WorldAudio v GB Radio

[2003] NSWSC 855

NEW SOUTH WALES SUPREME COURT

CITATION:      WORLDAUDIO v GB RADIO [2003]  NSWSC 855 revised - 10/10/2003

CURRENT JURISDICTION:               

FILE NUMBER(S):    50056/03

HEARING DATE{S):               15/09/03, 16/09/03, 17/09/03

JUDGMENT DATE: 10/10/2003

PARTIES:
WorldAudio Ltd Plaintiff 1
WorldAudio Communications Pty Ltd Plaintiff 2
GB Radio (Aust) Pty Ltd Defendant
GB Radio (Aust) Pty Ltd Cross-Claimant
WorldAudio Ltd Cross-Defendant 1
WorldAudio Communications Pty Ltd Cross-Defendant 2
Andrew Peter Thompson Cross-Defendant 3

JUDGMENT OF:       McDougall J      

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S):         Not Applicable

LOWER COURT JUDICIAL OFFICER:     Not Applicable

COUNSEL:
J T Gleeson SC/P J Brereton (Plaintiffs and Cross-Defendants)
R B S Macfarlan QC/P Whitford (Defendant)

SOLICITORS:
Blake Dawson Waldron for Plaintiffs
Gadens for Defendant

CATCHWORDS:
Contract - whether concluded or enforceable contract exists - uncertainty of terms - whether specifically enforceable - discretionary defences - whether asserting incorrect view of contract amounted to repudiation - whethere there was a breach - validity of termination for repudiation or breach - whether terminating party was ready, willing and able to perform - estoppel - applicability of s 52 Trade Practices Act - rectification

ACTS CITED:
Evidence Act 1995 (NSW)
Radiocommunications Act 1992 (Cth) 
Trade Practices Act 1974 (Cth)

DECISION:
See paragraphs 221-225

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDougall J

10 October 2003

50056/03             WORLDAUDIO LTD & ANOR v GB RADIO PTY LTD

JUDGMENT

HIS HONOUR:

Introduction

1. These proceedings concern two “Apparatus Licences” issued by the Australian Communications Authority (“ACA”) to Pieter Cecil Maria Marchant (“Marchant”) under Pt 3.3 of the Radiocommunications Act 1992 (Cth). The licences are numbered 1130395 (“the Melbourne licence”) and 1130396 (“the Sydney licence”).  The evidence does not disclose precisely when it was that the ACA issued the licences to Marchant, but nothing turns on this.  It is common ground that the licences are, and have since well before May 2001 been, in force.

2. The defendant (“GBRA”) is now recorded in the register maintained by the ACA as the licensee of each of the licences.  However, Marchant disputes that entitlement.  The dispute between GBRA and Marchant is the subject of litigation and has not been resolved. 

3. The plaintiffs claim to have the benefit of an agreement with GBRA in respect of the licences.  That agreement, the plaintiffs say, was made in correspondence on 2 April 2002.  In these proceedings, the plaintiffs seek declaratory and other relief (including relief by way of a decree for specific performance) in respect of what they say are their rights.

Events leading up to 2 April 2002  

1. On 16 May 2001 Marchant entered into a “Use Agreement” (“the Marchant Use Agreement”) with Jim Henry (“Henry”).  The Marchant Use Agreement included:

   4.1By cl 1, an authorisation from Marchant to Henry “or his nominee” to use the licences in accordance with s 114 of the Radiocommunications Act; and

   4.2By cl 8, an option granted by Marchant to Henry or his nominee to take a transfer of the licences upon giving notice in writing and in consideration of the payment of $200,000.

2. The term of the Marchant Use Agreement was 10 years from 16 May 2001.

3. Also on 16 May 2001, Henry and the second plaintiff (“WCPL”) entered into a “Nomination Agreement”, whereby Henry agreed “unconditionally and irrevocably ... to nominate [WCPL] ... to take the benefit of the [Marchant] Use Agreement”.  The consideration for that nomination was a promise by WCPL to pay Henry a fee of $800,000 (inclusive of GST) “payable at the time funds are released from trust in accordance with clause 8.5 of the [Marchant] Use Agreement”.  The effect of cl 3 is that Henry’s fee is payable when, the options under the Marchant Use Agreement having been exercised, the ACA approves the transfer of the licences and the transferee becomes recorded by the ACA as the registered holder of the licences.

4. In proceedings No. 4408 of 2000 in the Supreme Court of Victoria, GBRA and others sued Marchant, claiming, for reasons pleaded in an amended statement of claim dated 1 June 2001, that Marchant held the licences on trust either for GBRA or for a number of other parties and Marchant in specified shares, an order for transfer of the licences accordingly, an order for the taking of accounts and for other relief.  Marchant defended that claim and, by a defence and amended counter-claim dated 27 June 2001, sought a declaration that he is, and was at all relevant times, the owner of the licences and entitled to be registered as such pursuant to the Radiocommunications Act.

5. From about 17 October 2001, a wholly owned subsidiary of WCPL, Radio Two Pty Ltd (“Radio 2”), has been broadcasting on the frequency of the Sydney licence.

6. On 13 February 2002, Marchant gave a written authorisation to each of WCPL, Radio 2 and Henry “to operate radio communications devices under and in accordance with” the Melbourne licence and the Sydney licence. That authorisation was expressed to be given in accordance with s 114 of the Radiocommunications Act. It stated, among other things, that:

   “This authorisation may be revoked by [Marchant] in relation to each or both of the Licences or in relation to any or all of [WCPL, Radio 2 or Henry] immediately by written notice to [WCPL, Radio 2 or Henry] and such revocation will have the effect set out in clause 6 of the Radiocommunications (Limitation of Authorisation of Third Party Users) Determination 2000”.

7. The Melbourne licence and the Sydney licence were for AM frequency broadcast apparatus.  The first plaintiff, a listed public company then known as International Media Management (Holdings) Ltd (“IMM”), agreed, subject to a capital raising, to acquire all of the issued shares in, and all of the convertible notes issued by, WCPL.  The capital raising was required to enable WCPL to meet commitments that it had entered into to acquire broadcast apparatus licences that, in turn, would enable it “to create a new nation wide commercial free to air AM radio network, under the name Radio 2”.    The Melbourne licence and the Sydney licence were essential to that plan.

8. The prospectus was dated in March 2002.  It stated that WCPL had entered into arrangements that would enable it to acquire up to 41 apparatus licences, including the Melbourne licence and the Sydney licence.  As to those two licences, it stated that WCPL “has an option to acquire them at any time before 15 May 2001”, and that it would “exercise its option to acquire [them] when it is commercially appropriate to do so”.

9. The nature of WCPL’s rights to the Melbourne licence and the Sydney licence were further explained in s 8.9 of the prospectus, which referred to the detail of the Marchant Use Agreement and the Nomination Agreement.

10. After the prospectus was issued, GBRA made what was in effect a complaint to the Australian Securities and Investment Commission (“ASIC”) about the accuracy of some of the information in the prospectus.  The complaint itself is not in evidence, but it is common ground that:

    13.1        It was made by, or on behalf of, GBRA; and

    13.2The substance of the complaint is reflected in a letter of 27 March 2002 from ASIC to IMM.

11. In that letter, ASIC noted its understanding, based on information that it had received, that there was a dispute as to the ownership of the Melbourne and Sydney licences, and “that information about the dispute may be information that investors and their professional advisers would reasonably require to make an informed assessment of the prospects of IMM”.

12. ASIC further noted that, as a result of a decision in the Federal Court of Australia, which might enable the Administrative Appeals Tribunal to hear proceedings relating to the “ownership of the Licences”, there might be “a new circumstance that has arisen since the Prospectus was lodged which would have been required by s 710 of the Corporations Act 2001 to have been disclosed in the prospectus before the prospectus was lodged and that may be materially adverse from the point of view of an investor in IMM”. Accordingly, ASIC held the view “that information concerning the ownership dispute and the current status of the dispute may be information which should be disclosed by way of a supplementary prospectus ...”.

13. After IMM received that letter, the plaintiffs entered into negotiations with GBRA.  At that stage, GBRA had retained solicitors, Mulcahy Mendelson and Round (“MMR”), to advise it.  Mr Phillip Liberatore (“Liberatore”), a solicitor employed by that firm, appears to have had the day-to-day carriage of the matter on behalf of GBRA. 

14. On 28 March 2002, Mr Andrew Thompson of WCPL (“Thompson”) sent a copy of the Marchant Use Agreement by facsimile transmission to Liberatore.  It was said to be sent “without prejudice”. 

15. Also on 28 March 2002, Blake Dawson Waldron (“BDW”), who were acting for IMM, wrote to MMR offering “an arrangement” to GBRA and its shareholders and directors on certain specified terms.  Around that date, there were a series of telephone discussions between representatives of IMM (including Mr Jeremy Kriewaldt (“Kriewaldt”), a partner in BDW) and representatives of GBRA (including Liberatore), and also between representatives of IMM and Marchant (and his legal advisers).

16. On 2 April 2002, Thompson met Mr Richard Thomas (“Thomas”) of GBRA at the offices of MMR.  I will set out later my findings as to the sequence of events on that day.  However, it is clear that, in the course of that day, the plaintiffs, through BDW, made a written offer to GBRA and that GBRA, through MMR, accepted that offer in writing.  It is also clear that, on that day, Thompson and Thomas caused to be produced a letter from WCPL to GBRA, which Thompson signed, although it was dated 3 April 2003.  For convenience, I will refer to the outcome of the events of 2 April 2002 as “the 2 April agreement”.

The terms of the 2 April correspondence

1. The offer made by the plaintiffs through BDW to GBRA through MMR (“the 2 April offer”) stated as follows (omitting formal parts):

   “We refer to the discussions between our clients, IMM and WorldAudio Communications Pty Limited (“WorldAudio”) with your clients, GB Radio, Roger Thomas, Alan Thomas, Kerry Grills and GB Radio (Melbourne) Pty Limited.  We are instructed that our clients hereby offer an arrangement to your clients on the following terms:

   1.You, on behalf of your clients, will write to our clients and to the Australian Securities & Investments Commission in terms identical to those attached.

   2.Subject to 3 below, GB Radio will grant a lease of each of the Broadcast Apparatus Licences numbered 1130395 (1620kHz AM) and 1130396 (1611kHz AM) issued under the Radiocommunications Act 1992 (respectively the “Melbourne Licence” and the “Sydney Licence”) to WorldAudio on the same terms as that granted by Pieter Marchant on 16 May 2001, namely:

   (a)          expiry date – 15 May 2011;

   (b)monthly rental - $1,000 for the Melbourne Licence and $1,000 for the Sydney Licence;

   (c)a call option in relation to both the Melbourne Licence and the Sydney Licence, exercisable at any time on or before the expiry date of the lease on payment of the option exercise price; and

   (d)option exercise price - $500,000 for the Melbourne Licence and $500,000 for the Sydney Licence.

   3.The leases of the Melbourne Licence and the Sydney Licence will be conditional on GB Radio becoming the registered owner of the relevant licence before 15 May 2011.

   4.WorldAudio will enter a programming supply agreement with GB Radio for a term expiring on 15 May 2011, under which GB Radio will supply to WorldAudio British lifestyle programming material sourced in the United Kingdom, and our client will arrange for that material to be broadcast as follows:

   (a)12 hours of programming content per day under the Melbourne Licence, of which:

   (i)3 hours will be broadcast between 6:00am and 9:00am; and

   (ii)3 hours will be broadcast between 3:00pm and 6:00pm,

   unless otherwise agreed, provided that broadcasting will only commence when WorldAudio or one of its subsidiaries commences broadcasting under the Melbourne Licence in the ordinary course of its business; and

   (b)3 hours of programming content per day under the Sydney Licence and under each other broadcast apparatus licence under which WorldAudio or one of its subsidiaries commences broadcasting during the term of the programming supply agreement, of which:

   (i)1 hour will be broadcast between 6:00pm and 7:00pm; and

   (i)2 hours will be broadcast between 10:00pm and midnight,

   unless otherwise agreed.

   In return, WorldAudio will, and IMM will procure that WorldAudio does, subject to 5 below, pay GB Radio $650,000 within 8 business days of receipt of the application for IMM Shares contemplated in 5 below.

   5.GB Radio (or its nominees) will, after the re-commencement of quotation of shares in IMM on the Australian Stock Exchange Limited (“ASX”) stock market, apply for shares in IMM to the value of $300,000.  In determining the number of shares applied for, the relevant price per IMM share will be the greater of $0.20 and 90% of the volume weighted average price of sales of IMM shares on the ASX stock market (excluding option exercises, overseas sales and New Zealand sales) in the three trading days prior to the date on which the application is  received by IMM.  If IMM agrees to issue these shares, WorldAudio will pay, and IMM will procure that WorldAudio does pay, $350,000 to GB Radio and IMM will issue the relevant number of shares within 8 business days of receipt of that application.

   By your firm giving the letter referred to in 1 above to IMM and WorldAudio, your clients will be treated as accepting these terms, which will then be legally binding on IMM, WorldAudio and your clients.  The parties record that they will, as soon as possible, enter into a formal lease agreement in relation to the Melbourne Licence and the Sydney Licence on the terms set out in 2 above, subject to the condition in 3 above and a more formal programming supply agreement on the terms set out in 4 above.

   These terms shall remain confidential to the parties, unless disclosure is required to comply with the requirements of Australian Stock Exchange Limited”.

   (I interpose that para 2(d) was not literally correct, in that the amount payable under the Marchant Use Agreement on exercise of both options was $200,000.  The figure of $500,000 per licence appears to represent one half of this sum, together with the amount of $800,000 referred to in the Nomination Agreement.  However, no one submitted that anything turned on this apparent discrepancy.)

2. MMR complied with the first numbered paragraph of that letter by writing to the plaintiffs and ASIC (“the 2 April acceptance”) in the following terms (omitting formal parts):

   “We act for GB Radio (Australia) Pty Limited, GB Radio (Melbourne) Pty Ltd, Roger Thomas, Alan Thomas and Kerry Philip Grills.

   This letter serves to confirm our clients’ representation that if, as a result of the proceedings before the Administrative Appeal [sic] Tribunal involving any one or more of our clients, the Australian Communications Authority and/or Pieter Marchant, one or more of the Broadcast Apparatus licences currently issued in the name of Pieter Marchant and the subject of lease arrangements between Pieter Marchant and WorldAudio Communications Pty Limited (“WorldAudio”) (including, in particular, Broadcast Apparatus Licences number 1130395 and 1130396) (“the Relevant Licences”) becomes issued in the name of one or more of our clients or any entity controlled by any or all of them, our clients will ensure that the person in whose name any Relevant Licence is issued enters lease arrangements with WorldAudio substantially similar to those currently relating to that Relevant Licence.

   Our clients also confirm that they have no concerns as to the accuracy of any statements contained in the prospectus issued by International Media Management (Holdings) Limited and dated 1 March 2002 concerning the Relevant Licences and withdraws its complaints to the Commission in relation to that prospectus.

   Our clients acknowledge that each of the addressees to this letter is entitled to rely on its contents”.

The 3 April letter

1. The letter dated 3 April 2002 from WCPL to GBRA (“the 3 April letter”) read as follows (omitting formal parts):

   “WorldAudio does not intend to exercise the Sydney and Melbourne purchase of licence options (“the options”) at this time.

   WorldAudio will only exercise the Sydney and the Melbourne options on the instructions of GB Radio (Australia) Pty Ltd.

   WorldAudio acknowledges that Programming Supply Agreements remain in force after the options are exercised.

   WorldAudio acknowledges that GB Radio (Australia) Pty Ltd may instruct the company to exercise the Sydney licence option before 31 December 2002, and the Melbourne licence before 30th June 2003.

   The terms contained in this letter are additional to agreement dated 2 April 2002, and are intended to be legally binding on WorldAudio and GB Radio”.

   [The word “to” emphasised in the last paragraph of this letter was inserted by hand.] 

   The events of 2 April 2002

2. The only witness who was called in the proceedings was Thompson.  The key factual issue, as to the events of 2 April 2002, was whether the terms of the 3 April letter were settled, as between Thompson and Thomas, before or after GBRA accepted the 2 April offer.

3. Thompson’s evidence on that point was clear both in chief and in cross-examination.  He said, in substance, that, in the course of negotiations on 2 April 2002, and before GBRA (through MMR) accepted the 2 April offer, Thomas raised the question of a “side letter” to give GBRA some assurance that WCPL would exercise the options for which the 2 April offer provided.  Thompson said that he replied that “We have to get things sorted out with ASIC first because if we don’t do that the whole thing will collapse”.

4. The sequence of events continued, according to Thompson, with further negotiations.  At about lunchtime, Thompson says, Thomas said “I will agree to enter into a user agreement along the same lines as the Marchant agreement and will withdraw the complaint to ASIC”.  As a result, Thompson said, there was a telephone conference between Thompson, Thomas, Liberatore and Kriewaldt.  As a result of that telephone conference, BDW sent the 2 April offer to MMR by facsimile transmission.

5. When the offer arrived, Thompson said that Thomas and Liberatore left him alone and, after some time, rejoined him.  Liberatore then confirmed, in answer to a question from Thompson, that the “acceptance” had been despatched.  (I interpose that the 2 April offer was timed at “14.41pm” on 2 April, but that there was evidence, which I accept, to show that the fax machine had not been reset to take account of the end of daylight saving over the preceding weekend.  Transmission of the 2 April acceptance was timed at 13.57pm on the same day.)

6. Thereafter, Thompson said, he had a further discussion with Thomas in which, by reference to an earlier letter (dated 28 March 2002) from the plaintiffs to GBRA, the terms of what became the 3 April letter were, in substance, agreed. 

7. Thompson said that the 3 April letter does not reflect accurately what was orally agreed.  The terms of the oral agreement were “scribed”(as he put it) by Thompson, on a copy of the letter of 28 March 2002 that I have referred to, as follows:

   “ – WORLDAUDIO DOES NOT INTEND TO EXERCISE THE SYDNEY AND MELBOURNE OPTION AT THIS TIME.

   -   WORLDAUDIO WILL ONLY EXERCISE THE SYDNEY AND MELBOURNE OPTION ON THE INSTRUCTIONS OF GB RADIO (AUSTRALIA) PTY LTD.

   -  WORLDAUDIO ACKNOWLEDGES THAT PROGRAMME SUPPLY AGREEMENTS REMAIN IN FORCE AFTER OPTION EXERCISED.

   -  WORLDAUDIO ACKNOWLEDGES THAT GB RADIO (AUSTRALIA) PTY LTD WILL INSTRUCT THE COMPANY TO EXERCISE THE SYDNEY LICENCE OPTION BEFORE 31ST DECEMBER 2002 AND THE MELBOURNE LICENCE BEFORE 30TH JUNE 2003”.

1. Thompson signed that handwritten note.

2. Thompson said that he gave the handwritten document to Thomas, together with some WCPL letterhead, so that Thomas could have it typed.  He says that Thomas then said that the letter should be dated 3 April, because it was after close of business, and because “we don’t want to confuse this side letter with the agreement we have just made”, to which Thompson agreed.

3. Thompson said that Thomas took the draft away, and returned with a typewritten letter that Thompson read quickly, signed and returned to Thomas.  He says that he assumed that it was in the same form as the handwritten document and did not check it.  Specifically, he said that he did not notice that:

   31.1In the fourth paragraph (the last paragraph of the draft and the penultimate paragraph of the signed letter) the word “will” had been changed to “may”; or

   31.2That the last paragraph of the signed letter had been added.

   Thompson denied that he wrote the word “to” in the last paragraph of the letter between “additional” and “agreement”.

4. Neither Thomas nor Liberatore gave evidence.  I am satisfied that no adverse inference should be drawn against GBRA, on the principles set out in Jones v Dunkel (1959) 101 CLR 298, for not calling either of those gentlemen. As to Thomas: the plaintiffs, in their outline of opening submissions, had submitted that Thomas “was consciously and deliberately a party to converting the call option to a put option; concealing this from ASIC, the first plaintiff and the investing public; and then allowing ASIC, the first plaintiff and the investing public to believe that the statements in the prospectus remained true”. It was further submitted that “Mr Thomas is falsely setting up his own alleged fraud as a [reason] for denying the plaintiffs’ claim. Accordingly, it was submitted, “it will need to be made clear whether [Thomas] claimed privilege against self-incrimination”. Not surprisingly, Thomas did so. Because of uncertainties as to the operation of s 128 of the Evidence Act 1995 (NSW), where the alleged incriminating conduct might have occurred in a State (namely, Victoria) that has not adopted legislation equivalent to the Evidence Act, Thomas took the step for which s 128(2)(a) applies, rather than giving evidence and taking a certificate under s 128.

5. As to Liberatore:  it was shown that GBRA had made complaints of misconduct or unsatisfactory conduct against MMR to the Legal Profession Tribunal of Victoria.  Those complaints, as particularised, appear to relate to the dispute between GBRA and Marchant.  It is unnecessary to go into the detail of them because, in my view, the existence of those complaints means that one cannot rationally regard MMR in general, or Liberatore in particular, as being a witness whom one would have expected GBRA to call.

6. Neither party suggested that Liberatore, if called under subpoena, would do anything other than tell the truth to the best of his ability.  It follows, in my opinion, that it was open to either party to call him.  However, the circumstance of the complaint is, in my view, sufficient to rebut the view that might otherwise have prevailed, namely that GBRA should have called him. 

7. The plaintiffs submitted that I should accept the evidence of Thompson; GBRA submitted that I should not.  It is correct to say, as was submitted for GBRA, that there were a number of unsatisfactory features in the cross-examination of Thompson.  In particular:

   35.1He denied in cross-examination that, prior to 30 May 2002, he had from time to time given instructions on behalf of the two plaintiffs to BDW, although in his first statement he had said (para 24) that he gave some instructions to Kriewaldt (who, he said, inconsistent with his cross-examination, was the legal representative of both plaintiffs for the purposes of the negotiation with GBRA) in the course of the telephone conversation referred to in para [25] above.  When confronted with this, his evidence was evasive and unsatisfactory;

   35.2He refused to accept that the letter of 3 April was “properly to be seen as part of the legal arrangements negotiated on 2 April”, although this was asserted in the outline of the plaintiffs’ opening submissions that he had read, and that he had not requested to be corrected; and

   35.3He asserted repeatedly that the 3 April letter was a “comfort letter”, although on a number of occasions, both in public utterances (to the Australian Stock Exchange) (“ASX”) and in correspondence between BDW and Gadens, the plaintiffs had accepted that the letter formed part of, supplemented or amended the 2 April agreement (the precise form of words changed from time to time), or was one of the documents evidencing that agreement.

8. On balance, however, I have concluded that I should accept the core of Thompson’s evidence as it deals with the events of 2 April 2002.  The account that he gave in chief was substantially unshaken in cross-examination.  Although the matters referred to in the preceding paragraph indicate that Thompson was a less than convincing witness in some respects, they do not, to my mind, indicate that his evidence should be rejected in its entirety. 

9. It was put to Thompson that his account of the sequence of events on 2 April 2002 was unrealistic because, in effect, it involved GBRA giving the plaintiffs what they wanted before it had any assurance whatsoever that the plaintiffs would give it what it wanted in return (i.e., the ability to access the option price earlier rather than later).  However, it is important to note that the 2 April agreement did give a valuable right to GBRA, quite apart from the prospect of receipt of the exercise price of the options.  It gave GBRA the right to be paid $650,000 in advance for the supply of programme material over the ensuing period of about 9 years (para 4 of the 2 April offer).  In the absence of any evidence from GBRA on the point, it seems to me that I should regard this as a sufficient basis for rejecting the “commercially unrealistic” point that was put against Thompson.

10. Further, in my view, the objective probabilities favour acceptance of the core of Thompson’s account.  IMM had issued a prospectus to raise $6.5 million.  The prospectus was under challenge from ASIC, as a result of the complaint made by  GBRA.  The substance of the complaint, and therefore of ASIC’s concern, was that the prospectus was misleading, because it overstated WCPL’s entitlement to the Melbourne and Sydney licences.  It was obvious, as at 2 April 2002, that if WCPL could reach an agreement with GBRA that effectively mirrored the Marchant Use Agreement then, whichever of Marchant and GBRA succeeded in the Victorian proceedings, WCPL’s position, and therefore IMM’s position, would be secure.  It was also obvious that if GBRA withdrew its complaint, and ASIC was satisfied that the prospectus was (or had been made) materially accurate, and not materially misleading, then the capital raising could proceed.  From the plaintiffs’ perspective, an agreement of the kind embodied in the 2 April agreement was necessary if ASIC’s concerns were to be alleviated.  The core promise in the 2 April agreement, from the plaintiffs’ perspective, was the grant of the call options over the Melbourne and Sydney licences, coupled with the right to use (pursuant to the “lease” thereof) those licences until the options were exercised. 

11. In my view, it is less rather than more likely that Thompson would have put at risk the ultimate goal – to alleviate ASIC’s suspicions and have the capital raising proceed – by compromising the 2 April agreement in the way that, GBRA suggested, he did.  In my view, it is more rather than less likely that Thompson, as he said he did, would have put off negotiation on the “assurances” sought by Thomas until an agreement in terms of the 2 April offer was secured and documented.

12. It was not put to Thompson that he had engaged in what was, in effect, a plan to mislead ASIC and the investing public.  It was not put to him that, at the time it was purportedly made, the 2 April agreement was a sham, or that its key element had been subverted (as GBRA now says is the case) by the terms of the 3 April letter.  It must have been the case that Thompson would have appreciated that his conduct, if it occurred in the sequence that was put to him on behalf of GBRA, had the consequences just described.  It does not seem to me that a person in his position, who is clearly an intelligent, astute and experienced businessman, could have acted in the way that GBRA submitted he did without appreciating those consequences.  The failure to put those consequences to him in terms fortifies my acceptance of what I have called the core of his evidence as to the events of 2 April 2002.

Events after 2 April 2002

1. The relevant evidence of events after 2 April 2002 is substantially documentary and, to that extent (although not as to its consequences) uncontentious.    

2. In April 2002, IMM issued a supplementary prospectus dated 26 April 2002.  Apart from recording that the offer made under the original prospectus had closed fully subscribed on 2 April 2002, that document (among other things) supplemented section 8.9 of the original prospectus (see para [12] above).  Relevantly, it referred to the dispute between GBRA and Marchant and stated:

   “Pursuant to discussions with [GBRA] and its principals, an enforceable agreement was reached between [GBRA] and [WCPL] under which, should [GBRA] be successful in the proceedings before the Administrative Appeals Tribunal and become the registered owner of one or more of the Licences, [GBRA] will grant to [WCPL] a lease and option agreement in relation to those Licences on the same terms granted by Mr Marchant ...”.

3. On 21 May 2002, BDW sent to Gadens “first drafts” of a Programming Supply Agreement and a Use Agreement.  The draft Programming Supply Agreement was intended to implement para 4 of the 2 April offer.  The draft Use Agreement was intended to implement para 2.  Clause 9 of the draft provided as follows:

   “9.          OPTION

   9.1In consideration of the terms of this Agreement, GB Radio hereby grants to WorldAudio the option to take a transfer of the Licences (“Option”) and upon exercise by WorldAudio of the Option GB Radio shall forthwith apply in writing to the Australian Communications Authority in accordance with Division 8 of the Radiocommunications Act 1992 for the Licences to be transferred to WorldAudio or its nominee (in a form in all respects satisfactory to effect a transfer of the Licences under the provision of the Radiocommunications Act 1992) (“Transfer Request”)

   9.2The Option may be exercised by notice in writing by WorldAudio to GB Radio at any time during the Term.

   9.3          The exercise price for the Option is $200,000.00.

   9.4The exercise price will be payable upon receipt of a Transfer Request in respect of each of the Licences.

   9.5The exercise price shall be paid into the trust account of solicitors nominated by GB Radio to be held and not released to GB Radio until the Australian Communications Authority approves the Transfer Request and WorldAudio (or its Nominee) is recorded by the Australian Communications Authority as the registered holder of the Licences.

   9.6WorldAudio may nominate any other person to take the benefit of this (clause 9) (“Option Nominee”) and if WorldAudio makes such a nomination GB Radio will do all things necessary, beneficial or incidental to give effect to this Agreement as if the Option Nominee was Henry and to ensure that the Option Nominee takes the transfer of the Licences and becomes the registered holder of the Licences”.

4. The draft Programming Supply Agreement included parties – namely, GB Radio Ltd (a company incorporated in the United Kingdom and either a related or the holding company of GBRA) and Alan Thomas, Roger Thomas and Kerry Grills (all of whom were associated with GBRA) as parties.  None of them had been parties to, or named in, the 2 April agreement.

5. On 22 May 2002, BDW wrote to Gadens.  They stated, among other things, that the plaintiffs “remain committed to the terms of the letter of 2 April 2002 in their import, subject to resolution of the necessary technical and practical requirements necessary to ensure that high standards of commercial broadcasting are consistently made available ...”.  They stated further that the plaintiffs would “negotiate promptly and in good faith with your client the terms of the Programming Supply Agreement and Use Agreement required to more formally document the agreement of 2 April 2002 and will seek, subject to your clients [sic] also negotiating promptly and in good faith with them, to finalise that documentation by 4 June 2002”.  BDW also stated that the actual supply of programming would depend on establishment of the WorldAudio Network Operations Centre and the rollout of licences in accordance with WorldAudio’s business plan.  These matters, BDW said, demonstrated “the clear and unwavering intention of our clients to adhere to the intent of the agreement set out in the letter of 2 April 2002”. 

6. On 24 May 2002 Gadens commented on the draft agreements submitted on 21 May.  They stated that what was supplied “is simply inconsistent” with the 2 April letter and the 3 April letter.  They stated further that “[e]ven were it agreed that there are currently practical and operational reasons why it is not possible for the programming supply arrangements to have immediate effect”, GBRA had concluded “that the agreements which your client have in mind ... are, at once, different from the agreements reasonably contemplated by [GBRA] and not consistent with the letter agreement [i.e. the agreement constituted, as they contended, by the 2 April and 3 April letters]”.             

7. A number of specific complaints were made.  There were, in my view, two complaints that might be described as being of substance rather than of a drafting nature or as obvious mistakes (including the statement of the amount payable on exercise of each option as $200,000, rather than $500,000).  One was that the Programming Supply Agreement did not mention the Use Agreement (a matter that could have been tidied up in drafting), but incorporated parties “which were not parties to the letter agreement”.  Another was that the option contained in cl 9 of the Use Agreement “seems to totally ignore the letter written by Andrew Thompson of your clients to our client on 2 April (the letter is in fact dated 3 April). ...”.

8. Gadens further asserted that “it is clear that the agreements between our respective clients, upon which the investors will rely, will not be entered into”.  They concluded, not only that the plaintiffs were in breach of the letter agreement but that, alternatively, the plaintiffs had repudiated that agreement.  They stated that GBRA accepted that repudiation so that “[i]t follows that there is no enforceable agreement between our respective clients ...”.

9. On 27 May 2002, BDW responded.  Relevantly, they said that the complaints made by Gadens were either “matters arising as errors caused by the haste with which the document was [sic] produced and in most cases are matters where the draftsman takes responsibility and acknowledges those mistakes”, or “issues that appear to our clients to be capable of resolution by ordinary commercial negotiations ...”.  BDW stated that “Our clients are ready, willing and able to negotiate with your client on all the matters raised in your facsimile to ensure that the arrangements between your client and our clients are consistent with the letter of 2 April 2002 (as that may have been amended)”.

10. Also on 27 May 2002, Gadens complained to BDW that the plaintiffs “have chosen to disclose the terms of the Programming Supply Agreement ... in clear breach of their obligations of confidentiality to our client”.  That was said to be “a further breach of the letter agreement and a further act of repudiation of the letter agreement”.  BDW replied on 29 May 2002 rejecting those propositions. 

11. On 30 May 2002, Gadens wrote to BDW asserting once more that there had been an accepted repudiation.  That letter also purported to set out the basis on which the consideration of $650,000, referred to in para 4 of the 2 April offer, had been calculated.  It was said to be “a pro-rata application of the $3,000 per week rate spread over the period of the lease”.  The figure of $3,000 was said to have been chosen by reference to “a sub-lease of the Sydney licence ... in February 2000 for $3,000 per week”. 

12. There was further correspondence between BDW and Gadens as a result of which, on 11 June 2002, BDW wrote to Gadens confirming that their client elected to affirm the agreement as “that contained in the letter of 2 April 2002 as supplemented by the letter of 3 April 2002”.

13. On 20 June 2002, IMM wrote to ASX confirming that “[WCPL] has agreed with [GBRA] that [GBRA] may instruct [WCPL] to exercise the Sydney licence option before 31 December 2002, and the Melbourne licence option before 30 June 2003”.  That letter was signed by Mr Peter Solomon, the Chairman of the Board of IMM, but was sent with the prior knowledge of Thompson.

14. On 5 July 2002, Gadens wrote to BDW.  That letter is relied upon by the plaintiffs as an affirmation of the 2 April agreement (if, which the plaintiffs denied, they were in breach or had repudiated; and, of course, if there had been no effective termination either for repudiation or for breach).  Relevantly, that letter stated as follows:

    “I refer to our correspondence in May and June concluding with your letter of 11 June 2002.

    Whilst my clients remain of the view that your client has repudiated the agreement made between them and rejects that it has repudiated the agreement as put in your letter of 7 June, I note that your client elects to affirm the agreement and hold my clients to it.

    In view of the fact that your client has affirmed the agreement and wishes to hold my clients to it, I forward the application for shares in your client contemplated by clause 5 of that part of the agreement made between our clients as documented in the letter written by you and dated 2 April 2002.  Will you please arrange for your client to either:

    .              pay to my client the sum of $650,000; or

    .issue to my client shares in your client to the value of $300,000 and pay to my client the sum of $350,000;

    in either case within 8 business days of receipt of the enclosed application as required by clause 4 of the agreement.

    My clients will regard your client’s failure to comply with clause 5 as a breach of the agreement by your client.”

15. On 5 July 2002, BDW wrote to Gadens, seeking “a suitable time to finalise the formal documentation of the agreement” between our clients of 2 April 2002 (as amended by the letter of 3 April 2002).

16. On 9 July 2002, Gadens wrote to BDW stating that the plaintiffs’ obligation to pay the sum of $650,000 under para 4 of the 2 April letter “was not contingent ... on the execution of the formal agreements ...”.  The letter called on the plaintiffs to honour that obligation and to confirm “that the agreement of [2] and [3] April exists ...”.

17. On 12 July 2002, BDW sent revised versions of the Programming Supply Agreement and Use Agreement to Gadens.  Clause 8 of the draft Use Agreement provided as follows:

    “8.         OPTION

    8.1In consideration of the terms of this Agreement, GB Radio hereby grants to WorldAudio the option to take a transfer of the Licences (“Option”) and upon exercise by WorldAudio of the Option GB Radio shall forthwith apply in writing to the Australian Communications Authority in accordance with Division 8 of the Radiocommunications Act 1992 for the Licences to be transferred to WorldAudio (in a form in all respects satisfactory to effect a transfer of the Licences under the provisions of the Radiocommunications Act 1992) (“Transfer Request”)

    8.2The Option may be exercised by notice in writing by WorldAudio to GB Radio at any time during the Term.

    8.3The exercise price for the Option is $500,000.00 for each of the Licences.

    8.4The exercise price will be payable upon receipt of a Transfer request in respect of each of the Licences.

    8.5The exercise price shall be paid into the trust account of solicitors nominated by GB Radio to be held and not released to GB Radio until the Australian Communications Authority approves the Transfer Request and WorldAudio (or its Nominee) is recorded by the Australian Communications Authority as the registered holder of the Licences before the end of the Term”.

1. The draft Programming Supply Agreement continued to show GB Radio Ltd, Alan and Roger Thomas and Grills as parties.

2. On 15 July 2002, Gadens wrote to BDW reiterating their view that the plaintiffs were presently obliged to pay, one way or the other, the sum of $650,000 called for by para 4 of the 2 April offer.  It appears that BDW responded orally that the plaintiffs would not do so until a formal Programming Supply Agreement was entered into as specified in para 4.  Gadens asserted that WCPL was obliged to enter into a Programming Supply Agreement “strictly in accordance with the provisions of” para 4 of the 2 April agreement.   Likewise, it was asserted that the parties were obliged to enter into a lease “prepared strictly in accordance with” the 2 April agreement.

3. On 18 July 2002, BDW responded.  They disputed the construction of para 4 of the 2 April agreement put forward by Gadens and maintained that WCPL was ready, willing and able to pay or provide the consideration of $650,000 in accordance with para 4 of the 2 April agreement once a formal Programming Supply Agreement had been entered into.  The letter recognised that what it called “the 2 April letter” had been “amended”.  Further, it attached further revised versions of the draft Programming Supply Agreement and the draft Use Agreement.  As to the latter:  GB Radio Ltd, Alan and Roger Thomas and Grills were still shown as parties.  As to the former:  cl 8 provided as follows:

   “8.          OPTION

   8.1In consideration of the terms of this Agreement, GB Radio hereby grants to WorldAudio the option to take a transfer of each of the Licences (the option in relation to the Sydney Licence being the “Sydney Option”, the option in relation to the Melbourne Licence being the “Melbourne Option”, and each of them being an “Option”) and upon exercise by WorldAudio of an Option GB Radio shall forthwith execute an application in writing to the Australian Communications Authority in accordance with Division 8 of the Radiocommunications Act 1992 for the applicable Licence to be transferred to WorldAudio (in a form in all respects satisfactory to effect a transfer of that Licence under the provisions of the Radiocommunications Act 1992) (“Transfer Request”) and give the Transfer Request to WorldAudio for execution by it.

   8.2Each Option may be exercised by notice in writing by WorldAudio to GB Radio at any time during the Term.  The Options may be exercised separately.

   8.3(a)          Until 31 December 2002 WorldAudio may only exercise the Sydney Option with the consent of GB Radio (such consent not to be unreasonably withheld or delayed).

   (b)          Until 30 June 2003 WorldAudio may only exercise the Melbourne Option with the consent of GB Radio (such consent not to be unreasonably withheld or delayed).

   8.4The exercise price for each Option in respect of each Licence is $500,000.00.  Upon payment of the exercise price for a Licence, no further amounts are payable by WorldAudio as consideration for the transfer of that Licence.

   8.5The exercise price will be payable in respect of a Licence upon receipt by WorldAudio of a Transfer Request in respect of that Licence.

   8.6The exercise price in respect of a Licence shall be paid into the trust account of solicitors nominated by GB Radio to be held and not released to GB Radio until the ACA approves the Transfer Request in respect of that Licence and WorldAudio is recorded by the ACA as the registered holder of that Licence before the end of the Term.

   8.7Where WorldAudio has exercised an Option and receives a Transfer Request in respect of the relevant Licence executed by GB Radio, it must forthwith execute the Transfer Request and submit it to the ACA for recording of the transfer of that Licence”.

4. Gadens responded on 24 July 2002.  They commented that they had had “little time” to consider the redrafts.  However, they had been able (so they said) to ascertain that the drafts were inconsistent with the 2 April agreement.  The particular complaint made was that draft cl 8 did not reflect what they asserted was the right of GBRA:  namely, to ensure “that the control of the exercise of the option would always remain in [its] hands”. 

5. Gadens further asserted:

   “My clients have given your clients every opportunity to submit Agreements which are consistent with the letters of 2 and 3 April 2002.

   It follows that our clients regard the submission of these latest draft Agreements as a further act of repudiation of the agreements of 2 and 3 April by your clients or, alternatively, a breach of those agreements by your clients.

   Your clients have also failed or refused to pay to my clients the sum of $650,000 or to issue to them shares in World Audio Limited to the value of $300,000 and to pay the sum of $350,000 to them and, in view of your clients’ repudiation or breach of the agreements in place between our clients, our clients withdraw their application for shares in your clients and/or shares in your clients and money to make up the balance, as documented in our letter of 5 July 2002 to Jeremy Kriewaldt and the Application enclosed therewith.

   This letter should not conclude without some mention of our clients’ concerns for the shareholders in World Audio Ltd, both current and prospective, in view of the fact that there is clearly no agreement in place between our respective clients such as that alleged to be in place in the letter written by Mr P J Solomon, the Chairman of Directors of World Audio Ltd, to Mr Andrew Black of the Australian Stock Exchange Ltd on 20 June 2002.  That letter is seriously at odds with the true position in the following respects:

   ...”

6. Gadens concluded:

   “In the circumstances, which are that there is no agreement in place between our respective clients, which is binding upon them or, if there is, your clients are in breach of that agreement, my clients see it as their responsibility to advise the Australian Securities and Investments Commission and the Australian Stock Exchange accordingly.”

7. On 25 July 2002 BDW responded.  They continued to assert their client’s entitlements under what they referred to as “the letter agreement of 2 April 2002 (as amended by the letter of 3 April 2002)”.  They concluded that experience had shown that “the most useful course would be to meet to formalise the formal documentation and deal with all issues at once”.

8. At this point, I note that there is no suggestion that GBRA or Gadens had, prior to the institution of these proceedings, submitted any draft Programming Supply Agreement or Use Agreement to BDW or the plaintiffs.  Nor, on the evidence, had they acceded to the repeated requests by the plaintiffs (through BDW) to meet and resolve outstanding issues in relation to the “formal documentation”.  It is correct to say that, through its amended cross-claim (filed in Court on 15 September 2003), GBRA had propounded a draft Programming Supply Agreement.  On the evidence, that is the only occasion on which GBRA or Gadens undertook the task of drafting, as opposed to criticising, the formal documentation that was thought to be either necessary or desirable to implement the 2 April agreement.  I shall deal with the terms of that draft Programming Supply Agreement, and the criticisms that the plaintiffs make of it, when I deal with the issues raised by GBRA’s cross-claim.

9. On 24 September 2002, Downes J, sitting as President of the Administrative Appeals Tribunal, held, in proceedings between GBRA and ACA in which Marchant was joined as a party, that the Melbourne and Sydney licences (among others) should be issued in the name of GBRA as from 18 November 1998.  It was further ordered that the register of licences be corrected to show GBRA as holder of each of the licences as from 18 November 1988.  It is common ground that the formal change to the register occurred on 15 May 2003.

10. The last relevant matter of fact to note is that on 20 May 2003, WCPL wrote to GBRA and exercised what it said was its option to purchase the Sydney licence.  GBRA does not submit that the notice of exercise of option was formally deficient.  

The Radiocommunications Act and the Determination

1. It is not necessary to look in detail at the licensing provisions of the Radiocommunications Act. However, it should be noted that s 114 authorises a licensee to authorise third party users “by written instrument ... to operate radiocommunications devices under the licence”.

2. Section 115 provides, relevantly, as follows:

   “115      Determinations limiting authorisation of third party users

   The ACA may, by written instrument, determine:

   (a)categories of apparatus licences in respect of which licensees must not authorise other persons to operate radiocommunications devices; or

   (b)classes of persons who must not be so authorised; or

   (c)circumstances in which persons must not be so authorised

   ...”.

3. At all material times, there was in force a Determination that purported to have been made under s 115(1) of the Radiocommunications Act. That Determination was known as the “Radiocommunications (Limitation of Authorisation of Third Party Users) Determination 2000”. By cl 6, it provided:

   “6.          Revocation of Authorisation

   (1)A licensee of an apparatus licence must not authorise another person to operate radiocommunication devices under the licence unless the authorisation is given in such a way that:

   (a)          it is revocable at will; and

   (b)          its revocation

   (i)will be final and conclusive as against the person so authorised; and

   (ii)will not be capable of being challenged, appealed against, reviewed, quashed or called into question by any court; an

   (iii)will not be subject to prohibition, mandamus, injunction or an order for specific performance in any court;

   at the suit of the person authorised to operate the device, on account of any contract, agreement, arrangement or other understanding entered into between that person and the licensee whether or not incorporating the authorisation.

   (2)For the avoidance of doubt, nothing in this Determination prevents a licensee from entering into a contract, agreement, arrangement or other understanding, that would give rise to an action for damages against the licensee if the licensee were to revoke an authorisation to operate radiocommunications devices”.

4. It was not submitted before me that the terms of the Determination exceeded the authority given by s 115(1) of the Radiocommunications Act, nor was it submitted that, for any other reason, the Determination was not valid and binding according to its terms at any time material to the issues in these proceedings.  

The issues

1. The issues that the parties propounded for determination may be formulated as follows.

2. The plaintiffs submitted that:

   73.1A binding contract was constituted on 2 April 2002 when MMR, on behalf of GBRA, accepted the 2 April offer;

   73.2There was an intention immediately to enter into legal relations, so that the contract formed by virtue of the offer and acceptance fell within either the first or the second of the classes described in Masters v Cameron (1954) 91 CLR 353, 360;

   73.3The condition set out in para 3 of the 2 April offer had been satisfied either on 24 September 2002 (when Downes J, sitting in the Administrative Appeals Tribunal, ordered ACA to rectify its register to show GBRA as licence holder from 18 November 1998) or, at the latest, on 15 May 2003 (when ACA so rectified its register of licences);

   73.4GBRA had refused to perform its obligations under the contract;

   73.5GBRA now conceded that damages were not an adequate remedy (and, in any event, this was shown by the evidence of Thompson); and

   73.6Accordingly, it was an appropriate case for declaratory relief, as to the existence of the contract, and a decree for specific performance.

3. GBRA submitted that:

   74.1There was no concluded, or enforceable, contract because the terms set out in para 4 of the 2 April offer were too incomplete for enforcement and were not severable from the remainder of the alleged contract;

   74.2Alternatively, if there were a concluded or enforceable contract, it was not on the terms alleged by the plaintiffs, but was constituted by the two letters dated 2 April 2002 and the 3 April letter;

   74.3The form of “Use Agreement”, of which the plaintiffs seek specific performance, does not incorporate, in relation to the options, the terms of the 3 April letter and accordingly the plaintiffs are not entitled to the relief that they seek in respect of that User Agreement or in respect of the options;

   74.4The plaintiffs repudiated the contract by proffering, in respect of para 4 of the 2 April offer, draft documents that were inconsistent with the terms of the contract;    

   74.5GBRA accepted that repudiation and terminated the contract: letter of 24 May 2002 from Gadens to BDW;

   74.6Alternatively, after 24 May 2002, the plaintiffs further repudiated the contract by submitting further draft documents that were inconsistent with it;

   74.7Alternatively, the plaintiffs breached the contract by failing to pay GBRA the consideration for which paras 4 and 5 of the 2 April offer provided;

   74.8GBRA accepted the further repudiation and terminated the contract, or alternatively terminated it for breach: letter 24 July 2002 from Gadens to BDW;

   74.9Alternatively, the requirement under cl 4 of the 2 April offer to enter a Programming Supply Agreement was a condition precedent to any obligation on the part of GBRA to grant a lease of the licences;

   74.10No such Programming Supply Agreement has been entered into;

   74.11Accordingly, the plaintiffs are not entitled to the relief that they seek, either in relation to the User Agreement, or in relation to the options;

   74.12Further, if there is an enforceable contract, it provides that the options are exercisable only on the instruction of GBRA (relying on the 3 April letter), which instruction has not been given;

   74.13Further, the Court should not grant declaratory relief framed in the hypothetical terms of Prayer 4 of the Further Amended Summons, and should not grant relief in some different terms unless the plaintiffs further amend their summons;

   74.14There is, in the Victorian proceedings, a live issue as to who is “the beneficial owner of the licences”;

   74.15GBRA sought to join Marchant in these proceedings; the plaintiffs successfully resisted that application;

   74.16Accordingly, the Court should not grant specific performance whilst the Victorian proceedings are current and have not been determined;

   74.17Further, the Court should order the plaintiffs specifically to perform the obligation set out in para 4 of the 2 April offer by entering into a Programming Supply Agreement (in the terms of a draft propounded by GBRA and tendered as Ex DX06); and by paying GBRA the sum of $650,000 (this issue was raised both as a defence to the plaintiffs’ claim for specific performance and as an affirmative case by way of cross-claim); and

   74.18Finally, GBRA said that the plaintiffs’ conduct was contrary to representations evidenced by the 3 April letter, so giving rise to estoppels binding against the plaintiffs, or alternatively giving GBRA entitlements to relief under ss 87 and 82 of the Trade Practices Act 1974 (Cth).

4. The plaintiffs submitted in reply that if they had breached or repudiated the 2 April agreement prior to 5 July 2002, and if GBRA had not terminated the 2 April agreement prior to that date, then GBRA, by Gaden’s letter of that date, and (or) by Gaden’s letter of 9 July 2002, had affirmed the 2 April agreement.

5. There were further issues between the parties as to the proper construction of the 2 April agreement (assuming, of course, that it amounted to a binding contract).  Those issues related both to the proper construction of the 2 April offer and, on the assumption that the 3 April letter formed part of the 2 April agreement, to the resolution of what might be thought to be some tension between the terms of that letter and the terms of the 2 April offer.

6. In essence, GBRA submitted (on the assumption that there was a binding contract) that the terms of the 2 April agreement included the 3 April letter, and that the 3 April letter should be read according to its terms.  The result, according to GBRA, was that WCPL could not exercise the options unless and until it was so instructed by GBRA.

7. The plaintiffs submitted that the 3 April letter should not be read so as, in effect, to take away the right of WCPL to exercise the options at a time of its choosing:  at least (in the case of the Sydney licence) after 31 December 2002 and (in the case of the Melbourne licence) after 30 June 2003, and assuming that no instruction to exercise had been given prior to those dates.  In essence, the plaintiffs submitted that the 3 April letter should not be read so as to convert the call options for which, on any view, the 2 April offer provided to put options.    

Was a concluded, or enforceable, contract made on 2 April 2002?

1. The plaintiffs submit that the parties’ actions on 2 April 2002 have all the indicia of a legally binding contract.  There was an offer made and an acceptance, in the prescribed mode, of that offer.  There was consideration given:  namely, the mutual promises of the parties.  It is clear that, after 2 April 2002, the parties believed that they had entered into legal relations on that day, and it is clear that they believed that they had done so, on the terms of the 2 April offer, the 2 April acceptance and the 3 April letter.  The proposition that no enforceable contract was concluded on that day, does not seem to have occurred to anyone until after the institution of these proceedings. 

2. The basis of the submission for GBRA that the parties did not, on 2 April 2002, conclude an enforceable contract is said to be found in the terms of para 4 of the 2 April offer.  However, GBRA did not submit that the uncertainty arose because of the description of the subject matter of the proposed Programming Supply Agreement as being “British lifestyle programming materials sourced in the United Kingdom”.  Neither party submitted to me that this expression was too uncertain to be enforceable.  I see no reason to conduct an enquiry that the parties, as commercial people experienced in the relevant industry, did not suggest was relevant.

3. Rather, GBRA submits, para 4 is uncertain because it proposed that there would be brought into existence something described as a Programming Supply Agreement, but specified neither the terms that this agreement was to contain, nor any objective standard by which those terms could be ascertained.  Further, it was submitted that, having regard to the subject matter of para 4, one would expect that there would be important matters of substance, and not merely form, to be specified in the Programming Supply Agreement that was agreed to be made.  In this regard, GBRA pointed in submissions to the relative complexity of the draft Programming Supply Agreements prepared by BDW and submitted to Gadens in (purported) performance, or in an attempt to initiate performance, of para 4 of the 2 April offer.

4. The parties in their submissions referred to the well known formulation of Dixon CJ and McTiernan and Kitto JJ in Masters at 360:

   “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 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”.

1. In addition, as McLelland J pointed out in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd & Ors (1986) 40 NSWLR 622, 628, there is a fourth class of case, additional to those three, that was recognised by Knox CJ and Rich and Dixon JJ in Sinclair, Scott and Co v Naughton (1929) 43 CLR 310, 317. Their Honours described this (fourth) case as:

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

2. As McHugh JA stated in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 635:

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

3. In the present case, there can be no doubt, both from the terms of the documentation, and from the events of and leading up to 2 April 2002 (in so far as those events were known to all parties), that the parties intended to enter into a legally binding contract on 2 April 2002.  This, as I have already said, is confirmed by what the parties said and did thereafter:  each party conducted itself on the basis that there was a legally binding contract between them, one of the terms of which required a further agreement to be brought into existence. 

4. The question is, therefore, whether that objective intention, and what the parties believed to be its consequence, has been subverted by the language of para 4 of the 2 April offer.  In considering this question, it is important to bear in mind the approach taken by Barwick CJ in Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1967) 118 CLR 429, 433, in searching for the intention of the parties:

   “No narrow or pedantic approach is warranted, particularly in the case of commercial arrangements”. 

5. The approach commended by Barwick CJ was not novel, as indeed his Honour recognised by referring to the decision of the House of Lords in Hillas & Co v Arcos [1932] 147 LT 503, [1932] All ER 494, where Lord Tomlin said at 512, 499, that the courts should seek to construe agreements so that “without violation of essential principle, the dealings of men may as far as possible be treated as effective, and ... the law may not incur the reproach of being the destroyer of bargains”.

6. In Meehan v Jones (1982) 149 CLR 571, Mason J, at 589, referred to “the traditional doctrine that courts should be astute to adopt a construction which will preserve the validity of the contract”. Further, his Honour characterised the conclusion, that a provision is “void for uncertainty” as being “a draconian solution – one which is best calculated to frustrate the intentions of the parties”. Although that was said in the context of a “subject to finance” clause, it is, in my opinion, equally applicable in the present case.

7. Where (as in my opinion is the case here) it is clear that parties regard themselves as having reached a concluded and binding contract, then a court should strive to find a means of giving effect to the contract notwithstanding that there may have been terms left to be agreed at a later time: Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433, 446. Where, however, something that is essential (whether regarded as such by the parties, or found to be such by the court) has not been agreed upon, and cannot be determined by the court by recourse to some agreed or contemplated mechanism, formula or standard, then the court may not be able to fill the gap: ibid at 447. However, it is important to understand why that is so: as Kirby P put it in Coalcliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 20, the courts “cannot enforce such agreements [i.e. to agree] because they are incapable of judging where the negotiation on particular points would have taken the parties, acting bona fide but legitimately in their own interests”.

8. GBRA submitted that para 4 was framed in terms of future obligation rather than present agreement: “The parties will enter a Programming Supply Agreement”.  That is neither strictly correct, nor to the point.  There is a presently binding obligation, although performance of it will necessarily occur in the future.  In any event, the real question is whether the obligation to enter into an agreement is too uncertain to be enforceable.  

9. When one looks at para 4 it specifies:

   91.1the parties to the Programming Supply Agreement:  WCPL and GBRA;

   91.2the subject matter of that agreement:  British lifestyle programming material sourced in the United Kingdom;

   91.3the price to be paid for that subject matter:  $650,000 (payable, by reference to cl 5, either wholly in cash or partly in shares and partly in cash); and

   91.4the obligations of each of the parties in respect of that subject matter:  GBRA’s obligation to supply it and WCPL’s obligation to broadcast it in the stipulated manner. 

10. It was submitted for GBRA that the use of the words “under which” (i.e., under the Programming Supply Agreement) to introduce the obligations of the parties indicated that the material introduced thereby was not comprehensive.  That may be correct; but, of itself, it does not indicate that the obligation to enter a Programming Supply Agreement imposed by para 4 was of itself uncertain.  In my opinion, the position is analogous to that described by McHugh JA in GR Securities at 635, where his Honour (speaking in the context of the fourth, or Sinclair Scott & Co, category) said:

    “If the parties agreed on additional terms, they would be added to the formal contract.  If they did not, the formal contract would give effect only to the agreed terms and conditions of the correspondence”.

11. In the present case, it was open to the parties to negotiate a Programming Supply Agreement that went beyond what was specified in para 4 of the 2 April offer.  But if they did not, then the Programming Supply Agreement would simply express, in a separate document and perhaps in more formal language, the rights and obligations described in para 4.  It could be supplemented by such terms and obligations as the law might imply, or impose.

12. In the present case, GBRA has not pointed to any essential matter (in the sense explained above) that is not to be found within para 4 of the 2 April agreement.  Clearly, in negotiating and settling the terms of the Programming Supply Agreement that par 4 contemplated, the parties might, acting honestly and in good faith, have thought it desirable to make provision for a number of things (including, perhaps, more detailed specification of, or warranties as to, the lifestyle programming material that was to be supplied).  Further, and obviously, they would no doubt have included what are commonly referred to as “boilerplate” provisions.  However, it does not follow that there are essential provisions that are missing.  The weight of authority compels a conclusion that the Court should be slow to substitute its own judgment for what is essential, and what is not, for that of the parties. 

13. In essence, the case for GBRA must be that if the Programming Supply Agreement contained only the provisions set out in para 4 of the 2 April offer, then it would be uncertain and unenforceable.  That cannot be right where, as I have said in para [91] above, the elements of parties, price, property and obligation have been spelled out.  It might have been thought that the description of the subject matter as “British lifestyle programming material sourced in the United Kingdom” was insufficiently certain.  However, the parties have explicitly eschewed any such argument and, as I have said, I do not think that the Court should substitute its inexpert view for the considered view of parties, who clearly have substantial experience in the relevant field of commerce.

14. In my opinion, an agreement on the terms of para 4, whether or not supplemented by obligations imposed or implied by law, would be binding.  There is no material uncertainty as to any of the fundamental matters that are required so that the parties can perform their respective obligations.    Adopting the formulation of Kirby P in Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130, 135-136, I do not think that this approach requires the Court “to spell out ... that to which the parties themselves have failed to agree”, or that it holds the parties to “that which is irremediably obscure”, or that it involves the Court taking on “a discretion which the parties have, by their agreement, reserved to one or other of them”. Nor, adopting his Honour’s language from Coalcliff Collieries referred to above, does it involve the Court in “judging where the negotiation on particular points would have taken the parties ...”.

15. If, therefore, an agreement framed in terms of para 4 of the 2 April offer is not too uncertain to be enforceable, it must in my opinion follow that an agreement to enter into such an agreement is not too uncertain to be enforceable.  If the parties cannot agree on additional material then, as McHugh JA said in GR Securities, they will nonetheless be held to that which they have stipulated.

16. Further, the plaintiffs submitted that the parties were bound to act honestly and in good faith to negotiate the Programming Supply Agreement for which para 4 called.  In my opinion, this submission is in principle correct.  Such an obligation may arise either on the proper construction of the contract, or upon the basis of implication in fact.  The former approach is exemplified by the speech of Lord Blackburn in Mackay v Dick (1881) 6 App Cas 251, 263, where his Lordship said that:

    “... where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.  What is the part of each must depend on [the] circumstances”.

17. Thereafter, it could be said that any distinction between construction and implication became somewhat blurred.  Thus, in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, Mason J at 607 referred to “an implied obligation on each party to do all that was necessary to secure performance of the contract”: basing himself on what Lord Blackburn had said in Mackay, and on the decision of Griffith CJ in Butt v M’Donald (1896) 7 QLJ 68, 70-71, where his Honour referred to “a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract”.

18. Mason J drew from those statements principles of the following:

    “It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract”.

19. In Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, Dawson and Toohey JJ, at 219, identified what Griffith CJ had said in Butt as a “rule of construction”.  In the same case, McHugh and Gummow JJ referred to what Mason J had said in Secured Income Real Estate as being “that each party to the contract agreed to do all that was necessary on its part to enable the other party to have the benefit of performance of the contract”, as leading to “an implied undertaking”. 

20. In Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187 the Court of Appeal talked of terms of good faith and reasonableness implied by law. A similar approach was reaffirmed by the High Court in Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126.The High Court, building on what was said in Secured Income Real Estate and in Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359, confirmed the existence of an obligation on a party who contracts to confer a benefit to do those things that are necessary on its part to enable the other party to have that benefit, and at the same time to desist from conduct that hinders or prevents the fulfilment of the purpose of the express promise made.

21. In the end, I do not think it matters whether the theoretical basis for the imposition of a duty to act honestly and in good faith is to be found by a process of construction, by a process of implication, or by some combination of those processes.  It is sufficient, in my view, to say that in the present case, where undoubtedly the obligation to enter into a Programming Supply Agreement was of fundamental importance, the parties were bound to act honestly and in good faith to achieve that result.  That would involve, at the very least, negotiating honestly and in good faith (and, if it be additional, reasonably) to seek to reach agreement on the terms of a Programming Supply Agreement, and for each party to do such things as were necessary on its part to enable the text of that agreement, conforming in all material respects to para 4 of the 2 April offer, to be settled.

22. This leaves for resolution the classification of the 2 April agreement according to the taxonomy established by Masters (as extended, by reference to Sinclair, Scott & Co, in Baulkham Hills Private Hospital).  This is an important question.  If the agreement falls into the first of the Masters classes, or into the fourth, Sinclair, Scott & Co class, then para 4 imposes immediately binding obligations on each of WCPL and GBRA, notwithstanding that the more formal agreement that is contemplated has not been brought into existence.  If, however, it falls into the second of the Masters classes, then the result is that performance of the para 4 obligations is conditional upon the execution of that more formal agreement.

23. In my opinion, the present case is within the second of the Masters classes.  The obligations under para 4 are each expressed in the future tense:  the parties “will enter into a Programming Supply Agreement”, under that agreement GBRA “will supply” the relevant material and WCL “will arrange for that material to be broadcast” in the specified way.  Further, in return, WCPL “will ... pay” the stipulated consideration and IMM “will procure” that WCPL does so.

24. The obligations to supply and broadcast material are expressed, as a matter of language, to be obligations that will arise “under” the Programming Supply Agreement that is to be entered into.  They are not expressed to be obligations that arise immediately, or “under” the 2 April agreement.

25. Further, in my opinion, the better construction of the final sub-paragraph of para 4 is that the obligations of WCPL and IMM in that paragraph arise “in return” for the agreement to supply programming material – that is to say, they arise in return for the agreement of GBRA that will come into existence under the Programming Supply Agreement that is to be entered into.

26. I do not see anything inconsistent, or commercially implausible, in the conclusion that, whilst the 2 April agreement was meant to have immediate binding effect, the operation of one of the terms thereof – namely, those imposed by para 4 – should be conditional upon the execution of a more formal agreement.

27. Firstly, it was clearly necessary, and objectively the parties must be taken to have intended, that the 2 April agreement would have immediate effect.  That was necessary to enable GBRA properly to withdraw its complaint to ASIC, and to enable ASIC properly to be satisfied that the prospectus was not misleading and did not require to be supplemented.  The grant of the leases of the licences, including the call options in relation to the licences, was conditional upon GBRA becoming the registered owner of the licences:  see para 3 of the 2 April offer.  It could hardly be thought that WCPL intended to take programming material from GBRA, and broadcast it and pay for it, unless GBRA were in a position to meet its obligation under cl 2 (i.e. to grant the leases including the call options).  In my opinion, this is so notwithstanding that WCPL was broadcasting under the Sydney licence at the time the 2 April agreement was made:  its ability to do so flowed from documentation entered into in early 2002 (to which GBRA was not a party) and did not, until GBRA became the registered owner of the licences, depend on the 2 April agreement.  There was therefore no need for the obligations arising under para 4 to commence to operate immediately upon the making of the 2 April agreement. 

28. Secondly, as I have sought to explain, the obligation to enter into a Programming Supply Agreement was both enforceable and one that both parties were bound to seek to achieve by acting honestly and in good faith.  If GBRA formed the view that WCPL was, in effect, “dragging the chain”, there were remedies available.  WCPL was not in a position whereby it could unilaterally and indefinitely put off the commencement of the Programming Supply Agreement and performance of its obligations thereunder.

29. One matter that may be thought to be of significance in the present case is the attitude of the parties, as communicated to each other, after 2 April 2002.  Subsequent communications and actions may be looked at to consider whether communications up to a particular point in time have given rise to a binding contract at that point of time:  see Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251, 9255, where McLelland J reviewed the authorities. Further, such communications may be used as admissions, against the parties making them, as to the existence or non existence of a contract: ibid at 9255-9256. See also the judgment of Gleeson CJ in Australian Broadcasting Corporation v XIVth Commonweaith Games Ltd (1988) 18 NSWLR 540, 550-551.

30. In the present case, the conduct of the parties after 2 April 2002 is consistent only with a belief on each side that a concluded and presently binding contract had been reached on that day.  If the present dispute were limited to the question of whether that had occurred, then in my view the subsequent acts of the parties would be conclusive of the proposition that it had.  However, where the question is not so much whether that had occurred, but whether what had been agreed was sufficiently certain to be legally binding (or was so uncertain as not to be legally binding), the subsequent conduct of the parties cannot be determinative.  It does however give point to the observations of Lord Tomlin in Hillas, and of Mason J in Meehan, to which I have referred.

31. I therefore conclude that, upon acceptance by GBRA of the plaintiffs’ offer made in the 2 April letter, there came into existence a legally binding and enforceable contract, notwithstanding that the contract included an obligation to enter into a further contract.

32. I further conclude that the case is within the second of the Masters classes, so that performance of the obligations to which para 4 of the 2 April offer refers was conditional upon entry into a Programming Supply Agreement, as required by that paragraph.

What documents constitute the 2 April agreement?

1. GBRA submitted that, if there were a contract, it was constituted, not just by the 2 April offer and the 2 April acceptance, but also by the 3 April letter.  In this context, GBRA’s case as pleaded was not that the 3 April letter varied a contract formed on the terms of the two letters dated 2 April 2003, but that the contract that was made on that day was documented in, or by, the three letters in question.

2. The plaintiffs’ case on this issue was not entirely easy to discern.  In their written opening submissions, counsel for the plaintiffs said (para 28):

   “The plaintiffs accept that the letter is properly to be seen as part of the legal arrangements negotiated on [2 April 2002].  The plaintiffs say that on the proper construction of the letter, in the light of the surrounding conversations, (if admissible), it was intended to be a letter of comfort:  to give the defendant comfort that the second plaintiff would actually exercise the options to acquire the licences and do so sooner rather than later ...”.

The draft Use Agreement

1. GBRA submits that specific performance should not be granted of the draft Use Agreement (annexed to the further amended summons) because it does not incorporate the terms of the 3 April letter.  As I understand the submissions for GBRA on this point, they are effectively answered by the view that I have expressed as to the proper construction of the 3 April letter. 

2. It could be said that the draft Use Agreement, of which the plaintiffs seek specific performance, does not reflect the 3 April letter in that it does not provide for GBRA’s right to instruct WCPL to exercise the licences by the specified dates.  However, given that those dates have passed, there is in my opinion no need for this aspect of the 3 April letter to be reflected in the draft Use Agreement.  No purpose, except adherence to form, would be served by requiring the Use Agreement to incorporate a condition that was spent.

3. In final submissions, GBRA relied, in this context, on the terms of the Determination. Specifically, it was submitted that the draft Use Agreement did not comply with Clause 6 of the Determination because the authorisation that would be given on the terms of the Use Agreement was not given “in such a way that ... it is revocable at will”, nor would its revocation would have the quality set out in cl 6(1)(b).

4. For the plaintiffs, it was submitted that the effect of the Determination was sufficiently recognised in the draft Use Agreement, but that in any event this could be “clarified”. 

5. The draft Use Agreement propounded by the plaintiffs, and of which they seek specific performance, is annexed to their further amended summons.  Clause 2 provides as follows:

   “2.         USE

   (a)GB Radio authorises WCPL to use the Sydney Licence in accordance with section 114 of the Radiocommunications Act 1992 (Cth) (Section 114).

   (b)GB Radio authorises WCPL to use the Melbourne Licence in accordance with Section 114”.

6. Nothing else in the draft Use Agreement could be said to reflect the terms of the Determination.

7. Section 114 of the Radiocommunications Act does not state, in effect, that any written instrument of authorisation will be taken to incorporate the terms of any relevant determination made under s 115. 

8. In my opinion, the terms of cl 6 of the Determination are not reflected in the draft Use Agreement. It follows that an order for specific performance of the draft Use Agreement would compel GBRA to do something that is forbidden by the Determination. I do not propose to put GBRA into that invidious position.

9. Clearly enough, as was submitted for the plaintiffs, the position could be “clarified”; more accurately, the draft Use Agreement could be amended so that it does reflect properly the provisions of cl 6 of the Determination. That does not mean that the plaintiffs are now entitled to the relief that they seek in respect of the draft Use Agreement that they propound.

Termination for repudiation or breach

1. As I have said, the repudiation alleged by GBRA was the submission, on behalf of the plaintiffs, of draft documents (draft Use Agreement and draft Programming Supply Agreement) that were said to be inconsistent with the terms of the 2 April agreement.  As to breach, GBRA’s case is that the plaintiffs have breached the 2 April agreement by failing to pay GBRA the consideration of $650,000, to which para 4 of the 2 April offer refers.

2. The principal complaint of GBRA, in relation to the draft Programming Supply Agreement submitted by e-mail as a “first draft” on 21 May 2002, was that it purported to include parties who were not party to the 2 April agreement.  The principal complaint as to the draft Use Agreement was that it did not reflect what GBRA said were the relevant terms of the 3 April letter.

3. In my opinion, the contention that the draft documents submitted by BDW to Gadens on 21 May 2002 amounted to a repudiation of the 2 April agreement, is incorrect.  A number of the issues raised by Gadens, in their letter of 24 May 2002, were quite clearly of a drafting nature.  Of the more substantial complaints made, one, the statement of the consideration in cl 9 as $200,000 for each of the licences, was clearly a mistake (and was acknowledged as such, and rectified in a subsequent draft).  The other (failure to qualify the options in the way which, GBRA contends, the 3 April letter did) was in my view, for the reasons given above, misconceived.

4. But even if I were wrong in my view of the construction of the 3 April letter, it simply does not follow that the plaintiffs had, by submitting draft agreements in the form that was done, repudiated the 2 April agreement.  It would be necessary to deduce, from that conduct, an intention to repudiate the 2 April agreement.  As Stephen, Mason and Jacobs JJ said in DTR Nominees (138 CLR at 432):

   “No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms.  But there are other cases in which a party, although asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor.  He may be willing to recognise his heresy once the true doctrine is enunciated, or he may be willing to accept an authoritative exposition of the correct interpretation.  In either event an intention to repudiate the contract could not be attributed to him”.

5. Further, it follows from what their Honours said (at 432-433), that where a party acts in good faith, in “a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear” then “the Court is not justified in drawing an inference that the [party] intended not to perform the contract according to its terms or that it repudiated the contract”.

6. In my opinion, the evidence as at 24 May 2002 – the date on which GBRA, through Gadens, first purported to treat the contract as terminated for repudiation – falls far short of establishing that the plaintiffs intended not to perform the contract according to its terms, or that they repudiated it.  In my opinion, the complaints made by Gadens, in their letter of 24 May 2002, were aptly described in BDW’s reply of 27 May 2002:  see para [49] above.

7. Without wishing to be dismissive, I have to say that the correspondence passing between BDW and Gadens after 27 May 2002, and up until 5 July 2002, contributes little to the resolution of this aspect of the dispute.  However, it is to be noted that BDW requested an appointment for a meeting to discuss and complete preparation of the documentation (see their letters of 7 and 11 June and 5 July 2002 to Gadens).  No such meeting was appointed.

8. In any event, as I have noted, on 5 July 2002, Gadens wrote to BDW in the terms set out in para [54] above.  If the 2 April agreement had not already been terminated for repudiation – as in my view it had not – then this letter can only be treated as an affirmation of the contract.  The same applies to Gadens’ letter to BDW of 9 July 2002.

9. The subsequent actions on the part of the plaintiffs that are relied upon by GBRA as acts of repudiation, are the submission, on 12 and then on 18 July 2002, of further drafts of the Use Agreement and the Programming Supply Agreement that were said to be so inconsistent with the terms of the 2 April agreement that, in context, they must be treated as a repudiation of it.  In each case, the draft Programming Supply Agreement suffered from the defect that it named as parties people who were not party to the 2 April agreement.  As to the draft Use Agreements, Gadens’ response of 24 July 2002 identified “the fundamental issue” as being the asserted inconsistency of the drafts with the 3 April letter.  They contended that the 3 April letter “makes it perfectly clear in the second paragraph that the control of the exercise of the option would always remain in the hands of” GBRA, so that “your draft clause 8 [see para [60] above] ... is simply inconsistent with the agreement made between our respective clients in that important respect”.

10. It is correct to say that the drafts submitted on 12 and 18 July 2002 did not reflect the relevant requirements of the 3 April letter.  However, for the reasons that I have already given, it is incorrect to say that the relevant effect of that letter was “that the control of the exercise of the option would always remain in the hands of” GBRA.

11. It is to be noted that there was an important development in the drafting of cl 8, from that submitted on 12 July 2002, to that submitted on 18 July 2002:  compare the provisions of cl 8.3 of the latter (see para [60] above) with the provisions of the former (see para [57] above).  Clause 8.3 of the later draft still did not adequately reflect what, in my view, is the proper construction of the 3 April letter.  That is because it provided for the options being exercised, up until the specified dates, “only ... with the consent of” GBRA, rather than “at the direction of” GBRA.  However, the later version is an acknowledgment that GBRA has important rights under the 3 April letter in relation to the control, for a limited and specified period of time, of the exercise of the options.  To this extent, the draft, although still mistaken, is a step in the right direction.  It may be contrasted with the refusal of GBRA to recognise that its control over the exercise of the options was not absolute.

12. In my opinion, when one looks at the development of cl 8, it does not demonstrate that the plaintiffs intended not to perform the 2 April agreement according to its terms, or that they repudiated it.  The plaintiffs were propounding the later version as a document that correctly reflected the relevant requirements of the 2 April agreement.  In this, they were wrong.  However, particularly in the light of their repeated and unanswered requests for a meeting to settle the documentation, I do not think that they can be taken as saying that they would formalise the arrangement between them and GBRA only on the terms of the drafts that were submitted on 18 July 2002.  Further, their erroneous approach was matched by an (at least) equally erroneous, and more obdurate, approach taken by GBRA.

13. Even if I am wrong in this conclusion, I do not think that GBRA was entitled to do as it purported to do, and terminate the contract in reliance on the asserted (and, by hypothesis, existing) repudiation on the part of the plaintiffs.  It is clear that a party who claims to be entitled to terminate an executory contract (as this was) because of the repudiation of the other party must show not only that repudiation but also that it was itself ready and willing, up until the time of termination, to perform its essential obligations under the contract:  Foran v Wight (1989) 168 CLR 385, 408 (Mason CJ), 422 (Brennan J), 437 (Deane J) and 442 (Dawson J). The question of readiness and willingness must be ascertained at the time of termination and on the assumption that the repudiating party was then itself ready and willing to perform. In this context, as Dixon J observed in Psaltis v Schultz (1948) 76 CLR 547, 560, “[t]o be ready and willing to perform a contract a party must not only be disposed to do the act promised but also have the capacity to do it. ... It is enough that he is not presently incapacitated from future performance and is not indisposed to do so, when the time comes, what the contract requires”.

14. In the present case, even if, contrary to my view, the plaintiffs, by submitting the documentation that they did in July 2002, had intimated an intention not to perform the 2 April agreement according to its terms, or had repudiated it, GBRA was not in a position to accept that repudiation and terminate the contract in reliance upon it.  That is because, at that time (and, I would observe, at all material times), GBRA was not and has not been ready and willing to perform the 2 April agreement according to its terms.  It was not “disposed to do the act promised”.  That is because, as Gadens made clear in their letter of 24 July 2002, GBRA was only prepared to perform an agreement under which “the control of the exercise of the option would always remain in [its] hands”.  For the reasons that I have given above, GBRA had no such entitlement.

15. As to the inclusion, in the draft Programming Supply Agreements, of parties who were not party to the 2 April agreement (see para [175] above, this does not amount to repudiation.  The plaintiffs may have been trying to do that which, in my opinion (essentially for the reasons given in paras [92] and [93] above) they were entitled to do:  namely, to seek to negotiate a formal agreement that went beyond the terms of para 5 of the 2 April offer.  However, there is no basis for concluding that the plaintiffs would not, or were indicating that they would not, enter into a Programming Supply Agreement, in accordance with para 4 of the 2 April offer, unless those other parties agreed to be bound by it.  There is nothing else in the terms of the draft Programming Supply Agreements that GBRA pointed to as being so inconsistent with the terms of the 2 April agreement that it could be said to amount to repudiation.    

16. GBRA also claims to be entitled to terminate, and to have terminated, for breach:  the breach assigned being WCPL’s failure to pay the sum of $650,00 that, GBRA said, was due under para 4 of the 2 April offer.  In my opinion, there are two answers to this:

    182.1Firstly, for the reasons given in paras [104] to [114] above, there was then no such present and enforceable obligation; and

    182.2Even if I am wrong in that view, GBRA itself was not ready and willing to perform the 2 April agreement according to its terms, and was therefore not in a position to terminate, because of the asserted breach.

17. I therefore conclude that the 2 April agreement has not been terminated for repudiation or breach.

Hypothetical relief

1. By prayer 4 of the further amended summons, the plaintiffs claim declaratory relief in relation to the exercise of the options.  WCPL has purported to exercise the option over the Sydney licence.  There has been no attempt to exercise the option over the Melbourne licence. 

2. I do not think that it is appropriate to grant a declaration in the terms sought in prayer 4.  On the view that I have reached, the plaintiffs would be entitled to a declaration of their rights flowing from what, in my opinion, is a valid exercise of a subsisting option.  They are not, however, entitled to a declaration as to the effect of something that has not yet occurred.

The relevance of the Victorian proceedings

1. The existence of the Victorian proceedings was known to the parties when they made the 2 April agreement.  The parties must have known that, as a result of the Victorian proceedings, Marchant might be held to be, and GBRA might be held not to be, the owner of the licences. 

2. The parties chose to deal with the position as to ownership, not by reference to the outcome of the Victorian proceedings, but by reference to registration in the register kept by the ACA:  see para 3 of the 2 April offer.  Presumably, there was a reason for them dealing with the disputed ownership of the licences in this way, although the evidence does not reveal what that reason was. 

3. Nor does the evidence enable me to make any assessment of the likely outcome of the Victorian proceedings – or when, if at all, those proceedings will be decided.

4. GBRA chose to undertake the obligations that the 2 April agreement imposes on it, knowing that its ability to meet those obligations might be dependent on the outcome of the Victorian proceedings.  I do not see why, having knowingly undertaken the risk (be it great or small), that the outcome of the Victorian proceedings might be adverse, it should now be allowed to escape its obligations under the 2 April agreement by pointing to the fact that the risk still exists because the Victorian proceedings are unresolved.

5. In any event, the evidence shows that, regardless of the outcome of the Victorian proceedings, WCPL is entitled to options over the licences.  If Marchant succeeds in the Victorian proceedings, he will be bound by the terms of the Marchant Use Agreement.   If GBRA succeeds, it will be bound by the terms of the 2 April offer.  In truth, given that both contestants in the Victorian proceedings are obliged to grant options to WCPL over the subject matter of those proceedings, it seems to me that the real issue is which of them is entitled to receive the amounts payable upon exercise of the options.

6. I do not regard either the existence of the Victorian proceedings, or the possibility that their outcome might be adverse to GBRA, as a sufficient ground for withholding relief:  either by way of declarations of right, or by way of a decree for specific performance (assuming, of course, that the terms of the declarations, or the decree, are appropriately moulded to reflect the conclusions to which I have come).

7. Nor do I think that it is relevant to this analysis that GBRA sought to join Marchant in these proceedings but that, on the opposition of the plaintiffs, that application was refused.  It does not alter the position that, with knowledge of the existence of the proceedings and, therefore, with an appreciation of their possible adverse outcome, GBRA entered into the 2 April agreement and sought to protect its position, in relation to ownership, only in the way that it did.

GBRA’s draft Programming Supply Agreement 

1. By prayer 1A of its amended cross-claim, GBRA seeks specific performance of the obligation of WCPL, pursuant to para 4 of the 2 April offer, to enter into a Programming Supply Agreement.  It propounded, as exhibit DX 06, what it said was an appropriate form of Programming Supply Agreement. 

2. The plaintiffs accepted that, in principle, and subject to GBRA establishing that it is ready and willing to perform its own obligations under the 2 April agreement (on their proper construction, and not on what it said was the proper construction where these varied) then, in principle, para 4 of the 2 April offer could be enforced.

3. It must follow from what I have said in paras [90] to [96] above as to para 4 of the 2 April offer, that it is sufficiently certain to be enforceable.  However, before GBRA could obtain an order for specific performance of part of the 2 April agreement – namely, the obligations under para 4 – it must show that it is ready and willing to perform its own obligations under that agreement:  see para [180] above.Unless and until GBRA is prepared to grant a lease, or leases, in accordance with para 3, containing call options that are now (in the events that have happened) exercisable at the choice of WCPL, it would not be entitled to a decree for specific performance.

4. GBRA also submits, however, that the same result should follow by application of the maxim that he who seeks equity must do equity.  In this case, GBRA submits, because the plaintiffs are seeking equitable relief, in relation to GBRA’s obligations under the 2 April agreement, they must be willing to do equity, by performing (and submitting to a decree that they perform) their obligations under that same agreement.

5. This may well be correct.  However, I do not think that it would require WCPL to enter into a Programming Supply Agreement in terms of exhibit DX 06.  For example, in recital C, that document asserts that “[t]he parties have reached agreement on the terms upon which they will share use of the Melbourne licence and Sydney licence”.  But there is nothing in the 2 April agreement that requires WCPL to share the use of either of those licences with GBRA.  Nor, to the extent that the 2 April agreement may be said to incorporate the terms of the Marchant Use Agreement, does the Marchant Use Agreement have anything to say about shared use.

6. Clause 1(b) states that WCPL “is able to supply Radio Two broadcasts for broadcasting in Melbourne”.  Nothing in the 2 April agreement requires WCPL to do this.

1. Clause 1(d) states that GBRA “is able to supply GB Radio broadcasts for broadcasting in Sydney”.  By reference to cl 1(c), “GB Radio broadcasts” are, apparently, what has been broadcast by GBRA from a transmission site in Melbourne using the Melbourne licence.  There is no basis in the evidence upon which I could conclude that “GB Radio broadcasts” are the same as “British lifestyle programming material sourced in the United Kingdom”.  However, it appears from para 3 of the draft agreement that it is “GB Radio broadcasts” that are to be supplied in satisfaction of the supply obligation under para 4 of the 2 April offer.

2. Clauses 4.1 and 4.2, which deal with the hours of broadcast in Melbourne and Sydney, would impose an obligation on WCPL to broadcast “12 hours of programming content per day supplied by” GBRA.  This would appear to leave it entirely up to GBRA to decide what is to be supplied and broadcast.  It is not, in terms, something that I could conclude is a proper performance of the obligation to supply British lifestyle programming material sourced in the United Kingdom. 

3. Clause 4.3 departs even further from the terms of the 2 April agreement.  It would oblige WCPL to broadcast “3 hours of programme per day supplied by” GBRA from any other broadcast apparatus licence under which WCPL, or any of its subsidiaries, commences broadcasting during the term of the proposed Programming Supply Agreement.  There is no foundation in the 2 April agreement for the imposition of such an obligation.

4. The plaintiffs submit that, for these reasons, they could not be ordered to perform an agreement in terms of exhibit DX 06.  I agree.  That document cannot be regarded as one embodying the essential terms of para 4 of the 2 April offer.

5. The plaintiffs further submit that, by tendering a draft agreement that differs so radically from the contract, and by leading no evidence of its ability to supply what the contract in fact calls for, then GBRA has failed, for this reason as well as for the reasons mentioned in para [180]  above, to demonstrate its readiness and willingness to perform its obligations under para 4 of the 2 April offer.  Again, I agree.

6. The result is that although in principle I regard para 4 of the 2 April offer as embodying specifically enforceable obligations, there is no basis for ordering specific performance in the terms propounded by GBRA.

Estoppel/Trade Practices Act

1. GBRA submitted that the plaintiffs have conducted themselves in a manner inconsistent with the 3 April letter.  It seems to me that the views that I have come to on the proper construction of that letter essentially dispose of this aspect of the cross-claim.

2. However, it should be noted that on the findings that I have made, both the 3 April letter itself, and the negotiations that, with perhaps some modification, it embodied, post-dated GBRA’s acceptance of the 2 April offer. On that basis, it cannot be contended, either for the purposes of the doctrine of estoppel, or the purposes of s 52 (and perhaps other provisions) of the Trade Practices Act, that GBRA relied in any relevant way on whatever representations may be spelt out of either that letter or those negotiations.  For that reason also, this aspect of the cross-claim must fail.

3. Finally I should note that GBRA’s case on reliance is one of inference, it having called no witness to prove reliance.  I mention this only to record that, had the chronology other than as I have found it (i.e. had the representations been made before the 2 April offer was accepted), then I might have been prepared to infer reliance.  In those hypothetical circumstances, it seems to me that the connection might have been clear enough to justify the inference even though no witness was called; and in this context, having regard to the circumstances in which the relevant witness, Thomas, declined to give evidence (see para [32] above), I would not be prepared to draw any inference adverse to GBRA from the fact that Thomas did not give evidence.  

Rectification

1. By prayer 10 of their further amended summons, the plaintiffs claimed, in the alternative, an order for rectification of the 3 April letter.  The rectification that was sought is spelt out in para 16 of the summary of the plaintiffs’ contentions in that further amended summons.

2. In view of the conclusion to which I have come, as to the proper construction of the 3 April letter (in the context of the 2 April agreement), it is not necessary to consider the question of rectification.  However, in case I am wrong in that, I should record my findings as to the relevant facts.

3. In his evidence-in-chief, Thompson said that, after the 2 April acceptance had been despatched, he had a further conversation with Thomas, who sought “some assurance” that WCPL would exercise the options once funds were subscribed pursuant to the prospectus.  Thompson says that he told Thomas that WCPL could probably exercise the option over the Sydney licence by about 31 December 2002, and could probably exercise the option over the Melbourne licence by about 30 June 2003.  He said that “[i]f it was up to us alone we probably would not want to exercise the options before those dates but if you ask us to do so we will see what we can do”.  He said that Thomas asked for that to be put “in a side letter”, and that he agreed.

4. In his cross-examination, Thompson said repeatedly that he regarded the 3 April letter as a “comfort letter”, or something that was intended to give GBRA “a level of comfort”.  However, he said that his understanding of what had been agreed was that “[i]f we hadn’t exercised our options respectively by 31 December and 30 June, then he would ask us to within those time frames so that he would have the assurance he could get his money sooner rather than later”, and that “we will see what we can do if he wanted us to exercise the options within those dates”.

5. There was further evidence to similar effect:  for example, “if Roger asked us to [exercise the options] we would see what we could do, but we didn’t have the means to do it”.

6. However, it would appear, negotiations moved on.  Thompson’s final statement of the negotiations on this point was that “[t]he intent of the letter was, was to give Roger [Thomas] that assurance that he could exercise the options.  It was not to take away any of our rights in relation to exercise options at any time we decide”.

7. In this context, it may be worth noting that it was put to Thompson that what “Thomas sought from you [was] an assurance that GB would have the ability to require WorldAudio to exercise the options if GB wished” (T 48.33), or that “he wanted … the ability to instruct WorldAudio to exercise the options before the dates mentioned”, and that this was “precisely what is put in the letter” (T 50.38, .45).  If the intention of GBRA were as put to Thompson, then that intention did not require that the agreement recorded in the 3 April letter go further, and deprive WCPL of the right to exercise the options unless instructed to do so by GBRA. 

8. The evidence is a little unclear as to how the time limits attaching to GBRA’s rights to direct exercise of the options were negotiated.  It would appear that Thompson suggested the relevant dates to Thomas, as being dates by which WCPL could “probably exercise” the respective options.

9. It is difficult to see in this evidence, either a mutual intention to agree in the terms propounded in para 16(a) of the plaintiffs’ contentions, or an intention on the part of the plaintiffs to agree in those terms, communicated to GBRA and, either expressly or by conduct, concurred in by GBRA.  However, taking into account the terms of what was written – both by Thompson in hand, and in the 3 April letter itself – it is likely that the negotiations may have moved to the point where Thompson and Thomas agreed not just that, if GBRA requested it, WCPL would “see what it could do”, but that, if GBRA requested it, WCPL would exercise the options.  Unless WCPL undertook an obligation to exercise, as opposed to an obligation to consider exercising, the 3 April letter could not have been phrased as it was.

10. However, I accept that WCPL did not intend to give up its right to exercise the options if it had not been instructed by GBRA to do so and that it, through Thompson, communicated that to GBRA, through Thomas.

11. It therefore follows, in my opinion, that if, contrary to my construction, the 3 April letter does, on its proper construction, leave the exercise of the options entirely at the discretion of GBRA, then it does not reflect the intention of the parties.  On that basis, WCPL would be entitled to rectification of the second paragraph.

12. Alternatively, if Thomas, having been told WCPL’s position in the terms that I have found, propounded the 3 April letter knowing that it did not reflect WCPL’s intention, and procured Thompson’s signature accordingly, then WCPL would be entitled to rectification.

13. This deals with the claim for rectification propounded by prayer 16(a) of the further amended summons.  I have some difficulty in understanding the claim propounded by prayer 16(b).  It was submitted for GBRA that the fourth paragraph of the 3 April letter on its proper construction means what is set out in prayer 16(b) of the further amended summons.  I agree.  On that basis, there is no need for rectification.

Conclusions

1. It follows that the plaintiffs have in substance established their claims.  However, the precise form of the orders to which they are entitled will need to reflect these reasons. 

2. Further, the plaintiffs are entitled to succeed on the cross-claim brought against them by GBRA.

3. One matter that I have not considered in these reasons is the plaintiffs’ entitlement to injunctive relief, as sought in prayers 5-8 of the further amended summons.  However, it would seem to follow in principle that the plaintiffs are entitled to the relief sought in those prayers.

4. Further, by order made under Pt  31 r 2 at the conclusion of the hearing, the issues relating to the relief claimed in prayer 9 of the further amended summons have been ordered to be heard separately and after determination of all other issues in the proceedings.

5. The only order that I shall make at this stage is that I shall adjourn the further hearing of these proceedings to a date to be fixed by arrangement with my Associate, but no later than 31 October 2003, to enable the parties:

   (1)          To bring in short minutes of order to reflect these reasons;

   (2)To deal with the issues relating to prayer 9 of the further amended summons; and

   (3)          To put submissions on the questions of costs.         

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LAST UPDATED:               10/10/2003