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Federal Court of Australia |
Last Updated: 3 July 2001
POS Media Online Limited v Queensland Investment Corporation
TRADE PRACTICES - Negotiations concerning installation of advertising screens in shopping centres - Whether respondents' conduct was unconscionable or misleading - Whether respondents contravened provisions relating to acceptance of services.
CONTRACT - Formation of contract - Whether there was an over-arching contract between the parties requiring them to determine suitable locations for screens in each centre, with an obligation on each party then to execute a formal licence agreement in respect of that shopping centre - Intention of parties - Four licence agreements (out of an intended eight) executed by proposed licensee, but not by the proposed licensor - Agreements contained some interdependent terms - Whether licensor was bound by the four executed agreements - Whether respondents estopped from denying existence of a contract.
QUASI-CONTRACT - Quantum meruit - whether applicants are entitled to recover from the respondents the value of work done by them in anticipation of entering a contractual relationship.
Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387 distinguished
Sabemo Pty Ltd v North Sydney Municipal Council [1977] 1 NSWLR 880 not followed
Trade Practices Act 1974: ss 51AA, 52, 58
POS MEDIA ONLINE LIMITED and MALL MEDIA AUSTRALIA PTY LIMITED v QUEENSLAND INVESTMENT CORPORATION, PACIFIC ECHO PTY LIMITED, EASTLAND PROPERTY HOLDINGS LIMITED, WATERGARDENS PTY LIMITED, PERPETUAL TRUSTEES AUSTRALIA LIMITED, CANBERRA CENTRE INVESTMENTS PTY LIMITED, QIC LOGAN HYPERDOME PTY LIMITED, JOHN CLIFFORD LONGHURST
N803 of 2000
WILCOX J
29 JUNE 2001
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
1. The Application be dismissed.
2. The Cross-Claim be dismissed.
3. The applicants pay the costs incurred by the respondents in relation to the proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
JUDGE: |
WILCOX J |
DATE: |
29 JUNE 2001 |
PLACE: |
SYDNEY |
1 This case arises out of a proposal by the applicants, POS Media Online Limited ("POS Media") and Mall Media Australia Pty Limited ("Mall Media"), to install video screen based media delivery systems into shopping centres managed by Queensland Investment Corporation ("QIC"), the first respondent. QIC manages the centres on behalf of various owners, who are the second to eighth respondents in the proceeding.
2 POS Media and Mall Media claim that, during the course of negotiations between them, on the one hand, and QIC, on the other, one or more legally enforceable contracts came into existence, which has or have been breached by the respondents. The respondents dispute the formation of any contract. Alternatively, POS Media and Mall Media say the respondents are estopped from denying the existence of a contract. The respondents dispute this.
3 POS Media and Mall Media also allege contraventions by QIC of various provisions contained in the Trade Practices Act 1974: s 51AA (unconscionable conduct), s 52 (misleading conduct) and s 58 (acceptance of services). The respondents deny the alleged contraventions.
4 Further, QIC (which is a statutory authority established under Queensland legislation) disputes it is bound by the Trade Practices Act. On one view, this may not matter. POS Media and Mall Media make similar allegations under Queensland, New South Wales and Victorian Fair Trading legislation.
5 The applicants claim orders in the nature of specific performance of the alleged contracts, and/or damages and/or payment as on quantum meruit or equitable compensation.
6 POS Media and Mall Media are related corporations. Except where it is necessary to do so, I will not distinguish between them. I will use the abbreviation "POS" to refer to them jointly, or either one of them acting on behalf of the other.
The proceeding
7 The proceeding was instituted on 25 July 2000. It was assigned to Lehane J. The applicants moved for interlocutory relief. Their application was heard by Lehane J on 7 August 2000 but dismissed on 17 August. However, his Honour accepted the desirability of an early final hearing and directions were made to enable the evidence to be taken over the period 17 to 24 November 2000. At the conclusion of the evidence, on 24 November, some submissions were made but they were not able to be completed that day. Lehane J made directions for the provision of further submissions in writing.
8 Unhappily, at about the time the written submissions were provided, Lehane J became seriously ill. He was unable to do further work on the case. In January 2001 the proceeding was re-assigned to me.
9 On 26 February 2001 I conducted a hearing during which counsel for each of the parties outlined their cases and directed my attention to the more significant items of evidence. That hearing proceeded on the basis that I would, thereafter, read the whole of the evidence; and also listen to the tape recording of any oral evidence whose veracity was under challenge, if that seemed a useful thing to do. I would then hold a two-day hearing at which counsel would address me more fully, in the light of my then greater knowledge of the evidence. Counsel indicated they might call additional evidence, in relation to one matter, at that time.
10 I followed the agreed course. Prior to resumption of the hearing on 10 April 2001, I read the written evidence but I did not listen to any tape recordings of evidence. I am satisfied it is not useful to take that course. When the matter resumed on 10 April, counsel called some additional evidence relating to conveyancing practice. Counsel for both parties then addressed at some length. The hearing concluded at 4.30pm on 11 April when I reserved judgment.
11 It will be apparent from the above recital that, in reaching factual conclusions in this case, I have lacked the usual advantage of a trial judge, of having seen and heard all witnesses give their evidence. Under some circumstances, that would be an enormous handicap, making confident fact-finding extremely difficult, if not impossible. However, as will appear, this is substantially a documentary case. There are some disputes about primary facts; but I think only one of them is of significant importance. Substantially, the case turns on the contemporaneous documents.
The applicants' contract case
12 Before setting out the relevant facts, it is convenient for me to note the manner in which the applicants put their case in relation to breach of contract. Their counsel, Mr N Cotman SC, explained they contend for two positions, alternatively or cumulatively.
13 First, the applicants say there came into existence in July, or alternatively September or October 1999, an over-arching informal, but enforceable, legal agreement whereby POS and QIC committed themselves to the installation in QIC shopping centres of advertising screens supplied by POS. Counsel says the over-arching agreement, which was created orally and by exchanges of correspondence, required the parties to enter into an individual licence agreement in respect of each shopping centre, once they had agreed on the number, and location, of screens to be inserted in that centre - as they did by early November 1999. Counsel says the only reason there was no formal over-arching agreement was that the parties became bogged down in the detail of screen numbers and locations; but this does not derogate from the fact that an over-arching agreement was informally agreed. Counsel argues the applicants are entitled to orders enforcing the informal over-arching agreement.
14 The second position put by counsel is that there was a non-contractual understanding between the parties, that they would later enter into a series of binding licence agreements. Counsel argues this understanding was carried into effect, at least in respect of four shopping centres, when, on 28 October 1999, POS executed licence agreements in respect of those four centres. It is submitted that, whether or not the applicants are entitled to relief in relation to the remaining four centres, these four agreements ought to be enforced.
15 Having regard to the manner in which the applicants put their contract case, it will be convenient, after mentioning the early negotiations, to deal with the situation in each of the months of July, September and October 1999; the purpose being to consider whether it is correct to say, in relation to that month, that the parties had by then subjected themselves to a legally-binding over-arching agreement. I will then examine the more complicated situation as at the end of November 1999.
Early negotiations
16 POS is a digital media and technology organisation. At all material times, the chief executive officer of both POS Media and Mall Media was Peter Ross Aynsley. Mr Aynsley played a leading role in the negotiations with QIC that led to this proceeding.
17 It appears the earliest contact between POS and QIC occurred in November 1998 when a POS sales manager contacted Melissa Caruana-Moodie of QIC. Following that contact, Mr Aynsley had a meeting with Ms Caruana-Moodie. On 8 December 1998 he wrote to her outlining a proposal for POS to install digital screens in shopping centres managed by QIC, on the basis that QIC would receive a share of the advertising revenue generated by the screens. On 16 December Ms Caruana-Moodie acknowledged this letter and mentioned the need for advice from QIC's solicitors, Allen Allen and Hemsley ("Allens").
18 On 30 December POS received a draft licence agreement relating to one of the centres managed by QIC, Canberra Centre. This document was apparently prepared by Allens.
19 There followed a period of discussion about the terms of the draft agreement. The Allens partner handling the matter was Mark Stubbings.
20 Ms Caruana-Moodie's supervisor in QIC was Daryl Stubbings, the national manager, retail leasing and management. On 18 January 1999 Ms Caruana-Moodie made a report to him recommending QIC proceed with the POS proposal.
21 It seems Mr Daryl Stubbings was attracted to the proposal but he wanted further information. He took over carriage of the project and arranged for Grayham Rundle, the POS marketing director, to travel to Brisbane, where Mr Stubbings was based, for further talks. During February 1999 there were discussions and exchanges of letters.
22 On 2 March 1999 Mr Stubbings wrote to Mr Rundle. He referred to the correspondence and went on:
"In principle, there is general agreement with the matters that have been raised to date. As we discussed, prior to reviewing specific locations on site with the Centre Management Teams, could you please forward a `draft' agreement for our review. This document should contain the essential terms other than the commercial elements of the proposal, which obviously cannot be discussed until the specific sites are identified.Please note that final Board approval will be required prior to moving forward with any agreement."
23 Mr Aynsley requested Roxburgh & Co, solicitors, to review the draft agreement that had been prepared in December. Over ensuing months, there was correspondence about this, and also about joint visits, to each shopping centre, by representatives of the parties; the purpose being to identify suitable positions for video screens. There was also correspondence about the benefits, and practical operation, of the screens. This included predictions about the available advertising revenue.
The July "over-arching agreement"
24 It is common ground that Mr Aynsley and Mr Daryl Stubbings had a telephone conversation on about 5 July 1999, during which there was a reference to the parties looking at Castle Towers centre, then at an advanced stage of construction, as being the possible location of the first set of video screens. There is a difference between the two men as to whether Mr Stubbings told Mr Aynsley (as the latter asserts) that QIC had "reached a point where we are happy to proceed" or merely (as Mr Stubbings says) that the reference to Castle Towers was in the context of "once an agreement has been reached" by both parties. It does not matter who is correct. What is clear, and more important, is that Mr Stubbings wrote to Mr Aynsley on 15 July informing him QIC had instructed Allens to redraft the proposed licence agreement. In the course of that letter, he said:
"Subject to the finalisation of documentation satisfactory to the board of QIC we propose to proceed with POS Abilities generally in accordance with the correspondence between QIC and POS."
25 On the same day, Mr Aynsley acknowledged this letter. In the course of his response, he advised of a name-change, from "P.O.S. Abilities Pty Ltd" to "P.O.S. Media Online Pty Ltd", and that it was intended this company would become a public company within a few weeks. Mr Aynsley also said the contracting party with QIC would remain Mall Media, a fully owned subsidiary of POS Media. He expressed willingness "to meet at Castle Towers at any time, and to identify that property as the first in the roll-out in order to co-ordinate with your late September opening date".
26 In an affidavit made on 26 July 2000, Mr Aynsley said he sent a fax letter to Mr Stubbings on 16 July 1999. Initially, some weight was put upon the contents of that fax. However, Mr Stubbings denied having received it. During the trial before Lehane J, time was devoted to the question whether the fax was sent. It is now conceded by Mr Cotman that there is no evidence this fax was sent. It is possible Mr Aynsley composed the fax, on or about 16 July, but decided not to send it, possibly because he did not wish QIC to feel it was being subjected to undue pressure. Whatever the truth about that speculation, having regard to Mr Cotman's concession, it is unnecessary to refer to the terms of the proposed fax.
27 Mr Stubbings gave evidence, which was accepted by Mr Aynsley, that there was a telephone conversation between the two of them on 16 July in which Mr Stubbings said words to the following effect:
"I have arranged for Mr Mike Figallo, the Victorian Operations Manager, to conduct and co-ordinate a tour of the Shopping Centres with Roger Levitt to look at possible locations in the Shopping Centres for the installation of video screens."
Mr Levitt was a POS employee who had been charged with the task of arranging installation of the screens in the selected shopping centres.
28 In para 22 of the Further Amended Statement of Claim, the applicants plead the first of the agreements alleged by them in these terms:
"By reason of the letters of 15 and 16 July 1999 and the conversation of 16 July 1999 it was agreed between the parties that the Respondents would acquire the Applicants' services in the malls or centres owned or controlled by the Respondent upon terms that:-(a) The Applicant and First Respondent would negotiate in good faith to settle in full the terms on which the Applicants would install and operate screens in each of the malls, with the second applicant as the contracting party with the mall owner(s) being the Respondents herein (`the Mall Agreement');
(b) while negotiations to finalise the terms of the Mall Agreement were being conducted between the parties, the Applicants would:
(i) undertake the site surveys, discussions, recommendations, and negotiations as to the placement of screens in conjunction with the Respondent's representatives and particular centre management, with a view to agreeing the number and location of screens in each centre,
(ii) disclose confidential information to the First Respondent and the centre managers;
(iii) prepare and submit to the First Respondent plans and photomontages to reflect the agreed number and locations of screens;
(c) whereupon, the parties would execute, in respect of each particular centre, the Mall Agreement, added to or amended to the extent necessary to reflect the identity and features of each particular mall or centre and particular arrangements as to screen numbers, location and installation that had been so agreed between the parties.
This agreement is hereafter referred to as (`The Head Agreement')."
29 The pleading goes on to claim that, pursuant to the Head Agreement: first, on 16 July 1999 QIC submitted to the applicants a further revision of the draft "Mall Agreement"; and, second, POS (by Mr Levitt) and QIC (by Mr Figallo) conducted surveys and meetings in connection with the proposal.
30 Paragraph 25 of the pleading alleges that, between 2 August 1999 and 17 August 1999, further revisions of the draft agreement were exchanged between the applicants and QIC.
31 The evidence shows this allegation is correct. There was an important issue, in August 1999, as to "exclusivity"; that is, whether there should be a clause in the agreement prohibiting QIC from granting, to anybody else, rights similar to those given to POS. Allens thought an exclusivity clause might turn the agreement into a lease. There was correspondence about ways to avoid that result. It was not until early September that the exclusivity question was resolved.
32 Paragraphs 56, 57 and 58 of the Further Amended Statement of Claim plead the effect of the "Head Agreement". Those paragraphs are in this form:
"By reason of the Head Agreement between the Applicants and the Respondents, the Respondents are obliged to do all such things and execute all such documents as are necessary to permit the Applicants to install and operate their equipment according to the general terms of the Mall Agreements in fact executed, as amended or modified to refer to the centres for which no Mall Agreement has yet been executed but in respect of which locations of screens have been agreed.By reason of the Head Agreement, the executed agreements and the centres in respect of which the Respondents are obliged to execute agreements, the Second Applicant is entitled to enter into the centres and install and operate its equipment upon the terms of the executed agreements or the agreement for an executed agreement.
In the alternative, the Respondents are estopped from denying there is a legally enforceable agreement in the terms of the executed Mall Agreements and in respect of each of the centres referred to in paragraph 4, amended or modified so as to refer to the centres in respect of which there is no executed agreement."
33 It seems to me these claims are misconceived. There is no evidence to support the view that the parties intended, on or about 15 and 16 July 1999, immediately to create a contractual relationship. Since an early stage of the negotiations, both parties had contemplated a formal written agreement setting out the terms of their relationship. QIC had instructed Allens to prepare an appropriate form of agreement and POS had retained Roxburgh and Co to consider, and advise upon, Allens' draft. Discussions about the terms of the agreement were incomplete as at 16 July. In particular, the important issue of exclusivity was unresolved.
34 It may be accepted that, at 16 July 1999, Mr Aynsley and Mr Daryl Stubbings had a mutual expectation, based on their discussions, that Mr Figallo and Mr Levitt would soon commence visits to selected QIC shopping centres, with a view to briefing the centre managers about the proposal, identifying suitable screen locations in each centre and preparing plans and photomontages of the selected locations. It may also be accepted that Mr Aynsley and Mr Daryl Stubbings envisaged that, if agreement could be reached about those matters and, also, standard licence terms, in due course the parties would enter into binding licence agreements. However, there is nothing to suggest that, in July, either man intended to create a legally binding commitment to that effect. On the contrary, so far as Mr Stubbings was concerned, he had told Mr Aynsley on 15 July that QIC's proposal to proceed with POS "generally in accordance with the correspondence between QIC and POS" was "[s]ubject to the finalisation of documentation satisfactory to the board of QIC". Mr Aynsley had not demurred to that exposition of the situation. There was no legally binding agreement as at 16 July 1999.
35 In relation to estoppel, POS relies on the doctrine of promissory estoppel discussed by the High Court of Australia in Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387. However, that case depended upon the fact that the appellant allowed the respondents to act to their detriment, in demolishing a building, in the belief that the appellant would proceed with an exchange of contracts for purchase of the property. In the present case, as at 16 July 1999, POS was not under any misapprehension of the salient facts or as to QIC's position. Accordingly, there is no basis for contending that QIC was estopped from denying the existence of such an agreement. The claim made by POS in respect of the first of the claimed contracts must be rejected.
The September "over-arching agreement"
36 The next date, as at which POS claims the creation of a legally binding agreement, is 17 September 1999. As mentioned, there were negotiations between mid-July and early September about the terms of an exclusivity clause. That issue was discussed between Mr Aynsley and Mr Daryl Stubbings on 1 September. On the following day, Mr Aynsley sent a fax to Mr Stubbings in which he confirmed his agreement to certain terms, apparently being those discussed on 1 September. Mr Stubbings did not immediately respond to this fax. He discussed the proposed terms on 6 September with Laurie Brindle, QIC's senior manager, property investment and development. Mr Brindle was senior to both Mr Stubbings and Mr Stubbings' immediate superior, Robert Swann, QIC's property portfolio manager. The case has been conducted on the basis that Mr Brindle enjoyed a delegated authority that would have enabled him to exercise the powers of QIC's board of directors in relation to this transaction.
37 Apparently Mr Brindle was agreeable to the terms set out in Mr Aynsley's fax of 2 September. On 7 September Mr Stubbings conveyed the terms to Mr Mark Stubbings of Allens, as being amendments to which "we have now in principle agreed".
38 Mr Aynsley deposed that "within a week or so" of his letter of 2 September, Mr Daryl Stubbings said to him: "Your letter is fine. I'm now asking our lawyers to issue the final documents." Mr Stubbings said he could not recall such a conversation. However, he agreed that the alleged statement reflected what was in fact happening; so it seems likely the conversation occurred.
39 On 17 September Allens wrote to Mr Aynsley enclosing an "amended Mall Media Systems Agreement for your review and approval". In their letter, Allens asked Mr Aynsley for details of some matters, for insertion in the document. Allens said: "If this draft is satisfactory, we will proceed with drafting final documentation for each QIC centre." The enclosed document referred to the Canberra Centre. It contained three Schedules, all of which were left blank. The draft agreement contained (in cl 4) provisions about exclusivity. Mr Aynsley said, in his affidavit, these provisions "reflected the contents" of his letter of 2 September.
40 The evidence does not disclose any response by Mr Aynsley to the Allens letter. However, it establishes that, on 24 September, Mr Aynsley instructed James Kruger, of Gadens Lawyers, to consider the draft on his companies' behalf. In his faxed instructions to Mr Kruger, Mr Aynsley said:
"Please find herewith the latest version of the QIC Agreement, together with a covering letter from Allen Allen & Hemsley. It would be appreciated if you would review this document, establish contact with Allens, and finalise the Draft. QIC has indicated to us that it wishes to complete contracts at an early date, so it may not be necessary to move to an interim agreement with respect to the eight centres."
Mr Aynsley made some observations about the terms of the draft agreement.
41 On 28 September 1999 Mr Kruger wrote to Mr Mark Stubbings stating Gadens acted for Mall Media and had been asked to "review the draft licence agreement with QIC". They said their client "has instructed us to seek to have addressed the matters set out below". Before listing those matters, Gadens said:
"Our client seeks to have assurances on a number of matters before entering into the agreement with each of the Licensors. These matters are as follows:"
They went on to mention the need to obtain the consent of any mortgagees and for them to inspect any power of attorney pursuant to which the documents might be executed on QIC's behalf. Gadens then said they "are instructed to seek the following amendments to the draft submitted". They listed eleven proposed amendments, two of which related to the exclusivity clause.
42 At about the time this letter was sent, Mr Aynsley became aware of a circular memorandum from Mr Daryl Stubbings to "All Centre Managers", which was dated 20 September 1999 and headed "Licence Agreement, Mall Media Australia Pty Ltd". The memorandum commenced as follows:
"Over the past 12 months we have been in discussions with potential suppliers of Video Mall Advertising systems. The underlying concept that is common amongst all suppliers is the provision of several video screens and digital cameras that are centrally linked to a data bank of digitised video advertisements and news services.Whilst this is a relatively new concept in Australia, America and European Centres have utilised this revenue generating technology for several years.
We have decided to proceed with an agreement with P.O.S. Abilities Pty Ltd (Mall Media Australia Pty Ltd) on the following commercial terms."
Terms were then set out.
43 The memorandum concluded:
"Please review and provide comments to myself confirming the approved locations and screen sizes at your earliest opportunity. Once finalised, the installation at each Centre will be co-ordinated so as to ensure an orderly roll out.I have suggested to Mall Media that it would be appropriate to arrange an on-site review/presentation with each Centre Management team prior to installation. Peter Ansley [sic] from MMA [Mall Media] will be in contact to arrange a suitable time over the next few weeks.
In addition, the system is now operational in most AMP Centres if you would like to have an early review."
44 Parts of this memorandum are quoted in para 35 of the Further Amended Statement of Claim. That paragraph is preceded by four paragraphs pleading the alleged September agreement:
"33A. On or about 17 September 1999 the parties agreed that in respect of installation, the First Respondent would nominate the order in which it required the installation of screens in centres and in respect of that order, the Applicants would install three centres in the first three months, three in the second month and the rest in the third month after commencement of the agreements.
Particulars
The agreement was oral, between Mr Peter Aynsley and Mr Daryl Stubbings, on that day and in terms to the effect of the above paragraph.
33B. On the said date the parties agreed that they would expeditiously take such steps as were necessary for the Respondents to advise the Applicants on, and for the Respondents to nominate, the location of screens within the centres, and for the Respondents to nominate the order that it required for the installation of screens in the said centres and for the Respondents and/or the Applicants to adjust the relevant terms of the licence agreement for each such centre to reflect that selection and nomination.
33C. On or about 8 and/or 17 September 1999 the Respondents agreed with the Applicants that they would enter into Agreements in the form of the Mall Agreement for each of the centres referred to in paragraph 4 upon selection of the initial screen locations for the centres.
34. By the conversation and correspondence, referred to, pursuant to the terms of the Head Agreement, the parties agreed the terms of the Mall Agreement in the terms of the document enclosed in the Allens letter dated 17 September 1999."
45 The evidence does not establish any contact between Mr Aynsley and Mr Daryl Stubbings on or about 17 September 1999. However, I accept that, by that date, the two men had reached a consensus that QIC would nominate an order of installation, as between centres, and that POS would ensure installation of screens in accordance with an agreed timetable. It is not clear to me that the two men had settled on the particular times set out in para 33A of the Further Amended Statement of Claim. However, for present purposes, I assume they had.
46 I think it is also clear that, by 17 September, Mr Aynsley and Mr Daryl Stubbings had agreed on a mechanism for selecting suitable screen locations, namely by Mr Levitt and Mr Figallo together inspecting each centre and consulting with the centre manager. Mr Aynsley and Mr Daryl Stubbings both saw this process as important.
47 I have no doubt that, on 17 September, both Mr Aynsley and Mr Daryl Stubbings expected the POS proposal would be implemented. Mr Aynsley was enthusiastic about it and Mr Daryl Stubbings was at least positive towards it. Both men had expended considerable time and effort in negotiating terms for an agreement. QIC and POS had both retained lawyers to advise as to terms, no doubt at some expense. There was every prospect of legally-binding agreements within the near future. And the prospect was for a series of agreements, rather than one. As Mr Aynsley explained in an affidavit, at this time, "it was my understanding that POS Media would sign all eight licence agreements, one for each mall, at the same time as they were interdependent as to the amounts payable by POS Media to QIC."
48 It is equally clear that, on 17 September 1999, neither party thought it had already made a legally-binding commitment. In order to make the point, it is necessary only to refer to the letter of Allens to Mr Aynsley of 17 September and Gadens' response, on behalf of POS, on 28 September 1999. The solicitors for both parties were proceeding on the basis their clients' arrangement would be given legal effect through a series of written licence agreements, one for each centre. These agreements would be substantially similar, so the solicitors were engaged in the task of resolving the terms of a model agreement, which happened to be that intended for the Canberra Centre. As at 17 September those terms were not resolved.
49 It is true Mr Aynsley became aware, about the end of September, that Mr Daryl Stubbings had written to the centre managers, on 20 September, saying: "We [QIC] have decided to proceed with an agreement" with POS. But he knew QIC had not yet made the agreement. The letter from Allens of 17 September stated that, if the enclosed draft was satisfactory, "we will proceed with drafting final documentation for each QIC centre". Mr Aynsley knew Gadens had found the enclosed draft not to be satisfactory, and had requested QIC to accept numerous amendments. He knew those amendments had not been accepted by QIC. In short, he knew there was not yet an agreement.
50 The argument in favour of an over-arching informal agreement, as at 17 September, also encounters the formidable difficulty of Mr Aynsley's comment, in his letter to Mr Kruger of 24 September, "it may not be necessary to move to an interim agreement with respect to the eight centres". Mr Aynsley was saying it might not be necessary to make an over-arching agreement because QIC had indicated it wished to enter into the individual licence agreements at an early date. Mr Aynsley's comment is inconsistent with the proposition that he had, by then, entered into an informal over-arching ("interim") agreement with Mr Daryl Stubbings.
51 It seems to me the parties' legal situation on 17 September was the same as in July. Their negotiations had made progress since July, but the parties remained in a state of negotiation. I reject the claim of a September agreement.
52 The argument that QIC is estopped from denying a September agreement encounters the same difficulty as that expressed in para 35 above concerning the July claim. POS was under no misapprehension of the factual situation.
The October "over-arching" agreement
53 As I have recounted, Gadens submitted to Allens a list of amendments to the proposed licence agreement. Shortly afterwards, on 8 October, Mr Daryl Stubbings left the employment of QIC. In cross-examination Mr Stubbings said that, when he left QIC on 8 October, the final form of the documents had been determined, subject to resolution of the screen installation dates. Mr Stubbings agreed he "never told Mr Aynsley that Mr Brindle, or `the Board', had not approved the documents". He agreed he wanted the contracts completed at an early date in order to establish the revenue stream as soon as possible. Mr Stubbings' evidence went on:
"And you were suggesting to Mr Aynsley that it was necessary to undertake the inspection process expeditiously in order to get those contracts executed, weren't you?--- That's right.In other words, when you got the number of screen locations sorted out, you will be able to have the documents executed? --- I would then have the final form of documentation, that's right.
Well if you had a final form of documentation, that simply required some numbers to be put in and some pictures didn't you? --- I think there was still a fundamental term in terms of whether there was six screens or one screen per centre. I believe it would have affected the amount of revenue that POS would have been able to generate.
The aggregate number of screens affected the amount of revenue they could generate, didn't it? --- I believe so."
54 When Mr Stubbings left QIC, carriage of the negotiations with POS was taken over by Mr Swann. In about mid-October, according to Mr Aynsley's affidavit, he had a conversation with Mr Swann during which Mr Swann said to him: "Why are there changes after we have already reached agreement?" Mr Swann gave a slightly different version of this conversation. He deposed that his first telephone conversation with Mr Aynsley was on or about 12 October, when he said words to the following effect:
"I have to get approval for any agreement with POS Media from the Executive General Manager, Mr Laurie Brindle. I can't go to him to get approval without the terms of the proposed licence agreement being agreed between the parties. I thought that agreement had been reached on the terms of the proposed licence agreement."
Mr Swann denied Mr Aynsley's evidence "is a complete account of what was said by me."
55 Mr Swann's version of this conversation seems to derive support from a file note made by Mr Kruger on 14 October. The note first records a telephone attendance on Mr Aynsley. The note of that conversation is in these terms:
"Spoken to R Swan [sic]To have - need to go thru processes
Can we have original deal, are any of the items crucial?"
The note then refers to Mr Kruger reviewing the agreement and a later telephone attendance on Mr Aynsley which is recorded as follows:
"everything is a punt by you - no assetc you wear it
only to go back on 2 pts.
56 In his affidavit, Mr Kruger deposed that, in the first of these conversations, Mr Aynsley said to him:
"I've spoken to Robert Swann who has taken over from Daryl Stubbings. He said to me that to have changes to the Agreement he needs to go to the Board for approval and to avoid this process we have to have the original deal. Are any of the items in your letter crucial".
Mr Kruger conceded in cross-examination that this account of the conversation differs from his file note, but he said "to me going to the board is a process".
57 Whatever the precise terms of these conversations, Mr Aynsley agreed that, after the telephone conversation with Mr Swann, he instructed Mr Kruger to withdraw a number of the concerns Gadens had raised with Allens. He said Mr Kruger did this by a letter to Allens that was (apparently inadvertently) dated 28 September, but sent on 14 October. That letter commences in this way:
"We refer to previous correspondence.With a view to having the agreements executed as a matter of urgency, our client is willing to forego most of the items in our letter to you dated 28 September.
The remaining matters our client seeks to have addressed are set out below. In our view these matters clarify the intent of the parties in entering into the deal and do not alter the commercial terms. As such, we ask that they be considered by your client as a matter of urgency.
58 The letter repeats the two "general matters" earlier mentioned, relating to mortgagee's consent and production of the power of attorney. It goes on: "We are instructed to seek the following amendments to the draft submitted." The letter then sets out the terms of two amendments, dealing with the definition of "gross revenue" and liability for turnover rent. The letter concludes: "We look forward to receipt of the redrafted agreement which addresses these matters."
59 By a fax dated 14 October 1999, Allens sought QIC's instructions about Gadens' letter. Apparently, instructions were obtained. On 15 October Mr Mark Stubbings sent a fax to Mr Kruger in which he said:
"Our instructions have changed a couple of times in the last day or so as our clients continue talking with yours. The current position is that we have instructions to respond to your most recent fax as follows:1. The properties are not subject to mortgage.
2. We attach a copy of the NSW power of attorney. In the other states the properties are owned by different entities, some of which are companies which will sign under seal. When we draft the execution copies of those documents we will obtain copies of any relevant powers of attorney for you.
3. Not agreed, because the different retail tenancy legislation does not apply to this document.
4. Not agreed.
We are currently drafting execution copies for each centre. Before we can finalise the documents, we need some information from Mall Media. Please provide us with:"
Mr Stubbings then listed four items. He also mentioned he would obtain the plans and rules of each centre; it being intended the relevant plans and rules would be annexed to each agreement.
60 On 18 October Rachael Foster of Allens had a conversation with Mr Kruger in which Mr Kruger claimed the parties had agreed on a rent free period, from the commencement date until three months after installation of the screens. Ms Foster questioned this and sought instructions. However Mr Aynsley instructed Mr Kruger not to "push them on the issue", so Mr Kruger withdrew the contention. Ms Foster told Mr Kruger the relevant clause would remain as drafted.
61 Paragraphs 39A and 39B of the Further Amended Statement of Claim read:
"39A. Further and in the alternative, on or about 19 October 1999, the parties agreed all the terms of a licence agreement to apply in respect of each of the eight Centres referred to, as to the installation and operation of the Applicants [sic] screens within the Centres.
Particulars
The agreement was partly oral and partly in writing, the writing being in terms of the Allens draft agreement then in the possession of the parties, the oral being the conversation as to installation scheduling on or about 17 September 1999 referred to in paragraph 33A above and the conversation referred to in paragraph 38 above.
39B. Further and in the alternative to paragraph 33C, on or about 19 October 1999 the Respondents agreed with the Applicants that they would enter into Agreements in the form of the Mall Agreements for each of the centres referred to in paragraph 4 upon selection of the initial screen locations for the centres."
62 Paragraph 38 of the pleading, referred to in the particulars to para 39A, states:
"By a conversation between Mr Kruger on behalf of the Applicants and Rachel Foster of Allens on 19 October 1999, all outstanding drafting suggestions in relation to the documentation of the Mall Agreement were withdrawn by Mr Kruger."
63 The contention is that Mr Kruger's withdrawal meant consensus had been reached, by 19 October 1999, as to the terms of the agreement and an agreement then came into existence.
64 I accept that, by 19 October 1999, the parties had finally resolved their differences about the standard licence terms, as distinct from the term, particular to each site, about the period for installation of the screens. It is another question whether the resolution of those differences meant that a legally-binding over-arching agreement immediately came into existence. I do not think it did.
65 It seems that, by 19 October, Mr Levitt and Mr Figallo had inspected all the centres and consulted all the centre managers. Agreement had been reached as to the location of sites in some, but not all, centres. In respect of some centres, conversations were continuing.
66 Each draft of the model agreement prepared by Allens provided for the screen locations to be marked on plans annexed to the agreement. It seems the parties always regarded this as an important matter. This is understandable. POS had an interest in ensuring each screen was located in such a position as to have high public impact, and thereby generate maximum advertising revenue. QIC shared that financial interest, but also was concerned to ensure the screens did not create operational problems for tenants or for the centre manager; and, also, that they would not adversely affect public enjoyment of the centre. Under these circumstances, it is difficult to believe either party would have intended to enter into a legally-binding agreement, in respect of any particular centre, prior to agreement as to the location of the screens in that centre.
67 However, those considerations do not necessarily negative Mr Cotman's suggestion of an over-arching binding agreement, as at 19 October. The answer to that suggestion is not only that there is nothing in the evidence to point to an intention to make such an agreement; there is positive evidence that, at the time, POS appreciated it had not done so.
68 On 20 October Mr Kruger telephoned Ms Foster with a request that she and Mr Mark Stubbings recounted to QIC, in a fax of the same date, in this way:
"James Kruger has requested that Mall Media and QIC enter into a Heads of Agreement. It would state that all commercial terms have been agreed and the parties will be entering into the Mall Media Licence Agreements subject to:(a) obtaining the consent of the co-owner of the Logan Hyperdome to the Licence Agreement for that centre; and
(b) reaching agreement on the number and location of the screens for each centre.
The Heads of Agreement would also state that the parties will use reasonable endeavours to effect the Licence Agreements.
James indicated Mall Media would like to enter into this Heads of Agreement within the week because Mall Media is lodging a prospectus next week which will refer to the QIC and Mall Media Licence Agreements as part of Mall Media's income stream before the Licence Agreements have actually been entered into. The Heads of Agreement will simply indicate the deal is agreed subject to settling a few details.
Would you please confirm if QIC is willing to enter into the proposed Heads of Agreement?"
69 The fax is important, in relation to the present issue. If a legally-binding agreement had been reached, there would have been no need to "enter into" Heads of Agreement; the prospectus could have stated an agreement had been made. However, far from any document claiming this to be the case, the proposed Heads of Agreement was to say "the deal is agreed subject to settling a few details". In other words, the "deal" is not yet finally agreed.
70 Mr Kruger sent to Allens a draft Heads of Agreement document. The draft set out the following operative provisions:
"1.1 The parties agree to execute a Licence Agreement in the form of Annexure A for each of the following shopping centres as soon as reasonably practicable following the date of these Heads of Agreement:(a) Castle Towers, Castle Hill, Sydney
(b) Westpoint, Blacktown, Sydney
(c) Canberra Centre, Canberra
(d) Logan Hyperdome, Logan
(e) [Allens to specify]
(f) [Allens to specify]
(g) [Allens to specify]
(h) Woodgrove, Melton, Melbourne.
1.2 The parties must negotiate in good faith to agree on, and reach agreement on, the minimum number and location of screens that Mall Media must install under each Licence Agreement.
1.3 QIC must use its best endeavours to procure any co-owners of any of the shopping centres to execute the Licence Agreement for that shopping centre.
1.4 If a co-owner does not agree to execute the Licence Agreement for a shopping centre, the parties must negotiate in good faith to agree on, and reach agreement on, a revised turnover rent benchmark for exclusivity under clause 4 of each Licence Agreement based on the actual Licence Agreements executed."
71 It will be noted, first, that these terms are substantially the same as the terms of the over-arching agreement which, it is now suggested, the parties had already made. Second, Mr Kruger was able to specify only five of the proposed eight centres. Third, the document envisaged further negotiations in relation to screen numbers and locations. Fourth, Mr Kruger appreciated the need to obtain concurrence from any co-owner.
72 According to a file note made by Ms Foster, on 21 October Mr Kruger told Ms Foster that four of the eight sites were "agreed for screen and location" and Mr Levitt and Mr Figallo thought "agreement will be final on Monday". However, he proposed to lodge the prospectus on Wednesday and would still "like to do Heads of Agreement because time frame too tight".
73 Ms Foster told Mr Kruger she would get back to him about the request. On the following day, she spoke to Mr Swann. He said he would speak to Mr Aynsley. Later that day he instructed Ms Foster that QIC refuses to enter into Heads of Agreement and is "unhappy to be railroaded into it". Ms Foster informed Mr Kruger of this response on 25 October.
74 It is apparent that, at 19 October 1999, neither party thought it had entered into a legally-binding agreement. In my opinion they were correct in that understanding. It had never been the intention of either party to enter into any legally-binding obligation (over-arching or otherwise) unless and until there was an executed formal document. This had not yet happened. I reject the applicants' claim that there was an October "contract".
75 For reasons similar to those expressed in relation to July and September, I also reject the applicants' claim that the respondents are estopped from denying the existence of such a contract.
The November "concluded licence agreements"
(i) The sequence of events
76 During the period that a possible Heads of Agreement document was under consideration, Allens received plans and photomontages (but not the centre rules) relating to four of the eight centres. Notwithstanding the lack of rules, on 25 October 1999 Allens wrote to Mr Aynsley enclosing "execution copies in duplicate" of licence agreements for four centres. The letter stated:
"The centre rules for Schedule 3 of each agreement are not included because we have not yet received them from QIC. However, in the interests of getting the documents signed quickly, we are sending the execution copies to you now and will forward the centre rules as soon as we receive them.Please sign each agreement where indicated and return them to us. We will then arrange for the agreements to be executed by the appropriate entities from QIC and stamped where necessary."
77 The enclosed agreements were in substantially similar terms. The execution sheet provided for execution under the common seal of the licensor company (being, in each case, one of the respondents to this proceeding) and for execution on behalf of Mall Media, by its duly appointed officer in the presence of a witness. Clause 4, dealing with exclusivity, was identical in each draft. It provided:
"4.1 During the first year of the term of this licence, we must not grant a similar right to any other person in relation to the centre.4.2 During the second and third years of the term of this licence, we must not grant a similar right to any other person in relation to the centre, except that during the second and third years of the term:
(a) we may give notice to you cancelling that exclusivity of the total turnover rent which we receive under this licence and similar licences for the centres described in item 11 falls below $1,000,000.00 per annum; or
(b) we may cancel that exclusivity by giving you 3 months notice and the turnover rent payable by you to us after that cancellation will be reduced for each centre by the lesser of:
(i) 50% of the turnover rent payable per month; and
(ii) $5,000 per month."
78 Item 11 of the Reference Schedule to each draft agreement named the same eight centres, including the centre that was the subject of the particular draft agreement.
79 Clause 22 was also identical in each draft. This clause provided for termination of the agreement. One of the circumstances triggering the right of termination was that "the total turnover rent which we [the licensor] receive under this licence and similar licences for the centres described in item 11 falls below $500,000 per annum", and does not increase above that figure during a period of three months notice.
80 Clause 29 referred to the centre rules; in each case in this way:
"The centre rules (set out in Schedule 3) including any eatery and foodhall rules are part of the licence and you must obey them. We may change the rules as we think is necessary or desirable, but any change must be for the good management of the centre. We must give you a copy of the changed rules. If a term of the licence and a rule are inconsistent, the term of the licence prevails."
81 The Reference Schedule to each draft named Mall Media as the licensee and identified the particular licensor. In each case the licensor's address was given as care of QIC. The centre was identified and the licensed areas were stated to be: "As identified on the photographs and plans of the centre set out in Schedules 1 and 2". Photographs were set out in Schedule 1 and there were plans in Schedule 2. However, in each case, Schedule 3 was left blank.
82 In each case the "Starting Date" was given as "25 October 1999", the term of the licence being for five years from that date. Item 7 specified the "turnover rent", being a percentage of "gross revenue from advertising". The percentage started at 10% of annual revenue up to $750,000, rising in steps to 25% on annual revenue over $3,000,000.
83 Item 8 set out the permitted use by the licensee:
"The screening of paid video and/or audio video advertisements in the common areas of the centre and the display of any other video and/or audio video content approved in writing by us."
84 Item 10, which varied from one draft agreement to another, stated the number of screens to be installed in the relevant centre.
85 Mr Aynsley deposed that he received Allens' letter of 25 October by courier on that day. Mr Aynsley acknowledged receipt of the letter, by a fax to Mr Mark Stubbings and Ms Foster dated 28 October, in which he said:
"Thank you for the four QIC contracts, delivered by courier. We have reviewed these and respectfully request that you agree to the following amendments being made by hand:1. Correct three typos as follows:
(a) Clause 10.5 - change `then' to `than'.
(b) Clause 15.3 - change `newest' to `nearest'.
(c) Clause 18.3 - change `detaining' to `obtaining'.
2. Clause 10.2 - number of months will vary from Centre to Centre. Due to screen lead-times, we agreed with QIC to install 3 Malls within 3 months, another 3 Malls the next month, and 2 Malls the final month. Hence this number will vary from 3 to 5 according to the Centre. QIC agreed to determine its priority list (i.e. which Malls are to be completed in the first three months etc).
We are ready to execute the agreements immediately upon your confirmation of the above. Please do not hesitate to advise should you require any further information."
86 The requested confirmation was never supplied. However, Mr Aynsley went ahead with execution anyway, this being done by himself on behalf of Mall Media in Gadens' office on 28 October. At that time he made the handwritten changes he had foreshadowed.
87 On that same day, possibly while Mr Aynsley was in his office, Mr Kruger had a telephone conversation with Ms Foster during which she said to him words to the following effect:
"Please wait to amend until we have seen the final agreement on rollout from QIC. However, I think its okay to amend the small typos by hand."
88 Ms Foster then tried to contact Mr Swann in order to obtain instructions about the rollout, but he was not available. Mr Swann called her back on the following day and told her the timing of the screen installations was not yet settled.
89 Ms Foster gave evidence that, on 4 November, she had a telephone conversation with Michael Hodgson of Gadens who said: "Our client is lodging its prospectus tomorrow and we need resolution of all outstanding matters so that we can execute the agreements". Ms Foster replied: "I still need to get instructions from our client, and I will get back to you as soon as I can".
90 Ms Foster agreed in cross-examination that, over the ensuing few days, she made a number of calls to Mr Swann because she was "being pressed by the Gadens people to resolve this issue". However, it was still unresolved when the documents were returned to Allens with a letter from Gadens to Allens, dated 10 November 1999, in which Gadens stated the agreements "have been executed by our client". Gadens commented:
"Our client has initialled Clause 10.2 in the Agreements which currently provides for 3 months for the installation and commissioning period.Our client instructs us that their agreement with your client is that our client will complete 3 centres within the first 3 months, another three by the end of month 4 and the last 2 by the end of month 5. The order in which the centres are to be completed is a decision for your client to make. Once your client determines the order in which the centres are to be completed, please make the appropriate amendment to Clause 10.2 by hand."
91 Mr Swann gave evidence that, prior to the return of the agreements, he had a telephone conversation with Mr Aynsley designed to spell out QIC's position. In para 32 of his affidavit he said:
"On 5 November 1999, I had a telephone conversation with Mr Aynsley, during which I said words to the following effect:Swann: `I want to set out clearly my understanding of QIC's position. I am still awaiting a final sign off by all Centre Managers as to the location of the screens as well as a final report from Mr Michael Figallo as to the quality and general operational matters in relation to this screen. However, once I have all the screen locations and other information is to hand I will submit a final paper to the Executive General Manager, Property for his final consideration. It is his decision to make. This is not a rubber stamping exercise.'"
92 In his affidavit in reply, Mr Aynsley commented on this evidence. He said:
"As to paragraph 32 of Mr Swann's affidavit, I have no present recollection of a conversation on 5 November 1999, however at the 5th of November 1999 Mr Levitt and Mr Figallo had completed their site inspections and to the best of my recollection Mr Levitt had submitted a further record of the site locations from those visits to the centre managers and/or QIC for their sign-off. It was certainly true to say at that date that some of the managers had not replied with their written confirmation. A conversation in the terms that Mr Swann was still getting a `sign off by all Centre Managers' is quite possible, however I do not recall, and I deny, Mr Swann saying anything to me to the effect that he was waiting on a final report from Mr Figallo `as to the quality and general operational matters'."
93 Mr Swann was cross-examined about para 32 of his affidavit. In response to a question why he had the conversation, he said:
"I was concerned that the operational review and the discussion that had taken place generally was leading me to say that I've got to communicate effectively that I didn't want any misunderstanding that we are still reviewing this proposal."
Later he said: "I wanted to unequivocally state to Mr Aynsley that, as far as I am concerned, the deal was not a deal until the full documentation was executed and it was done". Mr Swann said his position was that he would certainly put the proposal to Mr Brindle, as it had gone so far, but "whether I recommended it or not is another matter."
94 Mr Swann's evidence went on:
"Is this right? You say that in this conversation, you were seeking to communicate to Mr Aynsley that final sign off from the centre managers was still coming but that there was now to be in effect a general interregnum while you waited for a final report from Mr Figallo as to quality and general operational matters in relation to the screens? --- And that this was not just a small matter. This was, this is, we had to ensure that the system would work to our satisfaction.It is more than that, isn't it? You say that what was the true state of affairs was, having received that report, you would consider it and if you didn't think the projects should continue, you would recommend against it and you would recommend against it to Mr Brindle? --- I didn't say that to Mr Aynsley. I didn't say that I would not, you know, that I just said that we had to consider it and we had to get it approved from the executive general manager. I mean that approval process was fair dinkum.
...
Mr Brindle would then make a decision based upon your recommendation? --- Well, he could take it or not. If he wanted to go ahead he could always overrule.
So you say, what you were making clear to Mr Aynsley in this conversation was, all bets are off. We're back to square one depending on what Mr Figallo says in his recommendation or his report and what I recommend to Mr Brindle and what Mr Brindle decides? --- I was trying to convey that this agreement is not put in place until we've got final approval from Laurie Brindle and it is executed.
What do you say Mr Aynsley said in response to that proposition? --- I believe it was a very short conversation and I think Mr Aynsley responded, I think he said that, can I, no. Hold on. I might be getting a little bit ahead of it. I think he was taken aback and I think he was, he said is there any information I can provide you but I think I might be getting that a bit out of context because I think it was a pretty one sided communication.
Did he say something like, what are you talking about? We've already executed agreements? --- I don't believe so.
Did he say, what are you talking about? We have four agreements and we're waiting for another four from your solicitors? --- Again I don't believe so."
95 Mr Cotman put to Mr Swann that he had "made up" the conversation of 5 November. Mr Swann denied this and said his letter of 12 November "is a clear statement of that telephone conversation". He agreed he did not instruct Allens to stop work in relation to the documents nor did he write to POS on 5 November to set out QIC's position.
96 Mr Aynsley was also cross-examined about 5 November. He said he believed he did receive a call from Mr Swann that day; he could not recall what prompted the call. Mr Aynsley did not remember Mr Swann saying "that he wanted to set out QIC's position clearly". However, he agreed that, sometime in early November, Mr Swann spoke to him on the telephone about QIC's position. He said this would have been about 5 November. Mr Aynsley said that, at about this time, the "type of discussion that we were having" included Mr Swann saying he was "awaiting final sign off from centre managers". Mr Aynsley said Mr Swann "seemed very unclear about what had been happening to date". He did not recall Mr Swann referring to the executive general manager, at least by that title.
97 During late October and early November, Mr Figallo and Mr Levitt had been proceeding with their task of identifying suitable screen locations. On 8 November Mr Figallo wrote a memorandum to Mr Swann enclosing what he called "summary and sign-off from the Centres for the video screen advertising project as requested". He also enclosed material comparing the POS system with other available systems. It is evident Mr Figallo thought the choice of system was still an open question.
98 On 9 November Mr Aynsley wrote a letter to Mr Swann that commenced:
"Just a brief update following finalization of the last round of screen location amendments that were submitted to Mr Mike Figallo last week. It has been quite some time since we provided you with an update on progress and we felt it time to do so.As you are aware, Mike and our Mr Roger Levitt have completed a further review of all of the Centres in conjunction with centre management at each location, and we have prepared revised photomontages to identify changes to the original locations and formats. We have also signed off on the legal agreement that Allen Allen & Hemsley had submitted to Gadens a few weeks ago, so that side is complete except for attachment of the exact locations."
99 Mr Aynsley then dealt at length with what he called "[o]ur overall roll-out". He gave details of arrangements being made or implemented with other shopping centre owners, progress in the "interactive side of the business", airtime sales, expansion of the POS "integrated media control system", the appointment of a new chairman of directors (Gary Rice) and a new finance director and the arrangements being made for public listing before the end of the year. The letter concluded:
"We felt it worthwhile to both update you on the above events and look forward to working with your team - and with each of the individual centre management teams - to ensure that the program format and content are everything that QIC would like it to be. One of the strengths of our system is the ability to tailor the presentation format site by site, to suit local needs, while at the same time maintaining an overall consistency to attract and maintain major national media buyers."
100 Mr Aynsley said in evidence that he would have sent this letter in response to a telephone conversation with Mr Swann. He could not say whether this was the conversation of 5 November "but the date suggests it was around that time".
101 During the course of submissions, Mr R B Macfarlane QC (who appeared with Mr A J Abadee for QIC) referred to this letter as "being more like a `pitch' than the letter of a man who believes he already had the benefit of a binding contract". That comment derives some support from the following evidence of Mr Aynsley:
"... what was it that triggered your writing this letter? --- I received from Swann directly, and also from the feedback I'd been getting from Roger Levitt and Mike Figallo as they travelled around the sites, a general impression that Rob Swann, I mean in some discussions with me he seemed to know what was going on and in others he was just very vague. And I thought it was important to give him a snap shot at that stage of where we were at.You thought, didn't you, that Mr Swann needed a bit of persuading as to the virtues of the product you were offering? --- I didn't really know where he fitted in, whether he would need persuading, because I wasn't sure exactly, other than Darryl [sic] Stubbings said that he was running it. But yes, I mean, yes.
Yes? --- Yes.
And you wrote this letter to try and put some matters before him that would hopefully cause him to look favourably on what was being offered by POS? --- I think my attitude more would have been to take any individual centre feedback with a better balance, given that he didn't really understand where we were to date, as he had admitted."
102 Whatever Mr Swann's degree of understanding, it seems he did not think there was a binding legal agreement. On 12 November 1999 Mr Swann wrote a letter which read as follows:
"Thank you for your letter dated 9 November 1999 setting out the status of your various business operations.I was somewhat concerned that there is no misunderstanding of QIC's current position and I write to confirm our telephone discussion of 5 November. During that discussion I advised that I was awaiting a final sign off by all centres as to the location of screens as well as a final report from Mike Figallo as to quality and general operational matters. I also understand that the legal document has now been agreed between our solicitors and that they were also awaiting screen locations.
As I stated, once I have all the screen locations and other information to hand I will submit a final paper to the Executive General Manager, Property for his final consideration. If he approves the final proposal I will then contact you to arrange execution of the documentation and agree the implementation details.
Both parties have allocated significant resources to this process, however, until we have a binding agreement we should both be aware of the importance of not making any commitments to third parties regarding potential advertising within QIC's portfolio.
I expect to be in a position to advise you of QIC's final decision by Monday 22 November 1999."
103 In his first affidavit dated 26 July 2000, Mr Aynsley acknowledged he received a letter from QIC on 12 November, although he said he was unable to locate a copy of it at the time of making his affidavit. However, in an affidavit in reply dated 16 November 2000, Mr Aynsley said that, contrary to his original affidavit, his recollection was that he did not receive Mr Swann's letter of 12 November until after he wrote a letter to Mr Swann dated 17 November.
104 The letter of 17 November makes no reference to Mr Swann's letter of 12 November. It is framed in terms of a follow-up to the letter of 9 November and refers to a report given to Mr Aynsley by Mr Levitt of concerns expressed by some centre managers which, Mr Levitt thought, stemmed from the managers' "unfamiliarity with the system capabilities and with the operational philosophy that had been developed and discussed with Mr Daryl Stubbings over many months earlier this year, prior to his departure from QIC". Accordingly, Mr Aynsley had "put this letter together as a few pages that you may wish to pass on the [sic] each Centre as part of the current process".
105 The letter also included the following paragraph:
"The other suggestion that Roger made was that we should perhaps revert to Mr Daryl Stubbings' earlier suggestion that the Centre agreements could be executed one by one, starting with those where the Centre and/or Asset Management were keen to proceed, and then moving forward with the other Centres on a timetable to suit each individual circumstance. Roger tells me that the three Victorian Centres, the Canberra Centre, and I think he said Hyperdome, all seem to have resolved the various issues satisfactorily and are in a position to proceed. I would appreciate your thoughts on this approach in due course."
106 On 18 November 1999 Mr Kruger lodged with the Australian Securities and Investment Commission a prospectus for a public issue of 24 million shares in POS Media, which had become a public company. The prospectus included, amongst the "competitive strengths" of the POS Media group:
"a five-year contract that is currently being documented with Queensland Investment Corporation to provide all video and audio/video media to the common areas of their shopping centres across east-coast Australia, including Castle Towers and Westpoint Blacktown in Sydney and the Canberra Centre;"
107 Counsel for QIC compare the wording of this item with the preceding item: "a five-year exclusive contract with AMP to provide all video and audio/video media to the common areas of nine major shopping areas across Australia ..."
108 At a later point in the prospectus, the following appears:
"Mall Media has reached agreement with QIC on the terms of a formal licence agreement for the installation of delivery systems in eight shopping centres owned or managed by QIC. In respect of each of the following shopping centres, a formal agreement has been executed:+ Eastlands, Ringwood, Melbourne VIC
+ Grand Central, Toowoomba, QLD
+ Woodgrove, Melton, Melbourne, VIC
+ Watergardens, Taylors Lakes, Melbourne VIC
Formal agreements for the following centres are expected to be executed before the Issue:
+ Canberra Centre, ACT
+ Hyperdome, Logan, QLD
+ Castle Towers, Castle Hill, Sydney NSW
+ West Point, Blacktown, Sydney NSW
The agreements shall have common terms, as set out below."
109 The four first-named centres were those identified in the four documents Mr Aynsley had signed on 28 October. The other four were included in item 11 of the Reference Schedule to those documents.
110 On 29 November 1999 Mr Swann sent a memorandum to Mr Brindle dealing with the POS proposal. He enclosed a copy of a report from Mr Figallo; presumably the report of 8 November. In his memorandum, Mr Swann set out the "pros" and "cons" of the POS proposal. He said "[t]he management and investment teams view the POS Media proposal as inappropriate given the potential to develop a more integrated revenue opportunity for the portfolio". Mr Swann referred to his letter to POS of 12 November as "setting out the status [of negotiations] from QIC's view". He said: "POS Media have not raised any concerns with this letter and I believe we could withdraw from negotiations with minimal risk". Mr Swann's formal recommendation was as follows:
"That negotiations with POS Media be terminated. That POS Media be advised that we are developing an integrated in-centre advertising strategy for the portfolio and their system is being considered as part of that strategy.Bruce Keech to develop an integrated strategy and implementation timetable by 31 January 2000."
111 A meeting was held in Brisbane on 3 December. It was attended by Mr Aynsley, Mr Rice and Mr Levitt on behalf of POS and Mr Swann on behalf of QIC. There is some disagreement between Mr Aynsley and Mr Swann concerning the discussion at the meeting but the disagreement is not important. It seems to be common ground that Mr Swann indicated QIC was reconsidering its position and asserted QIC was not legally committed to POS. It seems also to be common ground that the POS representatives claimed QIC was legally committed and mentioned the prospectus. Further, it seems clear Mr Swann disclaimed any responsibility for what POS had stated in the prospectus and said he would obtain legal advice on QIC's position.
112 On 6 December 1999 Mr Aynsley faxed to Mr Swann a lengthy letter in which he purported to summarise the whole course of negotiations between the two companies. The letter made no claim to there being a legally-binding contract prior to the execution of the four agreements on 28 October. In relation to that matter, the letter stated:
"At this point in time we have fully executed the original contracts for four centres that were submitted to us via your lawyers, Allen Allen & Hemsley, and have been awaiting the remaining four. We had understood there to be some adjustments required to screen types and locations, all of which must of course be finalised prior to execution of the contracts."
113 In relation to Mr Swann's letter of 12 November Mr Aynsley made this comment:
"We were somewhat confused by your closing statement regarding advertising commitments, given the long history of this specific matter. We assumed you meant that there were still certain sites that had to be agreed, and that we should not make any commitments for displays in any areas not yet settled. This was consistent with the feedback received from Mr Figallo previously, viz that there were still discussions on screen locations in one or two of the Centres."
114 The letter concluded:
"The above details fairly much summarise the position through until our meeting in Brisbane last Friday 3rd December 1999. We understand that - following Mr Stubbings' departure - you have reopened the consideration of mall advertising and promotion, including static signage etc. None of this of course is in conflict with our video advertising screens, as the agreements allow QIC to both use video for its own informational purposes and also allows any existing or new form of static poster, fixed display etc to continue.We trust that the above information is sufficient for your current purposes and look forward to finalising the remaining documentation. Please do not hesitate to advise should you require any further information in the meantime."
115 Mr Swann responded to this letter on 8 December. He said:
"Further to our meeting on 3 December 1999 and your letter of 6 December 1999, you will be aware that I have only recently taken over this area of QIC's business and am having to familiarise myself with QIC's position in relation to your company.I am currently waiting for reports from various sources, including our lawyers and my NSW manager.
I have also heard reports about operational issues relating to your equipment in other centres which concern me, particularly the audio component. I am therefore investigating that issue.
Your decision to list the company and incorporate information regarding the negotiations with QIC is not one in which we have been involved and if asked we would not have supported any use of this information.
I understand your interest in this matter and I confirm that I will reply to you as soon as I have received all of the information which I require."
116 Mr Aynsley replied to this letter on the same day. His reply dealt with some operational issues and the reason for the prospectus reference.
117 It seems Mr Swann received legal advice, from Mr Mark Stubbings, sometime before 15 December. On that day he sent a memorandum to Mr Brindle in which he canvassed the merits of various options and recommended refusal of the POS proposal.
118 Prior to any decision by Mr Brindle, Mr Swann telephoned Mr Aynsley to inform him that Richard Rice would be taking over the matter when he [Mr Swann] left QIC. He introduced Mr Rice over the telephone. During the course of the conversation, Mr Swann informed Mr Aynsley that QIC's advice was that there was no legally-enforceable contract in existence between QIC and POS. Mr Aynsley indicated he disagreed; however, he was happy to "keep working with Richard Rice".
119 Thereafter, Mr Rice took over responsibility for the matter. Apparently, Mr Brindle made a speedy decision. On 20 December 1999 Mr Rice wrote a letter to Mr Aynsley in which he said:
"Further to your discussions with Rob Swann, QIC has determined that no legally enforceable agreement exists between QIC or any of its Centres under management and Mall Media.However, QIC is reviewing its total mall media advertising requirements with a view to developing a more broadly based policy for the company.
When the overall direction has been decided, we hope to be in contact with you to further examine opportunities of mutual interest."
120 There were subsequent discussions between the two companies, extending well into 2000. But no agreement was reached and, ultimately, this proceeding was commenced.
(ii) The applicants' case for November concluded licence agreements
121 In their Further Amended Statement of Claim, the applicants plead the November "agreements" in this way. They refer to the terms of the letter from Allens to POS of 25 October 1999, and delivery of the "Mall Agreements" for execution by POS. They say:
"43B By the delivery of Mall Agreements for execution aforesaid, the Respondents:(a) offered the Applicants a licence of the nominated areas in the centres referred to in paragraph 43 above on the terms of those Mall Agreements; and/or
(b) offered to enter into licence agreements for the remaining centres identified in paragraph 4 above in respect of areas to be agreed by the first Applicant and the first Respondent in time to enable the installation of screens in all eight centres in accordance with the schedule referred to in paragraph 33A.
44. By a letter dated 28 October 1999 Mr Aynsley to Mr Stubbings and Ms Foster of Allens observed on typographical errors and observed that the clause 10.2 as expressed did not reflect the commercial agreement as to the timing of installation, and sequence of all malls and, therefore, the progress of installation in all the Respondents' malls.
...
45. On 10 November 1999 the Applicants, by Gadens, remitted to Allens the duplicate executed agreements, and, by the letter, invited the First Respondent to nominate the order in which the First Respondent wished the Applicants to install screens in the other malls.
45A. By the return of the executed agreements the Applicants accepted each of the offers referred to in paragraph 43B above and undertook to perform the terms of the agreements."
122 In relation to breach, the applicants plead:
"49. On and from December 1999 the Respondents have refused to perform either the executed Mall Agreements or execute and perform the unexecuted Mall Agreements in breach of the Head Agreement and the executed Mall Agreements and the unexecuted Mall Agreements.49A. The first Respondent has failed to nominate an installation order, or otherwise perform the executed agreements and the unexecuted agreements.
49B. The Applicants are and have always been ready willing and able to perform the executed and the unexecuted agreements."
(iii) The expert evidence
123 It is common ground that none of the licence agreements was ever executed by QIC. However, the applicants say this does not matter. The additional evidence called before me on 10 April 2001 was directed to this point. Counsel for POS read two affidavits made by Edward Spring Boyce, an experienced solicitor and conveyancer. In the first of those affidavits, Mr Boyce said:
"In my opinion where lease documents and/or licence agreements have been negotiated between legal representatives of respective parties, it is not common practice for there to be an exchange of executed agreements between the parties. The usual practice is for the solicitors acting for the lessor or licensor, as the case may be, to submit the agreed documents to the solicitors acting for the lessee or licensee, for those documents to be signed and returned to the solicitors acting for the lessor/licensor together with payments of the applicable stamp duty and any applicable registration fees if they are liable to pay it. The receipt of the fully signed agreement or registered lease as the case may be by the solicitors acting for the lessee/licensee will take several weeks if not months, depending upon the efficiency of the lawyers acting for the lessor/licensor and the time that it takes to achieve the execution of the documents of any mortgagee stamping and, where applicable, the registration process at the Land Titles Office.If it is not the intention of a lessor/licensor to be legally bound to the terms and conditions of lease or licence documents submitted to the solicitors acting for a lessee/licensee, in my opinion and experience, the covering letter from the solicitors acting for the lessor/licensor will express appropriate qualifications. I have observed that the letter from Allen Allen & Hemsley did not contain any qualifications and further contained a statement that upon receipt of the signed documents they would obtain the execution of those documents by the licensor and the stamping of those documents. In my opinion a solicitor acting for a licensee in those circumstances, in accordance with current conveyancing practice, would have concluded that the terms and conditions of the agreement were accepted by the licensor and that the parties would consider themselves bound to the agreement upon the return of duly signed agreements from the licensee."
124 In a second affidavit, Mr Boyce commented on the second paragraph, quoted in para 76 above, of the letter from Allens to POS of 25 October 1999. He said:
"3. In my experience I have used and have observed other legal practitioners to have used three general types of correspondence accompanying documents being sent to the other party or to its legal representatives in a transaction. Those types of correspondence in my experience use words to the effect that:(a) the documents are submitted in draft for the review of the parties; or
(b) the documents are submitted subject to the agreement of the party on whose behalf they are submitted to proceed with the transaction; or
(c) the documents are submitted for the execution of the party on whose behalf they are received either with or without advice that the documents will thereafter be signed by the party on whose behalf they have been submitted."
125 Mr Boyce stated he had acted in a great many transactions where he had observed documents and correspondence within each of the types specified in para 3 of his second affidavit. He thought the wording used by Allens, in their letter to Mr Aynsley of 25 October 1999, fell into category 3(c). Mr Boyce said, where he had submitted documents in this manner, "it is as a result of instructions from the client that it intends to be bound to the document as submitted upon its execution by the other party". He also said, where he has been the solicitor acting for a party receiving documents with a covering letter such as this, "I have had no experience that I can recall of a party denying the agreement after the return of the duly executed documents". He said:
"In those transactions where documents have been submitted to and returned by the party first executing in the circumstances referred to in paragraph 3(c) above it is my experience that in the absence of express agreement otherwise:(a) there is no formal exchange of counterparts;
(b) the parties do not wait for the return of the fully executed, stamped and if applicable registered agreement to the party first signing prior to attending to performance of their obligations under the agreement;
(c) the parties act in conformity with the agreement being on foot."
126 Under cross-examination by Mr Macfarlane, Mr Boyce said his evidence was directed only to the four agreements submitted with the Allens letter of 25 October; he was not concerned with all eight agreements. He thought that, as a matter of interpretation, cl 4.2 of the agreement could stand, with fewer than eight agreements; the disadvantage being that of POS. Similarly, he thought, with cl 22.2. When asked about cl 29 and the blank Schedule 3, Mr Boyce conceded it was unusual for the solicitors to have submitted the agreement for execution, with the intention that it should become immediately binding, if it lacked the rules. But he argued the rules could be changed and their absence did not derogate from the grant of a licence. Mr Boyce expressed the belief that the general practice in relation to a lease or licence applied to this case. He thought parties treated themselves as bound, in the para 3(c) situation, because they were estopped from denying the existence of an agreement.
127 Counsel for QIC read an affidavit by David James Sharpe, also an experienced solicitor and conveyancer. Mr Sharpe did not dispute Mr Boyce's evidence, insofar as it applied to lease transactions and licence arrangements such as a carpark licence. However, he thought the general rule did not apply in this case:
"In my opinion, the transaction contemplated between the Applicants and the Respondents was essentially a commercial arrangement concerned with the selling of advertising time on video screens to be installed in the shopping centres the subject of these proceedings and the apportionment of revenue between the parties. Clause 5.1 of the proposed licence agreements sets out that the percentage of revenue each party would receive was to be governed by the amount of revenue that was earned from the sale of the advertising time across all eight shopping centres the subject of these proceedings.The proposed licence agreements provided for a licence of airspace within the shopping centres, the subject of the dispute. However, in my opinion, this transaction was sufficiently unique that it is not possible to apply to it what practice may apply in standard lease transactions."
128 Mr Sharpe also said:
"In my opinion the transaction contemplated by the proposed licence agreements is sufficiently unique that it could not be said that:(a) there is a well known practice in relation to the exchange of agreements in relation to agreements such as these; and
(b) the practice that applies in relation to standard lease and licence arrangements applies equally to this transaction.
Even if it could be said that the proposed licence agreements were amenable to, and governed by the standard practice, I do not think that it could be said that the licensees would be immediately bound in this case as:
(a) the proposed licence agreements contemplated that agreements would be executed for all eight shopping centres;
(b) the agreements that had been executed were not in final form as the centre rules had not been provided; and
(c) from my review of the affidavits provided to me it appears that negotiations in relation to clause 10.2 of the proposed licence agreements may not have been concluded.
129 As indicated in Mr Aynsley's letter of 28 October, cl 10.2 relates to the timing of screen installation.
130 Under cross-examination by Mr Cotman, Mr Sharpe conceded that, in a particular case, the parties might be prepared to proceed with an agreement without the rules being annexed to it. He agreed the subject agreements envisaged less physical activity than would be involved in the conduct of a shop in a shopping centre. Further, Mr Sharpe agreed it was an important factor in his approach that there was a "commercial arrangement" (not necessarily a legally binding contract) between the parties that their transaction would extend to at least eight shopping centres.
131 Mr Sharpe also agreed it was a common approach for parties to come to a binding overall arrangement and then enter into a series of subsidiary licence agreements.
(iv) Submissions of the applicants
132 Mr Cotman says, on behalf of the applicants, that it is common ground that there was an "agreement" (whether legally binding or not) in relation to all eight sites. Therefore, even if there was no legally binding over-arching agreement, the making of binding agreements in respect of four shopping centres resulted in creation of a binding obligation on both parties to enter into agreements, on the same terms, in respect of the other four centres. Mr Cotman argues this is because all eight sites had been identified and all eight sites were needed for the executed agreements to work properly. He says it is "inherent in QIC imposing on POS obligations under one agreement that QIC would follow through on all eight".
133 In making this submission, Mr Cotman appreciates there is an issue whether there is a concluded agreement, even in relation to any of the four centres in respect of which Allens sent documents on 25 October 1999. However, he contends the Court should find there are concluded agreements in respect of those centres. Mr Cotman points out that the letter from Allens invited POS to execute the documents and the documents provided for the five year term to start that same day. Relying on Mr Boyce's evidence, Mr Cotman says it ought to be inferred that QIC did not intend its own execution of the documents should be a precondition to the licence agreements taking effect. Mr Cotman concedes that, when the four agreements were executed by POS, no decision had yet been made as to the order of installation of screens at the various centres and this affected the content of cl 10.2 of the agreements. However, he says, POS had put itself in the hands of QIC in respect of that matter; POS had authorised QIC to complete cl 10.2 in each document by inserting three months, four months or five months, as it saw fit.
134 Mr Cotman referred to the evidence of Mr Daryl Stubbings, mentioned at para 53 above, about the situation that had been reached when he left QIC on 8 October. He argues this case falls within the first of the three classes of case identified by Dixon CJ, McTiernan J and Kitto J in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360. Their Honours said:
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
135 Mr Cotman says that, by 25 October (or, at latest, by 10 November) the parties had reached finality in arranging all the terms of their bargain; they intended to be immediately bound to performance of those terms (as is evident from the Starting Date shown in the licence agreements), but proposed to have the terms restated in more precise form.
136 Alternatively, Mr Cotman contends the case falls within the second class identified in Masters v Cameron.
(v) Submissions of the respondents
137 Counsel for QIC dispute each of the applicants' contentions. They argue it had always been envisaged the arrangement between the parties would be carried into effect by the execution of eight licence agreements, one for each shopping centre. Counsel say the agreements were interdependent, so there was no agreement in relation to any shopping centre until all eight agreements were executed. Moreover, counsel contend, this is not a case in which the parties intended the agreements should come into force in advance of their execution by QIC.
138 Counsel observe that, in his letter to Mr Mark Stubbings of 28 September, Mr Kruger said POS sought an assurance "before entering an agreement with each of the licensors" about the form of the power of attorney under which the documents would be executed on QIC's behalf. Even after the withdrawal of other objections, in the letter dated 28 September but sent on 14 October, Mr Kruger persisted with this demand. Counsel ask why it was necessary to delay execution on this account, if the mutual intention was that the documents could be executed by QIC and the other respondents, at their leisure, after the agreements commenced to operate.
139 Counsel for the respondents say that, although there is evidence of a preliminary agreement as to the numbers of installations within particular numbers of months, the parties had agreed QIC would need to determine its preference as to the order of installation, as between particular shopping centres; this was never determined.
140 Further, counsel argue the letter from Allens of 25 October 1999 cannot be regarded as an offer to contract. They put eight reasons.
141 The first reason is that, as a matter of construction, the letter cannot be regarded as an offer, made by Allens on behalf of QIC, and capable of acceptance by POS executing the documents and returning them to Allens; the letter itself contemplates execution by QIC. That step would be unnecessary if the contract came into existence on earlier return of executed documents to Allens.
142 Second, the parties had always contemplated the execution of formal licence agreements in respect of eight centres "and it should not be inferred ... that contemplation had been pre-empted by a solicitor's letter which itself would affirm the contemplation of execution and which was confined to only 4 centres".
143 Third, counsel say that, although Allens had authority to send out documents for execution by POS, Allens had no authority to make a contractual offer. Counsel refer to the distinction made by Barwick CJ, with whom Kitto and Windeyer JJ agreed, in Pianta v National Finance & Trustees Limited [1964] HCA 61; (1964) 180 CLR 146 at 152:
"He was retained, in the capacity of a solicitor, to settle written terms of sale which he could advise his clients to accept and sign. For this purpose, he could negotiate and agree with the representatives of the respondent the terms which the respondent could be expected to accept or, if the representatives were so authorized, which they could accept on behalf of the respondent and which the solicitor could advise his clients as satisfactory in their interest. But this does not confer on the solicitor authority to contract on behalf of the clients to sell the land. If he is to have that authority it must be given expressly or by necessary implication."
That distinction was applied in Nguyen v Taylor (1992) 27 NSWLR 48 at 59, although with the opposite result because of evidence supporting an inference of authorisation and evidence of ratification of the solicitor's actions.
144 Fourth, counsel say three essential matters were not agreed by 25 October 1999: the areas in relation to which the licence agreements were to operate and the number of screens, the types of screens to be used and the time for installation in any particular shopping centre.
145 Fifth, counsel argue that, if the letter of Allens was an offer to contract, it was not accepted; the letter from POS to Allens was a counter-offer which was never accepted. It will be recalled that letter acknowledged receipt of the Allens letter enclosing the four agreements and said: "We have reviewed these and respectfully request that you agree to the following amendments being made by hand". The letter then listed three corrections of apparent typographical errors and referred to cl 10.2
146 Sixth, counsel suggest any contractual offer was effectively withdrawn by the 5 November conversation between Mr Swann and Mr Aynsley: see paras 91 to 96 above. That conversation took place before the return to Allens of the executed documents on 10 November.
147 Seventh, counsel assert QIC was not authorised to commit the other respondents, who were to be contract parties.
148 Finally, it is said the respondents are entitled to rescind any agreement that was made because of misrepresentations by POS as to the licensed areas. These alleged misrepresentations are particularised in the Cross-claim filed by the respondents.
(vi) Conclusions
149 It is not necessary for me to address all eight points raised by counsel for the respondents, for the purpose of determining whether any binding contract arose out of the documents forwarded to POS by Allens on 25 October 1999. From the respondents' point of view, it is sufficient if they make good any one of their points. I am satisfied the first three points, at least, are valid.
150 As I indicated in relation to the suggested informal over-arching agreements, it was always intended by the parties that their commitment would be expressed in a series of formal licence agreements, the terms of which would ultimately be settled by their respective solicitors. This process started very early in the piece, before the end of 1998. It proceeded in early 1999, when Roxburgh Co were advising POS, and became more intensive in September 1999 when Gadens were retained.
151 One of the major issues in the negotiations was the proposed exclusivity clause; that is, cl 4 in the draft agreements sent by Allens to POS on 25 October 1999. That clause was tied directly to the turnover rent received by QIC "under this licence and similar licences for the centres described in item 11"; that is, all eight centres. It is not to the point to say, as did Mr Boyce during the course of his evidence, that this clause could stand with fewer than eight agreements; the disadvantage being that of POS. The question is what was intended by the parties. In para 47 above, I mentioned Mr Aynslie's affidavit evidence that, in September, it was his understanding "that POS Media would sign all eight licence agreements, one for each shopping centre, at the same time as they were interdependent as to the amounts payable by POS Media to QIC". Mr Aynsley re-affirmed that understanding during the course of his oral evidence. Mr Aynsley said he "at all times considered these arrangements interdependent". In an email he sent to various POS personnel, and Mr Kruger, on 9 October, Mr Aynsley said the idea of signing contracts "centre by centre, as they are ready" "sounds fine in principle, but we will need to address the mechanics of the overall 8 centre minimum levels (to maintain exclusivity after Y1)".
152 It is equally apparent that Mr Daryl Stubbings and, later, Mr Swann saw any arrangement as involving all eight centres. There was never any suggestion, from either of them, that QIC might proceed with the arrangement in respect of some, but not all, the centres. That is not surprising. There would seem to be advantages, from the viewpoint of a manager of numerous shopping centres, in using a single video-advertising system, rather than different systems in different centres.
153 The evidence concerning events in November 1999 reinforces the inference that the parties always understood the eight agreements to be interdependent. Despite the fact that he had executed the four agreements on behalf of POS on 28 October, and these were returned to Allens on 10 November, Mr Aynsley never behaved like a man who believed he had the benefit of a legally binding agreement. See the terms of Mr Aynsley's letter of 9 November and his evidence (set out in para 101 above) about that letter. On 17 November he broached with Mr Swann the possibility "that we should perhaps revert to Mr Daryl Stubbings' earlier suggestion that the Centre agreements could be executed one by one"; that is, that agreements could come into effect one by one, as the details were agreed for each site, rather than all at the one time. This proposal was never accepted; its present relevance is that it was made.
154 I do not attribute any significance to the fact that the letter from POS to Allens of 28 October proposed rectification of three typographical errors; Ms Foster said in evidence that she agreed to those errors being corrected by hand. And perhaps the omission, from Schedule 3, of the shopping centre rules is also unimportant. The content of the rules was a matter that could be objectively ascertained; it would be reasonable to interpret the document as incorporating those rules by reference, if they were not annexed.
155 However, counsel's point about cl 10.2 falls into a different category. The date of installation of screens in a particular shopping centre was a matter of importance to both parties. This was not something that had already been determined, and set out in a document incorporated by reference; the critical decisions had not yet been made. I do not think it is an answer to counsel's point to say, as does Mr Cotman, that POS had put itself in QIC's hands in relation to that matter. POS had indicated an acceptable spread of its obligations, over eight centres, as between three months, four months and five months. It had said nothing as to its position in relation to any individual agreement, especially if the deal with QIC was to extend to less than eight centres, rather than them all.
156 Moreover, on 28 October, before POS "accepted" the supposed offer made by Allens on behalf of QIC on 25 October, by returning the executed documents to Allens, Ms Foster requested Mr Kruger to "wait to amend" cl 10.2 "until we have seen the final agreement on roll-out from QIC". Despite the fact that Gadens subsequently pressed Ms Foster about this issue, she maintained the position that this matter was unresolved and it was not acceptable for POS to deal with it in a unilateral way. The fact that Mr Kruger did not return the documents immediately after execution, but retained them for almost two weeks, until registration of the POS prospectus was becoming imminent, suggests Mr Kruger accepted this issue was unresolved. Putting the matter at its lowest, Ms Foster's request about cl 10.2 on 28 October counter-manded any implied invitation to POS to deal with the clause as it saw fit, within the broad parameters of earlier discussions.
157 The third point advanced by counsel for QIC is that Allens had no authority to make a contractual offer on behalf of their clients, as distinct from authority to forward documents for execution. It seems to me this contention is correct. As Barwick CJ pointed out in Pianta, the fact that a solicitor is acting, in that capacity, for a party to negotiations is not, in itself, enough to confer contractual authority on the solicitor; authority to contract must be given expressly or by necessary implication. There is no evidence of express authority in the present case. Neither is there anything that would support an implication. On the contrary, the fact that the form of the documents envisaged execution under common seal by the relevant licensor, the centre owner, points against an implication that Allens had authority to make an offer which, by acceptance on behalf of POS, could give rise to an enforceable contract.
158 I accept that, as Mr Boyce said and Mr Sharpe agreed, it is commonplace for documents such as leases and licences to be executed by the proposed lessee or licensee on the basis that the document would then immediately be binding, in advance of execution by the lessee or licensee. However, as both solicitors accepted, the question ultimately turns on the parties' intention. Mr Sharpe suggested, in effect, that the more unusual the transaction, the less likely it would be that the parties intended this course. The subject agreements were unusual. Allens did not use standard printed forms but, apparently, developed terms specially for the transaction. The arrangement was a "first" so far as QIC, at least, was concerned.
159 The evidence leaves me in no doubt that it was the mutual expectation of POS and QIC that the agreements would be formally executed by Mall Media and the relevant licensor, and their mutual understanding was that, until all eight agreements were executed, there was no legally-binding commitment at all.
160 I reject the applicants' contention that one or more legally-binding contracts came into existence in November, as a consequence of Allens sending to POS the four licence agreements on 25 October and the subsequent execution of those documents by Mr Aynsley on behalf of Mall Media.
161 I also reject the contention that QIC is estopped from denying the existence of one or more binding agreements. POS was at all times privy to the relevant facts and the understanding of the situation I have adopted reflects the understanding held at the time by Mr Aynsley. Further, I am not satisfied that POS was misled as to QIC's position or intentions. I will develop this point further when discussing the applicants' s 52 claim.
Unconscionable conduct
162 Section 51AA(1) of the Trade Practices Act provides that a "corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories". However, by subs (2), s 51AA(1) does not apply to conduct that is prohibited by s 51AB or s 51AC.
163 Counsel for the respondents contend that s 51AA is constitutionally invalid because it infringes the doctrine of separation of powers between the legislature and the judiciary. As they acknowledge, French J rejected that contention in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2000] FCA 2; 96 FCR 491. His Honour's judgment contains an account of the legislative predecessors of s 51AA and a comprehensive exposition of its meaning and area of application. I should follow that decision unless I am affirmatively persuaded it is incorrect. I am not so persuaded. I therefore approach the present issue on the basis that s 51AA is a valid law.
164 Further, for present purposes, I assume (without deciding) that s 51AA binds each of the respondents.
165 Even so, I reject the applicants' case under s 51AA. That case was expressed by their counsel, in the written submissions provided to Lehane J, in this way:
"... from at least 19 October the applicants believed or assumed that there was a binding agreement between the parties pursuant to which the respondents were bound to enter into the standard form licence agreement duly completed for each of the eight centres and that, from 25 October 1999, they believed that licence agreements had been made in respect of the Eastland, Woodgrove, Watergardens and Toowoomba centres. The whole of the conduct of the applicants and their communications with the respondents shows the progress towards the formation of such agreements and that they believed they were made by the dates referred to.That same evidence shows that the respondents knew of that belief or assumption on the part of the applicants by at least 19 October, so far as the portfolio agreement was concerned, and by 25 October, so far as the four centre agreements were concerned."
166 It seems to me these submissions are, substantially, factually incorrect. I agree that the conduct of the parties, and particularly the content of their communications, shows progress, during October and November 1999, towards formation of binding licence agreements. However, as I explained in the last section of these reasons, I believe the parties never reached any binding agreement. More importantly, in the present context, the analysis I have set out demonstrates POS realised no binding agreement had been reached. I need not repeat my earlier comments about that matter.
Misleading and deceptive conduct
167 The applicants also claim that QIC engaged in misleading and deceptive conduct, in contravention of s 52 of the Trade Practices Act. In their written submission to Lehane J, counsel said:
"73. The mechanism of the deception in contravention of s.52 can be analysed in two ways. Firstly, the conduct of the plaintiff [sic: respondents] in the period from at least 19 October to 10 November conveyed, in all the circumstances, a representation to the applicants that agreement or consensus had been reached pursuant to which the appropriate respondents would enter into centre licence agreements for each of the eight centres in the portfolio.74. Second, by an analysis more closely analogous to that applicable to the existence of the estoppel, the conduct of the respondents in failing to disabuse the applicants of their belief that the respondents would enter into licence agreements in respect of the eight centres in all the circumstances was conduct which was misleading and deceptive. In this context it is trite to say that it puts an impermissible gloss on the terms of s.52 and the equivalent provisions of the Fair Trading Act to suggest that conduct must involve a misrepresentation for there to be a contravention. Further, silence is conduct for the purposes of the Act in circumstances such as the present. ...
75. The true position, according to QIC, was that sometime after all the work which had been performed by the applicants on negotiation of standard form licence terms, site presentations and site selections, and after the applicants had commenced the acquisition of equipment and otherwise taken steps to put themselves in a position to perform the licence agreements, Mr Brindle would or might consider whether the respondents would proceed with the individual licence agreements. Such a scenario was never disclosed to the applicants. In its most extreme form, Mr Swann contended in evidence that there might never be a presentation to Mr Brindle for consideration because he, Mr Swann, did not have universal consensus on the POS Media proposal.
76. This asserted position is diametrically opposed to the manner in which QIC presented itself and its attitude to the transactions to the applicants over the relevant period. At the very latest it should have disclosed its view on the state of the relationship between the parties to the applicants immediately after the conversation between Mr Kruger and Ms Foster on 20 October 1999 in respect of the prospectus and the relevance of the state of the transaction between the parties to it. At the very least, to stay silent from this moment was conduct by the respondents which was misleading and deceptive in contravention of the statutory provisions." [Citations omitted]
168 Once again, I assume (without deciding) that s 52 binds each of the respondents. But, again, I find the contravention not made out.
169 As indicated in para 64 above, I accept that, by 19 October 1999, the parties had finally resolved their differences about the standard terms of the proposed licence agreements. The way was cleared for them to proceed with the creation, and execution, of the eight proposed licence agreements. To the extent that counsel argues the conduct of QIC, in the period from 19 October to 10 November, conveyed a representation to the applicants that agreement or consensus had been reached concerning standard licence agreement terms, I agree. I am confident Mr Kruger would have understood this to be the position at the conclusion of the telephone conversation with Ms Foster in which he withdrew POS's remaining objections to the draft licence agreement. However, any such representation reflected the position; there was nothing misleading or deceptive about it.
170 The second point raised by counsel depends on QIC's failure "to disabuse the applicants of their belief that the respondent would enter into licence agreements in respect of the eight centres". This point depends on the proposition that silence may constitute "conduct" within the meaning of s 52 of the Trade Practices Act.
171 The authorities clearly establish that, under some circumstances, a failure to speak may constitute misleading conduct, within the meaning of s 52 of the Trade Practices Act. Perhaps the most comprehensive discussion of the matter is that in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. In that case, Black CJ said at 32:
"Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of `mere silence' or of a duty of disclosure can divert attention from that primary question. Although `mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as `mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
172 At 41 Gummow J (with whom both Black CJ and Cooper J agreed) quoted with approval the following comment by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 at 53,195:
"The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist."
173 One circumstance that may give rise to a reasonable expectation of information is where this is necessary in order to prevent information that is in fact given by a person being misleading to the recipient. An example is furnished by the facts in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, referred to by Gummow J in Demagogue at 40. Of course, this is only one of the circumstances under which silence may constitute misleading or deceptive conduct.
174 I agree with counsel for the applicants that QIC took the position counsel outlined in the first sentence of para 75 of their submission. However, I do not think it is correct to say such a scenario was never disclosed to the applicants.
175 Early in the course of negotiations, two written statements were made on behalf of QIC about the need for approval by Mr Brindle or "the Board": see Mr Daryl Stubbings' letter to Mr Rundle of POS of 2 March 1999 (para 22 above), Mr Daryl Stubbings' letter to Mr Aynsley of 15 July 1999 (para 24).
176 On Mr Swann's version of the conversation, Mr Swann told Mr Aynsley on 12 October that he had "to get approval for any agreement with POS Media" from Mr Brindle. This version is contested by Mr Aynsley. Not having myself seen and heard these witnesses, it is difficult for me to determine which version to accept; this is the exception I had in mind when stating, in para 11 above, that only one of the disputes as to primary facts was of significant importance. I would not feel comfortable about resolving that dispute by listening to the tape recording of the relevant evidence. Because of these difficulties, without rejecting Mr Swann's account of the conversation, I put no weight upon it.
177 There is also a dispute about the telephone conversation of 5 November (paras 91 to 96 above) when, according to Mr Swann, he told Mr Aynsley he was awaiting a final report from Mr Figallo "as to the quality and general operational matters in relation to this screen" and, once he had screen locations "and other information", he would submit a final paper to Mr Brindle. Mr Swann said he warned Mr Aynsley: "This is not a rubber stamping exercise".
178 Mr Aynsley said he did not recall this conversation. However, subsequent correspondence seems to support Mr Swann's account. I refer, first, to Mr Aynsley's letter of 9 November which, I agree with counsel for the respondents, reads like a "pitch", and, second, to Mr Swann's letter of 12 November which states in writing the effect of what Mr Swann claims to have said orally one week earlier. I think the better view of the evidence is that, at least on 5 November, Mr Swann made clear to Mr Aynsley that QIC was not certain to proceed with the POS proposal.
179 If that view is adopted, there is little room for the applicants' contention that they were left in a position of disabused error about the intentions of QIC. It was not until 19 October that agreement had finally been reached concerning the standard licence terms. Until that stage had been reached, there was no scope for any belief that QIC was committed to proceed; it might not have proved possible to reach agreement on matters, relevant to all eight centres, that had commercial importance. So the period of disabused error could not exceed the 17 days between 19 October and 5 November.
180 However, to accept that period would be to ignore the work still being undertaken, on 19 October, by Mr Figallo and Mr Levitt. As I have previously suggested, the determination of the number and location of screen sites in each shopping centre was a matter of importance to both parties. There is no reason to believe either party would have wished to be bound to a deal that it thought unsatisfactory in relation to screen numbers and/or locations, or that it thought the other party would be prepared to be so bound. And it seems it was not until 8 November, or shortly before that day, that Mr Figallo and Mr Levitt completed the task of identifying suitable screen locations.
181 By 8 November Mr Aynsley had been thoroughly disabused by Mr Swann of any misconception about QIC's position.
182 The above discussion assumes this is a case in which QIC's silence as to its intentions might constitute misleading conduct. Having regard to the factual analysis set out above, it is not necessary for me to reach a concluded opinion about the correctness of that assumption. I will only say I regard the assumption as questionable. This is not a "half-truth" case, where a positive statement is misleading in the absence of a disclosed qualification. It seems to me this is merely a case in which parties had been engaged in prolonged and complex negotiations with steady progress in resolving all the numerous matters that needed to be resolved before either of them was willing to enter into a legally-binding commitment. I accept Mr Aynsley harboured an expectation that, if all the issues were resolved, QIC would enter into a legally-binding agreement. This expectation was natural and legitimate. However, there is no evidence it was induced or bolstered by any statement suggesting QIC had foregone, or would forego, its right to pull out of the negotiations, and the project, if it chose to do so; and for whatever reason it wished.
183 It is difficult not to have considerable sympathy for POS, and Mr Aynsley in particular. POS put an enormous effort into this project. The negotiations, and Mr Levitt's site inspections, must have occupied many hours of executive time and significant expense. POS claims it also incurred expense in purchasing equipment intended for installation in the subject shopping centres. I have no reason to disbelieve that claim. Moreover, it is difficult to avoid feeling that POS was disadvantaged by a circumstance not of its making: the departure from QIC of Mr Daryl Stubbings. Mr Stubbings was much more enthusiastic about this proposal than Mr Swann turned out to be. Of course, even if Mr Stubbings had remained with QIC, there would have been no guarantee of implementation of the proposal; the proposal would still have had to be approved by Mr Brindle and he might have sought, and been influenced by, Mr Swann's view. Nevertheless, the chance of implementation might have been greater if Mr Stubbings had continued to bear responsibility for it.
184 However, neither sympathy for POS nor speculation about what might have been is a substitute for evidence establishing that QIC engaged in misleading conduct. I do not think there is such evidence. The s 52 claim must be dismissed.
The section 58 claim
185 Section 58 of the Trade Practices Act provides as follows:
"A corporation shall not, in trade or commerce, accept payment or other consideration for goods or services where, at the time of the acceptance:(a) the corporation intends:
(i) not to supply the goods or services; or
(ii) to supply goods or services materially different from the goods or services in respect of which the payment or other consideration is accepted; or
(b) there are reasonable grounds, of which the corporation is aware or ought reasonably to be aware, for believing that the corporation will not be able to supply the goods or services within the period specified by the corporation or, if no period is specified, within a reasonable time."
186 By para 66 of their Further Amended Statement of Claim, the applicants pleaded that, in contravention of this provision, QIC requested from, and accepted the provision of services by, POS to QIC:
"... to wit, a survey of all the malls owned or controlled by the Respondents in Australia and the disclosure of confidential information, in consideration for the Respondents promising or representing that it would provide services to the Applicants, to wit, a future grant of authority to the Applicants, or either of them, to enter into the said malls to install and operate display screens for gain."
187 Paragraph 66 goes on to allege that, at the time of the request and acceptance, QIC "did not intend to supply the said service or intended to supply that service only on materially different terms".
188 Mr Cotman did not put any submission in support of the s 58 claim; rightly so. It seems to me s 58 has no application to this case. In the first place it is incorrect to see the arrangement for joint visits to the shopping centres by Mr Figallo and Mr Levitt as a request for services by QIC. This was a step undertaken by two parties, who were in a state of negotiation, in order to progress their negotiations. Neither was rendering a service to the other. They were working together to achieve something that, at the time, both thought to be a desirable outcome. Secondly, there is no evidence that, at the time the arrangement was made, QIC intended not to proceed with the proposal, or intended to do so only on materially different terms. On the contrary, when the arrangement was made, Mr Daryl Stubbings was positive towards the proposal. The fact that QIC later decided not to proceed with it does not establish this was QIC's intention at an earlier time.
Quantum meruit
189 Finally, the applicants plead, in para 75 of their Further Amended Statement of Claim, that:
"... by reason of the requests for work and services made by the Respondents to the Applicants, which were performed by the Applicants as alleged above, the Respondents are liable to pay the Applicants the reasonable costs of the work and services so performed as on quantum meruit."
190 In supporting the claim, Mr Cotman SC referred to Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880. In that case, Sheppard J (then a judge of the Supreme Court of New South Wales) held a builder/developer entitled to recover, on a quantum meruit basis, compensation for work done by it in connection with the proposed redevelopment of land owned by the defendant council. The work had been done, over a period of three years, at the invitation and request of the defendant, although in contemplation of an eventual redevelopment project involving both parties. After an extensive review of Australian and English authorities, Sheppard J held (at 900) there are occasions "when the law, irrespective of the common intention of the parties, will impose on one an obligation to pay the other for work done".
191 The primary authority used by Sheppard J to support that conclusion was the decision of Barry J in William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932; [1957] 2 All ER 712. It is convenient to set out Sheppard J's summary of the case, at 894 of his judgment in Sabemo:
"There the defendant was the owner of premises which had been damaged during the war, and which he proposed to rebuild. The plaintiffs, a firm of builders, submitted their estimate for the work of reconstruction and, although no binding contract was concluded between them and the defendant, they were led to believe that they would receive the contract. In this belief, and at the request of the defendant's surveyors, between January 1951 and June 1952 the plaintiffs prepared calculations of timber and steel requirements, prepared an estimate for a notional reconstruction of the premises for negotiating a `permissible amount' with the War Damage Commission, and prepared and submitted a revised estimate in accordance with new specifications for which they prepared their own bills of quantities. Further, the plaintiffs later prepared and submitted a new estimate following amendments made to the plans by the defendant, and varied this estimate from time to time as further alterations were proposed by the defendant. In July 1952 the defendant sold the premises instead of proceeding with the reconstruction. It was held that the work carried out by the plaintiffs at the defendant's request fell outside the normal work which a builder performed gratuitously when asked to submit a tender, and had been done in a belief, mutual to both sides, that the plaintiff would receive the contract for rebuilding the premises. The court, therefore, would imply a promise by the defendant to pay reasonable remuneration to the plaintiffs in respect of such work. It is to be observed that, if the plaintiffs had received the contract, as was anticipated, no charge would have been made for the work, the price of which was sued for. Remuneration for that work would have been absorbed in the contract price."
192 Sheppard J noted a finding by Barry J that the plaintiff had been asked to prepare estimates for work that the defendant never intended to undertake. In deciding to follow William Lacey, Sheppard J was influenced by the fact that, as in that case, North Sydney Council had made a unilateral decision not to proceed, for reasons having nothing to do with difficulty in reaching agreement as to the terms of the contract intended to be made with Sabemo. At 902-903 Sheppard J set out this statement of principle:
"In my opinion, the better view of the correct application of the principle in question is that, where two parties proceed upon the joint assumption that a contract will be entered into between them, and one does work beneficial for the project, and thus in the interests of the two parties, which work he would not be expected, in other circumstances, to do gratuitously, he will be entitled to compensation or restitution, if the other party unilaterally decides to abandon the project, not for any reason associated with bona fide disagreement concerning the terms of the contract to be entered into, but for reasons which, however valid, pertain only to his own position and do not relate at all to that of the other party."
193 The application of this statement of principle to the present case might entitle POS to recover from the respondents compensation for the work done by them in anticipation of a contract. That work would primarily, if not exclusively, consist of the work done by Mr Aynsley and others in respect of negotiations and Mr Levitt's activities in connection with visits to the eight centres. However, I find myself unable to accept Sheppard J's statement of principle, at least without significant qualification. I am respectfully of the opinion that the statement of principle lacks foundation in any of the cases cited by his Honour, and is inconsistent with some of them.
194 As I have indicated, the principal authority relied upon by Sheppard J was William Lacey. However, a critical finding in that case was that the work carried out by the builder exceeded the work a builder would normally perform gratuitously when asked to submit a tender. Further, Barry J found the builder was asked to provide estimates for work which the owner never intended to undertake; which estimates were used by the building owner for his own purposes in negotiations with the War Damage Commission. Accordingly, it is an over-simplification to treat that case as one in which the parties proceeded "upon the joint assumption that a contract will be entered into between them", in respect of that work. Nor were the estimates, at least, "in the interests of the two parties". Although it did not know this at the time, the building company was never going to obtain a contract to carry out the building work covered by those estimates. It follows that William Lacey fails to provide any support for the statement of principle enunciated by Sheppard J. It would be necessary to make significant qualifications to that statement of principle in order to accommodate William Lacey to it.
195 Qualifications that would accommodate William Lacey would render the statement of principle inapplicable to the present case. There is no evidence that the work done by POS exceeded what was "normal" in relation to an agreement to install video screen based media delivery systems in shopping centres. Indeed, it is not clear that it is meaningful to use the word "normal" in relation to such an agreement. Further, this is not a case where one party was asked to do work that the other party knew to be wasted effort, from the first party's point of view. The work done by Mr Aynsley and Mr Levitt was work that needed to be done in POS's own interests, if the proposal was to be implemented. And when they were allowed to do that work, QIC had not decided against implementation.
196 I do not find it necessary to deal with all the authorities cited by Sheppard J in Sabemo. As Sheppard J himself recognised, many of them are clearly distinguishable from the facts in Sabemo: for example, Craven-Ellis v Canons Ltd [1936] 2 KB 403, Way v Latilla [1937] 3 All ER 759, Jenning and Chapman Ltd v Woodman Matthews Co [1952] TLR 409, Bewer Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428.
197 The early cases were considered by the Full Court of the Supreme Court of Western Australia in Sinclair v Rankin (No 2) (1908) 10 WALR 126, a case in which the plaintiff performed accountancy work for the defendant on the understanding that he would be remunerated by being taken into partnership by the defendant. He was not taken into the partnership and sued for compensation. The plaintiff succeeded at first instance but lost on appeal. Burnside J (with whom Rooth J agreed) said at 132:
"The principle which governs the present case I take to be this, that where work is done in anticipation of a special contract, and such contract is not entered into, no action can be maintained on a quantum meruit in respect of the work done."
198 In Magripilis v Baird [1924] QSR 303 the Full Court of the Supreme Court of Queensland adopted a similar approach in relation to a claim for compensation by a plaintiff who had expended money and labour on land in anticipation of the grant of a lease by the owner.
199 The decision of the Supreme Court of New Zealand in Watson v Watson [1953] NZLR 266 is instructive. The plaintiff agreed to work with his brother in the country with a view ultimately to the erection and operation of a sawmill. The plaintiff received no remuneration. Gresson J held the plaintiff acted as he did in anticipation of a partnership in the sawmill; therefore he was not entitled to recover compensation for his labour during the period before completion of construction of the mill. However, the judge held, the failure of the defendant to take the plaintiff into partnership at that time constituted a repudiation of the promise of a partnership, so the plaintiff was entitled to compensation on a quantum meruit basis for his subsequent work. It will be seen the critical question was not whether particular work was beneficial to the defendant, but whether it could fairly be regarded as referable to the envisaged contract between the parties.
200 Sheppard J was fortified by an analogy with the law of restitution which, as he said, has developed significantly in recent years. He said (at 898) "it is now recognized that there are cases where an obligation to pay will be imposed (a promise to pay implied) notwithstanding that the parties to a transaction, actual or proposed, did not intend, expressly or impliedly, that such an obligation should arise. The obligation is imposed by law in the light of all the circumstances of the case". However, since Sheppard J wrote these words, it has become apparent that the basis of that imposition is the concept of unjust enrichment: see Pavey Mathews Proprietary Limited v Paul [1987] HCA 5; (1987) 162 CLR 221, especially per Deane J at 256-257. See also Mason and Carter, Restitution Law in Australia, (1995) Butterworths at paras [102] to [104]. At the end of their discussion in those paragraphs, the learned authors identify three factors restricting orders for restitution:
"(1) a concept of benefit, (2) obtained at the expense of the person seeking restitution, and (3) the justice of restitution, combine to produce the principle of restitution to prevent or reverse an unjust enrichment."
The application of this approach might have led to a different result in Watson v Watson.
201 Whether or not that is the case, and whatever might have been the position in Sabemo, it seems impossible to say, in the present case, that QIC obtained a benefit from the work of POS that existed independently of the proposed licence agreements between the two parties. The labour of Mr Aynsley in respect of contract negotiations had no independent value to QIC. The position in relation to Mr Levitt's exertions is less obvious. But they, too, were related to a particular contractual regime. There is no evidence that Mr Levitt's work (as distinct, perhaps, from Mr Figallo's work, which was undertaken from the perspective of centre managers and tenants) would have had value to QIC in any negotiations it might have had with other screen providers. The purpose of Mr Levitt's activity was to protect the interests of POS.
202 I accept that, in this case, QIC broke off its negotiations with POS at the last moment, and for reasons of self-interest unrelated to the terms of the proposed contracts. It is possible to regret such conduct, but regret is not enough to make applicable the principle applied in restitution cases. And it seems to me that, where the restitution principle is inapplicable, the law remains as it was stated in 1908 by Burnside J. To the extent that Sabemo may hold to the contrary, I respectfully disagree with that decision.
203 The quantum meruit claim, also, must fail.
Disposition
204 Each of the claims advanced by the applicants fails. The proceeding must be dismissed. Despite my sympathy with the position of the applicants, I see no principled basis for departing from the general practice about costs. The applicants must pay the respondents' costs of the proceeding.
I certify that the preceding two hundred and four (204) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox. |
Associate:
Dated: 29 June 2001
Counsel for the Applicant: |
N Cotman SC (before Wilcox J and Lehane J) and R Webb (before Lehane J only) |
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Solicitor for the Applicant: |
Abbott Tout |
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Counsel for the Respondent: |
R MacFarlane QC (before Wilcox J and Lehane J), A J Abadee (before Wilcox J) and P Durak (before Lehane J) |
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Solicitor for the Respondent: |
Allen Allen & Hemsley |
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Date of Hearing: |
7, 20-24 November 2000 (before Lehane J); 26 February 2001 and 10-11 April 2001 (before Wilcox J) |
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