Western Export Services Inc & Ors v Jireh International Pty Ltd
[2011] HCATrans 297
[2011] HCATrans 297
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S227 of 2011
B e t w e e n -
WESTERN EXPORT SERVICES INC
First Applicant
DAVID CISNEEROS
Second Applicant
STEVEN MEIER
Third Applicant
and
JIREH INTERNATIONAL PTY LTD
Respondent
Application for special leave to appeal
GUMMOW J
HEYDON J
BELL J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON FRIDAY, 28 OCTOBER 2011, AT 10.06 AM
Copyright in the High Court of Australia
MR B.W. WALKER, SC: May it please the Court, I appear with my learned friend, MR G.K.J. RICH, for the applicants. (instructed by Koffels Pty Limited)
MR R. MERKEL, QC: If the Court pleases, I appear with my learned friend, MR T MALTZ, for the respondent. (instructed by Meerkin & Apel Lawyers)
GUMMOW J: Yes, Mr Walker.
MR WALKER: Your Honours, the point emerges ‑ ‑ ‑
HEYDON J: Do you still support paragraph 9 of your written submissions?
MR WALKER: I am so sorry, your Honour, paragraph?
HEYDON J: Paragraph 9, which is on page 190? It seems to involve an overruling of a majority decision of this Court by trial judges in intermediate appellate courts? What Justice Mason said in Codelfa was agreed in by Justices Stephen and Wilson, constituting a majority of the Court.
MR WALKER: Quite so, your Honour. No, that is not a point that I wish to ventilate. However, the first sentence is, in our submission, apropos a matter ‑ ‑ ‑
HEYDON J: That first sentence collides directly with Justice Mason’s statement on page 352 in Codelfa.
MR WALKER: Yes, and, your Honour, in our submission, the proper – I will not call it collision – the proper comparison is not as, I am sorry, paragraph 9 suggests with intermediate appellate courts, but rather with this Court and, in particular, the proposition that we put in paragraphs 6, 7 and, in particular 8. In particular we have highlighted the passage from Chief Justice Gleeson’s reasons in McCann ‑ ‑ ‑
HEYDON J: But McCann and all the cases in footnote 7 are not cases in which there was any challenge to what Justice Mason said in Codelfa. The point was simply not present to the mind of the Justices. They are not authorities in favour of the first sentence of paragraph 9, or such as to justify what the New South Wales Court of Appeal has done in cases other than this.
MR WALKER: Your Honour, I think, in the context of special leave the proposition that your Honour has raised is, in effect, a statement of the question that we would seek to ventilate, namely, when there are clear enunciations, albeit without any leave having been sought to identify as wrong and needing to be overruled anything in Codelfa, when clear statements appear in subsequent judgments of this Court on something as general as the approach to contractual interpretation there is raised, for the profession and for intermediate appellate courts, the question of the enunciation of a test to be involved which is of much more than academic interest, that is whether there be what I will call a gateway issue to a consideration of the commercial context, under the rubric of either ambiguity or, upon one interpretation, absurdity - and they are perhaps related concepts - is of obvious practical significance for all judges, not just intermediate appellate judges and obviously of great significance for those advising. There is, and with great respect ‑ ‑ ‑
GUMMOW J: I think you have to face up to it, Mr Walker, would you be seeking special leave to reopen Codelfa?
MR WALKER: Your Honours, I think it follows from what I have just said that our argument necessarily would urge a preference for the later general statements, shorn of any gateway requirement of ambiguity. To the extent that that involves canvassing the way it was expressed in Codelfa, then yes. I have expressed it that way because it may be that there is a reconciliation possible, though I accept that ‑ ‑ ‑
GUMMOW J: I do not think there is any question of reconciling anything really. It is just a question of white‑anting Codelfa, it seems to me.
MR WALKER: It is certainly not white‑anting, your Honours. If we were to address the point we would address it directly, not in any implicit fashion.
GUMMOW J: In this activity there is a great mischief because the wider this net is thrown the greater the possibility of litigation and disagreement and expense in circumstances where ordinary contracts pass into the hands of all sorts of third parties who are expected to be able, on the faith of Codelfa, because they think that the words mean what they say.
MR WALKER: Yes, your Honours ‑ ‑ ‑
GUMMOW J: But that very important consideration does not seem to be adverted to in some of these cases referred to in these footnotes and to your paragraph 9.
MR WALKER: What is adverted to and this may be contrast, it may be development, in the ‑ ‑ ‑
GUMMOW J: They have to be shown to bankers, they have to be shown to revenue authorities, they have to be shown to subcontractors, so on and so forth.
MR WALKER: Certainly, yes. What does appear and what we do seek to present in the argument is that there is plainly a difference between what the courts in the United Kingdom have regarded, in relation to what I have called this gateway requirement, and in our submission ‑ ‑ ‑
GUMMOW J: That is irrelevant if it is inconsistent - it is for us to say what happens to Codelfa in the light of what is happening in the United Kingdom.
MR WALKER: Of course, your Honour.
GUMMOW J: Not in some post‑colonial restoration period, Mr Walker.
MR WALKER: No, that is not my point at all. It has nothing to do with stare decisis or anything like that. It was in answer to your Honour’s point about commercial certainty. It is not to be supposed, in our submission, that the courts of that trading nation are any less apprised of the need for the stability of meaning expressed by contractual wording than any other courts. Their opinions on the matter are at least worthy of consideration. They do not govern. They may not have any a priori persuasive value, but they are certainly worthy of consideration. It is an issue, in our submission, thrown up ‑ ‑ ‑
GUMMOW J: Are they formulated with a view to what was said in Codelfa?
MR WALKER: I do not think any of them ‑ ‑ ‑
GUMMOW J: Exactly. Why does it work the other way around?
MR WALKER: Your Honour, I say it works and it is certainly not a mechanism that I am trying to suggest. We do not say for a moment “I can pose an English authority which means that the Court, as it were, should deflect from its ordinary business and attend to whether there is agreement in this country with that”. Of course not - nothing to do with that.
But it is a much longer running difference, if there be difference and I want to bring attention back to the position in this Court because the general statements, post‑Codelfa, to which we have referred, subject of course to the observations with which Justice Heydon started by asking me about this morning, those general statements themselves stand as statements that do not appear to lend themselves, I stress, on the face of the statement of reasons, to a requirement to start with what I will call ambiguity before one can think about the broader context.
In our submission, if there is any similarity of method to be followed in the other important area where the meaning of words is the critical issue before the Court, namely statutory interpretation, there would be a coherence if the notion of having to formally establish something as, in itself, difficult and arguable as ambiguity, were treated the same way for contract as in statute and I do not mean about extrinsic materials. I am not talking about extrinsic materials in this case either.
Your Honour Justice Gummow referred to the uncertainties and expense. One aspect of the expenditure in contractual interpretation that the rules of interpretation of written contracts, in particular, pay regard to is this assembly and presentation at expense of negotiating material and other supposed factual matrix material. That is not what we are concerned with in this case. We are concerned with an understanding from the basic commercial setting, that is the court seeking to be apprised of the position the parties were in and what they were talking about in their written contract.
That, in our submission, is obviously a very important issue and it is not one which, in our submission, the later High Court cases suggest showed error by the trial judge, the learned trial judge, seeking to place himself in the position that these parties were when they negotiated for the ongoing payment commission with respect to the very sales that our contracting party was so glad to have got the facility to generate. That is the benefit that we obtained for them in return for the commission. They have turned, in effect, a commission to us into a commission to them from their new creature.
HEYDON J: I suppose the forensic position we have reached is this. If you challenged Codelfa and succeeded, would that give you victory or not? Justice Macfarlan did, although arguably at an inappropriate stage, take into account the background circumstances known to both parties or, at least, he propounded that as the test.
MR WALKER: We submit yes, though I am bound to accept, of course, that it would be quite unfair to suggest that Justice Macfarlan did not have regard to them. There were a number of other issues in the case as well and they are there. But we do submit that he very plainly regarded what I will call the printed words as conclusive because they were printed words with a tolerably obvious, what he called literal meaning.
Now, we submit that that word “literal” there is standing for a meaning, not taking into account that which the parties ought to be understood as having intended by their contractual negotiation, given what they themselves regard in that quite odd document, if I could just take your Honours back to it, picking up at page 5 of the application book.
It is an odd document. As your Honours will recall it nominates as parties two natural persons collectively known as a corporation. That rather suggests that the governing minds, the corporators, are people who have, as it were, the commercial motivations and expectations. They can have through their artificial creature other artificial creatures. So these were businessmen talking to each other in this odd way.
On page 6 one has what is called a “primary goal of negotiation” being spoken of. In essence, the very written document that the Court of Appeal attends to is one which perhaps unusually talks in terms of the commercial genesis and aim. That is a sentence, and I understand this cuts both ways, but that is a sentence which talks about establishing the corporation or “an associated entity” as the means of these businessmen roasting and supplying, et cetera. It is the sentence that follows with this omission of the phrase “or an associated entity, subsidiaries”, et cetera, upon which we foundered on appeal.
Now, in our submission, those two sentences taken together provide an immediate textual setting which, when set with the commercial aim and genesis of the transaction, do lend a real prospect to success if there be a putting to one side as a gateway proposition that the words by Jireh International Pty Ltd do not immediately suggest anything in the nature of ambiguity. Well in a sense, of course, they do not. By X by Y is not of its nature ambiguous on the face of things.
In the context, in our submission, it did lead to the considerations that found favour with the trial judge. In our submission, it can be seen from the sequence of reasoning that we have focused on in Justice Macfarlan’s reasons, particularly culminating in the passage starting at 157 of the book and culminating in paragraph 58 on page 158, in our submission the observation from about line 25 commencing “In other words” is what might be called a contestable gloss, by which I mean it does not appear from McCann, although it may be that it is something that ought to be understood in terms of the issues argued and, as Justice Heydon points out, not argued in McCann.
Our point about the High Court dicta upon which we base our present application are that they are expressed in the context of the general exercise of construing contracts. I accept entirely what was not argued and what was not canvassed in the course of the argument and, therefore, the decision in those cases. However, they stand as, obviously in themselves, authoritative statements for what they say. In our submission, on their face what they say is inconsistent with the rigid notion of a gateway through which the matter should pass.
Now, your Honours, that is, in our submission, the matter that warrants attention from the Court. It has to do not with a post‑colonial difficulty with United Kingdom authority, but with the state of affairs in the published reasons of this Court in the various decisions to which we have drawn attention. The very importance, not quite talismanic, but approaching it, quality of Justice Mason’s reasons in Codelfa, in our submission, add to rather than detract from the desirability of a grant of special leave in this case.
Your Honours, on the implied term point this much has to be said. It has not got as much merit as a special leave point as the interpretation approach, with which I have commenced. All we would wish to add is to ‑ ‑ ‑
GUMMOW J: Where does that appear in the draft appeal notice?
MR WALKER: It appears in ground 3 on page 186 at about line 32. The short point, which can have wider significance for traders involved in commission arrangements and distribution arrangements, is this. What we failed on - the point that overturned the success was this. There being no positive obligation to sell a bean, let alone many millions of beans, why should there be any obligation not to engage in other ways of selling the beans, to which the answer was this was an arrangement between obviously entrepreneurial businessmen. This was an arrangement where we have their very words in the letter agreement that those on the other side wish to have the opportunity to sell beans.
It may be supposed that the self‑interest of all entrepreneurial businessmen is to sell, rather than not sell. Therefore, there did not ever need to be, in order for the reasonable expectations and the like involved in the implication of a term, there did not need to be an anterior or separate obligation to sell. There was all the self‑interest in the world calculated to encourage sales. We took the risk obviously that they would perversely decide not to sell, a risk one could comfortably take. They said they wanted to. They said they were anxious to be in that position.
Common sense, in our submission, of a kind appropriate to commercial law in the implication of terms in such cases denies the need for a positive obligation to carry out the activity which might generate a commission, rather the self‑interest is enough to bring about the position whereby consideration can be given to whether there is an implied term not to resort to restructuring or other steps for whatever motive which would
have the effect of depriving us of the commission which would have come, had there not been those steps taken. May it please the Court.
GUMMOW J: Yes, Mr Merkel.
MR MERKEL: Can I just address at the outset my learned friend’s response to your Honours’ questions on Codelfa. This is a case where the Codelfa question simply does not arise and, as your Honour Justice Heydon pointed out to my learned friend, in paragraph 55, Justice Macfarlan did take into account surrounding circumstances but, more importantly, the surrounding circumstances in this case do not give you any assistance one way or the other in resolving any of these interpretation questions.
In our reply submissions to my learned friend we put quite upfront that they have not identified any surrounding circumstances that were not taken into account that should have been, or any surrounding circumstances that they rely on that should have been taken into account that changed the outcome.
We would say two things about the main thrust of our learned friend’s submissions which is that this Court should consider overruling what Justice Mason said in Codelfa. Firstly, this was not a case where surrounding circumstances were part of the battleground. They were looked at inevitably because of the lead up to the contract and the number of issues that this case involved, so that insofar as the question arises “Should surrounding circumstances be taken into account?” that was not a live issue in the case.
More importantly, we say that it cannot possibly change the outcome because his Honour took into account surrounding circumstances before finding ambiguity and found that they did not assist in the construction point put forward by our learned friends, which is simply what do the words “sales by Jireh to the Gloria Jean’s stores” mean?” We say that the surrounding circumstances give no support whatsoever to the submission that our learned friends would wish to put, that somehow those unambiguous words can be read up to have a very different meaning to their ordinary and natural meaning by reference to any particular surrounding circumstances.
When we actually analyse what we would wish to say on surrounding circumstances this is a case where all the contemporaneous circumstances point in favour of the parties intending the ordinary natural meaning of the words they use and not intending any other meaning, because at that stage no stores had ever been opened in Australia. No draft franchise agreement was in existence. There was uncertainty as to who would be the suppliers. There was uncertainty as to the product range, and clause 3 was related to an unlimited range of products and an unlimited geographic range of areas.
There was uncertainty as to how and when and in what circumstances the business would develop and the services being offered in this case by WES were services not only passed, but continuing, and there were different clauses of the letter agreement that dealt with its compensation. It had compensation under clause 2 for its direct supply, clause 3 on sales by Jireh, clause 4 in respect of further negotiations in relation to sales to other franchisees elsewhere and, in clause 5, a sale of an equity interest gave it a right to compensation and, importantly, because of that state of uncertainty we found clause 7, which provided for a review of the compensation provisions in respect of the interests of all parties within six months.
So that these surrounding circumstances were dealt with and when looked at show quite clearly that there was simply nothing that would justify a reading up of a clear and unambiguous provision such as clause 3, but equally importantly at the time this was being put to Jireh, Jireh was refusing to sign the letter agreement because of its concern about clause 3 operating in a way that it did not, or could not, ascertain was commercial. At the time this was being put, the master franchise and roasting agreement were being finalised with the American head company and in those circumstances it was a desperate need for WES to get this agreement signed.
So for WES to then articulate that we want five per cent commission on any sales by any associated company and having to define that, if those surrounding circumstances were taken into account, they could only lead to the conclusion that the parties intended the words to operate in accordance with the meaning that one would expect them to have and, as Justice Macfarlan pointed out, the words “and associates” were incorporated in the first part of clause 3, but not in the second part.
Really what this case is about is the most unexceptionable principle that what the trial judge did is take words which had an ordinary and natural meaning – whether they call it “literal” or whether they call it “ordinary and natural meaning” or “unambiguous” does not matter – and applied his Honour’s perception of a business and commercial‑like operation.
GUMMOW J: Yes, this is the point Justice Macfarlan emphasises at paragraph 56, I think, page 157.
MR MERKEL: Yes, your Honour, and what his Honour does in accordance with a long line of authority is say it is not for the court to enter into the sphere of what is a more businesslike and commercial operation. In Maggbury, your Honour, in the judgment with Chief Justice Gleeson and Justice Hayne, said minds will obviously differ on that. In Codelfa, three of their Honours made it clear that once you are into that territory it is not for the court to give a more commercial or a more businesslike operation.
It is really that point which was being addressed by Justice Macfarlan from paragraph 55 through to paragraph 65. Can I take your Honours to the conclusion his Honour at page 160 at paragraph 65 – and this was really what the whole case was about in the Court of Appeal:
Whilst the view could be taken that it would have been reasonable for commission to be payable in the case of sales by entities associated with Jireh, the Court does not know, and it is not relevant for the Court to know, why the parties adopted a more restrictive provision and in particular why they added a reference to “an associated entity” at the commencement of Clause 3 but chose not to do so in the critical last sentence –
Then his Honour made the critical observation, which was that –
The provision operates perfectly well when restricted in its application to sales by Jireh. There is nothing absurd about its operation in that way. It is not permissible for the Court to rewrite the provision to have it operate in what may be a more reasonable fashion.
Now, insofar as this case is cited as authority, it has already been picked up by the Court of Appeal for the proposition that can be properly discerned from his Honour’s judgment and case 7 on our list of authorities which we have handed up to your Honours is Miwa v Siantan Properties [2011] NSWCA 297, where Jireh was cited by their Honours at paragraph 18, and we would say this is as unexceptionable a proposition as one can get in this area. In the middle of the paragraph:
The courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense –
That is what we say is the proposition for which Jireh may be seen to stand, and we say that that accords with Maggbury. It accords with the observations in Codelfa by Justice Mason, Justice Brennan and Justice Aickin. Lord Mustill had said something very similar in our case No 3, which articulates the point, we say, very succinctly in Torvald v Arni Maritime Corporation in the House of Lords, which is at [1994] I WLR 1465, but could I take your Honours to what Lord Mustill said at page 1473 in paragraph G, and we say this is the gravamen of what this case was really about, where his Lordship said:
questions of this kind are better decided by looking at what the contract says than by speculating on the practical outcome of preferring one solution to another. Naturally, no judge will favour an interpretation which produces an obviously absurd result unless the words used drive him to it, since it is unlikely that this is what the parties intended. But where there is no obvious absurdity, and simply assertions by either side that its own interpretation yields the more sensible result, there is room for error.
We say that that is precisely what the underlying principle of absurdity, flouting business common sense, or something must have gone wrong in the language, is all about. The courts say when they see that kind of outcome, it goes to a contractual outcome the parties could not have intended, so something must have gone wrong with the language. But where you are in the territory that this case is in, you are in this territory where views will differ on what is more commercial, or what is less commercial.
So we say, with respect, that the surrounding circumstances cannot make any difference to the outcome of the present case, and we say that the party’s contract, as his Honour properly determined – Justice Macfarlan, and their Honours agreed with him, the other two judges that sat – it works perfectly well without any violence being done to the language.
So we say that this is not a case where the Codelfa question arises or where, if it did arise, it could result in a different conclusion, and on the main point that the case is authority for, we say it follows a long‑established line of principle established in this Court and acted on overseas.
On the question of the interposition of JIWD, the facts are very, very short on about that, but it is not an interposition of a company under the control – there was much more to it. That was a company set up as a third party to conduct the warehouse and selling operation, and had an agreement with Jireh by which Jireh was to get a payment. It was never challenged as being anything other than a bona fide commercial transaction, and it was not suggested to be other than in good faith.
But the important point is the construction that our learned friend is contending for, both on the express and the implied term, would have an extraordinary limitation on Jireh’s entitlement to structure its commercial arrangements subject to a good faith obligation to meet legal, financial, market and commercial demands in markets throughout the world for an unlimited range of products for an unlimited amount of time.
We say there is nothing in the background to these arrangements that would be suggestive of any kind of limitation of that kind being sought to be imposed, and it is really for that reason that we say clause 7 was put in to deal with that very uncertain situation. So there was to be a review as to the reasonableness of compensation.
Our learned friend had put quite strongly in a number of places that on the construction adopted by the Court of Appeal, it could render the commission rights in clause 3 nugatory. We say that is not so. His Honour Justice Macfarlan was acutely aware of it, and in paragraphs 74, 76 and 78 of the judgment – and I do not need to take your Honours there – his Honour made it clear that the rendering nugatory was fully protected by the good faith requirement which was readily conceded, that if Jireh took steps as a device or for a purpose of trying to defeat the commission rights, that would clearly be a breach. But that is not the issue in this case, and that has not occurred in this case. So we say that when one looks at the implied term, the authorities Justice Macfarlan set out at paragraphs 80 to 86 uniformly support the view his Honour took that absent a positive obligation to sell, a duty to co‑operate cannot in effect substitute itself for that obligation.
For those reasons, we say the decision on the express term, the implied term was plainly correct. This was an idiosyncratic contract arising in most unusual circumstances, and we would say, with respect, there is no issue of general principle that could be drawn from the unusual terms of this contract, nor is there any issue of general importance. It is just a contract case based on the contract drawn up in these particular situations that were governed by well‑established principle by the decision of the Court of Appeal. For those reasons, we would say special leave should be refused.
Can I just say one other matter? My learned friend did draw upon, in a very uncertain way, the fact that at the outset of the contract, there was reference to the two individuals, and that may somehow lead into some ambiguities ‑ ‑ ‑
GUMMOW J: Yes, that is right.
MR MERKEL: Justice Macfarlan – that arose in the Court of Appeal – there is a two‑edged sword, if the individuals were to have the rights, but at appeal book 156 in paragraph 52, his Honour observed that that point was dropped, and it was not relied upon in any way. So we say that this case has not been contested at any point of time on the basis that the fact that the two individuals were named in anticipation and belief that it was the corporate entities that were bound in any way affects the interpretation of the contract. It has never been put that way. So we say special leave should be refused. If your Honours please.
GUMMOW J: Thank you. Yes, Mr Walker.
MR WALKER: Your Honours, the point I was trying to advance on that last matter was not that which is recorded as not having been contended in paragraph 52 at page 156. They are other matters concerning agency or the identity of corporation of the people. My point was somewhat different.
The only other matter in reply is this. Of course, as I said in answer to Justice Heydon in‑chief, the suggestion upon a reading of our paragraph 9 of page 190 that there is a relevant difference between courts below this Court and this Court is not one with which we persist. The point, however, that the citation of authority in paragraph 9 makes is that there has been perceived to be a difference, and a possible affectation of the authority of the Codelfa true rule by reason of statements in this Court, statements which may well upon full argument require this Court, as it were, to state what they do and do not stand for.
At the moment, at least all of them – and they are very familiar citations to your Honours – are expressed in very general terms as the nature of the exercise they are addressing, contractual interpretation, would rather suggest. Our point simply is that there has been that perception in courts below, and it is for this Court to give the authoritative guidance about its own judgments which would appear, on at least one view of the matter, has misled courts below. Now, I need to be clear. I do not want to make a suggestion that is not true of this case. The two Court of Appeal cases, New South Wales and Victoria, that we have cited in our footnote 8 ‑ ‑ ‑
GUMMOW J: That is Franklins and MBF.
MR WALKER: Quite so. They were not cited in this case, and so I cannot say, as I no doubt would like to be able to say, that this is a case that sets ‑ ‑ ‑
GUMMOW J: Well, the primary judge referred to Franklins, I think.
MR WALKER: Yes, but I cannot say that this is a case where the Court of Appeal has, as it were, said something against it, but I do say that on the authorities, there are in our submissions real doubts and potentially misleading differences, all of which can and should be settled by the authority of this Court.
GUMMOW J: We will take a short adjournment.
AT 10.43 AM SHORT ADJOURNMENT
UPON RESUMING AT 10.54 AM:
GUMMOW J: Justice Macfarlan gave the leading judgment in the Court of Appeal in this matter. In the passage in his reasons in which he found error in principle in the reasons of the primary judge, his Honour said:
A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted.
His Honour added that the trial judge appeared:
to have acted on the basis that the provision would make more sense from a commercial point of view –
if it were construed as the trial judge did construe that provision. These statements by Justice Macfarlan since have been applied by the New South Wales Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at paragraph 18.
The primary judge had referred to what he described as “the summary of principles” in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at paragraphs 19 and following. The applicant in this Court refers to that decision and to MBF Investments Pty Ltd v Nolan [2011] VSCA 114 at paragraphs 195 to 204 as authority rejecting the requirement that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction. The applicant also refers to statements in England said to be to the same effect, including Westminster City Council v The National Asylum Support Services (2002) 1 WLR 2956 at 2958.
Acceptance of the applicant’s submission clearly would require reconsideration by this Court of what was said in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 by Justice Mason, with the concurrence of Justices Stephen and Wilson. Until this Court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.
The position in Codelfa as a binding authority was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at pages 62 to 63, paragraph 39 and it should not have been necessary to reiterate the point here.
We do not read anything said in this Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, paragraph 22; Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165, 179 paragraph 40; Wilkie v Gordian Runoff Limited (2005) 221 CLR 522 at 528 to 529, paragraph 15 and IATA v Ansett Australia Holdings Limited (2008) 234 CLR 151 at 160, paragraph 8 and at 174, paragraph 53 as operating inconsistently with what was said by Justice Mason in the passage in Codelfa to which we have referred.
However, the result reached by the Court of Appeal in this case was correct. Further, even if, as the applicant contends, clause 3 in the letter of agreement should be construed as understood by a reasonable person in the position of the parties with knowledge of the surrounding circumstances and the object of the transaction, the result would have been no different. Accordingly, special leave is refused with costs.
AT 10.59 AM THE MATTER WAS CONCLUDED
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