Vita Pacific Limited v Heather
[2000] TASSC 158
•9 November 2000
[2000] TASSC 158
CITATION: Vita Pacific Limited & Anor v Heather [2000] TASSC 158
PARTIES: VITA PACIFIC LIMITED
GIO GENERAL LIMITED
v
HEATHER, Eileen Glynis
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: APPELLATE
FILE NO/S: LCA 47/2000
DELIVERED ON: 9 November 2000
DELIVERED AT: Hobart
HEARING DATES: 12 October 2000
JUDGMENT OF: Underwood J
CATCHWORDS:
Contract - General contractual principles - Construction and interpretation of contracts - Implied terms - Business efficacy - Whether term implied into a contract made by acceptance of an offer of compromise.
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, applied.
Rules of Court 1965, O24A.
Aust Dig Contract [105]
Contract - General contractual principles - Construction and interpretation of contracts - Custom and usage - Implication by custom and commercial usage - Whether term implied into a contract made by acceptance of an offer of compromise.
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, applied.
Rules of Court 1965, O24A.
Aust Dig Contract [114]
REPRESENTATION:
Counsel:
Appellants: P A Griffits
Respondent: L K Mackey
Solicitors:
Appellants: Griffits & Jackson
Respondent: Jennings Elliott
Judgment Number: [2000] TASSC 158
Number of Paragraphs: 25
Serial No 158/2000
File No LCA 47/2000
VITA PACIFIC LIMITED and GIO GENERAL LIMITED v
EILEEN GLYNIS HEATHER
REASONS FOR JUDGMENT UNDERWOOD J
9 November 2000
The circumstances that give rise to this appeal from a determination of the Workers Rehabilitation and Compensation Tribunal ("the Tribunal") are most unusual.
On 5 July 1993, the respondent suffered an injury that arose out of and in the course of her employment with the first named appellant. I interpose that the second named appellant is the insurer of the first named appellant and as the interests of the latter are identical to those of the former, it is convenient to simply refer to the first named appellant as "the appellant" in these reasons for judgment. Liability under the Workers Rehabilitation and Compensation Act 1988 ("the Act") was not disputed and weekly payments were made. In November 1994, the respondent commenced proceedings in this Court against the appellant claiming damages for negligence arising out of the incident which caused the respondent's compensable injury.
On 7 May 1996, the trial of the action commenced before Zeeman J. On 1 May 1996, the appellant served on the respondent an offer of compromise. This offer complied with the provisions of the Rules of Court 1965, O24A in all respects, save that it did not include a statement, as required by O24A, r3(b)(iv), that the offer was served in accordance with O24A. The day before the trial commenced, the respondent served an offer of compromise on the appellant. Neither side accepted the offer made to it and the trial proceeded to a conclusion.
On 15 May 1996, judgment was reserved. On the same day, the respondent accepted the appellant's offer of compromise made on 1 May 1996. The trial judge was notified of this unusual turn of events and at the request of the parties, the trial resumed on 20 May 1996. At the resumed hearing, the question arose as to whether the respondent's cause of action had been effectively compromised. Zeeman J held ((1996) 6 Tas R 52) that the failure to comply with the provisions of O24A, r3(b)(iv), meant that the appellant's offer of compromise was not made in accordance with the relevant Rules of Court. Accordingly, Zeeman J held that the appellant's offer of 1 May 1996 was rejected by the respondent's counter offer of compromise made on 6 May 1996. Thus, he concluded that the plaintiff's cause of action had not been compromised. The learned trial judge proceeded to consider the merits of the action and ordered that judgment be entered for the appellant against the respondent.
From this judgment there was an appeal to the Full Court. The Full Court held (Heather v Vita Pacific Ltd (1996) 6 Tas R 120) that the learned trial judge should have amended the offer of compromise pursuant to the powers conferred by the Rules of Court, O83, r21, so that it did comply with the provisions of O24A. The Full Court ordered that the amendment be made and declared that the respondent's action was settled by her acceptance of the offer of compromise dated 1 May 1996.
The offer of compromise (before amendment by order of the Full Court) was as follows (formal parts omitted):
"offer of compromise
1 Name of the Party Making the Offer
The offer is made by the Defendant, Vita Pacific Ltd.
2 Name of the Party to Whom the Offer is Made
The offer is made to the Plaintiff, Eileen Glynis Heather.
3 The Cause or Causes of Action to Which the Offer Relates
The offer relates to all causes of action pleaded by the Plaintiff in her Statement of Claim dated 24 November 1994.
4 The Period for Which the Offer Remains Open
The offer remains open for the period of 14 days from the date of service of this notice.
5 The Offer of Compromise
The Defendant offers to compromise all causes of action pleaded by the Plaintiff against the Defendant in the Plaintiff's Statement of Claim dated 24 November 1994 for:
(1)$163,000 for damages; and
(2)costs to be taxed as between party and party on Table A of Appendix M to the Rules of Court.
"take notice that as a result of a settlement being made in response to this offer of compromise the Plaintiff may be liable to pay amounts under the Health and Other Services (Compensation) Act 1995 or the Health and Other Services (Compensation) Care Charges Act 1995.
dated this 1st day of May 1996."
It will be noted that the offer of compromise relates to all the causes of action pleaded in the respondent's statement of claim. Of course, that statement of claim did not plead the provisions of the Act and the respondent's entitlements thereunder. By an application dated 7 December 1999, the respondent referred to the Tribunal:
"My entitlement to compensation by way of weekly payments and medical and like expenses resulting from my injury on 5 July 1993."
By way of preliminary point, it was submitted to the Tribunal that the respondent's entitlements had been extinguished by virtue of the acceptance of the offer of compromise and the provisions of the Act, s133(2) and (3) which provide:
"(2) The subsistence of a right of a worker or a dependant of a deceased worker to damages in respect of an injury, or the taking of proceedings to establish any such right or for the recovery of any such damages, does not prejudice or affect his right to compensation in respect of that injury, but where a worker or a dependant of a deceased worker has obtained judgment (whether against his employer or any other person) for damages in respect of an injury or has accepted any money paid into court in satisfaction of a claim for damages, his right to any payments by way of compensation that have not been determined before the date of the judgment, or the date of his acceptance of money paid into court, is extinguished.
(3) The settlement by a worker or a dependant of a deceased worker of a claim for damages in respect of an injury, if by that settlement he agrees that all his further claims to compensation in respect of that injury are extinguished, has, for the purposes of subsection (2), the like effect as a judgment obtained by that worker or that dependant for those damages."
The Tribunal rejected the submission and by order dated 27 June 2000 ordered that the respondent's application for workers compensation be listed for determination on its merits. This appeal is brought from that order.
Implied term
On behalf of the applicant, Mr Griffits submitted that it was an implied term of the offer of compromise that it included any causes of action that the respondent may have pursuant to the Act.
Mr Griffits accepted that the test to determine whether a term is to be implied in a contract has been authoritatively stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 and by the High Court of Australia in a number of cases, notably Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 and Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd (1979) 144 CLR 596. In Codelfa, Mason J said at 347:
"The conditions necessary to ground the implication of a term were summarized by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (supra): '(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract'."
As an offer of compromise is a formal written document made in accordance with a prescription laid down by the relevant Rules of Court, the observations made by members of the High Court in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Hawkins v Clayton (1988) 164 CLR 539 and Byrne v Australian Airlines Limited (1995) 185 CLR 410 with respect to cases where there is no formal written contract, have no application to the circumstances of this case.
It seems to me clear that there is no room for the implication of a term along the lines propounded by Mr Griffits. Assuming, but not deciding, that such a term was reasonable and equitable, capable of clear expression and did not contradict any express term of the contract, it could not be said that such a term was necessary to give business efficacy to the contract. The contract made by the acceptance of the offer is perfectly effective without the implication of the term.
Mr Griffits relied upon a passage in the judgment of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. That case concerned a clause in a building contract which provided:
"If the Contractor fails within the period specified in the notice in writing to show cause to the satisfaction of the Principal why the powers hereinafter contained should not be exercised the Principal … may
(a)take over the whole … of the work … and … exclude from the site the Contractor … or
(b)cancel the Contract …".
The court held that there was an implied term that the principal should exercise the powers conferred by that clause reasonably. Priestley JA based his view upon the proposition that such clause was necessary to give business efficacy to the contract. He noted that the words of the clause empowered the principal to give notice to show cause upon any default, no matter how trivial, and said, at 258:
"For the principal, in such circumstances, to be able then to exclude the contractor from the site and/or cancel the contract would be, in my opinion, to make the contract as a matter of business quite unworkable. One way of explaining this view is to say that no contractor in his senses would enter into a contract under which such a thing could happen. The reasonable contractor, the reasonable principal and the reasonable looker-on would all assume that such a result could not come about except with good reason.
The over-riding purpose of the contract from both the contractor's and the principal's point of view is to have the contract work completed by the contractor in accordance with the contract, in return for payment by the principal in accordance with the contract. The insertion of a subclause such as subcl 44.1 not subject to the constraint of reasonable use by the principal is quite inconsistent with all the main contractual promises by each party to the contract to the other. The contract can in my opinion only be effective as a workable business document under which the promises of each party to the other may be fulfilled, if the sub-clause is read in the way I have indicated, that is, as subject to requirements of reasonableness."
Mr Griffits submitted that the over-riding purpose of the contract made by the acceptance of the offer of compromise was to bring to an end all claims that the respondent had arising out of the circumstances that resulted in the respondent suffering the compensable injury. That is not apparent from the terms of the contract. The purpose of this contract is clearly and unequivocally stated in the formal offer of compromise. It is quite a different contract from the building contract which was before the court in Renard Constructions, the purpose of which was clear from its terms.
It might well be that both parties overlooked the inclusion in the offer of compromise of a reference to claims under the Act, but this is no ground for the implication of a term. As raised with counsel during the course of argument, it might be a basis for an order for rectification of the contract made by the acceptance of the offer of compromise, but that is not in issue in these proceedings.
On behalf of the respondent, Ms Mackey submitted that as a matter of law, the acceptance of the offer of compromise did not create a contract into which terms could be implied. I do not accept that submission. Although the Rules of Court, O24A, prescribe certain requirements for the making of an offer of compromise, such an offer is nonetheless an offer at common law which, if accepted, becomes a contract at common law. A failure to satisfy the terms of the contract will be a breach of contract, actionable at law. This is so notwithstanding the provision of a statutory remedy in the event of breach by O24A r10. It may well be that compliance with the provisions of the Rule will make it hard to imply a term, for it will only be in the most unusual case that a term will satisfy the "clear necessity" test, but there is nothing about the Rule to oust the application of the common law of contract from an offer of compromise and its acceptance.
Mr Griffits argued in the alternative that the term sought to be implied should be implied as a matter of custom. The law with respect to this has been authoritatively stated by the High Court in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226. At 236 - 237, the Court said:
"The circumstances in which trade custom or usage may form the basis for the implication of terms into a contract have been considered in many cases. The cases have established the following propositions:
(1) The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact: Nelson v Dahl (1879) 12 Ch D 568, at p 575. The critical dependence of a finding of custom on the facts of the particular case means there is little to be gained by referring (as counsel for the appellant urged us to do) to the practices of the London marine market in the last century, notwithstanding that those practices formed the basis for the implication, in contracts of marine insurance, of a term similar to the first of the terms alternatively contended for in this case: see Power v Butcher (1829) 10 B & C 329, at p 340; 109 ER 472, at p 476; Xenos v Wickham (1867) LR 2 HL 296, at p 319; Universo Insurance Company of Milan v Merchants Marine Insurance Company [1897] 2 QB 93, at pp 95-97, 99.
(2) There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract: Young v Tockassie (1905) 2 CLR 470, at p 478; Summers v The Commonwealth (1918) 25 CLR 144, at p 148; Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48, at pp 60-61. In the words of Jessel M.R. in Nelson v Dahl, (supra) at p 575, approved by Knox C.J. in Thornley v Tilley (1925) 36 CLR 1, at p 8:
'[The custom] must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well as reasonable, and it must have quite as much certainty as the written contract itself.'
However, it is not necessary that the custom be universally accepted, for such a requirement would always be defeated by the denial by one litigant of the very matter that the other party seeks to prove in the proceedings.
(3) A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement: Summers v The Commonwealth (supra) at p 148; Rosenhain v Commonwealth Bank of Australia (1922) 31 CLR 46, at p 53."
In Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (supra), Gibbs J (as he then was) said, at 52:
"The authorities to which my brother Stephen refers show that the burden of proving a custom which is so notorious that everybody in the trade contracts on the basis that it forms a term of the contract is a difficult one to discharge."
In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (supra), the court said, at 238:
"In order to establish a custom to the effect that a broker is alone liable to an insurer for payment of a premium on a policy of insurance, it is not sufficient to show that in the ordinary course of events the premium is paid to the insurer by the broker, nor is it sufficient to show that where a broker has failed to pay a premium the insurer makes its first demand for payment from the broker. Both circumstances are consistent with the continued liability of the assured. It is necessary to establish a clear course of conduct under which insurers do not look to the assured for payment of the premium. This may be established by proving either an absence of claims by insurers against assured, or the existence of claims directed exclusively to brokers as a practice rarely if ever departed from."
Whether or not there is a custom is a question of fact. There is no appeal to this Court on issues of fact unless the fact found by the Tribunal was one that no tribunal acting reasonably and properly instructed as to the law could have made. The Tribunal found that there was no evidence of a custom such as that contended for by Mr Griffits. This is not surprising. There was no evidence at all before the Tribunal. In these circumstances, the short answer to Mr Griffits' submission that a term ought to be implied by custom is that the conclusion of the Tribunal that there was no evidence of such a custom is unassailable.
Mr Griffits drew attention to the provisions of the Act, s49(1)(a) which provides:
"49 ¾ (1) The following provisions apply to a proceeding before the Tribunal:¾
(a) the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks fit;"
However, that section must be read in conjunction with s57(1) which provides:
"57 ¾ (1) Subject to this section, the matter to be resolved in a proceeding before the Tribunal shall be resolved by the Tribunal on such evidence as is placed before it after all parties have been given a reasonable opportunity to be heard, and an order made by the Tribunal in relation to the proceeding is lawful and effectual whether or not all parties to the proceeding have presented their cases."
In addition, there is an obligation to comply with the requirements of natural justice. These provisions would not have permitted the Tribunal to make the finding of fact for which Mr Griffits contended by the application of its own untested and unexplored understanding of a custom in some undefined trade or profession. This is clear from the reference to "critical dependence of a finding of custom on the facts of the particular case …" set out in the passage cited above from Con-Stan Industries.
Although the Tribunal made the determination which is the subject matter of this appeal upon the basis contended for by Ms Mackey, the reasons for judgment go on to provide that if it was wrong in this respect, then for the reasons expounded, no term can be implied either ad hoc or by custom. The order it made was the correct one in the circumstances and the appeal is dismissed.
As an addendum, I observe that had the Full Court been alert to the possibility of the respondent making a claim for workers compensation, it is unlikely it would have ordered the amendment of the offer of compromise. Wright J was no doubt unaware of the possibility of the respondent making a claim for workers compensation for he said at 130, that there would be no injustice in permitting the offer of compromise to be amended. Further, I observe that this case demonstrates a clear need to amend the Act, s133, to include acceptance of an offer of compromise within the scope of its terms. The procedure of offers of compromise was introduced into the Rules of Court by Statutory Rule 146/1995, without consequential amendment to the Act.
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