Mathieson v Booth

SUPREME COURT OF VICTORIA
COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST	Not Restricted

No. 2077 of 1999

BRUCE LAWRENCE MATHIESON & ORS	Plaintiff
v
JOHN ALBERT BOOTH & ORS	Defendant

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JUDGE:	Warren J
WHERE HELD:	Melbourne
DATE OF HEARING:	15, 16, 17, 18 and 22 May 2000
DATE OF JUDGMENT:	26 September 2000
CASE MAY BE CITED AS:	Mathieson & Ors v Booth & Ors
MEDIUM NEUTRAL CITATION:	[2000] VSC 385

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Contract – whether an extension – whether an option.

Forfeiture – relief granted where unconscionable conduct occurs.

Estoppel – unconscionable conduct.

Fiduciary Duty – where a joint venture exists.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A. Archibald QC with Mr M. Pearce	Norton Gledhill
For the Defendants	Mr C. Scerri QC with Mr R.M. Peters	Arnold Bloch Leibler

HER HONOUR:

The plaintiffs seek specific performance, alternatively, relief from forfeiture or damages claimed in contract, estoppel or breach of fiduciary duty. The proceeding arises from the breakdown of a longstanding business relationship involving the ownership and management of various hotels by the first plaintiff, Bruce Lawrence Mathieson and his corporate interests and the first defendant, John Albert Booth and his corporate interests.

Summary of dispute

The parties agreed on 29 June 1994 to an arrangement whereby all of their joint hotel and property interests were transferred into the sole name of the Booth interests in order to facilitate bank re-finance of those assets. A written agreement was executed to effect the transfers. The agreement was intended to remain in place for 12 months and thereupon the Mathieson interests were to be reinstated. The reinstatement was subject to Mathieson providing written notice to Booth 14 days before the expiration of the 12 month period of the agreement that he had obtained a letter of offer of finance to pay out the then bank finance. Fourteen days before the expiration of the 12 month period, Mathieson purported to comply with the condition just described. However, the parties resolved to extend their arrangement for a further two year period, until June 1997, and to continue with the existing bank finance and not proceed with the re-finance proposal of Mathieson. There was to be a further agreement prepared by the parties' solicitors reflecting the extension arrangements. The further agreement was never executed. Over time events transpired such that in May 1997 Mathieson purported to give notice of reinstatement of his interests as they stood prior to the June 1994 agreement. Booth refused to reinstate Mathieson.

The Mathieson interests characterised the events of 1994 to 1997 as constituting an enforceable agreement consisting of three core elements. First, an initial agreement containing a condition of notice of a re-finance facility that was fulfilled by Mathieson in 1995. Second, an agreed and enforceable variation in 1995 of the 1994 agreement. Third, an entitlement on the part of the Mathieson interests as at 1997 to be reinstated without further obligation of notice of re-finance, that obligation having been fulfilled in June 1995.

The Booth interests characterised the events of 1994 to 1997 as consisting of four core elements. First, an initial agreement that gave Mathieson an option of reinstatement subject to the fulfilment of a condition of notice of a re-finance facility. Second, the non‑fulfilment of the condition at the operative time in 1995 because the re-finance proposal imposed an obligation upon Booth to provide a personal guarantee that had not previously existed. Third, by 1997, the lapsing of the option of reinstatement by Mathieson when the notice condition was not fulfilled. Fourth, an agreement to agree was reached in 1995 but never formalised by an executed variation agreement and, therefore, there was no binding agreement in place.

On the basis that the obligation to give notice of re-finance in 1995 was a one off obligation that had been met and on the further basis that the 1994 agreement was otherwise agreed to be varied by an extension to 1997, the Mathieson interests claimed relief based on specific performance, relief from forfeiture, in estoppel or breach of fiduciary duty so as to achieve reinstatement. Conversely, the Booth interests denied on all bases the entitlement of the Mathieson interests to reinstatement.

Background

Mathieson and Booth first met in about 1987 when working for a developer, Austotel Limited. In 1987 Mathieson and Booth acquired the Bayside Hotel in Sydney together with two other partners, one MacArthur and one Bereny (the hotel is hereafter referred to as "the Bayside"). In 1989 Mathieson and Booth acquired the Lodge Studio apartments in Sydney, again with the two other partners, MacArthur and Bereny (the property is hereafter referred to as "the Lodge"). There were other assets bought and sold such as a coffee shop in Mosman, Sydney. In 1989, also, Mathieson and Booth jointly acquired land in Kensington, Melbourne for the purposes of redevelopment. In 1990 MacArthur sold his interest in the Bayside and the Lodge to Mathieson and Booth. In 1992 Mathieson and Booth jointly acquired the Palace Hotel in Burke Road, Camberwell, Melbourne (the hotel is hereafter referred to as "the Palace").

The 1994 Events

There were no further acquisitions by the partnership until 1994. In that year further finance was required in relation to the Palace, the Bayside and the Lodge. Finance was arranged with the National Australia Bank. The bank required 100 per cent ownership by Booth and his interests as security for any loans secured in relation to the various hotel businesses. In a letter dated 15 March 1994 Booth sent a letter of offer to Mathieson (addressed to one of his corporate interests, Lincourt Pty Ltd) in the following terms:

"We refer to our previous discussions on the matter of the shareholder control over the Palace Hotel and the entities owning the Bayside and Lodge Hotels.
The Bank would require the Booth family to retain 100% control over all of the companies that own the Hotels. The option of majority control coupled with an option agreement and power of attorney over those shares not held by the Booth family is not favoured.
Amongst other concerns was a significant minority shareholding, the deal we are progressing assumes the Palace cross-securitises your other borrowings. It would be difficult to establish a benefit to a minority shareholder in providing this cross-linked security.
… "

Bereny agreed to sell out his interests in the Bayside and the Lodge and Mathieson agreed to transfer his interests, temporarily, to Booth for the balance of the term of finance from the National Australia Bank, a period of 12 months. The arrangement contemplated that Mathieson would transfer his interests to Booth until June 1995 at which time Booth would transfer back the Mathieson interests subject to certain terms. On 29 June 1994 Mathieson, Booth, their various companies and Bereny executed an agreement to give effect to the arrangements just described ("the restructure agreement").

At the time, the companies controlled by or associated with Mathieson were Mymack Pty Ltd ("Mymack") (in part), Palace Hotel Pty Ltd, Apan Pty Ltd ("Apan"), Wildhurst Pty Ltd ("Wildhurst") and Dinmack Pty Ltd ("Dinmack") (in part). The companies controlled by or associated with Booth were Sabo Pty Ltd ("Sabo"), Mymack (in part), Wardland Pty Ltd ("Wardland"), Lincourt Pty Ltd ("Lincourt"), Rushcutters Pty Ltd ("Rushcutters") and Dinmack (in part).

After the restructure agreement in June 1994, that is before reinstatement of the parties' interests as they were prior to June 1994 Mathieson controlled 100 per cent of each of Apan and Wildhurst. Apan held 25 per cent of the units in the Dinmack Unit Trusts and Wildhurst held 75 per cent of the units in the same trust. Dinmack was the trustee of the Dinmack Unit Trust. The company, Dinmack, leased the Bayside Hotel. At the same time, Booth owned 100 per cent of each of Wardland and Lincourt and each of those companies held 50 per cent each in Rushcutters. Rushcutters in turn owned the freehold of the Bayside Hotel. The net effect prior to reinstatement was that Booth owned 100 per cent of the Bayside Hotel and did not hold any interest in the management of that hotel. At the same time, Mathieson had no interest in the ownership of the hotel but controlled 100 per cent of the management of the Bayside Hotel. It was the plaintiffs' case that after reinstatement each of Booth and Mathieson were to have owned 50 per cent of the freehold of the Bayside Hotel and 50 per cent of the management of that hotel.

It was the plaintiffs' case that after reinstatement Booth would have owned 100 per cent of Wardland and Lincourt (as previously) but that those companies owned 50 per cent of Rushcutters whilst Mathieson owned the other 50 per cent. Mathieson controlled 100 per cent each of Apan and Wildhurst and those companies in turn held 50 per cent of the units in the Dinmack Unit Trust whilst Booth held 50 per cent of the units in the trust. Dinmack remained the trustee of the Dinmack Unit Trust and leased the Bayside Hotel to Rushcutters that in turn owned the freehold of the Bayside.

In relation to the Palace Hotel, after the restructure agreement in June 1994, that is before reinstatement, Booth owned 100 per cent of the Palace Hotel and Mathieson owned 100 per cent of the management. After reinstatement Booth would have owned 20 per cent of the freehold of the Palace Hotel and Mathieson owned 80 per cent together with 100 per cent of the management.

After the restructure agreement in June 1994, that is before resinstatement, Mathieson owned 100 per cent of the Palace Hotel Pty Ltd and that company leased the Palace Hotel. Booth owned 100 per cent of Sabo that controlled 90 per cent of the shares in Mymack. Booth controlled 10 per cent of the shares in Mymack. As a consequence, Booth's interests at that time controlled 100 per cent of the shareholding in Mymack. Mymack was the trustee of the Mymack Unit Trust and Sabo held 100 per cent of the units in that trust. Mymack in turn owned the freehold of the Palace Hotel. After reinstatement Mathieson would have continued to own 100 per cent of the Palace Hotel Pty Ltd that in turn leased the Palace Hotel premises. He claimed he was entitled to 80 per cent of the shareholding in Mymack Pty Ltd and that Booth, whilst continuing to hold 100 per cent of the shares in Sabo, Booth and Sabo thereafter held 20 per cent of the shares in Mymack Pty Ltd. The units in the Mymack Unit Trust were distributed on an equivalent basis, that is 80 per cent in favour of Mathieson and 20 per cent in favour of Booth and Sabo. Mymack continued as trustee of the Mymack Unit Trust and owned the freehold of the premises of the Palace Hotel.

The distribution of interests before and after the proposed reinstatement are set out in tabulated and flow chart form in the annexures to these reasons.

Ultimately, the Lodge was sold on 19 January 1996. It did not form part of the dispute between the parties over the right to reinstatement, if any, of the Mathieson interests. Nevertheless, for historical purposes, it is to be observed that Cotslem Pty Ltd ("Cotslem") was the ownership vehicle utilised by Mathieson and Booth at the relevant time in relation to the Lodge. Dinmack was the lessee of the Lodge from Cotslem. They were factors taken into account in the terms of the restructure agreement.

The restructure agreement executed on 29 June 1994

The restructure agreement was concerned with various finance facilities that had been provided to the Mathieson, Booth and Bereny interests and those of their respective companies. Reference was contained in the agreement to the "BAC Facilities" being finance facilities provided by Bill Acceptance Corporation Limited. Earlier in time, as a result of the provision of the BAC Facilities, Mathieson, Booth, Bereny and their associated interests provided joint and several guarantees on 22 November 1989. The BAC Facilities were secured by a number of securities including a first mortgage over the Bayside and the Lodge and charges over some of the companies associated with Mathieson, Booth and Bereny. At the time of the execution of the restructure agreement on 29 June 1994 the liabilities of the BAC Facilities were described as being in the order of $20M. The restructure agreement recited that by a deed dated 29 June 1994 BAC agreed to release the BAC securities and the BAC guarantors other than Mathieson and BLM from any liabilities under the BAC guarantees upon payment of $14M by 29 June 1994 and upon a further payment of $1M by 31 December 1995.

Clauses 3 and 4 of the restructure agreement provided:

"3. Booth's obligations
3.1On or before the settlement day Booth shall procure banking facilities from the National Australia Bank ("the NAB facilities"):
(a)to pay therefrom the sum of $14 million to BAC in order to release The BAC Securities and The BAC Guarantors other than Mathieson and BLM from any further liability under the BAC Guarantees.
(b)to pay therefrom the sum of $1,100,000 or thereabouts to Challenge and to procure a discharge of the Challenge Mortgage and to procure a release of both Booth and Lincourt from the Challenge Guarantee;
(c)to pay therefrom the sum of $616,514.24 to Bankwest to release the shares and units owned by Apan in Rushcutters and, Cotslem and the units in Dinmack and to procure a release of Booth and Lincourt from the Bankwest guarantees;

3.2The amount of $14,000,000 referred to in clause 3.1(a) and the sum of $1,100,000 referred to in clause 3.1(b) shall together be known as "the Temporary facility".
3.3On or before the settlement day Booth shall procure the transfer to Wildhurst:
(a)100 units in the Dinmack Unit Trust owned by Lincourt for the consideration of $1;

3.4On or before the settlement date Booth shall procure the transfer to Brudejo
(a)5 shares in Apan owned by Lincourt for the consideration of $1;
(b)100 units in the Apan Unit Trust owned by Lincourt for the consideration of $1.

3.5On or before the settlement date Booth shall procure the transfer to Eighteenth Enterprises:
(a) 1 share in Apan owned by Lincourt for the consideration of $1;

3.6On or about the Settlement Day Booth shall resign as a Director of Dinmack and Apan.
4.Mathieson's obligations
4.1On or before the Settlement Day Mathieson shall procure the transfer of the following shares and units;
(a) to Lincourt the following shares in Rushcutters:
(i) 5 A class shares owned by Apan for the consideration of $1.
(ii) 10 A class shares owned by Bereny for the consideration of $1.
(iii) 49,950 B class shares owned by Bereny for the consideration of $1.

(b)to Lincourt the following shares in Coslem
(i) 1 ordinary share owned by Apan for the consideration of $1.
(ii) 1 ordinary share owned by Bereny for the consideration of $1

(c)to Sabre the following shares in Mymack:
(i) 7 ordinary shares owned by Brudejo for the consideration of $7;

(d)to Wardland Pty. Ltd. (ACN 005 273 156) of 9/31 Queen Street, Melbourne, Victoria (Wardland) the following shares in Rushcutters:
(i) 5 A class owned by Apan for the consideration of $1.
(ii) 49,950 B class owned by Apan for the consideration of $1 .

(e) to Booth the following shares in Mymack:
(i) 1 ordinary share owned by Brudejo for the consideration of $1;

(f) to Sarbo the following units in Mymack Unit Trust:
(i) 80 A class units owned by Brudejo for the consideration of $10;
(ii) 8 B class units owned by Eighteenth Enterprises for the consideration of $10.

(g) to Wardland the following shares in Rushcutters:
(i) 20 A class shares owned by BLM for the consideration of $1;
(ii) 49,950 B class shares owned by BLM for the consideration of $1.

(h) to Booth the following shares in Cotslem:
(i) 1 ordinary share owned by BLM for the consideration of $1.

4.2On or before the Settlement Day Mathieson shall procure the transfer of the following units in Dinmack Unit Trust to Wildhurst:
(a) 100 units owned by Bereny for the consideration of $1.
(b) 100 units owned by BLM for the consideration of $1.

4.3On or about the Settlement Day Mathieson shall procure the resignation of Mathieson, Ross Blair‑Holt, Peter Davison, Claude Bereny and Dinesh Chauhan as Directors and/or Secretaries of Mymack, Rushcutters and Cotslem."

Hence, clause 3 of the restructure agreement specified the obligations imposed upon Booth arising from that agreement. It provided that by 29 June 1994 Booth would procure banking facilities from the National Australia Bank to pay the sum of $14M to BAC, $1.1M to Challenge and $616,514.24 to another financier Bankwest. The restructure agreement recited that Mathieson, Booth and Bereny and their associated corporate interests were indebted to Challenge and Bankwest for the amounts of $1.1M and $616,514.24 respectively. The restructure agreement recited that the amount of $14M and $1.1M in relation to BAC and Challenge respectively were to be known as "the Temporary facility".

Clause 7 of the agreement provided:

"7. Temporary facility

7.1This clause shall only apply to Mymack so long as Mymnack owns The Palace.
7.2This clause shall only apply to Rushcutters so long as Rushcutters owns The Sayside;
7.3This clause shall only apply to Cotslem so long as Cotslem owns The Lodge;
7.4The gross rent received by Mymack, Rushcutters and Cotslem in respect to The Palace, The Bayside and The Lodge respectively shall be paid into a Bank Account established by Booth for such purpose ("The Rent Account") and paid by Booth to NAB in accordance with the requirements of the NAB facility.
7.5The rent received in the Rent Account shall be paid by Booth to NAB in accordance with clause 7.4 as follows:
(i) an amount equal to the interest on the Temporary facility shall be paid to NAB;
(ii) the balance of the rent in the Rent Account shall be paid to NAB by way of a capital reduction of the Temporary Facility.

7.6Upon calculation of the amounts in 7.5(i) and (ii) each of Booth and Mathieson severally agree to pay to the Rent Account by cleared funds an amount equal to one half of the sum of $350,000 less the amount calculated in clause 7.5(ii) upon the expiration of each 3 month period commencing on the Settlement Day which amount shall be paid by Booth to NAB by way of a capital reduction of the Temporary facility.
7.7Each payment made by Booth and by Mathieson pursuant to clause 7.6 shall be recorded in the loan accounts for Mymack, Rushcutters and Cotslem (as the case may be) in the same proportions that the rent received by Mymack, Rushcutters and Cotslem in respect to The Palace, The Bayside and The Lodge respectively bear to each other and shall upon receipt by Booth in the Rent Account be paid to NAB by way of a capital reduction of the Temporary facility."

Hence, the restructure agreement provided in clause 7 that the Temporary facility would only apply to Mymack so long as Mymack owned the Palace and to Rushcutters so long as Rushcutters owned the Bayside. The agreement provided, also, that the temporary facility applied to Cotslem so long as Cotslem owned the Lodge. Clause 7.7 of the restructure agreement provided that the gross rentals received by Mymack, Rushcutters and Cotslem in relation to the Palace, the Bayside and the Lodge were to be paid into a bank account established by Booth for such purpose and known as the "Rent Account" and eventually be paid by Booth to the National Australia Bank ("NAB") in accordance with the requirements of the NAB finance facility. Clause 7.6 of the restructure agreement provided, also, that Booth and Mathieson each agreed severally to pay to the rent account an amount equal to one half of the sum of $350,000 less agreed calculations upon the expiration of each three month period commencing on 29 June 1994 and that Booth would pay that amount to the National Australia Bank by way of a capital reduction of the Temporary facility. Clause 10 of the restructure agreement provided that Mymack covenanted not to sell the Palace or give any option in relation to that hotel or otherwise encumber it prior to 31 January 1996 without the consent in writing of Mathieson.

Clause 11 of the agreement provided:

"Reinstatement

11.In the event that:
11.1Mathieson is not in default in respect to clause 7.6, and,
11.2Dinmack is not in default in respect to payment of rent to Rushcutters and Cotslem, and,
11.3Prior to fourteen days before the reinstatement date Mathieson gives notice‑ to Booth in writing that Mathieson has obtained a letter of offer of finance for:
(a)Mymack in the event Mymack owns The Palace, and
(b)Rushcutters in the event Rushcutters owns The Bayside, and
(c)Cotslem in the event Cotslem owns The Lodge which finance shall be secured by registered first mortgages over The Palace, The Bayside and The Lodge if those properties are owned by Mymack, Rushcutters and Cotslem respectively as aforesaid then the conditions detailed in this clause shall apply:

11.4The balance of the Temporary facility then outstanding shall be repaid to NAB by the new financier introduced by Mathieson upon the settlement day of the new finance referred to in clause 11.3 ("the Refinance Date") and any shortfall of the net proceeds of such loan required to repay the Temporary facility shall be contributed equally by Booth and Mathieson by way of a cash contribution to the companies to be paid to NAB.
11.5The shortfall which shall be contributed by Booth and Mathieson in Clause 1 1.4 shall not exceed a total of $4,000,000.
11.6Prior to or on the Refinance Date upon settlement of the new finance and upon payment by Mathieson and Booth of the shortfall referred to in clause 11.4 Booth shall:
(a)procure the release of The Palace, The Bayside and The Lodge as security for the NAB facilities;
(b)procure the transfer of the following shares and units to Mathieson or his nominee:

In Cotslem

2 ordinary share for the consideration of $1.

In Mymack

8 shares for the consideration of $1;

In the Mymack Unit Trust

(i)

80 A units for the consideration of $10;

(ii)

8 B units for the consideration of $10.

In Rushcutters

(i)

25 A class shares for the consideration of $1;

(ii)

99,900 B class shares for the consideration of $1.

11.7Prior to or on the Refinance Date Mathieson shall procure the transfer to Booth or his nominee 200 units in the Dinmack Unit Trust for the consideration of $1;
11.8Prior to or on the Refinance Date Mathieson, Ross Blair‑Holt and Dinesh Chauhan shall be appointed as directors and/or secretaries of Mymack, Rushcutters and Cotslem."

Thus, clause 11 of the restructure agreement entitled Mathieson to re-acquire his ownership interests on 26 June 1995 upon arranging finance to replace the NAB finance. Upon the re-instatement of the interests of Mathieson pursuant to clause 11, it was proposed by the restructure agreement that the ownership and management of the Bayside and the Lodge would be divided equally, that is, 50/50 between Mathieson and Booth and that the ownership of the Palace would be 80 per cent to Mathieson and 20 per cent to Booth and the management of the Palace would be 100 per cent to Mathieson.

Clause 15 of the agreement provided:

"Refurbishment of The Palace

Mathieson and Booth acknowledge that they have previously agreed to assist Mymack in the refurbishment of The Palace in an amount of $450,000 which was agreed to be contributed as follows:
(a) by Mathieson 80% - $360,000;
(b) by Booth 20% ‑ $90,000.

Booth Mathieson and Mymack acknowledge that Mathieson has at the date of this agreement procured the said refurbishment works at the cost of $450,000on behalf of himself and of Booth and that Booth shall repay $90,000 to Mathieson within 14 days upon demand."

Therefore, clause 15 of the restructure agreement included an acknowledgment by Mathieson and Booth that they had previously agreed to assist Mymack in the refurbishment of the Palace in the amount of $450,000 which was agreed to be contributed in the proportions of $360,000 representing 80 per cent of costs by Mathieson and $90,000 representing 20 per cent of costs by Booth. Under clause 15 Booth, Mathieson and Mymack acknowledged that Mathieson had as at 29 June 1994 procured the refurbishment works at the cost of $450,000 on behalf of himself and Booth and that Booth agreed to re-pay $90,000 to Mathieson within 14 days on demand.

There were additional provisions in the restructure agreement that became relevant to the issues between the parties in this proceeding. Clause 10 of the agreement contained a covenant that the Booth interests, that is, Mymack, would not sell the Palace or give any option in relation to it or otherwise encumber it prior to 31 January 1996 unless written consent was given by Mathieson. Clause 14 of the restructure agreement provided that if Mathieson gave notice of having obtained a letter of offer of finance (in accordance with clause 11.3) and was not in default otherwise under clause 11 and Booth failed to pay to Mathieson the sum of $500,000 (pursuant to clause 12) Booth covenanted to transfer all his shares and interest in Mymack and the Mymack Unit Trust to Mathieson. Clause 18 of the restructure agreement dealt with incidental matters. In particular, clause 18.2 contained a requirement that the restructure agreement could only be varied or replaced by a document executed by all the parties to the restructure agreement. Clause 24 of the restructure agreement set out the relevant provisions in the event of default and entitled Mathieson to give written notice to Booth requiring remedy of any default.

Following the execution of the restructure agreement on 29 June 1994 Mathieson and Booth and their respective interests abided by the terms of the agreement for the initial 12 month period.

The 1995 Events

In purported compliance with the 14 day notice requirement under clause 11 of the restructure agreement, Mathieson wrote to Booth on 9 June 1995 in the following terms:

"I hereby give notice under Clause 11.3 on Page 15 of the 29/6/1994 Agreement between Mathieson and Booth that I have obtained a letter of offer of finance for:-
(a)     Mymack
(b)     Rushbutters
(c)     Cotslem

Which finance is secured by registered first mortgages over the Palace, the Bayside and the Lodge."

In June 1995 Mathieson arranged finance to replace the National Australia Bank finance facility. The alleged arrangement of finance was said by Mathieson to consist of a letter dated 1 June 1995 from Direct Mortgage Funding Pty Ltd to Jan Hotel Management Pty Ltd advising of an offer to lend the sum of $13M to Rushcutters, Cotslem and Mymack for the purpose of re-paying the National Australia Bank facility and to allow Mathieson to purchase 50 per cent of Rushcutters and Cotslem and 80 per cent of Mymack. The offer provided that the term of the loan was for a period of three years. The letter is hereafter referred to as the "DMF letter".

Following the letter containing the 14 day notice on 9 June 1995 Mathieson and Booth met on 15 June 1995. The events that transpired at the meeting on 15 June 1995 and the legal consequences that flowed from those events were critical to the plaintiffs' claim.

There were some aspects of the meeting on 15 June about which there was no dispute. The meeting was at Booth's Taylors Lakes Hotel. It occurred in the afternoon. Mathieson brought with him the DMF letter of offer of finance. Mathieson showed that letter to Booth and Booth read it. It can be readily concluded that the letter of offer of finance read by Booth was the DMF letter it being the only letter of offer that Mathieson took to the meeting. Also, Booth's recollection of the particular aspects of the letter that he saw match the contents of the DMF letter. Mathieson told Booth about offers of finance from CUB (presumably Carlton & United Breweries) and St George Bank. Booth and Mathieson "agreed" to a two year extension of the NAB facility until 30 May 1997. Booth and Mathieson agreed that Booth would not have to pay $90,000 towards the $450,000 refurbishment of the Palace. The meeting was brief, between 20 and 30 minutes. At the end of the meeting, Booth and Mathieson shook hands. There appeared on the evidence to be no issue as to these facts. However, there was significant difference on important matters.

Mathieson alleged that at the meeting on 15 June 1995 an enforceable agreement was reached between he and Booth. The plaintiffs contended that the events of 15 June 1995 constituted a variation of the 1994 agreement. Conversely, Booth alleged that at the meeting no agreement was reached between he and Mathieson. Rather they agreed to execute a deed of variation and no more. The defendants contended that as a deed of execution was never signed there was no enforceable variation of the 1994 agreement.

In his evidence Mathieson said that at the meeting on 15 June 1995 Booth had proposed that they should extend the date for reinstatement of Mathieson's interests under the restructure agreement to 30 May 1997. Mathieson gave evidence that he told Booth at the meeting that such an extension was acceptable but that he, Mathieson, did not consider that he should be required again to obtain replacement finance as required under the provisions of the restructure agreement. Mathieson gave evidence that he told Booth it should be a joint obligation for both he and Booth to obtain replacement finance. Mathieson said that Booth agreed to this and that he left the meeting believing that he and Booth had a "firm agreement to continue with the NAB finance, to extend the reinstatement date to 30 May 1997 and relieve me of the obligation to obtain replacement finance". Mathieson said that at the meeting on 15 June 1995 Booth told him that he did not want to contribute to any renovation costs for the Palace Hotel because that hotel was the business of Mathieson. Further, the restructure agreement imposed an obligation upon Booth to pay 20 per cent of the costs of renovations to the Palace Hotel. Mathieson gave evidence that at the meeting he agreed to pay all of the costs of initial renovations and thereafter Booth would meet 20 per cent of such renovation costs.

The evidence of Booth as to the matters discussed at the meeting of 15 June 1995 was that over and above the agreed matters already described, he and Mathieson agreed that the restructure agreement would be extended for two years but that Booth would not provide a personal guarantee to support the refinancing. Booth said it was agreed that he would not contribute to the refurbishing of the Palace Hotel. Other matters Booth alleged were agreed at the meeting of 15 June 1995 were that the fees for preparing the statements for the NAB could be paid from the rent account and Mathieson was to pay his "top up" payments without requiring proof by way of bank statements. Importantly, Booth gave evidence that at the meeting he and Mathieson agreed that any future letter of offer of finance had to be unconditional, on terms and conditions approved by Booth and had to be provided a month in advance of the extended date. Other matters Booth said were agreed at the meeting were that Mathieson was to resolve with Booth a method of relieving Booth of the tax consequences of the restructure agreement and, finally, that Mathieson was to guarantee Booth one half of the NAB debt.

After the meeting a course of correspondence ensued between Mathieson's solicitor and Booth's solicitor in late June 1995 for the purposes of formalising the events of 15 June 1995. On 22 June 1995 the solicitors for Booth, Henty Jepson & Kelly, wrote to the solicitors for Mathieson advising that the restructure agreement dated 25 June 1994 was to be amended to extend the reinstatement date to 30 May 1997 and to include in clause 11.3 of the restructure agreement a requirement for Mathieson to provide to Booth a copy of an unconditional letter of offer of finance on terms acceptable to Booth one month prior to the reinstatement date and the insertion of a new provision in the restructure agreement requiring Mathieson to provide a personal guarantee to Booth for the sum of $7M being calculated as equal to one half of the temporary facility. The letter of Henty Jepson & Kelly of 22 June 1995 provided:

"We are instructed by our client the Agreement dated the 25^th June, 1994 is to be amended.
We advise the following issues will require amendment and request you seek your client's instructions in relation thereto prior to the formal drafting by you of the Amending Agreement:-
1.In Clause 1.1 the reinstatement date be amended to be the 30^th May, 1997.
This date is the same date as the expiration date on the Leases for The Lodge and The Bayside.

2.The definitions to include a reference to the Refinance Date which is also to be the 30^th May, 1997.
3.A new clause will need to be inserted in the Agreement to the effect if Mathieson does not complete the reinstatement or is in breach of the Agreement at the Reinstatement Date the Lessees, pursuant to The Lodge and The Bayside Leases, have no right to exercise the options contained in those Leases.
4.Clause 3.2 be amended to reflect the fact that the total of the temporary facility at the moment is $14,050,000.00.
5.Clause 7.5 be amended to provide part of the rent received in the rent account shall be paid towards all accounting and auditing fees charged by Land and Co.
This is very important as our client has to provide these accounts to the National Australia Bank regularly to ensure the continuation of the temporary facility.
This new clause we believe should be numbered 7.5(ii) with the current (ii) being numbered (iii).

6.A new Clause 7.6 be inserted with the current Clause 7.6 and 7.7 being renumbered accordingly with the necessary amendments to the clause numbers referred to therein.
The new Clause 7.6 is to read as follows:-

"If the interest charged by NAB exceeds the rental payments received Booth and Mathieson will both pay to the rent account by cleared funds an amount equal to one half of the shortfall amount within one day of being requested to do so by Booth."
7.Clauses 8 and 9 be deleted in their entirety except for a new clause to be inserted that if any of these properties are sold the sale proceeds, after the payment of all reasonable legal and selling expenses in connection with the said sale shall be paid to the NAB in reduction of the temporary facility.
8.The date referred to in Clause 10 be amended to the 30^th May, 1997.
9.Clause 11.3 shall require amendment to provide Mathieson has to give to Booth a copy of an unconditional letter of offer of finance on terms acceptable to Booth one month prior to the reinstatement date.
Clause 11.3 should also be amended to provide that Booth is not required to provide any guarantees in relation to the loans which may be entered into pursuant to Clause 11.3 and any Mortgage is not to be for a period longer than 3 years.
10.Clause 11.4 may need amendment as we require it to be clearly stated the refinance date must be the same date as the reinstatement date.
11.In Clause 11.5 the amount to be decreased from $4,000,000.00 to $3,000,000.00.
12.Clause 13 be deleted in its entirety.
13.Clause 14 can be amended by deleting the requirement of Mathieson to give notice pursuant to Clause 11.3, although the clause should be extended to ensure Mathieson or any companies associated with Mathieson are not in default pursuant to any other clause in the Agreement.
14.Clause 15 is to be deleted in its entirety.
15.Clause 16 is to be deleted in its entirety.
16.Clause 17 is to be deleted in its entirety.
17.In Clause 18 the issue of costs should be readdressed as our client is not to be responsible for the payment of any costs incurred due to the variation of this Agreement including the legal fees incurred by him.
18.A new clause is to be inserted pursuant to which Mathieson provides a personal guarantee to Booth for $7,000,000.00 being calculated as equal to one half of the temporary facility.

We believe it would be prudent for you to obtain instructions and then may be for ourselves to meet to prepare the proposed amendments."

On 23 June 1995 the solicitors for Mathieson, Aitken, Walker and Strachan wrote to Blair‑Holt enclosing a copy of the letter from Henty Jepson & Kelly dated 22 June 1995. Blair-Holt was and is the chief executive officer of the Mathieson group of companies. The letter from Aitken, Walker and Strachan of 25 June 1995 urged that the matter be resolved as soon as possible. Clarification was sought by the solicitors as to whether it was necessary for Mathieson to demonstrate his capacity to refinance the arrangement again in the future. Blair-Holt made handwritten notes on the letter from Aitken, Walker and Strachan dated 23 June 1995. In relation to the query concerning refinance he wrote the words "no" on the letter. The solicitors went on to propose that a call option was in fact required by Mathieson and this suggestion was marked or endorsed by a tick by Blair-Holt. Importantly, Aitken, Walker and Strachan advised in the letter that if the 1994 agreement was merely extended Mathieson would be placed in the situation of having to provide a new finance proposal in the future. Blair-Holt wrote on the letter "I agree". On 26 June 1995, Aitken, Walker and Strachan wrote to Henty, Jepson and Kelly advising that instructions were being obtained but, also, stating that the solicitors confirmed " … in general terms that the parties are agreeable that the agreement be extended until the 30^th May, 1997". Thereafter correspondence ensued between the parties. Melville liaised with Blair-Holt in relation to the terms of any amended agreement. On 11 October 1995 Melville sent a draft agreement to Blair‑Holt purporting to incorporate some of the comments raised in the Henty Jepson and Kelly letter. The draft agreement at that stage made specific reference to an acknowledgment that Mathison had given notice to Booth of an offer of finance (recital F), rescinded clause 11 of the restructure agreement of June 1994 and made no further reference or imposed any further condition with respect to refinance and notice of such. On 19 February 1997 Melville wrote once again to Blair‑Holt forwarding another version of the draft agreement. This version repeated the recital that notice had been given by Mathieson to Booth of refinance and otherwise did not impose any new or further obligation of notice upon Mathieson. Of course, the communications between Melville and Blair-Holt were between those persons. The course of correspondence reflects that on occasion they were concerned to protect Mathieson from a requirement of having to provide a new finance proposal and notice thereof in the future. The defendants focussed upon the correspondence between Melville and Blair‑Holt and the draft agreements as constituting an acknowledgment on the part of the Mathieson interests of an obligation of providing refinance and notice at the end of the extended term. Ultimately, a final version of a revised agreement was not sent by Aitken, Walker and Strachan to Booth until 3 March 1997. On that date the solicitors wrote to Booth enclosing a copy of an agreement for execution. In any event, the proposed written variation agreement was not signed by Booth.

Returning to the events of 1995, on 29 November 1995 Booth telephoned Mathieson to discuss offers to purchase the Bayside and the Lodge and also the matter of taxation concerns of Booth were discussed. Mathieson gave evidence that Booth referred to the agreement reached on 15 June 1995 in relation to his concerns over taxation. Booth had no recollection of the discussion but did not dispute that it occurred or the content described by Mathieson. As a result of the conversation, on 29 November 1995 Booth sent a facsimile transmission to Mathieson referring to a telephone conversation earlier in the day and attaching that which Booth described as the terms of the agreement reached during their discussions in June 1995. In the facsimile transmission Booth described the discussions in June 1995 as "relating to the current loan facilities with the National Australia Bank being continued to minimise costs in securing alternative financing of the Bayside, the Lodge and the Palace". The fax referred, also, to the payment of a fee of $500,000 to be paid by Booth to Mathieson for the improvement of the Palace Hotel and the introduction of gaming machines. The fax also stated that the $500,000 would be paid on 2 January 1996 to assist Mathieson in the re-payment of $1M to Westpac. Attached to the facsimile transmission was a handwritten note of Booth that he said he made on the day of the meeting of 15 June 1995. The handwritten note referred to the continuation of the NAB loan for a further two years and the provision of a personal guarantee by Mathieson. It did not make any reference to a requirement that Mathieson again obtain refinance and provide notice of such refinance.

On 29 December 1995 Mathieson paid the second instalment to BAC in accordance with clause 12 of the restructure agreement. On 3 January 1996 Booth paid the sum of $500,000 to Mathieson representing one half of the share of Booth's payment to BAC. On 19 January 1996 the Lodge apartments were sold and the proceeds of sale were applied in reduction of the NAB facility in accordance with clause 8 of the restructure agreement. On the same day, Dinmack surrendered the lease of the Lodge without compensation.

Mathieson made certain payments during the period 1994-1995 consistent with the obligations under clause 7.6 of the restructure agreement. On 3 October 1994 he made a "top-up" payment of $125,000. During 1994-1995 Mathieson carried out renovations to the Palace Hotel costing $450,000. On 3 January 1995 he made a further "top-up" payment of $138,500. On 6 April 1995 Mathieson made an additional "top-up" payment of $55,000. Further "top-up" payments of $130,000 were made on 5 July 1995 and 10 October 1995 by Mathieson. On 13 November 1995 Mathieson's interests acquired the lease of the Palace Hotel and paid $220,000 for the plant and equipment of the hotel.

The 1996 Events

On 23 January 1996 Mathieson made a further "top-up" payment in the sum of $175,000 in accordance with the restructure agreement. Again, on 19 April 1996 he made another "top-up" payment of $80,000.

On 3 May 1996 a meeting occurred between Mathieson and Booth together with Mathieson's accountant Mr Chauhan. Mathieson said that Booth acknowledged the existence of the agreement struck on 15 June 1995. At the meeting on 3 May 1996 Booth told Mathieson that he wanted him to defer his investment in the Bayside and the Palace. Shortly after the meeting on 29 May 1996 Booth arranged additional finance with the NAB secured by mortgages over the Palace and the Bayside without the knowledge and consent of Mathieson.

Mathieson continued to make "top-up" payments in accordance with clause 7 of the restructure agreement by paying $100,000 on 18 September 1996 and $160,000 on 11 February 1997. Furthermore, during 1997 Mathieson carried out renovations at the Palace costing $147,814. In addition, in March 1997 Mathieson acquired a property next door to the Palace for the purchase price of $476,019 to facilitate the expansion of the gaming area of the hotel.

By March 1997 Mathieson and Booth still had not signed a variation of the restructure agreement as agreed between them in June 1995.

The 1997 Events

In March 1997 a conversation occurred between Mathieson and Booth. In that conversation Booth proposed that he keep the Bayside and that Mathieson take the Palace. On 3 March 1997, Mathieson's solicitors sent a proposed agreement to Booth for execution. On 20 March 1997 Blair-Holt wrote to Booth concerning the proposal for the division of properties as suggested by Booth. On 7 May 1997 a meeting was held between Booth, Mathieson, Blair-Holt and Mathieson's solicitor Mr Melville. At that meeting the parties discussed the Bayside, the Palace and another property at Newmarket. Mathieson stated that he wanted to return to the "agreed arrangement" whereby he would have a 50/50 interest in Bayside, an 80/20 interest in the Palace and a 50/50 interest in the management of Bayside in his favour. Booth stated that he refused to agree to this arrangement and said that he relied upon clause 24 of the restructure agreement whereby he paid $5M and held his interest in the relevant property. The parties could not agree on that occasion.

On the same day as the meeting, on 7 May 1997, Mathieson wrote to Booth giving formal notice of the exercise of the reinstatement option provided in the restructure agreement and requiring settlement on 23 May 1997. By letter dated 13 May 1997 Booth responded disputing that the restructure agreement had been varied. The Booth letter made reference to discussions that had occurred between the parties and, in particular, letters between the solicitors setting out proposed terms. In the letter of 13 May 1997 Booth asserted that the proposal set out in the letter of Henty Jepson & Kelly had lapsed, alternatively, the proposal stood rejected as being inconsistent with the terms put forward by the solicitors for Mathieson. It was further asserted that the proposal was withdrawn. In the letter of 13 May 1997 Booth asserted that the restructure agreement could only be varied or replaced if all parties chose to execute a further agreement and until that occurred the restructure agreement continued on foot. As a consequence, Booth asserted in his letter that he refuted the entitlement of Mathieson to exercise a reinstatement "option" and that insofar as there was an "option" it had expired for want of notice in accordance with clause 11.3 of the restructure agreement prior to 14 days before the reinstatement date of 26 June 1995. The Booth letter of 13 May 1997 provided:

"I refer to your letter dated 7^th May, 1997. I do not agree that our Agreement made on 29^th June has been varied.
As I have said to you, the draft further Agreement prepared by Aitken Walker & Strachan, which I received with their letter dated 3^rd March, 1997 is not agreed. Its draft terms are very different, in many important respects, from the proposal which had been set out in Henty Jepson & Kelly's letter dated 22^nd June, 1995 to Aitken Walker & Strachan. While I believed that the proposal set out in Henty Jepson & Kelly's letter, almost two years ago, had long ago lapsed, should that not be the case I confirm that it stands rejected by reason of the inconsistent terms in Aitken Walker & Strachan's draft Agreement. Alternatively, the proposal is withdrawn.
I also confirm that, as provided for in the Agreement made on 29^th June 1994, that Agreement may only be varied or replaced if all parties choose to execute a further Agreement. Unless that occurs, the Agreement made on 29^th June, 1994 continues.
Under that Agreement, I do not agree that you now have any reinstatement option to exercise, as claimed in your letter. My understanding is that the option you once had expired for want of notice, in accordance with Clause 11.3 of the Agreement, prior to 14 days before the reinstatement date of 26 June, 1995. If you disagree with my understanding, please advise me clearly of the basis upon which you claim to have, and to be able to exercise, any such reinstatement option."

Ultimately the letter led to the commencement of these proceedings.

In the meantime Mathieson continued to make payments in accordance with clause 7.6 of the restructure agreement by paying $75,000 on 14 May 1997 and $500,000 on 25 August 1998. The latter payment was paid into a trust account on the basis that it was intended, if needs be, to constitute a "top-up" payment. During 1998-1999 Mathieson expended moneys totalling $888,410 on the recently acquired next door section of the Palace. Those costs were associated with the renovation of the next door property and the extension of the gaming area into the newly acquired section.

The Plaintiffs' case

The plaintiffs sought specific performance, alternatively, claimed breach of an agreement alleged to have been made on 15 June 1995 whereby the restructure agreement was varied. They claimed that Booth had admitted the existence of the variation agreement in a telephone conversation with Mathieson on 29 November 1995 and the note of the conversation faxed to Mathieson that day. The plaintiffs claimed that Booth had also acknowledged Mathieson's right of reinstatement at the meeting on 3 May 1996, in a conversation with Mathieson in March 1997 and at a meeting on 7 May 1997. It was also the plaintiffs' case that the parties at all times conducted their affairs in conformity with the variation having been made to the agreement. It was the plaintiffs' case that it was only after Mathieson sought to exercise his right of reinstatement under the agreement as varied Booth refused and claimed that Mathieson had lost that right of reinstatement.

The plaintiffs' alternative position was that if Booth's position was not accepted, namely, that the offer of finance arranged by Mathieson in June 1995 did not comply with the agreement, then the Court should order that Mathieson be relieved from the forfeiture of his interest under the agreement and be permitted to enforce that interest.

The plaintiffs' further alternative claim lay in estoppel. They relied on eight factors as creating an assumption in their minds that the agreement had been varied. First, Booth's statements to that effect in the meeting with Mathieson on 15 June 1995. Second, Booth's proposal in November 1995 that they share the costs of works (installing fire doors) in the Bayside. Third, the letter dated 22 June 1995 from Booth's solicitor. Fourth, Booth's subsequent acknowledgments of matters agreed to on 15 June 1995. Fifth, Booth's acceptance from Mathieson of a total of $850,000 between July 1995 and May 1997 in top‑up payments applied in reduction of the NAB finance in accordance with clause 7.6 of the agreement. Sixth, Booth's payment to Mathieson of $500,000 on 3 January 1996, being his half share of the $1,000,000 paid by Mathieson to discharge the debt owed to BAC, in accordance with clause 12 of the agreement. Seventh, the sale of the Lodge in January 1996 and application of the proceeds of sale in reduction of the NAB debt, in accordance with clause 8 of the agreement. Finally, the acceptance by Booth of the surrender of the lease of the Lodge by Dinmack without compensation so as to facilitate the sale.

The plaintiffs alleged that they had acted to their detriment in reliance on the assumption that the agreement had been varied in that they did not insist on reinstatement on 26 June 1995, they made the top‑up payments of $850,000 in reduction of the NAB finance, they discharged the BAC debt, they surrendered the lease of the Lodge without compensation, they acquired the lease of the Palace and its plant and equipment for $220,000 in November 1995, they acquired the property next door to the Palace for $476,019 in March 1997 and carried out its incorporation in the hotel and finally, they carried out renovations in 1994‑5, 1997 and 1998‑9 to the Palace costing approximately $1.45 million. Furthermore, the plaintiffs asserted that they would suffer detriment if the defendants were permitted to depart from the assumption they created in the plaintiffs' minds that the restructure agreement had been varied. They urged that it would be unconscionable to permit the defendants to depart from the assumption. As a consequence of these matters the plaintiffs alleged that the defendants were estopped from denying the variation to the restructure agreement as alleged by Mathieson.

The plaintiffs submitted that in doing the minimum equity between the parties to give effect to the estoppel, the court should order the transfer of the shares and units in accordance with the restructure agreement so as to place the Mathieson interests in the position that they were entitled to be in. It was said that by such means only the advantages of the enterprises would be available to the Mathieson interests. The mere award of damages would leave the parties together in a continuing unsustainable relationship.

A further claim in the alternative was that Mathieson and Booth were in a relationship in the nature of a partnership or joint venture. Booth himself regularly referred to the "partnership" or to he and Mathieson as "partners". The plaintiffs submitted that even if they were not partners in the strict legal sense, the relationship was one of trust and mutual confidence, giving rise to fiduciary duties. In refusing to reinstate Mathieson, the plaintiffs argued that Booth breached the fiduciary duties he owed. There was a further breach of these duties by Booth taking out additional finance with the NAB in May 1996, secured on the Palace and the Bayside, without obtaining Mathieson's consent. The plaintiffs claimed that Booth's breach of fiduciary duty has resulted in his misappropriation of property properly belonging to Mathieson, namely the shares and units to which Mathieson was properly entitled.

The primary relief sought by the plaintiffs was transfer of the 80 per cent interests in Mymack and the Mymack Unit Trust (the Palace Hotel) and the 50 per cent interest in Rushcutters Court (the Bayside Hotel). The plaintiffs proposed that they would transfer units to the defendants in the Dinmack Unit Trust, representing the 50 per cent interest in the management of the Bayside to which they asserted Booth was entitled. In addition to ordering the transfer of the shares and units, the plaintiffs argued that the Court should order damages for the dividends payable on those shares and units since 30 May 1997, when they should have been transferred. The amount claimed by the plaintiffs is the net amount of dividends paid on the Mymack units and the Rushcutters shares less the amount paid on the Dinmack units plus interest on that net amount. The plaintiffs submitted that if the Court declined to order the transfer of the shares and units then damages should be awarded for the value of the shares and units. The plaintiffs assessed damages based on the net assets of the Mymack Unit Trust and the net assets of Rushcutters as disclosed in their accounts, but adjusting the values of the hotels to market value. The net assets of the Mymack Unit Trust were said to be in the order of $7,582,023 and Mathieson's 80 per cent interest in the order of $6,065,618. The net assets of Rushcutters were claimed in the order of $15,213,763 and Mathieson's 50 per cent interest in the order of $7,606,882. Accordingly, if the Court declined to order the transfer of the shares and units, the plaintiffs claimed damages in the order of $16,773,820. If the transfer of the shares and units was ordered, then the plaintiffs claimed damages. If the plaintiffs were successful any orders as to the quantum of damages were to be determined at another time.

Evidence for the plaintiffs was given by Mathieson, his solicitor Mr Melville, the accountant to the Mathieson Group Mr Chauhan and the chief executive officer of the group, Mr Blair-Holt. The defendants called one witness, Booth. The documentary evidence exceeded four volumes.

The Defendants' Case

It was the defendants' case that there was no binding agreement reached on 15 June 1995. The defendants' case in the alternative was that if the "agreement" reached on 15 June was immediately binding, it was not in the terms alleged by the plaintiffs. There was either a binding agreement that included all of the terms referred to in the Henty Jepson letter or a binding agreement with two components, first, that the agreement would be extended for two years with all of its commensurate obligations and, second, that the NAB facility would remain in place for that period.

The defendants contended that the DMF letter did not comply with clause 11.3 of the 1994 agreement because it required security that went beyond registered first mortgages, required a personal guarantee to be given by Booth, was conditional on valuations being obtained and on DMF's "funder" not withdrawing.

In relation to the claim seeking relief against forfeiture, the defendants contended that there was no unconscionability on the part of Booth. Their case with respect to unconscionability was largely based on the assertion that there was no unconscionability, rather, that Mathieson had simply failed to comply with clause 11 of the 1994 agreement in May 1997.

Further, the defendants contended that the plaintiffs' allegation assumed that the defendants were insisting on their strict legal entitlements under the 1994 agreement so as to deprive Mathieson of his interest. In this respect the case of the defendants was that the right to reinstatement was no more than an option which Mathieson could choose to exercise. Mathieson either exercised the option granted by clause 11.3 in accordance with its terms, or he did not. If he exercised the option, he was entitled to the benefits that clause 11 of the 1994 agreement gave to him. If he failed to do so he did not have to procure finance to pay out the NAB debt for which Booth and his companies had become liable in 1994 in order to pay out BAC. They asserted that Mathieson failed to do so. Ultimately, the defendants contended that the failure of the Mathieson companies to exercise the option in 1997 did not involve any unconscionable conduct by the defendants that gave rise to any claim that the defendants are estopped from denying that the option was in fact exercised in 1997.

Complaint was made by Mr Scerri QC for the defendants that the plaintiffs had not properly, or at all, pleaded the allegations of assumption, reliance and unconscionability so as to find relief from forfeiture or a claim in estoppel. Strictly speaking that may have been so. However, in my view there was enough in the pleadings, the witness statements filed in advance of trial and the full opening of the plaintiffs' case by Mr Archibald QC such that I was satisfied that the defendants had sufficient notice and warning of the case to be met by them.

The defendants asserted that the plaintiffs' allegations were predicated upon there being a "partnership" or "joint venture". The defendants contended that the evidence did not support the existence of either a partnership or a joint venture. They asserted that there were contractual obligations in the 1994 agreement which were the full extent of the relationship of the parties. However, so far as the breach of fiduciary duty alleged that before 30 May 1997 Booth failed to procure the transfer of the relevant share and units to Mathieson or his nominees, the defendants contended that it was not a breach of a fiduciary obligation. At most it was a breach of the contractual obligations imposed upon Booth by clauses 11.6 and 11.8 of the 1994 agreement.

In addition to their defence, the defendants brought a counterclaim. After May 1997, Mathieson lodged charges with the Australian Securities and Investments Commission on the relevant defendant companies and lodged caveats on the titles to the hotels and other property of the defendants specified in the defendants' counterclaim. Mathieson relied on clauses 26.1 – 26.3 of the 1994 agreement to lodge the charges and caveats. The defendants contended that there was no basis for lodging the charges or caveats and that they should be removed. Accordingly, the defendants counterclaimed for removal of the charges and caveats.

The Claim for Specific Performance

In his opening Mr Scerri QC who appeared with Mr R. Peters for the defendants said that on and after 15 June 1995 both parties proceeded on the assumption that the restructure agreement would be extended by two years and neither party was entitled to resile from that assumption. Ultimately, the defence relied on by the defendants was that the contractual right of reinstatement was an option which was extended for two years and was not exercised or was not effectively exercised. As a consequence of this position the issues in the case were confined. There was no issue that an agreement was made on 15 June 1995 between Mathieson and Booth to vary the restructure agreement of 29 June 1994. Hence, the remaining issues in the case were the terms of the variation agreement made on 15 June 1995, in particular, whether Mathieson was required to obtain a further letter of offer of finance to be entitled to be reinstated in May 1997. If in fact Mathieson was required to obtain another letter of offer of finance to be entitled to be reinstated in May 1997 an issue arose as to whether that entitlement was lost by his not actually obtaining such a letter.

The terms of the variation agreement

The terms of the variation agreement were set at the meeting between Mathieson and Booth on 15 June 1995. There was a clear conflict in their evidence about what was said as to critical matters on that occasion.

It was contended for the defendants that the issue that arose for decision was whether the matters "agreed" on 15 June had immediate contractual force, or were subject to the execution of a written variation deed, which never occurred. The answer to this question depended upon the intention of the relevant parties, namely, Mathieson and Booth. It was not contended that either of them did not have authority to bind, or did not intend to bind, his related companies. The defendants contended that the following facts were relevant in discerning the intention of the parties in relation to the legal force of the matters which they had "agreed". First, the 1994 agreement was itself written. Second, a copy of the agreement was referred to at the meeting on 15 June 1995. Third, clause 18.2 of the 1994 agreement required variations to be in writing. Fourth, no memorandum of agreement, or similar document, was signed at the meeting. Fifth, both Mathieson and Booth expected that a written variation agreement would be prepared by their respective solicitors. Mathieson said he would hand the details over to Blair-Holt. Booth said he would have his solicitor, Mr Hanslow contact Melville to have a document drawn. Blair-Holt said that he understood that for there to be a variation a document had to be prepared. After 15 June 1995 Booth expected to receive a document varying the 1994 agreement that he and Mathieson would sign and on signing they would be bound. Mathieson left matters to Blair-Holt who knew a document was required. Sixth, the Henty Jepson letter of 22 June 1995 contemplated "an Amending Agreement". Henty Jepson were instructed that the 1994 agreement was "to be amended". Seventh, Melville's response of 26 June 1995 said that he was seeking instructions. During the next 21 months, Melville drafted several amending agreements and sought instructions from Blair-Holt about them. Eighth, none of Melville's drafts recited that the 1994 agreement had been varied on 15 June 1995. Each draft purported itself to effect the variation. Ninth, none of the draft variation agreements purported to record the matters that Booth and Mathieson had agreed upon in June 1995. Melville conceded in evidence that his covering letter to Booth of 3 March 1997 was an inaccurate summary of the agreement which was enclosed. Mathieson could not give any evidence on the subject because he did not read the 1997 draft agreement. Booth gave evidence of the differences between his understanding of the agreement in June 1995 and the 1997 draft agreement he received in March. He said that his immediate reaction was to tell Mathieson that he would not sign the agreement.

Hence, the defendants contended, if the matters that were "agreed" between Mathieson and Booth on 15 June 1995 were not intended by both parties to be binding immediately, the contract claim must fail, because it depended upon a binding variation made on 15 June 1995 to the 1994 agreement.

I observe that the defendants' case changed constantly from that put forward by Booth in his letter to Mathieson of 13 May 1997 to the matters alleged in the defendants' pleadings and again further to the case outlined in opening and subsequently closing addresses. On occasion it appeared to be of great significance to the defendants that the agreement, if any, reached on 15 June 1995 was not committed to writing. On other occasions, especially by the time of the closing of the defendants' case the main focus appeared to be upon a construction of the arrangements between Mathieson and Booth as providing Mathieson with no more than an "option". Nevertheless, the defendants appeared to urge that the agreement that was reached between Mathieson and Booth on 15 June 1995 came within the third class described in Masters v Cameron (1954) 91 CLR 353 as " … one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract". The evidence does not bear such position out. In my view it is apparent that on 15 June 1995 two businessmen, Mathieson and Booth, who were not distracted by the legal or formal requirements of committing their agreement to writing agreed to a deal there and then. They shook hands. Their agreement was effective and in place immediately. Both parties but particularly Mathieson acted thereafter on the footing that there was a change to the position that had previously obtained under the restructure agreement of 1994.

The alternative position of the defendants was that if this court found that a binding agreement was made on 15 June 1995, the contract claim nonetheless would fail unless a finding was made that it was a term of the binding variation that Mathieson was relieved of his obligation to procure replacement finance.

In order to determine the terms of the variation agreement it is necessary, first, to construe the terms of the original agreement and, second, to assess the evidence of the meeting between Mathieson and Booth in Booth's office on 15 June 1995 where the variation agreement was made.

In 1994 BAC would not accept any of the proposals put to it. Mathieson did not have the funds available at the time to pay even the $15M reduction which had been negotiated with BAC. It appeared that the only hope was that Mathieson could arrange finance with NAB. However, it seemed that NAB would have nothing to do with Mathieson. Booth had to give security well in excess of the value of the NAB facility so as to obtain it and the rent that Booth was to receive from the hotels was exceeded by Booth's principal and interest obligations to NAB, so that Mathieson was to "top up" the rent equally with Booth.

Under the restructure agreement, Booth had the obligation to obtain the Temporary facility and Mathieson had the obligation to obtain the refinance. Clause 11.3 of the restructure agreement required Mathieson to give Booth written notice at least 14 days before the reinstatement date that he had obtained a letter offering refinance. This requirement was fulfilled by Mathieson on 9 June 1995. Such conclusion is not affected by Booth's complaint that the DMF letter contained a requirement for personal guarantees. Clause 11.3 did not confine the security to first mortgages only. The restructure agreement did not preclude such security. Rather, it was a typical feature of all the financial arrangements in which Booth and Mathieson were involved. Significantly, Booth did not raise his complaint about the inclusion of the guarantee until after he refused to reinstate Mathieson in May 1997. Furthermore, it was not open to the defendants to contend that such a restriction was implied in circumstances where Booth's previous joint borrowings with Mathieson were all secured by personal guarantees (for example the BAC facility and the Challenge Bank facility). It can be observed also that first mortgage finance denotes finance at the best interest rates and terms available but does not refer to the provision of finance without the usual requirement for supporting personal guarantees.

Furthermore, there was nothing in the restructure agreement in the nature of a requirement that if notice under clause 11.3 was given and later the reinstatement date was extended a further notice was required. The notice of 9 June 1995 satisfied the condition. Until that condition was satisfied it was capable of defeating Mathieson's reinstatement right. Once that condition was satisfied, Mathieson's reinstatement right was indefeasible, even though the time at which reinstatement was to be implemented was deferred. The time stipulation of clause 11.3 was "prior to fourteen days before the reinstatement date". A notice given on 9 June 1995 satisfied that time stipulation where the reinstatement date was (originally or by variation) more than 14 days after 9 June 1995. Clause 11.3 did not stipulate, for example, "at least 14 days but not more than 30 days". Rather, it simply set a date beyond which the notice would not be given. As a consequence, upon its proper construction, clause 11.3 required only a single notice by Mathieson and a single letter of offer. It did not call for a further notice or a further letter of offer of finance after the parties agreed on 15 June 1995 to defer the reinstatement date.

In June 1995, Booth was keen to get on with his own business. He wanted reinstatement by Mathieson because reinstatement would release the additional security Booth had given to NAB. Booth wrote a note of this aim prior to seeing Mathieson on 15 June 1995 and gave evidence to the same effect. Booth knew that Mathieson said he intended to exercise his rights under clause 11.3 of the 1994 agreement, but did not think that Mathieson had the capacity to so do. Mathieson had to exercise the option given by clause 11.3 "prior to fourteen days before the reinstatement date". The reinstatement date was defined in clause 1.1 of the restructure agreement as 26 June 1995. Fourteen days before 26 June 1995 was 12 June, and Mathieson had to exercise his right "prior" to that date. Mathieson gave written notice on 9 June 1995. In the notice Mathieson said he had obtained a letter of offer of finance "which finance is secured by registered first mortgages over" the hotels. In this regard the notice followed the precise wording of clause 11.3.

Booth, having doubts as to whether Mathieson had in fact obtained a letter of offer of finance, immediately requested a copy of the letter of finance. On Tuesday 13 June Booth tried to contact Mathieson. Booth also asked his accountant, Mr Allen Wainrit to obtain a copy of the letter of offer of finance and he attempted to do so on 14 June. Wainrit's letter prompted a response from Blair-Holt in a facsimile of 14 June 1995. The facsmilie referred to two offers (when in fact Mathieson only had one offer in writing, the DMF letter). Thus, the defendants asserted that the facsimile was misleading. Blair‑Holt admitted as much in cross‑examination. However, this did not change the position as conveyed by Mathieson to Booth at the meeting on 15 June 1995.

In any event Mathieson said at the meeting on 15 June 1995, and I accept, that he told Booth, and Booth accepted, that after the extension Mathieson did not think he, Mathieson, should again be required to obtain replacement finance under the 1994 agreement and that the retaining of replacement finance should be a joint obligation. Mathieson was criticised by the defendants for his broad approach to the outcome of the meeting of 15 June 1995. In cross‑examination, Mathieson stated consistently that all that was agreed was a simple "rolling over" or "extension of two years" and said nothing further. Mathieson's evidence was corroborated by Blair‑Holt. Blair‑Holt gave evidence that on 15 or 16 June Mathieson told him "… that Booth had suggested that they stay with the National Bank finance for a couple more years under the current arrangements". Nevertheless, Mathieson stood fast in his evidence that the topic of notice of refinance and the requirement to repeat the obligation were discussed at the meeting on 15 June 1995 and resolved on the basis that Mathieson was not to be subject to any further obligation in this respect. For reasons to be developed shortly Mathieson was a man who got on with the task of doing that which he was skilled at doing, namely, operating hotel businesses. He conceded that he was not a man of detail or letters and that he left those matters to the accountants and lawyers. By contrast, Booth was a man who had a practice of making notes, often in some detail, of events. In my view it is a matter of some considerable significance that Booth remained silent until May 1997 as to the obligation he asserted remained upon Mathieson to secure and give notice of refinancing of the NAB facility. Furthermore, Booth's assertion that the obligation remained upon Mathieson after the events of 15 June 1995 is not supported in any way by the notes made by Booth immediately before and after the meeting of 15 June 1995. Overall the circumstances fall within the description of Brooking JA in Guilfoyle Pty Ltd v National Mutual Life Association of Australasia Ltd (2000) VSCA 25 (at para 1): "The cases without happy endings are those where the contract or lease is never signed and the parties then argue about the terms … A good deal of litigation or other dispute resolution is the result".

Booth said in his evidence that on 15 June 1995 he discussed the offer of finance in detail in relation to the high interest rate issue only, the requirement upon him to provide an unlimited personal guarantee and the fact that the offer was subject to valuations being obtained. Mathieson denied this. As to the high interest rate, I conclude that some aspects of the DMF letter were discussed. Mathieson said so in an abbreviated way. It follows also from Booth's 29 November 1995 memo. Further, Blair-Holt suggested that Mathieson had told him that Booth said the interest rate was high. As to whether there was "agreement" that replacement finance would be on terms that did not require Booth to provide a personal guarantee some important observations can be made.

Clause 11.3 referred to "finance … secured by registered first mortgages". Booth had a copy of the 1994 agreement at the meeting on 15 June 1995. His understanding was that clause 11.3 meant that he did not have to give a personal guarantee in respect of the replacement finance because it was to be replacement finance secured only by registered first mortgages on the hotels, with he and Mathieson having a joint obligation to "top up" any short fall in the extent of $4M. Further, a personal guarantee was required in the DMF letter. Booth said that the issue of guarantees was discussed, and the issue was dealt with specifically in item 9 of the Henty Jepson letter.

In my view the fact that finance of some kind needed to be available in May 1997 to pay out the NAB temporary facility does not lead to the conclusion that it was implied that Mathieson was again under an obligation (to the exclusion of Booth) to obtain refinance to give notice of it to Booth at least 14 days before 30 May 1997. This is particularly so where the main reason for not proceeding with reinstatement and payment out of the NAB facility in June 1995 was the mutual advantage to Mathieson and Booth of the minimisation of costs and more attractive terms of the NAB facility which was able to be rolled over to about May 1997. There is implied in all commercial contracts an obligation on the parties to co-operate to secure performance of the contract: Mackay v Dick (1881) 6 App Cas 251 at 263; Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607. Pursuant to this implied obligation, Mathieson and Booth were obliged jointly to arrange the refinance required in May 1997 to pay out the NAB. Mathieson was clearly willing to comply with this obligation and Booth was not.

In my view, even if there was any further obligation upon Mathieson solely to ensure that the NAB facility was able to be paid out, Mathieson complied with it by offering in May 1997, as he did, to put up his own money to pay out the bank. Mathieson was not seriously challenged as to his financial capacity and I accept that he had the resources to pay out the bank. So much was supported by the evidence of Mathieson's accountant, Chauhan. In order to establish that Mathieson was required to give a fresh notice under clause 11.3 with a fresh letter of offer of finance in May 1997, it was necessary for the defendants to prove that an agreement to that effect was made in June 1995, that Mathieson's notice of 9 June 1995 was not effective, that he was required to give another notice in 1997 and that he alone was to obtain the refinance required in 1997 to pay out the NAB facility. In my view, it is not enough for the defendants to say that no agreement was made on the point.

The defendants seized upon the course of correspondence between Melville and Blair‑Holt as demonstrating an acknowledgment and understanding by Mathieson that on 15 June 1995 a mere extension of the restructure agreement of 1994 was all that was agreed to. It was contended that each draft variation agreement prepared by Melville required Mathieson to procure the refinance of the Temporary facility. In my view these matters are a distraction as they are not indicative of the matters agreed to between Mathieson and Booth at the meeting on 15 June.

An agreement imposing on Mathieson a further obligation to give a notice under clause 11.3 and obtain further refinance was not established by the evidence. To find that such an agreement was made, I would need to accept Booth's account of the meeting on 15 June 1995 as against that of Mathieson's. Booth made a note of the events he said occurred at the meeting. There were in fact two versions of the note made by Booth. One was set out on a note pad. The note contained no reference to Mathieson again obtaining refinance nor to Mathieson again giving notice of having obtained a letter offering such finance. The second version of Booth's note of the meeting was on a yellow post‑it sticker attached to the note pad page. It did not record any reference to an obligation on Mathieson to arrange refinance again. In any event I accept Mathieson's account of the meeting on 15 June in preference to that of Booth having had the benefit of observing the evidence of both individuals.

There are other matters arising from the evidence of Booth that cause me to prefer the evidence of Mathieson in relation to the events of 15 June 1995. In cross‑examination Booth acknowledged his wrongdoing in giving security over the Palace and the Bayside for his personal borrowings. He admitted in cross‑examination that he had concealed this significant fact from Mathieson. He gave contradictory evidence about the variation agreement, he admitted an agreement to extend the facility for two years but denied that there was an agreement for Mathieson to be reinstated in May 1997. Furthermore, Booth was implausible in saying he resiled from the expression "partners" because he had been told it should only be used when partnership tax returns are filed. I also observed that Booth gave unsatisfactory explanations in his letters of 13 May 1997 and 4 June 1997 for refusing to reinstate Mathieson and adhered to those excuses in cross‑examination. Further, in cross‑examination Booth could not reconcile, if the NAB facility was agreed in June 1995 to be extended with the position he maintained in this proceeding. Furthermore, it was difficult to rationalise the conduct of Booth when he directed his staff in April or early May 1997 not to provide Chauhan with any further information for the top‑up payments by Mathieson, told Chauhan on 12 May that he had changed his mind and gave him that information and then accepted the top‑up payment of $75,000 on 14 May and when on 13 May he had written to Mathieson denying his reinstatement right.

As was observed by Ormiston JA in Guilfoyle, supra (at para 22): "Conclusions reached about oral negotiations are frequently a matter of impression and it is difficult for witnesses to avoid rationalisation after the event. It is, however, always a question of an objective evaluation of the whole of the facts". Ultimately, I accept Mathieson's evidence that he agreed with Booth that he was relieved of any obligation to obtain a further letter of offer of finance. In summary, I am satisfied that Mathieson had no obligation in May 1997 to give notice of a further letter of offer of finance to exercise his reinstatement right because the event stipulated by clause 11.3 (the giving of notice of a letter of offer of finance) had occurred upon the giving of the notice of 9 June 1995. The operation of that clause was spent. No further agreement was made which imposed an obligation on Mathieson to give fresh notice of a further letter of offer of finance for the deferred reinstatement date. In any event, I am satisfied that there was an express agreement reached on 15 June 1995 relieving Mathieson of any obligation to obtain a further letter of offer of finance.

It follows that I conclude that orders should be made as sought by the plaintiffs. However, in the event it was necessary for me to determine whether Mathieson was obliged in May 1997 to obtain a further letter of offer of finance, I turn to consider that matter.

Characterisation of the reinstatement right

Mr Scerri QC for the defendant described the right of reinstatement under clause 11 of the June 1994 agreement as an "option" and relied upon Westgold Resources NL v St George Bank Ltd (1999) 29 ACSR 396; also Phillips Fox (a firm) v Westgold Resources NL & Ors [2000] WASCA 85 (FC).

The pre‑existing position before the 1994 agreement was that the Mathieson interests had held 80 per cent of the Palace freehold and 50 per cent of the Bayside and the Lodge. The 1994 Agreement provided for the temporary transfer of those interests to Booth for nominal consideration to meet the NAB requirement of 100 per cent Booth group ownership. Booth's "ownership" was subject to constraints recognising Mathieson's ongoing interest in the properties, in particular, Booth was not to sell or encumber the Palace without Mathieson's consent as provided in clause 10. Furthermore, Mathieson undertook an obligation, pending reinstatement, to meet half the shortfall on the NAB facility by virtue of clause 7. His right to reinstatement was embedded in the original agreement. However, that right was subject to being defeated in the event that he did not perform his obligation to arrange refinance and did not notify Booth that he had done so at least 14 days before the scheduled refinance date. Mathieson's obligation was to obtain the refinance. Booth's corresponding concurrent obligation, conditionally upon refinance having been arranged and notified, was to retransfer the previous ownership entitlements to the Mathieson interests.

In my view, none of those arrangements involved any "option". The giving of notice of the letter of offer was the manifestation of Mathieson having discharged his obligation to obtain refinance. Furthermore, it was not a question of Mathieson making a business decision independently of any obligation, as to whether he wished to be reinstated. The notice under clause 11.3 was a notice that finance had been obtained. It was not a notice that Mathieson had made a decision that he wished to be reinstated and was exercising an option accordingly.

It is to be observed that clause 11 begins with the words "in the event that" which demonstrates the conditional nature of the matters that followed. The conditions were then set out in clauses 11.1, 11.2 and 11.3. They had the capacity, if their requirements were not met, to deprive Mathieson of his right to be reinstated. Clause 11.3 contained the requirement that Mathieson give notice 14 days before the reinstatement date that he had obtained a letter of offer of finance. Clauses 11.4 and 11.5 dealt with any shortfall in the new finance. Clause 11.6 then imposed on Booth the corresponding mutual obligation, upon satisfaction of clause 11.4 (and, impliedly, clauses 11.1, 11.2 and 11.3) to procure the release of the hotels from the NAB securities and to transfer the relevant shares and units to Mathieson.

On any sensible reading, clause 11 ultimately imposed a conditional obligation on Booth. In my view it cannot be construed as an "option" exercisable by Mathieson. Conduct that satisfies conditions is not to be equated with the exercise of an option. There was no offer by Booth to sell or transfer but rather an obligation on him, which must be performed if Mathieson performed the obligations imposed on him by clause 11.

In my view, the controversy about the true nature of an option, that is, whether there was an irrevocable offer or a conditional contract of sale, does not arise in this case because clause 11 is not an option. It involved a conditional promise by Booth to transfer the units. If referred to as an option, it can only be in that sense. Such construction of clause 11 is supported by general contractual principles. Clause 11 must be construed in the context of the contract as a whole: Hume v Rundell (1824) 2 Sim & St 174 at 177; 57 ER 311 at 312; Lloyd v Lloyd (1837) 2 My & Cr 192 at 202; 40 ER 613 at 617. By reading the contract as a whole, in particular the recitals that gave the general background to the contract by viewing the contract in the setting in which it was made, it is apparent that the contract established a temporary holding arrangement whereby Booth and Mathieson agreed that the former would assume ownership of the latter's shares and units for a limited time and that the latter would reacquire those shares and units when the Temporary facility ceased.

If there was any doubt or ambiguity about the true meaning of clause 11, then regard may be had to extrinsic evidence of the factual matrix in which the contract was made: Codelfa Construction Pty Ltd v State Rail Authority of N.S.W. (1982) 149 CLR 337 at 351‑2. In the present case such evidence only strengthens the argument that clause 11 contained a conditional promise by Booth to transfer the shares. The reason for the holding arrangement emerged from the evidence that the NAB would only make the loan if the three hotels were 100 per cent owned by Booth and his interests and if the problems attending cross collateralisation where other shareholders existed were avoided. These considerations militate against characterising the reinstatement right as an option. The rationale for the strict rules about compliance with time and other stipulations in the exercise of an option that is an irrevocable offer is that the grantor, by the option, has sterilised his property while the option is in force and should not be disabled from dealing with his property to any extent beyond the terms of the option: United Scientific Holdings Ltd v Burnley Council [1978] AC 904 at 929 per Lord Diplock. The grantee cannot complain, therefore, about being held strictly to the terms of the option.

However, the present case is very different. Booth, in effect, has been "holding" Mathieson's interest in the hotels under an arrangement that has enabled both parties to deal with their creditors without surrendering their interests in those properties. In my view, there is no rationale for strict compliance with option terms in this case and, therefore, no warrant for construing clause 11 as an option in the sense of an irrevocable offer. So much is borne out by the fact that Booth subjected his 100 per cent "ownership" to contractual constraints in the meantime and Mathieson made contributions towards paying off the finance as though he were an owner.

Mathieson was required to perform the condition in May 1997. If Mathieson was obliged to give a fresh notice in 1997 in order to be entitled to be reinstated, he had until 16 May 1997 to give that notice. I am satisfied that there was no agreement that one month's notice was required on the basis of events on 7 and 13 May 1997. On 7 May Booth told Mathieson at a meeting that he would not reinstate him. On 13 May Booth wrote to Mathieson denying Mathieson's right of reinstatement. The statement at the meeting on 7 May and the letter of 13 May evinced an intention on Booth's part not to perform his obligations to transfer the shares and units to Mathieson even if the latter satisfied the conditions affecting his reinstatement right. They operated to relieve Mathieson of any need, at that time, to obtain refinance and again give notice that he had done so: see Foran v Wight (1989) 168 CLR 385 at 396, 417, 420, 422, 427. Mathieson was ready and willing to organise funds to pay out the NAB facility, and informed Booth of his preparedness and of his flexibility to accommodate Booth's preferences. By relieving Mathieson of the obligation to perform the condition of obtaining a further letter of offer of finance Booth rendered his obligation under clause 11 unconditional. As a consequence Booth became liable to transfer the shares and units.

In any event, even if the arrangements between Mathieson and Booth were to be regarded as akin to a "conditional sale" option rather than an "irrevocable offer" option, the principles explained in Foran v. Wright would apply nevertheless. Hence, Mathieson's right to reinstatement would still be available. It was suggested for the defendants that waiver of a condition precedent to the exercise of an option cannot occur even though the option, on its true construction, is a conditional contract of sale rather than an irrevocable offer: Stillwell & Co Pty Ltd v Budget Rent‑a‑Car [1990] VR 589 at 603‑4 per Gray J. However, I note, with respect, that the observations of Gray J were obiter dicta and did not appear to attract the support of the other members of the Court. In Traywinds Pty Ltd v Cooper [1989] 1 Qd R 222, Kelly SPJ departed from this view at 226 and Macrossan J doubted it at 228. In any event, the obiter dicta of Gray J are inconsistent with Foran v Wight, which was not referred to in Stillwell.

Relief against Forfeiture

If, however, Mathieson was obliged to give notice of a further letter of offer of finance by 16 May 1997, in my view, in the circumstances he should be relieved from the consequences of not doing so pursuant to the principles of relief against forfeiture. Relief against forfeiture is available to an acquirer of property who can protect an interest under the contract of sale by injunction, specific performance or otherwise: Legione v Hately (1983) 152 CLR 406. Even a conditional contract of sale confers on the purchaser an interest capable of protection in this manner: Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 75‑6; Stern v McArthur (1988) 165 CLR 489 at 522. The failure by the purchaser to perform a condition does not disentitle him to the protection: Legione v Hately; Stern v McArthur. Accordingly, Mathieson had, pursuant to the June 1994 agreement, an interest in the shares and units susceptible of relief against forfeiture.

As a statement of principle, there are two broad circumstances in which relief against forfeiture is granted. First, where forfeiture operates as security for payment of money; second, where it would otherwise be unconscionable: Shiloh Spinners Ltd v Harding [1973] AC 691 at 722 also, Sigma Pharmaceuticals P/L v Nuc-One Enterprises P/L & Ors (1998) VSC 204. Examples of the former arise under mortgages or terms contracts where the mortgagee purchaser defaults in payment and is relieved from the loss of his interest in the property. The present case is in the second category but, at the same time, is strongly analogous to the first category because of the top‑up payments and the BAC second instalment. However, the defendants did not rely on any default in making those payments. In addition, the evidence showed Mathieson complied with his obligations to make those payments until Booth stopped providing the information for the top‑up payments. Furthermore, Mathieson put aside $500,000 for top‑up payments from the time Booth stopped providing the information. Indeed, Booth admitted that Mathieson paid over $1 million in top‑up payments. Mathieson made his $500,000 contribution to the second BAC instalment. Furthermore, Booth stood by and allowed the Mathieson interests to fit out the new Burke Road shop (which was purchased on 12 December 1996) as a gaming lounge as part of the Palace Hotel.

So far as the top‑up payments were concerned, the defendants' characterisation of them was unconvincing. It seems never to have been put forward before the trial and, indeed, Booth never offered to repay the top up monies until the time of his giving evidence. The questions can be postulated: If the top up payments were loans which Mathieson was obliged to make under the June 1994 agreement, why did Booth stop collecting them after May 1997? Why should Mathieson have been under an obligation to make interest free loans to Booth in any event? I consider I can only conclude it was an accounting convention to record them in loan accounts. This did not make them loans. I am satisfied they were not. They are properly characterised as top up payments that Mathieson agreed to make.

Ultimately, the real significance of the top‑up payments, the BAC instalment and the renovations and extension to the Palace Hotel is to demonstrate that it would be unconscionable of Booth to take advantage of any legal right he may have had to refuse reinstatement after receiving the benefit of those payments and of the improvements to the Palace.

Furthermore, on the basis of the principles in Legione v Hately, supra at 449, there are other factors to support a finding of unconscionability. As a co‑venturer owing fiduciary duties to Mathieson if reinstatement did not occur, Booth would not be acting fairly towards Mathieson and would be exploiting a technical omission. Further, Booth contributed to the failure by Mathieson to perform the condition by stating his intention at the meeting on 7 May 1997 and in his letter of 13 May 1997 not to reinstate Mathieson. Again, Mathieson's omission was trivial. He merely did not obtain a letter of offer of finance when he had ample resources to pay out NAB himself. He did so when Booth was asserting spurious grounds as to why Mathieson was not entitled to reinstatement. None of those arguments reflected Booth's position at trial, namely, that a 1997 notice of a letter of offer was required. Mathieson was entitled to act on the basis that Booth's only propositions were those in the 13 May 1997 letter. In addition Booth suffered no real damage by Mathieson's trivial omission and he would gain a valuable windfall as a result of the omission if permitted to do so.

It was urged by Mr Scerri QC on behalf of the defendants that relief against forfeiture is a limited and exceptional remedy that operates only where there is unconscionable conduct. It was submitted that it must be plain that it is necessary for a court to intervene in order to avoid injustice before relief against forfeiture is granted: see Stern v McArthur, supra. Relief against forfeiture does not authorise a court to re-shape contractual relationships into a form that the court itself regards as more reasonable or fair. However, there was no dispute between the parties that unconscionability must be found. For the reasons already stated I am satisfied that the conduct of Booth towards Mathieson was unconscionable. In my view, therefore, relief against forfeiture should be available to Mathieson even if he was obliged in 1997 to perform the condition of obtaining a fresh letter of offer of finance.

Insofar as it is necessary to do so, I turn to consider the claim based in estoppel and the allegation of breach of fiduciary duty.

Estoppel

The plaintiffs' alternative claim of estoppel was based on the asserted assumption said to have been created in the minds of the plaintiffs that the restructure agreement had been varied by virtue of the events of June 1995.

On the basis of the facts I have decided, I am satisfied that the actions and conduct of the defendants at the meeting on 15 June 1995 and thereafter created an assumption in the minds of the plaintiffs that the restructure agreement had been varied. As a consequence, the plaintiffs acted to their detriment in reliance on the assumption: see the test formulated by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-429; also, Metropolitan Transit Authority v Waverley Transit P/L (1991) 1 VR 181, 208; Falkiner Motors P/L v Nimorakiotakis (2000) VSCA 1, para 32.

I am satisfied that the statements made by Booth to Mathieson at the meeting on 15 June 1995, the proposal of Booth in November 1995 that he and Mathieson share the costs of minor works, the contents of the letter of Henty Jepson dated 22 June 1995, subsequent acknowledgments on a number of occasions by Booth, in particular on 29 and 30 November 1995 and 3 May 1996 of Mathieson's version of the matters agreed to on 15 June 1995, the acceptance by Booth of sums of money from Mathieson including the top up payments, the sale of the Lodge in January 1996 and the application of the proceeds of sale in reduction of the NAB debt and the acceptance by Booth of the surrender of the lease of the Lodge without compensation so as to facilitate the sale of the Lodge all lead to one conclusion. These matters combined created an assumption in the minds of the plaintiffs that the restructure agreement entered into in June 1994 was varied in June 1995 so that the term was extended for two years and that there was no further obligation upon Mathieson to give notice of refinance.

I am further satisfied that the plaintiffs acted to their detriment in reliance on the aforesaid assumption. Detriment was demonstrated by the fact that the plaintiffs did not insist on their potential reinstatement right in June 1995 further compounded by the ongoing making of payments by Mathieson to Booth including the top up payments and, in particular, the capital improvements made by Mathieson to the Palace. In my mind each of these matters establish a strong case of reliance on the part of the plaintiffs upon the assumption created by the defendants. It follows, further, that I am satisfied that it would be unconscionable to permit the defendants to depart from the assumption and avoid the reinstatement of the Mathieson interests. I am satisfied that in order to achieve equity between the parties, if it was necessary to do so based on the claim in estoppel, I would order the transfer of the shares and units in accordance with the agreement as varied in 1995 so as to place Mathieson in the position he was led to believe he would be in. In my view the awarding of equitable damages is inappropriate in the overall context of the commercial structure in place between the Mathieson interests and the Booth interest.

Breach of fiduciary duty

It is well established that persons who combine in a joint business undertaking may owe each other fiduciary duties irrespective of the legal form of the undertaking: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; Hill v Rose [1990] VR 129. It does not matter that they have not formed a partnership: United Dominions at 10. Nor does the use of a company structure preclude the existence of a relationship among the investors in the company of a fiduciary nature: Re Yenidje Tobacco Co Ltd [1916] 12 Ch 426; Re Wondoflex Textiles Pty Ltd [1951] VLR 458; Ebrahimi v Westbourne Galleries Ltd [1973] AC 360. In United Dominions the High Court considered the nature of joint ventures and the duties that may flow therefrom. In the joint judgment of Mason, Brennan and Deane JJ (at 10-11) it was held that the terms "joint venture" is not a technical term and connotes an association of persons for a variety of purposes including a financial undertaking with a view to profit.

In my view it is clear from the evidence that the business relationship between Mathieson and Booth was such that they owed each other fiduciary duties. They were involved in a number of joint investments over many years. Indeed, the very terms and effect of the restructure agreement were indicative of a relationship of mutual trust and confidence. In fact, a relationship of mutual trust and confidence was conceded by Booth in cross‑examination. Booth said he expected Mathieson to do the fair thing by him and that, in turn, he expected Mathieson to be interested in Booth's financial well‑being. Consideration of the authorities and commentaries in relation to the topic of joint ventures reveals that a fundamental indicia of a joint venture is the matter of trust: see United Dominions, supra; Biala Pty Ltd v Mallina Holdings Ltd (No. 4) (1993) 13 WAR 11, 57-8; also, Lehane, "Fiduciaries in a Commercial Context", in Finn, Equity and Commercial Relationships, pp.95-108. Furthermore, there was a constant usage by Booth of the expressions "partner" and "partnership" at various times in various documents. In my view this manner of expression conveyed the real nature of the relationship between Mathieson and Booth, that of a business partnership giving rise to mutual obligations. On these bases, therefore, I am satisfied that Mathieson and Booth mutually owed one another a fiduciary duty.

As Mathieson's fiduciary, Booth owed him duties to act in good faith, to avoid a conflicts of interest and not to prefer his own interests to those of Mathieson. These duties were breached by Booth in May 1997 in his refusal to reinstate Mathieson. This is so even if Mathieson did not take the particular steps required to achieve reinstatement in conformity with the precise terms of the 1994 Agreement. Any failure by Mathieson in relation to achieving reinstatement was highly technical. He did not have to obtain a further letter of offer of finance in circumstances where he had sufficient resources to pay out the NAB himself and where Booth was refusing reinstatement outright on dubious grounds. To rely on this omission would be at odds with the fiduciary duties owed by Booth. Conformity with those duties required Booth to accede to reinstatement and permit or cause it to occur.

Booth's corporate vehicles, Sarbo Securities, Lincourt and Wardland, which own some of the shares and units the subject of the reinstatement right, are his alter egos and must be taken to be knowing participants in Booth's breach of fiduciary duty. Booth, Sarbo Securities, Lincourt and Wardland have profited from their breach of fiduciary duty by retaining the ownership of the shares and units the subject of the reinstatement right. When property is misappropriated in breach of fiduciary duty a declaration of a constructive trust of that property is an appropriate remedy: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 per Mason J at 107; Jacobs' Law of Trusts in Australia (6^th ed) para 1330. Accordingly, if the plaintiffs had failed in their contractual claim for orders that the shares and units be transferred to Mathieson, a declaration would have been made that those shares and units were held on a constructive trust for Mathieson.

Summary of conclusions on liability

It follows from my reasons that I make four findings. First, in 1997 there was no obligation on Mathieson pursuant to the June 1994 agreement (as varied on 15 June 1995) to obtain refinance again and to give fresh notice of a fresh letter of offer of finance in order to be entitled to reinstatement. Second, even if Mathieson was subject to such an obligation, by reason of Booth's letter of 13 May 1997 and Booth's statements on 7 May 1997 Mathieson was not obliged at that time to arrange the finance and give notice of a letter of offer. Third, even if Mathieson was not relieved of the obligation to give the notice at that time, he should be relieved in equity from any forfeiture consequent upon his not doing so. Fourth, the plaintiffs have satisfied the necessary ingredients of estoppel such that it would be unconscionable for the Booth interests to refuse to reinstate the Mathieson interests. Finally, Booth's refusal to reinstate Mathieson constituted a breach of the fiduciary duties he owed to Mathieson.

It further follows that I am satisfied that the plaintiffs are entitled to the primary relief they seek for orders that the shares and units in the relevant companies be transferred to them. It is apparent that consequential arrangements will have to be made, such as for payment of the NAB finance and payment of outstanding top‑up payments (presently held in trust accounts). The plaintiffs have acknowledged as much. Furthermore, in addition, the plaintiffs are entitled to damages for the distributions they would have received had the transfers been made in May 1997. However, such damages need to be finally quantified. The defendants' counterclaim will have to be disposed of also.

I direct the parties to prepare minutes of orders in accordance with these reasons. In the absence of agreement as to the quantum of damages I will make orders and directions for the determination of the same on a future occasion.

ANNEXURE A

INTERESTS BEFORE AND AFTER REINSTATEMENT

PALACE				BAYSIDE
Ownership		Management		Ownership		Management
Before	After	Before	After	Before	After	Before	After
BOOTH	100%	20%	--	--	100%	50%	---	50%
MATHIESON	--	80%	100%	100%	--	50%	100%	50%

ANNEXURE B

RUSHCUTTERS / DINMACK / BAYSIDE

BEFORE REINSTATEMENT AFTER REINSTATEMENT

Booth

Booth

100%

ANNEXURE C

MYMACK / PALACE HOTEL

BEFORE REINSTATEMENT AFTER REINSTATEMENT

In Cotslem	2 ordinary share for the consideration of $1.
In Mymack	8 shares for the consideration of $1;
In the Mymack Unit Trust	(i)	80 A units for the consideration of $10;
(ii)	8 B units for the consideration of $10.
In Rushcutters	(i)	25 A class shares for the consideration of $1;
(ii)	99,900 B class shares for the consideration of $1.

[2000] VSC 385

26 September 2000