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Federal Court of Australia |
Last Updated: 29 June 2005
FEDERAL COURT OF AUSTRALIA
Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749
CORRIGENDUM
GIBSON MOTOR SPORT MERCHANDISE PTY LTD & ORS V ROBERT JAMES FORBES
& ORS
VID 372/2002
CRENNAN J
9
JUNE 2005 (CORRIGENDUM 29 JUNE 2005)
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
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V 372 OF 2002
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BETWEEN:
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GIBSON MOTOR SPORT MERCHANDISE PTY LTD ACN 095 810 110
FIRST APPLICANT ROBERT NOEL WATSON SECOND APPLICANT FREDERICK CHARLES GIBSON THIRD APPLICANT NOEL WATSON (AUST) PTY LTD ACN 005 254 848 FOURTH APPLICANT F.C. GIBSON PTY LTD ACN 082 475 705 FIFTH APPLICANT THE WATSON GROUP AUSTRALIA PTY LTD ACN 091 455 426 SIXTH APPLICANT SYNARBY PTY LTD ACN 057 500 973 SEVENTH APPLICANT |
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AND:
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ROBERT JAMES FORBES
FIRST RESPONDENT RACECAR PREPARATION & MANAGEMENT PTY LTD ACN 095 359 041 SECOND RESPONDENT BOB FORBES CORPORATION PTY LTD ACN 001 442 520 THIRD RESPONDENT |
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JUDGE:
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CRENNAN J
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DATE OF ORDER:
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9 JUNE 2005
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WHERE MADE:
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MELBOURNE
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CORRIGENDUM
1. On page 89, paragraph 269 of the reasons for judgment should read ‘Mr Watson effectively terminated the management agreement with RPM when he ceased further work on its behalf, which appears to have been on a date in late November 2001’ not ‘Mr Watson effectively terminated the management agreement with RPM when he ceased further work on its behalf, which appears to have been on a date in late November 2002’.
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I certify that the preceding paragraph is a true copy of the Corrigendum to
the Reasons for Judgment of the Honourable Justice Crennan.
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Associate:
Dated: 29 June 2005
FEDERAL COURT OF AUSTRALIA
Gibson Motor Sport Merchandise Pty Ltd & Ors v Robert James Forbes & Ors [2005] FCA 749
JOINT VENTURE – incidents of - fiduciary duties arising from
joint venture or negotiations for joint venture.
CONTRACT -
repudiation of oral contract by unilateral variation – implied terms
for termination – alternative quantum meruit
claims.
OTHER ISSUES – claims for express trust,
resulting trust and constructive trust – unjust enrichment –
estoppel – breaches of the
Trade Practices Act 1974 (Cth) s 52
and Fair Trading Act 1999 (Vic) s 9 and Fair Trading Act 1987
(NSW) s 42.
CROSS-CLAIM – account for unauthorised
transactions or unverified accounts – liability to account of
merchandising company – royalties.
Business Names Act
1962 (Vic), s 12(4)
Evidence Act (1995) (Cth)
s 103
Fair Trading Act 1987 (NSW) s 42
Fair
Trading Act 1999 (Vic) s 9
Income Tax Assessment Act 1936 (Cth) s
128A1
Partnership Act 1958 (Vic) s 5
Trade Practices
Act 1974 (Cth) s 4J, s 52, s 82, s 87
Associated
Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588
cited
Australian Oil and Gas Corporation Ltd v Bridge Oil Ltd (1995)
14 AMPLA Bull 60 referred to
Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR
137 cited
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] HCA 40;
(1977) 180 CLR 266 followed
Brambles Holdings Ltd v Bathurst City
Council [2001] NSWCA 61; (2001) 53 NSWLR 153 referred to
Branir Pty Ltd and Others v
Owston Nominees (No. 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 followed
Breen v
Williams [1995] HCA 63; (1995-1996) 186 CLR 71 followed
Burger King Corp v Hungry
Jack’s Pty Ltd [2001] NSWCA 187 cited
Byrne & Frew v
Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 cited
Canny Gabriel Jackson
Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321
cited
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR
1
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149
CLR 337 cited
Cummings v Lewis (1993) 41 FCR 559
followed
Devries v Australian National Railways Commission [1992] HCA 41; (1993) 177
CLR 472 followed
Didymi Corp v Atlantic Lines and Navigation Co. Inc.
[1988] 2 Lloyds Rep. 108 cited
Garry Rogers Motors (Aust) Pty Ltd v
Subaru (Aust) Pty Ltd (1999) ATPR 41-703 cited
Hawkins v Clayton [1988] HCA 15;
(1988) 164 CLR 539 referred to
Integrated Computer Services Pty Ltd v
Digital Equipment Corp (Aust) Pty Ltd (1988) BPR 11,110 referred
to
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 followed
Kelly v C.A. &
L. Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248 referred
to
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 referred to
Muschinski v
Dodds [1985] HCA 78; (1985) 160 CLR 583 referred to
Narni Pty Ltd v National
Australia Bank Ltd [2001] VSCA 31 referred to
Noranda Australia Ltd v
Lachlan Resources N.L. (1988) 14 NSWLR 1 referred to
Ravinder Rohini
Pty Ltd v Krizaic (1991) 30 FCR 300 referred to
Renard Constructions
(ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 referred
to
Rossiter & Curtis v Miller (1878) 3 App. Cas 1124 referred
to
Seven Cable Television Pty Ltd v Telstra Corp. Ltd (2000) 171 ALR
89 referred to
Television Broadcasters Limited v Ashton’s
Nominees Pty Ltd (No.1) (1979) 22 SASR 552 referred to
United
Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1
followed
Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32
referred
to
GIBSON
MOTOR SPORT MERCHANDISE PTY LTD & ORS V ROBERT JAMES FORBES &
ORS
VID 372/2002
CRENNAN J
9 JUNE
2005
MELBOURNE
Index
Heading Paragraph Number
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GIBSON MOTOR SPORT MERCHANDISE PTY LTD ACN 095 810 110
FIRST APPLICANT ROBERT NOEL WATSON SECOND APPLICANT FREDERICK CHARLES GIBSON THIRD APPLICANT NOEL WATSON (AUST) PTY LTD ACN 005 254 848 FOURTH APPLICANT F.C. GIBSON PTY LTD ACN 082 475 705 FIFTH APPLICANT THE WATSON GROUP AUSTRALIA PTY LTD ACN 091 455 426 SIXTH APPLICANT SYNARBY PTY LTD ACN 057 500 973 SEVENTH APPLICANT |
|
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AND:
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ROBERT JAMES FORBES
FIRST RESPONDENT RACECAR PREPARATION & MANAGEMENT PTY LTD ACN 095 359 041 SECOND RESPONDENT BOB FORBES CORPORATION PTY LTD ACN 001 442 520 THIRD RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS
THAT:
Note: Settlement and entry of
orders is dealt with in Order 36 of the Federal Court Rules.
REASONS FOR JUDGMENT
1 On 2 June 2002 the applicants filed an application in this Court for pecuniary and declaratory relief in respect of a range of causes of action under the Trade Practices Act 1974 (Cth) (‘Trade Practices Act’) and at general law. On 17 October 2003, a third further amended statement of claim was filed and pleadings in respect of that closed with the filing on 8 January 2004 of the cross-respondents’ defence, to the third further amended cross-claim, delivered 1 December 2003.
2 The proceeding arises out of the establishment in December 2000 of what can be described as a V8 Supercar racing team. This is a reference to a category of motorcar racing, which attracts attendances of the public and significant television coverage. Each of the parties played some role in creating and operating the team and its racing and merchandising operations over the course of approximately a year.
3 It is appropriate to say a little about the background to the dispute before examining the issues. It also should be noted that the precise identification of contested issues was only crystallized during final addresses, which followed extensive written submissions.
4 Until late 2000, Mr Craig Lowndes was a professional racing car driver in a V8 Supercar team sponsored by the automobile manufacturer, Holden Limited (‘Holden’) generally known as the Holden Racing Team (or ‘HRT’), competing in the race series run by the Touringcar Entrants Group Australia Pty Ltd (‘TEGA’). According to a standard agreement TEGA formed the Australian Vee Eight Supercar Company Pty Ltd (‘AVESCO’) to conduct its activities ‘on a more commercial and marketing oriented basis.’ TEGA’s stated objectives included supporting ‘. . . Teams and Drivers so that touringcar racing is guaranteed a place in Australian motor racing’ and pursuing ‘an equitable financial share of the revenues generated by the sports for the teams.’
5 It was not in contest that Mr Lowndes was a successful and popular young driver, having won the Australian Touring Car Championship in 1996, 1998 and 1999, being the youngest driver ever to have done so, and also having won the Bathurst 1000 race in 1996.
6 The evidence showed motorcar racing teams required considerable financial support some of which conventionally seems to have come from associated businesses such as motorcar manufacturers and petrol producers which sponsored teams. It also showed Mr Lowndes treated his position as a winning driver as creating opportunities for him to secure income through driving, sponsorship and associated merchandising.
7 By late 2000, Mr Lowndes was dissatisfied with his existing contractual arrangements to drive for HRT and was considering options in respect of his future career. Over the course of 2000, Mr Lowndes had become acquainted with the second applicant, Mr Noel Watson, who came to act as a manager for Mr Lowndes, assisting him in evaluating the choices that were open to him.
8 One of those choices involved driving for a racing team that used Ford cars made by the automotive manufacturer Ford Motor Company of Australia Limited (‘Ford’), thus a notional transfer of allegiance from Holden that was likely to attract considerable publicity.
9 Each of Holden and Ford owned certain intellectual property, including trade marks and was acquainted with sponsorship as a method of advertising products by reference to recognisable indicia of origin.
10 Other possible choices for Mr Lowndes involved developing proposals, of which Mr Watson was aware, being considered by each of the third applicant, Mr Fred Gibson, and the first respondent, Mr Bob Forbes, to create a new racing team. Mr Lowndes’s availability to drive for such a team was the impetus for these proposals.
11 The proposals involving Ford, Mr Gibson, Mr Forbes and Mr Lowndes coalesced in around December 2000. In January 2001 those parties were in a position publicly to announce the establishment of a V8 Supercar racing team, to be known as the ‘Gibson Motor Sport’, racing team for which Mr Lowndes was to race Ford cars. Mr Gibson had primary responsibility for the team’s racing activities; Mr Watson conducted its merchandising activities; Mr Forbes controlled and operated the company that owned most of the team’s main assets (through the second respondent, Racecar Preparation & Management Pty Ltd, (‘RPM’)).
12 This team competed with some success in the 2001 racing season, and continued into the 2002 season. By the end of 2001, however, the main protagonists in the litigation had had a ‘falling out’, and Mr Gibson and Mr Watson were no longer involved.
13 Mr Gibson and Mr Watson now bring this proceeding, together with a number of companies related to each of them and which were involved in the business arrangements described above. The primary claim is for breach of contract. The applicants contend that the ‘team’ described above was contractually structured as a joint venture in which each party made some special contribution to the team’s assets and opportunities. Within this overarching arrangement it is alleged there were a number of collateral contracts defining specific relationships between RPM and Mr Forbes on the one hand and each of Mr Gibson, Mr Watson and their related companies on the other.
14 It is further contended that certain trusts, express and resulting, were created over the assets of the racing team, in particular those held by RPM. There are claims of breach of fiduciary duty by Mr Forbes, and of estoppels operating in favour of the applicants. The applicants also plead causes of action under the Trade Practices Act, chiefly s 52 of that Act.
15 The applicants seek declarations that certain assets are held on trust; damages for breach of contract; declarations of constructive trust; an award of restitutionary damages and an account of profits in relation to the use of the putative trust assets; equitable compensation; and damages under s 82 and s 87 of the Trade Practices Act and other orders.
16 In addition, RPM brings a cross-claim against Mr Gibson and two of the applicant companies. The cross-claim is based upon aspects of the relationship between Mr Gibson and RPM. The cross-claimant alleges breach of fiduciary duty by Mr Gibson while acting in the position as manager of the racing team. It should be noted that a second proceeding (V 321 of 2003), brought by the first applicant and another in the present proceeding against the present second respondent seeking the second respondent’s winding up, was stayed until further order by order of Finkelstein J on 17 October 2003.
17 As foreshadowed, Mr Lowndes could be described as the catalyst of the events with which this proceeding is concerned. I have mentioned already his former association with HRT and his growing dissatisfaction with his contractual arrangements with Holden.
18 These arrangements comprised a Management Agreement with TWR (Australia) Pty Ltd (‘TWR’), the owner of HRT. Through Mr Watson, Mr Lowndes met Mr Battye, a solicitor from Ebsworth & Ebsworth, lawyers, whom he retained to assist him in circumstances where legal action was being threatened by TWR. In his evidence given on affidavit Mr Lowndes described the Managing Director of HRT, Mr John Crennan, as being ‘the head of TWR in Australia and in effect ... my manager’. Mr Lowndes said that he had become unhappy ‘that Crennan was both my manager and also ran Holden Special Vehicles (‘HSV’) and ran HRT for TWR.’
19 Due to the terms of his Management Agreement, Mr Lowndes’s freedom to exploit his own success was restricted. He said he saw Mr Crennan’s position ‘as a conflict’ and considered that Mr Crennan was not acting in his best interests, and that by 2000 ‘I had [had] enough of this arrangement and was hoping for an opportunity to leave HRT and Crennan’s management.’ Mr Lowndes’s decision to leave HRT at the end of the 2000 racing season was announced on or about 3 November 2000. The first V8 Supercar race for the 2001 racing season was to be held in Melbourne during the Australian Formula One Grand Prix weekend of 1 – 4 March 2001. However, due to the dispute between Mr Lowndes and HRT, by the end of 2000 Mr Lowndes had had considerable difficulty making arrangements to drive for a new team. If he were unable to find a new team by the start of the 2001 season the risk was that he might not have been able to compete that year.
20 It is necessary also to give some background detail about the other primary actors. Each of Mr Gibson, Mr Watson and Mr Forbes has a long-standing association with Australian motor racing. Mr Gibson was a racing car driver between 1961 and 1984. He won a major event, described as Bathurst in 1976. At various times from 1983 onwards he held positions managing racing teams. In particular, between 1990 and 1999 Mr Gibson conducted a racing car business under the business name GIBSON MOTOR SPORT. This team is said to have been highly successful, winning the Australian Touring Car Championship in 1990, 1991, 1992 and 1994 and the Bathurst 1000 race in 1992, 1994 and 1999. Each of them had longstanding relationships with Ford.
21 Mr Gibson was at all material times the sole and/or controlling director of F.C. Gibson Pty Ltd (‘FCG’), the fifth applicant, as well as of Angora Towers Pty Ltd and Favette Pty Ltd (non-parties who were involved in the transactions giving rise to this proceeding). The seventh applicant, Synarby Pty Ltd, was the company through which Mr Gibson issued invoices to RPM for his management services. Along with Mr Watson, Mr Gibson was also a director of the first applicant, Gibson Motor Sport Merchandise Pty Ltd (‘GMM’). While such matters were not admitted on the pleadings they were not live issues at the end of the hearing.
22 Mr Forbes first became involved with motor racing in the 1960s, competing as a driver in the touring car competition of the time. He has also had a long and diverse commercial career. With the formation in 1994 of TEGA as the organising body for Australian touring car racing, Mr Forbes became its founding chairman. He has since held office at various times as director of AVESCO and as a commissioner and director of the Australian Motor Sports Commission.
23 Mr Forbes is the sole director of the third respondent, Bob Forbes Corporation Pty Ltd, and has been a director of the second respondent, Racecar Preparation & Management Pty Ltd, since its formation on 12 December 2000.
24 Mr Forbes and Mr Gibson had known each other for years before the events took place, which have given rise to this litigation. They had uneventful business dealings between them. Mr Watson is said also to have had extensive involvement with the management of Australian motor sport, having been a director of TEGA and a founding director of AVESCO, and having been involved with racing teams since the 1980s.
25 Mr Gibson knew of Mr Watson since 1983 when both were involved with Nissan, a car manufacturer. He was said to have marketing, licensing and commercial experience and to be widely known and respected for his expertise. The fourth and sixth applicants were companies under his control utilized by him for the purposes of conducting business. As mentioned above, he was closely associated with Mr Lowndes during the latter half of 2000, and thus in a position to negotiate with teams and sponsors on the latter’s behalf. Like Mr Gibson, he was a director of the first applicant.
26 In or about late November 2000, discussions took place between Mr Gibson and Mr Forbes concerning the possible formation of a V8 Supercar team. This discussion was prompted by the availability for sale of assets then held by Bronzco Pty Ltd, a company controlled by Mr Garry Dumbrell. (The company name was later changed to ‘Gibson Motor Sport Pty Ltd’, but for ease of reference will be referred to in these reasons as ‘Bronzco’.)
27 Those assets comprised, generally speaking, everything necessary to run a V8 Supercar team in the TEGA/AVESCO race series. Mr Gibson previously owned these assets. In addition to mechanical plant and equipment, they included the business name ‘GIBSON MOTOR SPORT’ and the rights under what is called a TEGA franchise agreement. Mr Gibson had sold these assets to Bronzco in December 1999.
28 Independently, each of Mr Forbes and Mr Gibson claims to have had knowledge of the possibility of involving Mr Lowndes as a driver in any such new team, but each disputes how this influenced their negotiations and the contractual arrangements that eventuated. Neither Mr Gibson nor Mr Forbes claims that this topic was discussed in late November 2000 in connection with the possible sale of Bronzco’s assets, although each claims to have independently discussed the matter with Mr Watson during the course of October and November 2000.
29 It is not clear when Mr Forbes and Mr Gibson first discussed the position of Mr Lowndes. However, it is common ground that the topic was covered in the important meeting of 7 December 2000, which is discussed below.
30 Simultaneously, Mr Gibson was investigating the possibility of setting up a racing team in South Australia. This team would have been partly funded by the State of South Australia. Mr Gibson would have invested his own assets in any such venture. This proposal remained on foot until April 2001, when in Mr Gibson’s words it ‘faded away’. The parties contest the precise implications this proposal had for the course of negotiations between Mr Gibson and the other parties.
31 On 7 December 2000, a meeting took place between Mr Gibson, Mr Watson, Mr Forbes, and Mr Forbes’s accountant Mr Stanley, who was present for some of the time. At this meeting the initial arrangements were made for establishing the race team. The participants agreed on a number of basic points about the organisation of the team.
32 Among them was the most significant premise for the creation of the new team: that Mr Lowndes would drive for it and that as a result the team (as well as Mr Lowndes personally) would be sponsored by Ford. Those basic matters are common ground in this proceeding, but many further details and implications of the conversation are disputed.
33 The issue in dispute in this proceeding which was given greatest prominence by counsel for all parties, was whether the arrangements that were made on and from 7 December 2000 (the applicants contend in the alternative that the joint venture was negotiated from 7 December 2000 and concluded on or by 26 February 2001) were all part of a broader joint venture between Mr Gibson, Mr Watson and Mr Forbes (as the applicants contend), or whether there was no joint venture agreement but there were discrete contracts between the various parties and their nominee companies (as the respondents contend).
34 The applicants define the core of their putative joint venture agreement as being that ‘Watson, Forbes and Gibson would commit themselves to operate a complete motor sport business as described [in the third further amended statement of claim] for the period during which sponsorship income could support its racing activities’. In closing submissions the contract claim was described as follows:
‘When all of the tedious detail is stripped away the contractual claim is a simple one. The three principals agreed on 7 December 2000 and thereafter reaffirmed it by words and conduct over a period of time (probably until 7 September 2001). The three of them would contribute their respective resources to a successful race team centred on Craig Lowndes and Ford and that the operating company and the merchandising arm/company would be interdependent and would act for each other’s benefit. The venture was a long term venture for the life of the Ford/Lowndes sponsorship which was expected to be at least 5 years.’
35 Senior counsel for the applicants described the applicants’ contract case as having been refined over the hearing to various claims in respect of a joint venture in which the ‘contribution of respective resources’ made by the protagonists was described as follows:
‘. . . a venture agreed to by Watson, Gibson and Forbes on 7 December 2000 that in consideration of Gibson contributing his name, making available the workshop, securing the Dumbrell franchise, facilitating Dumbrell selling his race team assets to Forbes, and Watson using his best endeavours to procure Lowndes as a long term driver and Ford as a principal sponsor and to secure other sponsors and agreeing to set up a merchandising company, Forbes would lend the money to enable the operating company to purchase Dumbrell race assets and run the operating company (which became RPM) for so long as sponsorship was available to do so, for the benefit of the merchandising company.’
36 The case was opened on behalf of the applicants on the basis that the agreement between Mr Gibson, Mr Watson and Mr Forbes was not a partnership. In closing submissions it was contended that there was a partnership between those parties or an agreement for something ‘in the nature of’ a partnership. Although the respondents’ counsel was correct to suggest that claiming the parties were partners represented a significant shift in the applicants’ position, it was clear throughout the hearing that the main purpose of asserting a joint venture agreement between the parties was to found an argument that once the relationship of joint venture was found to exist, a duty of utmost good faith (of the kind relevant to a partnership) should be implied. That is, the applicants originally contended that whilst the agreement between the parties did not necessarily have all the indicia of a partnership, being a relationship which subsists between persons carrying on a business with a view to profit, it nevertheless should be treated as a partnership in which mutual trust and confidence governed the rights and duties of the parties inter se.
37 The applicants argue that a range of interlocking contractual and equitable duties subsisted under the alleged joint venture agreement, including contractual duties of good faith in negotiation and in dealing with the assets and opportunities of the racing team, as well as fiduciary duties. The contractual duties are said to have been implied in fact, to give business efficacy to the contract. The respondents deny the existence of any such general duties. The applicants argue in the alternative that if no contractual joint venture were formed as described above, then the parties were bound by fiduciary duties arising from the negotiation of a joint venture. The respondents deny this also.
38 It is common ground that it was generally agreed that Mr Forbes should provide the capital required to purchase the Bronzco assets (at least those other than the TEGA franchise). However, it should be noted that Mr Forbes consistently rejected the applicants’ description of him (or his interests) as the ‘financier’ of the team.
39 A significant reason for this was said by Mr Gibson to be that he needed the financial flexibility to continue to pursue a South Australian motorcar racing opportunity, while Mr Watson (as Mr Lowndes’s manager) could not legitimately have an interest in the racing team for which Mr Lowndes drove. The evidence showed Mr Lowndes insisted that there be no connection between his manager, Mr Watson, and any team for which he chose to drive.
40 It also seems common ground that the possibility of Mr Forbes buying the team was discussed in the week or so prior to 7 December 2000. While there was some contest of fact arising from Mr Dumbrell’s evidence about when he spoke to Mr Forbes, it is not necessary to resolve that in order to deal with the real controversy between the parties.
41 It was also understood that it would be Mr Forbes’s responsibility to incorporate the company that would purchase and hold the Bronzco assets. However, at the 7 December 2000 meeting it was left open whether Mr Gibson would become a partial shareholder in that company through providing a minority share of the capital required for the purchase.
42 The parties are in dispute over when it was agreed that Mr Gibson would purchase the TEGA franchise from Bronzco. The applicants contend that this was agreed on 7 December 2000. The respondents say that this was agreed during a telephone conversation on 10 December 2000.
43 This topic is linked to the disputed question of when Mr Forbes became aware of proposed changes the TEGA board was considering to the rules governing ownership of rights called TEGA franchises. Those changes would have had the effect of preventing Mr Forbes from having an interest in more than one Level One franchise.
44 Bob Forbes Corporation already held a TEGA franchise under which Mr Forbes’s son, Rodney Forbes, raced. In the event, the changes were not implemented, but the fact that the proposal was on foot as at 7 December 2000 is a significant part of the context. The applicants contend that Mr Forbes was aware of the proposed changes by 7 December 2000, while the respondents contend that Mr Forbes only became aware of the proposal on 8 December 2000.
45 The applicants contend that, because Mr Forbes knew he would be unable to hold an interest in both franchises if those changes were implemented, he agreed that Mr Gibson should hold the franchise. The applicants also say that Mr Gibson had to hold the franchise to keep the new race team separate from the team in which Mr Forbes’s son Rodney Forbes was to drive, since Ford was unwilling to sponsor a team in which Rodney Forbes drove, and moreover another driver was to be contracted for the new team but TEGA rules did not allow for more than two cars to race under any one franchise.
46 The respondents contend that the real reason Mr Gibson bought the franchise was that he may have needed it if he chose to pursue the South Australian proposal; that Ford had no objection to Rodney Forbes; that it was possible for three cars to race under a TEGA franchise; and that in the 10 December 2000 conversation Mr Forbes told Mr Gibson that he would allow Mr Gibson to race one car in the team using the Bronzco franchise rights in order to ensure that that franchise remained valid.
47 This last contention by the respondents underpins their contention that a contract was concluded between Forbes (on behalf of RPM) and Gibson (on behalf of FCG) that RPM would allow one of its cars to be raced under FCG’s TEGA franchise, and that FCG (as owner of the TEGA franchise) would pay to RPM the appearance money attributable to that car.
48 The applicants contend generally that each of the participants in the putative joint venture held on trust, for the joint venture, any assets that were necessary for the team’s activities or which were purchased for that purpose. The respondents deny the existence of any trusts subsisting during the term of whatever contracts existed between the parties, and contend that the various assets held by Mr Forbes, Mr Gibson, Mr Watson and their nominee companies were held absolutely – subject only to any contractual duties on the parties.
49 The applicants also contend that there was an express term of the joint venture agreement that Mr Gibson, Mr Watson and Mr Forbes would acquire a company (which became GMM) to conduct a merchandising business utilising the goodwill associated with the team. All three men would become directors, and they or their nominees would become shareholders, of this merchandising company. The respondents necessarily deny that these arrangements were terms of any joint venture agreement.
50 The applicants contend that the term of the overarching joint venture agreement was for a period defined in the third amended statement of claim to be ‘the period during which sponsorship income could support its racing activities’. Once sponsorship income became incapable of supporting the team’s racing activities, Mr Forbes, Mr Gibson and Mr Watson would each be entitled to cease being involved in the joint venture.
51 At this time, if Mr Forbes so chose he would be entitled to take absolute ownership of the Bronzco assets and any other plant and equipment purchased by RPM during the currency of the joint venture (that is, the joint venture’s equitable interests in those assets would dissolve). If Mr Gibson so chose he would be entitled to take absolute ownership of the TEGA franchise.
52 Whilst the respondents denied the existence of a joint venture agreement, they admitted there was agreement between RPM and Mr Gibson for management services, which was entered into on 7 December 2000 although they say terms of payment were agreed later. They also admitted there was an agreement on 7 December 2000 and confirmed on 18 May 2001 to pay certain commissions to Mr Watson, in particular 20% commission in the first year of the team sponsorship or sponsorships other than the initial Ford sponsorship, which is described below.
53 It appears to be common ground that the participants agreed that for all practical purposes Mr Gibson would be the manager of the team’s racing operations. (The applicants attached the label ‘Team Principal’ to this position, though the respondents preferred to describe Mr Gibson as ‘manager’ or ‘co-ordinator’ of the ‘operations of the Race Team’. The effect seems to me to be much the same).
54 The applicants claimed this to be part of the wider joint venture agreement, while the respondents say it was the subject matter of a distinct contract made on 7 December 2000 between Mr Gibson and Mr Forbes (on behalf of RPM, yet to be incorporated), which they labelled the ‘Gibson Services Agreement’.
55 There was no agreement in the 7 December 2000 meeting upon the terms of Mr Gibson’s profit or remuneration for performing his management role. The applicants contend that this aspect of the joint venture agreement was settled later, on or by 26 February 2001, by way of a distinct but related contract between Synarby Pty Ltd and RPM, which the applicants described both as a ‘consultancy agreement’ and the Gibson Services Agreement.
56 The respondents contend that it was a term of the discrete contract between Mr Gibson and Mr Forbes (or RPM) made on 7 December 2000 that Mr Gibson’s remuneration would be agreed upon subsequently, and that agreement was only arrived at on or about 18 May 2001. There is, however, no dispute that the sum to be paid to Mr Gibson (or his nominee) by RPM was $250,000 per annum.
57 The applicants further contend that there were express terms of the joint venture agreement that Mr Gibson would permit the joint venture to use the business name ‘GIBSON MOTOR SPORT’ and to occupy and use the workshop owned by Angora Towers Pty Ltd, and that Mr Gibson would cause his nominee (FCG) to acquire the TEGA franchise (as discussed above).
58 In contrast to the term of the joint venture pleaded by the applicants, the respondents contend that the discrete contract between Mr Gibson and Mr Forbes (or RPM) was terminable on reasonable notice; that it was limited in duration to the period for which Mr Lowndes would be contractually bound to drive for the team (under the agreement to be made between RPM and Mr Lowndes); and that it would terminate immediately upon Mr Lowndes ceasing to drive for the team. These terms were said to be implied to give business efficacy to the contract.
59 The contractual arrangements with respect to Mr Watson’s role in the racing team’s activities are somewhat more contentious. It seems clear that Mr Watson played two main roles. First, he procured sponsorship. Secondly, he managed the team’s merchandising. The details are contested.
60 The applicants contend that there were express terms of the joint venture agreement that Mr Watson would procure the services of Mr Lowndes as driver for the team; that he would manage the business of a merchandising company to be incorporated (GMM); that he would market and promote the race team and the joint venture and procure sponsors for the race team and joint venture; and that he would receive a commercial rate for those services, such rate to be between 10% and 20% of the sponsorship sums procured. These terms were said to have been agreed orally at the 7 December 2000 meeting.
61 The applicants further contend that at a later meeting, on 26 February 2001, it was agreed that Mr Watson (or his nominee) was to receive a commission of 10% of the sponsorship sum that had been arranged from Ford (the sponsorship being $1.5 million in 2001 and $3 million in each of 2002 and 2003) together with 20% commission (reducing by 2.5% per annum) on all additional sponsorship he might procure for the team, payable by RPM.
62 It must be noted, however, that the precise sum and structure of the Ford sponsorship had not been agreed by 7 December 2000; rather, it was agreed on 13 December 2000 at a meeting between Mr Gibson, Mr Watson, and Mr Geoff Polites of Ford. By 7 December 2000, there had been discussions between various persons which Mr Watson said led to his belief that Ford would support Mr Lowndes’s driving, and would sponsor whichever team for which Mr Lowndes chose to drive, provided Mr Lowndes drove a Ford car.
63 The respondents dispute that any binding agreement in respect of Mr Watson’s role was arrived at on 7 December 2000 at all. They maintain that Ford had already committed to sponsor the team, and that Mr Watson did not request commission on that sponsorship but only on additional sponsorship.
64 The respondents contend that at the 7 December 2000 meeting, Mr Watson proposed a 20% commission in the first year, and tailing commission (unspecified) thereafter, on additional sponsorship, and that Mr Forbes responded that if Mr Watson could obtain any additional sponsors Mr Forbes would happily pay 20% in the first year of team sponsorship. It is said that these discussions did not constitute a binding agreement, save for Mr Forbes’s agreement to pay 20% on sponsorship in the first year of the team if Mr Watson could obtain any sponsors additional to the initial Ford sponsorship.
65 The respondents say that on or about 18 May 2001, Mr Watson informed Mr Forbes that he would obtain additional sponsorship from ‘Dunlop/SPT’ and Mobil, and that it was agreed at this time that if Mr Watson did procure these sponsorships he would be paid 20% in the first year. The respondents do not admit that Mr Watson had procured additional sponsorships prior to 18 May 2001.
66 In relation to the merchandising role performed by Mr Watson and GMM, the respondents say that the discussions on and from 7 December 2000 between Mr Watson and GMM on the one hand, and Mr Forbes and RPM on the other were wholly inconclusive. The respondents’ preferred interpretation of the conversations that occurred was that Mr Watson made certain proposals and Mr Forbes said only that they ‘sounded fair’.
67 The principal pleading is of a joint venture concluded on 7 December 2000 with express terms as discussed above. The alternative pleading is that the joint venture agreement was concluded on 26 February 2001, which was partly implied by the course of events between 7 December 2000 and 26 February 2001.
68 The respondents deny both sets of allegations. It would be necessary to outline those events anyway as part of the factual context, but they must be considered in light of their significance in the pleadings.
69 Before dealing with the evidence in the case in more detail, it is necessary to note that the hearing of this matter exceeded the estimate and occupied 19 days. The third further amended statement of claim dated 23 October 2003 ran to some 85 pages yet some changes in the issues identified occurred in the course of the hearing. Affidavits filed and served ran to just under 600 pages, exhibits totalled almost 3,000 pages and written submissions, which were helpful and intended to save court time ran to 100’s of pages.
70 In a system of justice which has procedural fairness as a cornerstone, and where procedures permit a trial to be conducted by exchange of evidence in sworn affidavits, supplemented by the giving of oral evidence, there is a heavy obligation on counsel to ensure that material contests of fact do not become buried in paper and obscured by elaborate forensic efforts directed to collateral attacks on credit in respect of many issues, which do not necessarily relate significantly or proportionately to substantive or material issues, but which are now permitted in certain circumstances under the Evidence Act (1995) (Cth) s 103.
71 It would not be practical to refer to every single piece of evidence, aspect or event, in these reasons for judgment. There were countless disputes about conversations which did not require resolution in order to determine the material issues in dispute. All of the evidence in the proceeding, as well as the extensive submissions advanced in respect of such evidence, has been considered by me. Such findings of fact, which I proceed to make, are informed by regard to the whole of the evidence including my observations of all the witnesses when giving oral evidence, particularly about contested matters.
72 The applicants claimed an oral joint venture agreement for a specific project, namely creating and operating a motorcar racing team for Mr Lowndes and it was said an interdependent entity for selling associated products. Various express terms of the joint venture were pleaded
73 It was also pleaded there were implied terms to act fairly and in good faith and to hold and exercise personal or proprietary rights held for the business for the benefit of all parties and to consult in good faith when the business concluded for the purposes of payment of just compensation for the contributions made by each co-venturer and the preservation of value in the business. It was also claimed either as a result of the joint venture, or negotiations therefor, Mr Watson, Mr Gibson and Mr Forbes owed fiduciary duties to each other. Finally, in relation to the joint venture claim, it was admitted by the applicants that there was no single entity or joint venture vehicle established.
74 No formal written partnership agreement was claimed but I have described above a significant shift in the applicants’ position on the issue of whether the joint venture was governed by the principles applicable to a partnership. In any event, the applicants sought to imply a term of good faith into the joint venture and sought to argue consequently that joint venture property was held on trust. It is useful to consider briefly the leading authorities relating to joint ventures. It is also necessary to note that they show that questions of whether or not a joint venture involves specific partnership duties, or more generally identified fiduciary duties, depends very much on the facts of each individual joint venture.
75 The applicants relied on, and sought to come within, the broad definition given to the term ‘joint venture’ in United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 at 10 (‘United Dominions’):
‘The term "joint venture" is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots’ law, "adventure") will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership: such as a company, a trust, an agency or joint ownership.’
76 The term ‘joint venture’ has been defined on occasions for specific statutory purposes: see Income Tax Assessment Act 1936 (Cth) s 128A(1) and Trade Practices Act s 4J. Such statutory definitions are general and for the purposes of applying the provisions of the statutes in question. It can be noted the first statutory definition referred to employs a common enough use of the phrase ‘joint venture’ to distinguish a joint arrangement, which is not a partnership, whereas the definition under the Trade Practices Act covers a joint undertaking ‘whether or not in partnership.’
77 Whilst the term ‘joint venture’ has no settled common law meaning in Australian law, and there is no separate body of law dealing with the special features of joint ventures, like the well-developed jurisprudence in respect of partnership, some legal incidents of joint ventures were dealt with in United Dominions at 12-13 (per Mason, Brennan and Deane JJ) and at 14-16 (per Dawson J).
78 Distinctions which can be made between a joint venture and a partnership are not always simple or without controversy. The term ‘joint venture’ has conventionally and commonly been used to refer to an association for the purposes of a single undertaking rather than for the continuous ‘carrying on (of a) business’ characterising a partnership (s 5, Partnership Act 1958 (Vic)), yet, numerous single undertakings, to which the term joint venture may reasonably be applied, do not always in truth lie outside the uniform Partnership Acts or partnership principles and the collocation has certainly been used in a general sense to describe undertakings which do not have legal attributes differing from partnerships: see: J D Merralls QC., ‘Mining and Petroleum Joint Ventures in Australia: Some Basic Legal Concepts’ (1988) 62 ALJ 907; see also, extra-judicially, Hon. Justice McPherson, ‘Joint Ventures’ in Equity and Commercial Relationships, ed. Finn, 19 at 30-32, and Hon. Mr Justice J A Dowsett ‘Operator of a Joint Venture – Principal or Agent’ (1987) AMPLA Yearbook 269, and see generally W D Duncan (ed) Joint Venture Law in Australia (1995) Ch 2. Federation Press in Association with the Centre for Commercial and Property Law, Queensland University of Technology, 1994.
79 While joint venture agreements are generally governed by the principles applicable to contract and property, equity, through the mechanism of a constructive trust, may be called in aid in circumstances of incomplete agreement: Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 (‘Muschinski’) at 618, or called in aid because of a breach of a fiduciary duty: Ravinder Rohini Pty Ltd v Krizaic (1991) 30 FCR 300 (‘Ravinder v Krizaic’). Agreed contractual duties of joint venturers are not necessarily or routinely subject to any implied duty to act in good faith: Noranda Australia Ltd v Lachlan Resources N.L. (1988) 14 NSWLR 1; Australian Oil and Gas Corporation Ltd v Bridge Oil Limited (1995) 14 AMPLA Bull 60 at 70, Kelly v C.A. & L. Bell Commodities Corporation Pty Limited (1989) 18 NSWLR 248 at 258. See also the observations of Ormiston J. in Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 96-97 (‘Vroon’).
80 Recognisable and common characteristics of joint ventures include:
1. Participants hold proprietary interests in the assets of the joint undertaking, often, but not necessarily, as tenants-in-common: see the abovementioned article of Mr Merralls QC.
2. Participants exercise joint control of the undertaking.
3. Participants contribute to the joint undertaking, not necessarily equally; such contributions may be disparate: Canny Gabriel Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd [1974] HCA 22; (1974) 131 CLR 321 at 327; Television Broadcasters Limited v Ashton’s Nominees Pty Ltd (No.1) (1979) 22 SASR 552.
4. Participants in the joint undertaking enjoy rights and assume obligations, which are often several, and calculated by reference to ownership of shares and/or contributions made.
5. Participants have a joint (or community of) interest in the performance of the undertaking’s purpose: Cummings v Lewis (1993) 41 FCR 559 at 314/315 (per Cooper J);
6. Participants associate in the undertaking for mutual commercial gain which can be mutual profits.
81 These recognisable and common characteristics can be found in various permutations and constellations such that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of a joint venture agreement. It is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain.
82 As explained already, the joint venture is said by the applicants to have been agreed on 7 December 2000, and to be implied from conduct of the parties between then, and 26 February 2001, on which date it is alleged the joint venture was confirmed. Alternatively, the joint venture is said to have been agreed on 26 February 2001. There being no written joint venture agreement, I turn to consider the words and conduct relied on as evidencing the alleged oral joint venture agreement.
83 The first question calling for a decision is whether a concluded joint venture agreement was reached by 7 December 2000. As mentioned above a meeting took place on 7 December 2000 between Mr Gibson, Mr Watson, Mr Forbes and, for the latter part of the meeting Mr Stanley. Each gives a different account of what was said although it was common ground that the parties were in broad agreement that:
(i) Mr Lowndes would drive for the team (to be acquired);
(ii) Ford would support Mr Lowndes and provide sponsorship funds to the team to help pay for the team’s expenses;
(iii) a team which was already operating would be purchased from Bronzco by Mr Forbes for the purposes of operating the team;
(iv) the team would lease the same premises as it was leasing at the time (a workshop owned by Mr Gibson’s company Angora Towers Pty Ltd);
(v) Mr Gibson would manage the team; and
(vi) Mr Watson would promote the team and seek sponsorship for it and develop and sell (through a separate entity in respect of which profits would be shared) the team’s associated merchandise, 15% of the wholesale price of which would be paid to Mr Lowndes, as a royalty.
84 Mr Gibson’s evidence was that he indicated at the meeting he would need to speak to his accountant about any directorship or shareholding of 20% in the company which was to own the race team assets. He contended that he agreed at the meeting that he would be happy to purchase a TEGA franchise, which Mr Dumbrell held. He gave evidence in reply that:
‘There was no discussion between Mr Forbes and I about the precise nature of my involvement with the team at our meeting on 7 December or the description to be given to my role in the team. It was always assumed by me in my discussions with Mr Watson and Mr Forbes that I would run the team. Other than our discussion about the possibility of my taking a shareholding in the company which was to acquire the plant and equipment from Mr Dumbrell, the particular terms on which I was to be involved with Mr Forbes were not discussed until 11 January 2001 when my accountant and I met with Mr Forbes in Sydney.’
85 When Mr Gibson was cross-examined the following exchanges took place:
‘Mr Jopling: What’s your position as at the 7 December meeting relative to the issue of whether you’d become team principal?
Mr Gibson: I think it was automatically decided that I’d become team principal. I don’t think there was much discussion in that at all
Mr Jopling: Was it talked about at all?
Mr Gibson: It was assumed that the team would run under Gibson Motor Sport and I would run the team.
Mr Jopling: But was there express discussion between you and Mr Forbes about you becoming the team principal?
Mr Gibson: I can’t recall.
Mr Jopling: I put it to you that there was no discussion with you about the precise nature of your involvement with the team at that meeting on 7 December or and description given to your role in the team?
Mr Gibson: I’m sure Mr Forbes and I would have discussed that prior to the 7th, that I would run the team.
Mr Jopling: I put it to you - - -?
Mr Gibson: Yes.
Mr Jopling: - - at the meeting on 7 December that there was no discussion between you and Mr Forbes about the precise nature of your involvement with the team or the description to be given to your role in the team?
Mr Gibson: Correct.
Mr Jopling: You’d agree with that?
Mr Gibson: Yes.
Mr Jopling: Your position is that you’d had a discussion about those sorts of issues beforehand, had you?
Mr Gibson: Mr Forbes and I had spoken about this for the last three months, the opportunity is there and not there and what we didn’t like doing and this sort of thing, so it was an open discussion for quite a couple of months since he started talking about Mr Forbes’ car, Rodney Forbes’ car.
Mr Jopling: It is also your understanding as at 7 December that there was a discussion that you’d buy Mr Dumbrell’s TEGA franchise for $400,000?
Mr Gibson: Yes, Mr Forbes brought that up.
Mr Jopling: And that you’d make that franchise available unless the Adelaide deal came up, in which case you’d take it over to Adelaide?
Mr Gibson: No, it was nothing to do with Adelaide. I bought the TEGA franchise for our venture. .
Mr Jopling: Was there also a discussion about you making the workshop available?
Mr Gibson: Correct.
Mr Jopling: But you weren’t going to make the workshop available out of the goodness of your heart, were you, Mr Gibson?
Mr Gibson: Not really.
Mr Jopling: Your company, Angora Tower, was the owner of the workshop?
Mr Gibson: Yes.
Mr Jopling: It was going to be entering into an arm’s length transaction with RPM in relation to the lease of those premises?
Mr Gibson: Correct.
Mr Jopling: And you were going to be charging, what, $160,000 per year?
Mr Gibson: Correct.
. . .
Mr Jopling: The cost of the lease of the premises wasn’t a contribution on your part to this joint venture, was it?
Mr Gibson: Not really.
Mr Jopling: "Not really" – you don’t have any doubt. It certainly wasn’t. You were charging RPM, the company controlled by Mr Forbes in the end, for the total sum of $160,000?
Mr Gibson: Mr Jopling, we wouldn’t have been able to succeed if they hadn’t used the property.
Mr Jopling: You weren’t contributing the lease of the premises by forgoing rent, were you?
Mr Gibson: No. . . .
Mr Jopling: So is the position that as at 7 December, you hadn’t worked out whether you were going to be a shareholder?
Mr Gibson: Correct.
Mr Jopling: You hadn’t worked out what you were going to be paid?
Mr Gibson: That really didn’t come up to a big degree on the 7th.
Mr Jopling: You hadn’t worked out the precise shareholding of the merchandising company?
Mr Gibson: Correct.
Mr Jopling: And as you would have us believe it, the position of Ford and Lowndes hadn’t been confirmed as both sponsor and driver. Is that correct?
Mr Gibson: That’s correct.
Mr Jopling: I take it too that your position is that Dumbrell hadn’t been confirmed as a seller on your story?
Mr Gibson: Correct.
Mr Jopling The duration of the joint venture hadn’t been agreed or the partnership?
Mr Gibson: Correct.
Mr Jopling: The exit clause for the shareholding in the merchandising company hadn’t been agreed?
Mr Gibson: Correct.
Mr Jopling: The rate of commission to be paid to Mr Watson hadn’t been agreed?
Mr Gibson: Correct.
Mr Jopling: I think I said to you your remuneration, what you were going to be paid, hadn’t been agreed?
Mr Gibson: It hadn’t been discussed really.’
86 Also under cross-examination Mr Gibson admitted the parties ‘could have all walked away from those discussions’ as at 7 December 2000 although he emphasised they did not and said that ‘we all shook hands at the finish of the night.’
87 Mr Watson gave evidence that he opened the 7 December 2000 meeting by saying ‘We need to work out how we can put together something for all of us. It is imperative that we develop a win-win situation for all parties. By all parties I mean all of us as well as Craig and Ford.’ He also gave evidence that when Mr Forbes suggested that he and Mr Gibson take a shareholding in the company which would own the race team assets, Mr Gibson said he would need to speak to his accountant (which corroborates Mr Gibson’s evidence) and Mr Watson said ‘I can’t be a director or shareholder in the company because it will put me in conflict with Craig.’
88 When Mr Watson was cross-examined about his position on 7 December 2000 he agreed he was attending primarily in his position as Mr Lowndes’s manager and stated that on that day Mr Lowndes was still embroiled in a dispute with TWR over his management contract with TWR. When asked about what he told Mr Lowndes about that meeting on 7 December 2000, the following exchanges took place:
‘Mr Jopling: You knew, when you spoke to Stanley and Forbes on 7 December that you couldn’t be seen to be an owner of any team that your Mr Lowndes was associated with?
Mr Watson: Yes.
Mr Jopling: You made that abundantly clear to them?
Mr Watson: Yes.
. . .
Mr Jopling: You told Craig Lowndes straightaway on 7 December . . .
Mr Watson: No, the 8th.
Mr Jopling: --- that you had become a joint venturer in a team that he was going to race for. Is that your position?
Mr Watson: No, on 8 December I got hold of Craig because, he was away on the 7th, and I told him that we had formed a new joint venture and I was going to be involved in the merchandising and the sponsorship.
Mr Jopling: Did you tell Mr Lowndes that you were going to be an owner with two other persons of the management arm, the team that Mr Lowndes was going to drive for?
Mr Watson: No, because I wasn’t.
Mr Jopling: As a co-venturer, you would claim entitlement to all the assets of the joint venture?
Mr Watson: Yes, but I wasn’t, as you put it, involved as a director or a shareholder of RPM.
Mr Jopling: So, the important thing in your mind was not to be a director and shareholder but you could be an owner by other means. Is that right?
Mr Watson: It was for Craig’s benefit too.
Mr Jopling: No, I don’t think that’s answering my question. The important thing as far as you were concerned was not to be seen as a director and shareholder of RPM, but you would call yourself and you had become an owner of the joint venture?
Mr Watson: Yes.’
As well, Mr Watson agreed in
cross-examination that he never informed Mr Lowndes or Ford that he was a
co-venturer with a one-third
interest in any entity owning the team. He agreed
his ownership as to one-third was in the separate merchandising business. In
his words ‘. . . he (Mr Lowndes) knew I had an ownership in the team
through the merchandising business.’ Mr Watson also agreed in oral
evidence that ‘more than technical structural steps . . . had to be
attended to at the end of’ the meeting on 7 December 2000.
89 Mr Forbes gave evidence that Mr Watson did not open the meeting by speaking of the three parties collectively and said the main thrust of the meeting was to discuss his acquisition of Mr Dumbrell’s race team and what would follow after that.
90 It is clear from all the evidence, including the contemporaneous records made on the day by Mr Watson and Mr Stanley and Mr Forbes’s notes, some of which bore the date 7/12/2000 but part of which he said was an ‘agenda’ prepared prior, and some of which bore the date 8/12/2000, that the main discussion was about the costs of the team, how it would become self-sufficient financially through sponsorship, in particular Ford sponsorship, and what percentage of royalty payments Mr Lowndes would receive from a separate merchandising or marketing company to be set up. There was no concluded agreement about the shares to be taken in any marketing company.
91 It was agreed Mr Forbes would purchase Mr Dumbrell’s team but the precise shareholding in such a team was not agreed. It was agreed in principle that Mr Gibson would manage the team on a basis to be agreed later. It was also agreed that there would be the two roles for Mr Watson described above. It was agreed by Mr Forbes that Mr Watson would be entitled to charge commission or certain sponsorships which is a topic dealt with in more detail below.
92 The applicants contend that the matters, which were agreed, gave rise to a concluded joint venture agreement with certain details to be concluded later. Reliance was placed on Branir Pty Ltd and Others v Owston Nominees (No. 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424, especially a passage at 525 (‘Branir’). There, Allsop J. (with whom other members of the Full Court agreed) dealt with contracts arising when ‘business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t’s or where they think they have done so.’ His Honour was referring to instances where parties had agreed ‘the commercial essentials and having put in place necessary structural matters . . . go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation.’ His Honour said:
‘The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to essential elements of a contract.’
The applicants also relied on Vroon’s case as supporting the proposition that where parties have reached agreement, incompleteness of the terms should not necessarily preclude implication of terms necessary to give business efficacy to the agreement in accordance with the well-established principles in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 345/346 (‘Codelfa’) and/or a test of objective necessity which is possibly simpler, deriving from Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 422 (‘Byrne’); Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 (per Tadgell JA with whom Buchanan and Chernov JA agreed) and Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588 (‘Associated Alloys v ACN 001 452 106’).
93 There was no concluded agreement for a joint venture at the meeting on 7 December 2000. At the conclusion of that meeting on 7 December 2000 it remained open for all parties to continue to negotiate on the precise terms of whatever contracts were necessary to run a team for Craig Lowndes with the benefit of Ford Sponsorship monies. There were several matters supporting this finding. First, although the parties had agreed there was scope for setting up a race team for Mr Lowndes for the coming season and although they had discussed having a merchandising entity separate from an operating entity, there was no consensus on 7 December 2000 (or ‘mutual assent’ to repeat the language used in Branir and Vroon, which in turn derives from Rossiter v Miller (1878) 3 App. Cas 1124 at 1151 as referred to in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 361 (‘Masters & Cameron’)) about the necessary structural arrangements for the conduct of the envisaged race team or the race team business. The parties had identified a single project, the duration of which would depend on Ford sponsorship and Mr Lowndes’s agreement, with which they might be associated. They had also identified, to an extent, how different skills and resources might be deployed. Identifying a common objective or purpose does not of itself give rise to a joint venture agreement.
94 Critically, a joint venture agreement, or a partnership, were not the only possible methods by which effect could be given to a common intention, objective or purpose to set up a race team for Mr Lowndes, sponsored by Ford, and to set up an associated but separate merchandising entity. The fact that Mr Gibson, Mr Watson and Mr Forbes agreed on certain matters at the meeting does not reveal or evidence a common intention for a joint venture agreement or a common intention to be legally bound by what might be thought to be some recognisable incidents of a joint venture agreement, such as holding proprietary interests either severally or jointly in the assets of the joint venture.
95 The evidence showed that discussions about the holding of interests in the necessary assets of any race team or race team business or the sharing of any fruits of the business were preliminary and were to be considered further, not only by the parties, but also by their respective advisers. Issues such as the holding of assets necessary to a joint venture, the liability of joint venture partners, and provisions for exiting a joint venture agreement, the receipt or sharing of any gains of the joint venture are essential or critical terms; they are not to be characterised as merely ‘crossing the i's and dotting the t’s’ to employ the language of Allsop J. in Branir.
96 Secondly, while there were disputes about the precise details of the conversations occurring, including disputes which went to credit issues rather than substantive matters, contemporaneous notes of Mr Watson, Mr Forbes and Mr Stanley showed a high level of concordance on the central issue of whether the parties had reached a consensus about the structural arrangements to be put into place. They showed all the parties proposed further deliberation and consultations with consultants and respective advisers whose details were exchanged. They also show all parties appreciated the need to secure a binding promise in respect of foreshadowed sponsorship for the team from Ford, without which Mr Forbes would not have proceeded to acquire Mr Dumbrell’s team.
97 Accordingly, this case is one where a large number of issues, which were essential or critical to any joint venture remained outstanding on 7 December 2000 and required final agreement between the parties. Thus, unlike Branir, this was not a case where a consensus was reached about essential or critical terms but remained undocumented. The facts did not fall within any of the three possibilities canvassed in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360. An analysis by reference to conventional offer and acceptance may not always be appropriate: Vroon at 81; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [71] – [79] (per Heyden JA). However, whilst accepting that proposition, the facts here viewed as a whole, and objectively from the point of view of reasonable persons, do not show a concluded bargain. Further continuation of negotiation of important matters after an alleged date for conclusion of an agreement is an important factor in assessing whether a concluded agreement has been reached: Seven Cable Television Pty Ltd v Telstra Corp. Ltd (2000) 171 ALR 89 at [87] – [123] esp. [114] (Tamberlin J.).
98 What is clear from this initial meeting is that any profits to be made from the race team or by any separate merchandising company were totally dependent on Mr Lowndes, on his driving skill, on his willingness to be contracted as a driver for the team, on the maintenance of his skills and his willingness to authorise use of any of his indicia (and his celebrity) for the purposes of merchandising. It was also tolerably clear that any team set up and any future profits would also depend on Ford’s willingness to sponsor and to continue to sponsor the team. As Mr Watson agreed in cross-examination ‘. . .he (Mr Lowndes) was the centre of the thing.’
99 It is necessary next to consider the alternative claim that a joint venture agreement was concluded on 26 February 2001 and that such an agreement was partly implied by matters occurring between 7 December 2000 and 26 February 2001. Before dealing with events after 7 December 2000, it is necessary to describe an arrangement referred to in evidence as holding a TEGA franchise.
100 Mr Forbes asserted that he was not aware, until 8 December 2000, of a proposal that a new TEGA Teams Agreement between TEGA and competing teams would preclude multiple holdings of TEGA franchises by one entity. Mr Gibson and Mr Watson assert that a possible difficulty with Mr Forbes acquiring Mr Dumbrell’s franchise was discussed on 7 December 2000 when it was decided Mr Gibson would purchase the TEGA franchise, which Mr Dumbrell owned through a company he controlled.
101 As mentioned above, TEGA was a forum representing the owners of certain cars competing in motorcar racing in Australia. As at December 2000 TEGA had entered into agreements with such owners under what was called a ‘Franchise Agreement.’ Being a signatory to a TEGA Franchise Agreement was colloquially referred to as ‘owning’ or ‘holding’ a TEGA franchise, which was capable of being sold and can therefore be characterised as a capital asset. TEGA’s consent was necessary for any assignment of rights under a Franchise Agreement.
102 The standard Franchise Agreement, in evidence, contained detailed obligations on what is referred to in the document as ‘the Team’ and was styled as an agreement setting out ‘the arrangement by which you (the Team) participate in motor sports events run under the control of TEGA or AVESCO.’ Elsewhere the Franchise Agreement contained references to ‘the Team and Driver franchise system’ and set out provisions limiting the number of teams, which could compete and provided for three categories of teams. It also provided for ‘prize money, trophies, awards and appearance money’ to be paid or awarded to ‘Teams’ at Levels 1, 2 and 3. The TEGA franchise in this case was a Level 1 franchise. Teams were entitled to certain shares in a dividend pool declared at the end of each session. A Team was precluded from undergoing a change in control (direct or indirect) or selling or transferring its business without the consent of TEGA. The term ‘Drivers’ was defined to mean ‘each driver with whom the Team has an arrangement (legally binding or otherwise) to drive in the Events under the name, colours or banner of the Team or in a car owned or controlled by the Team.’ It is quite clear that references to ‘the Team’ where they occur are references to the entity, which had signed the Franchise Agreement.
103 In or about late 2000 TEGA gave notice to its members that it was proposing a new agreement styled a ‘Team’s Agreement’ as a substitute for the standard ‘Franchise Agreement’ described above.
104 The assertion by the applicants that it was decided on 7 December 2000 that Mr Gibson would purchase the TEGA franchise, which Mr Dumbrell owned, is connected with an assertion by them that Mr Forbes wished to adopt a low profile as owner of the race team assets such as cars and related equipment. Mr Forbes denies this and says he did not become aware of the TEGA proposals until 8 December 2000. If it matters, I prefer the evidence on this point of Mr Gibson and Mr Watson. It is improbable that a possibility, which the evidence showed was notorious in the industry at the time, namely that the relevant rules might change, was not known to Mr Forbes as at 7 December 2000 as he asserted.
105 On 14 December 2000, the board of TEGA approved the transfer of Bronzco’s TEGA franchise to FCG. Mr Gibson had paid $400,000 to acquire the TEGA franchise on behalf of FCG. Thereafter, Mr Gibson remitted prize money or moneys paid to him pursuant to the franchise to RPM. Such moneys were clearly intended under the standard form TEGA Franchise Agreement to assist in defraying the costs and expenses of the running of drivers’ cars. It was RPM, not Mr Gibson, who incurred such costs and expenses. Further, it was agreed by Mr Gibson, in evidence, that allowing RPM to utilise the TEGA franchise maintained its capital value for him, as such franchises were downgraded if not used.
106 Mr Gibson admitted under cross-examination that holding the TEGA franchise allowed him to pursue the separate proposal for a race team in Adelaide and also conceded the franchise was of no use without racing a car under it. He also conceded that at the end of 2001 he sold the franchise acquired from Mr Dumbrell at a profit of $250,000.
Events from 8 December until 18 December 2000
107 On 8 December 2001, Mr Forbes and Mr Dumbrell concluded an agreement in principle for the sale of the team assets, which Mr Dumbrell had previously purchased from Mr Gibson, for a price of $2.75 million, which sum was to be reduced by $400,000 in the event the TEGA franchise was not sold to the purchaser.
108 That document was entitled ‘Heads of Agreement for the Sale and Purchase of the business known as "GIBSON MOTOR SPORT".’ The "business" to be sold was defined to include the business name ‘GIBSON MOTOR SPORT’; all plant, stock and equipment of ‘GIBSON MOTOR SPORT’ and related entities; and the Level 1 TEGA Franchise (and attaching shareholdings in TEGA). The document stated that a ‘formal Contract of Sale between the parties hereto will be executed prior to settlement.’ Mr Falconer of White Cleland, Lawyers, Consultants and Notaries, acting for Mr Gibson, had the carriage of preparing that document.
109 The respondents say that this step was taken pursuant to discussions, which had already occurred between Mr Forbes and Mr Dumbrell. The applicants say that Mr Gibson "facilitated" Mr Forbes’s purchase of the Bronzco assets by allowing him to take advantage of the opportunity to purchase Bronzco’s assets – an opportunity the applicants say was open only to Mr Gibson prior to 7 December 2000. Mr Dumbrell denied he had prior discussions with Mr Forbes. This dispute does not matter because there was evidence showing Mr Dumbrell was a willing, even anxious, vendor.
110 Much was made in evidence of when exactly it was decided between Mr Forbes and Mr Gibson (and Mr Dumbrell) that Mr Gibson would purchase, from his own funds, the level 1 TEGA franchise which Mr Dumbrell had for sale. Much was also made in evidence as to whether Mr Gibson noticed that the Heads of Agreement, perused by him on 8 December 2000, described Bronzco assets as including the GIBSON MOTOR SPORT business name. It is not necessary to resolve these debates in order to determine material disputes between the parties.
111 On 11 December 2000 Mr Stanley sent certain documents to Mr Kinchington, Mr Gibson’s accountant, which included the Heads of Agreement for the acquisition of the business of Mr Dumbrell and an action list dated 10 December 2000. The action list confirmed the ongoing discussions about the precise contracts between the parties, which would be appropriate in all the circumstances. It also dealt with the acquisition of the TEGA franchise in some detail. It was noted there that FCG was to purchase the TEGA franchise for $400,000 The action list also referred to the possibility that Mr Forbes would lend Mr Gibson $320,000 personally and Mr Gibson could lend the purchase price of $400,000 to FCG. Mr Stanley also noted that any direct or indirect interest of Mr Forbes in the TEGA franchise ‘would be in breach of proposed amended rules of TEGA whereby no entity can hold an interest in more than one Level One franchise.’
112 On 12 December 2000, RPM was incorporated at the instigation of Mr Forbes. Mr Forbes held all RPM’s issued share capital, being 8 ordinary shares. Mr Gibson had expressed interest in becoming a director of RPM, subject to advice from his accountant. The respondents say he did become a director by consenting to do on or about 11 December 2000. The applicants deny this and rely on Mr Gibson. In any event he resigned as director on or about 21 December 2000, after signing a consent to become a director on 12 December 2000; he backdated the resignation to 12 December 2000.
113 On 13 December 2000, a meeting took place between Mr Gibson, Mr Watson and Mr Polites at which the basic terms of the Ford sponsorship were agreed. The arrangements were then confirmed in a letter from Mr Polites to Mr Gibson dated 18 December 2000. It was agreed that Ford would provide to the racing team a sponsorship sum of $1.5 million in 2001 and $3 million in each of 2002 and 2003, on the conditions that Mr Lowndes be the team’s principal driver, and that the team race only Ford vehicles. Ford provided a written agreement for execution. The agreement was expressed to be between Ford Motor Company of Australia Limited and the Participant, who was defined as FCG. Mr Gibson immediately forwarded a copy to Mr Forbes. The agreement contained a relevant recital and clause as follows:
‘C. FORD has offered to assist the PARTICIPANT by providing to the PARTICIPANT on, and subject to, the terms and conditions set out in this AGREEMENT, certain sums of money (‘SPONSORSHIP PAYMENTS’) being the SPONSORSHIP PAYMENTS set out in Item 4 of the SCHEDULE together with the other benefits and privileges (‘BENEFITS’) which are more particularly described in this AGREEMENT, and the PARTICIPANT has agreed to accept the SPONSORSHIP PAYMENTS and the BENEFITS on and subject to the said terms and conditions.
. . .
3. The SPONSORSHIP PAYMENTS will be used by the PARTICIPANT for the express purpose of defraying the costs and expenses directly incurred by the PARTICIPANT in racing the vehicle described in Item 6 of the SCHEDULE (‘RACE VEHICLE’) in the mandatory Series V8 Supercar races (‘MANDATORY EVENTS’) and shall use the BENEFITS provide by FORD for such purposes as are directly related to the racing of the RACE VEHICLE in the MANDATORY EVENTS. In this AGREEMENT, the term ‘MANDATORY EVENTS’ shall mean the AVESCO/TEGA Shell Championship Series V8 Supercar races of the years 2001, 2002 and 2003. Listed in Item 7 of the SCHEDULE are the MANDATORY EVENTS for the year 2001. The MANDATORY EVENTS for the years 2002 and 2003 shall be notified to the PARTICIPANT by FORD by 31 January, 2001 and 31 January, 2003 respectively.’
The language used reflects, and is consonant with, the language used in the TEGA standard form Franchise Agreement.
114 Mr Gibson denied in evidence that he had procured the sponsorship. The sums referred to are the initial Ford sponsorship sums in respect of which Mr Watson claims commission fees. Not only did Mr Watson give evidence about the work he undertook with Ford in procuring sponsorship funds, numerous contemporaneous records confirm this.
115 It was also agreed that Ford would execute a "driver’s agreement" with Mr Lowndes, under which Ford would pay Mr Lowndes $700,000 in the first year of the team’s operation (2001), as part of an ongoing commitment for 5 years. Mr Watson gave evidence of his role in procuring this sum for Mr Lowndes and Mr Battye agreed in cross-examination that Mr Watson’s role was significant. The Ford letter of 18 December 2000 stated that a more detailed agreement would be drawn up early in 2001 to finalise the arrangements.
116 On 18 December 2000, Mr Gibson on behalf of RPM signed the contract for the sale of the Bronzco assets. As a term of this contract, Bronzco agreed to surrender its lease over the workshop premises owned by Angora Towers Pty Ltd.
117 While the agreement in principle, which was prepared on 8 December, described the business being purchased as ‘Gibson Motor Sport’, and as including ‘The business name of ‘GIBSON MOTOR SPORT’’, the agreement executed on 18 December deleted that reference. Instead there was provision for the purchaser to direct the vendor as to the disposition of the business name.
‘GIBSON MOTOR SPORT’ business name
118 The background to the difference between the agreement in principle and the executed agreement was as follows. In or about 10 December 2000 Mr Gibson advised that the team could use the business name ‘GIBSON MOTOR SPORT’ as long as Mr Gibson was associated with it. Mr Forbes denies that he knew of Mr Gibson asserting any right to the business name until 20 December 2001. However, on the totality of the evidence Mr Gibson’s claim of ownership of the business name in the December period did not unduly perturb either Mr Forbes or Mr Stanley, although Mr Stanley sought confirmation of the fact in his action list of 10 December 2000 which corroborates Mr Gibson’s evidence that he made this claim at the time. Mr Stanley’s note records: ‘F. Gibson to confirm with his accountant whether he still owns a business name ‘GIBSON MOTOR SPORT’ yes, apparently he does – see renewal notice.’ This contemporaneous record raises at least an inference that Mr Forbes knew of Mr Gibson’s claim to the business name before 20 December 2000.
119 When Mr Dumbrell had acquired the business the year before from Mr Gibson, the sale and purchase agreement contained the following relevant terms:
‘Use of Business Name
(a) The purchaser (Bronzco) hereby grants to the Vendor an option to purchase the business name from the Vendor for the sum of $1,000 on the terms and conditions set out herein.
(b) This option shall be exercised as follows:
(i) The purchaser shall advise the Vendor by notice in writing within 14 days of the purchaser releasing its association with motor sport within Australia, such notice stating the date upon which the purchase has ceased to be associated with motor sport within Australia ("the case date").
(ii) The Vendor shall have a period of 45 days from the cease date to exercise its option.
(iii) The option is exercised by the Vendor advising the purchaser by notice in writing that it requires a transfer of the business name ("the exercise notice").
(iv) The purchaser shall within 14 days of the exercise notice, do all things necessary to sign all such documents and papers to enable the Vendor to be registered as the owner of the business name.
(c) (i) The purchaser agrees to do everything in its power and capacity during the course of its use of the name "GIBSON MOTOR SPORT" to ensure that the name is not brought into disrepute by any action of the purchaser or its associates.
(ii) The vendor has the right to request the purchaser to take steps to immediately remedy any situation that might, in the Vendor’s opinion, cause damage to the reputation of the vendor.
(iii) Should the purchaser refuse to act upon the request of the Vendor to remedy such a situation as referred to in sub sections (a) and (b), within a period of 45 days, the vendor has the right to withdraw the use of the name "GIBSON MOTOR SPORT" by withdrawing the registration of the business name as outlined in sub section (a) of this clause.’
120 The business name records in evidence for the State of New South Wales reveal that Mr Gibson carried on business under the name GIBSON MOTOR SPORT in New South Wales from 12 March 1991, the business name having first been registered on 12 November 1990. Those records showed the business name registration was last renewed on 16 January 1997 and that the registration was no longer current as at 16 April 2002. The records do not show any change of name in favour of Bronzco.
121 The extract from the Victorian Business Names records show that business was carried on by Mr Gibson under the business name GIBSON MOTOR SPORT from 4 December 1990 until 10 December 1999, Bronzco carried on business under the name from 10 December 1999 until 18 December 2000 and FCG was the current corporation carrying on business under the name as at 18 March 2002. Under s 12(4) of the Business Names Act 1962 (Vic) there is provision for a business name owner to give notice to the Director of Fair Trading that another corporation is carrying on business in place of or in association with the owner of the business name.
122 Clause 5 of the agreement between Mr Gibson and Bronzco covers permission to use the business name but subclause (a) provides the vendor has ‘an option to purchase the business name for the sum of $1,000’ on certain conditions if Bronzco release(ed) its association with motor sport within Australia. Subclause (c) reserves ‘ownership’ rights to Mr Gibson to withdraw use of the name. Mr Gibson in oral evidence suggested he had an arrangement with Mr Dumbrell to ‘reacquire’ his name if, for example, he needed it for the purposes of the Adelaide proposal. I do not regard that as relevant to my task of construing the provisions governing the use of the business name in the agreement between Mr Gibson and Bronzco. There was evidence of documents prepared for the purposes of the Adelaide proposal which featured the business name ‘GIBSON MOTOR SPORT.’ There was uncontested evidence that Mr Gibson did not pay $1,000 to Bronzco to ‘purchase’ the business name from Bronzco.
123 It is clear clause 5 of the agreement between Mr Gibson and Bronzco is not an example of felicitous drafting and clause 5(c) contains its own internal inconsistencies. However, applying the usual principles of construing the agreement so as to give effect to the intention expressed by the words used provided no inconsistency precludes such an approach, the effect of the clause appears to me to be that Mr Gibson gave Bronzco a legal right to use the business name whilst retaining beneficial ownership and goodwill in the name. The provision for Mr Gibson to ‘purchase the business name . . . for the sum of $1,000’ appears to me to be a clumsily drafted provision providing for Mr Gibson to reacquire full rights to the business name, that is to reacquire legal ownership, having kept all equitable rights in the business name.
124 While the clause is ambiguous, to the extent that Mr Gibson retained a right to withdraw the registration of the business name, Bronzco’s legal right seems more like a licence to use, rather than a proprietary acquisition of, the business name. However, the fact that the Office of Fair Trading for the State of Victoria recorded Bronzco as carrying on business under the business name from 10 December 1999 to 18 December 2000, is evidence that some change of name in respect of the business name was recorded with that Office, although there are no documents which directly evidence that issue. There was some evidence that a further change of name in favour of FCG was recorded with the office on 18 December 2000. It appears from the records in evidence that the address for renewals was always an address belonging to Mr Gibson. The totality of evidence on this issue leads me to find that Mr Gibson never disposed of the beneficial ownership of, or his goodwill in, the business name to Bronzco although he did grant Bronzco, a legal right to use the name though the mechanism of notifying the Office of Fair Trading of Bronzco carrying on business under the name, which rendered Bronzco the registered proprietor, for the time being, of the business name.
125 The arrangement between Bronzco and Mr Gibson in respect of the business name had subsisted for one year during which time Mr Gibson had acted as a consultant to Bronzco, thereby maintaining an association between him and the business name, which incorporated his surname.
126 Although the drafting of clause 5 is clumsy, there is hardly anything exceptional about the arrangements as Mr Gibson had a reputation in the business name, based on his own surname, which in turn had been known to the public by reason of his successes in the industry, first as a driver and then as a manager of teams. Any use not authorised by him while he was the legal proprietor of the business name, or not associated with him, after he permitted Bronzco to use the business name, could have run the risk of ‘passing off’ or breaching s 52 of the Trade Practices Act or s 9 of the Fair Trading Act 1999 (Vic). Whilst it formed no part of the claims or submissions, it is also possible the words ‘GIBSON MOTOR SPORT’, used simpliciter or with a stylised ‘G’ device described below, constituted use of the words as an unregistered trade mark in respect of products or services to which the words or words plus device were applied, rather than use of the words as a business name.
127 As already mentioned, the evidence did not disclose significant contemporaneous concern from either Mr Forbes or his advisers when Mr Forbes acquired Mr Dumbrell’s team and Mr Gibson simultaneously reacquired full rights to the business name. Mr Gibson’s evidence was that there was no complaint made about the transfer of the business name to him until 7 September 2001. The evidence showed this issue which was brought to Mr Forbes’s attention at least by 7 January 2001, only became a casus belli between Mr Forbes and Mr Gibson when Mr Forbes was looking for some justification, or cause, by reference to which Mr Gibson’s services as Team Principal could be terminated.
128 To complete the account of arrangements in respect of the business name it has to be noted that Mr Gibson, as a director of FCG consented to RPM using the business name. This was the subject of formal consent on 30 January 2001 expressed to continue until further notice in writing. This consent was subsequently amended. Mr Forbes’s accountant had suggested amending the consent to be ‘from the 18th day of December 2000 until the 31st day of December 2003 or such other date as may be mutually agreed upon . . .’ However, Mr Gibson signed a further consent on behalf of FCG to run ‘from the 18th day of December 2000 until such date as this consent is withdrawn . . . which shall be a date not less than 30 days after written notice of such withdrawal has been given . . .’ This further emphasizes, if further emphasis is needed, that Mr Gibson retained full ownership rights over his assets rather than ‘contributing’ them in any way to a joint undertaking.
129 Ford confirmed the sponsorship promise of 13 December 2000, already described, by letter dated 18 December addressed to Mr Gibson. Mr Gibson gave evidence of his view that the proposed sponsorship agreement proffered on 8 February 2001 (as drafted by Ford) should have been with RPM trading as GIBSON MOTOR SPORT, not with him or his company. He sent copies to Mr Forbes, Mr Watson and Mr Battye as soon as he received it. He said, and I accept, Mr Forbes expressed some reservations about the agreement being in the name of RPM, before he had further time to consider that. He amended the description of the recipient of sponsorship funds to read GIBSON MOTOR SPORT before returning the document to Ford, countersigned on 21 December 2000. Mr Watson agreed during cross-examination that RPM was meant to be the direct recipient of Ford’s sponsorship money.
Events from 20 December 2000 until 21 February 2001
130 On 20 December 2000, Mr Lowndes entered an exclusive driving agreement with a five year term expiring 31 December 2005 with Ford, which relevantly contained the following clauses:
‘The Driver undertakes that he shall at all times during the Term:
(a) race one or more vehicles of the kind marketed by Ford (appropriately modified for racing purposes) in the Team in the Championship;
(b) use his best endeavours to promote Ford MOTOR SPORT at all times during the Term;
(c) make genuine, positive and appropriate mention of Ford, Ford MOTOR SPORT, Tickford and Ford vehicles at appropriate opportunities including on any media programs and in any media interviews; and
(d) hold a full and valid CAMS licence for the purposes of racing vehicles in Australia and in particular, the Championship.
(clause 4.1)
In consideration of the Company providing the Services Ford shall pay the following amounts plus GST during the Term to the Company:
(i) $700,000 payable as to $350,00 on 2 January 2001 and as to the balance monthly in advance from 1 February 2001;
(ii) $720,000 per annum during 2002;
(iii) $740,000 per annum during 2003;
(iv) $760,000 per annum during 2004;
(v) $780,000 per annum during 2005
all amounts payable monthly in advance from 1 January 2002 during the Term.’
(clause 5.1)
On this day Mr Gibson indicated again he did not wish to be a shareholder or a director of RPM and he also formally resigned as a director as mentioned above. He gave evidence that on 20 December 2000, he told Mr Forbes ‘I am not prepared to be a director and shareholder in your company because my accountant has raised some concerns with it.’
131 It is necessary to note that some time in, or just after, the period 20 to 28 December 2000, Mr Forbes prepared a draft note by hand for Mr Gibson to send to Mr Polites. This referred to Mr Gibson endeavouring ‘to tie up the various matters relating to the buy back of Gibson Motor Sport prior to your announcement that Craig will be driving a Ford.’ It also stated ‘I look forward to catching up with you shortly after the announcement with a view to discussing any points that you or your staff would like to cover. At the same time I will brief you on how we have structured the team . . .’
132 On 4 January 2001, a public announcement was made that Craig Lowndes had signed up with Ford. The establishment of a Ford/Lowndes/Gibson team was the manner in which this was announced. The respondents sought to suggest that Mr Gibson had engaged in underhand behaviour in not explaining Mr Forbes’s role properly to Ford and allowing the situation to be described as Mr Gibson ‘acquiring back his old team’, which was the way events were described in the relevant press release. Mr Gibson said he could not recall telling Mr Polites he was buying back his old team on 13 December 2001, but conceded he may well have done so because at that stage he was proposing to buy the TEGA Franchise, proposing to use his factory for the team and thinking of becoming a shareholder in and director of RPM.
133 As noted above the TEGA franchise which FCG had acquired described ‘Team’ as the signatory FCG, the owner of the GIBSON MOTOR SPORT business name, which had not then been subject to any formal consent in favour of RPM. However, all relevant evidence shows that Mr Forbes was not associated with the ‘public face’ of the team in the way the holder of the TEGA franchise was. Because the evidence as a whole indicates Mr Forbes did not wish to take and did not take a public profile when a public announcement was made on 4 January 2001 that Mr Lowndes had joined a Ford team under Mr Gibson’s management, it seems to me not to matter too much what motivated him and which of various motives carried the most weight with him.
134 Uncertainties about the TEGA franchise rules may have been one factor; certainly there were contemporaneous records of Mr Forbes’s accountants, Mr Stanley and Mr Goodrick, which support this. Another may have been the fact that his son, Rodney, was also going to be driving with the team. Rodney Forbes was not considered by anyone involved to be ranked with Mr Lowndes as a champion driver. The fact that he was or might be a second driver in the team may have acted as a disincentive to Ford to sponsor the team. Natural reticence, which Mr Forbes showed, may have contributed. There was also the fact, made patent by numerous contemporaneous and subsequent documents, that Ford valued highly the combination of a winning manager, Mr Gibson and a winning driver, Mr Lowndes. Mr Forbes was of no real relevance to that combination, which was seen by Ford personnel involved as a combination which would attract public interest, especially from a youthful market, and the commercial benefits, which would flow from that.
135 Mr Lowndes and Ford were very pleased about Mr Gibson’s involvement. Numerous contemporaneous documents exhibited to the affidavit of Mr Battye show this clearly. They also reveal that Ford regarded Mr Gibson as a leading team manager. Something of the keenness of Mr Gibson, Mr Lowndes and Ford to be associated with the team is exemplified by the manner in which relevant indicia were presented to the public. See the example below of a piece of advertising, which is similar to many pieces of advertising material in evidence, all of which demonstrate the linking of the three names with relevant reputations, in the presentation of the new team to the public. Mr Forbes as owner of team assets, was of no particular relevance in this context, and Mr Gibson does not deserve any serious opprobrium for the way the initial presentation to the public was announced. This is because the arrangements were particularly complicated and not easily described in a press release intended to convey in simple terms that Mr Gibson would be managing a Ford team in which Mr Lowndes would be driving under a TEGA franchise owned by FCG but using cars and equipment owned by RPM. It is also because I am satisfied Mr Forbes had told Mr Gibson that he wished to maintain a low profile at that time.
136 The evidence showed that when Ford was finally apprised of the somewhat complicated arrangements whereby Mr Forbes, through his shareholding in RPM, owned the team’s assets such as cars and equipment and Mr Gibson, through his company FCG owned the TEGA franchise, Mr Polites, the chief person involved for Ford, was not unduly concerned. The matter was first drawn to the attention of Mr Marsden of Ford by Mr Forbes on 5 April 2001 and Mr Polites was aware of a possibility that Mr Gibson and Mr Watson might buy back the team from RPM in the third quarter of 2001. The only matter about which Mr Polites eventually required assurance was that Ford sponsorship monies were not being utilised for the purposes of Rodney Forbes’s car. RPM was eventually incorporated into the livery worn by Mr Lowndes on the upper forearms, together with the other indicia shown on the body of the livery, in the example above. It also should be noted in the example of Mr Lowndes’s livery shown above, there is a device of a stylised "G" with an arrow pointing leftwards into the stylised letter. This may be an unregistered trade mark when used this way. In any event the use of the device (with or without the words or mark ‘GIBSON MOTOR SPORT’ was not at this stage the subject of any written licence to use, in favour of either RPM or GMM although the evidence indicated Mr Gibson (or FCG) whoever owns the device, acquiesced in GMM’s use of the device.
Driver Agreement between Mr Lowndes and RPM
137 Mr Lowndes (and Craig Lowndes Pty Ltd) entered into an agreement on 4 January 2000 with the corporate predecessor to RPM (‘Mr Lowndes’s driver agreement with RPM’), which inter alia contained the following relevant clauses:
‘(RPM) OBLIGATION
The team shall ensure that Fred Gibson shall be involved actively in the management of the Team and shall act as Team Principal. The Team shall engage and assign to the Car allocated to the Driver competent and professional staff and consultants in relation to preparation of the Car to be driven by the Driver. The Team shall ensure that the Car provided to the Driver is of the highest possible technical standard and shall be the most competitive car the Team is capable of providing to the Driver for his use during the Championship in the Season. This clause shall be paramount to the extent that any provision in this Agreement that is inconsistent with this clause shall be read down accordingly.
(clause 10.6)
TERM AND REVIEW
The term of this Agreement is three years commencing at midnight on 1 January 2001 and expiring at midnight on 31 December 2003.
(clause 14.1)
Subject to clause 14.3 this Agreement may be renewed for a further period of one year commencing at midnight on 1 January 2004 and expiring at midnight on 31 December 2004. Subject to clause 14.3, the renewal of this Agreement shall be conditional upon the agreement of the Company, the Driver and ACN on such terms and conditions as may be agreed between the Parties.
(clause 14.2)
The Parties agree that there shall be a review of the compliance by the Parties of the terms and conditions of this Agreement and of the performance of the Team at Races in the Championship which review is to be carried out by the Review Team prior to the expiry of the third quarter of 2002. In the event of the Review Team failing to agree unanimously that the terms and conditions of this Agreement have been complied with by the Parties and the performance of the Team at Races in the Championship has been satisfactory this Agreement shall determine at midnight on 31 December 2002.
(clause 14.3).
. . .
TERMINATION
Either the Company or ACN shall be entitled to terminate this Agreement by written notice upon the happening of any of the following events:
(i) the other party failing to remedy a material breach of this Agreement within 21 days after receiving a written notice specifying the breach and requiring its remedy;
(ii) the other party persistently being in material breach of this Agreement and for this purpose "persistently" means the third occasion upon which the other party has received a written notice under (i) above notwithstanding that it or he has on the previous two occasions remedied the relevant breach in time;
(Clause 15.1)
The Company shall be entitled to terminate this Agreement forthwith and without notice on the happening of an Event of Default.
(Clause 15.2)
Any termination of this Agreement shall be without prejudice to any other remedy or right available to FGM, the Company or the Driver. The parties agree that in the event of termination of this Agreement the Team may liquidate any existing stock held and otherwise comply with existing contracts subject otherwise to its obligations to the Driver and the Company pursuant to this Agreement.
(Clause 15.3)
EVENT OF DEFAULT
An Event of Default occurs if:
. . .
Fred Gibson ceases to be involved actively in the management of the Team or ceases to be Team Principal and a replacement person acceptable to the Driver cannot be appointed within a reasonable time.’
(clause 16.l)
Any variation of any term was required to be in writing signed by both parties and any waiver was required to be in writing signed by the party to be bound by the waiver. It should also be noted that ‘season’ was defined as ‘the period from and including 1 February to and including the last race of the Championships (also defined) of each year of the agreement.’ It is likely that Mr Lowndes knew when he signed this agreement that neither Mr Gibson nor FCG owned the team assets such as cars and related equipment.
138 The relevant provisions concerning marketing are set out in paragraph [157] below. The background to and sequence of the agreements into which Mr Lowndes entered were dealt with in the evidence given by Mr Watson and also in the evidence given by Mr Battye. As Mr Lowndes’s manager and adviser, Mr Watson agreed he thought the best course of action for Mr Lowndes was to be ‘contracted to Ford and be effectively subcontracted out to a team.’ Mr Watson said ‘Ford would support Craig in whatever team he decided was best for him and once we’d explored the teams that were available to put him.’
139 On 11 January 2001 Mr Gibson and Mr Forbes met in Sydney with Mr Gibson’s accountant Mr Kinchington and discussed a note of Mr Kinchington’s styled Summary of Points, for what Mr Gibson described in his evidence as ‘. . . the sort of working relationship we (he and Mr Forbes) can put together.’ It was then made clear to Mr Forbes again that Mr Gibson was not willing to take up a shareholding in RPM. Mr Forbes was disappointed with this. The Summary of Points made the following suggestions about the necessary structural arrangements:
‘The following summary is a list of suggested points that I consider should form the basis of the working operations of the proposed MOTOR SPORT team owned by Bob Forbes (hereafter referred to as "Coy A") and F.C. Gibson Pty Ltd (hereafter referred to as FCG).
• FCG owns the franchise in own right.
• FCG contracts with Coy A to manage operations of MOTOR SPORT team for a period of five (5) years in return for a base fee of $250,000 pa plus 7% of gross business income.
• Fred Gibson agrees to allow Coy A to use the name "Gibson Motor Sport" as a trading name during the period of the management contract.
• . . .
• Fred Gibson NOT to be a director or shareholder of Coy A
• Coy A contracts all sponsorship etc outside work and retains prize monies.
Marketing Company –
There is to be a three way split of shareholding and directorships between Bob Forbes, Fred Gibson and Craig Lowndes’ manager. A percentage of sales revenue is to be distributed to Craig Lowndes and to the MOTOR SPORT team.’
140 It can also be noted that Mr Kinchington also suggested there be a ‘penalty pay-out clause . . . if management contract is terminated by Coy A . . .within five (5) years’. This suggestion does not seem to have been pursued by Mr Gibson in later discussions with Mr Forbes. The applicant served an affidavit from Mr Kinchington then chose not to call him to give evidence. In accordance with the principles of Jones v Dunkel (1959) 101 CLR 29 (‘Jones v Dunkel’) I am entitled to draw the inference his evidence would not have assisted the applicants, particularly Mr Gibson, in relation to the claim that there was an overarching joint venture agreement.
141 Despite still trying to agree the basis of a ‘working relationship’ in mid January 2001, Mr Gibson went ahead in January undertaking tasks as Team Principal and consented in early February to the separate merchandising company using the ‘GIBSON MOTOR SPORT’ name as part of its corporate name and using the words with or without the stylised "G" device as a name or mark to be applied to goods for sale. As an example of early tasks, on 15 January 2001 Mr Gibson paid the wages of the team’s staff, for which he was later reimbursed by RPM. Mr Forbes described this conduct in his oral evidence as ‘unnecessary.’
142 Also, during January 2001, Mr Watson and his staff undertook various tasks in connection with producing a range of merchandise and a catalogue. The separate merchandising company, the first applicant, was incorporated on 6 February 2001.
143 There was some evidence that by 13 February 2001 Mr Forbes developed a degree of anxiety about the way in which the team had commenced in a rush. In his first major affidavit sworn in this proceeding he gave the following evidence:
‘In or about the period from late February to early April I became increasingly concerned about a number of matters relating to the operation of the team. In particular, I was concerned about the finances and financial management of the team. The basis for these concerns were Goodrick’s observations after having attended the workshop in February and the fact that despite much assurance from Watson about sponsorship he had not come up with anything concrete.’
144 Mr Forbes had Mr Goodrick (a qualified accountant from Mr Forbes’s accounting firm, Stanley and Williamson) attend Mr Gibson’s premises on 6 February 2001 after which Mr Goodrick identified a number of matters for attention. Mr Goodrick noted that Mr Gibson requested periodic visits by Mr Goodrick to review how the affairs of the company were progressing. There was nothing particularly alarming in Mr Goodrick’s report. It was a thorough report indicating that attention to certain details would improve accounting procedures. Given that this was a new business and RPM, the owner, was located in Sydney, the report does not raise any inference that Mr Gibson was unable to undertake his duties including financial management duties as Team Principal. On 13 February 2001, Mr Forbes told Mr Stanley not to proceed with him becoming a shareholder or consenting to be a director of GMM although neither Mr Watson nor Mr Gibson were told of that decision then.
145 On 14 February 2001 Mr Gibson and Mr Watson met with Mr Battye. He had, by this stage, agreed to act both for Mr Lowndes and the team subject to a right to discontinue acting for the team if any conflict arose. Mr Battye had prepared an agenda for discussion. He gave extensive evidence about this meeting both in his affidavit and in oral evidence. Mr Battye agreed in cross-examination that his affidavit was based upon what Mr Rose, a solicitor acting for Mr Forbes, considered important from the respondent’s point of view ‘but he indicated he was nevertheless conscious of his obligations as an officer of the court.’
146 He said Mr Gibson and Mr Watson explained many of the complexities of the arrangements to him on 14 February 2001. Mr Battye agreed that contractual matters were being explained ‘. . . so that it could then be documented, whether by me or someone else.’ Mr Battye agreed that there was discussion at this meeting that commissions on sponsorship could be charged. He also agreed in cross-examination that an assertion he made in his affidavit that Mr Gibson said to him on 14 February ‘We haven’t agreed on the money for me or Noel’ (which assertion Mr Gibson and Mr Watson deny), could only have had the sense that no documentation in relation to contracts had been prepared, because he does not recollect any statement about a failure to agree on sums to be paid. In context, the statement seems to me, in any event, to be no more than a reference to the fact that Mr Gibson and Mr Watson did not wish to become shareholders in RPM and preferred to work under individual contracts pursuant to which they would be paid. This was a clear alternative to earning joint profits through joint ownership and control of RPM.
147 The evidence of Mr Battye in respect of this meeting is a further piece of evidence supporting the finding that no joint venture agreement was concluded on 7 December 2000, but that certain aspects of individual contract arrangements had been agreed, such as that Mr Gibson would be remunerated at a figure to be agreed for acting as team principal and Mr Watson would be paid commissions on sponsorships which he obtained. It should be noted that Mr Gibson gave evidence that Mr Battye’s account of the tenor and complexity of the meeting was not perfectly accurate.
148 The next question to be determined is whether a joint venture agreement was concluded (or confirmed) at a meeting on 26 February 2001 (‘26 February’). Mr Forbes, Mr Gibson and Mr Watson met on 26 February 2001 and although Mr Forbes expressed satisfaction about the team’s progress to that date, he was concerned to discuss the finances of the team, how much money was needed to support the team and the precise contractual arrangements which needed to be put in place.
149 Mr Forbes has prepared a document for this meeting and it is worth quoting material parts of it:
‘SUGGESTED FINANCIAL ARRANGEMENTS BETWEEN FRED GIBSON, BOB FORBES AND ALAN HEAPHY AT RACE CAR PREPARATION & MANAGEMENT PTY LTD TRADING AS GIBSON MOTOR SPORT
Overview
. . .
Most of the financial gains will only come when the Business and TEGA Franchises are sold.
I suggest that we should all be confident that we will progress beyond the Ford review period at the end of next year and that we sell or restructure the business at the and of the 5 year Ford contract period and that we all share in the profit which has been made at that time.
. . .
Structure
Fred to be Managing Director of RPM P/L t/as Gibson Motor Sport. Alan to be General Manager Motor Sport of Gibson Motor Sport.
The Ford Contract should be in the name of F.C. Gibson Pty Ltd and a separate agreement be drawn up between F.C. Gibson Pty Ltd and RPM p/L for the services being provided by RPM P/L.
This agreement should provide for all of the funds to be passed on to RPM P/L within 7 days of receipt by F.C. Gibson Pty Ltd (less FID and bank charges).
All other funds (sponsorship and the like) are to be paid directly to RPM P/L and the agreement should also reflect this.
Fred having the Contract directly with Ford reflects what Ford believe is actually happening (as I don’t think Fred included my suggestion note to Geoff Polites re having an early January meeting to discuss our structure when he countersigned Geoff’s one page fax).
Also, having the Ford Contract directly with Fred (F.C. Gibson Pty Ltd) will obviate any of the problems that may arise from TEGA once the new Teams Agreement is in place.
Financial
. . .
Bob will leave the original agreed capital in the business (final amount to be determined) and Bob will not charge interest on the agreed capital. The interest saved will contribute to the cost of running Rodney’s car.
Wages and Profit Split
During the period Fred Gibson and Alan are to receive fair and reasonable wages for their employment plus all bona fide expenses and, naturally, the use of the cars being provided by Ford.
The net profit from the business will be divided up in the following percentages:
Fred %
Bob %
Alan %
The same percentages would be used when splitting up the profits from the TEGA Franchise. This profit will be a capital profit in the hands of F.C. Gibson Pty Ltd.
The payment times of the profit would need to be discussed between the partners at the end of each financial year. I currently envisage that we may not be able to distribute the profit each year as we may want to leave it in the company to invest in operating plant and equipment eg. to purchase a test rig, to set up a paint and panel shop, to upgrade dynos, etc.
However, should there be sufficient cash flow available due to the securing of significant sponsorship or increased funding from Ford it may make the cash flow such that a payment of the profit split may be made at the end of each financial year.
. . .’
150 Mr Gibson gave the following affidavit evidence about this meeting
‘Mr Forbes read through the document (the document prepared beforehand which Mr Forbes brought to the meeting, (some of which is extracted above)) out loud and spoke about my taking a shareholding in RPM again. He said "We have got to discuss your taking a shareholding in RPM and take less by way of an annual fee." I said, "We’ve been through this before with Phillip (Kinchington) and a shareholding does not suit me. I’d just like to be getting an annual fee." Mr Forbes said, "It’s better if we keep the money in RPM and divide it up at the end. Most of the financial gains will come when the business and the franchise are sold. At the end of the 5 year period there will be substantial gains in plant and equipment." I said, "No, Bob, I want to draw a fee. I need a yearly income. A small shareholding does not suit me. End of story." Mr Forbes said, "What do you think your annual fee should be?" I said, "Bob, whatever’s fair." Mr Forbes said, "Noel, what do you think Fred’s worth?" Mr Watson said, "I think he’s worth $350,000 a year." Mr Forbes said, "That’s a bit much isn’t it? If I offered you 20% of the company would you take a lower annual fee?" I said words to the effect that "I’ve said before that a small shareholding like that doesn’t suit." I asked Mr Forbes words to the effect that "What do you think I’m worth?" Mr Forbes said "$150,000." I said, "That’s ridiculous Bob. We’re paying $120,000 to Alan Heaphy and you want me to agree to $150,000. Just be fair about this Bob." Mr Watson said "We’re using his name for God’s sake. It’s worth every bit of $350,000." Mr Forbes then said, "Well, how does $250,000 sound?" Mr Watson said, "How do you feel about that Fred?" I said, "I’m happy if everyone else is happy and thinks it’s fair."’
151 Mr Watson’s evidence corroborates Mr Gibson on this issue. Mr Watson’s affidavit evidence in respect of the meeting on 26 February 2000 was as follows:
‘Mr Forbes said to Mr Gibson, "Can I just explain to you about this shareholding in RPM again. I want to discuss the long-term benefit to you if you don’t take up your $250,000 a year and leave it in the business. I anticipate there will be capital growth in RPM of about $750,000 to $1 million per year. If you took a percentage profit share at the end of the venture, your share at the end of year 5 could be equivalent to $300,000 per annum." Mr Gibson said, "I can’t wait five years. I need regular cash flow." Mr Forbes said, "Then you could take $150,000 by way of a fee as well as a smaller share of the profit at the end of the five years." Mr Gibson said, "No, I’d prefer to just take a fee. I’ll get my profit when I sell the TEGA franchise."’
152 Leaving aside the major contest over whether there was a joint venture agreement, the only material contest between Mr Forbes and Mr Gibson in relation to the individual agreement that RPM pay Mr Gibson or his nominee ‘an annual fee’ for management services, rather than Mr Gibson taking up a shareholding in RPM, is that Mr Forbes states the figure of $250,000 per annum was raised on 26 February 2001, but finally agreed on 18 May 2001, the date upon which Mr Gibson agreed to abandon a claim to a percentage of gross profits.
153 Mr Watson was constrained by his management agreement with Mr Lowndes. Whilst no written management agreement was entered into between Mr Watson and Mr Lowndes until 20 June 2001, both Mr Watson and Mr Lowndes gave uncontested evidence that Mr Lowndes insisted that Mr Watson who was acting as his manager at the time refrain from any ownership interest in any motorcar racing team for which Mr Lowndes raced. Mr Lowndes’s insistence arose because of his past experiences with Holden. He was determined his manager, Mr Watson, should remain independent of any team.
154 Mr Watson to his credit was completely candid with Mr Forbes on 7 December 2000 about this and declined to be part of any joint undertaking in respect of owning team assets. On 7 December 2000, Mr Watson explained to Mr Forbes that he would undertake two roles, without venturing any capital. He would arrange sponsorship, on a commission fee basis and he would be responsible for marketing, intended to capitalise on Mr Lowndes’s celebrity and the team’s successes.
155 Mr Watson was the source of the idea that a separate marketing or merchandising company be set up for managing the commercial exploitation of the team’s successes and that percentage shares be taken up by each of Mr Forbes, Mr Gibson and him in any special purpose company set up for the purpose. However, he was also to be paid for his services separately. In support of the claim for a joint venture, it was argued that Mr Watson used his best efforts to procure Mr Lowndes as a driver, and to procure Ford as a sponsor and to secure other sponsors and to set up a merchandising company. Before turning to the arrangements in respect of each of those matters, the merchandising company arrangements need to be considered in more detail.
Gibson Motorsport Merchandise Pty Ltd (‘GMM’)
156 On 7 December 2000 Mr Watson made the suggestion on more than one occasion that merchandising should be conducted through a separate company in which each of the three protagonists could have a share. He gave evidence that on that occasion he said:
‘I will run it (ie. the merchandising company) and get my people involved to pull it together on a net cost basis. I can run the whole thing internally . . . We need to appoint a manager as well as an administration person. I would recommend Tim Walker as manager. The industry rate is about $92,000 for a manager . . . As to my own charges, any time I spend supervising the operations of the company it would charged at the manager’s rate.’
The costs of setting up a separate
merchandising company were also discussed at that meeting, both before and after
Mr Stanley arrived.
Mr Watson also raised Mr Lowndes’s requirement that
he be paid 15% of the wholesale price of any products sold by reference
to his
name, indicia or celebrity, as a royalty in respect of such sales. Mr Watson
gave evidence he said to the meeting ‘It’s on a pay-as-you-go
basis. We only pay once merchandise has been sold. The merchandising company
could pay the team 15%
so the team could on-pay Craig his royalties.’
Mr Watson also indicated his view that he thought in the first year the
separate merchandising company would ‘generate $300,000-$400,000
profit.’
157 The arrangements between Mr Forbes and GMM were never satisfactorily concluded. Whilst the basis for setting up joint shareholdings in GMM had been discussed between the protagonists, Mr Forbes never signed a consent form to become a director and never took up a shareholding. There was evidence of Mr Watson consulting with Mr Forbes about GMM undertaking a lease of a pantechnicon and Mr Stanley’s accountancy firm obtained a tax ruling on the GST implications of the acquisition.
158 Mr Lowndes’s management agreement with Mr Watson, the parties to which were Craig Lowndes Promotions Pty Ltd and Watson & Associates (Vic) Pty Ltd which was formalised in mid-June 2001, described Mr Watson’s services as follows:
‘Watson agrees to use its best efforts to promote and advance Lowndes professional career and to advise Lowndes in all aspects of his professional career including but not limited to:
(i) driver contract negotiations;
(ii) personal endorsement contracts;
(iii) charity appearances;
(iv) monitor and evaluate requests for donations and/or from charities;
(v) development, merchandising and marketing of apparel and merchandise;
(vi) utilisation of the Worldwide Web;
(vii) management of Lowndes’ diary of appearances and team and other obligations;
(viii) development of a strategic direction for Lowndes to enhance his income earning potential; and
(ix) advise generally and in response to requests from Promotions and/or Lowndes.
(Clause 3.1)
Watson agrees that he has no authority to bind Promotions and/or Related Entity and/or Lowndes to any sponsorship Agreement without their agreement.
(Clause 3.2)’
It should also be noted Mr Watson was to be paid percentage commission fees on sponsorships which he arranged for Mr Lowndes. Mr Watson referred in evidence to the obvious synergy between his management agreement with Mr Lowndes and his management agreement with RPM.
159 The agreement was terminable by either party on one month’s notice. Mr Lowndes gave evidence that Mr Watson terminated that agreement in or around mid-November 2001. Neither Mr Watson, nor any one of his related companies, was given any authorisation under that agreement to use, for the purposes of sale, any of the indicia associated with Mr Lowndes or his celebrity.
160 Mr Lowndes’s driver agreement with Ford signed on 20 December 2000, the parties to which were Craig Andrew Lowndes, Craig Lowndes Pty Ltd and Ford, contained the following provisions concerning merchandising:
‘Merchandising
Ford agrees that the Company (Craig Lowndes Pty Ltd) and the Driver may develop their own merchandising, memorabilia, collectibles and apparel range of products utilising inter alia, the Ford logo. The Company and the Driver will liaise with Ford in the use of the Ford logo particularly in terms of its location and prominence. Ford agrees that it will not unreasonably withhold its consent to the use of the logo by the Company and/or the Driver. Ford agrees that the Company and the Driver may use its logo without cost.’
(Clause 4.4)
161 Mr Lowndes’s driver agreement with RPM signed on 4 January 2001, contained the following relevant clauses concerning marketing:
‘Marketing
The Company (Craig Lowndes Pty Ltd) and the Driver jointly and severally hereby authorise (RPM) to use or utilise the Driver’s name, signature, photograph, likeness, reputation and identity on any number of occasions for commercial purposes including but not limited to licensing, endorsements, advertising, promotions, merchandising including without limitation apparel, memorabilia and collectables provided that the programme of advertising, promotion, merchandising, apparel, memorabilia and collectables must be developed in conjunction with the Company who shall authorise use of the Driver’s intellectual property such authorisation not being unreasonably withheld.
(Clause 5.1)
Subject to the consent required by clause 5.1, the Company and the Driver hereby jointly and severally irrevocably assign to (RPM) during the life of this Agreement all and any copyright or other rights whatsoever arising out of any use or utilisation of the Driver’s name, signature, photograph, likeness, reputation and identity pursuant to this clause provided that nothing in this sub-clause serves to assign or otherwise convey any right, title or interest in the use or ownership of the Driver’s domain name or site on the world wide web.
(Clause 5.2)
Nothing in this clause 5 shall prevent either the Company or the Driver or any other Company of which the Driver or Natalie Lowndes may be a director and/or shareholder from allowing or authorising or licensing any person, corporation or entity to use or utilise the Driver’s name, signature, photograph, likeness, reputation or identity for commercial purposes including but not limited to licensing, endorsements, advertising, promotions, merchandising including without limitation apparel, memorabilia and collectables except where such use or utilisation would conflict with or prejudice the name, reputation, income, image, products or services of the Team or of any sponsors of the Team or would otherwise bring the reputation of the Team or motor sport into disrepute.
(Clause 5.3)
(RPM) assigns to the Company during the life of this Agreement all and any copyright or other rights whatsoever arising out of any use or utilisation of (RPM) or the Team’s name, image, reputation and identity and any photograph or likeness of any Race Car of the Team without cost. The Driver and the Company agree that in the event of them utilising the Team’s name, image, reputation and identity or any photograph or likeness of any Race Car of the Team they will account to the Team in the amount of 15% of the net income received by them for such utilisation.
(Clause 5.4)
(RPM) will pay to the Company 15% of the manufactured wholesale purchase price of all Team merchandises, memorabilia, apparel and collectables ("its products") whether or not the Driver’s name, signature, photograph, likeness or identity appears. (RPM) shall report to the Company on a quarterly basis, all details in relation to sales of its products and shall account to the Company in payment of the percentage due in respect thereof.
(Clause 5.5)
The Company and/or the Driver retain ownership of their intellectual property.’
(Clause 5.6)
162 There is no contest that GMM paid royalties of $53,114.82 to Craig Lowndes Pty Ltd on 31 July 2001 and $68,670.16 was likewise paid on 31 October 2001 in respect of the July/September quarter. It is also not in contest that neither Mr Lowndes nor Craig Lowndes Pty Ltd, has received any royalties from either RPM or GMM for sales in the period 1 October 2001 until the cessation of trading.
Mr Gibson’s arrangements in relation to the Lowndes/Ford team
163 The evidence is that by and on 26 February 2001, Mr Gibson agreed to the following for himself in relation to the Lowndes/Ford team:
(i) a lease agreement between Angora Towers Pty Ltd (a company of Mr Gibson’s) as lessor and RPM as lessee of the workshop (said to be ‘state of the art’) used for the race team. There is no contest that the rent payable was a commercial rent, being $160,000 per annum which was $10,000 more than had been paid as rent by Bronzco during the previous year;
(ii) a service agreement between RPM, Synarby Pty Ltd (the seventh applicant being a company under the control of Mr Gibson) for the retention of Mr Gibson’s services as ‘Team Principal’ for an annual free of $250,000. There is a claim for the balance of the 2001 fee and a claim for damages for wrongful termination, a topic to which I shall return. It can be noted the implied duration of the services agreement must be consistent with the Lowndes/RPM Driver Agreement and Mr Gibson agreed in cross-examination that the duration of the team meant the duration of Mr Lowndes’s involvement. The respondents’ defence contained an averment that the Gibson Services Agreement ‘was limited in duration to the period for which Lowndes would be contractually bound to drive for RPM;
(iii) FCG, the fifth applicant owned the Level 1 TEGA Franchise Agreement (despite an earlier suggestion from Mr Forbes that the ownership reflect percentage ‘shares’ between them) which the team used and which he resold at a capital gain of $250,000 without reference to Mr Forbes. He agreed that earnings in respect of the franchise be passed on to RPM, to assist in funding the race team;
(iv) Mr Gibson authorised RPM to use his business name, free of any licence fee; and
(v) Mr Gibson had a share in the first applicant, GMM.
164 The facts show Mr Gibson did not wish to be part of any overarching joint undertaking or jointly owned motorcar racing team. In support of the claim for a joint venture agreement, it was argued that the ‘assets’ contributed by Mr Gibson to the joint venture were his name (ie. his business name), his workshop (ie. the workshop of Angora Towers Pty Ltd), (securing) the TEGA franchise which was the fifth applicant’s, and (facilitating) Mr Dumbrell selling the team to Mr Forbes on behalf of RPM. The evidence indicates Mr Gibson’s licensing of his business name free of charge was taken into account when Mr Forbes and he agreed his annual fee of $250,000 from RPM, which owned the team which he was managing. The evidence is that Mr Gibson (through his company, Angora Towers Pty Ltd) received a commercial rent for the workshop. The evidence is that Mr Gibson received a capital gain when FCG sold the TEGA franchise, a step he took without consulting Mr Forbes, and finally Mr Dumbrell was a willing, and even anxious, vendor who did not need to be persuaded by Mr Gibson to sell to Mr Forbes. It could not be said any one of these assets was a ‘contribution’ to a joint venture, particularly as each tangible item involved reservation of all Mr Gibson’s rights as owner (or the ownership rights of companies under his control) – his factory, his business name and the TEGA franchise all remained his to deal with and to make profits or fees from, either in his own name or in a related company, including earning such profits or fees from the race team itself.
165 Mr Gibson preferred to earn an annual fee and to receive various other sums (such as the factory lease fees, through Angora Towers Pty Ltd, and the capital gain on the sale of the TEGA franchise) individually rather than through ‘a joint undertaking with a view to mutual profit.’ He did not contribute capital to the company owing the team assets; he positively wanted to receive the individual payments referred to for his property and services rather than realise the value of such ‘contributions’ later on upon an ultimate disposition of team assets. (cf Ravinder v Krizaic).
166 He was prepared to allow earnings from the TEGA franchise to help fund RPM and he was prepared to authorise use of his business name without a licence fee, at least until he ‘fell out’ with Mr Forbes, but RPM was the source of both the lease fees payable to his company, Angora Towers Pty Ltd and his annual fee of $250,000 paid to Synarby Pty Ltd. Furthermore, it is clear from the terms of the TEGA standard Franchise Agreement that prize money and other earnings from the TEGA franchise were intended for the benefit of a team ‘running’ ie. paying for a driver; there is no intention evinced in that agreement that a person who managed a team such as Mr Gibson as distinct from a person financing it, such as RPM, should take such earnings for himself. In my view, neither of those matters evidence a joint venture agreement, particularly when there is such clear evidence that Mr Gibson positively did not want to undertake any of the obligations, risks or liabilities, which would have been associated with a joint undertaking, and also declined to place himself in a position to take a profit share on realisation of the team’s assets.
Mr Watson’s arrangements in relation to the Lowndes/Ford team
167 The evidence is that by and on 26 February 2001 Mr Watson had agreed to the following for himself in respect of the Lowndes/Ford team:
(i) a management agreement between Watson & Associates (Vic) Pty Ltd, a company under his control, and Mr Lowndes for which Mr Watson’s commanded a fee for management services and possible commission fees on sponsorships;
(ii) an agreement between Mr Watson and RPM pursuant to which he was to receive a commission fee (through a nominee company) in respect of sponsorships paid to RPM which he secured or obtained (a topic to which I will return);
(iii) a management fee in respect of managing the separate merchandising company; and
(iv) Mr Watson had a share in the first applicant, GMM.
168 The facts show that Mr Watson did not wish to be part of any overarching joint undertaking or jointly owned motorcar racing team and was in fact constrained from such ownership by the term of his management agreement with Mr Lowndes. Like Mr Gibson, Mr Watson preferred to earn fees and commissions individually rather than through ‘a joint undertaking with a view to a mutual profit.’ His ‘procuring of Mr Lowndes as driver’ for the team is more correctly characterised as part of his management tasks for Mr Lowndes for which he was paid by Mr Lowndes, rather than as a ‘contribution’ to a joint venture. Mr Lowndes was a free agent, employing Mr Watson, not the other way round, and Mr Lowndes could choose to drive with the team or not, irrespective of Mr Watson’s advice.
169 Mr Watson’s procuring of sponsorships was not a ‘contribution’ to a joint venture. As I explain below, I reject Mr Forbes’s evidence that there was no agreement to pay commission on the initial Ford sponsorship procured by Mr Watson, as at 7 December 2001 (and confirmed on 26 February 2001). Accordingly, Mr Watson will be entitled to the commission, which he contends is owing to him in respect of obtaining that initial Ford sponsorship. Had Mr Watson ‘contributed’ the initial Ford sponsorship to the team, free of commission charges, to my mind such a contribution could have been a piece of evidence supporting a joint venture agreement.
170 Finally, the set up of the merchandising company was arranged separately and deliberately so, from the race team. The fact that royalties paid to Mr Lowndes were intended at one stage to be channelled through the team, with which he had his driving contract, does not derogate from the fact that mutual profits were intended to be enjoyed through GMM itself, rather than through an overarching joint venture.
171 Mr Forbes’s position stated and restated in his written and oral evidence was there was never an agreement between him, Mr Gibson and Mr Watson for an overarching joint venture agreement as pleaded and as contended for by the applicants.
172 In assessing the evidence, and rejecting the claims that either on 7 December 2000, or alternatively on 26 February 2001, a joint venture agreement was concluded, I have relied on the wide connotation given to the phrase ‘joint venture’ in United Dominions at [10] and have approached the main issue by asking whether there was agreement for a joint undertaking for mutual commercial gain.
173 I am satisfied to the requisite standard that each of Mr Watson and Mr Gibson expressly rejected an opportunity to be part of a possible overarching joint venture (or partnership) with Mr Forbes. Mr Watson rejected the opportunity on 7 December 2000 and Mr Forbes never sought to pursue it once it had been explained to him by Mr Watson that Mr Watson’s involvement with the team was constrained by an overriding obligation to Mr Lowndes to avoid conflict between his obligations as Mr Lowndes’s manager and any role obtaining sponsorships (for which he sought to be paid a commission) and managing merchandising (for which he sought a fee and a profit share). Mr Gibson rejected the opportunity on 26 February 2001 as detailed above, preferring to contribute no capital, take no risks in respect of the entity owning the assets such as cars, and to be paid individually, pursuant to separate contracts, for his various services to the team qua landlord and manager, and to manage and realise for himself (or a company of his), any asset which he permitted the team to use, namely, his business name and the TEGA franchise.
174 Each of Mr Watson and Mr Gibson was offered joint control over the entity, which would conduct and take responsibility for, the motor sport business. Each declined. Mr Gibson declined after showing initial interest but reserving the right to discuss the matter further with advisers. Each was offered mutual commercial gain through the mechanism of sharing the profits or capital gain when the assets of the entity conducting the motor sport business were eventually sold. Each declined.
175 The fact that each agreed to exercise joint control of, and to share profits in, the first applicant does not alter the position in respect of the claim that there was an overarching joint venture agreement. First, arrangements in relation to setting up GMM were never concluded formally. This is because the first applicant was not a necessary part of the motor sport business; it was a separate entity dedicated to achieving derivative, or colloquially speaking ‘piggy back’, profits through the exploitation of the reputation, and any relevant indicia thereof of the motor sport business and it was dependent on Mr Lowndes, through RPM or otherwise, authorising use of his name, other indicia of his and his personality for commercial purposes. Accordingly, there was no joint venture agreement, for a joint motor sport business, concluded (or confirmed) on 26 February.
176 The whole of the relevant evidence shows that there is a considerable air of artificiality in the claim that there was an overarching joint venture agreement concluded on or by 26 February for the following reasons:
1. Assets used for the team purposes were not severally or even jointly owned:
(i) There was no entity, whether joint venture, company, partnership, trust or agency to which each of Mr Gibson, Mr Watson or Mr Forbes (or companies under their control) contributed capital or made other contributions as alleged;
(ii) Mr Forbes through his shareholding was the sole owner of RPM, the owner of the team assets such as cars and equipment;
(iii) Mr Gibson through FCG was the sole owner of the business name, GIBSON MOTOR SPORT, and his authorisation of its use by RPM without a fee was referred to when he accepted an annual management ‘services fee’ of $250,000;
(iv) Mr Gibson (through one of his companies) was the sole owner of the premises used by the team in respect of which he charged the team a commercial rate of rental; and
(v) Mr Gibson (through FCG) was the sole owner of the TEGA franchise, a capital asset.
2. Profits and gains of the team were to be allocated individually subject to individual contracts, rather than to be shared severally (or jointly) through a joint venture (or partnership):
(i) The separate company dedicated to merchandising was not an asset owned, even partly, by the team. It was a special purpose company in respect of which each of the principals was to have a one-third (1/3) share reflected in shares and directorships, entailing sharing as to one-third, that company’s costs, liabilities and profits or losses;
(ii) Mr Gibson chose to receive the ‘fruits’ of the race team by receipt of rental for his workshop, an annual management fee, a capital gain on the TEGA franchise and a percentage share of the profits in a separate merchandising company; and
(iii) Mr Watson chose to receive the ‘fruits’ of the race team by receipt of a commission on sponsorships he secured, a management fee for managing the separate merchandising company and a percentage share of the profits in that merchandising company.
In addition Mr Watson earned a management fee and commissions or sponsorships under his contractual arrangements with Mr Lowndes.
(3) There was no several (or joint) liability in respect of team assets:
(i) Mr Gibson (through Synarby Pty Ltd) was responsible for managing the race team pursuant to an oral management agreement;
(ii) Mr Gibson had no risk or liability in respect of RPM;
(iii) Mr Watson had no risk or liability in respect of RPM; and
(iv) Mr Forbes took the sole risk and liability in respect of RPM.
4. There was no community of interest in the purpose for which the team was set up:
(i) Mr Forbes was primarily interested in operating a successful team so that he could make a capital gain on the ultimate disposition of RPM. He also had an interest in placing his son, Rodney, in a TEGA team;
(ii) Mr Gibson was primarily interested in managing a successful team in order to receive rental for his premises (through Angora Towers Pty Ltd), management fees (through Synarby Pty Ltd) and a capital gain through FCG on the ultimate disposition of the TEGA franchise;
(iii) Mr Watson was primarily interested in Mr Forbes operating and Mr Gibson managing a successful team so that he could earn commission on sponsorships from RPM and earn management fees (through Noel Watson Associates) for managing the separate merchandising company and also so that he could earn an additional management fee and commission fees from Mr Lowndes pursuant to the management agreement between them; and
(iv) It was contemplated that each of Mr Forbes, Mr Gibson and Mr Watson had an interest in a profit share in the associated merchandising company.
Conclusions on joint venture agreement
177 On the facts of this case, there was no agreement on either of the dates contended for, for a joint undertaking for mutual commercial gain in a motor sport business. In passing, it should be mentioned that the applicants relied on a single instance use of the word ‘partner’ and a single instance of use of the word ‘venture’ by Mr Forbes in certain documents as evidencing a joint venture agreement. Such isolated uses by a non-lawyer cannot bear on the legal consequences of the facts as analysed in detail above.
178 To the extent that it was argued that conduct between 7 December 2000 and 26 February 2001 was conduct from which a joint venture agreement could be inferred, such conduct must be capable of providing all the essential elements of an express contract: Integrated Computer Services Pty Ltd v Digital Corp (Aust) Pty Ltd (1985) BPR 11,110 at 11,117 (per McHugh JA).
179 A joint venture as contended for would have required what is sometimes called ‘a suite of agreements.’ The parties all had their own advisers, accountants and lawyers. Dicta of Kirby P In Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 20 is apt for the facts here:
‘Courts are not well equipped, drawing on their own experience, to fill out the detail of such contracts (contracts between parties for a joint venture in the exploration of a coal mining lease) where the parties leave gaps in their own agreement. The fact that this may result in wasted time and money is a risk which parties to negotiation must always weigh up. Courts cannot enforce such agreements because they are incapable of judging where the negotiation on particular points would have taken the parties, acting bona fide but legitimately in their own interests.’
180 In fact the conduct between 7 December 2000 and 26 February 2001 was consistent with the individual contracts which each of Mr Gibson and Mr Watson preferred, rather than being conduct from which a joint undertaking for joint profits could be inferred. Such individual contracts were concluded as found above. This distinguishes the facts from a situation where a court may be more ready to imply terms because parties have ‘gone on with a contract’ as in Didymi Corp v Atlantic Lines and Navigation Co. Inc. [1988] 2 Lloyds Rep. 108.
181 Having determined, on the facts, that there was no joint venture agreement between Mr Gibson and Mr Watson and Mr Forbes or their respective companies, but that there was a concluded individual Gibson Services Agreement as described above, it becomes necessary to assess the alternative claims made by the applicants. I turn to consider the claims made under the Gibson Services Agreement. The applicants allege that pursuant to the joint venture agreement Mr Gibson’s nominee (which became Synarby Pty Ltd) entered into the Gibson Services Agreement to supply Mr Gibson’s services to RPM for which RPM would pay $250,000 per annum plus GST for so long as the Joint Venture Agreement continued. In the alternative there is a simple contract claim. That there was an oral services agreement between RPM and Synarby Pty Ltd (which was not collateral to any overarching joint venture agreement) is admitted by the respondents to have been concluded on 7 December 2000, the relevant terms of which became that Mr Gibson (through Synarby Pty Ltd) was to be paid an annual fee of $250,000 for the provision of management services to RPM.
Duration of the Gibson Services Agreement
182 There was no express provision agreed for the duration of the Gibson Services Agreement. The duration must implicitly be for the period during which Mr Lowndes was contractually bound to drive for RPM. The respondents positively aver as much in their defence. The evidence does not support an assertion made on behalf of the applicants (in the context of the joint venture agreement claim) that the team could have continued even if Mr Lowndes left. When Mr Gibson gave oral evidence the following exchange took place in cross-examination:
‘Mr Jopling: So far as you were concerned, when you were talking about the duration of the team, you were talking about a duration that involved Mr Lowndes were you not?
Mr Gibson: Correct.’
183 Mr Watson agreed during his cross-examination that Mr Lowndes was ‘crucial to the success and longevity of the team.’ It is worth noting in this context that the lease agreement between RPM and Mr Gibson’s company, Angora Towers Pty Ltd, was a lease for two years with an option for a third year which was, as Mr Forbes said in evidence, ‘in line with the Lowndes driver agreement.’
184 The principal contention between the parties in respect of Mr Gibson’s fee (leaving aside the date upon which it was agreed) was whether RPM wrongfully repudiated the agreement or whether Mr Gibson repudiated it either because certain accounting irregularities constituted a material breach of the Gibson Services Agreement, or because his words and conduct on 10 October 2001 constituted a repudiation. It should be mentioned here that the respondents’ first contention in respect of the severing of relations between RPM and Synarby Pty Ltd was that the Gibson Services Agreement had broken down irretrievably and Mr Gibson made a free decision to discontinue in his role as Team Principal. I reject that submission as inconsistent with the evidence. A considerable volume of evidence showed that, but for Mr Forbes’s actions to exert financial control and the inevitable friction that generated, the team was functioning properly. As it was alleged by the respondents that Mr Gibson repudiated the agreement, it was submitted he was not entitled to any damages arising out of the termination of his contractual services. An alternative argument was also put. This was that if Mr Forbes terminated the agreement, he did so on notice said to be constituted by his proposal made on 10 October 2001 to appoint a business and finance manager, to whom Mr Gibson would report. It was submitted that 30 days’ notice was reasonable notice having regard to the termination provisions in the consent to use the business name.
Ending of Gibson Services Agreement between Synarby Pty Ltd and RPM
185 The evidence as a whole, demonstrated that each of Mr Forbes and Mr Gibson became disenchanted over time with the motorcar racing team and the role which each sought to perform in respect of that team.
186 For Mr Forbes’s part, the evidence showed an increasing level of dissatisfaction with Mr Gibson as team principal. The main focus was on alleged shortcomings of Mr Gibson in respect of financial management and in the transparency of dealings with a Mr Parsons.
187 Mr Gibson for his part, felt a level of frustration with the circumstances because converting the team from a ‘Holden" team to a ‘Ford’ team within a very short space of time was a considerable strain on him and the workshop staff. The evidence showed Ford and Mr Lowndes were extremely pleased with the early results of the team under Mr Gibson’s management. Mr Gibson’s strength was his ability to obtain racing results; he indicated in early February 2001 that he had no objection to Mr Forbes having specialist financial persons attending to or assisting with the financial management. The evidence indicated Mr Forbes arranged for Mr Goodrick to obtain financial information regularly from Mr Gibson on behalf of RPM.
188 Another matter of contention was the assertion that Mr Gibson insufficiently explained Mr Forbes’s role to both Ford and generally. Mr Forbes’s position on this changed; at first he was content to have no public profile. Once Ford had agreed to the sponsorship and once the TEGA franchise rules were clarified, he was content to take a much higher profile. The fact that Mr Gibson did not fully appreciate the nuances in Mr Forbes’s position as it shifted over time (between 26 February 2002 and 5 April 2002) is unsurprising. In any event by early April 2001 Ford was apprised of the complicated arrangements as described above.
189 There was a good deal of evidence that the motorcar racing ‘world’ was a field of human enterprise marked by gossip, rumour, insecurities and uncertainties which derived at least in part from the competitive efforts of drivers, especially champions to maintain their successes, by employing those whom they perceived to be the best manager, by attracting the best and biggest sponsors and the most significant share of earnings possible. Earnings included both direct earnings and those arising from commercial activities ‘piggybacking’ on their success and reputation as drivers. It is necessary to refer to this evidence because contracted arrangements for running a team appear, as here, to have always depended on, or been subject to, arrangements with any significant driver and his sponsors.
190 Mr Lowndes gave evidence he became somewhat dissatisfied with the team. Mr Lowndes’s complaints about Mr Gibson included a complaint that it was a source of annoyance to him that Mr Gibson did not attend ‘debriefings’ which Mr Lowndes liked to hold after an event. The evidence was that Mr Heaphy, Mr Gibson’s second-in-charge, attended. This source of annoyance to Mr Lowndes does not constitute a material breach by RPM of the driver agreement between it and Mr Lowndes. He gave evidence he was somewhat dissatisfied also about the reporting lines in the team. Despite evidence in his affidavit of these dissatisfactions with Mr Gibson, Mr Lowndes made it clear during cross-examination that he would not have sought to waive or vary his contractual arrangements with RPM had there been no dispute between Mr Forbes and Mr Gibson, even though he would have liked Mr Gibson to address some issues differently. He agreed Mr Gibson was always approachable and he was not denied any opportunity to take up any complaint he had with Mr Gibson.
191 Mr Lowndes gave evidence he was not aware of Mr Forbes’s role in the team until April 2001 when Mr Battye explained Mr Forbes’s role to him. This seems unlikely given the driver agreement with RPM which he signed on 4 January 2001. Mr Lowndes also gave evidence he was concerned about the confusion which arose because of lack of candour at the outset about Mr Forbes’s role and the uncertainty between June and September about whether Mr Gibson would ‘buy’ the team from Mr Forbes by acquisition of the shares in RPM. However, he agreed in cross-examination that such matters did not trouble him so long as there was stability in the team.
192 Mr Lowndes also gave evidence that once Mr Gibson left as team principal, Mr Heaphy managed the team and Mr Forbes acted as its financial controller and chief executive officer. From his point of view, he said Mr Forbes had been unable to replace Mr Gibson with ‘a top-level team principal’, a designation many witnesses agreed applied to Mr Gibson. Critically, he also gave evidence the team could not afford to run three cars, Mr Rodney Forbes’s car constituting a ‘third car’, in the sense that Mr Rodney Forbes was not an equivalent driver to Mr Crompton who was the other team driver. He stated in oral evidence that it was clear to him in 2002 ‘the Team couldn’t run properly three cars at a high level’. He also gave evidence he had never been happy having Rodney Forbes as a second driver because ‘he crashed at times . . .’ Mr Lowndes agreed the team was a ‘shambles’ when managed financially by Mr Forbes and run by Mr Heaphy. As well, there was some evidence Mr Lowndes’s driving was, at a certain point in late 2001, less than optimum, a proposition from which he did not entirely dissent.
193 In assessing who is to blame, if any one individual could be blamed for the complex concatenation of events, which led to the severing of arrangements between RPM and Mr Gibson in mid October 2001, it is necessary to consider Mr Forbes’s concerns with the team in greater detail. The evidence makes it plain these concerns did not all subsist all of the time; rather the concerns evolved and changed over the period February to October 2001 and they were not fully and candidly conveyed to Mr Gibson and Mr Watson until early September 2001.
194 Mr Gibson and Mr Watson met with Mr Forbes and Mr Forbes raised a concern about RPM paying Mr Gibson 7% of gross profits, a suggestion which had first been made by Mr Gibson’s accountant, Mr Kinchington, in January 2001. Mr Gibson gave evidence of a conversation at this meeting as follows:
‘Mr Forbes said (to Mr Gibson) "We need to talk about your fee and how it’s going to be paid. We haven’t discussed the 7% of team budget put forward by Phillip Kinchington." I said "Bob, if that’s a concern to you, I’ll waive it and just go for the $250,000. I want to be fair with all these dealings and it seems at present that you have a particular bee in your bonnet about our budget." Mr Forbes said, "That’s good then. We can settle on the $250,000." I said, "I thought we had already settled the $250,000."’
195 At that meeting Mr Gibson and Mr Watson say they responded to Mr Forbes’s concern about the teams budget by offering to buy the team from him, that is to take over the RPM assets, paying to Mr Forbes or his entities a fair sum in respect of such a transaction. Mr Forbes denies this.
196 Mr Gibson, Mr Watson and Mr Forbes met and Mr Forbes indicated he did not like the management style of the team and he raised two options for the future. The first option was that he would ask a person such as Mr Steve Horne to become ‘CEO to oversee the whole operation.’ His second option was selling the team back for the price which he had paid for it, $2.25 million, but he wanted any such purchase completed by 30 June 2001. Mr Gibson gave evidence that on 6 June 2001 he telephoned Mr Forbes to indicate he and Mr Watson wanted to purchase the team and Mr Forbes reiterated that he wanted any sale completed by 30 June 2001.
197 Subsequent discussions occurred about the proposal but there was no offer by 30 June 2001.
198 Again Mr Gibson, Mr Watson and Mr Forbes met and the topic of Mr Forbes selling the team to Mr Gibson and Mr Watson was discussed. Mr Gibson deposed that the price Mr Forbes wanted for the team was discussed and Mr Forbes stated he would pay the fees owed by the team to Mr Gibson and Mr Watson ‘but they will be added on to the purchase price of the business.’ Mr Forbes denies he ever raised the question of adding the outstanding fees to the purchase price. Mr Watson forwarded a letter to Mr Forbes after the meeting which contained the following:
‘Thank you for spending the time today to pin down some of the finer points of the proposed acquisition. Both Fred and I would like you to accept this letter as our formal expression of interest to proceed with the purchase subject to the appropriate terms and conditions being agreed and funding being put in place within the time frames we discussed.
. . .
During next week we will be discussing the purchase with our respective financial advisors and reviewing the company’s current status to ensure that the matter is brought to a swift conclusion.’
Mr Battye gave evidence, which I accept, that he suggested some of the drafting of this letter when Mr Watson consulted him about the draft and did so on instructions from Mr Watson.
199 Then on 6 September 2001, Mr Watson sent a letter by facsimile transmission to Mr Forbes which stated:
‘We acknowledge receipt of financial reports in respect of RPM prepared by your accountants Stanley & Williamson on 31 August, 2001. The reports are now with our respective accountants.
On the basis of the assets and liabilities disclosed in the reports and subject to preparation of a contract of sale, we are pleased to advise that we are now in a position to proceed with the acquisition of RPM.
We confirm the conditions we discussed at our meeting on 13 July, 2001 which were that you would transfer the shares in RPM upon receipt of payment of $2,225,000. Upon transfer of the shares we would own the business comprising all of the current contracts as well as the plant and equipment. We confirm that the current liabilities of RPM would be met by the new owners.
Our intention is to have a contract drawn, the purchase monies paid and shares transferred before the end of September 2001.’
200 There was no evidence of any financial arrangements in place between Mr Gibson, Mr Watson and their respective bankers. An affidavit had been filed on behalf of the applicants from Mr Rees Attwood, Mr Gibson’s banker. He was not called. In accordance with the principles in Jones v Dunkel, I am entitled to infer that his evidence would not have assisted on this issue.
7 September 2001 facsimile message
201 On 7 September 2000, Mr Forbes sent a facsimile message to each of Mr Gibson and Mr Watson as follows:
‘I refer to Noel’s letter faxed to me on 6 September 2001 concerning your proposal to acquire management of RPM. I wish to inform you that your proposal to acquire RPM and its business is rejected.
A number of issues have emerged concerning the Ford sponsorship and the financial management of RPM by Fred Gibson that are of extreme concern to me as the sole Director of RPM. Also of concern is the unauthorised use of the name Gibson Motor Sport in connection with the business of the Watson Group Australia.
As you are both aware, rights to that business name were acquired by RPM pursuant to the terms of Sale of Business Agreement dated 18 December 2000 between it and Gibson Motor Sport Pty Ltd. The circumstances in which that business name appears to have been transferred to F.C. Gibson Pty Ltd upon settlement of that sale has been referred to the company’s lawyers for further investigation and advice.
You can expect to receive further correspondence from me early next week in relation to this and other issues.’
202 Mr Forbes agreed in oral evidence that this was the first time he had given any written notice to Mr Watson and Mr Gibson of his dissatisfactions with their performance.
203 Mr Lowndes gave evidence on affidavit that he had concerns, which came to a head about the same time. On 11 September 2001 Mr Lowndes’s solicitor, Mr Battye, wrote to Mr Forbes at RPM raising issues concerning the solvency, the management and the contracts governing the arrangement between the team and Ford. It was clear from that letter that Mr Forbes had had a discussion with Phillip Battye about being dissatisfied with Mr Gibson’s management and it is not possible to determine the extent to which the letter was solely the initiative of Mr Battye or Mr Lowndes. Mr Lowndes characterised this letter in his evidence as Mr Battye attempting to see if Mr Lowndes could terminate his driver agreement with RPM. Mr Battye, however, gave oral evidence that Mr Lowndes had not indicated to him any dissatisfactions with Mr Gibson even as late as September 2001. In any event, I accept Mr Lowndes’s oral evidence that whatever quibbles he had about the team, he would not have sought to terminate his driver agreement or to vary it or waive any of its provisions, had there been no dispute between Mr Forbes and Mr Gibson.
Events after 7 September until 9 October 2001
204 Mr Forbes gave evidence that he met with Mr Polites of Ford together with Mr James Gibson, his solicitor, on 17 September 2001. Mr Forbes gave sworn evidence that he had arranged this meeting in order to discuss ‘what was presently happening in relation to the management and ownership of the team and RPM.’ Ford had known the details of the ownership of the team since early April 2001. Mr Forbes said he had discussed the various matters, which might be raised at the meeting, and Mr James Gibson had prepared a strategy paper for him on his instructions.
205 The strategy paper outlined an answer for Mr Forbes if Ford asked him questions about the reason for the meeting. The paper states that he, Mr Forbes hoped to achieve a business with an excellent sponsor, an excellent driver and first class management of the business. One of the prepared responses for Mr Forbes was as follows:
‘Well that’s the reason why I’m here I want to make sure that you Ford are happy and secure in the sponsorship of the team. I want to make sure that Craig Lowndes knows that he is supported and most importantly, I want to put a financial controller in the business to make sure that the administration and controls are first class. I am quite happy to continue to use Fred Gibson. I know that he has considerable reputation and has the confidence of Craig and provided I am satisfied that Fred is not making any false or inaccurate statements about the ownership of the business and that if he kept away from the financial management and I think he can concentrate on doing what he does best which is managing the racing team.’
Mr Forbes knew perfectly well that the statements which Mr Gibson made to Ford in the January/February period were sanctioned by him and Ford well knew the position by 5 April 2001.
206 The letter of Mr Forbes of 7 September 2001 was followed by a 4 page letter from Andersen Legal, solicitors for Mr Forbes, dated 19 September 2001, which set out in some detail complaints Mr Forbes had against Mr Gibson. There was a separate letter sent to Mr Watson. In essence, the letter from Andersen Legal raised four issues in respect of Mr Gibson: the Ford sponsorship, ownership of the name GIBSON MOTOR SPORT, the financial management of RPM and fees for Mr Gibson’s management services.
207 The complaint about the Ford Sponsorship was that Mr Gibson did not disclose to Ford he was acting on behalf of RPM when dealing with Ford on sponsorship issues, especially in the early days of the team’s operation. A full accounting of all Ford sponsorship money was sought.
208 The evidence showed Mr Forbes had been content to take a low profile when Mr Gibson dealt with Ford at the time of the team launch. Much was sought to be made of the fact that Mr Forbes drafted a letter in the period 20 to 28 December 2000, for Mr Gibson to send to Ford, which in fact was not sent. However, that draft letter did no more than hint that the structure of the team needed explaining; it did not mention Mr Forbes or RPM.
209 When Ford realised the complexity of a structure in which Mr Forbes owned RPM, the owner of the team’s cars and equipment, but Mr Gibson owned the TEGA franchise, Ford was not unduly perturbed. Ford was told of this in early April, mere weeks after Mr Forbes told Mr Gibson on 26 February 2001 that Ford sponsorship money should be channelled through FCG to RPM.
210 The evidence, including the expert accounting evidence led on behalf of the respondents, also showed Mr Gibson properly accounted for Ford sponsorship money. Mr Forbes was quite content as at 26 February 2001 for there to be a side arrangement between RPM and FCG for the remittal of Ford sponsorship monies, because his desire at the time was to maintain a low profile. The evidence showed Ford sponsorship monies were never taken up as income by F.C. Gibson Pty Ltd. The abovementioned expert accounting evidence showed monies received by FCG were either remitted to RPM’s bank account or accounted for to RPM through a clearing account.
211 Mr Forbes accepted in cross-examination that part of Mr Goodrick’s duties on behalf of RPM included him checking Mr Gibson’s accounting for the Ford money. His complaint in cross-examination on this issue appeared confined to observing that because Mr Gibson was being reimbursed for expenses, this accounting exercise was less simple than it might have been otherwise. He, and the accountants who gave evidence, noted the remitting of funds or accounting did not always occur within seven days. However, the method for receipt of Ford money, then remitting or accounting to RPM, was certainly sanctioned by Mr Forbes on 26 February 2001 and the expert accountant for the respondents, Mr Russell, emphasised that his observations on this issue were descriptive; they were not necessarily criticisms.
212 The complaint about ownership of the GIBSON MOTOR SPORT business name was in essence that Mr Gibson had the business name retransferred to him without authority and there were further complaints that the business name should be transferred to RPM and that the use of the business name by the first applicant was unauthorised. These complaints all depend on a misconception of Mr Gibson’s rights to the business name which have been explained above. Furthermore, even if that were not so, the complaint that the use by GMM of the business name was unauthorised is factitious in the light of all the evidence of Mr Forbes acquiescing in steps taken to set up GMM, the corporate name of which he clearly knew. He also well knew that GMM was selling merchandise, which clearly showed, inter alia, the words GIBSON MOTOR SPORT, which as I have already said, may in fact be a trade mark usage in any event.
213 The complaint that financial management by Mr Gibson was of concern was expressed as being failure to give satisfactory responses to certain requests for information. The detailed accounting evidence in the case showed that the requests for information, which suggested in their terms that Mr Gibson was not handling money correctly on behalf of RPM, were without foundation. There was a difference in style between Mr Forbes and Mr Gibson which a good deal of evidence suggests was the real source of developing antipathy between Mr Gibson and Mr Forbes. An example of this occurred in early April 2001. Mr Forbes seems to have insisted that Mr Gibson should undertake a stocktake at the precise time when the team was under pressure to prepare for a major race. Mr Forbes claimed in oral evidence that he would not have expected Mr Gibson to undertake the work before the race. It would have been easy to have clarified such priorities at the time with Mr Gibson to avoid the upset which occurred. To the extent that it matters, I find Mr Forbes’s behaviour, on this occasion, to have been unreasonable. Having said that, it is not necessary to doubt the sincerity of Mr Forbes when expressing concerns about Mr Gibson’s financial skills. They had very different approaches to business and accounting. Accepting that Mr Forbes was sincere in his concerns, the question remains whether Mr Gibson had materially breached the Gibson Services Agreement as insinuated by the allegation that he failed to give satisfactory responses to certain reports for information.
214 The final point made in the letter contained an admission that RPM had agreed to pay Mr Gibson a sum of $250,000 per annum for his services but then noted that until such time as there had been a ‘full accounting of receipts and payments’ as requested ‘no payments would be made.’ The letter was a preliminary to Mr Forbes’s termination of the Gibson Services Agreement on 10 October 2001. Mr Polites of Ford was furious when he received a copy of this letter as evidenced by his response, exhibited to one of Mr Forbes’s affidavits. In his response of 19 September 2001, Mr Polites (who indicated he had received both letters of Andersen Legal and a fax of the same date from Mr Forbes) said he thought that Ford and Mr Forbes had an understanding that there was to be no ‘rocking the boat’ between September 2001 and the conclusion of the racing series. He said that course would have given Mr Forbes a chance to:
‘. . . look at the things you needed to do to ensure the level of accounting responsibility was sufficient to guarantee the safety of your investment in the team. This was to be between you and Gibson . . . clearly the situation is now "blown" . . . If I were Gibson I would just walk away – and that would mean Lowndes will simply not drive in your team at Bathurst or anywhere else . . . In short, you may finish with a team, with no manager, no driver and let me say quite clearly, no sponsor . . .’
The letter was prescient because the team did
not have an effective manager in 2002 and by the end of 2002 the team no longer
had
Mr Lowndes as driver and Ford as a sponsor.
215 On the totality of evidence relevant to these issues, I am not satisfied to the requisite degree that there was any material breach of the Gibson Services Agreement giving RPM a right to terminate the Gibson Services Agreement, for want of performance or for breach of duty by Mr Gibson as team principal in respect of diligence and honesty. Incorporated by reference here are detailed findings set out below in respect of various complaints about financial management which continued to be pressed in the respondent’s cross claim. I am also satisfied Mr Forbes wanted a casus belli, or cause, by reference to which he could get rid of Mr Gibson as team principal.
216 Mr Forbes said he was dissatisfied with Mr Gibson from very early on. He admitted in cross-examination the three matters which concerned him early on were the way Mr Gibson dealt with Ford in late December 2000 and on 4 January 2001 and presumably up to early April 2001, the transfer of the business name to Mr Gibson, which came to Mr Forbes’s attention possibly in December 2000, or at least by about 7 January 2001, and Mr Gibson’s resignation as director from RPM, which also came to Mr Forbes’s attention on or after 21 December 2000. Despite these three dissatisfactions, to the extent they occurred before 1 January 2001, they clearly did not deter Mr Forbes from agreeing to employ Mr Gibson as Team Principal from 1 January 2001 and, to the extent that they occurred subsequently, the matters were never raised with Mr Gibson as material breaches of the Gibson Services Agreement. Moreover, Mr Forbes encouraged Mr Gibson to deal with Ford as he did and continued to encourage this as at 26 February 2001 and Mr Forbes was not unduly concerned at the time about Mr Gibson reacquiring the business name.
217 Not unnaturally, this drew a bewildered response from Mr Gibson on 25 September 2000, in which Mr Gibson asserted he had always done his best to comply with requests for information and all accounting issues had been ‘progressively dealt with’; further documents were attached. When Mr Forbes’s accountant, Mr Goodrick, was cross-examined in respect of Mr Gibson’s management of financial matters, the following exchanges occurred:
‘Mr Wotherspoon: You had very many communications with Mr Forbes about this team over that year. That was your job, wasn’t it?
Mr Goodrick: It wasn’t my job other than to keep up to date with what was happening with the tax and statutory requirements of the - - -
Mr Wotherspoon: Yes, you were Mr Forbes’s link, leaving aside Mr Watson and Mr Gibson, you were Mr Forbes’s link between what was happening on the ground in Melbourne and his state of knowledge while he was conducting this business up in Sydney?
Mr Goodrick: I don’t think so.
. . .
Mr Wotherspoon: Can you just answer the question please, Mr Goodrick?
Mr Goodrick: I can’t really give you a yes or no, if you just bear with me I’ll get to the answer. I was initially asked to go down there around 6 February, which I did. I was initially required to go down there as an information gathering exercise. After that, I reported back to Mr Forbes as to what, you know, the standard of everything was down there. At that stage, I then put a letter together on 12 February. At that point, and you’ll notice in that letter at about point 16 there was a – I noted in there that there is a request by Mr Gibson – not specifically him, but it is mentioned that I had a request to go down there on periodic visits. I’ve had a reply, the reply on 14 February, that came back from Gibson required me, they wanted me, if you look at the second paragraph of their letter, they required me to go down there on a regular basis. If you look at the wording, they are asking for tax and statutory matters. When I first went down there on 6 February there was no intention for me to continue to go down for the rest of the year. It was initially requested by me - - -
Mr Wotherspoon: Right?
Mr Goodrick: I’m getting there. It was initially requested by Mr Gibson and Mr Wright that I go back down there. I would say on the definition of whatever financial operations is, I would say no, I was not the link between Mr Forbes and Mr Gibson. I was there to make sure the tax and statutory requirements were attended to. I was there to report back to Mr Forbes anything else I found. I was not there to give any opinion to anybody down there but to go and report back to Mr Forbes as to what I thought and he decided what happened from there.
. . .
Mr Wotherspoon: That letter of 14 February to you, the second paragraph, made it clear to you that Mr Gibson and Mr Wright felt that they were insufficiently qualified to deal with statutory matters. Isn’t that correct?
Mr Goodrick: Yes, with regard to dealings with relevant authorities such as the ATO and WorkCare institutions or insurers, et cetera.
Mr Wotherspoon: Mr Goodrick you never told them that they needed to go and get some other qualified accountant to prepare those records, did you? Mr Goodrick: I never told them because that wasn’t my job.’
218 By way of contrast to Mr Goodrick’s evidence extracted here, Mr Forbes agreed in cross-examination that he asked Mr Goodrick ‘to take a particularly hands-on role’ in relation to checking Mr Gibson’s accounting. The totality of evidence relevant to these issues showed that as at 7 September and 19 September 2001, Mr Forbes was anxious to be rid of Mr Gibson for a clear predominant reason, which was so that Mr Forbes could control expenditure to his satisfaction. He wanted to do this to protect his investment in the team. When Mr Forbes did in fact gain financial control of the team, the team failed as a racing team, performing far less well than it had, particularly in the early days of Mr Gibson’s management. Mr Lowndes’s evidence in that regard has been referred to elsewhere.
219 It can be inferred from this evidence that a successful racing team, for three cars including Mr Rodney Forbes as a driver, required a level of management skills to which Mr Forbes himself was not equal and infers that even a two car team in which Mr Rodney Forbes was a second driver, may have required a financial investment beyond that which suited Mr Forbes, rather than showing Mr Gibson did not manage the team properly, especially financially. This is not to ignore the complication that Mr Forbes’s initial expectation was that sponsorship would cover all the necessary costs of a successful team and that surplus sponsorship would ameliorate the costs of Mr Rodney Forbes’s car. It is not possible to say whether that might have happened had matters turned out differently. Obviously, a perfect match between sponsorship funds and outgoings may not occur from the first moment that a new team is set up. The standard form TEGA Franchise Agreement, in its terms, recognised the importance of sponsorship and at the same time instituted a system for awarding prizes, being money sums intended to supplement the sponsorship funds needed to pay for a team.
220 Mr Lowndes and his wife met with Mr Forbes and his wife over the two days 27/28 September. Mr Battye was also present. Mr Lowndes’s evidence was he knew what Mr Gibson and Mr Watson could ‘offer’ him and he wished to see what Mr Forbes could ‘offer’ him. He gave evidence that if he accepted Mr Forbes’s proposal to put in a chief executive over Mr Gibson (Mr Steve Horne was mentioned as a possibility) ‘it was unlikely that Gibson would want to remain with the team.’ Mr Battye’s contemporaneous file notes reveal extensive discussions. Mr Lowndes seems to have ventilated dissatisfactions, some of which Mr Crompton appears to have encouraged in him. There was some evidence that Mr Crompton coveted Mr Gibson’s job as Team Principal. Mr Forbes’s chief dissatisfaction, also ventilated, appeared to be financial issues as outlined in his solicitor’s letter of 19 September and lack of clarification of what occurred with sponsorship money from Biante and dealings with money received from Mr Parsons.
221 After considering the evidence of all those who gave evidence of what was said and done at this meeting and the contemporaneous records, it seems clear that Mr Forbes and Mr Lowndes agreed that Mr Lowndes would continue under his driver agreement with RPM subject to agreed waivers or variations. That is he would not insist on Mr Gibson being team principal and would not regard it as a default of the driver agreement if Mr Gibson ceased to act as team principal, as Mr Lowndes apprehended he would if Mr Forbes appointed Mr Horne over Mr Gibson.
222 On 1 October 2001, Mr Battye met with Ford personnel, including Mr Polites. He informed Ford of the matters discussed at the 27/28 September meeting. He gave evidence Mr Polites said ‘At the end of the day, Ford will back Craig. However, I think our preferred outcome would be for Craig to go with Gibson and Watson.’ Mr Battye also gave evidence that he stated to Mr Polites that Mr Lowndes has lost confidence in Mr Gibson and claimed the team had been run unprofessionally by Mr Gibson. To the extent that he was speaking on behalf of Mr Lowndes, this statement is contrary to Mr Lowndes’s oral evidence in this proceeding. To the extent that he was repeating complaints against Mr Gibson, made by Mr Forbes, on full examination these were not well founded. He gave evidence Mr Polites then said:
‘We will back Craig in whatever he wants to do. If you think that this will work and Craig wants to do it, we will back it. However, I think we should keep everything very quiet until after the Bathurst race.’
Races took place at Bathurst, New South Wales, on 5, 6,
7 and 8 October 2001.
223 Mr Forbes gave evidence of a meeting between himself, Mr Lowndes, Mr Watson, Mr Gibson and Mr Battye in Mr Battye’s office on 10 October 2001. There was no disagreement with Mr Forbes’s account of what he said about his position in relation to the team going forward. His account in his first affidavit was as follows:
‘After we all sat down, Battye explained to Gibson and Watson that he had met with me on the previous day in order to discuss my position in relation to the team structure going forward as they knew of my dissatisfaction with Gibson’s management, particularly the financial management, of the team. Battye then asked me to outline my plans for the team going forward. I said that I would be putting in a business and finance manager of the team and that Gibson would have to report to that person in relation to such matters.’
224 Mr Forbes also gave evidence that after Mr Gibson and Mr Watson had an opportunity to speak to Mr Lowndes, all present were told by Mr Battye that Mr Lowndes had decided to remain with RPM, at which point Mr Forbes said Mr Gibson indicated he did not wish to have any further involvement with the team. Mr Forbes also gave evidence he indicated then that GMM could continue to run the merchandising business but it would need to enter a proper agreement with RPM for that purpose. He also gave evidence that this was the first occasion on which he had seen Mr Watson’s letter of 1 March 2001 referring to sponsorship arrangements.
225 Each of Mr Watson and Mr Gibson also gave evidence of this meeting. The main contention in respect of this meeting is the correct characterisation and the legal effect of the words and conduct of Mr Gibson at the meeting. Mr Gibson gave evidence in one of his affidavits as follows:
‘On the evening of 15 October 2000 (he later swore this should have been 10 October 2001), I knew that Mr Forbes and I could not continue to work together and it would be harmful to the team if the conflict and friction continued. Morale in the team had diminished because of the acrimony and uncertainty that had been created since 7 September 2001. Over the course of the next couple of days, Mr Watson and I discussed what could be done to keep the team together. In the end, I thought it was better for the team if I was to leave as Team Principal. At least then the team would not self-destruct and the people who had given their heart and soul for Gibson Motor Sport for so many years would continue to have jobs.’
Mr Gibson denies that at the meeting of 10 October 2001, he said he did not wish to have any further involvement with the team. Mr Watson agreed in cross-examination that Mr Gibson’s position on the 10th of October 2001 (which he thought was the 15th of October 2001) was untenable.
226 The respondents’ submissions on this aspect are first, the agreement had irretrievably broken down and Mr Gibson decided to leave. Alternatively, Mr Forbes terminated the agreement on reasonable notice. The applicants’ contrary submission is that Mr Gibson was constructively dismissed and Mr Forbes repudiated the agreement. If, and to the extent that it is necessary to analyse events on 10 October 2001 in terms of repudiation and rescission, the whole of the relevant evidence indicates that it was Mr Forbes, on behalf of RPM, who repudiated the Gibson Services Agreement by announcing a variation to its terms which he very likely appreciated would not be acceptable to Mr Gibson, but more relevantly a variation with which Mr Gibson did not agree. It is not strictly necessary to make findings about what Mr Gibson said on 10 October 2001 because Mr Gibson unequivocally exercised his right to rescind by no later than 23 November 2001, his last day of attendance at the workshop. Thus, the Gibson Services Agreement was terminated on or by no later than 23 November 2001 when Mr Gibson unequivocally exercised a right of rescission as a result of Mr Forbes’s repudiatory breach.
227 It appears there were two subsequent meetings on 15 October 2001. At the earlier of the two, the protagonists discussed a proposal from Mr Watson which, in its terms, appeared to accept that arrangements which had been in place would need to be renegotiated on different terms. During the second meeting, Mr Gibson discussed Mr Parson’s payments with Mr Forbes and gave him $40,000 in cash.
228 Mr Gibson signed a licence agreement on 19 October 2001, on behalf of FCG, granting to RPM an exclusive right to use the business name GIBSON MOTOR SPORT and the name alone or with the device of the stylised ‘G’. It was clear on the evidence that the position between Mr Watson and RPM and between GMM and RPM was unresolved as at 19 October 2001.
229 There was a further meeting on 16 November 2001 between Mr Watson and Mr Lowndes and his wife. Shortly after Mr Watson advised Mr Lowndes that he resigned from the management agreement between them. Mr Lowndes characterised this in evidence as Mr Watson appreciating that Mr Lowndes or his company was likely to terminate that agreement. This decision of Mr Watson’s to resign as Mr Lowndes’s manager and the decision of Mr Lowndes to remain with RPM meant that the first applicant could only remain viable if RPM wished to continue to employ it for merchandising, because Mr Lowndes’s authorisation of any commercial exploitation of his personality and reputation was obviously essential.
230 Mr Gibson disposed of the TEGA franchise after the racing season was completed on 15 December 2001 for a capital gain of $250,000.
231 It is probably appropriate at this point to make observations about the main witnesses. Mr Gibson gave evidence in a straightforward fashion. He was a man who had clearly enjoyed a sound reputation for his skills in managing successful racing teams throughout the 1990s. He made no claims to Mr Forbes that he had financial skills, which he did not have. The team went well in the early period of his management and it never achieved any similar success once he was effectively forced out. Mr Forbes’s dissatisfaction with him, as expressed, seemed on the whole of the evidence to be essentially a function of Mr Forbes’s unrealistic expectations about what the costs and expenses of the team would be. Dissatisfaction was also the result of different and antithetical approaches to business. So much was recognised in final submissions made on behalf of the respondents. Many of Mr Forbes’s dissatisfactions could not be sheeted home to Mr Gibson in any simple fashion.
232 Mr Watson gave evidence in a manner, which was co-operative. Mr Forbes agreed in evidence that Mr Watson was ‘very good at his job’ which appeared to be a reference to his ability to obtain sponsorships and to undertake merchandising. Mr Lowndes also praised Mr Watson’s skills in his evidence.
233 Mr Forbes gave evidence cautiously, too cautiously, on occasions. For example, in oral evidence he denied the fact that RPM owed money to Mr Watson, then conceded it readily after he had a chance to review his answer, by reference to the way in which the case had been opened on behalf of the respondents. It was clear he had been elated at the prospect that his son Rodney would drive in a team significantly funded by him, in the first instance, which would primarily be perceived as a Lowndes/Ford/Gibson team such that surplus sponsorship might help cover the costs of running his son’s car. As the scale of the tasks of converting the team from a Holden team to a Ford team, and achieving sufficient early success to attract more sponsorship, dawned on him, he was aghast at the prospect that only his capital was at risk in respect of the team’s assets. He had obviously expected the team to be paid for by sponsorship monies rather than requiring any injections of additional capital from him. He had also thought at the outset Mr Gibson would be sharing the risk in RPM.
234 Mr Forbes was lacking in candour with Mr Gibson and Mr Watson over his alleged dissatisfactions. He was not frank with either of them when he first decided not to sign a consent form to become a director or to take up shares in GMM. He admitted in oral evidence his first written complaint to Mr Watson and Mr Gibson was the complaint in his letter dated 7 September 2001. This letter does not constitute notice of material breaches by either of them of agreements in place for the reasons identified above. Even if I am wrong and it did, Mr Gibson was never given any or any proper opportunity to explain or remedy alleged material breaches and the implicit allegations made against both of them in respect of the business name were misconceived.
Findings – Gibson Services Agreement
235 The whole of the relevant evidence shows Mr Forbes wanted to oust Mr Gibson as team principal so that he could more directly scrutinise and control expenditure. Such an aim was not incompatible with retaining Mr Gibson as team principal. Mr Forbes’s complaints and efforts to retain Mr Lowndes and to vary the Gibson Services Agreement by appointing a person, possibly Mr Steve Horne, over Mr Gibson had the inevitable effect of forcing out Mr Gibson. Mr Gibson did not consent to this course. The evidence shows it was Mr Forbes, on behalf of RPM, who evinced an intention to no longer be bound by the Gibson Services Agreement, which I have already found was implicitly for the period during which Mr Lowndes was contractually bound to drive for RPM, as positively averred in the respondents’ defence. This constitutes a repudiation by Mr Forbes. I accept the applicants’ submission to that effect and reject the respondents’ submission that Mr Gibson repudiated the agreement. Without any material breach in his role as Team Principal or manager, Mr Gibson could have expected to play this role until the end of 2002, ie. for the period during which Mr Lowndes was contractually obliged to drive for RPM.
Implied term for termination in the Gibson Services Agreement
236 Strictly speaking, it is not necessary to consider the respondents’ submissions in respect of an implied term for termination. I do so however, in deference to the arguments made, and in case I am wrong in finding Mr Forbes repudiated the agreement. The respondents averred in their defence to the third further amended statement of claim that there were three implied terms in the Gibson Services Agreement that it:
‘(A) was terminable upon the expiry of reasonable notice given by either RPM or Gibson; and
(B) was limited in duration to the period for which Lowndes would be contractually bound to drive for RPM; and
(C) would terminate immediately upon Lowndes ceasing to drive for RPM.’
It seems to me on the application of the
usual principles, discussed in more detail below, implied terms (B) and (C) were
necessary
for the reasonable and efficient operation of the Gibson Services
Agreement.
237 The respondents argued that, there being no express term in the Gibson Services Agreement for termination, it is necessary to imply term (A) as averred, for termination on reasonable notice ‘simply . . . to establish what the contract is, the parties not having themselves fully stated the terms’ as noted by Deane J. (quoting Wilberforce LJ), in Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 571 (‘Hawkins v Clayton’); see also Byrne at 422 and 442 and Associated Alloys Pty Ltd v ACN 001 452 105 [2000] HCA 25; (2000) 202 CLR 588 at 610. The suggestion made on behalf of the respondents was that reasonable notice should be 30 days, mirroring the period of notice referred to in the consent to RPM to use the business name, GIBSON MOTOR SPORT.
238 With an oral agreement, like the Gibson Services Agreement, there is the need to imply a term for termination. On the respondents’ arguments, it is necessary to consider what terms are to be implied for material breach and/or whether there is an implied term for termination on reasonable notice. Such events were not discussed between Mr Forbes and Mr Gibson and were not the subject of any express agreement. This is a situation in which it is possible to find that had the parties turned their minds to the possibility of termination for material breach of the agreement by either of them, or termination on notice, they would have agreed a term to cover that circumstance. Courts need to be cautious in implying terms and it is not enough to justify implication of a term for it to be reasonable to do so: Codelfa at 346/347.
239 It is appropriate to consider all the circumstances including the requirements of the Gibson Services Agreement and the fact that Mr Gibson was to act as Team Principal for two seasons of race events which appear to have been fixed for each month between March and November in any one year. It is also appropriate to consider that the Gibson Services Agreement, Mr Lowndes’s driver agreement with RPM and the lease agreement with Angora Towers Pty Ltd were all intended to be for the same period. Each party would need a reasonable opportunity to have material breaches remedied promptly, as alternative arrangements might take some time to put in place. Peremptory termination was capable of causing very significant financial harm, not only to the parties but also others. It seems to me an implied term covering termination for material breach is necessary for the reasonable and effective operation in all the circumstances of the Gibson Services Agreement: see Breen v Williams (1995-1996) 187 CLR 71 at 123 (per Gummow J).
240 Relevantly, Lowndes’s driver agreement with RPM, provided for termination in three circumstances only, viz. after a complex review process, for material breach and in the Event of Default. It contained no provision for termination at will or for termination on 30 days’ notice. That agreement’s provisions for termination in the event of material breach are set out in clause 15.1, extracted in turn at paragraph 137 above.
241 A driver agreement, such as the agreement between Mr Lowndes and RPM, would lack business efficacy if terminable at will or even on 30 days’ notice because, as Mr Lowndes stated and as Mr Forbes recognised, a successful team necessarily operated over an entire season or, as agreed here, over two seasons. Mr Lowndes’s income depended on stability in a team. Events of Default in the driver agreement covered insolvency and a range of serious matters capable of frustrating the agreement. It can be noted that there was no suggestion in Mr Forbes’s variation to the Gibson Services Agreement that he was doing so because, otherwise, it would be frustrated by some serious matter or event. The respondents’ submissions in respect of termination are that Mr Forbes was entitled to terminate (implicitly forthwith). Accounting or financial irregularities complained about are mentioned in that context. Alternatively, Mr Forbes was entitled to terminate on notice of 30 days.
242 The Gibson Services Agreement was entered into by the parties on the common understanding that it was to run in tandem with, or to use Mr Forbes’s phrase about the lease agreement ‘in line with’, the driver agreement. Mr Gibson’s services as a top class team principal were considered so essential by Mr Lowndes such that he was entitled to terminate the driver agreement with RPM forthwith if Mr Gibson ceased to be actively involved unless a replacement, satisfactory to Mr Lowndes, could be found within a reasonable period. It therefore is obvious that a term should not be implied that RPM would terminate the Gibson Services Agreement at will or on 30 days’ notice. It is equally obvious that a term should not be implied that Mr Gibson could terminate at will, or on 30 days’ notice, either of which actions could have imperilled RPM’s agreements with Ford and with Mr Lowndes.
243 The consent to use the business name was not necessary for the continuation of RPM’s business as was evidenced by the alacrity with which a change to the business name ‘OO MOTORSPORT’ occurred in early 2002.
244 It seems to me that the term to be implied for termination of the Gibson Services Agreement is a term mirroring the termination provisions in clause 15.1 of the driver agreement with RPM with changes, mutatis mutandis. For the avoidance of doubt the term to be implied in the Gibson Services Agreement for termination for material breach is as follows:
Either Racecar Preparation and Management Pty Ltd or Synarby Pty Limited shall be entitled to terminate this Services Agreement by written notice upon the happening of the following events:
(i) the other party failing to remedy a material breach of this Services Agreement within 21 days after receiving a written notice specifying the breach and requiring its remedy;
(ii) the other party persistently being in material breach of this Services Agreement and for this purpose "persistently" means the third occasion upon which the other party has received written notice under (i) above notwithstanding that it . . has the previous two occasions remedied the relevant breach in time.
245 Such a term seems reasonable and equitable given the nature of the Gibson Services Agreement. It also gives business efficacy to the agreement which will not be effective and may be subverted without it. Such an implied term also appears so obvious that ‘it goes without saying;’ it is clear and does not contradict other express terms of the contract: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26 (‘BP v Hastings’).
246 Recognising that it is no longer necessary to analyse an implied term in an oral contract, which has been partly executed, by reference to all the conditions in BP v Hastings, it can be noted that the implication of the term above is justified in any event by reference to the test of Deane J. in Hawkins v Clayton extracted above, or the test of ‘objective necessity’ deriving from Byrne’s case or the test of Gummow J. in Breen v Williams at 123.
247 It is necessary to note that even if I am wrong about the term, which in my view should be implied in respect of termination for material breach, this does not matter. The more critical finding is that I am not persuaded that it is appropriate, on the application of the usual principles, to imply a term that the agreement could be terminated by either party on 30 days’ notice. To do so would have subverted the business efficacy of the agreement and would have contradicted other express terms of the agreement.
248 Finally, it needs to be noted that the entire debate about implying terms for termination is artificial because Mr Forbes’s own words on 10 October 2001 extracted above indicate he was not purporting to terminate for material breach or terminating on notice. He was simply unilaterally varying the agreement because he wished to sever relations with Mr Gibson so that he could run the finances his way. Varying the agreement thus, without consent, is repudiating the agreement rather than terminating it for cause or on notice.
Conclusion on Gibson Services Agreement claims
249 In all the circumstance described above, RPM is liable to Synarby Pty Limited in respect of any sums due under the agreement at the time of unequivocal rescission, by Mr Gibson on behalf of Synarby Pty Limited, and for damages in respect of losses flowing from RPM’s repudiation (rather than termination) from 23 November 2001 until 31 December 2002. Synarby Pty Limited is not entitled to any damages for losses beyond that date. In the light of this conclusion, it is not necessary to consider quantum meruit claims.
250 There are claims on behalf of Synarby Pty Ltd for loss of anticipated benefits in 2003, 2004 and 2005, which are based on blaming Mr Forbes for the severing of ties between Mr Lowndes and RPM. Such claims are too remote, speculative, fanciful and unenforceable given Mr Lowndes’s clear reservation of his right to terminate his driving agreement on certain conditions at the end of 2002, which he did.
251 The applicants’ counsel invited me to make adverse findings about Mr Forbes’s credit. I decline to do so. I have accepted Mr Forbes’s account of many aspects of events. The fact that Mr Forbes’s recollections somewhat appeared to be affected by his unexpressed reservations and disappointments does not make him deliberately untruthful. It does however mean his recollection seems less reliable when it does not accord with the recollections of others, including his agents such as Mr Stanley who could be expected to corroborate him, and more particularly when his recollection is inconsistent with contemporaneous documents and he could not proffer any convincing explanation for such inconsistency: Devries v Australian National Railways Commission [1992] HCA 41; (1993) 177 CLR 472 at 479.
252 There is, in any event, only one important contested matter of fact where I am obliged to prefer one version of events rather than another by reference to a contest between witnesses in order to deal with a material fact in dispute and that is in relation to RPM’s arrangements with Mr Watson, to which I now turn.
253 The material dispute between RPM and Mr Watson is a narrow one. There is no contest that there is an individual agreement as I have found above. It is agreed that Mr Forbes, on behalf of RPM, on 7 December 2000, agreed to pay Mr Watson (or a nominee of Mr Watson’s which was the fourth respondent) a 20% commission on all sponsorships, which he obtained and which were paid to RPM. Those sponsorship sums were consensually described as ‘additional sponsorship’ to distinguish such sums from what was called the ‘initial Ford sponsorship’ described below. Payment was to be made on receipt of the additional sponsorship monies by RPM. If sponsorship money were paid in tranches, it would follow so would the commission fees be paid. Mr Forbes said the agreement covered 2001 only as there was no concluded agreement in respect of ‘tailing commission’ for additional sponsorship beyond 2001. Mr Watson asserts that Mr Forbes agreed to a ‘tailing commission’ such that commission fees owed in respect of additional sponsorship obtained by Mr Watson and paid to RPM in 2002, were 17.5% of the value of the additional sponsorship paid in 2002. Thus, tailing commission fees for 2002 were the subject of dispute.
254 The major point of disagreement, however, in respect of the agreement to pay sponsorship commission fees, is whether or not Mr Forbes, on behalf of RPM, agreed to pay a commission fee of 10% on what was called ‘the initial Ford sponsorship’. The initial Ford sponsorship was agreed to be a promise made on behalf of Ford to pay sponsorship in terms of the abovementioned letter dated 13 December 2000 being three sums: $1.5 million for 2001, $3 million for 2002 and $3 million for 2003. Mr Lowndes having terminated the driver agreement at the end of 2002, and the sponsorship money ‘following’ Mr Lowndes as all parties agreed in evidence, the amount promised for 2003 does not appear to me relevant in terms of contractual claims against RPM.
255 On this topic, Mr Watson gave sworn evidence of this matter being raised on 7 December 2000 as follows:
‘"At the end of the day I feel we will need a budget of $400,000 and I am happy to undertake the role of securing sponsors for the team. I’d charge our normal commercial rate for doing so." Mr Forbes said: "What is that?" I said, "Between 10 and 20% depending upon the length of the contract and the amount of money we were securing. This is typical of the industry and that is the way we charge. Given the time frame we have to work with I will need to throw a lot of man hours and resources to pull it together in time."’
256 Mr Watson’s affidavit evidence of the discussion of the same topic on 26 February 2001 was as follows:
‘Mr Forbes said to me, "Can we just discuss how your fees are paid again?" I said, "My costs are about $450,000 to $500,000 a year and that’s to maintain the team’s requirements and the sponsors’ requirements. That comes about by some of Melissa’s time, Tony’s time, my time and any contractors’ time plus some contribution to overheads. The fee I will charge the team will be 10% of the initial $1.5 million Ford sponsorship which we have got and then 20% of any other Ford sponsorship money and any other sponsors I secure. The 20% will diminish by 21/2 per annum with a floor of 10%". Mr Forbes said, "Okay, I understand that. I just wanted to know what we were up for".’
257 Mr Gibson’s evidence corroborates Mr Watson’s evidence.
258 Mr Forbes denied that there was ever agreement to pay Mr Watson 10% commission fees on the initial Ford sponsorship. Mr Forbes made a note marked 8 December 2000, which may have been made on 7 December 2000. The note mainly consists of figures. It shows dollar amounts for the various assets being sold by Mr Dumbrell. It records an amount of $400,000 beside which the word ‘Franchise’ is written. To the left of the figures, which appear to relate to assets of Mr Dumbrell’s such as ‘cars’ and ‘plant and equipment’, there is a note listing one below the other, the figures 1.5 and 2. Opposite the notation 1.5 Mr Forbes has placed 10%. In cross-examination of Mr Forbes on this issue and upon his note the following exchanges occurred:
‘Mr Hayes: I put it to you it’s very clear, that the 1.5 was the money that you anticipated was going to come from Ford. $2 million was the additional money that was going to come in from Ford and the 10 per cent was the commission that you were going to pay?
Mr Forbes: I don’t know where you get the extra 2 million from Ford.
Mr Hayes: Just take the 1.5, were you anticipating 1.5 million from Ford?
Mr Forbes: Yes.
Mr Hayes: Mr Watson was asking for 10 per cent commission on that?
Mr Forbes: No.’
. . .
Mr Hayes: Mr Forbes, do you agree that as of 8 December, the anticipated money to come in from Ford was $1.5 million?
Mr Forbes: Yes, had to be confirmed, of course, by Mr Watson.
Mr Hayes: I take it the answer to my question is "yes"? You were anticipating, on what Mr Watson had said, 1.5 million?
Mr Forbes: Anticipating, yes.
Mr Hayes: Can you think of anything that the reference to 10 per cent could be, other than Mr Watson’s commission?
Mr Forbes: Sitting here, no, I can’t think of what it could have been.
. . .
Mr Hayes: The only figure of 1.5 million that was discussed on the 7th was in relation to Ford?
Mr Forbes: That’s correct.
Mr Hayes: So we can take it, can we not, that the 1.5 there is probably a reference to what was said about Ford?
Mr Forbes: On the 8th – I can’t tell you the dates of those notes, I’m sorry.
Mr Hayes: But if you just try to actually follow my question – I’ll repeat it for you. "So we can take it, can we not, that the 1.5 there is probably a reference to what was said about Ford?" Isn’t that right?
Mr Forbes: Yes.
Mr Hayes: That was said about Ford on the 7th, wasn’t it?
Mr Forbes: Yes.’
259 Mr Stanley’s evidence by affidavit on what Mr Watson and Mr Forbes said at the meeting of 7 December 2000 on this issue was as follows:
‘Watson: I have a business that specialises in marketing and the acquisition of sponsorship. I can offer my services to Newco and raise sponsorship dollars on the basis of the Craig’s and Ford’s relationship which is a highly saleable product. In return I would be paid a commission.
. . .
Forbes: I am happy to pay you a commission on additional sponsorship once the money has been received. However, your involvement in the manner we have discussed is based on the assumption that you are bringing Ford and Lowndes to the party.’
260 However, during the cross-examination of Mr Stanley, the following exchanges took place:
‘Mr Hayes: You then asked Mr Watson, "About sponsorship, how are we going to fund the running of the team?" Mr Watson said, "I’m confident Ford will sponsor the team and will ask for 3 million but we’re more likely to get 1 to 1.5 there." Do you remember he said that?
Mr Stanley: I don’t remember those exact words. I remember that Noel Watson said that he would be able to get one and a half million, 1 million up front and 500 later and that he had an expectation to be able to get something over 2 million between 2 to 3 million for the following years.
. . .
Mr Hayes: One of the things that was said and that had already been said and agreed was the commission?
Mr Stanley: Yes, and my memory of that was 10 per cent. If my memory’s wrong, I’m sorry.
. . .’
When taxed in cross-examination about the differences between his evidence on affidavit and his oral evidence during cross-examination, Mr Stanley said that the evidence in his affidavit was the best he could do at the time of swearing his affidavit. While Mr Stanley had a clear recollection in the witness box that a 10% commission was an agreed figure, it is not unambiguously clear from his evidence whether he took this to be a reference to the initial Ford sponsorship and although it can be noted that there was never a claim for a 10% sponsorship fee in respect of any sponsorship other than the initial Ford sponsorship.
261 At the meeting of 26 February 2001, Mr Watson gave evidence that Mr Forbes merely checked the rates he was charging. Mr Forbes, he said, never disagreed with the rates or sought to negotiate different rates. Mr Gibson confirms this. Mr Forbes denies this evidence.
262 The sponsorship was agreed by Ford to be paid as described above. There was ample evidence that Mr Watson was the person who dealt with Ford on sponsorship issues and that he had expended time and effort directed to obtaining the initial Ford sponsorship, for a team in which Mr Lowndes would drive, prior to 7 December 2000 and between 7 December 2000 and the final agreement by Ford to provide it. There was no evidence Mr Forbes ever doubted this. The following exchanges took place in the cross-examination of Mr Forbes:
‘Mr Hayes: Did you not see it as a substantial benefit to you to have the services of Mr Lowndes paid for by someone else?
Mr Forbes: Yes.
Mr Hayes: Did you not also see it as a benefit to you to have Ford sponsorship of $1.5 million in 2001, $3 million in 2002 and $3 million in 2003?
Mr Forbes: Yes.
Mr Hayes: That’s essentially what Mr Watson said he negotiated with Ford, wasn’t it?
Mr Forbes: Yes.’
263 No written agreement between RPM and Ford was executed at this time in respect of Ford’s promise. The first payment of $750,000 was made in January 2001. The second payment of $750,000 was made later. Possibly some payments referrable to Ford’s promise then to pay $3 million in 2002 were in fact also paid. The sponsorship payments were remitted by FCG, when Mr Gibson was team manager to RPM, essentially as contemplated by Mr Forbes’s notes which he brought to the meeting of 26 February 2001, although Mr Forbes made it clear in oral evidence that the remission of sums to RPM did not always occur within 7 days. When not remitted the sponsorship monies were accounted for to RPM.
264 There was no evidence from Mr Forbes or in any contemporaneous documents that Mr Forbes ever queried Mr Watson’s proposal to charge 10% in respect of the initial Ford sponsorship at the 26 February 2001 meeting or any other occasion. Indeed, Mr Forbes’s own note of 8 December 2001 indicates he was well aware of the proposal to charge 10% in respect of the initial Ford sponsorship which as at 8 December 2000 was expected to be $1.5 million in 2001 and possibly $2 million in 2002. Mr Stanley’s recollections in oral evidence explain why Mr Forbes wrote the figure 2 below the figure 1.5 on that note. That appears to be a reference to what Mr Watson said about Ford sponsorship in later years beyond 2001. RPM needed Ford sponsorship and I find, on the balance of probabilities, I am satisfied Mr Forbes agreed to pay Mr Watson 10% on the initial Ford sponsorship. His conduct in never disavowing the proposal that Mr Watson receive 10% commission on the initial Ford sponsorship and in RPM taking the benefit of the initial Ford sponsorship and in Mr Forbes’s confirmation by words and conduct on 26 February 2001 that RPM would pay 10% on initial Ford sponsorship all support this finding.
265 Mr Watson wrote to Mr Gibson on 1 March 2001 seeking an acknowledgement of the arrangements for his commission fees. It was suggested in argument this letter should have gone to Mr Forbes and the fact that it did not was evidence that there was no concluded agreement for the payment of sponsorship funds. It was also suggested by the respondents that this letter purports to be a contract sought to be enforced against Mr Forbes and that it evidenced underhand behaviour by Mr Watson. Mr Watson said, and I accept, this letter was needed by his company because he was expending money while payment of commission fees was awaited. Mr Watson gave evidence, which was not challenged by Mr Forbes, of the expenses of Noel Watson (Aust) Pty Ltd.
Findings – Management Agreement
266 On the contested issue of whether or not Mr Forbes agreed, on behalf of RPM, to pay Mr Watson, through his company, 10% commission on the initial Ford sponsorship, in the light of all the evidence, I prefer Mr Watson’s account to that of Mr Forbes and accept that it was raised on 7 December 2000 and agreed on 26 February 2001 that Mr Watson, or his nominee would be paid 10% commission fees in respect of the initial Ford sponsorship on payment of such sponsorship monies by Ford to either F.C. Gibson Pty Ltd, on behalf of RPM, or directly to RPM. I also accept Mr Watson’s evidence that he explained the tailing commission on additional sponsorship on 26 February 2001 and Mr Forbes agreed to that figure by words and conduct on that day.
267 I prefer Mr Watson’s account of words and deeds giving rise to an agreement for RPM to pay Mr Watson (or a nominee) 10% commission on the initial Ford sponsorship, not because I regard Mr Forbes as being deliberately untruthful. Rather, I prefer Mr Watson’s account first because Mr Watson’s account is supported by contemporaneous documents and most importantly, Mr Stanley’s admissions. Secondly, it is corroborated by Mr Gibson. Thirdly, it is consonant with the evidence of industry practices. Mr Forbes agreed in cross-examination it was a normal industry practice for a person who obtained a sponsorship to be paid a 20% commission fee or something less than 20%. However, he was at pains to say this only applied to additional sponsorship. Fourthly, there is nothing in Mr Forbes’s account in affidavits or oral evidence, or in his contemporaneous notes, to indicate that he conveyed to Mr Watson that he would not pay commission on the initial Ford sponsorship or that he would not purchase Mr Dumbrell’s team at the price he eventually paid, if the purchasing entity had to pay Mr Watson commission on sponsorship on the initial Ford sponsorship, when he knew the norm in the industry. Mr Forbes wanted the benefit of the Ford sponsorship and wanted it to be subject to a binding promise by Ford, before he executed an agreement with Mr Dumbrell. His failure to say he would not pay Mr Watson’s commission, when his own contemporaneous note records the percentage sought, can only be construed as a silence amounting to assent to pay what Mr Watson said he would charge. Branir at 369.
268 The idea, that Mr Forbes advanced in oral evidence, that he would not have agreed to pay Mr Dumbrell’s sale price if he had agreed to pay 10% commission to Mr Watson in respect of the initial Ford sponsorship is not borne out by his contemporaneous words and conduct, nor that of Mr Watson or Mr Stanley, on 7 December 2000 and is a notion which the evidence shows was never mentioned at the time. Fifthly, the respondents agree Mr Watson is owed money and put in evidence an offer to pay him $500,000. Whilst I accept the submission that I should not construe any offer to settle as an admission that money is owed, I nevertheless regard my finding that Mr Forbes’s agreement that Mr Watson is owed a certain percentage in respect of certain sums, reflects the norm in the industry referred to above, which applies as much to the initial Ford sponsorship as it does to additional sponsorship.
Conclusion – Management Agreement claims
269 The findings of fact oblige a conclusion that RPM had an agreement with Mr Watson for the payment of 10% commission fees in respect of the initial Ford sponsorship paid in 2001 and 2002 in addition to commission fees which the applicants concede are owed by RPM being 20% on additional sponsorship paid during the year 2001. Further, Mr Watson’s claim for 17.5% commission fees payable on additional sponsorship obtained by him and paid to RPM in 2002 is also accepted. It is not in contest that payments for commission fees which are due were payable by RPM to the fourth applicant. Accordingly, RPM is liable for the payments particularised to the fourth respondent, the entity through which Mr Watson invoiced these fees. There is no convincing dispute about the termination of the management agreement, which is required to be determined on this hearing in respect of liability only. Mr Watson recognised the connection between his management agreement with Mr Lowndes, which he voluntarily terminated in mid-November 2001, and the management agreement with RPM. His agreement with RPM could not realistically enure beyond his voluntary termination of his agreement with Mr Lowndes, save and except for any sponsorships he obtained for RPM shortly thereafter, which were acquiesced in by Mr Lowndes. Mr Watson effectively terminated the management agreement with RPM when he ceased further work on its behalf, which appears to have been on a date in late November 2002. Further, in the light of these conclusions, it is not necessary to consider quantum meruit claims.
270 It is now necessary to consider the applicants’ further claims, both arising out of and/or dependent on the alleged joint venture agreement as well as alternative claims arising otherwise.
271 The applicants claim that RPM held certain assets on express trust. These are described as:
(i) the Bronzco assets;
(ii) sponsorship contracts with Dunlop, Mobil, Hewlett-Packard, PPG and McDonalds;
(iii) the Lowndes driver agreement;
(iv) the Gibson Services Agreement with Mr Gibson;
(v) the Management Agreement with Mr Watson;
(vi) the workshop lease with Angora Towers Pty Ltd;
(vii) the initial Ford sponsorship agreement;
(viii) the TEGA entitlement (franchise) held in Mr Gibson’s name;
(ix) the additional Ford sponsorship agreement; and
(x) the Ford 5 year sponsorship agreement.
272 Following that claim were claims that the assets where held on behalf of the joint venture as a result of which RPM became trustee of the alleged joint venture assets and held them for the purposes of the business on behalf of Mr Watson, Mr Gibson and Mr Forbes.
273 The findings already made in respect of the conclusion that there was no joint venture agreement are probably sufficient answer to this claim. However, for the sake of completeness the evidence disclosed the following:
(i) RPM acquired the Bronzco assets on its own behalf. Both Mr Watson and Mr Gibson declined to invest any capital in respect of RPM or to take up directorships. Each rejected offers to have joint control of RPM or to take shares in RPM which could have carried on entitlement to a share of profits in RPM.
It was specifically conceded in paragraph 28B of the third amended statement of claim that it was an express term of the joint venture agreement that at its conclusion if Mr Forbes so elected, ‘Forbes would take absolute ownership of the Bronzco assets and any other plant and equipment purchased by RPM . . .’ The Bronzco assets were held by RPM for the benefit of itself and members.
(ii) Sponsorship contracts were specifically intended to defray the expenses of running a team for Mr Lowndes a task undertaken by RPM. The asset was held by RPM for the benefit of itself and its members. (iii) The Lowndes driver agreement was an agreement between a driver and the owner of the team, which provided him with motorcars for the racing season. RPM held this asset for the benefit of itself and to be applied as described. Ford had no complaints about RPM’s use of sponsorship funds under the sponsorship arrangement with it. (iv) The Gibson Services Agreement between RPM and Synarby Pty Limited provided for payments to be made to Mr Gibson and it is difficult to see in what meaningful way it could be said the benefits of the agreement were held on his behalf which would suggest he both received individual payments but had some entitlement to other benefits by reason of some relationship with RPM. He specifically refused to have any or joint control of RPM or any connection with RPM other than the contract for his services. He rejected a suggestion he share in joint profits of RPM. RPM held this asset on behalf of itself and its members. (v) The management agreement is similar. Mr Watson specifically refused to have any joint control of RPM or to share in its joint profits. RPM held this asset on behalf of itself and its members. (vi) The lease with Angora Towers Pty Ltd resulted in Mr Gibson (through Angora Towers Pty Ltd) receiving commercial rent. It cannot be meaningfully asserted he had some other unspecified equitable interest in the lease. RPM held this asset, as tenant, on behalf of itself and its members whilst Angora Towers Pty Ltd was the other party, the landlord. (vii) The initial Ford sponsorship agreement was specifically for the purposes of assisting Mr Lowndes’s team defray its costs and expenses directly incurred in racing Mr Lowndes’s vehicle. RPM was the entity which incurred the costs and expenses. The evidence disclosed the Ford sponsorship money was spent on the costs and expenses of running the team, especially Mr Lowndes’s car. Mr Gibson and Mr Watson declined to take any ownership through shares or responsibilities through directorships in RPM, the owner of that team. RPM held its legal and beneficial entitlements to this asset on behalf of itself and its members. That was subject, as I have already said, to an agreement to pay Mr Watson commission fees. (viii) The TEGA franchise was held by Mr Gibson through FCG and sold for a significant capital gain without any reference to RPM. RPM never held this asset on its own behalf. The permission to RPM to use this asset was no more than a revocable licence and was made in consideration of RPM’s use of the franchise which, as already explained, maintained its capital value. (ix) The additional Ford sponsorship agreement was in the same category as the initial Ford sponsorship. (x) The evidence was that no concluded agreement between RPM and Ford for a 5 year sponsorship agreement was signed although there was an agreement for a reduced amount of $3 million per year. RPM held its interests in all Ford sponsorship agreements on behalf of itself and its members, subject to payment of such commission fees as had been agreed with Mr Watson.
Five year sponsorship with Ford
274 As this claim, in respect of a 5 year agreement with Ford has not already been canvassed in the context of the claims that a joint venture agreement was concluded at least by 26 February 2001, it is necessary to briefly describe the relevant evidence. Mr Watson claimed that Ms Meagher, on behalf of Ford, authorised a new five-year Ford sponsorship at a meeting on 3 September 2001. This was for Ford to pay $4 million per year in sponsorship for five years. So far as 2002 was concerned, this merely involved adding $1 million as $3 million had already been promised (or ‘pre-pledged’ as Ms Meagher put it) as described above. Ms Meagher claimed that not only did she not authorise a five year sponsorship agreement, but also she did not have authority to do so. She said in oral evidence Mr Marsden of Ford was the person who would need to agree to such a proposal which would also be advised to Mr Polites. I accept her evidence. Apparently, in the end, Ford signed a five-year agreement with RPM at a reduced amount of $3 million per year, although it appears clear that Ford would not have made payments beyond 2002 because the sponsorship from Ford was tied to Mr Lowndes rather than to the team in which he chose to drive.
275 No express trust could arise in respect of these facts.
Disentitlement to equitable relief
276 Having found the facts did not give rise to any trust as claimed, it is not necessary to consider the respondents’ submissions in respect of conduct by Mr Watson and Mr Gibson said by the respondents to disentitle either of them to equitable relief.
277 In the alternative to the claims based on alleging an express trust, Mr Gibson claims a resulting trust on the basis that he made certain money contributions to RPM with which RPM acquired assets and that he transferred to RPM three specific assets, namely, a Ford Falcon V8 Supercar and assorted parts, a Pumpa Engineering Pantechnicon and furniture in Mr Heaphy’s unit. The evidence in relation to these items shows that none of them was a contribution of the kind which would give rise to any equitable principle for the restoration of contributions of the kind referred to in Muschinski at 620, applied in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 at 148/149 (per Mason CJ, Wilson and Deane JJ).
278 The money contributions which are particularised are all either sponsorship monies received by Mr Gibson which were all intended to be applied to RPM or monies received by Angora Towers Pty Ltd or Synarby Pty Ltd or on behalf of RPM.
279 Furthermore, the evidence showed that the Ford Falcon V8 Supercar and assorted parts were part of the assets RPM acquired from Bronzco. Further, the evidence showed the Pantechnicon and furniture referred to were part of RPM’s assets acquired as they were from the initial Ford sponsorship funds. Indeed this is admitted in paragraph 48A(c)(A) of the applicants’ pleadings. Mr Gibson never had a proprietary entitlement to any of these assets and never conducted himself as though he did. He received consideration either directly from RPM or through the retention of Ford sponsorship money received on 16 January 2001.
280 No resulting trust can arise in respect of these facts.
281 In the further alternative, it was claimed that Mr Gibson and GMM conferred benefits on RPM, BFC and Mr Forbes. The alleged benefits were:
(i) the Ford V8 Supercar and parts, the Pantechnicon and furniture in Mr Heaphy’s unit, all of which were purchased from Ford sponsorship funds and which were never the subject of a proprietary interest of Mr Gibson’s;.
(ii) use of the name GIBSON MOTOR SPORT;
(iii) the payments I have dealt with already in para 278 above, all of which were payments received on behalf of RPM; and
(iv) GMM's payment of royalties of 15% to RPM (for payment onwards to Mr Lowndes) or to Mr Lowndes through his designated company, which were the entitlements arising under his driver agreement with RPM.
Conclusion – Unjust Enrichment
282 None of the ‘benefits’ identified at (i) and(iii) above, said to be owned by Mr Gibson, were in fact owned by him. Mr Gibson permitted RPM to use his business name which was taken into account by himself and Mr Forbes when agreeing an annual management fee of $250,000. He intended RPM to use, but not retain, the business name and acted accordingly on 19 October 2001 when he negotiated a fresh licence to RPM for use of the business name.
283 The benefits which GMM is said to have conferred was the subject of agreement and the royalties only arose as a proportion of the sales made by GMM as a result of GMM’s authorisation by Mr Lowndes to exploit the commercial benefits of his celebrity. The fact that Mr Lowndes may have given this authorisation via his driver agreement with RPM does not alter this substantial fact. These payments cannot be characterised as a benefit for the purposes of claims of unjust enrichment.
284 The applicants’ estoppel case is that Mr Gibson, Mr Watson and their respective nominees undertook certain activities on the assumption from 7 December 2000 until 6 June 2001 that:
‘(a) the Joint Venture Agreement was binding and enforceable in its terms;
(b) Forbes and his nominees were obliged to act in good faith to implement the Joint Venture Agreement; and or
(c) alternatively, that Watson, Gibson and Forbes owed fiduciary duties to each other as joint venturers or alternatively persons negotiating a joint venture to the effect of the implied terms set out in paragraph 28C above.’
285 The findings already made in relation to the existence of a concluded joint venture agreement are a sufficient basis upon which to reject this claim.
286 However, for the sake of completeness, it can be noted the evidence did not disclose any reasonable basis for the pleaded assumptions.
287 To the extent that the applicants sought to imply a term into the alleged joint venture agreement to act in good faith in implementing the agreement, and to the extent that alternatively it is claimed that Mr Watson, Mr Gibson and Mr Forbes owed fiduciary duties as either joint venturers, or alternatively as persons negotiating a joint venture agreement, the evidence did not support such assertions.
288 Implied obligations to act in good faith in both the contractual performance and the exercise of contractual powers and duties were said to arise in fact to give business efficacy to the joint venture agreement. Reliance was placed on judicial observations said to temper the stringency of the well-known criteria for the implication of contractual terms in Codelfa. These included observations of Ormiston J in Vroon at 68; at 422 (per Brennan CJ and Dawson and Toohey JJ.) and 442 (per McHugh and Gummow JJ.); Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 at [16] (per Tadgell J) (with whom Buchanan and Chernov JJ agreed). The passages to which I have already referred in Hawkins v Clayton and Associated Alloys Pty Ltd v ACN 001 452 105 are also applicable. It was also submitted in the alternative that an implied term of ‘good faith performance’ arose by operation in law, in reliance on Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187 and Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 at [34] (per Finkelstein J).
289 The evidence that Mr Watson and Mr Gibson specifically wanted to take individual benefits for themselves under individual contracts and rejected opportunities to have a share in the ownership, control, rights or obligations of RPM is evidence that the relationships between the protagonists are governed by the common law in respect of contracts without any specific or far-reaching duty to act in good faith in the exercise of contractual powers, a duty which has been suggested in respect of quite different and distinguishable contracts: see Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263-270 (per Priestly JA).
290 Conclusions that there was no concluded joint venture agreement on either of the dates put forward, and findings that such agreements as were the subject of negotiation were individual agreements, make it unnecessary for me to deal further with this claim.
291 The applicants claim that on 1 June 2001 Mr Forbes offered, orally, to sell his shares in RPM at par value and to relinquish any interest he had in GMM if Mr Gibson and Mr Watson would arrange the repayment of loan funds of $2,250,000, which BFC had made to RPM. It was contended that the offer was accepted, orally by Mr Gibson, on 6 June 2001. The evidence in relation to this development is discussed above.
292 The respondents describe Mr Forbes’s indication at that meeting of the price he sought for the team was an invitation to treat rather than an offer. Alternatively, it was claimed that if it were an offer, it was an offer to sell provided the sale could be concluded by 30 June 2001.
293 The exchanges of correspondence between the protagonists on 13 July, 6 September and 7 September 2001 have already been dealt with above.
294 The applicants pleaded that Mr Forbes’s letter of 7 September 2001 breached:
‘(a) the Buy Out Agreement and his duties as trustee;
(a) the term of the Joint Venture Agreement set out in paragraph 28C(a) to 28C(c) above; and
(b) his fiduciary duties alleged in paragraph 30 . . .
("the breaches")’
295 The distinction between an invitation to treat and an offer capable of acceptance is well known, although not always easy to apply. An agreement to sell something at a particular price can be an invitation to treat if it is no more than providing information, without the intention to sell. The price Mr Forbes sought for any acquisition of RPM, was indicated on 1 June 2001 as part of Mr Forbes presenting two possible options to resolve relations between the protagonists. The whole of the evidence relevant to this issue indicates this indication of a sale price was an invitation to treat, inviting Mr Gibson and Mr Watson to make an offer, if that were their preferred option. Their subsequent conduct, evidenced by the correspondence referred to above, supports this finding.
296 If I am wrong and Mr Forbes made an offer capable of acceptance on the evidence, he attached an essential condition, which was that any sale was to be concluded by 30 June 2001. He gave plausible evidence about the essential nature of this condition, which I accept. He needed to use his TEGA franchise, he needed to honour contractual obligations which RPM had, and he needed to consider alterative buyers if there were any.
Conclusion – Buy Out Agreement
297 The whole of the evidence relevant to this issue showed there was no concluded ‘Buy Out Agreement’ on 6 June 2001 by reason of Mr Gibson accepting Mr Forbes’s ‘offer’ of 1 June 2001. If I am wrong and there was a concluded agreement on 6 June 2001, there was no specifically enforceable agreement, unless Mr Watson and Mr Gibson accepted Mr Forbes’s term that a ‘buy out’ be concluded by 30 June 2001. This they did not do either on 1 June, 6 June or subsequently in 2001. It was in fact clear even as late as Mr Watson’s letter of 13 July 2001 (which he had shown to Mr Battye) that Mr Watson’s position on that date was that he and Mr Gibson expressed ‘interest to proceed . . . subject to the appropriate terms and conditions being agreeing and funding being put in place . . .’ Findings already made in respect of the alleged joint venture agreement and alleged fiduciary duties and express and resulting trust claims, make it unnecessary to further consider this claim.
298 The applicants applied for relief, by way of constructive trust, on the basis that:
‘1. There was a specifically enforceable "buy out" agreement concluded on 6 June 2001 resulting in Mr Forbes being a constructive trustee of share in RPM o behalf of Mr Watson an Mr Gibson as beneficiaries.
2. "Joint Venture Assets" and any traceable proceeds were held on behalf of Mr Gibson and Mr Watson by reason of alleged breaches of terms of the alleged joint venture agreement or fiduciary duties arising out of the joint venture agreement or negotiations for the joint venture agreement. In the alternative, damages or equitable compensation was sought.
3. The express trust was breached by RPM and the third respondent, BFC knowingly by RPM assisted RPM’s breaches of express trust.’
Conclusion – Constructive Trust
299 The constructive trust claims in respect of the ‘buy out’ agreement have been covered by the findings of fact in respect of the ‘buy out’.
300 As to the other two constructive trust claims, there was no joint venture agreement, and negotiations conducted were for individual agreements. Further, there was no express trust as covered by the findings of fact in respect of that issue.
301 Having now made findings in respect of all trust claims made in the proceeding, it is appropriate to mention that the application seeks an order setting aside certain debentures sought by Mr Forbes and BFC and granted by RPM, in respect of RPM’s assets. In the light of the findings in respect of the various trust claims, no order as sought in respect of those debentures would seem appropriate.
302 It was claimed that the written agreement between RPM, FCG and Mr Gibson, licensing RPM to use the business name GIBSON MOTOR SPORT contained a term that the name would be used in accordance with the joint venture agreement. The term was said to be implied.
303 In fact, the licence relevantly provided:
‘THE NAME
FCG and Gibson by this Agreement licence and consents to the use of the Name whether alone or in combination with any other word, words, name or names being used by RPM for trading or other purposes.
(Clause 2.1)
THE DESIGN
FCG and Gibson by this Agreement licence and consents to the use of the design of the representation of the Name including the Intellectual Property Rights of the representation together with the colour, format, get up and style ("the Mark") whether alone or in combination with any other word, words, name, names or other design or representation being used by RPM for trading or other purposes.
(clause 2.2)
PAYMENT
In consideration of the licence of the Name and the Mark by Gibson and FCG, RPM agrees to pay to FCG the sum of $100,000 plus GST payable by equal monthly instalments in advance beginning on the first day of January 2002 during the Term.
(Clause 3.1)
FCG agrees to invoice RPM in respect of the payments prescribed in Clause 3.1 on the first day of each calendar month commencing on 1 January 2002.
RESTRAINT
FCG and Gibson undertakes that it will not, during the Term or any renewed term either solely or jointly with or on behalf of any other person, use the Name or the Mark.
(Clause 5.1)
The Parties agreed that in the event that Gibson and/or FCG breach Clause 5.1, RPM may forthwith and without notice terminate this Agreement and upon termination FCG and Gibson is liable to pay to RPM all of the payments received by them in accordance with Clause 3.1 of this Agreement.
(Clause 5.2)
VARIATION
Any modification, alteration, change of variation of any term or condition of this Agreement shall only be made in writing, executed by all Parties.’
(Clause 10)
It can be noted this agreement deals with more than the business name and includes what is described as ‘the Intellectual Property Rights in the Mark’ which I have already mentioned incorporates the business name. There was an option to renew beyond the term of twelve months.
304 On 14 February 2002 Mr Forbes gave notice on behalf of RPM that RPM no longer wished to use the GIBSON MOTOR SPORT name. He agreed in cross-examination that RPM used the name until January 2002 when a new business name ‘OO MOTORSPORT’ was chosen. It was alleged that RPM wrongfully terminated the licence.
305 The letter of termination claimed that Mr Gibson was in default of the agreement because he permitted GMM to continue to use the GIBSON MOTOR SPORT name in circumstances where RPM had put GMM on notice by letter of Andersen Legal dated 17 January 2002 that its authorisation to use the name GIBSON MOTOR SPORT in connection with the promotion and sale of merchandising material would cease on 31 January 2002.
306 It appeared not to be in contest that GMM continued to use the business name at least for some period beyond 31 January 2002 because a GIBSON MOTOR SPORT website continued beyond that date. The extent of any such use is very unclear.
307 Mr Watson’s evidence in respect of winding down GMM is brief. Just when final sales occurred is not clear. It is clear that the merchandise could not be dealt with by deleting the GIBSON MOTOR SPORT mark where it occurred on various items. The arrangements between RPM and GMM were not the subject of any clear agreement and are discussed in more detail in respect of the cross claim below. However, involving as they did complicated arrangements, whereby GMM sold merchandise which was ‘authorised’ by Mr Lowndes (through RPM) in respect of indicia connected with him and in respect of which he was entitled to be paid a 15% royalty, it is, I think, necessary to imply a term into the arrangement between RPM and GMM in accordance with principles and authorities or implied terms, that GMM was authorised to use the GIBSON MOTOR SPORT name for such period as was reasonable for the disposition of its stock by reference to the name/mark.
308 The implication of such a term is supported by clauses 5 and 15.3 of the driver agreement between Mr Lowndes and his company and RPM, both of which have been extracted above. To have attempted to wind down GMM without the implication of such a term may have risked breaching arrangements with Mr Lowndes, Ford and/or misleading or deceiving the consumers of the stock.
309 Not only is it impossible to determine accurately what use was made by GMM of the business name except to the extent that the company was not wound up by then or what use was made of the name as a trade mark after 31 January 2002, except for vague evidence about a website, but it also not clear when Mr Gibson knew of RPM’s notice of 17 January 2002 to Mr Watson and GMM of the cessation of permission to GMM to use the indicia relating to GIBSON MOTORSPORT. Whilst he was a director of GMM all the evidence indicated that Mr Watson ran GMM without input from Mr Gibson. Although Andersen Legal’s letter of 19 September 2001 claimed use of the GIBSON MOTOR SPORT name by Mr Watson and GMM was unauthorised and RPM sought immediate cessation of such use, as at 19 October 2001, when the licence agreement was agreed, GMM was continuing. Mr Forbes had not indicated otherwise at the meeting of 10 October 2001, although he had made it plain he wanted a formal agreement between RPM and GMM. This indication by Mr Forbes on 10 October 2001 is tantamount to RPM reversing the request for cessation of use on 19 September 2001. In these circumstances, RPM as licensee of the name/mark from 19 October 2001, would be obliged to notify the licensor of the cessation of the arrangements with GMM, in order to found an allegation against the licensor that it breached the licence agreement for continuing, or not revoking such consent to use, as GMM had confirmed in Mr Gibson’s presence on 10 October 2001 by Mr Forbes.
310 Mr Forbes’s evidence indicates he gave GMM notice of cessation of permission to use indicia relating to GIBSON MOTOR SPORT on 17 January 2001 in order to facilitate GMM complying with requests from RPM for access to its accounting records for the purposes of calculating any royalties outstanding to Mr Lowndes.
311 In any event, RPM did not use the name GIBSON MOTOR SPORT in the year 2002. The payments agreed were in consideration for a licence to use. Whilst the letter of 14 February 2002 purported to terminate ‘for cause’ (about which I cannot be satisfied to the requisite standard), equally it seems to me to be tantamount to giving written notice that RPM no longer wished to continue to use the name. While the agreement is expressed to be an entire agreement and contains no provision for termination in circumstances where the licensee no longer wishes to use the name, I would imply a term, on the application of principles and authorities already discussed, as it must be reasonable and necessary for a licence to use to be terminated in such circumstances. This also gives business efficacy to the agreement, otherwise the licensor would not be permitted to use a name/mark in circumstances when the licensee is no longer using it. This could affect the continuing reputation and goodwill in the name/mark, which are valuable to a licensor. RPM was entitled to give notice of no longer wishing to use the property, the subject of the licence. Mr Gibson was thereby released from all the obligations on him in respect of the name, such as refraining from using it himself. It seems to me a 14 day notice period of discontinuance of use is reasonable in all the circumstances.
Conclusion – Gibson Motor Sport Licence
312 In those circumstances, I find that RPM is liable to the licensor for the sums shown on the January and February 2002 invoices in respect of use of the name/mark as the monthly charges were to be invoiced on the first day of any month and payable in advance. It can be noted the circumstances included permitting RPM to use the name/mark from 1 November 2001 until termination or variation and evidence showed it was used during that period.
Trade Practices Act Breaches
313 A complex and rolled up plea alleging unconscionable conduct against Mr Forbes, BFC and RPM was abandoned at trial.
314 It was claimed that on 7 December 2000 Mr Forbes stated to Mr Watson and Mr Gibson ‘that he would participate in the Joint Motor Sport Business’ discussed between them on that day and subsequently failed to correct the ‘7 December 2000 representations.’ The Joint Motor Sport Business was described elsewhere in the pleadings as the undertaking of the joint venture agreement. It was alleged that by this conduct (whether Mr Forbes intended the joint venture to continue or not) Mr Forbes contravened s 52 of the Trade Practices Act and the s 9 of the Fair Trading Act of Victoria and s 42 of the Fair Trading Act of New South Wales. Section 51A of the Trade Practices Act was relied upon to the extent that the representation related to a future matter.
315 Whilst findings in respect of the joint venture agreement are probably sufficient to deal with these allegations of breaches of the Trade Practices Act and cognate State legislation, for the sake of completeness, the allegations that Mr Watson and Mr Forbes relied on the ‘7 December 2000 representations’ or silence by Mr Forbes, is not borne out by the evidence. Various steps, which they took after 7 December 2000, are consonant with individual agreements which they concluded with RPM, and in Mr Watson’s case, with Mr Lowndes as well.
316 It was clear, even by their own accounts, that neither held a belief that there was a joint venture agreement on foot when they discussed the need to finalise various contractual arrangements with Mr Battye on 14 February 2001 or when they agreed final arrangements with Mr Forbes on 26 February 2001. Also, for the sake of completeness, the evidence as it stands does not support, to the requisite standard, various allegations that Mr Forbes’s conduct caused loss and damage as particularised.
317 There is a further claim of breach of the Trade Practices Act. It is alleged that between 1 June 2000 until 17 January 2002, RPM and Mr Forbes represented to the applicants that the respondents intended that the joint venture agreement would continue in some form and when the applicants did not buy out the respondents’ interest in the joint motor sport business, Mr Forbes encouraged the applicants to continue to perform their part in the joint venture agreement. A cognate allegation is made against BFC in that it is alleged BFC was knowingly involved in RPM’s contraventions.
318 Equally, the findings already made in respect of the joint venture agreement cover this claim.
319 Next, there is a claim for contravention of s 52 of the Trade Practices Act and the Fair Trading Acts of Victoria (s 9) and New South Wales (s 42) by RPM and Mr Forbes in meeting with Mr Lowndes between late August 2001 to mid October 2001 without Mr Gibson and Mr Watson and bringing about Mr Lowndes’s to continue to drive for RPM without Mr Gibson or Mr Watson continuing to be involved. It is also alleged Mr Forbes’s meetings with Ford in late August to October 2001, again in the absence of Mr Gibson and Mr Watson, caused Ford to refuse to perform its obligations under the alleged Five Year Ford Sponsorship Agreement.
320 The findings in respect of the Five Year Ford Sponsorship Agreement cover this allegation in respect of Mr Forbes’s meetings with Ford.
321 As to the meeting with Mr Lowndes, the evidence already mentioned was that Mr Lowndes met with Mr Forbes and Mr Battye on 27 and 28 September 2001. Mr Lowndes did not make any decision then to exclude Mr Watson’s involvement. Indeed, at the meeting of 10 October 2001, matters were left on the basis that GMM would continue and nothing was said on 10 October 2001, which could be construed as a termination by RPM of either Mr Watson’s management agreement or any arrangement between RPM and GMM although Mr Forbes did seek a formal agreement in relation to the latter.
322 As to Mr Gibson’s position on 10 October 2001, Mr Forbes repudiated the Gibson Services Agreement by varying its terms in a way he knew would be unacceptable to Mr Gibson, which variation was in fact not accepted by Mr Gibson. Mr Lowndes gave evidence he made his final decision about remaining with RPM, despite Mr Gibson’s possible exclusion as team principal, on 10 October 2001. The evidence showed Mr Crompton, Mr Battye and Mrs Lowndes, as well as Mr Forbes were all having discussions with Mr Lowndes before 10 October 2001 about the future of the team. Any one or all of them may have influenced Mr Lowndes’s final decision on 10 October 2001, to continue to drive with RPM even if Mr Gibson did not continue as team principal. One of Mr Lowndes’s principal concerns was to continue earning his living and to remain with ‘the boys’, that is all the necessary staff. In all the circumstances, I find Mr Lowndes’s decision was caused by Mr Forbes’s decision to vary the Gibson Services Agreement, rather than being caused by anything said to Mr Lowndes. In all the circumstances, Mr Forbes’s conduct in meeting with Mr Lowndes in August and prior to 10 October 2001 does not and could not constitute misleading and deceptive conduct, as pleaded, giving rise to damages as claimed under the Trade Practices Act or the Fair Trading Acts of Victoria and New South Wales.
323 This is particularly so given that the applicants have pleaded that their loss and damage was suffered because, but for Mr Forbes’s conduct in meeting with Mr Lowndes, in their absence, they would have explained to Mr Lowndes ‘the true nature of the venture, that Gibson had not misused or misappropriated money and the continued importance of the applicants’ involvement in it (ie. the venture). . .’ None of that would necessarily have availed given Mr Forbes’s determination to take financial control.
324 Finally, leaving that issue to one side, and perhaps most importantly, the damages sought are damages flowing from the loss of opportunity to have exploited for themselves, what is described as ‘the Lowndes Opportunity and/or the Dumbrell Offer’ and to have thereby earned profits. The lost opportunity refers back to loss and damage claimed pursuant to other paragraphs in the statement of claim covering the loss of ‘the opportunity to conduct RPM’s business as part of a motor sport business from September 2001 until December 2006’ and a paragraph alleging a claim in addition to damages, for relief in the nature of a constructive trust. Part of the particularised damage covers the same damages awarded in respect of the contractual claims under the Gibson Services Agreement and the Management Agreement of Mr Watson with RPM. Claims to damages beyond that appear untenable, given the well understood principles of causation and the evidence relevant to these claims which has already been analysed.
325 Next, it was alleged that RPM (and Forbes and BFC through knowing involvement) contravened s 52 of the Trade Practices Act by engaging in misleading and deceptive conduct in passing off RPM as having an association with Mr Gibson until late March 2002, whereby RPM procured sponsorship between December 2001 and March 2002.
326 RPM was entitled to trade under the business name GIBSON MOTOR SPORT until it terminated the licence it had on 14 February 2002. I have already found RPM is liable for relevant licence fees in respect of any such trading. There is no evidence of RPM using an associated with Mr Gibson with any sponsor in the period between 14 February 2002 and the end of March 2002.
327 Further, it is alleged that Mr Forbes and BFC contravened s 52 of the Trade Practices Act and cognate sections of the Fair Trading Acts of Victoria (s 9) and New South Wales (s 42) by engaging in misleading and deceptive conduct in relation to proposals to sell Mr Forbes’s shares in RPM and BFC’s ‘interest’ in GMM. It is claimed that Mr Forbes represented he was prepared to sell his shares in RPM for a nominal sum to Mr Watson and Mr Gibson provided they would discharge any loans by him (or monies) to RPM. The evidence does not support this and findings already made in respect of the Buy Out Agreement issue cover these allegations.
328 Further, BFC never applied for or paid for shares in GMM and Mr Watson was well aware of this at least as early as April 2001 that the only shareholders and directors in GMM were himself and Mr Gibson.
Conclusion – Trade Practices Act Claims
329 In accordance with the evidence referred to in respect of the trade practices claims, and incorporated by reference in the findings otherwise in the reasons above, none of the claims under the Trade Practices Act or Fair Trading Acts was made out.
330 Cognate allegations were made against RPM from the date of its incorporation (12 December 2000) and BFC in that it was alleged each of RPM and BFC was knowingly involved in Mr Forbes’s representations complained about and failed to correct them.
331 As the evidence, including the evidence extracted in these reasons, did not support the claim that it was ever agreed that there be a joint undertaking by Mr Forbes, Mr Gibson and Mr Watson, the allegations based on the Trade Practices Act and cognate sections of the Fair Trading Acts of Victoria (s 9) and New South Wales (s 42) which depend on that assertion cannot be made out.
332 The cross claim is dependent on establishing three claims: two against Mr Gibson, the first of which was also made against FCG, and one against GMM, as third cross-respondent, which can be summarised as follows:
1. A claim against Mr Gibson and FCG arising from Mr Gibson’s alleged breach of the Gibson Services Agreement and his fiduciary duty as manager to act in the best interests of RPM, by reimbursing F.C. Gibson Pty Ltd, from funds belonging to RPM for expenses not authorised by or incurred on behalf of RPM.
2. A claim against Mr Gibson for breach of his duties to act with reasonable care as agent for RPM and as manager for the Race Team and to exercise reasonable care to act in the best interests of the race team concerning money received from Mr Parsons.
3. A claim against GMM for an account of profits and the payment of any moneys due under what the respondents called the ‘Implied Merchandise Agreement’.
333 The first claim against Mr Gibson and FCG related first to components of an invoice of FCG directed to RPM in the sum of $60,534 described as ‘Reimbursement of accounts paid to 31 December 2000 relevant to 2001 race program.’ Secondly, the first claim also included an amount of $5,977.13 paid by RPM for amounts owing to Anderson Construction. Other payments for construction were withdrawn. A third component of the claim was a payment of $10,000 to William Bond which not pressed at the close of hearing.
Adelaide marketing expenses and Pumpa transporter expenses
334 Mr Gibson gave evidence that he informed Mr Forbes that he proposed to charge the team for the Adelaide marketing expenses and the Pumpa Engineering transporter, which were items in the abovementioned invoice. Mr Forbes accepted that Mr Gibson or FCG should be reimbursed for the ‘Pumpa’ transporter and RPM took ownership of that asset in due course.
335 Mr Forbes denied, however, that he ever authorised reimbursement of the Adelaide expenses. However, it was part of the respondents’ case that the Adelaide proposal remained a ‘live’ proposal until April 2001 and Mr Stanley admitted in his oral evidence that the allegedly ‘unauthorised’ expenses had been entered into RPM’s expense accounts. Mr Forbes’s agents, his accountants, knew of the expenses. There was no evidence such expenses were not treated as expenses for the purposes of RPM’s relevant tax return. Mr Russell, the independent expert for the respondents, gave evidence, which I accept that RPM accounted for the expenses in its books as claimed.
336 When cross-examined, Mr Gibson gave evidence he assumed Mr Forbes would want to become involved in the Adelaide proposal and Mr Forbes had not demurred when Mr Gibson stated he wanted to treat the Adelaide proposal as part of ‘our current motorsport program.’ Mr Forbes may well take the view that the act of not disagreeing with what Mr Gibson said does not amount to authorisation of the expenses, which would explain his evidence. Mr Battye revealed in his evidence that he understood the Adelaide proposal may have allowed RPM to expand from a two car team to a three car team. This corroborated Mr Gibson’s evidence that the Adelaide proposal could have resulted in an advantage to RPM. On the totality of evidence relevant to this topic, none of which I reject, it is not possible to be satisfied to the requisite degree that Mr Gibson or FCG is liable to RPM for breaches of the Gibson Services Agreement as alleged in respect of the Adelaide proposal expenses. I am satisfied that prior to April 2001 it was a real possibility that RPM could have obtained some commercial benefit from the proposal.
337 In all the circumstances, I find that neither Mr Gibson nor FCG are liable to RPM in respect of the first item of the first claim in the cross-claim.
338 In relation to expenses to Anderson Construction and an amount paid to the local council, the expenses concerned better lighting and the building of a dedicated security bay for a new car of Mr Lowndes, and filling in an external wall. Mr Gibson gave evidence that he had discussions with Mr Forbes about the expenses at the premises and pointed out the improvements were specifically for RPM as tenant. Mr Forbes suggested building expenses could be paid by the landlord who could then increase the rent. Mr Gibson also gave evidence that he heard nothing more from Mr Forbes about this at the time but as a result of Mr Forbes not being ‘happy’ with RPM paying for improvements, Mr Gibson ceased further work on them and had Angora Towers Pty Ltd pay an outstanding invoice to Anderson Constructions in the sum of $64,936.56. Mr Gibson did not increase the rent.
339 Mr Russell stated in his cross-examination that he was instructed that all claims for building expenses, save for the sum of $5,977.13, had been abandoned. This was an expense relating to the filling in of an external wall.
340 Mr Forbes conceded in his evidence that he had told Mr Gibson filling in the external wall was a ‘good idea’ but had done so on the basis that it was an expense to the landlord. It was not surprising that Mr Gibson misunderstood Mr Forbes’s observation and misinterpreted it as an authorisation by Mr Forbes on behalf of the tenant for the improvement. Whilst the other construction expenses, in respect of which claims were withdrawn are easily understood as being improvements incurred on behalf of the tenant, there is no evidence which allows me to conclude filling in an external wall was for the specific benefit of the tenant, RPM. Mr Russell gave evidence in cross-examination that this invoice was not merely an invoice in a series of construction invoices for work for RPM’s benefit.
341 When Mr Gibson was cross-examined he distinguished between invoices. The invoice for $64,536.56, which Angora Towers Pty Ltd paid he readily conceded covered ‘landlord expenses’, whereas expenses on a separate and earlier invoice (which included the disputed sum of $5,977.13) were recognisable by Mr Gibson as ‘expenses incurred on behalf of the tenant.’ By his conduct, Mr Gibson appeared to recognise that apparent authority which Mr Forbes gave in respect of the construction expenses was able to be varied by Mr Forbes.
342 It seems to me on the evidence, that the cost of filling in the external wall is an expense ‘to the landlord’, which happens, it seems, to have been included on an invoice which otherwise deals with a list of items agreed to be ‘expenses occurred on behalf of the tenant.’ Accordingly, I find Mr Gibson, on behalf of Angora Towers Pty Ltd, should account to RPM for the sum of $5,977.13, which may be done by an order for repayment of that amount together with interest. It should be noted, given all the circumstances described above, I do not regard this reimbursement of $5,977.13 as amounting to a material breach by Mr Gibson of the Gibson Services Agreement.
343 The second claim against Mr Gibson was that he failed to act with reasonable care and in the best interests of the race team in respect of cash sums received from Mr Parsons.
344 Mr Parsons asked Mr Gibson if he could drive with the team on the basis of paying $50,000 in cash for each of six races. Mr Gibson gave evidence he discussed this proposal with Mr Forbes. Mr Forbes agreed with this when cross-examined. The evidence indicated each of Mr Gibson and Mr Forbes regarded the proposal as a messy one but I am satisfied each was willing to accept the proposal because the team needed the money it could earn from accepting it. Mr Forbes said although he agreed he wanted Mr Gibson to account properly for the funds received. Independent expert accounting evidence confirmed that Mr Parson’s payments totalled $200,000, not $300,000 as had been agreed.
345 Mr Goodrick raised the issue of the team providing tax invoices to Mr Parsons in or about July 2001 and Mr Gibson kept asking him to refer the issue to Mr Forbes. Mr Gibson gave evidence he kept Mr Forbes informed of the arrangement with Mr Parsons. The respondents complain that Mr Gibson breached duties to act with reasonable care and diligence in respect of the transaction yet the evidence is Mr Forbes sanctioned it as helpful to the team’ financial position. Thus, the complaint is narrowly one that money was not properly accounted for. Mr Gibson and Mr Forbes ultimately had a discussion on 15 October 2001 about Mr Parsons’s payments. Mr Gibson gave Mr Forbes $40,000 in cash and otherwise explained how the balance had been spent. I am satisfied of the truth of this evidence. The narrative Mr Gibson gave in respect of these circumstances was full of verisimilitude and was not denied. Mr Gibson gave sworn evidence all of the money from Mr Parsons was spent paying team expenses.
346 The respondents’ final complaint about Mr Parsons’s money by the end of the hearing was that Mr Gibson has not sufficiently verified the accounting he gave to Mr Forbes in respect of these cash sums on 15 October 2001. A further complaint is that dynamometers paid for with $20,000 of Mr Parsons’s money were installations of the landlord and prima facie Angora Towers Pty Ltd should have been paid for this. Finally, a recorded cash sale of $9,600 lacks details and small expenses such as petty cash have not been verified.
347 Mr Gibson was not challenged in cross-examination in relation to his sworn evidence that all of the money from Mr Parsons was spent on team expenses. From this I an entitled to infer that expenses of dynometers were incurred for the benefit of RPM even if Angora Towers Pty Ltd or Mr Gibson retained ownership of the dynometers. I am also entitled to infer that the fact that petty cash expenses were incurred is not seriously contested. Mr Russell gave evidence that the Parsons’s payments had all been brought to account as income to RPM. There is no evidence they were not treated as such by RPM for taxation purposes.
348 It is not possible to be satisfied to the requisite standard that Mr Gibson in all the circumstances failed to act with reasonable care and diligence as agent of RPM and as manager of the race team, or failed to exercise reasonable care to act in the best interests of RPM and the team.
349 The third claim in the cross-claim is that the first applicant has not made any royalty payment to RPM for passing on to Mr Lowndes other than those made to Mr Lowndes on 31 July and 31 October 2001 and that it has failed to give RPM’s accountant unfettered access to its accounts as sought on 28 and 29 November 2001 after relations had broken down.
350 The applicants’ case in respect of GMM was that it was part of the joint venture agreement as pleaded and the applicants particularised ‘trading losses’ of $80,000 of GMM said to have arisen because stock was sold at heavily discounted prices. There was no claim in respect of these losses on the basis of any alternative contract claim between RPM and GMM, possibly in recognition of the difficulty in proving there was ever such a concluded contract. The evidence showed that Mr Watson knew in April 2001 that Mr Forbes had not consented to be a director of GMM nor had he or any nominee of his paid to take up a one-third share subscription. Mr Watson gave evidence he did not raise this with Mr Forbes because in early April Mr Forbes and Mr Gibson had a serious quarrel. The evidence also showed that although Mr Forbes was consulted about the lease of a pantechnicon, and informed of some matters concerning GMM, GMM was run quite independently, of either Mr Forbes or RPM, by Mr Watson as manager (or a nominee company of his). In Mr Watson’s cross-examination the following exchange occurred:
‘Mr Jopling: But GMM bought the trust, did it not, the pantechnicon?
Mr Watson: The merchandising business.
Mr Jopling: RPM didn’t have anything to do with it?
Mr Watson: No, it was never planned to be. The merchandising business has to be responsible for its own thing.’
351 The respondents’ claim was that there was an agreement between RPM and GMM to be implied from a course of conduct that GMM was to remit 15% royalties to RPM for distribution by RPM to Mr Lowndes (or his company) under the driver agreement in consideration for permission as required by GMM to conduct merchandising by reference to indicia owned by or under the control of RPM and/or Mr Lowndes and/or Mr Gibson.
352 Photographs in evidence of sample merchandise such as T-shirts show use of the Gibson name plus the stylised ‘G’ design, use of the GIBSON MOTOR SPORT name/mark, use of Mr Lowndes’s name and use of Ford’s name.
353 The totality of the evidence relevant to these issues indicates that there was an arrangement (never formalised) whereby RPM and/or Mr Lowndes (through RPM) authorised use of certain indicia belonging to RPM. The arrangement cannot be described correctly as an ‘Implied Merchandising Agreement’. Mr Lowndes, by virtue of his driver agreement with Ford authorised GMM to use Ford’s name. Mr Gibson and FCG by virtue of the consent to RPM, authorised GMM to use the business name GIBSON MOTOR SPORT as part of the corporate name GIBSON MOTOR SPORT MERCHANDISING PTY LTD and Mr Gibson (or FCG) acquiesced in GMM’s use of the mark GIBSON MOTOR SPORT with or without the stylised ‘G’ device. The evidence also showed royalty payments were paid as described above. Royalties were paid by GMM directly to Craig Lowndes Pty Ltd without any protest from RPM.
354 The evidence showed GMM had not accounted to RPM for royalties payable on sales after 1 October 2001, something which Mr Watson had originally agreed to do. There was no contest sales were made. Mr Watson gave evidence that a letter had been written to Mr Lowndes indicating that GMM would not ‘walk away from what moneys were outstanding, equally on the moneys he owed us.’ In this context, there is no evidence before me of what arrangements were reached between Mr Lowndes and his company and Mr Watson and any of his companies to achieve an orderly winding down of the management agreement between those parties, which may have had some impact on the winding down of GMM. Subject to Mr Lowndes, or his company, making a claim on RPM for such royalties, GMM is liable to account to RPM in respect of royalties for sales made by GMM between 1 October 2001 and the date upon which the last sale was made.
355 On the filing of an affidavit from Mr Lowndes evidencing that he has made a claim or intends to make a claim within a specified period against RPM in accordance with his driver agreement with RPM, for the payment of those royalties, I will order an account by GMM to RPM in respect of royalties payable on sales from 1 October 2001 until cessation of trading by GMM.
356 In my opinion the applicants are not entitled to the relief sought in the application other than some relief as sought in paragraph 9 in respect of the Management Agreement, the Gibson Services Agreement and the Gibson Motor Sport Licence. Further, the cross claim will be dismissed, save for the possible claim for an account by GMM to RPM dealt with above, and the minor claim in respect of the cost of external cladding of a building owned by Angora Towers Pty Ltd. I shall not make orders today but shall adjourn the matter to a date to be fixed to allow the parties to bring in short minutes in respect of final orders on liability and for directions in relation to any further hearing in respect of quantum and for final orders on the cross claim, as appropriate, and for any consequential orders, particularly in respect of orders made by Weinberg J. on 23 December 2002. Costs can be determined at the conclusion of any hearing in respect of quantum.
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I certify that the preceding three hundred and fifty six (356) numbered
paragraphs are a true copy of the Reasons for Judgment herein
of the Honourable
Justice Crennan.
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Associate:
Dated: 9 June 2005
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Counsel for the Applicant:
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Peter Hayes QC
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Michael Rivette
Scott Wotherspoon |
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Solicitor for the Applicant:
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Madgwicks Lawyers
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Counsel for the Respondent:
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Peter Jopling QC
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Peter Gray
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Solicitor for the Respondent:
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Allens Arthur Robinson
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Date of Hearing:
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15 June to 2 July 2004
9 July 2004 19 July 2004 26 to 27 July 2004 |
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Date of Judgment:
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9 June 2005
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2005/749.html