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Imam v Life (China) Company Ltd[2023] QCA 19

Imam v Life (China) Company Ltd[2023] QCA 19

SUPREME COURT OF QUEENSLAND

CITATION:

Imam v Life (China) Company Limited & Ors [2023] QCA 19

PARTIES:

RAAFAT IMAM

(appellant)

v

LIFE (CHINA) COMPANY LIMITED

(first respondent)

GUANGZHOU LIFE TRADING COMPANY LIMITED

(second respondent)

MAK SIU ON

(third respondent)

FILE NO/S:

Appeal No 7264 of 2021

SC No 11921 of 2018

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane – [2021] QSC 124 (Callaghan J)

DELIVERED ON:

17 February 2023

DELIVERED AT:

Brisbane

HEARING DATE:

18 July 2022

JUDGES:

Morrison and McMurdo JJA and Davis J

ORDER:

The appeal is dismissed with costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – where in each of the years 2004 and 2005 the appellant and respondents executed a written contract whereby the appellant was to provide consultancy services to the respondents – where, after November 2010, neither side attempted to perform any aspect of the contracts – where the communications between the parties from at least the beginning of 2011, through June 2012, manifested an intention to abandon the contracts – where the appellant commenced a proceeding in November 2018 seeking damages for breach – whether the contracts were abandoned – whether the preservation of accrued rights can be consistent with a mutual release of future obligations – whether the proceeding was brought out of time

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where in each of the years 2004 and 2005 the appellant and respondents executed a written contract whereby the appellant was to provide consultancy services to the respondents – where in December 2016, the appellant commenced a proceeding in Hong Kong (“the Hong Kong proceeding”) seeking payment from the respondents of his fees and the provision of financial information under the contracts – where in December 2017 the appellant entered into a litigation funding agreement expressed to be conditional upon approval for that agreement by a court in Hong Kong – where that court refused to approve the funding agreement on jurisdictional grounds – where in this Court, the appellant argues that the respondents are obliged to indemnify him for costs incurred in the Hong Kong proceeding – whether the costs incurred in the Hong Kong proceeding could be said to be costs suffered as a result of a breach of the contracts by the respondents – whether the respondents are obliged to indemnify the appellant for the costs of the Hong Kong proceeding

Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79; [2014] VSCA 32, applied

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12, cited

Fazio v Fazio [2012] WASCA 72, applied

Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53, cited

Marminta Pty Ltd v French [2003] QCA 541, cited

Summers v The Commonwealth (1918) 25 CLR 144; [1918] HCA 33, cited

Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279, cited

Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361; [1936] HCA 6, cited

COUNSEL:

M M Stewart KC, with D E F Chesterman, for the appellant

G D Beacham KC, with D Tay, for the respondents

SOLICITORS:

McCullough Robertson for the appellant

Bartley Cohen for the respondents

  1. [1]
    MORRISON JA:  The third respondent (Mak) wished to establish a fashion retail business in the People’s Republic of China and in Hong Kong.  The appellant (Imam) had considerable experience and connections in that industry.  By comparison, Mak was a complete novice.
  2. [2]
    Mak and Imam met when Mak was studying in Adelaide in the early 2000s.  Because he lacked experience and connections in establishing a fashion business, he sought the assistance of Imam.
  3. [3]
    Mak incorporated the other respondents to the appeal[1] in order to conduct his business.  Imam assisted Mak with aspects of establishing, and then running, the fashion business.
  4. [4]
    The business relationship between the parties was formalised in a written contract which had two editions.  The first was in February 2004, and then the second was a varied agreement on 18 July 2005.
  5. [5]
    The genesis of Mak and Imam’s business relationship was aptly summarised by the learned primary judge:[2]
  1. “[1]
    The third defendant, Mr Mak Siu On, referred to in the proceedings as Mr Mak, was born and raised in Hong Kong. He is the son of a rich man. But Mr Mak had his own aspirations. They dovetailed with his "passion for high end fashion". He wanted to market such clothing in China. This was, given developments in the Chinese economy, a visionary goal.
  2. [2]
    In 2000, however, when Mr Mak was a 23 year old student, it must have seemed a remote prospect. He lacked the knowledge, expertise and contacts - or anything, really – that might have assisted him in realising his ambition.
  3. [3]
    All of those absent qualities were embodied in the plaintiff, Mr Imam. He had been involved in the fashion industry since 1970, when he was 17. He made his first business connections in Asia in 1974. He grew a business that operated some 40 stores. In doing so he developed many contacts with Italian fashion suppliers.
  4. [4]
    To Mr Mak, the experienced plaintiff must have presented, when they met in or about 2000, as the ideal mentor. Their acquaintanceship developed into a business relationship which in tum developed into a friendship. With Mr Imam's assistance Mr Mak established the "LIFE China" business, which was conducted through the corporate entities· of the first and second defendants.
  5. [5]
    This background was the subject of much evidence but, in sum, the seasoned plaintiff assisted the inexperienced third defendant to build a successful luxury fashion retail business which now thrives in mainland China, Hong Kong and Macau. Nothing suggests that Mr Mak could have achieved this by himself.
  6. [6]
    As at 2004, the relationship was close. With Mr Imam's assistance, Life China had established or was in the process of establishing business relationships with leading Italian fashion houses, such as Ittierre [S.p.A] (Ittierre), Class Cavalli and Paciotti.  Mr Imam was a most valuable resource – the divide between the world of Italian fashion and the emerging Chinese economy was not bridged easily.”
  1. [6]
    Ultimately, the relationship between Mak and Imam broke down to the point where Imam was no longer providing consultancy services to the respondents.  The essential background to that breakdown of relationship was summarised by the learned primary judge as follows:[3]
  1. “[20]
    The plaintiff submits that he facilitated a franchise which allowed Life China to deal in the prestigious Giuseppe Zanotti Design (GZD) label. Once Life China had secured this franchise, the third defendant effectively "shut out" the plaintiff from any further communication. Mr Mak had, it seemed, turned away his former self – the aspirational fashion merchant – and, having been assisted by the plaintiff to become one, embraced the role of successful businessman.
  2. [21]
    The point came at which the plaintiff was no longer providing the defendants with the Consultancy Services for which both agreements provided. Indeed, there was a period of three years from July 2011 when there was barely any communication between them at all. However, in July 2014 the plaintiff asserted his right to be paid the sum to which he says he was (and continues to be) entitled under the 2005 Varied Consultancy Agreement. He also claims that the defendants breached the 2005 contract by failing to meet a requirement to provide access to financial records. On 23 October 2018 he instructed his solicitors to send a letter that terminated the Agreement for breaches. He seeks damages compensating him for the failure to pay Consultancy Fees attributable to purchasing orders, and for the Development Fees to which he says he remains entitled. His claim might, depending upon how it is calculated, amount to a total of $64,637,484.00.
  3. [22]
    The third defendant refused to pay the debt that is attributable to something he says he never promised, so the plaintiff attempted, unsuccessfully, to sue for that sum in Hong Kong. He now brings his claim in Queensland.”
  1. [7]
    The primary judge was faced with a number of matters in issue, including whether the forms of agreement were executed, and whether the 2005 agreement was a variation or a new agreement.  Those issues were resolved in Imam’s favour and are not the subject of challenge on appeal.

Issues on the appeal

  1. [8]
    The issues on the appeal, including those raised by the Notice of Contention, can be summarised as follows:
    1. (a)
      the proper construction of the Varied Agreement, and specifically whether Imam was required to provide advice about “Purchasing Orders” in order to be entitled to the “Consultancy Fee”, which he had not done after about 2010;
    2. (b)
      was the Varied Agreement abandoned by the parties by 26 May 2011, but in any event by 2 November 2012;
    3. (c)
      did Imam repudiate the Varied Agreement, and if so, was the repudiation accepted by the respondents;
    4. (d)
      is Mak liable to Imam pursuant to the Guarantee and Indemnity which he executed; and
    5. (e)
      aspects of the assessment of the claim for damages.

Relevant provisions of the Consultancy Agreement

  1. [9]
    The Consultancy Agreement at the centre of the issues between the parties was that executed in July 2005.  Of course, that was about seventeen months after the first Consultancy Agreement was executed, and seventeen months of the client operating the business and Imam providing the consultancy services.  The fact that a similar agreement had been operational for seventeen months by the time this agreement was executed is part of the commercial background that should be taken into account when construing the terms of the Agreement.
  2. [10]
    Various terms were defined in the Consultancy Agreement, and relevantly included:

““Business” means procuring, marketing and sale of the stock through the Store or Stores.

“Client” means:

  1. (a)
    LCCL and GLTCL; and
  2. (b)
    Associates and such other persons as the Client may subsequently involve in the running of the Business or any Stores established in the Territory for which the Consultant is providing or is entitled to provide Consultancy Services under this Agreement,

and includes LCCL’s, GLTCL’s, and each Associate’s and other person’s successors and assigns.”

“Consultancy Services” means the services that the Consultant is to provide to the Client under clause 3, and includes related services reasonably required to enable the Consultant to carry out its obligations under this Agreement.

“Other Stock” means Stock not supplied by Ittierre S.P.A.

“Purchasing Order” means an order for Other Stock whether or not the order is placed by the Consultant with a Supplier.

“Stock” means men's and women's fashion items of clothing and accessories that have been approved by the Consultant as appropriate for supply to and sale in the Business.

“Store” means the retail store or stores established by the Client for the purposes of carrying on the Business in the territory.”

  1. [11]
    The consultancy services themselves were the subject of clause 3.1 in the Agreement, which relevantly provided:
  1. “3.Consultancy Services
  1. 3.1Consultancy Services

In accordance with the Consultant’s authority under sub-clause 3.3, the Consultant agrees to provide to the Client the following Consultancy Services in a manner that, in the reasonable opinion of the Consultant, best promotes and advances the Business:

  1. (a)
    develop and use the Consultant’s current business relationships and any subsequently developed business relationships with the Suppliers during the term of this Agreement, including negotiating with Suppliers on behalf of the Client to obtain the supply of Stock and to obtain any authorisations or licences from the Suppliers necessary to enable the Client to be supplied with and sell the Stock;
  2. (b)
    advise the Client in all matters regarding the Stock and the Business, including publicity, public relations and advertising, and the selection of appropriate clothing and accessory lines to become part of the Stock of the Business;
  3. (c)
    assist the Client in establishing each Store and each Store's retail and wholesale operations, including:
  1. (i)
    assisting with the design and fitout of the Store; and
  2. (ii)
    assisting with the initial and ongoing training and supervision of Store staff;
  1. (d)
    supervising the overall retail operations of the Business; and
  2. (e)
    assist with the identification and establishment of further Stores in the Territory.”
  1. [12]
    As in the first agreement, the parties agreed that the consultancy services would be provided on a non-exclusive basis, with Imam to be classified as an independent contractor.  Clause 3.2 provided:
  1. “3.2Non-exclusive Consultancy Services
  1. (a)
    The parties acknowledge that the Consultancy Services are provided by the Consultant as an independent contractor.
  2. (b)
    The Consultant is permitted to perform the same or similar services for other clients or devote time to other business activities provided that they do not prevent the performance of the Consultant's obligations under this Agreement.”
  1. [13]
    Clause 3.3 dealt with the authority of Imam, acting as consultant.  Thus, clause 3.3 made provision in respect of Imam’s authority in the following terms:
  1. “3.3Authority of Consultant
  1. (a)
    The Client authorises the Consultant to approach the Suppliers on behalf' of the Client and to do all things necessary, including obtaining any authorisations or licences necessary to enable the Client to be supplied with and sell the Stock of the Suppliers in the Business.
  2. (b)
    The Consultant will be entitled, after proper consultation with the Client, to be the agent of the Client in respect of any other matter reasonably necessary to carry out the Consultancy Services and develop and expand the Business in the Territory for the Client.
  3. (c)
    The parties acknowledge that the Consultant will not advise or be required to advise the Client in relation to the day to day operations of the Business, which will be the Client's sole responsibility.
  4. (d)
    Except as specifically provided in this Agreement, the Consultant has no authority to act for, or to create, or assume, any responsibility or obligation for, the Client.”
  1. [14]
    The Agreement made provision for the obligations of Imam as consultant on the one hand, and the obligations of the client on the other.  Thus, clauses 4.2 and 4.3 provided as follows:
  1. “4.2Obligations of the Consultant

The Consultant agrees that he must provide the Consultancy Services in a manner that, in his reasonable opinion, best promotes and advances the Business.

  1. “4.3Obligations of the Client

The Client agrees that it:

  1. (a)
    may only use the Consultancy Services provided by the Consultant in any Stores established and operated in the Territory;
  2. (b)
    must not act in any way that prejudices or would be likely to prejudice:
  1. (i)
    the Consultant's relationship with the Suppliers; or
  2. (ii)
    the goodwill and the value of each Store and the Business overall;
  1. (c)
    must obtain the Consultant's approval for each new Store it wants to establish and operate in the Territory; and
  2. (d)
    must not approach or in any way directly or indirectly communicate or otherwise deal with any Suppliers, except such approaches, communications or dealings as may be approved in writing by the Consultant from time to time.”
  1. [15]
    At the heart of the issues between the parties before the primary judge, and on this appeal, was the question of the proper construction of the consultancy fees.  The Agreement first made provision in relation to the payment of fees, in clause 5.1:
  1. “5.1Payment of Fees

As consideration for the Consultant providing the Consultancy Services, the Client agrees to pay to the Consultant:

  1. (a)
    the Consultancy Fee, calculated in accordance with sub-clause 5.2 of this Agreement; and
  2. (b)
    the Development Fee, calculated in accordance with sub-clauses 6.2, 6.3 and 6.4 of this Agreement.”
  1. [16]
    Clause 5.2 then made specific provision in relation to the Consultancy Fees, and in a way which was materially different from the same provision in the 2004 agreement.  Whereas previously all stock had attracted a consultancy fee at 10 per cent of gross sales, the 2005 agreement drew a distinction between stocks supplied by Ittierre SPA, and “Other Stock”.  It did so in the following way:
  1. “5.2Consultancy Fee

The Consultancy Fee is payable by the Client to the Consultant in respect of each Store for which the Consultant provides or is entitled to provide the Consultancy Services under this Agreement:

  1. (a)
    for Stock supplied by Ittierre S.P.A.:
  1. (i)
    in an amount equivalent to 10% of the Gross Sales of Stock supplied by Ittierre S.P.A. of each Store;
  2. (ii)
    on a monthly basis, in accordance with the accounting requirements in sub-clause 8.1; and
  3. (iii)
    notwithstanding the termination of the Agreement.
  1. (b)
    for Other Stock:
  1. (i)
    in an amount equivalent to 10% of the Purchasing Order for Other Stock of each Store;
  2. (ii)
    within 7 days of the Consultant advising the Purchasing Order has been placed; and
  3. (iii)
    notwithstanding the termination of the Agreement.”
  1. [17]
    The payment of the fees was the subject of a separate clause, itself the subject of considerable attention upon the appeal.  It provided:
  1. “5.4Payment of Fees and Expenses

The Client agrees to pay into the Consultant's bank account or in such other manner as the Consultant may direct in writing from time to time:

  1. (a)
    for Other Stock within 7 days of the Consultant advising the Purchasing Order has been placed; and
  2. (b)
    for all other fees and reimbursable expenses as are required under this Agreement on a monthly basis by the twentieth (20th) day of each month.”
  1. [18]
    A separate agreement was made in respect of the earning of a development fee in the event of a sale of a store.  As will be seen, a store could not be sold without the approval of Imam, both of the sale and the sale contract, and such a sale contract had to contain covenants requiring the buyer to enter into a consultancy agreement with Imam.  Thus, clauses 6.1 and 6.2 provided as follows:
  1. “6.1Pre-sale requirements

The Client agrees that:

  1. (a)
    a Store must not be sold without the approval of the sale and the sale contract by the Consultant (which approval will not be unreasonably withheld);
  2. (b)
    it will notify the Consultant as soon as reasonably practicable before the intended sale of any Store (and, in any event, at least fourteen (14) days prior to the proposed signing of the sale contract), and provide the Consultant with all information and documents, including a copy of the proposed sale contract and the financial and trading statements and other accounting and business records of the Store, necessary to enable the Consultant to determine or verify:
  1. (i)
    the suitability of the prospective buyer to own and operate the Store; and
  2. (ii)
    the Consultant's likely entitlement to the Development Fee;
  1. (c)
    each sale contract must contain covenants requiring the buyer to enter into a Consultancy Agreement with the Consultant. The new Consultancy Agreement or other agreements that the Consultant may require the buyer to enter into may contain different terms and conditions, rights and obligations and fees and charges to this Agreement, at the Consultant's discretion; and
  2. (d)
    it will provide a copy of each sale contract to the Consultant as soon as reasonably practicable after signing.
  1. 6.2Development Fee for each Store Sold

For each Store sold by the Client during the term of this Agreement the Consultant will be entitled to be paid the Development Fee:

  1. (a)
    calculated as an amount equivalent to 50% of the growth in value of the goodwill of the Store being sold ("Goodwill Growth") in accordance with sub-clause 6.4 of this Agreement;
  2. (b)
    based on the Goodwill Growth being calculated from the date the Store commenced trading to the date of sale of the Store; and
  3. (c)
    paid to the Consultant on settlement of the sale of the Store to which the Development Fee relates, or within five (5) business days of settlement of the sale (if the Consultant in the Consultant's absolute discretion agrees to that later date).”
  1. [19]
    The parties agreed that the consultant might receive a development fee, payable at the time the contract was terminated, and that, in the event that happened, an agreed method of valuing the “Goodwill Growth”, upon which the development fee depended, was separately identified.  Thus, clauses 6.3 and 6.4 of the Consultancy Agreement provided as follows:
  1. “6.3Development Fee on Termination of Agreement

The Development Fee payable by the Client to the Consultant for each Store in existence on termination of this Agreement as provided for in sub-clause 9.3 will be:

  1. (a)
    calculated as an amount equivalent to the Goodwill Growth requirement in sub-clause 6.2(a)(i);
  2. (b)
    based on the Goodwill Growth being calculated from the date the Store commenced trading to the date of termination of this Agreement; and
  3. (c)
    paid to the Consultant within twenty-eight (28) days of the date of termination.
  1. “6.4Valuation of the Development Fee
  1. (a)
    The parties agree that the Goodwill Growth for each Store either being sold (as provided for in sub-clause 6.2) or in existence on termination of this Agreement (as provided for in sub-clause 6.3) will be valued under this sub-clause 6.4.
  2. (b)
    The Goodwill Growth is to be valued and determined on the market value of the Store as agreed by the parties, based on generally accepted accounting principles applicable to the Territory, taking account of the following matters (without limitation):
  1. (i)
    assuming that a reasonable time is available in which to obtain a sale of the Store in the open market and for that purpose 120 days will be deemed a reasonable time; and
  2. (ii)
    having regard to the following factors (in addition to other factors which the parties agree should reasonably be taken into account) based on the best information available at the time:
  1. (A)
    The prospects of the Business being conducted at the Store;
  2. (B)
    the value, at a specified capitalisation rate appropriate to the Business being conducted at the Store, of the estimated future maintainable earnings of the Store;
  3. (C)
    the yield which an open-market investor could reasonably require in an acquisition of the Store; and
  4. (D)
    the net tangible assets of the Store as disclosed in the last audited accounts of the Store.
  1. (c)
    Should the parties not agree on the valuation of the Goodwill Growth under sub-clause 6.4(b) above, then the matter will be determined in accordance with sub-clause 10.4 of this Agreement.”
  1. [20]
    The pivotal nature of Imam as a consultant to the business can be seen in clause 7.1 which deals with the determination of stock by the consultant:

“7.1 Stock Determined by Consultant

During the term of this Agreement, the Consultant will determine the nature and brands of the Stock to be supplied to the Business.”

  1. [21]
    The parties also agreed that certain statements of account would be kept and either supplied to the consultant by the client, or the subject of a right of access by the consultant.  Thus, clauses 8.1 and 8.2 provided as follows:

“8.1 Accounting records

  1. (a)
    Within seven (7) days of the end of each month both during the term of this Agreement and after termination of this Agreement or any period during which the Client or its Associates receive payment arising out of the Business, the Client will render a written statement of account to the Consultant setting out details of the Gross Sales received in respect of each Store during the preceding month.
  2. (b)
    The Client will also prepare quarterly profit and loss statements and such other reports and information as are reasonably required by the Consultant from time to time to enable the Consultant to verify the Gross Sales and the fees payable to the Consultant for each Store, and the Client agrees to keep and maintain, and agrees to ensure that its Associates keep and maintain, separate accounting and financial records for each Store for this purpose.

8.2 Inspection of Accounting Records

The Client agrees that the Consultant is entitled to inspect and audit the accounts, and the financial and corporate governance records of the Business and each Store and the Client agrees to allow, and agrees to ensure that its Associates allow, the Consultant upon reasonable notice to the Client access to these accounts and records, including for the purpose of:

  1. (a)
    determining whether a default exists under clause 9; and
  2. (b)
    determining and verifying the Consultancy Fees and Development Fees payable to the Consultant under this Agreement.”
  1. [22]
    The question of termination of the Consultancy Agreement and entitlements thereon were dealt with in clause 9:

“9.1 Termination by agreement

This Agreement may be terminated by written agreement between the parties.

9.2 Termination by default

Any wilful or substantial breach of this Agreement by the Client will entitle the Consultant to immediately terminate this Agreement, and in addition to any other rights the Consultant may have at law or in equity, the Consultant will be entitled to recover from the Client any amounts then due to the Consultant as fees or reimbursable expenses that would otherwise be due to the Consultant under this Agreement.

9.3 Payment of Development Fee on Termination

On termination of this Agreement for any reason whatsoever, the Consultant will be entitled to be paid the Development Fee calculated in accordance with sub-clauses 6.3 and 6.4 in respect of each and every Store in existence as at the date of termination.”

  1. [23]
    Clause 10.2 provided for the execution of a guarantee by the client or its associates:

“10.2 Directors’ Guarantee

If the Consultant requires it, each Officer of the Client or its Associates must execute a Guarantee in the form attached as Annexure A to this Agreement.

  1. [24]
    I pause to note that clause 10.2 was left in the Agreement in the form in which it appeared in the 2004 agreement.  As well, one has to note that, by the time the 2005 Consultancy Agreement was executed, the 2004 agreement had been in place and operating for some seventeen months, and was the subject of a guarantee executed by Mak.
  2. [25]
    Finally, clause 10.7 provided that the State of Queensland was the state in which the Agreement was made, and that the Agreement was to be governed by the laws applicable in Queensland.

Proper construction of the Agreement

  1. [26]
    Mr Stewart KC, appearing for Imam, contended that the nature of the relationship created by the Varied Agreement was one close to that of a joint venture, notwithstanding that, in a contractual sense, it was a contract of consultant and client.  He pointed to several features which, it was contended, supported that approach.  The first was that Imam was not paid an hourly fee or a success fee, but rather his payment was directly linked to the performance or success of the stores conducted by the business.
  2. [27]
    Secondly, the respondents had to obtain Imam’s approval for each new store they wanted to establish and operate, and could not sell them without his approval.  Correspondingly, the respondents were prohibited from participating or assisting any similar business.
  3. [28]
    Thirdly, clause 4.3(b)(ii) obliged the respondents not to act in any way that prejudiced the goodwill and value of each store, and the business overall.  This was submitted to be an express recognition of Imam’s economic interest in the respondents’ stores and business, atypical of the usual consultant and client type of relationship.
  4. [29]
    Fourthly, Mr Stewart referred to the manner in which the consultancy services were to be provided, specifically that they were not to be determined by the client, but rather by the consultant.
  5. [30]
    Fifthly, it was said that the obligations to cooperate and use best endeavours to ensure the business was successful, and to be just and faithful in dealings, were consistent with a long term, joint venture relationship. In my view, it does not assist to attempt to categorise the relationship in that way.  The parties regulated their relationship by a written agreement which was undoubtedly created in a commercial context.  It is the proper construction of that agreement which will determine the obligations and rights of each of the parties.
  6. [31]
    I pause to note that, in these reasons, I intend, for convenience only, to refer to the principals as Imam and Mak, and the corporate respondents collectively as Life China, unless the circumstances require individual identification.

Proper construction – Consultancy Fee

  1. [32]
    Imam’s contention on appeal was that the proper construction of clauses 5.1 and 5.2 was that the Consultancy Fee was payable by Life China to Imam “on a deferred basis for the Consultancy Services he had earlier provided … and even if he was no longer actively providing the Consultancy Services, including after the termination of the Varied Agreement”.[4]
  2. [33]
    The two recitals to the Agreement are couched in terms which indicate an ongoing relationship between Imam and Life China.  Recital A records that “the Client wishes to operate the Business within the Territory”.  The term “Client” is defined to mean Life China and Guangzhou Life Trading, but also other entities that may be subsequently involved in the running of the business or any stores established in the Territory.  The wording of that part of the definition of “Client” is relevant to the construction of clauses 5.1 and 5.2.  Subparagraph (b) provides:

“Associates and such other persons as the Client may subsequently involve in the running of the Business or any Stores established in the Territory for which the Consultant is providing or is entitled to provide Consultancy Services under this Agreement.”

  1. [34]
    Thus, the definition of “Client” expressly includes any stores for which Imam “is providing or is entitled to provide” the consultancy services.  The words “or is entitled to provide” must be given some meaning.  They are different from what is comprehended by the phrase “is providing”.  I shall return to this aspect later when considering clause 5.2.
  2. [35]
    Recital B records that Imam “has agreed to provide the Consultancy Services to assist the Client in establishing Stores and running the Business...”.  The definition of “Client” extends that concept to person/s who might be subsequently involved in running the business or any stores.
  3. [36]
    The definition of “Stores”, as well as “Business”, also comprehends events in the future, because the definition of “Store” means those stores established by the client, which, as can be seen above, includes entitlements brought in the future as those that the client “may subsequently involve in running the business and any stores”.
  4. [37]
    Clause 5.1 provides that the consultancy fee is payable “[a]s consideration for the consultant providing the consultancy services”.  That necessarily directs attention to clause 3.1, because “Consultancy Services” is defined to mean “the services that the Consultant is to provide to the client under clause 3, and includes related services reasonably required to enable the consultant to carry out its obligations under this Agreement”.
  5. [38]
    The nature of the consultancy services provides context within which the entitlement to payment must be analysed.  In that respect, there are a number of factors in clause 3.1 that may be noted.
  6. [39]
    First, clause 3.1 expressly provides that Imam was to provide the identified consultancy services “in a manner that, in the reasonable opinion of [Imam], best promotes and advances the Business”.  The parties therefore left it to Imam to make the judgment as to how the consultancy services might best promote and advance the business.  Reference to the consultancy services themselves supports the conclusion that Imam was to exercise a judgment rather than to simply apply identified steps or actions.
  7. [40]
    Secondly, clause 3.1(a) identified one service, namely to “develop and use [Imam’s] current business relationships and any subsequently developed business relationships … including negotiating with Suppliers … to obtain the supply of Stock...”.  Clause 3.1(a) included the development and use of “any subsequently developed business relationships...”.  The use of those words plainly looked to the future, and in my view, emphasised the fact that, not only was the relationship between Imam and all the respondents an ongoing one, the consultancy services included matters which would only arise in the future.  To that end, clause 3.1(a) contemplated a situation where Imam may not be providing consultancy service by way of using business relationship X, because business relationship X is one that did not currently exist, but might exist in the future.  The parties thereby contemplated, in my respectful view, that there may be situations where Imam was not providing consultancy services, but nonetheless the obligation and rights flowing from the requirement to provide them continued, as did the entitlement to fees.
  8. [41]
    Thirdly, clause 3.1(a) included, as part of the consultancy services, Imam’s negotiations with suppliers “to obtain the supply of Stock...”.  The definition of “Stock” was “men’s and women’s fashion items of clothing and accessories that have been approved by [Imam] as appropriate for supply to and sale in the Business”.  Given that clause 3.1(a) contemplated relationships with suppliers that might only arise in the future, that necessarily means that the negotiation with suppliers for the supply of stock contemplated stock that would only exist in the future.  That serves to reinforce the conclusion that the parties contemplated that, just because there were no negotiations at a particular point in time, or no supply of stock from a particular supplier at a point in time, did not mean that there was no entitlement to fees.  The particular relationship leading to a successful negotiation with a supplier, where that supplier might not exist at the moment, is a powerful factor indicating, in my view, that the contract contemplated a relationship between Imam and all the respondents which would evolve over time.
  9. [42]
    Fourthly, clause 3.1(b) provided that one of the consultancy services was that Imam would “advise the Client in all matters regarding the Stock … including publicity, public relations and advertising, and the selection of appropriate clothing and accessory lines to become part of the Stock of the Business”.  As pointed out above, the stock referred to might be stock that only exists in the future, though still within the life of the Consultancy Agreement.  Thus, it must be, in my view, that clause 3.1(b) contemplates advice that might only be given in the future, in respect of stock that might only exist in the future.
  10. [43]
    That conclusion is reinforced by the fact that “Supplier” is defined to mean “the industry and supply contacts of [Imam] which provide or may in future provide Stock or Other Stock to the Business through [Imam] providing the Consultancy Services during the term of this Agreement”.
  11. [44]
    The contract therefore contemplates consultancy services that have been provided at any particular point in time, as well as those yet to be provided in the future.  The permutations concerning business relationships, suppliers, supply contacts, and stock are many.  For example, it may be that, at any particular point, Imam knew of a supplier, but had not yet approached that supplier in order to provide stock to the business.  Alternatively, it may be that, at a particular point in time during the life of the Consultancy Agreement, Imam developed a relationship with a new supplier that led to the supply of stock.
  12. [45]
    Fifthly, clause 3.1(c) provides that one of the consultancy services is to “assist the Client in establishing each Store and each Store’s retail and wholesale operations...”.  The clause plainly contemplates that there might be more than one store, as does the definition of “Store”.  There is nothing in those provisions which would suggest that all of the stores had to be established at one point in time, for example at the start of the Consultancy Agreement, rather than progressively established over time.  So much is also evident from clause 3.1(e), which identifies one consultancy service as being able to “assist with the identification and establishment of further Stores...”.
  13. [46]
    It is therefore the case that the context in which one construes clauses 5.1 and 5.2 is that the relationship between the consultant and the client is ambulatory, extending into the future during the course of the Agreement, and comprehending the consultancy services, suppliers, stores, and stocks which, at any particular point in time, do not yet exist.
  14. [47]
    Clause 5.1(a) provides that the consultancy fee is paid “[a]s consideration for the Consultant providing the Consultancy Services...”.  Thus, the consultancy fee is in respect of services provided, and yet to be provided, during the course of the Agreement.  However, clause 5.1(a) provides that the fee is to be “calculated in accordance with sub-clause 5.2...”.  Thus, the opening lines of clause 5.1 contain the obligation to pay, whereas the words in clause 5.1(a) focus on how the payment is to be calculated.
  15. [48]
    One then turns to the relevant parts of clause 5.2, which provides that the Consultancy Fee is payable “in respect of each Store for which the Consultant provides or is entitled to provide the Consultancy Services under this Agreement”.
  16. [49]
    As noted above, as “Store” is one which the parties to this agreement contemplated would include one which only existed in the future.  Where that is the case, unless the consultancy services are those to assist in establishing a store,[5] or assisting in the identification and establishment of a store,[6] there might be no relevant consultancy service being provided at a particular point in time.
  17. [50]
    The focus of clause 5.2 is on a consultancy fee payable in respect of a store for which Imam “provides or is entitled to provide” consultancy services.  The plain words of that clause contemplate that a fee might be earned in respect of a store, even though no consultancy service is currently being provided.  The words “is entitled to provide” must be given some meaning.  They stand in contrast to the word “provides”, which bears the meaning of services actually provided at some point.  In context, the words “is entitled to provide” must connote services which Imam was entitled to provide but which had not yet been actually provided.
  18. [51]
    Clause 5.2 provides that the consultancy fee is to be calculated in three relevant ways.  The first is that it is in respect of each store for which Imam provides, or is entitled to provide, the services.  The second is that for stock supplied by Ittierre S.p.A., where the fee is calculated as ten percent of gross sales of stock supplied by Ittierre.  The third is that, for stock which is not Ittierre stock—in other words, “Other Stock”—the fee is calculated at ten per cent of the purchasing orders for such stock.
  19. [52]
    Different provisions also apply as to when the payment has to be made.  For Ittierre stock, it is on a monthly basis, in accordance with the accounting requirements in clause 8.1.  For stock which is not Ittierre stock, namely “Other Stock”, payment is to be within seven days of Imam advising that the purchasing order has been placed.
  20. [53]
    In each case, namely for Ittierre stock and “Other Stock”, the fee is payable “notwithstanding the termination of the Agreement”.[7]
  21. [54]
    The stock which underpins the payment of the consultancy fee is stock which is determined by Imam.  So much is plain from clause 7, which relevantly provides:

“7.1 Stock Determined by Consultant

During the term of this Agreement, the Consultant will determine the nature and brands of the Stock to be supplied to the Business.

7.2 Non-exclusive Supply

  1. (a)
    the Client acknowledges that some of the Suppliers of the Stock may cease to make or supply certain Stock to the Client or may otherwise only supply the Client on an non-exclusive basis.
  2. (b)
    the Client acknowledges and accepts that some of the Suppliers of the Stock may supply or distribute Stock to other retailers, wholesalers or distributors within the Territory and outside the Territory.

7.3 Alternative Supply of Stock

If, during the term of this Agreement the Consultant is unable to negotiate for the supply of any or all of the Stock or a particular brand or label to the Client, the Consultant will use its best endeavours to obtain and the Client will accept the supply of substitute Stock of the same kind and quality (as far as is reasonably possible) as the Stock that was unable to be supplied.”

  1. [55]
    The obligation of Imam under clause 7.1 is consistent with the obligation to provide consultancy services in the nature of negotiating with suppliers for the supply of stock,[8] and to select appropriate clothing and accessory lines to become part of the stock.[9]
  2. [56]
    Those provisions reveal that, for any of Life China’s stores, the stock will be stock which has been selected by Imam in terms of its nature, brand, and appropriateness, and subject to negotiation by Imam for supply.  In that way, the supply of the consultancy services by Imam has a direct connection with the stock in any particular store.
  3. [57]
    However, that does not mean that, under the Consultancy Agreement, Imam must select stock every year.  It must have been within the contemplation of the parties that Imam might select various lines of stock from brand X, and negotiate supply over a period of years.  In that way, the actual supply of consultancy services would occur when the stock was selected and the supply negotiated, but then cease during the period of actual supply by the supplier.  In other words, the parties must have contemplated that there would be periods where it was likely that Imam would be called upon to provide no consultancy services in respect of the selection of stock, yet nonetheless selected stock was being supplied and sold.  In that scenario, Imam would still be entitled to consultancy fees because they are calculated on the basis of a percentage of gross sales (in the case of Ittierre) or a percentage of purchasing orders (in respect of other stock).
  4. [58]
    In such a situation, Imam would have provided the consultancy services.  That situation would therefore not be caught by the phrase “is entitled to provide” in clause 5.2.
  5. [59]
    Yet another scenario is within the scope of the Consultancy Agreement.  It may be the case that Imam has provided consultancy services in respect of store X, and stock has been ordered for store X in accordance with Imam’s selections and negotiation. At the same time, store Y has been selected and approved as part of the business, but has no stock.  Consider the scenario that Life China moved some of the stock delivered to store X over to store Y, and sold it from there.  In that scenario, store Y would be one where Imam had not provided consultancy services in terms of selection of the stock, but nonetheless it was a store in respect of which he was entitled to provide such consultancy services.  In that scenario, it seems to me that consultancy fees would nonetheless be payable in respect of store Y on the stock that was ordered for it or sold at it, because, within the meaning of clause 5.2, Imam was “entitled to provide” consultancy services in respect of that store.
  6. [60]
    There are two provisions in the Agreement where the parties referred to consultancy services which Imam “is entitled to provide”.  The first is in the definition of “Client”, where reference is made to “any Stores established in the Territory for which the Consultant is providing or is entitled to provide Consultancy Services under this Agreement”.  The second is in the opening words of clause 5.2, which refers to “each Store for which the Consultant provides or is entitled to provide the Consultancy Services under this Agreement”.
  7. [61]
    Each of those clauses use words which link the provision of consultancy services, or the entitlement to provide consultancy services, to stores rather than the business in a general sense.  There is no relevant difference between the phrase “any Stores” in the definition of client, and “each Store” in clause 5.2.
  8. [62]
    Clauses 3.1(c) and (e) provide that some of the consultancy services which Imam agreed to provide were to:
    1. (i)
      assist in the establishment of each store, and each stores retail and wholesale operations; and
    2. (ii)
      assist with the identification and establishment of further stores.
  9. [63]
    There is no separate consultancy fee that might be earned by those activities, as distinct from those which concern negotiating with suppliers to obtain the supply of stock, advising in respect of stock, and selecting clothing and accessories lines to become part of stock.[10]
  10. [64]
    Clause 5.1(a) provides that, in consideration of Imam providing the consultancy services, Life China agreed to pay the consultancy fee, calculated in accordance with clause 5.2.  The consultancy fee under clause 5.2 is calculated by reference to stock sold (in the case of Ittierre stock) and stock purchased (in the case of other stock).  In each case, the stock referred to is the stock of “each store”.
  11. [65]
    As noted above, the Agreement contemplates a relationship where Imam selects and determines the stock,[11] and assists in negotiating supply,[12] but does not actually place any of the orders by which stock is obtained, nor take part in the sales.
  12. [66]
    Further, given that the evidence established that at least some of the stock was selected on a seasonal basis, the Agreement contemplated the situation where a new store might be developed and opened with the assistance of Imam, but was filled with stock that was the subject of decisions made prior to the store opening, and perhaps prior to the store being selected.  In other words, the line of stock may have been approved and determined at a point before the new store was contemplated or opened, but Life China chose to put already approved lines into that store.  On that basis, the Agreement contemplated that Imam might not be making approvals or determinations of stock specifically for the new store, and therefore, in that respect, was not providing those particular consultancy services for that store.  However, that store would be one in respect of which clause 5.2 applied, namely it was a store in respect of which Imam “is entitled to provide the consultancy services”.
  13. [67]
    In context, it seems to me that the phrase “is providing”, in the definition of “Client”, is the same as “provides” when used in clause 5.2.  In each case, it is distinguished from the situation where Imam “is entitled to provide” consultancy services.
  14. [68]
    One other provision provides assistance in resolving the meaning intended by the parties when they used the phrase “provides or is entitled to provide” in clause 5.2.  That comes from the definition of “Stock”, which, as noted above, means “fashion items of clothing and accessories that have been approved the Consultant as appropriate for supply to and sale in the Business”.
  15. [69]
    When the definition of “Stock” is included in clause 5.2(a), the opening words of that sub-paragraph then read:

“For men’s and women’s fashion items of clothing and accessories that have been approved by the Consultant as appropriate for supply to and sale in the Business, and supplied by Ittierre.”

  1. [70]
    It is apparent, in my view, that the relevant stock supplied by Ittierre, for which a fee is payable, does not require that the individual item sold be one which has been ordered by Imam.  To qualify as “Stock”, the item merely needs to be an item of clothing and accessories that has been approved by Imam, and which is supplied by Ittierre.  It may be that Imam has not only approved particular items, but negotiated with Ittierre “to obtain supply of Stock” in accordance with clause 3.1(a).  It may also be that that stock has been one instance where Imam has determined “the nature and brands” under clause 7.1.  However, none of those matters require that the particular Ittierre stock sold in a shop be an item of stock that has actually been ordered by Imam, as opposed to having been ordered by Life China as part of the business after the items have been approved or determined by Imam.
  2. [71]
    One can see that the parties probably intended that result, given the way in which the business might be expected to operate.  Imam may very well approve a particular line of clothing or accessories, thus determining the nature and brands of the stock, but not actually order any of it himself.  Having carried out his particular aspect of the consultancy services, the ordering from time to time might very well be expected to be done by Life China as part of the normal business operations.  In that respect, Imam will have provided consultancy services in respect of stock which is yet to be ordered and yet to be sold.
  3. [72]
    Therefore, at any particular time, Imam might not be providing consultancy services for a particular store, but the store remains one where Imam “is entitled to provide” consultancy services.
  4. [73]
    That construction gives a meaning to the Agreement which is one that a reasonable businessperson would have given it.[13]
  5. [74]
    In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[14] the High Court said:[15]

“[47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.  That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

[48] Ordinarily, this process of construction is possible by reference to the contract alone.  Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

[49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary.  It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.  It may be necessary in determining the proper construction where there is a constructional choice.  The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.

[50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective.  What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating.  What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.

[51] Other principles are relevant in the construction of commercial contracts.  Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”.  Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.”

  1. [75]
    The same construction applies to the reference to “Other Stock” in clause 5.2(b).  The term “Other Stock” simply means stock not supplied by Ittierre.  That still means items of clothing and accessories that have been approved by Imam as appropriate for supply to, and sale in, the business.  In precisely the same way as for Ittierre stock, as long as the “Other Stock” has been approved or determined by Imam, it does not matter that the actual purchase orders were not made by Imam.  In the same way, provided the particular lines and items of other stock were ones approved or determined by Imam, then their continued sale later in time attracts a consultancy fee even though the particular consultancy services were provided at an earlier point in time.  As long as the “Other Stock” is purchased for a particular store, that store is one in respect of which Imam “is entitled to provide” consultancy services.

Relevance of the accounting records

  1. [76]
    Clause 5.2(b) provides that the consultancy fee is payable on a monthly basis “in accordance with the accounting requirements in sub-clause 8.1”.  In turn, clause 8.1 requires Life China to do two things:
    1. (a)
      within 7 days of the end of each month, render a written statement to Imam setting out the details of gross sales in respect of each store during the preceding month; and
    2. (b)
      prepare a quarterly profit and loss statement, and other reports and information as might be reasonably required to verify the gross sales and “the fees payable to the consultant for each store”; for that purpose, Life China agreed to maintain separate accounting and financial records for each store.
  2. [77]
    The commercial sense of clause 8.1 is plain.  The parties agreed to a mechanism by which Imam would be informed of monthly gross sales, and given access to accounting records by which the fees could be verified.  Support for that conclusion is found in clause 8.2, under which Imam was entitled to inspect and audit the accounts for each store, expressly for the purpose of determining and verifying the consultancy fees.
  3. [78]
    In respect of “Other Stock”, the consultancy fee was not paid as percentage of gross sales.  It was to be calculated “in an amount equivalent to 10% of the purchasing order for other stock of each store”.  The requirement was for the consultancy fee to be paid “within 7 days of the consultant advising the Purchasing Order has been placed”.
  4. [79]
    It was contended below that, on its proper construction, clause 5.2(b) required that Imam place the purchasing orders.  In my respectful view, that is not the proper construction.
  5. [80]
    As noted above, the obligation on Imam was to approve items of clothing and accessories as appropriate for supply and sale, and determine the nature and brands of the stock to be supplied.  Apart from negotiating towards supply, there was no requirement under the Agreement obliging Imam to actually place orders, either for Ittierre or other stock.  Once again, the provisions of clauses 8.1 and 8.2 reveal the true commercial purpose behind the payment provision in clause 5.2(b).  Under clause 8.1, monthly records of the gross sales for each store had to be kept, and profit and loss statements or other records produced so that Imam could verify “the fees payable … for each store”.  For that purpose, under clause 8.1(b), the respondents had to keep separate accounting and financial records for each store.  Those records could be inspected by Imam under clause 8.2, precisely for the purpose of determining and verifying the consultancy fees.
  6. [81]
    It is, in my view, plain that the parties contemplated that the accounting records maintained under clauses 8.1 and 8.2 would be sufficient to enable Imam to discern what purchasing orders had been placed, and therefore be in a position to advise of that fact for the purposes of clause 5.2(b).
  7. [82]
    There is one further matter to be noted about the consultancy fees in respect of “Other Stock”.  Clause 5.1(a) provides that the consultancy fee is to be “calculated in accordance with sub-clause 5.2...”.  Clause 5.2 does not determine whether or not a consultancy fee is to be paid, but merely how it is to be calculated and when it is to be paid.  Thus, in the case of Ittierre stock, it is to be paid on a monthly basis,[16] and in the case of “Other Stock”, it is to be paid within 7 days of Imam advising the purchase order has been placed.[17]  In the case of clause 5.2(b)(ii), the act of advising that a purchase order has been placed does not determine whether or not a consultancy fee is payable, but merely when that payment is to be made.  As noted above, the way in which the Agreement was contemplated to operate was that purchasing orders would be placed by Life China as part of the operation of the business, but in respect of items of clothing and accessories that were approved or determined by Imam.
  8. [83]
    To reach the contrary conclusion, namely that, until there was advice that a purchasing order had been placed, there was no entitlement to a consultancy fee, would be to render that part of the Agreement a commercial nonsense.  Under such a scenario, purchasing orders would have been placed to the certain knowledge of Life China (who placed them), with their existence and timing revealed in the accounting records kept under clause 8.1, and verifiable by access to the records under clause 8.2, yet no entitlement to the consultancy fee would arise until the advice was given.  In my respectful view, that cannot be the commercial intention of business persons in this case.

Meaning of the phrase “notwithstanding the termination of the Agreement”

  1. [84]
    As can be noted from paragraph [16] above, clauses 5.2(a)(iii) and (b)(iii), dealing with Ittierre stock and Other Stock, include the phrase “notwithstanding the termination of the Agreement”.
  2. [85]
    Clause 5.1(a) provides that Life China agreed to pay Imam the consultancy fee “calculated in accordance with sub-clause 5.2...”.  When one has regard to the terms of clause 5.2, there are only two provisions that determine the calculation:
    1. (a)
      in respect of Ittierre stock, the calculation is 10% of gross sales for each store, that being a store for which Imam provides or is entitled to provide the consultancy services; and
    2. (b)
      for Other Stock, the calculation is 10% of the purchasing order for each store, that being a store for which Imam provides or is entitled to provide the services.
  3. [86]
    The other provisions of clauses 5.2(a) and (b) do not govern the calculation of the fee, but rather the entitlement to payment.  Thus, in the case of Ittierre stock, the remaining provisions are that the fee is payable on a monthly basis in accordance with the accounting requirements in clause 8.1, and notwithstanding the termination of the Agreement.  In the case of Other Stock, it is payable within 7 days of Imam advising the purchase order has been placed, and notwithstanding the termination of the Agreement.
  4. [87]
    Once that is understood, the construction of the phrase “notwithstanding the termination of the Agreement” becomes clear.  It is relevant to whether the fee is payable or not.  Since the fee is payable as consideration for the provision of consultancy services, once consultancy services have been provided, the fee is then payable in respect of Ittierre stock and other stock related to those services, notwithstanding that the Agreement comes to an end.
  5. [88]
    Termination of the Agreement is governed under clause 9.  Termination can occur by written agreement under clause 9.1, or as the consequence of a default under clause 9.2.  Such a default is constituted only by a wilful or substantial breach of the Agreement by Life China, which produces a termination by Imam.  Clause 9.2 provides that, in that circumstance, Imam “will be entitled to recover from the Client any amounts then due to the Consultant as fees or reimbursable expenses that would otherwise be due to the Consultant under this Agreement”.
  6. [89]
    Clauses 9.1 and 9.2 deal with two instances under which the Agreement might be terminated.  One is by agreement and the other by the client’s default.  Those clauses do not purport to deal with termination by other means such as repudiation or abandonment.
  7. [90]
    However, whatever the means by which the Agreement is terminated, whatever fees have been earned to that point and are payable, are still payable notwithstanding the termination of the Agreement.  That is the meaning that must be ascribed to that phrase in clause 5.2(a)(iii) and in clause 5.2(b)(iii).

Abandonment

  1. [91]
    The learned trial judge made a number of findings relevant to this issue.  Some appear to be summaries of the position, as opposed to individual fact finding.
  2. [92]
    Early in the reasons, his Honour said:[18]

“[21] The point came at which the plaintiff was no longer providing the defendants with the Consultancy Services for which both agreements provided.  Indeed, there was a period of three years from July 2011 when there was barely any communication between them at all.  However, in July 2014 the plaintiff asserted his right to be paid the sum to which he says he was (and continues to be) entitled under the 2005 Varied Consultancy Agreement.  He also claims that the defendants breached the 2005 contract by failing to meet a requirement to provide access to financial records.  On 23 October 2018 he instructed his solicitors to send a letter that terminated the Agreement for breaches.”

  1. [93]
    The learned trial judge had difficulties with the credibility and reliability of both Imam and Mak.  Concerns about reliability were compounded by conclusions reached by his Honour in relation to Imam making deliberate misstatements in his bankruptcy proceedings.[19]  His Honour concluded that Imam’s evidence “cannot establish any proposition, even if only on the balance of probabilities, unless it is supported by logical inference or other evidence that is reliable”.[20]  That comment was made in relation to the issue of when the Consultancy Agreements were executed.  His Honour noted that, on many other issues, Imam’s evidence was supported by business records and emails.
  2. [94]
    His Honour noted what he described as “more serious criticisms” that could be made of the evidence of Mak.  In that respect, his Honour referred to a “pattern of evasion” which emerged in his evidence, and kept developing as he gave evidence.  As with Imam, his Honour concluded that Mak’s testimony “should be put to one side unless confirmed or supported by other evidence or obvious inference”.[21]
  3. [95]
    His Honour subsequently referred to paragraph [21] of the Reasons (set out above in paragraph [92]) in these terms:[22]

“[74] ... As noted above, there has in effect been no relationship, and certainly no business relationship between the parties since 2012.  The Agreement had not been “performed” by either party since, at the latest, 2010.”

  1. [96]
    The particular findings of fact concerning this issue are recorded in paragraph [141] of the Reasons:[23]

“[141] For those purposes of determining whether the defence is made out on that basis, relevant findings of fact include the propositions that:

  1. (a)
    The last time any money was paid to the plaintiff pursuant to the 2005 agreement was in May 2008.
  2. (b)
    In an email exchange during March 2010, the plaintiff asked the third defendant about his plans “for payment on my behalf”. After suggesting a lump sum annual payment, the third defendant ultimately concluded this exchange by saying “sorry, I cannot help you this time”.
  3. (c)
    The last “active” business related communication between the plaintiffs was an email in which the plaintiff informed the defendant and his wife that the fashion house Versace was looking for franchises in China and Hong Kong in order to distribute the label “Versus”. This was sent on 27 June 2010.
  4. (d)
    In June 2010, as a result of what the plaintiff says was a lot of effort from him, an agreement was struck between “Vicini” (the source of GZD products) and Life China. Mr. Eugenio Morselli of Vicini was the person with whom dealings were conducted.
  5. (e)
    In an email of 7 November 2010, the plaintiff wrote to Mr Morselli and informed him that he was “no longer involved with the company Life China.”
  6. (f)
    In an email dated 14 January 2011, the plaintiff wrote to the third defendant and asked him to send a “final account as at the end of 2010, and I will upon receipt, send you a final account. And lets settle our affairs and say goodbye”.
  7. (g)
    In the same email chain the plaintiff suggested that he and the third defendant calculate what they owe each other “and that will bring our business to an end”.
  8. (h)
    In an exchange on 26 May 2011 the plaintiff mused that the parties had done “a lot of good things together” and expressed a desire to “stay friends and let the business pressures go their own way”. The third defendant recorded that he and his wife had “tears in our eyes when we go through your words”.
  9. (i)
    In an email of 27 July 2011, the plaintiff wished the third defendant and his wife both “a happy life and successful business” and asked the third defendant to “finalise our buss”. The third defendant responded “we will settle it”.
  10. (j)
    In an email dated 29 July 2011 the plaintiff recalled that when he and the third defendant had first started business, that he foresaw that “one day you will stop speaking to me because of money” and that “our business relationship will come to an end”. He maintained, however, that the friendship might persist “without money in the middle”.
  11. (k)
    On 7 June 2012, the plaintiff, by email, asked to meet the third defendant to “discuss payments”. In the email it was suggested that he and the third defendant should grow up and “let bygone be bygones”.
  12. (l)
    On any view of the evidence, neither the plaintiff nor any of the defendants attempted to perform or call upon each other to perform any aspect of the agreement after November 2010.”

The Zanotti Contract

  1. [97]
    On 23 June 2010, a Master Franchise Agreement was signed between Life China and Giuseppe Zanotti Design (GZD).  The learned trial judge found that “the expansion into the GZD line was another example of the way in which [Imam] played a role in key events that led to the growth of Life China’s business”.[24]  Prior to the Giuseppe Zanotti flagship store opening in December 2008, Imam negotiated with various landlords about the leases for stores for Life China’s business.  The learned trial judge’s finding was justified on the evidence given that Imam introduced Mak to the manager of GZD, and conducted significant negotiations and communications with that business on behalf of Life China, including negotiating the exclusive licence to distribute and sell those products in Hong Kong, Macau, and mainland China.[25]
  2. [98]
    The finding was also underpinned by GZD’s manager referring to Imam’s “instrumental role in successfully starting up the LIFE master franchise into greater China...”.[26]
  3. [99]
    The items of stock supplied by GZD came within the definition of “Other Stock” in the Consultancy Agreement.
  4. [100]
    As part of the introduction of GZD products, Imam approved the five-year business plan and purchase plan which was applicable to the years 2008 to 2013.[27]
  5. [101]
    The GZD licence, and supply of GZD products, provides an example by which the proper construction of the Consultancy Agreement, and, in particular, the provision of consultancy services and the entitlement to consultancy fees, might be tested.
  6. [102]
    As previously noted, the consultancy fees were payable as consideration for the provision of consultancy services.  The consultancy services included using Imam’s business relationships (both current and future) with suppliers to obtain the supply of stock for Life China.[28]  The services also included Imam providing assistance in establishing each store.[29]  The stock as defined related to items that had been approved by Imam as appropriate for supply to, and sale in, the business,[30] and Imam was to determine the nature and brands of stock to be supplied.[31]
  7. [103]
    There can be no doubt, as recognised by the learned trial judge, that Imam’s involvement in securing the GZD licence, and consequent supply of GZD stock, constituted the provision of consultancy services.  Therefore, each store that received GZD stock and sold it was a store for which Imam had provided consultancy services within the meaning of clause 5.2.  Supply under the GZD licence was ongoing over a period of at least five years, until at least 2013.
  8. [104]
    Under clause 5.1, Life China agreed to paid Imam a consultancy fee calculated in accordance with clause 5.2, which meant that, for each store receiving and selling GZD stock, Imam was entitled to a fee in an amount equivalent to 10% of the purchasing orders of that GZD stock.  That fee did not depend upon the ongoing provision of consultancy services in respect of the GZD licence or GZD stock.  That was achieved by the provision of consulting services which achieved the GZD Master Franchise Agreement, as a consequence of which GZD stock was provided to Life China.  Of course, there were other ways in which consultancy services might be provided during the lifetime of the GZD licence, in respect of stores being supplied with and selling GZD stock.  However, the proper construction of the fee to which Imam was entitled, as calculated under clause 5.2, is that the provision of consultancy services to achieve the master franchise agreement, as a result of which GZD stock was supplied over the lifetime of that licence, was all that was required to earn the fee, calculated in an amount equivalent to 10% of the purchasing orders of GZD stock for each store.
  9. [105]
    Once one reaches that conclusion, it must follow that any suggested inactivity in respect of the GZD lines or products in the years after 2010, but still within the lifetime of a GZD licence, cannot be construed as a basis for inferring abandonment.  Nothing more needed to be done in order to earn the consultancy fee.

Factual basis for abandonment

  1. [106]
    In Wallera Pty Ltd v CGM Investments Pty Ltd,[32] Kiefel J said:

“[40] Whilst the Australian cases may not have discussed the theoretical basis for abandonment to any great extent it is clear that regard is to be had to the conduct of the parties and what might be inferred from it.  Abandonment may be seen as a conclusion that parties have no further interest in a contract continuing, even though they may have said nothing to that effect.  It may nevertheless be clear that they both regard it as at an end.  This can more readily be discerned where one or more of the parties have ineffectively attempted to bring the agreement to an end and both behave as if it was ended as occurred in Summers v The Commonwealth (1918) 25 CLR 144 and DTR Nominees Proprietary Limited v Mona Homes Proprietary Limited (1978) 138 CLR 423.”

  1. [107]
    Whether a contract has been abandoned is a question of fact to be inferred from an objective assessment of conduct of the parties.[33]  As the learned trial judge accepted, by reference to what was said by Kiefel J in Wallera, one must have regard to the conduct of the parties, and what might be inferred from that conduct.  The authorities establish that the court looks at an objective assessment of the conduct of the parties, and as to whether that conduct results in an inference that neither party maintains an intention to perform the contract.  The assessment does not call for an examination of whether a party actually had this objective intention of abandoning, but considers “whether their conduct, when objectively viewed, manifested that intention”.[34]
  2. [108]
    The conduct in this case was set out in paragraph [141] of the reasons of the learned trial judge: see paragraph [96] above.  It seems that his Honour relied only on the exchange of emails between the parties.[35]  It is difficult to discern that his Honour took into account, or relied upon, anything that was said as between the parties outside the emails.  Even if his Honour had done so, no findings were made as to which parts of what was said or done outside the emails was accepted by the learned trial judge.  It seems that his Honour approached it within the context of there having been no payment since 2008, and no attempt on the part of either party “to perform or call upon each other to perform any aspect of the agreement after November 2010”.[36]
  3. [109]
    In my respectful view, that approach gives insufficient weight to the conduct of the parties when seen in the context of the proper construction of the Consultancy Agreement.  For the reasons set out above, once consultancy services had been performed, and stock was supplied and sold as a consequence, so long as that stock was supplied and sold as a consequence of the consultancy services, Imam was entitled to the consultancy fees set out in the Agreement.  It did not matter, nor did the Consultancy Agreement require, that, in respect of that particular stock, Imam would perform further services.  Of course, the contract contemplated that other consultancy services would be performed from time to time, themselves generating further stores, further stock, or the likelihood of either.  But that was not necessary to ground the entitlement to be paid consultancy fees in respect of consultancy services already provided.  To put it another way, the approach taken by the learned trial judge did not take account of the accrued rights and liabilities under the Consultancy Agreement.
  4. [110]
    In my respectful view, the learned trial judge’s approach to the question of abandonment ignored that context.  It is only in that context that the emails can be properly assessed for what they reveal on this issue.
  5. [111]
    The other difficulty is that, in paragraph [141] of the Reasons, the learned trial judge said that relevant findings of fact “include the proposition that”, then referred to a number of sub-paragraphs, only two of which were not the contents of an email.  The first of those two was to refer to the last time money was paid in May 2008.[37]  The second is the expression of a conclusion:[38]

“On any view of the evidence, neither the plaintiff nor any of the defendants attempted to perform or call upon each other to perform any aspect of the agreement after November 2010.”

  1. [112]
    His Honour’s reference to “evidence” must, I consider, be taken to refer to the emails.  There is no analysis of any other evidence, and his Honour seemed to approach it on the basis that whatever inference might be drawn would be drawn from the terms of the emails themselves.[39]
  2. [113]
    I therefore turn to the emails identified by his Honour as forming the basis for his Honour’s conclusion that the consultancy agreement had been abandoned.
  3. [114]
    On 17 February 2008, Imam sent Mak an email stating that it had been “a year since you last made a payments (sic) towards my fees.  [C]an you please fill in the attached file and email me back”.[40]  The attached schedule concerned Ittierre stock in Guangzhou, and sought considerable detail as to the goods received, the retail sales, and the fees due on those items.  The response from Mak was: “[w]e will calculate and send you the money ASAP”.[41]
  4. [115]
    On 11 March 2008, Imam emailed the representative of GZD, enclosing a letter of intent and a purchase plan which covered the following five years.[42]  The email was copied to Mak and Life China.  In the plan, the business proposal included a list of 16 brands, only one of which was Ittierre, carried across six different stores.[43]  The plan also listed two phases of potential expansion across several cities.[44]  The proposed contract with GZD was for a 5 year term, with an option of renewal for an additional 5 years.[45]  The two directors of the organisation were listed as Mak and Imam.[46]
  5. [116]
    Importantly, the proposal also contained a spreadsheet showing that the proposed income over the following 5 years for just the GZD brand alone.[47]
  6. [117]
    That proposal was copied to the respondents, who made no qualification to it.
  7. [118]
    In 2008, there were exchanges between Imam on the one side, and Mak and Life China on the other, concerning payment of Imam’s fees.  Thus, on 25 March 2008, Life China made a payment which was late, apologising for it.[48]  Imam responded with, amongst other things, a list of questions and directions as to what sums were to be paid in which account.[49]
  8. [119]
    By 13 November 2008, difficulties with payment were evident.  Imam emailed Mak to ask, “[w]hen do you think you can send some money I am very much in need for funds from HK”.[50]  Imam also asked for his “last trip expense” to be added to the account.  Life China and Mak answered saying, “[w]e will calculate and send you the money ASAP”.[51]
  9. [120]
    On 24 December 2008, Mak responded to Imam who had sent an email asking, “how is the GZ store trading in Hk?”.[52]  Mak’s response was to give some figures as to the trading, and to comment on activities taken in respect of advertising and the like.  He also added, “PS.  I do remember your fees, don’t you worry”.[53]
  10. [121]
    In October and November 2009, emails were exchanged between Imam and the respondents in connection with lists of stock and the preparation of codes for various products.  Stock lists were provided by the respondents to Imam, and he sought a list for a particular brand.[54]
  11. [122]
    Nothing in those emails signifies anything but each side continuing with the rights and obligations under the Agreement.  Fees were being sought by Imam, and payment was being promised by Mak on behalf of Life China.  The parties were exchanging information on stock lists and brands, as well as codes for record keeping or sales.  The proposal for the GZD Master Franchise Agreement was in progress and being negotiated by Imam.  If Mak and Life China did not actually pay some fees, it signifies a breach, rather than an intention to abandon.
  12. [123]
    In February 2010, there was an exchange of emails concerning Imam’s selling stock to assist with Life China’s financial position, and Mak expressing his gratitude for Imam’s “support”.[55]  As appears elsewhere, this was the sale of old stock in an exercise that sat outside the consultancy agreement.
  13. [124]
    In March 2010, Imam sent a request to Mak asking, “[c]an you please tell me what are your plans for payment on my behalf …”.[56]  Mak’s response was on 1 March 2010, and included:[57]
    1. (a)
      a reference to a debt collector being in Mak’s office for the Macau project;
    2. (b)
      the statement, “I know it’s time to pay your fees.  As you mentioned, you will not charge for any shop/brand which is not making profit”;
    3. (c)
      a summary of the overall position of various stores and brands;
    4. (d)
      a proposal to vary the arrangement for Imam’s fees in these terms: “We’d like to suggest a lump sum of amount of HKD500,000 per year for your fee regardless of negative or positive figures (from this payment) and for your effort in negotiating our best terms”; and
    5. (e)
      an apology for making a mistake about cashflow in respect of the “D&G payment” and promising to “try very hard to settle 1M for you”.
  14. [125]
    On 9 March 2010, Mak responded to an email from Imam asking, “[a]ny news on the payment please?”, by saying, “[s]orry I cannot help you this time”.[58]
  15. [126]
    The position in March 2010, evident from those emails, was once again the pursuit of rights and obligations under the consultancy agreement.  Mak acknowledged that fees were due, and he was making an effort to pay them.  In fact, he made a proposal to vary the basis for payments of fees into the future.  The business affairs were still being discussed.
  16. [127]
    On 23 June 2010, the Master Franchise Agreement was signed between the respondents Life China and GZD.[59]  It is this document which, his Honour accepted, was an example of the way in which Imam had “played a role in key events that led to the growth of Life China’s business”.[60]
  17. [128]
    Under the Master Franchise Agreement, the Agreement was deemed to have commenced on 1 January 2010 and to continue for an initial term of 5 years.  The Master Franchise Agreement therefore ran till at least January 2015.
  18. [129]
    Clause 3.2 gave Life China the option to renew for a further term of 7 years.  Clause 4 obliged Life China, during the term of the Agreement, to place “irrevocable orders” for the purchase of merchandise not less than the minimum net amount set out in Annexure I.  The goods were to be sold at “Approved Shops”, and, during the term of the Agreement, Life China had the right to operate its business with the marks and trademarks of the licensor.
  19. [130]
    On 17 March 2010, Imam emailed Mak and Life China proposing, if they agreed, an alteration to the existing arrangements.[61]  Matters raised by him included the following:
    1. (a)
      he recorded that the relationship was nearly 10 years old;
    2. (b)
      the last payment had been received on 18 April 2008, and, since then, each time he asked for payment, the reply was “don’t worry”;
    3. (c)
      that he felt humiliated “every time having to ask for what is contractually my entitlement”;
    4. (d)
      responding to Life China’s proposal to alter the arrangements and pay HKD$500,000 per year, he set out a list of all the things of the various ways in which he had assisted over time, which included travelling for Life China 53 times, and travelling to the Middle East to find buyers for Life China’s old stock;
    5. (e)
      having listed the ways in which Mak and Life China had made promises which were unfulfilled, Imam said he needed to “bring things to a clean agreement”, because “[i]f we cannot work together with respect I don’t think we should go on”; and
    6. (f)
      he put forward a proposal to pay a monthly sum of $10,000 AUD “for all I have done and I will do for you”.
  20. [131]
    The state of affairs as revealed by the emails to March 2010, was, again, one where each side acknowledged that there were existing rights and obligations under the consultancy agreement, which continued into the future, at least to January 2015.  The proposals put by each side as to varying fees were put on the basis that there was an existing entitlement to fees, ongoing in future years.  Nothing in that bespeaks abandonment.
  21. [132]
    On 26 June 2010, Imam emailed Mak[62] advising him that he had been approached by Versace who were looking for franchisees in China and Hong Kong, and that “[i]f you are interested let me know and I will put you in contact with them”.
  22. [133]
    Mak’s response came the next day, 27 June 2010, in these terms:[63]

“Thanks for your information.  However, we have to take care of all our existing problems first before we think of any new development”.

  1. [134]
    Therefore, as at June 2010, Imam was offering to provide consultancy services, by way of introducing Versace.  The only reason Mak declined to take up that offer was because they needed “to take care of all our existing problems first”.
  2. [135]
    On 3 August 2010, Imam and his wife sent an email[64] in which the history between the two sides was rehearsed, and the failure to pay Imam was highlighted.  It included the statement:

“Be prepared to pay [Imam] the agreed percentage regularly, for the past the future, and for as long as you have the business, because this is the agreement, let [Mak] show you the contract.

Settle the account with [Imam] and let the past teach you a lesson that everything comes back to you good and bad.”

  1. [136]
    That email plainly proceeded on the basis that there were existing rights and obligations under the consultancy agreement, which would continue into the future.
  2. [137]
    On 13 January 2011, Imam emailed Mak[65] stating:

“I think it is time we settle our affairs,

Obviously we both don’t wish to continue our buss (sic) relationship.

I don’t like to leave things unsettled and in the Air.

Please send me a final account as at the end of 2010, and I will upon receipt, send you a final account

And lets settle our affairs and say good bye.”

  1. [138]
    Mak replied on 14 January 2011,[66] stating “[w]e are not the one who intend to discontinue the business relationship”.  Referring to merchandise which had been sold, the loss of money on “Venetian Macau”, what they had already paid Imam so far, and “your contributions to our shops”, Mak enquired as to what a fair final account would be.
  2. [139]
    Imam responded the same day,[67] “… you have not paid me since 2006, I am sure it is not difficult for you to calculate what is owing to me.  You calculate what you owe me and I will calculate what I owe you and that will bring our business to an end”.
  3. [140]
    The response from Mak came later again on 14 January 2011,[68] in which Mak pointed out that it was wrong to say he hadn’t been paid since 2006, as “we paid for you D&G merchandise in Hong Kong”.  Saying that he was on a business trip, Mak said he would “communicate with you and check our record after I return”.
  4. [141]
    At that point, even though Imam had suggested that neither side “wish to continue our buss (sic) relationship”, that was rejected by Mak, who said that his side “are not the one who intend to discontinue the business relationship”.  What followed was a promise by Mak to check Life China’s records and communicate further.
  5. [142]
    In my respectful view, the exchanges to that point cannot lead to the inference that each side had abandoned the Agreement.  The contrary is the case, with Imam insisting on fees being paid, and Mak and Life China acknowledging that there were fees to be paid.  Further, that was said in the context that the GZD Master Franchise was then only concluding its first year of the initial term of five years.
  6. [143]
    On 26 May 2011, emails were exchanged between Imam and Mak.[69]  Imam noted the friendship between the two parties, and the fact that “we don’t communicate any longer”.  He went on:

“For the sake of all that we have done together, because we did a lot of good things together, lets stay friends and let the business pressures go their own way.

I have included for you the final account of the sale of the old stock.

So please take a moment of your time and lets finalise the business matters, we have between us, stay in touch and on a friendly bases (sic).”

  1. [144]
    Mak responded:

“I remember very well what you once said ‘money is sinful’, and totally agree with you especially in the fashion world.  We surely want to settle it with you.

Rebecca and I are planning to have a long holiday break starting early next month.  We will do some calculations and get back to you after we return.”

  1. [145]
    Those emails discuss the prospect of finalising business and settling something, but with each side stating that would only occur if agreement can be reached.
  2. [146]
    The next exchange came after the holiday taken by Mak and his wife.  On 27 July 2011, emails were exchanged between Imam and Mak.[70]  Imam asked, “Please if you can spare some time lets finalise our buss (sic)”.  Mak responded: “You have my words we will settle it but please give me some time”.
  3. [147]
    Imam responded on 29 July 2011,[71] saying, amongst other things:

“I told you when we first started business, that one day you will stop Speaking to me because of money, and you did not think it was going to happen, our business relationship will come to an end, and may be when it does, we can Be good friends again, because we don’t have anything to argue about.  We have spent good times together and I pray we can do that again without money in the middle.

As to business I am organising my business so that I can totally retire by the end of the next year, I intend to retire early 2013.”

  1. [148]
    Once again, that email exchange spoke of the business relationship perhaps coming to an end, but again, only if there was agreement.  Imam’s intention to retire in 2013 proposed a date still within the life of the GZD Master Franchise Agreement, and therefore says nothing as to payment or receipt of fees under the Agreement.  In any event, Imam’s retirement, as expressed, said nothing in terms about his involvement with Life China ending.
  2. [149]
    On 7 June 2012, Imam sent an email to Mak,[72] asking if he was in Milan, giving the dates when he (Imam) would be in Italy, and saying:

“I would like to meet with you, and have a chat.

Please lets grow up and let bygone be bygones.”

  1. [150]
    Nothing in that email bespeaks a desire to abandon the Agreement or rights under it.
  2. [151]
    On 10 March 2014, Imam filed a Debtors Petition for bankruptcy, and a statement of affairs in respect of his bankruptcy.[73]
  3. [152]
    On 30 and 31 July 2014, there was an exchange of emails.[74]  The exchange commenced with Imam emailing Mak:

“I have sent you several messages on your phone and email And still I have no response from you.

Please don’t ignore this message, this is very serious.

I want to settle our account once and for all.

You have to pay what is outstanding on my account Last time you asked me to wait because your father was ill  Now bless his Soul your father is no more.

Please respect your promise and calculate what you own me And pay me what I am entitled to.”

  1. [153]
    That email drew a response from Mak’s wife, Rebecca who expressed surprise that Imam “still think that we owe you money instead of you owing us”, a reference to Imam’s sale of old stock.[75]  She concluded, “[w]e want to settle once and for all with you too”.
  2. [154]
    Imam replied:

“I have tried to contact [Mak] on several occasions and asking to settle the matters between us.  I have asked him to send me your annual sales figures so that I can calculate the money owing to me according to the contract.  Whether I owe you any money depends on the calculations of the amounts that you owe me.

We have a contract between us from 2004.

This contract requires you to pay me 10% of the gross sales annually.  That I have not received from you.

I will be in Hong Kong next week and I am happy to meet with you and [Mak] to finalise this matter if you wish.”

  1. [155]
    Rebecca’s response came in the form of an email to Imam:

“Please email me the contract as I believe there is no perpetual contract in the World.  Besides, we closed all the Armani & D&G shops few years ago.  I have no Obligation to send you our figures.  And in our record, I think we have paid you enough.  10% on gross sales?!  You are the only one would charge this rate.

For the sake of your own good and for your family, I recommend you don’t be too greedy and let go of it considering you already took 5000 pcs of merchandise from us.  We did not chase you to pay but instead you keep chasing us.  It’s really a charity from [Mak].  I hope you appreciate it and move on.”

  1. [156]
    On 3 August 2014, Imam responded to Rebecca’s email[76] in these terms:

“Let me remind you, your husband came to me wanted me to set up for him a fashion business.

1 – I took hm in my stores in Australia, where I trained him with his brother.  In all aspect of retailing

2 – He used my company name in Australia “Life” to establish his company in HK as Life China

3 – I introduced him to the Fashion business, I negotiated all the contracts from the beginning, I was doing all the buying for your group until [Mak] learnt.  I brought you all the best labels in Italy, and due to my standing in the fashion industries and that of my company I was able to secure for you leases even in Hong Kong IFC which was not in your reach.

I gave you the business you have now with my work over 7 years, I travelled to Italy to Hong Kong and to China all these years to establish your company, and now it is time that I collect what is due to me according to contract and law.  I have waited because [Mak] asked me to give him time due the Illness of his father, and I waited.

This is not charity from [Mak] as you claim; this is my entitlement and right.

4 – Now I am willing to negotiate this contract and the debt owing if [Mak] is willing, otherwise we will leave it to the courts to give the verdict, please remember you will be up to all the legal cost as you will lose.

My contract is solid and in place.  And I want to exercise my right.”

  1. [157]
    Rebecca’s response[77] was to state:

“We both would like to see justice for what we already paid you plus over 5000pcs of stock from us.”

  1. [158]
    The exchanges referred to in paragraphs [152] to [157] above all took place while the GZD Master Franchise Agreement was still in its first term.
  2. [159]
    On 8 June 2015, Imam sent an email to Mak,[78] in which he stated:

“Please attend to my account and pay me

I really don’t want to take this to court.

You promised before that you will pay me and asked me to wait.

I think I have waited enough.

I am not going to forget about it.

Until the account I settled.

Ignoring all my emails and telephone calls

Will only lead us to court.

Please don’t do this.”

  1. [160]
    What followed thereafter, from 15 June 2015 onwards, were demands by Imam for payment in accordance with the contract, and denials of responsibility by Mak and his wife.

Finding in respect of abandonment

  1. [161]
    The trial judge expressed the conclusion that:[79]

“On any view of the evidence, neither the plaintiff nor any of the defendants attempted to perform or call upon each other to perform any aspect of the agreement after November 2010.”

  1. [162]
    In my respectful view, that finding cannot be right insofar as it concerns Imam.  As the email exchanges referred to above show, Imam repeatedly pressed for payment due under the Consultancy Agreement from 2009 through to 2015.  Those demands for payment of what was due under the Consultancy Agreement have to be seen in light of the fact that, in June 2010, the Master Franchise Agreement was signed between Life China and GZD.  That licence ran for initial term of 5 years, with an option for a further 7 years.  Even in its initial term, the licence ran until 2015.  There is, on the trial judge’s unchallenged finding, no doubt that Imam was central to the establishment of the Master Franchise Agreement, and his entitlement to fees resulting from the implementation of that agreement was one which commenced at the time the licence was given, and continued during its term.  There is no suggestion in the emails that Imam was foregoing any of those fees.
  2. [163]
    Further, from the perspective of Life China and Mak, there was an acceptance of the need to settle accounts with Imam.[80]
  3. [164]
    Further, the finding that the defendants did not attempt to perform, or call upon Imam to perform, any aspect of the Agreement after November 2010, pays insufficient regard to the fact that Imam’s entitlement to such fees as would flow under the Consultancy Agreement from the GZD Master Franchise Agreement, was one which had a corresponding obligation on the part of the respondents to pay the fees.  That obligation accrued when the Master Franchise Agreement was signed, and the obligation continued during the life of the Master Franchise Agreement.
  4. [165]
    Further, Imam’s pursuit of the fees he asserted he was entitled to under the Consultancy Agreement must be seen in light of the communication on 3 August 2010, in which Mak and Life China were urged to be prepared to pay “the agreed percentage regularly, for the past, the future and for so long as you have the business”.  That was an unequivocal assertion of rights under the Consultancy Agreement, and nothing subsequent to that, in my respectful view, suggested that Imam was abandoning those rights.
  5. [166]
    The trial judge expressed the view that:[81]

“[150] The defendants’ failure to pay anything to the plaintiff after 2008 was an unmistakable sign that they saw the agreement as having run its course.  So if, as seems likely, the reasons for the inactivity all sourced to their unilateral decisions, then the defendants were breaching the agreement.  It was open to the plaintiff to trigger the operation of Clause 9, or at least threaten to, at any time during the exchanges that are documented in [141].  For that matter, the plaintiff could have sought the defendants’ agreement that termination be effected under that clause by whatever method.  He could, at that time, have reaped the benefit of at least the development fees.  And if he was of the subjective belief that the contract did provide him with an ongoing right to consultancy fees, then there was no downside to termination at that time – his right to those fees would be unaffected.  On his reckoning, they had always been accruing and would continue to do so.  There was every reason for him formally to have the contract terminated at that time.

[151] He was not, however, obliged to do that.  He could, for his own reasons, simply walk away from the arrangement.  His failure, during the email correspondence, to refer to the explicit terms of Clause 9 suggests that is what he chose to do at that time.  It may be noted that in the email of 29 July 2011, the plaintiff did write that he had ‘never lost a friend because of money yet’ and ‘was not about to do that’.”

  1. [167]
    In my respectful view, there are a number of difficulties with the findings expressed in that passage.  First, the failure on the part of the respondents to pay anything after 2008 was not an unmistakable sign that they saw the Agreement as having run its course.  They were simply in breach of their obligation to pay fees due under the contract.  Subsequently, there were a number of statements acknowledging that Imam was due various fees under the Agreement.  For example, on 1 March 2010 Mak responded saying “I know it’s time to pay your fees”.  At that time, Mak attempted to negotiate an alternative way of paying, HKD500,000 per annum, which was plainly an arrangement (if agreed) that would continue into the future.
  2. [168]
    Secondly, the fact that there was an avenue for termination under clause 9.2 of the Consultancy Agreement did not oblige Imam to trigger it.  Such a breach had to be, under the terms of clause 9.2, a “wilful or substantial” breach.  Merely triggering a termination under clause 9.2 did not necessarily mean that Life China would have accepted that they were in breach in the requisite way.
  3. [169]
    Thirdly, Imam’s failure during the email correspondence to refer to the explicit terms of clause 9 does not suggest, of itself, that he “chose” to “simply walk away from the arrangement”.  Such a conclusion is contrary to his continued claim to be entitled to fees under the Consultancy Agreement.
  4. [170]
    Fourthly, the respondents’ failure to pay after 2008 must also be seen in light of their acceptance that there were fees to be paid, and that efforts would be made to do so.[82]  Further, in May and July 2011, Mak was assuring Imam that he wanted to “settle it with you”, and that they would “settle it”.
  5. [171]
    The trial judge made findings concerning Imam being “shut out” in these terms:[83]

“[148] It has to be allowed that if indeed it was because he was ‘shut out’, the plaintiff’s failure to perform actions such as approve Stock would not support a conclusion that he thought the agreement had run its course – although it is a pretty good clue that the third defendant saw it that way.  However, and even if it was a case of being ‘shut out’, the situation must have been exercising the plaintiff’s mind.  It is fair to ask what would have been expected of this experienced businessman if he did believe in the ongoing existence of an agreement, especially when he had been so particular about its requirements, and when he must have known that he was not performing them.”

  1. [172]
    There is, in my respectful view, a number of difficulties with that passage.  First, there is no express finding in the reasons that Mak and Life China did shut Imam out of the business.  That is implicit in the finding expressed in paragraph [141(l)] of the reasons, namely that “neither the plaintiff nor any of the defendants attempted to perform … any aspect of the Agreement after November 2010”.  But that is a conclusion which does not, on its face, descend to an analysis of the relevant evidence, or make findings concerning the conduct of the parties in that respect.
  2. [173]
    One thing that must be borne in mind is that, under clause 8.1, Life China had ongoing obligations during the term of the Agreement, and during “any period during which the client … receive payment arising out of the Business”, to give a written statement of account to Imam setting out the gross sales on a monthly basis.  Further, under clause 8.1(b), the respondents were to prepare quarterly profit and loss statements, and such other reports and information as might enable Imam to verify the gross sales and the fees payable for each store.  Finally, under clause 8.1(b), the respondents were obliged to keep separate accounting and financial records for each store for the very purpose of providing Imam with enough financial information to enable both the gross sales and the fees payable to be verified.
  3. [174]
    No findings are made as to whether Life China complied with any of those obligations.  Nor are there any findings as to whether Imam sought to inspect and audit the accounts under clause 8.2, and if so, whether Life China permitted access.
  4. [175]
    Such findings are, in my respectful view, necessary to be made before one could conclude that Imam had the requisite intention to abandon the Agreement in circumstances where he had been shut out of performing his own obligations.  Furthermore, those findings are necessary to distinguish between the provision of services which had already occurred, such as procuring the Master Franchise Agreement with GZD, and those that might be rendered in the future.  For those that had been performed, leading to accrued obligations to pay fees, stand in a different circumstance to those services that might not have been performed because Imam had been shut out.
  5. [176]
    Finally, such findings would be necessary in order to properly assess whatever loss might flow, either by way of fees under the Consultancy Agreement, or by way of damages for breach.
  6. [177]
    Secondly, that passage reflects a focus on the subjective intentions of the parties.  The same approach is apparent in paragraphs [150], [162], [164], and [167] of the Reasons.  The relevant assessment that should have been made is of their presumed intention, objectively ascertained.
  7. [178]
    The trial judge made various findings in paragraphs [158]–[166] of the reasons, which include the following:
    1. (a)
      had the parties “thought that the chill reflected in post 2010 correspondence (and lack thereof) was no mor than another [shift in the commercial relationship], then there could have been another ‘variation’”;[84]
    2. (b)
      the parties were discussing the relationship itself, rather than an isolated squabble about a particular transaction; and the “circumstances suggest rupture, not rearrangement”;[85]
    3. (c)
      the emails cited in the pleadings are express, by both parties, and without dissent from either, in the language of finality;[86]
    4. (d)
      the prospect of a new arrangement being floated in 2010, of itself, called into questions “the status of and degree of attachment to any existing agreement”;[87]
    5. (e)
      chasing fees owed does not speak clearly to Imam’s state of mind about the future of the Agreement; “scant ambiguity attended words like ‘goodbye’; requests made for money were expressed in language which suggests that outstanding amounts were a loose end that had to be tied off in order to being the business of the parties “to an end”, “settled” and “finalised”.[88]
  8. [179]
    His Honour then concluded this part of the analysis by saying:[89]

“[165] The alternative is that the language used did not mean that the agreement was "no longer", but reflected a decision made by the plaintiff to forego - for an indeterminate, but temporary period, the length of which was being left to guesswork - his right to a steady stream of income derived from efforts made by defendants, who must have been selling Other Stock that had not been approved by the plaintiff.

[166] The words in question cannot be tortured so as to yield this meaning. Especially is this so when, in these emails, the plaintiff made reference to neither the existence, applicability nor ongoing effect of the 2005 Varied Consultancy Agreement. He did not say he considered it still to be in force, or indicate that he might terminate it, with the consequence that he would be – so far as he was concerned – entitled to Consultancy Fees (indefinitely) and also to Development Fees (immediately). He did not express concern about the fact that the defendants had not, as required, provided him with the information he would have needed if he was to pursue a claim to entitlements under the agreement. He did not assert any existing right to continue to provide Consultancy Services nor did he reaffirm his willingness and ability to perform them. In fact, at no stage did he express hope that his specific brand of Consultancy Services were, or ever again would be, required.”

  1. [180]
    The finding in paragraph [166] is troubling.  It is that, in the emails referred to in paragraph [141] of the Reasons, “the plaintiff made reference to neither the existence, applicability nor ongoing effect of the 2005 Varied Consultancy Agreement”, and Imam “did not say he considered it still to be in force”.  However, that finding is unsustainable given that:
    1. (a)
      in March 2010 Imam made a demand for payment under the Agreement, and Mak responded acknowledging “it’s time to pay your fees”;
    2. (b)
      in March 2010 Mak proposed to vary the payment of fees to an ongoing sum of HKD500,00 per annum;
    3. (c)
      the Master Franchise Agreement with GZD was signed on 23 June 2010;
    4. (d)
      on 3 August 2010 Life China was told to be prepared to pay Imam “the agreed percentage regularly, for the past, the future and for as long as you have the business”;
    5. (e)
      on 14 January 2011 Imam was pursuing the fees, saying to Mak that it was “not difficult for you to calculate what is owing to me”;
    6. (f)
      in May 2011 Mak expressed his position as being that he “surely want to settle it with you”;
    7. (g)
      in July 2011 the exchanges concerned whether the two sides would be able to settle their differences;
    8. (h)
      in August 2014 Imam was demanding his fees under the agreement unless it was renegotiated, which did not happen; and
    9. (i)
      in June 2015 demand was made for a percentage of the sales “according to our contract”.
  2. [181]
    Even if the finding in the second sentence of paragraph [166] of the Reasons was literally true, it does not take account of the accrued obligation to pay fees under the Agreement, and particularly once the Master Franchise Agreement with GZD was signed, and the assertion in August 2010 that the fees were owed “for the past, the future and for as long as you have the business”.
  3. [182]
    The trial judge expressed his conclusion on the question of abandonment in paragraph [167] of the reasons:

“[167] Viewed against a background of relative and relevant inactivity, these communications provide a window into the minds of those who created them.  Given the contents of the email of 14 January 2011 and the way in which the third defendant himself characterises the situation, it can be said with certainty that the defendants abandoned the agreement by (no later than) May 2011.  The plaintiff’s position was made clear in July 2011.  The mutual crystallisation of intention to abandon occurred no later than this.  By then, both parties had formed an intention that further services would not be provided pursuant to the agreement – with the consequence that further payments would not be made under it.”

  1. [183]
    In my respectful view, there are difficulties with that conclusion.  First, reliance on Imam’s email of 14 January 2011[90] is problematic given Mak’s response to that email, which commenced: “[w]e are not the ones who intend to discontinue the business relationship”.[91]
  2. [184]
    Secondly, reference to “the way in which the third defendant himself characterises the situation”, and reliance on paragraphs [284]-[286] of Mak’s affidavit is, with respect, misplaced.  For a start, paragraph [286] was deleted from the affidavit.  Paragraph [284] refers only to an email concerning the sale of old stock, which was not a transaction under the Consultancy Agreement.  Paragraph [285] simply referred to the exchange of emails on 26 May 2011, 27 July 2011, and 29 July 2011.  Those emails are summarised above in paragraphs [143]-[148] above.  They include each side expressing a desire to settle accounts once and for all, but omit the contention by Imam that he should receive the annual sale figures so that he could calculate the fees, and that the Agreement “requires you to pay me 10% of the gross sales annually”: see paragraph [154] above.  It also omits the assertions on behalf of Mak and Life China that “we do not owe you anything”, that the disagreement about the sale of old stock should be settled first, that there was no obligation to send Imam the figures, and that “10% on gross sales?!  You are the only one who would charge this rate”: see paragraph [155] above.
  3. [185]
    The assertions by Mak and Life China in those emails has to be weighed against the fact that Mak denied signing the Varied Consultancy Agreement, and his evidence was rejected “unless confirmed or supported by other evidence or obvious inference”.[92]  Furthermore, the conclusion does not bring into account the accrued rights and obligations arising from the Master Franchise Agreement with GZD, which, on the unchallenged finding of the learned trial judge, was brought about by the efforts of Imam.  On the proper construction of the Consultancy Agreement, by virtue of the fact that Imam brought the Master Franchise Agreement to fruition, and, under it, stock was supplied and sold for years beyond 2011 or 2012, Imam was entitled to consultancy fees, and that was an accrued entitlement during the period of the exchanges of emails analysed by his Honour.
  4. [186]
    For the reasons I have expressed above, the finding that the consultancy agreement was abandoned was in error.

Repudiation

  1. [187]
    The learned trial judge made no finding on the issue of repudiation, notwithstanding it was alive in the trial.  The Notice of Contention urges a conclusion that there was repudiation by Imam, accepted by Life China.  The submission runs thus:[93]
    1. (a)
      an email from Imam on 7 November 2010;[94] this was said to be a clear expression of his intention no longer to be bound by the 2005 Agreement and he subsequently made no attempt to perform the agreement; it was submitted that Life China accepted that repudiation by their conduct in not sending any emails to him or requesting that he perform any tasks on behalf of Life China;
    2. (b)
      an email from the appellant on 26 May 2011;[95] Imam communicated an intention not to continue to provide services to Life China, which Life China accepted by their responsive email; they also did not send any emails to him or request that he perform any tasks on their behalf;
    3. (c)
      further emails by 2 November 2012:[96] in addition to the emails above, Imam sent three further emails to Mak which demonstrated Imam’s desire to bring the relationship between himself and Life China to an end; this was consistent with his conduct in not performing any further work for Life China; Life China accepted this repudiation by not sending any emails to him or requesting that he perform any tasks on their behalf; and
    4. (d)
      Imam’s failure to provide the Consultancy Services: Imam’s failure to perform the 2005 Agreement by providing the Consultancy Services means that he was not ready, willing and able to perform his obligations; this was the position at all times after 7 November 2010; he cannot therefore claim for damages for its breach or repudiation.
  2. [188]
    The email from Imam on 7 November 2010[97] was not communicated to Mak or Life China. It was sent to the representative of GZD.  It was listed by the learned trial judge in paragraph [141] of the Reasons as a relevant finding of fact.  His Honour then found that it should not be interpreted as though it had been sent to Mak or Life China.[98]  There is no finding that it came to the attention of Mak or Life China in any relevant way.  It may be that Mak said something about that in his affidavits, but, if so, there is no finding about that either, and there were trenchant findings adverse to Mak’s credit: see paragraph [94] above.  In those circumstances, it can hardly be an act of repudiation.
  3. [189]
    The email of 26 May 2011 is dealt with at paragraphs [143] to [145] above.  As I have noted above, this email has to be seen in the context of the proper construction of the Consultancy Agreement, and the fact that the GZD Master Franchise Agreement, brought into existence through Imam’s provision of consultancy services, was on foot.  In my view, that email was not repudiatory in nature.  It certainly expressed a desire to put business pressures aside because they were interfering with the friendship, and suggested that the parties finalise “the business matters”.  It is by no means clear that the “business matters” was not a reference to the sale of old stock, a transaction outside the Consultancy Agreement.  But, in any event, it was proceeding on the basis that whatever could be achieved would only be achieved by agreement.  The response is telling against an act of repudiation, or acceptance, in that Mak said he would get back to Imam, and he did not.
  4. [190]
    Further, it does not contain any clear and unambiguous communication by Imam that he no longer considered himself bound by the Consultancy Agreement.  At best, the email was a possible prelude to a mutual termination pursuant to clause 9.1, but that is not sufficient to constitute an act of repudiation.
  5. [191]
    The other emails by 2 November 2012 are those dated 27 July, set out at paragraphs [146] to [148] above.  For the reason expressed there, the email cannot be seen as an act of repudiation.  Without more, it cannot be said with any certainty that the business referred to was a reference to anything other than the sale of the old stock.  There is no finding to that effect, and the findings adverse to credit make it an impossible task for this Court to make that leap.
  6. [192]
    Further, whilst it may be said that Imam explored the prospect of finalising his business with Life China, that does not amount to an intention to not perform in a way that should be considered repudiatory.  Again, the language is consistent with a possible prelude to a mutual termination pursuant to clause 9.1.
  7. [193]
    The fact that Mak or Life China did not ask for further particular services to be performed does not take the issue any further.  The GZD Master Franchise Agreement was in place, and stock was being obtained under it and sold.  As noted above, Imam proffered further service in relation to Versace, which was declined by Life China because of other business concerns: see paragraphs [132] to [134] above.  In a context where the GZD Master Franchise Agreement was the product of Imam providing consultancy services, business under that Master Franchise was ongoing, and the Versace offer was in June 2010, it is, in my view, difficult to construe the failure to provide other particular services as an act of repudiation, nor Life China’s response as an acceptance.
  8. [194]
    Further, when one analyses the emails, it is apparent that in the communications by Mak and Life China to Imam between 2010 and 2015, Life China did not issue any notice of termination, nor any demand for performance, nor an allegation of breach of the Consultancy Agreement.  Instead, they gave Imam repeated assurances that they would perform calculations and make payments.  That is not the conduct of a party accepting a repudiation.
  9. [195]
    This ground fails.

The Guarantee issue

  1. [196]
    The trial judge held that the 2005 Consultancy Agreement operated as a variation to the one executed in 2004.  As a consequence, the guarantee given by Mak under clause 10.2 of the 2004 agreement was still applicable.[99]
  2. [197]
    One ground of the Notice of Contention was that his Honour was in error to make that finding and should have concluded that the 2004 agreement was rescinded, not varied.
  3. [198]
    In Balanced Securities Ltd v Dumayne Property Group Pty Ltd,[100] the Court of Appeal of Victoria enumerated some of the relevant principles which would guide the court’s consideration as to whether a subsequent agreement amended an earlier one, or brought it to an end and replaced it.  Their Honours held the following were relevant to that assessment:
    1. (a)
      the earlier agreement can be brought to an end either expressly or by implication;
    2. (b)
      the issue is to be resolved by ascertaining the manifest intention of the parties;
    3. (c)
      that intention is to be ascertained objectively by construction of the subsequent agreement, having regard to the relevant context of that agreement in accordance with ordinary principles of contractual construction; and
    4. (d)
      one factor militating in favour of the conclusion that the earlier agreement has been brought to an end and replaced, is where the terms of the two relevant agreements deal with the same subject matter but in different and inconsistent ways.
  4. [199]
    The 2004 Consultancy Agreement was accompanied by the Deed of Guarantee referred to in clause 10.2 of that document.  That clause 10.2 was in identical terms to the same clause in the 2005 agreement:

“If the Consultant requires it, each Officer of the Client or is Associates must execute a Guarantee in the form attached as Annexure A to this agreement.”

  1. [200]
    A guarantee was required under the 2004 Consultancy Agreement, and it was attached to that agreement as Annexure A.  That guarantee was given by Mak.
  2. [201]
    The initial Consultancy Agreement bore the date 6 January 2004.  His Honour found that that date could not be right,[101] however the precise date does not matter.  His Honour found, and it is not challenged, that the 2004 agreement was executed by each side after it had been drafted by the firm of Imam’s solicitors.
  3. [202]
    His Honour recorded the evidence of Imam’s solicitor that, whilst he could not recall exactly when it was that he was instructed to draft the 2005 Varied Consultancy Agreement, he could recall that occurring.[102]  He also recalled that the 2005 version “arose out of some changes that [Imam] wanted to make to the original 2004 document”.[103]
  4. [203]
    His Honour held that the evidence established, on the balance of probabilities, that Mak signed the 2004 Consultancy Agreement, and the Guarantee, and both copies of the 2005 Varied Consultancy Agreement.[104]
  5. [204]
    When one compares the two documents, it is evident that the intention of both parties was to make one change only, and that related to the method of calculation of fees.  The consequence was an alteration to clause 5.2.
  6. [205]
    To reflect that alteration, two new definitions were inserted, that for “Other Stock”, and that for “Purchasing Order”.  In all other respects, the Agreement was in the same terms.  So much so is that the case that in clause 6.3 of each document, clause 6.3(a) refers to a non-existent sub-clause, namely “sub-clause 6.2(a)(i)”.  There is no such clause in either agreement.  Each is a reference to “Goodwill Growth”, which is dealt with in clause 6.2 and 6.4.  The precise detail is of no consequence, but the inclusion of the non-existent clause points directly to the fact that the 2005 agreement was not a redraft, but a document created from the 2004 agreement with such changes as were necessary to reflect the variation.
  7. [206]
    One additional change was to add a new version clause 5.4.  In the 2004 document, clause 5.4 provided:

“5.4 Payment of Fees and Expenses

The Client agrees to pay the Consultant on a monthly basis by the twentieth (20th) day of each month such fees and reimbursable expenses as are required under this Agreement into the Consultant’s bank account or in such other manner as the Consultant may direct in writing from time to time.”

  1. [207]
    To reflect the new requirement in clause 5.2(b)(ii), namely, payment of fees for other stock within 7 days of the advice that a purchasing order had been placed, clause 5.4 was altered so that it read:

“5.4 Payment of Fees and Expenses

The Client agrees to pay into the Consultant’s bank account or in such other manner as the Consultant may direct in writing from time to time:

  1. (a)
    for Other Stock within 7 days of the Consultant advising the Purchasing Order has been placed; and
  2. (b)
    for all other fees and reimbursable expenses as are required under this agreement on a monthly basis by the twentieth (20th) day of each month.”
  1. [208]
    Clause 5.2 in the 2004 agreement provided:

“5.2 Consultancy Fee

The Consultancy Fee is payable by the Client to the Consultant in respect of each Store for which the Consultant provides or is entitled to provide the Consultancy Services under this agreement;

  1. (a)
    in an amount equivalent to 10% of the Gross Sales of each Store;
  2. (b)
    on a monthly basis, in accordance with the accounting requirements in sub-clause 8.1; and
  1. (c)
    notwithstanding the termination of the Agreement”.
  1. [209]
    What was intended to be achieved was the effect recognised by his Honour in paragraphs [15]-[18] of the Reasons, namely, to provide a new formula for calculating fees under the Agreement.  That was reflected in the 2005 version of clause 5.2 which provided:

“5.2 Consultancy Fee

The Consultancy Fee is payable by the Client to the Consultant in respect of each Store for which the Consultant provides or is entitled to provide the Consultancy Services under this Agreement:

  1. (a)
    for Stock supplied by Ittierre [S.p.A.]:
  1. (i)
    in an amount equivalent to 10% of the Gross Sales of Stock supplied by Ittierre [S.p.A.] of each Store;
  2. (ii)
    on a monthly basis, in accordance with the accounting requirements in sub-clause 8.1; and
  3. (iii)
    notwithstanding the termination of the Agreement.
  1. (b)
    for Other Stock:
  1. (i)
    in an amount equivalent to 10% of the Purchasing Order for Other Stock of each Store;
  2. (ii)
    within 7 days of the Consultant advising the Purchasing Order has been placed; and
  3. (iii)
    notwithstanding the termination of the Agreement.”
  1. [210]
    The other significant feature about the 2005 document is that, by the time it was executed in July 2005, the parties’ relationship had been on foot for some time, but more particularly the regulation of the parties’ relationship by the 2004 Consultancy Agreement had been in existence for some time.  Thus, Recitals A and B, whilst in the same terms as those in the 2004 agreement, did not accurately reflect the situation in July 2005.  For example, Recital A records that “the client wishes to operate the business”.  Of course, by the time of the 2005 agreement, the client was operating the business.  Likewise, Recital B recorded that the consultancy services were to assist the client “in establishing stores”, whereas, by July 2005, stores had been established, and the business was already running.
  2. [211]
    Similarly, clause 2 records that “the client appoints the consultant to provide consultancy services”.  That was the case in 2004, and that appointment was in place by 2005.
  3. [212]
    The other factor that was in existence under the 2004 agreement was that there was already a guarantee given by Mak and attached to that agreement.  That Deed of Guarantee and Indemnity[105] offered a guarantee of “the performance of the Client under the Agreement” in clause 1, and contained in the Agreement, in clause 5(f), that the guarantor’s obligations would continue regardless of any variation of the rights of the consultant against the client under the 2004 agreement.
  4. [213]
    In my view, when due regard is had to the matters outlined above, his Honour was justified in concluding that the 2005 agreement was a variation, rather than a recission or replacement of the 2004 agreement.  Further, the fact that the parties were plainly aware that the guarantee required under clause 10.2 of the 2004 agreement was in place, and the terms of that guarantee included Mak’s agreement that his obligations would continue notwithstanding any variation under 2004 agreement, his Honour’s conclusion was, in my respectful view, inevitable.
  5. [214]
    In my view, this was not a situation where the common intention of the parties was to abrogate, rescind, supersede, or extinguish the 2004 agreement, and to substitute a complex new and self-contained agreement.[106]  Objectively speaking, the 2005 agreement reflected what the drafting solicitor understood, namely that the 2005 document arose out of some changes that Imam wanted to make to the original 2004 document.  It was not a wholesale change but, rather, a variation to cater for the changed calculation of fees in respect of Ittierre stock and other stock.
  6. [215]
    In my view, his Honour was right to conclude that the common intention of the parties was that the guarantee already attached to the 2004 agreement would continue in effect, and secure the obligations under the 2005 agreement.
  7. [216]
    This ground fails.

The quantum issue

  1. [217]
    The learned trial judge did not assess the quantum that might flow in the event that his conclusions about the issue of abandonment and the construction of the Agreement were incorrect.  Instead, his Honour took a truncated approach of recording his “views on the way in which I would have dealt with the issues raised under this heading”, namely quantum.[107]  The reason for that approach was said to be because there might be debate about the question of costs and because a significant part of the hearing was consumed by evidence about quantum.
  2. [218]
    His Honour then referred to the fact that evidence had been received from two experts, Mr Poole and Mr Borelli, observing that there had been a large area of common ground, but that the resolution of the residual conflict between the experts “absorbed a lot of legal energy”.[108]
  3. [219]
    His Honour then dealt with each of the issues “briefly”, but stated “the overarching conclusion is that where there is a difference in approach, Mr Borrelli’s methodology is to be preferred”.[109]
  4. [220]
    Dealing with the period of entitlement to consultancy fees, his Honour did no more than record the essence of the two competing arguments,[110] and then held that “[i]f it were necessary to do so, the Consultancy Fees for this period would be calculated by the method adopted by Mr Poole”.[111]  Nothing was said to elucidate what that “method” was, and why it was justifiable in the face of whatever Mr Borelli said.
  5. [221]
    One example of the lack of exposure to reasoning can be found in his Honour’s overall comments about the period of entitlement to consultancy fees.  Having set out that the plaintiff’s claim was for the period from 2 November 2012,[112] his Honour then identified the defendants’ submission that the period of entitlement to consultancy fees was from 2 November 2012 to 1 April 2015 for the Hong Kong stores, and 2 November 2012 to 1 April 2015 for the China stores.  That period was couched as being applicable “even if I was wrong about their nature”, a reference to the changing nature of the GZD stores had two points in time.  His Honour then said:[113]

“[191] If it was necessary to do so, the Consultancy Fees for this period would be calculated by the method adopted by Mr Poole”.

  1. [222]
    It is not immediately apparent what was being referred to as “this period”, but it is something in paragraph [190] of the Reasons.
  2. [223]
    The learned trial judge then identified six questions which “would have to be addressed in any quantification of future Consultancy Fees”, in the event that “there was not a requirement for the plaintiff to provide services under the agreement”, contrary to his Honour’s conclusions.[114]
  3. [224]
    What then followed was observations on the approach that his Honour “would have taken” or “should be adopted” in respect of each of those questions.[115]  However, there was no assessment of the quantum of the consultancy fees.  In at least one case, the question of whether the assessment should be at the date of trial or at the date of termination, his Honour adverted to the necessity to take into account the adverse effect of “major geopolitical and economic events such as protests in Hong Kong, the US – China trade dispute and COVID-19”, but omitted to say how those events should be taken into account, unless it was comprehended in the statement that fees “should be calculated on the basis of the relevant forecasts as at the date of the trial”.[116]
  4. [225]
    In another case, the issue of what the appropriate perpetuity growth rate was, his Honour simply referred to a figure published by the United Nations in the Economic and Social Survey of Asia and the Pacific 2018, and called it a “consistent and reliable source”, without exposing how or why that conclusion was reached.[117]
  5. [226]
    One issue was what the appropriate present value discount rate was.  His Honour indicated that “the use of Hong Kong data in the calculation of the present value discount rate would be the preferred approach”.[118]  That was said to be justified by the fact that some of the stores were located in Hong Kong, and others had a closer connection to Hong Kong than to market based in the USA.  However, the reasons do not expose any analysis of the data and how it might impact in any calculation.
  6. [227]
    One question was whether, and to what extent, store closures should be taken into account.  His Honour adverted to this[119] in two ways.  First, his Honour held that there was no basis for any conclusion that Imam had been involved in the set-up of the “pop-up” store, and therefore would not be entitled to any consultancy fees flowing from its establishment.  That, of course, depends upon his Honour’s construction of the Consultancy Services Agreement, which, for the reasons stated above, was in error.  Secondly, his Honour stated that a particular assumption about the IFC Mall store “should not, for a number of reasons, be included in calculations”.  However, his Honour did not elucidate what those reasons were, nor what the impact upon the calculations would be.
  7. [228]
    Similar difficulties appear in that section of the Reasons dealing with the disagreements between the two experts.[120]  At no point did his Honour actually assess the quantum or elucidate the reasons why any particular approach would result in any particular figure.
  8. [229]
    It has long been accepted that a judge is required to expose the reasoning on a point critical to a contest between the parties.[121]  The giving of adequate reasons lies at the heart of the judicial process, because a failure to provide them can lead to a real sense of grievance if the losing party cannot understand why they have lost.[122]  In my respectful view, his Honour’s approach to dealing with the issue of quantum infringes those principles.  This was such a central feature in the case that it does not come within those qualifications where a judge is not required to decide every matter in argument, but can “put it aside or … merely salute it in passing”.[123]  Furthermore, what was said by his Honour was based on an erroneous view of the construction of the contract.  It is not presently possible to discern how that might be different if the correct construction was adopted.
  9. [230]
    The respondents urged that this Court is in as good of a position as the learned trial judge to assess quantum.  With respect, that is not an approach which this Court should adopt.  The obligation on a trial judge is to make an assessment of the quantum, in the event that the judge is wrong on the question of liability.  No such assessment was made, and this Court should not be put in the position of attempting what the trial judge did not attempt.
  10. [231]
    It is therefore appropriate, in my view, that the issue of quantum be remitted to the trial judge for determination in accordance with these reasons.

Conclusion

  1. [232]
    For the reasons set out above, the appeal must be allowed.  There are two difficulties confronting what should follow.  First, the application of the correct construction of the Consultancy Service Agreement means that the existing findings as to issues on quantum may alter.  Secondly, it may be that further submissions will be needed on that issue, particularly as to the fees that are applicable in respect of the GZD Master Franchise Agreement.  The issue of quantum of loss should therefore be remitted to the learned trial judge, to be dealt with in accordance with these reasons.
  2. [233]
    I propose the following orders:
  1. 1.Appeal allowed.
  2. 2.Set aside the orders made on 28 May 2021 and 12 August 2021.
  3. 3.The matter is remitted to the trial judge for further consideration in accordance with these reasons.
  4. 4.The respondents pay the appellant’s costs of the appeal.
  1. [234]
    McMURDO JA and DAVIS J:  The relevant facts and the reasoning of the primary judge have been detailed in the judgment of Morrison JA, which permits us to express our reasons more briefly.  We have concluded that the appeal should be dismissed, because the primary judge was correct to hold that the contract had been abandoned, and any cause of action had accrued, by a date which was more than six years prior to the commencement of the proceeding.
  2. [235]
    The plaintiff, Mr Imam,[124] and the defendant companies (the companies) executed two written contracts, each called a Consultancy Agreement.  The first of them, which was signed in January 2004, was supported by a Deed of Guarantee and Indemnity executed by Mr Mak.  The second of them, which was signed in July 2005 and which we will call the Agreement, was in largely similar terms, including a provision for a guarantee to be given by Mr Mak.  At the same time however, no guarantee was executed by him.  There was an issue, which is now the subject of a notice of contention, as to whether Mr Mak’s guarantee given in 2004 applied to any breach by the companies of the 2005 agreement.  That question need not be answered because with one suggested exception, any cause of action against Mr Mak accrued at the same time as a cause of action against the companies.  As we will explain below, that suggested cause of action had no merit.

Required performance of the Agreement

  1. [236]
    To discuss whether the Agreement was discharged by a mutual abandonment, it is necessary to discuss the rights and obligations which the Agreement conferred and imposed.
  2. [237]
    Mr Imam’s primary obligation was to provide Consultancy Services, meaning services required by cl 3.  He was not required to advise the companies in relation to the day to day operations of the business.  However his services, as required by cl 3.1, were to involve the constant application of his knowledge and experience and the development and exploitation of his business relationships with his contacts, defined as “Suppliers”.  That included negotiating with the Suppliers for the supply of stock which had been approved by Mr Imam as appropriate for supply to and sale in the companies’ business.[125]  It included the procurement of any authorisation or licence from the Suppliers which was necessary to enable the companies to be supplied with and sell the stock.[126]
  3. [238]
    Mr Imam was required to assist the companies in establishing each store in their retail and wholesale operations.[127]  He was to assist with the initial and ongoing training and supervision of staff for each store.[128]  He was to supervise the “overall retail operations of the Business”.[129]  And he was to assist with the identification and establishment of further stores in the Territory, which was defined to mean the People’s Republic of China, including Hong Kong.[130]  More generally, he was to use his best endeavours to ensure that the business was successfully established and operated.[131]
  4. [239]
    The companies’ primary obligations were to pay the Consultancy Fee, the Development Fee and, Mr Imam’s expenses reasonably incurred in connection with his provision of the Consultancy Services.  The Consultancy Fee was to be paid promptly:  either (for Other Stock) within seven days of his advising of the placement of the Purchasing Order by which he was entitled to that fee, or for all other fees and reimbursable expenses, on a monthly basis.[132]
  5. [240]
    He was entitled to a Development Fee on the settlement of the sale of the Store to which that fee related, no later than five days from the settlement of the sale.[133]  And for each Store in existence, on termination of the Agreement for any reason whatsoever, he was entitled to be paid the Development Fee for each such Store.

The relevant evidence

  1. [241]
    The trial judge found Mr Imam and Mr Mak to be unpersuasive witnesses, such that evidence of neither could establish any proposition unless supported by logical inference or other evidence that was reliable.[134]  The question of whether the Agreement had been discharged by an abandonment had to be, and was able to be, decided by reference to emails between the parties in a period from March 2010 to June 2012, and to uncontroversial evidence as to what had happened, or more correctly not happened, by way of the performance by either side of the Agreement.  The judge found that the companies paid nothing under the Agreement from 2008 and that Mr Imam did nothing to perform it from 2010.[135]  He further found that from July 2011 until July 2014 “there was barely any communication between [the parties] at all”.[136]
  2. [242]
    The emails between the parties were summarised in paragraph [141] of the Judgment, which Morrison JA has set out at [96].  As Morrison JA has discussed, those emails were preceded by emails between the parties from early 2008, in which Mr Imam was continuously seeking to be paid Consultancy Fees and reimbursed for expenses.
  3. [243]
    In February 2010, an exchange of emails evidenced Mr Imam assisting the companies by selling some of their old stock.  However, that was not a service which was required by the Agreement.  In March 2010, Mr Mak effectively conceded that the companies were then unable to pay fees and expenses as required by the Agreement.  Nevertheless, Mr Imam continued to act on the basis of the Agreement being on foot, and was instrumental in the introduction of a new supplier to the business in June 2010.  However in an email to that supplier of 7 November 2010, Mr Imam wrote that he was “no longer involved with the company Life China.”
  4. [244]
    On or about 13 January 2011, Mr Imam emailed Mr Mak, saying that “I think it is time we settle our affairs” and that “[o]bviously we both don’t wish to continue our buss relationship.”  The email continued:

“I don't like to leave things unsettled and in the Air.

Please send me a final account as at the end of 2010, and I will upon receipt, send you a final account

And lets settle our affairs and say good bye.”

Mr Mak emailed in response: “We are not the one who intend to discontinue the business relationship”.

  1. [245]
    In an email of 26 May 2011, Mr Imam wrote:

“…I realise that we have been friends for a long time, and it is a pity that we don’t communicate any longer.

I have been very unhappy with several matters, and I am sure you are the same as well, so lets leave all that aside.

For the sake of all that we have done together, because we did a lot of good things together, lets stay friends and let the business pressures go their own way.

I have included for you the final account of the sale of the old stock.

So please take a moment of your time and lets finalise the business matters, we have between us, stay in touch and on a friendly bases [sic] ...”.

  1. [246]
    In response, Mr Mak emailed:

“We have tears in our eyes when we go through your words and all the memories we have in our mind.

… I remember very well what you once said ‘money is sinful’, and I totally agree with you especially in the fashion world. We surely want to settle it with you.

Rebecca and I are planning to have a long holiday break starting early next month.  We will do some calculations and get back to you after we return.”

  1. [247]
    On 27 July 2011, Mr Imam emailed:

“…I wish you both a happy life, and successful business, Please if you can spare some time let’s finalise our buss.”

In response, Mr Mak emailed “You have my words we will settle it but please give me some more time.”

  1. [248]
    On 29 July 2011, Mr Imam emailed:

“I told you when we first started business, that one day you will stop Speaking to me because of money, and you did not think it was going to happen, our business relationship will come to an end, and may be when it does, we can Be good friends again, because we don’t have anything to argue about.”

  1. [249]
    On 7 June 2012, by an email to Mr Mak, Mr Imam asked for a meeting and suggested that the parties “grow up and let bygone be bygones”.
  2. [250]
    As the trial judge observed,[137] after November 2010 neither side attempted to perform, or called upon the other to perform, any aspect of the Agreement.  By that the judge was referring to a further provision of Consultancy Services and the payment of the agreed remuneration for those services.  Clearly Mr Imam was seeking payment for services which he had provided, but he had provided no services under the Agreement after June 2010, and on an objective view, after no later than the end of 2010, he evinced no intention of providing further services.  At the same time, again on an objective view, the companies evinced no intention that he should provide any further services, pursuant to the Agreement or otherwise.  On an objective view, the parties had no intention of further performing the Agreement.
  3. [251]
    For the appellant, it is submitted that the judge erred in concluding that the Agreement was abandoned because his reasons showed that he was drawing conclusions about the parties’ actual intentions, rather than apparent intentions or an objective assessment from their conduct.[138]  That criticism is fairly based.  It is well established that “[t]he abandonment of a contract, in the sense of the mutual release of future obligations, being an inferred agreement, does not depend upon the subjective intention of the parties, but upon whether their conduct (both acts and omissions) viewed objectively manifests an intention to discharge the contract”, as Murphy JA said in Fazio v Fazio,[139] citing Summers v The Commonwealth,[140] Wallera Pty Ltd v CGM Investments Pty Ltd,[141] DTR Nominees Pty Ltd v Mona Homes Pty Ltd[142] and Marminta Pty Ltd v French.[143]  Nevertheless, because the judge found both Mr Imam and Mr Mak to be unreliable witnesses, he ultimately reasoned by reference to the parties’ intentions to be inferred from their acts and omissions and any misstatement by the judge as to an actual rather than an apparent intention was inconsequential.
  4. [252]
    In Fazio, Murphy JA referred to the abandonment of a contract, in the sense of the mutual release of future obligations.  Similarly, in Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd,[144] Nettle and Beach JJA and McMillan AJA said:

“The consequences of the discharge of a contract by abandonment depend on the intention of the parties as manifested in the way that they have acted in relation to each other. According to ordinary contractual principles, the manifestation of such an intention may be express or implied. Where, however, a contract has been partly performed, it is not lightly to be supposed that parties intend to abandon accrued rights. Absent a clear indication to the contrary, it is to be inferred that the abandonment of a contract operates prospectively without prejudice to accrued entitlements.”[145]

  1. [253]
    The appellant’s argument advances four suggested reasons why, on the evidence, there should have been no finding that the parties had abandoned the Agreement.  The first is that Mr Imam had partially performed the Agreement with the consequence that, on the proper construction of cl 5.2 of the Agreement, he was entitled to receive an ongoing income from the conduct of the business.  It is said that it was unlikely that he would have abandoned his right to receive that future income stream.  As to that point, we accept that whilst the Agreement remained on foot, Mr Imam would have enjoyed a continuing remuneration that could be characterised as a reward for his past performance, and that this could have been a very large remuneration.  Against that, and again on an objective view, Mr Imam had been paid nothing for many years and the emails demonstrated a practice of delay and obfuscation by the companies which could not have engendered confidence that he would be properly remunerated in any event.
  2. [254]
    Secondly, it is submitted that the effect of the email communications was that the contractual relationship would end only once Mr Imam had received the financial information necessary for him to properly calculate the fees owing to him.  In other words, it is said, this was only an offer by him to bring the contract to a close.  That characterisation of the communications cannot be accepted.  The critical emails, dating from the beginning of 2011, occurred in the context where he had already ceased to provide the services which performance of the Agreement required of him.
  3. [255]
    Thirdly, it is submitted that the accounting which Mr Imam was requesting from the respondents was something to which Mr Imam was entitled only if the Agreement remained on foot.  Therefore, it is said, his requests for that information were consistent only with Mr Imam insisting that the companies perform their obligations under the Agreement.  This submission appears to misunderstand the respondents’ case, as upheld by the judge, which was that this was an abandonment of a contract operating prospectively and without prejudice to accrued entitlements.  Mr Imam’s insistence upon the provision of information to which he had an accrued entitlement was not inconsistent with the abandonment of the contract.
  4. [256]
    Fourthly, it is submitted that Mr Imam’s conduct, in not providing any services after June 2010, was insignificant because the Agreement did not require those services to be provided by specified times or with any specified frequency.  It is submitted that the manner of provision of those services was left entirely to Mr Imam’s reasonable judgment.  Further, it is said, it is significant that this was a long term contract, with no specified end date, so that a period of inaction provided even less of an indication that the Agreement was abandoned.  This submission cannot be accepted.  We have referred to the services which the Agreement required of Mr Imam.  It did not require services to be provided week by week, but the Agreement required the conscientious application of Mr Imam’s knowledge and experience on a continuous basis.  By the time of his June 2012 email, Mr Imam had done nothing to perform his contract for two years.
  5. [257]
    In our opinion, the omissions of the parties in the non-performance of their contract, together with their communications with each other at least from the beginning of 2011 through June 2012, manifested an intention of the parties to abandon the Agreement with prospective effect, although without prejudice to accrued entitlements.  The trial judge was correct to conclude that the contract was abandoned before 2 November 2012, which was the date that was six years prior to the commencement of the proceeding.
  6. [258]
    The abandonment of the Agreement may have engaged cl 9.3, which provided that on termination of the Agreement for any reason whatsoever, the Consultant would be entitled to be paid the Development Fee in respect of each and every Store in existence as at the date of termination.  By cl 9.3, Mr Imam was entitled to be paid the Development Fee calculated in accordance with cl 6.3 and cl 6.4 in respect of every Store then in existence.  The parties may have acted towards each other in a way which was inconsistent with the employment of that entitlement in the abandonment of the Agreement.  The point need not be decided, because any Development Fee was to be paid within 28 days of the termination, which was well prior to 2 November 2012.
  7. [259]
    Those provisions concerned only the Development Fee.  There was no corresponding provision for the Consultancy Fee.  As the abandonment of the contract did not affect rights which had accrued, Mr Imam remained entitled to recover whatever Consultancy Fees had become payable to him.  He remained entitled to the fee for such stock which had been supplied by Ittierre SPA and sold by the companies.  Similarly, he remained entitled to a Fee for such Other Stock for which an order had been placed.  Further, he remained entitled to the provision of such information, as to Gross Sales of Stock or Purchasing Orders as was necessary for the quantification of those unpaid fees to which he was then entitled.
  8. [260]
    However Mr Imam was not entitled to be paid a Consultancy Fee calculated on sales of Ittierre SPA Stock or purchases of Other Stock which occurred after the discharge of the contract.
  9. [261]
    If the Agreement was instead discharged by Mr Imam for the companies’ breach or repudiation, still Mr Imam would not have been entitled to ongoing payments of the Consultancy Fee calculated on subsequent sales or purchases by the Business.  Rather, the loss of that further income would have been a factor in the quantification of Mr Imam’s damages for loss of the bargain, a cause of action which would have accrued on the discharge of the contract.
  10. [262]
    The appellant’s case is that, according to the terms of cl 5.2, Mr Imam remained entitled to an ongoing stream of Consultancy Fees based upon sales and purchases which postdated the termination of the contract.  This argument relies upon the words in cl 5.2(a)(iii) and cl 5.2(b)(iii), “notwithstanding the termination of the Agreement”.  That interpretation cannot be accepted.  The Consultancy Fee was expressed to be payable in respect of each Store for which the Consultant “provides” or “is” entitled to provide the Consultancy Services.  Obviously, once the Agreement was terminated, the Consultant neither provided nor was entitled to provide Consultancy Services.  The present tense was used in cl 5.2 with the apparently intended effect, unsurprisingly, of entitling Mr Imam to a Consultancy Fee only whilst he was a Consultant.  The words “notwithstanding the termination of the Agreement” were apparently intended to make it clear that Mr Imam would be entitled to a Consultancy Fee, notwithstanding the termination of the Agreement, for sales or purchases, as the case may be, which had occurred prior to the termination.
  11. [263]
    Consequently, no cause of action could have arisen in favour of Mr Imam against the companies at a later date than the discharge of the Agreement by its abandonment.  As the Agreement was abandoned at least well before 2 November 2012, the proceeding was brought beyond the limitation period of six years when it was commenced on 2 November 2018.
  12. [264]
    In the same way, the proceeding which was then brought against Mr Mak was out of time.  The obligations of Mr Mak, under the Deed of Guarantee and Indemnity which he executed in January 2004, were as follows.  He guaranteed that the companies would duly perform their obligations under the 2004 agreement.  As a primary obligation, he agreed to pay to Mr Imam any amount due and payable by the companies to the Consultant under the terms of that agreement which was not paid when due.  Consequently, if his obligations under that Deed extended to the (2005) Agreement, his obligation to pay Consultancy Fees, Development Fees and expenses accrued simultaneously with that liability of the companies.
  13. [265]
    By cl 4 of the Deed, he agreed to indemnify and keep indemnified Mr Imam against all damages, costs, expense and losses of any kind which Mr Imam might suffer as a result of any breach by the companies.  However that covenant could not have applied to Mr Imam’s entitlement to fees and expenses which were payable under the Agreement,[146] because Mr Mak’s obligation in respect of them would have been his primary obligation expressed in cl 3 of the Deed.  Mr Imam’s entitlement to unpaid fees and expenses was not at the same time an entitlement to damages for breach of the Agreement.
  14. [266]
    At the trial, it was submitted for Mr Imam that it was not demonstrated that any cause of action had accrued prior to 2 November 2012.  That argument was largely based upon the contention, which we have rejected, that there was an ongoing entitlement to Consultancy Fees for sales and purchases which post-dated the termination of the Agreement.  It was also submitted to the trial judge that there was an ongoing obligation to provide records of the business,[147] which seemed to be premised on the same argument of an ongoing entitlement to Consultancy Fees, but to the extent that there was an ongoing obligation to provide such information as was necessary to verify the Consultancy Fees for which there was an accrued entitlement, the plaintiff’s cause of action would have been to the fees as a debt payable under cl 5.2, without a parallel claim for damages for a failure to provide that information.
  15. [267]
    It was also submitted to the trial judge that amounts became payable under cll 6.2 and 6.3 for Development Fees after 2 November 2012.  As we have explained, that cannot be accepted because the Development Fees became payable upon termination of the Agreement by the operation of cl 9.3.
  16. [268]
    In this Court, a further point is advanced for the appellant.  It is submitted that Mr Imam became entitled to be indemnified for costs incurred in a proceeding brought in Hong Kong.
  17. [269]
    In December 2016, Mr Imam caused letters of demand to be sent to each of the respondents from a Hong Kong firm of solicitors, seeking payment of Consultancy Fees and the provision of financial information.  The respondents requested a mediation under cl 10.5 of the Agreement, and a mediation was commenced before it was adjourned with no resumption.  In December 2017, Mr Imam entered into a conditional litigation funding agreement, which was expressed to be conditional upon approval for that agreement by a court in Hong Kong.  The application for approval was heard over two days in July 2018, and in the following month, judgment was delivered in which the court refused, on jurisdictional grounds, to approve the funding agreement.  Being unable to pursue his case in Hong Kong without funding, Mr Imam discontinued the proceedings in September 2018.[148]
  18. [270]
    From those circumstances, it is submitted for the appellant that Mr Imam was entitled to be indemnified by Mr Mak for his costs and expenses in the proceedings in Hong Kong, and it is said that this entitlement arose only when the costs were incurred, so that the case against Mr Mak was not entirely statute barred.
  19. [271]
    That submission cannot be accepted.  Mr Imam had no arguable case to be indemnified against those costs and expenses under the indemnity agreed to by Mr Mak, because they were not “damages, costs, expense and losses …[suffered] as a result of any breach of the Agreement by the [companies].”  They were costs and expenses which were wastefully incurred from a misconception by Mr Imam (or his legal advisors) that a court in Hong Kong might approve his litigation funding agreement.  In that Court’s view, it had no jurisdiction to do so.  On no common sense view could these costs and expenses be said to have been caused by any breach of the Agreement.[149]
  20. [272]
    Consequently, no cause of action pleaded by Mr Imam arose within six years of the commencement of the proceeding against the respondents, including Mr Mak.  That is sufficient to dispose of the appeal, without expressing a view about other arguments, including those raised by the Notice of Contention.
  21. [273]
    We would order that the appeal be dismissed with costs.

Footnotes

[1] Life (China) Company Limited and Guangzhou Life Trading Company Limited.

[2] Imam v Life (China) Company Limited & Ors [2021] QSC 124 at [1]-[6].  Citations omitted.

[3] Reasons below at [20]-[22].  Citations omitted.

[4] Appellant’s Outline, paragraph [21].

[5] Clause 3.1(c).

[6] Clause 3.1(e).

[7] Clause 5.2(a)(iii) in respect of Ittierre stock; clause 5.2(b)(iii) in respect of Other Stock.

[8] Clause 3.1(a).

[9] Clause 3.1(b).

[10] See clauses 3.1(a) and (b).

[11] Clauses 3.1 and 7.1.

[12] Clause 3.1.

[13] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47].

[14] (2015) 256 CLR 104.

[15] French CJ, Nettle and Gordon JJ.  Citations omitted.

[16] Clause 5.2(a)(ii).

[17] Clause 5.2(b)(ii).

[18] Reasons at [21].  Citations omitted.

[19] Reasons at [173] – [179].

[20] Reasons at [46].

[21] Reasons at [48].

[22] Reasons at [74].  Citations omitted.

[23] Citations omitted.

[24] Reasons at [18], FN 20.

[25] AB 694-721.

[26] AB 788.

[27] AB 694-721.

[28] Clause 3.1(a).

[29] Clause 3.1(c).

[30] Definition of “Stock”.

[31] Clause 7.1.

[32] [2003] FCAFC 279, at [40].  Emphasis added.

[33] Ryder v Frohlich [2004] NSWCA 472 at [136]; Sze Tu v Lowe (2014) 89 NSWLR 317 at [304].

[34] Marminta Pty Ltd v French [2003] QCA 541 at [22].

[35] Reasons at [142] and [180].

[36] Reasons at [141](l).

[37] Reasons [141](a).

[38] Reasons [141](l).

[39] Reasons [180], first sentence.

[40] AB 692.

[41] AB 726.

[42] AB 694.

[43] AB 699.

[44] AB 701.

[45] AB 718.

[46] AB 720.

[47] AB 721.

[48] AB 722 – 723.

[49] AB 722.

[50] AB 726.

[51] AB 726.

[52] AB 728.

[53] AB 728.

[54] AB 734 – 735.

[55] AB 737.

[56] AB 731.

[57] AB 731.  Emphasis added.

[58] AB 733.

[59] AB 2084.

[60] Reasons [18] – [20] and FN 20.

[61] AB 738—740.  Emphasis added.

[62] AB 743.

[63] AB 744.

[64] AB 745—746.

[65] AB 749.

[66] AB 750.

[67] AB 750.

[68] AB 789.

[69] AB 757 and 758.

[70] AB 756.

[71] AB 755.

[72] AB 761.

[73] AB 2057 – 2080.

[74] AB 767-769.

[75] A transaction sitting outside the Consultancy Agreement.

[76] AB 766.

[77] AB 766.

[78] AB 826.

[79] Reasons at [141(l)].

[80] So much is recognised as a minimum in the emails of 26 May 2011 and 27 July 2011.

[81] Reasons at [150].

[82] See the emails exchanges on 12-13 November 2008, 24 December 2008 and 1 March 2010.

[83] Reasons [148].

[84] Reasons at [158].

[85] Reasons at [159].

[86] Reasons at [160].

[87] Reasons at [161].

[88] Reasons at [164].

[89] Reasons at [165] and [166].

[90] Summarised in the reason paragraph [141(f)].

[91] AB 789.

[92] Reasons at [48].

[93] Respondents’ outline paragraphs 52-56.

[94] AB 788.

[95] AB 794-796.

[96] Respondents’ outline paragraphs 55 and AB 797-800.

[97] AB 788.

[98] Reasons [162].

[99] Reasons at [70]-[71].

[100] (2017) 53 VR 14 at [32].

[101] Reasons at [38].

[102] Reasons at [55].

[103] Reasons at [55].

[104] Reasons at [61].

[105] AB 157.

[106] See British & Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48 at [67].  See also Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 at footnote 51.

[107] Reasons at [185].

[108] Reasons at [187].

[109] Reasons at [188].

[110] Reasons at [189]-[190].

[111] Reasons at [191].

[112] Reasons at [189].

[113] Reasons at [191].

[114] Reasons at [192].

[115] Reasons at [193]-[198].

[116] Reasons at [194].

[117] Reasons at [196].

[118] Reasons at [197].

[119] Reasons at [198].

[120] Reasons at [199]-[204].

[121] Camden v McKenzie [2008] 1 Qd R 39, at [29]-[31].

[122] Abdel Naser Qushair v Naji Raffoul [2009] NSWCA 329 at [52].

[123] Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 385-386.

[124] Mr Imam died between the primary judgment and the hearing of this appeal.  By an order, his widow was substituted as the appellant.

[125] Cll 1.1, 3.1(a), (b).

[126] Cl 3.1(a).

[127] Cl 3.1(c).

[128] Cl 3.1(c)(ii).

[129] Cl 3.1(d).

[130] Cll 1.1, 3.1(e).

[131] Cl 4.1(a)(i).

[132] Cl 5.4.

[133] Cl 6.2(c).

[134] Imam v Life (China) Limited & Ors [2021] QSC 124 (Judgment) at [46], [48].

[135] Judgment [137].

[136] Judgment [21].

[137] Judgment [141](l).

[138] Judgment [147].

[139] [2012] WASCA 72 at [74].

[140] (1918) 25 CLR 144 at 151-152.

[141] [2003] FCAFC 279 at [2], [40], [57].

[142] (1978) 138 CLR 423 at 434.

[143] [2003] QCA 541 at [21]-[22].

[144] (2014) 45 VR 79 at [19].

[145] Citing Summers v The Commonwealth at 151-2; DTR Nominees Pty Ltd v Mona Homes Pty Ltd at 434; Fitzgerald v Masters (1956) 95 CLR 420 at 432 and Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 369.

[146] Assuming the Deed extended to the Agreement.

[147] Plaintiff’s written submissions at trial, paragraph 190 AR 354.

[148] Plaintiff’s written submissions at trial, paragraph 84 AR 318-319.

[149] cf Insurance Aust v Milton [2015] NSWSC 1392 at [35].

Close

Editorial Notes

  • Published Case Name:

    Imam v Life (China) Company Limited & Ors

  • Shortened Case Name:

    Imam v Life (China) Company Ltd

  • MNC:

    [2023] QCA 19

  • Court:

    QCA

  • Judge(s):

    Morrison JA, McMurdo JA, Davis J

  • Date:

    17 Feb 2023

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2021] QSC 12428 May 2021Plaintiff's claim dismissed: Callaghan J.
Primary Judgment[2021] QSC 19912 Aug 2021Costs judgment following [2021] QSC 124.
Notice of Appeal FiledFile Number: CA7264/2125 Jun 2021Notice of appeal against [2021] QSC 124 filed.
Appeal Determined (QCA)[2023] QCA 1917 Feb 2023Appeal against [2021] QSC 124 dismissed with costs: McMurdo JA and Davis J (Morrison JA dissenting).

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Abdel Naser Qushair v Naji Raffoul [2009] NSWCA 329
1 citation
Jump To
Cite 1 - [2009] NSWCA 329
Balanced Securities Ltd v Dumayne Property Group Pty Ltd (2017) 53 VR 14
1 citation
Jump To
Cite 1 - (2017) 53 VR 14
British & Benningtons v North West Cachar Tea Co (1923) AC 48
1 citation
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Cite 1 - (1923) AC 48
Camden v McKenzie[2008] 1 Qd R 39; [2007] QCA 136
1 citation
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Cite 1 - [2008] 1 Qd R 39
Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd [2014] VSCA 32
1 citation
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Cite 1 - [2014] VSCA 32
Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79
2 citations
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Cite 1 - (2014) 45 VR 79
Cite 2 - (2014) 45 VR 79
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520
1 citation
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Cite 1 - (2000) 201 CLR 520
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12
1 citation
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Cite 1 - [1978] HCA 12
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 C.L.R 423
4 citations
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Cite 1 - (1978) 138 C.L.R 423
Cite 2 - (1978) 138 C.L.R 423
Cite 3 - (1978) 138 C.L.R 423
Cite 4 - (1978) 138 C.L.R 423
Fazio v Fazio [2012] WASCA 72
2 citations
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Cite 1 - [2012] WASCA 72
Cite 2 - [2012] WASCA 72
Fitzgerald & Anor v Masters (1956) 95 CLR 420
2 citations
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Cite 1 - (1956) 95 CLR 420
Cite 2 - (1956) 95 CLR 420
Fitzgerald v Masters [1956] HCA 53
1 citation
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Cite 1 - [1956] HCA 53
Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378
1 citation
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Cite 1 - (1983) 3 NSWLR 378
Imam v Life (China) Company Limited [2021] QSC 124
3 citations
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Cite 1 - [2021] QSC 124
Cite 2 - [2021] QSC 124
Cite 3 - [2021] QSC 124
Marminta Pty Ltd v French [2003] QCA 541
3 citations
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Cite 1 - [2003] QCA 541
Cite 2 - [2003] QCA 541
Cite 3 - [2003] QCA 541
MF-Insurance Aust v Milton [2015] NSWSC 1392
1 citation
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Cite 1 - [2015] NSWSC 1392
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
2 citations
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Cite 1 - (2015) 256 CLR 104
Cite 2 - (2015) 256 CLR 104
Ryder v Frohlich (2004) NSWCA 472
1 citation
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Cite 1 - (2004) NSWCA 472
Summers v The Commonwealth (1918) 25 CLR 144
4 citations
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Cite 1 - (1918) 25 CLR 144
Cite 2 - (1918) 25 CLR 144
Cite 3 - (1918) 25 CLR 144
Cite 4 - (1918) 25 CLR 144
Summers v The Commonwealth [1918] HCA 33
1 citation
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Cite 1 - [1918] HCA 33
Sze Tu v Lowe (2014) 89 NSWLR 317
1 citation
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Cite 1 - (2014) 89 NSWLR 317
Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279
3 citations
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Cite 1 - [2003] FCAFC 279
Cite 2 - [2003] FCAFC 279
Cite 3 - [2003] FCAFC 279
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361
2 citations
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Cite 1 - (1936) 54 CLR 361
Cite 2 - (1936) 54 CLR 361
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd [1936] HCA 6
1 citation
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Cite 1 - [1936] HCA 6

Cases Citing

Case NameFull CitationFrequency
Coulter v Queensland Building and Construction Commission [2024] QCAT 1672 citations
1

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