GALCIF PTY LTD v DUDLEY'S CORNER PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, HANDLEY and SHELLER JJA 16 May 1995, 16 May 1995 [1995] NSWCA 161 COMPANIES — articles of association — shopping centre — negative covenant — promise not to conduct similar class of business — whether identical business of medical practice is "similar" — held: It is. INTERPRETATION — rules of construction — achievement of purpose of document — articles of association — ambiguity of words — caution in use of earlier cases and dictionaries. WORDS AND PHRASES- "similar''. COMPANIES — articles of association — negative covenant — construction of — company's articles govern shares in commercial shopping centre — articles limit carrying on of "similar class of business" to that carried on by another member — one member leases shop for use as medical practice — that member wishes to reclaim shop and to use the same itself as a medical practice — existing medical practice seeks and obtains lease of an adjacent shop from another member — whether that conduct amounts to carrying on or permitting to be carried on "a similar class of business" — primary judge (Bryson J) holds that it does not as the classes of business were identical, not similar — on appeal to the Court of Appeal — held: (1) The articles should be construed with a view to achieving their purpose and having regard to the ambiguity of their language. Manufacturers' Mutual Insurance Ltd v Withers AND Anor (1988) 5 ANZ Ins Cas 60-853 (NSWCA); Aspden v Seddon (1874) 10 Ch App 394 (CA); Cabell vy Markham 148 F 2d 737 (1945) applied; (2) Within the meaning of the articles, and for the achievement of their purpose, the conduct of an identical business, being a medical practice, would be in breach of the articles; (3) Proceedings returned to the Equity Division of the Supreme Court for determination of remaining issues conformably with the opinion of the Court of Appeal. INTERPRETATION — articles of association of company — meaning of words — proper approach to construction of negative covenant — achievement of purposes of covenant — care to be used in use of dictionaries — care to be used in use of earlier cases on words in question. Aspden v Seddon (1874) 10 Ch App 394 (CA); Cabell v Markham 148 F 2d 737 (1945) considered; Mays v Roberts [1928] SASR 217 applied. WORDS AND PHRASES — "similar". ORDERS 1. Allow the appeal; 2. Set aside the orders of Bryson J which were made by his Honour pursuant to his determination of the preliminary question which he isolated for decision; 3. Order that the proceedings be returned to the Equity Division for the determination of any remaining issues in contest between the parties, conformably with the opinion of this Court; 4. Order that the costs, in the Equity Division, of the resolution of the separated question be plaintiffs costs in the proceedings in the Equity Division; 5. Order that the 6th, 7th and 8th respondents pay the appellant's costs of the appeal but have, if otherwise so qualified, a certificate under the Suitors' Fund Act 1951; and 6. No order in respect of the costs of the 2nd, 3rd 4th and 5th respondents to the appeal. 2 UNREPORTED JUDGMENTS Kirby P This appeal comes to the Court from orders of Bryson J in the Equity Division of the Supreme Court. CONSTRUCTION OF ARTICLES GOVERNING THE USE OF A SHOPPING CENTRE The appeal concerns, in essence, the true meaning of a provision in the articles of association which govern the use of a commercial building at the corner of Anzac Parade and Maroubra Road, Maroubra, known as Dudley's Corner. The building is owned by Dudley's Corner Pty Ltd, the first respondent to the appeal and the first defendant below (Dudley's). Dudley's has appeared in this Court. It has submitted to the order of the Court. It has been excused. The articles of association allow for a scheme of ownership of the commercial units in Dudley's by way of company title. Galcif Pty Ltd, the appellant, (Galcif) owns a share in what are known as the "Group G shares". This share group relates to a shop known as 898 Anzac Parade. Pyntoe Pty Ltd, the second respondent to the appeal and the second defendant below, (Pyntoe) owns shares in Group H This relates to the shop next door to 898 Anzac Parade, known as 900 Anzac Parade. The principals of Pyntoe are Mr Joseph Gilles, Mr Patrick Lim and Mr Peter Bollard. The Court was informed that they are solicitors. They are the 3rd, 4th and Sth respondents to the appeal. They were the 3rd 4th and Sth defendants below. They and Pyntoe appeared in this Court to support the submissions of the real contestant in the case, Lamard Holdings Pty Ltd, the 6th respondent to the appeal and the 6th defendant below (Lamard). Lamard was, at the relevant times, a tenant under a lease arrangement from Galcif. The principals concerned in Lamard are two medical practitioners, Dr Paul Raftos and Dr Michael Fung who are the 7th and 8th respondents to the appeal, the 7th and 8th defendants below. Lamard is, with those principals, in contest with Galcif in relation to the proper construction of the articles of association of Dudley's. The articles state the objects of the company, Dudley's, are to include the purchasing of land "and to conduct the same as units for the use and occupation of members of the company or other persons." Leasing is an object of the company - see Article 3 (d). In Article 9 there are set out a number of limitations, qualifications and prohibitions. The one which is relevant to these proceedings is Article 9 (g) It reads: "The rights conferred by Article 4 upon a member are to be subject to the following conditions: 9(g). A member whose unit comprises business or commercial premises shall not carry on or permit to be carried on therein a similar class of business to that conducted by any other member whose unit comprises business or commercial premises or his tenant licensee or occupant except with the permission of the whole of the members and no such unit shall be sold leased or used for the purposes of a wine bar or saloon." The critical words which have come under attention in the appeal are the words: "A similar class of business to that conducted by any other member" Article 10 contains machinery for dealing with failures to observe Article 9. However, neither this Court nor Bryson J were immediately concerned in the operation of Article 10. URJ GALCIF PTY LTD v DUDLEY'S CORNER PTY LTD (Kirby P) 3 Dudley's granted Galcif a lease of 898 Anzac Parade. The term of the lease was 5 years. That term has been extended. The form of lease contained a covenant which, as it presently stands, reads as follows: "The Lessee hereby covenants with the Lessor that he shall not without the prior written consent of the Lessor use or permit to be used the shop premises hereby leased otherwise than as a Doctor's Surgery and shall not use the demised premises for conducting therein a class of business similar to that at present conducted within the building known as 'Dudley's Corner' by any tenant or occupier thereof (other than the Lessee) at the date of the commencement of the term." A DISPUTE ARISES OVER THE GRANT OF A NEW LEASE Galcif did not, at the times prior to the litigation, itself occupy the shop at no 898 Anzac Parade. It granted a sub-lease to Lamard for 5 years commencing on 18 May 1990 to Lamard. That lease expires on 17 May 1995. It is its expiry which occasions the urgency of the resolution of the matter which is now before this Court. The sub-lease was never registered. However, nothing tums upon that fact. CL3 (c) of the sub-lease is a covenant against use of the premises other than as a doctors' surgery. Lamard used, and still uses, the premises at 898 Anzac Parade as a doctors' surgery. It now appears that the principal of Galcif, Dr Stephen Yung who is the effective controller of that company, wishes to take up the use of the premises at the expiry of the lease on 17 May 1995. He wishes to use the premises as a medical practice in his own name or for his own purposes. For that reason he decided not to extend the lease which had been granted by Galcif to Lamard. Naturally, this was of concern to the medical practitioners in the Lamard practice. As one would infer, over the years they have built up certain goodwill. They wish to continue to practise in the same place. All of that is understandable. The present litigation has arisen out of that desire. Approaching as they were the expiry of their lease, and being mindful that Dr Yung and Galcif were not minded to extend the lease, they approached, or were approached by, Pyntoe for the purposes of securing a lease of the premises at 900 Anzac Parade. This was not done with the consent of the members of Dudley's. Galcif had not given such consent. In the light of Dr Yung's desires, one would infer it would not do so. The dispute which then arose was the subject of the proceedings before Bryson J. Galcif objected to the grant of the lease as a breach of the articles of association. The question thus presented was whether Article 9(g) operated to prevent a member, being Pyntoe, from carrying on, or permitting to be carried on, a "similar class of business" in the premises at 900 Anzac Parade. Bryson J resolved that question by the determination of a preliminary question of law which he isolated for separate decision. The question posed was: "Whether the 2nd defendant [Pyntoe] was in breach of CL9(g) of the Memorandum of Association of the Ist defendant [Dudley's] by entering into the lease with the 6th defendant [Lamard] executed on or about Ist April 1994". That lease was the new lease by which it was intended that Lamard would continue to carry on its business as a medical practice at Dudley's but at 900 Anzac Parade. The Court has been informed that Lamard has actually been carrying on its medical practice pursuant to the last-mentioned lease. Thus, at the moment, it is carrying on a medical practice both at 898 Anzac Parade (pursuant to the lease with Galcif, shortly to expire) and at 900 (pursuant to the new lease grunted to it by Pyntoe). 4 UNREPORTED JUDGMENTS THE DECISION OF THE PRIMARY JUDGE After reviewing the facts and considering case law on the meaning of the word "similar", Bryson J came to his conclusion in a relatively short passage in his reasons. His Honour said: "What CL9(g) prohibits is carrying on and permitting to be carried on a similar class of business' to that conducted by the plaintiff's tenant. In my opinion the very same business as that conducted by the plaintiff's tenant is not 'a similar class of business' to itself. There is an identity not a comparison. There is no room for even embarking on, let alone deciding, an exercise of allocating the business into a class and deciding whether that class is similar to itself. Comparison is impossible; it is the very same business, identical. Unambiguously, there is no prohibition directed to it." It was not suggested to Bryson J, or to this Court, that any statutory provision, eg relating to restraint of competition, was relevant to the resolution of the issue in hand. It was presented as a pure question of construction. Bryson J so approached it. So shall I. THE APPEAL TO THE COURT OF APPEAL The appeal originally came to this Court on a summons for leave to appeal from the determination by Bryson J of the separated question. However, when it did, the Court, as it was then constituted, pressed the claimant (the present appellant) to indicate whether it intended to advance certain other propositions in its dispute with the opponents, effectively, Pyntoe and Lamard, if the construction favoured by Bryson J stood. In answer to the Court's questions Galcif indicated that it would, for purposes of the present proceedings, without abandoning its other claims, abandon the remaining legal points in its case. In this way the parties were sent back to Bryson J to secure a final judgment. That was duly obtained. The appeal, therefore, comes to this Court as of right. It comes on the relatively short question of the meaning of the phrase in Article 9(g) "similar class of business." The short question which is posed for the Court is whether, in the circumstances stated, proof that the class of business of Lamard as the tenant of Pyntoe would be a medical practice renders it a "similar class of business" within Article 9(g) of the articles of association of Dudley's. Bryson J held that because it was precisely the same it was not within the meaning of the clause, and for its purpose, "similar". FOUR CONSIDERATIONS AFFECTING THE APPROACH TO THE TASK OF CONSTRUCTION There are four considerations which I will keep in mind in approaching the resolution of this appeal: 1. The process before the Court is an appeal. We are not sitting at first instance. We are considering whether it has been shown that Bryson J erred in the judgment he entered against Galcif. Words of any language are commonly disputable in meaning. Words of the English language are particularly so because of the history of the English language. Few, if any, English words are completely unambiguous or not susceptible of more than one meaning or have an entirely plain meaning. See McHugh JA in Manufacturers' Mutual Insurance Ltd v Withers and Anor (1988) 5 ANZ Insurance Cases 60-853, 75,343. In these circumstances the Court, even where faced with a task of legal interpretation, will pay respect to the opinion of the primary judge if that opinion is not shown to be available and appears not to be wrong; URJ GALCIF PTY LTD v DUDLEY'S CORNER PTY LTD (Kirby P) 5 2. The Court is not controlled by the meaning given to words, even the same word in earlier cases. This is because no two cases are ever precisely the same. The examination of earlier cases, such as cases on the meaning on the word "similar", are only of assistance to a court as the earlier judicial opinions prompt, by analogous reasoning, the approach which should be taken to the case in hand. It is useful to remember the advice of Sir George Jessell, MR in Aspden v Seddon (1874) R10 Ch App 394 (CA), at 397: "No Judge objects more than I do to referring to authorities merely for the purpose of ascertaining the construction of a document; that is to say, I think it is the duty of a Judge to ascertain the construction of the instrument before him, and not to refer to the construction put by another Judge upon an instrument, perhaps similar, but not the same. The only result of referring to authorities for that purpose is confusion and error..." 3. Nor is a court to be controlled by the meanings given to words in dictionaries. Learned Hand J in Cabell v Markham 148F 2d 737, (1945), 739 said: "[I]t is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary;..." I agree with that observation. As with the rules of statutory construction, so with dictionaries. The judge can open a dictionary and usually find there, in the multiple meanings offered for words, something for every disputant before the court. So it has proved in this case where different dictionary meanings of the word "similar" have been read to the Court to support, or to oppose, the construction put by Bryson J upon the words in Article 9(g). 4. The ultimate objective of a Court, as of any other person who approaches words in a document to give them meaning, is to give that meaning in the context in which the words appear and for purposes for which the words have been used by those who made the document. Bryson J recognised this obligation in his reasons. He indicated that he had taken into account the purpose of Article 9(g). However, Galcif complains that he either misunderstood the purpose or did not give effect to the rule of construction which he ostensibly embraced. ARGUMENTS OF THE RESPONDENTS For the respondents a number of arguments were put in support of his Honour's reasoning: The Court was taken, as I have said, to the dictionaries. It was argued that "similar", of its nature, connotes a process of comparison. What it involves is a "near identity, a close correspondence, a resemblance in many, but not all respects." Similarity does not involve actual identity. Thus, the Court was pressed with the language of the provisions of the lease between Dudley's and Galcif in an attempt to throw light on the meaning of the provisions of the Articles. However, as was pointed out by Handley JA during argument, that lease cannot be used to construe the Articles which were adopted many years before and between different parties; and 2. The Court was then told that the tenants had certain relevant rights and reference was made to Article 4(b). As I read Bryson J's reasons that argument was rejected by his Honour. Certainly no cross appeal or notice of contention was before the Court. I would doubt, as a matter of power, that the Articles can give rise to a contract between parties other than members referred to in the Articles. However, if there is anything in that argument, it is not a matter which is presently before this Court. All we are determining is whether Bryson J erred in 6 UNREPORTED JUDGMENTS the construction which he gave to Article 9(g) of the articles of association. Any residual complaint of the respondents about other matters will have to be advanced at first instance. THE PREFERABLE CONSTRUCTION: INTERPRETING THE ARTICLES TO ACHIEVE THEIR PURPOSE The appellant argued that the appropriate approach to the construction problem which was before Bryson J was to apply a step-by-step approach to the resolution of the question which was before his Honour. In my opinion that was the correct approach. I set out the way in which the appellant submitted that the relevant questions should be asked and answered, with which I agree. 1. PRELIMINARY MATTERS (PYNTOE) i Who is the "member" first referred to in Article Pyntoe Pty Ltd %g)? ii Which is its unit? 900 Anzac Parade. iii Do they comprise business or commercial Yes. premises? iv What CLASS of business does the member Medical practice. INTEND TO PERMIT to be carried on therein? 2. PRELIMINARY MATTERS (GALCIF) i Who is the "other member" referred to in Article Galcif Pty Ltd %g)? ii Which is its unit? 898 Anzac Parade. iii Does the member conduct a business from its No unit? iv Does its tenant, licensee or occupant conduct a Yes business from the unit? a Who is the tenant? Lamard Holdings Pty Ltd b What CLASS of business does the tenant Medical practice. conduct? 3 FINAL ISSUE What are the classes of member's business? First member's " class of business"? Medical practice Second member's "class of business"? Medical practice Are they similar? Yes The appellant, secondly, argued that, if one looks at the purpose for which Article 9(g) was provided, its overall objective is not difficult to find. It is to prevent members establishing businesses in a class which compete with each other, except by consent of the members. Such consent had not been forthcoming in this case and would clearly not be given. Accordingly, the purpose of the Article would be completely frustrated if the construction, which Bryson J favoured, were upheld. Thirdly, it was pointed out that it would be odd in the extreme if the proper construction of Article 9(g) were to provide protection to a member, such as the appellant, against the conduct of a similar class of business yet provide no protection whatever against the conduct of a business which was exactly the same. I agree with that submission. The way in which such problems are URJ GALCIF PTY LTD v DUDLEY'S CORNER PTY LTD (Sheller JA) 7 generally resolved in cases arising under restrictive covenants is set out in Drew v Guy [1894] 3 Ch 25 at 29. An analogous approach should be adopted in this case. Fourthly, the provision which here exists contains a negative covenant. It is one designed to prohibit members, such as Pyntoe, themselves or by their tenants, entering into competition with members such as Galcif. It would possibly be different if the covenant under consideration were a positive covenant (ie one requiring a party to carry on a similar class of business). However, it is not. It is a negative covenant designed to prevent a similar class of business being conducted. The conduct of exactly the same business is therefore within the rubric of a "similar" class of business. All "similar" businesses are not the same business. But all the same businesses are, for purposes of the Article, "similar" businesses. ORDERS Having come to this view it is necessary to provide for the orders in the appeal. In my opinion the following orders should be made: 1. Allow the appeal; 2. Set aside the orders of Bryson J which were made by his Honour pursuant to his determination of the preliminary question which he isolated for decision; 3. Order that the proceedings be returned to the Equity Division for the determination of any remaining issues in contest between the parties conformably with the opinion of this Court; 4. Order that the costs in the Equity Division, of the resolution of the separated question, be plaintiff s costs in the proceedings in the Equity Division; 5. Order that the 6th, 7th and 8th respondents pay the appellant's costs of the appeal but have, if otherwise so qualified, a certificate under the Suitors' Fund Act 1951; and 6. No order in respect of the costs of the 2nd, 3rd 4th and Sth respondents to the appeal. Handley JA I agree with the reasons of the President and with the orders he has proposed but out of deference to the arguments of counsel and the decision of the trial Judge I will add some short observations of my own. The detailed analysis of Article 9 (g) in the appellant's submissions referred to by the President and the findings of the trial Judge demonstrates that, with one exception, all the requirements of that article were satisfied in the present case. The sole matter in contention under Article 9 (g) was whether a "similar class of business" was being conducted in unit 900 to that being conducted in unit 898. Given the Judge's findings of fact the meaning and application of Article 9 (g) became a question of law for the Court. If the case had been decided by a Judge and jury, the question would have been one for the Court and not for the jury. Lamard Holdings Pty Ltd is carrying on a single business in units 898 and 900. The question is whether the same proprietor carrying on the same business in separate premises conducts a similar class of business in each. In my opinion the answer to that question is yes. Sheller JA I also agree but would add some short observations of my own. Bryson J held that there was no breach of Article 9(g) because the business carried on at Pyntoe Pty Ltd's shop at 900 Anzac Parade was the same business, part of Lamard Holdings Pty Ltd' s medical practice, as that carried on at Galcif Pty Ltd's shop at 898 Anzac Parade. The question was whether Pyntoe had permitted or intended to permit a similar class of business to that conducted by 8 UNREPORTED JUDGMENTS Galcif or its tenant to be carried on within the meaning of Article 9(g). Article 9(g) is not concerned with similar businesses but a similar class of business. In my opinion, by permitting the business of a medical practice to be carried on at No. 900, Pyntoe was permitting a similar class of business to be carried on. Although it was the same class of business nonetheless it was a similar class of business; see Mays v Roberts [1928] SASR 217 per Angus Parsons J at 219. In that case his Honour referred to the Imperial Dictionary which defines "similar" as "having a like form or appearance" and being capable of signifying "exactly like or having a general likeness". For these reasons, in my opinion, the orders proposed by the President should be made. Kirby P. The orders of the Court are as I have provided. 1. Allow the appeal; 2. Set aside the orders of Bryson J which were made by his Honour pursuant to his determination of the preliminary question which he isolated for decision; 3. Order that the proceedings be returned to the Equity Division for the determination of any remaining issues in contest between the parties, conformably with the opinion of this Court; 4. Order that the costs, in the Equity Division, of the resolution of the separated question be plaintiffs costs in the proceedings in the Equity Division; 5. Order that the 6th, 7th and 8th respondents pay the appellant's costs of the appeal but have, if otherwise so qualified, a certificate under the Suitors' Fund Act 1951; and 6. No order in respect of the costs of the 2nd, 3rd 4th and 5th respondents to the appeal. Counsel for the appellant: PJ Finch Solicitors for the appellant: John S Zouroudis and Co Counsel for the first respondent: Submitting appearance Solicitors for the first respondent: Cutler Hughes-Harris Counsel for second-fifth respondents (Pyntoe): GK Walsh (Solr) Solicitors for second-fifth respondents: RF Giles Payne and Co Counsel for sixth-eighth respondents (Lamard): RK Eassie Solicitors for sixth-eighth respondents: Paul Ward-Harvey and Co