L.N.E Cunneen and Co Pty Ltd v Allan Vincent Blackburn

[2017] NSWSC 73

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	L.N.E. Cunneen & Co Pty Ltd v Allan Vincent Blackburn [2017] NSWSC 73
Hearing dates:	30/01/2017, 31/01/2017 and 01/02/2017
Date of orders:	16 February 2017
Decision date:	16 February 2017
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	See at [152]. Parties to bring in orders.
Catchwords:	CONTRACTS – contract for accounting and business advisory services – general contractual principles – offer and acceptance – whether contract made and if so on what terms – construction and interpretation of contracts – construing the terms of a contract from the whole of the material – construing the terms of a contract where it is partly written and partly oral – uncertainty of terms – the use of post contractual conduct
Legislation Cited:	Contracts Review Act 1980
Cases Cited:	Watson v Foxman (1995) 49 NSWLR 315
Category:	Principal judgment
Parties:	L.N.E Cunneen & Co Pty Ltd Allan Vincent Blackburn (First Defendant) Carmel Anne Blackburn (Second Defendant)
Representation:	Counsel: DA Smallbone (Plaintiff) AP Cheshire SC (Defendants)   Solicitors: Anderson Lawyers (Plaintiff) Martin Place Lawyers (Defendant)
File Number(s):	2015/148497

Judgment

1. HIS HONOUR:   The facts of this case illustrate the wisdom underlying the observation, commonly but incorrectly attributed to Samuel Goldwyn, that “a verbal contract isn’t worth the paper it’s written on” [1] .

   1. See Boller and George, They Never Said It (Oxford University Press, 1990) at 42. The authors assert that in fact, Goldwyn said (of someone he regarded as trustworthy) “his verbal contract is worth more than the paper it’s written on”.

The dispute

2. The plaintiff says that it contracted to provide accounting and business advisory services to the defendants. The plaintiff’s case is that it was to be remunerated for those services by a 10% share of profits made by the defendants from their businesses, and by a 10% share of the growth in capital value of the assets of those businesses.

3. The contract on which the plaintiff relies is said to be partly written, partly oral, and partly implied by conduct. The documents relied upon are a draft deed that the plaintiff says it submitted to the defendants in June and again in August 2010, and a response proffered by the defendants in October 2010. To the extent that the contract was oral, the plaintiff relies upon various discussions between its principal, Mr Leigh Cunneen, and the defendants, both at the time the documents were proffered and at other times. The conduct on which the plaintiff relies consists of the parties’ alleged performance of various actions in a way that is said to be consistent with, so as to be probative of, the existence of a contract of the kind and including the terms on which the plaintiff sues[2] .

   2. The plaintiff relies on cases such as Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153.

4. The defendants deny the existence of a contract of the kind, or containing the terms, alleged by the plaintiff. They appear to accept that there must have been some form of retainer (it is rather difficult to see how the parties could have behaved as they did in the absence of any contract whatsoever). However, the defendants say, they have performed all their obligations under the retainer, up until its termination in March 2013.

5. The defendants say, further, that if there were a contract between them and the plaintiff in the terms pleaded, they are entitled to relief under the Contracts Review Act 1980 (NSW).

The issues

6. The parties agreed that the issues for decision were:

1. was there a concluded agreement and, if so, did it include post termination entitlements for the plaintiff from the defendants?

2. Was there sufficient certainty in respect of any agreement, in particular as to:

1. clause 5 of the written document (including as it may have been varied or amended by the proposal of 6 October 2010, not only generally but also in the light of the definitions relevant thereto;

2. the parties to the agreement?

3. If the plaintiff establishes an entitlement to post-termination payments, what is the appropriate (if any) remedy?

4. Are the defendants entitled to relief pursuant to the Contracts Review Act, which encompasses:

1. was the contract unjust in the circumstances at the time it was made;       

2. was the contract for business purposes and thus excluded by s 6(2);

3. what relief should be granted?

The witnesses

7. This is a case in which the observations of McClelland CJ in Eq in Watson v Foxman [3] are apposite. His Honour said:

Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration.

3. (1995) 49 NSWLR 315 at 318-319.

8. The plaintiff’s principal witness was Mr Cunneen. One aspect of his evidence was corroborated by his wife, Mrs Sheelagh Cunneen. Each of the defendants (Mr Allan Blackburn and Mrs Carmel Blackburn) gave evidence.

9. In my view, the evidence of each of the principal witnesses – Mr Cunneen and Mr and Mrs Blackburn – was substantially reconstructed through hindsight analysis, illuminated by perceptions of self-interest. I hasten to add that I do not think that any of them sought to give knowingly false evidence. The point is, rather, that their purported recollection of events has been influenced, subconsciously but heavily, by the factors to which I have referred. In consequence, I do not think that their evidence is inherently reliable.

10. Mr Cunneen purported to have a detailed recollection of numerous conversations that took place in 2010 (and at other times), despite the fact that he had no note, contemporaneous or otherwise, to support his account of those conversations. Whilst I do not think that Mr Cunneen was being deliberately untruthful, I have doubts about his ability to recall the detail of so many conversations after a period of years, in the course of which Mr Cunneen was pursuing a busy professional career. Mr Cunneen’s diary was produced. It contained references to appointments with Mr and Mrs Blackburn. However, it appears to be devoid of any indication of the purpose of the meeting, or of what might have been discussed at it.

11. The only file note made by Mr Cunneen that appears to refer to a significant meeting (that of 9 June 2010, when, he said, he gave Mr and Mrs Blackburn a copy of the draft deed setting out the plaintiff’s requirements, and discussed it with them) provides very little support for his evidence of that conversation. The note identifies some five topics that he said were discussed. Four of them relate to routine matters of accounting or administration. One – the fifth – reads (he said) “LNEC Agreement (min $2k pm?)”. That note supports Mr Cunneen’s evidence that the discussions at the meeting included the plaintiff’s requirement for what was in effect a monthly retainer (the draft deed specified $1,500, but Mr Cunneen said that he informed the defendants that he wanted $2000). It provides no support for his evidence as to other aspects of the draft deed that, he said, were discussed.

12. To my mind, it is quite extraordinary that a competent and careful man, as Mr Cunneen appears to be, carrying on the profession of an accountant, would not seek to document important matters discussed at meetings with clients or potential clients. Both common sense and self-interest would suggest that such discussions should be recorded in some way: if not by file note then, for example, by email (the parties were accustomed to communicate by email) setting out the principal topics discussed and agreed. The extraordinary nature of Mr Cunneen’s failure to do so is compounded by his evidence that he was very keen to have his professional relationship with the Blackburns stated in a formal written agreement.

13. For reasons that will become apparent, there are some aspects of Mr Cunneen’s evidence that find support in the way that the parties conducted themselves after October 2010. Conversely, there are surrounding circumstances that seem to be inconsistent with significant aspects of his evidence. It follows that I cannot accept uncritically the detail of Mr Cunneen’s evidence of the conversations, and that those aspects of his evidence require careful scrutiny.

14. I accept Mrs Cunneen’s evidence referred to at [8] above. She gave evidence of a conversation that occurred during a dinner at Leura on 17 August 2012. She was challenged on her recollection, but her evidence, to my mind, shows why it is that the relevant words would have struck her at the time, and stuck in her memory thereafter. Thus, I accept, she provides corroboration to this one aspect of Mr Cunneen’s evidence.

15. For the most part, neither of the defendants seemed to me to have any real recollection of the relevant events. Whilst I do not think that either of them sought deliberately to mislead the court, I do not accept their blanket denials of many of the matters of significance in the plaintiff’s case.

16. Neither Mr Blackburn or Mrs Blackburn kept any note of their various meetings with Mr Cunneen. I do not find that surprising since, although I have no doubt that they were competent and experienced business people, neither of them seemed to me to be particularly methodical in recording and documenting significant matters relating to their business. I add that Mrs Blackburn, who appears to have been responsible for the email communications between the plaintiff and the defendants, did not follow a practice of setting out in an email to Mr Cunneen, following significant meetings, her understanding of the matters discussed and agreed.

17. In reaching my conclusions as to the reliability of the witnesses, I rely both on my impressions of them as they gave evidence and on my analysis of what they said against what they did over the relevant time, from 2009 to 2013. Counsel for each party submitted that there were objective circumstances bearing on the assessment of the testimonial evidence. I agree, and shall refer to the relevant circumstances when I deal with those issues, the resolution of which involves assessment of credibility.

Factual background

18. Much of the factual history is non-contentious (or, to the extent that there are disputes as to who said what to whom, or when, the disputes go nowhere). Accordingly, I shall not refer to all the matters in dispute.

19. Mr Cunneen first met the defendants on 11 October 2009. They were interested in retaining the plaintiff as their accountant. I note at this stage that it is the plaintiff’s case that it was retained to provide both accounting services and what might be called business advisory services. The defendants were adamant that the plaintiff’s role was limited to the provision of accounting services. I do not agree. It is plain, from the history of performance of the retainer, that the plaintiff was required to do far more than provide accounting services strictly so called.

20. Mr Blackburn said that at this initial meeting, Mr Cunneen said that the plaintiff would not charge an hourly rate, but would work for 10% of the profits, on the basis that “the more money you make the more I make”. [4] Mr Cunneen denied that he used the words attributed to him by Mr Blackburn in that meeting.

    4. Affidavit sworn 23 November 2015, [14].

21. Regardless, it is the evidence of Mrs Blackburn that, at some time relatively soon after the meeting of 11 October 2009, Mr Cunneen proposed that he work for 10% of the profits of the defendants’ business and 10% of the growth in value of its assets. Mr Cunneen did not, I think, dispute that evidence.

22. In short, leaving aside the fine detail, it is plain that from very early on in the relationship, the defendants understood that the plaintiff would seek to be remunerated not on the basis of time based charging, but on the basis of a share of profits and a share of capital growth.

23. On 17 February 2010, a deed of trust was executed whereby the defendants’ company Allan Blackburn Investments Pty Ltd (the trustee) agreed to become trustee of a trust, settled by that deed, known as The Blackburn Unit Trust (the Unit Trust). It seems to be reasonably clear that this was done on Mr Cunneen’s advice, as part of a rearrangement of the defendants’ business interests. At that time, those interests included two hotels (The Family Hotel at Katoomba and The Alexandra Hotel at Leura, commonly known as “the Family” and “the Alex” respectively) and commercial properties in Waratah Street, Katoomba. Mr Cunneen’s advice, as to the hotel businesses, appears to have been that the defendants, who owned the freehold and conducted the businesses, should continue to own the freehold (in partnership), but that the businesses should be conducted through the Unit Trust.

24. The establishment of the Unit Trust is of some significance, because, ultimately, the way that the plaintiff was paid its entitlement to a 10% profit share was through distributions from it to a unit trust that was effectively controlled by the plaintiff. Mr Cunneen explained that the purpose of this somewhat unusual arrangement was to avoid complications with GST.

25. Mr Cunneen said that he proposed to the defendants, at a meeting on 19 March 2010 at their home in Leura, that the plaintiff would provide its services to the defendants for a remuneration of 10% of profit and capital growth. Although the defendants deny that these matters were then discussed, it seems to me consistent with the probabilities and with the chronology overall that Mr Cunneen did raise those topics.

26. Regardless, the defendants appear to accept (as I have said already) that the concept, that the plaintiff be remunerated by a 10% share of profit and capital growth, was well and truly “on the table”, by early 2010.

27. Mr Cunneen said that, in the course of the 19 March meeting, he advised the defendants to seek independent legal advice. He was by then aware that the defendants were accustomed to use a particular solicitor, Mr Bruce Hocking. The defendants denied that Mr Cunneen had suggested they obtain independent legal advice. I do not accept their denial. I think it likely that a careful and competent accountant in Mr Cunneen’s position, suggesting to new clients what appears to be a most unusual arrangement for remuneration, would suggest that the clients obtain independent legal advice.

28. According to Mr Cunneen, there were further meetings on 8 and 30 April 2010, again at the defendants’ home in Leura. Mrs Blackburn denied that the first meeting took place, but I think it did. Mr Cunneen referred to his telephone records, which showed that he had made a phone call from Leura at the time he said the meeting took place. Mr Cunneen said that he asked the defendants whether they agreed to the plaintiff’s remuneration proposal, but that they said they were still considering it. In my view, bearing in mind the importance of establishing a clear basis for remuneration, it is more likely than not that some such conversation occurred.

29. Mr Cunneen said that the topic of the plaintiff’s remuneration was raised again at the second (30 April) meeting. There is some confirmation of that from Mr Blackburn’s evidence that Mr Cunneen then provided a document with the word “agreement” and the defendants’ names on it. Although I think Mr Blackburn is mistaken in that evidence, it does tend to suggest that the topic of remuneration was still being discussed and considered.

30. Mr Cunneen said that there was a further discussion on 12 May 2010, in which again he sought the defendants’ agreement to the proposed method for the plaintiff’s remuneration. Mrs Blackburn said that although there may have been a telephone conversation on that day, there was no discussion of remuneration. In my view, Mr Cunneen’s evidence is to be preferred. On 15 May 2010, he sent an email to Mrs Blackburn that referred among other things to “our telephone conversation earlier this week”, and made it tolerably clear that either the or a topic discussed was Mr Blackburn’s “preferences for my services and remuneration”. Mr Cunneen attached to that email a tax invoice for work up until 30 April 2010, based on what he said were heavily discounted time-based costings.

31. Mrs Blackburn replied to Mr Cunneen’s email on 16 May 2010. It is apparent from her reply that Mr Cunneen was pressing for clarity, and that Mr Blackburn was the person who needed to provide it. In those circumstances, it is in my view more likely than not that Mr Cunneen was indeed seeking to have clarified and agreed the precise nature of the services that the plaintiff was to provide, and the precise and full basis on which it was to be renumerated for those services.

32. There was a further meeting a week later, on 19 May 2010. Mr Cunneen said that the topics discussed included the role the plaintiff should play in the defendants’ business, and the basis on which it should be remunerated. Mrs Blackburn denied that there was any such discussion. She said that the topic discussed was the impact of GST on revenue from the hotels’ gambling machines. Mr Blackburn, however, confirmed that there had been discussion of the basis of remuneration, including Mr Cunneen’s requirement for a 10% share of both profit and capital growth. In my view, it is more likely than not that those matters were discussed, although no one suggests that any agreement or consensus was then reached.

33. The next matter of significance was a meeting, again at the defendant’s home in Leura, on 9 June 2010. Mr Cunneen said that he presented the defendants with a draft deed that he had prepared, setting out the plaintiff’s requirements for remuneration. He said that he and the defendants read and discussed the deed, and discussed the way in which the proposed share of capital growth would be calculated.

18. The defendants agree that there was a meeting on that day. Mrs Blackburn said that in the course of that meeting, Mr Cunneen provided Mr Blackburn with a folded piece of paper, but that there was no discussion of its contents. Mr Blackburn said that he was not shown any document at that meeting; that had happened, he said, on 30 April 2010.

19. In my view, it is more likely than not that, at the 9 June meeting, Mr Cunneen did produce the draft deed setting out the plaintiff’s proposals. I say that because by then (as is clear) Mr Cunneen was becoming concerned that the relationship between the plaintiff and the defendants should be both finalised and formalised. In my view, it is more likely than not that he chose to do that by preparing and presenting for discussion the draft deed.

20. Further, after the relationship between the parties had broken down, the plaintiff’s solicitor, Mr Dante Aspite of Anderson Lawyers, wrote to the defendants stating, among other things:

We are instructed you entered into an agreement with our client which commenced on 1 May 2010. The terms of the agreement were set out:

a.   In a Deed attached herewith; and

b.   Your email to our client dated 6 October 2010 which is also attached.

37. It is not contentious that the letter included the attachments described in it, or that the first of those attachments was the draft deed to which I have referred.

38. Mr Hocking (who practised under the name “Martin Place Lawyers”) replied to that demand on behalf of the defendants. Among other things, he said:

Our clients deny that they entered into an agreement with your client and state that the document submitted to them but never agreed to was not the document [sic – obviously, the draft deed] you attach.

39. Mr Aspite replied asking for “a copy of the document your clients say was submitted to them”. Mr Hocking replied, setting out his client’s advice:

… that your client never left with them a copy of the Proposal. It was shown to them but taken away immediately by your client.

40. The obvious inference from all this is that the defendants accept that, either at the meeting of 9 June 2010 or at some later time (presumably, the meeting of 20 August 2010, to which I shall turn in a moment), they were given a copy of some “Proposal” setting out the plaintiff’s requirements. The only documents in evidence answering the description of such a “Proposal” are two copies of the draft deed (one with handwritten markings, and one plain). Thus, despite the defendants’ denials, I think it more likely than not that a copy of that draft deed was indeed provided to them. Although the defendants deny that this happened at the meeting of 9 June 2010, I find that it did. Mr Cunneen’s file note, prepared on 11 June 2010 (see at [11] above) confirms that one of the matters discussed at that meeting was the “LNEC agreement”. The draft deed did in fact provide for a minimum monthly payment, or retainer, although the specified figure was $1,500, not $2,000 – the figure that Mr Cunneen said that was discussed at the meeting.

41. If, as I think happened, the draft deed was provided to the defendants at the 9 June meeting, it makes no sense whatsoever that it would not have been discussed, at least in summary terms. After all, the whole purpose of preparing and providing the document was to crystallise and bring to a conclusion the debate over the extent of the services to be provided by the plaintiff, and the basis of its remuneration for them.

42. I shall return to the draft deed, and set out its terms (so far as relevant) before I come to the first of the agreed issues.

43. Nothing much happened, relevant to finalisation of the terms of the plaintiff’s retainer, during the rest of June 2010, or in July 2010. Mr Cunneen said that there were telephone discussions in which aspects of the retainer were mentioned. Mr and Mrs Blackburn give conflicting evidence in relation to that. Mrs Blackburn said there were no such conversations; Mr Blackburn said that in fact there was a meeting, but it did not concern profit share.

44. The next relevant meeting occurred on 10 August 2010. Mr Cunneen said[5] that:

1. he gave Mrs Blackburn what he called “the final form of the agreement”;

2. he told her that, “this is the final version of the document as far as I am concerned” and asked that she and Mr Blackburn “go through it… and make sure you are happy with it and then if you are, lets execute it and get on with life”; and

3. Mrs Blackburn replied, “Terrific. Let’s do that”.

   5. Affidavit sworn 7 September 2015, [91] to [93].

45. Mr Cunneen said that he left the draft deed with the defendants. Their evidence as to whether there was a meeting on 10 August 2010 is equivocal. Mr Blackburn appears to accept that there may have been such a meeting. Mrs Blackburn cannot recall one way or the other. Both assert that no document was given to them on that day.

46. Mrs Blackburn identified an email that she sent Mr Cunneen on 10 August 2010; it is time stamped 8:32pm. Its subject is “Adjustments 2010 Accounts”. It makes no reference to any meeting on that day, and a fortiori no reference to the provision of any draft agreement on that day.

47. There are some real difficulties that stand in the way of accepting Mr Cunneen’s evidence. The first is that there is no contemporaneous record.

48. Further, his evidence is puzzling. He described the draft deed in question as “the final form of the agreement” or “the final version of the document as far as I am concerned”. On examination, however, the document appears to be identical to the earlier version that, as I have found, was provided to and discussed with the defendants on 9 June 2010. Why would Mr Cunneen have described it as the “the final version” when it contained no changes whatsoever? His description of it makes no real sense.

49. Although I tend to think that there was a meeting between Mr Cunneen and the defendants on 10 August 2010 (as I have noted, Mr and Mrs Blackburn did not deny that there had been a meeting on that day), I am not satisfied, and do not find, that Mr Cunneen provided them with a further copy of the draft deed, or that he had with Mrs Blackburn the discussion to which he deposes in his affidavit. In reaching that conclusion I take into account the fact that, as subsequent events make clear, the defendants were still pondering the question of profit share, and had yet to formulate their views or express them to Mr Cunneen. In fact, they did not communicate their views until 9 October 2010, to which I will come a little later in these reasons.

50. There was another meeting, on 26 August 2010. Mr Cunneen had prepared, and gave to the defendants, distribution notices providing for the net income of the Unit Trust for the year ended 30 June 2010 to be distributed to various recipients. One of those recipients was Mr Cunneen’s trust, the CR Trust. Mr Cunneen said, and I find, that he gave the supporting calculations to the defendants at this meeting.

51. Mr Blackburn signed the distribution notice, in his capacity as a director of the trustee. Thereafter, the distribution to the CR Trust was paid, by two instalments, in September 2010.

52. The defendants accept that at least those things happened at the 26 August meeting. There is a dispute as to what further discussions there were. Nonetheless, the defendants appear to accept that the plaintiff’s entitlement to remuneration by then extended to (although, they say, it went no further than) a 10% share of profits of their business activities.

53. It is common ground that from then on until the relationship broke down, further profit distributions (being 10% of profits accounted for through the Unit Trust) were made to the CR Trust.

54. In late September 2010, according to Mrs Blackburn, she received a telephone call from Mr Cunneen in which he said that if there were no agreement for him to have a 10% profit share, he would not continue to work for the defendants. That is a little difficult to understand, because the 10% profit share basis of remuneration appears to have been settled, at the latest, by August 2010 (and the first payments had been made before the discussion to which Mrs Blackburn referred). Regardless, Mrs Blackburn told Mr Cunneen (so she said) that Mr Blackburn intended to prepare a proposal to submit to Mr Cunneen.

55. On 29 September 2010, Mrs Blackburn sent an email to Mr Cunneen which said, among other things:

We want to put a proposal to you in writing for your consideration and hope to do this in the next day or two if ok with you.

56. That proposal (the 6 October proposal) was put, by email, on 6 October 2010. I shall set out the full terms of the proposal before discussing the first issue, but note at this stage that it referred, among other things, to the following matters:

1. the Blackburn family wanted Mr Cunneen to continue to provide professional services but;

2. the basis on which any entitlement to share in capital growth would be calculated should be defined.

57. The proposal set out proposed base valuations for the two hotels, and proposed a “carve-out” in the event that either was “sold to a large conglomerate (e.g. Dan Murphys or McDonald’s) within three years”. In that event, the defendants proposed, the plaintiff “would receive a figure to be agreed upon”.

58. The proposal also contained a mechanism for finalising the entitlement to receive a share of capital growth “if either party wish to terminate this agreement”, in circumstances where the hotels had not been sold.

59. Mr Cunneen said that after he received the 6 October proposal (which appears to have been sent at 9:37am on that day), he rang Mrs Blackburn (the same day) and had a conversation. According to Mr Cunneen, the conversation was as follows [6] :

[LC]: I have received your email and that proposal is fine. You want to put a base value on the properties. I am fine with all of that. Let’s get on with it. We have an agreement!

[CB]: Yes.

6. Affidavit sworn 7 September 2015, [115].

60. Mrs Blackburn said that the form of the proposal had been drafted by Mr Blackburn, and that her input was limited to typing it and attaching it to the email which she sent to Mr Cuneen. Mr Blackburn said that he “wrote” the email (which he explained, consistently with Mrs Blackburn’s evidence, as meaning that he drafted the proposal attached to the email) because he “thought that the 10% growth in the hotels was reasonable but only from the point at which [Mr Cunneen] had started with us”. [7]

    7. Affidavit sworn 23 November 2015, [25]

61. Mrs Blackburn said, first, that she could not recall the details “surrounding” the proposal of 6 October 2010 because she “had a huge workload at the time”, which was “on top of [her] already time consuming work duties [8] . She denied that the conversation in question had occurred, and said that she did not deal with the matter “because Allan wrote the document” [9] .

    8. Affidavit sworn 30 October 2015, [25].

    9. Ibid, [104].

62. Mr Blackburn gave the following evidence [10] .

    10. Affidavit sworn 23 November 2015 [26], [27].

26.   Shortly after 6 October 2010 a telephone conversation between Carmel and Leigh took place. This conversation took place a day or so after our email of 6 October 2010. I was present on the phone line during that call and I disagree with Leigh’s version of the conversation contained in paragraph 115. We had the following conversation:

CB:   Hi Leigh, did you get our proposal?

LC:   Yes that’s why I am calling. How much will I get if you sell to Dan Murphys?

CB:   I don’t know I will get Allan to call you.

27.   I then called Leigh back shortly afterwards and we had the following conversation:

AB:   Hi Leigh, I would give you $50,000 if we sold to Dan Murphys.

LC:   Well I would want at least $200,000.

AB:   Well you can whistle Dixe for that because you won’t be getting it.

63. In the course of his cross-examination, Mr Blackburn said that this conversation did not occur during a telephone call but “at a previous meeting” which he said occurred “after this letter” [11]

    11. T148.12-.33.

Q.    After October 2010 there was never any debate between you about the terms of the agreement until 2014, was there?

A.    No.

Q.    Are you agreeing with me?

A.    Except I put in my affidavit that - when he rang for the phone call about a few days after he received this letter, I put in my affidavit that it was a phone call response back to him and, on thinking of it, it wasn't a phone call because it was while we were sitting at the lunch table at a previous meeting that he mentioned, "How much do I get if you sell to Dan Murphy's?" That was then the last conversation we had regarding his growth share until we terminated him.

Q.    I'm just trying to understand what you've just said. You're saying that this conversation referred to in your affidavit, that you said in your affidavit was a telephone call, you now remember it was in fact at a meeting.

A.    Yeah, it was at a meeting at the table because‑‑

Q.    Do you say that it was at a previous meeting?

A.    How do you mean, "a previous meeting"?

Q.    You just said "at a previous meeting".

A.    A previous - a meeting after this letter.

64. Mr Blackburn was cross-examined further on his evidence set out at [62] but, apart from the change from telephone to meeting, he adhered to it.

65. I am not satisfied, and do not find, that on or shortly after 6 October 2010, there was a telephone conversation between Mr Cunneen and Mrs Blackburn to the effect alleged by Mr Cunneen (see at [59] above). There are several reasons for this.

66. First, I accept Mrs Blackburn’s evidence that the question of profit share was a matter with which Mr Blackburn was dealing. In my view, having observed the defendants over the course of their lengthy cross-examinations, it is inherently implausible that she would have confirmed the “agreement” asserted by Mr Cunneen and inherently plausible that she would have told him (had he rung her) to speak to Mr Blackburn.

67. Second (and on a related point), I accept her evidence that she was extremely busy at the time, and was not focused on the detail of the agreement or arrangements between the plaintiffs and defendants.

68. Third, it is to my mind implausible (to say the least), bearing in mind my assessment of Mr Cunneen as a careful, competent and experienced accounting professional, that Mr Cunneen would have been content to base the plaintiff’s relationship with the defendants on the basis of a phone call, without (at the very least) confirming the conversation and the “agreement” in an email, or making a note of the conversation in a file note.

69. The whole tenor of this aspect of Mr Cunneen’s evidence is that he wanted the plaintiff’s relationship with the defendants to be formalised in a signed agreement, setting out the full details of their bargain. That was why he had drafted the deed that was shown to and discussed with the defendants. That is why he invited the defendants to respond with any changes that they wished to make. It is implausible in the extreme that, having had a response from the defendants, Mr Cunneen would have let the matter rest with an oral confirmation over the telephone, and would not have sought to redraft the deed to incorporate the defendants’ proposal. His casual attitude is completely at odds with his insistence, from March or April 2010 through to August 2010, that the agreement should be formalised.

70. After October 2010, the plaintiff continued to provide services to the defendants. Mr Cunneen continued to provide the defendants with interim and final distribution statements for profits derived through the Unit Trust, which included distributions of 10% of those profits in favour of the CR Trust. The defendants for the most part paid or caused to be paid those distributions in favour of the CR Trust.

71. One further matter that should be mentioned is the dinner (at Leura) on 17 August 2012 to which I referred at [14] above. Mr and Mrs Cunneen, and Mr and Mrs Blackburn, were present. According to Mr Cunneen, there was a conversation in the course of that dinner in which Mr Blackburn said [12] :

We have discussed it with the whole family, and all agree that you get your 10% share, no matter what happens in the future. We would have been cactus without you.

12. Affidavit sworn 7 September 2015, [170].

72. Mrs Cunneen gave evidence that, in the course of the dinner, Mrs Blackburn expressed her gratitude for the work done by Mr Cunneen, particularly in relation to CBA [13] . Mrs Cunneen added that, in the course of the dinner, Mr Blackburn said:[14]

Your finance proposal really helped us and gave us more time. We’d have been cactus without you. You’ve got your 10% no matter what.

13. Affidavit sworn 8 March 2016, [23].

14. Ibid [24].

73. Mrs Cunneen said that after saying this, Mr Blackburn left the table and Mrs Blackburn said[15] :

Oh, we all agreed, the whole family, some time ago, but we knew we had to make Allan say it to you himself.

15. Ibid [25].

74. Mr Blackburn denied, and Mrs Blackburn could not recall, that Mr Blackburn had used the words attributed to him. However, Mrs Blackburn accepted in cross-examination that the expression “cactus” was one that Mr Blackburn was wont to use. [16] She could not recall using the words attributed to her. I add that on no version of the conversation did the words “your 10%” identify the subject, 10% of which was to go to the plaintiff.

    16. T204.1-.4.

75. In early 2013, the relationship between the plaintiff and the defendants broke down. The defendants gave oral notice on 27 March 2013 that the plaintiff’s retainer was terminated. Mr Cunneen insisted on a month’s written notice. The defendants maintained their position, that the contract had been terminated by their oral notice. The plaintiff now accepts that the contract was terminated in the first half of 2013.

76. The reasons for the termination were explored in the evidence, but it is not necessary to make a finding beyond saying that, in my view, the defendants manufactured an excuse. The termination arose in the circumstances where the defendants, who were being pressed by their then bank Commonwealth Bank of Australia (CBA) to refinance, sought and obtained an offer of finance from ANZ Banking Group Limited (ANZ). Mr Cunneen expressed some doubts about the way in which the relevant officer of ANZ was conducting negotiations with the defendants. The defendants, for reasons that are not clear to me, took offence at this.

77. Regardless, the refinance went through. ANZ paid out CBA. The threat of enforcement action was lifted. It was after this occurred that the defendants terminated their relationship with the plaintiff.

78. It is not necessary to make any further findings because, if the agreement were (as in my view it was) one terminable at will, the defendants were able to terminate it as they did. On the other hand, if termination required a month’s notice (as the plaintiff contends), the plaintiff’s contractual loss would be profit share from 27 March 2013. Further, if the plaintiff is correct, any entitlement to share in capital growth would be assessed not as at 27 March 2013 but as at the end of April 2013.

79. I should note that in putting the matter the way I just have, I am overlooking the submissions put for the plaintiff, that termination of the equity share agreement is a matter of election, and that it was not until the plaintiff commenced proceedings seeking, among other things, an assessment of the profit and capital growth, and payment of 10% of whatever might be assessed, that it made the requisite election. I shall return to this issue.

The draft deed

80. The draft deed was one to be made between the defendants and the plaintiff. Its recitals stated:

A.   Allan and Carmel will conduct, commence to conduct and continue to conduct business and maintain investments directly, jointly and through various entities and trusts, some of which are identified in schedule A hereof.

B.   One of those investments and businesses is The Family Hotel at Katoomba, together with its associated and related parties and trading entities (“The Family Hotel”).

C.   Another of those investments and businesses is The Alexander Hotel at Leura, together with its associated and related parties and trading entities (“The Alexander Hotel”).

D.   Another of those investments and businesses is the rental properties located at 51-57 Waratah Street, Katoomba N.S.W. 2780, together with its associated and related parties and trading entities (“Waratah Street”).

E.    Allan and Carmel are desirous of obtaining the services of the Company to assist in the running of their affairs and the Company is desirous of assisting Allan and Carmel.

81. Recital D may be put to one side, because the Waratah Street properties were sold during the currency of the parties’ relationship, and the plaintiff makes no claim to any share of any capital growth in those properties up to the time of their sale.

82. The definitions set out in cl 1 are important:

1.   DEFINITIONS

In this Deed unless the context indicates a contrary intention:

“Commencement Date” means 1st May, 2010.

“Their businesses and investments” means only those businesses and investments which are or are associated or related parties with those referred to in the recitals above.

“Monies received by Allan and Carmel from their businesses and investments” includes all interest, dividends, distributions, profit shares, and profits on sale of shares, units, assets, investments, businesses or part thereof whether paid directly to Allan and/or Carmel or to associates or related parties or for the benefit of one or more thereof in respect of existing or further entities during the currency of this agreement; but does not include any monies received, or profits derived from, the sale of the family home at 65 Jersey Avenue, Leura N.S.W. 2780

“Associates or Related Parties” includes all family members, and all those people, companies, trusts and other entities as would be included pursuant to the relevant definitions contained in the Income Tax Assessment Act, 1936 as amended and the Corporations Law.

83. Clause 3 dealt with the plaintiff’s role:

3.   COMPANY’S ROLE

3.1   The Company, together with Allan and Carmel, shall jointly take all steps necessary to define, clarify and confirm the requirements that Allan and Carmel have for the services of the Company.

3.2   With reference to clause 3.1 above, it is anticipated that the Company may be asked to assist in the strategic planning and management of the affairs (including the day to day control and management) of each of the associated businesses and investments, including businesses and investments conducted by associated or related parties.

3.3    The Company must carry out its services in such manner and at such times as Allan and Carmel may from time to time reasonably direct.

84. Clause 4 dealt with “remuneration”:

4.   REMUNERATION

Allan and Carmel shall pay, or shall procure one of their entities to pay to the Company a Monthly fee of $1,500.00, together with any out of pocket expenses which may have been disbursed by the Company in the performance of services for Allan and Carmel. Allan and Carmel will remit to the Company all amounts due within 15 days of their being involved.

85. As I have said, it is Mr Cunneen’ evidence, supported by his file note, that during the meeting of 9 June 2016, he proposed a figure of $2,000 rather than $1,500 per month. It is convenient to note at this point that although cl 4 dealt with what might be called a base fee or retainer, separate to the cl 5 “equity” entitlements (which I shall set out in a moment), in practice, the monthly payments were treated as payments on account of the plaintiff’s entitlement to a 10% profit share.

86. Clause 5 dealt with the proposed equity entitlements:

5.   EQUITY

5.1   In addition to the remuneration referred to in clause 4 above, the Company shall be entitled to receive:

(a)   a 10% share of all monies received by Allan and Carmel from their businesses and investments in or associated with The Family Hotel. Payments of this share shall be made by Allan and Carmel at the same time as either of them receive such monies.

(b)   a 10% share of monies received by Allan and Carmel from their businesses and investments in or associated with The Alexander Hotel. Payments of this share shall be caused to be made by Allan and Carmel at the same time as either of them receive such monies.

(c)   a 10% share of all monies received by Allan and Carmel from their businesses and investments in or associated with Waratah Street. In calculating the 10% share in respect of any sale of Waratah Street, the share will only apply to that part of the gross proceeds which exceed $800,000.

Payments of this share shall be made by Allan and Carmel at the same time as either of them receive such monies.

5.2   The entitlement to these 10% shares shall continue notwithstanding that this agreement may later be terminated. In the event that this agreement is later terminated the 10% shares shall apply thereafter only to businesses and investments which existed prior to the date of termination hereof.

5.3   Depreciation and remuneration charges (in respect of Allan and Carmel) shall be excluded from the calculation of each of these 10% shares.

87. Clause 7 dealt with the topic of termination of the agreement. It is, to put it mildly, poorly expressed.;

7.   TERMINATION

7.1   Any party may terminate this agreement at any time by giving at least one month’s written notice to the other parties.    

7.2   Notwithstanding termination for any reason (subject only to clause 7.7), the Company shall be entitled to receive:

(a)   up until the date of termination, the remuneration referred to in clause 4 above; and

(b)   continuing after the date of termination, the 10% shares referred to in clause 5 above.

7.3   Should Allan and Carmel perceive that the Company has acted in a manner which is significantly contrary to the bests interests of Allan and Carmel, then they may forward in writing a notice of objection to such act or actions. The notice shall identify the offending actions and specify the reasons or reasons why such action is prejudicial. The notice shall also specify what remedial action or cessation of activity is reasonably required to restore the good order of this agreement.

7.4   Upon receipt of the objection referred to in clause 7.3, and unless the Company disagrees with the appropriateness of the objection, the Company shall comply forthwith with the remedial or cessation activity notified.

7.5   Where the company disagrees with the appropriateness of the objection, the Company will notify in writing Allan and Carmel of the disagreement. All parties will use best endeavours to resolve any disagreement, although the usual processes of independent negotiation, arbitration and litigation may become necessary.

7.6   Where it is ultimately determined that the objection or some part or parts thereof are reasonable and that the Company cannot or will not comply with those parts, Allan and Carmel may terminate this agreement by giving notice in writing within 30 days of such determination. Such termination will have effect from the date upon which the original notice of objection was received by the Company.

7.7   Where termination of this agreement occurs before 1st May, 2011 and in the manner contemplated by clause 7.6, the Company shall not be entitled to the benefit referred to in clause 7.2(b).

88. Clause 8 provided that no variation should be effective unless in writing and signed by the parties. Clause 13 provided that any provision held to be invalid or unenforceable should be severable, without effect on the balance of the deed.

The 6 October proposal

89. The email under cover of which the proposal was sent referred to the proposal as “comments for your perusal”, without any further elaboration. The proposal itself read (and I set it out in full):

Thanks for your email and your understanding of the busy weekend we had – which was very successful , we are receiving many positive comments and feedback about the Friday night launch. With 2 nightclubs we certainly know hard work.

We have had time to discuss the full proposal with the family and have all agreed that your professional input is positive to the future financial aspect of the businesses.

The current valuations of the hotels are $4.585 for the Family, and $2.5 for the Alex by Robinson & Robinson. These would be the valuations that any further growth would be based upon in terms of your 10% requirement.

We see these figures as the value of the hotels when you joined us.

Prior to the bank wanting a valuation on the Alex, Knight Frank had a valuation of $3.0.

At the present time we are committed to long term ownership of both hotels but,

If the Family Hotel is sold to a large conglomerate (eg. Dan Murphy or McDonalds) within 3 years you would receive a figure to be agreed on – not 10% of growth of the hotel from the valuation (as Dan Murphy has already offered us $6.5 million)

The above would also translate to the Alex.

If either party wish to terminate this agreement and a capital growth figure cannot be resolved between the 2 parties then both parties are to pay for a sworn valuation from a recognised valuer.

Hoping you are in agreement with this and we can move forward.

90. It is convenient to note at this point that:

(1)   Mr Blackburn said in the course of his cross-examination that the first part of the second (unnumbered) paragraph of the proposal was untrue, and that he knew it was untrue when he drafted it; [17] and

(2)   both Mr and Mrs Blackburn said in cross-examination that there had been no discussion with all of “the family” [18] .

17. T143-145.

18. T143-145 (Mr Blackburn); T206-208 (Mrs Blackburn).

91. Neither of those matters was revealed to Mr Cunneen. Neither of them says anything favourable about the credibility of Mr and Mrs Blackburn.

92. At this stage, I say nothing more about the proposal except that the reference in the third paragraph to “your 10% requirement”, is, clearly (as the seventh paragraph shows) Mr Cunneen’s requirement that the plaintiff’s remuneration include 10% of any capital growth in the hotels.

First issue: existence and terms of any contract between the plaintiff and the defendants

93. The commendably brief statement of this issue conceals, to some extent, the questions that it raises. The first question, of course, is whether there was a concluded contract between the parties. If it is concluded that there was a contract, the second question is, what are its terms.

94. Specifically, as to the second question, the questions (or sub-questions) are whether the terms included an entitlement to share in profit; whether they included an entitlement to share in capital growth; whether any such entitlements survived termination of the contract (this, I think, is what is meant by post-termination entitlements); and whether (as was the plaintiff’s case) those entitlements subsisted, notwithstanding termination, until one party elected to act in such a way as to bring them to an end.

The parties’ submissions

95. Mr Smallbone of Counsel, who appeared for the plaintiff, submitted that there was a contract. The elements of that contract comprised, he submitted:

1. the plaintiff’s “offer” consisting of the provision and discussion of the draft deed, on either or both of 9 June and 20 August 2010;

2. the defendants’ 6 October proposal; and

3. the plaintiff’s acceptance of that proposal, either expressly and orally (in the conversation that Mr Cunneen said he had with Mrs Blackburn on 6 October 2010) or by conduct.

96. Mr Smallbone submitted that the existence of the contract and its relevant terms were demonstrated by the parties’ post-contractual conduct. The particulars of subsequent conduct extended to some 33 acts (or conversations or documents) between 21 October 2010 and 25 June 2013. By way of summary, those acts included:

1. calculations from time to time of the profits of the defendants’ business activities (referable both to the partnership and to the Unit Trust), and payment of a 10% share to the plaintiff through distributions from the Unit Trust to the CR Trust (this group of particulars also includes emails and other communications in relation to payment of the distributions to the CR Trust from time to time); and

2. email exchanges between the plaintiff and the defendants, particularly in 2012 and 2013, in which the plaintiff asserted the existence and terms of the agreement (in the terms of the draft deed) and the defendants either failed to reply or, if they did reply, failed to dispute the existence of the agreement or its terms as alleged by the plaintiff.

97. Mr Smallbone submitted that the contract was one made on the terms of the draft deed, modified to the extent that it was inconsistent with the 6 October proposal. Thus, he submitted, the plaintiff had an entitlement under that contract to a 10% share in the capital growth of the defendants’ defined assets. Mr Smallbone acknowledged that the 6 October proposal contemplated that the agreement could be terminated, and with it the entitlement to any equity share, but said that if the agreement were terminated, termination of the equity share would depend on either the plaintiff or the defendants making an election to do so. He submitted that the plaintiff had so elected when it commenced these proceedings on 9 May 2015, because the plaintiff claimed (among other things) a determination of the capital growth in the properties and payment of 10% of that capital growth.

98. Mr Smallbone accepted that, notwithstanding the inscrutability of the contractual arrangements on which he relied, it followed (from the terms of the 6 October proposal, and inconsistently with the terms of the draft deed) that the plaintiff’s entitlement to a 10% share of profits would terminate at the same time as its entitlement to a 10% share of capital growth terminated.

99. Mr Cheshire of Senior Counsel, who appeared for the defendants, appeared to accept that there must have been a contract of some kind between the parties, for the provision of the plaintiff’s services to the defendants. He appeared to accept, also, that under that contract, the plaintiff was entitled to be remunerated by a 10% share of the profits made by the defendants from time to time from their business activities. Mr Cheshire submitted that there was no contract on or incorporating the terms of the draft deed. More generally, Mr Cheshire submitted, there was no contract incorporating a term entitling the plaintiff to receive a 10% share of capital growth in the defined assets of the defendants, or to any post-termination payment.

100. Mr Cheshire submitted that the 6 October proposal could not be regarded as a counter-offer. In its terms, he submitted, it was no more than some sort of statement of the defendants’ position, which was intended to be the subject of negotiation and, ultimately, incorporation into a formal agreement. He relied on the manifest unenforceability of the “carve-out” relating to sale “to a large conglomerate” as indicating that the document was no more than, in effect, a discussion draft.

101. In any event, Mr Cheshire submitted, there had been no express acceptance of the terms of the 6 October proposal. It will be apparent from what I have said already that I agree with that submission.

102. Mr Cheshire submitted that the conduct relied upon, whilst clearly capable of evidencing a contract of some form under which the plaintiff was entitled to be paid 10% share of profits, went no further. Specifically, he submitted, there was nothing in that conduct to prove that the contract between the plaintiff and the defendants entitled the former to a 10% share of the capital growth in the assets of the later. Likewise, Mr Cheshire submitted, the email exchanges on which the plaintiff relied were inconclusive.

Decision

103. I have found that it is more likely than not that the draft deed was given to the defendants in the meeting on 9 June 2010, and that there was discussion of it at that meeting. The submission of that draft deed could be understood to be an offer by the plaintiff to the defendant to provide services upon the terms, including as to remuneration, set out in it.

104. There is a question as to whether the terms of the draft deed were such that, upon acceptance, a legally enforceable contract would arise. That uncertainty arises because cl 3 did not set out the services that the plaintiff was to provide. It required that the parties should do what was “necessary to define, clarify and confirm the requirements that [the defendants] have for the service of [the plaintiff]” (cl 3.1, set out at [83] above). It might be thought to be a little strange that the draft deed provided no certainty as to the scope of services the plaintiff was required to perform – leaving those for later negotiation – but, nonetheless, sought to specify with some degree of particularity the basis on which the plaintiff would be remunerated for those services.

105. It seems to me to be strongly arguable that the provisions of cl 3 of the draft deed indicate that it was no more than a discussion document: a document intended to lead to the negotiation, documentation and signing of an agreement setting out the full terms of the parties’ bargain. Alternatively, perhaps, it could be argued that the scope of services to be required of the plaintiff might be inferred from conduct (that conduct constituting those services that, up until the date of submission of the draft deed, the defendants had requested the plaintiff to perform, and the plaintiff had performed). But if that were so, it might be thought that Mr Cunneen would have sought to define the scope of the services in the draft deed, rather than leaving it as, apparently, a matter for subsequent agreement.

106. Nevertheless, the principal debate between the parties was whether, assuming that the deed constituted some sort of offer to enter into a contract that was capable of acceptance so as to lead to the formation of a binding contract (and I acknowledge that this overlooks Mr Cheshire’s submissions as to other asserted areas of uncertainty in the terms of the draft deed), there was in fact acceptance either expressly or by conduct. It is to that factual question that I now turn.

107. It is clear that the defendants did not accept that offer, either expressly or by implication, before they submitted their 6 October proposal to the plaintiff. True it is that the plaintiff provided accounting and other services to the defendant between June and October 2010. However, in so acting, the plaintiff was doing no more than it had done prior to 9 June 2010. The defendants’ acceptance of those services cannot be taken as an acceptance that their provision was governed by the terms of the draft deed.

108. Certainly, Mr Cunneen does not appear to have thought that there was a concluded agreement, on the terms of the draft deed, between June and October 2010. On the contrary, he continued to press the defendants to formalise their response, so that an agreement comprising the whole of the parties’ bargain could be prepared and signed. Although Mr Cunneen’s subjective views do not dictate what, objectively, the reasonable onlooker would have made of the parties’ dealings, it seems to me that they provide evidence of how that onlooker would have interpreted those dealings. If Mr Cunneen, a person powerfully interested in the subject matter of the arrangements between the plaintiff and the defendants, did not think that there was a concluded contract containing all relevant terms, it is difficult to understand how the reasonable onlooker could have come to a different conclusion.

109. That view of events is confirmed by the fact that Mr Cunneen did not regard the 6 October proposal as an ineffective statement of position: ineffective because there was already a concluded contract. On the contrary, on his evidence, he regarded the proposal as the culmination of the negotiations, leading to an agreed position from which, by his alleged acceptance of the terms of the 6 October proposal, a concluded bargain could be constructed. Again, there is no reason to think that the reasonable onlooker, considering the facts objectively, would have come to any different conclusion.

103. I do not regard the 6 October proposal as a counter-offer capable of acceptance so as to lead, without more, to a concluded and legally enforceable contract. On the contrary, I think, when it is considered in context, it is (as Mr Cheshire submitted) no more than a statement of the defendants’ position on the unresolved question of the plaintiff’s claim to a share in capital growth. It set out the defendants’ requirement for a baseline valuation for each hotel, and their requirement – I point out, a fundamental part of their statement of position – that sale “to a large conglomerate” should not trigger that entitlement.

104. The 6 October proposal contemplated expressly that the plaintiff’s entitlement, in the event of sale “to a large conglomerate”, was to be a fixed agreed figure. Clearly, it required that the figure should be negotiated before this aspect of the parties’ bargain could be regarded as settled. In that context, I regard Mr Blackburn’s “whistle Dixie” evidence [19] as persuasive, and I do think (against Mr Cunneen’s denial) that he used those words to Mr Cunneen. Having viewed Mr Blackburn in the course of his lengthy cross-examination, and having considered carefully the content of that cross-examination (including his mode of answering questions), it strikes me as precisely the sort of thing he would have said.

     19. Affidavit sworn 23 November 2015, [27]:

105. Both Mr Smallbone and Mr Cheshire relied on the concluding words of the 6 October proposal: “[h]oping you are in agreement with this and we can move forward”. Mr Smallbone submitted that the expressed desire to “move forward” meant, in effect, “move forward in performance of a contract incorporating these terms”. Mr Cheshire submitted that the words meant, in effect, “move forward to finalise the terms of our bargain”.

106. Although the words are not clear, it seems to me that, viewed against the protracted background of negotiation, including Mr Cunneen’s repeated requests for finalisation and documentation of the bargain, Mr Cheshire’s analysis is more persuasive. In my view, those words, in context, mean no more than that the defendants wished to finalise the terms and complete the formalisation – documenting and signing – of their bargain with the plaintiff.

107. That view of the 6 October proposal – that it was some sort of statement of position intended to assist in the negotiation of a concluded agreement containing all the terms of the parties’ bargain – could well be seen to fit with the possible analysis of the deed to which I referred (without reaching a conclusion) at [104], [105] above. However, I add those words by way of observation; I do not rely on what I have just said as substantiating the conclusion expressed in the previous paragraph.

108. It may be objected, that the defendants did nothing thereafter to complete the documentation of their bargain. As a matter of fact, that is correct. However, I do not think that it is of any great significance. The simple fact is that the defendants were extremely busy coping with their substantial business interests, and with the demands of CBA to bring their accounts under control (and with the refinance that, essentially, this would involve). They were also deeply affected by the sad loss of their son Peter, who died in a motorcycle accident in November 2010. I have no doubt whatsoever that, against that background, technicalities such as finalisation of the terms of the bargain, and reducing those terms to a document that the parties could sign, was not a matter that was at the forefront of their minds.

109. In reaching that conclusion, I take into account my observations of each of the defendants in the witness box, and my assessment that, whilst they were undoubtedly competent business people (and accepting that Mrs Blackburn had tertiary qualifications in social work), they were not people who paid a great deal of attention to matters of form and administration. To my mind it is entirely plausible that they focussed on the nuts and bolts management of their business interests. Indeed, I think, one reason for their wishing to engage Mr Cunneen was to have the benefit of his assistance in matters of management and (despite their protests) strategy.

110. In any event, I have concluded that there was no express acceptance of the terms of the 6 October proposal. Thus, unless acceptance can be inferred from the particularised conduct on which Mr Smallbone relied, that proposal loses any contractual significance that it might otherwise have.

111. I start by observing that conduct is relevant in at least two ways. First (and of present direct relevance), there is the question of whether there can be inferred, from conduct after 6 October 2010, the plaintiff’s acceptance of the terms of the 6 October proposal. Second, and more generally, there is the question of whether there can be inferred, from that conduct, the existence of some agreement between the plaintiffs and the defendants and the terms of that agreement (whether or not referable, among other things, to the 6 October proposal). Those observations apply to both categories of particularised matters of conduct.

112. The first category of particularised matters relates to payment of the 10% profit share. Undoubtedly (as Mr Cheshire accepted) those actions are capable of proving the existence of a contract for the provision of services by the plaintiff to the defendants, under which the plaintiff was to be remunerated by a 10% share of “profits” (whatever that may mean). It does not go further, and prove the existence of a further entitlement, to a 10% share of capital growth in the defendants’ defined assets.

113. Further, there is nothing qualitatively different in the parties’ performance of whatever was their contract after 6 October 2010, compared to the performance between June and October 2010. Thus, just as that earlier performance did not prove the existence of a contract containing an entitlement to remuneration going beyond a 10% profit share, neither does the performance after October 2010.

114. The second category of particularised conduct, the emails, require closer analysis. It is convenient to develop this point by starting with the first (in point of time) that is particularised: an email of 12 April 2013 from Mr Cunneen to Mrs Blackburn. This email was sent after the defendants had given oral notice of termination of the agreement between them and the plaintiff. The email was headed “PROCESS OF SEPARATION”. Leaving aside formal parts, that email read:

I refer to our telephone conference on Tuesday morning (2.4.13), wherein you indicated your preference that we proceed to an orderly separation. On Wednesday this week (10.4.13), I spoke again with each of you by telephone. In light of your desire to change the instructions you had given me a week earlier, I thought it timely for us to consider the process of separation in more detail.

1.   As you know, our association is governed by an agreement that has effect from 1.5.10.

2.   That agreement was predicted on the mutual acceptance that our work together would create real value.

3.   It is common ground between us that much real value, and great achievements, have been delivered since our work together commenced around September 2009. During the course of our evening together on 17.8.12, Allan said to me that “We would have been ‘cactus’ without you.” And “We have discussed it with the whole family, and all agree that you get your 10% share, no matter what happens in the future.” Later that evening Carmel also confirmed the same sentiment, adding “We all just wanted Allan to say it to you himself”.

4.   My Company’s proprietary interest in that value and those achievements, in clause 7.2 of our agreement; which requires that the “10% shares” continue after any termination.

5.   The original agreement provided that my Company’s entitlement to those “10% shares” could only be extinguished, in essence, when your hotels and businesses were sold on market to arms length purchasers.

6.   You later proposed, and we adopted, a variation that the “10% shares” could also be extinguished, from the date you pay to my Company (in full) the share of growth of each of the subject assets.

7.   Your letter is quite prescriptive about the method of calculation, should that alternative be adopted.

8.   If and when you are minded to initiate a termination of our agreement, clause 7.1 requires that you serve written notice on my Company’s address for service of notice.

As you also know, I do not seek to conclude our association; but shall use my best endeavours to cooperate with your [illegible] in this area. For as little or as long as you want, you may rely on me to continue to make available the support that I have been providing to your during these past several years. Please do not hesitate to call upon me for discussion, advice or counsel; to the extent that it suits you to do so.

Given that you are obliged to continue to pay my Company, it doesn’t seem to be in your best financial interest also to pay someone else; for work which I stand ready to continue to do. It is, of course, your choice entirely to elect otherwise. Your most recent instructions are that:

You will be forwarding to me signed 2012 tax returns, for me to lodge on your behalf (I note that I need to receive these by 30.4.13); and

You will not be requiring my further assistance with the general ledgers of BAS lodgements.

Please provide me with reasonable notice, if your requirements of me alter.

With the foregoing in mind, you need to :

1.   Decide on what future date you would like to terminate my services.

2.   Provide written and adequate notice of that decision, in accordance with clause 9 of our agreement.

3.   Continue to remit my Company’s 10% share of the net income, as defined and calculated previously.

4.   Determine whether (and when) you want to extinguish the 10% shares, by the payment in full of the share of growth of each of the subject assets. In the spirit of cooperation, and if such a settlement were to occur in full by 30.6.13, I would accept the recent sworn valuation of the Family Hotel for $6.2million (excluding GST) by Knight Frank. In accordance with your letter, this would require a payment by you of $161,500 (excluding GST); together with the net income share up until that date.

Please advise by return how you would like to proceed. Please also advise when I may expect to receive the updated ledgers, or other relevant information, in order that my Company’s net income share may be calculated in respect of the months since 31.12.12. Thank you for the recent instalment payments you have made, on account of this continuing obligation.

122. There was no reply to that email; a fortiori, no reply challenging the existence of an agreement on the terms specified in it.

123. On 22 April 2013, Mr Cunneen sent Mrs Blackburn a further email, requesting that she “answer my recent inquiry” and asking in particular:

1.   When I may expect to receive the updated ledgers, in order that my Company’s net income share may be calculated in respect of the months since 31.12.12? On 2.4.13 you indicated that you had completed the ledgers to 31.1.13, and that by now you would have them further completed to 28.2.13.

2.   what are your plans and intentions for bringing the payments of such profit share within the terms of our agreement?

124. That email concluded:

As previously confirmed to you, I remain ready to provide the subject services of our agreement, which you may reasonably direct. It is not reasonable that you continue to give directions, and withhold payment vastly longer than all of your other obligations.

125. There was no reply to that email: at least, no reply that challenged the asserted existence of “our agreement” or the plaintiff’s entitlement to a profit share pursuant to its terms.

126. Mr Cunneen sent a further follow-up email on 17 May 2013 which, although it referred to the earlier emails and the absence of reply, nonetheless seems to have dealt mainly with the lodgement of tax returns. That email did prompt a reply, although that reply dealt only with the topic of tax returns.

127. On 27 May 2013, Mr Cunneen sent another email (on his wife’s email account) to Mrs Blackburn. Much of that email dealt with tax and other matters. However, it pressed for an answer to Mr Cunneen’s earlier emails, and included a statement that “our commercial agreement remains on foot”. Mr Cunneen qualified that statement by adding that he was “aware that you intend to terminate it at some future date”.

128. On 28 May 2013, the defendants did send (by email) a letter replying to Mr Cunneen’s email of the previous day. It did not dispute the statement that “our commercial agreement remains on foot”. Much of the reply sought to justify their decision to terminate the plaintiff’s services. It also sought that their tax returns be lodged immediately. The letter concluded by stating:

We do acknowledge there is settlement of monies to occur from the first part of this year, delay in doing this has been the inability for me to understand the process you have done to arrive at the past amounts.

Please forward the formula used when convenient.

129. On 4 June 2013, Mr Cunneen replied. He made a formal “demand” for a number of things, including:

Provide satisfactory responses to my requisitions, details of which are listed in my email of 27th May 2013; and

Bring up to date the performance of your obligations pursuant to our commercial agreement, including (but not limited to) the payment of my Company’s “10% shares” for the eleven months ended 31st May 2013. Again I remind you of clause 7.2 of our agreement, which requires that the “10% shares” continue after any termination.

In the circumstances where these demands are not fully complied with, I intend to:

Interpret your inactions and posture as constructive termination of our commercial agreement (with effect from 19th June 2013), such that no further services will be provided by my Company;

130. That email concluded:

I note your stated confusion about the calculation of past “10% shares”. The calculation has been performed many times during these past several years, and on each occasion I have sent you a copy of the details of the respective calculations. I attach hereto a further copy of the most recent explanatory calculation, which was attached to my email of 4th February 2013. The numbers come from the QuickBooks ledgers that you maintain, once their veracity has been established in review. Please advise further, what it is that you don’t understand about this process.

131. Mr and Mrs Blackburn replied to that email on 17 June 2013. They reiterated their position, that the agreement for provision of services had been terminated orally on 27 March 2013. They made various comments about alleged non-professional behaviour. However, the reply did not dispute the existence either of “our commercial agreement” (including a 10% profit share) or that it included cl 7.2 (which provided that the plaintiff’s entitlement would continue after termination).

132. It is necessary to put all that correspondence into context. The first and most significant aspect of context is that the defendants had become dissatisfied with the plaintiff, and had given oral notice terminating the contract between them. Mr Smallbone put to the defendants, and submitted, that their dissatisfaction was manufactured for the purpose of avoiding any obligation to pay profit shares on an ongoing basis, or capital growth shares. I do not accept that submission. In my view, it imputes a degree of deliberate dishonesty to the defendants that is quite inconsistent with my observations of them the witness box, and my view of their character formed on a consideration of the whole of the evidence.

133. I think that the defendants had become (subjectively) dissatisfied with Mr Cunneen and the plaintiff, and had decided to terminate their relationship with the plaintiff for reasons which, subjectively, they thought were valid. Whether or not, objectively, those reasons were valid is immaterial.

134. Thus, from the defendants’ perspective, they wanted two things:

1. submission of their tax returns; and

2. termination of their relationship with the plaintiff.

135. I conclude, on balance, that the defendants’ interest was in pursuing those two matters. Again, based on my observations of them and my view of their character and disposition, they were more concerned with the matters of interest to them – continuing to run their businesses, procuring lodgement of their tax returns, and severing their relationship with the plaintiff, than they were with replying in detail (or at all) to disputatious correspondence emanating from Mr Cunneen.

136. No doubt, in an ideal world, the defendants would have added to their no doubt considerable workload by sitting down each night and replying in detail to Mr Cunneen’s many emails. I do not think that they were the kind of people who regarded that kind of conduct as either necessary or appropriate.

137. Accordingly, I conclude that the defendants’ failure to deny the existence of an agreement between them and the plaintiff that included the terms of the draft deed (to the extent it was consistent with the 6 October proposal) does not prove, or constitute an admission by the defendants of, the existence of a contract containing the terms on which the plaintiff relies. To put the matter another way, the various emails that were exchanged form an important part of the overall factual matrix. But they do not have dispositive significance, so as to displace the conclusions that, otherwise, I draw from the whole of the facts (as they have been proved).

138. Mr Cheshire submitted that there were significant discrepancies between the acts that were said to constitute performance of an agreement between the plaintiff and the defendants, and the terms of the agreement asserted by the plaintiff. That is correct although, as Mr Smallbone submitted, some of the discrepancies are not of themselves significant. There is no need to go to the detail. The key point, for present purposes, is that the discrepancies, whether great or small, diminish the weight to be attributed to the parties’ conduct in assessing whether, as the plaintiff submits, there was an agreement made containing the terms upon which it relies.

139. I conclude that:

1. there was an agreement between the plaintiff and the defendants under which the former undertook to provide professional accounting and business advisory services to the latter, as from time to time requested;

2. under that agreement, the plaintiff was entitled to be remunerated by receiving 10% of the profits of the defendants’ business activities;

3. in practical terms, the parties treated the profits of the Unit Trust as a proxy for the profits;

4. that agreement was one terminable at will;

5. it was terminated either on 27 March 2013, by the giving of oral notice, or (if reasonable notice were required) within a month thereafter (for convenience, the end of April 2013). I choose that period because the draft deed contemplated a month’s notice of termination; and

6. the plaintiff has no entitlement to share in profits after, at the latest, 30 April 2013.

140. I conclude, further, that the plaintiff has not shown that it had any contractual entitlement to receive a share of the growth in value of the defendants’ defined assets.

141. Finally, and to the extent that it remains relevant, I conclude that there is no question of election involved to bring to an end the plaintiff’s entitlement to a share in the profits of the defendants’ businesses. That entitlement terminated with the agreement.

Second issue: uncertainty

142. On the conclusions I have reached, this issue does not arise. There seems little point in pursing an arid debate, which can involve only the application of well understood legal principles to the facts as I have found them. Accordingly, I will say no more than that, in my view, if (contrary to what I have said) the 6 October proposal is regarded as having contractual significance (because it was a counter-offer intended to be capable of acceptance so as to lead to the formation of a contract), it was relevantly lacking in certainty.

142. The sole subject with which the 6 October proposal dealt was the question of sharing capital growth. It postulated, as an essential element of that question, a carve-out in respect of sale “to a large conglomerate”. The remuneration that the plaintiff was to receive in that event was not specified, but, to the contrary, was something “to be agreed on”.

143. The question of a carve-out was thus integral to the subject-matter of the 6 October proposal: the basis on which the plaintiff might be remunerated by a share in the capital growth of the defendants’ defined assets. If the carve-out were to be notionally severed from the 6 October proposal (because of the undisputed uncertainty in its terms), what would remain would be a proposal radically different in substance and effect to that which was put.

144. It must follow that even if (contrary to my conclusion) the 6 October proposal had been accepted either expressly or by conduct, its acceptance could not give rise to a legally enforceable bargain. If cl 13 of the draft deed were somehow to be applied, so as to sever the subject-matter of the 6 October proposal, it would take away from the putative bargain the whole subject of sharing in capital growth. On that analysis, the plaintiff’s entitlements would remain limited to a share of profits.

145. I should note that Mr Cheshire’s submissions on uncertainty ranged very much further than the particular point that I have just dealt with. He submitted that there were substantial uncertainties in the language of the draft deed itself, including in its reference to “profit”. He submitted that there was no sufficient definition of profit, and no indication of any sufficient mechanism by which it was to be calculated.

146. There is no need to explore those submissions. On the view to which I have come, the parties’ conduct is capable of proving an agreement for the provision of services by the plaintiff to and as from time to time requested by the defendants, in consideration of which the defendants agreed to pay 10% of profits. The evidence establishes clearly enough either that the agreement was to pay 10% of the profits of the Unit Trust, or alternatively that the parties agreed that the profits of the Unit Trust could be treated as a proxy for the profits, in which the plaintiff was entitled to share as to 10%.

147. Since Mr Cheshire appeared to accept that there was an agreement containing at least those terms, and there is no inherent uncertainty in remuneration so calculated, it is as I have said unnecessary to consider his further submissions on the topic of uncertainty.

Third issue: remedies

149. This issue does not require determination. The plaintiff has not established any entitlement to a post-termination payment (that being the subject of the issue), and thus no question of remedy could arise

Fourth issue: Contracts Review Act

150. The defendants did not contend that a contract limited in the way that I have found (that is, providing no entitlement for the plaintiff to be remunerated beyond a share in profits, with that entitlement to cease on termination of the contract) should be reviewed (if indeed, contrary to Mr Smallbone’s submissions, it was susceptible to review). Thus, this issue does not require decision.

151. Since the question of further relief could only arise for decision on some counter-factual basis, there does not seem to me to be any point in expressing a hypothetical conclusion, other than to say I see no element of procedural injustice in the way that the putative bargain was formed. The defendants were intelligent, capable and experienced business people. They had access to legal advice, and chose not to take it (although, as I have found, Mr Cunneen urged them to do so). They had ample time to consider their position, and to submit whatever proposal they thought fit, in relation to both the services to be provided and the remuneration to be paid. If the bargain that was made was, subjectively, favourable to the plaintiff and unfavourable to the defendants, that has nothing to do with the means employed to conclude that agreement.

Conclusion and orders

152. In substance, the plaintiff has failed. I am not sure that the parties agree that the plaintiff has been paid its full share of profits, up until the date of termination of the agreement that I have found was made. If the plaintiff wishes, it may have a limited opportunity to argue that this question referred out, at its own risk as to the costs of the reference. Otherwise, the proceedings should be dismissed with costs.

153. The only order that I make at present is to stand the proceedings over until 10:00am on 3 March 2017 with a direction that by 27 February 2017 the plaintiff notify the defendants and my Associate of any further orders (beyond dismissal with costs), that it seeks.

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Endnotes

I then called Leigh back shortly afterwards and we had the following conversation:

AB:   Hi Leigh, I would give you $50,000 if we sold to Dan Murphys.

LC:   Well I would want at least $200,000.

AB:    Well you can whistle Dixie for that because you won’t be getting it.

Decision last updated: 17 February 2017