McDonald Murholme Pty Ltd v Victorian Radio Network Pty Ltd
[2018] VSC 434
•8 August 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2017 02661
| In the matter of section 109 of the Magistrates’ Court Act 1989 (Vic) | |
| BETWEEN | |
| MCDONALD MURHOLME PTY LTD (ACN 084 260 131) | Appellant |
| v | |
| VICTORIAN RADIO NETWORK PTY LTD (ACN 095 736 753) | Respondent |
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JUDGE: | SLOSS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28 February 2018 |
DATE OF JUDGMENT: | 8 August 2018 |
CASE MAY BE CITED AS: | McDonald Murholme Pty Ltd v Victorian Radio Network Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 434 |
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JUDICIAL REVIEW AND APPEALS — Appeal from the Magistrates’ Court on a question of law under s 109 of the Magistrates’ Court Act 1989 (Vic) — Booking agreement for provision of broadcast radio advertising services – Construction of agreement — Whether and when payment required — Whether payment obligation dependent upon non-broadcast in circumstances where payment not made in advance.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr M Irving SC | McDonald Murholme |
| For the Respondent | Ms C E M Exell | Minter Ellison |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 2
Background.................................................................................................................................... 3
The appellant engaged the respondent to broadcast its radio advertisements......... 3
The Booking Agreement..................................................................................................... 4
The process for preparing and airing the advertisements............................................ 7
The making of payments by McDonald Murholme....................................................... 7
McDonald Murholme’s concerns about the advertising and cessation of payments after 30 June 2015............................................................................................................................ 8
The proceeding in the Magistrates’ Court................................................................................... 10
Evidence given at the trial......................................................................................................... 12
Evidence given by Mr Hung on behalf of the plaintiff................................................ 12
Evidence given by Mr Sweeney on behalf of the plaintiff.......................................... 16
Evidence given by Mr McKay on behalf of the plaintiff............................................. 17
The defendant’s case......................................................................................................... 17
Submissions made by the parties at trial................................................................................ 18
The learned Magistrate’s decision............................................................................................ 19
The appeal......................................................................................................................................... 23
Ground 1: the learned Magistrate erred in finding that a debt was due, because a debt could only arise upon the performance of contracted services and VRN had promised not to air the advertisements if payment was not made three business days in advance............. 23
Ground 2: the learned Magistrate erred in finding that a debt was due for the price (the contracted sum) in circumstances where the price was not earned.............................................. 27
Ground 3: the learned Magistrate erred in finding that an amount was due by the appellant in circumstances in which the condition for liability was not satisfied because the advertisements were aired........................................................................................................................... 28
Ground 4: the learned Magistrate erred in finding that a debt was owed by the appellant in circumstances in which the obligation to pay for the placed booking did not arise – because the pre-payment condition was not fulfilled, there was no offer capable of acceptance by running the advertisements............................................................................................................ 29
The proper construction of the Booking Agreement................................................................ 30
Construing commercial contracts: relevant principles.......................................................... 31
Application – construction of the Booking Agreement............................................................ 34
Purpose of the Booking Agreement......................................................................................... 34
The Payment Clause: the payment obligation and the distinction between credit clients and non-credit clients....................................................................................................................... 36
Meaning of the words: ‘If payment is not made, advertisements will not be aired and Client shall remain liable for commercial airtime allocated’........................................................... 37
Conclusion................................................................................................................................... 50
Grounds 1 to 3.................................................................................................................... 50
Ground 4............................................................................................................................. 50
Ancillary matters............................................................................................................................... 52
Arguments not raised before the Magistrate.......................................................................... 52
Presumption in favour of correctness of the decision below............................................... 54
Conclusion......................................................................................................................................... 55
HER HONOUR:
Introduction
The appellant, McDonald Murholme Pty Ltd, operates a specialist employment law firm under the name ‘McDonald Murholme’. In February 2015, it entered into two agreements with the respondent, Victorian Radio Network Pty Ltd (‘VRN’), for the provision of broadcast radio advertising services. VRN is, relevantly, the operator of radio stations ‘1116 SEN’ (Sports Entertainment Network) and ‘1377 3MP’ (a classic rock station).
The advertising campaign commenced and advertisements were aired, but by mid-2015, McDonald Murholme had become disenchanted and raised concerns with VRN about the effectiveness of the advertising. After 30 June 2015, McDonald Murholme ceased making payments to VRN, but VRN continued to air the advertisements in the booked slots, and provided some additional ‘bonus’ slots in an attempt to appease McDonald Murholme and address its concerns. However, as no further payments were made, VRN terminated the agreements with effect from mid-October 2015.
On 23 August 2016, VRN commenced a proceeding against McDonald Murholme in the Magistrates’ Court at Melbourne, in which it sought payment of the sum of $37,335.10 as ‘monies due’ under those agreements. Following a hearing conducted on 13 and 14 June 2017, the learned Magistrate found for VRN and ordered:
McDonald Murholme Pty Ltd to pay Victorian Radio Network Pty Ltd
Claim $37335.10 and Interest $7216.35 Costs $13613.00 Stay 30 Days.[1]
[1]See Exhibit ‘AJM 1’ to the affidavit of Alan James McDonald sworn on 19 July 2017.
By a Notice of Appeal filed on 12 July 2017, McDonald Murholme now appeals from those orders, pursuant to s 109 of the Magistrates’ Court Act 1989 (Vic).[2]
[2]Section 109 of the Magistrates’ Court Act 1989 (Vic) relevantly provides as follows:
(1) A party to a civil proceeding in the Court may appeal to the Supreme Court, on a question of law, from a final order of the Court in that proceeding.
…
(6) After hearing and determining the appeal, the Supreme Court may make such order as it thinks appropriate, including an order remitting the case for re-hearing to the Court with or without any direction in law.
The question of law upon which the appeal is brought is whether, on the proper construction of the relevant agreements — styled in each case as a ‘Booking Agreement’[3] — McDonald Murholme was liable to pay a debt to VRN of $37,335.10 in circumstances where:
(a)McDonald Murholme did not have a credit account with VRN;
(b)McDonald Murholme placed bookings for advertisements with VRN;
(c)McDonald Murholme did not pay for the services three days in advance of the broadcast date; and
(d)VRN broadcast McDonald Murholme’s advertisements as booked.
[3]In the Magistrates’ Court, at the commencement of its case, the plaintiff, VRN, formally sought leave to further amend its complaint, by pleading two separate Booking Agreements, one pertaining to the broadcast radio advertising on radio station ‘1116 SEN’ and the other pertaining to radio station ‘1377 3MP’, in place of its earlier rolled-up plea. The solicitor for the plaintiff deposes that the further amended complaint was filed and accepted by the learned Magistrate at trial: see Affidavit of Timothy Brendan Gorton sworn on 4 August 2017, at [4].
For the reasons set out below, I have concluded that the learned Magistrate did not err in his decision. Accordingly, the appeal is dismissed.
Background
The appellant engaged the respondent to broadcast its radio advertisements
Under the booking agreement entered into between McDonald Murholme and VRN in February 2015,[4] the parties agreed that advertisements produced by McDonald Murholme would be aired on radio station 1116 SEN on a suite of specified dates commencing from 2 February 2015 and ending on 15 December 2015.
[4]Affidavit of Alan McDonald sworn 19 July 2017, exhibit AJM-4. There was limited evidence before the Magistrate concerning the date that the Booking Agreement was entered into. The Booking Agreement tendered before the Magistrate appears to have been executed by the appellant on or around 2 February 2015, and by the respondent on or around 29 May 2015. The parties agreed that the document was entered into in or around February 2015.
In April 2015, the parties entered into a further booking agreement whereby they agreed that advertisements produced by McDonald Murholme would also be aired on radio station 1377 3MP on a suite of dates between April and August 2015.[5]
[5]This booking agreement was not produced at trial: transcript, 13/06/2017, at 97-101. The transcript of the hearing on 13 June 2017 appears as exhibit ‘AJM 2’ to the affidavit of Mr McDonald sworn on 19 July 2017.
In the Magistrates’ Court, and on the hearing of the appeal, argument proceeded on the basis of the terms of the booking agreement pertaining to the broadcast of advertisements on radio station 1116 SEN, without any specific reference being made to the separate booking agreement pertaining to radio station 1377 3MP. It was not contended by either party that any distinction between the booking agreements ought to be drawn.[6] Accordingly, in these reasons, the agreements for advertising on both 1116 SEN and 1377 3MP are referred to collectively as the ‘Booking Agreement’.
[6]Transcript, 13/06/2017, at 13, 124 and transcript, 28/02/2018, at 27 and 44.
The Booking Agreement
The parties are agreed that the Booking Agreement is wholly in writing.[7] The Booking Agreement comprises:
[7]Much of the evidence adduced at the hearing in the Magistrates’ Court, and the discussion that ensued, was directed to ascertaining whether certain oral terms alleged by the defendant were proven. The learned Magistrate found that there were no such terms. No ground of appeal relates to the rejection of the alleged oral terms.
(a) a schedule of broadcasting dates, times and rates for the advertisements;
(b) a summary of the purpose of the agreement and a precis of the terms and conditions; and
(c) VRN’s standard terms and conditions.
The schedule of broadcasting dates set out in the Booking Agreement contains a listing of the number of timeslots that were agreed to be allocated for the broadcast of McDonald Murholme’s advertisements on the relevant radio station within a specified time period (e.g. between 6:00am and 7:30pm) on specified days (all being Monday to Thursday) in specified weeks. Each allocated airtime slot was of a duration of either 15 seconds or 30 seconds. Generally, the rate for a 15 second slot was $105.00, whereas the rate for a 30 second slot was $150.00. The evidence at trial as to the modus operandi was that more precise time allocations for each advertisement were proposed by the respondent, at its discretion, closer to the agreed dates specified in the agreement, on an ongoing basis. VRN sent ‘pre-time schedules’ to McDonald Murholme when specific times (to the nearest minute) had been determined, typically up to one week ahead of the broadcast time.[8]
[8]Affidavit of Jane Louise Salveson sworn 11 October 2017 (‘Salveson affidavit’), exhibit JLS-4.
A summary of the purpose of the Booking Agreement and a precis of the terms and conditions is set out at the foot of the schedule of broadcasting dates. It states that:
This Booking Agreement is confirmation of the Services to be provided by the Supplier and paid for by the Client. All prices are quoted inclusive of Goods and Services Tax (GST).
Payment is required strictly in accordance with credit terms.
Bonus spots may be cancelled or altered at any time at the discretion of the Supplier.
This Agreement may be cancelled by either the Supplier or Client upon giving 28 days notice.
THE CLIENT CONFIRMS HAVING READ THE STANDARD TERMS AND CONDITIONS ATTACHED TO THIS BOOKING AGREEMENT WHICH FORM PART OF THE AGREEMENT BETWEEN THE SUPPLIER AND THE CLIENT.
The ‘Supplier — Standard Terms and Conditions’ are then set out in un-numbered clauses, beginning with the following clause (the ‘Agreement Clause’):
Agreement
Any Booking placed by Client with the Supplier shall constitute an offer by Client to acquire Services on the terms set out in these Standard Terms and Conditions and in the Booking Agreement.
In the standard terms and conditions, a number of words or phrases are defined. Relevantly, the following expressions bear the following meanings ‘unless the context requires otherwise’:
‘Booking’ means a request to acquire space on the Supplier’s website or radio station or print media for Client’s advertising material, as identified in the Booking Agreement.
‘Supplier’ means the Supplier specified in the Booking Agreement usually being Victorian Radio Network Pty Ltd ABN 43 095 736 753 trading as 1116 SEN …
‘Client’ means the person contracting with the Supplier for advertising services …
…
‘Services’ means the advertising by the Supplier of the Client’s advertising material on the Supplier’s website or radio station or print media.
The clause which is the subject of the present dispute is found under the heading ‘Payment’. That clause (the ‘Payment Clause’), which appears as the second clause in the standard terms and conditions, provides as follows (emphasis added):
Client will be charged for the provision of Services at the rates set out in the Booking Agreement. Client will be liable as principal debtor for payment of amounts invoiced by the Supplier. If Client has a credit account with the Supplier, Client will be provided an invoice on a monthly basis for the value of Services provided during the preceding month and Client must pay the amount invoiced in accordance with the terms of that invoice and in any event, no later than 30 days from the date of that invoice (45 days for Agency Client[9]). If payment for Services is not made when due, the Supplier may, in its discretion: (a) charge interest on the unpaid amount at the rate of 12.0% per annum on all overdue amounts calculated monthly from due date until such amount is paid; and/or (b) suspend broadcast of any advertising material lodged by Client until such time as all outstanding payments are received by the Supplier. The Supplier may at any time at its discretion and without notice alter or suspend credit facilities. If Client does not have a credit account, or the value of Services exceeds the available credit limit, payments for Services must be made at least 3 business days prior to advertisements going to air. If payment is not made, advertisements will not be aired and Client shall remain liable for commercial airtime allocated.
The expressions ‘credit account’ and ‘commercial airtime allocated’ are not defined in the Booking Agreement.
[9]The expression ‘Agency Client’ is not defined, however there is a clause dealing with ‘Agency’ that provides:
If Client acts as an agent for another party, it shall be principally liable for payment of all accounts for Services and shall be deemed to have full authority in all matters connected with the entering into and performance of the Agreement with the Supplier.
It was not suggested that McDonald Murholme was an Agency Client.
Relevantly, the standard terms and conditions also include a clause dealing with ‘Termination’ (the ‘Termination Clause’) as follows:
Termination
Either party may terminate the Agreement between the Supplier and the Client without penalty upon the provision of 28 days written notice. Either party may terminate the Agreement immediately upon the provision of notice where: a) the other party has breached a term of the said Agreement; or b) if the other party is insolvent or ceases to carry on business.
The process for preparing and airing the advertisements
McDonald Murholme was responsible for producing the advertisements that were to be aired by VRN on radio stations 1116 SEN and 1377 3MP. Mr Alan McDonald, who practises as a lawyer and is the sole director of the appellant, prepared the advertisements with the assistance of a radio consultant, Mr Bruce McKay. In the Magistrates’ Court proceeding, Mr McDonald described Mr McKay as a long-standing commercial contact of his, who had arranged advertisements for him at many radio stations over a long period of time.[10] It was Mr McKay who had suggested to Mr McDonald that he use VRN to advertise McDonald Murholme.[11]
[10]Transcript, 13/06/2017, at 21.
[11]Transcript, 28/02/2018, at 54; transcript, 13/06/2017, at 3–4, 7–8.
Once the advertisements were prepared, as the date of each allocated timeslot approached, staff of VRN attended to preparing the ‘pre-time schedules’ identifying more specifically the intended broadcast time for each of the advertising slots allocated in the Booking Agreement, and notified them to McDonald Murholme, following which the advertisements were aired on radio stations 1116 SEN and 1377 3MP. After the advertisements were aired, VRN generated ‘aired spot details’, identifying to the nearest second when each advertisement went to air, and generated invoices which it sent to McDonald Murholme on a monthly basis in respect of each radio station.[12] The invoices did not itemise each advertisement broadcast, but grouped them by duration and allocated timeslot within specified date ranges, before setting out the total sum due and noting ‘terms strictly 30 days from invoice date’.
[12]Transcript, 28/02/2018, at 63–65. The evidence did not show how often McDonald Murholme was sent the aired spot details, but no issue was raised in that regard in this proceeding.
The making of payments by McDonald Murholme
McDonald Murholme did not have a credit account or a credit limit with VRN. The evidence was that from the outset, its usual practice was to pay by cheque, sometimes with post-dated cheques, for advertisements that were to be aired in the following month or two month period.[13] These cheques were usually collected from McDonald Murholme’s office by Mr McKay and delivered by him to VRN’s office in Richmond the same day.[14]
[13]Transcript, 13/06/2017, at 11 and 16. At trial, the plaintiff submitted that the defendant did not pay in advance for May and June 2015: transcript, 13/06/2017 at 69.
[14]Transcript, 13/06/2017, McKay XIC, at 86.
There is a handwritten notation endorsed on the front page of the Booking Agreement, underneath an ‘Approved’ stamp, which records or reflects this ‘payment in advance’ arrangement, as follows:[15]
[15]The respondent pleaded in its Reply (dated 13 April 2017) at [6(b)] that:
The Booking Agreement contained the terms and conditions of the agreement between the parties, save and except that it was agreed that [McDonald Murholme] could pay for the advertising placed with [VRN] by way of progressive payments of $10,000 per month as an alternative to the payment terms and conditions in the Booking Agreement.
Existing client approved subject to monthly upfront payments
29/1/15
However, no evidence was given at trial about the annotation or who made it.
McDonald Murholme’s concerns about the advertising and cessation of payments after 30 June 2015
By mid-2015, after the advertising campaign had been underway for a few months, Mr McDonald began to express concerns to the respondent about the effectiveness of the advertising.[16] After 30 June 2015, McDonald Murholme ceased making payments to VRN.
[16]Salveson affidavit, exhibit JLS-2.
On 7 July 2015, Mr McKay and Mr David Hung, sales director at VRN, met with Mr McDonald to discuss the appellant’s concerns about the effectiveness of the advertising campaign. At this meeting, VRN offered to provide some free airtime to the appellant, in addition to the airtime that had previously been allocated under the Booking Agreement, and Mr Hung came to that meeting having already set aside a number of time slots for this purpose.[17]
[17]Salveson affidavit, exhibit JLS-2; transcript, 13/06/2017, 29-30. A further employee from McDonald Murholme by the name of ‘Jocelyn’ was also present during this meeting.
Following the meeting, on 8 July 2015 Mr Hung sent an email to Ms Kathy Zmijewksi, the appellant’s communications manager. Relevantly, Mr Hung stated:
Hi Kathy,
Just a quick note to follow up the meeting Bruce [McKay] and I had yesterday with Alan [McDonald] and Jocelyn with respect to the concern on the level of response being generated by the campaign to date.
Last week we had activated on our own initiative a number of things to show that our intent is to work with [sic] towards getting things better for you and the business.
Specific actions were
1.a no charge sponsorship of a segment in each major session for at least two weeks if not four weeks across the month of July.
2.15 X 30 second no charge spots per week for 4 weeks starting w/c 6/7/15 so a total of 60 spots.
...[18]
Mr Hung also noted that it had been agreed the parties would meet again at the end of July to discuss the status of the arrangement.
[18]Salveson affidavit, exhibit JLS-2.
Notwithstanding that additional airtime was being provided to McDonald Murholme free of charge, Mr McDonald remained dissatisfied. On 20 July 2015, a further conversation took place between the parties to discuss ways to alleviate McDonald Murholme’s concerns.
On 21 July 2015, Mr Hung emailed Mr McDonald and noted that VRN had provided free airtime to the appellant during scheduled weekend slots for the preceding two week period. Mr Hung also confirmed that VRN would be providing further free airtime to the appellant going forward, and offered to conduct a further review in late July or the first week of August 2015.[19]
[19]Salveson affidavit, exhibit JLS-3.
At no stage did McDonald Murholme give notice to VRN of an intention to terminate the Booking Agreement.[20] Rather, while VRN continued to issue invoices to McDonald Murholme for advertisements it had broadcast, McDonald Murholme simply made no payments. Finally, on 13 October 2015, Mr Hung sent an email to Mr McDonald, confirming that ‘due to the account trading well beyond terms’ the respondent would ‘withdraw all scheduled advertising from w/c [week commencing] Oct 12th’.[21] To that point, however, VRN had continued to air McDonald Murholme’s advertisements during both the scheduled times and the additional bonus slots it had allocated.
[20]See transcript, 13/06/2017, at 40, 150.
[21]Salveson affidavit, exhibit JLS-6. See transcript, 13/06/2017, at 44.
The proceeding in the Magistrates’ Court
Against that background, on 23 August 2016, VRN commenced its proceeding in the Magistrates’ Court seeking payment of the sum of $37,335.10 together with interest and costs. In that proceeding, VRN claimed that McDonald Murholme had failed to make payment of the following invoiced amounts from 31 May to 31 October 2015:
Date of invoice Invoice Number Invoiced amount 31 May 2015 13600MP-1 $850.85 30 June 2015 13600MP-2 $841.50 31 July 2015 13600MP-3 $850.85 31 July 2015 13304SEN-6 $11,000.00 31 August 2015 13600MP-4 $411.40 31 August 2015 13304SEN-7 $10,120.00 30 September 2015 13304SEN-8 $10,059.50 31 October 2015 13304SEN-9 $3,201.00 Total $37,335.10
VRN claimed that all of the amounts the subject of those invoices related to advertisements that were aired on radio stations 1116 SEN and 1377 3MP during airtime slots allocated to McDonald Murholme under the Booking Agreement. The evidence showed that VRN had rendered the above listed invoices to McDonald Murholme and that they remained unpaid. It was not in dispute before the Magistrate that no charge had been invoiced in respect of any of the bonus spots allocated to McDonald Murholme, by way of addressing its concerns as earlier described.[22]
[22]See transcript, 13/06/2017, at 113.
The hearing commenced on 13 July 2017. VRN was represented by Ms Exell of counsel, instructed by Minter Ellison. Mr McDonald, in his capacity as director of McDonald Murholme, sought and obtained leave to appear on its behalf.
At the outset of the hearing, after dealing with some procedural matters, the learned Magistrate adopted a ‘pro-active’ approach, asking questions of counsel for VRN and of Mr McDonald as a means of ‘trying to sort out and narrow down the issues between the parties to save everybody time and money’.[23] By that means, his Honour readily ascertained that the relevant agreement was in writing (albeit that McDonald Murholme contended there were certain additional oral terms), and that there was no dispute between the parties that VRN had broadcast advertisements for McDonald Murholme at the times set out in the schedule to the agreement, or that the rates at which the advertisements were to be charged (to the extent they were to be paid for) were those set out in the schedule.
[23]Transcript, 13/06/2017, at 17.
Having narrowed the issues, his Honour then informed the parties that the hearing of the evidence would proceed in the following manner:
HIS HONOUR: So all I want to hear evidence from since nothing else is factually in dispute, is the circumstances of the meetings with the defendant and the agreement the defendant alleges. Understand?
COUNSEL: Yes Your Honour. I'll call Mr Hung first in respect of that.
HIS HONOUR: Yes. You can tell your witnesses they don't have to traverse matters which the parties have no dispute over.
COUNSEL: Yes.
HIS HONOUR: Nor am I interested in the intricacies or the like of radio broadcasting, I'm vaguely familiar all right?
COUNSEL: Understand Your Honour. And there may be one matter that hasn't been elucidated by what Mr McDonald has told you in relation to the radio station matters in terms of what was to be charged for and what was not to be charged for after July. We wanted to go to a little bit of evidence about that, but I've heard what Your Honour said.
HIS HONOUR: Thank you.[24]
[24]Ibid, at 24-25.
Evidence given at the trial
The plaintiff called three witnesses in support of its claim. Counsel adduced evidence orally from Mr David Hung (the sales director of VRN), then from Mr Stephen Sweeney (the chief financial officer and company secretary at VRN) and finally from Mr McKay (radio consultant). Relevant business records of VRN, including a client account record, were tendered primarily through Mr Sweeney. Each of Mr Hung and Mr McKay was cross-examined by Mr McDonald.
Evidence given by Mr Hung on behalf of the plaintiff
When giving his evidence, Mr Hung outlined the services provided by the VRN sales team across VRN’s radio stations 1116 SEN and 1377 3MP and its publication ‘Inside Football’. He also described how VRN had provided bonus advertisements to McDonald Murholme in addition to the agreed slots specified in the Booking Agreement. Mr Hung said that VRN had done so in an attempt to appease Mr McDonald after he had expressed concerns about the effectiveness of the advertisements.[25]
[25]See transcript, 13/06/2017, Hung XIC at 29-34, 38.
Mr Hung gave evidence about the meeting he and Mr McKay had with Mr McDonald and his colleague Jocelyn in early July 2015. Mr Hung said that a week or so prior to the meeting taking place, Mr McKay had alerted him to the fact that Mr McDonald was not happy with the effectiveness of the advertising campaign, and so he had pre-emptively started to schedule some bonus advertisements to be aired on top of McDonald Murholme’s paid advertising. At the meeting, when Mr McDonald expressed how disappointed he was with the results that he had had to date, Mr Hung responded to the effect that they had ‘already started to schedule some no charge ads to try to boost the response.’[26] Mr Hung was asked whether he ever offered all the advertising to Mr McDonald for free, and he responded ‘[n]o, absolutely not.’[27]
[26]Ibid, at 30.
[27]Ibid.
Mr Hung explained that the meeting was ‘really all about how do we try to get a better level of response so that Alan [McDonald] would be happy … it was all about focussing on what – what other things we could do.’[28] He said that one of the points Mr McDonald made at the meeting was that he was disappointed that the ads were not running where he felt they should be, and that they should be in different timeslots to those set out in the Booking Agreement. Mr Hung said he pointed out to Mr McDonald that the timeslots he was looking to move into were more expensive. But Mr Hung said to him that ‘despite them being higher price, absolutely we'll do this, because you know, you are a long-standing advertiser with us on 3MP and you know, you've certainly been spending you know, some good dollars with us on SEN.’[29]
[28]Transcript, 13/06/2017, Hung XIC, at 31.
[29]Ibid.
Mr Hung was asked by counsel for the plaintiff whether the issue of cancellation of the Booking Agreement, or cancelling any of the ads, was discussed at any stage during the meeting. He said ‘[n]o it wasn’t’, and added that ‘if it was I would have been pointing out that there is a 28 day cancellation period.’[30] When asked about the purpose of the notice period contained in the Termination Clause in the Booking Agreement, Mr Hung said:
We have that cancellation period to help us in the situation that somebody does want to cancel … if you’re left with what would be called a number of holes straight away, you don’t sell advertising off the drop of a hat, you’ve got to go and find replacements for it. And that takes – takes time…[31]
[30]Ibid.
[31]Ibid. This evidence was unchallenged by the defendant. Mr Hung reiterated this point later in his evidence (at page 42 of the transcript), where he indicated that it is not possible to schedule advertisements at a moment’s notice.
Following the meeting, as earlier described, on 8 July 2015 Mr Hung sent a follow-up email to Ms Zmijewski, copied to Mr McDonald and ‘Jocelyn’. In that email he recorded the measures VRN had ‘activated on its own initiative’ and set out the following actions, which he noted had been agreed upon at the meeting:
1)Creative message: It was agreed the new creative (just supplied recently) is very clear and “strong” and should be given an opportunity to “work”.
2)Alan advised that the sponsorship most valued was one in “breakfast” for the segment 5 in 5 and we could drop the others. We will retain the others unless “sold” as the extra exposure won’t hurt.
3)Alan requested that the sponsorship credit line for this and the “Inside Football” program you sponsor on Sundays use the credit line “McDonald Murholme – Winners for Workers, 9650 4555”. This change has now been made.
4)Alan was disappointed that no commercials were scheduled on weekends and that we should move the current 30 seconds placed BMAD[32] (530am-730pm to 630-930am). Since the meeting yesterday we are moving as many of the 30 seconds to the 630-930am zone as possible between now and the end of the month and are placing the 15 bonus commercials on the weekend fully address that concern (sic). (note the 6.30am-9.30 time frame is a higher priced time frame that we will be holding your current rate for as the priority is to get an indication of changes in “response” so come August we can start to formulate a view of where the ads will be best placed going forward from that month on.
5)It was agreed Bruce and I should come in again towards the end of July to review things again. Bruce will set this time up.[33]
[32]This appears to be an acronym for Breakfast, Morning, Afternoon, Drive-time.
[33]See exhibit JLS-2 to the Salveson affidavit.
Further correspondence ensued and Mr Hung said that further meetings took place ‘with Kathy [Zmijewski] in particular who was sort of passing on Alan’s thoughts on what we should be doing.’[34] He said that he had received a phone call from Mr McDonald on 20 July 2015 in which Mr McDonald had adverted to the fact that the booked advertising was running early in the week, from Monday to Thursday, and had expressed his view that a better response might be generated by advertisements during their AFL coverage, which is broadcast live on Fridays and weekends. Mr Hung said:
… Um, so getting that - that phone call that I would have had with Alan, it was about, "Hey you're running everything Monday to Thursday early in the week, I don't want that now, what I want is to be … part of the weekend, Saturday, Sunday." So again as part of … the objective of trying to keep um – well when I say keep Alan happy, it was more about getting him the response um where he would feel comfortable, I'd decided to rather than change his paid advertising over to the Saturday, Sunday, I said, "Well look let's leave in the Monday to Friday or Monday to Thursday spots, and I will run at no charge now spots on the weekend to give you that coverage that you're looking for." And also it just meant that we didn't have to make any changes if you like to the agreement that was in place.[35]
[34]Transcript, 13/06/2017, Hung XIC, at 33.
[35]Ibid, at 34.
Mr Hung followed up with an email to Mr McDonald the next day, 21 July 2015, copied to Ms Zmijewski and Mr McKay, in which he stated:
Further to our conversation early evening yesterday you raised your concerns on the spots that we had scheduled on the weekends that ran outside before/after our AFL broadcasts. As a general guide our AFL coverage (including the pre/post game wraps) on a Saturday start at 1pm and concludes at 11pm and on a Sunday it starts at 12midday and concludes at 8pm.
With the scheduled spots on both Saturday and Sunday (a total of 15) they have for the last two weeks been placed by me at no charge 5.30am-12mn to reflect your initial concerns on when we met that you had no weekend coverage including AFL and the show that you have a no charge sponsorship of (SEN Inside Football).
The objective in placing that many at weekends spots at no charge was to preserve your other paid spots for Monday to Friday placements and provide coverage that included not only the AFL but also our popular shows that are outside of the AFL that include “off the Bench” with Craig Hutchison Sat 9-11am, Crunch Time Saturday 11am-1pm with Anthony Hudson and Dermot Brereton, then on Sundays 10am-12noon the SEN Inside Football Show (that you have a no charge sponsorship) and Fineys final Siren Sundays 8pm-12mn.
These same spots i.e. 15 at no charge are placed again this coming weekend. I will now tighten them to just the AFL zones based on your preference.
We are also adding a further 20 X 30 no charge spots a week this week and then over the two weeks following that to provide even more opportunity to get a satisfactory result. These spots will be placed weekly as 5 X 30secs M-F 9am-12noon and then 5 X 30 seconds M-F 12 noon-4pm and then 10 x 30 M-f 7pm-10pm.
Alan, I believe that if we stick with the plan to review things late July/first week of August you will hopefully have some indication of any response trends from the new ad and extra placements that we can pick up on.
I will be in touch with Kathy and provide her with a computer confirmation of the placements from here and I will suggest with Kathy that we set up a review time now so it is in our diaries well in advance.[36]
[36]See exhibit JLS-3 to the Salveson affidavit.
Through Mr Hung, VRN tendered a large bundle of emails that were sent to McDonald Murholme on various dates between 7 April 2015 and 7 October 2015, advising it of the ‘pre-time schedules’ for the McDonald Murholme advertisements to be aired.[37] Mr Hung explained the role of the ‘pre-time schedules’ as follows:
So a pre time is an estimate, it's not a promise and it's not a given, it's an estimated pre broadcast time for when the ads for our clients and in this case McDonald Murholme, were proposed or likely to fall … So we sent Kathy the day before the times where the various ads would appear. So that's on the left-hand side, it starts with the time. So 9.05 being 9.05 am, and then the pm time is listed. The length of the ad is the next item. So if it's for 30 then it's a 30 second commercial. If it's got a 15, it's a 15 second commercial. Then it references the station being SEN. Then the next column is the price. So anything with a zero is zero dollars. Anything that's a paid um commercial is at the paid rate there. Then the client's name is referenced and then whether it's a bonus is referenced um or if it's um a paid commercial it will have the BM for breakfast, M for morning, meaning the timeslot or zone we would call it that it's going to run. BMADE is again time slot driven and then the account manager who works on the business, that's their name as in B. McKay for Bruce. So that's broadly what this does.[38]
[37]See exhibit JLS-4 to the Salveson affidavit.
[38]Transcript, 13/06/2017, Hung XIC, at 37.
When asked whether he ever received any notice about cancellation or termination of the contract with the defendant, Mr Hung said that he had not.[39] He also confirmed that the only advertisements that were offered to McDonald Murholme free of charge were those ‘that were over and above the paid advertising’, and the invoices that were rendered to McDonald Murholme by VRN related only to the advertisements that were the subject of the Booking Agreement.[40] Mr Hung explained that even though McDonald Murholme’s account was well overdue, VRN continued airing the advertisements through the football finals period and the agreement came to an end when he notified Mr McDonald by email dated 13 October 2015 that VRN would be withdrawing all scheduled advertising from the week commencing 12 October 2015.[41]
[39]Ibid, at 40.
[40]Ibid, at 40.
[41]Ibid, at 44.
Under cross-examination, Mr Hung said that he was not aware of any debt issues with McDonald Murholme and did not know that they had been paying in advance.[42] He confirmed that he had only recently become aware that McDonald Murholme had been paying for its advertisements at the start of the month before they were aired.[43] He added that he was ‘not across the payments’ but was ‘there to fix the response.’[44]
[42]Transcript, 13/06/2017, Hung XXN, at 46.
[43]Ibid, at 50.
[44]Ibid, at 51.
Evidence given by Mr Sweeney on behalf of the plaintiff
Mr Sweeney gave evidence about how payments received by VRN were banked within a day and recorded in VRN’s internal accounting system. He acknowledged that he did not have specific recollection of McDonald Murholme’s payments being received. Although counsel for VRN had intended to ask Mr Sweeney to give evidence about McDonald Murholme’s advertisements going to air, this did not occur once the learned Magistrate observed that that issue was not in dispute. Mr Sweeney was not cross-examined.
Evidence given by Mr McKay on behalf of the plaintiff
Mr McKay gave evidence about his business relationship with Mr McDonald over the years, the ‘payment in advance’ arrangement whereby he collected cheques from McDonald Murholme and delivered them to VRN, and the meeting he attended in early July 2015. He confirmed that he did not discuss any ‘free spots’ with Mr McDonald, adding that ‘[t]hat was all in the hands of David [Hung] because I wasn’t able to, to just do that.’[45] Under cross-examination, Mr McKay was asked about the ‘payment in advance’ arrangement. It was put to him by Mr McDonald that when June arrived, ‘there was no payment in advance and it was indicated there would not be a payment’. Mr McKay responded, stating ‘[n]o it was really not indicated that there would not be a payment in June.’[46] A little later, it was put to Mr McKay, and he agreed, that he knew ‘it was [his] job to come to [Mr McDonald’s] office to pick up a cheque and an authority as it were, to broadcast for the period that the cheque nominated’.[47]
[45]Transcript, 13/06/2017, McKay XIC, at 85.
[46]Transcript, 13/06/2017, McKay XXN, at 88.
[47]Ibid, at 95.
The defendant’s case
At the conclusion of the plaintiff’s case, Mr McDonald made a ‘no case’ submission. His Honour refused the application,[48] following which counsel for the plaintiff sought and obtained leave to re-open its case so as to tender a copy of its certificate of incorporation. After seeking a short adjournment, Mr McDonald then elected not to call any witnesses in support of the defendant’s defence.[49]
[48]Transcript, 13/06/2017, at 114.
[49]Ibid, at 117-118.
Submissions made by the parties at trial
The trial transcript records that the process of making submissions was an iterative one and the respective cases advanced in the oral submissions made at trial evolved somewhat from the way the cases had been put in the parties’ respective pleadings.
Counsel for the plaintiff submitted that as VRN had aired the defendant’s advertisements in accordance with the Booking Agreement, McDonald Murholme remained liable to pay the stipulated amounts for those advertisements, together with interest. In essence, VRN contended that, on the proper construction of the Payment Clause, in circumstances where it had broadcast the relevant advertisements on the various booked dates, it was entitled to recover the amounts invoiced even though the defendant had not paid in advance. VRN submitted that the words ‘[i]f payment is not made, advertisements will not be aired and Client shall remain liable for commercial airtime allocated’ were inserted for its benefit and effectively granted it a right to choose whether or not an advertisement would be aired if payment had not been made at least three business days before the booked broadcast time.
McDonald Murholme accepted that it had not paid the amounts the subject of VRN’s claim and acknowledged that it did not pay three business days in advance of the relevant advertisements being aired, despite VRN having notified it in advance on a rolling basis when it intended to air the advertisements.[50]
[50]At trial, the defendant conceded that it had deliberately not paid for those amounts: transcript, 13/06/2017, 9-12 and 145-148. As to the notification made to the appellant that the advertisements were going to be aired, see exhibit JLS-4 of the Salveson affidavit.
The defendant, through Mr McDonald, argued that it was not liable to pay VRN for the amounts claimed. In essence, the defendant submitted that it, as the client, had the ability under the Booking Agreement to stop the advertisements going to air by ceasing to make payments at any time, either because:
(a) on the proper construction of the Booking Agreement and the Payment Clause, McDonald Murholme was not liable in debt to pay for the Services, as it had not made payments three business days in advance of the advertisements going to air; or
(b) the parties had effectively agreed that McDonald Murholme would not be liable to pay for any advertisements unless it paid ‘upfront’ before the advertisements were aired.
Alternatively, the defendant contended that in July 2015, the Booking Agreement had been varied to include oral terms, whereby VRN had effectively offered to air all of McDonald Murholme’s advertisements thereafter without charge.[51]
[51]Transcript, 13/06/2017, at 20-24. In its further amended defence, the defendant also claimed that the plaintiff’s representatives had made false and/or misleading statements.
The learned Magistrate’s decision
Following the conclusion of the evidence and the submissions, his Honour informed the parties that he would give judgment for the plaintiff, VRN. In so doing, his Honour effectively rejected the defendant’s submissions. Having determined the matter, his Honour then suggested that the parties should discuss the figures involved, and attempt to agree upon them so that final orders could be made. He adjourned the matter to the next day, noting that if the parties were unable to agree the appropriate figures, they could come back briefly before the Court and he would make orders.
The matter returned to court the next day. When the form of the final orders was being discussed, Mr McDonald requested that his Honour not make an order until the parties had had the opportunity to address him with the benefit of some written reasons for his decision. But his Honour declined to provide written reasons, observing that he had ‘explained the decision several times over.’[52] In this regard, in its written outline of submissions filed on the appeal, the appellant acknowledges (at [2]) that ‘[t]he reasons for decision emerge from the learned Magistrate’s observations over the course of 60 pages of transcript in the course of discussion with representatives of the parties below.’
[52]Transcript, 14/06/2017, at 220. The transcript of the hearing on 14 June 2017 appears as exhibit ‘AJM 3’ to the affidavit of Mr McDonald sworn on 19 July 2017.
Against that background, during the course of the hearing before this Court, counsel for the appellant identified excerpts in the transcript of the trial that were said, individually and collectively, to constitute the findings made by the learned Magistrate that were in error. Those passages, along with other relevant excerpts, are set out below.
The learned Magistrate initially explained his understanding of the construction of the Booking Agreement as follows:
HIS HONOUR: … that’s what it ordinarily means. In other words, I tell you on the first of the month I want to terminate the contract the provision usually is that’s fine. We have scheduled ads for you for this month coming. We will run them in accordance with our agreement and at the end of that month we will stop running them and during (indistinct) to that month we will charge you for running those ads because that’s our agreement. That’s how contracts work, don’t they? So if the question is if I say I’m terminating the contract and refuse to pay, can they. This is a legal question – say to you, well, all right then but you will have to pay us for that 28 days anyway because that’s what you have agreed to do. Correct?
…
HIS HONOUR: The answer as a matter of law is that that’s the agreement. Yes. Unless the parties specifically agreed something else.[53]
[53]Transcript, 13/06/2017, at 50.
In response to the defendant’s submissions regarding the proper construction of the Payment Clause, his Honour made the following comments and observations:
HIS HONOUR: … clearly under this agreement if you don’t pay, that’s if you agree to pay cash in advance basically within three days, they have the right not to run the ads but they retain the right to claim the money off you according to the agreement unless you give them notice of termination operating the 28 day period of cancellation.
…
HIS HONOUR: I indicated … quite clearly before lunch that the only factual matter at issue here really is whether or not in July the plaintiff agreed to broadcast any further ads, any and all further ads, which is what it comes down to, free of charge. Now if they did agree to that good for you but if they didn’t they would fall back on this agreement and say, fine. We agreed to air a number of advertisements free of charge but we did not resile from your obligation to pay for the scheduled ads according to the agreement …
…
HIS HONOUR: … Now the contract will mean what it says. An interpretation clearly or a construction I should say of the contract is clearly on what I have just said, in favour of the plaintiff. It may well be that you can persuade the court otherwise but to suggest that the – this contract cannot be the basis of a suit against you is frankly untenable. It can be for the reasons I’ve just set out.[54]
[54]Transcript, 13/06/2017, at 106-107.
His Honour continued:
HIS HONOUR: … What happens is this. If you don't pay, yes, they had the right not to ad - not to put these ads to air.
MR McDONALD: That's exactly right, sir and that's - - -
HIS HONOUR: And - and - and client, not or client or anything else. And client shall remain liable for commercial airtime allocated. By inference, necessary because two of those ads which were not aired, right? So you can either get your money's worth or they can get your money if you don't pay up in advance as you promised, all right? That's plainly what it says.
It makes you liable. Until such time as you pay they don't have to air those ads but they can continue to charge you until you give them notice of cancellation of 28 days. On one view of it, they could have kept charging you for the entire currency of this contract. They didn't have to resile after three months at all …[55]
[55]Ibid, at 108-109.
As noted above, counsel for VRN had submitted that the final words in the Payment Clause, ‘if payment is not made advertisements will not be aired and clients shall remain liable for commercial airtime allocated’, effectively granted to VRN an option to decide whether or not to air an advertisement if payment had not been made. Counsel for VRN submitted that the defendant remained liable for Services performed, irrespective of whether that remedy was exercised. His Honour accepted that construction, finding that under the Payment Clause McDonald Murholme was liable to pay whether or not the advertisements were aired:
HIS HONOUR: … that agreement means what it says. We're not obliged to air these ads at all if you don't pay in advance because the time's already been allocated to you but if we don't you'll still have to pay us.[56]
[56]Ibid, at 123-124.
His Honour later continued:
HIS HONOUR: … it's a remedy afforded to the plaintiff. If you don't pay up, you don't broadcast the ads.
…
HIS HONOUR: We will simply make you pay for the time. In other words, it's basically a way of saying to them well look this is an inducement to pay what you should, because if you don't, it's still going to be payable for the time, but you're not going to get your ads.[57]
[57]Transcript, 13/06/2017, at 152-153.
The defendant argued that the plaintiff’s interpretation was incorrect. In effect, the defendant submitted that it would not be liable to make payments for the Services if payment had not been made three business days prior to the allocated time and the plaintiff nevertheless aired those advertisements. His Honour rejected that submission:
HIS HONOUR: What this clause says is that your liability remains, whether we broadcast or not. If you don't pay in advance, your liability remains. Because air time is air time. It doesn't matter whether it goes to air, or whether we are contracted for the time for it to go to air. All right.[58]
[58]Ibid, at 146-147.
The learned Magistrate went on to observe that what VRN had done, notwithstanding McDonald Murholme’s failure to pay in advance, was to air the booked advertisements and he concluded that VRN was not precluded from charging McDonald Murholme for having done so:
HIS HONOUR: What you've done is something in effect, you weren't legally obliged to do, right? It can hardly be detrimental to the plaintiff, A, it follows his directions and his agreement, right. And he had a perfectly available remedy (indistinct) to sue him for the time. So what the defendant says, oh no this clause absolutely precludes him from charging for ads that you go ahead and air.
COUNSEL [FOR THE PLAINTIFF]: Well [y]our Honour that can't be right. It just - it can't be right.
HIS HONOUR: No. No it can't be right. And it can't be right and it isn't right, all right, yes.[59]
[59]Ibid, at 154.
In reaching his decision about the proper construction of the Booking Agreement, his Honour also found that the contract was wholly in writing and had not been varied. No appeal ground is raised in respect of his Honour’s finding that there were no oral terms of the kind contended for by McDonald Murholme.
The appeal
McDonald Murholme contends that the liquidated sum of $37,335.10 which VRN sought and recovered was not owed as a debt, and that therefore the learned Magistrate erred by ordering payment of that sum.
The appellant raised four grounds of appeal that it claimed demonstrated that the learned Magistrate had fallen into error.
There is no dispute between the parties as to the relevant facts.
Ground 1: the learned Magistrate erred in finding that a debt was due, because a debt could only arise upon the performance of contracted services and VRN had promised not to air the advertisements if payment was not made three business days in advance
The first ground primarily concerns the meaning of the expression ‘Services’ and the following words contained in the Payment Clause of the Booking Agreement:
“[i]f payment is not made, advertisements will not be aired …”
The appellant submitted that the learned Magistrate ‘erred in finding that a debt was due’ by McDonald Murholme because the respondent had not earned the charge for the contracted services. The appellant’s submissions on this ground can be summarised as follows:
(a) as McDonald Murholme did not have a credit account, the Booking Agreement relevantly required that ‘payments for Services must be made at least 3 business days prior to the advertisements going to air’;
(b) the respondent promised to run the advertisements booked by McDonald Murholme, and also promised that ‘[i]f payment is not made, advertisements will not be aired’;
(c) the only way for the respondent to earn payment for the advertisements was to perform the contracted ‘Services’;
(d) ‘Services’, for the purposes of the Booking Agreement, means ‘the advertising by the Supplier of the Client’s advertising material’. It does not include the allocation of airtime or acceptance of the booking;
(e) the inclusion in the Booking Agreement of the words ‘if payment is not made, advertisements will not be aired’, meant that in circumstances where McDonald Murholme failed to make a payment ‘at least 3 business days prior to advertisements going to air’, the respondent did not have a choice about whether to perform the contracted services. It was not entitled to do so and thus it could not charge for the provision of ‘Services’ in relation to any advertisements it proceeded to air; and
(f) a debt could arise only when the contracted services were performed. Here, however, the airing of the advertisements was not the performance of the contracted services, and so no debt arose. Thus the learned Magistrate erred in finding that a debt was due by McDonald Murholme.
The appellant submitted that this construction of the Booking Agreement was commercially sound, as it accorded with the ordinary construction of contracts for the provision of services. Counsel for the appellant submitted that if McDonald Murholme did not pay for the advertisements three business days in advance, it would not become liable for the charge (a liquidated sum) but he acknowledged that it might remain liable for the airtime allocated.[60] He noted, however, that VRN had not sought to claim damages for the airtime allocated, and that if it had, it would have been required to take steps to mitigate its loss.
[60]Transcript, 28/02/2018, at 15, 20, 38.
The appellant also submitted that the Payment Clause should be construed as creating a ‘dependent obligation’ to pay the charge for the services as promised when rendered. That interpretation was said to be supported by the following reasons:
(a) contracts for the performance of services are ordinarily understood in this manner;
(b) the Payment Clause stated that ‘the Client will be charged for the provision of Services’ at the rates set out in the Booking Agreement. The Client is not charged for breaching its promise to pay for the booking. Any remedy for that breach lay in damages;
(c) the Booking Agreement by its terms distinguishes between the Client being liable ‘for payment of amounts invoiced’ and the Client being ‘liable for commercial airtime allocated’; and
(d) since the Payment Clause states that ‘if payment is not made, advertisements will not be aired and Client shall remain liable for commercial airtime allocated’, it follows in the present case that the client is liable for the airtime allocated, and not for the charge that would apply for the provision of Services.
The appellant contended that ‘commercial airtime’ had an ascertainable value (but also contended that its allocation was, in itself, valueless). Accordingly, counsel for the appellant submitted that if McDonald Murholme failed to make a payment at least three business days prior to the advertisement being aired, it would remain liable for ‘commercial airtime allocated’ and the respondent could bring a claim in damages for breach of contract.[61]
[61]The appellant accepted that any damages awarded for ‘commercial airtime allocated’ may be the same amount that was invoiced if it was not possible for the respondent to fill the vacant airtime at short notice.
In support of these submissions, the appellant relied on the following passages from Dixon J’s judgment in Automatic Fire Sprinklers Pty Ltd v Watson:[62]
In certain forms of executory contract where the promise of one party is to pay the other money in consideration of his transferring property, of his doing work, of his serving the former as his master, and, perhaps, of his providing other tangible things or definite services, the money to be paid is regarded as the price of or reward for the property or service when and so often as the transfer of the one or the performance of the other affords an executed consideration. In these contracts the promise to pay the price or reward is not construed as a simple obligation to pay a sum or sums at a future date supported solely by a consideration consisting in the corresponding promise to transfer the property, do the work, serve, or provide the things or services by the other party, so that a mere readiness and willingness on the one side of the latter to perform his part is enough to entitle him to the payments, notwithstanding that, whether owing to the fault of the former, or without fault on either side, the property is not transferred, the work is not done, the relation of master and servant ceases, or the things or services are not provided. The most familiar example is that of the sale of goods. There the common understanding of an agreement to sell is that it is the goods and not the promises to deliver that are to be paid for. The result is that, if the seller tenders goods in accordance with his contract but the buyer rejects them in breach of his contract, the seller cannot sue for the price; his remedy is for unliquidated damages for non-acceptance …
It is nothing to the point that the seller remains ready and willing to deliver the goods and refuses to treat the rejection as discharging the contract but, on the contrary, "keeps it open." Even so the price is not payable, for the reason that it is for the goods that the price is to be paid and until they are accepted there is no indebtedness. It is, of course, open to contracting parties to make what agreement they like about the matter. They may, if they choose, contract for payment of a sum certain at a time certain and make it clear that the payment is independent of the transfer of the goods. But that is not how an agreement to sell is ordinarily understood.[63]
[62](1946) 72 CLR 435 (‘Automatic Fire Sprinklers’).
[63](1946) 72 CLR 435, at 463-464.
Counsel for the appellant argued that these passages supported its interpretation by way of analogy, as they made clear that a provider of services will not earn a charge as a reward for services until those services are performed. In the present circumstances, it was submitted that this meant that the respondent needed to be more than just ready, willing and able to perform the Services. Rather, the Services needed to be provided in accordance with the contract. It was said that if the appellant failed to pay in advance for the advertisements, the Services could not be provided in accordance with the contract, and the respondent could not bring a claim for the charge — any remedy available to it would instead lie in damages for breach of contract. Accordingly, so the appellant contended, the respondent’s submission that the charge was earned as a result of the airtime being allocated was incorrect.[64]
[64]Transcript, 28/02/2018, at 21-22.
The respondent contended that the Payment Clause required payment for ‘Services’ which must be made three business days prior to the airing of advertisements. The consequence of a failure to make that payment is that ‘advertisements will not be aired’, rather than ‘Services will not be provided’. The appellant’s obligation to pay for the Services was not contingent or dependent on payment in advance in the manner asserted by the appellant. The respondent also took a broader view of ‘Services’ and submitted that, despite the words of the definition, the respondent’s performance of the ‘Services’ included the preparatory steps required to be undertaken in order to air the appellant’s advertisements, such as the allocation of airtime.
The respondent also submitted that the words ‘advertisements will not be aired’ are not restrictive of VRN’s rights; rather, they confer a remedy upon VRN enabling it to choose whether or not to air the advertisements following non-payment. If VRN aired the advertisements, then McDonald Murholme would remain liable to pay for the Services.
In response to the appellant’s reliance on Automatic Fire Sprinklers, the respondent emphasised the relevance of the following passage in Dixon J’s judgment in support of its interpretation:
… It is of, of course, open to contracting parties to make what agreement they like about the matter. They may, if they choose, contract for the payment of a sum at a time certain and make it clear that the payment is independent of the transfer of the goods.[65]
Ground 2:the learned Magistrate erred in finding that a debt was due for the price (the contracted sum) in circumstances where the price was not earned
[65]Automatic Fire Sprinklers (1946) 72 CLR 435, at 464.
The second ground advanced by the appellant was largely the same as ground 1.[66] The appellant submitted that the Payment Clause should be construed in the following manner:
[66]The appellant acknowledged the similarity and indicated that it was ‘advanced as a separate ground due to the uncertainty in discerning the reasoning of the learned Magistrate’: Appellant’s outline of written submissions, at [14].
(a) a client will be charged for the provision of Services;
(b) the Services were the advertisements;
(c) the price (the contracted sum) is not earned for allocating commercial airtime; and
(d) if payment was not made, advertisements would not be aired and the client would remain liable for the ‘commercial airtime allocated’ only.
On that interpretation, it was submitted that the respondent had not earned a charge for the provision of ‘Services’. Rather, it should have brought a claim for damages for ‘commercial airtime allocated’. Accordingly, it was said, the learned Magistrate erred in concluding that the appellant was liable to pay a debt that was due for the price of the Services.
In response, VRN submitted that ground 2 was misconceived and premised on arguments that were not raised in the court below. It submitted that there was no difference between the contract sum (owed for Services performed) and the price for the allocation of airtime.[67]
Ground 3: the learned Magistrate erred in finding that an amount was due by the appellant in circumstances in which the condition for liability was not satisfied because the advertisements were aired
[67]Transcript, 28/02/2018, at 87 and 92.
Ground 3 was founded upon a strict interpretation of the words:
… If payment is not made, advertisements will not be aired and Client shall remain liable for commercial airtime allocated.
The appellant claimed that the Booking Agreement stipulated that when payment had not been made in advance:
(a) the ‘advertisements will not be aired’; and
(b) the client ‘shall remain liable for commercial airtime allocated’.
Counsel for the appellant submitted that on the proper construction of the Booking Agreement, any liability of McDonald Murholme for ‘commercial airtime allocated’ was conditional on the advertisements not being aired by the respondent. He said:
The respondent, to comply with its obligations when payment is not made, can do what it will but it cannot air the advertisements. It can play dead air, it can play commentators whomever they have on there, it can play other advertisements but it cannot play my client's advertisements. The liability for commercial air time allocated was conditional on my client's advertisements not being aired. The respondent aired the advertisements and so no liability arose.[68]
[68]Transcript, 28/02/2018, at 35-36.
Counsel contended that because the respondent had aired the advertisements in circumstances where the appellant had not paid in advance, the condition precedent for liability was not established and thus no liability arose. Accordingly, the appellant submitted that the learned Magistrate erred in finding that an amount was due by McDonald Murholme in circumstances where the condition for liability was not established. Similarly to grounds 1 and 2, the appellant submitted that this interpretation had the commercial virtue of encouraging the respondent to mitigate its losses. Counsel for the appellant said:
Now the commercial virtue of that construction, which says, "No payment if you go ahead and air the appellant's advertisements", the commercial virtue is that it encourages the respondent to mitigate. That it forces them to go out and find someone else to pay for the time. And mitigation is – embodies commercial virtue in that it encourages commerce. It prevents sharp practice in the context of employment. It discourages laziness. It prompts the respondent here to go out and be proactive in filling the slots.[69]
[69]Ibid, at 36.
The respondent submitted that this construction gave rise to a strained interpretation of the Booking Agreement, and that the words ‘and advertisements will not be aired’ are not in the nature of a condition precedent to payment by the appellant for Services performed by the respondent. Rather, it was said, the words give rise to a contractual remedy in favour of VRN.
Ground 4: the learned Magistrate erred in finding that a debt was owed by the appellant in circumstances in which the obligation to pay for the placed booking did not arise – because the pre-payment condition was not fulfilled, there was no offer capable of acceptance by running the advertisements
The final ground advanced by the appellant relies on the interplay between the Agreement Clause, the Payment Clause and the definitions of ‘Booking’ and ‘Services’ in the Booking Agreement. The appellant submitted that, whilst there was one overarching contract, being the Booking Agreement, each booking placed by McDonald Murholme constituted an offer to acquire a separate service on a particular day, on the terms set out in the standard terms and conditions. Accordingly, it was said the Booking Agreement was a ‘divisible contract consisting of an agglomeration of entire obligations.’[70]
[70]See G Williams, ‘Partial Performance of Entire Contracts’ (1941) 57 Law Quarterly Review 373, at 374.
Further, it was contended that the placement of each booking was an offer by McDonald Murholme to acquire advertisements subject to a condition, namely that payments be made in advance. It was submitted that the ‘offer’, in these circumstances, was an offer to acquire Services and pay for them three business days in advance. That offer was to be accepted by performance (i.e. it would be accepted by VRN running the advertisements). It was said that in the case of the subject advertisements, there had been no acceptance of that offer because, since McDonald Murholme had not made payment three business days prior to the scheduled time for airing the advertisements, the pre-payment condition was not fulfilled and so there was no longer any offer that could be accepted by performance. On that basis, the appellant submitted the learned Magistrate erred in finding that the appellant owed a debt to the respondent in circumstances where an obligation to pay had not arisen.
VRN submitted that ground 4 was not premised on arguments made in the court below. It also argued that the appellant’s offer to acquire advertising services was accepted at one of the following alternative times:
(a) when the appellant made the bookings set out in the schedule to the Booking Agreement by executing the document;
(b) when VRN allocated airtime for the appellant’s advertisements; or
(c) when VRN sent pre-time schedules to the appellant.
The proper construction of the Booking Agreement
As will be apparent, the proper construction of the Booking Agreement is central to each of the grounds of appeal raised by McDonald Murholme.
At the hearing of the appeal, counsel for the respective parties addressed the Court on matters of proper construction. While there was consensus as to the applicable principles and the approach to be taken by the Court, each party contended for a different construction.
Construing commercial contracts: relevant principles
In his reasons for judgment in Australian Broadcasting Commission v Australasian Performing Right Association Ltd,[71] Gibbs J commenced by reiterating (what his Honour referred to as) the ‘trite’ observation that the primary duty of a court in construing a written contract is ‘to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied.’[72] His Honour then proceeded to explain how the court should undertake that task of construing the contract, as follows:
Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate", to use the words from earlier authority cited in Locke v Dunlop [(1888) 39 Ch D 387, at p 393], which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case [(1880) 16 Ch D 681, at p 686]. Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co Ltd v Arcos Ltd [[1932] UKHL 2; (1932) 147 LT 503, at p 514], that the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [(1968) 118 CLR 429, at p 437]).[73]
[71](1973) 129 CLR 99.
[72]Ibid, at 109.
[73]Ibid, at 109-110.
More recently, in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[74] the High Court has reaffirmed that an objective approach is to be adopted in determining the rights and liabilities of parties to a contract.
[74](2015) 256 CLR 104 (‘Mount Bruce Mining’).
In their joint judgment in Mount Bruce Mining, French CJ, Nettle and Gordon JJ explained the approach to be adopted by courts when construing commercial contracts as follows:[75]
[75]Ibid, at 116-117 [46]-[52] (citations in original), cited with approval in State of Victoria v Tatts Group Limited (2016) 90 AJLR 392, at [51] (French CJ, Kiefel, Bell, Keane and Gordon JJ). See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 91 ALJR 486, at [16] (Kiefel, Bell and Gordon JJ), [73], [77] (Nettle J).
[46]The rights and liabilities of parties under a provision of a contract are determined objectively,[76] by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.[77]
[47]In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.[78] That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.[79]
[48]Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.[80]
[49]However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.[81] It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[50]Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.[82]
[51]Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”.[83] Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.[84]
[76]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 [35].
[77]CodelfaConstruction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350 (citing Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574), 352. See also Sir Anthony Mason, “Opening Address”, Journal of Contract Law, vol 25 (2009) 1, at p 3.
[78]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 [35].
[79]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657 [35].
[80]CodelfaConstruction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352. See also Sir Anthony Mason, “Opening Address”, Journal of Contract Law, vol 25 (2009) 1, at p 3.
[81]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 657 [35], citing CodelfaConstruction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350, in turn citing Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574.
[82]CodelfaConstruction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352; Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574.
[83]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 657 [35], citing Re Golden Key Ltd [2009] EWCA Civ 636 at [28].
[84]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 657 [35], citing Zhu v Treasurer (NSW) (2004) 218 CLR 530 at 559 [82].
In adopting an objective approach, the court will look to what a reasonable person in the position of the parties would have understood the contract to mean. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[85] the High Court said ‘[w]hat matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe’[86] and that normally requires ‘consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.’[87] A few years later, in Electricity Generation Corporation v Woodside Energy Ltd,[88] a differently constituted High Court also reiterated and endorsed the view expressed by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW)[89] that the ascertainment or understanding of the commercial purpose or objects of the contract ‘is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”’.[90] In their joint judgment in Electricity Generation Corporation, French CJ, Hayne, Crennan and Kiefel JJ explained that a commercial contract should be construed by considering ‘the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract’[91] so as to avoid arriving at a result that could not have been intended. Further, their Honours endorsed the observations of Arden LJ in Re Golden Key Ltd (in rec)[92] to the effect that a court is entitled to approach the task of interpreting a commercial contract ‘on the assumption “that the parties … intended to produce a commercial result”’ and stated that a court is to construe a commercial contract ‘so as to avoid it “making commercial nonsense or working commercial inconvenience.”’[93]
[85](2004) 219 CLR 165 (‘Alphapharm’).
[86]Ibid, at 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
[87]Ibid. See also Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, at 461-462 [22].
[88](2014) 251 CLR 640 (‘Electricity Generation Corporation’).
[89](1982) 149 CLR 337 (‘Codelfa Construction’).
[90]Electricity Generation Corporation (2014) 251 CLR 640, at 657 [35] (French CJ, Hayne, Crennan and Kiefel JJ), quoting Codelfa Construction (1982) 149 CLR 337, at 350 (Mason J).
[91]Electricity Generation Corporation (2014) 251 CLR 640, at 656-657 [35].
[92][2009] EWCA Civ 636, at [28].
[93]Electricity Generation Corporation (2014) 251 CLR 640, at 657 [35], citing Zhu v Treasurer (NSW) (2004) 218 CLR 530, at 559 [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).
It is unlikely that the parties could have intended that a client who does not have a credit account could effectively achieve a suspension of the operation of the Booking Agreement by not making payment for the next month’s booked slots at least three business days in advance, and without it communicating that fact to VRN. In my view, such a construction is untenable and would render the arrangement an uncommercial one. That is because for so long as the agreement remained on foot, VRN as supplier was required to be ready, willing and able to perform by broadcasting McDonald Murholme’s advertisements in the booked slots. If the appellant’s construction were adopted, it would have been open to McDonald Murholme at any time after its non-payment to re-invigorate, unilaterally, VRN’s obligation to air advertisements by making payment, but in the meantime, for so long as McDonald Murholme did not make payment, VRN would be required to take steps to mitigate its loss.
Further, in my view, the contentious words do not give rise to a ‘dependent obligation’ in the relevant sense. The modern approach to construction according to which obligations are construed as ‘dependent’ is discussed at some length by Leeming JA (with whom Basten and Ward JJA agreed) in Hillam v Iacullo.[110] As his Honour there explained, the question of whether obligations are ‘dependent’ or ‘independent’ is one of construction and depends upon the intention of the parties.[111] In that regard, Leeming JA endorsed[112] the approach taken by Megarry VC in Tito v Waddell (No 2):
If an instrument grants rights and also imposes obligations, the court must ascertain whether upon the true construction of the instrument it has granted merely qualified or conditional rights, the qualification or condition being the due observance of the obligations, or whether it has granted unqualified rights and imposed independent obligations. In construing the instrument, the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights. The question always must be one of the intention of the parties as gathered from the instrument as a whole.[113]
[110](2015) 90 NSWLR 422, at 441-444 [93]-[108].
[111]Ibid, at 441 [93], citing Burton v Palmer [1980] 2 NSWLR 878, at 895 [76].
[112]Hillam v Iacullo (2015) 90 NSWLR 422, at 441 [93].
[113][1977] Ch 106, at 297.
His Honour also referred with approval[114] to the approach taken by Jordan CJ (with the agreement of Stephen and Maxwell JJ) in Newcombe v Newcombe,[115] as followed and applied by Mahoney JA in Burton v Palmer.[116]
[114](2015) 90 NSWLR 422, at 442.
[115](1934) 34 SR(NSW) 446 at 450-451.
[116][1980] 2 NSWLR 878, at 895.
Newcombe v Newcombe was a case concerning a separation agreement entered into between a husband and wife, where each had agreed not to ‘molest’ the other. The husband had also promised to pay maintenance to the wife. When the wife sued him for money she alleged was due under the agreement, it was held that she had breached her promise not to molest her husband, and that gave rise to a need to consider whether the husband’s promise to pay maintenance was independent of or dependent upon the wife’s promise not to molest him. In addressing that issue, Jordan CJ stated:
Where each of two parties to an indenture makes a covenant with the other, and the two covenants are not in terms connected, the question may arise whether they are independent (in the sense that each party is bound to perform his covenant irrespectively of whether the other performs his) or dependent (in the sense that one party is not bound to perform, or to continue to perform, his covenant unless the other has performed, or does perform, his, previously or concurrently or subsequently). In the absence of express provision in the deed, recourse must be had to implication. … An implication of intention that the performance of one covenant shall be conditional on the performance of the other arises where the nature of the covenants is such that any breach of either of them would necessarily be regarded by reasonable men as absolving the other party from performing his covenant. But the question is in every case one of intention.[117]
[117](1934) 34 SR(NSW) 446 at 450-451 (citations omitted).
In Newcombe v Newcombe, the promises made by the husband and wife were held to be dependent, with the result that the wife received judgment for maintenance until the breach, but not thereafter.
In the later case of Burton v Palmer, the indebted parties entered into a contract with their creditor whereby they covenanted ‘to pay to the releasor the sum of $10,000 in full and final settlement of all moneys now due by them’.[118] By a separate clause (cl 3) the debtors were released from specified debts (in the order of $16,000). The debtors did not in fact pay the amount of $10,000 but they nevertheless sought to rely upon the release. Mahoney JA (with whom Hutley and Samuels JJA agreed in relation to this aspect of the appeal) concluded that the release in cl 3 did not operate finally to prevent the plaintiff from enforcing his rights unless he was paid the sum of $10,000.[119] As Leeming JA noted in Hillam v Iacullo:[120]
[118][1980] 2 NSWLR 878, 894 [72].
[119]Ibid, at 895 [75].
[120](2015) 90 NSWLR 422, at 442-443 [100]-[101] (citations omitted).
[100]… Mahoney JA approached the matter in two ways. First, he had regard to the surrounding circumstances, in accordance with what Jordan CJ had said in Newcombe v Newcombe, … and stated that the “genesis” of the release was that the plaintiff should accept $10,000 in full settlement of the debt, and that the “aim” of the transaction was to provide that $10,000, if paid, should be accepted as such settlement. He said at 895 [76]:
[76]That for which the plaintiff’s obligations under cl 3 were to be given was not a promise but the actual payment of $10,000. Knowing these matters, the “reasonable men” to whom Jordan CJ referred, would, in my opinion, necessarily conclude that it was the intention of the parties that cl 3 was to have effective operation only upon the actual payment of that sum.
[101]His Honour reached the same conclusion having regard to what appeared on the face of the document, on the basis that:
[78]the releasees’ obligations to pay $10,000 were the sole consideration for the plaintiff’s obligations in cl 3, and this has been seen as supporting the inference that the parties intended that the obligations should be mutually dependent.
In Hillam v Iacullo, Mr and Mrs Iacullo had entered into a succession of agreements with Mr Hillam whereby they agreed to lend him money. The first agreement was for the sum of $200,000, the second was for an additional sum of $155,000 (albeit that it also dealt with the initial advance under the first agreement), and the third was for a further sum of $100,000 (albeit that it also dealt with the earlier advances made under the first and second agreements). Each loan agreement had the same period, interest rate and repayment date, and required Mr Hillam to make an ‘uplift’ payment of double the principal amount in either money or shares in a named company. The third loan agreement also required Mr Hillam to provide Mr and Mrs Iacullo with a charge over another company to secure ‘the amount of the loan’ within a reasonable time (cl 4.4).
The parties performed their respective obligations under the third loan agreement save in three respects: first, having initially transferred the sum of $25,000 to Mr Hillam, Mr and Mrs Iacullo never actually transferred the final tranche of $75,000 to him; second, Mr Hillam never provided Mr and Mrs Iacullo with the promised charge; and third, Mr Hillam never paid the uplift. The position taken by Mr and Mrs Iacullo was that they would only provide the additional $75,000 if Mr Hillam first provided the security contemplated by cl 4.4. On the appeal, Mr Hillam submitted that, by failing to provide the final tranche of $75,000, Mr and Mrs Iacullo were in breach, such that he was not required to provide the charge, and they could not enforce the right to the uplift of $910,000.
Leeming JA observed that Mr and Mrs Iacullo’s entitlement to be paid $910,000 turned purely on questions of contract, and turned on whether the obligations in cl 2.1 (which provided for the making of the ‘Loan’[121]), and cl 4.3 (to pay the $910,000 uplift[122]) were independent or dependent:
Was Mr Hillam’s obligation to pay that amount dependent upon Mr and Mrs Iacullo having complied with their obligation to advance the final $75,000? Or were they independent obligations?[123]
[121]Clause 2.1 provided: ‘The Lender will advance to the Borrower the Loan on the date of this Agreement.’
[122]Clause 4.3 provided: In the event that the Borrower is unable to effect the transfer of shares in Carpentaria Exploration Limited as provided in Clause 4.2, on or before 12 January, 2012, the Borrower shall pay to the Lenders the sum of $910,000, together with interest as provided in Clause 3, which shall accrue on the said sum of $910,000 as and from 12 January, 2012, until payment of the said sum.
[123](2015) 90 NSWLR 422, at 440 [92].
His Honour found that while cll 2.1 and 4.3 were not expressly linked, they were nevertheless connected in two ways. He said:
[104]… First, cl 2.1 provides for the making of the “Loan”, and cl 4 is headed “Repayment and Prepayment”. The obligations in cl 4.2 and cl 4.3 accrued at the same time as the obligation to repay the “Loan”. The third loan agreement is to be read as a whole and a natural reading of provisions in a section headed “Repayment and Prepayment” is that they are dependent upon the performance of the obligations in cl 2 to make a loan.
[105] Secondly, there is the obvious commercial link. The obligation to provide shares to the value of $910,000, and in lieu thereof that amount of money, was calculated so as to be double the amount lent. The same provision was made in relation to the first and second loan agreements. The “genesis” or “aim” of the transaction was clear: Mr and Mrs Iacullo promised to lend a specified amount of money, to be repaid with interest together with an uplift equal to double the amount promised to be lent.
In those circumstances, and against the background of the instructive judgment of Jordan CJ in Newcombe v Newcombe, as followed and applied by Mahoney JA in Burton v Palmer, his Honour found that it ‘was not open to Mr and Mrs Iacullo to require Mr Hillam to pay them an uplift of double the promised $455,000 when they for their part had been unwilling to lend all of that amount on the promised terms.’[124] In reaching that view he stated:
To borrow the language of Jordan CJ and Mahoney JA, no “reasonable” people would “necessarily conclude” that it was the parties’ intention that the “uplift” of $910,000 should be payable in circumstances where the lenders had failed to advance the whole of the $455,000 on which it was based. I respectfully agree with the primary judge in this respect.[125]
[124](2015) 90 NSWLR 422, at 443 [106].
[125]Ibid.
Turing to the present case, on its proper construction, the primary obligation of McDonald Murholme under the Booking Agreement was to pay the amounts invoiced by VRN for the provision of Services at the rates set out in the Booking Agreement. McDonald Murholme agreed that it would pay the requisite amounts monthly in advance. If it wished to terminate the agreement, and bring the broadcast of its booked advertisements to an end, it was required to give 28 days’ notice in writing to VRN. But for so long as the Services were provided each month, by VRN airing in the allocated time slots the advertisements that McDonald Murholme had booked, McDonald Murholme remained liable as principal debtor for payment of the amounts invoiced. The primary obligation of VRN on the other hand, was to air McDonald Murholme’s advertisements in the slots it had booked, for which it would receive the agreed fee.
The construction advanced by the appellant, whereby it could effectively sidestep its obligation in any particular month by simply failing to make the requisite payment in advance, is patently unworkable. Such a construction would render the contract uncommercial, and thus it is unlikely to have been intended by reasonable persons in the position of the parties. In my view, no ‘reasonable people’ in the position of the parties would ‘necessarily conclude’ that it was the parties’ intention that a client without a credit account could effectively suspend the operation of the Booking Agreement by not making payment for the next month’s booked slots at least three business days in advance, potentially without communicating that fact to VRN, and leave open the prospect that it might later, at its whim, re-invigorate VRN’s obligation to air advertisements by making payment. That is because, in the absence of a notice of termination, VRN was required to proceed on the basis that the client wished to continue with the advertising schedule it had booked, and be ready, willing and able to perform its contractual obligations by airing the advertisements. But once payment was not made at least three business days before the scheduled broadcast, whether deliberately or through inadvertence, the appellant’s construction would require that VRN not proceed to air the booked advertisements but instead take immediate steps to mitigate its loss and re-allocate the booked slots until such (unspecified) time as the client might change tack, make payment and thereby require its advertisements to be aired once again in the booked slots.
Accordingly, if, notwithstanding the view I have expressed to the effect that the bespoke payment-in-advance arrangement agreed between the parties prevailed, the words in the standard Payment Clause ‘advertisements will not be aired and Client shall remain liable for commercial airtime allocated’ were to have any operation in the present case, I consider that when viewed in the context of the entire Booking Agreement, those words would be understood by reasonable persons in the position of the parties as something in the nature of an in terrorem statement directed to the client, rather than creating any enforceable or dependent obligation. That is to say, the inclusion of those words in the Payment Clause simply serves to encourage the client to make payment in time by threatening the non-airing of the advertisements if payment is not made, while noting that liability for the ‘commercial airtime allocated’ remains. This statement does not, however, affect the client’s primary obligation to pay for the Services performed by VRN in accordance with the Booking Agreement. The learned Magistrate reached the same conclusion (emphasis added):[126]
HIS HONOUR: It's - no, it's a remedy afforded to the plaintiff. If you don't pay up, you don't broadcast the ads.
…
HIS HONOUR: We will simply make you pay for the time. In other words, it's basically a way of saying to them well look this is an inducement to pay what you should, because if you don't, it's still going to be payable for the time, but you're not going to get your ads.
[126]Transcript, 13/06/2017, at 152-153.
In any event, VRN did perform the Services and having done so, it claimed the amounts McDonald Murholme had agreed to pay. It did not seek damages for ‘commercial airtime allocated’. In circumstances where no notice of termination had been given, VRN aired the booked advertisements, and it invoiced McDonald Murholme for the advertisements so aired,[127] McDonald Murholme remained ‘liable as principal debtor for payment of amounts invoiced by the Supplier [VRN]’, notwithstanding that it had not made payment three business days prior to the advertisements being aired.
[127]The tendered invoices, upon which VRN sued, were all generated after the advertisements were aired: Exhibit JLS-8. See also Transcript, 28/02/2018, at 64.
This position accords with the findings made by the learned Magistrate where, for example, his Honour found (emphasis added):
HIS HONOUR: … clearly under this agreement if you don’t pay, that’s if you agree to pay cash in advance basically within three days, they have the right not to run the ads but they retain the right to claim the money off you according to the agreement unless you give them notice of termination operating the 28 day period of cancellation.[128]
…
HIS HONOUR: And - and - and client, not or client or anything else. And client shall remain liable for commercial airtime allocated. By inference, necessary because two of those ads which were not aired, right? So you can either get your money's worth or they can get your money if you don't pay up in advance as you promised, all right? That's plainly what it says.
It makes you liable. Until such time as you pay they don't have to air those ads but they can continue to charge you until you give them notice of cancellation of 28 days. On one view of it, they could have kept charging you for the entire currency of this contract. They didn't have to resile after three months at all …[129]
[128]Transcript, 13/06/2017, at 106.
[129]Ibid, at 108.
Conclusion
Grounds 1 to 3
For the reasons I have set out above, grounds 1 to 3 must fail. In my view, the learned Magistrate did not err in finding that McDonald Murholme remained liable to pay the invoiced amounts for its booked advertisements in circumstances where:
(a) McDonald Murholme failed to pay for the advertisements three business days prior to them being aired;
(b) McDonald Murholme gave no notice of termination; and
(c) VRN continued to air the advertisements.
Ground 4
In my view, ground 4 must also fail, essentially for the reasons advanced by the respondent.
The first clause of the standard terms (which was headed ‘Agreement’) provided that any ‘Booking’ placed by the Client with the Supplier ‘shall constitute an offer by Client to acquire Services on the terms set out in these Standard Terms and Conditions and in the Booking Agreement.’
The footer of the schedule of broadcasting dates states:
This Booking Agreement is confirmation of the Services to be provided by the Supplier and paid for by the Client.
…
THE CLIENT CONFIRMS HAVING READ THE STANDARD TERMS AND CONDITIONS ATTACHED TO THIS BOOKING AGREEMENT WHICH FORM PART OF THE AGREEMENT BETWEEN THE SUPPLIER AND THE CLIENT
Through ground 4, the appellant advances a construction that, in my view, is untenable having regard to the language of the Booking Agreement. The appellant contends that there is ‘one enduring, overarching contract’ — a ‘divisible contract consisting of an agglomeration of entire obligations’ — where each new booking is an offer ‘to acquire a separate service on a particular day.’[130] It submits that the offer made by McDonald Murholme was ‘to acquire services and pay three days in advance’ and was one that was ‘to be accepted by performance: that is, the running of the advertisement.’[131] The appellant says that in the present case, however, because the conditional part of the offer — the pre-payment — was not fulfilled, there was no offer that was capable of acceptance by VRN by running the advertisements, and accordingly, no obligation arose under the contract to pay for the placed booking.[132]
[130]Appellant’s outline of submissions, at [20].
[131]Ibid, at [22].
[132]Ibid.
The respondent took issue with ground 4, noting at the outset that it was not premised on arguments that were made below, and in circumstances where Mr McDonald as director of the appellant had accepted that it was bound by the terms of the Booking Agreement.[133] As to the merits, VRN submitted that McDonald Murholme’s offer to acquire advertising services was accepted when the bookings set out in the schedule were placed; alternatively, when the airtime was allocated by VRN; or in the further alternative, when the pre-time schedules were circulated by VRN to McDonald Murholme. In response, McDonald Murholme contended that none of these acts were acceptance as contemplated by the contract. Rather, it said, performance — ‘namely by airing the advertisements’ — was the only means of acceptance, so that if McDonald Murholme had not paid in advance, the offer was withdrawn before acceptance could occur, and McDonald Murholme could not be obliged to pay for a placed booking.[134]
[133]See the Salveson affidavit, at [4].
[134]See appellant’s submissions in reply, at [14].
In my view, when the Booking Agreement is read and construed as a whole, it is clear that the appellant’s offer to acquire services from the respondent was accepted at the time when either:
(a) the bookings as set out in the schedule were made by the appellant; or
(b) the Booking Agreement was signed by the parties.
Once the Booking Agreement was signed, it stood as confirmation of the services that were to be provided by VRN to McDonald Murholme and the amounts that McDonald Murholme was to pay for those services. If McDonald Murholme had made timely payment for its booked advertisements, it would not have been open to VRN to refuse to broadcast those advertisements on the basis that it did not wish to accept McDonald Murholme’s ‘offer’; the offer having already been accepted. Equally, once the Booking Agreement had been signed, it was not open to McDonald Murholme to withdraw its offer to acquire advertising services, whether by failing to make payment in advance or otherwise, again, because the offer had already been accepted. If McDonald Murholme no longer wished to have its booked advertisements go to air, its recourse was to terminate the Booking Agreement by giving 28 days’ notice to VRN.
Ancillary matters
Several ancillary matters were raised by the respective parties on the appeal. I deal with those issues briefly below.
Arguments not raised before the Magistrate
The respondent submitted that the appellant was, in effect, asking this court to make factual assumptions that were not made at trial. It also claimed that the arguments raised by the appellant in this appeal were not clearly put to the Magistrate.[135] To take one example, counsel for the respondent submitted that the learned Magistrate effectively found that VRN provided Services under the contract by airing the advertisements,[136] and while McDonald Murholme did not object to this finding at the time, on appeal it rejected the view that Services had been provided, by the airing of the advertisements, the prior allocation of airtime or otherwise. Counsel for the respondent submitted that VRN would suffer prejudice if McDonald Murholme was permitted to change its case in such a way on appeal.
[135]Transcript, 28/02/2018, at 50.
[136]See, e.g., Transcript 14/06/2017, at 177-178; Transcript 13/06/2017, at 123.
Recently, in Harplex Pty Ltd v Konstandellos,[137] the Victorian Court of Appeal noted that the law as to the raising on appeal of a ground not argued at trial is ‘not in doubt’,[138] citing the following passage from the joint judgment of Gibbs CJ, Wilson, Brennan and Dawson JJ in Coulton v Holcombe:
[137][2018] VSCA 67 (‘Harplex’). See also Commissioner of State Revenue v Mondous [2018] VSCA 185, at [79] (McLeish JA, with whom McDonald AJA agreed).
[138]Harplex [2018] VSCA 67, at [66] (McLeish and Hargrave JJA and McDonald AJA).
In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd [(1950) 81 CLR 418, at 438]; Bloemen v The Commonwealth [(1975) 49 ALJR 219]. In O’Brien v Komesaroff [(1982) 150 CLR 310, at 319], Mason J, in a judgment in which the other members of the Court concurred, said:
In some cases when a question of law is raised for the first time in an ultimate court of appeal, as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided … However, this is not such a case. The facts are not admitted nor are they beyond controversy.
…
In our opinion, no distinction is to be drawn in the application of these principles between an intermediate court of appeal and an ultimate court of appeal. Finally, in a recent decision of six justices of this Court (University of Wollongong v Metwally (No 2) [(1985) 60 ALR 68, at 71]) the Court said:
It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[139]
[139](1986) 162 CLR 1, 7-8.
Upon review of the material before the learned Magistrate and the transcript of that hearing it is clear that, apart from the arguments advanced in the appellant’s ground 4, the substance of the appellant’s arguments on appeal were raised before his Honour[140] Although the arguments were not as clearly or coherently formulated below, that reflects the impact on the course of argument before his Honour of the question whether the Booking Agreement had been varied by oral terms, which was then a live issue. As the respondent was on notice of the gravamen of the appellant’s arguments made in support of grounds 1 to 3, I find that it has not been prejudiced by the advancement of those arguments on appeal. As to ground 4, I have found in favour of the respondent, so it is unnecessary to answer this question. However, I note that the issue raised in ground 4 is essentially one of construction, and it is unclear what additional evidence would have been led by the respondent if the issue had been raised before the Magistrate.
[140]See, e.g., transcript, 13/06/2017, 19-20, 22-23, 112-113, 125 and 144-145.
Presumption in favour of correctness of the decision below
The respondent also submitted that there was a presumption in favour of the correctness of the Magistrate’s decision. Citing the reasons of Hedigan J in Urban No 1 Co-operative Society v Kilavus,[141] the respondent contended that an appellate court is not free to act upon its own conclusions but may only alter the decision of the tribunal at first instance if it has acted on a wrong principle of law, misapprehended the facts or made a wholly erroneous assessment of the relevant issues. Furthermore, it was said that there is a strong presumption in favour of the correctness of the decision appealed from and that the general rule is that the decision should be affirmed unless the court is satisfied that the decision is clearly wrong.
[141][1993] 2 VR 201 (‘Urban’), at 211.
In response, counsel for the appellant noted that Urban concerned an appeal from a judgment based on a discretion. That was said to differentiate it from cases where appeals had been brought on the basis of the proper interpretation of a contract.[142]
[142]Transcript, 28/02/2018, 11.
Given that I have found no error in the learned Magistrate’s decision, it is unnecessary to determine this issue.
Conclusion
For the reasons I have given, the appeal should be dismissed. I will hear the parties on the appropriate form of final orders to be made.
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