Graziano v Graziano - [2010] SASCFC 76

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
GRAZIANO v GRAZIANO
[2010] SASCFC 76
Judgment of The Full Court
(The Honourable Justice Anderson, The Honourable Justice White and The Honourable Justice Peek)
21 December 2010
CONTRACTS - PARTICULAR PARTIES - PARTNERS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT
The appellant and the respondent are two brothers who conducted a business in partnership - the respondent claimed that he and the appellant had reached a binding agreement for the termination of their partnership, including agreement as to the entitlement to the proceeds of a total and permanent disablement insurance policy on the life of the appellant - the appellant submitted that the termination agreement was not binding, and fell into the third category of agreement considered in Masters v Cameron (1954) 91 CLR 353 - the trial Judge held in favour of the respondent, and held that under the termination agreement, the appellant was entitled to the insurance proceeds to the partnership.
Whether the trial Judge erred in finding that there was a binding termination agreement between the brothers - whether the trial Judge erred in finding that the partnership was entitled to the proceeds of the insurance claim, and, accordingly, that it was open to the parties in their termination agreement to agree upon the disposition of the insurance proceeds.
Held: (White J, Anderson and Peek JJ agreeing) appeal dismissed - the trial Judge was correct in finding that a binding agreement was reached - as the appellant is entitled to the insurance proceeds under the termination agreement, it is unnecessary to consider his contention that those proceeds were his in any event, and were not an asset of the partnership.
Godecke v Kirwan (1973) 129 CLR 629; Chan v Zacharia (1984) 154 CLR 178; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-2) 149 CLR 337; Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216; Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd [1987] 2 Qd R 495; Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193; Carmichael v National Power PLC [1999] 1 WLR 2042; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Commercial Bank of Australia Ltd v GH Dean & Co Pty Ltd [1983] 2 Qd R 204; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147; Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653; Elmslie v Federal Commissioner of Taxation (1993) 118 ALR 357; Curtis v Sheffield (1882) LR 21 Ch D 1; Associated Grocers Co-operative Ltd v Hubbard Properties Pty Ltd (1986) 42 SASR 321; London Passenger Transport Board v Moscrop [1942] AC 332; House v The King (1936) 55 CLR 499, considered.

GRAZIANO v GRAZIANO
[2010] SASCFC 76
Full Court: Anderson, White and Peek JJ

ANDERSON J. I would dismiss the appeal. I agree with the reasons of White J.
WHITE J. Bruno Graziano, the appellant, formerly operated a business in partnership with his brother Antonio, the respondent. The termination of that partnership gives rise to the present appeal.
A Judge in the District Court upheld Antonio’s claim that in September 1999 he and Bruno reached a binding agreement for the termination of the partnership (the Termination Agreement). The Judge rejected Bruno’s claim that he was entitled, independently of the Termination Agreement, to the whole of the proceeds of a total and permanent disablement policy taken out in his name (the insurance proceeds). He held that Antonio owned the relevant policy on trust for the benefit of the partnership, and that one of the terms of the Termination Agreement was that Bruno should receive the whole of the insurance proceeds.[1]
[1] Graziano v Graziano [2009] SADC 132.
The Judge made declarations and orders giving effect to these conclusions. These included orders that Bruno transfer to Antonio and his wife his shares in the companies by which the partnership business had been incorporated; that he resign his directorship of one of those companies; that Antonio pay $205,000 to Bruno; and that Antonio facilitate the payment to Bruno of the insurance proceeds. Subsequently the Judge made orders under s 13 of the Enforcement of Judgments Act 1991 (SA) directing the Registrar of the District Court to execute on Bruno’s behalf the documents necessary to effect the transfers of the shares and the resignation of the directorship.
Bruno now appeals against the initial orders made by the Judge.
The appeal raised two principal issues. The first is whether the Judge was correct in finding that in September 1999 Bruno and Antonio reached a binding agreement for the termination of their partnership, including agreement on the payment of the insurance proceeds. The second is whether the Judge was correct in finding that Antonio was the legal owner of the insurance proceeds, but that he held them on trust for the benefit of the partnership. Bruno recognised that the second issue does not arise if his appeal on the first issue fails.
The trial Judge heard oral evidence from four witnesses: Bruno, Antonio, Mr Bartholomeus (an accountant) and Mr Van Dissel (a solicitor). He found that the evidence of Messrs Bartholomeus and Van Dissel was generally reliable.[2] Many of the factual issues in the trial were matters upon which only Bruno or Antonio or both could give evidence. Accordingly, the Judge’s assessment of their respective credibility and reliability was critical to his ultimate conclusion.
[2] Ibid at [376].
The Judge considered Bruno to be a particularly unreliable witness saying:
Bruno Graziano was a dreadful witness, in the sense of his presentation as a witness, including the manner in which he gave his evidence. There were times during his evidence when I wondered whether he had no understanding, even now, of how the business of the partnership operated. He often gave rambling evidence which often did not address the specific question asked of him. Many times I wondered whether he understood some questions. He would often contradict earlier evidence he gave.
In the end, however, I am satisfied that he did understand most of what was being asked of him either by his own counsel or in cross-examination by Mr Hoffman QC, as counsel for Antonio Graziano. I consider that often he retreated by giving rambling and confused answers to questions in order to avoid addressing them directly. …
During the trial I never quite knew whether or not Bruno Graziano was lying in giving some of his evidence. That is, whether he was giving evidence he knew to be false. I consider that there were times when he did that but it is difficult to identify them with precision. That is because I am satisfied that on many occasions in his evidence Bruno Graziano gave evidence when he knew that what he said was not entirely accurate, but he gave such evidence in such a way as to try to give the impression that he believed in the truth of what he said.[3]
[3] Ibid at [147]-[149].
The Judge regarded Antonio’s evidence as being generally credible and reliable.[4] On nearly all the matters upon which the evidence of Bruno and Antonio differed, the Judge preferred the evidence of Antonio. He also considered that Antonio’s evidence was more consistent with the documentary evidence or, in some cases, less inconsistent with the documentary evidence.[5]
[4] Ibid at [166], [383].
[5] Ibid at [166].
On the appeal, Bruno did not seek to disturb any of the Judge’s findings based upon credibility. He contended, however, that acceptance of Antonio’s evidence did not warrant the legal and factual conclusions of the Judge.
Background Circumstances to the Partnership Termination
Before 1987, Bruno, Antonio and other members of their family were engaged in a horticultural partnership business at Bowhill near Mannum. In addition, Bruno and Antonio conducted in partnership a separate market garden business at Sunnyside which is also near Murray Bridge. At one stage they and another brother had also operated in partnership a hotel at Birdwood. However, by about mid 1987, each of Bruno and Antonio had ceased participation in these partnerships.
In late 1987 or early 1988, Bruno and Antonio commenced a new business in partnership at Pooraka, using the name Hard Produce Services. The business involved the packing, wholesaling, distributing, transporting and processing of produce for the Pooraka Fruit and Vegetable Market. Later it became more of a transport business, particularly in relation to the supply and distribution of fruit and vegetables.
The brothers did not have a written partnership agreement. They had a verbal agreement that they would have equal shares in the partnership and that Antonio would split his share with his wife for taxation purposes.[6] The brothers treated themselves as equal partners.
[6] Ibid at [20].
The Judge found that Antonio had greater business acumen than Bruno. Antonio was responsible for matters of administration and finance, whereas Bruno’s principal (and considerable) contribution was the provision of his physical labour.[7] The Judge found that Antonio did not have a sophisticated understanding of the matters relevant to the finances and the operation of a business. Accordingly, both Bruno and Antonio were accustomed to relying significantly on the partnership’s accountant, Mr Bartholomeus, for advice, and to document in an appropriate way the decisions they made about the conduct of their business.
[7] Ibid at [8].
The two brothers bought a property at Pooraka on which to conduct the business. On the advice of Mr Bartholomeus, they acquired a shelf company, Quintile Pty Ltd, to be the purchaser. Each of Bruno and Antonio held 50 per cent of the shares in Quintile, and each was a director. The purchase price of the land was about $750,000. Initially the brothers had both vendor and bank finance but, in 1990, the Commonwealth Bank of Australia (CBA) became the partnership’s principal financier. In addition to the Pooraka land itself, the security to the CBA included mortgages over a property owned by Antonio and his wife and over a property at Brighton owned by Bruno. Bruno also gave security to the CBA over a term deposit of $150,000.[8]
[8] Ibid at [15].
Initially, the partnership business prospered. In about 1995, the focus of the business changed as growers commenced to deal more directly with the major supermarket chains. The brothers then became more involved in the transporting of produce and less involved in its wholesaling, processing and packaging.[9] The Judge found that the division of roles between the brothers continued. Antonio continued to be responsible for the commercial and administrative side of the business, whereas Bruno worked in the yard with the trucks. The partnership employed about 20 employees, including Mr Scholefield, an accountant.
[9] Ibid at [54].
The financial arrangements between the brothers were simple. When either needed money, he would approach Mr Scholefield who would then cash a cheque, entering the amount in the brother’s “personal column”. Antonio and Bruno trusted each other to exercise restraint in this regard, and each did so.[10]
[10] Ibid at [53].
After 1995, it seems that although the partnership business continued to expand, its profitability declined. This led to Antonio arranging for his family trust to lend the partnership substantial sums of money which he had derived from a lottery win. This was done without Bruno’s knowledge and was one factor which gave rise later to considerable suspicion on Bruno’s part about his brother’s activities.
In early 1998, the brothers moved to incorporate their business. From the beginning of 1998, any new trucks, trailers or equipment were acquired in the name of HPS International Pty Ltd (HPS International), and from about May 1998 another company HPS Transport Pty Ltd (HPS Transport) commenced operation of the business. Each of Bruno and Antonio had a 50 per cent shareholding in these two companies, but Antonio was their sole director.[11] Despite the incorporation, the brothers continued to regard themselves as partners.
[11] Ibid at [76].
In 1996, Bruno developed a back condition which was to disable him. On 3 March 1998, he underwent a spinal fusion. He did return to work afterwards but did not continue. The precise day upon which he finished work altogether is not clear on the Judge’s findings. There is some evidence that it was 13 October 1998,[12] and other evidence that it was after an incident on 20 November 1998.[13] Bruno’s cessation of work was associated with some fracturing of the relationship between the two brothers as, after 20 November 1998, they had no contact with each other for a period of a few months.
[12] Ibid at [66].
[13] Ibid at [67], [78].
On 18 May 1999, Bruno made application for payment of the total and permanent disablement benefit under an insurance policy taken out some years earlier. Eventually, in February 2001 the insurer made the claimed payment, which totalled $515,423.30[14] (the insurance proceeds). The insurance proceeds became the subject of dispute between the brothers and gave rise to the second issue on the appeal to which I referred earlier.
[14] Ibid at [48].
Events Between March and September 1999 – Partnership Termination
In March 1999, Bruno consulted a solicitor, Mr Van Dissel. Bruno wished to “get out of” the partnership, and he thought that Antonio had been cheating him. He instructed Mr Van Dissel in relation to both these matters. Thereafter, Mr Van Dissel had a series of meetings with Bruno, Antonio and Mr Bartholomeus, sometimes individually and sometimes together.
At Mr Van Dissel’s suggestion, the brothers obtained valuations of the plant and equipment and Mr Bartholomeus prepared partnership financial accounts to 30 April 1999. The valuations and accounts were discussed at the meeting between Mr Van Dissel, Mr Bartholomeus, Bruno and Antonio on 8 June 2009. Mr Van Dissel told those present that the accounts indicated that the business was insolvent and suggested that it should cease trading. He also told Bruno, in the presence of Mr Bartholomeus and Antonio, that he should take whatever Antonio was offering to buy him out. Antonio asserted that the valuations of the plant and equipment were too low, giving the appearance that the partnership was insolvent, when it was not.
Subsequently Mr Van Dissel met separately with Bruno and Antonio. On or about 11 June 1999, Antonio sent to Mr Van Dissel a written note of his proposal for taking over Bruno’s interest in the partnership business. The elements of the proposal were that he (Antonio) would take the whole of the shares in Quintile, HPS International, HPS Transport and another company, Diternal Foods, in which the brothers had a 50 per cent interest; all the debtors and creditors; all the stock; and all the accumulated tax losses. In exchange, Bruno’s property at Brighton, and the $150,000 deposit would be released as security for the CBA loans, and Bruno would be entitled to the whole of the insurance proceeds; there would be an adjustment of drawings in an amount of about $20,000; and Antonio would pay $5,000 for a container owned by Bruno and for Bruno’s half-share of a Honda motorbike.
There were some further communications between Mr Van Dissel and Antonio but Bruno terminated Mr Van Dissel’s retainer on 30 June 1999. In a letter confirming the termination of his instructions, Mr Van Dissel repeated to Bruno his assessment that the business was insolvent and his recommendation that it should be wound up in an organised manner. He also confirmed to Bruno that he could investigate his suspicions that Antonio had been cheating him by appointing an independent accountant to conduct an audit.
In early July 1999, Bruno retained new solicitors, Scammel & Co, to act on his behalf. Those solicitors corresponded with Antonio, including making an enquiry as to his current proposal for taking over Bruno’s interest in the partnership business. However, there was no progress towards an agreement until the two brothers met at the Pooraka premises on a Saturday in early September 1999.
The September 1999 Agreement
The Judge considered that the evidence indicating that in early September 1999, Antonio and Bruno had entered into “a complete and enforceable contract that provided, amongst other things, for the sale by Bruno Graziano to Antonio Graziano of all Bruno’s interests in HPS partnership and his shares in three related companies” was “extensive, … compelling and … irresistible”.[15] The matters which led the Judge to that conclusion were these:
1.By early 1999 Bruno had determined that he would not return to work in the partnership and that he wished to leave the partnership.[16]
2.Bruno retained Mr Van Dissel to assist him in exiting the partnership.[17]
3.The purpose of the meetings between the two brothers and Mr Van Dissel and Mr Bartholomeus in mid-1999 was to ascertain the financial position of the partnership so that a pay-out figure to Bruno could be determined.[18] However, because it appeared to Mr Van Dissel that the partnership business was insolvent, these meetings came to nothing.
4.As matters did not progress thereafter, Antonio telephoned Bruno to arrange a meeting to sort things out.[19]
5.The brothers had a long and frank meeting at the Pooraka premises on a Saturday in early September 1999 commencing at about 4.30-5.00 pm and continuing until about 3.00 or 3.30 am the following morning.[20] The Judge regarded Antonio’s evidence about what occurred at that meeting as generally credible and reliable, whereas Bruno’s was not.[21] During the course of the meeting, Antonio told Bruno for the first time of his lottery win and that he had used funds from that win to support the business.[22] Bruno volunteered to Antonio that he had “helped himself” to $10,000 from the business earlier that same year.[23] The Judge was satisfied that the meeting was a good one at which the brothers had been “prepared to speak calmly, openly and truthfully to each other about their partnership business, their personal relationship with each other, and about matters relating to their family”.[24]
6.At the meeting Antonio sought a means of ensuring that Bruno would receive some money for exiting the business.[25]
7.Notes made by Antonio during the meeting which, although discovered, were overlooked by both parties until part way through Antonio’s cross-examination supported Antonio’s account of what had occurred.[26]
[15] Ibid at [375]
[16] Ibid at [378].
[17] Ibid.
[18] Ibid.
[19] Ibid at [382].
[20] Ibid at [233].
[21] Ibid at [383].
[22] Ibid.
[23] Ibid at [383].
[24] Ibid.
[25] Ibid at [385].
[26] Ibid at [386].
The Judge was satisfied that the terms agreed upon by the two brothers at the meeting for the termination of their partnership were “a combination of the original letter of offer made by Antonio Graziano in June 1999, plus a cash payment to Bruno Graziano in the sum of $200,000”.[27] This was the Termination Agreement to which I referred at the commencement of these reasons. The Judge was also satisfied that Antonio told Bruno that he would get documents prepared for them both to sign, which would reflect what they had agreed.[28]
[27] Ibid at [387].
[28] Ibid at [389].

Following the meeting, Antonio did instruct Mr Bartholomeus to prepare documents to give effect to the agreement, and Mr Bartholomeus, in turn, instructed the law firm of Knox and Hargrave to prepare a draft contract.
The Judge found that Bruno and Antonio met again on the following Saturday. This was at Bruno’s request. He asked Antonio to pay him the $200,000 immediately, so that he could effect the purchase of a property. Antonio declined to do so until the papers were signed, but agreed to take other action to implement their agreement in the meantime. Shortly afterwards, Antonio took action to pay out a loan on Bruno’s car (as part of the balancing out of the brothers’ drawings), and arranged for Bruno’s property at Brighton and the $150,000 term deposit to be released as security for the CBA loan.[29]
[29] Ibid at [391].
The Judge was also satisfied that by December 1999, Bruno had refused to proceed with the September agreement. He was unable to make an explicit finding as to Bruno’s reasons for refusing to proceed, apart from Bruno having a conviction that Antonio had cheated him.[30] The Judge was satisfied that Bruno’s belief in that respect was mistaken. He held:
I am satisfied and find that Antonio Graziano never cheated his brother Bruno. I am satisfied and find that Antonio Graziano was attempting between June 1999 until they reached an agreement in September 1999, to allow Bruno Graziano to exit the partnership group in a way that would relieve him of all debt, release all the security that he had given to the bank, and give him in addition a significant sum of money. I am satisfied and find that what Antonio Graziano offered his brother Bruno to exit the partnership group, and what his brother accepted, reflected the financial position of the partnership group in a far more favourable light than it actually was. In other words, on the evidence before me and which I accept, the agreement that was reached between the two brothers significantly favoured Bruno Graziano, if one was attempting to reflect half the value of the partnership group. I am satisfied and find that what the brothers agreed to was to Bruno Graziano’s significant advantage, if compared to that which he would have been entitled if the partnership group had been properly valued. If the group had been liquidated Bruno Graziano would have likely received nothing, other than significant debt.[31]
[30] Ibid at [393].
[31] Ibid at [394].
Judge’s Finding Concerning the Insurance Proceeds
In relation to the insurance proceeds, the Judge found that, as a matter of construction of the policy, Antonio was the owner of the insurance policy insuring Bruno’s life and providing for benefits in the event of his total and permanent disability. He was also satisfied that Bruno was the owner of a “vice versa” policy over Antonio’s life. The Judge found that the brothers had taken out the insurance policies to protect the partnership from the adverse consequences if one or other or both brothers died, or became totally and permanently disabled. The result was that Antonio was entitled to the proceeds of the policy over Bruno’s life, but that he held those proceeds on trust for the partnership. Accordingly, it had been open to the brothers in September 1999 to reach agreement as to the fate of the insurance entitlement and, on the Judge’s findings, they had done so.
Was the September 1999 Agreement a Complete and Enforceable Contract?
On the appeal, Bruno accepted the Judge’s finding that he and Antonio had reached an agreement in September 1999. However, he submitted that the Judge’s finding that they had concluded on a complete and enforceable contract was wrong. Bruno referred to a number of features of the Termination Agreement, including matters with which it did not deal, which he submitted meant that it should not have been regarded as complete and enforceable. It is convenient to address the various matters to which Bruno referred under the headings which follow.
Is the Termination Agreement Sufficiently Certain?
A general proposition of the law of contract is that in order for a contract to be binding, its terms must be sufficiently certain. Thus, Viscount Maugham in G Scammell & Nephew Ltd v HC & JG Ouston[32] said:
In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intention; in other words the consensus ad idem would be a matter of mere conjecture.[33]
Contracts which are not sufficiently certain may be void, and the matters which may give rise to uncertainty are various.
[32] [1941] AC 251.
[33] Ibid at 255.
In the present case, counsel for Bruno contended that the Termination Agreement was uncertain because Bruno and Antonio had not reached agreement on several essential matters, and because there was a lack of clarity about some of the matters upon which they had purportedly agreed.
Counsel contended that Bruno and Antonio had not reached any agreement as to the date upon which the dissolution of their partnership was to take effect. They may have intended that it should be November 1998, but if that was so, a number of matters should have been addressed, including the provision of an indemnity to Bruno in respect of those liabilities of the partnership incurred after November 1998.
Counsel referred to the absence of agreement as to the values to be attributed to the different assets being transferred to Antonio. In particular, there was no agreement about the values to be attributed to the shares in each of the companies which Bruno was transferring, and no agreement as to the value of the other assets of the partnership which were to be transferred.
Next, counsel referred to the absence of agreement as to when the sum of $200,000 was to be paid and, generally, as to when “settlement” was to occur.
Counsel took as points of reference for a large part of his submission concerning incompleteness and uncertainty the draft contract prepared by Knox and Hargrave on 21 September 1999 on the instructions of Mr Bartholomeus, as well as Antonio’s pleading of the terms of the Termination Agreement. He identified some nine subject matters which had not been addressed by Bruno and Antonio at all, or which had been inadequately addressed. I will refer to these matters shortly.
It is first appropriate to record that courts endeavour, wherever possible, to uphold agreements.[34] That is particularly so, in cases like the present in which the agreements have been performed in part. Lord Tomlin in Hillas & Co Ltd v Arcos Ltd[35] said:
[T]he problem for a court of construction must always be so to balance matters that, without violation of essential principle, the dealings of men may as far as possible be treated as effective, and that the law may not incur that reproach of being the destroyer of bargains.[36]
[34] Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 at 14,569.
[35] [1932] All ER 494.
[36] Ibid at 499. See also York Air Conditioning and Refrigeration (A/sia) Pty Ltd v Commonwealth (1994) 80 CLR 11 at 53; Foxtel Management Pty Ltd v Seven Cable Television Pty Ltd (2000) 102 FCR 464 at [130]-[131].
The commercial context in which the Termination Agreement was negotiated must also be kept in mind. A prominent feature of that context was that the negotiating parties were not strangers to each other but instead two brothers who had worked together in business for many years. In addition, neither brother had a sophisticated financial understanding. As noted earlier, they were accustomed to rely very much upon Mr Bartholomeus for appropriate advice and to give effect, in a formal way, to the matters which, in a practical way, they had agreed upon. That context suggests that Bruno and Antonio were unlikely themselves to think it necessary to agree upon all the matters of detail for the implementation of their agreement. Instead, they may well have thought it sufficient to agree the principal elements of the arrangement for the dissolution of the partnership.
Further, it was open to the brothers to agree, explicitly or implictly, that they would leave it to Mr Bartholomeus to fill in any gaps in the detail of their agreement. As Gibbs J pointed out in Godecke v Kirwan,[37] parties to a contract may leave terms, even essential terms, to be determined by a third person. In such a case, the contract is not bad for uncertainty because, if the third person does settle the terms, the contract will thereby be rendered certain.[38] This means that it is no objection to the certainty of a contract that the power to determine the terms and conditions to be incorporated in the contract has been left by the parties to the solicitors or accountants for one of the parties.[39]
[37] (1973) 129 CLR 629.
[38] Ibid at 645.
[39] Ibid.
In the present case, an agreement by the brothers that they would rely, in their usual way, upon Mr Bartholomeus to implement appropriately their agreement can be seen to have been implicit. If the officious bystander to whom the law of contract resorts in relation to the implication of terms had been present and had queried, for example, whether or not the brothers were leaving it to Mr Bartholomeus to add any desirable terms, one would have expected an affirmative answer to be readily given. When this is kept in mind, many of the objections now raised by Bruno fall away. In particular, the fact that Bruno and Antonio did not address all the steps necessary to implement the Termination Agreement does not of itself deprive that Agreement of certainty.
It is true that Bruno and Antonio did not agree upon the allocation of values to be attributed to the various assets being transferred. However, it was not necessary for them to do so. It is open to parties to a contract to agree a global figure as the consideration for the transfer of several assets, and, in practice, it is the kind of thing which commonly occurs. In many cases, the parties will think it sensible to nominate the value for which a particular asset is being transferred because an omission to do so may have adverse capital gains tax or stamp duty consequences. In the present case, the absence of agreement as to the values for which particular assets were being transferred may have had the consequence, for either brother or both, that the transaction was less attractive than they had supposed. It may even be that what appeared to be a favourable bargain for either or both of the brothers, turned out to be a poor bargain. However, that is not something which detracts from the certainty or completeness of the Termination Agreement.
The absence of any agreement as to a “settlement” date does not deprive the Termination Agreement of certainty. When parties fail to specify a time for performance, courts will commonly find the existence of an implied term that the relevant action be taken within a reasonable time. A term of that kind has an enforceable content. There is no reason why such a term could not be implied in the present case.
The Nine Elements
The nine elements said by Bruno not to be have been addressed by the parties can now be considered. As noted earlier, Bruno used the terms of the Termination Agreement, as pleaded in Antonio’s Defence and the content of a draft contract prepared by Knox and Hargrave, as the point of reference for these submissions. Paragraph 34B of the Defence pleaded nine terms of the September 1999 Agreement.
First, paragraph 34B.1 alleged that it was agreed that the partnership was to be dissolved with effect from 1 November 1998.
It is true that the evidence does not indicate that there was an express agreement at the September meeting that the partnership should be regarded as having been terminated with effect from 1 November 1998. However, there are other matters which support such an agreement being reached. First, at the September meeting Antonio explained to Bruno that if he (Antonio) had the benefit of the tax losses incurred from November 1998, he could make the payment of $200,000. That is to say, it was the prospect of Antonio having the benefit of those tax losses which underpinned this important feature of the Termination Agreement. On the Judge’s findings, Bruno was aware of this. It must have been implicit therefore that the effective dissolution date was to be November 1998.
In addition, the commercial context in which the two brothers were negotiating is again important. Each of the two brothers knew that Bruno had not performed any work at all in the partnership business since November 1998. In a practical sense, that was when they had ceased carrying on business in partnership. This made it natural that some date in November 1998 should be selected as the dissolution date; and was an important part of the context in which the brothers concluded their agreement.
Bruno’s submissions in respect of this element fail.
The second term pleaded was that “all partnership debts and liabilities were to be transferred to [Antonio] and his wife jointly”. Contrary to Bruno’s submissions, the evidence of Antonio (which was accepted by the Judge) does indicate that this was a topic which was discussed explicitly between the two brothers.[40]
[40] Transcript 1196-8, 1207.
The third pleaded term of the Termination Agreement was that Bruno “would receive $33,625 to balance drawings (one payment of $10,000 which [Bruno] had previously taken from the partnership bank account, and one payment by cheque of $13,333.15 and the finance on his car loan paid out to the value of $10,291.87). I note first that it is not altogether clear whether these matters were discussed at the meeting. Antonio gave an explanation in his evidence-in-chief of these figures and it is not clear whether he was intending by that evidence to indicate what he had discussed with Bruno.
However, even if the matter was not discussed directly by Bruno and Antonio in the September meeting, it would, in my opinion, be of little consequence. The brothers had expressly agreed that there should be an adjustment so as to balance out the extent to which Antonio’s drawings exceeded those of Bruno after taking account of the $10,000 which Bruno had drawn from the business without Antonio’s knowledge. This would be achieved in part by the partnership discharging the outstanding liability on a loan used to purchase a car for Bruno. The context was one in which it was obvious to both brothers that the precise figures and the book entries necessary to implement their agreement would be ascertained by Mr Bartholomeus. The fact that the Termination Agreement left it to Mr Bartholomeus to identify the relevant figures and to make the appropriate book entries, does not deprive the Termination Agreement of its binding character.
The fourth pleaded element of the Termination Agreement was that Bruno was “to transfer to [Antonio] and his wife jointly all shares, rights and interest owned by [Bruno] in HPS International Pty Ltd, HPS Transport Pty Ltd and Quintile Pty Ltd”. Bruno’s submissions with respect to this element fail for much the same reasons as did his submissions concerning the second element.
There is another matter of context to be borne in mind in relation to the involvement of Antonio’s wife. The existing partnership was in substance a 50/50 partnership between Bruno and Antonio. However, Antonio’s share in the partnership was split equally between him and his wife. That fact was well known to Bruno. Bruno also knew that in all the discussions and negotiations concerning the partnership business, Antonio acted in effect as an agent for his wife. It must have been obvious to Bruno in the course of the September 1999 meeting that Antonio was representing his own interests and those of his wife. As agent, Antonio owed fiduciary duties to his wife. This included an obligation not to prefer his own interests to those of his wife.[41] This consideration supports the conclusion that both parties must have contemplated a transfer of the shares in the companies by which the partnership business had come to be conducted to both Antonio and his wife.
[41] Chan v Zacharia (1984) 154 CLR 178 at 198.
For these reasons, Bruno submissions concerning the fourth pleaded element of the Termination Agreement fail.
The fifth and sixth pleaded elements of the Termination Agreement were the provisions for the release of Bruno’s property at Brighton and the deposit of $150,000 as security for the CBA loans. Contrary to Bruno’s submissions, the release of the securities had been the subject of express discussion. It was referred to expressly in Antonio’s letter of 11 June 1999 to Mr Van Dissel which was used by Antonio at the September 1999 meeting as the basis for his discussion with Bruno.
The Judge also found that in late September 1999 Antonio arranged for the release of the securities provided by Bruno. This was important evidence suggesting that the brothers had reached a binding agreement.
The conventional principle is that it is not permissible to use evidence of what the parties said or did after their contract was made in the construction of its terms.[42] However, that principle does not preclude use of evidence of subsequent conduct to establish whether or not the parties reached agreement at all, or to establish the terms of their agreement.[43] In County Securities Pty Ltd v Challenger Group Holdings Pty Ltd[44] Spigelman CJ said:
Where what is in issue is the identification of the subject matter of the contract, or the identification of necessary terms which were not the subject of express provision in a contract not reduced to writing, then consideration of post contractual conduct does not contravene the reasons underlying the principle. … In my opinion, subsequent conduct, especially how a contract for purchase and sale was settled, is relevant, on an objective basis, to the identification of the subject matter of the contract or the determination of necessary terms, as distinct from deciding the meaning of words.[45]
[42] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-2) 149 CLR 337 at 348.
[43] Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216 at 237; Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd [1987] 2 Qd R 495; Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226 at 238.
[44] [2008] NSWCA 193.
[45] Ibid at [20]-[21].
Further, the principle that parties’ subsequent conduct may not be used in construing the terms of their agreement applies with less rigour, at least in the United Kingdom, in the case of contracts made by informal means. In relation to such cases, Lord Hoffmann said in Carmichael v National Power PLC:[46]
This austere rule would be orthodox doctrine in a case in which the terms of the contract had been reduced to writing. But I do not think that it applies to a case like the present. In a case in which the terms of the contract are based upon conduct and conversations as well as letters, most people would find it hard to understand why the tribunal should have to disregard the fact that Mr Lovatt and Mrs Carmichael both agreed that the C.E.G.B. were under no obligation to provide work and the applicants under no obligation to perform it. It is, I think, pedantic to describe such evidence as mere subjective belief. In the case of a contract which is based partly upon oral exchanges and conduct, a party may have a clear understanding of what was agreed without necessarily being able to remember the precise conversation or action which gave rise to that belief. … But the terms of the engagement must have been discussed and these conversations must have played a part in forming the views of the parties about what their respective obligations were.
The evidence of a party as to what the terms he understood to have been agreed is some evidence tending to show that those terms, in an objective sense, were agreed. Of course the tribunal may reject such evidence and conclude that the party misunderstood the effect of what was being said and done. But when both parties are agreed about what they understood their mutual obligations (or lack of them) to be, it is a strong thing to exclude their evidence from consideration. Evidence of subsequent conduct which would be inadmissible to construe a purely written contract … may be relevant on similar grounds, namely that it shows what the parties thought they had agreed.[47]
[46] [1999] 1 WLR 2042.
[47] Ibid at 2050-1.

Subsequent conduct may be used in this context in a retrospective manner. That is to say, it may be used in order to understand the meaning of the language used by the parties in their communications and in particular, in determining whether that language expressed, objectively, an intention to be bound. Gleeson CJ described this usage in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd[48] when he said:
[I]t is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.[49]
[48] (1988) 18 NSWLR 540.
[49] Ibid at 550.
In the present case, both Bruno’s and Antonio’s action after the Termination Agreement in relation to Bruno’s securities provides strong evidence that the parties had reached agreement. The alternative is that the release of the securities was simply an act of grace of Antonio. In the circumstances then existing between the brothers, this is a much less plausible explanation of Antonio’s conduct.
The seventh pleaded element of the Termination Agreement was Bruno’s resignation as a director of Quintile Pty Ltd. On the appeal, counsel for Bruno acknowledged that Antonio’s evidence indicated that the two brothers had expressly agreed on this subject matter.
The next pleaded element was the agreement for the sum of $200,000 to be paid. Bruno acknowledged on the appeal that the evidence established that this had been agreed between the two brothers in the September meeting.
The final element was the agreement concerning Bruno’s entitlement to the insurance proceeds. Again, it is plain that this subject matter was discussed. It had formed part of Antonio’s proposal since his letter of 11 June 1999.
The draft contract prepared by Knox and Hargrave on 15 October 1999 indicated that the purchase price was $183,264 and not $200,000 as agreed by the brothers. Bruno seized on this discrepancy. However, in my opinion, it is a matter of no consequence. It is apparent that the figure of $183,264 was derived by the solicitors after making adjustments, on the direction of Mr Bartholomeus, to the brothers’ respective loan accounts. It is possible that it was a proper implementation of the brothers’ agreement. But even if it was not, the fact that the solicitors included in a draft a new figure does not deny the completeness or certainty of the agreement which the brothers had reached. It would mean only that the lawyers’ draft did not reflect appropriately the brothers’ agreement.
The remaining provisions in the draft contract prepared by Knox and Hargrave were either matters which the brothers did discuss, or of a kind which solicitors acting reasonably would think should be in a partnership/share sale agreement without being essential for the agreement to be both complete and certain.
For these reasons, I consider that Bruno’s submissions concerning an absence of certainty in the agreement which he acknowledged he had reached with his brother should fail.
Subject to Documentation
The Judge was satisfied that the September 1999 meeting concluded with Antonio saying to Bruno that he would have documents prepared to reflect their agreement, and for signing by both him and Bruno.[50] The Judge was also satisfied that Bruno agreed to that course.[51] On the appeal, counsel for Bruno submitted that the brothers’ agreement was subject at least to the execution of the document recording it so that the agreement did not become binding until it had been executed. Counsel referred to the classification by the High Court in Masters v Cameron[52] of agreements which are made subject to formal contract:
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless or until they execute a formal contract.[53]
The High Court went on to say that in each of the first two classes, there is a binding contract but that in the third, the parties do not intend to be bound until the formal contract has been executed.
[50] Graziano v Graziano [2009] SADC 132 at [388].
[51] Ibid.
[52] (1954) 91 CLR 353.
[53] Ibid at 360.
Later, the High Court said that the words “subject to contract” or the use of some similar formula gave rise to a presumption that the agreement between the parties is not binding. Instead, the parties should be regarded as having reached agreement on the intended basis for a future contract. However, this presumption may not apply if the parties have agreed on all the essential matters for a concluded agreement and only intend in the future to execute a formal contract.[54]
[54] Commercial Bank of Australia Ltd v GH Dean & Co Pty Ltd [1983] 2 Qd R 204.
The fact that the two brothers contemplated the preparation of a formal contract does not of itself exclude their having intended immediately to be bound by their agreement.[55] Bruno submitted that the present case was of the third kind discussed in Masters v Cameron. Counsel for Antonio submitted that this case was in the first category or, at least, in the second category.
[55] Godecke v Kirwan (1973) 129 CLR 629 at 640-1.
It is often difficult to determine objectively the precise nature of the parties’ agreement to have a formal document drawn up to reflect their agreement. Parties frequently do not give express attention to this issue and much is left to be inferred from their conduct, and from the context in which the negotiation occurred. What is required is an objective assessment of the state of affairs between the parties, as distinct from the identification of any uncommunicated subjective reservation or intention that either may have harboured. The Court must consider what would objectively be conveyed by what was said or done, having regard to the circumstances in which the brothers’ statements and actions occurred.[56]
[56] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8 at [25]; (2002) 209 CLR 95 at 105.
In the present case, three considerations in particular point to the Termination Agreement being of the first class discussed in Masters v Cameron or perhaps in the category of case referred to in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd[57] by McHugh JA, namely:
The parties were content to be covered immediately and exclusively by the terms which they agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.[58]
[57] (1986) 40 NSWLR 631.
[58] Ibid at 634.
The first is that this is not a case in which either of the brothers at the September meeting used the words “subject to contract” or any other words to similar effect indicating that they did not intend their agreement to be binding. Antonio said only that he would have documents drawn up to reflect their agreement. Accordingly, this is not a case in which the presumption or “overriding condition” referred to in Masters v Cameron applies.
The second consideration is the commercial context to the brothers’ Termination Agreement. As noted earlier, Bruno and Antonio were well accustomed to reaching agreement on a course of action, and then leaving it to Mr Bartholomeus to document and record the transaction in an appropriate form. They had not previously conducted their business on the basis that their agreements should only become binding once Mr Bartholomeus had brought the appropriate documentation into existence and they had executed it.
The third matter indicating that the brothers intended to be bound immediately is their subsequent conduct. One week after the September meeting, Bruno requested payment of the sum of $200,000 which had been agreed on. This suggests that Bruno considered that the Termination Agreement was binding, even though it had not yet been documented in the way contemplated. Antonio told Bruno that he would not make the payment until the paperwork had been completed and signed. The Judge was satisfied that neither brother considered that Antonio’s response affected in any way the terms upon which they had agreed one week before.[59]
[59] Graziano v Graziano [2009] SADC 132 at [390].
For his part, as noted earlier, Antonio took action after the September 1999 meeting to implement part of the Termination Agreement. He arranged for the release of Bruno’s property at Brighton and his $150,000 term deposit as securities for the CBA loan. He also took immediate action to pay out the finance on Bruno’s car.[60] The Judge was satisfied that this action was taken by Antonio in part performance of the Termination Agreement.[61]
[60] Ibid at [391].
[61] Ibid.
For the reasons given earlier, it is permissible to have regard to the subsequent conduct of parties for the purpose of determining whether they had reached a binding contract.[62]
[62] See also B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149, 9154-6; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 at 670; Elmslie v Federal Commissioner of Taxation (1993) 118 ALR 357 at 368.
Accordingly, it is appropriate in the present case to have regard to the subsequent conduct of Bruno and Antonio to which I have just referred. That conduct tends to confirm that Bruno and Antonio each regarded himself as having reached a binding agreement and that they intended only that the documentation to be prepared for their signature should be a formal recording of their agreement.
This ground of appeal fails.
Antonio’s Wife Not a Party to the Proceedings
The Judge made declarations to the effect, amongst other things, that Bruno had agreed to transfer the assets and liabilities of the partnership and his shares in HPS International Pty Ltd, HPS Transport Pty Ltd and Quintile Pty Ltd to Antonio and his wife jointly.
Bruno submitted that declarations to this effect should not have been made because Antonio’s wife was not a party to the proceedings.
In support of this submission, counsel referred to the judgment of Jessel MR in Curtis v Sheffield.[63]However, that decision stands for a slightly different proposition, namely, that a court will not decide on future rights because, until the event happens, it does not know who may be interested in arguing the question and therefore whether it may be shutting out persons who, when the event happens, may be entitled to succeed. That is not the present case.
[63] (1882) LR 21 Ch D 1 at 4.
However, there is a general principle that courts will decline to make declarations affecting the rights of a person without that person being a party to the proceedings or, at the least, having the opportunity to be heard.[64] Accordingly, it would have been appropriate for Antonio’s wife to be made a party to the proceedings. However, the fact that she was not a party to the cross-action by which the declarations were sought against Bruno did not have the effect of invalidating the counterclaim, or of precluding the Court altogether from granting the relief sought by Antonio. Rule 77 of the District Court Civil Rules 2006 provides expressly that the validity of an action is not affected by the misjoinder or non‑joinder of a particular person as a party. Further, r 77(2) provides that the Court may, in those circumstances, determine the issues in dispute so far as they affect the persons who have been properly joined as parties.
[64] Associated Grocers Co-operative Ltd v Hubbard Properties Pty Ltd (1986) 42 SASR 321 at 330-1. See also London Passenger Transport Board v Moscrop [1942] AC 332 at 345.
The general approach of the courts in circumstances like the present is discussed in Zamir & Woolf: “The Declaratory Judgment”:[65]
Usually the Court will adopt an extremely pragmatic approach to the circumstances of a particular case. It will be reluctant to grant a declaration if a person who could be prejudiced by the grant of that declaration has not been made a party. Equally, however, it will be anxious to protect persons from unnecessarily being joined in proceedings in view of the expense and inconvenience involved. The decision of the court in any particular case will be very much a matter for its discretion and except in those rare cases where some error of principle can be ascertained, an appellate court will not interfere with the decision of the judge at first instance.
[65] [3^rd ed] at [6.13].
The point now raised by Bruno was not taken at trial. If it had been, it is likely that the position could have been easily remedied. Even now it would be possible for Antonio’s wife to be added as a party.
Bruno did not point to any particular prejudice having been occasioned by Antonio’s wife not being a party. Nor did he point to any evidence indicating that Antonio’s wife may not have wished to take a transfer jointly with Antonio of his shares in the company or of the assets and liabilities of the partnership. On the contrary, the evidence indicated that Antonio’s wife was content for Antonio to act as her agent in relation to all matters affecting the partnership business. It is also pertinent that Antonio’s wife was a beneficiary of the declarations, and that neither declaration imposed any obligation of an onerous nature on her. It also seems highly unlikely that she was unaware of the District Court proceedings. Finally, I think it relevant that it was not strictly speaking necessary for the Judge to have made the declarations in any event.
In these circumstances, the point now raised by Bruno seems more technical than substantive in nature. In my opinion, it is not a ground for interfering with the Judge’s decisions or orders.
Conclusion Concerning the September 1999 Agreement
In my opinion, each of Bruno’s criticisms of the Judge’s conclusions concerning the Termination Agreement should fail.
Refusal of Application to Reopen
After the completion of the evidence but before hearing the final submissions, the Judge refused an application by Bruno for permission to reopen his case. Bruno wished to lead evidence from a Mr Talbot-Wilson who has some expertise with respect to handwriting and signature verification.
The Judge refused that application. Bruno’s notice of appeal contained a ground contending that that decision was wrong. His summary of argument provided to the Court in advance of the hearing did not contain any submissions to support the ground. On the hearing of the appeal, counsel said that his instructions were to the effect that the ground should be maintained but that he could not usefully advance an argument to support it.
The Judge gave detailed reasons for his refusal of permission to reopen. They included the following:
1.Mr Talbot-Wilson’s proposed evidence, although more wide-ranging, went principally to the question of whether Bruno’s signature on a notice of resignation as a director of HBS International Pty Ltd was genuine. However, in the course of the opening of Bruno’s case, counsel for Bruno had indicated that that issue was not relevant to the issues to be determined by the Judge.[66] The Judge himself considered that he did not have to resolve the question of the genuineness of the signatures in order to resolve the issues in the trial.[67]
2.During the course of his evidence, Bruno had at times given conflicting evidence about whether certain signatures were his. The Judge said that he could not discern any material difference between signatures acknowledged by Bruno to be his, on the one hand, and those which he did not acknowledge as his, on the other. The Judge thought that Bruno’s evidence about his signatures had at times “an almost surreal and sometimes ludicrous aura”.[68]
3.Mr Talbot-Wilson’s proposed evidence would, in some respects, conflict with Bruno’s because he considered that certain signatures which Bruno had acknowledged as his own were in fact not genuine. [69]
4.The Judge was concerned about the trial becoming protracted unduly if permission to reopen was granted.[70]
5.Finally, the Judge considered that Bruno had been given ample opportunity previously to pursue any concerns which he had about the genuineness of signatures on documents relating to the partnership business.[71]
[66] Graziano v Graziano [2009] SADC 132 at [155]-[156].
[67] Ibid at [163].
[68] Ibid at [157].
[69] Ibid at [158].
[70] Ibid at [164].
[71] Ibid.
The decision concerning an application to reopen to call further evidence is very much a discretionary decision. A trial judge is much better placed to determine that issue than is a court on appeal. An appellate court would only interfere with such a decision on House v The King[72] grounds. As noted earlier, counsel for Bruno on the appeal did not consider that an argument in support of this ground of appeal could be usefully made. Implicit in this was a concession that the Judge had not made any error of the House v The King kind.
[72] (1936) 55 CLR 499.
This ground of appeal therefore fails.
The Insurance Proceeds
As noted earlier, the second principal issue advanced on the appeal was whether or not the Judge had been correct in finding that Antonio was the legal owner of the insurance proceeds but that he held them on trust for the partnership. Bruno acknowledged on the hearing of the appeal that it was not necessary for the Court to determine this ground of appeal if he failed on the first. That is because Bruno will, by virtue of the Judge’s findings as to the content of the Termination Agreement, and the orders which the Judge has made, receive the insurance proceeds in any event.
In those circumstances, I consider that it is neither necessary nor appropriate for this Court to address the various submissions made relating to this issue.
Conclusion
For the reasons given above, I consider that the appeal should be dismissed.
PEEK J. I agree with the reasons of White J and with his orders.