Case: Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110
Outcome: cited
In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110 at 11,117 ('Integrated Computer Services') , McHugh JA (Hope JA and Mahoney JA concurring) observed: '...a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words:...The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract:...Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances.' 106 Further, at 11,118, his Honour observed: 'Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.' (Authorities omitted) 108 The assessment of whether the conduct of the parties gives rise to a concluded contract is to be made by reference to the objective standard ( Meates v Attorney General [1983] NZLR 308 at 377; Integrated Computer Services at 11,118). 113 In this regard, the position of the applicant is to be distinguished from the position where the content of one of the party's conduct can provide a basis from which an inference can be drawn that an agreement has been reached, in the sense that the conduct evidences the performance of one or other of its provisions. The position is distinguishable from that in Integrated Computer Services , where McHugh JA said at 11,118: 'By the end of October 1983, I think that the parties had entered into a contract which embraced the seven matters to which I have referred. The terms of the June 1983 arrangement may not have been specific enough to be enforceable. But by June 1984 when access to the VAX was cut off, the parties had acted under the arrangement and given effect to it. What they did is explicable only on the basis of a binding agreement. ...' (emphasis added) 114 Secondly, I accept the submissions of counsel for the respondent that the subsequent conduct of the respondent did not point to the existence of the pleaded variation to the consultancy agreement. The memorandum of 10 July 2000 from Mr Brand to Mr Punch was not, in my view, an item of subsequent conduct evidencing the pleaded variation to the consultancy agreement. In fact, the contrast between the way in which Mr Brand in the memorandum describes the termination payment provisions in relation to Mr Hayes, on the one hand, and the reference to the respondent's 'standard' provision on termination in relation to Mr Rutherford and Mr Jones, on the other, supports an inference that there was a different regime in place for the payment of a termination payment to the applicant when compared to the other consultants. Indeed, the evidence of Mr Lindsay that he had seen the consultancy agreements and they all contained an express clause providing for payment of four weeks' fee for each year of service, serves further to distinguish the contractual position of the applicant (which did not have such a clause in its contract) from that of the other consultants. 115 Thirdly, I do not find that the notation in the respondent's Annual Report for the year ending June 2000 of a contingent liability of $1 575 853 in respect of termination payments for directors and executives, supports the inference that there was a variation to the applicant's consultancy agreement in the terms pleaded. The evidence as to how that sum was derived was unsatisfactory. During his opening counsel for the applicant tendered as exhibit 5 the document described in [94] on the basis that Mr Lindsay would identify this document as one of the documents which he used in deriving the $1 575 853 contingent liability and which he had sent to the respondent's auditors. However, when he came to give evidence Mr Lindsay did not in fact identify exhibit 5 as being the document referred to at par 21 of his witness statement or as being among the documents which he said he sent to the auditors to explain how the sum of $1 575 853 was derived. Further, in his evidence Mr Lindsay said that the contingent liability figure in the 2000 accounts was calculated by reference to a consultant's termination payment being payable on the basis of two months' base pay plus a payment of one month for each year of service. This method of calculation also does not support the applicant's contention that there was a standard practice of paying consultants' termination payments at the rate of one month's fee for each year of completed service. In any event, even if exhibit 5 had been used by Mr Lindsay in deriving the contingent liability figure in the 2000 accounts, the figure of $119 399 in respect of the applicant does not, for the reasons referred to by counsel for the respondent, support the applicant's contention. Neither is that figure of $119 399 explained by the methodology involving the two months' base pay described by Mr Lindsay. This would have resulted in the applicant being entitled to termination payment based on eight months' fee.