Carbone as Trustee for the S & N Carbone Family Trust v Mills

BEAZLEY P: I have had the advantage of reading in draft the reasons of Sackville AJA. I agree with his Honour’s reasons and proposed orders.

SACKVILLE AJA: This is an application for leave to appeal from a decision of a Judge of the Equity Division (Darke J). His Honour dismissed a claim by the present applicants (together the Carbones) for declarations and other relief based on the contention that they validly exercised an option to purchase a farm in northern New South Wales known as “Wolonga” (Call Option). The primary Judge held that the Call Option, which was created by an agreement in writing dated 4 September 2012 (Option Agreement), lapsed at 5.00 pm on 4 September 2016. Accordingly, his Honour concluded the Carbones’ attempt to exercise the Call Option on 28 September 2016 was ineffective. [1]

In addition to dismissing the Carbones’ claim, the primary Judge made declarations sought by the present respondent (Mr Mills) in a cross-claim. The declarations are to the effect that the Call Option lapsed at 5.00 pm on 4 September 2016 and that the Carbones had failed to exercise the Call Option before it lapsed.

There is now no dispute that on the proper construction of the Option Agreement the Call Option lapsed on 4 September 2016. Nor is there any dispute that in any event the Carbones had not complied with cl 15.1 of the Option Agreement, which prevented them from validly exercising the Call Option while certain interest payments were outstanding. [2] However the Carbones’ draft notice of appeal challenges the primary Judge’s rejection of two arguments advanced by them at the trial. Specifically they say that his Honour should have found that:

Mr Mills has filed a draft notice of contention in which he seeks to uphold the findings on estoppel on a ground not relied on by the primary Judge. Mr Mills’ contention is that the Carbones failed to adduce evidence that they changed their position in reliance upon the representations said to found the estoppels. It follows, so Mr Mills argues, that even if the Carbones make out their attack on his Honour’s reasoning, they cannot satisfy an essential element of a plea of estoppel.

Prior to the hearing, the primary Judge made an order directing that the hearing be limited to a determination of the Carbones’ claim for relief founded on their purported exercise of the Call Option (together with the corresponding claim for relief in Mr Mills’ cross-claim). In these circumstances, as the Carbones accept, they require leave to appeal from the orders made by his Honour. [5]

Mr Braham SC, who appeared with Mr Neggo for Mr Mills, did not oppose the grant of leave. As the substantive issues were fully argued, it is appropriate to grant the Carbones leave to appeal. However for the reasons which follow their appeal must be dismissed.

In August 2012, Mr Mills was the registered proprietor of Wolonga and an adjoining property, Taringa. He had previously granted Johnchap Pty Ltd (Johnchap) an option to purchase Wolonga and had entered into a contract for the sale of Taringa to Johnchap. However, Mr Mills had formed the view that neither transaction was likely to proceed further and that he should seek another buyer (or optionee) for the properties.

On 10 August 2012, the Carbones, accompanied by a real estate agent, inspected Wolonga and Taringa. Mr Mills was also present. During the inspection and at a meeting later that day, negotiations took place as to the manner in which the Carbones might acquire interests in the two properties.

On the same day, Mr Mills’ solicitor (Mr Cowley) sent to the Carbones’ solicitor (Mr Wilson) an email attaching a draft contract of sale in relation to Taringa and a draft option agreement in relation to Wolonga. Shortly thereafter the agent sent to both solicitors a sales advice he had prepared.

Correspondence then took place between the solicitors concerning the terms of the proposed contract for sale and the proposed option agreement. Between 28 and 30 August 2012, Mr Wilson discussed the proposed terms with the Carbones. During that period Mr Wilson wrote to Mr Cowley confirming various matters that had been discussed between the solicitors and requesting certain amendments to the draft agreements. On 30 August 2012, Mr Cowley sent amended draft agreements to Mr Wilson, who responded that the drafts appeared to be in order.

On 31 August 2012, Mr Cowley forwarded to Mr Wilson a contract of sale and an option agreement for execution by the Carbones and exchange. On 3 September 2012 Mr Wilson requested a further amendment to the option agreement. This led to some handwritten alterations to the final form of the Option Agreement.

Counterparts of the contract for the sale of Taringa and of the Option Agreement were exchanged on 4 September 2012, the date each bears.

The Taringa contract of sale provided for the Carbones to purchase the property for $2,203,920. Completion was to take place four weeks after termination of the contract for the sale of Taringa to Johnchap.

The Option Agreement was expressed to be made between Mr Mills, described as the “Vendor”, and the Carbones (as trustees of a family trust), described as the “Purchaser”.

Clause 2.1 provided for the Call Option as follows:

Clause 3.1 of the Option Agreement provided for a Put Option granted by the Purchaser to the Vendor. The Put Option is not presently relevant.

The “Option period” was identified in cl 4.1 as follows:

Clause 7.1 stated that if the Call Option was not exercised before 5.00 pm on the Call Option Lapse Date the Call Option lapsed. It is now not in dispute that the effect of cl 7.1, as a matter of construction, was that the Call Option lapsed on 4 September 2016, four years after the date of execution of the Option Agreement.

Clause 8.1 required the Purchaser to pay the Premium to the Vendor on or before 24 September 2012. If the Call Option was exercised, the Premium was to be applied in part payment of the deposit payable pursuant to the “Contract”, being the agreement for sale of land set out in Schedule 1 to the Option Agreement (cl 8.4).

Clause 11.1 provided as follows:

Clause 11.3 required the Purchaser to pay an occupation fee of $150,000 (plus GST) per annum. That amount was payable six months from the date of the Option Agreement (not the date the Carbones took possession). Payments of $75,000 (plus GST), adjusted for movements in the Consumer Price Index, were payable every six months thereafter, until completion of the Contract.

Clause 15 of the Option Agreement provided as follows:

Clause 20 stated that the Option Agreement was conditional upon the parties entering into the contract for the sale of Taringa to the Carbones. Clause 24 provided that the Option Agreement was also conditional on the termination of the option agreement between Mr Mills and Johnchap.

Schedule 4 to the Option Agreement set out the terms on which the Purchaser was entitled to use the Property pursuant to cl 11.1 of the Option Agreement. The Purchaser was granted a non-assignable licence to use the Property and could do so only for the purpose of farming and grazing (cll 2, 6). The Purchaser’s possession of the Property was non-exclusive with respect to the Vendor (cl 13.2). Schedule 4 did not specify the term of the non-exclusive licence but cl 11.3 envisaged that the Carbones would pay the occupation until completion of the “Contract” (that is the contract of sale that would come into existence on the exercise of the Call Option).

The terms of the Contract set out in Schedule 1 to the Option Agreement stated (cl 65.1) that the “Completion Date” was to be the earlier of:

The execution and exchange of the contract for the sale of Taringa satisfied the condition specified in cl 20.1 of the Option Agreement. At about the time contracts were exchanged, Mr Mills’ solicitor gave notice to the Carbones’ solicitor that the option agreement between Mr Mills and Johnchap had been terminated. The Option Agreement thereupon became unconditional and 4 September 2012 became the Call Option Commencement Date. [6]

Despite the notification to the Carbones that the option agreement with Johnchap had been terminated, Johnchap subsequently lodged caveats over the titles to both Taringa and Wolonga.

On 12 September 2016, Mr Mills commenced proceedings against Johnchap seeking declarations that the Option Agreement and contract of sale between those parties had been validly terminated. The dispute between Mr Mills and Johnchap led to a delay in the Carbones taking possession of Wolonga pursuant to the Option Agreement.

The Carbones paid the Premium due under cl 8.1 of the Option Agreement on 26 September 2012. Accordingly, the Carbones became entitled to possession of Wolonga pursuant to cl 11.1 from 26 September 2012. [7]

Johnchap withdrew its caveats on 28 September 2012 and the Carbones’ solicitor was notified of the withdrawal on 3 October 2012. The sale of Taringa to the Carbones was completed on 4 October 2012. [8]

As the primary Judge recorded, [9] there was a dispute as to when the Carbones entered into possession of Wolonga. They maintained that they did not take possession until 7 October 2012 (after Johnchap withdrew the caveats), while Mr Mills contended that they had actually moved into the homestead on Wolonga shortly after 24 September 2012. His Honour did not consider it necessary to resolve the dispute.

The Carbones did not pay the occupation fee due on 4 March 2013. On 17 April 2013, Mr Mills and Mr Carbone had a conversation in which they discussed payment of the outstanding occupation fee, including the interest payable. During this conversation, a discussion took place during which it was agreed that the “lease payments” or “rent payments” should be calculated from 4 October 2012 and paid on 4 April and 4 October each year. The parties were in dispute as to what, if anything, was said as to the time within which the Carbones could exercise the Call Option. The dispute is said by the Carbones to be central to their case on estoppel.

On 10 December 2013 Mr Mills sent a payment schedule to Mr Carbone under cover of an email marked “Carbone payment schedule Wolonga”. The contents of the payment schedule are addressed later. [10]

On 14 September 2016, Mr Mills served a “Notice to Vacate” Wolonga on the Carbones. The covering letter stated that the Carbones had not exercised the Call Option by the Call Option Lapse Date of 4 September 2016.

On 23 September 2016, the Carbones’ solicitor sent a letter to Mr Mills’ solicitor as follows:

On 28 September 2016, the Carbones served a Notice of Exercise of Call Option. It is the validity of that Notice that is in issue on the appeal.

The primary Judge first addressed the Carbones’ argument that the Option Agreement should be construed to provide for a “Call Option period” of four years running from the date the Carbones took possession of Wolonga. In considering this argument his Honour took into account the evidence of communications between the parties prior to the execution of the Option Agreement. [11] This required an evaluation of the conflicting evidence given by the Carbones, on the one hand, and Mr Mills on the other.

The primary Judge considered that Mr Carbone’s evidence had been “significantly undermined” in cross-examination and that his account of the conversations therefore had to be treated with caution. [12] His Honour also had “misgivings” about the reliability of Mrs Carbone’s affidavit. [13] By contrast, Mr Mills’ evidence was given truthfully and was likely to be reasonably reliable. [14]

It was common ground that in the discussion that took place on 10 August 2012, Mr Carbone said that he needed a four year lease of Wolonga. [15] The dispute was whether Mr Carbone said (as the Carbones claimed) that they wanted a lease for four years “from when we take over”.

The primary Judge did not accept the Carbones’ evidence on this point. [16] Nor did his Honour accept that Mr Mills said that they would have an option to purchase Wolonga while they leased the property. [17] His Honour accepted Mr Mills’ evidence that there was no specific discussion about when the option period would begin. However, his Honour was satisfied that Mr Mills agreed in a conversation after 10 August 2012 that the Carbones would have an option period of four years. [18]

His Honour made the following findings: [19]

On the basis of these findings the primary Judge concluded that:

The primary Judge observed that the Carbones’ various estoppel claims rested largely although not entirely upon Mr Carbone’s version of the conversation with Mr Mills on or about 17 April 2013. On Mr Carbone’s case, Mr Mills represented and Mr Carbone agreed that the Call Option period had commenced on 4 October 2012 and would continue until 4 October 2016. The parties thereafter proceeded on the basis of a mutually held assumption to that effect. [23]

The most significant divergence in the accounts of the conversation was whether the parties had discussed the date the Option Agreement became “active” or “effective”. Mr Carbone claimed that he told Mr Mills that the Taringa sale had settled on 4 October 2012 and that the Option Agreement became “active” on the same date. According to Mr Carbone, Mr Mills agreed, saying that Mr Carbone was “right”. Mr Mills denied that there had been any discussion about the option itself, as distinct from the payments due under the Option Agreement. [24]

The primary Judge did not accept Mr Carbone’s evidence on this issue. His Honour found that: [25]

This finding was based in large measure on his Honour’s lack of confidence in the accuracy and reliability of Mr Carbone’s evidence and his greater confidence in Mr Mills’ denials of Mr Carbone’s claims. [26] His Honour also thought it was “telling” that Mr Carbone did not promptly inform Mr Mills of the alleged rental agreement when the Notice to Vacate was served on 14 September 2016. Moreover Mr Wilson’s file notes contained no record of Mr Carbone giving him instructions that an agreement had been reached concerning the expiry date of the option. [27] His Honour rejected Mr Carbone’s evidence that he told Mr Wilson about the agreement by telephone on 14 September 2016.

The primary Judge accepted that Mr Carbone told Mr Wilson on 14 September 2016 and on other occasions that he believed the option period extended to 4 October 2016. But his Honour found that Mr Carbone did not attribute his belief to an agreement reached with Mr Mills in April 2013. In his Honour’s view, it was likely that Mr Carbone had formed the belief by linking the option period in his own mind to the date of settlement of the Taringa purchase (4 October 2012). [28]

His Honour found that the documentary evidence did not provide support for the existence of the asserted agreement. The Carbones had relied on the payment schedule sent by Mr Mills to Mr Carbone on 10 December 2013 which included a reference to “Settlement” next to the date of “4 October 2015”. His Honour found that even if the date was an error and was intended to be 4 October 2016, the reference to a settlement on that date did not indicate that the Call Option could be exercised at any time before that date. [29] In any event, his Honour accepted Mr Mills’ explanation that the date had been inserted by error in the wrong place on the spreadsheet. [30]

The primary Judge expressed his conclusions on the Carbones’ “primary estoppel case” as follows: [31]

Mr Mills’ alternative argument before the primary Judge was that the Carbones did not validly exercise the Call Option because cl 15.1 of the Option Agreement stated that any exercise of the Call Option would not be effective until the Carbones paid all outstanding interest due on moneys payable my them. There was no dispute before his Honour that the Carbones owed approximately $3,000 in interest on 28 September 2016, the date they purported to exercise the Call Option. [32] That amount also remained unpaid on 4 October 2016.

The primary Judge observed that in view of his rejection of the Carbones’ principal estoppel argument, it was not necessary to address Mr Mills’ alternative contention and the Carbones’ claim that Mr Mills was precluded from relying on cl 15.1 of the Option Agreement. Nonetheless his Honour addressed the competing contentions. [33]

The primary Judge construed cl 15.1 to mean that the purported exercise of the Call Option would be ineffective until and unless the Carbones paid the amount of outstanding interest. Once the interest was paid, the purported exercise of the Call Option would be valid, provided that the interest was paid before 5.00 pm on the Call Option Lapse Date. Since the Carbones had not paid the outstanding interest by 4 October 2016, the effect of cl 15.1 of the Option Agreement was that they had not validly exercised the Call Option.

His Honour recorded that the Carbones’ answer rested on Mr Mills’ evidence that in the conversation with Mr Carbone in August 2016 he had said that the underpayment of interest would be “sorted out in the end”. However the Carbones had not pleaded a case of estoppel based on this statement and they had not applied in closing submissions to amend their pleadings. His Honour therefore did not propose to consider the argument. [34]

The Carbones challenged two key findings of fact which, they argued, constituted the basis for the primary Judge’s rejection of their primary estoppel case. The two findings were that:

On the issue of reliance, Ms Fendekian, who appeared with Mr Edington for the Carbones, submitted that a plea of estoppel does not require the plaintiff to demonstrate the precise basis for his or her belief as to a state of affairs. In the present case, so Ms Fendekian argued, it was sufficient for the Carbones to establish that Mr Mills’ conduct was a contributing factor to the belief. His Honour noted that in any event neither Mr Carbone nor Mrs Carbone gave evidence that had it not been for the August 2016 conversation they would have paid the outstanding interest on or before 4 October 2016. [35]

Ms Fendekian challenged two specific findings of fact relating to his Honour’s conclusion that Mr Mills had not done or said anything amounting to a representation to Mr Carbone that the Call Option would not lapse until 4 October 2016.

First, she submitted that the primary Judge fell into error in rejecting Mr Carbone’s account of the conversation of 17 April 2013. In particular, his Honour overlooked or paid insufficient attention to objective evidence supporting Mr Carbone’s account. The objective evidence consisted of six matters:

Secondly, Ms Fendekian submitted that the primary Judge should have found that the payment schedule sent by Mr Mills to Mr Carbone in December 2013 constituted a representation to the effect that the Option period was four years from 4 October 2012 and thus the option would not lapse until 4 October 2016.

The Carbones’ written submissions in chief contended that the primary Judge should have found that a conversation which took place between the parties on August 2016 was sufficient of itself to support an estoppel. That contention was abandoned in the written reply submissions.

Ms Fendekian did not challenge the primary Judge’s construction of cl 15.1 of the Option Agreement. Nor did she dispute that the Carbones had not paid all outstanding interest either when they purported to exercise the Call Option (28 September 2016) or on the date the Call Option (on their case) lapsed (4 October 2016). Ms Fendekian however, submitted that Mr Mills was precluded from relying on cl 15.1 because he had breached an implied covenant not to hinder or prevent the fulfilment of the Option Agreement. In particular, so Mr Fendekian argued, Mr Mills failed to send an invoice or otherwise inform the Carbones of the amount of interest outstanding. She conceded that this argument had neither been pleaded nor put to the primary Judge.

Ms Fendekian submitted in the alternative that the primary Judge should have found that Mr Mills’ statement in August 2016 that the underpayment of interest could be “sorted out at the end” estopped him from relying on cl 15.1 in order to dispute the effectiveness of the Carbones’ purported exercise of the Call Option.

Mr Braham pointed out that at trial the Carbones relied on a number of arguments intended to produce the result that, notwithstanding the terms of the Option Agreement, the Call Option did not lapse until 4 October 2016. These arguments were primarily based on the conversation of 10 August 2012 during which Mr Carbone claimed that the parties had agreed that the Call Option would lapse four years “from when we [the Carbones] take over”.

Mr Braham submitted that the primary Judge’s rejection of these arguments has important forensic consequences for the Carbones’ estoppel argument. The Carbones’ case was that they believed well before April 2013 and indeed before execution of the Option Agreement, that the Call Option would lapse four years after they took possession of Wolonga. Mr Carbone gave evidence that he formed that belief by reason of the August 2012 conversation, not because of anything that happened in April 2013.

The 17 April 2013 conversation, even on Mr Carbone’s account, did not mention the date the Call Option lapsed: on his account the only reference was to the date the option commenced (“became active”). It was a necessary part of the Carbones’ case, so Mr Braham argued, that they understood what was said in April 2013 to convey that the option period was four years from 4 October 2012 because of Mr Carbone’s pre-existing belief that the Call Option would lapse four years after the Carbones took possession of Wolonga.

Since the primary Judge rejected the case based on the August 2012 conversations (and there was no appeal from these findings), it followed that there could be no basis for a finding that the 17 April 2013 conversation conveyed a representation that the Call Option would not lapse until 4 October 2016. Under the terms of the Option Agreement, the date the Call Option lapsed was fixed by reference to the date of the Option Agreement, not the date the Call Option commenced (that being dependent on the termination of the option granted to Johnchap).

Mr Braham submitted that in any event there was no basis for overturning the primary Judge’s rejection of Mr Carbone’s account of the conversation of 17 April 2013. The finding was largely credit based. None of the six “objective” matters identified by Ms Fendekian suggested that the finding was glaringly improbable or contrary to compelling inferences. Nor did the payment schedule or the August 2016 conversation advance the Carbones’ case on estoppel.

Mr Braham submitted that the Carbones should not be permitted to raise for the first time on appeal the argument that Mr Mills had breached an implied covenant not to hinder or prevent fulfilment of the Option Agreement. In any event, so he argued, the evidence did not establish that Mr Mills had in any way prevented the Carbones paying the outstanding interest on or prior to 4 October 2016.

Mr Braham further submitted that there was no error in the primary Judge refusing to consider the Carbones’ estoppel argument in relation to Mr Mills’ reliance on cl 15.1, because the point had not been pleaded. Even if the primary Judge erred in this respect, the argument had to fail because there was no evidence that the Carbones had relied on anything said by Mr Mills in August 2016.

As there was no dispute between the parties as to the relevant principles, they can be stated very briefly. The elements necessary to create an estoppel by representation are as follows: [36]

The High Court has explained that estoppel by convention is: [38]

The Carbones pleaded a case based on both estoppel by representation and estoppel by convention. They alleged that Mr Mills represented to them, both before and after the Option Agreement was executed, that the Option period would commence (or had commenced) on 4 October 2012 and would continue until 4 October 2016. The plea of estoppel by convention alleged that the parties proceeded on the basis of a mutual assumption to the same effect.

The representation was said to have been made in the conversations of 10 August 2012 (predating the Option Agreement) and 17 April 2013 (postdating the Option Agreement). The Carbones also relied on the payment schedule prepared in December 2013 and a conversation that took place between the parties in August 2016. The pleaded estopped by convention was founded on similar allegations.

On the primary Judge’s findings, Mr Carbone laboured under a misapprehension as to the effect of the Option Agreement, a misapprehension not shared by Mr Mills. Specifically Mr Carbone incorrectly believed that under the terms of the Option Agreement the Call Option would not lapse until four calendar years from the date the Carbones took possession of Wolonga.

The primary Judge observed that it was difficult to discern the basis for Mr Carbone’s misapprehension, although his Honour thought that it may have reflected Mr Carbone’s understanding that the Option period would not commence until Johnchap’s caveats were withdrawn and the Taringa sale settled. [39] That understanding, coupled with Mr Carbone’s apparent belief that the Call Option was exercisable during a fixed term of four years from its effective commencement, [40] would explain his genuine belief (in the events that happened) that the Call Option would not lapse until 4 October 2016.

Mr Carbone gave evidence that his understanding was “always” that it had been agreed that the Call Option would not lapse until four years from the date the Carbones took possession of Wolonga. On his account, he acquired that understanding before the Option Agreement came into force and retained the understanding thereafter. Indeed he said in his affidavit evidence that he did not turn his attention to the definition of “Call Option Lapse Date” in cl 1.1(3) of the Option Agreement (being the date four years from the date of the Option Agreement), but that if he had appreciated its significance he would have instructed his solicitor to amend the Option Agreement.

The primary Judge found that Mr Mills said nothing in his conversation of 10 August 2012 about the length of the Option period or the date on which it would lapse. There is no challenge to this finding. It follows, as Mr Braham submitted, that Mr Carbone’s misapprehension as to the Option period, both before and immediately after the execution of the Option Agreement, had nothing to do with anything said or done by Mr Mills prior to the Option Agreement coming into effect.

Mr Carbone’s evidence was that his belief as to the duration of the Option period was “confirmed” by the conversation of 17 April 2013. That conversation took place after Mr Mills provided Mr Carbone with calculations concerning the amount of the occupation fee that remained unpaid. Mr Carbone’s account in his affidavit was as follows:

Assuming, contrary to the primary Judge’s finding, that Mr Carbone’s account of the conversation was accurate, nothing was said by Mr Mills as to the duration of the Option period. The observation attributed to him, namely that the Option Agreement became effective from 4 October 2012, was made in the context of a discussion about the so-called “lease payments” (in fact the occupation fee payable pursuant to cl 11.3 of the Option Agreement). Even on Mr Carbone’s account, Mr Mills was simply conveying his understanding of the date by reference to which the “lease payments” would become payable. Mr Mills addressed neither the duration of the Option period nor the date the Call Option would lapse. This is hardly surprising since on any view of the Option Agreement the Call Option was not due to lapse until a date well over three years from the date of the conversation. As the primary Judge noted, there was no reason for the parties to be concerned at this point about the date on which the Call Option would lapse.

If the conversation confirmed Mr Carbone’s pre-existing belief as to the date the Call Option would lapse, it was because he was already under the misapprehension that the Option period was a fixed period of four years from the date the Carbones took possession of Wolonga. It was that misapprehension which led him (if it did) to interpret Mr Mills’ comment about the date the Option Agreement “becomes active” as saying something about the date the Call Option would lapse. The misapprehension under which Mr Carbone laboured was not induced by any conduct of Mr Mills.

There may well have been other factors contributing to Mr Carbone’s misunderstanding. The terms of the Option Agreement, while no doubt reasonably clear to a lawyer, may have been difficult for a lay person to follow or to remember. This is perhaps particularly true of the timing of the various events referred to in the Option Agreement:

Just as Mr Mills was not responsible for Mr Carbone’s misunderstanding as to the duration of the Option period at the time the Option Agreement came into force, Mr Mills was not responsible for any confusion on Mr Carbone’s part as to the terms of the Option Agreement. In short, to the extent that Mr Carbone failed correctly to understand the effect of the Option Agreement, his misunderstanding cannot be attributed to any conduct of Mr Mills. A self-induced misunderstanding cannot provide a basis for estoppel by representation. Nor can it provide a basis for conventional estoppel unless the misunderstanding is shared and acted upon by the other party.

For these reasons the Carbones’ case on estoppel could not have succeeded even if Mr Carbone’s account of the 17 April 2013 conversation had been accepted.

As has been seen, the primary Judge did not accept Mr Carbone’s account of the 17 April 2013 conversation. His Honour found that the only matter discussed during the conversation was payment of the occupation fee and that Mr Mills did not say anything to the effect that the Option Agreement became active as from 4 October 2013. It may not be strictly necessary to address the Carbones’ challenge to these findings. But as the challenge formed the centrepiece of their argument it is appropriate to do so.

No party other than Mr Mills and Mr Carbone was present during the 17 April 2013 conversation. Neither Mr Mills nor Mr Carbone made a contemporaneous note of the conversation. Each was giving evidence some years after the conversation occurred.

The primary Judge took into account the failure of Mr Carbone, immediately after the Notice to Vacate Wolonga was served on 14 September 2016, to give instructions to his solicitor that the Call Option would not lapse until 4 October 2016. But Ms Fendekian did not dispute that the primary Judge’s findings were largely based – as they had to be – on his Honour’s assessment of the credibility of Mr Mills and Mr Carbone. His Honour gave cogent reasons for concluding that he had little confidence in the accuracy or reliability of Mr Carbone’s evidence “even where he professed to have a clear recollection of what was said”. [41] His Honour formed the view, having observed Mr Mills in the witness box, that he did his best to answer questions truthfully and that he was prepared to make concessions that might have been unfavourable to his case. [42] In these circumstances, the principles stated in Fox v Percy [43] apply. Therefore this Court should only interfere if the finding is contrary to “incontrovertible facts or uncontested testimony”, or is “glaringly improbable” or “contrary to compelling inferences”. [44]

As has been noted, the Carbones relied on six matters as constituting objective evidence inconsistent with the primary Judge’s finding. These matters fall well short of establishing a sound basis for overturning the credit-based findings.

The first objective matter was said to be that the parties did not distinguish between the Option period and the timing of the “lease”. In fact the Option Agreement did draw a distinction, in that the Option period commenced on the termination of the Johnchap option, while the Carbones’ entitlement to possession arose on the date they paid the Premium. Even if neither Mr Mills nor Mr Carbone adverted specifically to the distinction during the 17 April 2013 conversation, their failure to do so is not inconsistent with Mr Mills’ account of the 17 April 2013 conversation or with the primary Judge’s acceptance of Mr Mills’ evidence.

The second to fourth matters relied on by the Carbones overlap. Mr Mills agreed in cross-examination that he had been worried when Johnchap lodged caveats on about 6 September 2012 because the caveats might have affected completion of the sale of Taringa to the Carbones. He also agreed with the cross-examiner that he believed at the time that the caveats had to be removed before the Option Agreement “could really take effect”. The cross-examiner’s question was loosely framed but Mr Mills’ answer reflected the provision in the Option Agreement stating that any default by him under the contract for the sale of Taringa was deemed to be a default under the Option Agreement (cl 20.2).

It appears that Mr Mills’ principal concern in September 2012 was that Johnchap’s caveats would prevent him from allowing the Carbones to take possession of the properties. That particular concern was resolved on 14 September 2012 when the solicitor for Johnchap indicated that the Carbones could have “free and unimpeded access” to the properties to plant crops. [45] It is not apparent why Mr Mills’ concern in September 2012 that Johnchap’s caveats should be withdrawn (as they were on 28 September 2012) should be regarded as inconsistent with his account of a conversation in April 2013 that took place nearly seven months later and dealt with a different issue.

The fifth matter relied on was the uncertainty that existed in April 2013 concerning the dates on which the occupation fee had to be paid. Mr Mills acknowledged that he was uncertain as to the position and sought advice from his solicitor. The issue was resolved by agreement between the parties. But that has little bearing on whether they discussed or referred to a separate issue (the duration of the Option period) that was not then of any concern to either party.

The sixth matter relied on as inconsistent with the primary Judge’s finding was the payment schedule sent by Mr Mills to Mr Carbone on 10 December 2013. The schedule was in the form of a half-page spreadsheet, described by the primary Judge as follows: [46]

The primary Judge accepted Mr Mills’ evidence that he originally prepared the spreadsheet for his own purposes to keep track of the amounts owed by the Carbones in respect of the occupation fee. Mr Mills inserted in the spreadsheet the dates for payment agreed on 17 April 2013. [47] He later sent the spreadsheet to Mr Carbone to show how he had calculated the outstanding amounts up to and including 4 October 2013, inclusive of interest.

The Carbones contended that the final date of 4 October 2015 in the spreadsheet was a mistake for 4 October 2016. Mr Mills explained that the mistake was not the insertion of an incorrect date, but placing the reference to “Settlement” opposite the date of 4 October 2015, rather than on a separate line below that date. The primary Judge accepted the explanation, which appears entirely plausible bearing in mind that the spreadsheet made no reference to any date after October 2015 on which the occupation fee might become payable.

In view of the primary Judge’s acceptance of Mr Mills’ evidence concerning the spreadsheet (a finding not challenged), there is no inconsistency between the content of the spreadsheet and his Honour’s finding concerning the 17 April 2013 conversation.

As has been noted, the Carbones’ written reply submissions abandoned reliance on the August 2016 conversation as an independent basis for establishing an estoppel. However, Ms Fendekian rather faintly suggested that the conversation was a further objective fact casting doubt on Mr Mills’ evidence. The short answer is that even on Mr Carbone’s version of the conversation, it simply concerned the time by which Mr Mills would “get [his] money” in view of the impending sale of the Carbones’ Western Australian property. The conversation had nothing to do with the time within which the Call Option could be exercised.

For these reasons no error has been demonstrated in the primary Judge’s findings concerning the conversation of 17 April 2013.

Ms Fendekian relied on the payment schedule, independently of any earlier dealings between the parties, as conveying a representation that the Call Option would not lapse until 4 October 2016. There are two fundamental difficulties with this contention.

The first is that the payment schedule, on its face, did not make any reference to 4 October 2016. The spreadsheet identified the amount that the Carbones would have to pay on “Settlement”, assuming that they exercised the Call Option. But the figure was placed next to the last date appearing on the spreadsheet, namely 4 October 2015. On an objective reading of the document this might suggest that it was prepared on the assumption that the Call Option would be exercised no later than 4 October 2015. But the spreadsheet cannot be read as conveying a representation that the Call Option would continue until 4 October 2016, unless exercised earlier.

Secondly, as was pointed out in argument, neither Mr nor Mrs Carbone gave evidence that they had understood the spreadsheet to convey the alleged representation. Nor did they give evidence that they relied on the spreadsheet in forming the view that the Call Option would not expire until 4 October 2016.

The Carbones’ reliance on the payment schedule as an independent basis for establishing an estoppel by representation or conventional estoppel is misplaced.

The Carbones have not established that the primary Judge’s rejection of their principal case on estoppel involved any error.

Since the Carbones’ principal estoppel argument must be rejected, it is not necessary to consider whether Mr Mills was precluded from relying on the Carbones’ non-payment of interest as an independent ground for concluding that they did not validly exercise the Call Option. I shall, however, briefly address the Carbones’ contentions.

The Carbones did not dispute that on the proper construction of cl 15.1 of the Option Agreement their purported exercise of the Call Option was ineffective unless they paid the outstanding interest on or before the lapse of the Call Option (on their case 4 October 2016). They also did not dispute that they had not paid the outstanding interest by that date.

The authorities establish that the courts may imply a duty on one party to a contract to co-operate in the doing of acts necessary to the performance by the other party of fundamental obligations under the contract. [48] The law also implies a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract. [49]

The difficulty confronting the Carbones is that they did not seek to rely at trial on a breach by Mr Mills of an implied covenant. Had they done so Mr Mills might well have sought to adduce further evidence relevant to this contention. That evidence might have addressed, for example, Mr Mills’ reasons for not sending an invoice to the Carbones and the extent of Mr Carbone’s knowledge that the outstanding interest had to be paid before the Call Option lapsed. In these circumstances it is not open to the Carbones to raise the argument for the first time on appeal. [50]

In any event, on the evidence before the primary Judge it is difficult to see how Mr Mills could be said to have breached any implied term of the Option Agreement. The service on the Carbones of the Notice to Vacate Wolonga hardly prevented or hindered the Carbones from paying the arrears of interest prior to 4 October 2016. If anything, service of the Notice would have encouraged them to make the payment. Nothing in the Option Agreement obliged Mr Mills to send an invoice to the Carbones. Mr Carbone’s evidence was to the effect that when the Notice was served he was aware of the “possibility” that interest was owing. Yet he made no inquiries as to whether Mr Mills was insisting on payment (despite earlier indications that Mr Mills wanted to be paid) nor as to the amount of interest due. It appears that Mr Carbone made no effort to pay off the arrears before 4 October 2016.

The Carbones’ pleaded case did not expressly rely on the August 2016 conversation with Mr Mills as founding an estoppel that would prevent Mr Mills relying on cl 15.1 of the Option Agreement to defeat the Carbones’ purported exercise of the Call Option. However, it is arguable that on a generous reading the Amended Statement of Claim can be understood as encompassing this estoppel argument.

Mr Mills agreed in his cross-examination that in the course of the August 2016 conversation he said that it would “be all sorted out in the end”. But the comment was made during a discussion in which Mr Mills considered that he was being “fobbed off” by Mr Carbone in response to Mr Mills’ questions as to when he would be paid. At best the comment was ambiguous.

As the primary Judge observed, neither of the Carbones gave evidence that their failure to pay the outstanding interest by 4 October 2016 was influenced by anything Mr Mills said in the August 2016 conversation. In the absence of such evidence the foundation for an estoppel is lacking.

It follows that if it was necessary for Mr Mills to rely on the Carbones’ non-payment of interest to defeat their purported exercise of the Call Option, it would be open to him to do so.

The Carbones should be granted leave to appeal but the appeal should be dismissed. The Carbones must pay Mr Mills’ costs of the appeal, including the application for leave to appeal.

BARRETT AJA: For the reasons given by Sackville AJA, orders should be made as his Honour proposes.