Isotomic Pty Ltd v Adelaide International Raceway Pty Ltd - [2007] SASC 111

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ISOTOMIC PTY LTD & ANOR v ADELAIDE INTERNATIONAL RACEWAY PTY LTD
[2007] SASC 111
Judgment of The Honourable Justice Anderson
30 March 2007
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - OFFER AND ACCEPTANCE - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY - SALE OF LAND
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - OTHER MATTERS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - PARTIES - GENERAL PRINCIPLES
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - CREATION OF RELATIONSHIP OF AGENCY - PARTIES
CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER - ASSIGNMENT OF CONTRACT
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE
EQUITY - EQUITABLE REMEDIES - SPECIFIC PERFORMANCE - DEFENCES - FROM NATURE OF CONTRACT - NO CONCLUDED CONTRACT
Agreement for sale and purchase of raceway- whether four or five titles were included - whether contract price was agreed - whether GST applied - whether raceway was puchased as a going concern - whether parties ever agreed the terms of a contract – whether any enforceable contract – question of true identity of purchaser and therefore who was entitled to benefit of contract – whether first Plaintiff has standing – whether contract had been validly assigned – if contract was enforceable whether it was validly terminated – whether second Plaintiff cooled off – whether failure of condition as to finance terminated the contract – whether the second Plaintiff repudiated the contract – whether repudiation accepted by the Defendant – claim for specific performance – whether Plaintiffs are entitled to an equitable remedy due to lack of clean hands –issues of credit. Held: Terms of contract never agreed - no enforceable contract – first Plaintiff not entitled to benefit of the contract – second Plaintiff acted as an agent for undisclosed principal - principal was not the first Plaintiff but another identity - in any event repudiation of contract by second Plaintiff – repudiation accepted by Defendant – lack of clean hands by Plaintiffs, plaintiffs not ready, willing and able to settle - no entitlement to specific performance – Deposit returned to first Plaintiff
Land and Business (Sale and Conveyancing) Act 1994 (SA) s 5 (1), s 5 (7) (a); Corporations Act 2001 (Cth); Fair Trading Act 1987 (SA), referred to.
King v Pogguiti (1922) 32 CLR 223; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337; Shepherd v Felt and Textiles of Australia (1931) 45 CLR 359; Jones v Dunkel (1959) 101 CLR 298, applied.
Scammell v Ouston [1941] AC 251; Stevens v Standard Chartered Bank (1988) 53 SASR 323; Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 1 All ER 213; Aidinis v Hotchin [1971] SASR 446; Elders Ltd v Incitec Pivot Ltd [2006] SASC 99; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; Gilberto v Kenny (1983) 48 ALR 620, considered.

ISOTOMIC PTY LTD & ANOR v ADELAIDE INTERNATIONAL RACEWAY PTY LTD
[2007] SASC 111
INTRODUCTION

In this matter the plaintiffs, Isotomic Pty Ltd ("Isotomic") and Mr George Nowak, are seeking specific performance in relation to a contract for the sale and purchase of a property known as the Adelaide International Raceway. It is necessary to set out in summary form, a brief description of the persons and entities involved in this dispute.
The second plaintiff, Mr Nowak, at all relevant times was a chartered accountant operating his own practice. In addition to his work as a chartered accountant he was heavily involved in many business deals and in particular was involved in the development of properties and some client mentoring work. He also had an interest in a V8 racing car team known as HMS Racing Pty Ltd.
The first plaintiff was incorporated on 6 February 2002. At that stage it was called Moto Wear Pty Ltd and Mr Nowak was a director of the company along with a Mr Halliday. Mr Halliday remained a director until September 2002 but remained as secretary and a shareholder until 3 February 2003. The name change from Moto Wear to Isotomic took place on 12 February 2003.
The defendant company, Adelaide International Raceway Pty Ltd ("AIR"), was part of a family business known as the Bob Jane Group of companies. This group operated a variety of businesses which included the business of the Adelaide International Raceway. The group was perhaps more widely known for its tyre retailing outlets. As part of a restructuring within the company caused by some financial difficulties, the defendant decided to sell the Adelaide International Raceway.
Mr Rodney Jane, on behalf of the defendant company was responsible for dealing with the sale of the raceway. He dealt with Mr Michael Brock an Adelaide real estate agent, who also had an interest in motor racing and actually drove for the team in which Mr Nowak was involved. As a result of his dealings, with those attempting to restructure the Bob Jane Group, Mr Brock became aware of the possibility of the raceway being for sale and discussed that with Mr Nowak.
At an earlier point in time, in late 2001, the Australian National Drag Racing Association ("ANDRA") which was the association administering drag racing in Australia, had been in discussions with the Bob Jane group regarding the possible sale of the raceway.
Mr Brock and Mr Rodney Jane had commenced discussions about the sale of the raceway in March 2002 although there was no formal sales agency agreement entered into at that time.
Between June and October 2002, Mr Nowak had discussions with certain persons regarding the possibility of them being involved in a consortium to purchase the raceway. Those persons included Mr Marveggio, Messrs Pat and Frank Carbone, Mr Basile and Mr Aretzis. They each had some interest in drag racing.
A sales agency agreement between AIR and Mr Brock was entered into on 9 October 2002. Mr Brock had already, by that time, had some discussions with Mr Nowak relating to the possible purchase of the raceway.
Discussions between Mr Nowak, and Mr Brock acting on behalf of the defendant, eventually led to an offer being made by Mr Nowak. The initial offer was made on behalf of "Charter Hill Property Group Pty Ltd and/or Nominee" on 4 October 2002 as the purchaser for the sum of $2.1M. Charter Hill was a company associated with the Nowak Group. The written offer made by Mr Nowak naming "Charter Hill or Nominee" as the purchaser was not accepted by Mr Jane. However, the sale price offered by Charter Hill was amended by Mr Jane to $2.5M by way of a counter offer. That was not accepted by Charter Hill and as a result there was no agreement.
There were further discussions between the parties and finally a contract note, the subject of this dispute, was signed on 18 October 2002 in the sum of $2.4m plus GST, if applicable. The deposit was $50,000. In this document the purchaser was described as "George Nowak and/or Nominee". On 26 November 2002, Frank and Pat Carbone and MCB Partnership (Mr Marveggio and Mr Basile) were issued with receipts for the money they advanced for the payment of the deposit. Mr Nowak contributed $10,000 towards the deposit. The receipts were accompanied by Investor Certificates.
Also on 26 November 2002, a company, Skylink Global Pty Ltd issued 490,000 shares to various investors. Skylink Global Pty Ltd later changed its name to Adelaide International Motorplex Pty Ltd on 16 December 2002. Mr Nowak was the sole director at the relevant time.
There followed discussions between the parties as a result of which, a separate agreement was entered into for the sale of certain plant and equipment. The 18 October contract note did not have a schedule of chattels attached. This new agreement, signed on 30 November 2002, followed disputes as to what the parties intended to be included in the contract. In particular, it was uncertain whether the contract was for the land, plus fixtures and fittings or if it included other chattels necessary for conducting drag racing, or whether the raceway was being sold as a going concern or finally if it was the whole business which was the subject matter of the contract. I will deal with this whole topic in some detail later in these reasons.
Following the separate agreement of 30 November 2002, specifying which plant and equipment was to be included as part of the contract, there were still unresolved issues between the parties including the size and description of the land being purchased. Mr Nowak was then saying that the sale of the raceway was on the basis of a going concern whereas Mr Jane was denying this.
On 17 December 2002, Mr Nowak had a further contract note prepared. In this document he included a fifth title which he said was because of a discussion held earlier with Mr Brock and then later with Mr Jane on 30 November 2002. The earlier contract note of 18 October 2002, only included four titles. This new contract note, in the nature of a further counter-offer by Mr Nowak, was not signed by Mr Jane. Mr Nowak was attempting to include as an additional part of the bargain a further 65 acres of land. The fifth title was in the name of another company in the Bob Jane group of companies. Mr Nowak said this was done on the basis of representations made to him by both Mr Brock and Mr Jane. I will deal with this topic in more detail when I discuss issues of credit later in these reasons.
By early 2003 it was obvious that there were difficulties in relation to the progress of the matter to settlement. There was now the dispute about the size and extent of the land which was intended to be included in the contract. This discrepancy in turn led to difficulties in obtaining finance. The financier, when the true acreage of the land was discovered, was not prepared to grant finance. Mr Nowak, on 14 January 2003, purported to cool off. The defendant retained solicitors in Melbourne at this stage. In Adelaide, Andersons Solicitors, and in particular Mr Palasis were the solicitors acting for Mr Nowak. The dispute at that stage centred around a claim for the return of the deposit. Mr Nowak formally requested the return of the deposit.
Shortly after this time, in early 2003, Mr Bob Jane met with a Mr Biagi (Bill) Russo whom he had discovered was interested in purchasing the raceway. Mr Russo had been involved in drag racing as a sponsor for some time. Mr Russo made various offers to purchase the raceway but these were unsuccessful. The first offer was for the amount of $2.2M and it was made on 10 April 2003. There was then a further offer before a final offer of $2.5M was made in July 2003. At this stage the Jane group clearly regarded the earlier contract note of 18 October 2002 as at an end. All of the offers made by Mr Russo were formally rejected in writing.
As further background, in 2002 when Mr Nowak was seeking members for a consortium to purchase the raceway, he held several public meetings. At these meetings publications produced by Mr Nowak were distributed in the name of Charter Hill Pty Ltd but nominating either Thunderdome Raceway Pty Ltd, or Adelaide International Motorplex Pty Ltd as the proposed company purchasing the raceway. These two companies were each nominated in different publications as the proposed purchaser. Motowear Pty Ltd (later to become Isotomic Pty Ltd) was not mentioned in these detailed publications.
In late 2002 a meeting organised by Mr Grant Harvey, a member of ANDRA, took place between Mr Nowak and Mr Russo during which they discussed the possibility of Mr Russo being involved in the purchasing consortium for the purchase of the raceway. Then in late December 2002 Mr Nowak telephoned Mr Russo and stated that the whole deal in relation to the raceway had fallen through.
Later in April 2003, after his offers had been rejected by Rodney Jane, Mr Russo telephoned Mr Nowak and asked him if the contract was still valid. Mr Russo requested a copy of the contract which was then sent to him. Finally, after all of Mr Russo's offers had been rejected by Rodney Jane, an agreement was reached between Mr Nowak and Mr Russo and his colleagues, Messrs Cavuoto and Georgiou. Mr Russo and his colleagues had agreed to purchase the company and become directors of Isotomic. This was on 19 September 2003.
At all relevant times Ms Westthorp was a personal assistant employed by Mr Nowak and her involvement in the case centres around a letter bearing the date of 17 October 2002 on the letterhead of Moto Wear. That letter allegedly gave the authority to Mr Nowak to enter into the contract of 18 October 2002 on behalf of Moto Wear Pty Ltd but, it also indicated an intention at that stage that the name of the company would be later changed to Isotomic Pty Ltd and then apparently after settlement to, yet again, change to the name Adelaide International Motorplex Pty Ltd. The letter purported to authorise Mr Nowak to sign the contract and all associated documentation on behalf of Moto Wear Pty Ltd. The letter is of crucial importance and will be discussed in detail later in these reasons. It is important as to the credit of both Mr Nowak and Ms Westthorp, but also in relation to whether Mr Nowak was purchasing a going concern and the question of identity.
As I have indicated, Mr Nowak purported to cool off on 14 January 2003. The plaintiffs have argued that the defendant nevertheless elected to keep the contract on foot or putting it another way, they argue that the defendant did not accept the repudiation by the plaintiffs. I will deal with this aspect later in these reasons but it is fair to say that both parties indulged at different times in various acts of brinkmanship in asserting their respective rights especially in relation to whether there was any contract on foot. The parties purported to take certain steps at times and then later both sought to resile from the consequences of what they had purported to do at an earlier point of time. These actions relate mainly to the issue of the termination of the contract and I will deal with these matters in due course.
I will also deal in detail with the way in which the various companies in the Nowak group were registered, de-registered, changed names, issued shares, refunded monies and paid for shares later in these reasons. For present purposes the major barriers which would prevent an order for specific performance are whether first, there was a concluded contract in the terms of the contract note of 18 October 2002 and secondly, whether, at the time of entering into the contract of 18 October 2002, Mr Nowak was acting as the agent of Isotomic.
THE ALLEGED AGREEMENT
The first matter to decide is whether there was ever a binding contract. In very simple terms, the issue is whether the bargaining between the parties ever reached a point of consensus, with both parties in agreement, as to the terms and conditions of the contract.
If in fact the parties did reach a consensus, the next question to be decided is whether their consensus is capable of forming a binding contract, that is whether the terms of the contract are sufficiently certain for the contract to be enforced.
If of course there was no concluded contract, then that is the end of the matter. If there was a contract, the matter becomes then more complicated by virtue of the uncertainty as to who were the purchasing parties. I will deal with these issues in turn.
If parties have negotiated and have not reached a final agreement or the supposed agreement which they have reached is so unclear as to lack a sensible meaning, then it is legitimate to say that the process of formation of a contract has not taken place. (See Scammell v Ouston [1941] AC 251 at 268-9).
There are effectively two types of uncertainty which can be found in the terms of contract; those where the agreement is unclear and those where the agreement is incomplete. It is essential that the terms of a contract are clear if a court is requested to grant a remedy. This is a case, in my view, where there is a combination of a lack of clarity and also incompleteness.
Mr Nowak and Isotomic have sued the vendor for specific performance or alternatively for damages, on the basis of the contract note dated 18October 2002. In the statement of claim, the plaintiffs do not include the additional agreement of 30 November 2002 for additional specific plant and equipment in their claim for specific performance.
In early October discussions had taken place regarding a possible offer which then led to a formal offer in writing being made by Mr Nowak on 4 October 2002. In that document he named "Charterhill Property Group Pty Ltd and/or nominee" as the purchaser. The offer was for $2.1m. This offer was referred to Mr Rodney Jane, and after making some amendments including an amendment to the sale price, the document was returned to Mr Nowak. The amended sale price included by Mr Jane was $2.5m. Mr Nowak did not sign the amended document.
As already indicated Mr Nowak signed a contract note on 18 October 2002 to purchase the property known as the Adelaide International Raceway for the sum of $2.4m, or, if GST was applicable, $2.64m. The vendor was a company, controlled by the Bob Jane Group of Companies, called Adelaide International Raceway Pty Ltd. The vendor signed the contract note dated 18 October 2002 shortly after it was signed by Mr Nowak. The contract was subject to the purchaser obtaining finance in the sum of $1.5m by 31 October 2002. A settlement date of 17 January 2003 was nominated. The agreement required a deposit of $50,000 to be paid by 23 October 2002. It was not paid in time but was paid on 28 November 2002.
The Sale Agreement Addendum
At the time the contract note of 18 October 2002 was signed there was no schedule attached to the contract, although the contract referred to an "attached schedule". A partially completed Form 1 was later signed by Mr Jane on 10 November 2002. The parties agree that no schedule was attached to the contract note nor was one ever prepared. The contract note therefore never identified with any precision what was agreed by the parties, as the intended subject matter of the chattels included in the contract.
Item G of the contract note excluded certain chattels and it was in item G that the parties nominated "all vendor's fittings, all plant and equipment, stock in trade, all personal effects and chattels and other items on attached schedule" as the excluded chattels. Clause G refers in turn to Clause 1.9 of the contract which defines the excluded chattels as those items identified as the excluded chattels in the schedule.
Clause 1.12 of the contract note deals with the "included chattels" which are again identified as those appearing in the schedule. Item E nominates, as included chattels, "all fixtures and fittings, all fixed floor coverings, all fixed partitions, all light fittings and window treatments, all built-in furniture (except those items detailed in Clause G overleaf)".
On or about 23 November 2002, Mr Jane and a colleague, Mr Chung, were in Adelaide and supervised the removal of two containers of items which they believed were not included in the sale of the raceway. As a result of this information coming to Mr Nowak's attention, he became concerned and arranged to meet Mr Jane at the raceway along with members of his purchasing consortium. This meeting took place on 30 November 2002. Various discussions took place which made it clear that the parties were not in agreement as to what items were to be included in the contract. As a result the document referred to below as "the sale agreement addendum" was prepared.

The property being sold is described in Clause 1.18 (it actually says 1.16 incorrectly) as, "the land together with the included chattels and the consumer credit chattels as detailed in the schedule".
Therefore the schedule was the vital part of the contract to identify what chattels were excluded. The schedule was never prepared and as a result it was left to the parties to later attempt to reach a separate agreement. Whilst they did this, that in turn led to further difficulties as Mr Nowak sought to re-define the terms of the contract which also led to a different contract price.
Going back to basics, the property the subject matter of the contract is never properly defined. It is not certain on the face of the document what is meant to be included or excluded as the contract is incomplete. I cannot infer the parties' intentions from the express words of the contract. The contract lacks certainty, is incomplete and therefore unenforceable.
The handwritten document signed by both Mr Nowak and Mr Jane is headed "AIR – Sale Agreement Addendum" and is dated 30 November 2002. The document sets out a list of chattels with an agreed price alongside the items. The document was prepared during the meeting between Mr Nowak and Mr Jane at the raceway on 30 November 2002.
The document included a notation "name – AIR – ask Bob". Mr Jane explained that the note was for him to inquire of his father, Bob Jane, whether the name Adelaide International Raceway could be used by Mr Nowak. There was no agreement at that stage as to whether the name was to be part of the sale. No agreement was ever reached on that topic.
The document was then typed up and headed "New Purchase Price $2.5M". Both this typed up version and the handwritten note made it clear for the first time what chattels were to be excluded from the sale. The document also provides for a payment of $25,000 in one month's time in addition to $100,000 added to the sale price and a further $25,000 allocated to Michael Brock, apparently for a waiver of agency fees.
Mr Nowak explained in his evidence that the purpose of the notation of the $25,000 was to pay the commission to Mr Brock for the sale of the raceway. Mr Jane in his evidence explained the $25,000 allocated to Mr Brock differently. He stated during his evidence that Mr Nowak didn't want to pay a further $25,000 and that he thought that as Mr Brock was a friend of his he might have been able to convince Mr Brock to discount the fee by $25,000. This amount, together with the $25,000 payable in a month's time, would then total the $150,000 amount agreed for the excluded chattels. Mr Jane stated that he thought that Mr Nowak was reluctant to agree to the amount of $150,000.
It seems therefore that even at that stage, namely, after the meeting at the raceway on 30 November 2002 and following agreement on the price for various individual chattels there was still no certainty in the final contract price.
Following that meeting Mr Nowak wrote a letter to Mr Jane of 2 December 2002. This letter was on the letterhead of the Charterhill Group P/L. The letter confirmed the meeting which had taken place, and purported to confirm the handwritten and signed addendum to the sale agreement specifying a new contract price of $2.5m plus GST if applicable (my emphasis). The letter then went on to say:
We do however now agree on the basis that we are purchasing the property as a going concern, and thereby we should be able to have GST negated on the transaction.
(emphasis added)
The letter sent to Mr Jane provided for a signature, by way of countersigning the letter, to indicate agreement provided the terms and conditions stipulated in the letter had been accepted. Mr Jane did not accept the terms and conditions in the letter. He disputed that it had ever been agreed that the property, that is the raceway, was ever to be sold as a going concern. Once again the parties failed to reach a consensus. Whether or not the raceway was to be sold as a going concern has important tax implications as to whether GST was payable. It also is relevant as to the certainty of the purchase price and the amount due at settlement.
On Mr Nowak's case he needed to have certainty as to what plant and equipment was included in the sale because he insisted that he wanted the purchase to be on a "going concern" basis. As will be seen later, the authority for Mr Nowak to enter the contract as agent for Moto Wear was on the basis that the purchase was of a going concern. Mr Jane denied that it was ever the case that the business was for sale as a going concern.
Was GST Payable?
The nominated purchase price of $2.4m in the contract note of 18 October 2002 was exclusive of GST. However, the parties agreed that if GST was applicable the purchaser would then pay an additional $240,000. Likewise the deposit of $50,000 was expressed to be exclusive of GST.
On its face therefore the contract left open the question as to whether GST was payable. Clause 2 of the contract says:
Subject to clause 8.8 and the special conditions, the vendor agrees to sell the property to the purchaser who agrees to buy the property from the vendor for the price together with any GST applicable.
An annexure was attached to the contract dealing with the topic of GST. Pursuant to the contract the parties were required to elect by reference to Clauses 8.10 or 8.11 as to whether GST was applicable. This was not done. The relevant amount in relation to the assessment of GST, namely, $240,000, is not insignificant and was not dealt with by the parties. The conclusion must be that the parties did not finally agree a price. They could not unless they knew whether GST was payable on the contract price and this was contingent on whether Mr Nowak was purchasing a going concern or not. Again, this emphasises the fact that the contract was incomplete on a fundamental matter and therefore unenforceable.
The size of the land
It is necessary to indicate here that in both the original contract note of 4 October 2002 and in respect of the contract note executed by both parties on 18 October, both documents specified four separate titles comprising the land to be purchased. In total, those titles comprised approximately 158 acres. Mr Nowak says that he was working on the basis that the total acreage of the land he had agreed to purchase was about 300 acres. There is no valid reason advanced as to why he should make that assumption.
After 18 October 2002 Mr Nowak made inquiries of the local council to ascertain the full details of the land, and discovered that the four titles specified in the contract did not include a piece of land which he estimated to be approximately 100 acres in size and which he said was always intended to be included in the contract. He said that this land was discussed between him and Mr Brock and was always to be included in the sale. He claimed Mr Brock re-presented this to him prior to 18 October, and that it was confirmed by Mr Jane on 30 November 2002. Mr Nowak asserted in evidence that at the meeting on 30 November 2002, Mr Jane drew an L-shaped plan representing the raceway and the extra land in his notebook. This is in dispute. Mr Jane denies it was ever discussed. Mr Jane discovered this notebook and there was no L-shaped plan within.
On 17 December 2002 that extra title was included in a new contract note prepared by Mr Nowak and the name of the owner of the extra title, Pacific Basin Pty Ltd, was added as an additional vendor. That was a related company within the Jane group of companies. It was in fact the company which was the registered owner of the additional land. Mr Jane did not agree to sign the new document. Still the parties had not been able to reach a consensus. They were not even ad idem on what land was included in the sale. Although this may not be relevant to determine the issues in this case.
The email of 10 January 2003
It is a well accepted principle that generally extrinsic evidence is not admissible for the purpose of construction of a contract. However evidence of surrounding circumstances and the factual matrix is admissible to assist in the interpretation of contracts if the language is ambiguous or susceptible to more than one meaning. (See Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981) 149 CLR 337 at 352 per Mason J.) The terms of the contract in this case are incomplete and uncertain and on this basis the surrounding circumstances are entirely relevant to aid in the proper construction of the contract.
The Plaintiffs further submit that any post-contract conduct is inadmissible in aid of the construction of the written contract. (See Stevens v Standard Chartered Bank (1988) 53 SASR 323.) I agree with the Plaintiffs' submission that such evidence is inadmissible if used for this purpose. However, documents such as the email of 10 January 2003 are admissible, not for the purpose of aiding in the construction of the contract, but on the basis that such evidence is relevant and admissible to show that there was never any concluded contract.
On 10 January 2003 Mr Nowak sent an email to Mr Jane. The email referred to the dispute which had taken place earlier regarding the inclusion of various items of plant and equipment, and referred to the further agreement reached on 30 November as “an enhancement to the contract”. The email gave notice that unless the 100 acres of land, that is, the land owned by Pacific Basin, was included in the sale, Mr Nowak would not be proceeding any further. He indicated that he would rescind the contract due to the misrepresentation of the amount of land the subject of the contract.
The email was in my view a carefully contrived, self-serving document in which Mr Nowak has attempted to put his gloss on the alleged agreement and the previous discussions held between the parties. From a reading of the document it is apparent that within the document Mr Nowak has attempted to achieve the following:-
·give the impression that he inspected the whole of the property including the extra land in question prior to signing the contract note on 18 October;
·assert that Mr Brock gave him an assurance that the finance clause in the contract had been extended;
·assert that Mr Jane had confirmed the extension of time regarding finance;
·describe the agreement regarding the plant and equipment on 30 November 2002 as an "enhancement to the contract";
·again, assert that 100 acres of land was meant to be part of the contract;
·seek to have an extra title included in the contract relating to that 100 acres.
·use the fact that he had not been granted finance as a means to terminate the contract;
·allege misrepresentation as to the amount of land included in the contract;
·assert that his cooling off rights had not yet commenced to run because he had not been served with a proper Form 1;
·most importantly to make it clear that unless the extra land was included he would not be proceeding with the contract.
On 14 January 2003 a notice was sent to both Mr Jane and to Mr Brock by Mr Nowak indicating that he had cooled off. It became clear at that stage that settlement would not be taking place on 17 January 2003. A decision was made by Mr Nowak to claim the deposit of $50,000 which had been paid. The deposit was not paid by 23 October 2002 as stipulated, but was in fact paid on 28 November 2002. The deposit of $50,000 was contributed to by members of the consortium as well as Mr Nowak who contributed $10,000 of the deposit amount. Solicitors were then retained by Mr Jane.
The purchasing consortium
During the period between 18 October 2002 and the time of the cooling off notice on 14 January 2003, Mr Nowak had been active in organising his purchasing consortium.
Behind the scenes discussions between Mr Nowak and ANDRA had also continued. There had been an application for finance to Carter Mayfair, the issuing of shares to Mr Nowak’s co-investors, and generally attending to matters relating to various corporations within the Nowak group. These details will be dealt with later in these reasons. In other words up to the time of the notice of cooling off Mr Nowak had been busy putting everything in place so that the parties could settle.
Is there an enforceable contract?
With that background in mind, the first issue to be decided in this matter is whether there is any enforceable contract and if there is, what are the terms of the contract. The only contract which the plaintiffs contend is enforceable is the one dated 18 October 2002. That contract was purportedly between “George Nowak and/or nominee” and the defendant company. It is argued by the plaintiffs that the particular nominee, and therefore the party entitled to specific performance is a company called Isotomic Pty Ltd. This company was incorporated on 6 February 2002 and initially was called Moto Wear Pty Ltd. Its directors were Mr Nowak and a Ross Geoffrey Halliday. Mr Halliday ceased to be a director on 12 September 2002. The change of name from Moto Wear to Isotomic took place on 12 February 2003. The question of the proper identity of the purchaser will be dealt with separately. For the purpose of deciding whether there was a concluded contract, it is sufficient to work on the basis that the purchaser was Mr Nowak and/or his nominee, regardless of which nominee was to be used.
On the pleadings it is clear that both parties accept that the contract was incomplete as at 18 October 2002. As indicated, a schedule of excluded chattels was not attached to the contract as stipulated at the time the parties signed. No such schedule was ever prepared. It is therefore very difficult to identify what was meant by the parties to be included as the subject matter of the contract.
It is apparent from the discussion which took place between Mr Nowak and Mr Jane on 30 November 2002 that they had different ideas as to what was meant to be included as the subject matter of the contract and whether the raceway was being sold as a going concern. They were clearly not in agreement at that time. The terms of the contract do not shed any light on what was intended to be included or whether the raceway was to be sold as a going concern.
Two examples, to illustrate the parties' lack of agreement, are what is known as a jet dryer, a rather expensive machine for drying out the drag racing strip, and also what is known as a Christmas tree set of lights, which are the starting lights for drag racing. Mr Nowak believed that both items were included in the alleged contract, but Mr Jane believed they were not. As a result, these items became part of the schedule drawn up and agreed between the parties on 30 November for a further consideration. This was clearly a new or collateral agreement, but even then the parties could not agree on its effect because Mr Nowak then attempted to turn it into a "going concern" contract which Mr Jane refused to acknowledge.
It is Mr Nowak’s case that he believed he was purchasing approximately 300 acres of land in total, and in particular a parcel of vacant land situated to the north of the actual racetrack. This vacant land contained a ponding basin. Mr Nowak maintains that Mr Jane told him that the contract included “what you see is what you get”, and that this land was meant to be part of the contract. He also said that Mr Jane drew a plan of the land in his notebook to show the vacant land. The whole of the land with the inclusion of the vacant land was 'L' shaped. The raceway itself and its surrounds, excluding the additional northern land, was comprised on four Certificates of Title. Mr Nowak also claims that it was his intention when entering into the contract that he was purchasing the whole business, the racetrack included, as a going concern. In this regard it is relevant that the contract stipulated a purchase price of $2.4m plus GST if applicable. GST of course would not be relevant if the whole business was purchased as a going concern. It is difficult to see why this important aspect was still undecided when the parties signed the contract note on 18 October 2002. As at 18 October 2002 the contract was incomplete and uncertain.
The arguments of the plaintiffs
The plaintiffs have argued that I should strive to enforce the contract of 18 October 2002. Mr Slattery QC, counsel for the plaintiffs, submitted that the contract identified the parties and the sale of certain land at a fixed price. It is submitted that on that basis I should attempt to find a commercially realistic result rather than find that no contract existed.
It is however not just a contract for the sale of land as Mr McNamara QC, for the defendant, points out. It purports to be a contract to sell the property of the Adelaide International Raceway and that both includes and excludes certain chattels. There is in fact no final price agreed as I have already pointed out because the parties did not agree on the topic of whether GST was applicable and also whether the price agreed for the purchase of chattels was to be included in the purchase price of the raceway or if it was a further stand alone agreement.
Whilst I agree with Mr Slattery for the plaintiffs, that the court should attempt to uphold a commercial contracts if that is at all possible, I am not able, even using the broadest of broad axes, to give any sensible meaning to the terms of the contract and the intention of the parties. I am unable to come up with a commercially sensible construction in relation to the state of the evidence. I am unable to do this for the reasons which I have already stated.
Mr Slattery submitted that the subject matter, namely the raceway land, was properly identified. I agree that the terms of the contract are clear on this topic and that it clearly provides for the sale of four titles of land as annexed to the contract.
During the trial, the Court went on a view and inspected the four titles comprising the Adelaide International Raceway and also the additional northern piece of land. Mr Nowak maintains that the land being sold was clearly identified to him by Mr Brock and Mr Jane as including the four certificates of title which were the subject of the contract note and additionally the northern title.
If I was to find the contract capable of being enforced, only the land clearly identified could be the subject of any order for specific performance.
The further factor against striving for a commercially workable solution is that the parties are in disagreement as to what chattels were to be included to such an extent that they entered into further negotiations and then a separate agreement. The terms of the contract in relation to the chattels are incomplete and uncertain. That was then subject to Mr Nowak attempting to categorise the contract as one for the purchase of the raceway as a going concern. Importantly, if Mr Nowak did intend to purchase the raceway as a going concern, no amount was attributed to the purchase of the goodwill associated with it. He had asked for, but been given no approval to use the name Adelaide International Raceway.
Mr Slattery submitted that Mr Nowak may have been confused as to what was meant by a "going concern". I reject that submission. Mr Nowak was experienced in business deals and in my judgment possessed a high degree of business acumen in the world of commerce and in particular relating to the buying and selling of properties. He was also “street wise”. He would not have been confused in my view.
Likewise the question of whether GST was payable or not would have surely loomed large in the eyes of someone as experienced as Mr Nowak. As I have already indicated it is quite a significant amount of money that is involved. If the property was to be purchased as a going concern as claimed by Mr Nowak then of course there was no need for any reference to GST in the contract note.

Mr Slattery further submitted as an alternative that Mr Nowak may have made a mistake in respect of both the size and description of the land and as to whether he was in fact purchasing a going concern. I reject any possibility of a mistake by Mr Nowak. I have already given my views as to why such an astute and experienced man would be unlikely to make such basic mistakes.
It seems to me that the contract is incomplete and uncertain at least because it did not specify what chattels were included, it was not clear as to whether GST was payable or not, which therefore meant the parties were uncertain as to whether it was a going concern basis, and in addition the parties were apparently bargaining on different areas of land. In fact, whereas Mr Nowak thought he was purchasing 300 acres, even if the extra title owned by Pacific Basin were included, the total acreage becomes 223 because the extra title is only 65 acres.
The contract was incomplete largely because Mr Nowak chose to make the subject matter of the contract a moving feast. He disagreed about which chattels were included, didn't know if it was a “going concern” contract when he signed it and thought he was buying land that was not being offered for sale.
In simple arithmetic the four titles actually depicted on the contract note had a total acreage of just over one half of the 300 acres Mr Nowak thought that he was purchasing. That estimated 300 acres included the fifth title which was not part of the contract note. It was in respect of Mr Nowak's belief that the land totalled about 300 acres that the application for finance was made. In fact, as I have indicated, the total acreage, even if the extra title was included was substantially less than 300 acres.
In relation to the going concern basis for the contract, Mr Nowak’s authorisation by virtue of a letter of authority dated 17 October 2002, was to enter into the contract on a going concern basis. It is my view that the agreement was incomplete and uncertain, and that moreover the parties were at cross-purposes as to what it was that was being purchased and sold. As I have said they were largely at cross purposes because of Mr Nowak's conduct in moving the goalposts.
It is my view that initially it was never intended by Mr Nowak that he would purchase the raceway as a going concern. Likewise it is my view that there were only ever four titles totalling approximately 158 acres included in the sale. However, Mr Nowak attempted to better himself through the uncertainty surrounding the absence of the schedule of chattels and therefore the uncertainty surrounding what chattels were included. He sought to take advantage of a situation created by the lack of a schedule of chattels.
He attempted by bluff and bluster to bargain extra chattels and land into the contract and then later decided that he wanted a going concern. Hence his letter of 17 October, written after the event, as I later find, was a convenient way of attempting to improve his lot by including both the extra title and, asserting that the basis of the contract was for the purchase of a going concern.
All of these actions show a devious and dishonest attempt by Mr Nowak to try and flavour the transaction for the purpose of this case. The subject matter of the contract was uncertain in any event for the reasons I have given. However, viewed in the light I have seen of Mr Nowak's actions, it certainly shows that the parties were never ad idem and that the terms of the contract were incomplete and uncertain.
As indicated, it is a well-established principle that the court will attempt to avoid frustrating the wishes of the contracting parties in so far as those wishes may be ascertained from the agreement between them. (See Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429.) However, the Court will not draft a contract for parties where they have failed to actually reach an agreement.
Mr Nowak asserts that it was his belief that he was purchasing the four titles comprising the racetrack together with the additional northern parcel of land. It was his belief that most chattels, in particular a “Christmas tree” and Jet dryer were to be included and the business was to be sold as a going concern for a price of $2.4m plus GST if applicable.
On the other hand, Mr Jane asserts that at all times he believed that he was only selling the four titles comprising the racetrack. He did not intend to include any chattels except some fixtures and fittings and that the price of $2.4m was to be inclusive of GST, as the purchase of the raceway was not on the basis of it as a going concern. It is obvious from the varying positions of the parties that in simple terms, the parties were never ad idem.
Mr McNamara contends that the contract does not identify all of the required subject matter and is therefore incomplete and unenforceable. Courts on previous occasions have been prepared to imply terms into a contract for the sale of land which was incomplete on its face, provided that the subject matter and price had been agreed upon and fixed. (See Pattison v Mann (1975) 13 SASR 34.) The Plaintiffs submit that at its simplest level, the contract identified the parties and the sale of certain land at a fixed price and is therefore capable of being enforced. In my opinion, neither the subject matter, nor the price were agreed by the parties. These are essential terms of the contract. Mr Nowak’s email dated 10 January 2003 is a clear indication of this as is the post-contract meeting between Mr Jane and Mr Nowak on 30 November 2002. As at 10 January 2003, almost three months after the contract had been signed, the parties had still not agreed on the terms of the contract. So much is clear from the email of that date.
Mr Slattery argued that the defendant should not be entitled to assert that there was no concluded contract. He says that the point was not pleaded and is opportunistic because I raised it in discussion with the parties during the hearing. Mr McNamara in response argues that it was in issue at all times, the defendant having denied the plaintiffs' allegations of an enforceable contract and therefore putting everything into issue. It is a fundamental requirement of the law relating to contracts that there be a consensus ad idem. The lack of consensus in this case led to an incomplete contract which is also uncertain. I find that the lack of consensus is a fatal blow in the Plaintiffs' case and I am not concerned that it was not pleaded as such. The parties were never ad idem, that is, even if I accept the evidence of Mr Nowak at its highest. As I will later conclude, I do not accept his evidence at face value because I do not believe him.
It is my view that there was no concluded bargain as the essential terms are not complete and therefore the claim by the plaintiffs must be dismissed. There is in fact no contract to interpret. That means that the deposit must be repaid by the defendant with interest. The deposit should be repaid to the plaintiff Isotomic because Mr Nowak has assigned any interest he had to Isotomic.
TERMINATION OF CONTRACT
The defendant has argued that even if I found that there was a contract on foot in the terms of the contract note of 18 October 2002, and further that even if the contract entitled Isotomic to claim the benefits of the contract, the plaintiffs would fail because the contract was terminated in 2003.
The plaintiffs argue that the defendant's conduct after Mr Nowak's attempt to cool off in January 2003, illustrates that they did not accept any repudiation by Mr Nowak but still wanted to settle on the contract which, they must have regarded as being on foot.
As late as 11 September 2003 a notice to complete was forwarded to Mr Nowak by the solicitors for the defendant. This required completion at a specified time and place. The plaintiffs argue that what the defendant now seeks to do is to deny the validity of its own notice to complete. They say the defendant is estopped from so arguing.
The defendant simply argues that the notice to complete of 11 September 2003 was of no legal effect because of the earlier actions of Mr Nowak in January 2003 as a result of which they claimed forfeiture of the deposit held by Mr Brock.
I have already said that there was a certain amount of shifting and changing ground taking place as to whether a contract was on foot, that is because both parties at different times served notices to complete on the other.
It may be that it was part of a tactical battle that was being run at that stage when both sides were acting at various times inconsistently with the position at law which they now take.
Mr Nowak, following the receipt of the notice to complete in September 2003, did make arrangements to proceed to settlement. He ultimately had his solicitors attend at the appointed time and place nominated for settlement. By September 2003, Mr Nowak had entered into a deed of assignment with Mr Russo and it was in his interest to maintain, contrary to his earlier conduct, that there was a contract on foot. Again, by this time, the defendant had negotiated with Mr Russo for the sale of the raceway.
The defendant relies on three matters in answering the submissions of the plaintiffs as to the effect of the defendant's notice to complete. First, it is submitted that the notice to complete given by the defendant was invalid and ineffective because the contract had already been terminated earlier by Mr Nowak. Secondly, the defendant had shown that it had accepted Mr Nowak's repudiation because it claimed forfeiture of the deposit from the agent and in any event then counterclaimed in these proceedings by seeking the forfeiture of the deposit and thirdly, the defendant says that it can justify its acceptance of the repudiation by reference to events which, although unknown to it at the time, nevertheless justify the stand taken.
This last submission relates to the way in which Mr Nowak failed to adequately advance his application for finance, and follows upon what Mr McNamara calls the well-established principle that the termination of a contract can be justified upon grounds which the terminating party did not act upon and of which it was unaware when it terminated the contract. (See Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359; Aidinis v Hotchin [1971] SASR 446; Elders Ltd v Incitec Pivot Ltd [2006] SASC 99.) In simple terms the defendant submits that they are entitled to refuse to perform the 18 October 2002 contract note because Mr Nowak failed to properly advance his application for finance, even though they were not aware of this at the time. I accept Mr McNamara’s submission on this ground and I will deal with the failed application for finance shortly.
If the Plaintiffs are not successful in relation to their estoppel argument, there are three ways, it is submitted by the defendant, in which the contract can be said to have been terminated. The first relates to the actions of Mr Nowak in early 2003 in sending a notice to the defendants indicating that he was cooling off. The second is simply the failure to obtain finance and that therefore pursuant to Special Condition R of the contract, a condition precedent was not satisfied. Finally it is argued in the alternative that the defendant, by its acceptance of Mr Nowak's repudiation of the contract, has validly terminated the contract. The suggested acts of repudiation by Mr Nowak are his attempt to cool off, even if it was not effective, and the notification of the failed finance application.
Notice of Cooling Off
The first argument by the defendant relates to the actions of Mr Nowak in purporting to exercise his rights to cool off pursuant to the contract. Although he gave a notice to cool off on 14 January 2003, the Plaintiffs now argue that it was not possible for him to have legally done so because he was not in fact a personal purchaser. That is, he was acting as agent for an undisclosed principal.
The statement of claim filed by the plaintiffs pleads that Mr Nowak was acting as an agent and therefore it is argued by the defendant that his actions regarding cooling off bound his principle. In other words if he was entitled to cool off, and if Isotomic were held to be a party entitled to the benefit of the contract, then Isotomic is also bound by the cooling off notice. On 14 January 2003, Mr Nowak, by facsimile, advised Mr Rodney Jane of his intentions to cool off. At the same time he demanded the return of the deposit previously paid. Cooling off is the subject of s 5(1) of the Land and Business (Sale and Conveyancing) Act 1994 (SA) ("The Act"). The right of cooling off is conferred on the purchaser under the contract. Section 5(7)(a) of the Act provides that a body corporate is not entitled to cool off. It is obvious that the intention of the Act is to allow individuals and not corporations to utilise the statutory right to “cool off”. Further, s 3 of the Act defines “purchaser” as the person or persons named in a contract as purchaser or purchasers or any one or more of them, and includes a prospective purchaser. That is Mr Nowak in the present case.
However the cooling off right must be exercised within the time prescribed in the section, namely, two clear business days from the date on which the Form 1 was served. The date on which it was served was a little unclear.
In reliance on the Form 1 Mr Nowak gave written notice to Mr Brock on 14 January 2003 that he exercised his rights to cool off. By a facsimile of the following day he requested a refund of the deposit. The solicitors acting for the defendant wrote to Mr Nowak advising him that he was outside the prescribed time for cooling off. It was asserted in that letter that the Form 1 was served on 12 November 2002 and that that was the time from which the cooling off rights were determined. Solicitors acting for Mr Nowak on 21 January 2003 requested the return of the deposit of $50,000 from Mr Brock who held the deposit in trust.
The defendant says that either Mr Nowak failed to properly exercise his cooling off rights, or alternatively by purporting to cool off, he either terminated or repudiated the contract. The defendant submits that if Mr Nowak was within time, then he was the person entitled to give the cooling-off notice and therefore it was effective and as a result it terminated the contract.
It is my view that Mr Nowak was not within time in purporting to exercise his rights of cooling off but his action in attempting to do so was a repudiation of the contract which was then accepted by the defendant. Whatever the exact date of the service of the form 1, the notice of 14 January 2003, was not given within two clear business days but some considerable time after the service of the form 1.
Condition as to Finance
Mr Nowak also sought to terminate the contract because of Special Condition R relating to finance. This condition made the contract subject to the obtaining of finance on or before 31 October 2002, in the sum of not less than $1.5M. Condition R was not satisfied. The question is whether the non-compliance with the special condition resulted from neglect or default on the part of Mr Nowak.
Clause 6 of the contract specifically provides for the situation, where the condition precedent, that is obtaining finance of $1.5M prior to 31 October 2002, is unable to be fulfilled. However, this inability to make out the special condition must not be “due to neglect or default” by the purchaser.
If Mr Nowak had made reasonable attempts to obtain finance but had been unsuccessful then, pursuant to Clause 6, Mr Nowak could have given written notice of his intention to terminate.
Clause 6 of the contract deals with special conditions. It states:
The party required to comply with a special condition must make every reasonable endeavour to do so. If the special condition is not complied with before the date specified in the special condition (or if no date is specified within 21 days of the date of this agreement) then:
6.1 If the failure to comply with the Special Condition is not due to the neglect or default of the Vendor or the Purchaser, the Vendor or, unless the Purchaser has waived such condition and communicated such waiver in writing to the vendor or the agent, the Purchaser, upon giving seven days written notice to the other party, may terminate this agreement and upon its termination (unless the condition is complied with in the meantime) all monies paid under this agreement must be repaid to the purchaser and all rights and liabilities under this agreement will cease; or
If the failure to comply with the condition is due to the neglect or default of the Vendor or the Purchaser, the party not in default may terminate this Agreement. If the Vendor is in default, the Purchaser may, upon giving seven days' written notice to the Vendor, terminate the Agreement and all monies paid by or on behalf of the purchaser must be repaid to the Purchaser upon the termination or otherwise clause 7.2 will apply. If the Purchaser is in default, clause 7.1 will apply.
Mr Nowak was advised by the financier, Carter Mayfair, that finance was not available because the land had not been properly described earlier in the application for finance, namely, amounting to approximately 300 acres. On receiving that information from Carter Mayfair, Mr Nowak decided to use the special condition relating to finance as a means of terminating the contract. He apparently wanted nothing more to do with the raceway at that stage
Mr Slattery argues that because Mr Nowak did not give the required formal notice in writing to the defendant, there was no valid termination of the contract by Mr Nowak. In the email of 10 January 2003, Mr Nowak clearly indicated how he intended to invoke clause 6.1 of the contract in the notice he gave earlier on 24 December 2002. Mr McNamara argues that the substance of the actions of Mr Nowak should prevail over the actual method used by him to convey his intentions, that is, substance should prevail over form. Mr Nowak's solicitors in their letter of 21 January 2003 to the defendant's solicitors assert positively that Mr Nowak had earlier, validly terminated the contract. I find however that the actions of Mr Nowak which were not in strict compliance with the terms of the contract, namely clause 6.1, were not sufficient to validly terminate the contract. In this case the substance of what took place did not excuse Mr Nowak from complying with the strict requirements of the contract.
However, as I will go on to discuss, the actions of Mr Nowak were sufficient to indicate an intention by him to repudiate the contract thereby allowing the defendant to accept that repudiation and terminate the contract in that way as distinct from a valid termination pursuant to the requirements of clause 6.1.
Defendant accepted acts of repudiation
Both in his attempt to cool off and in his use of the clause relating to finance, Mr Nowak illustrated that he wanted nothing more to do with the contract and was attempting to rid himself of any of the burdens of the contract.
In my opinion, Mr Nowak did not make a reasonable attempt to obtain finance. The finance application was not made until late November 2002, well after the designated date for approval, namely, 31 October 2002. Mr Nowak explained this by stating that Mr Brock had extended the time during which he could obtain finance. I do not accept this. Mr Brock, in evidence, testified that he is not able to give an extension of time without instructions from his client. Any extension of time would have had to be formally applied for in writing and any response would be required to be in writing as well. No evidence was tendered on behalf of the plaintiffs which indicated that Mr Nowak made any other application to any other financiers. I find that the failure of the special condition as to finance was due to Mr Nowak's neglect or default.

As I have said Mr Nowak made only one application to Carter Mayfair which was on the basis that the land being purchased was 300 acres. There was no finance application made in respect of the actual land which is the subject of the contract which the plaintiffs now seek to rely on, namely for 158 acres. There was no application made to any other potential source of finance. The defendant argues that at that stage Mr Nowak repudiated his obligations under the contract and that repudiation was accepted by the defendant.
Mr Nowak told Mr Rodney Jane in his email of 10 January 2003 that he was not proceeding with the contract because of Mr Jane's indication to him that the vacant land would not be included. Mr Nowak specifically said that unless that land was included he would not be proceeding any further.
It is my view that it is reasonable to infer from those actions by Mr Nowak that he did not wish to proceed with the contract and therefore it was open to the defendant to accept that repudiation. Mr Nowak at the same time instructed solicitors to seek recovery of the deposit.
On this basis in addition to my earlier finding that he did not comply with the formal requirements of the contract, I do not accept that Mr Nowak could validly terminate the contract pursuant to Special Condition R as he did not make reasonable endeavours to obtain finance.
In relation to termination therefore, if against what I have found, the contract was validly terminated by Mr Nowak in early 2003, either by his cooling off or by his reliance on special condition R, the result would be that the plaintiffs both fail but that they are entitled to the return of deposit. In the circumstances that Mr Nowak was acting as the agent for Isotomic on his own case then it seems only appropriate that the deposit in these circumstances be returned to Isotomic.
TRUE IDENTITY OF PURCHASER
If I am wrong in my earlier conclusions that there was no contract, and in the alternative that any contract was validly terminated, I now turn to the identity of the purchaser in relation to the 18 October 2002 contract note. The question of identity does not affect my determination as to whether there was a concluded contract, but rather who has the benefit of that contract if there is one and who in fact may enforce that contract having regard to the doctrine of privity of contract.
The plaintiffs have submitted that the actual identity of the purchaser was never a material consideration to the defendant when entering into the agreement for the sale and purchase of the raceway. In as much as it did not matter which entity it was that was nominated in the contract note, that is correct. The plaintiffs correctly point out that there is no obligation or duty on the purchaser to disclose the vehicle to be used as the purchaser until it is required to nominate the purchaser prior to settlement.
The point is, however, that it is fundamental as to the question of which entity has standing to enforce any contractual rights in these proceedings. In particular in this case it is also highly relevant as to the credit of Mr Nowak.
George Nowak signed the October contract note on 18 October 2002. The contract note was signed “George Nowak and/or nominee.” Issue has been taken in these proceedings as to the correct identity of the purchaser and the legal implications, which flow from the various alternatives. This question became a major issue in the trial and occupied a considerable time.
The plaintiffs assert that when entering into the contract Nowak acted as agent for Motowear Pty Ltd ("Motowear"), the undisclosed principal, pursuant to a letter of agency dated 17 October 2002 and the "Minutes of a Meeting of the Director" of the same date. It is alleged by the plaintiff that it was the intention of Motowear to later change its name to “Isotomic Pty Ltd” and to then register a trading name of “Adelaide International Motorplex Pty Ltd”. In the alternative, the plaintiffs assert that Mr Nowak assigned any interest he had in the contract to Isotomic Pty Ltd.
The defendant’s case is that at all times the true principal was Adelaide International Motorplex Pty Ltd, formerly Skylink Global Pty Ltd. The defendant relies on a series of contemporaneous documents, which surround the entering into of the contract, the conduct of Mr Nowak and the oral evidence given during the trial. It is asserted by the defendant, that if Isotomic is to be successful it must prove that Mr Nowak had actual authority to enter into the contract on 18 October 2002.
Background relevant to identity of purchaser
Mr Nowak asserted that at all times, it was intended that the raceway would be purchased using the money of a purchasing consortium, along with borrowed money and perhaps some government funding. This is supported by the documents tendered at trial and by the evidence given.
He testified that he believed that a company structure would be used to buy the raceway on behalf of the purchasing consortium. It was the most suitable structure, as it would allow for investors and shareholders to be easily accommodated. He stated that in early October he turned his mind to consider which company in his “suite of companies” would be best suited to this type of enterprise. He said that he always intended to use Motowear Pty Ltd as the nominee as it was a “clean, fresh, shelf company which hadn’t traded”. On the evidence before me, at no time did Mr Nowak intend to enter into this contract as the principal. At all times it appears that he was acting as agent for an undisclosed principal.
Mr Nowak further testified that he had instructed Ms Westthorp, who was an employee of his, some time during the week after, 18 October 2002, to prepare a letter evidencing this arrangement. This letter was tendered and admitted into evidence. The letter is on a “Moto Wear Pty Pty” (sic) letterhead. It is dated 17 October and states:
It is the intention of this company to enter into a contract with Adelaide International Raceway Pty Ltd to purchase 300 acres of land on Pt Wakefield Road, Virginia, South Australia, incorporating the fixtures, fittings and going concern raceway business known as "Adelaide International Raceway."
It would be the intention of the company to change its name to "Isotomic Pty Ltd" and register a trading name of ‘Adelaide International Motorplex’ and, ultimately after settlement of the said property, to change the company name to "Adelaide International Motorplex Pty Ltd."
In order to effect the signing of the contract and all attendances thereto and leading up to settlement, this company nominates George John Nowak as its nominee to sign the contract and all associated documentation thereto.
You are further authorised to pay a $50,000.00 deposit into the Land Agents' Trust Account on our behalf.
A document headed “Minutes of a Meeting of the Director” was also tendered and admitted into evidence. It asserts that at all times George Nowak was negotiating, for the purchase of the Adelaide International Raceway, on behalf of Motowear Pty Ltd. The minute was dated 17 October 2002.
Two separate information memoranda, created by Mr Nowak, were tendered and admitted into evidence. Mr Nowak had caused the creation of both memoranda and had gone public through these documents, seeking moneys from members of the public who would become part of the purchasing consortium who in return would be allocated shares in the purchasing company. The first of these information memoranda is undated. It was purportedly created in about early October 2002. It is titled “Information Memorandum” and is presented by Charterhill Property Group Pty Ltd. It refers to Adelaide International Motorplex Pty Ltd as the purchasing company. This document was presented to the original purchasing consortium members consisting of Messrs Basile, Carbone, Carbone, Marveggio, Aretzis and also to Mr Thorton of Carter Mayfair Pty Ltd, the proposed financier.
The second information memorandum is also undated and titled “Information Memorandum”. It is also “presented by Charterhill Property Group Pty Ltd.” It refers to Thunderdome Raceway Pty Ltd as the company purchasing the raceway. Mr Nowak testified that the name “Thunderdome Raceway” had come from a meeting he had had with other members of the original purchasing consortium. This company was never incorporated.
On 18 October 2002 Mr Nowak signed the contract for the purchase of the raceway with the words, “George Nowak and or nominee”.
On 26 November 2002, Messrs Pat and Frank Carbone and Mr Bruno Marveggio, original members of the purchasing consortium, were issued receipts for monies advanced in relation to the payment of the deposit. Receipts issued to MCB Partnership (Bruno Marveggio and Tony Basile), Frank Carbone and Pat Carbone were admitted into evidence and indicated that $20,000, $10,000 and $10,000 respectively, had been provided for the purchase of Adelaide International Raceway. The receipts did not bear either an ABN or ACN number. They were on “Thunderdome Raceway” letterhead. They were accompanied by Investors Certificates, which were for the issue of shares in Adelaide International Motorplex.
On 26 November 2002, Mr Nowak also approached Carter Mayfair Pty Ltd (“Carter Mayfair”), by letter, for finance for the purchase of the raceway. In this letter Mr Nowak, the author, states that:
The purchaser will be Thunderdome Raceway Pty Ltd and we will provide details of all shareholders including individual assets & liability positions in due course.
Later by a letter dated 12 December 2002, Carter Mayfair forwarded to Mr Nowak an “Indicative Funding Proposal”. This was tendered and admitted into evidence. Mr Nowak accepted this proposal on behalf of Adelaide International Motorplex, as its sole director. The application refers to the contract dated 18 October 2002. The name Thunderdome Raceway Pty Ltd has been deleted and the words Adelaide International Motorplex Pty Ltd have been inserted. Mr Nowak testified that he had made those changes. It is obvious that Thunderdome Raceway was included, by Carter Mayfair, as the purchaser on the basis of the letter forwarded by Mr Nowak on 26 November 2002.
Also on 12 December 2002, a letter was sent to Mr Nowak by Jardine Lloyd Thomson, an Australian Motor Sport Insurance Broker. The letter refers to an earlier conversation with Mr Nowak regarding the purchase of the Adelaide International Raceway and the need for an insurance policy. On the document there are handwritten words which say "please accept the cover and put in the name of Adelaide International Motorplex Pty Ltd". Mr Nowak, in the course of his evidence, admitted that this was his handwriting.
In his evidence Mr Nowak conceded that, by 12 December 2002, it was reasonably common knowledge that Adelaide International Motorplex Pty Ltd would be the company purchasing the raceway. This is supported by a number of additional documents tendered at trial including emails, media releases, insurance proposals and a discussion paper prepared by Mr Nowak’s then solicitors, Andersons Solicitors.
On 16 December 2002, Mr Nowak instructed Ms Westthorp to lodge with ASIC certain documents to carry out the resolutions in order to change the name of the purchasing company. The change of name notification was lodged with ASIC and Skylink Global Pty Ltd was changed to Adelaide International Motorplex Pty Ltd.
Also on 16 December 2002, Mr Nowak addressed a public meeting of potential investors. At the meeting people were invited to invest in the purchase of the raceway. The information memorandum was made available at this meeting. On 17 December 2002, Mr Nowak forwarded to Mr Jane a further contract note for the purchase of the raceway. An additional vendor was included by Mr Nowak as was an additional certificate of title. The purchaser on the December contract note was stated to be "Adelaide International Motorplex Pty Ltd". The ABN was that of Skylink Global Pty Ltd.
On 19 December 2002, the notice of the allotment of redeemable preference shares was signed and lodged with ASIC.
Messrs Frank and Pat Carbone produced documents in answer to subpoenas. The documents produced included an original share certificate issued to Tawela Pty Ltd , a company associated with Mr Pat Carbone, for 20,000 redeemable preference shares in Adelaide International Motorplex Pty Ltd and a share certificate certifying that Mr Frank Carbone had been issued 10,000 redeemable preference shares in Adelaide International Motorplex Pty Ltd. Mr Nowak gave evidence that the parties who contributed to the deposit did so in exchange for redeemable preference shares and that he directed the preparation and issue of shares. The letter from Mr Nowak, enclosing the share certificates is dated 19 December 2002. There is an inconsistency between the receipt issued to Mr Pat Carbone for $10,000 and the share certificate which indicates that 20,000, one dollar, redeemable preference shares had been allocated.
Counsel for the defendant tendered an electronic lodgement notice of the allotment of redeemable preference shares. The notice was in the name of Charterhill CF Pty Ltd. This document indicates that Adelaide International Motorplex Pty Ltd had issued 490,000 shares on 26 November 2002. It contains the ACN of Motorplex, formerly Skylink Global. This document was not lodged until 19 December 2002, after the December contract note was signed.
None of the contemporaneous documentation created in 2002 identifies Isotomic as the intended purchaser or alternately Motowear Pty Ltd. Of course the possibility of Mr Russo's involvement was not a factor at that point of time. But, as will be seen, things changed when he and his group became potential investors later in 2003.
The Suggested Mistake
The defendant asserts that the plaintiffs' case smacks of recent invention. The defendant alleges that at all times it was the intention of Mr Nowak to use Skylink Global Pty Ltd, later known as Adelaide International Motorplex, as the company to purchase the raceway. The defendant alleges that the letter of nomination, the Minutes from a Meeting of a Director and the alleged mistake when changing company names were a series of events created by Mr Nowak, after the event, for the purpose of providing to Mr Russo a “clean” company which had not traded and in which shares had not been allocated. The defendant points to a number of factual inconsistencies, which they submit, supports their case of recent invention by Mr Nowak. I will examine these inconsistencies and make findings.
Ms Westthorp gave evidence for the plaintiffs. She testified that in October 2002 she had a conversation with Mr Nowak on the topic of a contract in relation to Adelaide International Raceway Pty Ltd and which company, within the group, might be the purchaser. She stated that at that time there were a couple of companies which were dormant, one being Motowear Pty Ltd and the other being Skylink Global Pty Ltd. She said that Motowear Pty Ltd was preferred by Mr Nowak as it was a “cleaner company and didn’t have any history”.
Both, Mr Nowak and Ms Westthorp, gave evidence that the next conversation they had in relation to the Adelaide International Raceway was just after Mr Nowak signed the October contract. This conversation relates to the letter of nomination. Ms Westthorp testified, in great detail, about the contract for the purchase of the raceway and the instructions she received in relation to the letter of nomination. She was shown the letter, and she accepted that the letter was not prepared on the date that the letter was dated. She said that it was common practice to back date a letter of nomination to the day before the contract was signed. She stated that she thought that she actually prepared the nomination letter in question a couple of days after the contract was signed. Ms Westthorp explained how she used the computer to create the letter of nomination and then just modified it for the present circumstances. She testified that the words “Motowear Pty Pty” which appear on the letterhead, were simply a typing mistake. It seems like it was a “one-off” document and probably produced in haste. It is likely that the obvious typing mistake would have been discovered had it not been prepared in haste.
It was in fact put to both Ms Westthorp and Mr Nowak in cross-examination that the letter was not created in the week following the signing of the contract on 18 October 2002 but in fact it was created, in July 2003 after a letter of nomination was requested by Mr Palasis, Mr Nowak’s then solicitor. Both, Ms Westthorp and Mr Nowak, strongly refuted this allegation. Ms Westthorp testified that after she created the letter of nomination, Mr Nowak signed it and then she placed it, together with the contract, on the file until Mr Palasis requested to see the documents in 2003. Ms Westthorp also stated that she had also created the Minutes of a Meeting of the Director. In other words, on the basis of her evidence, the letter of nomination dated 17 October 2002 should have been on the file when it was sent to Mr Palasis in July 2003. Mr Palasis was not called to give evidence and the clear inference from the circumstances surrounding his request for the letter of authority is that it was not on the file when he requested it.
Ms Westthorp testified that between October and December 2002, she had received instructions from Mr Nowak in relation to the change of a company name. He asked her to change the name of the company, which had purchased Adelaide International Raceway to Adelaide International Motorplex Pty Ltd. She stated that she picked a company register from the shelf which contained all of the company registers, and that she later learned that she had made a mistake and picked up Skylink Global rather than Motowear Pty Ltd and had changed its name to Adelaide International Motorplex. ASIC documents were tendered and admitted into evidence. Those documents indicated that on 16 December 2002, the company Skylink Global Pty Ltd passed a resolution to change its name to Adelaide International Motorplex Pty Ltd. This was the day prior to the signing of the December contract.
Mr Nowak testified that his instructions were to change Motowear Pty Ltd to Adelaide International Motorplex Pty Ltd. This is inconsistent with the letter of 17 October 2002. The letter states that Motowear Pty Ltd would first be changed to Isotomic Pty Ltd. I find it somewhat unusual that Mr Nowak was unable to give an actual reason as to why Motowear Pty Ltd was meant to have its name changed to Isotomic Pty Ltd prior to it being changed to Adelaide International Motorplex Pty Ltd, as suggested in the 17 October 2002 letter of authority. Ms Westthorp testified that she did not ask Mr Nowak why two name changes were necessary. It is difficult to understand why such a double name change should take place in the future. Mr Nowak, in evidence, simply stated that there had been a purpose. The purpose he gave did not make sense in my opinion.
Ms Westthorp further testified, that it was not until February 2003, that she discovered the error she had made. This was as a result of Mr Nowak asking her to “change the name of Motowear or whatever it is called now, to Isotomic Pty Ltd”. Mr Nowak testified that when Ms Westthorp told him about the error that she had made, he then directed her to simply change Motowear directly to Isotomic. It was at this time that Mr Nowak also realised that Mr Halliday, the other director, had not been removed as secretary and shareholder of Motowear. Mr Nowak directed Ms Westthorp to change this as well.
Shortly after these events, Ms Westthorp received instructions from Mr Nowak to “clean up any companies that were not in use”. It was at this time that Adelaide International Motorplex Pty Ltd was deregistered. ASIC documents indicate that Motorplex was de-registered on 30 June 2003. At this time the shares issued in Adelaide International Motorplex were redeemed as well.

Finally, the defendant tendered an application made to ASIC by Van Dissels Solicitors, who were then acting for Mr Russo and his group. The document was dated 17 July 2003 and indicates that an attempt was made to change the name of Isotomic Pty Ltd to Adelaide International Motorplex Pty Ltd. This application was rejected by ASIC.
Conclusions on identity of purchaser
I have already dealt with the topic of extrinsic evidence in the context of the formation of a contract and the ascertainment of the subject matter of the contract.
The Plaintiffs argue that the Defendant should not be allowed to rely on the evidence of post-contract conduct and the events in relation to the references to Skylink Global Pty Ltd, later known as Adelaide International Motorplex Pty Ltd. They assert that the evidence of post-contract conduct and events regarding Adelaide International Motorplex are of little or no relevance to the construction of the contract and in any event the Plaintiffs assert that the events regarding Adelaide International Motorplex Pty Ltd were explained.
In relation to the question of the identity of the purchaser, it is accepted by the Plaintiffs that in certain circumstances, extrinsic evidence may be admissible to prove the parties to a contract where the contract does not make this clear. In Gilberto v Kenny (1983) 48 ALR 620, the High Court held that evidence of surrounding circumstances was admissible to demonstrate that the purchaser was acting as an agent for her husband and herself. The Plaintiffs seek to distinguish this case on its facts, from the case at bar, on the basis that there is no patent ambiguity surrounding the identity of the purchaser. They submit that the purchaser was clearly defined to be “George John Nowak and/or nominee” or in the alternative the capacity in which Mr Nowak entered into the contract was not relevant to the vendor at the time of the entry into the contract.
Whilst I accept that the identity of the purchaser was not material to the vendor, it has, however, important implications as to standing and to the relief available to the parties. On this basis documentation as evidence of surrounding circumstances is relevant and admissible. I do not accept the Plaintiffs’ submission that there is no ambiguity as to the identity of the purchaser. Clearly the true identity of the purchaser, and the nature of Mr Nowak’s role in the purchase of the raceway, is very much in issue in this case. It is accepted that Mr Nowak was acting as an agent for an undisclosed principal. The question is can Isotomic, on the basis of all the surrounding circumstances, be regarded as the nominee. The Plaintiffs’ tendered the letter of 17 October 2002, in support of their submission that Motowear Pty Ltd was the correct identity of the undisclosed principal. The Defendant’s rely on the surrounding, contemporaneous documentation in support of their case, which is that at all times the correct identity was Skylink Global Pty Ltd, later known as Adelaide International Motorplex Pty. In the alternative the defendant says that it was not Isotomic, which was the undisclosed principal. Therefore the identity of the purchaser goes to a matter in issue, namely, whether Isotomic has standing in these proceedings.
The authorities appear to be against the use of post- contract conduct in aid of the construction of a written contract. (See Stevens v Standard Chartered Bank (1988) 53 SASR 323) However, evidence of conversations, letters and their purport after the October contract note is relevant and admissible as an aid for interpreting the October contract note. Evidence of this type, is also relevant for questions of credit, relief, termination and standing.
By an email dated 10 January 2003, Mr Nowak asserted that he had purchased the Raceway on behalf of the consortium. This is supported by the documents produced in answer to subpoenas directed to Messrs Frank and Pat Carbone, Mr Marveggio, and Mr Basile and also the ASIC documents showing that shares had been issued in Adelaide International Motorplex Pty Ltd. Receipts were also produced. I have dealt with these receipts earlier. The receipts indicate that monies had been received from various members of the consortium for the purpose of purchasing the Adelaide International Raceway. The letter enclosing the shares is signed by Mr Nowak on the letterhead of Adelaide International Motorplex Pty Ltd, but the acknowledgment of the payment for the shares is on a letterhead of Thunderdome Raceway, again signed by Mr Nowak.
If Mr Nowak were to successfully acquire the raceway for a consortium, money from a finance provider would be required in addition to any monies paid in exchange for redeemable preference shares. Only Motorplex, formerly Skylink Global, had taken steps in order to able to proceed with the purchase of the raceway. That company had received monies, issued shares and applied for finance. In contrast Isotomic/Motowear had not made any attempts to obtain finance, nor had it issued any shares. This is supported by the fact that Mr Nowak signed the funding proposal received from Carter Mayfair, on behalf of Adelaide International Motorplex Pty Ltd.
Additionally, there is other documentation including the information memoranda, emails and the 17 December contract note which hold out Adelaide International Motorplex as the purchaser. It was conceded by Mr Nowak that by December 2002 it was common knowledge that it would be Adelaide International Motorplex Pty Ltd as the purchaser. None of the contemporaneous documentation created in 2002 identifies Isotomic as the intending purchaser or alternately, Motowear Pty Ltd. On all of the information available the entity purchasing the raceway was not Isotomic.
With that background in mind I will now consider the letter of 17 October 2002 and the suggested “mistake”. I find that the letter of nomination and the director’s resolution were created after the event to facilitate Mr Russo’s proposed acquisition of the Raceway and to avoid any personal liability on the part of Mr Nowak for the October contract. The evidence given by Mr Russo was unequivocal. He stated that he would not purchase the contracting company if that company had traded previously. I believe that this forced Mr Nowak into finding a company within his group which was dormant at the time, and the name of which could easily be changed to Adelaide International Motorplex Pty Ltd. The fact that shares had been issued in Adelaide International Motorplex and that Motowear Pty Ltd did not even have an ABN at the time of the October contract are, in my opinion, strong indicators that Adelaide International Motorplex Pty Ltd was the company which was intended to acquire the raceway. However that would not have suited Mr Russo and he was emerging as Mr Nowak's best chance of getting himself out of the mess he was in.
The evidence given by Ms Westthorp and Mr Nowak regarding the creation of the letter of nomination is the platform for the attack made on the credit of both witnesses by the defendant.
I find Ms Westthorp’s version of the events which precipitated and caused the creation of the letter to be inherently improbable. There may be some element of misguided loyalty in Ms Westthorp’s very detailed recollection of certain events and her vagueness regarding others. It seems to me highly unlikely that considering the events that were taking place, and the different names appearing on the various documentation, receipts, emails and memoranda that the letter of 17 October 2002, expressing in such explicit detail the identity of the purchaser and the intention to later change the company name, would have been created at the time it was purported to have been created. It is a perfect self-serving document for the case which is now put forward by the plaintiffs.
In addition, there are other contemporaneous documents including an Information Memorandum, a letter addressed to Carter Mayfair from Mr Nowak and receipts for the deposit monies which assert that Thunderdome Raceway is the principal purchasing company. I am concerned by the inconsistency between this evidence and the letter of nomination. In evidence, Mr Nowak stated that there was a change in nomenclature from Adelaide International Motorplex Pty Ltd to Thunderdome Raceway “which would have been in about mid-October”. This is at odds with the letter of nomination, which was created on the plaintiff’s version of events, some time in the week of 18 October 2002. I find that the evidence given by Mr Nowak on the topic of Thunderdome Raceway is incorrect as a letter dated 26 November 2002 was sent to Carter Mayfair asserting Thunderdome as the purchaser. I also find this evidence inconsistent with the letter of 17 October 2002 which makes no mention of Thunderdome Raceway. Surely, if the letter of 17 October 2002 had been created on or about the date it bears, an application almost a month later on 26 November would not have asserted Thunderdome Raceway as the purchaser.
Mr Nowak explained the use of the Thunderdome Raceway letterhead acknowledging the deposits paid, by stating that one of his administrative assistants would have created the letterhead using their own initiative. I do not accept this. Despite his attempts to distance himself I am convinced that Mr Nowak was very much a "hands on" operator in relation to all his business dealings.
Mr Nowak’s explanation regarding the issue of the redeemable preference shares I find similarly improbable. He stated that he did not give specific instructions for redeemable preference shares to be issued in the name of Adelaide International Motorplex Pty Ltd. He stated that probably during the course of some discussions the topic of issuing redeemable preference shares would have been raised. He said "The administration staff would, then have utilised their initiative in order to effect that task".
I likewise reject this suggestion. It is another attempt to distance himself from what was going on at a crucial time.
I find Mr Nowak’s evidence regarding the creation of the letter and the Minute to be similarly improbable. I believe that the letter of nomination came about as a result of the receipt of the letter forwarded by Andersons Solicitors, dated 17 July 2003, to Mr Nowak. Mr Palasis needed proof of the authority for Mr Nowak to negotiate and I infer that such authority was not on the file where Ms Westthorp said she placed it.
In relation to the suggested mistake change of names, I do not accept the plaintiffs’ version of events. I place particular emphasis on the memoranda prepared by Andersons, which were tendered and admitted into evidence. One in particular was titled “Discussion Paper – Structuring of Adelaide International Motorplex Pty Ltd”. It is dated 13 January 2003. It was put to me by the defendant in its submissions that the absence of Mr Palasis’ evidence supporting the assertions made by Mr Nowak and Ms Westthorp about the intended company and its structure is significant. It was submitted that adverse inferences could be drawn against the plaintiffs for that reason. (See Jones v Dunkel (1959) 101 CLR 298.) I agree that such an adverse inference is available in relation to the absence of Mr Palasis.
Ms Westthorp testified that Mr Nowak first requested that the company which purchased the raceway change its name to Adelaide International Motorplex Pty Ltd in about October to December 2002. She then stated that in February 2003 she realised that she had mistakenly changed the name of Skylink Global to Adelaide International Raceway rather than correctly, changing the name of Motowear Pty Ltd. She stated that she realised this mistake when Mr Nowak asked her to change the name of "Motowear or whatever it is now" to Isotomic. The order in which the changes of name took place is entirely inconsistent with the letter of authority.
When considering the discussion paper and the facts contained within, there is no reference to Motowear Pty Ltd. In fact the memorandum makes no reference to either Motowear Pty Ltd or to Isotomic Pty Ltd. Adelaide International Motorplex is referred to within the memoranda. At the date of the letter, namely, 17 October 2002, Motowear did not have an ABN. It could not enter into a contract, nor could it allocate shares. Motorplex did however, have an ABN. Motorplex was wholly owned and controlled by Mr Nowak through an associated company. At all times Mr Nowak had complete control as the sole director. It was the obvious entity to use in the transaction.
In contrast, Motowear although a single director company following Mr Halliday's removal as director on 12 September 2002, Mr Halliday remained as a shareholder and secretary in addition to Mr Nowak. The date of Mr Halliday's resignation as secretary, is the same day on which Motowear Pty Ltd changed its name to Isotomic Pty Ltd.
The ASIC resignation form purports to be signed on 30 August 2002 yet it was not lodged until 3 February 2003. I believe that this was to facilitate Mr Russo in acquiring Isotomic.
In the absence of any evidence from Mr Palasis I am prepared to draw the inference that any evidence given by him would not have been favourable to the plaintiffs. If Mr Palasis had been called he would have been able to shed some light on the circumstances in which he came into possession of Mr Nowak's file and whether, when he received it, the letter of 17 October 2002 was within the file.
Generally, pursuant to the doctrine of privity of contract, only parties to the contract may enforce the contract. An exception to this general rule is the law relating to agency and the situation of the undisclosed principal. In relation to the doctrine of the undisclosed principal, it is the intention of the agent to act on behalf of the principal which is paramount. (See Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 1 All ER 213) That is, the intention of the agent at the time when entering into the contract. I have considered the whole of the surrounding circumstances and the evidence given at trial. I have not used the post-contract events as an aid to the construction of the contract in relation to the identity of the purchaser. I have however used that information as the background to explain Mr Nowak's intentions as to the way in which he seeks to justify his actions in explaining for whom he was acting and generally in relation to his credibility surrounding the whole of the circumstances regarding the alleged mistake and the letter of 17 October 2002. I find that Mr Nowak did not have actual authority to enter into the contract for Isotomic Pty Ltd. It seems most likely that Adelaide International Motorplex Pty Ltd was to be the company that was, at settlement, to acquire the raceway, but in the final analysis it is not necessary to go that far.
Any interest that Mr Nowak may have had personally was assigned to Isotomic pursuant to a deed of assignment entered into on 16 March 2005. Mr Nowak was joined as a party to these proceedings on 13 September 2005. The proceedings having been issued on 2 December 2003. It was a condition of his joinder, agreed by the parties, that the joinder should not be retrospective. The unfortunate problem for Mr Russo, is that he appears to have become a pawn in Mr Nowak’s dealings. Isotomic has no standing as the undisclosed principal for the reasons already given. Mr Nowak cannot assign any of his rights, retrospectively, to the date of the commencement of these proceedings. Therefore even if there was an enforceable contract and it was not terminated at any stage, neither Mr Nowak nor Isotomic can enforce it.
CREDIT OF KEY WITNESSES
Mr Nowak
The defendant has submitted that Mr Nowak was an evasive and unreliable witness and that he was not candid with the court on a range of topics. Having had the advantage of observing Mr Nowak carefully whilst he was giving his evidence over some considerable time, I agree with the defendants’ submission that he was evasive. Too many times on vital issues he could either not remember or alternatively tended to suggest that it must have been a member of his staff who attended to various matters when they were matters of particular concern and likely to lead to adverse findings.
I have found that it is highly improbable that a person of his business acumen could be so naïve as to not know the details of the land he was purchasing. He attempted to suggest that a representation was made by Mr Brock that there was an extra piece of land involved to the order of what Mr Nowak thought was approximately 100 acres, yet he still signed the contract note. The contract note clearly sets out the specific dimensions of the four certificates of title included in the sale of the land. The boundaries of each title were clearly delineated on the title searches attached to the contract. Mr Nowak had been involved in purchasing, developing, and on selling properties for many years. The sale prices of the various properties he had bought and sold were worth many millions of dollars. I just do not accept his explanations relating to what he called the clear representation made by Mr Brock relating to the vacant land. I find that he deliberately set out to mislead the court on his evidence on this topic.
For a chartered accountant the ignorance which he claimed of the various statutory requirements and procedures relating to the processes within the offices of ASIC defies credibility. I find that he also was evasive in his answers when cross-examined about whether he had refreshed his memory before entering the witness box. He had in fact as it turns out refreshed his memory by reading his proofs of evidence, but when initially asked about this he was not candid.
I disbelieve Mr Nowak in relation to his evidence about the letter of 17 October 2002. I have found that the letter was not created until mid 2003 and then only because it was requested by his solicitors. I have found that it was then produced to satisfy the solicitors that there had been some authority back at the time of entering into the contract of 18 October 2002. I agree with the submissions made by the defendant that in relation to his evidence regarding production of this letter and in particular the reasons why and when it was produced to Anderson was evasive in the extreme. I have dealt with the letter fully in my reasons under the heading "True Identity of Purchaser".
In his application for finance, Mr Nowak applied to a company, Carter Mayfair, and this was done contemporaneously with the signing of the contact, namely, October/November 2002. The documents relating to the application for finance do not contain any information which could suggest that the finance was to be obtained for the purpose of purchasing a going concern. At some stage Mr Nowak has, for whatever reason, decided to allege a contractual basis quite different from that which was the subject of the original negotiations. I have said previously that I believe he was trying to confuse the issue in the hope that this may place him in some sort of superior bargaining position. He thought that by creating uncertainty he would be able to improve his position because the vendor would not wish to lose the opportunity of a contract.
In addition I found Mr Nowak evasive in relation to the topic of the allotment of redeemable preference shares and the monies actually paid. It is of concern that Mr Nowak in evidence stated that only 40,000 shares were allotted for cash consideration and that the remaining 450,000 were allotted in consideration for a series of promises from various persons to pay at settlement of this. If this is in fact true, this is in contravention of various sections of the Corporations Act 2001 (Cth). The electronic lodgement tendered at trial, indicates that no amount was unpaid and that all shares had been issued for cash only. On Mr Nowak's evidence, this was not in fact true. His explanation, that monies were to be paid at settlement, was self-serving in order to prevent self-incrimination and to distance himself from any contravention of the Corporations Act 2001 (Cth)

The defendant in its submission has instanced a number of other occasions when it is suggested that Mr Nowak's credit is in tatters. These topics are set out in detail in the written submissions filed by the defendant and elaborated on to some extent in oral submissions. I will not deal with them all except to say that in each of the instances raised by the defendant the explanations given by Mr Nowak when challenged were unconvincing. Many relate to the way in which company documents were handled by Mr Nowak and are dealt with under the topic of "True Identity of Purchaser". It was on these matters that he distanced himself and sought to place responsibility on his staff members.
One matter which should be highlighted is the change of name in relation to Skylink which became Motorplex in December 2002. Mr Nowak says that was a mistake. As I have already indicated he was not able to give any satisfactory explanation of how that mistake occurred. In the formal documents filed with ASIC and signed by Mr Nowak on 16 December 2002, the actual name Skylink appears on the face of the documents. Likewise Ms Westthorp could not explain that mistake. Mr Nowak said that he gave instructions to Ms Westthorp to remedy the mistake but no such steps were taken. No amending documents were lodged with ASIC. Ms Westthorp says she was asked by Mr Nowak in 2003 to change the name of Moto Wear to Istotomic. If it was a mistake it was easily fixed by a remedial application to ASIC. In addition, the order in which the name changes were meant to take place are inconsistent with the letter of nomination.
In March 2003 shares allotted to the original members of the syndicate or consortium were redeemed. From that point Mr Nowak was at liberty to remedy any mistake by simple procedures within the ASIC regulations. I assume that as a chartered accountant for many years he would be familiar with the ways and means of how these matters could be attended to, yet these simple measures which were available were not availed of.
In summary both his evidence and Ms Westthorp's evidence on this topic was most unsatisfactory and I do not accept it.
It was also pointed out that in the course of these proceedings when a request was made in November 2004 for discovery of documents relating to Motorplex that discovery was refused on the basis that the company was never involved in the exercise of the purchase of the raceway. Clearly it was involved as being the vehicle used by the consortium and the request was made within sufficient time of the de-registration of that company to have required Mr Nowak and his staff to maintain records pursuant to the rules under the Corporation Act. There was conflicting evidence as between Mr Nowak and Ms Westthorp as to where the records had originally been kept and Mr Nowak's only explanation was that they must have been destroyed when shift was made between the premises formerly occupied by his business to new premises. I reject that evidence and find that once again Mr Nowak was attempting to mislead the court in relation to that topic.
These matters are in my view the main pointers showing a complete lack of credibility in Mr Nowak. Wherever there is any other evidence relating to one of the main issues of the case I would prefer that, to the evidence given by Mr Nowak. In short I can have no faith in his ability to accurately present a true picture of what happened and the reasons for the occurrence of certain events.
Ms Westthorp
In relation to the letter of 17 October 2002, I also disbelieve Ms Westthorp in relation to the time and circumstances in which the letter was created. The letter was in my view created in a particular hurry. Ms Westthorp attempted to produce it on a letterhead but the letterhead was incorrect in that the letter in its logo nominated a company known as "Moto Wear Pty Pty". (sic)
The letter and its contents establish, in my view that it was prepared later in the piece as a self-serving document. As I have said it covers the field for the case now put forward by the plaintiffs. It speaks of purchasing the "fixtures, fittings and going concern raceway business". It is also to be noted that minutes prepared for the same date likewise speak of the purchase of a business. It was convenient for Mr Nowak at a later stage to produce a self-serving document consistent with his claim that he was purchasing a going concern and that the bargain he had agreed to involved land of some 300 acres. Ms Westthorp has gone along with Mr Nowak's intentions in creating the letter and she has not told the truth about its creation.
Mr Jane
I have no reason to doubt the truth of Mr Jane's evidence. He gave his evidence in a convincing and sensible way. I prefer his evidence wherever it is in conflict with that of Mr Nowak. I prefer all of his evidence in particular in relation to the fact that the agreement was never intended to relate to the purchase of the Adelaide International Raceway as a going concern. All of the objective facts support Mr Jane's version of events as distinct from that of Mr Nowak.
Mr Brock
Again, I formed a good impression of Mr Brock as a witness. His evidence about some topics in particular and including the alleged discussions with Mr Nowak about the size of the land, the extra title, the question of an alleged extension of time in which to obtain finance and his evidence generally as to the meetings he held with Mr Nowak, in my view, was inherently more likely than the versions put forward by Mr Nowak. I prefer his evidence whenever it conflicts with that of Mr Nowak.
Mr Russo
I thought his evidence was honest and accurate to the best of his memory. I formed a similar impression in relation to his partners Mr Georgiou and Mr Cavuoto. I have indicated in my reasons that I think Mr Russo and his partners were unfortunately the victims of Mr Nowak's attempts to protect himself in relation to the deposit and to offload any potential liabilities which might flow from his inability to perform the contract. Whilst I have considerable sympathy for Mr Russo and his partners in the position in which they now find themselves, I unfortunately cannot remedy that in these proceedings.
Mr Van Dissel
I thought he did his best in his attempt to reconstruct events with the aid of his file notes and with the other documents tendered in evidence. I do not believe that his evidence overall had much, if any, impact on the crucial decisions which I have to make in this matter.
Potential Witnesses not Called
Both parties submitted that I should, pursuant to Jones v Dunkel, draw adverse inferences against the party who failed to call certain witnesses. I have already made one such inference in the case of the plaintiffs' failure to call Mr Palasis.
The plaintiffs have suggested that such an inference should be drawn against the defendant for its failure to call Mr Chung. I do not think that any evidence he may have given would have added anything to the evidence of Mr Jane which I have accepted.
The defendant has suggested that inferences should be drawn from the failure by the plaintiffs to call Mr Nowak's wife and others in his office responsible for maintaining the statutory records and office systems. It was also suggested that members of the purchasing consortium should have been called.
I have expressed my views as to the way in which I consider Mr Nowak ran his business ventures and office generally. I have formed the view that he ran things in very much a "hands on" fashion. I do not consider that the evidence of any of the members of the office staff or of the purchasing consortium could have added anything to the topic of the manner in which Mr Nowak ran his business. In relation to the office systems I am convinced that Mr Nowak, despite his protestations, was generally aware of the office procedures and has used his suggested ignorance of the procedures as an excuse for not responding to various topics in cross-examination. I therefore decline to make any inference in the terms of Jones v Dunkel other than the inference I have made for the failure to call Mr Palasis.
RELIEF
In this matter the plaintiffs seek specific performance of the contract of 18 October 2002. No case has been presented by the plaintiffs in relation to an alternative claim for damages. The defendant first argues that the plaintiffs are precluded from obtaining an order for specific performance because at the time they were insisting that the defendant complete, that is on 29 September 2003, the purchasers were not ready, willing and able to settle.
Readiness and willingness to settle
It is argued that because the purchasers made it clear that if they did settle they would nevertheless be seeking damages and compensation in respect of the extra land which they say was part of the original bargain, it was not a case of settling on the amount nominated in the contract, namely, $2.4m. The plaintiffs insisted on an entitlement to compensation for what they say was the value of the land omitted from the description of the land in the contract note of 18 October 2002. It is said that the position taken by the purchasers is therefore at odds with them being ready, willing and able to settle.
The plaintiffs insisted that the extra land was an essential part of the contract from as early as the email of Mr Nowak dated 10 January 2003. When settlement was later being discussed they insisted that settlement was conditional on them maintaining the right to bring an action for the loss of the extra land at some later time.
Mr Nowak personally was not able to perform his part of the bargain after his finance was declined in December 2002.
When the action was instituted on 2 December 2003 the defendant submits that Isotomic was not ready, willing and able to settle. Isotomic had already claimed through its solicitors by letter dated 22 September 2003, that the contract had to be rectified. The rectification sought, was the additional vacant land, that is, the fifth title of approximately 65 acres previously referred to.
Isotomic originally sought damages for negligent representation under the Fair Trading Act 1987 (SA). The claim was for damages to be assessed for the loss arising from the misrepresentation alleged and that therefore as a result, a deduction should be made from the purchase price nominated in the contract, namely $2.4m, on account of those damages.
Isotomic did change its position in an amended statement of claim filed on 15 September 2005. The defendants contend, and I agree, that the relevant time to assess the plaintiffs' ability to settle on the contract was at the time of the notice to complete in September 2003, and when the action was commenced. The plaintiffs were not prepared to settle on the terms of the contract because of their claim for misrepresentation and damages alleging that the vacant land had not been included in the subject matter of the contract. That places the plaintiffs, in my view, into the same category as explained in the High Court decision of King v Pogguiti (1922) 32 CLR 223. That decision is authority for the proposition that a purchaser is not ready and willing to perform an essential term of the contract if he is only ready and willing to settle with a deduction from the purchase money. I find therefore, that the plaintiffs were not ready and willing to settle on 29 September 2003.
Lack of clean hands
The defendants also contend that even if the plaintiffs were ready, willing and able to settle they are seeking equitable relief but have not come to the court with clean hands. They say this in particular relating to the letter of 17 October 2002. I have already dealt with that aspect earlier in my reasons and although I am not prepared to go as far as counsel suggested, namely, to find that Mr Nowak's actions amounted to a fraud, I am nevertheless convinced that Mr Nowak was untruthful in his evidence regarding that document and that the document was retrospectively prepared some considerable time after 17 October 2002. It is not necessary for me to consider whether proof is made out on the higher standard of proof required for fraud because I have disbelieved Mr Nowak on this issue.
The claim for specific performance requires an analysis of whether, all other things being equal, the claim should nevertheless fail because of a lack of candour on the part of the parties seeking the relief.
The letter of 17 October 2002 is an important aspect of this lack of candour. It was, as I have said, an attempt to mislead the court. I have earlier dealt with other attempts to by Mr Nowak to mislead by his evidence on the various topics I considered when I discussed Mr Nowak's credit and as I have set out in the section of these reasons "True Identify of Purchaser".
Mr McNamara, in his submissions, has described an elaborate scheme which he contends was part of the grand plan of Mr Nowak. This involved Mr Nowak seeking to recoup his deposit in early 2003 and then a rear guard action to effectively protect himself from the consequences of future claims brought against him for his failure to complete the contract.
Mr Russo came to Mr Nowak's attention as a potential purchaser in April 2003. Mr Russo was aware that the company Adelaide International Motorplex Pty Ltd was the proposed purchaser. In an attempt to recover the deposit and to relieve himself of any potential liability, Mr Nowak had to retrospectively authorise his entry into the contract on behalf of a chain of companies of which each company was to play a different role. Adelaide International Motorplex Pty Ltd had to be included due to the fact that it was public knowledge that it was the proposed purchaser. Isotomic Pty Ltd was required by Mr Nowak in order to allow Mr Russo to acquire a clean company which hadn't previously traded.
The letter of 17 October 2002 was an essential part of Mr Nowak's retrospective justification for authorising himself, as agent for the undisclosed principal Isotomic, to be involved in the purchase.
The scheme so described can be seen to be elaborate. It both protected Mr Nowak for his default under the contract and at the same time offloaded any liability to Mr Russo and his partners.
Any lack of candour by Mr Nowak unfortunately also taints Isotomic in my view.
At the time that the course of action described earlier was put into motion, Mr Nowak was a director of Isotomic. He was still a director when the action was instituted by Isotomic.
CONCLUSION
In those circumstances I would decline to grant specific performance, all other things being equal, because of the lack of candour shown by Mr Nowak in his evidence and on what I have found was an attempt to mislead the court.
The defendant has also suggested that even if all of the matters which I have decided against the plaintiff were found in their favour and that I did make an order for specific performance it would have to be on terms relating to a requirement to pay interest on the purchase price at the default rate identified in this contract.
I have not found it necessary to consider that submission in view of the decision I have reached in relation to all other aspects. This would in any event probably require further evidence and submissions at the time of judgment if that judgment were in favour of the plaintiffs on the merits.
In the end result therefore the plaintiffs application for specific performance is refused. There will be judgment for the defendant.