Austin Bloodstock Pty Ltd v Judith Michelle Massey
[2011] VSC 421
•31 August 2011
| g | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST A
No. 3573 of 2011
| AUSTIN BLOODSTOCK PTY LTD & ORS (according to the schedule attached) | Plaintiffs |
| v | |
| JUDITH MICHELLE MASSEY | Defendant |
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JUDGE: | Pagone J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 & 18 August 2011 | |
DATE OF JUDGMENT: | 31 August 2011 | |
CASE MAY BE CITED AS: | Austin Bloodstock Pty Ltd v Judith Michelle Massey | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 421 | |
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CONTRACT – Formation – Whether binding agreement – Objective circumstances between the parties – No evidence of conduct constituting repudiation – Whether order for specific performance is appropriate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J B Davis | EKM Legal Pty Ltd |
| For the Defendant | Mr B Gillies | SLM Law Lawyers |
HIS HONOUR:
The principal issue in this proceeding is whether a legally binding agreement was entered into between the plaintiffs and the defendant for the sale of a horse. The plaintiffs contend that there was no legally binding agreement and that the defendant is obliged to refund to them an amount of $750,000 which they say was paid to her as the purchase price for her 5% share in a horse “if an agreement for that purchase were entered into” which the plaintiffs contend did not eventuate. The defendant contends that a legally binding agreement was entered into, that she is entitled to keep the $750,000 paid to her and that she is entitled to specific performance of the contract hereafter. The plaintiffs maintain an alternative claim of repudiation by the defendant of any agreement which may have been made and the plaintiffs have purported to accept any such repudiation.
The existence of a contract is to be determined objectively,[1] as is the basis upon which the rights and liabilities of the parties to any contract are to be determined.[2] In this case the parties signed what they described as “heads of agreement” and appear to have contemplated a formal agreement being entered into subsequently. Masters v Cameron[3] explained what might be contemplated by parties who reached agreement upon terms that were to be recorded in a subsequent formal contract. In that case it was said:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.[4]
The Court explained that in the first two cases there was a binding contract[5] but that the third was fundamentally different.[6] Which conclusion is to be drawn depends upon the “intention disclosed by the language the parties have employed”,[7] and to this it should be added that the agreement must not be uncertain[8] and must be capable of being enforced by specific performance.[9]
[1]Godecke v Kirwan (1973) 129 CLR 629, 638 (Walsh J); GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634 (McHugh JA); Sagacious Procurement Pty Ltd v Symbion Health Limited [2008] NSWCA 149 (Unreported, Giles, Hodgson and Campbell JJA, 11 August 2008) [68] (Giles JA); J & G Knowles and Associates Pty Ltd v Crowncross Pty Ltd [2010] VSC 227, [2]; Cargill Australia Limited v Cater Oil Company Pty Ltd [2011] VSC 126, [2].
[2]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352 (Mason J); Westgate Ports Pty Ltd v Port of Melbourne Corporation [2011] VSC 331.
[3](1954) 91 CLR 353.
[4]Ibid 360 (Dixon CJ, McTiernan and Kitto JJ).
[5]Ibid.
[6]Ibid 361.
[7]Ibid 362.
[8]Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695, 700-1 (Kaye J); May and Butcher Ltd v R [1934] 2 KB 17, 21 (Viscount Dunedin).
[9]Godecke v Kirwan (1973) 129 CLR 629; J & G Knowles and Associates Pty Ltd v Crowncross Pty Ltd [2010] VSC 227.
The subject matter of any contract between the plaintiffs and the defendant is the 5% interest of the defendant (“Ms Massey”) in a thoroughbred stallion named Starspangledbanner (“the horse”). The plaintiffs, through Mr Anthony Mithen (“Mr Mithen”), came to learn that Ms Massey wished to sell her 5% interest in the horse. The three plaintiffs breed mares through what Mr Mithen described as a joint venture under the name “Rosemont Stud”. Some 12 months previously the 95% interest in the horse which was not owned by Ms Massey had been for sale and Mr Mithen had participated in an unsuccessful attempt to purchase the 95% then for sale. At one point Mr Mithen had thought about, and took some steps towards, contacting Ms Massy to “see whether or not something could be arranged” with her interest in the horse. He was advised not to do so at that time but made contact with her when he discovered that her 5% interest had been advertised by her for sale on an internet website known as “bloodstock.com.au”.
The objective circumstances existing between the parties relevant to whether or not there was a contract between them may, therefore, relevantly begin with the fact of an advertisement for the sale of her interest in the horse by Ms Massey as its vendor. Mr Mithen contacted Ms Massey on the afternoon of 24 or 25 January 2011 upon him becoming aware of the 5% interest in the horse being for sale. His evidence of the first conversation with Ms Massey was that he introduced himself to her and had wanted to be clear with her about precisely who he was because he had made a media career previously and had had some television and radio exposure in the local Geelong area. He knew that Ms Massey was in Lara and said that he “wanted there to be no confusion” because people who knew of him as a media personality might not know that “he had a stud farm”. He wanted to make clear that he was ringing because he had a stud farm and was a serious potential purchaser. It appears that from earlier conversations he had had with others that he believed that Ms Massey “may be difficult to deal with”. He explained to her that his brother-in-law was also involved in the stud farm and that his brother-in-law was a businessman of some note in the community which she indicated to him that she knew.
In that first conversation they spoke about the horse and she explained her reasons for selling her interest. Ms Massey suffers from a debilitating condition which causes her to have chronic pain and easy fatigability. The severity of her symptoms vary from time to time and her condition appears to be unpredictable. She informed him that the closer it got to the horse going to stud the more anxious she would become because she knew that she would have to deal with the 95% owners, Coolmore Stud, who she distrusted. She informed him that she could no longer deal with Coolmore Stud, that the horse had meant a lot to her because it had been a gift to her from her sister but that she no longer wanted to have the concerns and difficulties. Mr Mithen and Ms Massey then spoke about other offers she had received and the possibility of selling the horse to Coolmore Stud. Ms Massey informed Mr Mithen of one offer from a former employee of Coolmore Stud who she felt she might trust. She had not received offers from Coolmore Stud and she attributed that to her belief that Coolmore Stud realised that she would not sell her interest to them under any circumstances.
The telephone conversation between them on that occasion appears to have ended with the clear indication from Mr Mithen that the plaintiffs through him were serious purchasers. He said in evidence that he left Ms Massey with the thought that he “would be a most interested purchaser and that if she wanted to sell that 5% to [him] and give [him] an answer [the following day] at $650,000, that [he] would accept that and [he] would come up with that money”. He also explained in evidence that he had said that to her at the time to signal his intent to show that he meant business and wasn’t just a “tyre kicker”. After that conversation with Ms Massey, Mr Mithen spoke to his brother-in-law about investment in the horse.
Mr Mithen also initiated the next contact with Ms Massey which was again by telephone. On that occasion she indicated that she wished to consult with her sister before doing anything. The dealings between them after that occasion were left on the basis that Mr Mithen would contact her again in the next day or so.
The third contact between the two was again initiated by Mr Mithen. It was Australia Day evening when he rang Ms Massey and he recalled that she sounded fairly pleased to hear from him. Ms Massey then indicated that she had spoken to her sister and would deal with Mr Mithen exclusively on the sale of the horse. In that conversation there were various options canvassed by Ms Massey about the price for the sale of the interest in the horse. Mr Mithen’s evidence was that Ms Massey was at all times consistent that her 5% interest in the horse was worth about $1 million. The options discussed by them included a purchase of 4% at $800,000 which Mr Mithen indicated was “a fair way off the $650,000” that he had offered. However, Mr Mithen was about to leave for New Zealand the following morning to attend horse sales in that country and he did not want to leave his dealings with Ms Massey “go a week or so” whilst he was away. Accordingly, he and his wife decided to pass by Ms Massey’s house on the way to the airport to meet and to discuss the possible purchase further.
At the end of that telephone conversation (and before calling upon her on the way to the airport) Mr Mithen set about creating the document headed “Starspangledbanner Heads of Agreement”. He spoke to his brother-in-law about the prospects and possibilities that he had discussed with Ms Massey and both Mr Mithen and his brother-in-law agreed that “it might just be easier that the whole 5% be owned by” them as a starting point. Mr Mithen’s evidence was that he arrived at Ms Massey’s house in Lara where they sat around the kitchen table and spoke about possibilities. At the meeting Mr Mithen had expressed some urgency about everything being sorted out by 1 February 2011. At that time he believed that 1 February 2011 was the start of the stud season. Subsequently he came to learn that it started later. He indicated at the meeting at Ms Massey’s house that the $1 million price tag was too high but that he could manage $750,000 and perhaps “there could be some benefits that could be earned along the way that she could share in”. That, no doubt, explains the terms which he had previously placed in the heads of agreement (and which he was soon to produce to have her sign) of a cash sale of $750,000 plus the provision by Rosemont Stud of either one nomination or 75% of the advertised service fee value in cash each year to Ms Massey for the first eight years the horse stood at stud. Thereafter Ms Massey was to be entitled to one nomination. His evidence of the meeting was that Ms Massey “seemed pretty comfortable with that” and “contemplated” ringing her sister and looked to her partner for some advice. Her partner shrugged his shoulders saying it was her decision whereupon Ms Massey “then put her hand across the table and she shook hands”. At this point Mr Mithen said that he explained to Ms Massey the importance of having a written heads of agreement for him to show to Coolmore Stud on both of their behalves and that because the matter needed to be delicately handled he needed something to present to them “that certainly looked official, [… and …] that would leave them under no other assumption other than they had missed their opportunity”. Ms Massey agreed to that, seemed comfortable with that, whereupon Mr Mithen went to the car, retrieved copies of the heads of agreement which he had previously prepared, signed them and had their respective signatures witnessed by Ms Massey’s partner and by Mr Mithen’s wife. The heads of agreement provided for payment to Ms Massey of $750,000 rather than the $1,000,000 she had wanted but would give her valuable rights of a nomination or 75% of the advertised service fee. The heads of agreement also provided that Rosemont Stud was to take all insurance responsibilities which Ms Massey wanted to occur immediately because the insurance burden was significant for her. He explained to her that as an interested third party he could take over the insurance and undertook to do so.
The heads of agreement document prepared by Mr Mithen is dated 27 January 2011 and was signed by Ms Massey as current owner and by Mr Mithen on behalf of Rosemont Stud being the name of the joint venture between the three plaintiffs. Its terms stated:
This is to certify that a heads of agreement has been reached between the current owner (5% only) of the stallion “Starspangledbanner” and Rosemont Stud, 210 Gully Road, Ceres.
The purchaser (Rosemont Stud) had a 48 cooling off period, agreed to by all parties effect from midnight on the day of signing.
The agreement is as follows:
Rosemont Stud purchases 5% of the stallion Starspangledbanner for an agreed sum of $750,000.
Rosemont Stud will provide either one nomination or 75% of the advertised service fee value in cash each year to the current owner for the first eight years the horse stands at stud. Thereafter, the current owner is entitled to one nomination.
Rosemont Stud will take all insurance responsibilities (fertility and mortality) and will therefore be entitled to all benefits of that insurance.
In the instance that Starspangledbanner is deemed insurance infertile, no further commitments will be expected from the current owner of Rosemont Stud and no compensation can be sought by the current owner.
Mr Mithen sought to give subjective evidence about his purpose in creating the heads of agreement and in having Ms Massey sign it. The burden of that evidence was to the effect that Mr Mithen needed to secure something by which to represent himself to Coolmore Stud as having secured something from which “there was no turning back for them” and which showed them that “they had missed their opportunity and [that] they needed to tell [him] what it was in fact that the stallion agreement would look like and what [his] 5% entitlement would be because, to [his] knowledge, Coolmore had failed to provide Ms Massey with that stallion agreement”. Although inadmissible as subjective evidence for the purposes of determining whether there was an agreement between Mr Mithen and Ms Massey it is perhaps instructive that what he was seeking to secure from her was something which would stand in the eyes of a third party as proof of a binding contract. In any event Mr Mithen wanted to obtain a copy of the stallion agreement which governed the rights of Ms Massey in her 5%interest. Although the parties had intended to conclude a deal by the heads of agreement the terms of that deal needed to take into account the terms of the stallion agreement with Coolmore Stud. Mr Mithen was later provided with a copy of the stallion agreement by Coolmore Stud.
Consistently with the understanding communicated by Mr Mithen to Ms Massey, the former promptly telephoned the son of the owner of Coolmore Stud announcing that it looked as though they were going to be partners. Mr Mithen was asked what he meant by that and responded that he “had done a deal on the last 5% of Starspangledbanner”. Although the details of the conversation between Mr Mithen and the son of the owner of Coolmore Stud is not admissible on the question of whether there was an agreement between the plaintiffs and Ms Massey, the fact of the communication is what they had understood would occur. Furthermore, and perhaps not content with the impression which the heads of agreement might alone have conveyed to those running Coolmore Stud, Mr Mithen secured media publicity for the fact of his purchase of the 5% interest owned by Ms Massey. Mr Mithen’s evidence was that he had obtained Ms Massey’s agreement for media reports to refer to him as the owner or the new purchaser of her 5% of Starspangledbanner.
On his return from New Zealand he left a message with Ms Massey noting the story in the newspapers about which he had previously forewarned her and expressed the hope that it was all OK with her and that media interest had not caused her too much hassle the preceding day. The message he left on that occasion went on to say that he thought it “better to get it out there and get it over with and done with really and move on” and that he would try to get over to her to work out a plan of attack from there. In another message left by him on her telephone he said that everything had been sorted out with the insurance and that they would get a payment schedule going. He also said that he had spoken to Coolmore Stud and that there had been some toing and froing but that there was nothing for her to worry about anymore.
The newspaper article announcing the purchase by Mr Mithen appeared in the Herald Sun on 2 February 2011. The evidence of Ms Massey was that Mr Mithen had wanted everything finalised by 1 February 2011 because he had then believed that date to be the start of the stud season. Her evidence was that she contacted him, or left messages for him, asking about payment at the beginning of February and wanting to know what was going on. Her recollection was that there was a long gap between communications between about 7 and 14 February. Mr Mithen agreed in cross examination that Ms Massey had attempted to contact him, that she had expressed concerns about payment, had asked him why he had not contacted her and, according to his recollection, had said that she thought that the agreement was over. Ms Massey’s evidence was that she had been promised the money on several occasions including on 7 February when she had been promised payment by the following Wednesday (9 February). No money was paid to Ms Massey at that time.
Mr Mithen contacted Ms Massey around 20 February 2011 after Mr Mithen was told what he believed to have been the re-advertisement of Ms Massey’s 5% interest in the horse on the internet. Mr Mithen was in Tasmania at the time and was told by his farm manager that the Starspangledbanner advertisement “had gone back up on the internet”. Mr Mithen had not seen the advertisement himself. Ms Massey’s evidence was that the original advertisement had never come down but that she had it annotated with the words “under offer” and with a statement that this “well publicised sale [was] under offer” awaiting the sale agreement contracts to be signed and that once that was completed the advertisement would be removed. Nothing appears to turn upon when the notation was put on the advertisement (a matter not pursued in cross examination of Ms Massey) and nothing appears to turn on whether the advertisement was put back onto the website or whether it was never removed, but I have no reason to doubt the evidence of Ms Massey on this point especially in the absence of any evidence that the advertisement had ever in fact been removed. In any event, upon having his attention drawn to the advertisement around 20 February, Mr Mithen telephoned Ms Massey and recalled vividly the medical condition which Ms Massey conveyed over the telephone which he described as “terribly low, terribly low”. He said that she answered in monosyllabic answers as if talking out of the corner of her mouth caused by the severity of her condition.
Mr Mithen recalled asking her how she was and being told that she was not well because she had been under terrible stress and had been concerned because she had left him messages some four or five days earlier to which he had not responded. His evidence of this conversation included the following exchange:
… she said, “Well, I thought the deal was off and that there was – you had disappeared into the darkness.” I asked her about the internet ad and she said, “Well, I thought it was all finished”, so while I didn’t see the ad, I assumed it had gone up there given that conversation. I assured her that everything was okay, that there was no intention …
Mr Mithen was asked again by counsel for the plaintiffs about the presence of the internet advertisement to which he responded that Ms Massey had justified that action by the fact that she thought he had disappeared and that everything was all over because he had not responded to her telephone message. He was then asked about what he next said to Ms Massey on the telephone from Tasmania:
MR DAVIS:What did you say when Ms Massey said that to you?
MR MITHEN: I tried to placate her.
MR DAVIS:What did you say?
MR MITHEN: I said that everything was okay, everything was on track. I may have given her the impression that part of the reason I hadn't got back to her was because I was busy organising the money, which was in fact not entirely correct but I put it to the top of the priority list to do as soon as I hung up, to ensure that the $750,000 would be paid as a sign of our commitment.
Mr Mithen then gave evidence that Ms Massey had also expressed concern about the rest of the deal and how that was going to work. Mr Mithen’s evidence was to the effect that Ms Massey said that it had not been finalised. His evidence was to have asked about what reservations she had about how that might work. Her concerns appeared to relate to how the nomination available to her might operate if the mare did not have a live foal and whether in such circumstances there might be a free return. By this time Mr Mithen had obtained and had read a copy of the stallion agreement and was able to inform her that its terms did not provide for a free return.
The result of that telephone conversation was an email sent by Mr Mithen at 12.53pm on 21 February 2011. Its terms were as follows:
This is to formalise the arrangement between Rosemont Stud and Michelle Massey regarding the sale of 5% of Starspangledbanner (referred to as “the horse” or “the stallion”)
Rosemont Stud will pay no later than 23/02/11 $750,000 for the 5% share of the stallion Starspangledbanner (Choisir – Gold Anthem) and as such takes on all associated costs in relation to the horse and earns all revenues related to the 5% share.
However, for the first eight southern hemisphere seasons of the horse’s stallion career, Michelle Massey will receive the yearly benefit of either:
OPTION ONE: One mare covered by the horse at no charge for the nomination (all additional costs are the responsibility of Michelle Massey). This nomination will NOT come with a free return applicable as they are the conditions Rosemont Stud is bound to under the stallion agreement with Coolmore. If the mare misses, slips or has a dead/deformed foal, there will be no responsibility for Rosemont to compensate Michelle Massey in any way. The mare to be covered will be made known to Rosemont Stud via email or written letter no later than July 15 (6 weeks before the breeding season) otherwise it will be assumed that Michelle Massey will be taking advantage of OPTION TWO.
OPTION TWO: Michelle Massey will be paid the equivalent of 75% of the Starspangledbanner’s advertised service fee to her nominated bank account. This will be paid on the 1st of August FOLLOWING the previous spring season. (Rosemont Stud is not paid any dividend from Coolmore Australia until the 31st of July FOLLOWING each spring breeding season, hence the payment date).
If the horse does not complete any of the eight seasons for any reason, Rosemont Stud will not be eligible to pay any compensation to Michelle Massey. If the horse dies, there will be no responsibilities on Rosemont Stud to pay Michelle Massey any compensation.
Following the eight year period, Michelle Massey will have a nomination to use or on-sell herself every southern hemisphere season the horse stands in Australia, however she (or the purchaser’s) will be bound by the conditions of that nomination which may not include a free-return protection clause. That nomination will be provided through Rosemont Stud and again, the mare or on-sell parties must be identified no later than July 15 before the imminent southern hemisphere breeding season. There will be no responsibility on Rosemont Stud to sell the nomination on Michelle Massey’s behalf.
Yours truly,
ANTHONY MITHEN
Rosemont Stud
Later that day Ms Massey responded to Mr Mithen with alternatives to what they had discussed that day:
Dear Anthony,
If what we discussed this evening is too complicate or you are not comfortable with it, there are two alternatives.
1). Is that we sell you 4% at $800,000 & retain 1% ourselves as originally proposed.
Or
2). Is an immediate payment of $750,000 now. With an additional $250,000 paid over 5 years & no free breeding nominations retained to Starspangledbanner, accessed through Rosemont Stud. (For ease, the payment of $50,000 a year, could be made at the end of 12 months, this years being paid in 17 months time, on the 1st of August 2012, as you preferred.)
All options total the agreed $1,000,000. Though we are taking a greater risk with the option currently in play because of our belief in the horse. Hence our insistence on the LFG when breedings are used. And when the alternate payment is taken, that the agreed payment of 75% of the advertised Service Fee, is deposited to the nominated bank account no later than the start of the current breeding season i.e. 1st of August. It will be our responsibility during the first 8 years of the horse standing at stud, to notify you in writing, by the 1st of June or another nominated date, of our intentions not to use the nomination, so you can make suitable arrangements.
I hope this offers you viable alternatives, if you desire, whilst keeping the entire transaction simple.
Yours sincerely,
Michelle.
There was then an attempt to pay the $750,000 as previously agreed which it seems failed because an “s” had been omitted from an email address. That was rectified and on 23 February 2011 Mr Mithen sent an email to Ms Massey confirming that and forwarding a payment advice indicating that the funds would clear that day. More significantly, however, Mr Mithen responded to the ideas that Ms Massey had raised in her email two days previously. His response was, in effect, that questions of nominations could be avoided by agreeing to pay $750,000 immediately and $250,000 over a period of five years. That would give to Ms Massey the sum of $1 million she had wanted albeit that the last $250,000 would be paid over five years rather than immediately.
Mr Mithen’s email on 23 February 2011 said:
Hi Michelle,
As you can see from below, he left out an “s” in your email address!!! Here is the payment advice and funds will clear today.
I have had a good chat to Nigel and he thought your idea of a $50,000 payment each year for five years was a very sensible move. It leaves no confusion and still gives you the opportunity to breed to Starspangledbanner if you wanted to use the money that way.
Perhaps you could put your thoughts to how that would work and email me back with a framework and we will go down that track. If you would like me to have a crack at if first, let me know.
Thanks very much for the help over the past few days on this. Given my schedule, it has been much appreciated. Back late last night and up early loading eight horses on the float for Melbourne Premier sale and heading up there now to set up the hospitality marquee we have for the sale! It’s never ending at the moment.
Cheers
Anthony
Ms Massey responded on the same day to thank Mr Mithen, confirmed receipt of the initial payment and undertook to have a written agreement prepared by her lawyer. Her responding email said:
Dear Anthony,
Just a quick note to say thank you; (I didn’t want to interrupt you with a phone call, whilst you were trying to get everything done tonight.) I have checked the bank account & the initial payment of $750,000 is there.
I shall get an Agreement written up, regarding the additional payments that are to come & send it to you as soon as possible.
Yours sincerely,
Michelle.
In my view these objective circumstances establish that on 23 February 2011 the parties agreed as between themselves to a contract for the sale of the horse for a total sum of $1 million payable by $750,000 by 23 February 2011 and by five equal instalments over five yeas of $50,000 with no nomination of a mare to be put to stud or other entitlements. By 23 February 2011 Mr Mithen had obtained a copy of the stallion agreement. An objective observer would conclude that the parties were in agreement about the subject matter of the contract (namely the sale of an interest in the horse) and about the fundamental terms upon which they had agreed to contract (namely the payment of $750,000 plus $250,000 over five years). The seller was willing to sell and had advertised the fact. The purchaser was willing to purchase and had initiated contact in response to the advertisement, had prepared heads of agreement to secure commitment, had publicly announced the fact of sale, had effected insurance, had informed the vendor that insurance had been effected, had finalised outstanding terms by the email exchange on 23 February 2011 and had paid $750,000. The entire course of dealings between the parties were to reach a binding agreement upon the sale of a 5% interest in the horse. The plaintiffs, through Mr Mithen, were keen to secure a binding agreement. The heads of agreement was not intended to be a sham and had the language of a binding contract. Indeed it provided for a cooling off period reserving to the purchaser the right not to be bound if they decided not to proceed within a specified period of time. It had been Mr Mithen who at their meeting on 27 January had impressed upon Ms Massey the urgency of having everything sorted out by 1 February 2011. The need to see the stallion agreement meant that the heads of agreement may have required change and, therefore, that it could not provide the concluded terms of their bargain. The failure to pay and the delay in confirming the agreement until the discussion on 20 February 2011 also created uncertainty about the plaintiffs’ commitment however, as at 20 February 2011, the plaintiffs, through Mr Mithen, were still eager to secure the bargain he had sought to reach for the plaintiffs through the heads of agreement. Mr Mithen and Ms Massey discussed the matters which had not been fully resolved (about the nomination, free return and the alternative of a proportion of the advertised fee) and on 23 February 2011 reached agreement for payment of $250,000 over five years in addition to the immediate payment of $75,000.
The defendant’s pleading originally claimed that the contract between them was made by the events leading to and including the emails of 23 February 2011 rather than having been concluded upon the signing of the heads of agreement on 27 January 2011. The plaintiffs did not contend that the heads of agreement constituted a binding enforceable contract. It may be that the heads of agreement taken alone might not have constituted a legally binding agreement due to a lack of certainty.[10] One of the terms in the heads of agreement was that Rosemont Stud was to provide either one nomination or 75% of the advertised service fee value in cash each year. What the heads of agreement does not indicate in that regard is which of the parties had the right to make the election between the two options. No submissions were made about the proper construction of the election in the heads of agreement other than the submissions for the plaintiffs that the failure to identify who could elect between the two options indicated that the agreement was legally uncertain. Between the date of signing the heads of agreement and 23 February 2011, however, Mr Mithen obtained the stallion agreement and Ms Massey appeared to have thought that the agreement was at an end by reason of Mr Mithen’s silence in the face of the urgency he had expressed to have everything sorted out by 1 February 2011, his failure to respond to the messages she had left for him, the non receipt of any part of the agreed sum and the concerns she had about the uncertainty around the arrangements between the parties after payment of the $750,000. Mr Mithen’s evidence was that at some point between 4 February and 20 February Ms Massey had affirmatively expressed the concern that she had thought the agreement was at an end because she had not been paid and had not heard from him. Those doubts were, by agreement between them, resolved by the exchange of emails and the conversations which the emails reflected. On 21 February 2011 Mr Mithen wrote to formalise the agreement by addressing the matters which were of concern to Ms Massey. His email deliberately adopted (again) the language of commitment when it began with the preamble explaining that the email was “to formalise the arrangement” between the plaintiffs and Ms Massey. Ms Massey accepted the terms and offered something which the plaintiffs could accept or reject at their election. They chose the second option, namely an immediate payment of $750,000 with additional payments of $250,000 paid over five years. That accorded with Mr Mithen’s email earlier that day and with the payment made. It was confirmed on 23 February 2011 by Mr Mithen’s email to Ms Massey saying that they had given consideration to her idea and had adopted for the option of payment of $50,000 per year for five years commencing 1 August 2012 as Mr Mithen had requested. That confirmation was accepted by Ms Massey’s subsequent email that day.
[10]Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, 130-3 (Brooking J); Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 67 (Ormiston J); Agius v Sage [1999] VSC 100, [56] (Byrne J); Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695, 700-1 (Kaye J).
The plaintiffs contended in the alternative that any agreement entered into between them and Ms Massey was repudiated by delivery of the written draft agreement on 5 April 2011. On that day Ms Massey sent to Mr Mithen an amended version of a formal agreement for the sale and purchase of the interest in the horse. It was sent with an email from Ms Massey apologising for the delay in making some amendments which he had requested to be made to an earlier draft. The document sent on 5 April 2011 also made some additions to the draft concerning the transfer of income and expenses to which I shall refer later.
The email sent by Ms Massey on 23 February 2011 had undertaken to have an agreement written up “regarding the additional payments that [were] to come” and to send it to Mr Mithen as soon as possible. It appears that Ms Massey then contacted her solicitor to have an agreement drawn up in accordance with that undertaking. On 4 March 2011 Ms Massey received the agreement from her solicitor and promptly forwarded it to Mr Mithen with a request that he phone her at his convenience after he had read it. Mr Mithen sent the draft to his solicitor who advised him on 7 March that the agreement appeared to do all that Mr Mithen intended but drew attention to some matters. The information communicated to Mr Mithen by his solicitor was sent to Ms Massey the following day, 8 March 2011, with observations from Mr Mithen. One of the matters raised by Mr Mithen’s solicitor appears to have been based upon a mistaken assumption that the first payment had not been made. Mr Mithen informed Ms Massey that the advice from his lawyers indicated that there was nothing needing a major change but referred to three matters in his lawyer’s email. The first was that his lawyer’s first matter was irrelevant to them because the $750,000 had been paid. Two other items were raised by Mr Mithen from the comments from his lawyer and he requested that the comments that he had received from his solicitor be forwarded to her solicitor for consideration.
That was the background against which on 5 April 2011 Ms Massey sent an email to Mr Mithen apologising for the lengthy delay and attaching the document for final execution. The parties were no longer in negotiation but were seeking to have their agreement formalised. There is no evidence of Ms Massey seeking to repudiate the contract in any way. Ms Massey did not engage in conduct which evinced an intention no longer to render performance of the contract or in conduct which would convey to a reasonable person a renunciation of the contract as a whole or of a fundamental obligation under it.[11] The plaintiffs contended, however, that the agreement was repudiated by Ms Massey insisting as a condition of performance upon clauses 1.6 to 1.9 of the 5 April 2011 draft. In my view there is no evidence of an insistence upon those terms as a condition of performance. The person drafting the agreement did so upon the belief (which I find to be the case) that the agreement was reached on 23 February 2011 rather than either 27 January 2011 or some date between those two, and that the provisions in clauses 1.6 to 1.9 sought to give effect to that agreement.
[11]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).
Clauses 1.6 to 1.9 of the draft provide:
1.6 Expenses
The parties agree that all expenses prior to the payment of the instalment on possession, namely all expenses incurred prior to 23 February 2011, in relation to the horse shall be borne by the Vendor.
1.7 Income
All income from marketing and bookings made prior to 23 February 2011 are payable to the Vendor.
1.8 Payment of Income
If Coolmore Stud pays any income or proceeds due to the Purchaser in accordance with clause 1.7 then the Purchaser agrees to immediately forward payment to the Vendor.
1.9 Further Agreement
The Parties agree that:-
(a)Coolmore Stud will be notified of the terms of clauses 1.6 – 1.9 (inclusive) of this Agreement to give effect to the matters comprised therein; and
(b)the Purchaser will provide a copy of the Stallion Agreement supplied by Coolmore Stud each year, or whenever the Stallion Agreement is amended or renewed until such time as all monies due under this Agreement have been paid to the Vendor.
These clauses are an attempt to provide for the revenue rights and expense obligations as between the parties upon sale of the interest in the horse. The date of 23 February 2011 coincides with the date of payment of the $750,000 and is the date at which I have found the parties to have reached a legally binding bargain. The plaintiffs did not contend that the parties had become legally bound before that date. Their statement of claim was amended on 19 August 2011 to seek relief by way of payment of revenue upon the assumption that I might find a contract to have been made between them and that a term of the contract between them was that the economic benefits of the sale would effectively pass to the plaintiffs as from 1 February 2011.
The draft agreement sent on 5 April 2011 may, in clauses 1.6 to 1.9, have sought to give effect to what the drafter, or perhaps Ms Massey, may have thought to have been the effect of an agreement being reached on 23 February 2011. However the agreement reached on that date was at all times an agreement which the parties had understood to give to the plaintiffs the benefits of ownership as from 1 February 2011. That date had been prominent from the start and had never been varied by mutual agreement. The terms of clauses 1.6 to 1.9 ought to have provided 1 February 2011 as the date from which the plaintiffs would be entitled to all income and be liable for all expenses. The defendant accepted 1 February 2011 as the relevant date in the alternative to 23 February 2011 in her pleading and did not seriously contend otherwise. In my view the agreement reached on 23 February 2011 included terms that as between the plaintiffs and the defendant the plaintiffs are entitled to receive all revenues howsoever earned in connection with Ms Massey’s 5% interest as from 1 February 2011 and would be liable for expenses upon that interest as from that date.
The plaintiffs’ claim for repayment of the $750,000, however, must fail. The amount was not paid to Ms Massey in anticipation of an agreement which had not been entered into or upon a common assumption that it would be repaid if an agreement was not reached. In my view the parties did reach agreement on 23 February 2011 for the sale of the 5% interest in the horse for a sum of $1 million upon payment of $750,000 immediately and $50,000 annual payment over five years from 1 August 2012. The defendant is entitled to specific performance of that agreement to the extent that it has not yet been performed. Specific performance is discretionary[12] but a contracting party does not have the right to elect to pay damages if the party does not wish to perform the contract.[13] In this case the terms to be performed by the plaintiffs are the payment to Ms Massey over the next five years of $250,000, the provision by them of information to Coolmore Stud to enable Coolmore Stud to deal with the plaintiffs as owners of the 5% of the horse previously owned by Ms Massey. The defendant may for her part be required to give the plaintiffs such accounting as between the plaintiff and the defendant to ensure that any income from her interest in the horse after 1 February 2011 is paid to the plaintiffs and any expenses before 1 February 2011 be borne by Ms Massey.
[12]Dowsett v Reid (1912) 15 CLR 695, 705-6 (Griffith CJ); NC Seddon and MP Ellinghaus, Cheshire and Fifoot’s Law of Contract (9th ed, 2008), 1130.
[13]Zhu v Treasurer of New South Wales (2004) 218 CLR 530, 574 (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).
An order for specific performance is appropriate in this case and does not engage any of the established limits against the exercise of the discretion.[14] The performance required by the plaintiffs to the defendants is the payment of $50,000 on each of five annual dates commencing 1 August 2012. The only other performance required by the plaintiffs to become entitled to the fruits of the agreement were conveyed by Coolmore Stud by email dated 25 February 2011, namely, provision to the managers of Coolmore Stud of (a) the full legal names of the purchaser; (b) the ownership percentage of each owner if there is more than one owner; (c) the address of each owner; (d) the ABN of each owner; and (e) the fax or telephone number of each owner. The performance required of the defendant is an accounting to the plaintiffs of the monetary entitlements and obligations of a sale of the interest in the horse as from 1 February 2011. It is conceivable that this may occasion some factual inquiries, allocations and apportionment but they are of the kind which courts are frequently called upon to determine if there is any further dispute between the parties.
[14]Zhu v Treasurer of New South Wales (2004) 218 CLR 530, 574; Coulls v Bagot’s Executor of Trustees Co Ltd (1967) 119 CLR 460, 504 (Windeyer J); Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 285 [13] (French CJ, Gummow, Crennan, Heydon, Kiefel JJ).
Accordingly I will make the following orders:
A. The defendant do any and all such things as may be necessary to convey the whole of her interest in the horse “Starspangledbanner” to the plaintiffs and that she account to them for all income and other revenue in connection with the horse howsoever earned, after allowing all proper expenses referable to such income and other revenue, as from and including 1 February 2011.
B. The plaintiffs’ claims are otherwise dismissed.
C. The plaintiffs pay to the defendant $50,000 on each of the following dates namely 1 August 2012, 1 August 2013, 1 August 2014, 1 August 2015, 1 August 2016.
SCHEDULE OF PARTIES
No. 3573 of 2011
| AUSTIN BLOODSTOCK PTY LTD (ACN 126 283 047) | Firstnamed Plaintiff |
| MITHEN BLOODSTOCK PTY LTD (ACN 127 047 992) | Secondnamed Plaintiff |
| LINKENHOLT PROPRIETARY LIMITED (ACN 005 710 181) | Thirdnamed Plaintiff |
| -and- | |
| JUDITH MICHELLE MASSEY | Defendant |