United Rural Enterprises Pty Limited v Lopmand Pty Limited

[2004] NSWCA 440

CITATION:	United Rural Enterprises Pty Limited & Ors v Lopmand Pty Limited & Anor [2004] NSWCA 440
HEARING DATE(S):	13 October 2004
JUDGMENT DATE:	26 November 2004
JUDGMENT OF:	Sheller JA at 1; Santow JA at 2; Tobias JA at 49
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONTRACT - interpretation - incorporated property joint venture - challenge to the construction placed upon terms of settlement of a dispute between two of three individuals who conducted certain real estate development projects - was there interpretation ambiguity in the contract justifying resort to extrinsic evidence - extrinsic evidence inadmissible but in any event itself not supporting contrary interpretation.
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Investor's Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181
PARTIES :	UNITED RURAL ENTERPRISES PTY LIMITED (ACN 064 425 785) (First Appellant) Gregory Hamilton Willoughby LINDSAY-OWEN (Second Appellant) LINDSAY-OWEN HOLDINGS PTY LIMITED (ACN 078 492 994) (Third Appellant) PAINTEN HOLDINGS PTY LIMITED (ACN 003 206 111) (Fourth Appellant) LOPMAND PTY LIMITED (ACN 002 494 662) (First Respondent) Tracey John LAKE (Second Respondent)
FILE NUMBER(S):	CA 40235/03
COUNSEL:	M CASHION, SC/ J M WHITE (Appellants) B DeBUSE (Respondents)
SOLICITORS:	Kemp Strang (Appellants) McCooe Raves & Poole (Respondents)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 4039/99
LOWER COURT JUDICIAL OFFICER :	Campbell J

CA 40235/03
SC 4039/99

SHELLER JA
SANTOW JA
TOBIAS JA

26 NOVEMBER 2004

UNITED RURAL ENTERPRISES PTY LIMITED & Ors v LOPMAND PTY LIMITED & Anor

Judgment

1 SHELLER JA: I agree with Santow JA.

2 SANTOW JA:

INTRODUCTION
This appeal challenges the construction placed upon terms of settlement of a dispute. That dispute was between the appellant, United Rural Enterprises Pty Limited (“URE” and collectively representing “the Lindsay-Owen interest”), and the respondent, Lopmand Pty Limited (“Lopmand” and collectively representing “the Lake interest”). They were two of three participants in an incorporated property joint venture. The third participant was Gilbert Frank Investments Pty Limited (“Gilbert Frank”) collectively representing “the John Alexander interest”. Their original respective one-third interests were represented by one share each out of three in a company called Painten Holdings Pty Limited (“Painten”).

3 The trial judge, Campbell J, in his judgment of 12 December 2002 concluded that the unambiguous meaning of the terms of settlement was that they released any claim by the respondent (the Lake interest) against the share held by Gilbert Frank, described as “the Gilbert Painten share”. The appellants contend to the contrary that those terms were ambiguous; further that, properly construed by reference to extrinsic evidence, they released any claim the respondent had against its “Lopmand Painten share” (rather than the Gilbert Painten share as the trial judge had decided).

4 Campbell J determined other matters in dispute as well, in that same judgment of 12 December 2002. I elaborate on the background to those matters under “Salient Facts” below. Thus he concluded that the Lopmand Painten share in Painten was held as security by URE under its equitable mortgage to secure a loan by URE to the Lake interest. To better secure URE’s equitable mortgage over that share and not by way of foreclosure, he ordered that the share be transferred to URE, giving URE an election to choose to become a registered holder (Red, 97). He earlier concluded that Lopmand maintained an equity of redemption in the Lopmand Painten share. Accordingly, the Lindsay-Owen interest held that Lopmand Painten share subject to Lopmand’s equity of redemption (Red, 91). Were the appellant to succeed in this appeal, that claim of an equity thereby upheld would instead have been released by Lopmand under the terms of settlement.

5 The determination of these other matters in dispute is relevant to this appeal only in a very limited sense. Clearly they cannot affect the interpretation of the Terms of Settlement from two years earlier. However, the December 2002 judgment does throw light on what is now at stake, following as it did an earlier dispute which led to the Terms of Settlement entered into on 9 December 2000. Thus if the appellant were to succeed in this appeal, it would not only retain its own share in Painten but would acquire the Lopmand Painten share absolutely. This is because the latter share would then be released from Lopmand’s vindicated claim of a retained equity in that share. The appellants would also have some claim over the Gilbert Painten share (from earlier dealings with that share between Mr Lindsay-Owen and Mr Alexander) but whose ambit is not relevant to determine in these proceedings. One can however infer that the Lindsay-Owen interest has evidently calculated that achieving this end point would give it control and ownership over the venture at a level greater than if the result of Campbell J’s interpretation of clause 8 were left undisturbed.

SALIENT FACTS

6 I set out below a diagrammatic representation of the share ownership in the joint venture vehicle, Painten, depicting the principal transactions.

7 Painten was the corporate vehicle through which three individuals, Messrs Lake, Alexander and Lindsay-Owen conducted certain real estate development projects. The current dispute is essentially between the Lindsay-Owen interest (now including Painten) as appellants and the Lake interest as respondents.

8 Mr Lake and Mr Lindsay-Owen were close friends, sharing an office and represented by the same solicitor, Mr Allen of the then firm of Allen, Allen & Hemsley.

9 Painten had three issued shares originally controlled by each of the joint venture partners:

(a) Mr Lake’s share was held by Lopmand;

(b) Mr Alexander’s share was held by Gilbert Frank;

(c) Mr Lindsay-Owen’s share was held by the trustees of his family trust.

10 In September 1993, Mr Alexander caused Gilbert Frank to lend $250,000 to Lopmand secured by a charge over the Lopmand Painten share and a charge over two lots in an unregistered subdivision (the Lake family home).

11 In early 1994 Mr Alexander fell out with Mr Lake and sought to extricate himself from all business relationships involving Mr Lake. This involved the following steps:

(a) 4 May 1994 – A loan agreement was executed by Mr and Mrs Lake, acknowledging and formalising the earlier agreement, and its security.

(b) 29 May 1994 – a Deed between the Lakes, Gilbert Frank, Mr Alexander and Mr Lindsay-Owen, and SLC (being a joint venture between Mr and Mrs Lake and Mr Lindsay-Owen), effectively severing all business dealings with Mr Alexander. This involved

(i) discharging the security held by Gilbert Frank over the Lopmand Painten share – which money ($290,000) came from Mr Lindsay-Owen via United Rural Enterprises Ltd (“URE”) to Gilbert Frank, paying out the loan of $238,000 (plus $12,000 interest) made by Gilbert Frank to Lopmand.

(ii) procuring the release of Mr Alexander from various bank guarantees given in respect of the Painten projects.

12 By early 1995, the release from the guarantees still had not been procured and a meeting was held between Messrs Lake, Alexander and Lindsay-Owen regarding the prospect of a call by the bank on the guarantees and the need for contribution.

13 After this meeting, Mr Alexander wrote to each of Messrs Lake and Lindsay-Owen saying he was prepared to accept $50,000 and a release from the guarantee, in return for his Gilbert Painten share.

14 Mr Lindsay-Owen countered with an offer of arranging the releases and forgiving a debt of $21,000 in consideration for the Gilbert Painten share.

15 In the event, this offer by the Lindsay-Owen interest was accepted and after various dealings with the Bank, the releases were made and a transfer under seal by Gilbert Frank of one share in Painten was forwarded to Allen, Allen & Hemsley plus a statement that the share certificate for that Gilbert Painten share had been lost; Red, 34.

16 The transfer did not name any transferee or any consideration for the transfer.

17 Mr Lake alleges that a “Letter Agreement” was entered into during February 1996 whereby the Lopmand Painten share was to be transferred to Mr Lindsay-Owen for approximately $146,606.50, that sum reducing the debt owed by the Lakes to URE.

18 Mr Lindsay-Owen denied the existence of this agreement.

19 Relationships between Mr Lake and Mr Lindsay-Owen then broke down irretrievably in early 1997, resulting in litigation between them as follows:

(a) URE filed a statement of liquidated claim against Lopmand and the Lakes in the District Court, claiming the sum of $250,000 plus accrued interest;

(b) Lopmand and the Lakes filed a Notice of Defence and cross-claim against URE, Mr Lindsay-Owen, his company and Painten, pleading

(i) An agreement in May 1994 between Lopmand and URE that they would each purchase half the Gilbert Painten share, and that URE would pay the purchase price for that share which would be repaid out of the Gilbert Painten share when all the assets of Painten were sold;

(ii) The Letter Agreement, whereby URE agreed to purchase the Lopmand Painten share for $146,606.56 (see above);

(c) Mr Lindsay-Owen sought to enforce in the Supreme Court certain other mortgages securing monies owed to him by the Lakes.

20 On 9 November 2000 “Terms of Settlement” were executed by all relevant parties in all relevant capacities and filed in court on 20 December 2000. Relevant clauses are:

“8 Mr Lake, Mrs Lake and Lopmand Pty Limited hereby withdraw all cross-claims made by them in Proceedings 4039 of 1999 TO THE INTENT that, as from 10 November 2000 United Rural Enterprises Pty Limited shall be entitled to be registered as owner of the share in Painten Pty Limited the subject of such cross claims as sole legal and beneficial owner free from all claims and interests in relation thereto made or which may hereafter be made by Mr Lake, Mrs Lake and Lopmand Pty Limited …

9 (a) If Mr Lake, Mrs Lake and Lopmand Pty Limited pay to United Rural Enterprises Pty Limited $150,000 in cash then United Rural Enterprises Pty Limited will accept such payment in full and final satisfaction of all its claims against Lake, Mrs Lake and Lopmand Pty Limited in proceedings 4039 of 1999 …


(b) The payment of $150,000 must be made in cash and may not be set-off against (wholly or in part) any other obligation or alleged obligation of any nature whatsoever …

(c) In the event that such payment be made then United Rural Enterprises Pty Limited will consent to orders dismissing proceedings 4039 of 1999 with no order as to costs …

(d) Lake, Mrs Lake and Lopmand Pty Limited will on or before 20 December 2000 deliver to United Rural Enterprises Pty Limited a notice of discontinuance of all cross-claims in proceedings 4039 of 1999 …”

21 The cross-claims were discontinued, but the $150,000 referred to in clause 9 was never paid.

22 Lopmand and Mr Lake sought declarations on the basis that the share referred to in clause 8 was the Gilbert Painten share (or alternatively, rectification to effect that). Campbell J made the declarations as sought by Lopmand and Mr Lake without ordering rectification.

23 URE and the Lindsay-Owen interests now appeal from that decision.

Judgment of 12 December 2002

24 The trial judge made the following findings:

(a) On its true construction, clause 8 of the Terms of Settlement relates to Mr and Mrs Lake and Lopmand withdrawing their claim to entitlement to the Gilbert Painten share (Judgment [98]).

(b) The words following “to the intent” are intended to spell out the consequence of the withdrawal of the cross-claims (Judgment [98]).

(c) The only entitlement to be registered as an owner of a share in Painten which would be a consequence of withdrawing the cross-claim is that URE would be entitled to be registered as owner of the Gilbert Painten share (Judgment [98]).

(d) The argument that clause 8 should be construed as referring to the Lopmand Painten share in order to achieve the “objective” of making a clean break between the Lake and the Lindsay-Owen interests was not persuasive (Judgment [100-101]).

(e) This argument also assumes that Mr Lindsay-Owen already had obtained the Gilbert-Painten share, which is a matter which the parties were hotly contesting prior to entering the Terms of Settlement ([104] Red, 79B).

25 It was unnecessary to grant rectification of clause 8 having regard to the following:

(a) Although there was some measure of common intention (that if settlement was fully implemented Lindsay-Owen would end up with the Gilbert Painten share and the Lopmand Painten share plus $150,000 in discharge of the entire Lake obligations relating to the loan of $250,000), that was not enough to give rise to a right of rectification where the settlement was not fully implemented, [109].

(b) Mr Lake and Lopmand were not under any mistake as to the meaning of clause 8, upon which rectification could be granted for URE taking advantage of the mistake.

(c) The suggestion that the parties were not at idem, and so the terms of settlement failed as a contract should be rejected; in any event offer and acceptance was not the means by which this contract was entered, [112].

(d) URE has not repudiated the Terms of Settlement by making the claims it made in these proceedings, and even if it had it would not place the Lakes in the position that the Terms of Settlement had never existed because it would only mean that the Terms need not be performed further, (Judgment [117]). This was on the basis that:

(i) clause 8 only involved withdrawal of the cross-claim, and involved action on the part of the Lakes alone, and

(ii) clause 9 imposed an obligation on URE to accept particular terms for settlement of these current proceedings, only if $150,000 was paid to it by the Lakes.

26 At [120] he concluded that:

(a) by reason of the withdrawal of the Cross-Claim under clause 8, URE was entitled to be registered as the owner of the Gilbert Painten share;

(b) once the time for the payment of the $150,000 under the Terms of Settlement had passed, URE was entitled to sue for the full amount of its debt plus interest and had an equitable charge over the Lopmand Painten share as security for that debt plus interest; and

(c) since URE had the same security rights as Gilbert Frank had had, URE was entitled to a transfer of the Lopmand Painten share, subject to the equity of redemption in Lopmand.

APPEAL GROUNDS

27 The first appeal ground was that the trial judge was in error in finding that clause 8 of the Terms of Settlement on its true construction related to Mr and Mrs Lake and Lopmand withdrawing their claim to entitlement to the Gilbert Painten share.

28 The second appeal ground was that the trial judge should have found that clause 8 of the Terms of Settlement on its true construction related to Mr and Mrs Lake and Lopmand withdrawing their claim to the Lopmand Painten share.

DISPOSITION OF APPEAL

29 The appellant correctly submitted that the issue on this appeal was the proper construction of clause 8 of the Terms of Settlement entered into in November 2000. At that time, Campbell J had not made any of the determinations which he subsequently made in his judgment under appeal two years later on 12 December 2002. Thus the essential question to be determined, adopting the interpretative approach of Lord Hoffman in Investor’s Compensation Scheme Ltd v West Bromwich Building Society (1998) 1 WLR 896 quoted with approval by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181 at 188, is to ask what “a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contracting” would have understood by the reference to “the share in Painten Pty Limited the subject of such cross-claims” in clause 8. Did it mean, as construed by the trial judge, the Gilbert Painten share, or as the appellant’s contend, the Lopmand Painten share?

30 Essentially the appellants sought to find ambiguity in the quoted words in clause 8 of the Terms of Settlement and thus justify resort to extrinsic evidence in resolving that ambiguity. Let it be first assumed there was ambiguity, an assumption to which I will return. Consider what that extrinsic evidence amounted to. The extrinsic evidence sought to be advanced covered two distinct subject matters. The first was effectively abandoned leaving only the second. That first was the proposition that the intention of the parties was to achieve a clean break between Mr Lake and Mr Lindsay-Owen.

31 The fundamental problem with that proposition, frankly conceded on appeal, was that a clean break was not achievable on the appellant’s preferred interpretation either. The appellants’ contention, that the Lopmand Painten share was the subject of release under clause 8 and not the Gilbert Painten share, necessarily meant that there still could not be a clean break, since the appellants’ preferred interpretation would then leave a dispute outstanding concerning the Gilbert Painten share.

32 In any event actual intention of the parties, here supposedly to achieve a clean break, could not as a matter of principle be allowed to prevail over their presumed intention objectively determined.

33 In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 Mason J referred to there being perhaps only “one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention”, namely where “the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position”. It might then be proper “to receive evidence of that refusal”. Clearly enough that situation does not obtain, even were such an exception allowed to the rule precluding reference to other than the parties’ presumed intention, objectively determined.

34 These observations are pertinent to the second category of extrinsic evidence to which the appellant then resorted. An affidavit was filed by Mr Peter Somerset, who had acted as solicitor for Mr Lindsay-Owen. He gave evidence of two conversations, the first with Mr Burton, Counsel for Mr and Mrs Lake and, the second with Mr Lindsay-Owen.

35 To place the matter in context I need first to quote primarily clause 4A, but also clause 4B of the Terms of Settlement. These were handwritten additions to the typed terms (Blue, 2/360):

“4A Mr Lindsay-Owen will indemnify Mr Lake and keep him indemnified against any guarantee or indemnity in respect of the indebtedness of Painten Holdings Pty Limited and will use best endeavour to procure Mr Lake’s release from any such guarantee.

4B Mr Lindsay-Owen will indemnify Mr Lake and keep him indemnified against any guarantee or indemnity in respect of the indebtedness of Euroka Homestead Pty Ltd or John Jacques Allen and will use best endeavours to procure Mr Lake’s release from any such guarantee.”

36 The relevant paragraphs 23 and 24 of Mr Somerset’s affidavit are quoted below (Blue, 1/32):

“23. Clause 4A was inserted at the request of Mr Burton. I distinctly recall Mr Burton requiring a clause in those terms to be inserted and he said to me words to the following effect:

‘I am told by Tracey that there a number of guarantees given by your client and by him in respect of obligations of Painten Holdings Pty. Ltd. As Tracey will have no further interest in that company it is necessary for your client to indemnify him against any claims.’

24. I recall walking across the foyer to Mr. Lindsay-Owen and saying to him words to the following effect:

‘ Greg Burton has told me that there are a number of guarantees in Painten by both yourself and Tracey. Is that correct ?’
Mr Lindsay-Owen said words to the following effect:
‘ Yes that is right. ’
I said to Mr. Lindsay-Owen words to the following effect:
‘ He has requested that the document be amended to state that you are indemnifying him in respect of any guarantees given by Tracey .’
I went on to say words to the following effect:
‘ I think that is quite reasonable in the circumstances as this will now be your company .’ “

37 There are a number of difficulties in the appellants’ attempt to rely upon these paragraphs in advancing the interpretation which they contend resolves the ambiguity presently assumed.

38 First, there is the impermissibility of relying on statements evincing a supposed actual or subjective intention, as against properly establishing presumed or objective intention. The trial judge correctly concluded at [105] that there was no proper basis for using those statements, concerning as they did the actual intention of one of the parties as an aid to construction. Mr Cashion, SC for the appellants, sought to escape that stricture by pointing to the clean break theory, flawed as it concededly was, as nonetheless an objective circumstances supporting the appellant’s preferred interpretation. Thus at Black, 328.5-.57 Mr Cashion said:

“CASHION: We say, when one is looking for the proper construction of this document, in particular, paragraph 8, one looks at two things. Firstly, one looks at the contents of the document itself and secondly, we say one looks at the evidence of, in particular, Mr Somerset, as to his discussions with Mr Burton, who was Mr Lake’s counsel at the relevant time. We submit that both of those matters, namely, the contents of the document itself and the discussions, indicate that the intention of the parties was a clean break between them in relation to the Painten project.

In paragraph 8, we deal with the first of those two matters, namely, the document itself. The specific aspects are, firstly, paragraph 8(a), the purpose and effect of the terms of settlement in so far as it concerned the dealings in Euroka, was a complete break between Mr Lindsay-Owen and Mr Lake and the transcript reference, as I recollect it, is a reference to the place in the transcript where Mr Lake agreed that was the intention in relation to Euroka.

To that end, in essence, three things were done. Firstly, Mr Lake resigned as a director of Euroka, Mr Lindsay-Owen or interests associated with him, bought out Mr Lake’s interest in Euroka and thirdly, Mr Lake obtained from Mr Lindsay-Owen indemnities and releases with respect to Euroka. That was the mechanism in the very same document by which the clean break, which Mr Lake agrees was intended, was effected.

HIS HONOUR: How can I use his evidence about an intention as an aid to construction?

CASHION: Your Honour probably can’t; I accept that, but the submission nonetheless remains valid, namely, that when one looks at the mechanism that was adopted in Euroka, it is, on its face, clearly intended to effect a clean break in relation to that company, or that venture, rather. There is resignation as a director, so any element of control in that sense goes; there is giving up of any rights and interests and conversely, being indemnified, having any liability exposure removed.

In relation to the Painten project, the document itself makes clear that exactly the same strategy was used. Indeed, at paragraph 2, your Honour sees, again, the resignation as a director of Painten Holdings and then in paragraph handwritten 4(a), your Honour sees an indemnification in respect of Painten Holdings - this is important – in exactly the same words as in 4(b), which relates to Euroka, save that the names of the entities are different.”

39 But even were one to accept this material as admissible on the construction of the Terms of Settlement, because it went to the commercial objective of the parties, determined from objective circumstance, the reference to the conversation with Mr Burton in the context of clause 4A does not advance matters. The problem for the appellants is that the conversation itself is ambiguous. To say that “as Tracey will have no further interest in the company it is necessary for your client to indemnify him against any claims” (being clearly a reference to Mr Lake), begs the question whether “no further interest” embraces simply his resignation as a director, or, as the appellant would have it, relates to his ceasing to have any shareholding at all in Painten and thus shedding his Lopmand Painten share. At [103] the trial judge correctly points out that “it is a common enough commercial practice for lenders to proprietary companies to require guarantees from directors of companies but not from shareholders, and Mr Lake was resigning as a director”.

40 The conversation with Mr Lindsay-Owen in para 24 of Mr Somerset’s affidavit concludes “I think that is quite reasonable in the circumstances as this will now be your company” meaning Mr Lindsay-Owen’s company. That again is capable of meaning that the company will be under his effective control following Mr Lake’s resigning as a director, without necessarily referring to his ceasing to be a minority shareholder. Neither this conversation nor the conversation with Mr Burton advances the appellant’s case for a different construction than that which the trial judge reached.

41 There are in any event convincing reasons for the trial judge’s preferred construction of clause 8. First, such ambiguity as might otherwise have existed in the reference to “the share in Painten Pty Limited the subject of such cross-claims” is resolved by the words preceding. Those words are a reference to URE being “entitled to be registered as owner of the share …”. That presupposes the existence of a transfer of that share, the dispute being as to its registration. As pointed out above, there was earlier a transfer under seal by Gilbert Frank of one share in Painten that had been forwarded to the then firm of Allen, Allen & Hemsley. Thus, as the trial judge concluded, the only entitlement to be registered as an owner of a share in Painten which would be a consequence of withdrawing the cross-claim, is that URE would be entitled to be registered as owner of that Gilbert Painten share. The words “to the intent” more naturally signal an intended consequence of the withdrawal of the cross-claims; Judgment at [98], Red, 76. By withdrawing all cross-claims made in proceedings 4039 of 1999 it must be remembered that the Lake interest was thereby withdrawing the claim that it had disposed of the Lopmand Painten share on the terms of the Letter Agreement. But that itself could not constitute a transfer of shares to which the words after “to the intent” would apply. Put shortly, the reference to withdrawing “all cross-claims” in clause 8 necessary involved a withdrawal of the cross-claim pleading the Letter Agreement. This is reinforced when one considers that the appellants never asserted a right in the Defence to the Cross-Claim to be registered as owner in respect of the Lopmand Painten share.

42 Second, there is a further textual indication in the use of the word “sole” before the expression “legal and beneficial owner” in clause 8. The use of the word “sole” in this context implies that there had previously been a claim to be jointly entitled to the share. That indeed was the very claim pleaded in the Cross-Claim, namely that Lopmand and URE would each purchase half of the Gilbert Painten share.

43 Finally, the Gilbert Painten share was the subject of the principal relief sought in the Cross-Claim. The balance of the relief in paragraph (c) of the prayers for relief pertained to the Lopmand Painten share and was an adjunct to the Defence.

Summing up

44 Even were resort to extrinsic evidence permissible, it does not assist the appellant. This is more especially so as the so-called “clean break” was never achievable since whichever share was covered by the Terms of Settlement still left dispute as to the other share. Moreover, the extrinsic material relied upon in terms of the conversation involving Mr Somerset and Mr Burton clearly went to subjective intention. It could not permissibly assist the flawed “clean break” theory, which in any event led nowhere. As a statement of subjective intention it was impermissible as an aid to construction of the presumed intention in any objective sense. That is quite apart from the intrinsic ambiguity of the conversations in question. In short the extrinsic material leads no-where, goes to subjective not objective intention and is itself ambiguous.

45 The text itself read as a whole and with knowledge of the genesis of the transaction was not in truth ambiguous. As Lord Steyn observed, writing extra-judicially on “The Intractable Problem with the Interpretation of Legal Texts” (2003) SLR 1 at 7 “the mandated point of departure must be the text itself. The primacy of the text is the first rule of legal interpretation for the Judge considering a point of interpretation. Extrinsic materials are therefore subordinate to the text itself”.

46 Mason J in Codelfa similarly emphasised that the starting point is to identify ambiguity in the text:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning” (at 352-3).

47 Here the appellants are seeking impermissibly to introduce extrinsic material in order to create ambiguity where none existed.

OVERALL CONCLUSION

48 I consider this appeal should fail and propose orders as follows:

(1) Appeal dismissed.

(2) Appellants to pay respondent’s costs of the appeal.

49 TOBIAS JA: I agree with Santow JA.

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Last Modified: 11/29/2004