Wayne Danckert v Ralph Erwin Tonkin

1. [1]

   The first plaintiff, Mr Wayne Danckert (Mr Danckert), is a director of the third plaintiff. The second plaintiff (Mr Weldon) is a solicitor and also a director of the third plaintiff. The third plaintiff, Carlisle Plaza Pty Ltd (Carlisle), is wholly owned and controlled by interests associated with Messrs Danckert and Weldon.

2. [2]

   The first defendant, Mr Ralph Tonkin, is the son of Mr Ron Tonkin and is a director of the second and third defendants. The second defendant, SRD Tonkin Pty Ltd (SRD), is a company owned and controlled by the first defendant and his two brothers, Messrs Steven and David Tonkin. The third defendant, Tonkin Pty Ltd, is a company owned and controlled by Mr Ron Tonkin.

3. [3]

   These proceedings substantially concern the question of whether a binding joint venture agreement (JV agreement) was entered into by the parties.

4. [4]

   The plaintiffs make two primary claims. The first is for specific performance of the alleged JV agreement or, alternatively, damages in lieu. The second is for damages for alleged misleading or deceptive conduct against Mr Ralph Tonkin, the first defendant.

5. [5]

   There is also a set of claims concerning alleged breaches of implied terms of the alleged JV agreement, alleged breaches of a duty of good faith, and impairment of the plaintiff’s leasehold interest. The plaintiffs also make claims concerning estoppel.

6. [6]

   The second defendant has brought a cross-claim against the third plaintiff alleging breach of a loan agreement and seeking an amount of $3,000,000 plus interest and costs.

Background facts

1. [7]

   On 23 November 2007 Carlisle, as trustee of the Danckert Family Trust (No 4) (Trust), became the lessee of certain land which comprised, amongst other things, the Bidwill Shopping Centre (Bidwill). The shopping centre, at this stage, had been closed for about ten years and was in a rundown condition.

2. [8]

   Also on 23 November 2007, Carlisle obtained a loan facility of $3 million from SRD by mortgaging its leasehold interest in the shopping centre (2007 facility). This was to fund the assignment of the leasehold interest and the building renovation work. The facility was guaranteed by Mr Danckert and Carlisle.

3. [9]

   The owner of the land is the New South Wales Land and Housing Corporation (Housing).

4. [10]

   HCS Properties Pty Ltd was the transferor of the lease to Carlisle on 23 November 2007. The consideration paid by Carlisle for the transfer of the lease from HCS Properties Pty Ltd was $550,000. On the transfer of the lease Carlisle paid to Housing the first year’s rent in advance.

5. [11]

   The intention of Carlisle (and those associated with it) was to renovate the shopping centre and then secure tenants to produce a viable and attractive local community shopping centre which would in turn, it was hoped, generate profitable revenue.

6. [12]

   Mr Danckert is a licensed real estate agent and a beneficiary under the Trust. However, Mr Danckert was made a bankrupt on 19 February 2008, although his bankruptcy was discharged on 15 March 2011.

7. [13]

   In early 2008 the plaintiffs commenced renovation work on the shopping centre.

8. [14]

   Between 2008 and October 2011 SRD made total advances of $2.75 million under the 2007 facility.

9. [15]

   However, as at October 2011, each of the parties alleged breaches of the original loan agreement by the other.

10. [16]

    On 25 October 2011 the parties entered into a Deed of Release and Variation to resolve their differences. Pursuant to this instrument, the parties released each other from the alleged breaches and SRD provided a further loan of $250,000, which Mr Weldon guaranteed. SRD eventually made advances of $165,657.89 under this facility.

11. [17]

    The loan agreement, guarantee and indemnity documents of 2007 had been prepared by representatives of SRD. On the other hand, the Deed of Release and Variation of October 2011 was prepared by Mr Weldon. In each case the respective parties executed the relevant agreements.

12. [18]

    In August and September 2013 SRD made further allegations of breach of the original loan, the mortgage, and the subsequent loan arrangements.

13. [19]

    On 6 February 2014 SRD served Carlisle with a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) alleging default on the part of Carlisle and seeking possession of the leasehold.

14. [20]

    In addition, on 11 February 2014 SRD commenced proceedings in the Supreme Court of South Australia against Messrs Danckert and Weldon.

15. [21]

    On 28 February 2014 the parties met in Adelaide to discuss the possibility of settling their disputes. Mr Weldon produced notes of the meeting but prepared them at the airport after the meeting had concluded, prior to him returning home (Ex P1).

16. [22]

    On 3 March 2014 Mr Weldon sent a letter to Schirripa Commercial Lawyers (the then solicitors for SRD) referring to the meeting and to the various matters discussed therein. This letter attached a proposal “to establish a joint venture” on certain terms and conditions.

17. [23]

    However, in the covering letter Mr Weldon commented as follows:

18. [24]

    Mr Weldon concluded by saying:

19. [25]

    The detailed proposal attached to the letter dealt with numerous matters, including the proposed 75:25 split between SRD and the plaintiffs’ interests. Under the letter “L” and heading “Legal documentation”, Mr Weldon remarked:

20. [26]

    However, on 5 March 2014 a Mr Nicholas Evans from Schirripa Commercial Lawyers, acting for the Tonkin interests, rejected the proposal.

21. [27]

    On 7 March 2014 SRD appointed Mr Divitkos, an accountant, as controller of Carlisle pursuant to s 429(2) of the Corporations Act 2001 (Cth).

22. [28]

    Further, SRD obtained a default judgment against Messrs Weldon and Danckert in the Supreme Court of South Australia on 27 March 2014 in the sum of $255,813.27, plus fixed costs at $3,046.00.

23. [29]

    In June 2014 SRD issued bankruptcy notices against Messrs Danckert and Weldon.

24. [30]

    In July 2014 Mr Danckert alleges he had a telephone conversation with Mr Ralph Tonkin in order to inform him that Housing was happy with the progress of the shopping centre.

25. [31]

    On 15 August 2014 a meeting took place between Mr Danckert, Mr Ralph Tonkin, Mr John Hyslop (from Foodworks), Mr Aman Jain and Manami Sall (for the prospective supermarket tenant).

26. [32]

    On 17 August 2014 Mr Ralph Tonkin sent an email to Mr Danckert. Amongst other things he said (as written):

27. [33]

    On 18 August 2014 Mr Ralph Tonkin sent an email to the putative tenant of the proposed supermarket at the shopping centre, which stated amongst other things:

28. [34]

    On 18 August 2014 there was a conference call held between Messrs Danckert, Ralph Tonkin, Ron Tonkin and Weldon to discuss matters concerning the joint venture. As is outlined below, there are differences in the accounts given concerning what was said in this conversation. The versions are, however, consistent in establishing at least that the Tonkins were concerned to open the shopping centre as soon as possible, the parties intended in principle to proceed with the joint venture proposal, the interests in the joint venture were to be split 75:25, a new company was to be formed, and the approval of Housing was necessary.

29. [35]

    On 20 August 2014 Mr Weldon sent an email to Mr Ralph Tonkin with a copy to Mr Danckert. He referred to a discussion which had taken place on that day and made some comments along the following lines.

30. [36]

    On 21 August 2014 Mr Weldon sent an email to Mr Ralph Tonkin and, again, Mr Danckert. He attached what he described as an “initial draft of the proposal” to go to Mr Ken Bartho (Mr Bartho). It is plain from the attachment (wrongly dated 22 July 2015), that Mr Bartho was at the Department of Finance and Services with the New South Wales Government.

31. [37]

    On 21 August 2014 Mr Ralph Tonkin sent an email to a Mr Ben Ziesing (an accountant/adviser at a firm called Gibson & Partners in South Australia). Copies of Mr Ralph Tonkin’s email were also sent to Messrs Weldon and Danckert.

32. [38]

    Amongst other things Mr Ralph Tonkin informed Mr Ziesing that a lease had been sent to the anchor tenant (the supermarket) and that a plan of action for Housing had been prepared. He also said:

33. [39]

    On 22 August 2014 Mr Weldon circulated to Mr Danckert and Mr Ralph Tonkin an amended draft to go to Mr Bartho.

34. [40]

    On 22 August 2014 Ralph Tonkin sent an email to Mr Weldon purporting to indicate his agreement with the draft that Mr Weldon had prepared. On the same day Mr Ziesing circulated to various members of the Tonkin family a detailed summary of a meeting which had taken place between himself and various Tonkin interests on 20 August 2014 (Ex P3). As appears from the email, a great many matters were discussed including the lease of the supermarket and the proposed joint venture arrangement. Mr Ziesing commented that Mr Ralph Tonkin had advised that a “JV Company” needed to be established to conduct the project. Mr Ziesing, however, raised questions about the proposed corporate structure.

35. [41]

    On 22 August 2014 Mr Weldon sent the final version of his proposal to Mr Bartho. The attached proposal informed Mr Bartho that the parties, relevantly SRD and Messrs Danckert and Weldon, had agreed to “enter into a joint venture to operate [the shopping centre]”. It asserted that terms had been agreed with a supermarket operator (National Security Service Pty Limited (National Security Service)) which would operate under the FoodWorks banner as the anchor tenant. The attachment to the letter was headed “Bidwill Shopping Centre – Proposal to Department of Finance and Services”. The proposal went on to announce that “the joint venture proposes the following” and then outlined various steps that would be taken into the future.

36. [42]

    Mr Weldon also made contact with Mr Ralph Tonkin by email on 22 August 2014 indicating that he wanted Mr Ralph Tonkin on behalf of SRD to agree with the contents of the attached letter (described at [40] above).

37. [43]

    Having received the communication from Mr Weldon, Mr Bartho on 25 August 2014 indicated to Mr Weldon that he would appreciate SRD providing him with a confirmation of the “re-united approach” proposed to be undertaken. Later that day (25 August) Mr Ralph Tonkin sent an email to Mr Bartho in the following terms (as written):

38. [44]

    During late August 2014, or perhaps very early September 2014, Mr Weldon was busily preparing a Deed of Release and Settlement (Deed of Release) and Shareholders’ Agreement for the purposes of formalising the joint venture.

39. [45]

    On 2 September 2014 Mr Danckert and Mr Ralph Tonkin were at lunch together at a hotel near the shopping centre. Mr Weldon arrived at the meeting bearing the draft documents and alleges he took Mr Ralph Tonkin through a number of the clauses in some little detail. There is a dispute as to precisely what occurred and what was said at this meeting.

40. [46]

    However, on 2 September 2014 Mr Weldon sent the draft documents which he described as “initial draft copies” of the Deed of Release and Shareholders’ Agreement to Mr Ziesing in Adelaide. Mr Weldon also commented in the course of his letter as follows:

41. [47]

    The draft Deed of Release, as appears from the recitals, purported to set out the history of the dealings between the parties including the various historic allegations and counter-allegations concerning breach. Recital S had twelve sub-clauses. It provided as follows:

42. [48]

    Amongst other clauses, it was anticipated that there would be a cl 16, “Entire Agreement”, which was to provide, as is conventional, that the Deed was the entire agreement between the parties on the subject matter.

43. [49]

    The proposed Shareholders’ Agreement was in turn a lengthy agreement, which contained provisions such as, for example, an “offer to purchase” clause and, indeed, a clause providing for a compulsory acquisition in the event of default. It also contained in its proposed cl 28, an entire understanding clause.

44. [50]

    On 4 September 2014 Mr Ziesing informed Mr Weldon by letter that he had attended to the registration of a new corporate entity, namely Bidwill Shopping Centre Pty Limited. He told Mr Weldon that:

45. [51]

    On 3 September 2014 Mr Weldon had sent an email to Mr Ziesing referring to the company name, Bidwill Shopping Centre, its place of business, and the identity of the directors. Mr Weldon told Mr Ziesing (amongst other things):

46. [52]

    On 4 September 2014 Mr Ziesing sent an email to Mr Weldon which, amongst other things, stated:

47. [53]

    Mr Weldon replied to Mr Ziesing on 4 September 2014 indicating:

48. [54]

    On 8 September 2014 Mr Weldon sent an email to Mr Ziesing. He said:

49. [55]

    On 9 September 2014 Mr Ziesing sent an email to Mr Ralph Tonkin with some detailed comments about the proposed documents. On the second page of the email Mr Ziesing made the following comments:

50. [56]

    Mr Ralph Tonkin simply forwarded Mr Ziesing’s email to Mr Weldon without comment.

51. [57]

    On 11 September 2014 Mr Weldon forwarded to Mr Bartho (copies to Mr Danckert and Mr Ralph Tonkin) a letter concerning historic rent liability. At or about this date rent owed to Housing amounted to approximately $565,000. Mr Weldon was proposing a plan of payment by instalments. He explained in the letter to Mr Bartho that $550,000 had to be borrowed to provide a cash incentive to the proposed supermarket tenant of $300,000 and an amount of $250,000 to be expended on external works and fitout on a number of the smaller tenancies. He explained borrowing needed to occur because the company was forced to accept a nine month free period for the supermarket and because the smaller tenancies would typically have a two month free rent period.

52. [58]

    On 12 September 2014 Mr Weldon sent an email to Mr Ralph Tonkin indicating that he and Mr Ziesing had agreed that Mr Weldon would send a revised deed of release and a proposed Unitholders’ Agreement. He then stated:

53. [59]

    On 15 September 2014 Mr Weldon sent an amended Deed of Release along with a Unitholders’ Agreement to Mr Ziesing. The documents he attached were in “clean” and “marked-up” versions.

54. [60]

    A number of matters were dealt with in the course of the letter and Mr Weldon concluded by stating:

55. [61]

    The proposed Deed of Release still contained Recital S, however it had a new paragraph added to it; a proposed sub-cl 13 in the following terms:

56. [62]

    This was an enlarged provision dealing with very precisely defined breaches and previous agreements. Under the proposed arrangements the previous loan agreements were to cease to have effect. In addition, the default judgment was to be set aside and the bankruptcy notices withdrawn.

57. [63]

    There were a number of other proposed changes to the Deed of Release, including a new cl 6.3 and a proposed cl 11 which stated:

58. [64]

    The “Loan Agreements” was a reference to the original loan agreement, the mortgage and the original deed and of course the subsequent loan agreement as well.

59. [65]

    On 17 September 2014 Mr Ziesing sent an email to Mr Weldon. He provided Mr Weldon with some details concerning some Tonkin corporate entities and then stated:

60. [66]

    On 17 September 2014 a Mr Balomatis, the principal solicitor for Housing, sent an email to Mr Weldon in which he stated:

61. [67]

    He then listed seven items which included, amongst other things, the JV agreement and “any” shareholders agreement.

62. [68]

    On the same day Mr Weldon forwarded to Mr Ralph Tonkin and Mr Danckert Mr Balomatis’ email. Mr Weldon, in his email, expressed his disappointment that Housing wanted to see so much information.

63. [69]

    On 18 September 2014 there was an email exchange between Mr Weldon and Housing as to an outstanding water rate notice.

64. [70]

    On 18 September 2014 Mr Weldon sent an email to Mr Balomatis attaching a letter of the same date. The email purported to set out in some little detail the various arrangements. Aside from giving a brief explanation as to the proposed arrangements between the parties, Mr Weldon attached various documents, which included the proposed JV agreement, a copy of the constitution for the new joint venture company, the Unitholders’ Agreement, the sub-lease with National Security Service, and correspondence with other prospective tenants.

65. [71]

    In relation to the proposed Joint Venture Agreement, Mr Weldon asserts he indicated that the units in the unit trust would not be issued until he had received advice from Housing that the assignment of the lease would proceed. Further, he says he indicated that upon Bidwill Square Shopping Trust assuming liability for the Carlisle debts and the joint venture vehicle “receiving Housing’s approval for the assignment”, SRD Tonkin would provide a discharge of mortgage in registrable from.

66. [72]

    Under the heading “Observations” Mr Weldon indicated that the joint venture documents “are not yet signed” and then stated:

67. [73]

    Under the heading “Summary”, Mr Weldon concluded by making the following comment:

68. [74]

    In a further email of 18 September 2014, in which Mr Weldon forwarded to Mr Ralph Tonkin and Mr Danckert his communication to Mr Balomatis, he indicated that he had not shown Housing the Deed of Release as it was “none of their business”.

69. [75]

    On 19 September 2014 Mr Ralph Tonkin sent an email to Mr Weldon indicating that he was proposing to finalise the lease over the coming weekend and to sign it “next Wed at your conference room, if not before”.

70. [76]

    On 24 September 2014 Housing wrote to the directors of Carlisle, with a copy to Mr Weldon, under the signature of Mr Balomatis, indicating that in principle Housing had agreed to the assignment of the lease subject to a number of conditions. Two of them were as follows (emphasis added):

71. [77]

    The letter concluded with the following statement (emphasis added):

72. [78]

    On 24 September 2014 Mr Weldon forwarded the letter from Mr Balomatis to Messrs Danckert and Ralph Tonkin. The letter from Mr Balomatis had attached to it a letter inviting Mr Ralph Tonkin and Mr Danckert to sign indicating their agreement to the terms and conditions set out in Housing’s letter. In due course, on or about 1 October 2014 both Mr Ralph Tonkin and Mr Danckert signed, indicating they had agreed to the various conditions and/or requirements of Housing.

73. [79]

    On 25 September 2014, Bidwill Shopping Centre Pty Limited signed a sub-lease to National Security for a period of 10 years commencing on 15 November 2014.

74. [80]

    On 13 October 2014 Mr Weldon forwarded some further documentation to Mr Ralph Tonkin and Mr Danckert concerning the car parking licence, which needed execution, and indicating that Housing wanted certain monies paid in relation to outstanding rent.

75. [81]

    On 13 October 2014 Mr Weldon also sent a detailed letter to Mr Balomatis concerning amendments to be made to the Deed of Car Parking Licence proposed by Housing.

76. [82]

    On 22 October 2014 Mr Ziesing sent an email to Mr Weldon and Mr Ralph Tonkin. He enquired as to when he might expect to receive what he described as “establishment documents” signed by everyone concerned.

77. [83]

    It was clear, however, by 27 October 2014, that certain matters concerning the lease were still not agreed with Housing. Mr Weldon kept Mr Ralph Tonkin informed concerning these developments, as is clear from an email from him to Mr Ralph Tonkin of 27 October 2014.

78. [84]

    By 10 November 2014 matters were still not finalised and an issue had arisen in relation to land tax debt. Mr Weldon, in an email of 10 November 2014, asked for Mr Ralph Tonkin’s views about the matter.

79. [85]

    During this period SRD was making contributions to fitting out the supermarket and other works at the shopping centre.

80. [86]

    On 13 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin and Mr Danckert. He said (as written):

81. [87]

    Mr Ralph Tonkin responded shortly after Mr Weldon’s email on the same day in the following terms:

82. [88]

    On 14 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin and Mr Danckert. It attached a proposed lessor’s disclosure statement which Mr Weldon indicated Mr Danckert was happy with. He asked Mr Ralph Tonkin for his comments.

83. [89]

    On 19 November 2014 a meeting was held at Mr Weldon’s office between himself, Mr Danckert and Mr Ralph Tonkin to discuss the various deeds proposed by Housing.

84. [90]

    On 20 November 2014 Mr Danckert and Mr Ralph Tonkin, according at least to Mr Ralph Tonkin, had a heated argument at the shopping centre. Mr Danckert’s evidence (Danckert affidavit 31/7/15, [26], [27] and [28]) attributes the argument to costs associated with the payment for refrigeration for the shopping centre.

85. [91]

    In his reply affidavit Mr Ralph Tonkin agrees he was not in a good mood but does not address Mr Danckert’s assertion about the heated remarks allegedly made by him at the shopping centre.

86. [92]

    During 20 and 21 November 2014 Mr Weldon asserts he had a conversation with Mr Ralph Tonkin about the disagreement with Mr Danckert and about the possibility of Mr Ralph Tonkin buying out Mr Danckert’s share.

87. [93]

    On 21 November 2014 the Office of State Revenue rejected Mr Weldon’s proposal concerning outstanding land tax.

88. [94]

    On 25 November 2014 Mr Danckert circulated a proposal for fees for a building certifier.

89. [95]

    On the same day Mr Ralph Tonkin requested a comparison quote.

90. [96]

    Again on 25 November 2014 Mr Danckert responded to Mr Ralph Tonkin’s question indicating there was not very much time to obtain a competing quote.

91. [97]

    On 26 November 2014 Mr Weldon sent an email to Mr Ralph Tonkin in the following terms:

92. [98]

    On 27 November 2014 Mr Weldon followed Mr Ralph Tonkin up by sending him another email. Amongst other things he made the following comments:

93. [99]

    On 28 November 2014 Mr Weldon and Mr Ralph Tonkin had a meeting in an attempt to resolve the dispute with Mr Danckert.

94. [100]

    On 1 December 2014 Mr Weldon sent a further follow up email to Mr Ralph Tonkin. It read in part:

95. [101]

    In this email, which was quite lengthy, Mr Weldon made some additional comments under the heading “The bigger picture” in the following terms:

96. [102]

    On 2 December 2014 Mr Weldon sent a further email to Mr Ralph Tonkin. Mr Weldon posed the question of what he should say if Mr Bartho asked him when documents might be signed. He told Mr Ralph Tonkin that he was ready to meet whenever Mr Ralph Tonkin was next in town.

97. [103]

    On the same day Mr Ralph Tonkin finally replied. In his email to Mr Weldon he reminded Mr Weldon that some four and half days had gone by since he asked for proof of the amount of cash that he and by implication Mr Danckert had put into the shopping centre.

98. [104]

    On 2 December 2014 Mr Weldon replied that his wife (who had kept a record of the payments) worked and that they had had commitments over the last weekend, but that he expected to get the figures to Mr Ralph Tonkin by “late tomorrow night”. He concluded the email to Mr Ralph Tonkin by saying “[t]hen we must get on with resolving the conflict within the j-v. That’s the most pressing issue.”

99. [105]

    On 3 December 2014 Mr Ralph Tonkin indicated to Mr Weldon that he needed bank statements (by implication) in order to prove the precise amount of cash spent.

100. [106]

     On the same day Mr Weldon responded saying that his wife had indicated that they may not have bank statements but he hoped to give Mr Ralph Tonkin some information the next day. Later on 3 December 2014 Mr Weldon wrote again to Mr Ralph Tonkin indicating that such materials he had and that he was happy to sit down with Mr Ralph Tonkin and go through the material in detail.

101. [107]

     Later again on 3 December 2014 Mr Weldon sent an update on the number of payments and again asked how Mr Ralph Tonkin wanted to proceed. On 5 December 2014 Mr Ralph Tonkin responded indicating that he wanted the material emailed to him.

102. [108]

     On 5 December 2014 Mr Weldon again sent an email to Mr Ralph Tonkin. He indicated that he had tried unsuccessfully to contact Mr Ralph Tonkin several times on that day, and that he attached certain documents showing expenditure of at least $244,000.

103. [109]

     On 10 December 2014 Mr Ralph Tonkin rather tersely replied:

104. [110]

     On the same day Mr Weldon indicated that bank statements had in fact been sent.

105. [111]

     Later on 10 December 2014 Mr Ralph Tonkin acknowledged that he had received the statements and would go through them in detail.

106. [112]

     On 10 December 2014 Mr Weldon sent an email to Mr Ralph Tonkin seeking an explanation of certain items.

107. [113]

     On 11 December 2014 Mr Ralph Tonkin sent an email to Mr Weldon. He said, among other things (as written):

108. [114]

     On 19 December 2014 Mr Weldon sent an email to Mr Ralph Tonkin asking him how he was “going with sending Housing docs x 3?”

109. [115]

     On 20 December 2014, in two separate emails, Mr Weldon sent to Mr Ralph Tonkin the car parking licence, and two deeds. One was a deed of consent to assignment of the lease and the other a deed of consent to a sub-lease.

110. [116]

     On 9 January 2014 Mr Weldon sent an email to Mr Ralph Tonkin. Mr Weldon informed Mr Ralph Tonkin that Mr Danckert had instructed a solicitor to write a letter of demand to Mr Ralph Tonkin. Mr Weldon assured Mr Ralph Tonkin that he had tried to remain neutral and he hoped that he and Mr Danckert could sort matters out as a matter of urgency.

111. [117]

     On 11 February 2014 Mr Weldon sent an email to Mr Ralph Tonkin indicating his disappointment at not having heard from Mr Ralph Tonkin. Mr Weldon commented (as written):

112. [118]

     On 13 February 2015, Schirripa Commercial Lawyers sent an email to Mr Weldon indicating that all future correspondence to Mr Ralph Tonkin or other members of the Tonkin family should be sent to that firm, which from that point forward would be acting for Mr Ralph Tonkin. It informed Mr Weldon of outstanding indebtedness and of the judgment sum against him and Mr Danckert in South Australia. The letter in part concluded with the following:

113. [119]

     On 2 March 2015 Mr Weldon provided a somewhat lengthy response. Amongst other things, he asserted that there had been an agreement between the parties.

114. [120]

     On 2 March 2015 Housing wrote to the directors of Bidwill and Carlisle, Mr and Mrs Danckert, and Mr Ralph Tonkin. The letter was stated expressly to be a reminder that documents were to be signed and returned. It asked when the documents would be signed by all parties and when all other outstanding instalments would be met.

115. [121]

     On 4 March 2015 Mr Weldon sent a letter to Schirripa Commercial Lawyers attaching a demand made by Blacktown City Council for unpaid rates totalling $29,280.60.

116. [122]

     On 24 March 2015 proceedings were commenced by the plaintiffs seeking, amongst other things, specific performance.

Legal principles

1. [123]

   The key legal controversy between the parties concerns whether the parties fell into the “second class” of agreements described in Masters v Cameron (1954) 91 CLR 353 at 360-362 (Masters v Cameron), or the so-called “fourth class” recognised in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 (Baulkham Hills).

2. [124]

   It is apposite to begin with the remarks of Higgins J in Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650:

3. [125]

   In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA considered:

4. [126]

   In Baulkham Hills at 628 a so-called “fourth class” of agreements was recognised, whereby the parties intend immediately to be bound but are “expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.” Some doubt has been cast on whether this is truly a fourth category: see, eg, Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [118] (Sagacious Procurement).

5. [127]

   In Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 (Toyota Motor Corporation) Brooking J made the following observations at 132-3:

6. [128]

   His Honour went on to say at 136:

7. [129]

   Later in his reasons, his Honour remarked (at 138):

8. [130]

   Tadgell J, at 170, considered that:

9. [131]

   His Honour went on, at 176, to remark:

10. [132]

    JD Phillips J said at 198-9:

11. [133]

    His Honour went on to say at 201:

12. [134]

    In Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 81, the following remarks were made:

13. [135]

    In Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 at [61] Allsop P and Meagher JA considered that:

14. [136]

    In Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 the relevant principles concerning formation were summarised by Sackville AJA (with whom Macfarlan and Gleeson JJA agreed) at [59] - [63]:

15. [137]

    In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105, the plurality (Gaudron, McHugh, Hayne and Callinan JJ) made the following observations (footnotes omitted):

16. [138]

    In Pavlovic v Universal Music Australia Pty Limited [2015] NSWCA 313 (Pavlovic v Universal Music), Bathurst CJ made the following remarks:

17. [139]

    In relation to the issue of subsequent conduct, it is appropriate to have regard to the subsequent conduct of the parties in ascertaining their intentions at the relevant time. In Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [112] Sackville AJA (with whom Hodgson and Campbell JJA agreed) considered that:

18. [140]

    In Sagacious Procurement the relevant principles were described as follows:

19. [141]

    Again in Pavlovic v Universal Music, Beazley P said the following regarding the subsequent conduct of the parties:

20. [142]

    The defendants seek to draw an analogy with Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 (ABC v Commonwealth Games), where price was agreed and a substantial payment made, yet the Court reached the conclusion that there was no binding agreement. In that case, Handley AJA remarked:

21. [143]

    In that case, Gleeson CJ considered at 548 that:

22. [144]

    In Toyota Motor Corporation it was said at 138.3-5 that:

23. [145]

    The plaintiffs rely upon both promissory estoppel and estoppel by convention. In relation to promissory estoppel, they cite the well-known articulation of those principles in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428.

24. [146]

    The plaintiffs, with respect to both the estoppel points, rely upon the decision of Brereton J in Moratic Pty Lt v Gordon [2007] NSWSC 5 at [29]-[34] (Moratic):

25. [147]

    In Labracon Pty Limited v Cuturich [2013] NSWSC 97 at [106] Lindsay J considered:

26. [148]

    In Sze Tu v Lowe [2014] NSWCA 462 at [431], Gleeson JA (with whom Meagher and Barrett JJA agreed) followed the approach of Brereton J in Moratic, summarising the applicable principles as follows:

27. [149]

    In relation to the loss said to have been suffered, the plaintiffs cite Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at [42] and [56], per Handley AJA (with whom Allsop P and Giles JA agreed):

28. [150]

    The Competition and Consumer Act 2010 (Cth) sch 2 (Australian Consumer Law) provides as follows:

29. [151]

    I note that the parties devoted very little, if any, attention to this part of the case, but the principles are well understood: see, eg, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191.

30. [152]

    A trial judge is in no way restricted in his or her assessment of a witness. He or she is not bound to accept any of that which the witness attests to or, indeed, may only accept part thereof: Cubillo v Commonwealth (No 2) (2000) 103 FCR 1 at [118]-[123]. Nor is a judge bound to accept the testimony of a witness where there has been no cross examination.

31. [153]

    I am mindful of the remarks of Gleeson CJ, Gummow and Kirby JJ in Fox v Percy (2003) 214 CLR 118 at [30]-[31] where they said:

32. [154]

    In Watson v Foxman (1995) 49 NSWLR 315 (Watson v Foxman) at 319, McLelland CJ in Eq made the following remarks:

33. [155]

    In any fact finding exercise, however, a judge must always be astute in particular when drawing inferences to carefully distinguish in his or her mind between what is a reasonable inference as opposed to what may amount to no more than mere speculation: Jones v Sutherland Shire Council [1979] 2 NSWLR 206 at 222.

The witnesses

1. [156]

   On balance I have to say I was somewhat unimpressed by each of the witnesses. I did not form the view any witness was not generally trying to recall events. However, each of the witnesses was, to my observation, quite defensive at times.

2. [157]

   No one had any contemporaneous diary notes of conversations, apart from a document recording one event (the meeting of 28 February 2014), which Mr Weldon wrote after the meeting and produced belatedly in the trial.

3. [158]

   Whilst I have not ignored the oral and affidavit evidence, I have found the contemporaneous communications and documents, especially those of Mr Weldon, the most significant in terms of coming to conclusions as to what the parties were in fact doing or attempting to do, bearing in mind the objective nature of the exercise.

Positions of the parties in summary – a binding agreement

1. [159]

   The plaintiffs submit a binding agreement existed on two alternative bases. The first is that such an agreement came into existence on or about 20 August 2014. The second is that an agreement came into existence prior to 26 November 2014. I will deal with each of these in turn.

2. [160]

   The defendants, on the other hand, submit that the parties had previously regulated their relationship with each other with a series of detailed written agreements, which they had executed. They say that the complexity of the Deed of Release and the Unitholders’ Agreement militate against a conclusion that the parties intended to be bound prior to execution. They say that the presence of a warranty that the parties had obtained independent legal advice (cl 13) is indicative of the fact the parties had an ongoing ability to review the documentation and withdraw from it up to the point of signature.

3. [161]

   The defendants say that while it is true Mr Ralph Tonkin was party to correspondence being sent to Housing that identified that the parties had agreed to enter into a joint venture, this did no more than state the fact that there was, in a general sense, an agreement to enter into a joint venture. They submit that it did not amount to a representation that such a binding agreement had already been entered into and say that, further, the language of futurity is used in the correspondence in question.

4. [162]

   The defendants say that the correspondence throughout September indicated that while the parties hoped (and expected) that their plans for a joint venture would come to fruition, they intended that the process would occur formally and that the relevant final step would be execution of the relevant documentation. The defendants also submit that it is one thing to say that the parties had reached a negotiated consensus on the matters between them, but quite another to say that they objectively intended to be irrevocably bound prior to signature.

5. [163]

   The plaintiffs submit that an agreement was made on or about 20 August 2014 that fell into either the second class of Masters v Cameron agreements or the fourth class identified in Baulkham Hills, it being either a case where the parties reached an immediately binding agreement but proposed to have the terms restated in a form fuller or more precise but to the same effect, or one where the parties were immediately bound but expected to make a further contract in substitution for the first contract containing, by consent, additional terms.

6. [164]

   The plaintiffs contend that the agreement is evidenced by the conversations between the parties and incorporates by reference the terms of the letter dated 3 March 2014. The plaintiffs say the parties were immediately bound but expected to execute formal documents expressing the agreement or, in the alternative, make a further contract in substitution containing additional terms.

7. [165]

   It is the contention of the plaintiffs that the Deed of Release and Unitholders’ Agreement satisfy either analysis. The plaintiffs also say the subsequent conduct of the parties is compelling evidence that there was a binding agreement.

8. [166]

   In the alternative to the parties having entered into a binding agreement on or around 20 August 2014, the plaintiffs say the parties had such a binding agreement prior to 26 November 2014. They say that it is not necessary to identify with specificity the time at which such an agreement was entered into. They say that in an ongoing relationship it is not easy to pinpoint the precise moment at which a contract was formed. They submit that agreements concerning terms and conditions which might be too uncertain or illusory to enforce at a particular time in the relationship may, by reason of subsequent conduct, become sufficiently specific to give rise to legal rights and duties. They say that within the parameters of a dynamic commercial relationship new terms will be added or will supersede older terms.

9. [167]

   The plaintiffs submit that it is necessary to look at the whole of the relationship and not only what was said and done when the relationship was first formed. A contract may be inferred, it is said by the plaintiffs, from the acts and conduct of the parties, as well as or in the absence of their words. The plaintiffs say the question in this type of case is whether the conduct of the parties, viewed in light of the surrounding circumstances, shows a tacit understanding or agreement.

10. [168]

    The plaintiffs submit that mutual assent to be bound may be clear even in circumstances where offer and acceptance cannot be identified, and despite the fact the moment of formation cannot be determined. They say such a manifestation of mutual assent will occur where, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.

11. [169]

    The plaintiffs contend that if the Court is not persuaded that the evidence demonstrates that a contract was made on or about 20 August 2014, it should be satisfied that the events subsequent to that date comprise a clear body of evidence manifesting mutual assent and an intention to be bound.

12. [170]

    On either view, the plaintiffs say that the Deed of Release and Unitholders’ Agreement embody the agreed terms of the relationship between the parties and that the defendants, having purported to resile from the agreement, ought to be ordered to take all necessary steps to execute the relevant documents.

13. [171]

    They also submit that the level of tension that arose between Mr Ralph Tonkin and Mr Danckert is not a sufficient discretionary reason to refuse specific performance. In addition, the plaintiffs submit that if the parties wish to sever totally their relationship, the buyout provisions in the Unitholders’ Agreement would allow them to do so.

14. [172]

    The plaintiffs say that the differences in recollection between the witnesses, concerning what was said in crucial conversations, are not significant. They emphasise the large body of documentary evidence and say that their witnesses’ account of events is consistent with the contemporaneous documentation.

15. [173]

    Furthermore, the plaintiffs say that it would have been open to the defendants to have called Mr Steve Tonkin, Mr Ziesing, or one of the relevant people from Schirripa Commercial Lawyers, and that they did not. In these circumstances, the defendants say that the Court may draw an inference that this evidence would not have supported the defendants’ case.

16. [174]

    The plaintiffs urge the Court to find that at all material times from August 2014 onwards Ralph Tonkin was put forward by the Tonkin interests as the person to deal with the plaintiffs, and he had authority to deal with the plaintiffs and bind the defendants. The plaintiffs also say that the Court should find that Mr Ziesing played a key role as advisor to the Tonkin interests.

The submissions of the parties in detail – a binding agreement

1. [175]

   The defendants draw attention to the events preceding 2014 (which are not controversial). An important part of that background, the defendants say, is that during this period the parties stood in the position of borrower and lender and were careful to document their relationship accordingly. The defendants point out that the 2007 dealings between the parties involved a substantial loan and a guarantee. Mr Weldon, the defendants say, regarded himself as an experienced contract lawyer. In his cross examination Mr Weldon recalled that the parties took care to document their dealings and ensured that they were provided with documents in advance of settling. That process customarily occurred by simultaneous execution of the various documents, which became operative on execution.

2. [176]

   The defendants highlight the fact that by October 2011 no rent-paying tenants had been secured for the shopping centre. Mr Danckert had entered and been discharged from bankruptcy, and neither he nor Mr Weldon were in a position to inject further funding into the project. The defendants note that, as in 2007, the documents to secure further funding were drawn up and executed together, becoming binding upon execution.

3. [177]

   The defendants note that the parties’ 2007 agreements contained clauses requiring amendment or variation to be in writing. Although the defendants accept that the plaintiffs’ case involves the replacement, not the variation, of the 2007 agreements, the defendants submit that these clauses are further indication of the formal manner in which the parties related.

4. [178]

   The defendants submit that by the start of 2014 the parties had a history of carefully recording their dealings in writing and relating to one another on the basis of agreements that became binding on execution and not, for example, of concluding oral agreements to be more fully documented at a later date. The defendants say that the Court should note that the 2011 Deed of Release and Variation bears strong similarities to the 2014 documentation drafted by Mr Weldon.

5. [179]

   In their reply submissions, the plaintiffs accept that the parties had used formal documentation in the past. They reiterate, however, the submission that the apparent significance of this fact must yield to the concatenation of circumstances arising in 2014 and the “situation of crisis” which did not, the plaintiffs submit, allow the parties to take the kind of approach taken in the past, nor make such an approach desirable. The plaintiffs submit, emphatically, that the parties did not intend to await formal documentation. They wanted to, and did, the plaintiffs say, move their agreement forward as quickly as possible with the expectation of executing formal documentation at a later time.

6. [180]

   The plaintiffs submit that the importance of the subject matter favours the case of the plaintiffs. The plaintiffs say that the agreement was evidently important because it had its genesis in a “situation of crisis”. This was, the plaintiffs say, why formal documentation was deferred to a later point in time. It was “subsidiary”, the plaintiffs say, and it was the fact of agreement that was most important, even if that agreement was not embodied in formal documents.

7. [181]

   The size and complexity of the agreement, the plaintiffs submit, are not self-evidently of great significance in this case. The plaintiffs submit that in truth the agreement required release from existing liabilities and steps to achieve what the parties had always sought as the final outcome – a tenant for the supermarket and the opening of the shopping centre. The terms of the Deed of Release and the Unitholders’ Agreement, the plaintiffs submit, are not particularly complex, and were easily analysed and commented upon by the Tonkins and their advisors (with minor changes made).

8. [182]

   As discussed above, the plaintiffs’ first contention is that the Court should find an enforceable contract was concluded on or about 20 August 2014. They submit that the events on 18-20 August 2014 need to be assessed against the background of the meeting in Adelaide on 28 February 2014 and the letter of 3 March 2014.

9. [183]

   The defendants submit that at the start of 2014 “things were grim”. The shopping centre was not open, there was no supermarket tenant in place, and no rent was flowing to Carlisle. It was in this context that SRD served the s 57(2)(b) notice and commenced proceedings against Messrs Weldon and Danckert as borrowers under the 2011 Loan Agreement. This formed the background to the 28 February 2014 meeting.

10. [184]

    The plaintiffs submit that to the extent that there are differences concerning the versions of what was said at the meeting in Adelaide, the Court should accept the evidence of Mr Weldon and Mr Danckert. They say that the letter of 3 March 2014 is, in part, a contemporaneous record of what was said and supports Mr Weldon and Mr Danckert’s version of events.

11. [185]

    The plaintiffs submit that the evidence of Mr Ralph Tonkin is consistent with the plaintiffs in so far as it concedes that Mr Danckert had indicated that there was a tenant for the supermarket and that the equity split should be 75:25. The plaintiffs say that it is clear from Mr Ralph Tonkin’s evidence that Mr Ron Tonkin was concerned about opening the shopping centre as soon as possible.

12. [186]

    The defendants make several submissions regarding the 28 February 2014 meeting. It is a common recollection, they accept, that Mr Ron Tonkin said words to the effect of “[g]et the bloody thing open”. The defendants submit that there remains no controversy over whether or not Mr Ralph Tonkin expressed “agreement” to a 75:25 joint venture. The defendants submit that Mr Danckert, in cross examination, conceded that while he had made reference in his affidavit evidence to Mr Ralph Tonkin expressing that agreement, in fact he had no such recollection.

13. [187]

    The plaintiffs submit that the letter of 3 March 2014 contained a detailed proposal which included all the essential elements of the agreement ultimately reached in August 2014. The defendants submit that the language of this letter is in terms of a “proposal”, and that everything points to the meeting of 28 February 2014 being one at which general proposals were made but no consensus reached.

14. [188]

    The plaintiffs say that the proposal in the 3 March 2014 letter was made on the basis of immediate agreement to be followed by more formal documentation. The plaintiffs accept that the proposal was not accepted in March 2014, but say that it was expressed in terms of offer and acceptance, demonstrating that if it was accepted it was intended to be immediately binding.

15. [189]

    The defendants submit that the proposition that the letter was being put on an offer-acceptance basis is not self-evidently correct. The defendants say that it should be recalled that the letter was being drafted by an experienced solicitor with an acute personal interest in obtaining releases from the obligations pressing upon him, but nonetheless the letter does not use the term “binding”, or even the term “offer”. Rather, the letter repeatedly uses the word “proposal”.

16. [190]

    The defendants say that the letter of 3 March 2014 is “replete with explanation, contingency and expression of belief”. They say that none of these are features of an offer capable of acceptance. In particular, they point out that contingency is a particular feature of the letter, and that some vital elements of the proposal are still to be decided. They point to remarks such as “we are open to proceeding in either of the 2 following ways”, “[w]e believe that Housing will approve it, subject to…”, and “a float of funds may be required to meet fitout costs”. Additionally, the defendants say that the letter contains a further narrative about possible funding options, a very generalised statement in relation to priority of funds, and references to the potential sale of the centre in terms that do not make it clear whether a contractual term is being proposed.

17. [191]

    As the proposal was expressly rejected two days after being made, the defendants submit that the Court need not make a final determination as to whether, had it been accepted, a binding contract would have arisen. The defendants do submit, however, that against the background of the parties’ dealings in 2007 and 2011 this would be a surprising conclusion to reach. The defendants characterise the document as being a “step along the way to building a consensus between the parties”, which consensus would then have been the subject of further, binding documentation. Overall, it is submitted by the defendants that the letter supports the notion that the parties were not inclined to resolve their differences in a binding way other than by the execution of formal documentation.

18. [192]

    The defendants observe, in the context of the 3 March 2014 letter, that it is worth noting that in rejecting the “Proposal”, SRD’s lawyers concluded by requesting that Mr Weldon ensure that any communications regarding the matter be directed to those lawyers, not to the directors and shareholders of SRD. The defendants say that there is no evidence of departure from that position by August 2014, and that this is a further indication that the parties’ existing written arrangements could not be expected to be overthrown by an informal oral agreement.

19. [193]

    The plaintiffs say, to the contrary, that by mid-August 2014 it is clear that Mr Ralph Tonkin was dealing directly with Mr Danckert and Mr Weldon, including the telephone meeting on 18 August 2014, the telephone meeting with Housing on 19 August 2014, and the email correspondence from August 2014 onwards. Any requirement that the parties deal through solicitors had by this stage, the plaintiffs contend, clearly been abandoned.

20. [194]

    The defendants note that on 7 March 2014 SRD entered into possession of the lease. On 27 March 2014 the default judgment was entered against Mr Weldon and Mr Danckert, and on 2 June 2014 bankruptcy notices were issued in respect of the judgment debt.

21. [195]

    The plaintiffs observe that it was clear to all the parties by mid-August 2014 that the central asset, the leasehold, was in peril, and that there was a risk that SRD would be removed from the site by Housing and that the lease would be terminated.

22. [196]

    The plaintiffs say this is important in contextualising the discussions between the parties. The plaintiffs say that, in this context, despite the history of using formal documentation, the parties “treated formal documentation as subsidiary” because the exigencies of the situation made such documentation unnecessary and undesirable. The plaintiffs say it is clear that the parties were willing to “do whatever it [took]” to get the shopping centre open.

23. [197]

    The plaintiffs refer to a conversation just prior to 15 August 2014 between Mr Danckert and Mr Ralph Tonkin, not denied or remarked upon by Mr Ralph Tonkin, where Mr Ralph Tonkin said that “[w]e will proceed with the joint venture we spoke about in Adelaide back in February.” They say that there was then a meeting with the prospective supermarket tenants on 15 August 2014. They submit that is clear from Mr Ralph Tonkin’s email of 17 August 2014 that by 15 August 2014 Mr Ralph Tonkin had embraced the elements of the proposal made in February 2014, which included a 75:25 equity split, the formation of a joint venture company, and the preparation of more formal documentation.

24. [198]

    The plaintiffs submit that although there are differences between versions of what was said during the telephone conference on 18 August 2014, the versions are consistent in indicating that:

25. [199]

    The defendants make several submissions regarding this phone conversation. The first is that the time estimates range from about 5 to 15 minutes. This tends against, the defendants say, the notion that there was a detailed discussion of a possible agreement. Furthermore, the defendants say, the idea than an experienced solicitor, himself facing bankruptcy, would have entered into a binding agreement in the course of a telephone call, without expressly drawing to the attention of the parties the fact an agreement was being created, is improbable. They say the dictates of both prudence and professional responsibility would have militated against Mr Weldon taking such a course.

26. [200]

    Mr Weldon, the defendants say, was concerned at least to deal with his existing liability. He was also involved in negotiations for the joint venture, the details of which had not been documented. They say that one would have expected to find express language directed to the binding nature of the agreement and immediate written confirmation. That did not occur.

27. [201]

    It is common ground that a feature of the conversation was overwhelming concern, particularly of Mr Ron Tonkin, that the supermarket be opened. That accords, the defendants say, with commercial reality. Until a supermarket tenant was secured for the project it is apparent where was no prospect of any substantial rent, and therefore no prospect of repaying the Tonkin interests.

28. [202]

    The plaintiffs observe that in the subsequent conversation with Housing the parties confirmed a “reunited” approach, a joint venture, a tenant for the supermarket, and the assignment of the lease from Carlisle. The defendants characterise the conversation with Housing on 19 August 2014 as being part and parcel of this shared concern and a recognition by the parties that, regardless of the legal structure adopted, they would need to keep Housing happy.

29. [203]

    The plaintiffs say that the uncontested evidence of Mr Weldon is that immediately on and from 19 August 2014 Mr Ralph Tonkin, Mr Weldon and Mr Danckert collaborated on matters relating to the joint venture, including securing a tenant for the supermarket (a draft of the sub-lease being sent out on 21 August 2014).

30. [204]

    The plaintiffs observe that the letter sent by Mr Weldon on 20 August 2014 to Mr Ralph Tonkin refers to the “proposed 75:25 joint venture arrangements” and deals with the issues of indebtedness, the judgment in South Australia, and bankruptcy notices.

31. [205]

    The defendants say that this letter is, on its face, quite inconsistent with a binding agreement being reached. They refer again to the language of a “proposed” joint venture, and to the list of “outstanding issues”. They note the absence, in an email from an experienced solicitor, of any language referring to a concluded agreement. They submit that the language concerning the “outstanding issues” is particularly telling because there is an observation that the plaintiffs would “like” to have some matters dealt with in a particular way. The defendants say that this is the language of ongoing negotiation.

32. [206]

    Furthermore, the defendants note that the issues listed under the heading of “outstanding issues” include a reference in issue 3 to an extension of time for compliance with the bankruptcy notice until “the date of sign off”. The defendants say that if a binding agreement had arisen at an earlier stage, the notice could simply have been set aside forthwith. They say that issues 1, 2 and 4 are requests that releases be given, and do not reflect any concluded agreement. The defendants submit it is clear that it was contemplated that the releases would become operative only on execution (as with the previous dealings between the parties).

33. [207]

    The defendants submit that Mr Weldon was familiar with the idea that an agreement might arise in simple terms, to be later replaced by a more detailed agreement, with each agreement being binding. He was cross examined concerning the 20 August 2014 email. In so far as his reliability as a witness arises, it is submitted by the defendants that the Court would be slow to accept that a solicitor in Mr Weldon’s position could have written the 20 August 2014 email if they believed a binding contract was already in existence.

34. [208]

    The plaintiffs say that the agreement was confirmed in Mr Weldon’s letter to Mr Bartho drafted on 21 August 2014 and sent to Mr Ralph Tonkin and Mr Danckert for comment before being sent on 22 August 2014. The plaintiffs allege that Mr Ralph Tonkin confirmed the existence of an agreement in his email to Mr Ziesing including the 75:25 split, through his endorsement of Mr Weldon’s letter to Mr Bartho, and in communicating about the “draft business plan” with Mr Bartho on 25 August 2015.

35. [209]

    The defendants make several submissions concerning the correspondence between 21 August 2014 and 1 September 2014. The defendants note that this correspondence includes an email from Mr Ralph Tonkin on behalf of SRD, which Mr Ralph Tonkin recalled was in wording dictated to him by Mr Weldon over the phone, confirming SRD’s commitment to a “re-united approach” and confirming Mr Weldon’s authority to submit the “draft business plan and proposal”.

36. [210]

    The plaintiffs point to Exhibit P3, the email from Mr Ziesing, which is, in part, a record of a meeting held with the Tonkins on 20 August 2014, as reflecting the existence of an agreement. In relation to this document, the defendants submit that internal documents have a different value to inter partes documents. They say that the contents of Ex P3 are consistent with (and proving nothing more than) the position that is otherwise clear – that the Tonkin interests were proceeding toward a joint venture, and expected that an agreement would be entered into, but that the process of reaching a binding agreement was ongoing.

37. [211]

    The defendants say that the correspondence around this time confirms what is otherwise evident. Namely, that the parties were of one mind in relation to the need to be seen by Housing to be working together, and that there was a proposal for a joint venture. Previously, the defendants submit, the parties had been united as a borrower and lender. That relationship had broken down. Housing needed, the defendants submit, to be assured that the relationship was restored so that the development of the centre and the meeting of liabilities in relation to the centre could proceed.

38. [212]

    In reply, the plaintiffs say that Ex P3 does use the language of agreement – “previously agreed by all as to the existence of their interest” – and records conduct by the Tonkins constituting an admission of the existence of an agreement.

39. [213]

    The defendants submit that it is clear at this time, and thereafter until mid-November 2014, that the parties were “agreed” regarding a joint venture, in that they proposed to enter such a venture. However, seen in the context of the history of the parties, the defendants say that the letter sent to Housing can be characterised as a summary of the parties’ expectations and not a statement of a binding legal position. The defendants place particular reliance on the language of “proposes”, “will be established”, “will assign”, “will assume” and “will discharge”.

40. [214]

    The defendants submit that the parties had every reason to reassure Housing that they were “reunited” because, without the ongoing involvement of the Tonkins, Housing had no prospect of recovering the rent it was owed or securing a functional shopping centre for the residents of Bidwill.

41. [215]

    The plaintiffs say that the defendants’ submissions concerning the letter to Housing demonstrate a fundamental flaw in the defendants’ case. The plaintiffs emphasise that the defendants concede that “Housing needed to be assured that the relationship was restored, in whatever legal framework.” If the defendants’ case is accepted, however, the plaintiffs say, then the relationship had not been restored, in any legal framework, but remained “unperfected and exposed to immediate destruction at the whim of either party”. This would have meant, the plaintiffs submit, the very thing that the parties were striving to avoid – the loss of the leasehold interest at the time that Housing was relying on the existence of the sub-lease with National Security Service and preparing documents such as the Deed of Consent to Sub-lease and the Deed of Car Parking License. This would, the plaintiffs say, have been “absurdly uncommercial” and cannot be reconciled with the evidence.

42. [216]

    The plaintiffs say that the extensive correspondence and documentary evidence shows that Mr Weldon, after 20 August 2014, clearly put a great deal of time and effort into preparing documents, dealing with Housing and keeping all parties informed. Similarly, they rely on Mr Danckert’s evidence concerning the time and effort he spent dealing with tenants and issues at the centre.

43. [217]

    In particular, the plaintiffs note:

    1. (1)

       The draft documents sent by Mr Weldon to Mr Ziesing on 2 September 2014;

    2. (2)

       Mr Weldon taking Mr Ralph Tonkin through the terms of the draft Deed of Release and Shareholders’ Agreement on 2 September 2014;

    3. (3)

       The details concerning the joint venture company provided by Mr Danckert to Mr Ziesing on 3 September 2014;

    4. (4)

       The incorporation of Bidwill and the documents sent by Mr Ziesing to Messrs Danckert and Ralph Tonkin in relation to the incorporation;

    5. (5)

       Mr Ziesing raising with Mr Weldon on 4 September 2014 the issue of the use of units in the unit trust and Mr Weldon responding that his family would be part of the Weldon/Danckert interest;

    6. (6)

       The letter sent to Mr Bartho by Mr Weldon on 4 September 2014 noting the progress of the joint venture agreement and including the statement that a lease of the supermarket space had been negotiated “with principals of a joint venture group which proposes to become sub-lessor of the above centre in substitution for the current sub-lessor”;

    7. (7)

       Mr Weldon sending a copy of this letter to Mr Danckert and Mr Ralph Tonkin and Mr Ralph Tonkin making no comment other than a remark about the importance of timeliness “at this stage”;

    8. (8)

       Mr Weldon, on 8 September 2014, asking Mr Ziesing for a response to the drafts sent on 2 September 2014 and stating that Housing “will let the JV vehicle take over the Lease by the end of the week – and the supermarket tenant is raring to go”;

    9. (9)

       Mr Ralph Tonkin forwarding Mr Ziesing’s remarks on the draft documents to Mr Weldon, without comment, on 10 September 2014;

    10. (10)

        Mr Ralph Tonkin requesting payment of interest on funds advanced on behalf of his family in a conversation with Mr Weldon on 11 September 2014;

    11. (11)

        The letter to Mr Bartho from Mr Weldon, copied to Mr Ralph Tonkin and Mr Danckert, setting out a repayment plan for unpaid rent sent on 11 September 2014;

    12. (12)

        The amended draft documents emailed to Mr Ziesing by Mr Weldon on 15 September 2014;

    13. (13)

        Mr Ziesing forwarding these documents to Mr Fabrizio Porcaro, a solicitor, for comment on 16 September 2014;

    14. (14)

        Mr Ziesing, on 17 September 2014, providing more details to Mr Weldon concerning the “Tonkin unitholder entity” and saying “[w]ith regard to the documentation, discussions have been held and Ralph is your contact point to finalise same”.

44. [218]

    In relation to the meeting on 2 September 2014 between Messrs Weldon, Danckert and Tonkin at the Bidwill hotel, the defendants submit that there is some uncertainty regarding the level of detail with which Mr Weldon “explained” the documents during the meeting. The defendants also observe that “contended for” might be a more accurate term to use, given Mr Weldon’s precarious position. The defendants submit that the mere fact of an attempt at explanation shows that the parties were yet to reach a full consensus as to the terms of their relationship. Furthermore, the defendants emphasise that Mr Weldon accepted that he left the documents with Mr Ralph Tonkin so that Mr Ralph Tonkin could reflect further on their contents.

45. [219]

    In terms of the letter of Mr Weldon to Mr Ziesing of the same day, the defendants point out that there is no reference to a concluded agreement and that the documents are described as “initial draft copies” that “broadly convey the intentions of the parties”.

46. [220]

    The plaintiffs say that the only countervailing evidence against the existence of a binding agreement is the language used by Mr Weldon in correspondence suggesting that the agreement was only “proposed” and not yet finalised. This use of language, the plaintiffs say, should be understood in context and cannot be determinative. The plaintiffs say that the weight of all the other evidence goes to support the existence of a binding agreement.

47. [221]

    In particular, the plaintiffs say that the language used by Mr Weldon in his letter to Mr Ziesing of 2 September 2014 (in which Mr Weldon says that the documents “broadly convey” the intentions of the parties) must be understood in the context of the entire letter. Taking that into account, the plaintiffs say, it is clear that Mr Weldon was making reference to the technical precision in language rather than failing to reference the fact an agreement had been reached.

48. [222]

    The defendants submit that the draft documents themselves strongly indicate that no binding agreement had been reached. They observe that Mr Weldon accepted in cross examination that he drew the recitals to the draft Deed of Release of 2 September 2014 with particular care, tailoring the document to reflect the circumstances of the parties. Mr Weldon accepted that it was a detailed document and was as complicated as documentation previously executed by the parties, which he recalled in cross examination had become operative on execution.

49. [223]

    Mr Weldon, the defendants submit, unequivocally affirmed that the Court should operate on the basis that what was contained in the document on a number of issues was what he, Mr Weldon, “honestly believed to be the situation”. In those circumstances, the defendants submit, given the fact that the document is drawn to give releases and other mutual covenants upon execution rather than to record releases and covenants previously given, these documents tend strongly against a binding agreement having come into existence or coming into existence at this point.

50. [224]

    Furthermore, the defendants submit that from 2 September 2014 there were still important matters to be finalised in relation to the proposed agreement. An example, the defendants say, is whether the matter would proceed under a shareholding or a trust structure.

51. [225]

    The plaintiffs say, however, that Mr Weldon’s reference in his email of 3 September 2014 to Mr Ziesing to “the shareholding position once the J-V has been finalised” must be read in context. They say that it is clear from the emails preceding this one that Mr Weldon and Mr Ziesing were discussing the ownership interests in Bidwill, and that the email exchange proceeded on the assumption that an agreement existed. Furthermore, they say it is clear that Mr Ziesing was of the opinion that an agreement in relation to the ownership of Bidwill had been reached.

52. [226]

    On 8 September 2014, the defendants say, Mr Weldon was still asking whether it was “possible to negotiate and finalise the releases and the JV arrangement by the end of the week.” This reflects, the defendants submit, both the reality that negotiation was ongoing and Mr Weldon’s anxiety to have the documents executed (and, therefore, operative). The defendants point out that an important issue about priority of payments was raised by Mr Ziesing on 10 September 2014 on behalf of the defendants.

53. [227]

    In relation to the email of 8 September 2014, the plaintiffs say that this email is clearly seeking to finalise the mechanics of what has already been agreed. In no way, the plaintiffs say, does that indicate that an agreement does not exist. In fact, they say it is evidence in favour of an agreement existing.

54. [228]

    In relation to the second draft of the two agreements sent by Mr Weldon to Mr Ziesing on 15 September 2014, with the Shareholders’ Agreement recast as a Unitholders’ Agreement, the defendants submit that this was a material and significant change to the proposed legal structure. They note that Mr Weldon deals with various matters in his letter and that he says various matters have been “conceded”. The defendants identify this as being, again, the language of negotiation. The defendants submit that the conclusion to the letter again refers to the urgency of finalising “these matters”, and again makes no suggestion there is a binding agreement in place. The need to deal with Housing in a “united” way is also referenced. This is, the defendants submit, all consistent with the parties being on the way to an agreement, but an agreement that would not be binding until execution.

55. [229]

    In relation to the change of structure, the plaintiffs say that while such a change might in some circumstances amount to a “very material change”, the change was proposed by the defendants’ advisor and accepted by the plaintiffs, rendering it “relatively immaterial” as between the parties, and a point of agreement.

56. [230]

    On 16 September 2014, the defendants observe that Mr Ziesing sent draft agreements in mark-up to Mr Porcaro. Once again, the defendants submit, the Deed of Release was drafted, in both its recitals and its operative provisions, in a manner consistent with operation upon execution and not with the documents subsuming a pre-existing agreement. The marked-up changes (in Ex P4), the defendants submit, show preoccupation on the part of Mr Weldon with the breadth of the releases and the paragraphs following them. Clause 7.2, the defendants observe, still proceeded on the basis that the bankruptcy notices would remain on foot until execution. On its face, the defendants say, everything points to an agreement that would take effect on execution.

57. [231]

    In reply, the plaintiffs submit that it is not unusual for recitals in agreements which replace an existing agreement not to recite the existence of the existing agreement. The plaintiffs say that nothing special can be read into this.

58. [232]

    Apart from the change in structure, the defendants submit that the Unitholders’ Agreement contained an important provision, apparently the result of negotiation, concerning interest on amounts advanced by the unitholders. The plaintiffs make the same submission in response to this that they make in response to the discussion above concerning the change in structure.

59. [233]

    The plaintiffs say that the Court should note that by 17 September 2014 the terms of the Deed of Release and Unitholders’ Agreement had been drafted by Mr Weldon, incorporating comments by Mr Ziesing and Mr Ralph Tonkin. They submit that the Court should also note that the marked-up versions had been submitted to Mr Ziesing for comment, Mr Ziesing had forwarded them on to Mr Porcaro, the Tonkin family had held discussions, no additional terms were sought or issues raised by the Tonkin interests, and Mr Ralph Tonkin had been nominated and authorised to finalise the documents.

60. [234]

    The plaintiffs point out that after 17 September 2014 no party makes any adverse comment, or indeed comment, about either the Deed of Release or the Unitholders’ Agreement. Instead, on 18 September 2014 Mr Porcaro produced the Unit Trust Deed establishing the Bidwill Square Shopping Trust with Bidwill as trustee. Also on this date, Mr Weldon sent a letter to Mr Balomatis enclosing copies of the relevant documents and saying “the joint venture is now proceeding by way of a fixed unit trust” (and sent a copy of this letter to Mr Ralph Tonkin). The plaintiffs note that in cross examination Mr Ralph Tonkin conceded that he never suggested to Mr Weldon or anyone else that anything in that letter was inaccurate or incorrect.

61. [235]

    In relation to the letter from Mr Weldon to Housing on 18 September 2014, it is pointed out by the defendants that Mr Weldon says “you will understand that the parties won’t sign the joint venture documents until Housing permits the assignment of the lease to the joint venture vehicle” and that “until Housing formally advises that it approves the assignment of the lease and advises any conditions in relation to that approval, the joint venture parties are not able to formally commit to each other in a legally binding way”.

62. [236]

    The plaintiffs say that the context of the letter is, again, important. They say that the purpose of the letter is not to record that there is no agreement between the parties, it is to persuade Housing to permit the assignment of the lease to the joint venture vehicle. The plaintiffs note that the letter achieved this purpose.

63. [237]

    In so far as the execution of the sub-lease in favour of the supermarket tenant is concerned, the defendants note that the document is expressed as being subject to and conditional on Bidwill obtaining the written consent of the Head Lessor to the grant of the lease. At this time, the defendants say, Bidwill had been incorporated but did not have a bank account or any assets or liabilities. In particular, it had yet to acquire any interest in the lease it was purporting to sub-let. In these circumstances, the defendants submit that the execution of the sub-lease document was entirely consistent with the parties proceeding on the expectation that, in due course, all the relevant documents would be executed. There is no evidence, the defendants observe, that any of the parties to the sub-lease turned their minds to what would happen if the documents were not executed. There were, however, the defendants submit, a range of commercially realistic options if that eventuality transpired.

64. [238]

    The plaintiffs say that the execution of the sub-lease had far greater significance than that acknowledged by the defendants. The plaintiffs reiterate that not only had the terms of all relevant documentation been agreed, but the sub-lease committed Bidwill to a third party. There is no evidence or reason reason to think, the plaintiffs say, that Mr Ralph Tonkin executed the sub-lease in any capacity other than as a director of Bidwill, signifying in an unqualified way its role as the joint venture vehicle going forward.

65. [239]

    The plaintiffs say that if the argument of the defendants was correct, it would mean, at one extreme, that the parties deliberately misled National Security Service or, at the other, acted on the basis that its interest could be ignored in circumstances where the sub-lease was effectively worthless. It would also mean, the plaintiffs submit, that despite all the steps taken and money invested, either party was free to abandon the central objective of preserving the leasehold. The plaintiffs submit that this cannot be correct.

66. [240]

    The plaintiffs say that ABC v XIVth Commonwealth Games can be distinguished because of the urgency with which money needed to be put into the project in order to preserve the lease, and because of the need to satisfy Housing of a reunified approach.

67. [241]

    The plaintiffs observe that by 23 September 2014 Mr Ziesing had applied for an ABN for the trust, and that on 24 September 2014 Mr Ralph Tonkin and Mr Danckert executed the sub-lease to National Security Service on behalf of Bidwill. Later on that day, Housing gave conditional consent to the assignment of the lease from Carlisle to Bidwill. The plaintiffs note that on 24 September 2014 Mr Divitkos ceased to be controller of the shopping centre. The plaintiffs submit that the Court should conclude that, if it had not already done so, SRD ceased to be mortgagee in possession on this date.

68. [242]

    The plaintiffs point out that fitout and refurbishment of the shopping centre commenced between September and November and that Mr Ralph Tonkin caused $300,000 to be paid out for that fitout, as required under the sub-lease. The plaintiffs submit that this sub-lease assumes the assignment of the lease between Carlisle and Bidwill. The plaintiffs say that after 13 November 2014 Mr Ralph Tonkin continued to make payments for the refurbishment, which totalled around $500,000.

69. [243]

    The defendants say, in relation to the expenditure by the Tonkins, that there is no evidence to suggest that the parties turned their minds to what would happen if the documents were not executed. Nothing, the defendants say, turns on this fact. After all, the defendants submit, SRD held a mortgage over the head lease, which meant that improvements to the shopping centre improved the asset over which it held security, at least as long as Housing did not terminate the lease. The defendants submit that given the evidence of substantial payments being made into the fitout of the supermarket, the prospect of Housing terminating should be understood as not increasing (and, the defendants say, one could suppose that SRD would have had standing to seek relief even if there was a threat of termination).

70. [244]

    The ongoing attention of Mr Ralph Tonkin to the terms of the supermarket sub-lease, the fitout of the supermarket, and other possible sub-leases, are all consistent with the same position, the defendants say, namely an expectation that a joint venture would arise, against the background that the Tonkin interests held a mortgage over the head lease if that did not occur. The defendants submit that given the lack of means of the plaintiffs, the Tonkins’ only prospect of recovering the funds loaned to the Bidwill project was to get the shopping centre open and confirm a supermarket tenant. Regardless of the legal structure adopted, the defendants say, that required putting funds into the project.

71. [245]

    The defendants say that it is not surprising that the contemporaneous documents throughout the period show that it was Mr Weldon who was anxious that the joint venture documents be executed. SRD, the defendants say, was protected by its mortgage, and if it risked throwing “good money after bad”, then the character of that risk was not substantially altered by whether the ultimate structure was one of borrower/lender or joint venture. There is no reason, the defendants say, to doubt the sincerity of the expectation of all the parties that the joint venture would come into existence. That is a different matter, the defendants say, to a legal obligation.

72. [246]

    The defendants submit that the events of November 2014 have no real significance in the matter. The defendants submit that for reasons not fully explored in the evidence the Tonkins decided not to proceed with the joint venture. From December 2014, the defendants note, Mr Weldon began to assert that there was a binding joint venture agreement in place. The defendants submit that those assertions should be taken to have almost no weight. The defendants submit that Mr Ralph Tonkin’s responses in December 2014 to Mr Weldon were focused upon establishing where the funds for the project had gone over the years – he simply did not, the defendants say, “buy into” the assertions made about a binding agreement. When Mr Weldon began to be more insistent, Mr Ralph Tonkin consulted solicitors who responded in kind. These events, the defendants say, do not shed any real light on the issues.

73. [247]

    In contrast, the plaintiffs submit that the assertions of Mr Weldon made after November 2014 gain weight when it is recalled that Mr Ralph Tonkin did not respond with any denial and kept dealing with Mr Weldon at that time as though an agreement was in place (until the letter of Schirripa Commercial Lawyers).

74. [248]

    The plaintiffs maintain that all the conduct following 20 August 2014 is conduct that post-dates the contract and goes to prove its existence. The plaintiffs say that the conduct of the parties after 20 August 2014 is consistent only with the existence of a binding agreement. In particular, the plaintiffs point to the time and effort expended after this date to prepare the formal documentation and the endeavours of both Mr Ralph Tonkin and Mr Danckert in dealing with tenants and other issues at the shopping centre.

75. [249]

    Alternatively, the plaintiffs say that the point at which the sub-lease was signed marks the point where the parties must be taken to have bound themselves. They say that at this point in time, Mr Ralph Tonkin had been appointed as the person to finalise the documents on behalf of the Tonkin interests. They say that he took no issue with any of the draft documents between 15 and 24 September 2014. Furthermore, they point out that Mr Ralph Tonkin executed the sub-lease on behalf of Bidwill. The plaintiffs observe that the sub-lease is made expressly conditional upon consent from Housing, but not expressly conditional on the assignment of the lease from Carlisle to Bidwill. The plaintiffs say this is indicative of the fact that an assumption was made that the assignment would go ahead, and that assumption could only be predicated upon agreement between the parties.

76. [250]

    The plaintiffs submit that it is of “utmost significant” that after 20 August 2014 the parties acted with a high degree of unanimity in dealing with third parties, with the clear objective of opening the shopping centre. To the extent there was any continued negotiation, the plaintiffs say, it was in relation to detail only. Negotiation of the substantive matters, the plaintiffs submit, was at an end. The plaintiffs say the parties could no longer be perceived as two commercial parties “circling each other” and acting in “pure self-interest”. Although acknowledging the existence of some self-interest, the plaintiffs say the level of common interest was so high that the parties should be understood as having entered into a binding agreement by 20 August 2014 or on 24 September 2014.

77. [251]

    The plaintiffs say that the urgency, the overall predicament in which the parties found themselves, the loss of patience by Housing, and all the conduct referred to above strongly militates against the conclusion that the parties manifested an intention not to be bound until the formal documentation had been signed.

78. [252]

    The plaintiffs say that the absence of argument about the terms of the Deed of Release and the Unitholders’ Agreement after 15 September 2014, together with the execution of the sub-lease and the payments made for fitout and for other work, constituted acceptance of the final terms of the formal documents, and an unequivocal, if implied, statement that they would be executed in that form.

79. [253]

    The conduct after 24 September 2014, the plaintiffs say, is consistent with the existence of a binding agreement. The plaintiffs point to:

    1. (1)

       The receipt and comment on the Deed of Car Par Parking Licence, the Deed of Consent to Assignment of Lease, and the Deed of Consent to Sub-lease from Housing;

    2. (2)

       The response to Housing sent by Mr Weldon on 13 October 2014;

    3. (3)

       Mr Ralph Tonkin’s endorsement of a modification to cl 63.4 of the sub-lease;

    4. (4)

       The enquiry after the signed documents by Mr Ziesing on 22 October 2014;

    5. (5)

       Mr Ralph Tonkin making reference in an email to a desire to meet Mr Ziesing and sign documents relating to the joint venture;

    6. (6)

       The conduct of Mr Ralph Tonkin, proceeding on the basis of an assumed agreement;

    7. (7)

       Mr Ralph Tonkin agreeing to the payment plan for outstanding land tax;

    8. (8)

       Mr Ralph Tonkin continuing to speak to Mr Danckert and Mr Weldon about the certification of works;

    9. (9)

       The ongoing correspondence of the parties.

80. [254]

    The plaintiffs say that it was only after all necessary steps had been taken and all documents drafted and agreed that Mr Ralph Tonkin appeared to resile from the agreement.

81. [255]

    The plaintiffs submit that it is noteworthy that even after November 2014 Mr Ralph Tonkin never expressly asserted that no agreement was made, nor suggested that statements made by Mr Weldon to the effect that there was a binding agreement were incorrect. To the contrary, the plaintiffs say, Mr Ralph Tonkin accepted that Mr Danckert had an interest that needed to be bought out. Similarly, the plaintiffs say Mr Ralph Tonkin’s email to Mr Weldon of 11 December 2014 speaks of “separating” from Mr Danckert, thereby conceding that a binding structure is in place. The plaintiffs note again that there is no express denial of an agreement until the letter of Schirripa Commercial Lawyers dated 13 February 2015.

82. [256]

    In the alternative, the plaintiffs say that on an objective assessment of all evidence and the relationship between the parties, as analysed above, the Court can conclude that at a point which cannot be isolated with certainty the parties formed a binding agreement, the terms of which can be found in the Deed of Release and the Unitholders’ Agreement.

83. [257]

    The plaintiffs submit in the alternative that the defendants, through Mr Ralph Tonkin and Mr Ron Tonkin, made representations that induced or encouraged the plaintiffs to believe a binding agreement had been made. The plaintiffs say the Court should infer that the defendants intended the plaintiffs would act in reliance on the representations. Objectively, in the circumstances, the plaintiffs say, there could be no other reason for making the representations. The plaintiffs say this conduct engages the operation of promissory estoppel.

84. [258]

    Alternatively, the plaintiffs say the representations constituted an agreed or assumed state of affairs adopted as the conventional basis of the relationship between the parties after 20 August 2014. They note that estoppel by convention does not rely on inducement on the part of one party, and in particular there is no requirement that either party know the other may incur detriment in reliance on the relevant assumption.

85. [259]

    The plaintiffs say that the reliance on the representations made by the defendants caused detriment to the plaintiffs, namely that they expended considerable time and effort on the basis that they believed they had a binding contract with the defendants. Furthermore, they point to Mr Danckert’s execution of the sub-lease.

86. [260]

    The plaintiffs say the appropriate relief would be an order that the defendants specifically perform the agreement they represented was in existence. They submit that this is not extravagant or uncertain, but the prima facie entitlement of the plaintiffs to have their reasonable expectation of a contract fulfilled and to prevent departure of the defendants from the assumed state of affairs.

87. [261]

    The defendants say that, having regard to the way in which the matter has unfolded, there is no practical room for the claims in estoppel or misleading and deceptive conduct to operate. They submit that it could not have been reasonable for Mr Weldon to assume that there was a binding agreement in place between the parties, having regard to the circumstances discussed above. The defendants say that if Mr Weldon drew that conclusion, notwithstanding the form of the documents he himself drafted, and despite his failure to draw this conclusion to Mr Ralph Tonkin’s attention in a timely way, it was not a reasonable conclusion to draw. Put another way, the defendants submit that any such conclusion could not reasonably be said to result from Mr Ralph Tonkin’s conduct.

88. [262]

    The defendants submit that it is apparent that Mr Danckert, to the extent he was relying on anyone in relation to the status of the dealings between the parties, was looking to Mr Weldon, and not to Mr Ralph Tonkin.

89. [263]

    Finally, the defendants submit that there is no loss or detrimental reliance established for either the estoppel claim or the misleading or deceptive conduct claim. The defendants submit that Mr Weldon and Mr Danckert had previously been doing work in respect of the Bidwill project on behalf of Carlisle and they continued to do so from August 2014. This work had to be done, the defendants say, regardless of the legal structure. The defendants submit there is no evidence or reason to conclude that they would have taken any different course by reason of any conduct of Mr Ralph Tonkin’s.

90. [264]

    In response, the plaintiffs say that it is clear that the plaintiffs, taken collectively, relied on assertions of an agreement made by the defendants. This reliance, the plaintiffs say, was entirely reasonable, and indeed it would have been unreasonable not to act in reliance on the existence of an agreement in the circumstances.

91. [265]

    The plaintiffs say, further, that if the Court finds that representations were made by the defendants to the effect that an agreement existed, then on the defendants’ case these must have been misleading because it is the contention of the defendants that there is no agreement. They repeat the observations made in the context of estoppel concerning reliance.

92. [266]

    The plaintiffs submit that the appropriate relief would be compensation pursuant to the Australian Consumer Law for expenses incurred in reliance on the misleading conduct.

93. [267]

    The defendants pursue the cross claim only against Carlisle. If there is no binding release established, the defendants say, then that claim must succeed. It is sufficient, the defendants say, for them to refer to the recitals of the draft Deed of Release, which reflected Mr Weldon’s understanding of the relevant transactions, and the interest provisions of the original loan.

Consideration

1. [268]

   Each example of this species of contractual dispute unsurprisingly turns upon its own facts.

2. [269]

   In other words, whether parties intend to be bound must be determined objectively, but inferences can and should be reasonably drawn from what the parties said or did, tempered by what it may be inferred a reasonable businessperson would have understood the parties intended.

3. [270]

   In summary, the first half of 2014 was a financially precarious time for all concerned. The shopping centre was not generating any income and debts were mounting. On 6 February 2014 SRD had served a s 57(2)(b) notice seeking repayment of $6 million from Carlisle. That same day SRD commenced proceedings against Messrs Weldon and Danckert alleging breaches of the 2011 agreement.

4. [271]

   The meeting in Adelaide on 28 February 2014 was obviously an attempt to discuss and if possible resolve issues. It is accepted by the defendants that Mr Ralph Tonkin expressed “agreement” with a 75:25 joint venture. Mr Weldon’s notes of the meeting refer to a proposal and a 75:25 split. They do not, however, refer to any binding agreement and none, of course, is suggested.

5. [272]

   The 3 March 2014 letter sent by Mr Weldon after the meeting is no more than a detailed proposal. There is nothing, in my view, in the tone and text of the letter of 3 March 2014, suggestive of anything beyond a proposal. It was, in any event, in fact rejected two days after it was put.

6. [273]

   I can find nothing in what occurred between 3 March 2014 and August of that year to suggest (objectively) that the parties were inclined to bind themselves in any other way than upon execution and exchange of formal documentation. Whilst there are conversations from time to time which undoubtedly took place in which I am satisfied persons expressed agreement in principle, I am equally satisfied the parties never objectively consummate that agreement, as at 20 August 2014 or thereafter.

7. [274]

   The parties had prior to 2014 organised their affairs quite formally. They had executed and exchanged formal documentation. That, in my view, is a most important part of the historical contractual context. There is nothing to suggest, in my view, that they had resolved this current dispute be dealt with in any other way.

8. [275]

   In other words, where disputation had arisen they resolved their differences by formally executing further documentation before moving on. Mr Weldon was in 2014 preparing documentation to achieve, if he could, the same outcome.

9. [276]

   There are numerous references in the various emails, especially those of Mr Weldon, for the need to execute documents prior to the parties being legally bound.

10. [277]

    Most importantly, I am firmly of the view, both parties appreciated and expected that Housing required signed agreement(s) between the parties. Housing was very concerned about the precise terms of the agreements prepared between the parties, to the point of requesting copies of them, no doubt to ensure they were appropriate (see [76] above).

11. [278]

    However, in addition and equally importantly, Messrs Weldon and Danckert needed the slate very precisely and formally wiped clean. They wanted not only a forgiveness of the previous debt, but a setting aside of a judgment and the withdrawal of bankruptcy notices. Unless the slate was comprehensively wiped clean, the judgment in South Australia, as an example, would stand. In my view business persons in this position would require nothing less than formal clarity and certainty.

12. [279]

    It is true that in this case the defendants were only intermittently represented by their own lawyers. Mr Weldon, who was in a position, in my view, of hopeless conflict, assumed the role from time to time of advising both the plaintiffs and defendants. I am satisfied he did so, however, not out of any philanthropic ideal but out of a desire to create and perpetuate harmony arising out of a real concern for his own commercial and financial wellbeing. After all, he had a judgment against him, which he had no desire or capacity to meet (T131.25).

13. [280]

    Mr Weldon nonetheless made frequent references in his communications with Mr Ralph Tonkin for the need to execute the formal agreements which he had prepared for all parties including himself. This was the position before and after August 2014.

14. [281]

    Mr Weldon did his best as principal, agent and/or intermediary to cajole each of Mr Danckert and Mr Ralph Tonkin to sign the respective documents, but to no avail. I am satisfied that he clearly intended that he would (subjectively) conclude all arrangements with signed agreements. He knew (as any person, however, objectively in his position would) that Housing would require and expect nothing less.

15. [282]

    These were parties with a past, and a chequered one at that. The defendants had poured substantial funds into the centre as an investment opportunity and there was suspicion and doubt as to how much the plaintiffs (Mr Danckert and Mr Weldon) had in fact contributed. There was a high level of distrust, despite Mr Weldon’s concerted charm offensive.

16. [283]

    In all the circumstances, I am satisfied no binding agreement came into existence on or about 20 August 2014. The events which the plaintiff’s rely upon, on analysis do not in my view point objectively in favour of a binding agreement. Certainly Mr Weldon had every reason to finalise a formal agreement, and I consider he was anxious to do so.

17. [284]

    Leaving conversations to one side – his email of 20 August 2014, after the 18 August 2014 phone call, speaks not of a binding arrangement, but a “proposed 75:25 joint venture” and a list of “outstanding issues”. This is quite contrary to any notion of a binding agreement. In my view, again objectively, such an email would not have been written by any person, let alone a commercial lawyer who believed there was a concluded bargain.

18. [285]

    In summary, the most significant factors which point, in my view, against any binding agreement in or about August 2014 are:

    1. (1)

       The practice or history of dealings between the parties, in 2007 and 2011, in regulating their affairs by negotiations followed by signed agreements.

    2. (2)

       It was in the nature of Mr Weldon’s experience and professional practice that he sought to draft precisely and formalise the terms and conditions of any agreement the parties (including himself) would enter. Mr Weldon financially was in a somewhat perilous state and I do not consider he (or for that matter, any legal practitioner in his position) would be content with anything less than a formal, carefully drafted set of documents which would be executed.

    3. (3)

       In my view Housing required and the parties (indeed any persons reasonably in the parties’ position) would have anticipated and expected to enter formal, executed agreements. This, in my view, was a pervasive theme continuing throughout the balance of 2014.

    4. (4)

       An equally potent factor is the very form and structure of the documents providing as they did for releases and covenants upon execution of the documents. This objectively suggests that the parties fully intended to be legally bound only on and after execution of the documents.

19. [286]

    The communications between 20 August and September 2014 in my view do not further advance matters for the plaintiffs. I am in no doubt the parties were working towards a written agreement. They appreciated Housing needed to see a show of unity. There is no doubt that a joint venture (75:25) was contemplated in principle, but I see nowhere anything objectively resembling a concluded arrangement.

20. [287]

    At the risk of repetition, Mr Weldon was engaged in a precarious juggling act. His anxiety and frustration to one side, he appreciated the benefit of a detailed, concluded and executed agreement.

21. [288]

    Importantly, on 2 September 2014 Mr Weldon sent the first draft of the various documents to Mr Ziesing, and on the same day physically handed copies to Mr Ralph Tonkin whilst he was having lunch with Mr Danckert. Mr Weldon, of course, asserts he gave Mr Ralph Tonkin an explanation of the documents. However, I am not satisfied with Mr Weldon’s evidence on this topic. Indeed, I do not accept the detail of his evidence at all. It was clearly not the context where any solicitor would reasonably or seriously expect to have someone like Mr Ralph Tonkin’s full attention. Mr Weldon accepted he left the documents with Mr Ralph Tonkin for him to further consider.

22. [289]

    Mr Weldon said nothing to Mr Ralph Tonkin nor to Mr Ziesing in his email of 2 September 2014 about there being a concluded agreement. Indeed the documents he circulated are merely, in my view, evidence of advanced drafts.

23. [290]

    I am not satisfied that this evidence rises any higher than an experienced solicitor giving a person a brief opportunity to satisfy himself that the drafts had captured the understanding in principle which had been discussed between the relevant parties. The reason Mr Weldon left the documents with Mr Ralph Tonkin is that he fully appreciated Mr Ralph Tonkin needed to consider the detail.

24. [291]

    More importantly perhaps, it seems to me, is that the form the drafts took in providing for releases to occur in the future, and upon execution, as opposed to recording or acknowledging releases and covenants which had already been given. Again, this in my mind points to execution of the documents as the moment the parties intended to be bound.

25. [292]

    By 15 September 2014 the structure for the joint venture had materially changed, in my view, from a shareholders’ agreement to a unitholders’ agreement. The tone, in my view, of Mr Weldon’s email of 15 September 2014 which enclosed the second drafts of the proposed documents, is that of proposal or negotiation. It is not suggestive of a finalised agreement. It is, in my view, a further attempt to get the structure and the precise terms and conditions of the structure in an agreed form.

26. [293]

    The point is well made by the defendants that the releases presented at this time were conspicuous in their breadth. That is unsurprising as Mr Weldon (apart from looking after Mr Danckert and his interests) had a vital interest (professional and commercial) in seeing the most favourable outcome for himself and his interests. It is also important to observe, in my view, that by September, Mr Weldon had added a new recital S13, and new cll 11 and 14. For example, the bankruptcy notices were to remain on foot until execution of the documents. None of these additions could be said to be trivial, and the fact they were being proffered for the first time in mid-September is another factor in persuading me that no binding agreement was reached at any earlier point in time.

27. [294]

    When Mr Weldon updated Housing on 18 September 2014, again there was simply no hint the parties were legally bound. Indeed Mr Weldon stated unequivocally that the parties had at that stage not bound themselves (see [72] above).

28. [295]

    It is true that later in September Mr Ralph Tonkin and Mr Danckert as directors of Bidwill executed a lease document in favour of National Security Service, but it was stated to be conditional upon written consent (importantly in my mind) of the Head Lessor. What I consider to be more important is that at that time Bidwill had no assets, liabilities or bank account. It was simply a shell. Therefore the execution of the lease has no significance as such, in my view, except as another example of commercial pragmatism.

29. [296]

    This conduct, in my view, is not determinative of an already existing agreement, but rather conduct which is merely a necessary prelude to one coming into existence.

30. [297]

    There is no doubt further substantial funds had been contributed to the project by the Tonkin interests, in particular a company called Tonkin Properties. These monies were paid directly to the relevant builder or supermarket tenant. SRD obviously, quite independently of any agreement with the plaintiffs, had a real commercial interest in making the centre operational and hence revenue producing.

31. [298]

    It was the Tonkin interests which had the capital to inject into the shopping centre. The plaintiffs had no tangible means of doing so. The Tonkin interests would only recoup their investment if the shopping centre was up and running with the possibility of a sale of the lease in the future.

32. [299]

    During this whole period (after 20 August 2014 to November 2014) the various relevant communications in my view portray Mr Weldon, again unsurprisingly, as being concerned to have the agreements executed. SRD, of course, had at least the comfort of a mortgage over the head lease. On the other hand, I consider, Mr Weldon and Mr Danckert were looking for a way out of their predicament.

33. [300]

    Mr Ralph Tonkin was devoting all his time and energy to the detail of the supermarket lease, the fitout of the supermarket, and the possible sub-lease to other tenants.

34. [301]

    In so far as subsequent conduct in the relevant sense is relied upon as corroborating the existence of a binding contract, I am unable to identify any which would in reality qualify objectively as such. The conduct of the parties, it seems to me, at all relevant times, whilst confirming an agreement in principle on certain matters (eg. a joint venture on a 75:25 basis) and an expectation or ambition to enter binding legal relations, continued throughout the whole of 2014, to do no more than evince an intention not to consummate any agreement and hence not to become legally bound until formal agreements embodying all terms and conditions had been agreed upon and executed accordingly. Mr Weldon voiced this very expectation as late as 1 December 2014, in his email to Mr Ralph Tonkin and set out above at [100].

35. [302]

    By late November the Tonkin interests had in any event decided not to proceed with the joint venture. It was clear by then that Mr Ralph Tonkin did not want to do business with Mr Danckert. Mr Weldon’s later assertions about the existence of a legally binding arrangement are self-serving, but in any event in my view of no weight whatsoever.

36. [303]

    I do not consider on the facts of this case it was reasonable for Mr Weldon to assume there was a binding agreement in place. He was drawing up documents for himself and others to sign and at all times he knew they had not been signed. He was instrumental in shaping the precise terms and conditions he wanted everyone to commit to, and he was the one who placed emphasis and important on execution as a significant event.

37. [304]

    With Mr Weldon setting the terms and conditions (for the most part), especially providing for execution to be the triggering event for a number of the releases, I am not satisfied anything said by Mr Ralph Tonkin was relied upon by Mr Weldon to conclude that there was a binding agreement in place. He was solely responsible for setting the relevant ground rules, namely a binding agreement only upon execution of the relevant documents.

38. [305]

    Mr Danckert, if he relied upon anyone at all, relied on Mr Weldon or separate lawyers he seemingly retained at the end of 2014.

39. [306]

    This analysis in my view disposes of both the estoppel and misleading and deceptive conduct claims.

40. [307]

    The cross claim is particularised against Carlisle only. In the absence of a binding agreement which would include a release then the debt is outstanding. In my view the cross claim should succeed and I would propose to enter judgment on the cross claim accordingly.

Conclusion

1. [308]

   The plaintiffs have been unsuccessful and I would therefore dismiss the proceedings.

2. [309]

   The defendants succeeded on their cross claim.

3. [310]

   Accordingly, I would direct the parties to prepare short minutes reflecting my reasons, and I will make orders accordingly.

4. [311]

   If the parties are unable to agree on costs they should make arrangements with my associate to have the matter relisted so argument can be heard accordingly.