Danckert v Tonkin - [2015] NSWSC 1570

Supreme Court

New South Wales

Medium Neutral Citation: Wayne Danckert v Ralph Erwin Tonkin [2015] NSWSC 1570
Hearing dates: 31 August 2015, 1, 2 September 2015 (hearing), 9, 11, 14 September 2015 (final written submissions)
Date of orders: 23 October 2015
Decision date: 23 October 2015
Before: Sackar J
Decision:
See [308]-[311]

Catchwords:
CONTRACTS – existence of a binding agreement – intention of parties to be bound – language of proposal – context of the agreement – history of formal documentation – subsequent conduct of parties

EQUITY – estoppel – whether representations made – whether representations relied upon – reasonableness of reliance – whether representations relied upon to the detriment of a party
CONSUMER LAW – misleading or deceptive conduct – whether representations were made – whether representations were misleading or deceptive
Legislation Cited: Competition and Consumer Act 2010 (Cth)
Corporations Act 2001 (Cth)
Real Property Act 1900 (NSW)
Cases Cited: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Cubillo v Commonwealth (No 2) (2000) 103 FCR 1
Delaforce v Simpson-Cook (2010) 78 NSWLR 483
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Fox v Percy (2003) 214 CLR 118
Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Labracon Pty Limited v Cuturich [2013] NSWSC 97
Masters v Cameron (1954) 91 CLR 353
Moratic Pty Lt v Gordon [2007] NSWSC 5
Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313
Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149
Sze Tu v Lowe [2014] NSWCA 462
Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Texts Cited: N/A
Category: Principal judgment
Parties:
First plaintiff: Wayne Danckert
Second plaintiff: Philip John Weldon
Third plaintiff: Carlisle Plaza Pty Limited (ACN 128 002 577)
First defendant: Ralph Erwin Tonkin
Second defendant: SRD Tonkin Pty Ltd (ACN 008 207 225)
Third defendant: Tonkin Pty Ltd (ACN 072 875 613)
Representation:
Counsel:
R Harper SC and J Darvall – Plaintiffs
K Smark SC – Defendants
Solicitors:
Garland Hawthorn Brahe Solicitors – Plaintiffs
Francom Legal – Defendants

File Number(s): 2015/88485
Publication restriction: N/A

Judgment

The first plaintiff, Mr Wayne Danckert (Mr Danckert), is a director of the third plaintiff. The second plaintiff (Mr Weldon) is a solicitor and also a director of the third plaintiff. The third plaintiff, Carlisle Plaza Pty Ltd (Carlisle), is wholly owned and controlled by interests associated with Messrs Danckert and Weldon.
The first defendant, Mr Ralph Tonkin, is the son of Mr Ron Tonkin and is a director of the second and third defendants. The second defendant, SRD Tonkin Pty Ltd (SRD), is a company owned and controlled by the first defendant and his two brothers, Messrs Steven and David Tonkin. The third defendant, Tonkin Pty Ltd, is a company owned and controlled by Mr Ron Tonkin.
These proceedings substantially concern the question of whether a binding joint venture agreement (JV agreement) was entered into by the parties.
The plaintiffs make two primary claims. The first is for specific performance of the alleged JV agreement or, alternatively, damages in lieu. The second is for damages for alleged misleading or deceptive conduct against Mr Ralph Tonkin, the first defendant.
There is also a set of claims concerning alleged breaches of implied terms of the alleged JV agreement, alleged breaches of a duty of good faith, and impairment of the plaintiff’s leasehold interest. The plaintiffs also make claims concerning estoppel.
The second defendant has brought a cross-claim against the third plaintiff alleging breach of a loan agreement and seeking an amount of $3,000,000 plus interest and costs.

Background facts

On 23 November 2007 Carlisle, as trustee of the Danckert Family Trust (No 4) (Trust), became the lessee of certain land which comprised, amongst other things, the Bidwill Shopping Centre (Bidwill). The shopping centre, at this stage, had been closed for about ten years and was in a rundown condition.
Also on 23 November 2007, Carlisle obtained a loan facility of $3 million from SRD by mortgaging its leasehold interest in the shopping centre (2007 facility). This was to fund the assignment of the leasehold interest and the building renovation work. The facility was guaranteed by Mr Danckert and Carlisle.
The owner of the land is the New South Wales Land and Housing Corporation (Housing).
HCS Properties Pty Ltd was the transferor of the lease to Carlisle on 23 November 2007. The consideration paid by Carlisle for the transfer of the lease from HCS Properties Pty Ltd was $550,000. On the transfer of the lease Carlisle paid to Housing the first year’s rent in advance.
The intention of Carlisle (and those associated with it) was to renovate the shopping centre and then secure tenants to produce a viable and attractive local community shopping centre which would in turn, it was hoped, generate profitable revenue.
Mr Danckert is a licensed real estate agent and a beneficiary under the Trust. However, Mr Danckert was made a bankrupt on 19 February 2008, although his bankruptcy was discharged on 15 March 2011.
In early 2008 the plaintiffs commenced renovation work on the shopping centre.
Between 2008 and October 2011 SRD made total advances of $2.75 million under the 2007 facility.
However, as at October 2011, each of the parties alleged breaches of the original loan agreement by the other.
On 25 October 2011 the parties entered into a Deed of Release and Variation to resolve their differences. Pursuant to this instrument, the parties released each other from the alleged breaches and SRD provided a further loan of $250,000, which Mr Weldon guaranteed. SRD eventually made advances of $165,657.89 under this facility.
The loan agreement, guarantee and indemnity documents of 2007 had been prepared by representatives of SRD. On the other hand, the Deed of Release and Variation of October 2011 was prepared by Mr Weldon. In each case the respective parties executed the relevant agreements.
In August and September 2013 SRD made further allegations of breach of the original loan, the mortgage, and the subsequent loan arrangements.
On 6 February 2014 SRD served Carlisle with a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) alleging default on the part of Carlisle and seeking possession of the leasehold.
In addition, on 11 February 2014 SRD commenced proceedings in the Supreme Court of South Australia against Messrs Danckert and Weldon.
On 28 February 2014 the parties met in Adelaide to discuss the possibility of settling their disputes. Mr Weldon produced notes of the meeting but prepared them at the airport after the meeting had concluded, prior to him returning home (Ex P1).
On 3 March 2014 Mr Weldon sent a letter to Schirripa Commercial Lawyers (the then solicitors for SRD) referring to the meeting and to the various matters discussed therein. This letter attached a proposal “to establish a joint venture” on certain terms and conditions.
However, in the covering letter Mr Weldon commented as follows:

We believe that the meeting was very productive, with considerable goodwill being expressed on both sides.
It not only allowed for a frank interchange but began to identify principles of a joint venture going forward, with the aim of getting the Carlisle Plaza Shopping Centre fully operational as soon as possible.
…
As agreed, Wayne and I were to formally put a proposal on behalf of Carlisle Plaza Pty Limited.
A. Proposal
The proposal is attached, which hopefully captures the matters discussed on Friday.

Mr Weldon concluded by saying:

Would you kindly obtain your client’s response to the Proposal as soon as possible?

The detailed proposal attached to the letter dealt with numerous matters, including the proposed 75:25 split between SRD and the plaintiffs’ interests. Under the letter “L” and heading “Legal documentation”, Mr Weldon remarked:

Once agreement has been reached, I can provide (within 3 business days) an initial draft of:
Shareholders Agreement
Deed of Assignment
The Deed of Assignment would need to be approved by Housing;
Once agreement has been reached, you can provide an initial draft of documentation to settle the current litigation.

However, on 5 March 2014 a Mr Nicholas Evans from Schirripa Commercial Lawyers, acting for the Tonkin interests, rejected the proposal.
On 7 March 2014 SRD appointed Mr Divitkos, an accountant, as controller of Carlisle pursuant to s 429(2) of the Corporations Act2001 (Cth).
Further, SRD obtained a default judgment against Messrs Weldon and Danckert in the Supreme Court of South Australia on 27 March 2014 in the sum of $255,813.27, plus fixed costs at $3,046.00.
In June 2014 SRD issued bankruptcy notices against Messrs Danckert and Weldon.
In July 2014 Mr Danckert alleges he had a telephone conversation with Mr Ralph Tonkin in order to inform him that Housing was happy with the progress of the shopping centre.
On 15 August 2014 a meeting took place between Mr Danckert, Mr Ralph Tonkin, Mr John Hyslop (from Foodworks), Mr Aman Jain and Manami Sall (for the prospective supermarket tenant).
On 17 August 2014 Mr Ralph Tonkin sent an email to Mr Danckert. Amongst other things he said (as written):

I will discuss new JV Company prep with Dad Tomw morning in time for our Tues 1030am phone conference with Housing.
Please send a draft heads of agreement as you think win/win for our new JV company, plus what we realistically need to offer housing for start of rental payments.

On 18 August 2014 Mr Ralph Tonkin sent an email to the putative tenant of the proposed supermarket at the shopping centre, which stated amongst other things:

I had our lawyer Phil Weldon working on the lease over the weekend and I need all your company information to put on the lease.

On 18 August 2014 there was a conference call held between Messrs Danckert, Ralph Tonkin, Ron Tonkin and Weldon to discuss matters concerning the joint venture. As is outlined below, there are differences in the accounts given concerning what was said in this conversation. The versions are, however, consistent in establishing at least that the Tonkins were concerned to open the shopping centre as soon as possible, the parties intended in principle to proceed with the joint venture proposal, the interests in the joint venture were to be split 75:25, a new company was to be formed, and the approval of Housing was necessary.
On 20 August 2014 Mr Weldon sent an email to Mr Ralph Tonkin with a copy to Mr Danckert. He referred to a discussion which had taken place on that day and made some comments along the following lines.

In order to facilitate the proposed 75:25 joint venture arrangements, we would like the outstanding issues to be dealt with as follows:
1. SRD Tonkin Pty Limited forgives WD and PW all indebtedness under the 25 October 2011 loan agreement and releases them from all liability under the loan agreement.
2. It follows from (1) that there should be consent orders filed in the SA Supreme Court
a. setting aside the default judgment on 27 March 2014 and any cost orders made in the proceedings; and
b. dismissing the statement of claim; and
c. No order as to costs.

3. SRD Tonkin should confirm that it extended time for compliance with the bankruptcy notice (to the date of sign off) and confirms that it withdraws bankruptcy notices issued against each of WD and PW.
4. SRD Tonkin forgives Carlisle Plaza the indebtedness under the mortgage and loan agreement and release WD from all liability under his guarantee of the mortgage and loan.
5. Tonkin terminates the appointment on behalf of the Controller of Carlisle Plaza’s leasehold interest (George Divitkos, BDO) and acknowledges that there is no utility in receiving the Report an to Affairs. SRD Tonkin indemnifies Carlisle Plaza, PW and WD from any claim by the Controller.

On 21 August 2014 Mr Weldon sent an email to Mr Ralph Tonkin and, again, Mr Danckert. He attached what he described as an “initial draft of the proposal” to go to Mr Ken Bartho (Mr Bartho). It is plain from the attachment (wrongly dated 22 July 2015), that Mr Bartho was at the Department of Finance and Services with the New South Wales Government.
On 21 August 2014 Mr Ralph Tonkin sent an email to a Mr Ben Ziesing (an accountant/adviser at a firm called Gibson & Partners in South Australia). Copies of Mr Ralph Tonkin’s email were also sent to Messrs Weldon and Danckert.
Amongst other things Mr Ralph Tonkin informed Mr Ziesing that a lease had been sent to the anchor tenant (the supermarket) and that a plan of action for Housing had been prepared. He also said:

3. JV company formation is now required, please contact Phil Weldon on the above email for details, basically 75/25 Tonkin/Wayne & Phil

On 22 August 2014 Mr Weldon circulated to Mr Danckert and Mr Ralph Tonkin an amended draft to go to Mr Bartho.
On 22 August 2014 Ralph Tonkin sent an email to Mr Weldon purporting to indicate his agreement with the draft that Mr Weldon had prepared. On the same day Mr Ziesing circulated to various members of the Tonkin family a detailed summary of a meeting which had taken place between himself and various Tonkin interests on 20 August 2014 (Ex P3). As appears from the email, a great many matters were discussed including the lease of the supermarket and the proposed joint venture arrangement. Mr Ziesing commented that Mr Ralph Tonkin had advised that a “JV Company” needed to be established to conduct the project. Mr Ziesing, however, raised questions about the proposed corporate structure.
On 22 August 2014 Mr Weldon sent the final version of his proposal to Mr Bartho. The attached proposal informed Mr Bartho that the parties, relevantly SRD and Messrs Danckert and Weldon, had agreed to “enter into a joint venture to operate [the shopping centre]”. It asserted that terms had been agreed with a supermarket operator (National Security Service Pty Limited (National Security Service)) which would operate under the FoodWorks banner as the anchor tenant. The attachment to the letter was headed “Bidwill Shopping Centre – Proposal to Department of Finance and Services”. The proposal went on to announce that “the joint venture proposes the following” and then outlined various steps that would be taken into the future.
Mr Weldon also made contact with Mr Ralph Tonkin by email on 22 August 2014 indicating that he wanted Mr Ralph Tonkin on behalf of SRD to agree with the contents of the attached letter (described at [40] above).
Having received the communication from Mr Weldon, Mr Bartho on 25 August 2014 indicated to Mr Weldon that he would appreciate SRD providing him with a confirmation of the “re-united approach” proposed to be undertaken. Later that day (25 August) Mr Ralph Tonkin sent an email to Mr Bartho in the following terms (as written):

SRD Tonkin Pty Ltd hereby confirms it’s commitment to the re-united approach to be undertaken with regard to the Carlisle Plaza shopping centre at Bidwill. We have add good input, along with Wayne Danckert & John Hyslop of Foodworks, to the draft business plan and proposal presented by Weldon Legal to LAHC last Friday, who is authorised to submit such plan.
I will discuss with Steven whether Schrippa Lawyers will still be acting on behalf of SRD Tonkin Pty Ltd given that Michael is no longer involved. Weldon Legal will be of great assistance in the preparation of leases for the Carlisle Plaza tenancies, as has been the case recently with the Foodworks lease preparation to Aman at National Security Pty Ltd last week…
Thank you for your patience and belief in us.

During late August 2014, or perhaps very early September 2014, Mr Weldon was busily preparing a Deed of Release and Settlement (Deed of Release) and Shareholders’ Agreement for the purposes of formalising the joint venture.
On 2 September 2014 Mr Danckert and Mr Ralph Tonkin were at lunch together at a hotel near the shopping centre. Mr Weldon arrived at the meeting bearing the draft documents and alleges he took Mr Ralph Tonkin through a number of the clauses in some little detail. There is a dispute as to precisely what occurred and what was said at this meeting.
However, on 2 September 2014 Mr Weldon sent the draft documents which he described as “initial draft copies” of the Deed of Release and Shareholders’ Agreement to Mr Ziesing in Adelaide. Mr Weldon also commented in the course of his letter as follows:

The documents are largely informed by the proposal Wayne Danckert and I put to the Tonkin family on 28 February 2014 (as confirmed in my letter to Schirippa Commercial Lawyers dated 3 March 2014), together with the recent discussions Wayne and I have had with Ralph Tonkin.

The draft Deed of Release, as appears from the recitals, purported to set out the history of the dealings between the parties including the various historic allegations and counter-allegations concerning breach. Recital S had twelve sub-clauses. It provided as follows:

The Parties wish to:
resolve their differences;
…
12. generally release each other from any liability of any kind arising under the Loan Agreements or on any other basis
on the terms set out in this Deed.

Amongst other clauses, it was anticipated that there would be a cl 16, “Entire Agreement”, which was to provide, as is conventional, that the Deed was the entire agreement between the parties on the subject matter.
The proposed Shareholders’ Agreement was in turn a lengthy agreement, which contained provisions such as, for example, an “offer to purchase” clause and, indeed, a clause providing for a compulsory acquisition in the event of default. It also contained in its proposed cl 28, an entire understanding clause.
On 4 September 2014 Mr Ziesing informed Mr Weldon by letter that he had attended to the registration of a new corporate entity, namely Bidwill Shopping Centre Pty Limited. He told Mr Weldon that:

The Company is the entity jointly established by Mr Ralph Tonkin & Mr Wayne Danckert in relation to the conduct of the Carlisle Plaza Shopping Centre. The shareholdings within the Company are to be updated in the near future to reflect the agreed ownership interests of the Tonkin family and the Danckert family within the project.
Upon receipt of approval from the Housing Corporation, the necessary ownership changes will be attended to forthwith.

On 3 September 2014 Mr Weldon had sent an email to Mr Ziesing referring to the company name, Bidwill Shopping Centre, its place of business, and the identity of the directors. Mr Weldon told Mr Ziesing (amongst other things):

As noted, any company incorporated today or tomorrow will not be able to reflect the shareholding position once the J-V has been finalised and the shareholdings will need to altered as soon as the J-V is finalised.

On 4 September 2014 Mr Ziesing sent an email to Mr Weldon which, amongst other things, stated:

One issue that I should have remembered to discuss yesterday, re the JV structure – previously I have recommended to the Tonkins that the structure should be that of a new company acting as the trustee of a new unit trust, with 75% Tonkin & 25% to be Weldon/Danckert.

Mr Weldon replied to Mr Ziesing on 4 September 2014 indicating:

Please note that my family will also participate in any JV arrangement (Wayne and I sharing the 25%).

When do you think you will be a position to respond to the documents I sent on 2 September?
If we go down the unit trust route, we will still need to deal with the elements set out in the Shareholder Agreement.

On 8 September 2014 Mr Weldon sent an email to Mr Ziesing. He said:

When do you think you will be able to respond to the documents I sent last week?
All things being equal, Housing will let the JV vehicle take over the Lease by the end of this week – and the supermarket tenant is raring to go. We can’t sign anything until these internal arrangements between us have been sorted.
Do you think its possible to negotiate and finalise the releases and the JV arrangement by the end of this week?

On 9 September 2014 Mr Ziesing sent an email to Mr Ralph Tonkin with some detailed comments about the proposed documents. On the second page of the email Mr Ziesing made the following comments:

One of the issues is the estimated cash payment required to acquire a freehold interest in the Centre. Ralph has estimated this cost to be in the region of $1.5 m. the requirement and financing of this payment needs to be discussed. We note that clause 10.2 of the Shareholders Agreement states that the Leasehold interest shall not be sold for less than $8m – presumably this clause is included because the Leasehold Interest is able to be sold without conversion to a freehold interest, but not sure about that latter point – if it will need to be converted, then that is an issue for SRD Tonkin.
There is also the issue that SRD Tonkin is effectively being asked to convert the debt that it is owed into a 75% equity stake in the JV entity. It would appear that if surplus funds are subsequently generated, either via ongoing operation or sale of the Centre, that these funds are to be disbursed on an equity basis, ie 75% SRD, 25% Danckert/Weldon (after payment of Additional Shareholder Contributions). We would suggest that the principal funds lent by SRD to Carlisle under the previous documents be calculated, ie the $6m excluding accrued interest, and that this amount be paid out in priority to any funds subsequently being paid out on any equity basis. The priority of payment clauses to be amended in the Shareholders Agreement would be 6.2, 11.1 & 20.1. Again, Ralph will discuss this with you further.
Notwithstanding the above paragraph, SRD Tonkin’s interest in the JV entity is to remain valued at $6m at commencement. It is merely the priority of the repayment of this amount that is subject to discussion.

Mr Ralph Tonkin simply forwarded Mr Ziesing’s email to Mr Weldon without comment.
On 11 September 2014 Mr Weldon forwarded to Mr Bartho (copies to Mr Danckert and Mr Ralph Tonkin) a letter concerning historic rent liability. At or about this date rent owed to Housing amounted to approximately $565,000. Mr Weldon was proposing a plan of payment by instalments. He explained in the letter to Mr Bartho that $550,000 had to be borrowed to provide a cash incentive to the proposed supermarket tenant of $300,000 and an amount of $250,000 to be expended on external works and fitout on a number of the smaller tenancies. He explained borrowing needed to occur because the company was forced to accept a nine month free period for the supermarket and because the smaller tenancies would typically have a two month free rent period.
On 12 September 2014 Mr Weldon sent an email to Mr Ralph Tonkin indicating that he and Mr Ziesing had agreed that Mr Weldon would send a revised deed of release and a proposed Unitholders’ Agreement. He then stated:

Ralph, Ben says its important that you and he meet with your dad. He doesn’t think your Dad is aware of what’s being negotiated.
Given the urgency of finalising the JV, perhaps you’ll need to be in Adelaide on Tuesday (or Wednesday).

On 15 September 2014 Mr Weldon sent an amended Deed of Release along with a Unitholders’ Agreement to Mr Ziesing. The documents he attached were in “clean” and “marked-up” versions.
A number of matters were dealt with in the course of the letter and Mr Weldon concluded by stating:

Housing wants to assign the Lease to Bidwill Shopping Centre towards the end of this week. In order for this to happen the agreements need to be finalised by then.
Housing has been told that we are a united force. Housing has made it clear that it will only deal with us if we are united and that otherwise it will take possession of the Centre.

The proposed Deed of Release still contained Recital S, however it had a new paragraph added to it; a proposed sub-cl 13 in the following terms:

[The parties] release all conceivable grounds of dispute or claim (existing or future, whether presently in the contemplation of the parties or not) against each (other than a breach of this Deed) in respect of and in relation to Original Breaches, the Carlisle Breaches, the Subsequent Loan Breaches, the Loan Agreements, any rights they may have under any agreements or deeds between any or all of Tonkin on the one hand and any or all of Carlisle, Danckert and/or Weldon on the other, and otherwise.
on the terms set out in this Deed.

This was an enlarged provision dealing with very precisely defined breaches and previous agreements. Under the proposed arrangements the previous loan agreements were to cease to have effect. In addition, the default judgment was to be set aside and the bankruptcy notices withdrawn.
There were a number of other proposed changes to the Deed of Release, including a new cl 6.3 and a proposed cl 11 which stated:

The Loan Agreements will cease to have effect from the date of this Deed.

The “Loan Agreements” was a reference to the original loan agreement, the mortgage and the original deed and of course the subsequent loan agreement as well.
On 17 September 2014 Mr Ziesing sent an email to Mr Weldon. He provided Mr Weldon with some details concerning some Tonkin corporate entities and then stated:

With regard to the documentation, discussions have been held and Ralph is your contact point to finalise same.

On 17 September 2014 a Mr Balomatis, the principal solicitor for Housing, sent an email to Mr Weldon in which he stated:

In order to further assist with evaluating the proposal, can you please provide the following documents/information which I assume you have…

He then listed seven items which included, amongst other things, the JV agreement and “any” shareholders agreement.
On the same day Mr Weldon forwarded to Mr Ralph Tonkin and Mr Danckert Mr Balomatis’ email. Mr Weldon, in his email, expressed his disappointment that Housing wanted to see so much information.
On 18 September 2014 there was an email exchange between Mr Weldon and Housing as to an outstanding water rate notice.
On 18 September 2014 Mr Weldon sent an email to Mr Balomatis attaching a letter of the same date. The email purported to set out in some little detail the various arrangements. Aside from giving a brief explanation as to the proposed arrangements between the parties, Mr Weldon attached various documents, which included the proposed JV agreement, a copy of the constitution for the new joint venture company, the Unitholders’ Agreement, the sub-lease with National Security Service, and correspondence with other prospective tenants.
In relation to the proposed Joint Venture Agreement, Mr Weldon asserts he indicated that the units in the unit trust would not be issued until he had received advice from Housing that the assignment of the lease would proceed. Further, he says he indicated that upon Bidwill Square Shopping Trust assuming liability for the Carlisle debts and the joint venture vehicle “receiving Housing’s approval for the assignment”, SRD Tonkin would provide a discharge of mortgage in registrable from.
Under the heading “Observations” Mr Weldon indicated that the joint venture documents “are not yet signed” and then stated:

While the joint venture parties are both united and excited about the way the project has progressed in the last month, you will understand that the parties won’t sign the joint venture documents until Housing permits the assignment of the lease to the joint venture vehicle.

Under the heading “Summary”, Mr Weldon concluded by making the following comment:

I trust that it is evident from the above that we are now at an advanced stage in being able to get the Centre open, and as early as 15 November 2014.
However, until Housing formally advises that it approves the assignment of the lease and advises any conditions in relation to that approval, the joint venture parties are not able to formally commit to each other in a legally binding way and the joint venture is not in a position to bind itself to any sub-lessees.

In a further email of 18 September 2014, in which Mr Weldon forwarded to Mr Ralph Tonkin and Mr Danckert his communication to Mr Balomatis, he indicated that he had not shown Housing the Deed of Release as it was “none of their business”.
On 19 September 2014 Mr Ralph Tonkin sent an email to Mr Weldon indicating that he was proposing to finalise the lease over the coming weekend and to sign it “next Wed at your conference room, if not before”.
On 24 September 2014 Housing wrote to the directors of Carlisle, with a copy to Mr Weldon, under the signature of Mr Balomatis, indicating that in principle Housing had agreed to the assignment of the lease subject to a number of conditions. Two of them were as follows (emphasis added):

the Corporation receiving, and finding satisfactory, all documentation in relation to the assignment of the lease by Carlisle Plaza Pty Limited to the Assignee;
the Corporation receiving, and finding satisfactory, all documentation in relation to the discharge of all mortgages, charges and other securities granted by Carlisle Plaza Pty Limited to its current mortgagees:

The letter concluded with the following statement (emphasis added):

If these matters are not satisfactory to the Corporation, the Corporation will not for any purpose be taken to have consented to any assignment of the lease for Bidwill Plaza.
Nothing in this letter releases Carlisle Plaza Pty Limited from any obligations under the Lease, the Variation of Lease and the Car Parking Licence unless and until all the above documentation is duly signed by all relevant parties and is satisfactory to the Corporation.

On 24 September 2014 Mr Weldon forwarded the letter from Mr Balomatis to Messrs Danckert and Ralph Tonkin. The letter from Mr Balomatis had attached to it a letter inviting Mr Ralph Tonkin and Mr Danckert to sign indicating their agreement to the terms and conditions set out in Housing’s letter. In due course, on or about 1 October 2014 both Mr Ralph Tonkin and Mr Danckert signed, indicating they had agreed to the various conditions and/or requirements of Housing.
On 25 September 2014, Bidwill Shopping Centre Pty Limited signed a sub-lease to National Security for a period of 10 years commencing on 15 November 2014.
On 13 October 2014 Mr Weldon forwarded some further documentation to Mr Ralph Tonkin and Mr Danckert concerning the car parking licence, which needed execution, and indicating that Housing wanted certain monies paid in relation to outstanding rent.
On 13 October 2014 Mr Weldon also sent a detailed letter to Mr Balomatis concerning amendments to be made to the Deed of Car Parking Licence proposed by Housing.
On 22 October 2014 Mr Ziesing sent an email to Mr Weldon and Mr Ralph Tonkin. He enquired as to when he might expect to receive what he described as “establishment documents” signed by everyone concerned.
It was clear, however, by 27 October 2014, that certain matters concerning the lease were still not agreed with Housing. Mr Weldon kept Mr Ralph Tonkin informed concerning these developments, as is clear from an email from him to Mr Ralph Tonkin of 27 October 2014.
By 10 November 2014 matters were still not finalised and an issue had arisen in relation to land tax debt. Mr Weldon, in an email of 10 November 2014, asked for Mr Ralph Tonkin’s views about the matter.
During this period SRD was making contributions to fitting out the supermarket and other works at the shopping centre.
On 13 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin and Mr Danckert. He said (as written):

After chasing up Chris Balomatis a few times, yesterday he got back to and informed me that Housing has agreed to backing down on us being responsible for the wider car park.
Also he had requested Clayton Utz to send out the amended docs. We should have them today or tomorrow.
This will now enable us to send out the other leases, as well as to finalise the documents for our internal arrangements.

Mr Ralph Tonkin responded shortly after Mr Weldon’s email on the same day in the following terms:

Thanks Phil. We need to meet next week & sign docs from Ben Ziesing regarding Bidwill Shopping Centre P/L. I am paying the final $50k to National Security today, don’t want them to have any reasons regarding Housing Dept approval not to start rent free period.

On 14 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin and Mr Danckert. It attached a proposed lessor’s disclosure statement which Mr Weldon indicated Mr Danckert was happy with. He asked Mr Ralph Tonkin for his comments.
On 19 November 2014 a meeting was held at Mr Weldon’s office between himself, Mr Danckert and Mr Ralph Tonkin to discuss the various deeds proposed by Housing.
On 20 November 2014 Mr Danckert and Mr Ralph Tonkin, according at least to Mr Ralph Tonkin, had a heated argument at the shopping centre. Mr Danckert’s evidence (Danckert affidavit 31/7/15, [26], [27] and [28]) attributes the argument to costs associated with the payment for refrigeration for the shopping centre.
In his reply affidavit Mr Ralph Tonkin agrees he was not in a good mood but does not address Mr Danckert’s assertion about the heated remarks allegedly made by him at the shopping centre.
During 20 and 21 November 2014 Mr Weldon asserts he had a conversation with Mr Ralph Tonkin about the disagreement with Mr Danckert and about the possibility of Mr Ralph Tonkin buying out Mr Danckert’s share.
On 21 November 2014 the Office of State Revenue rejected Mr Weldon’s proposal concerning outstanding land tax.
On 25 November 2014 Mr Danckert circulated a proposal for fees for a building certifier.
On the same day Mr Ralph Tonkin requested a comparison quote.
Again on 25 November 2014 Mr Danckert responded to Mr Ralph Tonkin’s question indicating there was not very much time to obtain a competing quote.
On 26 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin in the following terms:

Can you and I get together ASAP (preferably tomorrow morning) to discuss the situation with Wayne? We need to resolve this urgently. We need to sign the docs with Housing.
We can meet at Bidwill or here at my office. What do you want to do?

On 27 November 2014 Mr Weldon followed Mr Ralph Tonkin up by sending him another email. Amongst other things he made the following comments:

I have tried to contact you since Monday.
I know that you are very busy attending to all the jobs at Bidwill, however it is critical that you and I (not Wayne) have some quality time as soon as possible to discuss a resolution of the disagreement between you and Wayne.
This disagreement has the real potential to de-rail the whole venture. Already, Bartho is chasing Wayne as to why Housing’s documents have not been signed.
I am not acting for Wayne, but want to meet with you about what he proposes. I have told Wayne that I will convey what he has said, but thereafter, any further discussion should be with you directly. He said that he would use a lawyer.
However, in the first instance, it might help if I’m the “go-between”. It is better if we speak face-to-face and discuss the various issues.
We really need to get together as soon as possible, because until that happens, the documents can’t be signed
…

On 28 November 2014 Mr Weldon and Mr Ralph Tonkin had a meeting in an attempt to resolve the dispute with Mr Danckert.
On 1 December 2014 Mr Weldon sent a further follow up email to Mr Ralph Tonkin. It read in part:

I thought I’d let the dust settle for a few days before writing.
I know that you were in no mood to talk on Friday – but it’s vital at this critical point in the project that we work through the issues in a calm and constructive manner. I recognise that presently you don’t want to talk to Wayne – but you and I must talk because I have serious concerns about the future of the project. We urgently need to resolve the issues between you and Wayne.
I must admit I was really taken aback by your attitude to me on Friday.
I came to see you in good faith to try to resolve your differences with Wayne. I had been trying to contact you for most of the week. I was concerned that if your dispute with Wayne wasn’t resolved quickly, we could no longer present the united front we had previously shown to Housing and which, given the history of the lease, Housing required to see if it was going to deal with us.
About the blow up about Floyd Davies’ debt and the other things between you and Wayne, Wayne was going to pursue his rights under the joint venture agreement. I was concerned that this had the potential to blow everything apart.
I wanted to meet to convey a solution that Wayne wished to put as the way forward. It was easier if I did so in person because we could talk through the issues. As I indicated in my email on Thursday, I agreed to do so in the capacity of ‘go between’ and not as Wayne’s lawyer. I have an obvious concern about my own interest under the agreement but my immediate concern on Friday was to get over the difficulties that had arisen in the previous week. I was prepared to stay in the deal even if Wayne had to be negotiated out of it.
To then be accused of lying, to be told that I was no longer welcome at Bidwill and to be told that any dispute about the j-v agreement we had in place would now need to be dealt with by lawyers came as a total shock.
When we had last spoken on the previous Friday, you said that you and Wayne could no longer work with each other. You said that over the weekend you would explore buying out Wayne’s interests under the j-v agreement. You said that you would approach Aman about buying out Wayne. Because Aman had previously agreed to pay out Wayne’s $1 million when you and he had the earlier blowout, I believed that this had prospects. We spoke about my continued involvement in the j-v arrangement, but you did canvass me about the possibility of my interest in the agreement also being bought out by Aman.

In this email, which was quite lengthy, Mr Weldon made some additional comments under the heading “The bigger picture” in the following terms:

We desperately need to move beyond all “the stuff” of the last week or so.
Our j-v agreement has worked well until the hiccups of last week. We had agreed terms and we have all been playing our different roles under the agreement. On the basis of the j-v agreement, the works are being finalised, leases have been issued, a binding commitment has been made to Aman and Manami, and we are now in a position to finalise the commitments we have made to Housing.
As previously agreed, with the finalisation of Housing’s agreements, all documents were to be signed, including the ones from Ben Ziesing. In fact, we were going to discuss this when the 3 of us last met in my office – before the Floyd issue arose.
The issue with Wayne needs to be resolved for a variety of reasons, including the fact that Wayne remains a director of Bidwill Shopping Centre Pty Limited and Housing requires him to sign the documents and give personal guarantees etc. If Wayne is not to be involved in a directorial capacity, we need to work out how to communicate to Housing that Wayne still has an involvement – which will be the truth.
Housing expects us to sign the documents. We can’t delay them much longer.

On 2 December 2014 Mr Weldon sent a further email to Mr Ralph Tonkin. Mr Weldon posed the question of what he should say if Mr Bartho asked him when documents might be signed. He told Mr Ralph Tonkin that he was ready to meet whenever Mr Ralph Tonkin was next in town.

On the same day Mr Ralph Tonkin finally replied. In his email to Mr Weldon he reminded Mr Weldon that some four and half days had gone by since he asked for proof of the amount of cash that he and by implication Mr Danckert had put into the shopping centre.
On 2 December 2014 Mr Weldon replied that his wife (who had kept a record of the payments) worked and that they had had commitments over the last weekend, but that he expected to get the figures to Mr Ralph Tonkin by “late tomorrow night”. He concluded the email to Mr Ralph Tonkin by saying “[t]hen we must get on with resolving the conflict within the j-v. That’s the most pressing issue.”
On 3 December 2014 Mr Ralph Tonkin indicated to Mr Weldon that he needed bank statements (by implication) in order to prove the precise amount of cash spent.
On the same day Mr Weldon responded saying that his wife had indicated that they may not have bank statements but he hoped to give Mr Ralph Tonkin some information the next day. Later on 3 December 2014 Mr Weldon wrote again to Mr Ralph Tonkin indicating that such materials he had and that he was happy to sit down with Mr Ralph Tonkin and go through the material in detail.
Later again on 3 December 2014 Mr Weldon sent an update on the number of payments and again asked how Mr Ralph Tonkin wanted to proceed. On 5 December 2014 Mr Ralph Tonkin responded indicating that he wanted the material emailed to him.
On 5 December 2014 Mr Weldon again sent an email to Mr Ralph Tonkin. He indicated that he had tried unsuccessfully to contact Mr Ralph Tonkin several times on that day, and that he attached certain documents showing expenditure of at least $244,000.
On 10 December 2014 Mr Ralph Tonkin rather tersely replied:

Nothing attached. No proof of bank transactions rec’d.

On the same day Mr Weldon indicated that bank statements had in fact been sent.
Later on 10 December 2014 Mr Ralph Tonkin acknowledged that he had received the statements and would go through them in detail.
On 10 December 2014 Mr Weldon sent an email to Mr Ralph Tonkin seeking an explanation of certain items.
On 11 December 2014 Mr Ralph Tonkin sent an email to Mr Weldon. He said, among other things (as written):

I want to discuss with you, Ben Ziesing & Schrippa how to best separate with Wayne as I can not be in a company with him as director.

On 19 December 2014 Mr Weldon sent an email to Mr Ralph Tonkin asking him how he was “going with sending Housing docs x 3?”
On 20 December 2014, in two separate emails, Mr Weldon sent to Mr Ralph Tonkin the car parking licence, and two deeds. One was a deed of consent to assignment of the lease and the other a deed of consent to a sub-lease.
On 9 January 2014 Mr Weldon sent an email to Mr Ralph Tonkin. Mr Weldon informed Mr Ralph Tonkin that Mr Danckert had instructed a solicitor to write a letter of demand to Mr Ralph Tonkin. Mr Weldon assured Mr Ralph Tonkin that he had tried to remain neutral and he hoped that he and Mr Danckert could sort matters out as a matter of urgency.
On 11 February 2014 Mr Weldon sent an email to Mr Ralph Tonkin indicating his disappointment at not having heard from Mr Ralph Tonkin. Mr Weldon commented (as written):

Putting to one side the legal ramifications of all this, I am disappointed, at a personal level, that you departing from the clear assurances you gave me. On behalf of the Tonkin entities you repeatedly made it clear that despite your dispute with Wayne, our arrangements under the j-v remained in place.

On 13 February 2015, Schirripa Commercial Lawyers sent an email to Mr Weldon indicating that all future correspondence to Mr Ralph Tonkin or other members of the Tonkin family should be sent to that firm, which from that point forward would be acting for Mr Ralph Tonkin. It informed Mr Weldon of outstanding indebtedness and of the judgment sum against him and Mr Danckert in South Australia. The letter in part concluded with the following:

Our client instructs us that you have sent a number of emails to him in an attempt to create a “paper trail” of assertions about the position between the parties. Our client rejects those assertions regarding the existence of a concluded joint venture. To the extent that any discussions have occurred with Mr Ralph Tonkin in an attempt to resolve the differences between the parties, these have not resulted in a concluded agreement.

On 2 March 2015 Mr Weldon provided a somewhat lengthy response. Amongst other things, he asserted that there had been an agreement between the parties.
On 2 March 2015 Housing wrote to the directors of Bidwill and Carlisle, Mr and Mrs Danckert, and Mr Ralph Tonkin. The letter was stated expressly to be a reminder that documents were to be signed and returned. It asked when the documents would be signed by all parties and when all other outstanding instalments would be met.
On 4 March 2015 Mr Weldon sent a letter to Schirripa Commercial Lawyers attaching a demand made by Blacktown City Council for unpaid rates totalling $29,280.60.
On 24 March 2015 proceedings were commenced by the plaintiffs seeking, amongst other things, specific performance.

Legal principles

The key legal controversy between the parties concerns whether the parties fell into the “second class” of agreements described in Masters v Cameron (1954) 91 CLR 353 at 360-362 (Masters v Cameron), or the so-called “fourth class” recognised in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 (Baulkham Hills).
It is apposite to begin with the remarks of Higgins J in Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650:

If there was no complete contract, the plaintiffs must fail. The law knows no gradations in the contractual relations. It knows nothing of virtual agreements, or honourable understandings. Even if the defendants were shown to have disappointed the legitimate expectations of the plaintiffs for some unworthy reason – to have meanly backed out of almost completed negotiations – the action must fail. There is no contract unless the two parties mutually consented to be bound one to the other by one agreement. Moreover – though it ought to be superfluous to say it – it is one thing for two parties to settle what are to be the terms of an agreement, if it should be made; and quite another thing to make the agreement. I have found, in my experience, that the two processes are frequently confounded; and, if I may judge from some of the cases to which I have been referred by Mr. Starke, the confusion has not always been avoided even in the Courts.

In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA considered:

The only question considered by Yeldham J was whether there was a binding contract between the parties. In considering this question, in a context such as the present, it is of assistance to distinguish between three questions: did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract?: cf Barrier Wharfs Ltd v. W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650.

In Baulkham Hills at 628 a so-called “fourth class” of agreements was recognised, whereby the parties intend immediately to be bound but are “expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.” Some doubt has been cast on whether this is truly a fourth category: see, eg, Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [118] (Sagacious Procurement).
In Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 (Toyota Motor Corporation) Brooking J made the following observations at 132-3:

Those observations concerned a Masters v. Cameron dispute, but they are also apposite to a case like the present, in which the document said to be or evidence a contract makes no reference to a more formal document.
Each case is different. A relatively short letter may be held to record a binding agreement in a matter of great consequence and considerable complexity, in which numerous formal documents will have to be prepared and executed to give effect to the transaction, as in Custom Credit Corporation Ltd v. Cenepro Pty Ltd (unreported, Court of Appeal of New South Wales, 7 August 1991).
Just as possible uncertainty and incompleteness bear on intention to make a binding contract, so too does doubt as to the identity of the parties to the contract and doubt as to the identity of the person by whom some act under the contract is to be performed. As with uncertainty and incompleteness, even though it is possible to resolve the doubt as to identity of parties, the very doubt may in a given case be viewed as bearing on the presence or absence of intention to contract.
This case raises both questions of uncertainty, incompleteness and identity of parties and in addition the related and more fundamental question whether the parties to the suggested contract (whoever they may be) intended to contract. In a case like the present the question is whether the parties intended to make an immediately binding contract in the sense that some document or documents already brought into existence was or were to constitute or evidence a binding contract made between them: there is no doubt about the existence of an intention to contract in the sense of an intention or expectation or hope that at some stage a binding contract would be made between the parties. As Lindley LJ said in May v. Thomson (1882) 20 Ch D 705, at 722: " ... the parties corresponded intending to come to an agreement, fully expecting that they would come to an agreement, knowing perfectly well that the subject-matter of the sale was such that a formal agreement was absolutely essential, and that certain things of very great importance in matters of this kind, which were not alluded to in the letters at all, would have to be discussed and finally settled when they signed the final contract. In other words, it comes to this, without going through the letters critically and step by step, that the parties thought they had agreed to all the more material terms; that some less material terms and matters of detail would have to be discussed and settled by their agents, and that the agents were to prepare the final agreements; and I think they never did intend to be bound until the final agreement was signed."

His Honour went on to say at 136:

The evidence is consistent with the conclusion concerning intention to which Exhibit G itself points, namely, that the parties were negotiating in the hope and expectation that at some stage a binding contract, or collection of binding contracts, would be made; that they had already agreed on some of the principal terms of the contemplated contract or contracts; but that the matter remained in the realm of negotiation, it not being the intention that Exhibit G should constitute or evidence a rudimentary but binding contract.
An intelligent layman would find in documents coming into existence on or after 21 December 1990 clear indications that the Toyota companies did not regard Exhibit G as evidencing a binding contract.

Later in his reasons, his Honour remarked (at 138):

In both cases just cited the document or documents contained express reference to a formal contract of sale. That is not so in the present case. Nevertheless the two cases cited, and the other decisions cited earlier, show that the magnitude, subject matter or complexity of the transaction may suggest that the informal agreement was not intended to constitute a binding contract.

Tadgell J, at 170, considered that:

The approach which the learned trial judge was induced to adopt to his consideration of Exhibit G tended, in my respectful view, to leave out of account a question that I take to be fundamental to this case. Simply stated, the question is whether the appellants are, or either of them is, to be regarded as having promised by Exhibit G to assume legally enforceable obligations to purchase land, to lease it back and to lend $1.9 million. By treating the parties as not being in contention upon the question whether agreement had been reached in December 1990-and by proceeding upon the footing that they had reached an agreement of which Exhibit G was evidence - the necessity to investigate and determine the character of Exhibit G was passed by or overlooked. That is to say, in concluding or assuming that the parties had reached an agreement on or about 19 December in terms of Exhibit G, there was no separate consideration of what it was that Exhibit G was designed to do.

His Honour went on, at 176, to remark:

With regard to probability, the respondents' onus of proof in establishing what they allege was not much adverted to as such in the judge's reasons or in argument before us. Even so, it is not to be overlooked. Some simple but essential guidance was offered by Bingham LJ in Food Corporation of India v. Antclizo Shipping Corporation (The Antclizo) [1987] 2 Lloyd's Rep 130, at 143: "Agreements are not to be imputed to parties who have made none .. If, therefore, the court is to find an agreement . . . it must on the balance of probabilities be satisfied that there really was such an agreement." That was said in a case where it was sought to infer agreement from silence and inactivity but the principle is no different when reliance for proof of agreement is placed on what has been said and done.
What, if anything, was promised by the appellants is to be determined by ascertaining by inference and as a matter of fact what their words and conduct would have led KMG reasonably to believe that they were promising: Ashington Piggeries Ltd v. Christopher Hill Ltd [1972] AC 441, at 502, per Lord Diplock. The present case, like Australian Broadcasting Corporation v. XIVth Commonwealth Games Ltd involves: " . . . the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time": per Gleeson CJ, at 550. The nature, magnitude and complexity of the "rescue package" that was under discussion up to 21 December 1990 are appropriately to be considered upon an assessment of the character of Exhibit G: cf Sinclair, Scott and Co Ltd v. Naughton (1929) 43 CLR 310, at 316 and 332.

JD Phillips J said at 198-9:

The very existence of all this complex documentation points very strongly, I think, against an intention to make a binding and enforceable contract on about 19 December in the manner urged by the plaintiffs. It is stretching credulity to suppose, in the light of such careful, existing arrangements, that the parties were - or that either could reasonably have supposed that the other was-intending to agree finally on the injection of a further $7 million by means only of the letter of 19 December: see and compare Clifton v. Palumbo [1944] 2 All ER 497, at 499. This is a case in which further documentation was plainly anticipated. (I simply observe that in the loan agreements there is express provision made that any variation or modification will be documented.) Obviously, it was in the anticipated documentation that the identity of the parties would be plainly spelled out and, wanting such documentation, I think that the conclusion is impelled that there was in the meantime nothing binding or enforceable.

His Honour went on to say at 201:

That is the point upon which most of the cases cited to the court can be distinguished. For instance, it was submitted that the court strains to give effect to commercial agreements. But as an examination of the cases shows, that may be so where once the court has concluded that the parties did enter into what was intended to be a binding and enforceable contract. That intention may be discovered by the very nature and content of the document containing the bargain: eg, the charterparty in Didymi Corp v. Atlantic Lines and Navigation Co Inc [1988] 2 Lloyd's Rep 108 and the insurance contract in American Airlines Inc v. Hope [1973] 1 Lloyd's Rep 233. Or it may be discovered in informal correspondence in the light of the surrounding circumstances: eg, Corpers (No 664) Pty Ltd v. NZI Securities Australia Ltd (1989) ASC 55-714 (where the decision, although dependent upon the parties' conduct in relation to an informal document, may have turned on estoppel); contrast Allen v Carbone (1975) 132 CLR 528 (where the intention to contract was not to be so found). Or it may be Found in the fact that the parties have conducted themselves on the basis that they earlier entered into a binding contract; eg, British Bank for Foreign Trade Ltd v. Novinex Ltd [1949] 1 KB 623, F and G Sykes (Wessex) Ltd v. Finefare Ltd [1967] Lloyd's Rep 53; contrast Australian Broadcasting Corporation v. XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 where the parties' subsequent conduct pointed against their having been earlier bound. But however the contractual intention be determined to exist in the particular fact situation, the cases relied upon to support a generous approach to the construction of commercial agreements all depended for their result upon the court's first concluding that the parties did intend to be bound by an enforceable contract.

In Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 81, the following remarks were made:

I have already said something as to this method of analysis in Gjergja v Cooper [1987] VR 167, especially at 195-211. No authority binding upon me, either before or since that time, has yet laid it down that an analysis by way of offer and acceptance is not to be treated as the primary mode of ascertaining agreement, but I am prepared to accept, without examining in detail all the cases in which it has been discussed and referred to in the works cited above, that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. In the language of para22(2) of the Second Re-statement on Contracts: "A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined".

In Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 at [61] Allsop P and Meagher JA considered that:

61 HEG, using this material, submitted that, although it could not identify any particular occasion for offer and acceptance, from the body of evidence one could recognise the existence of contractual arrangements entered into by the parties. Particular reliance was placed upon cases such as Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110, at 11,117 per McHugh JA, Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at 179 [81] and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 at 525 [369]. It is undoubted that contractual arrangements do not only arise out of formal offer and acceptance. In some circumstances, it will be open to a court apprised of the commercial context and the acts, including words, of the parties to interpret the engagements of the parties to ascertain the existence and extent of a legal relationship. A relationship and a body of conduct may evince a clear mutual intention to be legally bound in a particular respect or a relationship or a document may be "instinct with an obligation", imperfectly expressed: Moran v Standard Oil Co 211 NY 187 at 198 per Cardozo J (Court of Appeals, 1914).

In Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 the relevant principles concerning formation were summarised by Sackville AJA (with whom Macfarlan and Gleeson JJA agreed) at [59] - [63]:

[59] First, in Australia the “objective” theory of contract has been accepted: see, most recently, Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at [35]. Consequently, in determining whether a binding contract has been concluded, the law is concerned not with the parties’ subjective intentions, but with “the outward manifestations of these intentions”: Taylor v Johnson [1983] HCA 5; 151 CLR 422 at 428 (Mason ACJ, Murphy and Deane JJ). Thus what matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (per curiam); Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40]-[41] (per curiam). In a case where the ordinary process of offer and acceptance has taken place, the court inquires as to what a reasonable person would infer or deduce from observing the exchanges between the parties: NC Seddon, RA Bigwood and MP Ellinghaus, Cheshire & Fifoot Law of Contract (10th Aust ed 2012, LexisNexis Butterworths) at [3.4].
[60] Secondly, it is not necessary, in determining whether a contract has been formed, to identify a precise offer or acceptance; nor is it necessary to identify a precise time at which an offer or acceptance can be identified: Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68] and authorities cited at [68]-[75] (Beazley JA, Santow and Ipp JJA agreeing). The questions to be asked are:
“in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the [plaintiff] and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?”
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [81] (Heydon JA).

[61] Thirdly, an agreement that is incomplete will not give rise to an enforceable contract. As was said in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ):
“It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete agreement, being no more than an agreement of the parties to agree at some time in the future.”

[62] An alleged contract will fail for incompleteness if, even though the parties have used clear language, a term which is regarded as essential as a matter of law has not been agreed: J W Carter, Carter on Contract (2014, LexisNexis) at [04-120]. The principle was stated by Viscount Dunedin in May and Butcher Ltd v The King [1934] 2 KB 17 n at 21:
“To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties.”

[63] If the parties have not agreed on all essential terms, for example because they have left one such term to be settled by future agreement, the contract is incomplete no matter what the parties themselves may think: G. Scammell and Nephew Ltd v H.C. and J.G. Ouston [1941] AC 251 at 260 (Lord Russell of Killowen); O’Brien v Dawson [1942] HCA 8; 66 CLR 18 at 37 (Willams J, Rich J agreeing); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 170 (Tadgell J); Australian Securities and Investments Commission v Fortescue Metals Group Ltd [2011] FCAFC 19; 190 FCR 364 at [123]-[124] (Keane CJ); at [212] (Emmett J); at [223]-[227] (Finkelstein J) (an appeal to the High Court was allowed, but not on this point: Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486).

In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105, the plurality (Gaudron, McHugh, Hayne and Callinan JJ) made the following observations (footnotes omitted):

Because the inquiry about this last aspect may take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules.

In Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 (Pavlovic v Universal Music), Bathurst CJ made the following remarks:

15   It is well established that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 362. In cases such as the present, which do not depend on the construction of a single document, what is involved is the objective determination of the question from the communications between the parties in their context and the parties’ dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550. As was said by Mahoney JA and McHugh JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, that includes consideration of what the parties said or wrote (at 334, 337).
16   It should be noted that Universal based its contention that a contract existed on classic offer and acceptance analysis. As the President pointed out at par [56] above, it contended that the email of 23 December 2014, attaching the proposed Deed, constituted an offer to enter into an agreement on the terms of the Deed, which was accepted by the 2.36pm email of 24 December from Mr Gorry to the solicitors for Universal. Universal did not contend that an offer was accepted by conduct, nor that, irrespective of whether or not there was a formal acceptance of the offer, it could be implied from circumstances objectively viewed from the point of view of reasonable persons on both sides that the parties had concluded a bargain: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [71]-[75]; Vroon BV v Foster’s Brewing Group Ltd (1994) 2 VR 32 at 81.
17   Whichever way the matter is looked at, I do not think that a binding agreement was reached. First, as a matter of construction, the words “he will sign” written by Mr Gorry are in the nature of a statement that his client would enter into a contract with Universal, rather than an acceptance of Universal’s offer.
18   Further, the communications to which I have referred above show that the parties, from the start of negotiations, intended that any agreement reached between them would be embodied in the Deed executed by each of them: see Eccles v Bryant & Pollock (1948) Ch 93 at 99. The nature and ambit of the dispute between the parties provide powerful reasons for why the parties would wish any accord which they reached to be embodied in a formal agreement. This could not be described as a mere matter of administration.

In relation to the issue of subsequent conduct, it is appropriate to have regard to the subsequent conduct of the parties in ascertaining their intentions at the relevant time. In Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [112] Sackville AJA (with whom Hodgson and Campbell JJA agreed) considered that:

112. In determining whether the parties intended to conclude a contract, their post-agreement conduct may be taken into account. The conduct may be relevant, among other purposes, in order to show that:
“it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature”.

Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88; 5 CLR 647, at 669, per Griffiths CJ. See also Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, at 547-548, per Gleeson CJ (with whom Hope and Mahoney JJA agreed); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153, at 163-164, [25], per Heydon JA.

In Sagacious Procurement the relevant principles were described as follows:

99 Regard to the parties’ subsequent communications is of some importance in this case. That regard may be had to their subsequent communications is undoubted. In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd Gleeson CJ said at 547-8
“There is ample authority for the proposition that reference may be made to the correspondence between the parties subsequent to 13 June 1986 for the purpose of showing that ‘it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature’: Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 669 per Griffiths CJ; see also Howard Smith and Co Ltd v Varawa (1907) 5 CLR 68; Hussey v Horne-Payne (1879) 4 App Cas 311; B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 and Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251.”

100 So also in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [25] Heydon JA said succinctly, referring to the same cases, that “post-contractual conduct is admissible on the question of whether a contract is formed”.
101 In Barrier Wharfs Ltd v W Scott Fell & Co Ltd at 669 Griffiths CJ had considered that subsequent correspondence between the parties showing that they continued in negotiation “negatives the idea of an existing concluded contract”. In Howard Smith and Co Ltd v Varawa (1907) 5 CLR 68 his Honour had said at 78 that “the question being whether the parties had in fact concluded an agreement on 1st December, any statements or conduct on their part after that date inconsistent with the existence of a concluded contract are relevant for this purpose”. In B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 regard was had to subsequent communications showing that the parties contemplated the execution of a formal contract, and Mahoney JA said at 9155, with reference to Barrier Wharfs Ltd v W Scott Fell & Co Ltd and Howard Smith and Co Ltd v Varawa, that although it was not conclusive on whether a binding contract had previously been made, the regard -
” … does provide support in the present case for the view that, as the parties understood it, whether the contract was to proceed was affected by matters to be agreed concerning settlement, and that in relation to that agreement, it was proposed to exchange contracts and proceed in the normal course of conveyancing”.

102   The juridical basis on which the subsequent communications bear upon contractual intention may not be settled.
103   In Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 McLelland J suggested at 9255-6 that the probative value of subsequent communications lay in the light they shed on “the proper interpretation of the earlier communications alleged to constitute the contract”, such as by showing continued negotiations whereby the alleged contractual dealings could not properly be interpreted as mutual assents to be bound; his Honour said they could also be admissions by conduct of the existence or non-existence of a subsisting contract, with the probative force “vary[ing] inversely with the strength of the available direct evidence of the matters in question”.
104   Interpretation of the earlier communications may not be an ideal description of the use of the subsequent communications on the first basis to which his Honour referred. It has been put a little differently in other cases. In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548 Gleeson CJ spoke of “interpretation and understanding of the earlier communications in that it constitutes an important source of information as to what are matters incidental, or for that matter essential, to a transaction of the nature in question”. In Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd one of Kirby P’s “principles” was -
“4. In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. Where correspondence between the parties after an informal agreement refers to important terms and conditions not mentioned during that informal discussion, it may more readily be inferred that the earlier discussion was simply a preliminary negotiation and not a binding agreement;”

105 I respectfully suggest that subsequent communications are not simply aids to interpretation, or a source of information as to matters with which a concluded contract should deal. Their probative value may be more direct. To repeat, the objective intention of the parties is fact-based, and found in all the circumstances. That in their subsequent communications the parties have continued in negotiations, or have expressed the common understanding that they are not legally bound unless and until a formal contract is executed, is of itself probative as to their contractual intention: see Howard Smith and Co Ltd v Varawa, stating simply that any statements or conduct inconsistent with the existence of a concluded contract are relevant.
106 The basis of subsequent communications as admissions is very different. It does not depend on communication between the parties, and that basis gives scope for evidence of, for example, a party’s internal memoranda saying or less directly conveying that there is or is not a concluded contract. Admissions bearing upon contractual intention present difficulties. As Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 550, “it will often be necessary to identify with some care the fact which is said to have been admitted”. What is said to be admitted may be a relatively straightforward fact, for example that A discussed with B the price for goods. But if a matter of mixed law and fact is involved, or the application of a legal standard, admissibility may be more contentious. It is considered in Grey v Australian Motorists & General Insurance Co Pty Ltd (1976) 1 NSWLR 669 at 675 per Glass JA and 684-5 per Mahoney JA; Jones v Sutherland Shire Council (1979) 2 NSWLR 206 at 231 per Mahoney JA; and Pitcher v Langford (1991) 23 NSWLR 142 at 147 per Kirby P and 160 per Handley JA, but see the reservations, with reference to other cases, in Cross on Evidence, Aust ed, at [33465]. An admission by conduct in a case such as the present may bring its own difficulties. And a statement that there is or is not a concluded contract, for example, may if admissible, carry significant weight or little weight depending on the circumstances, and the weight of any admission will depend on the source of knowledge of the person making the admission: cf Lustre Hosiery Ltd v York (1936) 54 CLR 134 at138-9 per Rich, Dixon, Evatt and McTiernan JJ.

Again in Pavlovic v Universal Music, Beazley P said the following regarding the subsequent conduct of the parties:

118 It is well settled that regard may be had to subsequent conduct of parties to determine whether, at an earlier juncture, the parties intended to enter into a binding agreement: see Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 547-548 per Gleeson CJ (with whom Hope and Mahoney JJA agreed); Brambles Holdings Ltd v Bathurst City Council at [25] per Heydon JA; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [101] per Giles JA (with whom Hodgson and Campbell JJA agreed); Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [121] per Basten JA (Gleeson JA agreeing).

The defendants seek to draw an analogy with Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 (ABC v Commonwealth Games), where price was agreed and a substantial payment made, yet the Court reached the conclusion that there was no binding agreement. In that case, Handley AJA remarked:

The communications relied upon by the appellant as constituting a contract, construed with regard to the subject matter of the negotiations and the surrounding circumstances, and in the light of subsequent communications between the parties, do not appear to me to evidence an intention to make a concluded bargain. Rather, they show that, in a context where it was contemplated that there would be express agreement on a number of important matters which the parties had not yet got around to discussing, or in respect of which their discussions were still at a very incomplete stage, the parties had made an agreement on the most important subject of their transaction, that is, the price, in the confident expectation that they would in due course come to terms on the other issues that needed to be addressed. The important matters to which I refer include, in particular, the definition of the rights which the appellant was to have (that is to say the subject in respect of which the appellant stated its “expectations” following 13 June 1986) and the matter sometimes loosely referred to as the possibility of boycott.

In that case, Gleeson CJ considered at 548 that:

It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.

In Toyota Motor Corporation it was said at 138.3-5 that:

I think it extremely unlikely that parties in the position of those said to be contracting in the present case, whose relationships had always been regulated by a series of formal and complicated agreements, would have intended to become bound immediately in respect of the sale of land for $5.1 million on the basis that they would, if necessary, be content to have such rights and obligations as the law confers or imposes upon those who do no more than agree to buy and sell land for a certain price.

Estoppel

The plaintiffs rely upon both promissory estoppel and estoppel by convention. In relation to promissory estoppel, they cite the well-known articulation of those principles in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428.

The plaintiffs say that the execution of the sub-lease had far greater significance than that acknowledged by the defendants. The plaintiffs reiterate that not only had the terms of all relevant documentation been agreed, but the sub-lease committed Bidwill to a third party. There is no evidence or reason reason to think, the plaintiffs say, that Mr Ralph Tonkin executed the sub-lease in any capacity other than as a director of Bidwill, signifying in an unqualified way its role as the joint venture vehicle going forward.
The plaintiffs say that if the argument of the defendants was correct, it would mean, at one extreme, that the parties deliberately misled National Security Service or, at the other, acted on the basis that its interest could be ignored in circumstances where the sub-lease was effectively worthless. It would also mean, the plaintiffs submit, that despite all the steps taken and money invested, either party was free to abandon the central objective of preserving the leasehold. The plaintiffs submit that this cannot be correct.
The plaintiffs say that ABC v XIVth Commonwealth Games can be distinguished because of the urgency with which money needed to be put into the project in order to preserve the lease, and because of the need to satisfy Housing of a reunified approach.
The plaintiffs observe that by 23 September 2014 Mr Ziesing had applied for an ABN for the trust, and that on 24 September 2014 Mr Ralph Tonkin and Mr Danckert executed the sub-lease to National Security Service on behalf of Bidwill. Later on that day, Housing gave conditional consent to the assignment of the lease from Carlisle to Bidwill. The plaintiffs note that on 24 September 2014 Mr Divitkos ceased to be controller of the shopping centre. The plaintiffs submit that the Court should conclude that, if it had not already done so, SRD ceased to be mortgagee in possession on this date.
The plaintiffs point out that fitout and refurbishment of the shopping centre commenced between September and November and that Mr Ralph Tonkin caused $300,000 to be paid out for that fitout, as required under the sub-lease. The plaintiffs submit that this sub-lease assumes the assignment of the lease between Carlisle and Bidwill. The plaintiffs say that after 13 November 2014 Mr Ralph Tonkin continued to make payments for the refurbishment, which totalled around $500,000.
The defendants say, in relation to the expenditure by the Tonkins, that there is no evidence to suggest that the parties turned their minds to what would happen if the documents were not executed. Nothing, the defendants say, turns on this fact. After all, the defendants submit, SRD held a mortgage over the head lease, which meant that improvements to the shopping centre improved the asset over which it held security, at least as long as Housing did not terminate the lease. The defendants submit that given the evidence of substantial payments being made into the fitout of the supermarket, the prospect of Housing terminating should be understood as not increasing (and, the defendants say, one could suppose that SRD would have had standing to seek relief even if there was a threat of termination).
The ongoing attention of Mr Ralph Tonkin to the terms of the supermarket sub-lease, the fitout of the supermarket, and other possible sub-leases, are all consistent with the same position, the defendants say, namely an expectation that a joint venture would arise, against the background that the Tonkin interests held a mortgage over the head lease if that did not occur. The defendants submit that given the lack of means of the plaintiffs, the Tonkins’ only prospect of recovering the funds loaned to the Bidwill project was to get the shopping centre open and confirm a supermarket tenant. Regardless of the legal structure adopted, the defendants say, that required putting funds into the project.
The defendants say that it is not surprising that the contemporaneous documents throughout the period show that it was Mr Weldon who was anxious that the joint venture documents be executed. SRD, the defendants say, was protected by its mortgage, and if it risked throwing “good money after bad”, then the character of that risk was not substantially altered by whether the ultimate structure was one of borrower/lender or joint venture. There is no reason, the defendants say, to doubt the sincerity of the expectation of all the parties that the joint venture would come into existence. That is a different matter, the defendants say, to a legal obligation.
The defendants submit that the events of November 2014 have no real significance in the matter. The defendants submit that for reasons not fully explored in the evidence the Tonkins decided not to proceed with the joint venture. From December 2014, the defendants note, Mr Weldon began to assert that there was a binding joint venture agreement in place. The defendants submit that those assertions should be taken to have almost no weight. The defendants submit that Mr Ralph Tonkin’s responses in December 2014 to Mr Weldon were focused upon establishing where the funds for the project had gone over the years – he simply did not, the defendants say, “buy into” the assertions made about a binding agreement. When Mr Weldon began to be more insistent, Mr Ralph Tonkin consulted solicitors who responded in kind. These events, the defendants say, do not shed any real light on the issues.
In contrast, the plaintiffs submit that the assertions of Mr Weldon made after November 2014 gain weight when it is recalled that Mr Ralph Tonkin did not respond with any denial and kept dealing with Mr Weldon at that time as though an agreement was in place (until the letter of Schirripa Commercial Lawyers).
The plaintiffs maintain that all the conduct following 20 August 2014 is conduct that post-dates the contract and goes to prove its existence. The plaintiffs say that the conduct of the parties after 20 August 2014 is consistent only with the existence of a binding agreement. In particular, the plaintiffs point to the time and effort expended after this date to prepare the formal documentation and the endeavours of both Mr Ralph Tonkin and Mr Danckert in dealing with tenants and other issues at the shopping centre.
Alternatively, the plaintiffs say that the point at which the sub-lease was signed marks the point where the parties must be taken to have bound themselves. They say that at this point in time, Mr Ralph Tonkin had been appointed as the person to finalise the documents on behalf of the Tonkin interests. They say that he took no issue with any of the draft documents between 15 and 24 September 2014. Furthermore, they point out that Mr Ralph Tonkin executed the sub-lease on behalf of Bidwill. The plaintiffs observe that the sub-lease is made expressly conditional upon consent from Housing, but not expressly conditional on the assignment of the lease from Carlisle to Bidwill. The plaintiffs say this is indicative of the fact that an assumption was made that the assignment would go ahead, and that assumption could only be predicated upon agreement between the parties.
The plaintiffs submit that it is of “utmost significant” that after 20 August 2014 the parties acted with a high degree of unanimity in dealing with third parties, with the clear objective of opening the shopping centre. To the extent there was any continued negotiation, the plaintiffs say, it was in relation to detail only. Negotiation of the substantive matters, the plaintiffs submit, was at an end. The plaintiffs say the parties could no longer be perceived as two commercial parties “circling each other” and acting in “pure self-interest”. Although acknowledging the existence of some self-interest, the plaintiffs say the level of common interest was so high that the parties should be understood as having entered into a binding agreement by 20 August 2014 or on 24 September 2014.
The plaintiffs say that the urgency, the overall predicament in which the parties found themselves, the loss of patience by Housing, and all the conduct referred to above strongly militates against the conclusion that the parties manifested an intention not to be bound until the formal documentation had been signed.
The plaintiffs say that the absence of argument about the terms of the Deed of Release and the Unitholders’ Agreement after 15 September 2014, together with the execution of the sub-lease and the payments made for fitout and for other work, constituted acceptance of the final terms of the formal documents, and an unequivocal, if implied, statement that they would be executed in that form.
The conduct after 24 September 2014, the plaintiffs say, is consistent with the existence of a binding agreement. The plaintiffs point to:

The receipt and comment on the Deed of Car Par Parking Licence, the Deed of Consent to Assignment of Lease, and the Deed of Consent to Sub-lease from Housing;

The response to Housing sent by Mr Weldon on 13 October 2014;

Mr Ralph Tonkin’s endorsement of a modification to cl 63.4 of the sub-lease;

The enquiry after the signed documents by Mr Ziesing on 22 October 2014;

Mr Ralph Tonkin making reference in an email to a desire to meet Mr Ziesing and sign documents relating to the joint venture;

The conduct of Mr Ralph Tonkin, proceeding on the basis of an assumed agreement;

Mr Ralph Tonkin agreeing to the payment plan for outstanding land tax;

Mr Ralph Tonkin continuing to speak to Mr Danckert and Mr Weldon about the certification of works;

The ongoing correspondence of the parties.

The plaintiffs say that it was only after all necessary steps had been taken and all documents drafted and agreed that Mr Ralph Tonkin appeared to resile from the agreement.
The plaintiffs submit that it is noteworthy that even after November 2014 Mr Ralph Tonkin never expressly asserted that no agreement was made, nor suggested that statements made by Mr Weldon to the effect that there was a binding agreement were incorrect. To the contrary, the plaintiffs say, Mr Ralph Tonkin accepted that Mr Danckert had an interest that needed to be bought out. Similarly, the plaintiffs say Mr Ralph Tonkin’s email to Mr Weldon of 11 December 2014 speaks of “separating” from Mr Danckert, thereby conceding that a binding structure is in place. The plaintiffs note again that there is no express denial of an agreement until the letter of Schirripa Commercial Lawyers dated 13 February 2015.
In the alternative, the plaintiffs say that on an objective assessment of all evidence and the relationship between the parties, as analysed above, the Court can conclude that at a point which cannot be isolated with certainty the parties formed a binding agreement, the terms of which can be found in the Deed of Release and the Unitholders’ Agreement.

Estoppel

The plaintiffs submit in the alternative that the defendants, through Mr Ralph Tonkin and Mr Ron Tonkin, made representations that induced or encouraged the plaintiffs to believe a binding agreement had been made. The plaintiffs say the Court should infer that the defendants intended the plaintiffs would act in reliance on the representations. Objectively, in the circumstances, the plaintiffs say, there could be no other reason for making the representations. The plaintiffs say this conduct engages the operation of promissory estoppel.
Alternatively, the plaintiffs say the representations constituted an agreed or assumed state of affairs adopted as the conventional basis of the relationship between the parties after 20 August 2014. They note that estoppel by convention does not rely on inducement on the part of one party, and in particular there is no requirement that either party know the other may incur detriment in reliance on the relevant assumption.
The plaintiffs say that the reliance on the representations made by the defendants caused detriment to the plaintiffs, namely that they expended considerable time and effort on the basis that they believed they had a binding contract with the defendants. Furthermore, they point to Mr Danckert’s execution of the sub-lease.
The plaintiffs say the appropriate relief would be an order that the defendants specifically perform the agreement they represented was in existence. They submit that this is not extravagant or uncertain, but the prima facie entitlement of the plaintiffs to have their reasonable expectation of a contract fulfilled and to prevent departure of the defendants from the assumed state of affairs.
The defendants say that, having regard to the way in which the matter has unfolded, there is no practical room for the claims in estoppel or misleading and deceptive conduct to operate. They submit that it could not have been reasonable for Mr Weldon to assume that there was a binding agreement in place between the parties, having regard to the circumstances discussed above. The defendants say that if Mr Weldon drew that conclusion, notwithstanding the form of the documents he himself drafted, and despite his failure to draw this conclusion to Mr Ralph Tonkin’s attention in a timely way, it was not a reasonable conclusion to draw. Put another way, the defendants submit that any such conclusion could not reasonably be said to result from Mr Ralph Tonkin’s conduct.
The defendants submit that it is apparent that Mr Danckert, to the extent he was relying on anyone in relation to the status of the dealings between the parties, was looking to Mr Weldon, and not to Mr Ralph Tonkin.
Finally, the defendants submit that there is no loss or detrimental reliance established for either the estoppel claim or the misleading or deceptive conduct claim. The defendants submit that Mr Weldon and Mr Danckert had previously been doing work in respect of the Bidwill project on behalf of Carlisle and they continued to do so from August 2014. This work had to be done, the defendants say, regardless of the legal structure. The defendants submit there is no evidence or reason to conclude that they would have taken any different course by reason of any conduct of Mr Ralph Tonkin’s.
In response, the plaintiffs say that it is clear that the plaintiffs, taken collectively, relied on assertions of an agreement made by the defendants. This reliance, the plaintiffs say, was entirely reasonable, and indeed it would have been unreasonable not to act in reliance on the existence of an agreement in the circumstances.

Misleading and deceptive conduct

The plaintiffs say, further, that if the Court finds that representations were made by the defendants to the effect that an agreement existed, then on the defendants’ case these must have been misleading because it is the contention of the defendants that there is no agreement. They repeat the observations made in the context of estoppel concerning reliance.
The plaintiffs submit that the appropriate relief would be compensation pursuant to the Australian Consumer Law for expenses incurred in reliance on the misleading conduct.

Cross claim

The defendants pursue the cross claim only against Carlisle. If there is no binding release established, the defendants say, then that claim must succeed. It is sufficient, the defendants say, for them to refer to the recitals of the draft Deed of Release, which reflected Mr Weldon’s understanding of the relevant transactions, and the interest provisions of the original loan.

Consideration

Each example of this species of contractual dispute unsurprisingly turns upon its own facts.
In other words, whether parties intend to be bound must be determined objectively, but inferences can and should be reasonably drawn from what the parties said or did, tempered by what it may be inferred a reasonable businessperson would have understood the parties intended.
In summary, the first half of 2014 was a financially precarious time for all concerned. The shopping centre was not generating any income and debts were mounting. On 6 February 2014 SRD had served a s 57(2)(b) notice seeking repayment of $6 million from Carlisle. That same day SRD commenced proceedings against Messrs Weldon and Danckert alleging breaches of the 2011 agreement.
The meeting in Adelaide on 28 February 2014 was obviously an attempt to discuss and if possible resolve issues. It is accepted by the defendants that Mr Ralph Tonkin expressed “agreement” with a 75:25 joint venture. Mr Weldon’s notes of the meeting refer to a proposal and a 75:25 split. They do not, however, refer to any binding agreement and none, of course, is suggested.
The 3 March 2014 letter sent by Mr Weldon after the meeting is no more than a detailed proposal. There is nothing, in my view, in the tone and text of the letter of 3 March 2014, suggestive of anything beyond a proposal. It was, in any event, in fact rejected two days after it was put.
I can find nothing in what occurred between 3 March 2014 and August of that year to suggest (objectively) that the parties were inclined to bind themselves in any other way than upon execution and exchange of formal documentation. Whilst there are conversations from time to time which undoubtedly took place in which I am satisfied persons expressed agreement in principle, I am equally satisfied the parties never objectively consummate that agreement, as at 20 August 2014 or thereafter.
The parties had prior to 2014 organised their affairs quite formally. They had executed and exchanged formal documentation. That, in my view, is a most important part of the historical contractual context. There is nothing to suggest, in my view, that they had resolved this current dispute be dealt with in any other way.
In other words, where disputation had arisen they resolved their differences by formally executing further documentation before moving on. Mr Weldon was in 2014 preparing documentation to achieve, if he could, the same outcome.
There are numerous references in the various emails, especially those of Mr Weldon, for the need to execute documents prior to the parties being legally bound.
Most importantly, I am firmly of the view, both parties appreciated and expected that Housing required signed agreement(s) between the parties. Housing was very concerned about the precise terms of the agreements prepared between the parties, to the point of requesting copies of them, no doubt to ensure they were appropriate (see [76] above).
However, in addition and equally importantly, Messrs Weldon and Danckert needed the slate very precisely and formally wiped clean. They wanted not only a forgiveness of the previous debt, but a setting aside of a judgment and the withdrawal of bankruptcy notices. Unless the slate was comprehensively wiped clean, the judgment in South Australia, as an example, would stand. In my view business persons in this position would require nothing less than formal clarity and certainty.
It is true that in this case the defendants were only intermittently represented by their own lawyers. Mr Weldon, who was in a position, in my view, of hopeless conflict, assumed the role from time to time of advising both the plaintiffs and defendants. I am satisfied he did so, however, not out of any philanthropic ideal but out of a desire to create and perpetuate harmony arising out of a real concern for his own commercial and financial wellbeing. After all, he had a judgment against him, which he had no desire or capacity to meet (T131.25).
Mr Weldon nonetheless made frequent references in his communications with Mr Ralph Tonkin for the need to execute the formal agreements which he had prepared for all parties including himself. This was the position before and after August 2014.
Mr Weldon did his best as principal, agent and/or intermediary to cajole each of Mr Danckert and Mr Ralph Tonkin to sign the respective documents, but to no avail. I am satisfied that he clearly intended that he would (subjectively) conclude all arrangements with signed agreements. He knew (as any person, however, objectively in his position would) that Housing would require and expect nothing less.

These were parties with a past, and a chequered one at that. The defendants had poured substantial funds into the centre as an investment opportunity and there was suspicion and doubt as to how much the plaintiffs (Mr Danckert and Mr Weldon) had in fact contributed. There was a high level of distrust, despite Mr Weldon’s concerted charm offensive.
In all the circumstances, I am satisfied no binding agreement came into existence on or about 20 August 2014. The events which the plaintiff’s rely upon, on analysis do not in my view point objectively in favour of a binding agreement. Certainly Mr Weldon had every reason to finalise a formal agreement, and I consider he was anxious to do so.
Leaving conversations to one side – his email of 20 August 2014, after the 18 August 2014 phone call, speaks not of a binding arrangement, but a “proposed 75:25 joint venture” and a list of “outstanding issues”. This is quite contrary to any notion of a binding agreement. In my view, again objectively, such an email would not have been written by any person, let alone a commercial lawyer who believed there was a concluded bargain.
In summary, the most significant factors which point, in my view, against any binding agreement in or about August 2014 are:

The practice or history of dealings between the parties, in 2007 and 2011, in regulating their affairs by negotiations followed by signed agreements.

It was in the nature of Mr Weldon’s experience and professional practice that he sought to draft precisely and formalise the terms and conditions of any agreement the parties (including himself) would enter. Mr Weldon financially was in a somewhat perilous state and I do not consider he (or for that matter, any legal practitioner in his position) would be content with anything less than a formal, carefully drafted set of documents which would be executed.

In my view Housing required and the parties (indeed any persons reasonably in the parties’ position) would have anticipated and expected to enter formal, executed agreements. This, in my view, was a pervasive theme continuing throughout the balance of 2014.

An equally potent factor is the very form and structure of the documents providing as they did for releases and covenants upon execution of the documents. This objectively suggests that the parties fully intended to be legally bound only on and after execution of the documents.

The communications between 20 August and September 2014 in my view do not further advance matters for the plaintiffs. I am in no doubt the parties were working towards a written agreement. They appreciated Housing needed to see a show of unity. There is no doubt that a joint venture (75:25) was contemplated in principle, but I see nowhere anything objectively resembling a concluded arrangement.
At the risk of repetition, Mr Weldon was engaged in a precarious juggling act. His anxiety and frustration to one side, he appreciated the benefit of a detailed, concluded and executed agreement.
Importantly, on 2 September 2014 Mr Weldon sent the first draft of the various documents to Mr Ziesing, and on the same day physically handed copies to Mr Ralph Tonkin whilst he was having lunch with Mr Danckert. Mr Weldon, of course, asserts he gave Mr Ralph Tonkin an explanation of the documents. However, I am not satisfied with Mr Weldon’s evidence on this topic. Indeed, I do not accept the detail of his evidence at all. It was clearly not the context where any solicitor would reasonably or seriously expect to have someone like Mr Ralph Tonkin’s full attention. Mr Weldon accepted he left the documents with Mr Ralph Tonkin for him to further consider.
Mr Weldon said nothing to Mr Ralph Tonkin nor to Mr Ziesing in his email of 2 September 2014 about there being a concluded agreement. Indeed the documents he circulated are merely, in my view, evidence of advanced drafts.
I am not satisfied that this evidence rises any higher than an experienced solicitor giving a person a brief opportunity to satisfy himself that the drafts had captured the understanding in principle which had been discussed between the relevant parties. The reason Mr Weldon left the documents with Mr Ralph Tonkin is that he fully appreciated Mr Ralph Tonkin needed to consider the detail.
More importantly perhaps, it seems to me, is that the form the drafts took in providing for releases to occur in the future, and upon execution, as opposed to recording or acknowledging releases and covenants which had already been given. Again, this in my mind points to execution of the documents as the moment the parties intended to be bound.
By 15 September 2014 the structure for the joint venture had materially changed, in my view, from a shareholders’ agreement to a unitholders’ agreement. The tone, in my view, of Mr Weldon’s email of 15 September 2014 which enclosed the second drafts of the proposed documents, is that of proposal or negotiation. It is not suggestive of a finalised agreement. It is, in my view, a further attempt to get the structure and the precise terms and conditions of the structure in an agreed form.
The point is well made by the defendants that the releases presented at this time were conspicuous in their breadth. That is unsurprising as Mr Weldon (apart from looking after Mr Danckert and his interests) had a vital interest (professional and commercial) in seeing the most favourable outcome for himself and his interests. It is also important to observe, in my view, that by September, Mr Weldon had added a new recital S13, and new cll 11 and 14. For example, the bankruptcy notices were to remain on foot until execution of the documents. None of these additions could be said to be trivial, and the fact they were being proffered for the first time in mid-September is another factor in persuading me that no binding agreement was reached at any earlier point in time.
When Mr Weldon updated Housing on 18 September 2014, again there was simply no hint the parties were legally bound. Indeed Mr Weldon stated unequivocally that the parties had at that stage not bound themselves (see [72] above).
It is true that later in September Mr Ralph Tonkin and Mr Danckert as directors of Bidwill executed a lease document in favour of National Security Service, but it was stated to be conditional upon written consent (importantly in my mind) of the Head Lessor. What I consider to be more important is that at that time Bidwill had no assets, liabilities or bank account. It was simply a shell. Therefore the execution of the lease has no significance as such, in my view, except as another example of commercial pragmatism.
This conduct, in my view, is not determinative of an already existing agreement, but rather conduct which is merely a necessary prelude to one coming into existence.
There is no doubt further substantial funds had been contributed to the project by the Tonkin interests, in particular a company called Tonkin Properties. These monies were paid directly to the relevant builder or supermarket tenant. SRD obviously, quite independently of any agreement with the plaintiffs, had a real commercial interest in making the centre operational and hence revenue producing.
It was the Tonkin interests which had the capital to inject into the shopping centre. The plaintiffs had no tangible means of doing so. The Tonkin interests would only recoup their investment if the shopping centre was up and running with the possibility of a sale of the lease in the future.
During this whole period (after 20 August 2014 to November 2014) the various relevant communications in my view portray Mr Weldon, again unsurprisingly, as being concerned to have the agreements executed. SRD, of course, had at least the comfort of a mortgage over the head lease. On the other hand, I consider, Mr Weldon and Mr Danckert were looking for a way out of their predicament.
Mr Ralph Tonkin was devoting all his time and energy to the detail of the supermarket lease, the fitout of the supermarket, and the possible sub-lease to other tenants.
In so far as subsequent conduct in the relevant sense is relied upon as corroborating the existence of a binding contract, I am unable to identify any which would in reality qualify objectively as such. The conduct of the parties, it seems to me, at all relevant times, whilst confirming an agreement in principle on certain matters (eg. a joint venture on a 75:25 basis) and an expectation or ambition to enter binding legal relations, continued throughout the whole of 2014, to do no more than evince an intention not to consummate any agreement and hence not to become legally bound until formal agreements embodying all terms and conditions had been agreed upon and executed accordingly. Mr Weldon voiced this very expectation as late as 1 December 2014, in his email to Mr Ralph Tonkin and set out above at [100].
By late November the Tonkin interests had in any event decided not to proceed with the joint venture. It was clear by then that Mr Ralph Tonkin did not want to do business with Mr Danckert. Mr Weldon’s later assertions about the existence of a legally binding arrangement are self-serving, but in any event in my view of no weight whatsoever.

Estoppel and False and Misleading Conduct

I do not consider on the facts of this case it was reasonable for Mr Weldon to assume there was a binding agreement in place. He was drawing up documents for himself and others to sign and at all times he knew they had not been signed. He was instrumental in shaping the precise terms and conditions he wanted everyone to commit to, and he was the one who placed emphasis and important on execution as a significant event.
With Mr Weldon setting the terms and conditions (for the most part), especially providing for execution to be the triggering event for a number of the releases, I am not satisfied anything said by Mr Ralph Tonkin was relied upon by Mr Weldon to conclude that there was a binding agreement in place. He was solely responsible for setting the relevant ground rules, namely a binding agreement only upon execution of the relevant documents.
Mr Danckert, if he relied upon anyone at all, relied on Mr Weldon or separate lawyers he seemingly retained at the end of 2014.
This analysis in my view disposes of both the estoppel and misleading and deceptive conduct claims.

Cross Claim

The cross claim is particularised against Carlisle only. In the absence of a binding agreement which would include a release then the debt is outstanding. In my view the cross claim should succeed and I would propose to enter judgment on the cross claim accordingly.

Conclusion

The plaintiffs have been unsuccessful and I would therefore dismiss the proceedings.
The defendants succeeded on their cross claim.
Accordingly, I would direct the parties to prepare short minutes reflecting my reasons, and I will make orders accordingly.
If the parties are unable to agree on costs they should make arrangements with my associate to have the matter relisted so argument can be heard accordingly.

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Decision last updated: 23 October 2015

Medium Neutral Citation:	Wayne Danckert v Ralph Erwin Tonkin [2015] NSWSC 1570
Hearing dates:	31 August 2015, 1, 2 September 2015 (hearing), 9, 11, 14 September 2015 (final written submissions)
Date of orders:	23 October 2015
Decision date:	23 October 2015
Before:	Sackar J
Decision:	See [308]-[311]
Catchwords:	CONTRACTS – existence of a binding agreement – intention of parties to be bound – language of proposal – context of the agreement – history of formal documentation – subsequent conduct of parties EQUITY – estoppel – whether representations made – whether representations relied upon – reasonableness of reliance – whether representations relied upon to the detriment of a party CONSUMER LAW – misleading or deceptive conduct – whether representations were made – whether representations were misleading or deceptive
Legislation Cited:	Competition and Consumer Act 2010 (Cth) Corporations Act 2001 (Cth) Real Property Act 1900 (NSW)
Cases Cited:	Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 Delaforce v Simpson-Cook (2010) 78 NSWLR 483 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Fox v Percy (2003) 214 CLR 118 Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 Jones v Sutherland Shire Council [1979] 2 NSWLR 206 Labracon Pty Limited v Cuturich [2013] NSWSC 97 Masters v Cameron (1954) 91 CLR 353 Moratic Pty Lt v Gordon [2007] NSWSC 5 Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 Sze Tu v Lowe [2014] NSWCA 462 Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Texts Cited:	N/A
Category:	Principal judgment
Parties:	First plaintiff: Wayne Danckert Second plaintiff: Philip John Weldon Third plaintiff: Carlisle Plaza Pty Limited (ACN 128 002 577) First defendant: Ralph Erwin Tonkin Second defendant: SRD Tonkin Pty Ltd (ACN 008 207 225) Third defendant: Tonkin Pty Ltd (ACN 072 875 613)
Representation:	Counsel: R Harper SC and J Darvall – Plaintiffs K Smark SC – Defendants Solicitors: Garland Hawthorn Brahe Solicitors – Plaintiffs Francom Legal – Defendants
File Number(s):	2015/88485
Publication restriction:	N/A