Moraitis Fresh Packaging (NSW) Pty Limited v Fresh Express Australia Pty Limited

[2007] NSWSC 626

Reported Decision: (2007) ANZ Conv R 383

New South Wales

Supreme Court

CITATION:	Moraitis Fresh Packaging (NSW) Pty Limited v Fresh Express Australia Pty Limited [2007] NSWSC 626
HEARING DATE(S):	5 and 6 June 2007
JUDGMENT DATE :	14 June 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Plaintiff’s claim for specific performance dismissed; claim for declaration as to construction of right of first refusal clause upheld.
CATCHWORDS:	CONTRACTS– Construction and interpretation – Right of first refusal – Right to purchase market stands – Whether right of first refusal could be for predetermined price – Whether obvious mistake or absurd result – Right of first refusal could be for predetermined price – Defendant’s right in market stands an assignable right under licence agreement - CONTRACTS – Offer and acceptance – Right of first refusal – Contract specified right of first refusal to be exercised by providing cheque to the “buyer” – Plaintiff made out cheque to wrong party – Whether plaintiff exercised right of first refusal – Strict adherence to specified method is necessary to exercise the right – Plaintiff did not exercise the right - EQUITY– Equitable remedies – Mistake – Rectification – Cross-claimant failed to prove that the agreement did not set out the common intention of the parties
LEGISLATION CITED:	Evidence Act 1995
CASES CITED:	Fitzgerald v Masters (1956) 95 CLR 420 Watson v Phipps (1985) 60 ALJR 297
PARTIES:	Moraitis Fresh Packaging (NSW) Pty Limited (Plaintiff/Cross-defendant) Fresh Express Australia Pty Limited (Defendant/First Cross-claimant) Cranvale Pty Limited (Second Cross-claimant)
FILE NUMBER(S):	SC 6423 of 2006
COUNSEL:	Mr J Whittle SC with him Mr B Burke (Plaintiff/Cross-Defendant) Mr R.J. Ellicott QC with him Mr Robert Newton (Defendant/Cross-Claimants)
SOLICITORS:	Hicksons (Plaintiff/Cross-Defendant) David Legal (Defendant/Cross-Claimants)

- 16 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

THURSDAY 14 JUNE 2007

6423/06 MORAITIS FRESH PACKAGING (NSW) PTY LIMITED v FRESH EXPRESS AUSTRALIA LIMITED

JUDGMENT

1 HIS HONOUR: The main question for decision in this case is whether the plaintiff has validly exercised a right of first refusal to purchase from the defendant a right to occupy Stands 5 and 6 of Shed A at the Flemington markets. The decision involves questions of the proper construction of a contract dated 5 June 1996 between the parties to the cross-claim and a claim for rectification of that contract.

FACTS

2 At the relevant time in 1996, the plaintiff, Moraitis Fresh Packaging (NSW) Pty Limited, which I will call Moraitis, was called Fresh Farm Produce Pty Limited. The defendant, Fresh Express Australia Pty Limited (Fresh Express) was a company formed for the purpose of being trustee of a unit trust in which the unit holders were Moraitis and Cranvale Holdings Pty Limited in equal shares. Mr Paul Moraitis was a director of Moraitis from 1982 until 2006. He was a friend of Mr Andrew Musumeci who is now the sole director of Fresh Express and a director of Cranvale with his father. The Moraitis and Musumeci interests decided to set up a new venture for the purpose of what was described as wholesale of fruit and vegetable products specialising in what Mr Moraitis called “soft produce” such as rockmelons, capsicums, egg plants, mangoes and lychees, and to set up a unit trust for that purpose in September 1994. At that time the trust purchased the right to occupy Stand 52 in A Shed and it entered into various financial obligations for that purpose. In 1995 Fresh Express and another Moraitis company agreed to purchase the rights to occupy Stands 5 and 6 for a purchase price of $500,000. The Moraitis company bought a two-thirds interest in those stands and Fresh Express a one-third interest. At the same time that this was achieved the Moraitis company, by way of swap, purchased the rights to Stand 52 from Fresh Express and sold to Fresh Express its two-thirds interest in Stands 5 and 6 so that Fresh Express then held the whole of the rights to Stands 5 and 6 and the units were held by Moraitis and Cranvale equally.

3 For some unexplained reason, the friendly relationship between Paul Moraitis and Musumeci was beginning to break down and although the Fresh Express business seems to have been quite profitable for the year ended 30 June 1995, it began to suffer losses in the early months of 1996.

4 Fresh Express was funded originally by $30,000 put in by each unit holder ,or perhaps $30,300 by Moraitis and $30,000 by Cranvale, as loan funds. It was also funded by additional loan funds by Moraitis, which was added to the $30,000 or $30,300 original seeding capital contributed by Moraitis.

5 At the beginning of June 1996 or shortly before that date, there was a conversation between Musumeci and Paul Moraitis under which it was suggested that the best course was for one or the other to buy the other out. I will return to that conversation when dealing with the claim for rectification but, as a result of the discussion, there were executed two agreements dated 5 June 1996.

6 Under the first of those agreements Cranvale purchased from Moraitis the units held by Moraitis in the trust. The agreement provided for a sale price of $50,005 with a completion payment of $5 and a balance of $50,000. The agreement was conditional upon Moraitis being released from any liability in respect of any debt or obligation incurred by Fresh Express. In other words, it was to be released from its guarantees. It was also conditional upon the Moraitis representatives resigning from positions with the trust company, and on Sydney Market Authority approving the arrangements. In a somewhat strange clause 5, the parties acknowledged representations made by Cranvale to Moraitis that there would be not any future transfers or changes in the capital of Fresh Express or of Cranvale or any future allotment of shares in those companies nor any future allotment of units in the unit trust or transfer of units in the trust. Clause 7 provided that the balance, namely $50,000, would become payable if there were any breach of those representations or of obligations under the collateral deed to which I will come.

7 Although Musumeci was not quite clear about this, I find that the $5 was paid but the balance of $50,000 has never been paid nor required to be paid.

8 A second deed of the same date is the one of significance in this action. That was a deed under which the same parties, namely, Moraitis, Fresh Express and Cranvale, according to the recital had agreed to resolve all financial matters of the trust and to evidence certain other arrangements. Paragraph 1 of the deed provided that unless the contrary intention appeared (a) "the amount" shall mean the amount of $85,971. Clauses 2, 3 and 4 of that deed are as follows:

2. The Trustee acknowledges the amount represents liabilities or entitlements due to the Seller from the trust. The Trustee shall pay the Seller the amount in full free of deduction. In return for the payment of the amount the Seller agrees it shall not make any further claim from the Trustee for any liability or entitlement due to it or claimed to be due to it and shall release the Trustee accordingly from any such liabilities or obligation.
3. The Trustee has the right to occupy the stand which it does for the benefit of the trust. In return for the Seller entering this Deed the Trustee grants to it the right of first refusal to re-purchase the stand on the terms expressed in this clause. The Trustee covenants and agrees that it shall not sell or assign or agree to sell or assign any interest in or right to occupy the stand to any other party without first having offered to transfer this right to the Seller. In the event the Trustee wishes to assign its right to occupy the stand to any other party it must first give written notice to the Seller of its intention to sell and assign this right in the stand. This notice shall be deemed an unconditional offer to the Seller to repurchase the right to occupy the stand. The Seller shall be entitled to accept the offer from the Trustee within twenty eight (28) days from the date of the notice by delivering a bank cheque drawn to the Buyer for the amount. The amount shall be the full consideration due and payable by the Seller to the Trustee to re-purchase the right to occupy the stand and the Trustee shall on receipt of the amount transfer and assign all its right and interest in the stand to the Seller. If the Seller does not accept the offer in accordance with this clause the Buyer shall not be bound further by this clause.
…

6. This Deed is conditional upon and interdependent with the collateral deed. This deed shall become operative;

(a) on the completion of the collateral deed, and
(b) upon receipt by the Seller of the amount.

9 There are other provisions which are not significant for in deciding the dispute here. In paragraph 32 of his affidavit of 1 June 2007, Paul Moraitis gives his version of the conversation which took place prior to the agreement, which is as follows:

32. I do not remember when I spoke to Andrew Musumeci again about his proposal, but it would have been during the week after our initial conversation. I recall that I said to him words to the effect:

"We'll sell our interest in Fresh Express to you. I want to keep this friendly."

I agree I then said words to the effect:

"You take over all the liabilities and guarantees and pay us out the amount of our investment and money owing to us."

I then said words to the effect:

"You can keep the Fresh Express name and logo and we won't take anything for the goodwill. But, if you ever want to sell the Stands, we have the right to buy them back at a price we agree on as part of this deal".
Mr Musumeci set out his version in his affidavit of 22 January 2007 in paragraph 8, which is as follows:

8. On about the following day or shortly thereafter Paul and I had a further conversation in which words to the following effect were spoken

Paul : "OK we will sell to you. You take over all the liabilities and guarantees and pay us out the amount of our investment and money owing to us. If you sell out we want a first right of refusal to buy on what someone else is prepared to offer."
Myself: "Do we need to get the lawyers and accountants to document this?"
Paul: “I'll get the lawyer to send you the paperwork."

Both were cross-examined but each stuck to his version. Moraitis did not remember whether or not he had read the agreement. He could not recall what instructions, if any, he had given to his solicitor, Mr Hand. He thought the company secretary might have given the instructions. Moraitis denied the words "first refusal" were mentioned. He said his father insisted on a right to reacquire the stand at a predetermined price. After the conversation it seems Mr David Hand, solicitor for Moraitis, prepared a draft deed which in its first form covered both the sale of the units and the settlement of accounts between Fresh Express and the Moraitis interests.

10 That document did not contain any definition of the "the amount" but contained a definition of "completion of payment" which was defined as the sum of $85,971. For some reason it was decided to separate the 2 transactions but little turns on that. Neither witness could say he had read the final documents before they were signed.

11 Fresh Express continued to trade at the stands for over ten years. It is apparent that it got into financial difficulties at some stage as a receiver was appointed to the assets by a bank but apart from certain matters of credit, nothing turns on that. Musumeci says that some time in November 2006 he had a number of offers for the stands. It is apparent word must have got out about this because Messrs Hicksons, solicitors for the Moraitis interests, wrote on 29 November 2006 to Musumeci expressing concerns about the proposals to sell Stands 5 and 6, sending a copy of the deed dated 5 June 1996 and referring to clause 3 of that deed.

12 In a conversation shortly thereafter between the solicitors, Mr David on behalf of Musumeci said that there must have been a mistake in the deed. On 11 December 2006, Messrs David Legal acting for Fresh Express wrote to Moraitis in the following terms:

The Secretary
Moraitis Fresh Packaging (NSW) Pty Limited
6 Carter Street,
HOMEBUSH BAY NSW 2127 BY COURIER

Dear Sir,

RE: FRESH EXPRESS AUSTRALIA PTY LIMITED OFFER TO SELL TO MORAITIS FRESH PACKAGING (NSW) PTY LIMITED STANDS 5 & 6 "A" SHED SYDNEY MARKETS


We act on behalf of Fresh Express Australia Pty Limited.

We are instructed by our client to offer to sell to your client, Moraitis Fresh Packaging (NSW) Pty Limited, the right to become the licensee from Sydney Market Authority of Stands 5 & 6 "A" Shed at Sydney Markets,

You have from the date of this letter until 9 January 2007 to execute the agreement enclosed herein and provide a bank cheque in favour of our client for the sum of $1,800,000.00 plus a further sum of $180,000.0 for GST.

If you are not in a position to accept our client's offer please notify us in writing as a matter of urgency.

Yours faithfully
DAVID LEGAL
per:
FRED DAVID

13 It is not necessary to set out the full draft agreement attached but clauses 2, 3 and 4 of the draft were as follows:

2. The Vendor hereby agrees to grant the right to the Purchaser to apply to SMA for and receive a grant of a fresh licence to occupy the Premises upon payment to the Vendor of a consideration of One Million Eight Hundred Thousand dollars ($1,800,000.00) ("the Fee").

3. The Purchaser hereby agrees to pay the Fee on or prior to 9 January 2007 or such sooner date as the SMA grants a fresh licence to the Purchaser to occupy the Premises

4. In the event the Purchaser fails to pay the said Fee, this Agreement shall have no effect.

Messrs Hicksons replied referring to the terms of the 5 June 1996 agreement stating that the amount payable as the right of first refusal was $85,971.

14 In paragraph 18 of his affidavit of 20 December 2 he had with Mr David, including the following exchange:

Hall: "Can you confirm that your client is proposing to sell the stands to a purchaser?"
David: "There is a potential purchaser and we've made the same offer to your client as was made to my client."

15 Paragraph 10 of the statement of claim was as follows:

10. On 19 December 2006 the Defendant informed the Plaintiff that the Defendant considered the Letter to be an offer given pursuant to clause 3 of the Deed.
Particulars
Telephone conversation between the Plaintiff’s and the Defendant’s respective solicitors on 19 December 2006 at approximately 5.10 pm.

16 Paragraph 5 of the amended defence is as follows:

5. As to paragraph 10 of the statement of claim the defendant says that if clause 3 of the deed of 5 June 1996 were operative in its present form the letter of the defendant’s solicitors of 11 December 2006 would on the proper interpretation of clause 3 of the deed amount to an offer.

17 On 4 January 2007, Moraitis delivered to Fresh Express a cheque payable to Fresh Express in the sum of $85,971 which was returned without presentation on 19 January 2007.

18 The plaintiff says that it has accepted the offer of first right of refusal. Leaving aside the claim for rectification in response to this the defendant says:

A. That on the true construction of the deed "the amount" does not mean the sum of $85,971 but that on its proper construction clause 3 gives a right of first refusal to purchase at a price offered by another purchaser or a price acceptable to Fresh Express.

B That any other conclusion would be absurd because;

(i) the value of the stand in 1995 was approximately $500,000,
(ii) the right of first refusal was to operate indefinitely into the future when it could be expected the value of the stands would increase and a value of about $500,000 was accepted by Fresh Express in its accounts for the year ended 30 June 1995 and subsequently,
(iii) that there is no consideration which would account for the difference in the value of the stands and the sum of $85,971 and that in any event a contrary intention exists.

C. In the alternative the defendant says that Fresh Express does not own or hold any interest or right to occupy the stands which it could sell or assign because:


(i) its right to occupy the stand was at 5 June 1996 pursuant to the licence of the Sydney Market Authority,

(ii) that authority was dissolved in 1997 when its assets became vested in Sydney Markets Limited,

(iii) that from at least 2003 after Sydney Markets Limited had purchased the freehold of the site from of the government, Fresh Express held a share in Sydney Markets Limited stapled to the tradeable space and for any assignment to take place it was a requirement there be an assignment of both,

and that the only way in which an occupier of the stand could sell the business was to surrender the occupation to Sydney Markets Limited which could in its discretion grant a new licence so that Fresh Express could not itself assign the stand.

D. Finally the defendant says that the notice was an offer to sell for $1,800,000 and that in any event for acceptance it was necessary to deliver a bank cheque drawn to the buyer, namely Cranvale Holdings Pty Limited, and this was not done. Further, whether or not a surrender was required, there could be no effective assignment without the consent of Sydney Markets Limited.

19 By way of cross-claim, Fresh Express seeks a declaration which is really defensive to the plaintiff's claim but in addition, seeks rectification of clause 3 by: (a) adding the words "for an amount which the trustee is prepared to accept or some other person is willing to offer for the right to occupy the stand" after the word "seller” at the end of the third sentence, and, (b) by inserting the word "said" before the words "the amount" at the end of the sixth sentence.

CONSTRUCTION QUESTION

20 I consider the words of clause 2 to be quite clear. The amount is defined in clause 1 and in clause 2 it is acknowledged that the amount represents liabilities or entitlements due to the seller from the trust.

21 On the accounts, those liabilities or entitlements consisted of:

(a) a repayment of $30,300;

(b) the share of the profits for the year ended 30 June 1995 of $85,453 less the share of the losses up to 3 June 1996 of $28,882 giving a balance of $55,671.

22 The total of (a) and (b) is $85,971. These amounts are set out in the minutes of a meeting of Fresh Express of 3 June 1996, signed by Mr Musumeci where it was confirmed that Cranvale was acquiring all the units in Fresh Express unit trust for $5. What it really meant was that it was buying all those units not already held by it for that sum. The amount is also referred to in clause 6 of the deed which I have set out. I do not think it could be said that some contrary intention appears so that the defined meaning does not apply.

23 That, however, leaves the argument available that there is an obvious mistake because it is claimed that to read the words with their defined meaning would lead to an absurd result. This would require a finding that the argument of Mr Ellicott QC for Fresh Express was correct, namely that ordinarily a right of first refusal is a right to acquire at a price which some other purchaser is prepared to pay or a price which the vendor is prepared to accept and that this should be taken to be the meaning of the clause in question irrespective of the words "the right of first refusal to purchase the stand on the terms expressed in this clause". It is said that anything else would be absurd and in some ways unfair and therefore unintended because the value of the stands was about $500,000.

24 I consider this argument must also fail. At the start it must be remembered that the Moraitis units were acquired by Cranvale for $5, which was not their value. Secondly, I accept the evidence of Paul Moraitis which I have set out which meant whatever the value of the net assets, including goodwill, they were being acquired by the trustee for Cranvale at this stage for nothing. It is fair to say that the price at which the offer of the right of first refusal could be exercised might be surprising. It is not possible to say that by construing the words "the amount" as meaning $85,971 that brings about an absurd and obviously mistaken result. Nor, I think, can the argument succeed that a right of first refusal necessarily involves some price to be determined in the future. That may be normal but I can see no reason why there cannot be an agreement that a right of first refusal be at a fixed price. It is, of course, much the same as an option to purchase an asset at a fixed price but in this case the option does not arise unless and until the right of first refusal is triggered.

INTEREST IN OR RIGHT TO OCCUPY THE STAND

25 It is the right to occupy Stands 5 and 6 to which clause 3 is directed. In 1996 the Flemington Markets were controlled by Sydney Market Authority, a body constituted under the Sydney Market Authority Act 1968. The business of the Sydney Market Authority was sold to Sydney Markets Limited on 1 November 1997 pursuant to the Sydney Market Authority (Dissolution) Act 1997 at which stage Sydney Markets Limited took a head lease from the State of New South Wales. Sydney Markets Limited purchased the freehold from the state on 21 June 2002. The contract for sale the of the business, under which Stands 5 and 6 were purchased on 13 November 1995, contained a condition making agreement subject to and conditional upon the purchaser obtaining approval from the Sydney Market Authority to purchase the licence of the vendor for the use of Stand 5 and 6. Insofar as the rights under clause 3 in question are concerned, it must be taken that the parties were aware of the requirement to obtain the consent of the Authority. Under the terms of the present occupancy agreement, which according to the evidence is that applicable from 2003 but may have operated before that date, clause 3.1 gives to a licence holder an entitlement to one ordinary share in Sydney Markets Limited for each of the premises, which presumably means stands, held and provides in clause 3.2 that the premises are stapled to the share. Clause 5 relates to dealing with the premises. Clauses 5.1 and 5.2 are as follows:

5.1 No assignment
You must not assign, sublet, licence, part with possession of or otherwise deal with your Licence or the Premises unless you have the written approval of SML. You may mortgage or charge your Licence with the approval in writing of SML.
5.2 Sale of your business
If You wish to sell the business You conduct from the Premises, SML may, in its absolute discretion, accept a surrender of your Licence and grant to your purchaser a Licence for the Premises.

26 Clause 26.12 provides that the giving of consent is at the sole discretion of Sydney Markets Limited. The constitution of Sydney Markets Limited gives to a member an unrestricted right to transfer a share "provided that the share must be transferred with the tradeable space to which it is stapled". Although the agreement sent with the letter of offer to Moraitis envisaged surrender and application by the purchaser pursuant to clause 5.2 of the licence agreement, I do not consider the argument of Mr Ellicott ,raised by paragraph 3(d) of the defence, that Fresh Express did not own or hold any interest in the right to occupy the stands which it can sell or assign to be correct as I do not consider it correct that the plaintiff can only acquire a right to occupy the stands if the defendant surrenders its occupancy licence so that Sydney Markets Limited may grant a new licence to a purchaser. There is, I consider, a difference between assignment of the premises under clause 5.1 and sale of the business under clause 5.2 of the licence agreement, and assigning the licence to occupy the premises does not necessarily require the sale of the business conducted from those premises.

27 There is in evidence a response to an email from the plaintiff to Mr Spragg, at Sydney Markets Limited. The email from the plaintiff's solicitor asked the following question:

What is involved in assigning the licence? In that regard I understand that the licence is assigned rather than revoked and issued in the name of the new stand holder. I also understand that SML needs consent to the assignment and the transfer fees payable on that assignment.

The response to that was:

Yes. Assignment rather revocation and re-issue is the correct description. SML will only process the transfer when all outstanding moneys (eg rent, electricity, comply notices) are paid, including a consideration fee (2.5% of assessed $520,000 of one and a half module A5 to 6 which is $13,000 plus GST) and any make good, any mortgages discharged and there is no other impediment for the transferor or transferee.

28 This can only make sense if the word "than" is inserted between "rather" and "revocation" and the reply must, I think, be read on that basis. An agreement to assign imposes on both parties an obligation to do what is necessary to allow the assignment to take place and to co-operate in complying for any necessary consent. The argument about non-assignability fails.

WAS THE RIGHT OF FIRST REFUSAL EXERCISED?

29 Clause 3 sets out the method of acceptance of offer of first refusal, under which Moraitis must deliver a bank cheque drawn to the “buyer” for the “amount”. The buyer under the agreement is Cranvale Holdings Pty Limited. The bank cheque delivered was a cheque in favour of Fresh Express Australia. It was not in favour of Cranvale. I consider that the same position must apply to the exercise of a right of first refusal as to the exercise of an option. Where the method of taking up the right of refusal or exercise of the option is set out then strict adherence to that method is necessary. That would not mean the omission of the words, "Pty Limited" on the cheque would be a failure to adopt the correct method, but the position here is different. The letter from the solicitors acting for Fresh Express asked for a cheque for $1.8 million to be paid in favour of Fresh Express but that is not really to the point. If the letter amounted to an offer under clause 3, as it is claimed that it did on the pleadings (except it is not admitted that on a proper construction of the deed this meant the amount was $85,971), then to ensure a binding contract arose pursuant to the right of first refusal, it was necessary to comply with the terms of clause 3.

30 The solicitors in sending the letter were, I accept, the agent of Fresh Express but were not the agent of Cranvale Holdings Pty Limited which was a party to the agreement. Mr Whittle, Senior Counsel for Moraitis, argued that the words "drawn to the buyer" were a mistake and they should be read as "drawn to the trustee". In other words, he argued there was no need for rectification because this mistake was obvious. He said that it was obvious because Fresh Express as trustee held the occupation rights to the stands and because the clause provided that the amount was the full consideration payable by Moraitis to Fresh Express to purchase the right of occupation.

31 He also argued that the last sentence of clause 3 indicated the mistake because Cranvale as a buyer and unit holder was not bound by that clause. This is a matter of some difficulty but Cranvale was a party to the deed and although a cross-claimant for rectification yet not a defendant, Cranvale is the sole unit owner. It would not necessarily be a breach of trust by the trustee to direct the payment to the sole beneficiary.

32 This is not a claim for rectification and I do not think it could be said that there is an obvious mistake or that a literal construction is absurd (Fitzgerald v Masters (1956) 95 CLR 420 at 426; Watson v Phipps (1985) 63 ALR 321.) The position could have been different had Cranvale not been a party to the deed.

33 In these circumstances I find no contract arose as a result of the delivery of the cheque. I should add that in any event, I do not consider paragraph 5 of the defence amounts to an absolute admission. Rather it is an admission of a clause 3 offer only if the construction contended for by Mr Ellicott was correct which I have found it is not.

34 It is on that basis that the defence raised, which I have set out in this judgment, and paragraph 5 of the defence were allowed to stand together.

THE CROSS-CLAIM

35 In these circumstances it is not really necessary to deal further with the cross-claim except for the claim for rectification. Insofar as the cross-claim is for declarations which are really mirror defences to the plaintiff's claim, the cross-claim should be dismissed.

RECTIFICATION

36 I have set out the versions of the conversations as to the agreement on either side. An attack was made on the credit of Musumeci in that he said he had submitted a return as to the affairs of the company as a result of the receivership of Fresh Express which was not true. He said that he was required to sign the statement by the receiver in an incorrect form. That is not really true. This matter really went to whether or not certain amounts claimed due to Fresh Express by other Musumeci companies were properly included as receivables. The receiver had said that they were not, presumably having doubts as do whether or not they would be repaid. I think little turns on this.

37 There was another statement by Musumeci in his first affidavit in these proceedings which stated he had received no offers for the business. According to his oral evidence in these proceedings before me, this was not true and this does reflect on his credit.

38 There is no such attack on the credit of Paul Moraitis although I should say I did not form a particularly favourable impression of him in the witness box, mainly because of his constant requests for questions to be repeated, many of which were not difficult to answer. Not all of this, I think, could be explained by the period of ten years which has elapsed since the agreements were signed. Paul Moraitis adhered to his statement that the right to repurchase was to be at a fixed price and that his father had insisted on this. His father was not called. He had no memory of reading or of signing the agreement. Neither did Musumeci. Musumeci said that in the form in which it was signed it was contrary to the instructions he had given to his solicitor but he did not call his solicitor. He also said that the matter was discussed with his father who was not called.

39 Insofar as the sum is fixed it does accord with the draft that had been forwarded to Musumeci and which he delivered to his solicitor, at which time he said he gave his solicitor details of the arrangement. On this evidence, it could not be said that the cross-claimant has established that the written agreement does not, as far as clause 3 is concerned, set out the common intentions of the parties or of an agreement reached between them as is pleaded.

40 On the Moraitis version, the figure was not agreed during the conversation but was arrived at later. The furthest the evidence could go would be that it did not conform with Musumeci's intentions, or perhaps even his understanding, but I find that has not been established to be the position on the part of the cross-defendant.

41 While, bearing in mind the Evidence Act 1995, it may be unwise to say that convincing proof is necessary to succeed in a rectification claim, the evidence adduced does not satisfy the burden of proof on the cross-claimant. Failure to call his solicitor or his father is against the cross-claimant as it can be taken their evidence would not assist him.

42 While the same applies to the absence of Mr Nick Moraitis, it is the plaintiff who bears the burden and on the evidence the deed is as required by Mr Nick Moraitis. No claim for rectification was pressed on the ground of unilateral mistake, at least so far as the pleading is concerned. In any event, whilst there was some faint argument about this, there was no evidence that the mistake, so far as the Musumeci’s intention was concerned, was known to the Moraitis interests and purposely kept from the Musumeci interests.

CONCLUSION

43 It follows from this that the plaintiff is entitled to the declaration in claim 1 of the statement of claim but omitting the words "in the events which have happened". The declaration sought in claim 2, that the notice of 11 December 2006 constitutes a valid notice under clause 3, should not be made because in spite of the admission on the pleadings, I think it fair to regard that as an admission only on the defendant's construction of clause 3. Injunctive orders should not be made because there is now no threat that Fresh Express will not act in accordance with clause 3 of the deed as now construed by this Court. It follows that the declaration which I have alluded to should be made and the balance of the statement of claim should be dismissed. The cross-claim should be dismissed.

COSTS

44 The defendant has succeeded on the main claim by the plaintiff for specific performance. It has, however, failed on the construction issues which took a lot of the time and which were raised defensively again in the cross-claim together with the rectification claim. So far as costs are concerned, I maintain the view that the most important matter in this case was whether or not the plaintiff could succeed in its claim for specific performance on which it has failed: nevertheless the declaration which I propose to make as to the true construction of the document was a matter on which it succeeded and as to which a large part of the time taken in the claim was given. I am of the view that on the plaintiff's claim, the proper order is that the plaintiff pay 40 percent of the defendant's costs of that claim.

45 On the cross-claim it is accepted that the cross-claimant must pay the costs of the cross-defendant and I propose to so order. The orders are therefore as follows:

1) I make the declarations sought in the plaintiff's claim 1 of the statement of claim omitting the words "and in the events which have happened".

2) The balance of plaintiff's claim be dismissed.

3) The plaintiff pay 40 percent of the defendant's costs of the statement of claim.

4) The cross-claim be dismissed.

5) The cross-claimant pay the cross-defendant's costs on the cross-claim.

6) The exhibits can be retained for 28 days and returned if no appeal has been lodged.

46 Leave is granted to restore at my time on arrangement with my Associate for any order in respect of the moneys paid into Court as security for costs.

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