LOLBIT Pty Ltd v Environmental Products (Australia) Pty Ltd - [2006] WADC 41

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: LOLBIT PTY LTD -v- ENVIRONMENTAL PRODUCTS (AUSTRALIA) PTY LTD [2006] WADC 41

CORAM: MCCANN DCJ

HEARD: 11 OCTOBER 2005

DELIVERED : 24 MARCH 2006

FILE NO/S: CIV 2947 of 2004

BETWEEN: LOLBIT PTY LTD
Plaintiff
AND
ENVIRONMENTAL PRODUCTS (AUSTRALIA) PTY LTD
Defendant

Catchwords:

Contract - Principles in Masters v Cameron - Breach of contract - Damages - Turns on own facts

Legislation:

Nil

Result:

Damages of $33,102.47 awarded

Representation:

Counsel:

Plaintiff: Mr S J Blyth
Defendant: Mr R J Grayden

Solicitors:

Plaintiff: Lewis Blyth & Hooper
Defendant: Hammond Worthington

Case(s) referred to in judgment(s):

Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622
Godecke v Kirwan (1973) 129 CLR 629
Masters v Cameron (1954) 91 CLR 353
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
The Commercial Bank of Australia Ltd v G H Deane & Co Pty Ltd (1983) 2 Qd R 204

Case(s) also cited:

Nil

MCCANN DCJ:

Introduction

In this action the plaintiff claims damages for the wrongful termination of a 12 month consultancy agreement which was allegedly entered into by the parties at a meeting on 20 March 2004. The plaintiff alleges that the agreement was repudiated by the defendant on 10 August 2004. The defendant denies that the agreement was entered into and in fact denies that any meeting took place on 20 March 2004. The defendant contends that the contractual relationship between the plaintiff and the defendant comprised a month‑to‑month consultancy agreement. The defendant contends in the alternative that any agreement between the parties was terminated by mutual agreement on 10 August 2004.

Non‑contentious factual background

Based upon the pleadings and the evidence adduced at trial the following background facts are not contentious.
Mr George Giandzi is a director of the plaintiff and possesses skills relating to the development of agricultural products. In 2003 the defendant was in the process of researching and developing new products. Mr Giandzi had previously carried out work for, or with, two directors of the defendant, namely Ms Patsy McCann and Mr Terry Smith. On or about 6 February 2003 the plaintiff and defendant entered into a written consultancy agreement whereby the plaintiff agreed to provide the services of Mr Giandzi to the defendant in relation to the development, trial and release of a fertilizer additive known as nutrient release agent. Material terms of this consultancy agreement ("the original agreement") were that the term of the contract was six months from 6 February 2003 and the defendant would pay the plaintiff the sum of $5,000 per month, plus GST. It was further agreed that the plaintiff would cover all of its own costs provided that the defendant would reimburse the plaintiff for its costs if the defendant required a representative of the plaintiff (i.e. Mr Giandzi) to undertake services that required overnight journeys and travel in excess of 500 km from Perth. (I note that cl 6 of the original agreement stipulated a radius of 400 km from Perth, instead of 500 km as pleaded, but nothing turns on this discrepancy.)
After the original agreement expired the parties continued on a month to month basis on the same terms and conditions, save that for a period of approximately two months commencing in September 2003 Mr Giandzi reduced his workload to three days per week (instead of his usual five days) and the plaintiff's remuneration was adjusted accordingly. It was well known to the defendant that Mr Giandzi wanted the plaintiff to have some security of tenure.
In October 2003 (the first of October according to Mr Peter Spry's uncontested evidence) the defendant acquired a business known as Choice Chemicals which was owned, or controlled, by Mr Spry. Mr Spry became a director of the defendant and Mr Giandzi's direct superior. In practice they worked somewhat independently of each other but they did meet on a regular basis in the defendant's office in Perth to review progress on the areas within Mr Giandzi's area of responsibility. Mr Spry became aware of Mr Giandzi's desire for security of tenure at some stage after he joined the defendant and prior to March 2004.
On 18, 19 and 20 March 2004 Mr Giandzi and Mr Spry attended the Pan Pacific Pork Expo in Brisbane on behalf of the defendant. They arranged in advance to share accommodation in an apartment complex which was located close to the Convention Centre in which the Expo took place. They travelled together on an overnight flight from Perth and arrived in Brisbane early on the morning of Thursday 18 March. Their accommodation was not ready when they arrived at the apartment complex, so the two men left and had breakfast together. Their accommodation was still not ready when they returned to the apartment complex and they waited in the foyer. Whilst doing so they held some discussions relevant to the defendant's affairs. The nature of those discussions and in particular the extent to which they pertained to the plaintiff's consultancy agreement is an area of dispute between the parties to which I shall return.
At some point during the Expo Mr Spry received news that his ailing father had suffered a fall and was unwell. The conference was scheduled to finish at 5 pm on Saturday 20 March but Mr Giandzi and Mr Spry did not attend that afternoon. Instead they spent the afternoon at the Breakfast Creek Hotel in Brisbane where they lunched and drank beer.
Mr Spry and Mr Giandzi left Brisbane on 21 March 2004. Mr Giandzi flew directly to Perth, but Mr Spry flew to Sydney where he had business to transact on behalf of the defendant.

The contentious facts

In summary, the plaintiff's case is as follows:
1.On the morning of Saturday 20 March 2004 Mr Spry agreed to meet Mr Giandzi at 7 pm in their apartment to negotiate a new consultancy agreement between the plaintiff and the defendant.
2.The meeting took place, as planned, in their apartment at 7 pm on the Saturday evening. In the course of the meeting Mr Giandzi and Mr Spry agreed, and shook hands, upon the terms of a new consultancy agreement as follows:
(a)The plaintiff would continue to supply Mr Giandzi's consultancy services to the defendant for a period of 12 months.
(b)The plaintiff's remuneration would remain the same as in the original agreement, but the parties would confer later with a view to including a commission component, so as to give the plaintiff the opportunity of earning additional remuneration over and above the base figure of $5,500 per month (inclusive of GST).
(c)The defendant would reimburse the plaintiff for fuel expenses incurred on trips which Mr Giandzi made outside the Perth metropolitan area.
(d)The defendant would supply Mr Giandzi with a hire vehicle and pay the expenses of the same if Mr Giandzi was required to make extended visits to the country. (The plaintiff pleads that the parties agreed that those expenses would be paid on an "ad hoc basis".)
3.Mr Giandzi and Mr Spry met at Mr Spry's home on the afternoon of 25 March 2004. It was discussed at this meeting that the defendant would pay the plaintiff a commission of 10 per cent on all sales in excess of $33,000 per month, in addition to the base payment of $5,500.
4.On 10 August 2004 Mr Spry and Mr Giandzi met in the former's office at Mr Spry's request. Mr Spry promptly informed Mr Giandzi that the defendant no longer required his services, that he was required to immediately gather up and return any company property in his possession and to thereupon leave the premises. Mr Giandzi asserted that the plaintiff had a 12 month contract, but accepted that in the circumstances he had no choice but to cease working for the defendant. (That is, on behalf of the plaintiff he accepted the defendant's repudiation of the consultancy agreement).
In summary, the defendant's case is as follows:
1.Mr Spry and Mr Giandzi had a discussion in the foyer of their apartment building in Brisbane on the morning of 18 March 2004, but Mr Spry refused to discuss the plaintiff's contract and the discussion related only to sales performance and customer‑related issues.
2.Mr Spry did not agree to meet Mr Giandzi at their apartment at 7 pm on the evening of 20 March, or any other time, and no such meeting ever occurred, and no discussions took place in relation to a new consultancy agreement.
3.Mr Giandzi and Mr Spry did not meet at Mr Spry's home on 25 March.
4.On 10 August 2004 Mr Spry and Mr Giandzi met in Mr Spry's office for the purpose of discussing Mr Giandzi's performance, which Mr Spry regarded as unsatisfactory. Mr Giandzi became upset and offered, in effect, to resign to which Mr Spry agreed (that is, the parties consensually terminated the agreement between them).

The issues

The issues in this action are:
1.Did Mr Giandzi and Mr Spry orally agree upon the terms of a new consultancy agreement between the plaintiff and the defendant at a meeting in their apartment in Brisbane on 20 March 2004?
2.If so, did the parties agree on all of the material terms of the agreement and is the agreement legally binding?
3.If so, was the agreement terminated on 10 August 2004 by mutual agreement between the parties, or was the agreement wrongfully "terminated" by the defendant, that is to say, did the defendant repudiate the agreement, and did the plaintiff accept such repudiation?
4.If so, what damages should be awarded to the plaintiff?
The plaintiff expressly disavowed reliance upon a contract concluded subsequent to 20 March 2004, that is to say, the plaintiff entirely rested its case upon the contention that an oral agreement was entered into on 20 March 2004. I turn now to consider the evidence for the parties.

Mr Giandzi's evidence on behalf of the plaintiff

Mr Giandzi testified in his evidence in chief that he and Mr Spry registered at the Expo in Brisbane on the morning of Thursday 18 March and spent the rest of the day meeting with prospective clients. He testified that Mr Spry was absent from the Expo itself on Friday 19 March as he was visiting abattoirs in the Brisbane area with other people. Mr Giandzi testified that he spent Friday at the Expo. He testified that on the morning of Saturday 20 March he had a discussion with Mr Spry in which they set a time for them to meet later that day (7 pm) for the purpose of negotiating the plaintiff's contract renewal. He testified that 7 pm was chosen because the Expo was due to finish at 5 pm and it was assumed that they would return to their apartment by 6 pm. He testified that he entered the appointment in his diary. The relevant page from his diary was tendered in evidence and contains an entry for 7 pm as follows: "Discussions with Peter re – contract".
Mr Giandzi testified that the meeting with Mr Spry took place as scheduled at 7 pm on the Saturday evening in their apartment and lasted for approximately one hour. He said that the meeting began with a discussion of the term of the proposed contract in which he said to Mr Spry that the plaintiff wanted security of tenure and required a minimum term of 12 months. He testified that the plaintiff needed security of tenure to justify passing over other employment or consultancy opportunities that were then available to the plaintiff. He outlined those reasons to Mr Spry who replied that "there were no problems" with a 12 month contract.
According to Mr Giandzi, the discussion then turned to the plaintiff's remuneration. He said to Mr Spry that the plaintiff wanted an increase in its monthly remuneration to $7,000 plus GST, but Mr Spry responded that he understood that Mr Giandzi wanted an increase but that he (i.e. Mr Spry) was thinking more in terms of a combination of a fixed retainer and a commission on sales. Mr Giandzi testified that Mr Spry suggested that the parties leave the retainer at $5,500 per calendar month inclusive of GST and work on a commission arrangement based on a budget figure to be determined at a later date. Mr Giandzi testified that he told Mr Spry that he would consider Mr Spry's proposal but that he did not see a problem in transferring to a combination of retainer and commission at some stage. He testified that he made it quite clear that his (i.e. the plaintiff's) minimum requirement would be a retainer of $5,500 per calendar month inclusive of GST. He said that Mr Spry's response was to say "We'll leave it at that and look at the commission basis at a later date, to be determined". He said that Mr Spry suggested that the parties "review the sales figures on a three monthly basis to ascertain what commission would be due to [the plaintiff] above the fixed retainer". Based upon some figures which Mr Giandzi said were "being toyed around" by the defendant's management before the meeting, Mr Giandzi proposed to Mr Spry that the plaintiff's commission be calculated at the rate of 10 per cent on sales above $33,000 per month. He testified that Mr Spry said that he could not "see a problem with that because we hadn't attained those figures at that stage".
According to Mr Giandzi's evidence, the discussion then turned to expenses which he incurred on behalf of the plaintiff whilst travelling out of the Perth metropolitan area. He testified that he told Mr Spry that the plaintiff required reimbursement of those costs and that the defendant would need to pay for a hire car for Mr Giandzi if such trips were extensive, which Mr Spry said was "understandable" and "there was no problem".
Mr Giandzi testified that he said to Mr Spry "that's sounds like a deal to me" and he extended his hand to shake hands with Mr Spry, whereupon Mr Spry said "Yes, that is a deal" and the two men shook hands. Mr Giandzi then said to Mr Spry that he would send him an email to which Mr Spry replied "Yes, that's fine. As soon as you do that, then I'll work on a draft for your agreement to be formalised". The two men then decided to go out together for a meal.
Mr Giandzi testified that both he and Mr Spry took notes during the meeting. Mr Giandzi said that he transcribed his notes to an email which was sent to Mr Spry on 23 March 2004. He destroyed his notes once the email had been sent. Mr Spry replied to that email on 24 March 2004 by interposing his comments after each of Mr Giandzi's points (i.e. his email was a composite of Mr Giandzi's email and his reply). I have set out the text of the composite email below (Mr Spry's contribution is in italics for ease of differentiation):
"Subject: contract
Peter to go through my contract particulars;
1)Duration 12 months [review every three months].
I don't think this a problem.
2)Remuneration to stay as is but additional 10 per cent commission over certain sales figures [to be determined soon].
I think we talked more about a point of change over as it is a little onfair [sic – unfair] if we have big peaks and troughs. What about we leave the retainer alone for a while then reduce it month by month as the sales grow? I will work on a draft for us to discuss tomorrow.
3)Fuel reimbursed on out of town visits.
No problem.
4)Any extended country trips the company will supply a hire vehicle and expenses.
It is only fair that we pay for country travel expenses but I cant see the need for a hire car each time you travel. I think we need to look at this on a case by case basis considering what you need to take and who you are seeing?
I will give you a call tomorrow and perhaps you can come over in the arvo.
Best regards Peter
Can you add to this?
George Giandzi".
No evidence was adduced from Mr Giandzi (either in chief or cross‑examination) as to the origin or purpose of the words in parenthesis in paragraph 1) and I am unable to attach any significance to their inclusion in the email. In particular, there was no evidence adduced by Mr Giandzi that the contract term was discussed at the meeting on Saturday evening on any basis other than it would be a full 12 months.
Mr Giandzi testified that the meeting referred to in the final paragraph of Mr Spry's answer took place at Mr Spry's residence on the afternoon of Thursday 25 March 2004. He said that the meeting was arranged in a telephone call that Mr Spry made to him earlier that morning. He said that Mr Spry asked Mr Giandzi to call in to see him when he (Mr Giandzi) had returned to Perth from a trip to the country. He said that he made a diary entry for the meeting. The relevant page was tendered in evidence and read "3.00 meeting at P. Spry". He said that he arrived at Mr Spry's house at approximately 3 pm and found that Mr Spry was "shaken" because of his father's ill health. As a result Mr Spry said that he was unable to have a full meeting and only wanted to talk about the commission structure that would apply to the plaintiff's contract. Contrary to his email to Mr Giandzi of 24 March, Mr Spry did not have a draft contract available for discussion. Mr Giandzi testified that Mr Spry apologised to him for failing to have the draft ready for discussion and said that this would happen as soon as possible. (In fact he never received a draft agreement from Mr Spry.) Mr Giandzi testified that he and Mr Spry discussed a commission structure based on a commission over and above the plaintiff's existing retainer, calculated at 10 per cent of sales in excess of $33,000 per month, payable quarterly.
Mr Giandzi testified that he had a discussion with Mr Spry in late June or early July 2004 in which he (Mr Giandzi) enquired as to the possibility of seeing sales figures so he could ascertain if the plaintiff was entitled to any commission. He said that Mr Spry's response was "I'll see what I can do" but that he knew "that we did not attain the budget figures".
Turning to the events of 10 August 2004, Mr Giandzi said that he arrived at the defendant's premises in Malaga at 9 am with the intention of collecting some literature and heading off to his first appointment. One of the secretaries informed Mr Giandzi that Mr Spry wanted to see him, so Mr Giandzi waited in the office for Mr Spry to arrive. Mr Spry arrived just after 10 am and invited Mr Giandzi into his office. When they had both entered the office Mr Spry closed the door and asked Mr Giandzi to sit down, which he did. Mr Giandzi testified that Mr Spry then said to him "George, your services are no longer required" to which Mr Giandzi replied "What do you mean?". Mr Spry then said "Well, sales figures have not achieved what we were hoping, and your services are no longer required". Mr Giandzi testified that he said to Mr Spry "Peter, I believe we have a contract in place" to which Mr Spry said "No, we do not have any contract in place". Mr Giandzi testified that he said "Well, I'll seek legal advice in this matter, because I am certain that we do have a contract in place". Mr Spry said, "No, we don't, and we want you to leave, I want you to leave now. If you could hand me all your documentations and all your price lists of our products, and then you may leave". Mr Giandzi said that he then went to his desk, collected all of his literature, price lists and product information, handed them to Mr Spry and left the building.
Under cross‑examination, Mr Giandzi said that the discussion between he and Mr Spry at their apartment complex on Thursday 18 March was informal and general and related to "business and products and chemicals". He said that he tried to arrange a time to meet with Mr Spry to discuss the plaintiff's contract, but Mr Spry declined on the ground that he was tired and did not have the time to do so. Mr Giandzi denied that this was the only occasion that the subject of the plaintiff's contract arose during the Brisbane trip. As to the meeting on 20 March 2004, Mr Giandzi said that he told Mr Spry that he would not work for the defendant for less than $5,500 per calendar month (including GST) and that he was looking for an increase in remuneration (i.e. commission over and above the base figure). As regards the wording of his email, he denied that his words "Can you add to this?" at the end implied that the contract terms had not been settled and he denied that he was inviting Mr Spry to propose additional terms. He testified that he was inviting Mr Spry to reply if he (i.e. Mr Giandzi) had omitted anything from the email. He testified on several occasions that he and Mr Spry shook hands at the end of their meeting on 20 March 2004.

Under cross‑examination Mr Giandzi denied Mr Spry's version of the meeting of 10 August 2004 (see par 28 below). In particular, he denied that he and Mr Spry referred to a problematic product trial which Mr Giandzi had been conducting for a client, namely the Kailis Group. Mr Giandzi said the problems with the Kailis Group trial had been discussed with Mr Spry previously. He accepted that there had been some hostility between the two of them about it.

The defendant's evidence

The defendant called evidence from Mr Stephen Palframan, who joined the company as chief executive officer on 1 January 2004. Mr Palframan's evidence was uncontentious and established that in the period that he was managing the defendant the company's focus moved from research and development to the commercialisation of products and the expansion of sales. He testified that the company wished to move towards a policy of commission‑based remuneration and that this policy was communicated to Mr Spry.
The defendant then called Mr Terry Smith. Mr Smith was one of the founding shareholders and directors of the defendant, but left the company in early April 2005. During the period of the plaintiff's relationship with the defendant Mr Smith's role was mostly in the area of finance and administration and it fell to him to pay the plaintiff's invoices and handle administrative matters associated with the plaintiff's consultancy agreement. He denied being Mr Giandzi's direct supervisor. He confirmed Mr Palframan's evidence that the defendant preferred to pay sales representatives on a commission basis rather than by fixed retainer or salary.
Finally, the defendant called Mr Peter Spry. In his evidence‑in‑chief he testified that he and Mr Giandzi had a discussion in relation to sales and customer‑related issues on the morning of Thursday 18 March whilst they waited in the foyer of their apartment building. He testified that Mr Giandzi tried to discuss a new contract but that he (Mr Spry) declined to do so and he told Mr Giandzi that there was no need for a new contract in the absence of satisfactory sales performance. He testified that he learnt of his father's ill health on Friday 19 March and that he was "very distressed". Mr Spry denied each and every aspect of Mr Giandzi's evidence in relation to the alleged meeting on the evening of Saturday 20 March 2004. He denied that an appointment was arranged on the Saturday morning, denied that the meeting took place and testified that he and Mr Giandzi never met for the purpose of discussing the plaintiff's contract whilst they were at the Pork Expo. He was unable to explain why Mr Giandzi sent the email on 23 March and simply testified that it "came and I responded to it". He testified that the contractual terms set out in Mr Giandzi's email were "certainly not" agreed to between he and Mr Giandzi in Brisbane. In relation to a meeting with Mr Giandzi at his home on 25 March, he testified that he did not telephone Mr Giandzi to arrange it, that he could not recall whether Mr Giandzi came to his house on the relevant afternoon and that he did not have any record of any discussion of the matters set out in the email. When asked if the meeting at his home happened he simply answered "No".
In relation to the events of 10 August 2004, Mr Spry testified that he had not been satisfied with Mr Giandzi's performance and in particular in relation to the work that had been conducted for the Kailis Group. He testified that he and Mr Giandzi had a meeting on 10 August in which he said to Mr Giandzi that the work for the Kailis Group had been handled badly. He testified that Mr Giandzi became upset and asked him if he wanted him to leave, to which he replied "yes". He denied telling Mr Giandzi that his services were no longer required.
In cross‑examination Mr Spry was referred to par 2) of the composite email. It was put to Mr Spry that his words "I think we talked more about a point of changeover" predicated that, contrary to his evidence‑in‑chief, there must have been some discussion between he and Mr Giandzi in Brisbane in relation to the plaintiff's contract remuneration. Mr Spry then acknowledged that there had been some discussion in relation to the plaintiff's fixed remuneration of $5,500 per calendar month, albeit he insisted that this discussion occurred as part of their meeting on the Thursday morning. Mr Spry testified that "It was clear that George wanted a fixed income" but that he informed Mr Giandzi that that was "not where the company was going" and that there "had to be performance criteria". Mr Spry testified that he could not recall whether Mr Giandzi stipulated a minimum contract period of 12 months. He acknowledged that he did not want to lose Mr Giandzi's consultancy services and he said he was sure he would have said as much to Mr Giandzi.
Mr Spry was cross‑examined about his denial that a meeting took place in his home on 25 March 2004. He said that he did not recall the meeting but he did "recall inviting" Mr Giandzi.
Mr Spry was also cross‑examined in relation to some handwritten notes which he made on Pork Expo notepaper (Exhibit 5). The notes read as follows:
"George Giandzi
March 2004
Sales down – Plan to improve?
NONE
PS & GG to discuss future commission only?
GG wants a new contract discuss with directors not my area. T.S P.Mc want him out as he won't work.
GG – Has other interests needs to focus and do the calls.
GG needs to prove before any new agreement.
Must stay on month to month fixed.
Commission to start ASAP."
Self evidently, these notes pertain to Mr Giandzi's performance and the plaintiff's contractual arrangements. Mr Spry testified that he did not know when the notes were created but said that it was after the Pork Expo in Brisbane and that it could have been as late as early April 2004. In re‑examination he testified (in answer to leading questions) that the notes were not made contemporaneously with any discussions in Brisbane and were intended, in effect, to capture the substance of what was discussed between he and Mr Giandzi in Brisbane to enable him to report to his superior, Mr Palframan. (These notes were shown to Mr Giandzi in his evidence‑in‑chief. He testified that he knew nothing about them and denied that they reflected any discussion that took place between he and Mr Spry.)
When cross-examined about the meeting on 10 August 2004 Mr Spry denied a series of questions that effectively put Mr Giandzi's version to him, that is to say, he denied everything that Mr Giandzi said about that meeting. He did say that the meeting had been brief.

Findings of fact – the consultancy agreement

The first factual issue is whether an agreement was reached between Mr Giandzi and Mr Spry in Brisbane on 20 March 2004 and, if so, the terms of that agreement. I am satisfied that Mr Giandzi's evidence is to be preferred for a number of reasons. Mr Giandzi gave his evidence in a clear‑cut, confident and consistent manner throughout. The renewal of the plaintiff's contract was an important, single issue about which he would be unlikely to be mistaken. Further, Mr Giandzi made diary entries for both the meeting on 20 March and 25 March 2004 which corroborate his evidence that the meetings took place. I accept that Mr Giandzi made contemporaneous notes of the Saturday meeting and that these were transcribed into his email to Mr Spry of 23 March 2004.
In contrast, Mr Spry's evidence in relation to the discussions between the two men in March was problematic in several respects. Mr Spry testified in chief that no meeting took place between he and Mr Giandzi on 20 March and that their informal meeting on 18 March did not deal with the plaintiff's contract save for a brief exchange in which Mr Spry rejected Mr Giandzi's attempt to place it on the agenda. In other words, Mr Spry denied that any substantive discussions took place in Brisbane about the plaintiff's contract. However, under cross‑examination he accepted that there was some discussion in relation to the plaintiff's remuneration during the Expo, a fact which was obvious from his contribution to paragraph 2) of the composite email. His evidence‑in‑chief was also inconsistent to some extent with his re‑examination, in which he testified that his notes on Expo notepaper (Exhibit 5) were intended to be some form of record or aide memoire of what he discussed with Mr Giandzi in Brisbane. Whether they were, or were not, intended to be a record of any discussions is problematic (see par 36 below). The point I seek to make at this juncture is that Mr Spry's evidence‑in‑chief and re‑examination were inconsistent on this point. Next, Mr Spry denied that a meeting took place at his home on 25 March 2004 and testified that he could not recall anything about it. It seems to me that it is unlikely that the meeting did not take place given that he suggested it in the composite email and in cross-examination he stated that he recalled inviting Mr Giandzi.
It is necessary to comment further upon Mr Spry's notes (Exhibit 5). At face value they are capable of corroborating the defendant's case in so far as their critical tone and air of 'unfinished business' are inconsistent with Mr Spry intending to, or having in fact, amicably entered into a new agreement in the terms alleged by the plaintiff. However, in my view the notes cannot be used for that purpose for the following reasons. First, the issue on the pleadings is whether an oral agreement was entered into on 20 March 2004. The notes were private to Mr Spry and are not relied upon by either party as having any contractual force (that is, they are not said to be evidence of an agreement or of contractual negotiations of any kind). Second, the notes were not relied upon by Mr Spry to refresh his memory and he did not actually testify that he and Mr Giandzi had a discussion in terms of the notes, apart from a bare assertion in re‑examination that the notes were intended to be a record of what was discussed in Brisbane. If the issues in the notes were discussed one would expect Mr Spry and Mr Giandzi to remember having done so having regard to their somewhat pejorative nature in places. Mr Giandzi was asked about the notes in his evidence‑in‑chief but denied that they reflected any discussion between he and Mr Spry and it was not put to him in cross‑examination that any discussion had taken place in terms of the notes. Third, as I read the notes, they tend to reflect personal points of view or reflections rather than a record of discussions between the two men. If one assumes for analytical purposes that they do comprise reflections of Mr Spry about the merits of the defendant entering into a new contract with the plaintiff, it remains the case that they do not reflect Mr Spry or Mr Giandzi's evidence about what actually transpired (save for the generalised evidence that Mr Spry gave in re‑examination). In short, the notes are pregnant with possibilities which did not arise on the evidence or pleadings. They are a private, self‑serving, out of court statement and are of no probative value in respect of the material facts.

Moreover, to the extent that the notes record Mr Spry's thoughts at a particular point in time, they must be contrasted with his evidence that he did not want to lose Mr Giandzi's services and that he would have said as much to him and also with the thoughts that he expressed in his email of 24 March 2004, all of which tended to be conciliatory towards Mr Giandzi and accepting of a twelve month contract extension. It appears to me that the things that Mr Spry was prepared to say to Mr Giandzi were not necessarily the same as his private thoughts and that he adopted an amicable or conciliatory approach with Mr Giandzi at all times in March.
In conclusion I find Mr Giandzi's evidence about the events of March 2004 to be more credible than that of Mr Spry and I accept his evidence wherever it conflicts with that of Mr Spry. Therefore, I am satisfied that the following findings can be made on the balance of probabilities, namely that at a meeting in their apartment in Brisbane on the evening of 20 March 2004 Mr Giandzi on behalf of the plaintiff and Mr Spry on behalf of the defendant verbally agreed upon the following and then shook hands:
1.The plaintiff would continue to provide consultancy services to the defendant through the agency of Mr Giandzi.
2.The term of the new agreement would be 12 months.
3.The defendant would continue to pay the plaintiff a consultancy fee of not less than $5,500 per month (inclusive of GST). I am mindful of Mr Giandzi's evidence that he initially said he would "consider" Mr Spry's proposal that the plaintiff's retainer be left at $5,500 per month (inclusive of GST) – that is, Mr Giandzi did not initially accept the proposal that the plaintiff now asserts was agreed. However, in the course of the discussions Mr Giandzi said that the plaintiff required a minimum retainer of $5,500 per month. Mr Spry replied "we'll leave it at that and look at the commission basis at a later date…" and at the end of the meeting they both said they had a "deal" and shook hands. In my view these statements and actions were sufficient evidence of offer and acceptance to enable a finding to be made that the parties had reached a consensus in relation to the plaintiff's minimum retainer.
4.The parties would confer with a view to negotiating an agreement upon the plaintiff's commission income.
5.The defendant would reimburse the plaintiff for fuel expenses incurred on trips out of the Perth metropolitan area.
6.The defendant would supply a hire vehicle to the plaintiff as and when required for any extensive travel by Mr Giandzi in the country.
7.Mr Giandzi would confirm the agreed terms by email whereupon Mr Spry would draft a formal contract for execution by the parties.

Was a legally binding agreement entered into?

Having made those findings, I must now address the defendant's contention that the parties did not enter into a final and conclusive contract. The defendant relies on two grounds. First, it contends that the parties never reached a consensus because they did not agree upon all of the material terms of the agreement. Second, the defendant contends that the parties did not intend to create legally binding relations between them until a formal agreement was executed (which never occurred). The defendant contends that the case falls within the third category or class of cases referred to by the High Court of Australia in Masters v Cameron (1954) 91 CLR 353. As the defendant argued its case it became apparent that these two contentions are inter‑related, because the second contention relies in part on the first. That is to say, the alleged lack of consensus on certain material terms which underlies the first contention is also relied upon as the reason the parties intended that there would be no binding contract until a formal agreement was executed – ie, because some of the material terms would be settled in the formal contract.
In support of the first contention the defendant pointed to the final sentence of Mr Giandzi's email of 23 March 2004, that is, the question "Can you add to this?" and submitted that the email was intended to be an offer to the defendant, not a record of a concluded agreement. In my view there would be some force in that submission if the email stood by itself. But, that is not the correct factual position. The email must be understood in the context of my findings as to what transpired in Brisbane on 20 March. Mr Giandzi testified that the question was an invitation to add any points that he had omitted and not an invitation to Mr Spry to raise additional topics. In my view the question is capable of being read in that way.
The defendant next submitted that the parties did not attain a consensus in relation to Mr Giandzi's entitlement to a hire car for country trips. It is submitted, in effect, that there was a lack of certainty as to what was agreed because of a lack of precision in the word "extensive". However, I do not accept that submission. In my view the word "extensive" was used by the parties in their negotiations as being synonymous with "extended", (as pleaded by the plaintiff), meaning "prolonged" or "of wide scope" (see the definition in the Shorter Oxford English Dictionary). In my view those expressions are capable of application in a commercial context by parties acting reasonably in the implementation of their agreement, or by a court if required to enforce the agreement.
In further support of its first contention, the defendant pointed to the fact that the parties did not finalise the proposed commission‑based system of remuneration in the meeting in Brisbane. In my view it is clear on the evidence (and I have so found) that on 20 March 2004 the parties agreed that some form of commission‑based remuneration would be appropriate, but had not agreed upon the terms of that remuneration. The parties had only agreed to negotiate about it. It was submitted by the defendant that the parties had not finalised their agreement because an essential term of the contract, namely the plaintiff's total remuneration package, remained to be settled. There is some force in the defendant's submission because Mr Giandzi went into the meeting with Mr Spry seeking not only security of tenure for the plaintiff, but an improved remuneration package. That did not transpire and the parties simply agreed to negotiate about an aspect of the remuneration package which would provide the potential for the plaintiff to earn additional income. The plaintiff submitted that a consensus was reached on an interim basis and that the agreement was intended to be legally binding. This requires a consideration of the principles enunciated in Masters v Cameron.
Masters v Cameron addressed the situation where the parties enter into an informal or short form of agreement which contemplates the subsequent preparation of a formal contract. The High Court pointed out (at 360) that there are three categories of cases of this kind:
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless make performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
It has been held that a fourth category exists, by way of variation of the first category, namely where the parties intend to be bound immediately by the terms which they have agreed upon, but expect to make a further contract in substitution for the first contract containing, by consent, additional terms. (See Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486, per Ipp J at 494 ‑ 495 citing Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 per McClelland J at 628; affirmed on appeal (1986) 40 NSWLR 631 per McHugh JA (Kirby P and Glass JA concurring). See also Cheshire & Fifoot, "Law of Contract", 8^th Australian ed at p 233 and "Masters v Cameron: The Fourth Class Here to Stay" (2005) 79 ALJ 493). Whether the parties have reached a binding agreement (that is to say whether the case falls within category 1, 2 or 4), or intended to postpone the formation of legally binding contractual relations, is a question of the parties' intention to be objectively ascertained from the language they have employed and no special form of words is essential (see Masters v Cameron at 362 and Godecke v Kirwan (1973) 129 CLR 629 at 638).

In this case the defendant submitted that any agreement between the parties falls into the third category enunciated in Masters v Cameron and accordingly the parties did not intend to enter into binding contractual relations. The defendant submitted that this is so because the parties left material terms unsettled, namely the proposed commission structure.
The defendant cited The Commercial Bank of Australia Ltd v G H Deane & Co Pty Ltd (1983) 2 Qd R 204 and submitted that where an agreement is effectively "subject to contract" a presumption arises that the agreement is in the third category. Now, it is clear from The Commercial Bank of Australia and the authorities referred to therein that there is a long history of treating contracts dealing with complex matters, particularly the sale and purchase of land, as presumptively falling into the third category where the parties have expressly stated that their agreement is "subject to contract". But, in my view that approach is not necessarily apposite in a case such as the present involving a relatively straightforward contract for the provision of consultancy services for 12 months.
In my view the agreement between the plaintiff and defendant falls into the so‑called first and fourth categories, that is to say the parties intended that their agreement would be reduced into a more formal document at a later stage, and that additional terms would be included in the contract reflecting any subsequent agreement in relation to the commission component of the plaintiff's remuneration. In other words, the parties intended on 20 March 2004 to be immediately bound by the terms that they had then agreed upon by way of an interim agreement. In my view this conclusion is supported by their use of the language of agreement (i.e. "that's a deal") and the solemn act of shaking hands. As such, I find that there was a legally enforceable contract between the plaintiff and the defendant entered into on 20 March 2004 in Brisbane as contended by the plaintiff in the terms set out in paragraphs 1, 2, 3, 4, 5 and 6 of par 38 above. Further, the contract remained in those terms because a formal contract was never executed.
I now turn to consider the next factual issue, namely whether the agreement was terminated by mutual consent, or by the plaintiff on the ground of the defendant's repudiatory breach.

Finding of fact - termination of the consultancy agreement

Once again, it is necessary to make findings which involve an assessment of the credibility of Mr Giandzi and Mr Spry. This task needs to be approached afresh. Some of the factors which influenced my assessment of credibility in relation to the events of March do not apply to the events of August 2004. So, for instance, Mr Giandzi's evidence is not supported by contemporaneous, documentary evidence such as diary entries and emails (and there is some documentary evidence that is ambiguous from the plaintiff's point of view – see par 51 below) and Mr Spry's evidence was not undermined by internal inconsistencies. Nevertheless, although I am not necessarily bound by my findings in relation to the events of March 2004, I do not exclude them either (as will be seen).
In my view, the following background matters are relevant. First, at the time or after the new agreement was entered into Mr Spry was actually in two minds about Mr Giandzi's future role with the defendant (see his notes in Exhibit 5). Second, the August meeting between Mr Giandzi and Mr Spry was called at the latter's request because he was dissatisfied with Mr Giandzi's performance, particularly in relation to his work with the Kailis Group (both Mr Spry and Mr Giandzi agreed that there was dissension between them about this, they only differed in their evidence as to the timing of that dissension). Third, as far as Mr Giandzi was concerned, the plaintiff had security of tenure, a benefit not to be lightly conceded. So, when the meeting took place the situation was thus. Mr Spry had been concerned with Mr Giandzi's performance for some time and matters had come to a head. For his part, Mr Giandzi was concerned with protecting what was due to the plaintiff. Against that background, it is difficult to comprehend that Mr Giandzi felt that it behoved him to offer to resign and leave the defendant's services on the spot but it is possible to comprehend that Mr Spry wanted to summarily dismiss the plaintiff (i.e. Mr Giandzi).
The defendant pointed to the fact that after the meeting the plaintiff rendered an invoice to the defendant for services which Mr Giandzi had provided up to 10 August 2004 which, it was submitted, evidenced that Mr Giandzi (for the plaintiff) accepted that the agreement had come to an end on that date and that the plaintiff was not entitled to any further money. There is some force in that submission which predicates that a person (such as Mr Giandzi) who regarded his company as still having a 12 month contract would continue rendering invoices on a monthly basis (as had been done before the termination). However, it must be noted that the stance which the plaintiff adopted was strictly correct from a legal point of view, namely, having accepted the defendant's repudiatory breach, the agreement did come to an end on 10 August and the plaintiff's right to monthly payments of liquidated sums pursuant to the contract ended and merged into a cause of action for unliquidated damages. In those circumstances it was legally correct for the plaintiff to only render an invoice for fees that were due and payable up to 10 August. Now, it could be said that the observance of the strict legal niceties in that way would not occur to a layman such as Mr Giandzi and that the delivery of the invoice was in reality an implied admission against interest. The difficulty that I have is that the implications of, or reasons for, the plaintiff proceeding as it did were not explored in the evidence in any meaningful respect by either party. The implication from Mr Giandzi's brief evidence on this point is that he regarded the plaintiff as having the right to render invoices for services actually rendered and that this ended when he left, but he still believed that the contract itself remained on foot. I would have been better able to assess the importance of this aspect of the matter if the invoice itself had been tendered in evidence, but this was not the case. I am simply left in the position that the plaintiff invoiced the defendant for such sum as was indisputably payable as at 10 August 2004 and that fact does not assist me one way or the other.
In the result I prefer Mr Giandzi's evidence about the meeting of 10 August 2004. In that regard I have taken into account the fact that Mr Giandzi's evidence in relation to the events of March 2004 was significantly more reliable than Mr Spry's evidence. For instance, Mr Spry had no recollection of two significant meetings that took place in March. Further, in my view the background to the August meeting renders Mr Giandzi's account more probable. I find that it is more probable than not that Mr Spry convened the meeting at his office for the express purpose of terminating the plaintiff's services, that Mr Giandzi did not know of that in advance, and that Mr Giandzi made no offer to terminate the agreement, or overture to do so, until Mr Spry laid the defendant's cards on the table, that is, in legal terms, until he repudiated the consultancy agreement on behalf of the defendant. I am mindful of the fact that on Mr Giandzi's evidence (which I accept) Mr Spry did not advert to the troubled Kailis Group contract when he explained why the plaintiff's contract was being terminated, which is at odds with the fact that the Kailis matter was probably uppermost in Mr Spry's reasons for wanting to sever the parties' relationship. However, in my view the fact that Mr Spry generalized and avoided the contentious Kailis matter is not particularly significant because Mr Spry was prone to taking the line of least resistance in his dealings with Mr Giandzi, a fact which is illustrated by the contrast between his private thoughts about Mr Giandzi in March 2004 (which were not always flattering) and his amicable dealings with Mr Giandzi at that time (see par 37 above).
For these reasons, I find that the plaintiff's consultancy agreement was lawfully terminated by the plaintiff on 10 August 2004 by reason of the defendant's repudiatory breach thereof. Accordingly, on that date the plaintiff's entitlement to payment for consultancy services under the contract ended and in lieu thereof the plaintiff became entitled to unliquidated damages to which I will turn shortly.
Before doing so, I wish to comment upon the evidence about a letter from the defendant's solicitors, Messrs Hammond Worthington to the plaintiff's solicitors, Messrs Lewis Blyth & Hooper.

The defendant's solicitor's letter dated 17 November 2004

On 17 November 2004 the defendant's solicitors, Messrs Hammond Worthington, wrote a letter to the plaintiff's solicitors, Messrs Lewis Blyth & Hooper, advising they had been appointed to act on behalf of the defendant and responding to a number of letters said to have been sent to the defendant by Messrs Lewis Blyth & Hooper on 30 September 2004, 11 October 2004, 25 October 2004 and 8 November 2004. Hammond Worthington's letter was received in evidence, but Lewis Blyth & Hooper's correspondence was not. Hammond Worthington's letter purported to set out the defendant's understanding of the factual position as follows. First, an agreement was reached between the plaintiff and the defendant in March 2004 to the effect that the plaintiff would be remunerated on a commission basis which would commence after a grace period of three months in which the plaintiff would continue to receive a fixed retainer of $5,000 per month. The purpose of the grace period was to allow the plaintiff to build up sales to make the commission structure viable. The letter went on to contend that according to the defendant the parties agreed to terminate the consultancy agreement at the meeting on 10 August 2004 because the plaintiff had failed to build up sufficient sales to justify being paid on a commission basis. It can be seen that this account differs significantly from Mr Spry's evidence at trial which was to the effect that no agreement was reached in March 2004 and that Mr Giandzi offered to terminate the consultancy arrangement in August 2004 because of performance problems including an ill‑fated trial with the Kailis Group. This inconsistency had the potential to significantly undermine the credibility of Mr Spry's evidence, but for the fact that there is no evidence that he gave the instructions to Hammond Worthington upon which the letter was based. Mr Spry was asked in cross‑examination whether he had given the instructions and he denied doing so. This is not a matter upon which a person could be mistaken and I am not prepared to make a finding that Mr Spry was dishonest about this issue. I accept Mr Spry's denial and accordingly the letter ceases to have any significance in terms of his credibility. It certainly has the potential to undermine the credibility of the person who did give the relevant instructions to Hammond Worthington, but there is no evidence as to who that person was and the matter simply cannot be taken any further.

Assessment of damages

The plaintiff claims to be entitled to damages in the sum of $40,142.47 on the basis that the plaintiff lost remuneration for the period 11 August 2004 to 20 March 2005 in that amount (inclusive of GST) as a result of the wrongful termination of the agreement on 10 August 2004. The defendant does not dispute the plaintiff's arithmetic and confined itself to contending that the plaintiff had partially mitigated its loss insofar as Mr Giandzi was able to earn some income in November and December 2004 whilst working at the Metropolitan Markets. Mr Giandzi testified that he worked from 3.30 am to 8.30 am for eight weeks, earning the plaintiff $800 per week plus GST. He testified that this was income that he would have earned (on behalf of the plaintiff) even if the agreement with the defendant had not been terminated since the relevant work was carried out outside normal working hours and would not have interfered with the provision of consultancy services to the defendant. In this regard it must be borne in mind that the consultancy agreement did not entitle the defendant to the exclusive use of Mr Giandzi's services.
In my view the issue is not whether the plaintiff and/or Mr Giandzi was entitled to carry out extra curricular work, but whether such would have occurred if the agreement between the plaintiff and the defendant had remained on foot until 20 March 2005. Unfortunately, there is very little evidence from which findings can be made in relation to this issue. In effect, I simply have Mr Giandzi's evidence or, more to the point, opinion that the employment at the Metropolitan Markets would have been taken up even if the contract with the defendant had remained on foot. The ultimate onus of proof in relation to damages lies on the plaintiff. The defendant has adduced evidence of mitigation of loss and the onus remains on the plaintiff to establish its actual loss. On the evidence, I simply do not know enough about the plaintiff's business activities outside the performance of the contract with the defendant, or the nature of the employment at the Metropolitan Markets, to be satisfied that it is more probable than not that Mr Giandzi would have performed the extra curricular work in addition to performing the contract with the defendant (if it had remained on foot). In that regard I take into account the fact that the times that Mr Giandzi worked at the Metropolitan Markets (that is, the early hours of the day for eight weeks) do not appear to me to be entirely compatible with the responsibilities that fell to him under the agreement with the defendant, which required him to devote approximately five days per week to the defendant's affairs and also necessitated that he travel outside the metropolitan area on a regular basis.
Therefore, I find that the plaintiff has not discharged the onus that lies upon it of proving that the plaintiff's breach of the consultancy agreement caused the plaintiff to lose the total sum of $40,142.47. Rather, I find that the plaintiff's loss to be equal to that sum less the plaintiff's earnings in November and December 2004 ($7040 inclusive of GST) with the result that the plaintiff is entitled to an award of damages in the sum of $33,102.47.