indicated the claim was submitted at $95AUD, and: 

Our claim was submitted at $95 per hour as this is what our sub‑contractor realistically expects to be paid for standby hours . . . we have an expectation that we will pay him something less than $95 per hour –

His Honour says in his finding: 

The underlined parts are arguably fraudulent.  At no stage did Howtrac seek to claim $95 per hour for standby. 

In the following few paragraphs, he explains why, at the time the letter was written, it was clear that the claim was for $60.  I need not take your Honours to that, but at paragraph 307: 

It is with that background that Mr Prater’s letter of 16 April to ECNZ has to be considered.  It is difficult to comprehend how Mr Prater could write to ECNZ which did not have access to the contract documents entered into by Thiess and Howtrac and assert that Howtrac believed it was entitled to $95 per hour for standby and that as at 16 April 1998 Howtrac realistically expected to be paid $95 per hour for standby –

This is where the particular finding of his Honour the trial judge, we say, makes it clear that there is an obviously relevant issue of post‑contract conduct which, we say, on its face would establish relevance within what we say is the rearticulated test of capacity to have regard to that evidence: 

If Thiess at the time when Mr Prater wrote the letter to ECNZ was of the opinion that it would never be liable for standby hours –

which is its contention as upheld by the Court of Appeal –

but only for working hours then to make the claims that it did on ECNZ was arguably false and deceitful.  On the other hand if it did contemplate that it would be paying standby hours –

our contention is, at that time it did, your Honours –

then the claims made by Thiess on ECNZ support the contention of Howtrac that standby hours were to be paid for at the end of the contract. 

Then it goes on in paragraph 312: 

If post‑contract conduct was admissible, this is telling evidence in favour of the Howtrac contention because Thiess was asserting to ECNZ that it was obliged to pay standby costs to Howtrac.  If Thiess honestly believed it was not liable for standby costs it should not have been representing to ECNZ that it was liable for same ‑ ‑ ‑

HAYNE J:   Was the issue of the honesty of this claim explored at the trial? 

MR GRIFFITH:   Your Honour, only to the extent that it is dealt with by his Honour the trial judge. 

HAYNE J:   Just so.  So that at trial, if post‑contract conduct had been admitted or argued for admission, there might have been a wonderful inquiry about the honesty of this claim and where the $95 came from ‑ ‑ ‑

MR GRIFFITH:   It would have gone for three weeks, your Honour, in a situation where the judge says, “I’m not going to have regard to any of the evidence.  I am bound by authority”.  What we say is that this suffices to indicate on its face that one should make the assumption of honesty and not deceitful behaviour on the part of the contractor claiming against the principal, to say this is affirmative evidence that, as against the principal, the contractor not only was claiming at the rate of $60, as was claimed by Thiess in its contract with the contractor, but also that it was paid this sum by ECNZ. 

So the evidence and the findings of the trial judge establish that there was a payment by ECNZ by reference to this claim as moneys payable by reference to standby hours to Howtrac.  And yet, your Honours, it is put as against the claim by Howtrac to Thiess that no money is payable on the proper construction of the contract. 

I appreciate the force of the points made to me by the presiding Judge and separately and eloquently by Justice Hayne, but our submission is, having regard to the realities of the conduct of a trial, at the least, this suffices to identify the issue as a real and live issue between the parties, admittedly in the context where there has not been a perfect exhaustion of the legal procedures which one would need to establish at the level of a final finding once one establishes the evidence is admissible. 

Your Honours, it would have been unreal to contemplate obtaining a ruling from the judge and then taking that up through the Court of Appeal, which, of course, one could only really make a formal submission, to the level of this Court to seek a direction at that point, because one could not apply for special leave in this Court when we are told, “It depends on the facts.  Come back when you’ve got the facts”. 

The alternative was between running what may well be a narrow but certainly expensive and prolonged process to exhaustively try the issue out in the context of the authority which was plainly against the admission of the evidence until and if one was successful at special leave and obtained the view of the entire five Justices of this Court, or to operate in a practical way, to do one’s best, in the context that before the trial judge, having regard to all issues which were at issue, the claim was entirely successful.  Howtrac won on the construction issue – as, indeed, we would contend it was entitled to win before the Court of Appeal – and it was only the respondent at the level of the Court of Appeal on these issues.

HAYNE J:   Was there a ground or a contention in the Court of Appeal about this subject? 

MR GRIFFITH:   There was not from Howtrac a notice of cross‑contention.  No, there was not, your Honour. 

HAYNE J:   Then how, on the issues joined in the Court of Appeal, would the issue arise?  How could this Court, giving that judgment which the Court of Appeal should have given on the documents before it, conclude otherwise than that no point arises? 

MR GRIFFITH:   Well, your Honour, the point which we raise in paragraph 50 of the Court of Appeal – it just said, in one sentence, that the evidence is inadmissible.  We say at the level of the Court of Appeal that was established and not capable of being recommitted.  It is only once authoritative direction comes from this Court.  It is either the case that this Court grasps an opportunity to resolve the doctrinal issue that one can get to the position that Courts of Appeal, particularly in New South Wales, we would say, and Victoria, but other Courts of Appeal, and trial judges will have proper directions so that trials can be conducted in a proper manner, consistently with what we say is the proper common law rule with respect to these important issues of construction. 

We appreciate, your Honours, the practical force of the points made as to the case that the evidence is not in perfect order but we say, having regard to the important issue which is involved, it should suffice from this extract that I have taken your Honours to that there is a plain issue there identified in post‑contract conduct where the conduct, on the basis of the trial judge’s findings, is found either to be fraud or totally consistent with respect to the conduct of the applicant.  We say that should suffice.

It is put against us that conduct is not mutual.  We say, your Honours, there is no requirement of mutuality, and that is a matter, of course, to be decided if the merits are argued out and special leave is granted.  It suffices that the conduct quite plainly may be identified as reflecting the parties’ common intention.  Our contention is clear.  We say that the justice’s findings on these paragraphs at the level of the trial judge are sufficient to establish with clarity when regard is had to them that there was the same common purpose in Thiess.  That must be so, alternative to an assumption that there was fraud, and we say that assumption should not be made and we do not assert that it should be made.  We say it is consistent with our view.  We are not challenging it.  We say it is honest and correct and confirms the common intention which we have established. 

On that basis, we submit that it is appropriate.  Although we do accept the force of the points made against us with respect to the

practicalities, we say they are ones that can readily be overcome because the Court should be satisfied at the lowest that there is a point ripe for attention and we say appropriate to be disposed of by this Court to deal with the legal issue, to be satisfied that it most certainly arises on the issues between the parties, and then to remit the matter for trial.  If there is a consequence because the procedures have not been the counsel of perfection, that can be dealt with, in our submission, by appropriate costs orders.  If the Court pleases. 

McHUGH J:   Thank you.  The Court need not hear you, Mr Karkar.

This application raises two questions that are said to warrant the grant of special leave to appeal.  The first question is whether evidence of post‑contractual conduct of a party or parties to a contract is admissible for the purposes of the construction of that contract.  That question was not raised before the trial judge or the Court of Appeal.  Indeed, counsel who then appeared for the applicant expressly said that he was not submitting that evidence of post‑contractual conduct was admissible on the question of construction.

If the question had been raised at the trial, the course of the evidence almost certainly would have taken a different course.  This makes the case an unsuitable vehicle for determining the issue.  If parties feel bound by existing authority, the proper course for them is to take the point and ultimately have the matter tested on appeal.  They cannot conduct the case on one basis and then, having lost on that basis, say in an ultimate appellate court that they have been precluded by authority from raising the point at the trial:  Piening v Wanless (1968) 117 CLR 498 at 505‑506, 509‑510, 511‑512.

The second question does not raise a special leave point.  It is whether an appeal court may disregard findings made by the primary judge as to considerations of commercial reality and business common sense that are relevant to the common intention of the parties to that contract.  It is debatable whether the question accurately states what the Court of Appeal did.  The Court of Appeal does not appear to have disregarded any findings of fact made by the trial judge as to considerations of commercial reality and common sense.  It appears merely to have disagreed with the inferences that the trial judge drew from the facts.  That was its right and, indeed, its duty.

Accordingly, special leave is refused with costs.

AT 1.58 PM THE MATTER WAS CONCLUDED