From Text To Context: Contemporary Contractual Interpretation
FROM TEXT TO CONTEXT: CONTEMPORARY CONTRACTUAL INTERPRETATION
ADDRESS BY THE HONOURABLE J J SPIGELMAN AC
CHIEF JUSTICE OF NEW SOUTH WALES
TO THE RISKY BUSINESS CONFERENCE
SYDNEY, 21 MARCH 2007
Law is a fashion industry. Over the last two or three decades the fashion in interpretation has changed from textualism to contextualism. Literal interpretation – a focus on the plain or ordinary meaning of particular words – is no longer in vogue. Purposive interpretation is what we do now. However, as one English judge put it, sometimes it becomes necessary to “separate the purposive sheep from the literalist goats” [1].
In constitutional, statutory and contractual interpretation there does appear to have been a paradigm shift from text to context. In contractual discourse, the focus on the commercial purposes of a transaction is often referred to as commercial interpretation or commercial construction [2].
All lawyers, both practitioners and judges, are traffickers in words. Words are the vehicle by which the law and legal relationships must be conveyed. Words are our basic tools of trade. Interpreting words is a large part of what we do.
The focus of this conference is on commercial arrangements. However, the task of drafting or interpreting commercial contracts is not, in principle, different to the drafting and interpreting of other legal texts. Ideas which have found their origin in statutory interpretation have come to be applied in the interpretation of contracts. Such convergence in approach also reflects changes in the broader intellectual milieu [3].
Of course, many of the principles which have developed with respect to specific kinds of documents cannot be transposed to the interpretation of other documents. The starting point for the interpretation of any text must be the nature of the document.
Accordingly, a quite different approach is appropriate for the interpretation of a Constitution, intended by its framers to adapt to changing social conditions, to that which is appropriate for the interpretation of an ordinary statute.
Similarly, many principles, often referred to as presumptions, which are applicable to the interpretation of a statute derive from the nature of the political system. An example is the principle of legality, encompassing a range of rebuttal presumptions that Parliament did not, in the absence of a clear statement of intention, intend to affect fundamental rights and freedoms, or restrict access to the courts, or abrogate legal professional privilege, or the privilege against self-incrimination, or to interfere with vested property rights, etc [4]. Such principles turn on the nature of the statute as a product of democratic Parliament. They do not apply to commercial contracts although, if the corporate social responsibility idea gathers momentum, it may well be that something similar develops in the context of commercial arrangements.
Nevertheless, over the course of some three decades, there does appear to have been a change in the basic approach to interpretation which has affected all categories of legal texts in a broadly similar way. A significant concern is whether the change in the general style of contractual interpretation – from text to context – has undermined the desirable objective of ensuring commercial certainty.
Certainty is significant, not only between the parties to the contract, but also for third parties who deal with one or other of parties to a contract on the basis of those contractual rights and obligations. There is a real question whether the expanded scope of matters to which consideration can be given in the course of interpretation has so decreased the capacity of all relevant parties to rely on the words as to raise the level of uncertainty about the obligation to deliver the relevant bucket of money or of monies worth. There can be no doubt that the expanded scope has significantly increased the cost of legal dispute resolution.
A principal purpose of the detail found in commercial agreements, as well as a significant purpose of contract law, is to allocate risks between the parties, often enough with respect to contingencies that cannot be anticipated. Interpretation is the necessary means of determining how those risks were in fact allocated. Anything which increases the level of uncertainty about how words have performed that task, itself increases risk. There is a certain cannibalistic quality about that proposition, but I think I will keep it.
Drafters of contracts are no less prone than parliamentary draftsmen to express exasperation about how their carefully crafted words are misunderstood by others, not least by judges. All lawyers who draft texts attempt to be as clear and comprehensive as they can. We try to anticipate the kinds of issues that may arise, to which the verbal formulae we devise have to be stretched. As Sir James Fitzjames Stephen put it:
“It is not enough to attain to a degree of precision which a person reading in good faith can understand. It is necessary to attain, if possible, to a degree of precision which a person reading in bad faith cannot misunderstand. It is all the better if he cannot pretend to misunderstand it.” [5]
This objective is never capable of complete achievement. Hence disputes and litigation about what words mean. In this process the principles of contractual interpretation constitute a distinct body of law reflecting, in large measure, a general body of principles applicable to the interpretation of all legal texts, albeit with numerous principles specifically applicable to contracts or to particular kinds of contracts.
The principles applicable to the interpretation of contracts constitute a discrete area of legal discourse. When Lewison’s book appeared in 1989 I found it to be the most practical of additions to the armoury of a commercial barrister. Now in its third edition, it remains an essential reference [6]. All commercial practitioners would benefit from either an Australian edition or an Australian equivalent.
In a commercial context where almost all commercial transactions of substantial size are contained in detailed written form, it would be reasonable to expect that the task of interpretation would receive considerable attention in contract law courses and texts. That does not seem to be the case.
CODELFA
Consideration of the contemporary Australian approach to contractual interpretation must commence with the judgment of Justice Mason in the well-known case of Codelfa where, relevantly, his Honour said:
“ … There is more to the construction of the words of written instruments than merely assigning to them their plain and ordinary meaning … This has led to a recognition that evidence of surrounding circumstances is admissible in aid of the construction of contract … “
And
“ … Evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract where it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although … if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But insofar as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable.” [7]
What Sir Anthony Mason referred to, in accordance with practice in the area of contractual interpretation, as “surrounding circumstances” was generally referred to in the cognate area of statutory interpretation as “extrinsic materials”. At about the same time as Sir Anthony adopted what was understood to be a restrictive approach to the kinds of surrounding circumstances to which it was permissible to have regard for the purposes of interpretation, he was establishing a much wider scope for matters to which regard may permissibly be had in the context of statutory interpretation.
In what was to become a particularly influential passage, Justice Mason said in K & S Lake City Freighters:
“Problems of legal interpretation are not solved satisfactorily by ritual incantations which emphasise the clarity of meaning which words have when viewed in isolation, divorced from their context. The modern approach to interpretation insists that the context be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity might be thought to arise …” [8].
This passage reflects a longstanding approach to interpretation which was, it appears, for some time lost sight of in a focus on the literal meaning of words. However, even Sir Owen Dixon, whom many would identify with a literal approach, said in a statutory interpretation context:
“The rules of interpretation require us to take expressions in their context, and to construe them with proper regard to the subject matter with which the instrument deals and the object it seeks to achieve, so as to arrive at the meaning attached to them by those who must use them.” [9]
The High Court has authoritatively adopted Sir Anthony Mason’s approach in K & S Lake City Freighters in a manner which employs a broader scope for reference to surrounding circumstances than that which Sir Anthony had identified in Codelfa as appropriate for contractual interpretation. The Court has said:
“The modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its wider sense for the existing state of the law and the mischief … one may discern the statute was intended to remedy.” [10]
The contrast between this approach and that adumbrated in Codelfa is, at first sight, quite stark. Codelfa appears to require the identification of ambiguity before looking at surrounding circumstances. Furthermore, it appears to take a narrow, rather than an expansive, approach to the scope of circumstances that are permissible to be considered.
CONTEXT
It has long been accepted that words do not exist in limbo [11]. Words never stand by themselves. It remains of significance for the drafters of contracts to take into account as wide a range of contingencies as they are capable of predicting. Nevertheless, not everything can be predicted. Nor are all of the assumptions, practices and facts about the background circumstances or, manner in which a contract will operate, set out in writing. We do what we can.
Justice Learned Hand put the need to place words and sentences in their context particularly well. He said:
“Of course it is true that the words used, even in their literal sense, are the primary, and ordinarily the most reliable, source of interpreting the meaning of any writing: be it a statute, a contract, or anything else. But it is one of the surest indices of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.” [12]
The same, of course, is true of the commercial purposes of a contractual relationship.
Justice Learned Hand also said:
“The meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create.”[13]
No one doubts that recourse must be had to the whole of a written contract. The issue is how far beyond that it is necessary or desirable, and hence permissible, to go.
Nothing in Justice Mason’s observations in Codelfa cast any doubt on the need to read the whole of a contractual text. When his Honour was referring to “surrounding circumstances” he was not intending to encompass in that context the contractual document as a whole, nor any interrelated contractual documentation. By “surrounding circumstances”, he was referring to matters extrinsic to the contractual documentation.
It is quite clear from the way that the High Court has approached contractual documents that it begins with an analysis of the overall relationship reflected in the contractual documentation and sets out so much of the structure and content of the document as a whole which may illuminate the particular clause or clauses in dispute.
Nevertheless, the task remains one of interpreting words that are in issue. Context, even the internal context of the whole of the instrument, cannot be used to distort the language. As Felix Frankfurter once put it:
“While courts are no longer confined to the language, they are still confined by it. Violence must not be done to the words chosen …” [14]
AMBIGUITY
There is an apparent contrast between the reference in Codelfa to taking into account surrounding circumstances “if the language is ambiguous” and the subsequent authority involving statutory interpretation, to which I have referred, which emphasises that the range of relevant context that can be taken into account, even before the determination of “ambiguity”, is broad.
In large measure, this may simply be a reflection of the fact that the word “ambiguity” itself has a number of different meanings. The word is not limited to a situation in which a word has more than one meaning by reason of lexical or verbal ambiguity or a sentence or phrase has more than one meaning by reason of grammatical or syntactical ambiguity. The word “ambiguity” is often used in the more general sense of indicating any situation in which the scope and applicability of a particular statute is, for whatever reason, doubtful [15].
I have expressed the view [16] that this is precisely what Justice Mason had in mind when, in Codelfa, he extended the relevant reference beyond “ambiguity” in the phrase: “If the language is ambiguous or susceptible of more than one meaning”. Subsequent authority, to which I will refer, would suggest that that is how his Honour’s reasons should be understood.
I have expressed a preference for confining the word “ambiguity” to its more usual meaning of verbal or grammatical ambiguity. Another word is required to consider the case where a word or phrase is “susceptible of more than one meaning”, i.e. any situation in which the scope and applicability of the particular clause in issue is doubtful. I prefer to describe the range of issues arising in this respect, i.e. beyond the scope of verbal or grammatical ambiguity, as raising a problem of “inexplicitness”[17].
The circumstances in which such an issue of interpretation can arise include the following:
- Deciding whether to read down general words;
- Deciding whether to imply a term;
- Deciding whether to depart from the natural and ordinary meaning of words;
- Deciding whether or not the contractual definition of a particular word does in fact apply to its use in the particular clause;
- Deciding whether or not to give qualificatory words an ambulatory meaning.
All of these issues arise in the course of interpreting legal texts. In the broad sense of “ambiguity”, they could be so described.
A large part of our problem, of course, is the richness of our language. As Lord Simon of Glaisdale, a master of statutory interpretation, with a fascination with the English language – he was both an officer of the Simplified Spelling Society and a Scrabble tragic – once put it:
“Words and phrases of the English language have an extraordinary range of meaning. This has been a rich resource in English poetry (which makes fruitful use of the resonances, overtones and ambiguities) but it has a concomitant disadvantage in English law (which seeks unambiguous precision, with the aim that every citizen shall know as exactly as possible, where he stands under the law).” [18]
Nevertheless, in a legal text, it is usually the case that one can clearly identify which of the range of meanings is intended. However, over recent decades the shift in jurisprudential fashion to which I have referred has called into question the resort to what has traditionally been called the “plain meaning” or the “natural and ordinary meaning” of words.
As Lord Hoffmann once put it:
“I think in some cases the notion of words having a natural meaning is not a very helpful one. Because the meaning of words is so sensitive to syntax and context, the natural meaning of words in one sentence may be quite unnatural in another. Thus the statement that words have a particular meaning may mean no more than that in many contexts they will have that meaning. In other contexts their meaning will be different but no less natural.”
Lord Hoffmann has been responsible for a significant turn in the approach to contractual interpretation which, in large measure, reflects in this sphere of legal discourse, the movement from text to context that I have identified.
LORD HOFFMAN’S RESTATEMENT
As I am sure this audience is well aware, Lord Hoffmann outlined a five-point scheme for contractual interpretation in the Investors Compensation Scheme case. It has proven to be a particularly influential formulation that led Lewison in the 3rd edition of his work on the Interpretation of Contracts to introduce a new Chapter 1 entitled “An Overview”.
Lord Hoffmann’s five points are:
“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must for whatever reason, have used the wrong words of syntax …
(5) The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the common sense proposition that we do not readily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.” [19]
Subsequently, his Lordship clarified his reference in proposition (2) to “absolutely anything”:
“ … [W]hen … I said that the admissible background included ‘absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man’, I did not think it necessary to emphasise that I meant anything which a reasonable man would have regarded as relevant. I was merely saying that there is no conceptual limit to what can be regarded as background. It is not, for example, confined to the factual background but can include the state of the law (as in cases in which one takes into account that the parties are unlikely to have intended to agree to something unlawful or legally ineffective) or proved common assumptions which were in fact quite mistaken. But the primary source for understanding what the parties meant is their language interpreted in accordance with conventional usage: ‘we do not easily accept that people have made linguistic mistakes, particularly in formal documents’. I was certainly not encouraging a trawl through ‘background’ which could not have made a reasonable person think that the parties must have departed from conventional usage.”
A difference of views has been expressed as to whether his Lordship’s approach was new, on the one hand, and whether it went too far on the other hand. The editors of the Authorised Law Reports did not think much of it, as it appeared only in Vol 1 of the Weekly Law Reports. However, it has proven to be a particularly influential exposition [20], expressly adopted in subsequent judgments of the House of Lords and by other common law jurisdictions, but not in its entirety, in the cases to which I will refer, by the High Court [21].
As can readily be seen, Lord Hoffmann’s approach has a closer similarity to that which the High Court has adopted for purposes of statutory interpretation, than the reasoning in Codelfa. In particular, he expressed no need to identify an ambiguity before taking into account surrounding circumstances. The High Court has either abandoned that part of Codelfa or acknowledged that it should never have been understood as so confined. Nevertheless, the High Court has not adopted Lord Hoffmann’s expression of the scope of matters to which regard may be had, expressed in terms such as “absolutely anything”, even as subsequently qualified.
THE AUSTRALIAN REACTION
The tension between Lord Hoffman’s analysis and Codelfa was recognised immediately after the Investors Compensation Scheme case was handed down [22].
The applicability of Lord Hoffman’s approach and its consistency with Codelfa was raised but not decided in the High Court in the Royal Botanic Gardens case. The Court expressly stated that, in case there was a difference, lower courts should continue to follow Codelfa[23]:
“It is unnecessary to determine whether their Lordships there took a broader view of the admissible ‘background’ than was taken in Codelfa or, if so, whether those views should be preferred to those of this Court. Until that determination is made by this Court, other Australian courts, if they discern any inconsistency with Codelfa, should continue to follow Codelfa.”
Shortly thereafter Justice Warren (as the Chief Justice of Victoria then was) had to interpret a pension scheme trust deed and to determine what was the permissible scope of surrounding circumstances, including in that case, whether conduct under the deed in its administration could be taken into account. English authority, to which her Honour referred with approval, adopted a broad view of this matter based on the authority of the Investors Compensation Scheme case. Notwithstanding the warning in Royal Botanical Gardens Trust, her Honour concluded that the pension scheme deed had to be given a “practical and purposive” interpretation [24]. Accordingly, her Honour adopted the approach of the English authorities on the basis that the factual matrix of the relationship “cannot be ignored” [25].
A clear indication of the likely development of the High Court approach had been given by Chief Justice Gleeson two years before Royal Botanic Gardens in McCann v Switzerland Insurance when he said:
“[22] A policy of insurance, even one required by statute, is a commercial contract and should be given a business like interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.” [26]
Furthermore, in a joint judgment in 2001, Gleeson CJ, Gummow and Hayne JJ had expressly adopted Lord Hoffmann’s first proposition, i.e. that “interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge … etc.” [27]
What has been characterised as a shift from the approach in Codelfa to an approach said to be similar to that of Lord Hoffman, commenced with the joint judgment in Pacific Carriers Limited v BNP Paribas:
“The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP and the purpose and object of the transaction.” [28]
The authority given for the last sentence of this passage is Investors Compensation Scheme. It remains, however, unclear as to how much of Lord Hoffmann’s five point scheme, other than the first, has been approved.
The joint judgment in Pacific Carriers went on to refer to Codelfa but only the passage in which Justice Mason referred with approval to a statement of Lord Wilberforce about the significance of knowing the commercial purpose of a contract.
Pacific Carriers was confirmed by the High Court in Toll (FGCR) Pty Ltd v Alphapharm Pty Ltd where the Court said:
“[40] … The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.” [29]
It does appear that, at least in the form in which it has been stated by the High Court in both these two recent judgments and in Maggbury, Codelfa has been superseded, without being overruled. The High Court has not expressly adopted the whole of Lord Hoffmann’s five point scheme. However, the general approach in Australia to contractual interpretation is to be found in these judgments.
Contrary to the suggestion in Codelfa, if it be such, there is no need to find an “ambiguity” before looking at “surrounding circumstances known to the parties”. However, the Court has not yet addressed the scope of the “surrounding circumstances” to which regard may permissibly be had. In particular, the Court has not adopted Lord Hoffmann’s suggestion, as subsequently qualified, that “absolutely anything”, which could affect the way a reasonable man understood a document can be taken into account.
The recent authorities were considered by Justice Finn in Lion Nathan v Coopers Brewery. His Honour determined, particularly on the basis of the footnote reliance on Investments Compensation Scheme, that the requirement to show ambiguity in advance, suggested on one view of Codelfa, was no longer authoritative. His Honour was upheld in the Full Court on appeal [30]. I think they are right, if perhaps a little bold.
When the New South Wales Court of Appeal had determined that an old decision of the High Court was no longer applicable, the High Court reminded all intermediate courts of appeal, in forceful terms, that it was up to the High Court to decide whether that was so or not [31]. Royal Botanic Gardens reflected this position.
One of the problems that arise from time to time is that the High Court does not always tell you that it is in fact departing from its earlier judgments. This may well have occurred in this context with respect to Codelfa. In any event, I remain of the view that Mason J was not intending to use “ambiguity” in a narrow sense.
In Lion Nathan Justice Finn noted that the analysis in Pacific Carriers was a step in the convergence of the principles governing the construction of contracts and the construction of statutes [32]. Upon this basis it is a little difficult to hail the new approach as a dramatic change and to give it a new label such as “commercial construction”, which I presume is intended to distinguish earlier approaches to interpretation which were somehow other than “commercial” [33]. One could cite dozens of judgments over the course of a century which emphasised how the commercial nature of contracts must affect their interpretation.
Nevertheless, over the course of the last few decades the movement from textualism to contextualism in all kinds of interpretation, does represent a significant change. The emphasis now given to the commercial purpose of a contractual arrangement is, if not new, of a different order of significance.
Lewison in his most recent edition referred to:
“ … [T]he attitude of the court in discerning (or attempting to discern) the commercial purpose of a particular transaction, and construing the contract in the light of that commercial purpose. This attitude has grown remarkably in recent years, and is perhaps the single most important change in the construction of all classes of written instruments this century.” [34]
I refer also to the observation of Lord Diplock in 1985 in The Antaios[35]:
“ … If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”
There can be no doubt that a “business-like” interpretation or reliance on “business commonsense” is an acceptable constraint on contractual interpretation. The only difficulty is that, at least when the matter comes to the level of litigation, each party remains convinced that “a business like” interpretation or “business commonsense” happens to coincide with its own commercial interests. This is not always easy to resolve.
OBJECTIVE INTERPRETATION
Both Pacific Carriers and Alphapharm affirm the longstanding view, also expressed in Codelfa, that the orthodox approach to interpretation is objective. The purpose is to ascertain the intentions of the parties in an objective sense. It is not to determine the subjective intention of the parties. This is a longstanding principle in contractual interpretation [36]. As long ago as 1925, Justice Isaacs described it in the following words “Few principles are more firmly entrenched in the law” [37].
In this regard, the law of statutory interpretation and that of contractual interpretation are the same. Accordingly, if a Minister in a Second Reading speech has expressed the intention of the legislation that is not determinative. The task of the courts in statutory interpretation is to determine what Parliament meant by the words it used. The courts do not determine what Parliament intended to say [38].
The same is true for contractual interpretation. The subjective intentions of the parties are not admissible but, even if admitted on some other basis, e.g. as revealing the “factual matrix” or commercial purpose or as relevant to a case based on misrepresentation, estoppel or rectification, the courts will not have regard to any such subjective statements on an issue of interpretation.
In this regard the common law has developed in a different way to the civil law. Article 1156 of the French Civil Code proclaims:
“In interpreting the contract, one should seek the joint intent of the parties communicating through the contract and not stop at the literal meaning of the terms.”
The civil law tradition has significantly influenced international statements of the law. For example, the UNIDROIT Principles of International Commercial Contract state:
“4.1(1) A contract shall be interpreted according to the common intention of the parties;
(2) If such intention cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.”
Chapter 5.101 of the Principles of European Contract Law adopt the same approach and this will unquestionably influence English decisions in the future.
Notwithstanding the new influence of European law on the common law of England, Lord Hoffmann retains the traditional objective approach to determining the intention of parties to a contract. Nevertheless, he noted in his proposition (3) in Investors Compensation Scheme that the exclusion of any declaration of subjective intent was an exception to the basic rule and that “the boundaries of this exception are in some respects unclear” [39]. Lord Bingham of Cornwall in re-expressing Lord Hoffmann’s judgment in Investors Compensation Scheme appeared to indicate a firm view that the necessity of ascertaining the party’s intentions is an objective one and did not suggest any change was likely [40]. In this respect Australian authority is quite emphatic [41].
GOING FURTHER THAN LORD HOFFMANN
Nevertheless, there have been suggestions that the well established exceptions to the scope of the new contextualism, of the exclusion of evidence of pre-contractual negotiations and of subsequent conduct, is not consistent with the principles which have now found favour [42]. The scope of the “surrounding circumstances” to which regard may be had, so it is said, should be as broad as Lord Hoffmann’s formulation – “absolutely everything” – suggests, including precontractual negotiations and subsequent conduct.
The case for abolishing the rule which excludes evidence of pre-contractual negotiations has been made forcefully by Lord Nicholls of Birkenhead who advanced four reasons why the rule should not be regarded as absolute:
1 “This would introduce much needed coherence into this area of the law.”
2 “This would make the law more transparent.”
3 “This would conform to the current international trend.”
4 “The exclusion of relevant evidence means that at times justice may not be done.”
As to the first of the reasons given by his Lordship about the need for “coherence” in this area of the law, his Lordship is referring to those who advocate taking the analysis of Lord Hoffmann in Investment Compensation Scheme to its logical conclusion.
The basic thrust of this approach has been that there is no logical reason why the new emphasis on the significance of context for the task of interpretation should be confined by boundaries such as the exclusion of pre-contractual negotiations and subsequent conduct. Lord Hoffmann’s exceptions to the general rule are said to render the law incoherent and the means for escaping from the current rule, such as an action for rectification or by the assertion of estoppel, including particularly an estoppel by convention, manifest that incoherence [43].
However, as Oliver Wendell Holmes famously said: “The life of the law has not been logic but experience” [44].
Furthermore, as Justice Kitto said, lawyers must resist:
“ … the temptation, which is so apt to assail us, to import a meretricious symmetry into the law.” [45]
I do not invoke the unkind remark of Ralph Waldo Emerson that: “A foolish consistency is the hobgoblin of little minds”, because the adjective “foolish” leaves matters at large [46].
Coherence in the law is unquestionably desirable. However, it is not the only value. I see no particular difficulty in the traditional approach accepted by Lord Hoffmann of having a general rule subject to exceptions. The common law has managed to accommodate such a mental exercise as does, I venture to suggest, the majority of statutes and a substantial number of written contracts. If there are good policy reasons for adopting an exception, as Lord Hoffmann himself suggests, there is nothing illogical, let alone incoherent, in doing so.
The common law has never had the fascination for consistency apparent in the civil law, which operates on the assumption that all relevant legal rules can be written down in a comprehensive manner. We have to be aware that English lawyers are now subject to civil law influences which are of no relevance to us.
The second reason given by Lord Nicholls is the desirability of making the law “more transparent”. This appears to be a reference to the fact that so much evidence about pre-contractual negotiations in fact gets into evidence as part of the factual matrix or by reason of some other cause of action, such as estoppel or misrepresentation or rectification, so that the evidence does in fact have an influence on trial judges’ approach to interpretation albeit an unacknowledged one.
I can see no particular purpose in allowing the fashionable concept of “transparency” to qualify appropriate legal doctrine. When the United States Tammany Hall politician, Senator Roscoe Conkling, proclaimed that when Samuel Johnson said that patriotism was the last refuge of the scoundrel, he had not thought of the possibilities of the word “reform”, one could today add the word “transparency” to that list.
Indeed, if there is a case for transparency in this respect, it is a case for reducing the amount of documentation that comes before a court under the rubric of the “factual matrix” or in barely arguable cases for an estoppel by convention or a suit for rectification.
The third reason to which his Honour refers as “the current international trend”, is the permeation into international arrangements of the European civil law. This is particularly true of the Principles of European Contract Law and also the UNIDROIT Principles of International Commercial Contracts. This is one of the many respects in which English law is likely to diverge from the common law of Australia, by reason of the influence upon English lawyers of the progressive integration of the United Kingdom into the European economic and political communities. For this reason alone it is necessary in the future for Australian lawyers to treat English authorities on such matters with caution.
Lord Nicholls asserts that the Restatement (Second) Contracts the United States also conformed with what his Lordship calls “the current international trend” [47]. The recently retired Chief Justice of Israel, in a comprehensive analysis of purposive interpretation in which he advocates contextualism against textualism, has also asserted that the American Restatement has gone in the direction of the European approach to the interpretation of all legal texts and that the American Restatement has adopted a subjective approach to interpretation [48].
Generalisation about American case law is difficult because the matter of contractual interpretation arises under both State and Federal law and there is no single common law of the United States. Accordingly, there is a great divergence in approaches within the United States. As one commentator has noted:
“[The Courts] vary from the intensely objective approach of the New York Court of Appeals to the subjective ‘knowing and voluntary’ test imposed by the Federal courts for the surrender of federal rights enacted for the protection of employees against various forms of discrimination.” [49]
Of the standard texts, Williston has no doubt that “it is the objective intent, not the subjective intent that controls” [50]; whereas Corbin states that “Interpretation of contracts is neither wholly objective nor wholly subjective” [51]. It is not correct to simply place the United States in the same category as the civil law influenced international texts. Retention of the objective approach may well be an advantage of the common law from a commercial perspective.
Lord Nicholls final reason is that sometimes “justice” may not be done. This is the ultimate Chancellors’ foot approach to the law. It is not an approach which has ever attained much traction in Australian jurisprudence, let alone in Australian commercial law. The implications of such an approach were analysed some years ago by Chief Justice Gleeson in a paper entitled “Individualised Justice – The Holy Grail” [52]. His Honour summarised the constraints on the ability of the law to “provide a form of justice that responds to the peculiarities of every individual case” as follows:
“First, people look to a system of justice to function in an even handed and consistent manner. The extent to which the results of cases depend upon the personal and subjective evaluation of situations by individual judges, especially when discretionary remedies are available, this expectation is disappointed …
Secondly, there is an abiding need for predictability and certainty in any system of law. The willingness of people to engage in commercial transactions, for example, depends upon confidence in their ability to know the way in which the law will assign rights and obligations to their conduct and their relationships. There are still many areas of law in which people accept, and clearly prefer, certainty to an assessment of individual merits. The value of reasonable certainty, and the demoralising consequences of unpredictability in the law, should not be underestimated.
Thirdly … the procedures by which justice is administered involve their own constraints upon the available degree of flexibility in the law …
Fourthly, it is expected of judges that they will apply neutral and general principles to the resolution of individual disputes; they have no mandate to act as ad hoc legislators who, by decree, determine an appropriate outcome on a case by case basis. The legitimacy of judges depends upon the nature of the function that is assigned to them, and upon the manner in which they perform that function …
Fifthly, it is wrong to assume that, running throughout the law, there is some general principle of fairness which will always yield an appropriate result if only the judge can manage to get close enough to the facts of the individual case. … The law responds to many impulses in addition to the dictates of apparent fairness in individual cases, and these need to be given full weight in any rational development of the law.”
COST
A significant reason for resisting the expansion of the scope of surrounding circumstances, indeed for restricting the extent to which this approach has already developed, is the increased cost imposed on commerce including, but not limited to, the cost of litigation.
The first step by Lord Wilberforce – taking into account the whole of the “factual matrix” – unquestionably expanded to a substantial degree the costs of litigation starting, perhaps, most significantly, with the enormous cost of the discovery process and, thereafter, the cost of the compilation of the “agreed bundle of documents”, the proliferation of disputes about what is admissible and what isn’t and the enormous burden imposed on all involved in litigation, including solicitors, barristers and the judge, in getting on top of an enormous body of material. As one former English judge said of Lord Hoffmann’s “absolutely everything” dictum:
“It is hard to imagine a ruling more calculated to perpetuate the vast cost of commercial litigation.” [53]
By the time I came to the Bar commercial briefs were no longer delivered tied in pink ribbon. For much of my time at the Bar cases would be described as one or two folder cases. Subsequently, they came to be described in terms of the multiple number of trolleys involved. No doubt this is in part driven by the technology of word processing and photocopying, but it is also driven by the movement from text to context as an approach to contractual interpretation [54].
THIRD PARTIES
The law of contractual interpretation focuses almost exclusively, as does the law on contract, on the parties to the contract. Contract law has not given effective consideration to the significance of contracts to others. Where one party to a contract wishes to deal with its interest in the contract that this issue becomes critical. That is so, in my opinion, whether both parties are aware of the intention to so deal at the outset or not.
Lord Nicholls acknowledges that one of the defects in his proposed approach may be the impact on third parties who are unlikely to know anything about pre-contractual negotiations. He accepts that that is so. However, he adds:
“When interpreting contracts courts already take into account ‘objective’ background matters known to the contracting parties but not necessarily known to others.
Furthermore, when interpreting a document intended for commercial circulation it may be reasonable to attach added weight to the meaning the words bear on their face. The context afforded by the nature of the document is one of the matters the notional reasonable reader will take into account.”
The impact on and the import to third parties is, in my opinion, significantly understated in this analysis. The effect on the uncertainty of commercial relationships, and the considerably increased costs of dispute resolution, whether by commercial arbitration or in the courts, is such that this is a matter entitled to considerable weight in determining the basic rule. It is not a consideration which is somehow to be flung into the balance as to how much “weight” the expression of a subjective intention is to be given by the judge or arbitrator who has to determine the true construction of the contractual provision in issue. When rules of exclusion are transmogrified into matters of “weight”, the predictability of the process of decision making is attenuated. A solid foundation is replaced by shifting sands.
In a forceful reply to Lord Nicholls’ article in the Law Quarterly Review, the author referred to an observation by Lord Hoffmann in another case, which expressed an unstated assumption in his five point schema in the Investors Compensation Scheme case as follows:
“The interpretation of a legal document involves ascertaining what meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed. A written contract is addressed to the parties.” [55]
The author notes that this passage:
“Does not reflect the present writer’s experience. A lawyer does not do the job he is retained to do if he drafts the contract so that it is intelligible to the original parties, and then only for as long as they can recall all the background knowledge that they had at the time of the signing.
It is not suggested there should be a retreat to literalism. However, the fiction that contracts are addressed to the original parties should be abandoned. Most professionally drafted commercial contracts are intended to be used by, and are therefore addressed to, people who will know the basic background to the deal, but no more than that.” [56]
This highlights a basic defect in Lord Hoffmann’s five point schema. It is not a scheme that can be applied to a substantial range of commercial contractual relationships.
It has always been the case that third parties have dealt with one or other of the parties to a contract with respect to their contractual rights and obligations under commercial contracts. That has always been so for financiers and indeed, more often than not in large commercial transactions, loan agreements are interrelated with an underlying basic contract between parties in a direct commercial relationship. The financier is never far removed, usually to the knowledge of both parties to a contract. However, in contemporary circumstances, most parties would assume that there was a financier involved for many transactions. More significantly, it would also be assumed that a financier may become involved after the contract has been executed.
Similarly, there have always been forms of dealing with contractual rights and obligations. One thinks of dealings with book debts by way of factoring and the like. However, in contemporary circumstances, virtually anything seems to be able to be securitised and subsequently made the subject of derivatives of a character only a mathematician can understand.
Such contemporary developments strongly suggest that third party involvement in commercial transactions is now of a considerably different order to the past. This challenges the general idea that a contract of commercial significance consists only of a relationship between two parties. As I have indicated, Lord Hoffmann’s schema appears to be based on this assumption. At least it makes no express exclusion for a different kind of commercial relationship.
In this regard, the focus of contract law may need to change. The traditional language is increasingly irrelevant. As has often been noted, it is no longer always useful to analyse relationships in terms of an “offer” and an “acceptance”. Nor is there usually much point in identifying with precision the way in which it is said that “consideration” can, in the traditional animated metaphor, be seen to “move” from the promisee to the promisor. Such difficulties are manifestations of the proposition that Lord Hoffmann’s assertion that “a written contract is addressed to the parties” is, today, a significant oversimplification.
The interests of third parties can be accommodated in Lord Hoffmann’s scheme. Either or both parties to a contract may know that third parties will, or will probably, or may become involved and that they would know little or nothing about the factual matrix or the surrounding circumstances, let alone about the subjective intention of the parties. However, it is, in my opinion, a significant defect in Lord Hoffmann’s schema that no express provision is made in this regard.
The scope of contemporary involvement by third parties with one or other of the parties to a contract, on the basis of the performance by the other party of its obligations, at least in commercial contracts of any size or longevity, is such that it should now be assumed that both parties are aware that the other party to the contract will, or may, (the test is yet to be determined) deal with its contractual rights with third parties, whether as lenders or as assignees or in some other capacity. On that basis both parties should be aware that any such a third party would rely on, and usually rely only on, the text of the agreement. Where a text purports or appears to be comprehensive in such a context, resort to the factual matrix could well be restricted and any suggestion of an expansion in the scope of “surrounding circumstance” in the direction of “absolutely everything” should be resisted.
There is a line of authority which restricts reliance on surrounding circumstances in a manner consistent with this approach. Investors were held to be entitled to rely solely on the statutory contract constituted by the memorandum and articles of association of a corporation [57]. The abolition by statute of the significance of ultra vires conduct by corporations has lessened the significance of a memorandum and articles of association [58]. However, this line of authority does restrict the scope for relying on surrounding circumstances in a context where third parties are known to be involved and where only the text of a contract is known, or likely to be or become known, to them.
RESTRICTING THE “ABSOLUTELY ANYTHING” TEST
The movement from text to context emphasises the importance in a commercial contract of including an entire agreement clause. They have, in part, been designed to combat claims for collateral oral contracts or the implication of terms and to provide some protection against alleged reliance on representations. However, as one observer has commented, without approval, entire agreement clauses are a means of “contracting out of contextualism” [59]. Drafters of commercial contracts should bear this in mind.
Such clauses are simply a means by which parties express their freedom to contract, by modifying the otherwise applicable common law rule of contractual interpretation. It is by no means clear whether these clauses will always be found to be conclusive. Their significance in many commercial contexts will be such, however, that a strong argument can be made that such a clause precludes consideration of “surrounding circumstances” external to the document, on the basis that parties have agreed to do just that.
Recent High Court authority in Pacific Carriers and Alphapharm has been careful not to accede to the whole of Lord Hoffmann’s schema. In particular, the confinement of the Australian formulation appears to be narrower than the “absolutely anything” test, even as qualified by Lord Hoffmann. When the Federal Court recently determined that these cases qualify the Codelfa requirement, if it were such, to first find “ambiguity”, their Honours restricted the scope of “surrounding circumstances” to which regard may permissibly be had [60].
There is authority in England which expresses dissatisfaction with the state of the law brought about by the shift to contextualism in interpretation of contracts. It is an approach which, to some degree, remains open for Australian courts to adopt. It is a long extract which is worth reproducing in full. Lord Justice Saville, in National Bank of Sharjah v Dellborg, an appeal from a case in the Commercial Court said:
“The law as it presently seems to be stated would appear to be that if the circumstances surrounding the making of the agreement showed to a reasonable man that to read paragraph 8 as covering only the amounts actually credited to the deposit accounts would produce a result which the parties clearly could not have intended, the court would (notwithstanding the meaning which the words bear as a matter of ordinary language) interpret the paragraph so as to accord with what a reasonable man, knowing of those circumstances, would understand it to mean. This is said to be justified on the basis that to do otherwise would result in the court interpreting the agreement in a way which in the light of the surrounding circumstances, simply offended common sense.
It is difficult to quarrel with the general proposition that when interpreting an agreement the court is trying to work out what the parties intended to agree, rather than analysing words in a vacuum. Thus where the words the parties have used are ambiguous or, read literally, are meaningless or nonsensical, the surrounding circumstances must be considered in order to select the appropriate meaning or to try to give the words meaning or sense. However, where the words used have an unambiguous and sensible meaning as a matter of ordinary language, I see serious objections in an approach which would permit the surrounding circumstances to alter that meaning.
Firstly, such an approach would seem to entail that even where the words that the parties have chosen to use have only one meaning; and that meaning (bearing in mind the aim or purpose of the agreement) is not self-evidently nonsensical, the Court will not be allowed to adopt that meaning without an explanation of the surrounding circumstances which would involve discovery, interrogatories, cross-examination and the like; for a party seeking to challenge that could assert with great force that until the circumstances are fully examined, it is impossible to decide whether or not they should override the plain words of the agreement. This would do nothing but add to the costs and delays of litigation and indeed of arbitration, much of which is concerned with interpreting agreements.
Secondly, the position of third parties (which would include assignees of contractual rights) does not seem to have been considered at all. They are unlikely in the nature of things to be aware of the surrounding circumstances. Where the words of the agreement have only one meaning, and that meaning is not self evidently nonsensical, is the third party justified in taking that to be the agreement that was made, or unable to rely on the words used without examining (which is likely to be difficult or impossible for third parties to do) all the surrounding circumstances? If the former is the case, the law would have to treat the agreement as meaning one thing to the parties and another to third parties, hardly a satisfactory state of affairs. If the latter is the case, then unless third parties can discover all the surrounding circumstances and are satisfied that they make no difference, they cannot safely proceed to act on the basis of what the agreement actually says. This again would seem to be highly unsatisfactory.
To my mind there is much to be said for the simple rule that where the words the parties have chosen to use have only one meaning, and that meaning (bearing in mind the aim or purpose of the agreement) is not self evidently nonsensical, the law should take that to be their intended agreement, and should not allow the surrounding circumstances to override what (ex hypothesi) is clear and obvious. This would enable all to know where they stand without the need for further investigations; and for the court to provide the answer, where the point is contested, without undue delay or expense. The law of rectification provides the means for correcting the agreement where the parties have made a mistake in writing it down. To my mind what appears to be present law does no service to the international or domestic commercial community, let alone others, such as those entering into leases and the like.
For these reasons it seems to me that what appears to be the latest approach requires qualification, if not reconsideration. Be that that as it may, I shall proceed on the basis that it is this approach that should be applied to the present case. Accordingly, the question is whether, from the surrounding circumstances that can legitimately be taken into account, it can be demonstrated that the parties cannot have intended to limit paragraph 8 as its language dictates and must have intended that amounts other than those actually credited to the deposit accounts should be included.” [61]
This case is not merely “unreported”. In this electronic age when there is no such thing as an unreported case, it is difficult to find it in England at all. The database called Current Legal Information, a Sweet & Maxwell resource available on Westlaw, does not refer to the case in any way. Three other English databases Justis, Justcite and Caselaw (Lexis Nexis) mention the case by reason of its citation in two English cases, but each citation is limited to the fact that it was relied upon in argument, and it was not applied in any way. Furthermore, none of these three sites actually provide access to the full text of the judgment. Indeed, the only place to obtain the full text of the judgment is on BAILLI, the British version of the Australian site AUSTLII.
I have a great deal of sympathy with the approach of Lord Justice Saville. I believe many Australian judges will also. It does not appear to me to be inconsistent with the extent to which the High Court in Maggbury, Pacific Carriers and Alphapharm has accepted part of Lord Hoffman’s five point schema. Australian Courts may be able to adopt a similar but not identical approach. There remains an opportunity to restrict the scope of “surrounding circumstances” which are pertinent for the task of contractual interpretation in Australian law more narrowly than in England.
END NOTES
1. Summit Investment Inc v British Steel Corporation (The Sounion) (1987) 1 Lloyds Rep 230 at 235 per Lloyd LJ.
2. See Gerard McMeel “The Rise of Commercial Construction in Contract Law” (1998) Lloyds Maritime & Commercial Law 382; Elisabeth Peden and J W Carter “Taking Stock: The High Court and Commercial Construction” (2005) 21 Journal of Contract Law 172; J W Carter and Elisabeth Peden “The ‘Natural Meaning’ of Contracts” (2005) 21 Journal of Contract Law 277.
3. See Gerard McMeel “Language and the Law Revisited: An Intellectual History of Contractual Interpretation” (2005) 34 Common Law World Review 256.
4. See generally J J Spigelman “The Principle of Legality and the Clear Statement Principles” (2005) 79 ALJ 769 at 774ff.
5. Re Castioni (1891) 1QB149 at 167-168 per Stephen J.
6. Kim Lewison The Interpretation of Contracts (3rd ed) Sweet & Maxwell, London (2004).
7. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 348 at 352.
8. K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 315.
9. R v Wilson; Ex parte Kisch (1934) 52 CLR 234 at 244. The Kisch case raised particular difficult issues, discussed in J J Spigelman “The Poet’s Rich Resource: Issues in Statutory Interpretation” (2001) 21 Aust Bar Rev 224 at 227-230.
10. CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 affirmed in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69] and Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273 at 280-281.
11. See e.g. Morris v Beardmore [1981] AC 446 at 459.
12. Cabell v Markham 148 F.2d 737, C.C.A.2(NY) at 739 (1945).
13. Helvering v Gregory 69 F.2d 809, C.C.A.2 at 810-811 (1934).
14. See Felix Frankfurter “Some Reflections on the Reading of Statutes” (1947) 47 Columbia Law Rev 527 at 543.
15. Bowtell v Goldsborough, Mort & Co Ltd (1905) 3 CLR 444 at 456-457; Repatriation Commission v Vietnam Veterans’ Association of Australia (NSW Branch) (2000) 48 NSWLR 548 at [116]; R Cross Statutory Interpretation (3rd ed) Butterworths, London (1995) at 83-84.
16. See South Sydney Council v Royal Botanic Gardens [1999] NSWCA 478 at [35].
17. See Repatriation Commission v Vietnam Veterans Association of Australia (NSW Branch) (2000) 48 NSWLR 548 at [116].
18. Stock v Frank Jones (Tipton) Ltd (1978) 1 WLR 231 at 236.
19. Investors Compensation Scheme Limited v West Bromwich Building Society (1998) 1 WLR 903 at 912-913.
20. See Ewan McKendrick “The Interpretation of Contracts: Lord Hoffman’s Restatement” in S Worthington (ed) Commercial Law and Commercial Practice Hart, Oxford, 2003.
21. See Lewison supra at 3-4.
22. See e.g. Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd [1999] 21 WAR 425; WASC 218 at [40].
23. See Royal Botanic Gardens & Domain Trust v South Sydney Council (2002) at 76 ALJR 436 at [39].
24. See Ansett Australian Ground Staff Superannuation Plan Pty Ltd v Ansett Australian Limited (2002) 174 FLR 1; [2002] VSC 576; at [213] and [232].
25. Ibid at [232].
26. See McCann v Switzerland Insurance Ltd (2000) 203 CLR 579 at [22]. The authority on which Chief Justice Gleeson relied was Lake v Simmon [1927] AC 487 at 509.
27. Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 216 CLR 181 at [11].
28. Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at 461-462.
29. See Toll (FGCR) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179. The authority relied on for this proposition was Pacific Carriers at [22].
30. See Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2005) 223 ALR 560 esp at 78-79 and on appeal [2007] 59 ACSR 444 esp at 45-52, 98, 101 and 254.
31. See Garcia v National Australian Bank Ltd (1998) 194 CLR 395 at [17].
32. Ibid at [79].
33. See Butterworths Carter on Contracts, Vol 1 esp at [12-040]; J. W. Carter, Elisabeth Peden & G J Tolhurst Contract Law in Australia (5th ed) Butterworths, Australia (2007) at [12-010]; Elisabeth Peden & J W Carter “Taking Stock: The High Court on Contract Construction” (2005) 21 Journal of Contract Law 172 esp at 178.
34. Lewison supra at 236, [7.15].
35. Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 199.
36. See Moneypenny v Moneypenny (1861) 9 HLC 114; 11 ER 671 at 684; Rickman v Carstairs (1833) 5 B & Ad 651; 110 ER 931; Smith v Lucas (1881) 18 Ch D 531 at 543; Drughorn v Moore [1924] AC 53 at 57; Joseph M Perillo “The Origins of the Objective Theory of Contract Formation and Interpretation” (2000) 69 Fordham L Rev 427.
37. Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60 at 76.
38. See Nolan v Clifford (1904) 1 CLR 429 at 449; R v Bolton; Ex parte Beane (1987) 162 CLR 514 at 518; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 459; Wik Peoples v Queensland (1996) 187 CLR 1 at 168-168; Dossett v TKJ Nominees Pty Ltd (2003) 218 CLR 1 at [10] and see the authorities discussed in R v Young (1999) 46 NSWLR 681 at [5].
39. For an analysis of the distinction between subjective and objective purposes in different jurisdictions see Aharon Barak Purposive Interpretation in Law, Princeton Uni Press, Princeton NJ (2005) at 336ff.
40. See Bank of Credit & Commerce International SA v Ali [2002] 1 AC 251 at [8].
41. See, e.g. Codelfa supra at 351-352 and 406; Pacific Carriers supra at 461, and Alphapharm supra at 179.
42. See, e.g. Gerard McMeel “Prior Negotiations and Subsequent Conduct – the Next Step Forward for Contractual Interpretation” (2003) 119 LQR 272; Lord Nicholls of Birkenhead “My Kingdom for a Horse: the Meaning of Words” (2005) 121 LQR 577.
43. In Australia there are conflicting authorities on a “convention” that precedes a contract. See cases listed by K R Handley Estoppel by Conduct and Election, Sweet & Maxwell, London 2006 at 8-012.
44. Oliver Wendell Holmes The Common Law, Maxmillan, London (1882) at 1.
45. Attorney General (NSW) v Perpetual Trustee Co Ltd (1952) 85 CLR 237 at 285.
46. Ralph Waldo Emerson essay on “Self Reliance”. See http://www.emersoncentral.com/selfreliance.htm
47. See Lord Nicholls of Birkenhead supra at 586.
48. See Barak supra.
49. Perillo supra at 466-467.
50. Samuel Williston A Treatise on the Law of Contracts (4th ed), West Group (1999) Vol 11 §31:4 at 280, 283.
51. Corbin on Contracts Vol 5 (Revised ed) Lexis, 1998 §24.6 at 25-28.
52. A M Gleeson “Individualised Justice – The Holy Grail” (1995) 69 ALJ 421 at 431-432.
53. Sir Christopher Staughton “How Do Courts Interpret Commercial Contracts” (1999) 58 Cambridge LJ. 303 at 307.
54. Catherine Mitchell “Entire Agreement Clauses: Contracting Out of Contextualism” (2006) 22 Journal of Contract Law 222.
55. See Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 at [73].
56. Alan Berg “Thrashing through the Undergrowth” (2006) 122 LQR 354 at 359.
57. See Egyptian Salt and Soda Company Ltd v Port Said Salt Association Ltd [1931] AC 677 at 682; National Roads and Motor Association Ltd v Pakim (2004) 60 NSWLR 224 at [81]-[86].
58. This was in issue in Lion Nathan v Coopers supra.
59. Mitchell supra; see also Elisabeth Peden and J W Carter “Entire Agreement – and Similar – Clauses” (2006) 22 Journal of Contract Law 1.
60. Lion Nathan v Coopers supra per Finn J at [79] and, on appeal, per Weinberg J at [48].
61. National Bank of Sharjah v Dellborg (unreported, 9 July 1997).
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