Rignanese v M & B Farmer Nominees Pty Ltd - [2008] SADC 99

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RIGNANESE & ANOR v M & B FARMER NOMINEES PTY LTD
[2008] SADC 99
Judgment of Her Honour Judge McIntyre
31 July 2008
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Plaintiffs seek a proper construction of a document - who are the parties referred to in that document - is it a contract or option as the plaintiffs contend - what extrinsic evidence can be considered as an aid to construction. Assignment what, if anything, was assigned to the plaintiffs. Held, the document is not a binding contract or option - it was not executed for the benefit of the parties contended by the plaintiffs - plaintiffs' claim fails.
Evidence Act 1929 s45A; Corporations Act 2001 (Cwth) ss181 and 1282; Coulls v Bagots Executor and Trustee Co Ltd (1966) 119 CLR 460; Clifton v Palumbo (1944) 2 All ER 497, referred to.
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) Traffic VLR 337; Schuler AG v Wickman Machine Tools Sales Ltd (1974) AC 235, applied.
Masters v Cameron (1954) 91 CLR 353 at 5, considered.

RIGNANESE & ANOR v M & B FARMER NOMINEES PTY LTD
[2008] SADC 99
Introduction

This matter arises out of the sale of agricultural land owned by Rignanese Pty Ltd situated on Penfield, Short and Pellew Roads at Penfield South Australia (“the land”).
The plaintiffs are the son and daughter of Giovanni and Giovanna Rignanese who were the sole directors of Rignanese Pty Ltd (“the Company”) at all relevant times. The company is now in liquidation.
A contract for sale and purchase of the land was entered into between the company and Barry Mead Farmer and/or nominee on 25 November 2002 (“the November 2002 contract”). Mr Farmer is a director of the defendant and subsequently nominated the defendant. The plaintiffs contend that, at the same time, the defendant through Mr Farmer either agreed to sell or, in the alternative, granted an option to purchase a portion of the land to Giovanni and Giovanna Rignanese within 6 months of settlement of the November 2002 contract. The land in question is now described in Certificate of Title Register Book Volume 5916 Folio 593 (“the disputed land”). The agreement is said to be evidenced in a letter signed by Mr Farmer and dated 25 November 2002 (“the November 2002 letter”).[1] The plaintiffs made it plain in their pleadings and in their opening that this document stands by itself and that their rights are encapsulated in that document.
[1] Exhibit P3
The plaintiffs say that they received an assignment of the rights contained in the November 2002 letter on 20 February 2007. Settlement of the November 2002 contract occurred on 16 March 2007. The plaintiffs now seek specific performance of the contract or option they say is contained in the November 2002 letter.
The defendant denies that the November 2002 letter constitutes either a contract or option and says further that the plaintiffs are not entitled to the relief sought or to any relief.
Issues
In view of the manner in which the plaintiffs have put their case, the main issues are:
·What is a proper construction of the November 2002 letter?
-Who are the parties referred to in that document?
-Is it a contract or option as the plaintiffs contend?
·What, if anything, was assigned to the plaintiffs?
·Are the plaintiffs entitled to the relief sought or any relief?
Evidence
Both plaintiffs gave evidence concerning this matter as did their parents Giovanna and Giovanni Rignanese. In addition a number of exhibits were tendered.
Mr Barry Farmer, a director of the defendant company also gave evidence, as did Geoffrey Moore. Mr Moore was formerly a consultant to the defendant company and conducted the negotiations for the sale and purchase of the land on behalf of the defendant.
The evidence of the plaintiffs was of limited value in relation to the construction of the letter as they were not privy to the negotiations. At the time the male plaintiff was aged 16 and the female plaintiff 17.[2] The evidence of the plaintiff’s parent’s Giovanna and Giovanni Rignanese was of more assistance. There were however some significant disputes between the evidence of Mr and Mrs Rignanese senior and that of Mr Farmer and Mr Moore. I will deal with these issues in detail later in these reasons however in general terms I found the evidence of Mr Moore and Mr Farmer more cogent than that of Mr and Mrs Rignanese senior.
[2] Transcript p124
Mr Moore in particular gave careful evidence of the negotiations and surrounding circumstances. He is in many respects an independent witness having no stake in the outcome of these proceedings. Both the defendant and the company have employed him whilst he was working as a consultant. He is now an employee of Rabobank and based in Mount Gambier.
Mr Farmer took a very “hands off” approach to the negotiations and so he was unable to comment about some of the matters put to him. However his evidence of the instructions provided to Mr Moore was clear, as was his evidence about the signing of the contract and the circumstances in which he first met Mr and Mrs Rignanese senior.
On the other hand, Mr & Mrs Rignanese senior were less impressive. It appeared that in many respects their recollection of events had been tailored to meet the current circumstances rather than describing what may actually have occurred. For example, Mrs Rignanese was adamant that the reason a separate title was issued for Lot A was due to their desire to purchase that land. It was however plain from the documents that the separate title was contemplated by the parties long before the prospect of someone purchasing Lot A from the defendant was raised. I will comment further on this issue later in these reasons. In summary however where there is a dispute between the evidence of Mr and Mrs Rignanese and that of Mr Farmer and Mr Moore – I prefer the evidence of the latter two witnesses.
Evidence received de bene esse
On the final day of the hearing the plaintiffs counsel sought leave to reopen the plaintiffs’ case in order to tender a CD, said to contain records of Flexible Finance Pty Ltd in relation to the mortgages held by it in respect of the land. In particular the plaintiffs sought to tender certain pages printed from the CD, which it is said sets out records of contact between Flexible Finance and Mr Moore.
The plaintiffs were unrepresented for a period of time preceding the trial and only formally obtained representation the day before the trial. It was my view that they may not have realised the significance of the material that was sought to be tendered. However, I had reservations concerning the admissibility of the documents and accordingly received them de bene esse.
Both parties made submissions concerning the material during the course of final addresses. The plaintiffs contended that the documents should be received as business records under s 45A of the Evidence Act (SA) 1929 (as amended). Whilst this may be so I need to have regard to the provisions of s 45A(2) and (3).
The material appears to comprise hand written notes of a person who has not been properly identified nor has there been any apparent attempt to call that person to give evidence as to the contents of those notes. The notes are brief and the material is clearly not complete. It is difficult to discern precisely what the notes purport to record. In these circumstances the material is of limited probative value or assistance. Further, admission of the documents would prejudice the defendant. The purpose of the tendering of the material was not entirely clear but it could only go to Mr Moore’s credit. There was no attempt to put the documents to Mr Moore and no application to recall Mr Moore.
It is my view that it would be an inappropriate exercise of the discretion to admit the material. Accordingly I decline to receive the material in evidence.
Background
In about 1998 the company purchased the land from Metro Meat. This purchase was financed by way of mortgages from Flexible Finance Pty Ltd. The land was situated at Penfield between Penfield Road, Short Road and Pellew Road. At the time it was comprised in Certificate of Title Register Book Volume 5720 Folios 515 (Lot 4) Folio 516 (section 3003) and Folio 517 (section 3007).
At some stage in 2001 the company was first approached by an agent of the defendant, Mr Geoff Moore, with a view to leasing a portion of the land being part of Lot 4 and the whole of section 3007. The company rejected this offer. The defendant indicated that if the company wished to sell the land it was interested in purchasing the land. The company also rejected this proposal.[3]
[3] Transcript pp 44-45, 92-93, 168-169
On 21 May 2002 the defendant made a written offer to the company to purchase 173 acres of land being part of Lot 4 and the whole of section 3007.[4] This land was a rectangular plot with Penfield Road, Short Road and Pellew Road comprising part of its boundaries. The internal boundary was a line of trees that separated this plot from the balance of the land held by the company. The line of trees did not however conform with the boundaries as set out in the existing titles and it was contemplated by the offer that there would need to be a change in the certificates of title to reflect the proposed boundary of the plot of land to be purchased.
[4] Exhibit P8
The defendant withdrew its offer by facsimile dated 25 June 2002 since there had been no response but indicated that it was prepared to discuss purchase should the company wish to sell the land in the future.[5]
[5] Exhibit D1
The plaintiffs’ aunt and uncle made application to the Supreme Court of South Australia on 23 July 2002 claiming an interest in the company and/or the land.[6]
[6] Exhibit P1
An interim injunction was granted on 6 September 2002 restraining the company from dealing with Certificates of Title Volume 5720 Folios 515, 516 and 517. Thereafter it appears that the company encountered some financial difficulties causing it to fall into arrears with its mortgage to Flexible Finance Pty Ltd. In consequence the directors say that they determined to sell some land to reduce the indebtedness of the company. Negotiations were then entered into with the defendant through its agent Mr Moore.[7]
[7] Transcript pp 24, 78-79
The company and Barry Mead Farmer and/or nominee entered into a contract on 25 November 2002 for the sale and purchase of a portion of land described in Certificates of Title Register Book Volume 5720 Folio 515 and Folio 517 subject to certain conditions.[8] Mr Farmer signed a letter of the same date, which was provided to Mr and Mrs Rignanese. This letter is contentious and is the subject of these proceedings.[9]
[8] Exhibit P2
[9] Exhibit P3
The injunction was varied in the Supreme Court on 20 December 2002 to permit the sale and purchase to proceed in accordance with the November 2002 contract.[10]
[10] Exhibit P1
ASIC records tendered in these proceedings indicate that Flexible Finance Pty Ltd lodged a notice of appointment of a controller on 3 March 2003.[11]
[11] Exhibit P7
A Deed of Assignment was entered into between Flexible Finance Pty Ltd, Rignanese Pty Ltd, Giovanni and Giovanna Rignanese and Farmer No. 1 Pty Ltd on 4 April 2003 that assigned the Flexible Finance mortgages over Certificates of Title Register Book Volume 5720 Folio 515 and Folio 517 to Farmer No 1 Pty Ltd. Farmer No 1 Pty Ltd is a company associated with the defendant. Mr Barry Farmer is a director of that company. In addition there was a Deed of Indemnity and the settlement date on the contract for the sale and purchase of land entered into on 25 November 2002 was extended.[12]
[12] Exhibit P6
New Certificates of Title were issued following a re-subdivision of the subject land on 19 May 2004. These are as follows:
·Certificate of Title Register Book Volume 5916 Folio 593. Lot 80 – land subsequently transferred to the defendant that is the subject of the present dispute (“the disputed land”).
·Certificate of Title Register Book Volume 5916 Folio 594 – Lot 81 - land retained by Rignanese Pty Ltd.
·Certificate of Title Register Book Volume 5916 Folio 595 – Lot 82 - land subsequently transferred to the defendant.
On 24 August 2004 a liquidator was appointed in respect of Rignanese Pty Ltd.
The defendant entered into a Deed of Settlement dated 19 December 2006 with the liquidator of the company[13] in which, inter alia, the remaining obstacles to settlement of the contract dated 25 November 2002 were removed and the liquidator, on behalf of the company waived any claim available to the company or the liquidator arising out of the letter dated 25 November 2002.[14]
[13] Exhibit D4
[14] Exhibit D4
Giovanna & Giovanni Rignanese signed a letter dated 20 February 2007 purporting to assign their interest in the letter to the plaintiffs dated 25 November 2002.[15]
[15] Exhibit P11
Giovanna & Giovanni lodged a Caveat on 1 March 2007 in respect of the disputed land claiming an interest pursuant to the letter dated 25 November 2002.[16] The plaintiffs lodged a Caveat on 16 March 2007 in respect of the disputed land on the same basis.[17]
[16] Exhibit D3
[17] Exhibit D5
The defendant completed settlement of the contract for the sale and purchase dated 25 November 2002 on 16 March 2007 and became the registered proprietor of the land comprised in Certificates of Title Register Book Volume 5916 Folio 593 and Certificate of Title Register Book Volume 5916 Folio 595.
The plaintiffs’ solicitors wrote to the defendant in a letter dated 11 May 2007 seeking to enforce rights asserted to arise under the letter dated 25 November 2002[18] in respect of the disputed land.
[18] Exhibit P3
The November 2002 Contract
The November 2002 contract is a standard Law Society of South Australia Contract for the Sale and Purchase of Land (November 2001 version). It was prepared by the solicitors for the company. The defendant was separately advised on the contract.
Annexure A to that contract contains a number of special conditions. Special Condition 1 reads as follows:
At settlement the vendor shall convey to the purchaser two separate Certificates of Title. The first for the land marked A in the plan annexed hereto and the second for the land marked B in the plan annexed hereto.
The contract contemplated re-subdivision and the issue of new Certificates of Title in respect of the land. The land that was the subject of the contract was a portion of the land described in Certificate of Title Register Book Volume 5720 Folio 516 and Folio 517. The plan attached to the contract shows an area marked A comprising approximately 30 acres and an area marked B comprising approximately 176.55 acres.
The purchase price for the land was $1m. Settlement was stated to be the earlier of fourteen days from the date of the deposit of the relevant plan of division with Lands Titles office satisfying special condition 3, or 20 February 2003.
The contract was executed on 25 November 2002. There is some dispute on the evidence as to the circumstances of the execution. Mr and Mrs Rignanese senior say that all parties attended at their home address at Pellew Road Virginia to sign the contract in the kitchen.[19] Mr Moore[20] and Mr Farmer[21] gave evidence that Mr Farmer executed the contract in his office at Taylors Road Virginia and that Mr Moore subsequently delivered the contract to Mr and Mrs Rignanese at their home for them to sign.
[19] Transcript p27,43 & p84,97-98
[20] Transcript pp173-175 & p192
[21] Transcript pp132-134; 165-166
The plaintiffs were unable to give useful evidence on this issue. Francesco Rignanese was at home but was in the office not the kitchen. He did not recall if Mr Moore attended that day.[22] He gave some evidence about a dark green four-wheel drive but the relevance of this was not readily apparent. Mr Farmer denied ever having owned such a vehicle. The plaintiff Ignazzia Rignanese was not present at the home when the contract was signed.[23]
[22] Transcript p122
[23] Transcript p110
In some respects the circumstances of the signing are irrelevant. It is plain that this contract was signed by all parties and the contract was carried out. It is however important as part of the circumstances surrounding the contentious letter as Mr and Mrs Rignanese say that there was discussion about the letter at the time the contract was signed.
The contract is of no assistance in determining the circumstances of execution. Mr Moore witnessed Mr Farmer’s signature. This is consistent with their evidence but not inconsistent with that of Mr and Mrs Rignanese. The common seal of the company was affixed and the Rignaneses signed in their capacity as Directors and Secretaries of the company. Their signatures did not need to be witnessed. Both parties signed the contract on 25 November 2002.
Mrs Rignanese thought that the document was signed between 10.30 and 11.30am. She stated that her husband, Geoffrey Moore and Barry Farmer were present at the time the contract was signed at her house in the kitchen. She said her daughter had left to go to TAFE and her son had gone to the office, which was on the other side of the house. In cross-examination it was put to her that she was mistaken in her recollection that Mr Farmer was present. She responded that she was sure that he was there.[24] She was cross-examined as to the content of an affidavit that she swore in these proceedings on 23 July 2007.[25] In paragraph 17 of that affidavit she stated:
The final signing of contracts which occurred on 25 November 2002 took place at our home and not in the manner described by Mr Moore. Present were Mr Farmer, Mr Moore, our children who are the plaintiffs in this action, and my husband and me.
[24] Transcript p41
[25] Exhibit D6
She was cross-examined as to the apparent inconsistency of this affidavit with her evidence as follows:[26]
[26] Transcript p43
Q‘Present were Mr Farmer, Mr Moore, our children who are the plaintiffs in this action, and my husband and me’; do you see that.
AYes. At that time what I meant was that they were aware that Barry Farmer and Geoff Moore had come in, right and that my son was actually on the property, but he was at the office.
QBut, what appears in paragraph 17 is wrong, isn’t it. They weren’t present.
ANo, but they were home, on the property my son yes.
QYour son was, your daughter wasn’t even at home on the property, was she.
ANot at that moment when Barry Farmer and Geoff Moore came, no.
QWhat I suggest to you is that you don’t really recall who was present at the time, do you.
AYes, I do. I may have made a mistake in the affidavit, right, but there’s me and my husband, Barry Farmer and Geoff Moore and I can remember Barry Farmer walking through the back door, took his shoes off and he had a glass of water while Geoff Moore had a cup of coffee
QAnd you can definitely remember that neither of your children were present.
AI made a mistake but my son was on the property, at the office.
Mr Farmer said in evidence that the first time he met Mr and Mrs Rignanese was at Flexible Finance some time after the contract was signed. He stated that he signed the contract at his office. He was not shaken in this under cross-examination. Mr Moore also said in evidence that Mr Farmer did not attend at the Rignanese property but rather signed the contract and the letter at his office.

I note that it appears consistent with Mr Farmer’s conduct of the negotiations that he had no contact with the Rignaneses at the time of signing the contract. Mr Moore had conducted all negotiations on behalf of the defendant. Mr Moore had attended at the Rignanese property on a number of occasions. Mr Farmer had not. There is no explanation why he would have changed this practice for the signing of the contract.
I also note the evidence of Mr and Mrs Rignanese concerning the discussions they say occurred in relation to the letter that is the subject of this dispute. Mr Moore and Mr Farmer deny these discussions took place. Mrs Rignanese gave quite detailed evidence about those discussions indicating that she raised a number of issues.[27] Mr Rignanese could only recall a discussion about the fact the letter did not have a name on it.[28] I will deal with the specific issues relating to the contents of the letter later in these reasons however I consider it surprising that, if the discussion took place as asserted by Mrs Rignanese, that no alterations or additions were made to the letter. For example there was evidence about a missing word – if the discussion occurred as Mrs Rignanese says it did with Mr Farmer present, one could reasonably have expected that the missing word would have been inserted following the discussion.
[27] Transcript pp28-31
[28] Transcript p84
Taking all of this into account I find, on the balance of probabilities, that Mr Farmer did not attend at the Rignanese house for the signing of the contract and that there was no discussion of the disputed letter on that occasion.
What is a proper construction of the November 2002 letter?
Negotiations for the sale and purchase of the land took place over a period of about 2 to 3 months between Mr and Mrs Rignanese for the company and Mr Moore for the defendant. Solicitors represented both parties but it appears that they did not take an active role in the negotiations but rather prepared the documentation. Towards the conclusion of negotiations Mr Moore prepared a letter[29] that outlined various aspects of the defendant’s offer to purchase the land for inclusion in the contract. The letter is undated but was apparently sent by the company’s solicitor to another party by facsimile on 7 November 2002.[30] Accordingly, I find that this letter was sent to the solicitor for the company prior to 7 November 2002. This letter made no mention of the arrangement referred to in the November 2002 letter.
[29] Exhibit D2
[30] Transcript p172
It appears common ground that the arrangement outlined in the letter that is the subject of this dispute was first raised by the Rignaneses the night before the signing of the contract.[31]
[31] Transcript p26
Mrs Rignanese gave evidence concerning this issue as follows:[32]
[32] Transcript pp26-27
QWhat was the arrangement in relation to the lot A.
AThe arrangement was that we asked Geoff Moore to draw up a letter that the 30 acres would be sold back to us, on settlement.
QWas that arrangement made prior to the signing of the contract.
AYes, the night before and the morning of the signing of the contract.
QNow, the night before, can you tell us what happened the night before.
AOkay. The night before went through the details that was to be written in the letter, and Geoff went back to Barry Farmer and came back at 7 o’clock to confirm that everything would be all right.
QPause there; when you ‘came back’ did he see you personally or did he ring you.
ANo, he came to see us personally.
QHe came back, indicated what you required in the letter was all right.
AYes.
QWas that all that was discussed.
AThat night, yes.
QAnd then the following morning, what was said.
AThe following morning, Geoff Moore rang us to confirm a time for him and Barry Farmer to come and sign the contract. Then I had asked him if the letter was prepared.
QYes.
AAnd asked him we wanted the letter before we signed the contract.
QWhat did he say when you asked him on the phone.
AHe agreed and said yes, the letter would be written up and be brought to the house.
The evidence of Mr Rignanese, Mr Moore and Mr Farmer does not contradict this evidence except insofar as Mr Moore and Mr Farmer deny that they went to the Rignanese property to sign the contract.
All four Rignaneses’ gave evidence that the 30 acres of land comprised in Lot A was of significance to them as a family and that it had always been intended that this land would ultimately be transferred to the plaintiffs. I will comment further on this issue in my reasons however it seems somewhat surprising that, given the asserted importance of this land, Mr and Mrs Rignanese did not raise this issue in negotiations until the night before the contract was signed. It further appears strange that no legal advice was apparently obtained on this issue given that the company instructed solicitors in relation to the contract.
The letter was prepared by Mr Moore at the premises of Virginia Farm Produce on the morning of the 25 November 2002 after Mr Farmer signed the contract.[33] He gave the letter to Mr Farmer for signing once it was complete. He then says, and I accept his evidence, that he took both the letter and the contract to Mr and Mrs Rignanese at their home and left these documents with them. His understanding was that the Rignaneses would not sign the contract if they did not have the letter.[34]
[33] Transcript pp173-179
[34] Transcript p187
The fact that the letter was prepared in some haste and was not viewed by either of the parties’ legal representatives may explain some of its shortcomings.
There is little dispute between the parties that the letter is ambiguous in a number of respects. The reference to “the contract” is, in context, the contract entered into between the company and Mr Farmer and/or nominee dated 25 November 2002.[35] Other aspects of the letter are less clear.
[35] Exhibit P2
The question is what extrinsic evidence can be used as an aid to the proper construction of the 25 November 2002 letter? The law is succinctly stated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW:[36]
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.
[36] (1982) 149 CLR 337 at 352
All parties gave evidence concerning the negotiations leading to the November 2002 contract and the letter. It is plain from the Codelfa[37]decision that evidence concerning the parties’ intentions is not to be accepted in preference to the objective framework of facts within which the documents came into existence.
[37] (1982) 149 CLR 337
Who are the parties referred to in that document?
The plaintiffs contend that the letter was provided to Mr and Mrs Rignanese senior personally rather than in their capacity as directors of the company. Mr Moore and Mr Farmer both gave evidence that they were aware that the company owned the land in question and that, as far as they were concerned, all dealings with Mr and Mrs Rignanese senior were in their capacity as directors of the company.[38]
[38] Transcript p153 and p177
The letter is signed by Mr Barry Farmer on letterhead of Virginia Farm Produce. There is no addressee on the letter but the letter reads as follows:
Dear Sir or Madam:
I hereby agree that should the contract for myself or nominee be successful to purchase 207 acres from Rignanese Pty Ltd for land situated on Penfield, Short and Pellew Roads (marked A and B) that a contract will then be entered into with ……… or nominee to sell that piece marked “A”.
Terms of the contract will be, but not exclusive to:
·Sale price of $150,000
·Rent of $18,000 payable on completion of contract
·Contract to be completed within 6 months of the land being acquired by myself or nominee with no extensions afforded
·Sale price will include transfer of underground water quota less any deductions on transfer amount to 33.5 million gallons
·Purchasers are to meet all costs in holding the land including council rates, water levy or any other costs associated with the land within 7 days of notification from myself or nominee
·All amounts shown are deemed to be GST exclusive.
The plaintiffs suggest that the words “Dear Sir or Madam” refer to Mr and Mrs Rignanese senior in their personal capacity rather than to the company. I have rejected the evidence that this issue was discussed at the signing of the contract and that Mr Moore said this referred to Mr and Mrs Rignanese senior. Mr Moore was cross-examined on this point.[39]
QYou have used the word ‘Dear Sir or Madam’.
AAs you would to any company.
QWhy didn’t you just simply put the directors of Rignanese Pty Ltd.
AI could have.
QAnd I suggest the reason you didn’t was because you were aware that this offer was being made to my clients as people individually and not to the company.
ANo.
[39] Transcript p190
A similar issue arises in relation to the use of the word ‘purchasers’ rather than ‘purchaser’ in dot point 5. The plaintiffs assert that this demonstrates that the proposed purchaser was not the company but rather Mr and Mrs Rignanese senior. Only Mrs Rignanese gave evidence about this – she says that Mr Moore told her that “…it meant that it was for myself and my husband”.[40] Mr Rignanese did not recall this discussion. I have found that this discussion did not occur. Mr Moore was cross-examined on this issue also.[41]
[40] Transcript p31
[41] Transcript p189
QYou have used the word plural there, it is not ‘purchaser’, it is ‘purchasers’.
AYes.
QAnd I suggest to you that was because this offer was made to Giovanni and Giovanna Rignanese; John and Joanne.
ANo, that’s not correct.
QI suggest to you that word, the plural, was used because you knew at the time the arrangement that you discussed with Mrs Rignanese was that it was they themselves, or their nominee, that was going to purchase the property in question. (sic)
AThat’s not correct.
QCan you explain why you used the plural.
AI’m not a lawyer. I would have just typed it as I spoke, I guess, or something of that nature.
The first sentence of the letter is clearly missing a word. There is some dispute as to what the missing word was. The plaintiffs contend that the missing word is “you” and that this is supportive of their assertion that the letter was addressed to Mr and Mrs Rignanese senior. Mr Moore rejected this proposition when it was put to him and suggested an alternative view as follows:[42]
QI suggest that what is missing there is the word “you”; that “A contract will then be entered into with you or nominee to see that piece marked A”. Is that correct?
ANo, I think it is probably more Mr Farmer was meant to be inserted into there, or myself, using the same language as the rest of it.
[42] Transcript p189
There was further cross-examination concerning the significance of several of the dot points, specifically the rental and water rights, to this issue. The evidence is somewhat inconclusive and the best that can be said is that these terms are ambiguous and do not assist in identifying who or what is to be the beneficiary of the contents of the letter.
Having carefully considered the issue I am of the view that the wording of the letter could equally bear the meaning put by either party with one exception. The exception relates to the missing word. The plaintiffs’ case is that the missing word is “you”. The insertion of the word “you” does not make sense in context because the sentence refers to a contract to be “entered into with …or nominee to sell that piece marked ‘A’”. Mr Farmer or his nominee would have been selling the land in the circumstances envisaged by the letter. The words “myself or nominee” were used earlier in the same sentence and clearly referred to Mr Farmer or his nominee. In my view Mr Moore’s evidence that the missing word is “myself” is more likely in context.
Whilst this removes one aspect of the plaintiffs’ argument it does not dispose of the issue completely. Accordingly I must turn to the objective facts known to both parties and the matters that are the subject of the contract in order to ascertain who the parties are.
Much was made of the fact that the contract for sale and purchase of land dated 25 November 2002 divided the land into Lot A and B. Mr and Mrs Rignanese gave evidence that the reason there were two different parcels of land in the contract was that it was intended that they would purchase the smaller portion of 30 acres.[43] It was further asserted that all Mr Farmer and the defendant wished to purchase was the land comprised in Lot B. This evidence is however inconsistent with the documentary evidence. True it is that the defendant initially sought to purchase a parcel of land roughly equivalent to that described as Lot B. At the time initial negotiations took place it was clear that the boundaries needed to be realigned because they were not in accordance with the physical boundaries on the property. For example the letter dated 25 May 2002[44] indicates that:
Property to comprise approx 173 acres with boundary to be extended to existing tree line
[43] Transcript p84, 56
[44] Exhibit P8
It was also noted that a new fence needed to be erected by the vendor on the new boundary. This letter pre-dates, by a considerable time, the occasion which the Rignaneses indicated that someone wished to purchase a part of the property. Mrs Rignanese was cross-examined at some length on this point.[45] Her answers were somewhat unconvincing. She acknowledged that as at May 2002 it was contemplated the boundaries would need to be realigned but maintained that this was because they wished to purchase back 30 acres of the land. Mr Rignanese gave evidence concerning the discussions in May 2002.[46] He indicated that the titles needed to be changed in order that the boundary would move back to an existing tree line. He gave evidence that subsequently Lot A was included in order to further reduce the debt of the company to Flexible Finance. Flexible Finance wish to reduce the debt by $1 million dollars and the purchase price agreed for Lot B was $900,000. The additional $100,000 was raised by including an extra 30 acres comprising Lot A into the sale agreement.[47]
[45] Transcript p56-58
[46] Transcript p79
[47] Transcript p83
It is common ground that the company was the owner of the land. It is further common ground that Giovanna and Giovanni Rignanese were directors of that company. Mr and Mrs Rignanese gave evidence, which I accept, that it was necessary for the company to sell land in order to reduce its borrowings. I further accept there was some pressure from the mortgagor Flexible Finance in relation to that issue. That much is plain from the evidence of Mr and Mrs Rignanese senior together with the action taken by Flexible Finance on 3 March 2003 to appoint a controller for the company when it appeared unlikely that the contract would settle in the agreed time frame. There is no suggestion that the terms agreed between the defendant and the company were inappropriate. I consider that it is reasonable to conclude that it was in the best interests of the company that the sale went ahead.
If I accept the plaintiffs’ contention that Mr and Mrs Rignanese senior were the parties to whom the November 2002 letter was addressed then I must consider the effect of the Corporations Act 2001 (Cth) as it was at the time the contract was entered into. The plaintiffs’ case is that this letter created rights for the benefit of the directors of the company rather than for the company. Mr and Mrs Rignanese senior were subject to certain obligations in relation to the company. This is particularly the case given the interest of Flexible Finance and the Supreme Court proceedings by the plaintiffs’ aunt and uncle claiming an interest in the company. The defendant contends that an agreement in the terms suggested by the plaintiffs would be a breach of the Corporations Act 2001.
I was referred to s181 and s182 of the Corporations Act 2001 as it was at 2002. Section 181 provides that:
SECT 181 Good faith – civil obligations
Good faith – directors and other officers
(1)A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)    in good faith in the best interests of the corporation; and
(b)    for a proper purpose.
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
Section 182 provides:
SECT 182 Use of position – civil obligations
Use of position – directors, other officers and employees
(1)A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)    gain an advantage for themselves or someone else; or
(b)    cause detriment to the corporation.
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
The plaintiffs’ case is, in effect, that the directors, having agreed terms for the sale price of the land which were reasonable in order to satisfy claims against the company, the night before the contract was due to be signed indicated to the defendant that they were not prepared to let the company sell the land unless the defendant gave the directors a benefit for themselves. This would appear to be a breach of sections 181 and 182. In construing contracts a court should apply a presumption that the parties did not intend the contract terms to operate unreasonably or illegally.[48]
[48] Schuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235

Leaving aside the corporations law issue the objective circumstances further suggest that the document should be interpreted as addressed to the company rather than Mr and Mrs Rignanese senior.
All prior dealings between the parties concerning the land, had been with Mr and Mrs Rignanese senior as directors of the company. Whilst Mr and Mrs Rignanese senior gave evidence that they were intended to be the beneficiaries of the letter, Mrs Rignanese gave evidence concerning the negotiations that led to the production of the letter that the land would be “sold back to us”.[49] The company owned the land. Mr and Mrs Rignanese senior had never owned the land and accordingly it was not something that could be “sold back” to them. I further note that Mr Rignanese used similar terminology when describing the arrangement stating that he and his wife could “re-purchase Lot 80 after settlement”.[50] Accordingly, no matter what was in the mind of the Rignaneses’ at the time of the negotiations with Mr Moore, if they used the terminology “sold back” or ‘re-purchased” it is entirely possible that Mr Moore and Mr Farmer may not have appreciated that the intended beneficiary was the Rignaneses rather than the company.
[49] Transcript p 26
[50] Transcript p 83
Accordingly I find that the intended beneficiary of any right contained in the letter was the company. The company, through the receiver, entered into an agreement with the defendant, which waives any claim available to the company or the liquidator arising out of the letter dated 25 November 2002.[51] This effectively deals with the claim. For completeness however I will deal with the other issues.
[51] Exhibit D4
Is it a contract or option as the plaintiffs contend?
If the document is a contract or option then it is essential, for it to be binding, that there be consideration moving from the promisee.[52] In this case the defendant contends that there has been no consideration from Mr and Mrs Rignanese. The plaintiff contends that the consideration is the $150,000 purchase price outlined in the letter. I do not accept the plaintiffs’ contention. The $150,000 is not consideration for the November 2002 letter. A possible consideration for the letter was that the company would not enter into the 25 November 2002 contract unless this letter was provided in relation to part of the land. If that amounts to consideration, and I am not certain that it does, it is not consideration from Mr and Mrs Rignanese senior rather it would be consideration from the company.
[52] Coulls v Bagot’s Executor & Trustee Co. Ltd. (1966) 119 CLR 460
The lack of consideration is fatal. Without consideration the latter would not be a binding contract nor a binding option. I do not however think that the document is a binding contract because the terms are not certain nor comprehensive. The document states that “terms of the contract will be, but not exclusive to” then lists a number of items. Some of those items are in themselves ambiguous such as “rent of $18,000 payable on completion of contract”. It is unclear who is to pay the rent and to whom. The case of Masters v Cameron[53] was referred to in argument. Dixon CJ, McTiernan Kitto JJ stated as follows:
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.
[53] (1954) 91 CLR 353 at p 360
It is my view that the terms of the November 2002 letter do not fall within either the first or second case. At most it could be said to be the third case, which does not constitute a binding contract.[54] Their Honours state:
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: (citations omitted)
[54] Masters v Cameron (supra) at 361
At most this is an agreement to agree. The document clearly contemplated further negotiation and additional contract terms.
I further note that whilst the document indicates, “I hereby agree” the use of the word “agree” does not, in my view, involve a contractual result. I refer to the decision of Clifton v Palumbo.[55]
Anyone who has had experience of transactions in relation to the purchase of land can recall letters written by vendors saying that they agree to sell at a named price, or that purchasers agree to purchase at a named price.
The use of the word “agree” in such a context may or may not involve a contractual result. On the other hand, if you say that the price has been agreed when the contract is being negotiated, you do not use the word “agree” in the sense that any binding contract has been entered into. All you mean is that that particular element in the contract which you are negotiating has been decided. You are agreeing that that is the figure which will be put into the contract and then you go on to debate the other matters which fall for discussion. Therefore, words like “agree”, “offer”, “accept”, when used in relation to a price are not to be read necessarily as indicating an intention to make, then and there, a contract or an offer as the case may be. Whether they do or do not must depend entirely on the construction of a particular document”.
[55] (1944) 2 All ER 497 at 499
Having looked at this document it is my view that the word “agree” does not import that a binding contract has been entered into. When taken in conjunction with the balance of the letter setting out some terms of the proposed contract, but clearly indicating that there will be further negotiation and other terms discussed, it cannot be said that this is a binding contract.
What, if anything was assigned to the Plaintiffs?
I have decided that the November 2002 letter is not a binding contract or option. I have further determined that whatever the document is, it was not executed for the benefit of Mr and Mrs Rignanese senior. Accordingly I find that, whilst the assignment dated 20 February 2007 may well be a valid assignment, the Rignaneses senior had nothing to assign to the plaintiffs.
Accordingly I do not consider that the plaintiffs are entitled to the relief sought or to any relief.