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Calmmonth Pty Ltd v AVJennings Properties Ltd[2021] QSC 3

Calmmonth Pty Ltd v AVJennings Properties Ltd[2021] QSC 3

SUPREME COURT OF QUEENSLAND

CITATION:

Calmmonth Pty Ltd v AVJennings Properties Limited [2021] QSC 3

PARTIES:

CALMMONTH PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE CALMMONTH TRUST

ACN 134 449 988

(plaintiff)

v

AVJENNINGS PROPERTIES LIMITED

ACN 004 601 503

(defendant)

FILE NO:

BS 11433 of 2017

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

27 January 2021

DELIVERED AT:

Brisbane

HEARING DATE:

9 – 11 November 2020

JUDGE:

Applegarth J

ORDERS:

Subject to any submissions as to the form of order or costs:

  1. Judgment for the defendant.
  2. The plaintiff pay the defendant’s costs of and incidental to the proceeding, including reserved costs, to be assessed if not agreed.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – GENERALLY – where a developer undertakes a major residential development in stages – where a consultant to the developer is entitled to be paid a fee on the sale of lots – where the consultant is also entitled to an additional fee if the revenue from the sale of each relevant stage exceeds the estimated revenue for that stage as set out in a consultancy agreement – where the development in fact occurred in different stages to that contemplated by the consultancy agreement – where the express terms of the consultancy agreement do not entitle the consultant to an additional fee in respect of new stages of the development – where the consultant submits that the agreement contains an implied term entitling it to an additional fee if the boundary of a relevant stage changed or an additional stage was added to an overall stage –whether the consultancy agreement contains the implied term contended for

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – CONTRACT IMPLIED FROM CONDUCT OF PARTIES – where the parties met to discuss the calculation of fees payable under a consultancy agreement –consultant disputes that an agreement to vary the consultancy agreement was reached at the meeting – where the consultant sent an email following the meeting confirming that an agreement was reached – whether an agreement was reached to vary the consultancy agreement

Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988; [2009] UKPC 10, cited

Australian Securities and Investments Commission v Hellicar & Ors (2012) 247 CLR 345; [2012] HCA 17, cited

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61, cited

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833, cited

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24, cited

Gemmell Power Farming Co Ltd v Nies (1935) 35 SR (NSW) 469, cited

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, applied

Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11, cited

Philips Electronique Grand Public SA v British Sky Broadcasting Limited [1995] EMLR 472, cited

Watson v Foxman (1995) 49 NSWLR 315, cited

COUNSEL:

D J Butler for the plaintiff

C A Johnstone, with M Eade, for the defendant

SOLICITORS:

Bartley Cohen for the plaintiff

McCullough Robertson for the defendant

  1. [1]
    AVJennings contracted with the owner of land at Coomera to undertake a large residential development.  Calmmonth was to assist AVJennings in the management and marketing of the development and, in return, was to be paid certain fees based on the sale of the developed lots.
  2. [2]
    The parcel of land subject of this dispute, comprising “super-lots” 1, 4 and 5, was to be developed in certain numbered stages.  Relevant to this dispute are Stages 4 and 9. 
  3. [3]
    Under the consultancy agreement, Calmmonth was to be paid a fee of 2.5 per cent upon the sale of each individual lot.  It might also be paid an additional fee of 33.8 per cent of any difference between the actual gross proceeds for the sale of all lots in a stage and the estimated gross proceeds set out in “Table A” of the agreement.
  4. [4]
    The contractual provisions for calculating Calmmonth’s additional fee were premised on the land being developed, relevantly, in Stages 4a, 4b, 9a, and 9b, and on certain “Management Lots” being developed as part of Stage 9.  The development ultimately did not proceed in that form.  Stage 4, as developed, comprised Stages 4a, 4b and 4c.  Stage 9 comprised Stages 9a, 9b and 9c. The management lots were “deleted” and replaced by eight traditional lots across Stage 9.
  5. [5]
    Calmmonth claims that it is due an additional fee under the agreement in relation to Stage 4 and Stage 9 of the development, totalling approximately $1.62 million.  Due to the changes in the way the land was in fact developed, the express terms of the consultancy agreement do not allow Calmmonth to claim the additional fee claimed by it. 
  6. [6]
    Calmmonth contends that a term should be implied into the agreement providing for it to be entitled to an additional fee where the boundaries of a sub-stage change, or where a further sub-stage is included within the boundary of an overall stage.  AVJennings responds that the legal requirements for such a term to be implied are not proven, and that Calmmonth is therefore not due such an additional fee.[1]
  7. [7]
    AVJennings also points to a meeting held between the parties, and correspondence and conduct following that meeting, by which it contends that an agreement was reached to vary the consultancy agreement to provide a different arrangement for Calmmonth’s additional fee.  Alternatively, it contends that Calmmonth is estopped from denying that the consultancy agreement was so varied.  Calmmonth denies that any agreement to vary the consultancy agreement was reached at the meeting or at any time thereafter.
  8. [8]
    In attempting to resolve matters, AVJennings paid to Calmmonth an amount which AVJennings had calculated as the additional fee due on Stage 4, on the basis that Calmmonth might in future contend that it is entitled to a greater amount.  By this proceeding, Calmmonth now does so.

The issues

  1. [9]
    The issues are as follows:
    1. (a)
      Did the consultancy agreement contain the implied term contended for by Calmmonth?
    2. (b)
      Was the consultancy agreement between Calmmonth and AV Jennings varied?
    3. (c)
      If the consultancy agreement was not varied, is Calmmonth estopped from denying that the consultancy agreement was so varied?
    4. (d)
      If the consultancy agreement contained no implied term, was not varied, and no estoppel can be raised, was the sum of money paid by AVJennings to Calmmonth as an additional fee properly owing under the agreement, or was it paid to Calmmonth by mistake?
  2. [10]
    Calmmonth acknowledges that its entire case, and any entitlement to the additional fee it claims, depends on the existence of the implied term for which it contends.

Relevant facts

The Development Rights Agreement

  1. [11]
    The relevant land was owned by DriftSail Pty Ltd, a company controlled by Mr Graeme Ingles – an accountant by profession, who was involved in property development.  Mr Ingles proposed to subdivide and develop the land as part of a development called “Big Sky”, which would comprise five “super-lots”.
  2. [12]
    During the Global Financial Crisis, Driftsail’s financiers required that Driftsail undertake the Big Sky development alongside a joint venture partner.  Driftsail and AVJennings entered into discussions concerning super-lots numbered 1, 4 and 5 of the Big Sky development.  They proposed an arrangement whereby Driftsail would own the land and AVJennings would pay for the construction costs of development and subdivision.
  3. [13]
    Mr Ingles incorporated the plaintiff, Calmmonth, in 2008.  Calmmonth was to receive a consultancy fee from AVJennings for marketing the relevant land and assisting AVJennings in its development.  Mr Ingles was the controlling mind of Calmmonth.
  4. [14]
    On 10 November 2010, Driftsail and AVJennings entered into a Development Rights Agreement (“DRA”).  This provided for AVJennings to carry out the development of the relevant land and pay the construction costs, with Driftsail retaining ownership.  As payment, AVJennings were to receive a fee of 72.6 per cent of the gross proceeds on the sale of each lot.  
  5. [15]
    Under the DRA, AVJennings had the sole right to manage the marketing and sale of the lots.  AVJennings was also entitled to undertake the development in stages, and could determine those stages, accelerate them, substitute a later stage for an earlier stage, or change the nature of a stage.  The plans included at Schedule 4 of the DRA provided that Stage 4 was to have 82 lots, while Stage 9 was to have 86 lots.  The Business Plan contained as a schedule to the DRA recorded that the forecast revenue for the development was $85.3 million.

The consultancy agreements

  1. [16]
    On 8 November 2010, Calmmonth and AVJennings entered into a consultancy agreement.  By that agreement, Calmmonth was to assist AVJennings in the development, marketing and sale of the relevant land, and was granted authority to negotiate sale contracts.  The agreement entitled Calmmonth to a fee of 6 per cent of the gross proceeds resulting from the sale of each lot.
  2. [17]
    In April 2011, AVJennings advised Calmmonth that its construction costs were likely to be higher than its original estimate and that the forecast revenue for the development had reduced from $85 million to approximately $81 million. 
  3. [18]
    Calmmonth and AVJennings recommenced negotiations and a new consultancy agreement was formally entered into on 20 June 2011, replacing the original consultancy agreement.  The new terms were largely the same, save for a change to the calculation of Calmmonth’s fee.  Calmmonth was entitled to a fee of 2.5 per cent of the gross proceeds received in respect of sales of the lots, as well as an additional fee (titled an “Additional Stage Consultancy Fee”), payable if the actual gross proceeds of a stage were greater than the originally estimated gross proceeds for the stage, as set out in a schedule to the agreement.
  4. [19]
    Clause 6.2(a) of the agreement relevantly provided:

“6.2 Additional Stage Consultancy Fee

  1. (a)
    [AVJennings] shall also pay to [Calmmonth] in respect of the services to be provided by [Calmmonth] hereunder an additional consultancy fee based on a Relevant Stage (“Additional Stage Consultancy Fee”) if the Actual Stage Gross Proceeds are greater than the Original Stage Gross Proceeds. The Additional Stage Consultancy Fee payable in respect of a Relevant Stage is then the amount calculated using the following formula:

 (Actual Stage Gross Proceeds – Original Stage Gross Proceeds) x (36.3% - 2.5%)

…

  1. (e)
    If the number of Lots changes in a Relevant Stage then the Original Stage Gross Proceeds for the Relevant Stage in Table A of Schedule 1 shall be amended using the number of actual Lots in the Relevant Stage and the original “average price” to determine the revised Gross Proceeds in Table A of Schedule 1. For the purpose of this clause Mgt Lot 9A and Mgt Lot 9B are to be excluded.
  1. (f)
    If Mgt Lot 9A and Mgt Lot 9B are redeveloped then the Additional Stage Consultancy Fee will be negotiated between the parties acting in good faith on a commercial basis and having regard to the currency of the market at the time of development. In determining the Additional Stage Consultancy Fee for Mgt Lot 9A and Mgt Lot 9B, [Calmmonth] will take into consideration the additional costs [AVJennings] will incur in the redevelopment.”
  1. [20]
    A Relevant Stage was defined to mean “the stages for the Lots as set out in Table A of Schedule 1”. The Original Stage Gross Proceeds referred to the estimated GST inclusive gross proceeds for all lots in a Relevant Stage as set out in Table A, while the Actual Stage Gross Proceeds referred to the GST inclusive gross proceeds of the sale or disposal of the lots in a Relevant Stage.
  2. [21]
    Table A in Schedule 1 of the agreement is reproduced below.

“TABLE A

Stage

Original Stage Gross Proceeds #
Gross

Proceeds #

No. of Lots

Average Price

Stage 3a

  9,829,980

45

218,444

Stage 3b & c

10,273,155

44

233,481

Stage 4a

  6,864,127

29

237,729

Stage 4b

13,050,127

53

246,229

Stage 9a

10,944,304

44

248,734

Stage 9b

10,610,983

40

265,275

Stage 10

16,628,014

61

272,590

Mgt Lot Stage 9A

  1,241,625

1

1,241,625

Mgt Lot Stage 9B

  2,384,400

1

2,384,315

Total

81,856,715

318

 

# Total Revenue is inclusive of GST ”

Re-design of the development

  1. [22]
    In early 2012, Mr Ingles was advised by AVJennings that the development was proposed to be redesigned “to create more traditional allotments which can be sold without the need for prescriptive designs imposed by the planning system”.  AVJennings sent Mr Ingles a memorandum which indicated that the number of lots proposed for Stage 9 had changed, and included the proposed deletion of the two management lots.
  2. [23]
    In September 2012, the Gold Coast City Council approved a change to the relevant development permit, which had the effect of splitting stage 9 into four smaller stages, 9a, 9b, 9c and 9d, and creating 105 new lots.  It also effected the “deletion” of the two management lots.
  3. [24]
    Also in September 2012, the Gold Coast City Council issued a Decision Notice which approved the development of Stage 4 into 82 lots in 3 stages, namely Stages 4a, 4b and 4c.
  4. [25]
    In July 2013, the debt owed by Driftsail to its financier was acquired by a third party.  The third party appointed receivers and managers to Driftsail.
  5. [26]
    In July 2015, Mr Ingles became aware that an application had been lodged on behalf of Driftsail relating to Stages 4 and 9 of the development.  The application sought to change the development approval for Stage 9 to:
  • relocate a proposed park from Stage 4a to Stage 9c,
  • increase the number of lots in Stage 9 from 105 to 110 (including eight lots variously within Stage 9, which were equivalent to the two original management lots); and
  • remove the proposed Stage 9d, leaving Stage 9 with Stages 9a, 9b and 9c only.
  1. [27]
    Following these developments, Mr Ingles was informed that a new layout had been approved for Stage 9 and that an application for a modified layout of Stage 4 was being prepared.

The August 2015 meeting

  1. [28]
    Mr Ingles approached Mr Tony Creighton of AVJennings, seeking a meeting in relation to the consultancy agreement.  Mr Ingles’ email of 10 August 2015 said:

“Hi Tony

I would like to have a meeting with you within the next week in relation to the Calmmonth Agreement. As you are aware I have a copy of the redesign of stage 9 which shows eight management lots. At the time of execution of the Calmmonth Agreement there were two Management Lots known as 9A and 9B. Clause 6.2(f) provides for a renegotiation between the parties in relation to the Consultancy Fee should those two lots be redeveloped.

This is a discussion we should have before you go to market on stage 9.

Let me know when you have some time available – I am happy to come to Brisbane.”

  1. [29]
    Mr Ingles and Mr Creighton (together with Ms Kathy Conrad, who managed Mr Ingles’ accounting practice and held a power of attorney for Calmmonth) met in Brisbane on 20 August 2015, where various alternative proposals for calculation of an additional fee were discussed.  The parties are in dispute as to whether an agreement was reached at that meeting as to any amendment to Table A of the consultancy agreement. 
  2. [30]
    Calmmonth’s case, based on Mr Ingles’ evidence, is that the parties did not agree to a proposal during the meeting, and that the meeting concluded by Mr Creighton saying something like “why don’t you go away and think about it”.  Mr Creighton’s evidence, and AVJennings’ case, is that the parties did reach an agreed position at the meeting.

Emails following the August 2015 meeting

  1. [31]
    On the day following the meeting, 21 August 2015, Ms Conrad, with Mr Ingles’ prior approval, sent an email to Mr Creighton, copied to Mr Ingles:

“Hi Tony

Thank you for meeting with myself and Graeme yesterday to discuss amending Table A of the Consultancy Agreement dated 20 June 2011 between AV Jennings Properties Limited and Calmmonth Pty Ltd (the Agreement) to incorporate the reconfiguration of stages 4 and 9. The amendments will be as follows:

  1. The Original Gross Proceeds for Stages 4a and 4b are to be added together to arrive at a total figure for stage 4. This total figure will then become the Gross Proceeds amount for stages 4a, 4b and 4c combined.
  1. The 2 Management Lots which were included in stage 9 at the time of signing the Agreement have been broken into 8 different lots, namely lots 937, 947, 959, 967, 969, 983, 984 and 997, these 8 lots will be referred to in the amended Table A as “Mgt Lots Stage 9” and the Gross Proceeds for these 8 lots will be equal to the total of the Original Gross Proceeds for Mgt Lot Stage 9A and Mgt Lot Stage 9B in the original Table A.
  1. The Original Gross Proceeds for stages 9a and 9b are to be added together to arrive at the total figure for stage 9 of $21,555,287. This total is to be divided by the original 84 lots at the average lot price for stage 9 of $256,611. The average lot price is then to be multiplied by 102 (being the total of the reconfigured lots (110) less the 8 Mgt Lots stage 9 referred to above) (sic). The result of this calculation, $26,174,277, is to be the Gross Proceeds amount for stages 9a, 9b and 9c combined.

Set out below is the amended Table A. I have attached a soft copy of the original Table A and the Amended Table A for your reference.

Table A – Amended

Stage

Original Stage Gross Proceeds #

Gross Proceeds #

   No of Lots

Average price

Stage 3a

Stage 3b & c

Stages 4a, 4b & 4c

Stages 9a, 9b & 9c

Stage 10

Mgt Lots Stage 9

  9,829,980

10,273,155

19,944,254

26,174,277

116,628,014

3,626,025

45

44

82

102

61

8

218,444

233,481

243,223

256,611

272,590

453,253

Total

86,475,705

342

 

# Total Revenue is inclusive of GST

Please confirm that this is your understanding of the agreement we reached on Thursday.

Regards

Kathryn Conrad
On behalf of Calmmonth Pty Ltd under Power of Attorney dated 25 May 2011” (emphasis added)

  1. [32]
     Following this email, the parties corresponded as follows:
    1. (a)
      On 21 August 2015, Mr Creighton emailed Ms Conrad, copying Mr Ingles:

“Thanks Cathy (sic),

I will review this over the weekend and revert back on Monday.”

  1. (b)
    On 26 August 2015, Ms Conrad emailed Mr Creighton:

“Hi Tony

Have you had a chance to review the amendments yet?”

  1. (c)
    On 26 August 2015, Mr Creighton replied to Ms Conrad’s email, copying Mr Ingles:

“Hi Kathy

Not as yet I will look at it tomorrow”

  1. (d)
    On 28 August 2015, Ms Conrad emailed Mr Creighton, copying Mr Ingles:

“Hi Tony

How did you go with the perusal of our figures, are you happy with everything.”

  1. (e)
    On 31 August 2015, Ms Conrad emailed Mr Creighton, copying Mr Ingles:

“Hi Tony

I haven’t heard from you, the figures are exactly those we agreed on at our meeting.

If we don’t hear from you we will assume that you are happy.” (emphasis added)

  1. (f)
    On 31 August 2015, Mr Creighton replied to Ms Conrad’s email, copying
    Mr Ingles:

“Sorry guys

Just did not get to it last week I will pick it up agin (sic) when I return an (sic) two weeks time”

  1. [33]
    On 31 August 2015, Mr Creighton suffered an accident while skiing, breaking his pelvis.  He spent a period in hospital recovering from the accident and dealing with other health complications.
  2. [34]
    The parties are in dispute as to whether the correspondence following the August 2015 meeting evidences a variation to Table A of the consultancy agreement.

The development as it occurred

  1. [35]
    The development was completed as follows:
    1. (a)
      The land originally comprising Stages 4a and 4b, consisting of 82 lots, was developed in Stages 4a, 4b and 4c, consisting of 91 lots in total;
    2. (b)
      The land on which original Stages 4a and 4b were to be developed was substantially the same land that was actually developed into Stages 4a, 4b and 4c;
    3. (c)
      The land originally comprising Stages 9a, 9b, Management Lot 9A and Management Lot 9B was developed in Stages 9a, 9b and 9c, consisting of 110 lots in total;
    4. (d)
      The two original management lots were deleted, and the land on which they were originally to be developed was included as part of Stages 9a, 9b and 9c; and
    5. (e)
      The land on which original Stages 9a, 9b, Management Lot 9A and Management Lot 9B were to be developed was substantially the same land that was actually developed into Stages 9a, 9b and 9c.
  2. [36]
    AVJennings earned total gross proceeds of $23,892,360 from its development of Stage 4.
  3. [37]
    AVJennings earned total gross proceeds of $27,525,680 from its development of Stage 9.

Payments made to Calmmonth

  1. [38]
    AVJennings has paid to Calmmonth a base fee of 2.5 per cent of the gross proceeds from the sale of:
    1. (a)
      each lot in Stages 4a, 4b and 4c; and
    2. (b)
      each lot in Stages 9a, 9b and 9c (including the eight lots which were equivalent to the original management lots).
  2. [39]
    The parties corresponded from September 2016 regarding Calmmonth’s entitlement to an additional fee for Stage 9 of the development.  Calmmonth maintained that because Stage 9 was not constructed in accordance with the plan as at the time of the consultancy agreement, the appropriate approach to calculate the additional fee payable on Stage 9 was to compare the revenue from the sale of all of Stage 9, as constructed, with the original gross proceeds estimate for that stage as set out in
    Table A of the consultancy agreement.  AVJennings did not accept that Calmmonth was entitled to any additional fee in respect of Stage 9.
  3. [40]
    From February 2017, the parties also corresponded regarding Calmmonth’s entitlement to an additional fee for Stage 4.  In attempting to “settle” the amount, AVJennings undertook calculations and arrived at a figure of $651,513.07 (plus GST) as the additional fee payable on Stage 4.  These calculations used the average price per lot for Stage 4a in Table A of the consultancy agreement, and multiplied that by the number of lots in Stage 4c, to arrive at an estimate of the original proceeds for Stage 4c, which formed part of the overall original stage gross proceeds estimate for Stage 4.  Actual proceeds had to exceed that amount in order for an additional fee to be payable to Calmmonth.
  4. [41]
    Mr Ingles did not agree with AVJennings’ methodology for calculating the additional fee payable for Stage 4, but requested that AVJennings’ calculated amount of $651,513.07 be paid to Calmmonth “on the basis that we can have a further discussion in relation to my concerns regarding the calculation of this figure”.
  5. [42]
    On 24 April 2017, AVJennings paid to Calmmonth an amount of $651,513.07 (plus GST) as the additional fee payable for Stage 4 of the development.  This was expressly paid without prejudice to Calmmonth contending that it was entitled to a greater amount.  AVJennings acknowledged that Calmmonth reserved its rights to dispute that amount.

Calmmonth’s implied term case

  1. [43]
    Calmmonth contends that a term should be implied into the consultancy agreement that where AVJennings “changed the boundaries of a Relevant Stage or included further stages within the boundary of the overall stage of which Relevant Stages were a part”, the Additional Stage Consultancy Fee would be calculated by applying the formula in cl 6.2(a) “to the difference between Actual Stage Gross Proceeds and Original Stage Gross Proceeds for the overall stage of which the altered Relevant Stages were part”.
  2. [44]
    As set out above, cl 6.2(a) of the consultancy agreement entitled Calmmonth to an additional fee if the actual stage gross proceeds for each “Relevant Stage” exceeded the original stage gross proceeds for the stage, as set out in Table A.
  3. [45]
    It is to be recalled that Table A, as agreed on 20 June 2011, did not specify any original stage gross proceeds for either Stages 4c or 9c of the development.  Such stages were not contemplated by the parties at the time the consultancy agreement was entered into.  Unless Table A was amended to provide original stage gross proceeds figures for Stages 4c and 9c, Calmmonth would have no express entitlement to an additional fee for these new stages.  Hence its reliance on an implied term.
  4. [46]
    The five requirements for a term to be implied in fact are well settled:
    1. (a)
      The implied term must be reasonable and equitable;
    2. (b)
      The implied term must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
    3. (c)
      The implied term must be so obvious that “it goes without saying”;
    4. (d)
      The implied term must be capable of clear expression; and
    5. (e)
      The implied term must not contradict the express terms of the contract.[2]
  5. [47]
    Any implication of a term must be based on the parties’ presumed intention at the time of the agreement, had they turned their mind to the matter in question.[3]  Courts are generally slow to imply a term into a concluded agreement, especially where the parties have devised a comprehensive and detailed contract to govern their relations.[4]
  6. [48]
    In Philips Electronique Grand Public SA v British Sky Broadcasting Limited, Sir Thomas Bingham MR (as Lord Bingham then was) said:

“The courts’ usual role in contractual interpretation is, by resolving ambiguities or reconciling apparent inconsistencies, to attribute the true meaning to the language in which the parties themselves have expressed their contract.  The implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision.  It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power…

The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of a contract.  So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong…

And it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.”[5]

Submissions

  1. [49]
    Calmmonth’s proposed implied term is submitted to allow “the possibility of additional commission on the facts as they actually occurred”, by entitling it to the additional fee if the actual gross proceeds for Stages 4 or 9, as a whole, exceed the estimated original stage gross proceeds for that stage as a whole.  That is, application of the implied term would require Calmmonth’s additional fee for Stage 4 to be calculated on the aggregate proceeds of each lot in Stages 4a, 4b and 4c. The same can be said for the application of the implied term to any additional fee payable on Stage 9. 
  2. [50]
    Calmmonth’s argument for an implied term starts with the proposition that the parties intended that it would be capable of earning an additional fee on the entirety of the land.  As the land which was actually developed in Stages 4 and 9 had substantially the same “footprint” as the land contemplated when the consultancy agreement was entered into, Calmmonth submits that the parties must have intended that Calmmonth was capable of earning additional fees on the entirety of the land. 
  3. [51]
    Calmmonth submits that this conclusion is fortified by the terms of cl 6, which provide for both base and additional fees “in respect of services to be provided” by Calmmonth under the agreement.  If both the base fee and additional fee are payable in respect of the same services on the same land, this is said to evidence that the parties intended that the additional fee was also capable of being earned on the whole of the land.  Calmmonth also submits that it would be an odd result if the agreement allowed for a base fee on all of the lots, but prevented Calmmonth from earning an additional fee on some lots.
  4. [52]
    AVJennings submits that Calmmonth’s implied term case “seeks to compare actual revenue for a certain number of lots with forecast revenue for a smaller number of lots”, therefore recasting the additional fee “from being one dependent upon the comparison of the sale price of each lot with the average forecast price per lot, to one being calculated by reference to stages and a fixed price per landmass”.  This is said to impermissibly focus on the concept of land, instead of the concept of lots upon which the consultancy agreement is premised.  It is also said to erroneously assume that, at the time of executing the consultancy agreement, the parties had agreed to fix the boundaries and forecast revenue for each stage of the development “for all time, regardless of what happened within such boundaries”.
  5. [53]
    Calmmonth’s case is that it is obvious that the parties would have agreed to it receiving an additional fee based upon the estimated revenue from the sale of stages that no longer existed in that form because the boundaries of a relevant stage had been changed or further stages had been included within the boundary of the overall stage.
  6. [54]
    The essence of AVJennings response is that it is not obvious that it would have agreed to such a formula for the payment of an additional fee, which relied on estimated revenue for the sale of lots in stages which were no longer to be developed in those stages, and irrespective of changes to the internal layout of the development of Stages 3, 4, 9 and 10.

What did the agreement provide?

  1. [55]
    A starting point in considering the parties’ submissions is what the agreement provided.  This permits one to identify the things about which they did not make provision and which might be the subject of an implied term.
  2. [56]
    The agreement provided in cl 6.1 for AVJennings to pay Calmmonth a “Consultancy Fee” equal to 2.5 per cent of the gross proceeds received in respect of a sale or disposal of “the Lots”.
  3. [57]
    As noted in [19], the agreement provided in cl 6.2 for an “Additional Stage Consultancy Fee” which was “based on a Relevant Stage” if the Actual Stage Gross Proceeds were greater than the Original Stage Gross Proceeds.  Under cl 6.2(a) the Additional Stage Consultancy Fee payable “in respect of a Relevant Stage” is the amount calculated using a formula.  It amounts to 33.8 per cent of the difference between the Actual Stage Gross Proceeds and the Original Stage Gross Proceeds of the Relevant Stage. 
  4. [58]
    Clause 6.2(e) applies if the number of lots changes “in a Relevant Stage”.  In that event, the Original Stage Gross Proceeds for the Relevant Stage in Table A is amended using the number of actual lots in the Relevant Stage and the original “average price” to determine the revised gross proceeds. 
  5. [59]
    Clause 6.2(f) provides that if management lots 9A and 9B are redeveloped then the Additional Stage Consultancy Fee will be renegotiated between the parties in good faith on a commercial basis and having regard to the currency of the market at the time of the development.  In doing so, Calmmonth is to take into consideration the additional costs AVJennings will incur in the redevelopment.
  6. [60]
    Attention to the terms of cl 6.2(a) identifies that the additional consultancy fee is “based on a Relevant Stage”.  Clause 6.2(e) also uses the term “Relevant Stage”.  The agreement defines a “Relevant Stage” to mean “the stages for the Lots as set out in Table A of Schedule 1.”
  7. [61]
    Calmmonth’s submissions on the implied term issue start with the proposition that the parties intended that Calmmonth would be capable of earning an additional fee “on the entirety of the land”.  A more precise statement is that the additional consultancy fee was based on the sale of a Relevant Stage.  Clause 6.2(c) made provision for the payment of the Additional Stage Consultancy Fee at the end of the month in which the sale of the last lot for a Relevant Stage had settled.  The notion of a “Relevant Stage” is central to the operation of cl 6.2, including the calculation of any Additional Stage Consultancy Fee and its payment.
  8. [62]
    AVJennings submits that, having regard to the definition of “Relevant Stage” by reference to stages in Table A, a “Relevant Stage” could comprise, as the circumstance requires, either sub-stages or what Calmmonth calls in its proposed implied term an “overall stage”.  The implied term contended for by Calmmonth uses the undefined term “overall stage”, for example, in referring to the proceeds “for the overall stage of which the altered Relevant Stages were part.” 
  9. [63]
    The changes specifically provided for in cl 6.2.(e) and cl 6.2(f), as well as the changes which are the subject of the implied term proposed by Calmmonth, arise in the context of the DRA which entitled AVJennings to undertake the development in stages and to, among other things, determine the stages and change the nature of a stage. 

The variety of possible changes

  1. [64]
    AVJennings was authorised to make a wide variety of changes to the development which would have implications for Calmmonth’s income by way of its 2.5 per cent consultancy fee in respect of a sale or disposal of a lot or by way of any Additional Stage Consultancy Fee pursuant to cl 6.2.  Some of the wide variety of changes can be mentioned by way of illustration. 
  2. [65]
    One would be the redesignation of lots into different Relevant Stages.  To take a hypothetical example based upon Stage 3 of Table A, as appears in [21], Stage 3 consisted of a total of 89 lots.  Suppose there was no change to the number of lots and the external boundaries of Stage 3 and the boundaries of the 89 lots in it also remained unchanged.  However, for marketing or some other purpose the 45 lots designated as Stage 3a were redesignated as Stage 3a (with 23 lots) and Stage 3aa (with 22 lots), with Stages 3b and 3c remaining the same.  The result of the change would be that there were now four, rather than three, Relevant Stages of what Calmmonth would describe as an “overall stage”.  The four stages might have been renumbered 3a, 3b, 3c (being the lots formerly described as 3b) and 3d (being the lots formerly described as 3c).  Nothing had changed on the ground in terms of boundaries of the lots in Stage 3, and there was no change in the number of lots in Stage 3.  Instead, on one view, AVJennings had included a further stage “within the boundary of the overall stage of which the altered Relevant Stages were a part” (to use the language of its proposed implied term).
  3. [66]
    A different scenario is the kind of change which in fact occurred in respect of Stage 4 where the land that was to comprise Stages 4a and 4b was developed as Stages 4a, 4b and 4c.  Stage 4 retained substantially the same “footprint” but now comprised a total of 91 lots instead of the 82 lots provided for in Table A.  Also, it was not possible to tell which lots in the revised development corresponded with the lots that, at the date of the consultancy agreement, were proposed to be developed in Stages 4a and 4b.  Stage 4 as a whole had the same footprint, but its internal layout and the lots inside it were entirely different.
  4. [67]
    Another possible, hypothetical change would be a change to the external boundaries of the “overall stage”.  Depending upon the circumstances, this change might occur with or without a change to the total number of lots in the overall stage or the total number of lots within a Relevant Stage.
  5. [68]
    In summary, it is possible to imagine a large number of potential changes to the Relevant Stages, with or without a change in the number of lots within a Relevant Stage.  Some changes would be insubstantial and not alter the lots being sold or the cost of developing them.  The risk and the reward to AVJennings would be essentially the same.  Other changes would be more substantial and come at a greater cost to AVJennings, with a different risk–reward equation. 
  6. [69]
    The issue is whether it is obvious that AVJennings would have agreed to have the same formula apply to each and every change where the boundaries of a sub-stage changed or a further sub-stage was included within the boundary of a stage.

Calmmonth’s case in greater detail

  1. [70]
    Calmmonth’s case is that cl 6.2(e) only operates when the “number of lots changes in a Relevant Stage”.  The Relevant Stages are those set out in Table A, being Stages 4a, 4b, 9a, 9b and Management Lot 9A and Management Lot 9B.  According to Calmmonth, cl 6.2(e) is premised on the Development proceeding with the number of “sub-stages provided in Table A”.  Clause 6.2(e) is said to not apply if the number of “sub-stages” (or more precisely the number of Relevant Stages) within Stage 4 or 9 is changed.  On this argument, because Stages 4c and 9c were not provided for in Table A, cl 6.2(e) is not capable of applying to them.  Similarly, cl 6.2(e) is submitted to not govern what happens “if the boundaries of a sub-stage (i.e. a Relevant Stage) changes”.  According to Calmmonth, cl 6.2(e) “only deals with an increase or decrease in the number of lots within a sub-stage”.  In other words, it only deals with an increase or decrease in the number of lots within a Relevant Stage.
  2. [71]
    Calmmonth pleads that the agreement contemplated that the number of lots could be changed within a Relevant Stage, in which case clauses 6.2(e) or 6.2(f) would apply, as the case may be.  It also pleads that the agreement:
  • did not contemplate the addition of any stage other than the Relevant Stages; and
  • did not contemplate changes to the boundaries of any Relevant Stage.

Is the proposed implied term the only contractual solution, or the one of several contractual solutions that would without doubt have been preferred?

  1. [72]
    I shall assume, consistent with Calmmonth’s pleaded case, that the agreement in respect of the payment of an Additional Stage Consultancy Fee did not contemplate the addition of any stage other than the Relevant Stages and did not contemplate changes to the boundaries of any Relevant Stage.  I will also assume the correctness of its argument that the implied term contended for by it does not contradict the express terms of clauses 6.2(e) and 6.2(f) because neither contractual term was intended to “cover the field” that would otherwise be occupied by the implied term.[6]
  2. [73]
    Calmmonth still must establish the other requirements for implying a term.  Importantly, the implied term must be so obvious that it “goes without saying”.  The point arises when the parties have omitted to make express provision for some event because they have not fully thought through the contingencies.[7]  The term sought to be implied must be so obvious as to go without saying.  This requirement is tested by asking whether an officious bystander would have replied “Of course” if asked if the term needed to be implied.[8]
  3. [74]
    It is not enough to show that had the parties foreseen the eventuality that in fact occurred they would have wished to make provision for it.  Calmmonth accepts the correctness of the statement in Philips Electronique as to the requirement of obviousness.  Lord Bingham stated:

“[I]t is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.”[9]

  1. [75]
    The issue is not whether a term was needed.  The issue is whether the term contended for by Calmmonth is the obvious one that would have been agreed to by the parties.
  2. [76]
    I am not persuaded that Calmmonth has shown that the implied term contended for by it was the only one contractual solution or the one of several possible solutions that would, without doubt, have been preferred.
  3. [77]
    If the parties had contemplated AVJennings changing the boundaries of a Relevant Stage or including further stages within the boundary of the “overall stage of which Relevant Stages were a part” (with or without a change in the number of lots within a Relevant Stage), then a number of contractual solutions were possible.  One solution would be similar to the solution found in cl 6.2(e) if the changes were expected to alter the number of lots in a Relevant Stage.  Another was a solution similar to cl 6.2(f) in which, depending on the nature of the change, provision would be made for the Additional Stage Consultancy Fee to be negotiated between the parties “acting in good faith on a commercial basis having regard to the currency of the market at the time of development”, and taking into consideration the additional costs AVJennings would incur as a result of the change.  Another possibility was the kind of agreement that was allegedly struck on 20 August 2015.  Another possibility was the kind of clause contended for by Calmmonth as an implied term. 
  4. [78]
    As the passage quoted from Philips Electronique makes clear, the question of whether a term should be implied arises after a crisis has been reached in the performance of the contract and the Court should not act with the benefit of hindsight.  It should not fashion a term which will reflect the merits of the situation as they appear at that time. 
  5. [79]
    The relevant inquiry in this case is not what term would have been agreed by the parties or been regarded as obvious to an officious bystander years after the contract was formed and when the parties were called upon to address a gap in the contract in respect of a situation which had in fact developed with various specific changes to Stages 4 and 9. 
  6. [80]
    In this case the issue is not what the parties would have agreed to fill a gap in the contract after a dispute arose when AVJennings changed the boundaries of a Relevant Stage or included further stages within the boundary of the overall stage of which Relevant Stages were a part, or did both of those things.  That issue would arise in respect of a particular change made in different market conditions and which presented different opportunities and risks.  In that concrete, later factual situation, a party would be inclined to seek a term which best suited its commercial interests at that time.  This would, in turn, involve a consideration of the amount of Calmmonth’s expected base consultancy fee (at a rate of 2.5 per cent) upon the sale of lots and also its prospects of obtaining an Additional Stage Consultancy Fee based on a Relevant Stage and what that additional fee might be.
  7. [81]
    The relevant issue is whether the implied term contended for by Calmmonth would have been the obvious provision had the parties (or more precisely, an officious bystander) addressed the contingencies for which specific provision had not been made.  This is assessed at the time the contract was agreed.  At that time there were a wide range of possible, future changes, either to the boundaries of a Relevant Stage or by the inclusion of a further stage within the boundary of the overall stage, or both.  Some of the changes would come at an increased cost to AVJennings.  Any particular change to the boundaries of a relevant stage or to include a further stage would carry different risks and different potential rewards, depending upon many factors, including market conditions at the time the change was made.  It is not obvious that the implied term contended for by Calmmonth would have been the only contractual solution, or the one of several contractual solutions that would have been preferred by the parties.  AVJennings might have sought a greater reward for a greater risk.  The parties might simply have left the matter to be the subject of further agreement in a form similar to cl 6.2(f), which provided for account to be taken of the market at the later time and any additional costs to AVJennings.
  8. [82]
    If the parties, at the time of negotiating the terms of the consultancy agreement, had thought through the contingencies about which provision had not been made and the contingencies of AVJennings changing the boundaries of a Relevant Stage or including a further stage within the boundary of an overall stage, then they would have been required to contemplate a wide variety of potential changes, with the various changes having implications for anticipated gross proceeds.  The changes would also have implications for the assessment of risks. The changes may have involved additional costs for AVJennings or costs savings.
  9. [83]
    In my view, it is not obvious that the parties would have agreed that Calmmonth be paid an additional fee based on the forecast sale of stages that existed at an earlier point in time, and regardless of the developer’s ingenuity in changing the internal layout of the development, the boundaries of stages, or the total number of lots in the overall stages, thereby increasing the revenue from the sale of lots.  On Calmmonth’s implied term case, in addition to its base fee on the sale of each lot, it would be entitled to an additional fee calculated on the estimated revenue from a different and superseded development.
  10. [84]
    A critical issue is whether it is obvious that the parties would have agreed to such a term for the calculation of an additional fee if the parties had contemplated the possibility that the development did not proceed in accordance with Table A because the internal layout of the development would be altered by changes to the boundaries of a relevant stage, the inclusion of further stages within the overall stage, or both. Many such changes would be apt to alter the development and the revenue which the new stages would be expected to generate.
  11. [85]
    Why would AVJennings necessarily be prepared to pay Calmmonth an additional fee based on the difference between:
    1. (a)
      the revenue which was originally expected to be generated from a development that was to no longer proceed in those stages, and
    2. (b)
      the revenue actually generated from the sale of stages with different boundaries, different internal layouts and a different number of lots?
  12. [86]
    It is possible that AVJennings would have agreed to a provision in the form of the implied term for which Calmmonth contends.  But it is far from obvious that the parties would have agreed to such a term if the prospect of changes to the boundaries of the stages in Table A or the inclusion of further stages within a relevant stage had been contemplated and discussed.
  13. [87]
    I shall assume that Calmmonth is correct and that cl 6.2(e) does not apply to a change in the number of lots in a Relevant Stage which results from a change in the boundaries of a Relevant Stage or the inclusion of further stages “within the boundary of the overall stage of which Relevant Stages were a part.”  If it did, then cl 6.2(e) would contradict the proposed implied term.  My assumption that cl 6.2(e) does not apply to such a change does not render it irrelevant to the implied term case.  This is because changes falling within the proposed implied term which increased the number of lots would pose a similar issue as arises under cl 6.2(e) of arriving at an amended Original Stage Gross Proceeds based on an increased number of lots. 
  14. [88]
    If there was a shared expectation that an increase in the number of lots would result in the total gross proceeds for all the lots in the stage also increasing, then this would have implications for the amount of the base fee, and also implications for any additional fee which AVJennings might be prepared to negotiate.  An increased, amended Original Stage Gross Proceeds by virtue of a new provision would reduce the potential amount of any additional consultancy fee. 
  15. [89]
    This is not to say that the parties would have been content to provide for any change in the number of lots as a result of changes to boundaries or the inclusion of further stages within an “overall stage” to be addressed in the same way as cl 6.2(e) addressed a change in the number of lots.  It simply is to highlight that a change which resulted in an increase in the number of lots (but which did not fall within cl 6.2(e)) was one of a number of contingencies about which the parties would need to provide, and that it is not obvious that the provision would have been in the form of the proposed implied term.
  16. [90]
    A wide variety of potential changes fall within the proposed implied term.  Some would have limited implications for the development of stages that were the subject of Table A.  Many other changes would have a wide range of implications for the gross proceeds of sub-stages, overall stages and the overall development of Stages 3, 4, 9 and 10.  They also would have implications for the costs to AVJennings of undertaking such a changed development.  Depending on the particular change to the development and its consequences in terms of potential proceeds and costs, AVJennings might have sought a provision different to the implied term proposed by Calmmonth to reflect the risks and rewards involved in the changes to the development made by it.  It is not obvious that the parties would have agreed to a single formula to calculate the additional fee which would apply to such a wide variety of changes.
  17. [91]
    Given the variety of potential changes, it has not been shown that there was only one contractual solution, being the term for which Calmmonth contends.  The variety of potential changes to boundaries or the inclusion of further stages within the boundary of an overall stage suggests that there were several possible solutions, including leaving the matter to be the subject of further agreement in the context of a specific change.  Clause 6.2(f) serves to identify a provision which left the additional fee to be negotiated, having regard to the current market at the time of the change and the additional costs of the change, as one of a number of possible solutions.
  18. [92]
    Calmmonth’s submissions accept that it is not enough for it to show that had the parties foreseen these contingencies they would have wished to make provision for them.  It must show either that there was one contractual solution or that one of the several possible solutions would, without doubt, have been preferred.  I am not persuaded that the solution contended for by Calmmonth would, without doubt, have been preferred. 
  19. [93]
    In the circumstances, the implied term contended for by Calmmonth is not so obvious that it goes without saying.  An officious bystander would not have replied “Of course” if asked whether a provision in those terms needed to be implied.

Conclusion on Calmmonth’s implied term case 

  1. [94]
    Calmmonth has not established the requirement of obviousness.  It therefore has failed to establish the implied term contended for by it.

Was Table A of the consultancy agreement amended?

  1. [95]
    This issue turns on:
    1. (a)
      whether there was any agreement reached at the August 2015 meeting to amend the terms of Table A; or
    2. (b)
      whether there was any agreement reached to amend the terms of Table A after the meeting, by a combination of verbal and written communications and conduct.
  2. [96]
    It is common ground that at the meeting, Mr Ingles and Mr Creighton did agree to:
    1. (a)
      add Stages 4c and 9c to an amended Table A; and
    2. (b)
      calculate the “average price” to be inserted into an amended Table A by adding together the estimated gross proceeds for Stages 4a and 4b, as listed in Table A, and dividing that result by the number of lots contemplated for Stages 4a, 4b and 4c (that is, 82), with that result to be applied as the average price to each of Stages 4a, 4b and 4c.

Relevant evidence

  1. [97]
    Calmmonth maintains that no agreement to amend Table A (as regards both Stage 4 and Stage 9) was reached at the meeting.  Mr Ingles’ evidence is that the meeting ended with Mr Creighton saying something like “why don’t you go away and think about it”.
  2. [98]
    Mr Ingles’ and Mr Creighton’s oral evidence confirmed that an agreement was reached at the meeting in respect of Stage 4.  Mr Creighton explained that that approach was dictated by cl 6.2(e) of the consultancy agreement:

“… under [clause] 6.2(e) of the existing agreement that we had in place, we had to take the average price for the original number of lots, and multiply it by the new number of lots … which was 82. … the reason we put in 4c, was because the agreement was silent on 4c, and that was important to [Mr Ingles], at the time.”

  1. [99]
    As for Stage 9, Mr Ingles maintains that there was no agreement reached about the calculation of an additional fee. 
  2. [100]
    It will be recalled that by the time of the meeting, the two management lots originally contemplated as part of Stage 9 had been ‘deleted’ and replaced with 8 traditional lots across Stages 9a, 9b and 9c.
  3. [101]
    Mr Ingles and Mr Creighton agree that two different approaches to calculate the additional fee payable on Stage 9 were advanced at the meeting:
  • Mr Creighton suggested that the estimated gross proceeds for the two original management lots be added together to form the estimated gross proceeds of the eight replacement lots, in an amended row of Table A, to be called “Management Lots Stage 9”. The average price for those new “management lots” would then be calculated by dividing the total of the estimated gross proceeds for the two original management lots by eight.
  • Mr Ingles suggested that the average price for Stage 9 be calculated by adding together the estimated gross proceeds of Stages 9a and 9b, then dividing that number by the original number of lots in Stage 9 (that is, 84).  To this, Mr Creighton had suggested that the average price arrived at on Mr Ingles’ method be multiplied by the total number of lots contemplated in Stage 9 at that time, less the eight lots replacing the management lots (that is, 102). 
  1. [102]
    Mr Creighton explained in evidence that his suggestion to multiply Mr Ingles’ average price figure by 102 was consistent with applying cl 6.2(e) of the consultancy agreement. 
  2. [103]
    Mr Ingles maintains that he did not agree with that suggestion, and that the meeting concluded as regards Stage 9 with Mr Creighton saying “why don’t you go away and think about it”.  Mr Creighton’s evidence was that although Mr Ingles at first did not agree, once they had “talked about it for a while”, Mr Ingles “did agree to it because he understood that we were using the clause in the agreement of 6.2(e) in accordance with the agreement.  So then we agreed on it.”
  3. [104]
    Ms Conrad’s handwritten notes taken at the meeting on 20 August 2015 are in evidence.  They include the following, which tend to suggest agreement having been reached at the meeting consistent with Mr Creighton’s proposal:

“🗸 Stage 4 agree total sale proceeds spread over whole stage

   82 lots”

“🗸 Add the 2 “c”s into consultancy no.s”

“🗸 9 split out M.D. lots (pink 8) leaves with 110 lots

  21,555,287 ÷ 84 x 102 =”[10]

  1. [105]
    Ms Conrad was originally included in the Trial Plan as a witness to be called by Calmmonth at trial and the original trial was adjourned because of her non-availability due to work pressures.  As it eventuated, Ms Conrad was not called to give evidence.  No explanation has been offered by Calmmonth for Ms Conrad not having been called as a witness.
  2. [106]
    It is to be recalled that Ms Conrad’s email, following the meeting in August 2015, set out a range of amendments to Table A of the consultancy agreement and concluded:

“Please confirm that this is your understanding of the agreement we reached on Thursday.”

  1. [107]
    In a follow up email sent on 31 August 2015, Ms Conrad again asserted that there was an agreement reached at the meeting:

“… I haven’t heard from you, the figures are exactly those we agreed on at our meeting…”

  1. [108]
    As set out from [32] above, these emails were part of a series of email correspondence between Mr Creighton and Ms Conrad following the meeting.  In response to follow up messages from Ms Conrad, Mr Creighton advised first that he had not had a chance to review the amendments, and then later (after his admission to hospital, and while on pain killers), that he “did not get to it” but would pick it up again when he returned in two weeks’ time.
  2. [109]
    Mr Ingles in evidence explained that the reference to the “agreement reached on Thursday” in Ms Conrad’s initial email was an attempt by him to “lock” AVJennings into an agreement whereby Calmmonth would earn an additional fee on Stage 4, but “sacrifice” any additional fee on Stage 9.  This is said to have been done in circumstances where:
    1. (a)
      there was no agreement reached during the meeting for the amendment of Table A regarding both Stages 4 and 9;
    2. (b)
      Mr Ingles was concerned that AVJennings may take the position that no additional fee was payable to Calmmonth for either Stage 4c or Stage 9c, because neither was included in the original Table A;
    3. (c)
      Mr Ingles considered that Stage 4 was likely to be worth more in additional fees than Stage 9; and
    4. (d)
      Mr Ingles was willing to earn no additional fees on Stage 9 if an agreement could be reached on Stage 4.
  3. [110]
    Mr Creighton explained in evidence that between his emails of 26 and 31 August 2015, he had looked at Ms Conrad’s figures and formed the view that they were consistent with what had been agreed at the meeting.  His lack of affirmative response to Ms Conrad’s emails during that period was explained by his being occupied on other projects before going on leave, and also wanting, as a courtesy, to first brief his internal team on what had been agreed and how the agreement would be administered.  He was not able to brief his team before going on leave, and thereafter was admitted to hospital.  
  4. [111]
    Mr Creighton concedes that his 31 August email stating that he “just did not get to it last week”, sent from hospital, was “probably incorrect”, as he was suffering from a broken pelvis and was under the influence of pain killers when he sent it. Mr Creighton maintains that he was comfortable with the figures as set out in Ms Conrad’s 21 August 2015 email and that they reflected the agreement reached at the 20 August 2015 meeting.
  5. [112]
    During 2016 and 2017, Calmmonth issued invoices to AVJennings for its 2.5 per cent base fee for various lots on the development.  Those invoices included lots within Stages 4c and 9c, along with the eight lots which replaced the original management lots. 
  6. [113]
    As outlined at [42], AVJennings paid to Calmmonth a figure of $651,513.07 (plus GST) in April 2017 as the additional fee payable for Stage 4.  Mr Creighton’s email to Mr Ingles in March 2017 explaining the calculation of this payment was as follows:

“… We don’t understand your position of how we calculated the Revised Gross Proceeds for stage 4 as the Consultancy Agreement is quite clear. The only issue is stage 4C which was not contemplated by the agreement. AVJennings has taken a generous approach and applied the lower of the average to the two sub stages (being Stage 4A $237,729).

As the agreement is not prescriptive as to how the revised proceeds for stage 4C are to be determined we could have used the average of the whole stage being $243,222 or stage 4b $246,229 (being by far the larger stage). Either of these approaches would reduce the payment to Calmmonth to $586,517.96 or $550,954.59 respectively…”

  1. [114]
    The agreement which, on AVJennings’ case, was reached at the August 2015 meeting would have required AVJennings to use the average price for Stages 4a and 4b together.  Taking either of the latter two approaches would have reduced the amount of the additional fee payable to Calmmonth.
  2. [115]
    During discussions relating to Calmmonth’s claim for additional compensation, AVJennings sent a letter on 9 May 2017 to Calmmonth’s lawyers which referred to Ms Conrad’s 21 August 2015 email, stating that:

“Your interpretation is also completely contradictory to your client’s previous interpretation set out by your client in its email to us of 21 August 2015 (attached). I refer you to paragraph #3 of that email in relation to stage 9 which specifically acknowledges the requirement for adjustment as we have set out in previous correspondence, and which also provides your client’s calculation of the adjusted original proceeds amount.” (emphasis added)

  1. [116]
    In a later letter on 30 May 2017, AVJennings referred to “the position agreed by your client in a meeting in 2015 which was confirmed by your client’s email to us of 21 August 2015” (emphasis added).

Relevant principles

  1. [117]
    Whether a binding agreement was reached is to be determined objectively, and will depend on the parties’ words and conduct, viewed in context.[11]  The evidence of witnesses and their contemporaneous views as to what happened can assist in understanding what, objectively, is likely to have occurred.  As Allsop J explained in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd:

“The objective theory of contract does not mean that one only looks at the transcript to see what was said.  One looks to witnesses and any other evidence to assist in understanding how it was said, with what manifest intention and in what context.  For such a task the expressions of view of the participants are evidentiary matters which can be taken into account in assessing what in fact happened and thus in assessing that ultimately objective question.”[12]

  1. [118]
    The parties’ subsequent conduct, although not admissible to answer a question of construction, is admissible in determining whether a contract was formed.[13]

Application of principles

  1. [119]
    Mr Ingles’ evidence that no agreement was reached at the August 2015 meeting is contradicted by a near-contemporaneous document: Ms Conrad’s letter sent on behalf of Calmmonth.  That letter was written by a participant in the meeting.  Its terms were approved by Mr Ingles.  It is compelling evidence that an agreement was reached at the meeting.
  2. [120]
    Mr Ingles did not impress me as a witness.  His recollection of what was said seemed poor and reconstructed to suit his interests.[14]
  3. [121]
    Calmmonth did not call Ms Conrad to give evidence.  She would be expected to be a witness called by Calmmonth.  The rule in Jones v Dunkel is enlivened.[15] 
  4. [122]
    The failure to call Ms Conrad allows an inference to be drawn that her evidence would not have assisted Calmmonth’s case.[16]  Importantly, the rule in Jones v Dunkel does not allow an inference to be drawn that Ms Conrad’s evidence would have been positively adverse to the plaintiff’s case.[17]  If there is sufficient evidence upon which to conclude that Calmmonth’s case (of no agreement having been reached at the meeting) is otherwise proved, the absence of evidence from Ms Conrad cannot be used to diminish that proof.[18]
  5. [123]
    In my view, the evidence leads to the conclusion that an agreement was reached at the meeting to amend Table A of the consultancy agreement.  Alternatively, the fact of the agreement is proven by what was said at the meeting and the parties’ words and conduct shortly after it.
  6. [124]
    Calmmonth submits that there was no agreement reached during the meeting, because:
    1. (a)
      Ms Conrad’s email on 21 August 2015 was an attempt by Mr Ingles to “lock in” an agreement, rather than confirming that an agreement had already been reached;
    2. (b)
      Mr Creighton, nor anyone else at AVJennings, ever confirmed their agreement with the amended calculations in Ms Conrad’s email;
    3. (c)
      AVJennings subsequently used a different methodology to the one allegedly agreed upon at the meeting when calculating the additional fee due on Stage 4; and
    4. (d)
      Subsequent correspondence from AVJennings sought to deny its obligation to pay an additional fee by reference to the terms of the consultancy agreement, rather than by any alleged agreement at the meeting.
  7. [125]
    There are references in Ms Conrad’s contemporaneous emails to an agreement having been reached at the meeting.  These emails were reviewed by Mr Ingles and he discussed them with Ms Conrad before they were sent.  On Mr Ingles’ version of events, he allowed emails to be sent which falsely claimed that an agreement had been reached.  I consider that to be improbable.  Rather than falsely assert that an agreement had been made when it had not been, it is more probable that the emails told the truth. 
  8. [126]
    I do not find his explanation that the emails were drafted in order to “lock” AVJennings into a proposal which had not been agreed convincing.
  9. [127]
    If the agreement alleged by AVJennings (as documented in Ms Conrad’s email of 21 August 2015) provided Mr Ingles with benefits that he wished to “lock in”, then he would have wished to “lock in” those matters by agreeing to the proposal at the meeting.
  10. [128]
    He controlled Calmmonth and did not need to report back to a superior and gain their approval before reaching an agreement.  He assessed the proposal to be, on balance, a good one for his company in the circumstances and had an interest in concluding the agreement at the meeting.  He had Ms Conrad at the meeting as a witness of what had been agreed at it.
  11. [129]
    In the days and weeks that followed the meeting and Calmmonth’s confirmatory email, Mr Ingles did not resile from the proposition that an agreement had been reached at the meeting.
  12. [130]
    Mr Creighton presented in the witness box as a thoughtful and careful witness.  He made appropriate concessions and acknowledged that, with the benefit of hindsight, he wished that he had taken the short time required back in August 2015 to send an affirmative response to Ms Conrad’s emails.  I agree with AVJennings’ submission that although it is inescapable that Mr Creighton did not provide an affirmative response, by the same token, neither Mr Ingles nor Ms Conrad confirmed to AVJennings that their “agreement” as set out in Ms Conrad’s email was off the table.  That is so in a context where Ms Conrad had previously said that failing any response from AVJennings, they would assume that AVJennings was happy.
  13. [131]
    Mr Creighton’s explanation for not responding affirmatively is understandable in the circumstances.  He was busy.  The matter was not contentious.  He had other more pressing things to prioritise before going on leave.  He then suffered serious injuries and was hospitalised.  
  14. [132]
    Calmmonth also relied on the fact that Mr Ingles took a file note of the meeting, in contrast to Mr Creighton not having done so.  Mr Creighton’s cross-examination is said to be largely consistent with the contents of Mr Ingles’ file note as regards the differing proposals discussed at the meeting, showing that Mr Ingles’ file note was accurate.  I accept that that is the case, but in circumstances where the real dispute is not the differing proposals put forward at the meeting, but rather the outcome of the meeting, I do not consider that Mr Ingles’ file note supports his assertion that no agreement was reached. Further, although Mr Ingles’ file note does not record any complete agreement having been reached at the meeting, Ms Conrad’s file note is consistent with Mr Creighton’s recollection that an agreement was reached.
  15. [133]
    In the absence of any evidence from Ms Conrad as to the basis on which the meeting concluded and the drafting of the emails, and with the benefit of her handwritten notes from the meeting which include tick marks and references to an agreement, I infer that her evidence, if given, would not have assisted Calmmonth in proving that no agreement was reached at the meeting.
  16. [134]
    The other features relied upon by Calmmonth to contend that no agreement was reached do not displace the probative force of Calmmonth’s contemporaneous documents and Mr Creighton’s evidence that an agreement was reached.
  17. [135]
    Mr Creighton was directed in cross-examination to his calculations for the additional fee payable to Calmmonth on Stage 4, undertaken in early 2017.  He accepted that his methodology for performing those calculations and some parts of his email were inconsistent with the agreement which AVJennings contends had been reached at the August 2015 meeting.  However, his explanation that AVJennings was adopting a more generous approach is understandable when viewed in the context of the parties attempting to reach a commercial resolution. 
  18. [136]
    The other correspondence relied upon by Calmmonth is the 9 May 2017 letter from AVJennings to Calmmonth’s lawyers, which referenced Calmmonth’s “previous interpretation set out by [Calmmonth] in its email to us of 21 August 2015”.  The reference to a “previous interpretation” rather than an “agreement” is submitted to tend against a finding of an agreement.  That phrase must be viewed in the context of the email as a whole, which also included a reference to a later part of Ms Conrad’s 21 August 2015 email setting out Calmmonth’s calculations and acknowledging the requirement for an adjustment in relation to Stage 9.  I consider that the phrase “previous interpretation” was a poor use of language, rather than an acknowledgement that no agreement had been reached at the August 2015 meeting.  That conclusion is supported by a further letter from AVJennings three weeks later which referred to “the position agreed by [Calmmonth] in a meeting in 2015 which was confirmed by [Calmmonth]’s email to us of 21 August 2015”.
  19. [137]
    For completeness, I note that AVJennings’ submissions rely on invoices issued by Calmmonth for its 2.5 per cent base fee in respect of Stages 4c, 9c, and the eight lots in place of the original management lots.  They are said to be subsequent conduct on the part of Calmmonth evidencing an agreement having been reached at the meeting to amend Table A.  This conduct seems to me to be equivocal.  The invoices are reflective of the base fee due under cl 6.1(a) of the consultancy agreement to Calmmonth on the sale of a lot within the land at Big Sky.  That entitlement arose  regardless of whether Table A was amended in the respects alleged by AVJennings.
  20. [138]
    For these reasons, I find it more probable than not that an agreement was reached at the meeting on 20 August 2015 to amend Table A of the consultancy agreement in the terms contained in Ms Conrad’s email of 21 August 2015.

Conclusion and orders

  1. [139]
    My conclusion that the consultancy agreement was varied makes it unnecessary to consider the alternative estoppel arguments, or AVJennings’ counterclaim.
  2. [140]
    Calmmonth having failed to establish the implied term which was essential to its case, its claim should be dismissed.
  3. [141]
    Calmmonth did not advance an alternative claim for $51,800.19, being the amount which AVJennings acknowledges it owes Calmmonth pursuant to cl 6.2(a) in relation to the Stage 9 management lots.  To this figure is added GST pursuant to cl 6.2(b).  AVJennings pleads that it is liable to pay that sum upon Calmmonth rendering an invoice, but submits that Calmmonth has not done so.
  4. [142]
    There seems insufficient justification to give judgment for that amount when it has not been claimed, but has been acknowledged.
  5. [143]
    There does not appear to be any reason as to why costs should not follow the event.  Subject to any submissions as to the form of the order or costs, I propose to order:
  1. Judgment for the defendant.
  1. The plaintiff pay the defendant’s costs of and incidental to the proceeding, including reserved costs, to be assessed if not agreed.

Footnotes

[1]AVJennings accepts, however, that if the Court makes certain findings, it will owe an additional fee of $51,800.19 to Calmmonth.

[2]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (“Codelfa”) at 347.

[3]Codelfa at 345-346.

[4]Codelfa at 346.

[5][1995] EMLR 472 at 481-482.

[6]Gemmell Power Farming Co Ltd v Nies (1935) 35 SR (NSW) 469 at 476-477.

[7]Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 at [25].

[8]Codelfa at 346-347 citing Shirlaw v Southern Foundaries (1926) Ltd [1939] 2 KB 206 at 227.

[9][1995] EMLR 472 at 482.

[10]The tick marks were included beside these parts of Ms Conrad’s notes.

[11]Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 512.

[12](2001) 117 FCR 424 at 512.

[13]Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163-164.

[14]Watson v Foxman (1995) 49 NSWLR 315 at 318-319.

[15](1959) 101 CLR 298 at 308, 312, 320-321.

[16]Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 384-385.

[17]Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 385; Australian Securities and Investments Commission v Hellicar & Ors (2012) 247 CLR 345 at 413.

[18]Australian Securities and Investments Commission v Hellicar & Ors (2012) 247 CLR 345 at 414.

Close

Editorial Notes

  • Published Case Name:

    Calmmonth Pty Ltd v AVJennings Properties Limited

  • Shortened Case Name:

    Calmmonth Pty Ltd v AVJennings Properties Ltd

  • MNC:

    [2021] QSC 3

  • Court:

    QSC

  • Judge(s):

    Applegarth J

  • Date:

    27 Jan 2021

  • White Star Case:

    Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Attorney-General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988
2 citations
Jump To
Cite 1 - [2009] 1 WLR 1988
Cite 2 - [2009] 1 WLR 1988
Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10
1 citation
Jump To
Cite 1 - [2009] UKPC 10
Australian Securities and Investments Commission v Hellicar [2012] HCA 17
1 citation
Jump To
Cite 1 - [2012] HCA 17
Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345
3 citations
Jump To
Cite 1 - (2012) 247 CLR 345
Cite 2 - (2012) 247 CLR 345
Cite 3 - (2012) 247 CLR 345
Brambles Holdings Limited v Bathurst City Council [2001] NSW CA 61
1 citation
Jump To
Cite 1 - [2001] NSW CA 61
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
2 citations
Jump To
Cite 1 - (2001) 53 NSWLR 153
Cite 2 - (2001) 53 NSWLR 153
Branir Pty Ltd v Owston Nominees [No 2] Pty Ltd [2001] FCA 1833
1 citation
Jump To
Cite 1 - [2001] FCA 1833
Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
3 citations
Jump To
Cite 1 - (2001) 117 FCR 424
Cite 2 - (2001) 117 FCR 424
Cite 3 - (2001) 117 FCR 424
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) HCA 24
1 citation
Jump To
Cite 1 - (1982) HCA 24
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
5 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
Cite 3 - (1982) 149 C.L R. 337
Cite 4 - (1982) 149 C.L R. 337
Cite 5 - (1982) 149 C.L R. 337
Gemmell Power Farming Co. Ltd v Nies (1935) 35 S.R. N.S.W 469
2 citations
Jump To
Cite 1 - (1935) 35 S.R. N.S.W 469
Cite 2 - (1935) 35 S.R. N.S.W 469
Jones v Dunkel (1959) 101 CLR 298
2 citations
Jump To
Cite 1 - (1959) 101 CLR 298
Cite 2 - (1959) 101 CLR 298
Jones v Dunkel [1959] HCA 8
1 citation
Jump To
Cite 1 - [1959] HCA 8
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11
1 citation
Jump To
Cite 1 - [2011] HCA 11
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
3 citations
Jump To
Cite 1 - (2011) 243 CLR 361
Cite 2 - (2011) 243 CLR 361
Cite 3 - (2011) 243 CLR 361
Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472
3 citations
Jump To
Cite 1 - [1995] EMLR 472
Cite 2 - [1995] EMLR 472
Cite 3 - [1995] EMLR 472
Shirlaw v Southern Foundries [1939] 2 KB 206
1 citation
Jump To
Cite 1 - [1939] 2 KB 206
Watson v Foxman (1995) 49 NSWLR 315
2 citations
Jump To
Cite 1 - (1995) 49 NSWLR 315
Cite 2 - (1995) 49 NSWLR 315

Cases Citing

Case NameFull CitationFrequency
Calmmonth Pty Ltd v AVJennings Properties Limited (No 2) [2021] QSC 232 citations
1

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