National Office Products Ltd v Commonwealth of Austalia
[2001] VSC 162
•25 May 2001
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted | |
| COMMERCIAL AND EQUITY LAW DIVISION | ||
No. 5316 of 2000
| NATIONAL OFFICE PRODUCTS LTD | Plaintiff |
| v | |
| THE COMMONWEALTH OF AUSTRALIA | Defendant |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27, 30 April and 1, 2 May 2001 |
DATE OF JUDGMENT: | 25 May 2001 |
CASE MAY BE CITED AS: | National Office Products Ltd v The Commonwealth of Australia |
MEDIUM NEUTRAL CITATION: | [2001]VSC 162 |
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Contract – written agreement, interpretation of clause relied on, words given their plain and ordinary meaning, opinion evidence and extrinsic evidence not had regard to.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | D. Clarke | Mahonys |
| For the Defendant | P. Allaway | Blake Dawson Waldron |
HIS HONOUR:
In these proceedings the plaintiff seeks to recover against the defendant $127,909.03, being costs incurred by the plaintiff which it alleges are payable to it by the defendant pursuant to a contract entered into between the plaintiff and defendant dated 14 August 1996. At times relevant to these proceedings and relevant to the plaintiff’s claim against the defendant, the plaintiff traded under the names Pederson Contact and Bois Cascade Office Products.
Pursuant to the contract and by cl. 2.1.1 thereof it was agreed –
“The Contractor [the plaintiff] undertakes for the Contract Price, to supply and deliver to the Commonwealth, the Services described in Schedule A and the Pricing Schedule at Schedule B, in accordance with the terms and conditions of the Contract.”
By cl. 1.1.1 of the contract, the “Contract Price” was defined to mean:
“…the price payable by the Commonwealth for each order for Services placed under the Contract and includes all costs charges necessary and incidental to the proper supply, delivery and acceptance of the Services.”
The period of the contract was a for a period of three years from 14 August 1996 reserving to the defendant the option to extend it for two additional periods of one year each.
By cl. 2.2.2 of the contract it was provided that:
“Notwithstanding any expiry of the period of the Contract, each party shall be required to fulfil any and all of its obligations outstanding at the date of expiry.”
As part of the contract and being that provided, in part, by Schedule A to the same the plaintiff agreed to provide and supply to the defendant stationery and office requisites, to be provided from a central warehouse direct to the client. The plaintiff also agreed that it would manage the Defence allocation of photocopy paper from the manufacturer on behalf of the Defence Centre Canberra and that it would, “receipt, store and deliver photocopy paper as required…” The plaintiff further agreed, pursuant to cl. 12 of Schedule A, that it would “record, receipt, store, pack and distribute the range of forms provided and required by Defence”. Under the heading in Schedule A “Furniture Office Machines and Minor Office Moves” and by cl. 16 thereof it was provided -
“DC-C [Defence Centre – Canberra] will approve, order and purchase furniture and office machines, and will also coordinate the collection, disposal, refurbishment and issue of these items. Pederson Contact will receipt, store and distribute new furniture and office machines as directed by DC-C. They will also collect items identified for return to store. Items identified for refurbishment by Defence will be delivered to and collected from the repairer. The cost of repairs remains a Defence responsibility and will be billed to DC-C.”
It is with respect to the provision of the services performed and provided by the plaintiff pursuant to cl. 16 of Schedule A of the contract that it claims to be entitled to recover from the defendant part of the costs which it alleges were incurred by it in providing this facility and service.
It was further provided by cl. 18 of Schedule A and within that part of the Schedule headed as referred to that –
“The cost of this service will be determined by the percentage of warehouse storage space taken up by this function, the cost of transportation, labour, stocktaking, reporting and margins in accordance with Schedule B. Invoices will be billed to DC-C monthly and will identify where costs have been generated by the storage of other items including forms, pamphlets and recruiting promotional material located in the area designated for furniture storage.”
Under the heading “Warehousing” in Schedule A to the contract and by cl. 22 it was provided:
“Pederson Contact will use the existing Defence Store facility at 14-22 Wicombe Street, Queanbeyan under a sub-lease to support the provision of the services included in this service level agreement. Any excess warehouse space may be used by Pederson Contact to support their own commercial operations.”
Schedule B to the contract by cl. 4 thereof provided the price basis for the plaintiff providing the services and facilities for the defendant with respect to stationery and office requisites, photocopy paper, forms and the furniture, office machines and minor office moves.
With respect to the latter facility and service to be provided by the plaintiff to the defendant pursuant to the contract it was agreed pursuant to cl. 4.4.1 of Schedule B:
“The Contractor will provide to Defence Clients a warehousing, delivery and transport service for furniture and office machines and arrange and assist minor office moves. The charge for the services will be calculated as in Attachment 2 to this Schedule.”
Pursuant to Attachment 2 to Schedule B of the contract which provided for the price to be paid by the defendant to the plaintiff for the provision of the warehousing service for furniture as detailed in Schedule A it provided by cl. 2(a) thereof that the plaintiff would render an invoice “monthly in arrears”. By cl. 2(b) of that attachment it was provided as follows:
“b. The price will be based on the following formula:
(i) Storage
The area occupied by the Defence’s furniture activities will be recharged to Defence at the same rate per square metre as Defence charge Pederson Contact for the total warehouse area.
The area currently occupied by these activities is 1,105 square metres.
Any statutory outgoing charged to Pederson Contact will also be recharged to Defence on a pro-rata apportionment utilising the area occupied by Defence’s furniture activities in relation to the total area of the warehouse.
(ii) Future Specialist
A full-time store person with the relevant expertise in the work requirement of Defence’s furniture activities will be employed by Pederson Contact and allocated to Defence on a full-time basis. This person will currently be graded at GS04 level.
All direct costs attributable to this individual (base salary, overtime, payroll tax, workers’ compensation insurance, superannuation guarantee levy, etc…) will be recharged to Defence.
(iii) Transportation
Transportation will be arranged by Pederson Contact on Defence’s behalf, covering the delivery of new furniture, delivery of second-hand furniture, collection of returns from client areas and the transportation element of minor office moves.
A separate account will be opened with the designated transport contractor to facilitate ease of reconciliation.
All transport costs will be recharged to Defence on a monthly basis.
(iv) Reporting
Reporting required by Defence will be provided free of charge.
(v) Stocktakes
A half yearly physical stocktake with reconciliations to the perpetual records will be undertaken by Pederson at no cost to Defence.
(vi) Minor Office Moves
The labour required to undertake minor office moves will be provided free of charge.
(vii) G.F.E. [Government Furnished Equipment]
Any government furnished equipment purchased by Pederson Contact that is used exclusively in the performance of the furniture warehousing service will be charged to Defence at a rate of 10 percent per annum of the value for which the goods were acquired from Defence.
(viii) Margin
Pederson Contact will charge a margin of 20 percent on all cost recharges excluding any costs inherent in the services provided free of charge.”
I have underlined the second paragraph to cl. b(ii) of this Attachment as the principal dispute between the parties in this proceeding is the meaning of that clause and in particular what is meant by the expression “All direct costs attributable to this individual”. The plaintiff claims that the part or portion of the workers’ compensation insurance premiums paid by it pursuant to the provisions of the Workers’ Compensation Act 1987 (NSW) and in particular the amount resulting from the experience adjustment made to the premiums in consequence of the furniture specialist being injured in circumstances entitling him to receive payments of workers’ compensation are “direct costs attributable to this individual”, which it was able to recharge against the defendant pursuant to the contract and which the defendant is obliged to pay to it. The defendant denies that such experience adjustments forming part of the workers’ compensation premiums paid by the plaintiff during the relevant years were “direct costs attributable to” the furniture specialist employed by the plaintiff within the meaning of cl. 2(b)(ii) of Attachment 2 to Schedule B of the contract. In these proceedings the plaintiff further claims against the defendant payment of costs incurred by it as a result of it engaging an insurance broker/agent to perform work relating to the claim made against it by the furniture specialist to be paid workers’ compensation. The defendant also denies that this cost incurred by the plaintiff was a “direct cost attributable to” the furniture specialist within the meaning of the aforesaid clause.
Pursuant to a “statement of agreed facts and contentions” signed by counsel for the plaintiff and counsel for the defendant and dated 27 April 2001 (being Exhibit P1 in these proceedings) the parties agreed on a number of facts and matters. By that document the parties acknowledged that –
“A:Save as expressly stated herein or in the pleadings, they make no admissions; and
B:This document is made without prejudice to the defendant’s right to contend at trial that the ‘premium formula’ and ‘premium difference’ as defined herein, have no relevance to the matters in dispute, and are not a proper basis for assessment of the plaintiff’s loss (if any).”
Thereafter was set out the following paragraphs –
“1.On or about 14 August 1996 the parties entered into an agreement, a copy of which is at CB 12-53 (the agreement) [the contract to which I have previously referred].
2.Pursuant to the agreement, the plaintiff provided, among other things, warehousing, delivery and transport services for furniture and office machines to the defendant in Queanbeyan, New South Wales (the ‘furniture services’). The furniture services had previously been performed by the defendant.
3.The plaintiff employed David Jolley (‘Mr Jolley’) to carry out the duties of furniture specialist to meet the defendant’s furniture requirements. He was employed at GS04 level and his base salary was $28,000 per annum. He was previously employed by the defendant to carry out the same functions.
4.The plaintiff was required to hold workers’ compensation insurance to cover all of its employees in New South Wales including Mr Jolley.
5.The plaintiff submitted monthly invoices for the furniture services to the defendant pursuant to the terms of the agreement (the ‘invoices’).
6.The invoice at CB133-134 [Exhibit P3] is the invoice submitted by the plaintiff for the month of October 1996. The other invoices submitted by the plaintiff were in similar form.
7.The invoices were presented each month and have all been paid in full.
8.In June and/or July 1997, Mr Jolley was injured whilst performing the duties of furniture specialist.
9.In or about 1997, the plaintiff made a claim on its workers’ compensation insurer (the ‘WC insurer’) in respect of the injuries to Mr Jolley (the ‘Jolley claim’).
10.The costs of the Jolley claim exceeded $150,000.
11.The WC insurer adjusted the workers’ compensation insurance premium payable by the plaintiff for the years ended 30 June 1998, 30 June 1999 and 30 June 2000 (the ‘adjusted premium’).
12.The adjusted premium (‘P’) for each of the years was calculated by the WC insurer using the formula (the ‘premium formula’):
P = (Tx(1 – S))+(ExS)+D
Where:
‘T’ is the basic tariff premium for the Plaintiff being the total actual wages paid by it across its entire business in New South Wales for the year multiplied by the applicable tariff rate.
‘S’ is the experience adjustment factor for the Plaintiff. This factor is determined by the formula:
0.9 x T
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T + $200,000
‘E’ is the experience premium for the Plaintiff for the period of insurance determined by the formula:
‘D’ is the dust diseases contribution for the Plaintiff, being the actual wages paid by the Plaintiff in New South Wales multiplied by the rate prescribed under section 6 of the Workers’ Compensation (Dust Diseases) Act 1942.
13.The tariff rates are determined under the annual insurance premium orders according to the classification of the employer’s business.
14.The tariff rates applicable to the plaintiff’s business in New South Wales for 1996/97, 1997/98, 1998/99 and 1999/00 are as follows:
1996/97 1997/98 1998/99 1999/00 1.97% 2.09% 2.41% 2.41%
15.The plaintiff’s total wages paid across its entire business in New South Wales are as follows:
1996/97 1997/98 1998/99 1999/00 1,606,313 2,946,608 3,655,045 4,356,812
16.When the premium formula was applied the workers’ compensation premiums payable by the plaintiff for the years 1997/98, 1998/99, 1999/00 were as follows:
1997/98 1998/99 1999/00 90,524.60 118,153.66 121,593.64
17.If the premium formula excluded from the total costs of the claims the costs of the Jolley claim the workers’ compensation premium payable by the plaintiff pursuant to the premium formula are:
1997/98 1998/99 1999/00 50,371.44 72,200.26 82,791.17
18.The difference between the workers’ compensation premiums paid by the plaintiff applying the premium formula inclusive of the costs of the Jolley claim on the one hand and exclusive of those costs on the other, is $124,909 (the ‘premium difference’) calculated as follows:
Inc Jolley Claim Excl. Jolley Claim Difference 1997/98 90,524.60 50,371.44 40,153.16 1998/99 118,153.66 72,200.26 45,953.40 1999/00 121,593.64 82,791.17 38,802.47 TOTAL 124,909.03
19.The plaintiff paid the sum of $3,000 to Richard Oliver International, Insurance Brokers, for management of the Jolley claim (the ‘broker’s fee’) [Exhibit P4].
20.The plaintiff in this proceeding claims the amount of $127,909.03 being the sum of the premium differences and the broker’s fee, plus interest and costs.”
It was contended on behalf of the defendant in these proceedings that the “direct costs attributable to” the furniture specialist with respect to “workers’ compensation insurance” paid by the plaintiff was limited to that part of the premium paid by it being the part or proportion of the basic tariff premium paid by the plaintiff as was attributable to the wages paid by the plaintiff to the furniture specialist during the relevant periods. It was contended on behalf of the defendant that such part of the premium paid by the plaintiff during the relevant years as was constituted by taking into account the experience adjustment factor and the experience premium paid by it (being the amount claimed and being $124,909.03) was not a direct cost attributable to the furniture specialist and therefore was not recoverable by the plaintiff against the defendant. On behalf of the plaintiff it was contended that this part of the workers’ compensation premium paid by it was a “direct cost attributable to” the furniture specialist.
This part of the plaintiff’s claim was therefore limited to the issue whether pursuant to the terms of the contract it was able to recover from the defendant as a “direct cost attributable to” the furniture specialist, Jolley, the difference between the workers’ compensation premiums paid by the plaintiff applying the premium formula including the costs of the Jolley claim on the one hand and exclusive of those costs on the other. In these proceedings the plaintiff did not seek to recover against the defendant that portion of the workers’ compensation premiums paid by it which were attributable to Jolley and which were that part of the basic tariff premium as constituted by the wages paid by the plaintiff to Jolley multiplied by the applicable tariff rate during the relevant years. It was contended on behalf of the defendant that it was only that part of the insurance premium so paid by the plaintiff attributable to the wages paid by it to Jolley that the plaintiff was able to recover against the defendant pursuant to the terms of the contract and that the amount of $124,909.03 claimed by the plaintiff was not recoverable.
By s.155(1) of the Workers’ Compensation Act 1987 (NSW) an employer (other than a self insured) is and was at all times relevant to these proceedings required to “obtain from a licensed insurer and maintain in force, a policy of insurance that complies with” Division 1 of Part 7 of the Act for “the full amount of the employer’s liability” under the Act “in respect of all workers employed by the employer…” for any injury to any such worker. There was provided by that section a penalty for breach of that provision. It was this section of the Act which provides the foundation for paragraph 4 of the “statement of agreed facts and contentions”.
Section 168(1) of the Act provided for the publication by gazette of orders fixing the manner in which premiums payable by an employer for such a policy of insurance were to be calculated. There was tendered on behalf of the defendant (Exhibit D6) Insurance Premium Orders for the years relevant to these proceedings being 1997-98, 1998-99 and 1999-00. Section 169(1) of the Act provided that the “premium payable by an employer… for a policy of insurance to which an insurance premiums order applies, shall be calculated in the manner fixed by the order”. Each of the Insurance Premium Orders referred to fixed the manner in which the premium payable by an employer for a policy of insurance was to be calculated. Each such Order provided the formula to be applied to calculate the insurance premiums to be paid by an employer pursuant to that employer’s obligation pursuant to s. 155(1) of the Act, to obtain and maintain in force a policy of insurance of the nature and kind identified by s. 155(1) of the Act. The formula identified and to be applied to calculate such insurance premiums was that providing the basis for the formula as set out in paragraph 12 of the “statement of agreed facts and contentions”.
Counsel on behalf of the plaintiff and the defendant each contended that the issue relevant to this part of the plaintiff’s claim against the defendant was able to be resolved and ought to be resolved by the court having regard to the clear and unambiguous meaning of the words “all direct costs attributable to this individual (…workers’ compensation insurance…) will be recharged to Defence”. Notwithstanding that such was the contention of each counsel, evidence was called on behalf of each party in the event of it being determined that the phrase, “all direct costs attributable to this individual (…workers’ compensation insurance…)” was determined to be in its form and terms ambiguous, in its meaning.
The defendant called as a witness Peter Wilkinson, a chartered accountant who carries on practice as a forensic accountant. He gave evidence that he was familiar with the method of calculating insurance premiums in New South Wales with respect to that State’s workers’ compensation scheme. He was shown paragraph 12 of the “Statement of agreed facts and contentions” and confirmed that that which was set out was the formula to be applied in calculating the relevant insurance premiums. Wilkinson gave evidence that the relevant formula was one that weights wages being the total wages of an employer against tariff. He agreed that the basic tariff rates for the relevant periods of time were the rates set out in paragraph 14 of the Statement of agreed facts and contentions.
Wilkinson expressed the opinion that the expression “direct costs” as it related to employment generally meant the “wages paid to an employee for services provided plus on costs associated with that employment”. He said that “on costs obviously vary from employee to employee but generally include superannuation guarantee levy, payroll tax, workers’ compensation levy, any penalties or awards that are applicable to the particular industry or the workplace.”
He was asked –
“included in those costs would there be commonly any provision for workers’ compensation insurance.”
He replied:
“… the standard provision is to apply the basic tariff amount as the workers’ component on costs.”
He was further asked:
“… in your opinion in the context of employment in a commercial contract, would direct costs or more particularly, the on costs portion of direct costs usually include provision for the increase in workers’ compensation insurance premiums due to the result of any particular claim or injuries?”
He replied:
“No.”
When asked why he said that, he replied:
“Simply, your Honour, in calculating on costs you are applying a known factor to a known wage level increases which may result as a result of an accident or some other cause, unknown are ignored in determining a level of on costs.”
The managing director of the plaintiff, David Kelly, gave evidence as to the tender process which the plaintiff had engaged in resulting in the plaintiff entering the relevant contract with the defendant which included negotiations with officers of the defendant before the contract was signed. He gave evidence that there was discussion which led to the words that appear in cl. 2(b)(ii) of Attachment 2 to Schedule B. He said that that discussion was, in substance, that the work of storing furniture, delivering it to users as requested and the performance of minor repairs was a service outside the ambit of their normal business and that they wanted to ensure that all costs that they expended on the arrangement were recovered and that they received a margin for the management of the contract. He was asked whether anything was said during the negotiations as to “what was meant by the words”. He replied, “probably the only words that there was any real discussion of was ‘direct’ and that was more of getting some basis rather than – some basis of charging so for instance we were not charging them for using the toilet and that was the only real dialogue we worked out”.
Kelly was further asked:
“You said there was dialogue about direct costs. You’ve given an example of a discussion about (indistinct) in the toilet what were the discussions about direct costs.”
He replied:
“They were more about trivialities but they didn’t want to be confronted with an ever on going list of the furniture specialist that had two cups of tea on the Monday and things like that rather than a true meaning of direct and indirect costs.”
Kelly further gave evidence that Jolley had his accident within the first year of activity. As to the claim for $3,000, which forms part of the plaintiff’s claim in these proceedings, Kelly gave evidence that the plaintiff incurred this expense in an “attempt to minimise the claim”. He said that it was their view that whilst they were managing and being paid a margin for activities on the contract there was a broad based responsibility and that they should seek to “make sure that costs deemed might have been on defence were as low as they possibly could so we engaged this insurance agent to try and minimise the claim”. Kelly said that at the time relevant to the plaintiff’s claim in these proceedings the plaintiff employed approximately 40 people in New South Wales.
It was put to Kelly in cross-examination:
“In your negotiations with the Commonwealth leading up to this contract this issue as to who would be responsible for increases in your workers’ compensation premiums in the event of an injury to Mr Jolley, this would have been paramount in your thinking at the time?”
He replied:
“Not at all.”
He was asked:
“You didn’t think of it?”
He replied:
“We thought of our recovery of workers’ compensation costs purely and simply as that.”
He said further that they did not discuss increases of any of the costs.
Alan Welbourne, a former officer of the defendant, identified the contract, the subject of these proceedings, as being the contract he negotiated between the Department of Defence and Pederson Contact (the plaintiff). He identified a document which he said he had received from the plaintiff during the course of negotiations leading up to the completion of the contract. During the course of his cross-examination Kelly was not prepared to accept that the document necessarily came from the plaintiff. I accept the evidence of Welbourne on this matter particularly when one has regard to its contents and terms. On the second page of that document under the heading “proposal”, “interim” it was stated:
“We would allocate a full time storeman to the furniture work requirement, the equivalent of a GSO4.”
It further stated under the heading “Costings”:
“A monthly invoice to the Department would be provided detailing:
(i)the full cost of the designated furniture employee covering base salary plus on costs.
(ii)…
(iii)…
(iv)…”
In determining the issue whether the plaintiff is able to recover against the defendant the sum of $124,909.03 pursuant to the terms of the contract entered into between it and the defendant and, in particular, that being the second paragraph to cl. 2(b)(ii) of Attachment 2 to Schedule B of the contract it is appropriate to have regard to that which was said by Gibbs J in Australian Broadcasting Commission v Australian Performing Right Association Ltd[1] where his Honour said:
“It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend the contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, ‘even though the construction adopted is not the most obvious, or the most grammatically accurate’ to use the words from earlier authorities cited in Locke v Dunlop (1888) 39 Ch.D 387 at 393, which although spoken in relation to a will are applicable to the construction of written instruments generally….”
[1](1973) 129 CLR 99 at 109.
In Schenker & Co (Aust) Pty Ltd v Malpas Equipment and Services Pty Ltd[2] the court was concerned with the interpretation of a clause (cl. 3) contained within a commercial contract. At p. 840 McGarvie J (with whose judgment Kaye J agreed) said:
“In its construction of clause 3 the court is seeking to ascertain what reasonable business people in the positions of Malpas and Schenker, if they had applied their minds to it at the time of contracting, would have regarded the clause as meaning. The approach suggested by Shaw L.J. in Nea Agrex S.A. v Baltic Shipping Co Ltd [1976] QB 933 at p. 954 is a useful one to apply to this case. First, ask what in the circumstances a person in the position of Malpas would have supposed Schenker meant by the clause, then ask what a person in the position of Schenker would have supposed Malpas understood the clause to mean. This approach emphasises that the essential question is what would reasonable business people in the position of the parties have taken the clause to mean.”
[2][1990] VR 834.
In Spunwill Pty Ltd v Bab Pty Ltd[3] Santow J set out in his judgment some eight principles to be applied when construing a written document including that which was relevant, being a contract which was in restraint of trade. I refer only to those principles as identified by his Honour in paragraphs 3 and 4 at p. 299 without referring to the citation of authorities in such paragraphs. Those paragraphs as identified at p. 299 are:
“3.In construing a written document the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document’s language to create. The emphasis is thus on giving effect to the apparent intention of the parties and direct evidence of the parties actual subjective intentions and expectations is inadmissible for the purposes of construction.
4.The language of a term is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind.”
[3](1994) 36 NSWLR 290.
In Codelfa Construction Pty Ltd v State Rail Authority of NSW[4] Mason J enunciated the rule necessary to be had regard to when interpreting a contract and whether evidence of surrounding circumstances is admissible to assist in such interpretation. His Honour at p. 352 said:
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking the facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.”
[4](1982) 149 CLR 337.
For convenience I set out again the second paragraph of cl. 2(b)(ii) of Attachment 2 to Schedule B of the contract the interpretation of which is the principle issue relevant to the first part of the plaintiff’s claim against the defendant. That paragraph reads:
“All direct costs attributable to this individual [the furniture specialist] (base salary, overtime, payroll tax, workers’ compensation insurance, superannuation guarantee levy, etc…) will be recharged to Defence.”
Each counsel submitted that this paragraph was unambiguous in its meaning, however each escribed different meanings to the same. The fact that each escribed different meanings to the same does not lead to the conclusion that the paragraph in its meaning must be ambiguous.
In seeking to interpret the meaning of this paragraph as contained in the agreement it is necessary to have regard to the fact that by the first paragraph of clause 2(b)(ii) of the attachment the plaintiff agreed to employ a “full time store person with the relevant expertise in the work requirement of Defence’s furniture activities”. It was as to the employment by the plaintiff of that person that it was agreed between it and the defendant that “all direct costs attributable to this individual (…workers’ compensation insurance…) will be recharged to Defence”.
In my view the phrase, to which I have referred is able to be understood and given meaning to by application of the ordinary meaning of the words “direct” and “attributable” as contained in that paragraph.
“Direct” is defined by The New Shorter Oxford English Dictionary, 1993, to mean:
“1. Straight, undeviating in course not circuitous or crooked.”
“5.Existing or occurring without intermediacies or intervention; immediate, uninterrupted.”
“Attributable” is defined in the Oxford English Dictionary, 2nd ed to mean “capable of being attributed or ascribed esp. as owing to, produced by.”
The plaintiff, by its employment of the furniture specialist at the Queanbeyan premises was obliged, pursuant to the provisions of the Workers’ Compensation Act 1987, to obtain and maintain in force a policy of insurance providing cover against the full amount of its liability under that Act for any injury to the furniture specialist. The premium payable by the plaintiff at first instance owing to its employment or produced by its employment of the furniture specialist was that referred to in the relevant formula as the “basic tariff premium” and being the wages paid by the plaintiff to the furniture specialist multiplied by the relevant tariff rate. That premium, the basic tariff premium, owing to or produced by the plaintiff’s employment of the furniture specialist would form part of or a percentage of the total tariff premium paid by the plaintiff during the relevant years. That basic tariff premium paid by the plaintiff owing to or produced by its employment of the furniture specialist was clearly a direct cost to the plaintiff in order that it comply with its obligation pursuant to s. 155 of the Workers’ Compensation Act 1987 (NSW) as it was the cost of meeting its obligation under the Act owing to or produced by its employment of the furniture specialist. That such is the case however is to be contrasted, in my view, when regard is had to the “adjusted premium” paid by the plaintiff in circumstances where the furniture specialist, Jolley, suffered injury while performing his duties of a furniture specialist which, in turn, led to the plaintiff making a claim on its workers’ compensation insurer in respect of the injuries to Jolley the cost of which exceeded $150,000.
The adjusted premium obliged to be paid by the plaintiff, pursuant to the relevant formula, had regard to and took into account an “experience adjustment factor” and the “experience premium”.
By employing the furniture specialist the obligation of the plaintiff under s. 155 of the Act was to obtain a policy of insurance and maintain the same to cover the full amount of its liability under the Act for any injury to a worker. Injury is defined by s. 4 of the Act. By sub-s. 4(a) injury is defined to mean:
“Personal injury arising out of or in the course of employment.”
It is not necessary for me to have regard to sub-ss. (b) and (c) of that section. By s. 9A of the Act it is provided that no compensation is payable under the Act in respect of an injury unless the employment concerned was a “substantial contributing factor to the injury”.
One can readily think of circumstances where a worker carrying out his work in the course of his employment is injured which injury is caused by the fault of his employer or a fellow employee, entitling the worker to recover compensation under the Act and entitling the employer to make a claim against its insurer under the policy of insurance which it has obtained pursuant to its obligation under s.155 of the Act. Such a claim having been made would affect the premium paid by the employer as the premium would take account of the cost of the employer’s claims. That such would be the case is demonstrated by reference to the formula set out in paragraph 12 of the “agreed facts and contentions”.
As I understand the agreed facts and contentions in this case it was agreed that in the three years relevant to these proceedings if the formula which was applied to determine the premiums paid by the plaintiff excluded the costs of Jolley’s claims the premiums would have been less in each of the relevant years the total sum of which is $124,909.03. In my view it is to be readily seen that the additional premiums paid by the plaintiff were not only produced by the plaintiff employing the furniture specialist but were produced by it employing such person who sustained injury whilst performing the duties of a furniture specialist in his employment with the plaintiff entitling the plaintiff to make a claim against its insurer under the policy that it was obliged to obtain and maintain under the Act. It was an agreed fact that the difference between the workers’ compensation premiums paid by the plaintiff applying the premium formula inclusive of the costs of the Jolley claim on the one hand and exclusive of those costs on the other hand was $124,909. The facts and matters which led to that difference were that in or about July 1997 Jolley was injured whilst performing the duties of furniture specialist, that the plaintiff made a claim on its insurer in respect of the injuries to Jolley and that the costs of that claim exceeded $150,000. In my opinion the additional costs incurred by the plaintiff were not direct costs attributable to the furniture specialist which were able to be recharged by the plaintiff against the defendant. In my opinion, such additional costs incurred by the plaintiff were not direct costs as they took into account the facts that while performing duties as a furniture specialist Jolley was injured, the plaintiff made a claim against its workers’ compensation insurer in respect of the injuries to Jolley and the costs of Jolley exceeded $150,000. It was having regard to and taking into account these matters and the application of the premium formula to the same that result in my view to the conclusion that this cost to the plaintiff was not a direct cost attributable to the furniture specialist. It was incurred by taking into account matters beyond those immediate to the employment of the furniture specialist, Jolley.
In reaching this conclusion I do not have regard to the opinion evidence of Wilkinson as to the meaning given by him to the expression “direct costs”. As referred to he expressed the opinion that such costs as related to employment generally meant wages paid to an employee plus “on costs” associated with that employment. He then sought to express his opinion as to the meaning and limit of “on costs” in such circumstances. To pursue that line of reasoning, in my view, there would need then to be had regard to the reference to “on costs” in negotiations had between the plaintiff and the defendant before entering into the subject agreement. Having concluded that the clause of the agreement, the subject of the dispute between the plaintiff and defendant in these proceedings, is able to be and should be interpreted having regard to the plain meaning of the words in the subject clause and, in particular, the words “direct” and “attributable” I do not have regard to the evidence as to what was said and occurred during such negotiations. In interpreting the subject clause by reference to the plain meaning of the words used in the same and applying that clause to the facts in this case leads me to conclude that the difference between the workers’ compensation premiums paid by the plaintiff applying the premium formula inclusive of the costs of the claim of the furniture specialist on the one hand and exclusive of those costs on the other hand being $124,909 are not “direct costs attributable to” the furniture specialist employed by the plaintiff pursuant to the agreement and are not rechargeable by the plaintiff to the defendant.
As to the additional sum of $3,000 claimed by the plaintiff in these proceedings which it is agreed to have been paid by it to insurance brokers for the management of the claim of the furniture specialist, Jolley, in my view such cost was not a direct cost attributable to the furniture specialist. Such costs were incurred by the plaintiff by engaging an insurance agent to try and minimise the claim that it may have against the defendant. No matter how worthy such an attitude was I am unable to conclude that it was a direct cost attributable to the furniture specialist. Rather it was a cost incurred by the plaintiff with respect to the claim made against it by Jolley, the furniture specialist, with respect to injuries suffered by him whilst performing his duties in the employment of the plaintiff and further by reason of the plaintiff engaging the broker for the purpose referred to.
In the result and for the reasons expressed I have concluded that the sums sought to be recovered by the plaintiff against the defendant totalling $127,909.03, are not recoverable by the plaintiff against the defendant pursuant to cl. 2(b)(ii) of Attachment 2 to Schedule B of the agreement entered into between the plaintiff and defendant and dated 14 August 1996. The plaintiff’s claim against the defendant must be dismissed.
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CERTIFICATE
I certify that this and the 20 preceding pages are a true copy of the reasons for judgment of McDonald J of the Supreme Court of Victoria delivered on 25 May 2001.
DATED this 25th day of May 2001.
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Ken Wriedt
Associate to Justice McDonald
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