Thus v Thredgold - [2004] SASC 343

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
THUS & ANOR v THREDGOLD & ANOR
Judgment of The Honourable Justice Besanko
2 November 2004
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Determination of a preliminary issue - the plaintiffs are the registered proprietors of land adjoining land of which the defendants are registered proprietors - the plaintiffs' property has the benefit of a registered right of way over the defendants' property - the plaintiffs commenced an action seeking declaratory and injunctive orders to protect and enforce the right of way after the defendants commenced works on their property - the defendants constructed a new driveway which they claim was to be the location of a new right of way pursuant to certain agreements between the parties - the parties attended a settlement conference and an agreement was concluded whereby engineers retained by each party would "jointly consider and report in writing whether the gradient of the new driveway can be improved so that it is not so steep" - where the subsequent clauses of the agreement deal with the requirement of a redesign if the engineers conclude the gradient of the new driveway can be improved and the rights of the parties should the engineers conclude the gradient of the new driveway cannot be improved - where both parties assert the existence of different implied terms of the agreement - where the engineers met and jointly considered the new driveway and each was of the view that the gradient of the new driveway could be improved - where the engineers individually produced a number of redesigns - where the defendants have indicated they wish to proceed with Redesign A prepared by their engineer, but the plaintiffs refuse to accept the redesign - where the defendants assert that Redesign A complies with the terms of the agreement and that the plaintiffs are bound to enter into a deed providing for the extinguishing and relocation of the registered right of way in accordance with Redesign A - where the plaintiffs assert that although the engineers jointly considered whether the gradient of the new driveway could be improved they have not jointly agreed upon a redesign and as such relevant conditions in the agreement have not been performed - consideration of the legal principles relevant to the interpretation of a contract and implied terms - whether it is necessary for the purposes of the agreement that there be a joint report of the engineers in writing - whether it is necessary that there be one joint design to achieve an improvement of the gradient of the new driveway or is it sufficient that the engineers agree that the gradient can be improved so and there be a design from one of the engineers which falls within the design parameters of the agreement - held that Redesign A involved an improvement in the gradient of the new driveway and was a redesign within the terms of the agreement.
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Breen v Williams (1996) 186 CLR 71, considered.

THUS & ANOR v THREDGOLD & ANOR
[2004] SASC 343
Civil

BESANKO J: This is an application for the determination of a preliminary issue in an action in this Court. A Master of the Court made an order for the determination of a preliminary issue pursuant to r75.02 of the Supreme Court Rules 1987. The order was made with the consent of both parties and the preliminary issue is identified by reference to certain paragraphs in the pleadings filed by the parties in the action.
Pursuant to an order of the Court the parties have filed a document entitled “Parties Joint Outline of Issues” (“Outline of Issues”). The Outline of Issues states that the issue in dispute is whether an agreement reached at a settlement conference on 22^nd December 2003 is binding and enforceable. The document is signed by the solicitors for each party, and I proceed on the basis that the statements in the Outline of Issues are agreed statements.
The Undisputed Facts
The statement of facts which follows is taken from the Outline of the Issues.
Mr Anthony Thus and Mrs Maree Thus are the plaintiffs in the action. They are the registered proprietors of the property at 4 Yarrabee Road, Greenhill in the State of South Australia. Mr Gavin Thredgold and Mrs Susan Thredgold are the defendants in the action. They are the registered proprietors of the property at 2 Yarrabee Road, Greenhill. The defendants’ property adjoins the plaintiffs’ property. The plaintiffs’ property has the benefit of a registered right of way over the defendants’ property. Both properties are in the Hills Face Zone and slope down from Yarrabee Road in a southerly direction.
The plaintiffs’ action against a third defendant, the Adelaide Hills Council (“the Council”), has been discontinued.
On 15^th October 2003 the plaintiffs commenced an action in this Court seeking, inter alia, declaratory and injunctive orders to protect and enforce the registered right of way. The plaintiffs allege that the defendants have excavated footings for their home so as to infringe the right of way, refused to reinstate the right of way and constructed a new right of way such that it is unsafe and in a location different to that originally represented.
The defendants allege that a new driveway they have constructed on their property is the location of a right of way to be granted to the plaintiffs in substitution for the existing right of way which is to be extinguished. The defendants allege that the new driveway was constructed as a result of:
1.An oral agreement reached on 20^th or 21^st October 2001 during the cooling off period on their contract to purchase their property (“the October 2001 Agreement”); and
2.An oral agreement reached on 18^th April 2002 at a meeting on the plaintiffs’ property to discuss the plaintiffs’ objection to a development application the defendants had lodged with the Council on 11^th January 2002 (“the 18 April 2002 Agreement”).
The plaintiffs deny an agreement was reached in October 2001 or in April 2002 or at all, and they assert that the defendants have proceeded to construct a new driveway hoping later to reach agreement with the plaintiffs as to the relinquishment of the right of way which agreement has not eventuated.
On 3^rd July 2002 the defendants caused a contractor to commence earthworks to create the new driveway (“the new driveway”) over which the right of way was to be granted (on the defendants’ case) or might possibly be granted (on the plaintiffs’ case).
The plaintiffs refused to execute documents to create a new registered right of way over the new driveway and to extinguish the registered right of way. The plaintiffs allege that they have no obligation to do so and wish to retain the registered right of way.
Between 14^th November 2002 and 20^th March 2003 there was correspondence between the parties concerning engineering aspects of the defendants’ new driveway. The plaintiffs obtained a report in respect of the new driveway from an engineer, Mr P Lewis of P A Lewis and Associates. The defendants obtained a report in respect of the new driveway from an engineer, Mr D Combe of David Combe and Associates.
On 20^th March 2003 Mr Combe prepared a document called an amended scope of works (“Mr Combe’s revised proposal”) in respect of the new driveway. On 25^th March 2003 Mr Lewis wrote to Mr Combe and advised that “Mr A Thus has confirmed that the revised proposal of 20^th March 2003 is acceptable”. The plaintiffs deny that their acceptance or otherwise of the engineering aspects of the defendants’ new driveway bind them to the relinquishment of the registered right of way and maintain that insofar as the engineering aspects were acceptable this was merely one aspect critical to the parties reaching any resolution with respect to the prospective relinquishment of the registered right of way.
The defendants have been prepared since 20^th March 2003 to complete the works in accordance with Mr Combe’s revised proposal and the Council’s requirements. On 10^th June 2003 the defendants’ solicitors forwarded a proposed deed to the plaintiffs’ solicitors providing for the extinguishing and relocation of the registered right of way in accordance with Mr Combe’s revised proposal.
On 29^th September 2003, the plaintiffs’ solicitors responded rejecting the proposed deed.
On 10^th October 2003, the defendants’ solicitors forwarded a slightly amended deed to the plaintiffs’ solicitors.
On 10^th October 2003, the plaintiffs’ solicitors responded again rejecting the proposed deed.
In their counterclaim the defendants seek orders requiring the plaintiffs to execute documents to create a new registered right of way over the new driveway and to extinguish the registered right of way and damages for increases in building costs and other damages occasioned by the plaintiffs’ refusal to so execute. There is a further allegation made by the defendants in the action that on 30^th January 2003 the plaintiffs, whilst in breach of the October 2001 agreement and the 18^th April 2002 agreement, sought to extort money from the defendants by improperly demanding compensation of $30,000 to relinquish their right of way whilst at the same time threatening to institute legal proceedings. The defendants allege that this conduct disentitles the plaintiffs to equitable relief. The defendants allege either binding agreements which have been part performed or an estoppel.
As I have said the plaintiffs commenced their action in this Court on 15^th October 2003 and on 22^nd December 2003 the parties and their legal advisers attended at the Supreme Court for the purposes of a settlement conference in that action. At the settlement conference the parties discussed the terms of an agreement to compromise their respective rights and interests and the claims made by them in the action. An agreement was concluded in writing by an exchange of letters between solicitors on 13^th January 2004 and it included some conditions subsequent. I will refer to this agreement as “the settlement agreement”.
The terms of the settlement agreement are as follows:
“1Combe and Lewis (Engineers) to jointly consider and report in writing on whether the gradient of the new driveway can be improved so that it is not so steep.
2The area within which the new driveway can be redesigned is within a reasonable distance (width) of the common boundary between Thus and Thredgold properties taking into account the existing topography of the land and extending (length) to the southern boundary of the existing right of way.
3If the Engineers determine the gradient cannot be improved then Thus and Thredgold are bound to accept the location and gradient of the new driveway as it is and they will enter into the Deed prepared by Clelands and forwarded to FRS Legal on 10 June 2003 (and slightly amended and forwarded to FRS by Clelands on 10 October 2003) with the $5,000 in Clause 8 altered to $15,000 and the proceedings shall be discontinued upon the basis that each party bears their own costs.
4If the Engineers determine the gradient can be improved then Thredgold will have the election as to whether to agree to the redesign by virtue of cost but Thus shall be bound by redesign. If Thredgold elects to agree to the redesign then the parties shall enter into the Deed referred to in paragraph 3 above altered to refer to the redesign and including $15,000 in Clause 8 and the proceedings shall be discontinued upon the basis that each party bears their own costs.
5If Thredgold elects not to proceed on redesign produced by the Engineers under paragraph 4 then each party reserves their rights in respect of the proceedings.”
Each party alleges that there were implied terms of the settlement agreement. However, there is a dispute between the parties as to what those implied terms are. The defendants allege that the following are implied terms of the settlement agreement:
“1The Engineers would consider any redesign in accordance with Australian Standard 2890.1; and
2The redesign would not require a new development application to be lodged with the Council.”
The plaintiffs allege that the following are implied terms of the settlement agreement:
“1The Engineers would jointly consider and jointly report in writing whether the gradient of the driveway could be improved so that it is not so steep.
2The Engineers would jointly redesign one or more driveways with improved gradients.
3The gradient of the redesigned driveway would improve upon the gradient of the new driveway to a significant (as opposed to a marginal) degree so as to achieve safety in and about its use.
4 Any redesign would be restricted to the Thredgolds’ land.
5If the Engineers were unable to agree upon a joint design of the new driveway then the rights of the parties were preserved.”
During the hearing on the preliminary issue, the plaintiffs modified their case on implied terms by reformulating 3 above by deleting all the words after “degree”, abandoning 4 and indicating that 5 was not pressed as a “separate ground”.
Mr Lewis and Mr Combe met and jointly considered whether the gradient of the new driveway could be improved so that it was not so steep, and each was of the view that the gradient of the new driveway could be improved so that it was not so steep. Each of the engineers proceeded to produce redesigns of the new driveway to reduce the gradient, but they never produced a joint design.
Mr Lewis, on behalf of the plaintiffs, produced a redesign called “Redesign D” and by letter dated 8^th March 2004 sent it to Mr Combe by facsimile. The defendants allege that Redesign D:
“1Was not designed within the constraints of the design parameters in that parts of the redesign were not within a reasonable distance of the common boundary and the redesign failed to take into account the existing topography of the Land.
2Was not designed by Lewis in accordance with Australian Standard 2890.1 in that Lewis designed it to achieve a minimum gradient of 1 in 6 when the Australian Standard 2890.1 only required 1 in 5.
3Was not designed by Lewis so as to avoid a new development application being lodged with the Council.”
Mr Combe, on behalf of the defendants, produced two redesigns called “Redesign A” and “Redesign A1” respectively. As to Redesign A and Redesign A1 the defendants assert that each of them:
“1Was designed within the constraints of the design parameters in that all of the redesign was within a reasonable distance of the common boundary and the redesign took into account the existing topography;
2 Was designed in accordance with Australian Standard 2890.1.
3Was designed so as to avoid a new development application being lodged with the Council.”
As to Redesign A and Redesign A1 the plaintiffs assert that each design:
“1     is not a joint redesign of both Engineers;
2     does not achieve safety;
3     requires work to be undertaken beyond the Thredgolds’ land; and
4achieves only marginal improvement as opposed to a significant improvement on the gradient.”
In the alternative, the plaintiffs say the settlement agreement is ambiguous and should be interpreted in a manner most favourable to the plaintiffs pursuant to the principle, contra proferentum. In the further alternative, the plaintiffs say the settlement agreement has not been satisfied in that the engineers have not jointly reported in writing to the effect that the gradient can be improved and have not jointly reported on one or more options for the redesign of the new driveway within the design parameters set forth in the settlement agreement. In the further alternative, the plaintiffs say that the settlement agreement has been frustrated by virtue of the fact that the engineers disagree as to the redesign so as to achieve improvement to the gradient.
The defendants have indicated they will proceed with either Redesign A or Redesign A1. The plaintiffs refuse to accept either of these redesigns.
The defendants seek an order by way of mandatory injunction requiring execution of the re-engrossed deed to give effect to the terms of the settlement deed (sic agreement).
What I have set out above is a summary of the key facts in the Outline of Issues.
The issues were further refined during the hearing before me. The defendants no longer advance Redesign A1 as a design which complies with the settlement agreement. They rely on Redesign A as the design which complies with the terms of the settlement agreement.
In summary, both parties agree that there was a settlement agreement which contained five express terms. Each party alleges that there are implied terms of the settlement agreement, although they differ as to what those implied terms are. The settlement agreement contains what the parties have called conditions subsequent. In other words, conditions which mean that complete performance of the obligations under the settlement agreement is conditional upon certain events occurring. The defendants say that all relevant conditions have been complied with and that the plaintiffs are bound (in accordance with clause 4 of the settlement agreement) to enter into the deed with certain alterations and to discontinue the proceedings upon the basis that each party bears their own costs. They seek an order requiring the plaintiffs to enter into the re-engrossed deed. On the other hand, the plaintiffs assert that although there has been joint consideration by the engineers of whether the gradient of the new driveway can be improved so that it is not so steep, and each engineer has reached the view that it can be, they have not jointly agreed upon a redesign. Relevant conditions in the settlement agreement have not been performed and the defendants’ claim for relief on the preliminary issue should be dismissed.
The evidence at the hearing
The defendants were dux litis at the hearing.
A number of documents were tendered by consent and I heard evidence from Mr Combe and Mr Lewis. There was no challenge to the competency or credibility of either engineer and for the most part their evidence was not challenged. I accept Mr Combe and Mr Lewis as witnesses of truth. I also received, subject to objections as to relevance, a written statement of a member of the firm of solicitors representing the plaintiffs, Mr Sean Ryan.
I start with Mr Combe’s evidence. The defendants engaged Mr Combe in 2002 and he provided a report to them on 28^th November 2002. The report dealt with the engineering aspects of the new driveway. Mr Combe expressed the view that the new driveway was placed at an acceptable grade. He said that the grades had been verified to a maximum grade of 1:5 and that this satisfied the relevant Australian Standard (AS 2890.1 Parking Facilities Part 1 Off Street Parking Para 3.5). In preparing his report Mr Combe had a report which Mr Lewis had provided to the plaintiffs dated 31^st October 2002 in which Mr Lewis discusses possible improvements to the new driveway. Mr Lewis refers to the slope of the driveway, but as I understand it does not make any recommendations for its improvement.
There was a good deal of debate before me about which part of the Australian Standard AS 2890.1 Parking Facilities Part 1: Off Street Parking (“the Standard”) governed the gradient of the new driveway. In my opinion, the Standard provides for a gradient for the new driveway of 1:5, and the Standard which replaced it in March 2004, AS/NZS 2890.1: 2004 Parking Facilities Part 1: Off-Street Parking, provides for a gradient for the new driveway of 1:4.

On 21^st February 2003 Mr Combe prepared what he called a scope of works and he sent it to Mr Lewis seeking his approval. The scope of works referred to a maximum grade of 1:5 for the new driveway and the need to satisfy the Standard with regard to change in gradient and access from Yarrabee Road. Mr Lewis responded on 6^th March 2003 and he agreed to a maximum grade of 1:5. He also made some other suggestions which I need not mention. Mr Combe adopted Mr Lewis’s suggestions, or at least he thought he did, and by letter dated 17^thMarch 2003 he sent a proposed plan for roadworks to drive and access at the defendants’ property to Mr Lewis. This is the document I have previously identified as Mr Combe’s revised proposal. The plan referred to a maximum grade of 1:5 for the new driveway.
By facsimile dated 25^th March 2003, Mr Lewis advised Mr Combe that Mr Combe’s revised proposal was acceptable to the plaintiffs.
Mr Lewis then gave evidence of his involvement in the events which occurred after the settlement agreement.
By letter dated 12^th January 2004 the solicitors for the defendants advised Mr Combe of the settlement agreement and asked him to meet Mr Lewis. Mr Combe and Mr Lewis met on the properties on 14^th January 2004.
On 19^th January 2004 Mr Combe wrote to Mr Lewis setting out two options for improvements to the driveway and access. Mr Combe refers to the two options as Option A and Option B. Option A is what I have previously referred to as Redesign A and I will refer to it as Redesign A. Redesign A involves reducing the grade of the driveway by lifting the base by 700 mm and lengthening the drive by 2 metres. Redesign A involves flattening the grade of the drive average grade of 1:5.9 (rather than 1:5) and according to Mr Combe, “is almost at grades which are suitable for public access ramps”. Option B is more radical. It arose as a result of suggestions made by Mr Lewis, and it involves commencing the drive 17 metres further west of the current centre line and flattening the grade to 1:9.2. It also involves placing a certain amount of fill on the property. In his letter Mr Combe sets out the ways in which he considers option B does not comply with the settlement agreement. One further point should be noted before leaving Mr Combe’s letter dated 19^th January 2004. Mr Combe notes that the existing access has an average grade of 1:5.26 with the steepest grade of 1:5 and that it could therefore be considered to comply with the Standard for a domestic driveway.
Mr Lewis wrote to Mr Combe on 9^th February 2004. In his letter Mr Lewis comments on the existing access, Redesign A and Option B. He states that the existing access has an average grade of 1:5.205 with the steepest grade of 1:4.10 over 5 metres and that in his opinion the driveway was not a “domestic” driveway because it would have to cater for at least two regular visits of trucks of 6 – 7 tonne capacity. In relation to Redesign A he states that although the new levels show an improvement, the average grade is calculated at 1:5.82 with the steepest section at 1:5.385 and that in his opinion this was still too steep for the commercial vehicles which have to use the driveway. Mr Lewis puts forward what he calls a “Revised Option B” and describes it as “the only viable option and is within a reasonable distance of the common boundary”.
In his evidence, Mr Combe said he agreed with Mr Lewis’s calculations of grade in relation to the existing access and Redesign A and that the calculations in his letter dated 19^th January 2004 were incorrect.
Mr Combe wrote to Mr Lewis by letter dated 12^th February 2004 and made the following observations about Redesign A and Revised Option B:
“Option A Regraded and marginally lengthened to achieve better than AS 2890.1 grades at about 1:5.4 as noted by your longitudinal sections.
·Complies with current DA.
·Allows access at 90^o from Yarrabee Road.
·Affords turning circles from Yarrabee Road for large trucks as is required by Mr Thus.
·Once sealed provides adequate entry and exit provisions for driveway access.
Option B Alternate entry and flatter grade at 1:7.
·Entry as proposed affords passenger car access and turning circles from Yarrabee Road.
·Turning circle curves for 7 tonne vehicles require wider access than is provided, requiring sleeper and longer embankments.
·The proposed banks are up to 7 metres in height and the batters and embankments are substantially greater than Council would find acceptable within the Hills Face Zone requirements.
I conclude that Option B doesn’t satisfy Mr Thus requirements for access by 7 tonne vehicles, has excessive amounts of fill such that it does not take account of existing topography and is unlikely to be approved if forwarded to Council.”
On 7^th March 2004 Mr Lewis wrote to Mr Combe sending him what he called a “Revised Option D”. The design shows a retaining wall a short distance west of the proposed driveway. Revised Option D is what I have previously referred to as Redesign D and I will refer to it as Redesign D.
On 9^th March 2004 Mr Combe advised the defendants’ solicitors of the details of the costs of the works in Redesign D, and on 11^th March 2004 he provided details of costs of the works in Redesign A.
On 12^th March 2004 Mr Combe wrote to Mr Lewis commenting on Redesign D and proposing a further design which he calls option A1. This is Redesign A1 and I will refer to it as Redesign A1. He put forward Redesign A1 as a “reasonable alternative” to Redesign D. Redesign A1 involves an improvement to the gradient of the driveway to 1:5.6 compared with the gradient in Redesign D of 1:6. Mr Combe makes the following comment in his letter:
“Option A1 provides an economical arrangement and significantly improves the gradient and establishes appropriate vertical curves at the top and bottom of the drive which when sealed will provide a safe access for both Mr Thus and Mr Thredgold in keeping with recommendations by Council Planning and the Settlement Agreement. ”
On 23^rd March 2004 Mr Combe wrote to the defendants’ solicitors setting out a table showing a comparison between the features of Redesign A1 and Redesign D respectively.
On 31^st March 2004, Mr Lewis put forward a Revised Option E and on 5^th April 2004 Mr Combe wrote to the defendants’ solicitors setting out the reasons he did not agree with Revised Option E.
One reason Mr Combe did not agree with Mr Lewis’s Redesign D was that because of the height of a battered bank, his understanding was that a development approval would be required from the Council.
None of the above was in dispute. I turn now to consider Mr Lewis’s evidence.
Mr Lewis said and I accept:
1.That he honestly held (and still holds) the opinion he expressed in his letter to Mr Combe dated 9^th February 2004 that the grade of the driveway as shown on Redesign A was too steep for commercial vehicles that have to use the driveway. He did agree in cross-examination that he had said in the letter that the gradient shown in Redesign A was an improvement on the existing position, and that Redesign A was within a reasonable distance of the common boundary and in that respect complied with clause 2 of the settlement agreement.
2.That he honestly held (and still holds) the opinion he expressed in his letter dated 31^st March 2004 that the grade shown in Redesign A1 is too steep because it is steeper than a grade of 1:6.
Mr Lewis has not treated compliance with the Standard as decisive in terms of the appropriate and safe gradient for the driveway. It seems that in early 2003 he was prepared to agree with a gradient of 1:5 for the driveway, but by the time he came to consider the designs put forward after the settlement agreement he had further information about the commercial vehicles which might use the driveway to enter the plaintiffs’ property and he considered that a less steep driveway was appropriate.
In cross-examination, Mr Lewis agreed that his revised Redesign D involved the placing of fill on the plaintiffs’ property.
As I have said, a statement of Mr Sean Ryan, a legal practitioner from the firm of solicitors representing the plaintiffs, was tendered in evidence by consent but subject to arguments as to relevance. For present purposes, I need only set out the following passage from the statement:
“I cannot specifically recall all the circumstances in which the Settlement Agreement passed back and forth to the point that a final written version was agreed but I do recall specifically that it was the suggestion of Sue on instructions from her clients that the redesign of the driveway should have some parameters set. One of those parameters was a limitation from the side boundary. Initially sue wanted a limit of 9 meters from the boundary. That was rejected. A second limitation was the topography of the land. I recall that I did not have any appreciation of what the phrase topography meant but that was explained to me by either Sue or Barry. The Clause reflecting these parameters was Clause 2 of the Settlement Agreement, which was drafted by Sue.”
“Sue” and “Barry” are references to the legal practitioners representing the defendants.
I do not think that this statement takes the matter very far. In any event, Mr Ryan’s statement was put forward to counter an argument by the defendants that Redesign D did not comply with the settlement agreement because the new driveway as shown in Redesign D did not fall within the design criteria in clause 2. I have decided the preliminary issue on other grounds and I need make no further reference to Mr Ryan’s statement.
Before leaving this summary of the evidence, I must make mention of certain matters which emerge from the documents tendered at the hearing.
Redesign A1 involves the placing of a certain quantity of fill on the plaintiffs’ property at a point where the proposed new right of way enters the eastern side of the plaintiffs’ property. There is a question as to whether this takes it outside the design parameters set out in clause 2 and in particular whether it is a redesign taking into account the existing topography of the land. There is also a question as to whether the plaintiffs consent to the placing of a quantity fill on their property. Redesign D also involves the placing of a certain amount of fill on the plaintiffs’ property at a point where the proposed new right of way enters the eastern side of the plaintiffs’ property and the same issues arise. There is an additional feature of Redesign D which must be noted. In Redesign D the mouth of the driveway is moved a short distance to the west and as I understand it this necessitates a quantity of fill in this area. There is a letter in evidence from the senior planning officer of the Council dated 12^th March 2004 to the defendants’ solicitors. It seems that the quantity of fill is such that a development approval would be required and the proposed use would be, or is likely to be, treated by the Council as a non-complying use.
By letter dated 19^th March 2004 the defendants’ solicitors wrote to the plaintiffs’ solicitors enclosing the Deed referred to in the settlement agreement amended to refer to Redesign A1 and asking that the Deed be executed and the proceedings discontinued. By letter dated 22^nd March 2004 the plaintiffs’ solicitors responded and said that the plaintiffs refused to sign the Deed. They asserted that the conditions of the settlement agreement had not been satisfied. They also asserted that Mr Combe’s Redesign A1 did not satisfy the design criteria in the settlement agreement because it involved the placing of a quantity of fill on the plaintiffs’ property. I pause to make the observation that that is also true of Redesign D. By letter dated 26^th March 2004 the defendants’ solicitors wrote to the plaintiffs’ solicitors offering Redesign A as an alternative to Redesign A1. As I have said the plaintiffs have refused to execute the Deed referring to either Redesign A1 or Redesign A.
It should also be noted that until the hearing before me the plaintiffs asserted that it was an implied term of the settlement agreement that any redesign would be restricted to the defendants’ property.
Issues in the action
The plaintiffs submit that it is an express or implied term of the settlement agreement that the redesign be a joint redesign, or, at least, a redesign with respect to which both engineers agree and that neither Redesign A nor Redesign A1 is a joint redesign, or at least, a redesign with respect to which both engineers agree.
It is convenient to start my analysis of the settlement agreement by mentioning briefly the legal principles relevant to the questions of interpretation of a contract and implied terms. In relation to the interpretation of a contract it is sufficient to say that a contractual provision is to be interpreted by reference to the whole of the contract and that a Court can only go outside the terms of the contract if there is an ambiguity in its provisions. In other words, two or more possible meanings of a contractual provision must arise before resort may be had to circumstances outside the contract, and the circumstances to which regard may be had are the surrounding circumstances. The surrounding circumstances are the objective facts existing at the time the contract was made. A party’s actual intention or expectation in relation to a contract is not an objective fact for the purposes of this rule (Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 per Mason J (as he then was) at 352 (“Codelfa”)). Ordinarily, the objective facts which may be used as an aid to the proper interpretation of a contract do not include the conduct of the parties after the contract has been concluded although it must be acknowledged that there are cases where the Court has taken into account the conduct of the parties after the contract has been made (J W Carter and D J Harland, Contract Law in Australia 4^th ed (2002) at [712]). It is not necessary for me to enter this debate in this case because the settlement agreement can be properly interpreted without regard to subsequent conduct.
A term may be implied because of a past course of dealing, or it may be implied because it satisfies the following tests:
1. it is reasonable and equitable;
2.it is necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3.it is so obvious that it goes without saying;
4.it is capable of clear expression; and
5.it does not contradict any express term of the contract.
(BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283; Codelfa at 347.) The defendants made brief reference to an implied term arising as a result of a past course of dealing (Breen v Williams (1996) 186 CLR 71) but I do not think that there was a past course of dealing in the relevant sense in this case, or if there was, that it gave rise to the implied terms alleged by the defendants.
The starting point is an analysis of the express terms of the settlement agreement. It seems to me that two questions arise at the outset about the proper interpretation of the settlement agreement. The first is whether it is necessary for the purposes of clause 1 that there be a joint report in writing in the sense of one report signed by both engineers. I do not think that that is a requirement because there would be little purpose in such a requirement. The purpose of clause 1 is as well achieved if there is a report from one engineer with which the other clearly indicates his agreement. The second question raises more difficult issues. Is it necessary that the engineers agree that the gradient of the new driveway can be improved so that it is not so steep, and that there be one design to achieve this with which both engineers agree, or is it sufficient (as the defendants submit) that the engineers agree that the gradient of the new driveway can be improved so that it is not so steep and there be a design from one of the engineers which falls within what were said to be the design parameters in clause 2? On one view (and this was the view advanced by the defendants) clause 1 deals only with whether the engineers agree that the gradient of the new driveway can be improved so that it is not so steep, and it does not deal with how the redesign referred to in the subsequent clauses is to be prepared, that is to say, whether the redesign can be prepared by one engineer without the agreement of the other, or whether it must be prepared by both engineers or at least by one engineer with the agreement of the other. If the defendants’ submission as to the proper interpretation is the correct one then it is significant that the other clauses in the settlement agreement do not deal with the question of how the redesign is to be prepared. I do not think the defendants’ submission is correct. It seems to me reading the settlement agreement as a whole that what the parties had in mind was that the engineers would jointly consider and report in writing on whether the gradient of the new driveway can be improved so that it is not so steep and that as part of that process they would agree to a design which would achieve the relevant purpose bearing in mind the design criteria referred to in clause 2. In my opinion, the parties did not specifically address the question of how the redesign would be prepared because they did not see it as a separate issue from the issue identified in clause 1, or perhaps put more accurately, they assumed that if the engineers agreed that the gradient of the driveway could be improved so that it was not so steep, they would also be able to agree on a particular redesign. I think that is the proper interpretation of the settlement agreement because I think the parties would have addressed the issue of the preparation of the redesign in their agreement if they had not seen it as part of the process referred to in clause 1. In reaching this view I also take into account the fact that clause 4 refers to “the redesign” and clause 5 refers to “redesign produced by the Engineers”.
There is one other point I would make. I see no reason why the engineers might not produce two or more redesigns (or agree to them) which comply with the terms of the settlement agreement. If that occurs an issue might then arise as to which redesign is the redesign for the purpose of the election which the defendants must make under the settlement agreement. For reasons I will give the issue does not arise in this case, but there is much to be said for the view that the election must be made in relation to the redesign which involves the greatest degree of improvement. Furthermore, having regard to the fact that under the settlement agreement much is left to the good judgment of the engineers, I see no reason why one of the engineers might not agree with a particular redesign but at the same time hold the view that his, or another, redesign is a better redesign.
Insofar as there is any ambiguity in relation to this particular issue, that ambiguity must be resolved having regard to the terms of the settlement agreement because I do not think that there are any relevant surrounding circumstances. I also make the point that I reach the conclusion I have expressed as a matter of the proper interpretation of the settlement agreement and not by a process of finding implied terms along the lines of the first two implied terms alleged by the plaintiffs.
Both parties agree that each engineer was of the view that the gradient of the new driveway could be improved so that it was not so steep and the question is whether they (the engineers) agreed upon a redesign or number of redesigns. The defendants assert that Mr Combe prepared Redesign A and Mr Lewis agreed with it. The plaintiffs assert that the engineers did not agree as to any redesign. In the alternative, they assert that Mr Lewis prepared Redesign D and Mr Combe agreed with it.

I start with Redesign A and the question whether Mr Lewis agreed with it in the relevant sense. In the context of the settlement agreement I think he did agree with Redesign A in his letter to Mr Combe dated 9^th February 2004. He said in his letter that Redesign A involved an improvement in the gradient of the driveway and he acknowledged that fact in the course of his evidence before this Court. It is true that he expressed the view, which he no doubt held in good faith, that the gradient shown in Redesign A was still too steep for the commercial vehicles which have to use the driveway, but that is not a statement that Redesign A does not comply with the terms of the settlement agreement. In his letter he does not identify any way in which Redesign A does not comply with the terms of the settlement agreement. I note that in his evidence he acknowledged that Redesign A was within a reasonable distance of the common boundary within the terms of clause 2. Mr Lewis expressed the view in his letter that his design was a better design in terms of the steepness of the driveway and safety considerations, but none of that detracts from the fact that in my view he agreed with Redesign A in the relevant sense.
The plaintiffs argued that Redesign A was not a redesign within the terms of the settlement agreement and they sought to deploy an implied term to the effect that the gradient of the redesigned driveway would improve upon the gradient of the new driveway to a significant (as opposed to a marginal) degree to make good that argument. I am prepared to say that the improvement contemplated by clause 1 must be something more than a de minimis improvement, but beyond that I do not think one can formulate an implied term which is capable of clear expression. Certainly the implied term alleged by the plaintiffs is not capable of clear expression and on that ground alone it fails the test for the implication of terms. Furthermore, even if the plaintiff was right and a term of the above nature should be implied, I would not be prepared to find on the evidence that Redesign A does not improve the gradient of the new driveway to a significant (as opposed to a marginal) degree.
In the alternative to its principal argument that the engineers had not agreed, the plaintiffs sought to argue that there was agreement as to Redesign D and that that redesign was a redesign within the terms of the settlement agreement. I doubt whether it can be said that Mr Combe agreed with Redesign D. The plaintiffs pointed to correspondence from Mr Combe and suggested that it showed his agreement, but I doubt whether it shows anything more than his optimism that the parties were getting closer and an agreement was becoming more likely. However, I think that there is a more fundamental reason for concluding that there was no agreement as to Redesign D. Redesign D involved the placing of a quantity of fill on the plaintiffs’ property. I do not know what instructions Mr Lewis had from the plaintiffs at the time he prepared Redesign D, but by the time the plaintiffs were refusing to execute the Deed on 22^nd March 2004 they were asserting in relation to Redesign A1 that the placing of fill on the plaintiffs’ property meant the design did not comply with the settlement agreement. That assertion applies equally to Redesign D. Furthermore, up to the time of the hearing before me the plaintiffs asserted that it was an implied term of the settlement agreement that any redesign would be restricted to the defendants’ property. Such an implied term would mean that neither Redesign A1 nor Redesign D would comply with the design criteria in the settlement agreement. It seems to me the engineers and the parties had a reasonable time within which to indicate that they agreed to a particular redesign. A reasonable time elapsed a short time after the defendants proffered the Deed referring to Redesign A. The plaintiffs did not indicate their agreement with Redesign D in that time; in fact, by implication, they were asserting that it did not comply with the design criteria in the settlement agreement.
The defendants submitted that Redesign D did not fall within the terms of the settlement agreement on other grounds. In view of the conclusion which I have just expressed it is not strictly necessary for me to deal with those arguments. However, I will mention them briefly. The defendants submitted that there were implied terms of the settlement agreement and that Redesign D did not comply with the implied terms. First, the defendants alleged that it was an implied term that the engineers would consider any redesign in accordance with the Standard. I reject that submission. It is by no means clear on the evidence that the existing driveway does not comply with the Standard. An agreed fact suggests that it does comply with the Standard. If it does, it is difficult to see how the suggested implied term sits comfortably with clause 1 which refers to improving the gradient of the new driveway. Furthermore, it seems to me that the suggested term is one that the parties would have included in the settlement agreement if they wished to have any improvement to the gradient of the new driveway governed by the Standard. Secondly, the defendants alleged that it was an implied term of the settlement agreement that any redesign would not require a new development application to be lodged with the Council. The defendants’ submission was that there were three possible outcomes under the settlement agreement and two of those outcomes involved entering into the Deed with certain alterations and the discontinuance of the plaintiffs’ action. The Deed refers to an existing development approval but it does not contain provisions to the effect that performance might be conditional upon the obtaining of a further development approval. The plaintiffs sought to counter this submission by referring to clause 2 of the settlement agreement and submitting that it was implicit in this clause that a redesign might require a further development approval. I think the plaintiffs are right and I reject the defendants’ argument that it is an implied term that any redesign would not require a further development approval from the Council. The matter does not necessarily end there, however, because in this case the further development application in relation to Redesign D might well involve a non-complying development, and that may raise further issues. However, in view of the conclusions I have already reached it is not necessary for me to explore this issue any further.
The engineers have agreed to Redesign A within the terms of the settlement agreement. There has not been an agreement as to Redesign D. The defendants have elected to agree to Redesign A within clause 4 of the settlement agreement and the parties must now perform the obligations set out in clause 4.
Conclusion
In my opinion, the defendants are entitled to the relief which they seek. I think the defendants should bring in minutes of order which dispose of the preliminary issue in precise terms. I will then hear the parties as to the minutes of order, costs and any other matters.