Maronich v Top Oak Pty Ltd - [2015] SASC 87

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
MARONICH v TOP OAK PTY LTD & ORS
[2015] SASC 87
Judgment of The Honourable Justice Parker
11 June 2015
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - PARTIES
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION
An action for damages against the second and third defendants for breach of oral contract. Alternative claims based upon promissory estoppel, misleading and deceptive conduct, constructive trust and breach of fiduciary duties.
Mr Maronich (plaintiff) and Mr Alvino (third defendant) were the only directors of Top Oak Pty Ltd (first defendant), which engaged in a wood chipping business called Oak Miracle. Mr Maronich and Optima Food Developments Pty Ltd (second defendant), as trustee of Mr Alvino’s family trust, were the only shareholders with one share each. Mr Maronich indicated a desire to leave the business and on 3 March 2011 he and Mr Alvino discussed how he would do so. On 29 March 2011 Mr Maronich resigned as director. On 30 March 2011 Mr Alvino caused $20,000 to be paid from Top Oak Pty Ltd to Mr Maronich. On 31 March 2011 Mr Alvino sought to cause a further $35,000 to be paid to Mr Maronich on the condition that Mr Maronich sign a form transferring his share to Optima Food Developments Pty Ltd. An altercation ensued and Mr Maronich refused to sign the form or accept the money. In the following weeks, the two made unsuccessful attempts to progress or conclude Mr Maronich’s exit from the business.
Whether there was a binding oral agreement as at 3 March 2011 between Mr Maronich and Mr Alvino. What were the terms of the agreement. Whether Mr Maronich repudiated the agreement.
Held (Parker J):
There was a binding oral agreement as at 3 March 2011 between Mr Maronich and Mr Alvino. A term of the agreement was that Mr Maronich would transfer his share in Top Oak Pty Ltd to Mr Alvino or Optima Food Developments Pty Ltd by 31 March 2011. Mr Maronich’s failure to transfer his share combined with his refusal to accept payment constituted a repudiation of the contract. Therefore, Mr Maronich has no remedy for breach of contract against Mr Alvino or Optima Food Developments Pty Ltd. The alternative causes of action also fail.
Corporations Act 2001 (Cth) s 257A, s 257D, s 257E, s 257F, s 257G; Australian Consumer Law (Cth) s 18, referred to.
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Masters v Cameron (1954) 91 CLR 353; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310; Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149; Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 240 CLR 45; Muschinski v Dodds (1985) 160 CLR 583; Brunninghausen v Glavanics (1999) 46 NSWLR 538, considered.

MARONICH v TOP OAK PTY LTD & ORS
[2015] SASC 87
Civil:

PARKER J: The primary cause of action in these proceedings is a claim in contract based upon an alleged oral agreement. Alternatively, the plaintiff has advanced a claim in contract which relies upon promissory estoppel so as to overcome certain difficulties that might otherwise defeat the contractual claim. In the further alternative, the plaintiff has advanced claims based upon misleading and deceptive conduct, a constructive trust and a breach of fiduciary duty.
For the reasons that follow, I have dismissed the plaintiff’s claim on each of the grounds that have been advanced.
The plaintiff, Andrew Maronich, and the third defendant, Joseph Alvino, were the only directors of the first defendant, Top Oak Pty Ltd. The only shareholders in Top Oak were Mr Maronich and Optima Food Developments Pty Ltd. Optima was the trustee of Mr Alvino’s family trust. Top Oak used the registered business name of Oak Miracle.
The winding up and contempt proceedings
Mr Maronich instituted proceedings in this Court to have Top Oak wound up. Mr Alvino eventually consented to the making of such an order. Top Oak was wound up by order by of the Court on 21 September 2012.
Part of an affidavit sworn by Mr Mark Hall, the liquidator of Top Oak appointed by the Court, in relation to the winding up proceedings was admitted into evidence in this matter. Mr Hall stated that the remaining funds of Top Oak, approximately $43,000, are insufficient to meet the costs of the liquidation.
On 8 December 2011 a Master of this Court issued an injunction against Mr Alvino restraining him from withdrawing more than $1,000 per week from the funds of Top Oak. Mr Maronich has instituted proceedings for contempt based upon an allegation that Mr Alvino has withdrawn sums substantially in excess of the payments permitted by the Court.
The contempt proceedings were referred to me by a Master. However, all parties have submitted that I should refer the contempt proceedings to another judge as in deciding these proceedings I will have to make findings concerning the credit of both Mr Maronich and Mr Alvino. I will make orders to that effect.
Witnesses
Mr Alvino called a chartered accountant, Mr Chris Milanko. He had been engaged to prepare tax returns on behalf of Top Oak and, in addition, provided some commercial advice. He also acted as the accountant for Mr Alvino. His oral evidence was consistent with the documentary evidence. I accept the correctness of his evidence.
It was Mr Alvino’s practice to make diary entries each day on issues relating to the business. He also made entries in a time sheet or running sheet that recorded the work that he and Mr Maronich had performed. The time sheets often also included material similar to his diary notes. A large volume of email messages passed between Mr Maronich and Mr Alvino and to a lesser extent, between them and Mr Milanko.
I found on a number of occasions that there was a conflict between the documentary evidence and the oral evidence. On those occasions, I have relied upon the documentary evidence. I have done so for two reasons. The first was that the documents were compiled at the time of, or very soon after, the relevant events. The second was that both Mr Maronich and Mr Alvino clearly hold strong views about the correctness of their own position. That view appears to have clouded their memory of some of the events that had occurred several years before the trial.
As I have already noted, part of an affidavit sworn by Mr M C Hall, the liquidator of Top Oak, was admitted into evidence.
Background
The background to this matter is complex and needs to be set out in detail.
The Top Oak business
Under its business name of Oak Miracle, Top Oak conducted a business of purchasing and importing oak wood and turning that material into wood chips. The chips were then roasted and packed before sale to wineries. The use of roasted wood chips influences the flavour and colour of wine so as to produce a result similar to that resulting from storage in the traditional oak barrels.
Mr Maronich and Mr Alvino hold university degrees in food technology and applied science respectively. Up until about 2008 both Mr Maronich and Mr Alvino were employed by a South Australian food technology company. While in that common employment they agreed to purchase and operate the Oak Miracle business.
On 13 June 2008, Mr Maronich, in his capacity as trustee of the Andrew Maronich Family Trust, became the holder of one share in Top Oak. On the same day Optima also became a holder of one share in Top Oak. On that day Mr Maronich and Mr Alvino also became the sole directors of Top Oak.
The price of $58,000 paid by Top Oak for the Oak Miracle business covered the purchase of plant and equipment and goodwill. The business was carried on in leased premises at all times.
Apart from some limited assistance for a period from a relative by marriage of Mr Alvino, the work necessary for the operation of the Oak Miracle business was performed by Mr Maronich and Mr Alvino. Mr Milanko was engaged to prepare tax returns on behalf of Top Oak. The evidence also suggested that at times he also acted as a general business adviser. He was also Mr Alvino’s accountant.
Mr Maronich and Mr Alvino were entitled to share equally in the profits of the business. Rather than drawing salary or wages, their practice was to submit tax invoices to Top Oak claiming payment for work done in the conduct of the business.
It had apparently been agreed between Mr Maronich and Mr Alvino that they would each contribute the same amount of labour to the business. However, Mr Alvino suggested that he had performed more work than Mr Maronich. It is unnecessary to resolve that question in relation to the period leading up to 31 March 2011. The labour contribution of the two participants was affected adversely by fairly serious injuries that they each suffered at different times in the course of their work. Mr Maronich’s work contribution was also affected, at least in the latter part of the working relationship, by a serious illness suffered by his then wife.
The work performed by Mr Maronich and by Mr Alvino primarily involved physical labour in the form of chipping, roasting and packing wood chips. Some of those tasks required the application of their technical expertise. The other work performed in the business included obtaining supplies of wood, marketing and customer relations. So as to use the roasting equipment efficiently, the two men worked shifts. There was an overlap of about one hour between their shifts when they were both at the premises and could discuss matters relating to the conduct of the business.
In addition to the work described above, the two men had agreed that Optima would provide services to Top Oak in the form of bookkeeping and administration. That work was performed by Mr Alvino with Optima being remunerated for the supply of his services.
Preliminary discussions about ending the business relationship
During the course of 2010 Mr Maronich and Mr Alvino began to discuss the severance of the business relationship. There were some areas of disagreement between them and the business was apparently not sufficiently profitable to support both. Those discussions occurred during 2010 and into early 2011. By that time Mr Maronich had become keener to leave the business because of the serious illness of his then wife.
Some of the discussions about severing the business relationship are recorded in diary entries made by Mr Alvino dated 20 January 2010, 22 January 2010 and 30 April 2010. For example, on 30 April 2010 Mr Alvino recorded that “AM [Mr Maronich]... talked about selling his half of OM [Oak Miracle] to me”. On none of these occasions was there any note by Mr Alvino that he had informed Mr Maronich that he was not interested in buying his interest.
On 29 May 2010 Mr Alvino made a diary entry in the following terms:
Spoke to Chris Milanko re AM money request. Doesn’t make any difference how he takes his share. Stated that I should also take equal share. Call it invoice “subcontracting” not “consulting”.
I consider that the reference to “how he takes his share” was clearly intended to mean the value of Mr Maronich’s interest in Top Oak as distinct from the share he held in the company. That conclusion is reinforced by the subsequent reference to Mr Alvino taking an equal share which could only refer to money or money’s worth.
On 10 September 2010 Mr Alvino made another similar diary note, ie
Spoke to Milanko about buy other ½ of OM. Need to get together with AM and discuss details. It is a good way to pay wages as opposed to outright purchase - tax deductible.
The lead up to the meeting on 3 March 2011
On 9 February 2011 Mr Maronich sent an email message to Mr Alvino setting out the basis upon which he wished to negotiate the termination of their business relationship. That message was said to replicate an earlier message that Mr Maronich thought that he had sent but which neither he nor Mr Alvino could locate.
The terms suggested by Mr Maronich were:
- They should finish roasting and packing chips for existing orders;
- Chips that were subject to existing orders should be put aside and a stocktake performed on the remainder;
- The remaining stock should be valued at $2.50 per kilogram; and
- The assets of the company should be valued at $70,000 to $90,000.
Mr Maronich’s message concluded with the statement:
I would appreciate if you make me an offer or if my assumptions are incorrect let me know and correct.
It is important you put something in writing we can refer to in the future as well as starting point for negotiations.
Mr Alvino promptly responded to that message by a further email. He stated they needed to talk more and iron out some details. He also said that he had the impression that Mr Maronich wanted to leave the business immediately and went on to ask what exactly he wanted to do.
Mr Maronich responded the same day by email. He indicated that the separation should occur in a manner that ensured “no-one is left to hang up dry”.[1] The timing should suit both of them but he believed they should seek to reach agreement before the end of the current quarter (ie by 31 March 2011) because of GST issues. In that context the message also stated:
We will be taking a portion of the money (consulting fee or similar) that will have a GST component in it and hence some money distribution should happen before the company pays GST.
[1] Many of the email messages sent by Mr Maronich reflected the fact that English is not his first language. I have reproduced them exactly. The intended meaning was always clear.
Mr Maronich concluded by saying that he was happy to finalise the arrangements by June but if it suited Mr Alvino to buy him out sooner that would be satisfactory.
A diary entry made by Mr Alvino on 11 February 2011 stated:
told AM that I am not interested in taking over. AM said to give him until mid March to arrange finance and decide. I said end February was enough time.
The exchange of email messages continued. On 28 February 2011 Mr Maronich sent a message to Mr Alvino stating that it seemed he would not be able to continue in the business. On the following day, 1 March 2011, Mr Alvino responded with a message to Mr Maronich asking what exactly he was proposing and what the time limits were. Mr Alvino went on to note that they still had an order from Kingston Estate Winery (KEW) to finalise and that ran until December 2011. He asked where they were going to keep the stock until the next vintage, assuming that it was sold cheaply, as storage was not cheap. Mr Alvino went on to state “I think we need to have a meeting to discuss these things (and write things down)”. Shortly thereafter, Mr Maronich replied by email and stated that “I do not have a proposition. We will need to search for solutions together”.
The meeting on 3 March 2011
Mr Maronich and Mr Alvino met on 3 March 2011[2] at the former’s home for a couple of hours to discuss the basis upon which he might leave the business. On that day Mr Alvino made the following diary entry:
Meeting with AM – re OM future @ his unit. Agreed to pay him 25K for his share of equipment, half current profits and his half of remaining stock at $2.50/kg when sold. He agreed & we shook hands. Planned to finish KEW order by end March.
[2] Mr Maronich referred in evidence to the meeting being on 2 March 2011. However, Mr Alvino said that it was held on 3 March 2011. His diary entry about the meeting was made on that date. While nothing turns on the issue, I rely on the contemporaneous written record and find that the meeting was held on 3 March 2011.
In an email message to Mr Milanko dated 3 March 2011Mr Alvino sought his assistance in relation to the arrangements with Mr Maronich. The message stated:
I require your assistance to finalise an agreement I have made with Andrew to solely take over the company. I have agreed to buy his half for $25,000 at the end of March 2011. His half of the stock will remain on site and be sold on consignment. Could you please allocate some time to discuss this with me prepare what is necessary to legalise this and safeguard my interests.
In a further email message to Mr Milanko dated 5 April 2011 Mr Alvino set out the history of his dealings with Mr Maronich. That message enlarged upon the diary entry that had described the meeting of 3 March 2011. It stated as follows:
Meeting with Andrew at his unit. I asked Andrew what he wanted if I took over. As per his email 9^th Feb he said he was happy with $25k for his share, half of the profit to end March, and his half of stock @ $2.50/kg when sold. We agreed to this and shook hands. We also agreed to finish KEW order by end March.
The time sheet entry made by Mr Alvino relating to the meeting held on 3 March 2011 was as follows:
Meeting with AM @ his unit re: OM future. AM asked for $25k share of for assets, 1/2 profits and 1/2 of stock at $2.50/kg. I explained that there are outstanding invoices & bills & orders and I was happy with his offer but could only pay for his half of the outstandings when the money was received (less bills). Also he retained ownership of his half of stock and that I would sell on consignment as we do with Todd’s stock. He was happy with this and we shook hands in agreement.
While important matters relating to the agreement were strongly contested in the trial, the basic terms of the agreement were not in dispute.
I find that on 3 March 2011 it had been agreed that Mr Maronich was to receive payments on the following basis:
- $25,000 for the plant and equipment and goodwill owned by Top Oak;
- The value of half of the stock on hand (at $2.50 per kilogram) with payment to be made as stock was sold on consignment. The stock was to remain at the Top Oak premises until it was sold;
- Half of the profits made until 31 March 2011;
- The KEW order was to be finished by 31 March 2011;
- The business expenses to be met by Top Oak were to be taken into account before computing the amounts payable to Mr Maronich under the agreement (other than the agreed sum of $25,000 and the payments for the stock on hand).
- Mr Alvino was to take over the business from 31 March 2011;
Mr Maronich’s evidence was that it had been agreed at the meeting that he would resign as a director of Top Oak on 31 March 2011 and later transfer his share. I will return to the question as to which of the three defendants was to receive that share and when the transfer was to occur. That question is the central issue in these proceedings.
Mr Maronich also stated that Mr Alvino was to organise the necessary paperwork to give effect to the resignation with the assistance of Mr Milanko. According to Mr Maronich, he was not required to transfer the share until the other agreed arrangements had been carried into effect, ie it was to be the final step. Mr Alvino expressed a different view.
While there are questions as to when Mr Maronich’s resignation as a director of Top Oak and the transfer of his share were to occur, I find that he and Mr Alvino had agreed on 3 March 2011 that these two steps would be taken. Both of these steps were necessary to give Mr Alvino complete ownership and control of the business as had been agreed.
Events after 3 March 2011

After 3 March 2011 Mr Maronich and Mr Alvino continued to work in the business. The time sheets compiled by Mr Alvino show that he performed a substantially greater part of the work from 3 March 2011 until 31 March 2011. However, at that time Mr Maronich’s wife was recovering from a serious illness and he was caring for his young daughter.
In the period between 3 March 2011 and 29 March 2011 Mr Maronich and Mr Alvino had some further discussions about the severance of the business relationship. However, nothing significant seems to have been discussed. Mr Alvino also obtained advice from Mr Milanko. I will refer to that advice later.
On 29 March 2011 Mr Alvino and Mr Maronich met at the latter’s home. According to Mr Maronich, the purpose of that meeting was to discuss payment of money to him in response to the invoice that he had issued earlier that day.
The resignation and invoice
On 29 March 2011 Mr Maronich resigned as a director of Top Oak. Mr Alvino promptly advised the Australian Securities and Investment Commission of the resignation.
Later on 29 March 2011 Mr Maronich forwarded an invoice to Mr Alvino’s email address in the name of Oak Miracle (ie the business name of Top Oak) seeking payment of $50,000 plus GST of $5,000 for what was described as “consulting fee and labour activities for period May 2010-March 2011”.
In response to that invoice a payment of $20,000 was made to Mr Maronich from the bank account of Top Oak on 30 March 2011. The particulars included in the bank statement describe that payment as being “buyout”.
The reference in the invoice to “consulting fee and labour activities” was consistent with the taxation advice provided by Mr Milanko. However, it is not apparent from the evidence why Mr Maronich issued the invoice for $50,000 (plus GST) rather than for some other sum.
On 1 April 2011 a further payment of $20,000 was made to Mr Alvino from the same account and described as “to match AM share”. I have already noted that Mr Alvino had recorded in a diary note dated 29 May 2010 a suggestion by Mr Milanko that such a payment should be made.
The visit to the Bank on 31 March 2011
On 31 March 2011 Mr Alvino and Mr Maronich met at the bank branch where the account of Top Oak was held. The joint purpose was to withdraw cash from the Top Oak account so as to pay to Mr Maronich the balance of $35,000 claimed under his invoice. Mr Maronich conceded that he had been upset that he had only been paid $20,000 in response to his invoice. The evidence of Mr Alvino was that this amount was the maximum payable by an electronic transfer.
The bank could not provide more than $5,000 in cash without prior notice. Mr Alvino withdrew $5,000 and then asked Mr Maronich to sign a share transfer form. According to Mr Maronich, Mr Alvino refused to hand over the $5,000 unless the transfer form was signed. Mr Maronich became angry and left the bank.
Mr Maronich went to his car which was parked nearby where Mr Alvino joined him. Mr Maronich said to Mr Alvino that it had been the latter’s responsibility to notify the bank of the large cash withdrawal. He said that he had enough of manipulation by Mr Alvino and also did not wish to deal any further with Mr Milanko. He wanted all of the accounting and financial records for Top Oak provided to his accountant who would draft a contract for the sale of the business.
Mr Maronich said in evidence that he had become angry because he was being requested to sign the share transfer form in return for a payment of $5,000 even though they both knew that the business was worth far more than that. He had therefore lost trust in Mr Alvino.
Mr Maronich stated that he had become concerned that Mr Alvino was delaying carrying into effect the agreement they had reached on 3 March 2011. It was not until late March (apparently a reference to the meeting on 29 March 2011) that Mr Alvino had insisted that he required an invoice before making any payment to Mr Maronich.
Mr Alvino said that he had not insisted that Mr Maronich sign the share transfer form before he was given the $5,000. Mr Maronich conceded that Mr Alvino probably had offered to arrange immediate electronic transfer of the balance of the sum claimed in the invoice and to pay the $30 bank fee for that service. Mr Maronich asserted that he had refused that arrangement as it was not in accordance with their agreement. This was apparently a reference to the discussions on 29 March 2011 about the manner of payment rather than a reference to the agreement on 3 March 2011.
Events after the meeting on 31 March 2011
Less than an hour after the conclusion of the discussion in the bank car park Mr Maronich sent an email to Mr Milanko stating:
I would like to reverse my resignation as a company director of Oak Miracle. As you know, Joe and I started a takeover process and this my resignation was part of a greater verbal agreement which stalled a little ... Please give me a call to further.[3]
[3] This is the actual text of the message.
Mr Milanko replied to Mr Maronich by email the following day. He stated that he did not know the law on this matter but did not believe that the resignation could be stopped. It might be necessary for Mr Maronich to be reappointed as a director. Mr Milanko concluded by suggesting that Mr Maronich might want to obtain legal advice and also discuss the matter with Mr Alvino.
Some two hours later Mr Maronich sought further advice from Mr Milanko by email. The message relevantly stated:
Joe came up with a document for me to sign and transfer my half of the company to him before money settlement. To be correct $5,000 was the amount in question he would not part with unless I sign. The remaining $70,000+, I should trust him. He said he obtained this document through you. Hence I assume he is getting advice somewhere.
...
Before I search for legal advice I need to determine the scope of the problem. First I have to ask Joe to sign ASIC form 484 and reinstitute me as a director.
Shortly thereafter Mr Milanko responded to Mr Maronich by email. He said:
Sorry, I know enough about company law to know that I genuinely don’t know!
Truthfully, if I agreed something with Joe, I know he would honour that agreement.
But I understand why other people might want more assurance than that. If you have already agreed on terms, why not formalise them in a contractor agreement combined with a share transfer form? Also include an option to buy back the share if the contract fails. It should not be this difficult.
In evidence, Mr Milanko explained that his reference to a “contractor agreement” meant a payment in response to an invoice for services that included a GST component.
On 5 April 2011 at the conclusion of an email message about other routine company business, Mr Milanko asked Mr Alvino how the arrangements were progressing with Mr Maronich. Mr Alvino responded almost immediately to Mr Milanko in the following terms:
It hasn’t progressed. I sent him an email saying to let me know when ready to talk.
Last Thursday at the bank he said he wanted me to go to his accountant with a copy of MYOB this coming Friday. Am I entitled to tell him to get stuffed as an agreement was made?
Talk about trust? He had the opportunity already planned???
Fun & games ahead I think.
A few hours later Mr Milanko responded to Mr Alvino with an email in which he asked what agreement had been made with Mr Maronich and how much of it was documented. He concluded the message by stating that the advice he had given to Mr Maronich was solid and “he should have merely documented a few more things and been a gentleman about it”.
Later on 5 April 2011 Mr Alvino sent an email to Mr Milanko setting out a detailed chronology of his dealings with Mr Maronich. I have already referred to that message. In relation to the events of 31 March 2011 he recorded:
Phone call from Andrew at 12.50pm asking to meet at bank 3.00pm to transfer rest of money. As I had a prior meeting I said that about 3.30pm would be better. I also discussed that we needed to leave enough money to cover short term commitments as suggested that $40K payment now (with balance later) was more appropriate. I was at bank at 3.30pm but he was late. Arrived at 3.45 and wanted $25K in cash (bank did not carry this much without prior notice) was happy to get $5K cash and rest transferred immediately at cost of $30, he did not was [want?] this and was happy with normal transfer. $5K cash was withdrawn but he changed his mind when he saw the share transfer form. Cash was deposited next day as bank had closed. Discussion in his car took place among other things wanted to take back his directors resignation. .... I have not had contact with him since.
Also on 5 April 2011 Mr Alvino had sent an email to Mr Maronich asking him to let him know when he was ready to talk. Mr Maronich responded to this message on 6 April 2011. He stated that they could talk any time and expected that they would go together to see his accountant on 8 April 2011. He asked that Mr Alvino bring receipts and accounting records. He then stated:
After our early March discussion [at Mr Maronich’s address] I assumed we have reached an agreement regarding OM. During this meeting I said more than once that it is important I have funds transferred before 01/04/2011 and it was left with you to provide an agreement/contract we both sign regarding this. Obviously this did not happen. Since this did not happen I have asked [his accountant] to help with us OM ownership transition. I will be responsible for [the accountant’s] fees and I will make you another offer.
On 7 April 2011 Mr Alvino sent an email to Mr Maronich in response to his message. He indicated that due to a personal commitment he was unable to attend the meeting with the accountant at the time nominated by Mr Maronich. He then stated:
Regarding our agreement, yes I thought we had reached one. I was not aware that I was to arrange an agreement/contract and on our second meeting on 29^th ... when you resigned as a director and I showed you an example of the Share Transfer Form, you did not mention any agreement or contract. You also did not remember that there was a limit to the internet transfer amount which resulted in only $20K being transferred instead of the $55K you requested. At the bank on the 31^st you agreed to the $5K cash and the remainder to be transferred (which could have been done immediately for a small fee) and then again you changed your mind. As far as I am concerned we have a binding agreement. If you have also changed your mind and wish to take control of OM, you make me an offer, I only agreed to the takeover as you wanted to shut it down and get on with life.
Later on 7 April 2011 Mr Maronich responded by email to that message. He asked Mr Alvino to advise when he could see his accountant and also asked him to advise if he did not wish to attend such a meeting. In that event, Mr Maronich asked when he could pick up the receipts and accounting records for Top Oak. He then said:
Regarding the agreement it is binding for both parties. If one party does not bind then obviously the whole agreement cannot bind. If you were buying me out it was your responsibility to make sure it happens so bank limits you should know about not me. You were very organised regarding my director resignation and shares transfer for $5,000. But all of this is behind us. Have you had any chances to look into how I could be re-elected as OM director?
On 11 April 2011 he sent another email to Mr Alvino noting that he had not yet received a reply to his previous message. He then stated:
To move forward my accountant needs to have a clear picture of OM financial position. This will enable me to draft an agreement and continue with OM ownership transition. In case you changed your mind and do not want to take over I will still need to know OM financial position to sell my half of a company. As I said many times before I do not want to continue with OM and I want to get out. Please do not procrastinate with this and help me so transition goes smoothly.
On 13 April 2011 Mr Maronich sent another email to Mr Alvino. He complained that there had been no response to his two previous messages. He then stated:
As you well know I wish to exit our partnership and sell my half of Oak Miracle. To do that I need to accurately determine moneys I can withdraw from business as well as assets value. For this I need to have an access to accounting software and receipts you currently have at your house. MYOB back up copy for past two years should be fine. Once my accountant ... receives these information he will use this data to establish my entitlements and the realistic value of the company. After this is done a sales agreement will be drafted and first offered to you. I believe current law requires that offer is first made to business partners before offering it to other parties. If you do not contact me and provide me with data required by Monday I will engage a lawyer. Once this happens I am certain there will be much less money for both of us and if you do not leave other options I will have to do this.
Later on 13 April 2011 Mr Alvino responded to Mr Maronich. He complained that they had agreed in the telephone discussion the previous day to meet at the Top Oak premises to discuss the situation but Mr Maronich had not attended nor given notice of his unavailability. Mr Alvino then stated:
The situation as I see it now is that I also do not want to continue with Oak Miracle. This was my original statement to you and I only agreed to carry on because you wanted to shut it down and “get on with life”. However, as you know there are still commitments to meet which you agreed to help finish but you chose to walk away. My intention is to finish the current commitments and then either sell or dissolve the company. Remaining funds once commitments of clean up, etc is done will be divided amongst share holders. With regard to the MYOB file, this does not belong to Oak Miracle until such time that Oak Miracle pays for the work done. In addition as I have mentioned to you on many occasions wanting to do a stocktake, not all stock is entered because you did not record anything you produced while I was injured. Share holders will receive a report when it is completed. If you wish to engage legal opinion, the choice is yours. But think carefully about the consequences.
The exchange of emails continued. On 14 April 2011 Mr Maronich replied by email to Mr Alvino. He said that he had been unable to attend the meeting as his wife was undergoing serious medical treatment and he was looking after their daughter. He was also suffering from a physical injury and spending much time in bed. He complained that Mr Alvino knew of these matters but had then asserted that it was Mr Maronich who was walking away from the business. He stated that they had agreed in March 2011 that there was nothing urgent that needed to be done in the business and “we will paddle along”. A maximum of ten days was required to finish the current order which could be done any time, eg by the end of June. Mr Maronich then stated:
It is good you decided what you want to do with OM. I will support your decision as long as they are not financially detrimental for me. Since you decided to sell as well, I believe the sooner we list the company for sale more chances for sale we have.
To list the company for sale I need financial details (receipts expenses etc) for past two years. As I said I will wait for them until Monday 11 am, 18 April 2011 before I ask for legal help.
If you decide for data in MYOB format it is ok if not any other format will be accepted. It all goes to your character again.
Regarding paying the work related to MYOB or any other work I am happy to discuss. I have a list of work I did that has not been recorded to add as well such as: 2 overseas trips, 4 months of full time PhD study, 2 years of work in the afternoon shift that by industry standard attracts 15% loading. Comparing to the morning shift.
Mr Maronich finished the message with an invitation for Mr Alvino to visit him at his home that day to discuss the issues. He commented “we are both aware that you hold the power to ruin us both financially. I do not have a choice.”
On 15 April 2011 Mr Maronich sent another email to Mr Alvino. He complained about the failure of Mr Alvino to respond to his earlier messages and stated that he had an appointment to see a lawyer. He stated the reasons for making this appointment were:
1. We agreed you are taking over the OM. In a process of ownership transfer you first requested I resign as a Director even though you did not provided a valid agreement regarding ownership transfer. I trusted you and resigned believing your intentions are honest. Than a couple of days later you requested I sign a company shares transfer for $5000 to you again without any written agreements. I refused since you filed to deposit agreed sum to my bank account. Than I asked you to reappoint me as a director so I can continue with work and organise my accountant to help us with legal side of this transfer (agreement, company assets etc) but this obviously did not get with your plans. Instead of reappointed me as a director you accused me of walking away from OM?
2. You have failed transfer money to my account as we agreed. I still haven’t received full amount as per invoice I sent on which we both agreed. Instead you transferred to yourself without any prior consultation with me.
3. For almost two weeks you are refusing to provide me with financial statements and details for the company I have a 50% share.
I believe there is a logic explanation for your behaviour and I would like to hear it. Recently I have struggled to comprehend how I can benefit from your actions so to avoid future misunderstandings it is best you come clean before 11am Monday.
On 17 April 2011 Mr Alvino informed Mr Maronich by email that he was happy to meet him to discuss the issues.
Mr Maronich and Mr Alvino then met with an Adelaide solicitor who had been instructed by Mr Maronich. That meeting did not resolve the issues. On 2 May Mr Maronich sent an email to Mr Alvino complaining that he had left the meeting before its conclusion. He requested Mr Alvino to provide documents relating to Top Oak.
Mr Alvino responded to this message on 3 May 2011. He stated:
When you called me to invite me at short notice, I did so as I do want to resolve the issues. As you very well know, at the meeting you insulted me and called me a liar many times and when you accused me of being heartless and not being sympathetic to Lydia’s tragic health condition, I had enough of your insults. I did not attend the meeting to be unjustifiably abused and at no stage did I attack you. For this I want an apology from you.
The same day Mr Maronich responded at length to that message from Mr Alvino. After some comment about Mr Alvino’s behaviour at the meeting with the solicitor, Mr Maronich stated:
... without properly signed sales agreement I did not feel it would be smart to transfer my company share to you. The events that followed and your consecutive behaviour speak for themselves and prove how right I was.
...
Couple of days later we spoke again and I made you even more details offer which you pretty much accepted. I did not want to push you and told you to go and think about this, consult you wife with words that the offer is valid for two weeks. Then after a week or more you came back and sad you can not do it because of your health. This was the first time you changed your mind.
...
and you are transferring company’s funds to your accounts.
...
Bring a bank cheques to me by tomorrow noon. The sum stated on this cheque needs to represent the real value of company assts plus the moneys I am entitled to. Than with that cheque we can go to my bank and provided cheque is valid I will sign a shares transfer form for you.
Your another option as you said it during our meeting held by balcony, (which you said your accountant told you) is to run a company to the ground and than buy it at auction for next to nothing. This option may appear tempting but it attracts court actions, audiotapes and all other sorts of evidence. At the end you will lose, I will recover some money through court and the rest I will recover directly from you.

The messages exchanged on 3 May 2011 were the final email communications between Mr Alvino and Mr Maronich that were put into evidence.
Mr Maronich took no part in the work of the business after the meeting at the bank on 31 March 2011. Mr Alvino continued to run the business until at least March 2012. He withdrew substantial sums from the accounts of Top Oak. Mr Maronich received no money from Top Oak after the payment of $20,000 to him on 30 March 2011.
The financial position of Top Oak
The Top Oak profit and loss statement and the balance sheet for the year ending 30 June 2009 were admitted into evidence. I will refer to that material as it provides some general support for other evidence given about the company finances.
The 2009 profit and loss statement recorded a gross profit from trading of $197,024.90 and a net operating profit before income tax of $91,046.70. After payment of tax, the net operating profit was $66,404.10. The principal expenses incurred by the company were rent, freight, depreciation and repairs and maintenance. The profit and loss statement does not record any payment having been made for the labour contributed to the business by Mr Maronich and Mr Alvino nor was any payment recorded in respect of the administrative services provided to Top Oak by Optima. After deduction of a loss of $8,904 incurred in the year ending 30 June 2008, the total amount available for appropriation was $57,500.10. That profit was retained.
The balance sheet disclosed that as at 30 June 2009 the current assets of Top Oak were $176,436.77. The two major current assets were cash at bank of approximately $114,000 and stock on hand of about $50,000. The fixed assets of $42,039.38 comprised plant and equipment. With the inclusion of intangible assets of $760, the total assets of the company were $209,236.15. Its current liabilities amounted to $161,734.05. The principal current liability was an amount of $116,408.67 due to “related entities”. That comprised $58,923.45 payable to the Alvino family trust (ie to Optima as trustee) and a further $57,485.22 payable to what was described as “Andrew’s family trust”, ie Mr Maronich. The other current liabilities were sums payable by way of income tax, GST and import duties and to trade creditors. The net assets and the total equity of Top Oak were $57,502.10.
The balance sheet and profit and loss statement for Top Oak for the year ending 30 June 2010 were prepared by Mr Milanko in April 2011, ie after the final breakdown of the working relationship between Mr Maronich and Mr Alvino. In that light Mr Milanko was cross examined about aspects of the 2010 and later financial statements.
The 2010 profit and loss statement recorded income of $157,520.98 and, after deduction of the cost of sales, a gross trading profit of $104,093.77. The general company expenses amount to $143,742.78. That resulted in a net operating loss of $39,649.01. The company made payments of $18,000 to Mr Maronich for what was described as “product development and marketing” and $25,000 to Optima for “bookkeeping”. The evidence of Mr Milanko was that the latter description covered not only bookkeeping but also general company administration. While Mr Milanko was challenged in cross-examination about the appropriateness of that payment and its timing, I was not persuaded on the balance of probability that the payment had been made other than in accordance with the arrangement that had existed between Mr Maronich and Mr Alvino for the conduct of the Top Oak business.
The balance sheet as at June 2010 recorded the total current assets as being $133,803.76. That largely comprised cash on hand of some $72,000 and close to $62,000 by way of stock. With the inclusion of fixed assets (largely Small Business Enterprise [SBE] Pools) the total assets amounted to $176,256.63. The current liabilities were a little under $45,000, being primarily provision for tax and amounts due to trade creditors. The long-term liabilities were directors’ loans of $44,498.59 owed to Mr Alvino and $48,635.70 to Mr Maronich. The net assets and total equity were each said to be worth $38,375.70.
In April 2012 Mr Milanko prepared a balance sheet for Top Oak as at March 2011.[4] That was done at the request of Mr Alvino in accordance with advice from his solicitors. The document displayed information in two columns, one being described as “historical cost” and the other as “realisable value”. The information in the latter column was not admitted into evidence.
[4] Exhibit D1.
The balance sheet prepared by Mr Milanko recorded that $30,483.44 was held in the Top Oak (or Oak Miracle) cheque account as at March 2011 and $2.00 in cash. The sum of $34,569.21 was owed by customers and a value of $66,498.55 was ascribed to the stock on hand. Thus, the total of current assets was said to amount to $131,553.20. Fixed assets comprised a total of $26,027.15 held in general and long-term SBE pools. The total gross assets were said to be $158,007.85.
Included in the current liabilities as at March 2011 was $62,863.72 payable to trade creditors. After adjustment for tax liabilities and credits, total current liabilities were $60,856.96. The long-term liabilities comprised $29,370.80 payable to Mr Alvino and $29,012.74 payable to Mr Maronich as directors’ loans. The net assets were $38,767.35. The equity of Top Oak was also $38,767.35. That largely comprised retained earnings of $38,373.70.
On 29 March 2011 Mr Alvino made a rough calculation of the amount that he thought was payable to Mr Maronich under the agreement of 3 March 2011. He recorded the balance of the Top Oak cheque account as being $74,588.33. The accounts payable amounted to $67,409.81. Deduction of that amount from the balance of the cheque account followed by division into two shares resulted in Mr Maronich having an entitlement of $3,589.26. The sum due as accounts receivable (after deduction of GST) was $31,426.55. The value of Mr Maronich’s half share in the accounts receivable was $15,713.27. Mr Alvino also took into account in his calculations the agreement to pay Mr Maronich $25,000 as his share of the Top Oak goodwill and plant and equipment. The end result was that Mr Alvino calculated the entitlement of Mr Maronich as being $44,302.53, ie the sum of $25,000 and $3,589.26 and $15,713.27.
Mr Alvino also noted that further invoices were expected in relation to gas, advertising and payments to the landlord. In his oral evidence Mr Alvino indicated that after expenses had been met the net amount payable to Mr Maronich would have been less than $40,000. However, he noted in the document that a further payment would be due on completion of the KEW order. That order had been half completed and was expected to produce $62,000 prior to deduction of expenses.
The Top Oak bank statements show that payments of $33,990.88 and $34,209.12 were received from KEW on 7 December 2011 and 9 February 2012 respectively. The evidence before the Court does not indicate the expenses incurred in fulfilling the KEW order.
The bank balance of $74,588.33 used by Mr Alvino in the calculations he made on 29 March 2011 is confirmed by the Top Oak bank statements. That was the balance prior to the payments of $20,000 made to Mr Maronich and to Mr Alvino on 30 March 2011 and 1 April 2001 respectively.
Payments to Optima after 31 March 2011
Mr Maronich ceased to perform work in the Top Oak business from 31 March 2011. All work thereafter was performed by Mr Alvino.
Between 31 March 2011 and 2 May 2011 payments totalling $63,600 were made to Optima. This comprised a payment of $20,000 made on 1 April 2011 (described as “to match AM share”) and payments of $11,000 and $16,500 respectively on 19 April 2011 and a further payment of $16,100 on 2 May 2011. The entries in the bank statements relating to the latter three payments each refer to an Optima invoice number. Mr Maronich has submitted that these payments were clearly funded from revenue derived from production by Top Oak prior to 31 March 2011 when he was still participating in the business.
In the period from 12 December 2011 to 12 June 2012 payments totalling $29,700 were made to Optima in weekly instalments of $1,100 and a further payment of $1,971.68 was made on 30 May 2012. Legal fees were also met by Top Oak. Mr Maronich has contended that the payments made in this period would have been, in part, derived from revenue earned by production prior to 31 March 2011. His counsel conceded that the proportions of revenue derived before and after that date could not be determined.
During the period from 13 June 2012 to 24 September 2012 payments of $232,725 were made to Optima by Top Oak. Mr Maronich has acknowledged that these payments would have been entirely funded from revenue earned after 31 March 2011.
That part of the affidavit sworn by Mark Hall that was admitted into evidence discloses that the amount received by him as the liquidator of Top Oak was $59,801.59. This largely comprised some $30,000 in the company bank account and a little under $27,000 as the proceeds of the auction of plant and equipment. Liabilities amounted to $16,507.18. Thus the amount he held as the liquidator of Top Oak was $43,294.39. However, his fees as at 18 March 2014 were $47,298.90 and he estimated that further fees of $5,500 would be incurred in finalising the estate. Thus, it would not be possible to pay any dividend to unsecured creditors or to shareholders. Mr Hall noted that Top Oak had paid invoices for legal fees addressed to Mr Alvino. Due to the lack of funds he could not investigate and obtain legal advice as to whether these monies were recoverable by him as liquidator.
Consideration
I have set out at [39] the terms of the agreement made on 3 March 2011 between Mr Maronich and Mr Alvino. A fundamental question arises as to whether or not that agreement gave rise to a legally enforceable contract or, alternatively, was it merely an agreement about terms that were to be included in a formal contract to be prepared later. Mr Alvino and Optima have submitted that, if a contract was purportedly made on 3 March 2011, it was void for uncertainty or mistake and not supported by consideration.
Further questions are the identification of the parties to the contract (if there was one), from what source were the payments to be made to Mr Maronich to be drawn, to whom or to what entity was Mr Maronich’s share to be transferred, whether there was any agreement as to the respective timing of the payments, the share transfer and Mr Maronich’s resignation as a director. Further issues are whether the joint performance of a stocktake and the performance of work necessary to complete orders were essential terms of any contract and if so, when were those actions to occur. If there was a legally effective contract, a further question arises as to whether it was repudiated by Mr Maronich. That question cannot be dealt with until the preceding issues are resolved.
Was the agreement intended to be a contract
Counsel for Optima and Mr Alvino submitted that the evidence does not indicate that the parties intended to be bound, without further discussion or negotiation, by the agreement they had made. Counsel also submitted that there could not be a binding contract as the parties were still in the process of refining essential aspects of their bargain.[5] An alternative interpretation noted by counsel for the plaintiff, but rejected in his submissions, is that the parties had reached agreement on terms but intended to postpone the creation of a contractual relationship until a formal contract could be drawn up and executed.[6]
[5] Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, at 548, 551.
[6] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353.
Mr Maronich’s evidence was that the first time he could recall preparation of a written contract being discussed was when he and Mr Alvino had met in his car outside the bank on 31 March 2011.[7] However, I note that he had canvassed the preparation of a written contract in an email message that he sent to Mr Alvino on 9 February 2011. He also said in his oral evidence that he could not recall whether they had previously agreed that Mr Alvino would arrange for preparation of a written contract.[8] He then said that he had assumed that Mr Alvino would attend to that issue as he was more frequently in contact with Mr Milanko.[9]
[7] Transcript P 99, L 10 – 12.
[8] Transcript P 99, L 10 – 13; P 160, L 9 – 20.
[9] Transcript P 160, L 21 – 32.
While Mr Maronich suggested in email messages dated 11 April, 13 April, 14 April, 15 April and 3 May 2011 that it was necessary to have a written agreement, the tenor of those messages was that he was seeking to introduce a new requirement and was not asserting that this had been agreed in the first instance.
On the other hand, Mr Maronich said in an e-mail message he sent to Mr Alvino on 6 April 2011 “it was left with you to provide an agreement/contract we both sign regarding this. Obviously this did not happen.” In his reply sent by e-mail the next day Mr Alvino stated that Mr Maronich had not mentioned the need for an agreement or contract on 29 March 2011 when he had resigned as a director and had been shown a share transfer form by Mr Alvino.
In light of Mr Maronich’s oral evidence, which is supported by each of the relevant email messages other than that of 6 April 2011, I find that he and Mr Alvino had not agreed that a written contract should be prepared. The message that Mr Maronich had sent on 9 February 2011 was merely a preliminary canvassing of the possibility of a written contract. Preparation of a written contract was first specifically suggested by Mr Maronich when he and Mr Alvino spoke in his car after their meeting at the bank. I consider it quite clear that Mr Maronich made this suggestion because he had ceased to trust Mr Alvino. The numerous references in email exchanges to the agreement reached on 3 March 2011 as being binding reinforce my conclusion that Mr Maronich and Mr Alvino had not intended that a written agreement should be prepared prior to 31 March 2011 and they intended to be bound by the oral agreement.
Counsel for Mr Maronich referred to (what is sometimes called) the fourth limb of the rule in Masters v Cameron.[10] This fourth limb recognises that parties may intend to be bound immediately by the terms they have agreed upon but expect to make a further contract in substitution for that first contract which will contain additional terms.[11] The evidence does not indicate that this was intended. The possibility of a further or formal contract being prepared was not discussed between Mr Maronich and Mr Alvino until 31 March 2011 after significant conflict had emerged.
[10] [1954] HCA 72; (1954) 91 CLR 353.
[11] Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628; Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310 at 317.
Who were the parties to the agreement?
If any contract was between Mr Maronich and Top Oak, rather than with Mr Alvino or Optima, the evidence of Mr Hall shows that the practical effect would be that there was not a defendant with the means to pay damages or compensation should Mr Maronich be so entitled.
Mr Maronich’s evidence was that he had not specifically agreed that the agreement made on 3 March 2011 would be with Mr Alvino. Nevertheless, as far as he was concerned he was dealing with Mr Alvino and not Top Oak or Optima. However, he would not have objected if Mr Alvino had nominated Optima to take on the legal liabilities that he contends were created in his favour. The latter is not inconsistent with Mr Alvino’s use of Optima to hold a share in Top Oak in its capacity as trustee of his family trust.
Mr Alvino stated that he did not intend Optima to be bound by the agreement and the possibility of binding that company was not discussed. He had not intended that the alleged agreement would bind him personally. He only intended to bind Top Oak.
Mr Alvino’s counsel sought to draw support for that position from his diary note made on 11 February 2011 where he had noted that he had told Mr Maronich that he was not interested in taking over the business. Mr Maronich accepted that Mr Alvino may have made that statement. However, he also said that in the period leading up to their meeting on 3 March 2011 Mr Alvino had revised his position on more than one occasion.
Mr Alvino admitted that there had been ongoing discussions during 2010 and up until March 2011 about the terms upon which Mr Maronich might leave the business. Such discussions are recorded in diary entries made by Mr Alvino dated 20 January 2010, 22 January 2010 and 30 April 2010. For example, on 30 April 2010 Mr Alvino recorded that “AM ... talked about selling his half of OM to me”. On none of these occasions was there any note by Mr Alvino that he had informed Mr Maronich that he was not interested in buying the latter’s interest.
I find that the diary entry made on 11 February 2011 simply records Mr Alvino’s position that on that day he was not interested in taking over Mr Maronich’s interest in the business. Mr Alvino’s subsequent messages and diary entries lead me to conclude that he had later revised his position as Mr Maronich has asserted.
A number of documents prepared by Mr Alvino strongly suggest that he intended to enter the agreement with Mr Maronich (or, alternatively, to use Optima to do so on behalf of his family trust) rather than have Top Oak be a party to the transaction.
In the diary entry made by Mr Alvino on 3 March 2011 he recorded that “agreed to pay him $25K for his share ...”. The email message he sent to Mr Milanko on 3 March 2011 even more clearly stated an intention that he was to enter the agreement rather than Top Oak, ie the message stated “I require your assistance to finalise an agreement I have made with Andrew to solely take over the company. I have agreed to buy his half ...”. He then concluded the message by seeking Mr Milanko’s assistance to “... safeguard my interests”.
In a similar vein, the time sheet entry made by Mr Alvino in relation to the meeting on 3 March 2011 stated “... I was happy with his offer but could only pay for his half ... I would sell on consignment as we do with Todd’s stock”.
To like effect was the email message sent by Mr Alvino to Mr Milanko on 5 April 2011 where he stated “... I asked Andrew what he wanted if I took over”.
Further, on 7 April 2011 Mr Alvino sent an email message to Mr Maronich stating, amongst other things, “... I only agreed to the takeover as you wanted to shut it down and get on with life”.
The same point was made again by Mr Alvino in an email message he sent to Mr Maronich on 3 May 2011 when he stated “as you very well know I only agreed to buy your share because you wanted to”.
This series of written records made by Mr Alvino on the same day as, or soon after, the meeting on 3 March 2011 provide strong support for Mr Maronich’s evidence that he was “only dealing with Joe”. I therefore find that Mr Maronich and Mr Alvino had neither discussed nor intended that Top Oak was to be a party to the contract to purchase Mr Maronich’s share. Notwithstanding that finding of fact as to the objective intention of the parties, it is necessary to consider a further issue.
Counsel for Optima and Mr Alvino submitted that if Mr Alvino had intended to create a legally binding agreement the relevant party was Top Oak rather than him personally. In support of that submission, counsel noted that at all relevant times both Mr Alvino and Mr Maronich had envisaged that payment for Mr Maronich’s share would be made from the funds of Top Oak and from the sale of assets owned by Top Oak.
Consistently with that position, on 29 March 2011 the sum of $20,000 had been transferred from the Top Oak bank account to Mr Maronich in part payment of the invoice that he had issued earlier that day. Furthermore, on 30 March 2011 Mr Alvino and Mr Maronich had arranged to meet at the bank of Top Oak to withdraw money from its account. On 13 April 2011 Mr Maronich had sent an email to Mr Alvino advising that he “needed to accurately determine monies I can withdraw from business as well as assets value”.

On 24 March 2011 Mr Alvino sent an email to Mr Milanko asking, amongst other matters, whether it was possible “for Top Oak to do a share ‘buyback’ or simply purchase Andrew’s share. He is wanting to invoice the company for the amount agreed.”
There was no evidence that Mr Milanko responded to that email message. However, his oral evidence was that he interpreted the message to reflect Mr Alvino’s lack of understanding of the way such transactions were normally conducted. His understanding of the purpose of the transaction was that Mr Alvino intended that Mr Maronich would no longer be associated with Top Oak. Mr Alvino had not indicated to him that the shares should be held personally or otherwise. However, Mr Milanko had advised him that “the only way to go forward was for his existing investment in the entity to take over the remaining 50% of the shares”. Mr Milanko had provided that advice as he thought that it would avoid the complications that would arise if another entity held the remaining 50% of the shares. He then prepared a share transfer form to enable Optima to purchase Mr Maronich’s share.
The evidence of Mr Milanko was that at some time between the meetings held on 3 March 2011 and on 29 March 2011 he had “instructed” Mr Alvino not to have Top Oak buy back the share from Mr Maronich. It was clear from Mr Milanko’s evidence that his reference to “instructing” his client actually meant providing firm advice. Mr Milanko also stated that it was his decision, rather than that of Mr Alvino, to prepare a share transfer document which had the effect of transferring Mr Maronich’s share to Optima. However, I consider that this action was based upon the knowledge that he had acquired as his accountant as to how Mr Alvino organised his affairs.
Mr Alvino’s evidence was that when he collected the share transfer form from Mr Milanko prior to meeting with Mr Maronich at the bank he had not realised that Mr Milanko had entered the name of Optima as the transferee. Counsel submitted that this evidence was consistent with Mr Alvino’s position that at all times during these discussions with Mr Maronich he was conducting business on behalf of Top Oak alone. Counsel also submitted that while Mr Alvino and Mr Maronich had both intended that there was to be an agreement between the latter and Top Oak, as a matter of law, there were several difficulties in giving effect to such an arrangement.
Counsel for Mr Alvino and Optima referred to s 257A of the Corporations Act 2001 (Cth). This provides that a company may only buy back its own shares if the buyback does not materially prejudice its ability to pay its creditors and it follows the procedures set out in the Act. Section 257D would have required a special or unanimous resolution passed at a general meeting of the company. Prior to entering into a buyback agreement section 257E would have required that the company lodge with ASIC a copy of a document setting out the terms of the offer. Section 257F would have required the documents to be lodged with ASIC fourteen days before entering into the buyback agreement. In addition, section 257G would have required the company to include with its buyback offer a statement setting out all the information known to it that was material to the decision of whether or not to accept the offer. There was no evidence of any attempt to comply with any of these statutory obligations. Thus, Top Oak could not have lawfully bought back its own share from Mr Maronich even if that was what had been agreed.
Mr Milanko’s evidence that he had advised Mr Alvino that Mr Maronich’s share should be transferred to Optima supports Mr Maronich’s evidence that the agreement was intended to be with Mr Alvino although he (Mr Maronich) was not concerned by the fact that Optima may receive the share as a nominee for Mr Alvino. The action of Mr Alvino in signing the share transfer form that transferred the share to Optima establishes that he acted upon that advice.
For these reasons I prefer Mr Maronich’s evidence on this point to that of Mr Alvino. I find that Mr Alvino, and not Top Oak, was intended to be a party to the agreement made on 3 March 2011 and that Mr Maronich’s share was to be transferred to Optima.
Whether there was intended to be a binding agreement
Both Mr Maronich and Mr Alvino stated that they thought they had reached a binding agreement at the conclusion of the meeting on 3 March 2011. Mr Maronich said that they shook hands in confirmation of the agreement. As previously noted, Mr Alvino also recorded in his diary entry for 3 March 2011 that they had shaken hands. The shaking of hands has long been used to signify an intention to create a binding oral agreement.
In an email message to Mr Maronich dated 7 April 2011 Mr Alvino stated “as far as I am concerned we have a binding agreement”. Mr Maronich responded soon after with a message to the same effect. While the statements made or conduct occurring after entry into a contract may not be admitted as evidence when the court is determining the meaning of the contract, such evidence is admissible to assist in determining whether there is a contract.[12]
[12] Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [144]; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [161]; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [99] – [106].
I find that the agreement made between Mr Maronich and Mr Alvino on 3 March 2011 was intended to bind both of them personally. However, that is not the end of the matter. Further questions arise as to whether the agreement was supported by consideration and whether the terms were sufficiently certain to be enforceable.
Was the agreement supported by consideration?
Mr Alvino and Optima submitted that the agreement was not supported by consideration. That was said to be the case because it was not clear from Mr Maronich’s evidence what Mr Alvino or Optima were to receive by way of consideration. When asked in cross-examination about this issue Mr Maronich merely said that he would continue to do some work for Top Oak. Counsel noted that this had not been pleaded as being part of the alleged agreement and, in any event, Mr Maronich had not done any such work.
Mr Alvino also submitted that he had not been promised any valuable consideration. The basis for that was explained as follows. The share to be transferred to Mr Alvino would not have had any value because half of the value of the company assets was to be paid to Mr Maronich at the same time. Thus, there was said to be no difference between Mr Alvino holding a 50% share in 100% of the assets of Top Oak and him holding 100% of the shares in the assets of the company after it had been devalued by 50%.
I consider that the consideration given to support the agreement made on 3 March 2011 was the promise made by Mr Maronich to resign as a director of Top Oak and to transfer his share to Mr Alvino or his nominee, Optima, in return for payment of the agreed sum. He did resign as director but did not transfer his share. The resignation as director gave Mr Alvino day to day practical control of the business. If Mr Maronich had carried out his promise to transfer his share to Mr Alvino, or to Optima, that would have given Mr Alvino complete control of the company. That constitutes valid and legally effective consideration.
The intended source of the money to pay Mr Maronich
Mr Alvino stated in evidence that there had been no discussion about the payment being made by him personally or by Optima. However, for the reasons that follow, I find that the intention of the parties was that payment would be made from the funds of Top Oak.
Mr Alvino stated in his email to Mr Milanko on 3 March 2011 after the meeting with Mr Maronich, that he had agreed to buy the latter’s interest in the company. Because Mr Milanko did not respond, Mr Alvino sent a further message to him on 24 March 2011. He stated:
Can you please let me know what needs to be done, other than the stocktake at the end of the month. Does ASIC need to be informed that he is no longer a director? Is it possible for Top Oak to do a share “buyback” or simply purchase Andrew’s share? He is wanting to invoice the company for the amount agreed.
On 29 March 2011 Mr Maronich sent an email to Mr Alvino attaching an invoice for $50,000 plus GST of $5,000. The message stated:
Please deposit today so funds get cleared before 1-4-11. We will square off at later date and make changes to the invoice wording if necessary.[13]
[13] A number of spelling errors in this message have been corrected.
As I have noted above, the invoice sought payment from Oak Miracle (ie the business name of Top Oak) in respect of services described as “consulting fee and labour activities for period May 2010-March 2011”.
Mr Maronich stated that Mr Alvino had told him that payment could not be made without an invoice. He was not sure whether or not Mr Alvino had stated that the invoice should be directed to Oak Miracle (ie Top Oak) but he had assumed that to be the case. He considered that the payment of $20,000 made to him on 30 March 2011 from the funds of Top Oak was paid in response to this invoice.
Mr Alvino denied that he had requested Mr Maronich to issue the invoice. That denial was not inconsistent with the email message to Mr Milanko on 24 March 2011 where he stated that Mr Maronich wanted to invoice the company for the agreed amount.
Mr Milanko’s evidence was particularly helpful in resolving the conflict between the evidence of Mr Alvino and Mr Maronich. Mr Milanko stated that his advice to Mr Alvino was that there were two aspects to the agreement. First, Mr Maronich’s share in Top Oak needed to be transferred to Optima. Second, so as to obtain a taxation advantage, the payment should be made as a “contractor type payment” ie in response to an invoice for services which were subject to payment of GST. That would result in Top Oak being entitled to make a deduction for taxation purposes. That would not be the case if a capital sum was paid for the transfer of the share. Mr Milanko’s evidence on this point is entirely consistent with the diary notes made by Mr Alvino on 21 May 2010 and 10 September 2010 in which he recorded that he had received advice from Mr Milanko to the same effect.
The transfer from Mr Maronich of his share in Top Oak to Mr Alvino (or to Optima as trustee of his family trust) would have resulted in Mr Alvino (or the beneficiaries of his family trust) holding the entire beneficial interest in Top Oak. The effect of Mr Alvino causing payment to be made from the assets of Top Oak was to diminish the value of the company. If the proposed share transfer had occurred it would have made no practical difference to the overall financial position of Mr Alvino and his family whether payment was made from his own funds or withdrawn from the assets of the company.
While Mr Alvino denied having suggested to Mr Maronich that an invoice should be issued to Oak Miracle, and thus Top Oak, that action was consistent with the advice Mr Alvino had received from Mr Milanko in May and September 2010 and again in March 2011 about the taxation advantage for Top Oak (and indirectly the shareholders). I prefer Mr Maronich’s evidence on this point for two reasons. First, it was consistent with the advice given twice to Mr Alvino by Mr Milanko about the tax benefits. Secondly, Mr Alvino did not protest about the rendering of the invoice. Instead, he complied with it by causing $20,000 to be paid from Top Oak funds and seeking to make a further payment to Mr Maronich from the same source during the meeting at the bank on 31 March 2011.
Mr Maronich’s resignation as a director
Mr Maronich’s evidence was that it had been agreed at the meeting on 3 March 2011 that he would resign as a director of Top Oak. Mr Alvino was to organise the necessary paperwork to give effect to the resignation with the assistance of Mr Milanko. The subsequent actions of Mr Alvino in arranging for preparation of the required documents by Mr Milanko confirm that evidence. Mr Maronich signed the resignation form on 29 March 2011 (although it was post-dated 31 March) and provided that to Mr Alvino.
Mr Alvino did not give any evidence about Mr Maronich’s resignation. Clearly, the resignation was one of the two steps necessary to confer complete control over Top Oak on Mr Alvino (the other being the share transfer). The fact that Mr Maronich signed the resignation form on 29 March 2011 (although dated 31 March) and provided it to Mr Alvino was consistent with his evidence that it had been agreed that the transaction would be concluded by 31 March save for the further payments that had been agreed.
Transfer of Mr Maronich’s share
I am satisfied that the oral and documentary evidence establishes that it had been agreed between Mr Maronich and Mr Alvino that the latter was to takeover (to use a deliberately neutral term) the Top Oak business from 31 March 2011.
A question arises as to what steps Mr Maronich and Mr Alvino had agreed upon to give effect to the latter’s takeover of the business. Mr Maronich’s resignation as a director with effect from 31 March 2011 gave Mr Alvino complete day to day control of the business subject only to ongoing observance of his duties as a director. However, the transfer of ownership would only occur when Mr Maronich’s share was transferred to Mr Alvino (or to Optima as trustee of his family trust).
There is no reference in the documentary evidence to a date having been specifically agreed for the share transfer. The evidence of Mr Maronich was that he intended that the transfer of the share was to be the final step in the agreed process. He said that he held that intention because his interests would be better protected if all payments had been made to him before he transferred the share. However, Mr Maronich did not state in his evidence that he had informed Mr Alvino of this intention.
The effect of Mr Alvino’s evidence was that all steps necessary to transfer control of the business were to occur by 31 March 2011. He had shown Mr Maronich on 29 March 2011 an example of a completed share transfer form (being that used when they had purchased the shares in the company several years earlier). The only action still required after 31 March was to make the agreed further payments. For these reasons, Mr Alvino arranged for Mr Milanko to prepare the share transfer form and also insisted that it be signed when he met Mr Maronich at the bank on 31 March 2011. Mr Alvino made a diary entry, apparently on 29 March 2011 at the same time as he made the calculations at para [88], that he would “pay the money when I get the signed share transfer form”.
I am satisfied that the Mr Maronich and Mr Alvino must have intended that the share transfer would take effect from 31 March 2011. That step was necessary to give Mr Alvino complete ownership of Top Oak. I am satisfied that it had been agreed that the change in ownership would occur on that date albeit that further sums were still to be paid to Mr Maronich based upon the stock on hand and the receipt of payment for orders. While Mr Maronich said in his oral evidence that he had proceeded on the understanding that the share transfer would occur later, he made no mention of that belief in any of the email messages he sent after the disagreement on 31 March 2011. For that reason, and because the signing of the transfer on 31 March was necessary to give effect to the agreed change in ownership on that date, I prefer the evidence of Mr Alvino on the timing of the share transfer.
Timing of payments
Mr Maronich said that it had been agreed that he was to receive an initial payment of $55,000, inclusive of GST, to be placed in his bank account on or before 31 March 2011. Monies due from the KEW order were to be paid by 30 June 2011 and a further payment was to be made by 31 December 2011 relating to the value of the remaining stock. Mr Maronich’s oral evidence about the June and December instalments is not supported by the documentary evidence, including the emails that he sent. Payment upon those dates was not mentioned at all by either man.
Mr Alvino denied that the timing of payments had been agreed in the manner described by Mr Maronich. His evidence was that by 31 March 2011 Mr Maronich was to receive a payment of $25,000 for the value of a half interest in the plant, equipment and goodwill of Top Oak together with a sum equal to half of the profits but subject to adjustments for amounts due to Top Oak and also liabilities payable by the company. The further payments were to be made as invoices were paid and Mr Maronich’s half share of the stock was sold.
Mr Alvino’s oral evidence is supported by his diary and time sheet entries dated 3 March 2011 and the email message he sent to Mr Milanko on the same day. I consider that Mr Maronich’s evidence about the fixed timing of the June and December payments is also inconsistent with the agreed basis for calculation of the payments to be made after 31 March 2011. The quantum of those payments depended upon sale of stock and receipt of moneys from third parties and the deduction of expenses that were still to be quantified. This suggests that a due date for payment would not be fixed several months in advance. For these reasons I prefer Mr Alvino’s evidence on this point.
Mr Maronich’s evidence did not clearly establish why he sought payment of the sum of $55,000 in the invoice rather than some other amount. The description provided in the invoice was clearly designed to secure a tax advantage as advised by Mr Milanko and did not represent the true basis for the payment. The sum claimed considerably exceeded the amount of less than $40,000 calculated by Mr Alvino as being the entitlement of Mr Maronich (subject to further payments based on completed orders and for stock). Because Mr Alvino was willing to pay the $55,000 it is unnecessary for me to make any finding about the basis upon which this amount had been quantified.
Stocktake
Mr Alvino and Optima have pleaded that it was an express term of the agreement made on 3 March 2011 that the KEW order would be completed by 31 March 2011. The stock was then to be put aside and a stocktake of the remaining stock was to be conducted jointly by Mr Maronich and Mr Alvino on 31 March 2011. As Mr Maronich did not take part in a stocktake it was submitted on behalf of Mr Alvino and Optima that Mr Maronich had repudiated the agreement. Alternatively, the evidence was said to show that the agreement had been terminated.
While Mr Alvino sent numerous emails and made many notes relating to the agreement, and set out its terms several times, there were only two mentions made by him of the stocktake issue. The first mention was in his email message to Mr Milanko dated 24 March 2011 where he referred to the need for a stocktake by the end of the month. The second mention appeared in an email message he sent to Mr Maronich on 13 April 2011 where he stated, amongst other things, “I have mentioned to you on many occasions wanting to do a stocktake”.
Mr Alvino was cross-examined about his failure to mention the need for a stocktake in any other of his many written records or communications relating to the agreement. His response was that the need for a stocktake was clearly understood and did not need to be mentioned because it was not possible to determine the value of half the stock without doing a stocktake. He also said that the stocktake was required because Mr Maronich had not entered into the business records all stock that he had produced while Mr Alvino had been off work due to an injury. The evidence given by Mr Alvino did not suggest that a date for the stocktake had been specifically agreed although his view was clearly that it needed to be done before 31 March 2011.
Mr Maronich’s evidence was that he had agreed with Mr Alvino that a stocktake would be done but a date had not been agreed. It was to be done when there was more room in the shed. He also stated that as the payments were to be made in instalments, it would be possible to adjust them when they were made in accordance with stock levels. I note that Mr Maronich referred in an email sent to Mr Alvino on 9 February 2011 to the conduct of a stocktake as a step in the process of changing ownership.

It is clear that a stocktake needed to be performed at some time so as to determine the payment due to Mr Maronich for the value of half the stock. Both Mr Maronich and Mr Alvino acknowledged that fact and Mr Maronich had recognised that on 9 February 2011. However, I am not satisfied that the date had been agreed. While Mr Alvino appears to have assumed that it was to be done on or before 31 March 2011, he made no mention in the various diary notes and emails of that being agreed. It appears to me that it may have been possible for the stock level as at 31 March 2011 to be determined by later doing a stocktake and making an adjustment for sales in the intervening period. That is consistent with Mr Maronich’s view.
It has not been established to my satisfaction that it was a term of the agreement reached between Mr Alvino and Mr Maronich on 3 March 2011 that a stocktake must be performed on or before 31 March 2011. However, they had accepted the need for a stocktake and, if they had not, such an agreement could clearly be implied because it was required to determine the final amount to be paid to Mr Maronich be based upon the stock on hand as at 31 March 2011. The stocktake could have been performed at a mutually convenient time. In that light it does not “go without saying” that the stocktake had to be performed before 31 March 2011. Thus, a term to that effect cannot be implied into the agreement.
Performance of further work
The terms of the agreement made on 3 March 2011 clearly required further work to be performed to complete, at least, the KEW order. The net proceeds of that further work were to be divided equally between Mr Maronich and Mr Alvino. Following the meeting on 3 March 2011 Mr Maronich continued to work in the business until the meeting at the bank on 31 March 2011. Thereafter, he performed no work whatsoever in the business. Mr Maronich’s own evidence was that some further work was necessary.
Whether agreement repudiated
Optima and Mr Alvino have contended that the series of emails referred to at paragraphs [65] to [76] that passed between the latter and Mr Maronich after 31 March 2011 made clear that either there was no agreement or that Mr Maronich expected Mr Alvino to treat the agreement as having been terminated. In response to that Mr Maronich has submitted he was simply attempting to renegotiate the terms of the binding oral agreement in light of the difficulties that had emerged.
If the email exchanges were to be viewed in isolation from the actions of Mr Maronich their effect could be taken to be that he was simply seeking to convert the oral agreement into a written agreement so as to provide him with greater protection and certainty. Of itself, that does not demonstrate repudiation. I take the same view of his attempt to persuade Mr Alvino to reinstate him as a director. However, the email messages must be read in the context of the conduct of Mr Maronich. I now turn to that issue.
There are several grounds upon which Mr Maronich might possibly be taken to have repudiated the agreement made on 3 March 2011.
One such ground was his refusal to accept the payment of $35,000[14] offered by Mr Alvino during the meeting at the bank coupled with his refusal to sign the share transfer form. Mr Alvino was only prepared to pay the $35,000 if Mr Maronich signed the share transfer form. He made a diary note, apparently on 29 March 2011, recording that this was his intention.
[14] $5,000 cash and $30,000 by electronic transfer.
I have found that the signing of the share transfer on 31 March 2011 was a term of the binding agreement reached on 3 March 2011. It was also agreed that the payment of $25,000 together with half of the bank balance was to be paid at that time (albeit that Mr Alvino was willing to cause Top Oak to pay the higher sum of $55,000). I therefore find that Mr Alvino was entitled to insist that Mr Maronich sign the transfer form as a pre-condition to payment. By refusing to accept the payment of $5,000 in cash, with a further electronic transfer of $30,000 to be arranged immediately, and also refusing to sign the transfer, Mr Maronich repudiated the contract made on 3 March 2011.
I have found that the promise by Mr Maronich to make the share transfer was one of the two elements of the consideration supporting the agreement. Mr Maronich failed to supply that consideration at any time. Because the share transfer would have given Mr Alvino (or, more strictly, Optima as his trustee) complete ownership of Top Oak, it was the more valuable component.
Mr Alvino and Optima submitted that the failure of Mr Maronich to participate in the stocktake by 31 March 2011 demonstrated a repudiation of the agreement. I reject that submission because it has not been established to my satisfaction that the timing of the stocktake had been agreed (as distinct from the need for a stocktake at some time).
Nevertheless, both Mr Alvino and Mr Maronich accepted that it was necessary to perform a stocktake at some point. The failure by Mr Maronich to participate in that process reinforces my conclusion that he repudiated the contract made on 3 March 2011.
The failure by Mr Maronich to perform any work in the business after 31 March 2011 was completely at odds with the term of the agreement that required outstanding orders, particularly the KEW order, to be completed. The payments to be made after 31 March 2011 required that work to be completed. However, he left Mr Alvino to carry out that work alone. Once again that reinforces my conclusion that Mr Maronich had repudiated the contract.
I find that Mr Maronich did repudiate the agreement that he had made with Mr Alvino on 3 March 2011. I make that finding based upon his failure to make the share transfer that was the central element in the assignment of ownership and control of the Top Oak business to Mr Alvino or his nominee, Optima combined with his refusal to accept payment. My conclusion is reinforced by Mr Maronich’s failure to perform any of the necessary work after 31 March 2011 and his failure to participate in the stocktake that was required to determine his final entitlements to payment under the agreement. By failing to sign the share transfer, Mr Maronich also failed to provide a key element of the agreed consideration.
Counsel for Mr Maronich submitted that if there was repudiation, it had not been accepted. Contrary to that submission, I find that Mr Alvino did communicate his decision to accept the repudiation when he made the following statement in an email message sent to Mr Maronich on 13 April 2001:
My intention is to finish the current commitments and then either sell or dissolve the company. Remaining funds once commitments of clean up, etc is done will be divided amongst share holders.
The subsequent actions of Mr Alvino were at all times completely consistent with that statement.
Mr Maronich has not contended that Mr Alvino had repudiated their agreement. In his evidence, Mr Maronich accepted that Mr Alvino had been willing during the meeting at the bank on 31 March 2011 to pay the additional $35,000 claimed in the invoice. Mr Alvino also performed the work that was required to complete outstanding orders, particularly the KEW order.
In light of my finding that there was a repudiation it is not strictly necessary to consider the other grounds for relief advanced by Mr Maronich and the defences advanced by Mr Alvino and Optima. However, I will do so for completeness.
Mistake
Mr Alvino and Optima have contended that any contract made on 3 March 2011 was void for mistake. The mistake is said to have been the belief of Mr Alvino that any contract was between Mr Maronich and Top Oak. I have already concluded that the parties intended that Mr Alvino would be a party to the contract (albeit that payment would be drawn from Top Oak funds). I therefore reject the contention that the contract was void for mistake.
Uncertainty
Mr Alvino and Optima have submitted that the agreement with Mr Maronich was void for uncertainty. The uncertainty was said to arise because the terms of the agreement were unclear and it was also incomplete in relation to important matters.
The basis for submitting that the agreement was unclear rested on five contentions. There was said to be confusion as to who had intended to enter the agreement, who had authority to make the offer, whom the offeree intended to make the offer to, who accepted the terms and what were the terms of the agreement.
I have already found that Mr Maronich and Mr Alvino intended to enter the agreement in their personal capacities and they had accepted the other’s offer. I have also set out what I have identified as the agreed terms.[15] While the precise date for the stocktake had not been agreed, I have found that this could have occurred after 31 March 2011. For those reasons I reject each of the five contentions to which I have just referred.
[15] See [39].
Mr Alvino and Optima have submitted that there is no evidence to establish that the parties had agreed on 3 March 2011 how those profits were to be calculated. There was no mention of this issue in any of the relevant documents and the oral evidence did not assist me. I find that there was no specific agreement as to how the profits were to be calculated. However, I do not regard that as invalidating the agreement.
I am satisfied that it was a term of the agreement that there was to be an equal division of the profits made up to 31 March 2011 and also the profits derived when orders on hand at that date were completed.
Counsel for Mr Maronich made detailed written submissions as to how the profits of Top Oak in the relevant period should be computed. In essence, his submission was that there should be a formula comprising three elements. The starting point was the Top Oak bank balance as at 31 March 2011. That had to be taken together with the company receivables. It was necessary to deduct outstanding liabilities from the aggregate of those two amounts.
The written submission went into considerable detail as to how those principles should be applied. A particular issue acknowledged by counsel for Mr Maronich was the need to identify the extent to which expenses which became payable after 31 March 2011 related to work done or liabilities that had accrued prior to that date. Because of my conclusion that Mr Maronich had repudiated the agreement, it is unnecessary to decide the correctness of the submissions made on his behalf about the calculation of profits.
I do not consider that the need to calculate profits rendered the contract void for uncertainty. The determination of profits for a small business such as Top Oak should be well within the capability of a competent professional accountant, whether Mr Milanko or another. Accountants must undertake such calculations constantly when they attend to their clients’ taxation and other business affairs.
Thus it would have been possible to determine with a sufficient degree of confidence the profits that were to be divided between Mr Alvino and Mr Maronich albeit that an accurate determination is likely to have required some careful accounting work. The need for such work does not render the agreement void for uncertainty. I note that the High Court held in Royal Botanic Gardens and Domain Trust v South Sydney Council[16] that a contract which simply provided that a party was to receive rent based upon “additional costs and expenses” was not void for uncertainty. The High Court held that those two matters were capable of calculation. I reject the contention that the agreement was void for uncertainty because the method of calculating profit had not been agreed.
[16] [2002] HCA 5 at [36] – [38]; (2002) 240 CLR 45 at 62.
Promissory estoppel
Mr Maronich has submitted that if his contention that the oral agreement of 3 March 2011 is enforceable as a contract does not succeed, he is entitled to relief on the basis of a promissory estoppel. The basis for the promissory estoppel is said to be that Mr Alvino is estopped from denying the enforceability of the agreement because he made a representation that it was enforceable and thereby induced Mr Maronich to resign as a director. That resulted in Mr Alvino gaining complete control over Top Oak. That loss of control resulted in Mr Maronich no longer having the capacity to enforce the first charge that he claims to hold over the profits of the Top Oak business.
The first charge was said to attach to the profits or surpluses derived by Top Oak on or after 1 April 2011 and was based upon the implied intention of the party’s that the payment by Mr Alvino of the agreed purchase price, which was to be funded from those profits or surpluses, would be paid before any distributions were made by Top Oak to Mr Alvino or Optima.
Because of my conclusion that Mr Maronich repudiated the agreement the possible technical barriers to the enforceability of the agreement canvassed by his counsel are not relevant.
I also consider that the first charge upon which Mr Maronich relies as an essential part of the detriment argument did not arise because of his repudiation, if not otherwise. It is therefore not necessary to consider further the promissory estoppel argument.
Constructive trust
Counsel for Mr Maronich submitted that a constructive trust should be recognised in accordance with the principles identified by Deane J in Muschinski v Dodds.[17] Counsel submitted that the constructive trust should be seen as a remedial device and as a form of restitution under which one party must restore property to another party. Where parties have entered into a joint endeavour under which one of the parties acquires the title to property that was intended to be an asset of the joint endeavour and the other party had never intended that the title holder was to hold the property in his or her own right, upon the failure of the joint endeavour, the property is held on a constructive trust for the benefit of the other party if the holder is bound in conscience to restore some or all of the property to the other party following the failure of the joint endeavour.
[17] [1985] HCA 78; (1985) 160 CLR 583.
Counsel submitted that in addition to the joint endeavour between Mr Maronich and Mr Alvino which operated as a form of quasi-partnership, there were three other relevant considerations. Those considerations were, first, there was an oral agreement which both parties regarded as binding and which had sought to notionally wind up the joint endeavour. Second, while the only parties to the oral agreement were Mr Maronich and Mr Alvino, Optima was merely a nominee of Mr Alvino. It was also contemplated by the parties that the purchase of Mr Maronich’s interest in the joint endeavour would be financed through earnings derived by Top Oak. In other words, there was to be a notional distribution to either Mr Alvino or Optima out of the profits made by Top Oak and then there was to be a notional payment made to Mr Maronich. This notional process was to be expedited by Mr Alvino causing Top Oak to make payment directly to Mr Maronich. That resulted in a first charge being created in favour of Mr Maronich over the profits or surpluses generated by Top Oak as security to ensure that the payments were actually made to Mr Maronich. That first charge was necessary to give business efficacy to the arrangement because the purchase price was to be paid in instalments.
The third consideration relied upon by counsel for Mr Maronich is that he had handed over complete control of Top Oak to Mr Alvino and had relied on him to carry out the terms of the oral agreement.
A further element of this submission was that the action of Mr Alvino in causing Top Oak to make payments to Optima from the assets of the company had resulted in Optima obtaining a financial advantage which Mr Maronich had not intended it to obtain. Furthermore, the actions of Mr Alvino had defeated the first charge and were contrary to the terms of the oral agreement. Optima was an accomplice of Mr Alvino in relation to those actions.
As a result of these matters counsel for Mr Maronich contended that Optima held the monies which it had received contrary to the terms of the oral agreement on a constructive trust for the benefit of Mr Maronich. It was further submitted that Optima ought to make restitution to Mr Maronich of the amounts that he would have received had the terms of the oral agreement been carried out and the first charge not defeated. Counsel contended that the sum payable in restitution was $123,323.10. That sum was calculated in the fashion I have described at [180] and [181].
Counsel for Mr Alvino and Optima submitted that the payments made by Top Oak to Optima after 11 April 2011 had occurred because Mr Alvino had become solely responsible for conducting and working in the Top Oak business. In other words, he was simply being rewarded from the profits of the business for his skills and labour.
I have already noted that counsel for Mr Maronich conceded that the payments made by Top Oak to Optima after 13 June 2012 were clearly made from revenue derived from the work of Mr Alvino. He also conceded that an uncertain proportion of the payments made between 12 December 2011 and 12 June 2012 had been similarly derived. While it was contended on behalf of Mr Maronich that all of the payments made to Optima before 2 May 2011 were attributable to work undertaken when he was still involved in the business, the evidence did not sufficiently establish that every relevant payment had that character. In that context it must be recognised that the business arrangement entitled Optima to payment for the bookkeeping and similar services provided by Mr Alvino. Thus, the amount that Mr Maronich might be entitled to if his constructive trust argument were to be accepted is unclear.
Because of my finding that Mr Maronich had repudiated the agreement made on 3 March 2011 the contention that he held a first charge over the assets of Top Oak to secure the payments promised to him by Mr Alvino must necessarily fail. That is enough to dispose of the constructive trust argument although I note in passing that it is not apparent to me that the circumstances would have given rise to a constructive trust of the type identified by the High Court in Muschinski v Dodds.[18] Deane J held at [9] that the mere fact that it would be unjust or unfair for the owner of property to assert ownership against another person does not, of itself, provide a basis to find that the other party has an equitable interest in the property. Relief by way of a constructive trust will only be available if equitable principles require that a person in whom ownership of property is vested should hold it for the benefit of another.
[18] Ibid.
Breach of fiduciary duty
Counsel for Mr Maronich has relied upon the decision of the New South Wales Court of Appeal in Brunninghausen v Glavanics[19] to assert that as the sole director of Top Oak Mr Alvino owed a fiduciary duty to Mr Maronich as a shareholder. It was contended that such a duty arose because Mr Maronich as a non-director shareholder was significantly dependent on Mr Alvino as the sole director to act in his interests. Furthermore, it was submitted that Mr Alvino did not owe an equivalent duty to Top Oak. A fiduciary duty was said to be imposed by law and not out of a voluntary assumption of responsibility by Mr Alvino as sole director.
[19] [1999] NSWCA 199; (1999) 46 NSWLR 538.
The submission was that how the profits of Top Oak were distributed, whether or not there was compliance with the terms of the oral agreement and whether or not the asserted first charge was enforced were all matters that in no way affected the interests of Top Oak. For that reason it could not be said that Mr Alvino owed a fiduciary duty to Top Oak in relation to any of these issues. For that reason he was not precluded from being under such a duty to Mr Maronich.

It was also contended that once Mr Alvino became the sole director of Top Oak then Mr Maronich became entirely dependent upon him in relation to the distribution of profits, compliance with the terms of the oral agreement and enforcement of the first charge. It was further suggested that it was quite apparent that Mr Alvino had seized the opportunity provided by his fiduciary position to advance his own interests by way of distributions from the assets of Top Oak to the detriment of Mr Maronich. That was in breach of the agreement and served to defeat the first charge. Mr Alvino used his position as sole director to make payments to Optima without regard to the obligations under the oral agreement and so as to frustrate the enforcement of the first charge. For that reason it was contended on behalf of Mr Maronich that Mr Alvino must account to him for the benefit or gain which he obtained which constituted failure to meet the first charge in the sum of $123,323.10.
Because of my finding that Mr Maronich repudiated the agreement, there could be no first charge. For the same reason there is no basis to the contention that Mr Alvino used his position as the sole director to make payments to Optima without regard to the obligations under the agreement. Whether or not any of the payments Mr Alvino caused to be made from the funds of Top Oak otherwise gave rise to a breach of his duties as a director is not within the scope of these proceedings and has not been the subject of any submissions.
Misleading and deceptive conduct
Mr Maronich has alleged that Mr Alvino engaged in misleading or deceptive conduct in the course of trade or commerce contrary to s 18 of the Australian Consumer Law. The basis for the claim of misleading or deceptive conduct is said to be a representation made by Mr Alvino to Mr Maronich that he would cause Top Oak to pay $55,000 to Mr Maronich on or before 31 March 2011. In reliance upon that alleged misrepresentation, Mr Maronich resigned as a director and suffered a detriment. The detriment was again alleged to be that he had given up control of the Top Oak business in favour of Mr Alvino and thereby lost the ability to enforce the first charge that he held over the assets of Top Oak.
That representation by Mr Alvino was said to be actionable when it was made on 29 March 2011 because Mr Alvino had no intention of causing Top Oak to pay $55,000 to Mr Maronich. Alternatively, it was actionable if Mr Alvino had no reasonable grounds for believing that he would cause Top Oak to make that payment.
The representation allegedly made by Mr Alvino was said to be misleading or deceptive on the following basis. As I have noted, on 29 March 2011 Mr Alvino made a preliminary calculation of the value of the entitlements of Mr Maronich under the oral agreement. He arrived at the gross sum of $44,302.50 but this needed to be reduced in recognition of certain liabilities. After deduction of those liabilities the amount payable to Mr Maronich would have been less than $40,000. When asked in cross-examination why he was prepared to cause Top Oak to pay Mr Maronich $55,000 when he thought that his true entitlement was no more than $40,000, Mr Alvino had stated that he was “doing him a favour”.
Mr Maronich has submitted that Mr Alvino did not take any steps to make the payments sought in the invoice. While he had transferred $20,000 to Mr Maronich on 30 March 2011, he then transferred the same amount to Optima on 1 April 2011 which he described as “to match AM payment”. For that reason the two payments of $20,000 should be seen as an ordinary distribution of profits and not as an attempt to pay Mr Maronich the amount to which he was entitled under the agreement.
Because of the belief by Mr Alvino that Mr Maronich was only entitled to less than $40,000, and as he had not made any real attempt to pay to him the sum of $55,000 claimed in the invoice, it was submitted that as at 29 March 2011 Mr Alvino had no intention of paying $55,000 to Mr Maronich. Alternatively, he had no reasonable belief that he would take sufficient steps to ensure that such a payment would be made. On that basis, the representation by Mr Alvino was said to be misleading and deceptive.
Counsel for Mr Maronich contended that if he had not resigned in reliance upon the representation he may well have been able to compel Mr Alvino to honour his obligations under the agreement and to pay him his true entitlement. That was said to be $123,323.10. Alternatively, Mr Maronich would have been able to wind up Top Oak and would have received what was described as “an equivalent amount” less the liquidator’s fees.
There are a number of difficulties with the misleading or deceptive conduct submission advanced on behalf of Mr Maronich. Mr Alvino and Optima have suggested that any relevant representation was not made in the course of trade or commerce. While they were conducting the Top Oak business, they were not conducting trade or commerce as traders in shares or as sellers of businesses. It is unnecessary to decide that question. I simply note that there may arguably be a relevant distinction between a misrepresentation about some matter concerning a business that is being sold (which may clearly amount to misleading or deceptive conduct in the course of trade or commerce) and a misrepresentation about the party’s intentions when that party is not a trader in businesses.
There is no evidence whatsoever to suggest that prior to the disagreement at the bank on 31 March 2011 Mr Alvino did not intend to honour the agreement he had reached with Mr Maronich. The fact that he had calculated the true worth of Mr Maronich’s interest in the business to be less than $40,000 does not, of itself, establish that Mr Alvino did not intend to honour the agreement. His action at the bank when he offered to transfer to Mr Maronich the balance of the $55,000 clearly leads to the opposite conclusion. I find that the misleading and deceptive conduct allegation must be rejected as it completely lacks any evidentiary foundation.
Conclusion
I find that none of causes of action relied upon by Mr Maronich have been established. In particular, I find that he repudiated the contract that he had entered with Mr Alvino to sell his share in Top Oak. The consequence of that repudiation was that his only available remedy was as a shareholder in the liquidation of Top Oak. That is outside the scope of these proceedings. I dismiss the action