Optimum Holdings (Australia) Pty Ltd v Open Realty Pty Ltd

[2002] NSWCA 110

CITATION:	Optimum Holdings (Australia) Pty Ltd v Open Realty Pty Ltd [2002] NSWCA 110
FILE NUMBER(S):	CA 40189/01
HEARING DATE(S):	11 February 2002
JUDGMENT DATE:	23 April 2002
PARTIES :	Optimum Holdings (Australia) Pty Ltd (Appellant) Open Realty Pty Ltd (Respondent)
JUDGMENT OF:	Giles JA at 1; Heydon JA at 9; Brownie AJA at 50

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	4362/00
LOWER COURT JUDICIAL OFFICER :	Puckeridge DCJ

COUNSEL:	Mr A Porthouse (Appellant) Mr D D Knoll (First Respondent)
SOLICITORS:	Raymond Lee & Co (Appellant) Landerer & Company (First Respondent)
CATCHWORDS:	Contract - formation - whether agreement constituted final contract - certainty of terms - - ND
CASES CITED:	Brookers (Australia) Ltd (in liquidation); Brooker v Pridham (1985) 41 SASR 380 Ogilvie v Adams (1981) VR 1041 Young v Queensland Trustees Ltd (1956) 99 CLR 560
DECISION:	See paragraph 49

CA 040189/01
DC 4362/00

GILES JA
HEYDON JA
BROWNIE AJA

23 April 2002

OPTIMUM HOLDINGS (AUSTRALIA) PTY LTD v

OPEN REALTY PTY LTD

Judgment

1 GILES JA: I have had the advantage of reading the reasons of Heydon JA in draft. With the following additional observations, I agree with them.

2 On 29 September 1999 the plaintiff lent $125,000 to the first defendant. By the Head of Agreement dated 20 December 1999 (a) the second defendant agreed to pay $120,000 to the plaintiff as the price for the plaintiff’s shares in the first defendant; and (b) the first defendant agreed to repay the loan as to $5,000 forthwith and as to $120,000 on or before 28 February 2000, and the second defendant guaranteed the latter payment. For the reasons given by Heydon JA, there was no vitiating uncertainty in the Head of Agreement. In any event, if the Head of Agreement fell away the loan appears to have been repayable on demand and the plaintiff could sue to recover the balance of the loan (see for example Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 566; Ogilvie v Adams (1981) VR 1041 at 1043; re Brookers (Australia) Ltd (in liquidation); Brooker v Pridham (1985) 41 SASR 380 at 382). The argument for vitiating uncertainty probably leads nowhere.

3 A cheque for $125,000 was given to the plaintiff. It was common ground that $5,000 of the payment was part repayment of the loan. Was the other $120,000 repayment of the balance of the loan, or was it payment for the shares?

4 The first defendant’s position was that it was repayment of the balance of the loan because Mr McCartney had made clear that no premium was to be paid for the shares: if there was no premium to be paid for the shares the $120,000 referred to in the Head of Agreement was in truth not payable as the price for the plaintiff’s shares in the first defendant, so the other $120,000 had to be repayment of the balance of the loan. For the reasons given by Heydon JA, Mr McCartney’s evidence did not establish an estoppel, variation, novation or other negation of the Head of Agreement so far as the second defendant agreed to pay $120,000 for the shares. The $120,000 referred to in the Head of Agreement as the price for the plaintiff’s shares in the first defendant was payable.

5 That does not completely answer the question, was the other $120,000 repayment of the balance of the loan, or was it payment for the shares?

6 Once Mr McCartney’s evidence is put aside, there was no evidence that anyone at the meeting said what the cheque was for when it was handed over.

7 The balance of the loan was not repayable until 28 February 2000, but the price of the shares was payable forthwith and the share transfer was signed and handed over on 20 December 1999. There is thus a strong inference that the other $120,000 was payment for the shares. The second defendant was obliged to pay for the shares, not the first defendant, and perhaps a first defendant’s cheque partially in repayment of the loan could have been regarded as wholly in repayment of the loan and not partially in payment for the shares by the second defendant; but the cheque came from the service company of Mr McCartney, the second defendant’s solicitor, upon the second defendant’s request to bring it to the meeting. The document signed by the second defendant promised payment of $120,000 by 28 February 2000, which arguably was otiose if the $120,000 had been repayment of the balance of the loan because the Head of Agreement already provided for repayment of the balance of the loan on or before that date; but the force of this is diminished because it is not clear when the document was signed and it could have been signed prior to the Head of Agreement then overtaken by the Head of Agreement. The better view, in my opinion, is that the other $120,000 was payment for the shares.

8 That left the first defendant obliged to repay the balance of the loan on or before 28 February 2000. The plaintiff was entitled to recover the $120,000 from the first defendant, and the orders proposed should be made.

9 HEYDON JA: This is an appeal by the plaintiff below from orders of Puckeridge DCJ, QC, dismissing a claim by the plaintiff for $120,000 against each of the defendants. The orders were made on 1 March 2001 after a trial on 23 and 24 January 2001.

Background

10 These were proceedings in which at trial the parties were in dispute as to the factual elements of the dealings between them and had difficulty in grasping the issues between them. A further difficulty stemmed from the fact that English was not the first language of the two witnesses for the plaintiff, Mr Song and Mr Lin. Some of the evidence of the former was given through an interpreter and some was not. It was not always easy to understand the evidence in either category. The interpreter was needed for the whole of Mr Lin’s evidence. Yet a further difficulty stemmed from Mr Lin’s tendency not to respond to questions.

11 The plaintiff put the following material allegations in its Statement of Claim.

“4. The Plaintiff lent to the First Defendant an amount of $125,000.00
Particulars
I. The Plaintiff advanced a loan to the First Defendant of $125,000.00 (‘the loan’) on 29 September 1999.
II. The Plaintiff has received by way of repayment $5,000.00 of the total amount of the loan.
III. The Second Defendant orally represented to the Plaintiff that the balance of $120,000.00 of the loan would be repaid within four weeks of 29 September 1999.
IV. By a document titled Head of Agreement dated 20 December 1999 (‘Head of Agreement’) the First Defendant agreed to pay the sum of $120,000.00 to the Plaintiff on or before 28 February 2000.
5. By the Head of Agreement the Second Defendant gave a personal guarantee for the loan.
Particulars
I. The Second Defendant by the Head of Agreement agreed to guarantee the payment to the Plaintiff of the said $120,000.00 and to pay such amount on demand.
6. The First Defendant did not pay to the Plaintiff the said $120,000.00 on or before 28 February 2000 or at any time.
7. The Second Defendant did not pay to the Plaintiff the said $120,000.00 on or before 28 February 2000 or at any time.
8. The Plaintiff has demanded repayment of the said $120,00.00 from the First Defendant.
Particulars
I. By way of a letter sent to the solicitors for the First Defendant, Messrs Thomas Stevens & Company dated 9 March 2000.
9. The Plaintiff has demanded payment of the $120,000.00 from the Second Defendant, in accordance with the Head of Agreement.
Particulars
I. By way of a letter sent to the home address of the Second Defendant dated 9 March 2000.
10. The First Defendant has refused to pay any or all of the said $120,000.00 in breach of the Head of Agreement.
11. The Second Defendant has refused to pay any or all of the said $120,000.00 in breach of the Head of Agreement.
12. The Plaintiff claims as against the First Defendant:
I. $120,000.00;
II. Interest in accordance with Section 83 of the District Court Act ;

III. Costs.
13. The Plaintiff claims as against the Second Defendant:
I. $120,000.00;
II. Interest in accordance with Section 83 of the District Court Act ;
III. Costs.”

12 The defendants’ Defence responded as follows:

“4. The Defendants deny the allegations contained in paragraphs 4 and 5 and say that no money was ever lent by the Plaintiff to the First Defendant, and therefore, any guarantee provided by the Second Defendant to the Plaintiff is not enforceable.
5. Further, in relation to the document titled ‘Head of Agreement’ and dated 20 December 1999, the Defendants say that it is an unenforceable agreement as the Plaintiff neither lent money to the Defendants, nor did it own the shares that it purported to own.
6. Further or in the alternative, the Defendants say that the Head of Agreement is not an enforceable contract due to the lack of consideration provided by the Plaintiff.
7. The Defendants admit paragraphs 6 and 7, but say that the Plaintiff was not entitled to receive the said $120,000.00.
8. The Defendants do not admit paragraphs 8 and 9 and say that the Plaintiff is not entitled to receive the amount of $120,000.00 from either of the Defendants.
9. The Defendants admit that they refused to pay as alleged in paragraphs 10 and 11 of the Ordinary Statement of Claim, but deny the allegations that they were in breach.
10. The Defendants deny that the Plaintiff is entitled to the relief claimed or any relief at all.”

13 The persons engaged in the transactions that led to the litigation were as follows. Mr Song was a director of the first defendant; he was the owner of 50 ordinary shares in the first defendant (50% of its issued capital); and he was said to be a “nominee” of the plaintiff company in relation to those shares. Mr Andrew Robertson, the second defendant, owned the other 50% of the first defendant’s issued capital. He did not give evidence and the other parties apparently considered that he had absconded. He was named as second respondent to the appeal, but the appeal has since been discontinued against him. Mr Lin was a director of and shareholder of the plaintiff. Mr Andrew McCartney was Mr Robertson’s solicitor.

14 It was not common ground below, but the trial judge found, and it is common ground in this Court, that the sum of $125,000 was lent by the plaintiff to the first defendant to enable the latter to pay part of a deposit on the purchase of a block of units at 13 Clarke Street Vaucluse. The loan was initially advanced by a cheque dated 29 September 1999 which was dishonoured on presentation and then by bank cheque dated 5 October 1999. On 29 September 1999 Mr Song applied for and was issued with 50 shares in the first defendant; he also consented to act as director of that company.

15 According to Mr Song, the loan was to be repaid within four weeks. It was not. According to Mr Song, in mid October 1999 he decided that the second defendant was not a suitable business partner, and the other members of the plaintiff agreed. After some negotiations, a meeting took place on 20 December 1999 for the purpose of resolving disputes between the parties. That meeting was attended by Mr Song, Mr Lin, the second defendant and (after some delay) Mr McCartney. At the end of the meeting the following document was executed by Mr Robertson, Mr Song, the plaintiff and the first defendant.

“ HEAD OF AGREEMENT
Andrew Robertson (‘Andrew’)
and
Optimum Holdings (Aust) Pty Ltd (‘Optimum’)
and
Lida Song (‘Lida’) as nominee of Optimum
and
Open [Realty] Pty Ltd (the ‘Company’)
1. Andrew is a director and registered shareholder of the Company holding 50% of the issued capital of the Company.
2. Lida is a director and registered shareholder of the Company holding 50% of the issued capital of the Company as nominee of Optimum (the ‘Shares’).
3. Optimum has advanced a loan of $125,000.00 to the Company (the ‘Loan’) which is repayable on demand. Optimum hereby demand the Company to repay the Loan and the Loan is immediately due and payable from the Company to Optimum.
The parties agreed that:
1. Andrew agreed to purchase the Shares from Optimum and Optimum agreed to sell the Shares to Andrew at the price of $120,000.00 (the ‘Price’).
2. Andrew shall pay the Price to Optimum upon signing of this Head of Agreement and Optimum shall cause and procure Lida to resign as a director of the Company and to execute all necessary documents to effect transfer of the Shares to Andrew or Andrew’s nominee.
3. The Company shall repay $5,000.00 of the Loan to Optimum upon signing of this Head of Agreement and agree and undertake to repay the balance of the Loan in the sum of $120,000.00 to Optimum on or before 28th February 2000.
4. In consideration of Optimum upon Andrew’s request agreeing to allow the Company until 28th February 2000 to repay the balance of the Loan in the sum of $120,000.00, Andrew hereby irrevocably guarantees to Optimum that the Company will repay the balance of the Loan in the sum of $120,000.00 to Optimum on or before 28th February 2000. Andrew further undertakes to Optimum that if the Company shall fail to repay the said sum of $120,000.00 to Optimum for whatever reason, Andrew shall on demand forthwith pay the said sum of $120,000.00 to Optimum without any claim of set off. The said payment obligation of Andrew shall be absolute obligation on the part of Andrew and shall not be affected by any reason of non-payment by the Company and shall still be binding on Andrew even if the Company has been put into liquidation.
5. Time is of the essence of this Head of Agreement.
Dated the 20th day of December 1999.”

16 Mr Song said that Mr Robertson thereupon gave him a cheque for $125,000. Mr Song said Mr Robertson signed a document in the following terms:

“ Re: Open [Realty] Pty Ltd
I refer to the above and our meeting today in relation to your resignation as a director and shareholder of Open [Realty] Pty Ltd.
I hereby advise you will be paid an amount of $125,000 today with the balance of $120,000 to be paid directly to you by 28/02/2000.
You have my personal guarantee in relation to this matter.”

17 The trial judge said that the plaintiff alleged, and the first defendant denied, that the meeting of 20 December 1999 resulted in an agreement:

“whereby the defendant agreed to pay to Optimum Holdings Pty Limited, the plaintiff, the sum of $120,000 for the fifty shares standing in the name of Lida Song. The plaintiff claims that it was also agreed at the meeting on 20 December 1999 that the defendant, Open Realty, would pay $5,000 part repayment of the loan of $125,000 made, and would repay the balance of the sum of $120,000 on or before 28 February 2000.”

18 Mr McCartney gave the following evidence about what happened near the end of the meeting:

“Q. What if anything did you say and could you please give the evidence in direct speech?
A. I said to Mr Robertson that I did not accept that there was any premium payable from Open Realty to Lida Song or anybody else for that matter.
Q. And what happened after that?
A. Mr Robertson and I had a further discussion in relation to it and he asked me whether I consented to the payment of the premium, I said I would not. That was a discussion that Mr Robertson and I had off to one side. I think we may have even gone to a separate office for that discussion.
Q. Were you present when, could you describe what happened in relation to the execution of the various documents?
A. There was, the parties were seated at a table in a large area of Dr Song’s offices. They sat down. Mr Robertson then proceeded to sign. Mr Robertson and Dr Song then proceeded to sign the heads of agreement.
Q. Were any other documents executed?
A. The transfer of shares.
Q. Did you say anything to Mr Song about the question of whether or not you were prepared to pay a premium for the shares?
A. I made it clear to everyone ---
…
A. I said in Mr Song’s presence to Mr Robertson I did not consider that Open Realty should pay any premium for the shares and I did not agree with the payment of the shares, of the premium.
Q. However you were aware that as between Mr Song and Mr Robertson there was apparently some agreement for Mr Robertson to acquire Mr Song’s shares in Open Realty?
A. Well only from what I saw from the heads of agreement, yes.
Q. And as far as you’re aware did that transaction or was that transaction ever given effect to?
A. No.
…
HIS HONOUR: Q. Did you ever say to Mr Song ‘This cheque is in full and final satisfaction of your’s and Optimum’s dealings’?
A. I don’t think I would have put it in those exact words your Honour, no. I would have said words to the effect that as far as I was concerned Open Realty owed no further monies to anybody involved in this transaction after I handed over the cheque for $125,000.
Q. Did you say words to the effect ‘There is no premium for the shares, this is just repayment of the loan’?
A. I would have probably said that, yes.
…
PORTHOUSE: Q. And you never said at that meeting to Lida Song that the payment of $125,000 was in full and final satisfaction of the dealings between Open Realty and Optimum?
A. As I said before I don’t recall saying those words.
Q. I accept that you did say you didn’t use those exact words but I put it to you that you didn’t [use] words to the effect that Open Realty owed no further money?
A. Not those words I used, yes.
Q. And that you didn’t say that you would not, you would not be paying any premium for the shares, you were just repaying the loan?
A. No I made it clear to Mr Robertson that as far as I was concerned that was the total money that Open Realty would be paying to Lida Song or Optimum or anyone else.
HIS HONOUR: Q. And you made it also clear to Mr Song?
A. In Mr Song’s presence.”

19 Mr Song denied that Mr McCartney said words to the effect that the $125,000 cheque was in full and final satisfaction of the dispute between the parties; and, as has been seen, Mr McCartney himself disavowed the use of any words to that effect .

20 The trial judge’s reasoning had two key elements. First, he said that he could not conclude that in addition to the repayment of the $125,000 there was to be a payment of $120,000, because there was uncertainty in the Head of Agreement. Secondly, he said that Mr McCartney’s words before the $125,000 cheque was handed over, and its acceptance by Mr Song, meant that the plaintiff was “estopped from denying that that was the purpose of the cheque, namely, full repayment of the loan, and that there was no premium payable on any share transfer.” It is convenient to deal with the second part of this reasoning first.

The primary arguments on the appeal: events at the 20 December 1999 meeting and “estoppel”

21 On the appeal counsel for the plaintiff/appellant submitted that the plaintiff’s case was simply that the Head of Agreement was a written contract complete in itself. So far as it called for repayment of the Optimum loan of $125,000 to Open Realty, that repayment was effected at the meeting of 20 December 1999 as to $5,000. So far as it called for a transfer of Mr Song’s shares, at the meeting a transfer of shares from Mr Song (named in recital 1 of the Head of Agreement as nominee for Optimum, the vendor) to Mr McCartney (solicitor for the purchaser Mr Robertson) was delivered. So far as the Head of Agreement called for a payment of $120,000 for the shares, that was effected at the meeting of 20 December 1999. The part payment of $5,000 in relation to the loan and the payment of $120,000 for the shares was effected by a cheque for $125,000 handed by Mr Robertson to Mr Song at the meeting. That left an obligation to repay the remaining $120,000 of the loan by 28 February 2000, and this was not done by that time or ever. The plaintiff submitted that the first defendant’s case was that the cheque for $125,000 was in full and final settlement of all outstanding liabilities – not only the $5,000 in relation to the loan and the $120,000 in relation to the price, but the balance of the loan as well. Whether this argument urged the conclusion that there was a variation, or a rescission coupled with a new agreement, or a novation, or an accord and satisfaction, or an “estoppel”, it depended on Mr McCartney’s evidence of what he said to the meeting.

22 The plaintiff advanced several submissions about Mr McCartney’s evidence. It submitted that:

(a) The trial judge erred in accepting Mr McCartney’s evidence that he said various things to the meeting.

(b) Even if he did say what he testified he said:

(i) he lacked authority to bind the first defendant;

(ii) the statements were only unilateral and were never assented to by Mr Song;
(iii) the statements were only bare representations by a non-party as to what he believed should happen.

23 The trial judge made no observations adverse to Mr McCartney’s credibility. He referred to his evidence at several places. He summarised his evidence about his relations with Mr Song from September 1999 without comment. He said:

“Mr McCartney, in evidence before the Court, stated that following the conference on 20 December 1999 he attended on the parties and paid over to Optimum Holdings Pty Limited a sum of [$125,000] which sum, he said, was in full and final satisfaction of all matters by way of dispute which had arisen between the parties.”

(In fact Mr McCartney did not state he said that.) Later the trial judge said:

“Mr McCartney, in evidence before the Court, said that at the time he handed the cheque over he said words to the effect, ‘There is no premium for the shares. This is just repayment of the loan’.”

A little later the trial judge said:

“In fact, on 20 December 1999, when Mr McCartney attended at the conference, he arranged to be executed a transfer of shares of the shares registered in the name of Lida Song to him as the transferee.”

(In fact Mr McCartney’s evidence was that he had prepared the transfer before his arrival at the meeting.) Finally, the trial judge said:

“When Mr McCartney handed over the cheque for $125,000 he clearly made it known to Mr Song that the cheque was in full repayment of the loan and that there was no premium payable on the shares.
On the evidence of Mr Song and of Mr McCartney I have come to the conclusion that that was specifically stated by Mr McCartney when he handed over the cheque for $125,000.”

(The reference to Mr Song’s evidence is difficult to follow. He denied that Mr McCartney said: “I have made it clear previously that you will not be receiving a premium for your shares and the payment of the $125,000 is in full and final satisfaction [of] yours and Optimum’s dealings with Open Realty”. He said he could not remember if Mr McCartney said anything at all; and then said “From my memory he didn’t say anything else”.)

24 It is plain, particularly from the last passage quoted from the trial judge’s reasons for judgment, that though he did not explicitly say so, the trial judge accepted that what Mr McCartney testified he said, he did say. It is understandable that the trial judge did this. Save for Mr Song’s rather vague evidence, Mr McCartney was not contradicted. He was not cross-examined to suggest that his evidence in chief was wrong: the only cross-examination was directed to the proposition that he did not say the payment of $125,000 was in full and final satisfaction of all obligations between Open Realty and Optimum or that only the loan was being repaid, but these were propositions he either denied in chief or did not support in chief. Further, though Mr McCartney was a somewhat irascible witness whose conduct in the witness box was not a model of decorum, he did appear to be a careful witness and an honest one. For example, the trial judge asked him in a leading question as to whether he said “This cheque was in full and final satisfaction” of the parties’ obligations: to answer that question “Yes” would have strongly favoured the case of the party calling him, the first defendant, but he declined to do that, preferring a less favourable answer, and adopted the same course in answer to a similar leading question by counsel for the plaintiff in cross-examination.

25 Subject to the plaintiff’s argument that the trial judge should not have accepted Mr McCartney’s evidence because it was, allegedly, “glaringly improbable”, it is sound to proceed on the basis that Mr McCartney’s testimony about what he said to the meeting is correct. The question then arises whether what the trial judge inferred from that testimony is correct. The question is one of characterising what Mr McCartney said in light of the circumstances. The oral submissions of each party to this Court substantially consisted of a close analysis of the somewhat fragmentary evidentiary materials concerning events in the few days before, and at, the meeting of 20 December 1999: the plaintiff contended for the conclusion set out below, the first defendant contended for conclusions supportive of the trial judge’s view that something in the nature of an estoppel had arisen against the plaintiff. The first defendant also appeared to contend that the trial judge’s findings were to some extent demeanour-based: save to the extent that the trial judge accepted Mr McCartney’s testimony, I would reject that argument. The first defendant also contended that a significant burden lay on the plaintiff to demonstrate error in the appeal: accepting that that is so, in my view the burden was discharged. The first defendant, in addition, relied on certain authorities: it is sufficient to say that they were not in point, and even if they had been, they could not have been controlling in relation to an issue of characterisation on the facts of this particular case.

26 In my judgment the utterances of Mr McCartney were statements by a solicitor to his principal, Mr Robertson, sometimes without others being present and sometimes in the presence of Mr Song and Mr Lin, urging him against a particular course of conduct. They were not statements by a solicitor with authority to act in negotiations with Mr Song or with plenipotentiary powers, as it were, to affect relations between Mr Song’s interests and Mr Robertson’s interests and create or vary contracts between them. The only person with the power and function of affecting Mr Robertson’s interests in that regard was Mr Robertson. In short, Mr McCartney’s statements were statements to the effect: “In my opinion it is quite unwise for you to be doing this, and I advise you that you should not be doing it.”

27 The reasons for that conclusion are as follows.

28 First, there were apparently extensive negotiations before 20 December 1999 between Mr Song and Mr Robertson. Mr McCartney said that Mr Song had engaged in “various discussions” with Mr Robertson about a shareholder’s agreement. He referred to three drafts being produced. There is no evidence that Mr McCartney’s role involved participating in those negotiations, or that his role extended beyond carrying out ministerial acts, conducting particular types of correspondence and drafting particular documents as required.

29 Secondly, in one item of that correspondence, a letter of 16 December 1999 to Raymond Lee & Co, a firm of solicitors representing Mr Song’s interests, Mr McCartney spoke of “our client”, not “I” or “we”. He was writing not as one of a group of principals, but as a solicitor acting for Open Realty Pty Ltd or Mr Robertson. In oral evidence he described himself as sending that letter because of having been “instructed” to do so. He used the language of “instructions” on several occasions.

30 Thirdly, Mr McCartney said his “proposal” was “$125,000 repayment of the loan, no premium to be paid” and “I made myself quite clear on that all the way through”. He made it clear by correspondence to Raymond Lee & Co, “and also my discussions with Andrew Robertson”. It is noteworthy that he did not say he made it clear in discussions with Mr Song.

31 Fourthly, between 16 December 1999, the date of the letter recording instructions that the parties had agreed that “payment of the sum of $125,000.00 in full and final settlement” would be effected, and 20 December 1999, Mr McCartney had no further communications with Mr Song or Mr Lin.

32 Fifthly, before midday on 20 December 1999 Mr Robertson rang Mr McCartney to say he was going to meet Mr Song and Mr Lin “to try and resolve the issue of the … withdrawal of Lida Song from Open Realty, yes that’s when I first knew about it.” This is typical of how Mr Robertson might treat his solicitor; it is less probable that he would have treated a partner or co-principal in that fashion.

33 Sixthly, Mr McCartney, who was called by the first defendant, gave the following important and unchallenged evidence in chief about what happened next:

“During the course of the day there were a series of phone calls from Mr Robertson to myself and vice versa regarding what was being discussed at the meeting and there was a raft of issues that did not just effect Open Realty, there were other matters that they were discussing which they were trying to resolve. During the course of the day it became apparent Mr Robertson was getting to the point where that there was some resolve between the three of them. I mean this was, as far as I could make out there was a problem between Lida Song and Brett Lin and Andrew Robertson. It wasn’t just limited to Open Realty. They were discussing these matters and trying to reach a result. Later, later in the day I received a call from Andrew Robertson and I suspect it was some time after 6 o’clock to say that it had now been resolved and to come over with the transfer of shares which I had already prepared. I’d also already prepared a set of minutes to reflect the fact that it was going to be a resignation of Lida Song from the board and that there had been approval of the transfer of shares and to bring the, the repayment of the loan for $125,000 with me.”

It is notable that Mr McCartney was not at the meeting during the day; that it was “ they ” who were trying to resolve matters, not Mr McCartney; and that there was “some resolve between the three of them ” – not Mr McCartney. It is also notable that just after 6pm Mr McCartney was told that “it had been resolved ” – not that he should come to the meeting to assist in arriving at a resolution as an affected principal. Finally, it is notable that what Mr McCartney had been doing consisted of the ministerial and drafting actions characteristic of a solicitor – preparing a share transfer and minutes and making a cheque available. He had made that cheque out in favour of Optimum Holdings because Mr Robertson had requested him to do so.

34 Seventhly, Mr McCartney testified that when he arrived at the meeting Mr Song, Mr Lin and Mr Robertson were there. He testified:

“They were waiting at that stage for a [head] of agreement to be drafted and finalised from Hong Kong which took some time to arrive I seem to recall which meant we had to wait for a while and that heads of agreement then arrived and Mr Robertson showed it to me.”

Mr McCartney was thus distant from the substantive negotiations which had generated the Head of Agreement.

35 Eighthly, Mr McCartney gave evidence of what he said after reading the Head of Agreement as follows:

“Q. What if anything did you say and could you please give the evidence in direct speech?
A. I said to Mr Robertson that I did not accept that there was any premium payable from Open Realty to Lida Song or anybody else for that matter.
Q. And what happened after that?
A. Mr Robertson and I had a further discussion in relation to it and he asked me whether I consented to the payment of the premium, I said I would not. That was a discussion that Mr Robertson and I had off to one side. I think we may have even gone to a separate office for that discussion.”

It is not entirely clear whether this evidence means that Mr McCartney had one discussion with Mr Robertson in the presence of the other two gentlemen and one off to one side or in a separate office, or whether it means that both discussions were away from the other two gentlemen. Even if the first discussion was in the hearing of the other two gentlemen, Mr McCartney does not say that he addressed them, only that he addressed Mr Robertson.

36 Ninthly, Mr McCartney gave the following evidence:

“Did you say anything to Mr Song about the question of whether or not you were prepared to pay a premium for the shares?
…
A. I said in Mr Song’s presence to Mr Robertson I did not consider that Open Realty should pay any premium for the shares and I did not agree with the payment of the shares, of the premium.”

With his characteristic precision and honesty, Mr McCartney declined the invitation inherent in the question to say he spoke to Mr Song; rather he said he spoke “ to Mr Robertson”, and only in “Mr Song’s presence”. He repeated that evidence in cross-examination: again he declined to accept a leading question to the effect that he made his position clear to Mr Song, and said only that he made it clear to Mr Robertson in Mr Song’s presence.

37 Tenthly, the transcript records the following in relation to Mr McCartney’s evidence in cross-examination about the Head of Agreement:

“Q. And did you discuss the document with Andrew Robertson?
A. Yes.
Q. Did you give him any advice about the document?
A. Yes.”

38 Eleventhly, in cross-examination the following evidence was given:

“Q. As someone who was providing legal advice to Andrew Robertson at the meeting and someone who was about to become a director of the company why was the document signed at all?
A. Well as far as I was concerned as I said to Mr Robertson ‘you shouldn’t be signing this document’.”

As the plaintiff submitted, there is no evidence that Mr McCartney ever said directly to Mr Song: “We are not going to sign this document. We are only going to pay $125,000.”

39 The plaintiff relied on evidence to the effect that the cheque for $125,000 was not handed by Mr McCartney directly to Mr Song, but was given to Mr Robertson who handed it to Mr Song. The evidence is not sufficiently clear in its significance to support any particular inference about the overall role Mr McCartney was playing, however.

40 In argument there was some discussion of the document dated 20 December 1999 which was separate from the Head of Agreement, by which Mr Robertson promised to pay $120,000 by 28 February 2000 over and above the $125,000 to be paid on 20 December 1999. If that had been handed over after Mr McCartney’s observations, it would be inconsistent with the first defendant’s case. But it is not clear precisely when it was handed over.

41 For the reasons just given, it follows that, subject to issues of certainty, the Head of Agreement was a final contract, not varied or novated or altered in its effect by any principle of accord and satisfaction or estoppel.

42 Accordingly it is not necessary to consider the plaintiff’s argument that Mr McCartney was not a plenipotentiary agent acting on behalf of Mr Robertson’s interests, though there is force in the view that even if he was an agent for some purposes he could not have greater authority to bind the first defendant than its then two directors, Mr Robertson and Mr Song, by means of anything said in their presence. Nor is it necessary to consider the plaintiff’s argument that Mr Song never assented to the propositions advanced by Mr McCartney. It is also unnecessary to decide whether the trial judge’s finding that Mr McCartney’s testimony that he said various things at the meeting should be rejected: in advancing the submission that the finding should be rejected, the plaintiff was assuming a very heavy burden, particularly in view of Mr Song’s evidence and in view of the way Mr McCartney was cross-examined. In any event, the “glaring improbability” on which the plaintiff relied vanishes if the conduct of Mr McCartney is characterised as it has been above.

The secondary arguments on the appeal: certainty

43 The other ground of the trial judge’s conclusion is that the Head of Agreement was uncertain.

44 The trial judge’s views on certainty were put thus:

“The heads of the agreement indicate that Mr Song was the nominee of Optimum Holdings Pty Limited in respect of those shares.
I do not see how Mr Song could be said to be a nominee for a share holding. There is no evidence before the Court that Mr Song was holding the shares on trust for Optimum Holdings Pty Limited. He said in evidence before the Court that he became a shareholder by mistake and that it was intended that that mistake be rectified. As at 20 December 1999 any such mistake had not been rectified and Lida Song was the registered holder of fifty ordinary shares in Open Realty Pty Limited. There is nothing in the share register which would indicate anything other than that he was the beneficial holder of those particular shares.
In those circumstances, paragraph 1 of the head of agreement is certainly uncertain as to the property and the beneficial owner of the shares referred to in paragraph 1 of those heads of agreement. It was Mr Robertson who agreed to purchase those shares. It is said they were to be purchased from Optimum and Optimum agreed to sell the shares, but he could not purchase the shares from Optimum because Optimum had no property in the shares. The only property in the shares belonged to Lida Song.
There may have been an agreement whereby Mr Robertson agreed to purchase the shares from Mr Song and Mr Song agreed to sell those shares to Mr Robertson or his nominee, but Mr Robertson is not here to give such evidence. In any event, it would certainly appear that the proper purchaser would be Andrew Robertson and not Optimum Holdings Pty Limited.
The uncertainty that exists there in the heads of the agreement makes it difficult for the Court to determine on the probabilities that there was in fact an agreement that in addition to the repayment of the loan there would be a payment of $120,000 for the shares registered in the name of Lida Song. Mr Song, in evidence before the Court, indicated that any settlement of the dispute between the parties, as he understood it, involved firstly the repayment of the loan of $125,000, secondly, his resignation as a director of Open Realty Pty Limited, thirdly, the transfer of the shares which he held in Open Realty and what he referred to as an additional sum of money for such shares.
Mr Song indicated that the heads of agreement, exhibit A, in fact reflected the agreement which was reached as to all those matters. However, the heads of the agreement is certainly uncertain as to the matters and is ambiguous, and in the absence of Mr Robertson the Court is unable to determine the exact nature of any agreement reached between the parties on 20 December 1999.”

45 The correctness of this approach was the subject of detailed written submissions by the plaintiff. The first defendant briefly argued that the Head of Agreement was ambiguous, and that this permitted the reception of Mr McCartney’s oral evidence. In oral argument the first defendant seemed to stay well away from reliance on the trial judge’s approach. It is not necessary to go to the detail of the parties’ written arguments.

46 Whether or not Mr Song was a nominee holding shares for Optimum as averred in Recital 2 of the Head of Agreement does not matter. The facts are that Mr Song was registered as the shareholder, by paragraph 1 of the Head of Agreement Optimum agreed to sell the shares, an executed share transfer was produced at the 20 December 1999 meeting, and steps had thereby been taken to enable the purchaser, Mr Robertson, to become owner of the shares. The Head of Agreement was thus clear, so far as paragraph 1 was concerned, and the vendor had performed its duty pursuant to that paragraph. Accordingly it did not matter whether, as the trial judge said, paragraph 1 was “uncertain as to the … beneficial owner of the shares”. Whether or not Optimum was beneficial owner, it could sell shares to which it did not have legal or equitable title, so long as it procured a transfer of the shares pursuant to paragraph 1. This it did. How it came to do this – whether by some unrecorded arrangement between Mr Song and Mr Robertson – did not matter, and hence it did not matter that the absent Mr Robertson did not give evidence about it.

47 In any event it was not the case that paragraph 1 was “uncertain as to the property”. The property was 50% of the shares in Open Realty.

48 In my opinion there was no relevant uncertainty or even ambiguity in any part of the Head of Agreement which debars the plaintiff’s attempt to enforce paragraph 3 of the Head of Agreement in these proceedings. Even if there were any ambiguity, reception of Mr McCartney’s evidence to resolve it (as distinct from receiving it to prove a variation or the like pursuant to the primary arguments on the appeal) would not produce an outcome favourable to the first defendant.

Orders

49 The following orders are proposed.

1. The appeal is allowed.

2. The verdict and the costs order of the trial judge are set aside.

3. In lieu of the verdict of the trial judge, there are substituted:

(a) a verdict for the plaintiff; and

(b) judgment for the plaintiff against the first defendant in the sum of $120,000 with interest from 28 February 2000 at the rates of interest payable on judgments in the District Court.


4. The parties are directed to file within seven days short minutes of these orders, recording in particular the judgment sum after calculation of interest pursuant to paragraph 3(b) above.

5. An order that the first defendant pay the plaintiff’s costs of the proceedings in the District Court and of the appeal.

50 BROWNIE AJA: I agree with Heydon JA.

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