Caves Beachside Cuisine Pty Limited v Boydah Pty Limited

Caves Beach is an attractive seaside spot south of Newcastle. In around 2005 the defendants set about developing a new hotel adjacent to the beach. That hotel, including a restaurant and function centre, became the Caves Beachside Hotel (the “Hotel”).

The plaintiff, Caves Beachside Cuisine Pty Ltd (“Cuisine”) is owned by Mr Greg Hopper and his wife. They have many years’ experience in the catering and hospitality industry in the Newcastle region.

In around 2005 Mr William Saddington of the defendants asked Mr Hopper if the latter would be interested in running the catering operations of the Hotel. Mr Hopper said he would and became involved in the design of the catering aspects of the Hotel. Mr Hopper also later diverted staff and resources from other catering undertakings in which he was involved at the time in anticipation of operating at the Hotel.

When the Hotel opened in March 2009 Cuisine began to provide the catering. That continued until July 2013, when one of the defendants terminated the arrangement under which Cuisine operated at the Hotel with effect from 31 March 2014. Cuisine vacated the Hotel on that date.

These proceedings arise from the fact that, despite negotiations over a number of years, including while Cuisine was operating at the Hotel, Cuisine and the defendants did not reach agreement on the final terms governing their relationship. Cuisine puts its case in a number of ways (contract, equitable estoppel and misleading and deceptive conduct) which seek to overcome that fundamental fact. At the centre of the defendants’ case is the proposition that Cuisine always knew agreement might not be reached but had taken a commercial risk in coming into the Hotel without a finalised agreement. When agreement could not be reached, that commercial risk had eventuated through no fault of the defendants. There was also a dispute about the value of certain confidential information of Cuisine which was obtained by the defendants.

The Court has concluded:

The Court finds the facts to be as follows. Most of the facts were undisputed. In the case of disputed facts there is a cross-reference from the relevant finding of fact to where in this judgment the reasons for that finding can be found. Because the parties did not differentiate between the terms, these reasons refer to “lease” and “licence” interchangeably and without suggesting that any legal difference between the two has any relevance to these proceedings.

Since the late 1970s the Hoppers have been involved in the restaurant and hospitality industry in the Newcastle area. Over the years they have operated a number of restaurants and function centres with considerable success. In 2004 Mr Hopper was inducted into the NSW Catering Hall of Fame.

The first defendant, Boydah Pty Ltd (“Boydah”) owns the Hotel and the Hotel’s business. The Hotel is located on land owned by the second defendant, Cebac Pty Ltd (“Cebac”).

The third defendant, Mr William Saddington and the fourth defendant Mr David Saddington, are brothers and directors of Boydah and Cebac. Without intending any disrespect, I shall refer to them by their given names as Bill and David respectively.

Sometime in 2005 Mr Hopper was contacted by Mr Rob O’Brien. Mr O’Brien was also involved in the development of the Hotel. Mr O’Brien asked Mr Hopper if he was interested in providing catering services for the Hotel. Mr Hopper said he was interested.

Not long after that conversation, Mr O’Brien recommended to Bill that it would be good to get Mr Hopper involved in the Hotel project. Bill agreed.

Within a month or so of Mr O’Brien speaking to Mr Hopper, Bill met with Mr Hopper. During the course of that conversation, after Bill had asked Mr Hopper if the latter would be interested in being the caterer for the Hotel, they had this conversation:

In later conversations before the Hotel opened Mr Hopper told Bill that he (Mr Hopper) would require a 15 year lease.

One such conversation after Mr Hopper had become involved with the design of the Hotel (see paragraph [19] below) was:

On another occasion, just before the Hotel opened in March 2009, they had this exchange, after which they shook hands:

As to the findings in paragraphs [13] and [16] above, see paragraphs [70] to [76] below.

In one or more of their conversations before the Hotel opened Bill also told Mr Hopper that any lease would have to include a buyout clause. Mr Hopper agreed. The buyout clause became the Buy Back Term (see paragraph [30] below).

From at least May 2006 Mr Hopper became involved in providing advice to the defendants about the design and fitout of the kitchen and other hospitality aspects of the Hotel. He attended a number of meetings in relation to the proposed bar and catering facilities. Bill accepted in cross-examination (T92:8) that Mr Hopper’s involvement at this stage was advantageous for the defendants.

Construction of the Hotel commenced in 2007. Bill accepted in cross-examination (T97:30-38) that from at least this point in time he had agreed with Mr Hopper that the latter would be provided with a lease and that he (Bill) knew Mr Hopper was operating on that assumption.

Cuisine was incorporated on 28 July 2008.

On the same day, Mr Hopper sent an email to his then solicitor, Mr Richard Hingston:

There is no evidence that Bill ever received a draft lease prepared by Mr Hingston (or anyone else on behalf of Mr Hopper) although one may have been prepared. However, shortly after the date of that email Mr Hopper and Bill had a conversation in which they agreed on an interim rent figure of 6% of gross sales plus outgoings. Mr Hopper accepted in cross-examination (T40:13-26; T42:14-16) that he understood this interim arrangement was such that after both parties knew how the catering business was going they were both free to try to negotiate a new rent. Furthermore, Mr Hopper also accepted that if subsequent negotiations as to rent and outgoings were unsuccessful, either party could walk away from the arrangement. After agreeing this interim arrangement Bill and Mr Hopper did not have any further discussions about the proposed arrangement until shortly before the Hotel opened in March 2009, when they had the conversation referred to in paragraph [16] above.

The Hotel opened in March 2009, from which time Cuisine was in occupation and operating the catering at the Hotel. This comprised:

Mr Hopper knew at the time Cuisine went into occupation of the Hotel that he could have insisted on a signed lease before occupation commenced and that while he may have asked “vehemently” for it (which Bill denied and it is not necessary for the Court to find) he did not insist upon it. Mr Hopper also accepted in cross-examination that he knew the risk in not obtaining a lease at the time of going into occupation (T54:47-55:16). However, by the time of the conversation referred to in paragraph [16] above, Mr Hopper acknowledged that he could not threaten that he would not go into occupation without a signed lease because by then he had gone too far and was past the point of no return (T37:43-44; T39:31-36). He also gave evidence that it was not his understanding that Cuisine could have a 15 year lease even if he and Bill could not agree the other terms of the lease (T54:10-13).

Mr Hopper redeployed key staff to the Hotel from another restaurant which he was running. Furthermore, Cuisine spent in excess of $200,000 in establishing the catering business at the Hotel.

Each month after the opening of the Hotel, Cuisine would provide Boydah with its sales figures and Boydah would invoice it for rent and the agreed proportion of outgoings.

Later in 2009 there were further discussions between Mr Hopper and Bill. So much may be inferred from an email of 20 August 2009 from Mr John Saddington to Bill on 20 August 2009 which includes the statement “A point to consider is that it’s only that Greg has brought up the lease/licence that has changed your previous understanding of the arrangement.” Mr John Saddington (to whom, without intending any disrespect, I shall refer as John) was a solicitor and brother of Bill and David.

By an email dated 13 October 2009, John sent Bill what was described as the “final draft to submit to Hopper” of a “Catering Services Licence Agreement” (the “Licence”) which was then provided to Mr Hopper. The term of the Licence was five years with two five year options, which Bill accepted (T104:8-12) had been proffered in order to make good the agreement he had reached with Mr Hopper to provide a “5 + 5 + 5” lease. Whatever other disagreements may have arisen in relation to the terms of the proposed Licence, there was never any real disagreement about the five year term with two five year options. Although David did suggest the possibility of a different approach later (see paragraph [50] below), the form of Licence under negotiation was always for a 15 year term. At the time of proffering the proposed Licence to Mr Hopper, Bill had obtained David’s instructions that the terms of the proposed Licence were acceptable to him (David).

The proposed Licence included the following additional terms:

Negotiations between the parties to agree the terms of the Licence continued after October 2009. In April 2010 there were negotiations to alter the original interim 6% rent to $100,000 per annum plus GST. This change was proposed in an email from Mr Hopper to Bill on 7 April 2010 which included:

Mr Hopper accepted in cross-examination (T48:38-49:4) that the final rent had not yet been agreed even after the 6% figure became $100,000. Just as there was an interim arrangement that either party could walk away from when the rent was 6% of sales, Mr Hopper agreed that they still had an interim arrangement that either party could walk away from after the rent became $100,000 per annum.

In August 2010 Mr Hopper’s solicitor was Mr Stephen Rayfield. On 16 August 2010 Mr Rayfield sent an email to John:

The version of the Licence attached to Mr Rayfield’s email (“Licence Version 2”) differed from the proposed Licence prepared in October 2009 (see paragraph [30] above) in the following respects:

Mr Hopper accepted in cross-examination (T57:48-50) that Licence Version 2 was what he was prepared to offer as at August 2010.

On 17 August 2010 John forwarded Licence Version 2 to Bill for instructions.

On 19 August 2010 Mr Rayfield resubmitted Licence Version 2 to John having “[fixed] up a couple of minor errors in the draft I emailed to you on Monday 16th”.

On 23 November 2010 John sent Mr Rayfield a further version of the Licence (“Licence Version 3”) and a new document called “Exception to Catering Services licence Agreement” (the “Exception Agreement”). The covering email included:

Licence Version 3 propounded by the defendants included:

In cross-examination (T59:37-39) Mr Hopper explained his understanding of the process at this time:

The effect of Licence Version 3 and the Exception Agreement was to highlight that the two remaining areas of substantive disagreement between the parties were the Assignment Price Term (20% (Cuisine) vs 50% (Boydah) of the sale price) and the Buy Back Term (250% (Cuisine) vs 200% (Boydah) of the net profit after tax).

On 5 December 2010 Mr Hopper emailed Bill:

Mr Hopper accepted in cross-examination (T61:11-12) that his email, in particular in resiling from clause 16.2.2, was just part of robust, commercial negotiation.

Apart from the minor dispute concerning the outgoings, and the proposed splitting of the difference on the Buy Back Term, the fundamental issue raised by Mr Hopper’s email was the complete deletion of the whole of clause 16.2.2 which included the Assignment Price Term. Mr Hopper did not suggest at the time or during the hearing that he only intended the deletion of clause 16.2.2(e).

To understand the significance of this it is necessary to set out the whole of proposed clause 16.2.2 as it appeared in Licence Version 3:

Quite apart from the Buy Back Term, clause 16.2.2 as a whole was critical to Bill because it gave Boydah the ability, in effect, to approve the party to whom Cuisine proposed to assign the Licence.

After receiving Mr Hopper’s email of 5 December 2010, Bill felt that the negotiation “was just getting too hard”. In cross-examination (T119:48-120:6) he explained that he “just put [Mr Hopper’s email] to one side for a while”. However, he also understood that Mr Hopper was desperately trying to obtain security of tenure by bringing the issue of the Licence to a head (T122:4-9).

Within days of sending his email of 5 December 2010, Mr Hopper contacted Bill. Bill said to Mr Hopper “The lease won’t be signed, David won’t sign it”. As to this finding, see paragraph [77] below.

In mid-January 2011 Mr Hopper spoke to David. This was their first conversation in connection with the Licence. By email sent on 17 January 2011 Mr Hopper reported to Bill on the conversation with David:

At 11.56am on 18 January 2011 Bill forwarded Mr Hopper’s email of 17 January 2011 to David, among others. Less than three hours later David emailed Bill:

On 20 January 2011 Mr Rayfield emailed John to ask if any progress had been made on the Licence. The next day John emailed Mr Rayfield saying “Not yet Steve – waiting for Bill and Dave to sort out. Best if Greg deals with them direct at this point”.

Mr Hopper had arranged for his accountant to send Cuisine’s accounts to David. On 31 January 2011 Mr Hopper emailed David with a copy to Bill, John and Mr Rayfield:

On 3 February 2011 Mr Hopper emailed the same recipients attaching his email of 31 January 2011 and saying:

On 3 February 2011 at 10.24am David sent Mr Hopper an email (emphasis added):

David’s email to Mr Hopper of 3 February 2011 attached David’s email to Bill of 18 January 2011 (see paragraph [50] above). During the evening of 3 February 2011, Mr Hopper responded to David by email (with copies to Bill and John) expressing his disappointment and enclosing a response which included:

The two emails referred to under “Option One” are at paragraphs [42] and [49] above. There is no evidence of any response to Mr Hopper’s email of 3 February 2011 by either Bill or David.

On 21 April 2011 Mr Hopper emailed Bill:

As the last line of that email demonstrates, and Mr Hopper acknowledged in cross-examination (T64:26-29), Mr Hopper understood that until there was a signed lease or licence document, Cuisine was not “locked in”, which the Court understands as a reference to a legally binding arrangement.

On 10 May 2011 Mr Hopper emailed Bill:

On 19 May 2011 Mr Hopper emailed Bill again saying “The NAB is chasing me re the lease at Caves. Could we meet asap for finalisation”.

On 26 July 2011 Mr Rayfield wrote a letter to John which included:

On 18 August 2011 John responded to Mr Rayfield “that mediation would not be suitable and Bill Saddington was going to advise Greg Hopper of that point and discuss the matter further with him”.

On 30 September 2011 Mr Rayfield emailed John inquiring whether something had been sent to Mr Hopper because “as you know, we’re very keen to wrap this up”. John responded that he hadn’t sent anything to Mr Hopper and “I don’t have any further instructions”.

There is no evidence that anything further was done to finalise the Licence for more than 12 months. In the week commencing 12 November 2012 Mr Hopper met with Bill and others. At the meeting Mr Hopper rejected Bill’s request for an increase in the rent that Cuisine was paying.

On 19 November 2012 Mr Hopper wrote a letter to Bill which included (emphasis added):

In March 2013 an information memorandum was issued in connection with the possible sale of the Hotel and related resort. That memorandum recorded that in 2010 the restaurant at the Hotel had won two awards and that in 2012 it had won regional awards as both a general caterer and a wedding caterer.

In late May 2013, Bill had a discussion with Mr Hopper in which Bill offered to buy Cuisine’s business at the Hotel. Mr Hopper rejected this offer.

On 15 July 2013 Boydah wrote a letter to Cuisine which included:

Cuisine vacated the Hotel on 30 March 2014. It sold a range of kitchen equipment to the defendants. Otherwise, Cuisine removed the balance of the equipment which it had purchased to use in the Hotel.

[Paragraphs [13] to [16]] The Court required Mr Hopper and Bill to give their evidence of the critical conversations in the witness box. My impression of each of them was that they were doing their best to give their evidence truthfully. Insofar as there were disagreements between them I regard that as the product of the passage of time rather than an intention to mislead. I have sought to resolve any important difference between them by reference to the inherent probabilities of the situation and pre-dispute records to the extent there are any. None of the critical conversations (see paragraphs [13] to [16] above) is the subject of a contemporaneous note.

Mr Hopper gave specific evidence of three conversations with Bill. I will consider each of these in turn.

As to the conversation set out in paragraph [13] above, the Court has accepted Mr Hopper’s version with one exception. The Court has accepted Mr Hopper’s first attempt at recalling what he said to Bill. A few moments after giving this version Mr Hopper said his words were “Yes, I’d be happy to purchase the project. It’s a very large project but I would require a 15 year lease and the balance of the details would need to be nutted out”.

Bill denied that the 15 year lease was referred to at their first meeting but accepted that he had agreed the 15 year term at some later time. The Court prefers Bill’s version of this first meeting because it seems less probable that Mr Hopper would have been so specific in the first meeting as opposed to later when he had become involved in the design process and would have had a better understanding of the scope of the undertaking.

As to the conversation in paragraph [15] above, the Court accepts Mr Hopper’s evidence. Bill accepted in cross-examination that at some time before the Hotel opened he had agreed with Mr Hopper that the lease would have a 5+5+5 year term (T104:8-12). It is also consistent with Bill’s evidence that in conversation with Mr Hopper before the Hotel opened, Bill had said to Mr Hopper “I agree that there should be a written lease, with agreed rent and outgoings. These can be discussed and finalised at a later date, after the hotel opens, when we know what the parameters are”.

As to the conversation in paragraph [16] above, the Court accepts Mr Hopper’s evidence. Bill’s own evidence was that he responded to Mr Hopper’s references to the need for a lease by saying “I understand you require a lease. But it will have to contain a buyout clause”.

[Paragraph [18] above] Bill was not challenged about this. Furthermore, Mr Hopper acknowledged an agreement to this effect in his email to Bill of 3 February 2011 (see paragraph [55] above). He also accepted in cross-examination (T55:49-56:11) that while the need for a buyout provision had been discussed before the Hotel opened, the terms of that clause was one of the things they would have to agree upon.

[Paragraph [48] above] Mr Hopper’s evidence was that Bill had said “I am fine to finalise the lease but David won’t sign it”. Bill denied this and the Court accepts Bill’s version. The Court does not accept Mr Hopper’s evidence because it is improbable that Bill would have said that he was willing to sign the Licence after Mr Hopper had proposed the deletion of clause 16.2.2.

Cuisine pleaded a case in contract in its Second Further Amended Commercial List Statement (“CLS”):

In setting out Cuisine’s submissions on its contract case, it is necessary to begin with several matters arising from Cuisine’s final submissions:

Against that background, Cuisine submitted that the agreement pleaded in paragraph 8 of the CLS had come into existence. Reliance was placed on the decision of McDougall J in WorldAudio v GB Radio [2003] NSWSC 855 (“WorldAudio”). In that case his Honour was considering the consequences of an exchange of correspondence which he had found gave rise to an agreement which included this express, written term:

The critical part of his Honour’s analysis on which Cuisine relied was:

Cuisine submitted that what occurred from about November 2010 demonstrated that the defendants had failed to negotiate in good faith. Particular reliance was placed on the following matters:

The defendants’ pleaded response to Cuisine’s contract case was to:

In the course of submissions the defendants also contended that if, contrary to their other arguments, there was an enforceable obligation on Cebac and/or Boydah to negotiate in good faith, then that obligation had been satisfied. The defendants had acted honestly in their negotiations but, by early 2011, those negotiations had reached a stalemate and the parties could not agree on essential terms of the Licence including the rent, the Buy Back Term and the Assignment Price Term.

It was submitted that it was not unreasonable or contrary to an obligation to negotiate in good faith, which nevertheless preserved the defendants’ right to act in their commercial self-interest, to give up on the negotiations after Cuisine’s volte-face in relation to clause 16.2.2 (see paragraph [42] above). Furthermore, David’s email to Mr Hopper of 3 February 2011 (see paragraph [54] above) which attached David’s email to Bill of 18 January 2011 (see paragraph [50] above) did not constitute a resiling by the defendants from the concept of a 15 year licence. On a fair reading all that David’s email of 3 February 2011 did was to invite Cuisine to propose a fixed dollar amount for the Assignment Price Term.

Finally, it was submitted that, on the facts of this case, an agreement to negotiate, if there was one, did not have sufficient legal content to be enforceable: Baldwin v Icon Energy Ltd [2015] QSC 112 (“Baldwin”) per Philip McMurdo J.

While not forgetting that the CLS is not intended to be a formal pleading, a lack of precision in Cuisine’s contract case became apparent in final address which led to some of the matters recorded in paragraph [79] above.

Whatever the alleged agreement was, it had to be implied because there was no evidence that words to the effect of the pleaded terms had ever been said or exchanged in writing between the parties. An examination of the affidavits demonstrates that there had never been such evidence.

Paragraph 8 of the CLS asserted that Cuisine had taken occupation of its part of the Hotel “pursuant to an agreement” but did not state when that agreement had been entered into. While the law recognises that particularly in commercial dealings a formal point of offer and acceptance may not be identified but a contract will exist, the question of when Cuisine said the agreement arose was nevertheless important because the answer would inform what facts, matters and circumstances could be taken into account in determining its existence and terms.

The material in the court book included requests for particulars and answers that had passed between the parties. At least in those there had been no exploration of the issue of when Cuisine alleged the agreement had come into existence. Similarly, CLS did not particularise the facts, matters and circumstances relied upon for the alleged implied agreement. There was no pre-trial correspondence in evidence between the parties which shed any light on that question.

In the course of argument I raised these matters with Mr Gyles SC for Cuisine. Because of its importance to these reasons, it is necessary to set out that exchange (T209:4-T210:19):

With no disrespect, the Court has some difficulty conforming those submissions to the contract alleged in the CLS. The high point of that disconformity is the reference to a “previous agreement”, which is not at all how the case was set out in the CLS. However, for the reasons which follow, the Court finds as essentially correct Mr Gyles SC’s characterisation of what occurred as “an agreement whereby Boydah said that it would provide a 5+5+5 lease to the plaintiff on terms that would be agreed at a later date”.

As has been noted in paragraph [79] above, Cuisine has had to accept that because words to the effect of those terms for which it contends were never said then, any agreement and those terms had to be implied. However, that acceptance risks passing over the importance of the express words that did pass between the parties. What the Court has found was said is set out in paragraph [15] above, but is repeated here for convenience:

The Court finds that due to the reference to “next year”, the conversation between Mr Hopper and Bill occurred sometime in 2008 while Mr Hopper was assisting with the design of the Hotel (see paragraph [19] above). Furthermore, the Court finds those words evidence an express, oral agreement between the parties. It would be entirely artificial to pass over those words or only include them as part of the facts, matters and circumstances relied on over an unspecified period of time to find that by an unspecified date an implied agreement containing the terms pleaded in the CLS had come into existence.

Pausing at this point to consider the possibility of an implied agreement to negotiate in good faith, there is much to be said for the proposition that while parties might, in particular circumstances, enter into an express agreement to negotiate in good faith, the implication of such an agreement by conduct is very difficult to conceive. This is because, in the absence of express words, all that is left is the parties’ conduct of negotiating. It would be a large step to suggest that whenever commercial parties undertake a negotiation they are to be taken to have, by their conduct, impliedly agreed to negotiate in good faith. On the contrary, what is naturally to be implied from the act of negotiation is that the parties are demonstrating they do not intend to be legally bound until their negotiation has given rise to a legally binding agreement. One consequence of the objective theory of contract is that they may be found to have reached that point when subjectively they are unaware or might resist the conclusion that the point of agreement has been reached, but that does not detract from the conceptual difficulty I consider underlies an implied agreement to negotiate in good faith.

Because of the Court’s ultimate view of the agreement in this case, it is of no procedural significance that it may have been with Mr Hopper rather than with Cuisine. Accepting Mr Gyles SC’s language and recognising the legal roles of the relevant defendants, the Court finds that the relevant conversation evidences an agreement the terms of which were that in consideration of Mr Hopper agreeing to provide catering services to Boydah for the Hotel, Boydah and Cebac would give Mr Hopper a 15 year lease on terms to be agreed at a later date.

Having found those to be the express terms of the contract agreed orally between Mr Harrison and Bill on behalf of the relevant defendants, Cuisine’s case in contract must fail. That is because the agreement which the Court has found to have come into existence was not in its express terms an agreement to negotiate a lease in good faith or at all. It was an agreement to grant a lease where all but one of the terms (essential or otherwise) was to be agreed later. This agreement included no agreed mechanism between the parties for all of those terms to be determined and no suggestion that those terms could be imposed unilaterally by one party or a third party such as an arbitrator.

The defendants’ submission that the agreement in this case was unenforceable as an agreement to agree is correct.

The agreement in this case is on all fours with the example posed by the majority of the High Court in Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 (“Booker Industries”) at 604:

The just quoted principle remains the law in Australia: United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 1007; (2009) 74 NSWLR 618 (“United”) at [56] per Allsop P (as his Honour then was and with whom Ipp and Macfarlan JJA agreed). However, while that statement of the law is binding upon me, Cuisine’s reliance on an implied term to negotiate in good faith invites the question whether developments in Australian contract law concerning good faith since Booker Industries might now lead to a different result. As opposed to an implied agreement to negotiate in good faith, could a term to that effect be implied into the agreement which the Court has found?

As a case such as United demonstrates, there has undoubtedly been a considerable development in the application of concepts of good faith to Australian contract law. The position is conveniently summarised by Allsop P in United:

The last sentence of the passage just quoted also demonstrates why the present case is distinguishable from United. United dealt with an express clause that was part of a dispute resolution provision. The present case invites the implication of a term of wide application as to how the parties should go about agreeing a contract. As Allsop P recognised in United (at [61]), the implication of a term requiring good faith raises many issues that simply do not need to be considered where there is an express term. Furthermore his Honour said (at [69]):

It would appear that these proceedings raise the following question identified in N Seddon, R Bigwood and M Ellinghaus, Cheshire & Fifoot Law of Contract, (“Seddon et al”) 10th Australian edition, Lexisnexis Butterworths, Australia, 2012 (citations omitted; emphasis added):

Among the cases to which the learned authors make reference in the footnote to their sentence “But the question has not yet been resolved” is WorldAudio. But that decision is fundamentally distinguishable from the case at bar. As paragraphs [93] to [96] of his Honour’s reasons demonstrate (see paragraph [81] above), McDougall J’s approach was premised on the rejection of the proposition that paragraph 4 of the agreement under consideration was uncertain and unenforceable. His Honour accepted that clause 4 set out the essential points of the parties’ agreement. As Allsop P expressed it in United (at [56]), “An agreement to agree is incomplete, lacking essential terms: Booker Industries (at 604). (That is not a question of uncertainty or vagueness, but the absence of essential terms)”. Paragraph 4 of the agreement in WorldAudio did not lack essential terms and therefore was not an agreement to agree. In this case, while the essential provision of the term of the lease was present, all other terms were lacking, including the essential term of rent. For this reason, while I am in respectful and complete agreement with McDougall J’s analysis in WorldAudio, it is of no assistance to identify the principles relevant to the agreement which the Court has found in this case.

Neither the efforts of the parties nor my own researches has identified a case where a term to negotiate in good faith has been implied into what would otherwise be an agreement to agree. It is therefore necessary to approach the question from first principles.

To imply an obligation to negotiate in good faith into an agreement to agree has a beguiling simplicity and attractiveness. One swift act of judicial legerdemain could right an apparent injustice by rendering what was previously unenforceable to be enforceable. Can a principle “established by authority, both ancient and modern” (to quote Booker Industries) be so easily overcome?

For the reasons which follow, I have concluded that the answer to this question is “no”.

As the judgment of Allsop P quoted in paragraph [104] above makes clear, the reason an agreement to agree is unenforceable is because it is incomplete, i.e. lacking essential terms. The law in relation to the implication of terms into a contract (whether as a matter of fact or by law) presupposes an enforceable agreement, i.e. a contract that contains all its essential terms. If the actual terms of the contract lack essential terms so that there is no enforceable contract, the process of implication cannot begin. As Seddon et al point out (at [10.37]):

The question of implying a term into an otherwise unenforceable agreement is answered by the dictum of Lord Roskill in the advice of the Privy Council in Aotearoa International Ltd v Scancarriers A/S [1985] 1 NZLR 513 at 556:

That statement was applied by the Full Court of the Supreme Court of Victoria in Australia and New Zealand Banking Group v Frost Holdings Pty Ltd [1989] VR 695 (per Kaye J; Marks and Teague JJ agreeing).

There has been some debate about what Lord Roskill and, later, Kaye J actually meant. For example, in Australian & International Pilots Association v Qantas Airways Ltd [2008] FCA 1972; (2008) 179 IR 200, Gray J said:

Similarly, in B. Coote, “Contract Formation and the Implication of Terms” (1993) 6 JCL 51, the author identifies three possible ways in which Lord Roskill’s dictum might be understood. He ultimately suggests (at 56):

In the present case it is unnecessary for the Court to parse Lord Roskill’s dictum. Essential terms are those terms which only the parties can agree for themselves. It is abundantly clear that not only had Mr Hopper and Bill not agreed the essential terms of any lease or licence, but that they understood that such an agreement would have to be reached some time in the future. In this case there was no binding agreement into which an implied term, whether to negotiate in good faith or anything else, could be implied. This follows from the application of Lord Roskill’s dictum no matter how it is read and the Court respectfully adopts and applies it.

One way of testing the conclusion in the preceding paragraph is to ask how the well-known tests for the implication of terms set out in the advice of the majority of the Privy Council in BP Refinery (Western port) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (“BP Refinery”) at 282-3 could be applied where a contract lacks all of its essential terms. If one assumes for the sake of argument a lease for 99 years, a particular implied term may well be so obvious that “it goes without saying” in certain factual circumstances but would not meet that test if it was a lease for five years. Without the essential term (and therefore an enforceable contract) the test for implication would have nothing to work on.

Another way of reaching the same result is to assume for the sake of argument that the law will imply into what would otherwise be an unenforceable agreement to agree (i.e. an agreement lacking an essential term) a term that the parties should negotiate in good faith. Would such an implied term have sufficient content so as not to be vague, illusory or uncertain?

In considering this hypothesis it is useful to look at examples where the courts have upheld express obligations to negotiate in good faith in the context of dispute resolution clauses. It is sufficient to quote two paragraphs from the reasons of Allsop J in United, where his Honour first finds that the relevant question is whether the clause has certain content and then goes on to explain how the express dispute resolution clause there under consideration did have such content:

United is an example of a case where the Court concluded that, in the specific context of a dispute resolution clause, the express obligation to undertake “genuine and good faith negotiations” was not vague, illusory or uncertain. The application of Allsop P’s approach led to a different result in Baldwin, in which Philip McMurdo J was called upon to consider a clause in an agreement described as a “Memorandum of Understanding” where the parties agreed “to use their reasonable endeavours to negotiate by 30 August 2008 (and in any event no later than 30 October 2008) a Gas Supply Agreement using the principles set out in Schedule 2 and including the following key factors …”. One of the principles set out in Schedule 2 was the completion of a “conceptual pipeline study that verifies the commercial viability of the pipeline”. Schedule 2 went on to provide “should this study not verify the viability of the pipeline the parties agree to negotiate in good faith to amend the GSA such that the pipeline is viable”.

His Honour summarised the problem and submissions:

His Honour then went on to consider four intermediate appellate decisions which had considered the question of a contract to negotiate, including, in particular, United. In doing so, he recorded the law in England established in Walford v Miles (1992) 2 AC 128 (“Walford”) per Lord Ackner (at 138):

His Honour’s critical reasoning is, with respect, both concise and clear:

In my respectful opinion, there are two points of principle in United which are binding upon me. First, it is not the law in New South Wales that any agreement to negotiate in good faith is in and of itself void or unenforceable for uncertainty. Second, such an obligation will be enforceable where it has legal content identified by reference to the context and contract in which the obligation arises. The legal content of an agreement to negotiate in good faith in the context of a dispute resolution clause such as that in United is provided by there being an existing contract between the parties and an agreed mechanism for its resolution. As Allsop P said (at [70]), “this requires an honest and genuine attempt to resolve differences by discussion and, if thought to be reasonable and appropriate, by compromise, in the context of showing a faithfulness and fidelity to the existing bargain”.

Baldwin appears, with respect, to be a faithful application of the principles which I have identified are established by United to the memorandum of understanding in Baldwin. In these proceedings the agreement which the Court has identified is even more devoid of clues or indications as to what any ultimate agreement might look like than was the case in Baldwin. In this case, whether the term to negotiate the lease in good faith was express or implied, there is nothing which gives it legal content. It is nothing other than a bare promise to negotiate a 15 year lease. To enforce such a promise is attended by all the difficulties identified by Lord Ackner in the passage from Walford quoted in paragraph [119] above. For the reasons which his Lordship there identifies, the Court concludes that in the agreement found by the Court in this case the inclusion of an implied term to negotiate the Lease in good faith would be unenforceable. That is another reason why such a term would not be implied.

The same reasons which I have identified as demonstrating the lack of legal content if an obligation to negotiate in good faith were implied into the agreement in this case also provide an another reason why that implication would not occur. The discussion in the preceding paragraphs demonstrates that there must be real doubt, given the uncertainty of its legal content, that the term could be said to be “capable of clear expression” (the fourth of the conditions in BP Refinery).

Furthermore, if (as I go on to consider below) the legal content amounts to no more than a requirement of honesty, it also must be questioned whether the second of BP Refinery conditions is satisfied, i.e. that an agreement to agree (assuming it to be otherwise enforceable) is effective without it, such that it is not necessary to give business efficacy to the contract. This conclusion can be reached either by saying that the law expects people to be honest in their dealings so the implication of a term to that effect adds nothing or that the requirement for honesty is already brought about by the various common law and statutory provisions that penalise misrepresentation or misleading and deceptive conduct and nothing further needs to be implied.

Finally, even if a term that the parties should negotiate in good faith could be implied into the agreement in this case (and that agreement is thereby rendered enforceable), Cuisine has failed to satisfy the Court that there was any breach of such an obligation by the defendants. Adopting the approach of the Court of Appeal of Western Australia in Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd (2010) 41 WAR 318 (referred to by Philip McMurdo J in [49] of Baldwin (see paragraph [120] above)), the Court concludes that the content of an obligation to negotiate in good faith in these proceedings would require honesty but not reasonableness and a duty not to negotiate in bad faith (giving the appearance of wishing to negotiate a deal when one in fact has no intention of doing so, irrespective of what terms may be offered). Reasonableness would not be part of the obligation of good faith for at least two reasons. First, being unreasonable is a perfectly legitimate tactic in the self-interested environment of commercial negotiation. Second, an agreement reached in good faith does not have to be objectively reasonable.

Measured against the standard identified in the previous paragraph, there is nothing in the conduct of the negotiations by the defendants which could be found to be dishonest or lacking in good faith. Reference should be made to two particular matters.

The Court does not accept Cuisine’s submission that David’s email to Mr Hopper of 3 February 2011 (see paragraph [54] above) which attached David’s email to Bill of 18 January 2011 (see paragraph [50] above) constituted a resiling by the defendants from the concept of a 15 year licence. Fairly read, by sending those two emails David was saying that while his initial reaction may have been to suggest a three year lease with no payout, what he was in fact prepared to agree to was a fixed amount for any payout within the context of the 15 year lease that had always been “on the table”.

Second, the Court does not consider it to be a breach of any duty to negotiate in good faith if, after reasonable efforts have been made over a reasonable period of time, an agreement cannot be concluded. Looking at the history of the negotiations, there is nothing contrary to such a duty in the defendants abandoning the negotiations when they did, after David presented his ultimatum set out in paragraph [55] above. It is clear, and no one suggested otherwise, that an obligation to negotiate in good faith does not in and of itself require an agreement to be reached or that parties are required to continue to negotiate indefinitely.

Finally, insofar as the implied terms contended for by Cuisine in paragraphs 8(b) and 8(c) of the CLS, the Court is of the view that an agreement to agree the lease (if otherwise enforceable) would be effective without those terms and they are not so obvious that they “go without saying”. For this reason, the orthodox application of the test in BP Refinery gives the result that those two terms would not be implied into the agreement found in this case, assuming it was otherwise enforceable.

Cuisine pleaded its equitable estoppel case in the CLS as follows:

Cuisine alleged that by requiring it to vacate the Hotel from March 2014 the defendants had acted contrary to the Representation and the Assumption giving rise to an entitlement in Cuisine to equitable damages.

Cuisine submitted that its case fell squarely within the well-known statement of equitable estoppel by Priestley JA (with whom Kirby P agreed) in Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 (“Austotel”) at 610:

Cuisine submitted that either by making the Representation, or by encouraging the Assumption, Boydah led Cuisine to assume that a contract would come into existence. Boydah knew and appreciated that Cuisine relied upon the Representation or Assumption in spending substantial time and money in connection with the catering business of the Hotel and commencing operations there to the benefit of Boydah. It submitted that, in the circumstances, it was unconscionable of Boydah not to grant the lease which it had encouraged Cuisine to expect. Whatever else may be said about the submission, the Court accepts that given Mr Hopper was the controlling mind of Cuisine, insofar as his mind was subject to the Representation and entertained the Assumption, upon its incorporation Cuisine was to be assumed to be acting upon the Representation and Assumption.

Cuisine submitted that the fact that the parties had not agreed all of the essential terms of a lease or licence did not represent an impediment to establishing the equitable estoppel. Support for this proposition was, it was said, to be found in the decisions of White J in EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 (“EK Nominees”) and Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717 (“Construction Technologies”).

In support of its damages claim Cuisine relied upon the report of Mr Richard Ivey, a forensic accountant.

The defendants submitted that the claim in equitable estoppel must fail because the essential terms of the proposed lease or licence had never been agreed by the parties. They submitted that, from the very beginning of the negotiations, everyone involved understood that it would be necessary for the parties to enter into a legally binding arrangement and that the entry into such an arrangement was subject to agreement about all of its terms. Where the essential terms in the agreement remained to be agreed, an equitable estoppel could not arise: DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; (2011) 83 NSWLR 728 (“DHJPM”).

The defendants submitted that Cuisine’s reliance on statements by White J in both EK Nominees and Construction Technologies to the effect that Austotel did not prevent a claim for equitable estoppel where the parties had not yet reached consensus on important commercial terms was misconceived. This was because in both cases the relevant assumption which the landlord was estopped from denying was that the landlord had bound itself irrevocably to granting the plaintiff a lease. In this case the parties clearly understood that neither of them was bound unless and until the negotiations for a lease or licence were successfully concluded.

Finally, the defendants submitted that it was apparent that in February 2011, when Mr Hopper emailed his proposal that the defendants either accept his terms or buy him out (see paragraph [55] above), Cuisine could not be said to be relying on any assumption that it had a present entitlement to a lease or licence.

On the question of damages the defendants relied on the report of Dr Rodney Ferrier, a forensic accountant.

For the following reasons, Cuisine’s claim in equitable estoppel fails both as a matter of fact and law.

The evidence does not support either a Representation or an Assumption in the terms pleaded in the CLS. As with Cuisine’s case in contract, the Court finds that the critical conversation is that recorded in paragraph [15] above. Neither the Representation nor the Assumption gives any force or effect to Mr Hopper’s words, with which Bill agreed, “Obviously we can work out rent and things separately”. The representation that was made in this case was not an unqualified promise that a 15 year lease or licence would be granted to Mr Hopper (subsequently assumed by Cuisine).

The Court finds that the representation in this case was, as with the agreement between the parties, to the effect that a 15 year lease would be granted on terms to be agreed at a later date. It was implicit in that representation that the 15 year lease would only be granted if those terms were able to be agreed. That was certainly Bill’s understanding. More importantly, by his own admission, that was Mr Hopper’s understanding and assumption, reflected in his frank admission (see paragraph [25] above) that it was not his understanding that Cuisine could have a 15 year lease even if he and Bill could not agree the other terms of the lease.

Mr Hopper was an experienced restaurateur who understood that he would not have any legally enforceable rights until he had entered into a binding lease or licence. So much is apparent from the fact that he set about negotiating the lease, recognising that:

While, of course, each case turns on its facts, those in DHJPM bear a real similarity to the case at bar. DHJPM was the lessee of office premises. As a result of a conversation with a representative of the respondent (“Blackthorn”), DHJPM assumed or expected that Blackthorn would take a sub-lease or licence of the leased premises. After DHJPM had signed the head lease and completed the fitout, Blackthorn refused to occupy part of the premises. At the time of that refusal, a number of important terms of an agreement between the parties had not yet been agreed.

There are two judgments in DHJPM: the judgment of Meagher JA (with whom Macfarlan JA agreed) and the judgment of Handley AJA. The reasoning in the two judgments is slightly different but ultimately to the same effect and, with respect, equally persuasive.

In his judgment, Meagher JA recorded the findings of the primary judge as to the critical conversations:

Meagher JA drew attention to the similarities and differences between DHJPM and the leading case of Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 397 (“Waltons Stores”):

His Honour then went on to give particular consideration to the first of the prerequisites for an equitable estoppel identified by Brennan J (as his Honour then was) in Waltons Stores, being that it is necessary for a plaintiff to prove that (emphasis added):

Meagher JA said of Brennan J’s first proposition:

Meagher JA then observed of the reformulated test in Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466:

Finally, Meagher JA summarised the position by this observation:

Turning his attention to the facts, in concluding that Blackthorn had not encouraged an expectation that it had “bound” itself irrevocably to enter into a sub-lease, the terms of which remained to be negotiated and agreed, Meagher JA said:

Handley AJA’s reasons, which I also respectfully adopt, focused more pointedly than those of Meagher JA on the difficulty posed for an equitable estoppel, particularly an equitable estoppel by encouragement, where the expectation that had been generated in the plaintiff was for an executory contract to come into exist on terms to be negotiated:

His Honour then reviewed a number of authorities, including at least one of some antiquity that bears precisely upon these proceedings:

Finally, his Honour concluded (at [124]) after analysis of the recent Australian authorities that “in these circumstances Waltons Stores is not binding authority for the recognition via proprietary estoppel of an executory contract where the content of that contract is not known”.

In this case the answer is the same whichever of the two judicial analyses in DHJPM is applied. That this is so may best be demonstrated by returning to the foundational statement of Brennan J in Waltons Stores that the assumption generated in the plaintiff must include that the defendant would not be free to withdraw from the expected legal relationship. When, as in this case, the expectation is of a legal relationship that will depend upon a contract (in this case a lease or licence) the terms of which remain to be negotiated then it becomes obvious, at least in the context of commercial parties dealing at arms’ length, that the “not free to withdraw” aspect of the test will rarely, if ever, be satisfied. This is because it is part and parcel of commercial negotiations, conducted in good faith and not otherwise infringing any existing common law or statutory constraints, that they need not necessarily result in an agreement. Mr Hopper accepted that the parties may not come to agreement (see paragraphs [23] and [25] above). Nor would it be suggested of such negotiations that they should continue indefinitely until one side or the other capitulates out of exhaustion, irritation or for some other reason. This is because such negotiations proceed between parties who are entitled to be entirely self-interested, including to conclude that it is not in their interest to accept certain terms or to continue to negotiate. In reaching this conclusion, the Court emphasises that it is confined to commercial dealings at arms’ length between unrelated parties. Different considerations have been held to apply in the analysis of equitable estoppel in family contexts where expectations have been generated, for example, of the ultimate receipt of interests in land or deceased estates.

It is, with respect, unnecessary for me to consider in any detail the decisions of White J in EK Nominees and Construction Technologies. EK Nominees predates the decision of the Court of Appeal in DHJPM. In Construction Technologies his Honour considers DHJPM but is able to distinguish, in particular, the reasoning of Handley AJA because Construction Technologies “did not expect to negotiate and settle the terms of the lease and formalise the relationship by entering into a contract” (Construction Technologies at [207]). By contrast, it was of the very essence of the promise made to Mr Hopper and the expectation thereby created in him that he would obtain a 15 year lease on terms that he and Bill would have to negotiate in the future. I note for completeness that Construction Technologies is, at the date of these reasons, subject to an as yet unheard appeal to the Court of Appeal.

Finally, if the preceding analysis is incorrect, it is necessary to consider whether the defendants’ cessation of negotiations and ultimate termination of Cuisine’s occupation of the Hotel was unconscionsable.

I respectfully adopt and apply Meagher JA’s analysis in DHJPM of what must be considered:

As the Court has already observed, in this case the essence of both the promise and the expectation was the grant of a 15 year lease on terms to be negotiated. In practical terms that promise and expectation will not be defeated in a way that is contrary to good conscience if the negotiations are conducted in good faith for a reasonable time and otherwise within the parameters of the law. For the reasons set out in paragraphs [126] to [128] above as to why the Court is not satisfied that the defendants failed to negotiate in good faith, the Court concludes that there has been no unconscionable conduct on the part of the defendants that would entitle Cuisine to equitable damages or any other form of equitable relief if the equitable estoppel for which it contended had otherwise been established.

Cuisine pleaded this case in misleading and deceptive conduct.

It is apparent from the pleading that Cuisine’s misleading and deceptive conduct case had three parts:

Because of the conclusions which the Court has already reached in the preceding paragraphs of these reasons, Cuisine’s misleading and deceptive conduct case can be dealt with in short compass. In doing so, no disrespect is intended to the careful way in which this part of the case was put on behalf of Cuisine.

As the Court has already decided, neither the Representation or Assumption as pleaded has been made out. The relevant representation was that Cebac and Boydah would grant a 15 year lease on terms to be agreed at a later date. That representation was understood and relied upon by Mr Hopper in the way set out in paragraphs [23] and [25] above. In particular, Mr Hopper neither understood nor relied upon what he had been told by Bill as an unqualified representation that a 15 year lease would be granted on any terms.

This aspect of the case also fails because at the time of the critical conversation (see paragraph [15] above) and up until around January 2011, the Court has no doubt that Bill had every intention of negotiating a 15 year lease with Mr Hopper in good faith. The Court reaches that conclusion on the basis of what in fact occurred, namely that from 2009 Bill proceeded to propound and negotiate the Licence.

In relation to the claim of unconscionable conduct, Mr Gyles SC submitted (T220.30-36) that there was unconscionable conduct because the defendants took advantage of unequal bargaining power which arose in their favour due to the precarious position Mr Hopper was in by having gone past the point of no return (see paragraph [25] above). Mr Gyles SC accepted (T220.39), correctly, that unconscionability in the statutory context invited the same inquiry as had to be undertaken in relation to the alleged good faith obligation in contract and the allegation of unconscionable conduct in the equitable estoppel case.

The Court rejects Cuisine’s submissions of statutory unconscionable conduct for the same reasons as it rejected the submissions in relation to breach of the alleged good faith obligation in contract and unconscientious conduct in equity. In doing so, the Court respectfully adopts and applies the observation of the Full Court of the Federal Court in Australian Competition and Consumer Commission v Samptom Holdings Pty Ltd [2002] FCA 62; (2002) 117 FCR 301 at [64] that “at least in the case of an experienced business person it must, in our opinion, be something more than commercial vulnerability (however extreme) to elevate disadvantage into special disadvantage”. There is no doubt that Mr Hopper was very experienced in the restaurant and hospitality business.

Finally, there was no misleading or deceptive conduct by silence. The defendants were under no obligation to say to Mr Hopper that the 15 year lease might not eventuate. Mr Hopper well understood that it might not happen if terms could not be agreed. He also understood that he (or Cuisine) was not bound until a binding agreement had been entered into (see paragraphs [23] and [25] above). By the time Bill had in fact abandoned the negotiations, if there was any duty on the defendants to say something then all the relevant conduct of Cuisine had already occurred so no causal connection could be established.

For these reasons Cuisine’s misleading and deceptive conduct is rejected.

Paragraph 20 of the CLS pleaded that “... the defendants have been unjustly enriched by retaining the goodwill of the Venture without compensating the plaintiff for its efforts in creating the value thereof”. It is no criticism to say that this aspect of Cuisine’s case was not at the forefront of its written or oral arguments. Nevertheless, it was ultimately put by reference to the decision of Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880 (“Sabemo”).

It is sufficient to cite its headnote as setting out the principle for which Sabemo is said to stand:

Whether Sabemo continues to represent an accurate statement of legal principle is not a straightforward question. The concepts of unjust enrichment and restitution in Australian law have undergone considerable exposition and development since 1977. Furthermore, Sheppard J himself (at 897) expressly stated that Sabemo was “not a case of unjust enrichment”.

The standing of Sabemo in the light of subsequent legal developments was considered at length by McDougall J in BBB Constructions Pty Ltd v Aldi Foods Ltd (2010) NSWSC 1352 at [331]-[391]. I am indebted to his Honour’s analysis and respectfully adopt it.

The Court accepts Mr Ashhurst SC’s submissions on behalf of the defendants that there are at least two reasons why Sabemo has no application to the case at bar.

First, McDougall J’s ultimate encapsulation of Sabemo was:

Mr Ashhurst SC submitted that while it was true that neither party in this case expected Cuisine to undertake its activities gratuitously, it had in fact not done so gratuitously. Cuisine had, as Mr Ashhurst SC submitted, five years of use of the premises and earned income. This case was nothing like the situation in Sabemo where the disappointed builder got nothing.

Second, McDougall J identified the decisive factor in Sabemo as being that the defendant council had unilaterally walked away from the project:

The precise expression used by Sheppard J (at 901) was to the effect that no liability would be incurred if the transaction has gone off “because of a bona fide failure to reach agreement on some point of substance”. Mr Ashhurt SC submitted, and the Court accepts, that these proceedings are a very good example of a bona fide failure to reach agreement rather than the defendants having unilaterally walked away. This submission succeeds for precisely the same reasons that the Court has accepted that there was no breach of the alleged good faith obligation and no unconscientious conduct on the part of the defendants in the way their negotiations with Cuisine ultimately came to an end.

For these reasons Cuisine’s claim based on Sabemo also fails.

Cuisine claims an entitlement to “an account of profits concerning the unlawful conversion and use by the Defendants of software and confidential information owned by the Plaintiffs.” It pleaded in the CLS:

Cuisine submitted that in February 2014, Boydah instructed an employee, Mr Peter Ward, to back up information contained on a PC and laptop owned by Cuisine that was kept at the Hotel. This was carried out by Mr Ward on 19 March 2014 at about 10:15pm. Cuisine contends that Bill was aware that the information was confidential and that it should not be accessed without Cuisine’s authorisation. That authorisation was never sought.

Boydah then employed Mr Adam Loades, previously Cuisine’s function manager, to work in the same role for the defendants. He was provided with a computer which was loaded with the information extracted from the back up. By virtue of the backup, the defendants derived benefit from floor plan diagrams and details of forward booked functions such as weddings enabling continuity of operation after Cuisine left the Hotel. There was also beneficial information about the details of five years of previous bookings.

On or about 21 March 2013, Ms Julie Wright, previously a catering manager for Cuisine, provided the defendants with a list of customers who had booked upcoming functions at the Hotel. This further assisted the continuity of operation enjoyed by the defendants.

On 31 March 2013, Cuisine vacated the Hotel as requested by the defendants. The extracted information enabled the defendants to continue operating the hospitality business out of the Hotel as though Cuisine had not left.

Cuisine submitted that by virtue of the information referred to in the preceding paragraphs, Boydah obtained the details of 71 parties who had booked weddings or other functions at the Hotel from April 2014 to October 2015. A list of those bookings was emailed by Bill to Mr Loades on 21 March 2014 and included the names of the bride and groom or, in the case of a commercial function, the company name, as well as their phone number and the date of their event.

Cuisine submitted that the first commercial advantage obtained by Boydah was the saving of Mr Loades’ time which would have otherwise been required to be spent locating the information about the hirers and liaising with them about their event requirements. On an hourly basis, Cuisine estimated a time requirement of two hours per function. On Mr Loades’ salary, reduced to an hourly rate, this resulted in a saving of $7,369.80 across the 71 functions in issue.

The second commercial advantage alleged was indirect and included the elimination of reputational damage that would have been occasioned by the efforts required to re-arrange each wedding or function with the 71 booked hirers. Further, the possession of five years’ of historical information would have streamlined Boydah’s business creating an additional commercial advantage. This secondary benefit is valued at $10,000 by Cuisine relying on the “broad brush” approach authorised by the High Court in Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 367.

Cuisine’s total damages claim is $17,369.80.

The defendants pleaded as follows:

The defendants admit obtaining benefit from floor plan diagrams used to plan functions which they would otherwise have had to develop. They also admit that they did not have to re-enter the details of future functions into their computer system. They dispute the assertion that the re-entry of data would have taken 114 hours of Mr Loades’ time and assert instead that Mr Loades would have absorbed that work into his working week without having to employ any additional staff.

Mr Loades said during his re-examination (at T203:28-32):

The defendants open offer of $1,800 plus costs to compensate Cuisine for any benefit obtained by virtue of using the backed up material was brought to the attention of the Court. This amount was reached by reference to the amount of $1,650 paid by Mr Hopper in November 2011 to a consultant for the development of floor plans and the purchase of a computer licence.

It is clear that the defendants unlawfully converted Cuisine’s software and confidential information during their back up of the computer system. The question for the Court is how Cuisine should be compensated.

In Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 (at 143) Dixon and McTiernan JJ made clear that difficulty in estimating an indirect loss will not preclude recovery:

In Ithaca Ice Works Pty Ltd v Queensland Ice Supplies Pty Ltd & Anor [2002] QSC 222 Philippides J said [at 17]:

As Cuisine on the evidence has suffered no loss, for example by reason of diminution in business as a result of the breach of confidence, an account of profits, as pleaded, is the appropriate method of compensation. G E Dal Pont, Law of Confidentiality, LexisNexis Butterworths, Australia, 2015 says [at 16.8]:

It is Mr Loades’ evidence that he would have been able to reconstruct the converted information during the course of his normal working hours with the defendants. While this may be the case, the Court does not accept that no benefit was derived by virtue of the defendants being in possession of that information. Rather, the list of hirers, floor plans and other data enabled the defendants to carry on the catering business of the Hotel with continuity of operation and avoiding any reputational damage that may have resulted from the duplicated planning of weddings and other functions.

In this case “profits” must be used somewhat loosely, with the focus being on their restitutionary character rather than the compensatory nature of damages. The essential question is how best to measure the value of the information. Such an approach demonstrates why it is no answer to say Mr Loades’ time was a fixed cost and he would have absorbed the task of recreating the information into his existing work.

Lawyers readily understand the costing of time as a means to value work product. In the circumstances of this case the Court accepts that 2 hours of Mr Loades’ time to recreate the information for each event is a just measure, which the Court rounds to $7,500.

The Court also accepts that there was a benefit of continuity and the avoidance of potential reputational damage to the Hotel’s business that was conferred by having the information. There was evidence that the bookings represented potential revenue of in excess of $400,000. The information enabled the defendants both to avoid some loss of goodwill and facilitated the future generation of goodwill. Doing the best I can, I consider this will be adequately compensated by doubling the time-based valuation of the information to $15,000.

There will be judgment for Cuisine against Boydah for $15,000. The Court will hear Cuisine as to whether that judgment should be entered against any other defendants. The balance of Cuisine’s claim will be dismissed. I will make provision for argument as to costs if they are not able to be agreed.