Ailakis v Olivero [No 2]

[2014] WASCA 127

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   AILAKIS -v- OLIVERO [No 2] [2014] WASCA 127

CORAM:   MARTIN CJ

BUSS JA
MURPHY JA

HEARD:   22 NOVEMBER 2013 AND ON THE PAPERS

DELIVERED          :   25 JUNE 2014

FILE NO/S:   CACV 152 of 2012

BETWEEN:   ANTHONY AILAKIS

First Appellant

RODNEY AILAKIS
Second Appellant

AND

JUAN CARLOS OLIVERO
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :SCHOOMBEE DCJ

Citation  :OLIVERO -v- AILAKIS [2012] WADC 174

File No  :CIV 3982 of 2010

Catchwords:

Evidence - Similar fact evidence - Whether logically probative of fact in issue - Evidence of prior similar transactions not probative of objective intent to create legal relations

Contract - Intent to create legal relations - Agreement in commercial context - Use of 'give' and words of thanks and appreciation - Promise to draft document regarding agreement

Contract - Consideration - Promise to perform pre-existing duty - Director's duties not public duties - Promise made to third party good consideration

Contract - Termination - Prior election to affirm - Continuing repudiation - Innocent party may terminate

Contract - Damages - Non-delivery of goods - Restrictions on sale inherent to goods - Restrictions on sale personal to promisee

Legislation:

Chancery Amendment Act 1858 (21 & 22 Vict. c. 27) ('Lord Cairns' Act')
Corporations Act 2001 (Cth), s 180(1)
District Court of Western Australia Act 1969 (WA), s 50(1), s 55, s 57
Rules of the Supreme Court 1971 (WA), O 6 r 1, O 20 r 2(1)
Supreme Court Act 1935 (WA), s 24(7), s 25(10)
Supreme Court of Judicature Act 1873 (UK)

Result:

Appeal dismissed

Category:    B

Representation:

Counsel:

First Appellant              :     Mr S Penglis

Second Appellant          :     Mr S Penglis

Respondent:     Mr M Howard SC & Mr T R Thies

Solicitors:

First Appellant              :     Herbert Smith Freehills

Second Appellant          :     Herbert Smith Freehills

Respondent:     Timothy R Thies

Case(s) referred to in judgment(s):

Airways Corporation of New Zealand Ltd v Geyserland Airways Ltd [1996] 1 NZLR 116

ASIC v Macdonald (No 11) [2009] NSWSC 287

Australian Broadcasting Commission v XIVth Commonwealth Games Ltd [1988] 18 NSWLR 540

Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052

Australian Securities and Investments Commission v Rich [2009] NSWSC 1229

Autodesk Inc v Dyason [No 2] [1993] HCA 6; (1993) 176 CLR 300

Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245

Bear Stearns Bank Plc v Forum Global Equity Ltd [2007] EWHC 1576

Betts v Neilson (1868) LR 3 Ch App 429

Bosaid v Andry [1963] VR 465

Brimaud v Boston Securities Entertainment Investments Pty Ltd [1998] FCA 1104

Carr v J A Berriman [1953] HCA 31; (1953) 89 CLR 327

Champtaloup v Thomas [1976] 2 NSWLR 264

Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488

Ciavarella v Balmer [1983] HCA 26; (1983) 153 CLR 438

Collins v Godefroy (1831) 1 B & Ad 950; (1831) 109 ER 1040

Crouch v Joseph (Unreported, WASC, Library No 9004.1, 22 August 1991)

CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15

Daniels v Anderson (1995) 37 NSWLR 438

Dare v Pulham (1982) 148 CLR 658

Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565

Duke Group Ltd (in liq) v Pilmer (1994) 63 SASR 364

Edwards v Skyways Ltd [1964] 1 All ER 494

Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95

Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237

Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189

Fullers' Theatres Ltd v Musgrove [1923] HCA 12; (1923) 31 CLR 524

Gates v City Mutual Life Assurance Society Ltd (1982) 43 ALR 313

Grivas v Brooks (1997) 69 SASR 532

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640

Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26

International Paper Company v Spicer [1906] HCA 75; (1906) 4 CLR 739

Janos v Chama Motors Pty Ltd [2011] NSWCA 238

Johnson v Agnew [1980] AC 367

Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351

Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281

Larking v Great Western (Nepean) Gravel Ltd (in liq) (1940) 64 CLR 221

Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666

Lombok Pty Ltd v Supetina Pty Ltd (1987) 14 FCR 226

Madden v Kevereski [1983] 1 NSWLR 305

Martin v Osborne (1936) 55 CLR 367

Masters v Cameron (1954) 91 CLR 353

McKenna v Richey [1950] VLR 360

Minter v Geraghty (1981) 38 ALR 68

Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23

Mood Music Publishing Co Ltd v De Wolfe Ltd [1976] Ch 119

Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723

New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154; [1975] 1 NZLR 505

Norton v Angus [1926] HCA 35; (1926) 38 CLR 523

O'Brien v Chief Constable of South Wales Police [2005] UKHL 26; [2005] 2 AC 534

Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444

Oliver Ashworth (Holdings) Ltd v Ballard (Kent) Ltd [1999] EWCA Civ 1027; [2000] Ch 12, 28

Oxus Gold Plc v Templeton Insurance Ltd [2007] EWHC 770

Pao On v Lau Yiu Long [1980] AC 614

Park v Brothers [2005] HCA 73; (2005) 222 ALR 421

Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coalmining Company Pty Ltd [No 7] [2012] WASC 502

Pirt Biotechnologies Pty Ltd v Pirtferm Ltd [2001] WASCA 96

Popiw v Popiw [1959] VR 197

Progressive Mailing House v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17

Rodocanachi v Milburn (1887) 18 QBD 67

Ronnoc Finance Ltd v Spectrum Network Systems Ltd (1997) 45 NSWLR 624

Royal Bristol Permanent Building Society v Bomarsh (1887) 35 Ch D 390

Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

Shadwell v Shadwell (1860) 9 CBNS 159; (1860) 142 ER 62

Sibbles v Highfern Pty Ltd [1987] HCA 66; (1987) 164 CLR 214

Singh v Crafter (Unreported, WASC, Full Court, Library No 920299, 28 May 1992, BC 9201172)

Summers v Cocks [1927] HCA 46; (1927) 40 CLR 321

Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245

The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

The Millstream v Schultz [1981] NSWLR 547, 555

Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41

United Australia Ltd v Barclays Bank Ltd [1941] AC 1

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 83; (1998) 192 CLR 603

Vrisakis v ASC (1993) 9 WAR 395

Ward v Byham (1956) 2 All ER 318

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Wentworth v Woollahra Municipal Council [1982] HCA 41; (1982) 149 CLR 672

Westpac Banking Corporation v Australian Securities Commission (1997) 72 FCR 318

Wicks v Bennett [1921] HCA 57; (1921) 30 CLR 80

Wigan v Edwards (1973) 47 ALJR 586

Williams Brothers v E T Agius Ltd [1914] AC 510

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1

Williams v Williams (1957) 1 All ER 305

Willison v Van Ryswyk [1961] WAR 87

Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105

Woods v Woods [2000] NSWSC 851

MARTIN CJ: 

Summary

1. The appellants, Anthony Ailakis and Rodney Ailakis, who are brothers (together the Ailakis brothers) appeal from a judgment of the District Court awarding the respondent, Mr Olivero, damages of $750,000 (being the limit of the District Court's jurisdiction, save in cases in which damages are claimed for personal injury).  The damages were awarded for breach of contract.

2. The Ailakis brothers admit that they promised to give Mr Olivero 1,000,000 shares in Redstone Resources Ltd (Redstone), a listed public company, for providing certain services which had the result of restoring an important mineral tenement to Redstone.  They also admit that he performed those services, and secured the restoration of the tenement, and that they never gave him the shares.  However, they contended at trial, and continue to contend on appeal, that their promises did not give rise to any contract enforceable by the court or that if there was a contract, Mr Olivero was, according to their primary submission, entitled to no more than nominal damages because of the way in which his case was conducted.  Happily neither the substantive law nor the law governing the practice and procedure of the courts are so out of step with basic commercial morality as to sustain their propositions.  For the reasons which follow, their appeal should be dismissed.

The facts

1. None of the grounds of appeal challenge any finding of primary fact made by the trial judge, although some of the grounds impliedly challenge the characterisation which she placed upon the facts which she found.  Accordingly, the primary facts relevant to the issues ventilated on appeal can be taken from the findings of the trial judge, augmented to a limited extent by facts established by non‑contentious evidence led at trial.

2. Redstone is a public company based in Western Australia engaged in the business of exploring for minerals.  At the times relevant to these proceedings its primary project involved the exploration of a tenement known as Tollu, situated in the West Musgraves region of Western Australia.  The tenement was thought to contain deposits of copper and nickel which might be proved up to the point at which extraction of those minerals was economically feasible.

3. At all material times, Mr Anthony Ailakis was a director of Redstone.  Mr Rodney Ailakis was not a director, but provided services to Redstone.  Through entities which they controlled, the Ailakis brothers controlled a significant portion of the issued shares in Redstone.

4. Mr Olivero met Mr Anthony Ailakis in about 1986 or 1987, and met Mr Rodney Ailakis sometime thereafter.  In about 2001 Mr Olivero was working as a pilot and operated a charter flight business out of Perth.  He first became involved with Redstone in 2001, when he loaned funds to the Ailakis brothers to enable Redstone to undertake a detailed aeromagnetic survey of the Tollu tenement.  From about 2005 onwards Mr Olivero assisted the Ailakis brothers in raising capital for the public listing of Redstone, which took place in June 2006.  Mr Olivero was a director of Redstone from May 2006 until October 2009.

5. Although Mr Olivero was generally described as a non‑executive director of Redstone, he also provided consultancy services to the company from time to time, and in one or other capacity provided services to the company of a character normally performed by executives.  It will be necessary in due course to consider the scope of Mr Olivero's duties as a director of Redstone in the context of one of the grounds of appeal.

6. Within the managerial structure of Redstone, Mr Anthony Ailakis was responsible for maintaining its mining tenements, including Tollu.  However, during April 2007 he overlooked the need to lodge an application for the renewal of the Tollu tenement prior to its expiry, and on 19 April 2007, Redstone's interest in that tenement expired.  Shortly thereafter, another company with interests in the West Musgraves area, Traka Resources Ltd (Traka) lodged an application for the Tollu tenement.  That application would take priority over any subsequent application by Redstone.  Unless Redstone could somehow recover the Tollu tenement, its loss would have had serious consequences for Redstone, and in particular would have been highly detrimental to the company's share price and to its ability to raise capital for exploration.

7. On 30 April 2007 Mr Anthony Ailakis telephoned Mr Olivero and told him what had happened to the Tollu tenement.  They met later that day at Redstone's offices.  Mr Anthony Ailakis conveyed his grave concerns with respect to the possible consequences of the loss of the tenement to Mr Olivero.  Those concerns included the possible loss of the services of another director of Redstone, Professor David Groves, an eminent geologist.  Mr Anthony Ailakis acknowledged his responsibility for the loss of the tenement during the course of his conversation with Mr Olivero.

8. Mr Anthony Ailakis firmly rejected Mr Olivero's suggestion that the loss of the tenement should be disclosed to the market.

9. Mr Anthony Ailakis and Mr Olivero then discussed ways in which the tenement might be recovered from Traka.  They agreed that offering Traka money to return the tenement was unlikely to be successful because of Redstone's limited financial reserves, and the fact that Traka had a number of wealthy backers who were unlikely to be interested in funds of the magnitude which Redstone could afford to offer.

10. Mr Olivero raised the possibility of assisting Traka in its negotiations with representatives of the Ngaanyatjarra Aboriginal community who claimed native title over an area within which Traka held mining tenements.  Mr Olivero advised Mr Anthony Ailakis that in the course of conversations with Mr Patrick Verbeek, the managing director of Traka, Mr Verbeek had told him of the difficulties which Traka had encountered in its negotiation with representatives of the native title claimants.  In the course of those conversations, Mr Verbeek had expressed his admiration for Mr Olivero's ability to negotiate with Aboriginal people, as a result of Mr Olivero's experience living and working in remote Aboriginal communities in the past.  It was agreed that Mr Olivero would approach Mr Verbeek and offer his services to assist Traka in its negotiations with representatives of the Aboriginal native title claimants in return for Traka agreeing to withdraw its application for the Tollu tenement.  Mr Olivero telephoned Mr Verbeek from Redstone's offices, and arranged to meet him the following day.

11. Prior to that meeting, Mr Anthony Ailakis and Mr Olivero met with a legal adviser to Redstone, and received advice to the effect that there were no legal avenues through which they could recover the Tollu tenement. 

12. On the same day, 1 May 2007, Mr Olivero met with Mr Verbeek.  During the course of that meeting, Mr Olivero offered to organise a meeting between Mr Verbeek and the Ngaanyatjarra Elders, and to assist Traka in negotiating access arrangements to its tenements within the area of the native title claims.  Mr Verbeek told Mr Olivero that if he assisted him in arranging a meeting, and did everything possible in his power to get the negotiations with the Ngaanyatjarra Elders on foot, Traka would withdraw its application for the Tollu tenement.  However, he advised Mr Olivero that he would have to seek the approval of the Traka board before those arrangements could be confirmed.

13. Mr Olivero telephoned Mr Anthony Ailakis and reported the outcome of the meeting to him.  Mr Anthony Ailakis expressed gratitude to Mr Olivero and told him that he would be rewarded for his efforts.

14. Later that day, Mr Olivero met Mr Anthony Ailakis at Redstone's office.  During that meeting Mr Anthony Ailakis congratulated Mr Olivero on the arrangement he had made with Mr Verbeek.  Mr Olivero advised Mr Anthony Ailakis that he had given his word to Patrick Verbeek, and that it would be necessary to follow through and provide full assistance to Traka.

15. Apparently by this stage Mr Verbeek had advised Mr Olivero that the board of Traka had approved the proposal, and that Mr Verbeek wished Mr Olivero to accompany him to the first meeting with the Aboriginal Elders.  After Mr Olivero admonished Mr Anthony Ailakis for overlooking the need to renew the Tollu tenement, Mr Anthony Ailakis acknowledged his responsibility and said:

    I have spoken to Rodney and we have decided to give you 1,000,000 shares in Redstone in appreciation for the work that you are doing, and to ensure that we meet the obligations in the Traka deal and get the property back.  We are very thankful and happy to do this for you.

16. The two men shook hands and Mr Olivero said words to Mr Anthony Ailakis to the effect of 'I am going to make sure we meet all our obligations to get the property back'.  Mr Anthony Ailakis then said words to the effect of 'I will draft an agreement as soon as I get the chance'.  Mr Anthony Ailakis is legally trained and practised as a solicitor for a number of years.  The conversation ended with Mr Anthony Ailakis saying to Mr Olivero words to the effect of, 'You're in charge of making sure we meet our part of the deal'.

17. The following week Mr Olivero travelled to the Blackstone community in the West Musgraves.  The community is situated near the border between Western Australia and South Australia, several days' drive from Kalgoorlie.  Mr Olivero met up with Mr Rodney Ailakis, who was stationed at Redstone's bush camp nearby.  They met with an influential Ngaanyatjarra Elder and arranged to return for another visit at which that Elder and other council members would meet with Mr Verbeek of Traka, and discuss his proposals.

18. While Mr Olivero was in Blackstone he discussed the loss of the Tollu tenement with Mr Rodney Ailakis.  He expressed grave concern at what had happened.  Mr Rodney Ailakis advised that he and his brother understood Mr Olivero's position, appreciated his commitment to Redstone, and were happy to give him 1,000,000 shares to ensure that Redstone would recover the Tollu tenement.

19. About two weeks later Mr Olivero and Mr Verbeek flew to Alice Springs and then drove from Alice Springs to Blackstone.  Mr Olivero introduced Mr Verbeek to the Ngaanyatjarra Elder whom he had met on his previous visit, and to other senior community members.  The Aboriginal representatives assured Mr Verbeek that they would arrange another meeting to discuss his proposals for access to Traka's tenements.

20. During the return flight to Perth on 26 May 2007, Mr Verbeek gave Mr Olivero a document executed by Traka but undated, withdrawing its application for the Tollu tenement.  Mr Olivero gave the form to Mr Anthony Ailakis the following day.  Mr Anthony Ailakis told Mr Olivero that he had not forgotten about his shares, and that he would organise a document to acknowledge their deal in the new few days, and would transfer the shares as soon as he had sorted out the escrow requirements.

21. For reasons that were not explained in the evidence, it was not until November 2007 that Redstone lodged the document executed by Traka withdrawing its application for the Tollu tenement, with an application by Redstone for that tenement.  The effect of the lodgement of those documents was to restore the Tollu tenement to Redstone.

22. In the meantime, from about July 2007 onwards, Mr Olivero repeatedly asked Mr Anthony Ailakis to sort out the paperwork for the shares to which he and other people who had been involved in raising capital for Redstone were entitled.  During the course of those requests, Mr Olivero told Mr Anthony Ailakis that he wanted to sell some of the shares to allow his children to put a deposit on a home, and that he wished to place the remainder in his self‑managed superannuation fund.

23. On or about 13 August 2007, Mr Olivero sent invoices to Redstone in respect of his services as a consultant.  Those invoices included charges for time spent on his two trips to Blackstone for the purpose of arranging Mr Verbeek's introduction to Aboriginal community leaders, including his travelling time.  Those invoices were paid by Redstone in due course.

24. On 27 July 2009, Mr Olivero sent an email to Mr Rodney Ailakis asking him to remind Anthony that he needed to transfer shares to him and to others who had been involved in raising capital for Redstone.

25. During October 2009 the relationship between Mr Olivero and Mr Anthony Ailakis broke down irretrievably, and in November 2009 Mr Olivero resigned from the board of Redstone.  On 9 December 2009. Mr Olivero sent an email to Mr Rodney Ailakis accusing him and his brother of going back on their word, and claiming an entitlement to the 1,000,000 shares which were still owed to him.  In the email, Mr Olivero indicated that he intended to follow all legal avenues to enforce his entitlement.  A writ commencing the proceedings the subject of this appeal was issued late the following year.

The decision of the trial judge

1. At trial a number of arguments were advanced on behalf of the Ailakis brothers which were rejected by the trial judge, which have not been pursued on appeal.  It is unnecessary to refer to those issues in the brief review of the decision of the trial judge which follows.

Intention to create legal relations

1. The Ailakis brothers submitted that there was no enforceable contract with Mr Olivero, because the parties did not intend to create legal relations.  Prominent in their submissions was reliance upon the language used, and in particular, the reference to the shares being 'given' to Mr Olivero, which was said to indicate that the shares were to be a gift and that the parties did not intend there to be a legal obligation to transfer them.  The trial judge rejected this submission, placing particular reliance upon the statement by Mr Anthony Ailakis to the effect that he would produce a written agreement as soon as possible, which she considered to be only referable to the existence of a legally binding agreement.

2. In that context the trial judge referred to a submission to the effect that it should be concluded that the parties did not intend to create a legally binding relationship until the agreement had been brought into existence.  She rejected that argument, on the basis that in her view the relationship between the parties fell within the first category enunciated in Masters v Cameron (1954) 91 CLR 353, 360, in that the parties intended to be bound immediately, notwithstanding that the documentation of their agreement was to be prepared later.

The admissibility of similar fact evidence

1. On behalf of Mr Olivero evidence was led of transactions between Mr Anthony Ailakis and others, which were said to be admissible on the basis that the facts of those transactions were similar to the transaction with Mr Olivero, and were therefore relevant to the issues in the case.  The evidence was led over objection from the Ailakis brothers.

2. Mr Richard Chilvers gave evidence to the effect that Mr Anthony Ailakis had agreed to give him a commission of 10% on all capital he raised, and that the commission would be paid in the form of Redstone shares.  Mr Anthony Ailakis promised to prepare a document recording the agreement, although no such document was ever produced.  However, some time later, Mr Rodney Ailakis provided Mr Chilvers with a trust deed in which he declared himself trustee of the number of shares in Redstone owed to Mr Chilvers.  Some time later again Mr Chilvers received share transfer forms which enabled him to transfer the shares promised to him to his nominee.

3. Mr William Hayes gave evidence to the effect that in 2005 Mr Anthony Ailakis agreed that Mr Hayes would be paid a 10% commission on any seed capital that was raised for the initial public offering of shares in Redstone.  Mr Hayes gave evidence to the effect that he had to remind Mr Anthony Ailakis on more than ten occasions between 2007 and 2009 of his obligation to transfer the relevant shares to him.  However, in 2009, shares equal to the amount of commission earned by Mr Hayes were transferred to him by Mr Rodney Ailakis.

4. The trial judge referred to a number of authorities which led her to conclude that similar fact evidence in civil proceedings is admissible if it is logically probative of a fact in issue – that is, if it is relevant.  Her Honour held:

   In the present case the evidence that Mr Ailakis had on two prior occasions entered into an agreement with persons in which he offered a reward of transferring shares held by him personally or by his brother in consideration for the persons performing a service to Redstone Resources and the fact that his undertakings were performed was admissible. The fact that Mr Ailakis had on previous occasions followed through on these agreements is logically probative of the issue whether he intended to enter into a legally binding agreement with Mr Olivero and intended to follow through on that [98].

5. However, her Honour went on to observe that she would not 'accord any material weight to the evidence of the earlier agreements' [101], because of the significant differences between the two earlier transactions and the transaction involving Mr Olivero.  She concluded:

   The similarities between the agreements entered into with Mr Chilvers and Mr Hayes on the one hand and that entered into with Mr Olivero were therefore not such as to make it significantly more probable that the parties intended to enter into a legally binding agreement. As I have already come to the conclusion, based on other circumstantial evidence, that there was an intention to enter into a legally binding agreement, it is not necessary to take into account the similar fact evidence. At best it provides some limited confirmation of the conclusion that I have already reached [103].

Did Mr Olivero provide consideration?

1. On behalf of the Ailakis brothers it was submitted that Mr Olivero's undertaking to assist Mr Verbeek in his negotiations with the Aboriginal Elders, and thereby secure the return of the Tollu tenement to Redstone was not valuable consideration because Mr Olivero was obliged to do those things in any event, because of his obligations as a director of Redstone.

2. The trial judge reviewed the evidence with respect to the nature of the services actually performed by Mr Olivero.  She also reviewed the evidence relating to the charges which he had levied, as a consultant, for services provided in that capacity.  She observed that the fact that Mr Olivero had, in his capacity as a consultant, provided services of an executive character, did not of itself mean that he was obliged to provide services of that character as a director of Redstone, given that he also served as a consultant, and was paid consultancy fees over and above his fees as a director.  Further, the fact that on one prior occasion Mr Olivero held himself out as an executive director of Redstone, and had on other occasions performed the duties of an executive director in relation to such things as fundraising, did not lead to the conclusion that everything which he did at an operational level, including the services he provided in relation to the restoration of the Tollu tenement, became part of his duties as a non‑executive director.

3. The trial judge concluded that the services provided by Mr Olivero in relation to the restoration of the Tollu tenement were not services of a character ordinarily performed by a non‑executive director, and Mr Olivero was not under a duty to provide those services in his capacity as a director of Redstone.  Accordingly, she concluded that his undertaking to provide those services, and his provision of those services constituted valuable consideration for the promise to transfer 1,000,000 shares to him.

Did Mr Olivero lose the right to terminate the contract and to claim damages for the failure to transfer the shares when he elected to sue for specific performance of the contract?

1. The writ issued by Mr Olivero claimed specific performance of the agreement to transfer 1,000,000 shares in Redstone to him and damages for breach of contract. The prayer for relief in the statement of claim filed on behalf of Mr Olivero also claimed specific performance and damages. The claim for specific performance was maintained in an amended statement of claim filed on behalf of Mr Olivero on 13 April 2011.Neither pleading expressly stipulated whether the damages claimed were in addition to or in substitution for specific performance (see s 25(10) of the Supreme Court Act 1935 (WA) - the current equivalent of Lord Cairns' Act).  However, particulars of the damages claimed filed on 7 July 2011 made clear that the damages claimed were limited to the consequences of the delay in transferring the shares to Mr Olivero, and did not include an amount to reflect the current value of the shares and to that extent were additional to rather than in substitution for an order for specific performance.  Damages for delay in performance were claimed because the market value of the shares had dropped considerably between 2007 and the time of trial.

2. However, in written submissions filed on behalf of Mr Olivero a few days before the trial commenced, it was stated that the claim for specific performance was no longer pursued, and that the claim for damages was pursued on the basis of the value of the shares had they been transferred to Mr Olivero in early June 2007, and sold by him in the manner he had intended.

3. At the commencement of the trial, counsel for the Ailakis brothers asserted that Mr Olivero could not claim damages for the loss of his bargain unless he had terminated the contract, and that termination had not been pleaded.  With leave, Mr Olivero then filed an amended statement of claim in which he pleaded that the failure to transfer the shares, as well as the denial of the existence of the agreement by the Ailakis brothers in the defence which they filed, constituted a repudiation of the agreement which he had accepted both by his written submissions and by a more formal notice dated 11 May 2012.  In that pleading Mr Olivero abandoned the claim for specific performance and claimed damages by reference to the value of the shares at the time they should have been delivered to him, or, in the alternative, by reference to their value at the time that he intended to sell them.

4. On behalf of the Ailakis brothers it was submitted at trial that if there was an agreement which they breached, their breach lay in the failure to deliver the shares to Mr Olivero within a reasonable time, and that after that breach, Mr Olivero had irrevocably elected to affirm the continued existence of the agreement by commencing proceedings claiming specific performance.  It was submitted that Mr Olivero was no longer able to terminate the agreement on the basis of a breach which occurred prior to his election to affirm the contract.

5. After referring to relevant authorities, the trial judge concluded that the Ailakis brothers had committed a continuing repudiatory breach of the agreement by asserting that they were not bound by its terms and that, in consequence, notwithstanding his prior claim for specific performance, as long as that repudiatory breach continued, Mr Olivero could accept that breach as bringing the agreement to an end at any time, which he had done by the written submissions filed shortly prior to trial, and by the amended pleading filed during the trial.  Accordingly, the trial judge concluded that Mr Olivero was entitled to terminate the agreement and claim damages calculated by reference to the loss of his bargain.

The assessment of damages

1. The trial judge accepted that a term should be implied into the agreement which she had found, to the effect that the Ailakis brothers would transfer the shares to Mr Olivero within a reasonable time after Mr Olivero had fulfilled his undertaking to Mr Verbeek.  She accepted that a reasonable time would have been 10 days after the day on which Mr Olivero gave to Mr Anthony Ailakis the form executed by Traka withdrawing its application for the Tollu tenement.  Accordingly, the trial judge concluded that the agreement obliged the Ailakis brothers to transfer 1,000,000 shares in Redstone to Mr Olivero on or about 8 June 2007.

2. On behalf of Mr Olivero it was submitted that the market value of Redstone shares on 8 June 2007 was at least $1.20 per share.  On that day, shares traded on the market at prices between $1.39 and $1.50, although only 81,000 shares were traded that day.

3. The trial judge noted that about one month later, on 12 July 2007, the board of Redstone resolved to apply a discount of about 20% to the market price achieved over the previous 10 days for the purposes of fundraising, and fixed a price of $1.20 per share for the purposes of a short form prospectus issued that day.

4. The trial judge concluded that this evidence established that Mr Olivero's claim that the shares had a value of not less than $1.20 on 8 June 2007 should be accepted.

5. The trial judge observed that:

   The long-established rule for the assessment of loss of bargain damages for non-delivery of goods is that the buyer is entitled to the market price of acquiring the goods at the time of breach minus the price the buyer had agreed to pay for them under the contract [178].

6. The trial judge observed that pursuant to the agreement which she had found, Mr Olivero was obliged to perform services in return for the shares, rather than to pay for them.  In that context she observed:

   … I can see no reason why the prima facie rule entitling Mr Olivero to the market value of the shares as at the date of due performance should not apply [181].

7. On behalf of the Ailakis brothers it was submitted that damages should be assessed on the basis of the market value of the shares at the time Mr Olivero said he would have sold them.  In that respect the evidence of Mr Olivero was to the effect that he would have sold 200,000 shares in June 2007 in order to use the proceeds as deposits for houses for his two children, and would have retained the other 800,000 shares in his self‑managed superannuation fund, and would not have sold them until some time later.

8. In relation to that submission the trial judge observed:

   The law is not in favour of taking into account a buyer's intention regarding the ultimate sale of goods or shares when an assessment is made of the damages payable to the buyer. (Citing a number of authorities for that proposition) [185].

9. The trial judge referred to the decision of Emmett J in Brimaud v Boston Securities Entertainment Investments Pty Ltd [1998] FCA 1104 where account was taken of the fact that the shares to which the plaintiff was entitled would have been subject to compulsory retention for a period, and the damages to which the applicant was entitled were assessed by reference to the likely market value of the shares at the end of that period of retention. In her Honour's view, the restriction on sale in that case was a matter relevant to the inherent value of the shares, and was for that reason properly taken into account. In her view the case before her was:

   [M]ore on par with the decisions … in which it was held that the purchaser's agreement to on-sell the shares and the purchaser's intention to on‑sell were not relevant in assessing the damages to which the respective buyer was entitled [196].

10. She concluded:

    … [I]t is irrelevant what Mr Olivero intended to do with the shares. He should be entitled to the usual measure of damages which is the market value of the shares at the time of non-delivery [199].

11. However, the trial judge went on to express the view that there was one aspect pertaining to the shares which could perhaps be said to be intrinsic to their value, which was Mr Olivero's inability to sell the shares for some time because Redstone was involved in a capital raising soon after the shares were due to be delivered to him.  In that regard she noted that the directors of Redstone had resolved, on 30 May 2007, that they would undertake a capital raising as soon as possible so as to enable the receipt of funds by mid‑July 2007.  She concluded that Mr Olivero was in possession of price sensitive information between 30 May and 12 July 2007 when the short form prospectus was issued, and was therefore unable to sell his shares during that period.

12. The trial judge did not consider that Mr Olivero's knowledge that the Tollu tenement had not yet been recovered was price sensitive information, because Mr Olivero was aware that Mr Anthony Ailakis was in possession of a document executed by Traka which would enable Redstone to recover the tenement in due course.

13. In the result, the trial judge concluded that the case was analogous to Brimaud, and that the value of the shares should be assessed by reference to the market value of shares in Redstone in the period following 12 July 2007, which was the period in which Mr Olivero could first have sold the shares.  However, she found that the average price of Redstone shares over the four weeks following 12 July 2007 was $1.27, which was greater than the amount of $1.20 per share which Mr Olivero claimed was the value of the shares at the time of breach in June 2007.

14. The trial judge went on to assess damages on the basis that the submissions put on behalf of the Ailakis brothers were accepted, and Mr Olivero's intention as to the time at which he would sell those shares was relevant to the assessment of their value.  On that basis she calculated damages on the basis that 200,000 shares would have been sold over the period of four weeks between 12 July and 10 August 2007, and 800,000 shares would have been sold during February 2011.  On that basis she calculated damages in an amount of $694,550.

15. In the result, because the amount of damages assessed by the trial judge ($1.2 million) exceeded the jurisdiction of the District Court, she awarded damages up to the limit of that jurisdiction, namely, $750,000.

The grounds of appeal and notice of contention

1. There are five grounds of appeal.  It is unnecessary to replicate their terms.  Ground 1 challenges the decision to admit the so‑called similar fact evidence.  Ground 2 challenges the conclusion that the parties intended to create legal relations.  Ground 3 challenges the conclusion that Mr Olivero provided good consideration.  The challenge is made on the sole ground that he was under a duty to perform the services necessary to restore the Tollu tenement by virtue of his position as a director of Redstone.  Ground 4 asserts that Mr Olivero was not entitled to terminate the contract and to claim loss of bargain damages because he had elected to continue the agreement by his claim for specific performance.  Ground 5 challenges the assessment of damages on limited grounds.  First it is said that the trial judge went beyond Mr Olivero's pleaded case by assessing damages by reference to the market value of the shares in late July, early August 2007.  Second, the trial judge is said to have erred by assessing damages in the alternative by reference to the dates at which Mr Olivero intended to sell the shares.

2. Mr Olivero has filed a notice of contention.  It has two components.  First it is said that if the trial judge erred in concluding that Mr Olivero's position as a director of Redstone did not impose a duty to provide the services necessary to recover the Tollu tenement, his promise to the Ailakis brothers to perform those services nevertheless provided good consideration, because his duties as a director were owed to Redstone.  Second it is contended that the conclusion of the trial judge to the effect that it was open to Mr Olivero to terminate the contract and claim damages for loss of bargain should be upheld on the ground that he had not previously elected to affirm the contract, because he had claimed both specific performance and damages.

Ground 1 – the admissibility of the similar fact evidence

1. Ground 1 asserts that the trial judge erred by admitting the evidence of Mr Hayes and Mr Chilvers as to their transactions with Mr Anthony Ailakis.  The appellants properly concede that the success of this ground does not, of itself, result in the success of the appeal because the trial judge did not attach any material weight to the evidence when arriving at her conclusion with respect to the parties' intention to create legal relations.  Rather, the ground is put as an adjunct to ground 2, which challenges that conclusion.

2. The general legal principles governing the admissibility of similar fact evidence in civil proceedings are not in doubt.  The leading authorities in the area were carefully reviewed by the trial judge, and the appellants do not suggest that she erred in her enunciation of the principles to be extracted from those authorities.  Relevantly those principles are:

   1.Similar fact evidence is a form of circumstantial evidence - Martin v Osborne (1936) 55 CLR 367; Grivas v Brooks (1997) 69 SASR 532.

   2.Circumstantial evidence is admissible if it is relevant to a fact in issue.

   3.Circumstantial evidence is relevant to a fact in issue if it is logically probative of the existence or non‑existence of that fact, in the sense that the occurrence of the circumstance makes the occurrence of the contentious fact more or less likely – see Grivas; Mood Music Publishing Co Ltd v De Wolfe Ltd [1976] Ch 119, 127; Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23, 28 – 31; Gates v City Mutual Life Assurance Society Ltd (1982) 43 ALR 313; O'Brien v Chief Constable of South Wales Police [2005] UKHL 26; [2005] 2 AC 534.

   4.So, in the case of similar fact evidence, the evidence will be logically probative and admissible if the occurrence of the similar fact makes the occurrence of the contentious fact more likely (see, for example, Gates).

1. More contentious is the existence and extent of any discretion to exclude similar fact evidence in civil proceedings on discretionary grounds, such as oppression or unfairness, or on the ground that the evidence was illegally obtained or, perhaps, on the ground that the time and expense involved in receiving and evaluating the evidence would be disproportionate to its probative value - see, for example, Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd; Duke Group Ltd (in liq) v Pilmer (1994) 63 SASR 364, 377 – 378. However, as there is no suggestion that there is any discretionary basis upon which the evidence could be excluded in this case, it is unnecessary to enter into that controversy.

2. It will be apparent from the principles which I have set out above that the necessary first step in any process of evaluation of the admissibility of similar fact evidence is the identification of the contentious fact in issue to which the evidence is said to be relevant.  That is necessary because the second step in the process requires an assessment of whether the occurrence of the fact said to be similar makes the occurrence of the contentious fact more likely.

3. In the present case there were no contentious facts in issue concerning the terms and circumstances of the transaction (to use a neutral term) involving the Ailakis brothers and Mr Olivero.  Neither of the Ailakis brothers gave evidence.  The only evidence of the critical conversation between Mr Anthony Ailakis and Mr Olivero was that given by Mr Olivero.  Mr Olivero's evidence of the conversations he had with Mr Rodney Ailakis was, to some extent, corroborated by the evidence of Mr Barrett.  Mr Olivero's evidence with respect to those conversations, and the actions which he took, was not contradicted by any other evidence and was not contentious.

4. As the trial judge correctly held, the question of whether the parties had an intention to create a legally binding contract 'is determined objectively by drawing inferences from what the relevant parties said and did in the course of their dealings' (reasons [51]).  Resolution of the issue does not involve a search for the uncommunicated subjective motives or intentions of the parties – Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 [25]; Masters v Cameron.

5. In this case, there were no contentious issues of fact concerning what the relevant parties said and did.  It follows that there were no contentious facts to which the evidence proffered on the basis of similar fact could be relevant, and therefore no basis upon which the evidence could be admissible.

6. With respect, the error in the approach taken by the trial judge with respect to this issue is evident in a number of portions of her reasons.  First, as I have noted, at [98] she asserted that, 'The fact that Mr Ailakis had on previous occasions followed through on these agreements is logically probative of the issue whether he intended to enter into a legally binding agreement with Mr Olivero and intended to follow through on that.'  That conclusion is erroneous because the intention of Mr Anthony Ailakis is to be assessed objectively, from what he said and did, and does not involve a search for his uncommunicated subjective intention.  What he said and did in relation to other transactions is irrelevant to the inferences objectively drawn from what he said and did in connection with the transaction involving Mr Olivero.

7. Second, the trial judge considered that this case was analogous to the decision in International Paper Company v Spicer [1906] HCA 75; (1906) 4 CLR 739. In that case the contentious question was whether a person who had purported to contract on behalf of paper manufacturers had actual or ostensible authority to do so. It was held that evidence to the effect that the person had purported to contract on behalf of the paper manufacturers on at least three prior occasions, and that the paper manufacturers knew that he was holding himself out as an agent, and had subsequently performed the obligations under the contracts he had arranged was admissible. However, the contentious question of agency in that case which involved issues of actual and ostensible authority is, with respect, very different to the question of intention to create legal relations, which was the issue to which the evidence was said to be relevant in this case. The fact that the putative agent was known by the putative principal to have been arranging contracts on its behalf which it had honoured, made it more likely, as a matter of logic, that the principal had either authorised the agent to act on its behalf or had clothed him with ostensible authority to do so. There is, with respect, no relevant analogy between the circumstances of this case and the issues which arose in International Paper Company v Spicer.

8. Third, after deciding to admit the evidence, the trial judge concluded that she would not accord any material weight to it, because of the significant differences between the circumstances of the prior transactions the subject of that evidence, and the transaction involving Mr Olivero.  With respect, that process of reasoning necessarily sustained the conclusion that the occurrence of the prior transactions was not logically probative of any issue relating to the transaction involving Mr Olivero, in the sense that it made the occurrence of a contentious fact more or less likely.  Put another way, there is, with respect, an irreconcilable tension between the conclusion that the evidence was admissible, and the conclusion that it should be given no weight.

9. For these reasons, ground 1 should be upheld.  The trial judge erred by ruling that the evidence of the prior transactions between Mr Anthony Ailakis and Mr Hayes and Mr Chilvers was relevant and admissible.  However, as the appellants properly concede, as the evidence had no material effect upon the process of reasoning by which the trial judge arrived at her conclusion, the erroneous admission of this evidence does not, of itself, sustain the conclusion that the appeal should be allowed and the decision of the trial judge set aside.

Ground 2 – intent to create legal relations

1. Ground 2 asserts that the trial judge erred by concluding that the parties intended to create a legally enforceable contract.  It is not suggested that the trial judge erred in her assessment of the legal principles properly applied but rather that she erred in her application of those principles to the circumstances of the case.  Nevertheless, it is desirable to briefly review the applicable legal principles.

2. As I have already noted, it is well established that the question of the parties intention to create legal relations is to be addressed objectively, having regard to their words and actions, and not by a search for the uncommunicated subjective motives or intentions of the parties - Ermogenous; Masters v Cameron.

3. Some of the authorities in this area distinguish between two classes of case – between cases involving family, social and domestic arrangements as compared to commercial agreements, in terms which might suggest that an intention to create legal relations will be presumed in the latter class of case, but not in the former.  For example, in Edwards v Skyways Ltd [1964] 1 All ER 494, 499 – 500, Megaw J observed:

   Where the subject matter of the agreement is not domestic or social, but is related to business affairs, the parties may, by using clear words, show that their intention is to make the transaction binding in honour only, and not in law; and the courts will give effect to the expressed intention …

   In the present case the subject matter of the agreement is business relations, not social or domestic matters.  There was a meeting of minds – an intention to agree.  There was, admittedly, consideration for the defendant company's promise.  I accept the propositions of counsel for the plaintiff that in a case of this nature the onus is on the party who asserts that no legal effect was intended, and the onus is a heavy one.

4. However, in Ermogenous the plurality (Gaudron, McHugh, Hayne and Callinan JJ) observed:

   In this context of intention to create legal relations there is frequent reference to 'presumptions'. It is said that it may be presumed that there are some 'family arrangements' which are not intended to give rise to legal obligations and it was said in this case that it should not be presumed that there was an intention to create legal relations because it was a matter concerning the engagement of a minister of religion. For our part, we doubt the utility of using the language of presumptions in this context. At best, the use of that language does no more than invite attention to identifying the party who bears the onus of proof. In this case, where issue was joined about the existence of a legally binding contract between the parties, there could be no doubt that it was for the appellant to demonstrate that there was such a contract. Reference to presumptions may serve only to distract attention from that more basic and important proposition [26].

5. Similar observations were made in this court a little earlier in Pirt Biotechnologies Pty Ltd v Pirtferm Ltd [2001] WASCA 96 by Murray J (Ipp and Owen JJ agreeing):

   I prefer the view that the legal onus to establish the existence of the contract and the intention to create legal relations remains upon the party asserting it, in this case, the appellant.  I accept that the onus may be readily discharged in the case of commercial negotiations where agreement on important matters might readily persuade the court that a contract was made.  It may be said then that an evidentiary onus will shift to the defendant to rebut that conclusion, but that is only a matter of evidence and in my opinion if the inference of an intention to create legal relations is to be drawn, it will be because the party asserting that it is so has discharged the onus of persuading the court:  Toyota Motor Corp Aust Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, per Tadgell J at 177 [21].

6. More recently, in Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237, the Full Federal Court held that:

   The surest and safest way to proceed is … by examining objectively the actual circumstances and context of the parties' dealings to ascertain whether what they said and did evinced an intention to contract as opposed to expressing a sincere, but legally insufficient, promise or commitment that reflected the trust or love shared between them [16].

7. Consistently with these authorities, it might readily be accepted that Mr Olivero carried the onus of establishing that he and the Ailakis brothers intended to create a legally enforceable contract.  However, in this case the identification of that onus is of no particular significance because all relevant facts and circumstances were established by the evidence which was led on behalf of Mr Olivero.  The issue is whether, having regard to all relevant facts and circumstances, it should be objectively inferred that the parties intended to create a legally enforceable contract, or whether it should be inferred that they intended their arrangements to be binding in honour only. 

8. In support of this ground, the Ailakis brothers draw attention to a number of facts and circumstances which are said to support the conclusion that the parties did not intend to create legal relations.  Those facts and circumstances are:

   (a)as at May 2007 when agreement was reached, the Ailakis brothers and Mr Olivero had been friends for approximately 20 years (although Mr Olivero described the relationship as mainly business, and said they did not see a lot of each other socially (ts 351);

   (b)Mr Anthony Ailakis and Mr Olivero were directors of Redstone and all parties were indirectly shareholders in Redstone;

   (c)Tollu was an important tenement to Redstone and had been lost through oversight on the part of Mr Anthony Ailakis;

   (d)the arrangements relating to the transfer of shares to Mr Olivero were not made until after the board of Traka had approved agreement in principle as to the terms upon which the Tollu tenement would be returned to Redstone;

   (e)Mr Anthony Ailakis was extremely relieved by the solution which had been devised, not only because it precluded a significant financial loss to Redstone but also because it minimised his personal embarrassment;

   (f)during the course of their meeting, Mr Olivero scolded Mr Anthony Ailakis, which prompted the offer of the shares;

   (g)the language used by Mr Olivero after the offer was made was language of gratitude ('Thank you very much and please thank Rodney'), rather than legal commitment;

   (h)it should not be inferred that Mr Olivero intended to render himself liable in damages for breach of contract if he did not assist Mr Verbeek in his negotiations with the Aboriginal Elders;

   (i)the fact that Mr Anthony Ailakis indicated both at the conclusion of the first conversation with Mr Olivero relating to the transfer of shares, and subsequently, that he would prepare a document recording the arrangements.

9. In addition, the Ailakis brothers placed particular emphasis upon the words used by the parties, which are said to be indicative of a lack of intention to create legal relations including use of the words 'give', 'reward' and 'appreciation'.  So, Mr Olivero's evidence was to the effect that after he told Mr Anthony Ailakis about his successful meeting with Mr Verbeek, Mr Anthony Ailakis replied with words to the effect of 'Oh, thanks a lot, thanks, oh you are going to be rewarded for this' (exhibit 22 [163] – [164], ts 149).  Similarly, Mr Hayes gave evidence to the effect that he heard Mr Anthony Ailakis say words to the effect that he had a plan to make sure Mr Olivero was rewarded for his efforts (exhibit 42 [44], [47], ts 454).

10. Evidence as to the use of word 'give' and words of thanks and appreciation includes:

    (a)Mr Olivero's evidence that Mr Anthony Ailakis said to him, 'I've spoken to Rodney and we have decided to give you a million shares in Redstone in appreciation for the work that you are doing …  We are very thankful and happy to do this for you' (exhibit 22 [175] – [177], ts 150);

    (b)Mr Olivero's evidence to the effect that Mr Rodney Ailakis said that they were happy to 'give' Mr Olivero a million shares 'to make sure that Redstone gets Tollu back' (exhibit 22 [202] – [203], ts 156);

    (c)Mr Chilvers' evidence to the effect that he heard Mr Anthony Ailakis say words to the effect of 'We're going to give Carlos a million shares' (exhibit 25 [25]);

    (d)Mr Barrett's evidence to the effect that Mr Rodney Ailakis said that he and Mr Anthony Ailakis 'appreciated' the work that Mr Olivero was doing and 'that is why we have both agreed to give you the million shares for your efforts' (exhibit 41 [31]);

    (e)Mr Olivero's evidence to the effect that he responded to the offer of shares by saying 'Thank you very much and please thank Rodney' (exhibit 22 [175] – [177], ts 150).

11. During oral argument, counsel for the appellants also placed reliance upon a portion of Mr Olivero's cross‑examination (at ts 363) where it was put to Mr Olivero that 'everything you did in regard to Traka, you didn't do under any legal obligation', to which he responded, 'I don't believe I had the legal obligation, sir'.

12. However, there are two reasons why this evidence is of no assistance to the appellants.  First, the interchange must be viewed in its context which was a series of questions directed to the proposition that Mr Olivero had a legal and fiduciary obligation to provide the services necessary to recover the Tollu tenement because he was a director of Redstone.  Viewed in that context, the answer given represents a denial of the proposition that he was under a legal obligation to provide those services by reason of his directorship of Redstone, not a denial of the proposition that he was under a contractual obligation to provide those services.

13. Second, at its highest, the evidence of Mr Olivero would go only to his subjective belief or intention which is, as I have noted, irrelevant.  Evidence of that nature is no more admissible or relevant to the issue of intent to create legal relations than, say, for example, evidence that he understood himself to be bound legally and enforceably immediately the arrangement was made.

14. During written and oral argument counsel for the appellants also placed reliance upon the terminology used in an email from Mr Olivero to Mr Rodney Ailakis on 9 December 2009 (exhibit 18).  The relevant portion of that email was in the following terms:

    It is unfortunate that you and Tony have chosen to go back in [sic] your word.  We are all extremely pissed off and disappointed and intend to follow all legal avenues to remediate the situation.

    We are also surprised at Tony [sic] denial that the deal existed in the first place, but fortunately we feel confident that we have enough evidence to prove our claims.

    There is also the promise you and Tony made to me on several occasions and in front of witnesses.  You told me that you and Tony had decided to give me 1M shares in appreciation of my work and nothing was ever transferred and they are still owed to me.

15. There must be considerable doubt as to whether terms used in a communication made more than two and half years after the arrangements relating to the transfer of the shares were made can be legitimately used for the purpose of drawing an inference as to the intention of the parties at that earlier time.  It seems to me to be strongly arguable that the terms used by Mr Olivero in this email do nothing more than reveal his subjective beliefs at the time the email was sent, and are therefore irrelevant to the intention of the parties two and a half years earlier.

16. Nevertheless, the evidence does not assist the appellants.  It is suggested that the lack of use of the word 'contract' supports an inference of lack of intent to create legal relations.  However, it is of some significance that Mr Olivero referred to 'the promise' and 'the deal'.

17. Reliance is also placed upon Mr Olivero's description of the transaction as one in which it had been 'decided to give me 1M shares in appreciation of my work' as being indicative of the lack of intent to create legal relations.  However, any inference to that effect is more than offset by the opening words of the email, in which Mr Olivero threatens legal action, his use of words of obligation like 'promise' and 'deal' and his reference to the shares still being 'owed' to him.

18. Accordingly, for these reasons this email does not assist the appellant's argument.

19. In order to resolve this ground it is necessary to consider all relevant facts and circumstances for the purposes of ascertaining whether it should be inferred that the parties intended to create legal relations by their arrangements.  Although Mr Olivero and Mr Anthony Ailakis may have been social acquaintances or friends, it is clear that the arrangements with respect to the transfer of the shares were made in a commercial context.  Both were directors of Redstone and both had a significant interest in the prosperity of that company through their shareholding.  Mr Olivero was also providing consultancy services to Redstone on a commercial basis.  The Tollu tenement was plainly an asset of considerable importance to Redstone and therefore to each of the Ailakis brothers and Mr Olivero.  Mr Anthony Ailakis had a particular interest in the restoration of the Tollu tenement, as its loss could have exposed him to a claim for breach of his duties as a director of Redstone and to considerable personal embarrassment.  The parcel of shares promised to Mr Olivero had a market value in excess of $1,000,000 at the time the arrangements were made. 

1. Although the commercial character and context of an agreement should not be regarded as giving rise to a presumption of an intention to create legal relations, the very significant commercial characteristics of the arrangements between the Ailakis brothers and Mr Olivero strongly support an inference that they intended those arrangements to be enforceable.

2. No inference to the contrary is to be drawn from the time at which the arrangements with respect to the transfer of shares were made.  Although Mr Verbeek had advised Mr Olivero that the board of Traka had given agreement in principle to the arrangements which he proposed relating to the restoration of the Tollu tenement to Redstone, there was much that remained to be done in order to secure that outcome.  As it transpired, it was necessary for Mr Olivero to undertake a laborious journey to a remote community in the central desert on two separate occasions.  It was clear that Mr Verbeek was relying upon Mr Olivero's personal capacity to secure the commencement of negotiations with the Aboriginal Elders, because of his prior experience in such negotiations.  It must therefore have been clear to all concerned that Mr Olivero's personal services were critical to the recovery of the Tollu tenement by Redstone.  Mr Olivero's promise to provide those services was implicit in the arrangements that were made, as the trial judge found.  The ongoing nature of Mr Olivero's commitment is evident from the words used by Mr Anthony Ailakis to conclude the meeting in which he promised to transfer the shares, when he said words to the effect of:

   You're in charge of making sure we meet our part of the deal.  Let Rodney and I know what you need.  Rodney and I will help organise the meetings (exhibit 22 [178], ts 150).

3. The words used by the parties are not inconsistent with a characterisation of their arrangements as the exchange of mutual promises intended to be enforceable.  The Ailakis brothers were promising to transfer a parcel of shares of considerable value to Mr Olivero.  He in turn was implicitly promising to provide the services necessary to secure the restoration of the Tollu tenement.  In such a context, the use of the word 'give' to describe the transfer of the shares, or the characterisation of that transfer as a 'reward' and the mutual expression of appreciation is entirely understandable, and not inconsistent with an inference that the parties were assuming enforceable obligations to each other.  While the word 'give' can, in the right context, connote a 'gift', in the sense of a voluntary transfer without consideration, in other contexts, including the context of an exchange of promises, it connotes nothing more than delivery.  The word 'reward' is not inconsistent with an intention to create legal relations, as its primary meaning, according to the Macquarie Dictionary, is 'something given or received in return or recompense for service, merit, hardship, etc'.  Nor are expressions of appreciation or gratitude inconsistent with an intention to create legal relations, especially in the context of this case, where Mr Olivero had successfully devised and executed a strategy which saved Redstone from significant financial loss, and Mr Anthony Ailakis from a potential claim and significant personal embarrassment.

4. Finally on this ground, the trial judge was correct to place considerable emphasis upon the uncontested evidence to the effect that Mr Anthony Ailakis said on two occasions during May 2007 that he would prepare a document recording the arrangements.  As I have noted, Mr Anthony Ailakis had previously practised as a solicitor, and there is a clear inference from those statements to the effect that all parties intended that their arrangements were to be legally enforceable and binding.  Mr Anthony Ailakis' promise to prepare a document recording the arrangements is unequivocally referable to the intention of the parties to the effect that such a document, when prepared, would provide a clear statement of their mutual obligations so that, in the event of disagreement, the document would define the extent of those obligations.  Viewed objectively there would be little point or purpose to be served in defining the extent of the mutual obligations of the parties unless those obligations were to be legally enforceable.

5. In an attempt to avoid the obvious inference arising from Mr Anthony Ailakis' statement to the effect that he would 'draft an agreement', both at trial and on appeal the appellants sought to pray in aid the principles enunciated in Masters v Cameron.  It was contended on their behalf that it should be concluded that this case falls within the third category of case enunciated in Masters v Cameron at 360 - that is, the category in which the parties did not intend 'to make a concluded bargain at all, unless and until they execute a formal contract'.

6. It should first be observed that the three categories identified in Masters v Cameron are concerned with the legal status of arrangements between parties in a context in which a formal document is to be prepared recording the terms of those arrangements.  That is an issue which is quite different in character to the issue presently under consideration.  So, a case will be placed in the third category in Masters v Cameron if the parties intended to be legally bound to each other, but only after the document recording their agreement had been executed.  In this case, the appellants' principal contention is to the effect that the parties did not intend that their arrangements would ever be legally binding and enforceable, but were only ever to be arrangements binding in honour.

7. In any event, the trial judge was plainly correct to reject the contention that it should be inferred that the parties intended their arrangements would only become binding and enforceable if and when the document proposed by Mr Anthony Ailakis was prepared and executed.  As I have already noted, at the time Mr Anthony Ailakis promised to transfer the shares to Mr Olivero, much remained to be done to secure the return of the Tollu tenement to Redstone.  It was clearly understood by all that time was of the essence, and Mr Anthony Ailakis made it clear that he was relying upon Mr Olivero to move promptly and effectively so as to provide the services which Mr Verbeek required as a condition of the return of the Tollu tenement.  It was clearly contemplated that those services would be provided, and they were in fact provided prior to the preparation and execution of the document to which Mr Anthony Ailakis referred.  In such a context it would be quite irrational to attribute to Mr Olivero an intention that his entitlement to more than $1,000,000 worth of shares would not arise unless and until the document proposed by Mr Anthony Ailakis was prepared and executed.  In the circumstances of this case the trial judge was plainly correct to conclude that the case fell within the first category identified in Masters v Cameron - that is, the category in which the parties intend to be immediately bound to the performance of their obligations, but at the same time intend to embody their obligations in a document to be prepared in due course.

8. For these reasons ground 2 must be dismissed.

Ground 3 - consideration

1. Ground 3 asserts that the trial judge should have concluded that Mr Olivero provided no consideration for the promise to transfer the shares to him because he already had an existing legal obligation to do whatever was necessary to secure the restoration of the Tollu tenement because he was a director of Redstone.

2. The submissions advanced in support of the ground involved the following propositions:

   1.a promise to perform a pre‑existing contractual duty may, in some circumstances, constitute valuable consideration (see Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1; Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723), but a promise to perform a pre‑existing public duty does not constitute good consideration (see Collins v Godefroy (1831) 1 B & Ad 950; (1831) 109 ER 1040; Westpac Banking Corporation v Australian Securities Commission (1997) 72 FCR 318);

   2.Mr Olivero's duties as a director of Redstone were public duties, because they are embodied in a statute (s 180(1) of the Corporations Act 2001 (Cth));

   3.the scope of any particular director's duties will depend upon the particular circumstances of the case, including the nature of the company, the provisions of its constitution, the size and nature of its business, the composition of the board, the position and responsibilities of the particular director within the governance arrangements for the company, the particular functions performed by the director, his or her experience and skills, the manner in which responsibility for the business of the company is distributed between the directors and the employees, and so on (see Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; Vrisakis v ASC (1993) 9 WAR 395, 451 – 452; Daniels v Anderson (1995) 37 NSWLR 438; ASIC v Macdonald (No 11) [2009] NSWSC 287 [250] – [255]).

   4.in this case, Mr Olivero assumed the obligation of doing all that was necessary to recover the Tollu tenement in this capacity as a director of Redstone, and therefore undertook to do nothing more, and in fact did nothing more, than perform his duties as a director, which did not constitute good consideration.

3. The third proposition above is amply supported by a long line of authority and may readily be accepted.  The first proposition is more contentious, as there are cases in which it has been held that a promise to perform pre‑existing duties, imposed by either statute or the general law, which have a public character can nevertheless constitute good consideration – see Ward v Byham (1956) 2 All ER 318; Williams v Williams (1957) 1 All ER 305; Popiw v Popiw [1959] VR 197; Airways Corporation of New Zealand Ltd v Geyserland Airways Ltd [1996] 1 NZLR 116. However, it is unnecessary to resolve the apparently conflicting authorities in this area for two reasons:

   (a)the second proposition above, upon which the argument depends, is plainly wrong; and

   (b)because Mr Olivero's duties as a director were owed to Redstone, the promise which he made to the Ailakis brothers, and which was enforceable by them, provided good consideration.

4. For the same reasons, it is unnecessary to resolve the fourth proposition above, which is essentially a question of fact, although there is much to be said for the trial judge's conclusion that the services provided by Mr Olivero when he travelled to Blackstone on two occasions and, on the second occasion, introduced Mr Verbeek to the Aboriginal Elders, were provided by him in his capacity as a consultant to the company rather than in his capacity as a director - see Deputy Commissioner of Taxation v Austin (1998) 28 ACSR 565, 570.

5. The second proposition advanced in support of the appellants' argument confuses the source of a director's duties with the nature and character of those duties.  It is clear that the duties of a director have a number of sources, including common law, equity and statute.  However, the fact that the scope of a director's duties, and the standards which must be met in the discharge of those duties, are embodied in a statute and can be enforced by the exercise of the remedies conferred by a statute does not of itself mean that the duties have a public character, analogous, for example, to the duty to attend court in answer to a subpoena (Collins v Godefroy; Westpac Banking Corporation v ASC) or the duty to care for a dependent child (Ward v Byham).  The duties of a director are owed to the company and are enforceable by the company.  Although the rule in Foss v Harbottle (1843) 2 Hare 461; (1843) 67 ER 189 has to some extent been ameliorated by the development of the shareholder's derivative action, including the current statutory form of that action, it remains the case that the remedy enforces the rights of the company as against those who owe duties to the company, such as its directors. The appellants' assertion that the duties which a director owes to the company in which he or she holds office are duties of a public character cannot be accepted.

6. Further and in any event, the appellants' assertion that a promise to perform the duties of a director cannot constitute good consideration is obviously cast too broadly to be accepted.  If this assertion were correct, directors would be unable to sue for their agreed remuneration.  In the circumstances presently under consideration, the appellants' only prospect of advancing an argument based on consideration would have to rely upon the fact that Mr Olivero had already agreed to provide services as a non‑executive director, and had agreed the remuneration which he would receive for those services, which he was therefore obliged to provide without additional remuneration.

7. However, cast in those terms, the argument must necessarily fail for the second reason to which I have referred above [101].

8. Mr Olivero's duties as a director of Redstone were owed to Redstone, not the Ailakis brothers.  Although, as I have noted, there is some controversy in relation to the question of whether a promise to perform an existing contractual duty, made to the party to whom that duty is owed, can constitute good consideration (compare Wigan v Edwards (1973) 47 ALJR 586, 594 with Williams v Roffey and Musumeci), it is clear that a promise to perform an existing contractual duty made to a third party provides good consideration to the party to whom the promise is given, who would otherwise have no means of enforcing the performance of the contract.

9. In New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154; [1975] 1 NZLR 505, a question arose as to whether a firm of stevedores could enforce a contract made with the owners of goods relating to the unloading of those goods from a vessel, when the stevedores already owed a contractual duty to the carriers of the goods to unload them. At 168 the Privy Council held:

   An agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration and does so in the present case:  the promisee obtains the benefit of a direct obligation which he can enforce.

10. In Pao On v Lau Yiu Long [1980] AC 614, parties to a contract with a company refused to carry out their obligations unless the shareholders of the company provided them with a guarantee against potential loss arising out of the contract. The consideration for the guarantee was a promise to perform the existing contractual obligation owed to the company. The majority held (at 632) that this was good consideration:

    Their Lordships do not doubt that a promise to perform, or the performance of, a pre‑existing contractual obligation to a third party can be valid consideration.

11. The trial judge recognised this principle.  At [112] she observed, 'The actual performance of a pre‑existing duty owed to a third party may also constitute good consideration:  Shadwell v Shadwell (1860) 9 CBNS 159; (1860) 142 ER 62, 68'. It may therefore be doubted whether the first element of the notice of contention filed on behalf of Mr Olivero was necessary, as the trial judge appears to have recognised the principle and to have advanced it as an alternative justification for her conclusion that good consideration was provided. At all events it is clear that the promise made by Mr Olivero to the Ailakis brothers to provide the services necessary to secure the restoration of the Tollu tenement constituted good consideration, irrespective of the scope and content of the duties which he owed to Redstone as a director. Ground 3 must therefore be dismissed.

Ground 4 - termination of the contract

1. Ground 4 asserts that Mr Olivero was bound by an election to affirm the continued operation of the agreement after breach by the Ailakis brothers, and could not therefore accept that breach as bringing the contract to an end in order to claim loss of bargain damages.

2. I have set out above the circumstances in which Mr Olivero purported to accept the breach of contract by the Ailakis brothers as bringing the contract to an end and claimed damages for loss of the bargain equal to the value of the shares to be transferred pursuant to its terms.

3. In the notice of contention filed on behalf of Mr Olivero he contests the conclusion of the trial judge to the effect that his commencement of proceedings for specific performance constituted an election to keep the contract alive (reasons [161]).  The contention relies upon the fact that the prayer for relief endorsed on the writ, and in every version of the statement of claim thereafter, claimed damages for breach of contract in addition to any claim for specific performance.  Accordingly, it is said that the claim for specific performance made in the context of an alternative claim for damages should not be seen as an unequivocal election to affirm the continuation of the contract.

4. There is clear authority in support of the proposition that a party can pursue alternative remedies, at least up until the point of judgment.  In United Australia Ltd v Barclays Bank Ltd [1941] AC 1, Lord Atkin observed:

   On the other hand, if a man is entitled to one of two inconsistent rights it is fitting that when with full knowledge he has done an unequivocal act showing that he has chosen the one he cannot afterwards pursue the other, which after the first choice is by reason of the inconsistency no longer his to choose … (but) I … think that on a question of alternative remedies no question of election arises until one or other claim has been brought to judgment.  Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other:  but he can take judgment only for the one, and his cause of action on both will then be merged in the one (30).

   See also Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; (1976) 136 CLR 444, 459 – 462; Fullers' Theatres Ltd v Musgrove [1923] HCA 12; (1923) 31 CLR 524, 546; Woods v Woods [2000] NSWSC 851 [15].

5. So, a party confronted with a breach of contract of a kind which could be accepted as bringing the contract to an end can sue for specific performance of the contract and claim damages for breach of contract, including for loss of the bargain, in the alternative without being taken to have elected either to affirm the contract or to accept the breach as bringing the contract to an end.  Mr Olivero asserts that this is what he did.  However, that proposition is difficult to reconcile with the particulars of damage filed shortly prior to trial, in which damages were calculated on the assumption that the shares would be transferred to Mr Olivero, and the only claim made was for the diminution in their value between the time at which they should have been transferred, and the time of trial.  On balance therefore I am inclined to the view that the trial judge was correct to conclude that, at least by 13 April 2011, when the amended statement of claim and particulars of damage were filed, Mr Olivero had elected to affirm the continued existence of the contract.  However, for the reasons which follow, this was no impediment to his subsequent acceptance of the Ailakis brothers' continuing repudiatory breach of the agreement, thereby bringing the agreement to an end and entitling him to claim damages for loss of bargain.

6. In assessing the consequences of an election to affirm a contract after breach, there is a vital distinction between those cases in which the election occurs after an act or omission which constitutes a single breach, and those cases in which the conduct of the party in breach manifests a continuing intention not to be bound by the contract, and thereby constitutes a continuing repudiatory breach.  In cases falling within the former category, an election to affirm the contract will result in the loss of the right to accept a breach as bringing the contract to an end at any time thereafter - see Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41, 55; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 656; Larking v Great Western (Nepean) Gravel Ltd (in liq) (1940) 64 CLR 221. However, in cases falling within the latter category, if the conduct of the party in breach manifests a continuing intention not to be bound by the contract, unless and until the party in breach retracts its implicit or express assertion to the effect that it is not bound by the contract and agrees to perform its terms, the innocent party can at any time accept the breach and bring the contract to an end – see Ogle v Comboyuro Investments; Sibbles v Highfern Pty Ltd [1987] HCA 66; (1987) 164 CLR 214.

1. Turning to the question of election, the words or conduct ordinarily required to constitute an election between rights must be unequivocal in the sense that they are consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other:  Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 646 (Stephen J). An election takes place when the conduct of the party is such that it would be 'justifiable only' if an election had been made one way or the other: Sargent (656) (Mason J):  Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41, 55. In the case of an alleged affirmation of a contract, it is always necessary to examine the conduct relied upon as an affirmation in its particular evidentiary setting, and the question must be answered whether the party able to terminate has communicated to the other party an unequivocal election to affirm, ie to renounce its rights to rescind: Champtaloup v Thomas [1976] 2 NSWLR 264, 269.

2. In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26, Deane, Toohey, Gaudron and McHugh JJ said:

   The true nature of election is brought out in this sentence from the seminal work of Spencer Bower and Turner, The Law Relating to Estoppel by Representation:  'It is of the essence of election that the party electing shall be "confronted" with two mutually exclusive courses of action between which me must, in fairness to the other party, make this choice'.

   …

   As Spencer Bower and Turner point out in the passage quoted earlier, at the heart of election is the idea of confrontation which in turn produces the necessity of making a choice.  But in a case such as the present one, the choice is not merely one of affirming the agreement; it involves as well the abandonment of the right to rescind.  Abandonment is more readily inferred in some circumstances, for instance where the choice arises once and for all (41 ‑ 42).  (footnotes omitted)

3. A plaintiff may claim in the one action both specific performance of the contract and, in the alternative, common law damages based on termination for its breach:  McKenna (371); Norton v Angus [1926] HCA 35; (1926) 38 CLR 523, 534 ‑ 535; Minter v Geraghty (1981) 38 ALR 68, 85; Singh v Crafter (Unreported, WASC, Full Court, Library No 920299, 28 May 1992, BC 9201172); Bosaid v Andry [1963] VR 465, 486 ‑ 490; Johnson v Agnew [1980] AC 367, 392. The claim in such proceedings for common law damages on the footing that the contract is gone (loss of bargain damages) does not itself preclude an ultimate order for relief in specie, nor does the claim for specific performance itself preclude the award of common law damages: McKenna; Singh; and Bosaid.  See also Summers v Cocks [1927] HCA 46; (1927) 40 CLR 321, where the plaintiff had claimed specific performance and 'further or other relief' (323), and upon dismissal of the claim for specific performance, Starke J said that the plaintiff was entitled 'to his or her remedy in law upon contract' (331 ‑ 332). Isaacs ACJ said that the appellant should be left:

   [T]o recover such redress as the law absolutely entitles her to … I adopt the statement of my brother Starke as to the facts and reasoning leading both to the defendant's breach of contract and to the refusal of specific performance.  The Court may, under the Judicature Act, substitute for the specific remedy that of damages.  To this the appellant is justly entitled failing specific performance if she desires to have an inquiry (324).

4. In Wentworth (678), Gibbs CJ and Mason, Murphy and Brennan JJ said that in Summers the court apparently relied on the Judicature Act power to award common law damages in addition to, if not the exclusion of, the Lord Cairns' Act provision.

5. In this regard, there is a fundamental difference between claiming alternative remedies and asserting inconsistent rights:  Ciavarella v Balmer [1983] HCA 26; (1983) 153 CLR 438, 449. Alternative claims for specific performance and common law damages based on termination of the contract are claims to alternative remedies, and merely claiming such alternative remedies in the one action does not involve an election between the inconsistent rights of affirmation and termination which respectively underlie those remedies: Oliver Ashworth (Holdings) Ltd v Ballard (Kent) Ltd [1999] EWCA Civ 1027; [2000] Ch 12, 28; Johnson (392); Fullers' Theatres Ltd v Musgrove [1923] HCA 12; (1923) 31 CLR 524, 546. A party is not, at least generally, called upon to elect between inconsistent remedies in litigation until the point is reached when the remedies are pursued to judgment: Ciavarella (449); United Australia Ltd v Barclays Bank Ltd [1941] AC 1, 18 ‑ 19, 30. At judgment, and subject to the matter referred to below, the plaintiff's causes of action merge in the judgment: United Australia (30).

6. However, the plaintiff's rights do not merge in a judgment for specific performance:  Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245, 273; Johnson (393 ‑ 394).  Thus, the plaintiff in proceedings claiming alternative remedies may, even after the decree for specific performance, be entitled to terminate the contract and claim loss of bargain damages at law if it would be inequitable to enforce the decree for specific performance:  McKenna; Johnson (394), (398 ‑ 399).  There is no inconsistency in terminating and claiming loss of bargain damages in that event, providing the plaintiff has obtained the vacation of the order for specific performance:  Sunbird (260).

7. On the other hand, where the defendant's breach of contract is of a nature which gives the plaintiff a right to terminate, and the plaintiff has unequivocally elected to terminate the contract in consequence, the termination effected by the election is inconsistent with any claim for relief in specie.  After termination of the contract, specific performance of it is 'impossible':  Fullers' Theatres (546).  If a party to a contract, faced with the choice of terminating the contract or keeping it on foot, terminates the contract that party will ordinarily have acted in a way that leaves no doubt as to the choice made:  Immer (41).

8. If a party maintains an action, previously commenced, to enforce a contract after a right to terminate the contract has arisen, that conduct may amount to an election to affirm the contract, although whether it does so will depend upon the particular circumstances of the case:  Ciavarella (448).

9. Also, where the plaintiff commences proceedings for specific performance only, the plaintiff's conduct in requiring, only, the performance of the defendant's promise has been regarded as involving an election not to treat that particular promise as the basis for terminating the contract:  Ogle (457); Park v Brothers [2005] HCA 73; (2005) 222 ALR 421 [40]. In the latter case the vendor had asserted, wrongly as it was found, that the contract had been rescinded. The purchaser's response to the wrongful rescission was not to accept the repudiation, but to 'affirm the contract by instituting proceedings for specific performance' [40]. As in the case of any alleged election, and as Ciavarella (448) illustrates, close attention will be required to the particular circumstances of the case.

10. It may also be noted in this context that there is authority which indicates that a plaintiff is not necessarily precluded from claiming loss of bargain damages, even though the suit as originally constituted was for specific performance only:  Crouch v Joseph (Unreported, WASC, Library No 9004.1, 22 August 1991) , 18 ‑ 21 (Anderson J). In that case, Anderson J regarded it as significant that the plaintiff, in opening his case at trial, stated that common law damages was the relief sought and, without objection from the defendants, he proceeded by various means to attempt to prove such damages. It may be that his Honour had considered that the defendant was estopped from relying on an election or had waived his right in that regard. It may also be that his Honour considered that in all the circumstances of that case, the claim for specific performance was not sufficiently unequivocal to evince the exercise of an election. It is, however, unnecessary to explore these questions for present purposes as Mr Olivero in this case claimed both specific performance and, in the alternative, common law damages.

11. It is essential to an award for loss of bargain damages that the defendant can no longer be required to perform his or her contractual obligation in specie:  Progressive Mailing House v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, 31; Sunbird (260 ‑ 261), (273). 

12. The writ in this case included a claim for specific performance and a claim for 'damages for breach of contract'.  Each version of the statement of claim to which we were referred contained a claim for 'damages'.  The pleaded breach was the failure to transfer the shares.  It was alleged that as a result of the breach Mr Olivero 'suffered loss and damage being the value of [the shares]'.  The claim for 'damages' was capable of signifying a claim for common law damages when each pleading is read as a whole and, in light of the writ, and bearing in mind that damages under Lord Cairns' Act, or its modern statutory equivalent, need not be expressly claimed where specific performance is sought.

13. Mr Olivero's claims for specific performance and damages in the writ and in each version of the statement of claim up to May 2012, were, prima facie, claims to alternative remedies and did not constitute an election between inconsistent rights.  In May 2012, the claim for specific performance was expressly abandoned by counsel for Mr Olivero and the statement of claim was amended to delete any claim for specific performance. 

14. The Ailakis brothers nevertheless contended that there was an election between inconsistent rights prior to May 2012 for essentially two reasons.  First, it was said that by their defence dated 8 March 2011, the Ailakis brothers had denied that there was a binding agreement; that the defence itself thus amounted to a repudiation of the agreement; and that by Mr Olivero joining issue and continuing with a claim for specific performance he, in effect, thereby affirmed the agreement with the result that he needed to point to some fresh repudiatory breach thereafter in order to terminate and claim loss of bargain damages.  (As noted earlier, ground 4 was to the effect that there was no further repudiatory breach capable of acceptance.)  The second contention is that prior to May 2012, the damages were particularised on 7 July 2011 'by way of damages caused by delayed performance' and that that was 'entirely consistent with an election to hold the plaintiffs to the contract'.  The result, it is said, is that Mr Olivero's claim was reduced to one of nominal damages, having abandoned in May 2012 the claim for specific performance and any consequential right to damages under Lord Cairns' Act in substitution for an order of specific performance.

15. I would reject the Ailakis brothers' first contention.  In commencing proceedings which included claims for specific performance and alternatively damages, Mr Olivero was claiming alternative remedies and not exercising inconsistent rights.  By joining issue with the appellants' plea denying the existence of the agreement, and maintaining the claim for specific performance until May 2012, Mr Olivero did not transform his claims for alternative remedies into an election between inconsistent rights. 

16. As to the Ailakis brothers' second contention, it is true that Mr Olivero's particulars of 7 July 2011 were consistent with his claim for specific performance in that they quantified monetary compensation taking into account the value of the shares on the assumption that the shares would be delivered in specie upon Mr Olivero obtaining final orders.  Properly construed, it particularised damages 'in addition to' specific performance.  It is also true, as the Ailakis brothers submitted, that the service of a pleading may evince an election between inconsistent rights:  Janos v Chama Motors Pty Ltd [2011] NSWCA 238 [23]; Perdaman Chemicals and Fertilisers Pty Ltd v The Griffin Coalmining Company Pty Ltd [No 7] [2012] WASC 502 [140] ‑ [145].

17. Nevertheless, this case involved, in effect, a breach of contract to transfer shares within a reasonable time - by 8 June 2007 (as it was found).  The cause of action was complete without proof of damage as damage was not the gist of the action, although the onus was on Mr Olivero to establish the nature and extent of his damage if he were to recover more than nominal damages:  Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 83; (1998) 192 CLR 603, 608.

18. Alternative remedies were claimed in the writ and statement of claim (properly construed).  As at 7 July 2011, the point had not been reached in the action where Mr Olivero was 'called upon to elect between inconsistent remedies' (Ciavarella (449)).  He was not then 'confronted' with two mutually exclusive courses of action (Immer (41)).  Particulars may be and often are, added to or amended from time to time in the interlocutory course of litigation.  Also, where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence, and particulars may even be amended after the evidence in a trial has closed:  Dare v Pulham (1982) 148 CLR 658, 664.

19. The question here is not whether the service of the particulars on 7 July 2011 was 'entirely consistent' with a claim for specific performance (as the Ailakis brothers contended), but whether, by serving the particulars, Mr Olivero had conducted himself so as to evince an unequivocal election to require performance in specie only, ie to renounce his right to damages based on termination for non‑delivery of the shares within a reasonable time.  In the circumstances of this case, I would not see the service of particulars in July 2011 by Mr Olivero as unequivocally evincing an intention to renounce the right to terminate the agreement and claim loss of bargain damages for the pleaded breach, or as justifiable only if an election had been made to require performance in specie to the exclusion of leaving open the right to claim loss of bargain damages based on termination at final orders (or at some earlier time if he elected to do so).  Accordingly, had ground 4 not been dismissed, I would have upheld the second part of the notice of contention.

20. Ground 5 challenges the primary judge's award of damages.

21. The trial judge held that the usual measure of damages for non‑delivery of the shares was the market value of the shares as at the date of non‑delivery - 8 June 2007.  Her Honour rejected one of the alternative arguments by the appellants to the effect that damages should be calculated by reference to the market value of the shares at the time of trial (ie, the date when the repudiation was accepted) and not at the time of the non‑delivery of the shares on 8 June 2007 [223] ‑ [232].  Her Honour's reasons included the following [172]: 

    It is accepted law that the assessment of damages in contract is a pragmatic subject which does not lend itself to hard and fast rules:  The Commonwealth v Amann Aviation Pty Ltd (119).  The principles for assessing damages for repudiation or breach of contract should not be treated as rigid rules of universal application, but as prima facie rules which may be displaced and modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept:  Wenham v Ella (466).

22. Her Honour's reference to The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 119 is a reference to Deane J's judgment in that case where his Honour said:

    Within the context of the principles laid down in Hadley v Baxendale, the more particular rules for assessing damages for repudiation or breach of contract should be treated not 'as rigid rules of universal application' but 'as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation … without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept (119 ‑ 120).  (footnotes omitted)

23. These statements of principle were accepted by the appellants. Ground 5 does not allege that the judge should have valued the shares by reference to the date on which Mr Olivero accepted the breach as bringing the agreement to an end. Also, during the course of oral argument, counsel for the Ailakis brothers made it clear that the appellants did not contend that damages should be assessed by reference to the value of the shares at the date of termination of the agreement. Further, there are no challenges to the judge's findings of fact to the effect that Mr Olivero did not fail to mitigate by buying the shares on market [229], and that he had not 'tried to speculate in a fluctuating market at the expense of the Ailakis brothers' [231]. Nor was it contended that the repudiation found by her Honour as the basis for terminating the agreement occurred after the issue of the writ and that this presented any problems with an award for loss of bargain damages in that action.

24. Ground 5.1 contends that the judge erred in assessing damages by reference to the market value of the shares 'as at late July/early August 2007'.  Ground 5.1 presupposes that the judge assessed damages as at late July/early August 2007, rather than as at the date of non‑delivery on 8 June 2007.  That raises a point as to the proper construction of the judge's reasons (see, eg, appeal ts 46). 

25. I would not read her Honour's reasons that way.  I would understand her Honour's reasons, relevantly, as follows:

    (a)damages were to be assessed at the date of the breach, ie 8 June 2007, and by reference to what her Honour described as the 'market' value at that date, being $1.20 per share:  [177] ‑ [181], [195] ‑ [198], [206], [222], [232] ‑ [233];

    (b)there was, 'perhaps', one matter affecting the intrinsic value of the shares which could be relevant in assessing market value and that was Mr Olivero's 'inability' to sell the shares within the period that the company was undertaking capital raising [199];

    (c)the company's capital raising was completed by 12 July 2007, at which point in time Mr Olivero no longer had 'price sensitive information' [202], [204];

    (d)insofar as the Ailakis brothers contended that during the period that Mr Olivero had 'price‑sensitive information', he would have been precluded from selling the shares in any event even if they had performed their agreement, that factor could be taken into account as affecting the inherent value of the shares [205] ‑ [206];

    (e)however, even if their inherent value as at 8 June 2007 was to be assessed on the basis that they were not tradeable by Mr Olivero until late July 2007, that would make no difference here because the share price was then $1.27 per share, which exceeded the value of $1.20 per share which Mr Olivero was claiming as the market value as at 8 June 2007 [206] ‑ [207].

26. In relation to (d) above, it should be noted that counsel for the Ailakis brothers submitted on appeal that her Honour erred in saying that he had submitted at trial that 'Mr Olivero would only have been able to sell shares after 12 July 2007' [205]. However, counsel's submissions at trial were to the effect that Mr Olivero would have been unable to sell shares in the capital raising period between late May to 12 July 2007 because he held price sensitive information in that period (ts 842 ‑ 847, and see also ts 859 where the submissions were confined to the capital raising period). It was submitted at trial that the consequences were:

    (a)with respect to Mr Olivero's primary claim, it precluded any assessment of damages by reference to market value as at 8 June 2007; and

    (b)Mr Olivero could not establish the first element of his alternative claim, where he particularised that he would have sold 200,000 shares in the period 15 June 2007 to 4 July 2007.

1. Accordingly, whilst counsel did not say in terms that Mr Olivero could sell shares after 12 July 2007, the import of the submissions was, relevantly, that the impediment to assessing damages by reference to the value as at 8 June 2007 was due to the inability to sell shares in the period to 12 July 2007.  In this context, as I read her Honour's reasons, her Honour said that rather than providing a complete obstacle to assessing damages as at 8 June 2007, any impediment to selling the shares up to 12 July 2007 based on price sensitive information was a factor that could bear upon the true value of the shares as at 8 June 2007.  It appears that if in the month or so after 12 July 2007 Mr Olivero could only have sold his shares on market at less than $1.20, the judge may or would have regarded that as evidence that they had an inherent value of less than $1.20 as at 8 June 2007.  However, her Honour said that if that matter were taken into account, there would be no material difference in this case because the inability to sell shares in the period to 12 July 2007 did not point to any reduction in inherent value beyond the $1.20 which was claimed to be the market value as at 8 June 2007.

2. In this context, I would read the word 'Accordingly' at the start of [207] of her Honour's reasons as referring to the Ailakis brothers' contention at [205] to the extent that her Honour accepted that contention in [206] of her reasons.  Even if, as Martin CJ considers in his reasons, her Honour's reasoning at (d) in [198] above was incorrect (about which I find it unnecessary to express a view), it is not critical to her Honour's decision to value the shares as at 8 June 2007.

3. Accordingly, on my understanding of the judge's reasons, read as a whole, the premise upon which ground 5.1 is built is unsound.  As Martin CJ has observed, the other aspects of ground 5 fall away if ground 5.1 is dismissed, as it should be.

4. I would dismiss the appeal.