Russell v RCR Tomlinson Ltd

[2012] WASC 405

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   RUSSELL -v- RCR TOMLINSON LTD [2012] WASC 405

CORAM:   PRITCHARD J

HEARD:   25-26 JULY 2012

DELIVERED          :   31 OCTOBER 2012

FILE NO/S:   CIV 1229 of 2010

BETWEEN:   DAVID WILLIAM RUSSELL

Plaintiff

AND

RCR TOMLINSON LTD
Defendant

Catchwords:

Contract - Construction of employment contract - Principles of contractual construction - Turns on own facts

Equity - Rectification - Common intention - Whether the subjective intentions of the parties are relevant

Equity - Rectification - Disconformity between common intention and terms of contract - Turns on own facts

Misleading or deceptive conduct - Elements of claim - Requirement to show evidence of loss

Damages - Assessment of compensation - Whether earlier payment should be taken into account in assessing damages - Requirement to show a sufficient connection with respect to subject - Turns on own facts

Legislation:

Trade Practices Act 1974 (Cth)

Result:

Order for rectification made

Category:    B

Representation:

Counsel:

Plaintiff:     Mr A J Power

Defendant:     Mr J L Snaden

Solicitors:

Plaintiff:     King & Wood Mallesons

Defendant:     Clayton Utz

Case(s) referred to in judgment(s):

Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54

Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389

Byrnes v Kendle (2011) 243 CLR 253

CFlub Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526

Chartbrook Ltd v Persimmon Homes Ltd [2009] 4 All ER 677

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594

Darlington Future Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

Guest v Commissioner of Taxation (No. 2) [2007] FCA 412

Hamilton v Whitehead (1988) 166 CLR 121

Jones v Dunkel (1959) 101 CLR 298

Joscelyne v Nissen [1970] 2 QB 86

Kearns v Hill (1990) 21 NSWLR 107

MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152

Mander Pty Ltd and Anor v Clements (2005) 30 WAR 46

Martin v Tasmania Development and Resources (1999) 163 ALR 79

McCormick v Riverwood International (Aust) Pty Ltd (1999) 167 ALR 689

McCourt v Cranston [2012] WASCA 60

Mulcahy v Hydro Electric Commission (1998) 85 FCR 170

Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad (1989) 167 CLR 219

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Pukallus v Cameron (1982) 180 CLR 447

Ryledar Pty Limited and Anor v Euphoric Pty Limited [2007] HCA Trans 698

Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603

Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357

Stoelwinder v Southern Health Care Network (2000) 177 ALR 501

The Bell Group Limited (In Liq) v Westpac Banking Corporation [No. 9] [2008] WASC 239

Tipperary Developments Pty Ltd v State of Western Australia [2010] HCA Trans 136

Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330

Walker v Salomon Smith Barney (2003) 140 IR 433

Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604

Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521

TABLE OF CONTENTS

Introduction

(i)     Factual overview and matters not in dispute

(ii)      The breach of contract claim

(iii)     The rectification claim

(a)          Principles in relation to rectification of contracts

(b)          Whether the parties held a common intention that Mr Russell would be paid the Retirement Benefit if dismissed pursuant to cl 11.3(b) at any time before Mr Russell had completed five years of service as the EGM

(c)          Whether there was a disconformity between that common intention and the terms of the Contract and whether that disconformity was the product of a common mistake

(d)          The order which should be made

(iv)     The misleading or deceptive conduct claim

(v)      RCR's 'set‑off' claim

(a)          The evidence as to the Disputed Notice Payment

(b)          RCR's 'set-off' claim fails

Conclusion

PRITCHARD J: 

Introduction

1. On about 9 March 2009, Mr Russell commenced employment with RCR Tomlinson Ltd (RCR) in the position of Executive General Manager (EGM) of RCR Positron Pty Ltd (Positron).  At the time, Positron was a wholly owned subsidiary of RCR.  Mr Russell's employment as the EGM was governed by a written contract of employment which was entered into on 4 March 2009 (the Contract). 

2. Mr Russell's employment was terminated by RCR on 16 December 2009.  Upon the termination of his employment Mr Russell was paid an amount (the Termination Payment) which comprised Mr Russell's accrued entitlements for salary, annual leave and other entitlements, together with a further payment of $62,499.97, which was said to constitute the equivalent of three months' base salary in lieu of notice (the Notice Payment).

3. A dispute then arose between Mr Russell and RCR in relation to a further payment to which Mr Russell claimed he was entitled under the Contract.  It is that dispute which is the subject of this action.  Mr Russell claims that he is entitled to a further payment of $297,500 (the Retirement Benefit).  RCR denies that Mr Russell is entitled to any further payment.  RCR also claims that under the Contract it was only required to pay one month's base salary to Mr Russell in lieu of notice, and accordingly claims that if it is found liable to make any further payment to Mr Russell, that part of the Notice Payment which it says represents an overpayment should be set off or taken into account in quantifying the further payment. 

4. Mr Russell's action has three bases.  First, Mr Russell claims that he is entitled to the payment of the Retirement Benefit pursuant to the terms of the Contract, on their proper construction, and that RCR's failure to pay the Retirement Benefit constituted a breach of the Contract.  RCR denies that its failure to pay Mr Russell a further $297,500 constituted a breach of the Contract.  It says that on the proper construction of the Contract it was entitled to terminate Mr Russell's employment on the basis of the payments it made and denies that Mr Russell was entitled to the payment of the Retirement Benefit. 

5. Secondly, and in the alternative, Mr Russell claims that if the Contract, on its proper construction, does not entitle Mr Russell to the payment of the Retirement Benefit, then the terms of the Contract do not reflect the parties' agreement.  Mr Russell claims that in those circumstances the Contract was drawn up and executed by him and RCR under a mutual mistake of fact and in the mistaken belief that the Contract embodied an obligation to pay the Retirement Benefit.  Mr Russell therefore claims that the Contract should be rectified so as to embody the agreement actually made between him and RCR.  RCR says that the true intention of the parties is reflected in the terms of the Contract and thus denies that the Contract should be rectified in a manner contended for by Mr Russell.

6. Thirdly, and in the alternative, Mr Russell claims that prior to his entry into the Contract, he held discussions on 2 and 4 March 2009 with the then Chief Executive Officer of RCR, Mr John Noordhoek. Mr Russell claims that Mr Noordhoek represented to him that he would be paid the Retirement Benefit if his employment with RCR was terminated other than on one of the grounds set out in cl 11.1 of the Contract (to which I will refer herein as a termination of employment 'other than for cause'), regardless of when the termination occurred (the Representations). Mr Russell claims that the Representations were made in trade or commerce, that they were representations with respect to a future matter within the meaning of s 51A of the Trade Practices Act 1974 (Cth) (the TP Act), and that by virtue of the Representations, RCR engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive, in contravention of s 52 of the TP Act.[1] Mr Russell claims that he relied on, and was induced by, the Representations to believe that in the event that his employment was terminated by RCR other than for cause, he would be paid the Retirement Benefit, irrespective of whether the termination occurred within the first five years of his employment. Mr Russell claims that as a result of this misleading or deceptive conduct, he suffered loss and damage in the amount of $297,500 and he seeks an award of damages in that amount pursuant to s 82(1) of the TPA.

   [1] Notwithstanding the repeal of the TP Act, and the enactment of the Australian Consumer Law, the TP Act continues to apply to the Representations: see cl 6 of sch 7 to the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (Cth).

7. RCR admits that Mr Noordhoek had discussions with Mr Russell on 2 and 4 March 2009, but denies that Mr Noordhoek made the Representations and says that Mr Noordhoek expressly told Mr Russell that he would not be entitled to receive a retirement benefit under the Contract unless he had completed at least five years' service with RCR at the time that his employment was terminated.  RCR also says, in the alternative, that if the Representations were made they were superseded by the Contract and, in any event, that Mr Russell did not rely upon the Representations and suffered no loss or damage as a consequence of them.

8. RCR also claims that if it is liable to Mr Russell in any amount in respect of his claims, then it is entitled to set off, in diminution or extinction of any such amount, the sum of $41,666.64 (the Disputed Notice Payment).  RCR claims that the Notice Payment paid to Mr Russell represented an amount equivalent to three months' base salary in lieu of notice, when in fact the Contract required the payment of only one month's salary.  The Disputed Notice Payment constitutes two months' salary, which RCR claims it overpaid Mr Russell.  RCR says that in the circumstances it is entitled to set off the amount of the Disputed Notice Payment against any amount which it may be found liable to pay to Mr Russell. 

9. Mr Russell admits that he was paid the Notice Payment and that it equated to three months' salary in lieu of notice, but he denies that the Notice Payment was more than what RCR was required under the Contract to pay him in lieu of notice.  Mr Russell therefore says that RCR is not entitled to any set off, diminution or extinction of the amount of the Disputed Notice Payment as against any amount which RCR may be found liable to pay Mr Russell.

10. These reasons deal with the following matters:

    (i)factual overview and matters not in dispute;

    (ii)the breach of contract claim;

    (iii)the rectification claim;

    (iv)the misleading or deceptive conduct claim; and

    (v)RCR's 'set‑off' claim.

11. For the reasons set out below, Mr Russell's claims of breach of contract and misleading or deceptive conduct fail, but he has established his rectification claim.  RCR's 'set‑off' claim also fails.

1. Factual overview and matters not in dispute

1. It is convenient at this point to outline briefly the chronology of the events which underpinned the issues in the trial.  There was no dispute about the background facts.  The real dispute concerned the content of conversations between Mr Russell and Mr Noordhoek on 2 and 4 March 2009 and, to a lesser extent, the circumstances surrounding the termination of Mr Russell's employment on 16 December 2009.

2. Between 10 March 2008 and 8 March 2009, Mr Russell was employed by RCR as a Project Manager for Positron.  At the completion of the project on which he had been working in February 2009, Mr Russell tendered his resignation.  A few days later, Mr Noordhoek offered him the position of EGM for Positron. 

3. In February 2009, Mr Noordhoek provided a draft EGM Services Agreement (the draft Contract) to Mr Russell for his consideration. 

4. Mr Phillip Crighton, who was, at the time, the Chief Financial Officer and Company Secretary for RCR and its numerous subsidiaries, gave evidence that Mr Noordhoek discussed with him the terms on which the EGM position should be offered to Mr Russell.  The details of that discussion are referred to below. 

5. In late February 2009, Mr Russell returned the draft Contract to Mr Noordhoek with some handwritten amendments which he requested be made to the draft Contract.

6. Mr Russell's evidence was that he discussed the proposed terms of his employment as EGM with Mr Noordhoek in a telephone conversation on 2 March 2009.  The evidence as to that conversation is outlined below.

7. Mr Noordhoek also submitted some proposed amendments to the draft Contract.  Mr Noordhoek's amendments, together with those made by Mr Russell, were provided to Ms Charmaine Higgins, the General Manager Corporate Human Resources for RCR, and Ms Higgins arranged for those amendments to be incorporated into the draft Contract. 

8. A copy of the draft Contract provided to Mr Russell was not in evidence, nor was the draft Contract bearing the amendments made by Mr Russell and Mr Noordhoek.  (The evidence was that that annotated draft Contract had been destroyed.)  There was evidence that most, but not all, of the proposed amendments were made, but there was no evidence as to the precise manner in which the draft Contract was amended.  Ms Higgins gave evidence as to her recollection of the significance of some of the amendments.  However, she did not have a detailed recollection of the nature of the amendments and, in the absence of any other evidence as to the terms of the draft Contract prior to, and after, the amendments were made, I do not give any weight to Ms Higgins' evidence as to the nature or significance of the amendments which were made.  

9. Mr Russell attended at RCR's head office on 4 March 2009, and met with Mr Noordhoek and Ms Higgins.  Ms Higgins gave him a letter (dated 3 March 2009) from RCR formally offering him the position of EGM and attaching a copy of the proposed contract.

10. Mr Russell's evidence was that he discussed the terms of the proposed contract with Mr Noordhoek at this meeting on 4 March 2009.  I refer to the details of those discussions below.  Ms Higgins was present for some, but not all, of that discussion. 

11. Mr Russell then confirmed his willingness to enter into the proposed contract, and proceeded to execute the Contract.  His signature was witnessed by Ms Higgins.  Mr Crighton then joined the meeting for the purpose of executing the Contract (along with Mr Noordhoek) on behalf of RCR. 

12. The parties approached the misleading or deceptive conduct claim, and the rectification claim, on the basis that the Representations said to have been made by Mr Noordhoek were made on behalf of RCR, and that insofar as the rectification claim was based on an intention held by RCR, and a mistaken belief held by RCR, such intention and belief equated to the intention and belief held by Mr Noordhoek.  Having regard to Mr Noordhoek's role as the Chief Executive Officer of RCR, and in view of the information before the court as to Mr Noordhoek's role and responsibilities, there can be no doubt that his conduct, intentions and beliefs relevant to the facts in issue were to be regarded as those of RCR.[2]

    [2] Hamilton v Whitehead (1988) 166 CLR 121, 127 (Mason CJ, Wilson & Toohey JJ).

13. By about August 2009, Mr Paul Dalgleish was appointed to the position of Chief Executive Officer of RCR, replacing Mr Noordhoek.

14. In August 2009, Mr Russell discussed the terms of the Contract with Mr Crighton.  He recorded the essence of that discussion in an email he sent to his wife (at his home email address) on 20 August 2009.  A copy of that email was in evidence, and I discuss its terms below.  Mr Crighton also gave evidence about his discussion with Mr Russell.

15. It appears that in early December 2009, Mr Dalgleish determined that Mr Russell's employment should be terminated.  During the afternoon of 16 December 2009, Mr Russell was approached at work by Ms Higgins and Mr Garry Ramse, the then interim Chief Financial Officer for RCR, who advised him that his employment was being terminated with immediate effect.  Mr Russell was given a letter signed on behalf of Mr Dalgleish advising him of the termination of his employment, and the basis on which his employment was being terminated (the termination letter).  Mr Russell had a short conversation with Mr Ramse and Ms Higgins.  The details of that conversation are discussed below.  Immediately upon leaving the building following the termination of his employment, Mr Russell made handwritten notes of the conversation he had with Ms Higgins and Mr Ramse.  A copy of those notes was in evidence. 

16. Evidence was given at the trial by Mr Russell, Mr Crighton, and Ms Higgins.  Neither Mr Noordhoek nor Mr Ramse gave evidence.

1. The breach of contract claim

(a)     The clauses in dispute

1. The breach of contract claim primarily concerned two clauses of the Contract, cls 7 and 11, the relevant parts of which are set out below.

   7.Retirement benefit

   7.1Calculation of benefit

   Upon Retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date, the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:

   One (1.0) times the total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.

   …

   7.3Operation

   This cl 7  continues to operate and have effect after termination of this Agreement.

   …

   11.Termination

   11.1Grounds for termination

   The Company at its sole discretion may terminate the Employment of the Executive General Manager in the manner specified in cl 11.2 if at any time the Exective General Manager is or becomes:

   (a)incapacitated by illness or injury of any kind which prevents the Executive General Manager from performing the duties specified …;

   (b)guilty of wilful misconduct …;

   (c)is (sic.) charged with any criminal offence …;

   (d)of unsound mind …;

   (e)bankrupt …;

   (f)continually or significantly neglectful of his duties …;

   (g)refusing or neglecting to comply with any lawful, reasonable direction or order ….

   11.2Notice of termination

   Where the Company decides to terminate the Employment for a reason specified in cl 11.1 it shall do so in the following manner:

   (a)for a reason specified in cl 11.1(a) by giving the Executive General Manager not less than one month's written notice or by paying one month's Salary in lieu thereof; or

   (b)for any reason specified in cl 11.1(b), (c), (d), (f) or (g) by giving the Executive General Manager notice effective immediately and without payment of any salary other than the Salary and any other entitlements accrued to the date of the termination.

   11.3Executive General Manager and Company to give notice

   (a)The Executive General Manager may terminate the Employment by giving the Company no less than three months' written notice.  If the written notice is dated prior to March 2014 the Company shall not be obliged to pay any Retirement Benefit.

   (b)Otherwise than as specified in this cl 11 , the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the retirement benefits as per cl 7 .

2. It is appropriate to also mention cl 13 of the Contract (the Restraint Clause).  Clause 13.3 of the Restraint Clause relevantly provided, in essence, that the EGM undertook to RCR that he would not, without RCR's prior written consent, carry on or be engaged in any business in competition with any business carried on by RCR, or otherwise act in competition with RCR, during the Restraint Period.  The 'Restraint Period' was defined in cl 13.7 of the Restraint Clause by reference to a series of descending terms, commencing with a term of five years and, if that period was deemed to be unenforceable, then four years and so on, to a period of six months from the date of the Contract. 

1. The term 'Retirement' was defined in the Contract to include the termination of the Contract pursuant to cl 11.3.  The term 'Retirement Date' was defined in the Contract to mean the date of Retirement.  'Retirement Benefit' was defined to have the meaning ascribed to that term in cl 7 of the Contract.

2. It was not in dispute that Mr Russell's employment was terminated pursuant to cl 11.3(b) of the Contract.  It was also not in dispute that the Commencement Date was the date on which Mr Russell's employment commenced, namely on or about 9 March 2009. 

3. Mr Russell's case was that that cl 11.3(b) of the Contract, looked at in the context of the Contract as a whole, was ambiguous in its meaning.  Counsel for Mr Russell accepted that one meaning of cl 11.3(b) was that the Retirement Benefit was payable in accordance with cl 7.  However, he submitted that an alternative meaning of cl 11.3(b) was also open, namely that the words 'as per clause 7' were simply intended as a cross reference to the method of calculating the Retirement Benefit, and its method of payment, which was set out in cl 7.  On that basis, counsel for Mr Russell submitted that the words 'as per clause 7' indicated that the Retirement Benefit would be payable if the EGM's employment was terminated by RCR, but irrespective of whether the EGM had been employed for five years or more. 

4. Mr Russell's case was that a consideration of the surrounding circumstances, which were known to both parties, supported the latter construction of cl 11.3(b).

5. RCR's case, in summary, was that the meaning of cl 11.3(b) was not ambiguous.  RCR's case was that when the EGM's employment was terminated by RCR by notice, cl 11.3(b) made clear that the EGM would only be paid the Retirement Benefit if the EGM had been employed by RCR for five years or more.  Counsel for RCR submitted that in the absence of ambiguity, it was not appropriate to have regard to the surrounding circumstances for the purpose of construing the Contract.  In the alternative, counsel for RCR submitted that even if regard was had to the evidence of the surrounding circumstances, nothing in that evidence supported the construction for which Mr Russell contended.

(b)     Principles of construction

1. In the construction of a written contract in a commercial context, the meaning of the terms of the contract is to be determined by what a reasonable person in the position of the parties would have understood those terms to mean.[3]  Evidence of surrounding circumstances is only admissible to assist in the interpretation of a written contract if the language used in the contract is ambiguous or susceptible of more than one meaning.  Accordingly, evidence of surrounding circumstances will not be admissible if the language of the contract has a plain meaning.[4]  If evidence of the surrounding circumstances is admissible, that evidence must be confined to objective facts known to both parties.[5]

(c)     Clause 11.3(b) is not ambiguous or susceptible to more than one meaning

[3] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ), referring to Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451.

[4] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J, Stephen & Wilson JJ agreeing); Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604, 605 [3] ‑ [5] (Gummow, Heydon & Bell JJ); and see the discussion of Jireh in McCourt v Cranston [2012] WASCA 60 [21] ‑ [23] (Pullin JA, Newnes JA agreeing at [52]).

[5] Cranston [24] (Pullin JA, Newnes JA agreeing at [52]).

1. In my view, cl 11.3(b) is not ambiguous, or susceptible of more than one meaning.  In reaching that view, I have taken into account the ordinary meaning of the words in that clause.  In my view, the words 'as per' clause 7 mean 'in accordance with' cl 7, with the result that payment of the Retirement Benefit referred to in cl 11.3(b) is to be calculated according to the qualifying period specified in cl 7.  As a result, if the EGM's employment was terminated by RCR after less than five years' service, the EGM would not be entitled to payment of the Retirement Benefit.

2. In reaching this conclusion as to the meaning of cl 11.3(b) I have also taken into account the context in which cl 11.3(b) appears.  The Contract is an employment contract between two parties.  It contains a specific clause (cl 7) providing for eligibility for payment of the Retirement Benefit in a number of circumstances.  In each of those circumstances, the same qualifying period of five years applies.  In that respect, the purpose behind the payment of the Retirement Benefit in cl 7 appears to be as an incentive to, and a reward for, longevity of service by the EGM. 

3. I also take into account that cl 11.3(b) sits within cl 11 which deals with the circumstances in which the EGM's employment may come to an end (whether at the instance of the EGM or RCR).  The purpose of cl 11.3 is to specify the notice period required when the EGM decides to end the employment relationship, or when RCR decides to terminate the relationship other than for cause. 

4. To the extent that both cl 11.3(a) and (b) refer to the Retirement Benefit, that reference appears to be in the nature of a cross‑reference to the primary clause which deals with eligibility for, and calculation of, the Retirement Benefit, namely cl 7.

5. It is not surprising to see such a cross‑reference within the Contract.  It is not difficult to envisage that in circumstances where the employment relationship has come to an end, disputes might arise as to whether the Retirement Benefit was payable, especially because in some circumstances (namely those set out in cl 11.1(b) ‑ (f)) the EGM would not be entitled to payment of the Retirement Benefit even if the EGM had been employed for more than five years.  In that context, cls 11.3(a) and (b) can be seen as providing a confirmation that the Retirement Benefit would be payable in the circumstances set out in cl 7 of the Contract.

6. To conclude that the words used in cl 11.3(b) are unambiguous is not to deny that the clause has what might be described as some curious features, when viewed in the context of the surrounding clauses in the Contract.  For example, as I have noted, cl 11 as a whole appears to be directed to the circumstances in which, and the terms on which, the employment relationship could be terminated.  Having regard to the terms of cl 7, and to the definition of 'Retirement Benefit', cl 7 was, according to its terms, clearly capable of application in cases where the EGM's employment was terminated pursuant to cl 11.3.  From that perspective, it was not necessary that cl 11.3 refer to the Retirement Benefit at all, save perhaps to create an exception from the circumstances in which cl 7  would otherwise operate.  However, the words 'as per clause 7 ' in my view do not convey any indication that an exception from the position under cl 7  was intended. 

7. A further curious aspect of the terms of cl 11.3 is that different words are used in cls 11.3(a) and (b), apparently to say the same thing, namely, that in the event that the employment relationship was terminated in the circumstances described, the Retirement Benefit would be payable if the qualifying period in cl 7 had been satisfied.  The fact that different words are used might suggest that a different meaning was intended in each clause.  Again, however, the words 'as per cl 7 ' are, in my view, so clear in their meaning that this conclusion is not open. 

8. The fact that the terms of cl 11.3(b) on its face, and in its context, are somewhat curious is not, in my view, a reason for interpreting that clause in a way which is contrary to the plain meaning of the words used.[6]  There was no evidence as to the authors by whom, or the manner in which, the Contract was drafted, but there was evidence that some amendments were made to the Contract at the behest of both Mr Russell and Mr Noordhoek.  The evidence was not sufficient to make any finding as to particular clauses which were amended as a result.  As a general observation, however, it is not appropriate to bring the same degree of scrutiny to a contract drafted (or amended) by persons who are not lawyers as one might to a contract drafted by lawyers, or to legislation.  Differences or inconsistencies in the expression of terms, or the existence of superfluous language in a document drafted by laypersons cannot sensibly be afforded the same degree of significance as they might be given in the context of a document drafted by lawyers or specialist legal drafters. 

   [6] Cf Kearns v Hill (1990) 21 NSWLR 107, 109 (Meagher JA).

9. Nor does it seem to me that the ordinary meaning of cl 11.3(b) would constitute an absurd result, so as to cast doubt on whether that meaning could have been intended by the parties.[7]  The construction of cl 11.3(b) contended for by RCR is consistent with the approach to the payment of the Retirement Benefit under the Contract in other situations.  That is, a Retirement Benefit is payable in the case of any termination of the EGM's employment (other than for cause) provided that the EGM has been employed for five years or more. 

(d)     The evidence as to the surrounding circumstances

[7] Westpac Banking Corp v Tanzone Pty Ltd (2000) 9 BPR 17,521, [19] ‑ [20] (Priestley & Fitzgerald JJA, Foster AJA).

1. Lest I am wrong in the conclusion I have reached, it is appropriate to consider the argument advanced by counsel for Mr Russell that cl 11.3(b) was ambiguous, and specifically to consider whether evidence of the surrounding circumstances assisted to resolve that ambiguity. 

2. As I have noted, Mr Russell's case was that the meaning of cl 11.3(b) was ambiguous in that the words used left open an alternative construction of cl 11.3(b) to the one advanced by RCR.  That alternative construction was that the reference to payment of the Retirement Benefit 'as per clause 7 ' was intended solely as a reference to the means for calculation of the Retirement Benefit, but not as to the qualifying period for the Retirement Benefit, in cl 7 .

3. The evidence to which counsel pointed (which for convenience I will refer to collectively as 'the surrounding circumstances') was evidence given by Mr Russell that Positron's revenue had declined significantly since it was acquired by RCR in October 2007, that Positron was carrying significant and unsustainable overheads, and that there had been recent managerial instability within Positron, including that Positron had been managed by three executive general managers between October 2007 and February 2009.  It was submitted that these circumstances were necessarily known to RCR. 

4. The evidence of the surrounding circumstances was tendered without objection from RCR, and no point was taken as to whether it constituted evidence of objective facts known to both parties.  Instead, counsel for RCR submitted that there was nothing in the surrounding circumstances which supported the construction of cl 11.3(b) contended for by Mr Russell.

5. I note that counsel for Mr Russell quite properly did not rely on the evidence given by Mr Russell as to his discussions with Mr Noordhoek prior to his execution of the Contract.  (Those discussions are considered below in the context of the rectification claim.)  However, counsel for Mr Russell did seek to rely on evidence given by Mr Russell that he was concerned that his employment might be in jeopardy once the new Chief Executive Officer of RCR, Mr Dalgleish, commenced in that position.  This evidence was not evidence of an objective nature which was known to both parties, and I do not take it into account for the purposes of the construction argument.

(e)     Construction of cl 11.3(b) in light of the surrounding circumstances

1. It was not entirely clear how the evidence of the surrounding circumstances supported the construction of cl 11.3(b) advanced on Mr Russell's behalf.  The argument appeared to be that the surrounding circumstances informed the pre-contractual negotiations between the parties, and that having regard to those surrounding circumstances, the object and purpose of the Contract could be discerned as being to persuade Mr Russell to accept the role of EGM 'and in doing so, to provide for remuneration, retention incentives and insurance against the risk of termination as appropriate to the seniority of the position'.[8]  Mr Russell's case was that in view of this contractual purpose, cl 11.3(b) should be construed as providing an additional incentive for him to accept the position of EGM.  The argument was developed in the following way.

   [8] Plaintiff's Written Outline of Submissions dated 18 July 2012 [26].

2. Counsel for Mr Russell submitted that while the five‑year qualifying period (in cl 7 ) could be regarded as a retention incentive in the context of cl 11.3(a) (so as to deter the EGM from resignation from his or her employment until at least five years of service), the same rationale could not explain the inclusion of a five‑year qualifying period in the context of terminations under cl 11.3(b), which were within the employer's discretion.  In the latter situation, it was submitted, an obligation to pay the EGM the Retirement Benefit, irrespective of the period of service, would protect the EGM from the risk of early termination by the employer.  In this sense, it was submitted, reasonable people in the position of the parties would regard the reference to the Retirement Benefit in cl 11.3(b) as intended to give rise to an obligation to pay the Retirement Benefit irrespective of the period of service, and thus as insurance for the EGM against the risk of early termination. 

3. I do not accept that the surrounding circumstances support this conclusion as to the purpose of cl 11.3(b).  It is far from clear why a company said to be in some financial difficulty would have agreed to the payment of a Retirement Benefit to an employee whose employment was terminated at any time prior to five years of service, having regard to the quantum of the Retirement Benefit (that is, a year's salary).  The acceptance of an obligation to make a payment of that quantum would also have been somewhat inconsistent with the terms of the Restraint Clause. 

4. Counsel for Mr Russell submitted that to construe cl 11.3(b) as incorporating the five‑year qualification period for the Retirement Benefit under cl 7  would produce an 'unreasonable, one‑sided and uncommercial result by giving [RCR] the benefit of both the retention incentive in cl 11.3(a) and the ability to terminate [Mr Russell's] employment at any time within the first five years of employment without paying the Retirement Benefit'.[9]  I am unable to agree.  In my view, the construction contended for by counsel for Mr Russell, in the context of the evidence of the surrounding circumstances, could equally be said to be commercially unrealistic.

   [9] Plaintiff's Written Outline of Submissions dated 18 July 2012 [30(c)].

5. For completeness, I note that counsel for Mr Russell also submitted that cl 11.3(b) should be construed by reference to the contra proferentem principle.  However, it is far from clear that the principle is applicable to a contract of employment (much less one involving an employee with years of business experience, and particularly with some years of experience in dealing with contracts) and given that cl 11.3(b) is not, on its face, a term of limitation or exclusion of liability.[10]  However, it is unnecessary to decide these questions because the contra proferentem principle will not be applied when there is no ambiguity in the terms of the clause in question. 

   [10] Cf Darlington Future Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, 510 (Mason, Wilson, Brennan, Deane & Dawson JJ); Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad (1989) 167 CLR 219, 227 (Mason CJ, Brennan, Deane, Gaudron, McHugh JJ).

6. Accordingly, the breach of contract claim fails.

1. The rectification claim

1. It was Mr Russell's case that at the time they entered into the Contract, the parties were under a common mistake as to the effect and operation of cl 11.3(b) when read in conjunction with cl 7.1 in circumstances where RCR terminated Mr Russell's employment pursuant to cl 11.3(b) of the Contract, at any time before Mr Russell had completed five years of service.  The mistaken belief was that the five‑year qualifying period for the Retirement Benefit in cl 7.1 would not apply where RCR terminated Mr Russell's employment under cl 11.3(b) of the Contract. 

2. In this part of my reasons, I deal with four matters.

   (a)Principles in relation to rectification of contracts;

   (b)Whether the parties held a common intention that Mr Russell would be paid the Retirement Benefit if dismissed pursuant to cl 11.3(b) at any time before Mr Russell had completed five years of service as the EGM;

   (c)Whether there was a disconformity between that common intention and the terms of the Contract and whether that disconformity was the product of a common mistake;

   (d)The order which should be made.

(a)     Principles in relation to rectification of contracts

1. Rectification is an equitable doctrine which applies to documents.  One of the circumstances in which it is available is in contract cases, where all parties to a contract, at the time of its execution, share a common intention to include a term in the contract, but where as a result of a common mistake, the contract does not include that term.[11]  Accordingly, rectification is a device by which the contract is made to conform to the true nature of the agreement between the parties.[12] 

   [11] Pukallus v Cameron (1982) 180 CLR 447, 452 (Wilson J, Gibbs CJ agreeing at 448), 457 (Brennan J); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 346 (Mason J).

   [12] Mander Pty Ltd and Anor v Clements (2005) 30 WAR 46, 50 [11] (Murray J), 59 [67] (McKechnie J).

2. In order to establish a claim for rectification, a plaintiff must prove that there was a disconformity between the common intention of the parties and the terms of the written instrument and that the intention continued to the time of execution of the instrument.[13] 

   [13] Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329, 340 (Sheller JA, Mahoney AP & McLelland AJA agreeing); CFlub Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526, 539 ‑ 540 [39] (Phillips JA, Tadgell & Chernov JJA agreeing); Mander (50 ‑ 51) [12] ‑ [14] (Murray J), (57) [51] ‑ [52] (McKechnie J), and (62) [85] (McLure J).

3. Rectification will be available whether the disconformity between the common continuing intention and the contract resulted from a mistake in recording the parties' common intention, or from a mistake about the meaning or effect of words deliberately chosen by the parties.[14] 

   [14] Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488, 547 ‑ 548 [282] ‑ [283] (McLure JA, Wheeler JA agreeing at 493 [1] - [2], and Newnes JA agreeing at 552 [305]).

4. Given that a written contract is ordinarily assumed to express the common intention of the parties to it, a court will exercise great care in making a finding that the contract does not in fact reflect the common intention of the parties.[15]  This cautious approach is commonly expressed in a shorthand fashion as amounting to a requirement that a plaintiff seeking rectification of a written contract will need to establish the existence of the parties' common intention by 'clear and convincing proof' (or words to that effect).[16] 

   [15] The rationale for requiring 'clear and convincing proof' was explained in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, 712 ‑ 714 [451] ‑ [461] (Campbell JA, Allsop P agreeing at 620 [30], Giles JA agreeing at 621 ‑ 622 [42]).

   [16] Pukallus (452) (Wilson J, Gibbs CJ agreeing at 448); Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54, 63 ‑ 64 (Rich, Starke & Dixon JJ); Franklins (712) [451] (Campbell JA, Allsop P agreeing at 620 [30], Giles JA agreeing at 621 ‑ 622 [42]); Mander (50 ‑ 51) [13] (Murray J), (57 ‑ 58) [53] ‑ [54] (McKechnie J).

1. What might be seen as a different facet of the same issue is the question of how the common intention of the parties is to be discerned.  In this respect, the authorities, at least at first blush, appear somewhat inconsistent.  In Ryledar Pty Ltd v Euphoric Pty Ltd, the members of the Court held that the type of intention that is relevant to rectification is the subjective intention (in other words, the actual intention) of the parties.[17]  (Hence, parol evidence is admissible in an action for rectification, in order to prove the intention of each of the parties to the contract.[18])  At the same time, however, the Court held that in order to establish the requisite common intention, the subjective intentions of each party had to be disclosed to the other party in some way[19] even if that intention was not manifested in an 'outward expression of accord'.[20]

   [17] Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, 641 ‑ 642 [176] ‑ [186] (Tobias JA, Mason P agreeing at 606 [1]), 657 ‑ 658 [267] ‑ [272] (Campbell JA, Mason P agreeing at 606 [1]). Special leave to appeal was refused, although on the basis that there were not sufficient prospects of the applicant overturning factual findings, on which its challenges to the approach taken by the Court were premised: Ryledar Pty Limited and Anor v Euphoric Pty Limited [2007] HCA Trans 698; see also Byrnes v Kendle (2011) 243 CLR 253, 285 ‑ 286 [101], 290 [115] (Heydon & Crennan JJ); see also the discussion in M Smith, Rectification of Contracts for Common Mistake, Jocelyne v Nissen, and Subjective States of Mind (2007) 123 LQR 116.

   [18] Ryledar (657) [269] (Campbell JA, Mason P agreeing at 606 [1]).

   [19] Ryledar (642) [182] (Tobias JA, Mason P agreeing at 606 [1]), (658 ‑ 668) [273] – [316] (Campbell JA, Mason P agreeing at 606 [1]). 

   [20] Joscelyne v Nissen [1970] 2 QB 86, 99 (Russell LJ); cf Pukallus, (452) (Wilson J, Gibbs CJ agreeing at 448) where it was noted, but not determined, that an outward expression of accord may not be required.

2. On the other hand, in Tipperary Developments Pty Ltd v Western Australia, McLure JA referred to the need for an 'objectively determined common intention' in order to obtain an order for rectification.[21]  It is not entirely clear what her Honour meant by this statement, but two preliminary observations can be made.

   [21] Tipperary (547) [281] (McLure JA, Wheeler JA agreeing at 493 [1] - [2] & Newnes JA agreeing at 552 [305]); special leave to appeal to the High Court on this point (amongst others) was refused: Tipperary Developments Pty Ltd v State of Western Australia [2010] HCA Trans 136. Recent authority in the United Kingdom has favoured the adoption of an objective test, namely what an objective observer would have thought the intentions of the parties to be: Chartbrook Ltd v Persimmon Homes Ltd [2009] 4 All ER 677, 700 [60] (Lord Hoffman); see also the discussion in D Hodge QC, Rectification, 2010, Chapter 3.

3. First, her Honour's statement needs to be understood in its context.  Tipperary was a case where rectification was sought on the ground that the written agreement (a deed of release) did not embody the parties' earlier oral agreement (the oral release agreement).  In such cases, the existence of a common intention as to the earlier oral agreement is always required to be objectively established.[22]  Further, the ground of appeal concerning rectification of the deed of release overlapped with the appellant's claim that there was no proper evidentiary basis for the finding of an earlier oral release agreement.[23]  The trial judge's finding that there was an oral release agreement involved a rejection of the evidence given by Mr Anderson that there was no earlier oral agreement to release the State of Western Australia and that he signed the deed of release on that basis.  In other words, evidence of Mr Anderson's subjective intention had been admitted, but the trial judge applied an objective test in determining that the parties had agreed that the oral release agreement was to release the State from liability.[24]  McLure JA rejected the appellant's claim that there was no proper evidentiary basis for that finding.[25]  It is in that context that her Honour's reference to the 'objectively determined common intention' of the parties in the context of the rectification claim must be considered. 

   [22] Cf Chartbrook (699 ‑ 700) [59] (Lord Hoffman).

   [23] Tipperary (548) [284] (McLure JA, Wheeler JA agreeing at 493 [1] - [2] and Newnes JA agreeing at 552 [305]).

   [24] The trial judge's findings are set out in Tipperary, (546 ‑ 547) [275] (McLure JA). 

   [25] Tipperary, (548) [284] (McLure JA).

4. The second and related observation is that the basis for the ground of appeal concerning rectification did not necessitate any discussion of the test for the existence of a common intention.  The Court does not appear to have been referred to the decision in Ryledar, nor to any of the authorities concerning what was required to establish the common intention of the parties relevant to a rectification claim.

5. Understood in their context, references by McLure JA to the objective determination of a common intention appear to contemplate the admission of evidence of the subjective intention of the parties, but a consideration of that evidence, together with any other relevant evidence, as part of an overall objective determination of whether a common intention existed.  From that perspective, there may be little difference in the outcome of that approach to common intention as compared with the approach adopted in Ryledar, given that in Ryledar the subjective intention of each party is required to be disclosed to the other party before a common intention may be discerned.

6. In the present case, for the reasons I set out below, whichever test for common intention is used, there was clear and convincing evidence to support the finding that the parties had a common intention up until the time when the Contract was executed that the Retirement Benefit would be payable if RCR terminated Mr Russell's employment pursuant to cl 11.3(b) of the Contract, irrespective of whether he had met the five‑year qualifying period referred to in cl 7  of the Contract.

7. The final principle which it is necessary to bear in mind in relation to a claim for rectification is that because the remedy of rectification involves rewriting the contract so that it no longer departs from the common intention of the parties (and the order made by the court will specify how that is to occur), the common intention of the parties has to be sufficiently well defined and clear to be able to be stated in words that can be incorporated in the contract.[26] 

(b)     Whether the parties held a common intention that Mr Russell would be paid the Retirement Benefit if dismissed pursuant to cl 11.3(b) at any time before Mr Russell had completed five years of service as the EGM

Mr Russell's evidence

[26] Franklins, (711) [446] ‑ [447] (Campbell JA, Allsop P agreeing at 620 [30], Giles JA agreeing at 621 ‑ 622 [42]).

1. Mr Russell's evidence was that he discussed the draft Contract and his proposed amendments to it with Mr Noordhoek by telephone on 2 March 2009.  In the course of that conversation Mr Russell expressed his concerns about accepting the EGM position, particularly with regard to the likely restructure of Positron that he expected would be initiated by the incoming CEO, and having regard to the term of the restraint period referred to in the draft Contract.  Mr Russell's evidence was that[27]

   Mr Noordhoek used words to the effect that 'in the event of my employment being terminated by RCR as part of a restructure, then RCR would not seek to enforce the restraint period for more than 12 months'.  He further stated words to the effect that I would be appropriately reimbursed during the restraint period because I would be paid a retirement benefit equivalent to one year's salary and superannuation if my employment was terminated at any time by RCR other than for cause.

   [27] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [19].

2. Mr Russell's evidence was that Mr Noordhoek told him that 'RCR would prepare [the Contract] to ensure that [Mr Russell] would be paid the Retirement Benefit on these terms'.[28]

   [28] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [19].

3. Mr Russell's evidence was that on 4 March 2009 he met with Ms Higgins and then Mr Noordhoek at RCR's premises in Welshpool.  Ms Higgins provided Mr Russell with a copy of the proposed contract under cover of a letter from RCR dated 3 March 2009 formally offering him the EGM position.  Mr Russell said that he then met with Mr Noordhoek.  Mr Russell was still concerned about the security of his employment if he accepted the EGM position and about the terms of the Contract in relation to his entitlement to the Retirement Benefit.  His evidence was that he sought assurances from Mr Noordhoek that in the event that his employment was terminated (other than for cause) he would still be paid the Retirement Benefit even if he had not completed the five years of service referred to in cl 7.1 of the Contract. 

4. Mr Russell's evidence was that in the course of his discussion with Mr Noordhoek on 4 March 2009, Mr Noordhoek told him on three separate occasions that if his employment was terminated by RCR (other than for cause) he would be paid the Retirement Benefit, irrespective of whether Mr Russell had completed five years of service for RCR.  Mr Russell's evidence was that when he first sought assurances in relation to the payment of the Retirement Benefit:[29]

   Mr Noordhoek responded by stating words to the effect that:

   (a)If RCR terminated my employment, other than for cause, then I would be paid the retirement benefit … regardless of when my employment was terminated.

   (b)The clauses in [the Contract] that dealt with my Retirement Benefit were common to the services agreements of other executives at RCR and were intended to protect senior personnel from a take-over of RCR, a major restructure or management change that occurred prior to the completion of a contract period.

   (c)Those other EGMs on services agreements with the same terms as mine, who had left before the completion of their contract period, had been paid the full amount of their retirement benefit.  …

   [29] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [23].

5. Mr Russell said that at the same meeting he also asked Mr Noordhoek why the restraint period in his contract was for a period of up to five years, when, in his conversation with Mr Noordhoek on 2 March 2009, Mr Russell had queried the period of the restraint.  Mr Russell's evidence was that he had requested an amendment to the restraint clause, and that that had not been made.[30]  Mr Russell's evidence was that Mr Noordhoek then said words to the effect that:[31]

   RCR would not seek to enforce the restraint period in clause 11.3 [sic] of my [Contract] for more than 12 months and that part of the purpose behind paying the Retirement Benefit was to appropriately reimburse executives for the period for which they were restrained from working for a company in competition with RCR.  Mr Noordhoek again stated words to the effect that I would be entitled to payment of the Retirement Benefit equal to one year's salary and superannuation no matter when RCR terminated my employment provided that my employment was not terminated for cause. 

   [30] ts 34.

   [31] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [27].

6. Mr Russell said that he and Mr Noordhoek then discussed the likely attitude of the incoming CEO, Mr Dalgleish, to Mr Russell's appointment to the EGM position.  Mr Russell said that[32]

   Mr Noordhoek … stated words to the effect that in the event that Mr Dalgleish did not wish to continue my employment as EGM of Positron, or if my employment was otherwise terminated by RCR except for cause, then I would be paid the Retirement Benefit in cl 7.1 of [the Contract] in addition to any other entitlements I might have.

   [32] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [31].

7. Mr Russell's evidence was that[33]

   [A]t the conclusion of my meeting with Mr Noordhoek, I was left in no doubt that, under the terms of [the Contract] I would receive a retirement benefit equivalent to one year's salary and superannuation if RCR terminated my employment, other than for cause, regardless of whether I had been employed in the position of EGM for five years at that time.

   Whether Mr Russell's evidence should be accepted

   [33] Exhibit 18, Witness Statement of David William Russell dated 22 November 2011 [32].

8. I approached Mr Russell's evidence with some caution, because there is always a risk that with the benefit of hindsight a party may, even sub-consciously, recast events in a way which is self‑serving.  However, having considered the content of Mr Russell's evidence, the manner in which he gave it, and having considered his evidence within the context of the evidence as a whole, I accept Mr Russell's evidence as to the conversations he had with Mr Noordhoek on 2 and 4 March 2009.  Mr Russell impressed me as a truthful witness, who gave evidence frankly, who was willing to accept that he had been wrong in the past, but who, in cross‑examination, consistently maintained his recollection of the events in question. 

9. Mr Noordhoek did not attend to give evidence.  I do not draw any inference adverse to RCR from the fact that Mr Noordhoek was not called, but his absence meant that there was no direct evidence of his conversations with Mr Russell other than the evidence given by Mr Russell.  I note that Mr Russell's evidence in relation to his conversation with Mr Noordhoek on 2 March 2009 was not challenged in cross‑examination. 

10. Furthermore, as I explain below, Mr Russell's evidence was consistent with other evidence that provided an indication of Mr Russell's intentions and understanding of the Contract, and of Mr Noordhoek's intentions and understanding of the Contract. 

11. Counsel for RCR submitted that Mr Russell's evidence should not be accepted for three reasons.  First, counsel submitted that Mr Russell's evidence was inconsistent in a number of respects.  Counsel pointed out that it was accepted by Mr Russell in cross‑examination that, at their meeting on 4 March 2009, Mr Noordhoek told him that the Retirement Benefit was subject to a five‑year qualifying period.[34]  However, that evidence was entirely consistent with the evidence‑in‑chief given by Mr Russell, which was that, in his meeting with Mr Noordhoek on 4 March 2009, Mr Russell queried why the qualifying period for the Retirement Benefit under cl 7.1 of the Contract was five years, when Mr Russell was aware that the contracts of other RCR executives specified qualifying periods of three years.  Mr Russell's evidence‑in‑chief was that Mr Noordhoek advised him that the change in the qualifying period to five years was in accordance with a decision of the Board.  Mr Russell's evidence was also consistent with Ms Higgins' evidence in relation to this part of the conversation between Mr Russell and Mr Noordhoek, for which she was present. 

    [34] ts 39. 

12. Counsel for RCR also submitted that Mr Russell's evidence was inconsistent with two prior statements to the effect that Ms Higgins had discussed the Retirement Benefit with him.  Counsel for RCR pointed to an email sent by Mr Russell to the members of the RCR Board in January 2010, and to the Statement of Claim initially filed on Mr Russell's behalf in these proceedings (which was later amended), in which Mr Russell had claimed that he had held discussions with Ms Higgins in relation to the Retirement Benefit, or that Ms Higgins was present when Mr Noordhoek discussed the Retirement Benefit with Mr Russell.  In contrast, in his evidence‑in‑chief[35] and in cross‑examination,[36] Mr Russell was adamant that Ms Higgins was neither present when he discussed the Retirement Benefit with Mr Noordhoek, nor that he discussed the Retirement Benefit with Ms Higgins.  However, Mr Russell said that he discussed with Ms Higgins the general terms of the Contract, and the amendments that he had made to the draft Contract.[37]  Counsel for RCR submitted that this was a very significant mistake on Mr Russell's part, and that it suggested at the least that Mr Russell's evidence as to the meeting on 4 March 2009 was unreliable. 

    [35] Exhibit 19, Witness Statement of David William Russell in Reply dated 27 February 2012 [9].

    [36] ts 35 ‑ 36, 39.

    [37] ts 47.

13. I am not persuaded that these inconsistencies warrant my rejection of Mr Russell's evidence as to his discussions with Mr Noordhoek on 4 March 2009, for three reasons.  First, Mr Russell quite frankly accepted that what was originally pleaded in the Statement of Claim was wrong[38] and that what was set out in his email to members of the Board on 8 January 2010 was wrong.[39]  He did not try to embellish or explain the inconsistency, other than to say that he had been mistaken.  I accept that his mistake was a genuine one.  Secondly, Mr Russell's evidence at the hearing - to the effect that Ms Higgins was not present when he discussed the Retirement Benefit with Mr Noordhoek on 4 March 2009 - was consistent with Ms Higgins' acknowledgment that she was not present for the entirety of the discussion between Mr Russell and Mr Noordhoek.[40]  Thirdly, I do not accept that the inconsistencies identified by counsel, when considered in their context, were as significant as he suggested.  It is, for example, not uncommon for amendments to be made to pleadings once a party sits down to prepare a detailed statement of the evidence he or she will give in a hearing, and turns his or her mind to the specific details of particular conversations and events.  An amendment in those circumstances does not necessarily cast doubt on the reliability of the party's evidence at the trial. 

    [38] ts 37.

    [39] ts 39.

    [40] ts 79.

14. Counsel for RCR also pointed to an email sent by Mr Russell to his wife at his home email address on 20 August 2009, following a conversation between he and Mr Crighton in relation to his contractual entitlements in the event that his employment was terminated.[41]  Counsel for RCR submitted that it was curious that that email made no reference to any discussion that Mr Russell had with Mr Noordhoek on 4 March 2009.  In my view, that omission was hardly surprising.  The purpose of the email appears to have been to record Mr Russell's conversation with Mr Crighton in August 2009.  There was no need to refer to a much earlier conversation with Mr Noordhoek in March 2009. 

    [41] Exhibit 8.

15. The second reason advanced by counsel for RCR as to why Mr Russell's evidence of his conversation with Mr Noordhoek on 4 March 2009 should not be accepted was that, given Mr Russell's concern about the terms of the Contract, it was 'inconceivable that Mr Russell, with his decades of senior management experience and with his training in commercial law … might not have insisted upon an amendment to his contract' to make the position clear.[42]  I do not accept that submission.  It was clear that by the end of their meeting on 4 March 2009, and in view of Mr Noordhoek's repeated assurances as to the operation of the terms of the Contract in relation to payment of the Retirement Benefit, Mr Russell was satisfied about what the terms of the Contract meant.  As I have noted above, his evidence was that he was left in 'no doubt' that under the terms of the Contract, he would receive a Retirement Benefit if RCR terminated his employment, other than for cause, regardless of whether he had been employed in the position of EGM for 5 years at that time.

    [42] ts 94.

16. In those circumstances, it is not surprising that Mr Russell did not seek an amendment to the Contract.  Given Mr Russell's experience in working with contracts, his years of work experience generally, and the fact that he clearly had not been reluctant to seek amendments to the Contract where he thought they were required, the fact that Mr Russell did not seek an amendment of cl 11.3(b) of itself supports the conclusion that he was satisfied as to the meaning of that term.

1. The third reason advanced by counsel for RCR as to why Mr Russell's evidence of his conversation with Mr Noordhoek on 4 March 2009 should not be accepted was that Mr Russell did not mention that conversation when his employment was terminated on 16 December 2009 and that it was 'inconceivable' that he would not have done so.[43]  I do not accept that submission.  The evidence was that Mr Russell was advised that his employment was being terminated with immediate effect, and he was asked to return his keys and leave the building immediately.  Even though Mr Russell had for some time held concerns about the security of his position, it must nevertheless have been a highly stressful situation.  In those circumstances, it is not at all surprising that Mr Russell did not think to mention his conversation with Mr Noordhoek many months before.  However, Mr Russell did have the presence of mind to ask why the termination letter he had been given did not refer to payment to him of the Retirement Benefit which he was owed pursuant to the Contract.  That Mr Russell made this inquiry supports the conclusion that his understanding was that he was entitled to the payment of the Retirement Benefit pursuant to the terms of the Contract. 

   [43] ts 95.

2. For completeness, I note that Ms Higgins' evidence was that Mr Ramse told Mr Russell that he was not entitled to the Retirement Benefit as he had not worked with RCR for a minimum of five years, and that Mr Russell replied that 'the Retirement Benefit clause could be interpreted in a number of ways and that he would seek legal advice on the matter'.[44]  Mr Russell's evidence was that no words to this effect were said by him or Mr Ramse.  I accept Mr Russell's account of what he said at the meeting.  His account is supported by a note he made immediately after the meeting concluded as to what had been said during the meeting.  In contrast, Ms Higgins accepted that she made no notes of the meeting.[45]  Her recollection of the events of that meeting was clearly imperfect, as evidenced by the fact that she made amendments to her witness statement at the time of giving evidence.[46] 

   [44] Exhibit 23, with the statement of Charmaine Keri-Ann Higgins dated 13 February 2012 [32].

   [45] ts 70 ‑ 71.

   [46] ts 68.

3. As I have already noted, Mr Ramse did not attend to give evidence.  Given the limited significance of the conversation on 16 December 2009 to Mr Russell's claims overall, it is not necessary to engage in a consideration of whether an inference adverse to RCR should be drawn for its failure to call Mr Ramse to give evidence as to his conversation with Mr Russell on 16 December 2009.[47]  The present factual issue can be resolved as I have indicated, having regard to the available evidence. 

   Other evidence as to Mr Noordhoek's intention and understanding of the Contract

   [47] See also at para [130] below in relation to Jones v Dunkel (1959) 101 CLR 298.

4. There was also other evidence which supported the conclusion that Mr Noordhoek intended that the terms of the Contract would be that Mr Russell would be paid the Retirement Benefit if his employment were terminated by RCR, other than for cause, and irrespective of whether he had served as the EGM for five years.  Mr Crighton gave evidence that he spoke with Mr Noordhoek prior to Mr Noordhoek finalising the terms of the remuneration package which was to be offered to Mr Russell.  According to Mr Crighton, Mr Noordhoek said words to the effect that the remuneration package offered to Mr Russell would need to be attractive because Mr Russell had already expressed some reluctance to accept the EGM position.  Mr Crighton also gave evidence that he and Mr Noordhoek agreed that Mr Russell should be offered the same retirement benefits enjoyed by Mr Crighton and other senior managers on the same level, namely that he would be entitled to receive a retirement benefit equivalent to one year's salary and superannuation in the event that his employment was terminated by RCR, other than for cause, at any time. 

5. Mr Crighton also gave evidence that Mr Noordhoek later told him that he had prepared the Contract with the intention that it would provide for Mr Russell to be paid the Retirement Benefit if his employment was terminated by RCR at any time, other than for cause.

6. There is one final matter to which I should refer, for completeness.  Counsel for RCR referred to cl 24 of the Contract which provided that the parties agreed that the Contract -

   embodies the sole and entire agreement and understanding between them and relevant to the subject matter herein contained and supersedes all prior understandings, … agreements … whether oral or written, express or implied, with reference to the subject matter hereof.

7. Counsel for RCR submitted that the existence of this clause cast doubt upon the existence of the requisite common intention, although he conceded that such doubt was not conclusive.  It suffices to say that in my view, this clause does not (on its terms), and could not, operate to preclude recourse to evidence which establishes the intentions of the parties as to what terms would be included in the Contract, or as to their understanding of the meaning of the terms included in the Contract, for the purposes of a rectification claim.[48]

   Findings as to the parties' intentions and understanding of the Contract

   [48] Cf MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152, 154 ‑ 155 (MacPherson JA, Moynihan JA agreeing at 156), 156 (Davies JA).

8. Having regard to the evidence to which I have referred, I find that Mr Russell's intention, from 2 March 2009 until the execution of the Contract on 4 March 2009, was that the Contract would include a term making clear that he would be entitled to payment of the Retirement Benefit, irrespective of the duration of his service, if his employment as the EGM of Positron was terminated by RCR other than for cause.  I further find that Mr Russell understood that the terms of the Contract which he executed on 4 March 2009 had that meaning. 

9. I also find that in formulating the terms of the Contract, it was Mr Noordhoek's intention that the Contract would include a term making clear that Mr Russell would be entitled to payment of the Retirement Benefit, irrespective of the duration of his service, if his employment as the EGM of Positron was terminated by RCR other than for cause.  I find that Mr Noordhoek's intention continued until he executed the Contract on 4 March 2009.  I further find that when they executed the Contract, both Mr Russell and Mr Noordhoek understood that cl 11.3(b) of the Contract had this meaning. 

10. I find that both Mr Russell and Mr Noordhoek conveyed their intentions and understanding of the Contract to each other. 

11. For the same reasons, I find that the evidence to which I have referred establishes objectively that Mr Russell and Mr Noordhoek had a common intention that the Contract would contain a term to the effect that Mr Russell would be paid the Retirement Benefit if RCR terminated his employment as EGM without cause, irrespective of the period of Mr Russell's service, and that that common intention continued up until the execution of the Contract, and that at the time of their execution of the Contract, both Mr Russell and Mr Noordhoek understood that cl 11.3(b) had this meaning. 

(c)     Whether there was a disconformity between that common intention and the terms of the Contract and whether that disconformity was the product of a common mistake

1. As I have already explained, on its proper construction, cl 11.3(b) did not have the effect that Mr Russell would be paid the Retirement Benefit if RCR terminated his employment as EGM other than for cause, irrespective of the period of Mr Russell's service.  As I have found, it was the parties' intention that the Contract should contain such a clause.  It was also their understanding that cl 11.3(b) had that meaning.  Therefore, there was a disconformity between the parties' common intention and the terms of the Contract. 

2. Both Mr Russell and Mr Noordhoek were mistaken.  This is a case where the parties were mistaken about the meaning and effect of the words used in cl 11.3(b) of the Contract. 

3. Counsel for RCR submitted that in fact the evidence did not support the conclusion that Mr Russell was mistaken about the meaning of cl 11.3(b).  He submitted that the fact that in their meeting on 4 March 2009, Mr Russell sought assurances from Mr Noordhoek as to the payment of the Retirement Benefit if his employment were terminated demonstrated that Mr Russell knew that cl 11.3(b) did not have the meaning he now contended for, and hence that he was not, in fact, mistaken as to the meaning and effect of cl 11.3(b).  Counsel submitted that the disconformity between the meaning of cl 11.3(b) and the intention of the parties was not due to any mistake, but resulted from Mr Russell's failure to insist on an amendment to cl 11.3(b) to clarify its meaning.[49]

   [49] ts 106.

4. I am unable to accept that submission.  As I have already explained, I am satisfied that at the conclusion of his meeting with Mr Noordhoek on 4 March 2009, Mr Russell held the belief that cl 11.3(b) meant that he would be paid the Retirement Benefit if his employment were terminated by RCR other than for cause within five years, and that belief was mistaken. 

(d)     The order which should be made

1. Counsel for Mr Russell submitted that the Contract should be rectified in either of two alternative ways.  First, it was submitted that the Contract should be rectified to read as follows:

   Cl 11.3(b) should be amended to read:

   Otherwise than as specified in this cl 11 , the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the retirement benefits as per cl 7  Retirement Benefit calculated in accordance with cl 7.1 and in the manner provided for in cl 7 .2 regardless of the date on which Retirement occurs.

   Cl 7 .1 should be amended to read:

   Upon retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date save and except for Retirement pursuant to cl 11.3(b), the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:

   ·One (1.0) times the total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.'

2. In the alternative it was submitted that the Contract should be rectified to read as follows:

   Cl 7 .1 should be amended to read:

   Upon retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date save and except for Retirement pursuant to cl 11.3(b), the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:

   ·One (1.0) times the total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.'

3. In making an order for rectification the Court should not do anything more than rewrite the contract to the minimum extent that is necessary so that the contract no longer fails to reflect the parties' common intention.  In Franklins, Campbell JA observed that[50]

   Crafting a remedy in rectification involves close attention to the words of the document. However, in the prior step of making a finding about a common intention, for the purpose of a rectification order, it is important that the court not confine itself to a narrow focus on particular words of the document. It is the document as a whole that is rectified, and the point of the exercise is that, once rectified, the document will not be contrary to the common intention of the parties to the document. Thus if a particular change to some words will result in some other words of the document operating in a different way, rectification will be justified only if that different operation of those other words is shown to be in accordance with the common intention of the parties.

   [50] Franklins, (711) [450] (Campbell JA, Allsop P agreeing at 620 [30], Giles JA agreeing at 621 ‑ 622 [42]).

4. Although the focus of counsel's submissions, and of the evidence (at least implicitly) was largely on the terms of cl 11.3(b) of the Contract, it seems to me that to ensure that the Contract clearly reflects the common intention of the parties which I have found, both cl 11.3(b) and cl 7.1 of the Contract should be amended, in terms of the first alternative proposed by counsel for Mr Russell, and I propose to make an order to that effect.

1. The misleading or deceptive conduct claim

1. In view of my conclusions in relation to the rectification claim, it is possible to deal with the misleading or deceptive conduct claim in rather briefer terms.  In order to succeed on his misleading or deceptive conduct claim, Mr Russell needs to establish that the Representations were made, that they pertained to a future matter, that they were misleading or deceptive, that they occurred in trade and commerce, that Mr Russell relied on the Representations, and that as a result of his reliance on the misleading Representations Mr Russell suffered loss and damage.

2. Counsel for RCR conceded that if I accepted Mr Russell's evidence and found that the Representations were made it would follow that having regard to s 51A of the TP Act, the Representations pertained to future matters and were misleading and that I should so find.[51] 

   [51] Defendant's Outline of Submissions dated 20 July 2012 [21]; ts 64 and 96.

3. However, counsel for RCR submitted that nevertheless Mr Russell's claim should be dismissed because the Representations did not occur in trade or commerce, that the evidence did not support a finding that Mr Russell relied on the Representations, and that there was no evidence to support a finding that, even if Mr Russell had relied on the Representations, he had suffered any loss as a result. 

4. It is unnecessary to deal with the rather vexed question as to whether the Representations were made in trade or commerce,[52] or to make a finding in relation to whether and how Mr Russell relied on the Representation.  That is because the misleading or deceptive conduct claim necessarily fails for the reason that the evidence did not support the conclusion that by relying on the Representations Mr Russell suffered any loss or that his loss was equivalent to the amount claimed.

   [52] Cf Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 604 ‑ 605 (Mason CJ, Deane, Dawson & Gaudron JJ); Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330, 338, 340 ‑ 341 (French, Sackville & Conti JJ); Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389, 394 (Wilcox J); Stoelwinder v Southern Health Care Network (2000) 177 ALR 501, 503 ‑ 503 [1] - [6] (Finkelstein J); McCormick v Riverwood International (Aust) Pty Ltd (1999) 167 ALR 689, 692 ‑ 696 [15] - [30] (Weinberg J); Walker v Salomon Smith Barney (2003) 140 IR 433, 472 ‑ 473 [180] - [185] (Kenny J); Mulcahy v Hydro Electric Commission (1998) 85 FCR 170, 212 ‑ 213 (Heerey J); Martin v Tasmania Development and Resources (1999) 163 ALR 79, 98 [76] - [77] (Heerey J).

5. In cases of misleading or deceptive conduct under the TP Act, the measure of damages in tort is the appropriate measure of damages awarded pursuant to s 82(1) of the TP Act.[53]  Because the object of damages in tort is to place the plaintiff in the position in which he or she would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he or she not relied on the representation.[54] 

   [53] Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 6 (Gibbs CJ), 14 (Mason, Wilson & Dawson JJ).

   [54] Gates (13) (Mason, Wilson & Dawson JJ).

6. Although the written submissions provided by counsel for Mr Russell referred to this principle, they did not set out how it was claimed that Mr Russell had suffered loss by virtue of his reliance on the Representations. 

7. The oral submission made by counsel for Mr Russell was that the loss suffered by Mr Russell was 'being held to the restraint period without the benefit of the payment of the Retirement Benefit'.[55]  Counsel for Mr Russell acknowledged that on the question of loss and damage his submission was one involving 'some novelty'.[56] 

   [55] ts 141.

   [56] ts 141, 142.

8. As I understood counsel's very brief submission, it was to the effect that pursuant to the Restraint Clause, Mr Russell would be restrained from working for a competitor, or in any way competing with RCR, for the period referred to in the Restraint Clause. Quite apart from the fact that that submission is at odds with the usual approach to awards of damages for misleading or deceptive conduct under the TP Act, it was not, in any event, supported by any evidence. There was no evidence to establish that Mr Russell had, by virtue of the Restraint Clause, been precluded from working for a competitor, or in competition with RCR. At best, the evidence was that it was possible that RCR's position would have been that it would enforce the Restraint Clause.[57]  There was no evidence from Mr Russell that RCR had attempted to enforce the Restraint Clause much less that the clause had actually been enforced.  However, even if Mr Russell had been precluded from working for a competitor, or in competition with RCR, there was no evidence that Mr Russell had, in any event, suffered a loss as a result. 

   [57] ts 80.

9. There was also no evidence as to the position Mr Russell would have been in had he not acted in reliance on the Representations. 

10. There is one further matter with which I should deal for completeness.  In the course of closing submissions I asked counsel for Mr Russell whether there was any authority that supported his submission as to the basis for the loss claimed by Mr Russell in this case.  Counsel acknowledged that he was unable to point to any such authority, but indicated that if he discovered some authority prior to judgment being delivered, it would be provided to the Court.[58]  Following the completion of the hearing, counsel for Mr Russell filed Supplementary Closing Submissions dealing in part (and quite extensively) with the question of loss in respect of the misleading or deceptive conduct claim.  Those submissions cast the claim in relation to loss in a different way to that advanced in the pleadings and at the hearing, and went beyond anything said on Mr Russell's behalf in written or oral submissions.  The supplementary submissions were the subject of an objection by counsel for RCR, on grounds including that they raised a different case from the one put at trial, and if relied upon, RCR would be deprived of the opportunity to adduce evidence in response to the claim. 

    [58] ts 142.

11. It suffices to say that I have not taken into account the Supplementary Closing Submissions filed on Mr Russell's behalf in relation to loss for the purposes of the misleading or deceptive conduct claim because they went beyond the case put at the trial, and the submissions were made other than pursuant to a grant of leave by the Court, and without the consent of RCR.[59] 

    [59] Cf Guest v Commissioner of Taxation (No. 2) [2007] FCA 412 [14] (Heerey J).

12. The misleading or deceptive conduct claim fails.

1. RCR's 'set‑off' claim

1. RCR claims that if Mr Russell is entitled to payment of damages arising out of the non‑payment of the Retirement Benefit then the amount awarded to him should be reduced by the amount of the Disputed Notice Payment (that is, by $41,666.64).  RCR claims that it paid Mr Russell the Disputed Notice Payment (over and above the one month's salary in lieu of notice which it was required to pay him pursuant to cl 11.3(b) of the Contract) as an ex gratia payment and on the basis that the additional amount exceeded what RCR was contractually liable to pay Mr Russell.

2. Initially, RCR characterised its claim as one in restitution, on the basis of a payment made by mistake.  However, counsel for RCR did not pursue that basis for the claim at trial.  Rather, the sole basis for the claim was that even in the absence of a mistake by RCR, there was a sufficient connection between the nature of the payment sought by Mr Russell, that is, an award of damages arising from the non-payment of the Retirement Benefit, and the nature of the ex gratia payment already made in the Disputed Notice Payment, so as to warrant the set off of the amount of the Disputed Notice Payment against any payment the Court might order RCR to make to Mr Russell.

Does s 32 of the SC Act permit an order for the payment of interest in this case?

1. Section 32(1) of the SC Act provides:

   (1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.

2. It is apparent that the words 'proceedings for the recovery of any money' are intended to have a broad operation. 'Any' such proceedings for the recovery of 'any' money are within the purview of s 32. The breadth of that phrase is further confirmed by the examples given in parentheses, which confirm that a proceeding for the recovery of money applies not only to a proceeding to recover a debt, but also extends to a proceeding where an award of damages is sought.

3. In view of the amendment of the prayer for relief, there is in my view no doubt that these proceedings can be characterised as proceedings for the recovery of money. That is so whether the nature of these proceedings, for the purposes of s 32, pertains to the proceedings as a whole as described in the amended statement of claim, or only to that part of the proceedings on which Mr Russell was successful. That is because the rectification claim is now coupled with a claim for specific performance of the Contract (as rectified) which involves the payment of money or with a claim for damages in lieu of, or in addition to, specific performance of the Contract as rectified. I note that the practical effect of the rectification of the Contract will be that the Contract will be read as if it was originally drawn as containing the rectified term.[71]  The effect of the rectification of the Contract will be that RCR will have been obliged to pay the Retirement Benefit since 17 March 2010 at the latest.  The order for the payment of $297,500 – whether characterised as an order for specific performance, or for damages in lieu thereof, clearly involves the recovery of the payment of the amount of the Retirement Benefit.

   [71] Craddock Brothers v Hunt [1923] 2 Ch 136, 151 (Lord Sterndale MR).

4. I turn, then, to consider why RCR says that interest cannot be awarded under s 32 of the SC Act in this case.

5. Prior to the amendment of the pleadings, RCR submitted that it was not open to the Court to make an order requiring RCR to pay a judgment sum to Mr Russell. However, RCR conceded that if the Court were to make an order that RCR pay Mr Russell a judgment sum, then the Court would have jurisdiction to order the payment of interest pursuant to s 32 of the SC Act, and 'there was no obvious reason it should not do so'.[72] Now that the parties have agreed to the amendment of the Statement of Claim, it appears that RCR's sole objection to an award of interest lies in its submission that the order for the payment of $297,500 which the parties have agreed is to be made by the Court is not an order for the payment of a judgment sum, but rather an order for specific performance. RCR contends that an order for the payment of interest pursuant to s 32 of the SC Act cannot be made in respect of an order for specific performance.

   [72] Defendant’s submissions, 18 December 2012, [21].

6. In support of that contention, RCR relied upon the decision of Le Miere J in Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd.[73]In that case, the defendant (FOS) in its counterclaim sought an order for the specific performance of its contract with the plaintiff (Utopia).  That contract required Utopia to act in accordance with a determination made by FOS, by paying a sum of money to the Rees, who were clients of Utopia in its capacity as a financial services provider, but who were not parties to the contract between Utopia and FOS.  Le Miere J held that an order for specific performance should be made.  FOS also sought an order for the payment of interest.  Le Miere J concluded that there was no basis upon which a payment of interest could be made.  His Honour held:[74]

   [73] Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd [2012] WASC 279.

   [74] Utopia Financial Services Pty Ltd v Financial Ombudsman Service Ltd [2012] WASC 279 [60].

   The counterclaim is not a proceeding for the recovery of any money.  It is a claim for specific performance of Utopia's obligations under the contract between Utopia and FOS.  Paragraph 9.5 of the Terms of Reference provides that FOS may decide that the Financial Services Provider [ie Utopia] pay interest on a payment to be made by the Financial Services Provider to the Applicant [ie the Rees].  However, FOS did not decide that Utopia pay interest on the payment to the Rees.  There is no basis for the court to order Utopia to pay interest.

7. Factually, Utopia is very different from the present case, particularly as the only order sought in the counter claim in Utopia was one for the specific performance of a contractual obligation.  The case is distinguishable from that perspective.  More importantly, Utopia does not establish, as a general proposition, that an order for the payment of interest pursuant to s 32 cannot be made in any case where specific performance is sought. Although his Honour's reasons are not fulsome, it appears that the basis on which Le Miere J held that an order for interest under s 32 could not be made in that case was that the order for specific performance which was sought and made was for the performance of a contractual obligation between Utopia and third parties, namely the Rees. FOS' counterclaim against Utopia was not one in which it sought to recover any money from Utopia. The contractual obligation which FOS sought to have specifically performed was a term of a contract between FOS and Utopia, by which Utopia agreed to comply with a determination made by FOS in a dispute between Utopia and the Rees. The effect of that determination was to require Utopia to pay money to the Rees. FOS would receive no monetary payment as a result of the specific performance of its contract with Utopia. Hence, his Honour went on to observe that the counterclaim was not a proceeding for the recovery of any money but was a claim for specific performance of Utopia's obligations under the contract between Utopia and FOS.

8. When his Honour went on to discuss how interest could have been awarded, it is apparent that he was not discussing an award of interest payable to FOS, pursuant to s 32 of the SC Act. Rather he was discussing how interest could have been payable by Utopia to the Rees. The only means by which this would have been possible had nothing to do with s 32 of the SC Act, but depended instead on FOS having included in its determination a decision that Utopia should pay interest to the Rees. An order for the specific performance of Utopia's contractual obligation to FOS would thus have resulted in Utopia's payment to the Rees of a sum for interest. As FOS had not included an interest component in its determination, and as s 32 of the SC Act did not apply, no interest was ultimately payable to the Rees.

9. In the present case, even if the proposed order for the payment of $297,000 is characterised, as RCR submits, as an order for specific performance of the Contract as rectified, the effect of that order will clearly result in Mr Russell's recovery of money. In the circumstances, the action can in my view properly be characterised as a proceeding for the recovery of money, and an order may be made for the payment of interest by RCR to Mr Russell, pursuant to s 32 of the SC Act.

10. In view of that conclusion it is unnecessary to consider the alternative bases upon which Mr Russell contended that interest could be awarded.

The costs claim ‑ overview of the parties' positions

1. References to costs in the reasons below refer to the costs of the action, other than in respect of the counterclaim (an order as to the costs of the counterclaim having been agreed between the parties). 

2. In relation to costs, Mr Russell seeks an order that RCR pay his costs of the action up to 15 February 2012 on the usual party/party basis, and thereafter that RCR pay his costs on an indemnity basis, on the basis that RCR unreasonably refused a Calderbank offer.[75]

   [75] Calderbank v Calderbank [1975] 2 All ER 333.

3. RCR, on the other hand, seeks orders that it pay one third of Mr Russell's costs of the action, and an order that Mr Russell pay two thirds of RCR's costs of the action. 

4. I will deal first with the costs of the action generally, and then deal with the application for an order for indemnity costs based on the rejection of the Calderbank offer.

The costs of the action ‑ the parties' submissions

1. Counsel for Mr Russell submitted that RCR should pay Mr Russell's costs of the action, because Mr Russell was successful in the action, and the general rule is that the Court will order that a successful party recover his costs.  Counsel for Mr Russell submitted that the action involved a narrow dispute, and that the evidence in respect of each of the three claims made by Mr Russell was the same.  He submitted that the rectification claim (in respect of which Mr Russell was successful) required a consideration of the terms of the contract, and that an analysis of those terms was necessary for the breach of contract claim.  He also submitted that the rectification claim required that evidence be given as to the pre‑contractual negotiations and their context, and that the misleading and deceptive conduct claim involved a different legal characterisation of the same evidence.  He submitted that the only 'extraneous' issue (by comparison) was the set off argument, and Mr Russell was successful on that issue. 

2. In contrast, counsel for RCR submitted that the Court should make orders that it pay one third of Mr Russell's costs of the action, and that Mr Russell pay two thirds of RCR's costs of the action, pursuant to O 66 r 2(a) of the Rules of the Supreme Court 1971 (WA) (RSC). He submitted that in this case there were three distinct causes of action, and although there was some factual overlap, those three causes of action did not involve the same facts.

3. In the course of his submissions, counsel for RCR accepted that there was quite a significant overlap in the evidence and the facts relevant to each cause of action.  However, he pointed out that the legal issues raised by each cause of action were different, and dealing with them involved time and expense for RCR.  He submitted that the appropriate way of delineating between those costs which were to be paid by Mr Russell and those to be paid by RCR was on the basis that each cause of action advanced by Mr Russell represented approximately one third of the entire action. 

4. In respect of the set‑off claim, counsel for RCR noted that that claim was not one of the causes of action, and it was therefore inappropriate to take the resolution of that claim into account in determining the extent to which Mr Russell's costs should be paid by RCR.  Furthermore, he submitted that if the Court determined that no order should be made for the payment of any sum to Mr Russell, then no basis would have existed for taking into account any set off in any event.  In those circumstances, he submitted that the costs of the set‑off component of RCR's case should be paid by Mr Russell.

Disposition of applications for costs other than the application for indemnity costs

1. By virtue of s 37 of the SC Act, the Court has a broad discretion to make orders in relation to the costs of, and incidental to, a proceeding.  However, that statutory discretion, while broadly stated, is not unqualified and the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation.[76]  The most important factor which guides the exercise of the costs discretion is the result of the litigation.[77] Generally speaking, the Court will make an order that the successful party to an action recover his costs from the unsuccessful party. This principle is reflected in O 66 r 1(1) RSC. In Oshlack v Richmond River Council McHugh J explained the rationale for this approach as follows:

   [76] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 96 [65] (McHugh J).

   [77] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 96 ‑ 97 [66] (McHugh J).

   The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

2. The starting point for considering the proper exercise of discretion with respect to costs is thus that Mr Russell as the successful party should be able to recover his costs from RCR.

3. However, there are exceptions to this general approach to costs. Generally speaking, these exceptions derive from the conduct of the successful party in relation to the litigation, or leading up to the litigation, which is seen to disentitle that party to the benefit of the exercise of the discretion in its favour.[78]  Considerations of that kind do not arise here.

   [78] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 [69] (McHugh J).

4. On the other hand, Mr Russell was unsuccessful in respect of two out of the three causes of action he pursued against RCR. The question is whether, and if so, how, that should be taken into account in the exercise of the discretion to award costs. The RSC contemplate that a departure from the usual order as to costs will sometimes be required if a successful party has not been successful on all of the issues raised in the proceedings. By way of example, O 66 r 1(3) provides:

   Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.

5. By way of further example, O 66 r 2 RSC relevantly provides:

   In the absence of any special order ‑

   (a)where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought.

6. These provisions, and the authorities pertaining to them, were recently discussed by the Court of Appeal in Souter v Condor Developments Pty Ltd.[79]  Newnes JA (with whom Buss and Murphy JJA agreed) made the following observations about the application of these provisions:[80]

   [79] Souter v Condor Developments Pty Ltd [2012] WASCA 22.

   [80] Souter v Condor Developments Pty Ltd [2012] WASCA 22 [27].

   It is trite law that the court has a very wide discretion as to costs, albeit it is a discretion to be exercised judicially. The general rule is that a successful party is entitled to an order for costs: O 66 r 1(1), Rules of the Supreme Court 1971 (WA). There are, however, two well-established exceptions to that rule to which it is necessary to refer.

   First, where a party, although generally successful, has failed on some issue or issues which increased the costs of the action, the court may order the party to pay the costs of those issues: O 66 r 1(3). But that is a power to be exercised with caution and not as a matter of course. While parties should be encouraged to litigate only those matters which are properly and reasonably in issue, parties should not be dissuaded by the risks of an adverse costs order from canvassing all issues which might be material to the proper determination of a case: Keet v Ward.  Moreover, any practice of determining costs on the basis of a painstaking analysis of which party won on which issue would simply add to the time, costs and uncertainty of litigation: see Bowen v Alsanto Nominees Pty Ltd.  Such an approach may also fail to do justice in cases where the issues were intertwined or overlapped, or there was only one substantive issue.  The exercise of the power to adjust an order for costs by reference to particular issues upon which an otherwise successful party has failed will ordinarily be appropriate only where the party has failed on discrete and severable issues which have added to the costs of the action in a significant and readily discernible way: Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell.

   Where the court considers that an order as to costs should reflect the failure of the successful party on some issues in the action, the better approach will often be to award the successful party a proportion of its costs, or to make no order as to costs, rather than attempt to award costs to the respective parties on an issue by issue basis: Phillips Fox (A Firm) v Westgold Resources NL.  Where a party is awarded only a proportion of its costs, the exercise of discretion involved will inevitably be more a matter of art than science, depending upon matters of impression and evaluation, and mathematical precision will be illusory: Amaca; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd.

   Secondly, where a plaintiff pleads two or more causes of action but succeeds on only some of those causes of action, the general rule is that the plaintiff is entitled to costs on the causes of action on which it was successful and the defendant is entitled to costs on the causes of action on which it was successful, as if separate actions had been brought: O 66 r 2(a). Again, and for similar reasons, an order of that kind is not to be made as a matter of course. It is necessary for the court to look at the realities of the case and attempt to do substantial justice in the particular circumstances. In some cases, while it might be strictly correct to say there are different causes of action involved, there may have been only one contest in substance. That will often be so where all causes of action arise out of the one course of dealings, the one transaction, or the same facts, in which case there would usually be one order for the general costs of the action, moulded as necessary to ensure that substantial justice is done: Permanent Building Society v Wheeler [No 2]; Keet v Ward.

   (Case citations omitted.)

7. Having taken into account all of the circumstances of the case, and the submissions of counsel, and having taken into account the approach referred to in Souter, I have formed the view that the proper exercise of discretion in relation to the costs of this case is that RCR should pay Mr Russell's costs of the action. I have reached that view for the following reasons. First, the facts of the case were relatively narrow in compass, and, there was a significant factual overlap between each cause of action. The facts which pertained to the causes of action for breach of contract, or to the misleading and deceptive conduct claim, but not to the rectification claim, were very confined indeed. Secondly, at least in so far as the trial was concerned, the breach of contract and misleading and deceptive conduct claims did not significantly increase the duration of the trial. Finally, in my view this is a case which should be viewed as arising, essentially, from one course of dealing, or one set of facts, between the parties, so that the just outcome in the circumstances is simply to require RCR to pay Mr Russell's costs of the action, rather than to make an order pursuant to O 66 r 2(a) RSC.

1. The only remaining question is whether any alteration to that order should be made to take into account the fact that RCR refused to accept an offer to settle made on behalf of Mr Russell and which expired on 15 February 2012. 

The application for indemnity costs after 15 February 2012

1. Counsel for Mr Russell sought indemnity costs after 15 February 2012, on the basis that RCR had, unreasonably, failed to accept an offer to settle the action by that date. 

2. By letter dated 10 February 2012 to RCR's solicitors, Mr Russell's solicitors made an offer to settle the whole action.  The terms of that offer (the settlement offer) were as follows:

   Our client offers to accept the amount of $330,000 from your client, inclusive of interest, in settlement of the whole proceedings on the basis that your client will pay his costs to be taxed or agreed.

3. The interest component of that offer to settle was calculated as interest at the rate of $48.90 per day (which corresponds to a claim for pre‑judgment interest at 6% per annum). 

4. The letter also made an offer to settle the costs claimed by Mr Russell in a fixed sum, to be paid by RCR within 7 days of settlement (the costs offer).

5. The settlement offer and costs offer contained in this letter were said to be made in accordance with the principles established in Calderbank v Calderbank.[81]The offers were left open until 15 February 2012, but RCR's solicitors did not reply to them. 

   [81] Calderbank v Calderbank [1975] 2 All ER 333.

6. Counsel for Mr Russell submitted that if it is accepted that Mr Russell is entitled to the payment of the sum of $297,500 plus interest, then the total amount awarded to Mr Russell will exceed the settlement offer made and he should be awarded costs on an indemnity basis from the date of the settlement offer. 

7. Counsel for RCR submitted indemnity costs should not be awarded.  He submitted that if an order for interest were not made, the amount of the settlement offer would exceed the sum awarded to Mr Russell.  In addition, counsel for RCR submitted that Mr Russell had not established that it was unreasonable for RCR not to accept the settlement offer, and the mere fact that the settlement offer was less than the amount ultimately awarded was not sufficient, of itself, to establish unreasonableness. 

8. The principles in relation to an award of indemnity costs following rejection of a Calderbank offer were set out by Buss JA in Ford Motor Company of Australia Ltd v Lo Presti.[82]They include that a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable.  The party who makes a Calderbank offer which is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour. 

   [82] Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [16] ‑ [32] (Buss JA, Wheeler JA agreeing).

9. I am not persuaded that Mr Russell has established that RCR's failure to accept his settlement offer was unreasonable, in all of the circumstances, for three reasons.  First, at the time the settlement offer was made RCR expected that it would be able to rely on evidence from Mr Noordhoek, as well as evidence from Ms Higgins, as to the pre-contractual discussions between Mr Russell and Mr Noordhoek.[83]  RCR anticipated that Mr Noordhoek would give evidence which would be inconsistent with Mr Russell's evidence about what the parties had agreed.[84]  On the basis of that anticipated evidence, RCR was entitled to consider that it had at least a fair prospect of success at trial. 

   [83] ts 13 February 2012, 4; ts, 27 November 2012, 197.

   [84] ts 27 November 2012, 183; Letter from Clayton Utz to King Wood Mallesons dated 26 March 2012, attachment JCB22 to affidavit of Jessica Clare Bowman in support of special costs orders, 25 November 2012.

10. Secondly, the offer which was made was effectively an offer to settle for an amount which was approximately 1% less than the amount to which Mr Russell considered he was entitled as at the date of the offer (having regard to the amount of the retirement benefit, and pre‑judgment interest until the date of the offer).  The extent of the compromise involved on Mr Russell's part was extremely modest. 

11. Thirdly, RCR had effectively only three business days to consider the offer (10 February 2012 was a Friday, and the offer expired on Wednesday 15 February 2012 at 5pm).  There was no apparent need for such urgency in the consideration of the offer ‑ the action was not tried for another five months. 

12. In circumstances where RCR was entitled to anticipate that on the strength of its anticipated evidence it had at least fair prospects of success, where Mr Russell's offer involved only a very modest compromise on his part, and where there was only a very short period available in which to consider and respond to the offer before it expired, despite the trial being some months away, I do not consider that it was unreasonable for RCR not to accept the settlement offer put to it.  Mr Russell's application for indemnity costs from 15 February 2012 is refused. 

Conclusion

1. I will make an order for the payment of interest pursuant to s 32 of the SC Act calculated with respect to the amount of $297,500, and an order that RCR pay Mr Russell's costs of the action, to be taxed if not agreed.

2. The parties' solicitors should confer about the form of orders giving effect to these reasons, including the precise amount of interest pursuant to s 32 of the SC Act, and in relation to the additional orders which they have agreed should be made to finalise the action.