The Gandel Group Pty Ltd v Walker
[1998] VSC 12
•31 July 1998
SUPREME COURT OF VICTORIA
| CAUSES JURISDICTION | Not Restricted |
No. 5657 of 1997
| THE GANDEL GROUP PTY LTD | Plaintiff |
| (ACN 006 190 709) | |
| v | |
| PAMELA JOY WALKER (in her capacity | Defendant |
| as executrix of the estate of the late Bruce Walker) | |
| JUDGE: | BYRNE, J. |
| WHERE HELD | Melbourne |
| DATE OF HEARING: | 20, 21, 22 July 1998 |
| DATE OF JUDGMENT: | 31 July 1998 |
| MEDIA NEUTRAL CITATION | [1998] VSC 12 |
Contract - construction of written agreement - “the Division”
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Bick | Arnold Bloch Leibler |
| For the Defendant | Mr P. Searle | Russell Kennedy |
HIS HONOUR:
Bruce Walker was prior to his death on 22 January 1996 a retirement village specialist. In December 1986 an entity within the Gandel group of companies acquired a retirement village in Sydney known as the Fernbank Retirement Village as a joint venturer with an entity within the Pratt Group (Wylie 4). It was intended that Mr Walker be engaged to manage the village, but this did not happen immediately.
In December 1988 the Pratt entity withdrew from the Fernbank venture and the entities within the Gandel group of companies acquired three further retirement villages in Sydney, Manors of Mosman, Pittwater Palms and Mosman Grove (Wylie 7, 8, 9). In mid-1988 there was established within the Gandel organisation a retirement division and Mr Walker became its “managing director”. The precise date of his engagement is uncertain. Lee Ann Wylie, who was then chief accountant of the Gandel Group Pty. Ltd., said it was after the establishment of the division structure in mid-1988 and that he was officially appointed a director in April 1989 (Wylie 12). Recital A to the agreement with which this litigation is concerned states that he was appointed by verbal agreement on 14 December 1987. The date, however, is immaterial, for he held this position on 15 November 1989 until his retirement in 1995.
It was on 15 November 1989 that the plaintiff, the Gandel Group Pty. Ltd. ("Gandel Group") entered into an agreement which confirmed Mr Walker's appointment as managing director of the Retirement Enterprises Division of the Gandel Group and provided for payment of his salary and a performance bonus. The litigation concerns the calculation of this bonus, there being no dispute that Mr Walker satisfied the preconditions to his entitlement to it. In the agreement, the expression "the Division" is defined as the Retirement Enterprises Division of Gandel Group, Mr Walker is referred to as “the Director” and Gandel Group as “the Company”
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The relevant clauses for my purposes are the following:
"1. The Company hereby confirms the appointment of the Director as Managing Director of the Division and the Director hereby confirms his agreement to act as Managing Director of the Division AND it is hereby agreed between the parties that for the purposes of this Agreement the Division shall be deemed to include the retirement village developments conducted by each of the Gandel Fernbank Unit Trust, the Farite Unit Trust, and the Care Unit Trust (hereinafter collectively called 'the Fernbank Development') and each of the Gandel Retirement Village Development Trust, The Gandel Manors of Mosman Trust, The Gandel Pittwater Palms Trust, and The Gandel Retirement Enterprises Trust (hereinafter collectively called 'the Mosman Development') together with such other retirement village developments as may be acquired by the Company and mutually agreed between the parties to form part of the Division. ... ... 4. In consideration of the Director achieving certain levels in the performance of his duties under the Service Agreement the Company hereby agrees to pay to the Director an amount equal to two per cent (2%) of the fair market value of the Division on the date upon which such payment is to be made and it is hereby agreed between the parties that the payment to be made to the Director in accordance with the provisions hereof shall be made on an after-tax basis or adjusted appropriately and shall (subject to the provisions relating to earlier termination or earlier resignation contained in Clauses 6 and 7 respectively hereof) be made on 31st December 1994 or within thirty (30) days of a final determination pursuant to Clause 5(a) hereof (whichever is the later). 5.(a) It is hereby agreed between the parties that the fair market value of the Division on the date upon which payment is to be made by the Company to the Director in accordance with the provisions of Clause 4 hereof shall be determined by agreement between the parties or failing such agreement within thirty (30) days by an independent valuer appointed by mutual agreement between the parties (and failing agreement by the
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President for the time being of the Law Institute of New South Wales) whose determination shall be final and binding on the parties and whose costs shall be borne equally between the parties AND it is further agreed between the parties that in determining the fair market value of the Division the following factors shall be taken into account:
(i) all funds used by the Division shall be charged at the average interest rate incurred by the Company on the borrowing of its funds;
(ii) only one-third of the profits derived from the Fernbank Development (including the sale of lots contained in Stage 4 of the development) and one-third of the deferred management fees payable to the Division in respect of the Fernbank Development (together with the whole of any increase in such deferred management fees as a consequence of the implementation of an alternative deferred management fee formula) shall be recognised in calculating the fair market value of the Division;
(iii) the remaining two-thirds of the profits derived from the Fernbank Development (including the sale of lots contained in Stage 4 of the development) may be recognised to the extent necessary in order to extinguish any losses which may have arisen in connection with the Mosman Development; and
(iv) the after tax cash flow from future management fees to be paid to the Division shall be included for a maximum of fifteen (15) years and shall be discounted to its present value at a discount rate of fifteen per cent (15%) per annum.
(b) For the purposes of this Clause 5 the expression 'deferred management fee' shall mean and include all payments made to a management company which is associated (within the meaning of the Companies (New South Wales) Code) with the Company by a resident of a unit in a retirement village at the time of resale of that unit save and except for any commission payable in consideration of such management company effecting such resale."
4 In brief, the parties have failed to agree upon the amount of the bonus payable to SC: 3 JUDGMENT
Mr Walker, and after his death to his estate, and have referred the matter to a valuer pursuant to clause 5(a). There is, however, an issue of principle between them as to whether the valuer should have any and, if so, what regard to the liabilities or some of the liabilities of the Division in determining its fair market value. Gandel Group, therefore, seeks a declaration which was finally formulated in the course of the trial in these terms:
“A declaration that ‘the Division’ referred to in the agreement being the Retirement Enterprises Division of the Gandel Group means the entities and trusts in the Retirement Enterprises Division and includes, such liabilities including debts owed by such entities and trusts to the Gandel Group.”
SHOULD RELIEF BE GRANTED?
Clause 5(a) provides for the parties to agree the fair market value of the Division and, if they fail to do so, for the appointment of a valuer to determine it and that the valuer's determination shall be "final and binding on the parties". On behalf of the defendant it was submitted that the issue of principle which Gandel Group would have determined by the Court is by clause 5 entrusted by the parties to the determination of the valuer. Accordingly, it was said, the Court had no jurisdiction to determine this issue or that it should decline to do so in deference to the agreement or as a matter of discretion.
It is common ground that the parties failed to agree upon the fair market value of the Division within 30 days or at all and that they failed to agree upon a valuer and that Bill M. Jansen, a member of the firm Ernst & Young, was on 22 October 1996 duly appointed valuer in accordance with clause 5(a). In his letter dated 31 October 1996 the valuer identified the issue of principle and proposed to deal with it. Following the commencement of this proceeding on 2 June 1997, at the request of the solicitors for Gandel Group, he has not proceeded further.
On behalf of Gandel Group it was submitted that the task of the valuer was to
value the Division in accordance with the agreement. It is not to determine
questions of law such as the construction of the agreement and thereby to identify SC: 4 JUDGMENT
the thing to be valued: Legal & General Life of Australia Ltd v. A Hudson Pty Ltd (1985) 1 NSWLR 314 at 331, per McHugh JA. The issue of principle here, it was said, comes down to determining what precisely it was the agreement requires the valuer to value. These were the entities which made up the Retirement Enterprises Division so that the valuer should make an assessment of the assets and liabilities of each of these entities so as to give a fair market value of them as a whole.
The position of the defendant was that the calculation of the fair market value of the Division required the valuer to value the assets of the entities in the Retirement Enterprises Division and that the liabilities of those entities should not be deducted from these assets. This is because “the Division” in the agreement means the assets of the entities comprising the Retirement Enterprises Division. It was submitted, then, that the resolution of this contest as to what it was that the valuer should value is part of the task entrusted to him by cl.5 of the agreement and that the court should not concern itself with this issue of principle.
The first contention put on behalf of the defendant was that the court lacked jurisdiction to entertain the question as to the construction of the agreement because this was within the province of the valuer. The legal basis for this submission was obscure. It was put that the valuer was in fact an arbitrator, but no argument was offered that the court had no jurisdiction to entertain a dispute which was the subject of an arbitration agreement. Indeed, it is difficult to imagine what such an argument might be. Section 53 of the Commercial Arbitration Act 1984 confers on the court power to order a stay of litigation where the dispute is equally the subject of an arbitration agreement. The existence of this statutory power and the very many cases which have held that an application under this section or its predecessors had not been properly made, assume that, if no stay is ordered, the dispute may be litigated in court. I express no view as to whether cl.4 of the agreement is an arbitration agreement. Even if it were, the attack on jurisdiction must fail.
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Next, it was put that the court ought not determine an issue which the parties have agreed to refer to a valuer. If the agreement were to refer the issue to him as arbitrator, the submission must fail. The court will not restrain a party from litigating a dispute in breach of an arbitration agreement; the plaintiff’s remedy lies in damages if loss can be shown: Anderson v. GH Michell & Sons Ltd (1941) 65 CLR 543. The position cannot be more favourable where the agreement is to refer the issue to him as an assessor or a valuer.
And so the defendant was driven to put its objection in terms of the discretion which the court undoubtedly has in determining whether to grant declaratory relief. Four bases were offered by counsel for the defendant in his written outline of argument. First, it was said that the proposed declaration was vague and uncertain. This is not an objection provided that the declaration can be formulated in terms which are acceptable. Second, it was said that the construction of the agreement may depend upon the intention of the parties at the time it was entered into and upon the surrounding facts circumstances. It is common ground that the agreement between the parties was reduced to writing and that it was contained in a document dated 15 November 1989. Evidence of the intention of the parties at the time and of the surrounding circumstances is, therefore, of limited value. In any event, this is not a reason to refuse declaratory relief where an issue of construction arises. Third, it was said that the issue was purely hypothetical in the absence of findings of fact and that the court should not give an advisory opinion. I was, for some time, attracted by this consideration, particularly as it seemed that the significance of the factors mentioned in cl.5(a) may depend upon the valuation approach adopted by the valuer. But it became apparent that these factors had little if any bearing upon the issue of principle before the court.
Fourth, it was said that there was no need for the court to make the declarations sought, for if the valuer fell into error of law then there was a remedy available under the Commercial Arbitration Act 1984. A number of things need to be said about this. It is by no means certain that this is an arbitration and that the
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Commercial Arbitration Act has any application. Next, the power to appeal under s.38 is exceedingly limited. Finally, it is difficult to see the attraction of leaving the parties to their rights under that Act after the point has been fully explored before me. The parties have already been subjected to considerable delay and expense, including the expense of this litigation. There does not seem to be much to be said for sending them away with no result on the basis that they can, at some future date, incur more expense and delay by seeking to appeal the arbitrator’s determination.
In oral argument, further grounds for the exercise of discretion adverse to Gandel Group were offered based upon its alleged delays in bringing the issue forward. On its face the delay is remarkable. In a few months there will occur the fourth anniversary of the date for payment of Mr Walker’s bonus. I am not able to sheet home to either of them the blame for this and I do not do so. It seems to me that the unexplained delay is a good reason to resolve the matter now. To do so will mean that the time, since the commencement of this proceeding in any event, will not have been wholly wasted.
I will not in the exercise of my discretion refuse to grant such declaratory relief as is appropriate to determine the issue of contractual construction which troubles the parties.
THE DIVISION
As I have mentioned, the contest between the parties was as to the meaning of the expression “the Division” in cl.4 and in cl.5(a). Does it mean the assets of the entities comprising the Retirement Enterprises Division, as the defendant contended, so that the valuer is to determine in accordance with the conventional valuing principles what a willing but not over eager purchaser would pay for these? Or does it mean the entities themselves, as Gandel Group contended, so that the valuer is to value the net worth of those entities.
The meaning of this expression must, according to conventional legal principles of
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construction of a written agreement, be found by an examination of the text of the agreement itself to discover the intention of the parties: Australian Broadcasting Commission v. Australasian Performing Rights Association Limited (1973) 129 CLR 99 at 109, per Gibbs, J. I bear in mind, too, that it is a commercial document and should, therefore, where the text permits, be construed to give it a sensible and businesslike meaning.
Evidence of the actual intention of the parties is not admissible for this purpose, nor is evidence of what the parties later thought the agreement meant. A good deal of the evidence in this case appeared to be directed to this end although counsel disavowed this objective. Evidence, however, is receivable of the surrounding circumstances known to the parties at the time of the contract, for this may place the expressions adopted by them in a real context and identify the commercial intent of the agreement: Codelfa Construction Proprietary Limited v. State Rail Authority of New South Wales (1982) 149 CLR 337. I received evidence, therefore, of the structure of the Retirement Enterprise Division as it stood in November 1989. Evidence which was led of changes to this structure after that date was given on behalf of Gandel Group without objection, but it is of no assistance to me on the construction issue.
The document was prepared by the lawyers for Gandel Group and approved by the lawyers of Mr Walker before its execution. It has the appearance of a legally drawn document and would ordinarily for that reason be subjected to a more rigorous analysis than one drawn by persons not trained in legal drafting. Upon a careful examination, however, the text betrays signs that make me less inclined to adopt this course. Some, but certainly not all, of them, will be mentioned below.
The entities within the Division were identified in the material before me as a number of trusts and companies, all of which were part of the Gandel organisation. This organisation was headed by another trust, the Gandel Group Family Trust whose trustee was the plaintiff, Gandel Group. The organisation is divided into a number of divisions including the retail division and the shopping centre division. The division with which I am concerned is variously called the Gandel Group
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Retirement Division in the consolidated accounts for 1993, the Gandel Group Retirement Village Division in the structural charts and the Gandel Retirement Enterprises Division in the agreement itself. It does not appear how the entities within this Division relate to the parent trust or its trustee. Nevertheless, it appears from the agreement that it was this trustee which made the agreement with Mr Walker appointing him managing director of the Division: cl.1, and under its terms it is his employer; it is able to terminate his employment: cl.2, it is obliged to contribute to his superannuation: cl.3(b); and it is obliged to pay him the bonus with which this dispute is concerned: cl.4.
It is convenient first to identify the entities comprising the Division as they appear in the chart as at November 1989 which is in evidence, by reference to the two developments referred to in cl.1 of the agreement, bearing in mind that the Division is there said to include these two developments; it may also include something else.
The Fernbank Development
This development is at St. Ives in New South Wales. It comprises three trusts.
•
Gandel Fernbank Unit Trust. The trustee of this trust was Famcote Pty Ltd which, through its nominee Fernbank Development Pty Ltd, was responsible for the development of stage 4 of the Fernbank Retirement Village.
•
Farite Unit Trust. The trustee of this trust was Fernbank Management (NSW) Pty Ltd which, through its nominee Fernbank Management Pty Ltd, was the manager of the Fernbank Retirement Village and the owner of the hostel building within that village.
• The CARE Unit Trust. The trustee of this trust was Comprehensive Australian Retirement Enterprises Pty Ltd which provided management services for the
Fernbank Retirement Village.
The Mosman Development
This development comprised three retirement villages known as Mosman Grove,
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Manors of Mosman with adjacent development land and Pittwater Palms. The development was held and conducted by a network of five unit trusts.
•
The Gandel Group Retirement Division Trust. The trustee of this trust which is the parent of the four trusts mentioned in cl.1 of the agreement was Silverlace Pty Ltd. The unit holders of this trust were themselves a series of discretionary trusts, called collectively the Besgan Trusts whose potential beneficiaries were the family members of the ultimate owners of the Gandel organisation. This trust was the parent trust in that it held all of the units in the four subsidiary trusts below.
• The Gandel Retirement Village Development Trust. The trustee of this trust was
Gandel Retirement Villages Developments Pty Ltd which owned both the development land adjacent to the Manors of Mosman Retirement Village and the unsold units at the Mosman Grove Retirement Village.
• The Gandel Manors of Mosman Trust. The trustee of this trust was Gandel
Mosman Villages Pty Ltd which, through its nominee Regency Services Pty Ltd, provided management services for the Mosman Grove Retirement Village. A company, the Manors of Mosman Pty Ltd which was associated with the trust by a put and call option on shares owned the unsold units at the Manors of Mosman Retirement Village.
•
The Gandel Pittwater Palms Trust. The trustee of this trust was Gandel Pittwater Palms Pty Ltd. The trust was associated by a put and call option with Pittwater Palms Management Pty Ltd whose activity was not disclosed but which had a subsidiary, Pittwater Palms Pty Ltd, which itself owned the unsold units at the Pittwater Palms Retirement Village.
• The Gandel Retirement Enterprises Trust. The trustee of this trust, Gandel
Retirement Enterprises Pty Ltd, provided head office administration. It was this trustee company of which Mr Walker was a director.
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Other Entities
•
The CARE Marketing Trust (Vic) which was elsewhere called the CARE Unit Trust Victoria. The trustee of this trust was Comprehensive Australian Real Estate (Vic) Pty Ltd. It was not operating.
• The CARE Marketing Trust (NSW) which was elsewhere called the CARE
Marketing Unit Trust. The trustee of this trust, Comprehensive Australian Real Estate (NSW) Pty Ltd, was a registered real estate agent which acted as such on the sale and resale of units in the retirement villages.
In summary, then, the chart shows that in November 1989 the Division comprised no less than 10 unit trusts, 10 trustee companies, two nominee companies and four other companies. The unitholders of the various trusts were not identified save that it was said, generally, that all entities within the Gandel organisation were potential beneficiaries of all of the discretionary trusts. This enabled profits to be distributed to loss-making entities for the purposes of minimising the tax burden. A subsequent example of this was shown in the Farite unit trust tax return for 1995 where that trust received a substantial amount of income from profit earned by a trust outside the Retirement Division. Again, I assume that Mr Walker had at the time of executing the agreement a general understanding of the structure of the Gandel organisation.
In cl.1 of the agreement, the Division is “deemed to include” the developments conducted by seven of these trusts. I am unable to attach any significance to the words “deemed to”. It should be noted that this inclusive description is capable of covering other retirement village developments “as may be acquired by [Gandel Group] and mutually agreed between the parties to form part of the Division”. The word “mutually”, like the words “deemed to” adds nothing to the meaning.
There was no evidence as to what the parties at the time of contract knew to be the net assets of these entities. I would suppose that they knew that the three developments had then been acquired and what they cost. The Fernbank Development had been purchased in 1986 under the joint venture agreement with
SC: 11 JUDGMENT the Pratt entities. According to the external funding summaries provided to me, the cost of the share of the Gandel entity was in the vicinity of $7M. The interest of the Pratt entity was purchased by the Gandel organisation in December 1987 for $7.5M based on September 1987 values. In December 1988 the Mosman Development was purchased for a total of some $44M. The total acquisition cost of the two developments was therefore approximately $60M. These developments represented assets in the form of vacant land for redevelopment, unsold units which were to be offered for sale, the contractual right to receive deferred management fees upon the resale in perpetuity of those units which were already sold and those to be sold, and hostel units which were rented to tenants. It seems that those rights vested in differing entities within the Division. By November 1989 the position had doubtless changed somewhat. I assume that the entities in the Division at that time had disposed of certain units and had incurred development expenses and owned other less substantial assets, such as motor vehicles and plant. There was, however, no evidence of any detail or value of these. On the other side of the balance sheet I was provided with a document setting out the Division’s loan accounts with the Gandel Group as at 15 November 1989. These showed loans which were estimated to total over $42.38M. I assume that as managing director of the Division Mr Walker knew all of this as did, of course, Gandel Group.
Against this background, I return to the text of the agreement. “The Division” is defined in Recital A merely as a particular division of Gandel Group. I take this merely to be a description of that administrative part of the Gandel organisation which was concerned with its commercial activities as developer, owner and manager of retirement villages. I construe the expression “managing director” not to mean a class of director in the corporations law sense of the word. Mr Walker may have been the managing director in this sense of the trustee of the trust which provided administrative services for the Mosman Development; it does not appear that he held that office in any of the 15 other companies within the Division. It seems that the title was intended to indicate that he was a general manager directing the retirement village activities within that part of the Gandel
SC: 12 JUDGMENT organisation. This being the case, the word “Division” in the expression “Managing Director of the Division” in Recital A and cl.1 must refer to those activities, to the businesses which were the subject of the commercial activities of the entities within that Division.
Clause 1 also stipulates what the Division includes. The terminology used here is again to identify this as the two developments conducted by certain trusts within the Division and certain other developments which may be acquired by Gandel Group in the future. The use of the words “developments” and “conducted” seem to me to be significant. Notwithstanding the use of the word “include” in cl.1.1, the tenor of the agreement suggests to me that “the Division” refers only to developments and, then only to retirement village developments, as there described. The word “include” is probably used to admit ancillary activities of other entities over which Mr Walker was given authority. The use of the words “developments” and “conducted” shows that the concern of the agreement, insofar as it deals with Mr Walker’s relationship with the entities, was that he manage and direct only those activities of those entities which properly concerned the retirement villages. He was not concerned, for example, with items on the balance sheet which arose from the financial movements within the group unconnected with the retirement village developments.
Clause 4 fixes the amount of the performance bonus by reference to the fair market value of “the Division” on the date on which the payment is to be made. It is accepted on the pleadings that this date in the present case is 31 December 1994. The expression “fair market value” connotes a saleable thing for which a price can be fixed. This does not assist me in my present task, for the expression is equally applicable both to the assets of the entities and to their net assets. One or all of the units in a unit trust and one or all of the shares in a company might be sold for a price representing their net worth.
It was suggested at first by counsel for the defendant that some clue to the nature of the subject matter of the valuation might be gleaned from the directions contained in cl.5 as to the factors which the valuer should take into account. This provoked a
SC: 13 JUDGMENT considerable discussion as to what this clause means and as to how these factors might bear upon the valuation method or methods which the valuer might or ought to adopt. It was, however, not suggested by counsel for either party that the court should construe this clause in a way which should in any way direct the valuer or fetter his professional judgement as to the proper approach or approaches to his task. I express no view upon this matter which is essentially one for the expertise and judgement of the valuer.
What was submitted on behalf of the defendant was that each of the factors mentioned in cl.5(a) was of a recurrent or profit and loss nature and that this indicated that the balance sheet approach of Gandel Group was not that contemplated in the agreement. Paragraphs (ii), (iii) and (iv) suggest that the valuer is to assess the fair market value of deferred management fees and further management fees. This may be so, but it is clear that this is a significant asset of the Division which must be valued whatever be the correct identification of the subject matter of the valuation under cl.4.
Counsel for Gandel Group submitted that the references in cl.5(a) to the cost of funds in paragraph (i) and to profits in paragraph (ii) and (iii) show that debts form part of the Division for valuation purposes. The mention of these factors, however, does not necessarily point to that conclusion. They connote a reference to outgoings on the profit and loss account. I have indicated what seem to be the principal assets of the developments. There may be others. It is not difficult to see that a valuer determining the fair market value of these or some of them might, depending upon the valuation approach adopted, need to determine interest rates and profits. Indeed, it might be said that if paragraph (i) pointed to indebtedness for the purpose of a balance sheet valuation as counsel for Gandel Group contended, it would be the amount of the debt rather than the interest rate which would be important.
It is not appropriate for me to express any view as to the proper valuation approach or approaches which the valuer might adopt. I cannot, therefore, draw any firm conclusions from cl.5 upon the question before me.
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I turn now to the commercial objective of the agreement. In 1988 or thereabouts, when Mr Walker was first recruited, the retirement division represented a relatively new area of commercial activity for the Gandel organisation. It may be supposed that Mr Walker was selected as possessing the expertise to build it up. When the agreement was executed in 1989 there were four villages. Mr Walker was to be paid a salary of $120,000 per annum, subject to adjustments, plus car. Although the agreement does not say so, it seems that it was to run for about five years, until 31 December 1994. The performance bonus provided for in cl.4 was to act as an incentive to him to achieve certain unspecified levels in the performance of his duties in that period. It was said on behalf of Gandel Group that it would be surprising if, against this background, cl.4 meant that, if nothing changed over the five years, Mr Walker should be entitled to two percent of the value of assets which had been purchased for some $44M, namely, $880,000. This represents more than his basic salary for the contract period. The like argument put on behalf of the defendant was that, since there was little if any equity in the net assets of the entities within the Division in November 1989, it would be very surprising if he agreed to accept as a bonus only two percent of the amount by which the equity of the Gandel organisation improved over the period of his stewardship and the more so, since this might be affected by decisions of the management of that organisation over which he had no control. I must say that I do not find either of these speculations very persuasive. I am left with the conclusion that cl.4 of the agreement shows that the bonus was intended as an incentive without any guidance as to how substantial that incentive might be. Anything further is speculation because I do not know how the parties saw the likely fortunes of the Division over the next five years. I do note that if their fortunes were affected by the addition of further developments, even this would not necessarily bear upon the amount of the bonus, for a new development is not included in the Division for the purposes of the agreement unless both parties agree.
I return, therefore, to the point at which I started, namely, Recital A and cl.1 of a fairly loosely drawn agreement. It is to my mind significant that the drafter used
SC: 15 JUDGMENT the words “development” and “conducted” in cl.1 and that Mr Walker was described as “Managing Director of the Division”. In the context of the whole agreement, Recital A and cl.1 indicate that Mr Walker was put in charge of a number of commercial developments or businesses which were conducted by entities which were part of the complex structure of the Gandel organisation. It was the fortunes of these businesses which he was charged to manage and direct. It was the value of these businesses which at the end of the five year term, was to determine the amount of his bonus. I conclude, therefore, that it is the value of the assets of these businesses which the valuer is to determine, and not their liabilities.
I will not, therefore, make the declaration sought by the plaintiff. I will in its stead declare that the obligation of the valuer under cl.4 of the agreement is to determine the fair market value of the assets of the retirement village business or businesses conducted by the entities within the Retirement Enterprises Division of the Gandel Organisation. I will hear counsel further as to the precise terms of the declaration.
As to costs, there is in my view no warrant to depart from the ordinary order for costs in favour of the successful party. The taxed costs of the defendant including any reserved costs and the costs of transcript will be paid by the plaintiff.
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