2023 Contract Law Masterclass with Jeffrey Goldberger

Hobart,16October2023

JeffreyGoldberger SpecialCounsel

Emailjeffrey.goldberger@nortonrosefulbright.com

Chapter1:Inferenceandimplicationintheidentificationof contractualterms

1Introduction

Mostlawyerswouldunderstandthedifferencebetweenanexpresstermandanimpliedterm ofacontractwhereanexpresstermisonearticulatedbythepartiesinwritingororallyandan impliedtermisoneimportedintoacontractinaccordancewithapplicablelegalprinciple.In Realestate.com.auPtyLtdvHardingham1,EdelmanandStewardJJintheirjointreasons capturedthedifferenceasfollows:

Contracttermsareeitherexpressedinwordsornotexpressedinwords.Ifatermisexpressed inwords,whetherwrittenororal,itiscalledanexpressterm.Ifthetermisnotexpressedin words,thenitmustbeatermthatisimpliedfromthecircumstances,includingtheconductof theparties.

Conversely,lawyersmaystrugglewiththedifferencebetweenaninferredtermandanimplied termandontheconceptualdifferencebetweeninferenceandimplicationinidentifying contractualterms.UntiltherecentdecisionoftheHighCourtinRealestate.com.authe conceptoftheinferredtermwasarecognisedcategoryofterminaninformalcontract. However,EdelmanandStewardJJintheirjointreasonsrejectedtheconcept.TheirHonours alsoconsideredthatitwasanalyticallyincorrecttosaythatthereisaseparatecategoryof informalcontractgovernedbydifferentrules.InlightofthelatestHighCourtdecision,itis appropriatetorevisitthegoverningprinciples.

2Implicationofterms

2.1Basisforimplication

UndercontemporaryAustralialaw,atermmaybeimpliedintoacontractinanyofthe followingcircumstances:

(a)infact;

(b)inlaw;or

(c)bycustomorusage.

Theanalysisinthispaperisconfinedtotheimplicationoftermsinfact.

2.2Implicationinfact

Aneventmayoccurinthelifeofacontractforwhichthepartieshavemadenoprovision.In suchcircumstances,apartymayarguethatthegapshouldbefilledbyanimpliedterm allocatingriskinrespectoftheoccurrenceoftheevent.However,asthepartiesdidnotturn theirmindstotheeventatthetimeofcontractthecourtshavedevelopedspecificcriteriafor theimplicationofaterminfactwiththecorecriterionbeingnecessity.InCommonwealth BankofAustraliavBarker2,FrenchCJ,BellandKeaneJJindiscussingimplicationinlawand implicationinfactsaid:

implicationsinlawarenotsoremotefromthoseconsiderationswhichsupportimplicationsin acknowledgedbybothpartiestothisappeal.Therequirementthatatermimpliedinfactbe neces specificapplicationofthecriterionofnecessityThepresentcaseconcernsanimpliedtermin lawwherebroadconsiderationsareinplay,whicharenotatlargebutarenotconstrainedbya

Theconservativeapproachofthecourtstotheimplicationoftermsishighlightedbythe followingpassageinMasonJinCodelfaConstructionPtyLtdvStateRail AuthorityofNewSouthWales3:

Forobviousreasonsthecourtsareslowtoimplyaterm.Inmanycases,whatthepartieshave actuallyagreeduponrepresentsthetotalityoftheirwillingnesstoagree;eachmaybeprepared totakehischanceinrelationtoaneventualityforwhichnoprovisionismade.Themore detailedandcomprehensivethecontractthelessgroundthereisforsupposingthattheparties havefailedtoaddresstheirmindstothequestionatissue.Andthenthereisthedifficultyof identifyingwithanydegreeofcertaintythetermwhichthepartieswouldhavesettleduponhad theyconsideredthequestion.

Accordingly,thecourtshavebeenatpainstoemphasizethatitisnotenoughthatitis reasonabletoimplyaterm;itmustbenecessarytodosotogivebusinessefficacytothe contract.

Also,BarrettJinEquity8PtyLtdvShawStockbrokingLtd4citedwithmanifestapprovalthe followingpassageinthereasonsforjudgmentofKirbyJinRoxboroughvRothmansofPall MallAustraliaLtd5:

Whatevermaybethepreciselegalcriterionforimplyingtermsintoacontractuponwhichthe partieshavenotexpresslyagreed,itwouldalwaysbenecessaryforacourtofourlegal traditiontobeverycautiousabouttheimpositiononthepartiesofatermthat,forthemselves, theyhadfailed,omittedorrefusedtoagreeupon.Suchcautionisinherentintheeconomic freedomtowhichthelawofcontractgiveseffect.Absentsomestatutoryorequitablebasisfor theintervention,itisordinarilylefttothepartiesthemselvestoformulateanyagreementto whichtheyconsenttobeboundinlaw.

InCodelfaMasonJreaffirmedthecriteriafortheimplicationofaterminfactasformulatedby thePrivyCouncilinBPRefinery(WesternPort)PtyLtdvHastingsShireCouncil6.The proposedimpliedtermmust:

(1)bereasonableandequitable;

(2)benecessarytogivebusinessefficacytothecontract,sothatnotermwillbeimplied ifthecontractiseffectivewithoutit;

(3)besoobviousthat"itgoeswithoutsaying";

(4)becapableofclearexpression;and

(5)notcontradictanyexpresstermofthecontract.

Thesecriteriaarecumulativeandeachmustbesatisfied.

InRenardConstructions(ME)PtyLtdvMinisterforPublicWorks7PriestleyJAaddressedthe "businessefficacy"test.Inthatcasethequestionwaswhetherthefollowingtermination clausewassubjecttoanimpliedtermastoreasonableness:

44.1IftheContractorfailswithintheperiodspecifiedinthenoticeinwritingtoshowcause tothesatisfactionofthePrincipalwhythepowershereinaftercontainedshouldnotbe exercisedthePrincipalmay:

(a)takeoverthewholeofthework...and...excludefromthesitetheContractor...or

3 (1982)149CLR337

4 [2007]NSWSC503

5 (2001)208CLR516at573

6 (1977)52ALJR20at26

7 (1992)26NSWLR234

Indealingwiththe"businessefficacy"requirementPriestleyJAnoted8:

Thequestionof"effectiveness"willonlycomeupwhenadisputehasarisenaboutthewaya contractistowork,andonepartyissayingthatatermneedstobeimpliedwhichwillproduce whatthatpartyclaimsisafair(orreasonable,orproper,orjust)wayofresolvingthedispute, andtheotherpartyissayingthatthecontractcanwork(whichimplicitlymeans"forpractical purposes"orfairly,reasonably,properlyorjustly)withouttheclaimedimpliedterm.Insuch casestheopposingpartieswilladoptdifferentviewsofwhatamountstoeffectivenesssofaras theircontractisconcerned.

HisHonourcontinued9:

Theover-ridingpurposeofthecontractfromboththecontractor'sandtheprincipal'spointof viewistohavethecontractworkcompletedbythecontractorinaccordancewiththecontract, inreturnforpaymentbytheprincipalinaccordancewiththecontract.Theinsertionofa subclausesuchassubcl.44.1notsubjecttotheconstraintofreasonableusebytheprincipalis quiteinconsistentwithallthemaincontractualpromisesbyeachpartytothecontracttothe other.Thecontractcaninmyopiniononlybeeffectiveasaworkablebusinessdocumentunder whichthepromisesofeachpartytotheothermaybefulfilled,ifthesubclauseisreadinthe wayIhaveindicated,thatis,assubjecttorequirementsofreasonableness.

alsoexplainedinGroconConstructors(Victoria)PtyLtdvAPNDF2 Project2PtyLtd:10

transactionsuchefficacyasbothparties

makingtheagreementworkoravoidinganunworkablesituation.Wheretheexpresstermsof anagreementaresufficienttogiveitthebusinessefficacythepartiesintendedittohave,itwill notbecomenecessarytoimplyadditionalterms.However,atermmaybecommercially necessary,inorderforthecontracttobeworkableinabusinesssense,notwithstandingthatit canoperatewithouttheterm.

2.3ImpliedtermsinEnglishlaw

InEnglandtheleadingauthorityontheimplicationoftermsinfactisMarksandSpencerplcv BNPParibasSecuritiesServicesTrustCompany(Jersey)Limited11.LordNeubergerin teriainBP

Refinerybutwithsomequalificationsasfollows:

equitablenesswill,usually,ifeveraddanythingifatermsatisfiestheothercriteria.

Secondly,businessnecessityandobviousnesscanbealternativesinthesensethatonlyone oftheseneedstobesatisfied.

Thirdly,necessityforbusinessefficacyinvolvesavaluejudgement.Thetestisnotoneof absolutenecessity.Thetestisthatwithouttheproposedtermthecontractwouldlack commercialorpracticalcoherence.

Subsequently,inYooDesignServicesLimitedvIlivRealtyPTELimited12,CarrLJhaving reviewedtheauthoritiessummarisedtheprinciplesasfollows:

(i)Atermwillnotbeimpliedunless,onanobjectiveassessmentofthetermsof thecontract,itisnecessarytogivebusinessefficacytothecontractand/oron thebasisoftheobviousnesstest;

(ii)Thebusinessefficacyandtheobviousnesstestsarealternativetests. However,itwillbearare(orunusual)casewhereone,butnottheother,is satisfied;

(iii)Thebusinessefficacytestwillonlybesatisfiedif,withouttheterm,the contractwouldlackcommercialorpracticalcoherence.Itsapplication involvesavaluejudgment;

(iv)Theobviousnesstestwillonlybemetwhentheimpliedtermissoobvious thatitgoeswithoutsaying.Itneedstobeobviousnotonlythatatermistobe implied,butpreciselywhatthatterm(whichmustbecapableofclear expression)is.Itisvitaltoformulatethequestiontobeposedbytheofficious bystanderwiththeutmostcare;

(v)Atermwillnotbeimpliedifitisinconsistentwithanexpresstermofthe contract;

(vi)Theimplicationofatermisnotcriticallydependentonproofofanactual intentionoftheparties.Ifoneisapproachingthequestionbyreferenceto whatthepartieswouldhaveagreed,oneisnotstrictlyconcernedwiththe hypotheticalansweroftheactualparties,butwiththatofnotionalreasonable peopleinthepositionofthepartiesatthetime;

(vii)Thequestionistobeassessedatthetimethatthecontractwasmade:itis wrongtoapproachthequestionwiththebenefitofhindsightinthelightofthe particularissuethathasinfactarisen.Norisitenoughtoshowthat,hadthe partiesforeseentheeventualitywhichinfactoccurred,theywouldhave wishedtomakeprovisionforit,unlessitcanalsobeshowneitherthatthere wasonlyonecontractualsolutionorthatoneofseveralpossiblesolutions wouldwithoutdoubthavebeenpreferred;

(viii)Theequityofasuggestedimpliedtermisanessentialbutnotsufficientpreconditionforinclusion.Atermshouldnotbeimpliedintoadetailed commercialcontractmerelybecauseitappearsfairormerelybecausethe courtconsidersthepartieswouldhaveagreeditifithadbeensuggestedto them.Thetestisoneofnecessity,notreasonableness.Thatisastringent test.

LondonTrocadero(2015)LLPvPicturehouseCinemasLimited13.Thequestionbeforethe Courtwaswhetheraleaseofpremisesforuseasacinemawassubjecttoanimpliedterm thatifthepermitteduseasacinemabecameillegalbecauseofregulationsrelatingtothe ntandservicechargeswouldbesuspendedforany periodduringwhichtheuseofthepremiseswasprohibitedbytheregulations.SirJulian

NicholasPattenagreeing):

[138]Inmyjudgment,noneoftheimpliedtermscontendedforinthetwocasessatisfies eitherthebusinessefficacytestortheobviousnesstest.Takingthebusinessefficacy testfirst,asCarrLJsetoutat[51(iii)]ofYooDesign,thiswillonlybesatisfiedwhere, withouttheimpliedterm,thecontractwouldlackcommercialorpracticalcoherence. ThatsimplycannotbesaidoftheleasesintheHengroveandTrocaderocases.They bothworkperfectlywellwithouttheimpliedterms.Bothleasesallocatetheriskthat thepremisescannotbeusedfortheirintendedpurposetothetenant,sothatthe tenantisobligedtocontinuetopayrentwherethecesserofrentprovisionsarenot applicable(whichonthishypothesistheyarenotonthepresentfacts)andthereis nothingunworkableorincoherentaboutthatallocationofrisk.

[139]Theobviousnesstestisequallyinapplicable.Thetermwhichitissoughttoimplyhas tobepreciselyexpressedandmustbesoobvioustogowithoutsaying.Iftheofficious bystanderhadaskedthequestionwhetherthepartiesintendedthat,ifthepremises couldnotbeusedlawfullybecauseofrestrictionssuchastheCoronavirus

restrictions,theobligationtopayrentwouldbesuspended,farfromates not,therentispayablethroughoutunlessphysicaldamagetoordestructionofthe attheaspectof thetestidentifiedbyCarrLJat[51(vii)]cannotbesatisfied:

infactoccurred,theywouldhavewishedtomakeprovisionforit,unlessit canalsobeshowneitherthattherewasonlyonecontractualsolutionorthat

[140]AsCarrLJsaidin[51(viii)]thetestforimplicationisastringentoneandinmy judgmentitisnowherenearsatisfiedinthesecases.AsMrFetherstonhaughQC pointedout,where,asinthesecases,thecontractsinquestionweredetailed documentspreparedbylawyers,thescopeforimplicationislimited.Furthermore,in myjudgmentnoneofthetermscontendedforcanbeimpliedintotheleasesbecause theyareinconsistentwiththeexpresstermsoftheleases,inthesensethattheyseek toreallocatetheallocationofrisksetoutinthebargainwhichthepartiesmade.

ThemostrecentdecisionoftheUnitedKingdomSupremeCourtwhichexaminesthelawon impliedtermsisBartonvMorris14

FoxpaceLimitedownedaproperty,NashHouse,whichitwasanxioustosellhavingalready experiencedanumberoffailedattemptsatsale.Foxpaceandtheplaintiff,MrBarton,entered intoanoralcontractunderwhichFoxpaceagreedtopayMrBarton£1.2millionifhe introducedaprospectivepurchaserofNashHousewhowentaheadandpurchasedthe propertyfor£6.5million.Intheeventswhichhappened,MrBartonfoundapurchaser. Contractsweredrawnupforthesaleofthepropertyfor£6.5million,butthepricewas reducedto£6millionafteritwasdiscoveredthatthepropertyfellwithinanareasafeguarded forthepurposeoftheconstructionofahighspeedraillink.

FoxspacerefusedtopayanythingtoMrBartonarguingthathissolecontractualentitlement wastobepaid£1.2millionif,butonlyif,thepropertywassoldfor£6.5milliontoapurchaser introducedbyMrBarton.Asthesalepriceforthepropertywaslessthan£6.5millionMr

Insubsequentproceedings,MrBartonarguedthathewasentitledtobepaidareasonable feeeitheronthebasisofanimpliedtermorforunjustenrichmentonafailureofbasis.

[39]AlthoughonecouldnotdescribethecontractbetweenMrBartonandFoxpaceas beingcarefullydrafted,thatwarningisappositeherebecause,giventhesurrounding circumstancesofthecase,thefactthattheydidnotrefertothepossibilityofthesale beingforlessthan£6.5milliondoesnotmeanthatonecanbeconfidentthatthey wouldhaveagreedwhatshouldhappeninthatevent.

[40]Iamthereforesatisfiedthatitisnotpossibletoimplyatermintothisagreementtothe effectthatMrBartonwillbepaidareasonablefeeifthesalewasforlessthan£6.5 million.Itisnotpossibletosaythatthereisanyparticularfeetowhichtheparties wouldclearlyhaveagreed,orwhichissoobviousthatitgoeswithoutsayinganditis notnecessarytoimplysuchatermtogivetheagreementbusinessefficacyor coherence.

Roseind Marksand Spencer BP Refinery.Relevantly,LadyRosesaid:

[107]

fundamentaldisagreementabouttheunderlyinglegalprinciples,althoughtheymay begivendifferentlevelsofemphasis.Therealdifferencebetweenusconcerns whethertheexpressterm,thatMrBartonwastoreceive£1.2millioniftheproperty wassoldfor£6.5milliontoapurchaserintroducedbyhim,wasacompletestatement ofthecircumstancesinwhichhewaspromisedsomerewardundertheagreement,or onlyapartialstatement,leavingittobeimpliedthathewouldalsoreceivesome unspecifiedrewardifthepropertywassoldtosuchapurchaser,butforlessthan£6.5 million.Ifitwasacompletestatement,thenalesserrewardforasalebelow£6.5 millioncouldnotbeimplied,becauseitwouldbeinconsistentwiththeconditionforthe rewardexpresslyagreed.Norcouldtherebearemedyinunjustenrichment,because anilrewardforsuchasalewaswhatthepartieshadagreed.Theenrichment consistingofthebenefittoFoxpaceofasaletoapurchaserintroducedbyMrBarton, fornorewardtohim,wouldnotbeunjust,becauseitwasanoutcomeprovidedforby theagreement.Unjustenrichmentmendsno-

InhisdissentingjudgmentLordLeggattheldthatMrBartoncouldsucceedonthebasisofa termimpliedinlaw.HisLordshipsaid:

[174] e propertyfor£6.5milliondoesnotconveythatFoxpacewouldnothavetopayanything atalliftheintroductionenabledFoxpacetosellthepropertyatalowerpricewhich Foxpacechosetoaccept.Tothecontrary,itstronglyindicatesthatFoxpacewas willingtopayareasonablecommissioninthatevent,inaccordancewithwhatwould anywaybethenormalcommercialexpectationandimpliedobligationuponan effectiveintroductionwhichresultsinasale.

[188]Iconcludethat,intheeventthat-asinfacthappened-Foxpacesoldthepropertyto thepurchaserintroducedbyMrBartonatapricelessthan£6.5million,thetermsof theoralagreementreachedbetweenthepartiesdidnotnegativeMrBarton'sright (pursuanttoatermofthecontractimpliedbylaw)tobepaidareasonablesumforthe valuableservicethathesuppliedinbringingaboutthesale.

InarecentpaperdeliveredbyRichardCalnan,aLondonpartnerofNortonRoseFulbright, theauthorindiscussingtheoralcontractidentifiedbythetrialjudgeinBartonvMorrissaid:

[47]Whatdothewordsofthispromisesignify?Itisundoubtedlythecasethatifthe propertyweresoldfor£6.5milliontoapurchaserintroducedbyB,thenthe£1.2 millionwouldbepayable.Butwhatifthepropertyweresoldformoresayfor£7 million?WouldAstillhavetopay£1.2million?

[48]Itislogisticallypossibletoarguethatpaymentwouldonlybedueifthepropertywere soldfor£6.5millionneithermorenorless.Butitwouldbeextremelyunlikely promisethatthefeewouldbepayableifthepriceachievedwere£6.5millionormore. Thepromisewasnotexpressedbythejudgeinthoseterms.Inthelightofthefacts,it wasunnecessarytodoso.Butitisimplicit.

2.4Implicationasanexerciseincontractinterpretation

AnimportantissuewhichhasbeenagitatedbothintheAustralianandEnglishCourts,is whethertheimplicationofaterminfactispartoftheprocessofcontractinterpretation, namely,aprocessconcernedwiththeascertainmentofthecontractualintentionofthe parties.

InCodelfaMasonJaddressedtheissueasfollows:15

Whenwesaythattheimplicationofatermraisesanissueastothemeaningandeffectofthe contractwedonotintendbythatstatementtoconveythatthecourtisembarkinguponan orthodoxexerciseintheinterpretationofthelanguageofacontract,thatis,assigninga meaningtoaparticularprovision.Nonetheless,theimplicationofatermisanexercisein interpretation,thoughnotanorthodoxinstance.

15 At345

InexplainingthispassageCampbellJAinFranklinsPtyLtdvMetcashTradingLtd16 commented:

245OneofthereasonswhyCodelfawasnotanorthodoxinstanceofinterpretationwas becausewhetheratermisimpliedintoacontractbyadhocimplicationisrestrained bythetestsinBPRefinery(Westernport)PtyLtdvShireofHastings(1977)180CLR 266at283(UKPC).ThespecificquestionthatMasonJwasaddressinginCodelfa waswhether,intheapplicationofthosetests,"itislegitimatetotakeintoaccountthe commonbeliefsofthepartiesasdevelopedandmanifestedduringtheirantecedent negotiations".

However,LordHoffmann,indeliveringtheadviceofthePrivyCouncilinAttorney-Generalof BelizevBelizeTelecomLtd17,concludedthattheidentificationofimpliedtermswaspurelyan exerciseincontractinterpretation.

HisLordshipsaid:

[17]Thequestionofimplicationariseswhentheinstrumentdoesnotexpressly provideforwhatistohappenwhensomeeventoccurs.Themostusualinferencein suchacaseisthatnothingistohappen.Ifthepartieshadintendedsomethingto happen,theinstrumentwouldhavesaidso.Otherwise,theexpressprovisionsofthe instrumentaretocontinuetooperateundisturbed.Iftheeventhascausedlosstoone orotheroftheparties,thelosslieswhereitfalls.

[18]Insomecases,however,thereasonableaddresseewouldunderstandtheinstrument tomeansomethingelse.Hewouldconsiderthattheonlymeaningconsistentwiththe otherprovisionsoftheinstrument,readagainsttherelevantbackground,isthat somethingistohappen.Theeventinquestionistoaffecttherightsoftheparties.The instrumentmaynothaveexpresslysaidso,butthisiswhatitmustmean.Insucha case,itissaidthatthecourtimpliesatermastowhatwillhappeniftheeventin questionoccurs.Buttheimplicationofthetermisnotanadditiontotheinstrument.It onlyspellsoutwhattheinstrumentmeans.

[19]Thepropositionthattheimplicationofatermisanexerciseintheconstructionofthe instrumentasawholeisnotonlyamatteroflogic(sinceacourthasnopowertoalter whattheinstrumentmeans)butalsowellsupportedbyauthority.

[21]Itfollowsthatineverycaseinwhichitissaidthatsomeprovisionoughttobe impliedinaninstrument,thequestionforthecourtiswhethersuchaprovisionwould spelloutinexpresswordswhattheinstrument,readagainsttherelevantbackground, speechthatthisquestioncanbereformulatedinvariouswayswhichacourtmayfind helpfulinprovidingananswer-butthesearenotin

question:isthatwhattheinstrument,readasawholeagainsttherelevant background,wouldreasonablybeunderstoodtomean?

However,inMarksandSpencerplcvBNPParibasSecuritiesServicesTrustCo(Jersey) Ltd18theUnitedKingdomSupremeCourt theimplicationofterms.

LordNeuberger(LordSumptionandLordHodgeagreeing)said:

[28]Inmost,possiblyall,disputesaboutwhetheratermshouldbeimpliedintoa contract,itisonlyaftertheprocessofconstruingtheexpresswordsiscompletethat theissueofanimpliedtermfallstobeconsidered.Untilonehasdecidedwhatthe partieshaveexpresslyagreed,itisdifficulttoseehowonecansetaboutdeciding whetheratermshouldbeimpliedandifsowhatterm.Thisappealisjustsuchacase. Further,giventhatitisacardinalrulethatnotermcanbeimpliedintoacontractifit

16 (2009)NSWCA407

17 [2009]UKPC10

18 [2016]AC742

contradictsanexpressterm,itwouldseemlogicallytofollowthat,untiltheexpress termsofacontracthavebeenconstrued,itis,atleastnormally,notsensiblypossible todecidewhetherafurthertermshouldbeimplied.Havingsaidthat,IacceptLord Carnwath'spointinpara71totheextentthatinsomecasesitcouldconceivablybe appropriatetoreconsidertheinterpretationoftheexpresstermsofacontractonce onehasdecidedwhethertoimplyaterm,but,evenifthatisright,itdoesnotalterthe factthattheexpresstermsofacontractmustbeinterpretedbeforeonecanconsider anyquestionofimplication.

[29]Inanyevent,theprocessofimplicationinvolvesaratherdifferentexercisefromthatof construction.AsSirThomasBinghamtrenchantlyexplainedinPhilipsatp481:

ambiguitiesorreconcilingapparentinconsistencies,toattributethetrue meaningtothelanguageinwhichthepartiesthemselveshaveexpressed theircontract.Theimplicationofcontracttermsinvolvesadifferentand altogethermoreambitiousundertaking:theinterpolationoftermstodealwith mattersforwhich,exhypothesi,thepartiesthemselveshavemadeno provision.Itisbecausetheimplicationoftermsissopotentiallyintrusivethat thelawimposesstrictconstraintsontheexerciseofthisextraordinary

[30]Itisofsomeinteresttoseehowimplicationwasdealtwithintherecentcaseinthis courtofAberdeenCityCouncilvStewartMilneGroupLtd2012SLT205.Atpara20,

[31]ItistruethatBelizeTelecomwasaunanimousdecisionoftheJudicialCommitteeof thePrivyCouncilandthatthejudgmentwasgivenbyLordHoffmann,whose contributionsinsomanyareasoflawhavebeenoutstanding.However,itisapparent -27areopentomore thanoneinterpretationonthetwopointsidentifiedinparas23-24and25-30above, andthatsomeofthoseinterpretationsarewronginlaw.Inthosecircumstances,the rightcourseforustotakeistosaythatthoseobservationsshouldhenceforthbe treatedasacharacteristicallyinspireddiscussionratherthanauthoritativeguidance onthelawofimpliedterms.

InWellsvDevani19theUnitedKingdomSupremeCourtconfirmedtheapproachadoptedby theCourtinMarksandSpencerplcvBNPParibasSecuritiesServicesTrustCo(Jersey)Ltd (supra).LordKitchen(LordWilson,LordSumptionandLordCarnwath,agreeing)said:

[28]InMarks&SpencerplcvBNPParibasSecuritiesServicesTrustCo(Jersey)Ltd [2015]UKSC72;[2016]AC742,theSupremeCourtmadeclearthattherehasbeen nodilutionoftheconditionswhichhavetobesatisfiedbeforeatermwillbeimplied andthefactthatitmaybereasonabletoimplyatermisnotsufficient.LordNeuberger ofAbbotsburyPSC,withwhomLordSumptionandLordHodgeJJSCagreedwithout qualification,explained(atparas26to31)that(i)construingthewordstheparties haveusedintheircontractand(ii)implyingtermsintothecontract,involve determiningthescopeandmeaningofthecontract;butconstruingthewordsused andimplyingadditionalwordsaredifferentprocessesgovernedbydifferentrules.In mostcases,itisonlyaftertheprocessofconstruingtheexpresswordsofan agreementiscompletethattheissueofwhetheratermistobeimpliedfallstobe considered.Importantlyforpresentpurposes,LordNeubergeralsomadeclear(at paras23and24)thatatermwillonlybeimpliedwhereitisnecessarytogivethe contractbusinessefficacyoritwouldbesoobviou .

InCommonwealthBankofAustraliavBarker20theHighCourt,wentsomewaytoaccepting LordHoffmann'sapproachinBelizeTelecomalthoughwithoutconfirmingitscorrectnessin Australianlaw.

FrenchCJ,Kiefel,BellandKeaneJJ,intheirjointreasons,said:

[22]Implicationofaterminfactinacontract,byreferencetowhatisnecessarytogiveit businessefficacy,wasdescribedinCodelfaConstructionPtyLtdvStateRail Authority(NSW)asraisingissues"astothemeaningandeffectofthecontract". Implicationisnot"anorthodoxexerciseintheinterpretationofthelanguageofa contract,thatis,assigningameaningtoaparticularprovision."Itisneverthelessan "exerciseininterpretation,thoughnotanorthodoxinstance."Theimplicationofterms infactwasalsocharacterisedinAttorneyGeneralofBelizevBelizeTelecomLtdas anexerciseinconstruction.LordHoffmann,deliveringthejudgmentofthePrivy Council,said:

itisnotenoughforacourttoconsiderthattheimpliedtermexpresseswhatit wouldhavebeenreasonableforthepartiestoagreeto.Itmustbesatisfied thatitiswhatthecontractactuallymeans.

Thedistinctionthusdrawnisappropriateeventhoughthescopeoftheconstructional approachadoptedbyLordHoffmannhasbeendebated.

PriortoBarkertheAustralianauthoritieswerecircumspectaboutaconstructionbased approachtoimplication.InVodafonePacificLtdvMobileInnovationsLtd21GilesJAinthe contextoftheimplieddutiesofco-operationandgoodfaithsaid:

Assoofteninthelaw,itisnecessarytomakesurethatwordsaretheservants,notthemaster. Ifitissaidthat,indeterminingthefullimportofclause18.4,asamatteroflawthepower conferredonVodafonemustbeexercisedingoodfaithandreasonably,andifthatisdescribed asaprocessofconstruction,sobeit.Butitisnotconstructionbyregardtotheordinary meaningofthewordsusedintheagreement.Thereisanimpositionoflaw,asexplainedby McHughandGummowJJinByrnevAustralianAirlinesLtdbyattributionofacontractualintent totheparties,andtheruleofconstructiontowhichtheirHonoursreferisaruleforimposingin lawameaningontheparties.Ihavenodifficultyinusing,inthatsituation,theaccepted descriptionofatermimpliedbylaw.

Theobligationtoexercisethepowerinclause18.4ingoodfaithandreasonably,iffound,isan obligationimposedbylawbyaddingtotheexpresswords"willhavethesolediscretion"the furtherwords"tobeexercisedingoodfaithandreasonably".Itseemstomeanaccurateuseof languagetogiveitthedescriptionofanimpliedterm,whenfromthepremiseofacontractual intentattributedinlawtothepartiestheydidnotinfactusetheexpresswordswiththeadded meaning.Itisalsoapreferableuseoflanguage,sinceitrecognisesthattheobligations imposedbylaw-becauseatermisimpliedinlaw-anddoesnotproceedonafictionthatan intentionofthepartiesisbeingfoundbyaprocessofconstruction.

JusticeRobertMcDougallwritingextrajudiciallyinapaperentitledExploringtheRecent UncertaintySurroundingtheImpliedDutyofGoodFaithinAustralianContractLaw22 endorsedGilesJA'scomments.HisHonoursaid:

Ingeneralterms,theprocessofconstructioninvolvesascertainingthemeaningofwordsused inthecontextinwhichtheyareused.Thestartingpointistheordinarymeaningofthewords; anddeparturefromthatordinarymeaning,orthegraftingofsomethingontothatordinary meaning,maybejustifiedwherethecontext(includingthatascertainedbyreferencetothe factualmatrix)sodemands.But,asGilesJApointedoutinthepassagethatIhavequoted,the ascertainmentofanobligationofgoodfaithbyaprocessofconstructionisnotconstructionin thesensethatIhavedescribed.ThisanalysisfindssupportinthejudgmentofMasonJin CodelfawhereHisHonourdescribedtheprocessofimplicationinlawas"anillustrationofthe processofconstruction,thoughdifferingfromthemoreorthodoxestablishmentofthemeaning ofacontractualprovision".Inthiscontext,DrPeden'sanalysisofconstructionasapplyingthe principleofgoodfaithtodeterminethefullimpactoftheexpresstermsofthecontractisnot analysisofthemeaningtobeattributedtothewords,butoftheincidentstobeengraftedupon thewordsthatthepartieshavechosen.

TherelationshipbetweenconstructionandimplicationwasconsideredbyDaviesJinAAP IndustriesPtyLtdvRehauPteLtd23AcentralbutseeminglyunresolvedissueinAustralian lawiswhethersubsequentconductmaybeadmittedtodeterminetheexistenceofanimplied term.DaviesJnotedtheissueasfollows:

[27]Itisapparentfromtheauthoritiesthatthereisnobrightlinebetweenproperly construingthetermsofacontractandtheimplicationofafurthertermtogivethe contractbusinessefficacy.However,thedifferencebetweenthetwoconceptsmaybe significantbecauseofrulesrelatingtoadducingevidenceaboutpost-contractual conduct.Thegeneralruleisthatevidenceofthewaythepartieshaveconducted themselvesafterthecontractismadecannotbereliedupontoconstruethemeaning ofthecontract.Ontheotherhand,authoritysuggeststhatsuchconductcanbe admittedtodeterminewhetheratermshouldbeimplied:CounciloftheCityofSydney vGoldsparAustraliaPtyLtd[2006]FCA472at[164].Further,thatpositionisclearer wheretheassertedcontractisnotclearlyembodiedinanagreementwiththeterms speltout:CountySecuritiesPtyLtdvChallengerGroupHoldingsPtyLtd[2008] NSWCA193at[17],[20][21].

Relevantly,inCounciloftheCityofSydneyvGoldsparAustraliaPtyLimitedGylesJsaid:

[164]Icanseenodifficultyinregardingsubsequentconductasrelevanttothequestion astowhetheratermisnecessarytogivebusinessefficacytothecontract.Indeed,if acontracthasbeenperformedwithoutadheringto,orwithoutinconsistencywith,the claimedterm,withoutcomplaintorcommercialdifficulty,thatwouldbepowerful evidencethatthetermisnotnecessary.Thelawprefersfactstoprophecies(HTW Valuers(CentralQld)PtyLtdvAstonlandPtyLtd(2004)217CLR640at[39]).It wouldbeoddtoimplyatermasnecessarywheresuchaconclusionwouldbe contrarytothefactsastheylaterappeared.Ifconductmayberelevanttonegativethe implicationofatermasbeingnecessarythenitshouldalsoberelevanttosupportthe

2.5Inferenceandimplication

ThereisclearHighCourtauthorityrecognisingacategoryofinferredtermininformal contracts.Thestart

HawkinsvClayton24

Thequestionin

thatcasewaswhetherinaninformalcontractbetweenClaytonUtzandaclientforwhomthe firmpreparedawilltherewasaninferredtermthatuponthedeathofthetestatrix,thefirm wassubjecttoacontractualobligationtoinformtheexecutorandbeneficiariesthatthefirm MrHawkinswastheexecutorandplaintiff.MrHardwick wastheClaytonUtzpartnerwhopreparedtherelevantwill.DeaneJsaidat569-570:

Whiletheevidencedoesnotdisclosethecontentofanyexpressdiscussionbetweenthe testatrixandMr.Hardwickaboutthetermsuponwhichtheexecutedwillremainedinthefirm's custody,itisnotsuggestedthattheeffectofanysuchdiscussionwastonegativeormodify anycontractualtermswhichwouldotherwisebeinferredorimpliedinthecircumstances disclosedbytheevidence.Indeed,itwouldseemclearthatthecontractualtermsuponwhich theexecutedwillremainedinthesafecustodyofthefirmwereleftlargelyunarticulatedbythe partiesandmustbesoinferredorimpliediftheagreementbetweenthemistobegivenany relevantcontent.Inthesecircumstances,itisnecessarytoidentifytwodistinctstagesinthe ascertainmentofrelevantterms.Thosestagesmaywelloverlapanditwilloftenbe unnecessarytodistinguishbetweentheminpractice.Thefirststageisessentiallyoneof inferenceofactualintention:what,ifany,arethetermswhichcanproperlybeinferredfromall thecircumstancesashavingbeenincludedinthecontractasamatterofactualintentionofthe parties?Thesecondstageisoneofimputation:what,ifany,arethetermswhichare,inallthe circumstances,impliedinthecontractasamatterofpresumedorimputedintention?

subsequentlychallengedbyGordonJinRPDataonthebasisthatitwasinconsistentwith themodernascendancyoftheobjectivetheoryofcontractualintention.

HisHonourhavingrejectedtheproposedtermasaninferredtermconsideredwhether, alternativelythetermcouldbeimpliedinfact.HisHonournotedthatcaremustbetakento avoidanautomaticorrigidapplicationoftheBPRefinerycriteriatoacontractwhichisoralor partlyoralorwhereitisapparentthatthepartiesneverattemptedtoreducetheiragreement tocompletewrittenform.Inthecontextofinformalcontracts,hisHonourformulatedthe followingtest25:

Themostthatcanbesaidconsistentlywiththeneedforsomedegreeofflexibilityisthat,ina casewhereitisapparentthatthepartieshavenotattemptedtospelloutthefulltermsoftheir contract,acourtshouldimplyatermbyreferencetotheimputedintentionofthepartiesif,but onlyif,itcanbeseenthattheimplicationoftheparticulartermisnecessaryforthereasonable oreffectiveoperationofacontractofthatnatureinthecircumstancesofthecase.Thatgeneral statementofprincipleissubjecttothequalificationthatatermmaybeimpliedinacontractby establishedmercantileusageorprofessionalpracticeorbyapastcourseofdealingbetween theparties.

DeaneJinrejectingtheproposedtermasanimpliedtermnotedthattherewasnofindingin thecourtsbelowdefiningwhatstepsaNewSouthWalessolicitorisrequiredtotaketolocate theexecutorandbeneficiariesofawill Honouralsorejectedtheexistenceofanytortiousdutyofcare.

Subsequently,inByrnevAustralianAirlinesLimited26theHighCourtconsideredtheprocess foridentifyingthetermsofaninformalemploymentcontract.Intheirjointreasons,McHugh andGummowJJsaid:27

Secondly,wherethecontractisnotinwritingandisoralorpartlyoraloritappearsthatthe partiesthemselvesdidnotreducetheiragreementtoacompletewrittenform,cautionis requiredagainstanautomaticorrigidapplicationofthecumulativecriteriaidentifiedinBP.We shouldproceedonthefootingthatthepresentcaseistobeapproachedinthisway.

Insuchsituations,thefirsttaskistoconsidertheevidenceandfindtherelevantexpressterms. Sometermsmaybeinferredfromtheevidenceofacourseofdealingbetweentheparties.It maybeapparentthatthepartieshavenotspelledoutallthetermsoftheircontract,buthave leftsomeormostofthemtobeinferredorimplied.

TheirHonoursalsosaid:28

Incontractsofthisnature,apparentlylackingwrittenformalityanddetailedspecificity,itstillis necessarytoshowthattheterminquestionwouldhavebeenacceptedbythecontracting partiesasamattersoobviousthatitwouldgowithoutsaying.Thatcannotbepostulatedhere.

InBreenvWilliams29theHighCourtwasconcernedwiththetermsoftheinformalcontract betweendoctorandpatient.Thequestionwaswhetheritwasatermofsuchcontractthatthe DawsonandTooheyJJinrejectingsuchatermsaid:30

However,itiscommongroundthattheobligationoftherespondentunderthecontractbetween himandtheappellantwastousereasonableskillandcareintreatingandadvisingthe appellant.Itisunnecessarytopausetoexaminewhetherthatstandardofcarewasimposed upontherespondentbyinference,byimplicationorasalegalincidentofthatkindofcontract. Norisitnecessarytoconsidertheeffectoftheoverlapofthedutyimposedincontractandin tortinthisarea.Whatcanbesaidisthatitwasnotnecessaryforthereasonableoreffective performanceofthatobligationthattherespondentshouldbeobligedtogivetheappellant accesstohermedicalrecords.

Subsequently,inMastersHomeImprovementPtyLtd(formerlyShellbeltPtyLtd)vNorthEast SolutionPtyLtd31,theVictorianCourtofAppealsummarisedthepositionasfollows:

[59]Thedistinctionbetweenimpliedandinferredtermsisnotalwayseasytoidentify.Inferredterms arethosewhich'canproperlybeinferredfromallthecircumstancesashavingbeenincludedinthe contractasamatterofactualintentionoftheparties.'Ontheotherhand,theimplicationoftermsis directedtowhatthepartieswouldhaveagreeduponhadtheyturnedtheirmindstoitatthetimethey enteredintothecontract.Someoftheauthoritiesspeakofatwostageprocessfortheidentification ofthetermsofthecontractandobservethatthetwostagesmayoverlap--first,inferenceofterms basedonactualintentionandsecondly,implicationoftermsbasedonpresumedintention.

Importantly,thetaxonomyrelatingtotheidentificationoftermswasrecentlyconsideredby theHighCourtinRealestate.com.auvHardingham(supra)

Turningtothefacts.

MrHardinghamisaprofessionalphotographerandthesoledirectorofRealEstateMarketing AustraliaPtyLtd(REMA)throughwhichhecarriesonbusinesswhichconsistsofproviding photographsandfloorplansofresidentialpropertiestorealestateagentsforthepurposeof marketingthosepropertieseitherforsaleorlease.Therewasnoformalcontractbetweenany oftheagenciesandREMAalthoughtherewasanestablishedcourseofdealing.ToMr

byRealestate.com.auPtyLtd(REA)whichwerethenuploadedtotheRPDataplatform.The primaryjudgefoundthatHardinghamwasawareofthetermsandconditionsofthecontract betweeneachoftheagenciesandREAinrelationtotheuploadingoftheimagesontheREA httomakethephotographsavailableaftermarketing campaignshadendedandthesaleandpurchasetransactionshadbeencompleted. Accordingly,MrHardinghamknewthattheagencieswererequiredtograntREAalicenseon

REMAsoughtinjunctionsagainstREAandRPDatarestrainingcopyrightinfringement.REMA decisioncontainsthreeseparatejudgmentseachcontainingadifferentfocus.

KiefelCJandGagelerJintheirjointreasonssaid:

22

TheapproachtakenbyDeaneJshouldnotdistractattentionfromthefullenquiryas totherightsandliabilitiesoftheparties,whichinthefirstplacehasregardtotheir wordsandconductheretheirconductinparticulartakingaccountofallthe circumstancesinwhichtheytookplace.Infocusingattentiononthedistinction betweenaninferenceandanimplicationhisHonourshouldnotbeunderstoodtobe limitingthatenquiry.

30

AlthoughMrHardinghamandREMAmaybetakentohaveunderstoodwhathad transpiredbetweentheagencies,REA,andRPDatainrelationtothetransactionsin question,theysaidnothing.Theymadenoobjection.Noquestionofestoppelonthe partofMrHardinghamandREMAhasbeenraisedintheproceedingsbutthatisnot tosaythattheirsilencehasnorelevancetowhatmaybetakenasconveyedtothe agencies.Anagreementanditstermsmaybeinferredfromtheactsandconductof theparties,includingtheabsenceoftheirwords.Inlightofsurroundingcircumstances thatabsencemayevidenceatacitunderstanding.Here,thattacitunderstandingmay beunderstoodtohavebeenevidenttotheagenciesinlightofwhatwastakentobe partofthemutualunderstandingonwhichthepartiesconductedtheircontractual relationships.

31

ThesilenceofMrHardinghamandREMAwhentheywellknewwhatREAandRP Datadidwiththeimages,andforhowlongtheycontinuedtousethem,isconsistent withanacceptanceofwhatwasnecessarytoachievetheintendedmarketing.Both MrHardinghamandREMAandtheagenciesappreciatedthatitcouldonlybe achievediftheagenciessubmittedtoREA'stermstouploadtheimagestoits

32

platform.TheagencieswerenodoubtledtobelievebytheconductofMrHardingham andREMAthattheyknewandacceptedthatasacommercialreality.Inthese circumstancesitisnotpossibletoconcludethatitwasintendedthattheagencies couldonlylicenseREAonthebasisofthelimitationcontendedfor.

Inthesecircumstancesnoquestionastowhetheratermneedstobeimpliedinthe sub-licencetoREAarises.

GordonJinherseparatejudgmentidentifiedthequestionraisedbytheappealasfollows:

42

Thecentralquestioninthiscaseiswhatwouldthewordsandconductoftheparties (H/REMAandeachagency),whenjudgedinlightofwhatthepartiesknew,haveleda reasonablepersontoconcludewerethetermsofthecontractbetweenthem.More particularly,whenbothparties(H/REMAandeachagency)knewthattheWorksthat H/REMAprovidedtotheagencytouseincampaignswouldbeprovidedtoRPData andmadeavailablethroughRPDataProfessionalandneitherH/REMAnorthe agencysaidanythingtothecontrary,wouldareasonablepersonconcludefromwhat thepartiesknew,saidanddidatthetimeofeachcontractthatH/REMApermitteduse oftheWorksbyRPDataafterthecampaignhadended?Theansweris"yes".

IndealingwithprincipleherHonourobserved:

48

Putinsimplerterms,theintentionofH/REMAandeachagency,objectively ascertained,aboutthescopeofthelicenceandtheabilitytograntasub-licenceisto beidentifiedfromwhatwassaidandnotsaid,fromwhatwasdone,andfromwhat theyreasonablykneworoughtreasonablytohaveknown.

49

Asisevident,thatapproachrequiresconsiderationandapplicationofbasic contractualprinciples,notreferenceto,orapplicationof,ataxonomyofcontractual termsasexpressorimplied.Ataxonomyofthatkinddependsonwhatcontenteach "category"isgiven.If,asmaybesuggested,termsareseparatedintoexpressed(in thesenseofbeingsaid)orimplied(inthesenseofbeingunexpressedorunsaid),it haslongbeenrecognisedthatatermwillbeimplieduponconditionsincludingthe necessitytogivebusinessefficacytoacontractbut,also,thattheremaybeterms whichrepresenttheobviouspresumedintentionoftheparties.Expressingthe taxonomyinbinarytermsisapttoconfusethetwodifferentcases.

50

Further,giventheascendancyoftheobjectivetheoryofcontractandits"commandof thefield",thereisnowlittle,ifany,distinctionbetweenthelattercaseofan"implied" termbyreferencetotheobviouspresumedorimputedintentionoftheparties,andthe identificationofthe"express"termsofanagreementbyreferencetotheobjective intentionoftheparties.Oldercasesdecidedbeforetheascendancyoftheobjective theoryofcontractshouldbeapproachedwithcaution.So,forexample,theapproach inHawkinsvClaytonwasthat,wherethecontractualtermswere"leftlargely unarticulatedbytheparties",thetermcouldonlybeinferredtobeatermofthe contractifthecourtwassatisfiedasamatterofactualfactthatthecontractingparties directedtheirmindstothequestion.Ifnot,thetermhadtobeimpliedbytheflexible applicationofcriteriafromBPRefinery(Westernport)PtyLtdvShireofHastings.That approachnolongerapplies.

AstoinferredtermsherHonoursaid:

bargainbasedonwhatthepartiessaidanddid,understoodinlightofwhattheyknew, mightbe,andsometimeshavebeen,describedas"inferred"terms.Itmaybethat describingtheminthatwaysuggeststhattheyareaspeciesofimpliedterm,and indeedsuchtermshavebeendescribedas"implied".Butwhetherthedescription "inferred"or"implied"iscorrectdependsentirelyonwhat"inferred"or"implied"is intendedtoconvey.AsDawsonandTooheyJJobservedinBreenvWilliams,"theline betweeninferenceandimplicationwillnotalwaysbeeasytodraw".And,inthe presentcase,theuseofeitherwordisliabletoleadtodefinitionaldisputeswhich wouldbewhollyunproductive.

EdelmanandStewardJJallowedtheappealonthebasisofanimpliedtermastothescope ofthelicencegiventotheagencies.Inrejectingtheconceptoftheinferredterm,their Honourssaid:

84 calledan"inferredterm".Contractterms arecommunicatedeitherexpresslyinwordsorimpliedlyfromconductand circumstances:"Ifatermisnotexpressedinacontract,thereisonlyoneotherwayin whichitcancomeintoitandthatis[asan]implication."

85

Theinsistencethatthereisnocategoryofcontracttermcalledan"inferredterm"does notdenytherelevanceoftheprocessofinferenceindiscerningtheexistenceof expressterms.Nordoesitdenythattheprocessofinferenceisessentialtothe identificationofimpliedterms.Inferenceisamethodoflegalreasoningthatcan identifytheexistenceofanexpresstermorthecontentofanimplication.Thereis thereforea"criticaldistinction"betweenanimplicationandaninference.

TheirHonoursapplyatwo-stepapproachtotheidentificationofcontractualterms:firstthe identificationofexpresstermsandsecondlybytheidentificationofimpliedterms.Their Honourssaid:

108

Nopartytotheseappealssuggestedthatthislong-established"firststep"of identifyingexpresstermsbeforeimpliedtermsshouldbediscardedforsomeorall informalcontracts.

Onexpresstermsandimplications,theirHonourssaid:

103Astoexpressterms,sincelanguageisimperfect,themeaningofmanyexpressterms willincludeimplications,suchasexplicaturesarisingfromthewordsexpressedand implicaturessupplementingthewordsexpressed:"languageitselfcouldnotfunctionif itdidnotsitatopavastinfrastructureoftacitknowledgeabouttheworld".

Nevertheless,theterm,asawhole,remainsanexpressterm:theimplication,fromthe wordsintheircontext,is"includedinandpartofthatwhichisexpressed",is "containedintheexpresswordsofthecontract",orisanecessarysupplementtothe wordsoftheterm.

104

Ininterpretinganexpressterm,implicationsderivedfromand"underlyingthewords" makesenseofthe"parties'expressedintentions,howeverobscureandambiguous thelanguagethatmayhavebeenused,togiveareasonablemeaningtothat languageifitcandosowithoutdoingcompleteviolencetoit".Theprocessisstillone ofinterpretingthewordsexpressedbetweentheparties.Thetermasawhole includinganyimplicationsfromthewordsremainsanexpressterm.

105

Itisonlywhenanimplicationissufficientlyindependentoftheexpressterms,andcan beseenasthesubjectofanentireterm,thatitwillbetreatedasanimpliedterm.But therecanbeaveryfinelinebetween,ontheonehand,animplicationcontainedinan expresstermand,ontheotherhand,animpliedterm.

Indealingwiththerelationshipbetweenanexpressandimpliedterm,theirHonourssaid:

110contractualimplicationscanhavetwoeffects.First,theyassistin understandingexpressterms.Secondly,theycanconstituteaseparateimpliedterm. Bothtypesofimplicationarerecognisedbyaprocessofinferencefromthe circumstances,includingtheconductoftheparties.Neitherimplicationis"anaddition totheinstrument"becauseboth"onlyspell[]outwhattheinstrumentmeans".In short,"[e]veryimplicationwhichthelawmakesisembodiedinthecontractjustas effectivelyasifitwerewrittenthereininexpresslanguage".

111

Oncetheexpresstermsofacontracthavebeenidentifiedandinterpreted,including withalltheimplicationstheycontain,thesecondtaskistoidentifyanyimpliedterms. Animpliedtermwillbesufficientlyseparatefromtheexpresstermsofacontractand willnotbeexpressedinwordscommunicatedbetweentheparties.Therecognitionof animpliedtermoccursbyinferencefromallthecircumstances.Aswillbeexplained below,theseappealsconcerntheexistenceandcontentofanimpliedterm.

InfindingthatatermwastobeimpliedinthecontractsbetweentheagentsandREMA,their Honourssaid:

133

Inshort,areasonablepersoninthepositionofthepartieswouldhaveknownthatone oftheverypurposesofREMAprovidingthephotographsandfloorplanstothe agencieswassothattheagenciescouldprovidethemtoREA,andthattheagencies hadnorealchoiceotherthantoacceptatermrequiringthemtoprovidealicenceto REAtousethephotographsandfloorplansindefinitelyandtoprovidethemtoRP Data.

134Inthesecircumstances,thenaturalandobviousimplicationcontainedinthecontracts betweenREMAandtheagenciesisthattheagencieswouldhavealicencetousethe photographsandfloorplansonthestandardtermsandconditionsofthecontracts betweentheagenciesandREA.Intheinformalcircumstancesofthecontracts,that impliedtermisplainlyreasonableandequitable,necessaryforbusinessefficacy, obviousandclear,anddoesnotcontradictanyofthelimitedexpressterms.

Perhapstobe

observationsinH.LundbeckA/SvSandozPtyLtd32 ontheinterpretationofcontractuallanguage.Relevantly,his Honoursaid:

93

Thereareephemeralborders,towhichlawyerssometimescling,betweenthree categoriesofinterpretationofwordsinlegalinstruments:(i)interpretationofthe meaningofexpresswordsinaclause;(ii)drawinginferencesthatrecognise implicationswithinaclause;and(iii)drawinginferencesthatrecognisetheimplication ofanew"term".Allthreeare"anexerciseininterpretation".Allthreeareconcerned with"whatthe[instrument]actuallymeans".Andallthreeinvolvedrawinginferences andrecognisingmattersthatareimpliedinthesensethattheyarenotconfinedtothe semanticsofliterallyexpressedmeaning.Forinstance,likethelattertwocategories, eventhefirstcategorywillofteninvolvedrawinginferencesfromcontextby recognisingexplicaturesfromtheexpresstext.Inallthreecategories,contextand purposesupplyadditionalinformationforthemeaningthatcombineswiththeliteral text.Bythismeans,the"implicationisincludedin[themeaningof]whatis expressed".

2.6ObservationsontheHighCourtdecision

BothKiefelCJandGagelerJintheirjointreasonsandGordonJinherseparatejudgment, eschewedrelianceonthetaxonomyofexpress,impliedandinferredterms.Rather,their Honoursfocusonthewordsandconductofthepartiestodistilthetermsoftheinformal contractsinquestion.Thisapproachseemsappropriateinthecaseofinformalcontracts wheretherearenoexpresstermsinthesenseoftermsarticulatedbythepartieswhetherin writingororally.However,StewartandEdelmanJJinagreementwithRaresJintheFull Courtidentifycertainexpresstermsbasedonthecommunicationswhichpassedbetweenthe parties.

HawkinsvClaytonnotethatit shouldnotdistractfromthefullenquiryastotherightsandobligationsofthepartieshaving regardtotheirwordsandconduct.TheirHonoursmakethepointthatonthefactsthereisno questionofwhetheratermneedstobeimplied.Conversely,StewartandEdelmanJJ concludethatatermistobeimplied.Itisunsatisfactorythatthetwosetsofjointreasons containdiametricallyopposedapproachestoabasicandfrequentlyoccurringcontractual question.

liantonrecoursetothe actualintentionofthepartieswhichdoesnotaccordwiththecontemporaryemphasisonthe objectiveapproachtotheascertainmentofcontractualintention.

StewardandEdelmanJJadoptatwo-stepprocessforidentifyingtermscomprisingasafirst steptheidentificationofexpresstermsand,asasecondstep,theidentificationoftheimplied

terms.However,thefundamentaldifficultywiththejointreasonsisthattheirapproachbothto theimplicationoftermsandtotheconstructionandinterpretationofcontractuallanguage departsfromexistingHighCourtandintermediateappellatecourtauthorityontheseissues.It isalsonotedthatthejointreasonsinpostulatingthatanimplicationonlyspellsoutwhata contractmeanswhilecitingLordHoffmanninsupportofthispropositiondonotrefertoMarks andSpencer,inwhichtheUnitedKingdomSupremeCourtunambiguouslyrejectedLord

However,interestingly,theQueenslandCourtofAppealinSpringfieldCityGroupPtyLtdv PipeNetworksPtyLtd33citedwithmanifestapprovalthejointreasonsofEdelmanand StewardJJinRealestate.comandEdelmanJinH.Lundbeck

Chapter2:Lossofcontractualrightsbyconduct:thetaxonomyof waiver,electionandestoppel

1Introduction

Aquestionfrequentlybeforethecourtsiswhetherapartyhasbywordsorconductirrevocably relinquishedacontractualright.InrespondingtothisquestionausefulstartingpointisMason SargentvASLDevelopmentsLtd34asfollows:

Anydiscussionoftheprinciplesgoverningthecircum mayprecludehimfromexercisingalegalrightwhichhepossessesisbesetwithdifficulties.They havetheirorigininthedifferencestobefoundinthevariousdoctrines(election,waiverand estoppel)whichmaycomeintooperationandinthedifferingconceptswhicheachdoctrinehasat timesbeenthoughttoembrace.

IndealingwiththetaxonomyBrennanJinCommonwealthofAustraliavVerwayensaid35:

Election,estoppelandwaiverarecognateconcepts:eachrelatestothesterilizationofalegalright rtyoranimmunity,accordingtothe

Thesedistinctdoctrinesservedifferentpurposes:election(ineitherspecies)ensuresthatthereisno a partywhoactsinrelianceonwhatanotherhasrepresentedorpromisedsuffersnounjustdetriment thereby;waiverrecognizestheunilateraldivestitureofcertainrights.Trueitisthatthedivisionsin natureandpurposebetweenoneofthesedoctrinesandanotherhavenotalwaysbeenexpressedin thewayinwhichIhavestatedthemandtherehavebeenoccasionswhenthesterilizationofaright hasbeendubiouslyattributedtoonedoctrineratherthantoanother.

Turningtothedoctrinesofwaiverandelection.

2Waiver

2.1TheGeneralPrinciples

Therehasbeendebateinthecaselawonthestatusofwaiverasadiscretedoctrineofthe commonlawprecludingtheexerciseofacontractualright.Waiverwasconsideredbythe HighCourtinVerwayenalthoughinthecontextoftheadjudicativeprocessratherthanin respectofcontractualrelations.ThequestionwaswhethertheCommonwealthhadbyits conductwaivedorwasotherwiseestoppedfromrelyingonalimitationdefence.Inhis analysisofwaiver,MasonCJsaid36:

Accordingtoitsstrictlegalconnotation,waiverisanintentionalactdonewithknowledgewherebya personabandonsarightbyactinginamannerinconsistentwiththatright:Crainev.ColonialMutual FireInsuranceCo.Ltd.;Grundtv.GreatBoulderPty.GoldMinesLtdHowever,thebetterviewis that,apartfromestoppelandnewagreement,abandonmentofarightoccursonlywheretheperson waivingtherightisentitledtoalternativerightsinconsistentwithoneanother,suchastherightto insistonperformanceofacontractandtherighttorescindforessentialbreach:seeKammins.This categoryofwaiverisanexampleofthedoctrineofelection.

MasonCJcitesCrainevColonialMutualFireInsuranceCoLtd37asauthorityonthenatureof waiver.InCraine,IsaacsJsaid38:

Awaivermustbean (perLordChelmsfordL.C.inEarlofDarnleyv. Proprietors&c.ofLondon,ChathamandDoverRailway).First,"somedistinctactoughttobedone toconstit (perParkeB.inDoed.Nashv.BirchandperWilliamsJ.inPerryv.Davis); next,itmustbe thatis,suchaseitherexpresslyorbyimputationoflawindicates intentiontotreatthematterasiftheconditiondidnotexistorasiftheforfeitureorbreachof conditionhadnotocc withknowleanessentialsupportedbymany

34 (1974)131CLR634at655

35 (1990)170CLRat394,421,423

36 At406

37 (1920)28CLR305

38 At326

authorities,fromPennant'sCaseanddowntoMatthewsv.Smallwood.isadoctrineof somearbitrarinessintroducedbythelawtopreventamanincertaincircumstancesfromtakingup twoinconsistentpositions(seeperJamesL.J.inPilcherv.Rawlins).Itisaconclusionoflawwhen thenecessaryfactsareestablished.Itlooks,however,chieflytotheconductandpositionofthe personwhoissaidtohavewaived,inordertoseewhetherhehas"approbated"soastopreventhim inEnglishterms,whetherhehaselectedtogetsomeadvantagetowhichhe wouldnototherwisehavebeenentitled,soastodenytohimalaterelectiontothecontrary(seeper LordShawinPitmanv.CrumEwing).Hisknowledgeisnecessary,orhecannotbesaidtohave approbatedorelected.

IncommentingonCraine,GaudronJinVerwayensaid39:

InCraine,IsaacsJ.referredtowaiveras"adoctrineofsomearbitrarinessintroducedbythelawto preventa[person]incertaincircumstancesfromtakinguptwoinconsistentpositions".The expression"takinguptwoinconsistentpositions"iswiderthantheexpression"assertingtwo inconsistentrights".Itistheassertionofinconsistentrightsthatisgenerallyunderstoodtobeatthe heartofwhatiscalled"election".SeeSargentv.A.S.L.DevelopmentsLtd.,perStephenJ.; Lissendenv.CA.V.BoschLtd.,perLordWright.Forpresentpurposesthequestionwhetherthereis adoctrine,beitcalled"waiver"oranythingelse,whichoperatesbyreferencetothetakingof inconsistentpositionsratherthantheassertionofinconsistentrightscanbeconfinedtothesituation where,inthecourseoflitigation,apersonassertsarighttotakeapositionwhichisinconsistentwith oneearliertakeninthesamelitigation.(Footnotesomitted.)

ThequestioninCrainewaswhethertheinsurerhadbyitsconductwaivedacondition precedenttoitsliabilitytoindemnifytheinsuredunderafireinsurancepolicy.Thepolicy termsrequiredtheinsuredtolodgeaclaimwithin15daysaftertherelevantlossanddamage. Theinsuredlodgedaclaimoutoftime.Thepolicyfurtherprovidedthatnorequirementofthe policywouldbedeemedwaivedunlessstatedinwritingtobewaivedbytheinsurer.Despite itslatelodgementtheinsurercontinuedtoinvestigatetheclaimandretainedpossessionof waiverclausetheinsuredwouldhavesucceededonawaiverargument.However,hisHonour heldthatasamatterofinterpretationthewaiverclausedidnotcaptureestoppelbyconduct. Onthefacts,hisHonourconcludedthattheinsurerwasestoppedfromrelyingonthe clause,hisHonoursaid40:

Therightsunderthatclause,accordingtothedefendant'sargument,mightbeexercisedsoastoget ridofallthesalvage,andsoastoobstructtheplaintiff'sbusinessformanymonths,andyetthe Company,withfullknowledgeofthefacts,mightleavetheplaintiffnotmerelywithhisfireloss,but alsowithhisbusinessloss,irrecoverable.Theunfairnessofkeepingpossessioninthatwayasa contractualprovisionandthendiscardingtheplaintiff'sclaimonthegroundthatallthetimethere wasnocontractualliabilityissoopposedtowhatanyjustpersonwouldexpect,thatitisamaterial circumstanceinrespectofevidenceofestoppel.Theplaintiffmight,onthatbasis,haveresistedthe continuedoccupationofhisproperty

However,thebetterviewisthatinAustralianlawthereisnoindependentcommonlaw doctrineofwaiverpotentiallyimpactingcontractualrelations.Thedoctrinalstatusofwaiver wasconsideredbytheHighCourtinAgriculturalandRuralFinancePtyLtdvGardiner41.In theirjointreasonsGummow,HayneandKeifelJJsaid42:

Waiverhasoftenbeenusedinsensessynonymouswithelectionorestoppel.Ithasbeensuggested thatwaiverisindistinguishablefromoneorotherofthosedoctrines.Sometimes,althoughexpressed intermsofwaiver,thereasoningadoptedincasesrevealstheelementsforapplyingamorespecific principle,typicallyelectionorestoppel.Anditmaybethatincasesoftheseveralkindslast mentioned,thetermisusedasnomorethanaconclusionarywordstatingtheconsequencesofthe operationofthatmorespecificprinciple,ratherthanasindicatingtheapplicationofanydistinctand independentprinciple.

Nonetheless,itisclearthattherearecasesinwhichthewordhasbeenusedinsensesotherthan thoseembracedbyprinciplesofelection,estoppelorvariationofcontract.So,forexample,waiver hasbeenusedinthesenseofrescissionwherewhathasoccurredis"anentireabandonmentand

dissolutionofthecontract".Ithasbeenusedinconnectionwithapartynotinsistinguponatermofa contractwhichisidentifiedasatermforthatparty'ssolebenefit.Andfromtimetotime"waiver"has beenusedtodescribesomemodificationofthetermsofacontractwithouttheformalities,or consideration,necessaryforaneffectivecontractualvariation.

Theuncertaintiesanddifficultieswhichattachtotheuseoftheterm"waiver"havebeenrecognised injudgmentsofthisCourt.Yet"waiver'remainsfirmlyembeddedinthelawyer'slexicon.For example,inOslandvSecretarytotheDepartmentofJusticethisCourtconsideredthe circumstancesinwhichbyitsconductapartyentitledtolegalprofessionalprivilegeagainstthe productionofdocumentsistobetakentohave"waived"thatprivilege.

Theuncertaintiesanddifficultieswhichattachtotheuseofthetermhavepromptedattemptsto constructataxonomyofwaiverinwhichdistinctionsaredrawnbetween"waiverbyelection"and "purewaiver"orbetween"waiverbyelection"and"unilateralwaiver".Itisnotnecessarytoconsider whethersuchclassificationsareuseful.Rather,itisimportanttoidentifytheprinciplesthataresaid tobeengagedintheparticularcase.

TheirHonourstreatedCraineasanexampleofelectionalthoughIsaacsJneverdiscussed electioninhisjudgment.Relevantly,thepluralityinGardinersaid43:

AndasCrainevColonialMutualFireInsuranceCoLtdshows,theexercise,despiteknowledgeofa breachentitlingonepartytobedischargedfromitsfutureperformance,ofrightsavailableonlyifthe contractsubsists,willconstituteanelectiontomaintainthecontractonfoot.

KeaneJA(ashisHonourthenwas)inhisexaminationofwaiverinAcePropertyHoldingsPty LtdvAustralianPostalCorporation44said:

[149]TheviewofDowsettJ45,vizthatthereisnoseparatedoctrineofwaiverofcontractualrights basedonrepresentationsorconductbyapartyunlesstherepresentationsorconductamounttoa bindingelectionorareaccompaniedbydetrimentalreliancesufficienttosupportanestoppelor considerationsufficienttosupportacontractualvariation,hasbeenvindicatedbythedecisionofthe HighCourtinAgricultural&RuralFinancePtyLtdvGardiner.

[150]InlightofthediscussionofthispointinAgricultural&RuralFinancePtyLtdvGardineritwould usetootherfieldsoflegaldiscoursesuchasthewaiveroftherighttolegalprofessionalprivilege andwaiverofadefenceunderalimitationstatute.

ThedoctrinesofelectionandwaiverwererecentlyconsideredbytheHighCourtinAllianz AustraliaInsuranceLimitedvDelorVueApartmentsCTS46

Turningtothefacts.

InMarch2017,DelorVueobtainedapublicliabilityandpropertydamagepolicyofinsurance fromAllianzinrespectofacomplexofelevenapartmentbuildingsinNorthQueensland.At thetimeofitsproposaltoAllianz,DelorVueknewthattheapartmentbuildingshadserious non-structuraldefects.ThisinformationwasnotdisclosedtoAllianz.InlateMarch2017,the apartmentbuildingsweresubstantiallydamagedbyacyclonewhichstruckNorth Queensland.DelorVuenotifiedaclaimunderthepolicy.Inthecourseofinvestigatingthe claimAllianzestablishedthenon-disclosure.However,on9May2017,Allianzthroughits

Despitethenon-disclosureissuewhichispresent,StrataCommunityInsurance(SCI)ispleasedto confirmthatwewillhonourtheclaimandprovideindemnitytotheBodyCorporate,inlinewithall otherrelevantpolicyterms,conditionsandexclusions.

includingalackoftransparencyintheadjustmentprocessanddelay.Inresponse,Allianzput aproposalforsettlementwhichincludedarequirementthatDelorVuepayfortherepairof

43 At589 44 [2010]QCA55

FreshmarkLtdvMercantileMutualInsurance(Australia)Ltd[1994]2QdR390at403

pre-existingdefects.TheresponsemadeitclearthatifDelorVuedidnotaccepttheproposed termsforsettlement,Allianzwouldnotpayanythingpursuanttosection28(3)ofthe -disclosure

Section28(3)oftheActprovidesthatifaninsurerisnotentitledtoavoidacontractbyreason ofamisrepresentation,theliabilityoftheinsureristobereducedtotheamountthatwould placetheinsurerinapositioninwhichtheinsurerwouldhavebeenifthemisrepresentation hadnotbeenmade.Conversely,undersection28(2),theinsurermayavoidthecontractifthe misrepresentationwasmadefraudulently.

InproceedingsagainstAllianz,DelorVuearguedthatAllianzwasboundbytheemailof9 May2017andwas,accordingly,preventedfromrelyingonsection28(3)oftheActtoreduce itsliabilityunderthepolicytozero.DelorVuereliedonelection,waiver,estoppelandbreach ofthedutyoftheutmostgoodfaith.

TheFullFederalCourtfound(DerringtonJdissenting)thatDelorVuewasabletorelyon eachofthedoctrinesofwaiver,electionandestoppel.TheCourtalsoheldthatAllianzwasin breachofthedutyoftheutmostgoodfaith.Relevantly,theprimaryjudge,AllsopCJsaid47:

Theoperativeprinciplesofelection,waiverandestoppelhavesomedegreeoftaxonomical confusionandoverlap.Thisispartlylinguistic.IhaveconcludedthatAllianzdidnotelectbetween inconsistentandmutuallyexclusiverights.Itdid,however,choosebetweeninconsistentpositions withfullknowledgeofallthefacts,acourseofactionwhichprovideditwithanadvantage,beingthe entitlementsofaninsurertofullaccesstotheinsuredpropertyandtotheco-operationofitsinsured, whichitreceived.ThatchoiceandthatactioninvokedthedoctrineofwaiverasilluminatedbyCraine vColonialMutualFireInsuranceCoLimited[1920]HCA64;28CLR605.IalsoconsiderAllianzto beestoppedfromresilingfromthechoicethatitmadeascommunicatedbythe9May2017email takingintoaccountandconsideringthedetrimenttoDelorVuesuchresilingwouldproduce,nonspecificthoughthatdetrimentwas.

48:

IturntothewaivercasetowhichIadvertedearlier.Inthiscase,thedeliberateandknowingtaking andexpressionofapositionconfirmingcovernotwithstandingtheexistenceofrightsoranavailable positionastorightsunderorinconnectionwithaninsurancepolicytodenyliabilityforthisclaimand therebytoobtainthebenefitasinsurerofrightsoffullaccesstotheinsuredpropertyandofthefull co-operationofitsinsuredilluminatesastarksimilaritywiththepositioninCrainevColonialMutual. ThediscussionbyIsaacsJ,indeliveringthereasonsoftheCourt(KnoxCJ,IsaacsandStarkeJJ), emphasisedat326theintentionalityofthedistinctact,donewithfullknowledge,theintentionbeing totreattherelationshipasiftheconditionhadnotoccurred,topreventtwoinconsistentpositions beingtaken:approbatingtogetsomeadvantagetowhichhewouldnototherwisebeentitled,and laterreprobatingbytheinconsistentposition.Thedrawingcloselytogetherofsuchcircumstances exhibitingwaivertotheoperationofestoppelcanbeseeninThompsonvPalmer[1933]HCA61;49 CLR507at547(perDixonJ)andYorkshireInsuranceCovCraine[1922]2AC541at546547.All theelementsofthecircumstancesthatledtoaconclusionofwaiverinCrainevColonialMutual werepresenthere:fullknowledge,thedeliberateactandintentiontotakeapositioninconsistent withanyassertionofarightunders28(3),thatisthedeliberateacttoconfirmcover,theintention beingtotreattherelationshipasiftherehadbeennonon-disclosure,wherebyAllianzwasthereafter entitledtotheadvantage(thatitthereafterhad)ofadjustingtheclaimandtherebyassessingitsown positionbyfreeandfullaccesstothepropertyandtheco-operationofDelorVue,anadvantage whichitwouldnothavehadhaditasserteditsentitlementunders28(3)toactonthebasisthatits liabilitywasnilbecauseitwouldneverhaveissuedthepolicy.Ifithaddonethattheassessmentof thedamage,itsrepairandthecontrolofthepremisescouldhaveallbeeninthehandsofDelorVue.

Thus,notwithstandingthecircumstancesoftheapplicabilityofthedoctrineofestoppel,andbearing inmindthecautiontobeobservedinanyassertionoftaxonomicalclarityinthisfield,tobederived fromconsiderationofAgriculturalandRuralFinance238CLRat583601[40][93],Iwouldalso concludethatbyMay2018Allianzhadwaivedanyentitlementtoassertapositioninconsistentwith thattakenbyitintheemailof9May2017.

Relevantly,thepluralitysaid49:

[31]Outsidethecontextoflitigation,andinthelawofcontract,thecircumstancesinwhichawaiver cannotberevokedhavealwaysbeenexceptional.Ifsuchcircumstanceswerenotbothexceptional andjustifiedtheywouldundermineothercontractualrules,includingthosegenerallyrequiringthat variationofacontractbeintheformofadeedorsupportedbyconsideration.Hence,asidefrom circumstanceswherealegalrightcannolongerbeenforcedduetoentryintoadeed,afresh agreementforconsideration,orexpiryofalimitationperio nottoenforcealegalright,thelegalright maycontinuetobeenforceduntilitisfullysatisfied.

GagelerJinhisdissentingjudgmentendorsedsanalysisofwaiverasadoctrine applicabletotheunilateraldivestitureofcertainrights.HisHonoursaid:

[158]Nodoubt,thereareaccruedrightswhichinuresolelyforthebenefitoftheright-holderwhich, forreasonsoflegalprincipleorlegalpolicyorlegalhistory,areincapableofunilateraldivestitureor abandonment.Longstandingauthorityindicatesthatarighttopaymentofadebtorafixedsumof moneyisoneofthem.Thestatutoryrightofaninsurertoreduceitsliabilityconsequentuponan insured'sfailuretocomplywiththepre-contractualdutyofdisclosureisnot.Substitutingasitdoes forthecommonlawrightofaninsurertoavoidacontractofinsuranceformaterialnon-disclosure, whichaninsurercouldwaive(orelect)toabandon,thestatutoryrightisonewhichtheinsurermust similarlybeabletowaive(orelect)toabandon.

[159]Thatiswhatoccurredhere.Withknowledgeofthefactsgivingrisetoitsstatutoryrightto reduceitsliabilitybyreasonofDelorVue'sfailuretocomplywithitspre-contractualdutyof disclosure,SCIonbehalfofAllianzmadeand,byitsemailof9May2017,unequivocally communicatedtoDelorVueachoicenottorelyonthatstatutoryrightinanswertotheclaimwhich DelorVuehadbythenmadeforpropertydamagearisingfromTropicalCycloneDebbie.Allianz therebyandthereuponwaivedthatright,inconsequenceofwhichAllianzwasthereafterprecluded fromattemptingtoreassertit.

entwasclearlyuninfluencedbythefollowing observationsofthepluralityinAgriculturalandRuralFinancePtyLtdvGardiner50:

Butif,asisthecasehere,therewasnoelectionbetweeninconsistentrights,therewasnovariation ofthecontract,andtherewasnodetrimentalrelianceupontherepresentation,noreasonisgivenfor holdingthepartyconcernedtoitsearlierexpressedattitudebeyondthefactthattherepresentation wasmade.Toholdthatthemakingoftherepresentation,withoutmore,sufficestoaltertherights andobligationsforwhichthepartiesstipulatedbytheircontractisastepthatshouldnotbetaken.

Itshouldnotbetakenfortworeasons.First,toholdthatthemakingofarepresentation,without more,alterstherightsandobligationsofpartiestoacontractwouldbetosupplantaccepted principlesgoverningwhetheranestoppelisestablishedandwhetheracontracthasbeenvaried.It wouldsupplantthoseprinciplesbydispensingwiththeneedtoshowdetrimentalreliancetoestablish anestoppelandbydiscardingasirrelevanttheneedtoshowconsiderationforanagreementtovary anexistingcontract.Thesecondreason,whichinasenseisnomorethantheobverseofthefirst,is thatnoreasonisprofferedtoholdthepersonmakingtherepresentationtoit.Thepersontowhom therepresentationismadehasnotreliedonit;itisnotdemonstratedthatdeparturefromthe representationwouldbeunjust;therewasnoconsiderationtosupportabargain.

ItisalsonoteworthythattheHighCourtinGardinerrefrainedfromdecidingwhetherthere wassomeresidualcategoryofunfairnessatcommonlawdistinctfromthecaseofwaiver.

DespitetheviewoftheHighCourtthatwaiverasadiscreteprincipleshouldbeconfinedto thelitigationprocesstheexpressionstillhascurrencyinthecontextofwaiverofconditions precedenttotheexerciseofanoption.ThiswasrecentlydemonstratedintheNewSouth WalesCourtofAppealdecisioninWillisAustraliaLtdvAMPCapitalInvestorsLtd51

Turningtothefacts.

On21January2014AMPgrantedasixyearleasetoWillisexpiringon30September2020in respectoflevel16andpartoflevel15inpremisesintheSydneyCBD.Theleasecontained anoptiontorenewforafurtherfouryeartermfrom1October2020togetherwithasecond optiontotakealeaseofthebalanceoflevel15.Clause20.4oftheleasesetoutthe conditionsfortheexerciseoftheoptionforthewholeoflevels15and16.Therewerefive suchconditionsincludingaconditionthatbeforetheExpiryDatethetenantdelivertothe landlordabankguaranteeforaprescribedamount.PriortotheExpiryDatethetenant satisfiedalloftheconditionsexcepttheconditionrelatingtothedeliveryofthebank guarantee.Willisthenchangeditsmindanddecidedthatitdidnotwanttoproceedwiththe lease.AMPcontendedthatthegrantoftheoptionconstitutedaconditionalcontractandthatit hadwaivedtimelyperformanceoftheconditionrelatingtothedeliveryofthebankguarantee. AMPsoughtspecificperformanceoftherenewedlease.

Theprimaryjudge(WhiteJ)concludedthatWillishadexercisedthesecondoptionwhichhis HonourconstruedtobeaconditionalcontractandthatAMPhadwaivedthetimely performanceoftheconditionrelatingtothebankguaranteeconditionwhichwaswhollyfor

WillisappealedtotheCourtofAppealrelyinguponthefollowinggrounds:

Ground1:TheprimaryjudgederredinfindingthatWillishadexercisedtheoption.

Ground2:Theprimaryjudgederredinconcludingthattheoptionwastobeconstruedasa conditionalcontractinsteadofanirrevocableoffer.

Ground3(a):Theconceptofwaiverwasnotavailableinthecontextoftheexerciseof options.

Ground4:Theprimaryjudgeerredinfindingthathisconstructionoftheoptionavoided commercialnonsenseorcommercialinconvenience.

cludedthattheoptionwastobeconstrued asanirrevocableofferandthatassuchAMPhadnorightscapableofbeingthesubjectofa waiver.ItwasentirelyamatterforWilliswhetherornottosatisfytheconditionsforthe acceptanceofthatoffer.AlthoughtheCourtofAppealusedthetaxonomyofwaiverof conditionsprecedent,theCourtexpresseddoubtastowhetherthattaxonomywas appropriate.TheCourtnoted:

[101]Ground3(a)raisesthequestionwhetherAMPhadanyrighttowaivethetimingofthe performanceoftheconditionincl20.4.Theissueofwaiverinacontractualcontextcangiveriseto somedifficultquestions,asisevidentfromthediscussioninAgriculturalandRuralFinancePtyLtdv Gardener(2008)238CLR570;[2008]HCA57;AllianzAustraliaInsuranceLtdvDelorVue ApartmentsCTS39788[2022]HCA38andWagnersCement.AsGummow,HayneandKiefelJJ consideredinGardenerat[51],thecasesinwhichthetermwaiverhasbeenusedhaverevealedthe Insuchcircumstances:

operationofthatmorespecificprinciple,ratherthanasindicatingtheexistenceofany distinctandindependentprinciple.

[102]Inconformitywiththisobservation,whentheprimaryjudgeusedthetermwaiverinhis reasonsforjudgment,hemeantelectingnottoinsistontheperformanceofaparticularcontractual requirement.

[103]InAllianz, stcommonusageofwaiveristo describeanunequivocaldecisionbyaparty,communicatedtotheotherparty,nottoinsistupon aright relationtogrounds1,2and4,AMPhadnorightcreatedundertheLeaseinrelationtothecondition

2.2

incl20.4whichwascapableofbeingwaived,applyingthecriticalpassagesinGilbertJMcCaul(see at[84][85]above).

caselawwouldsuggestthatitisoflittlevalue.SuchaclausewasconsideredbytheEnglish CourtofAppealinTele2InternationalCardCompanyvPostOfficeLtd52whichillustratesthe ineffectivenessofsuchaclauseinthefaceofelectionbyaffirmationbythenon-defaulting party.Therelevantclauseprovided:

16Nowaiver

Innoeventshallanydelay,neglectorforbearanceonthepartofanypartyin enforcing(inwholeorinpart)anyprovisionofthisAgreementbedeemedtobea waiverthereoforawaiverofanyotherprovisionorshallinanywayprejudiceany rightofthatpartyunderthisAgreement.

PostOfficeLtdattemptedtoterminatetherelevantagreementsome12monthsaftertheright toterminatehadaccrued.Theevidencewasthatduringthat12monthperiodPostOfficehad continuedtoperformthecontract.

InrejectingtheeffectivenessoftheclauseAikensLJsaid:

[56]Inshort,clause16cannotpreventthefactofanelectiontoabandontherightto terminatefromexisting;eitheritdoesoritdoesnot.Thisconclusionisreinforced,I think,bythetermsofclause16itself.Althoughitstipulatesthat"innoeventshallany delay,neglectorforbearance"onthepartofanypartyinenforcingaprovisionofthe agreement"beorbedeemedtobeawaiver"oftheprovisionor"...shallinanyway prejudiceanyrightofthatpartyunderthisAgreement",itdoesnotdealatallwiththe issueofelectionofwhetherornottoexerciseacontractualright.Thegenerallaw demandsthatapartywhichhasacontractualrighttoterminateacontractmustelect whetherornottodoso.Thisclausedoesnotattempttosaythatthedoctrineof electionshallnotapplyevenassumingthatanycontractualprovisioncouldexclude theoperationofthedoctrine.

3Election

3.1Thebasicprinciples

AnyconsiderationofthedoctrineofelectioninthecommonlawstartswiththespeechofLord AtkininUnitedAustraliaLtdvBarclaysBankLtd53.HisLordshipsaid:

Ontheotherhand,ifamanisentitledtooneoftwoinconsistentrightsitisfittingthatwhenwithfull knowledgehehasdoneanunequivocalactshowingthathehaschosentheonehecannot afterwardspursuetheother,whichafterthefirstchoiceisbyreasonoftheinconsistencynolonger arisesuntiloneorotherclaimhasbeenbroughttojudgment.Uptothatstagetheplaintiffmay pursuebothremediestogether,orpursuingonemayamendandpursuetheother:buthecantake judgmentonlyfortheone,andhiscauseofactiononbothwillthenbemergedintheone.

TheHighCourtinKhouryvGovernmentInsuranceOfficeofNewSouthWales54noted:

[633]Apersonconfrontedbytwotrulyalternativerightsorsetsofrights,suchastherighttoavoid orterminateacontractandtherighttoaffirmitandinsistonperformance,mayloseoneofthemby acting"inamannerwhichisconsistentonlywithhishavingchosentorelyon[theother]ofthem" (perLordDipiock,KamminsBallroomsvZenithInvestments[1971]AC850at882;seealsoTropical 52 [2009]EWCA9

TradersLtdvGoonan(1964)111CLR41at55andSargentvASLDevelopmentsLtd(1974)4ALR 257at279-80;131CLR634at665).Whereaninsurerisconfrontedwithsuchalternativerightsand electstoaffirmthecontractofinsurance,heiscommonlysaidtohave"waived"therighttoavoidor terminateit(CrainevColonialMutualFireinsuranceCoLtd(1920)28CLR305at325ff).While actual"prejudicetotheotherside"mayberelevant,particularlyindeterminingwhetheranelection shouldbeimputedtoapersonwhoisnotshowntohavemadeaconsciousdecisiontoelect(see, egSargent(ALR)at274;(CLR)at656;TropicalTraders,at55;ChamptaloupvThomas[1976]2 NSWLR264at274-5,andScarfvJardine(1882)7AppCas345at360),itisnotnecessarythat suchprejudicebedemonstratedtoestablishacompletedelectionbetweentherighttoaffirmandthe righttoavoidacontract.Anelection,unlikeestoppel,isconcernedwithwhatapartydoesandnot whathecausestheotherpartytodo(see,egCraineat326;perRich,DixonandEvattJJin NewbornvCityMutualLifeInsuranceSocietyLtd(1935)52CLR723at733-5).Atthelatest,itis completeor"final"whenmadeand"communicated"totheotherparty(seeNewborn,at733).

Whereanelectionisnotshowntohavebeenconsciouslymade,thewordsorconduct reliedupontoimputeitmustunequivocallyevidence"theexerciseofoneofthetwosetsof rightsand[be]inconsistentwiththeexerciseoftheother"(perStephenJ,Sargent'scase (ALR)at266;(CLR)at646).

Subsequently,inGalafassivKelly55GleesonJAindeliveringtheleadjudgmentoftheNew SouthWalesCourtofAppealsummarisedthedoctrineofelectionasfollows:

[74]Attheheartofelectionistheideaofconfrontationwhichinturnproducesthenecessityof makingachoice:Immer(No145)PtyLtdvUnitingChurchinAustraliaPropertyTrust(NSW)[1993] HCA27;182CLR26at42.Thuswhereaparty,facedwiththechoiceofterminatingthecontractor keepingitonfoot,terminatesthecontractordinarilythatconductleavesnodoubtastothechoice beingmade.Thisisbecausethecontractnolongerexists.ButastheHighCourtexplainedinImmer at41,thequestionisnotansweredsoreadilywherethesituationistheconverse.Thisisbecausea partymayactonthebasisthatthecontractremainsonfootwithoutnecessarilybeingconfronted withthenecessityofmakingachoicetoeitherterminateoraffirmthecontract:Immerat42-43.

[75]Thisistobecontrastedwithasituationofinconsistentremediestoenforcearightwhereno questionofelectionarisesuntiloneorotherclaimhasbeenpursueduntiljudgment:UnitedAustralia LtdvBarclaysBankLtd[1941]AC1at30;BaxtervObaceloPtyLtd[2001]HCA66;205CLR635at [39].Theinstitutionofproceedingsforalternativeremedies(includingreliefofanequitablenature)is notanelectionbythepromiseeinfavourofeitherremedy.Theverypurposeofseekingalternative reliefistokeepthepromisee'soptionsopen:seeJWCarter,Carter'sBreachofContract(2nded, 2011,LexisNexisButterworths)at[10-58].Thedistinctionbetweenalternaterightsandremediesand itsconsequenceshasbeendescribedbytheHighCourtas"fundamental":CiavarellavBalmerat 449.

[76]Althoughanelectionbetweeninconsistentrightsoncemadeisirrevocable:TropicalTradersLtd vGoonan[1964]111CLR41at55,itdoesnotfollowthataninnocentpartywhoseeks(andgets) specificperformanceistreatedasaffirmingthecontractirrevocablysoastopreventtheinnocent partyfromlaterbringingthecontracttoanendiftherepudiatingpartypersistsinitsfailureto perform.

However,theprincipalHighCourtauthorityonelectionisSargentvA.S.LDevelopments Ltd56.TheCourtaddressedfourkeyquestions.

(1)Whatisthedoctrineofelection?

StephenJenunciatedthedoctrineinthefollowingterms:57

Thedoctrineofelectionasbetweentwoinconsistentlegalrightsiswellestablished,but certainofitsfeaturesarenotwithouttheirobscurities.Thedoctrineonlyappliesiftherights areinconsistenttheonewiththeotheranditisthisconcurrentexistenceofinconsistent setsofrightswhichexplainsthedoctrine;becausetheyareinconsistentneitheronemay beenjoyedwithouttheextinctionoftheotherandthatextinctionconfersupontheelector thebenefitofenjoyingtheother,abenefitdeniedtohimsolongasbothremainedin existence.

(2)Whenmusttheelectionbemade?

MasonJnoted:58

Apersonconfrontedwithachoicebetweentheexerciseofalternativeandinconsistent rightsisnotboundtoelectatonce.Hemaykeepthequestionopen,solongashedoes notaffirmthecontractorcontinuanceoftheestateandsolongasthedelaydoesnot causeprejudicetotheotherside.Anelectiontakesplacewhentheconductofthepartyis suchthatitwouldbejustifiableonlyifanelectionhadbeenmadeonewayortheother (TropicalTradersLtd.v.Goonan).So,wordsorconductwhichdonotconstitutethe exerciseofarightconferredbyorunderacontractandmerelyinvolvearecognitionofthe contractmaynotamounttoanelectiontoaffirmthecontract.

(3)Whatknowledgemusttheelectingpartypossess?

Thereissomecontroversyastowhetherinordertoattractthedoctrinetheelecting partyneedonlyhaveknowledgeofthefactsgivingrisetotheinconsistentsetsof rightsorwhethertheelectormusthaveknowledgebothofthosefactsandoftheright toterminatetherebycreated.InthiscontextStephenJnotedthedistinctionbetween thecircumstancewheretheterminationrightarisesunderacontractandwherethe rightarisesatcommonlaw.Intheformercase,asthepartiesaredeemedtoknow theircontractualrightsitissufficienttoattractthedoctrinethattheelectorsimplyhas knowledgeofthematerialfactscreatingtherightalthoughhasnoactualknowledge thatthosefactscreatearighttoterminate.

HisHonournotingthisdistinctionconcludesasfollows:59

Iamnottobetakenasconcludingthatwherecontractuallyconferredrightsarenotan issuetherecanbenobindingelectionwithoutknowledgeoftherighttoelect.Itisnot necessaryformetodecidethepointandIdonomorethandrawattentiontothedistinction madebyHerringCJintheCoastalEstatescaseasexplanatoryofsomeoftheconflictof authorityonthistopic.

OnthispointMasonJnoted:60

Ifapartytoacontract,awareofabreachgoingtotherootofthecontract,orofother circumstancesentitlinghimtoterminatethecontract,thoughunawareoftheexistenceof therighttoterminatethecontract,exercisehisrightsunderthecontract,hemustbeheldto havemadeabindingelectiontoaffirm.Suchconductisjustifiableonlyonthefootingthat anelectionhasbeenmadetoaffirmthecontract;theconductisadversetotheotherparty andmaythereforebeconsideredunequivocalinitseffect.

InTudorDevelopmentsvMakeig61,BastenJAcitedthefollowingpassageinthejoint reasonsofRich,DixonandMcTiernanJJinElder'sTrustee&ExecutorCoLtdv CommonwealthHomes&InvestmentCoLtd62:

ThedoctrineuponwhichtheCourtactedisthat,asageneralrule,inorderthatapartymay beprecludedbyhisconductfromexercisinganelection,itisnotnecessarythatheshould haveknowledgeoftheexistenceofhisrighttoavoidthetransaction,aswellasofthefacts uponwhichthatrightarises.ThisaccordswiththeopinionofJordanCJexpressedinthe courseofhisjudgmentinO'ConnorvSPBrayLtd(1936)36SR(NSW)248...

InEpworthFoundationvHealthcareImagingServices(Victoria)PtyLtd63,JuddJ noted:

[139]Thewordsorconductordinarilyrequiredtoconstituteanelectionmustbe unequivocalinthesensethatthewordsareorconductisconsistentonlywiththeexercise

58 at658

59 at645

60 at658

61 [2008]NSWSC1116

62 (1941)65CLR603

63 [2009]VSC293

ofoneofthetwosetsofrightsandinconsistentwiththeexerciseoftheother.Theinnocent party'sowninterpretationorunderstandingofthenatureorextentofthecontractualrights willbeirrelevantsothatitmattersnotatallwhethertheywereawareoftheexistenceof therightoritseffect.Itisenoughthattheyknewoffactswhichbroughtthatrightinto operation.

(4)Whatconstitutesanelection? StephenJnoted:64

Thewordsorconductordinarilyrequiredtoconstituteanelectionmustbeunequivocalin thesensethatitisconsistentonlywiththeexerciseofoneofthetwosetsofrightsand inconsistentwiththeexerciseoftheother;thusforalessortocontinuetoreceiverent underaleasewillbeconsistentonlywithhisrightsaslessorandinconsistentwiththe exerciseoftherighttodeterminethelease...However,lessunequivocalconduct,only providingsomeevidenceofanelection,maysufficeifcoupledwithactualknowledgeofthe rightofelection.

AndBrennanJinImmer(No.145)PtyLimitedvTheUnitingChurchinAustralia PropertyTrust(N.S.W.)65said:66

Anactamountingtoanelectionmustbeunequivocal.Whereacontractcanbeterminated attheoptionofapromisee,therighttoterminateisnotnecessarilylostbythepromisee doinganyactconsistentwiththecontinuanceofthecontract.Iftheactisalsoconsistent withthereservationofarighttoterminateincertainevents,therighttoterminateisnotlost bythedoingoftheact.

InChamptaloupvThomas67,GlassJAsaid:

Itisalwaysnecessarytoexaminetheconductrelieduponasanaffirmationinitsparticular evidentiarysetting.Thequestionmustthenbeansweredwhetherthepartyabletorescind hascommunicatedtotheotherpartyanunequivocalelectiontoaffirm,i.e.torenounceits righttorescind.Thematerialsuponwhichthedecisionistobemadewillincludeany reservationswhichhavealsobeencommunicated.Theanswertobegivenisadecisionof factbaseduponalltheevidentiarydata.Thereisnooverridingprincipleoflawthatanact doneunderthecontractwillalwayscommunicatethedecisiontoaffirm,regardlessofthe surroundingcircumstances.

Thecriticalimportanceofestablishingunequivocalconductasarequirementofelectionis illustratedbythemorerecentdecisionoftheNewSouthWalesCourtofAppealinDonauPty LtdvASCAWDShipbuilderPtyLtd68.

Turningtothefacts.

program.TheshipbuilderwasASCAWDShipbuilding(ASC).On20August2009,ASC enteredintoasubcontractwithDonau(previouslyknownasForgacsEngineeringPtyLimited) fortheconstructionofcomponentpartsofeachoftheships.Subsequently,on26October 2012thepartiesenteredintoaSecondHeadsofAgreement(2HA)whichwasintendedto promotecostandperformanceefficienciestoaddressproblemsthataroseinthe implementationoftheoriginalcontract.Thenewpaymentregimeunderthe2HAwasto commenceonthesocalledTransitionDatewhichwasdefinedtomeantheearlierofthedate inclause4.1(a)orthedateASCapprovedtheBaselineTrueUpwhichwasessentiallyan agreedproductionandschedulebaselinetoapplyfromtheTransitionDate.

Relevantly,underclause4.1(a)thepartiesagreed:

(a)touseallreasonableendeavourstocompletetheBaselineTrueUpby14 December2012providedthatiftheBaselineTrueUpisnotagreedby28 February2013ASCmayterminatethisAgreementbyprovidingwrittennoticeto thateffectwhereuponthepartiesshallhavenofurtherrights,claimsor

TheBaselineTrueUpwasneveragreedalthoughtheregimecontemplatedbythe2HAwas practicallyineffectbefore14December2012.Thepartiescontinuedtonegotiatethecontent oftheBaselineTrueUpafter28February2013.Ultimately,on7June2013ASCpurported toterminatethe2HA.

Intheensuingdisputeconcerningpaymentandentitlementsthecentralquestionwas whetherASCvalidlyterminatedthe2HAon7June2013.

ForgacscontendedthatASChadlostanyrighttoterminatebythatdatebecause:

(a)ithadelectedbyconducttoaffirmtheagreement;and

(b)itfailedtoexerciseanyaccruedrighttoterminatewithinareasonableperiod.

TheCourtofAppealheldthatalthoughtherewasnoelectionbyASCprecludingtheexercise ofitscontractualterminationright,ASChadlostthatrightbyfailingtoexerciseitwithina reasonableperiodoftime.

Onthequestionofelection,Forgacscontendedthatbyfollowingtheproceduresinthe2HA and,inparticular,infailingtoissuepurchaseordersascontemplatedbytheoriginalcontract, ASCaffirmedthe2HA.Inrejectingthissubmission,theCourtofAppealagreedwiththe followingreasonsoftheprimaryjudge69:

[110]

2013,thepartieswerefollowingtheproceduressetoutinclause2.1(b)(i)-(iv)eventhough, ontheconclusionsIhavereached,theywereundernoobligationtodosountil28 February2013.ThefactthatASCcontinuedtofollowthoseproceduresafter28February 2013wasequivocal.ItwasequallyconsistentwithadecisionbyASCtofollowthe proceduresthepartieshadalreadybeenfollowingpendingadecisiononwhetherto exercisearightofterminationornot,whichitselfdependedonwhathappenedinrelationto Forgacssuffered

havebeendifferentifASChadinsistedoncompliancewiththeproceduressetoutinthe 2HA.Butthatisnotwhathappened.Rather,bothpartieswerecontenttocontinuetodo whattheyhaddonebeforetheTransitionDatewhilenegotiationsonBaselineTrueUp purchasersinChamptaloupvThomas.Inbothcases,thepartysaidtohavemadethe electionactedinawaythatwasconsistentwiththecontract,butinneithercasedidthe partyinsistonarightinawaythatwasonlyconsistentwithadecisiontoelecttoobtainthe benefitsofthecontractratherthantoreserveitspositiononwhethertoterminateornotfor atime.

BellPintheCourtofAppealnoted: [91]

thepartiescontinuedtoseektoagreeBaselineTrueUpafter28February2013andthatASChad, byimplication,areasonabletimeafterthatdatewithinwhichtoterminatethe2HAalsoservedto imprecisenatureofwhatareasonabletimewaswithinwhichtoexercisetherighttoterminate,when claritythatwould,inmyopinion,berequiredtosustainaconclusionthattherehadbeenan unequivocalelection.

ReturningtoAllianz.

McKerracherandColvinJJ(DerringtonJindissent)said:

[134]Allianzplacedrelianceuponthewayinwhichs28(3)operated.Itmaybeacceptedthat,unlike s28(2),itdoesnotconferarightupontheinsurertomakeachoicewhethertobeboundbythe policy.Rather,itprovidesaformofanswertoaclaimmadeunderthepolicy,namelytoreducethe amountpayable.Thepointatwhichthebenefitoftheprovisionmaybecalledinaidbyaninsureris inrespondingtoaclaim.Insomecases,itmayseektodosoastopartonlyoftheclaim.Inthat instance,itmaynotberelevantlyinconsistenttoseekalsotoexerciserightsunderthecontractof insurance.

[135]However,where(ashere)theinsurerisfacedwithaclaimofakindwheretheinsurerisaware ofa'relevantfailure'(inthiscasethenon-disclosure)whichwillresultintheclaimbeingreducedto niliftheclauseapplies,thentheinsurerdoesfaceinconsistentpositions.Theinconsistencyarises eventhoughthereisnotachoiceconferredbytheprovisionupontheinsurer.Ashasbeen explained,thedoctrineofelectionisnotconfinedtothoseinstanceswherethecharacterofthe inconsistencyarisesfromtheexistenceofarighttochoosewhethertoavoidacontract(orexercise someotherrighttochoose).Rather,itariseswherethelawimposesanobligationtochooserather thanproceedkeepingtwoinconsistentpositionsopen.Thelawdoessoasamatteroffairness.

TheHighCourtpluralityinreversingtheFullFederalCourtsaid:

[56]Astothemodernapproachtoelectionbyaffirmation,s28(3)doesnotgivetheinsurerany powertoelecttoaffirmthecontractratherthantoavoidorterminateitscontractualobligations. Thereisnosenseinwhichadecisionbyaninsurertowaivethedefenceunders28(3)involvesan electionbetweenalternativeandinconsistentsetsofrights(orevenanimmediateinconsistency betweencontinuinglegalpositions).Withorwithoutwaiver,theinsurancecontractremainsonfoot andrelianceonthedefenceunders28(3)isnotimmediatelyinconsistentwithanyofthecontractual rights.Initsoperationinrelationtorights,s28(3)standsinstarkcontrastwiths28(2),whichisa statutoryrecognitionofthepowerofaninsurertoavoidacontractfromitsinceptionforafraudulent non-disclosureorafraudulentmisrepresentation.Aninsurerthatelectstowaivethepowerunders 28(2)electstoaffirmthesetofcontinuingrightsundertherelevantcontractofinsuranceratherthan toexercisetheimmediatelyinconsistentpowertoavoidthecontractfrominception.

[57]Indeed,thesubmissionsofDelorVueandthedecisionofthemajorityoftheFullCourttothe contraryaredirectlyinconsistentwiththereasoningandunanimousresultinthisCourtinGardiner. Althoughnumerousfactsweredisputedinthatcase,Gummow,HayneandKiefelJJproceededon theassumptionthatalenderandanindemnifierhadrepresentedtoanindemnifiedpartythatthe indemnity"remainedeffectiveandenforceable,despitepastdefaults".Thedefaultsconcerned failurestomakepunctualperformanceunderseparateagreementswiththelender.Despitethat representation,theirHonourssaidthat"therewasnoelectionbetweeninconsistentrights"andthat toholdthelenderandindemnifiertotherepresentationwould"supplantacceptedprinciples governingwhetheranestoppelisestablishedandwhetheracontracthasbeenvaried".

4GeneralobservationsonAllianzintheHighCourt

(1)Waiver

The waivercaseisconsistentwiththeearlierdecisionoftheCourtin AgriculturalandRuralFinancePtyLtdvGardiner.Asnotedabove,itisnowreasonablyclear thatinAustralianlawthebetterviewisthatthereisnoindependentdoctrineofwaiver potentiallyimpactingoncontractualrelations.However,thedoctrineremainsoperativeinthe adjudicativeprocesseg.waiveroflegalprofessionalprivilegeorwaiverofalimitation defence.

(2)Election

AllsopJheldthatDelorVuedidnotelectbetweeninconsistentandmutuallyexclusiverights butdidchoosebetweeninconsistentpositionswhichresultedintheapplicationofthedoctrine

reversedbytheHighCourt.Theessenceofthepluralityjudgmentisthatthewaiverofthe defenceundersection28(3)oftheActdidnotinvolveanelectionbetweenalternativeand

inconsistentsetsofrightsbecausethesubsectiondoesnotgivetheinsurerarighttoavoid thecontractincontrasttosection28(2)whichdoes.Arguably,thepluralitytakeanunduly narrowviewofthecontentofthedoctrineofelectionwhichapplieswheretherearetwo inconsistentsetsoflegalrights.Inthiscase,AllianzinthefaceofDelor-disclosure wasentitledtochoosebetweenreducingtheamountpayableunderthepolicyorpayin accordancewiththetermsofthepolicy.Itwouldappearthatthisisachoicebetween inconsistentandalternativerights.Thedoctrineofelectionshouldnotbestrictlyconfinedtoa choicebetweenterminationofacontractanditsaffirmation.Thiswasclearlytheviewofthe HighCourt.

(3)Estoppel

DelorVuehadanarguablecaseonbothpromissoryandconventionalestoppel.Thecentral issuewaswhethertherewasdetrimentalreliancebyDelorVueonthe9May2017email. ThisisanevidentialmatterandtheburdenwasonDelorVuetoestablishsuchreliance. AllsopCJandthemajorityofthefullFederalCourtfounddetrimentalreliance.TheHighCourt notedthatDelorVuewouldneedtoestablishthatithadlostanopportunitythatwasofreal andsubstantialvalue,evenifitcouldnotprovethattheopportunitywouldhaverealiseda thattherewasnobasistoinfer arealorsubstantialprospectofaparticularallegedlostopportunityarising.Clearly,what DelorVuemayhavedoneinrespectofrepairsifAllianzhadnotsentthe9May2017emailis conjectural.

(4)Utmostgoodfaith

Thepluralityheldthatthedutytoexercisetheutmostgoodfaithdidnotimposeontheinsurer adutynottoresile,withoutareasonablebasis,fromanysignificantrepresentationtothe consideredthattherecognitionofsuchadutywouldhavetheeffectofsubsumingthe operationofthedoctrinesofelection,waiverandestoppelintoabroaderpositivedutynotto departfromsignificantrepresentations.However,thedutytoexercisetheutmostgoodfaith isakeyfeatureofinsurancecontractsanditmaybeappropriatethatinthecontextof insurancecontracts,itisparamount.However,generally,thelinebetweenthedoctrinesof estoppelandelectionandthedutytoexercisetheutmostgoodfaithremainsbright.

credit.

5Thedoctrineofapprobationandreprobation

InVerwayenvTheCommonwealthofAustralia(supra)BrennanJreferredtothedoctrineof approbationandreprobationascloselyrelatedtoelectionandwhichissometimestreatedas aspeciesofelection.ThedoctrinewasconsideredbytheCourtofAppealofWestern AustraliainMandurahEnterprisesPtyLtdvWesternAustralianPlanningCommission70in whichMcLureJAsaid:

108ThedoctrineofapprobationandreprobationwasinitiallypartofScottishlaw.ItsEnglish equivalentwasthedoctrineofequitableelectionbetweenestates.Thenotionof approbationandreprobationisusedinterchangeablyinthecaselawwithelection,waiver andestoppel.Asaresult,itisdifficulttoconfidentlyidentifyfromthecasesthematerial elementsofanyindependentdoctrineofapprobationandreprobation.

However,intherecentdecisionoftheWesternAustraliaSupremeCourtinMirabelaNickel Ltd(inliquidation)(Receiversandmanagersappointed)vMiningStandardsInternationalPty

Ltd(No.5)71,HillJrestatedtherequirementsfortheapplicationofthedoctrineassetoutby WaksmanJinSkymistHoldingsLtdvGrandlaneDevelopments72asfollows:

(a)theapprobatingpartyactorconductmustbeclearandunequivocal.Thishasthe practicaladvantageofenablingapropercomparisontobemadewiththelatter allegedlyreprobatingact,toseeifthelatteristrulyinconsistentwiththeformer;

(b)thepartyinquestionmusthavegainedabenefitfromtheapprobation.Ifthereisno benefit,itisnotclearwhyitwouldbeunjusttotheotherpartytoallowthefirstpartyto reprobate;

(c)thereprobatingactorconductmustbeclearlyinconsistentwiththeearlierapprobatingact orconduct.

6Failuretoexerciseaterminationrightwithinareasonabletime

Independentlyofthedoctrineofelectionapartymayloseanaccruedterminationrightbya failuretoterminatewithinareasonableperiodoftime.Althoughsimilarfactsmayberelevant tolossofaterminationrightbyelectionorbytheexpiryofareasonableperiodoftimeeach servesadifferentpurpose.ThedifferenceisexplainedbyBallJastheprimaryjudgein Donauasfollows:

[117]ASCdidnotseriouslydisputetheimplicationofareasonablenesslimitationontherightof termination.Itsprimarycontentioninrelationtothisaspectofthecasewasthattheimplicationofthe limitationaddednothingtotheprincipleofelection.Undertheprincipleofelection,apartywitha righttoterminatehasareasonabletimeinwhichtoconsiderwhethertoexercisetherightand provideditdoesnottakestepstoaffirmthecontractandtheotherpartyisnotprejudicedbythe delay,thepartywiththerightwillnotbeheldtohavemadeanelection.Butifthedelaydoesnot amounttoanelection,itshouldnotbetreatedasunreasonableforthepurposeoftheimplied limitation.

[118]Idonotacceptthatsubmission.Theimpliedlimitationontherightandthedoctrineofelection focusondifferentthings,althoughobviouslysomeofthesamefactswillberelevanttoboth.Election isconcernedwiththeconductofthepersonwhohastheright.Theimpliedlimitationisconcerned withwhatisfairandreasonablehavingregardtothetermsofthecontract.

ThedecisionoftheprimaryjudgethatASCvalidlyterminatedthe2HAwasreversedbythe CourtofAppeal.

BellPsaid:

[104]Whatisareasonabletimeinanygivencasemaybeaffectedbythenatureoftheobligationto beperformed(forexample,whetheritisdependentonsomethirdpartyperformanceor circumstancesoutsidethecontrolofthepartyundertheobligation)ortherighttobeexercised(for example,whethertherightisdependentupontheprovisionofsomeinformationthatmayneedtobe assessedbeforetherightcanbeexercisedorsimplyuponthehappeningofaneventorthepassing ofaparticulartime).

HisHonourinconcludingthatASCdidnotvalidlyterminatethe2HAon7June2013said:

[125]Once28February2013passedwithoutagreementastoBaselineTrueUp,ASChadto decidehowitwasgoingtocontinuemovingforward:underthetermsofthe2HAorunderthe onegotiatewith aviewtosecuringanagreementonBaselineTrueUpandcl2.1(c)incentivisedForgacstoreach agreement,andalthoughtherighttoterminatewasunilateral,thedateofthe28February2013was orkinthecommercialandcontractualroadahead.Unlike Ballas,theexerciseoftherighttoterminatethe2HAwasnotdependentuponthereceiptbyASCof all

[126]Inthiscontext,althoughthepartiescontinuedtonegotiateBaselineTrueUppastthe TransitionDateandindeedpost28February2013,thecontractualobligationundercl4.1(a)ofthe 2HAonbothpartiestousereasonableendeavourstocompletetheBaselineTrueUpby14 December2012meantthatASCwasonnoticeoftheriskofBaselineTrueUpnotbeingagreedby Forgacsforsomeconsiderableperiodpriorto28February2013.ASChada10weekperiodafter14 December2012todecidewhetherornotitwouldterminateon28February2013.Italsohadthis periodtonegotiateastandstillagreementifitanticipatedneedingmoretime.Thesewerematters thatinformedthemeaningofwhatareasonabletimewasandwhich,inmyopinion,strongly suggestedthatitshouldbeveryshortlyafter28February2013.

[127] eservationofrights,ASC wasatriskoflosingitsrightofterminationifitdidnotexerciseitpromptlyafter28February2013. ContinuingnegotiationwasconsistentwithASCwishingtosecureagreementonBaselineTrueUp; itsaidnothing,however,aboutwhetherornotASCwouldexerciseitsrighttoterminate(assuming thattherightremainedalive)ifnoagreementwerereached.AsIhaveindicatedin[46]-[71]above, .The parties,bytheircontractuallanguage,contemplatedthatitmayoperatewithoutsuchagreement beingreached.

[128]Moreover,thecontinuanceofnegotiationspersecouldnotoperateasthemeasureof reasonablenessoftimebecause,onthislogic, thenegotiationscouldcarryonindefinitelywithouttherightbeingrequiredtobeexercised.

[129]AcommercialpartysuchasForgacs,involvedinamultimillion-dollarprocurementcontract, and 2HAtobeexercisedwithinareasonabletimeofthatrightarisingifitwastobeexercised,was entitledtoholdASCtothatpromiseintheabsenceofcond languageofIsaacsJinMaynard.

[130] purportedtoexerciseits righttoterminate.Itfollowsthatthe2HAwasnotvalidlyterminated.

BastenJAinagreeingwiththeconclusionsofBellPnotedthefollowing:

[166]Inthepresentcircumstances,theremaybethreepossibilitiesforthestageatwhichto considerthereasonabletimewithinwhichitwasopentoASCtoterminatethe2012agreement, namely(i)whenthe2012agreementwasexecuted;(ii)whenthepowertoterminatearose,and(iii) whennoticeofterminationwasgiven.Ononeview,theleastplausibleoftheseisthethird,which dependsonanexpostfactoanalysisbythecourtastowhetherornotareasonabletimeexpired beforethenoticewasgiven.Suchanapproachappearstobedestructiveofanassumptionthatthe termsofacontractmustbereasonablycapableofascertainmentatthetimetheyareagreed.Such alevelofindeterminacy,ifavoidable,shouldbeavoided.Yetbothpartiessubmittedthatthe reasonablenessoftheperiodwasindeedamattertobedeterminedatthedatethenoticeof termination,effectiveimmediately,wasgiven.

Chapter3:Contractdamagesandtheinterplaybetweencausationand mitigation

Everylawyerknowsthatuponbreachofcontracttheinnocentpartyiswelladvisedtotakereasonable stepstomitigatetheirlossflowingfromthebreach.Thisadviceisofteninaccuratelysaidtobefounded uponadutytomitigate.However,asamatteroflaw,theinnocentpartyisnotsubjecttoanyobligationto mitigate.AsnotedbySirJohnDonaldsoninSotirosShippingIncvSameietSolholt73:

Aplaintiffisundernodutytomitigatehisloss,despitethehabitualusebythelawyersofthephrase defendant isnotliableforalllosssufferedbytheplaintiffinconsequenceofhissoacting.Adefendantisonlyliablefor suchpartof

Thus,afailuretomitigatemaybeanalysedintermsofcausationinthesensethatacomponentofthe igateratherthanthebreachofcontractcomplainedof. TheinterplaybetweenmitigationandcausationwasrecentlyconsideredbytheNewSouthWalesCourtof AppealinEdwinDaveyPtyLtdvBoulosHoldingsPtyLtd74

Turningtothefacts.

On22November2010,BoulosasvendorandEdwinDaveyaspurchaserenteredintoasalecontractfora propertyinPyrmont,Sydneyforapriceof$10.8m.Thecompletiondatewas22October2011.However, on6January2011thecompletiondatewasvariedbyagreementto23August2012.Thesaleultimately completedon18September2012(afterreceivershadbeenappointedtoBoulos).Thecontractprovided thatadepositof$2.8mwastobepaidbyEdwinDaveyandreleasedtoBoulosasto$1.3monexchange andafurther$1.5mby31December2010.On6January2011EdwinDaveyreleasedanadditional$1m toBoulos.

ThepropertywassubjecttoamortgageinfavourofPerpetualassecurityfora$13.2mloantoBoulos.In enteringthesalecontractandreleasingthedepos mortgageterms.However,ultimatelyPerpetualagreedtodischargethemortgageonthebasisofa paymentagreementwithEdwinDaveyunderwhichEdwinDaveyagreedtopayPerpetual$500,000if Perpetualreceivedlessthan$7mfromthecompletionofthecontract.Asnotedcompletiondidnotoccur until18September2012whenitoughttohaveoccurredon23August2012.Bouloswas,therefore,in breachofcontract.

On28June2013PerpetualdemandedpaymentfromEdwinDaveyof$500,000inaccordancewiththe paymentagreement.ThisamountwasreceivedbyPerpetualunderbankguaranteesestablishedby EdwinDaveywithStGeorgeBank.

EdwinDaveysoughtrecoveryofthe$500,000fromBoulosbywayofdamagesforbreachofcontract. Relevantly,thebreachcomplainedofwaslatecompletion.AsnotedbyGleesonJAthenormalmeasureof damagesfordelayincompletingalandsalecontractisthevalueoftheuseoftheland,whichwill generallybetakenasitsrentalvalue.

WardCJinEq(asherHonourthenwas)heldinfavourofBoulos.HerHonourdeterminedthatthe relevantbreachwasnotcausativeofthelossofthe$500,000whichherHonouralsoheldtobetooremote forthepurposesofthefirstlimbofHadleyvBaxendale

GleesonJA(MacfarlanJAandSimpsonAJAagreeing)madethefollowingobservations.

76Asindicated,theprimaryjudgecorrectlyrecordedthatEdwinDaveyputitsclaimfordamagesfor consequencesofthebreachofcontract,andthatinundertakingthosereasonablemitigatorysteps,it incurredexpenditureunderthepaymentdeedwhichisrecoverableasdamagesforbreachof contract:see[38]above.

77However,inaddressingthisclaimfordamagesherHonourdidnotrefertotheinterplaybetween causationandmitigation(CastleConstructionsat[19]-[21]),norcommencewiththecausation causedtheincreasedlosswasareasonablestepforEdwinDaveytotake.Rather,afterobservingat

[404]thatthedamagesclaimedbyEdwinDaveyforbreachofcontractwerenotforthelosssuffered bythefailuretocompleteontime,thatis,damagesfordelay,herHonourreasonedthatanobligation voluntarilyundertakenbyEdwinDavey(underthepaymentdeed)didnotflownaturallyfromthe connectionbetweenthebreachbyBoulosinfailingtocompleteontime beingthepaymentof$500,000toPerpetualtodischargeitsmortgage:at[406].

78Irespectfullydisagreewiththisreasoningandthefollow-onconclusionat[410]thattheissueof rwascorrectinstatingthatEdwinDaveydidnotput itsdamagesclaimfortheexpenditureincurredbythemitigatingactionasdamagesfordelay,itisno answertothecausationquestiontosaythattheexpenditurewasincurredvoluntarily.Thatisthevery natureofmitigatingaction.

Wasthereacausativelinkbetweenthebreachandtheloss?

79Criticaltotheinterplaybetweentheissuesofcausationandmitigationisthefactthatthecontract provideadischargeofitsmortgage.IfEdwinDaveyhadnotcontingentlyincurredtheexpenditure completebythefixeddateremainedunremedied,wasthelossofthepropertyandits$3.8million depositandprepaymentwhichhadbeenreleasedtoBoulos.

101ThiscaseisconcernedwiththesecondlimboftheruleinHadleyvBaxendale.Whatwasinthe contemplationofthepartiesdependsuponaconsiderationofthetermsofthecontractinthelightof thematrixofcircumstancesinwhichitwasmade:TheCommonwealthvAmannAviationat92 (MasonCJandDawsonJ).

104Inthiscase,thetermsofthecontractprovidedforthereleaseofthedepositandprepaymentto Boulos.ThecontractobligedBoulostoprovidecleartitletoEdwinDaveyoncompletionandthis meantthatitwasnecessaryforBoulostoprovideadischargeofthePerpetualmortgageonthedate fixedforcompletion.ThematrixofcircumstancesknowntoBoulosincludedthatthepurchaseprice waslessthantheBoulosdebtsecuredbythePerpetualmortgage,andthatBouloshadenteredinto thecontractanditsvariationprovidingforthereleaseofthedepositandprepaymenttoBoulos, consent.

105Itisnotnecessaryfortheparties,specificallythedefendant,tocontemplatethedegreeorextentof thelossthatwasinfactsufferedortheprecisedetailsoftheeventsgivingrisetotheloss.Itis sufficient,forthepartyinbreachtobeliable,thatthepartiescontemplatedthekindortypeoflossor damagethatwassuffered:AlexandervCambridgeCreditCorporationLimited(1987)9NSWLR310 at365-366(McHughJA).

106Giventhecircumstancesreferredtoat[105]above,afindingshouldbemadethatitwasin contemplationofBoulosatthetimeofthecontractanditsvariationthat(a)Perpetualmightnot provideadischargeofitsmortgage,sincePerpetualhadnotgivenitsconsenttothecontractorits variation,andhadnotreceivedthedepositandprepaymentasrequiredunderthetermsofits mortgage,and(b)thatifBoulosfailedtocompletethecontractonthefixeddatebecauseitcouldnot obtainadischargeof

actiontomitigatethepotentiallossofits$3.8milliondepositandprepaymentbyincurringthe videadischargeofits mortgage.

Thereare3keypointstonoteinrelationtothiscase.

First,expensesincurredbyapartyinmitigatinglossistobetreatedasaseparateheadofconsequential loss.

Secondly,anexpenseincurredinreasonablemitigationofalossmayberecoverableeventhoughthe expenseisgreaterinmagnitudethanthedamagesrecoverablefortherelevantbreachofcontract:Arsalan vRixon75 75

Thirdly,indefiningconsequentiallossforthepurposesofanexclusionclauselawyersshouldbemindful thatthecoststoaninnocentpartyofmitigatingalossarisingfromabreachofcontractisaclassof consequentialloss.

Chapter4:Settlementdeedsandreleases:principlesanddrafting issues

1

Theconstructionandinterpretationofsettlementsandreleases

Thelegalprinciplesgoverningtheconstructionofcontractsanddeedsapplyequallytothe constructionofsettlementsandreleases,subjecttoanequitablequalificationidentifiedbytheHigh CourtinGrantvJohnGrant&SonsProprietaryLimited76(Grant),asrecentlyexplainedand clarifiedbytheNewSouthWalesCourtofAppealinReidvCommonwealthBankofAustralia77.

Theseprinciplesofconstructionhavebeenstatedandrestatedonnumerousoccasionsbythe AustralianappellateCourts.However,thecentralprincipleasexpressedbytheHighCourtin MountBruceMiningPtyLtdvWrightProspectingPtyLtd78isthatindeterminingthemeaningof thetermsofacommercialcontractitisnecessarytoaskwhatareasonablebusinesspersonwould haveunderstoodthosetermstomean.Thustheapproachtointerpretationisstrictlyobjective.

Inrespectofsettlementagreementsgenerally,BeachandWalkerJJAintheirjointreasonsin ZivkovicvParke79said:

Sometimes,oneorbothpartiesdonotfullycomplywiththeirobligationsundertheirsettlement agreement.Inthosecases,adifficultquestionmayariseastowhetherthesettlementagreement availabletotheparties.Thatquestionisresolvedinaccordancewithconventionalprinciplesof constructionofcommercialcontracts.Thoseprinciplesrequirethecourttoassesstheintentionofthe partiesobjectively,havingregardtothetermsofthesettlementagreement,itscontextandthe objectsitisintendedtosecure.[Footnotesomitted]

TheseminalauthorityonreleasesistheHighCourtdecisioninGrantvJohnGrant&Sons ProprietaryLimited80.TheprinciplesestablishedbyGrantwereusefullysummarisedbyMiddleton JinPlaycorpGroupofCompaniesPtyLtdvPeterBodumA/S81asfollows:

[206]TheleadingauthorityontheconstructionofdeedsofsettlementandreleasesisGrantv JohnGrant&SonsProprietaryLimited(1954)91CLR112.InGrant,themajorityjudgment (DixonCJ,Fullagar,KittoandTaylorJJat123-4),citedthejudgmentofLordWestburyin LondonandSouthWesternRailwayCovBlackmore(1870)LR4HL610,wherehis Lordshipsaid(at623):

Thegeneralwordsinareleasearelimitedalwaystothatthingorthosethings whichwerespecificallyinthecontemplationofthepartiesatthetimewhenthe releasewasgiven.

[207]TheirHonours,havingrejectedanyneedtodistinguishbetweenequitableandcommonlaw constructionprinciples,laiddownthefollowingprinciplesforconstruingarelease(at12930):

thegeneralwordsofareleaseasameansofescaping thefulfilmentofobligationsfallingoutsidethetruepurposeofthetransactionas ascertainedfromthenatureoftheinstrumentandthesurroundingcircumstances includingthestateofknowledgeoftherespectivepartiesconcerningthe existence,characterandextentoftheliabilityinquestionandtheactualintention ofthereleasor.

[208]Thus,theirHonourssaid(at131):

Thequestioniswhetheruponaproperinterpretationofthedeedthegeneral releaseclauseshouldberestrainedtomattersindisputewithinthemeaningof theserecitals.Thequestiondependsprimarilyontheapplicationoftheprima faciecanonofconstructionqualifyingthegeneralwordsofareleasebyreference toparticularmatterswhichrecitalsshowtobetheoccasionoftheinstrument.

76 (1954)91CLR112

77 [2022]NSWCA134

78 (2015)256CLR104

79 [2022]VSCA43

80 (1954)91CLR112

81 [2010]FCA23(2010)84542

Subsequently,inSarinavFairfaxMediaPublicationsPtyLtd82theFullFederalCourt(Rares, BromwichandMarkovichJJ)inexplainingthescopeofGrantsaid:

[20]Where,inadeed(oragreement)aclauseprovidedonepartywithareleaseinwideor generalwords,thecommonlawprincipleofconstructionrestrictedtheotherwisewideor generaloperationofthosewordsbyconstruingthereleaseclauseasoperatingupononly thesubjectoroccasiontowhichthedeed(oragreement)readasawhole referred:Grant91CLRat123-124perDixonCJ,Fullagar,KittoandTaylorJJ.Thus, where,asoftenoccurs,adeedrecitedthatthepartieshavehadaparticulardispute,butthe clausecreatingthereleasedidnotexpresslyconfineitsoperationtothedisputementioned intherecitals,theprinciplesofconstructionatcommonlawreaddownthewidewordsof thereleasetoapplyonlytothedisputeintherecitals.Indeed,DixonCJ,Fullagar,Kittoand TaylorJJexplained(Grant91CLRat124and131)thatthecommonlawprinciplewasthat awritteninstrumentexpressedingeneralterms(beitadeedorstatute)hadtobe construedhavingregardtothecircumstancestowhichtheinstrumentmusthaveintended toapply.Thisinsubstanceaccordswiththemodernprinciplesapplicabletothe constructionofcontractsanddeeds.

TheirHonourshavingnotedtheobjectiveapproachtotheconstructionofcontractsnoted:

However,whereoneofthepartiestoareleasesoughttorelyuponitswideandgeneralwords, equityconsideredwhetheritwouldbeunconscientiousforthatpartytoenforcesuchameaningby

CLRat124-125.Inotherwords,asDixonCJ,Fullagar,KittoandTaylorJJheld(at129-130),equity willrestrainapartyseekingtoenforceawideorgeneralreleasewhereitwouldbeunconscientious forthatpartytodosoinallofthecircumstances.Insuchacase,thecourtwillexaminethe knowledgeandintentionofbothreleasorandreleaseeastothesubjectmatteronwhichtherelease wouldoperate.

Clearly,thesubjectiveknowledgeandintentionofthepartiesisrelevanttoanassessmentwhether relianceonareleaseingivencircumstanceswouldbeunconscientious.

TheaboveobservationsbytheFullFederalCourtinSarinavFairfaxMediaPublicationsPtyLtd wererecentlycitedwithmanifestapprovalbyJagotJinHellsAngelsMotorcycleCorporation (Australia)PtyLimitedvRedbubbleLimited(No4)83

ThescopeoftheequityidentifiedinGrantwasconsideredearlierbyPembrokeJinTheOwners CorporationofStrataPlan61390vMultiplexCorporateAgencyPtyLtd(No2)84(Multiplex),in whichhisHonournoted:

29Inotherwords,equitypermitsaninvestigationofthecircumstances,includingconsideration oftheactualintentionsoftheparties,inordertodeterminewhetherenforcementofthe generalwordsofareleasewouldbeagainstconscience.

30Significantlyhowever,thejointjudgmentinGrantvJohnGrant&Sons(supra)also recognisedthattherewillalwaysbecaseswhere,properlycharacterised,thepartiesshould betakentohaveintendedthatthegeneralwordsofareleaseshouldoperatetoencompass allconceivablefurtherdisputes,whetherdisclosedornotandwhetherwithintheknowledge ofapartyorbothparties,oroutsideofit:GrantvJohnGrant&Sons(supra)at129.Insuch acasethereisnoroomfortheapplicationofequitableprinciple.Theequitableprinciple onlyhasaroletoplaywhenitappearsfromthetermsorthecontextorotheradmissible evidence,thattheenforcementofthelegalrightwould,byaliteralapplicationofthegeneral wordsofarelease,beagainstconscience.Itwouldnotbeagainstconscienceifthecourtis satisfiedthatthepartiesintended"uponaparticularandsolemncompositionforpeace"to releaseuncertaindemandsandpresentlyunknownclaims:SalkeldvVernon(1758)1Eden 64at67-68,citedinGrantvJohnGrant&Sons(supra)at129.(boldingadded)

Multiplexinvolvedtheinterpretationofareleaseinacomplexbuildingdispute,inwhichMultiplex madeanapplicationthatcertainissuesrelatingtothereleasebedeterminedasseparate questions.Inthatcontext,PembrokeJnoted:

82 [2018]FCAFC190

83 [2022]FCA190

84 [2012]NSWSC322

34Importantly,inacasesuchasthiswherethereleasorwasrepresentedbyskilledsolicitors, wherethetermsofthereleasewerenegotiatedoveraconsiderabletimeandwherethe circumstancestendtosuggestthatthepartiesintendedthatallclaims-whetherpresently knownornot-otherthanthosethatwerespecificallyexcludedanddefined,shouldbe released,evidenceofthenon-awarenessoftheexistenceorlikelihoodofcertainclaims maynotbesignificant.Afterall,theverypointofthecontractuallanguagechosenbythe partiesintheDeedinClause5.1(a)andinthedefinitionof"Claims"appearstohavebeen tocoverunknownclaims.

35Ontheotherhand,non-awarenessbythereleasorcoupledwithknowledgebythereleasee ofthecircumstancesthatmaygiverisetoaclaim,mayinsomecasespossiblybesufficient toinvoketheequitableprinciple.Howeveritwillnotnecessarilydoso.Muchwilldependon thequalityofthereleasee'sknowledge-whetheritisspecificorgeneralandwhetherin somewaythatknowledgeshouldbeseenasaffectingtheconscienceofthereleasee.

36Arelevantfeatureofthiscaseisthatitinvolvesamajorbuildingdispute,wherethe notoriouslikelihoodoffutureclaimsarisingfromtheunderlyingsubjectmatterwouldhave beenwellunderstoodbythespecialistconstructionlitigationsolicitorsadvisingtheplaintiff. ItseemsunlikelythatthepartiescouldhavebeenunawareofthislikelihoodwhentheDeed wasenteredinto.Andtheremaywellbeadifficultyfortheplaintiffifthereisnoevidence fromitssolicitorthathisactualintentionwasdifferentfromtheordinarymeaningofthe wordsusedintherelease.Thesolicitorwasafterallthepersonresponsibleontheplaintiff's behalfforthenegotiationofthetermsoftherelease.(boldingadded)

Pem GrantwasfollowedbyLeMiereJinWrightvLemon85.Interestingly,his Honournoted:

Principlesofequityhavenothingtodowiththeprocessofconstruction.

ItisclearthattheequitableprincipleenunciatedinGrantdoesnotformpartofEnglishLaw. However,intheleadingauthorityofBankofCreditandCommerceInternationalSAvAli86,Lord Nichollsmadethefollowingobservation:

ThusfarIhavebeenconsideringthecasewherebothpartieswereunawareofaclaimwhich subsequentlycametolight.Materiallydifferentisthecasewherethepartytowhomthereleasewas givenknewthattheotherpartyhadormighthaveaclaimandknewalsothattheotherpartywas ignorantofthis.Insomecircumstancesseekingandtakingageneralreleaseinsuchacase,without disclosingtheexistenceoftheclaimorpossibleclaim,couldbeunacceptablesharppractice.When thisisso,thelawwouldbedefectiveifitdidnotprovidearemedy.

HisLordshipacknowledgedthatthewordingandcontextofageneralreleasemayoperateto extendthereleasetounknownclaims,subjecttothefollowingcaveat:

Thisapproach,however,shouldnotbepressedtoofar.Itdoesnotmeanthat,oncethepossibilityof furtherclaimshasbeenforeseen,anewlyemergentclaimwillalwaysberegardedascaughtbya generalrelease,whateverthecircumstancesinwhichitarisesandwhateveritssubjectmattermay be.Howeverwidelydrawnthelanguage,thecircumstancesinwhichthereleasewasgivenmay suggest,andfrequentlytheydosuggest,thatthepartiesintended,or,moreprecisely,thepartiesare reasonablytobetakentohaveintended,thatthereleaseshouldapplyonlytoclaims,knownor unknown,relatingtoaparticularsubjectmatter.Thecourthastoreconsider,therefore,whatwasthe typeofclaimsatwhichthereleasewasdirected.

2Recentdecisions

InReidvCommonwealthBankofAustralia87theNewSouthWalesCourtofAppeal(BellCJ, LeemingandWhiteJJA)examinedtheequitableimpactofGrantontheconstructionof compromisesandreleases.

On28October2003,MrandMrsReidenteredintoseparateguaranteesinrespectofloansmade bytheCommonwealthBank(Bank)tothreeseparatecompanies.Onthesamedate,MrandMrs ReidexecutedamortgageoverapropertytheyjointlyownedinMenangle,NewSouthWales (MenangleProperty).InJanuary2012theBankcommencedproceedingsseekingjudgment againstMrandMrsReidasguarantorsandalsosoughtjudgmentforthepossessionofthe MenangleProperty.InMay2012MrReidandthecompaniescommencedproceedingsagainstthe Bankonthebasi

settlements,onewithMrsReidon10October2013andonewithMrReidon13February2013. ThematterwascomplicatedbyFamilyCourtproceedingsbetweenMrandMrsReidtowhichthe Bankbecameapartyon8May2012.

Relevantly,thesettlementdeedwithMrReidcontainedthefollowingreleaseinfavouroftheBank:

5.Release

5.1MrReid,theCompaniesandDorgalreleaseanddischargetheBankfromallliabilityfor damagesorlossandfromallsumsofmoney,accounts,actions,proceedings,claims, demands,costsandexpenseswhateverwhichMrReid,theCompaniesand/orDorgalor anyoreachofthemhasorhadoratanytimeinthefuturemayhaveagainsttheBankforor byreasonorinrespectofanyact,cause,matterorthingarisingoutoforinconnectionwith orincidentaltotheLoans,theLoanAgreement,theProperty,theSale,theMortgage,the Proceedings,orinanywayrelatingtothemattersreferredtointherecitals.

5.2Uponallotherterms,conditions,representations,acknowledgmentsandwarrantiesinthis DocumentbeingcompliedwithbyMrReid,theCompaniesandDorgal,theBankcovenants nottofiletheJudgmentasagainstMrReid,theCompaniesorDorgalorseektorecoverthe balanceoftheSecuredMoneysagainstMrReid,theCompaniesand/orDorgalafterthe

InJune2015,theBanktookcontroloftheMenanglePropertyandexchangedcontractsforitssale. However,aftertheBanktookpossessionthepropertywasvandalisedandbecauseofthedamage sustainedtheBankallowedthepurchaseradiscountof$370,000.00,whichMrReidonly discoveredthreeyearslater.

MrReidcommencedproceedingsagainsttheBankintheDistrictCourtseekingrecoveryofthe $370,000.00discount.AbadeeDCJorderedthesum thewidetermsofthereleasecontainedinclause5.1ofthesettlementagreement.

MrReidthenappealedthisruling,onaninterlocutorybasis,totheNewSouthWalesCourtof Appeal.

judgment,hisHonour,inidentifyingtheissuesraisedbyGrantsaid:

Grant&SonsPtyLtd.Oneiswhetherequitywouldconstrueareleasedifferentlyandmore narrowlythanthesamewordswouldbeconstruedatlaw.Thesecondisastothe equitywouldpreventthereleaseefromrelyingontherelease.

Astothefirstissue,hisHonourmadethefollowingobservation:

43ThereisanattractiontotheideathattheequitableaspectofGrantwasconfinedtothe unconscientiousexerciseoflegalrights,whichcouldbeinformedbythesubjective intentionsoftheparties,andthattheapproachtoconstructionofthedocumentisthesame atlawandinequity.Thataccordswiththeemphaticendorsementoftheobjectivetheoryof contractindecisionssuchasToll(FGCT)PtyLtdvAlphapharmPtyLtd(2004)219CLR 165;[2004]HCA52.ThesamepointwasmadebyLordNicholls,whendealingwith releases,inBankofCreditandCommerceInternationalSAvAli[2002]1AC251;[2001] distinctfromanequitablein Clyde).Doubtlessitseemstotwenty-firstcenturyeyesastrongthingtoconcludethatthe

samedocumentwouldbeconstrueddifferently,accordingtodifferentrulesandbyreference todifferentevidence,byacommonlawcourtandanequitablecourt.

InconcludingthatGrantpermittedtheadmissionofevidenceofthesubjectiveintentionofthe partiestoinformtheconstructionofarelease,hisHonourcitedinsupportthedecisionofthe VictorianCourtofAppealinBurnessvHill88inwhichtheCourtheldthattheignoranceofboth release,madeitunconscientioustorelyonthegeneralwordsoftherelease.However,Leeming JAwentontosayinthiscontext:

51ThatisnotinconsistentwiththestatementinGrantthatitispossibletodraftareleasewhich extendstoclaimswhichareunknown.Thereisastreamofauthoritytothateffect.One decisionwhichisoftencitedtothatend,andwasreliedonbytheprimaryjudge,isDoggett vCommonwealthBankofAustralia(2015)47VR302;[2015]VSCA351,whereWhelanJA saidat[63]thatGrant:

nonlyeverapplytomatters thenknowntotheparties.Itispossibletoenterintoanarrangementwhichdoes vJohnGrantrestrainapartyfromunconscientiousrelianceonlegalrights. Particularcircumstancesmayrevealthatitwouldbeunconscientioustoallowthe generalwordsofareleasetobereliedupon.GrantvJohnGrantwassuchacase. Buttherewillbenoroomfortheapplicationofthoseequitableprinciplesifitis clearthatthepartiesintendedthegeneralwordsofareleasetoencompassall

52Thosepassagesconfirmthattherearecircumstancesinwhichpartiesmayrelease unknownclaims,fallingoutsidethescopeforequitableintervention.Thattheexception existsisundoubted.Butidentifyinginadvanceofatrialpreciselywhenonecanconfidently concludethatthereisnoscopeforequitableinterventionisproblematic,tosaytheleast,in caseswhereareleaseissoughttoapplytofactsnotpresentinexistenceandofwhichitis allegedthatonepartyhasnotdisclosedwhatoccurredtotheother.

54Thebasisuponwhichthereleasecametobeexecuted,andwhattheBankthereafterdid, willbethesubjectofevidenceattrial.Itcannotconfidentlybeconcluded,inadvanceoftrial, thatfactscouldneveremergeinlightofwhichitwouldbeunconscientiousfortheBankto relyontherelease.

WhiteJ,alsoallowingtheappeal,madethefollowingobservations:

126InPerryHerzfeldandThomasPrince,Interpretation(2ed,2020,ThomsonReuters)para [30.80],thelearnedauthorssaythattheequitableprinciplehasnoapplicationwherethe partieshaveclearlyreleasedunknownorfutureclaims.

127TheBankreliesuponthereleaseascoveringallclaimswhichMrReidatanytimeinthe futuremayhaveagainsttheBankfor,orbyreason,orinrespectofanyact,cause,matter orthinginconnectionwith,orincidentalto,thesaleoftheMenangleProperty(cl5.1).

128

Buttheconductofthe exerciseofitspowerofsale.Primafacie,thereleaseofclaimsinrespectofthefuturesale ofthepropertywouldcovermatterssuchasanallegedfailurebytheBanktotakeproper stepstomarketthepropertyforsale,orotherwisenottakingreasonablecaretosellthe propertyforitsmarketvalueorthebestpricereasonablyobtainablehavingregardtothe circumstancesexistingwhenthepropertyissold(CorporationsAct2001(Cth)s420A). Possibly,althoughthismightbecontentious,thereleasemightextendtoafailureto exercisethepowerofsaleingoodfaith.

3

Mostrecently,inRW&MESmithPtyLtdvBoralResources(Vic)PtyLtd89theCourtofAppealof Victoriarevisitedtheprinciplesofcontractualinterpretationinrelationtoreleases.Relevantlythe Courtsaid:

circumstancesinwhichadeedofreleasecouldbenarrowedtoitsspecifiedsubjectmatter. Twoprinciplesofcontractualinterpretationandoneequitableprincipleemergefromthat case.Weconfineourselvestotheprinciplesofinterpretation.

97Thefirstisthatthegeneralwordsofareleasearetoberestrainedbytheparticular qualifythegeneralwordsoftherelease.Thesecond,related,principleisthatthegeneral wordsofareleasearelimitedtothosethingswhichwereincontemplationofthepartiesat thetimewhenthereleasewasgiven.TheHighCourtexplainedthatthesecondprinciple foundearlierexpressioninthewordsofTauntonJinUptonvUpton,putthisway:

[T]hegeneralwordsofareleasemaybelimitedbytheparticularmatteroutofwhichthe releasespringsandtheparticularintentofthepartiesbywhomthereleaseisexecuted.

98AsalsoexplainedbytheHighCourt,therelationshipbetweenthetwointerpretiveprinciples liesinthedifferencebetweencontrollingthegeneralwordsbyreferencetoanexpress recitalandcontrollingthembyreferencetoactualdisputeswhichexistedbetweenthe releasorandreleasee.

99Theseprincipleshavebeenacceptedandappliedconsistentlysincethepublicationof Grant,includingrecentlybytheFullCourtoftheFederalCourtinWardman,theNewSouth WalesCourtofAppealinReid,andtheVictorianCourtofAppealinBurness.

Issuestobeconsideredwhendraftingarelease

(1)Isitintendedthatonlyonepartywillbereleasedordothereleasesneedtobemutual?

(2)Willthereleaseonlybegivenonpaymentofthesettlementsum(conditional)orwillitbe givenonexecutionofthedeed(unconditional)?Generally,theformerispreferableforthe partywhoisreceivingthesettlementsum.

(3)Isthereleaseintendedtocapturebothknownandunknownclaims?Ifso,thisneedstobe madeclearinthedefinitionofClaim.Further,anyexcludedClaimmustbeclearlyidentified inthedefinition.

(4)Itmaybeusefultoincorporateanacknowledgementbythereleasorthatthoughtheymay discoverfactsorinformationdifferentfromorinadditiontothefactsorinformationthat theynowknow,itistheirintentionto,andtheydo,fullyandfinallysettleallClaimsonthe termsofthisdeed.Thisacknowledgementmayminimisetheriskofthereleasor subsequentlyrelyingontheequitableprincipleinGranttoavoidthereleaseinmakinga laterclaim.

(5)Thereleaseshouldcontainanindemnityfromthereleasortothereleaseeindemnifyingthe releaseefromandagainstallclaimsagainstthereleaseebyanypersonorbodyclaiming through,byorunderthereleasor.

(6)Unlikeadeedpoll,thedoctrineofprivityofcontractwillappliestoadeedinterpartes. Thus,ifapersonnotpartytothedeedofreleaseisintendedtobenefitfromtherelease, thereleasorshouldbedeclaredtoholdthereleaseontrustforitselfandanyother nominatedthirdparty.

(7)Itisopentointroduceatimeoftheessenceclauseintothedeedofrelease.Thiswould entitleapartytoterminatethedeedimmediatelyifthecounterpartyfailedtomeetatime obligation.

4Releasesandcovenantsnottosue

TheAustralianauthoritieshavedrawnacleardistinctionbetween,ontheonehand,areleaseand, ontheother,acovenantnottosue,althoughincertaincircumstancesacovenantnottosuemay operateasarelease.Thus,DixonJinMcDermottvBlack90stated:

Atlaw,"theonlycaseinwhichacovenantorpromisenottosueisheldtobepleadableasabar,or tooperateasasuspension,andbyconsequenceareleaseorextinguishmentoftherightofaction,is wherethecovenantorpromisenottosueisgeneral,nottosueatanytime.Insuchcases,inorder assigned,thatthedamagestoberecoveredinanactionforsuingcontrarytothecovenantwouldbe equal v.Beech).

Also,GummowJinThompsonvAustralianCapitalTelevisionPtyLtd91said:

Thereasonwhyacovenantnottosueofthisnaturehasbeenheldtoprovideapleainbarwasmore fullyexplainedbyWillistoninthefollowingpassage:

Thisistoavoidcircuityofaction;for,iftheplaintiffintheoriginalactionshouldrecover,thedefendant couldrecoverpreciselythesamedamagesbackforbreachofthecovenanttoforbearornottosue. Insteadofpermittingthedoubleaction,thecourtproducesthesameeffectmoresimplybygiving judgmentforthedefendantintheoriginalaction.

Itisaquestionofconstructionwhetheracovenantinanyparticularcaseoperatesasareleaseor onlyasacovenantnottosue.

5Jointobligations

Thecriticaldistinctionbetweenareleaseandacovenantnottosueisthatthereleaseofonejoint obligorautomaticallyreleasesallotherjointobligors,whereasacovenantnottosueoneindividual jointobligordoesnotreleasetheotherswhoseliabilityremainsunaffected.Accordingly,ifabank weretoreleaseoneco-guarantor,theotherco-guarantorswouldbeautomaticallyreleased.Thatis whyasettlementbetweenabankandoneco-guarantorwillusuallyincorporateacovenantnotto sueratherthanarelease,therebypreservingtheliabilityoftheotherco-guarantors.However,the commonlawprinciplethatthereleaseofonejointobligorreleasestheothershasbeenamended bylegislationinNewSouthWalesandVictoria.

Also,theHighCourtinLavinvToppi92heldthattheequitabledoctrineofcontributionbetweencoguarantorsappliestoaco-guarantorwhohasthebenefitofacovenantnottosue.Thepointisthat acovenantnottosuedoesnotchangetheco-ordinateliabilityofco-guarantors.Inthiscontext,the HighCourtapprovedthefollowingobservationbyLeemingJAintheCourtofAppeal:

[74]IreturntoMsLavin'ssubmissionthatitisnecessarythattheliabilities,inordertobe"coordinate"soastosupportarighttocontribution,be"ofthesamenatureandtothesame extent".Acovenantnottosuedoesnotaltertheliability.Indeed,thepremiseofthe covenantisthattheliabilityremains;itistheliabilitywhichisthesubjectofthecovenant. ThereremainedacommunityofinterestsharedbyMsLavinandMsToppi,atleastinthe broadersenseinwhichthetermwasusedinequity.

6Accordandsatisfaction

Apartfromdocumentingareleaseinaformaldeedofsettlement,thepartiesmayreachagreement throughanaccordandsatisfaction.ThistypicallyarisesbytheacceptanceofaCalderbankoffer madebyonepartytoanother.Thecommonlawhasrecognisedthreecategoriesofaccordwhich wererecentlysummarisedbyKyrouJA(BeachandWalkerJJAagreeing)inZivkovicvParke93as follows:

81

Anaccordexecutorydescribesasettlementagreementunderwhichnobindingcontract arisesuntilthereiscompliancewiththeobligations causeofactionsubsistsandcanbepursued.Thus,iftheplaintiffclaims$1,000andunder thesettlementagreementthedefendantpromisestopay$100within30days,abinding contractdoesnotariseuntilthedefendantmakesthatpayment.Ifthedefendantfailsto complywithhisorherobligationsunderthesettlementagreement,neitherpartycan enforceitbecauseitisnotabindingcontract.Inthatsituation,thesettlementagreement doesnotprecludetheplaintifffrompursuinghisorherclaimfor$1,000.Ifthedefendant complieswithhisorherobligationsunderthesettlementagreement,itbecomesabinding

82Anaccordandsatisfactiondescribesasettlementagreementwhichbecomesabinding thattime,irrespectiveofwhetherthedefendantcomplieswithhisorherobligationsunder theagreement.Thus,intheaboveexample,theplaintiffistreatedasacceptingthe amount,astheconsiderationforsettlinghisorherclaimfor$1,000.Thatpromisehasthe made.Fromthattime,theonlyrighttheplaintiffhasagainstthedefendantistoreceivethe amountof$100.Ifthedefendantdoesnotpaythatamountinaccordancewiththe contractualobligationtopay$100.Theplaintiffcannolongerpursuehisorherclaimfor $1,000againstthedefendant.

83Anaccordandconditionalsatisfactiondescribesasettlementagreementwhichbecomesa causeofactionunlessanduntilthedefendantcomplieswithhisorherobligationsunderthe plaintiffmaybringthecontracttoanendbyacceptingtherepudiation,andpursuehisorher originalcauseofaction.Alternatively,theplaintiffmaytreatthecontractassubsistingand example,wherethedefendanthaspromisedtopaytheamountof$100within30days,if thatamountistenderedwithinthatperiod,theplaintiffisboundtoacceptitandcannot pursuehisorheroriginalclaimfor$1,000.However,ifthedefendantdoesnotpaythe amountof$100within30daysandhisorherfailureconstitutesarepudiationofthe settlementagreement,theplaintiffhastwooptions.Theplaintiffmaybringtheagreement toanendandpursuetheoriginalclaimfor$1,000or,alternatively,theplaintiffmayseek

Turningtothefacts.

Thecaseinvolvedthecategorisationofthetermsofasettlementofadefamationactionbroughtby therespondent.TheapplicantsacceptedaCalderbankofferbytherespondentwhich,relevantly, provided:

1.Paymenttotheplaintiff[therespondent]bythedefendants[theapplicants]of $80,000infullandfinalsettlementofthismatter.

2.Paymenttobemadebyelectronicfundstransferintoanaccountnominatedbythe plaintiff.Thepaymentistobemadeby29August2020(andanagreementtothe entryofjudgmentforthatamountintheeventofdefault).

3.MrZivkovic[thefirstapplicant],immediatelydeleteeachofthepublicationsthesubjectofthe

4.MrZivkovic,agreetopublishimmediatelythefollowingapology,whichistoremainvisible

The$80,000wasneverpaid.Thereafter,therespondentre-listedthematter.Theprimaryjudge awardedtherespondent$160,000indamages.

Theapplicants(defendants)soughtleavetoappealonthebasisthatthesettlementwasanaccord promisetopay$80,000.Conversely,therespondentcontendedthattheagreementwasan accordandconditionalsatisfactionwh

settlementsumwithintheprescribedperiod.Accordingly,therespondentwasentitledtopursue hisoriginalcauseofaction.

Theprimaryjudgeheldthatthesettlementwasanaccordandconditionalsatisfaction,the conditionsofwhichhadnotbeensatisfied.TheCourtofAppealbyamajorityagreed.

Intheirjointreasons,BeachandWalkerJJAsaid:

8Thesettlementagreementmustbeconstruedasawhole,withregardtoitsfullcontextand purpose.Itisnottobeconstruedpiecemealorbyreferencetoindividualterms,or individualphraseswithinindividualterms.

9Absentthewordsinbracketsincl2,wethinktherecouldbenodoubtthat,properly construed,thesettlementagreementwasnotanaccordandsatisfaction,butrather,wasan accordandconditionalsatisfaction.Thesettlementagreement,notbeingexpressedtobe aresolutionoftheproceedingonthebasisofanexchangeofpromises,doesnotcontain languageofthekindtraditionallyseeninasettlementagreementthatconstitutesanaccord andsatisfactionofanunderlyingproceeding.

13Construedasawhole,inourviewthechronologicalobligationsimposedontheapplicants bythesettlementagreementsuggestthatfullandfinalsettlement(inthesenseofthe performanceofeachofthoseobligations,culminatinginthepaymentofthesettlementsum. Thatis,thesettlementagreementisanaccordandconditionalsatisfaction,notanaccord andsatisfaction.Thatconclusionissupportedbythefollowingmatters,althoughweaccept thatnoneofthemisdeterminative.

Theofferthensetoutsixclauses.Itisplainthat,althoughcl1referredtothepaymentof $80,000wasallthatwasrequiredtoperformtheagreement.

propositionthatwhattherespondentwastoreceiveinconsiderationfordischargingthe applicantsfromliabilitywasthepaymentofthesum,notapromisetopaythesum. Thirdly,cls3,4and5requiretheimmediatetakingofcertainactions.Inouropinionitis inherentlyunlikelythatapartytoanagreementofthiskindwouldacceptapromisetotake theseactionsinreturnforthedischargeoftheunderlyingclaim,ratherthanagreeingto dischargetheclaimoncetheactionsweretaken.Thatisparticularlysowherethereisa realdoubtastowhether,undereachofcls3,4and5,thepublicationofanapologymight notbeenforceablebyanactionforspecificperformance.Wediscussthisissueingreater detailbelow.

KyrouJAindissentsaid:

109Therearetwostrikingfeaturesoftheabovechronology.First,settlementoccurredafterMr Parkeobtaineddefaultjudgmentfordamagestobeassessed.Inmanycases,settlement oc

andresultsinthecauseofactionmerginginthejudgment.However,inthepresentcase, thedefaultjudgmentdeterminedthatMrParkewasentitledtodamagesfordefamation, withtheonlyoutstandingissuerelatingtothedamagesbeingtheirquantum.Thatmeans claimmergedinthedefaultjudgment,suchthatthejudgmentwastheexclusiverepository ofhisrightsinrelationtodamages.Secondly,MrParkemadetheCalderbankofferonthe eveofthedateinitiallyfixedfortheassessmentofdamageshearingandspecifiedthatit couldonlybeacceptedpriortothetimeinitiallyfixedforcommencementofthathearing.

110ThesetwofeaturesindicatethatthepartiesintendedthatacceptanceoftheCalderbank offerwithinaverynarrowtimeframewouldresolvetheoutstandingissueofquantumby agreementratherthanbycurialassessment.ItwouldbeconsistentwiththatintentionforMr consentjudgmentforthatamountintheeventofnon-paymentbytheduedate.

111Ontheotherhand,itwouldbeinconsistentwiththatintentionforMrParketohavetheright toputasidethesettlementagreementandseekanassessmentofdamagesintheeventof non-paymentbytheduedate.Thatisbecausetheexistenceofsucharightwouldfailto giveeffecttotheremedyforbreachspecifiedbythesettlementagreement,namely,the entryofjudgmentfortheamountof$80,000.Theapplicantscouldnotopposetheentryof judgmentforthatamountbecause,byacceptingtheCalderbankoffer,theyagreedtothe entryofsuchjudgment.

7Summaryofkeypoints

(a)Thereleaseofanobligationorcauseofactionmaybeeffectedbydeedunderseal,orby accordandsatisfaction.94

(b)Thecriticaldistinctionatcommonlawbetweenareleaseandacovenantnottosueisthat areleasewhollydischargesanobligationwhileacovenantnottosuepreservestheobligation butconstitutesacontractualpromisenottoenforceit.

(c)Thescopeofareleaseisgovernedbytwoprinciplesofcontractualinterpretationandone equitableprinciple.

First,thegeneralwordsofareleasearetoberestrictedbytheparticularoccasionreferredtointhe recitals.

Secondly,ifthereleaseexpresslygoesbeyondtherecitals,thegeneralwordsofthe releasewillbelimitedtothosethingswhichwereinthecontemplationofthepartiesatthe timewhenthereleasewasgiven.

Thirdly,areleasewillnotbeenforceabletotheextentthatitwouldbeunconscientiousin allthecircumstances.Todeterminewhetherenforcementwouldbeunconscientious,a courtwillhaveregardtotheactualknowledgeandintentionoftheparties

Chapter5:TheproportionateliabilityregimeinTasmaniaand federally

1Background

TheproportionateliabilitylegislationwasintroducedbytheStatesandTerritories between2002and2005.Thelegislationisnotuniformandthereremainimportant differencesbetweenthevariousStateandTerritoryregimes.Specifically,theregimeis excludablebycontractinNewSouthWales,TasmaniaandWesternAustralia.Itis expresslynon-excludableinQueenslandandalthoughthelegislationintheotherStates andTerritoriesissilentonexcludability,thebetterviewisthatitisnon-excludable.95In 2013anunsuccessfulattemptwasmadetoharmonisetheregimes.

InHunt&HuntLawyersvMitchellMorganNomineesPtyLtd96,FrenchCJ,Hayneand KiefelJJintheirjointreasonsexplainedtheintentoftheproportionateliabilityregimeas follows:

10.Part4oftheCivilLiabilityActrepresentsadeparturefromtheregimeofliabilityfor negligenceatcommonlaw(solidaryliability),whereliabilitymaybejointorseveralbut eachwrongdoercanbetreatedastheeffectivecauseandthereforebearthewholeloss. Underthatregime,aplaintiffcansueandrecoverhisorherlossfromonewrongdoer, leavingthatwrongdoertoseekcontributionfromotherwrongdoers.Theriskthatanyof theotherwrongdoerswillbeinsolventorotherwiseunabletomeetaclaimfor contributionlieswiththedefendantsued.Bycomparison,underaregimeof proportionateliability,liabilityisapportionedtoeachwrongdoeraccordingtothecourt's assessmentoftheextentoftheirresponsibility.Itisthereforenecessarythattheplaintiff sueallofthewrongdoersinordertorecoverthetotallossand,ofcourse,theriskthat oneofthemmaybeinsolventshiftstotheplaintiff.

Undersection3A(3)oftheCivilLiabilityAct2002(Tas)(Act)theproportionateliabilityregime containedinPart9Amaybemodifiedorexcludedbyagreement.

2Thekeyprovisions

Theproportionateliabilityregimeisbaseduponthreeinterlockingconcepts.

First,anapportionableclaim;

Secondly,concurrentwrongdoerscausingthesamelossordamagetotheplaintiff;and Thirdly,proportionateliabilityforapportionableclaims.

Apportionableclaimisdefinedinsection43A(1)oftheActasfollows:

(a)aclaimforeconomiclossordamagetopropertyinanactionfordamages(whether intort,incontract,understatuteorotherwise)arisingfromafailuretotakereasonable care(butnotincludinganyclaimarisingoutofpersonalinjury);

(b)aclaimforeconomiclossordamagetopropertyinanactionfordamagesunderthe AustralianConsumerLaw(Tasmania)foracontraventionofsection236ofthatAct;

Concurrentwrongdoerisdefinedinsection43AoftheActasfollows:

(2)InthisPart-

95 ability

InthecaseofVictoria,theproportionateliabilityschemeispartoftheWrongsAct1958(Vic).Anumberofthepartsof thatActexpresslystatethattheycanbeexcludedbyappropriatecontractualprovisions.Thepartrelatingto proportionateliabilitydoesnot.Theapplicationoftheexpressiouniusestexclusiorulethereforesuggeststhatitis stronglyarguablethatthepartiestoacontractcannotcontractoutoftheVictorianproportionateliabilityscheme. 96

concurrentwrongdoer,inrelationtoaclaim,isapersonwhoisoneoftwoor morepersonswhoseactsoromissions(oractoromission)caused, independentlyofeachotherorjointly,thedamageorlossthatisthesubjectof theclaim.

Theregimeforproportionateliabilityiscontainedinsection43BoftheActwhich provides:

(1)Inanyproceedingsinvolvinganapportionableclaim

(a)theliabilityofadefendantwhoisaconcurrentwrongdoerinrelationtothatclaimis limitedtoanamountreflectingthatproportionofthedamageorlossclaimedthatthe damageorloss,and

(b)thecourtmaygivejudgmentagainstthedefendantfornotmorethanthatamount. U monetarycompensation.MacfarlanJAinPerpetualTrusteeCoLtdvCTCGroupPty Ltd(No2)97incommentingonthatdefinitionobserved:

18.Thatdefinitionprovidesthatdamagesinclude"anyformofmonetarycompensation" (s24AEoftheWrongsAct1958(Vic)).Thesearebroadwordswhich,inmyview,are apttocoveraclaim,ashere,forcontractualindemnityforlosssufferedasaresultofa breachofcontract.Perpetualofferednogoodreasonforreadingtheexpressiondownto excludesuchaclaim.

Itis,therefore,conceivable,thataclaimunderanindemnitygovernedbythelawof Tasmaniamaybeanapportionableclaim.98

3 ydefinitionofconcurrent wrongdoer

ThekeydecisionoftheHighCourtisHunt&HuntLawyersvMitchellMorgan NomineesPtyLtd

Thecasewasconcernedwiththedefinitionofconcurrentwrongdoerinsection34(2)of Part4oftheCivilLiabilityAct2002(NSW)whichisinthesametermsassection43Aof theTasmanianAct.

Turningtothefacts.

Therespondentlentsome$1mtoajointventure.Oneofthejointventurersforgedthe signatureoftheotherjointventurertotheloanandsecuritydocuments.Hunt&Hunt drewupbothdocumentsbutnegligentlyfailedtoincorporateanexpresscovenantto repayinthesecuritydocumentrelyinguponwhatturnedouttobeavoidloan agreement.Theloanwasirrecoverablebytherespondent.

InproceedingsbythelenderagainstHunt&Huntfordamagesfornegligence,Hunt& Huntarguedthattheclaimagainstthemwasanapportionableclaimunderthe proportionateliabilityregimeinPart4oftheCivilLiabilityAct2002(NSW)

TheNewSouthWalesCourtofAppealheldthattheclaimwasnotanapportionable claimasthedamageorlosscausedbyHunt&Huntwasdifferentinnaturefromthat causedbythefraudulentjointventurepartyand,accordingly,theywerenotconcurrent wrongdoers.

TheHighCourtreversedtheCourtofAppeal.

Intheirmajorityjointreasons,FrenchCJ,HayneandKiefelJJmadethefollowing observations.

24.Intheidentificationofthedamageorlossthatisthesubjectoftheclaim,itis necessarytobearinmindthatdamageisnottobeequatedwithwhatisultimately awardedbythecourt,whichistosaythe"damages"whichareclaimedbywayof compensationandwhichareassessedandawardedforeachaspectofthedamage sufferedbyaplaintiff.Damage,properlyunderstood,istheinjuryandotherforeseeable consequencessufferedbyaplaintiff.Inthecontextofeconomicloss,lossordamage maybeunderstoodastheharmsufferedtoaplaintiff'seconomicinterests.Ithas alreadybeenobservedthattheCivilLiabilityActequates"harm"withdamageto propertyandeconomiclosswhichresultsfromafailuretoexercisereasonablecareand

45.Thelaw'srecognitionthatconcurrentandsuccessivetortiousactsmayeachbea causeofaplaintiff'slossordamageisreflectedinthepropositionthataplaintiffmust establishthathisorherlossordamageis"causedormateriallycontributedto"bya defendant'swrongfulconduct.Itisenoughforliabilitythatawrongdoer'sconductbeone cause.Therelevantenquiryiswhethertheparticularcontraventionwasacause,inthe sensethatitmateriallycontributedtotheloss.Materialcontributionhasbeensaidto requireonlythattheactoromissionofawrongdoerplaysomepartincontributingtothe loss.

46.Therecanbenodoubt,onthefindingsoftheprimaryjudge,thatHunt&Huntwasa wrongdoerwhoseactionswereacauseofMitchellMorgan'sinabilitytorecoverthe moniesadvanced.Thequestionunders34(2)oftheCivilLiabilityActiswhetherthe fraudsters'acts,independentlyofHunt&Hunt,alsocausedthatdamage.

48.Indeterminingthequestionofcausation,itisnecessarytokeepclearlyinmindthe harmsufferedbyMitchellMorgan:itsinabilitytorecoverthemoniesadvanced.Merelyto thenstatetheobviousfactsthatthemonieswereadvancedundertheloanagreement andonthesecurityofthemortgageistoacknowledgethattheharmsufferedhas morethanonecause.

49.BecauseMitchellMorgan'sdamageisitsinabilitytorecovermonies,itis understandablethatattentionisfocusedupontheimmediateconsequenceofHunt& Hunt'snegligence,namelythemortgage'sinefficacyassecurityagainsttheproperty,as causativeofthedamage.However,asHunt&Huntpointsoutinitssubmissions,there weretwoconditionsnecessaryforthemortgagetobecompletelyineffective:(a)thatthe loanagreementwasvoid;and(b)thatthemortgagedocumentdidnotitselfcontainthe debtcovenant,butdidsosolelybyreferencetotheloanagreement.Hunt&Huntwas responsiblefor(b),butthefraudsterswereresponsiblefor(a).

50.Itshouldnotbeoverlookedthattheeffectofthefraudsters'conductwasthatMitchell Morganenteredintothetransactionandwasleftwithanunenforceableloanagreement. MitchellMorganhadnopromisetorepayuponwhichitcouldsueanditwasunable,ina practicalsense,torecoverfromthefraudsterswhenthefraudwasdiscovered.The fraudsters'conductmustthereforebeseenascontributingtoMitchellMorgan'sinability torecover.

4Failuretotakereasonablecare

Therehasbeenadebatebothinthecaselawandinlegalcommentariesastowhether afailuretotakereasonablecareviewedasanessentialcomponentofthedefinitionof anapportionableclaimisfactuallybasedorlegallybased.

72.5%forthefraudulentjointventurerand15%forhiscomplicitsolicitor.

ThesocalledfactbasedapproachwasreaffirmedbyBarretJinReinholdvNewSouth WalesLotteriesCorporation(No2)99inwhichhisHonoursaid:

22 bedetermined bywhatthecourthasdecidedinthecase,notbywhatmightbeprayedorpleadedinan established,notaclaimasmadeoradvanced.

23ThisapproachaccordswiththattakenbyMiddletonJtoanalogouslegislationof Victoria(PartIVAAoftheWrongsAct1958(Vic))inDartbergPtyLtdvWealthcare FinancialPlanningPtyLtd[2007]FCA1216.Afterreferringtotheneedforfacts warrantingapportionmenttobeputforwardbyadefendantatanearlystage,hisHonour said(at[31]):

matteroffact,whethertherelevantclaimbroughtbytheapplicantisaclaim arisingfromafai

24ThedecisionofBrysonAJinChandravPerpetualTrusteesVictoriaLtd[2007] NSWSC694;(2007)ANZConvR481reflectsthesameapproach.HisHonour statusistobeaddressedanddeterminedbyreferencetofindingsastoliabilityand causationalreadymadeintheproceedings.

failuretotakereasona

judgedinthelightofthefindingsmadeandisnotdeterminedbythewordsinwhichitis framed.

ThefocusofthisapproachisonthefindingsoftheCourtattheendofthetrialandnot ontheframingoftheclauseofaction.Thus,iftheCourtshouldmakeanyfindingofa claimeventhoughtheplaintiffdidnotpleadanysuchfailure.

Conversely,thesocalledlegalapproachwasadvancedbyMacfarlanJAinPerpetual TrusteeCompanyLtdvCTCGroupPtyLtd(No2)100inwhichhisHonoursaid:

22.Forasuccessfulactionfordamagestohavearisenfromafailuretotakereasonable care,itisinmyviewnecessarythattheabsenceofreasonablecarewasanelementof the,ora,causeofactionuponwhichtheplaintiffsucceeded.AsobservedbyProfessors McDonaldandCarterin"TheLotteryofContractualRiskAllocationandProportionate Liability"(2009)26JournalofContractLaw1at18,thecontraryviewwouldproducethe absurdresultthatapartytoacontractwhofailedtoperformastrictcontractualobligation wouldbenefitfrombeingfoundtohaveactednegligentlyratherthan"innocently".If claimscouldbeapportionedwherenegligenceisnotanelementofthesuccessfulcause ofaction,butmerelyarisesfromthefacts,aplaintiffcouldlosehisorhercontractual righttofulldamagesfromapartywhosebreachofacontractualprovisionofstrictliability happenedtostemfromafailuretotakereasonablecare.

23.MyviewaccordswiththatwhichIreachedinrelationtothesimilarlyworded,andin myviewrelevantlyindistinguishable,provisionins5AoftheActwhichrendersPart1A applicableonlytoa"claimfordamagesforharmresultingfromnegligence(Perpetual TrusteevMilanexat[87];seealsoMonaghanSurveyorsPtyLtdvStratfordGlen-Avon PtyLtd[2012]NSWCA94at[76]and[77]).Itappearstodifferfromthatexpressedby BarrettJ(ashisHonourthenwas)inReinholdvNewSouthWalesLotteriesCorporation (No2)[2008]NSWSC187at[20]-[30]andinotherfirstinstancedecisionstowhichhis Honourreferred.UnlesshisHonourwassimplysayingthatitisnecessarytoexamine thecourt'sfindingstoidentifythecause,orcauses,ofactionuponwhichtheplaintiff succeeded,Icannot,withrespect,agreewithhisHonourthatthe"natureoftheclaim,for

thepurposesofPt4,istobejudgedinthelightofthefindingsmadeandisnot determinedbythewordsinwhichitisframed"(at[30]).InmyviewtheapplicationofPart 4turnsnotonthefactsthathappentobefoundbutontheessentialcharacterofthe plaintiff'ssuccessfulcauseofaction.Subjecttocasesthatareconductedwithoutregard tothepleadings,ifnegligenceisanessentialelementofthatcauseofaction,itwillhave beenpleadedintheStatementofClaim.Ifitisnot,itwillnothavebeenpleaded.Itwould becuriousindeedif,toattractPart4oftheAct,thedefendantpleadedandprovedhisor herownnegligencewhenthatwasnotallegedbytheplaintiff.Thetextofs34(1)does not,inmyview,contemplatethatoccurring.Thenaturalmeaningofthewordsused indicatesthatafailuretotakereasonablecaremustbepartof,andthereforeanelement of,theplaintiff'ssuccessfulcauseofaction.

Inthesamecase,BarrettJrestatedhispositioninReinholdbutwithadifferent emphasis.HisHonoursaid:

42.Itcannotbesuggested(nordoIthinkithasbeensuggestedinanydecidedcase) thatthenatureorqualityofa"claim"is,forrelevantpurposes,tobedeterminedsolelyby lookingatthecourt'sdecisioninrelationtoit.Noristhenatureorqualityofa"claim"to bedeterminedsolelybylookingatthetermsinwhichitisframed.Rather,itisa combinationofthetermsinwhichtheclaimisframed(orpleaded)andrelevantfindings ofthecourtinrelationtoitthatmustbeassessedinordertodecidewhetheritisaclaim "inanactionfordamages...arisingfromafailuretotakereasonablecare"andhasthe otherattributesofan"apportionableclaim"unders34(1)(a).

InthemorerecentdecisionoftheNewSouthWalesCourtofAppealinRahmev Benjamin&KhouryPtyLtd101MacfarlanJAreproducedthepassagefromhisjudgment inPerpetualTrusteeCompany.BothBathurstCJandMcCallumJAagreedwithout comment.

InPerpetualTrusteeCothequestionwaswhetheraclaimunderanindemnitywas apportionable.

Turningtothefacts.

CTCcarriedonbusinessasamortgageoriginatorandinthatcapacityenteredintoa MortgageOriginationDeed(MOD)withPerpetual.Relevantly,clause14.3oftheMOD containedthefollowingindemnity.

14.3Originator'sindemnity

TheOriginator[CTC]indemnifiestheTrustee[Perpetual]andthe Manager[Resimac]againstanyliabilityorlossarisingfromandany costs,chargesandexpensesincurredinconnectionwith:

(d)anybreachbytheOriginatorofanyofitswarrantiesorobligations underorarisingfromthisdeedorfailuretoperformanyobligation underthisdeed,

including,withoutlimitation,liability,loss,costs,chargesorexpenseson accountoffundsborrowed,contractedfororusedtofundanyamountpayable orexpenseincurredunderthisdeedandincludingineachcase,without limitation,legalcostsandexpensesonafullindemnitybasisorsolicitorand ownclientbasis,whicheveristhehigher.

Aborrowe

broughttheborrowertoCTC.Thefraudconsistedoftheborrowerrepresentinghimself asanotheridentity.TheprimaryjudgefoundthatCTChadneithercheckedthe 101

purportedloanapplicantagainsthispassportphotographnormetwithhiminpersonin relationtotheloanapplication.TherewasclearlyafailurebyCTCtoexercise reasonablecareinpresentingtheloanapplicationtoPerpetual.

Perpetualsoughttoenforcetheindemnity.CTCinresistingarguedthattheclaimunder theindemnitywasanapportionableclaimasitinvolveditsownfailuretouse whocountersignedtheloanapplicationwereconcurrentwrongdoers.

MacfarlanJAheldthattheclaimundertheindemnitywasnotanapportionableclaim. Indealingwiththeapplicationoftheproportionateliabilityregimetoindemnities, ProfessorBarbaraMcDonaldsaid102:

Whereadefendantwhohasbeenfoundliabletoaplaintiffseekstorelyona pre-existingcontractualindemnityorrightofcontribution,thepositionisentirely differenttotheapportionmentprocess.Thedefendantisnotaskingthecourtto exerciseitsdiscretionorjudgmentofcomparativefaultandresponsibilitybutis ratherseekingtoenforcearightwhichdependspurelyonthevalidityand constructionofthecontractualterm.Simpleindemnitiesareprimarilyenforced, notremediedforbreach.

MorerecentlytheVictorianCourtofAppealinTanahMerahVicPtyLtdvOwners CorporationNo.1ofPS613436T103concludedthataclaimfordamagesforbreachofa fitnessforpurposewarrantyinabuildingcontractwasnotanapportionableclaimunder PartIVAAoftheWrongsAct1958(Vic)

Turningtothefacts.

InMay2010thedeveloperoftheLacrosseproject(theconstructionofaresidential apartmentcomplex)enteredintoadesignandconstructcontractwithLUSimonPtyLtd (thebuilder).Thebuildingsurveyorissuedtheoccupancypermiton14June2012.

In2016afireseriouslydamagedthebuilding.Thegravityofthefirewastracedtothe useofcombustiblecladdingwhichwasconstructedwithaluminiumcompositepanel (ACP)containingapolyethylenecore.

individualapartmentownerscommencedproceedingsin theVictorianCivilandAdministrativeTribunal(VCAT)against8respondentsincluding:

thebuilder(LUSimon)

thebuildingsurveyor(GardnerGroupPtyLtd)

thearchitect(ElenbergFraserPtyLtd)

thefireengineer(ThomasNicolas)

warrantywerenotapportionableclaims.

TheCourtofAppealofVictoriaheldasfollows:

(a) PerpetualTrusteeCompanyLtdvCTC GroupPtyLtd(No2)104ratherthantheBarrettJapproachinReinhold,aclaim

102 IndemnitiesandtheCivilLiabilityLegislation(2011)JournalofContractLaw56at62.

103 [2021]VSCA72

104 [2013]NSWCA58

willbeanapportionableclaimifthefailuretotakereasonablecareisan elementofthecauseofactionsuccessfullypleadedbytheplaintiff;

(b)VCATwascorrectinholdingthataclaimfordamagesforbreachofanimplied statutorywarrantyastofitnessforpurposeinadesignandconstructcontract doesnotinvolveafailuretotakereasonablecareasanelementofthecauseof action;and

(c)accordingly,theownersclaimagainstthebuilderaspleadedwasnotan apportionableclaim.

5Arbitrationsandexpertdeterminations

Priortotheenactmentofthemostrecentdomesticcommercialarbitrationlegislation therewouldhavebeenasolidargumentthattheproportionateliabilityregimedidnot applytoarbitrationsconductedinanyoftheStatesorTerritories.However,inlightof thislegislationthepositionmaynotbesoclear.

IntheCivilLiabilityActsofNewSouthWales,VictoriaandTasmaniathedefinitionof anarbitration.Forexample,Part3oftheCommercialArbitrationAct2010(NSW)is competenceofanarbitraltribunaltoruleonitsjurisdiction.Therearecorresponding provisionsintheCommercialArbitrationAct2017(ACT).

However,intheCivilLiabilityActsofWesternAustraliaandSouthAustraliathereisno whichdoesnotincludeatribunal.

CivilLaw (Wrongs)Act2002(ACT).

Expertdeterminationswouldnotbesubjecttotheproportionateliabilityregimeinanyof theStatesorTerritories.Thatisnottosaythatthepartiesmaynotexpresslyprovidefor itsapplicationasamatterofcontract.

Turningtothecaselaw.

InAquagenicsPtyLtdvBreakO'DayCouncil105,TennantJsaid:

95.ItisnotstrictlynecessarytoreachaconcludedviewaboutwhethertheAct,Pt9A, appliesgenerallytoarbitrations.However,anumberoffactorsexistwhichsupportthe contentionthatitdoesnot.ThereisnothingintheActwhichexpresslymakesitsterms applicableinarbitrations.ThereisnoprovisionintheCAActwhichmakestheprovisions oftheActapplicableinarbitrations.Anarbitrationisdealtwithbyanarbitrator.Atno pointintheCAActisahearingconductedbyanarbitratorlikenedtoproceedingsina court.ThroughouttheAct,Pt9A,theterm"court"isused.ThatwordisdefinedintheAct toincludeatribunal,and"inrelationtoaclaimfordamages,meansanycourtortribunal byorbeforewhichtheclaimfallstobedetermined."Theterm"damages"isdefinedto includeanyformofmonetarycompensation.

96.Thereisnodefinitionof"tribunal"intheAct.Part9Aappliesto"apportionable claims".Thedefinitionsofwhataredefinedtobesuchclaimsbothexpresslyreferto claims"inanactionfordamages".Anarbitratordoesnotdealwithanaction.An arbitratordealswithadispute.TheAct,Pt9A,contemplatescourtproceedingsinvolving anumberofparties,andthecourtisempoweredtojoinnon-partyconcurrent wrongdoers.Anarbitratorhasnopowertojoinpartiesnotdirectlyinvolvedinthedispute beingdealtwith,althoughheorshecanconsolidatearbitrationswiththeconsentofthe parties.Further,anarbitrator'spowersarederivedfromtheagreementbetweenthe partiestosendamattertoarbitration.

werecitedwithapprovalbyBeechJintheSupremeCourtof WesternAustraliainCurtinUniversityofTechnologyvWoodsBagotPtyLtd106.The caseinvolvedthereferralofaquestionoflawbyanarbitratortotheSupremeCourt, namely,whethertheproportionateliabilitylegislationappliedtoarbitrations.HisHonour said:

89.Theabsenceofpowerforanarbitratortojoinaconcurrentwrongdoerprovidesa plausiblereasonwhyParliamentmighthavechosen,inthesphereofdisputes

93.Finally,althoughthelegislationisnotidentical,obitercommentsfromothersuperior courtsinAustraliasupporttheconstructionwhichIhaveadopted.InAquagenicstheFull Courtdecidedthatonaproperconstructionofthearbitrationagreement,the proportionateliabilitylegislationofTasmaniawasexcluded.Thereforethecourtdidnot havetodecidewhetherthatlegislationapplies,onitsproperconstruction,toarbitrations generally.Nonetheless,allmembersofthecourtfavouredtheconstructionthatthe legislationdoesnot,byforceofitsprovisions,apply,althoughEvansJ,withwhomWood Jagreed,didnotexpressafinalviewonthepoint(see[26]-[34]and[95]-[98]).Ascan beseen,someofthereasonsIhavegivenechoobservationsmadebytheirHonours.In takingintoaccounttheAquagenicscase,IdonotoverlookthatintheTasmanian legislation,unliketheWesternAustralianlegislation,theword'court'wasdefined.

InTesseractInternationalPtyLtdvPascaleConstructionPtyLtd107,DoyleJAhaving consideredtheauthoritiesconcludedthattheSouthAustralianproportionateliability regimedidnotapplytoarbitrations.Hisanalysiswouldapplywithequalforcetothe regimesintheotherStatesandterritories.Relevantly,hisHonoursaid:

[132]Incircumstanceswheretheveryconstructionissueishowfar,andinwhat circumstances,thegeneralpolicyunderpinningtheimpositionofproportionateliability wasintendedtoapply,Idonotthinkitassiststoassert,ingeneralterms,thatParliament intendedtoimplementthatpolicy,oreventhatParliamentintendedtoapplythatpolicy toallapportionableclaims.TherelevantissueiswhetherParliamentintendedtoextend thatpolicychoicetotheresolutionofapportionableclaimsinarbitrationproceedings.For thereasonsIhavesetout,Iseenotextualbasisforconcludingthattherelevant Parliamentsintendedtoextendthatpolicytoarbitrations,andseveraltextualand contextualindicationstothecontrary.Insofarastheremighthavebeenageneral purposeofgivingeffecttoapolicyofreallocatingtheriskandburdenofcasesinvolving policywasonethatstruckabalancethatassumedthattheplaintiffwouldhavethe opportunitytojoinallwrongdoerstotheonesetofproceedings(soastoensurethatit couldobtainafullrecoveryinthoseproceedings).Giventheinabilityofanarbitratorto orderjoinderofallwrongdoers,itwouldseemthatthecontemplatedbalancewouldbe struckdifferentlyinthecaseofarbitrationproceedingsweretheytobesubjecttothe applicationoftheproportionateliabilityprovisions.

6Reform

In2013theStandingCommitteeonLawandJusticeconsideredtheintroductionof uniformlawsonproportionateliability.Amodellawwasdraftedandreleasedforpublic comment.However,nothingcameofthisproject.

Interestingly,themodellawprohibitedcontractingoutofthelegislationandalso providedthattheregimeonlyappliedtoproceedingsinacourttherebyexcludingall otheralternativedisputeresolutionmechanisms.

106 [2012]WASC449

107 [2022]SASCA107

7Theproportionateliabilitydefencetoclaimsformisleadinganddeceptive conductundertheFederalstatutoryregimes

7.1Thestatutoryregimes

TheFederalregimesdealingwithproportionateliabilityformisleadinganddeceptive conductarecontainedinthefollowingActs:

(a)Part2,Division2,SubdivisionGAoftheAustralianSecuritiesand InvestmentsCommissionAct2001(Cth);

(b)Part7.10,Division2AoftheCorporationsAct2001(Cth);

(c)PartVIAoftheCompetitionandConsumerAct2010(Cth)(CCA);

Bywayofexample,PartVIAoftheCCAprovides:

PartVIA-Proportionateliabilityformisleadinganddeceptiveconduct 87CBApplicationofPart

(1)ThisPartappliestoaclaim(anapportionableclaim)iftheclaimisaclaimfor damagesmadeundersection236oftheAustralianConsumerLawfor:

(a)economicloss;or

(b)damagetoproperty; causedbyconductthatwasdoneinacontraventionofsection18ofthe AustralianConsumerLaw.

(2)ForthepurposesofthisPart,thereisasingleapportionableclaimin proceedingsinrespectofthesamelossordamageeveniftheclaimforthe lossordamageisbasedonmorethanonecauseofaction(whetherornotof thesameoradifferentkind).

(3)InthisPart,aconcurrentwrongdoer,inrelationtoaclaim,isapersonwhois oneof2ormorepersonswhoseactsoromissions(oractoromission)caused, independentlyofeachotherorjointly,thedamageorlossthatisthesubjectof theclaim.

(4)ForthepurposesofthisPart,apportionableclaimsarelimitedtothoseclaims specifiedinsubsection(1).

(5)ForthepurposesofthisPart,itdoesnotmatterthataconcurrentwrongdoeris insolvent,isbeingwounduporhasceasedtoexistordied.

87CDProportionateliabilityforapportionableclaims

(1)Inanyproceedingsinvolvinganapportionableclaim:

(a)theliabilityofadefendantwhoisaconcurrentwrongdoerinrelationto thatclaimislimitedtoanamountreflectingthatproportionofthe damageorlossclaimedthatthecourtconsidersjusthavingregardto

(b)thecourtmaygivejudgmentagainstthedefendantfornotmorethan thatamount.

(3)Inapportioningresponsibilitybetweendefendantsintheproceedings:

(a)thecourtistoexcludethatproportionofthedamageorlossinrelation towhichtheplaintiffiscontributorilynegligentunderanyrelevantlaw; and

(b)thecourtmayhaveregardtothecomparativeresponsibilityofany concurrentwrongdoerwhoisnotapartytotheproceedings.

(4)Thissectionappliesinproceedingsinvolvinganapportionableclaimwhetheror notallconcurrentwrongdoersarepartiestotheproceedings.

(5)AreferenceinthisParttoadefendantinproceedingsincludesanyperson joinedasadefendantorotherpartyintheproceedings(exceptasaplaintiff) whetherjoinedunderthisPart,underrulesofcourtorotherwise.

7.2KeyIssues

Thecourtshaveaddressedanumberofissuesinrespectoftheapplicationofthe Federalregime.

First,iftwoormorepersonscontributejointlytothecommissionofasingleactcausing harm,arethosepersonsconcurrentwrongdoersundersection87CB(3)oftheCCA?

Secondly,isaclaimagainstanindividualformisleadinganddeceptiveconductwhois thedirectingmindofacorporation,anapportionableclaimasbetweenthatindividual andthecorporation?

Thirdly,whereclaimsarebasedbothonmisleadinganddeceptiveconductandon othercausesofactioneg:abreachofacontractualdutyofcare,arealloftheclaims apportionableclaimsoronlythoseclaimsrelatingtomisleadinganddeceptiveconduct.

Turningtothefirstissue.

ThisissuewasconsideredbytheNewSouthWalesCourtofAppealWilliamsv Pisano108.

Thiswasanactionbypurchasersofpropertyagainstthevendors,aMrWilliamsanda MsDandris.Thevendorsinstructedanagentwhomadecertainrepresentationsasto thestateofthepropertyandthestandardofrenovationswhichappearedona commercialwebsite.Further,duringaninspectionthepurchaserswerehandeda brochurewhichalsocontainedstatementsconcerningthepropertyandthestandardof renovations.Therepresentationsinducedthepurchaserstopurchasetheproperty. Followingthepurchasethepurchasersdiscovereddefectsincludingsignificantwater penetration.Thepurchaserscommencedproceedingsagainstthevendorsseeking damagesonanumberofbasesincludingacontraventionofsection18oftheAustralian ConsumerLaw.

Theprimaryjudgeenteredaverdictagainstbothvendorsholdingthateachhadmade thesamerepresentationsandhadjointlyparticipatedinasingleact.

asanapportionableclaim

underPartVIAoftheCCAwasrejectedbytheprimaryjudge.HisHonourconcluded thatMrWilliamsandMsDandrisboreequalresponsibilityforthelossanddamage sufferedbythepurchasers.

TheCourtofAppealallowedWilliams

EmmettJAindeliveringtheleadjudgmentsaid:

67Thequestionofconstructionraisedbythepresentappealiswhethers87CB(3) appliestoasituationwhereasingleactthatcausesdamagethatisthesubjectofa claimundertheConsumerActiscommittedbytwoormorepersonsjointly.

80Neithertheexplanatorymemorandumnorthespeechonthesecondreadingofthe BillleadingtotheintroductionofPtVIAisofassistanceintheresolutionofthe constructionquestion.Clearlyenough,thepurposeofPtVIAistointroduceasystemof proportionateliabilityforjointandseveralwrongdoerswhocontravenes18ofthe AustralianConsumerLaw.Theevidentpurposeistogiveeffecttoalegislativepolicy that,inrespectofclaimsforeconomiclossorpropertydamage,adefendantshouldbe liableonlytotheextentofhisorherresponsibility.Thecourtmustapportionthat Thatistosay,thedefendantcanshowthatthereisanother,orthereareothers,whose actsoromissions(oractoromission)canbesaidtohavecausedthedamagethatthe omission),orindependentlyofthem.Ifthereisanotherwrongdoerorthereareother wrongdoers,thenheorsheorthey,togetherwiththedefendant,areallconcurrent wrongdoers.Thereisnoreasonwhythatpurposeshouldnotextendtowrongdoerswho jointlycommitasingleactthatcausesthelossclaimedbytheplaintiff.

Turningtothesecondissue.

Isitopentoanindividualwhoisthedirectingmindofacorporationagainstwhoma claimformisleadinganddeceptiveconducthasbeenmadetoraiseaproportionate liabilitydefenceonthebasisthatthecorporationisaconcurrentwrongdoer?

ThiswasconsideredbytheFullFederalCourtinRobinsonv470StKildaRoadPty Ltd109.

ReedConstructionsAustraliaPtyLtd(Reed)enteredintoadesignandconstruct contractwithStKildaRoad,asprincipalfortheredevelopmentofabuildingat470St KildaRoad,Melbourne.RobinsonwasthechiefoperatingofficerofReed.Inrespectof subcontractorsandsuppliershadbeenpaid.Thisdeclarationwasmateriallyuntrueand misleadingordeceptive.

StKildacommencedproceedingsagainstRobinsonforcontraventionsofsection18of theAustralianConsumerLaw.

Robinson,relyingonthedecisionofWilliamsvPisano110arguedthatwheretwo personsarejointlyanddirectlyliableforasinglerepresentation,theclaimisan apportionableclaimandthusReedandRobinsonasitsCOOwerejointlyliablefor KerracherandMarkovic

Onconsideringtheconceptofconcurrentwrongdoers,hisHonouridentified(at[67])that aquestionofconstructionwhicharoseonappealwaswhethers87CB(3)appliestoa situationwhereasingleactthatcausesdamagethatisthesubjectofaclaimunderthe CCAiscommittedbytwoormorepersonsjointly.

InfindingagainstRobinsonthecourtadoptedtheapproachofMossopJinDunnv HansonAustraliasiaPtyLtd111McKerracherandMarkovicJJsaid:

51HisHonouropined,andweagree,that,first,itcannotbesaidthattheactsare independentbecausethereisasingleactcarriedoutbythepersonwhichisalsotheact loss.Thereisnocapacityforjointconductbecausethereisonlyasingleact,which makesitartificialtosaythattherearetwoactsofpersons,oneofthecompanyandone ofthedirector.Thecompany,onthefactsofDunn,didnothing,butwasdirectlyliable onlybyreasonoftheactsofitsseniorofficer.Inthosecircumstances,therecannotbe anyconcurrentwrongdoingwithinthedefinitionofs87CB(3)oftheTPAorinany wrong

52Inthepresentcircumstancesalso,andforthosereasons,therecouldbeno apportionmentofthewrongdoingtoReed,representedbyMrRobinson.This constructionalsoappearsmoreharmoniouswiththeviewoftheQueenslandCourtof AppealinHadgelias(at[21]).

53Thereasonwhys87CB(3)oftheCCAcouldnotapplymaybeputanotherway.The provisionrequiresthattheconcurrentwrongdoerbeapersonwhoisoneoftwoormore personswhoseindividualactsoromissionswould,independentlyofeachother,have causedthedamageorloss.Inthepresentinstance,thereisnoindependentactatallof Reedwhichcouldfallforconsideration.Whilethecompanywouldhavebeen100% liableifsuedfortheactsofMrRobinson,theactswerenotactswhichwereindependent oftheactsofMrRobinson.Tothecontrary,theyweredirectlydependentuponhis conductinthattheyareregardedatlawasoneandthesameact.

54Asaconsequence,itwouldbeimpossibletoformanyviewthatReed,byvirtueof conductofsomeotheremployeeorofficer,shouldcontributeanypercentage,letalone 50%bywayofapportionment.Theveryconceptofapportionmentrequiresan assessmentofthedegreeofwrongdoingofthecontributorywrongdoer.Thereisno evidenceofanywrongdoingonthepartofReed,butfortheactionsofMrRobinson himself.

55WerespectfullyagreewiththeviewsofMossopJinDunnandofMcFarlanJAin Tomasetti.HadReedbeenjoinedinthiscase,eachofReedandMrRobinsonwouldbe 100%liable.Therewouldbenobasisforapportionment.Thepurposeofthestatuteis tolimittheliabilityofthedefendanttothatproportionofthelosstheCourtconsidersjust, saidinTomasetti,eachwouldbefullyliable,aswouldbethecasehere.But,inany event,inthisinstance,thereisnodoubtinthefindingthat100%oftheliabilityrestswith MrRobinson.

Thequestionwhetheracorporateentityandanaturalpersonwhocontrolsthatentity maybeconcurrentwrongdoersundersection87CB(3)wasagainconsideredbythe NewSouthWalesCourtofAppealinDSHEHoldingsLtd(ReceiversandManagers)(in liq)vPotts112TheCourt(consistingofLeemingJA,KirkJAandBastenAJA), relevantly,observed:

438Liabilitycanbecharacterisedasjointorseveral,orboth.Separately,itcanbe characterisedasdirectorvicarious.Thesedifferentformsofcharacterisationwillhave differentpurposes.Thestatutorypurposeofproportionateliabilityistopreventasolvent concurrentwrongdoerbeingliableforthewholeofthelossordamagesufferedbythe plaintiffincircumstanceswherethereareoneormoreotherconcurrentwrongdoerswho willescapeliabilitybecausetheyareimpecunious.

439Somecaremustbetakenwhentheseprovisionsareappliedtocaseswherea naturalpersonandacorporateentitywhichiscontrolledbythenaturalpersonareeach saidtobeconcurrentwrongdoers.ThatwasthecaseinTomasettivBrailey[2012] NSWCA399(wheretheactsofMrBraileywerethecorporateactsofhiscompany)and inRobinsonv470StKildaRoadPtyLtd(2018)263FCR572;[2018]FCAFC84(where thecompanyhadasoledirector).Therearestatementsintheformercaseat[154]-[156] thateachoftwoconcurrentwrongdoersmaybe100%liabletoaplaintiff.Ifso,that wouldbedirectlycontrarytoaprincipalobjectiveoftheregime.Inthelattercase,upon whichMrPottsrelied,thequestionaroseastowhetheracompany,withasoledirector whowasthealteregoofthecompany,couldbeaconcurrentwrongdoerwiththe director.McKerracherandMarkovicJJreasoned:

HisHonouropined,andweagree,that,first,itcannotbesaidthattheacts areindependentbecausethereisasingleactcarriedoutbythepersonwhich causedthedamageorloss.Thereisnocapacityforjointconductbecause thereisonlyasingleact,whichmakesitartificialtosaythattherearetwoacts

440Itisdifficulttoreconciletherejectionofasingleactforwhichtwowrongdoersare jointlyliablewithstatutorylanguagewhichexpresslycontemplatesthepossibilitythat thereisasingleactoromissionoftwoormorepersons.Further,itisimportanttobearin mindthat,althoughperhapsobscurelyworded,thelegislationdoesnotallowa vicariouslyliableprincipaltobeaconcurrentwrongdoer.Thatfollowsfromtwo provisions.First,s87CF,whichconfersonadefendantwhoisaconcurrentwrongdoer immunityfromclaimsforcontributionorindemnitybyanyotherwrongdoer.Secondly, s

Theseprovisionswouldnotworkharmoniouslyifadefendantwhoseliabilitywaspurely vicariouscouldbeaconcurrentwrongdoer.Thatthatwastheintentionoftheprovision appearsfromthereportofProfessorJLRDavis,uponwhichtheproportionateliability defenceinvariousstatuteswasbased:CommonwealthofAustralia,InquiryintotheLaw ofJointandSeveralLiability:ReportofStage2(1995).ProfessorDavisrecommended thattheproposedschemeforproportionateliabilityshouldnotapplytoinstancesof vicariousliability,asnotedinWoodhousevFitzgerald(2021)104NSWLR475;[2021] NSWCA54at[101].EmmettJAnotedinWilliamsvPisano,thatthatconsideration wouldjustifytheresultinHadgeliasHoldingsPtyLtdvSeirlis[2015]1QdR337;[2014] QCA177at[14],[21],whichhadinappropriate

441Inthepresentcase,thedifficultyfacedbyMrPottswasthatheacceptedhewasnot thealteregoofthecompany(inwhichcasehisactswouldhavebeentheactsofthe company)(Tcpt,p4270(1));rather,thecompanymayhavebeenvicariouslyliableforhis acts,butonthatbasisitwouldnothavebeenaconcurrentwrongdoer.

SubsequentlyinTaylorvStavInvestmentsPtyLtd113theNewSouthWalesCourtof AppealwithMitchelmoreJAdeliveringtheleadjudgement(SimpsonAJAandBasten AJAagreeing)reliedontheguidanceprovidedbyDSHEHoldingsbutdistinguishedit onthefacts.InthiscontextMitchelmoreJAsaid:

121ThemisleadinganddeceptiveconductthatherHonourfoundinthiscasewas constitutedbythegivingofthewarrantiesincl2.17oftheFirstandSecondContractsto whichIhavereferredabove.TrueitisthatMrTaylorandMrWilkinsonwerethe individualswhowereengagedinthediscussionsandothercommunicationswhichledto thegivingofthosewarranties,onbehalfofYatangoMobile.However,whenitcameto thefinaltermsoftheFirstandSecondContracts,thewarrantieswereexpressly MrTaylor,MrWilkinson,andYatangoMobile.In circumstanceswherethewarrantiesweregiveninthoseterms,YatangoMobilewasa concurrentwrongdoerwithinthemeaningofs87CB(3).Thiswasnotacaseinwhichthe liabilityofthecompanywaslimitedtoitsvicariousliabilityfortheactsofitsdirectors:cf Pottsat[440].

Turningtothethirdissue.

Areclaimswhencombinedwithclaimsformisleadinganddeceptiveconduct, apportionableclaimsunderthefederallegislation?

ThisissuewasfinallysettledbytheHighCourtinSeligvWealthsurePtyLtd114 followingconflictingdecisionsintheFullFederalCourt115

Thecaseinvolvedsection1041LinDivision2AofPartPt7.10oftheCorporationsAct 2001whichrelevantlyprovides:

(1)ThisDivisionappliestoaclaim(anapportionableclaim)iftheclaimisaclaimfor damagesmadeundersection1041Ifor:

113 [2023]NSWCA204

114 (2015)255CLR661

115 WealthsurePtyLtdvSelig[2014]FCAFC64andABNAMROBankNVvBathurstRegionalCouncil [2014]FCAFC65

(b)damagetoproperty;

causedbyconductthatwasdoneinacontraventionofsection1041H.

(2)ForthepurposesofthisDivision,thereisasingleapportionableclaiminproceedingsin respectofthesamelossordamageeveniftheclaimforthelossordamageisbasedon

Acompanyissuedaprospectustoobtainfinancefrominvestors.Thescheme plannerhadaretainerwithMrandMrsSelig,theinvestors.MrBertramwasan authorisedrepresentativeofWealthsure.TheprimaryjudgefoundthatWealthsureand MrBertrambreachedtheretainerandbreachedtheirdutyofcare.Theprimaryjudge alsofoundthatapartfromthecontraventionofsection1041H(misleadingand claimswerenotapportionable.TheCourtof Appealreversed.TheHighCourtreinstatedthejudgmentoftheprimaryjudge.

IntheirjointreasonsFrenchCJ,Keifel,BellandKeaneJJsaidat672:

22Thelossanddamageallegedtohavebeensufferedbytheappellantsasaresultof eachofthevariouscontraventionsoftheCorporationsAct2001ortheASICAct,or breachofcontractorofdutyofcare,wasthesame.ThequestioniswhetherDiv2A appliessothatthislossanddamageistobeapportionedbetweenthefirst,second,fifth andsixthrespondentsinrespectofallofthoseclaimsorwhetherDiv2Aislimitedinits applicationtotheclaimsbasedoncontraventionsofs1041H.Theanswertothat questionliesinthemeaninggivenbytheprovisionsofDiv2Atoan"apportionable claim".

23Section1041N(1)providesthatacourtmustapportionliabilityforlossanddamage havingregardtotheextentofadefendant'sresponsibilityforit,whereproceedings involvean"apportionableclaim".Attentionistherebydirectedtos1041L(1),thepurpose ofwhich,clearlyenough,istodefinewhatisan"apportionableclaim"towhichDiv2A applies.

27Indeterminingwhatisan"apportionableclaim"forthepurposesofDiv2A,the reasonsofthemajorityintheFullCourtdidnotfocusupons1041L(1),butrathers 1041L(2).Thetwoaspectsofsub-s(2)whichwereconsideredtobecriticaltoan understandingofwhatconstitutesan"apportionableclaim"were(i)therequirementthat thelossordamagethesubjectofthecausesofactionbethesame;and(ii)the acknowledgmentthattheremaybemorethanonecauseofactionandthattheymaybe ofdifferentkinds.

28Consistentlywiththeapproachofthemajority,thefirstandsecondrespondents submittedbeforethisCourtthattheeffectofs1041L(2)istodisregardthelegalbasisfor theclaim,leavinganyclaimforthesamelossanddamageasthebasisfor apportionment.Theunderlyingassumptiontotheapproachforwhichthefirstand secondrespondentscontendisthatthe"cause[s]ofaction"referredtoins1041L(2)are tobeequatedwith"theclaimforthelossordamage".Onthisvieweachcauseofaction pleadedistobetreatedasanapportionableclaim.

29Applyingwell-settledrulesofconstruction,thesamemeaningshouldbegiventothe word"claim"whereitappearsinsub-ss(1)and(2).Thefirstandsecondrespondents' constructionofs1041L(2)resultsinaninconsistencybetweenthemeaninggiventothe word"claim"insub-ss(1)and(2).The"claim"ins1041L(1)isaclaimfordamages unders1041Ifordamagecausedbyconductincontraventionofs1041H.Whens 1041L(2)speaksofaclaimbasedonmorethanonecauseofaction,itcannotbe speakingofaclaimliabilityforwhicharisesduetocontraventionofanormofconduct differentfromthatwhichcreatesliabilitytoaclaimfordamagesdescribedins1041L(1), namelys1041H.

Chapter6:Therelationshipbetweencommonlawandexpresspowers toterminateacontract:practicalconsiderations

1Terminationatcommonlaw

InKoompahtooLocalAboriginalLandCouncilvSanpinePtyLtd116theHighCourt identifiedthreecircumstancesinwhichacontractmaybeterminatedatlaw.

First,breachofanessentialterm,historicallyreferredtoasacondition.Contractingparties areatlibertytomakeanytermoftheircontractessentialeventhoughobjectivelyitisof trivialsignificance.Intheabsenceofastatementbythepartiesastowhetheratermis essentialtheHighCourtadoptedthetestofessentialitypropoundedbyJordanCJin TramwaysAdvertisingPtyLtdvLunaPark(NSW)Limited117.HisHonoursaid:

Thetestofessentialityiswhetheritappearsfromthegeneralnatureofthecontract consideredasawhole,orfromsomeparticulartermorterms,thatthepromiseisofsuch importancetothepromiseethathewouldnothaveenteredintothecontractunlesshehad beenassuredofastrictorasubstantialperformanceofthepromise,asthecasemaybe, andthatthisoughttohavebeenapparenttothepromisor.

Recently,inCromartyResourcesvThalangaCopperMines118inconsideringthecontentof theJordantest,MeagherJA(BellPandPayneJAagreeing)said119:

Therelevantpro

dependsonwhether,inconstruingthecontract,theintentiontobeimputedtothepartiesis thatthepromisewasofsuchimportancetothepromiseethatitwouldnothaveenteredinto Thelatterwouldjustify Judgment[189],[191],[192]).

Astheplurality(GleesonCJ,Gummow,HeydonandCrennanJJ)notedinKoompahtoo LocalAboriginalLandCouncilvSanpinePtyLtd(2007)233CLR115;[2007]HCA61at TramwaysAdvertisingPtyLtdvLunaPark(NSW)Ltd(1938)38SR(NSW)632at641-642,

treatedasjustifyingtheinnocentpartybringingtheagreementtoanend(cfJudgment [189]):Koompahtooat[48];JDHeydon,HeydononContract(2019,LawbookCo)at[7.300].

ThesepassagesrepresentanimportantclarificationastohowtheJordantestwillbe applied.Thus,apartyassertingthatatermisessentialwillneedtoestablishonabalance ofprobabilitiesthatitwouldneverhaveenteredintothecontractunlessassuredthatthe termwouldbestrictlycompliedwith.Thus,mereassuranceofstrictcompliancewouldnot besufficient.

Secondly,asufficientlyseriousbreachofaninnominateterm.Thiscategoryofterminating breachisfoundedontheclassicjudgmentofDiplockLJinHongkongFirShippingCoLtdv KawasakiKisenKaishaLtd120althoughitisnoteworthythathisLordshipdidnotusethe expressioninnominateterminhisjudgment.Suchatermischaracteristicallyonein analysisthepluralitysaid:

Perhapstheadoptionofothertaxonomiesforcontractualstipulationsmightachievesimilar outcomes.However,HongkongFirwasdecidedin1961andhaslongsincepassedintothe mainstreamlawofcontractasunderstoodandpractisedinAustralia.

116 (2007)233CLR115

117 (1938)38SR(NSW)632at641-642

118 [2021]NSWCA284

119 Atparagraphs40and41

120 [1962]2QB26

Indescribingthenatureofasufficientlyseriousbreachjustifyingterminationtheplurality said121:

Breachesofthiskindaresometimesdescribedas"goingtotherootofthecontract",a conclusorydescriptionthattakesaccountofthenatureofthecontractandtherelationshipit creates,thenatureoftheterm,thekindanddegreeofthebreach,andtheconsequencesof thebreachfortheotherparty.Sincethecorollaryofaconclusionthatthereisnorightof terminationislikelytobethatthepartynotindefaultislefttorelyuponarighttodamages, theadequacyofdamagesasaremedymaybeamaterialfactorindecidingwhetherthe breachgoestotherootofthecontract.

Ajudgmentthatabreachofatermgoestotherootofacontract,being,tousethelanguage ofBuckleyLJinDecro-WallInternationalSAvPractitionersinMarketingLtd,"suchasto deprivetheinjuredpartyofasubstantialpartofthebenefittowhichheisentitledunderthe contract",restsprimarilyuponaconstructionofthecontract.

Thirdly,renunciationoftenreferredtoasrepudiation122.Indealingwiththetaxonomythe pluralitysaid123:

Thetermrepudiationisusedindifferentsenses.First,itmayrefertoconductwhichevinces anunwillingnessoraninabilitytorendersubstantialperformanceofthecontract.Thisis sometimesdescribedasconductofapartywhichevincesanintentionnolongertobe boundbythecontractortofulfilitonlyinamannersubstantiallyinconsistentwiththeparty's obligations.Itmaybetermedrenunciation.Thetestiswhethertheconductofonepartyis suchastoconveytoareasonableperson,inthesituationoftheotherparty,renunciation eitherofthecontractasawholeorofafundamentalobligationunderitSecondly,itmay refertoanybreachofcontractwhichjustifiesterminationbytheotherparty

InEnglishlawthetaxonomyhasdevelopedsomewhatdifferentlyalthoughtheconceptual foundationissubstantiallythesame.ThusinGrandChinaLogisticsHolding(Group)Co.v SparShippingAS124,GrossLJ(HamblenLJandSirTerenceEthertonMRagreeing)said:

Breachesofcontractentitlingtheinnocentpartytotreatthecontractasatanendmaybe classifiedasfollows:

(i)Breachofcondition;

(ii)Repudiatorybreach,i.e.,anactualbreachofaninnominatetermwherethe consequencesaresuchastoentitletheinnocentpartytotreatthecontractasat anend;

(iii)Renunciatorybreach,i.e.,ananticipatorybreachofcontract(i.e.,inadvanceofthe duedateforperformance),wheretheotherpartymakescleartotheinnocentparty thatitisnotgoingtoperformthecontractatallorisgoingtocommitabreachofa conditionorisgoingtocommitabreachofaninnominatetermandthe consequenceswillbesuchastoentitletheinnocentpartytotreatthecontractas atanend;ineachcasehere,theinnocentpartyhasanelectiontoacceptthe renunciatorybreachatonceandtoterminatethecontract,withoutwaitingforthe duedateofperformance:see,Burrows,op.cit.,atpp.116-117.

Therearethreepointstonoteinrespectofthistaxonomy.

First,arepudiatorybreachinthesenseusedbyGrossLJwouldbecharacterisedin Australianlawasafundamentalbreachofaninnominateterm.

Secondly,thereferencetoarenunciatorybreachisnotstrictlyaccurate.Itisclearthatthe renunciationofacontracthasnolegaleffectuntilacceptedbytheinnocentparty.Thus,

121 At140

122 SeetherecentdiscussionsofrepudiationinHongvGui[2022]NSWCA245(1December2022)

123 At135

124 [2016]EWCACiv982atparagraph21

untilacceptancearenunciationhasnoforceoreffectand,isnot,abreach125.Similarly, referencestoanticipatorybreachshouldstrictlybereferencestoanticipatoryrenunciation orpossiblyintheAustralianlegaltaxonomyanticipatoryrepudiationalthough,theplurality inKompahtoopreferredtheuseoftheexpressionrenunciationtodescriberepudiationin thefirstsenseidentifiedintheirjudgment.

Thirdly,inEnglishlawananticipatoryrenunciationincludesanintentiontocommita breachofaninnominatetermgoingtotherootofthecontract.However,itmaybedifficult todiscernthedifferencebetweenanintentionnottoperformacontractandanintentionto commitabreachgoingtotherootofthecontract.Thisconceptualdifficultywasaddressed inKoompahtooinwhichthepluralitysaid126:

Theremaybecaseswhereafailuretoperform,evenifnotabreachofanessentialterm(as towhichmorewillbesaid),manifestsunwillingnessorinabilitytoperforminsuch circumstancesthattheotherpartyisentitledtoconcludethatthecontractwillnotbe performedsubstantiallyaccordingtoitsrequirements.Thisoverlappingbetween renunciationandfailureofperformancemayappearconceptuallyuntidy,butunwillingness orinabilitytoperformacontractoftenismanifestedmostclearlybytheconductofaparty whenthetimeforperformancearrives.Incontractualrenunciation,actionsmayspeak louderthanwords.

2Therelationshipbetweencommonlawandcontractualpowersof termination

2.1Theco-existenceofcommonlawandcontractualpowers

Typicallyacommercialcontractwillincorporatearegimeconferringaterminationrightin threediscretecircumstances,namely:

(a)fordefault

(b)ontheoccurrenceofaninsolvencyevent

(c)forconvenience

Inthecaseofbreachadistinctionisusuallydrawnbetweenbreachescapableofremedy andthoseincapableofremedy.Intheformerthepartyinbreachmaybegivenan opportunitytocurethebreachbytheissueofanoticetoremedywithinaprescribedperiod oftime.Onfailuretoremedyasrequiredanimmediaterighttoterminateaccrues.Itis importanttonotethattheNewSouthWalesCourtofAppealinBurgerKingCorporationv HungryJacksPtyLtd127madeitclearthatapurportedterminationwithoutcompliancewith anapplicablenoticetoremedyprocesswouldconstitutearepudiationofthecontractand conferonthecounterpartyarighttoterminatetogetherwitharighttorecoverlossof bargaindamages.

Theauthoritativetestastowhetherabreachiscapableofremedywasstatedby SugermanJinBatsonvDeCarvalho128asfollows:

To'remedy'abreachisnottoperformtheimpossibletaskofwipingitout-ofproducingthe sameconditionofaffairsasifthebreachhadneveroccurred.Itistosetthingsrightforthe future,andthatmaybedoneeventhoughtheyhaveforsomeperiodnotbeenright,and eventhoughthatmayhavecausedsomedamagetotheLessor...abreachmaybe remedied...eventhoughthetimefordoingthethingunderthecovenantmayhavepassed

Relevantly,breachofatimestipulationisabreachcapableofremedyalthoughfactuallyit isnot.

InConcutPtyLtdvWorrell129,GleesonCJ,GaudronandGummowJJintheirjointreasons said:

Indiscerningthatintention,regardshouldbehadto"thefamiliarprincipleofconstruction thatclearwordsareneededtorebutthepresumptionthatacontractingpartydoesnot intendtoabandonanyremediesforbreachofthecontractarisingbyoperationoflaw". Thus,anexpressprovisionforterminationforbreachincertaincircumstancesmaybe regardedasdesignedtoaugmentratherthantorestrictorremovetherightsatcommonlaw whichapartyotherwisewouldhavehadonbreach.

Itis,however,opentothepartiestoexpresslyprovidethatthecontractualtermination regimeconstitutesanexclusivecodegoverningterminationtherebyexcludingany concurrentcommonlawrighttoterminate.Absentsuchaprovisionitisaquestionof constructionwhetherthepartiesintendedtheregimetobeanexclusivecode.Inacomplex commercialcontractcomprisingnumeroustransactiondocumentsitwillbenecessaryto considerallofthesedocumentstodetermineasamatterofconstructionwhethera reasonablepersonwouldhaveconcludedthattheterminationregimewasintendedbythe partiestobeanexclusivecode.

MorerecentlyinFonterraBrands(Australia)vBegaCheeseLtd130,McDonaldJobserved:

669Atcommonlawpartiestoacontractmayterminateforbreachofaconditionor essentialtermorbecauseoftherepudiationoftheotherparty.Thepartiestoacontractmay displacethesecommonlawrightsofterminationthroughthetermsofthecontract.Whether aterminationclauseexpresslyorimpliedlydisplacesthecommonlawrightsofterminationis wordsareneededtorebutthepresumptionthatacontractingpartydoesnotintendto abandonanyr

2.2Lossofbargaindamagesonterminationunderacontractualpower

Thegeneralprinciplegoverningrecoveryoflossofbargaindamageswasformulatedby MasonCJinSunbirdPlazaPtyLtdvMaloney131inwhichhisHonoursaidat260:

Lossofbargaindamagesarerecoverableonlyifthecontractisatanend.Oncetermination duetothedefendant'swrongfulconductisestablishedtheplaintiffisentitledtodamagesfor lossofbargain:DominionCoalCoLtdvDominionIron&SteelCoLtd[1909]AC293at 311.BarwickCJsuggestedinOgle(CLRat450)thatterminationisnotanessential elementinanactionforlossofbargaindamages,exceptinthecaseofanticipatorybreach, butthepreponderantopinioninAustraliaandEnglandisagainsthisview:seeOgle(CLRat 458,perGibbs,MasonandJacobsJJ);ProgressiveMailingHousePtyLtdvTabaliPtyLtd (1985)57ALR609;157CLR17at31,perMasonJ(withwhomWilsonandDeaneJJ agreedgenerally,andDawsonJagreed);PhotoProductionLtdvSecuricorTransportLtd [1980]AC827at844-5,849.

However,lossofbargaindamagesarenotrecoverableontheexerciseofacontractual powertoterminateunlessthereisaconcurrentrighttoterminateundertherulesofthe commonlaw.Forexample,therighttoterminateontheoccurrenceofaninsolvencyevent wouldnotconferarighttorecoverlossofbargaindamagesasabsentanexpress provisiontheoccurrenceofaninsolvencyeventwouldnotbeabreachofcontract.The leadingauthorityisProgressiveMailingHousePtyLtdvTabaliPtyLtd132Relevantly, MasonJsaidat31:

129 (2000)176ALR693

130 [2021]VSC75

131 (1988)166CLR245

132 (1985)157CLR17

Itisoftensaidthatrepudiationorfundamentalbreach-inthesenseofbreachofacondition orbreachofanothertermortermswhichissoseriousthatitgoestotherootofthecontract, andthusdeprivestheotherpartyofsubstantiallythewholebenefitofthecontract(Federal Commerce&NavigationCo.Ltd.v.MolenaAlpha(53))~entitlestheinnocentpartyto rescindthecontractandsuefordamagesforlossofthebargain:see,e.g.,Oglev. ComboyuroInvestmentsPty.Ltd.(54).Butthisdoesnotmeanthatsuchdamagesare recoverableonlyintheeventofdischargeforbreachthoughitisessentialtoanawardof damagesforlossofbargainthatthedefendantcannolongerberequiredtoperformhis contractualobligationsinspecie.Thisessentialfoundationmaybeestablishedbya commonlawrescissionofthecontractbytheinnocentpartyorbyaterminationofthe contractintheexerciseofacontractualpowersotodo.Ineitherevent,assuming repudiationorfundamentalbreachbythedefendant,hecouldnolongerberequiredto performthecontractandisliablefordamagesforlossofbargain.Thewell-recognized distinctionbetweencommonlawrescissionandterminationpursuanttoacontractualpower suppliesnoreasoninprinciplewhysuchdamagesarerecoverablebytheinnocentpartyin onecaseandnotintheother,providedofcoursethattheexerciseofthepoweris consequentuponabreachordefaultbythedefendantwhichwouldattractanawardfor suchdamages.

Terminationintheexerciseofacontractualpowerisnotanaffirmationofthecontractwhich debarstheinnocentpartyfromsuingfordamagesforbreachonthegroundofrepudiationor fundamentalbreach.Thisisbecausethetermination,sofarfrominsistingonperformance bythepartyatfault,bringstoanendhisobligationtoperformhispromiseinspecie.

InthesamecaseDeaneJsaidat55:

Whilethedistinctionbetweenterminationforfundamentalbreachandterminationfora breachwhichthepartieshaveagreedinadvancewouldbesuchastogiverisetoarightto terminateisnotwithoutdifficulty(cf.Larrattv.BankersandTraders'InsuranceCo.Ltd.; SotirosShippingInc.v.SameietSolholt(The"Solholt"),themajority'sreasoninginShevill proceededonanassumptionthatgeneraldamagesforlossoftheleasewouldhavebeen recoverableifthelessee'sfailuretopayrenthad,inthecircumstancesofthatcase, constitutedrepudiationorfundamentalbreach.ThepresentcaseisincontrasttoShevillin that,ashasbeensaid,thetenant'sbreachofcovenantconstitutedafundamentalbreachof thememorandumoflease.

HisHonourconcludedhisjudgmentwiththefollowingsuccinctstatementoflegalprinciple at56:

Morespecifically,whereacontractualrighttoterminateforpastbreachandthecommon lawrighttoterminateforrepudiationorfundamentalbreachexistconcurrently,thereliance uponthecontractinvolvedintheexerciseofthecontractualrighttoterminatewillnot precludetherecoveryofdamagesforlossofthefuturebenefitofthecontractbyreasonof repudiationorfundamentalbreachunlessthecontractexpresslyorimpliedlysoprovides.

2.3Thescopeoftherequirementtobereadywillingandabletoperformasapreconditiontotheexerciseofaterminationright

Whereacontractconsistsofmutuallydependentandconcurrentobligationssuchasa contractforthesaleoflandorforthesaleofgoods,eachpartymusttenderperformance againsttenderofperformancebytheother.Thus,DeaneJinForanvWight133saidat433:

Intheordinarycaseofacontractforsaleofland,thecontractualobligationsofthepartiesto completethesaleareconcurrentandconditionalinthesensethatthevendorisnotobliged toconveythelandandthepurchaserisnotobligedtopaythepurchasepriceotherwise thanuponconcurrentperformancebytheotherparty.Neithervendornorpurchaserwillbe guiltyofbreachofcontractifhefailstocompletewithinthetimeoruponthedayfixedbythe contractunlesstheotherpartytendersperformanceofhisconcurrentobligations.

Also,inForanvWighttheHighCourtconsideredthequestionwhetheracontractingparty whoisnotreadywillingandabletoperformforfeitsanyentitlementtoterminatefor

repudiationorbreachofanessentialtermbythecounterparty.OnthispointMasonCJsaid at409:

Accordingly,inrelationtoterminationforactualbreach,theprincipleisthatestablishedby theearlierdecisions-theplaintiffisrequiredtoshowthathewasreadyandwillingto performthecontractifithadnotbeenrepudiatedbytheplaintiff.Inotherwords,the requirementisthattheplaintiffbereadyandwillingtoperformexcepttotheextentthatthe defendantdispensedwithhisperformance.Inthecaseofananticipatoryrenunciation acceptedbytheplaintiff,therequirementofreadinessandwillingnessextendsonlyupto thetimeofacceptancebecausethentheearlierrepudiationresultsinanearlyterminationof thecontract.Accordingly,inthecaseofactualbreachtherequirementofreadinessand willingnessismorestringent;itcontinuesthroughtothetimeforperformance.Thatis becausetheterminationofthecontractdoesnotantedatethetimeforperformance.Subject tothisdifferenceandtothepossibilityofadifferenceintheonusofproof,theprincipletobe appliedinthecaseofactualbreachisconsistentwiththattobeappliedinthecaseof terminationforanticipatorybreach.Thedifferenceintheonusofproofarisesbecauseinthe caseofterminationforanticipatorybreachtheplaintiffwillgenerallybeabletoshowatthe timeofterminationthathewouldhavebeenabletoperformatthetimeforperformanceby demonstratingthathewasnotthendisabledorincapacitatedfromsuchperformance.As DixonCJnotedinRawsonvHobbs,at481,one"mustbeverycarefultoseethatnothing butasubstantialincapacityordefinitiveresolveordecisionagainstdoinginthefuturewhat thecontractrequiresiscountedasanabsenceofreadinessandwillingness".

approach.

SubsequentlytheFederalCourtconcludedthatthelimitationonterminationidentifiedby MasonJinForanvWightdidnotapplytotheexerciseofacontractualpowertoterminate.

Relevantly,inAllphonesRetailPtyLtdvHoyMobileLtd134,PerramJsaid:

[55]Idonotthinkitisnecessarytoreachaviewonwhetherapartywhohas repudiatedanagreementmaytakeadvantageofabreachbytheotherpartyofanessential termand,thereupon,terminatetheagreement.Thisisbecausetheoutcomeofthat questionhasnoimpactonthepositionofexpresspowersoftermination.Itis,Ithink,plain thatthepartiescouldbytheircompactexpresslyprovidethepowersgiventothemunderit couldbeexercisedevenwherethepartyseekingtodosoandhadrepudiatedthe agreement.Noneofthefamiliardoctrineswhichcanstrikeatthevalidityofthecontractual termswouldinvalidatesuchaprovision.

AllphoneswasrecentlyconsideredandappliedbytheCourtofAppealofVictoriainWillisv Crosland135

Turningtothefacts.

On4November2019theplaintiffenteredintoacontractwiththedefendanttopurchasea property.Thedepositwas$187,500ofwhich$1,000waspaidon5December2019.Itwas agreedthatthebalanceofthedepositwouldbepaidon18December2019.

Condition21ofthecontractincludedthefollowing:

21.2Thepurchasermayendthiscontractwithin14daysfromthedayofsaleif thepurchaser:

(a)obtainsawrittenreportfromaregisteredbuildingpractitioneror architectwhichdisclosesacurrentdefectinastructureonthe landanddesignatesitasamajorbuildingdefect;

134 [2009]FCAFC85

135 [2021]VSCA320

(b)givesthevendoracopyofthereportandawrittennoticeending thiscontract;and

(c)isnotthenindefault.

21.3Allmoneypaidmustbeimmediatelyrefundedtothepurchaserifthecontract endsinaccordancewiththisgeneralcondition.

InearlyDecember2019theplaintiffobtainedabuildingandpestreportwhichidentifieda numberofdefectsintheproperty.Shethenunsuccessfullysoughttonegotiatea$25,000 reductioninthepurchaseprice.

At2:59pmon18December2019theplaintiffpaidafurther$184,000inrespectofthe depositleavingashortfallof$2,500.Thenat7:51pmon18December2019theplaintiff throughhersolicitorterminatedthecontractrelyingonclause21.2.On19December2019 aNoticeofDefaultandRescission.

Theplaintiffsoughtrecoveryoftheamountspaidbywayofdeposit.

Thedefendantarguedthatitwasapracticalimpossibilityfortheplaintifftopaythebalance ofthedepositinthemannerstipulatedbymidnighton18December2019.Theprimary judgefoundforthedefendantonthebasisthatthepurchaserhadnotdischargedtheonus thatshewasready,willingandabletopaythebalanceofthedepositbythemidnight deadline.

IngrantingtheplaintiffleavetoappealandallowingtheappealtheCourtofAppealnoted:

58

balanceofthedepositwasnotarelevantenquiry.Itisofcourserelevanttothemutualor reciprocalperformanceofobligations.PartyAcannotinsistonperformancebypartyB unlesspartyAisinapositiontoperform.However,thisstateofreadinessisirrelevantif partyAisentitled,byanexpresscontractualprovision,toterminateacontractforbreach anddoesnotwishtoperformorseekperformancebypartyB.

themeaningofclause21.2(c)and,thereforenotentitledtoterminateunderclause21.2, theCourtinrejectingthissubmissionsaid:

76

timethatsheservedthenoticeofterminationunderCondition21requiredthatthe purchaserbenottheninbreachoftheContract.Thatisacommonsenseapproachtoa standardformcontractforthesaleofpropertyinVictoriathatisincommonusebymany persons,withvaryingexperiencesinbusinessandrealestatetransactions.Whilethe edinthecontract,thatdoesnotrequirethe conclusionthattheworddefaulthasanybroadermeaningthanthewordbreach;the Contractisnotastatute.

77Conductevincinganintentionnottobeboundbyacontractisnotabreachofthe contract.Thereisnobreachifthetimeforperformancehasnotfallendue.Rather,thereis anindicationthatthepartydoesnot,atthetimeoftheconduct,intendtoperformwhenthe timeforperformancearrives.Withoutmore,thisisastateofaffairsthathasnorelevant legalconsequences.Thecontractremainsonfootandeachpartyisrequiredtocomplywith anyobligationasandwhenitfallsdue.Likewise,thefactthatapersonis,ataparticular time,unabletoperformtheirobligationsunderacontract,whenthetimeforperformance hasnotyetarrived,doesnotconstituteanactualbreachofthecontract,evenifitconstitutes arepudiation.

78However,followingrepudiatoryconduct,theothercontractingpartyhasanelection availabletothem.Theotherpartyneednotwaitforanactualbreachtooccur.Theother partycaneitheraccepttherepudiationandterminatethecontract,inwhicheventfurther

performanceisunnecessary,orseektoenforcethecontract.Thecriticalpointisthat, unlessanduntilanelectionismade,thereisnoalterationintherightsandobligationsofthe parties. submission,thereisnodefaultorbreachofcontract.136 Inthatcontext,ifthepartyevincing anintentionnottobeboundbythecontract,orotherwiserepudiatingthecontract,validly exercisesarightoftermination,anyunacceptedrepudiationofthecontractbythatpartyis ofnoconsequence.

Returningtothepositionatcommonlaw.

Assumingthatthereisarequirementthatapartymustbeready,willingandableto performtheirobligationsasapreconditiontotheexerciseofaterminationrightthereisa problemwherebothpartieshaverepudiatedtheirobligations.Thismaymeanthatneither partyisabletoterminateresultinginthecontractsittingindefinitelyinsomelegallimbo. ThisproblemwasconsideredbyKeaneJinHighmistPtyLtdvTricareLtd137inwhichhis Honoursaid:

[61]Itmakescommercialsensetoallowapartytorecoverdamagesforlossofbargain onlywherethatpartywasitselfinapositiontoperformitssideofthebargain.Ifitwere otherwise,itcouldnotsensiblybesaidthatitwastheotherside'sconductwhichcausedthe lossoftheprofitinvolvedinthebargain.Thatadvantagecouldnothavebeenobtainedeven iftheothersidehadfulfilleditsobligations.Ontheotherhand,itdoesnotmakemuchsense tosaythat,wherebothpartiestoacontractdeclaretoeachothertheirfixedresolvenotto performtheircontract,thecontractcontinuesinexistenceinsomelegallimboforthereason thatneitherpartyisready,willingandabletoperformthecontract.Suchapropositionmay beintelligibletometaphysicians,butitisoflittleuseintermsoftheregulationofcommerce accordingtothereasonableexpectationsofhonestpeople.

[62]Totheextentthatrepudiationisnomorethanthecommunicationofanintention nottoperformthecontract,ifbothpartiesexpressthatintentionitisdifficulttoseewhythe contractshouldnotberegardedasatanend,notbecauseoneortheotherhasexerciseda rightconferredbylawunilaterallytoterminatethecontract,butbecausetheoriginal consensusbywhichthebargainwascreatedhasbeenreplacedbyanewconsensus--that thebargainshouldbeterminated.Suchacasecould,inmytentativeview,becharacterised asacaseofterminationbymutualassent...

InArmstrongStrategicManagementandMarketingPtyLimitedvExpenseReduction AnalystsGroupPtyLtd(No9)138 , commentsinHighmist.

3Theterminationprocessandthedraftingofnoticestoterminateand noticestoremedy

ThereissomediversityofapproachbetweenEnglishandAustralianlawinrelationtothe potentiallegaleffectofanoticeofterminationofcontract.Turninginitiallytothepositionin Englishlaw.

Phones4ULtdvEE

Ltd139

EELtdisoneofthemajormobilenetworkoperatorsintheUKprovidingconnectionand ThepartiesenteredintoaTradingAgreementon8October2012.Itcontainedthefollowing terminationprovisions:

136 JWCarter, ofContract(LexisNexisButterworths,1st ed,2011),[7-51],quotedinNetwork TenPtyLtdvSevenNetwork(Operations)Ltd[2014]NSWSC692,[137](StevensonJ);MeritonApartments PtyLtdvTheOwnersStrataPlanNo72381[2015]NSWSC202,[323](SlatteryJ).

137 [2005]QCA357

138 [2016]NSWSC1005

139 [2018]2AllER(Comm)315

14.1Eitherpartymayatanytimebygivingnoticeinwritingtotheotherterminatethis Agreementwithimmediateeffect:

14.1.1iftheotherpartycommitsamaterialbreachofthisAgreementandeithersuch breachisincapableofremedyor,ifcapableofremedy,hasnotbeenremediedtothe reasonablesatisfactionoftheotherpartywithin30daysofawrittenrequestfromtheother partytoremedysuchbreach;

14.1.2 anysteps(oranythirdparty

On12September2014thedirectorsofPhones4Uresolvedtoappointadministrators.On 17September2014EEforwardedthefollowingterminationlettertoPhones4U:

WerefertotheAgreement[ietheTradingAgreement].Inaccordancewithclause14.1.2of theAgreement,weherebyterminatetheAgreementwithimmediateeffect.Asaresult,we herebyterminatewithimmediately[sic]effectyourauthoritytosellandpromoteallEE productsandservi

limitingthegeneralityoftheprevioussentence,nothinghereinshallbedeemedtoconstitute awaiverofanydefaultorterminationevent,andEEherebyreservesallrightsandremedies

AtthetimeofterminationEEhadaliabilitytoPhones4UforrevenuegeneratedfromEE contractsintroducedbyPhones4U.

Phones4Uappliedforsummaryjudgmentinrespectofthisliability.Theapplicationwas metbyacounterclaimbyEEforlossofbargaindamagesarisingonbreachofessential obligationsandrepudiationbyPhones4UoftheTradingAgreement.Thequestionforthe CourtwaswhetherEEhadareasonableprospectofrecoveringlossofbargaindamages noreferencetobreachofanessentialobligationorrepudiationbyPhones4U.Inholding thatEEhadnorealprospectofsuccessonitscounterclaimandthatPhones4Uwas entitledtosummaryjudgment,BakerJsaid:

ThelossofbargaindamagesclaimrequiresEEtoshowthattheterminationofthecontract, whichcreatedthelossofbargain,resultedfromtherepudiatorybreachorrenunciationby Phones4UthatitispresentlytobeassumedEEmightproveattrial.Thatinturnrequires EEtoshowthatthecontractwasterminatedbyitsexerciseofitscommonlawrightto terminateforthatbreach,respectivelythatrenunciation.(Noallegationismade,akintothat madeinLeofelisvLonsdaleonappeal,thattheterminationresultedinanyeventfrom(the factsconstituting)theallegedrepud communicatedonlyaterminationundercl14.1.2independentoftherepudiatorybreachor renunciationnowalleged,thenthecontractwasnotterminatedatcommonlawfor repudiation.Thatitcouldhavebeensoterminated(ifEEmakesgooditsallegationof repudiation)cannotbeusedtorecharacterisethefacts...

Thiscasealsodoesnotconcernaterminationofacontractexpressedtobefora repudiatorybreachorrenunciationthatexistedandgaverisetoacontractualrightof terminationwhereonlythecontractualrightiscitedasjustifyingthetermination.Forsucha casetwodifferentissuesarise:firstlywhetherontheproperconstructionoftherelevant contracttheinnocentpartyonlyhadthecontractualright,iewhetheritscommonlawright wasexcludedorreplaced,notmerelysupplemented;ifnot,then,secondly,whetherthe expressrelianceonthecontractualrightofterminationdefeatsacommonlawclaimforloss ofbargaindamagesfoundedupontheconductcitedbytheinnocentpartywhenterminating.

Insuchacase,iftheinnocentpartysucceedsonthefirstissue,thenithasexpressly terminateduponthebasisoftheveryrepudiationuponwhichitsubsequentlyfoundsits causeofaction.Itcanthereforesaythattheterminationresultedfromthatrepudiation; nothingmoreisrequiredprimafacietofoundthecommonlawlossofbargaindamages claim.Relianceonacontractualrightofterminationwhenterminatinginsuchacaseisnot inherentlyinconsistentwiththesubsequentpursuitofthatclaim.Forthistypeofcase,in

(at[143][144]).Thatanalysisdoesnotbindme,andwasinanyeventobiter.However,it wastreatedascorrectbyBurtonJandtheCourtofAppeal(obiter)inStoczniavGearbulk, whichwasinturnreliedonbytheCourtofAppealinCavenagh;andTomlinsonJagreed withitinShellEgypt[2010]EWHC465(Comm)at[31](iii)(evenif,strictly,Ithinkhewas wrongtodescribeitasauthoritative).Iwouldthereforebemostreluctanttodifferfromthe analysisinDalkiaifIdisagreedwithit.Asitis,Iagreewithit.

IntheearlierdecisionoftheCourtofAppealinCavenaghvWilliamEvansLimited140the Courtconsideredtheauthoritiesonthegeneralpointofwhenaterminationletter,writtenin theexerciseofacontractualpowertoterminate,couldberegardedasanacceptanceofa repudiation.InthiscontexttheCourtcitedthefollowingpassageinthejudgmentofMooreBickLJinStoczniaGydniaSAvGearbulkHoldingsLtd141:

Itmustbeborneinmindthatallthatisrequiredforacceptanceofarepudiationatcommon lawisfortheinjuredpartytocommunicateclearlyandunequivocallyhisintentiontotreat .Ifthecontractand thegenerallawprovidetheinjuredpartywithalternativerightswhichhavedifferentlegal consequences,aswasheldtobethecaseinDalkiaUtilitiesV.Celtech,hewillnecessarily havetoelectbetweenthemandtheprecisetermsinwhichheinformstheotherpartyofhis decisionwillbesignificant,butwherethecontractprovidesarighttoterminatewhich correspondstoarightunderthegenerallaw(becausethebreachgoestotherootofthe contractorthepartieshaveagreedthatitshouldbetreatedasdoingso)noelectionis necessary.Insuchcasesitissufficientfortheinjuredpartysimplytomakeitclearthatheis nonethelesseffectiveifthecircumstancessupportit.That,asIunderstandit,iswhatRixLJ wassayinginparagraph32ofhisjudgmentinStoczniaGdanskaSAvLatvianShippingCo withwhichIrespectfullyagree.

TurningtothepositioninAustralianlaw.

ShepherdvFelt&TextilesofAustraliaLtd142 HisHonourendorsedthefollowingstatementbyGreerJinTaylorvOakesRoncoroni& Co.143:

Itisalongestablishedruleoflawthatacontractingparty,who,afterhehasbecomeentitled torefuseperformanceofhiscontractualobligations,givesawrongreasonforhisrefusal, doesnottherebydeprivehimselfofajustificationwhichinfactexisted,whetherhewas awareofitornot

However,itwouldappearthatinEnglishlawthisprincipleistreatedasadefencetoan allegationofrepudiationratherthanasprovidingabasisforacauseofactionforlossof bargaindamages.ThispointwasmadebyBakerJinPhones4U.

ThesocalledshepherdprinciplewasrestatedbyMasonJinSunbirdPlazaPtyLtdv Maloney144.HisHonoursaid:

ShepherdvFelt&TextilesAustralia(1931)45CLR359standsasauthorityforthegeneral propositionthatterminationofacontractmaybejustifiedbyreferencetoanygroundthat wasvalidatthetimeoftermination,eventhoughitwasnotreliedonatthetimeandeven thoughthegroundactuallyreliedonisfoundtobewithoutsubstance.

MorerecentlyinGriffithsvMartinez145,RobbJobservedasfollows146:

140 [2012]EWCACiv697at[44]

141 [2010]QB27

142 (1931)45CLR359

143 (1922)38TLR349

144 (1988)166CLR245

145 [2019]NSWSC664

146 Atparagraph312

Eachpartofthe

significantaspectoftheprinciplestatedbyhisHonour.Thatisthat,underthegenerallawof contract,whenonepartypurportstoterminatethecontractforbreachbytheother,where theactofterminationwillbearepudiationifnotjustified,theterminatingpartymayjustify theterminationbyanysufficientbreachbytheotherparty,whetherornotknowntothe terminatingparty,wherethatbreachhadbeencommittedbeforetheactthatwould otherwisebearepudiation.

TherehasbeensomedebateintheAustralianauthoritiesastothewidthoftheshepherd principleinitsapplicationtotheterminationofemploymentcontracts.

StartingwiththefollowingcommentbyVickeryJinHodgsonvAmcorLtd147:

Second,theShepherdprincipleinitsbroaderform,inmyopinion,cannotbeapplied,in effect,toconvertaterminationundertakenononebasis,namelyacontractualterminationin thiscase,toaterminationonanotherbasis,namelyasummarydismissal.Thisisso,even thoughfactshavenowcometolightwhichwouldhavejustifiedthesummarydismissalof Hodgsonasat11August2004.TheShepherdprincipledoesnotgosofar.

However,inthelaterdecisionoftheNewSouthWalesCourtofAppealinDownerEDILtd vGillies148, 149:

Asamatterofprincipleandauthority,thelimitationontheprincipleshouldnotbeaccepted. ThereisnoreasoninprincipleforShepherdvFeltandTextilestobeconfinedtosupporting asjustifiableactsdoneundercontractwhicharenotvalidwithoutfurtherjustificationfrom thefactsnotpreviouslyknown.Inprinciple,itshouldequallyextendtoaddingafurtherbasis forjustificationoftheactifthatfurtherbasishasseparaterelevance.Sotoapproachthe matteraccordswiththeapproachtotheavailabilityofdamagesforlossofbargainevenif thecontractbeterminatedintheexerciseofacontractualpower:

ThepracticalfoundationofAllsop notusuallydiscovereduntilafterhisorherdepartureitseemedinequitablethatan outgoingemployeeshouldholdontoasubstantialpayouttowhichhewouldnotbeentitled iftheemployerhadbeenawareofwrongfulconductjustifyingsummarydismissal.

However,theEnglishcourtshaveheld150 determinedonthebasisofaterminationonnoticetheemployeeacquiresanaccruedright totheamountpayableonsuchterminationwhichcannotbenullifiedbyanattempttorecharacterisetheterminationassummarydismissalforwrongfulconduct.

IncontinuingthedebatethefullFederalCourtinMelbourneStadiumsLimitedvSautner151 nalysis.TheCourtnoted152:

WedonotconsiderthatShepherdsupportsMSL'scontentionthatalawfullyterminated agreement,ineffect,mayberesuscitatedandthenre-terminateduponsomegroundnot knownatthetimeofthetermination.Anagreementmaybeterminatedlawfullyforany numberofreasons:resignationoftheemployee;redundancy;effluxionofthecontractual termofemploymentorsomeothercontractualbasis.Acontractcannotbeterminated

TotheextentthatDowner(andBibbyFinancialServicesAustraliaPtyLtdvSharma[2014] NSWCA37whichfollowedit),maysuggestotherwise,wewoulddisagree.AllsopP construedtheterminationclauseinDownerinawaywhichenabledtheShepherdprinciple tobeinvokedinitswiderexpressionasarticulatedbyhisHonour.Wedonotneedfor presentpurposestoexplorethattextualconstructionindetail.However,wewoulddepart fromhisHonour'sreasonsat[144]whichwouldpermit,followinga(lawful)terminationofan

147 [2012]VSC94at[1602]-[1614]

148 [2012]NSWCA333

149 Atparagraph136

150 CavenaghvWilliamEvansLimited[2012]EWCACiv697

151 [2015]FCAFC20

152 Atparagraphs112and113

agreement,anentitlementtorelyuponadifferenttypeofterminationbaseduponaserious misconductprovisiontosustainthatverytermination.

TheapproachoftheFullFederalCourtrepresentsthepositioninEnglishlawand, arguably,thatpositionappearstobemoreanalyticallysoundthan DownerEdi.However,overallthepositionremainsunsettledinAustralianlaw.Itis noteworthythattheCourtofAppealofVictoria153intheappealHodgsonvAmcorLtd refrainedfromdecidingwhetherDownerEDIorSautnerwasthepreferredauthority.

Recently,WardCJinEq(asherHonourthenwas)inMastersinBuildingTrainingPtyLtdv StateofNewSouthWales154comprehensivelyexaminedthecontractualtermination process.

Turningtothefacts.

In2015theNewSouthWalesGovernmentintroducedreformstotheVocationalEducation designedtosubsidisestudentstocompleteVETinavarietyofcompetencies.Underthe programstudentswereabletoselectaRegisteredTrainingOrganisation(RTO)through whichtheirtrainingwouldbesubsidised.RTOswereregulatedbytheAustralianSkilled andQualityAuthority(ASQA).UndertheprogramtheNewSouthWalesGovernment wouldpaysubsidiesandloadingstoRTOsgovernedbystandardformprovisions describedastheSmartandSkilledContractTermsandConditions.

MastersinBuildingTraining(MBIT)wasanRTOwhichenteredintocontractual arrangementswiththeStateGovernment.Thesearrangementswentbackto2015and wererenewedonanannualbasis.Thecurrentannualcontractexpiredon30June2021.

Thestandardtermscontainedthefollowingclause:

21.2Termination,suspensionorvariationfordefault

(c)IfanEventofDefaultoccurstheDepartmentmay,bywrittennoticetotheProvider, immediately:

(i)

(ii)withholdinwholeorinpartanySubsidiesandLoadingspayabletothe Provider

(iii)placeanyfurtherconditionsinrelationtoSubsidisedTraining

(iv)varytheContractinaccordancewithclause21.3

(v)exerciseanyofitsotherrightsundertheContract;or

(vi)terminatetheContract.

(d)IftheDepartmentbelievesthatanEventofDefaulthasoccurred,theDepartment may(butisnotobligedto)givetheProvideranoticerequiringtheProvidertoshow thattherehasbeennosuchEventofDefault,ortoremedytheEventofDefault wheretheEventofDefaultiscapableofremedy.IftheDepartmentissatisfiedthat theProviderhasfailedtocomplywiththenoticebyeithershowingthattheEventof DefaultdidnotoccurorbyremedyingtheEventofDefault,theDepartmentmay, bywrittennoticetotheProvider,terminatetheContract.Thisclause21.2(d)does law. 153 [2021]VSCA6 154 [2022]NSWSC499

On13December2019theDepartmentofEducationissuedMBITwithasuspensionnotice underclause21.2(c)(i)basedonvariousEventsofDefault.Followingdiscussionswiththe Departmentthesuspensionwasultimatelyliftedon4February2020.Howeveron11 September2020theDepartmentissuedafurthernoticeofsuspension.

FollowingaletterfromtheDepartmentdated4March2021whichraisedquestionsasto potentialfraudulentconductbyanMBITemployeethepartiesheldameetingon12March 2021duringwhichtheeventsofdefaultwerediscussedandMBITsoughttoexplainits position.

MBITcontendedthatthesediscussionswerethecommencementoftheprocess contemplatedbyclause21.2(d).

However,on25March2021theDepartmentissuedanoticeofterminationpursuantto clause21(c)(vi).ThenoticedidnotspecifyanyparticularEventofDefaultbutsimply referredtothe13December2019suspensionnotice.

MBITchallengedthevalidityofthenoticeofterminationonthebasisthattheDepartment havingcommencedtheprocessunderclause12.2(d)wasnotentitledtoinvokea terminationunderclause21.2(c)(iv).

IdonotaccepttheconstructionprofferedbyMIBTtotheeffectthatthereisnopowerto terminateundercl21.2(c)iftheprocessundercl12.2(d)hasbeeninvokedandisnot complete;notleastbecausecl21.2(d)expresslyprovidesthatitdoesnotlimitthe -clauseoratlaw.Inotherwords,Iacceptthatit wouldbeopentotheDepartmentineffectlegitimatelytochangeitsmindastotheposition inrelationtoanearlierdefaultthathadbeenidentifiedthefactthatatsomestageitmight haveconsidereditsufficientsimplytosuspendthepositioninrelationtocertain qualificationsdoesnotmeanitcouldnotlaterdecidethatitshouldterminatefordefaults includingtheearlierEventsofDefault.While,asadvertedtoabove,theremighthavebeen argumentsbasedonadutyofgoodfaith(perhapsanestoppel)arisingoutofthefactthat thecl21.2(d)processhadbeencommenced,theywerenotherepursued.Ofcourse, insofarasthemoresummaryprocedureforterminationwasfollowed,thentheDepartment wouldbeatriskifitterminatedforanEventofDefaultthatwasnotlaterestablishedtohave beenextantatthetime.

InsofarasitissuggestedthattheDepartmentcannotrelyongroundsoftermination(or EventsofDefault)notspecifiedinthenoticeoftermination,Idonotacceptthatasageneral propositionthisiscorrect.Thereisalong-standinglineofauthoritythat,atcommonlaw,a failuretospecifythereasonforterminationwillnotinvalidatethenoticeoftermination, providedthatavalidbasisforterminationexistedatthetimethepartygavenoticeof termination.

Atcommonlaw,anunequivocalelectiontoterminatethecontractisessential,butitisnot MannaiInvestmentCoLtdvEagleStarLifeAssuranceCoLtd[1997]AC749at768).

Accordingly,relianceonaneventofdefaultnotspecifiedinthenoticeofterminationdoes notbyitselfaffectthevalidityoftermination(althoughtheremaybecircumstancesinwhich apartyisprecluded,saybyreferencetoprinciplesofestoppel,fromrelyinguponaground ofterminationnotspecifiedinthenoticesee,forexample,thediscussionbyCarterin BreachofContractat[1007]).

changingitsbasisforterminatingthecontract.HerHonourrejectedthissubmissionand notedasfollows:

Giventheuncertainscopeandcontentofthedutyofgoodfaith,andthegeneralreluctance shownbyAustraliancourtstotreatgoodfaithasatermimpliedinallcontracts(see,for example,KirbyP,ashisHonourthenwas,inHughesBrosat93;EssoAustraliaResources PtyLtdvSouthernPacificPetroleumNL[2005]VSCA228at[25]perBuchananJA),it seemsunlikelythatanimplieddutyofgoodfaithwouldextendtorequiringthattherebean opportunitytoremedyabreach(atleastwheretherewasnosuchrequirementaspartofthe contractualprocessoftermination).

Finally,turningtothecontentofanoticetoremedy.

InYanvZhang155,KennedyJsetoutthefollowingguidanceinrespectofthespecificity requiredbyanoticetoremedy:

First,asstatedbyLordSteyninMannaiInvestmentCoLtdvEagleStarLifeAssuranceCo Ltd,theconstructionofanoticemustbeapproachedobjectively.Theissueishowa reasonablerecipientwouldhaveunderstoodtherelevantnotice,ietheissueiswhat reasonablepersonsinthesamecircumstancesastheactualpartieswere,wouldhavehad inmind.

Second,itisimportantthatthenoticeidentifytheapplicableclauseofthecontractallegedly intheclause.

Third,itmaybeenoughtodirectattentiontotheprovisionsofthecontractinrespectof whichdefaultismade.However,particularsmayalsobenecessarywitheachcase dependingonitsowncircumstances.

Finally,itmayberelevanttoconsideranyinformationprovidedbythedrafterofanoticein responsetoaninquirybytheaddressee.

AlsoinDiplomaConstructionPtyLtdvMarulaPtyLtd156NewnesJAstated:

Whatemergesfromthecasesistheneedforthenoticetobringsufficientlytotheattention oftherecipientwhatthedefaultisallegedtobe;orintheoft-quotedphraseofMegarryJin particularfacts.

155 [2018]VSC694

156 [2009]WASCA229,[79]