Din v Westpac Banking Corporation [2003] FJHC 21; HBC0295j.2000s (28 August 2003)

IN THE HIGH COURT OF FIJI
(AT SUVA)

CIVIL ACTION NO. HBC 295 OF 2000S

Between:

HASSAN DIN
First Plaintiff

and

FINANCE SECTOR MANAGERIAL STAFF ASSOCIATION
Second Plaintiff

and

WESTPAC BANKING CORPORATION
Defendant

Sir Vijay R. Singh for the Plaintiffs
G.E. Leung and Ms. S. Sorby for the Defendant

JUDGMENT

These proceedings concern the interpretation of a clause of a collective agreement entered into between the Second Plaintiff (the Union) and the Defendant (the Bank) on 9 September 1997. The proceedings were commenced by way of Originating Summons filed on 17 July 2000. Two affidavits in support were filed on the same day:

(a) Robert Bijay Kumar, the Union’s General Secretary; and

(b) Dewan Chand Shankar, National Secretary of the Fiji Bank and Finance Sector Employees Union (the FBEU).

On 20 November 2000 the Bank filed two affidavits in answer:

(a) Paul Wilkinson, bank officer; and

(b) Robert Joseph Larizza, bank officer.

On 21 November the Plaintiffs were given leave to file a further affidavit. On 19 December an affidavit by Gayendra Singh, retired civil servant, was filed. This prompted the Bank on 19 January 2001 to file a final affidavit by Mr. Larizza.

In his second affidavit Mr. Larizza questioned the objectivity of Mr. Singh whose evidence was based on his recollection of conciliation proceedings over which he had presided arising out of a dispute between the Bank and the FBEU in 1992. Mr. Singh is also related by marriage to Mr. Shankar. In view of these considerations and paragraphs 12 and 13 of Mr. Singh’s affidavit, which for the first time raised important matters of fact which were disputed by the Bank, it was agreed that oral evidence would also be taken.

On 8 and 9 July 2002 I took evidence from all five deponents. The First Plaintiff did not himself testify. A bundle of Court documents including the affidavits and preliminary written legal submissions by Counsel was prepared together with a 78 page bundle of other agreed documents. At the conclusion of the hearing both counsel indicated their wish to file final written submissions. These submissions were filed on 18 and 19 July and I briefly heard Counsel on 24 July 2002.

A copy of the collective agreement is exhibit BK 1 to Mr. Kumar’s affidavit. The clause in question is clause 8 (vi) Retirement Allowance which reads as follow:

“A Manager qualifies for retirement allowance at the age of 55 years and after having completed 15 years of service or more as follows:

(a) For 15 to 19 completed - one month salary at the rate

years of service payable at the time.

(b) For 20 to 30 completed - three months salary at the rate

years of service payable at the time in addition

to (a) above.

(c) For over 30 completed - one month salary payable in

years of service accordance with the rate payable

at the time for each completed

year of service in addition to (a)

and (b) above and payable up to

the age of 55 years.”

The clause has given rise to two different interpretations. The entitlements under sections (a) and (b) are not in dispute: section (a) entitles the retiree to a total of one month’s salary for the years 15 to 19. Section (b) gives an additional entitlement of a total of three months salary for the years 20 to 30. It is clause (c) which has caused difficulty.

The Plaintiffs say that the First Plaintiff, who retired after 34 years of service was entitled, by virtue of clause (c) in addition to his entitlements under sections (a) and (b) to a further amount of one month’s salary for each of the 34 years of his service.

The Bank, on the other hand, maintains that in addition to his entitlements under sections (a) and (b) the First Plaintiff is only entitled to one month’s salary for each of the four years completed over and above the first 30 years of his service.

At a monthly salary rate $4,515.58 applicable to the First Plaintiff the results of these differing approaches are highly significant:

Bank Plaintiffs

Clause (a)
15-19 years 4515.58 4515.58
(1 month’s salary)

Clause (b)
20-30 years 13,546.74 13,546.74
(3 months salary)

Clause (c)
30-34 years (4x4515.58=) (34x4515.58=)
18,062.32 153,529.72

TOTAL $36,124.87 $171,595.04

While the second Plaintiff and the Bank were both adamant that the clause should be taken to mean what they each contended that it meant I have no doubt that the clause is ambiguous and susceptible to more than one meaning. In those circumstances it is especially important to adopt the correct approach to its interpretation.

In Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337 to which I was helpfully referred by Sir Vijay in paragraph 36 of his final written submission Mason J explained the law. At paragraphs 22 to 24 of the Judgment he wrote:

“22. The true rule is that 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 when 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, as we have seen, if the facts are notorious knowledge of them will be presumed.

23. 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 in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

24. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”

It will be clear from these words that it is necessary in this type of case carefully to examine into which of the two categories “objective background facts” on the one hand and “statements and actions of the parties reflective of actual intention and expectation” on the other, the various aspects of the parties’ evidence fall. Because of the manner in which the evidence was presented in this particular case (affidavits followed by oral evidence) some, perhaps much, evidence may have been adduced which may not in fact have been receivable.

Before turning to the evidence in detail it is also important to refer to one aspect of the Plaintiffs’ case which is somewhat unusual.

On 24 July Sir Vijay submitted:

“You cannot interpret the second agreement in a different way from the first because the wording is identical.”

In answer, Mr. Leung said:

“We say that the 1992 agreement was an earlier agreement.”

These submissions must be explained.

Prior to 1995 Westpac Managers did not have a trade union of their own. According to paragraph 12 of Mr. Wilkinson’s affidavit they originally came under a loose grouping known as “Westpac Local Managers Association (WLMA)”. WLMA eventually became the Union which, according to exhibit PW 2 of the same affidavit was registered as a trade union in about June 1995. On 2 June 1995 (exhibit PW 3) the Bank recognised the Union “as the representative of and the agent for all local employees of either sex employed in the Bank as professional or managerial staff or occupying positions of equivalent status in the matter of collective bargaining relating to salaries and the other terms and conditions of employment.”

According to paragraphs 9 and 10 of Mr. Kumar’s affidavit the recently registered Union lodged a log of claims with the Bank in December 1995. Probably because the Union had only recently being formed and because there was already another long established union in the banking sector, the FBEU, the Union’s log of claims was prepared after consultation with Dewan Shankar, the FBEU’s national secretary.

It appears that the log took the form of a draft memorandum of agreement which included a retirement allowance clause drafted in the form in which it in fact finally appeared in the collective agreement as signed and which has already been set out above.

It seems that the Bank did not reply to the Union’s log of claims until 24 September 1996 when an amended memorandum which had been the subject of redraft in Sydney was returned to the Union (exhibit BK 2 to Mr. Kumar’s affidavit). According to paragraph 11 of Mr. Kumar’s affidavit the Bank proposed to amend Section (c) of the clause to read (additional words underlined):

“(c) For over 30 completed - one month salary payable in accordance

years of service with the rate payable at the time for each

completed year of service over 30 years

in addition to (a) and (b) above and payable

up to the age of 55 years.

For example a manager with 33 full years of service would be entitled to 1 month as per (a) plus 3 months as per (b) plus 3 months as per (c) total 7 months.”

This proposed amendment to the clause is worded in the same way as the corresponding clause in a draft memorandum exhibited to Paul Wilkinson’s affidavit as exhibit PW5.

On 29 September 1996 the Union replied (exhibit BK 2). The amendment proposed to the clause was “unacceptable”.

On 2 October 1996 the Bank again wrote to the Union (exhibit PW 7), Mr. Paul Wilkinson who was then the Bank’s Manager, Human Resources, wrote:

“Retirement allowance

The clause reflects existing terms and conditions.

Also, the interpretation of the clause was raised as an issue by the Local Manager’s Association and resolved at that time. Newsletter 94/9 refers and a copy is attached for information.

We confirm our intent to put in place an agreement which reflects the current terms and conditions of Managers. Discussions to date and advices provided by our Sydney Administration have been in good faith and based on this intent.”

(A copy of the newsletter referred to, 94/9 is exhibit PW 4 to Paul Wilkinson’s affidavit. According to item 3.3 the Bank’s narrow interpretation of the identical clause in the existing FBEU Agreement was accepted).

On 9 October Mr. Wilkinson again wrote to the Bank (exhibit BK 4). He repeated his remarks about the retirement allowance clause in identical terms.

On about 5 November 1996 the Union wrote to the Bank. Only a draft of the letter was produced (exhibit BK 6). It seems that the Union’s letter was written following some form of circular memorandum sent out by the Bank to the Union’s members. Parts of the draft appear to have been lost. The letter is written in rather aggressive terms. The Union agreed that the draft agreement (presumably exhibit PW5) “reflects some of the existing terms and conditions applicable to managers” however “the additional amendments that have been proposed reflect your intention to entrench your Bank’s position and lower the benefits for our members – lower then currently enjoyed by the salaried staff and service workers of Westpac.”

On 15 November the Bank replied (exhibit PW 11). In relation to the retirement allowance clause Mr. Friend, the Bank’s Chief Manager wrote:

“Retirement

This clause allows for the same conditions as stated in the FBEU agreement. The clause was amended slightly in the draft document to clarify the interpretation. We acknowledge your interpretation is different however you appear to be reading each sub clause cumulatively rather than discreetly (sic) as is the intention.”

On 18 April 1997 (exhibit PW 9) Mr. Wilkinson once again wrote to the Union. He wrote:

“Retirement Allowance (Clause 8 (vi))

Clause amended to read the same as the current FBEU Agreement. As discussed the Bank’s interpretation of this clause remains unchanged.”

Following this exchange of letters the negotiations culminated in the signing of the collective agreement (exhibit BK 1) on 18 September 1997. In paragraph 54 of his affidavit Mr. Wilkinson explained:

“The negotiations were very lengthy, spanning over 2 years. A large number of clauses were being negotiated simultaneously. In the interests of bringing negotiations to an early conclusion and finally establishing an overall agreement Westpac agreed to leave the wording in the retirement clause as it was in the FBEU Agreement. However this was on the clear understanding that this did not change the Bank’s position on its interpretation of this clause.”

In April 2000 the first Plaintiff decided to retire after 34 years service with the Bank. On his behalf the Union submitted a claim for retirement allowance calculated to include one month’s salary for each of the 34 years served. The rejection of this claim led to these proceedings. As already noted from Sir Vijay’s closing remarks and as emerges clearly from the affidavits filed on behalf of the Union it is central to the Plaintiffs’ case that the Bank had conceded when negotiating its agreement with the FBEU in 1992 (the first agreement) that the clause in question was to be construed in the manner advocated by the FBEU which was the same manner in which the Union now advocates that it should be interpreted. When the Bank then denied that it had accepted the FBEU’s interpretation (see paragraphs 41 and 48 of Paul Wilkinson’s affidavit and paragraphs 17 and 19 of Robert Larizza’s affidavit) the Union sought to rebut this denial by placing evidence before the Court in the form of Gayendra Singh’s affidavit, the thrust of which was that the Bank had indeed conceded.

The very important question then arises: does a concession by a party to an earlier agreement that certain words in that agreement are to be construed in a certain manner bind that party when negotiating a subsequent agreement with a different party containing the same words? In my opinion it does not; as a general rule a contract only binds those who are parties to it.

With the exception of exhibits 1 and 2, neither of which in my opinion advanced the matter, all 71 pages of the documents handed up and tendered by consent pre-dated the registration of the Union. They were all concerned with negotiations between the Bank and the FBEU. The entire testimony of Dewan Shankar and Gayendra Singh was concerned with the negotiation of the FBEU Agreement which was eventually signed in July 1992 (Documents 71 to 75) that is, over three years before negotiations between the Union and the Bank even began. Mr. Kumar’s testimony did not add to his affidavit evidence. The only Defence witness who was involved in the negotiations of the relevant clause was Mr. Wilkinson. He added little to his affidavit evidence. He did accept that the Bank attempted to redraft the clause but maintained that it never altered its position as to its meaning. He stressed that the “huge” payment out which would result from the Union’s interpretation would have the effect of turning what was supposed to be an allowance into something akin to a pension lump sum payment which was not what it was intended to be. He accepted that two members of the FBEU had been paid according to the FBEU formula but told me that these payments were made in error. He concluded by telling me that when it became clear that the Union and the Bank would not be able to agree upon a rewording of the clause it was decided to leave the clause unaltered but to make the Bank’s view of its meaning clear.

I did not find the oral evidence to be particularly helpful either by way of background explanation or in the interpretation of the clause. Even if I was satisfied that the Bank accepted the FBEU’s interpretation of the meaning of the clause I do not think that it follows that the Bank must be held to that interpretation when beginning negotiations with an entirely different union some three years later. In fact, I did not feel I could place any great reliance on Gayendra Singh’s evidence; he conceded that he had little actual recollection of the events which occurred in July 1992 and based his evidence largely on the notes which he made at the time (documents 66 and 66a). These notes confirm that the clause was creating a problem but do not reveal that the Bank altered its position as he had in his affidavit claimed and which the Bank denied.

In my view the 1992 negotiations between the Bank and the FBEU have only a slight bearing on the negotiations between the Union and the Bank. The clause as presented by the Union was known by the Bank to have created problems of interpretation before. In an effort to avoid those complications the Bank attempted to redraft. When the attempt threatened to derail the whole process it was abandoned. The Bank then agreed to a clause which it knew that the Union took to mean something different. Details of these negotiations on the Codelfa principle seem to me to be inadmissible. Among admissible objective background facts however may be included the existence of the FBEU clause, its incorporation into the agreement with the Union and the Bank’s interpretation of the meaning of the clause which was clearly signalled in the letters from the Bank to the Union already referred to, in particular exhibits PW 7 and 9.

As I see it, the Union, by these proceedings is asking the Court to declare that the Bank accepted an ambiguous clause to bear a meaning which the Bank clearly indicated that it rejected.

In his closing written submissions Mr. Leung advanced a number of reasons why the Bank’s understanding of the clause should be preferred. He repeated Mr. Wilkinson’s gratuity/pension argument. He also suggested that the Union’s interpretation was “absurd” not only because of “double dipping” involved (paragraphs 2.30, 2.33) but also because of the extremely large difference in entitlement between a person retiring just short of 30 years and a person retiring just after 30 years of service. While these points have some persuasive value in my view they do not really affect the outcome of the Plaintiff’s case. Agreements are not usually struck down or upheld on the grounds of eccentricity.

In my opinion the decisive consideration is that it cannot, as I find, be doubted that the Union and the Bank agreed to be bound by the clause although well aware that the other party held a different view as to its meaning. Perhaps they thought that it was not worth further negotiation since the number of instances in which the clause would apply would probably be very small. Whatever the motive, the fact that the parties did not agree what the clause meant must have the consequence that there was no agreement between them on the matter embodied in the clause (see e.g. Scriven v. Hindley [1913] UKLawRpKQB 134; [1913] 3 KB 564).

The clause is clearly severable from the rest of the collective agreement. It is now up to the Bank and the Union to attempt to reach a genuine agreement which can be unambiguously expressed. Meanwhile I decline to grant the declaration and the orders sought.

M.D. Scott
Judge

28 August 2003.