Move 4 Life Pty Limited v Illawarra Retirement Trust

Case •

[2021] NSWDC 654

•

27 October 2021

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Move 4 Life Pty Limited v Illawarra Retirement Trust [2021] NSWDC 654
Hearing dates: 26, 27 August; 21 October 2021
Date of orders: 27 October 2021
Decision date: 27 October 2021
Jurisdiction:Civil
Before: P Taylor SC DCJ
Decision:

(1)   Judgment for the defendant.

(2)   Plaintiff to pay the defendant’s costs.

(3)   Liberty to either party to apply by email to my associate within 14 days to vary order (2).

Catchwords:

CONTRACTS — Construction — Interpretation — Natural and ordinary meaning – “due” – “payable”

CONTRACTS — termination — consequences of termination — accrued rights – prepayment or upfront payment of annual fee – fee for annual licence and services – termination for convenience after invoice but before payment made or payment due – termination before provision of services - entitlement to payment – commencement date of annual period

Cases Cited:

Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57

Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191

Attorney General of New South Wales v Homeland Community Ltd [2015] NSWCA 15

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36, (1973) 129 CLR 99

Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435

Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183

Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432

Byrnes v Kendle (2011) 243 CLR 253

China National Foreign Trade Transportation Corporation v Evlogia Shipping Co SA of Panama [1979] 1 WLR 1018

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

CPB Contractors Pty Ltd v JKC Australia Lng Pty Ltd (No 2) [2017] WASCA 123

Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7, (2014) 251 CLR 640

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196

Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292; [2008] NSWCA 310

Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70

Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

Motor Yacht Sales Australia Pty Ltd v Blann [2020] NSWCA 349

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

Naaman v Sleiman [2015] NSWCA 259

Newcombe v Newcombe (1934) 34 SR (NSW) 446

Ocelota Pty Ltd & Ors v Water Administration Ministerial Corporation & Anor [2000] NSWSC 370

Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900

Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; [2019] HCA 13

Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (In Liq) [1936] HCA 6, (1936) 54 CLR 361

Category:Principal judgment
Parties: Move 4 Life Pty Limited (plaintiff)
Illawarra Retirement Trust (defendant)
Representation:

Counsel:
Mr S Keizer (plaintiff)
Mr N Riordan (defendant)

Solicitors:
Norton Rose Fulbright Australia (plaintiff)
Thomson Geer (defendant)
File Number(s): 2020/309934
Publication restriction: None

Judgment

INTRODUCTION

  1. Move 4 Life Pty Limited and Illawarra Retirement Trust entered a “Service Agreement” dated 31 January 2017. The Agreement was terminated on 8 July 2020. Move 4 Life claims an annual payment of $187,000 for the 2020/2021 financial year which is disputed by Illawarra.

ISSUES

  1. The existence of the debt depends upon the construction of the written Agreement and is the only issue in the proceedings, there being no dispute about the quantum.

BACKGROUND

  1. The parties entered the Agreement on the Commencement Date, 31 January 2017. Illawarra was, in accordance with the Agreement, [1] invoiced $145,000 on the Commencement Date, $124,000 on 1 July 2017, and an Annual Base Subscription Fee based on the number of employees, on 1 July 2018 and 1 July 2019. This was the "basis for the calculation of the fee for amounts calculated up to and including 1 July 2021". The fees were to be invoiced "annually on 1 July from 1 July 2019". The Agreement provided that "[p]ayment is due 30 days from the date of invoice", [2] and the fees were paid by Illawarra.

    1. Cl 4 of the Schedule of Services and Fees to the Service Agreement (Schedule).

    2. Cl 11 of the Schedule.

  2. On 5 June 2020 Illawarra gave notice that it would terminate the Agreement, effective 8 July 2020. There was no dispute that Illawarra was acting within its rights in so doing: the Agreement provided that Illawarra "may terminate this Agreement for convenience at any time on thirty (30) days' notice in writing". [3] On 1 July 2020 Move 4 Life invoiced Illawarra the sum of $187,000 purportedly for the "Annual Base Membership Subscription". [4]

    3. Cl 7.c of the Service Agreement (Agreement).

    4. Exhibit A, Court Book (CB) 191.

  3. The efficacy of the invoice depended on the contractual consequences of Illawarra's termination.

THE CONSEQUENCES OF TERMINATION

  1. The Agreement provided that termination for convenience by Illawarra prior to the first anniversary of the Commencement Date would result in “no additional payments”. [5] Absent an alternative agreement by the parties, which did not occur, if the termination occurred "after the first Anniversary and prior to 1 July 2020", [6] there were further payment obligations on Illawarra according to cl 7.c.ii of the Agreement. The agreement was silent on the consequences of termination on the anniversary of the Commencement Date, or termination on 1 July 2020. Since neither of those events occurred, the Court need not pause to determine the consequences of that hypothetical. But I incline to the view that, in context, "prior to" would be read as "prior to the expiration of", in preference to "prior to the commencement of".

    5. Cl 7.c.i of the Agreement.

    6. Cl 7.c.ii of the Agreement.

  2. Whether a cancellation in the first 12 months of the Agreement "prior to the first anniversary of the Commencement Date" [7] where "no additional payments will be made" implies that there was to be no refund for unprovided services is also a question that does not arise here. It is, however, clear enough that cl 7.c.ii did impose an obligation independent of services[8] when a termination occurred after the Commencement Date and prior to 1 July 2020. Whether the Agreement provided such an obligation - that fees were payable independent of services - when termination occurs immediately after 1 July 2020 is ultimately the issue to be determined.

    7. Cl 7.c.i of the Agreement.

    8. See Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 465.5.

  3. Clause 7.c.ii provided that where the Agreement was terminated after the first anniversary of the Commencement Date and prior to 1 July 2020, a period of some two years and five months, Illawarra was obliged to pay:

"an amount equal to the annual fees that would be payable if the Agreement had not been terminated from the termination date to immediately after 1 July 2020". [9]

9. Cl 7.c.ii of the Agreement.

  1. In this case, the termination was on 8 July 2020, which was, plainly enough, not a date "prior to 1 July 2020". Both parties therefore submitted, though with differing suggested outcomes, that cl 7.c.ii was not directly applicable to the circumstances before the Court. Neither party submitted that 8 July 2020 was a date materially different from "immediately after 1 July 2020", nor did either party suggest that the fees would differ, or materially differ, in the present case from the case where the contract was terminated on 2 July 2020.

  2. I do not accept the parties' common submission about the inapplicability of cl 7.c.ii, subject to one caveat not identified by the parties and to which I will come. In my view, the fees payable for a termination after the anniversary of the Commencement Date and before 1 July 2020 must be precisely the same as the fees payable for a termination immediately after 1 July 2020, because the methodology for determining the fees for termination before 1 July 2020 is to look to the fees payable after 1 July 2020.

  3. If the fees payable for the earlier termination equals the fees payable for the later termination, it follows that the fees payable for the later termination equal the fees payable for the earlier termination, by the symmetric property of equality. As cl 7.c.ii determines the fees for the earlier termination, it must also determine the fees for the later termination.

  4. The caveat is that termination before 1 July 2020 results in an obligation on Illawarra to pay the fees that are "payable" if the termination were immediately after 1 July 2020. It is conceivable that fees that have accrued immediately after 1 July 2020 are not to be defined by what is then "payable". The significance of the term “payable” is considered later in this judgment. At present, I shall ignore the caveat.

  5. A construction pressed by Move 4 Life renders the entitlement to terminate for convenience of limited value up to 30 June 2020, since there is a specified minimum payment. The clauses do not indicate that termination for convenience thereafter continues to be subject to a minimum annual fee.

  6. Notwithstanding the identity that exists between the amount of fees resulting from a termination before 1 July 2020, and those resulting from a termination immediately after 1 July 2020, still the Court is left to determine the amount. Move 4 Life submits that a further annual fee is payable for the upcoming year; Illawarra says no further annual fee is payable. The parties agree that the quantum of fees in dispute is $187,000 inclusive of GST. The Agreement provides that those fees are "due 30 days from the date of the invoice", that is, 31 July 2020, being 30 days from 1 July 2020 when Move 4 Life invoiced Illawarra those fees. The question remains: is Illawarra indebted to Move 4 Life for those fees when it terminated the contract on 8 July 2020 (or, which is the same point for the reasons I have given, if it had terminated the contract before 1 July 2020).

CONTRACTUAL CONSTRUCTION

  1. As the Agreement is between two commercial entities, it is to be construed according to the principles of construction of commercial contracts. The Court is to adopt an objective approach, ascertaining the meaning conveyed to a reasonable person having the background knowledge common to the parties, including as to matters of law. [10] Reference is to be made to the contractual language, the surrounding circumstances and the purposes and objects secured by the contract. [11] This includes the background and context of the contract. [12] The contract is construed as a whole,[13] and generally the Court approaches the task of construction on the assumption that the parties intended to produce a commercial result. [14]

    10. Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [11]; [2001] HCA 70 at [11].

    11. Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514 at [44]; [2019] HCA 13.

    12. Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7, (2014) 251 CLR 640 at [35].

    13. Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36, (1973) 129 CLR 99 at 109.

    14. Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [15], see also Motor Yacht Sales Australia Pty Ltd v Blann [2020] NSWCA 349 at [35]-[36].

  2. Nevertheless, if the words used are not ambiguous, the Court must give effect to them, unless the literal meaning "flouts business common sense"[15] or would lead to an absurd result. [16]

    15. Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201; Maggbury at [43].

    16. Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 at [37].

  3. If the contract is open to two possible constructions, the preferred construction is one which will avoid apparently capricious, unreasonable, inconvenient or unjust consequences,[17] even if that construction is not the most obvious,[18] especially if it is "most consistent with business common sense". [19]

ACCRUED RIGHTS AND ANALYSIS

17. Bank of Queensland Ltd at [37]; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109.

18. Bank of Queensland Ltd at [37].

19. Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, 2908 at [21].

  1. Ultimately, whether Illawarra is liable to pay the Annual Base Subscription Fee of $187,000 invoiced on 1 July 2020 is determined by whether the right to that fee had accrued to Move 4 Life prior to 8 July 2020, when the contract was terminated. Although the classic statement by Dixon J in McDonald v Dennys Lascelles Ltd [20] concerned the consequences of termination for breach, its application extends to termination not involving breach or termination for convenience, as here. When the contract is terminated, it:

“is not rescinded as from the beginning…but rights are not divested or discharged which have already been unconditionally acquired… causes of action which have accrued…continue unaffected.” [21]

20. (1933) 48 CLR 457.

21. McDonald v Dennys Lascelles Ltd at 476-477.

  1. Further:

“no liability can be brought into existence if it depends upon a further act of performance. If the title to rights consists of vestitive facts which would result from the further execution of the contract but which have not been brought about before the agreement terminates, the rights cannot arise.”[22]

22. Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (In Liq) [1936] HCA 6, (1936) 54 CLR 361 at 380.

  1. Conversely:

“if all the facts have occurred which entitle one party to such a right as a debt, … the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation.” [23]

23. Westralian Farmers at 380.

  1. Here the fee was not "due" until 31 July 2020, [24] and it was not payable until that date or thereafter. [25] A debt is due when it is owing, and payable when it is both due and "the time for payment has arrived, and an action could be maintained in respect of it". [26]

    24. See Schedule, cl 11.

    25. CPB Contractors Pty Ltd v JKC Australia Lng Pty Ltd (No 2) [2017] WASCA 123 at [122].

    26. Ibid.

  2. Although Move 4 Life submitted that the Court is not compelled to construe "due" and "payable" in cl 11 of the Schedule and cl 7.c.ii in the Agreement respectively in accordance with the legal meaning of those terms, no alternative meaning of the words was identified, and it was Move 4 Life that submitted the principle stated earlier from Maggbury Pty Ltd v Hafele Australia Pty Ltd,[27] that the meaning conveyed to a reasonable person is informed by matters of law. In my view, the contract is clear that the annual fee was neither due nor payable until 31 July 2020. Those words do not have some specialised meaning in the Agreement.

    27. (2001) 210 CLR 181 at [11]; [2001] HCA 70 at [11].

  3. Move 4 Life argued that the contractual statement defining when fees “will be invoiced” [28] was not an obligation on Move 4 Life, but clarification on when fees became due and payable. That is, although the Agreement expressly provided that "[p]ayment is due 30 days from the date of invoice", payment was actually due on the date of the invoice. There was no sound basis identified to reject the plain words of the Agreement.

    28. Cl 4 of the Schedule.

  4. Is the circumstance that payment was not due as at 8 July 2020 determinative of whether the debt has accrued? In Naaman v Sleiman,[29] Gleeson JA (with whom Meagher and Ward JAA agreed) stated:

“Since the specified dates for payment … had not fallen due, it is not possible to say that an ‘unconditional’ right to a payment vested in Mr Naaman, as at the date of termination … in the sense identified in McDonald v Dennys Lascelles Ltd.”

29. [2015] NSWCA 259 at [59].

  1. As was noted in the Westralian Farmers passage quoted above,[30] it is not the present right to payment of the obligation which is determinative, but whether further performance is necessary before the obligation matures into a debt. Thus, in another not especially analogous context, if a tradesman, having done some work, issues an invoice for payment, the right to recover the debt has accrued if no further work need be done to support the invoice, even if the invoice is specified to be due and payable at some future date and termination occurs beforehand.

    30. At [20].

  2. Could the debt arise here even if it was not yet due? The text of the Agreement does not specify the existence of a debt as at the date of the invoice, no services were provided by the date of the invoice, the fee was consideration for annual services to be provided, [31] no period of licence was provided by the date of the invoice, the annual licence was consideration for the fees paid, [32] and the text identifies 1 July 2020 as no more than the date of the invoice. [33] All these matters militate against a debt existing as at the date the invoice was sent.

    31. Cl 3.a of the Agreement.

    32. Cl 2.a of the Agreement.

    33. Cl 4 of the Schedule.

  3. Was further performance required by Move 4 Life after 1 July 2020?

  4. The principal obligations placed on Move 4 Life by the Agreement were to grant Illawarra a "licence to use the SYSTEM", [34] the system being a suite of human movement training programs, [35] and to provide certain services. [36] In each annual period, Illawarra was to be granted a licence to use the system and to receive the 10 listed services. [37] Whilst it may be possible that some, even all, the services could be postponed beyond 31 July 2020, it is not correct to say that no further performance was required. Move 4 Life had an obligation to continue to provide the licence, and to continue to provide the annual services, both of which were consideration for the fees. [38] That other rights and obligations existed in the Agreement, in respect of both parties, does not remove these obligations from Move 4 Life.

    34. Cl 2 of the Agreement.

    35. Cl 1 of the Agreement.

    36. Cl 3 of the Agreement.

    37. Cl 5.a-5.j of the Schedule.

    38. Cll 2 and 3 of the Agreement.

  5. Termination prior to 1 July 2020 enlivened a right only to those fees which were "payable" on 2 July 2020. [39] As indicated, no annual fees were due, payable, or due and payable until 31 July 2020,[40] and thus were not due or payable at the termination date of 8 July 2020. In a context where no or negligible services have been provided by Move 4 Life as of this date, the circumstance that no fees were due or payable is a strong pointer that no fees had "accrued" or been "unconditionally" acquired as was held in Naaman, quoted earlier. [41]

    39. Agreement cl 7.c.ii.

    40. Cl 11 of the Schedule; CPB Contractors Pty Ltd v JKC Australia Lng Pty Ltd (No 2) [2017] WASCA 123 at [122].

    41. See [24] above.

  6. Move 4 Life argued that, effectively, the consideration for the payment of the annual fee was the licence, and the circumstance that Illawarra chose to terminate does not mean it was unavailable to them. [42] Move 4 Life submitted that the existence of a licence, rather than the use made of it, is sufficient to render the licence fees due. [43]

    42. See plaintiff’s reply submissions, 15/10/21, at [50].

    43. Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99 at 104.

  7. This submission is misconceived. It ignores the express obligation on Move 4 Life to provide the services as consideration for the fees: [44] the Chief Executive Officer of Move 4 Life described the services as "an integral part of what [it was] offering". [45] And it overlooks the difference between a terminated licence and a licence which persists but is not utilised. Clause 8 of the Agreement provided that the Agreement and all benefits to Illawarra under it came to an end immediately upon termination, and imposed upon Illawarra an obligation to deliver up all materials and cease using the system. So once Illawarra terminated the Agreement for convenience, it was obliged to and did return all of the Move 4 Life material. It was precluded from using the system, it had no licence, and it received no services. That Move 4 Life sought to persuade Illawarra to abandon its termination and receive the services and the licence is not to the point. [46]

    44. Cl 3 of the Agreement.

    45. T30/44-47.

    46. Exhibit A, tab 27, CB 185-186.

  1. Move 4 Life raised the question of whether the annual fee would be recoverable by Illawarra if termination occurred halfway through the annual period. Whilst that is not the situation faced by the parties, and so does not arise, there was nevertheless no apparent reason why the fee is not divisible according to the part of the year during which the licence was granted and the services provided. As an example, the initial fee was for a shorter period of days than the whole year. [47]

    47. Cl 4 of the Schedule.

  2. Clauses 2 and 3.a of the Agreement and cl 5 of the Schedule, by specifying performance of one as consideration for the other, indicate that the obligation of payment of fees, the provision of services and the grant of the licence are mutually dependent and not unconditional obligations. [48]

    48. Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 at [93], see also Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 at 464, Newcombe v Newcombe (1934) 34 SR (NSW) 446 at 450.

  3. The expression that the fees are in consideration for an annual licence and annual services, [49] is a textual feature inconsistent with Move 4 Life's submission that the "Annual Base Subscription Fee…is not made dependent on performance of those services"[50] and that "there is no nexus between performance of those services and [Illawarra's] contractual obligation to pay the Annual Base Subscription Fee". [51] If the licence is granted and the services provided for only half a year, in the absence of an express provision, there seems no reason why half of the fees were not refundable. If Move 4 Life provided more or less than half the services in half the annual period, Move 4 Life could recover in quantum meruit (or resist a recovery of fees paid) to the extent of the value of the services provided and a licence granted. [52]

    49. Cll 2 and 3 of the Agreement.

    50. Plaintiff’s reply submissions, 15/10/21 at [51], see also [47].

    51. Plaintiff’s reply submissions, 15/10/21 at [51].

    52. See Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560; [2019] HCA 32 at [172].

  4. Similar circumstances were considered in Ocelota Pty Ltd & Ors v Water Administration Ministerial Corporation & Anor,[53] when an annual lease payment was paid in advance. In that case, Hodgson CJ in Eq concluded that "it would indeed be absurd if the lessor could simply retain the whole"[54] in circumstances where the lease was terminated early. There was a total failure of consideration for that period when the Agreement was not on foot. [55] Although significance was placed on the word "annual" by Move 4 Life, it seems to be no different to the "annual rent" in a lease which ordinarily does not require the payment of the whole for only part, including only a small part, of the period.

    53. [2000] NSWSC 370.

    54. At [78].

    55. See Ocelota at [79].

  5. In Ocelota, the landlord had a right to terminate without breach. Move 4 Life referred to the different circumstance here where a right to terminate for convenience was exercised by Illawarra. That distinction does not seem material. If two parties can terminate for convenience, there seems to be no basis to conclude, in the absence of an express provision, that there would be a large penalty, or a substantial difference in rights, depending on which party terminates. The proper construction of 7.c.ii, and the Agreement as a whole, rather than the distinction identified by Move 4 Life, governs the fees payable. Properly construed, cl 7.c.ii does not contemplate a further fee for the period into 2021, when the Agreement is terminated on 8 July 2020.

  6. Move 4 Life referred to negotiations in evidence indicating that monthly and quarterly payment options were not accepted by Illawarra. The circumstance that Illawarra did not accept increased monthly payments [56] indicates only that initially Illawarra preferred to pay in advance for a longer period than pay a higher amount by monthly payments. It is not persuasive about whether a pre‑payment or an upfront payment would be refundable in the event of early termination. In other respects, the records of the negotiations do not assist to resolve any ambiguity. In any event, evidence of negotiations can only be admitted for the limited purpose of establishing background facts known to both parties, and the contractual subject matter, not about the intentions and expectations of the parties. [57]

    56. Exhibit A, CB 69-71.

    57. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352, Byrnes v Kendle (2011) 243 CLR 253 at [99], Attorney General of New South Wales v Homeland Community Ltd [2015] NSWCA 15 at [66].

  7. Once it is recognised that the annual fee payment is payment in advance for the licence and the services, it can amount to no more than the provision of a sum in the hands of Move 4 Life to be applied by it in satisfaction of a debt arising upon a provision of the services and licence. [58]

“[I]t is a payment of a debt in advance, a debt that can only arise from the execution of the consideration. Up till then it is a promise to pay money which if fulfilled or enforced, results in a provisional payment defeasible by the subsequent failure, for any cause, of the real consideration.”[59]

58. Cf Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 465.

59. Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 465.

  1. "For any cause" must include termination for convenience. The fees were not fully earned until a licence had been granted for a year, and the annual services performed. [60]

    60. Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292; [2008] NSWCA 310 at [79], [83]-[84] and [93], see also Naaman v Sleiman [2015] NSWCA 259 at [58]-[59], China National Foreign Trade Transportation Corporation v Evlogia Shipping Co SA of Panama [1979] 1 WLR 1018.

  2. Accordingly, the liability of Illawarra to pay the annual fee did not accrue or come into existence. This is because the entitlement of Move 4 Life to the fee depended on further acts of performance: the performance of the services and the continuing grant of a licence.

  3. This construction reflects the principle that a commercial contract should be given a construction that reflects “business common sense”. [61] It would seem unreasonable and unjust[62] to construe an ambiguous clause so as to require Illawarra to pay a fee for a licence and services when no services and no, or next to no, licence is provided.

    61. Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 at [21].

    62. See Bank of Queensland Ltd at [37]; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109.

  4. Move 4 Life contended that where the contract is terminated for convenience, the extent of its obligations, to be entitled to the entire annual fee, is to perform its obligations for the period the contract is on foot. This proposition was not developed, and no authority was cited for it. It seems contrary to the authority of Ocelota and is inconsistent with the mutually dependent obligations indicated by cll 2 and 3 of the Agreement. It would substantially weaken without textual justification the right of Illawarra to terminate for convenience.

  5. Move 4 Life sought to distinguish Naaman [63] and Interstar [64] :

“Both those cases concerned fees that were payable with respect to periods of time after the contract was terminated, where those fees were consideration for services to be provided … in those future time periods.”[65]

63. Naaman v Sleiman [2015] NSWCA 259.

64. Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292; [2008] NSWCA 310, see para 39 of judgment.

65. Plaintiff’s reply submissions, 15/10/21 at [24].

  1. It is difficult to discern how this principle does not also apply to the present case. The fees were payable with respect to an annual period, most or all of which was "after the [agreement] was terminated". And the Agreement specifically provided that the fees were in consideration for services (including the licence) which was wholly or substantially for a future time period.

  2. Move 4 Life referred to the asserted contrast in cl 7.c.ii between termination "prior to 1 July 2020", and the fees payable if termination occurred "immediately after 1 July 2020". The difference between "prior to" and "immediately after" was said to imply that some fees must have accrued on or immediately after 1 July 2020. The uncertainty of whether the fees accrued on 1 July 2020 or after 1 July 2020 does not assist the argument. But more significantly, the supposed contrast cannot have the significance attached, at least in respect of the date of termination.

  3. As indicated earlier, there is no difference between termination before or after 1 July 2020, in terms of the fees resulting. Clause 7.c.ii defines the fees to be the same. So the supposed contrast does not operate to produce a difference in the fees, and the fees’ due date of 31 July 2020 indicates the contrary.

  4. Move 4 Life's submissions contemplate that the guaranteed fee is not merely the same for whatever date termination occurs between 1 February 2018 and 30 June 2020, as cl 7.c.ii specifies, but extends for another year. That is, a termination on 30 June 2021 produces the same quantum of annual fees. It seems surprising that the proper construction of a clause specifying the fees to be the same for whenever termination occurs in a two-year-and-five-month period, is to have the effect that the fees are the same for whenever termination occurs in a three-year-and-five-month period. Or to put the point another way, a clause that provides for fees as at 2 July 2020 for any termination up to 30 June 2020 is submitted by Move 4 Life to mean that any termination up to 30 June 2021 results in those same fixed fees. If that were the intended meaning, a much clearer formulation could readily be identified.

  5. For the reasons given, I am satisfied that no additional annual fee is payable.

IS ANY AMOUNT DUE FOR TERMINATION ON 8 JULY 2020?

  1. The question arises as to whether any fees were payable for the period from 1 to 8 July 2020, when the Agreement was on foot. The point is theoretical because no claim was made by Move 4 Life for payment for this period of eight days. And as no services were provided in that period and a licence period of only eight days existed (if the annual period dated from the commencement of 1 July 2020), the amount would, assuming the services and the licence were of equal value, equate to only 4/365th of the annual fee, which is just under $2,050, almost de minimus in the present circumstances.

  2. The foundation of an entitlement to even this small amount supposes that the annual services and the licence period run from 1 July to 30 June each year. In support of this period, Move 4 Life referred to a pleading, [66] which did not address the point, and to correspondence, where on one post-contractual occasion, [67] a representative of one party indicated this understanding. But future performance or a future assumption cannot be evidence of the proper construction of a written agreement. [68] Nor can counsel's common submissions on a matter of construction bind the Court to that particular construction.

    66. [11(a)]-[(d)] of the Amended Statement of Claim and Defence to Amended Statement of Claim.

    67. Affidavit of Stephen Walz, tab 12, at [34] and [38].

    68. Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [58] per Giles JA (Allsop P at [41] agreeing); at [309]-[329] per Campbell JA (Giles JA at [42]-[43], [58] agreeing), Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35].

  3. Move 4 Life identified one textual matter which was said to support a financial year annual period. The final words of the text in cl 4 of the Schedule provided that the Annual Base Subscription Fee would be invoiced annually on 1 July "from 1 July 2019", and Move 4 Life submitted that therefore the fees are for the period from 1 July 2019. On reflection, this phrase does not have this effect. Rather, it indicates that the invoice dates for future periods, such as in 2020 and perhaps in 2021, would be dated 1 July 2020 (and 1 July 2021), the existing fee methodology being applicable in the Agreement up to and including 1 July 2021. [69] Thus the phrase does not identify the annual period for the fees, or the services or the licence to which the fees are linked. [70]

    69. See cl 4 of the Schedule.

    70. Cll 2 and 3 of the Agreement.

  4. A contrary position, that the licence and services commence on 31 July 2020, finds limited support in the Commencement Date of 31 January 2017, the anniversary of the Commencement Date in cl 7.c, and the circumstance that the annual fees are due on 31 July. [71] Perhaps more significant is that cll 2 and 3 in terms contemplate that in consideration of the services to be provided, the fees will be paid, [72] and in consideration of the fees being paid (on 31 July), the non‑exclusive licence is granted. [73] That is to say, while the services are to be provided at some time, and the fees are due and payable on 31 July, the licence is granted in consideration of the “fees paid”, indicating the licence may run from 31 July when the fees have been paid.

    71. Cl 11 of the Schedule.

    72. Cl 3.a. of the Agreement.

    73. Cl 2 of the Agreement.

  5. In the present case, no services were provided between 1 and 8 July 2020, and on this construction, the licence period for the next 12 months had not yet commenced. These matters indicate that, at least in respect of the licence, the Agreement would work similar to an annual renewal of insurance: the premium is invoiced in advance, payment is due on the date the past year's insurance concludes, and the payment activates cover for the ensuing 12 months. Even if this was not so, still the text indicates that the month of July in 2020 and in subsequent years may be a fee‑free period in the event of termination, given the circumstance that fees were not due in this month.

  6. The specified due date, the textual factors in favour of a 31 July start date for the licence at least, the absence of provision of any services, and the absence of a claim for any amount for the eight days alone, leave me unpersuaded that any amount should be held to have accrued before 8 July 2020.

  7. If I am wrong on this point, Move 4 Life would be entitled to the sum of $2,049.32.

  8. For these reasons, the proceeding should be dismissed.

ORDERS

  1. The orders of the Court are:

  1. Judgment for the defendant.

  2. Plaintiff to pay the defendant’s costs.

  3. Liberty to either party to apply by email to my associate within 14 days to vary order (2).

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Endnotes

Decision last updated: 06 December 2021

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Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57