MacDonald Holdings (QLD) Pty Limited v Nikolas - [2007] NSWSC 552

No judgment structure available for this case.

CITATION: MacDonald Holdings (QLD) Pty Limited v Nikolas [2007] NSWSC 552

HEARING DATE(S): 9, 10, 12, 16, 17, 18, 23, 26 October 2006 and 26 February 2007

JUDGMENT DATE :
4 June 2007

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Bergin J

DECISION: Plaintiffs entitled to entry of judgment against the third defendant. Claims against first and second defendants dismissed. Cross-claim dismissed.

CATCHWORDS: [CONTRACT] - Whether terms for payment regime when "business performance" is "lower than expected" uncertain - Whether uncertain terms can be severed - Whether terms providing for payment of rental for full term of terminated agreement "liquidated damages" or "a penalty" - [MISLEADING OR DECEPTIVE CONDUCT] - Whether alleged misrepresentation made - Whether false - Whether reliance

LEGISLATION CITED: Civil Procedure Act 2005 (NSW)
Fair Trading Act 1987 (NSW)
Industrial Relations Act 1996 (NSW)
Trade Practices Act 1974 (Cth)

CASES CITED: Boucaut Bay Co Limited (in liquidation) v The Commonwealth (1927) 40 CLR 98
Brew v Whitlock (No 2) [1967] VR 803
David Jones Limited v Lunn (1969) 91 WN (NSW) 468
Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited [1915] AC 79
Esanda Finance Corp Limited v Plessnig (1989) 166 CLR 131
Fitzgerald v Masters (1956) 95 CLR 420
O’Dea v Allstates Leasing System (W.A.) Pty Limited (1983) 152 CLR 359
State of New South Wales v Banabelle Electrical Pty Limited (2002) 54 NSWLR 503
The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60
Trawl Industries of Australia Pty Limited v Effem Foods Pty Limited (trading as “Uncle Bens Of Australia”) (1992) 27 NSWLR 326
Whitlock v Brew (1968) 118 CLR 445

PARTIES: MacDonald Holdings (QLD) Pty Limited (first plaintiff)
Green Eagle Projects Pty Limited (second plaintiff)
Ian Robert MacDonald (third plaintiff)
Ian Grant MacDonald (fourth plaintiff)
Viktor Nikolas (first defendant)
Petar Nikolas (second defendant)
Gwydir Erosion & Fabrimat Supplies Pty Limited (third defendant)

FILE NUMBER(S): SC 50035/2005

COUNSEL: Mr DK Jordan and Ms L Young (plaintiffs)
Mr J Miller (defendants)

SOLICITORS: CBD Lawyers & Corporate Advisers (plaintiffs)
Swaab Attorneys (defendants)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

4 JUNE 2007

50035/05 MACDONALD HOLDINGS (QLD) PTY LTD & ORS v VIKTOR NIKOLAS & ORS

Introduction

1 The plaintiffs, MacDonald Holdings (QLD) Pty Limited (MDH), Green Eagle Projects Pty Limited (GEP), Ian Grant MacDonald (MacDonald) and his father, Ian Robert MacDonald, seek damages from the defendants, Viktor Nikolas (Nikolas), his father Petar Nikolas and their company Gwydir Erosion & Fabrimat Supplies Pty Limited (Gwydir), for fees claimed to be owing under a Licensing Agreement and under a Dry Hire Agreement (Hire Agreement) (the Fees). The plaintiffs claim that Gwydir wrongfully repudiated the Agreements by failing to pay the Fees and that the plaintiffs accepted those wrongful repudiations and terminated the Agreements.

2 The plaintiffs also claim that Gwydir, and Nikolas and his father as directors of Gwydir, represented that: (1) Gwydir had the capacity to perform the Agreements when it did not; and (2) Gwydir by itself, or supported by Nikolas and his father, had the financial capacity to honour the commitments under the Agreements when it did not. The plaintiffs claim that in reliance upon the representations they were induced into entering into the Licensing Agreement and the Hire Agreement and claim damages under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) in the amounts of the outstanding Fees.

3 The defendants cross-claim against the plaintiffs alleging that MacDonald engaged in misleading or deceptive conduct whereby Gwydir was induced into entering into the two Agreements. The defendants seek an order for the return of moneys paid under the Licensing Agreement ($395,000) and the Hire Agreement ($119,046.64). They also seek the return of an amount of $100,000 for an item of equipment, described in the Licensing Agreement as a “Head including Goose Neck” (the Head) that MDH failed to deliver.

4 Although there were numerous representations pleaded in the cross-claim, by the time the trial had concluded the only remaining representation alleged to have been made was that a few days prior to 14 November 2000, at the Union Hotel in North Sydney, MacDonald represented to Nikolas that during the financial year 1999-2000 the “sheetpiling business conducted by the MacDonald Group of Companies, in New South Wales had turned over $4.5 million”. It is alleged that this representation was false in that the sheetpiling business in New South Wales had turned over only about $815,000. It is alleged that Nikolas advised his father of the representation and that Gwydir was induced to enter into the Licence Agreement and Hire Agreement on the basis of the representation.

The MacDonald System

5 The MacDonald Sheet Piling & Anchor System (the System) was developed in Queensland by the MacDonald family. It is described as a versatile ground support system consisting of a series of overlapping formed steel sheet piles cantilevered or restrained by passive ground anchors. The System is used in a variety of applications including foreshore protection, harbour works trench support, earth support for basement construction, underpinning and open-cut trench excavation.

The parties

6 MacDonald operated MacDonald Sheet Piling Pty Limited from the commencement of its operation in New South Wales in about 1997 and worked on site as the manager of the business. MacDonald’s father is a director of MDH which operates the sheet piling business on Queensland, the head office for which is on Hope Island, Queensland. MacDonald is not a director of MDH or GEP.

7 Nikolas worked with his father’s firm, IM Engineering, as a labourer where he received estimating and technical training and steadily progressed from labourer through to project manager. He holds certificates in quality assurance and safety and has licences to operate industrial equipment of various sorts. Nikolas’ father is a mechanical fitter, a motor mechanic and a mill (clamp) engineer. Prior to the involvement with the New South Wales sheetpiling business, Gwydir carried on business as an erosion contractor installing fabrimat (polyester concrete mattresses) mainly for irrigation channels and in conjunction with various government departments and councils. Nikolas and his father purchased Gwydir from a businessman, Tony Hayes, who is an associate of MacDonald’s father.

Background to Agreements

8 At a meeting in the MDH office on Hope Island in May 2000 Tony Hayes suggested to MacDonald that Nikolas and his father might be potential licensees for the sheetpiling business in New South Wales. Mr Hayes advised MacDonald that Nikolas and his father had purchased Mr Hayes’ screw piling and concrete pumping business.

9 In June 2000 MacDonald met with Nikolas and his father at a major construction site at Kurri Kurri, New South Wales, to demonstrate the nature of the work carried out in New South Wales. Nikolas advised MacDonald that he would like to look into the business further and MacDonald invited him to visit the Sydney office to review various soil conditions and gain an insight into the current systems. In July 2000 Nikolas attended the offices of John Barker, MacDonald’s accountant. Although the defendants originally relied upon quite a deal of evidence in relation to this meeting to establish their misleading or deceptive conduct claims, it became irrelevant after the defendants abandoned all bar one of the alleged misrepresentations.

10 In July 2000 Nikolas and his father had a meeting with MacDonald at Camperdown on a proposed development site. At this meeting Nikolas advised MacDonald that he and his father were interested in becoming subcontractors for the System and were prepared to supply labour and to be trained. Between July and October 2000, the discussions and meetings between Nikolas and MacDonald were based upon a plan for Gwydir to provide sub-contractor services to MacDonald’s business. It was not until October 2000 that Nikolas expressed an interest in licensing the business. On about 21 October 2000 in a telephone conversation in which MacDonald suggested that Nikolas should start thinking about the training of a third person, Nikolas claims the following conversation took place:

Nikolas: If you’re feeding us sub-contract work in Sydney $25 is okay but what if we obtain work on the Central Coast or in Newcastle?

MacDonald: I’m not sure. Maybe we could think about form sort of royalty. We are so busy in Sydney that we can never satisfy demand. Put an offer in writing Viktor. We would consider the possibility of a royalty or perhaps a designated area, put a proposal in writing.

Nikolas: If we are going to invest money in the system and buy equipment we will need a commitment from you. You seem to be the most experienced and have everything in your head especially practical knowledge.

MacDonald: You have my commitment.

Nikolas: Ok I will get it to you as soon as possible.

11 At a meeting at MacDonald’s office in North Sydney in October 2000 MacDonald gave Nikolas hand written pages headed “Estimating/Quotation Sheets”. Nikolas claimed that at the time MacDonald gave those pages to him the following conversation took place:

MacDonald: I’ve been working on these figures for three years. This is the costing to run the office and the ground crew and all other associated costs. I originally intended to buy the Sydney operation from Ian but he wouldn’t sell it to me. I have worked these costings out from personal experience on the job. I have witnessed these expenses.

Nikolas: Has anyone verified these figures?

12 One of the pages was headed “Overheads at Present” with a description at the bottom of the page, “North Sydney Overhead”. That page listed total expenses of $17,200 per week and $894,000 per year and included the following:

20% Compulsorary (sic) $86,000 per week $4,472,000/yr
turn over

13 Nikolas and MacDonald discussed various jobs and figures on the pages and Nikolas referred MacDonald to a sheet that showed 20% profit. Nikolas claimed that MacDonald said that was a “minimum” and that some jobs made over 30%. MacDonald informed Nikolas that his father was not willing to sell the business to him and that they fought “like cats and dogs”. Nikolas clamed he also referred to the compulsory turnover at $86,000 per week with $4.472 million for the year and that the following conversation then took place:

Nikolas: What’s that mean Grant?

MacDonald: Well last year we turned over 4.4 million so that’s what I’d expect to do again.

Nikolas: Okay well what’s the last line here “Need to be at $50,000 a week?”

MacDonald: That would be the bare minimum I’d expect to break even.

Nikolas: So you’re telling me that $50,000 a week, $2.6 million a year, is the break even point?

14 On 26 October 2000 Nikolas faxed a letter dated 23 October 2000 on Gwydir’s letterhead to MacDonald at “MacDonald Sheet Piling” at North Sydney in the following terms:

RE: MUTUAL AGREEMENT

As discussed by phone last Saturday 21st October 2000, Ian MacDonald has instructed Gary Barker to outline some key points for a formal agreement between Gwydir Erosion & Fabrimat Supplies Pty Ltd and MacDonald Sheet Piling Pty Ltd (copy contained).

Since discussions over some months were between us, I invite you to make any changes to the following that you consider appropriate for the first draft. Upon the draft agreement being accepted by you, I shall send a copy to Ian McDonald for his approval.

Agreement Draft

1. Conformation ( sic ) of discussions:

b) Loan of excavator temporarily until such time Gwydir Erosion & Fabrimat (GEF) is able to purchase one.

c) Rate of $15.00/m² for work completed with borrowed equipment owned by MacDonald Sheet Piling Pty Ltd. (Head and Excavator).

d) Rate of $25.00/m² for work completed using equipment owned by G.E.F Pty Ltd. (Head and Excavator).

all

licensing price for designated area, years down the track?? As an option??

Peter Chalkley shall have first preference in financing the above machinery.

Ian McDonald has requested labour from Monday 16th of October 2000, to be invoiced against McDonald Sheet Piling Pty Ltd. What would the rate be?

In summary, we (Gwydir Erosion Fabrimat Supplies Pty Ltd) are very keen to finalise the above discussions.

sic

(sic)

any

15 On 26 October 2000 Nikolas received from Gary Barker of MacDonald Sheet Piling in Queensland a copy of a draft License Agreement that Mr Barker suggested was along similar lines to Nikolas’ fax of that day.

Alleged misrepresentation – November 2000

16 There is no issue that a meeting took place in the Union Hotel at North Sydney around 14 November 2000. There is also no issue that those present at the meeting included Nikolas, MacDonald and Tony Hayes. In the cross-claim (par 16) the defendants claim that during this meeting MacDonald represented that “during the financial year 1999-2000, the sheetpiling business conducted by the MacDonald Group of Companies in New South Wales, had turned over about $4.5 million”. This claim is denied by the plaintiffs and MacDonald claimed in his evidence that at the meeting he said “I believe between the Queensland and New South Wales installation[s]” the turnover was “around” $4 million and $4.5 million. I will deal with these competing versions of what occurred at this meeting later.

Offer

17 On 17 November 2000 Gwydir wrote to MacDonald’s father at MacDonald Sheet Piling Pty Ltd in Queensland in terms that included the following:

We propose the purchase of MacDonald Sheet Piling Pty Ltd (NSW) as per the following terms:-

Option 1

$200,000.00 deposit payable upon acceptance

$100,000.00 paid every two months until the balance of $500,000.00 has been paid in full
i.e. three instalments of $100,000.00 each over six month period.

Option 2

$200,000 deposit payable upon acceptance

$100,000 paid every three months until the balance of $500,000 has been paid in full
i.e. three instalments of $100,000 each over a nine month period.

This option shall only be used in the case of business performance being lower than expected.

Acceptance of these terms will give Viktor, Petar and Grant exclusive rights to all business facets in NSW.

18 There were a number of further discussions between Nikolas and MacDonald after the letter of offer and before the Agreements were signed. Nikolas claimed that MacDonald provided certain documents to him on 11 December 2000 whilst he was at the North Sydney office. Those documents have been referred to as documents 320, 321 and 322. These are documents with which I will deal in detail later when considering the versions of the conversation at the Union Hotel. They contain representations in relation to the turnover of MacDonald Sheetpiling (NSW1) Pty Ltd (NSW1) being approximately $4.3million. They are not relied upon by the defendants as separate causes of action but rather as evidence from which it would be concluded that it is more probable than not that the alleged representation in the Union Hotel was made.

19 On 12 December 2000 Nikolas wrote by facsimile to the National Australia Bank enclosing document 322, describing it as "total income" and stating that he believed the "true scenario to be much more attractive". That facsimile included the following:

Detailed below is the work at hand:-
- $361,400 - Pittwater Rd, Collaroy (29% GP min + 12%
- $250,000 - 43-45 North Styne Manley (sic)
- $250-300 k Marrickville
- $1M Arncliff[e]
----------------------------------------
$1.36M (without concrete) to be completed by end February 2001 weather permitting.

The Licensing Agreement

20 The Licensing Agreement between MDH, as Licensor, and Gwydir, as Licensee, dated 19 December 2000 suffers from a deal of imprecision. It included the following on the Front Sheet:

WHEREAS

The Licensor is entitled to market and license the Interlectual (sic) property of the MacDonald system and the Licensee is interested in entering into a license agreement on the terms herein.

21 MDH granted to Gwydir the “sole and exclusive licence” to market and use “the MacDonald System” in New South Wales and any improvements to that system (cl 1(b)). The expression “the MacDonald System” was not defined. MDH also granted Gwydir a licence to grant sub-licences and/or sub-territories in New South Wales in relation to the System (cl 1(c)); and a licence to market, distribute and sell consumable products associated with the System in New South Wales (cl 1(d)). Clause 1 also provided:

(sic)

22 There is nothing in the Licensing Agreement by way of definition or otherwise that assists with the interpretation of the meaning of the expression in clause 1, “except in the event business performance is lower than expected”. It is an expression that appears to have been taken from Gwydir’s letter of offer. There is nothing in the Agreement from which it is possible to ascertain what the business performance expectation of the parties was nor is there any mechanism for determining whether and/or how such business performance could be measured against any expectation.

23 Clause 2 of the Licence Agreement provided as follows:

Transfer of Contracts

On payment of the first $200,000 deposit and execution of the Agreements any new contracts in the name of MacDonald Sheet Piling (NSW1) Pty Ltd shall be transferred to the Licensee. Any new contract that has not been part performed or performed. Any contracts being performed at the date of execution shall be transferred to the Licensee as detailed in a schedule attached.

24 The only “Schedule” to the Licensing Agreement reads as follows: “[append material describing the MacDonald System]”. There is no schedule attached to the Licence Agreement detailing contracts “being performed at the date of execution” as described in Clause 2

25 Clause 4.1 provided as follows:

4. HIRE of the Sheet Piling Jaw and an Adaptor for driving Sheet Piling by Licensee (AS REQUIRED)

26 Clause 15 was in the following terms:

Development

The recipient acknowledges and agrees that in the event that it or any of its employees creates, improves, discovers or otherwise develop or creates improvements, enhancements, modifications, developments and innovations to the Confidential Information in the course of the Permitted Purpose, all rights, title and interest in and to such improvements and innovations shall be solely and exclusively owned by the Licensor unless otherwise agreed by the parties in writing.

27 There is no other reference in the Agreement to “Confidential Information” nor is there any other reference to “Permitted Purpose”. The word “recipient” suggests that this clause may have been cut and pasted from some other document in which a recipient apparently received information said to be confidential for some permitted purpose. Clause 20 moves into language of “owner” and “client”, not elsewhere defined, in relation to insurance of, amongst other things, “equipment”.

28 Clause 22 of the Agreement provided relevantly:

Financial Policies

(a) Maintain and employ in connection with Licensee’s business and operations under this Agreement such working capital and net worth as may be required to enable Licensee properly and fully to carry out and perform all of Licensee’s duties, obligations and responsibilities under this Agreement.

(b) Pay promptly all amounts due to Licensor in accordance with terms of sale extended by Licensor from time to time.

29 Clause 23 provided:

23 Use of Licensor’s Name
23.1 Unless agreed in writing by the Licensor, the Licensee will not use, authorise or permit the use of the name “MacDonald Sheet Piling” or any other trade mark or trade name owned by Licensor as part of its firm, corporate or business name in any way. Licensee shall not contest the right of Licensor to exclusive ownership of any trade mark or trade name used or claimed by Licensor. Licensee may, subject to written authority from Licensor, utilise Licensor’s name, trade marks or logos in advertising on stationery and business cards. Notwithstanding the above, the Licensor consents to the use by the Licensee of the name “MacDonald Sheet Piling (NSW 1) Limited” as contemplated by this clause.

30 The contemplation referred to in the expression “as contemplated by this clause” in clause 23.1 in respect of the use of the name “MacDonald Sheet Piling (NSW 1) Limited” is elusive. Similarly clause 37 referred to “Sub-Licensee”, rather than Licensee, agreeing to terms and conditions as stated in what was described as a Deed of Agreement as to Confidentiality “attached”. No such Deed was attached.

31 Clauses 24.1 and 24.2 (a), (e) and (f) provided as follows:

24 Terms and Termination
24.1 Unless earlier terminated as provided below, the term of this Agreement shall commence (Date Licensing Starts) and shall continue until (Date Licensing Expires).

(a) Failure of Licensee to fulfil or perform any one of the material duties, obligations or responsibilities of Licensee in this Agreement, which failure is not cured with the time, specified in the (Time to Cure Default Notice) from Licensor.

(e) Should the Agreement be terminate[d] for any reason, the Licensee gives the Licensor full and proper authority to enter any place of business of the Licensee to recover any equipment or property recoverable under legal entitlement or by this Agreement.

(f) In the event that the Licensee does not operate the business, in a normal business like way, for a period of six consecutive months then this Agreement is at an end.

32 The expression “Date Licensing Expires” was ‘explained’ in Appendix A, referred to below. It provided that the NSW total region purchase was “indefinite” and that “it does not expire”.

33 Clause 25 provided relevantly:

Obligations on Termination

On termination of this Agreement, Licensee shall cease to be an authorised Licensee of Licensor and:

(a) All amounts owing by Licensee to Licensor shall, notwithstanding prior terms of sale, become immediately due and payable.

(sic)

34 Clause 27 provided as follows:

(a) Licensee’s Liability – Notwithstanding any other clause in this Agreement, Licensee’s liability to the Licensor is limited to direct losses, damages or injuries which arise directly from the relationship between the parties, or which arise directly out of any breach of Licensee’s obligations under this Agreement to a maximum amount equal to the consideration paid by the Licensee for the granting of this head licence under clause 1. Licensee will have no further liability or responsibility to Licensor for any other direct, or any indirect or consequential injury, loss (including, without imitation, loss of profit) or damage, howsoever arising.

Licensor’s Liability

35 Clause 35 provided:

Severability

If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable terms had never been included.

36 Clause 39, which is a handwritten clause attached to the Agreement, was in the following terms:

As per telephone conference on Friday 15.12.00 between Andrew (Reynolds Lawyers), Grant MacDonald, Gary Barker, Tony Hayes (MacDonald Sheet Piling) & Viktor Nikolas (Gwydir Erosion and Fabrimat Suppliers).

The Licensee (sic) agrees in principle to this agreement. There shall be some fine “tuning” as mentioned by Andrew to a letter (appendix A) describing the assurance by Ian MacDonald that the “Licencee” (sic) of NSW shall have exclusive control of all aspects within the NSW region.

37 It is not clear what the parties had in mind by the use of the expression “other minor business outside this agreement” in this clause. Although attached to the Hire Agreement and not this Agreement, Appendix A was dated 19 December 2000 and was in the following terms:

APPENDIX A – NSW AGREEMENT

1. Assurance by Ian MacDonald in the form of a letter outlining exclusive control of all aspects within the NSW region.

This includes such things as:- right to sub-licence, all negotiations, orders placed, despatch, monies received, issue sub-contracts, the right to create installation “models” alternate to the NSW agreement, control of labour, machinery, contracts outside flood mitigation work.

2. Option to continue hire – head after the ten year hire has lapsed/ceased/expired. Discount of 70% for further 10 year period for original head, as is.

3. Re-sale of NSW total region. at any stage in the future with no monies or entitlements to go to Ian MacDonald or any entities which Ian may own eg (MacDonald Sheet Piling, Harbour Graphics, Greeneagle Projects etc.) Does not include intellectual or mechanical patents what so ever. Upon any sale of the whole of the NSW region, Grant MacDonald[‘]s commissions are still payable to Grant (or beneficiary by the new owners, and by the new owners in the future (ie to carry on with all new owners).

4. NSW total region purchase is indefinite as far as no time period (ie does not expire) clause 24.1.
5 Resale of NSW region to a prospective buyer has no restriction as long as financially the buyer is solvent & of good character & not in direct competition with MacDonald Sheet Piling Pty Ltd (as per clause 32) & (clause 8(a)).

38 The Hire Agreement was between GEP, as the owner, and Gwydir, as the client, for the term commencing on 2 January 2001 with a termination date of 28 December 2003. There was an option of “3 years hire + 2 if desired”. Gwydir agreed to pay GEP $29,791.67 per month (inclusive of GST) as the hiring fee. The equipment the subject of the Hire Agreement included two Hitachi 30 tonne excavators, one 30 tonne Kato crane and one 28 tonne Kato crane for yard use only. Clause 9 provided:

9. Payment obligations

(sic)

(b) make all payment to the place and in the manner specified by the owner by writing from time to time (or if the owner does not so specify then by cash or cheque to the office of the owner set out above) and without set-off deductions or withholdings on any account;

(c) pay interest on any rent or other money which the client does not pay on the due date or on demand (as applicable). Interest will be calculated daily at the rate of 2% per annum above the owners[’] cost of funding the overdue amount. Unpaid interest will be compounded monthly.

39 The Hire Agreement also provided as follows:

11

Procedure on expiry or termination

11.2 If the client does not return the equipment to the owner when required by this agreement, the owner may at any time retake possession of the equipment and the client:

(a) authorizes the owner to enter any premises where the equipment is located to dismantle the equipment if necessary and to remove it and to repair or reinstate those premises if the owner considers it appropriate to do so;

(b) release the owner from any liability which the owner might otherwise have for any damages or loss caused by the owner retaking possession of the equipment in accordance with this clause; and

(c) must reimburse to the owner on demand all costs and expenses incurred by the owner in retaking or attempting to retake possession of the equipment including, with limitation, costs and expenses incurred in doing anything contemplated in paragraph (a) and any monies paid by the owner in releasing any lien claimed over the equipment.

...

12 Default

(a) the client does not pay on the due date any installment (sic) of rent or other money payable under this agreement;

…

(a) take action to force the client to perform its obligations under this agreement; or

(b) terminate this agreement by notice to the client, whereupon the client must immediately return the equipment [t]o the owner in accordance with clause 11.1 and in either case the owner may also take action against the client to recover damages for breach of this agreement.

…

13. Fundamental provisions

(a) pays all rent and other money due under this agreement on time as is required by this agreement; and

(b) complies with its obligations under clauses 3(a) to (i), 4(a), (b) and (d), 6.1 and 15.1.

The client repudiates this Agreement if it does not comply with any of the fundamental provisions of this agreement.

(a) all unpaid rent up to the date of terminations and all other moneys which are then payable to the owner pursuant to this agreement; and

(b) the unpaid balance of the instalments (sic) of rent that would have been payable during the period from the date of termination until the expiry date set out in the schedule, brought to a present value by applying the discount rate to each such instalment over the period by which the date for payment is brought forward by this clause [Discount rate] means the rate which is 2% less than the lower of:

(i) the interest rate implicit in this agreement; and

(ii) the rate at which the owner can re-invest the amount received for a term ending on or as near as possible to the expiry date set out in the schedule; and

(c) any stamp duty and financial institutions duty payable in respect of the amounts referred to in paragraphs (a) and (b); and

(d) any costs and expenses incurred by the owner in repossessing the equipment and making any repairs necessary to bring it to the condition in which the client is required to return it under this agreement; and

40 Clause 14 provided as follows:

14. Exclusion of warranties

(a) before signing this agreement it examined the equipment and satisfied itself as to the condition, suitability and specifications of the equipment and its fitness for the client[‘]s purposes;

(b) if (sic) has relied solely upon its own judgment in all maters relation (sic) to the selection of the equipment;

(c) neither the owner nor anyone on its behalf has given any warranty or made any representation to the client as to the quality, fitness for any particular purpose, suitability or condition of the equipment;

(d) the client[‘]s obligations under this agreement (including, without limitation the obligation to pay rent) will continue despite any defect in or breakdown of the equipment or any other matter concerning the equipment;

(e) so far as the law permits all conditions and warranties on the part of the owner which might be implied in relation to this agreement or the equipment (whether by statute or otherwise) are excluded; and

(f) to the extent that any implied condition or warranty on the part of the owner cannot be excluded, the liability of the owner for the breach of any such condition or warranty is limited (but only to the extent permitted by law) at the discretion of the owner to the replacement of the equipment or the supply of equivalent equipment, payment of the cost of replacing the equipment or acquiring equivalent equipment, or the repair of the equipment or payment of the cost of having the equipment repaired.

14.2 If any provision of clause 14.1 is or becomes unlawful or void it shall be read down to the extent only to which it is unlawful or void.

(a) prior to signing this agreement the client conducted negotiations with the supplier of the equipment; and

(b) the client will obtain from the supplier any warranties that it may require in relation to the equipment.

41 Appendix A to the Hire Agreement was in the following terms:

1. For the client to have satisfied itself (as per clause 14.1(a)) as to the condition of the equipment, an examination is called for. New equipment does not require such examination. The client agrees to the examination/condition report to be documented, ie. for wear, damage, defects prior to this Hire Agreement. An independent party or personel ( sic ) to document the above condition report.

2. Breakdowns less than $1,000 the client shall be responsible to pay (clause 3(k)).

3. Breakdowns more than $1,000 Ian & client shall negotiate the cost of repairs, taking into account, maintenance, negligence, manufacturers (sic) warranty, insurance excess.

January to June 2001

42 The plaintiffs claim that Nikolas Pty Limited (NPL), not Gwydir, operated the NSW1 business between January 2001 and June 2001 and that any losses were suffered by NPL and not by Gwydir. The defendants claim that NPL was Gwydir’s nominee and that the payments that were made by NPL were made at Gwydir’s direction and were payments on behalf of Gwydir. There are bank records recording various payments, some of which are referred to below, but otherwise there are no loan or transactional documents recording any arrangements between Gwydir and NPL in relation to the operation of the sheetpiling business.

43 Anthony Monahan, the financial controller for NPL, gave evidence that in January 2001 there was no system set up to manage the accounting of the business. He agreed in cross-examination that the absence of such a system was “very poor” (tr 358) and also agreed that the business headquarters at North Sydney were “very disorganised” (tr 357). His preference would have been for an accounting system to be set up within days of the business being taken over (tr 359). He attended to the setting up of accounts for utilities, rent, telephones and general supplies from late January into February 2001. This was operated as a paper system and converted to a computer system at the end of February 2001.

44 Mr Monahan’s main function during January to June 2001 was for NPL but there may have been some occasions when he “did something for Gwydir”. The bank account for MacDonald Sheetpiling NSW (NSW1) was apparently opened on 17 January 2001 with the National Australia Bank (the Bank) in Hamilton near Newcastle in New South Wales. The account was styled “Nikolas Pty Limited t/as MacDonald Sheetpiling NSW”. Mr Monahan gave evidence that Nikolas raised a loan for $220,000 and $120,000 was deposited into the NPL account on 18 January 2001. On the same day a cheque in the amount of $100,000 was written which appears to have been deposited into the account of IM Engineering, however Mr Monahan was not able to offer an explanation for that transaction (tr 369). In cross-examination he was taken to other transactions in the IM Engineering account including transfers of $65,000 and agreed that it would appear that such deposits were to bring the overdraft within its limits (tr 371). The NPL account also included entries styled “Loan To Gwydir” of: $8,000 on 14 February 2001, $10,000 on 19 February 2001, $6,000 on 22 February 2001. There were also transactions listed as “pay Gwydir (Vn)” two amounts of $5,280 on 2 March 2001. There was also an entry on 9 March 2001 “Pay Gwydir Inv 42” in the amount of $10,371.

45 On 13 March 2001 the entry for cheque number 285 of $29,791.66 appears to be a payment of the monthly hiring fee under the Hire Agreement. There were further payments of invoices on 15 March 2001 styled “Pay Gwydir Inv 049” and “Pay Gwydir Inv 050” in the amounts of $1,463 and $3,300 respectively. On 26 March there were two entries “Pay licence Gwydir” each of $3,410. On the same day there was a further amount for cheque number 316 in the amount of $29,791.66, apparently for the hire fee. On 29 March there was a “Loan to Gwydir-Bb” in the amount of $964.20. Mr Monahan gave evidence that he understood that excavators were being used in the production of income for NPL trading as MacDonald Sheet Piling NSW. He agreed that income from that business was received by NPL.

46 It is apparent that on 14 February 2001 CBFC provided $110,000 to Gwydir for the leasing of two pieces of equipment. On the same day, Mr Monahan sent a facsimile to MacDonald’s father in Queensland asking him to note that $110,000 had been deposited into MDH’s bank account that day on behalf of “Viktor Nikolas (Nikolas P/L)”. Mr Monahan advised in that fax that $65,000 of that amount was a payment instalment “as required” and the balance of $45,000 was a “credit” to NPL and should not be used. Mr Monahan advised that Nikolas would discuss the matter with him and give him a “full explanation”. Mr Monahan said Nikolas directed him to send the fax in those terms (tr 388).

47 The plaintiffs seemed to claim that NPL did not have enough resources to operate the business and that it operated the business in a less than competent fashion. It was claimed that any loss was suffered by NPL and that Gwydir cannot claim such a loss; alternatively if NPL was acting on Gwydir’s behalf, any loss suffered by Gwydir was as a result of NPL’s incompetence. The evidence relied upon in this regard, although very general indeed, included: that Nikolas attended the business irregularly; that a contracts manager was not appointed until March or April 2001; that a contracts estimator was not appointed until March or April 2001; and that the business was under capitalised. The defendants claim that there were few contracts available to NPL and that although clause 2 of the Licensing Agreement required MDH to transfer contracts to it, no such contracts were transferred to it.

48 On 28 May 2001 Nikolas, Mr Monahan and Mr Linbeck flew to Queensland to attend a meeting with MacDonald, his father and Garry Barker at Hope Island. At this meeting Nikolas provided those present with a copy of a document analysing the profit and loss of the business to that date which showed a loss of $163,891. Mr Linbeck asked MacDonald's father why he thought the figures were so different to those of the previous year and suggested it had to be one of two things; either the cost of the goods had increased or alternatively a different type of work was done. Both MacDonald and his father confirmed that the cost of the goods was the same. Mr Linbeck suggested there was a need to compare the type of work done in 2000 against the type of work done in 2001. Nikolas said that he had a million dollars already approved by the Bank to purchase the machinery. McDonald said that such amount would not be enough to buy the machinery and that he bought one of the excavators for $300,000 that was now worth $400,000 because of the drop in the Australian dollar. Nikolas suggested that MacDonald get an independent third-party valuation and he would pay whatever the third-party said it was worth. Nikolas suggested that this way MacDonald would still make money on his investment. MacDonald’s father said, "No, I sold you New South Wales too cheaply. I'm not selling you the equipment; the lease term is for 3 years. That's how I'm making my money”.

Termination

49 No further payments were made by the defendants after 29 May 2001. On 4 June 2001 Reynolds Lawyers wrote to the directors of NPL advising that they acted for MDH and that NPL was indebted to MDH in the amount of $76,303.40 for goods supplied to NPL. The letter claimed that such amount had been outstanding for a considerable period and that MDH demanded repayment within seven days of the date of the letter. The letter also advised that if NPL failed to pay that amount MDH would take immediate steps to seek payment by way of Statutory Demand with a view to winding up NPL.

50 In their respective pleadings the parties referred to a letter dated 18 June 2001 from GEP's solicitors to Gwydir’s solicitors as the document allegedly terminating the Hire Agreement. Neither party has burdened the Court with this document in the evidence and it is unnecessary to refer to it other than to fix the date upon which it was alleged that the Hire Agreement was terminated by reason of Gwydir’s alleged wrongful repudiation by non-payment of amounts due under the Hire Agreement

51 On 17 July 2001 the plaintiffs' solicitors wrote to the defendants’ solicitors in terms that included the following:

Our client seeks to record their disappointment in that your clients have failed to accept the invitation to discuss matters that are outstanding.

In respect of the Licensing Agreement dated the 19th December 2001, your client has breached the Licensing Agreement by, inter alia, failing to make payments as required in clause 12 of the Agreement.

Also your client has breached or has been continually in breach of clause 22.1. In fact our client is daily receiving requests for payment from suppliers engaged by your clients.

Your client has also breached the licensing Agreement by using the name "Macdonald Sheet Piling" without the written authority to do so.

Further your client has printed business cards, which are misleading and deceptive in that they represent your client as a Director of Macdonald Sheet Piling when in fact he is not.

Subject to clause 26 we request your client cease claiming a right to the mail, however we do not seek to have any records destroyed pursuant to clause 26.

(sic)

52 Although the evidence lacks precision, there is no issue that MDH re-entered the North Sydney premises after the defendants left the business in July 2001. At that time MDH repossessed the business and the equipment. GEP contends that NPL was trading the business and in possession of the machinery up until and including July 2001. A liquidator was appointed to NPL in March 2002.

Previous proceedings

53 In July 2001 GEP commenced proceedings in the Supreme Court of Queensland seeking damages of $935,024 for non-payment of the Fees under the Hire Agreement. On 7 December 2001 the defendants commenced proceedings in the Industrial Relations Commission of New South Wales seeking orders declaring the Licensing Agreement and the Hire Agreement void on the basis that they were unfair contracts within the meaning of s 106 of the Industrial Relations Act 1996 (NSW). Although the evidence does not disclose the detail with any particularity, it appears that the parties decided that they would proceed with the present proceedings instead of these previously commenced proceedings.

These proceedings

54 The present proceedings were commenced by way of Summons filed on 18 March 2005. The proceedings were heard on 9, 10, 12, 16, 17, 18, 23 and 26 October 2006 and 26 February 2007. There were major problems with the plaintiffs’ affidavit evidence. Much of it was inadmissible and, having regard to the fact that these parties had been litigating for so many years, I granted leave to call oral evidence to replace the largely inadmissible affidavit evidence. There were also numerous amendments to the plaintiffs’ and defendants’ claims during the proceedings. The plaintiffs abandoned a number of misrepresentations alleged to have been made by the defendants and the defendants abandoned a number of misrepresentations alleged to have been made by the plaintiffs. Although the defendants had originally sought some relief under s 106 of the Industrial Relations Act 1996, that was also abandoned.

55 After the evidence concluded on 26 October 2006 the parties sought further adjournments in November and December 2006 to comply with a regime for final submissions. The plaintiffs filed written submissions in chief on 6 November 2006. The defendants’ submissions were filed on 23 November 2006 and the plaintiffs’ submissions in reply were filed on 5 February 2007. Final oral submissions were made on 26 February 2007. Mr DK Jordan of counsel, leading Ms L Young, of counsel, appeared for the plaintiffs and Mr James Miller, of counsel, appeared for the defendants.

Plaintiffs’ claim re Licensing Agreement

56 The payments due from Gwydir to MDH pursuant to clause 1 of the Licensing Agreement were: $200,000 on the signing of the Agreement on 19 December 2000; and then $100,000 every two months on each of 19 February 2001, 19 April 2001 and 19 June 2001; or every three months on 19 March 2001, 19 June 2001 and 19 September 2001 depending upon the level of business performance against expectation. The payments due under clause 4.1 were: $25,000 as deposit on signing of the Agreement on 19 December 2000 and the balance of $75,000 on 18 January 2001.

57 The plaintiffs submitted that as the “expected” business performance was not defined in the Licensing Agreement it was not possible to ascertain when the business performance was “lower than expected”. It was submitted that this part of clause 1 of the Licensing Agreement had no effect, and accordingly the three instalments of $100,000, after the initial payment of $200,000, were to be paid every two months rather then every three months.

58 The plaintiffs created the following payment schedule to demonstrate the outstanding amounts as at the date of purported termination of the Licensing Agreement:

Date	Payment Required	Sum of Payments Required	Payment Made	Sum of Payments Made
10 November 2000	$0	$25,000	$25,000
19 December 2000	$25,000 Deposit for the Head	$25,000	$25,000
21 December 2000	$25,000	$40,000	$65,000
2 January 2001	$200,000 Initial payment under clause 1	$225,000	$65,000
18 January 2001	$75,000 Balance of payment for the Head	$300,000	$220,000	$285,000
14 February 2001	$300,000	$45,000	$325,000
19 February 2001	$100,000 First instalment on two monthly basis – clause 1	$400,000	$325,000
14 March 2001	$400,000	$12,707.75	$337,707.75
19 April 2001	$100,000 Second instalment on two monthly basis – clause 1	$500,000	$337,707.75
21 May 2001	$500,000	$20,000	$357,707.75
29 May 2001	$500,000	$32,292.25	$395,000
19 June 2001	$100,000 Third instalment on two monthly basis – clause 1	$600,000	$395,000

59 The plaintiffs claim that Gwydir was in continuing default of the payment requirements under the Licensing Agreement from 19 February 2001. Although payments were made after that time the plaintiffs claim that by June 2001 $600,000 should have been paid and only $395,000 had been paid.

60 MDH was entitled to treat Gwydir’s non-compliance with its obligations under clause 1 of the Agreement as a failure to perform a material obligation. The plaintiffs were entitled to terminate the Agreement if Gwydir had not cured that failure within the time specified in a “Time to Cure Default Notice”. It has not been suggested by the defendants that MDH failed to comply with the service of the requisite Notice. Rather it was submitted that the business performance was lower than expected; the instalments became payable three monthly; and as at the date of purported termination Gwydir was not in breach of its obligations under clause 1 of the Agreement.

61 There is no issue in relation to the accuracy of the amounts in the payment schedule table above, however the defendants claimed that as the Head was not delivered to Gwydir it is reasonable to bring all the payments to account as payments under clause 1 of the Licensing Agreement. On that approach and on the premise that the instalments were to be paid every two months, by 17 July 2001 (the date of MDH’s alleged acceptance of Gwydir’s wrongful repudiation) Gwydir should have paid $500,000 and it had only paid $395,000. If the instalments were to be paid every three months on the basis that business performance was lower than expected, Gwydir should have paid $400,000 with the balance of $100,000 due on 19 September 2000. Thus, Gwydir was still in default by an amount of $5,000 as at 17 July 2001.

Uncertainty

62 A term in a contract is uncertain if it is not possible to ascertain the true intention of the parties in respect of that term. The apparent haste with which the Licensing Agreement was finalised by Gwydir without the assistance of an independent solicitor had the outcome of imprecision and some contractual curiosities. If there had been agreement on what the “expected” business performance was to be, so that Gwydir’s liability to pay the instalments under clause 1 was extended from every two months to every three months, it is reasonable to expect that the parties would have included it in the Agreement or perhaps in some contemporaneous document or communication. The first mention of the expected business performance concept is found in Gwydir’s letter of offer dated 17 November 2000. There is nothing in that letter that provides any definition of the so-called “expected” business performance. That expression found its way into clause 1 of the Licensing Agreement again without any definition.

63 The letter of offer was sent about one week after the alleged representation in the Union Hotel that the turnover of the business in New South Wales was $4.5 million or between $4 million and $4.5 million. The Licensing Agreement was signed after MacDonald gave Nikolas document 322 recording gross revenue for NSW1 in the previous financial year of $4.3 million. Nikolas’ evidence in his affidavit of 17 January 2006 was that he made a note on document 322 of the net profit of 22.8% and that MacDonald said, “That is an absolute minimum net profit you can expect.” Although Nikolas claimed that he was “impressed with the calculation of gross and net profit of the business” and that he relied on document 322 in forming his decision to cause Gwydir to enter into the Agreement, the statement allegedly made by MacDonald about the expected minimum profit was not pleaded as a representation in the defendants’ misleading or deceptive conduct claim and it was certainly not referred to in Nikolas’ evidence as a matter that he relied upon in causing Gwydir to enter into the Licensing Agreement. There is also no suggestion in Nikolas’ evidence that he included the expected business performance concept in the letter of offer as a result of anything said by MacDonald.

64 Nikolas gave no evidence of his “expectations” of the performance of the business at the time the letter of offer was sent on 17 November 2000. Even assuming that the expected business performance was that it would have a gross turnover similar to $4.3 million, there is no mechanism in the Licensing Agreement for the assessment of “business performance” against that expectation. The meaning of “business performance” is also rather elusive. It is certainly far from clear as to whether the parties meant for instance: the gross revenue as against the previous year; or the net profit of the operation at a particular time compared to the previous year; or the number of contracts secured against the number secured for the same period the previous year; or the prices negotiated in the contracts as compared to those in the contract the previous year. Commercial common sense suggests that where the expression “business performance” is combined with the concept of being “lower than expected” the parties probably intended that the performance of the business as a whole, that is the gross revenue less the expenses, being the net profit was what was intended by the use of that expression.

65 However there is also the question of when such an expectation was to be measured against performance. The first instalment of $100,000 was due two months after the payment of the initial $200,000. Questions that arise on this aspect of the matter include, if it was gross revenue that was the measure of business performance, whether it was intended that the revenue for that two month period was to be compared with the revenue for the same two month period the previous year or whether it was intended that a pro-rata comparison of 2/12th (or some other fraction) of the revenue of the previous year be made without taking into account the possible impact of industry holidays at the beginning of the year. Further questions arise because of the explanatory statement in the letter of offer that the three instalments were to be “over a six month period” or “over a nine month period” and the reference in clause 1 of the Agreement to “bi-monthly or quarterly payments”. If the payment of the first instalment was made at two months and business performance fell below expectations at about three and half months, it is not clear when the next instalment would fall due. The possibilities include the next payment being due three months from the last payment, being at the fifth month, or being due at the sixth month on the basis that the payment regime was then over a nine month period. This analysis demonstrates even further the uncertainty of the intention of the parties in using these words in clause 1 of the Agreement.

66 The only evidence of any assessment of the “business performance” in the six-month period from 19 December 2000 when the Licensing Agreement was signed was the reference to the alleged loss of $163,891 in profit and loss statements provided at the meeting on 28 May 2001 in Queensland. This figure was not analysed in any way in the evidence and there was no evidence of any suggestion that the instalment regime was discussed at that meeting or at any other time. The defendants called general evidence as to why the business was not “profitable” from Antony Stuart Monahan, the financial controller of NPL from January to July 2001. Mr Monahan’s evidence was that the business was not profitable for three main reasons: (1) the cost structure was too high resulting in no, or very limited, profit margins; (2) at the time it was taken over, the business had no forward order book; and (3) limited work was able to be acquired. Mr Monahan gave no evidence in relation to any expectation of business performance and dealt generally with the profitability of the business.

67 In any event it is necessary to construe the Licensing Agreement for the purpose of ascertaining, if possible, the true intention of the parties when they used the words “in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months” in clause 1 of the Agreement. It is clear that the parties were willing to give Gwydir a longer period to pay the balance of $300,000 if the stated circumstance pertained. However I am of the view that it is totally uncertain how that circumstance was to be ascertained and the time at which it was to be ascertained. I am also of the view that even if the circumstance could be ascertained the date of the next instalment was totally uncertain.

Severance

68 The parties turned their minds to the prospect of a “term” being held to be “invalid or unenforceable” in clause 35 of the Licensing Agreement which provided as follows:

Severability

If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable terms had never been included.

69 The plaintiffs submitted that the “term” that is able to be severed is that part of clause 1 that provides that “in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months”. The Court strives to preserve the validity of commercial agreements: Trawl Industries of Australia Pty Limited v Effem Foods Pty Limited (trading as “Uncle Bens Of Australia”) (1992) 27 NSWLR 326 per Kirby P at 332; however if, for instance, a term or part of the contract is uncertain, severance may occur if it does not result in materially altering the nature of the bargain that the parties have struck: State of New South Wales v Banabelle Electrical Pty Limited (2002) 54 NSWLR 503 at 517-518 paras [32]–[36].

70 In The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60 Knox CJ said at 72:

When a contract contains a number of stipulations one of which is void for uncertainty, the question whether the whole contract is void depends on the intention of the parties to be gathered from the instrument as a whole. If the contract be divisible, the part which is void may be separated from the rest and does not affect its validity .

71 The test to be applied is whether the parties intended that if clause 1, or any part of it, could not for any reason take effect, the whole contract must fail: Fitzgerald v Masters (1956) 95 CLR 420 at 427 per Dixon CJ and Fullagar J; Brew v Whitlock(No 2) [1967] VR 803 at 807 per Winneke CJ, Little and Gowans JJ; Whitlock v Brew (1968) 118 CLR 445 at 461 per Taylor Menzies and Owen JJ; David Jones Limited v Lunn (1969) 91 WN (NSW) 468. Clause 35 evinces an intention that the parties wished to protect the balance of the contract from failure after severance of a “term”. The use of the word “term” in clause 35 of the Licensing Agreement suggests that the parties were not intending that severability would only be available if the invalid portion of the agreement was of a minor nature. However that is not to suggest that the use of that word in clause 35 endorsed severance of a term, the result of which would be to materially alter the nature of the bargain between the parties.

72 The issue that arises in this instance is whether the severance of the offending part of clause 1, thereby preventing Gwydir from relying upon the second alternative for a longer period over which to pay the $300,000, would materially alter the terms of the bargain between the parties. In determining this issue it is appropriate to compare the weight that the uncertain, and therefore unenforceable, aspect of the consideration bears in relation to the consideration as a whole: DW Greig and JLR Davis Law of Contract (Lawbook Company, Sydney, 1987) at 371.

73 In Fitzgerald v Masters (1956) 95 CLR 420 the executors of the estate of the late John Martin Fitzgerald (the deceased), the appellants in the High Court, appealed from an order made in the Supreme Court of New South Wales that they, as executors of the will of the deceased, specifically perform an agreement in writing dated 5 March 1927, entered into between Rupert Clarence Masters, as purchaser and the deceased as vendor, of certain land in Dubbo, New South Wales. The contract recited that a deposit of £200 had been paid and that the balance of the purchase money was to be paid "in instalments of £10 or more, at the option of the purchaser, per month", the first of such payments to be made on or before 1 April 1927. Clause 2 of the contract provided that Masters was entitled to equal possession of the Homestead Farm with the deceased and was equally liable for the rents, rates, taxes, mortgage payments, including interest, and costs of any improvements or repairs. Clause 3 provided for transfer of one half interest in the Homestead Farm to Masters when he had paid the full amount of £850 to the deceased and provided that Masters complied with clause 2 of the contract. Clause 8 provided: "The usual conditions of sale in use or approved of by the Real Estate Institute of New South Wales relating to sales by private contract of lands held under the Crowns Lands Act shall so far as they are inconsistent (sic) herewith be deemed to be embodied herein". The appellants claimed that the document executed by the parties was not effectual to bring a contract into existence in that the terms were so uncertain that the "sale" could not be enforced. That argument was based on clause 8 of the contract. Mc Tiernan, Webb and Taylor JJ said at 438:

In the circumstances of the case it [clause 8] must be regarded simply as a compendious provision inserted by way of more abundant caution to cover such incidental matters as did not obtrude themselves for the consideration of the parties. But their intention that they should be bound by the declared terms is clear. And it is equally clear that they intended their agreement to subsist even if the provisions of cl. 8 should fail to incorporate some term or terms from an identifiable form containing "usual conditions". But it is said that if the provisions of cl. 8 proved to be nugatory, not because of the failure to find not inconsistent terms in an identifiable form, but because of the non-existence of any such form, the conclusion should be reached that the parties failed to agree. The suggestion does not carry conviction to our minds. Clause 8 was merely an appendage to the parties' declared agreement and there is nothing to show that it was intended to serve any purpose beyond providing for possible contingencies the nature of which they do not appear even to have contemplated. That they did not contract by reference to the provisions of any known form speaks eloquently that they mistakenly assumed the existence of some form of contract such as that described in cl. 8 does not affect the matter.

74 The primary consideration for the agreement was that Gwydir would pay MacDonald $500,000 in exchange for an exclusive licence to use “the MacDonald System” in New South Wales. The amount of $500,000 was payable in any event and although of the option of having an extra three months to pay the balance of $300,000 would probably not be appropriately described as a “mere appendage”, its absence does not in my view materially alter the nature of the parties’ bargain.

75 There may be a question of whether the provision in the Licensing Agreement, “in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months” is a "term" within the meaning clause 35 of the Agreement. It was not submitted that such provision was not a “term" within the meaning of that clause and, in any event, I am satisfied that this provision would fall within that description. I am satisfied that it is appropriate to sever the provision in clause 1 which provide that, “in the event business performance is lower than expected in which case the payments of $100,000 will be payable every three months”. Accordingly by 17 July 2001 Gwydir was in default of its obligations under the Licensing Agreement. Gwydir is entitled to a reduction in the amount owing of $100,000 by reason of the non-delivery of the Head. I am also satisfied that Mr Miller's submission that all monies paid, including the amount for the Head, should be taken into account in relation to Gwydir’s liability to MDH in respect of the $500,000. By reference to the Payment Schedule extracted earlier, the amount owing is therefore reduced to $500,000 of which $395,000 had been paid. Gwydir had failed to pay $105,000 then owing to MDH.

76 The next question that arises is whether MDH was entitled to terminate the Licensing Agreement. MDH claimed that Gwydir’s non-payment of the fee under clause 1 of the Licensing Agreement was a breach of a fundamental term entitling it to treat such breach as a wrongful repudiation of the Licensing Agreement and to terminate it. Clause 24.2 (a) provided that MDH could terminate the Agreement if Gwydir failed to "fulfil or perform any one of the material duties, obligations or responsibilities" under the Agreement and if such failure was not cured within the time specified in the “Time to Cure Default Notice” from MDH.

77 In its original Summons, filed on 18 March 2005, MDH claimed that on or about 20 June 2001, Gwydir was in breach of the provisions of clauses 1 and 4 of the Licensing Agreement (C 10). Gwydir denied that contention without particularising the basis of such denial (C 13). MDH claimed that by reason of Gwydir’s breaches of clauses 1 and 4 of the Licensing Agreement it had wrongfully repudiated the Agreement and had evidenced an intention no longer to be bound by it (C 13). It claimed that on or about 17 July 2001 MDH notified Gwydir that it had accepted its wrongful repudiation of the Agreement and its unwillingness to be bound by it and terminated the Licensing Agreement (C 14). In its original Defence dated 22 July 2005, Gwydir denied it had wrongfully repudiated the Licensing Agreement, without particularising the basis of that denial, and also denied that MDH was entitled to terminate the Agreement, however at that stage it indicated that it would rely upon s 106 of the Industrial Relations Act, a claim which as I have already said was later abandoned (C15 and 16).

78 MDH reiterated the claims in relation to wrongful repudiation in its Amended Summons filed on 18 October 2006 (C 10-16). In its Amended Defence, filed on 24 October 2006 and further amended on 26 October 2006, Gwydir abandoned the claim in relation to s 106 of the Industrial Relations Act, referred to the fact that it would rely upon the matters pleaded in the cross-claim, and denied it had wrongfully repudiated the Licensing Agreement and that MDH was entitled to terminate it (C 13-17). There was no reference in the respective pleadings, nor was there any written or oral submission made by or on behalf of Gwydir that MDH was not entitled to terminate the Licensing Agreement by reason of any failure to comply with clause 24.2(a) of the Licensing Agreement. The defendants’ defence as run at trial and put in final submissions was that: Gwydir was entitled to make quarterly payments rather than bi-monthly payments because business performance was lower than expected and was therefore not in default as at 17 July 2001; even if the payments were due bi-monthly the next instalment was not due until 19 June 2001; the Hire Agreement was terminated on 18 June 2001 having the effect of terminating the Licensing Agreement on the same day thus wrongfully terminating the Licensing Agreement prior to the next instalment of $100,000 being due to MDH.

79 As I have said earlier, the parties have not burdened the Court with a copy of the letter of 18 June 2001. However the detail of the letter was not relied upon other than for fixing the date. Mr Miller submitted that when the Hire Agreement was brought to an end it was impossible for Gwydir to exploit its purported exclusive rights in New South Wales because it did not have access to the equipment essential for that exploitation. It was also submitted that the termination of the Hire Agreement made it impossible for MDH to comply with its obligations under clause 4 of the Licensing Agreement. It was submitted that because termination of the Hire Agreement effectively destroyed the substratum of the Licensing Agreement, rescission of the Hire Agreement would terminate the Licensing Agreement.

80 I do not accept that the termination of the Hire Agreement, assumed to be on proper grounds, terminated the Licensing Agreement. The Licensing Agreement was between MDH and Gwydir. The Hire Agreement was between GEP and Gwydir. There is no doubt that on termination of the Hire Agreement Gwydir was obliged to return to GEP the equipment the subject of the Agreement (cl 11). The Hire Agreement does not refer to the Licensing Agreement. Clause 4 of the Licensing Agreement was a lease arrangement between MDH and Gwydir that did not depend upon anything in the Hire Agreement between GEP and Gwydir. MDH was obliged to lease the Head to Gwydir independently of anything in the Hire Agreement. There is nothing expressly or by implication in either the Licensing Agreement or the Hire Agreement to suggest that the parties intended that when the Hire Agreement was terminated, the Licensing Agreement would thereby be terminated. In a practical sense, it would certainly make life more difficult for Gwydir to continue with its Licensing Agreement once it lost the entitlement to the Hire Agreement, however it was in a position to consider alternative commercial arrangements either with MDH or GEP for the hire of relevant equipment. I am not satisfied that the parties intended that the termination of the Hire Agreement terminated the Licensing Agreement. I am also not satisfied that the Licensing Agreement was frustrated by the termination of the Hire Agreement. Accordingly the Licensing Agreement remained on foot until 17 July 2001.

81 Another reason I have recounted the way in which the defendants approached the trial and final submissions is to highlight the fact that it was never suggested that any termination of the agreement was wrongful by reason of non-compliance with clause 24.2(a). It is therefore unnecessary for me to deal with such clause; however, it seems to me that Gwydir did not require MDH to give it in any formal sense a Notice to Cure Defect under clause 24.2 (a). It is obvious that the parties had reached an impasse in relation to Gwydir’s failure to make payments due for product supplied to it by MDH. The letter of 4 June 2001 referred to earlier in this judgment gave Gwydir seven days to pay certain amounts that were outstanding. It is true that this letter does not refer to the specific agreement under which the demands were made but it is clear that Gwydir was in default, and that it evinced an intention to no longer be bound by the Licensing Agreement. The letter of 17 July 2001 refers to the fact that MDH had invited Gwydir to discuss the outstanding matters and also referred to Gwydir's failure to comply with clause 12 of the Licensing Agreement, which contained an obligation on Gwydir to pay all charges due within 14 days of delivery in the amount shown on “the invoice". This appears to be a reference to the supply of products from MDH to Gwydir rather than any suggestion of non-payment of the licence fee instalments.

82 In any event, as I have said, the defendants did not characterise or even raise any failure on MDH's behalf to give it time to cure any defect as conduct that would disentitle MDH from validly terminating the Licensing Agreement. I am satisfied that MDH was entitled in the circumstances both of non-payment of amounts for products and for failure to pay the instalment due under clause 1 of the Licensing Agreement to terminate the Agreement.

83 MDH is entitled to entry of judgment against Gwydir in the amount of $105,000. MDH also claims interest under s 100 of the Civil Procedure Act 2005 (NSW). If the parties are unable to agree on an order for interest I will hear argument in due course.

Plaintiffs' claim re Hire Agreement

84 Under the Hire Agreement, Gwydir paid GEP monthly payments of $29,791.67 for the months of January up to and including April 2001. GEP claimed that Gwydir’s failure to pay any further monthly payments was a breach of a fundamental term, amounting to a wrongful repudiation which it accepted on 18 June 2001 thereby terminating the Hire Agreement (cl 9 and 13). GEP abandoned its claim for the total amount of $935,024 being the total of the amount of instalments for three years and now only claims the amounts of the Fees due for one year, being $29,791.67 for the remaining eight months of that year totalling $238,333.36 or alternatively for the three months of July 2001 as at the date of termination, being $89,375.01 inclusive of GST.

85 GEP contends that clause 9(a) of the Hire Agreement sets out a "calculation" of total rent amounting to $357,500 and then divides that amount by 12 to arrive at a monthly instalment amount of $29,791.67. The Schedule to the Agreement provides for monthly instalments to be made on the first day of each month. GEP contends that the proper interpretation of the Schedule and clause 9(a) is that the hire amount is the yearly payment of $357,500 which GEP had agreed to accept in monthly instalments. It was submitted that GEP extended a concession to Gwydir in allowing it to pay the rental in instalments over 12 months, rather than requiring an "up-front" payment of the total rental amount. It was submitted that the total amount was an existing debt at the time the Hire Agreement was terminated. In those circumstances it was submitted that the proper quantum of damages is the amount owing under the Agreement at the date of termination, calculated as the total yearly rental, less the amounts paid. The amount paid is $119,166.68 leaving the balance of $238,333.36 owing to GEP at termination.

86 The defendants claim that clause 13.2 of the Hire Agreement is void or alternatively unenforceable as a penalty. It is alleged that clause 13.2 allows GEP to take advantage of its provisions on the occurrence of either a serious or a trivial breach. The plaintiffs submitted that this cannot be the case having regard to the clearly expressed delimiting words in the first sentence of clause 13.2, which refer only to a failure to comply with "fundamental provisions" of the Hire Agreement. It was submitted that a breach of a fundamental provision is not a trivial breach. GEP relies upon clause 13.2(b) as a contractual basis for accelerating the payment of the remaining rental instalments for the first year of rental. In this regard reliance was placed upon the following passage from Gibbs CJ’s judgement in O’Dea v Allstates Leasing System (W.A.) Pty Limited (1983) 152 CLR 359 at 366-367 (footnotes omitted):

The Protector Loan Co. v Grice; Wallingford v Mutual Society

Astley

Weldon

Thompson v Hudson

; Ex parte Burden; In re Neil

116 Nikolas did not give any evidence in his affidavit as to what was said at the Union Hotel and Mr Millar did not seek leave to ask Nikolas any questions in his evidence–in-chief as to what was said at the Union Hotel. Mr Miller relied upon the general claim made by Nikolas in his affidavit that MacDonald had said “the turnover of the business was between $4.4 and $4.5 million in the previous financial year” and had repeated "the figures" a number of times during the negotiations and prior to the entry into the Licensing Agreement. Mr Jordan did not put to Nikolas in cross-examination that at the Union Hotel MacDonald had referred to the turnover being for both the Queensland and New South Wales operations.

117 The extent of the cross-examination of Nikolas by Mr Jordan in relation to the conversation at the Union Hotel was as follows (tr 319):

Q. I think you said that the conversation you had had with Grant MacDonald was in a pub?
A. One of the conversations was in the Union Hotel.

Q. In relation to turnover?
A. That's correct.

Q. And at that time he said, or around that time he said something to the effect of the accounting is done in Queensland?
A. I don't believe we discussed accounting at that stage and where it was done.

Q. But in terms of the turnover, is it the case that you had been comforted to see the document [document 322] said 4.3 million?
A. It reflected discussions between Grant and I.

Q. Because at one stage you said you had heard 4.5. Do you recall giving that evidence?
A. Yes, 4.5, 4.4.

Q. I want to suggest to you that the figure suggested by Mr Grant Macdonald was 4 to 4.5. Do you recall that?
A. May have been.

118 The following exchange took place at the end of Mr Jordan’s cross-examination of Nikolas (tr 335):

HER HONOUR: So that this trial doesn't go off on a technicality. Mr Miller, I regard issue as having been joined between Mr MacDonald's version of what was said at the hotel and what Mr Nikolas claims was said at the hotel. I presume that Mr Jordan's lack of cross-examination of Mr Nikolas will not be relied upon by you on a Browne v Dunn point?

MILLER: No your Honour.

HER HONOUR: Is that the correct presumption?

119 In final submissions it was the plaintiffs who took the forensic approach that Nikolas had not given evidence of the conversation at the Union Hotel and accordingly MacDonald's version of the conversation should be accepted. In final written submissions the plaintiffs claimed as follows:

Mr Nikolas does not, at any time, give evidence as to which entity or entities Mr MacDonald is said to have made the representation about.

120 That submission is accurate. Nikolas' affidavit dealt specifically with the meeting at the Union Hotel (paragraph 54) and made no mention of the alleged conversation. The plaintiffs have accepted that a conversation did occur at the Union Hotel in which the turnover was mentioned, but it was submitted that the onus was on the defendants to establish what was actually said at that meeting, having regard to the fact that MacDonald’s evidence was that he said that the turnover of $4 million to $4.5 million was for both the Queensland and New South Wales businesses. The plaintiffs made the following written submission (2.4.10):

In the absence of any contrary evidence from Mr Nikolas, particularly in relation to which entity the Cross-Claimants' allege the representation refers, the evidence of Mr Macdonald must be accepted as to the content of the Union Hotel Representation.

121 The evidence that MacDonald gave in his affidavit was quite inconsistent with his oral evidence. However it would appear that his affidavit evidence may well be the truth of the matter. MacDonald was addressing the alleged representation in the cross-claim that the MacDonald Group of Companies in New South Wales had turned over $4.5 million. His affidavit evidence was: "I say that this figure is an accurate reflection of the New South Wales gross turnover for that period". It is peculiar then that he would claim in his oral evidence that he had represented that the figure of $4.5 million was the turnover of the combined businesses of Queensland and New South Wales. The fact was that the New South Wales business did have a turnover of $4.3 million, $800,000 of which was income from NSW1 and the balance of which was from Harbourgraphics Pty Limited (Harbourgraphics).

122 Harbourgraphics is a registered Queensland company and operated the business in New South Wales during the financial year 1999/2000 up to about March 2000 at which time NSW1 took over the operation of the business. The existence of Harbourgraphics as the company operating the business during that period was seized upon by Mr Miller in his final submissions in a manner that was difficult to understand. It has never been suggested that Harbourgraphics competed with Gwydir after it took over the business in 2001. Rather Mr Miller seemed to suggest that it was appropriate to exclude the revenue earned by Harbourgraphics for the business operation in New South Wales and to restrict the revenue for the business operation of New South Wales to that earned by NSW1.

123 The defendants’ claim is that the representation that was made at the Hotel was false. There is no evidence that MacDonald said at the Union Hotel that NSW1 had a turnover of $4 million to $4.5 million. Mr Miller submitted that such a representation can be gleaned from the use of the words "the MacDonald Group of Companies" and the fact that the cross-claim defined such term to exclude Harbourgraphics. I cannot accept this submission. What has to be proved is what was said at the Union Hotel. This cannot be done by an allegation in a pleading that the words "the MacDonald Group of Companies" were used, without giving any evidence that the words were used and then relying upon a definition of the words in the pleading to exclude a particular company from the Group. No evidence was given by Nikolas that MacDonald specifically excluded Harbourgraphics from the alleged turnover.

124 MacDonald maintained that to the best of his knowledge as at December 2000, the combined New South Wales and Queensland turnover was in the range of $4 million to $4.5 million. He also insisted that when he spoke to Nikolas at the Union Hotel at North Sydney he informed him of that range for both New South Wales and Queensland. MacDonald was cross-examined in relation to the figure of $4.3 million that appeared in document 322, which purported to be a turnover for NSW 1 as follows (tr. 150-151):

Q. Your understanding in November 2000 was that the combined turnover Queensland, New South Wales was in the range of four to four and a half million dollars?
A. Correct.

Q. You were also of the view at that time that the Queensland business for the financial year 99/2000 could not have been trading as low as about $200,000?
A. That’s correct.

Q. So, in November and May I suggest also December 2000, it would have been your view, would it not have, that the proposition that the New South Wales business alone was trading at 4.3 million dollars simply could not be true?
A. Say that again please?

Q. If the combined business on your understanding was trading in the range of four to four and a half million dollars?
A. Yes.

Q. The question then is any proposition put in November or December 2000 than in the previous financial year New South Wales, the New South Wales business had traded at 4.3, that is the proposition that you knew at that time must have been inaccurate?
A. Well, I didn't know that, that's what I am saying to you, I didn't know that turnover of 4.3 at that time.

Q. That was the basis of your knowledge?

A. That’s correct.

Q. And to your knowledge the combined turnover of the two States was that the range of four to four and a half million dollars?
A. For installation, yes.

125 McDonald was taken back to document 322 in which the turnover was stated to be $4.3 million and gave the following further evidence in cross-examination (tr 152-154):

Q. I am not asking you whether it was available to you, I am asking this question; if that document had been available to you in December 2000 what appears on that document would also have immediately have been a matter that you would have said to yourself that is just wrong, correct?
A. What I previously said, yes, I would say that this document, the accountant is saying we have had a turnover 4.3.

Q. But do you agree with me that what the document clearly sets out is a proposition that in December of 2000 on the basis of your knowledge you knew was incorrect?
A. No.

Q. Can I ask you to look at the document again carefully?
A. Yes.

Q. Do you see, do you accept that the figure of 4.3 million dollars?
A. Yes.

Q. If her Honour finds that this document puts forward a proposition the New South Wales business was trading at 4.3, that on the basis of your state of knowledge in December 2000 you would have instantly said that can't be right?
A. If I saw this document, yes.

…

Q Perhaps it will allow me to ask you this question, during the financial year 99/2000 the only source of income for New South Wales 1 was the sheetpiling business, correct?
A. Operation of all the systems in ground.

Q. The sheetpiling business?
A. Yeah.

Q. So, to the extent that the document 322 suggests that the gross income was 4.3 do you agree with me that what is suggested the proposition put there, income earned from the sheetpiling business by New South Wales 1 in the financial year ended 2000 was 4.3 million dollars?
A. That's what it says there.

Q. When you were preparing your affidavit of September 2005 you have told her Honour that you posed for yourself the question how correct is this document?
A. Yes.

Q. Did you pursue that interest in the question of the accuracy or correctness of the document?
A. It was explained to me.

126 MacDonald then gave evidence that a solicitor and an adviser explained to him that the $4.3 million was made up of “Harbourgraphics installation and NSW1”. He accepted that no such proposition appeared on the face of document 322 and that the only company referred to on the document was NSW1 (tr 154). He then gave the following further evidence in cross-examination (tr 155):

Q. It is the case, is it not, that certainly whilst preparing your affidavit of September 2005 you became aware that the company New South Wales 1 in the financial year 1999 to 2000 did not trade with a turnover of 4.3 million dollars?
A. Yes.

127 There are many curious aspects to this case, not the least of which were the myriad of amendments and changing positions of the parties throughout the trial. MacDonald's evidence is also very curious. It appears that his original affidavit evidence was correct, that is, that the figures mentioned at the Union Hotel were an accurate reflection of the gross turnover for the New South Wales business. It is true that the business turnover included the income for both Harbourgraphics and NSW1. I am not sure why, having given this evidence effectively justifying why the alleged representation in the cross-claim was made, MacDonald then gave oral evidence that the turnover to which he referred at the Union Hotel was the combined Queensland and New South Wales turnover. It appears from the evidence that the Queensland operation was “roughly” or “approximately” the same as the turnover of the New South Wales business (tr 402) and thus the combined turnover would have been double the figure mentioned by MacDonald. It is all very odd. The other curious aspect of the matter is the pleaded words "the McDonald Group of Companies" in the representation as claimed in the cross-claim. As I have said earlier, the route that Mr Miller took to try to establish that such expression excluded Harbourgraphics was flawed.

128 I am of the view that it is very unlikely that MacDonald used the rather formal words “the MacDonald Group of Companies in New South Wales” in his conversation at the Union Hotel. I am not persuaded that MacDonald’s version of what was said can be accepted. I found him a rather unreliable witness. I am satisfied on all the evidence that it is more probable than not that what MacDonald said at the Union Hotel was that the turnover of the New South Wales business was between $4 million and $4.5 million.

129 MacDonald was the construction manager for Harbourgraphics from 1997 until mid-2000. The financial statements for Harbourgraphics record a gross turnover for the year ending 30 June 2000 for the sheet piling operation in New South Wales of $3.27 million. Although MacDonald gave evidence that he pointed out to Nikolas a number of archived job files (tr 211) Nikolas claimed that he was unaware that any of the income recorded for NSW1 related to income earned by Harbourgraphics. This claim by Nikolas was tested in cross-examination in particular by reference to Appendix A to the Licensing Agreement, in which there was a reference to "Harbour Graphics" in Nikolas’ handwriting. That reference was in relation to the "re-sale of NSW total region" and included the statement that such sale could occur at any stage in the future "with no monies or entitlements to go to Ian McDonald or any entities which he may own eg (Macdonald Sheet Piling, Harbour Graphics, Green Eagle Projects etc.)". Nikolas was cross-examined as follows (tr 260-261):

Q. So, by the time that you drafted this document on 19 December 2000, you were aware of the existence of Harbourgraphics as an entity?
A. That's correct.

Q. And when you wrote "Harbour Graphics" here, you thought you were referring to Harbourgraphics Pty Ltd?
A. I assumed it was proprietary limited.

Q. You knew that it was an entity associated with Ian Macdonald, correct?
A. I assumed so. I didn't know who the director's were, but I assumed it would be a MacDonald group.

Q. You knew it as an entity associated with Macdonalds Sheetpiling, didn't you?
A. I don’t know if there was any link. Same with Green Eagle Projects.

…

Q. You put "Harbour Graphics" in here, because you thought it was relevant to the business which you were licensing as a result of the agreement of 19 December 2000?
A. That's correct, exclusive rights.

Q. So, not only did you want to exclude all others from the New South Wales territory, you particularly wanted to exclude entities associated with the Macdonalds?
A. And anybody else, that's correct.

Q. And here you particularly wanted to exclude Harbourgraphics, didn't you?
A. They were the only ones, to my knowledge, at that time, that's correct.

130 I am not satisfied that the reference to "Harbour Graphics" in Appendix A to the Licensing Agreement proves that Nikolas was aware that Harbourgraphics earned income from sheet piling in New South Wales. Nikolas was attempting to exclude companies associated with Ian MacDonald from receiving any monies in any future sale, irrespective of the nature of the company's business. There is absolutely no suggestion that Harbourgraphics was mentioned at the Union Hotel meeting, nor is there any suggestion that Harbourgraphics was mentioned in documents 320 to 322.

131 Christopher John Ryan, the accountant for the sheet piling business carried on by MacDonald in both Queensland and New South Wales at the relevant time, gave evidence that the turnover for NSW1 for the year ending 30 June 2000 was $826,000 and that Harbourgraphics had a turnover of $3.3 million, thus making a total turnover of the New South Wales business of about $4.125 million. In cross-examination of Mr Ryan Mr Miller elicited evidence that Harbourgraphics operated the New South Wales business for the majority of the year ending 30 June 2000 and that in the latter part of that year NSW1 took over trading the business (tr 401). It was well before the defendant became interested in the New South Wales business that Harbourgraphics had ceased to operate it. There does not seem to me to be anything sinister about the change of entity operating the New South Wales business. As I have said, this is not a case in which it is suggested that Harbourgraphics continued to trade in New South Wales in competition with NSW1 after Gwydir entered into the Licensing Agreement and Hire Agreement.

132 There is absolutely no issue that MacDonald advised Nikolas that if he wanted to look at the accounting and financial statements in relation to the New South Wales business, he would have to go to Hope Island where the documents were held. There is also no issue that there was a conversation between MacDonald and Nikolas in which Harbourgraphics was mentioned and that Macdonald said that Harbourgraphics did not have anything to do with the New South Wales business any more (tr 190; tr 258-259). That was a true statement. The representation that I have found that was made at the Union Hotel was not false. The turnover of the business in New South Wales in the year ending 30 June 2000 was $4.3 million and was within the range mentioned by MacDonald in the representation.

133 Mr Ryan was taken to document 322 and gave the following evidence in cross-examination (tr 404):

Q. 4.3 million is set out as the gross turnover?
A. Yes

Q. That was incorrect, wasn't it?
A. It is incorrect in the name of that entity. That is described at the top of the page.
Q. It is grossly incorrect to put it under the name of that identity, isn't it, Mr Ryan?
A. It is clearly incorrect.

134 It is true that document 322 referred only to NSW1 but that does not convert the representation that I have found to have been made into a false representation. As I have said a number of times document 322 was not relied upon as a separate cause of action. Indeed no case was run on the basis that had Gwydir known that the New South Wales business was operated by Harbourgraphics in the first half or two thirds of the financial year ending 30 June 2000, it would not have entered into the Licensing Agreement or the Hire Agreement. The approach the defendants adopted in the misleading or deceptive conduct claim seems to me to be misconceived. The misconception is the exclusion of the revenue of Harbourgraphics from the turnover of the New South Wales business for the year ending 30 June 2000. In my view there is no proper foundation for that exclusion. The representation was not false.

Reliance

135 Although, having regard to my finding in relation to the representation, it is unnecessary to deal with reliance, I should say this. There was a paucity of evidence in relation to any reliance upon a conversation in the Union Hotel. As I have said earlier, Nikolas did not even refer to the alleged representation in his affidavit nor did he give oral evidence in chief of the content of such representation. The letter of offer dated 17 November 2000 was written within days of the representation and made no reference to the representation. The letter of offer included the rider that the payment regime in Option 2 would become operative when business performance was lower than expected. I am of the view that the inclusion of that rider means that the defendants did not rely upon the representation, but rather sought to protect themselves against the prospect of lower then expected business performance, by giving Gwydir a longer time within which to pay the balance of the instalments. Even if I had found that the representation made by MacDonald at the Union Hotel was not true, I would have had difficulty finding that Gwydir had relied upon it for the purpose of entering into the Licensing Agreement or the Hire Agreement.

136 The misleading or deceptive conduct claim against MDH fails. The cross-claim will be dismissed.

Conclusion

137 MDH is entitled to the entry of judgment on its claim under the Licensing Agreement. GEP is entitled to the entry of judgment on its claim under the Hire Agreement. The plaintiffs’ misleading or deceptive conduct claim is to be dismissed. The cross-claim is to be dismissed. The parties are to bring in Short Minutes of Order reflecting these findings together with an agreed order in relation to interest and costs. If the parties are unable to agree on an order in relation to costs and/or interest, I will hear argument when the matter is listed for the filing of the Short Minutes by arrangement with my Associate.

**************************

Actions

Download as PDF Download as Word Document

Citations

MacDonald Holdings (QLD) Pty Limited v Nikolas [2007] NSWSC 552

Most Recent Citation

Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106

Cases Citing This Decision

1

Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106

Cases Cited

9

Statutory Material Cited

4

R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68

Robinson v Young [2005] NSWSC 777

CITATION:	MacDonald Holdings (QLD) Pty Limited v Nikolas [2007] NSWSC 552
HEARING DATE(S):	9, 10, 12, 16, 17, 18, 23, 26 October 2006 and 26 February 2007
JUDGMENT DATE :	4 June 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Bergin J
DECISION:	Plaintiffs entitled to entry of judgment against the third defendant. Claims against first and second defendants dismissed. Cross-claim dismissed.
CATCHWORDS:	[CONTRACT] - Whether terms for payment regime when "business performance" is "lower than expected" uncertain - Whether uncertain terms can be severed - Whether terms providing for payment of rental for full term of terminated agreement "liquidated damages" or "a penalty" - [MISLEADING OR DECEPTIVE CONDUCT] - Whether alleged misrepresentation made - Whether false - Whether reliance
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Fair Trading Act 1987 (NSW) Industrial Relations Act 1996 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	Boucaut Bay Co Limited (in liquidation) v The Commonwealth (1927) 40 CLR 98 Brew v Whitlock (No 2) [1967] VR 803 David Jones Limited v Lunn (1969) 91 WN (NSW) 468 Dunlop Pneumatic Tyre Co Limited v New Garage and Motor Co Limited [1915] AC 79 Esanda Finance Corp Limited v Plessnig (1989) 166 CLR 131 Fitzgerald v Masters (1956) 95 CLR 420 O’Dea v Allstates Leasing System (W.A.) Pty Limited (1983) 152 CLR 359 State of New South Wales v Banabelle Electrical Pty Limited (2002) 54 NSWLR 503 The Life Insurance Company of Australia Limited v Phillips (1925) 36 CLR 60 Trawl Industries of Australia Pty Limited v Effem Foods Pty Limited (trading as “Uncle Bens Of Australia”) (1992) 27 NSWLR 326 Whitlock v Brew (1968) 118 CLR 445
PARTIES:	MacDonald Holdings (QLD) Pty Limited (first plaintiff) Green Eagle Projects Pty Limited (second plaintiff) Ian Robert MacDonald (third plaintiff) Ian Grant MacDonald (fourth plaintiff) Viktor Nikolas (first defendant) Petar Nikolas (second defendant) Gwydir Erosion & Fabrimat Supplies Pty Limited (third defendant)
FILE NUMBER(S):	SC 50035/2005
COUNSEL:	Mr DK Jordan and Ms L Young (plaintiffs) Mr J Miller (defendants)
SOLICITORS:	CBD Lawyers & Corporate Advisers (plaintiffs) Swaab Attorneys (defendants)