Johnston v Brightstars Holding Company Pty Ltd - [2014] NSWCA 150

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150
Hearing dates: 17 October 2013
Decision date: 14 May 2014
Before: Beazley P at [1];
Basten JA at [99];
Gleeson JA at [132]
Decision:
Appeal dismissed with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:
CONTRACTS - General contractual principles - Variation of contracts - Proof of terms of variation - Pre-contractual conduct

CONTRACTS - General contractual principles - Variation of contracts - Proof of terms of variation - Post-contractual conduct - Whether admissible as admissions

EVIDENCE - Admissions - Whether admissible on questions of mixed fact and law

EVIDENCE - Witnesses - Cross-examination - Rule in Browne v Dunn - Where witness gives no evidence of alleged event
ESTOPPEL - Equitable estoppel - Reliance
Legislation Cited: Uniform Civil Procedure Rules 2005
Cases Cited: Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353
Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; 238 CLR 570
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1
Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153
Browne v Dunn (1894) 6 R 67 (HL)
Bulstrode v Trimble [1970] VR 840 at 849
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Dovuro Pty Ltd v Wilkins [2003] HCA 51; 215 CLR 317
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43
Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd [2014] HCA 7
Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175
Fox v Percy [2003] HCA 22; 214 CLR 118
Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669
Hopcroft v Edmunds (2013) 116 SASR 191
James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303
Mannai Investment Co v Eagle Star Life Assurance Co Ltd [1997] AC 749
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382
Pitcher v Langford (1991) 23 NSWLR 142
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165
Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387
Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 107
Wilson v Anderson [2002] HCA 29; 213 CLR 401
Texts Cited: Lewison and Hughes, The Interpretation of Contracts in Australia (Law Book Co, 2012) at [2.04]-[2.05]
J D Heydon, Cross on Evidence (9th ed, 2013, LexisNexis Butterworths)
Category: Principal judgment
Parties: Paul Arthur Johnston (First Appellant)
Blair Massey Warren (Second Appellant)
Brightstars Holding Company Pty Ltd (First Respondent)
Peter Wilson (Second Respondent)
Representation: Counsel:
G Reynolds SC; C Botsman (Appellants)
C Harris SC (Respondents)
Solicitors:
Kemp Strang Lawyers (Appellants)
Willis & Bowring (Respondents)

File Number(s): CA 2012/350075; 2012/348802
Decision under appeal

Jurisdiction:

9111

Citation:

Brightstars Holding Co Pty Ltd v Johnston [2012] NSWSC 929;
Brightstars Holding Co Pty Ltd v Johnston; In the matter of Brightstars Freehold Pty Ltd [2012] NSWSC 1228

Before:

Stevenson J

File Number(s):

2011/324919

HEADNOTE

[This headnote is not to be read as part of the judgment]

By a Deed of Settlement dated 12 May 2011, the appellants agreed, inter alia, to pay $170,000 to the respondents' solicitors. The deed was subsequently varied by agreement of the parties. The dispute concerned the terms of that variation. The appellants contended that the variation was to expunge their liability for payment of the $170,000, whereas the respondents contended that the liability was merely deferred and was to be made to either or both of the respondents rather than directly to their solicitors.

The evidence which the respondents relied upon to support the variation for which they contended included the unchallenged evidence of their solicitor of conversations he had had with the appellants' solicitor, and post-contractual statements made by the appellants that were said to constitute admissions.

Stevenson J, in the Supreme Court, found that the agreement was to defer liability, with an implied term that the payment was required on the giving of reasonable notice. On appeal to the Court of Appeal, the appellants challenged his Honour's reliance on the respondents' evidence described above, and also claimed that the respondents should be estopped from resiling from the terms of the variation for which the appellant's contended.

The Court dismissed the appeal.

(i) Per Beazley P, Basten and Gleeson JJA: The Deed of Settlement was varied by communications between the parties' solicitors on 24 and 25 November 2011. The variation was to defer the obligation to pay the sum of $170,000, not to release that obligation: [77], [117], [130], [133].

(ii) Per Beazley P (Gleeson JA agreeing): The evidence of negotiations between the parties, prior to any offer or acceptance of the variation, was not admissible to prove or support the proof of a variation of contract in the terms alleged by either party. The evidence was admissible only as part of the surrounding circumstances: [48].

Considered: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [23]; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337, [352]; Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd [2014] HCA 7, [35].

(iii) Per Beazley P (obiter) (Gleeson JA agreeing): Australian law does not recognise the subjective intention of the parties as relevant to the construction of the contract actually formed. It is therefore not legitimate to use as an aid in the construction of a contract anything which the parties said or did after it was made: [56].

Considered: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [23]; Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337; James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603; Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; 238 CLR 570.

(iv) Per Beazley P:

(a) In the present case, whether the terms of the variation were as alleged by the appellants or by the respondents was a question of fact, such that post-contractual conduct was admissible as admissions on that question.

(b) It is not necessary to consider whether post-contractual conduct may constitute admissions as to what the terms of a contract are in circumstances where that question involves a question of mixed fact and law: [84].

Considered: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193; Dovuro Pty Ltd v Wilkins [2003] HCA 51; 215 CLR 317; Hopcroft v Edmunds (2013) 116 SASR 191.

(v) Per Basten JA (Gleeson JA agreeing): Where post-contractual statements provide evidence of facts, the assertion of which is against the interests of one party, it may be admissible as an admission by that party. However, to the extent that the evidence reveals an opinion as to a question of law rather than fact, the admission may be irrelevant or valueless: [121]. In this case, the issue is one of fact: what did the parties agree?: [122].

Considered: Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382; Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193.

(vi) Per Beazley P (Gleeson JA agreeing): The rule in Browne v Dunn (1894) 6 R 67 (HL) is a rule of fairness that creates a requirement to cross-examine a witness if it was intended that the witness' evidence should not be accepted: [71]. In circumstances where the appellants' witness, Ms Bernauer, did not refer to alleged conversations between herself and the respondents' solicitor in her affidavit, and the appellants were aware of the respondents' reliance on those conversations, the appellants could and should have obtained further evidence orally or by affidavit. There was no aspect of fairness that required the respondents to call Ms Bernauer for cross-examination: [72].

Considered: Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1.

(vii) Per Beazley P (Gleeson JA agreeing): In their claim for estoppel, the appellant's did not establish reliance on a representation made by the respondents. If the appellants' solicitor failed to fully inform them of the terms of the variation to which she had agreed, that is not a matter they can visit upon the respondents: [96].

Considered: Walton Stores (Interstate) Ltd v Maher [1988] HCA 7, 164 CLR 387.

Judgment

BEAZLEY P: This is an appeal from a decision of Stevenson J in which his Honour ordered the appellants to pay to the respondents the sum of $198,949.46. His Honour found that the liability to pay arose out of a Deed of Settlement dated 12 May 2011 that had been varied by subsequent agreement.

Under the terms of the original Deed of Settlement, the appellants had agreed to pay to the respondents' solicitors the sum of $170,000 on settlement of a Share Sale Agreement also entered into on 12 May 2011. His Honour found that the variation agreed to by the parties was a deferral of the time of payment of the $170,000 and an implied term of that agreement was that payment was required on the giving of reasonable notice. His Honour found that reasonable notice had been given by a letter dated 31 January 2012 from the respondents' solicitor, Mr Mattiussi of Willis & Bowring, to the appellants' solicitor, Ms Bernauer of Wood Marshall Williams.

The appellants contend that the Deed of Settlement was varied so as to expunge their liability for payment of that sum and that his Honour erred in finding that their liability to pay had only been deferred.

Background

The second respondent, Mr Wilson, together with another person, Ms El Kafrouni, and the appellants, Mr Johnston and Mr Warren, had established a number of childcare centres, trading as Brightstars Early Learning Centres. Disputes amongst these parties led to litigation in the Supreme Court (the equity proceedings) which was ultimately settled by entry into the Deed of Settlement and the Share Sale Agreement.

Under the Share Sale Agreement, Brightstars Holdings agreed to purchase shares in various of the Brightstars companies, including Brightstars Freehold, for a total purchase price of $900,000. Brightstars Freehold owned real estate at Engadine which was subject to a mortgage to the National Australia Bank (NAB). The mortgage debt was $575,000. Monies in the sum of $155,000 were also owed to one of Mr Warren's companies, John Nich Pty Limited (John Nich).

Clause 5 of the Share Sale Agreement provided that the debt owing to each of NAB and John Nich was to be paid prior to or on completion of the Share Sale Agreement. It was understood between the parties that the debts would be paid out of the purchase price of $900,000 at the time of settlement.

Clause 8 of the Deed of Settlement provided relevantly that the appellants would on completion of the Deed and the Share Sale Agreement, pay $170,000 by bank cheque to Willis & Bowring from the purchase monies received from the sale of the shares. The sum of $170,000 was on account of legal costs incurred by Mr Wilson and Ms El Kafrouni in the equity proceedings.

Settlement of the Share Sale Agreement did not take place on the due date of 12 July 2011. Brightstars Holdings and Mr Wilson thus commenced further proceedings seeking, inter alia, specific performance of the Share Sale Agreement and the Deed of Settlement. However, on 1 December 2011, whilst the proceedings were still pending, the Share Sale Agreement was settled. However, on settlement, the entirety of the $900,000 purchase price was paid to NAB as a condition of release of the mortgage on the Engadine property in the circumstances described below. As the entirety of the $900,000 was paid to NAB, no part of those funds were available to Messrs Johnston and Warren to pay the $170,000 to Willis & Bowring as required by the cl 8 of the Deed of Settlement.

As the shares had been transferred, specific performance of the Share Sale Agreement was no longer required. However, Brightstars Holdings and Mr Wilson continued the proceedings, seeking payment of the sum of $170,000 which they alleged remained due under the Deed of Settlement.

As I have indicated, it was not in contest that there had been a variation of the Deed of Settlement (or perhaps a new agreement) entered into by the parties. The contest was as to the terms of the contract as varied. The answer to that question depended upon what conversations, documents or events constituted the variation. At the conclusion of the oral hearing of the appeal, the respondents were directed to file a notice of contention identifying the variation for which they contended. The question of the grant of leave to file the notice of contention was stood over to be determined in the course of the judgment on the appeal.

Pursuant to the Court's direction, the respondents filed a notice of contention on 18 October 2013. The pleaded variation for which the respondents contended was as follows:

"The conversations between Adrian Mattiussi and Amber Bernauer on 24 and 25 November 2011 ... either alone or in conjunction with the letter from Willis & Bowring to Wood Marshall Williams dated 25 November 2011 ... constituted an offer and acceptance creating a contract for variation to clause 8 of the Deed of Settlement dated 12 May 2011 ... under which the payment of the $170,000 referred to in clause 8 was to be paid:

(i) after completion of the Deed, rather than on completion of the Deed; and

(ii) to Peter Wilson and/or Brightstars Holding Company Pty Limited, rather than to Willis & Bowring"

A number of incidental issues were debated in depth on the appeal. These included the relevance of conversations both prior and subsequent to the entry into the variation of the contract; the relevance of email communications between the appellants and their solicitor Ms Bernauer post-1 December 2011; whether the respondents, in the conduct of their case, had offended the principle in Browne v Dunn (1894) 6 R 67 (HL); and whether the credit findings of the trial judge had miscarried such as to require a new trial. An estoppel ground, raised in the amended notice of appeal, was also maintained. All other grounds of appeal were abandoned.

For the reasons which follow, I have concluded that the Deed of Settlement was varied by an offer made by the respondents' solicitor, Mr Mattiussi, to the appellants' solicitor, Ms Bernauer, on 24 November 2011 and by her acceptance on 25 November 2011 in advising Mr Mattiussi that she had arranged for settlement. The variation was to defer the time at which the sum of $170,000 payable to Willis & Bowring under the Deed of Settlement was to be paid. It was an implied term of the variation that payment was to be made within a reasonable time.

The evidence and findings of the trial judge

The critical evidence in the case comprised the Deed of Settlement and the Share Sale Agreement, Willis & Bowring's letter of 25 November 2011, and evidence of conversations between the parties' respective solicitors in late November 2011. His Honour also considered that conversations in October 2011, together with conversations and correspondence between the parties and their respective legal representatives following settlement of the Share Sale Agreement on 1 December 2011, were relevant to the determination of the agreement reached between the parties. The appellants also submitted that earlier events, between May and September, were relevant as setting the context in which the arrangements contained in the Deed of Settlement and Share Sale Agreement were agreed and as supporting the variation for which they contended.

If I am correct in finding that the variation was for the deferral of payment of the sum of $170,000, the conversations in October 2011, events between May and September 2011 and other communications and conversations after settlement of the Share Sale Agreement on 1 December 2011, were not relevant to the determination of the terms of the variation agreed to by the parties, save to the extent that the post-1 December events may constitute admissions that the sum of $170,000 was owing, in acceptance with the terms of the variation as alleged by the respondents.

Events between May and September 2011

The appellants contended that when NAB was provided with copies of the Share Sale Agreement and the Deed of Settlement in about May 2011, the bank became concerned with the involvement of Mr Wilson and Ms El Kafrouni in the arrangements, because of what was described in submissions as their "bad credit history" and "their security position" generally. Particular reference was made to the indebtedness of the company Brightstars Morayfield Pty Ltd (Brightstars Morayfield) to NAB in the sum of $732,000. That was said to be relevant because under the Deed of Settlement, the second respondent, Brightstars Holdings, which was Mr Wilson's nominee company, was to be issued 48 per cent of the shares in Brightstars Morayfield.

The appellants contended that as a result, NAB had insisted that as a condition of releasing the security on the Engadine property, it required not only the payment of the mortgage debt of $575,000, but also that the balance of the $900,000 purchase price be paid to it, to be applied in reduction of Brightstars Morayfield's indebtedness. The respondents also contended that NAB wanted Mr Wilson and Ms El Kafrouni to have a reduced shareholding in that company.

Although out of chronological sequence, it should be noted that there was in evidence a file note of Ms Bernauer of a telephone conversation she had with NAB on 15 November 2011, in which she recorded that the Bank was "unsure about security position of the group" and that "names were noted in Deed of Settlement". The appellants submitted that this was a reference to Mr Wilson and Ms El Kafrouni, who, as has been noted, were alleged to have had an unsatisfactory history with NAB.

The point shortly made was that the reason that the total purchase price of $900,000 was paid to NAB on settlement was because NAB required a $325,000 reduction in Brightstars Morayfield's indebtedness, which would leave no monies available to the respondents to pay the $170,000 to Willis & Bowring as required under cl 8 of the Deed of Settlement. The appellants submitted that on settlement on 1 December 2011, Mr Wilson obtained a benefit from the reduction of Brightstars Morayfield's debt with the NAB, as he was a shareholder in Brightstars Holdings which in turn obtained a 48 per cent shareholding in Brightstars Morayfield under the Deed of Settlement.

It may be accepted that the payment of the $900,000 to NAB was used to reduce Brightstars Morayfield's indebtedness to NAB. Except as providing background why the payment of the whole of the $900,000 to NAB had occurred, I do not consider the evidence referred to above to be relevant to the questions in issue on the appeal.

The October 2011 conversations

Both the appellants and the respondents deposed to conversations in October 2011 relating to the payment of the $170,000 to Willis & Bowring.

The trial judge accepted that there were conversations between Mr Mattiussi and Ms Bernauer and between Mr Mattiussi and the first appellant Mr Johnston, on 11 October 2011. His Honour accepted Mr Mattiussi's version of those conversations. In the conversation with Ms Bernauer, Mr Mattiussi said that he was prepared to seek his clients' instructions to delay the payment of the $170,000 "until after the settlement if there's no other way". Mr Mattiussi added, "[y]our people could then use their remaining assets to pay the $170,000 but that should not be a problem having regard to their assets".

On the same day, Mr Mattiussi, with the consent of Ms Bernauer, had a conversation with Mr Johnston in which he encouraged Mr Johnston and Mr Warren to be more involved in negotiating with NAB in order that settlement of the Share Sale Agreement could proceed. In that conversation, Mr Mattiussi said that he told Mr Johnston that he would seek instructions about delaying the payment of the $170,000 until after settlement.

On 12 October 2011, the second respondent, Mr Wilson, said he was telephoned by Mr Warren and Mr Quilkey. Mr Quilkey became a shareholder in Brightstars Morayfield pursuant to the Share Sale Agreement and appears to have been advising or assisting Mr Warren in relation to these transactions. Mr Quilkey urged Mr Wilson to accept payment of the $170,000 after settlement, with the amount being secured by an unregistered mortgage over a property owned by Mr Warren. Mr Warren confirmed to Mr Wilson that he was happy to secure the payment of $170,000 over his property. Later that day, Mr Warren sent a facsimile to Mr Wilson setting out the details of the indebtedness of the various Brightstars companies to NAB and also noting that the "[s]olicitor has agreed to wait for his fees".

The trial judge accepted Mr Wilson's evidence of this conversation, finding generally that Mr Wilson was a credible witness and noting that there was no challenge to this evidence in cross-examination.

The November 2011 events

There was a second mortgage on the Engadine property to Leda Pty Ltd (Leda). Mr Mattiussi deposed to a telephone conversation with Ms Bernauer on 24 November 2011, as follows:

"[Ms Bernauer]: 'I did receive the email from [the solicitor for Leda] and I haven't called him back yet as I was waiting to hear from the NAB as to whether they were prepared to go ahead and settle on the basis that they receive $900,000. I'll call them again.'

[Mr Mattiussi]: 'Now that Leda has agreed to discharge, if the NAB agrees provided it receives $900,000 I'll get instructions to proceed on that basis. Your client can arrange to pay the $170,000 after the transfer is settled direct to Wilson and we'll get it from the client once he receives it.'"

Ms Bernauer did not give any evidence in response to this part of Mr Mattiussi's evidence. Mr Mattiussi was not cross-examined on it and the trial judge did not refer to the conversation in his judgment.

The letter dated 25 November 2011 from Willis & Bowring, on which the appellants rely as constituting the complete terms of the variation, was sent to their solicitor, Ms Bernauer. The letter stated:

"Mr. Miles [the solicitor for Leda] confirmed that Leda had agreed to provide a Discharge of Mortgage in respect to the Engadine property in order to facilitate the early settlement to our client of Brightstars Freehold Pty Limited and Brightstars Early Learning Centres (Engadine) Pty Limited. The Discharge of Mortgage was to be provided without consideration.

We were also advised that he had communicated his intentions to you some two days earlier by email, but had not heard anything further from your office.

In our conversation, we now understand that you did receive the email from Mr. Miles confirming their intention, however you had written to the National Australia Bank ("NAB") seeking their confirmation that they would be prepared to proceed with a settlement of the Engadine property upon receipt of $900,000.00. The reason you had not communicated with Mr. Miles or this office was that you were awaiting NAB's confirmation.

...

As you are aware, our instructions are to proceed [on the basis that NAB would agree to the settlement upon NAB's receipt of the entire sum of $900,000]. The question of this firm's costs as evidenced in the settlement documents is to be a matter between this firm and our client. We have taken this approach in order to facilitate settlement of the Engadine property without further delay." (Primary judge's emphasis)

Mr Mattiussi gave evidence that there was a further telephone conversation with Ms Bernauer on 25 November 2011, in which she said:

"The NAB has agreed to go ahead with the settlement on receipt of $900,000. I'm trying to book it in for Thursday but I'll let you know."

(The "Thursday" referred to in this conversation was 1 December, the date upon which settlement in fact occurred.) Ms Bernauer did not respond to this evidence either and nor did his Honour refer to it.

The trial judge, at [51], rejected evidence of Mr Johnston of a conversation with Mr Mattiussi on 29 November 2011, following receipt of the letter of 25 November 2011, in which he alleged Mr Mattiussi told him that Mr Wilson was going to have to come up with his legal fees, as had been stated in the letter.

On 30 November 2011, Ms Bernauer wrote to Willis & Bowring directing them to pay the total sum of $900,000 on settlement to NAB and confirming settlement on 1 December 2011.

The post-1 December evidence

His Honour's consideration of the evidence following settlement of the Share Sale Agreement commenced with correspondence from Ms Bernauer on 23 January 2012. However, there was correspondence earlier in January upon which Messrs Johnson and Warren relied as supporting their position that they had been released from liability to pay the sum of $170,000 to Willis & Bowring.

On 13 January 2012, Ms Bernauer sent an email to Messrs Johnson and Warren attaching a letter that she stated she was proposing to send to Willis & Bowring. The draft letter requested, inter-alia, that Willis & Bowring send their "tax invoice for costs in the sum of $170,000 referred to in the Deed of Settlement".

Mr Johnston responded to Ms Bernauer's email as follows:

"Why are we asking for a[n] account off [Mr Mattiussi] when he said in his previous email that he is working out his costs with Peter Wilson?"

Mr Johnston was not cross-examined on the contents of this email.

Ms Bernauer, in an email reply, advised Mr Johnston:

"Thank you for your email. I note that the correspondence dated [25] November 2011 from Willis and Bowring stating that they are sorting out their fees with Wilson does not release your obligations under the deed ..."

In response, on 18 January 2012, Mr Johnson emailed Ms Bernauer, referring to a conversation he had with Mr Mattiussi before Christmas 2011, in which he said "[t]here was no mention of costs as he was working that out with Wilson".

The letter of 23 January 2012, to which the trial judge referred, was a letter from Ms Bernauer to Mr Mattiussi which had been sent by Ms Bernauer as a draft to Mr Johnston on 13 January. The letter stated:

"We note that in compliance with the Deed of Settlement and Share Sale Deed we are currently resolving the GST issues with the ATO and anticipate that such matters will be finalised within 3 weeks.

In the meantime please kindly provide us with your tax invoice for costs in relation to the sum of $170,000 referred to in the Deed of Settlement."

Mr Mattiussi responded by letter dated 31 January 2012, asserting that the sum was owing and a tax invoice was not required. Mr Mattiussi stated in the letter that payment of the $170,000 was required without further notice.

On 21 February 2012, Ms Bernauer emailed Messrs Johnston and Warren stating that the sum of $170,000 was still outstanding and seeking advice as to "how you both propose on coming up with funds to pay the $170,000". Mr Quilkey replied to Ms Bernauer from Mr Warren's email address, seeking clarification as to whether Mr Mattiussi was aware that Mr Warren was agreeable to providing documentation and a caveat to secure the $170,000. There was also an email sent from Mr Warren's email address on 13 March 2012, purportedly from himself and Mr Quilkey, stating:

"We of course realise that there will not be any excess from the sale of [specified property] to pay the $170K but we have offered [Mr Mattiussi] a second mortgage on [Mr Warren's] unit at ... Woollahra."

There was evidence of other emails and conversations, all of which indicated an understanding on the part of Messrs Johnston and Warren, or at least an acceptance on their part, that the monies remained owing. Mr Warren was cross-examined to the effect that in February 2012, he was prepared either to pay the sum of $170,000 or to give security for it. Mr Warren agreed that was so, "if he could raise the money".

Mr Warren also admitted in cross-examination that his understanding was that the monies remained owing. His Honour rejected Mr Warren's evidence that he had not sent nor seen a letter sent from his fax line to Ms Bernauer, the content of which involved an acknowledgement that the $170,000 was owed.

Various emails and other correspondence from Ms Bernauer also indicated that at all times she understood that the monies were owing and that she had been instructed to that effect. This was clear in a letter dated 7 March 2012, in which Ms Bernauer wrote to Mr Mattiussi as follows:

"We are instructed that provided all other matters can be resolved (but for the taxation matters which we understand will be pending for some time) our client is prepared to offer security for the sum of $170,000 by way of a second mortgage in respect of Mr Warren's property at ... Woollahra ...

We are instructed that our clients intended upon sourcing the sum of $170,000 through the sale of Mr Warren's property at ... Woollahra."

Decision of the trial judge

Stevenson J, at [60], stated that the terms of the letter of 25 November 2011, viewed in isolation, gave some support for the version of events for which the appellants contended. However, his Honour considered that there were other circumstances that did not support that version. Stevenson J concluded that the post-settlement evidence pointed overwhelmingly to the appellants clearly understanding that the arrangements relating to the payment of the sum of $170,000 was that payment of that sum could be deferred. In particular, his Honour found, at [62] and [88]-[89], that notwithstanding the terms of Mr Mattiussi's letter of 25 November 2011, the appellants clearly understood that Brightstars and Mr Wilson had not agreed to forego payment of that sum. His Honour's reasoning was as follows:

"62 Examination of the events following 1 December 2011 makes quite clear, in my opinion, that what was agreed between the parties was that the $170,000 need not be paid on settlement, but was to be paid later; and that it was not the parties' agreement that the $170,000 was not to be paid at all.

...

88 In my opinion, the above evidence points overwhelmingly to the conclusion that, contrary to the case advanced before me in these proceedings, Mr Johnston and Mr Warren clearly understood that the arrangements leading up to the 1 December 2011 settlement so far as they concerned the $170,000, amounted to no more than an agreement by the plaintiffs that the $170,000 could be paid after settlement and not, as required by clause 8 of the Deed of Settlement, on settlement itself. Notwithstanding the terms of Mr Mattiussi's letter, and as Mr Johnston and Mr Warren understood perfectly well, the plaintiffs did not agree to forego payment of the $170,000.

89 The communications from both Mr Warren and Mr Johnston are impossible to reconcile with either of them genuinely believing that Brightstars Holding and Mr Warren had agreed to waive the requirement that the $170,000 be paid and, in effect, agreed to pay an extra $170,000 for the shares."

His Honour found further support for his conclusion in the fact that the first time any suggestion was made that Messrs Johnston and Warren had been released from the obligation to pay the sum of $170,000 was in their amended defence. He noted that there had been no such suggestion made in the original defence, in the affidavits of Messrs Johnston and Warren sworn prior to the adjournment of the specific performance hearing on 5 July 2012, or during the course of the application to vacate the hearing date of 5 and 6 July 2012, when a question arose as to the payment of the sum of $170,000 as a condition of the adjournment. His Honour noted that the imposition of the condition was opposed on the basis that it was impracticable to raise the money in a short period of time, not on the basis that the monies were not owed: see judgment at [90].

His Honour stated, at [91], that he had a strong impression that after the adjournment consideration was given to the terms of the letter of 25 November 2011 and "the idea conceived that an argument of the type advanced was available". Regardless of whether that was so, his Honour rejected that there was an agreement, made shortly prior to the settlement of the Share Sale Agreement on 1 December 2011, that the sum of $170,000 was not payable. Rather, there was an agreement to pay that sum "later". His Honour held, at [93], that given the agreement that the sum not be paid on settlement, the sum became payable on reasonable notice. His Honour found that reasonable notice was given by Mr Mattiussi's letter of 31 January 2012.

Consideration

The appellants' contended variation

The appellants submitted that the conversation on 11 October 2011 between Mr Mattiussi and Ms Bernauer and the further conversation between Mr Mattiussi and Mr Johnson on that date did not contain any offer. It merely indicated a preparedness to obtain instructions as to the deferment of payment. The appellants also submitted that the conversation between Mr Wilson, Mr Warren and Mr Quilkey on 12 October likewise did not constitute an offer. Rather, in that conversation, suggestions were made as to possible ways to break the impasse that had arisen relating to settlement of the Share Sale Agreement and the Deed of Settlement. This was particularly apparent from Mr Quilkey's comment, "if Mattiussi works with us and waits for the $170,00 till after settlement". In any event, the appellants contended that, even assuming an offer was made in one or more of these conversations, there was no evidence of acceptance of any offer.

The appellants also submitted that the facsimile of 12 October from Mr Warren to Mr Wilson was neither an offer nor an acceptance, nor indeed a proposal of any kind, and in any event there was no evidence that either Mr Mattiussi or Mr Wilson had communicated to them that Mr Mattiussi had agreed to defer receipt of his fees.

The respondents likewise eschewed any reliance upon the conversations or correspondence in October 2011 as constituting the contract whereby the Deed of Settlement was varied. Both parties were right to do so. It is apparent that the communications in October 2011 were negotiations between the parties seeking to achieve a settlement of the Share Sale Agreement. None of the communications contained an offer or an acceptance. The evidence was admissible only as part of the surrounding circumstances. Otherwise, the events of 24 and 25 November would have been difficult to understand. The evidence was not admissible to prove or support the proof of a variation of contract in the terms alleged by either party. The operative principle was summarised in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 per Heydon JA at [23], who stated that:

"... pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales ... at 347-352 ..."

In Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337, Mason J stated, at [352], in relation to negotiations:

"Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification."

Underlying the observations in these cases is what is referred to in contract jurisprudence as the "objective theory of contract". In Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd [2014] HCA 7, the plurality reaffirmed the objective approach to the construction of contracts noting, at [35], that:

"The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or object to be secured by the contract."

Messrs Johnston and Warren contended that the letter of 25 November 2011 was an offer whereby their contractual promise to pay $170,000 to Willis & Bowring for costs incurred by the Wilson interests would be expunged. They contended that on its proper construction, the letter contained two terms: first, a condition that NAB would allow settlement upon receipt of the sum of $900,000; and secondly, a term that costs were to be a matter between Mr Mattiussi and his clients. The appellants submitted that the contract was accepted either by the letter of 30 November 2011, or alternatively that settlement itself constituted acceptance of the offer.

The appellants submitted alternatively that as between 25 November and 1 December there was a manifestation of mutual consent to the offer made in the letter. The appellants also submitted that it was possible that Ms Bernauer's telephone conversation with Mr Mattiussi on the 25 November constituted an acceptance of the offer contained in the letter.

In summary, the appellants' argument was that the amount involved in the share sale transaction remained constant. However, its distribution changed, so that NAB was to receive the total amount. They submitted that their interests were affected because their company, John Nich, did not receive the sum of $155,000 it was to be paid under the Deed. On the respondents' side, Willis & Bowring were no longer to be paid out of the purchase price. Rather, the respondents had to arrange for payment of those costs. However, Mr Wilson obtained a benefit as a shareholder of Brightstars Morayfield whose indebtedness to NAB was reduced as a result of the payment of the purchase price of $900,000 to NAB on settlement.

The appellants submitted that there were two errors in his Honour's reasoning which resulted in his failing to find that the letter of 25 November 2011 constituted an agreement, or at least an offer that was accepted, to release them from their contractual obligation to pay the sum of $170,000. First, they submitted that his Honour failed to analyse the October conversations to ascertain whether there had been an offer and acceptance. Had he done so, he would have found there had been no offer or acceptance. I have already dealt with that argument: see above at [48].

Secondly, the appellants contended that his Honour impermissibly relied upon their subjective belief as to the terms of a contract as purportedly evidenced by their post settlement conduct. The appellants also submitted that the evidence following formation of the contract showing what the parties intended at the time of contract was irrelevant. The appellant submitted, therefore, that his Honour's reference to this material as evidence of their subjective intention was irrelevant and erroneous.

Although the status of post-contractual conduct may not be finally settled, it is clear that Australian law does not recognise the subjective intentions of the parties as relevant to the construction of the contract actually formed: see Codelfa, Brambles and Electricity Generation Corporation. In Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at 446, Gibbs J approved a statement from James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603 that:

"... it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made."

This statement was recently reaffirmed in Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; 238 CLR 570 by Gummow, Hayne and Kiefel JJ at [35]. See also Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 107 at [358] per Campbell JA (Barrett JA and Sackville AJA agreeing).

I agree, therefore, with the appellants' submission that events that occurred after 1 December 2011 were irrelevant as an aid to construction of the terms of the variation that the parties had agreed to. The appellants' various emails and letters, however, constituted evidence of admissions that the monies were owing. The question of admissions is discussed below.

The respondents' contended variation

As I have indicated, there was no dispute between the parties that the Deed of Settlement had been varied. The question was what was the agreed variation. The appellants contended that the variation, or at least the offer, was contained within the terms of the letter of 25 November. They resisted any suggestion that the variation was constituted by the conversations of 24 and 25 November 2011 between Mr Mattiussi and Ms Bernauer, as contended by the respondents in the notice of contention. The appellants submitted that these conversations did not constitute a variation of the Share Sale Agreement and in any event, the terms of those conversations were in different terms from the contract found by the trial judge. The trial judge found that the contract had been varied only to defer the time at which the $170,000 was to be paid to Willis & Bowring.

This leads to a consideration of the respondents' notice of contention, which is set out at [11] above.

The appellants argued that leave should not be granted to the respondents to rely upon the variation pleaded in the notice of contention, first, because it pleaded a contract that was inconsistent both with the reply filed in response to the defence and with the evidence and secondly, because there was no explanation for the failure to file the notice of contention within the time specified in the rules: see the Uniform Civil Procedure Rules 2005 (UCPR), r 51.40. The appellants submitted that they had not come to deal with a case based on a contract in different terms to that found by the trial judge. They submitted that at best, success by the respondents on the variation for which they contended might require a retrial. The appellants also submitted that the variation in the terms contended for by the respondents should be rejected. It is necessary to deal with the various arguments advanced because if leave is not granted to file the notice of contention, the appeal obviously has a stronger chance of succeeding.

There were some differences between the respondents' reply and the variation now pleaded in the notice of contention. The reply pleaded that the deferred payment was to be made to Brightstars Holdings, whereas the variation pleaded in the notice of contention was that the payment was to be made to Mr Wilson and/or Brightstars Holdings. The appellants submitted that this also differed from Mr Mattiussi's evidence that payment was to be made to Mr Wilson. It was submitted that this was an important distinction because Brightstars Holdings was partly owned by Ms El Kafrouni.

The reply also pleaded that payment was required "within a reasonable time", which the appellants contended was pleaded as an express term. The appellants pointed to the absence of such a term, either express or implied, in the variation pleaded in the notice of contention. The appellants also referred to the absence of any reference in the reply to conversations in which the variation was agreed to, and to the absence of any pleading of an offer and acceptance.

The respondents submitted that his Honour's reasons were to be understood in the context of the orders that he made. His Honour's failure in his judgment to refer to the change in payee was an oversight, given that he had made an order that payment of the monies was to be to the respondents. The respondents also submitted that his Honour's reasons should be read in light of the manner in which the matter was conducted at trial, where the focus was on the question whether the obligation to pay the sum of $170,000 had been discharged, or whether that obligation had merely been deferred. They submitted that there was very little reference to the question of the party to whom the payment was to be made and that presumably this was a matter of little significance to the appellants, as their concern was with the liability to pay.

Although the reply did not allege a specific offer or acceptance, nor expressly refer to the conversations between the solicitors on 24 and 25 November 2011, it nonetheless contained a pleading of a variation whereby payment of the $170,000 was to be deferred until after settlement. During the course of the proceedings at first instance, Mr Mattiussi was cross-examined about the content of his letter of 25 November and, in particular, about the absence of any reference in it to payment being deferred. Further, as noted above, a case based on the conversations was articulated in the respondents' closing written submissions filed on 26 September 2013. No objection was taken by the appellants in their closing oral submissions to the court on 27 September 2013 that that case could not be argued.

It is apparent, therefore, that the respondents had raised a case, based on the conversations of 24 and 25 November 2011 between the solicitors, that the variation of the Deed of Settlement involved the deferral of the obligation to pay the sum of $170,000. Although the respondents' written submissions did not raise the matter in the crisp way articulated in the notice of contention, that case had been put in the court below. As the appeal was contested, it must have been apparent to the appellants that that was because the respondents relied upon a variation deferring the payment of the sum of $170,000. In my opinion, there is no unfairness in granting leave to the respondents to file the notice of contention.

The appellants submitted that if the respondents were granted leave to rely on the notice of contention, the Court should reject their argument that the variation was in the terms for which they contend. The appellants' submissions focussed on two matters: first, whether Mr Mattiussi's evidence of the conversations of 24 and 25 November should be accepted and secondly, whether the respondents had infringed the rule in Browne v Dunn by not cross-examining Ms Bernauer as to whether the conversations had occurred and if so, in what terms.

In respect of the first challenge, the appellants submitted that merely because Mr Mattiussi was not cross-examined on the conversations did not mean that the court was obliged to accept his evidence: see Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382 at [105]. They submitted that there were significant problems in this Court accepting his evidence which, they contended, was inconsistent with other evidence: Bulstrode v Trimble [1970] VR 840 at 849.

One of the matters that was in issue in the proceedings was the accuracy of the letter of 25 November, which made no reference to payment of the sum of $170,0000 being deferred. In cross-examination, Mr Mattiussi described his letter as being "clumsy" and to the extent that there was no reference to the deferral of payment of the sum of $170,000, he said it was inaccurate. He said, however, that the letter nonetheless stated what he always understood the position to be, namely, that his clients were responsible to him for his fees. To the extent that there was a question as to how the sum of $170,000 was to be paid, he said that was a matter between his clients and the appellants. In my opinion, given this explanation, the letter is not inconsistent with the variation for which the respondents contend and it was open to the court to accept his evidence as to the conversations he said were had on 24 and 25 November.

The second challenge made by the appellants to the case advanced on the notice of contention related to the 'failure' to cross-examine Ms Bernauer. The appellants contended that, in accordance with the principle in Browne v Dunn, there was an obligation on the respondents to cross-examine Ms Bernauer on the conversations to which Mr Mattiussi deposed.

The rule in Browne v Dunn is a rule of fairness. It was explained by Hunt J in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 as a requirement to cross-examine a witness if it was intended to contend that the witness' evidence should not be accepted. In the present case, although Ms Bernauer's affidavit evidence was read in the appellant's case, there was no reference in her affidavits to the 24 and 25 November conversations. The appellants sought to explain away this omission on the basis that Ms Bernauer had ceased to act for them because of a perceived conflict of interest and that Mr Mattiussi's evidence post-dated her affidavits and her ceasing to act for them. They contended in those circumstances that there was an obligation on the respondents to call Ms Bernauer or to require her to be called for cross examination and to ask her about the conversations. The corollary of this submission was that they had no forensic obligation to adduce evidence from her on this matter.

I do not agree. The appellants were aware of the conversations to which Mr Mattiussi deposed and of the respondents' reliance on those conversations as the basis of the variation for which they contended, namely, for the deferral of payment. If the appellants wished to contest the conversations, they could and should have called Ms Bernauer to give evidence. They did not do so although Ms Bernauer had attended court in response to a subpoena issued at the instance of the appellants. The respondents were under no obligation to require her to be called so as to cross-examine her on evidence that the appellants had not seen fit to obtain from her, either by way of further affidavit evidence or orally at the trial. They also had the forensic advantage of the absence of any cross-examination of Mr Mattiussi on the conversation. I do not consider that there was any aspect of fairness that required the respondents to question Ms Bernauer as to the conversations. Nor were they required to call her for cross-examination, notwithstanding that she was present at court and available to be cross-examined. They were entitled to rely upon the absence of any challenge to that evidence by the appellants.

The appellants also alleged a number of inadequacies in the evidence which, they contended, impacted upon the accuracy and cogency of Mr Mattiussi's evidence. The alleged inadequacies related to the absence in evidence of any file note of the conversations on 24 and 25 November, such that an inference should be drawn that no file note existed and therefore that no such instructions had been given. The appellants also pointed to the absence of any other corroboration of the key words of the variation alleged by the respondents.

Although there was no file note produced in evidence, it should be noted that Willis & Bowring's bill of costs listed telephone calls with Ms Bernauer on 24 and 25 November and Ms Bernauer's costing sheet lists a telephone call on 25 November. That evidence constitutes corroboration. But in any event, evidence does not require corroboration to be accepted and his Honour found Mr Mattiussi to be a credible witness who gave clear and responsive evidence. Although the appellants referred to Fox v Percy [2003] HCA 22; 214 CLR 118, they did not point to incontrovertible evidence to the contrary of the evidence given by Mr Mattiussi. Nor did the appellants refer to any other matter that would involve the considerations referred to in Fox v Percy. Given the uncontested evidence of the conversations on 24 and 25 November, the letter of 25 November 2011 was not of that character.

It is of particular importance in this context that Mr Mattiussi was not cross-examined on the conversations with Ms Bernauer on 24 and 25 November. He was not challenged to the effect that he had no such instructions, nor was there any evidence to suggest that he had no such instructions, as the appellants have contended in their further written submissions. Nor was Mr Wilson challenged on the basis that he had not given any such instructions. The appellants' criticism that the respondents' instructions to Mr Mattiussi were not in evidence is of no substance.

The appellants also submitted that it was relevant that Mr Mattiussi gave no reason in his evidence as to why the identity of the payee had changed from a payment to him to a payment to Mr Wilson. With respect, this is apparent from the terms of the conversation on 24 November, the letter of 25 November, as well as Mr Mattiussi's evidence referred to above at [68]. Mr Mattiussi would look to his client to pay him, and those monies would be recouped by Mr Wilson from the respondents.

In my opinion, the conversations between Mr Mattiussi and Ms Bernauer on 24 and 25 November constituted an offer and acceptance on behalf of their clients that payment of the sum of $170,000 was to be deferred.

Post-contractual conduct as admissions

The respondents also claimed in their notice of contention that the appellants had made 11 admissions that there was a variation of the Deed of Settlement in the terms for which they contend. Those admissions were said to be constituted by the letter of 23 January 2012 and by various email communications, reference to some of which has already been made.

In County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, McColl JA observed, at [162], that notwithstanding the rule precluding post-contractual conduct as an aid to interpretation of a contract, regard may be had to that conduct as "constituting an admission of the state of the parties' rights". The following cases were cited as authority for that proposition: Pitcher v Langford (1991) 23 NSWLR 142 at 160; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 684-685; Jones v Sutherland Shire Council [1979] 2 NSWLR 206 at 231; and Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 188E. This statement and the status of these authorities needs to be considered in light of the authorities as to the admissibility and probative value of admissions about matters of law, or of mixed fact and law.

In Dovuro Pty Ltd v Wilkins [2003] HCA 51; 215 CLR 317, a question arose as to the admissibility of statements made by a corporation that it had "failed its duty of care". Gummow J (McHugh and Heydon JJ agreeing) expressed the view, at [71], that those statements did not provide a basis upon which to make a finding of negligence. In coming to that conclusion, Gummow J indicated, at [68], that the observations of Mahoney JA in Jones v Sutherland Shire Council and Pitcher v Langford that admissions could be made of matters of law or mixed fact and law had been stated too widely. Whilst facts may be the subject of an admission, a conclusion which depends upon the application of a legal standard is either not admissible or at the best valueless: see Grey v Australian Motorists & General Insurance Co Pty Ltd per Glass JA at 676.

Glass JA's statement in Grey was referred to in Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43, where Lockhart and Gummow JJ observed:

"[W]hen a standard, measure or capacity is fixed by law, a party cannot be asked to admit a conclusion depending upon the legal standard; however, the witness may be asked to admit facts from which the conclusion of law may be drawn by the court."

Their Honours also observed that the law was unsettled as to whether admissions may be made of matters of mixed fact and law. In Dovuro at 341, Gummow J set out these observations of Lockhart J and himself in Eastern Express. See also J D Heydon, Cross on Evidence (9th ed, 2013, LexisNexis Butterworths).

In Hopcroft v Edmunds (2013) 116 SASR 191, the appellants sought to rely upon a statement by the respondent extracted in cross-examination, that he believed a contract had come into existence, as an admission that there was a contract. Kourakis CJ considered that the evidence was inadmissible because it expressed a legal conclusion. White J (Stanley J agreeing), observed that some admissions involving legal conclusions would not be admissible or at best would be "regarded as valueless". However, his Honour, at [109], considered the admission made in cross-examination was not based on a legal standard and accordingly its admissibility was not precluded by the statement in Dovuro. Nevertheless, as the statement was only a statement of subjective belief, his Honour held it was irrelevant to the objective assessment of whether the contract had been formed.

The question in issue in the present case is not whether the parties had agreed to a variation of the Deed of Settlement, about which there was no dispute, but as to the terms of the variation. In the present case, it was a question of fact whether those terms were as alleged by the appellants or by the respondents. Subject to the one email from Mr Johnston to Ms Bernauer, the communications between the parties following the formation of the contract were consistent with a variation whereby liability was deferred. As such, that conduct was admissible as admissions that the terms of the variation were as alleged by the respondents. There may be occasions where the question of what the terms of a contract are involves a question of mixed fact and law. In that case, the question of admissibility of post-contractual conduct is less clear, as discussed above. However, for the reasons given, it is not necessary to discuss that possibility in the present case.

Further challenges

The appellants made a number of other criticisms of his Honour's judgment, which are considered briefly to determine whether they provide any basis for a different conclusion from the one I have reached as to the terms of the variation agreed by the parties.

The appellants submitted that the effect of his Honour's finding, at [88] and [89], as well as his earlier finding at [62], that Mr Warren and Mr Johnston could not genuinely have believed that the respondents' had agreed to waive the payment of the $170,000, was in effect a finding of fraud against his clients. The appellants submitted that the finding was erroneous and that the e-mail correspondence in January 2012 (see [34] and [36] above) was contemporaneous evidence of the appellants' belief as to their contractual obligations arising from the new or varied contract. The appellants also submitted that the advice contained in Ms Bernauer's email, in response to Mr Johnston's email of 13 January 2012 (see [35] above), was wrong, because pursuant to the variation, they were no longer liable to pay the sum of $170,000 to Willis & Bowring, or to Mr Wilson on account of those costs. They pointed out that there was no cross-examination of either appellant or of Ms Bernauer relating to the email correspondence between them. The appellants submitted that in the circumstances, his Honour's credit findings had miscarried with the consequence that the judgment could not stand.

I would reject these submissions. They involve no more than a submission that the Court should prefer one part of the appellants' evidence over Mr Mattiussi's evidence. The fact the appellants acted on the basis that they remained liable to pay the sum of $170,000 also puts paid to this submission. The email of 13 January excepted, the post-1 December evidence involved various admissions that the variation agreed upon was to defer payment. In particular, there was Mr Warren's unqualified statement in cross-examination that he understood that the sum of $170,000 was owing. There was also Mr Wilson's email of 22 February to Mr Mattiussi's partner seeking a confidential meeting "to assure him his firm will be paid".

The appellants also challenged his Honour's findings, at [90] and [91], that only after the adjournment of the proceedings in July 2012 was the idea conceived that the letter of 25 November 2011 constituted a contract whereby their obligation to pay the sum of $170,000 was expunged. The appellants submitted that those findings were not probative of any fact in issue. They also contended that the bases upon which his Honour came to that conclusion were not supportable. First, as to the finding at [90(a)] that there was no such suggestion made in the defence filed in 2011, that defence was filed on 10 November 2011 in response to the specific performance claim and prior to the letter of 25 November 2011.

Secondly, in response to his Honour's statement at [90(b)] that there was no suggestion of a variation of contract in the affidavits sworn by the appellants before the adjournment of 5 July 2012, the appellants made two points. First, an affidavit was sworn by each appellant on 17 November 2011, a week prior to the letter of 25 November. A further affidavit was sworn by each appellant on 21 March 2012, at which time the original statement of claim for specific performance was on foot. The appellants contended that as there was no claim at that point for the $170,000, there was no need to address that contention.

Thirdly, the appellants challenged the accuracy of his Honour's statement, at [90(c)], that on the occasion of the adjournment application to vacate the hearing dates of 5 and 6 July 2012, whilst the appellants had opposed the imposition of a condition of the adjournment that a sum of $170,000 be paid, the only reason given was that it would be impracticable for the appellants to raise that sum in a short time. His Honour recorded, at [90(c)], that there had been no suggestion that the sum of $170,000 was not owed. The appellants submitted that this failed to reflect their counsel's statement that the condition should not be imposed because "there would seem to be prima facie a number of arguable defences". Further, the appellants contended that as the trial judge had proposed that the $170,000 be paid into court, rather than to the respondents, it was not necessary at that point for the appellants to contest whether the money was owing.

Although there were some inaccuracies in this part of his Honour's judgment, I do not agree that they provide a basis to set aside the orders made or for there to be a retrial. His Honour accepted that Mr Mattiussi was a credible witness and as I have already noted, there was no incontrovertible evidence to the contrary, such that this Court should interfere with his Honour's credit finding.

That leaves the inconsistencies in the evidence that the appellants allege are such that the Court should not accept Mr Mattiussi's evidence. It is unnecessary to deal with these inconsistencies in any detail other than the appellants' reliance on the post-December 1 evidence which they contended showed that a payment to Willis & Bowring was intended, rather than a payment to Mr Wilson. I do not consider there to be any inconsistency that undermines the orders made by the trial judge. Mr Mattiussi's evidence was that his clients remained liable for his costs and that whether the payment of the $170,000 was to be directed to him or whether it was to be paid to Mr Wilson depended upon whether Mr Mattiussi had already been paid by his clients.

The estoppel argument

Senior counsel for the appellants correctly accepted that this was a difficult argument upon which to succeed. The argument can be dealt with briefly. The appellants' case on estoppel was based on their evidence that having received a copy of the letter of 25 November 2011 from Ms Bernauer, they gave instructions to settle. In Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 Brennan J stated, at 423:

"It is essential to the existence of an equity created by estoppel that the party who induces the adoption of the assumption or expectation knows or intends that the party who adopts it will act or abstain from acting in reliance on the assumption or expectation."

The respondents submitted that the appellants had not made out the necessary elements of an estoppel. First, they submitted that the element of reliance had not been made out. The letter of 25 November was not a representation that there was no liability to pay but a statement that the direction to pay to Willis & Bowring had been cancelled. The respondents next submitted that there was no reliance upon them. Reliance, if any, must have been upon their own solicitor. The respondents also submitted that there was no evidence of detriment, nor was there any submission advanced that they had suffered a detriment. They submitted that there could not have been any detriment because prior to the alleged representation in the letter they were liable to pay the sum of $170,000. That liability remained after receipt of the letter.

Whether or not there was an estoppel depends, in my opinion, on the proper construction of the letter of 25 November 2011 in the context of the conversations between the solicitors on 24 and 25 November 2011. The letter cannot be looked at in isolation from those conversations. It was apparent from the conversations of 24 and 25 November that Ms Bernauer, as the appellants' agent, accepted a variation of the Deed of Settlement whereby the appellants' liability to pay the sum of $170,000 was deferred.

I am of the opinion that the appellants have not established reliance on a representation made by the respondents, through their solicitor Mr Mattiussi. There is no evidence of what Ms Bernauer told the appellants of those conversations. If she failed to fully inform them of the terms of the variation to which she had agreed and had only forwarded Mr Mattiussi's letter to them, that is not a matter that they can visit upon the respondents. Any reliance they had which related to the letter was reliance upon what their own solicitor told or did not tell them.

Conclusion

As will be apparent from what I have said in these reasons, there were certain deficiencies and errors in his Honour's reasons. In particular, his Honour failed to refer to the conversations of 24 and 25 November. Those conversations were the critical evidence in the respondents' case and establish a variation of the contract whereby the liability under the Deed of Settlement to pay the sum of $170,000 was deferred. Notwithstanding his Honour's failure to refer to that evidence, he found that the Deed of Settlement had been varied in the manner for which the respondents contended. I see no error in his Honour's finding an implied term that payment was to be made in a reasonable time.

Accordingly, I propose that the appeal be dismissed with costs.

BASTEN JA: On 12 May 2011 the appellants (Messrs Johnston and Warren) entered into two agreements, the purpose of which was to terminate a joint venture involving two other individuals (Mr Peter Wilson, who is the second respondent, and Ms El-Kafrouni) and a number of companies. The disputation between the two groups had resulted in litigation in the Supreme Court in 2010. One agreement ("the deed of settlement") involved a settlement of that litigation.

The recitals to the deed of settlement identified eight companies which it was said were formed or acquired in 2009 "for the purpose of developing and operating childcare centres." The settlement involved the appellants (and a company they controlled, John Nich Pty Ltd) transferring to a company known as Brightstars Holding Company Pty Ltd ("Brightstars Holding"), controlled by Mr Wilson, all the shares held or controlled by the appellants in three companies, Brightstars Freehold Pty Ltd ("Freehold"); Brightstars Early Learning Centres (Engadine) Pty Ltd and Brookvale Childcare Pty Ltd.

What has been set out so far is tolerably clear from the two agreements (the deed of settlement and a "share sale deed"); some aspects of what follows are less clear. That fact reveals a degree of confusion on the part of the drafter of the deeds. Certainly the commercial purposes which underlay the structure of the obligations are not revealed by the documents themselves. (There is even inconsistency in two relatively brief documents as to the abbreviations adopted.)

Prior to the share transfers, Freehold (which owned a property at Engadine on the southern outskirts of Sydney) had a debt, secured by a mortgage over the land, to the National Australia Bank ("the NAB") in an amount of $575,000. It appears that the appellants' company (John Nich Pty Ltd) was owed an amount of $155,000 by one or more of the three companies the subject of the share transfers. It also appears that Mr Wilson, possibly with others, had incurred legal fees in the Supreme Court proceedings payable to his solicitors, Willis & Bowring of Miranda, in an amount of $170,000. The intention of the parties to the settlement and share sale was that each of the companies the subject of the share transfers would be "debt free" upon completion and that Willis & Bowring would have been paid their fees. That could have been achieved by the respondents making payments to the NAB, John Nich Pty Ltd and Willis & Bowring respectively in amounts which totalled $900,000. The deeds, however, provided that $900,000 was the purchase price payable by the respondents to the appellants and a company they controlled, Brightstars Early Learning Centres Pty Ltd ("BELC"). It was an obligation of the appellants and BELC under the deed of settlement that they would pay $170,000 from the purchase moneys to Willis & Bowring. The appellants (though not BELC) were obliged under the share sale deed to ensure that the debts to the NAB and John Nich Pty Ltd were paid, prior to or upon completion.

Difficulties in giving effect to the deeds

Settlement of the agreements was intended to occur within two months of the date of execution. That did not happen, relevantly for present purposes, for four reasons. First, the settlement involved a variation in the shareholding of a fourth company, Brightstars Morayfield Pty Ltd ("Morayfield"). Prior to the settlement, there were four issued shares in Morayfield, each of which was held by either the appellants or persons associated with the appellants. The deed of settlement required that Morayfield would issue shares to Brightstars Holding immediately upon execution of the agreement, so that Brightstars Holding would have 48% of the total issued shares in Morayfield and Mr Wilson would be appointed a director of Morayfield. The agreement further provided that Mr Wilson was to resign as a director of Morayfield "during any period in which an application for bank finance by [Morayfield] is pending, but will be re appointed as a director ... once any such application has been determined or is withdrawn." This element of barefaced chicanery was significant in so far as it disclosed a concern that the involvement of Mr Wilson might not be acceptable to a financier. That concern materialised in the response of the NAB, when it learned of the agreements.

Secondly, the NAB was neither a party to the agreements, nor, it appears, was it consulted in advance of their execution. Morayfield (as well as Freehold) had an outstanding indebtedness with the NAB. When the NAB learned of Mr Wilson's proposed involvement in Morayfield, it required, as a condition of discharging the mortgage over the Engadine property, not only that the full debt secured on the Engadine property be discharged, but that the Morayfield debt be significantly reduced.

The third difficulty with the settlement, not identified in the deeds, was the existence of a second mortgage over the Engadine property, in favour of a company known as Leda Pty Ltd.

Fourthly, the respondents appear to have had difficulties in raising finance.

Clearly the cumulative effect of these problems required waiver of the requirement for completion within two months of the date of the deeds. The difficulties were resolved, but their resolution formed part of the on-going discussions between the solicitors for the respective parties.

The deeds were not amended, but settlement took place on 1 December 2011 with a transfer of $900,000 to the NAB. That resulted in the dispute the subject of the present proceedings, namely whether the appellants remained liable to pay $170,000 to Willis & Bowring, or whether all their obligations under the deeds were discharged on settlement.

Assuming that the shareholdings in Morayfield, following completion of the agreements, was as proposed in the deed of settlement, the effect of the additional payment to the NAB should have benefited the appellants and the respondents in roughly equal shares. Although the appellants raised that fact as a possible reason for treating the obligation to pay Willis & Bowring as having been discharged, no possibility of apportionment was raised in this Court: the only question was whether or not the appellants remained responsible for the full amount of the sum due to Willis & Bowring.

Because the deeds did not envisage the additional payment to the NAB, and because the commercial purposes underlying the structure of the payments was not articulated in the deeds, it is not possible to resolve the issue in dispute by construing the deeds. There was clearly a variation of the contractual arrangement recorded in the deeds. The first question was whether the variation was wholly or partly reduced to writing. There were exchanges of emails between the solicitors prior to completion of the agreements, on 1 December 2011. There were also telephone conversations between the respective solicitors. It is necessary to consider whether the terms of a variation can be gleaned from these materials.

Pre-settlement conduct

The appellants contended that the terms of the variation were in writing and were to be found in a letter dated 25 November 2011 from Mr Mattiussi of Willis & Bowring to their solicitor, Ms Bernauer. The relevant part of the letter stated:

"In our conversation, we now understand that you did receive the email from Mr Miles [of Leda Pty Ltd] confirming their intention, however you had written to the National Australia Bank ("NAB") seeking their confirmation that they would be prepared to proceed with a settlement of the Engadine property upon receipt of $900,000.00. The reason you had not communicated with Mr Miles or this office was that you were awaiting NAB's confirmation.

We note that you were to again communicate with the NAB and to provide us with further update following those communications.

As you are aware, our instructions are to proceed on that basis. The question of this firm's costs as evidenced in the settlement documents is to be a matter between this firm and our client. We have taken this approach in order to facilitate settlement of the Engadine property without further delay.

We look forward to your further advices."

That letter was not free of ambiguity on the critical issue. The letter was not primarily directed to the present issue: while the letter envisaged that the payment of Willis & Bowring's fees by the appellants would not be required at settlement, the letter was silent as to the respective obligations of the appellants and Mr Mattiussi's client, Mr Wilson.

The evidence relied upon by the respondents and accepted by the trial judge in relation to discussions pre-dating the 25 November letter had two elements. The first was a proposal to delay the payment of $170,000 "until after the settlement", a proposal floated by Mr Mattiussi in a conversation with Ms Bernauer on 11 October 2011, subject to obtaining instructions from Mr Wilson. Mr Mattiussi repeated the proposal in a conversation directly with Mr Johnson on the same day. The following day Mr Quilkey, a 25% shareholder in Morayfield and a party to the deed of settlement (and also the accountant for the second appellant, Mr Warren) rang Mr Wilson urging him to proceed with the settlement on the basis that $170,000 would be paid later. This conversation was recounted in an affidavit of Mr Wilson dated 2 August 2012, the substance of which was set out by the trial judge at [46], noting that it had not been challenged in cross-examination. According to Mr Quilkey, Mr Warren was happy to give an unregistered mortgage secured by a caveat for the amount of $170,000. That security did not eventuate, but Mr Warren did send Mr Wilson a document setting out details of "NAB exposure", on which Mr Wilson wrote:

"Johno [Mr Johnston] $50,000.00 to costs

Balance of Costs Secured by caveat."

Mr Wilson sent the annotated statement to Mr Mattiussi, noting arrangements with the NAB and Leda Pty Ltd and concluding:

"Paul Johnston has borrowed $50,000 towards costs & the balance will be Secured by a Caveat. I told them to get Amber [Ms Bernauer] to put there [sic] idea in writing to you."

On 12 October 2011 Mr Johnston sent an email to Mr Mattiussi referring to their conversation with respect to arrangements with NAB. The communication confirmed that Mr Mattiussi had spoken directly to Mr Johnston (with the agreement of Ms Bernauer).

There were no further relevant communications between 12 October 2011 and 24 November, when Ms Bernauer and Mr Mattiussi spoke, Mr Mattiussi stating that settlement could proceed on the basis that the appellants "can arrange to pay the $170,000 after the transfer is settled direct to Wilson and we'll get it from the client once he receives it." As the President has noted, Ms Bernauer did not respond to that aspect of Mr Mattiussi's evidence and Mr Mattiussi was not cross-examined on it. However, it cannot be said to resolve the ambiguity in the letter of 25 November because it did not purport to be made upon instructions of Mr Mattiussi's clients; nor, it appears, did Ms Bernauer respond to the proposal.

The fact that a part payment of $50,000 was not made at or prior to settlement, and that no security was obtained with respect to the balance, might suggest that the respondents had abandoned their earlier insistence that Willis & Bowring be paid $170,000 out of the settlement moneys. On the other hand, it might be inferred that both parties assumed that the additional sum was payable, but the respondents allowed settlement to proceed without any part payment and without obtaining security for the balance.

Given that during October there was ample evidence to support the finding that payment of the $170,000 was merely to be delayed, it is implausible that at some point there was an undocumented acceptance by Mr Wilson that payment was not required. Even if the principals were somewhat lax in documenting their agreements, it would be a startling inference that the solicitors failed to make any record of such a change. In the case of Ms Bernauer, such a change would have been of great significance to her clients and would have demanded express acknowledgment. For Mr Mattiussi, such a change would have removed what appears to have been his primary expected source of payment of the firm's fees. This reasoning supports the inference accepted by Beazley P that the obligation on the appellants to make the payment was deferred rather than discharged.

Something was sought to be made by the appellants of the need to find a further variation in the agreement, namely that the payment be made to Mr Wilson rather than to Willis & Bowring direct. However, that was not shown to be a matter of any moment to the appellants. Willis & Bowring were acting for Mr Wilson and his interests; he was primarily liable for their fees. The reference in the letter of 25 November to the firm's costs being "a matter between this firm and our client" may well have reflected an expectation or hope on the part of Mr Mattiussi that his fees (or some part of them) would, or might be, paid by Mr Wilson before Mr Wilson received the deferred payment from the appellants.

Post-settlement conduct

The respondents also sought to rely on evidence of post-settlement conduct to demonstrate that there was no agreement to discharge the appellants' obligation to pay the $170,000 for legal fees, whether the payment was to be made direct to Willis & Bowring or to their client, Mr Wilson.

There are difficulties attending the use of post-contractual statements to construe the terms of a contract. It is an accepted principle that anything which the parties said or did after a contract was made cannot be used "as an aid in the construction of" the contract: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570 at [35] (Gummow, Hayne and Kiefel JJ), referring to the statement of Lord Reid in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603. That principle derives from the "objective" theory of contract, which provides that the legal obligations of the parties to the contract do not depend upon their subjective beliefs but upon the view of the reasonable bystander informed as to the surrounding context and circumstances, which in practice means the view of the court based on the evidence before it: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 775 (Lord Hoffmann); Wilson v Anderson [2002] HCA 29; 213 CLR 401 at [8] (Gleeson CJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 at [16] (Lord Hoffmann, PC); and see Lewison and Hughes, The Interpretation of Contracts in Australia (Law Book Co, 2012) at [2.04]-[2.05].

On the other hand, where it provides evidence of facts, the assertion of which is against the interests of one party, it may be admissible as an admission by that party. However, to the extent that the evidence reveals an opinion as to a question of law rather than fact, the admission may be irrelevant or valueless. (The relevant authorities were collected by Campbell JA in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382 and in Lym International Pty Ltd v Marcolongo [2011] NSWCA 303.) Alternatively, the evidence may establish contextual facts in existence at the time the contract was executed.

These principles apply to the determination of the meaning of a written document. However, in this case, as succinctly stated by Spigelman CJ in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]:

"The issue is not one of interpretation, because there are no words to interpret. The issue is one of fact: what did the parties agree?"

The conclusion reached by trial judge was based primarily on the post-settlement conduct of the parties, which, he held, demonstrated that, over a period of some six months, the appellants acted on the basis that they had a continuing obligation to pay $170,000.

To the extent that post-settlement conduct could be considered, the appellants sought to rely upon communications between themselves and their solicitor as evidence that they did not personally believe they had any obligation to pay Willis & Bowring's fees, although their solicitor was of a contrary view. The trial judge did not rely upon this material and was correct not to do so. With respect to an alleged agreement not wholly reduced to writing, the post-agreement conduct of one party known to the other, and communications between the parties, which reveal a common assumption as to the existence and terms of an agreement may provide evidence of such an agreement. However, the subjective views or reservations of one party, undisclosed to the other, cannot provide a basis for inferring the terms of a pre-existing agreement.

The judge's analysis commenced with the letter of 23 January 2012 sent by Ms Bernauer to Mr Mattiussi. She sought a copy of Willis & Bowring's tax invoice for $170,000, being the amount referred to in the deed of settlement. Mr Mattiussi responded on 31 January 2012 that the sum was part of the agreement and did not require support by way of a tax invoice. He stated that the figure was "not subject to taxation or negotiation, and we look to your clients for payment without further notice."

On 22 February 2012, Mr Quilkey sent an email to Ms Bernauer indicating that Mr Warren was agreeable to giving a caveat to secure the $170,000. The trial judge accepted that the email was sent with Mr Warren's knowledge and agreement: at [70]-[74].

On 6 March Mr Quilkey sent an email to Ms Bernauer reporting on a telephone conversation between Mr Warren and Mr Wilson and Mr Mattiussi in the course of which Mr Warren had told Mr Mattiussi that Morayfield was "going to tender later this week" and that his (Mr Warren's) unit at Woollahra would be sold as soon as the tenant vacated the premises: at [76]. On 7 March Ms Bernauer wrote to Mr Mattiussi confirming the offer of security and the proposed payment of $170,000 from the sale of Mr Warren's Woollahra property. The trial judge accepted that both of the appellants had approved the form of the letter: at [79].

Based on this material, the trial judge was satisfied that the arrangements leading up to the settlement on 1 December 2011 included an agreement that the $170,000 need not be paid at settlement, as required by clause 8 of the deed of settlement, but could be paid subsequently, on reasonable notice. That conclusion was expressed at [88] in terms of the appellants' understanding of the arrangements: by inference, the trial judge accepted that the respondents had no different understanding. The judge further implied that payment was to be made "on reasonable notice" and that notice had been given by Mr Mattiussi's letter of 31 January 2012, which required payment "without further notice".

If any issue had arisen as to the period which might constitute "reasonable notice" it would have required consideration of the understanding of both parties that the appellants did not have the cash to make the payment on 1 December 2011, but that they had sufficient equity in available assets and, in particular, a property owned by Mr Warren in Woollahra. (It was later accepted that the sale of Morayfield would not provide sufficient funds to make the payment.) The appeal was not concerned with that question.

Conclusion

The inference available from the communications between the parties (primarily through their respective solicitors) after settlement permits the conclusion, as a matter of probability, that the agreement reached prior to settlement was that the payment of $170,000 would be deferred, but that the appellants' obligation to make the payment was not discharged.

It follows that the appeal must be dismissed. The appellants must pay the respondents' costs in this Court.

GLEESON JA: This appeal concerns whether the parties to a Deed of Settlement entered into on 12 May 2011 - which provided for the payment of $170,000 by the appellants (Messrs Johnston and Warren) to the respondents' solicitors on completion of another agreement, a Share Sale Deed, also entered into on 12 May 2011 between, amongst others, Messrs Johnston and Warren and the first respondent - subsequently agreed that the obligation on the appellants to make such payment was deferred until after settlement of the Share Sale Deed (rather than released).

I agree with Beazley P for the reasons given by her Honour and the additional reasons of Basten JA, that, based on the conversations of 24 and 25 November 2011 between the parties' solicitors, the agreed variation of the Deed of Settlement involved the deferral of the obligation to pay the sum of $170,000 not the release of that obligation.

On the issue of whether the respondents may also rely on evidence of post contractual conduct as evidence of an agreement not wholly reduced in writing to defer the appellants' obligation to pay $170,000 (whether the payment was to be made direct to the respondents' solicitors, Willis & Bowring, or to their client, Mr Wilson), I agree with the reasons of Basten JA.

As to the estoppel argument and the other complaints raised by the appellants, I agree with the reasons of Beazley P.

I agree with the orders proposed by Beazley P.

**********

Decision last updated: 14 May 2014

Medium Neutral Citation:	Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150
Hearing dates:	17 October 2013
Decision date:	14 May 2014
Before:	Beazley P at [1]; Basten JA at [99]; Gleeson JA at [132]
Decision:	Appeal dismissed with costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	CONTRACTS - General contractual principles - Variation of contracts - Proof of terms of variation - Pre-contractual conduct CONTRACTS - General contractual principles - Variation of contracts - Proof of terms of variation - Post-contractual conduct - Whether admissible as admissions EVIDENCE - Admissions - Whether admissible on questions of mixed fact and law EVIDENCE - Witnesses - Cross-examination - Rule in Browne v Dunn - Where witness gives no evidence of alleged event ESTOPPEL - Equitable estoppel - Reliance
Legislation Cited:	Uniform Civil Procedure Rules 2005
Cases Cited:	Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 Agricultural and Rural Finance Pty Limited v Gardiner [2008] HCA 57; 238 CLR 570 Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 Browne v Dunn (1894) 6 R 67 (HL) Bulstrode v Trimble [1970] VR 840 at 849 Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 Dovuro Pty Ltd v Wilkins [2003] HCA 51; 215 CLR 317 Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 35 FCR 43 Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd [2014] HCA 7 Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 Fox v Percy [2003] HCA 22; 214 CLR 118 Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 Hopcroft v Edmunds (2013) 116 SASR 191 James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 Jones v Sutherland Shire Council [1979] 2 NSWLR 206 Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 Mannai Investment Co v Eagle Star Life Assurance Co Ltd [1997] AC 749 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382 Pitcher v Langford (1991) 23 NSWLR 142 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 Walton Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 107 Wilson v Anderson [2002] HCA 29; 213 CLR 401
Texts Cited:	Lewison and Hughes, The Interpretation of Contracts in Australia (Law Book Co, 2012) at [2.04]-[2.05] J D Heydon, Cross on Evidence (9th ed, 2013, LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Paul Arthur Johnston (First Appellant) Blair Massey Warren (Second Appellant) Brightstars Holding Company Pty Ltd (First Respondent) Peter Wilson (Second Respondent)
Representation:	Counsel: G Reynolds SC; C Botsman (Appellants) C Harris SC (Respondents) Solicitors: Kemp Strang Lawyers (Appellants) Willis & Bowring (Respondents)
File Number(s):	CA 2012/350075; 2012/348802
Decision under appeal	Jurisdiction: 9111 Citation: Brightstars Holding Co Pty Ltd v Johnston [2012] NSWSC 929; Brightstars Holding Co Pty Ltd v Johnston; In the matter of Brightstars Freehold Pty Ltd [2012] NSWSC 1228 Before: Stevenson J File Number(s): 2011/324919