Geemaz Management Pty Ltd v Geelong Motors
[2013] VSC 571
•24 October 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
No. S CI 2013 04089
| GEEMAZ MANAGEMENT PTY LTD (ACN 124 101 015) | Plaintiff |
| v | |
| GEELONG MOTORS PTY LTD (ACN 124 009 141) | Defendant |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 and 10 October (Geelong), 14 October 2013 (Melbourne) | |
DATE OF JUDGMENT: | 24 October 2013 | |
CASE MAY BE CITED AS: | Geemaz Management Pty Ltd v Geelong Motors Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 571 | |
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CONTRACT – Terms of commercial agreement recorded in annotated email print out signed by the parties – Whether parties signing the email print out intended to conclude an enforceable bargain – Masters v Cameron (1954) 91 CLR 353; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 388; Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Australian Communications Corp Pty Ltd v Coles Group Ltd [2011] VSC 490; and Ryldedar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M.A. Robins SC with Mr D.F. McAloon | Coulter Roache Lawyers |
| For the Defendant | Mr R. Heath | Arnold Bloch Leibler |
HIS HONOUR:
Introduction
This matter came to the Commercial Court for first directions on 27 September 2013. Having regard to the nature of the dispute and the relief sought, which included a claim for specific performance of an agreement for the sale of a motor dealership business in Geelong, arrangements were made for an early trial of the critical issues in dispute.
The parties assisted in expediting the matter by agreeing that the Court should determine a preliminary question in this proceeding, namely: “Was there a binding concluded agreement in the terms pleaded in paragraphs 3 and 4 of the Amended Statement of Claim?”
The plaintiff submits that the answer to the preliminary question is “Yes”, and the defendant submits that the answer is “No”.
Background
The plaintiff is a company within the Blood Motor Group, which is a group that operates a number of car dealership franchises in Geelong.
The defendant owns and operates two car dealership franchises from premises located on the corner of the Princes Highway and Barwon Heads Road, Geelong. These are:
(a)a Mercedez Benz dealership; and
(b)a Chrysler Jeep Dodge dealership, trading as “Geelong City Chrysler Jeep Dodge” which sells and services new, demonstrator and pre-owned Chrysler Jeep Dodge Vehicles.
The business which is the subject of the agreement sought to be established in terms of the preliminary question is this Chrysler Jeep Dodge dealership which is operated by the defendant.
In early March 2013, the plaintiff was contacted by employees of Chrysler Australia Pty Ltd (trading as Fiat Chrysler Group) (“the Franchisor”) to ascertain whether the plaintiff would be interested in taking on the Fiat Chrysler Jeep Dodge franchise for the Geelong region under which the defendant currently operates his Chrysler Jeep Dodge dealership (“the Franchise”). The business the subject of the agreement to which the preliminary question is addressed is the business which operates under the Franchise.
Pleadings
The plaintiff’s Amended Statement of Claim pleads that a binding agreement was concluded either on 4 June 2013 or, alternatively, on 13 June 2013. Paragraph 3 of the Amended Statement of Claim pleads the alleged agreement, as follows:
“On 4 June 2013, or alternatively, 13 June 2013, the plaintiff and the defendant entered into an agreement (‘the Agreement’) to which the defendant agreed to sell, and the plaintiff agreed to purchase, the Business.
PARTICULARS
The Agreement was partly in writing and partly oral. The written part of the Agreement comprised a document that was initialled and signed by Sean Blood (on behalf the plaintiff) and was signed by Jennett (on behalf of the defendant) (‘the Signed Terms’) in each other’s presence during a meeting attended by Sean Blood and Jennett at the offices of the defendant on 4 June 2013 (‘the 4 June Meeting’). The Signed Terms is in the possession of the plaintiff’s solicitors and may be inspected by appointment. The oral part of the Agreement consisted of discussions between Sean Blood and Jennett at the 4 June Meeting. On 13 June 2013, Sean Blood, Brian Blood and Damon Muir met with Jennett. In Jennett’s presence a deposit cheque in the sum of $20,000 was written, signed and given to Jennett. Jennett asked if a receipt was required. Sean Blood said no. The parties then exchanged congratulations.”
For convenience, the abbreviations which appear in paragraph 3 of the Amended Statement of Claim are used in the reasons which follow. In terms of definitions, it should also be noted that paragraph 2(c) of the Amended Statement of Claim defines the expression “the Business” in terms of the Chrysler Jeep Dodge dealership in Geelong, trading as “Geelong City Chrysler Jeep Dodge”, and selling and servicing new, demonstrator and pre-owned Chrysler Jeep Dodge vehicles. Again, that descriptor is also applied in these reasons.
Paragraph 4 of the Amended Statement of Claim pleads the alleged terms of the Agreement, matters which are referred to in further detail below.
In terms of the pleadings, the defendant submits that the plaintiff’s claim, as pleaded, is that the terms of the Agreement stem exclusively from events on 4 June 2013, namely the document signed by each of Mr Sean Blood and Mr Tony Jennett on 4 June 2013, and discussions between those individuals on 4 June 2013 (“the 4 June meeting”) and the conduct at a meeting on 13 June 2013 (“the 13 June meeting”). The defendant further submits that the plaintiff’s claim, as pleaded, is that the terms of the Agreement stems exclusively from the 4 June printout and the discussions at the 4 June meeting, and that it, the plaintiff, does not contend that the terms of the Agreement are to be located in any other source, including dealings subsequent to the meeting on 4 June 2013.
Further, the defendant submits that the terms of the Agreement as alleged by the plaintiff, as set out in paragraph 4 of the Amended Statement of Claim, do not contain any pleaded allegation as to the essentiality or otherwise of any such term. On that basis, it is submitted that the plaintiff’s case stands or falls on the proposition that all of the alleged terms were agreed, no “halfway house or fallback position” having been pleaded.[1]
[1]Referring to Australian Communications Corporation Pty Ltd v Coles Group Ltd [2011] VSC 490 at [32] (Cavanough J).
In relation to the document signed by Tony Jennett and Sean Blood on 4 June 2013 (“the 4 June printout”) as amended, signed and dated 4 June 2013, the defendant pleads in its Defence, as follows:
“3(b) it says further that the 4 June document –
(i)was expressed on its face to be an outline of certain relevant terms which might be able to be progressed to the next stage;
(ii) was stated by the defendant’s Mr Anthony Jennett to be –
(A)subject to further review and negotiation by the parties,
(B)subject to legal review and drafting,
(C)conditional on obtaining Fiat Chrysler’s approval,
if agreement in relation to all matters could be reached;
(iii)was, in any event, superseded by a further document entitled ‘Heads of Agreement’ sent under cover of an email from the plaintiff’s Mr Sean Blood to Mr Jennett following their meeting on 4 June 2013, which further document was not signed and was not otherwise the subject of agreement between the parties.”
Having regard to the importance of the 4 June printout and its treatment by Sean Blood and Tony Jennett, it is helpful to say something further at the outset as to its provenance and contents. In terms of its provenance, it is necessary to appreciate that Tony Jennett was, prior to the 4 June meeting, having discussions with Mr Brett Fitzpatrick for the sale of the Business to Peter Stevens Motors Pty Ltd of Ballarat. That this process was occurring is not controversial in these proceedings but, nevertheless, is illuminated in some detail by a chain of emails between Tony Jennett and Brett Fitzpatrick between 15 May and 3 June 2013.[2] These emails are particularly important in relation to the 4 June printout and the 4 June Meeting because the evidence is that Tony Jennett took a copy of his email to Brett Fitzpatrick of 15 May 2013[3] and cut and pasted from the second line of the main text of that email to the last line of that main text, which material was reproduced as the 4 June printout.
[2]Court Book 21-23.
[3]Court Book 22-23.
The 4 June printout, the product of the process just described, is in the following terms, with the deletions and additions made at the 4 June Meeting, marked up (noting the additions are italicised and deletions struck out in the text below).[4] The changes made to the 4 June printout at the 4 June Meeting were made by hand, the evidence being that, apart from Tony Jennett’s signature, the changes were made by Sean Blood:
[4]Court Book 24.
“Having reviewed your proposal and discussed with advisors, I would like to respond with the following:
New Cars/Used Cars
As per your proposal. All new stock and agreed value on any demonstrator or used vehicle.
Parts Stock
An alternate valuation methodology is proposed.
<12 months parts stock at purchase price
12 months – 24 months stock at 50% of purchase price
>24 month parts stock at nil.
Special Tools
We have a schedule of tools and diagnostic equipment for CJD.
Purchase at agreed value. We would need to provide you with a copy of this list when appropriate. On independent valuation.
Goodwill
Based on advice and turnover, your goodwill offer appears a bit light.$300,000-00.
I am not being delusional or unrealistic in this area, however we would be seeking a higher figure.Records
I realise this area is an ‘inexact’ one, however we would also provide the database which is approaching 1,500 names.
We are also holding close to 20 forward orders which are predominantly for update Grand Cherokees which would also be transferred to you, subject to the timing of any sale/transfer.
These orders are all for delivery in the second half of 2013, and we are still writing orders.
All Sales & Service Customer for CJD.
Staff
I have not briefed our sales guys as yet as things have not progressed to a level where there is a firm offer to consider.
Not sure of your views here, but you may wish to speak with either or both of our CJD guys at an appropriate time.
Also, we have a CJD Diagnostic Specialist/Master Tech who you may also want to speak with.
Apart from those guys we don’t really have any other dedicated CJD people on our team.
Transfer of leave and entitlements may become relevant if any of our guys were to transfer across. Details can be provided if and when required.
Let me know if there are any other details which you may require.
Thanks again for your first outline, and hopefully we can agree on enough to progress to the next stage.
4/06/2013
[Sean Blood (signed)] [Tony Jennett (signed)]
4/6/13
- Names to transfer.
-“
As is clear from the pleadings and the plaintiff’s and defendant’s cases as argued, the issues raised are very much an application of the principles enunciated in Masters v Cameron.[5] The critical and oft cited passage from the judgment of the High Court in Masters v Cameron is as follows:[6]
“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.”
[5](1954) 91 CLR 353 at 360.
[6](1954) 91 CLR 353 at 360 (Dixon CJ and McTiernan and Kitto JJ).
Reference has also been made to the, so-called, fourth class of case additional to the three referred to in Masters v Cameron, to which reference was made, in Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd.[7] In relation to the fourth category, Sackville AJA said in Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd:[8]
[7][2009] NSWCA 386 at [105] (Sackville AJA), with reference to the statement of McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628.
[8][2009] NSWCA 386 at [105] (Sackville AJA).
“105Mr Jackman submitted that the finding that Mr Hodgkinson had said at the meeting that he wanted Mr Baxter to draft an agreement properly was not inconsistent with the parties intending to conclude a binding agreement at that time. Although the appellants did not address the issue in their written submissions, Mr Jackman said that the case fell within the so-called fourth category of cases involving an agreement which contemplates that the matter will be dealt with by a formal contract: cf Masters v Cameron [1954] HCA 72; 91 CLR 353, at 360, per curiam; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd(1986) 40 NSWLR 622, at 628, per McLelland J. That is, the parties intended to be bound immediately by the terms agreed, but expected to make a further contract in substitution for the first, containing additional terms. Thus, notwithstanding Mr Hodgkinson’s statement at the meeting and the contemplation that there would be a formal contract, the parties should be taken as having intended to enter into an immediately binding agreement.”
The reference to the judgment of McLelland J is, critically, to the following passage:[9]
[9](1986) 40 NSWLR 622 at 628.
“’… legally binding agreement in principle …’
This phrase, occurring as it does in the letter of 21 March 1986, and tacitly adopted by the letter of 25 March 1986, was clearly part of the consensus. It was submitted on behalf of the defendants that it signified that although agreement had been reached on some terms, agreement had yet to be reached on others, from which it followed (1) that regarded as an ‘agreement to agree’ on those other terms, the consensus was incapable of forming a binding contract and (2) that the parties could not have intended to be legally bound prior to agreement being reached on those other terms.
So far as the first of these matters is concerned, I do not accept that the words ‘agreement in principle’ in the present context import the idea that there must necessarily be agreement on further terms to be embodied in the ‘formal contract’ provided for in the consensus, as opposed to an expectation that there would or might be agreement on further terms to be so embodied. In other words, I do not consider that the phrase in question should be construed as an ‘agreement to agree’ on further terms, but rather as an indication, at the most, of an expectation of agreement on further terms.
So far as the second matter is concerned, I do not consider that any implication of an intention not to be legally bound which might otherwise be suggested by the words ‘agreement in principle’ can prevail over the clear import of the words ‘legally binding’. The intention of the parties to be legally bound by their consensus is sufficiently clearly expressed to take the case out of the third class of cases referred to in Masters v Cameron 91 CLR 353 at 360-2, i.e. ‘cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own’. There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ and Rich and Dixon JJ in Sinclair Scott & Co v Naughton 43 CLR 310 (at 317), namely, ‘one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.’ Their Honours refer to the speech of Lord Loreburn in Love & Stewart v S Instone & Co (1917) 33 TLR 475 at 476 where his Lordship said that:
‘It was quite lawful to make a bargain containing certain terms with which one was content, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, nonetheless that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.’
It seems to me that subject to the matters yet to be considered the present case falls into this fourth class as described in Sinclair Scott & Co. v Naughton.”
Having painted the legal landscape against which the particular circumstances of the present proceedings are to be considered, I turn now to those matters with a view to further consideration of relevant principles in light of the factual findings.
Dealings between the parties leading up to 4 June 2013
During the period from March to late May 2013, the plaintiff attended meetings with representatives of the Franchisor. The first of these meetings was a meeting between Sean Blood and Mr Mark Bradshaw and Mr Mark Tavcar. There were further meetings during May 2013 where Sean Blood and Mr Brian Blood met Mr Mark Dunphy of the Franchisor, both in Geelong and in Melbourne. There was also an email, sent on 13 March 2013, by Mark Bradshaw to Sean Blood which included the following statement:
“We currently have some issues with our current dealer, which we are working through. If you wish to take your interest further, we would be willing to introduce you to the dealer on the proviso you outlined your representation plans to us if a buy/sell agreement was negotiated successfully.”[10]
[10]Court Book 1.
Other information was also obtained by the plaintiff from the Franchisor and also from Tony Jennett in relation to the performance of the Business and the Franchisor’s dealer programs.[11]
[11]Court Book 10 and 11.
Sean Blood and Tony Jennett met on 16 April 2013 to discuss the terms upon which the plaintiff might acquire the Business. There was a discussion about the goodwill sale price and “the other parts of the future agreement”.[12] As observed by the defendant, Sean Blood did not, however, shed any light on this discussion in relation to the other parts of the future agreement.
[12]Transcript, 64 and 65.
By early June 2013, the plaintiff had decided that it wished to make an offer to acquire the Business. As a result, Sean Blood and Brian Blood attended a meeting with Tony Jennett at the defendant’s premises on 3 June 2013. There was a discussion at this meeting about the value of the goodwill of the business. Tony Jennett said that his desired amount for the goodwill of the Business was in the range of $250,000 to $300,000.[13] In response, Sean Blood offered to pay $250,000 for the goodwill of the Business. This offer was not then accepted by Tony Jennett, who said that he needed to contact the other prospective purchaser of the Business to ascertain his position. Sean Blood’s evidence is that there was also discussion at the meeting “about employees and the rest of the issues” and he also said that they “spoke about the other parts of the deal”.[14] As appears, however, from Sean Blood’s evidence-in-chief, matters were discussed, rather than resolved, and it was anticipated that there would be further discussions.[15]
[13]Transcript, 70.23-70.29 (S. Blood); 185.27-186.1 (Jennett).
[14]Transcript, 70.28-71.31.
[15]Sean Blood’s evidence in this respect was (transcript pp 70.30-71.13):
“… I spoke about the other parts of the deal and then I offered $250,000 to Tony. Tony’s response was - it was something along the lines that it was good, but he was requesting a bit more, and then he disclosed that it was between the 250-300 range that he was wanting. Tony’s comment was that he wanted to go back to the other party and get their final offer, to see where they were at, because he said that he was a fair way down the track in negotiation with the other party. I then said to Tony, ‘Tony, what will it take to do a deal?’ Tony’s response was that he wanted to go back to the other party to see where they were at, so I left it at that. I said, ‘Tony, we’ll be back’ - and I can’t remember whether I told him I rung the next morning, to go back the next day.”
Sean Blood’s evidence of the discussions at this meeting do not, as submitted by the defendant, shed light on the detail of these discussions and Tony Jennett’s evidence, though not inconsistent, does not take these matters into any detail. Brian Blood’s evidence in relation to these discussions was also pitched at a very high level and does not shed light on the detail of these discussions.[16]
[16]Transcript, 150.
Sean Blood’s evidence is that, prior to the 4 June 2013 meeting, he prepared a file note recording his list of “essential terms” for the proposed agreement for the purchase of the Business.[17] Sean Blood could not say, however, whether the date of 1 August 2013 written in the top right hand corner of this note or the words in a hand drawn box under that date – “subject for to [sic] approval from Fiat Chrysler Group. Aust.” – was written on the note prior to or subsequent to this meeting. The point was also made by the defendant that this so called record of “essential terms” does not include anything regarding the price or prices at which the plaintiff would acquire new vehicles, used vehicles or demonstrator vehicles. It submitted that terms in respect of price are essential to business in asset sale transactions.[18] In this vein the defendant submitted that as there was evidence that the defendant then held approximately fifteen demonstration vehicles, which were assets the subject of the proposed sale transaction, the acquisition cost of the vehicles – hence the effect on the sale price – would not have been insubstantial. The defendant makes the further point that the so called record of “essential terms” insofar as it refers to staff does not refer to any obligations, nor is it couched in promissory language. Rather, the reference to staff is, in this note, merely: “Ability to speak to two technicians and two sales staff”. It was submitted that this cannot be described as a contractual term, let alone an “essential term”. There is no evidence that Sean Blood’s so called record of “essential terms” was provided to Tony Jennett at or before the 4 June 2013 meeting, or subsequently. Consequently, I am of the view that this note would ordinarily be viewed merely as an aide memoire prepared by Sean Blood for his own purposes and so be treated, in terms of the law with respect to the formation of contracts and the interpretation of their provisions, as being no more than a record of his subjective intent for the purpose of contractual negotiations between the plaintiff and the defendant.[19] Nevertheless, in a commercial context it is of more significance, as is discussed further below.[20]
[17]Court Book 112.
[18]Referring to ANZ Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 and the other authorities referred to in Australian Communications Corp Pty Ltd v Coles Group Ltd [2011] VSC 490, footnote 26.
[19]See Ermogenous v Greek Orthodox Community (2002) 209 CLR 95 at 105-6 (Gaudron, McHugh, Hayne and Callinan JJ).
[20]See below, paragraph 57.
4 June 2013 meeting
Sean Blood met with Tony Jennett at the defendant’s premises on 4 June 2013, the day after the discussions to which reference has been made, namely on 3 June 2013.
The focus of the meeting was the 4 June printout which Tony Jennett, as described previously, had prepared by “cutting and pasting” the substance of the email dated 15 May 2013 which he had sent to Brett Fitzpatrick.[21] Tony Jennett printed off this document as a single page and both he and Sean Blood sat around the conference table in Tony Jennett’s office to consider its contents. Tony Jennett’s evidence is that he said to Sean Blood, “Can we work our way through this document and establish what we can agree on?”[22] Tony Jennett said that Sean Blood said, “Yes”, and that they then proceeded to work through the various categories listed in the 4 June printout. According to Tony Jennett, the meeting took 20 minutes or half an hour, including some preliminary conversation, before the document discussed, the 4 June printout, was printed. Tony Jennett’s evidence is that in the course of these preliminaries, he recalled some discussion about the status of the negotiations with the other party, Brett Fitzpatrick, and that he recalled saying he was, “Still waiting to hear back from them”.[23]
[21]See above, paragraph 13.
[22]Transcript, 188.1 and 188.2.
[23]Transcript, 186.31-187.1.
The discussions, when they turned to the 4 June printout, involved Sean Blood and Tony Jennett reading the document line by line, discussing its contents, and deciding whether or not they agreed or disagreed with its terms or, alternatively, agreed to modify them. The modifications to the 4 June printout were written on the document Tony Jennett and Sean Blood were discussing, by the latter and, apparently, as the discussion progressed. These modifications are shown in the contents of the 4 June printout as set out above.[24]
[24]See above, paragraph 14.
The line by line consideration of the contents of the 4 June printout is clear from Tony Jennett’s evidence, particularly his evidence with respect to the earlier parts of that document:[25]
[25]Transcript, 188.2-189.19.
“We then proceeded to work through those categories. The first heading, New Vehicles, Used Vehicles, Sean said, ‘We can agree on that.’
Just stop there. Was there any talk before Sean said what you’ve just explained, any talk about that heading and the text under it before Sean said, ‘We can agree on that’?---Not that I can recall. Sean read the wording that was there and said, ‘Yes, we can agree on that.’
Alright. What was the next thing that was discussed, as best you can recall, Mr Jennett?---Parts stock.
And how did that discussion in relation to that bit of the document unfold?
---Again, I believe Sean read the terms that were outlined in that document and said, ‘Yes, we can agree on that.’No other discussions about that part of the document?---Not that I can recall.
Alright. What was the next thing discussed?---The next category, Special Tools.
Who raised that as the next category?---Probably me, because it was the next one to fall.
And what did you say about that topic, if anything?---Sean read the words and then sought to add the condition that the pricing for any special tools would be established by independent valuation.
Let’s just pause there. Let’s do it step by step. Was there a discussion about that? It appears on the document. Who wrote it on the document?---That’s not my handwriting, that's Sean’s.
And before it was written on, you observed him write it on, did you?---Yes.
Before it was written on, what discussions, if any, took place in respect of that topic - that is the topic the subject of the handwritten annotation?---I believe it was a comment by Sean, ‘Can we establish the value of the tools based on an independent valuation?’ I said, ‘Yes.’
Was anything else said about that topic, special Tools, after that?---Not that I can recall.
It is tedious, I know, and I apologise for that, and to His Honour, but would you then tell His Honour what happened next in the conversation?---We moved on to the category of goodwill and Sean said, ‘If we offer $300,000, can we agree on that?’ and I said, ‘Yes.’
What then happened?---That figure of $300,000 was added to that document and initialled.
Who made the changes to the document?---Sean.
Including the strikeouts?---Yes.
And was anything else said in respect of the topic goodwill? You’ll have to tell His Honour?---Not that I can recall.”
The fruits of the discussion as outlined by Tony Jennett are to be seen in the 4 June printout in terms of the addition to the “Special Tools” material, being the additional words “on independent valuation” and, with respect to “Goodwill”, the deletion of the three lines immediately under that heading and the addition of $300,000.00, together with Sean Blood’s initials. Though no modification was made to the material under the heading “New Cars/Used Cars”, the evidence is that Sean Blood said, “We can agree on that”, and then the discussion moved on. The evidence is that there were no used vehicles to be sold and that, according to Tony Jennett, there were only a small number of demonstrator vehicles to be sold, 15, as against 57 new vehicles. Having regard to the manner in which the parties treated the discussion of the “New Cars/Used Cars” topic in the 4 June printout in the context of a process whereby agreement, disagreement or modification was sought to be achieved, topic by topic, I am of the view that a fair inference on the evidence is that the parties did not regard the matter as being of significant importance and that, in any event, the fixing of prices of demonstrator and new vehicles would not be a matter of difficulty for such experienced motor vehicle dealers as Tony Jennett and Sean Blood. Additionally, the reference to pricing of “Special Tools” by reference to independent valuation, a matter added to the 4 June printout with respect to this subject head, is indicative of this position in that it shows that the parties turned their mind to pricing and indicates, in all probability, difficulty in pricing special tools as distinct from demonstrator and new vehicles.
As appears on the 4 June printout, a further heading was added with respect to “Records”, but the following text not changed, save for the addition of “All Sales & Service Customer for CJD”. In other words, all sales and service records for Fiat Chrysler sales and service customers were to be included.
The final topic in the 4 June printout is “Staff”. Sean Blood’s evidence is that Blood Motor Group employs around 250 staff and that it was of no consequence if Tony Jennett required some, all or none of the defendants’ four dedicated Fiat Chrysler staff to transfer as part of the sale. Tony Jennett agreed that Sean Blood made it plain to him that he was prepared to take all of the Fiat Chrysler staff who wanted to transfer if required.[26] It is, as submitted by the plaintiff, self-evident that the transfer of the employment of these people required discussion and agreement with them, as the 4 June printout indicates.
[26]Transcript, 240.27-240.29.
When Tony Jennett and Sean Blood had completed discussion of the topic “Staff”, it appears that their discussion and consideration of the 4 June printout concluded. Tony Jennett’s evidence in this respect was as follows:[27]
[27]Transcript, 193.3-240.29.
“And was there any other discussion about employees and staff?---I don’t believe so.
You said earlier that you worked through the contents of the document for discussion purposes. After Staff was dealt with, did you work through with Mr Blood the rest of the document?---No.
Was anything said about the last two paragraphs or sentences in the document?---No.
HIS HONOUR: You mean, ‘Let me know if there are any other details and thanks again’?
MR HEATH: That’s the one to which I was referring, Your Honour.
HIS HONOUR: Yes, I understand that.
MR HEATH: Is that right, Mr Jennett?---Yes.
Well, what happened then? You got to the end of Staff, no further discussions, what was the next event, that is viewed objectively, in this meeting, please tell His Honour?---After the discussions we’d had, I said to Sean, ‘We’ve gone through the document, we’ve established what we’ve agreed on. Can we agree on this?’
Who said that?---Me.
Yes. And did he respond?---He said, ‘Yes.’
What then happened?---I believe Sean signed the document and put a date next to it.
And?---And then passed the page over to me and I initialled and signed it as well.
Was there any discussion about the signing process or anything to do with signing?---No.”
Thus, in terms of actual discussion, the evidence is that there was no discussion of the last two sentences of the 2004 printout, namely:
“Let me know if there are any other details which you may require.
Thanks again for your first outline, and hopefully we can agree on enough to progress to the next stage”.
It might be said that these last two sentences are simply a carryover from the email from which the 4 June printout was derived and are, on the basis of the evidence, not to be regarded as of any significance in terms of any agreement which may flow from the 4 June printout and discussion of its contents. Nevertheless, the possible effect of these sentences, if regarded as “included” in the fruits of the 4 June discussions, are considered in the reasons which follow.[28]
[28]See below, paragraphs 47-50.
Following the signing of the 4 June printout, Tony Jennett and Sean Blood discussed a “target” completion date for the transfer of the business, namely, 1 August 2013. They also discussed the preparation of heads of agreement, though very briefly. In this respect, Tony Jennett’s evidence is:[29]
“After the document was signed, were there any further discussions at this meeting?---I said to Sean, ‘Okay, what happens next? Who’s responsible for doing up a heads of agreement?’ And Sean responded and said, ‘I’ll get one over to you.’
Having then mentioned the 1 August target date, Tony Jennett and Sean Blood shook hands. No mention was made by Tony Jennett at this meeting about needing advice or imposing any other condition on the 4 June printout as signed, such as being subject to the Franchisor’s approval.[30] Nevertheless, it was clearly understood by both parties that the arrangement would need to be approved by the Franchisor; in the sense that this is obviously necessary for a business dealing in its motor vehicles – but that the Franchisor’s approval was contemplated as being obtained by agreement or as a result of successful application of the Franchising Code of Conduct. Under clause 20(c) of that Code, the Franchisor’s consent could not be unreasonably withheld if the plaintiff sought its consent to the proposed transfer of the franchise.
[29]Transcript, 193.30-194.3.
[30]Transcript, 74 (S. Blood XN).
Effect of the signed 4 June printout
A matter which the plaintiff emphasised a number of times is the point that the sale of the Business is not, in the present circumstances, a complex transaction. However one might analyse the nature or extent of the essential terms in a transaction of this kind in circumstances like the present, I accept that this is a fair characterisation of the position, particular when one has regard to the terms of the various draft and final Heads of Agreement which are before the Court.[31]
[31]There was initially a one page draft Heads of Agreement which was signed by Sean Blood and Tony Jennett dated 4 June 2003: Court Book 24. A second draft Heads of Agreement dated 13 June 20013 was then prepared and unsigned with the plaintiff and defendant as the named parties: Court Book 49. There was also a draft Heads of Agreement between the defendant and Peter Stevens Motor Group Pty Ltd which was an attachment to email correspondence between Brett Fitzpatrick and Tony Jennett dated 17 and 18 July 2013: Court Book 86-93. A final and executed copy of the Heads of Agreement between the defendant and Peter Stevens Motors Pty Ltd which is undated: Court Book 125-9.
In terms of agreement, the plaintiff’s primary submission is that the events at the 4 June 2013 meeting, including the signing of the 4 June printout, constituted the entry into of a concluded and binding agreement pursuant to which the defendant agreed to sell and the plaintiff agreed to purchase the Business and which contains the terms set out in paragraph 4 of the Amended Statement of Claim, together with the oral aspects of those terms as pleaded.
It is clear that, for the purpose of determining whether the parties reached a binding agreement as claimed, the Court is to ascertain the objective intention of the parties. Thus, Campbell JA (with whom Mason P and Tobias JA agreed) said, in Ryldedar Pty Ltd v Euphoric Pty Ltd:[32]
“For the purpose of deciding whether a contract has been entered, or what construction it bears, the common intention that the court seeks to ascertain is what is sometimes called the ‘objective intention’ of the parties. That is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had, concerning the subject matter of the alleged contract: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912–913; 1 All ER 98 at 114–115; Taylor v Johnson (1983) 151 CLR 422 at 429; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549–550.”
[32](2007) 69 NSWLR 603 at 655.
It is also clear that it is not inimical of a binding agreement that the parties intend to embody their agreement in a formal or more formal document if their conduct, considered objectively, evidences an intention to be bound; as is the position in either the first or the second class of cases referred to in Masters v Cameron.[33] The agreement may also fall into the, so-called, fourth class of case additional to the three referred to in Masters v Cameron but, again, the common feature is an intention of the parties to be bound immediately by the terms agreed.[34]
[33](1954) 91 CLR 353 at 360-361; set out above, paragraph 15.
[34]See Aberdeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [105] (Sackville AJA), with reference to the statement of McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628; and see above, paragraph 16.
In GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd, McHugh JA (with whom Kirby P and Glass JA agreed) emphasised the central and critical question in the present circumstances with respect to the events of 4 June, namely, whether the parties had an intention to be bound immediately:[35]
“…the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: Godecke v Kirwan (1973) 129 CLR 629 at 638; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 332-334, 337. If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.”
[35](1986) 40 NSWLR 631 at 634.
Apart from the terms of the written document under consideration, there may be relevant circumstances surrounding the process of, to use a neutral term, endorsement of the written document in addition to more general surrounding circumstances. In the present case, the evidence is that at the conclusion of the 4 June Meeting, Sean Blood and Tony Jennett shook hands and the meeting finished.[36] Where parties shake hands following negotiations or discussions, it might be thought that a “deal” has been concluded and “obligations” entered into by the parties shaking hands; a position reflected in common parlance – “to shake on it”.[37] Nevertheless, common experience would also indicate that any “obligations” entered into may not necessarily be binding in the sense of contractual obligations but may, rather, be obligations as a matter of honour in circumstances where the parties did not intend to enter into legal relations. Naturally, it rather depends on the particular circumstances, as is indicated in the judgment of Byrne J in Agus v Sage[38] where his Honour considered whether an agreement had been reached by the parties during a meeting in a restaurant on 5 February 1997 which had been the subject of a handshake and recorded in a handwritten memorandum (on a paper serviette or placemat) which was signed by one of the parties on that date. As to these circumstances, and more generally, Byrne J said:[39]
“The parties must agree with sufficient certainty upon such terms as are, in the circumstances, legally necessary to constitute a contract. This means that, whatever the negotiators might have thought and, more importantly, whatever the reasonable bystander might infer as to their state of mind, the law will not find a contract exists unless it has been relevantly established that the essential and critical terms of the bargain have been agreed upon: Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32 at 67, per Ormiston J and the cases there cited. This is the burden which the plaintiffs must discharge: Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 177, per Tadgell J. This said, I approach my task with a strong disposition to give effect to the intentions and expectations of the negotiators who by their handshake signified that they had concluded a binding agreement. This means that I should strive to overcome any uncertainty in such a case: Hawthorn Football Club Ltd v Harding [1988] VR 49 at 55, per Tadgell J. It is necessary to observe, too, that at this level I am not concerned with the question whether the note or memorandum is sufficient; it is whether the parties agreed on all the necessary terms at their meeting in the restaurant on the evening of 5 February.” [emphasis added by the plaintiffs]
[36]Transcript, 194.18-194.19 (Jennett XN).
[37]See Oxford English Dictionary, “shake” v., sense 9.a(a).
[38](2003) VConvR ¶54-664.
[39](2003) VConvR ¶54-664 at [51].
In terms of the relevant surrounding circumstances, the plaintiff submitted that in the present case, they relevantly include the following:[40]
[40]Plaintiff’s Outline of Closing Submissions (13 October 2013), paragraphs 24 and 25.
“24.The ‘surrounding circumstances’ in the present case relevantly included the following as at 4 June 2013:
(a)the defendant was, to the knowledge of the plaintiff, in a position where it needed to sell the Business (including as a consequence of the position adopted by the Franchisor);[41]
[41]Sean Blood’s evidence was that Fiat’s representatives told him that “they were considering removing the franchise off Tony”: T61 L18-L21 (S Blood). Brian Blood’s evidence was that at the meeting on 3 June 2013, the substance of Jennett’s words was that he “needed to get out, he needed to sell”: T150 L17-L18 (B Blood).
(b)objectively speaking, the acquisition of the Business was a relatively simple transaction – no real estate was involved, no third party securities were involved, the number of staff to possibly transfer was only 4 and the only third party interest to be considered was that of the Franchisor whose rights and obligations in respect of such an assignment were governed by the Franchising Code of Conduct;[42]
[42]Brian Blood’s evidence was that, in terms of complexity of franchise acquisition transactions, the proposed acquisition of the Business was “very simple”: T150 L24-L27 (B Blood).
(c)the terms set out in the Outline Agreement had been prepared by the defendant and sent to the other prospective purchaser by way of conveying the matters that the defendant sought to have agreed if the Business was to be sold;
(d)the meeting on 4 June 2013 was preceded by the parties’ meeting on 16 April 2013 (at which the terms of the proposed sale of the Business were discussed) and the further meeting on 3 June 2013 (at which meeting, inter alia, an offer to pay $250,000 for the goodwill of the Business was made and rejected);[43]
[43]T71 L1-L13 (S Blood); T150 L1-L7 (B Blood); CB114; T238 L22 – T239 L20 (Jennett).
(e)the meeting on 4 June 2013 occurred after Mr Jennett had been given time to speak overnight with the other prospective purchaser to ‘get their final offer’ in light of the firm offer made by the plaintiff on 3 June 2013;[44]
[44]T71 L1-L13 (S Blood).
(f)no words of qualification or conditionality were expressed by Mr Jennett when he affixed his signature to the Outline Agreement after Sean Blood had signed and dated the document; and
(g)Mr Jennett’s acceptance of the deposit cheque on 13 June 2013 (which he retained until 22 July 2013) and his act in then congratulating the three directors of the Blood Motor Group and sealing the bargain with a handshake.[45]
[45]T252 L21-26 (Jennett); Brian Blood’s evidence was that those present “shook hands and said, basically, “Congratulations, well done” type scenario”: T152 L2-L13 (B Blood).
25. A reasonable person with knowledge of:
(a)these surrounding circumstances;
(b)the words and action of Sean Blood and Jennett at the 4 June meeting (as described above at paragraph 18), including the signing of the Outline Agreement; and
(c)the contents of the Outline Agreement (considered further below),
would conclude that the parties had entered into binding agreement on 4 June 2013. Alternatively no later than 13 June 2013.”
The defendant, on the other hand, contends that the relevant surrounding circumstances are indicative of lack of any final agreement and, it follows, lack of intention to be bound by the signed 4 June printout. The defendant also submits that the alleged process of agreement at the 4 June Meeting does not yield an agreement, even assuming one were reached, containing the terms as pleaded in paragraph 4 of the Amended Statement of Claim. I turn now to the matters in controversy between the parties in this respect.
In relation “New Cars/Used Cars”, it is submitted that the terms of the 4 June printout do not support the plaintiff’s pleading for the alleged term that “the plaintiff would purchase all of the defendant’s stock of new Chrysler Fiat vehicles for the amount that had been paid by the defendant for those vehicles”.[46] Further, it was submitted that there was no textual support for the alleged term in respect of the price for which the plaintiff was bound to acquire new CJD-branded vehicles from the defendant. It was also said that there was no allegation, or even suggestion that this term is located in any discussions between Sean Blood and Tony Jennett. Further, it is said that there is no evidence in relation to the meaning of the phrase “as per your proposal”, which appears under this subject head in the 4 June printout and, additionally, it is correct, as the defendant contends, that there is no evidence of any standard practice in relation to the valuation of new stock and any demonstrator or used vehicles. Nevertheless, having regard to the other factors considered in these reasons with respect to the signed 4 June printout, including the nature of the sale, the knowledge and experience of Tony Jennett and Sean Blood with respect to businesses of the kind being sold and the evidence as to the nature of the discussions with respect to new stock and demonstrator or used vehicles, I am of the opinion that the proper inference to be drawn is that agreement was reached in this respect. The fact that neither Tony Jennett nor Sean Blood thought it necessary to elaborate further on the means of calculating the value of new stock or any demonstrator or used vehicles is, in my view, merely indicative of the position that these values would be readily accessible and understood according to the usages of their industry; as they well understood from their knowledge and experience. Further support for this inference is, in my view, provided by the handwritten addition to the printed material under the “Special Tools” subject head, providing for “independent valuation”. In all the circumstances, it is a reasonable inference that special tools and diagnostic equipment would be more difficult to price. It follows that, having drawn this inference with respect to “New Cars/Used Cars”, this is not a case where there is no other means, standard, or machinery or a formula which would yield the value, hence price.[47] It follows that this is not a situation where the Court is, in effect, making a bargain for parties which they have not made[48] and neither is it a situation where there is lack of an essential term which would see the agreement fail for lack of completeness.[49]
[46]Amended Statement of Claim, paragraph 4(a).
[47]cf Hawthorn Football Club Ltd v Harding [1998] 49 at 55 (Tadgell J), referring to Booker Industries Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 605 (Gibbs CJ and Murphy and Wilson JJ).
[48]cf ASIC v Fortescue Metals Group Ltd (2011) 274 ALR 731 at [123] (Keane CJ).
[49]See Geebung Investments Pty Ltd v Varga Group Investments (NRH) Pty Ltd (1995) Aust Contract Reports ¶90-059 at p 90,328.
In relation to whether the term with respect to “New Cars/Used Cars” was or was not essential, the defendant submits that neither the subjective views of Sean Blood nor those of Tony Jennett can be considered on the basis that the search for contractual intention is not one “for the uncommunicated subjective motives or intentions of the parties”.[50] This is clearly an accurate statement of the law as expounded by the High Court, but, the issue does not arise for the reasons which I have indicated. Further, I observe that the evidence does not provide any basis for discerning unequivocally that some of the provisions of the 4 June printout or other matters discussed at the 4 June Meeting were more important than others, in the sense of being essential. Nevertheless, some guidance may be obtained from the evidence as to the way the parties treated the 4 June printout in terms of the evidence of their discussions at the 4 June Meeting and the modifications they made to the 4 June printout. It is not, however, necessary to take this matter further for the reasons I have indicated in relation to the various subject matters discussed, though I do touch upon the matter again in relation to the subject matter of “Staff”, as discussed below.
[50]See Ermogenous v Greek Orthodox Community (2002) 209 CLR 95 at 105-106 (Gaudron, McHugh, Hayne and Callinan JJ).
In relation to the subject “Records”, the defendant submits that the text under this heading in the 4 June printout refers to a database transfer, but does not support the written term pleaded in paragraph 4(f) of the Amended Statement of Claim. The term as pleaded is that:
“The defendant would transfer its database of Chrysler Fiat customer records (including sales and service records) to the plaintiff and will take all reasonable steps to ensure that Chrysler Fiat customers would, in the period following the transfer of the Business, have their service requirements met by the plaintiff”.
Although I accept that some additional elements offered in paragraph 4(f) of the plaintiff’s pleadings are not spelt out in the words used in the 4 June printout, these elements do, in my view, merely reflect a fair inference from the words which are used in that document in all the circumstances of the 4 June Meeting. Nevertheless, the words which are used with respect to “Records” in the 4 June printout do, in my view, provide sufficient basis for agreement in any event.
In relation to the subject of forward orders, the defendant submits that the relevant terms of the 4 June printout do not support the term pleaded in paragraph 4(g) of the plaintiff’s pleading. First, it is said that the defendant refers to this phrase: “subject to the timing of any sale/transfer”. It is said by the defendant that this phrase connotes a future agreement to sell and a future transfer under any such sale agreement, and that the use of the word “any” undermines the existence of contractual intention to sell as under the agreement reflected in the 4 June printout. Secondly, it is submitted that contrary to the plaintiff’s case, the agreement does not include a term identifying the time of the transfer of the business (a matter which is considered further in the reasons which follow). The elements of futurity which the defendant identifies and seeks to stress in relation to the subject of forward orders is explicable on the basis of the provenance of the 4 June printout. In any event, in my opinion, in the context of the language of this document, read in light of the discussions between Tony Jennett and Sean Blood at the 4 June Meeting, I am of the view that this is a very artificial approach. It does not have regard to the relevant surrounding circumstances or to the authorities which indicate that the Court should approach the language in a document such as the 4 June printout insofar as it contains terms of a commercial agreement in light of the relevant circumstances and with a view to giving business efficacy to the provisions.[51]
[51]See below, paragraphs 61-62.
The defendant submits that the material contained in the 4 June printout with respect to the subject heading “Staff’ does not support the term pleaded in paragraph 4(h) of the Amended Statement of Claim. The plaintiff’s pleading in this respect is that:
“The defendant would assist with the transfer to the plaintiff of such of those employees of the defendant involved in the Business as were required by the plaintiff, to be transferred on such terms as were agreed between the plaintiff and those employees”.
It is true that the language of the 4 June printout with respect to the subject of “Staff” is not cast in the language of obligation, but again, I am of the opinion that this criticism both ignores the provenance of the document, relevant circumstances and the authorities with respect to construction to give business efficacy.[52] It is quite clear, as the plaintiff submits, that it would be necessary, following any agreement for the sale of the Business for the purchaser, to discuss with existing staff their plans and intentions following the sale. Additionally, it is not, in my view, necessary to cross the line into subjective intention to have regard to Sean Blood’s evidence that his existing motor dealership business or businesses is well staffed and that he is not in need of any further staff, save that it would be advantageous and desirable to have a technician, whether described as a “CJD Diagnostic Specialist/Master Tech”, to use the words of the 4 June printout, or, as he said, someone familiar with the Fiat Chrysler vehicles. In my opinion, and with due respect to Sean Blood, I think this is simply commonsense and it is a matter which should be treated as a relevant circumstance, objective and not subjective. Consequently, I am of the opinion that the plaintiff’s pleading with respect to the matter of “Staff” is a fair statement of the effect of the 4 June printout and the agreement reached in this respect.
[52]See below, paragraphs 61-62.
I turn now to the last two sentences of the 4 June printout. Reference has already been made to these sentences, which were, on the evidence, not the subject of any discussion between Tony Jennett and Sean Blood on 4 June but were, nevertheless, left in the signed document unaltered.[53]
[53]See below, paragraph 31.
On one view, it might be said that these two sentences were never adopted by Tony Jennett and Sean Blood, in spite of their signing the 4 June printout and, consequently, they are simply to be disregarded. In my opinion, this would be an artificial approach, because although they were not discussed, it is reasonable to infer from the evidence that they were read and that both Tony Jennett and Sean Blood were aware that they were contained in the document as signed. Having regard to the fact that parts of the document were crossed out, it would, of course, have been open to them to cross these sentences out. For these reasons, I am of the view that they should be treated as part of the signed 4 June printout for present purposes and, consequently, it is necessary to examine their effect, if any.
In relation to the first sentence: “Let me know if there are any other details which you may require”, I am of the opinion that this is entirely consistent with an intention of the parties that the signed 4 June printout and other matters agreed at the 4 June Meeting should constitute a binding agreement and one which would then be presently enforceable. One can think of many situations where an elaborate and formal agreement has been entered into where it was contemplated, expressly or impliedly, that further information would be provided by one party to the other, either as a matter of obligation or on request.
In relation to the second sentence: “Thanks again for your first outline, and hopefully we can agree on enough to progress to the next stage”, I am of the view that this is also quite consistent with an intention that the signed 4 June printout and other matters agreed at the 4 June Meeting would constitute a binding and presently enforceable agreement. The language needs to be read having regard to the provenance of the 4 June document arising, as it did, from Tony Jennett’s negotiations with Brett Fitzpatrick and it being the product of cutting and pasting from an email between those individuals.[54] Nevertheless, even looking at the words as they stand, I am of the opinion that the second sentence is quite consistent with a situation where there is an intention to be immediately bound, but at the same time it is proposed to have the terms restated in a form which would be fuller and more formal.
[54]See above, paragraph 13.
As the defendant submits, the 4 June printout does not refer to any completion date. The evidence does establish, however, that after the 4 June printout was signed, Tony Jennett and Sean Blood discussed a “target date” for the parties to “work towards” as being 1 August 2013. There is also the reference to that date in the aide memoire that Sean Blood says in his evidence that he took to the 4 June meeting. However, as indicated previously, this aide memoire would ordinarily be treated as merely evidence of the subjective intent of Sean Blood in the negotiation process; though it has more significance in a commercial context.[55] Its significance in the latter respect does not, however, make it of any significance with respect to the “target date” or the Franchisor’s approval. More specifically, the defendant submits that there was no basis for the plaintiff’s pleading with respect to the completion date. Paragraph 4(i) of the Amended Statement of Claim pleads: “The parties will take all reasonable steps to complete the transfer of the Business from the defendant to the plaintiff by 1 August 2013”. In my opinion, it is a reasonable inference, having regard to the contents of the signed 4 June printout and other matters discussed at the 4 June Meeting, that the parties would take all reasonable steps to complete the transfer as soon as possible, having regard to the need to obtain the approval of Fiat Chrysler, the Franchisor.[56] In relation to this approval, the defendant contends that, as there was no discussion of the need for such approval at the 4 June Meeting and as there is no reference to it in the 4 June printout, there is no basis for the plaintiff’s pleading that it was a term of the agreement that “the defendant would notify Fiat Chrysler (the franchisor of Chrysler Jeep Dodge franchise operated by the Business) of the Agreement”.[57] The evidence relied upon by the plaintiff in this respect was the discussion between Tony Jennett and Sean Blood at the 4 June Meeting following the signing of the 4 June printout. In my opinion, the evidence supports the claim that the completion date was agreed, as a target date of 1 August 2013, and that the defendant would inform the Franchisor, as alleged. Even if it were a term of the agreement that the approval of Fiat Chrysler, the Franchisor, was required, it would not, in my view, affect the binding and presently enforceable character of the agreement for the reasons advanced by the plaintiff.[58]
[55]See above, paragraph 23; and see, below, paragraph 57.
[56]See above, paragraph 32.
[57]Amended Statement of Claim, paragraph 4(j).
[58]Plaintiff’s Outline of Closing Submissions (13 October 2013):
“49.However, this was not a condition precedent to the agreement for the sale of the Business that was entered into by the parties on 4 June 2013. Indeed, the parties’ entry into the agreement was a precursor to the plaintiff seeking the consent of the Franchisor to the proposed transfer of the Franchise, consent which could not be unreasonably be withheld by reason of clause 20(2) of the Franchising Code of Conduct. [Footnote 73: Big Four Pty Ltd v DaimlerChrysler Australia/Pacific Pty Ltd [2002] FCA 783 relates to the ability of a prospective franchisee to rely upon clause 20(2) of the Franchising Code of Conduct. Sundberg J found, at [14], that it was ‘fairly arguable that where a franchisee has sought the franchisee’s consent to a transfer of the franchise to a prospective transferee, the prospective transferee can rely on a contravention of the franchisor’s obligation not unreasonably to withhold its consent to the transfer.’]
50.If the need to obtain the Franchisor’s approval of the transfer of the Franchise was regarded as having contractual force (noting that a clause to this effect was included in the Heads of Agreement prepared by Sean Blood), it would be properly characterised as a ‘condition subsequent’ to the parties’ agreement or, alternatively, a condition precedent to the parties’ performance of their unconditional agreement. In order to determine whether or not such a condition had been satisfied, a written request to the Franchisor for consent to the transfer of the Franchise (as contemplated by the Franchising Code of Conduct) would first need to be made and then have been the subject of a decision by the Franchisor. Given the position adopted by the defendant, apparently at the direction of the Franchisor, this did not occur. Rather, on 1 August 2013, the Franchisor advised the plaintiff that, ‘FCG did not proceed to consider your Group’s expression of interest further once our incumbent dealer in Geelong requested that we forward an application form to another party.’
A further issue that arises with respect to the 4 June printout and agreement on the basis of that document at the 4 June Meeting is that there is no express reference to the identity of the proposed purchaser. Indeed, Sean Blood’s evidence is that there was no discussion at the 4 June meeting in relation to the identity of the proposed purchaser. The defendant submitted initially, in its written submissions, that the evidence was insufficient to establish that the plaintiff was put forward as the purchaser for the purposes of the Agreement said to have been reached on 4 June 2013. The defendant did not, however, press this point and accepted the basis of the plaintiff’s submission that it had been identified to Tony Jennett as a party.[59]
[59]In this respect, the plaintiff made the following submission (Plaintiff’s Outline of Closing Submissions POCS (13 October 2013), paragraph 5, footnote 4):
“Sean Blood’s evidence was that he identified the plaintiff to Mr Jennett as the entity that would be purchasing the Business: T90 L26 – T 91 L20. So much was confirmed on 4 June 2013 at CB25 et seq. In any event, even if the plaintiff was not expressly referred to by name in the negotiations, it matters not whether Sean Blood, Brian Blood and Darron Muir were negotiating on its behalf as agents for an undisclosed principal. See for example Thomson v Davenport (1829) 9 B & C 78 at 90; see too G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 636:
‘The vendor contended that, although it could be proved that Hospital Corporation did not exist, no further evidence could be led to show that Baulkham Hills was the contracting party. It contended that parol evidence is only admissible when the meaning of a document is ambiguous and that there was no ambiguity about the name Hospital Corporation. However, evidence of mutually known facts is always admissible to identify a descriptive term in a document: Prenn v Simmonds [1971] 1 WLR 1381 at 1384; [1971] 3 All ER 237 at 241; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429; Codelfa Constructions Pty Ltd v State Rail Authority (1982) 149 CLR 337 at 351. In accordance with this general rule, parol evidence is admissible to show that whatever name was used in the contract the person sued or suing is the person who made the contract: Trueman v Loder (1840) 11 Ad & El 589 at 594; 113 ER 539 at 541. Moreover, even if parol evidence is only admissible to clarify meaning when a term in a document is ambiguous, that rule has no application when the issue is whether the person sued or suing is a party to the contract. Evidence was admissible and relevant, therefore, to show that Baulkham Hills was the contracting party.’”
Having regard to these matters and the relevant surrounding circumstances as set out in the plaintiff’s submissions to which reference has been made[60] and my consideration of the defendant’s submissions, I find that the parties did intend to be bound by their agreement on 4 June 2013, both on the basis of the 4 June printout and subsequent discussions.
[60]See above, paragraph 39.
The effect, or otherwise, of events after this date and on 13 June 2013 is considered further in the reasons which follow. Nevertheless, as will be seen, the discussion which follows does not detract from the position I have indicated with respect to events as at 4 June 2013 at the conclusion of the 4 June Meeting.
Commercial context and extent of agreement
Further support is provided for my findings with respect to the 4 June printout and the agreement reached at the 4 June Meeting on this basis when consideration is given to the broader commercial context, to the extent that the authorities indicate is permissible. In this respect, Gleeson CJ (with whom Hope and Mahoney JJA agreed) said in Australian Broadcasting Commission v XIVth Commonwealth Games Ltd:[61]
“In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron ((1954) 91 CLR 353) dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.
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.”
The matters addressed by Gleeson CJ with respect to commercial context raise a variety of issues, including the characterisation of any agreement reached in terms of the classes identified in Masters v Cameron and the subsequent application of what was said in that case in subsequent authorities.[62] Additionally, the issue of sufficiency of any agreement reached and, in turn, the related question whether there was an intention to create legal relations is also raised. It would follow, as Gleeson CJ indicates, that in a situation where parties failed to agree on the full range of terms usually necessary, in the particular circumstances, to constitute a contract, then the inference that no intention to create legal relations and, consequently, that no binding agreement was reached, becomes very strong. The assessment in this respect is clearly a matter of degree, as the concluding sentence in the passage quoted from the Chief Justice’s judgment indicates.
[61](1988) 18 NSWLR 540 at 548.
[62]See above, paragraphs 15 and 16.
In the present circumstances, I have, for the preceding reasons, formed the view that the agreement reached at the 4 June Meeting, based on the 4 June printout, is sufficiently comprehensive having regard to the nature of the transaction and does not omit terms that, in the commercial context of that transaction, might be thought to be essential and thus indicative of no intention to conclude a bargain; that is, to enter into legal relations.
My views in this respect are also strengthened by the matters identified in the plaintiff’s submissions with respect to the commercial context.[63] In particular, I think it is indicative of the ambit of agreement necessary to effect the proposed transaction that the contents of the agreement reached at the 4 June Meeting were based upon Tony Jennett’s proposed terms for the sale of the Business which were extracted by him from an email that he had previously sent to the other prospective purchaser, Brett Fitzpatrick. Additionally, it is clear that both Sean Blood and Tony Jennett were experienced in motor vehicle dealership businesses. Moreover, the evidence is that Sean Blood has had considerable experience in relation to the sale and purchase of automotive dealerships, having been involved in eight dealership purchases of his own and two others as an employee. Consequently, in my view, the aide memoire which Sean Blood prepared in advance of the 4 June meeting[64] is, in this commercial context, to be regarded as indicative of the terms that would be required in an agreement for the sale of a business of the type to which the 4 June printout is directed; as distinct from being merely evidence of subjective intent in the negotiation process.[65] Each of the matters raised under the underlined subject headings in that document was clearly discussed at the 4 June Meeting and resolved, as indicated previously.[66] I refer to the underlined subject headings to distinguish that material from the 1/8/13 date and the “subject for to approval from Fiat Chrysler Group Aust” written to the right hand side of that document.[67]
[63]See Plaintiff’s Outline of Closing Submissions (13 October 2013), paragraphs 27 and 28.
[64]See above, paragraph 23.
[65]See above, paragraph 23.
[66]Court Book 112.
[67]As to these additions, see above, paragraph 23.
Further, at no time prior to the application to Tony Jennett of, what appears to be, some pressure by the Franchisor after 13 June 2013[68] did Tony Jennett suggest that the agreement reached at the 4 June Meeting was incomplete in some way on account of failing to deal with a material topic or issue. Consistently with this position, Tony Jennett’s email communication with Brett Fitzpatrick in July 2013 referred to “All elements of the Blood Group offer” being “the same as we had developed” and listed terms which substantially correspond with those contained in the 4 June printout.[69] Additionally, it was accepted by Tony Jennett at trial that the Heads of Agreement that he subsequently prepared and emailed to Brett Fitzpatrick in July was very similar to the agreement reached on 4 June 2013 insofar as “big ticket items” are concerned.[70]
[68]See below, paragraph 76.
[69]Court Book 88
[70]Transcript, 246.23-246.26.
The plaintiff also raised in its submissions in this context the issue of the transfer of the new stock and demonstrator or used vehicles. My views in relation to the manner in which the agreement based on the 4 June printout should be construed in this respect have been set out previously, so it is not necessary to revisit those issues. Nevertheless, in the present context I accept that it is at least consistent with the position I reached that Tony Jennett adopted the same approach in relation to this subject in the Heads of Agreement document which he emailed to Brett Fitzpatrick on 18 July 2013 - apparently as a document capable of setting out the terms of their concluded agreement.[71] As an alternative submission in this respect, the plaintiff submitted that even if the Court were to conclude that the provisions of the agreement with respect to demonstrator vehicles or staff were in any way incomplete or not capable of being given effect to, a position which the plaintiff did not accept, then there would be no bar to enforcing the remainder of the agreement reached on the basis of the 4 June printout; consistently with the approach stated by McHugh JA in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd[72]:
“Upon the proper construction of the document, it may sufficiently appear that ‘the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms’: Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 (at 317).”
[71]Court Book 90-93.
[72](1986) 40 NSWLR 631 at 634 (McHugh JA with Kirby P and Glass JA agreeing).
For the preceding reasons, I do not accept that there is a “gap” in the terms of the agreement reached on 4 June 2013 with respect to vehicles or staff, so it is not strictly necessary to pursue this issue. Nevertheless, having regard to my views with respect to the “New Cars/Used Cars” subject matter and the manner in which Tony Jennett treated the same issue in the Heads of Agreement emailed to Brett Fitzpatrick on 18 July 2013, both with respect to new vehicles and demonstrator vehicles, it may be inferred that agreement as to pricing those vehicles was not thought to be essential either by Tony Jennett or Sean Blood. Additionally, regard should be had to the commercial context and the relative simplicity of this sale and purchase business transaction, in contrast to the multi-party arrangement which was sought to be enforced in Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd.[73] In that case, the negotiations were said to concern “matters of considerable complexity, involving large sums of money and the transfer of various forms of valuable property, including real estate”.[74] I am of the view that if there is a “gap” in relation to the disposal of vehicles, then it is not one that would render the agreement made on 4 June 2013 unenforceable or lead to the conclusion that the parties did not intend to enter into legal relations in the form of a binding and presently enforceable contract.
[73][2009] NSWCA 386.
[74][2009] NSWCA 386 at [133] (Sackville AJA with Hodgson JA and Campbell JA).
Finally, in a commercial context, reference was made to a number of cases in relation to uncertainty with respect to contractual provisions, many of which are discussed by Lewison and Hughes in The Interpretation of Contracts in Australia.[75]
[75]Law Book Co. 2012 at 368-374, [8.09]; see, for example, Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 130-1 (Brooking J) (FC); Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 436-7 (Barwick CJ); Meehan v Jones (1982) 149 CLR 571 at 578 (Gibbs CJ) and 589 (Mason J); and Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 274 ALR 731 at [223]-[225] (Emmett J).
In this respect, and particularly apposite in the present circumstances, is the statement by Barwick CJ in Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd:[76]
“[A] contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, at p 512 ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright’s words in Scammell (G) & Nephew Ltd v Ouston (1941) AC 251 is not ‘so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention’, the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved.”
The approach to the construction of the commercial contracts for which the Upper Hunter County District Council case stands as authority does, in my view, provide additional support to the approach I have taken with respect to the language of the 4 June printout as the basis for the agreement reached between the parties on that day.
[76](1968) 118 CLR 429 at 436-7 (Barwick CJ).
Post-agreement conduct and other matters
In my opinion, having regard to the position I have reached in relation to the agreement for the sale of the Business, it is not necessary to consider post-agreement conduct, and nor is it necessary to pursue issues raised in the course of the trial in relation to the credit of Tony Jennett or Sean Blood, noting the defendant’s submission that the case does not turn on credit issues. Nevertheless, it may assist if I do express some views in relation to post-agreement conduct.
It is clear from the authorities that courts may take into account the post-agreement conduct of parties in determining whether they intend to conclude a contract.[77]
[77]Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547-548 (Gleeson CJ); and Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386, [112] (Sackville AJA with Hodgson JA and Campbell agreeing).
The significant event following the 4 June Meeting was the meeting on 13 June 2013 at the defendant’s premises which was attended by Tony Jennett, on behalf of the defendant, and Sean Blood, Brian Blood and Mr Darren Muir on behalf of the plaintiff. Prior to the 13 June meeting and after the 4 June 2013 meeting, Sean Blood sent draft Heads of Agreement to Tony Jennett, as had been contemplated in their discussions at the 4 June meeting.[78] For convenience, these draft heads of agreement are referred to as “the First Heads of Agreement”. The First Heads of Agreement were attached to an email from Sean Blood to Tony Jennett dated 4 June 2013 (4.39pm).[79] Omitting formal parts, the email is in the following terms:
“This is the simplest Heads of Agreement I have – let me know if it’s all fine and I will come out in morning and sign with you.”
The defendant, in submissions, draws attention to the fact that subsequently, in cross-examination, Sean Blood was at pains to suggest that his accountant had prepared the document. The significance of this was said to be a suggestion that Sean Blood ought not to be held responsible for the contents of this document in light of the defendant’s submissions that the terms of the First Heads of Agreement reflected differences in substance from those settled at the meeting earlier in the day on 4 June 2013. In my view, subsequent events indicate that authorship was not significant, though it may go to explaining some of the provisions in relation to new vehicles and used and demonstrator vehicles as appearing in the First Heads of Agreement. In relation to the covering email to which the First Heads of Agreement was attached, the defendant also draws attention to the description of the document in the “Attachments” line of that email as “CJD-HOA In Principle Agreement”. The same phraseology or description appears in the subject line of that email. It is not, in my view, clear that a great deal could be made of this descriptor. First, it is ambiguous in the context of the email and might be thought to be a description of the First Heads of Agreement, rather than any reference to what had occurred earlier in the day on 4 June 2013. Secondly, it may have been intended to mean – had it been cast in more lawyerly language – without prejudice to and/or pursuant to the agreement reached at the 4 June Meeting. In my view, one or both of these interpretations is to be preferred having regard to this ambiguity and the subsequent events, including Sean Blood’s statement to Tony Jennett later on 13 June 2013 that “We have an agreement”.[80]
[78]See above, paragraph 32.
[79]Court Book 25.
[80]See below, paragraph 76.
The defendant also drew attention to the differences between the 4 June printout and this First Heads of Agreement. It is said that the differences were highlighted during the cross-examination of Sean Blood and that the draft was plainly more than, using Sean Blood’s phrase, “a more presentable document”. The defendant characterised its terms as containing fresh proposals in respect of matters not discussed at the 4 June Meeting, containing additional terms and some terms that modified terms discussed and agreed at the 4 June meeting. By way of example, the defendant submitted that this draft Heads of Agreement contained new or different provisions, including the following:
“(1) a provision making the agreement conditional upon the plaintiff gaining the approval of FC (T 126.23-29);
(2)a provision requiring the payment of a deposit into a trust account pending completion;
(3)a provision dealing with the termination of the defendant’s employees and adjustments in respect of the defendant's liabilities to employees;
(4)the insertion of a mechanism to ascribe value to used and demonstrator vehicles in default of agreement;
(5)a provision qualifying the obligations of the plaintiff in respect of the purchase of new vehicles; and
(6)the insertion of a binding settlement date.”
It was submitted that, on this basis, this First Heads of Agreement did not restate the terms of the 4 June printout “in a form which will be fuller or more precise but not different in effect”, referring to the first category of agreements as described in Masters v Cameron.[81] Further, it was said that, given the differences between the two documents, the First Heads of Agreement represented or entailed an intended “departure from or addition to that which their agreed terms express or imply” in terms of the class of agreements described as category two in Masters v Cameron.[82]
[81](1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ).
[82](1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ).
Emphasising the point, the defendant submitted that the terms of the First Heads of Agreement were not a mere oversight on the part of Sean Blood but, rather, intentional. In particular, the defendant refers to the provision relating to the acquisition of “new vehicles” from the defendant. The defendant submits that the proposal of the new term as set out in this First Heads of Agreement was borne of the plaintiff’s self-interest because, had Tony Jennett signed this document, the plaintiff would have paid less for new vehicles than the agreement reached at the 4 June Meeting, with reference to the 4 June printout, required. The defendant contends that Sean Blood was reluctant to accept that point, but his response was that the document was to be reviewed by Tony Jennett and, in effect, he could choose to sign on that basis or not, as he wished. In the context of the dealings between the parties and also having regard to the fact that the First Heads of Agreement is not a complex document, it relates to relatively simple transaction and its language and layout makes its position very clear, particularly having regard to the experience and expertise of Tony Jennett and Sean Blood with respect to dealing in motor vehicles, I accept Sean Blood’s characterisation of the position. The other differences said to be contained in the First Heads of Agreement by reference to the terms discussed and agreed at the 4 June Meeting are not, in my view, significant having regard to my findings in relation to what was discussed and agreed at that meeting. For these reasons, I find no reason to reject Sean Blood’s evidence that the purpose of the First Heads of Agreement was to provide a “more presentable Heads of Agreement” for presentation to the Franchisor and is not to be treated as indicative of the position that the terms discussed and agreed at the 4 June Meeting were not binding and presently enforceable contractual terms.
There were further dealings between Sean Blood and Tony Jennett in the intervening period between 5 and 12 June 2013, and it is to these events to which I turn.
On 5 June 2013, Tony Jennett and Sean Blood had a telephone conversation during the course of which Tony Jennett raised a query in relation to the treatment of new cars in the First Heads of Agreement. It appears from the evidence that this was the only issue raised with respect to the document.[83] The defendant submits that the limited nature of the query is not of significance as the existence of other new or modified terms meant that the First Heads of Agreement represented a fresh proposal for Tony Jennett’s consideration. The point is also made that Tony Jennett did not sign the First Heads of Agreement and that it follows that he never accepted the whole of the new proposal. The defendant also made reference to an email from Tony Jennett to Sean Blood dated 5 June 2013, the subject being “Chrysler Jeep Stock”. This email begins with the sentence, “Further to conversation of earlier today, please find below list of vehicle which are new in stock with build dates prior to 2013”. The email then lists 17 vehicles prefaced by the sentence, “As part of the agreement, we would expect all of these vehicles to go across as new cars unless sold in the interim”. For the reasons indicated previously with respect to the subject “New Cars/Used Cars” in the 4 June printout as discussed at the 4 June Meeting, I am of the view that the provision of this information is consistent with the agreement on 4 June being attended as a binding and presently enforceable agreement. The email and further discussions are simply implementation of requirements of that agreement.
[83]Transcript, 196.11-197.1.
The defendant also makes reference to communications on 6 and 7 June 2013, the first being with Mark Bradshaw of the Franchisor, and the second with Sean Blood. Tony Jennett’s evidence in relation to the first conversation was in substance that the Franchisor had not heard from the plaintiff for a number of months and that the plaintiff had not submitted any franchise plans to it. Tony Jennett’s evidence is that in the second conversation with Sean Blood, he passed on the substance of the first conversation, with Mark Bradshaw, and that Mark Bradshaw had also said that in the conversation with Sean Blood, the latter had said that the plaintiff was going to submit plans to Fiat Chrysler, the Franchisor. Tony Jennett said that Sean Blood told him that the plaintiff was going to present four marketing plans to Fiat Chrysler, the Franchisor. On 7 June 2013, Sean Blood sent a detailed business proposal to Fiat Chrysler, the Franchisor,[84] the timing of which does accord with the evidence in relation to the two telephone conversations on 6 June.
[84]Court Book 38-48.
The defendant submits that these matters support a finding that in the days following the signing of the 4 June printout, the plaintiff “did not rush to tell FC about the formation of the alleged agreement”. In my opinion, in the context of the events surrounding the 4 June meeting, a delay of two or three days in presenting a proposal to the Franchisor, Fiat Chrysler, is not surprising or indicative of the position the defendant seeks to advance. Additionally, one would not necessarily expect that the plaintiff would have a business proposal ready and in hand to submit to the Franchisor at a moment’s notice following the 4 June 2013 meeting and, in any event, it appears that a “target date” for completion of the transaction was discussed at the 4 June meeting, and that date was 1 August 2013. So as at 6 or 7 June, time was not pressing in terms of submission of a proposal to Fiat Chrysler, the Franchisor.
The defendant also made reference to two emails passing between Tony Jennett and Brett Fitzpatrick on 6 June 2013.[85] The sentence in the 6 June email to which the defendant seeks to attach significance is:
“I [sic] there anything you wish to send through as we are close to an agreement on a strong offer at this end”.
[85]Court Book 37.
The defendant concedes that the statement in this email is plainly inadmissible on the question of disclosed contractual intention, but it is said that it does protect Tony Jennett from any criticism that he was “stringing along” Brett Fitzpatrick in the knowledge that he had signed a legally binding agreement with the plaintiff. This is, however, not an issue which I regard as significant with respect to the controversy between the parties, and particularly as I do not regard issues of credit as being matters of significance in these proceedings.[86]
[86]See above, paragraph 65.
The defendant also submits that it is significant that there were no dealings between the parties during the period 7 to 11 June 2013. In this respect, the defendant submits:[87]
“The defendant notes the following in respect of this period: (1) Sean Blood did not send Tony Jennett a revised version of the 1st HoA, even though the plaintiff needed a ‘presentable’ and signed copy HoA to give FC; (2) the plaintiff sent FC a detailed business proposal stating that it proposed to enter an agreement with the defendant regarding the sale of the business (see section D.8 below); and (3) there is no evidence that the plaintiff communicated the existence of the agreement to anyone in this period.”
In my opinion, this period of inactivity is not significant in the context of the events during early June until some time after the meeting on 11 June 2013 and is, in any event, a short period which, as it happens, spans the Queen’s Birthday long weekend of 8, 9 and 10 June 2013.
[87]Closing Submissions – The Defendant’s Outline (14 October 2013), paragraph 90.
The 13 June 2013 meeting was the subject of submissions by both parties. The meeting was between Tony Jennett, Sean Blood, Brian Blood and Darren Muir, and took place at the defendant’s premises. It is uncontroversial that Sean Blood gave Tony Jennett two documents at this meeting, the first was a second draft Heads of Agreement[88] (“the Second Heads of Agreement”) and a cheque from the plaintiff (bearing the name of the drawer as Geemaz Management Pty Ltd – ACN 124 101 015) made payable to the defendant for the sum of $20,000.[89]
[88]Court Book 49-52.
[89]Court Book 53.
The plaintiff submitted that the conduct of the parties both following the meeting on 4 June 2013 and at the meeting on 13 June 2013 was consistent with them having entered into a binding agreement on the earlier date. It is convenient to set out the plaintiff’s submissions in this respect in full:[90]
[90]Plaintiff’s Outline of Closing Submissions (13 October 2013), paragraphs 31-35.
“31. In the present case, the conduct of the parties following the meeting on 4 June 2013 is consistent with them having entered a binding agreement at that time. Most notable is the meeting that occurred on the morning of 13 June 2013 at the defendant’s premises, attended by Jennett (on behalf of the defendant) and Sean Blood, Brian Blood and Mr Muir (on behalf of the plaintiff). The evidence as to what occurred at that meeting is as follows:
(a)Sean Blood advised Mr Jennett that a meeting between the plaintiff and the Franchisor the previous day had gone well.
(b)Sean Blood had brought a chequebook to the meeting and stated that he would pay the defendant a deposit. He filled out a cheque from his chequebook made payable to ‘Geelong City Motors’ for $20,000, signed it, had Mr Muir countersign the cheque and then handed it to Mr Jennett. Mr Jennett offered to provide a receipt, an offer that was declined by Sean Blood.[91]
[91]CB53-54 (cheque and cheque stub); T37 L16 - T38L4 (Muir); T45 L5-L8 (Muir); T79 L7-L20 (S Blood); T110 L1-L9 (S Blood); T152 L2-L13 (B Blood).
(c)Sean Blood delivered a Heads of Agreement to Mr Jennett, revised from the previous version of the document in accordance with Mr Jennett’s request … .
(d)The meeting concluded by the attendees shaking hands and congratulating each other on the agreement that had been reached.[92] Brian Blood’s evidence was that those present ‘shook hands and said, basically, “Congratulations, well done” type scenario’.[93] Mr Jennett accepted that the meeting ‘finished on a note with you [Jennett] congratulating the Bloods and Mr Muir and sealing the bargain with a handshake’ (emphasis added).[94]
[92]T38 L4-L13 (Muir); T134 L5-L9 (S Blood); T152 L2-L17 (B Blood).
[93]T152 L2-L13 (B Blood).
[94]T252 L21-L26 (Jennett).
32.Despite the premises of the defendant being a short drive from the plaintiff’s premises, Mr Jennett did not return the cheque handed to him on 13 June 2013 until he sent it by post to the plaintiff’s solicitors under cover of a letter dated 22 July 2013.[95] Mr Jennett conceded under cross-examination that he never genuinely attempted to return the cheque prior to this time save for a bare offer to do so after the Franchisor began to apply pressure to him.[96]
[95]CB98.
[96]T254 L11-L12 (Jennett).
33.The plaintiff’s alternative position, reflected in the amendment made to its Statement of Claim on the opening morning of the trial, is that if a binding agreement was not in place on 4 June 2013, then on any view such an agreement was made by the conclusion of the meeting between the parties’ representatives on 13 June 2013.
34.Later on 13 June 2013, when Mr Jennett telephoned Sean Blood and advised him that the Franchisor ‘had changed the way they wanted to deal with this process’, Sean Blood’s response was that ‘we have an agreement’.[97] It was only after this time and the Franchisor’s intervention that Mr Jennett sought to prevaricate and to (falsely) qualify what had been agreed between the parties. As acknowledged by Mr Jennett, it was the implicit threat from the Franchisor that ‘scared’ him from honouring the Outline Agreement.[98] Mr Jennett’s evidence was that he told Sean Blood on 19 June 2013 and again on 18 July 2013 that it would not be ‘sensible’ for Mr Jennett to ‘act against’ or ‘ignore’ the ‘wishes of the manufacturer’ and that, ‘all the risk here sits with me and not with you’.[99] By contrast, Sean Blood’s position was steadfast throughout that the parties had reached a concluded and binding agreement. Mr Jennett’s evidence was that:
(a)on 19 June 2013 Sean Blood ‘reiterated, “But we have an agreement.”’;[100] and
(b)on 18 July 2013, Sean Blood ‘said that we had an agreement.’[101]
35.Mr Jennett conceded under cross-examination that prior to the threat made to him by the Franchisor, the only query he raised with Sean Blood regarding the agreement reached on 4 June 2013 related to a departure from the Outline Agreement that appeared in a Heads of Agreement prepared by Sean Blood and emailed to Mr Jennett later on 4 June 2013 (…).[102] Further, in Mr Jennett’s account of his meeting with Sean Blood and Mr Muir on 17 July 2013, he stated that Mr Blood stated that he wanted Mr Jennett to ‘tell Fiat Chrysler that we have an agreement’. On neither Mr Jennett’s account, nor Sean Blood’s nor Mr Muir’s accounts, did Mr Jennett respond to that request the effect that ‘but there was no such agreement’.[103]
[97]T203 L1-L8 (Jennett).
[98]T241 L24-L27 (Jennett).
[99]T203 L17-L25 (Jennett), T210 L25-L30 (Jennett).
[100]T203 L26-28 (Jennett).
[101]T219 L31 (Jennett).
[102]T242 L27-L30 (Jennett).
[103]T208 L18-L28 (Jennett).
Neither the First Heads of Agreement – provided prior to the 13 June meeting – nor the Second Heads of Agreement – provided at that meeting were ever signed by Tony Jennett. The events following provision of the First Heads of Agreement appear to have flowed naturally, as one might expect, to the 13 June meeting and the provision of the Second Heads of Agreement, in revised form from the first. The Second Heads of Agreement was not signed at that meeting. The evidence in this respect is that Tony Jennett’s response to this document at the 13 June meeting was to say that he needed time to review it and to have another party do the same. In my view, there is nothing in this response which is inconsistent with a binding and presently enforceable agreement having been reached at the 4 June Meeting.
Issues are also raised with respect to the handing over of the $20,000 cheque by Sean Blood at the 13 June meeting. Evidence differs as to whether the cheque was actually handed to Tony Jennett or whether it was simply placed on the table around which the attendees were sitting. In any event, there is no doubt that the cheque was left with Tony Jennett, and apparently willingly. There is no evidence of any response from Tony Jennett along the lines of “there is no basis for this payment”, or “I will keep it pending any agreement being reached”, or the like. Indeed, the evidence is that Tony Jennett offered Sean Blood a receipt for the cheque, but that was declined by the latter as being unnecessary. The evidence of Tony Jennett was he made no effort to return the cheque at the 13 June meeting, and that the only attempt he made to return the cheque before he posted it back to the plaintiff was his reference to it in his conversation with Sean Blood later on 13 June 2013.[104]
[104]Transcript, 252.8-252.13.
The basis of the $20,000 cheque is not entirely clear. Both the First Heads of Agreement and the Second Heads of Agreement contain the following provisions:
“Payment
A deposit of $20,000.00 lodged in a Trust Account, on the signing of this Agreement. To be held in trust until the signing of an Unconditional Contract, it is then to be transferred into the Vendor’s Solicitors Trust Account.”
As neither the First nor the Second Heads of Agreement was signed and the agreement reached at the 4 June Meeting did not provide for the payment of a deposit, the better view is that the cheque was offered both as an indication of good faith on the plaintiff’s part, and a payment which would be treated as payment of the deposit under the terms of the Second Heads of Agreement in the event that document was signed. As events turned out, the Second Heads of Agreement was not signed and the cheque was returned over a month later under cover of a letter dated 22 July 2013.[105] In my view, the delay in returning the cheque is not significant except that it is consistent with the plaintiff’s characterisation of the significance and effect of discussions at the 13 June 2013 meeting.
[105]Court Book 98.
Further, in relation to the 13 June 2013 meeting, there are inconsistencies in the evidence as to whether it concluded with a celebratory hand shake and congratulations on an agreement reached or somewhat more sedately. In my view, it matters little, because even if the more positive ending is accepted and as indicative of an agreement reached, what is the agreement? In the context of the course of dealings between the parties to that point, it would be artificial to contemplate an oral agreement modifying the agreement reached at the 4 June Meeting in terms of the Second Heads of Agreement for at least three reasons. First, for the preceding reasons, the First and Second Heads of Agreement were within the contemplation of a heads of agreement document as discussed at the 4 June Meeting – and so were to be regarded as flowing from and consistent with the agreement then reached. Secondly, the Second Heads of Agreement was not signed on the basis that Tony Jennett wished to consider its provisions and, it appears, with the assistance of a third party. Thirdly, the “Payment” provisions of the Second Heads of Agreement, which have been set out, expressly contemplate the terms of that Agreement operating only on its execution, and the same appears true of the other provisions. This does not, however, detract from the binding and presently enforceable nature of the agreement reached at the 4 June Meeting – rather, it merely goes to the commencement of the operation of the Second Heads of Agreement in place of the then presently operative terms of the existing agreement, which commenced at its genesis at the 4 June Meeting.
For these reasons, I accept the plaintiff’s submissions as to the characterisation of the nature and effect of the 13 June 2013 meeting.
Events following the 13 June 2013 meeting
In my opinion, very little of any significance occurred after the 13 June meeting apart from events later that day, then on 19 June and 17 and 18 July 2013, as submitted by the plaintiff:[106]
[106]Plaintiff’s Outline of Closing Submissions (13 October 2013), paragraphs 34 and 35.
34.Later on 13 June 2013, when Mr Jennett telephoned Sean Blood and advised him that the Franchisor ‘had changed the way they wanted to deal with this process’, Sean Blood’s response was that ‘we have an agreement’.[107] It was only after this time and the Franchisor’s intervention that Mr Jennett sought to prevaricate and to (falsely) qualify what had been agreed between the parties. As acknowledged by Mr Jennett, it was the implicit threat from the Franchisor that ‘scared’ him from honouring the Outline Agreement.[108] Mr Jennett’s evidence was that he told Sean Blood on 19 June 2013 and again on 18 July 2013 that it would not be ‘sensible’ for Mr Jennett to ‘act against’ or ‘ignore’ the ‘wishes of the manufacturer’ and that, ‘all the risk here sits with me and not with you’.[109] By contrast, Sean Blood’s position was steadfast throughout that the parties had reached a concluded and binding agreement. Mr Jennett’s evidence was that:
(a)on 19 June 2013 Sean Blood ‘reiterated, ‘But we have an agreement.’[110]; and
(b)on 18 July 2013, Sean Blood ‘said that we had an agreement.’[111]
35.Mr Jennett conceded under cross-examination that prior to the threat made to him by the Franchisor, the only query he raised with Sean Blood regarding the agreement reached on 4 June 2013 related to a departure from the Outline Agreement that appeared in a Heads of Agreement prepared by Sean Blood and emailed to Mr Jennett later on 4 June 2013 (considered further below).[112] Further, in Mr Jennett’s account of his meeting with Sean Blood and Mr Muir on 17 July 2013, he stated that Mr Blood stated that he wanted Mr Jennett to ‘tell Fiat Chrysler that we have an agreement’. On neither Mr Jennett’s account, nor Sean Blood’s nor Mr Muir’s accounts, did Mr Jennett respond to that request the effect that ‘but there was no such agreement’.[113]
[107]T203 L1-L8 (Jennett).
[108]T241 L24-L27 (Jennett).
[109]T203 L17-L25 (Jennett), T210 L25-L30 (Jennett).
[110]T203 L26-28 (Jennett).
[111]T219 L31 (Jennett).
[112]T242 L27-L30 (Jennett).
[113]T208 L18-L28 (Jennett).
The plaintiff’s submissions in this respect are well based in the evidence and, in my view, the inferences which are implicitly drawn from the evidence and which are inherent in these submissions support the plaintiff’s case. It should also be said that the matters and statements relied upon could not, on any view, be said to be evidence of matters subjective to a particular party. Rather, they were statements which, in the circumstances, called for a response; otherwise the inferences made by the plaintiff would reasonably be drawn. They are, nevertheless, not conclusive of the characterisation of the position as a matter of law – that is for the Court. With this reservation they are, however, entirely consistent with the characterisation I have concluded should be applied to the agreement reached at the 4 June Meeting.
Conclusion
For the preceding reasons, I am satisfied that the agreement reached at the 4 June Meeting is properly characterised as one within the first category of cases identified by the High Court in Masters v Cameron.[114] There is, of course, nothing to prevent parties to such an agreement moving ultimately to a situation which would invite classification recording to the, so called, fourth category of agreements by reference to the Masters v Cameron categories.[115] If matters had proceeded further at the 13 June 2013 meeting, or subsequently, a fourth category position might have been reached, but they did not. Otherwise, I regard the 13 June 2013 meeting as consistent with and as one of the events that might be expected to flow from an agreement within the first category of cases.
[114](1954) 91 CLR 353 at 360; and see above, paragraph 15.
[115]See above, paragraph 16.
For these reasons, my answer to the preliminary question: “Was there a binding concluded agreement in the terms pleaded in paragraphs 3 and 4 of the Amended Statement of Claim?” is “Yes”.
The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear further submissions on this issue.
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