The legal effect of mistakes in employment documents

It is surprisingly common for employment contracts and other formal arrangements to contain errors which are not discovered until later. What is the legal situation in this context?

“The respondent relied upon the doctrine of mistake. It submitted that at common law, mistake comprehends not merely just a belief arising from an erroneous conclusion to a matter of fact or law, but also comprehends a mistaken belief arising from inadvertence to, or ignorance of the existence of a fact or legal requirement. In this regard, the respondent relied upon the High Court decision of David Securities Pty Ltd and Others v Commonwealth Bank of Australia (1992) 175 CLR 353. The respondent further submitted that had the respondent paid the incorrect rate specified in the Assignment Agreement to the applicant, that the applicant would have been under an obligation to make restitution for the difference in accordance with the doctrine of mistake (New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662). 15 As a matter of contractual principle, common mistake occurs when the employer and employee have agreed the terms of the employment contract, however the written document does not accurately reflect the agreement. A unilateral mistake in contract law can arise when one party mistakenly believes that a written agreement is accurate, while the other party is aware of the mistake and acts unconscionably in relation to it (See generally Chitty on Contracts Volume 1 General Principles, Twenty Seventh Edition, Chapter 5). 16 A court can grant the rectification of a contract to accurately reflect the common intention of the parties. An employer asserting that the employment contract contains a mistake will need to establish that the parties agreed to the term prior to recording the agreement in writing; the written contract does not accurately reflect the agreement; that it was the continuing intention of the parties, from the time the term was agreed until the time the written contract was formed, that the term remained as agreed; and if rectification were to be granted, the written contract would give effect to the common intention of the parties. …………………………. Regrettably in this case, an error was made in the completion of the Assignment Agreement document by Mr Gallacher of the respondent. This error was recognised and was corrected by the respondent in July 2014. The written documents signed by the parties in this case at the commencement of the applicant’s employment, did not accurately reflect the agreement reached by them at an earlier point. The respondent communicated this to the applicant as soon as the error was detected and she was aware of the mistake from that time, if not earlier. The doctrine of unilateral mistake applies. 29 In any event, even if this doctrine does not strictly apply, as a matter of equity and good conscience under s 26(1)(a) of the Act, it would be unfair and plainly inequitable to hold the respondent to a document that was so clearly provided and executed in error, and which did not truly accord with the agreement the parties reached in relation to rates of pay. Accordingly, the application must be dismissed.”

 

KOBA v CREST PERSONNEL PTY LTD  2019 WAIRC 00653