Helmos Enterprises Pty Ltd v Jaylor Pty Ltd - [2005] NSWCA 235

NEW SOUTH WALES COURT OF APPEAL

CITATION: Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235

FILE NUMBER(S):
40350/04

HEARING DATE(S): 13/04/05

JUDGMENT DATE: 08/07/2005

PARTIES:
Helmos Enterprises Pty Limited (A)
Jaylor Pty Limited (R1)
Kingsley's Australian Steakhouse Pty Limited (R2)

JUDGMENT OF: Hodgson JA Young CJ in Eq Stein AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): 4814/02

LOWER COURT JUDICIAL OFFICER: Brownie AJ

COUNSEL:
S D Rares SC and P Dowdy (A)
M Walton SC and M S White (R)

SOLICITORS:
Bray Jackson & Co (A)
Diamond Peisah & Co (R)

CATCHWORDS:
CONTRACT-Commercial contracts- Plaintiff seeking to purchase two restaurants- First purchase completed- Second purchase not completed- Seven aspects of deal unclear- In circumstances contract in fourth class of Masters v Cameron- How court deals with problems of incomplete contract.

LEGISLATION CITED:
Liquor Act 1982
Retail Leases Act 1994, ss 39, 41, 41A
Trade Practices Act 1974 (Cth)

DECISION:
Orders: (1) Appeal allowed with costs; (2) Orders of Brownie AJ set aside; (3) Cross appeal dismissed with costs; (4) Remit issue of quantum of damages to the Equity Division; (5) Costs of the first trial referred to the Judge or Associate Justice who hears the second trial.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40350/04
SC 4814/02
HODGSON JA
YOUNG CJ in EQ
STEIN AJA
Friday 8 July 2005

HELMOS ENTERPRISES PTY LIMITED v JAYLOR PTY LIMITED

FACTS

The plaintiff sought to buy two restaurants, one in the City and one at Woolloomooloo.
The City restaurant was owned by K. K owned half of the Woolloomooloo restaurant with J.
The purchase of the City restaurant was completed. J objected to completing the purchase of the Woolloomooloo restaurant on the grounds that there was no contract, but merely an intention to enter into a contract and that if there were a contract it was void for incompleteness on seven major points.
The trial judge upheld the latter point and held that there was no contract.
The trial was split, but in an informal way so that no evidence of damage was led.
The Court of Appeal held that there was a contract. The issue as to whether the plaintiff could recover damages for breach was questionable. The Court considered that because of this fact, the costs of the first trial should await the result of the further hearing.
The Court also made observations as to the need for precision when splitting trials.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40350/04
SC 4814/02
HODGSON JA
YOUNG CJ in EQ
STEIN AJA
Friday 8 July 2005

HELMOS ENTERPRISES PTY LIMITED v JAYLOR PTY LIMITED

Judgment

HODGSON JA: On 14 April 2004, Brownie AJ gave judgment in proceedings in which the appellant (Helmos) had claimed damages against the first respondent (Jaylor) and the second respondent (Kingsley’s) for breaches of contracts, namely a contract for the purchase by Helmos of Jaylor’s share in a company (Crabhouse) conducting a restaurant business in Woolloomooloo, and a contract obliging Kingsley’s to enter into a joint venture agreement with Helmos for the purpose of conducting that business. The primary judge gave judgment for Jaylor and Kingsley’s, and ordered Helmos to pay their costs.
Helmos has appealed from those orders, and Jaylor and Kingsley’s have cross-appealed seeking declarations that there was no binding agreement between Helmos and either Jaylor or Kingsley’s.
HELMOS’S CLAIM
During the second half of 2001 and early 2002, Kingsley’s conducted a restaurant in King Street, Sydney, and Kingsley’s and Jaylor conducted a restaurant in Woolloomooloo under the terms of a joint venture agreement dated 5 June 2001 pursuant to which Crabhouse had been appointed agent to manage the joint venture. There were two issued shares in Crabhouse, one owned by Kingsley’s and one owned by Jaylor.
Helmos’s case was that in January 2001, Jaylor offered Helmos an option to purchase its 50% interest in Crabhouse for $1.1 million, such option to be accepted in writing on or before 5pm on 15 April 2002; and that Kingsley’s made an offer to Helmos that, in consideration of Helmos accepting Jaylor’s offer and entering into a contract with Kingsley’s to purchase its King Street restaurant, Kingsley’s would enter into a fresh joint venture agreement with Helmos to operate the Woolloomooloo restaurant through a new company on the same terms and conditions as its joint venture agreement with Jaylor.
In February 2002, Helmos completed the contract to purchase the King Street restaurant; and on 8 April 2002, it wrote purporting to exercise an option to purchase Jaylor’s interest in Crabhouse.
Subsequently, Kingsley’s and Jaylor denied they were bound by any contractual obligation in respect of the Woolloomooloo restaurant, and on 26 September 2002, Helmos commenced proceedings for specific performance.
On 16 April 2003, Helmos purported to accept repudiations of contracts, and it continued with the proceedings as a claim for damages for breach of contract. In the proceedings, Helmos also claimed damages for misleading conduct under the Trade Practices Act.
DECISION OF PRIMARY JUDGE
On 10 September 2003 the matter was set down for hearing on the basis of liability only. During the hearing before the primary judge, on 16 March 2004 he made the following order:
By consent I order that there be separately determined all questions relating to the liability of any party and that all questions of damages be deferred until after determination of all questions concerning liability.
The primary judge held that, in the transactions relied on by Helmos, the parties did intend to enter into binding contractual relationships, whilst contemplating that there would be a further more formal agreement reached, possibly containing other terms.
However, he considered that the transactions did not create binding contracts, because there was still too much to be worked out, particularly in relation to Helmos’s insistence that there be a fresh joint venture arrangement through a new company. The primary judge listed seven points:
1.The assignment or grant of a lease to the new company, and adjustment of guarantees of the lease.
2.The circumstance that Helmos did not want to purchase Jaylor’s share in Crabhouse, as contemplated by the agreement with Jaylor.
3.Replacement of a licence to Crabhouse for storage of certain materials.
4.Replacement of a berthing facility agreement.
5.Dealing with chattels under hire purchase to Crabhouse, and guarantees of the hire purchase agreements.
6.Arrangement of a new licensee under the Liquor Act.
7.The terms of a new joint venture agreement with a new manager.
The primary judge also rejected the Trade Practices Act claim, and accordingly gave judgment for the defendants.
APPEAL AND CROSS-APPEAL
In its appeal, Helmos challenged the view of the primary judge, on the basis that his seven points were merely matters of “mechanics”, capable of being worked out without the need for further agreement between the parties.
In its cross-appeal (which more properly should be regarded as a Notice of Contention), Jaylor and Kingsley’s contended that the primary judge was in error in finding an intention to create legal relations.
DISPOSAL OF APPEAL
I agree with Young CJ in Eq. that the appeal should be allowed and the cross-appeal should be dismissed and, subject to what I say below, I agree substantially with his reasons.
In my opinion, where an order is made for separate determination of questions concerning liability, it is highly desirable that it be made clear at that time whether or not, as part of that hearing, a party seeking damages must establish (at least on a prima facie basis) an entitlement to some substantial damages, so that a further hearing to assess those damages serves a useful purpose: see National Engineering Pty. Ltd. v. Chilco Enterprises Pty. Ltd. [2001] NSWCA 291 at [1], [5]-[8].
This did not happen in this case, and a ruling on evidence made by the primary judge on 15 March 2004 indicates that he and the parties were proceeding on the basis that Helmos needed to prove damages only in relation to its Trade Practices Act claim. Accordingly, it is appropriate now to proceed on the basis that the appeal can succeed, even if Helmos has not shown an entitlement to any more than nominal damages. Incidentally, this consideration reinforces the point that strictly, the appeal should have been by leave: Triden Properties Ltd. v. Capita Financial Group Ltd. (unreported, Court of Appeal, 26/11/93); Chilco at [1] and [3]. However, as in Chilco, no point was taken on this.
The discussion by Young CJ in Eq. concerning numbers 2 and 7 of the primary judge’s seven points indicate that to enforce the contracts, in the absence of further agreement, Helmos would have needed to complete the purchase of Jaylor’s share in Crabhouse, relying on the contracts as giving it Jaylor’s rights under the existing joint venture agreement, and then working out the details of the future relationship between it and Kingsley’s by means of dispute resolution procedures provided by that existing agreement. Plainly, that was something Helmos did not want to do, because it was insistent that the joint venture be conducted by a new entity, and it was looking for completion of the agreements in a way such that the new entity to conduct the joint venture would already be in place. Accordingly, there is a real question whether Helmos has shown itself to be ready, willing and able to perform the agreements, in the only way in which they could have been enforceable by Helmos in the absence of further agreement.
In my opinion, entitlement to damages for repudiation requires proof that, but for the repudiation, a plaintiff would have received some benefit under the contract, or at least the chance of some benefit having commercial value; and in general, that requires proof that the plaintiff would, on the balance of probabilities, have done what was necessary on its part to entitle it under the contract to that benefit or chance of benefit. That issue was not addressed below, and there is a real question whether the evidence led by Helmos could have established that. If Helmos does not establish that much, in my opinion its only entitlement would be to nominal damages; and there would then be a real question as to who should pay the costs, both of the original hearing before the primary judge and of the damages hearing.
There is also a question as to whether Helmos could be entitled to damages from both Jaylor and Kingsley’s. Helmos would have received no benefit under the agreement with Kingsley’s unless it had obtained completion of Jaylor’s agreement conferring on Helmos Jaylor’s half interest in the Woolloomooloo restaurant business. There was no suggestion that it was Kingsley’s repudiation that caused Jaylor to repudiate its agreement. The question really is whether damages recoverable from Kingsley’s should be on the assumption that Jaylor performed its agreement, or on the assumption that Jaylor did not perform its agreement. My tentative view is that if Helmos proved that it would have done what was necessary on its part to be entitled to have Jaylor perform its agreement, it should be able to recover damages from Kingsley’s on the basis that Jaylor would have performed the agreement. At present, I see no reason why Kingsley’s should in effect be able to hide behind Jaylor’s breach, if Helmos would have been entitled to performance from Jaylor.
However, these matters are matters that will need to be determined at the damages hearing.
YOUNG CJ in EQ: This is an appeal and cross-appeal from a decision of Brownie AJ sitting in the Equity Division.
The parties to the various arrangements discussed in these reasons are the appellant, "Helmos," a company controlled by a Mr Varvaritis ("Vavaritis"), the respondent, "Jaylor", a company controlled by a Mr Jeffreson ("Jeffreson"), and Kingsley's Australian Steakhouse Pty Ltd, ("Kingsley's"), a company controlled by a Mr (Kingsley) Smith ("Smith").
The basal question before his Honour and before us is whether there was a binding contract between the parties for the transfer of Jaylor's one ordinary share in Kingsley's to Helmos for a consideration of $1,100,000.
Although Brownie AJ was sitting in the Equity Division, the decision made was one purely in accordance with the common law. This was because although the proceedings had commenced as a suit for specific performance, the appellant had, before the hearing, terminated the contract, so that the only issue was whether there was a binding contract and damages. This point may have significance in some later discussion in these reasons.
In essence, Brownie AJ held that, even though the transaction fell within what is commonly called the fourth class in Masters v Cameron (1954) 91 CLR 353 (as to which see GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631), there was no contract because the parties had never agreed on seven vital matters which were necessary to make their arrangement viable.
The appellant says that his Honour erred in finding that the contract was void for uncertainty. The cross-appellant says that Brownie AJ was in error in finding that there was an intention to create legal relations.
There was a subsidiary issue before the trial judge and that was whether the conduct of Jaylor in and about the negotiations was misleading and deceptive under the Trade Practices Act 1974 (Cth). This was because it had misled Helmos into believing that there was a contract when it did not intend to be bound by the negotiations. His Honour dismissed this claim on "the simple factual level" that up until August 2002, Jaylor did intend to be contractually bound.
The appeal was heard on 13 April 2005. Mr S D Rares SC and Mr P Dowdy appeared for the appellant/cross-respondent and Mr M Walton SC and Mr M S White appeared for the respondents/cross-appellants.
The basal facts of the case are that Kingsley's wholly owned and operated a restaurant in King Street, Sydney called Kingsley's Australian Steak House. Kingsley's also had a half-share in a second restaurant at Woolloomooloo called Kingsley's Steak and Crabhouse. Jaylor owned the other half-share.
Jaylor and Kingsley's conducted the Woolloomooloo restaurant pursuant to a joint venture agreement (the "JVA") dated 5 June 2001, which created a separate company, Kingsley's Crabhouse Pty Limited ("Crabhouse") for that purpose.
In May 2001, Helmos entered negotiations with Kingsley's to buy the King Street restaurant, although it made it clear that it would only do so if it could buy Jaylor's half-share of the Woolloomooloo restaurant as well. This was made explicit on 14 January 2002 when Mr Bray, solicitor for Helmos, said to Mr Doumanis, solicitor for Jaylor:
"It is essential that we receive confirmation from your client that he [Mr Jeffreson] is prepared to give our client the right to purchase the half-interest in the Woolloomooloo restaurant as they are really interested in purchasing both businesses, not just one. Could you please send me a letter confirming that your client has agreed to give our client this right before we exchange contracts for the purchase of the King Street restaurant."
Mr Doumanis was unable to provide a formal agreement to this effect but in response to Mr Bray's request that something be put in writing with respect to the purchase of Jaylor's half-share in the Woolloomooloo restaurant before it would proceed with its contract with Kingsley's for the King Street restaurant, he said:
"All I can offer you is a letter. I don't have any instructions beyond that. The parties will need to deal with the terms of any contract later." [Emphasis added].
Jaylor's solicitors did in fact provide a letter to Helmos' solicitors to this
effect on 15 January 2002, the substance of which was as follows:
"JAYLOR PTY. LIMITED ("Jaylor") AND HELMOS INTERPRISES PTY.LIMITED ("Helmos")
BUSINESS: KINGSLEYS STEAK AND CRAB HOUSE ("Kingsleys Crab House")
We refer to recent telephone discussions between our respective offices regarding Helmos' interest in purchasing Jaylor's 50% ownership of Kingsleys Crab House. We are instructed to confirm the following:-
1.            Jaylor hereby offers Helmos the opportunity to purchase its 50% interest in Kingsleys Crab House ("offer to purchase") for $1,100,000.00 ("the purchase price").
2.            Helmos is to exercise the offer to purchase by notice in writing to our office ("exercise of offer") no later than 5.00pm, 15 April, 2002, time being of the essence ("exercise date").
3.            Upon receipt of the exercise of offer Contracts for purchase of Jaylor's 50% interest in Kingsleys Crab House ("contract of purchase") shall be sent to your office no later than five days from the exercise date.
4.            Subject to Jaylor and Helmos' agreement to the terms and conditions contained in the contract of purchase, settlement thereof shall take place no later than 14 days from the exercise date.
5.            The purchase price to be free of any deductions.
6.            Jaylor undertakes until the exercise date not to enter into any contract, lease or any other arrangement with any other party as would prevent Jaylor from performing its obligations pursuant to the exercise of offer."
It is the terms of this letter, or alternatively the terms said to be omitted from it that are central to the current appeal. In fact the primary judge found the following seven matters were left outstanding from the parties' negotiations:
1.The lease of the Woolloomooloo premises to Crabhouse and how it would be affected by the supposed contracts;
2.The nature of exactly what Helmos was purchasing: that is, whether it was simply the purchase of a share in Crabhouse or some other mechanism whereby Helmos would acquire Jaylor's interest in the JVA;
3.A licence to Crabhouse to use storage space nearby to the restaurant;
4. The lease of a berthing facility to Crabhouse;
5.A hire-purchase agreement entered into by Crabhouse for the. use of equipment in the restaurant;
6. The liquor licence for the Woolloomooloo restaurant; and
7.Jaylor's desire to change the management arrangements contained in the original JVA.
On 17 January 2002 Helmos' solicitors informed Kingsley's solicitors that it had received the 15 January offer and that it would accept it only if Helmos received a letter from Kingsley's acknowledging that Kingsley's would enter into a fresh JVA with Helmos once it did accept.
Mr Michell, solicitor for Kingsley's, confirmed that day that Kingsley's would enter into a fresh JVA with Helmos as requested.
Helmos and Kingsley's exchanged contracts for the purchase of the King Street restaurant on 22 January 2002 and completed it on 18 February 2002, however there is little more to be said about that contract that could be relevant to the present proceedings. The only significance of it is that it shows that part of the arrangement between Helmos and Kingsley's was fully executed.
On 8 April 2002 Helmos formally accepted Jaylor's offer of 15 January 2002 by letter between their solicitors. Helmos suggested that the details of the January agreements could be worked out at a meeting between the two parties and their legal advisers and accountants. In subsequent correspondence between Mr Bray and Mr Doumanis, Mr Bray requested that Mr Doumanis submit a draft agreement for the transfer of Jaylor's share.
However, it appears that nothing further was done to progress Helmos' acquisition of Jaylor's share in the Woolloomooloo restaurant, although it was only in August 2002 that it became clear that the respondents no longer considered themselves bound by the various communications referred to above which the appellant says formed binding contracts.

In fact, on 20 August 2002 Jaylor's solicitors informed Helmos' solicitors that at no time did Jaylor and Kingsley's intend to be legally bound by any supposed arrangement between them.
It appears that this change of heart on the part of the respondents was motivated by unrelated concerns held by Mr Smith with respect to the value of his company's share in the Woolloomooloo restaurant, although this was really only relevant for the purpose of the trial judge determining Mr Smith's credibility.
In this regard, his Honour found that wherever there was conflict between the evidence of Mr Varvaritis, principal of Helmos, and Mr Jeffreson and Mr Smith, Mr Varvaritis' evidence was to be preferred.
It is convenient to deal first with the cross-appeal, and then with the issues on the appeal. I will thus consider the issues under the following heads:
1.            Was the judge correct in finding that the parties intended to create legal relations?
2.            Was the judge correct in classifying the case under the Masters v Cameron calculus?
3.            Was the judge in error in finding that the alleged contract was void for uncertainty?
4.            Did the judge err in dismissing the appellant's case under the Trade Practices Act?
5.            Other matters argued on the appeal.
6.            What is the result of the appeal?
However, before dealing with the issues, I must note that, although it appears that the document was never formally filed, all parties agree that the document called "amended statement of claim" printed on pp 19 and following of the red appeal book represents the claim made at the trial.
1. "Intention to Create Legal Relations" is a standard heading in text books on the law of contracts. However, it must be remembered, as four justices of the High Court pointed out in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105-6:
"Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened".
Brownie AJ said at [34] of his reasons:
"Viewing the matter objectively, as one must (Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105), the correspondence of 15 and 17 January and 8 April, particularly when coupled with the conversations between the solicitors, points towards the conclusion that the parties did intend to be bound. After a good deal of negotiation the solicitors for the parties spoke and wrote to each other in terms that lawyers often use, and on serious occasions."
There does not seem to be any complaint about that passage. Indeed it is consistent with the experience of decisions of courts in dealing with the question as to whether the parties intended to create legal relations.
Generally in commercial agreements there is a strong presumption in favour of an intention to create legal relations, a presumption that will only be rebutted with difficulty: Edwards v Skyways Ltd [1964] 1 WLR 349, 355; Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, 177. In this case it is fairly clear that the parties intended to create legal relations, particularly because the parties communicated via their solicitors and employed language usually associated with commercial contracts.
The question as to whether parties intended to create legal relations and the question whether what the parties signed had the effect of constituting an enforceable contract are two distinct matters.
This can clearly be seen from the classic textbook case of Balfour v Balfour [1919] 2 KB 57 where there was no doubt that the husband and wife had made an arrangement: the question was whether the parties intended a domestic arrangement or a legally enforceable contract.
I can find no error in Brownie AJ's approach and determination of this matter.
2. His Honour then went on to consider into which category of the possibilities set out in Masters v Cameron (1954) 91 CLR 353 the case fell and decided with an economy of reasons, that the case fell into the so-called fourth class where the parties had agreed to be bound immediately even though there would be a more formal agreement subsequently which could contain other terms. He cited Sinclair, Scott &Co Ltd v Naughton (1929) 43 CLR 310, 317; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634-5 and Player v Isenberg [2002] NSWCA 186.
Mr Walton says that the authorities relied on do not provide a secure foundation for his Honour's ruling.
Before considering this point in detail, I must note that it is important to realise that this issue (as to whether the parties intended to be bound immediately by the January and April 2002 exchanges or whether they only intended to be bound once a more formal agreement had been executed) is a wholly separate issue to the question of completeness or uncertainty. This is so, although the two are often related because similar evidence is usually looked at when determining each; see eg Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548.
As is well known, the High Court in Masters v Cameron (1954) 91 CLR 353 at 360, said that cases of the present type may belong to one of three classes. The three classes set out were:
1.              Where the parties have reached final agreement on the terms of their contract and agree to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document;
2.              Where the parties have reached final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract;
3.             Where the parties intend there not to be a concluded contract unless and until a formal document is executed.
The vital question is always what the parties intended by the words they have used. In a case where the parties have expressly or impliedly indicated that there will be a further agreement, it is a question of construction whether the execution of a further contract is a condition of the bargain or else is merely an expression of the desire of the parties as to how their transaction will be completed: Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, 289. Each case turns on its own facts.
In Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628, MH McLelland J said:
"There is in reality a fourth class additional to the three mentioned in Masters v Cameron ... 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.' "
The words quoted derive from Sinclair, Scott &Co v Naughton (1929) 43 CLR 310 at 317.
McLelland J's decision was affirmed in this Court as GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631. The court there consisted of Kirby P, Glass and McHugh JJA. The lastmentioned gave the leading judgment with which the other two judges noted their agreement.
At page 634, McHugh JA said:
"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 surrounding circumstances … . 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.
Even when a document recording the terms of the parties' agreement specifically refers to the execution of a formal contract, the parties may be immediately bound."
His Honour then cited with approval the passage from Sinclair's case cited by McLelland J.
Mr Walton submits that the cases cited by Brownie AJ were either not applied correctly or should have been distinguished.
He noted that the passage customarily quoted from Sinclair is preceded by the words "The case is not one". He points out that Sinclair was a case that was decided on the basis that there was no intention to be bound because there were too many unknown terms. As such it was similar to this case and so his Honour should have taken his later findings on incompleteness into account when determining this issue. This he appeared not to do.
Mr Walton then said that Baulkham Hills should be distinguished because although it was a case that clearly recognised the fourth category of Masters v Cameron, it did so on the basis that particular words were used by the parties that explicitly evinced an intention to be immediately bound. In the instant case, he said, his Honour should have had regard to the use by Jaylor's solicitors of the words, "Subject to Jaylor and Helmos' agreement to the terms and conditions contained in the contract of purchase ..." in the 15 January 2002 letter. These words distinguished it from Baulkham Hills.
He then distinguished Player v Isenberg. I should briefly digest that case before dealing with Mr Walton's submissions on it.
The court consisted of Beazley, Giles and Ipp JJA, the former giving the leading judgment with which the other two judges noted their agreement. The dispute concerned alleged agreements to deal with the aftermath of the dissolution of a solicitors' practice.
At [49] and following of her judgment, Beazley JA briefly reviewed a large number of authorities on the subject and considered that depending on the size, importance and complexity of the subject matter of the agreement so one would or would not expect the parties to consider themselves bound by an informal document. She held that there was no contract in the case before the court.
Mr Walton submitted that Player v Isenberg in fact emphasises the importance of the factors which Brownie AJ failed to apply: that is, the failure of the parties to agree on important matters in a complex transaction which that case considered a major factor in justifying a finding that there was no contract.
The criticisms in Mr Walton's submissions merely go to whether the conclusions reached in the fact situations dealt with in the cases cited are of guidance in the present case. They do not go to the basic principle.
Certainly, the numerous yet to be determined terms, as outlined in [14] above tell against an intention by the parties to be bound. The use of a "subject to contract" type phrase by experienced solicitors further supports this view. However, this is not determinative and, indeed, the actual phrase itself appears somewhat equivocal in that it may simply mean subject to the agreement of the further terms not yet determined; that is, something akin to a fourth Masters v Cameron situation.
There has been recent academic discussion as to whether there really is a fourth class to be added to the three specified in Masters v Cameron; see the article in (2004) 20 JCL 156 by Peden, Carter and Tolhurst, "When Three Just Isn't Enough". However, an article by academics which attacks the considered view of MH McLelland J, one of the greatest equity judges of the 20th century, in a decision which was upheld in the Court of Appeal and since followed by almost every judge of the Court of Appeal and the Equity Division, as not being of any authority and contrary to what the High Court said in Masters v Cameron, does not rate serious consideration. Indeed no-one gave it more than passing reference in the instant case.
It needs to be realized that in an arrangement that falls within the fourth class, as McHugh J pointed out in the GR Properties case at 635, "If the parties agreed on additional terms they would be added to the formal contract. If they did not, the formal contract would only give effect to the agreed terms and conditions of the correspondence." Thus, if it is abundantly clear that essential terms cannot be added subsequently, the contract will fail.
The question in the present case is whether the arrangement fell into the third class as Mr Walton submits or the fourth class as found by the trial judge. The third class is, of course, the only one in which a contract is not created.
It is true, as Mr Walton submits, and as the authorities demonstrate that an intention to be bound will be less likely to be found "the more numerous and significant the areas in respect of which the parties have failed to reach agreement" are: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 548.
It is also the case, that the use of particular words in the written documents, such as "subject to contract", while not completely determinative, will usually give rise to a strong prima facie presumption of an intention not to be bound until a formal document is drawn up: Chillingworth v Esche [1924] 1 Ch 97 and Masters v Cameron at 362-363. However, those cases and others that have since stated the presumption have tended to involve contracts for the sale of land. The presumption may be weaker in other circumstances; see eg Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204 at 210 in relation to a guarantee and City of Box Hill v E W Tauschke Pty Ltd [1974] VR 39 at 46 with respect to a construction contract.
However, one has to look at all the circumstances. The court has also to bear very much to the forefront that the present case is a commercial dealing which involved not only the arrangement with respect to the Woolloomooloo restaurant, but also the King Street City restaurant. That latter restaurant was dealt with between Helmos and Kingsley's by a contract that to the knowledge of Jaylor, was fully executed by transfer to Helmos.
There was some debate before us as to whether there was one tripartite contract or two separate contracts. Apart perhaps from the question of quantum of damages, it really does not matter which was the case.
However, I venture to think that Mr Bray, Helmos' solicitor was very close to the mark when he said in evidence:
"The purchase of the shares by my client was necessarily involved with a new joint venture with the existing partner ... . As I said, I believe the two transactions, one flowed into the other, the sale of shares and the new entity would occur, that would occur on the one day, so it was essential that the documents for both be prepared at the same time."
In all these circumstances, it was quite appropriate for the trial judge to take the view that the parties intended to create legal relations and that the case came within the fourth class.
The cross-appeal must thus be dismissed.
3. I turn now to the appeal itself and focus upon the question as to whether the number of matters left outstanding meant that the contract failed for uncertainty or incompleteness.
It is important to define what is meant by saying that a contract is void for uncertainty. In Custom Credit Corporation Ltd v Cenepro Pty Ltd (unreported, NSWCA, 7 August 1991) Mahoney JA said (omitting reference to some of the examples and authority to which his Honour referred):
"As has been pointed out ... there are various kinds of uncertainty. A contract may be uncertain because there has been no agreement at all; there is merely an agreement 'to agree' … . It may be uncertain because the agreement arrived at leaves undetermined one of the terms which the law requires specifically to be agreed in order that the contract be valid and enforceable ... . One of the terms of the agreement may contain words so vague as to be for this purpose meaningless ... or one of the terms of the contract may assume something that does not in fact exist ... ."
Lewison, The Interpretation of Contracts, 3rd ed (Sweet & Maxwell, London, 2004) at p 275 says that uncertainty may in principle have one of two results. The uncertainty may be such as to prevent any binding agreement from coming into existence. Alternatively, there may be a binding agreement, but with the omission of the uncertain term. He cites Vitol BV v Compagnie Europeene des Petroles [1988] 1 Lloyd's Rep 574, 576.
The present case is not one dealing with any of the matters of uncertainty strictly so called. It is about an arrangement where the parties have left various matters in an incomplete state. It is not the precision or meaning of the language used by the parties that is in question but rather whether certain important or essential terms have been, or are capable of being determined; see Carter and Harland's Contract Law in Australia, 4th ed (Butterworths, 2002) at [258] and see Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 342-4.
The trial judge decided that in all the circumstances and especially because there were seven essential issues yet to be determined by the parties with respect to the sale of Jaylor's Woolloomooloo share, the parties' exchanges were too uncertain to constitute binding contracts. In his Honour's words, "There was just too much still to be worked out." The thrust of Mr Rares' submissions in answer to this finding was that each of the seven undetermined matters was mere "mechanics", each of which was capable of being ascertained by available machinery without the need for further agreement between the parties.
Chitty, 28th ed 2-103 and following, notes, particularly at 2-105, that there are many instances where courts have enforced agreements which were incomplete and that courts will endeavour to do so unless without further agreement, the contract made is unworkable. The editor cites Perry v Suffields Ltd [1916] 2 Ch 187 where a contract to sell a hotel for a certain price was enforced even though essential details such as the deposit and completion date were not specified.
In Thorby v Goldberg (1964) 112 CLR 597 at 607, Menzies J approved the statement of Sugerman J in this court that:
"It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties."
There are many similar statements to the same effect; see eg Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 130.
In Hall v Busst (1960) 104 CLR 206 at 222, Fullagar J held that in contracts for the sale of land there are three necessary or essential elements: the parties, the subject matter and the price. He did not mention essential conditions.
This issue was considered in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 (affirmed in the Court of Appeal at [1987] 2 Lloyd's Rep 615). That case involved the sale and purchase of corn gluten feed pellets. The contract in question was contained in a series of telexes that included the price and terms of shipment and payment. However, the buyers subsequently informed the sellers that certain terms, which had been the subject of negotiation, had been left out and consequently there was no concluded contract. Bingham J held that although it was usual for a contract of this kind to contain terms as to the loading rate, demurrage and despatch and carrying charges, those terms were subsidiary and not essential for the formation of a concluded contract and so could be worked out later.
Bingham J approached the question by saying, at 611:
"I think, furthermore, that the Court must bear constantly in mind the subject matter with which it is dealing. The relevant principles of the law of contract are, no doubt, of universal application, but the proper inference to draw may differ widely according to the facts of the particular case. One case may concern a protracted negotiation, perhaps conducted in writing through lawyers, between parties who have had no dealings of any kind before. Another may concern a series of quick-fire exchanges between professionals both of them practitioners of the same trade, both having many previous dealings, and with a wide measure of common experience, knowledge, language and understanding between them. One could not sensibly approach these cases in the same way."

On appeal, Lloyd LJ, with whom O'Connor and Stocker LLJ agreed, approved of the approach taken by Bingham J and stated at 619 that:
"It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant ... . Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later."
[Emphasis added]
The decision of the High Court in Godecke v Kirwan (1973) 129 CLR 629, is consistent with this thinking. The court enforced a serious commercial bargain even though a more formal contract was contemplated which would deal with some serious matters not included in the informal document which the parties had signed.
The cases appear to make the distinction between a vital term and an essential term on the one hand and other important matters.
Mahoney JA in Custom Credit Corporation Ltd v Cenepro Pty Ltd, gave as an illustration of the omission of a vital term, the omission from an agreement for lease of the date of commencement. Such an omission has from early times been held to invalidate the agreement.
An essential term relates to parties, property and price, though, even here, price is sufficiently certain if it can be rendered certain.
Other important terms are capable of being included in a contract subsequent to its formation, without the contract being considered initially as incomplete. However, as Pagnan SpA makes clear, the question whether a term is so "important" or "essential" that its omission renders a contract incomplete is one of degree and will depend on the nature of the circumstances surrounding the pre-contract negotiations and the nature of the contract itself.
The difficulty in deciding what makes a term essential or important for this purpose was explained in Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32, a case concerning a joint venture agreement for the purchase of a ship where the name of the ship had been omitted. Ormiston J dealt with this problem at 68 and, after noting the difficulties in defining the essential terms as stated by Lloyd J in Pagnan SpA, he showed a preference for a less formalistic approach, one that placed less emphasis on the need to strictly define essentiality or importance:
"Where parties have deliberately written the terms upon which they wish to bargain but have omitted ... a term which might in other circumstances have been expressly ... stated, the courts will endeavour to give effect to the fact that the parties did not see the absence or deficiency of such a term as preventing them from reaching agreement. The significance of each term omitted ... will doubtless depend upon the nature of the contract ... . It does not follow, however, that the omission of a series of terms, each of significance, can ordinarily be overcome and the courts will be less likely to overlook the deficiencies where they have good reason to doubt that the parties have set down or expressed the whole of the terms upon which they wish to deal."
Ormiston J's statement appears to be in agreement (although, not unreservedly so) with what Kirby P said, in Custom Credit Corporation Ltd v Cenepro Pty Ltd should be the correct attitude taken by courts in cases like the present. That is, that where the contract in question is of a commercial nature, the court should adopt a commercial approach so that everything that can be done is done to give effect to an agreement which men of business would assume would be fulfilled:
"If, as seems obvious from correspondence from three financial sources, large and important commercial agreements are effected substantially upon short letters which contain the essence of the parties' promises, it would be a great misfortune if the law refused to enforce such promises where the business community organises its affairs upon the assumption that such promises would be fulfilled and, if necessary, enforced. Such a disparity between commercial expectations and legal principle should be avoided if at all possible." (At p 39 of BC9101701)
Kirby P was influenced by what is said by Greig & Davis, The Law of Contract (LBC, 1987) at pp 358-362 and by what I said in Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd [1989] ANZ ConvR 548 that from about 1932, the courts abandoned the formal and strictly logical approach demonstrated in cases such as May & Butcher Ltd v The King (1929) [1934] 2 KB 17n and adopted a commercially realistic approach in the enforcement of apparently incomplete or uncertain contracts (see eg Hillas &Co Ltd v Arcos Ltd (1932) 147 LT 503 and in Australia, York Air Conditioning & Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11).
However, taking a realistic approach does not mean abandoning contractual principles altogether so that the court will not go to unacceptable lengths to do what, in truth, the parties should have done for themselves: Corpers (No 664) at 554.
This court reviewed the authorities on uncertainty generally in Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130. Kirby P listed a number of principles which he distilled from caselaw that he said was enormous. Amongst his list of principles was the rule that the court endeavours as much as possible to uphold the validity of agreements.
In the same case, Hope JA discussed a large number of authorities which showed just how far courts are prepared to go to avoid a finding of uncertainty.
Finally, on this section of the case, I should note the judgment of Rix LJ in giving the decision of the English Court of Appeal in Mamidoil--Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] 2 Lloyd's Rep 76. At p 89 his Lordship sets out a list of principles derived from his analysis of the cases. Two matters on the list are worth noting for the present case, viz:
".. particularly in commercial dealings between parties who are familiar with the trade in question and particularly where the parties have acted in the belief that they had a binding contract, the courts are willing to imply terms, where that is possible, to enable the contract to be carried out.
Where a contract has come into existence, even the expression 'to be agreed' in relation to future executory obligations is not necessarily fatal to its continued existence."
The present case is one where all the key players were involved in the restaurant industry and would all have been aware of what was necessary to be done in order to transfer a restaurant business from one owner to another.
Traditionally, different views were taken at law and in equity regarding what could be done where there was an incomplete contract. In equity, defective mechanics of a contract could be remedied by a reference to a master or to conveyancing counsel. The limits to this device were examined by the High Court in Hall v Busst (1960) 104 CLR 206.
Common law did not have the machinery to carry out such an exercise. However, at common law, the contract was construed so as to avoid uncertainty or incompleteness by implying that what was not spelt out was to be done in a reasonable manner within a reasonable time.
Neither of these methods can assist in the instant case.
There is another principle which exists both in equity and at law that where a contract is partly executed, a plea of uncertainty will rarely succeed.
It seems to me that the situation is in like plight where A to the knowledge of B enters into and completes a contract with C in the expectation that A's contract with B will also be completed.
The present contract is really in this category. Although Helmos and Kingsley's were the contracting parties for the completed contract for the sale of the King Street restaurant, it is clear from the evidence that Jaylor knew of this deal and Helmos' desire to be involved in both restaurants.
Justice Lewison, in his work referred to earlier at [8.12] gives a series of illustrations where courts in equity (Gregory v Mighell (1811) 18 Ves 328; 34 ER 341) or at law (eg British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623) have gone to considerable lengths to avoid finding uncertainty when a contract has been partly performed.
The alleged contract in the present appeal is a commercial contract between parties who are obviously experienced in commercial dealings. Accordingly, this is a case to which the above observations apply so that all attempts should be made, but only where possible, to give effect to their alleged agreement.
Before addressing the seven specific omissions that the trial judge said rendered the Woolloomooloo contract uncertain, I note that it was impressed upon the court by Mr Walton that we should not just look at the importance of each missing term in isolation but also look at their importance in conjunction with the number of terms missing, effectively asking us to adopt an in toto approach. It seems the primary judge adopted a similar approach in coming to his decision.
Mr Walton relied on the judgment of Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 for the proposition that the more numerous and significant the yet-to-be-agreed matters are, the slower a court should find that the parties have the requisite contractual intention.
However, it is clear from the passage relied on, that Gleeson CJ was referring to cases involving contractual intention of the Masters v Cameron type and not cases where a contract is said to be incomplete for lack of the necessary terms. Indeed, the need to do everything possible to give effect to a commercial agreement suggests that the court should examine one-by-one each missing term said to be essential to determine whether there needs to be further agreement between the parties or whether those terms are capable of being found by machinery or implication. An in toto approach, at least to the question of completeness, in my opinion is inappropriate.
The first matter that concerned the trial judge on the incompleteness question related to the fact that the alleged contract between Helmos and Jaylor was missing provisions that dealt with Crabhouse's (that is, the Joint Venturers') lease of the Woolloomooloo premises.
In fact there were three aspects of the lease found to be missing: whether and how Jaylor's interest in the lease would be assigned to Helmos; whether Jeffreson could be released from a bank guarantee given to the lessor so as to substitute Varviritis in his position; and what would happen to Crabhouse's undertaking to the lessor to complete certain work to the premises once Helmos replaced Jaylor.
Mr Rares submitted that ss 41 and 41A of the Retail Leases Act 1994 provided the mechanism by which the lease could be assigned to Jaylor. Expressing this another way, there existed a formula implied by law which could be applied to ascertain how the assignment would occur; see Greig & Davis at 377.
The primary judge found that, based on Helmos' 17 January 2002 letter to Kingsley's, the parties intended to replace Crabhouse with another company and enter a new Joint Venture Agreement. Therefore, there would need to be some way in which assignment from Crabhouse to the new entity could be effected.
There is no doubt that the Act applies to Crabhouse's lease of the Woolloomooloo premises. Section 39 contains the only means by which a lessor can withhold its consent to an assignment. Given the facts of this case, only non-compliance with s 41 could provide the basis for not giving consent. Section 41 requires the assignor to disclose to the lessor information regarding the assignee's financial standing and business experience. Once the assignor has complied with s 41, s 41A protects the assignor from liability to pay any amounts owing by the assignee.
I agree with Mr Rares that, given the nature of all the parties involved, there is no reason to suspect that the lessor would withhold consent and even if it did, for whatever reason, that would be a matter going to breach or frustration, not formation of the contract. The Act provided the mechanism for assigning the lease without the need for further agreement between the parties. Put another way, any terms regarding the assignment of the lease would not be sufficiently important or essential such that the Act would be an inappropriate method by which they could be determined.
The second aspect of the incompleteness regarding the lease was doubt over what would happen to a bank guarantee given by Jeffreson (who was in turn indemnified as to 50% by Smith) for the lessor's benefit for an amount equivalent to three months' rent. Again, section 41A of the Retail Leases Act provided protection to Jeffreson for any liability incurred by Helmos after assignment of the lease. In addition, Varvaritis gave evidence in cross-examination that he had agreed with Smith that he would simply replace Jeffreson and assume any responsibilities he had under the Joint Venture Agreement.
The idea of a straightforward "substitution" of Helmos for Jaylor (and Varvaritis for Jeffreson) appears to be at odds with Helmos' requirements that a new company replace Crabhouse and a fresh Joint Venture Agreement needed to be entered into. However, Varvaritis' evidence makes clear that the parties had agreed that the new Joint Venture Agreement would contain the terms of the old Joint Venture Agreement, the only difference between the two being that Crabhouse would be replaced by a new entity so as to allay Helmos' concerns over the past financial history of Crabhouse.
Thus the old Joint Venture Agreement provided the means by which the guarantee could continue and so this aspect of the lease was at least capable of determination. If there was some reason why Varvaritis could not be substituted for Jeffreson as guarantor, such as the lessor withholding consent, that would again be a question of performance; see Fitzgerald v F JLeonhardt Pty Limited (1997) 189 CLR 215 at 219.
There was further doubt over the third aspect of this issue, that is, whether certain works agreed to be undertaken by Crabhouse pursuant to a Deed of Release between it and the lessor were part of the alleged contract. The Deed of Release did not form part of the lease so the mechanisms referred to above do not apply. However, it is implicit in Varvaritis' assertion that Jaylor would be substituted by Helmos, that all Crabhouse's responsibilities would pass to the new entity. There was no evidence to contradict that or to suggest that Helmos would not agree to accept Crabhouse's responsibilities under the Deed. Even if there was, it is doubtful whether the responsibilities under the Deed can be classed as essential or necessary terms for the purpose of incompleteness as the Deed was peripheral to the lease and was not essential for the running of the restaurant.
The second matter of concern was the nature of the interest Helmos was to take.
The trial judge found that although Helmos' pleadings referred to a contract to purchase Jaylor's share in Crabhouse as well as its interest in the Woolloomooloo restaurant, Helmos did not want to purchase the share in Crabhouse because it was insisting that a new company be set up to replace Crabhouse. With respect, I think this is a misunderstanding of what was envisaged by the parties.
First, it is artificial to say that Helmos was purchasing a share in Crabhouse and the Woolloomooloo restaurant. Regardless of the language used by the parties, what in reality Helmos was purchasing was a one half share in the control of the assets the subject of the Joint Venture Agreement. Crabhouse was merely the present vehicle for the purpose of conducting the restaurant. Jaylor was purchasing one share in Crabhouse as that was the current vehicle. It really did not matter much which was the corporation that was used for the purpose of the new Joint Venture Agreement.
This point is weakened by the fact that the pleadings and order sought refer to the share in Crabhouse. However, if that contract were specifically performed to the letter, any new joint venture agreement with a new vehicle could easily be arranged.
Of course, on the facts, Helmos was adamant that a new Joint Venture Agreement should be entered into which would nominate a replacement for Crabhouse. However, this did not mean that Helmos did not want to purchase a share in the JV (or Crabhouse, on the pleadings). It was simply a two-stage process whereby Helmos agreed to buy Jaylor's share in the JV and once this occurred, Helmos and Kingsley's agreed to enter into a new JVA and create a new managing company. The two steps were not necessarily inconsistent.
The trial judge did not elaborate on why he considered that the above issues were incomplete or uncertain. Assuming that his Honour was suggesting that they were uncertain (as opposed to incomplete), the above analysis shows that the subject matter of the alleged contract was capable of being given a meaning that accorded with the parties' objective intentions, without going to unacceptable lengths to do so.
The third problem concerned storage space. The lessor of the Woolloomooloo restaurant had granted a licence to Crabhouse to use storage space near the Woolloomooloo premises. The trial judge found that this was, by itself, a minor matter. Given the need to determine each incomplete term one-by-one without relying on their cumulative effect to find an "overall" incompleteness, the storage space licence is clearly far from essential or necessary for the conclusion of the completed contract.
The fourth problem concerned the berthing facility. Crabhouse had the right to allow boats to berth at a berthing facility near the Woolloomooloo premises pursuant to a berthing facility rental agreement with the owner of the wharf. The agreement only had approximately six months to run at the time the alleged contract was made. Again, this was a relatively minor matter which, for the same reasons as above should not be relied on as a basis for finding the alleged contract incomplete.
The fifth problem concerned the fact that various items of equipment used in the Woolloomooloo restaurant were under hire purchase. Furthermore, a guarantee given by Jeffreson under that agreement would need to be dealt with, thus involving the financier as well.
This was not surprising and, indeed, one would tend to think that this would occur with the transfer of any restaurant business.
I agree with Mr Rares' submission that this was, once again, a matter of performance and not formation, since Helmos' assurance that it would take on all Jaylor's responsibilities under the Joint Venture Agreement necessarily implied that Varvaritis would be willing to replace Jeffreson as guarantor.
The sixth problem concerned the liquor licence for the Woolloomooloo restaurant which would need to be transferred from Jeffreson to someone else. The trial judge found this to be another source of incompleteness. However, here again, this is something that is handled almost as a matter of routine in many sales of businesses. The Liquor Act 1982 sets out how a liquor licence is to be transferred so that the only real incompleteness remaining was the identity of the transferee. Varvaritis' assurance that he would assume Jeffreson's role and the fact that he was already an experienced restaurateur makes clear that he was to be the intended transferee.
Finally, the judge found that there were insoluble problems with the management agreement.
As part of the arrangement between Helmos and Kingsley's, Helmos wanted to change the management arrangements of the Woolloomooloo restaurant. Mr Rares submitted that the management arrangements could be negotiated separately to the alleged contract and if an agreement could not be reached, the alleged contract would continue unaffected. This presents some difficulties for Helmos: indeed, it is the most awkward of the seven problems.

In the context of a contract for the sale of a restaurant business, it is difficult to see how terms concerning the management of that restaurant are not essential or necessary for the completeness of the contract. Further, it must be realized that management arrangements for a restaurant are not to be equated with the employment of a manager of a second-hand shop. Often it is quite irrelevant who the owner of a restaurant may be; it is the manager and the chefs who are the more significant entities.
However, whilst it was true that Helmos wished to replace the management agreement with some new agreement on a different basis and with a different manager, and whilst it is true that the matter of good management of a restaurant is vital, nonetheless there is no reason to suppose that the matter was so vital that Helmos would not leave the existing structure in place until the ripe time for change.
The trial judge merely said on this issue at [48]:
"… the joint venture agreement contained detailed provisions concerning the management of the venture, in essence by Mr Smith's nominee, for a fee, but the plaintiff wanted to change that arrangement, substituting a different manager and a different fee arrangement."
What the judge said was perfectly correct. However, if Helmos was unable to negotiate a new management agreement with a different manager and at a different fee, it would have had to accept a continuation of the existing agreement. It did not mean that the whole agreement was vitiated.
Most of the above problems involved the creation or re-arrangement of third party contracts. In my opinion, if the respondents' argument that these transactions were more than mere "machinery" and were sources of incompleteness because there was still too much to be agreed -is to be accepted, then one would need to overlook the commercial reality of contracts of this kind generally.
The respondents' submissions seemed to suggest that there would only be completeness of the contract in these proceedings if all the subsidiary contracts, eg the Woolloomooloo lease, the berthing agreement, the storage space contract and the hire-purchase agreement, had been worked out first. The logical extension of this thinking would mean that wherever commercial contracts rely on or are related to third party contracts (something that occurs almost all the time), all those third party contracts would need to first be concluded in order to achieve completeness of the primary contract. This is obviously an impractical and commercially unrealistic situation, one which, as I have said above, is the kind of approach courts have deliberately moved away from.
Accordingly, with respect, the trial judge erred in finding that these matters operated to void the contract for uncertainty or incompleteness.
4. In light of my views on the contract arguments, it is unnecessary to deal with the Trade Practices part of the appeal.
Had I needed to deal with it, my first impression is that the learned trial judge's finding of fact that at all relevant times prior to August 2002, Jaylor intended to be bound, was well within his mandate and that that was sufficient to find against Helmos on this point.
I consider the main argument against this, that if A misleads B as to whether a contract exists, it is irrelevant that A also misled himself, to be quite unconvincing.
5. Various other matters were argued on the appeal, which, because of the way I have considered the argument, do not arise for decision. However, for completeness, I will briefly mention one of them.
Towards the end of the oral submissions it became apparent that there was an issue as to whether the purchase of Jaylor's share and the entering into of a new Joint Venture Agreement between Helmos and Kingsley's were two separate contracts or really just one, with Kingsley's entry into a new Joint Venture Agreement being a condition precedent to Helmos' performance.
His Honour's judgment seems to have proceeded on the assumption that there were two agreements.
As I have said earlier, apart from its possible relevance when and if damages are assessed, at least in the way I have considered the case, the point does not appear to have any effect on the matters to be decided by this court in this appeal.
6. Accordingly, the appeal must be allowed.
It follows that there was a contract between the parties which the respondents have breached and that the appellant is entitled to damages for that breach.
There is no purpose in making a declaration to this effect. The court does not make declarations as a staging post in litigation.
In accordance with the request of counsel for the appellant, the issue of quantum of damages is referred to the Equity Division for the assessment of damages. The parties would prefer this to be dealt with by Brownie AJ, but, if this is not convenient, it may be dealt with by any Judge or Associate Justice.
However, I should note that it has been flagged that the question of assessment may involve difficult questions of principle linked to the matter as to whether the appellant was itself ready willing and able to fulfil the contract on its part.
I agree with the remarks of Hodgson JA as to the wisdom of reserving the costs of the first trial to the Judge who hears the second trial.
The orders must be:
Appeal allowed with costs;
Orders of Brownie AJ set aside;
Cross appeal dismissed with costs;
Remit issue of quantum of damages to the Equity Division;
Costs of the first trial referred to the Judge or Associate Justice who hears the second trial.
STEIN AJA: I agree with Young CJ in Eq.
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LAST UPDATED: 08/07/2005