In the matter of Jimmy's Recipe Pty Ltd (No 2)

[2020] NSWSC 632

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Jimmy’s Recipe Pty Ltd (No 2) [2020] NSWSC 632

Hearing dates:

12 May 2020

Decision date:

26 May 2020

Jurisdiction:

Equity

Before:

Leeming JA

Decision:

1. Dismiss the interlocutory process filed by the plaintiff on 6 April 2020.
2. Dismiss the interlocutory process filed by the fifth defendant on 13 April 2020 (as amended on 8 May 2020).
3. Direct the plaintiff and the fifth defendant to provide agreed short minutes of order, or, failing agreement, orders for which they contend, together with short submissions in support, in relation to the return of the $50,000, any other directions for future conduct of the proceedings, and costs, within 14 days of today, with a view to any other dispute being determined on the papers. If either side contends that there should be an oral hearing, that contention and short reasons in support of it should be included in the document.
4. The exhibits to be returned.

Catchwords:

CONTRACT – construction – settlement deed – whether obligation upon two parties to pay Settlement Sum joint and several – effect of definition dividing Settlement Sum into two unequal components – effect of interpretation clause providing that obligations by two parties were joint and several – effect of clauses being subject to the context otherwise providing – resolving conflict between two clauses, each of which subject to the context otherwise providing – limited utility of dictionary definitions – significance of entire agreement clause – limited relevance of precontractual communications

 

EVIDENCE – relevance of precontractual documents to construction – distinction between inadmissible evidence of subjective intent and admissible evidence of context

 

EQUITY – estoppel – unilateral mistake – whether representation made during negotiations as to effect of draft deed – whether any representation made in terms which could found relief – significance of contemporaneous documentary records – significance of testimonial evidence – limited advantage of trial judge

  EQUITY – rectification – need to establish common intention – requirement of very clear proof – where parties did not turn minds to the point – multipartite deed – whether all parties must share common intention – attribution of intention to separately represented corporate party

Legislation Cited:

Supreme Court Act 1970 (NSW), s 31(3)

Cases Cited:

2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409
AIB Group (UK) Plc v Martin [2001] UKHL 63; [2002] 1 All ER 353
Arnold v Britton [2015] AC 1619; [2015] UKSC 36
Australian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119; [1958] HCA 51
Babb v Wilkie (US Supreme Court, 6 April 2020)
Barak Pty Ltd v WTH Pty Ltd [2003] NSWSC 15; 11 BPR 20,687
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2015] NSWCA 319
Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253
Boreland v Docker [2007] NSWCA 94
Camden v McKenzie [2008] 1 Qd R 39; [2007] QCA 136
Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295
Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
Food Marketing Institute v Argus Leader Media 139 S Ct 2356 (2019)
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187
GPI Leisure Corp Pty Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461
Harris v Smith [2008] NSWSC 545; 14 BPR 26,223
In the matter of Jimmy's Recipe Pty Ltd [2018] NSWSC 1331
In the matter of Jimmy's Recipe Pty Ltd [2020] NSWSC 516
In the matter of Jimmy's Recipe Pty Ltd [2020] NSWSC 93
Lahoud v Lahoud [2009] NSWSC 623
Macdonald v Shinko Australia Pty Ltd [1998] Qd R 152; [1998] QCA 53
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23
McDermott v Black (1940) 63 CLR 161; [1940] HCA 4
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Octane Fitness v ICON Health and Fitness 572 US 545 (2014)
Pell v The Queen [2020] HCA 12; 94 ALJR 394
Perpetual Custodians Ltd v IOOF Management Ltd [2013] NSWCA 231; 304 ALR 436
Peter Pan Drive-In Ltd v Flambro Realty Ltd (1978) 22 OR (2d) 291; 93 DLR (3d) 221
Peter Pan Drive-In Ltd v Flambro Realty Ltd (1980) 26 OR (2d) 746; 106 DLR (3d) 576
Righi v Kissane Family Pty Ltd [2015] NSWCA 238
Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13; 93 ALJR 583
Romag Fasteners Inc v Fossil Group Inc (US Supreme Court, 23 April 2020)
Scaffidi v Perpetual Trustees Victoria Ltd (2011) 42 WAR 59; [2011] WASCA 159
Segelov v Ernst & Young Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11
Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47
Smalley v Motor Accident Authority (NSW) (2013) 85 NSWLR 580; [2013] NSWCA 318
South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69
TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68
Victoria v Tatts Group Ltd [2016] HCA 5; 90 ALJR 392
Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:

E Aprill, “The Law of the Word: Dictionary Shopping in the Supreme Court”, 30 Ariz St L J 277 (1998)
J Brudney and L Baum “Oasis or Mirage: The Supreme Court’s Thirst for Dictionaries in the Rehnquist and Roberts Eras” 55 Will & Mary L Rev 483 (2013)
S Christensen and W Duncan, The Construction and Performance of Commercial Contracts (Federation Press, 2nd ed 2018)
P Herzfeld and T Prince, Interpretation (Lawbook Co, 2nd ed 2020)
J D Heydon, Heydon on Contract (Lawbook Co, 2019)
D Hodge, Rectification (Sweet & Maxwell, 2nd ed 2016)
M Lemley, “Chief Justice Webster” (2020, ssrn.com/abstract=3537211),
S Robertson, “Making Sense of Commercial Common Sense” (2018) 49(2) VUW L Rev 259
J Tarrant, Rectification of Documents (Federation Press, 2020)
J Thomson et al, Commercial Contract Clauses: Principles and Interpretation (3rd ed, Thomson Reuters, 2019)
Glanville Williams, Joint Obligations (London, Butterworths, 1949)

Category:

Principal judgment

Parties:

Gek Sim Tsia (Plaintiff, Applicant on interlocutory process filed 6 April 2020)
Jimmy’s Recipe Pty Ltd (Administrators Appointed) (First Defendant)
Jimmy’s Recipe Gateway Pty Ltd (Second Defendant)
Alwin Nan Chu Chong (Third Defendant)
Norannie Chong (Fourth Defendant)
Chee Wee Seow (Fifth Defendant, Applicant on interlocutory process filed 13 April 2020)

Representation:

Counsel:
D Barnett, W Chan (Gek Sim Tsia)
P H Greenwood SC, P Dodson (Chee Wee Seow)

  Solicitors:
Brown Wright Stein Lawyers (Gek Sim Tsia)
Cohen & Krass (Chee Wee Seow)

File Number(s):

2017/200809

Publication restriction:

Nil

Judgment

1. LEEMING JA: The active parties to this phase of the proceedings, commenced by interlocutory processes filed last month, are the plaintiff Ms Gek Sim Tsia and the fifth defendant Mr Chee Wee Seow. Those two interlocutory processes were listed for hearing before me, exercising the powers of a Judge of this Court pursuant to s 31(3) of the Supreme Court Act 1970 (NSW), with a high level of expedition having regard to the subject matter. The underlying 2017 proceedings, pending in the Equity Division, concern the operation of two Malay-Chinese food outlets in the Sydney CBD, operated by the first and second defendants separately, but sharing the name “Jimmy’s Recipe”. The plaintiff is a minority shareholder in Jimmy’s Recipe Pty Ltd who has been given leave to bring proceedings on its behalf against Jimmy’s Recipe Gateway Pty Ltd (the second defendant), Mr Alwin Chong (the third defendant), Ms Norannie Chong (the fourth defendant) and Mr Seow: In the matter of Jimmy's Recipe Pty Ltd [2018] NSWSC 1331. The gist of the claim is that the first defendant’s business, name, goodwill and intellectual property has been appropriated by the operations of the second Jimmy’s Recipe business. The third and fourth defendants have also been found guilty of contempt (arising out of a breach of an undertaking to bank the cash takings of the first Jimmy’s Recipe business), following a two day hearing in 2019 with judgment delivered on 19 February 2020: In the matter of Jimmy's Recipe Pty Ltd [2020] NSWSC 93. Mr Seow was not said to have been involved in the contempt.

2. Without any disrespect, I shall follow the approach taken in the parties’ deed, and refer to the plaintiff, third, fourth and fifth defendants as “Sim”, “Alwin”, “Norannie” and “Seow” respectively. Sim is unwell, and the litigation has been conducted by her attorney, Mr Jia Hao Tsia, and so I shall also refer to “the plaintiff”.

3. The two interlocutory processes concern a settlement deed dated 24 February 2020, pursuant to which the parties agreed to the proceedings being dismissed with general releases upon Sim receiving $565,000. Reference was made in the deed to the “Settlement Sum” comprising amounts of $515,000 and $50,000, the former to be paid by Alwin, the latter to be paid by Seow. Seow paid $50,000 in accordance with the deed. Alwin has paid nothing, and has recently been declared bankrupt.

4. The plaintiff contends that Seow is liable to pay the whole of the $565,000, and if that occurs, then the release in the deed will become operative and the 2017 proceedings will be dismissed in accordance with consent orders annexed to the deed. Seow contends that his liability is limited to $50,000. Against the possibility that his construction of the deed is wrong, he contends that the plaintiff is estopped from asserting that he is liable to pay the entire $565,000. He also submits that the deed should be rectified in equity. Finally, he submits that the plaintiff’s insistence that he pay $565,000 is unconscionable in circumstances where the plaintiff knew that he believed his liability was limited to $50,000.

5. One could perhaps debate the precise legal category into which the deed falls and in particular whether it amounted to accord and satisfaction, or alternatively accord and conditional satisfaction (the authorities are reviewed in Scaffidi v Perpetual Trustees Victoria Ltd (2011) 42 WAR 59; [2011] WASCA 159 at [26]-[33]). But what matters is the meaning of the parties’ agreement rather than the legal category (which may itself be debatable) into which it falls: Blue Moon Grill Pty Ltd v Yorkey's Knob Boating Club Inc [2006] QCA 253 at [20]. It was confirmed during the hearing (T59.38-60.39) that it was common ground that the release in the deed is executory and conditional, and is only operative upon receipt of the full $565,000 in a nominated account. That is to say, it was common ground that, to paraphrase the language of Dixon J in McDermott v Black (1940) 63 CLR 161 at 183; [1940] HCA 4, performance of the payment of $565,000, not the mere promise to pay that amount, was what was taken by Sim in place of her causes of action in the proceedings. The 2017 proceedings remain on foot, and in the event that the $565,000 is not paid, they will continue unless otherwise resolved. Thus, if Seow is right, and he is only obliged to make payment of $50,000, then unless some further compromise is reached, he will be entitled to the return of the money and the proceedings will continue.

The deed

6. The deed’s recitals refer to the underlying proceedings, and to a costs order made in this Court, which proceeded to assessment and was registered as a judgment debt in the District Court in the amount of some $160,000. One recital also refers, incorrectly, to an outstanding judgment on the motion for contempt which the plaintiff had filed against the third and fourth defendants. That was correct when it was drafted, in January 2020, but became incorrect when judgment was delivered shortly before the deed was executed.

7. Clause 1.1 contains definitions and provides that “unless the context indicates otherwise”,

“Settlement Sum means $565,000 (inclusive of any GST) comprising, and to be payable, in the amounts of $515,000 by Alwin and $50,000 by Seow.”

8. I will explain below how what was originally a definition confined to a monetary amount expanded to include words directed to the composition of that amount and by whom it was to be paid.

9. Clause 1.2 is headed “Interpretation” and has all the appearance of boilerplate to which at best only limited attention was given. It concerns successors, amendments, plurals, gender, other grammatical forms of words, time, headings, etc but relevantly provides:

“In this deed unless the context otherwise indicates:

...

(m) any agreement, representation, warranty or indemnity by two or more parties (including where two or more persons are included in the same defined term) binds them jointly and severally;

...”.

10. The operative provision governing payment is cl 2(a):

“Alwin and Seow agree to pay, and Sim agrees to accept, the Settlement Sum in full and final settlement of any and all Claims, including the Proceedings and any and all further liability or potential claims arising directly or indirectly in or from the Proceedings, the Judgment and Contempt Motion that Sim may have against [the other parties] in relation to the affairs of Jimmy’s Recipe or Gateway”.

11. Clauses 2(b) and (c) provide:

“Alwin and Seow must pay the Settlement Sum in full by electronic funds transfer to the Nominated Bank Account within 28 days of the date of this Deed.

Alwin and Seow must provide to Sim, or to Sim’s solicitors, proof of payment on the date the Settlement Sum is paid.”

12. Clause 3 requires Sim to provide a signed transfer of her 25% shareholding in Jimmy’s Recipe in favour of Alwin following receipt of the Settlement Sum. The clause provides that the consideration of $9,700.00 for those shares “forms part of, and is provided for, in the Settlement Sum”.

13. Clause 4 is a generally worded release, given in consideration of the terms of the deed and the payment of the Settlement Sum and “only upon the completion of the actions set out in clauses 2 and 3”. Everyone accepts that the release is not yet effective. Clause 6 makes provision for the parties to sign consent orders, to be held in escrow by Sim’s solicitors until the Settlement Sum was paid. Those orders, if made, would dismiss the proceedings with no order as to costs, and vacate all costs orders previously made. Those orders have not been made, and the 2017 proceedings remain on foot.

14. Clause 19 is an entire agreement clause:

“This deed comprises the entire agreement between the parties in respect of the subject matter of this deed and supersedes any prior agreement, arrangement or understanding, whether oral or in writing, between the parties from the date of this deed.”

15. Clause 23 is a no representation or reliance clause:

“Each party confirms that it does not enter into this deed in reliance on any representation or other inducement by or on behalf of any other party, except for the representations and inducements expressly set out in this deed.”

Overview of submissions on construction

16. It is convenient to give a short overview of the parties’ submissions immediately, although some details are better deferred to the analysis which follows.

17. The plaintiff’s submissions focussed upon the primary obligations in cl 2(a), (b) and (c). Each is expressed as something to be done by “Alwin and Seow”. In particular, the payment of the Settlement Sum is something which those two men “agree” to pay in cl 2(a), and that is sufficient, so it is said, to engage cl 1.2(m) so as to bind Alwin and Seow jointly and severally. According to the plaintiff, the concluding words in the definition of “Settlement Sum” identified merely the way in which the defendants allocated responsibility for the $565,000 as between themselves and did not affect Sim’s entitlement to be paid the full amount by either of them. The plaintiff said this made commercial sense, because Seow had an interest in discharging the liability of the other defendants. In particular, he was a director and (indirectly) a shareholder in Gateway, which itself was one of three defendants liable to pay the quantified costs amount of some $160,000.

18. Seow’s submissions focussed upon the definition of “Settlement Sum”. He submitted that the words “to be payable, in the amounts of $515,000 by Alwin and $50,000 by Seow” must be given work to do. When the definition of “Settlement Sum” is substituted elsewhere in the deed where that defined term is used, including cl 2(a), the result is, in his submission, to make it clear that Mr Seow is only liable to pay $50,000. This was said to be supported by various contextual considerations, including the fact that Mr Seow was only joined as a person knowingly involved in some of the alleged breaches by Alwin, and that substantial heads of liability, including liability already found to exist, could on no view be sheeted home to Seow.

19. Further, Seow relied upon the way in which the deed came to be executed. The concluding words in the definition of “Settlement Sum” were added during negotiations into an earlier draft which had merely provided that “Settlement Sum means $565,000 (inclusive of any GST)”. Still further, Seow says that in the two months preceding the execution of the deed, he had consistently maintained that he would not pay anything more than $50,000.

20. The plaintiff resists resort being had to the earlier drafts of the deed for the purpose of construction, and relies upon the entire agreement clause, and what was said of a similar clause in Righi v Kissane Family Pty Ltd [2015] NSWCA 238 at [46]. Alternatively, if one were to have regard to the earlier drafts, then the plaintiff maintained that it was also necessary to have regard to the rejection of additional words, proposed by Seow’s solicitor, which would have made the position clear beyond argument. The proposed insertion and rejection of the additional words is central to the factual issue which arises on Seow’s interlocutory process, and it is convenient to defer the details for the moment.

Reasoning and conclusions on construction

21. On the view I take, the proper construction of the settlement deed can be ascertained by having regard only to the materials to which it was common ground regard could be had. I explain why immediately below. There is of course also a vast swathe of evidence which is directly or peripherally relevant to the claims in estoppel, rectification and unilateral mistake, but which the plaintiff submits may not be used for construction. That material is either neutral or confirmatory of the construction I would reach on taking the narrower approach to the evidence favoured by the plaintiff.

22. There was no dispute, nor could there be, that the principles governing the construction of a written commercial contract such as the deed require the meaning to be determined objectively. The intention imputed to the parties derives from the contractual text in light of its context and purpose: see Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35], Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52]; Victoria v Tatts Group Ltd [2016] HCA 5; 90 ALJR 392 at [51]-[75] and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]. But expressed at that level of generality, the principles do not much assist the resolution of the parties’ dispute.

The presumption of joint and several promises

23. The plaintiff says that there is a promise in cl 2(a) by two parties (Alwin and Seow) to “agree” to pay the Settlement Sum. Clause 2(b) likewise contains a promise by the same two parties. In each case, that is sufficient, according to the plaintiff, to engage cl 1.2(m) such that their promise is joint and several.

24. I accept the prima facie position that that is the effect of cl 1.2(m). Clause 1.2(m) reflects the fact that New South Wales (unlike most other Australian jurisdictions) has not altered the position at common law that an obligation expressed to bind two parties is presumed to bind them jointly and not severally (the position is discussed in J Thomson et al, Commercial Contract Clauses: Principles and Interpretation (3rd ed, Thomson Reuters, 2019), pp 128-129). Clause cl 1.2 alters that default position.

25. The effect of a promise being joint and several is not without its complexity. The position was lucidly explained by Glanville Williams, Joint Obligations (London, Butterworths, 1949), pp 34-35 by reference to a judgment of Baron Parke:

“The nature of a joint and several obligation was expounded by a judge famous for his learning in the common law as follows. ‘A joint and several bond ... though on one piece of parchment or paper, in effect comprises the joint bond of all, and the several bonds of each of the obligors, and gives different remedies to the obligee.”

26. The complexity that such a clause can engender was mentioned by Lord Millett in AIB Group (UK) Plc v Martin [2001] UKHL 63; [2002] 1 All ER 353 at [14]-[20]; the complexity inclined his Lordship towards not reading such clauses literally. However, that was a minority view, and no party in this litigation raised the point, which I accordingly pass over.

27. Accepting, favourably to the plaintiff, that cl 1.2(m) bears its literal meaning, it is common ground that its application upon Alwin’s and Seow’s agreement in cl 2(a) is not inevitable. Clause 1.2(m) only applies “unless the context otherwise indicates”. The real question is whether the operation of cl 1.2(m) is displaced by the context, and, in particular, by the words “comprising, and to be payable, in the amounts of $515,000 by Alwin and $50,000 by Seow” in the definition of “Settlement Sum”.

Substitution of “Settlement Sum” by its definition

28. Seow submitted, and I did not understand the plaintiff to resist, that the deed was to be construed by reading the entirety of the definition into the substantive clauses where reference is made to “Settlement Sum”. That is the conventional approach: Segelov v Ernst & Young Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156 at [88].

29. (For completeness, I am conscious that just as cl 1.2 is subject to the context otherwise indicating, so too is the definition of “Settlement Sum” in cl 1.1. I did not understand the plaintiff to rely upon the opening words of cl 1.1. That course was wise. Legal content cannot be given to cl 2(a) without going to the definition of “Settlement Sum”; that is to say, the definition is an essential part of the parties’ bargain. On the other hand, cl 1.2(m) serves a completely different purpose, namely, to displace the default position at common law that obligations expressed to bind two persons are construed as joint obligations. In other words, the definition of “Settlement Sum” is the negotiated bespoke agreement of the parties, while cl 1.2(m) is boilerplate. It is no answer to the problem posed by the definition of “Settlement Sum” to observe that the definition may be displaced by a contrary indication in the context.)

30. As Segelov illustrates, sometimes the substitution of a definition can give rise to grammatical difficulty. When the definition of “Settlement Sum” is substituted into cl 2(a) (and, for clarity, underlined), the clause reads:

“Alwin and Seow agree to pay, and Sim agrees to accept, $565,000 (inclusive of any GST) comprising, and to be payable, in the amounts of $515,000 by Alwin and $50,000 by Seow in full and final settlement of any and all Claims, including the Proceedings and any and all further liability or potential claims arising directly or indirectly in or from the Proceedings, the Judgment and Contempt Motion that Sim may have against [the other parties] in relation to the affairs of Jimmy’s Recipe or Gateway”.

31. Two observations may be made of the effect of substituting the definition for the defined term.

1. The literal effect of including the words “and to be payable” in the two amounts by Alwin and Seow is to qualify the promise in the clause that “Alwin and Seow agree to pay”. That is because the object of “agrees to pay” is the $565,000, which is also the subject of “to be payable”. The coincidence of active and passive forms deriving from the same verb “pay” and the object of the active form being identical to the subject of the passive form tends powerfully in favour of the first being qualified by the second.

2. The syntax does not function perfectly, because of the imperfections in the definition. The word “in” does not correspond to “comprising”, while the word “by” makes sense if it identifies by whom the amounts are “payable”, but does not accommodate the participle “comprising”. But its somewhat garbled grammar does not prevent the ordinary task of attributing legal meaning to the clause.

32. The most natural reading of the definition of Settlement Sum is that there are two limbs: a limb dealing with how the $565,000 is to be comprised, and a limb dealing with by whom it is to be payable. This was understandably embraced by Seow, who said that the second limb qualified each of Alwin’s and Seow’s obligations to pay. Mr Barnett’s solution in oral submissions to the grammatical imprecision was to invite the Court to conclude that “comprising” and “to be payable” amounted to a single composite term, which to that extent was less closely connected with and therefore less apt to qualify the obligation upon Alwin and Seow to “pay” the $565,000. While I acknowledge the warts-and-all way that the plaintiff attended to the textual weaknesses attending his construction as well as its strengths – ordinarily it is more effective advocacy to grapple with the weaknesses of one’s case, rather than hoping that they may pass undetected – I am unpersuaded by the proffered solution. The syntactical imprecision in the prepositions does not seem to me to be a sufficient reason to devalue the force of the linkage between “pay” and “to be payable”. The fact that other words are less than perfectly grammatical does not much detract from the significance attributable to “pay” and “to be payable” being directed to the same dollar sum. That was Lord Neuberger’s point in Arnold v Britton [2015] AC 1619; [2015] UKSC 36 at [18]: “[i]f there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve”.

Submissions based on the Cambridge Dictionary online

33. The written submissions prepared on behalf of the plaintiff (signed by counsel previously briefed) sought to deal with the words “comprising, and to be payable” in a different way. It was said that according to the Cambridge Dictionary online, “comprising” means “to consist of” while “payable” means “that should be paid”. Based on those meanings, it was said that when the definition was substituted into cl 2(a), the clause read:

“[the third and fifth defendants] agree to pay ... $565,000 ... [to consist of], and [that should be paid], in the amounts of $515,000 by [the third defendant] and $50,000 by [the fifth defendant].”

34. It was then submitted that the latter part of those words was “silent as to the primary obligation of the defendants” and “indicates the sources of funds and no doubt governs the apportionment of liability for the Settlement Sum as between the third and fifth defendants”.

35. With this approach I wholeheartedly disagree. Mr Barnett did not disavow it, but he did not mention the submission in his oral address and for good reason. First, for reasons which need not be rehearsed here, construction of documents is not much advanced by choosing a favoured dictionary definition of a word, and substituting that definition into the text: see South Western Sydney Local Health District v Gould (2018) 97 NSWLR 513; [2018] NSWCA 69 at [77]-[81]. Frequently, the choice of the favoured definition dictates the result, and produces merely the illusion of analysis.

36. All dictionaries are not alike. The favoured meaning “that should be paid” is absent from the Oxford English Dictionary, from the New Shorter Oxford Dictionary and from the Macquarie Dictionary. No explanation was given for counsel’s choice of dictionary; I am left wondering how many dictionaries were consulted in order to identify the favoured meaning. My copy of Black’s Law Dictionary gives the following definition of “payable”:

“Capable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable. A sum of money is said to be payable when a person is under an obligation to pay it. Payable may therefore signify an obligation to pay at a future time, but, when used without qualification, term normally means that the debt is payable at once, as opposed to ‘owing’”.

That account helpfully captures the range of meanings in legal contexts, which the word is capable of bearing, and makes it clear that resort to a dictionary in the present case is, at best, the starting point of analysis, rather than the conclusion. It is I suppose elementary that dictionaries identify meaning by words, and give the widest range of available meanings, while contracts are drafted in sentences, whose meaning turns in the first instance on the immediate context of the sentence read as a whole. Determining the meaning of the whole sentence is not assisted by using different words which the parties did not use which have been taken from a dictionary.

37. Moreover, the submission disregards the immediately preceding words “to be”. Those two small words are capable of contributing to a very wide range of meanings. In their present context they are readily capable of imposing an obligation, or, more accurately, reinforcing the obligation immanent in “payable”.

38. By choosing a definition that dilutes the force of “payable” to something which should be paid, and omitting words which might strengthen the obligatory aspect of “payable”, the submission simply disregards aspects of the parties’ agreed text in two distinct ways. But cl 2(a) is made of basic words familiar to any legal practitioner and indeed to any businessperson in the position of the parties; why ever should resort to a dictionary be necessary in such a case?

39. The limited role of a dictionary in the process of construction has more recently been endorsed in J D Heydon, Heydon on Contract (Lawbook Co, 2019), p 266. However, the views I have expressed here and elsewhere about the use of dictionary definitions have been said, in the second edition of their extremely helpful work, to overstate the position: P Herzfeld and T Prince, Interpretation (Lawbook Co, 2nd ed 2020), pp 36-37, by reference to Smalley v Motor Accident Authority (NSW) (2013) 85 NSWLR 580; [2013] NSWCA 318 at [47]; 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409 at [81], TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [80] as well as Gould. I acknowledge that much will turn on the particular word and the particular dictionary definition. I accept that genuinely obscure words, and obscure meanings of words, may be elucidated by a dictionary, although such words are not commonly found in modern contracts and statutes. But, with respect to those who are less unattracted to dictionaries than am I, I fail to see how the definitions collected in counsel’s preferred dictionary of basic words like “liability”, “unreasonableness”, “unless”, “unlikely” and now “payable”, all of whose meanings are surely self-evidently contextual, will much assist determining the particular legal meaning of the sentence in the particular contract or statute where they occur.

40. The issue is very important in the United States. When a statute authorises a plaintiff whose registered trademark has been violated to recover, “subject to the principles of equity”, the defendant’s profits, any damages sustained and costs, a dictionary definition of “principle” does not much help; cf Romag Fasteners Inc v Fossil Group Inc (23 April 2020). When a statute requires personnel actions to be “free from any discrimination based on age”, a dictionary definition of “free from” does not much help: cf Babb v Wilkie (6 April 2020). Whatever the meaning of “confidential” in a freedom of information statute be, the range of meanings given to that word in a dictionary does not much help; cf Food Marketing Institute v Argus Leader Media 139 S Ct 2356 (2019). Whatever the meaning of an “exceptional case” when attorneys’ fees may be allowed in patent legislation, the dictionary definition of “exceptional” does not much help: cf Octane Fitness v ICON Health and Fitness 572 US 545 (2014). There are many, many instances of such reasoning in recent decisions. I am far from alone in considering the United States Supreme Court’s embrace of dictionary definitions as tending against transparency. I have previously referred to E Aprill, “The Law of the Word: Dictionary Shopping in the Supreme Court”, 30 Ariz St L J 277 (1998); see further the well-titled papers by J Brudney and L Baum “Oasis or Mirage: The Supreme Court’s Thirst for Dictionaries in the Rehnquist and Roberts Eras” 55 Will & Mary L Rev 483 (2013) and M Lemley, “Chief Justice Webster” (2020, ssrn.com/abstract=3537211), who quotes in fn 110 a former editor of the Oxford English Dictionary:

“[I]t’s probably wrong, in almost all situations, to use a dictionary in the courtroom. Dictionary definitions are written with a lot of things in mind, but rigorously circumscribing the exact meanings and connotations is not usually one of them.”

41. I respectfully think that Australian courts should be cautious before accepting submissions on the construction of statutes or contracts based on dictionary definitions.

Clause 1.2(m) is displaced by the context

42. Returning to the question of when cl 1.2(m) would be displaced, the plaintiff relied upon what Barrett J had said in Barak Pty Ltd v WTH Pty Ltd [2003] NSWSC 15; 11 BPR 20,687 as to the operation of a qualification “unless the context indicates a contrary intention”, especially at [17]:

“The important point is that the qualification ‘unless the context indicates a contrary intention’ operates solely by reference to the content of the instrument itself. There is, in effect, a direction by those responsible for composing the instrument to those who will afterwards read it that the whole of the subject matter and the scheme by which the instrument deals with that subject matter are to be considered in deciding whether a word to which a defined meaning is assigned is to be read as having some other meaning. Only if, by express words or necessary implication, the instrument itself shows, within its own four corners and without resort to extrinsic evidence, that the other meaning must have been intended is it permissible to abandon the defined meaning.”

43. I note for completeness the concern I raised during the hearing, namely, that the position may well be less circumscribed. There is a line of authority, not mentioned in Barak, to the effect that the words “unless the context indicates a contrary intention” are unnecessary, and that any specially defined term may not bear that defined meaning where the term appears elsewhere in the document even without an express provision that about the context indicating to the contrary. The position is relevantly identical in contracts and in statutes. In an appeal concerning the construction of an insurance contract, Fullagar J said:

‘Neither in the case of a statute nor in the case of a contract or any other instrument is there any rule of law or of construction which requires us to apply a definition where to do so would be at variance with a context or with a general intent to be gathered from the whole of the instrument”: Halford v Price (1960) 105 CLR 23 at 33; [1960] HCA 38.

44. In Perpetual Custodians Ltd v IOOF Management Ltd [2013] NSWCA 231; 304 ALR 436 at [86], I said, with the agreement of McColl and Gleeson JJA:

“The same approach applies to contracts. For example, Lord Steyn has written extrajudicially that ‘[e]ven an agreed definition is of limited use: it takes no account of contextual requirements’: (2001) 21 OJLS 59 at 60. The same point was made by Fullagar J in Halford v Price (1960) 105 CLR 23 at 33. Professor McMeel has written (The Construction of Contracts, 2nd ed (2011) Oxford University Press, p159) that ‘even defined terms must yield to wider context or contrary intention.’ Professor Carter has said that ‘the absence of [words to the effect ‘unless the context indicates otherwise’] does not mean that the definition necessarily applies to every usage of the term in the document’ (The Construction of Commercial Contracts (2013) Hart, p 446). That must in my opinion be correct in principle. The ordinary approach to construction insists on reading the contract as a whole and doing so harmoniously, so as to resolve or minimise internal inconsistency. Foreign to that approach would be a slavish rule that defined terms inevitably bear every aspect of their defined meaning.”

The point is further elaborated in P Herzfeld and T Prince, Interpretation, p 477.

45. There may be some tension between those decisions and the strictness of the formulation in Barak as to when a provision such as cl 1.2(m) is displaced. It seems unlikely that the test for displacing the operation of interpretation provisions is based on the presence of words such as “unless the context indicates a contrary intention” if those words are otiose. Further, in point of principle, everyone accepts that extrinsic evidence is available as an aid to the construction of at least some contracts; it seems difficult to see why in such a case extrinsic evidence should not bear upon whether a clause such as cl 1.2(m) is displaced. All of that said, it seems likely that little will turn on this point in any real case, and nothing turns on it in the present case.

46. It is sufficient to adopt the plaintiff’s submission, even if that is in fact an unduly circumscribed approach. Even on the approach for which the plaintiff contended, the effect of the words “unless the context indicates a contrary intention” must be considered within the four corners of the contract and therefore in light of the express words “comprising, and to be payable, in the amounts of $515,000 by Alwin and $50,000 by Seow”.

47. If cl 1.2(m) is applied to the obligations in cll 2(a) and 2(b), then each of Alwin and Seow is severally obliged to pay the full $565,000 to Sim. But that would be inconsistent with the express language of the definition of “Settlement Sum” when it is imported into those two clauses. The inconsistency arises from the words “to be payable” and the separate identification after those words of the precise amounts which each of Alwin and Seow is required to pay. In their context in the definition of Settlement Sum, those words are to be read as a qualification upon what would otherwise be the primary obligations to pay the plaintiff in cll 2(a) and (b). But the qualification is inconsistent with Alwin and Seow being jointly and severally liable in the full amount.

48. Against that conclusion, the plaintiff says that the references to $515,000 and $50,000 merely reflect the liability of the two men vis-à-vis one another. But the obligation upon which cl 1.2(m) is said to apply is the obligation that “Alwin and Seow agree to pay the Settlement Sum”, and when the definition of Settlement Sum is substituted into that obligation, there is, it seems to me, the plainest of language indicating that the primary obligation to pay cannot be joint and several.

45. To reiterate, the point comes down to the meaning of the promise given to Sim, expanded by inserting the definition, and simplified by omitting immaterial words concerning GST and Sim’s acceptance:

“Alwin and Seow agree to pay ... $565,000 ... comprising and to be payable in the amounts of $515,000 by Alwin and $50,000 by Seow.”

50. I do not accept that cl 1.2(m) has the effect that the plaintiff can require Seow to pay the full $565,000, leaving Seow to recover $515,000 from Alwin. Accepting that aspects of the syntax are awkward, that is not a licence to undo the ordinary effect of the qualifying words “comprising” and “to be payable” and the dollar figures indicating that the $565,000 is made of two components. The word “comprising” and the two amounts of $515,000 and $50,000 point to the $565,000 constituting two components. And even if that is a little unclear, the words “to be payable” qualify the obligation upon Alwin and Seow to pay, being the very obligation in respect of which the plaintiff seeks to deploy cl 1.2(m). The qualifying words “to be payable” in separate, unequal amounts is as clear an indication as may be that both men are not severally liable in the total amount.

Further considerations favouring Seow’s construction

51. Two other matters strengthen the conclusion I would reach based on cll 1.1, 1.2 and 2 alone. First, the plaintiff’s construction sits uneasily with cl 3. That clause contains an acknowledgement by Sim that $9,700 comprises the consideration for the 2500 shares transferred by her to Alwin. The plaintiff’s construction allows for the possibility that Seow will pay the entirety of the Settlement Sum, including the consideration for the shares she is required to transfer to Alwin. On the other hand, Seow’s construction requires Alwin to pay most of the Settlement Sum, easily exceeding the $9,700 which is consideration for the shares he receives under the deed.

52. Secondly, Seow’s construction has the advantage of according with a sensible commercial purpose. This is not a case where contributions are to be made by two parties to compromise a large claim against both of them. Part of the claim is for liability consequential upon the contempt judgment, which attaches only to Alwin and Norannie. Another part of the claim is the liability for the costs order which has been registered as a judgment in the District Court. Seow is not directly liable for any part of that judgment. It was clear to all the parties at all times that there were individual components to the liability which the deed was intended to compromise, and it was clear that Alwin’s exposure was much greater than Seow’s. As it happens, it is plain on the face of the deed that what had been agreed, as between themselves, was that Alwin would pay slightly more than ten times the amount paid by Seow.

53. The uncommerciality of the construction favoured by the plaintiff is that it is inherently improbable that Seow would assume the entirety of Alwin’s liability, which is some ten times greater than his own, and included large components of liability for which he bore no responsibility, in circumstances where Seow’s interests were far from wholly aligned with Alwin’s. I am conscious that the issue is to identify what the parties are taken to have agreed, not what they should have agreed, and that mere imprudence on the part of one party is not sufficient: cf Arnold v Britton at [20] and see, for the restrictions of this consideration, S Robertson, “Making Sense of Commercial Common Sense” (2018) 49(2) VUW L Rev 259. Even so, I regard the result for which the plaintiff contends as contrary to common sense.

Precontractual statements

54. That is sufficient to resolve the question of construction, before attending to the dispute as to the use of precontractual documents. This turned on cl 19. It was said in Righi at [46], of a clause materially identical to cl 19, that:

“the parol evidence rule operates to exclude the use of pre-contractual conduct (such as negotiations between the parties and prior drafts of the contract) so as to add to, subtract from or in any manner vary or qualify the May Deed or as a direct aid in construction of the May Deed” (footnote omitted).

55. As much may be accepted. However, as Emmett JA, with whom Ward and Gleeson JJA agreed, immediately proceeded to elaborate, what matters is the purpose for which extrinsic evidence is tendered. Emmett JA said:

“As is clear from the above, the purpose for which such evidence is to be used is critical to determining whether or not it is admissible (in the non-evidentiary sense). Evidence of prior negotiations between the parties can sometimes be used for the purpose of establishing aspects of the contract’s context, evidence of which is always admissible. For example, evidence of pre-contractual negotiations between the parties might establish their common understanding that certain work was to be done for three eight-hour shifts per day, six days per week. Even prior drafts of a contract have been used for that purpose” (footnotes omitted).

56. There can be dispute whether evidence of, say, pre-contractual negotiations is sought to be used permissibly, to identity the context in the manner identified by [46] of Righi, or impermissibly, as a “direct aid in construction”, contrary to an entire agreement clause, in the manner identified in of Righi. The Court of Appeal was alert to that distinction, which is apt to be blurred rather than crisp, and did not need to express a concluded view on how it applied in that appeal. The same point was made by Bathurst CJ, with the agreement of Beazley P and Macfarlan JA, in BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2015] NSWCA 319 at [65]:

“ALF was correct in pointing out that evidence of negotiations may be admissible in construing a contract, not on the basis that such evidence shows the subjective expectations and intentions of the parties but rather that it shows the context in which the agreement was made and the surrounding circumstances objectively known to the parties ... Further, as Emmett JA recently pointed out in Righi v Kissane Family Pty Ltd [2015] NSWCA 238 at [48], Ward and Gleeson JJA agreeing, the line between using extrinsic evidence of negotiations to show the context in which the agreement was made or using such evidence to show the subjective intention of the parties as an aid to construction can be blurred.”

57. A narrower approach may be seen in S Christensen and W Duncan, The Construction and Performance of Commercial Contracts (Federation Press, 2nd ed 2018), p 213, but I am bound by what was said in Righi and BB Retail Capital. In any event, I respectfully think it is correct in principle. It is one thing for the parties to promise that their deed is the entirety of their agreement, and supersedes every prior agreement, arrangement or understanding between them. It is another thing entirely to give legal meaning to the words they have chosen in their deed. After all, “[e]very clause in a contract, no less arbitration clauses, must be construed in context. No meaningful words, whether in a contract, a statute, a will, a trust, or a conversation, are ever acontextual”: Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13; 93 ALJR 583 at [83] (Edelman J). Clause 19 does not speak to the admissibility of and reliance upon evidence relevant to context and purpose. None of the foregoing is to deny that an entire agreement clause may have a material impact fending off conclusions that there is a collateral contract, or a precontractual representation, or an estoppel.

58. The process of construction of a written contract does not turn on the parties’ subjective intentions. However, a line of authority permits regard to the “known and communicated desire” of one party as a contextual matter, consistently with the objective approach to contractual construction. The words “known and communicated desire” are those of Beazley JA in Boreland v Docker [2007] NSWCA 94 at [72], applied by Ward J in Lahoud v Lahoud [2009] NSWSC 623 at [446] and by me, with the agreement of Gleeson JA, in Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [61], with reference to further authority to the same effect at [60] and [62]-[63]. I acknowledge the contrary view of White JA in the same case, which has attracted the endorsement of Professor Tarrant: J Tarrant, Rectification of Documents (Federation Press, 2020), pp 48-50. Nonetheless, I think I am entitled (and indeed bound) to have regard to the fact that critical words in the definition of “Settlement Sum” reflected the consistently stated position of Seow, that his liability was limited to $50,000. I do so not because they indicate Seow’s subjective understanding. I do so because the context in which cl 2(a) and the definition of “Settlement Sum” falls to be construed is one in which the $50,000 had a clear meaning – it was the amount which, to the knowledge of all parties, Seow had consistently said was the maximum he would contribute. Seow’s stated position concerning the $50,000 is an objective surrounding circumstance which gives colour to the division of $565,000 into two components of $515,000 and $50,000. A further factor favouring Seow’s construction is that a reasonable person in the position of the parties might have intended that the obligation to pay the $565,000 was to be limited consistently with Seow’s stated position, and might not have intended Seow to be liable in the full amount.

59. That said, I am unpersuaded that anything turns on the acceptance of an expanded form of the definition of “Settlement Sum” proposed by Mr Lambert or the rejection of a further clause proposed by Mr Krass in circumstances described below. The provenance of the words used in the deed as executed does not meaningfully bear upon the context in light of which cl 2 is to be construed.

60. However, as noted above, I would have reached the same conclusion even if I put the fact of Seow’s consistently stated position of his maximum contribution to one side.

61. Accordingly, I reject the plaintiff’s construction. It follows that the plaintiff’s interlocutory process must be dismissed.

Seow’s interlocutory process

62. In light of those conclusions, the majority of Seow’s interlocutory process, which is premised on his being liable to pay the full $565,000, falls away. (True it is that it also sought declaratory relief that upon the true construction of the deed, Seow’s liability was limited to $50,000; but its substance was in the claims for estoppel, rectification and unilateral mistake.) However, in accordance with the usual practice described in Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34 at [3]-[4], I should address those submissions – which, once again, I considered to be of high quality – against the possibility that a different construction be upheld on appeal. I should do so even though that requires findings to be made of some factual matters, which turns on the divergent recollections of three legal practitioners of the events of 24 January 2020, in order to avoid or at least minimise the risk that there need be a new trial.

63. It should be said immediately that none of the three legal practitioners was cross-examined so as to suggest that he or she was doing other than his or her best to recollect the events of that afternoon. I do not doubt that that was what each was seeking to do.

The factual issue

64. Seow’s cases based on estoppel and unilateral mistake are related. Both turn on the main factual issue that arose, which was the terms in which Ms Vojvodic rejected the suggested changes from Mr Krass to cl 2. The issues here are:

1. whether there were one or two conversations on 24 January 2020 between Mr Lambert and Ms Vojvodic between 4pm and 5.20pm, and

2. if so, whether in rejecting Mr Krass’ wording, Ms Vojvodic had made a statement in their second conversation sufficient to found an estoppel or to engage the doctrine of unilateral mistake, so as to prevent the plaintiff’s relying upon the legal meaning of the settlement deed.

The three witnesses

65. The three witnesses who were cross-examined were:

1. Mr Craig Lambert of counsel, retained by Mr Peter Papadopoulos acting for Alwin and Norannie;

2. Mr Warren Krass, partner of Cohen & Krass, solicitor for Seow (Mr Krass had retained counsel, who had appeared at the informal settlement conference, but who appears to have played no part in the negotiations leading to execution of the deed);

3. Ms Snezana Vojvodic, partner of Brown Wright Stein Lawyers, solicitor for the plaintiff (also working on the matter was Ms Melissa Morgan, a senior associate at the firm).

66. Each witness made two affidavits. The sequence is as follows:

1. Mr Krass affirmed affidavits on 5 and 18 April (the latter expanding on the former).

2. Mr Lambert swore an affidavit on 20 April.

3. Ms Vojvodic responded with affidavits affirmed on 27 April and 5 May. Her first affidavit exhibited a number of filenotes made by her of conversations with Mr Lambert in January 2020.

4. Mr Lambert responded with a further affidavit sworn on 8 May. This second affidavit exhibited Mr Lambert’s mobile phone records, which appear to show the time and duration of calls originated from his handset, and extracts of his fee note, which also record conferences with the plaintiff’s solicitors.

67. Seow’s points of defence and cross-claim gave particulars of a representation by Ms Vojvodic on 24 January 2020 to the effect that Sim accepted that:

1. the definition of “Settlement Sum” had the meaning that Seow’s obligation to pay was a several obligation to pay $50,000 and no greater amount;

2. no further words of limitation of Seow’s liability needed to be added to the deed in order to express or reiterate that limitation of liability; and

3. Seow was “protected” from liability to Sim in excess of $50,000.

68. This was put in issue by a relatively elaborate reply and defence to cross-claim, the details of which need not be summarised.

The significance of timing

69. It may assist if I explain immediately why the timing matters. Seow’s case based on estoppel and unilateral mistake turns on a wholly oral statement said to have been made on behalf of the plaintiff by Ms Vojvodic which was made not to Seow’s lawyers, but to Mr Lambert who was retained on behalf of Alwin and Norannie. Seow says that Mr Lambert immediately relayed Ms Vojvodic’s statement, and relied on it to his detriment; he also says that it is the basis for his claim based on unilateral mistake.

70. Accordingly, it is critical to Seow’s case not merely that Ms Vojvodic made the statement, but that she made it at a time when it could be and was in fact communicated by Mr Lambert to Mr Krass.

71. Both the timing and terms of any statement made by Ms Vojvodic were in contest.

Contemporaneous documents

72. I start with the incontestably correct context, as recorded in contemporaneous documents, as suggested by Keane JA in Camden v McKenzie [2008] 1 Qd R 39; [2007] QCA 136 at [34], which in turn accorded with what had been said in Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [28]-[29]:

“Usually, the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation.”

73. There was uncontroversial evidence that there had been an unsuccessful mediation in 2018, that a deed of settlement had been drafted in negotiations which followed the mediation, and that while judgment was reserved on the contempt prosecution, there was an informal settlement conference which lasted the whole of 19 December 2019. The parties came close to achieving settlement, but fell short. The sticking point was the total amount the defendants were to pay. Seow had offered to pay $50,000. His consistently stated position was that he would pay no more.

74. The parties reached agreement on 21 January 2020. It is unnecessary and perhaps impossible to say whether there was then and there a presently binding oral agreement and if so its nature; cf Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622. It was at all times contemplated that a deed of settlement would be executed, which would provide for a period to pay, following which releases would be given and the proceedings dismissed.

75. The first draft of the deed in evidence was provided on the morning of Wednesday 22 January 2020. That had the correct settlement figure ($565,000) but had been based on an earlier draft and had not been updated to provide for Seow’s $50,000. It was emailed by Ms Morgan, and Ms Vojvodic said, and I accept, that she had not personally turned her mind to its detail (T38.26).

76. The second draft was provided by Mr Lambert on that Wednesday afternoon. His changes to the first draft were highlighted in yellow. His email to Ms Vojvodic identified four changes, of which the first two were “Setting out who pays the settlement monies” and “Specifying an amount of consideration for the transfer”. (There was also an immaterial change to one of the Recitals.)

77. Those changes were reflected by changes to the definition of “Settlement Sum”, and to cll 2 and 3, as follows (what Mr Lambert had highlighted in yellow is emboldened below):

“Settlement Sum means $565,000 (inclusive of any GST) comprising and to be payable in in the amounts of $515,000 by Alwin and $50,000 by Seow.”

“2 Payment

(a) Alwin and Seow agree to pay, and Sim agrees to accept, the Settlement Sum in full and final settlement of any and all Claims, including the Judgment and the Contempt Motion that Sim may have against:

(1) Alwin;

(2) Norannie;

(3) Seow;

(4) Jimmy’s Recipe (including any director, officer, employee or agent of Jimmy’s Recipe); and

(5) Gateway (including any director, officer, employee or agent of Gateway),

in relation to the affairs of Jimmy’s Recipe or Gateway.

(b) Alwin and Seow must pay the Settlement Sum in full by electronic funds transfer to the Nominated Bank Account within 28 days of the date of this Deed.

(c) Alwin and Seow must provide to Sim, or to Sim’s solicitors, proof of payment on the date the Settlement Sum is paid.

3. Transfer of shares

On or before the Date of Settlement and following receipt of the Settlement Sum in cleared funds, Sim must provide to Alwin’s solicitor’s a signed transfer in proper and enforceable form transferring all of her 2500 shares in Jimmy’s Recipe (Sim’s Shares) to Alwin with the consideration for the same expressed on the signed transfer to be “2,500 x $3.88 per share = $9,700.00” which the Plaintiff agrees forms part of and is provided for in the Settlement Sum.”

78. All of Mr Lambert’s suggestions reproduced above, except for the surplus “in” in the definition of “Settlement Sum” and the reference to “the Plaintiff” instead of “Sim” in cl 3, were ultimately accepted in the deed as executed. Ms Morgan sent a further draft reflecting as much to Mr Lambert on Thursday 23 January just before noon.

79. An email from Mr Krass on the Wednesday evening records that his firm’s server was down for maintenance and he did not have access to his file and was writing on his phone.

80. The following day, Thursday 23 January, by email sent at 12.43pm, Mr Krass made further changes to those proposed by Mr Lambert. (His changes were made directly on Mr Lambert’s document, the relevant clauses of which are reproduced above, rather than upon the further draft which had been sent to Mr Lambert earlier that day as mentioned above.) Mr Krass’ covering email said merely that his suggested changes were attached, and that he had yet to run them past his counsel.

81. Mr Krass raised two comments in relation to the width of the mutual releases, which were at that stage expressed to extend to “any other dealings between the Parties whatsoever”. His comment (which was repeated) was “I cannot work out what this means ... cannot make it fit grammatically”. The only changes which he put forward were three alterations to cl 2. In the original document, his changes were in blue underline, while Mr Lambert’s were in yellow highlighting. I have left Mr Lambert’s changes in bold, and added Mr Krass’ proposals in underline:

149. The plaintiff acknowledges that the position might well be different if there had been an acknowledgment from the plaintiff or her lawyers that Seow’s liability was limited to $50,000, even if Alwin did not pay. It was conceded, and in my view properly so, that “[i]f Ms Vojvodic responded by saying that that is the basis upon which the plaintiff is proceeding, that the deed already reflects that position and that the fifth defendant can rely on that assurance, then one can see the basis for a claim for any one or more of common mistake, unilateral mistake, misrepresentation or estoppel”. However, I have concluded that Ms Vojvodic did not make that response.

150. In short, I do not accept there was a conversation after 5pm between Mr Lambert and Ms Vojvodic, after Mr Krass had asked Mr Lambert to “press” his changes, during which Ms Vojvodic gave an assurance to Mr Lambert that Seow was “protected”, which Mr Lambert relayed to Mr Krass. I do not accept that there was a further conversation after 5pm on Friday 24 January, and while I do accept that there was a conversation earlier that day when Mr Lambert raised Mr Krass’ suggested alterations to cl 2, I am not satisfied that Ms Vojvodic’s response amounted to a representation capable of founding equitable relief in the nature of estoppel or unilateral mistake.

151. In those circumstances, there is no occasion to turn to the other obstacles which this aspect of Seow’s claim faces. Those include whether Mr Lambert relayed Ms Vojvodic’s assurance to Mr Krass, whether it was reasonable for Mr Krass to rely on Mr Lambert’s account, and the effect of the no representation clause. I do not think it is appropriate to address those aspects, which not only do not affect the outcome, but also are premised on something being said in a conversation after 5pm which I have concluded did not occur.

Rectification in equity

153. Those findings do not necessarily stand in the way of the settlement deed being rectified in equity. That does not turn on there having been any representation from Ms Vojvodic as pleaded. Nor is the entire agreement clause an answer to rectification: Macdonald v Shinko Australia Pty Ltd [1998] Qd R 152; [1998] QCA 53. However, it is necessary for Seow to establish that there was, at the time the document was executed, a common intention which, through a common mistake, was not reflected in the document: Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 346 and 350-351; [1973] HCA 23; Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47 at [46] and [103]; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 at [12]-[14]. It is also necessary for Seow to provide very clear proof. Many adjectives have been used to describe this, including “very strong”, “irrefragable”, “clear and convincing” and “proved to a high standard”: see the account in Heydon on Contract at 1113-1115. Strong evidence is needed to counteract the evidence of the parties’ intention displayed by the instrument itself. There is also the inherent unlikelihood, in a case such as the present, that all three sets of lawyers for the plaintiff, Alwin and Seow were separately mistaken as to the intentions of their clients, such that especially cogent evidence is required. This is the point made in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [461]:

“To conclude that the parties have misrecorded their common intention in that sort of situation involves the solicitors on both sides of the transaction having each failed to grasp and express the intention of his or her own client. In other words, each of the solicitors has been mistaken, and, furthermore, mistaken in the same way. There is a measure of inherent unlikelihood in such an event happening.”

154. The plaintiff’s attorney, Mr Jia Hao Tsia, gave evidence on this topic as follows:

“I did not think about what Sim’s rights were under the draft deed if one or the other of Alwin and Seow did not or could not pay, beyond always having in mind that the releases would not take effect until Sim received the whole sum.

I deny that I intended or believed that Sim could only ever recover from Seow the sum of $50,000 irrespective of whether Alwin paid or could pay. I simply did not think about that issue.”

155. No application was made to cross-examine him. I accept that evidence. His evidence accorded with that of the lawyers acting for Sim, Alwin and Seow that they did not turn their minds to the position.

156. As Mr Barnett submitted, that falls short of what equity requires. Equity requires all parties to have been under the apprehension that in such circumstances, the obligations were limited to the amounts specified. It is not sufficient that the parties did not actively turn their minds to the issue, in order to establish a basis for rectification in equity.

157. The parties’ submissions did not explore the law governing this point. I note that some Canadian authority might support Seow. There are similarities between the present case and Peter Pan Drive-In Ltd v Flambro Realty Ltd (1978) 22 OR (2d) 291; 93 DLR (3d) 221 at 224, appeal dismissed 26 OR (2d) 746; 106 DLR (3d) 576. But I would not depart from what was said in GPI Leisure Corp Pty Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 at 17,465-6:

“Although it may not be necessary that the parties held a common intention as to the precise words in which the term should be expressed, it is necessary that there be a common intention as to the substance and detail of the precise variation which it is said should be made to the instrument.”

158. Likewise, Brereton J accepted in Harris v Smith [2008] NSWSC 545; 14 BPR 26,223 at [39] that “it is not open to rectify a contract to include express terms ... which the parties never contemplated”. As his Honour observed, that does not prevent the implication of terms in the contract as rectified in the usual way. But Seow’s claim for rectification presupposes that the deed does not expressly or impliedly on its proper construction limit his liability to Sim to $50,000.

159. It is not necessary for me to consider whether the absence of evidence of intention of Gateway is a further obstacle to this claim. Gateway was a party to the deed, but it was arguably not a party to the promise in cl 2. That gives rise to complexity in two respects. The first is whether the knowledge of Seow (who was one of three directors) may be attributed to Gateway, which was separately represented in the litigation, for the purpose of rectification in equity. The second is whether Gateway’s intention is necessary in relation to rectifying a clause in a multipartite deed which only involved promises between Sim, Alwin and Seow; it is not entirely clear to me that that is so. On the first aspect, Gateway was separately represented, including in the negotiations; it may be doubted that equity would regard Mr Seow’s state of mind as sufficient for this purpose. A long series of cases where questions of attribution have arisen in England and Wales is considered in D Hodge, Rectification (Sweet & Maxwell, 2nd ed 2016) pp 397-415. On the second aspect, Gateway was not a party to the promise in cl 2(a), and it may perhaps be doubted, if it were shown to the requisite high level of clarity that Sim, Alwin and Seow had executed the deed under a common mistake, that Gateway’s failure to turn its mind to a point which did not concern it would stand in the way of rectification. But no submissions were made on this point, and I express no concluded view.

160. Accordingly, were I of the view that Seow was primarily liable to Sim in the amount of $565,000, I would dismiss his claims in estoppel, unilateral mistake, or rectification.

Conclusion and Orders

161. For those reasons, both interlocutory processes should be dismissed.

162. A minor issue concerns the form of both parties’ interlocutory processes. In particular, Seow’s interlocutory process appeared not to join all parties to the deed. I granted leave at the conclusion of the hearing for an amended process to be provided. In accordance with that leave, the plaintiff and Seow provided short minutes of order, to which they consented, which had the effect of retrospectively joining additional parties to the interlocutory processes. I indicated while judgment was reserved that I was not prepared to make such orders, which would have an effect on persons who seemed not to have been joined to the interlocutory processes, merely on the basis of what the plaintiff and Seow agreed, and that the point could be revisited when judgment was delivered. In light of the outcome, my present view is that nothing turns on this. True it is that I would not make the declarations sought by Seow in the absence of joinder; cf Australian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119 at 133-134, accepting Bowen QC’s submission at 121; [1958] HCA 51. But even if all necessary parties were present and had been heard, I also see no reason, as presently advised, for any declaratory relief to issue. The only significance of the issue of the construction of the deed is whether the plaintiff can demand $515,000 from Seow. I have concluded that he cannot. The litigation will continue until it is resolved, consensually or by judgment. There is no suggestion, so far as I am aware, that a declaration of the construction recorded in these reasons will assist anybody. If that be wrong (if for example some financial institution is concerned by Seow’s potential obligation to pay $515,000) then this point may be revisited.

163. I will give the parties an opportunity to be heard as to any further orders which are appropriate, including orders for the return of the $50,000 and the further conduct of the underlying proceedings, which will need in due course to attend to the bankruptcy of Alwin and Norannie. It will also include costs. However, it may assist if I express my present – and therefore necessarily preliminary – views on the latter.

164. The starting point is for the costs of each interlocutory process to follow the event. (The substance of the matter is that the plaintiff ran a construction case, and Seow responded not merely by propounding his own construction, which would not have required a separate interlocutory process, but by seeking equitable relief.) That would give rise to an especially arid dispute in categorising which of the plaintiff’s costs are attributable to Seow’s equitable claim, and which of Seow’s costs are attributable to the plaintiff’s contractual claim. The possibility of a contested assessment of both parties’ costs should be avoided if at all possible.

165. I think it is likely, irrespective of the outcome of that dispute, that the costs of Seow’s interlocutory process considerably exceed those of the plaintiff’s. However, in a real sense Seow’s interlocutory process was “defensive”, in the sense that it was an unsuccessful but arguably not unreasonable fallback response to the plaintiff’s case based on construction.

166. There was also a contest concerning waiver of privilege which I determined on the papers, favourably to the plaintiff: In the matter of Jimmy's Recipe Pty Ltd [2020] NSWSC 516. The costs of that would be small, but not trivial.

167. Bearing in mind all those matters, my tentative view is that no order as to costs, with the intent that the plaintiff and Seow each bear their own costs of the two interlocutory applications (including the privilege dispute), may be an appropriate exercise of the discretion.

168. I make the following orders:

1. Dismiss the interlocutory process filed by the plaintiff on 6 April 2020.

2. Dismiss the interlocutory process filed by the fifth defendant on 13 April 2020 (as amended on 8 May 2020).

3. Direct the plaintiff and the fifth defendant to provide agreed short minutes of order, or, failing agreement, orders for which they contend, together with short submissions in support, in relation to the return of the $50,000, any other directions for future conduct of the proceedings, and costs, within 14 days of today, with a view to any other dispute being determined on the papers. If either side contends that there should be an oral hearing, that contention and short reasons in support of it should be included in the document.

4. The exhibits to be returned.

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