Riverina Wines P/L v Tarac P/L - [2004] SADC 173

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RIVERINA WINES P/L v TARAC P/L
Judgment of His Honour Judge Muecke
10 December 2004
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES
Whether the parties reached a binding 3 year Packaging Services Agreement - Held that it was the understanding and intention of both parties that no 3 year contract would exist unless and until a document was executed by both parties.
Masters v Cameron (1954) 91 CLR 353; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd [1988] 14 NSWLR 523; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833, considered.

RIVERINA WINES P/L v TARAC P/L
[2004] SADC 173
Background

In this action the plaintiff Riverina Wines Pty Ltd (“Riverina”) claimed damages for alleged breach of contract by the defendant Tarac Pty Ltd (“Tarac”). Riverina initially pleaded a number of other causes of action which were all abandoned at trial. The quantum of Riverina’s alleged loss and damage was an issue at the commencement of the trial. However, during the trial I was informed that the parties had agreed that, if Tarac was liable to Riverina for breach of contract, Riverina’s loss and damage as at 31 July 2004 was $400,000. Accordingly, this judgment deals only with the question as to whether or not Tarac is liable to Riverina for that sum.
Riverina was and is a company incorporated in New South Wales carrying on business in that state and elsewhere as a vigneron and wine producer. In particular, it conducts such business in the Riverina district of New South Wales. Riverina’s operations were based at Griffith in country New South Wales.
As part of its business Riverina sold, bottled and packaged wine products throughout Australia and overseas. It had a significant annual turnover in its bottled and packaged wine products with the majority of such products being exported. About one-half of its exports were to the United Kingdom. Before what I find to be 24 September 2001 Tarac carried on a wine bottling and packaging business in Nuriootpa in the Barossa Valley of South Australia. It owned a bottling and packaging plant there. It conducted its wine bottling and packaging business under the name “Tarac Bottlers”. By Business Sale Agreement dated 13 September 2001 (Exhibit D42) Tarac sold the business of Tarac Bottlers to Vinpac International Pty Ltd (“Vinpac”).
In about mid-1997 Tarac commenced to bottle and package wine for Riverina. The terms “bottling” and “packaging” were used during the trial. I assumed the term “packaging” was used to describe the packaging by Tarac of Riverina’s bulk wine in containers other than bottles. There was no evidence that Tarac packaged Riverina’s wines other than in bottles. I shall use the terms “bottled” and “bottling” and “bottles” rather than the term “packaging”, or variations of it, except where that latter word is used to describe agreements or drafts thereof.
The case concerned the commercial arrangements between Riverina and Tarac by which Tarac bottled Riverina’s bulk wine at Nuriootpa in South Australia. In general terms those arrangements involved Riverina buying grapes from various growers in Australia; making different styles of wine at its winery at Griffith in the Riverina to be sold under various labels; transporting that wine in bulk transport tankers by road to Tarac’s bottling plant at Nuriootpa; and Tarac receiving that bulk wine and bottling and otherwise processing the wine. My use of the term “otherwise processing the wine” compendiously includes the unloading by Tarac of the bulk wine received from Riverina; testing it before bottling; testing it at various stages of the bottling process including at its completion; issuing appropriate certificates required by government regulation including those relating to exporting wine to overseas countries; sealing the bottles by corks or other closures; labelling the bottles with Riverina’s labels; packing the bottles in cartons; loading the cartons into containers and arranging for the transport of such containers to a port for export or otherwise for delivery to their ultimate destination. For all of these services Tarac charged and were paid by Riverina. Riverina also paid Tarac for the “dry goods” (eg bottles, corks, cartons) used by Tarac in the process just described.
Although there was considerable oral evidence given by both parties at the trial there was much common ground as to that evidence. Indeed, the factual matters in dispute were very limited ones and were, even then, not particularly significant to the critical issue in the case.
The issue at trial
The critical issue is whether agreement was reached by Riverina and Tarac in mid-June 2001 which bound the parties to a three year “Packaging Services Agreement” commencing on 1 August 2001.
Riverina contended that the effect of conversations between its Chief Executive Officer, Mr Nido, and Tarac’s Packaging Manager, Mr Blythman, in December 2000 and June 2001 was that by mid-June 2001 there was a concluded and legally binding agreement in relation to all of the terms necessary to constitute a new three year “Packaging Services Agreement” and, in particular, that the new term would be three years; that trading terms would be sixty days flat, not the previous 30/60/90 days trading terms; and that there would be a new pricing structure in accordance with Schedule 1 of the “Packaging Services Agreement”.
On Riverina’s case the three year agreement was evidenced by an undated and unsigned Packaging Services Agreement which was sent to Riverina by Tarac following a conversation between Mr Nido and Mr Blythman in June 2001 in which Mr Nido told Mr Blythman that Riverina was happy with the terms of an agreement which had been forwarded to Mr Nido by Mr Blythman in May 2001. It was said that Mr Nido and Mr Blythman had agreed in that telephone conversation that the “new” agreement would commence on 1 August 2001; that Mr Blythman would send to Mr Nido a copy of the agreement in its final form; and that Mr Nido would have the document executed by Riverina and would return it to Tarac. Mr Nido’s evidence was that he had intended, at the time of his conversation with Mr Blythman and when he received the document, to execute it and return it to Tarac. Mr Nido’s evidence at one point was that pressure of work and oversight had resulted in his not executing it and returning it to Tarac. It was never executed and returned.
By September 2001 Tarac was in negotiations with Vinpac to sell its bottling business to Vinpac. A business sale agreement between Tarac and Vinpac was executed on 13 September 2001 (Exhibit D42). Tarac handed over its business to Vinpac on 24 September 2001. Riverina contended that in June 2001 it had a binding three year packaging services agreement with Tarac. When Tarac sold its bottling business to Vinpac neither Tarac nor Vinpac did or could meet those contractual obligations for three years from 1 August 2001. Accordingly, Tarac was in breach of that agreement and Riverina suffered loss as a consequence.
Riverina could not or did not enter into arrangements with Vinpac for Vinpac to bottle its wine. Initially, Riverina made arrangements for other bottlers to do so. Riverina later built a bottling plant of its own and bottled its own wine. The agreed quantum of damages relates to Riverina’s losses in those respects.
As indicated earlier there was not much in dispute as to the facts. I proceed to make findings on the evidence including findings as to disputed matters. Some of the findings I make are inconsistent with some of Mr Nido’s evidence. On some matters Mr Nido gave inconsistent and contradictory evidence. Where my findings are contrary to Mr Nido’s evidence I have rejected his evidence.
Findings of facts
When Tarac commenced bottling wine for Riverina in about mid-1997 it was done on the basis that Riverina would inform Tarac of its requirements for the bottling of a identified consignment of bulk wine. Tarac would provide a quotation to Riverina based upon it supplying all services and dry goods for the bottling process of the particular consignment and all other services relating to it. Upon Riverina’s acceptance of the quotation the bulk wine would be sent from Griffith to Nuriootpa. Tarac would bottle the wine and provide other services in respect of it. An account would then be rendered by Tarac and paid by Riverina. There developed amongst the two companies various paperwork in what became a standard form to reflect each stage of that process. This process of individual job quotations and invoicing for separate bottling jobs continued to be used by the two companies until about August 1998 and, as it turned out, for some time after that month. Even when there was an executed agreement in existence this process was reflected in such an agreement.
In August 1998 Mr Blythman visited Riverina’s winery at Griffith and there spoke to senior officers of Riverina. One of the purposes of his visit was to discuss with those officers the negotiation and execution of a “Packaging Services Agreement” by which Tarac would bottle Riverina’s wines.
By letter dated 1 September 1998 Mr Blythman wrote to the then General Manager of Riverina, Mr David Hammond (Exhibit P10). He attached a draft of a “Packaging Services Agreement” which draft was said to allow “for a three‑year period commencing 1 October 1998 to 30 September 2001” (Exhibit P10A). Mr Blythman wrote that “(I)n developing this agreement we have anticipated that Riverina Wines will commit to package its entire product at Tarac Bottlers. This is expected to be in excess of 250,000 cases per year”. Mr Blythman set out what he referred to as key points of the fee structure detailed in Schedule 2 of the draft agreement. He referred to service fees remaining fixed for two years and to dry good pricing remaining fixed until 30 June 1999. Mr Blythman pointed out what he referred to as the benefits to Tarac of a “longer-term commitment” reflected by the agreement.
The attached draft Packaging Services Agreement was similar in structure to the “draft” Packaging Services Agreement Mr Blythman would send to Mr Nido in May 2001, nearly three years later. The majority of the terms of both documents were identical. Each was expressed to be for three years; each contained a clause that the agreement was not binding upon Tarac until it was duly executed by a duly authorised officer of Tarac (the date of such execution being referred to as “the Acceptance Date”); and each contained a clause providing that for such time as the charges (being the cost of the provision of the services by Tarac) remain unpaid by Riverina Tarac will be entitled to a lien (general or particular as the case may be) over any of the product and any other property of Riverina in the possession of Tarac. Each of these provisions are important in determining the issue in this case.
Schedule 2 of the draft Mr Blythman sent to Riverina in September 1999 and Schedule 1 of the draft he sent to Riverina in May 2001 was a schedule of Tarac’s charges to Riverina. Importantly (at least for Tarac), each draft also contained a schedule envisaging (in the case of the former) and setting out (in the case of the latter) Riverina’s forecasts for volumes of wine to be bottled by Tarac in the year following the coming into force of the anticipated agreements. I am satisfied and find that this aspect of their commercial dealings was important to both companies where a long-term contract between them was contemplated. Riverina could set future budgets according to future volumes of wine to be bottled and could obtain advantages as to the price of dry goods at least because Tarac could obtain advantageous prices for dry goods where there was some certainty as to what future bottling it could expect to do for Riverina. Tarac could obtain the benefits of a having assured business from a client such as Riverina for a certain medium to long term. This was important to Tarac because Riverina was at all times one of Tarac’s largest clients.
I am unable to find exactly what happened to the draft Packaging Services Agreement sent by Tarac to Riverina in September 1998 following the receipt of it by Riverina in that month.
I find that on 6 July 1999 Tarac sent a further draft Packaging Services Agreement to Riverina (Exhibit D39). Generally, it was in identical terms to that sent to Riverina in September the previous year. There were two exceptions. First, the term of the agreement in the new draft was said to be for two years commencing 1 August 1999. Secondly, the new draft included a schedule referring to Riverina’s forecast volumes for the first year of the proposed agreement, which forecasts were to be confirmed by Riverina by 1 August 1999.
There were some negotiations regarding this draft Packaging Services Agreement. An officer of Riverina sent to Mr Blythman some comments he had received from Riverina’s solicitors regarding the proposed agreement (Exhibit P36). The solicitors had commented on clause 4.1 of the draft which provided that until Tarac signed the agreement it was not binding upon Tarac, and on clause 11.6 of the draft which provided that Tarac was entitled to a lien over the product and any other property of Riverina in the possession of Tarac. The solicitors recommended that Riverina seek to delete the lien clause and referred to an assumption by the solicitors that Riverina had given a fixed and floating charge over the assets of its business to its bankers. There were other detailed comments by the solicitors.
I find that by facsimile dated 17 November 1999 Tarac sent to Riverina a copy of an agreement signed by Tarac with amendments “as discussed” (Exhibit D41). There were no amendments to clause 4.1 (referring to the agreement not being binding upon Tarac until it is executed by it) or to clause 11.6 (the lien clause). I find that Tarac executed the Packaging Services Agreement on 17 November 1999 (Exhibit P11). I find that Riverina executed the agreement on or about 16 December 1999, on the same date as Antonio Sergi executed a Deed of Guarantee in favour of Tarac (Exhibit D37). The executed agreement provided that it would commence on 1 August 1999 and cease on 31 December 2000 (clause 4.2).
I find that subsequent to 1 August 1999 Riverina and Tarac conducted their commercial business affairs on the basis of the terms of that agreement, and in particular on the schedule of charges in Schedule 2 of it; Riverina’s forecast volumes contained in Schedule 3 of it; and on the Tarac standard forms copied and contained within Schedule 4 of it.
I find that by at least the middle of 1999 Riverina was suffering liquidity and cash flow difficulties. Its management and financial arrangements were under stress. Its then General Manager ceased employment with the company at that time and the Board of Directors of Riverina then engaged the services of a consultant, Mr Nido, to advise it, particularly in relation to its then financial stability and its funding requirements. Mr Nido was then a consultant to industry whose work included giving advice to corporations, particularly on such issues. Mr Nido had had extensive prior experience within the asset management division of one of Australia’s largest banks.
Mr Nido advised the board of Riverina as to its financial and funding requirements and Riverina’s borrowings were rationalised and settled on about 22 or 27 April 2000. Suncorp Metway became the lead lender to Riverina. Mr Nido informed the board of Riverina that a shortfall in “required” borrowings would necessitate Riverina making considerable adjustments to its operations after April 2000. I find that at that time Riverina gave to Suncorp Metway a fixed and floating charge over all the assets of Riverina. I find that Riverina gave this charge to Suncorp Metway on 17 April 2000. I find that Mr Nido knew in April 2000 that such a charge was given because not only had he been engaged by Riverina to effect the new borrowing arrangements, he had, in February 2000, been appointed as Riverina’s Chief Executive Officer. He remained as Chief Executive Officer of Riverina thereafter.
I find that in mid-December 2000 Mr Blythman of Tarac contacted Riverina requesting a meeting with Riverina to discuss a new contract between the two companies. I find that Mr Blythman informed Riverina that he was seeking such a meeting because the contract between the two companies expired at the end of December that year. A meeting occurred on 14 December 2000 at Riverina’s offices at Griffith. The evidence as to who attended that meeting was unclear. It is unnecessary for me to make findings as to exactly who attended other than Mr Nido and Mr Sergi on behalf of Riverina and Mr Blythman on behalf of Tarac.
Only Mr Nido and Mr Blythman gave oral evidence at the trial of that meeting. I find that neither man had a clear and independent memory of what was said at that meeting. I find that both men relied heavily upon a contemporaneous note of the meeting taken by Mr Nido (Exhibit D35). Mr Blythman’s recollection and evidence was entirely dependent on it. I consider that Mr Nido’s evidence as to this meeting was not particularly reliable. I consider that he confused things that were said at a later meeting with what was said at this meeting. I find that at the meeting Mr Blythman referred to the then current contract between the two companies expiring on 31 December 2000. I find that there was no discussion about that fact although I am satisfied that Mr Nido was silently anxious about why a contract with a significant company like Tarac had not been the subject of discussions earlier than a couple of weeks before its expiration. Although Mr Nido’s notes make no reference to a term of any proposed new agreement I find that Mr Nido and Mr Blythman discussed a three year term as being appropriate for a new agreement. Mr Blythman had always been anxious to have a three year contract with Riverina and I am satisfied that at the meeting he put forward the benefits to both Tarac and to Riverina of a three year contract. I am satisfied that Mr Nido considered that a three year term would be in Riverina’s best interests and he indicated at that meeting that Riverina would not be opposed to an agreement for such a term.
Mr Nido’s notes also do not refer to discussions about the terms of payment of any account rendered to Riverina by Tarac for bottling done by Tarac for Riverina. The then current agreement between the two companies provided for “One Third payment is required at 30/60/90 days from the end of month in which the packaging occurs. If payment terms are not met, a 1% per month surcharge on overdue accounts will prevail” (Schedule 2, clauses 2.3). I find that Mr Nido and Mr Blythman discussed a change to that provision such that full payment would be required at 60 days from the end of the month in which the packaging occurs. I find that both men expressed the view that each would be satisfied of such a change to the then existing payment terms.
The other matter I find that was discussed between the two men was what Tarac would charge Riverina for all work associated with bottling Riverina’s product. I find that Mr Blythman said, and Mr Nido agreed, that charges could not usefully be discussed in detail, let alone agreed, until Riverina informed Tarac of the volumes of product to be packaged by Tarac in at least the coming year and any anticipated forecasts thereafter. I find that the meeting on 14 December 2000 concluded with Riverina undertaking to provide information as to these matters to Tarac. I find further that Mr Nido and Mr Blythman agreed at that meeting that from 1 January 2001 Tarac would continue to bottle Riverina’s product on the basis of the terms of the then existing Packaging Services Agreement. I find that both men understood that to be that the Tarac standard forms in Schedule 4 of the expiring agreement would be used for each bottling job requested by Riverina; that the charges in Schedule 2 of the agreement would be applied; and that the payment terms in Schedule 2 of 30/60/90 days would continue to be applied. I am unable to find what words were used to reach this understanding between the two men, but I am satisfied that it was probably expressed between them to be that from 1 January 2001 it would be “business as usual” under the terms of the expiring agreement.

Puzzled by the fact that negotiations had started so late in the term of an agreement that was just about to expire I find that Mr Nido asked Mr Sergi to get the Tarac file out for him. I find that probably happened immediately after the meeting of 14 December 2000. I find that the only “agreement” that Mr Nido found in the file was the undated draft Packaging Services Agreement sent by Tarac to Riverina under cover of letter dated 1 September 1998 (Exhibits P10 and P10A). This draft Packaging Services Agreement contained an clause to the effect that the agreement was for three years commencing on 1 October 1998. Mr Nido said in evidence that he did not notice when he looked at the agreement that it contained a stamp “DRAFT” on the front page. He said that he also did not notice that the letter of 1 September 1998 referred to an attached draft. Mr Nido said that he did not carefully read the agreement other than noting that it would expire on 30 September 2001.
I am unable, and find it unnecessary, to make positive findings about what Mr Nido did or did not read in those documents (Exhibit P10 and P10A). I do find, however, that he realised from a brief glance at those documents that the document was unsigned and that events had, at some time since September 1998 and before December 2000, overtaken what he read in those documents. I find that he knew by late December 2000 that the charges were not as contained in the draft. The letter referred to them being reviewed both in July 1999 and in September 2000. I am not able to find positively that in December 2000 Mr Nido read clause 11.6 of the draft of September 1999 which entitled Tarac to a lien over any of the product or any other property of Riverina in Tarac’s possession. I find that in late December 2000 Mr Nido assumed that other documentation existed that reflected the commercial arrangements between the two companies. He did not, however, then pursue what such documentation was and he was prepared to work on the basis that Mr Blythman was correct as to the expiry of the existing agreement between the two companies, being 31 December 2000, and to proceed to attempt to negotiate a “new” three year agreement with Tarac.
By 7 February 2001 Riverina was in default of its payment terms for bottling done for it by Tarac. I find that this was not an unusual occurrence as it had occurred from time to time from some time in 1999. Although Riverina had, from time to time, been overdue in its payments to Tarac that had not affected the good commercial relations which seemed to have existed throughout between Riverina and Tarac. In early February 2001 Tarac withheld dispatching Riverina’s product from its bottling plant at Nuriootpa because of its default in payment. Tarac indicated that it would await a promised payment plan from Riverina before trading would resume as normal. There were discussions about the account with Mr Nido. Mr Nido was informed that Tarac had received some money from Riverina in December 2000 but had received nothing in January 2001. Riverina had promised to forward a payment program to Tarac by 2 February 2001 but it had not done so. I find that a payment program was provided to Tarac by Riverina by facsimile dated 8 February 2001 (Exhibit D25). I find that Tarac was not satisfied with that program and sought a meeting with Mr Nido. In the meantime Tarac resolved to release two full container loads of Riverina’s product. I also find that by early February 2001 Riverina had not supplied any of its bottling forecasts to Tarac as it had promised at the meeting on 14 December 2000.
I find that a meeting requested by Tarac occurred on Thursday 15 February 2001. Like the meeting in December of the year before, I find that neither Mr Nido nor Mr Blythman (who were the only witnesses who gave evidence of the meeting) had a clear and independent memory of what was said and what occurred at the meeting. I find that the meeting occurred at Riverina’s premises at Griffith and that Mr Nido, Mr Blythman, Mr Salapatas of Riverina and Mr Obst (a director of Tarac) were present. Others may have come and gone during the meeting. I find that Mr Blythman had made a note for himself to raise certain things at the meeting. They included Riverina’s forward bottling projections, a contract between the two companies, and Riverina’s delinquent account with Tarac. I find that Mr Blythman made some contemporaneous notes during the meeting, in addition to the notes he made to jog his memory as to what he needed to discuss with Riverina. Evidence was given from these notes but they were not tendered at the trial.
I find that at the meeting of 15 February 2001 Mr Nido made a “presentation” to the officers from Tarac such as to try and satisfy Tarac’s officers of Riverina’s financial strength and viability. Mr Nido also sought to explain why it was having difficulty meeting Tarac’s payment terms. He referred to that being as a result of a lower than expected volume of export sales by Riverina. I find that at the meeting Riverina undertook to make a significant payment on its outstanding account that day, and that it further undertook to provide a payment schedule by lunchtime of Wednesday of the following week, being 21 February 2001. Riverina also undertook to provide to Tarac by that time a schedule of its projected volumes of bottling. I find that Riverina promised to do that so that Tarac could advance the documentation for the proposed new contract between the two companies. I also find that the two companies confirmed their earlier discussions (on 14 December 2000) to provide in a new contract for Riverina to pay on 60 days rather than on the existing 30/60/90 days.
I find that by letter dated 26 February 2001 Riverina sent to Mr Blythman Riverina’s 2001 requirements and schedule (Exhibit P12). In that letter Riverina asked Tarac to base their costing on Tarac providing all dry goods for all production runs. Riverina further asked Tarac to “note that one product range of Riverina Wines is still uncompleted and dry goods spec’s are still pending. These and any other specifications will be forwarded to Tarac with the utmost speed once finalised”. Considerable documentation was attached to that letter. I cannot find if other specifications were forwarded to Tarac and, if so, when they were. I find, however, that some time in May 2001 Mr Blythman sent to Mr Nido a document headed “PACKAGING SERVICES AGREEMENT”. I find that the document sent to Mr Nido was in the form of Exhibit P13. I find that in the document there was clause 4.2 dealing with “commencement”, and that in that clause the agreement was expressed to be for three years commencing on 1 August 2001. I find that the document was not bound.
I reject the evidence that was to the effect that there was some document sent by Mr Blythman to Riverina which contained either no date on which the agreement would commence or no clause dealing with the commencement of the agreement. I find that Mr Blythman inserted a commencement date in the document he sent to Riverina in May 2001. I find that Mr Blythman, in May 2001, chose the prospective commencement date of 1 August 2001. I am unable to find with confidence as to why he chose that date. It may have been that he thought that such a prospective date would give the two companies sufficient time to negotiate the final terms of an agreement, or it may have had something to do with the fact that he was negotiating a new contract with his supplier of bottles which would conveniently fit in with a starting date for the Riverina contract of 1 August 2001, or it may have been for both of these reasons.
Mr Nido’s evidence was that he received a document similar to Exhibit P13 (but without any commencement date or without a clause dealing with commencement) and that he did not immediately consider and read it. He later explained that there had been a tragedy in his family in early April 2001. I am prepared to infer that because of that Mr Nido was, in May 2001, distracted from and probably not particularly interested in commercial matters relating to Riverina and Tarac. I am prepared to infer that is why, when Mr Blythman telephoned him to see what he thought of the proposed contract shortly after Mr Blythman had sent it to him, Mr Nido explained to Mr Blythman that he had not yet read it, but that he would soon do so and contact Mr Blythman about it.
I find that thereafter Mr Blythman telephoned Mr Nido several times to ascertain his reaction to the draft agreement. I find that not only was Mr Blythman eager to finalise the contract as soon as possible but that Mr Nido was aware that he was.
I find that in about mid-June 2001 Mr Blythman again rang Mr Nido enquiring about the agreement. This was another conversation between Mr Blythman and Mr Nido in respect of which I am satisfied that neither man had an accurate and independent recall of what was said, let alone the sequence in which things were said. I find, however, that during this telephone conversation Mr Nido informed Mr Blythman that he had looked at the document. I cannot make any findings as to what word or words Mr Nido used. Whether he told Mr Blythman that he had looked at the document, or read the document, or reviewed the document, or perused the document, or whether he used some other word I am unable to find. Whatever words were used I find that Mr Nido conveyed, and intended to convey, to Mr Blythman that he had read and considered the document in its entirety and therefore could speak with authority to Mr Blythman about the document and its terms and conditions. I find that Mr Nido had by then read the document in sufficient detail as to be aware of the commencement date and term of the proposed agreement, the charges, and the terms of payment. I find that Mr Nido told Mr Blythman that the document appeared to be in order so far as Riverina was concerned and that he was prepared to execute the agreement in its then current form on behalf of Riverina. I find that Mr Blythman promised to send to Mr Nido a final copy of the agreement for execution by Riverina and return to Tarac. I find that Mr Nido undertook to have the document executed and returned to Mr Blythman upon receipt of the final document. I find that both men, on behalf of their respective companies, then understood that the document to be sent to Mr Nido for execution by Riverina would be in identical form to that document which Mr Blythman had sent to Mr Nido in May earlier that year.
I further find that following the discussion to which I have just referred Mr Blythman said to Mr Nido words to the effect that because it seemed that there would be a new contract the charges and terms of payment in the document could commence on 1 August 2001 with the then existing arrangements between the two companies continuing as they had in the previous several months until 1 August 2001. It was then envisaged by both men that the new charges and payment provisions would operate from 1 August 2001, the date both men knew was expressed in the document as being the commencement date for a three year contract between the two companies.
I find that at no time during this telephone conversation in mid-June 2001 did Mr Blythman refer to the fact that the old agreement would expire on 30 September 2001 and that the new agreement would come into force as from 1 October 2001. I find that Mr Nido never at any time questioned Mr Blythman about an agreement expiring on 30 September 2001 rather than on 31 December 2000.
I find that at the end of this telephone conversation between Mr Nido and Mr Blythman in mid-June 2001 both men were aware of the effect of clause 4.1 of the draft and both understood by that clause and by what they had said to each other about signing the document that the two companies would not be bound to a three year agreement in the terms of that document unless and until both companies had signed the document.
I find that shortly after the telephone conversation to which I have just referred Mr Blythman arranged for and had sent to Mr Nido one or two bound copies of the agreement that he envisaged that Mr Nido would sign and return to him. I find that the one or two bound copies was in the form of and identical to Exhibit D30.
Mr Nido’s evidence was that when he received a bound copy of the agreement he put it on his desk in his office at Griffith. He intended to sign it and return it to Mr Blythman. His evidence was that he did not do so and he explained that that was as a result of oversight and pressure of work. I do not accept his evidence to that effect. I find that at least by some time in late June when Mr Nido was intending to execute the proposed agreement he either read it more carefully than he had done before, or he had otherwise become aware of the fact that an agreement by his company which contained clause 14.1 (the lien clause) would put Riverina in breach of the fixed and floating charge it had given to Suncorp Metway in April 2000. Mr Nido did not strike me during the course of his evidence at trial as being a careless or sloppy executive, nor one who would allow pressure of work or oversight to effect his proper conduct of important commercial dealings by the company of which he was the Chief Executive Officer (even taking into account his family tragedy). I am also satisfied that Mr Nido was at all times an astute commercial manager and was aware of his company’s responsibilities to its financiers. I am satisfied that Mr Nido was not the sort of executive or the sort of person who would sign a document knowing that signing it would put his company in breach of its legal obligations to its lead financier.
I find that shortly after receiving the bound agreement Mr Nido realised that he could not bind his company to the terms contained within the agreement by executing the agreement and returning it to Tarac. I find that when Mr Blythman telephoned him to ask him where the executed agreement was Mr Nido dissembled and said that he had not yet got around to signing it.
I find that from mid-June 2001 Mr Nido was aware that Mr Blythman was expecting an executed agreement to be returned to him. I find that by at least late July 2001 Mr Nido knew that Riverina could not execute such an agreement in the form in which it had been sent in May 2001, and later in either late June or early July 2001, without putting Riverina in breach of the charge it had given to its financiers in April of the previous year. Furthermore, I find that Mr Nido knew that the lien clause was a matter of significance to both Riverina and Tarac. Earlier in the year 2001 Tarac had “retained” some of Riverina’s product pending Riverina bringing its account with Tarac into order. That had occurred in February 2001. In June 2001 there were further discussions between the two companies regarding Riverina bringing its outstanding account with Tarac into order. Mr Nido had on both occasions been involved directly in discussions with Tarac (see Exhibit D31 as to the June 2001 discussions).
I find that from late July to early September 2001 Mr Nido was unsure of how to proceed in respect of executing the agreement with Tarac. I find that in mid-June 2001, at the time of their telephone conversation, both Mr Nido and Mr Blythman considered that a three year contract between their two companies would not arise until the document sent to Mr Nido by Mr Blythman was executed by both companies. I find that Mr Nido knew that that was the understanding of Mr Blythman and I find that Mr Nido also had such an understanding. I find that Mr Nido was, in mid-June 2001, aware of clause 3.1 of the agreement and that he understood its effect. I find that he later relied on its effect in forming a belief that I find he later had to the effect that his company was not in breach of the charge it had given Suncorp Metway, and would not be unless the document was executed.
I find that by late July 2001 Mr Nido did not intend to sign the agreement and was content, at least for the time being, to continue to have Riverina’s product bottled by Tarac under the then existing arrangements, which were changed from 1 August 2001 to Riverina’s benefit by Tarac adopting a 60 day payment regime rather than the previously existing 30/60/90 day payment terms, and by the application of new charges.
I find that by early September 2001 Riverina had become aware that Tarac was in the process of selling its bottling plant. I find that Mr Nido was aware of that when he wrote to Mr Blythman by letter dated 8 September 2001 (Exhibit P14). Mr Nido wrote:
I refer to the packaging services agreement and mention that Clause 11.6 Lien is not acceptable as this breaches Riverina Wines Pty Ltd, Loan Covenants and Conditions pertaining with its facilities granted by Suncorp Metway Bank Ltd. We are precluded from giving or conferring any security interest over any of our assets and this includes all of our packaged stocks held by Tarac.
We will also require a Right of Entry to be given in favour of our bankers for the purpose of entering Tarac premises and taking control of all Riverina Wines stock, should the bank require to take possession under their security interest (Registered Mortgage Debenture) held over the company’s fixed and floating assets.
In the light of the foregoing we require your concurrence and amendment to the Agreement to reflect these changes.
Please call me if you are unable to accommodate these amendments.
I find that when Mr Nido wrote in these terms he did not consider that Riverina had a binding three year agreement with Tarac, which agreement contained a lien clause. I find that Mr Nido considered that Riverina had no agreement with Tarac which contained such a term or condition. I find that Mr Nido’s letter to Mr Blythman was a belated attempt by Mr Nido to put in place a three year contract between the two companies which would bind any purchaser of the business of Tarac Bottlers, but which did not breach security that Riverina had given to its financiers. I consider that my findings are consistent with the terms in which Mr Nido wrote to Mr Blythman. In the second sentence of the first paragraph Mr Nido refers to Riverina being precluded from giving or conferring any security interest over any of its assets. If Mr Nido considered there was a three year contract between the two companies in the terms of the bound document he had not executed that would mean that he considered that Tarac had already given or conferred a security interest over its packaged stocks which was then held by Tarac. I find that Mr Nido wrote this letter in the belief that there was not a three year binding contract between Riverina and Tarac and in the hope that Tarac would belatedly accept a variation to the document such that the document as varied could be executed by both companies with the result that they would both then, and only then, become bound by it.
There was a considerable amount of documentary evidence tendered at the trial that related to what became the sale of Tarac Bottlers by Tarac to Vinpac. Many of those documents were prepared by officers of Tarac or reflected discussions between Tarac and Vinpac. None of those documents reflect an understanding or belief by any officer of Tarac that there was in place a three year binding contract between Riverina and Tarac. In my view, all reflected an understanding or belief by officers of Tarac that there had been agreement in principle to many essential terms of such a contract, but that a three year contract binding on both parties had not been consummated. I find that Mr Blythman and all officers of Tarac who were given information by Mr Blythman understood and believed that no binding three year Packaging Services Agreement would arise until an agreement was executed by both Riverina and Tarac.

I find that, at all relevant times (including to the end of September 2001), Mr Nido had a similar understanding and belief.
Conclusions
In Masters v Cameron (1954) 91 CLR 353 the High Court (comprising Dixon CJ, McTiernan and Kitto JJ) said at pp360-362:
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. Of these two cases the first is the more common. …
… 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: Governor &C of the Poor of Kingston-upon-Hull v Petch (1854) 10 Exch 610 [156 ER 585]. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker (1950) 80 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller (1878) 3 App. Cas. 1124. Lord O’Hagan said:
Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made (1878) 3 App. Cas. at p 1149.
And Lord Blackburn said:
parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement (1878) 3 App. Cas. at p 1152.
So, as Parker J said in Von Hatzfeldt-Wildenburt v Alexander (1912) 1 Ch 284, at p 289 in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
Later authority establishes that, notwithstanding that the parties have in contemplation the execution of a formal agreement, where the essential terms of the contract are agreed and neither party reserves to itself the right to vary them or otherwise expresses an intention not to be bound, there is a concluded contract in existence (see Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd [1988] 14 NSWLR 523).
Reference to a passage in the judgment of Allsop J in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 (20 December 2001) is also relevant in this case. Allsop J said at p108:
… a number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting "i"s and crossing "t"s or where they think they have done so. Here, the "i"s were not dotted and the "t"s were not crossed because of Mr Graham's conduct. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: `and we hereby agree to be bound' in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. (Authorities are then cited. My emphasis.)
Riverina contended that the evidence at trial was clear and uncontentious that in mid-June 2001, in the telephone conversation between Mr Nido and Mr Blythman, the defendant asked whether the “Packaging Services Agreement” containing the pricing set out in “Schedule 1” was acceptable to the plaintiff, to which Mr Nido responded that it was. Riverina contended that at that point agreement was struck on all proposed terms which were themselves complete, clear and unambiguous. Riverina contended that the parties acted, and obviously intended to act, as if they were bound by a contract, even though the formalisation of the contract (which they both anticipated) had not occurred. Riverina submitted that whilst there was an expectation on the part of both parties that the new “Packaging Services Agreement” would be executed “… in the fullness of time”, a binding contract had been concluded in the telephone conversation between Mr Nido and Mr Blythman in mid-June 2001. Riverina submitted that the circumstances of this case fall within either the first or the second of the classes referred to by the High Court in Masters v Cameron, (or perhaps a variation of one or other of them).
Tarac contended that the circumstances of this case fall within the third class of case referred to by the High Court in Masters v Cameron. Tarac contended that this is a case in which the intention of the parties was not to make a concluded bargain at all unless and until they executed a formal contract. Tarac contended that the history of the dealings between Riverina and Tarac showed that from September 1998 Tarac wanted to have long term written contracts with Riverina. Tarac submitted that the December 2000 discussions were no more than negotiations in the course of which the parties agreed in principle that they should move towards a written agreement for a three year term, with changed terms of payment and with new prices. No prices were agreed and no commencement date was discussed. Tarac submitted that the February 2001 discussions likewise remained in principle. No prices or commencement date were then discussed. It was submitted that the provision of the document by Tarac to Riverina in May 2001 made plain that the intention of the parties was that if approved the document would be executed and would contain the terms and conditions upon which packaging services would be provided during the envisaged three year term. It was submitted that Mr Blythman’s actions in a series of telephone calls to Mr Nido during the period May 2001 to July 2001 demonstrate Mr Blythman’s requirement that Riverina execute the Packaging Services Agreement. It was submitted that Mr Nido was under no misapprehension about the need to sign and to return the signed agreement to Tarac. Mr Nido expected that a document would be executed by both parties. He undertook to execute it and return it to Mr Blythman. It was submitted that the agreement by Mr Blythman to apply new terms from 1 August 2001 was upon the undertaking by Mr Nido to sign the Packaging Services Agreement which was, in its entirety, intended by both parties to govern their relations during the three year period from 1 August 2001. It was submitted that the lien clause was an integral component of any three year agreement, as was clause 4.1 of the document Tarac sent to Riverina. It was submitted that Tarac was always entitled pursuant to that clause to decline to be bound to a three year term until it had executed the agreement.
The findings I have made lead me to conclude that the conduct of Mr Nido on behalf of Riverina and of Mr Blythman on behalf of Tarac manifest a mutual assent and understanding by both only to be bound to a three year agreement upon the execution by both parties of the document which was ultimately forwarded by Mr Blythman to Mr Nido in bound form (Exhibit D30). I have no doubt that Mr Blythman had such an understanding and that he and other officers of Tarac continued to have such an understanding at the time of the sale of Tarac Bottlers by Tarac to Vinpac. I am also satisfied and find that Mr Nido had the same understanding. I have found that he consciously decided not to sign the agreement and that he decided not to sign because he understood that to so would put his company in breach of its obligations to its financiers. I find that Mr Nido did not believe at the time of his telephone discussion with Mr Blythman in mid-June 2001 that by what they had said to each other in that conversation a binding three year contract had been consummated. I find that at that time Mr Nido’s belief was that such would only arise upon execution of the document by both companies. I find that both Mr Nido and Mr Blythman were aware of clause 4.1 of the document and were aware of its effect. I am satisfied that neither Mr Nido nor Mr Blythman intended in their mid-June 2001 telephone conversation then to make a concluded bargain at all. I find that the understanding and intention of both men was that no long-term bargain would be made on any terms unless and until the document they were then discussing was executed by both companies.
Accordingly, my conclusion is that Riverina and Tarac did not, in mid-June 2001, reach agreement binding them to a three year Packaging Services Agreement commencing on or about 1 August 2001 and evidenced by the document Mr Blythman had forwarded to Mr Nido.
I conclude by referring to certain contentions by Riverina as to clause 4.1 of the document.
Riverina contended that “any potential relevance or effect of clause 4 was contradicted and overtaken by the course which negotiations took, the agreement reached in mid-June 2001 and the parties’ conduct thereafter”. Riverina submitted “that all clause 4.1 achieved was to express an intention on the part of (Tarac) at the time the document was proffered and absent any other behaviour by (Tarac) that might operate to vary that intention”. Riverina further submitted that given the terms of the agreement that was alleged to have been reached in mid-June 2001, it would be unwarranted to suggest or to find that a subsequent execution of the agreement by Riverina would activate the clause 4.1 “procedure” and present Tarac with an “offer” it was at all times free to reject. It was submitted that the time for the operation of clause 4.1 had gone. Riverina submitted other reasons as to why clause 4.1 should be disregarded.
I do not accept any of these contentions or submissions. I see nothing in the conduct of Tarac which would justify disregarding clause 4.1 or finding that it could have no operation after the discussions between Mr Nido and Mr Blythman subsequent to May 2001. That is particularly so in view of my findings as to Mr Nido’s and Mr Blythman’s knowledge of and understanding of clause 4.1.
The parties had never conducted business on the basis of any long term written agreement between them other than upon such an agreement executed in late 1999. Clause 4.1 was in the only agreement ever executed by the parties and it was in all draft agreements which passed between them.
I find that both parties were at all times aware of clause 4.1 and were at all times aware that its effect was that no binding written agreement would arise or exist between them unless and until it was executed by both companies. I find that both parties conducted their affairs and their discussions on that basis. I find that both Mr Nido and Mr Blythman did so during the whole of the period December 2000 and September 2001.
My conclusion is that the Riverina has not established that it had, in mid‑2001, a binding three year Packaging Services Agreement commencing on 1 August 2001 on the terms of the bound undated Packaging Services Agreement, Exhibit D30.