Roombridge Pty Ltd T/A Laguna Noosa v Grainger
[2007] QDC 12
•23 February 2007
DISTRICT COURT OF QUEENSLAND
CITATION:
Roombridge Pty Ltd T/as Laguna Noosa -v- Grainger [2007] QDC 012
PARTIES:
ROOMBRIDGE PTY LTD (Plaintiff/Appellant)
AndPETER GRAINGER
(Defendant/Respondent/Cross Appellant)FI LE NO:
D189/2006
DIVISION:
Civil
PROCEEDING:
Appeal
ORIGINATING COURT:
District Court, Maroochydore
DELIVERED ON:
23 February 2007
DELIVERED AT:
Maroochydore
HEARING DATE:
13 February 2007
JUDGE:
Judge J.M. Robertson
ORDER:
Plaintiff’s appeal upheld.
Defendant’s cross-appeal dismissed.CATCHWORDS:
CONTRACT- construction of contract - whether contract is ambiguous
EMPLOYMENT CONTRACT – scope of award on the rights of employer and employee to opt outCOUNSEL:
Mr G. D. Beecham (for the Plaintiff)
Mr A. C. Barlow (for the Defendant)
SOLICITORS:
Skyes Pearson Miller (for the Plaintiff)
WHD Lawyers (for the Defendant)
CASES JUDICIALLY CONSIDERED:
Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
TEXT JUDICIALLY CONSIDERED:
Cheshire and Fifoot’s “Law of Contract” 8th Australian Edition, Chatsworth, NSW: Butterworths 2002
Introduction
Mr Peter Grainger was employed as a real estate salesperson by Roombridge Pty Ltd trading as Laguna Noosa subject to the terms of a written agreement dated 15 October 2004. On 18 May 2005 Mr Grainger gave a weeks’ notice to his employer which effectively terminated the employment. The employer then sued in the Noosa Magistrates Court for a sum equal to the difference between a net $600 per week paid to Mr Grainger from the commencement of the agreement, until termination, and commissions earned by him during that period. Mr Grainger counter-claimed for payment of commission which he argues on a proper construction of the agreement, was to be in addition to the $600 per week.
There was a short trial in the Noosa Magistrates Court on 2 June 2006 before Her Honour Magistrate Callaghan. The employer called two (2) witnesses; Mr Forsyth and Ms Miller who are principals of the employer company and their evidence is not challenged. Mr Grainger did not give or call evidence. Her Honour reserved her decision and gave a considered judgment on 16 June 2006. Her Honour found against the employer, in the sense that although she found that the $600 per week was an advance and not salary, she construed the agreement as providing for a minimum base salary of $476 per week as per the Award plus commission, a result not contended for by either party.
She effectively dismissed the counterclaim for the same reasons although on her findings the employer did owe the employee $130.11. Not surprisingly both parties have appealed.
It is common ground that the issues raised on the appeal concern the proper construction of the employment agreement which in turn focuses on the characterisation of the $600 per week referred to in the agreement.
The employment agreement is in a standard form prepared by the REIQ. It is common ground that the agreement was made pursuant to stage 2 of the Award. The box to be crossed in this event in the “reference schedule” at the commencement of the agreement is not crossed, and Her Honour found this was an error and neither party contends otherwise.
The $600 per week is set out in an Annex (sic) to page 1 of the agreement which states:
“This page forms part of the Employment Agreement between Roombridge Pty Ltd and Peter Grainger.
1. Roombridge Pty Ltd agrees to pay Peter Grainger $600 per week (after tax) for a period of six months from 11 October 2004, being the date of commencement of his employment with Roombridge.
2. If for any reason, Peter Grainger leaves the employment of Roombridge at any time within the six months period referred to in point 1 of the annexure, he agrees to repay to Roombridge any shortfall in the total of the weekly amounts advanced compared to any commissions from sales he would be entitled to receive during this period.
3. This Employment Agreement will be reviewed at the expiration of the six month period referred to in point 1 of this annexure.”
Under the remuneration heading on page 2 of the Reference Schedule there is no “base salary” indicated, although the monthly pay period box is marked. Commission rates are specifically set out.
The Award
The Relevant Award at the time was the Property Sales Award Queensland – State and a copy was exhibit 2 in the proceedings before her Honour.
Stage 2 of the Award is (relevantly) in these terms:
“STAGE 2 EMPLOYMENT
2.4 Application, Flexibility, Intent
2.4.1 Flexible Employment Arrangements
Stage 2 Employment allows employers and employees covered by this Award to arrive at arrangements which differ from the provisions of Stage 1 Employment and, subject to such arrangements being registered as prescribed, to apply those arrangements in lieu of clauses 2.1 to 2.3.
2.4.2 Statement of Intent
Stage 2 Employment is designed to recognise the unique nature of the Real Estate Industry, and practices and procedures which have been accepted and proven over time, including the payment of total or partial commission based on transactions and performance.
2.5 Opting Out of Stage 1 Employment
2.5.1 Qualifying to Opt Out
Where it can be demonstrated that an employee:…..
(a) Can demonstrate a personal work history:
…..
(ii)in the case of someone who holds a Real Estate Agent’s Licence,
which would provide a reasonable expectation of an earning capacity in excess of 115% of the award rate of pay prescribed for a Property Sales Person;
the employee and the employer may freely elect to alter in part or totally the provisions of clauses 2.1 to 2.3, subject to the conditions set out in clause 3.”
Clause 2.1 to 2.3 deal with wages, commission, leave, public holidays, etc in Stage 1 Employment.
Clause 3 deals with written employment agreements and 3.1 sets out the minimum requirements of such agreements.
The agreement must be lodged by the employer with the Property Sales Association of Queensland, Union of Employees (PSAQ).
Clause 3.2.3 (which relates to stage 2 employment) provides that an agreement, such as the one under consideration in the appeal:
“shall…
(iv) provide conditions which, overall, provide at least equal benefits to the average good employee as set out in Clause 2.1 to 2.3”
Pursuant to 3.2.4(c), the secretary of the PSAQ is authorised to investigate an agreement such as this, and if “not satisfied that the Agreement meets the required criteria” a whole range of referral procedures are set out.
These are not relevant here because the secretary approved the Agreement “to the extent that it complies with the award”.
The Oral Evidence
Mr Forsyth gave uncontested evidence that prior to meeting Mr Grainger he was contacted by him as a result of an advertisement run by Laguna Real Estate seeking real estate agents. Mr Grainger contacted him from NSW “and said he was interested in coming up and selling real estate in, and shifting to, Noosa”. He then met with Mr Grainger in person who eventually decided he would like to work for Laguna Real Estate.
Mr Forsyth said in evidence:
“We had a discussion in my office in relation to Peter working for Laguna Real Estate. It was then brought up that he would be making a – the trip up to Noosa and the cost of coming up would be significant, and he’d have to settle in and so forth and so on. So he asked me whether we would advance him a sum of money on a weekly basis until he got settled. And I discussed that with Olivia Miller, my partner, and we agreed to do that on a contractual basis.”
The employment agreement was then executed on 15 November 2004. On 5 May 2005 there was a meeting between Mr Forsyth, Ms Miller and Mr Grainger. Mr Forsyth gave evidence:
“It was in relation to Peter’s performance over the period of time that he’d been with us. We were concerned that he wasn’t performing to the standard that he indicated that he could perform with us. We discussed various aspects of his performance, his prospecting, his – what he had coming up and so forth and so on. He indicated to us that he was just about to turn around the corner, and he believed that he could turn that corner and bring some sales in. Olivia and I discussed it and we went along with that, and decided to keep him in that employment on the same basis that we employed him.
He asked us to – well, basically, he – Peter asked us if we would basically leave his current situation as is, and really wanted us to believe in him and believe that he could turn the corner and gain some sales for our company.”
The Issues on the Appeal
The Proper Characterisation of the $600 per week
Mr Grainger argues that the contract is unambiguous; the $600 was by way of salary and should not be construed as being an advance against commission. Mr Barlow who appeared for Mr Grainger both below and on appeal points (inter alia) to what he says is the clear language of clause 1. He submits that despite the use of “advanced” in Clause 2 and the absence of any figure under “Base Salary”, the payment has all the features of a weekly salary. He argues that as more than six months had elapsed at the time, Clause 2 in the annexure was no longer operative at the time of termination of the agreement.
He submits that as the agreement is unambiguous, I am not entitled to look at extrinsic evidence to aid in construction. In relation to any alleged variation on 5 May 2005 he calls in aid Clause 3.3 of the Award which is in these terms (relevantly):
“Failure to comply with the registration and approval requirements of clause 3 shall: …
(c) mean that any agreement entered into between the parties shall be operative only to the extent that the agreement does not conflict with the provisions of this Award”;
and clause 17 of the terms and conditions which requires that any variation is to be in writing, signed and lodged for registration with PSAQ.
In my opinion, the agreement in this critical respect is quite ambiguous. In the wording of Clauses 1 and 2 of the annexure and in the remuneration section in the reference schedule there is language which could support both constructions.
The role of the court in construing a contract is to “ascertain and give effect to the intention of the contracting parties”: Homburg Houtimport BV v Argosin Private Ltd [2004] 1 AC 715 at 737. That intention, to be determined objectively is “what a reasonable person would have understood (the words of the contract) to mean”. However, where the terms of a written agreement are ambiguous, a court can, in certain circumstances, take into account extrinsic evidence to enable it to ascertain the intention of the contracting parties.
The classic exposition of the law is that of Mason J (as he then was) in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
As the learned authors of Cheshire and Fifoot’s “Law of Contract” 8th Australian Edition, Chatsworth, NSW: Butterworths 2002 note (at 386) more recent authority suggests a more liberal or relaxed attitude to the receipt of extrinsic evidence provided that it is known to both parties.
It is clear when one has regard to the extrinsic circumstances both prior to the execution and on 5 May 2005, the parties intended that the $600 per week be treated as an advance against commission to be earned by Mr Grainger, who on the basis of his own signed acknowledgement in the application to register the agreement as a Stage 2 type agreement, was prospectively an employee who could demonstrate “a reasonable expectation of an earning capacity in excess of 115% of the Award rate”.
I think this also answers Mr Barlow’s second point in relation to construction. In argument he initially advanced what I thought to be a surprising argument that no agreement under stage 2 which provided for remuneration on a commission only basis could be lawful. He modified his argument during discussion to add the proviso that no such agreement was lawful unless in its terms it provided conditions “which, overall, provide at least equal benefits to the average good employee as set out in Clauses 2.1 to 2.3”. Such an assessment could only be made prospectively and given the way in which I have construed the $600 payment, and bearing in mind that Mr Grainger was the holder of a Real Estate Licence and on his acknowledgement “would provide a reasonable expectation of an earning capacity in excess of 115% of the Award rate”; even in the absence of evidence bearing directly on the matters in 3.2.3(a)(iv); I hold that this agreement does not offend against this section of the Award. The Award itself acknowledges the unique nature of the Real Estate Industry, and acknowledges that employers and employees may opt for an agreement for remuneration by commission only. The standard terms and conditions, (clause 8.2), which is part of the agreement, also anticipates remuneration in whole by commission, which, on the construction I have favoured, this agreement in fact was.
I also agree with Mr Beecham that Mr Grainger can derive no comfort from Clause 3.3 of the Award. In my view this clause does not apply because on the uncontested evidence there was no failure here to register or have the agreement approved.
Mr Barlow, in arguing that the agreement could be construed on its own terms, submitted that the 5 May meeting lead to an agreement that the employee would continue to pay (by way of salary) $600 per week (as per Clause 1 of the Annexure) but that, as more than six months had elapsed, Clause 2 had no further operative effect. There is an obvious failing in this argument as Clause 1 itself is limited to a six month application in its own terms. In any event, on the approach I favour, the parties then agreed to continue the employment on the same basis as previously i.e. including Clause 2 and that included the agreement that the $600 was to continue to be an advance against commission earned.
It follows that the employer should succeed on its appeal and the employee fail on his cross-appeal. I will allow the parties time to calculate the correct judgment sum, bearing in mind interest, and to make submissions on costs.
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