Anro Nominees Pty Ltd v Earlsfield Developments Pty Ltd, in the matter of Earlsfield Developments Pty Ltd (ACN 095 386 922)
[2009] FCA 388
•24 April 2009
FEDERAL COURT OF AUSTRALIA
Anro Nominees Pty Ltd v Earlsfield Developments Pty Ltd, in the matter of Earlsfield Developments Pty Ltd (ACN 095 386 922) [2009] FCA 388
CONTRACT – whether a concluded agreement reached – offer and acceptance – approach where no discernible offer and acceptance – conduct subsequent to alleged conclusion of agreement – relevance to whether concluded agreement made.
Corporations Act2001 (Cth) s 233(1)
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 cited
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 cited
Cheshire and Fifoot’s Law of Contract (9th ed, LexisNexis, 2008) cited
Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 cited
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 citedIN THE MATTER OF EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922)
ANRO NOMINEES PTY LTD (ACN 004 953 593) and MAURICE GORE v EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922) and MOSHE FURMANVID 985 of 2008
SUNDBERG J
24 APRIL 2009
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 985 of 2008
IN THE MATTER OF EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922)
BETWEEN: ANRO NOMINEES PTY LTD (ACN 004 953 593)
First PlaintiffMAURICE GORE
Second Plaintiff
AND: EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922)
First DefendantMOSHE FURMAN
Second Defendant
JUDGE:
SUNDBERG J
DATE OF ORDER:
24 APRIL 2009
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The preliminary question posed at [3] of the Reasons for Judgment herein be answered as follows: “The document titled Furman/Gore Joint Venture: Basis of negotiated distribution of bank Account, a copy of which is Exhibit MF3 to Mr Furman’s affidavit sworn 27 February 2009, did not constitute an agreement between Mr Furman and Mr Gore as to the final distribution figures as alleged in paragraph 37 of that affidavit”.
2.The second defendant pay the plaintiffs’ costs of the preliminary question.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VID 985 of 2008
IN THE MATTER OF EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922)
BETWEEN: ANRO NOMINEES PTY LTD (ACN 004 953 593)
First PlaintiffMAURICE GORE
Second Plaintiff
AND: EARLSFIELD DEVELOPMENTS PTY LTD (ACN 095 386 922)
First DefendantMOSHE FURMAN
Second Defendant
JUDGE:
SUNDBERG J
DATE:
24 APRIL 2009
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
In this proceeding the plaintiffs seek orders under s 233(1) of the Corporations Act2001 (Cth) requiring the defendants to account for and distribute to them as creditors of the first defendant (Earlsfield) the amounts to which they are entitled from the proceeds received from the sale of assets by Earlsfield.
In an affidavit sworn by the second defendant (Mr Furman) in response to the application he said:
By around 5 August 2008, Gore and I had agreed final distribution figures through discussions between myself and Len Boucher on behalf of Gore. On 7 August 2008, Len Boucher of TWB prepared and faxed to me and Mark Saltzman a document titled ‘Furman/Gore Joint Venture: Basis of negotiated distribution of bank Account’ … That document reflected the final distribution figures that I had agreed with Gore. I note that the breakdown included:
a.a deduction of $47,809 from Gore’s drawings, relating to Gore’s unauthorised use of the Dickens Rd deposit to pay Anro’s GST liabilities;
b.an adjustment in my favour of $20,000, which related to outstanding construction fees that Gore owed me in relation to work I had done on a development at Seaford. Although the Seaford development was not a project within the Earlsfield joint venture, I thought that it was appropriate to use this final account on the Earlsfield joint venture for that outstanding debt to be settled, and on the basis of the fax I received from TWB on 7 August 2008, I believed that Gore agreed to this;
c.a payment of $4,565 in fees to TWB, Gore’s accountant (which I agreed to, notwithstanding that I did not consider that the fees were rightly payable from Earlsfield’s funds).
The breakdown did not include other outstanding building fees that Gore owed me, which at the time I was prepared to forego in the interests of reaching a settlement of the final distribution of profits.
On 3 March 2009, on the application of Mr Furman, Gordon J ordered that the existence and terms of the agreement alleged by Mr Furman be determined as a preliminary question.
Mr Furman relied on three affidavits sworn by him and two affidavits sworn by Mr Saltzman, his and Earlsfield’s accountant. The second plaintiff (Mr Gore) relied on an affidavit sworn by him and one sworn by Mr Boucher of TWB Chartered Accountants, his accountant. All deponents were cross‑examined.
I make the following findings of fact:
(a)On or about 31 July 2008 Mr Gore asked Mr Boucher to negotiate with Mr Furman about the basis upon which the final distribution of Earlsfield’s funds could be agreed, and Mr Furman was aware of this.
(b)Between 31 July and 7 August 2008 (inclusive) Mr Boucher and Mr Furman negotiated about a final distribution. Mr Saltzman was involved in the negotiations. Mr Gore did not have any significant direct role in the negotiations, which were almost exclusively conducted by Mr Boucher on his behalf.
(c)During the period late July to 7 August 2008 Mr Gore was frequently changing his mind within a day and from day to day about features of a proposed settlement, in particular the $20,000 fee for the Seaford project referred to in the passage quoted at (b) in [2] (Seaford fee). Prior to 31 July he was prepared to agree to the fee in order to achieve a settlement. Early on 31 July he was not prepared to, though he realised he was going to have to make concessions if the matter were to be settled. Later that day he agreed to the $20,000 “extortion” in exchange for a full settlement. At a meeting between Mr Boucher, Mr Gore and Mr Saltzman on 6 August, it was apparent that Mr Gore would not agree to Mr Furman receiving the Seaford fee. On the morning of 7 August Mr Boucher told Mr Furman that Mr Gore had “instructed him” that the Seaford fee was “a great difficulty for him” in accepting the proposed distribution. Despite this Mr Boucher thought that Mr Gore would eventually agree to pay the fee.
(d)Mr Gore was under financial and health pressures at the time. He needed funds, and realised he was in a weak negotiating position, in that he wanted to achieve a settlement which he could only do by making concessions he didn’t want to make.
(e)On 7 August Mr Boucher sent a fax to Messrs Furman, Gore and Saltzman. On the first page Mr Boucher referred to the attached pages as “the agreed basis for distribution of the funds held in the joint venture bank account for your approval”. The second page was headed Furman/Gore Joint Venture: Basis of negotiated distribution of bank Account, and stated that Mr Gore would receive $415,786 and Mr Furman $279,650. The document explained how these amounts had been arrived at. After deduction from Earlsfield’s funds at bank of its estimated GST liability and accounts outstanding, together with a refund of capital to Mr Gore, the balance was to be shared equally between Mr Furman and Mr Gore save for an adjustment of $20,000 in favour of the former in respect of the Seaford fee.
(f)Mr Furman received the fax on the afternoon of 7 August. After considering it he rang Mr Boucher and said he agreed with the proposed distribution.
(g)Mr Furman believed that because Mr Boucher was acting on Mr Gore’s behalf in the negotiations, he had full authority from Mr Gore to arrange a final settlement. Accordingly, he understood that he and Mr Gore had settled the matter on the terms of the 7 August fax. Neither Mr Gore nor Mr Boucher told Mr Furman that Mr Boucher had authority to conclude an agreement on Mr Gore’s behalf.
(h)After Mr Gore’s receipt of the 7 August fax he was very unhappy about the Seaford fee. He telephoned Mr Boucher on a number of occasions on the afternoon of 7 August and told him he was angry about the inclusion of the Seaford fee and would not accept it. Mr Boucher advised him to take a pragmatic view, to sleep on the proposal and let him know his decision in the morning.
(i)On the morning of 8 August Mr Gore told Mr Boucher that he would not accept the proposal. Mr Boucher passed this on to Mr Furman and caused a proposed settlement meeting at Mr Saltzman’s office to be cancelled.
(j)On 11 August Mr Furman informed Mr Boucher that over the weekend he had found that Mr Gore had retained GST credits of over $100,000. Mr Furman did not in that conversation claim that an agreement had been concluded on 7 August.
(k)On 22 and 26 August Mr Saltzman faxed letters to Mr Boucher relating to Mr Furman’s GST discoveries. Mr Saltzman did not in those letters claim that an agreement had been concluded on 7 August.
(l)On 26 August Mr Furman’s then solicitors sent Mr Gore a letter demanding that the GST amounts discovered by Mr Furman be repaid to Earlsfield together with interest. The letter said that when this had been done, Earlsfield’s accountant would be able to distribute the joint venture monies. The solicitors made no claim that a concluded agreement for distribution was already in existence.
(m)On 28 August Mr Boucher wrote to Mr Furman recounting that Mr Gore had reluctantly agreed to GST adjustments requested by Mr Furman and then “withdrew his agreement”.
(n)On 2 September Mr Furman proposed to Mr Boucher that the balance of Earlsfield’s funds be shared equally between the parties ($350,000 each). Mr Furman did not in that conversation claim that a concluded agreement had been reached on 7 August.
(o)Mr Gore rejected the further proposal.
(p)At no time between 7 August 2008 and 2 March 2009 did Mr Furman or anyone on his behalf assert to Mr Boucher that a concluded agreement had been reached.
In Mr Furman’s third affidavit (3 April 2009) he sought to correct one of the amounts in the proposed distribution accompanying the 7 August fax. In the form in which the fax was received by Messrs Saltzman, Furman and Gore, a refund of capital to Mr Gore of $245,945 was to be made from the $721,244 available following the deduction of various amounts. Mr Furman deposed that the amount of the refund was discussed in the course of various telephone calls with Mr Boucher leading up to and on 7 August. Mr Boucher proposed $245,945. Mr Saltzman had told Mr Furman the correct figure was $236,000. In Mr Furman’s final conversation with Mr Boucher before the fax was sent on 7 August, he claimed Mr Boucher said $236,000 would be acceptable, and it was agreed that Mr Saltzman would make the appropriate adjustment at the meeting next morning. That adjustment would have increased the ultimate distribution to Mr Furman from $279,650 to $284,622 and decreased that to Mr Gore from $415,786 to $410,814.
The primary case put by Mr Furman is that Mr Boucher had express authority from Mr Gore to send the 7 August fax and that Mr Furman accepted the offer it contained in his conversation with Mr Boucher on the afternoon of 7 August, in which he told Mr Boucher he agreed with the proposed distribution. In other words the case is put on the basis of a contract arising from an offer made by Mr Gore (through his agent) to Mr Furman and an acceptance by the latter. Mr Furman’s alternative case was that, if he did not have express authority, Mr Boucher had ostensible authority to send the fax.
The primary case assumes that the fax contained an offer that would ripen into a contract if accepted by Mr Furman. That is not the case. The fax was directed not only to Mr Furman but to Mr Gore (as well as Mr Saltzman, because the settlement related to Earlsfield’s funds). The addressees were asked for their approval. Mr Boucher had every reason, as Mr Gore’s agent, to insert those words. He had been closely involved with Mr Gore in lengthy and complicated exchanges with Mr Furman and Mr Saltzman. He knew Mr Gore was very “emotional” about his fallout with Mr Furman and his reluctance to allow Mr Furman the Seaford fee to which he thought he was not entitled. He also knew that Mr Gore had over recent days frequently changed his mind on whether to agree to the fee. In those circumstances it is unreasonable to treat the need for approval as specific to Mr Furman, so that his consent alone would give rise to a binding settlement. That is what is involved in Mr Furman’s argument; that only his approval of the distribution was sought. The question is whether a reasonable observer, apprised of the factual matrix, would conclude that by their dealings the parties intended to make a concluded bargain so long as Mr Furman was happy with the terms of the proposal. In my view that observer would not so conclude, for the following reasons. First, the fax, addressed as it is, seeking the approval of the three addressees, points strongly against such a conclusion. The second relates to the factual matrix, which includes the matters referred to earlier in this paragraph in relation to Mr Boucher’s appreciation of Mr Gore’s state of mind and susceptibilities. The third related matter is that, having regard to Mr Gore’s frequent changes of mind in relation to the Seaford fee, it would be unrealistic to treat Mr Boucher, an accountant of long experience, acting in this instance as Mr Gore’s agent, as intending by sending the fax to bind his principal when he knew that Mr Gore was vacillating as to whether to agree to pay the Seaford fee and had not given him explicit instructions to agree to it.
The reasonable observer’s answer would be the same if the matter is approached more broadly than by way of the confines of offer and acceptance. While offer and acceptance may be the primary mode of ascertaining the existence of an agreement, in an appropriate case, including where there is no readily identifiable offer and acceptance, a court may look at the matter more broadly by asking whether, objectively and having regard to the totality of the dealings between the parties, they should be considered to have entered into a contractual relationship without inquiring too closely into the formalities of offer and acceptance: see Cheshire and Fifoot’s Law of Contract (9th ed, LexisNexis, 2008) at 97 and Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 79‑83. For the reasons given at [8], the objective observer would not conclude that the fax enabled Mr Furman’s approval alone to bring a concluded agreement into existence.
So called “post contractual” conduct is admissible on the question whether a contract has been formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77, Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668‑669, 672 and Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25].
On 11 August, three days after Mr Gore refused to approve the faxed proposal, Mr Furman told Mr Boucher he had discovered that Mr Gore had retained GST credits of over $100,000. He described his discovery as “a key issue that must now be taken into account in relation to any final distribution”. He did not in his conversation with Mr Gore claim that an agreement had been concluded on 7 August. Rather he treated the GST issue as part of a continuing negotiation, which in fact went on for a considerable time.
Mr Saltzman’s letters to Mr Boucher of 22 and 26 August relating to Mr Furman’s GST discoveries also made no claim that an agreement had been concluded on 7 August. I do not accept the submission by Mr Furman’s Counsel that such a claim was made. This was based on a passage in the first letter, that whilst the “Supervision Fee in the amount of $22,000 was the catalyst for the basis of the negotiated distribution of bank account performed by you being set aside”, the GST issue now had to be reconciled and brought back into the equation. Putting aside the fact that the $22,000 Supervision Fee had nothing to do with Mr Gore’s refusal to approve the proposal, this passage is far from an assertion that any concluded agreement had been reached on 7 August. The observation that the negotiated distribution had been “set aside” is no more than a statement that it did not proceed. Counsel was only able to make the submission sound plausible by rendering the passage so that it included the words “Mr Gore had set aside … the negotiated distribution”. As with the 11 August conversation, Mr Furman’s “key issue” relating to the GST had to be accommodated in any future distribution. Again it was part of a continuing negotiation.
The 26 August 2008 letter demanding that the GST amounts together with interest be repaid to Earlsfield made no claim that a concluded agreement for distribution was already in existence. It too was part of the ongoing attempt by Mr Furman and Mr Saltzman to collect the GST “before there is a distribution of monies collected”. The letter said that this had to happen before Mr Saltzman could distribute the joint venture monies.
Mr Furman’s 2 September 2008 proposal that the balance of the funds be shared equally between the parties is another episode in the continuing negotiation to find an agreed distribution formula.
Finally, Mr Furman agreed in cross‑examination that neither he nor anyone on his behalf had, between 7 August 2008 and 2 March 2009, asserted that a concluded agreement had been reached on 7 August 2008. It is not simply that over a seven month period no claim was made that a concluded agreement had been reached on 7 August. Throughout their exchanges Mr Furman, Mr Saltzman and the former’s solicitors were negotiating or dealing with Mr Boucher and Mr Gore in relation to the very topic on which Mr Furman later made the claim that a concluded agreement had been made on 7 August. Despite numerous opportunities when there was occasion to raise the matter, it was never mentioned. To my mind that points against a finding that Mr Furman believed that a binding agreement existed.
These post‑7 August matters reinforce the conclusion to which I would in any event have come, namely that no concluded agreement was reached on 7 August.
Counsel for Mr Furman made submissions as to the extent of Mr Boucher’s authority as an agent. He contended that the authority to negotiate with Mr Furman included power to send the 7 August fax. Assuming that is correct, it does not assist Mr Furman for, as I have said, the terms of the fax do not allow his approval to bring a concluded agreement into existence in the absence of Mr Gore’s approval.
Mr Furman’s case was put in the alternative on the basis that Mr Boucher had ostensible authority to despatch the 7 August fax. Ostensible authority to act as Mr Boucher did would not assist Mr Furman to overcome the obstacle to the success of his primary case based on Mr Boucher’s actual authority.
I answer the preliminary question posed at [3] as follows:
The document titled Furman/Gore Joint Venture: Basis of negotiated distribution of bank Account, a copy of which is Exhibit MF3 to Mr Furman’s affidavit sworn 27 February 2009, did not constitute an agreement between Mr Furman and Mr Gore as to the final distribution figures as alleged in paragraph 37 of that affidavit.
For completeness I note that Exhibit MF3 as sent to Messrs Furman, Saltzman and Gore did not contain the figures sought to be substituted by Mr Furman’s affidavit of 3 April 2009 recorded at [6]. The “final distribution figures” alleged in paragraph 37 of Mr Furman’s affidavit of 27 February 2009 are those in the document in the form in which it was faxed.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate:
Dated: 24 April 2009
Counsel for the Plaintiffs: P Bornstein Solicitors for the Plaintiffs: Salinger & Associates Counsel for the Second Defendant: T Clarke Solicitors for the Second Defendant: Cyngler Kaye Levy
Date of Hearing: 6 April 2009 Date of Judgment: 24 April 2009
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