Zaps Transport (Aust) Pty Ltd v PJG Warehousing & Distribution Pty Ltd

1. [1]

   GLEESON JA: I agree with Payne JA. I would add the following brief observations in relation to issue 1, assuming (contrary to the conclusion of Payne JA, with which I agree) that the two documents which the appellants sought to rely upon were admitted as further evidence on appeal. Those documents are identified in [54] of Payne JA’s reasons. The appellants contended that these documents established repudiation by the respondent/vendors of their obligation to complete, thus disentitling them to interest on the purchase price under special condition 9 of the contract.

2. [2]

   In my view, neither the “settlement sheet” proffered by the vendors to the purchaser prior to the completion date, nor the email that showed that the settlement sheet had been received by the purchaser’s solicitor, constituted a renunciation of the vendors’ contractual obligations with respect to completion of the contract. As Payne JA has explained, the “settlement sheet” contained an adjustment for “employee entitlements” of $42,792.37, and the amount which the primary judge ultimately found to be the correct adjustment was $48,059.47. Counsel for the appellants asserted that the difference in the amounts is explained by the difference then existing over long-service entitlements but the Court was not taken to any evidence in that regard.

3. [3]

   The documents sought to be relied upon by the appellants (the purchaser/guarantor) do not establish that the respondent/vendors were either unwilling or unable to perform their contractual obligations, that is, that they evinced an intention to no longer be bound by the contract, or stated that they intended to fulfil the contract only in a manner substantially inconsistent with their obligations and in no other way: Shevill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 (Shevill) at 625-626 (Gibbs CJ); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623 at 634, 647-648, 658 (Laurinda); Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; 233 CLR 115 (Koompahtoo) at [44]. Repudiation is a serious matter and is not to be lightly found or inferred: Shevill at 633 (Wilson J).

4. [4]

   The test for renunciation is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it: Koompahtoo at [44]; Laurinda at 659 (Deane and Dawson JJ) and 647 (Brennan J).

5. [5]

   Here, the purchaser did not assert factual inability to perform by the vendors. The purchaser asserted unwillingness to perform should be inferred from the vendors’ conduct in failing accurately to calculate the adjustment amount in respect of “employee entitlements” in the settlement sheet proffered to the purchaser’s solicitor.

6. [6]

   Given the test for renunciation and the absence of evidence relating to the calculation of the adjustment for “employee entitlements”, I would not have been prepared to make a finding that the respondent/vendors repudiated their obligations under the contract, even if the two documents were admitted as further evidence on appeal.

7. [7]

   PAYNE JA: These proceedings arise out of a contract dated 13 July 2007 for the sale of a business described in the contract as a “Transport company and warehouse within the business of transportation, distribution and warehousing of liquor only” (the Contract).

8. [8]

   The primary vendor was PJG Warehousing & Distribution Ltd (PJG), which was the first plaintiff in the District Court proceedings and is the first respondent in these proceedings.

9. [9]

   The other vendor parties were:

   1. (1)

      Good Deal Pty Ltd (Good Deal), which owned various pieces of equipment listed in Annexure B to the Contract. Good Deal was the second plaintiff in the District Court proceedings and is the second respondent in these proceedings;

   2. (2)

      Storetrans Pty Ltd (Storetrans), which held a lease on the Villawood premises where PJG’s business was located. Storetrans was the third plaintiff in the District Court proceedings and is the third respondent in these proceedings; and

   3. (3)

      Peter Gooding, a director of PJG, Good Deal and Storetrans. Mr Gooding was the fourth plaintiff in the District Court proceedings and is the fourth respondent in these proceedings.

10. [10]

    The purchaser was Zaps Transport (Aust) Pty Ltd (Zaps Transport) as trustee for the Westin Tristar Unit Trust, which was the first defendant in the District Court proceedings and is the first appellant in these proceedings.

11. [11]

    Mr John Zappia, the sole director of Zaps Transport, was a guarantor of Zaps Transport’s obligations and the second defendant in the District Court proceedings. He is the second appellant in these proceedings.

12. [12]

    The Contract was a standard form “Contract for the sale of business – 2004 edition,” supplemented by special conditions. The key features of the Contract were as follows:

    1. (1)

       the Contract date was 13 July 2007;

    2. (2)

       the completion date was 30 days after the Contract date, 13 August 2007;

    3. (3)

       the Contract price was $720,000, apportioned on the face of the Contract in the following manner:

    4. (4)

       the deposit was $650,000, with the balance of $70,000 payable upon completion;

    5. (5)

       special condition 1(a) provided that the purchaser was entitled to immediate possession:

    6. (6)

       clause 1.2 provided that the adjustment date was the date of possession (i.e. 13 July 2007);

    7. (7)

       all relevant risks and liabilities associated with the business passed to the purchaser on the adjustment date, in particular clause 5 (the business and all its assets were at the risk of the purchaser after that date); clause 18.1 (all profits takings and outgoings of the business were the property of the purchaser after that date); special condition 1(b) (all employee entitlements save in respect of one employee, Jodie Carter, were the responsibility of the purchaser after that date); special condition 1(d) (purchaser responsible for necessary insurances); and special condition 14 (the responsibility for storage contracts became the purchaser’s after that date);

    8. (8)

       clause 18.2 provided that the balance payable upon completion was subject to adjustments;

    9. (9)

       special condition 9, which was not the subject of close examination by the primary judge but which is the centrepiece of the appellants’ claim in this Court, provided that if the purchaser failed to complete by the completion date, “without default by the vendor”, interest would run on the settlement sum calculated at 12 per cent per annum compounded daily;

    10. (10)

        special condition 16, titled “Training Before Completion,” provided that an “essential term and condition” of the Contract was that Mr Gooding “assist the purchaser” to provide tuition, to “assist and facilitate” the purchaser in obtaining the benefit of the goodwill of the business and to introduce the purchaser to suppliers and clients of the business. The precise terms of this obligation will be addressed in relation to the appeal concerning the purchaser’s cross–claim where the correct construction of special condition 16 is an important question.

Relevant facts

1. [13]

   At all relevant times, Zaps Transport operated a storage and transport business. Zaps Transport sought to purchase the vendors’ business (the Business) in order to expand their existing business. Negotiations leading to the execution of the Contract commenced in March 2007.

2. [14]

   The parties signed the Contract on Friday 13 July 2007. On the same day, the purchasers paid the vendors the deposit amount of $650,000. The outstanding balance of the Contract price was $70,000. Also on 13 July 2007, and pursuant to special condition 1(a), the purchasers took immediate possession of the Business and its Villawood premises.

3. [15]

   Between 13 July and 1 August 2007, Zaps Transport relocated the Business (with the exception of some items the subject of a Customs Bond) from Villawood to premises at Smithfield, and integrated the Business with a pre-existing business apparently conducted by a related company.

4. [16]

   In the first week after the Contract was signed, on 17 or 18 July 2007, Mr Gooding introduced Mr Zappia to some clients of the Business. Mr Gooding gave evidence that those clients were McWilliams Wines, Angoves Wines, Inglewood Wines and David Haviland Wines. Mr Zappia gave affidavit evidence that the clients were Angoves Wines and Cobrol. In cross-examination he said that he was also introduced to McWilliams Wines and may have been introduced Inglewood Wines.

5. [17]

   Mr Gooding travelled to Queensland soon after the Contract was signed. Mr Gooding says this occurred in the second week after the contract was signed (being 23 – 27 July), whereas Mr Zappia says it was three days into the first week (being 18 July).

6. [18]

   Mr R Angyal SC, who appeared for the appellants in this Court, accepted that Mr Gooding gave Mr Zappia notice that he was travelling to Queensland. He also accepted that there was no evidence that Mr Zappia complained then or at any time subsequently about Mr Gooding travelling to Queensland.

7. [19]

   On 1 August 2007 Mr Gooding, having returned from Queensland, attended the Villawood premises to remove a number of filing cabinets which did not pass to the ownership of the purchasers on the sale. Mr Dominic Zappia (the son of Mr John Zappia) was present at the Villawood premises at the time and, after a verbal exchange about the removal of the filing cabinets, a physical altercation ensued.

8. [20]

   After 1 August 2007 there was no contact between Mr Peter Gooding and Mr Zappia or Zaps Transport about the subject matter of special condition 16 of the Contract (that is, Mr Gooding’s obligation to assist the purchaser).

9. [21]

   Indeed, so far as the evidence reveals, there was no communication between Mr Zappia or anybody else on behalf of Zaps Transport and Mr Gooding about the subject matter of special condition 16 of the Contract other than that described in paragraphs [16] – [17] above.

10. [22]

    Completion did not occur on the completion date, 13 August 2007. The vendors say that by 13 August they had done all things that the Contract required them to do prior to completion. In effect, they say that they were ready, willing and able to complete on that date. But the purchasers did not complete.

11. [23]

    On the hearing of the appeal, Zaps Transport sought to tender a “settlement sheet” which had been proffered by the vendors to the purchasers on about 3 August 2007, which was not in evidence before the primary judge. There are issues with the admissibility of this evidence on appeal, which are addressed below. For now it is sufficient to say that the settlement sheet calculated a total amount payable by the purchaser on settlement of $55,666.78, which figure was derived after making an allowance for “employee entitlements” of $42,792.37 in favour of Zaps Transport. This settlement sheet, assuming it is allowed into evidence, contains the only evidence of a settlement sheet proffered by the vendors prior to the settlement date. The appellants accept that they did not proffer any settlement sheet of their own or make any offer to pay a settlement amount at any time prior to the completion date, 13 August 2007.

12. [24]

    In September and October 2007, after the completion date, there was an exchange of additional “settlement adjustment sheets”. The vendors’ “settlement adjustment sheet” increased the adjusted settlement amount to $267,686.22. On 28 September 2007 the purchasers put forward, for the first time, their own settlement sheet, showing a settlement amount of $26,296.87. That settlement sheet was in evidence, but it bears the fax machine date stamp of 3 October 2007 (whereas the fax from the purchasers to the vendors bears the stamp of 28 September 2007). This discrepancy was not explained in the evidence.

13. [25]

    On 2 October 2007, the vendors served a creditor’s statutory demand on the purchasers. This demand was subsequently set aside. There matters were apparently left for some years.

The proceedings in the District Court

1. [26]

   On 5 July 2013, the vendors commenced proceedings against the purchasers in the District Court of New South Wales seeking, inter alia, payment of the balance of the Contract price.

2. [27]

   The purchasers resisted payment of the balance of the Contract price and also cross-claimed against the vendors on the basis of an alleged breach of essential obligations under the Contract, namely, the obligations imposed by special condition 16. The purchasers sought damages on the basis that the breach had caused damage to the goodwill of the Business.

3. [28]

   The parties also made various other allegations against one another relating to certain chattels. Those allegations were addressed by the primary judge but were not ultimately the subject of this appeal.

4. [29]

   The central dispute in the proceedings before the primary judge was the extent to which between 13 July 2007 and 1 August 2007 the vendors performed their obligations under special condition 16.

5. [30]

   On 29 May 2015 the primary judge found in favour of the vendors on both the primary claim and the cross-claim. However, his Honour found that the sum that the purchasers were required to pay the vendors was substantially lower than the amount sought by the vendors.

6. [31]

   The primary judge’s conclusions on the issue of breach were as follows:

7. [32]

   The primary judge ordered that Zaps Transport and Mr Zappia (as guarantor) pay the vendors the sum of $82,765.03 comprising:

   1. (1)

      $74,965.03 for the remaining amount owing under the Contract (being $70,000 as adjusted under clause 18.2 of the Contract): and

   2. (2)

      $7,800 for chattels belonging to the vendors which his Honour found had been converted by the purchaser.

8. [33]

   The challenge contained in the notice of appeal to this aspect of his Honour’s orders, based on an alleged repudiation of the Contract by the purchasers in breaching special condition 16, was not pressed on this appeal. Counsel for the appellants correctly accepted that, in the circumstances, even assuming breach by the vendors, the purchaser had elected to affirm the Contract. Further, there was no challenge to the primary judge’s calculation of the remaining amount owing under the Contract.

9. [34]

   The primary judge next ordered that Zaps Transport and Mr Zappia (as guarantor) to pay interest of $75,059.25 made up of:

   1. (1)

      $70,093.22 payable at the rate provided under special condition 9 of the Contract in respect of the unpaid balance of the Contract price; and

   2. (2)

      $4,966.03 payable under s 100 of the Civil Procedure Act 2005 (NSW) in respect of the value of the goods converted.

   3. (3)

      The appellants challenge the award of contractual interest (item (1) above), but not the award of interest on the goods found to have been converted (item (2) above).

10. [35]

    The primary judge dismissed the purchaser’s cross-claim on the basis that his Honour found no breach of special condition 16, as explained in paragraph [31] above. The appellants appeal from that finding.

11. [36]

    His Honour did not address causation and quantification of loss on the alternative basis that there had been a breach of special condition 16. These issues are the subject of the notice of appeal and a notice of contention filed by the vendors.

Issues on this Appeal

1. [37]

   I propose to address issues in these proceedings by first addressing the issues raised under the primary claim and then the issues under the cross-claim as follows:

2. [38]

   The primary judge concluded that the vendors were entitled to be paid interest on the unpaid Contract price pursuant to special condition 9 of the Contract. His Honour found that interest began running on the amount owed by the purchasers on 13 August 2007, being the completion date.

3. [39]

   Special condition 9 provides:

4. [40]

   The argument advanced in this Court was that the primary judge had erred in awarding interest under special condition 9 of the Contract because, at the completion date, 13 August 2007, the vendors were in “default” within the meaning of special condition 9 as they had repudiated the Contract by failing accurately to calculate the adjustment amount in respect of employee entitlements. Further, it was submitted that there was a second relevant “default” within the meaning of special condition 9 as they had repudiated the Contract by breaching special condition 16.

5. [41]

   Thus, it was submitted, the purchaser was entitled not to complete the purchase by the completion date and, accordingly, the primary judge erred in awarding interest under special condition 9 to the vendors on the amount found to be owing under the Contract.

6. [42]

   In argument the Court was taken to the following provisions in the Contract relating to employee entitlements:

   1. (1)

      Special condition 1(b) which provided that the vendor would be liable for all employee entitlements up to (but not including) the adjustment date (13 July 2007), from which date the purchaser would be liable for all employee entitlements until completion (13 August 2007). There was an exception in respect of one employee, Jody Carter, for whose entitlements the vendor remained liable;

   2. (2)

      Clause 31.1 which provided that before completion (13 August 2007) the purchaser make an offer of employment to each employee in the Business which it wished to employ. The offer would be conditional on, and effective from, completion;

   3. (3)

      Clause 31.3 which provided that before completion (13 August 2007) the purchaser provide the vendor with a list of the transferring employees and details of their accrued employee entitlements as at completion;

   4. (4)

      Clause 31.4 which provided that in calculating the amount owing under the Contract, the vendor adjust for the value of any accrued employee entitlements (that is, those which had accrued by the adjustment date, 13 July 2007); and

   5. (5)

      Clause 18.2 which provided that the parties make any necessary adjustment on completion.

7. [43]

   The effect of these clauses is that the purchaser had to select employees it chose to hire from amongst the vendors’ staff and, at completion, the vendor had to adjust, namely give credit to the purchaser, for the value of those employees’ entitlements which had accrued up to the date of possession, 13 July 2007.

8. [44]

   Counsel for the purchaser sought to rely upon further evidence on appeal relating to this issue. The effect of that evidence, it was submitted, was that prior to the completion date the vendors had not made an allowance of $48,059.47 for employee entitlements in the settlement calculations which had been exchanged between the parties. (The primary judge ultimately found that the correct amount to be allowed for employee entitlements was $48,059.47). This, it was submitted, was “fundamental” and amounted to repudiation of the Contract. In those circumstances, it was submitted that the vendors had no entitlement to interest under the Contract as this was a “default” within the meaning of special condition 9. It was submitted that this default was not remedied until the sixth day of the trial when counsel for the vendors accepted that an amount should be allowed as part of the adjustment to reflect employee entitlements.

9. [45]

   The primary judge was criticised for failing to make relevant findings and for awarding interest under special condition 9 the Contract.

10. [46]

    In my view, it is hardly surprising that the primary judge did not advert to the “employee entitlements” issue in determining the award of interest under the Contract. It was not part of the case presented to him. A question arises about whether the appellant should be permitted to rely on the “employee entitlements” issue in this Court, it being raised for the first time here. In my view, for the reasons that follow, it should not.

11. [47]

    Counsel for the purchaser conceded that the argument that the “default” exception in special condition 9 was enlivened by the vendors refusing to adjust for employee entitlements was not put to the primary judge. It was submitted, however, that the issue arose on the materials that were before the primary judge.

12. [48]

    On a fair reading of the written and oral submissions below, the appellants did not suggest to the primary judge (or for that matter to any witness) that the relevant default was a failure properly to take into account employee entitlements in calculating the appropriate adjustment amount. Further, there was not a word in the written submissions on appeal in this Court about this issue.

13. [49]

    If this issue had been raised in the Court below it is obvious that it would have been necessary for both parties to have led evidence and explored the matter in cross-examination. The fact that on this appeal the purchaser sought to lead evidence for the first time about the content of a “settlement sheet” containing a calculation of “employee entitlements” which was proffered by the vendors prior to 13 August 2007 is a cogent demonstration that this issue was simply not explored at the trial, as it undoubtedly could have been.

14. [50]

    The High Court has repeatedly made it clear that in circumstances such as the present, the new argument cannot be raised for the first time on appeal. In Whisprun Pty Ltd v Dixon [2003] HCA 48; 200 ALR 447 at 461 (Gleeson CJ, McHugh and Gummow JJ) said:

15. [51]

    In the present case, counsel for the appellants submitted that the argument that the “default” exception in special condition 9 was enlivened by the vendors refusing to adjust for employee entitlements was a “subset” of what was put in general terms to the primary judge. However, in my view, this argument was not articulated at all until the hearing of this appeal. While the purchaser denied any entitlement to interest in the pleading, I do not accept that the argument that the “default” exception in special condition 9 was enlivened by the vendors refusing to adjust for employee entitlements formed any part of a larger submission made at the trial.

16. [52]

    The “actual conduct of the proceedings” at trial, as I have sought to demonstrate in paragraphs [45] to [49] above, make it clear that it was not the purchaser’s case at the trial that the “default” exception in special condition 9 was enlivened by the vendors refusing to adjust for employee entitlements. In my view, this Court should not permit the argument to be raised for the first time on appeal.

17. [53]

    It remains to deal with the application by the appellants to adduce further evidence on the appeal, being two documents not in evidence below.

18. [54]

    The first is a “settlement sheet” proffered by the vendors to the purchaser prior to the completion date containing an adjustment for “employee entitlements” of $42,792.37 (it will be recalled that the primary judge ultimately found that the correct adjustment amount for employee entitlements was $48,059.47) and the second is an e-mail that showed that the settlement sheet had been received by the purchaser’s solicitor.

19. [55]

    That evidence is admissible only in circumstances in which special grounds are present: Supreme Court Act 1970 (NSW) s 75A(8). In my view, special grounds have not been shown in this case to permit the tender of this further evidence. My reasons for rejecting the tender of the further evidence are as follows:

    1. (1)

       First, there is no evidence that the further evidence sought to be tendered could not with reasonable diligence have been located and deployed in the District Court (if indeed this was an issue that the appellants wished to agitate in that Court). The Court was informed from the bar table that the material had been located by the appellants in the files of a bankrupt solicitor who had acted on the sale of the Business for the purchaser but not when the material had first been sought by the appellants;

    2. (2)

       Second, it is obvious that on the face of these documents that the record of calculations made and exchanged prior to completion of the correct amount of employee entitlements is incomplete. There is likely to be additional evidence, certainly on the respondents’ side of the record and most likely on the appellants’ side, which is not before the Court;

    3. (3)

       Third, the material is not highly probative on the issue sought to be raised by the purchaser. The “settlement sheet” proffered by the vendors to the purchaser is notable in that it does contain an adjustment for “employee entitlements”, which together with certain unidentified legal costs total $42,792.37. True it is that those adjustments for “employee entitlements” are less than the $48,059.47 that the primary judge ultimately found to be the correct adjustment amount for such entitlements, but for my part, in order to conclude that there had been a repudiation of the Contract by the vendors in respect of adjustments for employee entitlements, which enlivened the “default” exception in special condition 9, I would need to know much more than these bare facts. The Court was informed from the bar table by counsel for the appellants that the difference in the amounts is explained by a difference then existing over long service leave entitlements, but was not taken to any evidence of how this came about;

    4. (4)

       Fourth, even if the further evidence was admitted, and taking into account evidence (referred to in paragraph [24] above) that the vendors, many weeks after the completion, proffered settlement calculations which did not take into account any employee entitlements, I would not infer, without more evidence, that the vendors had evinced an intention not to be bound by the Contract in any communication with the purchaser prior to the completion date, 13 August 2007, which in my view is the relevant date for the purposes of special condition 9;

    5. (5)

       Fifth, I have already concluded that this issue was not raised by the purchaser before the primary judge and it would be unfair to permit it to be raised for the first time on appeal. In those circumstances there would be no utility in permitting the tender of the documents in this Court.

20. [56]

    Accordingly, in my view the challenge based on the calculation of “employee entitlements” to the primary judge’s conclusion about the award of interest under special condition 9 of the Contract fails.

21. [57]

    The only remaining ground so far as the principal appeal is concerned is the allegation that by reason of a breach of special condition 16 the vendors were not entitled to the payment of interest under special condition 9.

22. [58]

    Even assuming in favour of the appellants that special condition 16 was breached (which, as I explain below I have not found), it is clear that the “breach” referred to in special condition 9 does not encompass the breach of special condition 16 upon which the appellants rely.

23. [59]

    Special condition 9 uses the expression, "without default by the vendor”, by reference to the subject matter of completing the Contract by the completion date. The relevant “default” is clearly one referable to completion of the Contract, not a default referable to a breach of a promise or warranty, including a term of the Contract to provide training, even one described as “essential”. The description in the Contract of special condition 16 as “essential” may have permitted the purchaser to have treated the breach (if there was a breach) as a repudiation of the Contract and terminated the Contract. However, it will be recalled that the purchaser in this case elected to affirm the Contract. In my view, a failure to assist in providing training or introducing customers or suppliers to the purchaser says nothing about the obligations of the parties to complete the Contract.

24. [60]

    On the correct construction of special condition 9, there needs to be a relevant connection between the purchaser failing to complete (on the one hand) and the default by the vendor (on the other hand). A failure to assist in training or introducing customers and suppliers does not in my view engage the exception in special condition 9. It is not a relevant “default” for the purposes of that clause.

25. [61]

    For these reasons, I am of the view that the only challenges pressed on this appeal to the primary judge’s findings fail and the appeal concerning the vendors’ claim must be dismissed.

26. [62]

    The remaining issues each arise in relation the purchaser’s cross-claim.

27. [63]

    It will be recalled that the purchaser’s cross-claim was based on an alleged breach of special condition 16 of the Contract. The primary judge found that there was no breach of special condition 16 and dismissed the cross-claim. Special condition 16 of the Contract provided:

28. [64]

    The principles of construction of a contract such as the present are well known and not in dispute on this appeal. For present purposes it is sufficient to refer to the following statement of principle in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at 656 (French CJ, Hayne, Crennan and Kiefel JJ):

29. [65]

    Dealing first with the relevant content of the obligation contained in special condition 16, the appellants submit that the effect of special condition 16 was that Mr Gooding “was to effectively remain employed with the business”. In written and oral submissions the appellants emphasised the temporal aspect of Mr Gooding’s obligation to assist – that is, “for the period commencing immediately after the date of this contract of successive working days until completion …”. This way of approaching the question of construction in my view does not address the critical question of the content of the obligation contained in special condition 16. Whether or not an employee is obliged to attend a particular place of business or whether or not the employee has an obligation to act in a particular way, depends on the terms of the contract of employment. To describe Mr Gooding as “effectively” an employee for a month tends to obscure the relevant enquiry.

30. [66]

    In the present case, the obligations of the parties must be gleaned by examining the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the Contract.

31. [67]

    The primary judge made no specific findings about the scope Mr Gooding’s obligations under special condition 16, but rather addressed the matter on the basis that no breach had been established.

32. [68]

    In construing the obligations contained in special condition 16 it is appropriate to focus first on the language used. The text of special condition 16 is not without its difficulties. The text identifies obligations personal to Mr Gooding insofar as it casts on him a responsibility to “assist” the purchaser to provide tuition to the purchaser on certain identified topics relating to the Business (sub-paragraph (a)), to assist and facilitate the purchaser in obtaining the benefit of the goodwill (sub-paragraph (b)) and to introduce the purchaser to suppliers dealing with the Business customers and clients of the Business (sub-paragraph (c)).

33. [69]

    The obligation to “assist” the purchaser is silent on whether Mr Gooding was obliged to do any of the things in sub-paragraphs (a)-(c) in the absence of any request from the Purchaser that he do so. Neither does the special condition specifically address whether Mr Gooding was required to be physically present at the Business, wherever it was being conducted, during the relevant period.

34. [70]

    The competing constructions of special condition 16 are:

    1. (1)

       that Mr Gooding was required personally, and without any request by the purchaser, to ensure each of the matters addressed by sub-paragraphs (a)-(c) of the special condition were effected; or

    2. (2)

       that Mr Gooding was only required to attend to any of the matters addressed by sub-paragraphs (a)-(c) of the special condition in response to a request or instruction by the purchaser.

35. [71]

    In understanding the commercial purpose or object of the special condition it is appropriate to have regard to the context in which special condition 16 operates. In my view the following matters of context assist in construing the obligation:

    1. (1)

       the assistance to be provided by Mr Gooding to the purchaser was to be provided at a time when the purchaser, and not the vendors, was in control of the Business. This is to be distinguished from the usual arrangement under a standard form sale of business, where the vendor retains possession and operates the business until the completion date;

    2. (2)

       all relevant risks and liabilities associated with the Business passed to the purchaser on the adjustment date, in particular clause 5 (the business and all its assets were at the risk of the purchaser after that date); clause 18.1 (all profits takings and outgoings of the business were the property of the purchaser after that date); special condition 1(b) (all employee entitlements save in respect of one employee, Jodie Carter, were the responsibility of the purchaser after that date); special condition 1(d); and special condition 14 (the responsibility for storage contracts became the purchaser’s after that date);

    3. (3)

       the purchaser was given the opportunity to select employees of the Business who were each available for continuing employment in operating the Business. Those employees who the purchaser was able to choose from were known to include very experienced employees;

    4. (4)

       Zaps Transport was an experienced operator in the same field of operations as the vendors. It sought to purchase the Business in order to expand its existing business. The Business was merged with an existing business apparently conducted by a related company almost immediately upon the adjustment date. Well prior to the completion date the physical location of the Business was moved from its existing premises in Villawood to existing premises operated by a company related to the purchaser located in Smithfield.

36. [72]

    In my view, and having regard to these matters of context, special condition 16 should be construed as obliging Mr Gooding to take reasonable steps to assist the purchaser in relation to the relevant subject matter of sub-paragraphs (a)-(c) of the clause as and when requested to do so by the purchaser. On a proper construction of special condition 16, Mr Gooding was not required to be present at any particular location, absent a request or instruction from the purchaser.

37. [73]

    If special condition 16 obliged Mr Gooding unilaterally to take steps to “train” staff or “introduce” customers to the purchaser, without any request by the purchaser, that would in my view potentially interfere with the purchaser’s control of the Business and potentially undermine the purpose and effect of special condition 16. A reasonable business person, in my view, would have understood the terms of special condition 16 to mean that the purchaser had the power to choose whether to require Mr Gooding, for example, to assist it in providing tuition or provide an introduction to customers and suppliers.

38. [74]

    Counsel for the appellants further submitted that the obligation was to assist the purchasers in “integrating” the Business with the existing Zaps Transport business. However, that is not the effect of special condition 16. Selecting the staff to be trained in “integration”, selecting the premises where the training was to take place and selecting the precise subject matter of the training are all matters which a reasonable business person would, in my view, have understood, pursuant to the terms of special condition 16, as being in the province of the purchaser as the person responsible for the Business at that time under the Contact. Of course, the purchaser had the right to require Mr Gooding to “assist” it in carrying out these tasks but the special condition provided no obligation to act absent such a requirement.

39. [75]

    Turning then to the question of breach, the appellants submitted that the primary judge erred in failing to find that the vendors breached special condition 16 because Mr Gooding:

    1. (1)

       did not introduce the purchasers to any clients after 1 August 2007;

    2. (2)

       was in Queensland for a period of time between 13 July and 1 August 2007; and

    3. (3)

       did not provide any training to the purchaser.

40. [76]

    The appellants’ principal submission is that the primary judge should have concluded that special condition 16 was breached by the failure of Mr Gooding to do these things, even in the absence of a request by the purchasers that he do them. As I have said, in my view special condition 16 did not require Mr Gooding to assist the purchaser in doing any of the things in paragraphs (a)-(c) absent a request by the purchaser.

41. [77]

    There is no finding by the primary judge and no evidence that the purchaser made any request of Mr Gooding to do any of the things in sub-paragraphs (a)-(c) and no finding by the primary judge and no evidence that the purchaser made any request of Mr Gooding to be present at either the Villawood or Smithfield premises during the relevant period prior to the completion date.

42. [78]

    So far as the introduction of the purchaser to clients after 1 August 2007 is concerned, the primary judge found that prior to 1 August 2007, Mr Gooding introduced Mr Zappia to some clients of the Business. There is no finding made by the primary judge that Mr Zappia (or anybody else on behalf of the purchaser) made any request for an introduction to other clients of the Business. In cross-examination, Mr Zappia had made a claim, not contained in his affidavits and not the subject of any documentary support, that he had made a request of Mr Gooding to introduce other clients. No ground of appeal was directed to the failure of the primary judge to conclude that Mr Zappia had made such a request and no written or oral submissions were made to the effect that the primary judge should have found that Mr Zappia asked Mr Gooding to introduce more clients. Further, in oral address, counsel for the purchaser accepted that after the altercation that occurred on 1 August 2007 “neither party wanted to deal with the other” (notwithstanding that Mr Gooding’s obligations under special condition 16 continued for twelve more days). In my view, the primary judge did not err in failing to find that the vendors breached special condition 16 because Mr Gooding did not introduce the purchasers to any clients after 1 August 2007.

43. [79]

    So far as Mr Gooding’s presence in Queensland during part of the relevant period is concerned, the appellants submitted that Mr Gooding’s travel to Queensland during the period prior to the completion date was a breach of special condition 16 in that it made performance of the obligations in special condition 16 impossible.

44. [80]

    Having regard to the evidence before the primary judge, however, I have concluded that Mr Gooding’s travelling to Queensland was not a breach of special condition 16. The evidence was that in the first few days of the period after the adjustment date, Mr Gooding introduced Mr Zappia to clients of the Business. Mr Zappia accepted that he was told by Mr Gooding at about that time that he was travelling to Queensland and that he would be absent from Sydney for some time prior to the completion date. Mr Zappia did not complain about Mr Gooding’s absence and, as I have said, the purchaser made no request at any time of Mr Gooding to do any of the things addressed by special condition 16. Accordingly, in my view breach of special condition 16 was not established by the absence of Mr Gooding during the period.

45. [81]

    So far as the provision of training to the purchaser is concerned, there was no evidence of:

    1. (1)

       any request by the purchaser that Mr Gooding provide any training;

    2. (2)

       the content of any such training if it was to be provided; or

    3. (3)

       the persons to whom training was supposed to be provided.

46. [82]

    The purchaser was capable of making its own decisions as to what training it required (from Mr Gooding or elsewhere) and was sufficiently informed to make such decisions. Mr Zappia operated a similar business and had access to the vendors’ business records upon taking possession on 13 July 2007. Accordingly, in my view breach of special condition 16 was not established by the absence of the provision of training by Mr Gooding to the purchaser.

47. [83]

    The appellants next submit that the primary judge based his conclusion that Mr Gooding was not in breach on matters which were irrelevant to the question of breach. Those matters were:

    1. (1)

       that the purchasers had access to the business records from which they could elicit customer details; and

    2. (2)

       that key personnel remained in the Business.

48. [84]

    In my view, the primary judge made no relevant error in taking those matters into account. Both of those matters were matters of context which he was entitled to take into account in construing the Contract. In construing the provisions of a commercial contract the obligations of the parties are to be determined objectively by reference to the text, context and purpose of the contract: State of Victoria v Tatts Group Limited [2016] HCA 5 at [51] and [61]-[72]. The primary judge did not depart from the correct approach.

49. [85]

    Finally, the appellants submit that the primary judge’s finding (at paragraph 36 of the judgment) that the vendors performed special condition 16(b) by performing 16(c) is “an error of law because it renders special condition 16(b) redundant”. In my view, the appellants’ criticism of the primary judge in relation to this issue is unfair. His Honour found no breach of special condition 16(b) in this case because the appellants did not assert any breach of special condition 16(b) based on anything other than what they assert amounted to a breach of special condition 16(c). In oral submissions the weakness of the appellants’ position about breach of special condition 16 was exposed. The obligation under 16(b) was “to brief Mr Zappia on the ins and outs of the business, the ins and outs of the clients, their peccadilloes”. There was no evidence of what that brief should have comprised and nothing was suggested about the content of any such obligation.

50. [86]

    Of course, a court will strain against interpreting a contract so that a particular clause in it is nugatory or ineffective: Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402 at 411. On a fair reading of the judgment, the primary judge did not say anything to the contrary. There is, of course, work for special condition 16(b) to do outside special condition 16(c) (for example, the introduction by Mr Gooding to an expert, Mr Whitfield, to assist the purchaser to obtain a bond licence). Counsel for the appellants could not identify any matter, material to any breach alleged in this case, where the obligation in sub-paragraph (b) went further than obligation in sub-paragraph (c).

51. [87]

    In light of the above matters, I do not believe that the primary judge erred in failing to find breach of special condition 16 and, accordingly, would dismiss the appeal so far as it relates to the cross-claim.

52. [88]

    Although strictly unnecessary in light of the conclusion I have reached about breach of special condition 16, I propose briefly to address the topics of causation and loss.

53. [89]

    It is clear in my view, that even if I had concluded that special condition 16 was breached, the appellants have failed to establish causation and quantification of damage. I would dismiss the appeal for these additional reasons.

54. [90]

    The plaintiff bears the burden of proving causation and the loss or damage suffered: Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768; 196 ALR 257 (Granny Smith).

55. [91]

    In the present case, the appellants’ evidence as to causation was seriously deficient. The primary evidence on the issue was an affidavit of Mr Zappia. This did not address the correct question of whether the purchaser had suffered damage as a result of the alleged breach of special condition 16.

56. [92]

    At its highest, Mr Zappia’s evidence about the damage allegedly suffered as a result of an alleged breach of special condition 16 was the following:

57. [93]

    To establish causation in the present case it would be necessary to conduct a comparison between the position the purchaser was in, assuming breach of special condition 16, and the position the purchaser would have been in if there been no breach of special condition 16.

58. [94]

    No attempt was made by the purchaser to prove the position it was in, assuming breach of special condition 16, and the position it would have been in if there had been no breach of special condition 16. The evidence did not address the question of how, for example, if Mr Gooding had not travelled to Queensland, or had introduced particular customers to Mr Zappia, the position the purchaser was in would have been any different. The purchaser’s case before the primary judge was seriously deficient in that it never addressed what precisely it was that it said Mr Gooding should have done in compliance with his obligation under special condition 16 such that it could be demonstrated that it had suffered damage as a result of the vendors’ alleged breach of contract.

59. [95]

    So far as quantification of damage is concerned, the appellants’ case was also seriously deficient. The steps in the damages case, which was almost wholly based on the evidence of Mr Zappia, were usefully summarised by counsel for the respondents:

60. [96]

    Accordingly, at its heart, rather than addressing the contractual measure of damages, which are assessed on the principle that the injured party, as far as money can do it, is placed in the position it would have been in if the contract had been performed, the purchaser’s evidence addressed a case that, subjectively, Mr Zappia believed he had overpaid for what he described as the “goodwill” of the Business.

61. [97]

    The value ascribed to goodwill on the front page of the Contract was $565,673. Therefore, Mr Zappia said, the purchaser suffered a loss of $282,836.50. The allocation of the amount of goodwill on the contract is an allocation for accounting purposes and does not necessarily represent goodwill for legal purposes: Commissioner of Taxation of the Commonwealth of Australia v Murry [1998] HCA 42; 193 CLR 605 at 612, 614 (per Gaudron, McHugh, Gummow and Hayne JJ). Accordingly, the starting point of the appellants’ damages case was flawed.

62. [98]

    Mr Zappia referred to various documents in support of his assertion that the Business lost about 30-40% of its client base within 6 months of the purchase, but those documents were, on analysis, unhelpful to this aspect of the purchaser’s case. In his affidavit, Mr Zappia said:

63. [99]

    Annexure F is a document which shows PJG’s sales, by customer, between July 2006 and May 2007. Of the 50 clients there listed, 27 have a hand-drawn asterisk next to them. However, the following exchange reveals that the asterisks were an unreliable guide to establishing whether or not the particular customer was a customer of the Business prior to the sale:

64. [100]

    As a result of the inconsistency between what Mr Zappia said at paragraph 30 in his affidavit (on the one hand) and what he said under cross-examination (on the other hand), Annexure F is in my view a poor foundation to establish any loss.

65. [101]

    Mr Zappia’s attempt to show a reduction in turnover based on a comparison of total income with income from clients in the period 2007 to 2008 also suffers from a number of fundamental problems:

    1. (1)

       First, a very substantial part of the allegedly lost business is, on Mr Zappia’s evidence, attributable to four customers - Lion Nathan, Beringer Blass, Bacardi Lion and Fine Wines. Mr Gooding was not cross-examined on statements in his affidavit evidence that:

    2. (2)

       Second, to the extent that the Court might draw inferences from Mr Zappia’s evidence about the loss or damage suffered, those inferences tend to point away from the conclusion the appellants ask the Court to reach. For instance, Cobrol and Inglewood Wines were the two clients that Mr Zappia agreed Mr Gooding did introduce to Mr Zappia. According to Mr Zappia, Cobrol and Inglewood Wines ceased to be clients shortly after the Business was purchased. In light of this, I would not infer (without more) that the absence of an introduction from Mr Gooding caused any particular clients to leave;

    3. (3)

       Third, there was a paucity of evidence about the integration of the Business with any pre-existing business conducted by Zaps Transport. The documents said to show the turnover of the relevant business which were annexed to Mr Zappia’s affidavit concerning damages were business records of another company, Westin Tristar Logistics Pty Ltd, which was apparently an existing business into which the Business was integrated. The evidence was silent about whether the business records this Court was taken to showed decreased turnover of the Business that was purchased, as opposed to the pre-existing business of the purchaser (or the merged business). That issue, which is critical to any finding of damage, could not be resolved on the evidence led;

    4. (4)

       Fourth, there is a real problem in potentially inappropriate comparisons being drawn by reason of the inadequate documentation sought to be deployed to prove damage. For example,

66. [102]

    This is a case of the kind described by Hayne J in Granny Smith (at 266) in which the claimant sought to “calculate its damages precisely” but failed to “adduce precise evidence of what has been lost”. In such a case, it is not appropriate for the Court to engage in “estimation” or “guesswork” in respect of the quantum of damages.

67. [103]

    A case was not put by the purchaser on the basis of a loss of a chance to negotiate a different contract of the kind addressed by the High Court in Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332.

68. [104]

    Finally, on the damages issue, the purchaser also relied upon an affidavit of Mr Bridges, an accountant. Mr Bridges set out the steps in Mr Zappia’s reasoning that I referred to above in paragraph [95]. He then said:

69. [105]

    This is an insufficient and unsatisfactory basis upon which to seek to prove causation or loss. In my view the report of Mr Bridges should not have been admitted into evidence: Dasreef Pty Ltd v Hawchar [2011] HCA 21; 243 CLR 588 (Dasreef). I doubt that the ultimate opinion expressed, being in effect an endorsement of the assumptions made by and “commercial experience” of another witness, is a matter of evidence capable of being admissible under s 79 of the Evidence Act 1995 (NSW). In any event, Mr Bridges did not expose the reasoning upon which his opinion was based as required by Dasreef. As a result, the Court could not assess whether his evidence was based upon specialised knowledge and the report should not have been admitted into evidence.

70. [106]

    In my view, the evidence led by the purchaser was insufficient to discharge its onus to prove causation and loss. Accordingly, the purchasers have failed to prove any damage flowing from the alleged non-performance of special condition 16.

71. [107]

    For these reasons, even if persuaded that special condition 16 had been breached, I would have dismissed the appeal in relation to the purchaser’s cross-claim.

Orders

1. [108]

   I have concluded that his Honour was correct to have made the award of damages that he did on the primary claim, together with interest at the rate specified in the Contract, and to have dismissed the respondents’ cross-claim.

2. [109]

   Accordingly, I propose the following orders:

   1. (1)

      Appeal dismissed;

   2. (2)

      The appellants are to pay the respondents’ costs of the appeal.

3. [110]

   EMMETT AJA: This appeal is concerned with the entitlement of the vendors under a contract for the sale of a business to recover from the purchaser of the business, the balance of the purchase price payable under the contract, together with interest. A Judge of the District Court (the primary judge) concluded that the vendors were entitled to recover the balance of the purchase price together with interest. Judgment was entered in favour of the vendors against the purchaser and a guarantor in the sum of $74,965.03 for the remaining amount owing under the contract, together with interest in the sum of $70,093.22 payable at the rate provided under the contract in respect of the unpaid balance of the purchase price. The primary judge also entered judgment in respect of claims for conversion of chattels that are not in issue in the appeal.

4. [111]

   By the contract, which was entered into on 13 July 2007, the vendors agreed to sell the business to the purchaser for a total price of $720,000. The purchaser was to have the benefit of possession on and from the date of the contract, which provided for a deposit of $650,000, with the balance of $70,000 payable on completion. Completion was to take place within 30 days after the date of the contract.

5. [112]

   Completion did not take place as provided for in the contract. Eventually, the vendors commenced proceedings to recover the balance of the purchase price. The purchaser resisted the payment of the balance of the purchase price and cross-claimed on the basis of alleged breach of special condition 16 of the contract, which provided that an essential term and condition of the contract was that one of the principals of the vendors would provide tuition to assist and facilitate the purchaser in obtaining the benefit of the goodwill of the business and to introduce the purchaser to suppliers and clients of the business. The purchaser sought damages on the basis that the breach of that clause had caused damage. The central dispute in the proceedings before the primary judge was the extent to which the principal performed the obligations under that clause. The primary judge concluded that there had been no breach of the clause in question.

6. [113]

   Special condition 9 of the contract provided that, if the purchaser failed to complete the contract by the completion date “without default by the vendor”, interest would run on the balance of the purchase price at the rate of 12% per annum compounded daily. The purchaser resisted the payment of interest under that clause on the basis of the alleged breach of special condition 16. It contended that, because of that breach, the vendors were not ready, willing and able to complete on the completion date. The primary judge concluded that, because there was no breach, interest was payable in accordance with special condition 9.

7. [114]

   The principal questions on the appeal were:

8. [115]

   I have had the considerable advantage of reading in draft form the proposed reasons of Payne JA. I agree with his Honour, for the reasons proposed, that even if there were a breach by the principal of his obligation under special condition 16, that is not a breach contemplated by special condition 9. That is to say, the relevant default is a default referrable to completion of the contract, not a default referrable to a breach of some other promise contained in the contract.

9. [116]

   I also agree with Payne JA that the primary judge did not err in concluding that there was no breach of special condition 16. It is therefore unnecessary to decide whether or not the purchaser established any loss or damage. If it were necessary, I would be disposed to agree with the conclusion reached by Payne JA that the evidence adduced on behalf of the purchaser was insufficient to discharge its onus to prove causation and loss.

10. [117]

    Accordingly, the appeal should be dismissed with costs. I agree with the orders proposed by Payne JA.