Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited
[2018] FCAFC 205
•21 November 2018
FEDERAL COURT OF AUSTRALIA
Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited [2018] FCAFC 205
Appeal from: Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited [2018] FCA 174 File number: NSD 486 of 2018 Judge: MCKERRACHER, REEVES AND FARRELL JJ Date of judgment: 21 November 2018 Catchwords: APPEAL – primary proceeding a trial – consideration of the evidence before the primary judge and his Honour’s analysis – where the same material examined on appeal – whether the primary judge’s findings were “glaringly improbable” – no appellable error found
CONTRACTS – appeal from the primary judge’s finding that no legally binding contract had been formed between the relevant parties – whether his Honour erred in failing to find the parties formed a contract – whether his Honour erred in unduly focusing on language, failing to give surrounding circumstances any or sufficient consideration or failing to have appropriate account of post-contractual conduct
CONSUMER LAW – misleading or deceptive conduct – whether his Honour erred in failing to find a reasonable party would have concluded there was a binding agreement
ESTOPPEL – where estoppel claim based upon representation – where representation alleged was not found
Held: no appellable error
Cases cited: Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 358 ALR 683
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Campomar Sociedad, Limitada v Nike International Limited (2000) 202 CLR 45
Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486
Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd [1995] NSWCA 166
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
Jpex Software Services Pty Ltd v Hosking [2000] VSCA 239
Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44
Masters v Cameron (1954) 91 CLR 353
Rafferty v Madgwicks (2012) 203 FCR 1
Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Yorke v Lucas (1985) 158 CLR 661
Date of hearing: 13 August 2018 Date of last submissions: 27 August 2018 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 186 Counsel for the Applicants: Mr GA Sirtes SC with Mr B Le Plastrier Solicitor for the Applicants: Bartier Perry Counsel for the Respondents: Mr SK Dharmananda SC with Mr WCJ Zappia Solicitor for the Respondents: HWL Ebsworth Lawyers ORDERS
NSD 486 of 2018 BETWEEN: PLANKTON AUSTRALIA PTY LIMITED ACN 144 578 852
First Appellant
PLANKTON FARMS PTY LIMITED ACN 603 140 889
Second Appellant
IAN SIMON TRACTON
Third Appellant
AND: RAINSTORM DUST CONTROL PTY LIMITED ACN 003 646 160
First Respondent
ROBERT GREGORY KERR
Second Respondent
JUDGES:
MCKERRACHER, REEVES AND FARRELL JJ
DATE OF ORDER:
21 NOVEMBER 2018
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellants pay the costs of the respondents, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
SUMMARY
The appellants appeal a judgment following an urgent trial by which the primary judge rejected their contentions that Plankton Australia Pty Limited ACN 144 578 852 had concluded an enforceable contract with the first respondent, Rainstorm Dust Control Pty Limited ACN 003 646 160: Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited [2018] FCA 174. The primary judge also dismissed causes of action claiming that Rainstorm and its officers had participated in misleading or deceptive conduct and/or were estopped from denying the existence of the legal relations for which Plankton contended.
The primary judge conducted a detailed analysis of the contemporaneous written communications between the parties and others with whom they dealt. His Honour also took into account the content of affidavits in support filed by the parties. He had the usual benefits of observing evidence adduced during cross-examination.
The primary judge considered that the parties were in serious negotiation, intended to create legal relations, expected at relevant times that they would create legal relations, but had not reached the necessary consensus required to establish a contract.
The claims in misleading or deceptive conduct and estoppel turned, not only on communications between the parties, but also on communications with others with the knowledge of the parties. Again, the primary judge conducted a detailed examination of all the facts and circumstances. For the most part, it was possible to reach a conclusion at trial without reliance upon credibility findings. There were, however, key aspects of oral evidence for Plankton which the primary judge rejected. By that evidence, Plankton sought to establish that the parties had orally completed all matters necessary (even accepting that some were outstanding) to reach a binding agreement. The primary judge stated his findings to this effect (at [101]):
However, viewed objectively, what occurred in that conversation was a discussion about the aspect of the proposal then being considered that concerned the equity position in Algalfields, not the proposal as a whole. For the purposes of the proposal and ongoing discussions between the parties (and matters to be communicated to the Department of Lands to advance securing long term lease for the Site) the parties reached a consensus as to an 85%/15% split for equity in Algalfields. However, what was not communicated in the conversation was any final and binding commitment to the terms of the proposal which was, at that time, still a matter of discussion between the parties in anticipation of agreeing terms to be recorded in written documents.
Having rejected the oral evidence as going too far, the process of analysis by the primary judge turned, essentially, on the exchanged communications taken in the context of the dealings between the parties and third parties. On appeal, senior counsel for Plankton fully accepted that it would be necessary for this Court to conclude that the primary judge’s finding (at [101]), was a finding which was “glaringly improbable”: Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550 per French CJ, Bell, Keane, Nettle and Gordon JJ (at [43]).
We have carefully considered Plankton’s arguments on each of the three causes of action but, for the reasons which follow, we are not persuaded that there was any error on the part of the primary judge.
As it was at trial, it is necessary to go into detail as to both the evidence and the analysis. The same material was examined on the appeal.
COMMON BACKGROUND
As at 2010, Aurora Algae Ltd leased a Site at Gap Ridge, near Karratha in the Pilbara region of Western Australia. At the Site there was a particular species of micro algae indigenous to Australia, known as Dunaliella selina algae (DSA), being cultivated in saline pools. Other algal species were also cultivated there. The Site was contained on two Crown leases.
The leases for the Site were due to expire on 26 April 2015. In April 2014, Rainstorm entered into an agreement with Aurora to take an assignment of the leases. Under this agreement there was a restraint upon Rainstorm using the Site for production of algae. However, Rainstorm’s interest was not in algae cultivation, rather it wanted to use the ponds and other infrastructure to process waste bitterns, sourced from an adjacent land owner, Dampier Salt, into a dust control product. After entry into the agreement with Aurora, Rainstorm sought to transfer the leases and sought a new long term lease on the Site to commence upon the expiry of the existing leases. In due course, the existing leases were transferred to Rainstorm.
Mr Ian Tracton, the third appellant, controlled InterClinical Laboratories Pty Ltd, which was involved in DSA production at the Site prior to 2014. Mr Tracton also controlled Plankton. From April 2014, negotiations ensued between Mr Tracton, for Plankton, and Mr Robert Kerr, the managing director of Rainstorm, regarding arrangements for DSA production at the Site. Before those negotiations, Mr Tracton had approached Aurora concerning whether there would be any issue with DSA production (as distinct from other forms of algae production) on the Site. Despite the restraint agreed with Rainstorm, Mr Tracton was informed there would be no issue in relation to DSA production.
A Plankton subsidiary, Plankton Farms Pty Limited, the second appellant, was incorporated for the undertaking of the cultivation of DSA on the Site.
THE PRIMARY JUDGMENT
As indicated at the outset, Plankton, Plankton Farms and Mr Tracton, contended at first instance that a legally binding Joint Venture Agreement was concluded between Plankton and Rainstorm in relation to activities on the Site, including the cultivation of DSA by Plankton and the production by Rainstorm of its dust suppression product. Plankton asserted that by the terms of the Joint Venture Agreement, amongst other things, Plankton and Rainstorm agreed to establish Algalfields Pty Ltd. Algalfields was to be a company in which Rainstorm and Plankton would be shareholders and which would hold the “master lease” in respect of the Site, granting sub-leases to each of Plankton Farms and Rainstorm. Importantly, the parties accepted that this could not occur without first obtaining the consent of the Minister for Lands for the State of Western Australia.
The primary judge noted that the issue in the proceeding was not whether Plankton and Rainstorm intended to create legal relations. His Honour accepted that they participated in a process of negotiation where the ultimate object was to conclude a contract. However, the principal issue, as his Honour saw it, was whether prior to the disavowal of the existence of an enforceable contract by Rainstorm in June 2015 the parties had reached a consensus of a kind that the law would regard as being an enforceable contract or, alternatively, whether Rainstorm had led Plankton to believe that such an agreement had been concluded and Rainstorm had acted in reliance upon that state of affairs. The primary judge discussed the relevant contractual principles (at [11]-[18]), referring to Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 and a number of other cases. It is common ground that the principles cited were unexceptional and gave no cause for complaint to Plankton on appeal.
The history of dealings
His Honour then proceeded to trace the history of the parties’ dealings in greater detail. As this background goes to the issues on appeal, we now record most of the primary judge’s analysis.
The primary judge dealt first with Mr Tracton’s prior connection with the Site. His Honour noted a business sale agreement had been reached in 2010 between Mr Tracton and InterClinical to purchase, amongst other things, all of the stock of dried product that had been produced from DSA cultivated on the Site. InterClinical supplied customers with that product over subsequent years, with the stock running down by 2014 and, by the time of trial, the stock was very low. It is only possible to grow DSA at a handful of locations throughout Australia. Mr Tracton was interested in acquiring the leases for the Site when the opportunity arose because of the existing infrastructure and his past connection with the Site, but did not have the funds to do so.
His Honour then turned to the parties’ initial dealings, noting that on 4 April 2014, Mr Tracton contacted Aurora, the former lessee of the Site, indicating that Plankton was keen to work with the new owners of the Site for the production of DSA.
Rainstorm wrote to Mr Murray Raven, the manager for the Pilbara region at the Department of Lands, on 8 April 2014 seeking the transfer of the Crown leases for the Site to Rainstorm. The letter also advised that Rainstorm wished to make a formal application for a long term lease of the land to be used for manufacturing dust suppression products and conducting an aquaculture business to commence immediately following the expiration of the then existing lease. The letter concluded with a paragraph saying:
Finally, as you know, the Leases expire in April 2015. Leaving aside the issue of Aurora’s application for Ministerial Approval to the transfer of the Leases to Rainstorm, Rainstorm wishes to make a formal application for a long term (30 years would be ideal) lease of the Land for the purposes outlined above, which lease would commence immediately following the expiration of the current term of the Leases. I would appreciate your assistance and advice on what is necessary to initiate this process.
Three days later, on 11 April 2014, Aurora informed Mr Tracton that it had no objection to InterClinical and Plankton operating to produce DSA at the Site. In late May, Mr Tracton sent an email of 27 May 2014 to Mr Kerr advising that, further to discussions, they were keen to finalise arrangements with Mr Kerr to continue to use the Site at Karratha for the growth and harvesting of micro algae, to which Mr Kerr responded that he was “knocking up some suggested wording for you to put onto your letterhead”. Mr Kerr went on to invite Mr Tracton to “amend as you feel fit”, but requested that he get it back “ASAP as I need to get my email off to the Ministry of Lands with some urgency”.
A further email was sent on the same day by Mr Kerr to Mr Tracton setting out the draft terms of the letter to be sent out by Plankton to Mr Raven. It commenced with:
As discussed, competing parties are trying to overturn the deal Rainstorm struck with Aurora on the grounds that we don’t have a ‘big enough’ aquaculture component to our proposed use of the leases.
It continued by requesting “a letter on your letterhead stating something along the lines of: …”. The draft terms of the letter were then set out. The primary judge concluded (at [30]) that this early communication revealed a concern on the part of Mr Kerr that the transfer of the leases of the Site might not be approved by the Minister unless it could be demonstrated that the Site would be used for substantial aquaculture activities. Further, according to the primary judge, it revealed that Mr Kerr considered that an arrangement with Plankton would assist Rainstorm in securing a transfer of the leases.
Mr Tracton responded to Mr Kerr’s email, attaching a draft letter for him to forward to the Western Australian Government regarding finalisation of the new leases required for the Site. The attached letter, subsequently sent to Mr Raven, included the following passages:
[Plankton] and [Rainstorm] have a mutual interest in the use and development of [the leases for the Site] for the conduct of aquaculture and related activities. [Plankton] in [sic] involved in the growth, harvesting, development and research of the micro marine species Dunaliella salina.
…
It is anticipated that the complementary nature of both company’s [sic] businesses will mean full utilization of the potential of the lease sites, provide employment in the Karratha and Pilbara area and bring in export dollars to Australia. Myself and key personnel from [Plankton], along with key personnel from Rainstorm are intending to fly to the site within the next few weeks to inspect the facilities so the arrangement between Rainstorm and [Plankton] can be finalized. We see the site as a unique opportunity to maximize the value of the existing algae production infrastructure, which will allow us to relocate our existing business development plans from Queensland to Western Australia and would appreciate any assistance in finalizing the lease transfer to Rainstorm, so we have a legal basis to finalize our own sub-lease arrangement with Rainstorm.
The primary judge noted (at [33]) that he could be confident that at that time no agreement had been concluded (nor had it been so pleaded) and that the parties were in discussions about a sub-lease arrangement between Rainstorm and Plankton. Plankton takes no issue with this finding. At that time, the prospect of such a sub-lease arrangement was being presented to the Department to support Rainstorm’s application for a long term renewal of the leases of the Site. The primary judge noted that what the letter did reveal was a perspective that it was necessary to finalise the position of Rainstorm in respect of the lease of the Site before any sub-lease arrangement with Plankton might be concluded.
An email of 27 May 2014 from Mr Kerr to Mr Raven, followed a discussion which appeared to have transpired between the two. It included the following extracts:
As discussed on the phone, when Aurora Algae put out the remaining period of its leases to tender, there were 5 or 6 companies bidding. [Plankton] actually outbid Rainstorm, Murujuga and the others but did not have financing in place at the time so subsequently the deal was made with Rainstorm. Since that time, Rainstorm and [Plankton] have been negotiating arrangements for both companies to share the site. Rainstorm with its bitterns processing and aquaculture supplements business while [Plankton] would expand its existing business of growing salt water algae …
The ponds and facilities which [Plankton] require are not required by [Rainstorm] and the infrastructure required by [Rainstorm] is mostly not required by [Plankton]. Rainstorm has already purchased all the physical assets onsite but are still waiting for the actual transfer of the lease(s). There might need to [be] a bit more pondage constructed but that is one of the issues I’m discussing with [Mr Tracton] of [Plankton] later this week when he flies in from Sydney. In the following weeks, representatives of both companies will be flying to the site to finalize the sharing arrangements. Unfortunately, with the unexpected hitch in transferring the lease to Rainstorm from Aurora, we aren’t in a legal position to finalize any contracts with Australian Phytoplankton. And, naturally, any long term commitments between the two companies will depend heavily upon Rainstorm securing the long-term lease after the exploration of the current lease held by Aurora.
(Emphasis added.)
The primary judge was satisfied that the reference to “Australian Phytoplankton” appeared to have been intended to be a reference to Plankton. Significantly to his Honour, this contemporaneous communication was also consistent with an approach whereby the finalisation of any contracts was to abide the outcome of dealings with the Minister to secure a long term lease.
A few days later, on 30 May 2014, Mr Kerr emailed Ms Erin Kelly, which appeared to his Honour to be to a Department of Premier and Cabinet email address, which included the following content:
I thought it would be timely to let you know, that myself and [Mr Tracton] of [Plankton] have agreed on arrangements to share the facilities at the Aurora Algae site. Mr Tracton first contacted me 2010 looking for sources of bitterns … when Rainstorm signed the lease transfer agreement with [Aurora], I intended to discuss with Mr Tracton whether his companies ([Plankton] and [InterClinical]) would be interested in utilizing the algae growing infrastructure on the site. I had intended to finalize the lease transfer and extensions first before commencing negotiations with Mr Tracton, however, given the current circumstances and the passing of time I initiated contact fairly recently. Yesterday, after initial telephone and email discussions, Mr Tracton flew to Perth and we have agreed that the arrangement is viable and mutually beneficial. Perhaps, most importantly to the Ministry of Lands, our arrangement now provides continuity of the original lease requirements for aquaculture over and beyond Rainstorm’s own activities in that space.
His Honour considered this email to paint a slightly different picture than earlier communications, for it suggested that arrangements to share the facilities had been “agreed”. However, the primary judge said (at [39]):
Importantly though, no claim is made by Plankton Australia that an enforceable contract was concluded between the parties at this time. Mr Kelly deposed that the original arrangement he discussed with Mr Tracton was that Plankton Farms would be incorporated and Rainstorm would sub-lease the algal growing portion of the Site to Plankton Farms for an annual fee of $200,000 or, in lieu of lease fees up to 20% equity. This appears to be the nature of the “arrangements to share the facilities” that were agreed at this time.
The primary judge noted that in early June 2014 Mr Kerr sent an email to the Pilbara Development Commission (PDC). That communication was in very similar terms to the email to Ms Kelly. It concluded with a statement to the effect that Rainstorm and Plankton had agreed on arrangements to share the facilities at the Site. That email was copied to Mr Tracton. Mr Tracton agreed that the discussions he had with Mr Kerr at that time were about Plankton becoming a sub-lease-holder and that no binding agreement had been reached at that point. He accepted that the detail was still to come. The primary judge said it was, nevertheless, evident that the parties described the outcome of their early discussions as an “agreement”, albeit not a binding one at law.
Mr Tracton gave unchallenged evidence about a meeting that he attended with Mr Kerr and Dr Ken King, the Chief Executive Officer (CEO) of the PDC. Mr Tracton explained that during that meeting there was a conversation in which he said words to the effect that:
Plankton and Rainstorm are currently in negotiations to secure mutually beneficial commercial agreements. Prior to finalising that agreement we will need to ensure that a new long-term lease for the Site is granted by the Minister.
(Emphasis added.)
Mr Tracton also said that Mr Kerr responded that it was the intention of the parties that if Rainstorm was awarded a further long term lease, it would enter into a sub-lease for the duration of the period of the long term leases with Plankton. In the same month, Mr Tracton and Mr Kerr continued discussion in relation to coexistence on-site. A point came when Mr Tracton was not willing to advance negotiations further and disclose his business plans until Mr Kerr signed a confidentiality agreement. There was some minor tension in that it was put to Mr Tracton that he was not prepared to take Mr Kerr at his word in wanting a formal legal document about confidentiality. Mr Tracton responded that he had only known Mr Kerr for about three weeks. A formal confidentiality agreement was executed.
The primary judge said the fact that at the instigation of Mr Tracton the parties recorded their confidentiality agreement in a formal manner provided some context to their ongoing dealings and the extent to which it was likely that they may have contemplated that a legally binding agreement may be reached between them concerning activities at the Site without the terms being recorded formally in writing. Implicit in this observation by his Honour was that the insistence of a formal agreement as to confidentiality suggested that the parties would expect a formal agreement over the more substantive issues.
In the course of this month, there were two further exchanges. On 19 June 2014, Plankton and Rainstorm entered into the confidentiality agreement, reciting that each party had agreed to provide the other access to confidential information “as a pre-requisite for the provision of developing a new on-going business relationship between the parties”. On 24 June 2014, a letter was sent to the PDC on the letterhead of Plankton, but signed by Mr Tracton, Managing Director of Plankton and by Mr Kerr, Managing Director of Rainstorm. Reference was made to a meeting “in Karratha last week” confirming a number of points, including:
4.Rainstorm will be taking an equity position in [Plankton’s] farming arm. The details of the equity arrangements cannot be completed until the new long-term lease arrangements for the site is [sic] finalised.
5.When Rainstorm is awarded a suitable long-term lease, [Plankton] will be granted a lease of the same duration for the purpose of algae aquaculture farming. Due to the significant capital investments required for algae aquaculture farming and production, a long-term lease arrangement is vital to the project being viable.
…
7.Once the leases are in place, [Plankton] algae growth and production will occur in the Pilbara Region rather than North Queensland, as originally planned.
(Emphasis added.)
At the conclusion of the letter, the parties said “[w]e hope to finalise all leasing arrangements as soon as possible to maximise the current growth season which commences in August”.
From this correspondence, the primary judge (at [48]) thought it significant that the letter contemplated that the completion of the details of the equity arrangements as between Plankton and Rainstorm after new long term lease arrangements for the Site had been finalised. It was indicative of the order in which things were to occur.
In the following month, on 14 July 2014, the Department informed Mr Kerr (and Aurora) of the Minister’s consent to the transfer of the two leases. Whether those leases, which were to expire in April 2015, would be renewed remained an outstanding question. Mr Tracton was not copied in on this communication.
Late in that month, Mr Tracton commenced steps to engage Mr Owen Bunter to carry out certain works for Plankton on-site. Mr Tracton and Mr Kerr, in due course, agreed to split the cost of Mr Bunter for the period between August 2014 and the beginning of December 2014. Plankton took occupation of the Site at the beginning of August 2014 and incurred, thereafter, significant expenses associated with its occupation. Mr Tracton gave evidence that he went onto the Site to evaluate it for the purposes of re-establishing the algae farm, to work out how much it was going to cost to set it up and to do reconnaissance before finalising any arrangements. He accepted he also sought to show to Mr Kerr that he was genuine about his intention to set up an algae farm on the Site and that he anticipated that if he was able to showcase his abilities it would be easier to reach an agreement with Mr Kerr. The primary judge noted that also in August 2014 Mr Kerr raised with Mr Raven the possibility of a meeting with him and Mr Tracton to consider “the next phase of leasing” the Site. On 8 August 2014, Mr Tracton, having been sent a copy of an email from Mr Kerr to Mr Raven, emailed Mr Kerr in the following terms:
FOOD FOR THOUGHT
I believe if we work together as one enterprise, we will have the best chance of securing the future tenure of the site.
My suggestion is that we set up a co-owned PTY LTD company for the lease renewal.
This company would be owned and backed by Greg Kerr from Rainstorm Pty Ltd and Ian Tracton from [Plankton]/[InterClinical] – a group of long-term, established and successful Australian company’s [sic].
We need to give the new company an attractive name; eg; AQUATEN PTY LTD.
If you are in favour of my suggestion, we can bounce this idea off Murray at our meeting in Perth.
It was noted that the reference to “Murray” was clearly a reference to Mr Raven. His Honour considered this appeared to be the first point at which there was a suggestion about the leases of the Site being taken over by a company in which both Rainstorm and Plankton had an interest. Until this stage, the communications reflected consideration only of a sub-lease from Rainstorm to Plankton’s “farming arm”, in which Rainstorm would take an equity interest.
The email was forwarded by Mr Kerr to his co-director Mr Tim Keenan, with the following email message:
Ian is suggesting a co-owned company with no suggested structure. So it is odd to bounce ideas off of a blank wall.
I understand that you were looking at a three prong strategy:
1)We go it alone. … [Rainstorm] owns the site and Plankton is a secondary lease owner. Plankton rents or purchases assets that it needs.
2)We partner in a co-owned company which owns the master lease. Plankton pays us $600k to own half the site.
3)We partner in a co-owned company which owns the master lease. Plankton pays [Rainstorm] or the new company a lease rate ($100k) a year.
If we go into a co-owned company we need to protect our ownership of the long-term lease. I don’t want to find [Rainstorm] in a situation where the other 50 percent share is up for grabs. It has to revert back to [Rainstorm] so we have 100 percent ownership. I don’t know how to structure this. Need a lawyer to set the articles of the co-owned company. May be some type of ‘First Right of Refusal’ clause, but I don’t want to colour the outcome of the structure.
His Honour was unclear from the communication between the directors of Rainstorm whether there had been some discussion of the possibility of the leases of the Site being held by a company in which each of Rainstorm and Plankton held an interest prior to the 8 August 2014 email or whether the discussion was prompted by the email. In any event, his Honour said that the sequence of events up until this point evidenced that the decision by Mr Tracton on behalf of Plankton to go onto the Site in August 2014 was not influenced by any belief that there was an agreement in place.
Mr Kerr deposed that in a meeting in or around late August 2014, with Mr Raven and Mr Tracton in attendance, Mr Raven said words to the effect that it would slightly improve chances of renewing the leases if the application for renewal was made jointly by Plankton and Rainstorm because it was anticipated that Plankton would be performing the aquaculture component of the permitted use of the leases with respect to the Site. Mr Kerr’s evidence was that he asked “what would give the best chance of a new lease: an application in Rainstorm’s name, a joint application by Rainstorm and Plankton?”. Mr Raven responded with words to the effect “probably [a] joint [application]”. Mr Kerr gave evidence that after the meeting he said to Mr Tracton words to the effect that he did not like the idea of the leases being jointly held, but if it was going to improve the chance of a new lease then “we would make a joint application”.
The primary judge concluded that the chronology suggested that the prospect of the “master lease” being held by a company in which each of Plankton and Rainstorm held shares was being considered before the meeting with Mr Raven at which it was suggested that it would improve the chances if the actual application for renewal was made jointly by those parties.
Various on-site steps took place, as noted by the primary judge:
(a)two generators were purchased to be shipped to the Site;
(b)batches of algae were received from Flinders University;
(c)plans were made to purchase fuel storage tanks for the generators;
(d)steps were taken in relation to obtaining an aquaculture licence for production of DSA;
(e)arrangements were made to have the existing centrifuges on the site sent off-site for service and any necessary repair; and
(f)Mr Tracton communicated with a prospective customer on 20 October 2014 advising that he was well into setting up new DSA growth ponds to be used for commercial production and hoped to have some regular DSA concentrated slurry product available for sale in early 2015.
An email exchange of 30 October 2014 from Mr Tracton to Mr Bunter (copied to Mr Kerr), included the following:
Please ensure these matters have been addressed and we will be soon ready for race upon culture growth:
1/ AquaCulture Licence: we need to ensure that we are compliant in all regards. We need to either have the previous Aurora aquaculture licence to grow Dunaliella salina (and other algae’s [sic]) transferred over to [Plankton]. Alternatively, we can simply apply for a new licence …
2/ All growth ponds to be ready asap for our growing cultures, whereby all ponds have been washed out and flushed with clean sea water and cleaned of debris, with no artemia, shrimp or unwanted sea creatures remaining in any of our ponds, as they will eat and interfere with our growth cultures …
…
3/ Ocean water and bitterns intake pumps require a filter, ie; to prevent artemia (etc) getting on to our site and into any of the ocean water retention, bitterns and growing ponds.
…
4/ Ensure a raceway growth and all other production ponds and tanks are operational, with all pumps and water jets working properly.
…
Mr Bunter replied with notations to the email, including:
Working on this. The ERP’s by and large are ready (with the above caveat) and electrically we should be okay. The final testing and re-commissioning of the ponds/raceways will not be able to be achieved until[:]
a)The waste disposal system is back in place with waste water being directed to the evaporation ponds.
b)The pumps to do so – re-installed.
c)The methodology for the delivery and nutrient source (itself) is decided upon.
The next major project being processing and re-configuration.
a)This requires electrical and control work, pipe re-configuration, filtration and settlement systems and of course the centrifuge is to come back and be installed.
From this exchange, the primary judge concluded that these steps in relation to on-site activity taken went well beyond any notion of mere “reconnaissance”. However, the primary judge noted that in his oral evidence, Mr Tracton was reluctant to accept that he had already committed to a commercial operation at the site by the end of October 2014. Nonetheless, as the primary judge noted, Mr Tracton by that time had caused these substantial steps to be taken at the Site towards producing DSA. They could not be said to have been taken pursuant to any agreement because it was not until the end of November, at the earliest, that Mr Tracton said that an agreement was reached, nor in reliance upon any representation as the alleged representational conduct relied upon by Plankton occurred after that time.
Rather, the primary judge found that Mr Tracton had a keen interest in producing DSA at the Site and was trying to demonstrate his capabilities to Mr Kerr. He needed a supply of DSA for when his existing stocks needed replenishing. The evidence before the primary judge was that by the end of November 2014, Plankton had spent about $200,000 on activities at the Site.
Key negotiations resumed in November 2014, with the parties engaging in negotiations about the terms on which Plankton or Plankton Farms might be allowed to cultivate DSA on the Site on an ongoing basis. His Honour inferred that the negotiations seemed to have arisen out of steps being taken to make a submission to the Department to support securing long term lease of the Site.
The evidence from Mr Kerr was that on the basis that Plankton and Rainstorm would be making a joint submission for a new lease, he began negotiating the terms to a potential long term agreement between the parties around November 2014. That appeared to commence from an email earlier in that month from Mr Kerr to Mr Tracton saying that he had been absolutely “flat out” for the last fortnight but intended to make a big push on the lease renewal in the coming week. Mr Tracton responded on 5 November 2014, saying:
I also plan to re-visit the Crown Lease submission letter again tomorrow. The time is right – not to [sic] early and not too late. The lease still has about 5 months to run and lease renewals are usually done between 3-6 months prior to expiration.
On 13 November 2014, the Department sent Mr Kerr an email explaining that Mr Raven had taken long leave. The Department requested a concise submission, referring to a discussion of such a submission at a meeting with Mr Raven on 27 August 2014.
This resulted in Mr Kerr sending an email to Mr Tracton (copied to Mr Keenan) on 18 November 2014 saying:
To summarize our discussion, this is how I see the structure coming together:
ŸAlgalfields Pty Ltd is formed as a holding company with 1,000 shares – 950 to Rainstorm and 50 to [Plankton][.]
ŸAlgalfields then provides to [Rainstorm] and to [Plankton] subleases of the same duration of the Algalfields Master Lease, I.e. 21 years for all leases.
ŸThe annual charge for each of the subleases will be 50% of the cost of the Master Lease (currently unknown) plus $2,000 to cover admin and ancillary costs[.]
…
There will be lots of cooperation between [Rainstorm] and [Plankton] because we have a joint vested interest in making the site work. Happy to talk this through further with you but ultimately, [Plankton] is going to get a heck of a good site with most of the expensive infrastructure already in place for algal production. We should each continue writing up [Plankton’s] and [Rainstorm’s] business plans for submission to the [Department] under the umbrella of a submission from Algalfields. I’ve asked my solicitor to begin drawing up some of the necessary documentations but even though it won’t all be in place we’ll have enough to tell the [Department] the general plan. I’ve attached one document already but more shall be forthcoming.
Attached was a consent to be executed by Plankton for it to become a member of Algalfields. It was proposed that Plankton would acquire a 5% interest in Algalfields, which would be the holder of the “master lease”. Notably for the primary judge, the email did not link the summary of the discussion about the structure to the need for a joint company to improve the prospects of securing long term leases of the Site, rather it indicated a broader cooperative joint interest in making the Site work.
The primary judge observed that the 18 November 2014 email provided an important context for the communications which followed for two particular reasons. First, it referred to necessary documentation to be drawn up by Rainstorm’s solicitor. Secondly, the statement was that even though all would not be in place there would be enough to tell the Department “the general plan”.
Mr Kerr’s email was forwarded by Mr Tracton to his solicitor, Mr Bruce Coode of Coode & Corry, with the following message:
Hi Bruce,
Please find attached my REVISED PROPOSAL for Greg at Rainstorm:
Please add suggestions and comments.
I want to send this document to him ASAP.
Until we agree on the basis on our business arrangements, we cannot progress to the WA Crown Lease submission.
Thanks,
IAN
To the email was attached a completely reworded proposal headed “Revised Proposal Summary”, commencing with the words “[f]urther to our discussions, I would like to propose the following …”.
Then on 24 November 2014, Mr Tracton forwarded an email to Mr Kerr in the following terms:
Please find attached my revised proposal. I hope you will find it fair and reasonable. Happy to discuss further.
In the meantime, can you please forward me what you’ve prepared so far regarding the WA lease renewal submission document. This will assist me in completing my part.
It attached an expanded version of the Revised Proposal Summary document, concluding with a list of matters described as “Additional notes and clauses to be added into the agreements and company documents” (original emphasis of the primary judge). Subsequently, on the same day, Mr Kerr received an email from Mr Tracton with the subject “[Plankton] – how I want to complete the lease renewal presentation document and my Dunaliella selina promotional product information brochures”. It said:
I was working on our lease renewal presentation document over the weekend and it is driving me crazy. I have decided to employ a professional business proposal writer to help prepare the lease renewal submission document, which will include: business plan and outline, corporate identity profiles, background, product summaries, benefits to the community, WA and Australia, etc. It will be fast-tracked and ready within 2, 3 or 4 days. The cost will be between $500 and $700. I am happy to pay for it. If you send me what you’ve prepared, I will co-ordinate all the information accordingly so that we can quickly to have it finished [sic].
It was certainly apparent, as the primary judge considered, that matters were proceeding with greater intensity at this point. The primary judge inferred that the parties considered there was a need to proceed with some urgency in providing a submission. Its preparation was being undertaken at the same time as there were discussions between the parties.
His Honour inferred that the context showed that the parties were engaged in discussions about their business arrangements and were also seeking to advance a submission to be provided to the Department. His Honour observed that there was no express language manifesting an intention to reach a concluded agreement. His Honour said, on the contrary, the document used language of discussions and the establishment of common ground. There were no invitations for particular terms to be accepted, agreed or concluded in some particular way. None of the proposal documents provided for the terms to be agreed or adopted by a signature on behalf of the parties.
Nonetheless, it is clear that a process of refinement was occurring. On 25 November 2014, Mr Tracton sent a further document entitled “Revised Proposal Summary (V2)” as an attachment to the following email:
Further to our discussions, I have revised the proposal accordingly.
In summary, the new trading/business company “[Plankton Farms]” could generate extremely high returns for all involved. This is a rare opportunity.
In regards to Algafields as the leaseholding/management company – [Plankton] together with [Plankton Farms], as an ongoing trading/business concern, will add significant value to the overall worth and value of the crown lease.
Please find revised proposal attached, as per our discussion.
Please let me though [sic] your thoughts and comments.
If this arrangement is suitable, I would like to work [to] having both new entities, ie; Algafields Pty Ltd and Plankton Farms Australia or [Plankton Farms] registered as WA companies.
Kind regards and speak soon.
V2 expanded upon the section “Additional notes and clauses to be added into the agreements and company documents”.
On the following day, 26 November 2014, Mr Kerr emailed Mr Tracton a marked up version of the Revised Proposal Summary that had been sent to him the previous day with a covering email stating that he had made his amendments and invited any comments or a phone call. The tracked changes included some further amendments to the section “Additional notes and clauses to be added into the agreements and company documents”. It also changed the proposal to the shareholding in Algalfields to be held as to 85% by Rainstorm and 15% by Plankton. The earlier version had referred to 80% and 20% respectively.
This gave rise to an email from Mr Tracton to Mr Kerr on the same day saying:
The proposal’s looking good and taking shape.
I am trying to cover as many contingencies as possible, so that we are all on common ground when moving forward.
The last set of points was suggested by my accountant/business adviser.
Please review the attached revised V4 proposal for discussion.
The primary judge emphasised two points: first, the reference to points suggested by Mr Tracton’s “accountant/business adviser”; and, secondly, the invitation to engage in further discussion in respect of the attached version of the document.
Attached was ‘Revised Proposal Summary (V4)”, which added a section at the end of the proposal in the following terms:
Further points for consideration:
ŸExpenses and Income to be reviewed and emailed on a quarterly basis upon completion of each BAS with ATO …
ŸAccounts to be reviewed yearly upon lodgement with ATO … (with Profit and Loss and Balance Sheet)
ŸDividend distribution to be at 25% (or whatever you feel is appropriate) of net profit after company has achieved $400,000 profit … estimated 2/3 years … Maybe put in a contingency to reconsider altering this percentage to a higher amount if feasible.
ŸAll other surplus funds to be reinvested in the growth of the company with worldwide plan of distribution …
ŸAll government grants and funding obtained remains in the company and is spent appropriately for business expansion and development …
ŸAll funds and surpluses to be advised on quarterly and planned spending budgets in Marketing, Research and development. etc. …
ŸAll these items need to be in the agreement (ie: shareholders agreement and the Memerandum [sic] of understanding) …
To this, the primary judge noted the following. First, the section was headed “points for consideration”. Consistently with the course of communications in respect of the earlier proposals, this introductory language suggested to his Honour that the list contained additional items for discussion, not the finalised terms of a formal offer for acceptance. Secondly, the language used within the dot points was consistent with ongoing discussions. Thirdly, the final dot point, his Honour said, expressly contemplated that there would be a shareholders agreement and a memorandum of understanding to be prepared at a later stage. That language, together with the language about the notes and clauses “to be added into the agreements and company documents”, viewed objectively by the primary judge, manifested an intention that any agreement was to be recorded in subsequent formal instruments comprising at least a shareholders agreement and a memorandum of understanding.
It appears to this Court that 26 November 2014 was a critical date. Mr Tracton deposed in an affidavit filed before the primary judge in relation to this email exchange of 26 November 2014:
A short time after sending that email, I telephoned Greg Kerr and had a conversation with words to the following effect:
I said:“Would you consider my amended proposal increasing the equity position in Algalfields?”
Greg said: “No. What I emailed yesterday is the deal. That’s it.”
I said: “Okay, I can live with that. Well let’s move forward with it then. What do we need to do in relation to the WA crown for the master lease.”
Greg said: “We need to finalise the dossier for them.”
I said:“Okay. Well I will get my business writer to write it up for us so that it looks and reads well.”
Greg said: “Okay. Great.”
There was some doubt as to precisely when this occurred, but the primary judge noted there was no real dispute it occurred within one day of V4 being circulated.
Although Mr Tracton deposed to his understanding based on that conversation and email that Plankton and Rainstorm had entered into a Joint Venture Agreement, Mr Kerr deposed otherwise. Mr Kerr said the proposals from each side were never agreed and did not result in a legally binding agreement. He subsequently deposed that he never communicated to Mr Tracton that Rainstorm offered to enter into an agreement with Plankton on the basis set out in the emails exchanging the proposals, nor that Rainstorm accepted the terms of the proposals. Mr Kerr said “[t]he only thing I told Ian [that] Rainstorm would do is make a joint application for the new lease”.
Mr Tracton was cross-examined and re-examined about this discussion. During re-examination Mr Tracton said:
The – a phone call that I made to Greg regarding the proposal agreement negotiations that were on 26 November asking him about the one – one major point, being the – the percentage breakdown of Algalfields, and I was requesting – I was agreeing with him. He – he gave me a final proposal. I’m saying to him, “look, I’m happy with everything in there. Would you consider twenty percent for Plankton Australia rather than 15 percent?” Greg said: “No. My final proposal is what I’ve offered you there” and I said, “Alright. Well, I – I’m happy with that. Let’s – what do we have to do to move forward? Do we agree on this?” “Yes” both parties agreed and – and we – we moved forward.
The primary judge rejected the version of events recorded by Mr Tracton in re-examination in the following passages of his Honour’s reasons (at [98]-[100]):
99This version of the telephone conversation is materially different to that which Mr Tracton stated in his affidavit (quoted above). In particular, in his affidavits Mr Tracton at no point suggested that he asked Mr Kerr “Do we agree on this[?]” and Mr Kerr said “yes”. The absence of any such evidence in his affidavit is striking because it is both the key conversation upon which the applicants rely in bringing their contract claim and it is the main factual issue in dispute in these proceedings. In those circumstances, I do not accept the evidence as to the version of the telephone conversation given by Mr Tracton in his oral evidence. I find that the evidence about the parties having agreed is no more than Mr Tracton’s conclusion or characterisation of the consequence of the conversation and reflects the case that he advances in these proceedings. I mean no criticism of Mr Tracton in finding that the words “do we agree on this?” were not spoken by him and the response “yes” was not given by Mr Kerr. No doubt he now believes that an agreement was reached. However, whether there was a concluded contract that is legally enforceable requires a consideration of two separate matters. First, what did the parties actually say and do? Second, what is the correct legal conclusion to be drawn as to whether a contractual liability arose from those dealings?
100I do accept that there was a telephone conversation between Mr Tracton and Mr Kerr after the V4 proposal. I do so recognising that there is some inconsistency as to the evidence of Mr Tracton as to precisely when that telephone conversation occurred. Mr Kerr accepted that it was possible that such a conversation occurred. Having regard to the course of the communications between the parties it is likely that such a communication occurred. As I explain below, subsequent communications by Mr Tracton and Mr Kerr with third parties referred to the shareholding in Algalfields as being 85% on the part of Rainstorm and 15% on the part of Plankton Farms. Indeed, information to that effect was included in the business case submitted to the Department of Lands shortly after the exchange of the proposals. Therefore, it is likely that it was the subject matter of a telephone conversation. Further, I find that the conversation was substantially in terms of that deposed to by Mr Tracton in his affidavit.
The primary judge did not find, based on an objective consideration of the evidence before him, that the parties reached a binding agreement. Importantly again we note his Honour observed (at [101]):
However, viewed objectively, what occurred in that conversation was a discussion about the aspect of the proposal then being considered that concerned the equity position in Algalfields, not the proposal as a whole. For the purposes of the proposal and ongoing discussions between the parties (and matters to be communicated to the Department of Lands to advance securing long term lease for the Site) the parties reached a consensus as to an 85%/15% split for equity in Algalfields. However, what was not communicated in the conversation was any final and binding commitment to the terms of the proposal which was, at that time, still a matter of discussion between the parties in anticipation of agreeing terms to be recorded in written documents.
That led to his Honour accepting that the parties reached a consensus concerning the equity to be held in Algalfields, but not the oral evidence of Mr Tracton to the effect that there was communication of any agreement with respect to the matters addressed in the proposals being exchanged. Viewed objectively, his Honour considered the parties were taking care to record matters in a formal way as their discussions progressed and, in that context, it was most unlikely that the exchange of proposals concluded with an oral commitment.
Rather, his Honour said that the parties engaged in discussions for the purposes of reaching sufficient consensus to enable a submission to the Department. Otherwise, the question of finalising their agreement was held over until the outcome of the application was known. The parties proceeded on the basis that any agreement would be concluded once the outcome of the application to secure long term tenure of the Site was known.
Following what Plankton contends was the reaching of the Joint Venture Agreement, the parties made the Submission to the Department. On 1 December 2014, Mr Kerr and Mr Tracton each signed a joint letter to the Department. The letter confirmed that Rainstorm and Plankton had “a mutual interest in the commercial use and development” of the Site. The letter continued:
As such, the two companies have agreed to form a partnership and have created a new business enterprise called, Algalfields …
Plankton emphasised, in particular, the words used in this sentence.
The letter attached the detailed Submission which recorded the following:
In anticipation of the current leases expiring in April 2015, a new business entity named [Algalfields] has been created with joint ownership by [Rainstorm] and [Plankton] (Figure 1). As the incumbent leaseholder, Rainstorm is willing to relinquish its rights to apply for a subsequent 21 year lease … in favour of Algalfields doing so. In exchange, it has been agreed that Rainstorm shall gain a minority equity position in the newly formed [Plankton Farms] who will hold the Aquaculture Licenses and subsequently all commercial stakeholders will have an economic interest in both Rainstorm and Plankton Farms achieving maximum utilization of the site in continuing commercial success.
…
Plankton Farms and Rainstorm have a mutual and complementary interest in the commercial use and development of [the Site] for the conduct of aquaculture and bitterns related activities. To continue with the primary usage of the site, as well as working to expand and maximize the existing usage of site [sic] and improving its commercial viability, Algalfields will be the Master Lease holder and manager, see Figure 1. It is anticipated that the lease of the Site will be transferred from Rainstorm to Algalfields under a new Lease agreement with simultaneous approval being sought for Algalfields to sub-lease the Site to Plankton Farms and Rainstorm to conduct their respective complementary commercial activities.
The primary judge noted that Fig 1 depicted Algalfields as the “Lease Management Holding Company”, with an ownership structure of Rainstorm as to 85% and Plankton as to 15%. It also referred to sub-leases to each of Plankton Farms and Rainstorm. It contained detailed explanation as to how the Site would be utilised by Plankton in cultivating DSA and Rainstorm in extracting bitterns.
On the same day, on 1 December 2014, Mr Tracton emailed Mr Kerr informing him that the “new company for the algae farming operations is now registered as Plankton Farms”.
Also on 1 December 2014, Plankton Farms submitted an expression of interest (EOI) for State government funding under the “royalties for regions” project. Input into the EOI was provided by each of Mr Kerr and Mr Tracton. The EOI concluded with the following statement:
To date Rainstorm has [spent] $1.2 M to buy the site and its infrastructure from Aurora Algae Pty Ltd. Rainstorm has spent further money on other site inputs and improvements. To date, Plankton Farms and [Plankton], on speculation, without any long term lease in place, have inputted $100,000+ in wages, equipment repairs and purchases, infrastructure modifications, laboratory set-up and so on. [Plankton] has three employees currently on the site.
Importantly, at this juncture, the primary judge noted a significant feature of his analysis of the relationship between the parties. An issue arose at trial as to whether the words used in the EOI and set out above were, in effect, a statement by Mr Tracton that his presence on-site was speculative, both as to the risk concerning a long term lease and a risk that the parties would not conclude an agreement. His Honour doubted that the words conveyed the latter, rather, his Honour said that the parties expected to conclude an agreement. They knew that there was uncertainty as to whether there would be long term leases. Part of what needed to be demonstrated was sufficient proposed aquaculture activities on the Site in order to justify a new lease for that purpose (being the purpose for which the existing lease of the Site had been granted). His Honour was of the view that it would be inconsistent with the evident purpose of the EOI to introduce doubt as to whether Plankton was likely to conclude an agreement with Rainstorm. His Honour accepted, however, that was not to say that there was, in truth, a concluded agreement at that point but rather the statement in the EOI simply did not address that issue.
This observation by the primary judge is telling. It is consistent with both parties’ cases that at this point they expected to conclude an agreement. The real question was and is whether they had and whether they would. That summary, however, fails to encapsulate the case advanced for Plankton and the argument which it presses on appeal. Plankton contends that, not only did the parties expect to conclude an agreement, but that all important terms of that Joint Venture Agreement had been reached with the remaining aspects being mere detail. That is where the parties differ and differed at first instance.
On 3 December 2014, Mr Kerr sent Mr Tracton a form of consent for Plankton to become a shareholder in Algalfields. It was executed and returned and documents for the registration of Algalfields were also prepared. The company, however, never was incorporated.
Meanwhile, in early December 2014, activity continued on-site. The primary judge noted that on 9 December 2014, Mr Tracton followed up in relation to the centrifuges on-site stating “[w]e want and need them back in Karratha ASAP for our test productions (Dunaliella salina algae harvesting) commencing early in the new year”. Plankton Farms employed Mr Bunter as general manager for the Karratha algal cultivation and production.
An email address was allocated to Mr Kerr for Plankton Farms in December 2014.
Mr Kerr emailed the Department following up the Submission, concluding:
I know we took quite a while to get our submission in as it is of burning importance to us and we took forever to tweak and edit it. I’m not seeking to hold you to any specific date but we have spending, and more importantly, employment decisions to make and at this point we don’t have any certainty beyond next April.
Throughout this time, Mr Bunter was engaged as the full-time general manager at the Site by Plankton Farms. Mr Bunter communicated by email with both Mr Tracton and Mr Kerr concerning steps occurring in relation to setting up the DSA production and progress of matters such as the aquaculture licence, the centrifuges and production trials.
His Honour then turned to dealings and exchanges between the Department and Mr Kerr and Mr Tracton commencing in early 2015. These communications with the Department were not in accordance with the parties’ requests in that the Department emailed Mr Kerr and Mr Tracton, on 8 January 2015, stating that it was prepared “to refer the issue of a new lease to appropriate agencies for comment and approval”, but on 12 January 2015 the Department followed up with a further email in the following terms:
Further to my email below and as discussed with Greg last week – if the Minister for Lands agrees to the issue of a new lease as per your application, it is the Department of Lands preference that the new lease be issued to the current leaseholder [Rainstorm]. Subject to the approval of the Minister for Lands (under delegated authority), the lease could then be transferred as required.
(Emphasis added.)
The Department subsequently prepared plans in relation to the area essential for the proposed business activities and the Department sought confirmation that there was no objection to the new lease, if approved, being issued to Rainstorm. The communications from the Department went to both Mr Kerr and to Mr Tracton.
There was ongoing activity by Mr Bunter in particular in the early months of 2015 but, in any real sense, there was quite a hiatus in terms of finalising agreements until a communication on 21 May 2015 from Mr Tracton to Mr Kerr. Mr Tracton sent a document headed “Heads of Agreement”, which was an amended form of the V4 proposal, commencing with the following words:
For current on-going business, subsequent shareholder agreements and basic memorandum of understanding
Based upon mutual discussions and email correspondence to date
Creating a strategic operating alignment for specific business arrangements between Rainstorm and [Plankton]
The primary judge noted, unlike the proposal documents exchanged in November 2014, at the end of the document there was provision for signature by Mr Kerr on behalf of Rainstorm and Mr Tracton on behalf of Plankton. This met with an immediate response from Mr Kerr indicating that he had received the draft Heads of Agreement and saying “[w]e’re going to have to have a serious talk about the role of Algalfields and the Master Lease”.
Mr Tracton sent a draft of the EOI on the following day to various parties, including Mr Kerr. This document contained the following content:
In 2014 Plankton Farms was formed for the purpose of subleasing the Karratha Site from its new leaseholder, Rainstorm Dust Suppression Pty Ltd … to farm, harvest and produce the Dunaliella salina biomass.
Rainstorm will contribute to and invest in the Plankton Farms Project, by way of providing the use of the existing site infrastructure …
The joint partnership between the two successful entities, [Plankton] and Rainstorm, augers well for commercial success of the Plankton Farms initiative.
It also contained a figure described as “Relationship Structure”, by which Rainstorm was also described as the “Site Leaseholder”. Otherwise, the language used in the figure appeared to reflect the terms of the request made by Mr Kerr in his email of 15 May 2015 where he queried the need to refer to Algalfields and expressed a preference that the quantum of what Rainstorm paid to Aurora be omitted. The draft submission also contained the following content:
Plankton Farms via it’s [sic] holding company [Plankton] – will be contributing an estimated $1.5 million in cash and kind into the project. Plankton Farms and [Plankton], on speculation, without any long term lease in place, have invested over $400,000 in wages, equipment repairs and purchases, infrastructure modifications, laboratory setup and site development. Plankton Farms has fulltime employees currently on the site to assist the setup of the Plankton Farms Project.
…
To date Rainstorm has invested the capital to secure the leasehold and the existing site infrastructure from Aurora Algae. The value of the leasehold and replacement cost of the existing site infrastructure is estimated at $5 million…
(Emphasis added.)
The primary judge said that the language used in this document referring to “on speculation” appeared to be an updated version of the language that had been used in the EOI. Later, on 27 May 2015, Mr Kerr, Mr Keenan and Mr Tracton all met in Perth. The unchallenged evidence of Mr Keenan before the primary judge as to the events of that meeting was that “Greg” (referring to Mr Kerr) said the Department had rejected the proposal for the lease to be in the name of Algalfields and, therefore, the lease was going to be in Rainstorm’s name. Mr Keenan’s evidence was that, as a result, Rainstorm was prepared to revert back to the original proposal of Rainstorm giving a sub-lease to Mr Tracton’s company and that the parties would need to negotiate the terms of that deal.
The dispute comes to a head
Two days later, on 29 May 2015, Mr Tracton emailed Mr Kerr saying:
Continuing on from our conversation in Perth, I understand that you and I have an arrangement/agreement in place. We made a deal and have been working together as a team. We negotiated a business arrangement based on receiving a renewal and new lease for the site. In November, 2014, this agreement was confirmed through various discussions and emails. On December 4, 2014, we jointly made a formal submission to the W.A. Department of Lands based on those discussions. When you told me in Perth this week that things have changed – I don’t know what. Our business arrangements were put in place 6 months ago. Algalfields and Plankton Farms were created accordingly. As consideration, I have put a substantial amount of monies into our business project to date.
I have put 110% effort into everything to value add and ensure you, (ie; Rainstorm) and me, (ie; [Plankton]), would be able to secure a future lease for the site.
I have really enjoyed working with you to date and look forward to a mutually successful and rewarding future.
However, in contrast, on 5 June 2015, Mr Kerr responded as follows, indicating the difficulties between the parties, saying amongst other things:
The return to the original plan where Rainstorm owns 100 percent of the main lease, and Plankton receives a sublease from Rainstorm seems to have been a surprise to you. We are only going back to the original agreement where Rainstorm has the lease and subleases the main portion of the algae growing areas to Plankton Farms. This has been my intention for the entire time of our dealings accept for the several month period between the time Murray Raven suggested a joint application would improve our chances and when you were subsequently advised that a simple Rainstorm renewal was best. I have certainly never been ambiguous about not wanting any partnership on the master lease which is something that Rainstorm already bought and paid for. It was only when you and I first met face to face with Murray Raven and I asked him flat-out would it improve my chances of lease renewal if it was a joint application rather than Rainstorm only. When he said he thought it would be better to make a joint submission, I didn’t like it one bit but – I sucked it up and agreed to use that tactic if it improved the palatability of our renewal application. This was despite my expression to you that I figured it would only add a few % increase of our chances which I rates [sic] as already being greater 90% chance of renewal.
I think it is important to point out that this is the current situation: Rainstorm had already negotiated and purchased 100% of the lease and all physical assets on the site from Aurora in two separate transaction [sic]. We had to wait for the actual transfer process to work through the slow-moving processes of government which, as we know, is excruciatingly slow. This purchase was a result of a multi-year battle which makes the current lease renewal, seem like a trivial exercise. I’m not saying the current renewal has been quick and easy but in comparison to the heavy lifting and expenditures made by Tim and myself before you arrived on the scene it has been. We’ve probably spent more on lawyer’s fees than you’ve spent total. We had to demonstrate to PDC et al that aquaculture/algae farming would take place on the site as well which would occur the insertion of a sublease. This was ALWAYS Rainstorm’s plan – acquire the master lease, get our bitterns production in order, then sublease out the algae farming infrastructure to someone who could make best use of it. The foot-dragging by the PDC meant that we had to bring an algal tenant into the scene a bit earlier than we planned.
…
The primary judge noted that there were aspects of this email from Mr Kerr which were not accurate. But, in his Honour’s view, it did not matter whether the justification provided by Mr Kerr for disagreeing with the matters set out in Mr Tracton’s email was correct. Rather, what was apparent from this point on was that Rainstorm maintained that there was no binding agreement and insisted upon only discussing with Plankton the terms of the sub-lease. It is clear that Rainstorm refused to accept that there was an agreement which required it to seek a transfer of the “master lease” to Algalfields.
The short issue in the proceeding, his Honour said, was whether this was a course that Rainstorm was free to adopt or whether it was bound by contract (or should be treated as being bound by reason of Mr Kerr’s signature to the Submission to the Department) to press for the lease being granted to Algalfields.
On 16 July 2015, Coode & Corry wrote to Mr Kerr recording Mr Tracton’s instructions that Mr Kerr had purported to unilaterally alter the terms of the agreement reached regarding the joint enterprise to obtain the lease and to conduct activities on the land, including commercial farming of algae. The letter rejected the assertion that the terms of the agreement could be altered and rejected proposed new terms. The letter requested confirmation that Mr Kerr would adhere to the existing agreement. This confirmation was not forthcoming.
Analysis by the primary judge
The primary judge then addressed the nature of the contract claim, noting that the case was that there was in existence an enforceable contract reached by the telephone conversation at the end of November 2014 by which the parties agreed to be immediately bound to all the terms of an offer made by Rainstorm on 26 November 2014 (being the version before the final V4 proposal from Plankton to Rainstorm). That agreement was to have the terms stated in a form which would be fuller or more precise but not different in effect or was made by the parties expecting to make a further contract in substitution for the first containing, by consent, additional terms. The alternative contractual argument was that if there was no agreement reached in the telephone conversation, then assent to those terms could be inferred from the acts and conduct of the parties in the period thereafter until around late May or early June 2015.
Following June 2015, as the primary judge noted, the competing positions of the parties had been established. Plankton contended there was a binding agreement. Rainstorm denied this position, but was willing to continue to negotiate. Indeed, there were extended discussions and negotiations between the parties attempting to resolve their dispute during which time Plankton Farms remained on-site undertaking substantial activities to progress the production of DSA and incurring significant costs. As the primary judge noted, however, that conduct clearly took place in the context of the ongoing disavowal by Rainstorm of the existence of a contract in the terms alleged, or otherwise. Plankton, on the other hand, contended that the conduct of the parties in occupying the Site together over a considerable period demonstrated that there was no reason to think that there would be difficulty in the constant supervision hurdle in relation to an award of specific performance.
As was apparent from the primary judge’s narrative and analysis of the events, he was not satisfied that any concluded contract had been reached between the parties arising from the telephone conversation at the end of November 2014, but fully accepted that the conduct of the parties prior to the exchange of their proposals was contextually important for the events which took place in November 2014.
The context, as perceived by his Honour, was that Plankton had gone on to the Site and had taken substantial steps towards advancing the production of DSA. It did this even though it was clear that there was no agreement in place. This behaviour was inevitably speculative because, on any view of the matter, there was no agreement between the parties and there was a commercial risk that no long term lease could be secured. This behaviour, his Honour also said, was consistent with a course of waiting until there was certainty concerning a long term lease before finalising the terms of an agreement, a course generally reflected in the documents. The parties, indeed, had agreed the terms of an arrangement or overall plan and they had committed to a “partnership” in the non-technical sense. His Honour said it was a partnership in the sense that they would work together to secure the long term lease so that Plankton and Rainstorm could undertake activities on the Site. They had not, however, worked through any of the details or terms that would apply.
His Honour’s view was that despite Plankton having been on the Site from the beginning of August 2014 until the beginning of November 2014 incurring substantial costs, there had been no discussion or negotiations between the parties as to the terms of an agreement to govern their ongoing relationship. The primary judge noted Mr Tracton’s acceptance that his conduct in going onto the Site in August 2014, and undertaking work in relation to DSA, was partly to show that his intentions were genuine and to showcase his abilities so that it would be easier to reach an agreement with Mr Kerr. Although Mr Kerr supported and committed to the exercise of making a joint application for a new lease in August 2014, the parties had not taken any immediate steps to discuss the terms of their long term agreement. This, his Honour said, was also consistent with leaving the final terms until the outcome of the lease application to the Department was known. His Honour considered that the immediate context for the exchange of the proposals in November was the need to formulate with sufficient detail the business arrangement that would be put in place if a long term lease was secured to enable the urgent preparation of a submission to support the application for long term leases. Importantly, in his Honour’s view, the parties did not need to conclude an agreement at that time as Plankton had already entered onto the Site and was advancing the DSA component of the planned activities.
Essentially, engaging in ongoing discussions was consistent with the course that had been adopted up until that time, which was to leave the finalisation of the terms of an agreement until after the position in relation to the long term leases was known. His Honour said, if the parties were to move to finalising the terms of an agreement that would govern their relationship over a very long term, then it would be expected that there would have been some explicit mention of a deviation from the course that they had been following up until that time.
His Honour also observed that the exchange of proposals began with a brief email, attaching a consent for Plankton to become a member of Algalfields and, importantly, the statement by Mr Kerr that he had asked his solicitor to begin drawing some of the necessary documentations and “even though it won’t all be in place we’ll have enough to tell the [Department] the general plan”. The primary judge characterised this as Mr Kerr taking steps to establish Algalfields, even though there had been no response from Mr Tracton. This too was consistent with the parties taking steps to advance their relationship, even though they had not concluded an agreement.
The primary judge continued his analysis as to why a concluded agreement was not reached, saying that the response from Mr Tracton was to prepare a document entitled “Revised Proposal Summary”. It was not couched as an offer, nor did it invite any form of response by which the contents was to be accepted or agreed. It did not provide for any signature or invite endorsement of consent or acceptance. It was sent under cover of an email that included the statement “Happy to talk this through further”. Before sending the Revised Proposal Summary Mr Tracton took legal advice about its contents, but there is no evidence that this was known to Mr Kerr.
As to the next proposal, the V2 proposal, which was sent to Mr Kerr with a covering email from Mr Tracton referring to “our discussions” and asking for “thoughts and comments”, it also stated that “[i]f this arrangement is suitable, I would like to work [to] having both new entities” registered. The primary judge opined that the use of the term “arrangement”, in context, indicated to a reasonable party in the position of Mr Kerr that Mr Tracton was also working on the basis stated by Mr Kerr at the outset, namely, that they were engaging in discussions that would result in enough to tell the Department “the general plan” in the Submission that was being advanced at the same time.
When Mr Kerr responded with a marked-up V2 proposal (in effect, V3), his covering email said “[w]ould appreciate any comment and feel free to call me”. There could be no suggestion this was consistent with a finalised agreement. The main change was to the equity in Algalfields which was amended to show 85% to Rainstorm and 15% to Plankton.
His Honour was also satisfied that the subsequent conduct of the parties was not such as to manifest consent and an agreement as pleaded. The conduct, in short, his Honour said, was consistent with the parties wishing to reach an agreement and expecting that they would, but not unequivocally confirmatory that they had reached agreement. Specifically, the primary judge referred to the following matters.
First, the contents of the Submission to the Department shortly following the November telephone conversation could not be considered divorced from the course of dealings between the parties. While it is true that the terms of the Submission and covering letter reflected the extent of the consensus reached through the exchange of the proposal documents, the language used in the Submission was hedged with qualifications consistent with the parties not yet having concluded an agreement, according to the primary judge. As examples of this, his Honour referred to the letter saying that Rainstorm and Plankton had agreed to form a partnership and had created a new business enterprise called Algalfields. His Honour stressed that the letter did not say that they had formed the partnership, nor did it say that they had entered into a joint venture agreement or a shareholders agreement or, indeed, that they had concluded any form of agreement. His Honour said (at [158]):
It is one thing to agree to form a partnership and create a new business enterprise. It is a different thing to reach a binding agreement as to the terms that will govern the partnership and the new enterprise. The general statement in the letter is akin to the statements made by the parties as early as May 2014 that they have agreed on arrangements to share the facilities. There is no suggestion that those statements reflected the existence of a binding agreement.
Plankton takes firm issue with the dissection of the correspondence and close analysis to the words without, it is said, the full appreciation of the context and intent of the parties.
His Honour went on to observe that the Submission stated that a new business entity named Algalfields has been created with joint ownership by Rainstorm and Plankton. In reality, however, that had not occurred. His Honour said that the creation of Algalfields, in any event, was equivocal. Equally, a statement it had been created was not in fact correct. The fact that the Submission said that “Rainstorm is willing to relinquish its rights to apply for a subsequent 21 year lease … in favour of Algalfields doing so” did not, according to the primary judge, indicate that the parties had entered into an agreement to that effect subject to the consent of the Minister. Rather, it simply expressed a willingness on the part of one party, Rainstorm.
Further, the Submission stated that Algalfields would be the master leaseholder and manager and set out an ownership structure consistent with the structure in the proposals. It stated “[it] is anticipated that the lease of the Site will be transferred from Rainstorm to Algalfields under a new Lease agreement with simultaneous approval being sought for Algalfields to sub-lease the Site to Plankton Farms and Rainstorm”. As his Honour noted, this language was consistent with the parties’ expectation as to the nature of the agreement which would be concluded between them given their then current plan if the Minister’s approval was obtained. His Honour said the language used was not of a kind to indicate that a different view should be taken concerning the exchange of proposals and the effect of the telephone conversation.
The second matter is that on 1 December 2014, the Submission was issued in which Rainstorm and Plankton jointly represented the following:
(a)in the subject header, it concerned an application by Rainstorm and Plankton “for and on behalf of [Algalfields] to conduct aquaculture algae cultivation & bitterns processing activities”;
(b)it stated “the two companies have agreed to form a partnership and have created a new business enterprise called, Algalfields”;
(c)the diagrammatic representation of the parties’ relationship, set forth under “4. Subleases”, reflected a business structure that had already been agreed between the parties; and
(d)the Submission stated:
In anticipation of the current leases expiring in April 2015, a new business entity named [Algalfields] has been created with joint ownership by [Rainstorm] and [Plankton] (Figure 1). As the incumbent lease holder Rainstorm is willing to relinquish its right to apply for a subsequent 21 year lease on [the Site] in favour of Algalfields doing so. In exchange, it has been agreed that Rainstorm shall gain a minority equity position in the newly formed [Plankton Farms] who will hold the Aquaculture Licenses and subsequently all commercial stakeholders will have an economic interest in both Rainstorm and Plankton Farms achieving maximal utilisation of the site and continuing commercial success.
(Emphasis added.)
That the wording of the letter and Submission was drafted carefully was confirmed by Mr Kerr in cross-examination and by Mr Kerr's email to Ms Grace Pacecca of 12 December 2014, where Kerr noted: “I know we took quite a while to get our submission in as it is of burning importance to us and we took forever to tweak and edit it”.
Importantly, in the same email, Mr Kerr said the following to Ms Pacecca:
I trust the PDC understands that all of the infrastructure on the site now belongs to Rainstorm and [Plankton], regardless of who they might wish the next lease to be awarded in 2015.
(Emphasis added.)
The representations in the Submission are said to have been plainly regarded as appropriate to not only present to the Department, but also to Mr John Lally, the CEO of the Karratha and Districts Chamber of Commerce and Industry and Deputy Mayor of Karratha.
Thirdly, on 1 December 2014, Mr Tracton with Mr Kerr’s knowledge signed the EOI that was presented to the Department under the aegis of the “royalties for regions” scheme in which the following matters were noted:
(a)an “Agreement and partnership between Rainstorm and [Plankton]”; and
(b)the “Partnership Relationship Structure” placed Algalfields at the apex as the “Lease Management Holding Company”.
Fourthly, Plankton and Rainstorm each commenced utilising the facilities, including the common facilities, in the manner contemplated in the proposals. On 11 December 2014, Mr Tracton assisted Mr Kerr to set up a “@planktonfarms” email address.
Plankton submits that the primary judge ought to have found that the post-contractual conduct was demonstrative of a concluded bargain. The primary judge erred by diminishing the significance of the Submission and the letter and by treating the utilisation of the facilities as nothing more than a continuation of previous activity when, in fact, this conduct was only explicable by reference to the existence of a concluded bargain.
Ground 1 analysis
As a starting point, in relation to the approach to be taken on appeal we are mindful of the need to identify error as stressed by Allsop J (as the Chief Justice then was) in Branir, followed and upheld recently in Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 358 ALR 683 and consistent with the High Court’s reinforcement of the role of intermediate appeal courts in Robinson Helicopter. In this case, there was only one occasion on which it was necessary to determine whether or not an account given orally was accurate. Otherwise, the approach taken by the primary judge was to take into account the content of contemporaneous communications against the backdrop and context of the commercial dealings and actions taken by the parties and others with whom they were both dealing. In that context, the benefit enjoyed by the primary judge is significantly more limited than would be the case in a trial which turns exclusively on the credit of a particular party. Nonetheless, as Plankton acknowledges, it is necessary for error to be identified. It is of course necessary for the error to be one to which the grounds of appeal point. The question is whether the asserted errors (or any of them) are established.
We do not consider that the primary judge, in concluding (at [101]) that the parties had not reached “any final and binding commitment to the terms of the proposal”, made a finding which was “glaringly improbable” in the sense described in Robinson Helicopter. This critical finding made by the primary judge was based on careful consideration of the evidence of what his Honour described (at [99]) as “both the key conversation upon which the applicants rely in bringing their contract claim and … the main factual issue in dispute in these proceedings”. His Honour’s conclusion was, in our view, correct in light of the evidence (summarised above at [64]-[69]).
In our assessment, the contention that the primary judge failed to consider the parties’ language and conduct in context as a whole is entirely without foundation or merit. We have set out in considerable detail the content of the primary judgment to illustrate the lengths to which his Honour went to look in detail at each aspect of the communications and background and to consider the submissions of the parties in relation to each step along the way. We specifically reject the contention that his Honour only examined exchanges and conduct in isolation without having regard to the context as a whole. It is quite clear from the following analyses that it was the latter to which his Honour directed attention.
While it is true that the primary judge looked at the specific negotiating expressions, he did not do so in isolation. He had regard to conduct which preceded the specific exchanges on which reliance is placed, observing that the prior conduct provided important context. The same approach was adopted in relation to the Submission to the Department. The approach was as even-handed as the content and context would permit.
It was correct to conclude that the Submission did not record a completed agreement between the parties. That was not its purpose on any view of the matter. The Submission was prepared to present a business case to the Department as to why the leases ought to be renewed and in response to the request for the same to Mr Kerr on 13 November 2014 from a Department project officer. His Honour expressly said that the contents of the Submission should not be considered divorced from the context of the dealings between the parties and that was necessarily so. Those dealings have been examined in close detail in preceding paragraphs of the judgment. The view taken by the primary judge that the parties believed they would be able to reach agreement as at the time the alleged oral agreement occurred and the Submission was made, was not only open, but undoubtedly the correct assessment of the position.
It is relevant to repeat again for emphasis that Plankton nominated 26 November 2014 as the date upon which the alleged Joint Venture Agreement was formed, relying on the 26 November 2014 email exchange as the key evidence of that agreement. Here we again note the primary judge’s findings about absence of any agreement as between the parties. His Honour found no agreement has been reached between the parties as at 27 May 2014 (at [33]) and this was not contested on appeal. The primary judge had due regard to the formal confidentiality agreement entered into between the parties (at [44]-[45]), attaching what we consider to be appropriate significance to the execution of a formal agreement in respect of this matter in the context of assessing whether a formal agreement had been made as alleged. No issue was taken on appeal with his Honour’s finding (at [58]) that no agreement had been reached as at August 2014. The key finding challenged on appeal is his Honour’s conclusion (at [93]) about the email of 26 November 2014, though Plankton also takes some issue with the consideration had to the 24 November 2014 email exchange (at [51]) and the emphasis placed on that correspondence.
Too much emphasis, in our view, is placed by Plankton on the statement “it has been agreed”. His Honour was entitled to and correct to observe that expressions akin to that statement had been made by the parties from as early as May 2014, long before the time at which Plankton claims that a binding agreement was reached. For parties to refer to the fact they have agreed to something, does not mean, without more, that they are contractually bound. Equally, we consider the statement to the effect that Algalfields had been created, was equivocal. Certainly, steps were being taken to advance the relationship between the parties at this point in relation to the creation of Algalfields but, in fact, it had not even been created at all. It is true that the notice of consent for Plankton to become a member of Algalfields was forwarded on 18 November 2014 and this is consistent with the fact that the parties were anticipating reaching an agreement and were taking steps to be in a position to progress should an agreement be reached, however it does not follow, either alone or in context amongst other statements, that the incorrect statement that Algalfields had been created was anything other than equivocal. What is central to the reasoning at this time, is that the parties were anxious to secure the necessary leases so that they could then proceed with committing to an agreement. It does not mean that they had reached an agreement, nor did the conduct surrounding the Submission to the Department evidence or confirm they had reached such an agreement.
From the outset, by email of 24 June 2014, it was confirmed that the equity split could not be completed until the new long term lease arrangements for the Site were finalised. This was the whole thrust of the parties’ activities at this time to lock in the long term leases of the Site. The finding made that any long term agreement would be concluded once the outcome of the application to secure the long term tenure of the Site was known was undoubtedly correct.
The construction placed by the primary judge on the exchanges between the parties and others, in our view, is not shown to be in error.
There is a further difficulty with the content of the Joint Venture Agreement. There is no doubt that the agreement, as pleaded and as construed, did not include Plankton Farms or Algalfields as parties, yet required those entities, according to Plankton, to comply with certain terms. Absent a pleading of a pre-incorporation contract (or an application to advance such a claim), it is difficult to see how non-existent parties, such as Algalfields, could be bound by the putative Joint Venture Agreement. There is no proper foundation for the contention that the matters left to be agreed were merely the mechanical detail. That does not accord with the finding correctly reached by the primary judge as to outstanding matters, nor does it deal with the question of when it was the parties agreed to be bound. These factors make it very difficult to conclude that there was a binding Joint Venture Agreement.
The primary judge was correct to conclude that:
(a)the documents used language of discussion and with a view to the establishment of common ground;
(b)there was no invitation for particular terms to be accepted, agreed or concluded in some way; and
(c)none of the versions of the proposals relied on by Plankton provided for the terms to be agreed or adopted by signature on behalf of the parties.
Moreover, matters were left outstanding such as:
(a)the email under which the V4 proposal was sent, contained an invitation for Mr Tracton to Mr Kerr to engage in further discussion on the proposal;
(b)the language used in the V4 proposal was consistent with such ongoing discussions; and
(c)the V4 proposal expressly contemplated that there would be both a shareholders agreement and a memorandum of understanding and, clearly, these would be in writing.
It was entirely open to the primary judge to conclude, as he did correctly, that on an objective view these matters in totality manifested an intention that any agreement was to be recorded in a subsequent formal instrument with not insignificant terms to be added at a time when the outcome of the application for the leases of the Site was known. Moreover, all of this was against a background in which no one knew what the Minister was going to say about the preferred ownership structure of the master lease holder. For example, the Minister may have considered that Rainstorm had assets and Plankton had not been able to raise finance to buy from Aurora. The only asset of Algalfields would be the master lease. But, in any event, the critical issue of the Minister’s response was quite unknown.
It might also be said, in light of the background of Plankton’s insistence on a formal confidentiality agreement, that the subject matter of the putative agreement being of very considerable commercial consequence to the participating parties would make it improbable that the parties intended to conclude a binding agreement without such detailed documentation.
There is nothing in the subsequent conduct to change this position. Rainstorm was not issued with any shares in Plankton Farms. Plankton had not challenged this finding. It is inconsistent with the term which Plankton says required Rainstorm to be issued with 20% of the shares in Plankton Farms. There was no evidence of any conduct consistent with such a term. Indeed, there was conduct inconsistent, such as the failure to incorporate Algalfields. It may well be that communications with solicitors were designed to put in place the incorporation of Algalfields, as were the communications with the Department designed to achieve the approval, but such communications do not constitute conduct showing unambiguously that the parties had reached agreement. That is entirely consistent with the parties then believing that they would reach agreement and needed to put certain things in place, principally securing lease approval.
Rainstorm is right to submit that such conduct must be unambiguous (Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 per MacFarlan JA (at [5]) (Beazley JA agreeing). It was not unambiguous as:
·the registration of Algalfields was consistent with a continuation of pre-contractual conduct;
·the Submission was hedged with qualifications, consistent with the parties not having concluded a binding agreement;
·Mr Tracton, through Plankton, started working on-site long before any putative agreement has been reached (on 1 August 2014). By October 2014, he had taken substantial steps towards commencing a commercial operation of DSA production on-site and the facilities were shared prior to November 2014. All of this was before the date of the putative agreement;
·Mr Tracton always intended to use a special purpose vehicle, as the parties knew. Plankton Farms was set up as a wholly owned subsidiary of Plankton but the shareholding was not split 80/20 as required by putative term 3;
·Mr Tracton was found to be keen to demonstrate his capabilities to Mr Kerr with the view to increasing the prospect of concluding the leases; and
·Mr Kerr was much involved in dealings concerning the activities of the cultivation of DSA, both prior to and after November 2014.
The ongoing activities on the Site after the 26 November 2014 date of the putative agreement fell well short of equivocally demonstrating that the parties intended to contract as pleaded.
Remaining grounds and their consideration
Grounds 2 and 3 deal with misleading or deceptive conduct while grounds 4 and 5 deal with estoppel. These subsidiary grounds of appeal are essentially just assertions that the primary judge was wrong in his conclusions on those matters. They raise nothing that has not been previously considered above.
The primary complaint of Plankton in this regard is that the analysis of the statutory claim was undertaken “in the shadow of his Honour’s findings on the contract claim”. It was a non-sequitur, Plankton argues, for his Honour to reject all the representations said to arise out of the Submission on the basis that it was necessarily implicit in the finding that no agreement existed, that Mr Tracton could not have been misled into thinking an agreement did exist. Plankton argues that the threshold to reach a conclusion that Mr Tracton was misled into thinking that a contract existed was lower than that required to determine whether a contract objectively construed actually came into existence. Far more material requires consideration than that which is permitted in an inquiry into whether a contract exists. Further, where a Court finds that a contract was not formed, it does not mean that someone was not misled into thinking that one was formed. Equally, it is argued that there is no necessary equivalence between a finding that a contract did not exist and a finding that it was likely one existed, that is, that there was a “real or not remote chance” having regard to all the surrounding circumstances that a person was misled into thinking that a contract had existed: Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 per Bowen CJ, Lockhart and Fitzgerald JJ (at 87).
Plankton argues that the relevant circumstances were such that it was likely that, even if not reaching the higher standard of a concluded agreement, the Submission and exchanges on 26 November 2014 nevertheless created a real or not remote chance that a person in Mr Tracton’s position would think that there was a concluded agreement. Considering that the primary judge concluded that there was reliance, against which there is no cross-appeal, Plankton contends it was not open to seamlessly migrate the findings on the contractual claim to the misleading or deceptive conduct claim without appreciating the different analytical approach required for such a cause of action.
In the circumstances of this case, grounds 2-5 may be considered together. There is no doubt that the Submission did not objectively convey a representation to Plankton as to the existence of an enforceable agreement, either in the terms pleaded or at all. It was also entirely apparent that the primary judge did undertake a detailed contextual inquiry, closely examining all relevant circumstances relied upon and advanced in the trial in reaching his conclusion, both for the purposes of the parties’ contractual intentions and in relation to the subsidiary alternative pleas of misleading representations and estoppel. These were negotiating commercial parties. Their commercial dealings were laid bare in the written communications and the contextual surroundings as reflected in the affidavit material. There was nothing unorthodox in the approach of the primary judge and it cannot be said that he did not clearly understand the plea of representations in relation to the subsidiary grounds. Nor can it be seriously contended that he did not set out the appropriate authorities and apply them. A finding was entirely open, having regard to all the material at the time of the Submission, that a reasonable person in Mr Tracton’s position would not have concluded that there was a binding agreement between Plankton and Rainstorm. Nothing in the act of subscribing to the statements in the Submission, or in other pleaded activity, altered this finding. The Submission was directed to the Department for a particular purpose. That is not to say its content would prove to be inaccurate if approval was given in the form requested in the Submission. But approval was not forthcoming in the form requested, such that the parties did not enter into a binding Joint Venture Agreement on the terms the subject of previous proposals.
No error is demonstrated in relation to these subsidiary grounds of appeal.
CONCLUSION
The parties accept that costs should follow the event. As none of the grounds of appeal have succeeded, the appeal will dismissed with costs.
I certify that the preceding one hundred and eighty-six (186) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices McKerracher, Reeves and Farrell. Associate:
Dated: 21 November 2018
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