ACT CIVIL & ADMINISTRATIVE TRIBUNAL

GARRINGTON & ANOR v DWYER DUNN PROPERTY CONSULTANTS PTY LTD (Civil Dispute) [2017] ACAT 25

XD 1277/2016

Catchwords: CIVIL DISPUTE – contract dispute – termination fee – whether doctrine of rectification applies – whether there is ambiguity or discrepancy in the agreement clause – rule of contra proferentum

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 6, 7, 16, 17, 22, 36

Cases cited: Australian Broadcasting Commission v Australasian Performing Rights Association Limited (1973) 129 CLR 99Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337Fitzgerald v Masters (1956) 95 CLR 420Goldsborough Mort and Co Ltd v Quinn (1910) 10 CLR 674Kearns v Hill (1990) 21 NSWLR 107Petelin v Cullen (1975) 132 CLR 355

List of Texts/Papers cited: Justice Edelman, ‘The Three Issues in Construction of

Contracts’ from the Supreme and Federal Court Judges’ Conference, Brisbane, 2016

Tribunal: Presidential Member E Symons

Date of Orders: 10 April 2017Date of Reasons for Decision: 10 April 2017

AUSTRALIAN CAPITAL TERRITORY )CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 1277/2016

BETWEEN:

JUDITH MARIA WHITTEN GARRINGTONFirst Applicant

BRIAN LESLIESecond Applicant

AND:

DWYER DUNN PROPERTY CONSULTANTS PTY LTDRespondent

TRIBUNAL: Presidential Member E Symons

DATE: 10 April 2017

ORDER

The Tribunal orders that:

1. Judgment for the applicants in the sum of $3790.11, being $3548.00 plus interest from

31 October 2016 to 10 April 2017 of $88.11, plus filing fee of $145.00 and search fee of

$9.00.

2. The respondent pay to the applicants $3790.11 by close of business 24 April 2017.

………………………………..Presidential Member E Symons

REASONS FOR DECISION

Background

1. At all relevant times the applicants owned seven residential properties (the properties)

in Canberra.

2. The respondent is a real estate agency which manages property in the Australian Capital

Territory.

3. The respondent managed the leasing of the applicants’ properties pursuant to seven

managing agent agreements (the agreements) which included the following relevant

terms and conditions:

2. TERMINATION OF AGREEMENT

(a) This agreement remains in force until terminated.

(b) Either the Licensee or the Principal may terminate this Agreement upon

giving 30 days prior written notice to the other.

3. TERMINATION FEE

(a) If at the time of termination of this Agreement pursuant to Clause 9 the

property is subject to a fixed term lease then the Lessor will in addition to

any other amounts payable under this Agreement pay the Agent a

Termination Fee of:

2 week’s rent plus GST.

4. REIMBURSEMENT OF EXPENSES OR CHARGES ...

5. REMUNERATION

(a) The Principal agrees to pay the Licensee the following amounts:

(i) A commission on all rent received at the rate of : 7% + GST

(ii) A letting fee for each tenancy as specified in clause 4(a).

(b) The Licensee is authorised to pay the commission and the letting fee,

following the preparation of a statement or tax invoice addressed to the

Principal, in priority to any other amounts, from rental amounts received on

behalf of the Principal.

6. INDEMNITY ...

7. [No clause 7]

8. COMPLIANCE WITH LAWS

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The Licensee and the Agent will, in carrying out all the obligations on their part

to be carried out pursuant to this Agreement, comply with all applicable laws.

9. PRIVACY ACT 1988 COLLECTION NOTICE

(a) The Principal acknowledges that the Licensee and/or the Agent uses

personal information collected from or about the Principal to perform the

Licensee’s and/or Agent’s obligations under the Agreement.

4.(sic) The Principal authorises the Licensee and/or the Agent to:-

(i) use such information collected to promote the services of the Licensee

and/or the Agent and to seek potential clients.

(ii) disclose such information to other parties including media

organisations, on the internet, to potential landlords and their advisers, to

clients of the Licensee and/or the Agent both existing and potential, to

persons engaged to evaluate the Property, owners’ corporations,

government and statutory bodies, financial institutions, valuers, building

consultants and pest inspectors.

(c)(sic)The Licensee and/or the Agent will only disclose such information to other

parties as is required to perform the Licensee’s duties under this

Agreement, to carry out those matters described in Clauses 8(a) and (b)or

as is otherwise allowed under the Privacy Act 1988 and provided that it is

not in contravention of the Residential Tenancies Act 1997.

(c)(sic)The Licensee will provide to the Principal the information collected if the

Principal wishes to have access to the information.

(e)(sic)The Principal is at liberty to correct information collected by the Licensee

if it is inaccurate, incomplete or out of date.

...

4. By email dated 9 October 2016, the applicants gave the respondent thirty days written

notice of termination of each of the seven agreements in accordance clause 2(b) of those

agreements.

5. The respondent advised the applicants by email dated 12 October 2016 that it intended

to claim a termination fee of two weeks rent on each property.

6. By email dated 15 October 2016 the applicants disputed the respondent’s entitlement to

two weeks rent and GST upon termination of the agreements “as there has been no

termination in relation to the Privacy Act 1988 Collection Notice.”

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7. On 31 October 2016, prior to termination of the agreements on 8 November 2016, the

respondent withheld a total of $3,548 from the October rent receipts for five of the

applicants’ properties which were subject to a fixed term lease.

8. By email dated 1 November 2016 the applicants directed the respondent to pay the

money withheld on 31 October 2016 to their account.

9. The respondent sent an email to the applicants on 1 November 2016 which stated:

Attached are copies of the managing agent forms for the 5 properties that are currently under lease. They clearly indicate that you are liable for a termination fee which has nothing to do with the privacy act and you will accordingly be charged that fee...

10. On 9 November 2016 the applicants transferred the management of the properties to

another agent.

The proceedings

11. The applicants filed an application in the ACT Civil and Administrative Tribunal (the

Tribunal) on 15 December 2016 seeking:

(a) the monies wrongfully taken by the respondent in breach of agreements;

(b) ACAT filing fee and search fees;

(c) interest; and

(d) damages occasioned by the breach of the agreements.

12. In the response filed on 9 January 2016, the respondent disputed the claim and stated:

Mr Garrington signed seven Management Agreements providing for a termination fee of two (2) weeks rent plus GST, should the properties be under a fixed term lease which five of these properties were,Mr Garrington was well aware of this clause when he transferred these properties to us as he did it gradually over a period of time as each properties’ lease expired (hence avoiding the termination fee with his previous agents).The Termination Fee Clause (3) refers to clause (9) which is not in fact relevant to Clause (3) and does not apply....

13. The parties attended a directions hearing on 7 February 2017. The application was set

down for hearing on 27 March 2017.

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14. At the hearing Mr Ahern appeared for the applicants pursuant to a power of attorney

and Mr Marjason, solicitor of Marjason & Marjason, appeared for the respondent.

Although the applicants had filed a joint witness statement and a witness statement by

Ms Kay Stares, neither of the applicants nor Ms Stares attended the hearing. After some

discussion between the Tribunal and the parties representatives, Mr Ahern agreed that

he would not rely on the three witness statements and he withdrew that part of the

applicants’ claim which sought damages of $1,500 for the breaches of contract in

relation to the deductions from the respondents’ trust account, which the applicants

alleged were unauthorised.

15. The hearing proceeded on the basis of submissions in relation to the interpretation of the

agreement, and in particular clause 3(a). At the conclusion of the hearing the Tribunal

reserved its decision. This is the Tribunal’s decision.

The legal framework

16. Section 17 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act)

provides that a person may make a civil dispute application to the tribunal. Section 16

of the ACAT Act provides that a civil dispute application consists of one or more of the

following

(a) a contract application.

...

17. Section 22 of the ACAT Act provides that the tribunal has, in relation to civil dispute

applications, the same jurisdiction and powers as the Magistrates Court has under the

Magistrates Court Act 1930, part 4.2 (Civil Jurisdiction).

18. Section 36 of the ACAT Act provides that the tribunal must hear each application made

to it.

19. The objects and principles of the ACAT Act are set out in sections 6 and 7. The objects

include:

...

(b) to ensure that applications to the tribunal are resolved as quickly as is consistent

with achieving justice; and

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(c) to ensure that the decisions of the tribunal are fair.

...

20. Section 7 states:

In exercising its functions under this Act, the tribunal must—

(a) ensure the procedures of the tribunal are as simple, quick, inexpensive and informal as is consistent with achieving justice; and

(b) observe natural justice and procedural fairness.

The issue

21. The issue before the Tribunal is the proper interpretation of clause 3(a) of the

agreement.

The applicants’ submissions

22. In their submissions filed at the commencement of the hearing the applicants firstly

submit that clause 3(a) of the agreement is conditional, there are two conditions

precedent joined by the word ‘and’ in clause 3(a) and both of these conditions have to

be met before a termination fee is payable, namely:

(a) there is a termination of the agreement ‘pursuant to clause 9’; and

(b) at the time of the termination of the agreement ‘the property is subject to a fixed

term lease’.

23. There is no blanket entitlement in clause 3(a) to two weeks rent plus GST upon

termination of the agreement.

24. While there was no dispute that five of the applicants’ properties were the subject of a

fixed term lease at the time the notices of termination were given to the respondent, the

applicants contend that there was no termination pursuant to clause 9 and as that

condition precedent in clause 3(a) was not satisfied, they were not liable to pay a

termination fee for each of those properties to the respondent.

25. Secondly, the applicants submit that:

(a) there is no issue of ambiguity or discrepancy in clause 3(a); rather this is a case of

inconvenient drafting. In this regard the applicants rely on the High Court

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decision in Fitzgerald v Masters1 and submit that clause 3(a) has some meaning,

however inconvenient for the respondent; and

(b) in support of their submission that there is no issue of ambiguity the applicants

referred the Tribunal to the High Court decision of Australian Broadcasting

Commission v Australasian Performing Right Association Ltd2 and submitted that

“the ordinary meaning of the parties’ language must prevail in this ordinary

commercial situation.”3

26. Thirdly, the applicants submit4 that the fact that a document contains infelicities and

mistakes is not a sufficient reason for a court to interpret its provisions in a narrow or

unreal way. In support of this contention the applicants referred the Tribunal to the

NSW Court of Appeal decision of Kearns v Hill5 in which Meagher JA said the court is

to “construe each provision according to its natural meaning, and in such a way to give

it its most ample operation.”

27. Fourthly, the applicants submit that the courts have stressed “the necessity of holding a

person who signs a document to that document”6 and rely on the decision of the High

Court in Petelin v Cullen7 where the Court stated:

The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that

1 (1956) 95 CLR 420, at 426-7 “Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.”

2 (1973) 129 CLR 99 at pages 114-115 (Stephen J) “This agreement is one in which, in my view, two corporations have determined, in unambiguous terms and in a formal document obviously prepared with legal assistance, their quite complex contractual relationship for a considerable term of years into the future. The approach of courts to the construction of such documents, when they contain no ambiguity nor any other patent error or omission, cannot be other than that of an uncritical rendering of the meaning of the text.’ and cf. page 105 (Barwick CJ) ‘But if that result is produced by the application of the words in which the parties have expressed themselves, it is no part of the function of a court by some process of divination as distinct from construction of the language employed to attribute to ...”

3 Applicants’ submissions 27 March 2017 page 4 ‘Ambiguity or Discrepancy’4 Applicants’ submissions 27 March 2017 page 4 ‘Ambiguity or Discrepancy’5 (1990) 21 NSWLR 107 at 1096 Applicants’ submissions 27 March 2017 ‘Ambiguity or Discrepancy’7 (1975) 132 CLR 355, 359

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document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" (Muskham Finance Ltd. v. Howard (1963) 1 QB 904, at p 912 ) and in the qualifications attaching to the defence which are designed to achieve this objective.

28. Fifthly, the applicants submit8 that so long as some intention can be ascertained (that is

the agreement is not void for uncertainty), then the contract is binding in that sense. The

applicants rely on the High Court decision in Goldsborough Mort and Co Ltd v Quinn9

to support this submission.

29. Sixthly, the applicants submit10 that there is no evidence that the applicants knew of the

respondent’s ‘error’ in the drafting of clause 3(a) and there is no element of

unconscionability of the applicants taking advantage of the respondent.

30. Seventhly, the applicants submit11 that there were no prior transactions between the

parties that could form the basis to imply a term that is identical to clause 3(a) and

which does not include the words ‘pursuant to clause 9’. Such a term is not necessary to

give business efficacy to the agreement; the agreement is effective without implying

such a term. Further, the term is not so obvious that it goes without saying. The

applicants rely on the Privy Council decision in BP Refinery v Hastings12 which

summarised the test for whether a term should be implied ‘in fact’ into a contract, to

give effect to the intentions of the contracting parties, as follows:

Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied:

1. it must be reasonable and equitable;2. it must be necessary to give business efficacy to the contract, so that no

term will be implied if the contract is effective without it;3. it must be so obvious that "it goes without saying";4. it must be capable of clear expression;5. it must not contradict any express term of the contract.

8 Applicants’ Submissions 27 March 2017 page 4 ‘Ambiguity or Discrepancy’9 (1910) 10 CLR 67410 Applicants’ Submissions 27 March 2017 page 4 ‘Equity – Unilateral Mistake

and Unconscionability’11 Applicants’ Submissions 27 March 2017 pages 4,5 ‘Prior Transactions;

Imply Terms’12 PC 1977

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31. Eighthly, the applicants submit13 that the respondent is attempting to rectify the

agreement by interpreting clause 3(a) without reference to or by deletion of the words

‘pursuant to clause 9’ and contends that:

(a) the only clause in the agreement providing for termination pursuant to a clause is

clause 2; the reference to clause 9 in clause 3(a) cannot be interpreted to be a

reference to clause 2 and the contract is effective without the rectification sought

by the respondent.

(b) if it was intended that clause 3(a) was to apply to clause 2, then there would be no

need to have created a new clause 3(a).

(c) the decision to separate the two terms into two separate clauses must not be

ignored in the interpretation for the benefit of the party who drafted the clause.

(d) the doctrine of rectification cannot apply as the parties did not actually agree on

such terms and then fail to incorporate that agreement into the contract. The

applicants referred the Tribunal to the High Court decision in Codelfa

Construction Pty Ltd v State Rail Authority of New South Wales14 where Mason J

stated:

...with rectification the term which has been omitted and should have been included was actually agreed upon. ... Rectification ensures that the contract gives effect to the parties' actual intention; the implication of a term is designed to give effect to the parties' presumed intention.

32. Ninthly, the applicants submit15 that the rule of contra proferentum must be applied; the

rule applies against the respondent being the party putting forward the clause in issue,

particularly as that party drafted that clause and is the party who stands to benefit if the

clause is rectified in the way the respondent seeks.

The respondent’s submissions

33. The respondent submits that the reference to clause 9 in clause 3(a) of the agreement is

irrelevant and should be struck out as it has nothing to do with termination or anything

giving rise to termination. Clause 9 relates only to the Privacy Act.

13 Applicants’ submissions 27 March 2017 page 4, ‘Rectification’14 (1981) 149 CLR 337, 34615 Applicants’ Submissions 27 March 2017 page 6, ‘Contra Proferentum’

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34. Under the principles of rectification the words ‘pursuant to clause 9’ should be struck

out and the rest of the clause be given its full meaning. The respondent provided the

Tribunal with a paper by Justice Edelman entitled ‘The Three Issues in Construction of

Contracts’ from the Supreme and Federal Court Judges’ Conference, Brisbane in 2016

to support the respondent’s submissions.

Consideration

35. It was clear, as Mr Marjason conceded, that the agreement had been fairly sloppily

drafted. The Tribunal readily acknowledges that the agreement was not drafted by

Mr Marjason or his firm. It appears to be a ‘cut and paste’ of clauses from another or

other documents.

36. In relation to the applicants’ first submission the Tribunal accepts and finds that clause

3(a) as drafted contains two conditions precedent, namely (i) the termination of the

agreement pursuant to clause 9 and (ii) at the time of termination the property is subject

to a fixed term lease. Both of the conditions precedent have to be met before a

termination fee is payable to the respondent.

37. However, the respondent contends that the inclusion after ‘termination of the

Agreement’ of the phrase ‘pursuant to clause 9’ is irrelevant and under the principle of

rectification this phrase should be struck out and the rest of clause 3(a) given its full

meaning.

38. The Tribunal finds that there is no issue of ambiguity or discrepancy in the actual

wording of clause 3(a) in the agreement. The Tribunal concurs with the applicants’

submission that a termination may arise pursuant to the clause as drafted and the

applicants may be required to pay the two weeks rent plus GST to the respondent in

circumstances where, for example, the applicants provided incorrect information to the

respondent or where the applicants refused to allow the respondent to use and disclose

such information contrary to clause 9. The phrase ‘pursuant to clause 9’ has some

meaning. The ordinary meaning of the parties’ language in this clause should prevail.

39. The applicants contend that the fact that the termination provisions in the agreement

were separated into two clauses, clause 2 and clause 3(a), must not be ignored. If, as the

respondent contends, clause 3(a) is rectified by deleting the phrase ‘pursuant to clause

9’, the applicants argue that such an interpretation would result in a situation where the

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respondent would be entitled to two weeks rent plus GST for any termination where a

fixed term lease exists including at the election of the respondent pursuant to clause 2(b)

or in a case where a breach by the respondent causes a repudiation in which case the

payment of the two weeks rent plus GST would amount to a reward.

40. The respondent asserts that clause 3(a) provided for them to be paid a termination fee if

their agreement was terminated during a fixed term lease and the applicants were aware

of this from their previous management agreement with another firm of local real estate

agents. The respondent asserts that this was the reason why the applicants only moved

their individual properties to the respondent at the end of each fixed term lease. As the

matter proceeded without evidence being called, the Tribunal cannot be satisfied that

there is any basis for this assertion.

41. The Tribunal is satisfied that the parties had no prior transactions that could form the

basis for implying that the parties knew that the clause as drafted was in error and that a

termination fee would be payable for termination of a fixed term lease unrelated to

clause 9 of the agreement.

42. The respondent had prepared the agreement and evidenced its consent to the

agreement’s terms and conditions by executing it. The respondent is in the real estate

business which includes managing rental properties and should have been conversant

with the relevant documentation. The preparation and execution of such agreements is

part and parcel of the business of managing rental properties. What the respondent

appears to be asking of the Tribunal is that the Tribunal substitute its commercial

judgment for the respondent’s commercial judgment.

43. The applicants evidenced their consent to the agreement’s terms and conditions by

signing it. The email exchange between the applicants and the respondent referred to in

[6] and [8] above satisfies the Tribunal that the applicants did not know of the

respondent’s alleged error in drafting clause 3(a) and that they did not understand that

the respondent intended clause 3(a) to apply to them without the phrase ‘pursuant to

clause 9’.

44. If the respondent did make a mistake in drafting clause 3(a) that mistake was due to its

own want of care and reflection, or expressed another way, its negligence. The

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respondent should not be allowed to call it into question to prejudice the applicants, the

other contracting party, because of the respondent’s mistake.

45. In his paper, ‘The Three Issues in Construction of Contracts’, Justice Edelman referred

to a decision of the Court of Appeal in Western Australia16 in relation to rectification

and said:

More recently, the Court of Appeal in Western Australia in RCR Tomlinson Ltd v Russell[2015] WASCA 154 [53] said that ‘ in order to constitute a common intention the intention of the parties must have been disclosed in some way, although not necessarily by a direct communication that gives rise to an outward expression of accord between them’.

46. The Tribunal is not satisfied, from the material before it, that the parties had a common

intention, express or implied, that a termination fee would apply upon termination of an

agreement during a fixed term lease, other than in accordance with clause 3(a) as

drafted and which was not included in the agreement between them.

47. In this regard the Tribunal also notes the statement by Mason J in Codelfa Construction

Pty Ltd v State Rail Authority of NSW17, while there was no claim made for rectification,

comparing rectification with implication:

The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. Thus in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention.

48. For these reasons the Tribunal is not satisfied that the doctrine of rectification should be

applied.

49. As stated above in [38], the clause is not ambiguous, it does have some meaning.

50. If the Tribunal is wrong, and clause 3(a) as drafted is ambiguous, the Tribunal is

satisfied that the rule of construction applied to ambiguous clauses, contra proferentum,

applies against the respondent. The respondent is putting clause 3(a) in issue, the

respondent drafted the clause or is responsible for the terms and conditions in the

16 at [33]17 at 346

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agreement as it is the respondent’s document, and the respondent is the party who is

seeking the benefit from the interpretation which it seeks of clause 3(a) in the

agreement. This rule places the cost of losses on the party who was in the best position

to avoid the harm, in this case the respondent.

51. For the reasons set out above the Tribunal will enter judgment for the applicants and

make orders accordingly.

………………………………..Presidential Member E Symons

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HEARING DETAILS

FILE NUMBER: XD 1277/2016

PARTIES, APPLICANT: Judith Maria Whitten Garrington & Brian Leslie

PARTIES, RESPONDENT: Dwyer Dunn Property Consultants

COUNSEL APPEARING, APPLICANT N/A

COUNSEL APPEARING, RESPONDENT N/A

SOLICITORS FOR APPLICANT N/A

SOLICITORS FOR RESPONDENT Marjason & Marjason Solicitors

TRIBUNAL MEMBERS: Presidential Member E Symons

DATES OF HEARING: 27 March 2017

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