Raward v Vine Nominees P/L - [2001] QSC 494

SUPREME COURT OF QUEENSLAND

CITATION: Raward v Vine Nominees P/L & Ors [2001] QSC 494

PARTIES: RAWARD, Malcolm John
(plaintiff)
v
VINE NOMINEES PTY LTD (ACN 009 692 068)
(first defendant)
LENEN PTY LTD (ACN 001 045 816)
(Second defendant)

FILE NO: S8959 of 2000

CITATION: Raward & Co P/L v Lenen P/L

PARTIES: M J RAWARD & CO PTY LTD (ACN 053 501 250)
(plaintiff)
v
LENEN PTY LTD (ACN 001 045 816)
(defendant)

FILE NO: S1843 of 2001

DIVISION: Trial Division

PROCEEDING: Trial

DELIVERED ON: 21 December 2001

DELIVERED AT: Brisbane

HEARING DATE: 26-30 November 2001, 4-5 December 2001

JUDGE: Muir J

ORDER:
In action S 1843 of 2001:
Judgment for the plaintiff, M J Raward & Co Pty Ltd in the sum of $420,750, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis.

In action S 8959 of 2000:
Judgment for the defendants, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis.

CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – MATTERS NOT GIVING RISE TO BINDING CONTRACT – VAGUENESS AND UNCERTAINTY – UNCERTAIN PROMISES – where bonus to be shared between senior staff – where senior staff not identified – where no method of apportionment specified

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – AGREEMENTS CONTAMPLATING EXECUTION OF FORMAL DOCUMENT – WHETHER CONCULDED CONTRACT – where director of defendant signed memorandum of discussion regarding bonus scheme for plaintiff – where subsequent conduct of parties consistent with existence of concluded contract – whether parties intended to be legally bound

CONTRACTS – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PREFORMANCE – REPUDIATION – where consultancy agreement terminated after plaintiff made claim under bonus scheme – whether consultancy agreement repudiated

CONTRACTS – PRINCIPLE AND AGENT – AUTHORITY OF AGENTS – CONSTRUCTION AND EXTENT OF AUTHROITY – AUTHORITY CREATED BY OTHER MEANS – IMPLIED AUTHORITY OF GENERAL AGENTS – where only one director of defendant present at meeting and signed memorandum – whether implied authority to bind defendant

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH, AND DEFENCES TO ACTION FOR BREACH – where plaintiff entered into consultancy agreement to do same work required under original agreement – where remuneration under consultancy agreement was calculated as a proportion of the sale price – whether plaintiff parties had abandoned original agreement

Trade Practices Act

ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, compared
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27, cited
André at Compagnie S.A. Marine Transocean Ltd (The Splendid Sun) [1981] 1 QB 694, cited
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441, cited

Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216, cited
B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147, cited

Bank of New Zealand v Spedley Securities Ltd (in liq) (1992) 27 NSWLR 91, cited
Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, cited
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, cited
Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61, compared
British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623, cited
Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, cited
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 334, cited
Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204, cited
Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, cited
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, considered
F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 2 Lloyd’s Rep 53, cited
Fitzgerald v Masters (1956) 95 CLR 420, cited
Glass v Pioneer Rubber Works of Australia Ltd [1906] VLR 754, cited
Godecke v Kirwan (1973) 129 CLR 629, cited
Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, cited
G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, cited
Haynes v McNeil (1906) 8 WALR 186, cited
Hely Hutchinson v Brayhead Ltd [1968) 1 QB 549
Liverpool City Council v Irwin [1977] AC 239, compared
Masters v Cameron (1954) 91 CLR 353, considered
Northside Developments Pty Ltd v Registrar General (1990) 170 CLR 146, applied
Paal Wilson & Co a/s v Partenreederei (The Hannah Blumenthal) [1983] 1 AC 854, cited
Pagnan S.p.A. v Feed Products Ltd [1987] 1 Lloyd’s Rep 601, considered
Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78, cited
Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, cited
Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205, cited
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, cited
Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, considered
Storer v Manchester City Council [1974] 1 WLR 1403, cited
Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, compared
Talbot v Talbot [1968] Ch 1, compared
Summers v Commonwealth (1918) 25 CLR 144, considered
Thorby v Goldberg (1964) 112 CLR 597, cited
Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25, cited

York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11, cited

COUNSEL: J C Bell QC and D D Bates for the plaintiff
G E Hiley QC and I R Perkins for the defendants

SOLICITORS: McCullough Robertson for the plaintiff
Minter Ellison for the defendants

The dispute between the plaintiff, Malcolm John Raward, and the defendants, Vine Nominees Pty Ltd and Lenen Pty Ltd, in action S 8959 of 2000 concerns the plaintiff’s alleged entitlement to a bonus or incentive payment as a result of the sale by Lenen Pty Ltd (“Lenen”) of a large parcel of land on the ocean front at Kingscliff. The plaintiff contends that at a meeting on 18 November 1976 between Vine Pty Ltd’s (“Vine”) two directors, Clyde Ian Barclay (known as Ian and described subsequently as Mr I Barclay) and Donald Edward Barclay, and himself, an agreement (“the 1976 agreement”) establishing an incentive scheme was entered into.

Under that agreement, the plaintiff alleges that, in consideration for the plaintiff’s “efforts in introducing, managing and developing various projects”, the defendants agreed to pay the plaintiff 5% of the profit before tax or 10% of the profit after tax derived from any such project sold outright by the defendants.

It is also alleged that the agreement provided for a payment of 3% of the profit before tax or 6% of the profit after tax per annum from any such project, which produced regular income for the defendants. Those sums were allegedly payable in addition to any remuneration otherwise due to the plaintiff from Vine or other Barclay family companies.

The defendants deny the existence of any agreement such as that alleged by the plaintiff. They accept that there was a proposal made by the plaintiff on or about 18 November 1976 but assert that Mr D Barclay was not a party to it and that it was never accepted. Alternatively, they allege that if an agreement was entered into, it was uncertain, or subject to the execution of a written contract. It is alleged also that it was purportedly entered into by Mr I Barclay without the authority of the defendants. In the further alternative, it is contended that it was abandoned or otherwise came to an end. As a matter of construction, it is contended that, if a binding agreement was entered into, no moneys become payable under it.

In action S 1843 of 2001, a company controlled by the plaintiff, M J Raward & Co Pty Ltd (“Raward & Co”), claims against Lenen damages for the repudiation by Lenen of a consultancy agreement entered into between those companies on 5 February 1999. The damages claimed are particularised as the plaintiff’s entitlement to a bonus of $420,750 in respect of the sale of the parcel of land described as the “Lenen North land”. Alternatively, Raward & Co claims the moneys under the terms of the consultancy agreement.

These claims are resisted by Lenen on numerous grounds, which, together with the grounds relied on by the defendants in action S 8959 of 2000, will be considered in due course.

Historical narrative – events prior to November 1976

In about 1971, Mr I Barclay and Mr D Barclay and companies controlled by them sold 40% of their interests in other companies through which the Barclays conducted their construction business to an English corporation, John Mowlem & Co Ltd. Barclay Holdings Pty Ltd, initially employed the plaintiff on 15 November 1971 in the capacity of secretary/accountant. He was given the role of investing, on behalf of companies controlled by the Barclay brothers, the balance sale price of the 40% interest amount to some 5 to 6 million dollars. A company, which came to be called Vine Nominees Pty Ltd (“Vine”), became the trustee of Family Trusts set up and controlled by each of the Barclay brothers. At all relevant times the Barclay brothers have been its directors and have held all the issued shares in its capital. The plaintiff’s employment was transferred to that company and, under his management, it pursued a policy of investing the trust funds in assets which were expected to produce low rates of income but high capital gains.

One property acquired by the Barclay interests at the instigation of the plaintiff was a parcel of 184.743 hectares of beachfront land located south of Kingscliff in New South Wales (“the Lenen South land”). The land, at the time of its acquisition, was owned by Ocean Paradise Estates Pty Ltd (“OPE”), in which company the plaintiff’s father held shares as a beneficiary of his father’s estate. OPE had owned the land since the 1930s, but due to the existence of sand mining tenements over the land, had been unable to conduct any subdivisional development.

Lenen Developments Pty Ltd (“Lenen”) was incorporated to acquire the shares in OPE which it did for the sum of $1,405,815 in about November 1973. Subsequently, Lenen itself became the registered proprietor of the land in consequence of a distribution in specie on the winding up of OPE. The Barclay brothers were the directors of Lenen at relevant times and the initial holders of the two issued shares in its capital. Vine later held one of the shares but the evidence does not reveal when it acquired it.

In the following year the plaintiff introduced to the Barclay brothers a nearby 73.8567 hectare parcel of beachfront land owned by the estate of Thomas Quigan (“the Lenen North land”). That land was purchased by Lenen in about April 1974 for $741,059.

The plaintiff, in 1974, identified to the Barclay brothers parcels of land at Coolangatta, which, in his view, could be developed at a profit. Greenmount Developments Pty Ltd (“Greenmount”), 50 percent owned by the Barclay family interests on the one hand and on the other by a company in which 40 percent of the shares were held indirectly by John Mowlem & Co Ltd and the remaining 60 percent by the Barclay interests, was acquired to purchase and develop this land. Throughout this period the plaintiff was employed by Vine but also had managerial responsibilities in respect of other Barclay family companies as well as Greenmount.

In 1976, the Barclay Mowlem Group had two holding companies, Barclay Mowlem (Australia) Pty Ltd and Barclay Mowlem (PNG) Pty Ltd, a company registered in Papua New Guinea. The Mowlem interests held 40 percent of the shares in these companies and Mr I Barclay and Mr D Barclay personally or through corporations controlled by them each held 30 percent. The two holding companies held 100 percent of the shares in companies, including Barclay Managerial Pty Ltd, Barclay Bros Pty Ltd and Barclay Properties Pty Ltd, which carried on the construction and related businesses of the Barclay Mowlem Group. The Barclay brothers, directly or through family companies, held 100 percent of the shares in companies, including Vine, Lenen and OPE, which they used as vehicles for property investment and development.

In 1976, the Barclay brothers and a director appointed by the Mowlem interests, were directors of the companies in the Barclay Group which conducted the construction business. The Barclay brothers, however, had the effective control of all companies in the Barclay Group. Mr D Barclay had primary responsibility for the operational side of the construction business whilst Mr I Barclay had primary responsibility for dealings with employment matters, administration and pricing and tendering. Mr D Barclay had no direct involvement in staff remuneration but, by reference to public service salary levels, drew up salary schedules from time to time to be used as guidelines for setting the remuneration of Barclay Group employees. There was no agreement or resolution binding Mr I Barclay to implement these schedules to the letter or whereby he was unable to depart from them should he consider that there was good reason for so doing.

The plaintiff’s terms and conditions of employment were the subject of annual review which, at least until the early 1980s, took the form of a face to face discussion between the plaintiff and Mr I Barclay. The pattern which developed was for the participants to have before them a document containing the break-up of the plaintiff’s proposed salary into components such as a gross annual salary and items such as superannuation payable by the employer, car and other expenses, telephone allowance or clubs and so on. Mr I Barclay, a careful and methodical person, would give consideration to each component of the proposed salary and accept or alter it in turn. At the conclusion of such meetings, once agreement had been reached, the document under consideration would be initialled by Mr I Barclay. Any alterations made by him to the document would also tend to be initialled. Such reviews took place on 6 July 1973, 10 June 1974 and 30 June 1975. Mr D Barclay did not attend meetings of this nature and saw none of these documents. I infer that, as a matter of general practice, he was not informed of the salary set by his brother.

The events of 18 November 1976

On 18 November 1976, a meeting took place at which the plaintiff’s salary was the subject of discussion. The plaintiff contends that the meeting was attended by both of the Barclays. They deny that Mr D Barclay was present. This time there was no pro forma document before those present at the meeting. Rather, the plaintiff recorded on a sheet of foolscap his understanding of the discussion and gave it to Mr I Barclay, keeping a carbon copy for himself. Mr I Barclay then signed at the foot of the document acknowledging its contents.

The document, which is relied on by the plaintiff as setting out the contractual terms on which he sues, provides as follows –

“18/11/76
CIB, DEB & MJR
Re MJR’s Basic Annual Salary
At this date set at maximum engineer range which is age bracket 29 years = $15701 Basic
+ 10% for departmental manager consideration $ 1570
$17,271

+7.5% Company Superannuation $1295
$18,566
Payable from 1/7/76 to 30/6/77
Payable on basis employs wife and part as a consideration to be left in Coy for Coy to pay approved expenses.
This year’s salary retention $1000
In addition MJR to draw up agreement on basis of summary of page 2 of MJR submission ie On a development sale 5% of gross or 10% of net profit & on ongoing management situation if sale not effected 3% of gross & 6% of Net: Gross Profit = Before Tax & Net = after Tax. This to be shared between Senior Staff appointed at a later date as an incentive.”

The “MJR submission” referred to in the 18 November memorandum is a three page typed document prepared by the plaintiff and provided by the plaintiff to Mr I Barclay at or before the meeting on 18 November.

It commences by stating that it sets out the plaintiff’s “general basis of remuneration” for his “efforts” in “introducing, managing and developing various projects” undertaken “by the Barclay Family Group of Companies or Barclay Mowlem Group of Companies”. It then lists the following four projects, which are said to “already apply to such a scheme” –

“1. Ocean Paradise Estates land
2. Estate of Thomas Quigan land
3.Greenmount Hill, 77 Sunset Strip, Santa-Lu-Cia and Errolyn land

4. Marine Parade, Coolangatta project.”

The document then states that such remuneration would be broken down into –

1. An annual salary

2. An introductory fee for each project.

3. A further fee which recognises the problems of guiding the project through its various development stages.

4. A fee that recognises the realisation of the projects.

The document next elaborates on the matter of remuneration, stating –

“In calculating the amount of remuneration under the above headings, the following preliminaries are made:
1. Salary
This is to be the normal salary that could be attracted in the commercial world. It is subject to normal annual reviews and is to recognise the effects of inflation during the review periods; As well as the increasing responsibilities as the Group grows in size and complexity of management.
.../2

Page 2.
2.Introductory Fee
In general practice, such a fee is in the vicinity of 2½% of the value of the project introduced. It covers the cost of feasibility studies and allows for the introduction of the project to the developer.

3.Project Management fee
Such fee normally varies from project to project depending upon the complexities and quantity of time spent in dealing with the problems that arise. It is very difficult to assess such a fee as a percentage of a particular cost or realisation however, the fee recognises the skills involved in guiding the project to the best overall end result through the necessary Local Government and State Government Authorities and in dealing with all matters which arise in dealing with the project to a point where it may be realised.

4.A Selling Fee
This fee recognises the ability to take the project from a point where it may be sold or realised to the actual realisation. It is the type of fee that Real Estate Agents collect and recognises the contact, between Vendor and Purchaser.
Alternatively, if the project is not to be sold, it recognises the on‑going management of the project in such a way that the project realises its full income earning potential. It involves the supervision of management and continuing arrangement for the best results overall of the project. Normally, this fee is 2½% of the sale price of the project or depending upon the size of the project involved, somewhere between 6% and 12½% of the gross return of the project.
Where one person is involved in dealing with all of the problems of the various projects from point of introduction to point of realisation or future management, it would be unrealistic to pay a salary and each of these fees. Consequently, it is proposed that in addition to the salary negotiated each year, an additional sum be paid which is equivalent to a percentage of the gross or net return of the project depending upon what course of action is taken once the project reaches a stage of realisation. If the project were to be sold outright then a figure equivalent to 5% of the gross return or 10% of the net profit would be paid. Wherever the project undergoes a protracted management period to produce regular income, that a fee be paid from the gross return or net profit of that ongoing management situation equivalent to 3% of the gross return or 6% of the net profit per annum....”

The plaintiff asserts that, “following a salary review”, he and the Barclay brothers “sat down and went through” the typed memorandum “chapter and verse”. He said, referring to the memorandum, that it was “agreed that it would be the basis of a personal bonus scheme for me”. He does not recall any objection to the projects identified in the memorandum.

In cross-examination, he gave much more detail of the circumstances of the meeting and added –

“… we discussed what the terminology meant. We discussed the fact that there were these already identified projects and we discussed that it would apply to projects that were introduced by me in the future, and we reached agreement that we would prepare – we reached agreement on the concept that I had put forward and that I would write at the bottom of the salary review situation the words that I have subsequently written and in that process we would introduce the concept of applying this salary to other senior staff that were employed in the future …”.

He said that he does not recall any part of his proposal being “ruled out” and that he was surprised when it was accepted.

The 1976 to 1979 salary reviews

On 1 February 1978 the plaintiff’s salary was reviewed from 1 July 1977 in discussion between the plaintiff and Mr I Barclay. The document which recorded the results of that review made no reference to the November 1976 agreement. Nor did the salary review document dated 19 November 1976 which recorded the plaintiff’s agreed salary for the 12 months period commencing 1 July 1976.

The first document in evidence prepared after November 1976 which refers to the 1976 agreement is a salary review document in the plaintiff’s handwriting which was initialled by Mr I Barclay on 26 May 1978. Towards the bottom of the page, after the salary break-up and the addition of the words and symbols “+car +subs +2 clubs +out of pocket expenses +telephone”, appears “+special agreement dated 18/11/76”.

In connection with the review of his salary for the year commencing 1 July 1978, the plaintiff produced a document on 10 March 1979, which contained a break-up of his salary in the usual form. That was altered in a minor respect by Mr I Barclay who initialled it and wrote on it “agreed 12/3/79”. That document also included reference to “special agreement dated 18/11/76”.

Implementation of an incentive scheme in 1980 and 1982

Prior to meeting with Mr I Barclay to discuss his salary for the year ended 1 July 1980, the plaintiff prepared, for the purposes of his salary submission, the following documents –

1. A handwritten sheet dated 19-1-80, headed “calculation of MJ Raward’s Salary 7/79-7/80” which calculated a base salary on three alternative bases.

2. A document dated 19-1-80 and headed “calculation of MJ Raward. Incentive Bonus. Net profit after all expenses but before tax.” That document attributed a total net profit after tax of $167,201 to projects called Kooringal, Bermay Court and Peak Court and arrived at a bonus of $16,720 being 10% of the above figure. It also claimed a bonus in respect of a project at Wynnum on two bases $94,004 (on the basis of no tax payable) and $58,453 (on the basis of an obligation to pay capital gains tax).

3. Typed documents which set out the way in which the plaintiff had calculated the “project trading profit” for each of the Kooringal, Bermay Court, Wynnum and Peak Court projects.

These documents were discussed by the plaintiff and Mr I Barclay. On the document numbered 2 above, Mr Barclay made his own calculations which, although accepting the plaintiff’s gross profit figure of $309,631, deducted $189,414 (being an assessment of gross overheads at a level of 61.2% of project cost) to arrive at a net profit after tax of $64,917. The plaintiff successfully objected to the alteration.

Mr Barclay also wrote out his own re-calculation of the plaintiff’s 10% bonus in respect of the Wynnum project. In that case, he made provision for an overhead allowance of $22,000 and a deduction of $30,000 on account of a building contract margin to arrive at a net profit after tax of $389,254.

At about the same time there, was discussion between Mr I Barclay and the plaintiff of the plaintiff’s standard salary package for the year commencing 1 July 1979. In that regard, the plaintiff prepared a document which included a break up of the annual salary he was seeking. It contained reference to a “special agreement” and was initialled by the plaintiff and Mr I Barclay against the date 29 February 1980.

Also on 2 February 1980, the plaintiff prepared a separate three page, handwritten document, which reads –

“Calculation & Settlement of Deferred Payment Incentive Payments for MJ Raward
It is agreed that for the financial year 1977/78 & 78/79 that the following be the basis for the calculation of the above scheme.

1977/78 1978/79

Greenmount Developments (Pty Ltd)
Gross Operating Profit Before Tax            209844               248027
Less Interest Component  44163                 86204
165681               161823
Less Tax at 46%  76213                 74438
89468                 87385
Incentive calculated at agreed 6%                  5368                   5243

Re Wynnum Shopping Centre
Gross Profit before Overheads Barclay Fee & Tax 772840
Less Overhead MJR  22000
Less Barclay Fee     30000
  720840
Less Potential Tax @ 46%  331586
  (Effective Net Profit)   389254
Incentive Calculated at 10%   38925

(Initialled By CI Barclay) 2/2/80

Total Incentive  $49536
1977/78  $5368
78/79  $5243
Wynnum on basis of paying tax      $38925
In the event that tax is not paid on Wynnum due March April 1981 then a further Bonus on tax allowance will become payable Being 10% of $331586
MJ Raward is to reformulate a new agreement covering 1979/80 year for Greenmount Developments P/L & thereafter but excluding any further profits from Wynnum which will be treated as above on a basis of a % of extra profits above an agreed budget on similar lines to the Ken Mackay system payable over say 3 years and to make allowance for incentive to other senior staff worthy of such consideration.
On properties that have already been purchased as a result of M J Raward’s initiative to date and that later are developed and the profits from which form part of a group incentive profit to the other senior staff in addition to M J Raward that such properties should be valued as at today’s date with any capitalisation profit at today’s date and the bonus incentive thereon being allocated individually to M J Raward and any bonus incentive applicable as from today’s date from properties developed with such profit calculated from today’s values that the bonus incentive from such profits to be spread amongst the group senior staff as applicable from today’s date.”

The document was signed by the plaintiff and Mr I Barclay.

A meeting took place on 20 February 1982 between Mr I Barclay and the plaintiff after which the plaintiff drew up a document, which was signed by Mr I Barclay, who wrote “agreed” and the date beside his signature. On 25 August 1982, Mr Raward wrote the words “this is for Greenmount Developments P/L” on his copy of the document and initialled it. The document provides –

“Resolved that the existing bonus incentive scheme as in writing for J Raward to be finalised by the payment of moneys owing on the Wynnum Shopping Centre project as per the file details.
With the issue of the recent position charter and standards and the draft bonus incentive scheme M J Raward to come up with a suitable Bonus incentive scheme for his division which will include Greenmount Resort and Rainbow Place on some basis as from the commencement of each of these projects.” (emphasis supplied)

No draft bonus incentive scheme was prepared by the plaintiff.

At this time, Greenmount was part of the Barclay Mowlem Group and the plaintiff was in charge of the property division of that group. The other employees in the division were a secretary and a Mr Frank Wilson. The plaintiff said that the discussion, which took place leading up to the signing of the document, concerned the termination of his personal incentive scheme with regards to Greenmount and its future projects and the conclusion of the payment of the bonus moneys under the Wynnum Shopping Centre project. He further said that the discussion about drawing up a new bonus scheme included reference to its being based on one used within the Barclay Mowlem group but contemplated that it would give recognition to the plaintiff’s introduction of the properties which he had already introduced into Greenmount. That approach is consistent with the content of the 2 February 1980 memorandum and I accept that the discussion was generally along the lines stated by the plaintiff.

Salary reviews and changes in employment

The plaintiff ceased to be employed by Vine on 31 March 1981 and commenced employment with Greenmount on 1 April 1981. The change of employment came about because it was contemplated that much of the plaintiff’s time would be taken up with the development of Greenmount Resort in which John Mowlem & Co Ltd had an indirect interest. It was thought that, in the circumstances, the plaintiff should not be employed by a company owned and controlled solely by the Barclay interests.

The next salary review document, which is dated 14 February 1982 and deals with the 12 month period commencing on 1 February 1982, erroneously shows the plaintiff’s employer as Barclay Bros Pty Ltd. It is signed by Mr I Barclay against the date 16/12/1982 written by him. Against the printed words “any special arrangements/comments” he has written “outstanding payments to 30/11/82 by Greenmount”.

The salary review documents in 1983 and 1984 also made no reference to any incentive scheme.

Further salary review meetings between the plaintiff and Mr I Barclay took place in 1983 and 1984. In a handwritten memorandum to Mr I Barclay dated 29 June 1984, the plaintiff raised the question of his incentive payments. He reminded Mr Barclay that it has been established that should no tax be payable in respect of the Wynnum project, then a further 10% of $331,568 was payable and noted that no tax had in fact been paid. He sought this sum plus interest on the outstanding moneys at the rate of 10% per annum.

In a memorandum dated 31 July 1984 addressed to Mr I Barclay, the plaintiff noted –

“As agreed in recent discussion following my memo of 29/6/84 I now confirm bonus payable at $38,657 being $33,157 + interest of $5,500. ...
This bonus payment finishes all outstanding arrangements that previously were in effect between MJR and Greenmount Development Pty Ltd of a bonus calculation nature. Arrangements will continue in force for Vine Nominee’s interest at Kingscliff NSW, Kirra Hill etc.
Please sign this memo to record our agreement in this matter.” (emphasis supplied)

The plaintiff then signed it and wrote the date 1/8/84 at its foot. Mr I Barclay, although given a copy, did not sign it. The evidence does not suggest that there was any further discussion about the matters raised in it, but I accept that it records matters agreed between the plaintiff and Mr I Barclay.

On 1 July 1984, the plaintiff became an employee of Barclay Bros Pty Ltd and his employment by Greenmount ceased.

The plaintiff said that at the time of his change of employment he raised with Messrs I and D Barclay the question of his incentive scheme and was told that the obligations under that scheme would be honoured notwithstanding the identity of his employer. Both of the Barclays swore that they did not recall any such conversation. The plaintiff’s account receives some support from his diary note of a conversation with Mr D Barclay on 5 September 2000. The note, like others of its kind, may contain self-serving material and omit other references which could cast a different light on the matters dealt with in the note. It thus needs to be approached with a degree of circumspection. Also, it was written about six years after the time of the alleged conversation. I do not accept that there was such a conversation with Mr D Barclay but I consider it probable that something to that effect was discussed and agreed with Mr I Barclay.

On 4 June 1986 the plaintiff was appointed Finance Director of Barclays Bros Limited. It was a term of his engagement that it be terminable by either side on the giving of three months’ notice. The appointment was a full time one and the letter of appointment made provision for salary and allowances totalling $75,796. There was no reference to any bonus or incentive entitlement and the letter stated –

“The terms and conditions of this new appointment supersede and take precedence in all respects over any and all previous employment agreements.”

The plaintiff resigned from his employment with Barclay Mowlem Limited “and its various subsidiary companies” on 8 April 1988 and he and Barclay Mowlem Limited agreed that the resignation would take effect from 6 May 1988.

On 6 May 1988 the plaintiff signed a document on the letterhead of Barclay Building and Engineering Contractors in which he confirmed his “termination of employment with Barclay Bros Limited” and acknowledged “receipt of final payment in full of all moneys due to me in accordance with my terms of engagement, and certify that I have no further claims for any compensation whatsoever with exception of Superannuation due to me through the Barclay superannuation plan”.

The alleged mention of the 1976 agreement to Mr D Barclay in 1991

No reference was made by the plaintiff to the existence or terms of the 1976 Agreement between mid 1984 and 1991. In 1991, after mediating in a dispute between the Barclay brothers, the plaintiff asserts that he informed Mr D Barclay of a concern that Mr I Barclay would become vindictive when it came time for moneys to be paid under his incentive scheme in respect of the Lenen land. Mr D Barclay, the plaintiff swears, responded that he knew of an agreement in that regard, and although he could not recall its terms, the plaintiff could be assured that the terms of the agreement would be honoured when the time came.

No documentary record exists of this conversation, which is not admitted by Mr D Barclay. Although I accept that the plaintiff may well have said something on that occasion which raised the possibility of vindictive conduct by Mr I Barclay, I am not persuaded that what was said alerted Mr D Barclay to the existence of the 1976 agreement.

In 1991, the plaintiff either on his own behalf or on behalf of a company controlled by him, had occasion to write to both the Barclay brothers, Lenen and also to Mr I Barclay, about the affairs of the Barclay family companies. The correspondence makes no reference to the 1976 agreement.

One of the letters in that chain of correspondence contains a lengthy and carefully thought out justification of a fee note presented by the plaintiff to Vine in connection with a sale of shares or proposed sale of shares by the Barclay interests in Barclay Mowlem Limited. The letter concluded –

“… However I am prepared to act in the interests of some clients for whom I am able to perform a unique service. You and Don have recently gained the benefit of that service. If you don’t like it please say so and I will cease to make myself available to you. I have to date accumulated several hours on the Kingscliffe [sic] matter and if you prefer to cease our association, I will render an account to date and we can go our separate ways.”

I consider it likely that, after his resignation from the Barclay Mowlem Group, the plaintiff had doubts about the continued enforceability of the 1976 agreement and was reluctant to confront either of the Barclay brothers about it. I regard it as significant that the plaintiff made no attempt to record the continuation of a bonus entitlement on his resignation as an employee of the Barclay Mowlem Group.

Work performed by the plaintiff in relation to the projects after 1988 and other consultancy arrangements

Between April 1988 and March 1994, the plaintiff, as a director or employee of Raward and Co or of Lonnavale Pty Ltd, another company controlled by him, continued to perform for a fee consultancy work in respect of the Lenen land as and when required by Lenen. The work was normally done at the request of Mr I Barclay, and in 1993 and 1994 the terms on which Raward and Co acted were spelt out in letters from that company to Lenen.

In 1994, the plaintiff had some negotiations with Mr I Barclay concerning a proposed new consultancy arrangement between Raward & Co and Lenen. In the course of those discussions, the plaintiff gave to Mr I Barclay a draft letter addressed to the Barclay brothers containing the plaintiff’s ideas about development of the land and a proposal for a fee structure. The document contains the following –

“Since acquisition of the land, in recognition of the introduction of the opportunity through M.J. Raward, there has been in existence an arrangement facilitating a share of the profits being distributed to him. This proposal continues that theme. It is proposed that a free equity be granted of xxxxxx% of Lenen Pty Ltd. in recognition of the increase in value to date and to ensure the long term commitment of M.J. Raward to the project in the future.” (emphasis supplied)

The plaintiff and Mr I Barclay, according to the former, went through the document “chapter and verse” on 22 March when Mr Barclay made some notations in handwriting on his copy of the document. I am not persuaded that there was discussion about the 1976 agreement. I think it probable though that Mr I Barclay understood the first sentence of the above quotation to be a reference to the 1976 agreement. I also consider it likely that Mr Barclay understood the plaintiff to be raising a potential claim under the 1976 agreement in order to secure a new bonus arrangement. Neither of the men had in mind that the 1976 agreement would stand if Raward & Co’s proposal was accepted.

Mr I Barclay, on behalf of Lenen, wrote to the plaintiff on 19 April 1994 rejecting the proposal contained in the draft letter. The plaintiff, in the capacity of employee or director, nevertheless continued to act as a consultant in relation to the Lenen land from time to time until October 1994. The plaintiff then had no involvement with the Lenen project until August 1998 when he was contacted by Mr I Barclay and asked to provide further advice and assistance.

In December 1988, Mr I Barclay submitted a written offer to Raward & Co in which Lenen offered to engage Raward & Co to provide advice and services in relation to the proposed sale of the Lenen land.

Raward & Co responded to the letter of offer by a letter to Lenen dated 21 January 1999. In the letter, Raward & Co, accepted Lenen’s offer but sought clarification of a number of matters. The plaintiff and Mr I Barclay discussed the letter in the course of which, according to the plaintiff, he said “there is also the matter of the earlier agreement and your obligations to me under that”. He swore that Mr Barclay responded “Look, if you have got a claim under some earlier agreement, put it in writing. This is a bloody good offer. Please sign it or go away”. The plaintiff then signed the letter of offer of 18 December 1998. After the letter was signed, according to the plaintiff, Mr D Barclay arrived and a further conversation took place concerning the 1976 incentive agreement. According to the plaintiff, Mr I Barclay said to Mr D Barclay words to the effect “Malcolm still thinks he’s got a claim or an entitlement on some prior agreement”. Mr D Barclay said nothing and Mr I Barclay then said words to the effect “Malcolm, if you’ve got a claim under some prior agreement, put it in writing”.

Both Barclays do not admit that any such conversation took place. The plaintiff did not proceed to put his claim in writing and advanced no credible explanation for his failure to do so. I accept that the plaintiff may well have made reference to the 1976 agreement in discussion with Mr I Barclay on 5 February 1999 but I do not accept that the conversation about putting a claim in writing took place. In a conversation on 4 September 2000, Mr I Barclay suggested that the plaintiff should state his position in writing and it may be that the plaintiff has confused the sequence of events. I consider it improbable that the Barclays, whilst being confronted with a claim under the 1976 agreement, would agree to the bonus provisions in the consultancy agreement. It is more likely that the plaintiff again made some allusion to the 1976 agreement in discussion with Mr I Barclay with a view to negotiating a more favourable consultancy agreement.

The plaintiff contended also that in the course of this meeting Mr I Barclay placed some ticks on the letter of 21 January. The implication was that Mr Barclay had agreed that his bonus would be calculated by reference to the cumulative total of sales. Whatever may have been the case in relation to the markings on the document, I am not satisfied that anything was said or done in the course of the meeting to vary the offer made in Lenen’s letter dated 18 December 1998. Indeed, the evidence strongly suggests to the contrary. The plaintiff, in the course of the meeting of 5 February 1999 or at its conclusion, signed the letter of offer of 18 December without alteration after Mr Barclay said in effect, “take it as is or forget it”. The plaintiff’s evidence, after late discovery of some diary notes, was to the effect that after begrudgingly agreeing on 5 October 1999 to the Barclays’ mode of calculating the bonus payments, he resiled from that agreement in a telephone conversation with Mr D Barclay later the same day. Even if the plaintiff’s recollection in this regard is accurate, which I do not accept, his conduct after entering into the consultancy agreement could not vary its terms.

Mr I Barclay sent a facsimile to the plaintiff on 20 July 1999 with which he provided a draft agreement between Richtech Pty Ltd and Lenen concerning the development of the Lenen land and a further draft agreement between Richtech and the plaintiff for the provision of services in relation to the sale of the Lenen land.

The plaintiff said he found the proposed documents unsatisfactory for a number of reasons including the fact that they sought an agreement with him rather than his company and he thought that the proposed change in the identity of the contracting party might have been intended to effect “the 1976 arrangements”.

On 31 August 2000 Raward & Co submitted an invoice dated 31 July 2000 to Lenen seeking payment of a fee of $566,250 for services rendered to 30 June 2000 under the consultancy agreement. Mr I Barclay, on behalf of Richtech Pty Ltd, wrote to the plaintiff on 25 August 2000 enclosing a proposed receipt and waiver addressed to various of the Barclay family companies including Vine, Lenen and Richtech acknowledging acceptance of the sum of $541,250 in full satisfaction of all claims, actions and demands against those companies. On 1 September 2000 Mr I Barclay on behalf of Richtech wrote to the plaintiff enclosing a cheque for $566,250 in favour of plaintiff and Raward & Co, stating that it was “in full and final satisfaction of any and all claims from yourselves associated with the sale of properties.” The plaintiff refused to accept the cheque on such conditions. Payment was made later after service of a statutory demand.

On 12 September 2000 the plaintiff wrote to Mr I Barclay and the companies in the Barclay group of companies including Vine, Lenen and Richtech enclosing an invoice dated 12 September 2000 in the sum of $2,592,151 for a bonus under the November 1976 agreement and a lengthy supporting submission. The bonus was claimed on the basis of 10% of a nett after tax profit on the sale of the Lenen’s South land of $25,921,518.

On 2 October 2000, the plaintiff’s solicitor served on Lenen a statutory demand claiming payment of the sum of $566,250 under the consultancy agreement.

In a letter dated 6 February 2001 to the plaintiff and Raward & Co, Lenen purported to terminate the consultancy agreement on the basis that –

“Due to the legal proceedings that you have commenced against us, it is clear that for obvious reasons (including the resultant complete cessation of effective communications between you and our company) you are no longer able to provide the service that is required.”

Raward & Co submitted another invoice to Lenen dated 13 February 2001 in the sum of $420,750 for “bonus remuneration” under the consultancy agreement. The fee was calculated on a sale price of $20,200,000 for the Lenen North land. An amended invoice was submitted on 29 May 2001 claiming $456,750 on the basis of a sale price of $22,000,000.

Was an agreement concluded on 11 November 1976?

The plaintiff’s pleadings allege that the 1976 agreement was made orally between himself on the one hand and the Barclay brothers on behalf of the defendants on the other. It was further alleged that it was evidenced by the handwritten memorandum and the typed memorandum. In his submission to the Barclay brothers dated 12 September 2000, the plaintiff asserted that the agreement was constituted by the handwritten document dated 18 November. In address, although nothing was said about whether the agreement was oral or in writing, it was accepted on behalf of the plaintiff that the terms of the alleged agreement were contained in the handwritten memorandum and so much of the typed memorandum as was incorporated in the handwritten memorandum by reference.

The defendants, in support of their contention that the parties did not intend to enter into a binding agreement on 18 November 1976, point to the introductory words of the handwritten document, “MJR to draw up agreement on basis of summary of page 2 of MJR submission”. Those words, it is said, show that all that was intended was that the plaintiff prepare a draft for the Barclays’ consideration.

It is then submitted that the alleged agreement, creating as it did the potential for the payment of substantial sums of money, was in respect of an important matter and it was thus unlikely that the parties intended that any agreement be concluded without formal documentation. Further, it is said that the alleged agreement failed to deal with a number of matters which “commonsense dictates ought to have been dealt with”. Those matters include: express identification of all parties to the agreement; express identification of the senior staff to whom the agreement was to apply or a definition of “senior staff”; the manner of allocation of the incentive or bonus payments between senior staff; calculation of profits and losses on projects; the time at which the bonus became payable and circumstances in which the agreement would terminate.

The fact that “many subsidiary questions would require attention” and that the subject matter was inherently complex tends against a conclusion that the parties intended to be bound.[1] So too does the fact that finality was not reached on an important matter.[2] Lack of finality on an important point though is not necessarily fatal as is demonstrated by later discussion under the heading “uncertainty”. If the parties intend to be bound contractually even though an important point remains to be resolved, courts will strive to give effect to that intention.[3]
[1]Cf Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 and ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548.
[2]B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 97011 and Pagnan S.p.A. v Feed Products Ltd [1987] 2 Lloyds Rep 601 at 619.
[3]Pagnan S.p.A. v Feed Products Ltd [1987] 2 Lloyds Rep 601.

The plaintiff contends that the facts fall within the first class of case addressed in the following passage from the judgment of the Court in Masters v Cameron. [4]
[4](1954) 91 CLR 353 at 360-361.

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. …
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own.” (emphasis supplied)

The defendants contend that the parties did not intend to be bound until a formal contract was executed and that the circumstances of this case thus fall within the third class of cases referred to in Masters v Cameron. For reasons which will soon become apparent, I do not regard the facts of this case as falling within any of the categories addressed in Masters v Cameron.

Whether the parties intended that a binding agreement come into existence on 18 November 1976 is to be determined objectively by reference to the words and actions of the parties.[5] In G R Securities v Baulkham Hills Private Hospital Pty Ltd,[6] McHugh JA observed –

“However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances”.

[5]Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 502; Masters v Cameron (1954) 91 CLR 353 at 362; and Storer v Manchester City Council [1974] 1 WLR 1403 at 1408.

[6](1986) 40 NSWLR 631.

I have set out earlier the plaintiff’s version of the conversation leading up to the signed memorandum but I am not satisfied that the plaintiff recalls sufficient of that conversation to conclude from his oral evidence alone that an agreement was entered into on 18 November. Although I consider that the plaintiff’s recall of relevant events was superior to that of either of the Barclays, I formed the view that the plaintiff’s recollection was unreliable, and that he found it difficult to distinguish between an actual recollection and reconstruction. I consider Mr I Barclay’s oral evidence to be less reliable than that of the plaintiff.

The other critical piece of evidence which came into existence on 18 November 1976 is the signed memorandum. Arguably, it has more of the appearance of a direction about the preparation of a draft agreement than a record of a binding agreement. It states that the plaintiff is to “draw up (an) agreement”. This is to be done, in part, on the basis of the summary on page 2 of the plaintiff’s three page document. That document explores, in a general way, bases on which bonus or incentive payments may be awarded and calculated. The body of the document does not purport to prescribe particular fees for particular circumstances, let alone address the many problems which might arise in the practical working out of the proposed incentive scheme. One matter which is left to be worked out in the future is the identification of the employees who are to participate in the proposed scheme and the manner and extent of their participation. Those matters, as later discussion shows, potentially have great impact on the quantum of bonuses payable to the plaintiff.

Another area of potential uncertainty is the application of the proposed scheme to the Barclay Group of companies. At the time, the plaintiff was an employee of Vine but projects specified in the typed memorandum were being undertaken by Vine, Greenmount and Lenen. There existed the possibility that other companies would become involved at a later date and the subject discussion failed to address expressly the questions of identity of the employer parties.

The foregoing matters offer substantial support for the contention that the parties did not intend a binding agreement to come into existence on 18 November. Were it not for the subsequent conduct of the parties, which is now addressed, I would have concluded that the parties did not intend to contract until a more comprehensive document was brought into existence and its terms agreed.

The plaintiff’s case though gains considerable strength from the fact that the plaintiff and Mr I Barclay proceeded on the basis that a binding agreement had been entered into on 18 November 1976. That agreement, with some deviation from its terms, was implemented by the payment of negotiated bonuses in 1980. It is well established that the existence of an agreement may be inferred from the subsequent conduct of the parties.[7] The fact that there has been performance of a transaction by both sides is also strong evidence of the existence of an intention to enter into legal relations.[8] Also, the existence of a contract may be proved by admissions.[9]
[7]Haynes v McNeil (1906) 8 WALR 186; Glass v Pioneer Rubber Works of Australia Ltd 9 [1906] VLR 754; Brogden v Metropolitan Railway Co (1877) 2 App Cas 666; Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 and The Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204.
[8]British Bank for Foreign Trade Ltd v NovinexLtd [1949] 1 KB 623 at 630 and Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27.
[9]Australian Energy Ltd v Lennard Oil NL (supra).

There can be no doubt that Mr I Barclay saw the references to the November 1976 agreement in the salary review documents when considering them for the purposes of reviewing the plaintiff’s salary. He explained, in effect, that he took no notice of such references because he considered them to be no more than references to “an agreement to agree”. He also passed off the discussions in 1980 and 1982 relating to the Wynnum Shopping Centre and Greenmount bonuses as concerning gratuities which he, with the authority of the board of directors of the employer company, had agreed to pay. The bonuses, he claimed, had nothing to do with any pre-existing incentive agreement or scheme.

I did not find any of these explanations convincing and gained the distinct impression that Mr Barclay was uncomfortable in advancing them. In my view, it would have been quite out of character for Mr Barclay, at relevant times, to have expressed his agreement with the contents of a document if he thought that it misstated a material fact, particularly if the error could operate to the disadvantage himself or one of his companies. I have little doubt that when signing the 1978, 1979 and 1980 salary review documents containing reference to “special agreement” or “agreement dated 18/11/1976”, Mr Barclay understood that he was accepting the existence of a legally binding incentive agreement entered into with the plaintiff in November 1976.

The memoranda of 2 February 1980 and 25 August 1982 offer further documentary evidence of the parties’ understanding that such an agreement existed. The former notes that the plaintiff “is to reformulate a new agreement …” whereas the latter states that “… the existing bonus incentive scheme as in writing for M J Raward to be finalised …”. Other documents, including the 31 July 1984 memorandum, point in the same direction.

One of the more puzzling features of this case is why Mr I Barclay ever agreed to the plaintiff’s incentive scheme proposal in the first place. He said that he regarded it as a “naive document”, as indeed it was. Implementation of its terms could result in the employer being singularly disadvantaged to the benefit of the plaintiff. For example, if three projects were concluded in a particular year, one realising a profit and the others losses greater than the profit, the plaintiff would nevertheless be entitled to a bonus on the profit-making project without regard to the losses sustained. Further, if, for example, the employer developed a resort business project and operated it for a number of years, the plaintiff would be entitled to three percent of the before tax profit even if the employer traded at a loss overall.

It is also difficult to see why the plaintiff should have been given such a generous incentive to do what he was already being paid quite well to do as a manager. The plaintiff’s explanation, in essence, is that things on the investment side of the Barclay business were bubbling along quite well; the Barclay brothers were happy with the plaintiff’s performance and could see that the plaintiff had the capacity to introduce good quality projects for the general benefit of the Barclay Group. While there is probably some substance in that appraisal, I consider it likely that when the plaintiff agitated for a generous incentive arrangement, Mr I Barclay was not particularly concerned about the content of the proposal and gave it only cursory consideration. Although his habit and inclination was to be both thorough and cautious about such matters, his perception was that the implementation of any incentive scheme would be within his control. It thus did not occur to him that the application of the agreement could produce a result which was overly generous to the plaintiff or unacceptably detrimental to the interests of the employer.

Mr I Barclay’s conduct in relation to the bonus negotiations in 1980 and 1982 offers some support for this analysis. He then imposed his will on the plaintiff and required him to accept sums calculated by Mr Barclay so as to produce a level of payment satisfactory to him. It is also the case that Mr Barclay, in November 1976, did not concern himself with the question of what the consequences would be if the plaintiff’s employment or his involvement in an introduced project were to terminate.

It is relevant that the first written reference to the 1976 agreement after November 1976 did not occur until 1 February 1978. A possible explanation for this is that something occurred between those two dates which caused the plaintiff and Mr I Barclay to accept the existence of a binding agreement. Neither party though advanced that explanation and there is no evidence of any conversation or conduct in that period which may have resulted in uncompleted negotiations maturing into a concluded agreement. In those circumstances, having particular regard to the post 18 November 1976 conduct of the parties, I find that an agreement was reached on that date.

Uncertainty

The defendants argue that if, contrary to their contentions, the parties intended to enter into a binding agreement on 18 November, and their negotiations reached a stage of sufficient finality for an agreement to be concluded, the agreement is void for uncertainty.

In view of my later finding that the fee claimed by the plaintiff was not payable to him under the terms of the agreement, it is not strictly necessary for me to resolve this question or the defences of lack of authority and abandonment raised by the defendants. It is, however, desirable in case this matter comes to be considered by an appellate court, that I separately consider those matters and, where appropriate, make findings of fact.

The concluding words of the signed memorandum give rise to the greatest difficulties for the plaintiff. In the oral discussion between the plaintiff and Mr I Barclay the latter stated a requirement that that the incentive scheme would also apply to senior staff appointed at a later date. That was accepted by the plaintiff. The discussion though did not touch on questions such as numbers of other potential participants or the nature and extent of participation.

In Thorby v Goldberg,[10] Menzies J quoted, with approval, the following passage from the judgment of Sugerman J in the court below –

“It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential or critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention.”

[10](1964) 112 CLR 597 at 607.

Notwithstanding the fact that an essential or critical term is not agreed the parties’ bargain will not be regarded as incomplete if there exists some mechanism if for determining the outstanding matter[11] or, if in the absence of such a mechanism, the Court is able to make a determination by reference to some objective criteria or standards.[12]
[11]Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 605 and 610-617; Attorney-General v Barker Bros Ltd (1976) 2 NZLR 495 and The Queensland Electricity Generating Board v New Hope Collieries Pty Ltd (1989) 1 Ll Rep 205, 210.
[12]cf Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 and Talbot v Talbot [1968] Ch 1.

No mechanism was provided in the agreement for determining an apportionment of bonus payments between participants. Nor, in my view, are the circumstances such that, in the absence of agreement, the court could arrive at an apportionment by reference to some objective criteria or standards. The agreement is thus unenforceable, unless it is implicit that, in the case of disagreement between employer and employee, one of the parties may make the appropriate determination. There is another possibility. If the parties have expressly or impliedly left the question of participation of the senior staff for determination at a later date whilst intending to be bound immediately, the agreement may be enforceable.

The following observations of Lloyd LJ (with whose reasons Stocker and O’Connor LJJ agreed) in Pagnan S.p.A. v Feed Products Ltd[13] are apposite –

“(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled (see Love and Stewart v Instone per Lord Loreburn at p. 476).
(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.
(6) It is sometime said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, ‘the master of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.”

[13][1987] 1 Lloyd’s Rep 601 at 619.

At first instance, Bingham J addressed the question of parties to negotiations agreeing to be bound, notwithstanding the continuation of negotiations on an important point, in these terms -

“Where the parties have not reached agreement on terms which they regard as essential to a binding agreement, it naturally follows that there can be no binding agreement until they do agree on those terms: see Rossiter v Miller (1878) 3 App. Cas. 1124 at p. 1151 per Lord Blackburn. But just as it is open to parties by their words and conduct to make clear that they do not intend to be bound until certain terms are agreed, even if those terms (objectively viewed) are of relatively minor significance, the converse is also true. The parties may by their words and conduct make it clear that they do intend to be bound, even though there are other terms yet to be agreed, even terms which may often or usually be agreed before a binding contract is made: see Love and Stewart, sup,. per Lord Loreburn LC at p. 476.”

The circumstances addressed in paragraph (6) of the above passage from Lloyd LJ’s reasons in Pagnan is similar to the class of case recognised in Sinclair, Scott & Co Ltd v Naughton[14] as one in which –

“The parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”

[14](1929) 43 CLR 310 at 317.

The principle stated in paragraph (6) was referred to by Ipp J (with whose reasons the other members of the Court agreed) with apparent approval in Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd .[15]
[15][2000] WASCA 27.

The above principles are difficult to apply where the performance of that part of the bargain which has been agreed may be affected in its execution by matters which are left for future resolution. I refer in particular to the potential impact on the plaintiff’s remuneration of the addition of another or others to the incentive scheme. On balance though, I conclude that it was impliedly agreed that the agreement would take immediate effect in respect of the plaintiff and that the extent of the participation of senior staff would be resolved at a later date. That conclusion derives support form the fact that the primary thrust of the discussion on 18 November 1976 was the remuneration of the plaintiff. Also at that time, there was no other person actually identified as a potential scheme participant. The agreement was thus not uncertain on formation and at no stage did employer companies seek to introduce senior staff into the incentive scheme.

I conclude also that it is implicit in the agreement that in the event of the appointment of senior staff whom the employer wishes to participate in the scheme, the employer may determine the basis and extent of such participation. It is a term of the agreement that senior employees may participate. It is only the employer who is able to determine whether the services of such persons should be retained and the nature and extent of their respective duties. Clearly, it is not possible to determine the extent to which such persons will participate before their duties are known. Also, it is impossible to predict how the value of the contributions of such an employee to the prosperity of the employer or to the advancement of a given project will compare with those of the plaintiff or other employees.

In the absence of the appointment of a third party to decide respective contributions, the only feasible option is for the decision to be made by the employer. Employers make similar decisions in relation to bonus payments as a matter of course but I rather think it would be extremely unusual for a determination of the type under consideration to be vested in a third party.

In my view, such a term would meet the criteria necessary for the implication of a term. Such a term would not result in an illusory contract[16] as the employer would be under a duty to act reasonably, or at least in good faith, in making any determination. Also, such a term would be more readily implied if, without it, the agreement which the parties believed to exist and upon which they acted, would be or could become unenforceable.[17]
[16]Thorby v Goldberg (1964) 112 CLR 597 at 605; Godecke v Kirwan (1973) 129 CLR 629 at 646 and Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 359-361.
[17]British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623; F &G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53.

Courts are willing to uphold commercial bargains wherever reasonably possible.[18] As was said in the Queensland Electricity Generating Board v New Hope Collieries Pty Ltd,[19] “arguments invoking alleged uncertainty, or alleged inadequacy in the machinery available to the Court for making contractual rights effective, exert minimal attraction”. Where the parties have acted for some time on the understanding that an agreement exists, courts are even more reluctant to find that no enforceable contract exists.[20] In F & G Sykes (Wessex) Ltd v Fine Fare Ltd, Denning MR said –

“In a commercial agreement the further parties have gone on with their contract, the more ready are the courts to imply any reasonable term so as to give effect to their intentions.”

[18]Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205; and Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 at 523.

[19](supra) at 210.

[20]Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711; F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53; York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11; and Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27.

The defendant’s case on uncertainty would be stronger if the signed memorandum sought to incorporate the whole of the typed memorandum, but it does not. The concept expressed in the signed memorandum is a simple one, providing for a specified and ascertainable fee in specified circumstances. I thus conclude that the 1976 agreement is not uncertain.

Construction of the November 1976 agreement

In the plaintiff’s written submissions, attention was drawn to the following words in the typed memorandum –

“Set out hereunder is a general basis of remuneration for the efforts of M J Raward in introducing, managing and developing various projects that come to hand and are undertaken by the Barclay family group of companies or Barclay Mowlem group of companies.”

It was then submitted that –

“In other words, Raward’s incentive was in respect of his efforts in introducing projects and managing and developing those projects undertaken by companies in either group”.

Thus stated, there is little difference between the plaintiff’s and the defendants’ approach to construction. The plaintiff’s pleaded case is that his only obligation was to use “efforts in introducing, managing and developing” various projects for the defendants. In address, the plaintiff’s contention was that although he could not earn an entitlement to an incentive payment without introducing a project, once a project was introduced his obligation was to perform in respect of it those duties given to him from time to time by “the directors of the company”.

The defendants’ submission, assuming for the purposes of argument the existence of an agreement, was that the plaintiff was required to be “involved in dealing with all of the problems of the various projects … to point of realisation” in an employer capacity in order to earn his fee.

As is submitted on behalf of the plaintiff, the incentive or bonus the subject of discussion and agreement on 18 November 1976 was for “the efforts of (the plaintiff) in introducing, managing and developing various projects”. At the time the discussion took place the plaintiff was employed on a salary as the secretary/manager of Vine. One of his roles in that capacity was to introduce projects, to manage and develop them, and then to effect a sale in appropriate cases. He had the overall carriage of the projects under consideration subject to the ultimate direction of the Barclay brothers.

The memorandum made the point that “where one person is involved in dealing with all of the problems of the various projects from point of introduction to point of realisation or future management (in other words, where the plaintiff was fulfilling his then role) “it would be unrealistic” for an incentive or bonus to provide for the payment of separate fees in respect of the separate acts or stages of project introduction management and sale. The oral evidence of the plaintiff also supports the conclusion that the negotiated fee was based on the shared understanding that the plaintiff would be performing the duties expressed in the opening words of the typed memorandum.

It is necessarily implicit in what was said or written that the bonus or incentive payment would accrue to the plaintiff only where the plaintiff introduced a project and, in his capacity as manager, had responsibility for that project through to “point of realisation”. He said, and I accept, that the contents of the typed memorandum were discussed. He also said that its contents were agreed. I doubt that this was so unless the plaintiff was seeking to convey that he and Mr I Barclay agreed that the incentive payments would apply to the projects specified in the typed memorandum in the circumstances mentioned in the introductory paragraph of the memorandum.

The plaintiff must take the good with the bad. If he wishes to rely on a relatively short oral exchange substantially recorded in a brief memorandum as constituting an incentive scheme agreement, he must take it with all its limitations. One such limitation is that it did not address expressly a number of obvious enough contingencies such as changes in the plaintiff’s duties and the termination of his employment. The 1976 agreement provided for a fee which would become payable only where the plaintiff participated in all stages of a project from introduction through management to sale, at least where the project was sold on completion. The agreement, so construed, would operate to disadvantage the plaintiff in the event that his employment ceased before finalisation of all stages of a project. He would also be disadvantaged if his employer, during the term of his employment, caused the management of the project or the project’s sale to be effected by another or others. In such a case though, the plaintiff may have had a claim on the basis of breach of an implied obligation that the employer do everything reasonably within its power to give the plaintiff the benefit of the contract.[21]
[21]Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607.

On the other hand, to construe the agreement in the manner contended for by the plaintiff would give rise to even more commercially unrealistic consequences. If the plaintiff’s participation in a project or his employment ceased immediately after he introduced a project to his employer, on his construction, he would nevertheless be entitled to a full bonus payment. Also it would be quite inconsistent with the terms of the agreement for the plaintiff to be entitled to remuneration merely for introducing a project, or for that matter, introducing it and developing it to the point at which it became ready for sale.

The plaintiff was not “involved in dealing with all the problems of” the Lenen projects between the termination of his employment with the Barclay group in April 1988 and about July 1991. After the latter date all of the work done by the plaintiff in respect of those projects was done by him as a servant or agent of Raward & Co or Lonnavale Pty Ltd. After 5 February 1999, any work done by the plaintiff in relation to the projects was pursuant to Raward & Co’s consultancy agreement. Even prior to the cessation of the plaintiff’s employment by the Barclay Mowlem Group his involvement in the Lenen projects had decreased to a marked extent.

It was argued on behalf of the plaintiff that the capacity in which he performed work on the projects was irrelevant. Reliance was placed on the fact that the plaintiff’s entitlement to a bonus was in addition to his entitlement to be paid a negotiated salary.

The plaintiff’s argument, however, cannot succeed. It cannot be said that in any capacity he “introduced managed and developed” the subject projects. He introduced them but “managed” and “developed” them for part of the development period only.

There is the additional difficulty that any work done by him other than as an employee of the Barclay Mowlem group could not contribute to an entitlement to remuneration under the 1976 agreement. The reason for this conclusion is that the agreement was an employee’s incentive scheme. It made provision for an incentive to be paid to an employee in addition to his salary in order to reward the employee and to encourage him in the performance of his duties as employee. That is implicit from the “nature of the contract itself” as expressed in the words of the contract.[22] Once his employment ceased, in the circumstance under consideration, the agreement became incapable of further operation.
[22]cf Brambles Holdings Limited v Bathurst City Council [2001] NSW CA 61 and Liverpool City Council v Irwin [1977] AC 239.

Authority to enter into the 1976 agreement

It is alleged that Mr I Barclay had no actual or ostensible authority to enter into the 1976 agreement on behalf of Vine or Lenen.

I doubt that Mr D Barclay was present in the discussions leading up to the signing of the November 1976 memorandum despite his initials being written at the top of the memorandum by the plaintiff. It would have been inconsistent with normal, and almost invariable, practice for him to have been at the meeting. I think the more likely explanation for his initials being on the memorandum is that the plaintiff thought it desirable to have both directors acknowledge the 1976 agreement. This did not happen.

His absence from the discussion though has no bearing on the 1976 agreement as Mr I Barclay had both actual and ostensible authority to enter into it. He had actual authority because, by a long history of dealings between the directors of relevant companies, Mr I Barclay customarily set employee’s terms and conditions of employment without seeking the prior approval of Mr D Barclay or any subsequent ratification of his actions. That course was not the subject of any formal resolution but it was the way in which the subject companies conducted their affairs to the knowledge of all interested persons and entities at relevant times. Actual authority is to be implied in these circumstances.[23]
[23]Hely Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583.

As for ostensible authority, in Northside Developments Pty Ltd v Registrar General[24], Brennan J said -[25]

“A company is bound by an act done when the person who does it purports thereby to bind the company and that person is authorised to do so or the doing of the act is subsequently ratified. … Authority for the purpose is derived either directly from the constitution of the company or from some antecedent act (typically, a resolution of the governing body) which is itself binding on the company. As between a company and a party who deals with it, a company is bound by an act purporting to bind it not only when the person who does the act has the company’s authority to bind it by that act but also when that person is held out by the company as having that authority and the party dealing with the company relies upon that person’s ostensible authority.”

[24](1989-1990) 170 CLR 146.

[25]At 171-172.

Since becoming an employee in the Barclay group of companies, the plaintiff could see that the person who conducted and concluded negotiations with employees in respect of terms and conditions of employment was Mr I Barclay. He was aware that no other person on behalf of relevant companies participated in that process. Mr I Barclay was thus held out to the plaintiff has having authority to set the plaintiff’s terms and conditions of employment.

Abandonment of the November 1976 agreement

In order to support their abandonment argument, the defendants point to –

(a) The remuneration payable under the consultancy agreement by way of a sum calculated as a proportion of the sale price as a reward for the plaintiff’s work in securing such a sale.

(b) The failure on the part of the plaintiff to refer to his alleged entitlement under or the existence of the alleged November 1976 agreement when negotiating the terms of the consultancy agreement.

If I am correct in concluding that it was implicit in the 1976 agreement that the plaintiff would have an obligation to oversee the development and sale of the project, the work required to be done under the consultancy agreement is work which would have come within the obligations of the plaintiff under the November 1976 agreement. The plaintiff, of course, was not a party to the consultancy agreement but there can be no doubt that it was contemplated by the plaintiff and Raward & Co that the services to be provided under the consultancy agreement would be those of the plaintiff himself.

If the November 1976 agreement were to remain on foot there could be no rational reason for entering into the consultancy agreement. The plaintiff could earn his fee under the consultancy agreement only by doing work of the nature of that already required of him under the November 1976 agreement, if that agreement remained in effect.

As mentioned earlier, it is probable that on 5 February 1999 the plaintiff alluded to the existence of the 1976 agreement in the course of negotiations with Mr I Barclay concerning the consultancy agreement. I do not accept that he asserted, expressly or impliedly, that the 1976 agreement would remain on foot if the consultancy agreement were to be entered into. Mr I Barclay, for his part, did not seek any clarification of the plaintiff’s position in relation to the 1976 agreement. It is likely that he thought that the 1976 agreement was no longer enforceable and that, if enforceable, it would be supplanted by the consultancy agreement. I consider it probable also that the plaintiff doubted the continued survival or enforceability of the 1976 agreement. He did not inform Mr Barclay that he reserved the right to allege its continued existence or to claim under it because it was plain to him that had he done so, negotiations concerning the consultancy agreement would have been terminated by Mr Barclay.

Some time later Mr I Barclay became concerned about whether the plaintiff had any claims under the 1976 agreement but by that time it had been abandoned and could not be revived.

In those circumstances, can the 1976 agreement be said to have been abandoned by the parties?

Parties may abandon a contract by conduct. In DTR Nominees Pty Ltd v Mona Homes Pty Ltd,[26] the parties to a contract for sale and purchase each claimed that the contract had been lawfully terminated by it as a result of the other party’s breach and neither party regarded the contract as still being on foot. In those circumstances it was concluded that they had abandoned the contract.
[26](1977) 138 CLR 423.

In Summers v The Commonwealth[27] the parties to a contract for the supply of blocks of marble were in dispute concerning its terms. One party purported to give notice of cancellation of the contract, following which neither party took any steps towards its performance. The parties were held to have abandoned the contract.
[27](1918) 25 CLR 144.

Abandonment can also be inferred from the failure of parties to attempt to perform a contract or to call upon the other party to perform over a long period of time.[28] In such a case “what is really inferred … is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that ‘the matter is off altogether’”.[29]
[28]Pearl Mill Co Pty Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78 and André et Compagnie S.A. v Marine TransoceanLtd [1981] 1 QB 694 at 700 and 713.
[29]Fitzgerald v Masters (1956) 95 CLR 420.

The subjective intention of the parties on 5 February 1999 is irrelevant. In determining what inference is to be drawn regard must be had to what a reasonable person would conclude from the parties’ words and acts.[30]
[30]André et Compagnie S.A. v Marine Transocean Ltd [1981] 1 QB 694 at 713 and Paal Wilson & Co a/s v Partenreederei (The Hannah Blumenthal) [1983] 1 AC 854 at 915-6.

I have found that the plaintiff could earn an entitlement to remuneration under the 1976 agreement only whilst acting in the capacity of employee and that the agreement came to an end on the cessation of his employment. If I am correct about this, the abandonment argument has no practical significance. If, however, as the plaintiff asserts, the 1976 agreement continued to operate and the plaintiff’s entitlement to remuneration could be affected by work done by him in relation to the projects after the termination of his employment, the question of abandonment has potential significance.

In my view, on 5 February 1999, a reasonable person would have concluded that, by entering into the consultancy agreement, the plaintiff and the other parties to the 1976 agreement regarded it as at an end. Such a person would have had in mind also the fact that the plaintiff had not been an employee of any Barclay company for many years and that since 1988 any work he had done had been in the capacity of employee or director of another company for which payment had been made. He or she would not have thought it likely that any employer or employee would have thought it appropriate or sensible to provide a reward or incentive in addition to he generous one which already existed.

Accordingly, I find that if contrary to my conclusions the 1976 agreement remained in force after the termination of the plaintiff’s employment with the Barclay Mowlem Group, it was abandoned on the entering into of the consultancy agreement.

Other issues arising in action S 8959 of 2000

The defendants contended that if the 1976 agreement was enforceable a bonus became payable on the sale of lot 1 of the Lenen South land in 1991 and that any claim in respect of it was statute barred. It was further contended that, on the true construction of the 1976 agreement, no bonus was payable until the full proceeds of sale of a project had been received. In respect of the Lenen North land, the full proceeds of sale will not be received until 2002 and thus, it was argued, that the plaintiff had no claim, at least in respect of the unreceived part of the sale price. The latter point has substance but had I found that the plaintiff had an entitlement under the 1976 agreement I would have granted appropriate declaratory relief.

It was agreed between the parties’ accounting experts that the total profit on the projects before allowing for opportunity costs was $45,885,462. The defendants, however, argued that, in determining profit, conventional economic theory required a deduction on account of opportunity costs. In this case the defendants said that they should be calculated on the basis of the interest which would have been earned by the defendants had the total cost of acquiring and developing the subject land been invested for the relevant period in the purchase of 90 day bank bills.

The parties to the discussion on 18 November 1976 did not turn their respective minds to the question of how profit was to be calculated, except by reference to the possible incidence of income tax. The evidence did not disclose that the parties would have had in mind when discussing profit and loss anything other than straightforward accounting concepts of revenue less outgoings. Although I accept that it is customary for developers to make profit calculations for various purposes by taking into account opportunity costs, the evidence does not establish that such costs are taken into account for the determination of profit and loss for income tax purposes or generally for determination of profit and loss in accordance with ordinary accounting concepts. I therefore conclude that opportunity costs are not to be taken into account.

Another contention of the defendants was that in calculating profit, regard should be had to “allowances for overhead costs attributable to the defendants’ projects incurred by other members of the Barclay Group of Companies”. The quantum of such overheads was not assessed. Furthermore, in the absence of evidence that such costs were debited to the defendant companies, the point does not appear to me to have any substance.

The plaintiff sought to calculate profits of the projects by reference to Lenen’s draft balance sheet as at 30 June 2001. The point of this approach was to increase the profit of the project by taking into account retained earnings derived from matters such as mining royalties and interest on the proceeds of sale of land. I accept the defendant’s argument that this approach is inconsistent with the terms of the 1976 agreement which contemplates the calculation of profit on sale of a project. Revenue earned from other sources becomes relevant only “if a sale (is) not effected … on (an) ongoing management situation”.

Lenen’s claim under the consultancy agreement entered into on 5 February 1999.

Under the consultancy agreement, Raward & Co was retained by Lenen “to provide best professional advice and service … to achieve our objective of selling our land holding … for the best possible price and the shortest time consistent with market demand and plans and programs as agreed from time to time.” The land the subject of the agreement was the Lenen North land and a 168.4 hectare parcel being Lot 2 on DP 811425 (Lenen South land, excluding Lot 1 on DP 811425).

The sale of the Lenen South land was completed on 30 August 2000 and, as has been seen, Raward & Co claimed, and was paid, a bonus payment under the consultancy agreement of $566,250.

Lenen entered into the contract for the sale of the Lenen North land on 30 June 2000 for a sale price of $20,200,000. By letter dated 6 February 2001 Lenen purported to terminate the consultancy agreement. By letter dated 7 February 2001, Raward & Co purported to accept Lenen’s wrongful repudiation and terminated the consultancy agreement.

Notwithstanding the letter of 7 February 2000, Raward & Co rendered an invoice dated 13 February 2001 to Lenen claiming a fee under the consultancy agreement in the sum of $420,750 calculated as follows –

“(a) as per clause 6(ii) 2.5% of $3,350,000 totalling $83,750;
(b)as per clause 6(iii) 2% of $16,850,000 totalling $337,000.

It is not submitted that by this conduct Raward & Co affirmed the consultancy agreement and it is plain that after 7 February 2000 both parties treated it as at an end.

Raward & Co alleges that, in breach of the consultancy agreement, Lenen has refused to pay the invoiced amount. The allegation is misguided. Upon termination of the consultancy agreement, Raward & Co’s claim became one for damages for breach of contract. As Raward & Co had no further duties to perform under the contract once Lenen had contracted to sell all the land, there should be no material difference between Raward & Co’s damages claim and any fee which would have been payable to it under the consultancy agreement had it remained on foot. There was no argument to the contrary, possibly because the payment of the balance sale price is, in effect, secured by bank guarantee. Strictly speaking the damages should be discounted slightly to take into account acceleration of payment, but as that possibility was not the subject of submissions I will disregard it.

Lenen resists payment of the moneys claimed by Raward & Co on the grounds that the consultancy agreement was lawfully terminated on 6 February 2001 and that, in any event, a substantial part of the moneys claimed ($240,000) would not be payable, even if the consultancy agreement was on foot, until receipt of the balance purchase price of $12,000,000 due on 22 June 2002.

For the reasons just advanced, the latter argument is unsustainable.

The first ground relied on by Lenen to support its purported termination is that Raward & Co provided no services to Lenen after the plaintiff made his claim on 12 September 2000 for payment under the 1976 agreement. This point was not pleaded and insofar as it alleges that the consultancy agreement was terminated on 6 February 2001 in reliance on a breach of contract by Raward & Co through non-performance of its obligations under the agreement, it is inconsistent with the allegation in para 5(c)(vi) of the amended defence of Lenen. It is there alleged that after 27 June 2000 Raward & Co ceased to provide professional advice and services pursuant to the consultancy agreement “as the need for those services was at an end”. Accordingly, these allegations are unsustainable also.

Lenen asserts that Raward & Co failed to inform Lenen of the plaintiff’s alleged entitlements under the November 1970 agreement when negotiating the terms of the consultancy agreement. It is alleged that this conduct is misleading and deceptive, that had Lenen been informed of such entitlements it would not have engaged Raward & Co on the terms contained in the consultancy agreement and further that pursuant to s 87 of the Trade Practices Act any order for payment of the sum claimed by Raward & Co should be refused.

It is doubtful that Lenen can set up the prospect of relief under s 87 as a defence to Raward & Co’s claim.[31] Even if the alleged misleading and deceptive conduct could be relied on as a defence, there is no good reason why an order would be made under s 87 denying Raward & Co the sum claimed or any part of it. The consultancy agreement was entered into and a fee became payable pursuant to the terms of that agreement. I have found that no entitlement exists under the 1976 agreement and, accordingly, Lenen’s complaint is merely that it was not informed of the possibility of an unsustainable claim under the 1976 agreement. I also have reservations about whether Raward & Co’s failure to mention the possibility of such a claim was misleading and deceptive within the meaning of s 52 of the Trade Practices Act.
[31]Bank of New Zealand v Spedley Securities Ltd (in liq) (1992) 27 NSWLR 91 at 99, 106 and 108.

The remaining basis for resisting Raward & Co’s claim is that, the plaintiff by making and persisting with his claim under the 1976 agreement, he caused “a complete breakdown of the working relationship” between the parties. It is submitted that there is an implied term in the consultancy agreement that Raward & Co and/or the plaintiff as its director and controller would not conduct himself or itself in a manner incompatible with the due and faithful performance of Raward & Co’s duties, or inconsistently with the maintenance of a relationship of trust and confidence and in a manner which would be destructive of Lenen’s confidence in Raward & Co to occupy a trusted position as a professional adviser.

I am unable to find that the implied terms on which Lenen relies are either so obvious that they go without saying or are necessary to give business efficacy to the agreement.[32] The work Raward & Co was required to do under the consultancy agreement was to assist in the sale of the subject land for the highest possible price in the most tax effective manner possible. It is unnecessary to imply terms of the nature asserted by Lenen for the agreement to be workable. Also the fact that the parties expressly stated the circumstances in which Lenen would have the right to terminate also detracts from the defendant’s argument.
[32]Cf Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 334 at 336.

There is also a dispute between the parties as to the basis on which the bonus claimed by Lenen & Co is to be calculated. The relevant part of the consultancy agreement provides –

“Bonus
6.When a portion or all of Lenen’s land is sold a cash bonus based on the following percentages of the sale price or prices in total as achieved will be payable to you.
(i)For the first sale (s) achieved up to a total of $20 million in value a bonus of 2% of the value up to $20 million dollars will be payable to you.
(ii)In addition to (i) above for sales in total value between $20 million up to $30 million for the excess value over $20 million up to $30 million a bonus of 2½% of the excess value will be payable to you.
(iii)In addition to (i) and (ii) above for sales in total value above $30 million for the excess value over $30 million a bonus of 2% of that excess value will be payable to you.

Progressive payments as applicable will be made within 30 days of receipt of a sale price in cash by Lenen from a sale of its land whereby on receipt of that cash it puts Lenen into a cash positive situation as determined by Lenen for the following 12 month period after allowance by Lenen of its forward cash commitments for the following 12 month period. Cash means Lenen’s own cash and does not include cash available to Lenen from borrowed funds.”

It is submitted on behalf of the defendants that for the purpose of bonus calculation each sale is to be treated separately. The argument advanced is that the use of the letter “a” twice in the introductory words of clause 6 shows that the provision contemplates a bonus for “each individual sale” and that the words “in total” refer to the total sales value of “each individual portion”.

What was intended by clause 6 is not immediately clear but, on a close examination of its wording, the defendants’ construction cannot be sustained. The introductory paragraph and those numbered (i), (ii) and (iii) each contemplate that a single bonus may be payable in respect of more than one sale and that it may be calculated by reference to the total of two or more sale prices. Each of the numbered paragraphs refers to sales or sale(s) and uses the word “total” or the expression “in total value”.

The reference in the final paragraph to “progressive payments” also suggests that payments are referable to a cumulative total of sale prices.

On 5 February 1999, there appears to have been an oral agreement between the parties that clause 6 of the consultancy agreement not be construed so that bonus payments are calculated by reference to the cumulative total of separate sale prices. That consensus was not part of the defendants’ pleaded case and no attempt was made to amend the pleadings to rely on it. I made it plain in the course of the hearing that the case would be determined on the issues raised in the pleadings. Consequently, I am unable to take any such oral agreement into account.

In action S 1843 of 2001 there will be judgment for the plaintiff, M J Raward & Co Pty Ltd in the sum of $420,750, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis.

In action S 8959 of 2000 there will be judgment for the defendants, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis.

CITATION:	Raward v Vine Nominees P/L & Ors [2001] QSC 494
PARTIES:	RAWARD, Malcolm John (plaintiff) v VINE NOMINEES PTY LTD (ACN 009 692 068) (first defendant) LENEN PTY LTD (ACN 001 045 816) (Second defendant)
FILE NO:	S8959 of 2000
CITATION:	Raward & Co P/L v Lenen P/L
PARTIES:	M J RAWARD & CO PTY LTD (ACN 053 501 250) (plaintiff) v LENEN PTY LTD (ACN 001 045 816) (defendant)
FILE NO:	S1843 of 2001
DIVISION:	Trial Division
PROCEEDING:	Trial
DELIVERED ON:	21 December 2001
DELIVERED AT:	Brisbane
HEARING DATE:	26-30 November 2001, 4-5 December 2001
JUDGE:	Muir J
ORDER:	In action S 1843 of 2001: Judgment for the plaintiff, M J Raward & Co Pty Ltd in the sum of $420,750, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis. In action S 8959 of 2000: Judgment for the defendants, together with the costs of and incidental to the action including reserved costs to be assessed on the standard basis.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – MATTERS NOT GIVING RISE TO BINDING CONTRACT – VAGUENESS AND UNCERTAINTY – UNCERTAIN PROMISES – where bonus to be shared between senior staff – where senior staff not identified – where no method of apportionment specified CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – AGREEMENTS CONTAMPLATING EXECUTION OF FORMAL DOCUMENT – WHETHER CONCULDED CONTRACT – where director of defendant signed memorandum of discussion regarding bonus scheme for plaintiff – where subsequent conduct of parties consistent with existence of concluded contract – whether parties intended to be legally bound CONTRACTS – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PREFORMANCE – REPUDIATION – where consultancy agreement terminated after plaintiff made claim under bonus scheme – whether consultancy agreement repudiated CONTRACTS – PRINCIPLE AND AGENT – AUTHORITY OF AGENTS – CONSTRUCTION AND EXTENT OF AUTHROITY – AUTHORITY CREATED BY OTHER MEANS – IMPLIED AUTHORITY OF GENERAL AGENTS – where only one director of defendant present at meeting and signed memorandum – whether implied authority to bind defendant CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH, AND DEFENCES TO ACTION FOR BREACH – where plaintiff entered into consultancy agreement to do same work required under original agreement – where remuneration under consultancy agreement was calculated as a proportion of the sale price – whether plaintiff parties had abandoned original agreement
Trade Practices Act ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, compared Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27, cited André at Compagnie S.A. Marine Transocean Ltd (The Splendid Sun) [1981] 1 QB 694, cited Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441, cited Australian Energy Ltd v Lennard Oil NL [1986] 2 Qd R 216, cited B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147, cited Bank of New Zealand v Spedley Securities Ltd (in liq) (1992) 27 NSWLR 91, cited Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, cited Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, cited Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61, compared British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623, cited Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, cited Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 334, cited Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204, cited Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, cited DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, considered F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 2 Lloyd’s Rep 53, cited Fitzgerald v Masters (1956) 95 CLR 420, cited Glass v Pioneer Rubber Works of Australia Ltd [1906] VLR 754, cited Godecke v Kirwan (1973) 129 CLR 629, cited Goldburg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711, cited G R Securities v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, cited Haynes v McNeil (1906) 8 WALR 186, cited Hely Hutchinson v Brayhead Ltd [1968) 1 QB 549 Liverpool City Council v Irwin [1977] AC 239, compared Masters v Cameron (1954) 91 CLR 353, considered Northside Developments Pty Ltd v Registrar General (1990) 170 CLR 146, applied Paal Wilson & Co a/s v Partenreederei (The Hannah Blumenthal) [1983] 1 AC 854, cited Pagnan S.p.A. v Feed Products Ltd [1987] 1 Lloyd’s Rep 601, considered Pearl Mill Co Ltd v Ivy Tannery Co Ltd [1919] 1 KB 78, cited Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, cited Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205, cited Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, cited Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310, considered Storer v Manchester City Council [1974] 1 WLR 1403, cited Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, compared Talbot v Talbot [1968] Ch 1, compared Summers v Commonwealth (1918) 25 CLR 144, considered Thorby v Goldberg (1964) 112 CLR 597, cited Trentham (G Percy) Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25, cited York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11, cited
COUNSEL:	J C Bell QC and D D Bates for the plaintiff G E Hiley QC and I R Perkins for the defendants
SOLICITORS:	McCullough Robertson for the plaintiff Minter Ellison for the defendants