Sturesteps v McGrath & Ors [2012] HCATrans 117 (11 May 2012)

Last Updated: 16 May 2012

[2012] HCATrans 117

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S373 of 2011

B e t w e e n -

GEORGE OSVALD STURESTEPS

Applicant

and

ANTHONY GREGORY McGRATH

First Respondent

CHRISTOPHER JOHN HONEY

Second Respondent

HIH CASUALTY AND GENERAL INSURANCE LIMITED (IN LIQUIDATION AND SUBJECT TO A SCHEME ARRANGEMENT)

Third Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 MAY 2012, AT 11.35 AM

Copyright in the High Court of Australia

__________________

MR B.W. RAYMENT, QC: May it please your Honours, I appear with my learned friend, MR R.W. WASHINGTON, for the applicant. (instructed by W. Musgrave Lawyers)

MR F. GLEESON, SC: Your Honour, I appear with my learned friend, MR R.M. FOREMAN, for the respondents. (instructed by Ashurst Australia)

GUMMOW J: Yes, Mr Rayment.

MR RAYMENT: Your Honours, as originally propounded, this special leave application raised three matters. We only wish to address the first two and the third will not be pressed.

GUMMOW J: Now, where do we see the grounds?

MR RAYMENT: Well, I was really seeking to identify them by reference to the special leave questions, your Honour. The third one about interest we do not seek to press upon your Honours.

GUMMOW J: I see.

MR RAYMENT: Now, your Honours, the first of them arises in this way. The legal background assumed by the trial judge to be correct did not depend upon there being a gateway to the taking into account of surrounding circumstances only if there is ambiguity on the face of an instrument. The same view was taken in the Court of Appeal. Now, at the trial his Honour was persuaded, when he took into account surrounding circumstances, that they were capable of being given effect, notwithstanding what appeared in the written document and the Court of Appeal was not.

So, when this application was originally intended to be brought here, before the Court enunciated what it has enunciated on the Jireh special leave application, there could only have been a question, as it were, about whether the difference between those two courts merited a grant of special leave or not. But now we seek to submit that there is an opportunity for us to argue the special leave application on a wider basis, so in other words we would seek to show your Honours first that this is an appropriate vehicle for the reconsideration, if this Court decided to embark upon it, of the true rule discussed by Justice Mason and, secondly, that the case is otherwise appropriate for the grant of special leave.

Now, your Honours, the agreement was unambiguous in this relevant respect. It is at page 160 of the application book. Your Honours see there is a definition of “HIH” on that page and a different definition of “HIH Group”. For relevant purposes, the question was about the meaning of what is contained in clause 17.1(c), that is, did the agreement take effect only according to its terms so that the annual remuneration package would have regard to “each completed year of service . . . with HIH”, which was defined, as I say. Now, the circumstances sought to be proved before the learned judge and accepted at first instance - - -

GUMMOW J: No rectification case - - -

MR RAYMENT: No. The circumstances sought to be proved before the learned judge were this. The company had adopted a policy and applied a practice for years, administered indeed by the applicant himself, amongst others, and well known to those who participated in the signing of the service agreement, of treating all employees then employed by the group as having started their employment with whichever of the companies first employed them, even if they were predecessor companies. That was applied for all purposes, including the calculation of everybody’s retrenchment benefit when the time came for it.

Now, his Honour found it to exist. The findings of - within a narrow compass – they are in paragraphs 23, 24 and 25 of his first judgment at pages 11 and 12. So for his Honour there was, yes, this written agreement which said what it said, but there was also, independent of it, practice, well known to everybody, of treating first employment as first employment within a predecessor company.

GUMMOW J: Now, what do you say about Chief Justice Bathurst’s points at paragraph 18 on pages 89 and over to 90?

MR RAYMENT: Yes, well, that is the difference between the Court of Appeal and the trial judge. Their Honours noted the findings, did not really set them aside or disprove of them.

GUMMOW J: The parties have chosen - - -

MR RAYMENT: But said that notwithstanding them, the written agreement ought to prevail over them. That is really the difference between the learned trial judge and the Court of Appeal. Their Honours said we read the agreement, it means what it means and if there was a policy which stood outside the documents which everybody thought was going to apply unless something was said to the contrary then it is too bad.

GUMMOW J: Well, that is why the remedy of rectification was devised, I suppose.

MR RAYMENT: Yes, well, it may be that - - -

GUMMOW J: You seem to subvert that, it seems to me.

MR RAYMENT: Well, your Honour, it may be that they overlap, may it not?

GUMMOW J: Because you could not meet the rigour needed to make out a case of rectification.

MR RAYMENT: As the law was then understood, maybe we did not have to - before Jireh, as it were.

HAYNE J: But at base, Mr Rayment, you accept the document is unambiguous?

MR RAYMENT: I do.

HAYNE J: It has a meaning contrary to the meaning you seek to ascribe to it.

MR RAYMENT: It does.

HAYNE J: You seek to give an operation to the document which it does not have according to its terms by reference to something described as surrounding circumstances. Is that right?

MR RAYMENT: Yes, your Honour.

HAYNE J: Which fall sort of agreement between the parties.

MR RAYMENT: Yes, precisely correct.

HAYNE J: A very large proposition.

MR RAYMENT: Well, that, with respect - really what I am coming to is the second part of my dealing with the first question. But, your Honours, reasonable men who knew of this policy and knew it applied to them and administered it, would indeed, we submit, as the trial judge said in paragraph 25, have got a shock if it was suggested that they were doing anything by signing this document which in some way created an exception to a deliberately decided upon, well-understood policy applicable to every employee in the company. That is the question.

In other words, reasonable men do not sit down, we submit, when they have such a clear understanding, to parse and analyse a document put before them which they did not have a solicitor drawing for them, and reach a conclusion that a policy, which they well understand, practice they administer themselves, will no longer apply because of its terms. It was not a practice which depended upon the terms of particular contracts. It was universal, uniform and the only difference in its application related to the cap which might apply to different categories of employees.

As his Honour said at the trial that would not detract from it. It is perfectly correct that a lawyer drawing that document might have understood it one way, but the parties who signed it did not because they were aware of another matter, namely the existence of this policy. That was how it was really found by the trial judge.

I accept that, as it were, a threshold question for your Honours, before you get to the second part of this first special leave question there is the question, is it open to the Court, is it possible that the Court will agree with what the learned trial judge said about those stated facts? I need to pass through that hurdle. But if I do, in other words, if it is not an inappropriate vehicle, then we submit this question arises for the Court.

Having enunciated what is clearly stated in the Jireh reasons may it not be appropriate for the High Court to grant special leave with a view to entertaining an application on the hearing of the appeal to review the statement of Sir Anthony Mason in Codelfa, described there as the true rule? That true rule, as your Honours obviously know, is not the rule in New Zealand, England, Hong Kong, Singapore and elsewhere in the world and it is unfortunate, we submit, that a commercial document might receive a different interpretation having regard to where it might encourage forum shopping in some cases if Australia has a different rule about that.

Secondly, the Court has many times said, and not withdrawn, the proposition that you are entitled and, indeed, bound to know from evidence before you what are the surrounding circumstances to a document so that you may be placed in the position of the parties in understanding it. We submit that it is awkward with such a view, but there has to be patent ambiguity on the face of the document before you can give effect to it, and this case is a good example of why it is so.

GUMMOW J: The other side of the coin is the enormous expenditure that is engendered by some other theory to the great enrichment of the Bar, but not to the great enrichment of the clients.

MR RAYMENT: But perhaps to the attainment of justice, is it not, your Honour?

GUMMOW J: What should be a half-day case in a commercial list becomes a two or three-day case.

MR RAYMENT: But, your Honour, once it was concluded in Prenn v Simmonds - - -

GUMMOW J: That is why the doctrine of rectification was devised to erect a fairly strict barrier which you have shown no inclination to mount.

MR RAYMENT: Well, your Honours, all that Australia would be doing - - -

GUMMOW J: It is not as if the law shuts its face to these matters, but it opens its eyes in a fairly realistic fashion.

MR RAYMENT: Your Honours would be familiar with the fact that in England this is precisely what happens - - -

GUMMOW J: I am not particularly deterred by what happens in the United Kingdom, Mr Rayment.

MR RAYMENT: Also in Hong Kong and Singapore and the like, your Honour. We submit it is consistent with the adoption of the rule that the Court is entitled or, indeed, bound to know the surrounding circumstances to the document before construing it but once one does know it one should not have to disregard - - -

GUMMOW J: Now, you can go on repeating yourself, Mr Rayment. What do you want to say about the 556(1C) issue, if anything?

MR RAYMENT: If your Honour please.

GUMMOW J: I have stopped you because you are running out of time.

MR RAYMENT: Yes, thank you, your Honour. Well, now, your Honours, that question relates to section 556 of the Corporations Act, which your Honours will see at page 206 of the respondent’s bundle, easily set out. Subsections (1A), (1B) and (1C) all use the word “attributable”, the same word in each section. Legislation, when drawn, must have intended, we submit, to use the word in the same sense in each of those three subsections. The word “attributable” in (1A) must refer to, we submit, the notion of when something becomes payable when it accrues, when it is earned and the same with subsection (1B), when does it accrue, when is it earned?

Subsection (1C), referring to retrenchment payments, we submit, bears the same meaning. The learned judge found that. He found that there was a uniform use of the word in the section. The effect of what has been found in the Court of Appeal is that that is not so, that one should read the section as if it used the words in (1A) and (1B) one way and in (1C) another way. We submit that is contrary to ordinary canons of interpretation. We submit that there was nothing in the judgment of the learned trial judge facing the history of the section, looking at a leading authority about an earlier form of the section which was otherwise than orthodox.

The distinction drawn in the International Harvester Case, to which his Honour refers, the decision of Justice Beach, was between what a document is for on the one hand and the manner of the calculation of the benefits under it. By that I am not determining characterisation. We submit that approach is right. It is to be contrasted with what appears in paragraph 40 of the reasons of the Chief Justice here, page 31 of the application book, where his Honour really appears to have reached a diametrically opposite conclusion. His Honour speaks of the reason payment is made and finds in effect that it is by reason of the past service, which is precisely what Justice Beach declined to do and what his Honour declined to do.

An alternative view is put forward in the reasons of the Court of Appeal, which your Honours can see at page 121 in the reasons of Justice Sackville where his Honour refers to the contribution of the acts of the directors to fixing of their own salaries at annual reviews. We submit that is not, with respect, open as a meaning of the subsection. It would appear to catch only so much of the salary as was increased over the years rather than the whole of it and, in short, we submit, for the reasons given by the trial judge as to construction this Court may grant special leave and review it. Those are our submissions, if the Court please.

GUMMOW J: Thank you. We do not need to hear from you, Mr Gleeson.

The applicant presses grounds (a) and (b), but not (c), in the draft notice of appeal. In respect of each of those grounds, (a) and (b), the decision of the New South Wales Court of Appeal is not attended by doubt. Accordingly, there is no basis for a grant of special leave. Special leave is refused with costs.

We will adjourn to reconstitute.

AT 11.53 AM THE MATTER WAS CONCLUDED