Leadenhall Australia Pty Ltd v Doman - [2018] SADC 123

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
LEADENHALL AUSTRALIA PTY LTD v DOMAN & ANOR
[2018] SADC 123
Judgment of His Honour Judge Chivell
30 November 2018
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
INTERPRETATION - ADMISSIBILITY OF EXTRINSIC EVIDENCE IN RELATION TO INSTRUMENTS - WHEN EVIDENCE ADMISSIBLE - IN GENERAL
RESTITUTION - RESTITUTION RESULTING FROM UNENFORCEABLE, INCOMPLETE, ILLEGAL OR VOID CONTRACTS - RECOMPENSE FOR SERVICES RENDERED - QUANTUM MERUIT - GENERAL PRINCIPLES
The plaintiff was engaged by the defendants after their dairy enterprise encountered financial difficulties. Primarily, the defendants wished to refinance so as to preserve their interest in the business. Attempts to do so were unsuccessful. Eventually, the business was sold. Part of the sale transaction involved leasing back the business to the defendants.
The plaintiff sues for unpaid fees pursuant to a contract signed by the parties under which the defendants opted for a ‘no win-no fee’ option. This involved an uplift of fees in the event of ‘success’ being achieved.
Issues to be determined: the terms of the contract and whether it was partly oral; what constituted ‘success’; whether ‘success’ involved the defendants retaining ownership and ongoing management of the business; whether the ‘success fee’ provisions were void for uncertainty; if not, whether payment thereof was conditional upon the plaintiff having ‘brought about’ the transaction which constituted ‘success’; whether, if no contractual relations were found to exist, the fees, including a ‘success fee’, were payable in any event on a quantum meruit basis.
Held: Judgment for the plaintiff.
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24, (1982) 149 CLR 337; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37, (2015) 256 CLR 104; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45, (2011) 86 ALJR 1; Victoria v Tatts Group Ltd [2016] HCA 5, (2016) 328 ALR 564; Simic v NSW Land and Housing Corporation [2016] HCA 47, (2016) 260 CLR 85; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12, (2017) 343 ALR 58; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7, (2014) 251 CLR 640; Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd [2014] SASC 84; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, (2009) 76 NSWLR 603; Hoyt's Pty Ltd v Spencer [1919] HCA 64, (1919) 27 CLR 133; Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234, (2009) 261 ALR 382; Foxtons Ltd v Bicknell [2008] EWCA Civ 419; Doyle v Mount Kidston Mining and Exploration Pty Ltd [1984] 2 Qd R 386; L J Hooker v W J Adams Estates Pty Ltd [1977] HCA 13, (1977) 138 CLR 52; Moneywood v Salamon Nominees [2001] HCA 2, (2001) 202 CLR 351; Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd [2014] VSC 455, (2014) 108 IPR 52, referred to.

LEADENHALL AUSTRALIA PTY LTD v DOMAN & ANOR
[2018] SADC 123

Leadenhall Australia Pty Ltd is a private company owned by Mr Timothy Lebbon and his wife. Mr Lebbon is the managing director. He is an accountant, valuer and corporate adviser. His particular speciality is large transactions involving the sale of businesses, corporate finance and the like.
In 2014, Leadenhall was engaged by Messrs Peter and Jason Doman. The Domans operated a large dairying enterprise at Mount Schank, near Mount Gambier, South Australia. The enterprise involved a number of companies and trusts. The four companies involved in the enterprise were Pedra Branca Dairying Pty Ltd, Southern Dairy Equity Pty Ltd, Limestone Plains Pty Ltd and Doman Agricultural Investments Pty Ltd. The Domans, Southern Dairy and Limestone owned various parcels of land.
In 2014 the business was in serious trouble. Pedra Branca, Southern Dairy and Limestone were all in receivership. Pedra Branca, the central operating company, was in external administration pursuant to a Deed of Company Arrangement entered into on 28 May 2013. This effectively put a moratorium on the company’s debts for 12 months in the hope that the business might be refinanced.
The business was indebted to the National Australia Bank to the extent of about $27 million. There were other, unsecured, debts totalling about $1.5 million.
By mid-2014, there was a real prospect that the companies would be wound up and the business liquidated. The Domans had been unable to find further finance. They approached Mr Lebbon to help them. He agreed to do so, and performed services for them until the businesses were ultimately sold to Beston Farms Pty Ltd in late 2015.
This litigation is about Leadenhall’s claim for unpaid professional fees arising from the services rendered by Mr Lebbon, and particularly about whether Leadenhall is entitled to an uplift by way of a ‘success fee’ for his services.
The Formation of a Contract
Mr Lebbon had been recommended to the Domans by a friend. He agreed to help. On 6 August 2014, he wrote them a ‘Letter of Engagement’.[1] In that letter, and in two Schedules, he set out his understanding of the assistance the Domans required, outlined the services he thought were necessary, and set out three options as to how his fees could be paid. The Domans chose a ‘no win-no fee’ option for payment. This involved a very large uplift in Mr Lebbon’s fees in the event of ‘success’. The Domans accepted Mr Lebbon’s terms and conditions. The uplift was a success fee of $100,000 plus a multiple of three times Leadenhall’s hourly rates, payable on settlement of the transaction.
[1] Exhibit P1, pp 2-5.
In the ensuing 14 months or so, complex negotiations were conducted in an attempt to avoid financial disaster, and to preserve for the Domans an interest in the business into the future. This all culminated in September 2015, when the business was sold to Beston Pacific Asset Management Pty Ltd for more than $18 million. There is a dispute as to the extent of the interest to be preserved. There are also disputes about the role played by Mr Lebbon in the negotiations, and about how the contract defined ‘success’.
Mr Lebbon sent statements to the Domans on a monthly basis throughout the period from July 2014 to August 2015. These statements gave a running total of the hours Mr Lebbon claimed he and his staff worked, and the hourly rates applicable.
Prior to settlement of the sale transactions and all the consequential sub‑transactions involved in the sale of the properties, Mr Lebbon sent a statement to the Domans setting out the fees being claimed by Leadenhall. The amount claimed was $995,318.07. This money was not paid at settlement, as the Letter of Engagement required.
An invoice was raised for the same amount and sent to the Domans in October 2015. About two weeks later, they paid $200,000. They have not paid the balance.
Issues to be Determined
Issues to be determined in this litigation include:[2]
1.Was the contract between Leadenhall and the Domans entirely written, or partly oral and partly written?
2.What were the terms of the contract? In particular, what constituted ‘success’? Did ‘success’ necessarily involve the Domans retaining ownership and management of the business?
3.Were the provisions of the contract which applied to a success fee void for uncertainty?
4.If there was a valid provision in relation to a success fee, was the payment of any such fee conditional upon Mr Lebbon having ‘brought about’ the transaction which constituted ‘success’?
5.Is Leadenhall entitled to the uplift in fees provided for in the contract on the basis that ‘success’ was achieved?
6.If the Letter of Engagement and accompanying documents did not give rise to contractual relations, should the Domans pay on the basis of quantum meruit? In particular, should any payment on a quantum meruit basis include a success fee?
[2] Part-way through the trial, the parties reached agreement as to the quantum of the plaintiff’s claim. At that point, counsel for both parties outlined the issues which remained to be determined (T 219-227).
Agreed Chronology
An agreed chronology of relevant events[3] was presented to the court. It sets out the following events:
[3]    FDN 122 filed 14.5.18.
1.    Prior to 16 April 2013, the companies Pedra Branca Dairying Pty Ltd, Southern Dairy Equity Pty Ltd and Limestone Plains Pty Ltd (“the Doman Group”) had borrowed funds from the National Australia Bank (“the NAB”) to finance the operation of a dairy farm, secured by a combination of personal guarantees given by Jason and Peter Doman (“the Domans”), mortgages over the farming properties and securities over the assets of the Doman Group (“the Securities”).
Receivers & Managers and Administrators appointed
2.    On 16 April 2013, as a result of defaults in the Securities, the NAB appointed Rodney James Slattery and Martin Francis Ford as Receivers and Managers of Pedra Branca, Southern Dairy and Limestone Plains (“the Receivers”).
3.    On 23 April 2013, Simon Alexander Wallace Smith and Salvatore Algeri were appointed as administrators of Pedra Branca (“the Administrators”).
4.    In or about April 2013, the Domans engaged or made enquiries with several consultants and brokers, including Pete Dossett, attempting to find (funding) to pay out the NAB and have the Receivers and Administrators removed.
5.    On 28 May 2013, the Domans executed a Deed of Company Arrangement (“the First DOCA”) and the Administrators were appointed as Deed Administrators of the DOCA.
6.    By approximately July 2014, the Receivers had installed managers at the farm and were marketing the properties and farm for sale.
Engagement of Plaintiff
7.    On or about 28 July 2014, the Domans first made contact with Tim Lebbon.
8.    On 6 August 2014 the Domans:
(a)sent a written offer of settlement to the NAB proposing a payment arrangement; and
(b)sent a written proposal to the Administrators for payment to creditors.
9.    On 6 August 2014, Tim Lebbon for and on behalf of Leadenhall, wrote to the Domans a letter of engagement.
10.   On 12 August 2014, Domans returned a completed letter of engagement to Tim Lebbon by email.
11.   On 22 August 2014, there was a creditors meeting with the Administrators at which the DOCA was extended for a further 90 days.
12.   In mid to late August 2014, the Domans engaged a consultant, Unhappy Banking, to negotiate with the NAB.
13.   On 18 September 2014, the solicitors for the Doman Group filed and obtained an injunction against the Receivers’ sale of the properties and the farm on the basis of a failure to comply with a mediation clause in the loan documents.
14.   In or about October 2014, Mr Lebbon introduced the Domans to Mr Martin Reukers of Red Connect Business Solutions Pty Ltd on the basis that he might secure finance for the Domans. The Domans engaged Mr Reukers on or about 21 October 2014.
Settlement with the NAB
15.   On 9 October 2014, following a mediation with NAB and the receivers, the Domans entered into a “Deed of Settlement and Forbearance” (“the First DOSAF”) and a “Farm Management Agreement” with the NAB and the Receivers.
16.   The First DOSAF required the Domans to pay to the NAB:
(a)the sum of $500,000 by 6 November 2014; and
(b)the sum of $13 million by 15 February 2015.
17.   The Domans borrowed funds from friends and paid $500,000 to the NAB in November 2014, but could not raise the funds to pay the balance by 15 February 2015.
18.   On 16 February 2015, a Deed of Variation and Extension was concluded which extended the time for payment under the First DOSAF until 13 March 2015.
19.   On 13 March 2015, the balance owed to the NAB by the Domans was not paid. As a result, on 31 March 2015, the NAB terminated the First DOSAF.
20.   In or about 7 April 2015, the Doman Group received letters of offer of finance from Linear Dairy Pty Ltd and LoansPlus which enabled the Doman Group to obtain a further extension of time for the payment to be made to NAB.
The Beston Agreement
21.   In or about early April 2015, representatives of Beston Foods were introduced to the Domans by Pete Dossett and attended the farm properties.
22.   On or about 13 May 2015, an entity which was part of Beston Foods, Beston Pacific Asset Management Pty Ltd (“Beston”), entered into a heads of agreement with Doman Agricultural Investments Pty Ltd (a company related (to) the Doman Group). The heads of agreement provided for the sale of the farm and properties to Beston under a leaseback arrangement (“the Beston Agreement”).
23.   During May and June 2015, Beston and the Doman Group negotiated underlying sale contracts prior to Beston’s IPO in or about July 2015.
24.   Completion of the Beston Agreement and the sale contracts were conditional upon capital raising by Beston through its IPO, as well as due diligence by Beston.
Second DOCA
25.   On 17 April 2015, the First DOCA (having since been extended again in or about November 2014) was terminated by resolution of the creditors.
26.   On or about 8 May 2015, a new DOCA was entered into whereby $750,000 be paid into a deed fund, subject to the agreement with Beston being completed (“the Second DOCA”).
Second DOSAF
27.   On or about 13 June 2015 a Deed of Settlement and Forbearance was completed between the Doman Group, the NAB, and the Receivers which extended the payment date to 31 July 2017.
28.   In or about early August 2015, a further Deed of Extension and Variation of the Second DOSAF was entered into which extended the payment date until 19 August 2017.
Leadenhall’s Fees
29.   On 29 August 2015, Tim Lebbon sent the Domans an email attaching a spreadsheet which set out the time and costs to 31 August 2015 which set out claimed time and costs in the total amount of $995,318.07 inclusive of GST.
Completion of the Beston transaction
30.   On or about 3 and 4 September 2015, pursuant to the Beston Agreement, the Doman Group sold the properties and farm assets to Beston. The Doman Group’s liabilities to the NAB were discharged from the proceeds of the sale.
31.   On or about 4 September 2015, also pursuant to the Beston Agreement, Grasslands Dairy Co Pty Ltd (“Grasslands”) entered into a lease over the properties with Beston.
The invoice and a payment
32.   Between 4 September and October 2015, there was correspondence from Mr Lebbon to the Domans and the solicitors acting for the Domans on the topic of the payment by the Domans to Leadenhall for its services.
33.   On 12 October 2015, Leadenhall sent the Domans an invoice for their services in the sum of $995,318.07 inclusive of GST.
34.   On 27 October 2015, the Domans made a payment to Leadenhall of $200,000.
35.   On 10 December 2015, Rodney James Slattery and Martin Francis Ford retired as receiver managers of Pedra Branca, Southern Dairy and Limestone.
Domans vacate the Properties
36.   In or about mid-January 2016, due to a series of disputes with Beston, the lease between Grasslands and Beston was terminated and the Domans vacated the properties.
In this litigation, Leadenhall sues the Domans for the balance of $706,019.40. As I will discuss later, this quantum was agreed by the parties on the fourth day of the trial.
The Terms in the Letter of Engagement
The Letter of Engagement is dated 6 August 2014. Mr Lebbon wrote:[4]
It is important that the Letter of Engagement sets out correctly your requirements and is tailored to your needs. If there are any matters that you wish to discuss or would like to clarify, please do not hesitate to contact us.
[4] Exhibit P1, p 4.
Mr Lebbon set out his understanding of the nature of the assistance being sought by the defendants as follows:[5]
In essence you … have asked (Leadenhall) to assist you with making arrangements to secure an ongoing interest in part or all of one or more of the above entities and / or their operations.
The situation is, to say the least, extremely difficult and you have little or no resources of your own with which to pursue a restructure and / or refinance and / or alternative management arrangements.
[5] Exhibit P1, p 2.
As to his understanding of the services requested by the Domans, Mr Lebbon wrote:
We will do what we can to try to create a position for you in one or more of the operations going forward. The precise work to be undertaken is not known nor the time extent thereof. However, we have had discussions with you and the Administrators of PBD and with the National Australia Bank and have started creating some potential ways forward, although you should not underestimate the magnitude of the hurdles and difficulties which are faced.
The work which may be required includes, but is not limited to:
.    Discussions with relevant parties.
.    Structuring alternative transactions.
.    Evaluation of potential financial outcomes.
.    Negotiations of transactions.
.    Arranging for funding.
.    Structuring of future entities and trusts.
.    Financial management.
.    General corporate advice.
We are not experts in the fields of taxation or law and you should take your own independent advice in respect thereof.
The alternative bases for the charging of fees were also set out in the Letter of Engagement:[6]
It is unknown how much time may be required but at our standard fee rates, one could see time costs stretching to $300,000 or more if we are able to bring together a transaction. If that then extends to fundraising and the operation of trusts going forward with outside investors the fees would be higher.
We always offer clients alternative fee bases and in this instance we offer you the following alternatives.
(a) Fee basis of payment for time spent – we keep detailed time records – irrespective of outcome.
(b)   Payment on a success basis – normally we look for a multiple of our fees on an hourly basis because of the risks and time delay involved. In this instance we would suggest a success fee of $100,000 plus a multiple of 3 times our hourly rates payable on settlement of the transaction.
(c)   The commutation of our fees into an interest in the ongoing entities. This has risks and costs associated with it. We suggest this be discussed with you but are thinking 20% could be appropriate.
[6]    Exhibit P1, p 3.
In an accompanying email, Mr Lebbon wrote:[7]
As discussed I really don’t know what the most appropriate remuneration basis is and have thus given you some alternatives.
If there is a 4^th alternative which you prefer please advise.
[7] Exhibit P1, p 1.
Importantly, one of the introductory paragraphs in Schedule A provides:[8]
If there is any conflict between these Terms and the Engagement Letter, then the Engagement Letter shall prevail.
[8] Exhibit P1, p 6.
Some of the terms and conditions in the Schedules include:
·   an acknowledgment by the ‘Client’ that the Agreement (defined in paragraph 1 as the Engagement Letter together with the Terms and Conditions) ‘constitutes the terms and conditions of the relationship between (Leadenhall) and the Client’;[9]
·   the ‘engagement’ could be terminated at any time by either party upon the giving of 90 days’ written notice to the other party;[10]
·   the ‘Entire Agreement’ clause mentioned previously;[11]
·    a ‘Dispute Resolution’ clause requiring the parties to mediate before litigating.[12]
[9]    Exhibit P1, p 7, [4].
[10] Exhibit P1, p 12, [30].
[11] Exhibit P1, p 12, [32].
[12] Exhibit P1, p 13, [35].
Schedule B specifically relates to an arrangement where a ‘success fee’ is agreed upon. The most significant part for the purposes of these proceedings is the definition of ‘success’:[13]
Unless otherwise defined in the engagement Letter, “Success” means the Client entering into a Contract with a party or counter-party during the period of this Agreement or within two years from the date of the Effective Termination of this Agreement whereby one or more of the following occurs:
. a change in the beneficial ownership or control of the Securities, or of the business or of the Assets of any party connected to the Vendor or
. new Securities are issued by any party connected to the Vendor.
[13] Exhibit P1, p 14.

‘Assets’ are also defined:
The items including but not limited to Securities, assets, rights or other property transferred from the Vendor to the Acquirer, including liabilities of the Vendor assumed by the Acquirer as part of the Transaction.
As for payment of success fees, the Terms and Conditions provide:[14]
If Success is achieved the Client shall pay (Leadenhall) the Success Fees in accordance with this Schedule B.
Where the Client is the Vendor, any Success Fee payable will be paid from the proceeds received at Completion. The Client authorises (Leadenhall) to ensure that this provision is included in the Contract(s). All of the parties comprising the Client will be jointly and severally liable for payment of (Leadenhall’s) fees.
In the event the Client is the Vendor and an Acquirer pays a deposit and does not complete a Transaction and all or part of that deposit is retained by the Client, a Success Fee up to the value of that deposit retained will be payable within seven days of the date of notification by the Acquirer of their intention not to proceed with a Transaction.
(My emphasis)
[14] Exhibit P1, p 15, [2].
The Letter of Engagement concludes:[15]
It is important that the Letter of Engagement sets our correctly your requirements and is tailored to your needs. If there are any matters that you wish to discuss or would like to clarify, please do not hesitate to contact us.
Our normal practice is to ask the Client to counter-sign two copies of our Engagement Letter, to return one to us and to retain one copy, so that there is a clear understanding of our relationship.
By sighing and returning this Letter of Engagement you are warranting that you have received a copy of our Terms and Conditions, have read this, understood it and agree to be bound by the terms set out in that document.
[15] Exhibit P1, p 4, [5].
The Domans did not indicate that there were any matters they wished to discuss or wished to clarify. They signed the letter under the execution clause:
We have read and understand the above and attached Terms and Conditions and agree to the terms and conditions for the engagement of Leadenhall Australia Pty Ltd.
Both Peter Doman and Jason Doman signed the Letter of Engagement. In addition to that, they both initialled each page of the letter as an acknowledgment, if one was necessary, that they had read and understood each page.[16]
[16] Exhibit P1, pp 21-25.
After the acknowledgment, the following appears in the Letter of Engagement:[17]
We select alternative ¨ (a) ¨ (b) ¨ (c) (please tick one) as the fee basis to apply.
[17] Exhibit P1, p 5.
I have already mentioned that the three alternatives for the payment of fees were set out earlier in the Letter of Engagement. These were (a) fees for time spent, (b) fees on a ‘success’ basis and (c) fees on an equity basis. Both alternatives (b) and (c) are circled.[18] This is explained by Jason Doman’s email of 12 August 2014[19] to Mr Lebbon:
Will get (signed Letter of Engagement) scanned back to you this morning. Probably best for now to start with option B but could roll into to c - does this make it option d?
[18] Exhibit P1, p 23.
[19] Exhibit P1, p 19.
Principles to be Applied in Interpretation of Commercial Contracts
As to the objective approach to the interpretation of contracts, in Codelfa Construction Pty Ltd v State Rail Authority (NSW), Mason J said:[20]
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.
[20] [1982] HCA 24; (1982) 149 CLR 337 at 352.
The legal principles to be applied to the interpretation of commercial contracts were more recently outlined by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[21] as follows:[22]
The rights and liabilities of parties under a provision of a contract are determined objectively (Electricity Generation Corporation v Woodside Energy Ltd), by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (citing Reardon Smith Line Ltd v Hansen-Tangen) See also Sir Anthony Mason, “Opening Address”, Journal of Contract Law, vol 25 (2009) 1, at p 3).
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean (Electricity Generation Corporation v Woodside Energy Ltd). That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract (Electricity Generation Corporation v Woodside Energy Ltd).
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning (Codelfa Construction Pty Ltd v State Rail Authority (NSW)).
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating” (Electricity Generation Corporation v Woodside Energy Ltd, citing Codelfa Construction Pty Ltd v State Rail Authority (NSW), in turn citing Reardon Smith Line Ltd v Hansen-Tangen). It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations (Codelfa Construction Pty Ltd v State Rail Authority (NSW); Reardon Smith Line Ltd v Hansen-Tangen).
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result” (Electricity Generation Corporation v Woodside Energy Ltd, citing Re Golden Key Ltd). Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience” (Electricity Generation Corporation v Woodside Energy Ltd citing Zhu v Treasurer (NSW)).
These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.
(Citations omitted)
[21] [2015] HCA 37; (2015) 256 CLR 104 at [46]-[52].
[22] I have incorporated the references in footnotes into the text of the quotation for ease of reference.
A debate remains about whether ambiguity in the meaning of words in a contract is a precondition to a court having regard to surrounding circumstances and the objects of the transaction. In the reasons for the refusal of special leave to appeal in Western Export Services Inc v Jireh International Pty Ltd,[23] there is a statement that ambiguity in the language of the contract is such a precondition. In Mount Bruce Mining, Kiefel J (as her Honour then was) and Keane J pointed out[24] that statements made in the course of reasons for refusing an application for special leave do not have precedential effect. In any event, the issue did not arise in Mount Bruce Mining. Bell and Gageler JJ agreed with this, observing:[25]
These appeals do not raise an important question on which intermediate courts of appeal are currently divided. That question is whether ambiguity must be shown before a court interpreting a written contract can have regard to background circumstances.
Until that question is squarely raised in and determined by this Court, the question remains for other Australian courts to determine on the basis that Codelfa Construction Pty Ltd v State Rail Authority (NSW) remains binding authority.
(Citation omitted)
[23] [2011] HCA 45, (2011) 86 ALJR 1.
[24] At [112]-[113].
[25] At [118]-[119].
The principles of construction outlined in Mount Bruce Mining have been cited with approval in later High Court decisions in Victoria v Tatts Group Ltd,[26] Simic v NSW Land and Housing Corporation[27] and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd.[28]
[26] [2016] HCA 5; (2016) 328 ALR 564.
[27] [2016] HCA 47; (2016) 260 CLR 85.
[28] [2017] HCA 12; (2017) 343 ALR 58.
In Simic, Gageler, Nettle and Gordon JJ quoted from Electricity Generation Corporation v Woodside Energy Ltd[29]:
The proper construction of each Undertaking is to be determined objectively by reference to its text, context and purpose (Electricity Generation Corporation v Woodside Energy Ltd; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd). As was stated in Electricity Generation Corporation v Woodside Energy Ltd:
[T]he objective approach [is] to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean … [I]t will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd [2009] EWCA Civ 636 at [28]], unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or

working commercial inconvenience’.
(Citations omitted)
There is no mention of a precondition of ambiguity to the consideration by a court of surrounding circumstances in that passage.
[29] [2014] HCA 7; (2014) 251 CLR 640.
In Essential Beauty Franchising (WA) Pty Ltd v Pilton Holdings Pty Ltd,[30] Blue J adopted these principles. After citing Codelfa, Western Export Services, and particularly Electricity Generation Corporation, Blue J said:[31]
In light of this recent decision of the High Court, I consider that ambiguity is not a pre-requisite to the admission of evidence of surrounding circumstances in existence at the time of the contract known to both parties.
[30] [2014] SASC 84.
[31] Essential Beauty at [203].
Notwithstanding the more recent consideration of these issues in the High Court, I am bound to follow Blue J’s conclusions on the issue. I will approach this case on the basis that ambiguity on the face of the contract is not a precondition, or prerequisite, to a consideration of the surrounding circumstances when interpreting the contract.
In Franklins Pty Ltd v Metcash Trading Ltd,[32] Allsop P (as he then was) formulated[33] several further tenets of interpretation not mentioned above. These included:
·‘(the words) should be read “fairly and broadly, without (the court) being too astute or subtle in finding defects”’;[34]
·there may be a contest about the commercial perspective to take from the surrounding circumstances. This may require findings of fact to be made in those areas. It may also be that the parties brought evidently different commercial aims and purposes to the bargain. ‘In neither case is the evidence of the commercial aims and purposes thereby necessarily unhelpful’;[35]
·it may be that negotiating parties will be at pains not to expose what they want from the terms and operations of an agreement. ‘In such cases, as in many cases, the bargaining that takes place is over what words are acceptable and the commercial aims and objects of negotiation give a framework and context to understanding what the bargained-for words mean’.[36]
[32] [2009] NSWCA 407; (2009) 76 NSWLR 603.
[33] At [19].
[34] Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 514; [1932] All ER Rep 494 at 503 per Lord Wright.
[35] Franklins at [20].
[36] At [21].
A Written Contract?
The plaintiff’s case is that the contract between the plaintiff and the defendants is wholly written, and comprises the Letter of Engagement and Schedules A and B thereto.[37]
[37] Third Statement of Claim, [43] (FDN 67).
Schedules A and B are both entitled ‘Terms and Conditions’. Schedule A comprises a number of fairly standard general conditions. Schedule B is described as an addendum, and specifically relates to ‘success fee arrangements’.
The Letter of Engagement states:
4. We attach our Terms and Conditions (Ref: 140806 LAL Terms). This document contains important information about your rights and obligations as a client of LAL and together with this Letter of Engagement, form the terms of the offer to provide services which is being made to you by LAL.
Schedule A contains paragraph 32:
32. Entire Agreement
This Agreement sets out the entire understanding of the parties relating to the subject matter hereof and supersedes and cancels any prior communications, understandings and agreements between the parties. The contents of this Agreement cannot be modified or changed nor can any of the provisions be waived except by written agreement signed by both parties.
These terms and conditions arguably preclude any suggestion that the written contract is other than entire. In Hoyt’s Pty Ltd v Spencer,[38] Isaacs J (with whom Rich J agreed) said:
… if the parties agree to commit their agreement to writing, then what is written is the conclusive record of the terms of their agreement, and, unless it can be shown that the document was not intended as the complete record of their bargain, no oral evidence can be admitted to alter or qualify it.
(My emphasis)
[38] [1919] HCA 64; (1919) 27 CLR 133 at 143.
In Masterton Homes Pty Ltd v Palm Assets Pty Ltd,[39] Campbell JA (with whom Allsop P and Basten JA agreed) summarised the principles applicable to the question whether a contract is wholly written, or party written and partly oral:[40]
(1)When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties …
(2)It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing … Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them …
(3)The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing …
(4)Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact … Similarly, finding the terms of a wholly oral contract is a question of fact …
(5)In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are … If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances … If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed …
(6)A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract …
There is no suggestion of a collateral contract in this case.
[39] [2009] NSWCA 234; (2009) 261 ALR 382.
[40] Quoted in Seddon, NC & Bigwood, RA Cheshire and Fifoot Law of Contract (11^th Aust. Ed.) LexisNexis Butterworths, Australia 2017 at [10.5], pp 427-8.
In a case such as this where there is an ‘entire agreement’ clause in the contract, the express statement that extrinsic terms are excluded should, prima facie, be upheld. Cheshire and Fifoot point out, however, that:[41]
… it is clear that such a clause does not prevent the admission of evidence of pre-contractual conduct in support of a claim of deceit or misleading conduct, or of rectification, or of equitable estoppel. Moreover, it does not, unless implied terms are expressly referred to, operate to exclude the implication of specific terms to give business efficacy to a contract, or (a fortiori) of generic terms implied by law. These qualifications apart, evidence of extrinsic terms has generally (but not always) been excluded in cases of documents containing an entire agreement or merger clause.
(References omitted)
[41] At [10.7], pp 431-2.
In this case, the defendants argue that Mr Lebbon’s use of the introductory words ‘I refer to our recent discussions’ in the Letter of Engagement demonstrates the contract on its face is not an entire contract, and that it was the intention of the parties that additional oral terms of the contract were not excluded.
I reject that submission. Those introductory words were followed by Mr Lebbon’s outline of his understanding of the defendants’ requirements. The fact that this understanding was reduced to writing, and accepted by the defendants, leads to the conclusion that the defendants agreed that Mr Lebbon’s understanding was correct. This does not suggest that there were additional oral terms. Mr Lebbon’s reference to previous discussions, and the fact that the parties’ mutual understanding was incorporated in the written contract, is more consistent with an intention to exclude additional oral terms. The ‘entire contract’ clause excludes the possibility that the defendants had other requirements which were not expressed in the contract.
Partly Oral and Partly Written?

I will now consider the defendants’ contentions about the terms of the contract.
In paragraph 15 of the Third Defence, the defendants pleaded that:
… prior to receiving the letter of engagement, the second and third defendants had reached an agreement and/or understanding with the plaintiff that the services which were to be provided were those to secure re-finance for the Doman Group and any associated restructuring and management arrangements with the result that the second defendant (and/or third defendant) had a position in those companies which owned and operated the Farm business and the Properties.
(My emphasis)
In paragraph 21(b) of the Third Defence, there is a further pleading, in the alternative to paragraph 21(a), which is a plea that the provisions of the contract as they applied to a success fee were void for uncertainty, as follows:
(b)in the alternative, under the contract (whether written entirely, or partly written and partly oral) it was:
(i)    a term of the agreement that the plaintiff would provide services by way of advice, introduction to potential financiers, representation and negotiation to:
a.secure re-financing, and any associated restructuring and management arrangements, so that the Receivers could retire from their positions; and thereafter
b.allow the second and/or third defendant to have an ongoing ownership interest and a position in one or more of the entities in the Doman Group which owned and operated the Farm business and the properties;
(ii)     a term of the agreement that there would be a success fee paid only if it was the plaintiff that brought together the transaction that secured the outcomes in both (a) and (b), and that it would not otherwise be paid a success fee for outcomes it did not bring about;
(iii)     it was not a term of the agreement that the plaintiff would pursue the potential sale of the entities, their assets and/or securities or that any such sale would constitute “success” under the agreement;
(iv)    it was not a term of the agreement that a success fee would be paid for a transaction in which:
a.there was a change in the beneficial ownership or control of the business, assets or securities connected to the vendor;
b.new securities were issued by any party connected to the vendor;
c.some other form of business arrangement is entered into which enables the second and third defendant to meet their objectives;
d.all of the assets of the Doman Group were sold;
(v)     in the event there was such a term as stated in (iv), it was not a term that a success fee would be paid for a transaction or business arrangement which the plaintiff had not brought about;
(vi)    it was not a term of the agreement that the plaintiff was entitled to be paid on settlement of the transfer of assets from a sale; and
(vii)    it was not a term of the agreement that where the client is the vendor in a sale, that any success fee paid will be payable from the proceeds received at the completion of that sale.
(My emphasis)
In his closing address, Mr Roder SC, counsel for the defendants, said:[42]
We say in general that the context of all of this and the commercial purpose behind the original arrangements between Mr Lebbon and the Domans are critical and that it is not the correct approach and not consistent with authority just simply to look at the four corners of a letter or, indeed, some standard terms of conditions but devoid of context and without reference to the particular commercial purpose. By that I don't mean that your Honour should look at what particular parties understood terms to mean and I don't mean that somehow prior negotiations [supplant] what might be in a written agreement. We say short of that and even in the absence of ambiguity, I will take your Honour to modern authorities about this, the starting point in construing a commercial contract is to look at the words that are used, we accept that. But, in the context of the background facts that were known to both parties, what is the commercial purpose of the agreement and also the subject matter of the agreement.
[42] T 676.
The pre-contractual interactions relied upon by the defendants took place in the following context, which the defendants assert, and I agree, are uncontested:[43]
[43] Defendants’ Closing Submissions at [36]-[51].
The starting point is that the defendants are respectively third and fourth generation dairy farmers. Until approximately 2013, the Doman family owned land at Mount Gambier from which they operated their own very substantial family owned dairy farm.
The initial property owned by the Doman family was known as “Green Shed”. Green Shed was passed down to Peter and his wife Rosalind from Peter’s grandfather and father. Peter worked on the farm from the time he left school in 1970. Jason started working at the farm full-time in 1994.
Over time the farming operations had been substantially expanded. In 1994, Green Shed was a 400 acre block containing a 10 a-side swing over dairy, milking about 130 cows per day. By 1996, the herd had expanded to 230 cows and a 50 unit rotary dairy was constructed on the farm to cope with the additional production.
So had the land. Between approximately 2003 and 2006, Limestone Plains Pty Ltd and Southern Dairy Pty Ltd, companies owned and operated by the Doman family, acquired land surrounding the farm known as “Ashwood” and “Blue Shed”. In turn the land acquired was then developed. Each time the above properties were acquired, laneways, roadways, fences and irrigation were built so as to integrate it into the farming operations and the herd was expanded.
As the situation stood by the end of 2012, the farm had a herd of 2,200 to 2,400 cows and was calving between 150 and 180 cows per month. The farm was one of the largest family-owned farms in South Australia.
Objectively, the defendants’ farming “operations” in which an “ongoing” interest was sought were not simply management arrangements of farming another person’s farm. Jason had never received dividends from the farm and the profits from the farm were reinvested in the farm. Such management arrangements are objectively different and completely rejected by the Domans.
Over time funds had been borrowed from the NAB to finance the farm operations. Those borrowings were secured by personal guarantees, mortgages over the land and other securities over the assets of the farm.
By the end of 2012, the milk price had fallen significantly and the Doman Group requested an extension to their overdraft with the NAB to assist with the farm’s cash flow into early 2013.
The NAB ultimately refused that extension and two consequences shortly followed. On 16 April 2013, the NAB appointed Rodney James Slattery and Martin Francis Ford as Receivers and Managers (“the Receivers”) of the assets of the dairy operations, including the land, herd, and plant and equipment. On 23 April 2013, Simon Alexander Wallace-Smith and Salvatore Algeri were appointed as Administrators (“the Administrators”) of the operating entity of the Doman Group’s dairy farm, Pedra Branca Dairying Pty Ltd.
In about May 2013, the Receivers appointed managers to the farm and the Doman Group was required to hand over the operation of the farm to the managers, Ace Farming.
There is a body of evidence that from the time that the Receivers were appointed, the Doman Group sought to refinance the debt owed to the NAB, have the Receivers removed and take back control and ownership of the farming land, herd and plant equipment. This is set out further below.
The defendants made enquiries with several banks and funders and spent time in Melbourne attending meetings with numerous brokers and consultants.
They investigated debt and equity funding and, if necessary, were prepared to take on an equity partner in the farm to obtain the funds required to pay out the amount owed to the NAB, being about $20 millions.
The defendants never investigated a sale of the properties and farming operations, nor appointed anyone to undertake such a sale on their behalf. The clear and compelling evidence was that they were implacably opposed to such arrangements at all times prior to and when engaging the Plaintiff.
This context is significant to what followed in July 2014 in relation to the discussions that preceded the negotiation with the plaintiff. It is submitted that the purpose and subject matter of the contract did not involve a sale.
By approximately July 2014, the defendants’ efforts to locate finance themselves had not resulted in any proposals for funding and they were referred to the plaintiff by a family friend.
The ‘pre-contractual interactions’ relied on by the defendants which assist in the interpretation of the contract were as follows:[44]
(a) a conversation on 28 July 2014 between Jason (Doman) and Mr Lebbon, in which Jason provided Mr Lebbon with information about the appointment of the Receivers and Administrators, and the efforts the defendants were making to obtain funding to pay out the NAB. This is set out in a file note prepared by Mr Lebbon and dated the same day. Mr Lebbon gave inconsistent evidence about this discussion. He did not initially wish to concede that he was asked about equity funds, but it is clear that issue was raised;
(b)a further conversation a short time later between Peter (Doman) and Mr Lebbon. It is not clear (and it is not necessary to resolve given that there were many conversations where both were present) whether Jason was also present during that conversation. They discussed the Doman Group’s situation further and what Mr Lebbon would be able to do to assist them;
(c)a meeting on 31 July 2014 when Mr Lebbon was in Melbourne for other business. He accompanied the defendants to meetings with Mr Wallace-Smith and Pauline Martin of Deloittes at about midday, and Mr Neil Findlay of the NAB in the afternoon. Each of those meetings concerned the position of the Doman companies, and the defendants’ efforts to have them taken out of receivership;
(d)until early August 2014, the defendants and Mr Lebbon exchanged various emails concerning the financial position of the Doman Group of companies, discussions that had taken place with the receivers and the NAB, and the DOCA; and
(e)on 6 August 2014, Mr Lebbon prepared proposals to the NAB and the Administrators. The proposal to the NAB was based on earlier discussions between Peter (Doman) and Stephen Commodeur, who worked with the Receivers. The proposal was not accepted.
[44] Defendants’ Closing Submissions at [52].
None of these items of information, which the defendants suggest provide ‘context’ to the contract, demonstrate, to use the words of Mason J in Codelfa, ‘the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting’. All they do is demonstrate the ‘actual intentions, aspirations or expectations’ of the Domans. The statement:
The defendants never investigated a sale of the properties and farming operations, nor appointed anyone to undertake such a sale on their behalf. The clear and compelling evidence was that they were implacably opposed to such arrangements at all times prior to and when engaging the Plaintiff,
may well have been true. But Mr Lebbon made it clear to the defendants in the Letter of Engagement that all he could do was ‘assist’ them, that the situation was ‘extremely difficult’, and that they had ‘little or no resources of (their) own with which to pursue a restructure and/or refinance and/or alternative management arrangements’.
It is simply untenable to suggest that such context, or the alleged interactions, could give rise to a contractual condition that Mr Lebbon was required to achieve a refinancing so that the defendants could retain ownership of the business.
Nor is it tenable to suggest that any such context, or the interactions, could give rise to a contractual condition which completely negates the definition of ‘success’ in Schedule B to the Letter of Engagement, and instead substitutes a definition of success which required Mr Lebbon to ‘bring about’ the transaction which enabled the defendants to retain ownership of the properties and management thereof going forward.
Nowhere in the context outlined, or the alleged interactions, were any such conditions discussed, nor did they arise by inference from any such discussions.
I have no doubt, on the evidence, that it was the defendants’ hope and aspiration that they could raise the necessary finance so that they could continue to own and operate their properties. I do not take the plaintiff to dispute that. Mr Lebbon said in cross-examination:[45]
Q.Because they had made it perfectly clear to you, had they not, that in terms of the operation or the interest in the farm that they wanted to continue in its ongoing operations, part of its ongoing operations included their equity ownership of the farm.
A.Part of the discussions we had was an ongoing interest and that interest was defined as either in part ownership and/or management.
Q.They made it perfectly clear to you that their ongoing interest that they wanted you to obtain was it included an equity interest in the farm.
A.Their preferred route to obtain interest.
[45] T 264.
Of course, the Domans had ‘intentions, aspirations or expectations’ (to use the words of Mason J in Codelfa) that they would be able to continue to own and operate their farming business. But their debts were more than $27 million and they had spent the previous 16 months or so, since the receivers were appointed on 16 April 2013, failing to convince potential financiers to lend them the money to pay it back. This is the ‘objective framework of facts within which the contract came into existence’, referred to by Mason J.
The language of the contract does not include the defendants’ professed commercial purpose. Instead, the language is aspirational – to ‘assist’, to ‘do what we can to try to create a position for you … going forward’.
It is inaccurate for the defendants to say that the Domans never contemplated a sale of the properties, with or without a lease-back, when they engaged the plaintiff. The Letter of Engagement sets out that the work which may have been required included, but was not limited to, structuring alternative transactions, evaluation of potential financial outcomes, negotiations of transactions and structuring of future entities.[46] Of course, they also included ‘arranging for funding’, but it is incorrect to suggest, as Mr Roder submitted in his closing address,[47] that Mr Lebbon’s only role was obtaining finance to pay out the bank so that they could continue in ownership. The fact that Mr Lebbon did take steps to try and arrange funding[48] does not prove that obtaining finance was his only role. He did many other things as well.
[46] Exhibit P1, p 3.
[47] T 677.
[48] Defendants’ Closing Submissions at [67]-[84].
The plaintiff clearly pointed out that the result which the defendants aspired to would not be easily achieved. The Letter of Engagement contains statements such as ‘the situation is, to say the least, extremely difficult’, ‘the precise work to be undertaken is not known nor the time extent thereof’ and ‘you should not underestimate the magnitude of the hurdles and difficulties which are faced’.[49]
[49] Exhibit P1, p 2.
A Reasonable Businessperson?
Referring back to the High Court’s decision in Mount Bruce Mining, the arguments of the defendants must be viewed against the viewpoint of a ‘reasonable businessperson’, having regard to the ‘language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract’.
Further, the interpretation of the contract should proceed on the basis that the parties ‘intended to produce a commercial result’ or, put another way, the contract should be construed ‘so as to avoid it “making commercial nonsense or working commercial inconvenience”’.
Mr Kym Weir gave evidence as part of the plaintiff’s case on these topics. Mr Weir’s curriculum vitae is part of Exhibit P5. He is a chartered accountant, company director, insolvency practitioner and corporate adviser with many years’ experience.
Mr Weir’s report, dated 15 March 2017, is also part of Exhibit P5. He described Mr Lebbon as ‘pre-eminent’ in his field. He described the fees charged by the plaintiff of about $995,000, based on the success fee in the contract, as ‘fair and reasonable’.[50] He said the fee reflects:
1.   The fixed element of the assignment (i.e. $100,000 whatever time spent)
2.   The variable element of the assignment (i.e. the time costs at normal rates) which can be calculated and advised on an ongoing basis to the client.
3.   The success fee element (an extra 2 times costs at normal rates) that in turn accounts for;
a.   The lack of guarantee of payment to Leadenhall
b.   The lack of certainty of the time to reach a successful conclusion
c.   The uncertainty of the resources required by Leadenhall to negotiate and conclude.
d.   The effective funding by Leadenhall of the Domans to receive professional advice.
[50] Exhibit P5, p 8.
Mr Weir said that the fee was not exorbitant because:
1.   It was agreed between the parties at commencement
2.   It was monitored by regular reporting to the Domans (by) Leadenhall
3.   It was capable of being calculated against recorded times at the predetermined rates.
Expressing the view of a ‘reasonable businessman’ as to the interpretation of the contract, Mr Weir said:[51]
[51] Exhibit P5, p 9.
3.2.1.2The terms of the letter of engagement signed by the Domans
The terms of the letter of engagement are quite clear and have been accepted in writing by the Domans. The fact that alternative fee structures were offered is significant because Domans were able to consider the best option for them rather than a “take or leave it” proposal.
3.2.1.3The estimate in the letter of engagement that the fee would be in the vicinity of 3 x $300,000 plus $100,000 plus GST
The fact that a fee estimate was provided meant that the Domans should not have any surprises as to the fee structure and calculation basis provided achievement of “Success” was agreed. The concept of “part success” does not appear in my reading of the documents.
3.2.1.4The industry practice of charging success fees
Success fees are necessarily agreed as a result of negotiation between the parties taking into account such matters:
·   the complexity of the matter dealt with
·   time required to complete
·   chances of success
·   the experience and expertise of the appointee
·   the ability of the appointor to pay
·   the need to fund the appointee
Mr Weir confirmed these opinions in evidence.[52]
[52] T 325-6.
The defendants did not call any ‘reasonable businessman’ evidence in their case.
Mr Weir was not specifically asked to express an opinion about his interpretation of the terms of the contract. I take his evidence as indicating that a success fee was well accepted in business circles, that it was appropriate in this case, was not unreasonable or exorbitant, and to charge it did not make a ‘commercial nonsense’.
Mr Roder submitted that there was an inherent unlikelihood that it would have been within the contemplation of the parties that the plaintiff could earn a $1 million fee, as per Mr Lebbon’s estimate in the Letter of Engagement, if all that was required to constitute ‘success’ was a transaction where the defendants became a ‘mere farm manager’ for somebody else, or there was a ‘mere sale’ of the defendants’ properties, let alone a sale at an ‘undervalue’. The implication of Mr Roder’s submission is that it would make commercial nonsense to construe the contract that way.
This is an oversimplification of the context in which the contract was created. In the first place, no one knew, at the time the contract was entered, how long the process would take and what fees would be involved, or what the outcome would be. Secondly, as I have already observed, Mr Lebbon was aware that it was the defendants’ aspiration that they would be able to retain ownership. But it was also within the contemplation of the parties that this aspiration might not be achieved. Mr Lebbon made that clear in the Letter of Engagement.

To look at the matter from Mr Lebbon’s perspective, it is unlikely that he would be prepared to provide services worth about $300,000 without security, on a no win-no fee basis, with the only criterion of success which would give rise to an uplift being the unlikely event that the defendants would be able to retain ownership of the properties. There was a very substantial risk at that time of NAB proceeding to liquidate the businesses. This was long before the second DOSAF in June 2015. Prior to that, the prospects of the liquidation of the companies being avoided was looking very bleak indeed. Mr Lebbon is a very well qualified and experienced business consultant. I do not accept that he would undertake a consultancy with such a very high risk of receiving no remuneration at all.
Mr Roder argued that the eventual outcome of the Beston transaction did not amount to ‘success’ because it was unsatisfactory to the defendants, for the following reasons:
·the sale price of the farming properties, livestock and plant and equipment was substantially discounted;
·the rental payable by Grasslands was too high;
·the defendants could not operate the leased farms in the same way and with the same freedom as they did when they owned them;
·there was no milk supply agreement fixing a milk price which would have made the rent payable by Grasslands commercial;
·the leasing arrangements were not what the Domans had in mind when they engaged the plaintiff and were unsatisfactory.
Much of this dissatisfaction with the outcome appears to have arisen with the benefit of hindsight. Clearly, at the time of the Beston transaction, the Domans thought that the deal was the best they could do in the circumstances. The Grasslands lease constituted an ‘ongoing interest’ in the defendants’ farms. The Heads of Agreement negotiated between the parties contained provisions for call options, or ‘buyback’ options. Mr Roder argued that such provisions did not find their way into the eventual sale contracts. There is no evidence as to why this was so.
I do not accept that the Beston deal was so unsatisfactory to the Domans. It achieved, in summary:
·       a leaseback of the farming properties with an option to purchase after 10 years;
·       ongoing ownership of property in the form of stock, plant and equipment worth more than a million dollars;
·       management and control of the dairying business during the currency of the lease;
·       payments to the unsecured creditors;
·       a reduction in the amount owed to the NAB by more than $10 million, perhaps as much as $13 million;
·       release from their obligations as guarantors of the NAB loans;
·       discharge of the NAB’s mortgages over the land.
It is little wonder that the defendants chose to accept the Beston offer.
Even on those figures, the Domans secured ‘an ongoing ownership interest and a position in one or more of the entities in the Doman Group which owned and operated the Farm business and the properties’, to use their own words in the Third Defence.[53] Even on that criterion, ‘success’ was achieved. But it is not necessary to go that far. ‘Success’ was achieved according to the definition in Schedule B, which was a term of the contract between the parties.
[53] Third Defence, [21(b)].
But I think the short answer to all of these submissions of the defendants is that these considerations were apparent to them at the time they entered the contract. They were experienced in business. Their correspondence illustrates that they were not naïve or ignorant of business practice. Jason Doman’s email of 12 August 2014, at the time the contract was signed, when he said:
Probably best for now to start with option B but could roll into to c – does this make it option d?
clearly demonstrates that he, and by inference his father, fully appreciated the basis of paying Mr Lebbon’s fees on a ‘success’ basis. Indeed, his use of the words ‘for now’ and ‘start with option B’ indicates that they would keep the fee payment basis under review, and perhaps move to option C, the ‘equity’ basis, if circumstances rendered that option more appropriate. The fact that Mr Lebbon provided the defendants with monthly statements of his fees throughout the period under discussion indicates that the defendants had ample opportunity to review that decision to adopt option B and chose not to.
The fact is that the defendants chose to enter the Beston transaction of their own free will. The alternatives by September 2015 were unpalatable. The DOSAF had expired. As a result of the Beston deal, the NAB had agreed to accept in satisfaction of its claim a much lower figure than was originally owed, and the defendants escaped personal liability for any of the debt.
At the time, their reaction was not one of hostility or opposition to the eventual deal offered by Beston. It is true that Peter Doman was, on his evidence, which is disputed by the plaintiff, angry at Beston’s first offer, but that was increased and eventually accepted.
One indication of the defendants’ attitude is in an email from the defendants’ solicitor, Clayton Davis, to Tim Lebbon, Peter Doman and Jason Doman in which he shows them a draft of a letter to the National Australia Bank’s solicitor, seeking approval of the Beston transaction. The draft letter contained the following passage:[54]
We are putting a lot of work into finalising the Beston deal, and the Domans are prepared to do whatever is necessary to provide the NAB with sufficient comfort for it to approve the deal, which would not only see the Domans with a positive outlook for the future for the first time in many years, but see your client paid out we believe faster than any other alternative.
[54] Exhibit P2, Volume 10B, p 1632.
By August 2015, the defendants were still on good terms with Beston. Peter Doman’s email to Alistair McFarlane of Beston dated 26 August 2015 does not indicate any unhappiness with progress towards settlement:[55]
[55] Exhibit P7, p 1.
Hi Alistair
Thanks for Allan’s and your time yesterday. Too brief to cover all the topics but it was good to hear where Beston are at and the issues yet to be addressed.
We have just heard from Clayton that we are meeting in Adelaide tomorrow at 8.30am to finalise leases etc. As you and Allan said yesterday Due Diligence and Conditions Precent have been met so I think it is only the Leases and valuations outstanding. If there is anything else to be addressed or anything we need to bring with us, please let me know.
In preparation we would like to contact Tom Thorn regarding the budgets he has presented to you. Also a summary of the Due Diligence.
Attached is the WCB (Warrnambool Cheese and Butter) Farm Investment Partnership income estimate Jason discussed with you yesterday. Upfront payment Year 1 of $699,548. Net price Year 1 $7.48/KgMS
Regarding milk cartage Trevor McIntyre’s mobile number is […]. Jason spoke to him a little while ago and he seemed keen. He has a lot of experience so definitely worth talking to.
Also attached an updated DLS herd valuation. When is Rob French (Elders) on farm?
Regards
Peter
In the early negotiations with Beston, the Domans took the position that the rent, based on 9% of valuation, was unsustainable if the milk price went below 55 cents per litre. They said that if that occurred, they would need rent forbearance from Beston.
The Heads of Agreement signed by the defendants on 14 May 2015 provided that:[56]
If the milk price is subject to a negative change that is not sufficient to adequately support pre-advised budgeted farm viability (taking into account other sources of available of [sic] and on farm income at the time) BGFC will negotiate a rental forbearance agreement for an agreed time in open consultation with the Lessee. A required amortisation of agreed deferred rental income would be scheduled over the subsequent 12-36 months, or remaining term of the lease. No additional interest penalties charges will apply, while reasonable administration costs and out of pocket expenses will be equally shared.
[56] Exhibit P1, Volume 2, pp 228-9.
There is no evidence before me as to what happened after settlement in September 2015 in relation to the defendants’ ability to pay the rent, what happened between them and Beston in relation to forbearance, and what led to the eventual breakdown in the relationship between the defendants and Beston, and the eventual vacation of the farms. I upheld an objection by the plaintiff to the admission of such evidence.
Certainly, the issue of milk prices was significant to the Domans. As mentioned in the email quoted above, Jason Doman received spreadsheets from Warrnambool Cheese and Butter showing indicative pricing for dairy products on 12 May 2015, two days before the Heads of Agreement was signed.[57] The spreadsheet[58] which Peter Doman sent to Alistair McFarlane on 26 August 2015 provided information about potential milk pricing if they entered into a four-year contract with Warrnambool Cheese and Butter. Jason Doman acknowledged that, although there were matters to work through, that was what they had in mind.[59]
[57] Exhibit P7, pp 6-7.
[58] Exhibit P8, p 8.
[59] T 606.
Was the Beston Deal Commercially Viable?
Whatever deficiencies the Beston deal may have had, the fact is that the defendants executed the Heads of Agreement in May 2015 (or at least Peter Doman and Rosalind Doman did) and settled the transaction in September 2015. I accept the submission of Mr Duggan SC, counsel for the plaintiff, that both Jason Doman[60] and Peter Doman[61] were, at the relevant times, confident that they could make the business viable.
[60] T 602.
[61] T 489.
Conclusion
I conclude that there is no basis for the contractual terms argued for by the defendants being incorporated into the contract. In my view, there are no grounds for incorporating into the contract that the plaintiff should not receive a success fee unless the defendants retained ownership and control of their companies.
For the reasons expressed above, I also conclude that there is no basis for incorporating into the contract that the plaintiff was required to ‘bring together’ the parties to the Beston transaction in order to achieve ‘success’.
Did Lebbon Bring Together the Beston Transaction?
In case I am wrong and there was a requirement that Mr Lebbon should ‘bring together’ the parties to the Beston transaction in order to achieve ‘success’, the plaintiff submitted, in the alternative to its contention that the Letter of Engagement and Schedules thereto constitute an entire contract, that Mr Lebbon’s services did constitute an effective cause of the Beston transaction being achieved.
The defendants argue that the use of the word ‘achieved’ in clause 2 of Schedule B[62] supports the contention that Mr Lebbon was required to bring together the transaction because the meanings of ‘achieve’ and ‘bring together’ are identical.[63] The Macquarie Dictionary is quoted as providing that to ‘achieve’ means to ‘bring to a successful end’. But to ‘bring to a successful end’ is not the same as to ‘bring together’. The latter expression means to ‘introduce’, as in ‘to bring (a person) into the acquaintance of another’ (quoting from the same dictionary). In that context, it is incorrect to assert that ‘achieve’ and ‘bring together’ have the same meaning.
[62] The sentence is ‘If Success is achieved the Client shall pay [the plaintiff] the Success Fees in accordance with this Schedule B’.
[63] Defendants’ Closing Submissions at [148].
Further, I do not think that the defendants’ interpretation of the contract in this regard is assisted by the cases quoted.
In Foxtons Ltd v Bicknell,[64] the contract in question was a real estate agency agreement. The agreement contained a specific requirement that the purchaser be ‘introduced’ by the agent. The argument was about whether the agents must prove that they were the ‘effective cause’ of the eventual purchase of the property in the sense that the purchase was the result of the introduction.[65] Lord Neuberger held that there was such a requirement,[66] adverting to the commercial context to resolve an ambiguity in the language of the contract. His Lordship expressly refrained from implying such a term into the contract, but relied on the language of the contract.[67]
[64] [2008] EWCA Civ 419.
[65] See the judgment of Lord Neuberger at [22].
[66] At [34].
[67] At [37].
The decision is of no assistance to the defendants and, in any event, was decided in a completely different commercial context.
In Doyle v Mount Kidston Mining and Exploration Pty Ltd,[68] the contract also required an ‘introduction’. In that case, the court held that there was no requirement that the introduction be causally related to the sale. McPherson J quoted Barwick CJ in L J Hooker v W J Adams Estates Pty Ltd:[69]
“¼ the commission is not fully earned unless there is a sale which has resulted wholly or partially from the efforts of the agent. The most common way of performing the agent’s task is to introduce to the principal a person who becomes the purchaser under a binding contract of sale. In terms of causation, the agent has thus been an effective cause of the sale. It is nothing to the point in such a case that that person would have become the purchaser without the intervention of the agent: or that the principal’s own efforts were also an effective cause of the sale.”
[68] [1984] 2 Qd R 386.
[69] At 393 quoting [1977] HCA 13; (1977) 138 CLR 52 at 58.
That case does not assist the defendants either. If anything, the last sentence of Barwick CJ’s comments assists the plaintiff in that provided the agent, or in this case the consultant, does what he has contracted to do, the court will not read into the contract an extra requirement that the agent’s efforts caused the sale.
Finally, in Moneywood v Salamon Nominees,[70] the case turned upon the interpretation of s 76(1)(c) of the Auctioneers and Agents Act 1971 (Q). The agent had introduced the purchaser to the vendor, but the contract for the sale of the entire parcel of land did not proceed because of the intervention of the local council. A later contract for the sale of a smaller parcel of land between the vendor and the same purchaser did proceed, but the vendor argued that the appointment of the agent was not ‘in respect of such transaction’. The High Court held that the agent was entitled to commission in respect of the later transaction.
[70] [2001] HCA 2; (2001) 202 CLR 351.
It can be seen that the issues in Moneywood bear no similarity to the issues in this case. All three of these cases involved real estate agencies where there was a specific contractual requirement that the agent introduce the buyer and an implied term which is customary in such contracts that the introduction by an agent was an effective cause, but not necessarily the exclusive cause, of the eventual sale.[71]
[71] See the discussion of ‘effective cause’, or ‘causa causans’, by Gummow J in Moneywood at [81]-[90].
An Effective Cause of the Transaction?
Even if Mr Lebbon was required by the contract to have been an effective cause of the entry into the Beston transaction, the plaintiff argues that he fulfilled that requirement.
It is the plaintiff’s case that ‘success’ was achieved by one or more of the Beston transaction,[72] the DOSAF[73] and the ‘Grasslands transaction’.[74]
[72] The sale on or about 4 September 2015 of the three farms owned by Limestone, Pedra Branca, Southern Dairy and Peter and Rosalind Doman, together with plant and equipment, water licences and livestock to Beston (‘the Beston transaction’).
[73] Deed of Settlement and Forbearance dated 9 June 2015 (Exhibit P1, p 124) between the receivers of the distressed companies and the parties to a Deed of Company Arrangement (‘DOCA’) (Exhibit P1, p 41) entered into on 8 May 2015.
[74] The purchase by Grasslands Dairy Co. Pty Ltd, a company incorporated on 1 September 2015, of plant, equipment and livestock which had previously been owned by Pedra Branca, and the lease of the three farms previously owned by the defendants’ companies and purchased by Beston, to Grasslands.
Mr Roder conceded that Mr Lebbon did ‘some work in relation to (the Beston) transaction’.[75]
[75] T 711.
Mr Duggan submitted that Mr Lebbon’s contribution to the eventual outcome was much more substantial than the defendants would allow. He pointed to a number of examples of Mr Lebbon’s work contributing to the eventual outcome:
- the meeting with National Australia Bank
Mr Lebbon accompanied the Domans to a meeting with Mr Neil Findlay on 31 July 2014. Mr Findlay was a senior manager with the NAB. The meeting was part of the preparation for the creditors’ meeting on 22 August 2014. Jason Doman acknowledged Mr Lebbon’s role:[76]
[76] T 583.
Q.    … he represented someone who was a competent, impressive professional that you were able to present to the bank and that's why you took him along.
A.    Yes, absolutely.
Q.    He then assisted you with the letters which were drafted by him and sent out to the administrators, do you recall that.
A.    Yes, he assisted, yes. Yes, he drafted those up.
Q.    He drafted a letter to the NAB making a proposal to the NAB which you agreed with, correct.
A.    Correct, yes.
Q.    And he also drafted a letter containing some proposed terms for the DOCA, deed of company arrangement, which could then be sent to the unsecured creditors.
A.    He did, yes.
Q.    And he did that by the 7th, before 7 August so that that material could be distributed to the unsecured creditors prior to the meeting coming up on the 22nd.
A.    Yes, he did, yes.
Q.    And part of that also involved persuading the administrator about giving you guys another 90 day moratorium, correct.
A.    That worked hand in hand. We had to get a proposal to the NAB and then the administrators would sit tight until we done a deal with the NAB.
- the Deed of Company Arrangement
Mr Lebbon’s role in persuading the NAB not to wind up Pedra Branca and foreclose on the defendants’ properties was important. The Deed of Company Arrangement in relation to Pedra Branca had been executed in May 2013, so by April 2014 the bank’s patience was wearing thin. At a meeting with the defendants’ creditors on 22 August 2014, only 12 days after the Letter of Engagement was executed by the Domans, Mr Lebbon attended with the defendants. At that meeting the creditors, and the NAB-appointed administrators, were persuaded to extend the DOCA for a further 90 days. This must have taken some doing, as the administrators, Mr Wallace‑Smith in particular, had earlier recommended to the NAB that Pedra Branca be wound up. Neither side to this dispute called evidence from anyone else who was present at the meeting, but despite the defendants’ denials, it is a fair inference that Mr Lebbon’s presence and presentation assisted to persuade them to extend, where the defendants’ previous attempts to persuade them to do so had not. Peter Doman acknowledged that Mr Lebbon ‘assisted greatly’ in that process.[77]
[77] T 451.
- the farm debt mediation
Mr Lebbon raised the issue that the NAB was obliged under Victorian legislation to engage in ‘farm debt mediation’ before it could take further steps to enforce the debt owed to it. As a result, the Domans sought legal advice and then took proceedings in Victoria seeking an injunction, which were successful. A Deed of Settlement and Forbearance (DOSAF)[78] was executed on 9 October 2014 in settlement of this dispute, and of the defendants’ liabilities to the NAB.
[78] Exhibit P1, p 87.
In the DOSAF, the defendants and the companies acknowledged the debt to the NAB was $25,355,684. Pursuant to the deed, the NAB agreed to forbear from exercising its rights to enforce this debt upon payment of a deposit of $500,000 and a further payment of $13,000,000 by 15 February 2015. This gave the defendants breathing space to find alternative finance at a much more achievable level.

It is true that Mr Lebbon did not support the idea of litigating against the NAB, preferring to negotiate. But his role in identifying the issue of farm debt mediation and recommending that the defendants consult their solicitors about it was clear. The resolution of this issue with the NAB was crucial, as it resulted in a significant concession by NAB as to the amount owing, and gave the Domans valuable time to continue searching for a solution to their debt problems.
- the meeting with Beston
Mr Lebbon’s role in the preparations for, and at the meeting with, Beston’s representatives on 16 April 2015 was also important. The evidence of Mr Lebbon and that of Peter Doman is to be contrasted. Mr Lebbon said he was asked to attend a meeting with Beston by Peter Doman. Peter Doman sent him a number of financial documents to read before the meeting. Mr Lebbon said that Beston’s initial offer was to buy the Domans’ land for 85% of the valuation, which was $14 million. There was also discussion about plant and equipment, and ongoing management.[79] Mr Lebbon said he asked Mr McFarlane, Beston’s representative, to go through their proposal step by step. Mr Lebbon said that he, Jason Doman and Mr Davis, the defendants’ solicitor, then conferred in a separate room. By this time, it was early afternoon.[80] Mr Lebbon said that he spoke at the meeting for 30 to 40% of the time, and that Peter Doman, Jason Doman and Mr Davis did not say much.[81]
[79] T 187.
[80] T 188.
[81] T 190.
Mr Lebbon said that when the meeting resumed, he told Mr McFarlane that the figure of $14 million ‘wasn’t good enough’,[82] and it was eventually agreed that a further, independent, valuation would be obtained. Mr Lebbon said that this was his proposal.[83] Further discussion ensued about other aspects of the transaction.
[82] T 191.
[83] T 192.
There was a further meeting on 17 April 2015 with Mr Roger Sexton, the Chairman of Beston, Mr Lebbon and Mr Davis, the defendants’ solicitor. Mr Lebbon said he tried to obtain some further benefits for the defendants. First, he proposed that the defendants receive some options or shares to be issued in Beston’s capital-raising to fund the purchase. Mr Sexton refused. Eventually, Mr Sexton agreed to allocate to the defendants $100,000 worth of shares from the ‘Chairman’s list’ (a list of subscribers who receive priority allocations at the discretion of the Chairman).[84] Mr Lebbon said he then did a considerable amount of work preparing for the proposed transaction.[85]
[84] T 205.
[85] T 206-7.
The defendants’ version of these events was quite different from Mr Lebbon’s version.
Peter Doman said that along with himself, Jason Doman and Mr Davis, Messrs McFarlane and Ebert from Beston, Messrs Walton and Dossett representing intermediaries, and Mr Lebbon were present. He said that the Beston offer was actually based on a farm valuation of $17 million, not $14 million as Mr Lebbon had said. This was reduced by 15% to $14.5 million, with a provision that they could buy the land back in 10 years’ time with a similar discount, 15% from valuation.[86] He said the lease payment by Grasslands was to be 9.5% of valuation, which he said was impossible as they would have needed a milk price of 55 cents per litre, and it was then in the low 40s.[87]
[86] T 396.
[87] T 397.
Peter Doman said that at this point he stood up and walked out of the room, and Jason Doman, Tim Lebbon, Mr Davis and Mr Dossett followed him out. Once they were outside, Mr Davis took him aside and told him that he had received an email from the NAB’s solicitors advising that the DOSAF, which had been extended and varied several times since 15 February 2015 when it was due to expire, would not be extended further.[88] Mr Davis read out the email to him.[89] He concluded that he had no choice but to deal with Beston. He said:[90]
I remember speaking to Pete Dossett and Tim and Jason on a number of occasions but what came to my mind straightaway is that Andrew Nobes's valuation and so I just said 'Look, how about we go back in?' and this was after quite a long discussion and this didn't happen in five minutes 'How about we go back in and we propose that there is a new current market valuation done?'.
[88] Exhibit P2, Volume 10A, p 345.
[89] T 435.
[90] T 400.
Peter Doman said that they all returned to the room and put the revaluation proposal to Beston. Mr Ebert said he would need to get approval. Mr Davis pointed out that the rent was unsustainable at 55 cents per litre, and they would need ‘rent forbearance’ at that level until the milk price recovered. He said that Tim Lebbon said things in support of what others said, and that ‘the main thing I remember … is he talked about participatory loans’.[91]
[91] T 402.
In summary, Peter Doman said that his role in the negotiations was that ‘I spoke most of the time’ and ‘I was leading the negotiations on my behalf’.[92]
[92] Ibid.
Peter Doman said that it was Mr Davis who negotiated the Heads of Agreement which were later signed on 14 May 2015 and also Mr Davis who negotiated the contracts for the sale of the land in June 2015, and all the subsequent negotiations and agreements, culminating in settlement in September 2015.[93]
[93] T 406.
Mr Duggan submitted that Peter Doman’s recollection of these events is faulty and should not be accepted. I accept that, when cross-examined about these events, Peter Doman’s evidence was evasive and unsatisfactory.[94]
[94] See, for example, at T 433.
Peter Doman’s memory of the events was sketchy.[95] He did not have notes to refresh his memory of these events. Jason Doman did not have notes either. His evidence was to the same effect as that of his father. Mr Lebbon, on the other hand, did have notes, and his memory was more detailed and more likely to be accurate as a result. Neither side called evidence from the other participants to these negotiations.
[95] E.g. T 442-3.
I accept Mr Duggan’s submission that the defendants’ version of these events should be rejected in favour of Mr Lebbon’s version on the balance of probabilities. I also accept the submission that the defendants were deliberately downplaying Mr Lebbon’s role to suit their version of the events. Mr Duggan submitted that Mr Lebbon’s email to the defendants and Mr Davis dated 19 April 2015,[96] in which he followed through from the 16 April meeting and allocated tasks to the defendants and Mr Davis, is also more consistent with him having played a prominent role in these events.
[96] Exhibit P2, Volume 10A, p 759.
- the meeting with Rod Slattery
The NAB had terminated the original DOCA on 17 April 2015. After the meeting with Beston on 16 April 2015, and the signing of the Heads of Agreement on 14 May 2015, the NAB instructed its solicitors, Norton Rose Fulbright, to approach Mr Davis to arrange a meeting between Mr Lebbon and Mr Slattery, the receiver appointed by the bank. After an initial approach, Mr Davis wrote back to Mr Steven Palmer of Norton Rose Fulbright offering that the defendants, Mr Davis and Mr Lebbon all meet with the NAB ‘to provide further explanation as to why the Domans (believed) the Beston offer to be a quicker and more certain route to paying out the NAB, as well as providing a more viable option for (the) Domans going forward’.[97]
[97] Exhibit P2, Volume 10B, p 1173 – email C Davis to S Palmer, 26.4.15.
Mr Palmer replied:
Thanks Clayton, I will pass all of that on. The meeting between Rod and Tim is critical. I do not expect to obtain instructions in relation to a broader meeting until that meeting has taken place, but will seek instructions.
At this point, there was another offer on the table from an organisation called ‘Loans Plus’. The Domans obviously regarded the Beston offer as preferable.[98]
[98] Lebbon XN at T 208; P Doman XXN at T 435-6, 469-473, 525; Exhibit P2, Vol 10A, p. 130.
The NAB, however, favoured the Loans Plus proposal. Clearly, they needed Mr Slattery’s advice about the relative merits of the Beston deal. The plaintiff submits that this is a clear indication that Mr Lebbon had taken a lead role in the negotiations, that his advice was highly valued by the bank, and that his presentation to Mr Slattery was ‘critical’ to the NAB’s attitude to further forbearance. Peter Doman somewhat reluctantly accepted this was the position.[99]
[99] T 471.
Conclusion
I conclude that Mr Lebbon played a leading role in all of the negotiations, preparations and consultations which led to the Beston transaction. His services were not an exclusive cause, but they were an effective cause of the transaction being successfully negotiated. As such, I uphold Mr Duggan’s submission that Mr Lebbon ‘brought together’ the transaction in that sense.
Void for Uncertainty?
In his written closing submissions, Mr Roder confined his submission that the contract was void for uncertainty to the terms of the definition of ‘success’ in Schedule B.[100]
[100] Defendants’ Closing Submissions at [191].
Mr Roder referred to:
·an apparent conflict between the Letter of Engagement and Schedule B as to the definition of ‘success’.
However, there is no definition of ‘success’ in the Letter of Engagement. I do not accept that Mr Lebbon’s understanding of the assistance required by the defendants which he set out in the Letter of Engagement, creates an inconsistency with the definition of ‘success’ set out in Schedule B. The entire purpose of Schedule B was to deal with a success fee, the defendants, having opted for option (b), the ‘no win-no fee’ option;
·in one criterion of ‘success’, Schedule B describes:
.a change in the beneficial ownership or control of the Securities, or of the business or of the Assets of any party connected to the Vendor,
an apparent ambiguity as to the meaning of ‘vendor’. I do not accept that. ‘Vendor’ is defined in the document as ‘the party or parties selling the Assets’. That is not ambiguous;
·an apparent ambiguity as to the meaning of ‘Securities’. Whether or not that is so, this case does not involve the issue of new securities, so any such ambiguity is irrelevant;
·there is no definition of ‘client’ in Schedule B. There is a definition of ‘the Client’ in Schedule A. Schedule A is also part of the written contract. The definition is:
Where the client is:
o an individual, that individual;
o a business, that business and its owners jointly and severally;
o a corporation (either public or private), the corporation and its members jointly and severally.
There is no dispute, nor could there be, that the Domans were ‘the Client’ in this case. The Letter of Engagement, with which Schedule B should be read, states:[101]
In essence, you, Peter and Jason Doman, as the Client …
Both Peter and Jason Doman signed the Letter of Engagement, accepting the terms and conditions contained therein, and contained in the Schedules. There is no dispute that if one of the defendants is liable, the defendants are jointly and severally liable. This was accepted by Mr Roder in his closing address.[102] The Domans were ‘the Client’;
·there are several aspects of the Letter of Engagement which are ‘vague and uncertain’:
.In essence, you … have asked us … to assist you with making arrangements to secure an ongoing interest in part or all of one or more of the above entities and / or their operations.[103]
.We will do what we can to try to create a position for you in one or more of the operations going forward.[104]
.The precise work to be undertaken is not known nor the time extent thereof … The work which may be required includes …[105]
[101] Exhibit P1, p 2.
[102] T 699.
[103] Exhibit P1, p 2.
[104] Exhibit P1, p 2.
[105] Exhibit P1, pp 2-3.
These statements do not define ‘success’. Success is specifically defined in Schedule B:[106]
Unless otherwise defined in the Engagement Letter, “Success” means the Client entering into a Contract with a party or counter-party during the period of this Agreement or within two years from the date of the Effective Termination of this Agreement whereby one or more of the following occurs:
. a change in the beneficial ownership or control of the Securities, or of the business or of the Assets of any party connected to the Vendor or
. new Securities are issued by any party connected to the Vendor.
[106] Exhibit P1, p 14.
This is not void for uncertainty. ‘Vendor’ is defined as ‘the party or parties selling the Assets’. The vendor was therefore the companies controlled by the defendants. The Domans had control of the assets, and beneficial ownership of them, through their shareholding and directorships of the companies selling the assets. The Domans were thus ‘connected to the Vendor’. When the companies sold the assets, their beneficial ownership of the assets changed.
The defendants argued that it was not the Domans who entered the contracts, it was the companies. I think this is an unduly technical and artificial interpretation of the contract. It was the Domans who agreed to sell, they represented the will of the company in each case. In that sense, it was they who entered the contracts.
Conclusion
I conclude that the definition of ‘success’ in Schedule B to the Letter of Engagement is not void for uncertainty.
An Alternative Business Arrangement?
The plaintiff’s alternative position is that the transactions in which the assets were sold constituted an ‘alternative business arrangement’ within the meaning of clause 7 of Schedule B, which states:
Alternative Business Arrangement for Achieving Client Objectives
If the Client ultimately enters into some other form of business arrangement which enables them to achieve their objectives, then that arrangement will be taken to mean that Success has been achieved and the Success Fee(s) will be calculated and paid as if a Transaction had been completed.
(My emphasis)
When ownership proved impossible to achieve, the Beston transaction was clearly an ‘alternative business arrangement’ as described in clause 7. It could not be described any other way. The question then becomes whether the arrangement enabled the defendants to ‘achieve their objectives’.
I have already held that the commercial purpose of the contract between the plaintiff and the defendants was to obtain Mr Lebbon’s professional services as a corporate adviser to assist the defendants to achieve an outcome which was the most favourable outcome to them, having regard to their extreme financial difficulties, if retaining ownership was impossible.
That being the case, the voluntary decision by the Domans to enter the Beston transaction enabled them to achieve a result which was surprisingly good, given the dire financial situation they were confronted with in August 2014.
Mr Duggan argued that the Domans achieved a deal they were happy with, they escaped personal liability for the debts incurred by the companies despite the fact that they had personally guaranteed them, and the Grasslands transaction involved a 10-year leaseback of the farming properties which enabled them to continue managing the enterprise.
Mr Roder repeated his arguments about his clients’ objectives being to retain ownership of the farms. Since this was not achieved, the Beston transaction could not be said to have met their objectives.
The expression ‘achieve their objectives’ in this clause of the contract does seem to suggest that the subjective ‘intentions, aspirations or expectations’ of the Domans, to use the words of Mason J in Codelfa, will have more significance in interpretation of this clause than they did in resolving suggested ambiguities or uncertainties in the substantive contract.
Conclusion
This topic was not developed extensively in argument beyond what I have outlined above. Were it necessary to do so, I would venture the opinion that the Beston transaction did not enable the Domans to achieve their objectives, when that context is assessed subjectively.
That being so, I do not consider that the plaintiff could establish that the Beston transaction constituted an ‘alternative business arrangement’ which would have led to a success fee. An alternative claim to a success fee based on clause 7 of the contract would fail on that basis.
Quantum Meruit
The plaintiff claims that, in the event that I find that the contract with the defendants is unenforceable, the defendants have been unjustly enriched by the plaintiff’s work.[107] The plaintiff alleges in support of that contention that:
·the work was done at the defendants’ request;
·the Letter of Engagement made clear to the defendants, and it would have been clear to a reasonable person, that the work was to be remunerated;
·the defendants accepted the benefits of the plaintiff’s work;
·the defendants were well aware of the nature and quantity of the plaintiff’s work;
·the plaintiff provided the defendants with monthly summaries of work done;
·the plaintiff’s work was effective;
·the defendants made specific requests for work to be done throughout the relevant period.
[107] Third Statement of Claim, [72A].
On that basis, the plaintiff says that it should be remunerated for work done to the extent that it is fair and reasonable.[108]
[108] Third Statement of Claim, [72F].
On Monday, 21 May 2018, the fourth day of the trial, I was informed by counsel that the parties had agreed certain aspects of the quantum of the plaintiff’s claim. Those aspects are:
·a ‘base amount’ of $265,339.80 inclusive of GST, being the number of hours worked multiplied by agreed hourly rates;
·if the plaintiff is entitled to a success fee pursuant to the contract, then the base amount is multiplied by 3, and $100,000 plus $10,000 GST is added to the total, giving a figure of $906,019.40, less $200,000 paid by the defendants, leaving $706,019.40.
The remaining issue to be determined is whether the plaintiff is entitled to the uplift it would have received as a ‘success fee’ in the circumstances of the case on the basis of quantum meruit. In other words, is it fair and reasonable that the plaintiff be remunerated in that way?
In Vasco Investment Managers Ltd v Morgan Stanley Australia Ltd,[109] Vickery J summarised the factors to be taken into account in assessing a quantum meruit claim as follows:
[109] [2014] VSC 455; (2014) 108 IPR 52 at [359].
a)The enquiry is not primarily directed to the cost to the plaintiff of performing the work, since the law is not compensating that party for loss suffered’; however, the actual cost should not be ignored.
b)Any price or commission agreed between the parties may be received as evidence of the value the parties themselves put on the services performed, even where the services have not been totally performed, but the agreed amount is not determinative of the matter.
c)“[I]n many cases, the appropriate method of assessing the benefit of the work is by applying an hourly rate to the time involved in performing those services”, and “the court may have regard to the rate of remuneration which is commonly accepted in the industry”, taking into account “the standing of the person performing the services, the difficulty of the task, [and] the fact that the services required imagination and creativity which may be difficult to discern in the end product”.
d)“[I]n the case where the services are of such [a] kind that it is difficult or impossible to assess the number of hours involved or to itemise the precise services, the court is entitled to make a global assessment or to reduce or increase the remuneration which can be proved with some certainty in order to reflect the fair and reasonable value”.
e)Where it is customary, in a particular industry, for the services to be recompensed on a commission basis, calculated on an event the court may have regard to what is a reasonable commission and apply it, if appropriate, subject to adjustment where the relationship has been terminated before the service provider has completed the tasks which produced the event.
f)Further, adopting the principles referred to by the Court of Appeal in Sopov v Kane Constructions Pty Ltd (No 2), in a situation where a quantum meruit claim arises where an existing concluded contract has been terminated, given that “the quantum meruit remedy rests on the fiction of the contract’s having ceased to exist ab initio, that contract can have no ‘continuing influence’ when the value of the work is being assessed on a quantum meruit.” In such a situation the quantum meruit remedy ignores the bargain which the parties struck, and ignores the rights accrued under the contract up to the date of termination. The contract price is relevant on a quantum meruit, but not because of any “continuing influence” of the contract. The price is merely a piece of evidence, showing what value the parties attributed — at a particular time — to the work which the claimant was agreeing to perform. It may be taken into account as relevant evidence in the body of evidence to be considered by the court in assessing a reasonable sum. However, it needs to be born in mind that the contract price is struck prospectively, based on the parties’ expectations of the future course of events. A quantum meruit, on the other hand, is assessed with the benefit of hindsight, on the basis of the events which actually happened.
g)As the New South Wales Court of Appeal observed in Renard Constructions v Minister for Public Works, there is no conceptual difficulty in the notion that the “fair and reasonable” value of the benefit conferred may exceed any price for which the service provider contractually agreed to provide the services or carry out the works in question. Restitutionary liability is independent of contract.
h)It is well-established that the value of the services or work done can be proved by evidence of costs actually and fairly and reasonably incurred. But proof of the appropriate quantum is not confined to such evidence.
i)Restitution may also include an entitlement to a margin for profit and overhead. As stated by the Court of Appeal in Sopov, the existence of the entitlement to a profit margin is consistent with the restitutionary objective of measuring the value of any benefit conferred. The inclusion of a margin for profit and overhead means that the calculation approximates the replacement cost of the work or services and is an appropriate index of value to ascertain what it would have cost the principal to have had this work or the services carried out by another in comparable circumstances.
(References omitted)
In that case, Vickery J held:[110]
In the circumstances, the reasonable expectation of Vasco was that it would be paid by way of success fee in the event that the transaction were to be successfully concluded, and this was communicated to Morgan Stanley. The work done in respect of the requests made by Morgan Stanley was not done gratuitously, and Morgan Stanley should have appreciated that this was the case.
In the circumstances, Morgan Stanley should have realised that Vasco expected to be paid for its services on the basis of a success fee when the transaction was completed.
[110] At [372]-[373].

In this case, the plaintiff pleaded the following factors going to the reasonableness of paying it a success fee:[111]
[111] Third Statement of Claim, [72F].
1)the terms of the letter of engagement signed by the Domans;
2)the estimate in the letter of engagement that the fees would be in the vicinity of 3 x $300,000 plus $100,000 plus GST;
3)the industry practice of charging success fees;
4)the choice of the Domans to decline liability for an hourly rate and accept a success fee …;
5)the risk which the plaintiff took in undertaking work for the Domans that it would not be paid;
6)the time delay before any payment was due;
7)the financial circumstances of the Domans in August 2014;
8)…
9)the continued and ongoing requests for and acceptance of the services of the plaintiff by the Domans following the signing by the Domans of the Beston letter;
10)the amounts foreshadowed in the reports on time and costs to date sent by Leadenhall to the Domans;
11)…
12)the reduction in the Domans’ personal liability to NAB at July 2014 accruing to $27,071,259.11 at 5 June 2015 to Nil;
13)the shares in Beston issued to the Domans or their nominee;
14)the cows retained by Grasslands as trustee for Pedra Branca;
15)the plant and equipment retained by Grasslands as trustee for Pedra Branca;
16)the unharvested crops retained; and
17)(the) stocks retained;
18)…
19)the seniority, reputation and experience of Mr Timothy Owen Lebbon;
20)the hours of work performed by the plaintiff’s staff and Director;
21)the standard hourly rates charged and recovered by Leadenhall and the accompanying terms when liability for payment is not subject to a contingency;
22)the amount which would be charged by an experienced financial services professional for providing the services to the Domans by Leadenhall in similar circumstances.
All of these factors arise on the evidence and it is appropriate that they be taken into account, particularly numbers 2), 4), 5), 6), 9), 19) and 22).
The defendants’ acceptance of the terms in the Letter of Engagement is clear evidence of ‘the value the parties themselves put on the services performed’.[112]
[112] Vasco, supra, at [359] point b).
The plaintiff’s contentions in this regard were supported by the expert witness Mr Kym Weir. He listed the factors he took into account:[113]
a.    The risks associated with taking on an assignment with the Domans, who apparently were not in a sound financial position to pay all or part of the Leadenhall fees if the outcome is not successful.
b.    That the Domans are not providing guarantees for payment of fees, whatever the outcome.
c.    The complexity of the transactions contemplated to achieve a successful outcome.
d.    The diversion of Leadenhall’s senior resources to an assignment with inherent uncertainty of payment.
e.    The background and experience of Mr Lebbon in handling assignments involving valuations and negotiations of the nature contemplated.
[113] Exhibit P5 - Report p 7, [6.3].
I do not accept the contention that Mr Weir’s opinions in this regard should be tempered by his answers to questions in cross-examination about whether success was in fact achieved. That is a different issue, going to the interpretation of the contract. I also reject the submission that Mr Weir’s opinions were based on a lack of understanding of the transactions, the work that was involved, and the contribution of the plaintiff.[114] I think that Mr Weir had a good understanding of these matters.
[114] Defendants’ Closing Submissions, [218].
The defendants’ arguments in relation to quantum meruit were as follows:
·they accept that the plaintiff is entitled to be paid on a quantum meruit basis if the contract is uncertain;
·the plaintiff is only entitled to be paid for work done after 12 August 2014. I reject that. The restitution being considered is for work done,[115] and does not arise from the contract. In any event, I have been given no basis to deduct any particular sum from the agreed amount on the basis suggested;
[115] Vasco, supra, at [359] point g).
·there is no case pleaded as to the elements of unconscionability or unjust enrichment. In Vasco, Vickery J said:[116]
[116] At [353]-[354].
Morgan Stanley further submitted that only by establishing the three basic elements of “benefit”, “at Vasco’s expense” and “injustice” would Vasco establish a “prima facie” claim to restitution.
However, an analysis, framed exclusively as a cause of action in unjust enrichment terms, is misplaced in this case. A claim for quantum meruit is a free standing claim arising in specific circumstances, while unjust enrichment has been identified in Australian law as a legal concept unifying a variety of distinct categories of case. It is not identified as a principle which in itself can provide a sufficient basis for direct application in particular cases, however compelling it may be as a theoretical justification for the law to operate to provide restitution in response to particular indicia.
(References omitted)
It is not necessary to plead the elements of unconscionability or unjust enrichment in a claim based on quantum meruit;
·an assessment in quantum meruit does not value the work performed in accordance with the terms of the contract. I accept that. However, I have already said that the terms of the Letter of Engagement provide evidence of the value the parties put on the work at that time, even if the contract is unenforceable for some reason;
·an uplift based on success can only arise by reference to a defined, successful outcome about which the parties have reached agreement. I repeat, quantum meruit only arises if there is no agreement. In Vasco, Vickery J awarded a success fee which he assessed according to industry standards without reference to any negotiations on the topic between the parties.[117]
The only evidence of prevailing industry standards came from Mr Lebbon, and Mr Weir;
·there is an inherent inconsistency in the notion that the plaintiff (is) seeking in restitution a success fee calculated at a multiple of time worked plus a fixed bonus in the context of a contract that has been held to be uncertain. That is not the scenario here. As I have mentioned, the defendants only seek a finding that the provisions for a success fee are void for uncertainty. But in any event, Vickery J had no difficulty awarding a success fee where the entire contract had been declared void for illegality. There is no inherent inconsistency;
·quantum meruit is to be assessed in hindsight, not by reference to the risks and possibilities that the parties envisaged at the time of entering the agreement. In the defendants’ written submissions, this proposition was sought to be justified by reference to Vasco at [381]. There is nothing in that paragraph to that effect. It is true that Vickery J said that:[118]
A quantum meruit, as has been stated, is assessed with the benefit of hindsight on the basis of the events which transpired.
(My emphasis)
That does not exclude reference to the ‘risks and possibilities that the parties envisaged at the time of entering the agreement’. Reference to risks and possibilities is just another way of saying that the court may have regard to the ‘value the parties themselves put on the services performed’, not overlooking that ‘the agreed amount is not determinative of the matter’.[119] Indeed, the corollary of that principle is that a ‘fair and reasonable’ amount may be more than the amount agreed.[120]
[117] See Vasco, supra, at [377]-[388].
[118] Vasco, supra, at [360].
[119] At [359] point b).
[120] At [359] point g).
Conclusion
I conclude that the plaintiff has established an entitlement to be remunerated for Mr Lebbon’s services to the defendants on the basis of quantum meruit to the same extent as would have been payable pursuant to the contract. The amounts were, in Mr Weir’s view, ‘fair and reasonable’. No evidence to the contrary was produced by the defendants. The amounts claimed included the uplift in view of the particular circumstances prevailing at the time the contract was entered into. The plaintiff supplied monthly reports on the work done and amounts charged, and it was open to the defendants at any stage to change the basis for Leadenhall’s fees, or terminate the contract if they wished to. They did not do so.
Summary of Findings
1.The contract between Leadenhall and the Domans, consisting of the Letter of Engagement with its two Schedules, was wholly written.
2.‘Success’ was defined in Schedule B, and consisted in this case of the Domans entering a contract, the Beston transaction, whereby a change in the beneficial ownership or control of the assets of the three companies Pedra Branca, Southern Dairy and Limestone occurred. This definition of ‘success’ did not necessarily involve the Domans retaining ownership or control of the business.
3.The definition of ‘success’ was not void for uncertainty.
4.The payment of a success fee was not conditional upon Mr Lebbon ‘bringing about’ the Beston transaction. Mr Lebbon brought about the transaction, in the sense that his services were an effective cause of the transaction taking place, in any event.
5.Leadenhall is entitled to the uplift in its fees provided for in the contract on the basis that ‘success’ was achieved.
6.In the event that the contract was invalid, the plaintiff would have been entitled to the same fees on the basis of quantum meruit in any event.
Judgment
My conclusions are:
·the plaintiff is entitled to judgment pursuant to the contract in the sum of $706,019.40;
·in the alternative, the plaintiff is entitled to judgment on the basis of quantum meruit in the sum of $706,019.40.
There will be judgment for the plaintiff in the sum of $706,019.40.
I will hear the parties as to any further orders.